Will that be a V or a W recovery?

Just when you thought it was safe to rejoice over the quick and painless economic recovery, now we have both ‘experts’ and ‘hot tub makers’ claiming that we’re in for a W shaped recovery. In other words, we’re right smack dab in the middle of the W and looking at another drop, rather than at the end of a ‘V’ shaped recovery.

So what do you think? Are we all good, or are you concerned about more economic lean times ahead? Is the jobless recovery a possibility, or is it just wishful thinking?

106 Comments
newest
oldest most voted
Inline Feedbacks
View all comments
Carioca Canuck
Carioca Canuck
10 years ago

It is an "M" shaped economic cycle….not a recovery by any stretch of the imagination, for the last leg of the M does not go up.

patriotz
11 years ago

@observer:

The question remains however, if many houses are less than their mortgage value, and due to economic considerations there is a systemic risk of defaults, will the banks still maintain this position?

If the mortgage is CMHC insured the bank will renew your mortgage no questions asked. CMHC is holding the bag on default, not them. They bank just wants you to keep making payments, which is why they loaned the money in the first place.

rp
rp
11 years ago

@Anonymous: I'll go out on a limb here. Vancouver prices will be lower *next year*, by 10-15%. As Mish says, governments and central banks have fired every bullet at the deflation monster and it's still coming. Credit is contracting, shipping has dried up, and outside of Wall Street and "free money programs" there are no signs of a wider recovery. I expect the stock market to crash this year or early next year because the valuations are simply ludicrous. It's safe to say that without the stock market bounce people would not be hearing any of this "green shoots" nonsense. That being said, real estate prices move slowly and our government will doubtlessly throw buckets of good money after bad trying to prop up the housing market. So a crash could play out over 5 years or more. But the… Read more »

Specuskeptic
Specuskeptic
11 years ago

"…Paul Martin implemented between 1988 and 1993."

Uhm…. that would be Mulroney's man (our current ambassador to the US) Michael Wilson for most of that time. Good try though….

Specuskeptic
Specuskeptic
11 years ago

"…Paul Martin implemented betwen 1988 and 1993."

Uhm…. that would be Mulroney's man (our current ambassador to the US) Michael Wilson for most of that time. Good try though….

NO -LYMPICS
NO -LYMPICS
11 years ago

97 X /dev/null :

Isn't ths OLD news…..the Chretien Liberals downloaded, robbed and gouged to acheive their so – called fiscal prudence ?

NO -LYMPICS
NO -LYMPICS
11 years ago

Was out in Burnaby and right across the street from Bill Copeland arena on the West side of Kensington is a construction site that looks abandoned.

Dominion is the general contractor and the 1st floor is poured, but the second floor has forms set up and rebar sitting and rusting.. and weeds are growing on the site.

Anyone know what's going on there?

NO -LYMPICS
NO -LYMPICS
11 years ago

I heard on the news that the BC Gov't is looking at revisng the Strata Act so that rentals will be allowed in ALL stratas, ie a strata council cannot refuse condos being rented out. This is apparently to alleviate the housing shortage ?

If that does happen, watch stratas start going downhill…there is a reason why many stratas choose to disallow rentals. Also, I don't think there is much shortage…check craigslist.

observer
observer
11 years ago

The good news is that the market cannot ignore fundamentals. The bad news is that it can ignore fundamentals longer than most people can wait, especially with a complicit financial system. So the crash will only happen once most people have bought. You might even jokingly make the claim that once bear activity starts to decline on this blog, the time will be ripe (has it declined since last year for instance?). I would say it is unlikely that prices can double once more (which is not much consolation and will probably make many cringe). On the other hand, it is likely that prices will halve in value in the long term. If current trends continue, I would guess we will see a downturn within the next 2 years if not earlier. But there are a couple of wild cards… Read more »

/dev/null
/dev/null
11 years ago

@NO – LYMPICS:

Even for The Province that's a really weak article. I'd be really interested to hear Ms. Bader describe in greater detail all the stealth taxes that Paul Martin implemented betwen 1988 and 1993.

read on
read on
11 years ago

93: grammar.

Anonymous
Anonymous
11 years ago

Okay, you've been telling me for 3 or 4 years now that the collapse of the Vancouver RE market is imminent. I do agree: it is a bubble, these prices make no sense whatsoever.

BUT can someone please tell when it will actually happen? Please try to be accurate within 2 years, if at all possible….

Many thanks.

observer
observer
11 years ago

@patriotz: If the stock market is being supported by leverage and low interest rates, then I see your point about the stock market falling if interest rates rise. In that case, it is really looks like a no win situation all around if the government increases interest rates.

If the stock market rises due to true growth as we are being led to believe, then my point was that it would be more attractive to move money there from lower yielding investments like bonds, so that would cause bond yields to rise.

Anonymous
Anonymous
11 years ago

IMPORTANT QUESTION!

I would be very skeptical of a bank that sends a response with so many grammer errors.

That said the gist is correct unless you are asking for more money they won't be reassessing the home.

observer
observer
11 years ago

@arit: This sounds like one of many typical responses and is probably what would happen under normal circumstances. The question remains however, if many houses are less than their mortgage value, and due to economic considerations there is a systemic risk of defaults, will the banks still maintain this position? As Roubini says, it's damned if you do and damned if you don't.

What happened in the US? That should give some idea of what might happen (i.e. if banks don't ask for the difference, they might risk going bankrupt in the end).

arit
11 years ago

IMPORTANT QUESTION! In the latest RE chat with a friend, I told him that when the mortgage term is due (5 years), IF the house de-values, the bank will will ask for the difference or they won't renew his mortgage. He asked his banker and got the following response. Was I wrong? Please advise! ==== Very good question from your colleague, so far the bank does not re-evaluate the property when the contract is due, therefore as long as you keep paying on it, we do not concern about the appreciation or depreciate of the property. Unless you require to borrow more funds again, we will need to re-assess the value, if it’s lower, you will not getting more funds but will not need to pay down the difference between the original value and the new value. Hope I’ve answered… Read more »

NO - LYMPICS
NO - LYMPICS
11 years ago

Anyone heard of this RE site "ZILLOW"

http://www.zillow.com/

NO - LYMPICS
NO - LYMPICS
11 years ago

Outsourcing Unemployment

China's cities the new Detroits?

http://www.youtube.com/watch?v=YEDFgJACMcQ&fe

As the host says, US has relied on consumer spending and asset inflation after it outsourced jobs to Asia.

China is suffering a massive slowdown due to the US slowdown…. over 30 million unemployed ….one stat is 6 million graduates, 5 million have NO jobs.

However, if China can get its own citizens to become consumers it will do better than the US, given China has the manufacturing base which the US lost.

Thats a big "if", as China has lots of closed factories as the video shows.

NO - LYMPICS
NO - LYMPICS
11 years ago
NO - LYMPICS
NO - LYMPICS
11 years ago

Vancouver Island foreclosures:

http://islandlife.tv/wp-content/uploads/2009/06/V

NO - LYMPICS
NO - LYMPICS
11 years ago

Bear Mountain owes taxes

Company appeals assessments, stalled interchange 'not involved'

http://www.timescolonist.com/news/Bear+Mountain+o

patriotz
11 years ago

All of the bull arguments for RE globally post-2005, or in Vancouver 1980-81, or for any bubble asset at any time for that matter, can be reduced to just three words:

"Fundamentals don't matter"

NO - LYMPICS
NO - LYMPICS
11 years ago

In BC Business

The Bulls/Bears Real Estate Guide

http://www.bcbusinessonline.ca/bcb/top-stories/20

Economists? What do they know? So-called industry experts? Forget about it. For the real dirt on which way the market is heading, you’ll need to start digging for answers in some unexpected places.

What the Bulls & Bears Say About

1. Months of Inventory | 2. Asian Influence

3. Olympics | 4. Local Stuff | 5. Demographics

6. Affordability | 7. Fundamentals | 8. Banks

patriotz
11 years ago

@observer: Normally, bond prices go in opposite direction to stock prices No, the norm is for bond and stock prices (and RE prices) to move in the same direction as capital is mobile between the two asset classes and will seek the maximum yield. This has been the case for both the 70's (bear markets) and 80's and 90's (bull markets). This correlation has been broken recently by falling interest rates (which mean a bull market in bonds by definition) in response to the dot-com and financial stock markets busts at the beginning and end of the decade respectively. An increase in interest rates going forward will bring on a bear market in bonds (again by definition) and will very likely bring on a bear market in stocks IMHO. I should clarify my recommendation in that I am recommending bonds… Read more »

NO - LYMPICS
NO - LYMPICS
11 years ago

Further to the above post 81

Its this stealth taxation and its insidiousness that keeps any true growth in wages stagnant, and why the RE bubble is simply not sustainable.

=====

Also on the news…In the US people facing foreclosure have been stripping out their own homes…ie pulling out sinks, tubs, carpets,electrical etc…. simply leaving a shell requiring thousands of dollars to fix.