Friday Free-for-all!
It’s Friday and we’re going into a long weekend! Lets do our end of the week news round-up and open topic discussion thing. Here are a few stories I’ve noticed recently:
-Falling Van house prices bad for both sides
-Paying a price for houses that aren’t homes
-Translink: $11 million surplus actually $3 million deficit
-Flocks of speculators & presales vanish
-Vancouver: We’re still building lots of condos
-RBC: BC economic picture darkens
-Banks only pass on half of rate cut to customers
-Flaherty: No bailouts for Canadian banks
-Carlton’s Nick Rowe on Canadian housing market
-Washington Mutual Exec predicted collapse
So what are you seeing out there? Post your news, links, thoughts and anecdotes here and have an excellent long weekend!
note: any conversation on Vancouver, real estate or economics is allowed, please keep it civilized. When posting articles please only quote pertinent points and link to the original instead of pasting the entire article here. Pasting a link will automatically create a clickable hot-link. Thanks!
October 15th, 2008 at 1:06 pm
"Across B.C., the average MLS home price in September was down 7.4 per cent to $412,149 compared with the same month a year ago, the B.C. Real Estate Association also reported Wednesday. "
Is this the gentle dip that will quickly be preceeded by the next leg up?
October 15th, 2008 at 10:23 am
I wonder how many mortgages were backed by equity on parents' RE or other assets and how that's going to shake out, especially as a lot of those parents are set to retire… well, maybe not retire anymore. Any insight?
October 14th, 2008 at 12:51 pm
Patriotz
"An asset with an almost certain downside in price is not risky, because you can make money shorting it with a low level of risk."
Yes, but it's a semantic argument, are we talking about the "stock market investor's definition of risk" or the "man on the street definition of risk".
In the case of housing it is an asset but you can't "short" the market or do most of the other financial trickery you can do on the markets so your definition of risk doesn't really cover it.
Here is what dictionary.com says, I don't really care to pursue the subject further:
"1. exposure to the chance of injury or loss; a hazard or dangerous chance: It's not worth the risk.
2. Insurance.
a. the hazard or chance of loss.
b. the degree of probability of such loss.
c. the amount that the insurance company may lose.
d. a person or thing with reference to the hazard involved in insuring him, her, or it.
e. the type of loss, as life, fire, marine disaster, or earthquake, against which an insurance policy is drawn. "
October 14th, 2008 at 11:14 am
The issue here is not downside risk, which is a function of the uncertainty of future earnings (rents in the case of RE), but detachment from fundamental value, which makes a fall in prices more certain the larger it gets.
An asset with an almost certain downside in price is not risky, because you can make money shorting it with a low level of risk. Risk has to be equal on both the long and short side. Unfortunately you cannot short Vancouver RE.
RE in a one-industry town is risky, because there is a real risk that local incomes, and thus rents, may be significantly reduced.
October 14th, 2008 at 10:59 am
Patriotz
Stop picking nits. The discussion was about downside risk and even by your definition what I said was not incorrect (although by your definition it may have been incomplete, but, as I said the response was regarding downside risk).
Let's talk about important things and not get bogged down in ridiculous semantic arguments.
October 14th, 2008 at 10:12 am
If an investment is guaranteed to return somewhere between 0.1% and 100%, it has 0 risk.
No it doesn't, because you can get more than .1% guaranteed from a risk-free investment (government bonds). If the lower bound of return on an investment is lower than what you can get from a risk-free investment, it is risky by definition.
October 14th, 2008 at 9:57 am
TSX up over 1000 points. Careful, it's a "BEARTRAP".
"DEAD CAT BOUNCE"