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.
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( I9 i& j* x* r, a9 q; `! |4 @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.

0 f- ?1 g/ ]( m2 f' Q2 i8 l% a9 KTo 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.

& I- B1 j; ]& m- u3 o, f3 Y& ^; v. DSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
8 l) E1 d  Z& m. Q* G3 p" ISan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
0 ?1 y+ W1 L* UNew 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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8 W5 W! g) G8 l* ]If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

* |+ q; J3 N- f' ?* e3 yIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.

% b( F  v7 b: v6 j) ]0 i2 J Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
+ K: ]2 g& u; G1 A* N' z  q, rBoston  20.5 30.2
& l# z# T5 ^  i  ^  n; F" U& a( OSan Diego  22.8 29.7
San Francisco  23.8 27.2
Los Angeles  21.3 25.6
9 Q+ U6 a' J0 @" `Seattle  20.4 25
: W1 A! A3 C  p! ~Denver  17.7 23.7
+ O, F0 P6 b( n& E  J. _2 YNew York  21.2 22.5
% E. K# H3 W7 q$ IChicago  17.2 20.8
6 o4 @/ e& O2 g: [5 e4 {7 `Washington, D.C.  17.1 20.4
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9 g2 T+ M0 e5 ]' N! j3 IIt'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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; O  j! \! N9 lFrom: 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.

it would be a good reference.
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. q  u) {. v0 W1 O6 bthanks

醉酒当歌

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

- r4 j4 q: ?+ n! Y[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]