Yes, I believe price/rent ratio is a good measure for housing market health. Check out the ratio for major markets.
From
New York Times:
In the last five years, the rent ratio in many coastal cities has more than doubled, according to an analysis for The New York Times by Economy.com, a research company. In San Francisco and San Jose, Calif., it has spiked to nearly 35 on average - or about equal to the price-earnings ratio Microsoft's stock reached in 2000. In West Palm Beach, Fla., and San Diego, the ratio is almost 30. In New York, Miami and Los Angeles, it is about 25.
A typical three-bedroom house in Mill Valley, Calif., about 10 miles north of the Golden Gate Bridge, now costs about $1 million, said Vanessa Justice, a real estate broker with Cagwin, Seymour & Hamilton there. A similar home would cost less than $40,000 a year to rent - for a rent ratio of more than 25.
Some of these regions seem to be the places Mr. Greenspan was describing when he said last week that there were "a lot of local bubbles" in housing. Speaking yesterday at a conference in Berlin, Roger W. Ferguson Jr., the Fed's vice chairman, said, "Right now, housing prices in many markets in the United States are relatively high when judged by conventional valuation measures."
