Its friday free-for-all time. A few stories I’ve noticed recently:
-How to avert a global downturn? Bailout.
-Loonies rise brings increased bankruptcies
-CIBC loses a few million on subprime gambles
-Want a 2nd mortgage? good luck!
-Still booming here though!
What are you seeing out there? Post your news, links and anecdotes here!
There’s an article in todays New York Times about the way dropping home prices are affecting consumer spending – its an interesting look at the way the boom and bust cycle works on ‘positive feedback loops’ which aren’t always positive. When house prices are increasing people spend more money and will take on extra debt to buy more ‘investment’ property thereby driving high prices higher. When the peak has been hit this effect is reversed. Dropping house prices eliminate the ‘ATM effect’ of home equity withdrawals removing a large portion of discretionary spending from the economy. Less spending means less income thereby driving dropping house prices lower.
Mr. Whittey once seemed an unlikely member of that cohort. A sales manager at a flooring and tile company, he exudes the unflappable air of someone raised amid the easy money of the casino world. Until recently, he and his wife regularly embarked on shopping sprees of $1,000 and up.
He bought a 21-foot boat and two flat-screen televisions for their home. He sold his old truck and bought a new one, he said, “just ’cause I didn’t like the color.†Mr. Whittey could live in such fashion because his company was making good money and his house was appreciating.
But today, the value of his own home, which reached $500,000, has fallen and a separate investment property he bought seems likely to fetch far less than the $580,000 he owes the bank. His commissions have diminished, so his income is down. His neighbor recently fell behind on house payments, prompting the bank to foreclose. Anxiety reigns.
“We used to go out to eat three or four nights a week,†Mr. Whittey said. “Now, we don’t go out at all.â€
We’ve talked a lot about the risks of sharply rising residential land prices here, but what about industrial land prices? Mark sends in the link to this article about the rising cost of urban land driving industry east.
“Our industrial land prices are probably the highest in North America and certainly the highest in Canada,†Heed said.
The high prices reflect both soaring demand and the fact that Metro Vancouver has virtually run out of industrial land. The vacancy rate has plunged to 1.3%, while industrial land rezoning has virtually stalled.
“Companies, big employers, have options in Alberta,†Heed warned a National Association of Industrial and Office Properties (NAIOP) meeting in Vancouver last month.
He said that in Calgary, 3,000 acres of serviced industrial land will come to market this year and, by 2009, the city will have 5,000 acres of industrial land ready to develop.
“That’s where the business will be heading unless something is done,†he said. “In 10 years, we will be in serous trouble.â€
..That hasn’t happened yet though, despite the high cost of land there’s still industrial development going on:
More than 3.5 million square feet of industrial space is under construction.
Speculators are also apparently still interested in the Metro industrial sector.
According to Colliers, all five of the major industrial sales during the second quarter of this year were to investors.
You’ve almost made it to the end of the week! Lets just call it Friday and do the open topic thing!
-Who in the real world can afford to live here ?
-At least you can start paying US prices for books.
-The demise of Britains housing boom?
-Fed done cutting rates?
-US government wants people to keep their homes.
What are you seeing out there? Post your news, links and thoughts here!
