“…housing has to revert to the basic value where HOUSE PRICE = 8 * ANNUAL RENT.”
In San Diego, I believe that this ratio was actually more like 10x or 12 x annual rent. Where does 8x come from ? National figures ?
I purchased a house in Clairemont in 1996 for $163k. This was within 1% or so of the bottom of the market, at the point which housing prices were too LOW and needed to increase to revert to the mean (mean reversion works both ways). Using your valuation (8x annual rent) gives me a rental rate of $1698 monthly.
I know for a fact that rental rates at this time were far less. I rented out this same house in 2000 for about 1300 per month.
