You make all valid points, David and I appreciate your idea on a historical study. Rents have a tremendous influence on expected market valuation. The other economic factors have a lot to say about the medium-term change in rents (population, wages, unemployment, etc).
You are correct though, it would not need to be done as the conclusions are obvious in hindsight. This type of logic though is comparable to value vs growth stock investing. No kidding Amazon would be good to buy 15 years ago, but does it makes sense as an investment today at 63x earnings, maybe but likely not. Similarly, the median home price in SF Bay area is 37x rent when other metros are selling at ratios in the teens.
We know a few things: 1) Predicting relative returns by market is a fool's errand and 2) overvalued markets can continue to be overvalued for a long time, and 3) in order for these investments to make long-term sense, they must remain relatively overvalued in comparison to more modestly valued markets. Putting it all together, investments in more "value" markets require fewer conditions to be successful.
