3 ms·
1) That assumes that what drives housing prices is residential ownership. 2) What is a "justifiable" P/E multiple? What is the justification (other than past v
by ultraluminous 8y ago
1) That assumes that what drives housing prices is residential ownership.
2) What is a "justifiable" P/E multiple? What is the justification (other than past values) for _any_ P/E ratio?
What were the drivers of either the numerator or denominator?
This is to say, that macro and micro economics try to model extremely complex systems. When trying to analyze "value" it's worth considering that your mental model might not be accounting for many/most of the relevant forces.
- tempestn 8y agoUltimately a P/E ratio should be justified by discounted future expected returns, compared to the risk free rate. So ultimately, the P/E ratio is a market prediction of future earnings growth.