Big banks and the housing market alarm

There are a few banks out there making noise about the Canadian housing market. Let’s see, what are their names again? Oh, here they are.. Some place called CIBC and Royal Bank and then one called Toronto Dominion. They seem particularly concerned about the market in Vancouver and Toronto.

CIBC chief executive officer Gerry McCaughey told analysts and investors in Toronto that the housing market is “leaning heavily into an area that might be peaking,” and instead will begin to soften.

His comments came as the heads of Royal Bank of Canada and Bank of Montreal also expressed concern over cooling housing prices, particularly in the condo markets in Toronto and Vancouver, where capacity is significantly overbuilt.

And from the second link:

British Columbia is forecast to have it worse, said senior economist Jacques Marcil, and will likely see “a signifcant correction” this year. Indeed, he said in a report today, the Vancouver market likely peaked last year.

The report, which examined the country’s provincial economies, projects home resales in British Columbia will sink 3.7 per cent this year, while prices decline 3.5 per cent.

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Anonymous

@Dyugle: Got it. Thanks.

Dyugle

http://www.laurenandpaul.ca/MarketTrends.ubr
Look on the last page of the report. That is the average price graph.

Anonymous

@WFT?: …The graph comes from the REBGV. …

Can you provide a link?

WFT?

@DEFAULT NAME:

The graph comes from the REBGV.

Anonymous

@WFT?: …The double digit drop is in the average price. The graph has been posted a number of time over the last week. ..

I remember seeing the graph but the source is not clear. What's the source for the numbers?

WFT?

@DEFAULT NAME:

The double digit drop is in the average price. The graph has been posted a number of time over the last week.

The smaller drops are probably the house price index.

Anonymous

@WFT?: Why has the average price dropped 13% since May? BTW,I think Ozzie said it was a 17% drop on CKNW…..

Where's 13% coming from? I read in the paper yesterday, either the Vancouver Scum or the Globe (not that I believe either of those rags) that prices have only dropped 1.3% (or something like that).

Dyugle
patriotz

@Alum:

"But at current low interest rates, i do not see a correction in housing prices."

Dandy one going on in Kelowna for the last few years.

At current low interest rates, ownership costs versus rent are as out of whack in Vancouver as they were in many US markets at the top. And rates have gone down a lot since then. They can't go down significantly going forward from now.

So what's so special about Vancouver that makes you think that this Wile E Coyote act is sustainable here when it hasn't been anywhere else?

Best place on meth

@Dyugle:

Student loans cannot be wiped out in a bankruptcy.

WFT?

@Alum:

Why has the average price dropped 13% since May? BTW,I think Ozzie said it was a 17% drop on CKNW.

Alum

@Fishbowl:

"Another inventory party Friday – 12K this time.

Last years 12K party took place on Feb 11.

If we keep having these things every 8 days my liver is going to throw in the towel.

________

Yawn…

See same commentary from January in 2009, 2010, 2011…

Yes folks, get excited about the same trend that screws you over every year…

Guess that is what you get from listening to a grad student…"

If interest rates rise, we will have a problem. But at current low interest rates, i do not see a correction in housing prices.

Dyugle

If you are underwater on your house but you need your car to get to work, which loan gets paid? You may also need access to credit more than you need a negative cash flow house that is underwater. Sometimes mortgage payment can move down the list of priorities. This happened in the U.S.. Think of a 20 something with a 6 figure student loan and a six figure mortgage. Say he has been out of school long enough that if he declared bankruptcy both debts would be wiped out. Provided the house appreciates he can sell and wipe out his student loan with the profits. If the house tanks he can declare BK and wipe out all his losses and the student loan. This is the classic "heads I win, tails you lose" situation. Why wouldn't a person, or… Read more »

N

It turns out the banks and economists were wrong. Thankfully, The Sun turned to realtors to set the record straight.

http://www.vancouversun.com/business/More+gains+h

Anonymous

@DEFAULT NAMEe: "I imagine they’re balanced out by the small number of sales By Owner that don’t go through MLS."

I imagine those are balanced out by the FSBO inventory. Can't add one but not the other.

patriotz

@Ouch that hurts:

"When shtf, people pay their mortgages first and all their unsecured/uninsured debt last."

Equity in a house over $12K is not protected in BK. RRSP's are, but only for contributions 12 months before the BK claim, and I doubt that many people who are going to be in trouble will have that much foresight.

I do agree that the banks are going to lose money on consumer loans, as most people who are going to go under won't have any house equity for the banks to go after anyway.

http://bc.bankruptcycanada.com/bc-bankruptcy-exem

Fishbowl

Another inventory party Friday – 12K this time.

Last years 12K party took place on Feb 11.

If we keep having these things every 8 days my liver is going to throw in the towel.

________

Yawn…

See same commentary from January in 2009, 2010, 2011…

Yes folks, get excited about the same trend that screws you over every year…

Guess that is what you get from listening to a grad student…

Ouch that hurts

Banks are f'd. When shtf, people pay their mortgages first and all their unsecured/uninsured debt last.

They also max out all their available credit in the process.

Wouldn't want to be a lender right now.

The Leak

Those are still some pretty healthy bearish numbers 🙂

Anonymouse

@patriotz:

"This of course means that some “sales” may not actually result in a closing, e.g. buyer makes unconditional offer and then can’t get financing."

I imagine they're balanced out by the small number of sales By Owner that don't go through MLS.

Best place on meth

Another inventory party Friday – 12K this time.

Last years 12K party took place on Feb 11.

If we keep having these things every 8 days my liver is going to throw in the towel.

VHB

Jan-2012 Total days 21 Days elapsed so far 7 Weekends / holidays 4 Days missing 0 Days remaining 14 7 Day Moving Average: Sales 60 7 Day Moving Average: Listings 288 SALES Sales so far 412 Projection for rest of month (using 7day MA) 846 Projected month end total 1258 +/- 334 NEW LISTINGS Listings so far 1988 Projection for rest of month (using 7day MA) 4035 Projected month end total 6023 +/- 938 Sell-list so far 20.7% Projected month-end sell-list 20.9% MONTHS OF INVENTORY Inventory as of Jan 11, 2012 11740 MoI at this sales pace 9.34 Sales are a bit lower than normal. Listings are WAY above. We have only once had 5K+ listings in January. 5147 in 2009. Well, we're on pace for 6K+ for 2012. The sell-list ratio is at 2009 levels. Now, it does typically… Read more »

paulb.

New Listings 266

Price Changes 49

Sold Listings 59

TI:11740

http://www.laurenandpaul.ca

N

@patriotz:

I see. So it really is close reflecting the final decision to buy rather than the actual sale going through. I stand educated.