How will you know when home prices have finally bottomed out? What indicator has a long term record of accurately predicting home prices?

Online After-The-Crash Home Price Calculator - based upon P/E Ratio

Believe it or not, PE Ratio is the one indicator that has stood the test of time in the long run. In fact, for more than 100 years it has reliably shown what the equilibrium value is for real estate assets - both commercial and residential!

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 linked to 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, so you will have to add them yourself to get a more accurate picture.

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.

Calculate the price of your home after the crash!