David Rosenberg changes his mind...

Dec. 2009:

and this:

"In answer to the question as to whether prices are in a bubble, all we will say is that when we ran some charts showing Canadian home prices normalized by personal income or by residential rent, what we found is that housing values are anywhere between 15 per cent and 35 per cent above levels we would label as being consistent with the fundamentals. If being 15 per cent to 35 per cent overvalued isn't a bubble, then it's the next closest thing. We are talking about two to three standard deviation events here in terms of the parabolic move in Canadian home prices from their lows. So, if it walks like a duck …"

Dec. 10, 2009.

April 2010

NOW THIS!! in March 2011:

Wonder what made him change his mind? Prices only went higher!

Which Rosenberg is right?

I put these in the comments but they deserve a bit more exposure

so I copies and pasted them in a post...

The periphery is NOT selling.

6 detached residential sold on Sunshine Coast in the last 14 days.

Total inventory in this category is 517.

Do the math!

If you are paying full price you may be over-paying just a tad!

March 30, 2011 9:45 PM

fish10 said...

Squamish 4 sales in the last 2 weeks for the detached residential category and 196 listings.

Whistler 0 and 178!

2 condos sold and 259 are listed.

My question:

What is the 'market price' when so few units sell?

March 30, 2011 9:52 PM

fish10 said...

In the Gulf Islands only 3 residential detached have sold since Jan 1st 2011 with 136 listed.

If you are bidding, bear in mind the above MOI. Ask your RE agent to find out what the seller paid for it (it takes ten seconds), sometimes you will be shocked and may cross a few numbers off your bid :)

Once again my question is:

when there are so few sales, how do banks, appraisers, RE agents etc decide what fair market value is??

There's no more land left stupid!

That's what someone quite close to me keeps telling me.

To which I will I will post the following and let it reply for me:

Metro Vancouver population Density = 735.6 /km²

Metro Tokyo population Density = 5655 /km²

BTW- I just worked out the MOI for the Sunshine Coast based on the last two weeks...12 MOI.

Punishing the Good!

The mantra of the last decade has been reward speculation and punish prudent behaviour. Imagine you are back in 2003 or 2004 and you are thinking of buying. Your parents taught you to be prudent and so you are quietly saving up a good down-payment, denying yourself nights out, fancy cars etc.

Meanwhile the property market is in a parabolic up-trend whether you are in Vancouver or Toronto. So you wait. Everything that goes must eventually correct. You wait patiently. But the Federal Government Ok's longer mortgages. So property takes flight at a steeper rate. You just wait, keeping your powder dry and saving your nest egg in conservative interest bearing stuff.

You see the housing bubble in the US start to burst in 2005 and by 2007 it is in full retreat.



The whole world goes into an orgy of speculation, egged on by the likes of Greenspan and Bernanke and in 2008 the orgy of debt finally bursts.

This is your moment. This is when your hard saved up pennies will finally be worth something. Wrong!

The Federal Government goes crazy- doubling the CMHC and allowing them to under-write a ruinous amount of risky mortgages. Meanwhile the Bank of Canada drops rates to near-zero. The Provincial Government backs the Credit Unions regardless of the risk on their books and the Federal Government takes car loans and second mortgages off the books of the major banks.

RESULT: RE has a tiny correction, blink and you missed it, and you are now left getting LESS than inflation on your savings. All to bail out the irresponsible.

This does two thing to the psychology of the nation.

1) It tells the buyers left, that the Government will not let RE drop.

2) it tells speculators that they will always be bailed out, no matter how over-extended they are. Once it hits the fan, the Government will load the risk onto tax-payers.

We then get a huge rebound in prices and the prudent are completely screwed. HAM money, Olympic money, Government subsidized spending etc add to the fire and prices go parabolic. All the time, interest rates are held sufficiently low, so that all savings whither away. The message is..buy something, Anything! Gold/ RE/ Stocks anything but hold savings in safe bonds.

The final play in this saga.

The graph goes STRAIGHT UP. There is panic buying. The Governor of the Bank of Canada and the Finance Minister lecture Canadians about their lack of savings and irresponsible borrowing!!

They decide to remove the most irresponsible lending but give enough lead time to allow the last push into tax-payer risk-assumed mortgages.

Possible end game

The property market finally drops under it's own weight or is driven down by inflation and higher mortgage rates. The Government panics and once more finds a way to try and bail out speculation by making mortgages tax-free, or providing direct support to banks, or printing money to pay the CMHC debts (as in the US) and finally destroys any equity the prudent may have left.

Thanks to Larry Yatter for permission to use his chart.

All is not well in the OK corral

While Vancouver is reaching nose-bleed levels due to the reasons I put down in my previous posts and fear of being left out forever (too late with 300% gain in just over a decade!) some places are not doing so well.

The OK is one of them. Here are the MOI from the latest stats for feb:

Central OK

Total listings up a few %. Sales down 25% YOY and MOI at s staggering 23 months!

North OK

Total listings up. Sales down 15%. Total volume of sales was less than one of our priciest homes in Vancouver. MOI..23 months again.

Shuswap

30% drop is sales YOY. An unbelievable 39 MOI!!!!

They need an influx of Albertan money Asap, or the place is toast. That shouldn't be a problem with the price of oil hitting $103.

Compare that with Vancouver. VHB on Condo forum calculates the MOI for Vancouver in the low single digits.

What does that tell me? It tells me that I was right in this post (and wrong in many other things) :

The prices in Vancouver are driven by things that are unique to Vancouver. Crime, commodities and Mainland Chinese investors as well as the usual reasons. The rest of the Province is in a full fledged correction since they do not benefit as much from these factors.

Parabolic

That's the only word to describe the Feb Vancouver price rise. Here it is from Larry.

What is the reason- is it soaring debt as Jesse has suggested, some of the reasons I listed in my previous post or maybe it is even simple than that- maybe...the world economy was/is recovering and we are just sitting at far too low an interest rate for far too long and that is blowing up our bubble.

BTW - when do we stop calling it a bubble- if it doesn't intend to pop :)

In any case we are skewed by the March 18th deadline for irresponsible mortgages. Lets see what happens after that.

Meanwhile zero rates causes anxiety. Not just for savers who get nothing, and watch inflation eat their hard earned dough, not just for renters who cannot catch up with rising prices, it is even stressful for those on the right side of the game. The big borrowers. They know that ZIRP cannot go on for ever but for now the music is still playing..meanwhile should they sell their biggest asset or buy more. What do to?

That is what our irresponsible Central bankers have done, they have punished prudent behaviour. Carney is like a parent who keeps telling his kids to stop using drugs and then gives them a fresh twenty dollar bill and turns his back. They have mismanaged us into yet another bubble.

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

Lets turn our attention elsewhere. Victoria is flat with some average up and all medians down.

Sales are down 25% from last year.

The Okanagan RE board site is down. I will up-date this post once it is up again.

Fraser Valley is flat. Benchmark detached up 1.2% , attached down 2.5% and condos flat YOY.