You might recall our previous discussion about San Francisco’s housing P/E. In summary, it’s out of whack.
From an investing perspective, while the cost (Price) of an investment in San Francisco real estate has risen, the returns (Earnings) have remained flat. This suggests that the majority of buyers are banking on appreciation (i.e. speculating), which is not a problem as long as the market continues to climb. Either that, or rents have to go through the roof…
· Area rental prices ignore housing bubble [Chronicle]
· Modest rise in apartment rent [Examiner]