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Think Real Estate is Expensive In Your City? Think Again!

August 25, 2007 on 2:52 am | In Real Estate News | 1 Comment

It’s no secret that home prices have surged over the past few years, particularly in the already price Northeastern United States and the West Coast. It’s sad when you live in one of these areas, and see that you could have 2 or 3 times the house for the same price in the south or midwest…

But quit your crying, it could be worse! Forbes has just published a list of the World’s Most Overpriced Real Estate Markets. Here’s a taste:

Monaco’s housing market earned a P/E ratio of 74.07. What’s more, the well-earned moniker of “tax haven” apparently doesn’t apply to transaction costs, which rack up to a 20% premium when buying and selling a property.

Rome landed at No. 2 with a P/E of 50.51; it’s a slow growth market, which remains very expensive. Representing North America in the world’s top 10 were Los Angeles (5th place at 26.88) and Vancouver (6th at 26.81).

Who cares about cities outside the US you say? Well, Forbes supplied a list of America’s Most Overpriced Real Estate Markets as well.

Take San Diego. A slumping housing market, where only 5% of residents can afford the median home, and a high price-to-earnings ratio made the oceanfront city our most overpriced real estate market. Had weather been included as a statistical measurement, there’s no doubt San Diego would have avoided our list of top 10 most overpriced cities–but we didn’t factor in sunshine.

We incorporated a second metric: an affordability index. Calculated from National Home Builder Association and Wells Fargo (nyse: WFC - news - people ) 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.

(emphasis mine)

Read on and thank God, your lucky stars, or whoever it is you thank, that you aren’t crying yourself to sleep in your checkbook every night like the folks in these cities.

Tags: unaffordable real estate, affordable real estate, expensive homes, home prices, expensive real estate, real estate prices, affordable homes, unaffordable homes