CMHC, opinion

Who to blame for housing bubble? Government.

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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.

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patriotz

@What?:
“Sold Listings 218 218 people did something smart and another 218 did something stupid.”

That’s assuming that the sellers pocketed the money. But in fact most sellers buy another property, indeed many trade up.

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Simpatico

@Randomposter: So my question is, when the housing collapse hits its stride in Vancouver, which banks and credit unions will be hit the worst? Anyone have access to DBRS or any ratings for financial institutions? I read in the G&M that the largest banks are now busily ridding themselves of their subprime mortgage loans by selling them off to the Genworths of the world. This may be confirmation of the banks’ belief in an imminent rate hike–i.e. shed the loans that will likely default in a rate hike.

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What?

@paulb.:
Sold Listings 218 218 people did something smart and another 218 did something stupid. When the bubble bursts, it’s gonna be loud.

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N

Lord love a duck!

I love this one:

AVAILABILITY OF PURCHASE OPTIONS: Recent development in Richmond has vastly increased the real estate inventory available to prospective buyers, with waterfront views and modern facilities being a big draw.

Yup, everyone knows that high inventory really pushes those prices up. Imagine what prices must be like in China’s ghost cities!

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southseacompany

Well waddya know? All the stats must be wrong, ’cause the Sun says:

24 reasons why Richmond real estate is booming

Real estate in Canada – specifically in B.C. – continues to rise, according to recent figures, despite other parts of the world heading into depression-like financial crises. Leading the way in Canadian real estate is Richmond, where median home prices are rising fast. But why? Here are our top 24 reasons Richmond is top of the real estate charts.

http://www.househunting.ca/vancouversun/real+estate+richmond/5471831/story.html

Must be true ’cause it’s in the Sun!

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good-format

Copied from PaulB’s number
http://www.laurenandpaul.ca

 Date      Listing  Price(+-)  Sold   Inv     Inv(+-)  S/L(%)
Apr-02       450     139       125   16,074            27.8
Apr-03       319     133       224   16,124     50     70.2
Apr-04       302     131       147   16,230    106     48.7
Apr-05       277     118       117   16,345    115     42.2

Apr-10       403     211       159   16,475    130     39.5
Apr-11       416     151       202   16,618    143     48.6
Apr-12       333     140       103   16,736    118     30.9
Apr-13       289     146       150   16,807     71     51.9

Apr-16       341     170       137   16,883     76     40.2
Apr-17       280     177       179   16,893     10     63.9
Apr-18       301     146       170   16,971     78     56.5
Apr-19       251     127       129   17,025     54     51.4
Apr-20       238     131        85   17,137    112     35.7

Apr-23       309     175       150   17,195     58     48.5
Apr-24       343     145       218   17,220     25     63.6

Total-Cur   4852   2,240     2,295           1,146     47.3
5 day-avg    288     145       150              65     52.1
Total-Est  6,006   2,819     2,897   17,482  1,408     48.2
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fred

vreaa has an anecdote from a surrey toilet. it is very interesting… it’s a must read! we need more stories like this!

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Smoking Man

No sign of a listings tsunami as of yet.

It will come. When is the question. My guess is not until the word is out that prices are lower year over year, which is probably a month or two out.

Waiting sucks (sometimes).

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Idiots

Devore says:

It’s not blind faith, it’s just people being people.

Exactly! This is why the only blame that you can place for this clusterf*ck disaster that’s been created is policy.

Banks are expected to act like banks, RE agents are expected to act like RE agents, builders are expected to act like builders, and greedy/clueless/impatient sheeple are expected to act like they do (if anything, they should be protected from themselves).

Policy is the only protection, and when it come to the democracy that seems to be for sale in is country, policy is written by those with the deepest pockets.

Kinda sad really.

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Randomposter

The definition of subprime mortgages in the US is a bit vague in Canada. Borrowers in the US buying above their price range often obtained mortgages like interest-only ARMs with low initial payments, counting on having a larger income after the loan reset or, as a last resort, selling the now more-valuable home and pocketing the equity, no way to lose (wink wink said the banks). Tapped-out consumers spent paper equity from their homes through home equity loans because they were richer than they thought. Neither of these examples are subprime loans, and both work great when prices always rise. The ARMs “blew up” when they had to be renewed after between 1 and 5 years – last of the fallout should be through the system by 2014. Home equity loans may not blow up but you are sure as… Read more »

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Devore

@Anonymous:

People though Nortel would turn around right up until it went nipples north. Such is the world of the blindly faithful.

It’s not blind faith, it’s just people being people.

If you look at a professional investor, they have discipline, they have detachment, they are analytical. They will take profits when their target is reached, and they will cut their losses when their analysis didn’t pan out. Contrast to your typical retail investor, who will pile into a bull market, let a good thing ride (for too long), hates to take a loss (which gets larger with time). People get emotionally attached, lose their way and get screwed.

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paulb.

New Listings 343
Price Changes 145
Sold Listings 218
TI:17220

http://www.laurenandpaul.ca

paulboenisch@gmail.com

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Yalie

@Makaya:

There was supposed to be a crucial difference, though. In the United States, many of the mortgages underlying the securities bundles that turned bad were subprime, meaning the home-buying borrowers had dubious credit histories. In Spain, the mortgages used as collateral for the bundled securities were considered to be prime — lent only to creditworthy borrowers.

Is there an echo in here?

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patriotz

@Makaya:

“What we are seeing,” he said, “is a massive impoverishment of a country.”

Of course, the massive impoverishment actually took place during the bubble, just like in the US. Ireland, etc. The bust simply took away the illusion that the country was getting richer.

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Makaya

What will happen in BC once the bubble bursts? We just have to look at the situation in Spain… What’s frightening is how familiar things that happened there sound! Cost of Spain’s Housing Bust Could Force a Bailout By any measure, the Spanish real estate boom was one of the headiest ever. Spurred by record-low interest rates, Spaniards piled into holiday villas along the Costa Blanca, gaudy apartments in Madrid and millions of starter homes throughout the country. Marta Afuera Pons is juggling two mortgages — one on her house, another on an investment property that went sour — and is about 350,000 euros in debt. She is trying to persuade her lender, the savings banks BMN, to take back the mortgage and the property. But since the frenzy drove Spanish home prices to a peak in 2007, they have… Read more »

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Anonymous

@fixie guy
One question: Is Vancouver in the lead or is Winnipeg in the lead? Hard to tell by the colors but I would not be surprised if Winnipeg was leading and Vancouver had not yet reached the change seen in Edmonton.

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crashcow

@Anonymous: I’ve been making the same argument with cities closer to home…places like Abbotsford had a big run-up without HAM. The common denominator Canada-wide and even world-wide was/is cheap & easy credit + animal spirits.

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crashcow

@market stats: Genworth given a 43% chance of default within 5 years? Fugly.

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Anonymous

Best place on meth Says:

“80% of the discussion is about HAM driving prices.”

It’s locals fearful of HAM driving up prices who are actually driving up prices.

Or they believe they can profit from their belief HAM are driving up prices.

Fear and greed, the usual suspects.

…..with cheap and easy credit to make it possible…until lately. Easy.is getting harder and cheap is on borrowed time.

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Micky

N says: “As the debt gets mopped up and resources are better priced and allocated, should we expect the manufacturing and consumer economy to pick up?”

Debt de-leveraging in US did not even started yet. 15trillion in debt, millions of houses in shadow inventory, 50 mil pop on a food stamps, ..not a pretty picture…Canada better start looking for other markets and start building Northern Gateway… US in the shitter for the foreseeable future

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Anonymous

@Bony:

I don’t believe in his “threat” to increase rates anymore. But the bubble will burst regardless.

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patriotz

@N:
I think so. The other thing that would be good for the US would be a bust in China. This would bring commodity prices down. The US exports little to China so there’s not much downside for them.

It would be bad for Canada, though. Or should I say the West, Ontario and Quebec would be better off with a lower dollar.

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N

@patriotz:

Is this reason to be bullish on the US economy? RE there is getting back toward reasonable levels, and they have done it quickly compared to Japan. As the debt gets mopped up and resources are better priced and allocated, should we expect the manufacturing and consumer economy to pick up?

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H@M

It will be MUCH easier to see the effects of HAM…

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