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.
, @* Y5 o% P* p) v1 z) v, Y
1 q3 r4 U9 q0 K0 O; J  ?3 QNot 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.
6 I4 A1 K8 X! [& L
6 `9 u( \: p1 T* N) @8 GTo 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:
- ^$ @9 F( B9 `+ i! R& w, l

& g4 }- M7 s# u+ k0 SIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
/ f) O& |# j" G, x# t( z  s
4 {4 H/ R6 ]& \! _7 K% ZSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
San Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
" z! e5 Q* t: ENew 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.
1 U8 s1 o$ U" c% G0 Q& ]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 ?: w5 p: s' B) u7 e2 m0 ~# DIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
) S+ t5 R5 z3 R+ I6 \8 Y
, O: T& T. C0 e. OIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
7 O3 k0 y# `! A- E  y- H/ H
Home P/E ratios for 9 metro areas
; t$ F, \4 d  Z) Q" }% W0 Q Avg. 1988-2000 2001
* w! Z. F/ x# o0 VBoston  20.5 30.2
9 n( `7 m2 Q2 @  }/ v  ESan Diego  22.8 29.7
) }4 m4 N5 g3 s* nSan Francisco  23.8 27.2
. \3 R7 J* q  N, f* z" YLos Angeles  21.3 25.6
) H% H( o$ o, @' DSeattle  20.4 25
  Y8 [& ]- k( S1 D  o% FDenver  17.7 23.7
/ o9 y) @+ c6 D/ e. \New York  21.2 22.5
Chicago  17.2 20.8
; d/ V  @% O/ HWashington, D.C.  17.1 20.4

% }% N/ K3 G) t
" u0 O1 }8 e7 ]8 J) h
2 r# S6 Q: K6 lIt'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.
! ?! H3 Y: j! H- L

+ u4 e" }/ }9 M$ j; mFrom: 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.
& \* w( S) b. l8 X" F' `* `
it would be a good reference.
( H/ ^: V, h* F, |, I/ v
, i* Q( U1 z9 g  g" Q' s+ k# P. dthanks

醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
# h- r! w  F: v4 B) O
/ W) c( l4 F* A7 s0 f2 N: y( m0 {[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]