Feeling bearish on Canadian housing?

Over at the Financial Post there’s an editorial that’s pessimistic about the Canadian real estate market:

The arithmetic is simple, and some of the warning signals look uncomfortably like those of the days before the market implosion that brought the 1980s to a thumping, crashing close.

Start with resale home prices. A “matched sales” approach to measuring prices tracks, over time, multiple sales of the same properties — this reduces the likelihood of measurements getting skewed by cyclical or regional shifts in the price mixes of homes that happen to be selling. Over the past ten years, prices so measured, in Canada’s major markets, have doubled, increasing at more than 7% per year, at a time when consumer price inflation generally had been running at about 2%.

So why is that a problem? Because average wages have not been running much ahead of inflation, and that means that house prices have steadily been bubbling out of reach of workers’ abilities to afford them. The house price-to-income ratio last peaked and then plummeted from 1989 to 1991, and the ratio regained its prior peak in 2004-05. Since then? It has climbed steadily higher yet, the ratio now far outstripping anything seen in the past 20 years.

Eventually that makes housing affordability a problem, and quickly so when interest rates start to rise. Housing looks affordable now, given that mortgages remain on the market at rates near their all-time lows. However, carrying costs relative to income would rocket upward, were rates one or two percentage points higher. Such rate increases are not in the cards in Canada today — but they will arrive all the same, and sooner rather than later if inflation continues to test the upper bound of its target range, as it did through 2011.

Read the full article here.

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1.am.first
Guest
1.am.first

fiiiiiirrrsssst

left already
Guest
left already

I see that things are still the same in the cold and rainy BC.

We got 28 degrees yesterday here in San Diego, beaches were steaming with life.

I hope for all you guys things return back to sanity. Vancouver is sooooooo overrated, total hubris!

I came to ski in Whistler with the family for one week and it was foggy and rainy every day and sooooo expensive. Total rip off. So next time, off to Colorado, no more reasons to come there. Good luck!

gordholio
Member

Left Already, I envy you. San Diego vs the glorious Best Puddle On Earth = no fricken contest IMO. If I could legally live and work in the US, I'd have moved to the San Diego area before you. 🙂

One could argue that US gun laws are a key downside, but tell that to the five (or is it six?) people that have been shot in greater Vancouver in the last ten days alone.

Annonymass
Guest
Annonymass

"Balanced"…But by all means listen to a bunch of Miserable Renters who've never made a business decision in their lives.
http://www.cbc.ca/news/business/story/2012/01/05/

victoria
Member
victoria

I don't ski but I have friends all over Canada these are ski nuts.

Whistler seems finished. They say the expense and the climate sucks – better skiing elsewhere. We went there in the summer and were shocked about the price of things. I think we spent $80 on a large and medium take-out pizza.

Won't go back.

My husband is French/British and he is used to skiing in Europe and is used to high prices but he thought that Whistler was over-the-top – and it was summer.

specialfx3000
Member
specialfx3000

@Annonymass: Typical narrow-minded Troll…

It likely does not occur to you that renting indeed is a 'business decision'; a wise decision in overpriced, over-hyped Raincouver.

By the way, don't you have a leaky roof to repair?

Annonymass
Guest
Annonymass

Vancouver is about Future potential as the planet faces challenges..Many would love a bit of "Raincouver" right now.
http://www.bbc.co.uk/news/world-asia-16388157

macho nacho
Guest
macho nacho
@Victoria: The problem with Whistler is that winters seems to be getting pushed further out. Nowadays, other than a typical big dump of snow in Nov/Dec, the best conditions are usually in Feb/Mar where it seems to snow a lot, with mixed sunny days. That's when I've been going up the last 4 years and it hasn't let me down yet. As for prices, you just have to look for deals. The annual turkey sale is great for 50% off ski gear. Lately, I've also noticed that retailers are hurting, so they've started discouting their stocks by Mar. Accomodations are not too crazily priced if you avoid Xmas/New Year/President's Week. Food is pricey, but if you stick to where the locals eat and avoid the over-rated "marquee" restaurants you are okay. Good places are: Pasta Lupino, Splitz Grill and believe… Read more »
Troll
Guest
Troll

@gordholio: I don't get it, this blog is filled with all these smart bears, who have it all figured out (unlike those goofs at the BOC or the big banks for example), and yet they can't seem to figure out how to make a living outside of a city that they hate. Weird. Maybe Fixie will enlighten us, he uses lots of big words.

N
Guest
N

I've got to say, I can't understand why people who don't like living in Vancouver care about the prices of houses here.

registered
Member
registered

10 Troll Says: "I don’t get it,…"

A spark of promise! You still struggle with basic history though. In every crashing national market the majority of banks, governments and real estate associations played the same 3-monkeys in unison puppet show and were all disastrously wrong. You've yet to explain why Canada is right about a 'new paradigm' in median home prices.

"Maybe Fixie will enlighten us, he uses lots of big words."

Two syllables then: straw man.

VHB
Member
VHB

The inventory counts on realtylink have bottomed out. It always takes a few days for stuff to get updated there, so there is often a lag of a few days before the end-of-month changes are reflected on the public site.

The key question now is how quickly the inventory slopes up.

Many of the areas I track are starting the year at levels similar to previous years. VW SFH is way above. But we should note that these heightened inventory levels are not geographically widespread around REBGV.

VHB
Member
VHB

Before everyone gets all excited, remember that the first few months of the year is always when the price increases are highest. The resason is that there are lots of people shopping in February-March, but the year's inventory peak doesn't typically happen until months later. This presses MoI low and price increases up.

Here are the averages, and a link to a graph

14 year avg 5 yr avg 2007-2011

January 0.84% 1.49%

February 1.69% 2.38%

March 1.06% 0.82%

April 1.01% 2.11%

May 0.34% 0.66%

June 1.26% 0.48%

July 0.81% -0.17%

August 0.01% 0.32%

September -0.16% 0.34%

October 0.50% -0.95%

November -0.26% -0.62%

December -0.19% -0.28%

http://vancouvercondo.info/forum/topic/inventory-

Not much of a name...
Member
Not much of a name...

@VHB: It will be interesting to see how it plays out. There seems to be a lot of factors at play this year that can have an impact on prices. The easiest way to deal with it is to sit back and buckle up. Hopefully it won't be too bumpy of a ride.

YLTN @ Work
Guest
YLTN @ Work

For all the rational bears that just don't get why the bulk of the population "drinks the koolaid", this book is a good read:

http://www.amazon.com/Social-Atom-Cheaters-Neighb

It's a bit old (2007), and funny in hindsight that the author didn't predict the US bust; failure to apply one's own theories…

registered
Member
registered

11 N Says: "I’ve got to say, I can’t understand why people who don’t like living in Vancouver care about the prices of houses here."

Why do you care?

Outsider
Guest
Outsider

@N: I can't speak for others, but I find the situation in Vancouver fascinating and I dont live there. I was also reading bubble blogs from California and Nevada and I don't live there either.

I don't know why it should be a prerequisite to want to live somewhere to be interested in economic factors.

I'm also interested in the Chinese economy, but living there would be the worst punishment imaginable to me.

N
Guest
N

@fixie guy:

"Why do you care?"

About the prices of houses here? Because I want to buy one. I love Vancouver. I chose this city after having lived in (in reverse order), NYC, Paris, Rome, Philippines, Tokyo, Toronto and moved here for the weather and the people and the access to mountains and sea, and the food. All of which I love. But I am not going to do so if it's obviously a bad deal, like it has been ever since I got here five years ago. There is also some entertainment value to watching the market. But if I didn't like it here, my attention would be focused on where I wanted to go and how to get there, not the prices of houses here, because I wouldn't want to buy one.

Troll
Guest
Troll
@fixie guy: You still struggle with basic history though. In every crashing national market the majority of banks, governments and real estate associations played the same 3-monkeys in unison puppet show and were all disastrously wrong. You seem to struggle with basic critical thinking. You dismiss a detailed, well reasoned analysis which is backed with historical data simply because others in the same position around the world have been wrong in the past. Why don't you try opening your mind a little more? Although maybe good to start with understanding the difference between real and nominal first, or why Detroit or Las Vegas is not the same as Vancouver. You’ve yet to explain why Canada is right about a ‘new paradigm’ in median home prices. Not sure what I need to explain here, I didn't coin the term or concept… Read more »
squeako
Guest
squeako

Feeling Bearish?

No, I am still sleeping/hibernating. Run mean and lean.

Meaning, no money spent, all saved/invested, and absolutely not, NOT, in real "devastate" at this time and nearish future. Sorry real estate dreamers, hopers, future whiners. (Remember you called price protesters aka bears, whiners not so long ago?)

I have very few belongings weighing me down, most in quality investments, so flexible I am and can "fly" on a short notice.

So sad.. too bad BC, losing another of your "talents" could be in the cards. But ooh well…etc. etc.

I guess nepotism in government is not too good is it?

Cant run a province on gushy gooey feely feely, you need hardcore brains that know how to think. But.. again.. ooh well..

LOL

WFT?
Guest
WFT?

Toronto is the hottest real estate market right now according to BMO.

http://www.theglobeandmail.com/report-on-business

John B.
Guest
John B.

The problem is that there is always somebody who buys. I would like to know who is so crazy right now and invest in the housing in Canada, be it Vancouver or Toronto or whatever big city. From what i have seen, Canadian houses are overvalued and there is big bubble which will sooner or later burst and all overestimated prices will fall. The bad thing about it is that people will loose their homes as happened in US three years before…

Annonymass
Guest
Annonymass

Yeah…Sure everything is getting Cheaper..It's all a "Ponzi Scheme"…
http://www.cbc.ca/news/offbeat/story/2012/01/05/t

"Mad Max" is coming…
http://www.bloomberg.com/news/2011-11-08/imperial

registered
Member
registered

@20 Troll: Never made any such claims. Quit channeling Dave.

This appears to be an insurmountable hurdle for you. Economic principles are the same everywhere. The past is predictive of the future. Excess mortgage liquidity lead to historically unprecedented price/rent ratios, affordability numbers and appreciation that eventually proved unsustainable and collapsed markets around the globe. All in a historical instant. Vancouver is another city, not a place of myth and magic outside physical laws. It isn't special, nor are Edmonton, Calgary, Winnipeg, Toronto and Halifax. The same conditions here strongly point to the same future.

This is so simple and straightforward that your constant confusion and pathetic misrepresentations make you among the most tiring people it's been my misfortune to interact with. Get a pet.

Annonymass
Guest
Annonymass

Why do you Morons keep comparing our market to that of The United States? 80% of Canadians live within a Hundred Miles of the U.S. Border and that's not likely to ever change. If you want live and work in an Urban setting your options are pretty limited.
http://www.nationsencyclopedia.com/economies/Amer

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