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Housing as a multiple of Canadian equities

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I took a quick look at Canadian housing prices in certain cities over the last 25 years a multiple to the Toronto stock exchange – I took month end data but smoothed the TSX over trailing three months

– I figured that the TSX takes into account, interest rates, earnings, asset inflation,… and all the other factors that trickle down to housing prices.

What I found is that if the TSX doesn’t appreciate.
Vancouver real estate requires (based on comparative multiples):
1) a 10% drop just to be at the normal end of – expensive from extreme expensive
2) a 20% drop to be at the high end of normal
3) a 30% drop to be at the cheaper side of normal
4) a 40% drop to be in line with the lowest multiples we have seen in the past.

But what i am sure about is that there is no way that the multiple can expand anymore.

If I could trade vancouver real estate on an exchange – I would short it and us treasuries.

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Frank

Our tax dollars at Work. No wonder we are running huge deficits, no one is watching the cash register

From today's National Post

http://tinyurl.com/2cwr5vs

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patriotz

@anonymous1:

But…people aren’t even buying the condos now at market prices, are they?

People will always buy at market prices, by definition.

The reason the OV condos aren't selling is that Millenium/CoV are asking above market prices.

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NO - LYMPICS

43 superduperbulltime

http://www.youtube.com/watch?v=Vn3dDc2mpjw

Is that YOU in the video ?

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superduperbulltime

Stock market sold by crazy bear in seconds but house last lifetime bear. That's why Vancouver house price never go down. You can't live in stock bear you can live in house or condo.

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BoB

Loose with the "facts" on the bears side again:

anonymous1 Says:

October 11th, 2010 at 7:42 pm

…buy a condo for $500k, which will rent out for $1500 a month (maybe)…

It's obviously still not a good return but the above would rent for closer to $2000 a month.

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NO - LYMPICS

LEED Us Not into Health Problems

http://www.triplepundit.com/2010/06/leed-us-not-i…

Currently, a building achieves LEED status based on an aggregate score, with some measurements, such as energy efficiency, weighing more towards the final score than others, like air quality.

This makes it possible for a building to achieve the highest LEED certification, Platinum, even if it makes no improvements in indoor air quality, the study warns.

=========

Does the OV design address this ?

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NO - LYMPICS

London's 2012 Olympic Village The Olympic village The village will have 17,320 beds and provide each athlete with 16m² floor space. There will be 3,300 apartments Each apartment will have a TV, internet access, and a private courtyard. The dining hall will cater for 5,500 athletes at a time. Difficulties experienced by developers Lend Lease[10] in raising funds for the village (the single largest project in the 2012 scheme) resulted in the scale of the village being reduced by "almost 25%"[11]. This was achieved predominantly by providing accommodation for London-based athletes only. Those competing in events outside London were to be housed elsewhere. Following the athletes' experiences in Beijing 2008 (and in particular through comments concerning athletes' welfare by International Olympic Committee President Jacques Rogge) this compromise was to be reconsidered whilst pressure built for the finance deal to be… Read more »

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NO - LYMPICS

BAD WATER after major Metro Vancouver infrastructure upgrade ?

http://www.globaltvbc.com/video/index.html?releas…

BS of bureaucracy.

New homes in Vancouver require complex filtration ? after we taxpayers spent almost a $ Billion on new filtration plant.?

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VHB

@anonymous1: Bingo. Agreed. That's another of the many problems at the ole' OV.

– 'Market prices' mean something different than what the CoV thinks it does.

– also, the huge uncertainty of the cost of the LEED platinum untested and untried technology. Who pays when this all breaks in 4 years?

– also, the persistent rumours of poor construction quality. Again, big potential cost for the strata down the road.

– and lots lots more!

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anonymous1

@VHB: But…people aren't even buying the condos now at market prices, are they? And I highly doubt it's because they worry about living amongst the poverty-stricken and downtrodden. Think Woodwards. The problem is these condos have come up for sale at a time when the whole real estate market is drying up. I have a friend who is trying to sell not one, but two of those damn condos (resale, of course, he planned to flip but guess what, that didn't work out). My significant other said we should offer him $150k each. Then rent them out. At that price we'd actually have a profit. Huh. Imagine that. But with prices not increasing into never-neverland, no one has any incentive to buy a condo for $500k, which will rent out for $1500 a month (maybe), while the mortgage will cost… Read more »

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VHB

Mason in Tuesday's G&M on the OV. Advocates selling the social housing at market prices.

But that's only one problem of many at the ole' OV . . . .

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No More Gordocracies

Securitized Mortgage Debt: The Shot That Will Kill Many Financial Entities "Dear CIGAs, I am asking for your attention again because of the depth of the fraud and now the size of the securitized mortgage debt OTC derivative pile of garbage that is in the trillions. This entire mountain of weapons of mass financial and social destruction is now in question. I have been telling you this for more than 2 years since the manufacturers and distributors of this crap were called by the NY Fed due to the loss of control over the paperwork. I had dinner with my former partner, then lead director of and CEO of Bear Stearns. I could not contain myself so I asked him why he did so much business in OTC derivatives which were certain to bankrupt them. The answer I got was… Read more »

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NO - LYMPICS

32 Lilypad

I'll second THAT motion !!!

Thanks POPE !!!

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NO - LYMPICS

30 patriotz Well, by signing the documents, this happened under Clinton watch. He could have postured politcally..ie make a stand against it, even if its passing would be a fait accompli. QUOTE The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by a Republican majority, basically following party lines by a 54–44 vote in the Senate[6] and by a bi-partisan 343–86 vote in the House of Representatives.[7] After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90–8 (one not voting) and in the House: 362–57 (15 not… Read more »

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Lilypad

Happy Thanksgiving Everyone!!!

Let's see — what do I have to be thankful for?

1. POPE's blog

2. POPE's blog

3. POPE's blog

Three cheers for POPE!!!!

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House

@VancouverGuy(a): I agree but comparing real estate total returns to something like a REIT or utility with large land holdings should be as close as we can get to comparing RE to a publicly traded company. From that POV condos are overvalued by 50%.

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patriotz

@No-lympics:

Recall the GLASS STEAGALL Act was repealed by Clinton in No. 1999

No, it was repealed by Congress. The President doesn't make laws.

The bill (which was sponsored by 3 Republicans) was signed by Clinton, but it would have become law even if he had vetoed it, as over 2/3 of the House and Senate voted for it.

That's not letting Clinton off the hook as he had the opportunity to show his disapproval even if he could not have stopped its passage.

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realpaul

I was reading a week old copy of the Van Sun and a story related to a 'financial makeover' on a woman who was 'an administrator' at the Provincial health dept. The article stated that the woman took home net 'after all deductions $14,250 per month. Let me put that another way……some bimbo civil servant is gouging the taxpayer for close to thirty thousand dollars a month gross pay for pushing paper down at the Provincial Health dept. I was reminded of this atat. http://www.vancouversun.com/business/public-secto… the payroll of civil service workers making over $100,000 annually has jumped 22% this past year. I can only say "HOLY FUCK …… are we that stupid !!" I have a fairly good grip on private sector salaries and I know people who work for multi national companies and have signifagant responsibilities who don't pull… Read more »

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patriotz

@townhomer:

There was a substantial increase in real wages during the 1960's, and as well an increase in the labour participation rate (more women working, remember the baby boom ended in the mid-60's when oral contraceptives became widespread).

1960 and 1969 were really different eras (not just in incomes!). For the former look at the "post-war" houses you can still see in areas like Boundary and Grandview.

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No More Gordocracies

"If I could trade vancouver real estate on an exchange – I would short it and us treasuries."

should add…..and go long gold and silver

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townhomer

@Happy Renting: I disagree. Although not quite 50 years old,I live live in a townhouse that was built in 1969 as affordable family housing unit. At approximately 1400sq ft this three bedroom features a patio leading to a huge back yard, a huge front yard, a garage, lots of storage, real hardwood floors throughout, a kitchen where a dining table and six chairs take laess than a third of floorspace, tons of cabinets and counters, lots of windows, two balconies with enormous patio doors, a separate laundry room, utility room on the ground floor (now converted to a fourth bedroom/recroom). I have looked far and wide to find a brand new unit even remotely as "luxiorious" as my modest seventies place to move to, but I couldn't. And I didn't even care what it would cost. Honestly. Unless you count… Read more »

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VancouverGuy(a)

House prices are unlevered, whereas stocks are levered.

On top of the added financial risk, stocks are also riskier from the perspective that they are often in competitive, dynamic markets with operational risk.

Stocks also retain a portion of earnings in order to fund future growth (hopefully) at a rate greater than GDP if possible. Real estate earnings should grow more in line with inflation.

As a result of all of this, the value of stocks should grow faster than the value of real estate. As such, I do not think there is any validity in a prediction based on stock market prices.

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NO - LYMPICS

Base Metal prices?

Copper is up largely due to the increased electronic sytems they place in motor vehicles. Copper in construction has beeb supplanted to a large degree by plastic.

However, the increased sophistication of cars simply leads to faster rate of obsolecensce.

Regardless, Canada seesm to be reverting back to hewers of wood and drawers of water. We sell the world raw materials, and they ship us back their finishd product.

I wouldn't be surpised if places like China are simply stockpiling thse raw resources and when the hammer falls, resources will get whacked.

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patriotz

@Anonymous:

What I’m interested in seeing is if theres an inverse relationship between performance of the TSX composite and RE prices. That is, when RE tanks people take their money out and put it in stocks, and vice-a-versa.

No, it's a positive relationship – i.e. RE and stock prices tend to move in the same direction. Simple reason – both tend to go down in recessions and go up in good times. The post-2001 RE bubble has been an exception.

Also both RE and stock prices have a positive relationship to bond prices, i.e. a negative relationship to interest rates.

There really isn't much asset shifting between stocks and RE. Few people own stocks (either individually or in mutual funds) outside of RRSPs. People get money to buy RE by borrowing it.

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realpaul

Granny Bashing hits the mainstream…I was wondering when they'd notice. I have been observing this for years as the smarmy losers who want to tlive a life style they aren't smart enough to buy themselves result in bashing granny for downpayments, groceries, school fees for the kids, vacations, credit card payments etc etc etc. Now…the incidents of outright theft and in many case violent muggings by relatives are becoming the norm. "Canadian cases of elder financial abuse rising: police The centre has noticed a rising number of incidents where relatives with joint accounts or access to debit cards steal from the elderly, and Watts believes the problem is about to become much worse because of the debt load of baby boomers. “You have an asset-rich older generation. You’ve got a debt-ridden, poorer population having a difficult time in the markets,”… Read more »

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