Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
3 T- q; ~9 S' R2 m/ l8 m2 tLeamer 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.

0 o( c! Y6 g8 {2 k7 B' qNot 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.

) Z7 {+ p8 T% x$ t2 Y2 Z) ULeamer 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.
  C6 O( b& V) r! m8 O% Z
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.

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.
  J4 q* [1 N' O& O% oNew 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.
. H3 m" S# X2 o% z0 q, GYou 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.
. R. r% A, \6 A; W- h
/ d+ |5 C, X$ I& S/ lIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.

) P4 I9 P5 `3 g# F' R8 `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
& ?, j+ `! [$ O$ T1 o Avg. 1988-2000 2001
/ N% ^: T) X+ b' o) ?3 w9 w2 wBoston  20.5 30.2
San Diego  22.8 29.7
& }9 D' |/ _+ t; y% O) sSan Francisco  23.8 27.2
: D3 [8 s# i  Y" `7 p7 Q4 S8 w4 GLos Angeles  21.3 25.6
Seattle  20.4 25
6 G  \) g0 l! ?$ u  U& ADenver  17.7 23.7
New York  21.2 22.5
, g4 `; M3 Z1 s* u, U% X5 g2 EChicago  17.2 20.8
Washington, D.C.  17.1 20.4

  V$ k+ y: U2 m. X4 G% v
% n8 l0 O* S" X  J9 t9 q) m/ w; p- y7 U
9 p$ q! |, x- N6 x. ~& K1 _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.
2 }! G! z* K: y" v( G2 e
5 @6 t5 _; W( N/ M0 Eit would be a good reference.
3 J# D; L; s% P2 `0 I
( i9 Q$ t5 D( ^6 \! X/ Tthanks

醉酒当歌

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

0 o. N& P8 T8 }3 D$ t[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]