Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
7 r6 s1 K4 @7 y3 \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.
7 h+ F+ F- P4 I6 M0 q" U
8 z1 I/ B/ U, ONot 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.

4 [5 h* y- v/ [6 f0 K, NLeamer 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.

; Q; F2 j) Q9 t8 YTo 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:

% x+ ], \5 _0 Y# c
In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.

San Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
- M) b6 I1 G& W& D5 tSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
7 G) M6 @5 u% `- n% C0 d  fNew 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.
3 m$ ~: R) G" T( |/ DYou 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.
6 @3 ^# A, X( Q6 }8 M" h
If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

/ g, e, v4 G+ s' JIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
( C. K# D1 U3 V4 i, m1 k4 M" @: p1 m
% Q9 h2 V+ F" a5 D( g Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
Boston  20.5 30.2
San Diego  22.8 29.7
  e6 h( H9 j! r* l! s# C  tSan Francisco  23.8 27.2
Los Angeles  21.3 25.6
Seattle  20.4 25
: F/ n* I8 W/ j. e5 v8 ]Denver  17.7 23.7
: ^; Z% h) \: D7 G3 KNew York  21.2 22.5
* U4 [7 D" t. |. ^7 P8 p; t7 MChicago  17.2 20.8
5 G- ?( m" B/ ^4 H3 oWashington, D.C.  17.1 20.4
: h  B+ `* j: z0 F: A
& r# B' ~  f; p7 L& c/ ?4 p

: G$ ?1 N, {% H  i4 c& ?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.
# v% W, J) P& H! r8 B
. f( S' ^7 `( ?& c! l: G/ i
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.
% Q# W& w6 A3 Q$ @6 y6 d
it would be a good reference.
* m0 O9 E1 C: X
. d# |# [5 y. H) d6 d. H4 p/ Kthanks

醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
9 L+ W0 I. H+ d: t4 r' O2 k1 Q% N; s
[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]