Is there a house bubble in Edmonton?

smalltown

How to figure a home's fundamental value
" Q& y% a# v- ?6 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.

7 }2 p; a0 p( o  [# g% L* ^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.

, }3 h- @  t0 M3 W! p) Q3 w/ bTo 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 X/ i/ S* E+ m. x# U
* B+ `# h8 U3 S9 W
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.
6 @8 f- r; @  N+ m/ MNew 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.
. B1 g2 l7 R4 f5 |) e' x( DYou 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.
3 X* V7 x* `7 ]5 A7 Q! w( C
& |, q+ X3 H0 G, B  rIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
# O% j' \$ n. k; q7 l
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
$ H& r4 L5 W0 Z6 P2 | Avg. 1988-2000 2001
Boston  20.5 30.2
San Diego  22.8 29.7
San Francisco  23.8 27.2
5 f  }% g/ Z7 ]7 M8 nLos Angeles  21.3 25.6
& z; W: B. m$ m2 x; d! jSeattle  20.4 25
Denver  17.7 23.7
' I( j2 b* P2 q9 K, i3 ]New York  21.2 22.5
Chicago  17.2 20.8
Washington, D.C.  17.1 20.4
( e: T5 @, P* v+ s
0 u  v% l9 I: l
; g6 l- W% @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.
# t" q6 J: u4 z0 r' V

2 Y" [. L0 z3 J: Z( F2 O# fFrom: 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.

' r6 L- K! T3 A! f: f) @2 q. wit would be a good reference.
; S! w4 O; D' y2 @7 N$ ^+ d, v1 `
, P( J1 D3 i, U  S4 e' r3 Jthanks

醉酒当歌

20% buble at least. And it can take 3-5 years to digest the bubble if not burst.
& D. H3 b* H) Y, V
[ 本帖最后由 醉酒当歌 于 2007-1-14 16:41 编辑 ]