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August 13th, 2007 at 2:56 pm
Good article indicating the potential spill over of credit squeeze. Banks involved include BMO, CIBC World Mkts, TD Securities, Metcalf & Mansfiled and National Bank. And they say Canada is largely immune!
Breaking News (Globe and mail):
Credit crunch hits Canadian firm
Canadian Press
Monday, August 13, 2007
TORONTO — Canada’s Coventree Inc. became another victim of the U.S. subprime mortgage crisis on Monday when the specialized financial services company reported that it has been unable to fund the repayment of $250-million in notes that were to mature Monday.
Coventree, which did its initial public offering late last year, saw its shares fall by $4.48 or 34.5 per cent to close Monday at $8.50 on the Toronto Stock Exchange after a trading halt on the shares was lifted. The stock had been issued in November at $10.75 for total proceeds of about $41-million..
Continue Reading …
August 13th, 2007 at 2:40 pm
Great article Tony. And don’t forget this crashed happened right before the “real” olympics in LA – Summer of 1984.
August 13th, 2007 at 2:19 pm
great link tony danza, i havent seen that before.
The more things change the more they stay the same.
August 13th, 2007 at 12:52 pm
Tony Danza … thank you so much for posting the article. The arguments for the continued push upwards of GVRD housing prices seems so eerily similar it’s scary
Fundamental reasons for the upwards move seems similar in every cycle when the real reason is psychological in nature. Once that clicks in one’s head, they’ll understand the game!
The article is precious!
August 13th, 2007 at 12:42 pm
Interesting article about the subprime. Guess who else has been lending money to the Americans fueling the overexcited RE market. Like I said before, wherever there is a trending market, in the absence of capital control regulations, foreign money will come. Vancouver’s (the rest of the country as well) RE market is no exception. Remember, most of the world has had cheap liquidity for a long time. Japan’s carry trade is one where cheap money is borrowed for global investing. If other banking systems are taken down by the US subprime mortgage blowout where the peak of rate resets hence defaults is projected to come at the end of this year, the stock market is right to project big problems with the financial sector. One can expect this drying up our Vancouver’s foreign speculator’s cash as a way to crash our party. More speculation on my part, but seems to be playing out that way. Enjoy the article (pay attention to the bottom):
Globe and Mail:
Central banks soothe markets again with injections
13/08/07
By David McMahon and Krista Hughes
NEW YORK/FRANKFURT (Reuters) – Central banks in the world’s leading economies pumped extra money into the financial system for a third straight trading day on Monday, but in far smaller amounts as investor nerves steadied over the dangers of a credit squeeze.
The European Central Bank lent out an extra 47.67 billion euros ($65.29 billion) in overnight funds, its smallest amount since lending rates shot up last Thursday on fears European banks faced huge exposure to risky U.S. mortgage debt.
Rest of article …
August 13th, 2007 at 12:32 pm
Our markets (RE, stock, economy) has been on a tear for some years. This “subprime” indigestion/cancer, born out of cheap liquidity and made clear by tightening liquidity, seems to be the straw that will spark the end of the party and mark the start of the downward carnage … well party for me!
Anyone care to speculate which is the next hammer to fall?
As always, the reward goes to those that are patient and prudent … NOT to the greedy and foolhardy who views risk as merely something that the experienced throw in to ruin the fun.
The market is projecting more problems to come. Even with the large injection of liquidity and great news from CIBC, financials opened high on the day with a close lower than what has occured for some time.
Leverage is a 2 edged sword >>> in an upmarket, it’s great. In a downmarket … it’s going to slice you in half! (Finance 301)
August 13th, 2007 at 12:16 pm
This article has probably been posted before but I couldn’t resist:
Ben Stein’s 1984 warning
August 13th, 2007 at 11:12 am
satv:
RE always goes down… they aren’t making mortgages anymore……
i’m willing to bet this will put a kink in your plans for world domination….
August 13th, 2007 at 9:33 am
Longtime gay lover gets nothing in will
Common-law relationship gave no rights to house rules court-cbc.com
August 13th, 2007 at 9:23 am
Michael,
In Victoria, prime locations,
I am seeing many homes over $600,00 selling $10,000 under asking. Homes over a million are coming down at least $50,000 and homes in the 1.7 range at least $200k under asking. I am linked up to the Private client services.
The Peg. Everyone makes fun of the Peg. You are all mean. Just kidding. Anyway, I am just sick. My cousins 24 year old daughter has just over-paid for a 2 bedroom house with her boyfriend. She is employed for the summer with the government and used her 3 pay cheque stubs for the mortgage. She won’t have a job after September.
Ex Winnipeger
August 13th, 2007 at 8:24 am
“But experts say Winnipeg’s sizzling housing market won’t cool off any time soon.”
Of course it won’t.. everyone wants to live in the ‘Peg
August 12th, 2007 at 4:11 pm
Does anybody else seeing more places on MLS that are like 10-15k below what they would have been listed at like a month ago? Has any kind of downward movement started here yet?
August 12th, 2007 at 3:08 pm
Winnipeg. LOL.
August 12th, 2007 at 11:35 am
I’m not at all surprised. Winnipeg is running out of land as well, with the Pacific to the West, and the Atlantic to the East, and US to the South, furthermore it is considered to be the California of the Prairies.
It has nothing to do with irrationality, hype, or low interest rates It’s about fundamentals.
My God, those poor suckers that are buying into this fraud. Imagine, if you will, trying to unload a house in Winnipeg when this market turns.
Many will walk away,
August 12th, 2007 at 10:45 am
Here’s a comment from thehousingbubbleblog.com:
“The Winnipeg Sun from Canada. “It has smashed records, defied expectations and baffled buyers. But experts say Winnipeg’s sizzling housing market won’t cool off any time soon.â€
“Wes Schollenberg, president of the Winnipeg Realtors Association, said…the association looks set to reach a record annual sales total of $2 billion for 2007. ‘We’re shooting for $2 billion and we don’t expect any drop-off,’ said Schollenberg.â€
What’s so sad about the rocketing house prices in Winnipeg is that here’s yet another city in Canada that once offered its youth the ability to buy a home and raise a family.
The “housing miracle” takes hold and one generation “wins” and the remaining now enter that weird world where owning a SFH to raise a family beomes a fantasy.
Hopefully this market goes bust before Winnipeg loses its one attractive feature.
August 12th, 2007 at 8:07 am
VANCOUVER CONDO…
KNOWS HOW 2 PARTY…
My money’s in GIC’s and PC Bank 4% savings account. Safe harbour.
depend on what amount in bank/annually compunded interest rate. government takes half of that if you have just one property all is yours.what about rent you paying,moving expenses time by time,owner restrictions etc,etc.still if you happy thats good ,but how long can you manage moving and paying increasing rent. then beat your head for bubble no bubble what a life without house and wife.
satv is troll said……
there must be a line or two in there on how we are running out of land.
hey robsnumber,
vancouver was out of land since 3 decade,what we got now for new projects is parking lots, and warehouse conversions.our developer earn some respect their engineering art work convert 50 parking into almost 500 for single projects+units.
ultersman said……..
I don’t know about the validity of the 5 x average earnings, but can you imagine how far Vancouver prices have to fall if this ratio is universally applicable
ultersman,
you can get some idea from chicago ,but metrocity or states all over the world have 0% chances because amenities,in door/outdoor activities,night life etc.etc.no other state or city can beat them .you must count some name like chicago,new york,new delhi,hong kong,central london,paris,bombay,worlds best vancouver.I might missing few more.and for your kind information vancouver will be known as metro vancouver starting sept,2007.
Manhattan,
congratulations if that was your first purchase ,all is yours and you don’t really have to waste time again to think -think-think.post your comment too often otherwise market represent only one side of coin here.
tulip mania said……
Robyn, Why don’t you give us the numbers?
How much net migration? How much have incomes grown?
In God we trust, all others please bring data
tulip mania,
Robyn know you will abuse those immigrant, I can tell you the great source international immigration is common but there is one more thing is to add there was a word about 2016 olympics in california ,but recently chicago took over.so california who was getting ready to kick start suddenly got depressed .so they decided to join Vancouver along with Alberta ,and washington.do not start any joke on california and washington.
************condo party
Now let me welcome everybody to the vancouver west
a place that’s untouchable like elliot ness
The track hits ya eardrum, like a slug to ya chest
Pack a vest for your jimmy in the city of sex
We in that sunshine state with a bomb ass hemp beat
The state where ya never find a dance floor empty.
And pimps be on a mission for them greens
Lean mean money-makin’-machines servin’ fiends.
I been in the game for ten years makin’ rap tunes
Ever since honeys was wearin’ sassoon.
Now it’s ’2010′olympics
And they clock me and watch me
Diamonds shinin’
Lookin’ like i robbed liberace.
It’s all good, from diego to tha bay
Your city is tha bomb if your city makin’ pay
Throw up a finger if ya’ feel the same way
Dre puttin’ it down for
vancouver condo.
vancouver condo…knows how to party.
vancouver condo…knows how to party.
In the citaaay of b.c.
In the citaaay of good ol’ watts
In the citaaay, the city of b.c.
We keep it rockin! we keep it rockin!
vancouver condo rocks
that song was edited from california-love to vancouver condo-from2pac-2-pack2.
August 11th, 2007 at 11:39 pm
…maybe their RE bubble is even more out of hand?
Yep. It’s in Asia, too. Which of course runs completely contrary to the “we’re special!” theory for our local run up.
August 11th, 2007 at 10:57 pm
Given the magnitude of credit crunch in Europe, maybe their RE bubble is even more out of hand? I know that the three funds in question involve US mortgages, but overall credit in EU has been booming. New apartments in Kiev, Ukraine, for example, start at 30x annual income. The run up is about 600%. I know that it’s not comparable to mature market, but bubbles tend to follow a similar pattern.
August 11th, 2007 at 10:30 pm
“When will we see this in Vancouver?”
I was checking out prices for 2 bedroom condos for a couple of months, but haven’t seen any advertised that had price changes last month or this month. there were a few in june, mostly going down in $10k increments, but sometimes up.
“satv is a troll”… ha ha ha.. that just cracks me up.
August 11th, 2007 at 7:49 pm
Just a little schadenfreude from yesterday.
housing bears
The WSJ article link is printed in its entirety, but it we already know how the story goes.
Eventually, the wolf does show up.
August 11th, 2007 at 7:33 pm
Without a second body blow to the system, it is entirely possible the broader markets will muddle through the current mess, allowing current real estate bubble will deflate slowly.
Ah. The ole’ soft landing scenario. I was so hoping that would happen. Yeah, it’s entirely possible. I believe that will happen … even if millions of others don’t
August 11th, 2007 at 6:44 pm
I read this reader comment from the link (to an Irish real estate blog) supplied by Patriotz:
“The average house price should be no greater that 5 times
average earnings (According to the bank of England and the
old central bank of Ireland). Average Industrial wage =
32,000 euros and therefor house price = 32,000 * 5
house price = 160,000 euros.
Average house price in Dublin say 400,000 euros this means
that the house price must drop at least 50% to come back
into proper valuation. Also markets are called mean
reverting which means that all markets eventually revert
to the mean (average) this includes stock markets, bond
markets, property markets etc.”
I don’t know about the validity of the 5 x average earnings, but can you imagine how far Vancouver prices have to fall if this ratio is universally applicable?
This renter says bring it on PLEASE!
August 11th, 2007 at 5:29 pm
If the GIC is covered by CDIC (conditions apply, many are not) then it will be covered to the limits allowable by CDIC. It is also not always true that a GIC taken from a CDIC member is itself covered by CDIC.
All that said, if safety is a concern I personally would definitely take a GIC from a Canadian bank over a broker’s money market fund.
It’s a complicated world out there…
August 11th, 2007 at 4:57 pm
There are stock market GICs, but mine are fixed rate. The safest of the safe.
August 11th, 2007 at 4:19 pm
BTW – those of you looking at GICs and money markets as a safe harbor should read the terms of your investment very carefully. Many of those allegedly cash-friendly investments have significant exposure to non-agency MBS and other debt instruments of dubious reputation.
I’m not the most financially astute person, but the ‘G’ in GIC tells me that unless the bank itself goes down, the GIC is as safe an investment as there is. That’s why it has the lowest returns. No?
August 11th, 2007 at 2:47 pm
Cramer is a windbag with his own agenda, so it shouldn’t be a huge surprise he is conflating “credit crunch” with “lack of liquidity”. We temporarily have the former, which will resolve itself as people establish a more realistic model of the MBS and corporate lending out there, but there is no significant lack of the latter. Those who need mis-priced risk to make their deals happen will be screwed – but then they should be.
I have to say I’m surprised at the Fed’s ability to keep walking this “inflate – but not too much” tightrope. They’ve managed to avoid deflation (#1 but mostly unstated goal) yet still keep short term interest rates at a reasonable discount to “real” inflation (#2 but more public goal) for far longer than I would have expected.
Without a second body blow to the system, it is entirely possible the broader markets will muddle through the current mess, allowing current real estate bubble will deflate slowly.
BTW – those of you looking at GICs and money markets as a safe harbor should read the terms of your investment very carefully. Many of those allegedly cash-friendly investments have significant exposure to non-agency MBS and other debt instruments of dubious reputation.
August 11th, 2007 at 12:37 pm
The Bernanke Agenda: Just Say No
The Fed chairman feels the pain of subprime borrowers and the Street, but he’s got his priorities
Finally a guy with balls
August 11th, 2007 at 9:14 am
Just don’t expect 2004 prices…:).
Of course not; prices won’t be that high. (No smiley because no joke.)
My money’s in GIC’s and PC Bank 4% savings account. Safe harbour.
August 11th, 2007 at 8:00 am
Anecdotal story:
Friends’ relatives are getting back into the local market (after selling about a year ago). Only this time they are only buying uncompleted presales. Why? They don’t want to bother renting it out because they say there’s no way they can cover the mortgage with rent.
So, for them, the best way to play the market these days is with a call option play. All they could lose in the end is the presale downpayment. Who says property markets aren’t sophisticated.
August 11th, 2007 at 7:34 am
My point is, there is a lot of money out there and where to put it to work is and always has been a problem of much study. I would not expect a real estate crash here with sound properties with fair valuations, location, amenities and did I say location? I would expect more….
You forgot to mention the Olympics, which once televised across the world, immigration will increase to several million a month, and I just skimmed through, but somewhere between the fear injection, and the need to act now, before one is “priced out for ever†from the best place on earth, there must be a line or two in there on how we are running out of land.
August 11th, 2007 at 5:54 am
Patiently waiting … interesting price reduction figures.
Wait until the defaults that come out as the result of interest rate renewals.
August 11th, 2007 at 2:11 am
“Check out MLS D1178564, fresh from ZipRealty:
Price Reduced: 07/31/07 — $595,000 to $495,000
Price Reduced: 08/03/07 — $495,000 to $395,000
Price Reduced: 08/09/07 — $395,000 to $349,000
Now that’s what I call a MOTIVATED seller!”
From thehousingbubbleblog.com, about a house in Florida.
When will we see this in Vancouver?
August 11th, 2007 at 1:22 am
vanhattan,
Most of my money is in GICs. Has been for several months. Its my safe harbour in the storm.
I expect to see 2003 prices in two or three years, perhaps lower. There have already been reports of declines of over 30% from the peak in some bubble markets in the US. And its just beginning. 30% off the peak is when I consider buying.
August 11th, 2007 at 12:49 am
over here in Ireland there has been no need for slick marketing for condos as the people have been camping out just to buy an overpriced flat during the last several years.
Would that be the same Ireland where 1 in 7 houses is now vacant?
Yes, you too can be the proud owner of yet another empty property!
August 10th, 2007 at 11:28 pm
Well, I don’t know about you guys but where you are putting your money? I just pulled a bunch of $ out of the market 2 weeks ago on a hunch and in the process saved myself 5% that it would have dropped this week alone. I feel more secure owning real property right now. Sure I am not a “flipper” and I live in my investment so it does not matter in the short term. When the equity markets are this volatile where does one put their cash…in art? My point is, there is a lot of money out there and where to put it to work is and always has been a problem of much study. I would not expect a real estate crash here with sound properties with fair valuations, location, amenities and did I say location? I would expect more prudent investors with tighter grips on their $. Still, for those who have been sitting on the sidelines for the last several years, your opportunity may be here as flippers may want to bail? Just don’t expect 2004 prices…:). The problem always seems to be that just when you think the crash is imminent or actually taking place, the conversation and paranoia shifts to a differnt focus and it is quickly back to business as usual. Short term memory for all involved I suppose. Things are different this time I believe. The world has changed in many ways that we do not yet quite understand.
Best of luck to all.
PS; I do not post much but very much enjoy the daily banter. Thanks to all posters for keeping this a spirited conversation!
August 10th, 2007 at 10:08 pm
Hi Squidly77,
Enjoy your posts over at the Alberta bubble blog. Occasionally, you guys have some push-n-shove matches going on over there. lol
If anyone wants to exam a bubble, then this mildew rain-city really takes the cake. I’m envious of other places that think they’re in a bubble. Vancouver is probably on of the most unhinged places in the western world.
Hopefully, we will follow the same trajectory as Calgary, and especially, Edmonton … waiting as this mess unwinds
August 10th, 2007 at 7:22 pm
come over to the
albertabubble.blogspot.com occasionly
we are fighting what you are
irrational exuberance and
money hungry hogs
that dont want to work
nah..they want free money
that rennie must drive you guys ballistic
fight on
the crash is closer then many think
August 10th, 2007 at 7:17 pm
housingbubblecasualty.com
garyincalgary asked
is subprime alive in canada
go there to read the answer
vancouver is mentioned
latest post..under comments
wow..all the bubbles..your in a massive one as are we in calgary
i can hear the hiss though
good luck vancouverites
your bubble will burst
keep poking the pins in it
when you get sick of that
kick it in
its close now
mortgages are getting sooooooooo tough to get
August 10th, 2007 at 6:08 pm
“Any thing else is either a wild ass guess or wishful thinking depending on if you are “invested” or not.”
Somewhat peculiar that excess liquidity caused the problem, and now the central bankers are thought to be firing up the printing presses again.
But perhaps not, my wild ass guess is that they are trying the old “moral suasion†tactic.
Central bankers must surely realize there is so much hidden and underreported inflation, that they cannot cut rates.
It won’t be long now before inflation, and stagnation come to co-exist again.
Tick Tock, Tick Tock
August 10th, 2007 at 4:26 pm
“how will the liquidity freeze affect Canada?”
The liquidity freeze? What’s happening is a credit tightening that is inconsistant by market. It will affect people differently in different regions. Any thing else is either a wild ass guess or wishful thinking depending on if you are “invested” or not.
August 10th, 2007 at 3:16 pm
Robyn Adamache, a senior market analyst for the Canada Mortgage and Housing Corporation said
“Vancouver’s resale market is a prime example of strong growth, fuelled by the city’s low unemployment rate, higher incomes and rising net migration into B.C., she said.”
Robyn, Why don’t you give us the numbers?
How much net migration? How much have incomes grown?
In God we trust, all others please bring data.
August 10th, 2007 at 2:43 pm
ReductiMat:
Essentially it just raises the cost of doing business for many companies. This has a net negative impact on the economy as a whole which can be just a blip or can trigger a recession or depression.
On the RE front it makes mortgages more expensive and the creditors more reluctant to lend money so people will have a tougher time getting approved.
August 10th, 2007 at 2:08 pm
Jim, how will the liquidity freeze affect Canada?
August 10th, 2007 at 1:59 pm
“It hasn’t even started in Canada… yet… “
What hasn’t started? Subprime meltdown? Won’t happen in Canada. Stock market turmoil? Happening now. Real Estate collapase? Hasn’t really started in the US other than a few high profile markets.
August 10th, 2007 at 1:10 pm
It hasn’t even started in Candada… yet…
August 10th, 2007 at 12:38 pm
ahken, thx for the article!
IMO the banks know that mortgage foreclosures are just getting started. The credit crunch has a long way to unwind yet.
August 10th, 2007 at 10:34 am
since when is Burnaby “urban living”?
over here in Ireland there has been no need for slick marketing for condos as the people have been camping out just to buy an overpriced flat during the last several years.
there were even panics breaking out last year as the prices rose from the front of the queues to the back!
oh how feel for those suckers now.
August 10th, 2007 at 10:33 am
Sorry for the long article…couldn’t link it as subscription required!
August 10th, 2007 at 10:32 am
GlobeInvestorGold:
A misfire?
09:18 EST Friday, Aug 10, 2007
The European Central Bank, Federal Reserve and Bank of Canada all signalled their willingness to come to the aid of financial markets.
And so they should, because that’s part of their job.
But in seeking to calm the jangled nerves of investors, they may have inadvertently made a bad situation worse.
Not that they had much choice in the matter.
Faced with a credit squeeze that pushed overnight interest rates sharply higher, the European Central Bank injected $130-billion (U.S.) into the banking system. Underlining the severity of the problem, it was its biggest cash infusion yet, and about 37 per cent more than it provided the day after 9/11.
The move came after Paris-based BNP Paribas halted withdrawals from funds that had invested in subprime U.S. mortgages, saying the sudden evaporation of liquidity for the securities “has made it impossible to value certain assets fairly regardless of their quality or credit rating.”
The ECB was only trying to help, of course. But it may have ended up fanning the flames.
“The ECB is treating this like an emergency; it might make traders even more afraid,” Peter Lynch, chairman of private equity fund Prime Active Capital in Dublin, told Bloomberg News.
The Federal Reserve Board did its part by adding $24-billion in temporary reserves to the banking system – its biggest liquidity injection since April. The Bank of Canada said it also stood ready to help.
“In light of current market conditions, the Bank of Canada would like to assure financial market participants and the public that it will provide liquidity to support the stability of the Canadian financial system and the continued functioning of financial markets,” it said in a press release.
In other words, nothing to panic about, folks. Everything’s under control.
The response from investors? Sheer panic.
On Wall Street, the Dow Jones industrial average plunged 387.18 points or 2.8 per cent to 13,270.68 for its second-biggest drop of the year. In Canada, the benchmark S&P/TSX sank 280.18 points or 2 per cent to 13,478.01, with heavily weighted financials absorbing some of the worst blows.
“Central banks are trying to calm things down, but … by reacting this way they may give people the impression that they know something the rest of us don’t,” said David Kelly, economic adviser at Boston-based Putnam Investments.
“The real question that investors need to ask is, what does this mean for the economy? Because if it doesn’t really stop economic activity, if it doesn’t stop hiring or buying or building a plant or exporting or importing, then this will be a relatively short-term financial event.”
Still, investors appear to be preparing for a worst-case scenario. Which is what, exactly?
According to John Johnston, chief strategist for Harbour Group at RBC Dominion Securities in Toronto, it’s that credit dries up and the U.S. economy – huge chunks of which function on borrowed money – goes into recession. That, in turn, could pull down the rest of the world.
Not that he sees that happening. “A more realistic case is that it’s a credit event that dings the economy but doesn’t send it down,” he said.
Until the subprime smoke clears, investors will be left wondering whether central banks have the problem in hand, or whether they’re desperately trying to forestall something bigger and scarier.
“That is the question,” said Stewart Hall, market strategist at HSBC Securities Canada. “Do we get concerned about this because all of a sudden there is a severe tightening in credit that has compelled the central banks to come in and provide liquidity? Or do we take the more optimistic route and say this is the way it’s supposed to happen, this is a large part of the reason we have central banks, to help out when things get particularly tight?
“I put myself more in the camp of optimism.”
August 9th, 2007 at 11:12 pm
That last link courtesy of CondoHype, if you haven’t seen the excellent and funny Condo Hype blog yet do yourself a favor and check it out.