Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
! ^7 i2 u1 q, cLeamer 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 J# E& P0 Y8 W8 R* X/ wNot 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.

2 _7 M! u: J% w. N- E; n4 p4 qLeamer 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:

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In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
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+ Y4 w9 ^2 ^; `San Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
; A2 Q# v7 G1 i- F/ M1 ESan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
  X6 H: X9 O! `1 C$ tNew 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.
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$ Z6 i+ a* q( tIf 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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  b2 ^; E( U' y6 _" aIf 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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, G( e8 E+ N5 P, E# F) W$ b Home P/E ratios for 9 metro areas
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4 _) d6 D. |2 VBoston  20.5 30.2
San Diego  22.8 29.7
# N3 k$ a* @3 `$ ?+ \$ OSan Francisco  23.8 27.2
  e! C$ V/ H/ R, s2 B+ |  W( bLos Angeles  21.3 25.6
: ?5 K2 \2 z1 ?- [6 }Seattle  20.4 25
" E& y6 ]! h- V' x# z% h8 hDenver  17.7 23.7
' s8 \7 \9 V: V6 @0 l. X; oNew York  21.2 22.5
8 b$ T: s. Y3 Y9 F" @0 OChicago  17.2 20.8
Washington, D.C.  17.1 20.4


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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.


From: 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.
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it would be a good reference.

7 k4 o2 Y3 g* o; a' ?/ }+ u( Ythanks

醉酒当歌

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

( J' o1 L+ c. e& W[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]