US Housing market continues plummet
The big news of the day yesterday was the ongoing misery of the US housing market that seems to continually surprise and astound economist and journalists everywhere. July sales dropped a record 27% to their lowest pace in 15 years. Soft landing anyone?
“This is a worrisome report and while it reflects the volatility caused by the end of the (government home-buyer) tax credits, it also indicates a deterioration in the underlying trend for housing demand,” said Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch in New York.
“For the overall economy, the dangerous link to housing is home prices and this report signifies that home prices should fall considerably faster, which could tip the economy back into a recession. We are, however, not quite there yet but this is a worrisome report.”
With home sales tumbling, the inventory of previously owned homes for sale rose 2.5% to 3.98 million units from June, representing a supply of 12.5 months — the highest since at least 1999 and up from June’s 8.9 months.
The jump in the supply of homes was almost double the six to seven months’ supply considered to be a healthy level.
Last month foreclosed properties accounted for 22% of sales while short sales made up 10%. First-time buyers accounted for 38% of transactions, the lowest in 12 months.
The national median home price rose 0.7% from July last year to $182,600.
August 24th, 2010 at 6:24 pm 1
US is US
CANADA is CANADA
UK is UK
and ….
Vancouver is Vancouver
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August 24th, 2010 at 6:33 pm 2
August Van. West – New Condo sales
1994 = 32
1995 = 40
1996 = 120
1997 = 198
1998 = 59
1999 =123
2000 = 49
2001 = 77
2002 = 49
2003 = 71
2004 = 73
2005 = 105
2006 = 87
2007 = 74
2008 = 24
2009 = 60
2010 = 15 ***Aug 25
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August 24th, 2010 at 6:36 pm 3
August Van. West – NEW units sales (House+condo+townhouse)
1994 = 53
1995 = 72
1996 = 148
1997 = 220
1998 = 72
1999 = 144
2000 = 57
2001 = 90
2002 = 56
2003 = 89
2004 = 85
2005 = 138
2006 = 99
2007 = 96
2008 = 30
2009 = 94
2010 = 17 ***Aug 25
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August 24th, 2010 at 6:38 pm 4
Aug
1994 = 2159
1995 = 2326
1996 = 2141
1997 = 2096
1998 = 1589
1999 = 2002
2000 = 1805
2001 = 2659
2002 = 2558
2003 = 3413
2004 = 2570
2005 = 3800
2006 = 3092
2007 = 3493
2008 = 1611
2009 = 3496
2010
= 435 ***Aug 8
= 703** Aug 9
= 864** Aug 12
= 995** Aug 13
= 1092** Aug 17
= 1198** Aug 18
= 1457*** Aug 21
= 1685** Aug 25
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August 24th, 2010 at 11:00 pm 5
Stories Of People Avoiding Vancouver
“Vancouver is just too expensive for what it is.”
http://wp.me/pcq1o-1fc
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August 24th, 2010 at 11:14 pm 6
@House:
You posted yesterday something to the effect your parent's bond ladders were turning into a set of horizontal monkey bars.
Why would you ladder bonds in an environment of a secular decline in yields (yields have been declining for thirty years)? You get the income and security but you reinvest at lower rates.
Better to trade the bonds (sell them before maturity and reinvest), this way you get:
1. Your principle back.
2. Some capital gain.
3. Interest to date.
Better still invest in a professionally managed bond fund, you can do this at a relatively low MER, let them worry about the timing and trading.
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August 24th, 2010 at 11:32 pm 7
@LightsOut: Ain't no good way of getting 7% risk free on money these days. Sure sell the bonds and then what? Start eating thru the principal? Works great when interest rates decline I agree but what do you say to the person 5 years from now if rates stay low?
Not saying it will happen here but Japanese fixed income is downright horrible. Maybe retirees there can try their luck on the carry trade
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August 24th, 2010 at 11:37 pm 8
I'm shocked, shocked I tell you, about this worrisome report.
Remember the old axiom that the market tends to undershoot after a bubble pops?
Well here we go again….
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August 24th, 2010 at 11:38 pm 9
@ Alum:
You forgot;
Fundamentals are fundamentals.
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August 24th, 2010 at 11:44 pm 10
There are lots of good yield bond funds. I have some in CLF.TO 1-5 yr govt laddered 4.5%
some in IPL-UN.TO at 6.7%, some in BCE, etc etc. BRC.UN looks pretty good too. Consult a professional before investing yadda yadda. Not that hard to get a relatively safe 6%.
NOTHING is risk free. Capital depreciation through inflation is also a risk, by doing nothing.
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August 24th, 2010 at 11:44 pm 11
@House:
"Ain’t no good way of getting 7% risk free on money these days"
7% risk free is gone..probably for a very long time.
Until yields put in the ultimate low, which is still some way off I hope, you can still get capital gain to supplement the bond income – whats wrong with that?
Under normal circumstances I prefer equities but these are not normal circumstances.
When the bond bull dies it will probably be time for equities again but they will have to be a lot cheaper than they are now to tempt me.
No guarantees. I know its tough on older investors who are risk averse but thems the rules.
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August 24th, 2010 at 11:50 pm 12
USA: Five 'New Normals' That Really Will Stick
Long-Term Unemployment
Renting Over Owning
Saving Over Spending
Staycations Over Vacations
Higher Taxes For 'The Rich'
http://finance.yahoo.com/family-home/article/1104…
Renting Over Owning
"Buying a home may never be the promising investment it was before the crisis hit. Gone are the days of looking at a lovely Cape Cod and seeing an instant piggy bank."
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August 24th, 2010 at 11:59 pm 13
Uh oh bears, Teranet home price index out today. How can crash be starting when prices still rise in Van? Up almost 1% from May to June.
http://www.housepriceindex.ca/Default.aspx
Vancouver is Vancouver. Don't try to change it. Stay Classy.
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August 25th, 2010 at 12:10 am 14
@SuperSmartBull:
You are the last remaining mega idiot in Vancouver. We'll see where you are in a year when bulls are begging for mercy and all the buyers are gone.
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August 25th, 2010 at 12:14 am 15
@buffates: You are right, groupthink demand that only relevant stats are those that prove bear case. Do Teranet stats scare you? That why you resort to childy name call?
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August 25th, 2010 at 12:17 am 16
@SuperSmartBull: You're still in June? hows the weather back there? Let us know when you get to August and we'll talk about the current state of the housing market.
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August 25th, 2010 at 12:25 am 17
@SuperSmartBull:
No, I love driving while looking in the rear view mirror. Those stats have dust on them. Let's have this debate around Christmas time.
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August 25th, 2010 at 12:30 am 18
@Bondscum: Why talk August until you get stats?
Point is 2 sets of stats showing different things. RE board showing drop in June which cause big cheering and party for bears. But Teranet show prices rising. So what do stats really mean? Maybe no trend yet either way. Definitely no sign of crash. I know bear, pound fist and yell, "but it HAS to crash". But once again bears are too early to a party that may not happen.
Unless bears cling to RE board stats over others. Now that would be irony.
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August 25th, 2010 at 12:33 am 19
@vreaa: Sad but true. Everything is more expensive here, even Ikea!
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August 25th, 2010 at 12:49 am 20
I see that the media war against reason is beginning in earnest. Both the Sun and the Pimps are pumping again….hard. The Sun has a series of articles running that demphasise reasoned ctitisism and lump everything that is not 'pimp talk' into a 'basket of unwashed commentary'. The attempt at misdirection is amusing….and desperate.
http://www.vancouversun.com/business/Canadian+ris…
No no say Cayo…..plice neva go down…..it differant here….buy treeeeeeee or you regret forever. I can't remember……did 'never never land' continue to exist after Peter Pan grew up? I'm thinking that this is the reason why RE will 'never go down' in Vanshithole…that fundamentals can be wished away. I'm seeing similarities between the Vancouver Sun and those guys that sell penis enlargers……they don't care what they say as long as you're still buying……the result is the same for the sheeple in the end… a flaccid dick and another dissapointment.
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August 25th, 2010 at 12:58 am 21
SuperSmartBS, this might be challenging but if you download the Teranet Excel sheet available on the same page, and for clarity open it, you'll see the last recorded transaction date is June 2010. Actually, I'm surprised a super smart couldn't count the sales activity bars on the graph and see there are only six. If you need help figuring out which month is sixth:
http://www.englishclub.com/vocabulary/time-months…
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August 25th, 2010 at 1:01 am 22
@SuperSmartBull:
Do Inventory stats scare you?
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August 25th, 2010 at 1:04 am 23
US is US
UK is UK
Canada is Canada and has delayed the reckoning
And Vancouver will suffer a collapse larger than California and Arizona.
R/E has been an excellent vehicle through which to make money. But as with dotcom IPOs, the trick is to leave while the gettin is good.
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August 25th, 2010 at 1:05 am 24
Home Ownership- An Unsupportable Socialist Dream- Time to get the industry back to free market principles.
This article is the Don Cayo's and RE pimps vision of hell.
http://www.financialpost.com/news/unsupportable+A…
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August 25th, 2010 at 1:06 am 25
Bulls,
Rates will go up – eventually. So, pray tell, how are those who are stretched out now (while the interest on 5 year fixed is 3.6%) to their limits with housing payments be able to afford them when the rates go back to 6%? Mind you, 6% is still considered low interest rate. A couple making 120k with no debt, at this funny rate of 3.5%, according to RBC calculator, can afford 420k mortgage (30 yr term). However, this same couple, at the rate of 6%, can afford only 320k mortgage, and get themselves a crappy townhouse in Port Moody.
So, bulls, do you truly believe that these rates will remain low for another five years?
And what will happen when people simply can't afford the payments any more?
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August 25th, 2010 at 1:06 am 26
@fixie guy: Please never apply for head-bear, you are not qualified. Probably also avoid heavy machinery and sharp tools.
I will go slowly so you understand.
YES, we talk about June.
Teranet show price INCREASE in May to June.
GVREB show price DECREASE in May to June.
Therefore these stats are inconclusive at best, yet bears declare start of crash in May as GVREB stats show decrease. This is cherry-pick. Bears cherry pick from evil Realtor board. That is funny.
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August 25th, 2010 at 1:18 am 27
@SuperSmartBull:
Cherries getting ripe for the bears these days. Bears may get full.
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August 25th, 2010 at 1:21 am 28
@SuperSmartBull: "Therefore these stats are inconclusive at best"? I thought prices only ever unambiguously went up?
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August 25th, 2010 at 1:29 am 29
Retail commerce in the US sucks, as is pointed out in this article. Having just been in NYC I concur…business was dead there comparatively to other times in the past. The famous crowds were subdued. I talked to a guy who owned four stores on Broadway and 5th Ave who told me his daily take was down from an average of $20,000 to $5000. Where is the 'recovery'?
Letterman was right…Obama is so 'outta there'….a charasmatic speaker but nothing going on.
http://www.guardian.co.uk/football/2010/aug/24/ma…
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August 25th, 2010 at 1:31 am 30
@SuperSmartBull: Teranet uses a three month moving average for their numbers. Their numbers will always be a little bit different than REBGV, but over the long term, the trend will be the same. Currently that is down.
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August 25th, 2010 at 1:33 am 31
Sadly, I think SSB has a point. The Teranet data don't lie, whereas the REBGV is as trustworthy as a Chinese sweatshop owner on payday.
I don't know what strain of BC Bud this town is collectively smoking… but it's clearly living up to its reputation. Maybe next month.
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August 25th, 2010 at 1:33 am 32
I recommend jumping over to Calculated Risk for more analysis on this. He is claiming this release is not the first report that will disappoint in the coming 1-2 weeks. He was calling this one about 2 weeks ago, even longer for those who read his remarks in the comments. Don't say you weren't warned!
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August 25th, 2010 at 1:39 am 33
@SuperSmartBull: "Teranet show price INCREASE in May to June."
Yeah a whopping 0.8% increase. Like your comments, that's in the noise.
Teranet averages its data over 2-3 months. Averaging produces a lag so I think June will most likely be the peak for the year. But maybe those uber-rich Shanghaiese who weren't smart enough to buy 5 years ago will come over to keep prices high forever.
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August 25th, 2010 at 1:52 am 34
No one can say, but certainly possible. Bears looking for higher rates to kill this market may be disappoint for long time.
Bears, you are missing point again. Maybe Teranet data 3 month average, maybe begin trending down soon, maybe maybe maybe. This is same old story from bear. Until signs are clear from all stats that prices are crashing, bears do disservice to themselves by calling pre-mature crash and having fake party. Bears do it again and again and again. Current data is not showing crash when not viewed through bear 3d glasses. You can list all reasons why market should crash, doesn't matter at this point, it hasn't. So please just sit on deck and enjoy rest of summer with DougieDog and Cranteeny. Maybe think about where good place to dig mole tunnel. Probably not around QE park, earth is too hard for shovel.
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August 25th, 2010 at 2:10 am 35
What is happening in the US is what we will be seeing in a couple of years in Vancouver. The government had postpone the crash in '08 but this time, there is nothing they can do about it. If you have recently purchase real estate, be afraid, very afraid!
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August 25th, 2010 at 2:16 am 36
@SuperSmartBull – You're right, there was an uptick. How bizarre, when you can rent at less than a third of the cost of ownership! So strange that FTB are putting 2/3 more into the monthly cost of their housing.
That doesn't make any sense, paying more for the same thing.
Oh, think, think, think. Why would they do this?
I KNOW! They must be speculating that there's a serious upside for them! Otherwise, why invest so much borrowed money in a single asset class AND pay more for the same space?
Hmm. Last time I saw this was in the States a couple years ago. They had a touch of the irrational exuberance flu.
(sarcasm off)
Watching the monthlies is a fun distraction: but we all know that those numbers contain noise, and most of us have been surprised trying to guess when the irrationality might end. Hell, if this sucker went for another year, it'd surprise the hell out of me, but it wouldn't change my analysis.
The basic truth – that FTBs are paying more for the same space in order to invest borrowed money in a single asset class – well, that's provably the way it is.
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August 25th, 2010 at 2:19 am 37
Just another negative headliner:
More bad news on home sales sends stocks lower
http://finance.yahoo.com/news/More-bad-news-on-ho…
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August 25th, 2010 at 2:19 am 38
@SuperSmartBull: Just remember, the downturn has to start somewhere. Could this minor downturn in prices be a precursor for the long awaited slide? Only time will tell.
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August 25th, 2010 at 2:21 am 39
@SuperSmartBull:
When all data shows the crash is here, it's already too late to sell. Real investors can read the warning signs. There are many warning signs.
Listings are near historical high
Sales near over decade low
Prices at historical high
Affordability at historical low
Mortgage rates near historical low(can't go much lower)
Economy going into double dip
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August 25th, 2010 at 2:23 am 40
@SuperSmartBull: Using your own Teranet data… notice that just before the 2008 crash, there was a huge upswing in prices? Yes, that's what's happening now… the bounce before the final fall.
Also, keep in mind that prices aren't such a good indicator, because a lot of stubborn homeowners hang onto unrealistically high prices; one should pay more attention to sales numbers and MOI.
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August 25th, 2010 at 2:32 am 41
Larry is starting his monthly comparisons again for the next 7 days.
First up, Coquitlam.
Median price down 6.6% mom.
Sales down over 50% mom.
http://www.yattermatters.com/2010/08/count-down-d…
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August 25th, 2010 at 2:32 am 42
@Starving Artist:
That´s the running (coupon) yield, NOT the yield to maturity. The fund holds bonds with a market price currently over 100 which will pay back 100 upon maturity. That has to be subtracted from the running yield.
That said, CLF is a reasonable place to park money if you want safety of principal. As for the poster who thinks managed bond funds will beat the market with any kind of reliability, forget it. Nor can you beat the market by selling bonds before maturity.
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August 25th, 2010 at 2:41 am 43
@Jim Bob:
No it's not. RE markets move with glacial speed compared to the stock markets. Anyone who bought at a price more than a few % from the top can still get out.
The irony is that most RE "investors" will deny the obvious signs of a crash and hang on, hoping for a turnaround. But a few will catch on and bail out, which is enough to keep prices falling. Slowly.
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August 25th, 2010 at 2:47 am 44
@oneangryslav2
Further to your question about the prognosis for rates.
Check out this Levy piece.
http://www.levyforecast.com/recent-publications/d…
They are painting a bleak picture of a "contained depression" with the implication of low rates for a long time.
They focus on unemployment – but equally important is the secular change from credit expansion to credit contraction and the desire to pay down debt.
Levy are pretty good. Wynne Godley was there for a long time and Hyman Minsky was there also – a good pedigree.
Steve Keen gave a talk there awhile ago – his modeling is interesting.
My current bet is rates will be low and dropping for quite a while.
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August 25th, 2010 at 2:54 am 45
Thanks to Garth for finally backing me up with a comment as to why falling real estate prices are not 'deflationary'. I was banging away at this fact and getting nowhere.
"Over recent weeks I’ve been yakking on about deflation. Some people will think a fool losing six hundred thousand on a concrete box in a town with no economy constitutes deflation. It doesn’t. This is a price correction of the kind that will sweep into major urban areas. It restores some sanity by revaluing properties closer to what would be normal market levels. And if these were normal times, that’s where it would end. Big losses for recent buyers. Three or four years of crappy sales. Then a slow grind higher.
But this is not normal, and to see what comes next I counsel you once again to look south.
Yesterday economists were pulling out words like “devastating,” painful” and “fateful” to describe the current state of American housing. I’m sure you heard the news. Resales in July plunged by 27% across the US to the lowest level in 15 years in the worst one-month freefall since they started counting this stuff 42 years ago.
But the news gets worse. The biggest drop in sales came with affordable houses middle-class families would snap up, priced between $100,000 and $250,000 (the average US house now sells for about $180,000). There is a 12-month supply of unsold homes. Foreclosures have risen 1,000% in four years. Demand for single-family homes is at a decade-and-a-half low. Foreclosures and short sales account for a third of all transactions (vultures). Almost 25% of families with mortgages in the US are now in negative equity. Over 4,000,000 live in homes they have stopped making payments on, since there’s no equity."
If you go on to read the rest of his blog entry you will come away with a reasoned opinion as to why the biggest drops in the most speculative areas of the market have not happened yet but will and when they do they will be extreme. The west side for example will WISH 50% was as far as prices have to fall……not even close.
http://www.greaterfool.ca/
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August 25th, 2010 at 2:57 am 46
@ Jimmy August 25th, 2010 at 10:19 am
Yeah, more negative data…
Then…magically stocks stage amazing turn around. Everyone shrugs off news and goes back to the bucket of Coronas (or pitcher of Mojitos or whatever tickles your fancy…)
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August 25th, 2010 at 3:02 am 47
U Bond guys may want to take a look at this.
http://www.bloomberg.com/news/2010-08-25/german-b…
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August 25th, 2010 at 3:07 am 48
@ Teddybear August 25th, 2010 at 9:06 am
If history is any indicator, rates could stay low for a very long time. Of course, this would imply that things are not so great. While payments may not change much, prices will be lower and many homeowners will be hugely underwater (without the option to simply walk away like in the US).
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August 25th, 2010 at 3:09 am 49
Where is the plethora of public opinion in Canada being printed? We have no objective media….people are being kept in a state of ignorance.
http://economicrot.blogspot.com/2010/08/weekend-f…
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August 25th, 2010 at 3:14 am 50
@patriotzed:
Indeed. I was just trying to scare baby bull. In a volatile RE market like we have now, holding off a sale could result in a 20 percent loss, or 200k for a Vancouver SFH.
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August 25th, 2010 at 3:21 am 51
Has anyone yet pointed out to the inappropriately named SuperSmartBull that the Teranet index tracks matched sales pairs and the others are overall market average/medians, so they're not directly one-to-one mappable? Or is it even worth the effort trying?
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August 25th, 2010 at 3:37 am 52
@LightsOut: "with the implication of low rates for a long time."
So from, say, 2.5% to 1.5%? Bond funds are going to have a tough time with that one.
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August 25th, 2010 at 3:40 am 53
I'm surprised with the fact that there are so many intelligent people on this blog trying to convince a clown (SuperSmartBull) that crash is inevitable, strange?
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August 25th, 2010 at 3:42 am 54
@fixie guy: Yes your correct. Would the Teranet index not be the more accurate one then? SSBs point is the data is not yet conclusive that a correction has begun. I think we can all agree on that.
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August 25th, 2010 at 3:59 am 55
True that Vanrod, but it also lags 3 months so irrelevant to August numbers. The other indexes are not. So for smoothed market accuracy, Teranet. For instantaneous data, the others. No need for false dichotomies.
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August 25th, 2010 at 4:02 am 56
"the data is not yet conclusive"
Haha. Prices are always a lagging indicator. As shawnchong said, look at sales. From that measure, the "crash" has already begun. Just ask Realtors.
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August 25th, 2010 at 4:10 am 57
@jesse
"So from, say, 2.5% to 1.5%? Bond funds are going to have a tough time with that one."
Au contraire – if I'm holding a 30 year bond with a 2.5% coupon and rates drop to 1.5% I will see a cap gain of approximately 24% and income of 2.5% per year. Thats better than stocks and may even beat bullion if the drop is over say 1 year.
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August 25th, 2010 at 4:17 am 58
SSB is obviously more intelligent than they're pretending to be. I'm surprised some of you haven't worked this out yet.
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August 25th, 2010 at 4:17 am 59
@fixie guy:
Thank you for making my point. Please ask yourself question, why is useful to use running average? Maybe to filter out noise? So no need to get excited about 'instantaneous' monthly or weekly or daily data because too much noise.
Please still no power tools.
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August 25th, 2010 at 4:21 am 60
@jesse:
That is interesting idea. What is correlation coefficient between # of sales and MOM price change? Do decreasing sales ALWAYS predict falling prices?
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August 25th, 2010 at 4:25 am 61
@jesse
Also don't forget bond funds have large holdings of older bonds still paying good coupons usually. So the fund will probably still pay well north of 1.5% for a long time. If yields stay flat forever the payout will come down gradually as the bonds are paid out and reinvested at the lower rates.
Also as rates come down the cap gains go up on further rate declines (a 10 basis point move down on a 2% coupon is better than a 10 basis point down move on a 2.5% coupon by a wide margin). So this game can be played for a long time.
However you should trade bonds just like stocks
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August 25th, 2010 at 4:33 am 62
Thompson aka SuperSmartBull, come back when you understand basics like 'sales pair' and how monthly numbers (heaven help us) affect rolling averages. Quit wasting everyone's time with spray and pray rationalizations.
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August 25th, 2010 at 4:35 am 63
I agree with SSB and Vanrod.
The downward trend in Vancouver real estate is not yet proven and not yet firmly established. The Teranet data clearly bears that out.
I encourage them both as well as their families to continue buying and/or holding real estate.
Good luck to both of you.
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August 25th, 2010 at 4:36 am 64
@SuperSmartBull: "What is correlation coefficient between # of sales and MOM price change?"
Highest correlation to price changes is MOI. Right now MOI is around 7 which is unusually high for this time of year. Price drops are coming. MOI is also seasonal and will normally increase through the fall. Of course this is only valid without uber rich Shanghainese coming by the planeload.
But don't go and tell Realtors all about the MOI-MOM correlation. The three things they need to worry about are sales, sales, and sales. By that measure the "crash" is here.
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August 25th, 2010 at 4:49 am 65
The bullshit tap is being turned on to full blast with Global news at Noon pimping 'What can you Buy for $650K' Bwahahahahahahahaha ….they had the blond bimbo for the background gushing sound effects while 'crack report-whore' Sarah Daniels went hog wild about East Abbottsford Bwahahahahahahahah…New West Bwahahahahahahahahaha and some shithole in Surrey…..bwahahahahahahahahaha….the first in a blueberry patch with Sikh extremists for neighbours and the other two so old and fucked up that the granite and the promise of an unfinished 'nanny suite' almost made me upchuck my gin and juice.
Boys and girls….the war has officially begun and the local media has chosen sides. If this is the upshot of the 'public relations ' strategy….to get two bimbos trying to promote prices as they are as being affordable and accessible….and promote this crap as affordable……ho ho ho have we got some need for a big umbrellas for the bullshit thats going to rain down on the unsuspecting sheep.
Did everyone notice that the pimping has only included the whores from the real estate related and dependant industries?????????? not a word of critique??????? Will Garth Turner be arrested when he comes to town with his opposing views????????
If the twin bimbos think that $650K is the best thats going to come then maybe they should think about whats happening in Britain and Ireland where sales orgs, reps orgs and the media is the subject of many ( growing) lawsuits because of the zealous pimpimg of real estate in those jurisdictions to the unsuspecting and the trusting. Apparently consumer protection laws are infringed when the industry pimping is also sold as gospel by organizations that lie for money and consumers get burned. Will it happen here….from what I am seeing in the meida now ( this past week) it is likely that the blowout will have legal ramifications of fraud and deceptive advertising. Wait for it…you heard it here first.
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August 25th, 2010 at 4:52 am 66
@jesse:
This is fair analysis. Of course the only distinction is magnitude of price drop. Bear wishing for massive crash 30%+. Another possibility is small drop 10% or flat price.
http://canadabubble.com/charts/634-greater-vancou…
Look at MOI chart for 2006 to 2010. There are 2 other times when MOI behave like this year. Armageddon 2008 lead to dramatic fall without Bruce Willis. But also similar pattern in fall 2006. Result was flat price and then MOI drop again in 2007. Both are possible outcome. Only blinded Debbie or DougieDog Downer Fixie-bear can't admit that to themselves.
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August 25th, 2010 at 5:03 am 67
@SuperSmartBull: Seriously SSB, where exactly will you find those buyers to give you that soft landing. Please don't say it's gonna be the bus load of Chinese investors that get $30/day meals.
Unless sales pick up, MOI will likely continue to grow.
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August 25th, 2010 at 5:04 am 68
@specialfx3000:
…. and prices will drop. (with accelleration)
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August 25th, 2010 at 5:06 am 69
@SuperSmartBull: "Of course the only distinction is magnitude of price drop. "
Yup. How many months of MOI at 7 will be required for prices to drop by 40%? I figure about 50, or just over 4 years. In "real estate years" that's around 3.642 weeks.
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August 25th, 2010 at 5:07 am 70
@Best place on meth: Well, we've already had three months of falling prices. If I recall correctly, the REBGV stats show prices down 6% from the peak in only three months.
How many more months of price declines do you need to see before you will conclude that the "downward trend" in local RE prices has been "proven"?
I would say that three straight months of prices declines is a down trend.
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August 25th, 2010 at 5:10 am 71
July 2006 MOI = 3.82
July 2010 MOI = 7.29
Dec 2006 MOI = 6.52
Dec 2010 MOI = ?
Assuming the same percentage increase we should expect that question mark to turn into a 12.44
What was your point again?
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August 25th, 2010 at 5:17 am 72
re Global news. It's really weird to see 'reporters' go on about RE in the news. Why would RE be in the news (TV/papers/radio) so often in the first place?
having lived in Germany until i was 30 years of age i can say I've never seen a RE segment in German news – ever.
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August 25th, 2010 at 5:17 am 73
@SuperSmartBull:
MOI is a function of the competing mechanisms contributing to the creation of supply and demand, respectively, to purchase real estate at any given point in time. It's not a factor independent of the economy, personal psychology (also affected by the economy), wage growth, future prospects, the bond markets, etc.
Given that, SSB, do you feel like the fall of 2010 is more like 2006 or 2008?
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August 25th, 2010 at 5:24 am 74
#72 G, Its called 'pimping'. Probably Germany has consumer protection laws that require the pimps to disclose news from advertising as they do in the US and Britain.
The local media has obviously no regard for the consumer.
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August 25th, 2010 at 5:28 am 75
hopefully nobody posted this:
http://www.google.com/trends?q=blowjob
who is number 1?
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August 25th, 2010 at 5:32 am 76
@realpaul: Don't worry, we can sue them. The list is long. They are disguising advertising as reporting and journalism and not disclaiming it as such. The local media gets a large percentage of its revenue from real estate. They have their rolodex of the same cheerleaders posing as "professionals" that provide forecasts and advise. This is a huge conflict of interest and everyone that stupidly bought real estate in the last 4 years based on what they were told in the local media should sue them. Its not reporting, its advertising and promoting a bias based on income which is a clear conflict of interest.
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August 25th, 2010 at 6:10 am 77
@oneangryslav2:
I think it's in between the two, but on the 2006 side. I know this will anger bear, but I would be surprise to see repeat of 2008 under current environment. Maybe black swan change to SuperSmartBear, but not now. Besides everybody know that crash can't begin until every bear has capitulate, and there are still too many on this blog drinking Cranteeny and having DougieDog.
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August 25th, 2010 at 6:17 am 78
@specialfx3000:
What if sales pick up in fall and winter and listings continue to go down? Do you still think MOI increase?
- What if low sales is not lack of buyers, but lots of buyers in 'wait and see' mode? What would cause them to jump in? Maybe 10% off peak price?
- What is many listings are just fishing expedition or crazy chicken pricing? Maybe non-serious sellers continue to pull listings?
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August 25th, 2010 at 6:18 am 79
@gork:
Shows you how much our economy depends on people buying and selling houses to each other. It seems like we have no real economy anymore, just people buying and selling things to each other (consumerism!) and houses make up a huge percentage of this economy. Too bad this requires people to take on more and more debt, since our wages definitely aren't growing. Which is why it will eventually collapse. The media has convinced us all that a strong housing market with ever-increasing prices = strong economy. Too bad it's just not true, quite the opposite, in fact. An economy built on debt is weak, like a house of cards.
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August 25th, 2010 at 6:49 am 80
I've been reading this site for the last few weeks and find it quite interesting. I'm personally bearish on lower mainland real estate, but I do appreciate SSB occasionally…. I think we have the hint of a crash, but it can't be confirmed yet. The amount of faith in real estate in this town is crazy.
Some anecdotes
Last weekend had lunch with my wife's cousin. They are moving back to Ottawa in the fall. They spoke to a realtor recently who told them "the market isn't so hot right now, wait until October, it'll come back just like last time". I kept my mouth shut, but there is one couple who are holding off listing now, but will HAVE to sell in the next few months.
Of my group of friends.. late 20s early 30s. I can think of 6 couples who own. Of those 6 only two actually came up with their own downpayment, and both of them make >300k a year. The interesting thing is, both of them have been forced to move East for job advancement. The rest have all been given minimal downpayments from their parents.
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August 25th, 2010 at 6:55 am 81
gork Says:
August 25th, 2010 at 1:17 pm
re Global news. It’s really weird to see ‘reporters’ go on about RE in the news. Why would RE be in the news (TV/papers/radio) so often in the first place?
—————————————————
I saw that real estate segment this afternoon. They were showing a renovated house in New Westminster with a nanny suite (mortgage helper) and more bang for your buck if you go further away from Vancouver. There is gotta be a number of views thinking, wow, I better go out and buy now.
Global may defend its "consumer segments" as telling the viewers what's out there at various prices.
They pump housing. They also pump travel. Just look at the numerous travel segments with Claire Newell – Travel's Best Bet where she lists off a few great travel deal packages.
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August 25th, 2010 at 6:56 am 82
@realpaul: The fact that this person gets positive ratings attests to the demographic of this blog.
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August 25th, 2010 at 6:57 am 83
@Jim Bob: You mean like as evidenced in the past 10 years?
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August 25th, 2010 at 6:59 am 84
@realpaul: Perhaps the media should be government regulated. Oh right, but you hate government. Realpaul you are a sad example of DNA.
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August 25th, 2010 at 7:01 am 85
@SuperSmartBull, regarding "What if low sales is not lack of buyers, but lots of buyers in ‘wait and see’ mode? What would cause them to jump in? Maybe 10% off peak price?",
1. Do you really think there are buyers left in any quantity? Given that the chief CREB (Calgary realtors) spokesperson explained the recent drop in sales due to borrowing demand from the future, it seems that realtors understand the idea pretty well. There just aren't very many buyers left, and the number continues to diminish as the herd mentality concerning real estate continues to shift. Moo, moo, baa, baa, they're catching on.
2. But to make you happy, let's assume there are some buyers left. That being the case, I expect many of them will in fact jump in at 10% off. Oh well, oh dear, too bad, so sad, "catch a falling knife" …. it won't be me jumping in!
Regardless … in the end it's all good for those who are waiting to buy at prices where it is cheaper to own than to rent. The outcome is inevitable, only the timing is unknown. Why can I say that? Because all Ponzi schemes eventually collapse.
Let this be your mantra: "all Ponzi schemes collapse". Say it five times before going to bed every night, and you will begin to understand.
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August 25th, 2010 at 7:10 am 86
#81 J, all those 'segments' are in fact 'advertising' that has been bought and paid for by the advertiser. Those 'travel spots' are in fact independantly produced with supported advertising, the revenue is shared with the station….all offered up as 'advice'…with the smiling Bimbo faces just like Home Shopping Channel and the 'best deal plugs' as little more factual than a real estate agents spiel who hasn't had a commission for a couple of months…..in other words…its all bullshit. Thats a fact that few people seem to understand.
These real estate segments are also time 'rented' by the pimps and independantly produced, bought and paid for by the presenters sponsors…..thats how TV really works.
What is criminal is that your government hasn't brought in consumer protection laws that would require these lieing pimps to disclose the advertising that is being disguised as 'news'. Now….if they were to disclose who hired the 'craxk report-whore' to do the 'real estate segment' on Global today, then people would have formed a totally new and subjective perception and treated the segment as an ad rather than a 'news segment'. The advertisers are hiding behind the historical trust that people 'had' for news organizations, manipulating the public, knowing full well that a percentage of viewers are gullible and trusting 'because they said so on TV'.
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August 25th, 2010 at 7:20 am 87
@realpaul: Watch CBC News realpaul. We don't have your kind of bimbos.
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August 25th, 2010 at 7:20 am 88
@Peter Mansbridge: BTW, who uses the word bimbo these days anyways? Realpaul, I imagine you look like Mr. Fearley from 3's Company.
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August 25th, 2010 at 7:48 am 89
@Peter Mansbridge: Mr. Furley was a dork.
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August 25th, 2010 at 7:52 am 90
@SuperSmartBull:
Wrong again, SSB. If you think that the sentiment on this blog is indicative of that of the general population, you have very poor perceptive skills.
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August 25th, 2010 at 7:54 am 91
@Arnold Palmer:
Ah, but it IS very much regulated. But, oh right, you can only speak in false dichotomies to make your point. Where you have all knowing, all loving, all perfect government on one side, and anarchy on the other. How about a government that actually enforces the laws and regulations it already has, since it has taken on the responsibility of protecting its citizens? That would certainly be a fresh change.
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August 25th, 2010 at 7:56 am 92
@SuperSmartBull:
What if with the economy slowing and unemployment rising, people are finally reaching the limits of what they can afford to pay on a monthly basis to "own" a house?
What if the surprising symettry of what happened in the US and what is happening in Canada continues?
What if things just are not different here and Vancouver, like every other city in the world, is not immune to basic laws of economics?
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August 25th, 2010 at 8:01 am 93
Gadzooks! Canada 5 year bond almost dipping below 2%!
Get ready for another cut in mortgage rates….
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August 25th, 2010 at 8:23 am 94
@Bondscum: Mortgage rates won't go much lower than they are, regardless of the yield on Canadian government bonds. Why? It's all about the economy. The spread between the five-year bond and mortgage rates means that banks can make some good coin, but the absolute rates we're seeing right now are signaling very rough economic times ahead, where property owners' ability to keep paying their mortgages will come under increasing strain.
Nothing that's happened in the last couple of years has disabused me of the view that we are in for a generation of relative economic malaise as the inevitable result of finally coming to terms with the effects of an unprecedented global (and decades-long) credit expansion.
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August 25th, 2010 at 8:23 am 95
@Bondscum: Is it possible that the bond market is going to rain on our crash again?
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August 25th, 2010 at 8:49 am 96
Commentary by David Rosenberg on the current R/E swan dive in the US:
"The U.S. housing sector is clearly double-dipping — that dive to 3.83 million units in July undercut the “depression” low of January 2009 by 15%! The lesson for the government is that their ‘tax goodies’ do nothing more than distort the market rather than actually help out. Oh yes, we should add this too; the “bulls” were all over the fact that home prices in yesterday’s existing sales report did not decline and that should be construed as a sign that real estate valuation has bottomed out. Not so fast. The fact that existing homeowners were stubborn and refused to discount was one of the reasons why sales slid a record amount in July, but reality will eventually set in that to move the near-record inventory, it will be the asking price that inevitably approaches the bid, not the other way around…"
I love that last observation, that the ASKING PRICE WILL INEVITABLY APPROACH THE BID, NOT THE OTHER WAY AROUND.
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August 25th, 2010 at 8:52 am 97
Is it possible that the bond market is going to rain on our crash again?
Didn't help the US much…
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August 25th, 2010 at 9:10 am 98
The Ellusive Canadian Housing Bubble: Summer 2010 Edition -Canary in a Coal Mine
Some interesting stuff here…
"The current housing market has the potential to explode, with a single spark causing a vilent cocllapse in prices."
"properties in Vancouver are 35-50% above their fair value"
http://www.scribd.com/doc/36383418/The-Elusive-Ca…
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August 25th, 2010 at 9:47 am 99
@Dan in Calgary: I'm currently owning (condo in the suburbs) and my total monthly housing costs are less then most of my friends that live in comparable condo's downtown. Is it because I put 20% down? Possibly, so please don't spew blanket statements like "owning is more expensive then renting" right now, when that is not always the case.
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August 25th, 2010 at 9:49 am 100
New Listings 173
Price Changes 83
Sold Listings 111
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August 25th, 2010 at 9:53 am 101
@oneangryslav2:
I keep waiting for Americans to arrest their drift toward a Europe-like twilight and rekindle the spirit of entrepreneurialism and limited government that made their country so dynamic. I'm not sure it's going to happen.
"ASPEN, Colo.–Intel Chief Executive Officer Paul Otellini offered a depressing set of observations about the economy and the Obama administration Monday evening, coupled with a dark commentary on the future of the technology industry if nothing changes.
Otellini's remarks during dinner at the Technology Policy Institute's Aspen Forum here amounted to a warning to the administration officials and assorted Capitol Hill aides in the audience: unless government policies are altered, he predicted, "the next big thing will not be invented here. Jobs will not be created here."
The U.S. legal environment has become so hostile to business, Otellini said, that there is likely to be "an inevitable erosion and shift of wealth, much like we're seeing today in Europe–this is the bitter truth."
http://news.cnet.com/8301-13578_3-20014563-38.htm…
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August 25th, 2010 at 9:59 am 102
@Post 99 Anonymous
Did you include cost of commuting to work, and loss of productivity due to sitting in traffic and having less time to recharge with your family & friends?
Living in the suburbs can not be compared to living downtown unless you can include the following factors:
Travel time: Suburbs to downtown takes at least an hour each direction. That's 2 hours lost a day. In minimum wage terms, that's $16 you're not being paid for as part of a work day.
Transportation cost: a 2010 TDI is estimated to cost $0.50 per mile including gas, maintenance and depreciation. Or There's transit @ 2 or 3 zone rates.
Opportunity cost: Because you have 2 hours less in a day to recharge, you have less energy to focus the next day, less time to improve your skills, or less time to socialize and build your networks.
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August 25th, 2010 at 10:04 am 103
@Anonymous: 99 – Apples to oranges. What is the cost of renting in the burbs where you live? What is the cost of owning dt where your friends are?
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August 25th, 2010 at 10:23 am 104
99 reporting in: Yes there is a travel time to my daily commute, however it's only about 35 minutes each way, and I use transit not my personal vehicle. (Lots of time to surf VCI, and look at all the new builds still going up along the skytrain line.)
Prices downtown where my friends live are extremely overpriced as you can imagine, Yaletown, Mid-Town and International Village. I would not be able to get the same value for my dollar downtown.
And yes it would be cheaper to rent where I live but only by around $150-$200 per month. I would rather pay that premium just so I don't have to have the hassle of a landlord, again personal choice.
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August 25th, 2010 at 10:40 am 105
@Anonymous:
My b.s meter is red-lining right now. Please fill us in on the specifics. How long is your mortgage term? Rates? Monthly mortgage payment, insurance, strate fees.
What is, in actual dollars, the rent for a unit comparable to yours.
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August 25th, 2010 at 10:46 am 106
I'm with 99, the burbs are a better value than renting DT and there are way less douche bag posers than in Vanhattan!
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August 25th, 2010 at 10:46 am 107
@ThisTimeIsDifferent: #98
Good article, this part made me laugh:
"A broad group of analysts and commentators, ranging from industry participants to academics, have been willing to publicly entertain a number of explanations ranging from the somewhat plausible to the laughably arcane."
He must have been reading from the book of Somerville.
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August 25th, 2010 at 10:49 am 108
@Arnold Palmer:
Take a look at the solution for US recessions over the last 30 years. Lower and lower interest rates. The US interest rate has been at zero for a long time now and hasn't been able to recover. The engine of the world's economy has just run out of fuel and we're stuck in a pile of shit. But please, buy more real estate, it worked for Tom Vu, and it can work for you.
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August 25th, 2010 at 10:57 am 109
“Vancouver is just too expensive for what it is.”
For me, that just says it all. I've just got back for spending 3 weeks there. I loved it, it's a great place. But it just ain't worth th money – not by a long chalk.
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August 25th, 2010 at 11:40 am 110
Anonymous, regarding your comfortable position and "Possibly, so please don’t spew blanket statements like “owning is more expensive then renting” right now, when that is not always the case".
Good for you! You're an exception to the general rule. Well done!!
Did I "spew"?. I thought I merely generalized. Definition of spew: "spit: expel or eject (saliva or phlegm or sputum) from the mouth". Were you trying to be offensive?
btw, are you counting correctly? Just curious. You're obviously comfortable with where you are, so it doesn't really matter whether your math is wrong. I wouldn't normally bring this up, but you suggested your housing costs are low "because I put 20% down". For example, what is the opportunity cost on the 20% you put down? If I owned a $2 million dollar house outright, what is it costing me? (a) Zero or (b) the substantial opportunity costs on not investing $2 million?
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August 25th, 2010 at 11:44 am 111
@Anonymous:
"I’m with 99, the burbs are a better value than renting DT and there are way less douche bag posers than in Vanhattan!"
Yeah, no Ed Hardy-wearing douchebags in Surrey…… right?
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August 25th, 2010 at 12:24 pm 112
Jim Bob Says:
August 25th, 2010 at 6:49 pm
But please, buy more real estate, it worked for Tom Vu, and it can work for you.
———————————————–
I wonder how many people on this site actually watched Tom Vu's infomercials that were on TV about 20 years ago. He was hilarious with the beautiful women on the sailboats.
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August 25th, 2010 at 12:25 pm 113
C'mon, lets not pick on Surrey….they got the most housing starts this month. Ed Hardy should be opening up shop soon.
As for DT…little culture, little excitement, and way too many "try hard's" and shoebox millionaires.
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August 25th, 2010 at 12:31 pm 114
Remember the Canadian guy on the Tom Vu infomercial? He only made 12K on his deal….must have not been from Vancouver.
Come to my seminar!
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August 25th, 2010 at 12:47 pm 115
Hey crew Stu here, Stu. Now we're living in uncertain times, even the Kings are paying millions to that handicapped looking kid the Canucks used to have. One thing you can count on is suburban condos here in lotus land. You might pay a bit more than rent but a little sacrifice can pay big dividends. Think of the sacrifice Stu's father made fighting the Japs in Burma. Fought malaria as well as the kamikaze. Owning real estate is a right worth fighting for.
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August 25th, 2010 at 1:21 pm 116
@Stu:
Thanks to men like your dad, the Germans will never attack Pearl Harbour again.
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August 25th, 2010 at 1:40 pm 117
I really don't understand how Canada's economy continues to grow, given what's happening south of the border and the fact that the US is our largest trading partner.
From Mish, I learn that since 2006, almost as many residents of the US have been added to the food stamp roll as there are residents of Canada. Yup, just under 30 million extra USers are being provided with food stamps (for a total of about 40 million) since 2006.
http://globaleconomicanalysis.blogspot.com/
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August 25th, 2010 at 1:45 pm 118
Wow, can you be any more of a twit than to rag on one of the best character actors of the past five decades? Don Knotts is a legend in the acting business.
http://www.threescompany.com/tcompany/www/cast.ht…
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August 25th, 2010 at 2:25 pm 119
@VHB: "Is it possible that the bond market is going to rain on our crash again?"
It's a lot like taking heroin. First shot's a blast, then it's diminishing returns. Or so I've heard.
We can do a bit of math on interest rates and take a good guess though. The variable rate has little room to move. For those who will or have gone variable, affordability doesn't markedly change.
The 5 year posted mortgage rate went from around 7% to 5.25% in 2008-2009, a 1.75% drop or 15% "step change" in monthly payments. This time we could expect maybe a 0.75% drop or so, or about 7% step change in monthly payments. This improved affordability is muted because the previous drop and lower prices likely borrowed future demand.
It's hard to say what the governments will do but, at least now, there is significant push to balance the books in a few short years. The spending that went along with the interest rate cuts may not materialize.
I would say that the coming mortgage rate drops will help keep MOI from running away. Price moves will be muted but on the downside nonetheless. The real story in BC is outside the LM where MOI is well into the right hand plane. Owners there need to visit an oncologist soon to give them the bad news. Time to get the affairs in order.
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August 25th, 2010 at 2:41 pm 120
Downtown vs the Burbs is ENTIRELY irrelevant. All that matters is rent vs. the full cost of owning for similar units in the same area.
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August 25th, 2010 at 2:47 pm 121
The Zero Hedge blog has a post with a pdf on the current state of the Canadian housing market. Lots of excellent charts and graphs comparing income and prices, etc.
http://www.zerohedge.com/article/elusive-canadian…
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August 25th, 2010 at 3:12 pm 122
@oneangryslav2:
To the extent that 86pct of our exports head there. The continued dismantling of the US growth machine coupled with our inevitable housing crash makes for an ugly decade ahead. Whereas previous generations will be remembered for winning global wars and expanding prosperity we will probably go down as the generation that lost the plot.
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