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GreaterFool.ca -predictions of a canadian RE crash

greater-fool-coverthumbnail.jpgMP Garth Turner has a new book out called “Greater Fool – the troubled future of real estate“.   He argues that the Canadian real estate market is due for a collapse similar to the one currently happening in the US.

He recently started a blog at greaterfool.ca that looks like yet another source of negative news about real estate markets in North America.

The following is an excerpt from his book blurb:

The timing couldn’t be better for Garth Turner’s newest book on real estate and its impact on personal finances. At a time when the US is clearly heading for recession, stock markets roil, a global credit crunch overwhelms banks and a climate crisis lurks, can the Canadian real estate market withstand the threat? Do we really think we’re immune?

More than 400,000 US families lost their homes last year and more than a million more are threatened. House prices have collapsed as much as 30% in some markets, amid predictions of another 25% slide. New home sales are down over 40%. There are 20,000 new, empty houses for sale in Phoenix, streets of foreclosures in California and desperation in Florida. What happened? Will it hit here?

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67 Responses to “GreaterFool.ca -predictions of a canadian RE crash”

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  1. 67

  2. cashisking Says:
    March 14th, 2008 at 10:07 am

    Just moved here from Toronto but grew up and went to University here. I have been in finance since I left school. I bought my first house in 1993 at the age of 26. It was a good time to buy b/c my mortgage payments + the interest on my down payment (ie cost of capital) was less than rent. Also the headlines in popular media were questioning whether you should ever again own realestate. My father who dabbled in realestate pointed out that these were the exact headlines in popular media back in the early 80’s and anyone who bought at that time had made a killing.
    The smartest guys always roll there eyes when they hear “it’s different this time” – which is interchangeable with “it’s different out here”. It’s not. It never is. Realestate prices are out of whack in the short term. Whether this extends another year (>5%) or not I can’t tell you. It will end and it will be ugly. I suggest people pick up a Financial Times (funny pink paper), WSJ, NYT, or for the really bullish Barrons to find out what is going on in the real world and how it may impact “the most beautiful place on earth”. Easy money (credit) is drying up and the de leveraging of North American balance sheets has begun. This will probably take a couple of years and have some nasty surprises along the way. Fortunately were six months in.
    Prediction is for 25% decline over next two years.

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  3. 66

  4. scullboy Says:
    March 14th, 2008 at 9:34 am

    Drachen:

    Did you see the Doctor Who episode where the Daleks met the Cybermen for the first time?

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  5. 65

  6. Drachen Says:
    March 14th, 2008 at 9:15 am

    Is it just me or is there a subtle irony at play here? MR and Krrish debating whether Gold or Real Estate is where you should put your money…

    rofl

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  7. 64

  8. Garth Turner’s New Book and Blog at Investing Intelligently Says:
    March 14th, 2008 at 1:29 am

    [...] a new book out called “Greater Fool” as reported by Vancouver Condo Info (see “Us housing market problems to show up in Canada?). It’s all about the coming crash in housing prices in Canada. He’s also started a blog [...]

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  9. 63

  10. krrish2 Says:
    March 13th, 2008 at 7:52 pm

    Sure Micheal, your graphs are above the shoulders but feets I mean base is over sand. do you live in richmond?good luck micheal.

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  11. 62

  12. Michael Randallbard Says:
    March 13th, 2008 at 7:36 pm

    Krissst..I doubt you will be able to understand this but here goes anyway

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  13. 61

  14. krrish2 Says:
    March 13th, 2008 at 7:12 pm

    Micheal Randallbards,

    Please do not try to stand on silly point just one cover drive and your helmet will blow up in the air and your teeth’s Ohh and please don’t try to bat infront of me otherwise this left handed fast pace bowler will deliver a bouncer on over pitch that will blo your bat,pad,and ofcourse your helmet again and please don’t try to be on bowlers side otherwise this left handed batsman going to shoot the ball in the air over boundry line that would be definitiley sixer on extra cover boundry.Anyway…..
    SMART US & EUROPEAN CANADIAN ASIAN INVESTORS BUYING IN VANCOUVER – STILL CHEAP!

    Micheal Rendalbards why don’t you take a shower today every body knows that you are residing over sand. Micheal be careful don’t let the gold slip away while you tumble over sand.Oh ho ho ho-Watch Out!!!!!

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  15. 60

  16. Michael Randallbard Says:
    March 13th, 2008 at 5:56 pm

    GOLD HIT $1,000.00 USD TODAY

    Here’s the kicker….if the BoC cuts rates and the CAD drops against the USD but still drops against the Euro what will that do to Gold priced in CAD?

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  17. 59

  18. Michael Randallbard Says:
    March 13th, 2008 at 5:23 pm

    Irish banks may need life-support as property prices crash
    Last Updated: 12:48am GMT 11/03/2008

    The Dublin government appears to be almost powerless to prevent a severe downturn. Ambrose Evans-Pritchard reports

    The Irish banking system faces acute strains and may require a phase of temporary nationalization as the property slump leads to a wave of defaults, according to a leading Irish economist.

    Morgan Kelly, of University College Dublin, said the government is almost powerless to stop the downturn becoming a severe slump. “We’re in a classic post-bubble recession, yet we can’t do anything that a country would normally do in this situation because we’re inside the eurozone,” Prof Kelly said. “We can’t cut interest rates, we can’t devalue, and there is a lot less room for fiscal stimulus than people think. We’re stuck.

    “We have a domestic recession now colliding with a global recession. It is the state of the banking system that will determine how terrible this will be, and frankly that is looking very shaky.”

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  19. 58

  20. blueskies Says:
    March 13th, 2008 at 3:18 pm

    when Vancouver sneezes a lot of people will be covered in wet phelmgy sticky boogers….. now that’s funny! :-)

    just had the distinct pleasure of jaywalking across Hornby Street at the same time Bob Rennie was…. of course he was going in the opposite direction….as usual

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  21. 57

  22. scullboy Says:
    March 13th, 2008 at 2:58 pm

    Ex-van,

    They’ll be a laughing matter all right… the question is more who will me laughing, and who won’t.

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  23. 56

  24. ex-vancouverite Says:
    March 13th, 2008 at 2:12 pm

    You guys are allowed to have whatever point of view you have. The time will tell, and you guys can keep repeating the same topic day after day while the market goes it’s own way. hahahaha…..

    Perhaps someone will bookmark this comment as one of the more ill-informed opinions posted on this blog. Probably not, though, there are just too many of them.

    References to this type of nonsense, made in the future, won’t be a laughing matter.

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  25. 55

  26. Anonymous Says:
    March 13th, 2008 at 12:58 pm

    “when New York sneezes, the whole world catches a cold”.

    it’s been long time since new york got loose motion but haven’t feel any sign of downturn in decades to come here in Vancouver.I would like to read statement from any opponents.Anybody?

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  27. 54

  28. andrew Says:
    March 13th, 2008 at 12:54 pm

    You guys are allowed to have whatever point of view you have. The time will tell, and you guys can keep repeating the same topic day after day while the market goes it’s own way. hahahaha…..

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  29. 53

  30. evergreen Says:
    March 13th, 2008 at 12:36 pm

    Remember if you can’t say something nice..

    Good move, Pope! After all, it’s just an opinion.

    That link regarding the US is important, thanks. The whole financial world looks to that satellite, the DJIA as it crunches out the daily numbers. As they say, “when New York sneezes, the whole world catches a cold”. And I say, “When New York giggles, the whole world laughs heartily”.

    Anyway, as a matter of interest, can somebody tell me who are buying those multi-million dollar homes everyday for weeks that I see on Paul’s Numbers?

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  31. 52

  32. The Pope Says:
    March 13th, 2008 at 11:44 am

    Remember Andrew that ‘Rich Foreigners’ were supposed to be driving the market in ‘81 before it suddenly dropped in half. They were also supposed to be driving the market in Miami up until a few years ago. Its one of those vague feel-good arguments that is always used to justify bubble prices when in the end it always comes down to speculation.

    If you were very very wealthy why would you purchase property in Vancouver over any other market in the world? Again, I think you should put the numbers into perspective before you rely on ‘wealthy foreigners’ to support the future of our market:

    China has a population of 1.3 billion people with about 300k of those being millionaires. The US has a population around 300 million with about 2.5 million being millionaires. Thats a big difference, there are as many millionaires in New York as there are in China.

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  33. 51

  34. Drachen Says:
    March 13th, 2008 at 11:35 am

    Jack:

    “It’s like flipping a coin 100 times and playing heads or tails. If you flip 50 times in a row and it landed on heads what do you think the chances are it will be tails for the 51st time?”

    Are you saying that markets are random? If not it’s a terrible analogy.

    A better analogy would be the video of the 777 from Boeing a few years back, the wing stress test (I’m sure you can find a video if you look). They stressed the wings up to the safety standard, no problem but as they kept increasing the stress it got more and more likely that the wing would break until *BAM* all at once. Nobody could have predicted exactly how much force it would take but anyone with the numbers could have given you a range where it would break. Same goes for the markets and we’ve been in the “break zone” for a while now, I personally think it’s impossible for prices to climb another 20% and highly unlikely that they’ll climb 10% without a collapse. Also, unlike the wing test you can’t hold at a certain level, once it gets beyond a sustainable level it’s either up or down, there is no flat.

    So, given all that, YES you can predict when the collapse will come but not with pinpoint accuracy.

    I say most probably (95%) this will be the year when we go over the top, possibly (4.9%) next year, incredibly slim chance (.1%) the year after. Beyond that, it is IMO impossible for prices to keep going upwards here.

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