Up-date

There is no sign of a slow-down in our housing market so far. Maybe it is the last rush to buy before school starts. However the numbers are far from bearish, with 100% sales/list or higher the last few days in many areas.

To look at Vancouver RE you would think the world was in the midst of a rip-roaring boom not a near depression.

If I had to guesstimate it, I would say prices are flat but clearly not dropping with this level of activity.

The right shoulder mentioned in the chart below may take some time to play out, but if we see prices move up higher, then the comparison with the bubble graph, or a head and shoulders top will lose validity.

Anonymous said...
What 'event' would cause the second part of that graph to play out?

It seems inconceivable that we are just on the edge of another major drop, but anything is possible

There are many things. Putting aside the black swan events which of course cannot be predicted, there are some likely suspects out there:

1) A slow down in China. We have increasing correllation with the Chinese economy (HK, China, Taiwan and you can add Korea). Not only do we have significant numbers off-shore buyers from these countries but their demand also detemines the price for many of our commodities.

China's rebound has been quick and impressive. It took a huge infusion of stimulus and orders from the government to the banks to lend or else..but it worked to stop the Free-fall and produce some domestic demand which will have to tide China over until the rest of the world recovers. However their recovery and need for commodities is still very fragile and I could see a weakening in demand later this year or early next.

China is truly an economic miracle, but the juiciest rewards may have been restricted to those with the best contacts. The fruit doesn't fall too far from the tree according to this report:

http://tinyurl.com/njcpn7

Any renewed weakness will not be well received by the rank-and-file, and could cause some social problems.

2) Interest rates. We have seen interest tick up slowly from the lows a few months ago. If we start to show some economic strength, ironically the rates will move higher and start to impede that very growth. Am I predicting that..no. It is just something to watch.

3) The Swine flu bears watching. Hopefully it will not make a big come back and restrict travel, spending etc and add to deflationary pressures.

4) A double dip recession. We are seeing some stabilisation in the US and elsewhere. However this is happening from a very low base. Unemployment sits at 9.7%, a rate that is almost unheard of in the US. If you add in the number of workers who are employed, but working on reduced hours, it would push the rate up a few more %.

Were we NOT to stabilise here, we would be looking at a full scale depression.

I think the recovery will be tepid at best and then there is a very good chance that we stagnate or start to sink again. However I do not have a good feel for the time-line, whether it would be in the next year or even longer that this happens.

I am sure you guys can think of lots more reasons too. Lets see if this pressure cooker buying keeps going or we settle to a more balanced market (and dare I say even a bear market again) once fall comes.