My stocks stink.
Thats it! I’m cashing out all my stock and buying pre-sale condos in downtown Vancouver. US and Canadian markets had another stumble today on more bad news from the home-lending sector and fears of a wilting economy. Gold mining stocks lost their glitter today and sub-prime lender New Century Financial isn’t looking so shiny either. Just how the hell is a fella s’posed to get rich these days?
The Mortgage Bankers Association said delinquencies among all borrowers reached the highest since the second quarter of 2003. Government data also showed February retail sales rose less than economists forecast, spurring concern department stores and discount retailers will be hurt by the fallout from the home-lending market.
“I would be very surprised if it didn’t spread,” said Alex Motola, who manages the $2 billion Thornburg Core Growth Fund in Santa Fe, New Mexico. “The consumer is at risk again.”
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March 13th, 2007 at 11:26 am
March 13th, 2007 at 11:29 am
Also I kick puppies.
Poor defenseless fuzzy puppies.
March 13th, 2007 at 1:20 pm
The market is still the best place to be as it is liquid, it trends, and you can trade from both sides of the market. Further, equity markets are pursuing 24 hours trading with one single global market. Therefore, trading skills learned here is more valuable and more enduring.
That said, real estate trends can last a long time without the short-term interim pullbacks seen in the market (which serves to confuse and confound as to whether or not the trend is ending). Like an elephant on a rampage, once it gets going, it’s hard to stop. But once it stops and reverses, the same momentum applies. The unfortunate part is that it is illiquid and one cannot get out easily. Also, you can only trade from the long side (in Canada anyway, in US, one can short housing companies).
Ahkenaten
March 13th, 2007 at 1:29 pm
pope: leave those poor puppies alone!
March 13th, 2007 at 2:10 pm
March 13th, 2007 at 4:46 pm
Anyone know how I can short Van’s real estate market?
Ahkenaten
March 13th, 2007 at 5:09 pm
well, for a start, rent.
if you’re doing that already, sit tight.
March 13th, 2007 at 6:24 pm
March 13th, 2007 at 7:51 pm
http://www.cytiva.com/cejobs/cojobsCaAccred.asp
March 13th, 2007 at 7:53 pm
down is a bit of an understatement.
Buckle up and hold on tight because the ride has just begun. The Dow will be opening lower - at least according to the futures index as I’m writing. I really don’t think we will see the slump really stop until the recession hits and things get put back in order. It’s been too good too long due to this idiotic credit bubble we live in.
On the bright side, we can all tell our grandkids how we lived through this melt-down.
March 13th, 2007 at 8:25 pm
That’s why we don’t know how this meltdown is going to turn out. Too many people believed that the same thing that happened in the last 2001-2002 recession will re-occur again. It will be relatively quick and painless. It’s obvious because during a recession, people usually spend less and save more. This builds us capital reserve for the next economic expansion.
But now, far more people are exposed to debt than the last stock market did. Savings rate is negative. Which means, in this coming recession, people are going to spend less, but they’ll be busy repaying back the loans they owed during the go-go years and have nothing left to save . While I like to stay optimistic, the next recession may drag even longer than usual. Japan’s still suffering after 20 years of mild deflation and grandkids now in their teen years are suffering from massive unemployment. I’m not sure if you need to tell them. They’ll probably blame us for our past stupidity!
March 13th, 2007 at 8:39 pm
March 13th, 2007 at 8:53 pm
I think we are about to see some drastic numbers, at least from a historically tame numbers, which will of course put more fear into the market. The last foreclosure numbers for San Diego had 2,468 foreclosures and 5,072 notices of default. And growing. And growing Metro San Diego has about 3 million people, so prorated, that would be about 1600 foreclosures in GV. And like us, San Diego has massive downtown residential construction under way (our own Nat Bosa is/was in full swing down there). San Diego has already large losses of construction and mortgage jobs, more to come.
March 13th, 2007 at 9:09 pm
I’d really love to say that the prices are already down by double digits from their peak. However, the RE market is so good at obsfucation that it’s impossible. I was reading an article a few weeks back that stated quite confidently that, nationally, housing prices in Q4 of 2006 were up by a bit over 1%. My first thought was WTF?!!! Every stat I’ve seen shows a decrease. Then I read where the stats came from.
The author decided to report on US figures that were tracked by Freddie Mac on same property resales with a cap of $471K. This was the first time I’ve ever seen this stat published, and for good reason - it’s totally meaningless. It is quite obvious that the result only measures used houses that wouldn’t even house a chipmunk in any of the top ten markets. And it is only for those houses that are purchased under the Freddie Mac program - which is smaller than Fannie Mae.
Just goes to show how deep the shills will go to convince you that it’s rain when they’re pissing on your leg.
March 13th, 2007 at 9:23 pm
The last sliver of doubt is gone.
The plug has been pulled and we’re going down. Hope to be loading up on half price bargains by Sept.
I’m ecstatic…have waited a long time for this and damn well deserve it. I’m starting my victory dance, even though the Canucks blew a 2 goal lead.
Good night Rob.
March 13th, 2007 at 9:26 pm
But it’s rebounding! The drops are now consistently less than 3% ;-]
So as to avoid being accused of understatement again, may I point out that oil has collapsed to $29 per half-barrel.
On the bright side, we can all tell our grandkids how we lived through this melt-down.
For me, the melt-down will hopefully represent a return to sanity … but I’m not so sure it will play out that way.
Tokyo down 3%, gonna be interesting tomorrow in North America
And Europe? I think I’ll stay up just for fun.
Notes: (a) one barrel = two half-barrels.
March 13th, 2007 at 9:29 pm
March 13th, 2007 at 9:35 pm
March 13th, 2007 at 9:49 pm
March 13th, 2007 at 10:04 pm
not doom and gloom. we are on the threshhold of a return to sanity
March 13th, 2007 at 10:08 pm
March 13th, 2007 at 10:36 pm
You had to change your name from “dush” because you could’nt stand the ridicule to your brilliant posts.
Was your imagination too challenged to find a name that was different enough to avoid suspicion? After all, there are so many other original monikers to choose from.
March 14th, 2007 at 5:19 am
True that the industry has a habit of obfuscation, and true that there is little incentive for an entity to publish true stats.
But what about the S & P Case-Shiller Metro Area Home Price Indices (yes THAT Shiller)? These are traded on Mercantile Exchanges, and have futures to boot. Admittedly thinly traded, but the benchmark is still valid.
Here is the S&P blurb about them, with downloadable historical data. link
This site is even better, with clickable maps and charts:
link
If you are really bored, you can watch the live trading of these contracts on the mercantile exchange (Chicago?). The futures aspect is also interesting. You’d figure the smart money would be going short.
March 14th, 2007 at 5:23 am
If you include opportunity cost (and if you don’t believe that money grows on trees you should) IT IS the WORST thing you could to right now.
The fact that nominal break even will eventually be reached is meaningless. The goal isn’t not to lose money. The goal is to have as much money as possible. If I wait two years and save $200K, is that worthwhile? For many it is, for some it isn’t. $200K could mean an earlier retirement, the ability to work part time, or the means to buy whatever turns your crank.
March 14th, 2007 at 5:33 am
Well, it’s pretty hard to obfuscate same-house comparisons:
Now the standard bull retort is that these houses are cherry-picked. But note they are in all price ranges and all over town. If they are all down double digits, how could the whole market not be down a similar amount?
HBB is also full of anecdotal accounts of double-digit declines on same-house sales.
The goal isn’t not to lose money.
May I point out that if you’re paying twice rental cost to hold a house that is worth the same (nominal) as you paid for it 5 or 10 years from now, you’ve lost a bundle of money.
March 14th, 2007 at 6:27 am
Just looked up the property assessment and taxes on the house I rent. Assessment is a tad short of 500 times my rent. Property taxes eat up the first 2.27 months’ rent. Maintenance? Well, I didn’t pay for the just-completed fence and deck repairs, and won’t pay for the upcoming new roof (waiting for nicer weather). Why buy?
March 14th, 2007 at 6:28 am
I thought the same when I picked up Toll Brothers Sep $25 puts for $0.55 a month or two ago. That beauty is up to $2 now. Usually when I spot the ‘obvious’ ones, I lose big time. In hindsight, I wish I went all in.
March 14th, 2007 at 7:41 am
Hold your sanity and keep your emotions in check!
But damn, I pity the gamblers!
Ahkenaten
March 14th, 2007 at 7:42 am
Come late come correct but a bit late to learn Vancouver real estate is too late.
Who must the value of game,one who loose or one who win?
answer is the one who lose.
What is share market?
When some companies earn profit share goes up companies always start worries about fear that investor will with draw their share,then what companies do they run upgrade and expand their bussiness which slow down their sales and bring market down otherside companies get stronger and no body knows that,this is my understanding because I am kind of witness that takes atleast 3 year to jump back to normal or high till that time what will happen to investor but there is always little margin of profit that we can’t lough/cry
March 14th, 2007 at 7:47 am
March 14th, 2007 at 7:51 am
Are you seriously implying that real estate over the long term is better than the stock market?
March 14th, 2007 at 7:51 am
Friends of mine in 94′-95′ that gambled and bought (RE mkt)couldn’t get out in time and was caught in the downtrend. There are also others that got caught up in the asian market-uptrend feeding frenzy and was wiped out. My friend’s boss had 10 luxury condos in Singapore valued at over 1mil ea. and when the market finally rolled over, he of course couldn’t sell. Unless you want to take a huge loss, you’d have to keep feeding the mortgage monster. Eventually, he had to walk.
Don’t get caught holdin’ the bag.
Ahkenaten
March 14th, 2007 at 8:00 am
if a company’s executive upgrades and makes business decisions based on their fear/fondness of stock market investors, the company deserves to go bankrupt.
Share prices trade in cycles reflecting the overall economic cycle. This “cycle”, prior to the institution and adaption of our modern day fiscal and monetary policies based on Keynesian economics were even shorter. Peaks to trough now generally runs from 2 to 3 years. In the pre-keynesian days, it use to run in months. Imagine that!
Ahkenaten
March 14th, 2007 at 8:16 am
At least mortgage rates won’t be going up anytime soon . . . inverted yield curve.
Ahkenaten
March 14th, 2007 at 8:38 am
Article in the Globe and Mail
Ahkenaten
March 14th, 2007 at 8:56 am
Although the market languished for some time after hitting bottom in 82, most of the damage was done within a year. The 90 crash was even shorter. After the double top (early 95 and late 96) bottoms were reached in less than 6 months, only to stay flat for the next 5 years.
If the biggest up-spikes are followed by the fastest drop, then our unprecedented bubble could drop with unprecedented speed. It all depends on how fast the panic can be spread, and for the first time ever, we have the internet to fuel the fire.
All the crap about the olympics may not be that outrageous, because our market will have crashed long before then, and it could help to spur the recovery.
Hi Rob, I know you’re lurking.
March 14th, 2007 at 9:05 am
I think the internet (particularly blogs) has played a role in the speed (but not the inevitability) with which the U.S. mortgage saga has begun to unfold.
March 14th, 2007 at 9:20 am
Also I kick puppies.
I figured out the integrated inverted coding system of your 3/13/07 12:29PM message above, to wit: you lied about kicking puppies and being a liar and a cheat, and cleverly tried to mislead me into thinking you were giving bad advice on investing in downtown condos.
So the hidden message for clever people such as myself was “buy now!”. And since you run a blog, you must know. I didn’t like any of the pre-sales I found, mostly because the lineups were non-existent so that must mean that they aren’t making them as good as they used to. So I just bought ten used ones (condos, not puppies) from a guy on CraigsList who gave me 30% off what he said they were worth. His sister-in-law knows somebody at CMHC, so that’s how he knows what they’re worth. He also said they each have a special assessment of $43,000, which I don’t have to pay extra for. So I figure just in that alone I’ve made $43k x 10 = $430k. Thanks for the heads-up!
btw, the best thing is that the condos have commercial tenants who are in the horticulture business and he says they want to keep renting.
Full disclosure: (a) I’m short on Vancouver RE; (b) I have a tenuous grasp on reality.
March 14th, 2007 at 9:33 am
March 14th, 2007 at 9:36 am
ReductiMat
Real estate have edge over share market.even when market goes down still you or some one as owner or tenant can continue use the land for peaceful living and reduce the debt as you go that is automaticaly bring you in profit.if we lost share what is left there to use and holding property sooner later can pop up again,but share market that part you holding share hard to predict.
AKHEN
Companies get stronger because you have little margin in your hands that you never want to cash.it is like some one playing with your emotion.but real estate depend on population you can always predict that will grow up the world is witness unless or otherwise(fear of terrorism,earthquake,or fear of tsunami)other fact hardly knock down because of local overflow flow over to nearest not on to another border unless trading small for big.
That’s my opinion
March 14th, 2007 at 9:46 am
March 14th, 2007 at 9:59 am
If you can’t stay liquid, you will die (financially).
Value of a company is determined by its ability to increase revenue and decrease its relative costs (increasing net profit is always good).
Stock market values (partially true in the RE market) are driven by greed and fear . . . another word, emotions.
Those that has bought real property but can’t really afford it and had to borrow to finance nearly or the entire purchase price, if they are cash poor, when the market turns, they WILL get killed as they can’t stay liquid enough.
That is why we have a huge problem (will be even greater) in the States with loan defaults. In Canada, there’s the CMHC to mitigate the risk of 0 percent down mortgages, so there’s less of a problem of mortgage implosion.
The decline of the housing market has the real potential to negatively affect consumer sentiment as rising property prices has played a significant part in the consumer’s feelgood factor.
Good luck to all,
Ahkenaten
March 14th, 2007 at 10:26 am
no I am a warehouse worker 10 year on my current job.
March 14th, 2007 at 11:48 am
If you believe that markets are remotely efficient in the long run, such factors are long priced in. Risk-return you know. Finance 101.
If the income stream is obvious and riskfree, the appreciation has already happened. Markets are forward looking.
March 14th, 2007 at 1:16 pm
Gee, I make an average wage but that average price is a like $200,000 from the average price in Victoria and much more than Vancouver. Funny how the west coast averages aren’t mentioned in the article,guess they know we are all in La La Land out here so use reminding us how ridiculous it has got. 80% affordability index coming up !
March 14th, 2007 at 4:30 pm
I appreciate that
akhen
I appreciate your knowledge about share mkt.
My opinion is not to hurt share mkt.and not to gain r.e.
my comments comes from personel experiance that is based since July 1997 and knowledge through up’s and down in life.
so far I only lose if I play lotto some time but I am not crazy player only play one chance lose$3.00 as not a winer occasionally.
LIVE RESPONSIBLY/BUY CONFIDENTIALY
March 14th, 2007 at 5:37 pm
March 14th, 2007 at 6:46 pm
98 250k 500k=250′1/4
2006 380k 470k =90k
2007 Jan260k 375k = 115k in one and half month not bad
up and coming I will sell the last purchased after june 2008
March 14th, 2007 at 6:47 pm
March 14th, 2007 at 7:58 pm
You reached real price break even. I don’t have specifics, but you would have been “profitable” far earlier than that. For one thing, you are ignoring net rental income.
March 14th, 2007 at 8:41 pm
Is that an annual operating profit, or a total return of > 0 from time of purchase?
If you bought at the peak in 1981 your net rental income would have been negative for a decade or more.
So your break even point is when the present value of your net rental losses equals the capital gain on your purchase price.
And I think anyone buying today is in for a really long wait before the break even point is reached.
Note that the above applies both to investment properties and owner-occupiers (imputed rent). The break even points will be different because of income tax considerations for the investment property.
March 14th, 2007 at 8:44 pm
March 14th, 2007 at 8:49 pm
It can be viewed a couple of ways. The important thing is apples to apples. If you are looking at it in real terms, you should not include debt, so net rental income is merely rent minus non-interest costs. And technically, the net rental income should be carried forward at real return of risk free (which is probably negligible.)