How to tell if your home is overvalued

It seemed natural that with the introduction of record-low interest rates, threats of housing bubbles wouldn't be far behind. For years, the Federal government, Bank of Canada - and now, the International Monetary Fund - have warned about potential housing overvaluation across the country.

The thing is, saying that houses across Canada are, on average, 10% overvalued doesn't make much sense. Canada is a vast country - and housing markets vary drastically from one area to the next.
So how can you tell if your house is overvalued? Well, that's a difficult - if not impossible - question to answer (unless you're an economist - but even then...). That being said, I've always liked this concept that was printed in the New York Times way back in 2005. It employs a mathematical equation similar to that used in the stock market, to determine if stocks are overvalued. The equation looks at a house's "rent ratio": You take the price of a house in a typical area and divide it by the cost to rent it for an entire year. The result is the rent ratio - and the lower the ratio, the better. Typically anything under 20 is considered "bubble safe".
The article acknowledges this is an imperfect measure - mainly because it's not always easy to find out what your house would get on the rental market. That being said, it has proven to be somewhat useful - and is definitely worth a shot if you're worried about buying a home that's potentially overvalued!