Are Housing Prices Cheap?

Source: The Economist

Back in 2005, The Economist published a very insightful analysis that examined the ratio of house prices to rent. The Economist concluded at the time that the ratio was out of whack, and that the housing market was, therefore, in a bubble.

The Economist was about one to two years early, but it was ultimately proved right.

Based on the analysis, I decided not to purchase a house in 2006 when I might have qualified for one of the notorious no documentation loans so prevalent at the time.

Thank goodness I followed The Economist‘s advice.

Now, according to The Economist, it seems that, in the aggregate, it is now cheaper to purchase a house than it is to rent one. There are a number of other positive signs that the national housing market is improving as well. For instance, foreclosures are down 17.7% in the first quarter from where they had been at the end of 2010, and mortgage rates have fallen back to historic lows.

If The Economist‘s track record is any indication, the magazine is likely right, but early.

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About Sean Patrick Hazlett

Conservative clean energy crusader, national security hawk, financial analyst, engineer, and former military officer.
This entry was posted in Finance and Economics and tagged , , , . Bookmark the permalink.

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