Sunday, November 1, 2009

October Numbers

As usual Larry Yatter is the first one out with the numbers for average prices:

They show that detached are within a hair of the highs and apartments and attached look to have surpassed their previous highs.

Well what can we say about the I said every 'bubble bursting graph' will look different. I gave some examples in this post:

It may be that we are following the more complex top set by places like Southern California :

However I have to say, if we continue with these strong gains, then we may have to admit that a new up-trend has started...difficult though that is to believe...from these lofty levels, driven by all-time low interest rates.

I expect all Canadian cities to show gains.

Here is how it happened:

We are in the same position as places like Norway and Singapore. Norway is resource-rich, and Singapore is fiscally sound. We are probably both. When the crisis happened, interest rates world-wide crashed and many areas outside of the US and UK where banks had been completely irresponsible did not need this extra stimulus. The result was a new property boom.

The rates dropped to save banks and to help manufacturing, but what they did was reignite assets. Look at gold well over $1000 and property prices in many parts of the world started to take flight.

Some of these areas were Norway, Hong Kong, Singapore and South Korea and of course Canada.

Of course in the other jurisdictions they are doing something about it. In Norway they are raising interest rates specifically to cool RE. Regulators in South Korea, Hong Kong and Singapore told banks they needed to tighten lending, to nip the RE bubble in the bud.

Meanwhile what are we doing? We have a few words of caution from Mark Carney but no increase in interest rates, and the Government with one eye on the next election, is INCREASING the ability of the CHMC to lend at these over-priced levels.

We are truly setting ourselves up for a crisis. Both by feeding the fire of price speculation, and encouraging folks to get into the market with very little skin in the game AND at the lowest rates in history.

We should be doing the opposite. Waiting until rates are high and likely to go down, wait until prices have fallen and then help people buy..they would be getting in at the bottom of the prices an the top for rates not vice verse.

We are just setting these folks up for failure at the slightest rise in rates, drop in value or increase in job losses.

Enough said. Lets see what November brings. The October numbers were not heartening for those waiting for more reasonable prices


  1. fish, with goverments all over debasing their currencies, maybe the smart thing is to go out and buy a house, maybe those people are not stupid after all, imagine you buy a house for 1million dollars and in two years those 1 million dollars are only worth 10k on a purchasing power basis, you can just pay off the house and be morgage free. I think the goverment are playing a dangerous game and some pople understand it, buying a house is same as an asset like gold or oil, only that houses are much more useful to the common man.

  2. Anon- what you say may be true. However the governments are playing a very dangerous game.

    Fiat money (paper money) has no intrinsic value, only deemed value. Once it becomes apparent that the only way out for the governments is to print money and pay the debts (like Zimbabwe) that illusion of worth will disappear.

    People will not want to hold money. All material things will soar including housing. Long interest rates will explode as investors dump long bonds and capitalism, which in it's current format is dependent on fiat money comes to an end.,

    We then have bigger problems than the price of housing.

    Watch long bond yields. Bond investors are the most savvy and conservative. At the first hint of serious inflation, long yields will rise sharply.

    No sign of that yet.

  3. Governments may be printing money like mad, but you may have noticed that it is deflation that is happening, not inflation. CPI keeps turning up in the negatives. If your 1 million dollars becomes worth only 10K in purchasing power, that pre-supposes some absolutely massive pay raises across the board. Seriously now! You know that's not happening. A million dollars almost seems normal right now - pretty much the benchmark house, right? In a deflationary environment, it's going to feel more like ten million.

  4. I agree GM. For now we are in deflation, though if you are a prospective home-buyer, it sure doesn't feel like it!

    If the Central banks hadn't stepped in and supported assets, we would have a deflationary collapse , even here in Canada.

    Canada’s Inflation Rate Stays Below Zero
    Kate Yule
    Friday, October 16, 2009

    Canada’s annual inflation rate slipped one-tenth of a percentage point in September, keeping well below the zero mark.

    Statistics Canada says a drop in gas prices are the main reason the inflation rate is at minus 0.9 per cent.

    It now costs 23 per cent less to fill up your gas tank than it did in September 2008.

    Only Saskatchewan had a positive inflation reading last month.

    Ottawa’s rate of inflation remained the same, as did Toronto’s. Ontario’s annual inflation rate dropped slightly, from minus 1.0 to minus 1.1

  5. I agree that we might be ina deflationary period, but why are all the asset prices going up? look at oil, commodities and houses? prices have gone up from last year, right? I do the shopping myself and I cant find anything cheaper than last year, evth seems to go up, maybe some garbage I dont need at Walmart is cheaper but generally prices for things you need are higher than one year ago. I dont know if it is a good time to buy a house now or not, surely pricess seem to be high, very high , but so far everyone seems to be paying the morgage, where is the money coming from then? I have not heard yet a resaonable argument as to why prices are going to fall when the goverment and central banks are inflating at full speed. I am sure goverment in colaboration with central banks will create massive inflation, and as inflation is good to those of first access to money, having a house is not such a bad deal after all...

  6. I'll guess deflation, but it doesn't matter. House prices will lag inflation anyway. Even if nominal prices go up, real prices will drop. So it could beat holding cash but your wealth will still be deteriorating.

  7. Westy Van- 5 listings 6 price changes 4 sales.

    Vibe- count me in the deflation camp. I think the Central banks are actually going pull in the punch bowl so far Norway and Australia have increased rates and in due course the Fed and BOC will quit buying everyone else garbage (CHMC excepted) and we will see more price drops.

    Lets see.