KILKENNY -- After returning from 12 days in the States, I'm convinced housing is overpriced in many areas. That's the opinion of Alan Greenspan of the Federal Reserve as well. And since Fortune magazine gave its cover story over to the same topic last week, we can assume the bubble is popping in some markets.
According to the New York Times, "the easiest way to gauge a home's value is to borrow a tool from the stock market. In the most basic method of analyzing a stock, investors look at its price-to-earnings ratio, a comparison of a company's share price with its annual profit. The higher the ratio, the more expensive a stock is relative to its underlying value.
Houses have their own version of such a ratio. Take the price of a typical house in an area, divide it by the amount that house would cost to rent for a year and the result is what might be called a rent ratio, an imperfect but still telling measure of real estate.
That ratio today shows that housing is not nearly as overpriced as stocks were in the late 1990's. But many areas are showing signs of irrational exuberance.
David Leonhardt -- "Is your house overvalued?"