Friday, June 15, 2012

Inflection Point near

Ok folks, time to look over the lay of the land.

We have had 10% average price declines in Vancouver and every bank and his dog has now come out saying there will more corrections ahead (mild ones though -only 15%!) but no collapse.

Remember we do not want a collapse. That is what happened in 2008 and Flaherty and Carney opened the helium nozzle. We want slow and steady.

Could this be it?? We have been defeated so many times that it is hard to get too excited. Let us watch inventory. At this time of year listings taper off and people pull their homes as they go on holiday. You can see this clearly in the inventory graphs linked. The first sign that 2008 was very different, was that this drop over late June, July and August did not materialize. Sales dropped so fast that even with the summer removals, the inventory kept going up.

Lets see what 2012 has to bring.

In any case if we do get a correction, there is very little ammunition to reverse things. Rates are too low already. Everyone now admits that the CMHC was part of the problem and puts our national fiscal house in perilous danger and to drag them out of the penalty box would be a major policy reversal. Same with the investor immigration program which is finally being tightened up. Just leaving a few hundred thousand as an interest-free loan with the Provincial Government and then buying a house in another Province is finally being regarded as stupid policy! No kidding. Entrepreneurs are what we really need.

So the wind is our our sails. Carney, who is not under the same pressure from the RE lobby, has finally woken up to the bubble he helped create and harps on about it at every chance. That legacy may be more fragile than first thought.

Enjoy the rest of Junaury.


  1. Fish,

    What do you mean by Carney having finally woken up. I'm not so sure... would love to hear what he's said that's got you thinking this way.

    By the way, I now know tons of people who are "waiting to buy". Knife catchers or floor establishers. We'll see. I hate this game but I agree. Nice and slowly does it.

    Except for TO. We want TO in HAM to frighten those who count into creating more anti-foreign spekker policy.

  2. Carney is in full out panic mode . He went to ZIRP but the low interest money only went into a consumer binge primarily housing
    Now if he raises rates the higher cad and higher business rates will kill any manufacturing left in ontario
    Therefore he is trying to 'talk' canadian consumers into responsible borrowing - like that will work

  3. All this talk about how we "want" a steady non-panicked decline is as absurd as those people who believe that if the bears would just shut up there would be no chance of a bust.
    The market (all markets) do what they do based on a great many factors, but what we fervently desire to happen isn't one of them. Once a bubble is blown the bust is baked in, and the damage of the bust is largely determined by the size of the bubble re fundamentals and the degree that the bubble has subsumed the rest of the economy.

    1. I dont disagree with you. However if one believes that a correction is desired, then the best way to get there is a slow decline which is less likely to cause policy-makers to act.

      think about it stock-market terms. If the market slowly drops 15% over a year, not much is done, however if the market drops 5% a week as it did in 2008, then the Central bankers and Finance Ministers are out there in full action hero mode. ZIRP, bail-outs, extra-spending etc.

      Similarly if we had a free-fall in RE like 2008/9 they would undoubtedly act again and bring the correction to a premature end. Will my wishes have any effect on the market? They haven't for the last 7 years, so why should they now: )

      Just saying however

    2. Yes. We want slow and steady not to tempt fate, meaning not to tempt Carney to act. He still can lower rates. They can still grant more money to the CMHC. I agree with you AC but we aren't exactly in a free market here. Nowhere, in fact, is free from the invisible hand right now.

  4. ahhh the invisible hand LOL

    Dow Has Risen, Rates Fallen Since Fed's Bond-Buying Moves
    Wall Street Journal - ‎31 minutes ago

    Since 2008, the Federal Reserve has increased its holdings of long-term government bonds and mortgage-backed securities to more than $2.6 trillion from less than $500 billion as part of an effort to stimulate markets and boost the economy.