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Is there a house bubble in Edmonton?

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发表于 2007-1-13 10:30 | 显示全部楼层 |阅读模式
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How to figure a home's fundamental value1 j- }( k' l6 n5 {* N' M' N
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 A7 p( t$ i1 j% c
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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.
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, _+ d/ N: K- O( {+ H- C, q: PLeamer 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.
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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:( o4 r9 P" `( o2 v

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! p: [4 L2 o3 I+ v9 HIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.0 G9 ~, Y  _1 ~9 q
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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.! e, ~+ k0 ?8 }
San Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.& v9 C6 a2 Y! I; y9 r
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.
5 V! f/ B; v( M1 U( ~8 GYou 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.
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If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming." j. l  W. h6 s
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If home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.6 V$ w6 t& x$ N. ?6 v

6 L# O7 ^& n3 U Home P/E ratios for 9 metro areas
% z3 h  F6 [1 C& F Avg. 1988-2000 2001
0 n2 m/ c1 O/ B1 t8 u+ i% CBoston  20.5 30.2 9 n6 [: x% X9 U7 O- k- \8 O
San Diego  22.8 29.7 6 C( n$ L8 s" `. J3 n) z6 E( V
San Francisco  23.8 27.2
4 ^. O" H9 H- r4 j! LLos Angeles  21.3 25.6
. ?, J0 Z1 Y; O6 SSeattle  20.4 25
% j% V& d* W9 X) _- S  i: d& aDenver  17.7 23.7
  R! a! j; g1 `" K7 `! G. H+ QNew York  21.2 22.5
- [! d2 i5 n  D% w0 mChicago  17.2 20.8
6 |: y' y# r" |- HWashington, D.C.  17.1 20.4
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5 k4 ~( o2 K5 f3 T/ x2 x( l" x8 }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.0 }9 R; n- A7 S6 F  E' l
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From: http://moneycentral.msn.com/cont ... ingguide/P37631.asp
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发表于 2007-1-13 12:43 | 显示全部楼层
Who has the P/E for Edmonton for the last 20 years, please post it here.5 g  Y  C5 C/ s" Y2 C

8 T9 n0 H  z: l- M; K) `it would be a good reference.. E9 f$ K( a* {7 e

# ~% E" i4 Y8 U8 W; ?thanks
鲜花(150) 鸡蛋(3)
发表于 2007-1-14 16:40 | 显示全部楼层
20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
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7 x1 F( ?) z. [5 A[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]
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