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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 value: ~/ N: Y& e  Z) x* 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.
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* \( E( ]) z# uNot 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." v2 J) l! r  C' C6 h4 r
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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.
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% v$ l& Q  Q  yTo 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:
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  G1 c8 Q, Z1 CIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
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& @$ n3 i9 g$ R. |( bSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
2 B+ _% B9 ?. t1 B! CSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
5 m7 l6 d( i( z" PNew 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 1988.6 }# z" O3 U, Q
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. / l' v5 Y  ~4 x5 k" f) o
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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.$ [, j6 P( A2 f4 X% L0 f" V( N

4 q9 m: C6 H& @) T; d# k+ fIf 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 ' I6 k, ]* k% G; I- u
Avg. 1988-2000 2001 ' A& Y$ S6 p$ o* R  i
Boston  20.5 30.2 2 ]3 j6 |5 H* s' `
San Diego  22.8 29.7 4 B+ H3 Z* M" e
San Francisco  23.8 27.2 7 G2 O  _4 u; B: z9 t, p
Los Angeles  21.3 25.6 ' v; ]/ \3 R. Z' O
Seattle  20.4 25 ' q. C) z5 Z+ i; B4 a' x7 H
Denver  17.7 23.7
9 ?$ l! d( L3 D& INew York  21.2 22.5
& ]5 }8 m& f2 m4 Z+ ^! c! zChicago  17.2 20.8 , s3 I9 ~9 h- t9 r6 `( K7 h9 g
Washington, D.C.  17.1 20.4 2 B9 z# M6 Q( Z: T0 @

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+ t* Y7 m/ T" H& tIt'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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From: http://moneycentral.msn.com/cont ... ingguide/P37631.asp
鲜花(49) 鸡蛋(0)
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.( ]% ]' r; b; {
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it would be a good reference.
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5 Q: K2 s2 m/ Zthanks
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." M2 g+ E/ r& f* o
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[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]
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