tag:blogger.com,1999:blog-13164186.post114110334187599463..comments2024-01-27T19:26:32.604-05:00Comments on Bubble Meter: A Real Estate P/E Ratio for Washington DCDavidhttp://www.blogger.com/profile/11169148764438565562noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-13164186.post-86711415244856603802007-11-25T14:31:00.000-05:002007-11-25T14:31:00.000-05:00The P/E ratio as illustrated here is incorrect. I...The P/E ratio as illustrated here is incorrect. In the same way as used in any other investment calculation, the total outlay must be used not the "monthly cost of ownership". The above calculation lead to P/E ratios that are far lower than they actually are.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141761759029323332006-03-07T15:02:00.000-05:002006-03-07T15:02:00.000-05:00Whether or not your landlord is porfiting really h...Whether or not your landlord is porfiting really has nothing to do with you or the price. Prices should be set based on demand. Most landlords in areas like SF or SD are not recovering the cost of a new mortgage + HOA dues + upkeep + property taxes (on a new mortgage.) Of course if he bought the property 40 years ago and it's paid off then he's got no mortgage right? So if you want to know if you're paying too much go look at craigs list and see if you can do better.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141469815881769372006-03-04T05:56:00.000-05:002006-03-04T05:56:00.000-05:00I am a renter in a $2300/mo townhome near San Dieg...I am a renter in a <BR/>$2300/mo townhome near San Diego. I know that the landlord uses my rent toward the mortgage but I'm not sure if he's profiting. Given the "bubble" how can I find out if I'm being overcharged so he doesn't take a loss? He bought it just before leasing it to me for one year. When the lease is up in August, will I be able to negotiate new terms for future years since he may feel nervous about prices falling/me leaving?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141263009266959672006-03-01T20:30:00.000-05:002006-03-01T20:30:00.000-05:00I'm glad I sold my house on 1st st nw when I did. ...I'm glad I sold my house on 1st st nw when I did. Paid well over $200K for house where no quality of life exists. Now I'm in Montreal, paying $700 per month and have all the quality of life I could ever want.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141244134941842682006-03-01T15:15:00.000-05:002006-03-01T15:15:00.000-05:00You might include depreciation of the property as ...You might include depreciation of the property as well. If you believe properties are overvalued (which I do) and there will be a short term correction of 3-7% in the next year then 300K condo today might be worth 285K next year. So you are losing about $1100 a month on depreciation of a $300K condo. That would really mess with your P/E.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141242222079501992006-03-01T14:43:00.000-05:002006-03-01T14:43:00.000-05:00anon 6:05,Thanks for the advice. I'll do as sugges...anon 6:05,<BR/><BR/>Thanks for the advice. I'll do as suggestedDavidhttps://www.blogger.com/profile/11169148764438565562noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141221910360277462006-03-01T09:05:00.000-05:002006-03-01T09:05:00.000-05:00If you save your graphs as .gif files they will co...If you save your graphs as .gif files they will compress more and not have those funny halos around the edges when you view them at 100%. JPG files are better for photographs or images with a variety of colour gradients.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141150643227200322006-02-28T13:17:00.000-05:002006-02-28T13:17:00.000-05:00Keep in mind, however, that the above formula is s...Keep in mind, however, that the above formula is set on Condo rental rates (which also have a much lower rate of return on the open "for sale" market). And, not all real estate investors invest purely for the short-term monthly cash flow. Take, for instance, that a long term rate of return on your 20% down and approximately 2% out of pocket investment spread over the course of 12 months (the difference between your monthly rental income vs. what you owe), and historically spread that over the course of so many years, the rate of return superceeds that of a savings account, money market account, cd rates, or very conservative investing -- HOWEVER, with all but the investing, each of those options are GUARANTEED.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141145858119148622006-02-28T11:57:00.000-05:002006-02-28T11:57:00.000-05:00" If this is because the basic economic justificat..." If this is because the basic economic justification is forgotten in the hope of finding a bigger fool"<BR/><BR/>1) Speculative episode<BR/>2) Lower interest rates<BR/>3) Easy CreditDavidhttps://www.blogger.com/profile/11169148764438565562noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141145388239993192006-02-28T11:49:00.000-05:002006-02-28T11:49:00.000-05:00Wonderful work!! I am wondering about the followi...Wonderful work!! I am wondering about the following question. <BR/><BR/>As you have defined the RE P/E ratio; at a RE P/E ratio of 1 there is no real economic distinction between renting and owning. For the RE P/E ratio significantly higher than 1, it obviously makes more sense to rent than to own. This implies a built in equilibrium tendency; as the cost of ownership becomes more uneconomical more people would rent bringing the ratio back towards 1.<BR/><BR/>Why then has the ratio increased by almost a 100% and continued to increase for a good 6-7 years? If this is because the basic economic justification is forgotten in the hope of finding a bigger fool; then wouldn’t this be a “bubble” by definition?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141143857327155932006-02-28T11:24:00.000-05:002006-02-28T11:24:00.000-05:00Eric,A great piece of work - well done.I have one ...Eric,<BR/><BR/>A great piece of work - well done.<BR/><BR/>I have one quick comment. In your first numerical example, it looked like you excluded the 20 percent and just calculated the housing cost from the loan on the 80 percent. I would respectfully suggest that you should include the foregone interest on the 20 percent.<BR/><BR/>Having said that, using the HPI and the rental index seems to correct for this minor point.<BR/><BR/>Again, congratulation on a very useful piece of analysis.<BR/><BR/>returntodcRuined Invegashttps://www.blogger.com/profile/00585137296788888964noreply@blogger.comtag:blogger.com,1999:blog-13164186.post-1141143171170184172006-02-28T11:12:00.000-05:002006-02-28T11:12:00.000-05:00>> Now obviously you can’t just take the actual pr...>> Now obviously you can’t just take the actual price of your home and divide it by the monthly rent.<BR/><BR/>Actually you can. You'd want to use annual rent not monthly, and ideally substract maintenance and insurance out of the rent before dividing. <BR/><BR/>Voila, there you have a P/E ratio, and it is on the same scale as your other investments.Anonymousnoreply@blogger.com