Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
. y$ Z, i8 l$ \0 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.

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.

1 S: j) ^$ B+ K' q8 ^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:
5 m0 S  g% D, N7 `0 s& m

In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
$ H' \% {3 U, Z  h0 A& I
; u# c6 R$ z( ZSan 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.
$ D/ X) {% u- J; B  b) G* `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.

If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

9 D- w2 t7 a9 T/ n) C! y9 bIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
  g" i: M' `$ D0 ^- K: N+ v
- _. u9 F% Z" f9 U6 A* B# w# M. P Home P/E ratios for 9 metro areas
& y; g6 a5 r+ M1 o8 Z Avg. 1988-2000 2001
5 W+ J) E9 s4 ^/ {8 `* M( R' LBoston  20.5 30.2
$ M+ A# ^" M: ^San Diego  22.8 29.7
  q7 _1 u0 E5 d( L0 y- ~San Francisco  23.8 27.2
Los Angeles  21.3 25.6
! K+ B5 H( z: H! v1 h4 `( rSeattle  20.4 25
; g( j% @4 z' kDenver  17.7 23.7
3 y; b& T, N- H  Z9 v/ k# `New York  21.2 22.5
" u3 l4 `! B6 e; G& F$ uChicago  17.2 20.8
' f' C0 l$ U: T, a7 Y5 FWashington, D.C.  17.1 20.4
- e6 @0 O5 S# B( K, _8 `4 X: h
7 k* u$ ~6 V/ n- c/ u
" L7 T. @" A" [0 x
: K0 r7 _& u# ]) Z) nIt'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.

! n: ]. s2 q' O8 _1 U, y! t+ D
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.

it would be a good reference.
: z! y8 C: T* Y0 E( E. u; i, m
% j! P/ b7 M4 q4 x! D0 pthanks

醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
; W) a0 G) U1 \) r' V: E
6 G* b5 w% Z" t* x( K+ V[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]