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IMO Overvalued usually implies a comparison to something else. For housing you could compare to: cost of renting, cost of in-fill construction, salaries in the
by Eridrus 8y ago
IMO Overvalued usually implies a comparison to something else.
For housing you could compare to: cost of renting, cost of in-fill construction, salaries in the area, cost of alternatives (eg moving, to other neighborhoods or cities).
I think these housing headlines are also basically asserting that prices will fall, which clearly hasn't been true, but is a valid statement of belief.
- kspaans 8y agoYup, probably the simplest objective metric to calculate is price-to-income ratio as a measure of "overvalued" in a given location.
- TheTrotters 8y agoNot really. There's no universal law which says that bread has to be X% of local income or that housing has to be Y%.
- kspaans 8y agoYou're right, interpreting whether a given price-to-rent ratio is overvalued or not is subjective, but calculating that ratio is (mostly) objective and can make for an apples-to-apples comparison between different locations.