Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
9 g; J- n0 i' k2 g- B$ E* @9 I- kLeamer 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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& v4 t/ _: D2 W: b4 ^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.

' q! Y5 V1 q8 L$ K* YTo 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.
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San Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
/ S6 l3 h  R: g4 C2 m- BSan 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.
/ ?+ l5 @8 O# j( qYou 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.

# @* m5 O0 e$ R# s6 nIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

# w6 j4 n1 _* o- H& ^) `$ xIf 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
7 F$ M- Y( W% K* m Avg. 1988-2000 2001
Boston  20.5 30.2
9 ^7 Y0 E. P& wSan Diego  22.8 29.7
9 [- ^* t; p9 F5 s% w# eSan Francisco  23.8 27.2
) d6 r& m, @) kLos Angeles  21.3 25.6
  i: U& i! d5 H  x' rSeattle  20.4 25
Denver  17.7 23.7
New York  21.2 22.5
5 \  G6 G# m: I  B5 \) P6 A% O# n( ]+ F, h: vChicago  17.2 20.8
Washington, D.C.  17.1 20.4



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.


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.
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+ t$ x" X. j0 C2 oit would be a good reference.
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0 ~- `2 P* J! d  uthanks

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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[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]