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FFFA! New Year, Peak & Crash.

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It’s the end of another week and that means it’s time for another Friday Free-for-all.  This is our regular end of the week news round up and open topic discussion thread for the weekend.  The first one of 2013!

Lets get to the links:

–REBGV HPI: peak down this much
–Here’s the press release
–Hottest property values dip in 2012
–Real Estate boom meet Dot Com Crash
–Jesse wins the 2012 prediction contest
–Here’s the 2013 prediction contest
–Why housing prices aren’t coming back
–Whistler condos down 39% over 5 years
–Dec 2012 Condo battle map
–Vancouver Realtor Hunger Index
–

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

*Just a reminder: Registration is open over at the Vancouver Peak Forum, but you must leave a human comment within 2 days of registering or your account will be automatically deleted.  This policy helps us keep the board purged of spammer accounts.  Thanks for your understanding!

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Anonymous

“The US has put themselves in such a horrible fiscal position I believe the fed will politically be forced to do everything in its power to keep interest rates low to preserve the status quo.”

There is no doubt they will try. Every country with massive debt tries to do this. Try and do it are different. See Spain and Italy. The US does have a huge advantage by being the reserve currency but at some point it is no longer in the fed’s control. Bond buyers demand more yield based on risk of default. At some point in the not too distant future the US balance sheet will be so bad investors will want more than 2%. Like Zero Hedge pointed out even a move to 3% will cause huge problems.

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Sunny123

To Vangrl

“I rent back from investor for $1400…“ there are tons of 1 bed rooms for rent for well under $1400…is that something to brag about since your message is all how smart you are (even though you denied the hell out of it) with your $…

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Anonymous

….I’ll refrain from posting and keep this a one sided blog…….

Promises, promises!

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Anonymous

….That’s why these rental situations make sense to investors/landlords. If taxes were even loosely enforced, this whole scheme becomes unbalanced…..

There’s no way that rental income would exceed expenses so there’s nothing to enforce.

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patriotz

“US has crossed the line where theyre now comparable to Japan. ”

They’re not at all comparable to Japan. Japan is one of the world’s biggest creditors and their government does not borrow from foreign lenders.

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Groundhog

Yes, I think we’re thinking the same way.

We’re in a position now where if the economy improves interest rates in Canada will need to rise (at least come off their emergency lows) which will put a damper on both RE through higher mortgage rates and the economy in general through a higher CAD$. Basically, we’re stuck.

The US has put themselves in such a horrible fiscal position I believe the fed will politically be forced to do everything in its power to keep interest rates low to preserve the status quo. This affects Canada in that if we do need to increase rates, the interest rate differential will have a large impact on the USD/CAD exchange rate.

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Reasonable Bullish Position

The most reasonable bullish position is simply (as VHB has ponted out many times) MOI.

If listings are weak, and sales fall around the 10 year average (whether driven by low rates, foreign money, gov’t buying incentives, improving economic environment, or a continued downward pressure on local IQs), MOI will face downward pressure.

The data is fairly reliable. High MOI and prices are pressured down. Low MOI and prices are pressured up. 6ish MOI and prices stay flat.

A bull friendly 2013 is certainly a possibility, and any bear that doesn’t see that must be new to this blog.

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gokou3

Pastrick are like the fortune tellers / palm readers. They sell hope, not substance.

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kansai92

A soft landing is like the Sasquatch.
People talk about it, people believe in it.
But no one’s seen a real one.

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VHB

@groundhog that ZH post says that US growth won’t pick up. Sure fine–but that’s not Helmut’s prediction. Helmut says 1) US and Can growth pick up substantially 2) This brings up Van RE.

I say if (1) happens, then the yield curve steepens; BoC and Fed get ready to move. That spoils Helmut’s RE party.

I’m not predicting higher interest rates. I am saying that if growth goes up a bunch, interest rates will not stay low. That’s the problem with all of the ‘prices stay flat until wages catch up’ scenarios. If wages start picking up enough to start moving toward prices, then interest rates won’t stay low.

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Groundhog

Zerohedge has an excellent post right now about US interest rates.

I dont think US rates ever rise while the US as we know it exists. Theyve crossed the line where theyre now comparable to Japan.

Canada will be hesitant to increase interest rates as long as the US had low rates.

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jesse

“what variables are in his model”

No clue but IIRC Pastrick was beaten down hard in late 2008 and turned uber-bearish on RE early in the year. He was predicting -10% drops or worse through ’09. Things turned up in ’09 and he had a giant introspective mea culpa. I expect he’s predicting the same sort of thing in 2013, with Vancouver miraculously rebounding after “mildly” correcting in 2012. I’m penning him and his ilk “oh-niners”.

Poor Helmut is in effect predicting affordability is going to get perpetually worse and it’s always a good time to get into the market. Remember this?
http://www.moneyville.ca/article/1005715–this-housing-expert-waited-too-long-to-buy

I think the adage applies: senior officials can be fired for incompetence in principle… but not in practice.

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VHB

re pastrick:

Makes you wonder what variables are in his model. He bases his RE rebound claim on a big rebound in US and then Canadian growth.

But if US and Canadian economic growth picks up substantially does Pastrick project the 5-yr to remain at 1.5%?? Very very unlikely. If it does go up, what does he seriously think would happen to the Van RE market.

As others said earlier in this thread, the reason bull arguments often get downvoted is they lack any internal consistency. It’s just blowing smoke.

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Groundhog

Almost time to update the Coaster yet?

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jesse

Helmut Pastrick Bottom Call sighted!!!!1!!
Bottom call thread

“It’s a mild market correction,” said Credit Union Central economist Helmut Pastrick.

He predicts a continued soft real estate market for the next several months before buying and prices perk up in the second half of the year.

Pastrick bases his forecast on improving growth in the U.S. that will spill over into B.C. later in the year, and spur continued economic growth and home price gains in 2014-16.

He said the recent decline in prices may also help draw some prospective buyers back into the property market.

– January 4, 2013

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jesse

, if you look at the Case-Shiller data from the US you can see the seasonality — after the first year of declines, the spring of 2007 saw a slight leveling off (though still a negative slope). If 2013 is going to be a poor year for Vancouver real estate, I would expect flat or slightly negative price changes through the spring. Those conditions would see MOI in the spring averaging around 7. That would then almost certainly lead to significant price drops in the second half of the year and concomitant high MOI.

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A voice of reason

This week will see our first 300+ listing days of 2013. You can take it to the bank.

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patriotz

“Tolstoy was cool, but the reason for my surprise is that LA and SD are so close to each other.”

The busts in LA and SD were in fact very similar. The difference is that SD peaked and then declined ever so slightly for the better part of a year, then LA peaked, then they both went down pretty much in lockstep.

Looking at the stats simply on a decline post-peak basis is misleading. Look at the graphs that I linked to and you see what really happened.

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Anonymous

An Observer Says:
January 6th, 2013 at 1:57 pm

“The Case-Shiller data I used was for single family homes in those cities.”

Great job. Thank you for your time, Observer.

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Anonymous

“the reason for my surprise is that LA and SD are so close to each other”

Comparing LA and SD is like comparing Vancouver and Kelowna. Both in the same state/province but very different cities. Although, all 4 were/are in a bubble for the same reason – cheap and easy credit.

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Crasher

Tolstoy was cool, but the reason for my surprise is that LA and SD are so close to each other. But then, LA probably covers more ground and is more diverse than any other city in the world with many areas within the city going their own direction.

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oneangryslav2

@111

After 6 months, SD was only down 7.4% compared to 26.1% for LA, but after 36 months from peak SD had dropped more than LA.

I guess it just goes to show (to paraphrase one of the real estate industry’s favourite slogans) that all real estate bubble bursts are local. Or to paraphrase Tolstoy*: “all rising real estate markets resemble one another, each crashing real estate market crashes in its own way.” 😉

*The topic of Tolstoy’s famous quote was families: “All happy families resemble one another, each unhappy family is unhappy in its own way.”

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An Observer

The Case-Shiller data I used was for single family homes in those cities. If you look at the entire Greater Vancouver area (including Whistler, Bowen Island, Pitt Meadows etc) then the number drops to -3.8% for 6 months and -6.3% for 8 months. If you limit it to Vancouver West, Vancouver East, West Vancouver, North Vancouver, Richmond, New Westminster and Burnaby (what most people would consider the core Vancouver area I believe) the 6 month number is -4.2% and 8 months is -7.1% I know what you are getting at – by focusing on Vancouver West I am using a subset of the region and comparing against larger sample sizes in the US. It’s a fair argument but the reasoning behind this is that I believe Vancouver West is a great barometer of the bubble. When people outside of Vancouver… Read more »

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rp1

“That’s a pretty good correction.”

And -2005 was a pretty good bull run. Then government largesse and interest rate manipulation started turning the market into a bloated corpse, and we had another bull run. Quite remarkable. But as I recall, the same thing happened to stocks in the 1990s.

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