Can’t burst a bubble that isn’t there

Some people are freaking out about a housing bubble in Vancouver.

Relax.

Tsur Sommerville of the UBC CUER Sauder school of business says there is no bubble and I bet the developers who sponsor the school would agree.

So it’s unanimous, no bubble.

But if you want a giggle check the spelling on the URL.. Sponsers? well I guess they study economics, not spellonomics.

Anyways, Tsur says no bubble in Vancouver.

“You can’t burst a bubble that wasn’t there,” said Somerville. “But you can have prices above where they should be and it not be a ­bubble.

“A bubble isn’t just defined by high prices,” he said.

Somerville identified a housing “bubble” as conditions akin to what was happening in 2007.

“It didn’t matter what the condo looked like or what it’s going to look like or who was building it, people were lined up around the block and snapping it up,” he said. “They were saying, ‘I’ll take 12, please.’ That’s more of a bubble environment.”

So there you have it.  We had a ‘bubble environment’ in 2007, but right now there is no bubble because very little is selling so we’re safe from a bubble that could burst.  We have prices that are above what they should be, but no bubble.

Read the full article in The Province.

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Anonymooose
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Anonymooose

What a retard. Seriously, where did he go to school?

gokou3
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gokou3

“Somerville identified a housing “bubble” as conditions akin to what was happening in 2007.”

So he actually defined a Vancouver RE bubble! One that DIDN’T burst, amazingly. (How can a bubble that doesn’t burst be defined as a bubble? Circular, I know.. that’s exactly my point)

Let’s see if he’s luckier this time around

Property Economists Are The Ethical Ones?
Guest
Property Economists Are The Ethical Ones?
http://www.ivo-welch.info/oped/ethics.html –quote– What is worse is that many academics (economists and otherwise) will defend almost any behavior in exchange for money. This applies especially but not only to large firms that are in the business of providing expert witnessing advice (such as Charles River Associates, Lexecon, etc.) They see themselves not as economic experts whose task it is to provide the court with expert advice, but as economic experts whose task it is to provide the lawyers that hire them with the best economic arguments to defend any behavior. From “The Inside Job”: http://www.youtube.com/watch?v=8lHvTKzfu8Q Hilariously, and on camera, this one gets caught in a lie about the title of a paper he wrote that is central to justifying unethical behavior in the 2008 financial collapse. He then suggests the title of the paper was a typo and he actually had… Read more »
G
Guest
G

You can only identify a bubble in retrospect. He gave example for 2007 was a bubble. And it’s a bubble because 2008 prices retracted. Now in 2012, the price are even higher than 2007, but it is NOT a bubble. Why? because the price hasn’t retracted significantly yet.

So in simple words, it’s “prices dropped significantly” vs “prices going to drop significantly”. Canucks won the Stanley cup vs Canuck is going to win Stanley cup

The reason the forum quote something “Can’t burst bubble in when there isn’t” in a title in VCI (where more people are bearish), just to encourage more people to reply with emotions.

ScubaSteve
Member
ScubaSteve

Just another economist who has lost his balls after 10 years of bubble-hell and doesn’t even know what is going on anymore. He has waited for a bubble for so long, it finally comes, and he is clueless. This is a hellish prediction for him to make. He will look foolish a year from now.

Joe Q
Guest
Joe Q

this summerville guy kills me

patriotz
Member
@G: “You can only identify a bubble in retrospect.” WRONG. Many, many commentators identified the bubble in the US and elsewhere in 2005. The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops… Investors are prepared to buy houses they will rent out at a loss, just because they think prices will keep rising—the very definition of a financial bubble. http://www.economist.com/node/4079027 If investors are willing to buy properties which carry an operating loss because they think they can come out ahead later selling for a higher price, that’s a bubble NOW by definition. Somerville, Rennie et al are just playing Humpty Dumpty and inventing their own definitions of “bubble”. The latter even came out and said that investors cannot break even on costs but are expecting capital gains, and then… Read more »
Glen Livet
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Glen Livet

AHA! I knew it. I always knew Tsur Sommervile is the credible academic expert and that Yale Professor Robert Shiller has no clue what he was talking about when he refers to Vancouver’s bubble 😉

Seriously, How can local media give this guy any forum at all??

Dave#1
Guest
Dave#1

I would like to find some quotes from Sommerville in 06/07 where he claimed no bubble…..DOH
Yup, I missed it last time, but now that prices are 20% higher, no bubble now.
What a Dolt!!!!!
Dave#1

frank
Guest
frank

@Anonymooose:

From his own web-site.

here’s where he went to school:

Hebrew University, Jerusalem, Israel
B.A., Economics and East Asian Studies, 1986. Graduated with Honors, Faculty of Social Sciences Dean’s List.

Harvard University, Cambridge, Mass.
Ph.D., Economics, 1994; A.M., Economics, 1991.

Here are the courses he teaches:

Teaching – Courses

Commerce 307 – Real Estate Investment

Commerce 408 – Real Estate Development

Here is his web-site:

http://strategy.sauder.ubc.ca/somerville/

If there was anyone talking his own book, then it would be this guy.

Piklishi
Guest
Piklishi

@frank: Really, I would never take his courses. I would be broke in no time. The students should be aware, Omg.

Anonymous
Guest
Anonymous

@G: “You can only identify a bubble in retrospect.”

Come on. That is like a doctor saying you can only confirm you have a terminal disease until after you die. If any other professional used the same criteria Tsur is using we could never forecast anything until after the final outcome takes place.

Icomplain
Guest
Icomplain

But “best place on Meth” with his Grade 8 education says it’s a Bubble…How can such a genius be wrong?

Keeping An Eye On The Pimps
Guest
Keeping An Eye On The Pimps

Obviously not the intent, but the Merchants of Bullsh*t like Tsur are doing society a service.

I like to think of it as Psycho Analysis Economics Therapy Gratis.

Consider the poor fool prodded by Global who has mortgaged his and her future for a leaky fungus crammed box.

They need Tsur, or Prozac; it’s temporary relief,and it’s cheap.

The indebted slaves can get some relief,when they read the Province for free at coffee break.

Not fair, I know, the pimps will blame it on an unforeseen “Black Swan Event”.

Johnny
Guest
Johnny

“But real estate is crashing everywhere”….Don’t think I’ve ever seen a bigger gathering of dummies in one place before.
http://www.heraldsun.com.au/realestate/buying/australians-help-fuel-london-housing-boom/story-fndcuqbl-1226471438591

Anonymous
Guest
Anonymous

who cares about the spelling. armchair economists and stupid bears just dont know they have been making fun of themselves for too long already. it’s about time for them to move back to the cage.

watcher
Guest
watcher

@Glen Livet:

actually, as Frank noted, Tsur is a very capable academic – see his CV for his refereed publications, and note he was smart enough to get in and complete the Harvard PhD, and tapped on the shoulder to head up Sauder Real Estate. Like it or not, UBC business and economics is well-regarded and has a number of leading academics. And comparing his statements to Shiller is a moot point, particularly when Shiller himself stated he really didn’t know much at all about Vancouver when he made the bubble statement.

The fact is that Tsur has the credentials, publication record and education to be considered an expert in the field of real estate economics

patriotz
Member
Courtesy Mish: The high dollar and the global slowdown are crushing Canada’s trade-dependent economy. The latest evidence: The country posted the largest trade deficit in July since Statistics Canada began keeping records in 1971. It wasn’t just the scale of the gap – $2.3-billion – that jolted analysts. It’s how the economy got there. Virtually all major exports fell sharply, including energy, autos, agriculture, forest products and machinery-and-equipment. The overall drop was 3.4 per cent, paced by an even larger 5 per cent decline in exports to the U.S. – Canada’s largest customer. http://globaleconomicanalysis.blogspot.com/2012/09/canadian-exports-collapse-expect-plunge.html Now you might ask, if we are running such a big trade deficit, why do we have such a high dollar? The answer is that the high dollar is not being supported by trade but by Canada borrowing from foreign lenders. When foreign lenders loan CAD… Read more »
patriotz
Member

@watcher:
Somerville knows perfectly well that there is a RE bubble in Vancouver by the accepted financial definition, he’s simply spouting BS to the public to serve the agenda of his cronies in the RE business.

I note that Somerville teaches a course in RE investing. This means RE investing by people who actually know what they are doing, i.e. REIT’s and similar businesses, and I have no doubt that he teaches the accepted industry metrics, by which anyone “investing” in a house or condo in Vancouver today would be considered out of his mind.

But it seems that his peers seem unwilling to judge him by what he says to the media.

SunBlaster
Guest
SunBlaster

A rebutal of a case only comes if the case is present or perceived to be present, thus a rebutal is a good indicator of the case existance or majority of observers perceiving its existance.

vanpire
Guest
vanpire

@watcher:
Anyone who’s ever watched a movie about an impending terminal disaster knows this:
Never, EVER let the general population know the meteor is about to hit the earth.
That creates panic and makes it difficult for the Government officials, VIPs and all sorts of Sponsors to safely board those Big Ships they have prepared ahead of time. And I hope you all know continuity of Government rather than well being of its subjects is paramount, so desperate times = desperate measures and so on…

In the meantime have the happy music play just a little bit louder and make all the Talking Heads you have at your disposal talk about how meteors never really hit the Earth, so not to worry folks, nothing here to see.

And no, I’m not being sarcastic.

BurnabyRealtor
Guest
BurnabyRealtor

I’m actually a Realtor and I want prices to drop about 10%-15% because things will boom for us once that happens…keep up the good work guys.

Black Swan Fungus LOL!
Guest
Black Swan Fungus LOL!

@watcher:

Granted, Tsur looks very nice on paper. Unfortunately, the media is not doing a good job of examining the question of what weight should be assigned to the predictions of experts in quasi-scientific fields such as Economics.

Such “experts” do not actually have an objective model for subjective questions. Well regarded academics in high visibility fields related to personal finance will always have conflicted financial incentives. Almost universally, they will tend to provide interpretations of the data which are of the most benefit their own careers.

patriotz
Member
Here is the syllabus for Commerce 307 at UBC in 2010. Commerce 307 Term project: This assignment is an investment analysis of the potential purchase of an income producing real estate asset. You must prepare a written report that provides the critical analysis for whether: your firm should acquire the asset at the listed price. In doing so bear in mind the following: a. While your firm is a major real estate investor for pension funds, your analysis should be based on the attractiveness of the property as a stand-alone asset, i.e. ignore any portfolio or corporate objective issues. b. You are trying to ascertain whether the price makes sense for the asset in question. As part of an acquisition analysis you will also have to idenitfy the maximum price you would pay for this asset c. Defend your decisions… Read more »
Ralph Cramdown
Guest
Ralph Cramdown

I’m with Tsur. Have you ever seen an ultra-slow motion video of a balloon popping or a bubble bursting? At the beginning, there’s an expanding hole, but the shape is still mostly intact. Because of the hole, it isn’t a bubble, lacking a contiguous surface. That’s where we are now.

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