USA bubble peak vs. Canada today

Vibe posted an interesting comparison of the 2006 US bubble peak to the present day Canadian situation in the forums this weekend.  The local Vancouver market is bubblicious, but is there a national Canadian housing bubble?

Everyone pretty much agrees about Vancouver, but here are a couple of points that were made about the national scene:

1.It is reasonable to claim that there is not a housing bubble in Canada because only certain areas are over inflated.

2.Vancouver’s very high prices skew the national average and cause Canada to look worse than it really is.

One thing I think we can all agree on is that the US did have a housing bubble. Well I put together a spreadsheet that I feel shows that affordability is about as bad across Canada as it was in the US at their peak. It also shows that Vancouver is not skewing our national data any more than the most overpriced cities in the US were skewing their data.

In order to measure affordability I used house price to personal income ratios. I compared the 20 cities used in the Case Shiller Housing Index to the 6 cities used in the Teranet Housing Index. The US data is from 2006 while the Canadian data is from 2009.

I think the following graph most clearly illustrates my point:

Vancouver is the only Canadian city with a ratio over 9, while the US had 3: LA, San Fran and San Diego. Toronto is the only Canadian city with a ratio between 5 and 9, the US had 9 in this range. The under 5 range looks bigger for Canada but we have more population covered by our index than they do by theirs. The important thing is that the percentage of each nations population living in cities with elevated ratios is similar.

The distribution and average ratios for both countries are almost identical. I did a population weighted average of the ratios and this gave a higher value for the US than Canada, 6.3 versus 5.6. Keeping in mind that the Canadian data comes from 3rd quarter 2009, during our recent price dip, I don’t think this is a huge difference.

Now I don’t know what the future holds, but to me this data suggest we are in a very similar situation to the US at their peak. We might not take the same path down (we already had a double top) but I don’t see why our eventual bottom should be much, if any, higher than theirs. And any price drops should be distributed across the nation in a similar fashion as well.

Here is a link to the data for anyone interested.

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House buyer
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House buyer

Shameless and disgusting Van bears are suppression views from bull camp which has been right for the past ten yrs;times and times again reality has proven bull are right 101 percents.With Great China's blessing, Van RE will never collapse though there might be occasional Hiccup but Van RE will only go upward indefinitely. Those idiots who are following the advice from stupid bears are the losers,while listeners of bull are rewarded abundantly with ton of cash which they couldn't imagine in unspeakable joy. Listen you bear:admit your stupidity and ego and following the trench or you will be priced of this heavenly beautiful city.

there ain't a city like Vancouver in this icy old country.

patriotz
Member

@BH: Do they (CMHC) really only have $1.3 billion for this purpose? What happens if/when it isn’t enough? Do they just fold and declare bankrupcy, leaving the banks unpaid? CMHC is a Crown corporation and a Crown entity cannot default on its obligations. Period. There are essentially 2 options for CMHC if it runs out of reserves due to defaults: 1) Borrow on the bond market (CMHC has a Crown guarantee on its debt and can borrow on the same terms as the GoC), and raise premiums to amortize this debt over the long term. IOW future housebuyers would pay. 2) Get a bailout from the GoC, i.e. GoC would expressly make an equity transfer to CMHC. IOW taxpayers would pay. My bet is on (1), as it could be done quietly and would not affect the GoC deficit (CMHC… Read more »

Specuskeptic
Member

"reach super level 10+"

I'm on pins and needles there superdouchetime.

rp1
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rp1
superboomtime
Guest
superboomtime

Bears your dreams will never come true because once 17k is reached realtors will start bringing in the hot money. Once the hot money is in then watch out above because prices will reach super level 10+. This market is about to take off like tiger woods to whore house.

crashcow
Member

@paulb: I've wondered that too, but she only takes high-net worth individuals.

painted turtle
Guest
painted turtle

The one city to worry about if you’re a homeowner is Vancouver, where normal mortgage rates would have resulted in the typical household spending 78 per cent of its income to carry a bungalow, just shy of the peak level.

http://www.theglobeandmail.com/globe-investor/investment-ideas/features/experts-podium/housing-affordability-the-great-quandary/article1554481/

paulb
Member

@Fandango:

I wonder if she is a good financial advisor. She sure seems like a real straight shooter.

paulb fan
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paulb fan

@paulb: So 17K tomorrow. Geez, how am I going to sleep tonight. The anticipation is killing me.

Fandango
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Fandango

Vancouver Roller Coaster on Danielle Parks Juggling Dynamite:
http://jugglingdynamite.com/

crashcow
Member

@paulb: Another 3 party month? Yay!

paulb
Member

@crashcow:

16,800 no biggie

Disbelief
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Disbelief

I saw on kingsway a high rise with 1.8% finance rates for 5 years. Talk about reset rates. Buy now and in five years you're screwed. That's what they should say.

Specuskeptic
Member

Pope says: "@House buyer: Saying it twice doesn’t make your argument any stronger. Stop double posting please."

I'll take it one step further. Stop single posting while you're at it. 😛

Disbelief
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Disbelief

Anon 92
if that's all it would take. I love it.

crashcow
Member

@paulb: Thanks. Curious to see what inventory is at with April month-end expires.

painted turtle
Guest
painted turtle

Inventory is on a cruise in the Caribbean.

Since he does not pay a mortgage, he can easily take days off his job. And since the real estate-ATMs ran out of cash in the US, one can find really good bargains on luxurious holiday packages.

Kite towards moon
Guest
Kite towards moon

"YOU tell me."

Maybe two for one pizza or two for one house or 10 apartment for one house.Hey boombust run buddy run,This guy from the adoption of poster name does not care what you write after him.

Where is inventory?

jesse
Member

@Best BSer Anywhere: "so we only do business with people we like"

Haw Haw Haw :mrgreen:

Best BSer Anywhere
Guest
Best BSer Anywhere

Jesse says:

"If I were a Realtor I would be cutting back my spending and dusting off my resume. Just in case…"

At least one braggart isn’t concerned

Here is what one well known pumper who has his own blog says:

“Life is too short to be engaged in an unprofitable and soul destroying business, so we only do business with people we like.”

Anonymous
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Anonymous

Dear Lord,

I know that I don't talk to you that much, but this past year you

have taken away my favourite actor, Patrick Swayze, my favourite actress, Farah

Fawcett and my favourite musician, Michael Jackson.

I just wanted to let you know that my favourite Premier is

Gordon Cambell

Amen

Boombust
Guest
Boombust

"A great number of sellers have pocketed a significant amount of money, likely on the order of $300-400MM in capital gains in just one month. One wonders what they will do with it all!

No joke. What will they do with it?

Hmm…roll it into cigars? YOU tell me.

Boombust
Guest
Boombust

"@ Boombust

Attn: That was a parody…"

Is that Newfie for "party"?

Oh, that's on its way, not to worry.

Kid Fynnland
Guest
Kid Fynnland

We should define the ultimate bear day; the bear triple crown.

How about:

500+ listings

100- sales

200+ price changes

Does that sound reasonable?

The bear trifecta. Can we do it?

Kite towards moon
Guest
Kite towards moon

The reason behind price change:List prices are to hook up a customers as seller once the contract will be signed to list a unit, realtor will get back to sellers to change the prices with some excuses.In other case, by looking at market strength,the sellers can approch to realtors as well but price changes does not mean one direction and changes up or down does not mean lower than market prices.

Here is an most recent example from last month of price changes in the listing prices:

jesse Says:

May 1st, 2010 at 11:19 pm

A great number of sellers have pocketed a significant amount of money, likely on the order of $300-400MM in capital gains in just one month. One wonders what they will do with it all!

No joke. What will they do with it?