Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
! S  o3 |! F; Q7 {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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( M$ P; O( `- T* Y4 ATo 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.
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.
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.

: s0 C" N7 @2 i0 n; JIf 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.

6 `& j2 L) D! P8 y, I: z: s Home P/E ratios for 9 metro areas
: |3 ]! N6 S1 b6 t3 s Avg. 1988-2000 2001
2 P/ r+ M6 x7 ]4 z4 A$ oBoston  20.5 30.2
San Diego  22.8 29.7
4 q$ A% x  G8 N2 a! B$ O' V1 g6 C& PSan Francisco  23.8 27.2
Los Angeles  21.3 25.6
Seattle  20.4 25
- c7 W' w$ `1 A& y, `" DDenver  17.7 23.7
New York  21.2 22.5
- K% {4 I- |/ l- h, M! tChicago  17.2 20.8
* w2 Y1 X: _) u- L# Y! [$ o# PWashington, 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.


2 c$ B6 A8 v% r, Z8 D/ W' r4 W, ~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.

; E. B0 \' R8 u- Cit would be a good reference.

6 }1 w9 B$ _" i6 F3 Vthanks

醉酒当歌

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

2 @; R4 z$ v4 ?  ~3 P, l7 e3 s8 F[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]