Friday, May 11, 2007

America's Most Overpriced Real Estate Markets

America's Most Overpriced Real Estate Markets.
By Matt Woolsey, Forbes.com
May 11, 2007

No matter the locale, its denizens almost always gripe about the stiff cost of living, housing and doing business. But in some places the financial pain is clearly more acute than others

Behind The Numbers
Using the 40 largest metro areas, we started by estimating a "price-to-earnings" ratio for each market. (Like the P/E of a stock, this value attempts to measure the price a homeowner would pay for one dollar of return.) Using data from the National Association of Realtors (NAR), the U.S. Census Bureau and the Office of Federal Housing Enterprise Oversight, we took each market's median home price and divided it by annual rents minus taxes and insurance for those properties. (We assumed for this exercise that other costs don't vary drastically from city to city.)

The average P/E for the 40 markets is 28. Note: Unlike, say, the S&P 500 index of stocks, ours is not a weighted-average P/E. If it were, certain cities with greater overall sheer market value would carry more weight.

We incorporated a second metric: an affordability index. Calculated from National Home Builder Association and Wells Fargo data, the affordability score is the percent of the population who can afford to buy the median-priced home, assuming a 6% mortgage rate. In a city like Los Angeles, No. 4 on the list, a wee 2% of homes are affordable for residents pulling down a median income


1. San Diego
San Diego, Calif.
Median home price: $601,800
P/E: 5th highest
Affordability rank: 2nd least affordable
Housing price trend: -4.5%


2. Miami
Miami
Median home price: $371,000
P/E: 9th highest
Affordability rank: 6th least affordable
Housing price trend: -6.2%


3. Sacramento
Sacramento, Calif.
Median home price: $374,800
P/E: 10th highest
Affordability rank: 5th least affordable
Housing price trend: -4.1%

4. San Francisco
Median home price: $736,800
P/E: Highest
Affordability rank: 4th least affordable
Housing price trend: 2%

5. Washington
Median home price: $431,000
P/E: 10th highest
Affordability rank: 5th least affordable
Housing price trend: -4.1%

6. Honolulu
Median home price: $630,000
P/E: 3rd highest
Affordability rank: 11th least affordable
Housing price trend: even

7. New York
Median home price: $469,000
P/E: 6th highest
Affordability rank: 5th least affordable
Housing price trend: 2.3%

8. Los Angeles
Median home price: 584,800
P/E: 4th highest
Affordability rank: Least affordable
Housing price trend: 3.2%

9. Boston
Boston
Median home price: $402,200
P/E: 12th highest
Affordability rank: 14th least affordable
Housing price trend: -2.4%

10. San Jose
San Jose, Calif.
Median home price: $775,000
P/E: 2nd highest
Affordability rank: 8th least affordable
Housing price trend: 2.7%

http://www.forbes.com/forbeslife/2007/05/03/market-housing-overpriced-forbeslife-cx_mw_0504overpricedmost_slide_2.html?partner=yahoore

http://promo.realestate.yahoo.com/Americas_Most_Overpriced_Real_Estate_Markets.html

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