 鲜花( 0)  鸡蛋( 0)
|
How to figure a home's fundamental value
! `( L4 _: A: G, v K& iLeamer 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., |2 t$ F/ [: l0 a9 J! N
. v0 X, e, Q1 f. M
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.
- X& K% d8 l: I! C5 T* z# n$ o, l; a# m2 j' ?
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.
7 |! g2 n( o% W3 B# |5 V: D* T4 J2 S, _4 l; u C
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:+ c- N; D) a/ a4 O8 t) N# U. o) p4 o
1 s% T( B/ A( k2 ]) P
5 z( U( _ n# G6 a
In Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.
8 [; u2 r- m6 M; O6 G
$ k$ Y! J1 u# z- X: g" M0 \- kSan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
$ C( \& k4 @; m; ?, @8 MSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.2 D: X% D! u) k! u3 W
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.) G; w) a" s' {1 l
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. ; k/ T# q: F/ g' F+ o
1 \3 m' q7 s. N' p" {
If home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
: B7 d. c+ ~0 b* Z. N
5 u' s* a3 Y k* f2 D6 U0 z# a) mIf home prices are rising while average rents are falling -- which is the situation in San Francisco -- the bubble is pretty much unmistakable.
8 |6 _; e4 z/ I+ J( q$ M
5 ~0 R1 w( ?; U4 k Home P/E ratios for 9 metro areas
# C8 f% N6 q& y# r- s. a Avg. 1988-2000 2001 ! \# n+ o* c0 P6 A# s3 H
Boston 20.5 30.2
/ M+ e/ x; w) K+ ?* _San Diego 22.8 29.7
4 o; B% X4 _4 `5 c0 {San Francisco 23.8 27.2
! M! ~- M1 A$ TLos Angeles 21.3 25.6 2 R! J, K" f+ Y. y* @* ]" u/ E
Seattle 20.4 25
. h7 D/ ~- `1 e3 G4 _Denver 17.7 23.7
& Q( B" J2 N$ q- FNew York 21.2 22.5 ' t( \" Y1 L0 R% H& L3 ^# P& n4 b4 `
Chicago 17.2 20.8
( T- j7 J' f: a9 ?5 b; zWashington, D.C. 17.1 20.4
4 Q+ S0 a# A D
, [+ R" b/ E' G5 w& r1 G* e% G. b/ P7 E/ W6 _% a, N
7 Y5 ~9 j5 b8 C0 a9 l
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.
) s! Z0 H# M! s; s# V
* m S* ]( Y" M' \/ U3 N) f: m* m I1 Q
From: http://moneycentral.msn.com/cont ... ingguide/P37631.asp |
|