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.

9 j8 Z: W& w) LNot 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.
' {) _* |$ J; N! T( x
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:


In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
5 H0 g9 u# G6 Y( d& G, H+ J* c
9 z  J' ?  S6 s- n: vSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
6 T  n2 P: ?) P6 Q; M+ H7 A8 ?4 ?San Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
. f1 z" s: c* A, b; T% ^3 u# `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.
* c0 O. ]0 u" L" B- Z& [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.

# v( _$ D$ j. @1 H; T- B, `9 zIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
* u3 N4 L1 u! \* `
If home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.

Home P/E ratios for 9 metro areas
/ t6 d% |/ ?# B+ ~* r, Q Avg. 1988-2000 2001
3 I6 R* {$ h3 t9 `" C9 \; [Boston  20.5 30.2
San Diego  22.8 29.7
/ H, W% r! V: d. z$ x/ F  |, oSan Francisco  23.8 27.2
Los Angeles  21.3 25.6
0 Y& m9 ~: z8 u% V% pSeattle  20.4 25
Denver  17.7 23.7
New York  21.2 22.5
. V: E1 C- [3 R: J9 B+ s+ y( AChicago  17.2 20.8
Washington, D.C.  17.1 20.4
6 M3 b/ n1 O" P; n* c* k) f
  o1 U) n/ ]' x

2 d, K6 ?' x- x1 w3 _' C8 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.


8 ^7 x1 z) K' z8 @0 DFrom: 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.
9 y) R$ ^6 c8 L) S) P# g' \" j% G
4 r! d% c0 ~" C+ Qit would be a good reference.
2 A$ J0 |* d  u  U# N- V" K4 W
! N) O4 g& X+ X# K: D3 Othanks

醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
! U$ A& f7 d8 [* Q4 @: X) ~) Z4 }$ s; z
% T8 z2 j% L. O* A# T[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]