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Here it is the middle of the night and you can't sleep. A fist of cold steel is gripping your heart. You are fighting off the panic that is trying to steal your breath. Your stomach is in knots and you feel like you might throw up. It's a crippling state to be in.

Your castle, your haven from the world, YOUR HOME -- the place so full of your dreams, time, sweat and hard earned cash is now at risk of being taken away and it's gnawing at your gut.

You (and possible your wife, husband or a partner) have put yourself on the line -- and something just happened to shake the balance of what was going on in your life and rock your world (not in a good way)...

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Get a calculator like the one on this page for your webpage or blog! Follow this link to get the embed code for the "After The Crash Home Price Estimator".     >>>More...

 

 

Home Value Calculator

What is the real value of a home after the crash?


Historically, the value of a home fluctuates as property markets experience booms and busts - there is, however, a time-tested constant value of determining the default value of a home based upon its PE Ratio.

 

The calculator above will give you a rough estimate of your home's value when all of the smoke clears from the current bust. It may take as long as 3 years to get there, but get there it will.

 

Rental markets provide a support for property, as some 40% of US residents are renters - home prices always revert to a mean PE Ratio (Price/Earnings Ratio) of 15-17.

 

Real Estate is no different than any other investment, in that the price of the investment will be a function of the income that investment can generate. This calculator ignores many other complicated variables such as property taxes and common fees for homes which have a homeowners' association. This calculation is a rough estimate but will determine the value based upon Price/Earnings Ratio - ignoring things such as taxes, fees, maintenance costs and vacancy rates.

 

Another thing to consider is that when the economy tanks, rental prices can go down along with home prices, and vacancy rates can rise- further skewing the measurement. While predicting future prices is highly complex, determining present PE ratios, is not.

 

There are numerous articles on Historical PE Ratios, and people are now beginning to apply this to Real Estate Markets. Investors in financial instruments have long been familiar with PE Ratios and their constancy over time - in the long run.

 


 

If you want to read more on that subject, here is a Google Search that will uncover more information for your perusal.

 

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Historical P/E Ratio

    There have been a lot of articles in the real estate press lately about the historical P/E Ratio for homes.

 

    Just like other investments, home prices also can be evaluated upon the basis of a P/E Ratio.

 

    A P/E (or Price/Earnings) ratio is the ratio of the price of an investment divided by its potential earnings. Just as for stocks and other investments, there are 'equilibrium' PE Ratios for homes - the magic number is around 15. A PE Ratio of 15 is about the historically correct price for real estate in a normal market. When the bubble bursts, the ratios will go below this for a time and eventually come back to equilibrium.

 

OKAY, SO HOW DOES IT WORK?

So if your home would rent for say, $2000 per month, that is $24,000 per year. Multiply that times 15 and you get $360,000.00 - the equilibrium value of your home. That is a very simplified way of looking at it. A real investor would deduct costs, such as taxes, maintenance 5% for vacancies and other, but in a nutshell, these ratios have stood the test of time.    

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Articles on P/E Ratio

Your Castle's P/E Ratio - Forbes Magazine

Housing Bubble (Wikipedia) - Read more about the housing bubble

Price Earnings Ratio (P/E Ratio) - Investopedia

 

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