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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
' E  R- Q7 |6 ~/ L+ v6 OLeamer 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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  p7 j# }/ ~8 a% N, J! o6 FNot 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.
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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.# F2 n8 f# B6 f5 i- T$ q4 n

( r7 i: ?8 s9 r3 a# ^1 JTo 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:
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6 l/ r$ V( B! {7 {5 i4 P9 DIn Boston, the residential real estate market’s P/E recently topped 30 -- compared with just under 20 in 1988.. t: g9 d% r/ k

  J1 M$ @; k( d% i- k% ESan Francisco’s previous peak of 25.6 in 1989 has been eclipsed, with the P/E currently at just over 27.
3 r1 Y, ~& c7 h# aSan Diego’s current P/E is nearly 30, compared with a 1989 high of 23.4.$ t/ K" K# j0 m' Z2 J3 E" z( s
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 1988.8 Y  o2 U+ ~5 t; _4 P, s
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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/ S$ o% f. H; ~+ w0 s( NIf home prices are rising much faster than rents, as is true in Los Angeles, that’s a strong indication a bubble is forming.
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- T+ v! r$ D1 G' p  I% ~1 kIf 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 ! n6 V; ?) y$ s, W" ?3 {
Avg. 1988-2000 2001
0 F; R$ h/ Q( k8 R1 K5 X; ^Boston  20.5 30.2 * o' L# S0 m# `$ x6 y  T' t
San Diego  22.8 29.7 , X2 B$ z1 C9 m/ v7 n
San Francisco  23.8 27.2   t+ i+ ~$ c$ `9 R- m, T8 r
Los Angeles  21.3 25.6 8 n- D  @/ i& u2 Z, o
Seattle  20.4 25
1 m0 R2 [0 I% N! n7 UDenver  17.7 23.7
9 x  a& i& ~1 vNew York  21.2 22.5 , B* j& X- Q1 }5 Q. i) b7 v
Chicago  17.2 20.8
. H; j. {: J$ H- uWashington, D.C.  17.1 20.4 ( W, R! ^. @; |# F7 i  {$ {

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* _4 Z$ Q' ~. i- |& _6 H; U( P1 s% ^5 VIt'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.
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3 h; Z- o, i% K6 f/ Y& f9 ?0 j' WFrom: 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.! p9 l6 x& D, O( x3 A1 u, N* s/ @

6 l6 y0 [, R1 P/ v3 M& U. Zit would be a good reference.
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  q$ {" Z8 J/ y# {0 k3 d+ Othanks
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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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