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Is there a house bubble in Edmonton?

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发表于 2007-1-13 10:30 | 显示全部楼层 |阅读模式
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How to figure a home's fundamental value. n7 V$ j$ J+ Y4 Y$ |' @; {
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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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.- j. @0 p/ B' [& r' ]( [( g
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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.
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, ^/ m* I/ P: e+ Q5 CTo 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:) \" v  X$ ^. X% Q  m( V

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In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.& U! g$ ^6 A; C' r# @! ?1 [

' h  M" M& _  {) eSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27., K7 _$ w* f4 o. x
San Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.
  G  S  f6 c. ?6 D4 s$ i% I7 eNew 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.
) S* d# S  l6 g$ q+ B. f. C5 y. x9 }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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If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.5 o" x0 z- e' N* Z

9 J5 B/ W0 j* }( b5 h6 o) B9 c3 Q* k6 _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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Home P/E ratios for 9 metro areas . S' z4 J1 r2 I
Avg. 1988-2000 2001 / {/ O$ f  f7 P& i* j( c; y" k0 C
Boston  20.5 30.2
: K0 }: @- W0 TSan Diego  22.8 29.7 7 u, w( W9 J* P" Q" @
San Francisco  23.8 27.2
9 R( o9 M" `# T0 A6 o* I' FLos Angeles  21.3 25.6 % H& C! H7 I: L# c
Seattle  20.4 25
8 J$ {1 K; I- Q6 O% q- b. G- M$ LDenver  17.7 23.7
; w3 H3 \9 c" a! U4 u0 S, j' dNew York  21.2 22.5
4 }/ \- a; Q) f% |! f$ j* T- Z) PChicago  17.2 20.8 & w& |$ C5 v( ]# z9 N  r" R# E
Washington, D.C.  17.1 20.4
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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 r* d2 W4 R- u: I# I

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2 R1 z7 z% [$ ?' FFrom: http://moneycentral.msn.com/cont ... ingguide/P37631.asp
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发表于 2007-1-13 12:43 | 显示全部楼层
Who has the P/E for Edmonton for the last 20 years, please post it here.: w9 d, s; N7 m

. t4 A1 ~7 W  f0 y. rit would be a good reference.$ W2 a$ Z- s# E" q9 ~  m

0 k- H+ V/ V8 [4 v& \( Rthanks
鲜花(150) 鸡蛋(3)
发表于 2007-1-14 16:40 | 显示全部楼层
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 ]
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