Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
2 a* V, o4 h0 jLeamer 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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9 G& C* ?8 C/ W. j1 _; CNot 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.

7 M; U  W) I& xTo 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:


7 z/ C& E' f% Q% t, I! F7 pIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.

7 Q4 J0 a% `  O5 G  P& FSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
) ]$ ]* G; k$ z6 }. W' _San 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.
4 F0 Q5 V& v, S% |- ~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.
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% w3 z8 ]4 Y: k9 M) H4 v# wIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
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# }: t+ N" I( b6 RIf 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
Avg. 1988-2000 2001
9 s+ g0 p2 t# y9 r; _( P% z# n8 ABoston  20.5 30.2
San Diego  22.8 29.7
. I9 Y8 [7 _' v9 n: p2 TSan Francisco  23.8 27.2
  F) D9 ^1 o& y) R  |Los Angeles  21.3 25.6
Seattle  20.4 25
Denver  17.7 23.7
4 O  v& ?: k/ E+ r8 [( f( d% ANew York  21.2 22.5
) i4 A4 c% |7 RChicago  17.2 20.8
Washington, D.C.  17.1 20.4



+ |! E6 c; C- m" hIt'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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1 U& A/ w' j+ s4 @+ UFrom: 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.

# Y; \  C) T1 S  ?, ~$ Z; ]8 Y- V  v' qit 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.
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$ x7 M7 B( \) J/ t9 y2 T[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]