Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
; |7 ]6 s% z3 e; ~. vLeamer 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.

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.

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.
3 j( o+ j& r1 k' C
  o* v3 s. `; V/ y) vTo 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:


! J' ~+ q5 W# G: ZIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
8 u. _  D+ L, t
  V6 Z. a$ Z+ L8 D0 o9 g* b0 @5 `San Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
! h- U. f4 V  Y* Y' y# RSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
' h2 }# [$ @3 e8 UNew 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.
* e2 i! E+ n9 u$ f% |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.

If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

2 \* L, X2 O# s' B6 AIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
3 [9 R" Z! U  Y) p: |6 O3 i
Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
Boston  20.5 30.2
San Diego  22.8 29.7
San Francisco  23.8 27.2
, b1 O' @8 e( N1 n3 n1 aLos Angeles  21.3 25.6
# }' x* v1 N% B) I# I$ [Seattle  20.4 25
9 m7 w0 n1 _  @& \  `7 C+ n% B5 `Denver  17.7 23.7
" v* \* G, [) cNew York  21.2 22.5
9 b' A% ^$ X3 W8 F" K, zChicago  17.2 20.8
Washington, D.C.  17.1 20.4

0 I3 [% g$ y8 A3 x- l9 J- @

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.


7 `+ L: n3 Q/ p' J( T2 XFrom: 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.
4 l; |) T" ^$ |1 V* N
thanks

醉酒当歌

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

" [; y6 r( p  m: h3 ^" O) m[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]