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Hello Inflation.

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Inflation is surging ahead, but as long as we can keep the global economy nice and F***ed up, interest rates should stay at record lows. Free money!

Core inflation, which excludes volatile elements such as gas and food, surprised economists by jumping to 2.2 per cent in September annualized from 1.9 per cent in August. Headline inflation also surged higher, to 3.2 per cent annualized, as clothing, tuition fees, car prices and transportation costs all contributed to higher prices for consumers.

Economists had expected an overall annual rate of 3.1 per cent in September and a core rate of two per cent.

Jimmy Jean, economic strategist with Desjardins Capital Markets, called the CPI “pop” a short-term issue as tuition is a one-off event, clothing prices are seasonal, and auto prices are playing catch-up.

“From the Bank of Canada’s perspective, we don’t believe this to be much of a worry as it is not indicative of broad-based accelerating price pressures,” he said in a note.

Mark Carney, governor of the central bank, is universally expected to maintain the benchmark lending rate at one per cent, with many economists now projecting a resumption in policy tightening no earlier than the second half of 2012 as external headwinds are still the most pressing issue for the Canadian economy.

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jesse

@fixie guy: "You’re assuming that has nothing to do with a real estate bubble, and contradicting what you implied earlier about rents and wages"

No, property can reasonably forecast future rents and wages, through expected gentrification and density increases. There is reasonable basis for properties to trade at high price-rent. There is most certainly a speculative bubble, but underlying factors I mentioned do produce real capital appreciation ex bubble valuations, and no it's not a perpetual effect.

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fixie guy

@65 patriotz: That's what I meant by 'statistically trivial'. Of course some will appreciate. Some will depreciate. It's irrelevant to Sommerville's conclusions about the market as a whole, which are disingenuous at best.

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patriotz

@fixie guy:

A vacant (or nearly vacant) lot will appreciate more in % terms than a developed property even given a constant price/rent, i.e. no bubble.

Do the math. The owner of the developed property is getting a rental value, i.e. yield, the owner of the lot isn't. If both properties are priced fairly, i.e. the total return is the same going forward, the price of the lot has to appreciate more because there's no yield.

That's not intended to excuse Somerville who IMHO is trying use this to confuse the issue of bubble pricing.

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fixie guy

59 jesse Says: "a low density property in Van West has appreciated well above inflation." You're assuming that has nothing to do with a real estate bubble, and contradicting what you implied earlier about rents and wages. "Sommerville is right, though, that appreciation of certain types of housing will be detached from underlying rents because of future density/income gains, but that’s not free reign to use past performance to predict future results." Again, Sommermath didn't prove valid in Miami, Phoenix, Las Vegas, Ireland. Why is it right in Vancouver? Reasoning based on monthly payments by definition assumes the underlying conditions setting them will hold for the life of the mortgage. Since globally nations are in historically unprecedented stimulus mode, that's incompetent. Worse yet Tsur is forward predicting government housing policy for a generation. Those incredible underlying assumptions effectively makes him… Read more »

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Anonymouse

@Best place on meth:

"You called a peak on Aug 12 which was wrong, it was Sept 30. Inventory also increased by another 1000 after you called your peak."

I said it had "just about" peaked and went on to state its limit. That's closer than most here. The fact that I called it on August 12th, shows that I saw it coming before you did.

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jesse

Kevin Falcon jumps the shark Europe's financial troubles are like a slow-moving train wreck but the crisis provides an opportunity for British Columbia, says the province's finance minister. Kevin Falcon toured the European continent this month promoting B.C. as a safe harbour for investment. Governments were cowering, banks were collapsing and investors were running scared as Europe braces for serious belt-tightening measures, Falcon said, summing up his European tour. "The bad news is that what's happening in Europe is a slow-motion train wreck," Falcon told reporters Monday. "Everyone knows it's got to be dealt with. The speed at which it's being dealt with is not sufficient at all to give any kind of comfort to investors around the world." The minister’s sales pitch to bankers, traders and investors in France, Germany, Switzerland and England focused on B.C.'s diversified economy and… Read more »

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jesse

@space889: BTW Sommerville acknowledged later that his calculations were more aligned to detached properties, and thought appreciation of condos at the same level was unlikely due to inability to increase land utility (he calls it "capital land ratio"). I'm not justifying 7% PA gains on real estate continuing; quite the opposite, I think there is a secular bull market that's near the end of the tracks. I think Sommerville et al's analysis inappropriately handles appreciation as the independent variable. However I do think there is some room for above-inflation appreciation, though nowhere near close to 7%. By best estimates, based on density increases alone it's probably less than 1% real appreciation on a bungalow in a densifying neighbourhood, and that appreciation eventually plateaus out as density gains are realised. Increasing real incomes is another way of increasing values through imputed… Read more »

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Anonymous

To buy or rent: that is the question

http://www.vancouversun.com/business/rent+that+qu…

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jesse

@fixie guy: a low density property in Van West has appreciated well above inflation. Incomes in the area have also appreciated so effective rents will have outpaced inflation. From what I see certain properties where density increases and gentrification occur will have higher future rents.

What Sommerville was doing was incorrect by forecasting past price appreciation into the future but there are properties that do outpace inflation as a city matures.

I understand the real appreciation argument; for most properties that's true. Some will appreciate in real terms for reasons I mentioned, but no free lunch: owners suffer lower cash flows for higher capital appreciation.

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jesse

@A non mouse: here's the link http://www.straight.com/article-502626/vancouver/…

Wow, someone actually runs a platform on Vancouver's real estate bubble. I'm impressed.

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Best place on meth

@Anonymouse:

You called a peak on Aug 12 which was wrong, it was Sept 30.

Inventory also increased by another 1000 after you called your peak.

Yet you somehow think you were right so I'm wondering if you're actually retarded.

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Anonymouse

@Best place on meth:

I called the peak back at the beginning of August. Here's the thread:

http://vancouvercondo.info/2011/08/economic-recov…

And what I said:

"Inventory has just about peaked. On an earlier thread I said it would top out at 17500, but I now don’t think it will get that far."

Total Inventory that day was 16250. So I was right.

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Anonymous

@Anonymous: ….But I guess, if you want to make your point it’s easier just to pull numbers out of your ass.

It’s just so flawed…..

I think that you're missing the real irony: it's not that they're pulling the numbers out of their ass, it's just that their so monumentally inept and stupid they can't do even basic math. And folks are trusting these imbeciles to help them with the biggest purchase of their lives? Makes you wonder: who's dumber?

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Best place on meth

@Conrad:

>>>and inventory starts it inevitable decline for the year.<<<

I think I'll have to agree with the worthless cheerleader who's stated the obvious and the predictable, that inventory has likely peaked.

Of course, it's peaked much later in the year than normal which means only 2 months until it starts rapidly rising again only this time from a much higher level than last January 1st.

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anon

—-Higher inflation = Higher rents for landlord —

Unless higher inflation is accompanied by higher vacancy rates like now

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emmi

@Alum: Rents are based on what the market will bear. Hence all the subsidized renters.

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patriotz

@mikoyan:

"where do you guys see inflation? I only see deflation in the cards."

Consumer price inflation and asset price inflation are completely different things. Same goes for wage inflation.

Talking about the effects of "inflation" without those qualifiers is useless.

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mikoyan

where do you guys see inflation? I only see deflation in the cards.

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Conrad

and inventory starts it inevitable decline for the year. Another fun year of being wrong hey bears. See you next bear hunting season….

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fixie guy

@35 jesse: Sorry, that rationale sounds to my ears more like reiteration than demonstration. Inflationary increases are not appreciation, it's flat lining. Even that level of mediocrity is far from assured. The world is littered with counter arguments. Your reasoning contradicts Shiller's findings that, inflation adjusted, houses don't appreciate at all long term.

Re: future cash flows, wages are strongly correlated with inflation and rents with wages. No free lunch.

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paulb.

New Listings 200

Price Changes 152

Sold Listings 169

TI:16759

http://www.laurenandpaul.ca

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patriotz

@Alum:

"Higher inflation leads to higher wages"

No it doesn't. (note the present tense)

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Alum

@Anonymous:

Higher inflation leads to higher wages (if one a job, of course)

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A non mouse

RE: Last post.

may need to copy and paste link in browser

j.mp/tzbryJ

Georgia Straight.

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A non mouse

"Sandy Garossino: Vancouver, we’ve got a housing problem"

j.mp/tzbryJ

Independent candidate calls it like she sees it.

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