Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
! Z8 U" d3 W3 E$ R4 o# m- c8 I, F6 mLeamer 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.
9 C* ?' s7 D! c. q% \3 F% j7 u
1 ]# M' J# r, Y: nNot 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.
; b8 k5 a; w& n9 q0 E5 n/ ~( x  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.

* I9 w8 ]/ Z' I; _1 {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:
- W6 {& F# O2 C$ A

" e% k7 u1 U4 d8 w" T4 nIn 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.
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.
. |6 b% ?: b$ v7 z( `6 p+ zYou 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.
' F& Q8 o: l# F
3 M  ~  {$ c" J. p) r& }* ~If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

If home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
: }; T' L* _+ t: L& d8 p1 b
Home P/E ratios for 9 metro areas
- r5 s8 H' Y4 f0 M" F. h Avg. 1988-2000 2001
& f  ~8 D5 Y5 f, C: l9 UBoston  20.5 30.2
San Diego  22.8 29.7
San Francisco  23.8 27.2
2 H4 @1 ]1 Z- [4 o: ~" I6 v9 QLos Angeles  21.3 25.6
) d0 U" {6 {$ |7 ?9 q) I: Z- M6 WSeattle  20.4 25
Denver  17.7 23.7
New York  21.2 22.5
; D$ L! s2 L+ ^- _9 p9 O4 R8 B% pChicago  17.2 20.8
Washington, D.C.  17.1 20.4
4 @5 @  W3 f' Z! w8 j8 f& p

! U. s9 c4 I4 C4 r
+ R& o2 }! l! vIt'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 B  O, [! W* D

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.
) m% X) i+ v- A1 j$ s1 w/ p
it would be a good reference.

  Y+ ^" S4 t3 N( I% \thanks

醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
7 p2 T/ h" m- W+ G5 n3 y: }; V
" y( y0 a% U$ w* N' v0 j[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]