Friday, February 08, 2008


Since market pricing for real estate is subject to significant variability based on factors such as location, the Smiths in “Bubble, Bubble, Where’s the Housing Bubble?” (Brookings Panel on Economic Activity, March 31, 2006) offered that a realistic “fundamental value” can be based on rental value since that would reflect what the surrounding community (including the would-be buyer) can afford or is willing to pay. It has nothing to do with what’s fair in pricing. In a community in which there is a high demand for housing — as is the case around Hawaii — renters may share the unit to be able to afford it, but if they pay the rent, that establishes value.


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