Friday, April 30, 2010
Wednesday, April 28, 2010
Most aren't. But some definitely are. Or rather some are, some of the time.
As I head round the bear blogs, I see the usual hope for change, but I also something else. Anger and bitterness, the result of years of waiting outside the gate and watching your dream move further away every day. It is understandable.
However the result is anger, towards everyone and everything.
Like hoping the buyers suffer losses, hoping they are foreclosed or the City and Province go bankrupt. Enough already... they are your neighbours. So they got sucked into the vortex, that doesn't make them criminals.
And if things work out as bad you want...sure you can say 'I told you so' to all your buddies at work, as you all pack your things up and head out the door to try and find another job.
Or I read them say what a terrible city Vancouver is and how stupid Vancourites are...so what the hell are you doin' here??? Obviously they don't have roots in this city.
I suspect a lot of the REALLY belligerent bears are relative new-comers. (6 years or less). Some of the most rabid I met were from the big T or Brits. they sold their expensive property and moved here for the easy life and have found to their disgust that prices here are even higher, salaries are a lot lower, and they have had to down-size.
Hey, I want prices to drop too. But I don't want Armageddon and mass unemployment. I want the CMHC shuttered. But not so I can buy a cheaper house, so we don't go bankrupt as a country when the bubble bursts, which is a little more important than whether I own or not.
Some people have trouble looking past their nose.
And as to rich off-shore buyers. Yes it irks me. Yes I am pissed off when no-taxed money competes with my over-taxed savings but consider this....
There are Millions of Canadians who own prime water-front property in Mexico, Costa Rica, Panama, Guatemala etc which the locals can only dream of.
Desirable property has become an international commodity and there ain't nothing we can do about it. We should at least use local taxes to make sure they are not left empty without a penalty and use that extra money for social housing. But we cannot stop it...we do it.
Think on this: Friends of mine..Husband and Wife are blue-collar workers who just bought a waterfront home in a poorer Central American country to spend their retirement winters at. They bought it from a local lawyer and his family, who apparently, with the down-turn, couldn't afford to own it any more.
How would we like it if a heavy duty mechanic and hospital clerk from Taiwan came and bought our prime property? Maybe not so much.
So lets all chill out. Lets not hope people lose everything just because they made, what we consider, is a foolish decision. But let us lobby for change.
People stopped the Government bail-out of Canwest.
People complained so much, the CHMC has been reigned in.
Mark Carney and our MPs need to hear from us on interest rates penalizing savers and encouraging speculation.
Or we can just gripe and get bitter and hope the sky falls in. Enough said.
Monday, April 26, 2010
Friday, April 23, 2010
Retails sales came in weaker than expected, especially once you back out the car sales. The pre-Olympic boost has dropped.
Inflation has come in at a pretty tame 1.4% (though only by manipulating the numbers since housing is on fire and is the highest family expenditure).
So what is the Bank of Canada to do?
it's last statement made it clear that rate rises were just around the corner. It has already stated that Canadians are taking on too much debt and housing is over-heated.
So does it leave rates at zero and keep inflating the debt bubbles, until they burst like the US, losing all credibility.
Or does it raise in the face of weak data.
They should not have got themselves into this space in the first place. Zero rates = speculation and debt. You reap what you sow...
Wednesday, April 21, 2010
I was thinking about my previous post and the reluctance of the Bank of Canada to raise rates from their current near zero.
When they dropped them over a year ago, it was chop, chop, chop...no warning. We have to save our speculators!!
Now that the time has come (and passed) to raise them, they change the language slowly, they warn, they cajole, they play coy and then MAYBE they raise a teenie weenie bit.
All I can say is THINGS MUST BE REALLY BAD! Why else would they pussy-foot around so much. We have never been here before. No precedent exists for such low rates. Basically we are saying to folks- don't save money, spend it, invest it in over-priced real estate or stocks, but if you put it wisely in your bank account for retirement- you will lose 1.5% a year or more!!
The only other recent time when I know of rates being so low - is Japan who have had low rates for almost a decade.
Of course their real estate hasn't been that hot for a very long time too:
We are not Japan, there are many differences but let me remind you of something important.
When the Japanese RE bubble burst in the early 90's, Japan hit the wall. The rates were dropped to zero and they let Japanese banks lie and pretend their loans were still viable so they would not be insolvent. The Japanese government pumped billions into their banks.
THE USA and especially Greenspan and Rubin derided them. They told them to let their banks fail, take the losses, and move on. Short sharp medicine.
Fast forward to 2008. The exact same thing happens in the US. What do they do?
Rates are cut to 0.25%, banks are bailed out, mark to market rules are suspended (which allows banks to lie and pretend a loan is still viable).
And now in Canada we are wagging our finger at the US and saying...
How could you have let things get so out-of-hand in RE, and bubble up so much. How could you have the tax-payer on the hook directly, by having Freddie and Fannie buy all these crap mortgages. What idiots!
Fast forward to 2011....
Tuesday, April 20, 2010
Of course in my opinion the whole CMHC should be shut down, or at least put on ice. The tax-payer has no business being exposed to the liability of insuring mortgages that the private sector wouldn't provide otherwise.
It is just adding liability on top of all the other liabilities we have burdened the future generations with.
At least put the huge behemoth on ice until there is a correction. I would have thought that was obvious. The last thing you want, is to insure mortgages at all time high prices and all time low rates.
Wait until it hits the fan - rates are higher, prices are down and no-one can borrow money. Then you can bring the carcass of the CMHC out of the deep-freeze to help get the wheels of RE moving again. It would make more sense and reduce the liability risk. But that would be too logical.
Talking of not being logical, the Bank of Canada basically said today that it is thinking of raising rates- PLEEEEZE!
Either raise them or shut up.
We are at 0.25%. Would the world have come to an end if we had gone to say...0.5%?? Of course not! It would have just sent a message that they care about savers and borrowers better be careful.
But by trumpetting this possible, maybe, we'll see rate change, they give every last speculator time to load up on debt, preferably government insured.
I think Mark Carney spent too long at that den of speculation (and possibly fraud) Goldman Sachs.
Larry Yatter is showing some nice price drops in Cambie and Kits. Inventory is moving up nicely. Anyone buying from now on, better try and get a good deal, as the winds are blowing in your face.
Thursday, April 15, 2010
Will all those who were clamouring for the Olympics to be held here, please dig deep into your pockets and PAY UP! thank you.
Over half billion dollar bill for Vancouver to host 2010 Winter Olympics
2 hours, 58 minutes ago
By The Canadian Press
VANCOUVER, B.C. - A preliminary report estimates that hosting the 2010 Olympics cost Vancouver over a half a billion dollars.
The report will be presented to city council next week and suggests the lion's share of the costs went to venues and local infrastructure improvements.
The bottom line doesn't include the cost to the city of taking over the $1 billion Olympic athletes village project.
Vancouver never had an omnibus budget for Olympic costs, though it earmarked $20 million to cover items like city celebrations and decorations.
The full cost of hosting the Games for the city is actually over $700 million, but was partly financed through contributions from the provincial and federal governments.
The report is expected to be made public, but an early copy was provided and publicized by a local rights advocate.
Wednesday, April 14, 2010
By Alex VEIGA
AP Real Estate Writer
LOS ANGELES (AP) -- A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.
RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. In addition, households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009.
More homes were taken over by banks and scheduled for a foreclosure sale than in any quarter going back to at least January 2005, when RealtyTrac began reporting the data, the firm said.
"We're right now on pace to see more than 1 million bank repossessions this year," said Rick Sharga, a RealtyTrac senior vice president.
Foreclosures began to ease last year as banks came under pressure from the Obama administration to modify home loans for troubled borrowers. In addition, some states enacted foreclosure moratoriums in hopes of giving homeowners behind in payments time to catch up. And in many cases, banks have had trouble coping with how to handle the glut of problem loans.
These factors have helped slow the pace of foreclosures, but now that trend appears to be reversing.
"We're finally seeing the banks start to process the inventory that has been in foreclosure, but delayed in processing," Sharga said. "We expect the pace to accelerate as the year goes on."
In all, more than 900,000 households, or one in every 138 homes, received a foreclosure-related notice, RealtyTrac said. The firm based in Irvine, Calif., tracks notices for defaults, scheduled home auctions and home repossessions.
Homeowners continue to fall behind on payments because they've lost their job or seen their mortgage payment rise due to an interest-rate reset. Many are unable to refinance because they now owe more on their loan than their home is worth.
The Obama administration's $75 billion foreclosure prevention program has only been able to help a small fraction of troubled homeowners.
About 231,000 homeowners have completed loan modifications as part of the Obama administration's flagship foreclosure prevention program through March. That's about 21 percent of the 1.2 million borrowers who began the program over the past year.
But another 158,000 homeowners who signed up have dropped out - either because they didn't make payments or failed to return the necessary documents. That's up from about 90,000 just a month earlier.
Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.
The states with the highest foreclosure rates in the first quarter were Nevada, Arizona, Florida and California, with Nevada leading the pack, RealtyTrac said.
Rising home prices and speculation fueled a wave of home construction there during the housing boom. But now the state, particularly around the Las Vegas metropolitan area, is saddled with a glut of unsold homes.
Still, the number of homes in Nevada that received a foreclosure filing dropped 16 percent from the first quarter last year.
All told, one in every 33 homes in Nevada was facing foreclosure, more than four times the national average, RealtyTrac said.
Foreclosure filings rose on an annual and quarterly basis in Arizona, however.
One in every 49 homes there received a foreclosure-related notice during the quarter.
Florida, meanwhile, posted the third-highest foreclosure rate with one out of every 57 properties receiving a foreclosure filing.
California accounted for the biggest slice overall of homes facing foreclosure - roughly 23 percent of the nation's total. One in every 62 properties received a foreclosure filing in the first quarter
Saturday, April 10, 2010
Wednesday, April 7, 2010
Monday, April 5, 2010
Any intervention in a complex system may or may not have the intended result, but will inevitably create unanticipated and often undesirable outcomes.
This is a common occurrence in the world. Some people think they are smarter than they are and can intervene in a very simplistic manner in a complex situation, with many variables and still expect to have a linear outcome. OK before you leave from boredom let me give you an example:
Ronald Reagan decides to arm the hodge podge of fundamentalist factions in Afghanistan to fight the Russians in the 1980's. They win and twenty years later they are using some of those weapons against US troops. Who would have thought that would happen?
Here's another example:
Think back to September 2008. Lehman brothers had just gone bankrupt in the US, the world stock exchanges were collapsing, the financial ponzi scheme in Wall Street was unwinding.
There was a sudden realisation that the RE bubble in the US had burst and a large proportion of the mortgages given on those properties would never be paid back.
We were still in pretty good shape in Canada. yes, we had a bubble in Vancouver which was deflating, but many other parts had already corrected to more reasonable affordability levels. There was never any concern about widespread defaults in Canada.
However the Central Bank and the Government had to act! DO SOMETHING. ANYTHING. NOW
SO they followed the crisis-ridden Fed and chopped rates to ZERO:
Then they doubled the CHMC lending capacity.
Not too surprisingly the result of these activities was a rip-roaring trans-Canada housing bubble and debt binge which has the Bank of Canada wringing it's hand.
The problem arises not from evil-doers in Government, but by mis-guided do-gooders. The normal capitalist business cycle requires booms be followed by busts. This penalizes speculators and capital is then redirected from the latest craze, Dot-coms or RE into other areas which have been starved of capital due to the frenzy. If this cleansing doesn't happen, speculative behaviour is reinforced.
The bubble then gets so big that it has to be sustained at all costs or it will down the whole house of cards.
However along came a fellow called Alan Greenspan who convinced us all that he could defy the business cycle. It was an lucky by-product that his supporters in Finance also had their most lucrative two decades ever under his leadership. Every time they speculated too much and a bust seemed imminent- he lowered rates or bailed them out directly.
Unfortunately our own Mark Carney came from the Temple of financial expediency itself, Goldman Sachs and so he followed the same play book.
Cut rates and boost spending, support financial institutions and allow them to reap wind-fall profits from the huge gap between what they pay borrowers and what they charge lenders.
The result however has NOT been more stability. In fact we have reached the moment of maximum instability. We now have a huge RE bubble across the country in which the riskiest mortgages have tax-payer liability written all over them.
IE- we have been brought by our Greenspan-clones to the very place where the US was prior to it's financial collapse.
I would suggest you read that last sentence again. We are currently the flavor of the month -as you can see from the huge rally in the Canadian dollar. We are stable, we have commodities- yes we have a few deficits here and there- but they are manageable.
Well how about a decade of deficits.
How about a situation so perilously on the edge that a small increase in rates or a small weakening in employment could lead to a daisy chain of lower prices and defaults which reinforce each other.
We missed a great opportunity. We could have thanked our lucky stars that we were in such good shape, and told Canadians to buckle up for a few years and deal with the pain, but instead we decided to push the gravy-train a little further along the line, we are now close to where the US train went off the tracks and hurtled down the canyon.
Saturday, April 3, 2010
Thursday, April 1, 2010
Let me tell you about the history of this blog. I started in 2007. We watched local RE reach crazy heights, then we charted the steady rise in inventory of 2008, and the crash that followed it.
I had a hiatus for health reasons and returned in March 2009, well into the correction and my first post was discussing when the bears should get in.
We were by then in the midst of the financial crisis, and housing was in 'no-bid' land. I posted on how the 15% + drop in prices and the zero 'emergency' rates had brought about the 40% price drop that we had all been expecting.
I expected a recovery and then another down-leg as the emergency measures were lifted or the recession moved unemployment up and buying power down.
These emergency rates and all the increased Government spending were to make up for years of irresponsibility.
Debt that was piled on shaky assets and could no longer be serviced.
The answer to this, according to our central banks, was more of the same. Bring the interest rates down to insanely low levels, for an insanely long time, and then whine, as Mark Carney does, about how Canadians aren't saving enough, how they are borrowing too much and why is housing in a bubble?
What else would they expect?? Take a glutton to a buffet and wonder why they are gorging themselves to death.
It is not just RE. Look at all assets, they are back up to pre-crisis levels in many cases. The TSE is flying, gold hit new highs, and most of the rest are up there. Who would have thought it?
Certainly not me.
I thought they would act more responsibly and we would be at 2-3% by mid-2009, once they had allowed the banks to reap enough money from the steep yield curve.
However playing by the old (and failed) tactic of accommodating excesses seems to have won the day. With this we get:
1) Low savings - why should I save when I am getting 0.4% before tax and inflation is running at three or four times that.
2) A stampede into assets, leveraged up, on borrowed money. Isn't that what got us into this mess in the first place?
The really foolish US consumer over-extended themselves on debt for flat screens, and SUVs and over-priced homes and then couldn't pay back their debts, so the world spins out of control and the result is we are all doing it now!
Chinese, Canadian, European - we are all American now.
Ultimately though I am the fool, for believing our policy-makers would be more responsible this time.
Greenspan said there was no debt and property bubble repeatedly, then after it burst he said he couldn't have been expected to see the bubble, and even if he could, it wasn't his fault. With leaders like that, looking for responsibility was definitely foolish.