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.

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.

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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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:


! `* z$ F; T7 A# x0 [8 `4 pIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.

San 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.
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.
5 p, x' P7 N0 rYou 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.

If 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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If 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 Z/ H. @( @7 A Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
9 L3 Y( b; m3 q8 |* nBoston  20.5 30.2
) n0 e/ z0 a# ]! d9 w. c0 oSan Diego  22.8 29.7
San Francisco  23.8 27.2
" |* R; k4 b/ u$ sLos Angeles  21.3 25.6
* L* e! m" o0 J9 `. ASeattle  20.4 25
Denver  17.7 23.7
New York  21.2 22.5
# s; L5 H" }  c' r6 W. r0 j( ^Chicago  17.2 20.8
Washington, D.C.  17.1 20.4
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, q2 A0 Y! B" W2 s/ |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.

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# S/ f  W0 j. A$ D. V7 R. cFrom: 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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5 S% g/ A0 P" d! N) b; `* w. `it would be a good reference.

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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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: G+ M' v/ z* J6 c[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]