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.
$ [$ i3 a. n- D% U* 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.
9 a! C7 W) J5 F7 j: x0 s( ]/ s
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.
* B% P! l& _" L9 y5 h" G5 y
5 E6 D0 a, o. k) ^' m  L5 a4 n! ATo 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:


8 B) O3 w, W7 W  ZIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
2 a( \7 C; n3 j9 k2 O
San Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
' L; o* e0 @9 M$ BSan 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.
; ?  }5 {' X  y" j, N( h( M, SYou 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.
# j, V! B: r' U; u/ q
) W1 j$ }8 ^8 z) ~3 F; [If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
7 R3 O7 G* r' r9 n9 K
If home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.

9 U( i" k5 R: b3 b  i4 ~+ u1 l Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
/ }8 w2 x9 E! L$ X, B% Q: P' ?: ABoston  20.5 30.2
San Diego  22.8 29.7
: x6 {: i! s; p6 _; mSan Francisco  23.8 27.2
Los Angeles  21.3 25.6
Seattle  20.4 25
  T4 |: L) Q/ V) @Denver  17.7 23.7
New York  21.2 22.5
1 y6 I" A3 z8 h/ _1 y; aChicago  17.2 20.8
Washington, D.C.  17.1 20.4
; v* b; m2 {6 ?7 B# p8 g


" B. o( D$ x4 T4 v2 F( CIt'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.
- i8 q7 s! d% T! v" I; N
$ f1 p$ I. L+ s5 i/ S* c! y
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.
6 a; V4 e0 h$ S  ?
* Z, ^6 j: I6 t0 A6 T9 r8 Z& Fit would be a good reference.

thanks

醉酒当歌

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

# m: O7 m' A+ ?9 c1 A8 L- Q- \- T[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]