What does it matter? Explain why mortgage rates were high in 1999 with low prices and high rental yields. According to you, it’s because it was a risky investment, right? Simple question for someone like you who obviously has extensive economics training.

Greater investment opportunities and returns outside of bonds (relative to now) drove down bond prices (relative to now), thus increasing yields, which in turn leads to higher mortgage rates. What else?

#28 oneangryslav

I agree ,….the numbers used are likely b.s.

We were in Penticton in Fall of 2007. It was pretty bleak and barren looking that "non summer" time of year. Nice quaint town per se, but mostly older established homes.

The developers simply misjudged the market, and got stuck.

A lesson learned the hard way. Just because you build it does not mean they will come and buy it .

As usual, this is not going to end well for the working families.

Crooks and thieves will always stay afloat, especially those in or close to the government. Biggest fortunes were always made in times of the greatest misery.

We are all so bloody stupid not to learn from our own mistakes.

Some interesting analysis of our housing market at:

http://housing-analysis.blogspot.com/

Add in factors like birth/death of housing units, inflation, and the fact that lending standards were relaxed in 2006 (40 year, zero down payment), the model looks neat, even though the causality isn't fully understood.

One thing which might make a difference going forward but was not significant in the past is how employment is counted. If everyone keeps their job, but is only offered half as many hours to work, that wouldn't necessarily be apparent from unemployment rates.

The problem with cpi is that it is too abstract and even for those who have some idea of how they calculate it and what it represents, very few will keep track and actually translate the numbers into what it means on a day to day basis. What statscan needs to do is publish a regularly updated cpi for dummies and list some basic household staples items with current price versus price say 5 and 10 years ago. Also, how much a typical shopping basket would have changed in price. That would be a great service to the people to remind them on a regular basis what purchasing power their CDN dollar has. Maybe they do this but I'm not aware of something like this. e.g. if apples cost 3.30/kg in 2008, they would have cost 3.19/kg in 2004, and… Read more »

fwiw … robert shiller is on bnn, and he says housing prices in the US will be lower 5 years from now.

RE Bubbles for Dummies: The New Homeowner Hallucination: "We'll Rent For A Year And Then Sell When The Market Comes Back" http://www.businessinsider.com/henry-blodget-next… QUOTE: Mark Hanson of the Field Check Group continues to write great analyses of the housing market. Mark remains extremely bearish, and he attributes the recent pick-up in sales velocity to seller capitulation rather than renewed buyer demand. Mark thinks the next segment of the market to crash will be the mid- to high-end, where many smug homeowners are now telling themselves they'll just rent their houses for a year while they wait for the market to "come back." Needless to say, Mark thinks these folks are dreaming. Because of the epidemic negative equity across the mid-to-high end, a large percentage of high-leverage exotic loans still in place, and the belief amongst the upper-crust (or severely over-leveraged depending… Read more »

From Penticton " Few takers for discounted condos" QUOTE: Alysen Place, the financially troubled condominium development in the south end of Penticton, is once again selling units, albeit slowly. The project has been in receivership since the end of the March after running into financial difficulties late last year. Receiver D. Manning and Associates last month announced that the remaining 35 units would go on sale at deeply discounted prices, with Vancouver-based MAC Marketing Solutions handling sales. Partner John Ryan said his company has so far sold eight units, including two of the most expensive ones. That leaves 27 units up for sale. Another 34 units sold before the project ran into difficulties. ========= QUOTE: Discounts range from 20 to 55 per cent, with prices starting as low as $249,900 to a high of $699,900 for the penthouse. The average… Read more »

U.S. shale gas supply casts 'dark clouds'over Alberta Province warns loss in gas revenue will batter budget http://www.calgaryherald.com/business/shale+suppl… Got any RE in Alberta? Flu$$$$h ! Anecdote: Family member lives in Alberta and employed at a "frac-ing" company.(ie frac-ing extracts the last remnants of a well's reserves) However,their firm has been working in Northern BC. Apparently, our BC royalties rates are less than Alberta's. However, Gordo brags about our booming BC oil and gas gov't revenue cash cow. However all the signs are that Gordo is full of shite and massive budget deficits loom. If this cash cow dies, like it apparently has in Alberta…more grief on the BC horizon. The US will exploit its own reserves once the technology exists to exploit it , and for a number of reasons . QUOTE: Another issue facing the government and industry is… Read more »

FYI: " The Science of Economic Bubbles and Busts " http://www.scientificamerican.com/article.cfm?id=… QUOTE: " The VMPFC turns out to be a central location for what economists call “money illusion.” The illusion occurs when people ignore obvious information about the distorting effects of inflation on a purchase and, in an irrational leap, decide that the thing is worth much more than it really is. Money illusion may convince prospective buyers that a house is always a great investment because of the misbegotten perception that prices inexorably rise. Robert J. Shiller, a professor of economics at Yale University, contends that the faulty logic of money illusion contributed to the housing bubble: “Since people are likely to remember the price they paid for their house from many years ago but remember few other prices from then, they have the mistaken impression that home prices… Read more »

I have always wondered what would happen if the sold assignment was defaulted upon.

I think the developer, under some contracts, gets a percentage of the profits of the sold contract. If this happens, would the original seller get that money back? There are too many things in pre-sale contracts that favour the developers way too much.

Well don't look now but CITI and the BOA have offered to pay 100% of the TARP back and are fully solvent. What has happened is that they have in fact written off 100% of the bad loans which in Japan they couldn't do because of the onerous legislation in Japan, BIG diferance. BTW I own BOA stock and its done well since the implosion and the chopping and the crying and wailing. Unlike many 'fraidy cats I was a net buyer throughout the biggest down days of March and April. The stock has re-upped from under $3 to $12 today. Infamous yes, insolvent no. Like me, the big picture in the US bank sector looks bright. Intrest rates ( Long term bond and mortgage) go up when the lenders demand more premium for risk, nothing to do with private… Read more »