Forecasts for 2012 housing market.

A very sensible forecast from Tsur Sommerville:

“We start off by saying I have no idea,” Somerville told the Georgia Straight in a phone interview. For him, forecasting is a risky business because “you’re wrong more often, even if you’re intelligent”.

An economist who earned his PhD from Harvard University, Somerville said that he prefers to evaluate what others have projected for the new year.

“The general trend seems to be that it’s going to be a slower market than 2011, and I think the combination of lingering economic unease and uncertainty is consistent with that,” the UBC academic explained. “The other thing is 2011—if you take away Richmond, the West Side [of Vancouver], and West Vancouver—was not some amazing prices-going-through-the-ceiling kind of year. In general for most places, things are going to look like 2011. Maybe a little bit slower.”

Asked about the biggest risk to the market, Somerville responded: “The economy, the economy, and the economy.”

Full article in the Georgia Straight.

Sort by:   newest | oldest | most voted
jesse
Member

The biggest risk for high prices is high prices. Everything else is an excuse for something that was baked in years ago.

observer
Guest
observer

The increase in variable rates is going to take its toll.

Ouch that hurts
Guest
Ouch that hurts

H said:

@Ouch, that hurts:

Do you know how much he was renting for?

I believe rent is 2100ish. Still no bids or showings on the 699 price point, so my guess is there will be a reduction coming in spring.

FWIW, I put together a nice rent v own calculator, if someone wants to add to the forum. Not sure how I pass that along, but if someone emails me at jaketaylor dot biz at gmail dot com, I can send you a copy.

registered
Member
registered

This is how real economists analyse an asset market:

http://www.ucsd.tv/search-details.aspx?showID=114

Compare the above to local economarketing speak:

“The general trend seems to be…"

“The economy, the economy, and the economy.”

“The more you’re worried about your debt load, the more you’re worried about the economy.”

"…global hazards like the financial crisis in Europe and the lingering malaise in the U.S…."

"Lenders are fairly conscious of the risks involved and they’re quite conservative.”

CMHC, Helmut? Faith Popcorn does more creditable work.

trash crash alert
Guest
trash crash alert
At least parts of old Toronto such as Rosedale, Forest Hills, Lawrence Park have well built original houses with solid foundations and real brick. What is the new modern house consist of: simulated cardboard, gyp rock, plastic Take a drive on the West Side and see how they are building these new cardboard $3 million homes – gyp rock plywood with simulated exterior – it is all crap supported by 2 x 4, 2 x 6's. Some bureaucrat in Ottawa at CMHC devised socialism in finance whereby one can buy houses with literally no money down. Land component values get dramatically inflated and the net result is cardboard box houses with box store cheap lights and plastic doors. The winners of socialist policies: developers, bank executives, governments collecting artificial tax revenues on a phony price level and baby boomers realizing… Read more »
space889
Member
space889

@trash crash alert: And how would such houses stand up against earthquakes? Also, doesn't 1 log costs thousands of dollars already?? I doubt houses build with materials like you specified would be that much cheaper. Last longers sure, cheaper I don't know.

space889
Member
space889
With regard to yesterday's comment about CMHC going after homeowner for shortfalls after paying out the banks, I wonder how many people actually knows that. I certainly didn't until I read about it on this site. I bet 90% of the people think the CMHC insurance they bought operate just like any other insurance they buy. They pay the premium and insurance company pay up when things go wrong. If people realizes that they are actually liable for any shortfall CMHC suffers then I wonder how many people would bother with CMHC mortgages since you are paying the insurance premium and getting absolutely no benefits at all. This would also seriously depress future demands since people will now have to pay off their existing mortgage to CMHC even after foreclosure, on a place they no longer own, likely at a… Read more »
Flip Flop
Member
Flip Flop

@Space

with the reduction in lender risk with CHMC MI, I would guess that you're likely to get a better rate, so there could be a bit of an offset.

FF

Anonymous
Guest
Anonymous

I don't know about the market will go in 2012.

I know my paycheck shrinks after New Year.

Payroll taxes, MSP all go up expect my salary.

Annonymous
Guest
Annonymous

Uh Oh…American market looks to be improving.
http://www.bloomberg.com/news/2011-12-29/pending-

Anonymouse
Guest
Anonymouse

@Ouch that hurts:

"Still no bids or showings on the 699 price point,"

The bids will happen in court, on a pre-determined date.

Anonymouse
Guest
Anonymouse

@trash crash alert:

"If we had no CMHC, we would have well built houses "

You're dreaming. CMHC or not, developers will always try and minimize costs to maximize profits.

registered
Member
registered

12 DEFAULT NAMEe Says: "…developers will always try and minimize costs to maximize profits."

They didn't in the past?

deanbc
Member
deanbc

Finally, an economist who admits he doesn't have a crystal ball. Of all the economists who couldn't predict the global financial crisis, I wonder how many of them are seriously questioning their conception of the economy. People who want to take the piss out of this lordly profession should read Steve Keen's "Debunking Economics".

Anonymouse
Guest
Anonymouse

@fixie guy:

"They didn’t in the past?"

Of course they did. What's your point? That they "don't make em like they used to"? Part of maximizing profits is responding to the customers requirements. If, collectively, your customers don't seem to care about details in build quality – then guess what you get?

registered
Member
registered

"15 DEFAULT NAMEe Says:

December 29th, 2011 at 10:16 am

@fixie guy:

“They didn’t in the past?”

Of course they did. What’s your point? That they “don’t make em like they used to”? Part of maximizing profits is responding to the customers requirements."

You need me to point out you just changed your argument from 'developer determines' to 'customer does'? If the customer does, the CMHC comes back into the picture just as space889 suggested, rendering your original rebuttal invalid. But hey, why use reason or consistency when you can substitute lazy bravado, Internet warrior.

Ridiculous
Guest
Ridiculous
@fixie guy: I was under the impression that the fact that housing was no longer looked upon for its intrinsic value had been adequately discussed on this forum, ad nauseum? If people cared about living in the properties they owned, many more would have focussed on the "rent versus buy" math, taking quality into account (which for all intents and purposes is much more important to an owner who must deal with ongoing maintenance versus a renter who carries no such risk). They don't and therefore don't. As patrioz et al have gone over a zillion times, a very large portion (if not all) of the value house buyers associate with a house purchase in Vancouver lies in their percieved ability to sell higher later. Just like with stocks, once housing stops providing outsized YOY "returns", the tendency of current… Read more »
Anonymouse
Guest
Anonymouse

@fixie guy:

"You need me to point out you just changed your argument from ‘developer determines’ to ‘customer does’? "

They're one and the same thing. The developer builds product that customers will buy, whilst being able to turn a profit.

patriotz
Member

'Asked about the biggest risk to the market, Somerville responded: “The economy, the economy, and the economy.”'

Strictly speaking he's correct, since in economics "risk" means an unknown event affecting future returns. Its more than correct, it's a truism.

It's a known fact that rents and incomes are massively out of proportion to prices and that interest rates and other costs to the owner cannot go down significantly. That means that it's a certainty, not a risk, that for someone buying today either that buyer or a subsequent buyer is going to lose money. That is, buying is a huge gamble, but not a "risk" properly speaking, because it's inherent in the price that the buyer pays.

patriotz
Member

@space889:

"I bet 90% of the people think the CMHC insurance they bought operate just like any other insurance they buy."

It does. The mortgage is the property of the lender and mortgage insurance protects the owner of the mortgage from loss.

It's "mortgage insurance", not "borrower insurance". The borrow pays but there are many situations where the payer of insurance is not the beneficiary.

IMHO this is another plank in the "can't lose" mentality, like the misconception many borrowers have in the US that the lender has no recourse (only true in some states in some situations).

Annonymous
Guest
Annonymous

@Ridiculous…When have prices in Kits or Shaughnessey or West Van. EVER been cheap? Long before "The Bubble" these were expensive places to live and are pretty unique neighbourhoods when it comes to large cities…it's been asked a thousand times on this site but never answered..What do you guys consider a "fair" price in Kits for a detached home?

VMD
Guest
VMD
[CMHC Warns on Household Debt] – too much for them to guarantee? ; ) "Canada Mortgage and Housing Corp. cautioned that Canadians need to be “vigilant” about growing levels of household debt, noting ramped-up use of personal lines of credit and increasing debt-to-disposable income ratios. ..The federal government has intervened to tighten mortgage rules three times in recent years and the report noted the latest changes “will further reinforce the stability of the Canadian housing market.” However, the CMHC cautioned that major challenges to Canadians’ ability to pay their mortgages could come through job losses, another recession or rising interest rates. The ratio of debt-to-disposable income has also been increasing at a rapid pace, fuelling concerns about the levels of indebtedness. Compared to annual disposable income, household debt stood at 150.6% in the second quarter of 2011, a record high,… Read more »
Flip Flop
Member
Flip Flop
@ Annonymous: I would think Kits is kind of special, in that the rental stock has a pretty low vacancy rate, so it might be a little more attractive to investors than other areas. This should give it a little more trough protection if we see a significant correction. I used to live in a 2BR upper unit of a place at Stephens/Broadway. Total house prob brought in $4,000/mth, max. 2 legal units, plus 1 damp cave at 'garden level'. Based on the spreadsheet I use, if you paid $1M for that house and sold it for $2M in 25 years, you'd end up with the same amount of equity as you would have paying $4,000 month to live there, and banking the difference at the same rate charged on the mortgage. Looking at mls, similar houses in the area… Read more »
Manna from heaven
Guest
Manna from heaven

The federal housing agency says more than 20 per cent of Canada's economy is related to spending on homes.

http://www.ctvbc.ctv.ca/servlet/an/local/CTVNews/

Anybody have numbers for Ireland, Spain and the US at their peak?

macho nacho
Guest
macho nacho
@Annonymous: Cheap and hot money have made true price discovery almost impossible. However, I can tell you some numbers based on historical transactions. My sister/spouse bought a 2,000 sq ft SFH near QE Park (Heather St) in 2000-01 for about $480,000. Lot size was 50 x 100. House was old, but livable with $30-40,000 in work. Back then, mortgage rates were about 7% (ballpark) with 25-year amortization. They put 20% down. Today, a similar house probably goes for $1.25 million and mortgage rates are about 2.75% variable on 30-year amortization. If you were to assume inflation is about 3.5% annually (forget the CPI, as we want something more practical so I'm aiming higher here), that $480,000 house in 2000-01 dollars would be about $700,000 in 2011 dollars. BTW, they sold that place in 2007-08 for about $880k and moved to… Read more »
wpDiscuz