Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
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.

2 @$ H4 z3 q8 |6 S3 t: JNot 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.

+ X' }: f& l; _+ hLeamer 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.

To 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:

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1 g$ @. B5 f8 L: l: i6 Z9 e+ B; Z: FIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
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# V$ t3 z& T* a; M" v/ KSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
San Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
New 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.
; B6 i# D* g! }/ D, K! ]You 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.

, V! Z+ Z6 m8 M6 V- w0 zIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
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0 h6 ~1 `6 _( G! s. u5 {7 _- |  ZIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
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1 x7 U  y" ?- {1 F Home P/E ratios for 9 metro areas
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6 Z/ V9 e8 M$ F: ^* Z1 Z" h# @6 b8 vBoston  20.5 30.2
2 ^  d! ^/ @7 M* N, X. ^; gSan Diego  22.8 29.7
: s1 _+ Y: H: l7 N/ M( sSan Francisco  23.8 27.2
Los Angeles  21.3 25.6
# ]3 n5 r* O1 G! wSeattle  20.4 25
" Y4 P/ l1 e* a$ n, A( ?3 v8 q0 F- wDenver  17.7 23.7
" l0 Q! ~( b' b, YNew York  21.2 22.5
1 v% ^5 C9 x9 ?! z- s/ BChicago  17.2 20.8
Washington, D.C.  17.1 20.4

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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.
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8 Y' S3 V5 i  r& \  E" rFrom: 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.

it would be a good reference.

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醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
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[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]