Friday free-for-all

It’s Friday and here’s your open thread to discuss whatever’s on your mind when it comes to the housing market and Vancouver. Post your links, anectdotes, numbers & news here.

Whats been going on this week?

-global stock market wobbles
-end of the month stats coming out soon
-rsp deadlines

Whats happening in your neck o’ the woods?

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Drachen
Drachen
13 years ago

I've had something working around the back of my mind for some time now. Can anyone help me out?As far as I can tell property values for resedential real-estate are approximately 200% of what they should be in a rational market. What I am curious about is how many fictional dollars does that represent? In other words, how much money in is going to vanish from the economy of Vancouver in a crash?(yes I know it can't vanish if it was never really there but people believe it's there which is sometimes more important than the reality)

Freako
Freako
13 years ago

"The other alternative energy plays are not my cup of tea,too volataile though they say corn may be the hot grain to buy this year with the ethanol demand. "Well congratulations on a well timed investment. I foresee a huge increase in nuclear reactors some decades out. It is the only realistic way of generating the additional electricity we will need. New nukes will be much more technologically advanced and efficient than the current crop. As such uranium may be a long term strategic investment, but as always, supply will come out of the woodwork whenever prices shoot out.

OnTheIsle
OnTheIsle
13 years ago

"Uranium is a little different, as it is a resource that is in high demand. Undoubtedly, the push towards nukes will pressure prices, though as always increased exploration and extraction will bring supply to market. "Wasn't you Freako. The problem with uranium supply is that the new supply is like 5 years away at the earliest and all nuke plants have to keep a 2 year supply on hand at all times. Throw in the nuke plants being built now that feel pressured to stockpile now incase of higher prices and you can have a hyper bull market happen. The other alternative energy plays are not my cup of tea,too volataile though they say corn may be the hot grain to buy this year with the ethanol demand.

Freako
Freako
13 years ago

" With an economy half the size of the US, what do you think is going to happen? If the entire west coast gave away free money and LA was in a deflationary spiral, woudlnt they lend it for some yield?"Wouldn't it be more appropriate to call it rent-free money? Second, it isn't even necessarily free if currency risk is taken into account. I know that exchange rates are subject to many political and non-market factors, so interest rate parity need not always apply. But speculators will surely hammer away at arbitrage opportunities and close the gap? If interest rate parity does apply, zero rates merely means that the Yen is expected to depreciate versus currencies with nominally positive interest rate (which would all currencies). It is no free lunch from a domestic perspective either, as in a deflationary environment,… Read more »

Freako
Freako
13 years ago

"My alternative energy (uranium) investment is up 300 % since I was last telling some bimbo (on the VHB board) who thought I was full of it."Don't think I was that bimbo, but IMHO alternative energy has had pretty fat valuations for a while. Many great shorting opportunities pop up from time to time. Especially smallerish and unproven technologies such as flywheel or microturbines. Investors are very determined to stick money into the sector de jour, and many stocks shoot up undservedly. Uranium is a little different, as it is a resource that is in high demand. Undoubtedly, the push towards nukes will pressure prices, though as always increased exploration and extraction will bring supply to market.

bakakuse
bakakuse
13 years ago

Freako, when you say a small fraction, do you mean buyers using Japanese yen to fund a real estate transaction, or Japan leaving rates so low for so long?I only know of three properties in Vancouver financed with yen loans, but I do know the Japanese savings have allowed governments to print money like hell without their 10 year rates going up.The bank of Iceland's overnight rate is at 15% to protect its currency, but the BOJ can leave rates at 0% for 8 years? With an economy half the size of the US, what do you think is going to happen? If the entire west coast gave away free money and LA was in a deflationary spiral, woudlnt they lend it for some yield?When the BOJ ended its quantative easing policy last year, the markets sold off. They signal… Read more »

mold
mold
13 years ago

casualobserver: I bet we see an increase in that rrsp borrow limit for FTB's.

casual observer
casual observer
13 years ago

I was wondering if any one has an opinion on what a possible government or Bank of Canada response would be in the face of a declining RE market?The last time we had a serious downturn, the resonse was to allow first time buyers to access their RRSP money for a down-payment (up to $20,000).Any ideas?

OnTheIsle
OnTheIsle
13 years ago

If all the so called hot Alberta money is buying up BC at over-inflated prices and the US housing market is only half way to hell as some of the pros are saying, then would it not make economical sense to dump that overpriced BC property/condo in the rainforest and buy that getaway condo in Palm Springs or somewhere else warm in California that is only an extra hour flight away ? I know thats what I will be thinking when this sordid saga all plays out. solipsist, My alternative energy (uranium) investment is up 300 % since I was last telling some bimbo (on the VHB board) who thought I was full of it. Look for uranium to maybe hit $100 this week. Wanted to buy a small call postion on the VIX index this week for insurance purposes,missed… Read more »

Freako
Freako
13 years ago

"but I know that you know that whatever has caused the RE boom only has to equal a small fraction of the increase in total RE capitalization. (prices at margin). "I didn't mean to suggest that there should be a one to one relationship. But right you are, prices are set at the margin. However, even marginal pressure only goes so far.I betcha the TOTAL carry trade is only a small portion of the total value of RE transacted over the last 5 years. That number is NOT pressured at the margin.

rentah
rentah
13 years ago

freako: I personally don't believe all the liquidity can be put down to the Yen carry trade either, but I know that you know that whatever has caused the RE boom only has to equal a small fraction of the increase in total RE capitalization. (prices at margin).

Freako
Freako
13 years ago

"Vancouver RE will correct because psychology has trumped fundamentals;""If a recession is needed to pop this bubble, then there is no bubble. "We need to distinguish between root cause and proximate cause. The root cause is fundamental What caused the avalanche? The skier or the loose snowpack?The root cause of any housing downturn is fundamental overvaluation. The proximate cause can be anything that reverses the psychology. Perhaps the trigger(s) will be so innocuous that the cause of the reversal of psychology will seem spontaneous. Or maybe some in your face event. Who knows?

Freako
Freako
13 years ago

"The whole worldwide asset bubble is largely a result of the yen carry-trade, "That is an awfully big claim. What is the total value of the carry trade versus increase in total RE capitalization?

duck
duck
13 years ago

another plinket from the CR blog, quoting a GMAC Mortgage Group senior vice president as he commented on the U.S. housing and mortgage situation:"We're all going to be struggling, struggling more than we are today. We're headed halfway down the mountain, and we've got a ways to go."Now there's been a lot of gloom chatter by a lot of people, but when guys like a GMAC VP does a reality check and says something like this, doncha think it's big?

bakakuse
bakakuse
13 years ago

I'm with swirlyman, I've been long the yen for a month.The dam BOJ sure loves blowing asset bubbles. When a country with 35% of the world's savings leaves interest rates at 0% for as long as Japan has, the money is going to go elsewhere. And it went everywhere from Google stock to Van real estate.Go into any bank in Tokyo and you'll see ads for saiken, bonds. Almost all my family in Japan has their money in foreign currency. This has kept rates down worldwide. Last week the TSX was down 3% and the yen was up 3% vs the loonie, weird hey?

duck
duck
13 years ago

Stunning graphs over at Calculated Risk blog, based on Case-Shiller home prices, and showing bursting bubbles. Phoenix kind of looks like Vancouver will in a few months maybe.(The [Standard & Poor’s/Case-Shiller home price] indexes, which now cover 20 regions, … [record] all sales in an area, and then [compare] the price with the price that house fetched the last time it changed hands. They include only single-family homes, not condominiums or cooperative apartments, which can distort the picture in areas where such apartments form a major part of the housing market.)

rentah
rentah
13 years ago

warren, mold, reductimat, solipsist: regarding investments now.US treasuries.Short the QQQQs.Gold still has a fair way to go in this correction. Lots of hot (hedge?) money in it now that likely has to be purged before a low. Note the recent correlation between gold stock and general stock moves.

rentah
rentah
13 years ago

vhb said: VW hot; outlying areas not.Yeah, agreed. I watch VW pretty closely, using some of the high-end subdivisions to monitor that end of the market. In Point Grey recently four 33×122 lots (admitted knockdowns) sold with askings in the 900K to 1.1M range. Also 'flip' renos going well over their 2006 sales prices (but then one needs to do the math re carrying and reno costs).This tells me there are still developers believing that they'll be able to knockdown and build at a profit, likely hoping for sales in the 1.6-1.8M range this Fall. But, as we've said elsewhere, these guys aren't particular geniuses at reading the markets, and some will be caught with their pants down when prices soften.

mohican
mohican
13 years ago

I posted the Fraser Valley Real Estate Board statistics and analysis over at http://langley-financial-planning.blogspot.com tonight.Check it out.

satv
satv
13 years ago

Aha wha wow bow I think its realy going to drive crazy.seems like your post is late night with a jug in your hands.oye are you alright.do you think some one paying millions of dola to see his wife oye.anyway lol after reading blogs getting very interesting well I like that u did not peace me uf

quack
quack
13 years ago

2 Mr Beckham and Victoria's arrival in USA.3 opning up madam tussaud museumthese are small but very effective steps to restore nice environment that can fuel up economy.If only Vancouver could get these, we would finally and definitively be world class … and even the dyed-in-the-wool naysayers would have to agree for sure. Do you think David and Victoria ever come to Vancouver? That would make me say "Wow, man! Dat's a B-bobbin shizle biscuit!", and would definitely rescue our real estate market. I don't think he's a very good hockey player, so he would have to play for the White Caps when he comes.If the Wax Museum you mentioned was really totally excellent, then we might actually out-class Victoria with their little wax museum, and then our house prices could be classier than theirs. Like, is there an index… Read more »

mold
mold
13 years ago

2 Mr Beckham and Victoria's arrival in USA.3 opning up madam tussaud museum. these are small but very effective steps to restore nice environment that can fuel up economy.Hahahahahahahaha!(wipes tears from eyes)Thanks satv, thats priceless! As far as your prediction that vancouver west prices will continue to rise in the short term, remember how accurate thats been in the past: As recently as 1990 that prediction was made only to be followed by a %40 percent drop over the next two years.I wont be buying at the peak, thanks.

satv
satv
13 years ago

TOE LOOP JUMP(triple toe)Some of user and media always talk about that "Canadian economy is depend on USA" so that down side will effect Canada big time.Well I can see some changes taking initiative in USA to restore base.News that poped up 1. democratic decline on trops and more funding for war. 2 Mr Beckham and Victoria's arrival in USA.3 opning up madam tussaud museum. these are small but very effective steps to restore nice environment that can fuel up economy.VANWEST will countinue to rise because where ever price are up these 2 new mind blowing projects will start little bit up from there and will drive the price crazy. that will implement ( copy and paste )to other on goingprojects. CAPITOL RESIDENTS on Robson and DONOVAN in Yaletown.

quack
quack
13 years ago

paul said "wow nice headlines at Bloomberg <a href="http://www.bloomberg.com"www.bloomberg.com"<br />It got worse during the day.Check out the gloom at http://www.marketwatch.com

quack
quack
13 years ago

Chip, thoughtful post.But apart from this, Vancouver RE is going to collapse without any help from recession south of the border.Sure hope so, but I wonder if it's getting so ugly south of the border that it can't help but affect us. The sub-prime news chatter is increasing in frequency. It used to be you heard some big items once a month, then once a week, then it's been daily, and today it's changing really fast. Ugly's the word and I suspect it will affect a lot of ordinary people.