Housing sales in a bad economy
Housing sales in BC last month were one ‘bright spot’ in an otherwise volatile provincial economy according to this article in the Vancouver Sun.
Central 1 said B.C.’s economy appears to be coming out of a recession, but warned in its weekly economic bulletin that “the recovery is generally expected to be weak and volatile.”
B.C.’s seasonally adjusted unemployment rate eased slightly compared to a month earlier — a 7.8-per-cent jobless rate in July compared to 8.1 per cent in June.
That statistic is somewhat misleading because a growing number of laid-off workers have abandoned the search for new employment. Eighteen thousand people withdrew from the labor market in July, Central 1 reported.
“Industry-wise, jobs declined in manufacturing and construction, along with educational, accommodation/food and miscellaneous services,” the credit union said.
David Hobden, an economist with Central 1 Credit Union, said there had been significant job growth in the financial, insurance and real-estate services sectors.
Now the question is how long a lagging economic indicator like housing can keep looking shiny and bright in a dim economy, and are there are any lasting benefits of a strong housing market in a time of job losses? One short term upside is that people who recently lost jobs and needed to sell have had a good market to sell into, but how much longer will we be able to sustain the recent sales blitz?
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August 12th, 2009 at 9:08 pm
Belief in using home sales/prices as a barometer of the economic health of a country is fairly recent and flawed. If one were to do that to measure the prosperity of a countrys economy Costa Rica would stand out as at least equal to Vancouver Island!
The wind down of the derivitives market has been slowed but not stopped. There is far worse yet to come.
August 11th, 2009 at 9:39 pm
Talking about bubbles …
http://therealnews.com/t/index.....mival=4060
August 11th, 2009 at 8:11 pm
Anonymous:
Re HST:
A recent article demarcated the differences.
Old parts of the economy may benefit but they don’t have the same economic impact they once did….but the emerging parts of the new economy will get hit hard . That’s why tourism is nervous…as well as other service based sectors.
The HST is insidious and aimed at making a nickle and diming tax grab by the death of a thousand tax grabs. Much of our old economy (manufacturing)has been relocated off -shore…our cost of living has been lowered in the short term by buying cheap offshore imports, but in the long term has relegated Gov’ts to using cheap circus stunts with fiat money at low interest rates.
IMHO, its a myth that the HST benefits will trickle down to us. Did you hear about the tax saving stunt Terasen Gas pulled to avoid taxes and won in a recent court ruling ? Bought equipment for its pipeline expansion , transferred to a shell company and rented it back…then BURIED it, and claimed its now part of the ground thus not taxable. This saved them approx $5 million and they claim it will pass onto the consumer. Joke!
August 11th, 2009 at 7:53 pm
Crashisking:
No, I don’t intentionally plagiarize…one unintentional ommission is not a hanging offence. Not interested in pissing match either.
BTW, the POPE runs this site…and has a voting process for people to voice their “aye” or “nay” on other’s opinions.
re Olympics, just because it’s a done deal doesn’t mean one has to ever agree to it nor accept it. I hope that the world wakes up soon to what the Olympics really represent.
There is an enormous amount of info out there…sometimes it’s good to share. No one is forced to read it. Often new VCI posters are thankful they didn’t take a leap of faith in buying RE after reading the VCI posts. I personally have learned an enormous amount from the various posters and sincerely thank them for their contributions.
Again, critique ? or contribute ?
August 11th, 2009 at 7:50 pm
“The two provincial governments are doing this because (a) they are being bought off by the feds, (b) it will raise a honking new mess of money, (c) it’s the kind of tax politicians love, since it’s automatic and universal and (d) business groups have been lobbying for it, since they get to write off all the tax that consumers are stuck with.”
========================
I understand that it is more satisfying to revolt than to be fair minded, but indeed the value added tax is a modern consumption tax, used by all developed countries (except the US that is slowly turning into the most backward country on Earth).
Those who ever had to deal with PST know that it is a nightmare tax (just like the US sales & use taxes are), impossible to administer, or even understand. GST/HST is paid only once, at the consumer level, but PST was often paid several times before the final goods reached the consumer.
And if we talk about consumption tax, what sense does it make anyway to tax only the consumption of tangible goods, and not the consumption of services?
I think that the HST is a far better tax than the PST, that we will not pay much more tax under the HST system, and most people who curse the HST don’t understand how the previous (current) system worked.
August 11th, 2009 at 7:22 pm
Dear “No-Lympics”
Don’t mean to jack the thread or start a pi$$ing contest. I’m not a troll. You like to cut and paste without giving credit, very uncool. I’m no Olympics booster, but they are coming – make the best of it. Few of the buildings will be useless, are you familiar with GM Place and the Coliseum?
I promise to shut up now if you will quit dominating the replies on this site, I think you like the sound of your own voice a little too much.
August 11th, 2009 at 7:06 pm
Microcosm:
Near us is a 12 unit townhome development.
( I’ve mentioned this one a few times )
They sold 10 of the 12 last year…and were stuck with 2 UNsold units up until about one month ago.
Then as soon as those (2) were sold another “For Sale sign” went up 2 weeks ago…and that unit 3rd sold.
Now today, another For Sale sign showed up(4th in a month).
Given the current madness, bet it’s sold by next week.
August 11th, 2009 at 6:59 pm
Here’s someone who didn’t do too well due to real estate.
August 11th, 2009 at 6:51 pm
Bubbles like this one are a cash advance. Money gets injected right into the local economy via transaction fees and those taking paper gains. In the long term that advance needs to be paid back with interest. It’s why Vancouver’s economy, with its high dependency on real estate and construction, is in for a long drawn out period of malaise, especially since mortgage rates depend upon the rest of the world, not Vancouver.
Even the government is cutting; hiring freezes in education and health care are going to snowball later this year. The City of Vancouver is crapping bricks with the fall in permit revenue and Robertson doesn’t want to raise taxes with his eyes on the premiership. Patience.
August 11th, 2009 at 6:27 pm
On Global 6 PM news :
Vancouver bidding wars.
2 homes were sold for approx. $200,000 over list.
One was asking approx $900,000 ….sold for approx $1.1 million ……and on Main street(???).
I have also noted that over the past several year there are about a handful of select realtors that are historically interviewed re RE market. This time around they talked to Paul Eviston. ( Whose turn next time ? )
They also report starts are still way down.
Contrast this with one recent RE blogger saying Month to month sales are off almost 50 %
Still insane.
August 11th, 2009 at 6:08 pm
Correction:
Post # 29 was from Garth’s blog
Crashisking said
” And BTW, you’re a little late, in case you haven’t heard – the Olympics are coming here next year. Are there any other inevitable things you are opposed to? ”
You mean, that’s what all those overpriced useless buildings were built for ? and here in BC ? I hear all Olympics result in costly legacies and faux economic booms.
Other inevitable things that I am opposed to ?
Mostly trolls with nothing useful to add or debate.
Not much else.
Here….. pull my finger.
August 11th, 2009 at 5:35 pm
Insurance companies not honouring new leaky condo warranties: owners
Insurers say lack of maintenance by owners is source of some problems
http://johngrasty.ca/?p=247
Some owners of recently built leaky condominiums say B.C.’s new Home Warranty Insurance program isn’t working and that companies are unfairly rejecting their damage claims.
Dave Ricketts, a principal with RDH Building Engineering in Vancouver, said the owners of some of the leaky condo projects built since 2000 that he’s involved with are contemplating going to court after warranty companies refused their claims.
“Some of [the warranty companies] are just putting their own interpretation on the claims and deciding what they think is covered and not covered and others are just saying, ‘well, as an opening gambit, we’re going to say we’re denying everything.’”
The new home warranties are provided by four authorized private-sector insurance companies and cover labour and material defects for two years, building envelope defects for five years and structural defects for 10 years.
========
Not surpised….insurance companies are not in the business of writing cheques, but simply prostitute themselves to provide a false sense of security .
August 11th, 2009 at 5:33 pm
Hey “No-Lmpics” #29, you are plagiarizing from Garth Turner’s blog. Make sure you give proper credit if you’re going to cut and paste somebody else’s work.
And BTW, you’re a little late, in case you haven’t heard – the Olympics are coming here next year. Are there any other inevitable things you are opposed to?
August 11th, 2009 at 5:30 pm
Leaky Condo costs have soared past $3 billion, so far
http://johngrasty.ca/?p=288
Leaky Condo reconstruction costs have soared past $3 billion so far, and that doesn’t include the indirect societal costs borne by British Columbians that nobody is tracking.
Since only about 20 percent of leaky condo owners met the government imposed “means test” of the Homeowner Protection Office loan program, the $670 million in HPO victim loans made to date represents about 20 percent of the total direct cost of the leaky condo disaster.
Local bankruptcy trustees and lawyers are in for another windfall.
With remediation costs more than three times what they were 10 years ago we are about to witness the further and extreme plundering of hundreds, perhaps thousands, of British Columbian families at the bloodied hands of Housing Minister, Rich Coleman.
The discontinuation of the HPO Reconstruction Loan Program by this Minister and his government is unconscionable.
In the Fall of 2007 the HPO received an independent report from McClanaghan and Associates which clearly pointed out that we were not even half way through the leaky condo disaster in BC. The full extent of the leaky condo disaster was finally being acknowledged after 9 long years of under-estimating.
======
So…given this article, the Gov’t has pulled the plug on assisting leaky condo owners, and they haven’t even got the majority of them fixed !!!! Those that bought them as highly leveraged investments may be in even deeper doo doo if their strata shows them an engineering report.
When the market collapses,potential buyers will have lots of product to choose from and will be insisting on these reports. At the same time I can see strata full of near bankrupt owners who either can’t afford the report, let alone the repairs, or trying to sweep it all under the rug.
Be warned: Condo buying will be even more risky, regardless of the selling price.
August 11th, 2009 at 4:50 pm
#1
“If this economy is so dim then why are buyers outbidding each and paying 2 or 3 hundred thousand dollars over asking”
Buying and selling real estate to each other does not make an economy, nor a “bright” economy for that matter. If you were to throw in thriving diversified commercial sectors, record employment, and rising wages, then maybe the economy would not be so “dim.”
Oh wait, inflation adjusted wages have been stagnant for 20 plus years, our unemployment has more than doubled in the last year, and have never had a diversified economy, even during the 7 boom years we just enjoyed. But I am sure the rich asians will be our saviour…lol
August 11th, 2009 at 4:19 pm
What the ‘shadow inventory ‘ of Swine-couver?
http://globaleconomicanalysis......ython.html
August 11th, 2009 at 3:42 pm
Even the mighty Seattle up til recently perma bulls were talking of Seattle is not dropping in price and we are like Seattle. Do you still think we are like Seattle well you better hang on to your shorts we are headed down then. I have checked Craigslist and there are over 750 listings for rentals in the lower mainland. There are gonna be some speculators that are gonna be a bleeding if they can’t rent it out…
August 11th, 2009 at 3:34 pm
http://www.kirotv.com/houseand.....ml?taf=sea
If you are at all interested in what is happening in Seattle……
Also, about the Scot buying the house in White Rock #18. Wasn’t the bank of Scotland the first to go under? Now we know where all the money went!
August 11th, 2009 at 3:04 pm
Recession over!!
So we have a bullet proof banking system in Canada?
Citizen Bank shifting focus to it’s Visa business … exiting loans and mortgage thus becoming a non-deposit taking bank.
” Message from the President and CEO Jason Farris
Jason Farris To our members:
I’m writing today to tell you about some significant changes at the bank. We’re moving to a more streamlined business model that focuses on our strengths—our successful Visa* credit card and prepaid card business for consumers, and our equally popular foreign exchange services for non-retail clients.
As a result, we’ll no longer offer savings and loans products. The bank will become a non-deposit taking bank and thus, is selling most of its residential mortgages, consumer loans and real estate secured lines of credit to The Toronto-Dominion Bank (“TD Canada Trust”). Depositors in B.C. can choose to move their accounts to comparable products within our parent company, Vancity Credit Union. Depositors outside of B.C. can choose an EasySwitch™ option with TD Canada Trust. ”
https://www.citizensbank.ca/Personal/Changes/MessageFromCEO/?lpos=hp_pos_main&lid=hp_announcement
August 11th, 2009 at 2:45 pm
As night follows day, troubles trail deficits. There’s simply no escape, and this time the consequences will be as profound as they were in 1991. As that year dawned, the country got a new sales tax – a value-added thing called the GST, which would go on to raise more than $40 billion a year.
Canadians hated it, and in the next election destroyed the government responsible.
But the GST was inevitable, following years of record budget deficits which wildly inflated the national debt, crashed the dollar and gave us crushing interest rates. It took years of the money-sucking tax to balance the books and actually reverse the tide of debt.
Until now.
Since 2005 Ottawa has increased program spending at twice the rate of inflation. Even before the wheels came off the economy last fall, federal spending had hit the highest point ever, under Stephen Harper. Despite pledging in the last election he would not allow an annual deficit, it’s now going to be at least $50 billion (a record), and will take years to reduce.
The Parliamentary budget officer estimates at least $200 billion will be added to the national debt. That debt is financed mostly by bonds. When the government is forced to flood the marketplace with new bond issues, it competes for capital, and forces mortgage rates up. That interest on $600 billion debt is tax money, transferred from your income to the pocket of investors. It doesn’t buy a single new MRI machine, fund a school or fill a senior’s prescription.
But so much for economics.
I have a small taste for you of what’s coming, since governments are now incapable of living within their means. It’s the son of GST.
Starting in just over 10 months, seventeen million Canadians will wake up to a new tax on everything. Called the HST (for Harmonized Sales Tax), it will force everyone in Ontario and BC to double the sales tax paid on a range of things to which GST only now applies.
The two provincial governments are doing this because (a) they are being bought off by the feds, (b) it will raise a honking new mess of money, (c) it’s the kind of tax politicians love, since it’s automatic and universal and (d) business groups have been lobbying for it, since they get to write off all the tax that consumers are stuck with.
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So…the GST was shoved down out throats of Canadian in order that the trickle down affect of benefitting business would ultimately benefit us.
Gee is that why Ontario’s rust belt continues to grow ? GM and Chrysler bankrupt.
Now, as Gov’ts increase deficits, we will again assist business by downloadng the cost onto the citizens via the HST in the hope this will again help business and thus we will reap the benefits ? Oh I get it, if it fails the first time try again…didn’t Einstein have a quote re: that?
The Feds are bribing the Provinces and buying them off one by one so in the end the HST will be in place from sea -to- shining sea.
Also according to this article,
” And the worst: this tax will come into effect just about the time the Bank of Canada says it will lift its current freeze on interest rates. That should be an interesting one-two punch – rising mortgage rates and romping taxes.”
This does not bode well…all too predictable.
If FTB or any RE buyers can’t read between the lines….well…..
August 11th, 2009 at 1:31 pm
When you start to run low on money the prudent thing to do is to cut back on luxuries so you have enough for necessities. Yet we have a government that is cutting millions from healthcare while paying millions for government workers to ‘volunteer’ for the winter games. With financial decisions like these being made all the way up to top government levels is there any wonder we’re in economic trouble?
August 11th, 2009 at 12:42 pm
If you have the time:
Argentina’s economic collapse
http://www.itulip.com/forums/s.....#post41130
How political leaders (of any political stripe), the opposition and the bureacracy etc. can be corrupted to selling out the country to outside interests and wiping out the middle class.
Eerie parallels to US and Canada
August 11th, 2009 at 12:34 pm
Dr No:
Those are the real stats we should be asking.
There was a point where peak prices met peak sales numbers.
In the current market, are prices below peak and still below peak even after so -called bidding wars ?
If they are below peak price, that indicates both a trend and a lot of parties underwater who bought at the peak.
August 11th, 2009 at 12:24 pm
I’m curious about the unemployment stats dropping people who have “given up” on looking for work. Who determines if they’ve given up? AFAIK you can’t give up on looking for work while your collecting ei can you? Do they ask people, or do they just assume they’ve “given up” looking for work when they run out of aid?
August 11th, 2009 at 12:21 pm
“Houses sold for more than asking price?
Back to old ” relativity “.
Garth’s blog sniffs this strategy out as listings begin below market value,….. buyers feel it is “on sale” ….. then bidding wars ensue, driving the price higher.”
This is so true! The west side house that I rent (very cheaply I might add) just sold for $50k over asking – in a bit of a bidding war, but it was still $200K less than it sold for a little over a year ago. The jig is up!
August 11th, 2009 at 12:20 pm
Rp, I’d argue that the leap in bankruptcies indicate there are some problems with the canadian economy even if it’s not to the same extent as in the US. “housing” is too broad a category to be a leading or lagging indicator. Starts may tend to lead, but have house resale prices ever risen before jobs and business income recovery after a recession?
August 11th, 2009 at 12:14 pm
From Garth’s blog:
” Smart money have sold all their stocks, waiting for the next stock market crash forcing citizens to buy U.S. and Canadian Bonds…then these govts lend all this cash to banks who then restart the cycle and reinvest this money back into the stock markets so that the plebes and their mutual funds can reinvest at the market tops and the cycle simply repeats itself over and over.”
Corral the herd then milk it?
Is this the strategy ?
August 11th, 2009 at 12:04 pm
Personal Bankruptcies increase 54%
http://www.theglobeandmail.com.....le1248035/
People don’t ‘abandon’ their search for employment. They either can’t get work or the EI component abandons them. I everyone ‘abandons’ the search for unemployment we’ll see full employment is that right?
August 11th, 2009 at 12:01 pm
Ahab: Could be 6768 ANGUS DR, V6P 5J3. Sold for $1.527 from a list of $1.290 on August 3rd.
August 11th, 2009 at 11:43 am
NEW HST Scheme was able to nail down housing starts that makes oil prices tumbled and then stock market crashed all these factors boost Vancouver Real Estate from RE-Sale category.Please do not advice me to invest in stock and do not advice me to rent,Just give me a break.Buy Vancouver real Estate and enjoy your life because hey Vancouver Real Estate Never Goes Down
August 11th, 2009 at 11:33 am
# 1
My parent’s just sold their 800k place for 75k over asking in White Rock to some rich Scottish! Rich Scots love Metro Vancouver – the weather is better, its less dense, prices for everything are cheaper here, they have buckets of money, Scotland’s economy is on fire! What do you say about all the rich European money coming over here!
If I was to answer my own question, I would say one example does not make a trend and the explanations for the Scots loving Vancouver are all RE pumper myths….
August 11th, 2009 at 11:28 am
Sorry, just to clarify. Housing investment is a leading indicator, that is, people building houses, people buying houses, etc. House prices, on the other hand, are lagging. Of course, none of that necessarily applies if you have a housing bubble.
Also, much of our post WWII experience is shaped by recessions caused by higher interest rates (to cool off the economy) or business overinvestment. That is certainly not the case in the US, where the recession is due to overextension of consumer credit. Credit-based recessions are very different, and it’s not yet clear whether we will have such a thing in Canada, although we are certainly poised for one.
August 11th, 2009 at 11:15 am
Houses sold for more than asking price?
Back to old ” relativity “.
Garth’s blog sniffs this strategy out as listings begin below market value,….. buyers feel it is “on sale” ….. then bidding wars ensue, driving the price higher.
August 11th, 2009 at 11:14 am
To those who have lost all faith (me)….My former hometown of Belfast, N Ireland was once the bubbliest city in the UK. Everyone was a real-estate genius, flipping properties, flip-this-house TV etc was the new porn, and shiny, young professionals yapped endlessly about their multiple housing portfolios. Oh the tedium.
Around 2007 fundamentals inconveniently intruded into the party and prices had the audacity to plunge 40%, the worst in the UK.
Just when they thought the pain could go on no longer, the only economic writer / journalist who predicted the crash (and was laughed out of town) has now predicted it may fall a further 50% to reach price levels at 30% of peak levels. Ooooh!
The point of this story is that the upwardly mobile bright young things of Belfast felt that their town was just as “different” as the Vancouver types believe theirs to be. Yet here in Vancouver a 40% plunge is considered impossible and for a 70% plunge to occur, well now…let’s not get silly.
I don’t think a plunge of this magnitude will happen here, but it has happened in other western cities beyond the usually-cited US casualties.
Read the article and substitute Vancouver for Belfast and the arguments made all sound very reasonable.
http://www.newsletter.co.uk/ne.....5541438.jp
August 11th, 2009 at 10:57 am
RE # 8
According to all that I have learnt via BNN etc, I believe that housing is a LAGGING indicator whereas the Stock Market is a LEADING indicator. This suggests that once a recovery is fully underway (beyond the potential headfake we are possibly experiencing) the stock market will respond positively whereas housing will take far longer to recover (people still unemployed etc).
Perhaps the confusion is that here in B.C. where real estate plays such a central role in economic activity – it neither lags or leads – it is the economy!
August 11th, 2009 at 10:45 am
Hovering: argues real estate (commercial and residential) are lagging indicators.
I guess it depends on what they mean by “real estate”. I was specifically talking about housing starts.
If you look again at the graph of US housing starts and recessions, it is pretty clear that housing starts have fallen before the start of every recession since the 1960′s (except for the dot-com recession of 2001).
On the other had, since commercial real estate investment lags residential by 5 to 8 quarters, it is also true that CRE spending doesn’t begin to increase until after the end of a recession, making commercial real estate a lagging indicator.
August 11th, 2009 at 9:52 am
patriotz 4: That’s why, for example, FDR created the FHA to help people buy houses in the 1930’s when the cost of buying was half the cost of renting.
That’s due to uncertainty about future income. Ironically that drives up rent as it is less risky for people with volatile future income to rent instead of enter into a trade of future income for ownership. Credit actually improves the general welfare of most consumers, if they can collateralize it.
August 11th, 2009 at 9:34 am
“Following the backlash from outraged members, Vancity now says it will not move ahead with the rate hikes.
Chief Executive Officer Tamara Vrooman said members have made it clear the move was “too much, too fast.”
But Vrooman said something will still need to be done to keep the credit union financially healthy and staff are considering options, but no decisions have been made yet.”
http://www.cbc.ca/canada/briti.....-hike.html
First, its interesting that a modest rate hike would cause a membership revolt. Has that happened before?
Second, I wonder how Vancity is going to make up for this. I suspect cuts in staff and services. All members suffer because some members can’t handle a rate hike.
August 11th, 2009 at 9:27 am
http://finance.yahoo.com/tech-.....amp;ccode=
“..forget all you’ve heard about recovery and inflation, “we’ve only seen the first phase,” of the downturn according to Bob Prechter (a Nobel Prize-winning economist who famously predicted the 1987 stock market crash). Next to come, is “a credit implosion” that will once again destroy the value of stocks, commodities and especially real estate. “The biggest area of overvaluation because of credit extension is the real estate area,” he says. “And if you’ll notice that’s the area that’s had the weakest of any kind of attempt at a recovery.”
August 11th, 2009 at 9:10 am
Funny, “Can’t Stop Asia” says in the first comment “If this economy is so dim then why are buyers outbidding each and paying 2 or 3 hundred thousand dollars over asking.” and seems to think this is a BULL market indicator.
I ask the same question and think it means there’s a bubble going on. (Especially since the data on rich folks from Asia, like our data on Santa Claus, shows something else happening than happens in our popular anecdotes.)
In this whole long watch on housing, I’ve never heard anyone say how this is sustainable. Like two years ago, unemployment down, but growth only in the service sector. And Baristas can’t afford these prices! They’ve only said “it’s sustaining, therefore it is sustainable”. Which isn’t true at all, really.
August 11th, 2009 at 8:44 am
crabman:
http://www.caryl.com/pressrele.....essID=2567
argues real estate (commercial and residential) are lagging indicators.
August 11th, 2009 at 8:19 am
Now the question is how long a lagging economic indicator like housing can keep looking shiny and bright in a dim economy, and are there are any lasting benefits of a strong housing market in a time of job losses?
Were you being ironic Pope? ;^)
Here are an article, a paper and a video on how housing leads the economy.
The bottom line is: when housing starts fall, the economy falls and unemployment rises (with a 12-18 month lag).
When you look at Vancouver housing starts and compare them to US housing starts, it looks pretty evident that US housing starts have bottomed, but Vancouver starts are nowhere near the bottom.
August 11th, 2009 at 7:01 am
Ahab: Angus Drive also goes through Kerrisdale and Shaughnessy.
August 11th, 2009 at 4:38 am
1.5 million for this 33′ wide lot house on Angus. The buyers are from mainland China
$1.5M for a house on a 33′ lot in Marpole? I call bullsh–.
August 11th, 2009 at 2:48 am
Investing in housing or any other asset (and yes housing is an investment, even your own house) is positive for the economy if the yield on the asset (i.e. the rental value in the case of a house) exceeds the borrowing costs. The reason is simple – it puts income into the hands of the owner (in the case of a homeowner, he has more disposable income than if he was renting the same property). That’s why, for example, FDR created the FHA to help people buy houses in the 1930′s when the cost of buying was half the cost of renting.
When the yield on the asset is lower than borrowing costs, as for dot-com stocks in 2000 or housing today, the effect is negative on the economy because it decreases the income of the investors. People are literally throwing away money. This is precisely why recessions followed the dot-com bubble of the early decade, and the housing bubble of the late decade. And it’s why every house purchased today in BC at today’s ridiculous prices will prolong the coming recession here.
Note BTW an asset is still an investment even if it loses money – it’s just a bad investment.
August 11th, 2009 at 1:39 am
The economy is so dim, and China has a couple of bubbles of its own soon to pop. It all works until it doesn’t.
August 11th, 2009 at 1:34 am
Housing is not a lagging indicator, it normally leads the economy into and out of recessions. It would be a rather strange miracle if the recession simply went away, but that is what the stock market and many other indicators are telling us. Unfortunately the fundamentals don’t agree, and it looks like we’re headed for another drop when the reality check finally comes.
August 11th, 2009 at 12:00 am
If this economy is so dim then why are buyers outbidding each and paying 2 or 3 hundred thousand dollars over asking. A real estate agent told me a house that just sold last week went over asking by over 230K. The house was 19 years old and a very ordinary vancouver special (laminate flooring). Final sale price was over 1.5 million for this 33′ wide lot house on Angus. The buyers are from mainland China.
What do you people have say about all the Asian money coming into Vancouver. China, South Korea, this money get recycled into the economy, does it not? And Gordo collects more property transfer tax.