Word: prices
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...Granted, price-rent ratio is hardly the last word in predicting home prices. Economists who use these numbers (including those at Economy.com) take into account a lot of other factors when forecasting, like housing affordability, population trends and how incomes in an area are changing. Price-rent ratio is the quick and dirty way of doing it - but that also makes it more accessible. It's easy to look at a price-rent ratio of 21.7 in Miami, compare it to a 15-year average of 16.8 and realize the market still has quite a bit of room to fall...
...trick of the real estate trade is price-rent ratio, sort of the property equivalent of a stock's price-earnings ratio. What it's saying lately is encouraging, though not downright bullish...
...Here's how it works: if the price of buying a house divided by the cost of renting an apartment is higher than usual, then houses are more expensive than they should be. A lower-than-normal ratio suggests good value. Changes in these data are of interest not just to potential buyers trying to figure out if it's time to finally jump off the sidelines but also to current homeowners wondering how much more pain they're due for, as well as to policymakers angling to prop up prices. At TIME's request, Moody's Economy.com ran numbers...
...first pass, the data suggest we've largely come back to earth. The average price-rent ratio for the 54 metro areas Economy.com broke out was 19.8 for the three months through September, a couple of points higher than the 15-year average of 17.7 but significantly lower than where the ratio stood three years ago, 24.4. By doing some additional math (which we'll explain later), we can surmise that house prices still have to drop 4.6% over the next five years, assuming the price-rent ratio returns to normal over that period. Funny how that almost doesn...
...trickle of Russian gas pumped via Ukrainian pipelines. Ukraine is pivotal to Europe's gas supply; about 80% of Russian gas normally flows through Ukraine, and Russia provides 25% of Europe's gas. The latest cuts are the result of a dispute between Russia and Ukraine over the price Ukraine should pay for gas. Russian energy monopoly Gazprom says the per-unit price of $179 that Ukraine pays is a subsidized relic from the Cold War-era and that it is no longer offset by Ukrainian pumping services for Gazprom's clients in Europe. Gazprom wants to raise the price...