Out of Town for a Few days

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

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

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

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?

Some Court ordered Sales

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...

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.