Thursday, September 11, 2008

America's Most Overpriced Zip Codes- Rose City Park, Portland

A reader of the blog sent me this nice report from Forbes:

In a report for, produced a price-to-earnings spread for each ZIP code in the nation's 40 largest cities by comparing rental costs with buying costs for similar properties, based on number of bedrooms, location and price per square foot.
Price-to-earnings, or P/E, expresses how much one has to pay for each dollar of return. A neighborhood with a high P/E is overvalued because a buyer is getting a low return based on costs--and paying a huge premium to live in area relative to how much it would cost to rent a similar property there. In TriBeCa, for example, which is No. 1 on our list, the P/E of the measured property is 36.3.
A high P/E can be a sign of an investment being overpriced, but a rock bottom P/E doesn't mean a bargain. In fact, when you get into the single digits, you're usually buying a weak investment in an area few are interested in. Detroit's 48235, around 7 Mile Road, for example, has a P/E of 3. It is inundated with foreclosed properties and houses going for as little as $25,000. It's hard to put an exact epicenter on Detroit's real estate crash, but this neighborhood is in contention.

Guess what! Rose City was ranked the ninth most overpriced zip code in America.