If you haven't yet read this well-reasoned critique of the CAPE stock market valuation metric, you should.
The Shiller CAPE, as constructed by its proponents, utilizes inconsistent data. In this piece, I'm going to explain the inconsistency in rigorous accounting detail, and then share the results of a modified version of CAPE that eliminates it. I'm also going to illustrate the distortion that changes in dividend payout ratios create for CAPE.
"In 1960, about one in four renters paid more than 30 percent of income for housing. Today, one in two are cost burdened," according to the study, America's Rental Housing.
"Cost-burdened" means you're paying more than 30 percent of income for housing and "severely cost-burdened" means you're paying more than half. "By 2011, 28 percent of renters paid more than half their incomes for housing, bringing the number with severe cost burdens up by 2.5 million in just four years, to 11.3 million," according to the Harvard study, which was conducted with partial funding from the MacArthur Foundation.
See our statistics on rent as a fraction of income.