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Are home prices peaking?

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This article from the November 2007 issue of MoneySense Magazine looks at prices across Canada and asks the question Are home prices peaking?

Even banks are admitting that after a decade of unthrottled expansion, Canada’s real estate boom may finally be losing steam.

The average price of a home in Canada recently topped $310,000, a gain of 60% in real terms in just nine years. Canadians haven’t witnessed a boom like this since just after World War II—and it’s clearly not sustainable. If prices continued to rise at their current rate, the average house would fetch $10 million by 2037. Since that doesn’t seem plausible, the big question is not whether the current boom will stop, but when.

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krrish

"The continued strength of the real estate market is a reflection of the economic vitality seen throughout the province. With overall wages on the rise and unemployment in decline, buyers and sellers are left with a healthy and strong climate in which to operate," says REBGV

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Freako

Ever since the inception of the Fed in 1914, its mandate is to make the price of money cheaper.

Huh? Do you make this up as you go along?

When people calls deflation, the Fed "tightens" the supply of money

No. Tightening slows inflation. Deflation is an exceedingly rare event, once during the civil war, the other the Great Depression. There have been smidgeons of delation on other occasions, but none in recent history.

But the correct definition is that, the Fed deflates the money supply by raising rates.

Again, no. A tight monetary policy does not entail a reduction in the money supply. The last time the money supply contracted was during the Great Depression.

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Vanman

Freako, The Fed Funds rate in 1914 was 6%. By 1922, it went down to 4.5% and stayed there until 1928. By August 9th, 1929, it went back up to 6% again. All this time, the rates only went down 1.5%, but went back up to 1914 level! However, by 1927, the Fed Reserve paid absolutely no attention to the bubble it was forming, just like the subprime mess of today and kept printing money. It should have raised the rate back to 6% even by 1926, 2 years earlier. As usual, they are always late. Freako has this preconceived notion that inflation is controlled by money. Money is a currency in exchange of goods. Without goods, money is pretty much worthless. Yes, you can use it as toilet paper or fuel for fire. That would be the extent of… Read more »

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freako

Vanman, you wrote all that for naught. When I say deflation, I of course mean a decrease in general price levels. Declining CPI in other words.

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craig

I should have done this to begin with. If you google US Housing Bubble 2005 you get 633,000 hits. The second hit is from a NY Times business story in May 2005:

"Fed Debates Pricking the U.S. Housing 'Bubble'

WASHINGTON, May 30 – If the housing market has become a bubble, as increasing numbers of economists warn, would the Federal Reserve try to deflate it?"

Let's recap. Increasing numbers of economists were warning of a bubble, the Fed was discussing it, and Greenspan had earlier in the year referred to "froth" and "lots of little bubbles" in particular local markets.

Apart from all of them, yep, Krugman was a voice in the wilderness.

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thevanman

Patriotz said; Credit has to be given to Paul Krugman of the NYT for being right on both these issues, having called the RE bubble top in summer 2005. And I think the Economist called the bubble even earlier, but of course that publication is unknown to most Americans, as opposed to the NYT which is well-known but not well-read – and simply not believed by those with a certain political bias. But both sources admit they did not anticipate the contamination that the mortgage meltdown would bring to financial markets today. I say; On his book tour and speech at Google, he did admit making a number of bloopers, but of course proudly announces his 2005's prediction of the bubble burst as being right. Was he lucky or was he just like any other experts before him who knows… Read more »

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craig

Patriotz said: "And, smart guy, I said in the very next sentence that the Economist called the bubble before Krugman did. So take your strawman and burn it." You said you "think" the Economist called it, but hey it's just a detail. And as for a strawman, if you "give credit" to Krugman for suggesting a bubble in 2005, you think he did something special. He didn't. It was obvious to many. And the fact that he has ballsed-up so many other predictions is certainly germane. "What was your position on the US housing bubble in mid-2005, Brainiac? The same as your hero in the White House?" I sold in 2005. "And as for the "surge", any objective observer can see that the entire Iraq project is an unmitigated fiasco, regardless of the perceived outcome of any short-term strategy." Do… Read more »

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strataman

krrish said…

Since 2001 USA tight their immigration policy and tight their borders.

Dammit! Thats why your here! 🙂

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strataman

M "I can't imagine their situation to be anything other than greed."

I disagree more like nieve I think. People like that have absolute faith in MSM and the "powers of the day". They live in a fantasy land of "If I am a good person I will be rewarded". Unfortunately they will be hurt worse than the specuvestor that walked away laughing!

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Richard

"Man oh man…. at this point I think we're at the "paradigm shift" point on that bubble graph I saw a few weeks ago. "

I don't know… i think we've still got a ways to go…

here's a link to the real estate council of bc's website. they have an annual report there. seems the realtor population hasn't yet matched the 1994 peak of 20,000.

On the other hand, the number of students has decreased from last year, so i guess interest in real estate as a profession has peaked?

Still, with that number of realtors around, that means the environment is still pretty supportive of a large realtor population. i think it's still a hostile environment for buyers…

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m-

Scullboy: I'm a bear. I was being facetious.

As far as what was going through those kids' minds, the only thing I can imagine, given the absurdity of their to-be-short-lived situation, is that they must be expecting a windfall. They know they're only going to be there for a couple years, and they're expecting to come out ahead.

Fear of being priced out forever shouldn't cause somebody to buy something they know to be wholly unsuitable for themselves to live in. I can't imagine their situation to be anything other than greed.

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Paul

REBGV stats for Dec are posted:

http://www.nvcondos.ca

Also some commentary on my blog:

http://paul-northvancouverhomes.blogspot.com/

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Scullboy

Sorry to post twice but it struck me we could just call Sat Poochie. It's perfect because it's a bit less over the top, plus Poochie was that Itchy and Scratchy everyone hated. 🙂

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Scullboy

Richard:

Man oh man…. at this point I think we're at the "paradigm shift" point on that bubble graph I saw a few weeks ago.

Is it any wonder nobody wants to hear the party might not last forever? Consider how MUCH skin people have in the game. Nobody wants to lose that kind of cash….

and I think SatV will now be known as Pooched Out Chocolate Starfish (POCS if you're lazy) … a nickname is born! 🙂

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Richard

Too short to bother tinyurling…

——————————-

Vancouver Sun

Thursday, January 03, 2008

METRO VANCOUVER – Real estate sales across the Lower Mainland in 2007 defied forecasts rebounding from 2006 levels with more transactions and double-digit price increases when forecasters predicted moderation.

In Greater Vancouver, realtors processed 38,050 sales through the Multiple Listing Service in 2007, which was 7.2 per cent higher than 2006, but still 6.1 per cent off the record 2005.

Greater Vancouver prices were also up between 11.4 per cent on single-family homes and 14.4 per cent on condominiums.

Fraser Valley realtors processed 16,547 MLS sales in 2007, three per cent higher than 2006 sales.

Prices of single-family homes were also up 11.4 per cent and 14.9 per cent for condominiums.

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Crabman

Thanks for the info Pooched Out Chocolate Starfish! I'm glad you set me straight! Now I understand Vancouver RE no go down cuz we twin Port Mann bridge! 1.Since 2001 USA tight their immigration policy and tight their borders. Lot people still go, build lots house. More immigrant. 2.Natural Disasters are increasing in volume every time that shows up doing damage upto 16 billions worth of property. Many disaster and hurricane make vegas and phoenix no gud! 3.Threat of terrorism are being renew too often bin and jarghawi consuming most of media time on all national and state levels. Cant buy house, terrorist on TV. 4.Investors or genral public estimate the population wrongly because most of people are illegal immigrants from mexico and like wise countries. Yes, population number cook up! 5.Las Vegas suit better to gamblers or sex industries… Read more »

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Richard

link

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Scullboy

Drachen, I have to say I'm astounded. That thought was something that just occured to me in passing. In some ways it really is different here. When I bought in TO, my agent sat me down and told me I should plan to live in my place 5-10 years. She said that was the only way to develop any equity in the place. She encouraged me to buy toward the upper end of what I could comfortably afford. Her point was that I should find a place I loved and would be happy to live in for a while, otherwise I'd just end up moving in 2 years and spending any money I had saved. I still consider that to be sensible advice. I compare that to "buy whatever you can afford just so you are in the market and… Read more »

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Clarke

"The bubble is built on lies, stupidity and greed."

True enough. I do tend to see people like the couple profiled in the CBC piece as victims more than anything. They needed shelter, wanted to own a place, renting can be real challenge, and they bought into the "buy now or be priced out forever" thing. They did not seem to have a game plan of becoming rich flipping condos, and planning to sell and move out later, hopefully pocketing a few bucks is a pretty common idea, not necessarily indicative of low morals.

A lot of speculators will get what they deserve, but they will certainly not be the only people taking hard hits….

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Drachen

Scullboy: "I was just thinking, even if that couple's place appreciates at 15%, every OTHER place appreciates at the same rate and therefore relative to all other owners they're in the same boat, which means they'll never really be able to move up." Yep, that's the great irony of the 'property ladder' if all properties appreciate say 50% between you buying and selling you'll actually be WORSE off moving up to the next 'rung' than if you'd bought the next step up to begin with! And yet this huge lie, in spite of the obvious mathematical contradiction is scattered about like fish food with the suckers gobbling it up. The bubble is built on lies, stupidity and greed. I wish our education system forced kids to take some critical thinking and economics classes in HS, honestly a HS graduate who… Read more »

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Scullboy

m-

Please, please tell me that post was tongue in cheek, rather than fist in *ss, Thumbs – style…..

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Scullboy

Pooched out chocolate starfish said

"Growing incomes and a rising population, factors that will help keep housing starts and the resale market up. "Over the next couple of years, the housing market will respond to the fundamentals of population growth and increasing real incomes as lending rates move upwards,".

Hey f**ktard, Crabby's stats indicate past population growth was mediocre. It must be really painful, pulling stuff out of your ass while simultaneously jamming your fist in there.

And real incomes aren't increasing, you drooling idiot.

Could you please jam your other fist deep down your throat? That way you'd be unable to speak OR type, which would spare the rest of us.

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m-

I figure that couple's plan is to work here for a couple of years, until they can't shove the baby in the closet anymore (sometime around 2010).

Then they'll sell and move back to Ontario with a cool $100K in their pockets, tax-free, where they can buy something that they so rightly deserve, given what smart forward-thinkers they are.

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Krrish

btw

Richard, thanks for the link huge drive on assessment feel sorry 4those who miss the boat.

jesse, thanks for being wiseman.

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Krrish

Can you explain how this mediocre growth can prevent property values declining while boom towns like Las Vegas (+83.3%) and Phoenix (+45.3%) are in the tank? Crabman, 1.Since 2001 USA tight their immigration policy and tight their borders. 2.Natural Disasters are increasing in volume every time that shows up doing damage upto 16 billions worth of property. 3.Threat of terrorism are being renew too often bin and jarghawi consuming most of media time on all national and state levels. 4.Investors or genral public estimate the population wrongly because most of people are illegal immigrants from mexico and like wise countries. 5.Las Vegas suit better to gamblers or sex industries contrast to that- in Vancouver B.C you can catch all the action of life. just forgive me if I am missing something because I don't really track them.recent stories from usa… Read more »

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Scullboy

Crab: I try. I mean seriously, it's impolite to make fun of people who really are retarded. Sat/Thumbs is great because you can make fun of him for being so damn stupid without getting in trouble. I find I can only bear his self-fisting routine because afterwards we're free to tear him to shreds. Not only is he a complete f**ktard and a liar, he's transparently easy to spot when he does one of his stupid identity changes: "Hey everyone, I'm new to this post, I'm not (insert last incarnation here)! Beep beep! Smile for sunny day! Watch me jam my fist elbow deep in my chocolate starfish!" You'd think he'd realize he gives himself away *every* *single* *time*, wouldn't you? I was just thinking, even if that couple's place appreciates at 15%, every OTHER place appreciates at the same… Read more »

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