What does your MP think?

As you’ve probably heard, the Canadian Real Estate Association is asking it’s 100,000 plus members to send in a form letter to their MPs in reaction to rumored changes to mortgage finance rules.  In the form letter they say:

In particular, we are concerned about the negative impact modifications to the allowable amortization period or minimum down payment requirements would have. These changes would create affordability problems, especially for first-time buyers. First-time buyers are the first link in a chain reaction of real estate activity.

But let’s be clear – the ‘allowable amortization period or minimum down payment requirements’ are not proposed rules that will prevent private lenders from offering any deal they want, they are a reduction of excess government credit pumped into the housing market over the last few years.  What the CREA seems to be proposing is the conflicted idea that our housing market is stable and not in a bubble, but that minor changes to down payments or amortization terms on government insured mortgages could cause a collapse (of that non-existent bubble).

Also from the CREA form letter is this justification:

The housing sector played a key role in Canada’s economic recovery. In fact, a report published by Altus Group in 2009 found the typical MLS® home sale and purchase between 2006 and 2008 produced $46,400 in spin-off spending. Based on this research, forecast annual sales in 2010 generated an estimated $20.5 billion in spin-off economic activity and over 185,000 jobs.

Sounds like a good spin off, but according to this article in the CBC, the issuance of CMHC mortgage backed securities in 2010 is estimated to be $100 billion.  Are we really getting the best sustainable economic spin off from that money?

For all the CREA claims to care about first time buyers, they are who would be most protected by adjustments to government backed mortgages.  If you can’t afford a down payment right now maybe you shouldn’t be buying.  As we’ve seen all around the world from the US to Dubai to Ireland, Spain and Portugal, rocketing property values without income growth is not sustainable, no matter how much governments or real estate associations would like them to be.

This is a small local blog, we get less than 4000 readers a day which is far less than the CREA’s 100,000 plus members, but that doesn’t mean your voice shouldn’t be heard.  If you want to make your views known to your MP you are welcome to use this form letter written by Jesse in the forums.  You can find contact info for your MP here.

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I’m no expert on bubbles, I don’t know what makes them pop (aside from lack of money to sustain it at the bottom layer).

That's all it takes. Asset bubbles are Ponzi schemes, and all Ponzi schemes necessarily fail without any external event because they require exponentially increasing inputs of money. In RE bubbles that means the market eventually runs out of buyers.

Bubble deniers will always point to something else, but that's the hard truth.

Waving Flags

2011 BC Assessment – Estimated % Market Movement for BC Cities: Jurisdiction Name 2011 % Gain/Loss 557 100 Mile House -6.17 313 Abbotsford 6.50 324 Abbotsford (City) 6.50 502 Alert Bay -1.84 501 Anmore 0.04 202 Armstrong -0.53 503 Ashcroft 1.60 345 Barriere -4.48 504 Belcarra 2.03 321 Bowen Island -3.25 301 Burnaby 12.07 506 Burns Lake 5.67 508 Cache Creek -4.32 336 Campbell River 3.60 568 Canal Flats 10.21 201 Catlegar 4.44 302 Central Saanich 1.73 512 Chase -0.04 514 Chetwynd 18.96 303 Chilliwack 3.85 352 Clearwater -2.27 515 Clinton -6.78 304 Coldstream -2.38 213 Colwood 5.21 412 Comox 3.46 305 Coquitlam 9.12 204 Courtenay 3.63 205 Cranbrook 0.60 413 Creston 2.75 516 Cumberland 3.86 206 Dawson Creek 5.86 306 Delta 9.22 207 Duncan 2.89 517 Elkford 9.97 208 Enderby -1.24 307 Esquimalt 5.50 209 Fernie 6.06 519 Fort… Read more »


January 2011 month-end projections

Days elapsed so far 5

Days remaining 15

Average Sales this month 78

Average Listings this month 225

Projected sell/list 34.5%


Projected month end total 1552 +/- 418

95% Conf Interval lower bound 1134

95% Conf Interval upper bound 1970


Projected month end total 4500 +/- 930

95% Conf Interval lower bound 3570

95% Conf Interval upper bound 5430


Inventory as of January 10, 2011 9863

MoI at this sales pace 6.36


I'm already excited: green up arrows on the CULT index.

Sure, celebrating inventory is like praying for the monsoon that always comes but it's important to celebrate the cycles of nature.


@paulb.: Thanks Paul. Looks like we have a decent chance at 10K inventory on Tuesday. You all know what that means, right? P A R T Y! ! ! I'll go set up the thread now in the forum. Everyone go get your party clothes ready!


#44 @Junius: "We are about to see just how much speculation there was in this market. I think it is a lot more than you realize."

I think it's a lot less than in 2008, since the bounce sucked in so many first time buyers. But we'll see. The rate of inventory growth and price declines will be key. I still can't believe they bounced the market with 0.25% and risky CMHC loans. That has got to be the most inadvisable policy you could possibly make, and I think the long term consequences will be severe. Oh well, more debt slaves for the revolt I guess.



Sorry, I just glance at the numbers these days.


New Listings 266

Price Changes 68

Sold Listings 98



have any idea on the breakdown between attached/detached look with your numbers so far this year?


#48 yalie,

very good post. thanks.


#7 @paulb. Regarding building permits. More information at the source: http://www.statcan.gc.ca/daily-quotidien/110110/d


The number of listings in the two new towers that I am watching in Richmond (not to buy, but I am renting in one of them so it's of interest to watch them):

August 2010 — 33

October 2010 — 30

December 31,2010 — 9

Jan 2011 — 9

Once the listings expired they decreased to 9 and they are not being put back on yet. The listings will explode later in the spring. These condos were marketed to asian buyers (including Indian).

We'll see what happens….


@Troll: Real estate market, indeed perhaps all markets to some extent, are driven by sentiment. No particular event or scenario is required. Look at the US market. There was no reason for it to tank. Interest rates were low and going lower. Credit was wide open to all comers with a pulse (and probably even without). Once sentiment starts to turn, it is very difficult to stop, because the momentum keeps building and more people jump on board. I'm no expert on bubbles, I don't know what makes them pop (aside from lack of money to sustain it at the bottom layer). Perhaps people slowly come to realization the situation is ludicrous? I don't know. Especially with real estate, things move so slowly and the market is so wide and deep, that it becomes impossible to chronologically piece things together… Read more »

CRASH JPMorgan-Chase

housing shortage in Australia???? Gawd! I spend a fair amount of time there. NO SHORTAGE…..keeeeerist mates, there's only 19 million people and 5 majorly big cities and dozens and dozens of smaller ones and hundreds of petrol station towns in between where one can stop for a Toohey's or a VB. I had to laugh. Here is what goes on: The population isn't big enough to keep everyone employed so parasitic capitalism runs wild. Remember that the northern part of OZ, you know, north of "The Dog Fence" (Google it) are cattle and the southern part of the country are sheep. There are no cattle anywhere south of the fence and no sheep north of the fence. The fence runs all the way across the country from east to west….5,000 kms. Sheep and cattle can be herded into overpriced real… Read more »

CRASH JPMorgan-Chase

Australia's "Tulip Mania" About to Crash;


The reduction in new construction is a red herring. There is a large existing supply of rental accommodation due to: -10 years of new construction growth over the past decade -increases in secondary rental suites. The construction industry could stop dead today and it wouldn't change the fact that we've had a huge increase in housing units – both the "official" numbers and the unofficial numbers comprised of secondary suites. I've never known so many amateur landlords as I have seen in the last few years. It used to be fairly rare to rent out part of your house to someone, now it's an everyday occurrence. It's the only way most people can afford to buy at these prices. Since they're mostly illegal, these new suites are not added to the official new supply numbers, but they definitely impact the… Read more »


@Troll: "we may avoid a lot of the excessive overbuilding"

I think this is probably going to be true, however Vancouver prices are currently more silly, on yield basis, than many (if not most markets) that had excessive over-building at their peaks.

Maybe the crash takes 10 years instead of 8. Whatever. Many bears are getting antsy because they can't wait for that long, but that's just another tragedy of our times I suppose.


Hey Pope,

Happy new year!

Thanks v much for the blog. I really enjoy this form and reading the comments from a number of the regulars (Dave excluded, of course.)

What I was hoping you'd do for the new year was devote a post to everyone's predictions for the coming year – it's always interesting to see what everyone else is thinking…



Agreed. Banks are more important than realtors. Banks will get what they want.


#43 Troll,

Ah, it is different here. We shall see.

You are forgetting that house construction has outpaced house formation for years. They have been making your argument in Australia for years. However they just discovered that in a falling market their is a whole lot inventory than they thought.

We are about to see just how much speculation there was in this market. I think it is a lot more than you realize.


@Devore: Fair comment. But the fact that they're pulling back in anticipation of a softening market seems to indicate that we may avoid a lot of the excessive overbuilding that plagued US and European crash areas. That overbuilding exacerbated the correction by flooding the market with supply when demand had already vanished. If we avoid that situation, then we presumably experience a milder correction. Hence my original comment that this is a piece of bad news for crash hungry bears, which is counter-intuitive. Of course some dumb bears can't come to grips with that, since all data is bearish.


@Troll: Troll, nothing to do with decreased supply. Building permits indicate market outlook by developers. If they thought real estate would keep selling like hot cakes, they'd be planning to build like no tomorrow, but they're pulling back expecting a very soft market. Can you ever look beyond today's inventory numbers?


The final numbers will be a bit late tonight. Watch for them at about 9pm or so.

Here's where we are for 4:30pm:

New Listings 230

Price Changes 64

Sold Listings 86

Best place on meth

@Manna from heaven:

>>>Data collected on behalf of the central bank suggest roughly one-third of the financing made available via HELOCs are used to pay off other debt, while another 20% is used for stock-market investments. The roughly 50% of financing remaining, Ms. Côté said, is used on current consumption, and renovating or purchasing other properties.<<<


Only 30% of the proceeds was used responsibly while the other 70% was blown on stock speculation, useless shit for the house and MORE real estate.

I'm sure this will end well.


@Troll, "So by that logic if listings balloon this spring that should be taken as a leading indicator of surging sales?"

No, you really don't understand anything beyond really, really simplistic arguments and clever turns of prhase do you?