Does P/E in real estate valuation matter?
The other day Dan at the Bayosphere linked to this site. One of the comments for that entry had this to say:
Home Prices and People’s Long-Range Dreams | Bayosphere
By-the-by, you DO understand that P/E is a real estate valuation model is almost useless, right?
Is it?
Does it make sense that if you buy a home and spend $4000 a month in PITI (Principal, Interest, Taxes, and Insurance) – that you can only rent it out for $2000 a month?
Maybe a P/E ratio of 1 is old and busted, and that a P/E ratio of 2 is the new hotness. Maybe homes in the Bay Area are meant to have Silicon Valley style P/E’s!
Maybe Taser can relocate here and help drive the P/E ratio to be closer to theirs… you know… 496!
