More on BOC housing market risk speech
The BoC release a speech on Monday with a significant portion dedicated to the housing market:
http://www.bankofcanada.ca/en/speeches/2010/sp110110.html
This speech reminds us several times that rate policy is to be used to control inflation, and that housing is only one factor of many that affect inflation. Unfortunately the speech glosses over that housing is the sole factor affecting inflation currently, and how low rates have contributed to housing being the sole factor driving inflation.
“As Canada’s economic growth moves towards its potential, it is expected that a robust housing market, supported by exceptionally low interest rates, will continue to work as an important engine pulling the Canadian economy out of recession. This has implications for monetary policy, which, as I’ve said, aims to achieve the Bank’s inflation target of 2 per cent over the medium term. It’s important to remember that this target is symmetrical; that is, we are equally concerned about whether inflation is above target or below target – as we expect it to be until 2011. The revival of the housing market is one factor that is helping us to achieve our inflation target, and it is a powerful means through which monetary stimulus affects the economy. Of course, we need to keep a close eye on the housing market, along with all other sectors of the Canadian economy, to ensure that we are providing the right amount of monetary stimulus. In setting monetary policy, we view housing – or the exchange rate, the energy sector, the auto industry, or any other factor – through the prism of our inflation target.”
The speech then reiterates a previous comment from Mark Carney, that the BoC should not be managing the risk of financial institutions:
“An array of supervisory and regulatory instruments can be used by the government to restrain a buildup of systemic risks. These include capital requirements for institutions, leverage ratios, loan-to-value ratios, terms and conditions for mortgage insurance, and a variety of other measures. These instruments can be targeted to risks to the entire financial system that stem from particular markets or institutions.
Using these instruments to safeguard the whole financial system – not just individual institutions – is the essence of the macroprudential approach. Macroprudential supervision is one of several concepts in a current global initiative to strengthen supervision and regulation in the wake of the global financial crisis. In Canada, a system-wide, or macroprudential, approach is the shared responsibility of the Department of Finance and all of the federal financial regulatory authorities, including of course the Bank of Canada, the Office of the Superintendent of Financial Institutions, and the Canada Deposit Insurance Corporation. Ultimately, it is the Minister of Finance who is responsible for the sound stewardship of the financial system.”
Now Carney has officially passed the buck to Flaherty to cool the housing bubble. What remains to be seen is how Carney will reach target inflation
without housing being the sole factor if Flaherty does implement the proposed changes to cool the housing market. The BoC had predicted GDP growth to return to normal by now, yet the numbers are far less than predicted.
Oh, lastly this wonderful quote:
“Using the current path of household indebtedness, and alternative assumptions about how quickly interest rates may increase, the simulation generates a scenario indicating that, by the middle of 2012, almost one in ten Canadian households would have a debt-service ratio that makes them vulnerable to economic shocks.”
In 2 years if the BoC does nothing, 1 in 10 of us are in trouble. Thus why the BoC is taking the opportunity to pass the buck now.
-taylor192
January 13th, 2010 at 4:16 am 1
As I said in the previous thread, asset bubbles are net deflationary in the long term. They yield some short term increase in demand in return for a much larger long term decrease. What could be more obvious when you look at Japan post-1990 and the US et al today.
And just what kind of depression did the housing market need a "revival" from? Like houses couldn't find buyers at historically normal real prices? Canadian housing markets range from grossly overvalued to reasonably valued across the country (but undervalued nowhere) – that's a market that's overheated, not one that needs "reviving". That's sort of like talking about the "revival" of Ben Johnson's career after he went back on steroids (and got caught, again). The solution is to stay off the steroids and get back to real investment – i.e. with a yield exceeding borrowing costs – to get a productive economy long term. And get house prices back to historic norms of rents and incomes so people are not pouring their future disposable income down the drain by becoming homedebtors. And the way to get that is by making RE compete fairly in the capital markets by eliminating government guarantees on mortgage lending.
The way they are talking, you would think we were in the 1930's, when you could buy a house for 3 years rent. Then encouraging home ownership was exactly the right thing to do, because RE was an underpriced (i.e. overyielding) asset. Turning renters into homeowners provided long term stimulus, because it put money in their pockets every month.
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January 13th, 2010 at 9:01 am 2
@patriotz
I agree with you, yet consider your comment:
"They yield some short term increase in demand in return for a much larger long term decrease"
Flaherty, Carney, and the rest of the troopers are not in it for the long term. Thinking short term keeps them in their seat, and they won't be around in the long term to deal with the aftermath. Its modern politics at its worst.
Those troopers (pun intended) are singing:
"We're here for a good time
Not a long time
So have a good time
The sun can't shine everyday"
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January 13th, 2010 at 9:09 am 3
"the BoC should not be managing the risk of financial institutions:"
The BOC receives its mandate from the government of the day. It, as an advisor and contributor, wants to avoid damaging financial collapses. It doesn't mean they aren't helping manage the problem but it does mean the overall responsibility and ultimate decision-making power is squarely on the shoulders of elected officials. Just to clarify what you mean by "manage".
If the economy starts recovering faster than expected or if households continue to take on more debt when they should be rebuilding balance sheets, I think mortgage tightening is inevitable. I'm getting the feeling they will wait until they see housing and preliminary GDP data from the spring before doing anything.
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January 13th, 2010 at 9:38 am 4
A possibly interesting paper to some regarding central banks and bubbles.
I haven't read all of it yet.
"Central bankers should not try to prick asset price bubbles simply because it is not worth it. Attempts to do so using monetary instruments will almost certainly fail, because the connection between monetary conditions and asset markets is far less tight than most commentators assert."
http://www.policypointers.org/Page/View/3216
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January 13th, 2010 at 9:41 am 5
@jesse:
No, the BoC receives its mandate from Parliament and is supposed to be independent of the government of the day (i.e. the cabinet).
If you really meant the same thing as me, apologies but do keep in mind these terms have standard meanings.
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January 13th, 2010 at 10:26 am 6
Off topic with regard to BOC. With regard to all rich Chinese people wanting to move to Vancouver, this little paragraph was written by Richard Russell of DOW Theory Letters (the largest fee based subscription investment newsletter in the world) about rich Chinese moving to his place of residence La Jolla. Excerpts below -
"I note more and more Asians here in La Jolla. I'm thinking that in ten years La Jolla will be half Chinese. Consider this — you're a Chinese multimillionaire (and there are thousands of them). You want to get rid of a lot of the dollars you own. You search the world — the best weather on earth is in San Diego's La Jolla. La Jolla is situated right on the Pacific Ocean. The US is a free country, nobody goes to jail and is tortured because he announces that Obama is a dud. Home prices in the US are cheap compared with prices in China. La Jolla is a bargain, and probably a good "safe haven" just in case things don't go right in China. "
I showed this to my wife and her reaction was "no I think rich Chinese people will still to Vancouver because Vancouver is way more famous in China than La Jolla". I think partly this is due to at least 2 popular Chinese TV series based in Vancouver. Also when she moved to Vancouver back in 2000, it was in part because people posted online in China that Vancouver is paradise on Earth – however she absolutely hates the rain and the dark cloud here, really disappointed. She much prefer sunshine. She thinks Hawaii is really paradise on Earth.
As well, she said even more important is the fact that virtually all the rich people in China who can buy a $1.5M/$2M+ houses in Canada or US got at least a good portion of their money illegally or at least in an extremely questionable manner. What does that mean? It means that they would prefer Canada over US because they don't need to worry about being deported back to China with their $$! Yeap that's right! Her believe that there will be lots of rich Chinese people coming over and buying up expensive real estate is simply because Canada don't deport criminals with lots of money back to China! So our absolute best advertising for Vancouver and its real estate is not "Best Place on Earth", ski and golf in the same day, mountain and ocean view, democracy & human rights, etc. Nope. Our best advertising apparently is people like Lai Changxing who don't get deported and gets to live high on the hog here
And I have absolutely no comeback for that argument, especially now Canada has the approved tourist destination status which makes coming to Canada easier than before. So yeah come winter Olympics, we might indeed get a flood of rich Chinese people coming over and buying expensive houses and moving prices up even more. However what else these people might bring over, that's an entirely different question.
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January 13th, 2010 at 10:36 am 7
I have no idea what to say about the post about Vancouver and chineses immigration, except that the brand new development just being finished across the street from where I live has been bought up entirely by rich asian investors, who promptly started renting it all out to poor caucasians right after completion.
Both a highschool and an elementary withing couple of blocks of my place are now predominantly asian and my kid who's blond with blue eyes sticks out like sour thumb and has no friends at all, because hardly anyone in his class speaks english anymore… This is in south burnaby, btw…
Just sayin'.
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January 13th, 2010 at 10:44 am 8
I started thinking about this today as it pertains to the future value of real estate and how it will perform over the next decade……it is something that absolutely needs to be paid attention to right now, especially if you are foolish enough to even be thinking about buying a house or condo, as there are the 9,000,000+/- retiring Canadian "baby boomers" who start turning 65 next year. These are the people that have some 65-75% +/- (and in many cases as high as 95%) of their financial net worth tied up in real estate. They will all die, triggering an estate sale, or sell out while still alive within this period, due to the probability expressed in actuarial tables.
So……….
As hard as it may be to mathematically extrapolate "home ownership" among this crowd, I will make an attempt.
You have 9,000,000+/- boomers in Canada…….so for the purposes of approximate population the numbers I will use this site……
http://www.citypopulation.de/Canada-Metro.html
Now obviously everyone does not live in the major population centres, so I will account for that as follows……
As of May 2006 there were 31,612,000 people in Canada. 17,170,000 of these folks lived in the provincial capitals alone. So "perhaps" 54% of our boomer population as of this date, is concentrated in those 11 cities. While this may not be totally accurate as the real number could be higher or lower, let's assume that 54% of those 9,000,000 baby boomers equals 4,860,000 residents in those 11 cities, for the sake of this specific exercise.
So the question becomes…..how many of those 4,860,000 "boomers" own real estate ? Or, to put it another way, how many additional time sensitive RE listings can your local market absorb "AND SELL" each and every year over the next ten years in a row ?
Calgary represents in total 6.2% of that 17,170,000 city dweller population figure…….so perhaps (and who really knowss) 301,320 (6.2% of 4,860,000) boomers live in Calgary.
Now, looking directly at Calgary, we had between 550 and 1,837 houses sell each month in 2009 and between 225 and 738 condos sell each and every month…..overall that gives us a low figure of 775 per month and a high figure of 2,575 combined units sold per month in 2009.
How many of the boomers here own RE that will have to be sold over the next ten years ?
If they all do, that means the market will need to SELL 2,511 pieces of RE each and every month for 120 straight months in a row "OVER AND ABOVE" all of the existing listings that are already out there and will continue to be out there. Is that feasible ? LOL !!!
If 50% of them do (highly probable when you account for a husband and a wife owning one piece of property) that means an additional 1,255 SALES EACH AND EVERY MONTH FOR 120 STRAIGHT MONTHS over and above the existing sales volume. LOL again.
If 25% of them do……is is an additional 627 sales per month as per the same criteria….in Calgary alone. LOL again.
Do the math with Vancouver……
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January 13th, 2010 at 10:49 am 9
@taylor192:
"Flaherty, Carney, and the rest of the troopers are not in it for the long term. Thinking short term keeps them in their seat, and they won’t be around in the long term to deal with the aftermath. Its modern politics at its worst."
But, in the converse, as much as I dislike Harper and his policies he is thinking at least in some degree in the long term because he wants to re-shape Canada permanently.
We all know that he's the real force and Flaherty will bow to his whim and HE knows that if the housing bubble does a Godzilla on every major Canadian city the Cons will never be re-elected in our lifetimes unless they're seen as being part of the solution and not part of the problem. So I believe the government will do something, even if it's just something for show with no real impact they will do something.
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January 13th, 2010 at 10:52 am 10
@Keith in Calgary:
Garth Turner has been talking about that for a while, he has some good info on Boomer property ownership etc.
Another good point he makes is that 60% (at least, maybe more I forget the exact number) of boomers have no retirement plan outside of the government pension and Real Estate. Those millions of Canadians are going to be forced to sell before they die or move to an old-age home so it will hit all the sooner.
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January 13th, 2010 at 11:11 am 11
@Drachen
I'm a Conservative supporter and agree that Harper is a shrewd politician. He has to know that if the economy tanks on his watch, the Conservatives won't be reelected for many terms.
Being a shrewd politician I bet he's banking on Canada's recourse mortgages. Canadians cannot walk away from houses and cause the catastrophe that happened south of the border. Instead we'll be in for a long period of zero growth (negative with inflation) which is not good, yet not catastrophic enough to lose support, especially with the Liberals so far behind in the polls currently.
Then the Conservatives can pass the buck. It is easy to put the blame on other parties, like the Ontario Liberals for hurting business or the NDP for wanting to tax Canadian business to uncompetitive levels.
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January 13th, 2010 at 11:14 am 12
The title of my next contribution: "Easy come, easy go"
http://www.vancouversun.com/health/Calgary+Vancou…
Vancouver may be a great city for migrants, now. We'll see what the economy looks like after the Olympics and if these migrants head elsewhere looking for better opportunities.
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January 13th, 2010 at 11:50 am 13
Please, the baby boomer argument has been around for well over a decade, and Garth brings nothing new to the "argument." In the lat 1990s and early 2000s, it was the baby boomers were all going to retire early, and a massive number of positions would open up. This never materialized, and instead, we saw the push away from mandatory retirement. And no, they are not staying in the job market because their portfolios got whacked in 2008 – they had the opportunity to get out during the boom years, and they did not.
Any babyboomers I know always laugh at the thought that they are all going sell off their places to downsize. They have established a lifestyle and will not simply give it up. The supposed issue of not having any money means nothing when shelter is usually your biggest cost, and that has already been covered off (with the exception of property taxes and maintenance). A lot of "retirees" also continue to work and provide their expertise as consultants since there are not enough Gen Xs to replace them. And if all else fails, there are wallmart greeter positions.
Remember, these guys are not indebted up to their eyeballs, and care little if their house depreciates or if interest rates go up. They largely have the old school mentality where a house is a home not an investment – the exact opposite perspective of those that bought in the last 10 years…
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January 13th, 2010 at 12:25 pm 14
@taylor192:
"I bet he’s banking on Canada’s recourse mortgages."
If he is he's an idiot. Most places in the states have the same basic rules as here, with the exception of California and Texas all of the states with non-recourse mortgages are not very significant. The North East (most densely populated and richest area) is all similar to here for the rules on foreclosures. Also, in California the rules are not quite as clear cut, the bank CAN come after you for more than your house but they must do so as a legal action (taking you to court) which they only generally do if you have significant other assets.
Also to be considered, Canada's bankruptcy laws are much more lenient than in the US so bankruptcy is a more realistic option for a drowning Canadian homeowner, I suspect that alone will make up the difference of the 1/3 or so non-recourse mortgages.
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January 13th, 2010 at 12:25 pm 15
But they all die eventually, and here in Canada that avergae age of death in2005 was 74.2 years of age……so, you cannot deny that little factoid……..and the house normally goes up for sale thru the estate or via the inheritor.
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January 13th, 2010 at 12:37 pm 16
15
So if the average age when MEN (I assume) dies is 75, and baby boomer are just turning 65, doesn't that mean a nice long DECADE before their deaths and estate sales put any pressure on the market…
At best, you might have a minor influence on listings as they die over the span of the coming decades..
Gee, bears are getting desperate no? First, rising interest rates will kill the market – nope, hasn't happened and BOC its not going to let that happen for some time. Now, everyone is relying on dying boomers to be the catalyst for an RE collapse. When that does not happen in the next year, what is going to be the new argument? rising health care costs, peak oil, insert whatever reason gives you hope that you can get into the market…
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January 13th, 2010 at 12:42 pm 17
@Drachen:
That is where I got the idea from……..Garth's site…..
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January 13th, 2010 at 12:45 pm 18
@Please…: Nope average blended age…..men and women…..they start turning 65 next year….so if you re-read my post because I think you didn't even fully read it, you'll see that I spread the numbers out evenly over the next 10 years for the sake of simple comparison. Not everyone dies at 74.2…..some last a lot longer, others expire faster. My guesstimate assumes that they all do not suddenly die at 74.2, which wold flood the market even worse than it would normally be under my initial scenario. Keep trying, you'll becomone of these statistics soon enough too……..LOL !!
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January 13th, 2010 at 12:47 pm 19
Space (#6)
La Jolla has roughly the same number of residents as West Vancouver (~43,000) and about 11% of them are "asian". Not sure if it is fair to compare La Jolla to all of GVRD. It sounds like Richard Russell is trying to pump up RE in La Jolla. What, you thought the people only pump YVR RE?
That being said, educated chinese workers tend to flock to SD for work in the numerous industries there. There are many major corporations that have R&D or production sites in SD that hire Chinese and Indian technical workers/scientists. These working "rich" tend to live in Carmel Valley, Del Mar, Encinitas, UTC, Rancho Bernardo, Scripps Ranch…
the same can be said for Orange County, areas of LA and the Bay Area.
For these people, the job is the main criteria. In fact, in San Diego, there are relatively few asian food service workers that I would rank their chinese food in the lower 20% of all the places I have eaten chinese food. (its another story for vietnamese food). I also anectdotally do not see a prevalence of asian gangs in SD as this type of business is controlled by other ethnicities.
So yeah, I agree, YVR gets the investors, crooks and gang members while the educated software, hardware, biotech, accountants and others go to where the jobs are.
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January 13th, 2010 at 1:08 pm 20
@Drachen
Canadian bankruptcy laws are a bit different, notably the minimum income tests whether to walk away from debt, or to have to enter a structured repayment. Canadians more often have to repay.
Even with unemployment taking a nosedive we didn't see bankruptcies increase to the level to affect housing, instead more people were buying. Thus even with our economy in the toilet, people have enough money to buy a house.
I don't see our economy taking another major hit, since we're dependent on the US and they've already taken their hit. Thus I don't see unemployment taking another nosedive, meaning Canadians that passed the income tests required to buy a house, will probably pass them to avoid bankruptcy and have to repay.
As for your comment, look at the various states that were catastrophic: they are the non-recourse states. The north-east has declined, yet nowhere near the levels of Cali, Arizona and Nevada. Florida stands out as the exception, a recourse state that has suffered immensely, so you do have a point, it could happen here (Vancouver).
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January 13th, 2010 at 1:10 pm 21
@Anonymous:
In other words these kind folks are supplying cheap capital to increase the supply of rental housing and drive down rents, which of course will ultimately drive down prices. And to keep the local tradespeople working.
And to think this sort of foreign aid was something the white folks did for the yellow folks not too long ago.
Bring it on.
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January 13th, 2010 at 1:10 pm 22
Sorry, I do not read "guesstimates" from armchair psuedo-statiticians, whose analysis is full of caveats and assumptions….
"becomone of these statistics soon enough" – sorry, but I am no where near that dying age – hate to disappoint…
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January 13th, 2010 at 1:18 pm 23
@Keith in Calgary:
"But they all die eventually, and here in Canada that avergae age of death in2005 was 74.2 years of age……so, you cannot deny that little factoid……..and the house normally goes up for sale thru the estate or via the inheritor."
That's faulty thinking. Boomers who are alive now will not die at an average of 74.2.
Think of it this way, if a country had a population where half the people lived to be over 100 and half died within moments of birth the average age would be 50 but, if you make it to age 50 your life expectancy is another 50 years not zero. So the real age we can expect boomers to live to on average now is actually the mid '80s. Your factoid may be accurate but it is also irrelevant as it encompasses birth-death and not age 65-death.
I don't have the Canadian chart but the US one is HERE and shows a life expectancy for a boomer aged 65 of about another 20 years (probably slightly longer in Canada because our life expectancy is higher).
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January 13th, 2010 at 1:23 pm 24
@Drachen
I'll have to find the chart again, yet from memory in Canada the median lifetime was 86yo with standard deviation of 1.5yrs. Which means most of us will live to 83-89yo, and only 2% live past 90yo.
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January 13th, 2010 at 1:23 pm 25
Also, in 2005 the life expectancy was 80 and hasn't been below 75 since the '70s, so even your "factoid" wasn't accurately depicting the reality of the situation.
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January 13th, 2010 at 1:27 pm 26
You gotta love the Liberal/Socialist spin on this.
"If we don't raise taxes we're all gonna die"
Listen liberal bozo, the way to survive is to cut taxes, cut government spending on stupid programs, cut civil service pensions and perks, lay off 50% of all civil servants immediatley and stop this interferance with progress by the socialist unions by sending union memebers and thier crazy greedy leaders to reducation camps for ten to fifteen years.
http://www.vancouversun.com/business/Canada+chron…
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January 13th, 2010 at 1:46 pm 27
@Drachen:
People don't understand life expectancy. As you say its the median age of death looking forward for a given cohort. It's not the age at which people are most likely to die.
One fallacy which you hear a lot south of the border is that when Social Security was introduced in the 30's the life expectancy was only 69 so they didn't expect many people to collect it. In fact the reason for that figure is that in those days many people died in childhood due to infectious diseases, and many young women died in childbirth and young men in industrial accidents and wars. But once into middle age their chance of living into their 70's and 80's was not much less than today.
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January 13th, 2010 at 1:53 pm 28
Drachen……
The use of the term "life expectancy" for people born today (or even 20 years ago) is a totally different thing, influenced by numerous different medical and sociological factors, than it is for people born 65 years ago and the age they are expected to live to.
I won't get into several examples to make my point, but the dramatic decline of smoking in the past 20 years is one factor, versus what a 65+ year old aged person today who smoked all (or most) of his/her life is going to have to deal with in the near future as a contributing factor in their demise. Whereas my dad, who turns 84 in 2 weeks, still lives in the only house he has ever bought and smokes a pack a day as he has done for all his life.
Now I said in my orignal post that the whole exercise was based upon facts, as well as generalities and assumptions, since forecasts always are……..which makes it interesting in an anecdotal sort of way.
Reality is, the ages in the Stats Can chart linked below are the "averages", by province and sex, as to when we die……"we" being people who have been exposed to the aforementioned factors all of their lives and aged 65+, not the people growing up today (<30) who are expected to live longer. That is the difference.
But we are not talking about life expectancy anyways….we are talking about the average age of death as per this Stats Can data…..
http://www.statcan.gc.ca/daily-quotidien/080114/d…
Please…..
When you stick your head in the sand it exposes your ass.
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January 13th, 2010 at 1:56 pm 29
My last comment about the "ostrich manouver" was directed at the poster called "please"……..
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January 13th, 2010 at 2:00 pm 30
@smartmoney:
Actually "smart" money, that's a good sounding story but if you'd bother to actually check into the economic truths behind it you'd find it's completely inaccurate. Depending on how taxes are used higher taxation can and does create a better business environment, take for example the massive Toyota plant that went into Ontario a few years back, there were several States down south vying for the plant with lower minimum wage, lower taxes and they'd offered millions in additional tax breaks to encourage Toyota to move there. They decided on Ontario because they pay well above minimum wage, the education level of workers is much higher and health care is provided by the government and wouldn't cost the company an arm and a leg to cover it's employees.
So smartass, would you rather follow the path of our bankrupt neighbours (who are well ahead of us in the direction you propose) or should we lean more towards Europe which has fared exceedingly well through the "crisis" and indeed has seen lowering crime and poverty rates, increased business activity and has just been generally more successful than the United States and Canada economically for the past 20 years or so.
I really don't understand people like you, we have a big glaring example of the flaws in your proposal right to the south of us, and yet you prattle on with these completely false ideas about economics etc. like you think you actually know what you're talking about. It really doesn't take that much thought to put 2 and 2 together does it?
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January 13th, 2010 at 2:17 pm 31
@Keith in Calgary:
All of which is why I linked to the TABLE in my last post, because even though it's US data it's likely highly comparable to ours and therefore the most relevant source.
Pay attention.
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January 13th, 2010 at 2:59 pm 32
As is said before……"life expectancy" (your chart)and "average age of death" (my chart) are two different things all together.
Either way, lets just go and add another 5 years to my 10 year figure I used to meet your 80 year "expectancy", and, spread the sales needed to absord the totally estimated and prospective boomer housing inventory over that 15 year period instead of the 10 I used…..it's still a rididulous monthly increase needed, and RE sales would consistently have to be at around 2005-2007 levels for 15 years straight here in Calgary. Now, that ain't gonna happen…..over 5-10-15 or 20 years.
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January 13th, 2010 at 3:32 pm 33
You don't understand, if you want to know how long the average 65 year old now will live you use the chart, that's what it's for, that's why it was created, so that that very specific question could be answered. There are lots of people who's jobs are dependant on that very question so a lot of time and money has gone into making it as accurate as possible.
Adding 5 years to a bogus figure just makes it a bogus figure +5, it's complete gibberish.
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January 13th, 2010 at 3:54 pm 34
Yup, as I said – a useless guesstimate…of course, gibberish may be more appropriate
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January 13th, 2010 at 3:55 pm 35
@taylor192:
"especially with the Liberals so far behind in the polls currently."
Yeah that 1% gap is going to take a lot for the Liberals to overcome… (that's sarcasm by the way)
Shutdown leaves Tories, Liberals nearly tied: poll
I was just doing my daily news browse, I'd have mentioned this earlier if I'd known it earlier.
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January 13th, 2010 at 4:30 pm 36
@Please…:
Don't get me wrong, I still think the market will bust but dying boomers will be far too little far too late to have an impact, the market will collapse under it's own weight by then.
I'm merely correcting an inaccurate argument put forward by my own side. Which is interesting because I never have seen the same done for the "bull" side of the argument in spite of the many flaws in the theories put forward by that side of things.
The more important and more relevant way to use the impending boomer demise is as a tool for forward-thinkers (that's what investors do, as opposed to speculators). Since there will be a record breaking number of people downsizing, moving into old age homes and dying over the next 25 years it IS bound to have an effect on prices, and if the market were rational it would have an effect NOW. Ergo the market is irrational (for that and a great many other reasons, all of which stand the test of mathematics and Economics).
And what happens to irrational markets? As sure as the sun will rise they CORRECT. Always have, always will. The only issue on the table for rational people with the intelligence and interest to investigate is WHEN.
In fact, in my experience the side that criticizes it's self in a debate is most often the correct side. Not that this tidbit necessarily means anything, I'm just saying is all.
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January 13th, 2010 at 5:26 pm 37
@Drachen
Sheeple forgot about the last time Harper did this and his support rose to a recent high, and will forget about this time too. His timing with the Olympics is perfect, afterwards the sheeple will have forgotten. I consider the current polls a blip that doesn't matter.
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January 13th, 2010 at 6:37 pm 38
Yeah well, this isn't really the place for politics, but there's a pretty huge difference between "They're way ahead in the polls." and "They're ahead by less than the margin of error in the polls but I think they'll recover soon in spite of the fact that I just pointed out some reasons why they'll sink further in the polls, oh and I forgot to mention I don't really know anything about politics." (Which is paraphrasing your new amended version of your original statement and adding some personal observation)
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January 13th, 2010 at 6:51 pm 39
@Drachen:
I beleive the book was titled: "Boom, Bust and Echo"
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January 13th, 2010 at 8:16 pm 40
#30 Drachen, I have an issue with 85% of the current tax revenue of all levels of government going into wages and benefits of civil servants. That definatley is not the issue at all with what is going on south of the border. Your knee must have jerked up and smacked you upside the head.
Instead of schoolbooks we have indexed diamond studded pensions, what is right about that?
Instead of an audit on competancy we have the BCTF trying to negotiate a moratorium on testing, why?
Instead od reduceing the fat we have unions agitating for bigger concessions from the minority government for support, why?
When the tax revenue needed for hospitals and seniors gets 100% siphoned off the greedy socialist unions and you're personal tax bite go's from 70% to 100%, then I suspect thosse who support the staus quo will shake themselves off and say
"Wha hoppen man, don't bogart that joint dude".
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January 13th, 2010 at 8:16 pm 41
@Drachen
Not the place for politics? We are talking about economic policy right?
Pointed out some reasons they'll dip further in the polls? Please tell me you're not an Iggy supporter and believe the hype. Harper pulled this stunt before, and the sheeple forgot all about it.
My conservative roommate is part of that 10% dip in the polls… yet do I really think he'll ever vote for the left? Ya right, hell will freeze over first.
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January 13th, 2010 at 8:33 pm 42
Even in the most expensive town that we live in (Vancouver, BC), AS LONG AS you have your home paid off, you CAN survive with minimum wage. Which is why there are boomers who work as Wal-Mart greeters, MCDs, etc… To say that boomers will sell in droves when they are 65s is a bit too far fetched. Mr. Garth Turner was well known to sell this idea in the 1990s through his then Turner's Report and his Millennium TV outlet. I did miss the cute East Indian chick that hosted that show though.
If 60% of the boomers had their homes paid off, which I suspect they do in Vancouver (ours were years ago), this means they won't be selling. Boomers are healthier than ever — people still exercise. The current extreme ultra-runner record holder in British Columbia is held by a 65 year old man! Ultra-running is like running over 42KM. You folks here can run more than 50miles continuously?!?
So they are not dropping dead.
What will be causing the downfall of the real estate market is the shift to another asset class. The reason why RE went hot was due to the dot.com bust — eg Nasdaq is still below 5000 for a decade! Once an asset class is identified, bubble will form and you'll see a shift from RE asset to that. And then, there's no turning back. Other factors like interest rate hikes and so forth are just the medium.
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January 13th, 2010 at 8:39 pm 43
I realized here that people here are very negative and hoping for a crash. The bears here are constantly covering their ears to good news and only hope for bad news. What's wrong with seeing your next door neighbors get rich? Life sucks so live with it. I see so many cheerleaders hoping for a raise in interest rates. You guys are so stupid. The fed has been talking about raising rates but they have no balls to do it because they know there will be an economic meltdown. This 'raise rates' talk has been going on for ages and it ain't happening boys and girls. Get with the program. The fed will do what it takes to prop up the economy. Unemployment rate is stabilizing, money is all over the place. Just look at the olympics, people can fork out thousands for tickets. It goes to show that the economic stimulus is working or who the hell would pull out all that cash to watch the olympics?
I'm so happy scullboy is out of town. He's missing out on a great world event. I'll think about that bozo when I sit at GM Place watching hockey games while sipping my $7 beer.
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January 13th, 2010 at 8:40 pm 44
the boomer effect is more pertinent in markets where there is little or no immigration. i wouldn't expect it to be a big factor here. garth turner- for entertainment purposes only. has been wrong too many times to be taken seriously.
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January 13th, 2010 at 8:46 pm 45
Drachen: "Since there will be a record breaking number of people downsizing, moving into old age homes and dying over the next 25 years it IS bound to have an effect on prices"
There is significant underutilization of SFHs as baby boomers' children leave home. This is backed up by data from the suburbs showing population declines in established (SFH) neighbourhoods.
There are three primary classes of boomers selling: those who want to downsize because they don't like the extra space, and those who HAVE to downsize because it's their retirement nest egg or their health deteriorates. We will soon find out who's been the grasshopper. On average I expect significantly more grasshoppers than buyers.
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January 13th, 2010 at 9:04 pm 46
@The Van Man: You live in a very simple world. It must be nice. You paid off your house, so most boomers must have too. Some old guy is healthy, so most boomers must be too.
I'll keep it simple for you: the retirement wave will cause more supply than demand in RE over the next generation. In other words, the fundamentals will worsen. Bad for real estate. Real prices would drop even in a healthy market, but since we're in a super bubble (locally), they will collapse.
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January 13th, 2010 at 9:17 pm 47
@stagnate: Come on, the immigration argument again? Immigrants are not rich, in fact Canada has a problem of immigrants living off welfare. Here's a couple links from Google; there are plenty more.
http://global-economics.ca/immigrationquebecontar… http://www.canadaimmigrants.com/statistics.asp
These people are not going to be buy real estate at current valuations from boomers. Not even close.
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January 13th, 2010 at 9:20 pm 48
@stagnate: 25% of British Columbians will be over the age of 65 within twenty years— and, yes, this statistic accounts for the effect of migration.
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January 13th, 2010 at 10:30 pm 49
http://www.howestreet.com/articles/index.php?arti…
"This is a very strange time – I've never seen anything quite like it – with no good places to be, at least as far as Americans in America are concerned. Maybe Canadians are next – their real estate market hasn't really collapsed yet. If I still owned property in Canada – I used to live in Vancouver – I'd hit the bid tomorrow morning. The same in Australia, China, and the UK."
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January 13th, 2010 at 10:41 pm 50
@mino3: You must be newbie here everyone else knows that Vanman represent bears on the blogs since 2004.
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January 13th, 2010 at 10:58 pm 51
I've been following local blogs since VHB. What does that have to do with anything?
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January 13th, 2010 at 11:14 pm 52
VHB. I remember that guy. Wait, I AM that guy!
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January 13th, 2010 at 11:19 pm 53
Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year.
America slides deeper into depression as Wall Street revels
(but we borrow like there's no tomorrow….RTP)
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January 14th, 2010 at 1:35 am 54
Hey, how many of you would be interested in getting together in person for drinks? We could call it our 1st annual VanConInfConf[erence].
RE bulls and RE bears would be seated at separate tables…just kidding, although Supraboy would have to sit in the corner by himself.
Any interest?
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January 14th, 2010 at 1:52 am 55
mino3: i understand what you are saying, boomer selling is a bearish factor but well down the list. there are already a lot more boomers in downsizing situations than upsizing, but that hasn't had much bearish effect on the market. locally here there are significant numbers of wealthy immigrants and the poor ones tend to pool their resources accross a sizeable family grouping. they tend to target the type of product the boomers are downsizing from.
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January 14th, 2010 at 4:16 am 56
@stagnate:
In other words eight people move into a house that used to have just two occupants. Yeah, that's just the ticket to keep demand up to supply.
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January 13th, 2010 at 9:16 pm 57
[...] from space889 at vancouvercondo.info 13 Jan 2010 10:26 am – “I note more and more Asians here in La Jolla. I’m thinking that in ten years La Jolla will [...]
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January 14th, 2010 at 4:52 am 58
@smartmoney:
That is complete nonsense, the only level of government that spends that kind of money on its own employees (which is what I assume you mean by "civil servants") is the school boards. Municipalities come next but they have much higher capital costs.
Public sector employees account for 17% of all employment in Canada. But public sector spending is about 35% of GDP. Obviously spending on government employees must be far smaller than you claim. For example:
http://www41.statcan.ca/2008/3055/ceb3055_000-eng…
Not mentioned above is debt service costs, which by themselves make your 85% figure impossible.
BTW doctors are not government employees, although of course almost all of their income comes from the government. Similarly many other people in the private sector such as construction workers.
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January 14th, 2010 at 5:47 am 59
"I’m so happy scullboy is out of town. He’s missing out on a great world event. I’ll think about that bozo when I sit at GM Place watching hockey games while sipping my $7 beer."
*ahem* AHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!
Um, you seem to think about me a *lot* SupraLadyBoy. Admittedly I have that affect on a lot of girly Asian boys. I know, I know…. you've heard about virile Maritime men and what we're swingin' under our kilts.
It's gotta be tough, you and all your ladyboy friends servicing those fat old Daddy types. That's how you're getting into the Olympic events, right? I mean those call center jobs aren't exactly high paying. Only you and your little girlfriends would be stupid enough to pay 7 bucks for that watered down moose piss. Luckily it only takes …. what…. a shot and a half of the stuff to get you buzzed enough to go on your back for Daddy. I'm sure thoughts of me will be going through your head at the time too…. "Damn that scull boy with his boyish good looks, I'll be he's so manly in his kilt and big…. swingin…. sporran…."
And since I'm speaking to one of 'em now maybe you can tell me, is your obsession simple jealousy or are you just starvin' for a real man? Is it bitterness over what you can never have? C'mon dude, I'm dyin' to know.
And for the rest of you, yeah admittedly it's a vulgar post but I had to address Supra's obsession…. it was getting a little disturbing.
Those Asian fem boys can be so clingy and they never take "no" for an answer…..
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January 14th, 2010 at 10:43 am 60
scullboy, if you suspect that some posters are fems, they are fems who make good money to think in real estate. After all posting online is anonymous and genderless. Take a chill pill. Marry a rich cougar and all your pecuniary problems solved.
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January 14th, 2010 at 12:44 pm 61
@patriotz:
In other words eight people move into a house that used to have just two occupants.
—–
There's a name for that: 'Kitsalanofication'. Funny, it used to be the Russians that didn't have any single family dwellings. Seems like we’re headed there now! What happened?
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January 23rd, 2010 at 5:20 pm 62
I loved this well written article and great website. Very informative. Keep up the good work!
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