Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
/ S0 Q7 N0 N- n6 E* @, r/ wLeamer 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.

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.
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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:

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In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.

& z; W  `+ e9 [  ^1 y) ~$ ?% V# gSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
6 M, R% m  s9 e# S9 K& OSan 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.
& \' D9 R) A2 E, z( L4 OYou 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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  ]! q( s9 {7 F7 u" l8 e2 ~If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

1 `4 L& c+ x* y  V+ EIf 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
3 o6 `8 I( o' K; R7 | Avg. 1988-2000 2001
Boston  20.5 30.2
+ @2 L9 L% v- [' h6 V$ S. B) jSan Diego  22.8 29.7
# [& g& y  m8 |8 i8 u; W& p" ?San Francisco  23.8 27.2
9 ?# v3 O3 ~( l0 V8 p6 a0 xLos Angeles  21.3 25.6
; ^; n. I0 k( l( I+ a6 f5 T: LSeattle  20.4 25
Denver  17.7 23.7
- P: h" X! u6 M  t  uNew York  21.2 22.5
+ X8 Z, _3 j/ {- P$ P. |Chicago  17.2 20.8
: I6 \  y# X2 `6 OWashington, D.C.  17.1 20.4
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- G# V# C* r- a2 j4 Y4 p+ t1 UIt'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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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.

% [  H. o# Y! G$ wit would be a good reference.
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" ?5 G5 l6 W/ J/ qthanks

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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5 J* Y7 e5 [6 X/ i[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]