Tuesday, March 22, 2005

Price to rent ratio

When will this bubble burst? This is like deja vu for me. It reminds me of Nasdaq P/E ratios in the late 90's when they were totally out of line with reality.

WSJ:"Since 1999 and 2000, the relationship between rents and home prices has "broken down," says Mark Zandi, chief economist of Economy.com. With interest rates falling, it's "not surprising that the relationship has changed," Mr. Zandi adds. "What is surprising is that it has changed so much."

In San Francisco, the monthly cost of renting an apartment is just 45% of the monthly cost of buying a home, down from 67% in 2001, according to an analysis of 21 key markets prepared for The Wall Street Journal by Torto Wheaton. In Washington, D.C., rental costs are now just 59% of the cost of owning, down from 82% in 2001. In Miami, rental costs are 63% of the cost of homeownership, down from 89% in 2001."


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