Ready for a 25% off sale?

A day after the RBC released a report saying there is no condo bubble in Toronto we get a conflicting report from Capital Economics.

Not only do we have a housing bubble problem in Canada, it appears to be peaking and bursting right now.

Economist David Madani says get ready for a 25% drop in prices.

The thing people always seem to forget when it comes to housing markets is that they move SLOWLY.

Housing prices typically respond to changes in the market with a lag of five to nine months, according to Mr. Madani. He points out that home sales have already seen material declines, down 4% over the last two months. Vancouver in particular has been hard hit, with sales down 28% year-over-year.

“Overall, the willingness of buyers to pay these historically high house prices now looks to be proving fragile against the increasingly disappointing macroeconomic backdrop,” he said. “The housing bubble in Vancouver already appears to be deflating, with only Toronto defying the inevitable. Accordingly, we expect substantial declines in house prices over the next year or two.”

Check back here in two years to see whose prediction was more accurate: RBC or Capital Economics.

 

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patriotz
8 years ago

@jesse:
“Some people know they’re overpaying and still overpay.”

For the ordinary buyer (as opposed to people like us) overpaying just means paying more today than they would have to pay later.

If they think they will be able to sell for more later, no price is too high.

Once the idea sinks in that prices might not keep going up, as in the US, ordinary buyers magically get tuned into the idea that buying should not cost more than renting.

ScubaSteve
ScubaSteve
8 years ago

Banks are at it again. Offering 5 year fixed rates at 2.94%, then releasing press statements claiming “RECORD LOW RATES”, trying to create panic buys from idiots who want to get that extra 0.04% from the last 2.98% mortgages. And it will sadly work for some really stupid people.

No Noise
No Noise
8 years ago

I’m still a bit confused. First of all I thought Fannie and Freddie were bankrupt – guess not. So are they a middle-man between the Fed and the banks? As you say, they buy the long money and pass it on to the consumer. Not clear on what role CMHC has in lending money to Canadian investors – perhaps none. So I guess because Fannie/Freddie play the middle-man and pic off a percentage and the American customers benefit? If this happens, why isnt there such an effect on short-term borrowing?

Anonymous
Anonymous
8 years ago

@jesse: “Some people know they’re overpaying and still overpay.:

I think few believe they are overpaying. Some realize there is a risk prices will go down but they think that is just blip and soon after prices will be much higher than they paid. I think that is most peoples logic.

VHB
VHB
8 years ago

@No Noise: fannie and freddie bought the long stuff CMHC doesn’t. Since it has to stay on the bank’s own books, they’re more careful about it.

piklishi
piklishi
8 years ago

@No Noise:
So who has the answer as to why there is a +5% difference between Canadian and USA long term mortgages (25 yrs plus)?

The US Banks are trying to make people borrow for cheap because all of them have (borrowed from the gov) printing machines working day and night. What are they going to do with so much cash, overloaded. Rather give it for a small fee. They were just not allowed to give it for free…:)

left already
left already
8 years ago

“So who has the answer as to why there is a +5% difference between Canadian and USA long term mortgages (25 yrs plus)?”

For the same reason that you pay 40% more at the pump, and all other retail stuff.

piklishi
piklishi
8 years ago

This is how it goes, the order:
First the sales go down (so far close to %50)
Then guess what, prices will go down (?00000)
Soon the prices be will our topic. Lets say in the next 2 months.

No Noise
No Noise
8 years ago

So who has the answer as to why there is a +5% difference between Canadian and USA long term mortgages (25 yrs plus)?

jesse
8 years ago

@oneangryslav2: “In other words, if “ownership premium” is a good that people want, why wouldn’t they seek to buy it at the lowest cost possible?”

Because they don’t want to wait for 5 years for prices to drop. Some people know they’re overpaying and still overpay. What a funny world.

VHB
VHB
8 years ago

@good-format:

Projected total sales: 2,155

Total sales so far:    1,916
Avg sale (5 days):        83
Projected total:       2,155

Thanks for those projections. That puts us on pace to be worse than 2008. Here’s to worst sales in 11 years!

year  sell  list  sell/list
2001  2618  3504  74.7%
2002  2670  3929  68.0%
2003  4023  4447  90.5%
2004  3019  4785  63.1%
2005  3652  4107  88.9%
2006  2732  4370  62.5%
2007  3873  4924  78.7%
2008  2174  7104  30.6%
2009  4114  5061  81.3%
2010  2255  4138  54.5%
2011  2571  5097  50.4%
Mean  3064  4679  65.5%
median  2732  4447  71.3%
good-format
good-format
8 years ago

Projected total sales: 2,155

Total sales so far:    1,916
Avg sale (5 days):        83
Projected total:       2,155
zrh2yvr
8 years ago

Very sorry everyone- – #41 post has the pre/post flipped.

Still -it is not good. 19 pre July 10 and 39 post July 9.

Thus, as the pre July 10 sales are going away, the overall numbers continue to decrease. It is intresting to see how long it takes to post. I’m sure by the end of the month we will still be having some post.

Best place on meth
Best place on meth
8 years ago

1900 sales with 3 days to go.

mobile vhb
mobile vhb
8 years ago

Fridays are on average very light sales days. Anyone want to predict under 50 sales for tomorrow?

paulb
8 years ago

New Listings 168
Price Changes 136
Sold Listings 59
TI:19357

http://www.paulboenisch.com

HFHC
HFHC
8 years ago

New Listings 242
Back On Market Listings 15
Price Changes 192
Sold Listings 94

ALL LOWER MAINLAND

Paul B’s numbers will be lower 🙂 YAY

shriller
shriller
8 years ago

@ N — I expect that at some point credit will get extended to these people. Hopefully it will be because they improve their credit scores. Then I expect the rent/mortgage payment ratio to fall below 1. But not too far. @ Anonymous — No, that is an expected future gain. Not a like as in ownership. I do not dispute that many people have bought with irrational expectations. Indeed I am counting on it. But liking ownership is something completely different. And yes, I expect people should want to buy it at the cheapest price possible. I’m hoping to buy the `ownership’ value for my wife at a substantial discount. Todays numbers are a step in the right direction. In terms of data, there is some from the Survey of Financial Security (now discontinued) but it’s too old to… Read more »

grypnt
grypnt
8 years ago

@ScubaSteve: Even if you own a detached home, you will end up with redneck neighbours at some point leaving trash all over their lawn and throwing cigarette butts over your fence all over your lawn.

As a contrast to ScubaSteves experience living in a luxury condo with mainly owners, I live in a west side privately managed all rental building and have never seen any of the things he mentions, no garbage in stairwells, no dogs pissing in the halls.

I thought owners were supposed to have pride of ownership?

Anonymous
Anonymous
8 years ago

@ScubaSteve:

RBC 25 year mortgages 8.75%

US 30 year mortgages 3.49%, new all-time low.

What the hell is wrong with Canada?

zrh2yvr
8 years ago

What a great day – sunshine – – been on two patios already. Home between stops now. I don’t want to pre-empt our best PaulB but here is my daily update. – – This is interesting.

Total Attached and Detached sales today was 58
of which, 39 were pre July 10 sales
19 were Post July-9 sales.

That is a very interesting point to show that the post July 9 sales have really been weak. Like – Really weak. As well, the pre July 10 sales just keep coming in to show that when July is all done, only about 20% of the sales will actually have related to post rule-change transactions. Thus – the Real Estate Board should not be making any comment on the impact of the change and how it is in the statistics.

ScubaSteve
ScubaSteve
8 years ago

Projected sales as of end of July for the first 7 months of 2012

Vancouver West
– 853 sales (2012)
– 1449 sales (2011)
Richmond
– 664 sales (2012)
– 1234 sales (2011)
West Vancouver
– 420 sales (2012)
– 818 sales (2011)

West Van down 48.7%. Richmond down 46.2%. Van West down 41.1%. I wonder how this is going to turn out? Richmond is leading the price declines. Unlike the wealthy arrogant homeowners in Van West/West Van, the Richmond homeowners obviously can’t handle the heat. Prices down 5% MOM already and worsening. MOI could reach 28 for Richmond at the end of the month.

oneangryslav2
oneangryslav2
8 years ago

@Anonymous:

Do you ever wonder why when prices are high and going higher everyone seems to ‘like to buy’ but when prices are low and either flat or going lower people tend to NOT like to buy? Same houses, same people, same needs.

Moreover, at a lower price, the implied “ownership premium” is much less. In other words, if “ownership premium” is a good that people want, why wouldn’t they seek to buy it at the lowest cost possible?

Anonymous
Anonymous
8 years ago

@shriller: “People will buy houses because they like to buy them. And at many different times in history they have paid a (modest) premium to do so.”

Do you ever wonder why when prices are high and going higher everyone seems to ‘like to buy’ but when prices are low and either flat or going lower people tend to NOT like to buy? Same houses, same people, same needs. Only difference it that prices are not rising. Do you get where the like in your like to buy comes from? What they like is the expected capital gain and when that vanishes they don’t like to buy. Get it?

N
N
8 years ago

@shriller:

Is your argument that, at some point in the near future, deadbeats in the States will once again be able to get big mortgages, and that the lack of cheap credit to people with low scores is an anomalous blip?