Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
3 s5 |5 G6 g" @5 i1 mLeamer 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.

3 T" f+ A3 b4 x& h9 G1 tNot 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.
0 z# d. C" X0 s" k. F2 [  u
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.
) C# t' @: n/ [; X2 _/ r; J
To 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.

San Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
3 r- |, D$ V' J8 W; ~% rSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
# q# e9 E$ B: P: nNew 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.
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.
: |1 G2 g, u" ~5 H7 x5 _
* Y7 d# f1 h( y3 i/ R' iIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

3 f: E! o4 f6 M- h1 \& xIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
9 E" y2 }9 h+ v$ S' r2 c
3 A. i: F- `9 r# P% p Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
Boston  20.5 30.2
, l6 a, Q/ b7 O( f& U9 D7 jSan Diego  22.8 29.7
( ?% D1 n/ O5 J. QSan Francisco  23.8 27.2
! a; H! k, q& I' l* fLos Angeles  21.3 25.6
Seattle  20.4 25
7 G$ @3 s, k3 h% bDenver  17.7 23.7
; f! g# h! S+ E2 \! ?7 P* G2 c$ [New York  21.2 22.5
Chicago  17.2 20.8
+ M  u$ ^1 `9 j: N; U" W. z9 DWashington, D.C.  17.1 20.4
: d* g5 D% N9 v


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.


0 M) M0 Z* o1 x/ 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.

3 d+ R" X% y/ e) C* }it would be a good reference.

$ D+ c+ a% i$ p( M. h+ n' zthanks

醉酒当歌

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

5 Y0 j  C8 o8 c[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]