Correction, not crash
Our good huckstersfriends at Royal Lepage have issued a press release titled, “Correction, not crash for Canadian real estate market in 2009; Average house prices forecast to fall 3.0 per cent”
You can find the reassuring news here.
Up next, why Joe the Used Car Salesman says it’s a great time to buy a car.
-ReductiMat
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January 21st, 2009 at 9:04 am
Well, I think this thread may be done? I regret being distracted by some pettiness.
But anyway, now that the crash has been underway for a while, I’m losing interest in the discussion about “rightness” (like who called what when, romeo jordan style). And now I’m getting more interested in what to do next.
Robert Shiller offers some interesting ideas:
a) offering objective financial planners to lower income families, that can be hired at an hourly rate (rather then percentage commission) and who are not affiliated with a private company or brokerage. He suggests possible government sponsorship.
b) developing “financial instruments” that let you hedge on the real estate market (in a more direct way than shorting banks and builders). In the last bubble, you couldn’t directly bet against the market, you just had to ride it out. What if you could bet against it in the future?
I’m not sure if his ideas would work, but they are interesting, and he is someone who I respect. I don’t think we have left the era of bubbles, we’re still going strong with multiple asset classes being overvalued and the bond market…hopefully we can learn from our mistakes.
This could be an interesting thread topic. Does it interest anyone else?
January 21st, 2009 at 8:15 am
“Straw man much?”
not that it matters, but I don’t see a straw man. I just thought you were being kind of petty and I thought read on had raised an interesting line of thought, to do with realtors offering financial advice (which I think is wrong).
There’s no need to be so aggressive, everyone here knows you’re very clever. So calm down.
January 21st, 2009 at 12:14 am
And a global asset bubble like the housing bubble can only happen with the connivance of governments and central banks, which is a form of central planning in itself.
What you say makes a lot of sense. But if you listen to what economists say, and surely they know a little something about this, they keep on arguing for lower interest rates and more credit. Most people in their gut know this isn’t right, but how does one argue with nobel prize winners, and how does one ignore that 4.25% mortgage rate and friends/family/baristas urging/ridiculing you to buy at nonsensical prices?
I think the discrepancy is in what the objective is. Most economists measure progress on the basis of a few narrow indicators like GDP and employment and their whole theories are meant to improve performance on these indicators, which may or may not be correct.
For example, I read this from somewhere: if you and your neighbor pay each other $100 to dig up a hole and then cover it up, the economy benefits because two jobs were created and GDP increased by $200. The government benefits from the taxes collected. Everyone is happy. So if lowering interest rates and enough credit allows people to do this, then that is good economic policy.
But of course this is ridiculous because digging up the hole and covering it is not a valuable economic activity in any reasonable sense. So where is the flaw in the economists’ analysis?
You could say this is fine because then if your economy is based on digging and covering up holes, eventually it collapses and people have to switch to growing food for instance or else everyone starves. In the meantime, many people have to stave before people learn the lesson because they don’t listen to reason, but they listen to hype and greed.
Paul Krugman refers to economics as a dismal science. I think it will remain that way until it can suggest good policy which will prevent people from learning the lessons the hard way over and over again.
One major flaw I see right away is that most economists only seem to only care about GDP and employment. For instance, had they also considered the net worth of its citizens as something to monitor, they might have realized giving out too much easy credit might increase GDP and employment but only by creating a nation of consumers in debt.
So it seems to me their theories are incomplete in what they are trying to achieve and model.
Another problem is the practice in accounting of including assets whose price depends on a market price. Some mechanism needs to be introduced whereby such assets are flagged and their role in determining net worth and further borrowing is only considered with a diminished role. Not sure exactly how, but surely this is something they should be thinking about if they want to prevent the bubble/crash cycle.
Maybe the right thing to do is to only ever value an asset at the average of its estimated fundamental price and its current market price as standard accounting practice so when it comes to determining net worth or further borrowing, the bubble doesn’t feed itself as much.
January 20th, 2009 at 11:09 pm
British banks are ‘technically insolvent’ (and other secrecies)
http://www.globalresearch.ca/i.....;aid=11916
January 20th, 2009 at 10:53 pm
realpaul:
Stalin had a great buisness plan. He killed all his non-performing assets. What a guy.
That’s politically non-performing of course. A lot of them happened to be the best economic performers. And the rest is history.
But asset bubbles achieve some of the same results as Stalinist central planning – they divert capital away from productive investments and into spurious ones. And a global asset bubble like the housing bubble can only happen with the connivance of governments and central banks, which is a form of central planning in itself. The great irony is that only a decade after Stalinist central planning bit the dust, the US and other Western countries (including Canada – 0/40 eh?) engaged in an orgy of state-sponsored malinvestment that rivaled anything the USSR ever did.
January 20th, 2009 at 10:35 pm
From CondoHype:
QUOTE
Will taxpayers be on the hook for Bob Rennie’s Millennium Water marketing fees?
For all the chatter about secret memos, sustainable design and hedge fund financing, nobody’s talking much about Rennie. His absence from the Olympic Village discussion is odd. Rennie is the the project marketer. Every sale goes through his company.
Now that the city is funding the development, it’s unclear if Rennie’s estimated $50,000-per-unit payday will apply to future sales. From what I can tell, there’s no reason to believe it won’t. Despite the bailout, Millennium is expected to remain on the books as the developer in order to preserve existing pre-sales.
To date, Rennie has pre-sold 265 “lower-value” units. The big mystery is the remaining 472. One can only imagine the public furor if the condo king collects fees when the units sell at a loss.
==================
The plot thickens.
However I shake my head that in a hot RE market WTF one needs to pay $50 ,000 in fees per unit ?
If this is a COV project ,WHY was this NOT put to tender like most public sector contracts ?
Where was Rennie’s wizardry for the other 2/3 of the project that hasn’t sold?
Someone got ripped off …but it sure wasn’t ol Bob.
Yeesshhh !
January 20th, 2009 at 10:35 pm
(you could say it is similar to a communist system – in a communist system, stalin inflicted the pain, in a capitalist system, the invisible hand of the market inflicts the pain)
January 20th, 2009 at 10:27 pm
I’m in a rather cynical mood these days. I even think avoiding wrong headed responses is unavoidable. There will always be a Greenspan to ruin the market. By its very nature, the capitalist system will always promote someone like him to the top.
The only way for the economy to recover is if many people suffer horribly as a result of their economic nonsense. Only then does it stick and only then will they start to engage in economically meaningful activity. No reason or logic will persuade them, only pain.
January 20th, 2009 at 10:01 pm
patriotz:
Stalin had a great buisness plan. He killed all his non-performing assets. What a guy.
snapshot of the CDN economy today
http://www.marketwatch.com/new.....t=hplatest
January 20th, 2009 at 9:56 pm
This might be a bit cynical but the more I think about it, the more I think severe recessions and/or depressions are unavoidable.
I’m not sure about the “severe” part, but yes recessions are unavoidable. It’s part of the business cycle which is an inevitable outcome of uncertainty in a market economy. Recessions happen when capital has been misallocated and market forces finally force an adjustment. You can only avoid recessions if you have a Stalinist planned economy.
But though recessions are unavoidable, wrongheaded responses to them which make things worse are another issue.
The very reason we are in the mess we’re in today is that Greenspan and friends tried to avert a recession following the dot-com crash and 9/11 by releasing a flood of easy money. If the US, and the world, had taken its medicine back then there would have been no housing bubble, and in all likelihood that recession would have been long past us by now and things would be humming along pretty well. But a recession in 2001 was at odds with Bush’s “if you don’t go shopping you’re letting the terrorists win” guns and butter policy, so the housing bubble had to be created.
January 20th, 2009 at 9:49 pm
It appears that the infamous nicalisa has an accepted offer. Wonder if it will complete. Go nicalisa!
Postby nicalisa on Tue Jan 20, 2009 9:10 pm
We listed 6 days ago. We had our open last Saturday where over 75 people showed up. We had an accepted offer 2 days later. We are NOT at the bottom of the market….and we heckled on this board for our asking price….hmmmm…maybe we were just lucky….
PS. the buyers were renters and not owners so that is one less listing to look forward to in the spring.
http://www.realestatetalks.com.....bd779c08e3
January 20th, 2009 at 9:48 pm
this is a good read on buisness, banking, manufacturing, export and tourism powerfhouse Singapore. These people IMHO are 3 times smarter , agressive, less spoiled and far less ‘entitled’, than most Canadians. If they are admiting to big problems and are actively persuing solutions, they we are in big doodoo given the retarded politicians we have to rely on.
http://www.bloomberg.com/apps/.....refer=home
http://www.bloomberg.com/apps/.....refer=home
January 20th, 2009 at 9:44 pm
Good read on an export , manufacturing, buisness and finance powerhouse Singapore. Keep in mind that these people are on average three times smarter and more aggressive than anything we see in this country. If they’re in trouble now , we’re in big trouble for sure.
http://www.bloomberg.com/apps/.....refer=home
January 20th, 2009 at 9:39 pm
M-: I heard that it costs $0 now to ship stuff from China to Europe. Just like when the airlines put on a seat sale of $99 coast to coast. They try to make a bit of money from the fees and meals.
January 20th, 2009 at 9:03 pm
CZ: You can visit infront of those locations given in the chart for 2008 all projects for those units were completed for example,La Hermitage,Elan,and Terminus.
January 20th, 2009 at 8:57 pm
nobody!!!!!:
If you have a source of prove, it would be nice to update to the wiki.
Wiki – just a free (free of charge and free in freedom) knowledge source with loosely managed contribution individuals, which should be used as your own judgment.
January 20th, 2009 at 8:53 pm
I know a guy who works in the harbour. He says a year ago there were more container ships, and most were carrying full loads. Now, there are fewer ships (not by much), but the ones that are here are carrying nowhere near their full capacity.
January 20th, 2009 at 8:41 pm
Things are slow at the docks. The regulars are complaining about crappy jobs. Of course its a dockworkers heritage to complain so that in itself is not unique. However the tugboat skippers are telling me they are gettin orders to push the boats off with partial loads. They are high in the water like never before. That’s the good stuff too:wheat potash, peas. Some say “letter of credit” problems.
January 20th, 2009 at 8:22 pm
ted:There are only 3,799 units for 2009 and 1022 seymour could be exempted because it believes to be a rental building by same corporation “Onni”. Please tell The Pope when his total is wrong why even bother calling it wiki?.if you can not keep track of truth just delete wiki from condofo,And you? can’t you read the charts and year of completion?.Are blind or just acting to be?.
January 20th, 2009 at 8:08 pm
This might be a bit cynical but the more I think about it, the more I think severe recessions and/or depressions are unavoidable. Unless human beings develop the ability to resist hype and listen to reason, the only thing they will listen to is pain.
Judging from what we still see in the media these days, it is sad to note that the pain will likely have to be very excruciating in order to completely eradicate the RE disease that infected everyone.
January 20th, 2009 at 8:01 pm
Banks are not charities and their purpose is not to “help” people. They are businesses. They should be expected neither to give nor receive handouts.
AMEN Brother!