Neighborhoods Where the Bubble Hasn't Burst

In a report for Forbes.com, Hotpads.com, an aggregator of rental listings, produced a price-to-earnings spread for each ZIP code in the country's 40 largest cities by comparing rental costs with buying costs for similar properties, based on number of bedrooms, location, and price per square foot.

A price-to-earnings ratio, or P/E, expresses how much a buyer has to pay for each dollar of return. Buyers in high P/E neighborhoods pay a huge premium to live in the area relative to how much it costs to rent a similar property there.

A high P/E can simply mean a neighborhood is overpriced, but it can also indicate where buyers have gambled that the area will ultimately appreciate further, turning an overpaying buyer into a smart investor.

Here are 10 neighborhoods, by ZIP code, where P/E is highest, but so is the confidence that the area will appreciate further:

New York, TriBeCa, ZIP code 10013, Purchase-to-rent spread: 36.3

Boston, Chinatown, ZIP code 02111, P/E spread: 30.5

Seattle, Downtown, ZIP code 98104, P/E spread: 30.3

Los Angeles, West Hollywood, ZIP code 90038, P/E spread: 30.2

San Diego, Calif., Mission Hills, ZIP code 92103, P/E spread: 30

San Francisco, Outer Sunset, ZIP code 94122, P/E spread: 28.5

Phoenix, Coronado, ZIP code 85006, P/E spread: 27.1

Dallas, Greenway Parks, ZIP code 75209, P/E spread: 26.7

Portland, Ore., Rose City Park, ZIP code 97213, P/E spread: 26.6

San Jose, Calif., Willow Glen, ZIP code 95125, P/E spread: 26.1

Source: Forbes.com, Matt Woolsey (07/29/2008)