Friday, March 11, 2011

Home prices would have to drop another 15%

Comparing home prices with income, real estate is still overvalued:
On a national level, Shiller and other economists compare home price changes with income growth over the years. Before the bust, home prices had been outpacing earnings since the late 1990s.

Just to get that back to a normal ratio — which we last saw in 1998 — home prices would have to drop another 15%, according to Anthony Sanders, a director of Real Estate Entrepreneurship at George Mason University.

"Even after the bubble burst, the ratio of income to home prices is still way too high," he said.
Comparing home prices with rents also says home prices need to fall more.

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