Vancouver RE and then some

Bank Liars

2012-01-28T15:22:00.000-08:00

The Bank CEOs have become veritable Pinocchio's. They or their economists keep sounding the alarm about the highest level of consumer debt ever, the housing bubble etc and yet the banks are trying to convince consumers to take on even more debt!

Contrast what they have said with what the banks are doing:

1) Nixon. CEO of Royal Bank:

"When you look at markets like Vancouver and Toronto there is a level of caution from a risk perspective that is higher today than it would have been a couple of years ago," he said.

"When you look at the condo side there is probably vulnerability ... it is the area which is most vulnerable with respect to Canadian housing."

2) Downe CEO of Bank of Montreal

Bank of Montreal president CEO Bill Downe agreed there is a risk of a downturn in the housing market, saying the best hope is for a soft landing.

"There is no question that the warning signs around the Canadian housing market have been visible for more than a year," he said, also mentioning Toronto and Vancouver specifically.

3) Clark CEO of TD Bank

However, given that the ratio household net debt to income levels sits at a historic 150% — meaning mortgage and other debts are 1.5 times a Canadian household's average income — it would be risky if debt levels rise further.

Here's what their banks are doing:

Bank of Montreal just had a gimmicky 5 year 2.9% mortgage to squeeze a few more buyers into debt before the 'best case soft landing ' comes along.

TD Bank is teaching their loan officers to convince borrowers to take out equity from their homes.

Hat tip to VREAA

Royal Bank is pumping their cash back mortgages.

Meanwhile here's what Scotiabank says: However, household spending gains will be dampened by weak job creation and rising consumer debt, now at record levels.

You know Scotiabank, they guys who have come up with the 'You are Richer than You Think' ad line. What does that mean?? Most of us are more indebted than ever and are suffering with stagnant wages and yet we are supposed to be richer??

......................

BTW how much do they get paid. About $8 -16 M a year- then there are benefits and pensions to add in.

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Surrey including Whiterock (where there have been some HAM sightings)

1682 SFH listed.

102 sales since Jan 1st

167 if you go back all the way to Dec 15th to date.

Either way a lot of inventory and not much interest. Haven't been there for a while, but I think I will go down next week-end and see the forest of for sale signs where there used to be real forests :)

Bernanke Speaks...

2012-01-26T13:05:00.000-08:00

..and basically throws in the towel.

Two years of no rate rate hikes.

We will keep buying our own bonds.

We will print more money.

We will stop when Goldman Sach's share price hits $200!

Bernanke and Grenspan make our Carney seem like the epitomy of wisdom and monetary conservatism.

Remember this crisis in the US COULD HAVE BEEN prevented. If only the regulators weren't in bed with the Wall Street sharks, they could have reined in the irresponsible lending, and the housing bubble.

It's not like there weren't enough people like Schiller repeating that a crisis was coming, it's just that this bunch is used to easy money, and like a drug addict, stopping it now would kill the addict, so they shake there heads and keep injecting.

The problem in the US was almost no one saved any money. They just spent with wild abandon. Now that it has hit the fan- the few who did save must be punished and forced to either have their savings reduced to worthless paper or be forced to spend it too on worthless crap they don't need.

That's how ponzi economies work.

BTW- some good news. The 2.9% five year mortgage from BMO ended yesterday. I was actually thinking of closing my account with BMO. The jerks offer me almost nothing for my deposit account and yet are trying to get more financial crack out to home buyers.

Bill Downe the Bank of Montreal CEO JUST SAID

Bank of Montreal president CEO Bill Downe agreed there is a risk of a downturn in the housing market, saying the best hope is for a soft landing.

"There is no question that the warning signs around the Canadian housing market have been visible for more than a year," he said, also mentioning Toronto and Vancouver specifically

That's from two weeks ago..just before they started this idiotic 2.9% gimick. Mr DOWNE What the &^$% are you doing????

Do you even know how stupid this makes you look?

You say that the best case is for a soft landing and then your bank offers crack rates!

How can you still justify your many Million dollar salary and benefits package?

It's like saying -Jim here looks like he may die of liver cirrhosis if he doesn't quit drinkng and then offering him a bottle of Wild Turkey!

Is it just me or does it seem like we live in a world where no-one is accountable for anything.

No Kidding Bat-Man...

2012-01-22T17:33:00.000-08:00

The art of the under-statement from our own Mr Carney!

You would think the fact that local buyers have to go into a ruinous amount of debt to buy anything beyond a 1 bed condo would make it more than just 'probably or likely'...no?

Come out of the closet Mr Carney, you too can say the bubble word. It is liberating. And remember you will be absolved of even more guilt if you call it now, rather than AFTER it bursts like Greenspan and his pet Bernanke.

Some Canada property markets likely overvalued: BoC

Sun Jan 22, 2012 3:09pm EST

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1 of 1Full Size

TORONTO (Reuters) - Some parts of the Canadian real estate market are "probably overvalued" and policymakers are monitoring to see if further steps are needed to cool it, the head of the country's central bank said in an interview broadcast on Sunday.

It was the second time in recent days that Bank of Canada Governor Mark Carney voiced concern about property prices, which surged after the financial crisis as borrowing costs tumbled.

"We see that in a number of real estate markets in Canada, valuations are at a minimum, firm; in others, they're probably overvalued. So there are risks there. We're watching it closely. We're working with our partners, the federal government, the superintendent of financial institutions," he said in an interview on "Question Period" on CTV.

"Measures have been taken. They've been effective. We'll keep up that vigilance. If more needs to be done, I'm sure the appropriate authorities will take those measures."

The federal government has tightened mortgage regulations several times in a bid to prevent a property bubble from forming. Finance Minister Jim Flaherty said on January 17 that the government is watching the housing market closely and is ready to intervene if needed, but is not about to do so now.

Carney once again warned Canadian exporters that they should look for opportunities beyond the main U.S. market, given the country's economic troubles.

"The nature of the U.S. recovery is, it's going to take a number of years before they get back to the U.S. that we used to know. In fact they're not, in our opinion, ultimately going to get back fully to the U.S. we used to know. So we need new markets," he said, noting the Chinese market is a tremendous opportunity for Canada.

(Reporting by Jeffrey Hodgson; Editing by Jan Paschal)

2012 The year of the Water-dragon Starts

2012-01-20T21:45:00.000-08:00

And what will it bring for the crazy housing market of Vancouver.

Will it bring the expected throng of Mainland flying in to buy more Multi-Million Dollar homes?

Or will they be a no-show?

Will the inventory build up continue?

Will we get any weakening and if so, will the Fed panic at the first sign of weakening and dive in again to save it from the long over-due correction.

Will Carney grow a set of cajones and stop punishing prudent savers?

How about Flaherty, will he actually mean what he says? He says he won't intervene when the bubble bursts- how likely is he to keep his word when the power of the RE lobby and late-to-the-market owners start complaining.

..May the dragon's tongue of fire burn all the speculators and absentee owners and bring with it a scorching of the edifices of wood that sell for gold and allow the sprouting of new hardy plants which have not been able to reach the sun's rays...

Putting a couple of myths to rest..

2012-01-17T17:19:00.000-08:00

There are some active myths that the self-serving financial world perpetrates that need dealing with.

Myth number ONE.

It is different here because we have recourse mortgages. ie people cannot walk away and mail in the keys like many states in the US. The debt will follow you unto bankruptcy. True, but does it really matter when you cannot pay?!

If you have very little equity in your home and the RE market falls (ie you cannot borrow more against the value) and you lose an income stream, or get less over-time or have another calamity- you are toast. If rates start rising you are burnt toast. But even without higher rates- if you let the bank mortgage officer cram you into a gigantic mortgage you had better hope that you have a perfect career ahead of you.

Myth number TWO.

The Bank of Canada cannot increase rates even a tiny bit, because the Canadian dollar will explode higher.

Garbage! The CAD is paying 1% and the US rates are at 0.25%, yet the CAD peaked at 1.06 and is now down to 98 cents with neither changing rates.

Furthermore look at the Aussy Dollar. The prime rate in Australia is 4.25% So we should expect the AUD to be 10% higher? 20% higher? It is in fact just over 5% higher than the CAD.

So raising rates by 0.5 or even God forbid 1% would have very little effect on the CAD rate. Exchange rates depend on more than just a tiny differential in interest rates. In our case it depends on the price of oil, Borrowing forecasts etc etc.

Need more proof of the error of this thinking?

The Bank of Japan cut the Yen's prime rate to UNDER 0.1%.... that's right under 0.1%. A farce really- it means that you would have to leave your money in the bank for nearly 9 centuries to double it.

So the Japanese Yen must be trash..eh?

This is what the YEN is doing v the USD. With every cut it has gone higher. So it is not as simple as the simpletons say!

Bank of Canada keeps punishing savers...

2012-01-17T07:17:00.000-08:00

Stays pat at 1%.

Sees faster recovery and higher growth and yet the deteriorating global situation will dampen growth.

Do you get the idea that the B of C doesn't really know what to expect. Uncharted waters. Not sure what's coming. So call it both ways and then stick it to savers again.

Then we have a TD Bank spokeswoman saying that lower mortgage rates are NOT an invitation to borrow more. Huh? Well it's in your hands lady. Tighten requirements as you lower rates and the net result will be a less money borrowed by less extended borrowers.

BUT you want consumers to exercise restraint even while the banks have become debt-pushers, with subliminal ads that equity must be withdrawn and spent with stupid statements saying that we 'are richer than we think' (that will come back to haunt them) even while stats show the highest debt burden on consumers ever, completely unrelated to their measly income growth.

What should we be doing?

2012-01-15T19:37:00.000-08:00

We have Chinese New Year almost upon us and no doubt there will be a good crowd of buyers coming from the Mainland with suitcases of money to buy their piece of our city- for an investment, for diversification, to get money somewhere safe.....for future use in emergencies. Who knows what the motivation is.

The article below is what is going round the net at the moment. Some of the folks have made their money by looting or accepting bribes and the amounts are eye-popping.

Should we be asking these new investors how they got their money? Is it fair to the Chinese people to just allow huge sums to be brought out from their country without asking if it was stolen?

Or should we just be grateful that these high end buyers are coming here buying multi-million houses, paying transfer taxes, generating economic activity and jobs and not ask too many questions?

That seems to be what our Premier wants.

China's Great Swindle: How Public Officials Stole $120 Billion and Fled the Country

Just how many corrupt Chinese government officials have fled overseas? How much money have they stashed away? And how did they manage to transfer abroad such colossal sums?

Last week, the People's Bank of China published a report that looked at corruption monitoring and how corrupt officials transfer assets overseas. The report quotes statistics based on research by the Chinese Academy of Social Sciences: 18,000 Communist Party and government officials, public-security members, judicial cadres, agents of state institutions and senior-management individuals of state-owned enterprises have fled China since 1990. Also missing is about $120 billion.

The People's Bank of China report stresses that until now, nobody has been able to provide an authoritative figure of the exact sum pilfered, and the figure of $120 billion is still only an estimate. It is nonetheless an astronomical sum. It is equivalent to China's total financial allocation for education from 1978 to '98. Each escaped official stole, on average, $7 million. But the real numbers might be even higher. Some media have reported that the wife of the deputy chief engineer of the Ministry of Railways, Zhang Shuguang, who was recently caught for corruption, owns three luxury mansions in Los Angeles and has bank savings of as much as $2.8 billion in the U.S. and Switzerland.

This example gives a glimpse into the broader picture.

The number of corrupt officials fleeing China reflects the government's serious attitude about the crackdown on corruption. But if corruption, dereliction of duty and abuse of power are the norm, then the system itself is corrupt. The number also highlights multiple failings in China's embarrassingly ineffective anticorruption campaign.

It takes considerable time for an official to gain a large sum of money by corrupt means and then organize to smuggle it out of the country. Not being able to catch someone during this long time period is the government's first failing.

Next, when a corrupt official prepares his flight, he usually first sends his wife and children overseas while staying behind in China as a so-called naked official. To have such "naked" yet unexposed officials makes for a second failing.

In a country where capital outflow is strictly controlled, how on earth do these people manage to transfer their money overseas successfully? This is the third failing.

And the fourth failing: how they manage to change their identity. These crooks usually hold multiple passports and use many identities. For instance, the former governor of Yunnan province, Li Jiating, had five passports, all real.

The way they escape punishment is the fifth failing. Extradition involves the political and judicial systems of two countries, each with its own concept of law enforcement. The judicial procedure is often complicated and tedious. Extradition is very often obstructed by the fact that a person condemned to death in absentia cannot be extradited for human-rights reasons. In addition, China has not signed extradition treaties with the U.S. or Canada, the two most used destinations, so once the official has run away, the chance of catching him and putting him on trial is close to zero.

Even if they do get caught, the stolen funds are rarely recovered. This is the sixth failing. The U.N. Convention Against Corruption sets out the principle of returning illegal assets, but the procedure is difficult in practice. Not only does China have to show that it owns the assets, but it also has to share some of the money with the countries participating in the joint action. After deductions here and there, there isn't much left.

And, finally, the seventh failing: the government officials who have managed to escape set an example for those still hiding at home. Some of them once held high positions with access to important state secrets and were likely bribed by hostile parties. This poses is a threat to China's political, military and economic stability.

It is for these reasons that it is more important to stop corruption at the source than to catch the culprits after it has happened.

Policies combating money laundering or obliging top government employees to report their personal wealth will not solve this problem. Nor will the close monitoring of naked officials. The effective solution would be to establish a clean system where nobody dares to be corrupt. Certain media have suggested the implementation of a property declaration system. This would be like using antiaircraft guns to fight mosquitoes. But at least it would be a weapon that knows its target.

Also from Worldcrunch:

Are the banks schizo?

2012-01-14T18:20:00.000-08:00

On the one hand we have a parade of bank CEO's and economist falling over each other daily to say housing may be in a bubble and care is needed, consumer debt is too high and self-control is needed and yet on the other hand they are trying to stuff as much debt down the throats of consumers as they can.

What is this - good cop, bad cop?

They run 'money porn' adds saying your are richer than you think (huh didn't you just say I was over-indebted?) and showing folks taking money out of their home equity to go on exotic beach holidays.

The message is simple - do not deny yourself anything. Do not build savings or equity in house, just borrow and spend. You can pay it off, or someone can. Banks have become crack pushers.

The latest in this series of bank inducements to spend is the Bank of Montreal's, lowest ever mortgages. 2.99% for five years. Lets get the last few folks who cannot afford to buy these over-priced bricks and timber into debt and then we can sink the whole ship.

Now I know that mortgage rates usually follow Canada bonds, and Canada bonds have been going down as money tries to find a safe home. However it also depends on many other factors including how easy it is to access money by banks and their risk tolerance and forecasts for the asset they are lending on.

If they have room to play with rates, how about giving more than the near zero % they are giving savers in their deposit accounts. They are basically stealing the savers net returns and giving it to the borrowers.

Where is the fairness in that?

Mark Carney wants us to save more...and do what with it? Put it into a savings account or a bond and LOSE 2% a year to inflation! Or throw it into the stock-market and hope for the best or what exactly.... just save it so Carney can feel better and point to a graph showing higher savings so he can garner another international job.

How about increasing rates to match inflation and then see what happens.

In fact why don't we just get rid of the dorks that run the Central Banks and just allow a computer program to set interest rate policy. Some economists have run models and have shown that it would work better than the emotional and often wrong-but-worshipped suits like Greenspan or Bernanke or Carney who respond to crises in knee jerk ways, setting the stage for the next even bigger crisis and bubble.

Lets hope we get many more of these headlines and articles.

2012-01-12T21:05:00.000-08:00

New Home prices rise, soften in Vancouver.

OTTAWA (Reuters) - New home prices rose by a stronger-than-expected 0.3 percent in November from October but continued to subside in the pricey Vancouver market, according to Statistics Canada data released on Thursday.

Analysts surveyed by Reuters had expected a 0.2 percent rise. On a yearly basis, prices rose 2.5 percent, the same rate as in October.

But prices eased in closely watched Vancouver. The coastal city has Canada's most expensive property market. A surge in prices and sales there that followed the recession had caused concern about a possible bubble.

The latest data showed prices in the city have fallen gently or held steady in the last six months, and are now 0.2 percent lower than November 2010. From October to November, they were down 0.3 percent.

Prices in eastern and central Canada were rising, on the other hand. In Toronto and neighboring Oshawa prices rose 1.0 percent on the month and 6.2 percent on the year. Prices in the Prairie cities of Winnipeg and Regina were also more than 5 percent higher on an annual basis.

The latest report comes after data on Tuesday showed Canadian housing starts climbed more than expected in December.
Canada's housing sector, which did not experience the subprime mortgage boom and bust seen in the United States, played a key role in lifting the economy out of recession as ultra-low interest rates drove sales and prices higher.

But many Canadian policymakers fear the market's post-recession boom, combined with a long run of low lending rates, could create a fresh asset bubble.
Bank executives told a Toronto conference on Wednesday that the Vancouver and Toronto condo markets were particularly vulnerable.

Where to now?

2012-01-09T01:57:00.001-08:00

You guys tell me what you think. I will throw my ten cents in when there are at least 5 other guestimates

For Makaya

2012-01-08T20:32:00.001-08:00

Makaya said...

Hey Fish, any data from the Okanagan and Sunshine Coast for December?

Not much to say about the OK.

Here are the stats from the Central Area which includes Kelowna

Totals include variables in any given, due to preceding month's collapsed sales and deleted listings. e & oe

ResidentialCondo/Apt

Sales 31 New Listings 87 Current Inventory 766 Sell/Inv. Ratio 4.05% Days to Sell 166 Average Price $196,066 Median Price $186,500

Condo/Townhouse

Sales 21 New Listings 51 Current Inventory 389 Sell/Inv. Ratio 5.40% Days to Sell 121 Average Price $324,183 Median Price $310,000

Lots

Sales 6 New Listings 43 Current Inventory 541 Sell/Inv. Ratio 1.11% Days to Sell 197 Average Price $297,300 Median Price $242,899

Residential

Sales 96 New Listings 179 Current Inventory 1,138 Sell/Inv. Ratio 8.44% Days to Sell 108 Average Price $451,130 Median Price $424,625

Ratio of Sales vs Inventory 5.43%

You don't need me to tell you that those sell/list ratios add up to enormous MOIs which can only be resolved by more buying or a sellers strike.

They don't have December 2010's numbers up (I couldn't find them anyway) but there are big drops compared with January 2011 prices. December is an oddity, so we won't say that the OK is crashing....yet... just that it is under some 'price pressure'.

......................

Here are some nice graphs from Victoria

SFH average prices are now under December 2009 levels and Townhomes are really in a down-trend.

As for the Sunshine Coast. Almost no SFH sales in December - barely into double digits - while 390 sit on the books. However it was December, so volume is expected to be light. A single solitary SFH sale so far in 2012. (note my Sunshine Coast analysis ends at Pender Harbour /Egmont)

Lets clear something up...

2012-01-07T18:55:00.000-08:00

VREAA posted a missive from Cam Good, the well know, helicopter-Realtor. It comes from his blog.

In this, he states:

"Some feel that the Chinese are to blame for the hefty price tags on Vancouver homes. Recent economic prosperity in China has led to the emergence of a huge class of ‘new rich’ and they are buying up Canadian real estate, sight unseen, to the chagrin of many.

And yet, Canadians are doing the exact same thing in the States, in places like Las Vegas, Florida and Arizona. The economic fallout from the sub-prime mortgage crisis combined with the overall tightening of US credit markets has led to a dramatic drop in real estate prices. The bottom line: American real estate is an accessible and potentially lucrative investment and many Canadians are already taking advantage of the opportunity.

If a house is for sale, whether it be in Arizona or Vancouver, and somebody has the money to buy it, should it matter where they come from?"

My response is simple.

Two wrongs do not make a right. If Canadians are buying in Arizona and Florida, and pricing out the local people who work and pay taxes and are policemen and nurses and firemen all the other professions whom we rely on for a civilized society- better still they are not even corrupt- then yes it is a bad thing.

However the prices in those areas have been in free-fall and the economy stinks so our money is actually benefitting everyone. Not so here. The short term benefit of a massive transfer of wealth to a few people, while the rest are under significant housing pressure is not welcome.

There are many desirable countries who DO limit foreign or investor ownership of their housing stock and somehow manage to make a big profit on those who still insist on coming.

Look at Singapore. A small industrious tax-haven with limited land, where many wealthy (especially Chinese and Europeans) want to own and live. They have set aside certain areas where investors from off-shore can buy lots and build. The price of buying is MANY time the costs of lots in the local area and the homes built must be of a certain size and cost. I believe the land is even sold with long leases and not freehold, and yet they are selling.

No extra benefits come with this land ownership like free healthcare or education or passports. It is a simple investment.

Now lets look at the us: for the price of a home, we allow all the above benefits and allow our city to be socially destabilized. Who is going to change the regulations here? No one.

Are we doing this in Arizona? Of course not, they would love us to go down there buy and get sick, and spend many thousands on the hospital bill, and forget passports- the border guard may not like the look of you and you cannot even go to your new investment.

...........

If Mr Good had spent a bit more time researching, he would find a better example to compare to the Chinese buying everything here. Costa Rica. I was down there 6 years ago and the Americans and Canadians owned nearly every piece of waterfront. The locals just could not compete with our money. Blue collar workers were outbidding local Doctors and Lawyers. There were no regulations to prevent this.

The result was that even though everyone knew the foreign money brought lots of jobs with the new developments (mostly low paying) - I heard a lot of resentment towards the new land-owning class.

This guy gets it

2012-01-06T08:07:00.000-08:00

Debt debt debt

The banks have been our enablers, the below-inflation interest rates have made a joke out of saving and the day of reckoning is fast approaching.

Three part piece.

Ah..Stats

2012-01-04T18:53:00.001-08:00

From the FVREB news release:

Although 2011 ranks the third slowest year for sales in Fraser Valley since 2002, it was only 10 per cent less than the 10‐year average of 17,210 sales. The volume of new listings received in 2011 was 6 per cent more than the 10‐year average of 29,867 new listings, placing last year third in ranking since 2002.

Sidhu adds, “One trend from 2011 that is clear was the preference for single family homes. For the most part in our region, both sales and prices of townhomes and condos either stayed on par with 2010 or decreased.”

In December, the benchmark price of a detached home in the Fraser Valley was $522,998, an increase of 3.3 per cent compared to $506,145 in December 2010 and a decrease of 1.7 per cent compared to November.

For townhouses, the benchmark price in December was $315,330, a decrease of 2.1 per cent compared to the same month last year when it was $322,054 and down 3.8 per cent compared to November. The benchmark price of apartments in December was $237,285, a decrease of 1.2 per cent compared to December 2010 and a decrease of 0.5 per cent compared to November.

Average prices year over year show detached homes up 9.1 per cent – $610,269 in 2011 compared to $559,456 in 2010. The average price of townhomes increased by 2.6 per cent, going from $336,484 in 2010 to $345,138 in 2011 and the average price of apartments increased by 0.9 per cent going from $223,910 in 2010 to $225,976 in 2011.

Interesting that they pulled the 'average price' into the end of the news release, as it seems to show more strength. Meanwhile in the REBGV news release they talk only about Benchmark and not Average. Maybe because the benchmark is down 1.5% from the highs - and all the averages are much lower - the SFH average is down 13% from the highs!!

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MSM picks up on Victoria's secret

.............................

More MSM and TD Bank

"British Columbia is forecast to have it worse, said senior economist Jacques Marcil, and will likely see "a signifcant correction" this year. Indeed, he said in a report today, the Vancouver market likely peaked last year."

dang@Victoria.re

2012-01-03T21:51:00.000-08:00

Victoria SFH dropped 8.4% Dec 10-Dec 11

HERE

A $50K drop YOY!

December numbers are always a bit skewed.

However the annual sales numbers for 2011 was the lowest for 5 years, lower than 2008!

That would suggest Victoria is in a full out housing recession.

We should get the official VREB numbers soon.

Also the YOY numbers for the FVREB should be interesting.

Down....

2012-01-01T13:36:00.000-08:00

Good ol'Larry out with the numbers asap and we are down significantly on the average price.

Here is Larry's graph

SFH dropped an astonishing 6% MOM. 1134K to 1064K.

SFH prices are now up less than 2% YOY and Apartments are up 1% YOY. RE is now lagging inflation and even GICs!

SFH Inventory is up 17% from last December, while sales are DOWN 17% from last year.

This could be it boys and girls!

Here's what I said earlier in December

.. we could see it drop down and if so it could be quite precipitous. It is far too tough to call, we will have to wait for the data.

The pattern I mentioned in this post resolved downwards.

MOI for SFH = 7.5

MOI for apartments = 6.6

MOI for attached = nearly 8

No Kidding!

2011-12-29T22:54:00.001-08:00

The CMHC came out and warned about the huge debt load of Canadians. No kidding!? And who helped them get into such a morass of debt and obligations??

The CMHC for one!

Of course we have been screaming on the bear blogs about the huge debt load of Canadians for years, and now- late to the party- Carney, Flaherty, the Banks and even the CMHC are jumping on board.

Of course none of us bloggers can do diddly squat about it- only the four mentioned about can AND THEY WON'T.

No point shouting 'FIRE' while you keep pouring gasoline on the flames!

The first part will make you laugh. The CMHC says that the debt situation warrants closer monitoring by 'the authorities' and yet the IMF says the CMHC needs closer monitoring by 'the authorities'. What a joke!

OTTAWA (Dow Jones)--Canadians' record level of household debt is a "serious issue" that merits closer monitoring by authorities in the years ahead, Canada Mortgage and Housing Corp. (CMH.YY) said.

In a year-end publication released Thursday, CMHC - the government-owned provider of mortgage insurance in Canada - said mortgage debt accounts for 68% of total household debt, by far the largest contributor. The agency, which is Canada's largest mortgage insurer and benefits from explicit government backing, said personal lines of credit have surged in recent years, increasing at higher growth rates than any other sub-component of household debt held by chartered banks.

"It is important that consumers and stakeholders continue to be vigilant in monitoring both the magnitude as well as the composition of household debt and take appropriate action," CMHC said.

The major risk in the mortgage market, it added, is the emergence of another, deep recession that sparks a series of job losses that would affect households' ability to pay their mortgages. Still, "most Canadian households have the capacity to deal with adverse economic conditions, due to the high quality of mortgage credit in Canada, the substantial equity position of most Canadian homeowners with a mortgage, and households' ability to adapt their discretionary spending."

Canada's ratio of household credit market debt to disposable income stood at 150.8% as of the third quarter, prompting warnings this month from the International Monetary Fund. The IMF said further "vigilance" is required by Canadian policymakers, including the possibility of increased supervision of CMHC, which the Washington-based body said has emerged as a key financial institution in Canada.

Federal Finance Minister Jim Flaherty has repeatedly warned - as lately as two weeks ago - that Canadians need to exercise caution in taking on additional mortgage and consumer-loan debt. Under his watch, the Conservative government has tightened mortgage-lending rules three times in an effort to avoid a U.S.-style housing bust.

-By Paul Vieira, Dow Jones Newswires: 613-237-0669; paul.vieira@dowjones.com

Hubris

2011-12-27T12:40:00.000-08:00

Hubris (also Hybris): over-whelming pride, arrogance or confidence.

noun

From the Greek: to express excessive pride or wanton violence.

Indo-european roots

2008:

American lawmakers "have taken leave of their senses," European Union Trade Commissioner Peter Mandelson said late on Monday evening in an interview with the BBC. "I hope that in Europe we will not see politicians and parliamentarians replicating the sort of irresponsibility and political partisanship that we have seen in Washington."

The European Commission spokesman Johannes Laitenberger told reporters on Tuesday that "the turmoil we are facing has originated in the United States. It has become a global problem. The US has a special responsibility in this situation."

"The German government expects, as do I, that the United States of America will pass a bailout package this week, because that is a precondition for restoring trust in the markets," Merkel said. "That is of incredible importance."

"The idea of an all-powerful market which must not be constrained by any rules, by any political intervention, was mad," Sarkozy said. "The idea that markets were always right was mad." He also said that self-regulation and laissez-faire capitalism "were finished."

Europe did nothing to reign in their own debt or their financial institutions.

2011 :

"What started as a sovereign debt crisis in smaller countries in Europe has now spread, causing extreme stress in the European financial sector and threatening global growth. Unfortunately, this time, the policy response to our shared challenges has not been as strong and co-ordinated as it needs to be. This slow response has resulted in missed opportunities, with each missed opportunity increasing the cost and difficulty of resolving the crisis. " Steven Harper October 2011

" A definitive solution that could have been delivered before the G20 meeting this weekend in Paris has been promised by the Cannes summit. Quite frankly, Europe's response over the past year has been disappointing. To be clear, this crisis could have been contained. Instead, it was allowed to grow." Jim Flaherty October 2011.

Carney warned that the world’s advanced economies, especially the Europeans, have spent a generation accumulating a “mountain of debt,” with global public debt to global GDP reaching a ratio of almost 80 per cent, a level that has “historically been associated with widespread sovereign defaults.”

We now have a higher per capita consumer debt than the US did before their collapse. We have higher price/rent ratios is many markets than the bubbliest markets in the US did at the height of their property bubble.

We have the same risk-enabling structures in place (CMHC) that the US did (Freddie and Fannie). Our per capita exposure to this debt-at-risk is higher than the US. BTW- Mr Carney- Our largest province is on credit watch as it's debt spirals out of control, and the BC and the Federal Debts are becoming structural according to the Auditor General.

In the words of the finance Minister: To be clear, this crisis could have been contained. Instead, it was allowed to grow.

CMHC ALERT!!

2011-12-24T23:20:00.000-08:00

I posted this as a comment on a previous post but it really needs more discussion :

This is what the IMF says about the CMHC.

“Since CMHC is now one of the largest financial institutions in Canada and the key backstop to the housing market, it would be useful to undertake a review aimed at ensuring that CMHC has a modern and effective governance structure and supervision, and assessing the scope for further strengthening its risk management,” said one of dozens of recommendations the IMF made in its annual report on the Canadian economy.

...

In the question and answer session they mentioned more oversight and supervision of the CMHC being needed several times, and remember we (Canada) are supposed to be the poster child for financial responsibility!

Who is on the Board of Directors of the CMHC? This is from their web-site:

Board of Directors — Biographies

In accordance with the Canada Mortgage and Housing Corporation Act, the CMHC Board of Directors is responsible for managing the affairs of the Corporation and the conduct of its business. The Board is comprised of ten members, including the Chairman, and the President and Chief Executive Officer.

Dino Chiesa
Toronto, Ontario
Chair of the Board of Directors, CMHC
Principal, Chiesa Group
Karen Kinsley
Ottawa, Ontario
President and Chief Executive Officer
CMHC
James A. Millar
National Capital Region
Associate
The Sussex Circle
Brian Johnston
Toronto, Ontario
President
Monarch Corporation
André G. Plourde
Montréal, Quebec
President, Groupe immobilier de Montréal Inc.
Sophie Joncas
St-Hubert, Quebec
Chartered Accountant
E. Anne MacDonald
Pictou, Nova Scotia
Lawyer
Michael Gendron
Edmonton, Alberta
Chief Financial Officer
Mancap Group
Rennie Pieterman
London, Ontario
Partner, Practical Plumbing Co. Ltd.

A rather small board considering the Hundreds of Billions which are at stake. Their background, from what I have gleaned from the CMHC web-site...

A developer, a CMHC employee and executive, a consultant, another developer, a real estate broker, a CA, a small town lawyer with RE/Wills and municipal experience, another developer, a partner of a plumbing and renovation company.

I am sure they are well meaning people. However I am not reassured. Neither it would seem is the IMF which has called for more supervision.

Where are the well-known Business and Economic Professors from U of T or McGill? Where is the seasoned insurance executive who has dealt with major losses? Where is the representative from the Canadian Tax Payers Association? WHERE is the significant representation of NON-housing interests? Why not have an a housing skeptic Economist like David Madani on the Board?
Would we only let Doctors and Nurses run the Ministry of Health? Of course not. Should the Minister of Health only ever be a doctor, and the Minister of Defence only ever be a soldier? Of course not. We need outside views to be heard too, especially when we all have to share in the liability.
Here is more of what the IMF had to say..

Gian Maria Milesi-Ferretti, the IMF official who led the review of Canada, stressed on a conference call with reporters that the fund has no reason to think CMHC currently represents a risk.

Rather, the IMF simply thinks the government should evaluate closely whether it’s appropriate for one of the country’s largest financial institutions to operate without formal oversight, he said.

This has the potential to have very serious adverse consequences. Anyone who thinks we cannot have a crash like the US because we do things differently here, have not lived through the last few crashes we have had here! This time the stakes are much higher.

Happy Turkey Day...

2011-12-24T08:59:00.000-08:00

Joy for everyone but the unfortunate fowl.

Who will be the turkey next year?

For the last half-a-dozen years it is the prudent who have been tarred and feathered. Those who saved, those who refused to buy a broken down mouldy shack for a Million bucks, those who believe in self-dependence and who are trying to live with an eye on their needs for children, retirement or unexpected events. This turkey has been plucked to death!

Those who have borrowed, jumped on the band-wagon and over-indebted themselves have had the plum pudding.

This whole process has been aided and abetted by our bankers who keep telling us to borrow home equity to go on holidays and buy stuff, and that we are 'richer than we think' (who came up with that one), the Central bank which leaves rates at emergency levels for ever and then says don't borrow and spend - SAVE!!

The Government which has killed the Wheat Board because it is not 'free market enough' and yet doubled the CMHC mega-monster, even after they saw what happened with Fannie and Freddie in the US.

What is it they say.."those who ignore history are condemned to repeat it"

Of course the media was it's usually limp self-serving self. Particularly the local papers which have only improved marginally since the Aspers left.

However things they are a changing, Carney, the IMF, the media and most of the banks have now come out with warnings on housing. Though I fail to see what point all these warnings have without some concrete action, like raising mortgage rates 1% or anti-speculation laws, or residency laws for buyers.

Nope, we have leaders who, like the Captain of the Titanic having steered the ship badly now see an iceberg ahead and can only shout hysterically without even trying to turn the wheel.

A Great Christmas to all of you who drop by and to your families.

Take one part over-indebted consumer. Add two parts bubbling RE and...

2011-12-22T11:33:00.000-08:00

....you have a recipe for disaster...

From the Globe and Mail;

IMF casts nervous eye on Canadian housing market

Posted on Thursday, December 22, 2011 12:55PM EST

It is worth looking at the whole article but here is a pertinent excerpt:

With household debt at about 150 per cent of disposable income, the domestic spending boom that helped Canada weather the financial crisis already is at its limits.

A collapse in housing prices would be a serious blow to the economy because of the link between consumer demand and household wealth.

The IMF, in its annual report on Canada’s economy, estimates that a 10 per cent decline in housing prices could result in a 1.1 per cent drop in personal consumption, excluding durable goods, which would correspond to loss 0.5 per cent loss in gross domestic product.

Now you know why Carney is worried, but he wont do anything about it except jaw-bone away.

Teranet October Numbers

2011-12-21T14:14:00.000-08:00

From the Calgary Herald

CALGARY — Calgary house prices in October fell for the second consecutive month, according to a new national survey which looks at repeat home sales.

The Teranet-National Bank National Composite House Price Index, released Thursday, said prices in Calgary fell by 1.5 per cent from September. However, they were up 1.7 per cent compared with a year ago.

The index is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index.

At the national level, prices were flat for the second consecutive month.

But they have increased 7.9 per cent in the 11 metropolitan markets that were surveyed.

On an annual basis, the following markets showed price increases: Halifax (1.6 per cent), Hamilton (4.5 per cent), Montreal (5.4 per cent), Ottawa (3.8 per cent), Quebec City (5.6 per cent), Toronto (10.4 per cent), Vancouver (10.0 per cent), and Winnipeg (7.0 per cent).

Decreases were registered in Edmonton (0.1 per cent) Calgary (1.5 per cent) and Victoria (0.2 per cent).

%%%%%%%%%%%%

I suspect their November and December numbers will show a few more dropping from the Green column into the Red Column.

Marc Carney finds Fiscal Religion

2011-12-20T22:00:00.000-08:00

Well as you all know, I have been a vigorous critic of Central Bankers who for three decades have followed the 'Greenspan Doctrine' that :

1) The business cycle can be thwarted by easing monetary policy if speculation deflates

2) Markets are best left to run themselves

3) You can only see a bubble after it has burst.

4) Only intervene if the speculators are very large and can threaten 'the whole system' or have good connections

5) The accumulation of enormous debt on shaky assets or income flow, is something that should be ignored until it is so large as to threaten 'the whole system' and then some gentle finger wagging is in order.

6) Savers and the prudent most always be punished to benefit the indebted speculators.

Carney has been no stranger to this play book. He assumed office nearly three years ago and has only just now realized what a critical burden of debt Canadians have put themselves under.

The three years have been filled with mortgage shenanigans from the Federal Government, lax lending from banks, the myriad home-equity-sucking loan companies, and his own zero rates- running 2-3% BELOW inflation.

Bit late old chap! It's like giving a teenager a bottle of moonshine every day and then complaining that he isn't doing his home-work!

Of course Jim Flaherty has been there for nearly 5 years, so when he wags his finger about too much debt, it is worth remembering that he has passing the moonshine out for even longer.

What we have in the Vancouver Market is this

2011-12-14T23:12:00.001-08:00

A consolidation pattern. So far the market has dropped, picked up a bit, and then dropped a bit again, much like this pattern.

When assets do this, they moved out of their trend and are biding time. Waiting for the next buying frenzy to move them up or a break down and out of the pattern.

It could go either way. So far European debt crises, Chinese slow downs, commodity collapses etc have had very little effect on the price of housing in this city, though outside buyers have seen 5-10% drops in the last two years.

December will show a high sales/list ratio due to on-going buying but less listings. The price may just edge up or down a bit, leaving January with the final tale to tell on this pattern resolution.

It should break down- however I do not for one second count out the possibility of renewed easing by the Central banks of the world. Carney has been talking tough on Canadian consumer debt which he helped create with ultra-low rates, but I am sure he would not blink an eye-lid and join with his buddies in slashing back down to 0.25% which would save the stockmarket and push all assets- gold, RE, oil back into the stratosphere.

One day there will be nowhere to go. rates will be at zero. The US Fed will own most US bonds (they have already bought up so much in their ponzi scheme, that they own more than China or Japan or the Gulf States!) The consumer will be so tapped out that, like a gorged glutton they cannot take on another cent to consume.

We are pretty close to that state but there may be just a little more they can squeeze into the glutton:

Like the fellow who makes his entrance at about one minute 10 seconds

Is China's Housing market unravelling?

2011-12-13T21:01:00.000-08:00

First this from Bloomberg:

China Stocks Drop to 2-Year Low on Housing Slump, European Debt

By Bloomberg News - Dec 13, 2011 1:46 AM CT

China’s stocks fell to their lowest level in more than two years, after Chinese housing sales slumped and ratings companies said last week’s European summit did little to resolve the region’s debt crisis.

Anhui Conch Cement Co. (600585), whose materials are used in property construction, slid 4.5 percent after Fitch Ratings said China faces slower growth in home sales and construction next year. Poly Real Estate Group Co. led declines for developers after the nation’s biggest real-estate website reported housing transactions plunged more than 50 percent in 13 cities out of 35. Jiangxi Copper Co. (600362) retreated the most this month on concern faltering growth in Europe will cut demand for raw materials.

The Shanghai Composite Index (SHCOMP) slumped 42.96 points, or 1.9 percent, to 2,248.59 at the close, the lowest since March 2009 and capping a four-day, 3.6 percent loss. The CSI 300 Index (SHSZ300) fell 2.3 percent to 2,421.93. The Bloomberg China-US 55 Index, the measure of the most-traded U.S.-listed Chinese companies, retreated 2.4 percent in New York yesterday.

The Shanghai Composite has slipped 3.6 percent this month as concern about a slowdown in economic growth outweighed the first cut in lenders’ reserve requirement ratios in three years by the central bank on Nov. 30. The index has tumbled 20 percent in 2011, exceeding last year’s 14 percent decline, after the central bank raised interest rates to combat inflation and curb property-price gains.

Anhui Conch, China’s biggest cement maker, lost 4.5 percent to 15.76 yuan. Huaxin Cement Co., the Chinese affiliate of Holcim Ltd., tumbled 5.1 percent to 12.95 yuan. Gansu Qilianshan Cement Group Co. (600720) slid 4.8 percent to 9.47 yuan.

Lending to developers will remain tightly controlled as the government prolongs a campaign to stabilize property prices and some smaller builders are “more vulnerable,” Fitch said in a report today.
Tax Cuts

Poly Real Estate, China’s second-largest developer by market value, fell 1.9 percent to 9.58 yuan. China Vanke Co. (000002), the biggest, lost 1.8 percent to 7.17 yuan.

Chinese housing transactions declined in 27 out of 35 cities tracked by Soufun Holdings Ltd. during the week of Dec. 5-11, according to the operator of the nation’s biggest real- estate website. Transactions fell more than 60 percent in at least 4 cities, including Tianjin and Hangzhou, it said.

China may use tax cuts to shore up expansion in the second- largest economy next year as export growth weakens and the threat of bad loans from stimulus spending narrows the government’s options. The nation’s top officials are mapping out policies for 2012 at the annual Central Economic Work Conference in Beijing. The event started yesterday, according to the state- run Xinhua News Agency.
Economic Growth Outlook

“China is no longer able to rely on massive investment in infrastructure building to stimulate the economy,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA. “Tax cuts are unavoidable.”

The nation’s economic growth may “hit its bottom” in the first and second quarters next year, China Securities Journal reported, citing Ba Shusong, a researcher at the State Council’s Development Research Center. There may be moderate rebound in the third and fourth quarter and growth may be more than 8 percent next year, it said.

...........................

Then take a look at this

If China does falter it may well take some of the steam out of our hotter market segments. Richmond has already started waning and the Westside is losing some of it's frenzied HAM bidders, but West Van is still attracting big number buys.

Though I see some homes have dropped 500k or $1m from original asking. Sooo.... how does the Realtor come up with the selling price , when such huge price drops occur soon after listing. It is crazy really. No other item has such bizarre pricing metrics. When a buyer comes and views a house, they probably think there was formula that the seller or agent used to come up with the price.

Instead it may just be the number the agent used to get the listing or the wishful fantasy of the seller!

A few thoughts

2011-12-10T08:56:00.000-08:00

Here is the HPI for Vancouver

As you can see some areas are already fraying, eg the Sunshine Coast which is down 11% from 3 years ago and nearly 3% from 5 years ago. That means someone who bought with cash would be down 3% + five years of inflation..say 12%= 15% in real terms.

Big, leveraged purchases that drop in value really hurt!

Here is the site

Here are the numbers from the REBGV

Detached
Greater Vancouver	$890,204	1.4	$890,561	262.9	11.4	33.6	37.5
Burnaby	$911,365	2.6	$919,411	268.3	14.9	39.2	41.9
Coquitlam	$689,527	6.2	$708,098	242.6	1.1	12.0	18.2
Maple Ridge	$448,315	3.4	$448,564	204.5	1.9	6.4	6.3
New Westminster	$683,503	4.2	$659,143	281.7	13.5	26.7	33.0
North Vancouver	$985,731	2.9	$970,670	246.2	11.0	31.7	26.3
Pitt Meadows	$520,416	9.0	$523,738	213.6	-0.6	7.5	21.5
Port Coquitlam	$581,502	5.1	$554,671	245.8	5.2	12.9	21.4
Port Moody	$751,345	15.4	$768,754	225.9	4.4	29.8	17.4
Richmond	$1,061,256	2.7	$1,071,538	313.3	15.3	56.1	66.6
South Delta	$686,430	4.9	$718,209	224.3	11.2	21.0	19.8
Squamish	$530,896	10.8	$492,615	201.7	10.6	-9.6	19.7
Sunshine Coast	$374,502	7.1	$399,287	213.1	-6.7	-11.2	-2.7
Vancouver East	$863,183	2.4	$853,701	292.4	15.9	42.6	46.3
Vancouver West	$2,019,926	2.7	$2,019,783	335.2	18.9	81.0	81.5
West Vancouver	$1,759,616	4.2	$1,723,444	259.2	23.9	37.1	46.4

December is a quiet month. No one lists near Christmas unless they are desperate, however people still buy to get a new place for the New Year, so stats may be skewed to a high sales/list ration. January will tell the tale.

When we look at Larry's average price chart, it looks like we are in a consolidation period like a mini 2008. This could resolve up or down. I have no idea.

We could get another run up if the Bank of Canada cuts rates and the Federal government loses it's nerve again and pumps up the CMHC monster again, despite all the recent rhetoric, or if the HAM money comes in ever bigger amounts perhaps driven by fear of political uncertainty at home.

However, just as easily, we could see it drop down and if so it could be quite precipitous. It is far too tough to call, we will have to wait for the data.

What we do know there have been some major price drops in Victoria, the Sunshine Coast and the Okanagan. The Fraser Valley is flat. Vancouver is the last domino to fall (or not!)

What does it cost to buy and sell...

2011-12-08T08:05:00.000-08:00

Just a rough estimate and please tell me if you think I missed anything out..

Paid by Seller

Realtor fees - Varies and negotiable. Anywhere from 7% on the first 100K of sales price and then 2.5% on the rest ..down

Legal fees $600-1000

Paid by Buyer

Appraisal for mortgage (often the lender will pick this up) but even if you are buying with cash you should get one $750 +/-

Legal fees $600-1000

Property Transfer Tax 1% on the first 200K and 2% on the remainder.

Insurance for the property - Critically important and most lenders will insist on it.

I forgot the PTT in the example below and have rejigged the numbers to account for that and a more realistic cost of selling.

Taking the PTT and 2.5% selling costs into consideration the difference is $110K for the renter and $79K for the buyer. A substantial difference!

Is it a Crash or isn't it?

2011-12-07T15:10:00.000-08:00

Vancouver Condo has mentioned my Victoria numbers and I see there is hot debate as to whether the drop in Victoria's prices are significant or not.

The bears are calling it a crash and the bulls are brushing it off. Well 5% drop in median over two years is not a crash but it is significant (I will show you how significant soon).

In fact in a normal RE market bear markets are usually flat or down a few % to 5% tops. However after the huge run-up we have seen where prices are up 100% in many cases, over the curse of the last half decade, 5% seems rather puny.

OK lets crunch the numbers:

Rent v Buy in Victoria Nov 2009-2011 each with $100k . the renter puts the 100K into a two year 2% GIC

Assume you bought two years ago at the median price of $555K with 100K down.

You mortgaged the balance at a 5 year fixed at 3.59% you would pay $2293 a month.

You have paid $8K of property transfer tax which is gone forever!

After two years you would owe $431K due to principle pay down.

We know that with taxes and repairs the cost of owning is more than renting. In Vancouver it can be 70% or more higher. I am not an expert on Victoria but I will assume it is 15% higher. Say $3500 a year more which is probably conservative.

Now assume you had to sell due to an unexpected emergency eg a job loss or transfer.

You sell at November 2011's median price of $530K

You pay 2.5% for selling related expenses and end up with 518K

You pay off the mortgage and are left with $87K of your down-payment. However you did pay $8K in PTT.

The renter has his 100K + 7K less he paid for renting and he got 4K on his deposited money (from which tax has to be paid of... lets say $1K)

Result:

Buyer walks away with 79K

Renter walks away with 110K

Not a crash but not insignificant. You can see why in Vancouver with it's much higher median prices, the difference will be even more severe should prices drop.

..........................................

The HPI for SFH for the Sunshine Coast is down 6% in just the last year!

Ok

2011-12-07T07:24:00.000-08:00

Stats here

Basically a sales list ratio of about 6.59% or a MOI of 15 (Shuswap MOI 20)

Average SFH price down a wee bit from October 2011.

Could not find the November 2010 numbers to compare with on their site. As I have said before, the OK data is presented in a very user unfriendly way and the main focus seems to be how much did we sell? Since that is what counts for their members, Realtors.

Fair enough, but it does made comparisons difficult.

Victoria SFH prices down YOY and over the last 2 years

2011-12-05T07:30:00.000-08:00

Condo prices are also down YOY and flat over two years. Attached has taken a big dive and is down 15% over two years (a thinner market so we won't read too much into that)

Here are the graphs from the VREB

SFH Average Greater Victoria

Nov 2009 = $617,987

Nov 2010 = $636,557

Nov 2011 = $592,034

Median 2009 = $555K

Median 2010 = $530K

Median 2011 = $530K

This is news IMVHO. Big drops in SFH Median and Average prices over the last two years according to the VREB stats.

So how did they deal with it their news release?

It doesn't seem to have been mentioned!

FVREB and then some

2011-12-03T17:05:00.000-08:00

Here is the crux of the matter

MOI= 9

In November, the benchmark price of a detached home in the Fraser Valley was $532,086, an increase of 5.4 per cent compared to $504,848 in November 2010 and an increase of 0.3 per cent compared to October.

For townhouses, the benchmark price in November was $327,764, an increase of 2.5 per cent compared to the same month last year when it was $319,623 and up 0.7 per cent compared to October.

The benchmark price of apartments in November was $238,461, a decrease of 1.6 per cent compared to November 2010 and a decrease of 2.2 per cent compared to October.

Basically pretty flat prices YOY in the FV- up or down a couple of %. Probably a good place to get deals if you need to buy. Median prices are even flatter. Up less than inflation or down a tiny bit. Not much HAM money there.

Full package of stats.

...........................

Had an interesting discussion with a health economist this week-end which may explain why we accept HOT money from anywhere so readily.

He says that the Boomers who head into retirement will be taking out $3 in pensions, health benefits, drug benefits, seniors housing and medical costs for every $1 they put in, that's inflation adjusted dollars.

If his numbers are correct, where is the rest going to come from?

Our taxes are already prohibitively high, no one can even bring themselves to cut anything- drugs for example - there are lots of very expensive drugs that are not much better than cheaper ones, but the drug companies spend millions to convince doctors AND patients that the tiny difference is worth triple the price and that if the government doesn't pay for it, they are heartless SOB who are only interested in their pensions.

Likewise, he says, there are countless high tech medical tests and procedures done on very elderly patients which are of little benefit but who is going to say no! The heartless Government? The doctor who is getting paid to do it and maybe sued if they don't?

The US has just spent like drunken sailors and gave money to banks and Wall Street and don't like tax so they have a leaning tower of debt. We aren't far behind, but our betters have understood that with the HAM comes huge inflows of cash and economic activity and short term tax revenue, and this reduces the debt that we have to pile on, since we cannot say no to anyone.

Sure it brings huge social costs with it, but social costs be damned, at least we don't have to say......enough!

What did I tell you??

2011-12-01T19:48:00.000-08:00

(Does a little dance and strut of victory)..

Here's what I thought would happen:

MOI 6.5

MOM price change -1-2% in most of the categories (attached is always an odd one)

YOY- I think we will still be up 4-5% YOY after October's disappointing rebound.

Here is what happened from Larry Yatter's number.

Average SFH down 2% MOM.

MOI 6.3

However we are up 8-9% YOY still.

All categories showed drops.

Listings 14% higher than last year and sales down 12%.

Very different from last year when we saw the summer lull give way to a fall buying spree and dropping inventory. Maybe we have finally seen home prices reach their maximum level of unaffordable frenzy, maybe the bubble can no longer be blown up.

Fall 2011 is very different from Fall 2010 but we need a lot more to declare this lunacy ended.

Is it a myth?

2011-11-30T06:41:00.000-08:00

Some bear blogs are having a discussion as to whether the HAM buyers are driving our market or not.

My opinion is simple, in some areas they ARE they market. In others, like Pitt Meadows or Langley they are not much of a factor.

Take the North Shore. here is my anecdotal info. This year, I have had 3 friends sell their places. One bought smaller and banked the difference, one is renting and one moved to the Island with his family. ALL 3 sold to mainland Chinese buyers for MUCH higher than they had ever hoped for and in two cases for higher than their listing price as a HAM bidding war broke out.

Over the week-end I carried out my own unscientific experiment. I called up 5 newly listed rental homes in West Van on craigslist. 3 had Chinese agents who quickly admitted that their clients had just bought the homes and in fact two of them didn't even have possession yet. The other two were professionals agents- one volunteered that their client was from the Mainland and had just purchased it as an investment and had no intention of occupying for now. the last one would not reveal the ownership.

Based on my experience therefore it would seem that in some parts of Vancouver, the HAM money ARE the buyers PERIOD. The likelihood of being able to compete in the higher end market after 40% taxes unless you run a goldmine or are the CEO of Lululemon is zero...

Remember Landcor said that they estimate 74% of buyers in certain areas of Vancouver to be from off-shore. That is an astounding number and were it anywhere else in the world, there would be an outcry to legislate and regulate, but not here where we are the keepers of Hot money!

The only up-side I can see is that some people are making out like bandits, like my friends who sold, and some realtors who will hopefully be paying some taxes, and the Province will be getting the property transfer tax. It is btw desperate for any money it can get it's hands on with the deficit soaring, so if you think they are about to kill this golden goose, think again.

Any guesses for November's numbers..

2011-11-27T21:27:00.000-08:00

MOI

Price change MOM, YOY - average or median or Benchmark for the 3 categories.

Here's mine:

MOI 6.5

MOM price change -1-2% in most of the categories (attached is always an odd one)

YOY- I think we will still be up 4-5% YOY after October's disappointing rebound.

For now the HAM frenzy seems to have moved to the North Shore..

Will the Market lead Housing..

2011-11-25T20:15:00.001-08:00

As I noted in previous posts, our stock market has been leading house prices..

See here

The market topped in April and our home prices peaked in May. So we would seem to lag the stock-market by a month or so as you will see from Larry's excellent chart

In October the stock-market dropped and then rapidly rebounded and lo and behold, we had an unexpected bounce in our home prices. What now?

Well, we have had another shellacking in stocks in November. and the market is down 8% in two weeks. IF this relationship still holds we should see a dip in our prices too.

IF...

The sad state of the MSM

2011-11-23T09:55:00.000-08:00

I know that you all move around the bear blog world. However in case you missed it here is the sorry state if our MSM which cannot even bother to check the most basic facts.

Here is the exchange between me and vreaa. Sad that we have such shoddy reporting

Fish10 on 22 November 2011 at 7:45 pm said:

Well done to everyone for pointing out the crass error of the National Post.
This is a great line from the Editor:

“We have confirmed that you are correct and the person used in the story works in condo marketing. If we had known this it would have been disclosed, and that change has been made in the online story.”

No kidding!

So how weak exactly is the journalism on this paper? They ask someone – what do you do? ‘Marketing’. They don’t even bother to ask, “marketing WHAT?” and then they run a rah rah RE storey.

This is what passes for information and analysis at this sorry paper.

Reply ↓

vreaa
on 22 November 2011 at 8:01 pm said:
Actually, it’s probably more sinister than that.
The reporter very likely knows that she works in RE (probably got the lead to interview her via contacts in the RE industry). Then intentionally omits the fact in the article.

Reply ↓

Fish10
on 22 November 2011 at 8:11 pm said:
You are probably right. It is inconcievable that they asked every other question except what she actually does for a living.

If the storey was a plant via the RE industry then things are truly messed up, in fact it shows what little respect we have for the integrity of the MSM (particularly some papers) that we even consider it possible.

Brazil tries to limit Chinese land purchases..

2011-11-21T07:05:00.000-08:00

SAO PAULO, (Reuters) - Brazil's government is working on a new rule to further limit the purchase of farm land by foreigners, arguing that the current legislation has been ``insufficient,'' a Brazilian newspaper said Saturday.

The new rule, which could come as a decree, aims to close loopholes that buyers have been using, such as purchasing land through Brazilian companies, Folha de S. Paulo newspaper said.

It could also impose restrictions on investment funds joined by foreigners and force international banks to sell land received as collateral of a defaulted loan within a year.

Brazil is one of the world's largest producers of food and biofuels, and the expansion of its production is seen as crucial toward addressing growing demand for these products, especially from emerging economies such as China.

Brazil's attorney general last year reinterpreted a land law that now limits purchases of rural land by foreigners, or by Brazilian firms that are controlled by foreigners, to areas no larger than 250-5,000 hectares () depending on the region.

The current rule has been fueling uncertainty among agricultural investors and proving a handicap for expansion, according to analysts.

The new legislation should set clearer mechanisms for foreigners to partner with Brazilian companies, especially for agricultural projects, Folha said.

The land legislation is aimed mainly at stopping the advance of China, which has been buying land in other countries through its sovereign fund, the newspaper said.

Official records show 4.3 million hectares of Brazilian land owned by foreigners, but it could be as much as three times bigger than that, the newspaper added.

Reporting by Inae Riveras; Editing by Paul Simao

This Emperor has no clothes....

2011-11-18T07:18:00.000-08:00

While Mark Carney is being feted around the world as the wise Central banker who 'saved' the Canadian financial system and has now been chosen to run an international financial regulatory agency...we may want to look a little closely at his achievements.

1) Today we have consumer inflation running at 2.9%. What would a reasonable interest rate be in such a scenario? 3%? 4%? Not 1%. This is theft from savers.

2) Due partly to his Zero interest rate policy and lax lending, Canadians are the most indebted EVER! He may keep saying he wants people to pay down debt and save, but folks are not stupid. Why save, when you LOSE money every year?

3) He proclaims that he is against bail-outs and TBTF (too big to fail). yet our monolithic banks have a built in bail-out in the form of the potentially-ruinous CMHC, who's liabilities could bring the house down.

A recent report stated that while Canadian government debts were not as bad as many other countries, the high level of consumer debt, RE bubble and liability transfer to the Fed government..meant that we were actually at the same over-all debt level as any one of the PIIGS.

There was another Central banker who was lauded as a great genius and has now been shown to be a complete and utter fool, blowing up bubble after bubble..Alan Greenspan.

Lets hope that Carney ( and us ) do not end up in the same mess.
The fundamental problem is that Central bankers surround themselves with bankers, traders, investment bankers and sepculators. They go to their dinners, they come from that back-ground, they leave office and go back to big paying money-moving jobs. So when times are good, they hear the phrase..'Don't do anything' and when it finally hits the fan, 'help us, do something'. The result is the huge imbalances we have now.

The fact that one unelected official can have so much power over a country's fate is the biggest problem.

Restricting Off-shore ownership picking up steam..

2011-11-17T18:45:00.000-08:00

Big piece on CBC BC News about the up-coming civic election and calls for restricting RE ownership by off-shore investors.

An astounding number was revealed. I cannot unfortunately find a link yet (doesn't seem to be up)

74% of recent buyers of Richmond and Vancouver RE are thought to be from Mainland China according to Landcor. Money escaping possible future restrictions.

One listing 'boasted' that it had never been lived in and it's ten year old appliances were never used.

In my building we have absentee owners from Korea, China, Taiwan, Russia, Israel and Dubia. Some units are rented and others are left permanently empty- though there is someone who comes round to pick up the mail and pay bills on the empty ones.

How did we get into such a mess? Lax rules for one. even Australia has restrictions on off-shore ownership, even China does, but we don't. Why not?

The only people to bring it up was Peter Ladner, after he left office, and a solitary councillor who says 'we should look at the matter'.

Too late!

And I doubt one solitary Vancouver councillor can do much. The Australian rules came form their Federal government, not from one city councillor, however well intentioned. Can you imagine our own Premier and Prime Minster making such a pronouncement.

Lets start with punitive taxes on any house not occupied for 6 months a year. We have a city that is unaffordable for those who work here and make it liveable for the parvenues, and keeps the city safe and sound for their investments.

The piece on the CBC ended with a Chinese candidate in Richmond saying how Chinese investors should be directed to investing in businesses instead of RE. Quite right.

Funny...

2011-11-15T20:18:00.000-08:00

I often visit Garth Turner's blog. He is an ex-MP, Cabinet Minister, Investment writer, investment adviser and speaker who most bear blog readers know well.

He keeps a regular blog going here and sometimes he gets things right and sometimes not, however he has an interesting turn of phrase. There was one such in the latest post which had me laughing and I thought it worth reprinting:

'Since this pathetic blog crawled from the primordial ooze (I should clean the Bunker more often), I’ve argued against our infatuation with the physical. For reasons I have pounded into sand, real estate will disappoint mightily in the years ahead, now completely unsupported by economic fundamentals and held aloft by duct tape, HGTV, fleeting aspirations and delusional mothers-in-law. No match for debt, lost jobs or swampy incomes.'

BTW

That latest post highlights the situation in Whistler (which has a MOI of over a year), which like the Sunshine Coast and the Okanagan and Victoria is not rosy and not the frenzy that is Vancouver.

Whowouldathunkit...

2011-11-08T18:37:00.000-08:00

THE BCREA comes out with a bearish forecast on home prices..

Vancouver to drop 3.5%.

BC to drop 2.5%

....in 2012.

All from the pen and mouth of our very own Cameron Muir.

and here is what they say about Victoria

' Prices in Victoria will remain below the $504,561 average in 2010, however, slipping to $499,000 this year, then up to $501,000 in 2012.

“The Victoria market is being impacted by slower growth in employment, reduced interprovincial migration flows and continuing weakness in US tourism,” said the report.'

VICTORIA....

2011-11-02T07:44:00.000-07:00

Big drop in the Average and flat median YOY. Looks the opposite of what is happening in Vancouver, where only the very wealthy are still buying. It seems like in Victoria lower priced housing is still selling:

Total Greater Victoria SFH

October 2011

Average $595,836

6 month Ave $619,828

Median $539,750

October 2010

$641,780

$627,263

$539,500

SOURCE

The Good the Bad and the Ugly

2011-11-01T18:58:00.000-07:00

Larry has his numbers out and they paint a mixed picture.

The Average prices showed:

Detached and attached moved up and condos lost value. Detached went up about 5% MOM. Just when you think this market has started it's descent up it pops like dracula ready to bite some flesh off unsuspecting buyers.

I said that I expected one of the indices for one of the categories to be flat YOY and it seems like apartments will fit the bill.

The YOY rise in average apartment prices is about 1%. Less than inflation.

Detached is up about 9% YOY with higher inventory and flat sales. What does that mean - it means more expensive houses are being sold. The 1% are buying more than the 99%.

If so the HPI or median may paint a different picture.

So what now?

Well we got a pop in the most expensive segment, detached, with the same sales and higher inventory. I don't think this is a sustainable and I would have to say that detached SHOULD have a big drop in even the average price next month.

We have moved from challenging each other and nit-picking to calling our shots, and if we are wrong, so be it.

Out of Town for a Few days

2011-10-28T06:37:00.000-07:00

I will back to examine the October numbers with you.

After a bearish start to October we have seen some recent strength in the sales. No surprise with the huge run-up in the markets and sentiment. The TSE and our RE sales seem to be very highly correlated at present.

Of course it wasn't helped by Carney's slap in the face of savers. No interest hikes for a long time. And have you noticed he has quit talking about over-indebted Canadians and the RE market. Seems like all these Central Bankers know is to fix one bursting bubble by blowing up another one.

And Carney is regarded s one of the best Central bankers in the world and may be moving to a take over an International bank regulatory body. The rationale being that our banks have survived the crisis so well. That's because we haven't had our crisis yet! ...and when we do, the risk has already been moved to the tax-payer's balance sheet via the CMHC.

So what are we going to get from the October number- trick or treat. I had though we were headed for lower numbers and stated that I thought we would be flat YOY for one of the indices. Hard to read if that will happen or I was too optimistic (bearishly optimistic).

Sales have firmed up in the second half of the month and as Larry Yatter's figures have shown, we have a mixed picture. Coquitlam has less sales, huge MOI and yet the average and median prices have gone up! I suspect due a change in the mix of sales.

On the other hand Richmond has less sales, the MOI is up but much less than Coquitlam and yet prices are down significantly. North Van also has stronger MOI and sales have been fairly steady but the prices are also down quite a bit.

So the final numbers could show anything. I will be watching for the HPI particularly to see what that shows. Clearly this Fall is weaker than last and the price trajectory has moved down.

MOI quickie

2011-10-22T21:11:00.000-07:00

SFH Based on the last month of sales and current listings:

Sunshine Coast 18.2

Richmond 13!!

North Vancouver 4!

New West 5.2

Squamish 13.6

Vancouver West 9.89!

Coquitlam 7

Maple Ridge 12.86!!

Surrey 12.5

Abbotsford 16.64

South Surrey White Rock 9.85

West Vancouver 6.84

Sorry guys too busy to post the MOIs

2011-10-21T19:05:00.001-07:00

Will try and get to that in the next few days.

We are seeing a little bump up in sales. Why? Who knows.. But we have had a dip in the 5 year rates and then recently another run-up in the stock-market which seems to be highly correlated with the RE frenzy.

As stocks go up, people feel richer and more confident while others cash out of stock options and banks feel more macho about lending.

Anyway we have had a small blip up in the list/sale ratio over the last week or so, which has coincided perfectly with the stock run-up, lets see how far this has to run.

We are still seeing Governments around the world committed 100% to keeping rates so low, well below inflation, that savers get punished and speculators which are never-to-be-reigned-in saved.

For now it is a wait and see. This fall was very different from last fall. Listings kept coming and sales dwindled, we will have to see if this is a temporary set-back or whether we are off to the races again.

Watching China suggests things are not so hot. There stock market is down 22% from a year ago, though an agreement this week in Europe may change all that.

Where are we

2011-10-16T09:17:00.000-07:00

Thanks for the responses. We do seem to be on the down-slope of the curve below, somewhere around denial and anxiety (BTW I agree denial should probably come before anxiety)

We are certainly in a flat market at best in most parts of Vancouver and the Fraser valley. Many areas are well into 7-8 MOI and by definition into a buyer's market. However how soon price drops follow depends on many things that we need to keep an eye on:

1) China is primary amongst these. Not only are the Chinese the big money buyers in many areas (yes they are) but our dependence on resources also makes their financial situation doubly important for our housing market. They stumble and we fall.

2) Interest rates. Super low. No sign yet of any of the irresponsible Central banks that got us into this mess allowing long or short rates up. In fact the US Central bank is even buying it's own long bonds to keep rates low. BTW- They started talking about doing this late September. Do you think they may have Wall Street insiders know a little sooner??

No wonder people are marching in the streets, the current system reeks of corruption.

Anyway back to rates- no increase on the horizon. On the contrary if Europe falters, then US and Canadian bonds will be seen as a safe-haven and rise. Only if things get REALLY bad and banks can't borrow and therefore can't lend will we see pressure on mortgages. I would not bank on this happening ;)

3) Government policy. After a series of catastrophic policy decisions (IMVHO) helped pump up RE, turning the virtuous Canadian economy into a borrow and spend US-wannabe, I cannot forecast what these bozos will do next. The C-team in Ottawa seems to have remembered their fiscal Conservatism a little now, but I would not put it past them to give way if housing drops and reach for the CMHC-pedal again. Pumping up the CMHC is the way Government increases debt and liabilities for us all, without it showing up on the country's balance sheet. Meanwhile they can pretend to be holding the line on the deficit (which is already 'structural' according to the Auditor General).

4) The US. We are still very dependant on the US - for 70% of our exports in fact. So any re-recession will also hit us and you can expect Carney to remove the 1% he gave to savers. More money will have to be transferred from the prudent savers to the reckless speculators.

5) Watch the stock-market. Lo and behold the market went up and we got a bounce in Vancouver sales the last few days. It is an odd correlation. I suspect it is multi-factorial..there is a feel-good, we are all wealthy attitude, there is the insiders who cash out stock options, and of course there are the Chinese who sell hundreds of Millions of stock and diversify to whatever and where-ever they can.

Can I forecast all of these. Nope. Not even one of them. And they will move in opposite directions. If Europe starts defaulting, expect a number of things- long interest rates here to drop, short interest rates to be cut, the USD to rally, commodities to drop, China to drop, and our market to drop!

So what will be the net effect? ...ummm

Anyway we will be watching the inventory numbers and I will have some MOI up mid-week for you all to look at -including the Fraser Valley. Glad to be rid of Adsense. I am sure it works for some, but it sure didn't work for me!

Where Do YOU Think We Are?

2011-10-12T21:44:00.001-07:00

Some Court ordered Sales

2011-10-10T13:59:00.000-07:00

Ex-Grow Op

Big Surrey Home

Whistler- but how much do you need to spend to be able to live in it?

36 acre house and land

Vancouver View Suite

$200/foot suite

$160/foot suite

$200/foot suite in Whiterock.

$110/foot suite in Maple Ridge

If I remember correctly, at the depth of the 2008/9 crash, before ZIRP and CMHC was put on steroids suites in Surrey and surrounds sold for $100-150/foot. We are almost back there, considering these are asking prices.

Time to stick that neck out even further...

2011-10-06T06:43:00.000-07:00

Nothing ventured, nothing gained.

So here it is my call for October's numbers...

We have already OK and Fraser Valley prices flat YOY..

We need a drop of $48,000 in the average SFH price to get there in Vancouver..

I think we are going to get pretty close when we get the October numbers.

I suspect something will have reached ground zero. One of the measures (average, median or benchmark) of one of the sub-units. Eg Condos or Attached or SFH.

I did pretty good calling for a substantial drop for SFH for September, lets see if I am lucky twice in a row.

Why do I say this? Just by looking at the numbers..

1) The drop in listings at month end was less than usual.

2) Sales have not picked up and price changes are matching or beating sales.

3) Sales have not picked up even though mortgage rates at the long end have come down.

4) The MSM is talking 'correction'.

5) Flaherty just said no new stimulus unless it gets really bad.

Here is the ironic thing- the last go around they would have been fine with just letting Carney punish savers and reward speculators with his zero interest rate. However it was just too tempting to step on the housing accelerator pedal. Result = big bubble. That pedal is too risky now when we are already travelling at 100 MPH.

6) China- our cash buyers have issues of their own. Hard to get a read on how things are going there. It is so large that anyone reporting in one major city may miss what is happening somewhere else. What is clear is that 10% growth is gone for now. Their scope of purchases are narrowing in any case to just a few areas.

7) The stock-market has been on a downward trajectory. RE and the TSX have tended to mirror each other. The TSX has dropped 20%+

8) The RE price graph has cracked. We have had a parabolic run-up which peaked in May, and prices have come down. This has a psychological effect on both buyers and sellers.

9) The domestic growth drivers are tepid at best. Governments are not in spend mode, the Olympics build out is over, the world economy is weakening affecting commodities which have taken a beating (look at copper) and tourism (which is down).

Adding all the above together it seems to me that we have more weakness ahead. If you can think of more reasons, or reasons why it won't please pipe up!

All this assumes there are no major external shocks in the world economy.

Quick OK RAW DATA...

2011-10-05T19:01:00.000-07:00

SOURCE

Not sure how reliable the average and median prices are. I have tended to ignore them in the past since they show such huge fluctuations month to month due to the small sample size. Sales and MOI are the most important indicators IMO.

Central OKANAGAN. Where the action is! Sales up from last year. Prices mixed compared with August and flat YOY. see for yourselves. Higher averages, lower median suggesting the upper end buyers are still active. MOI = 14.

September 2011

Condo/Apt

Sales 65 New Listings 180 Current Inventory 878 Sell/Inv. Ratio 7.40% Days to Sell 107 Average Price $256,189 Median Price $212,500

Condo/Townhouse

Sales 40 New Listings 96 Current Inventory 540 Sell/Inv. Ratio 7.41% Days to Sell 127 Average Price $328,331 Median Price $303,646

Lots

Sales 11 New Listings 44 Current Inventory 643 Sell/Inv. Ratio 1.71% Days to Sell 226 Average Price $185,036 Median Price $175,000

Residential

Sales 145 New Listings 362 Current Inventory 1,590 Sell/Inv. Ratio 9.12% Days to Sell 88 Average Price $517,864 Median Price $427,000

Ratio of Sales vs Inventory 7.15%

August 2011

ResidentialCondo/Apt

Sales 63 New Listings 151 Current Inventory 934 Sell/Inv. Ratio 6.75% Days to Sell 117 Average Price $243,307 Median Price $237,000

Condo/Townhouse

Sales 39 New Listings 98 Current Inventory 546 Sell/Inv. Ratio 7.14% Days to Sell 118 Average Price $355,573 Median Price $350,000

Lots

Sales 17 New Listings 50 Current Inventory 117 Sell/Inv. Ratio 14.53% Days to Sell 167 Average Price $241,294 Median Price $189,900

Residential

Sales 132 New Listings 357 Current Inventory 1,709 Sell/Inv. Ratio 7.72% Days to Sell 85 Average Price $470,138 Median Price $431,935

Ratio of Sales vs Inventory 7.59%

September 2011

Condo/Apt

Sales 37 New Listings 158 Current Inventory 988 Sell/Inv. Ratio 3.74% Days to Sell 105 Average Price $234,800 Median Price $218,000

Condo/Townhouse

Sales 33 New Listings 87 Current Inventory 493 Sell/Inv. Ratio 6.69% Days to Sell 109 Average Price $341,088 Median Price $332,000

Lots

Sales 5 New Listings 71 Current Inventory 613 Sell/Inv. Ratio 0.82% Days to Sell 92 Average Price $217,180 Median Price $195,000

Residential

Sales 117 New Listings 392 Current Inventory 1,666 Sell/Inv. Ratio 7.02% Days to Sell 92 Average Price $466,382 Median Price $425,000

Ratio of Sales vs Inventory 5.11%

NORTH OK

Sales down. Prices mixed YOY. MOI = 21

September 2011

Sales 10 New Listings 16 Current Inventory 158 Sell/Inv. Ratio 6.33% Days to Sell 277 Average Price $155,250 Median Price $148,000

Condo/Townhouse

Sales 10 New Listings 40 Current Inventory 250 Sell/Inv. Ratio 4.00% Days to Sell 143 Average Price $232,640 Median Price $246,250

Lots

Sales 8 New Listings 44 Current Inventory 327 Sell/Inv. Ratio 2.45% Days to Sell 118 Average Price $171,613 Median Price $170,000

Residential

Sales 46 New Listings 134 Current Inventory 816 Sell/Inv. Ratio 5.64% Days to Sell 119 Average Price $401,684 Median Price $363,500

Ratio of Sales vs Inventory 4.77%

September 2010

Sales 9 New Listings 22 Current Inventory 187 Sell/Inv. Ratio 4.81% Days to Sell 138 Average Price $157,322 Median Price $164,500

Condo/Townhouse

Sales 15 New Listings 39 Current Inventory 227 Sell/Inv. Ratio 6.61% Days to Sell 119 Average Price $302,467 Median Price $295,000

Lots

Sales 11 New Listings 33 Current Inventory 394 Sell/Inv. Ratio 2.79% Days to Sell 161 Average Price $151,800 Median Price $155,000

Residential

Sales 69 New Listings 135 Current Inventory 743 Sell/Inv. Ratio 9.29% Days to Sell 110 Average Price $385,819 Median Price $348,000

Ratio of Sales vs Inventory 6.71%

Shuswap/ Revelstoke- sales up a bit prices mostly down YOY. MOI = 20

September 2011

Condo/Apt

Sales 3 New Listings 3 Current Inventory 66 Sell/Inv. Ratio 4.55% Days to Sell 155 Average Price $233,000 Median Price $173,000

Condo/Townhouse

Sales 9 New Listings 9 Current Inventory 96 Sell/Inv. Ratio 9.38% Days to Sell 158 Average Price $314,011 Median Price $333,000

Lots

Sales 10 New Listings 15 Current Inventory 301 Sell/Inv. Ratio 3.32% Days to Sell 311 Average Price $199,690 Median Price $75,000

Residential

Sales 24 New Listings 69 Current Inventory 446 Sell/Inv. Ratio 5.38% Days to Sell 113 Average Price $315,003 Median Price $297,500

Ratio of Sales vs Inventory 5.06%

September 2010

Condo/Apt

Sales 2 New Listings 9 Current Inventory 61 Sell/Inv. Ratio 3.28% Days to Sell 59 Average Price $184,000 Median Price $184,000

Condo/Townhouse

Sales 2 New Listings 3 Current Inventory 100 Sell/Inv. Ratio 2.00% Days to Sell 112 Average Price $350,625 Median Price $350,625

Lots

Sales 8 New Listings 29 Current Inventory 28 Sell/Inv. Ratio 28.57% Days to Sell 65 Average Price $596,375 Median Price $140,000

Residential

Sales 19 New Listings 55 Current Inventory 407 Sell/Inv. Ratio 4.67% Days to Sell 126 Average Price $330,868 Median Price $337,000

Ratio of Sales vs Inventory 5.20%

REBGV Numbers out (and more)

2011-10-04T14:48:00.000-07:00

Slightly increased sales. Much higher inventory.

Here it is.

"Those sales also rank as the third lowest total for September over the last 10 years."

"Consistent increases in property listings and fewer home sales over the summer months has helped move the Greater Vancouver housing market into the upper end of a buyers’ market."

"“Our sales-to-active-listing ratio currently sits at 14 per cent, which is the lowest it’s been this year. Generally analysts say that a buyer’s market takes shape when the ratio dips to about 12 to 14%, or lower, for a sustained period of time,” Setticasi said."

Benchmark Attached and Aprtments 4-5% above last year. Detached still 13% over last year.

MOI= 7.2

My take. We peaked in May 2011. We are in a different environment now. More later.

BTW - Jesse has just put up some outstanding graphs on the state on the housing market. Look at the MOI graph in particular. We were heading down in 2010. we are heading UP now.

PS - Here is Fraser Valley

“This is the third month in a row based on the 10‐year average where
we’ve seen lower sales combined with a higher influx of new listings.”

Benchmark up from last year. SFH + 4.5% Attached + 1.8% Apartment + 1.6%

It wont take much to send those numbers down into negative YOY.

The average price for SFH and Attached are already -ve YOY by 0.8% and 1.5%

The Median price for apartments are -ve YOY by 1.1%.

MOI = 8.7...growl..

So depending on what you want to follow- Average, median or benchmark..the stats show the three categories to be up or down marginally year on year. ie Flat.

The next month's stats will establish the trend.

A few things to ponder while we wait for the official numbers and the FVREB stats

2011-10-01T21:21:00.000-07:00

Wandering around the internet I found some good reads.

We are now apparently more expensive than London and New York. Except in those cities the high end homes are Brownstone or Granite edifices that have stood solidly for over 100 years. Here we have particle-board Mansions that sell for Millions

Even local realtors are getting tired of the speculative bubble unless they are directly suckling at breast of the speculators.

Leading real estate professionals reacted today to yesterday's news that home prices in Vancouver now exceed New York and London's. One realtor said he believes that buyers from Mainland China have pushed the local buyers out of the market. Each cited homes bought and traded like stocks and bonds and investment properties sitting empty, but some see the Chinese home rush as a bonus to Vancouver, while another sees it as a liability.

"Many people who buy here aren't buying because they're moving here," said Hasman. "They're buying on speculation or to park money here ... There have been cases where people come and purchase five or six houses. No one needs five to six houses unless you're speculating.

And this blog illustrates an excellent example of the above.

How about we all send a link to the first article to our Political representatives. I like the line about 'No one needs five to six houses...etc'

Add your own commentary. Eg the the effect of this unfettered access to our RE market is having on you personally. How unfair it is that we are one of the few places that do not restrict speculators access to housing stock. How it puts pressure of those living here due to unaffordable prices AND empty houses -and will cause a crisis when the bubble finally pops.

It will take you 5 minutes:

Here is the list of MLAs and their e-mail addresses.

Here is the same for MPs.

Lets make this an issue! The real estate industry- developers, Realtors, mortgage industry and speculators are a very powerful lobby. Let's push back a little.

WE DID IT!

2011-10-01T08:20:00.000-07:00

MUCHO kudos to Larry again for being out with the numbers so fast.

That's a 5% drop in the average price from last month and a 10% drop in the SFH average from the high-water mark in May of this year.

Guess I got it right this time. I did say that May was going to be the high point or I was heading out of here and then I said 12 days ago that I thought we would have a significant drop in September.

Hey, I have to blow my own trumpet a little, being a RE bear has not been easy, seeing your well thought out arguments steam-rollered by abrupt changes in policy, lax lending or off-shore money.

I said the September numbers would be crucial. With more inventory coming onto the market rather than leaving, with the trajectory of the stock market being down rather than up and with China wobbling economically, we had very different dynamics from last year.

Average condo prices are down 6% from the high-water mark. After the huge run up of recent years, these numbers do not sound too dramatic, but they are a good start and remember statistics dictates that the same % move down shaves off more $$ than the same % move up added.

Just to give you some perspective, in October 2010 the SFH Average price from Larry's stats was $1,058,000. SO we need to lose another $ 46K to go negative YOY.

Fingers tightly crossed. We CAN do it.

Enjoy the weekend

Bits and Bobs

2011-09-28T21:07:00.000-07:00

1) China's RE bubble is in trouble. This is critical for us here in BC. This guy says..'get out of China'.

IF he is right, commodities will be in big trouble.

2) Mixed picture on the prices from Larry- some places like Coquitlam are down big while others like East Van are up big, even with lower sales. Well, we will know in a few days what the average and benchmark numbers are.

3) Make this site your RE hub. This may not be the best or most high tech site, in fact far from it :)

but I have listed all the best site here >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

And you can see in an instant when they put up their posts.

4) Ads. Well readers I know you are interested in the ad experiment and I did promise to tell you how rich I got from throwing the ads up. I have made a total of $39 from ads since I signed up with Google Adsense two month ago. In fact I haven't made anything since they only pay when it gets to $100 and then after you jump through a number of hoops. SO what say you all..since the return is so minimal shall I get rid of the ads and spare you all the distractions. I will be swayed by your comments.

Just to remind ourselves where we are...

2011-09-27T20:57:00.000-07:00

As we head into the September numbers, this is the most anticipated report since last fall. At that time we had high inventory, but dropping listings robbed of us of our correction.

This year we have higher inventory, but no let up in the listings flow and a real drop in the list/sale ratio. Good things better flow from this.

It is useful to know where we stand now. As you can see even though some areas are still on fire, there are other areas which are already down YOY... and this clears that awful post with the many fonts :)

From the recent BCREA report:

According to the BCREA survey, the average price in B.C. rose 10.7 per cent in August compared to August 2010 to $540,000 from $488,000.

However, price changes fluctuated sharply by region, with the Fraser Valley showing the sharpest increase of 19.7 per cent over the year, from $424,000 to $508,000.

Metro Vancouver prices rose 14.4 per cent from $681,000 to $779,000, while Victoria prices rose 13.7 per cent from $472,000 to $537,000. The rest of Vancouver Island showed a slight price drop.

However, Powell River showed the sharpest drop - 12.7 per cent, from $297,000 to $260,000 - while the Okanagan Mainline recorded a 0.3-per-cent drop in prices from $384,000 to $383,000 and the South Okanagan dropped 7.2 per cent from $331,000 to $307,000.

Year-to-date, it was more of the same, with B.C. recording a 14.7-per-cent price increase in the first eight months compared to the same period in 2010, Metro Vancouver recording a 19.2-per cent hike over that period and the Fraser Valley seeing a 12.6-per-cent increase.

However, the Okanagan Mainline saw a 2.5-per-cent decline in the six-month period and the South Okanagan recorded a 5.4-per-cent drop in prices.

Powell River saw an eight-per-cent drop in the six months, while Victoria recorded a 0.5-per-cent decline in the average price.

The Kootenay region recorded a 4.4-per-cent increase in August compared to August 2010, from $274,000 to $286,000, although the average price fell 3.5 per cent year-to-date.

Is this fellow right...

2011-09-25T20:23:00.000-07:00

I found this excellent article by an Economist, Alexandre Pestov at the Schulich School of Business (try saying that twenty times fast) in a comment posted On Ben's site . The graphs are excellent, so are the arguments- though I didn't see much mention of HAM or outside money which has had such a significant effect on our prices.

It was written in Feb. 2000 and he makes the usual case for the bubble in Canada, however he also states the things that may make the bubble pop, which he mentioned may all come about in 2011.

Here are some excerpts:

Current housing prices in Toronto, Vancouver, Montreal and Calgary are difficult to rationalize using any combination of fundamental metrics. As history shows, this leads to a price correction. The disparity between gains in income, growth in rental rates and home prices in Canada is quite apparent.

Over the last 13 years, growth in home prices substantially outperformed all other components. From the fundamental price-to-rent perspective, real-estate as an investment no longer represents an attractive asset. In fact, at the current home prices in major Canadian cities, renting an apartment makes more financial sense than owning it. This market state leads to an array of predictable consequences. For instance, renting a property out now requires a substantial subsidy by the home owner, which effectively eliminates renting out as a contingency measure in case of income loss.

..............

The price-to-income ratio in Canada is at a historically high level. In fact, in some cities it is the highest on record. Over the last 13 years home prices have become decoupled from homeowners income, the mean household income has risen by 23 to 32 percent in the four largest Canadian cities.

Over the same period, the average house prices in these cities increased between 100 and 200 percent. Based on the price-to-income ratio, the four major Canadian cities experienced growth comparable to that of the hottest spots of the US housing bubble. Yet, the US bubble burst, but home prices in Canada remained around these tremendously high levels.

..................

Affordability in Canada is approaching historically high levels. In Vancouver, the housing affordability index exceeded the peak of the latest housing bubble of the late 80s. Adjusted for interest rates, the current affordability index in other Canadian cities is at par or above the peak of the late 80s bubble. If interest rates went up to the historical average, average households in Toronto and Vancouver would be paying 100 percent or more of their gross income towards ownership costs.

.................

On the median multiple ratio measurement, Vancouver (9.3), Toronto (5.2), Montreal (4.9), and Calgary (4.6) hover substantially above the “normal” 3.0 level. Based on this valuation, Toronto is considered a “severely unaffordable” city, while Montreal and Calgary lie on the border between being “seriously unaffordable” and “severely unaffordable”. Vancouver prominently stands out even from this crowd: it is not just “severely unaffordable, but it is also the least affordable city in Canada, the US, UK, Ireland, Australia and New Zealand.

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There are three main triggers that may help to set off the housing market decline. They are: HST, Olympics and rising rates

...

The whole piece is worth reading. But basically he says the triggers could be quite minor.

Eg the end of the construction boom linked to Olympics and the public debt problems that come out of it

Or a small rise in rates.

Or the advent of HST which has pulled demand forward (often due to confusion) and left a drop off that follows

He stated that all three were likely events in 2011.

Well I think he has been partially right. Bubbles are impossible to time and the 'trigger' for the burst is usually not what one would have expected.

Eg we have had the post Olympic drop in public spending, but the Government has kept the build-out going. Also the main hang-over (the Olympic Village) seems to have been thrown around the neck of the City of Vancouver and not the Province.

Also rates did start to move up in 2010 and many thought they would go a lot higher (not us here) - but the worldwide economic crisis has stopped the rise dead and a drop may now be on the cards.

However 2011 does indeed seem to have been the top for now. April to May 2011. And new possible 'triggers' have emerged. These include; a slow-down in China, another world-wide economic crisis, changes in Federal policy on mortgage length and CMHC insurance, a drop in commodity prices and higher unemployment. Maybe something else will come along and be 'blamed' for the fall. Whatever it is, it is never due to our own greed or our leaders' complacency. If it wasn't for 'X" we would still be in a boom!

And if you want a clear indictment of the foolish decisions our leaders made in this whole mess, there is no better summary than this. This is THE MOST important paragraph of our BUBBLE. I have re-read it many times.

Well done Mr Pestov for outlining it so clearly:

It is worth reminding ourselves that the bubble in Canada did not burst due to the massive intervention by the Harper government.

The intervention was orchestrated by injecting thousands of new buyers - many of whom cannot afford owning the property they purchased – into the market to prop up the prices.

The scheme worked, and the disaster was temporarily averted. However, the problem was not fully or even partially rectified.

By postponing the bubble deflation, the bubble was inflated further. If a housing market collapse would have caused pain and distress on behalf of a large and overleveraged Canadian population in 2007, the housing crash of 2011 will affect all the same buyers, plus many more of those who were sacrificed to keep the prices going up. More fire sales and more competing properties on the sell side will cause a sharper and a deeper downturn that would have been experienced in 2007.

Furthermore, CMHC, the second largest crown corporation in Canada, would require a bailout due to all the risky sub-prime mortgages it has insured. Every single one of the main sub-prime lenders in the US went out of business or required a massive bailout2. Unlike the US, the Canadian sub-prime lender would not require a bailout. In Canada, the bailout is already embedded in the system. It would simply be passed on to tax payers in the form of a larger national debt, higher taxes or tighter funds for social programs.

......

That last sentence explain why we are ALL in for a very difficult time when this bubble bursts. The Government has already committed to the bail-out! The only thing that remains to be decided is when and how much we all pay.