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.
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. i1 D  Y9 G6 D2 m  k1 c5 aNot 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.

* A. [& R8 U. s$ @; T/ P7 YLeamer 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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  w" v, A0 |9 B, y1 |9 g4 D% ETo 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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! {3 V9 n3 N- x! ^0 u, c2 qIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.

- w% v# f1 C% zSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
" a8 j4 P  ^+ m, FSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
! _6 C0 y) y3 n1 m2 m' aNew 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" Z' h& G+ X4 N; u& NYou 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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3 Y+ Z5 o9 R" TIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

% q: F6 m4 |9 f5 C4 _If home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.

& ~" z2 F6 D: n% z Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
+ w6 ?, Y" L3 P, u( XBoston  20.5 30.2
/ k- w5 Z2 a1 P: e/ g+ N5 c! g  q2 FSan Diego  22.8 29.7
6 Q$ |0 V, U+ o( F; g. PSan Francisco  23.8 27.2
/ T  E# w  n7 _% S" w1 a. pLos Angeles  21.3 25.6
  A3 q' r  H. ^Seattle  20.4 25
Denver  17.7 23.7
New York  21.2 22.5
Chicago  17.2 20.8
Washington, D.C.  17.1 20.4

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% L# C+ _& c" {( s: BIt'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" a8 |# K3 P1 Y' t7 U1 gFrom: 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.

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醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
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[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]