Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
3 Q7 I, u* r2 p8 ~3 c- d1 ]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.

' w( [: n  V: q" N, Q9 p2 A( E5 O6 t* QNot 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.

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.

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:


In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
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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.
; k5 x- S2 X+ A; DNew 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 I0 z, f# \) ]3 K, qYou 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.

' j5 J9 B% J+ C, I! XIf 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.

Home P/E ratios for 9 metro areas
' }$ n6 h) a* h6 X+ f5 P Avg. 1988-2000 2001
+ |/ g; |. m9 m! kBoston  20.5 30.2
San Diego  22.8 29.7
San Francisco  23.8 27.2
6 i6 ^. `" [) }$ J  z$ }Los Angeles  21.3 25.6
Seattle  20.4 25
Denver  17.7 23.7
New York  21.2 22.5
; M+ `8 f# [8 H1 R* f9 [* i' KChicago  17.2 20.8
& }* J! w/ D& E7 Y0 tWashington, D.C.  17.1 20.4



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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& T/ L2 W1 P! C! L# w) hFrom: 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.
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9 }# _6 e- o6 Z0 g3 W3 Qit would be a good reference.
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7 v; d0 Q6 @+ Athanks

醉酒当歌

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

& y# r  Q2 ?1 ~& W" X8 ^[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]