Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
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.

, h4 g# f0 K7 a" O, }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.

+ v! E7 U) K( B% sLeamer 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.

7 _6 H# B" [* [* CTo 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.

. P$ r: Z" g6 U' A  cSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
  X( c, T, \% E! {6 [+ E, J+ o# i- kSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
6 O, y2 \; ]+ qNew 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.
1 w# K3 J' J5 s* `5 g5 M& g7 xYou 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.

$ r7 @6 P$ \5 M# `/ C6 O" NIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
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6 m4 D9 J- T  K! c1 e  I9 v6 N0 @If home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
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Home P/E ratios for 9 metro areas
- e( E/ S3 R0 ?$ t5 H7 B; s! f Avg. 1988-2000 2001
0 k  r  B& z; L. _* M+ r" LBoston  20.5 30.2
San Diego  22.8 29.7
, z( i& J; c; Q1 GSan Francisco  23.8 27.2
& g( I# {( C8 @6 q; r% fLos Angeles  21.3 25.6
Seattle  20.4 25
% P6 C% C. }4 q' k- ]5 a/ Y5 PDenver  17.7 23.7
2 g3 l$ M$ Z# o: ONew York  21.2 22.5
; Q, n. \( g! {8 c" x) j: xChicago  17.2 20.8
Washington, D.C.  17.1 20.4
/ M, L, R( {: V3 S5 m9 H
8 ^8 a  U6 }$ G$ Y  M* S* R; A, m
" {- R+ }4 ^3 Z& W& M5 g( Y' G& L
- G6 v$ ^, d  ]- Q  _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.


# k+ w# X0 {0 p0 S4 \9 T% q& d6 fFrom: 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.

it would be a good reference.

' D. h8 o0 }& [; e* B6 I" Gthanks

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 ]