Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
% @. Y5 y& {" B: R+ [Leamer says he can tell because homes, just like stocks, have a price-to-earnings ratio (P/E) that he believes determines their fundamental value. The “earnings” part of the ratio consists of the annual rent the house could command. Homebuyers can compare current P/Es with historical levels, Leamer says, to get some idea of whether houses in their cities are becoming overvalued.

1 Y$ ~/ X6 y& w+ U$ j# eNot everyone buys the idea that P/Es dictate value. But investors who completely ignore P/Es do so at their peril, as many have learned in recent years. Leamer, who heads the prestigious Anderson Forecast at the University of California in Los Angeles, points out that the P/E for the Standard & Poor’s 500, a key stock benchmark, was nearly double its previous historical high when the stock market bubble burst in 2000. When home P/Es peaked in California, Boston, Dallas and other markets in the mid-1980s, devastating real estate recessions followed.
# W& n$ k0 O7 A; ^3 Y
Leamer didn’t invent the concept of P/Es for homes. But his willingness to proclaim bubbles in several of the nation’s hottest markets has brought him lots of attention recently.

5 ^% ^8 ?" T4 ]! TTo calculate P/Es for entire cities, Leamer divided the median home price in each by the annual rent for a two-bedroom unit in each city -- and looked at P/Es each year since 1988. Here’s what he found:

7 W9 o+ D( v0 x; L
0 Q# w% Q. h4 d1 ^5 {In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
  j7 [6 M4 P. v+ b/ s
San Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
" w+ K( ?) ^! |' ~San Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
9 J: m3 J( H$ U0 y# Z+ |# k! J4 p+ KNew York, by contrast, is actually well below previous peaks. The area’s current 22.5 P/E is above its recent nadir of 17.6 in 1993, but down from 28.6 in 1988.
$ `% A  t9 h" U8 eYou don’t have to know exact P/Es, however, to spot signs of trouble, Leamer says. Any time there’s a disconnect between prices and the underlying value of homes, as measured by their market rents, there’s the potential for a bubble.
3 v# r/ U8 }/ Q' _7 ?( F
3 o6 X, O% N5 B! f: p! }2 OIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
) f5 n+ B/ z! O
1 N$ X! _8 V$ N8 GIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
8 k  {. ]6 j2 A8 `1 s* P
Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
Boston  20.5 30.2
San Diego  22.8 29.7
San Francisco  23.8 27.2
" `; g* ~" T. ?Los Angeles  21.3 25.6
Seattle  20.4 25
, y4 k. y7 r/ |' _4 XDenver  17.7 23.7
  f" w" K/ [9 k' d* M5 gNew York  21.2 22.5
Chicago  17.2 20.8
* B0 I1 F$ a( {7 n& OWashington, D.C.  17.1 20.4


& O/ s- B; M# _2 L: [. _
It's difficult to compare P/Es from one city with those from another. P/Es in Atlantic City, N.J., have wavered between 17.3 and 11.6 since 1988; in San Diego, P/Es have not dropped below 20. But you can look on the P/E as a measure of risk -- that is, the higher the P/E is above its average level, the greater the risk, no matter where you live.

2 i. r" L. D/ g! C& A
From: http://moneycentral.msn.com/cont ... ingguide/P37631.asp

CANDYMAN

Who has the P/E for Edmonton for the last 20 years, please post it here.
! z- ^& O. v, Z
it would be a good reference.
  ]3 v. j& I/ n5 B
thanks

醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.

[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]