Real Estate overpriced, Carney contemplates collapse

Commenter painted turtle pointed out a couple of interesting news items. First off, a survey by The Economist shows Canadian real estate overpriced by 23.9%, which is high, but not as high as Australia, Hong Kong and France.

“Singapore, Hong Kong and Australia boast the gaudiest year-on-year price increases, even if the rate of appreciation is down a bit from the summer,” the report states. “House prices in China rose by 9.1 per cent in the year to September, compared with a 12.4 per cent rise in May.”

The Economist’s analysis of “fair value” of housing is based on comparing the ratio of current house prices to rents, with the long term average.

Simply put, the purchase price of a house is divided by the rent it could have earned per year, and the result is the price-to-rents ratio.

A high result could mean a house is overvalued, while a low number means it could be undervalued.

You can see the list over at CTV.

Averaging home prices across an entire country must be kind of tricky though. Especially in a country as big as Canada there’s a big difference between the market in Vancouver and Windsor.

All this talk of overpriced real estate must be getting to Mark Carney, because the Bank of Canada governor just said out loud that an abrupt correction in Canadian house prices is a possibility:

Bank of Canada governor Mark Carney agreed Tuesday that an abrupt correction in Canada’s housing market is possible.

Appearing before the Commons finance committee and responding to a question from Nova Scotia MP Scott Bryson, Carney said he was not predicting a significant drop in prices, but given how far prices have risen and the high level of Canadians’ household debt, it could not be ruled out.

Carney told the committee the bank is limited in what it can do to use interest rate changes to encourage Canadians to reduce their debt.

Read the full article over at the CBC.

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coastal
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coastal

Carney translation : "I've done all I can, don't say I didn't warn ya … PS if you keep listening to Ozzie Jurrock that this is normal then yer on your own and don't come crying for a hand out."

N O - LYMPICS
Guest
N O - LYMPICS

Damn….I'm #2

Royce McCutcheon
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Royce McCutcheon

The scariest thing for me, as real estate corrects, is that the average Canadian might end up blaming this correction and the attendant economic hurt on things like "foreign" buyers and the HST (where applicable). Ah well, at least we can hope that people will realize that their house is only ever "worth" the price it will sell for.

* * *

Marge: "Hasn't this experience taught you, you can't believe anything you hear?"

Homer: "Marge, my friend, I haven't learned a thing."

N O - LYMPICS
Guest
N O - LYMPICS

Campbell's speech

Lets see

Cabinet turnover(100% concidence) will buy some time…

HST will be avoided…that's John Les' cross to bear.

Campbell will refer to the Fraser Institute report realeased this week praising him.(another coincidence)

He will blather on re statistics(from Tsur Summerfool and Cameron Manure) whose relativity will use straw man arguments that we are better off than—–. even though the world econpomy is going dwon the shitter aka being a 3 out of ten is 100% better than being an 2 out of 10

That's my warm up thesis for now.

superduperbulltime
Guest
superduperbulltime

Sometime I do feel bad for bear for 1 minute then I remember how stupid bear is for not paying attention in school. You brought this on yourself bear. Constantly watching stats, reading blogs, watching meager "savings" grow, trying to convince rich homeowner friends crash is coming. You can end now if you just move away like skullboy or get better job and haircut.

Prca
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Prca

@superduperbulltime:

Mom says hello, coffee was good again. You know the rest…

realpaul
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realpaul
We've all watched with amusement as the debt/income ratio has gone from 80 to 150 over the past ten years. The personal debt numbers are directly corelated to the manipulation of intrest rates that began 'to save the world' after the tech bust and the dreaded 'deflation' that would surely follow. It seems to me that real prices ( of course there no inflation) have over doubled in that same time frame….coincidental? Td's forerunning the 125% mortgage is certain to attract the fools and exacerbate personal debt stats….no doubt. As long as rates are held down and Flaherty can convince the public that GDP debt is 'reasonable' compared to Zimbabwe, then we'll have follow up from his doppleganger Carney making suggestions that debt/income should be sustainable at between 130 and 140% as long as rates stay negative…..Bwahahahahahahahahahahahahahaha….Its like the story… Read more »
realpaul
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realpaul

BTW…the desperation of the Dems has them pumping out 'happy ' numbers by the truck load trying to distract voters from the reality of how things are getting worse. In fact forclosures are up…way up….unemployment is up…way up. The banks are witholding over ten million units as 'ghost inventory' at the request of the government to 'stabilize the market'. Seasonal adjustments as we all know are complete fabrications and statistical masturbation…adjusted back 100% of the time. Gee…is there an election or something?

http://www.marketwatch.com/story/new-home-sales-c

kansai92
Guest
kansai92

We live in an age of cheap money and bubbles.

As the real estate bubble comes to an end I can see

money gravitating into the gold and silver markets

resulting in yet another bubble.

Risk Lover
Guest
Risk Lover
The scariest thing for me, as real estate corrects, is that the average Canadian might end up blaming this correction and the attendant economic hurt on things like “foreign” buyers and the HST (where applicable). Ah well, at least we can hope that people will realize that their house is only ever “worth” the price it will sell for. ********** This is scary for you? Who cares what they blame it on. Foreign buyers – well, the RE pumped them as the bastion of support for the market, and many people were more than happy to sell to offshore investors, and many more were happy to think that their home prices would always be supported by them. Are we worried about offending these buyers? They make up a fraction of the market, so they are inconsequential if Canadians get upset… Read more »
Woodrow
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Woodrow

Teranet data for August out. Vancouver down for the second month in a row (.4%)

Captain Highliner ar
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Captain Highliner ar

5 superduperbulltime

Mom says hello, coffee was good again as was the blowjob with her gums. Your dad was caught in mom's clothes flashing other cross dressers. Clean up your suite in the garage, you are 2 years behind in the rent and summer school fees …

Anonymous
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Anonymous

Carney told the committee the bank is limited in what it can do to use interest rate changes to encourage Canadians to reduce their debt.

Translation, mortgage/HELOC rules are about to get tougher again.

Hollywood Starwhacke
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Hollywood Starwhacke

At this time, before nominations close Feb. 31 , we wish to nominate REALPAUL for the best rants on VCI.

The quality, passion and caliber far exceeds the international standards.

Regards:

HSO

realpaul
Guest
realpaul

#10 RL…you mean like whats happening right now?

http://finance.yahoo.com/news/Gross-Grantham-blas

-is whats happening in the US

Our government is buying mortgages by sheltering the risk with CMHC as the back stop…..the bottom line is that its all debt the government is borrowing from itself….ahh….us.

space889
Guest
This is with regards to Patriotz reply to the post about rent at a loss vs sell now for a big loss upfront in the last post. uhm…that wasn’t his point at all! Geez…if you are going to lay the smackdown on someone about how they aren’t rational and can’t think straight financially, at least actually read the guy’s post and understand what point he’s trying to get across. He’s not even talking about if holding on a property with negative cash flow is good investment or not. He’s merely trying to illustrate what the average person will likely think and how they will go about analyse the sell versus hold decision, and what effect that will have on the supply of housing for sale. It doesn’t matter if you think the analysis is wrong and stupid because you aren’t… Read more »
realpaul
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realpaul

#14 SWO…if deception and misdirection are the only strategies my detractors can come up with to counter the arguments I put forth…then I suppose thats victory for the truth isn't it? Why not call me Hitler or Satan…don't stop at accusing me of 'ranting'…is this all the intelligence you can muster? The people here , generally. aren't as stupid as you take them for….

NO - LYMPICS
Guest
NO - LYMPICS

So whats going on in the international scene

The RE market appears to be collapsing globally.

Is Canada the last domino to fall, inevitably, but simply leaning about 45 degrees into the abyss..ie an "average" prior to economic gravity taking over ?

Hollywood Starwhacke
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Hollywood Starwhacke

REALPAUL

A backhanded compliment is often better/more sincere than a Federer forehand smash

HSO

Royce McCutcheon
Guest
Royce McCutcheon
@Risk Lover: The breadth of the real estate delusion is huge in our population – and I'd venture a guess it's particularly wide here in BC. Even home owners who didn't buy in the last few years may have a vested interest in seeing prices preserved. I'm not worried about what's RIGHT in all this – I'm worried about WHAT WILL ACTUALLY HAPPEN. And if more people don't get the message about what actually caused the run-up and the correction – if delusion lingers – what happens? My guess is that we may see the exact thing you say we should be afraid of: a bailout or some other action that fuels continued debt and risk-taking. Without an injection of perspective to make at least some people see their own hand in this mess, I believe deluded people will vote… Read more »
Best place on meth
Member
Best place on meth

@Hollywood Starwhackers OSCARS:

>>>At this time, before nominations close Feb. 31 , we wish to nominate REALPAUL for the best rants on VCI.<<<

I second ramblingpaul for that award.

patriotz
Member

@Risk Lover:

The scariest thing that every Canadian should be worried about is the potential for homeowner bailouts.

There won't be any.

1. All the homedebtor "bailouts" south of the border are simply to keep the banks from going under. The banks here have already got their bailout.

2. Homedebtor bailouts would go on the deficit, which the Cons have to appear to be reducing.

3. Homedebtor bailouts would be of net benefit to big cities (which vote you know which way) at the expense of rural areas (which vote the other way).

4. The Con party line is that there is no bubble here, it's different from the US, and they are not going to do anything to contradict that.

The only "bailout" homedebtors will see is in bankruptcy court.

Hollywood Starwhacke
Guest
Hollywood Starwhacke

21 Best place on meth

Thank you for your input:

However you are tied with " scullboy" for the HSO silver Oscar.

Note:

Patriotz will be awarded the lifetime achievement, which will be preented by Sir Wm. Vander Zalm Esq.

ALSO: No shirt, No tie …..shoes are optional = No HSO

Regards

HSO committee

Royce McCutcheon
Guest
Royce McCutcheon

@patriotz:

Hope you're right.

Patiently Waiting
Member
Patiently Waiting

Oh wow, so much to discuss in one short story. A little treat for us bears:

"More than half of B.C. homeowners would like to renovate over the next two years, but concerns over their financial futures appear to be stalling the process, according to a new Ipsos Reid survey to be released today.

Indeed, 77 per cent of the province's homeowners expressed high levels of concern about their finances…"

"Only 36 per cent of B.C. respondents said they plan to remain in their home for more than 10 years, the lowest figure in the country."

"B.C. residents were also among the least likely (57 per cent) in the country to commit to major renovations, rather than to sell and move if they had a choice."

Read more: http://www.vancouversun.com/homeowners+least+like