The Economist defines fair value of housing as the long-run average of two measures:
the price-to-income ratio, a gauge of affordability, and the price-to-rents ratio, an analogue of the price-to-earnings ratio used to judge the equity value of listed firms.
By these measures, here’s their table on key undervalued/overvalued countries.
Note the U.S. is 19% below fair value.
That said, the U.S. is an absurdly large sample size, as I discussed last week.
That piece was the latest in my series on how to price a home locally. It’s a must-read on methodology of national home pricing, and why lacks local relevance.
–Downdraft: Global House Prices (Economist)
–Interactive Tool: Global Home Prices & Rents (Economist)