Soft landings for all!


TD has just put out their forecast for a canadian housing market soft-landing that will be softer than the soft landing currently not being enjoyed in the USA.

The gloom and doom from down south:

An ever-deepening housing correction is scarring the economic landscape. A sharp backslide in residential investment shaved 1 percentage point off real GDP growth in the third quarter, which marked the largest drag from this sector in 16 years. TD Economics expects to see a repeat performance in the final quarter of this year given that housing starts plummeted 13 percent in October. Moreover American shoppers are already contributing about half a percentage point less to GDP growth. And, estimates show that it takes at least one year for the full impact of a change in real estate wealth to feed through to consumption behaviour.

Bah! That’s merely semantics. If we only look at the US market 1 month at a time it IS the soft landing that everyone was predicting there a year ago. Its only when you look at long stretches of time (several months in a row) that the US housing crash looks bad.

The Canadian market is doing pretty good so far though:

Any drag from cooling housing construction will be mild in comparison to the U.S. This is not to say that the Canadian economy is free of housing risks. For instance, residents in Vancouver dedicate an inordinate amount of pre-tax income (+50%) to housing costs, while Alberta’s double-digit price growth won’t be sustained. However, a boom-bust cycle can be avoided if price growth cools in the near-term, which seems quite possible given ongoing supportive fundamentals.

Some hopeful signs for a potential soft landing have already emerged. New listings are up substantially in Calgary (51% y/y), Edmonton (27% y/y) and Vancouver (19 y/y), which should help alleviate price pressures in time. If a hard landing were to befall the western provinces, it would likely be due to the ripple effect of an unexpected collapse in the U.S. economy, rather than a sharp reversal of domestic fundamentals.

So as TD sees it, the only real risk to the canadian market is the US economy. And hows that going so far again?

South of the border, however, the U.S. economy will fall short of its potential pace (3.3 percent) by a full percentage point, resulting in a greater degree of economic slack. Moreover the American slowdown has only reached its halfway mark.

I’m sure many Americans would be dissapointed to hear that they’ve only reached the halfway mark in their economic slowdown. That’s a strange thing to state as fact. Is the TD bank perhaps controlling the US market? Or else they’ve hired some new soothsayers.

Either way, you may find it useful to know that both ‘defuse anthropomorphic assets’ and ‘forecasts hide upon metaphors‘ are anagrams for ‘the prophesies of nostradamus

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Freako
Freako
13 years ago

"become a bootlegger and live in your mothers basement"In this updated tale, Gatsby operates a meth lab. In his momma's basement. And he frequents Starbucks.

Freako
Freako
13 years ago

"Both profit by providing no service to the customer. In otherwards, they are useless sacks of $@*& with no value to society."Flippers can and do serve a role by providing liquidity. Second, the term is loosely defined, by many who engage in the practice have expertise in getting the most for the reno buck, so some add value.As for the pre-sales camper, he provides value by financing the builder. If the builder had waited until the completion to sell, the sales would be exactly the same given similar market conditions.In theory the net impact of flippers and the like is nil. However, since it is currently amateur hour, greedy flippers compete with owners TEMPORARILY pushing up prices which feeds the frenzy further and brings more amateurs to the game. The net impact of flipper WILL still be nil, so expect… Read more »

the pope
the pope
13 years ago

Differentiate yourself from a ticket scalper! Both profit by providing no service to the customer...Until you need that last minute ticket to the upcoming Barry Manilow Goth/Metal music & dance festival. Then you'll be sorry you ever bad-mouthed the scalper.

the pope
the pope
13 years ago

I think we would all do well to heed freakos advice, which I will take the liberty to sum up here:"become a bootlegger and live in your mothers basement"My mum lives more than 3,000 km away though! Thats one hell of a commute!

Anonymous
Anonymous
13 years ago

To All you housing flippers (speculators) out there, here is a challenge.Differentiate yourself from a ticket scalper!Both profit by providing no service to the customer. In otherwards, they are useless sacks of $@*& with no value to society.We should look on them with the disgust!

Freako
Freako
13 years ago

However, I can't resist asking a fatuous question; would things have ended better for Gatsby if he had lived in his momma's basement and drank coffee? Good question. Did this hypothetical Gatsby still bootleg on the side? In either case, yes, he would likely have lived to see the 50's when the economy returned to stellar growth.

Alpha_Bear
Alpha_Bear
13 years ago

freako,I've been reading your posts on this and other RE blogs, and respect your reasoned and temperate views. However, I can't resist asking a fatuous question; would things have ended better for Gatsby if he had lived in his momma's basement and drank coffee?

Freako
Freako
13 years ago

"Let's party like it's 1929! (or is that 1936? (my token nod to the Olympics))"The great Gatsby didn't live in his momma's basement. And dabbled in a different drink than coffee. It didn't end too well for him, nor anybody else living in that era.

Alpha_Bear
Alpha_Bear
13 years ago

warren,I don't live at home. I was using poetic license to make my point. I sold my house this fall, and am currently renting a house while I watch the real estate market. To give you an idea of how messed up the market currently is, I'd have to pay 700 to 1000 times my monthly rent to purchase the house I'm renting.I've been following the global economy and real estate markets for several years now, and am convinced that the price reductions (in real terms) coming down the pipe will make the early 1980's look like a picnic.Let's party like it's 1929! (or is that 1936? (my token nod to the Olympics))Oh, for the record, I don't drink coffee.

Warren
Warren
13 years ago

alpha bear said:I'd rather live in my mother's basement, banking the money I save from not drinking coffee, and just adopt a "wait and see" attitude regarding real estate prices over this winter.Really? Mommy's basement? Not drinking coffee? Come on, I think we're talking about renting vs. owning in Vancouver, not owning vs. living at home. Honestly, if you're over 25, move out now. Life is short, and there's a whole world of experience outside your parents' house just waiting for you.For the record, I moved out at 19 and don't regret a moment of it. I'm now a renter and a landlord.

RE-diculous
RE-diculous
13 years ago

I too saw he ROBTV article today by Derek Holt of RBC, here's the link: http://www.robtv.com/ and go to 1:45 ET today for 6 minute video. It is pretty clear where there is little value for money in RE in Canada – that $425K house in Halifax, Calgary and even Toronto sure looked a darn lot better than the tear down in Vancouver.And per the anonomous postings about us all living in our parents basement, etc – I have owned 2 houses in Vancouver over the last 15 years and could afford to buy another one today, however, I tend to avoid all markets where the value is so lacking. This will right itself in due course.

Freako
Freako
13 years ago

We need to separate the quality of the argument from the motivation of the messenger.Doing so won't change where things are going, but I pretty sure that one camp is right and the other wrong. If I wanted to know where things are going, I'd listen to the quality of the arguments and decide.Anecdotally it seems as if it is: Price to rent multiples are out whack versus bears scrotumless whiners. But that is just my opinion. To each his own. What will happen will happen.

Anonymous
Anonymous
13 years ago

anonymous, just for clarity, "impecunious" means "have no more money left". It doesn't refer to anything about the human body.

Anonymous
Anonymous
13 years ago

I think most can afford to buy now but why would they? To watch your RE value decrease? What if you had to sell? You'd be losing money. I don't know too many people who like to lose $.To the anonymous post excaliming that we, 'GET OUT OF OUR MOMMY'S BASEMENT'. I just have to say you're likely the type of guy that might have a few bucks, blow it and then end up impecunious. Get some smarts and financial advice before you spew.

wannaget2calgary
wannaget2calgary
13 years ago

AAarrggghh! Too many anonymous posters. I'll probably end up both agreeing with and whining at the same anonymous poster. 😉

wannaget2calgary
wannaget2calgary
13 years ago

I know where I stand. How about you?"I know you are but what am I?" again? Playground tactics!I'm not sure you really do know where you stand. How self-aware are you? Can you see no parallel other than global warming? Or is deflecting (vs. addressing) rather pointed challenges a strategic maneuver? Rhetoric vs. reason?

betamax
betamax
13 years ago

From where I sit, most of these bearish blogs are just bear clubhouses where you pat each other on the backs, and reassure each other that you’re smarter than those idiots who buy RE.And thanks in turn for posting "My favorite misconception/stereotype of all!"No wonder you didn't get the 'latte' reference; you either don't read or don't understand what is being said here. If the bears are so wrong, why waste your time arguing with them? You're obviously trying to reaffirm the validity of your own decisions. Good luck with that, and with them.

patiently waiting
patiently waiting
13 years ago

The money you speculators are making off real estate is at the expense of low to middle income Vancouverites who are being exploited by excessive housing costs. Not to mention the massive homeless problem while spec condos sit empty. There is little difference between a starving South American peasants and someone freezing on the streets of Vancouver.

Anonymous
Anonymous
13 years ago

patiently waiting said…"anon 11:16am: So in that sense, are you any better than a CEO of an oil company or coffee corporation?"Buying & Holding RE vs the WTO exploiting poor countries & OPEC price fixing & insisting their industry isn't to blame for global warming….I know where I stand. How about you?

patiently waiting
patiently waiting
13 years ago

anon 11:16am:So in that sense, are you any better than a CEO of an oil company or coffee corporation?

Alpha_Bear
Alpha_Bear
13 years ago

warren said:"Good point about the economy too. I'd rather have a job and be buying an expensive house than have no job and not being able to afford the "rock bottom" real estate."While I admire warren's optimism in the face of increasingly bad economic news, I'm not willing to risk my financial health by betting that the job I hold today will be able to pay off the mortgage of an "expensive house".I'd rather live in my mother's basement, banking the money I save from not drinking coffee, and just adopt a "wait and see" attitude regarding real estate prices over this winter.I'm willing to take the chance that I might be wrong about the future of BC real estate, and, by letting the market pass me by as prices go to the moon, end up happily living in my… Read more »

Anonymous
Anonymous
13 years ago

patient said…"How do you justify your real estate speculation?"The same way somebody justifies Day Trading. The pay offs can be huge. It is a personal choice. As you can see from my post, I buy & hold. Speculative maybe, but hardly in the sense you alluding to.

patiently waiting
patiently waiting
13 years ago

Anon 9:32am:The statement you responded to is a shot at Bears not Bulls. It is suggesting that Bears drink $5 lattes.So you're big on ethics. Ethically, would do you think of the current state of real estate and housing in Vancouver? Do you have any problems with it? How do you justify your real estate speculation?

Anonymous
Anonymous
13 years ago

"What's your view on how it will all unfold in Calgary? I'm a bit muddled on how it might go. "Tough one to call for sure. Oil prices could well stay up through a recession if international issues with Iran and Nigeria continue so the Alberta economy should be OK. Bottom line is what happens this spring, if the buyers back off cause of recession worries and sellers need to sell then we will have a correction no matter what the interest rates are.

wannaget2calgary
wannaget2calgary
13 years ago

And Calgary's is only in the 40% range cause the wages are so much better there. When the US recession speculation turns to reality in the next few months, look out below.What's your view on how it will all unfold in Calgary? I'm a bit muddled on how it might go.