Who to blame for housing bubble? Government.

So if there’s a housing bubble in Canada who is to blame? Some people blame foreign buyers, some people blame local buyers. Some people think sellers are to blame and some people think the government is to blame. From the National Post:

Many analysts are becoming increasingly concerned that some cities — notably Toronto, Vancouver and possibly Calgary — are in the midst of their own U.S.-style housing bubble. A document written by the country’s financial regulator and obtained earlier this year through an access to information request, expresses concern over the “emerging risk” of Canadian loans that “have some similarities to non-prime loans in the U.S. retail lending market.” Bank of Canada Governor Mark Carney continued tosound the alarm as well last week over the growing level of household debt, while maintaining the overnight lending rate at a near-record low level of 1%.

The question remains as to why prices in Toronto and Vancouver — where the economy is stagnant — are rising so fast, and not in cities like Edmonton and Saskatoon — where the economy, and population, is booming.

Read the rest of the article here.

Sort by:   newest | oldest | most voted
asalvari1
Guest
asalvari1

off topic but still interesting:
http://vancouverpricedrop.wordpress.com/

topten list of biggest weekly price drops.

registered
Member
registered

The chart below shows the percentage HPI increase in a few of the cities discussed relative to May 1999, the earliest complete data. Saskatoon wasn’t available so Winnipeg numbers are used instead:

http://oi42.tinypic.com/s4bfgh.jpg

Far from the bubbliest, Toronto distantly trails even the Comp 6 in appreciation over the last 23 years. The overwhelming leader in price jump by far was Edmonton, only recently overtaken by Vancouver.
These are real, inflation adjusted prices directly correlating to the number of worked hours required to buy a home, or the amount of other goods and services sacrificed. The asset bubble is national.

market stats
Guest
market stats
Mick Murphy
Guest
Mick Murphy

from listening to coworkers, people understand the market is soft “right now”, and there are a lot of adjustments down in price. however they think it’s just normal fluctuations.

AG Sage
Member

@fixie guy: thanks for this post. I think this is going to be the biggest stunner of the crash, that all but the most rural have a painful fall in store.

By my 5 stages of grief theory, this claim of “it’s contained” is pure bargaining. So, maybe people don’t really believe it based on facts, but like to repeat it because it makes them feel better.

Anonymous
Guest
Anonymous

@fixie guy: “The overwhelming leader in price jump by far was Edmonton, only recently overtaken by Vancouver.”

Last time I was in Edmonton I don’t think I even saw an Asian. I would assume the amount of people who immigrate to Edmonton is pretty low. For all of you who have the theory HAM is driving the market in Vancouver please explain how Edmonton has appreciated the same with no HAM and little immigration over the past 23 years? Could it be HAM has very little impact with exception of a few areas in Vancouver and the easy cheap credit gobbled up by locals is to blame?

Joe Mainlander
Guest
Joe Mainlander

@ Anonomous #6

Perhaps they’re ‘equity nomads’ from Vancouver.

Here’s The Housing Bubble Blog’s Ben Jones desciption of a US parallel;

“It really reminds me of 2004 when Californians were spreading across the whole country, buying property left and right, using their equity from the California bubble to create bubbles in other areas, like Las Vegas. We called them “equity nomads.”

More:
http://www.theglobeandmail.com/life/home-and-garden/real-estate/buying-and-selling/what-will-make-the-housing-boom-go-bust-greed/article2402051/singlepage/

patriotz
Member

@Joe Mainlander:
“Perhaps they’re ‘equity nomads’ from Vancouver”

Doesn’t fit well with the fact that Edmonton peaked in 2007 and is down about 15% since while Vancouver is up 30% or so from the same date.

Anonymous
Guest
Anonymous

@Anonymous: “Could it be HAM has very little impact with exception of a few areas in Vancouver and the easy cheap credit gobbled up by locals is to blame?”

Yes. But people prefer to have a scapegoat.

Patiently Waiting
Member
Patiently Waiting

Has Cam Good jumped the shark? I think he did with the Groupon crap. Nobody took it seriously, nothing more has been said of it in the media, and no one discussed it other than us obsessive bubble bloggers.

Now his site is claiming to be starting a new Key China with over 300 reps selling there. Its just getting more and more bizarre. Playing the “China” game at this time will come back to haunt him. That bird had flown.

I predict he’ll be out of business within a year, or at least rapidly winding down. His rise to fame was with that MacBulk site that supposedly breathed life into the condo market in 2009 (bullshite). Those days are long gone, and old Cam is running out of steam.

Soon he’ll be back in Kelowna with his tail between his legs.

Urbain
Member
Urbain

@Anonymous: Yes, and the boogeyman of illegally procured money from overseas is easy for the population and, more importantly, the government, to get behind. Many accept that we have our share of white collar crime in this country and the prospect of importing it, or having already imported it, makes the demonization of an entire ethnic group around which the government may rally with respect to tightening and/or enforcing regulations. The Harper Government™ gets to play the “it’s not our fault” card while pointing the finger at a tangible group.

Simple
Guest
Simple

Hey Everyone,

Thanks for participating in the “Wisdom of Crowds” experiment yesterday.

The median guess turned out to be a 51% price decline. This may turn out to be a bit bearish given the make-up of this blog. However, I am sure that if I surveyed the “man on the street” the median guess would turn out to be “Wait. House prices can go down?”

Thanks again!

By the way, if you are interested in the “Wisdom of Crowds” check out this video. It is a good primer. http://www.youtube.com/watch?v=r-FonWBEb0o

tutu
Guest
tutu

“Could it be HAM has very little impact with exception of a few areas in Vancouver and the easy cheap credit gobbled up by locals is to blame?”

Ofcourse, But Makaya and his ilk could not masturbate on Chinese scapegoating..

Anonymous
Guest
Anonymous

@Simple:

“The median guess turned out to be a 51% price decline.”

Not surprising, given that you asked people to choose a number between 0 and 100!

UnagiDon
Guest
UnagiDon

@Anonymous: “For all of you who have the theory HAM is driving the market in Vancouver please explain how Edmonton has appreciated the same with no HAM and little immigration over the past 23 years?”

Different cities have different factors, and some common factors.

Common factors: easy credit, CHMC, subprime lending, etc.

Vancouver-specific factors: HAM active in certain market segments (Van West SFH, West Van SFH, West Richmond SFH), trickle-down effect of HAM (i.e. fear of HAM) in other segments, narcissism (thanks to Olympics and BPoE marketing scheme), etc.

Edmonton-specific factors: booming petro-jobs market

UnagiDon
Guest
UnagiDon

@Simple: “Thanks for participating in the “Wisdom of Crowds” experiment yesterday.”

Wisdom of Crowds requires diversity of opinions. Although the opinions expressed on this blog may be correct, they are not very diverse.

Simple
Guest
Simple

@Anonymous #14

The standard deviation of the data was 8.33. The fact that the median was roughly half-way between 0 and 100 is a coincidence.

@UnagiDon #16

I am not sure how you assessed and quantified the diversity of participants in the survey.

patriotz
Member

Real House Prices and Price-to-Rent Ratio at late ’90s Levels

Look at the charts and you’ll see that US house prices are not low by historical norms. But affordability is very good because interest rates are so low.

Of course it would be unimaginable for prices in Vancouver to return to the late 90s. But it was unimaginable in the US too.

Best place on meth
Member
Best place on meth

@Anonymous:

“Could it be HAM has very little impact with exception of a few areas in Vancouver and the easy cheap credit gobbled up by locals is to blame?”

It’s both.

It’s not the absolute numbers of offshore Chinese that are driving up prices, it’s the effect of the real estate industry and media pumping up the HAM story to scare locals into thinking there is an endless supply of them, as in millions coming here to buy up everything in sight.

The plan has worked brilliantly as the frightened local sheep have have been tricked into taking the bait.

When the pump and dump scheme reaches the endpoint the locals will be the bag holders.

gordholio
Member

19, BPOM: Exactly.

Anonymous
Guest
Anonymous

@Mick Murphy: “however they think it’s just normal fluctuations.”
People though Nortel would turn around right up until it went nipples north. Such is the world of the blindly faithful.

gordholio
Member

10, Patiently Waiting:

“…nothing more has been said of it in the media, and no one discussed it other than us obsessive bubble bloggers.”

I’m still discussing it. I don’t wanna be all mysterious or anything, but I can’t say much more right now. I just hope that what I *think* might come to fruition does.

Patiently Waiting
Member
Patiently Waiting

@gordholio: Anything you can do to hasten the demise of Scam’s media presence is more than welcome. I don’t ever want to see his self-important, douchebag face on the news ever again. 🙂

UnagiDon
Guest
UnagiDon

@Simple: “I am not sure how you assessed and quantified the diversity of participants in the survey.”

I did not. But, this is a “bear blog”. If you survey the participants here, your outcome is likely to have a bearish bias.

Similarly, if you ran the same poll at a realtor convention, your outcome would have a bullish bias.

The central thesis of “The Wisdom of Crowds” is: “that a diverse collection of independently-deciding individuals is likely to…”
http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds

You’re missing the “diverse” part.

Anonymous
Guest
Anonymous

@Simple:

“I am not sure how you assessed and quantified the diversity of participants in the survey.”

Online polls generally exhibit many forms of bias. The website it’s posted on, and its readership, being the most obvious.

wpDiscuz