TD: A bubble brewing?
TD is the latest bank to ask “is a bubble brewing in Canadian real estate?” TD Bank Financial Group released a report today on the Canadian housing market, and their conclusion should not surprise any readers here:
Call this housing cycle a blip if you like. But we feel that is misleading, especially because of what this suggests for the future. While the market looks remarkably unperturbed from start to end of this sharp cycle, existing home sales and prices cannot sustainably stay on their current path. Markets are currently very tight and favour sellers, as evidenced by multiple competing offers and bidding wars, but we expect them to rebalance over the course of 2010. As the central bank begins to hint at a tightening monetary policy cycle in the second half of next year, sales could well see a last gasp of strenght. Moreover, by that time, the availability of units on the supply side should provide a relief valve helping to cool price growth. And, by 2011, while the overall economy will have improved significantly, housing markets will be losing momentum.
They also mention the concept of borrowing demand from the future:
A more difficult issue relates to how much of the current demand is simply being brought forward, i.e purchases in recent months that advanced sales to take advantage of low rates, which raises the risk of a dip in ensuing quarters. Because the pool of potential buyers is not fixed and itself depends on affordability, it is not possible to satisfactorily address this issue in a precise quantitative fashion with the current data available. There is little doubt as to the direction of this effect, however. The prevailing ‘now or never’ mentality will weigh on future demand.
The full PDF of the report can be found on the TD site here.
Hat-tip to Donald for the link!
December 27th, 2009 at 11:58 pm
Nice description.
December 3rd, 2009 at 5:52 am
God bless you SUpratard, you're a dim little critter aren't you?
My buddy at TD essentially ran an arm of the bank that loaned GOVERNMENTS money to complete infrastructure projects. My parents are wealthy entrepreneurs as well, and then there are the families in the East that own whole chunks of provinces and have been wealthy for many more generations then you and your family have been in Canada.
People who have been wealthy for generations do not gamble with their cash. They calculate risk vs opportunity and invest based on that. This is something you just don't seem to get.
Risk and opportunity are two sides of the same coin so to speak. Ordinarily if the risk is high, the opportunity to make money is also high. However in the case of Vancouver real estate the risk is now extremely high and the corresponding opportunity to profit is VERY VERY LOW.
Many of not most bears understand this, which is why they are bears.
It's like standing around a gambling casino. Bears are observers watching people make increasingly foolish bets. They know that while the gamblers have won the last few hands eventually they're going to lose and that will wipe out not only their profts, it'll take the grocery money and the kids' college funds too.
The problem is the gamblers are so intoxicated with the success of their past wins they've gone beyond rationality and won't listen to the voice of reason.
I don't mean to sound like a racist asshole but is there something in the Asian psychology that doesn't get this? All the Chinese guys I know loooooove to gamble but a lot of them are really bad at figuring odds.
December 2nd, 2009 at 11:04 pm
#11, The RCMP need some transparency? "From the mouths of babes" they say. No Duh!!!!!!!!!!!
An immediate 'stop work' order would be more appropriate. As far as 'numbers' go, I suggest reading the papers. Count back the number of citizens killed by RCMP in the past year and tally that against the number of CDN soldiers killed in Afghanistan over the same period. Yeah thats right, pretty shocking isn't it?
There needs to be immediate civilian oversight and removal of all personal files into the public domain. All agents under 50 should be given an independant psych evaluation. The RCMP members involved in atrocities and the cover ups should have thier benefits and pensions revoked and the budget should be directed towards paying victims reparations.
As far as the 'gangbangers' are concerned it has been RCMP inaction over the years that has led to the proliferation of the problem as it exists. How were they suddenly able to come up with so much information after the media turned a fire on under thier asses. They have been complicit all along and should be permaently barred from police intelligence services.
December 2nd, 2009 at 9:14 pm
#49 @observer: However in early 2008 everyone reading financial blogs knew that most of Wall Street was bankrupt. The subprime losses were there, it was just a question of where the bodies were buried. The US was already in a recession (although this was disputed) and then Bear Stearns went under, confirming everyone's worst fears. It was perfectly clear that a crisis would occur.
We now know that few of those massive losses will ever be realized. No large banks will go under. The government has sanctioned their fraudulent accounting practices, extended credit as necessary to keep them running, and monetized much of their toxic waste. Millions of people are also living mortgage free in houses they bought but aren't paying for because banks won't or can't recognize any more defaults. Furthermore, we know that real reform is impossible at least in the US. Even superficial reforms have been eviscerated by the banking lobby.
The conversation on the internet has shifted from "how long until banks go bust due to lies and financial machinations" to "how long until countries go bust due to lies and financial machinations". The system has been trashed to save the bad actors, who are now clearly in charge and have their hand on the taxpayers' credit card.
In this new era, I do not have much faith in numbers on a bank statement or stock in a company. Anything paper or electronic can easily be manipulated away or decimated outright. Much greater security can be had by owning a house, even though the government could conceivably take that though property taxes.
That being said, I still have all my money in GICs, etc. I'm not running out to buy gold. I'm just saying, I understand why people would go out and buy a house and overpay now.
December 2nd, 2009 at 8:41 pm
Two other bubble cities also had condos called 'The Mark'; Scottsdale, AZ and San Diego, CA. Both projects were pre-sold at peak prices, but weren't completed until after those bubbles had popped. Who says developers don't have a sense of humour?
http://www.livethemark.com/
http://www.themarksandiego.com/