Cheapest Homes in 40 Years?

Barry Ritholtz shares a new metric to determine if the home prices have come down sufficiently or not.

Cheapest Homes in 40 Years? Not Even Close… | The Big Picture: "By comparing Homes costs with buyers ability to pay for them, you develop a model with periods of over and undervaluation.....I would argue the measure of Median income to Median home price a much better gauge. It tracks people’s ability to pay for homes — something the NAR model does not. Even better, its not from a biased industry spokesperson."


According to this index, the home prices today are at a 0.5 to 0.6 point higher than in the eightees. Compared to ninetees, the index indicates that the home prices are about 0.2-0.3 points higher. Thus, homes may not be cheapest ever from histotical perspective (the point Barry is trying to make), but they have come down sufficiently from the highs in 2005-7.

If you are considering real-estate as an investment, you have to think carefully - is this the right time or will the index point downwards again? I believe it will be the latter.
Post a Comment

Popular posts from this blog

Rafting down Colorado river

Learning from your mistakes