Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
3 d' ?) S2 U8 ^4 Z- m. k0 tLeamer 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.
, ]- }+ D# n/ b  _4 _9 R7 s
Not 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.
! w9 w4 t- d: b" J# F
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.
( I6 w1 ~2 L8 }, M5 K
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:

* y. P' Q/ v4 T4 v
3 j/ B+ \6 {# b( n, F& XIn 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.
1 {4 P/ c% m( p* g) x2 M3 I* [! VSan 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.
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.

7 p. n, G5 a; Q/ e+ d) f) {% dIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

9 U# |# S) P& {' t& A  h6 mIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
  s2 u6 `( A7 t8 Q2 b+ k" U
* ]/ S) w3 o) ]' e1 W! a Home P/E ratios for 9 metro areas
, _0 c( a9 Q' ?1 c Avg. 1988-2000 2001
Boston  20.5 30.2
San Diego  22.8 29.7
San Francisco  23.8 27.2
Los Angeles  21.3 25.6
9 ^% z1 {" g' c- x* s5 q& c6 dSeattle  20.4 25
5 ^- H2 T2 ^/ EDenver  17.7 23.7
7 S5 X  E3 u( i, M. {New York  21.2 22.5
" x7 N& Y9 H2 `0 i9 Q: RChicago  17.2 20.8
8 D! C% C. L1 e! `9 GWashington, D.C.  17.1 20.4

- h4 c% d/ F. @; E
( n$ u1 H# y. a1 z: N
: Y* P% A4 T6 g. n5 G4 h( R0 tIt'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 k& M( n: b/ T, h: g

/ m2 h% g. K7 p( x  `. BFrom: 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.

% R1 C2 H: ^: f) M' n7 u5 w+ S) Ait would be a good reference.

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 ]