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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s
Bo Xilai
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Bo Xilai

Capital Economics, an independant research firm or RBC, a company which makes billions selling and servicing mortgages?

Hmm, I wonder who has an interest in putting a “spin” in their analysis?

registered
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“There is always a stand-off period at the end of a housing bubble, when prospective buyers refuse to meet the price of sellers, who refuse to drop the asking price,” he said in a note. … Mr. Madani said that he expects housing prices in Canada to crash 25% over the next couple of years.” The standoff prediction, while correct as far as it goes, misses that the pool of buyers (qualified for mortgages) shrinks with the recent return of lending standards to historic norms. When the market is in rapid appreciation, to a large extent price doesn’t matter to buyers as long as they can carry payments. Buying is still rational in expectation of guaranteed returns. That return however relies on the ability to sell. Significantly reducing the number of buyers turns it into a different market. It’s not… Read more »
joe_blown_away_by_high_housing_costs
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joe_blown_away_by_high_housing_costs

@s:

Yes, the BC Liberals have their very own “fudge-it budget”!

Anonymous
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Anonymous

@joe_blown_away_by_high_housing_costs: Yes, the BC Liberals have their very own “fudge-it budget”!

It is funny how anytime the topic of financial mismanagement comes up the BC NDP come to mind.

Anonymous
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Anonymous

A 25% Canada wide correction will be more like 50% in Metro Vancouver with the most damage being on the higher end. Those Westside houses will get absolutely slaughtered.

b5baxter
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New graph: http://vancouverpeak.com/groups/inventory-graph/forum/topic/inventory-graph/?topic_page=2&num=15#post-2518

The rate of inventory has increase has definitely slowed. Current levels have fallen below the 2008 trend line.

Over the last month the average daily increase was:12
At this rate we would reach 20,000 in 79 days (Oct-13-12)

On an unrelated note, I just got a phone call from someone trying to convince me to advertise at the Vancouver Real Estate Investment forum in November. Managed not to laugh.

tinpot
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tinpot

@Anonymous: Not likely, I think you have that backwards. The smaller towns around Canada will see some prices fall, but we’re unlikely to see much of any price drop in Vancouver. It’s too desirable.

patriotz
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@tinpot:
Vancouver was a hell of a lot more desirable when prices crashed in the early 80’s. Some plenty desirable places in the US took a beating in the recent bust too.

“Desirable” does not justify ownership costs being massively higher than rents.

Chabar
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Chabar

@tinpot:

Tinpot is joker, just sarcastic.

oneangryslav2
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oneangryslav2

As the month-end quickly approaches, I’ve been eagerly anticipating the next GVREB press release here on VCI. I think that it’s a fantastic counterweight to the REBGV’s monthly propaganda. I’m thinking that it would be great to supplement GVREB’s press release with VCI’s own home price index. If there is anybody out there who could supply the data (paulb?), I’d be happy to put my statistical skills to use.

In addition, to sale price, I’d need only a few additional variables–sq. footage, location (municipality), whether it is attached/detached, etc., and number of bedrooms/bathrooms/floors, and lot size.

Contrary to the REBGV’s house price index, our results would make all of the statistical tables and standard errors publicly available.

So, does anybody know how we can get access to the data requested above?

skippa_azza
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skippa_azza

Just renewed my rental contract. Land lord came with a request for 4.5% increase although my previous contract was two years ago. Guess what, I talked him down to keep a lid on rental increase or else I will move out. Land lord obliged with my request. Yippe… No rent increase for 3 years. Boy, I love living in a new condo with view at much less than the carrying cost.

gokou3
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gokou3

@skippa_azza: Which part of the town do you rent at, if I may ask?

skippa_azza
Member
skippa_azza

@gokou3: Burnaby, Brentwood area. I prefer Burnaby since it’s close to my office (5 mi drive or 2km) and school. It’s gives me lot of flexibility (work from home, drive or walk) and reduces my stress levels.

Patiently Waiting
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Patiently Waiting

@skippa_azza: Yes, nobody should be accepting increased rent. If anything, ask for a decrease once you’ve established you are a reliable tenant.

Are wages going up? No. Rents shouldn’t be either.

skippa_azza
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skippa_azza

@Patiently Waiting: I would have. But my land lord is quite nice and gives me no trouble. I’m already paying 10% less than what I see in the market. My unit is bigger compared to others in the same floor, corner unit and everything is paid for, gas, parking, laundry. More over, he had given me half month rent off on my lease. I could not beat his offer and want to be fair too. I can afford to rent or buy. But just playing the waiting game… My job pays well and haven’t been any decline in my earning power for last several years and I’m climbing career ladder even during recession times.

Felip
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Felip
Yes, nobody should be accepting increased rent. If anything, ask for a decrease once you’ve established you are a reliable tenant. Are wages going up? No. Rents shouldn’t be either. _______ Well, I got my rent increase. Admittedly, we used to be a lot under market rental, then a little under market rental, and now on par after successive increases. We had some work done on the building so the cost was passed on, expectedly. Of course, I now go out of my way to phone my landlord about the smallest little things – garbage left out by the bin, illegal parking, clogged drains, bent blinds, etc. Of course, I make sure lights are left on everywhere in common areas since the cheap bastard puts up signs everywhere telling everyone to turn them off, and I constantly run hot water… Read more »
Vote Down The Facts
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Vote Down The Facts

@skippa_azza:

Shared laundry should be considered “cruel and unusual punishment” by the United Nations.

gokou3
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gokou3

http://byron.livefraservalley.ca/homes/9888-Cameron-Street/19221437/?index=11

Check this listing. 7 price drops for a total $78k reduction. But then, who wants to live in a Coquitlam condo for $480/SF? I don’t care if you are on the 36th floor of a new building.

Try $400/SF for now and $350/SF in a year.

Anonymous
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Anonymous

The following is a quote from the comments section on the seeking alpha website for an article on Canadian Real Estate and Household debt.

“And all said, i don’t think Canada will get much of a housing correction unless we get a very bad recession. The overpricing is in pockets. It does not necessarily apply even city-wide. Though maybe most of Vancouver has got ahead of itself. But then again, if the rich Hong Kong(ites) and other Chinese still want the homes, it could go on for a very long time.”

http://seekingalpha.com/article/741391-canadian-real-estate-and-household-debt

Patiently Waiting
Member
Patiently Waiting

@skippa_azza: Cool. I’d pay a small premium to not have to worry about BC Hydro billing mistakes and their fail customer service. 😛 So first they demand a few hundred dollars and claim it must be a problem on my end… then, a few months laters, quietly credit it back with no apologies or explanation. Assholes.

shriller
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shriller

@patriotz
Precisely. Rents reflect desirability. I can rent much more cheaply in Whalley than the westside. Prices reflect an ownership premium.
Has anyone else noticed an increase in the asking rents asked on craigslist lately? I noticed something similar in 2009 but haven’t really been watching again until lately. My guess is that these reflect shadow inventory. After all, wasn’t the lesson from 08-09 that the market will rebound quickly? Thus if the market slows just get someone to pay the mortgage via rents while waiting for the moment to list. I do wonder if this is what is going on…

patriotz
Member

@shriller:
“Prices reflect an ownership premium.”

Ownership premium is just a euphemism for bubble.

It’s the renter who should be paying the premium because he’s getting the use of the asset with far less risk than the owner.

Which amazingly is what the US has settled down do.

Anonymous
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Anonymous

@oneAngrySlav

If you can manage to get your hands on a decent amount of sales data, I’d wonder If running the average on sales within 2 standard editions of the mean would give a more reliable representation of price movements, by eliminating some of the noise.

ScubaSteve
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ScubaSteve
@skippa_azza: The rental club is nice. I have been renting for 3 years also, and my rent hasn’t gone up. I am paying $900 a month for a 1 bedroom condo. Two identical units in the building sold for $242k and $251k last year. Imagine the mortgage on those, plus property tax, plus strata fees, plus transfer tax to buy it. No thanks. Everytime I into the hallway or lobby there is more damage to the building… someone moves a sofa in and tears up the elevator, or rips the walls apart. Every Saturday some idiot breaks something. People leave garbage in the stairwells, let their dogs piss all over the place. I could care less, since I just rent… but if I were an owner, I’d sure be ticked off. We better be quiet though. If we keep saying… Read more »
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