Friday Free-for-all!

It’s that time of the week again!

lets do our regular end of the week news roundup and open topic discussion post for the weekend!

Here are a few recent links to kick off the chat:

Vancouver sales decline 32%
Vancouver drags down national numbers
Time to panic
Vancouver market cooling too quickly?
Last September was a different season
Realtors forced to change jobs
What did Billy do wrong?
HPI vs the San Diego bubble graph
Policies will not make housing affordable
House rich, lifestyle poor
Condos best rented, not owned

So what are you seeing out there?  Post your news links, thoughts and anecdotes here and have an excellent weekend!

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West Coast Woman
Guest
West Coast Woman
Re: Article in Vancouver Sun “Policies will not make housing affordable” The entire rationale for these policies was that land in Vancouver is expensive because there’s a shortage of land, and that’s why Vancouver has an affordability crisis that City Council was compelled to address. It seems City Hall didn’t understand the memo telling them that Vancouver was in a real estate bubble driven by easy and cheap credit, and that this was the real cause of rising prices. I wonder if they’ll still be relying on the “shortage of land” explanation and “affordability crisis” excuse for using these policies when prices drop 40-50%, and there’s still a huge inventory of unused/unsold housing units? Or if the developers will continue to build all these new luxury condos that have already been approved on the west side once they realize there… Read more »
More Data Please
Guest
More Data Please
One more link. From CBC’s “Anger In America” documentary: http://angerinamerica.cbc.ca/#3-real-estate-crisis Scroll to the bottom of the page for the video clip on Cleveland’s housing crisis solution – demolishing properties to artificially raise prices through scarcity. This is what I call punish the property instead of punish the idiots who overpaid because the bank gave them “free money”. Also, fans of COC(CaucasiansOnCredit) blubbering, should have a look at the full documentary in the CBC player. Once again there is somebody complaining (like the woman in Ireland) about how they were somehow “forced into buying a ridiculously overpriced home”. What I would like to see is a documentary called “Free Money Society”, where psychologists and economists interview people in Canada who take these loans with no practical intention to ever fully repay. They could investigate a number of theories, for example: (1)… Read more »
george
Guest
george

Banks must be able to fail without taxpayer bail-outs or else the next rescue will provoke “almost uncontainable” levels of public anger, Bank of England deputy governor Paul Tucker has warned.

Paul Tucker warns backlash to another bank bail-out would be “uncontainable”

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9603780/Paul-Tucker-warns-backlash-to-another-bank-bail-out-would-be-uncontainable.html

jesse
Member

October sales. Very strong relative to September’s. This is very unusual strength. I see on first pass four potential reasons:
1) A random occurrence
2) Prices have fallen enough to make mortgage payments more affordable all of a sudden
3) Rush of sales due to incentives and a closing off of financing terms before underwriting guidelines change
4) A renewed bout of investment dollars from somewhere else

The last time we saw such a large seasonally adjusted uptick was March 2011. That was the month before CMHC changed its insurance qualification rules. Not that I know much one way or the other but October 2012’s recovery has been remarkable (not too far below 2011/2010 but still pretty bad).

More Data Please
Guest
More Data Please

Banks must be able to fail without taxpayer bail-outs”@george: YES!

My post on the responsibility of borrowers isn’t a pass for financial institutions. Insolvent banks MUST be sent to bankruptcy court without bailout, have their debts unwound, and where feasible bank fiduciaries should be subject to criminal sanction.

RBC, I’m talking to you! RBC using their block trade facility (see link) for collateral and market avoidance must be prosecuted by Canada! Usury marketing of mortgages by RBC to Canadians should also be investigated.

It should be enough that if RBC’s CEO Gordon Nixon has Finance Minister James Flaherty’s number on the speed dial of the phone at his desk, RBC (or any other Canadaian bank) should be subject to scrutiny for political corruption. RBC, you don’t own Canada! Canada exists for the benefit of Canadians.

http://www.bloomberg.com/news/2012-04-02/rbc-sued-by-u-s-regulators-over-wash-trades-seeking-tax-benefit.html

Anonymous
Guest
Anonymous

@jesse: with 65 sales yesterday, I think it would be wise to wait until the end of the month before making a judgement on October’s market. We can’t call it a “very strong market” yet, even relative to September’s market.

More Data Please
Guest
More Data Please
@jesse: re: “October sales. Very strong relative to September” Excellent question! The follow-up question that comes to mind is who are the sellers? Are they COC or HAM? Let me explain. (1) HAM sellers. Caution and awareness. HAM knows this is a casino bet, just like the Macau Baccarat table. They close out their excess property at the bid and wait for another day when the eights (8’s) are smiling on their gambling beliefs. (2) COC sellers. Ordinary assimilated Canadians of any race have property that is underwater and have suddenly changed religion because they see an even bigger world of hurt coming if they hold on for even one more day. They take the bid and change religion. My sense of it is, the sales are mainly HAM gamblers who know their eights have run out. http://www.google.ca/search?q=chinese+gambling+culture
jesse
Member

@Anonymous: “We can’t call it a “very strong market” yet, even relative to September’s market.”

You can define strong any way you like but right now with 9 days left the trend is tracking to about 2k, or about 90/day. If we average 60 for the rest of the month that will finish Oct at 1700-1800, which is still about 20% above September’s. Further if that were to occur it would be different from the process variability seen in the past 2 years where sales were relatively constant through the entire month. I’m pointing out that daily numbers have tripped through what looks to me to be an abnormal sales event, is all. Maybe it’s noise.

vanpire
Guest
vanpire

@jesse:
When September sales were analyzed, the experts were quick to notice that there were only 20 working days that month, hence low monthly sales.
As luck would have it, October has 23 working days, so there… sales increase explained.

jesse
Member

@vanpire: Averages for October were markedly higher than September. This is not a month end argument based on total sales days, the numbers are up on a daily basis. The only way October comes in at the same level as September on a daily basis is for sales to crater for the rest of the month. That would mean a departure from the normal pattern of October dailies.

I’m not sure if people are disliking the numbers or my analysis!

market stats
Guest
market stats

Unfortunately I think it will be continue to be challenging for BOC to raise rates due to non resource economic performance and related pressure to weaken the currency. Until those factors change there is little likelihood of official BOC rate hikes. That said ongoing tightening on housing credit from the Finance Minister, eg. CMHC, OSFI continues to be possible.

http://www.bloomberg.com/news/2012-10-19/canadian-dollar-falls-as-inflation-data-adds-to-rate-speculation.html

Makaya
Member
Makaya

@jesse: “I’m not sure if people are disliking the numbers or my analysis!”

I think it’s your choice of words that people are disliking. Calling “very strong” a market with such low sales is not an accurate description of what’s really happening (especially after yesterday’s catastrophic sales), even if you mentioned “relative to September”.

Just my two cents…

jesse
Member

@Makaya: Maybe lol, doesn’t change the data though. I’ll use more rational language next time 🙁

specialfx3000
Member
specialfx3000

Yep, another example of Vancouver being on the same stage as Melbourne, New York, London, Paris, Hong Kong, etc…

“When Topshop opened its first Australian location in Melbourne last year, hundreds of ecstatic shoppers lined up overnight for an opportunity to be the next trend-setter.

It’s the same at the clothing retailer’s launches around the world: New York, London, Paris, Hong Kong. Wherever Topshop goes, fashionistas flock…”

Whoops, except Vancouver.

“…only a handful of shoppers turned out. At times, there appeared to be more staff than there were customers browsing the furry clutches, pink blush and sequined tops.”

I blame the rain.

http://metronews.ca/news/vancouver/408829/vancouvers-topshop-opens-without-the-stampede/

Many Franks
Guest
Many Franks

@jesse: It’s disappointing to see the downvotes; this site is stronger when we’re not selectively blind. I really appreciate the information you post.

Turkey
Guest
Turkey
Vancouver Sun: “Household debt headlines don’t tell the whole story”. (By the way, using Chrome, it’s easy to completely block/delete the paywall pop-up. I use a combination of AdBlock and Page Eraser plug-ins. I am not paying for that rag until their stories are consistently this good.) Even if we allow that Canada’s household debt level approximates that of the U.S. before the collapse, financial vulnerability is where Canadians and Americans part ways. Because mortgage interest is tax deductible in the U.S., it makes sense (or appeared to before 2008) to carry a large mortgage. There is no tax benefit for Canadians, who prioritize paying off the mortgage. Let me get that straight: Americans can write off their mortgage interest against income tax, which makes it easier for them to hold large debt. Canadians have run up a comparable household… Read more »
Bo Xilai
Guest
Bo Xilai

@specialfx3000:

“When Topshop opened its first Australian location in Melbourne last year, hundreds of ecstatic shoppers lined up overnight for an opportunity to be the next trend-setter.”

Bad reception to Topshop in Vancouver because they don’t sell 100 dollar yoga pants.

Many Franks
Guest
Many Franks
@Turkey: Yeesh. So Canadian households are not significantly more financially vulnerable today than they were in September; the change is largely due to accounting protocols. The debt ratio is up 1.6% (by the new accounting) last quarter. That’s a 6.6% annualized increase, at a time when debt ratios are already off the charts and Mark Carney is already pooping bloody nickles over it. …The same revision that raised the level of household debt, also increased household net worth to $6.6 trillion from $6.3 trillion in 2011 from 2010. On a per-capita basis, household net worth rose to $190,800 from $182,900 year over year. In the second quarter alone, household net worth increased by 0.9 per cent. So net worth was revised upwards about 5%, while debt was revised upwards about 10%. Debt increased 1.6% last quarter, while net worth increased… Read more »
jesse
Member

@Many Franks: disappointing to see the downvotes”

Hardly. It’s quite revealing on many levels!

Some Guy
Guest
Some Guy

Jesse, I count daily sales volumes up about 10-15% in October vs. September this year (so far), whereas the norm from the last 2 years was October about 5% higher vs. September.

It’s hard to know the reason for the bigger uptick this year, but looking at the area I follow (Tri-Cities), it seems like more sellers are getting realistic about the changing market and have dropped their prices in order to sell.

I guess we’ll see (or at least get some idea) how much of the increase in sales is being driven by price reductions when the price indices come out for October month end.

jesse
Member

@Many Franks: The funny thing about my comment is that, in my view, it’s most likely quite bearish in the longer run. I’ll put it a different way:

1) Data indicate October sale rate compared to the September level is markedly higher. This is unusual.
2) This may just be noise.
3) One conjecture is that with upcoming mortgage rule changes we are seeing a similar effect to what occurred in March 2011 with sales surging only to fall again the next month
4) If this is the case that means future demand is in effect brought forward and will lead to lower sales later on. That will lead to more severe sales and price declines subsequent.

Or it could just be more “HAM”! 😀

Patiently Waiting
Member
Patiently Waiting

@jesse: During the US bust (2007-2009), bears were sometimes alarmed by freakish upticks in sales in various places. They turned out to be rounds of knifecatching. There’s been some fairly aggressive price reductions, so this may be happening. Don’t worry, these sales need to happen to set the new lower market prices.

Not much of a name...
Member
Not much of a name...

http://money.ca.msn.com/video/?cp-documentid=3fbfeddb-5af2-4ba5-ad98-1b99f5aced9a

Interesting video with David Choi, President of Royal Pacific Realty. There were two parts that really stuck out for me.

6:15 – States that Chinese “investors” were not speculating since they weren’t using leverage to buy.
8:20 – Chinese will only buy when fundamentals make sense. They won’t purchase is locals cannot buy.

Hmmmm…..

JR
Guest
JR

For those wanting to read crappy Van Sun articles I have found a way, although a bit cumbersome, to get rid of the paywell modal aka “subscribe now” popup. These instruction are for chrome browser.

1. Command-Option-I. This will bring up the developer tools.
2. Click on the console button, the rightmost button.
3. There will be a little prompt looking like this > where you past the below.
4. Paste then hit enter: $(‘#gregbox-outer’).hide();
5. Paste then hit enter: $(‘body div:last’).hide();

You will have to do this on each page.

Enjoy

Yalie
Guest
Yalie

Regarding the sales bump in October, I think it’s a combination of freaking-out sellers lowering their prices plus the upcoming October 31 rule changes. Note that despite the fact that the “July 8” changes have come and gone, the cash-back mortgage ban which was announced at the same time does not come into effect until October 31. You can still get one at TD for example:

http://www.tdcanadatrust.com/products-services/banking/mortgages/view-all-our-mortgages/5-cashback.jsp

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