Research Recap

U.S. Housing Nearing Bottom, But Foreclosures Worrying

Mark Zandi tells me that housing valuation is determined based on the house price-to-income ratio and the house price-to-effective apartment rent ratio. He uses the Case Shiller indices for house prices. "If the price-to-income and price-to-rent ratios are both well above their long-run pre-bubble average (1980-2003) then it is classified as being significantly overvalued. If one of the ratios is above its long-run average then it is overvalued. If both ratios are near their long-run average it is correctly valued. If both ratios are below their long-run average it is undervalued. These are crude measures of valuation, but informative."

And for what it's worth, economy.com is an independent unit of Moody's and not part of the ratings division.



On Jul 28 01:49 PM Bigman16 wrote:

> Are Moody's values based on the Median Home Price in the first exhibit?
> And what are they comparing that to - average household income?