Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
; r. I2 y2 C  q( {* bLeamer 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.
8 n0 m+ v' g% V. ]" f
+ o0 K  ~* z! p( ]1 u% L( x2 ~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.

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:

$ C# H% V% x1 _  M6 S6 ^4 H
In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
- T: Y( b9 ~( S; X1 W2 H
: X' M" n1 Z2 e/ u/ D7 g" BSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
3 l7 {6 @- y- u3 k( C3 J# h+ MSan 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.
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.
: j( h* ^: K- Y
If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
* g  e7 K7 z* n
If home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
* q# y8 t- |. U- @: @7 i* p; i
Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
Boston  20.5 30.2
San Diego  22.8 29.7
8 B" g7 B' x! e) U. g+ b8 lSan Francisco  23.8 27.2
Los Angeles  21.3 25.6
( o9 k5 C' Q; O8 B  P! HSeattle  20.4 25
3 t) q1 v7 X* |+ YDenver  17.7 23.7
New York  21.2 22.5
! d" _9 e* V0 q) @, t, |* o: `Chicago  17.2 20.8
; f0 S: d& b! ?9 n( j# o' `Washington, D.C.  17.1 20.4



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.
6 T0 M5 [7 A  G3 R3 J$ y% F5 E9 S
$ {. E/ y% E+ I2 @9 i
; H" B5 ^" h4 NFrom: 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.
- H- v6 y0 c: ]5 L) _
* o  k& |- Y1 E6 }it would be a good reference.

8 o4 z/ R! p7 S9 R0 F1 Gthanks

醉酒当歌

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

3 H% O+ m' ?: W( `# y1 v2 O[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]