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Is there a house bubble in Edmonton?

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发表于 2007-1-13 10:30 | 显示全部楼层 |阅读模式
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How to figure a home's fundamental value6 k& ]8 O6 @- v
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.3 T3 [% e* v5 f" ~8 [; V8 w, L

1 C: W" T& Z0 F4 A6 n0 }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.
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6 @4 n  {; }( f4 WTo 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:" [# t# q& y$ y$ m' _

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In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.1 E  E9 U. R9 |

* ^1 |; X) R7 u# d# H  i% G" lSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.2 D, E# t; y* v5 _0 \2 B' F
San Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.4 u- D' l+ Y6 j- e+ a8 t2 ?7 v
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.- G) {( S: J* u( T+ C8 \; P2 O
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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3 T/ `4 e) M* H1 m4 }/ YIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.' Q5 H% y' l# a( u8 i- Q

# \1 M) g8 I/ Z: v; y. Q' V$ UIf 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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2 ^: Q3 D4 N, E& G5 V; x% R Home P/E ratios for 9 metro areas 1 r- g$ C* f8 h0 |) C$ L* e" [
Avg. 1988-2000 2001 " T, m5 m4 K* ?  O$ @$ ?
Boston  20.5 30.2
7 l( m% K6 {0 l! a2 p1 HSan Diego  22.8 29.7 8 d$ Z) s! [! d: P% i$ d9 P
San Francisco  23.8 27.2
. q. M6 m2 ~0 q8 U/ `Los Angeles  21.3 25.6 . j7 x- P5 i& e
Seattle  20.4 25
0 P# F- n% E8 O4 N; X% GDenver  17.7 23.7 3 [0 U. d" A+ M  z: S
New York  21.2 22.5 ! i, D4 G& B1 ], q' M6 |) h( o
Chicago  17.2 20.8 / y! m- u  V7 G& j( A
Washington, D.C.  17.1 20.4 8 v/ p4 R) R% |; u, A0 F2 l$ V

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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.: z: `# d1 d! e4 E4 T% I: s

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* _" T/ ]" D- B# Z( a5 EFrom: http://moneycentral.msn.com/cont ... ingguide/P37631.asp
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发表于 2007-1-13 12:43 | 显示全部楼层
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.
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thanks
鲜花(150) 鸡蛋(3)
发表于 2007-1-14 16:40 | 显示全部楼层
20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
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; q9 \" z* s' g0 j7 _[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]
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