44% drop in Canadian house prices a ‘realistic worst case scenario’

Are all the credit rating agencies ganging up on Canadian house prices now?

Moody’s is the latest, with a ‘stress test’ case of a nationwide 44% drop in house prices.

The “variable” analysis assesses how much current house prices have departed from “sustainable” market fundamentals. The assumption is that, in the event of a severe economic shock, expected demand that has been baked into current house prices will not materialize. In Canada, the growth in house prices over the past 10 years has ‘’far outstripped” the growth in incomes, according to Moody’s.

“Think of it like an elastic [being stretched],” explains Mr. Connor of National Bank Financial. “The snap back is going to be a lot harder.”

This is the first article we’ve seen recently that seems to point clearly to what would cause the price drop: the simple fact that prices are too high.

Such a house price decline, were it to happen, would be driven primarily by the phenomenal upswing in Canadian home prices over the past decade, Moody’s said.

Canada joins Spain, as well as the United Kingdom and Australia, in the ratings agency’s assessment of countries where growth in housing prices over the past 10 years has driven their values away from sustainable market fundamentals and into “overheated” territory.

“As with Australia, Spain and the U.K., we expect house prices in Canada to suffer the most due to the misalignment of current house prices with historic fundamentals,” Moody’s said.

Read the full article in the Financial Post.

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johnny_O
Guest
johnny_O

“Misalignment of current house prices with historic fundamentals.”
Wtf? Wasn’t anyone listening for the past 10 years when it was made evident that HAM from corrupt CCP members were fueling markets in Australia and Canada
And eveyone else was jumping in thinking real estate was a sure bet?

I think our governments are just like crack whores and will do whatever they have to to get a quick fix if the markets begin to sink.

They’ll call Beijing directly, ‘send more HAM!’

patriotz
Member

“Wasn’t anyone listening for the past 10 years when it was made evident that HAM from corrupt CCP members were fueling markets in Australia and Canada”

You do know that in % terms Winnipeg has gone up more than Vancouver over the last 10 years?

So what does Winnipeg have in common with Vancouver? It isn’t HAM.

Guy Smiley
Member
Guy Smiley

Oh – I think know the answer to this one!! Are they running out of land in manitoba?

Pdub
Guest
Pdub

Odd, i must have missed this article when it was in the Sun!

But if they did run it the headline would surely be: “Moody’s Sees Phenomenal Upswing in Canadian Home Prices”.

elvince
Guest
elvince

“So what does Winnipeg have in common with Vancouver?”

So your theory is that a bad nhl team is correlated with a rising RE market?

Carioac Canuck
Guest
Carioac Canuck

Interesting……………I missed that article in the Calgary Herald as well…..ROTFLMAO !!!!

Makaya
Member
Makaya

So what does Winnipeg have in common with Vancouver? It isn’t HAM.

Surely it isn’t snow and freezing temperature in Mars… 🙂 Could that be lack of Land? We have lake Winnipeg and lake Manitoba to the North, the US border to the south, the Whiteshell Provincial park to the East and, well, Saskatchewan to the West 🙂

Anonymous
Guest
Anonymous

Johny_O,

Exactly, it is the government that is the problem. They’ve failed in what they’re supposed to do. They’ve purposely created imbalances in the economy (understatement).

The only way they are going to be held accountable is if there is a severe shock. Bring it on…really sad when citizens have to wish this..

Mr. Magoo
Guest
Mr. Magoo

Moody’s is forecasting a 44% decline in housing prices nationally. That number should help scare off the HAM buyers because it sounds like double death to them!

eagle eyes
Guest
eagle eyes

WSJ – Surprising weakness in China economy.
Quote “When China jumps, the rest of the world shakes”

johnny_O Says, They’ll call Beijing directly, ‘send more HAM!’

Call them all you want, nobody is answering.

An Observer
Guest

I read the article but can’t see where they are predicting a 44% drop – they actually say ““Moody’s Investors Service is in no way predicting the extent nor the causes of a large scale house price depreciation in Canada,””.

They mention this as a possible worst case scenario but you could also say that the TSX could drop 44% or more as a possible worst case scenario but that doesn’t mean you think it will happen imminently.

I do happen to think that the GVA is in for a 40ish% drop from peak but telling people “look, Moody’s expects a 44% drop” will lose you a lot of credibility. Of course, the underlying unstated message there is that they probably believe this is a lot more likely than a worst case scenario.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

i’m just sitting here, reading all these garbage posts, waiting for the swiss guy, vmd, or observer to post something useful.

No Noise
Guest
No Noise

Moody’s is making a stress-test prediction but, as #9 mentioned, the exact number 44 (chinese double-death) is actually a coded message to Beijing and Ottawa to keep RE inflating HAM out of Canada.

Anonymous
Guest
Anonymous

…“So what does Winnipeg have in common with Vancouver?”….

You can watch it raining in Vancouver from both places.

Best place on meth
Member
Best place on meth

A 44% drop is nowhere near the worst case scenario for Vancouver.

Anonymous
Guest
Anonymous

….i’m just sitting here, reading all these blah, blah, blah…..

Hang in there. It’s tough whey you can’t make any sales.

Vote Down The Facts
Guest
Vote Down The Facts

The credit rating agencies have such a good track record, too.

crashcow
Member

“There is no bubble” – Virtually every economist pre-2012.

“The national housing market is more like a balloon than a bubble.” – Sherry Cooper, BMO, Jan 2012

“Think of it like an elastic. The snap back is going to be a lot harder.” – Grant Connor, National Bank, Mar 2013

These morons keep getting warmer.

johnny_O
Guest
johnny_O
Patriotz, A bit more than a year ago, a co-worker of mine retired to Winnipeg. Apprx. 5 years before that he used the equity in his GVA house to buy a quadru-plex apartment in Winnipeg and rented it out. He sold his house 6 months before retiring and started transferring his belongings including his wife to Winnipeg. Finally, he left BC to begin his retirement, spending half his time in Europe and the other half in Winnipeg. Why Winnipeg? One of the coldest places in winter apart from Siberia. I don’t know but obviously he had his reasons. But one reason was clear, the price he paid for that apartment building and how much rents are going for in Winnipeg. Btw, I did ask him who bought his house in GVA. Take a guess. So I’m not sure if you… Read more »
Wakeup call
Guest
Wakeup call

Mr. Magoo….#9

No need to scare off HAM, it’s long gone! Those warnings from Moodys and other rating services have been going global for some time time now. Unfortunately, the few remaining dummies still buying into this market are locals who are still drinking the Tsur and Cam coolaid.
I know it’s hard to believe, but there will always be a small minoriy that is unable to separate credible reasoning from BS.

Bo Xilai
Guest
Bo Xilai

Chinese villagers’ tactics in repelling real estate developers…

Maybe Vancouverites should adopt similar behaviour…

http://www.businessinsider.com/shangpu-village-rebels-against-land-grab-2013-3?op=1

Vote Down The Facts
Guest
Vote Down The Facts

Sounds like Intrade has shutdown – did anybody use it to place any bets on the Vancouver Teranet HPI?

johnny_O
Guest
johnny_O

@No noise.

#44 Chinese DD. But who is sending the warning shot? Bond vigilantes? Are they trying to tell us rates are going up sooner than expected?
If that is the case, why is the stock market on a tear? Is it about to also crash?

Anonymous
Guest
Anonymous

hey guys, can we talk about immigration again, or something like that? i really enjoy such discussions.

addair
Guest
addair

Hi johnny_O

Part of the reason for the stock market going up is that it is attracting a lot of money that is fleeing the bond market, although stocks could soon see a healthy correction as well.
Int rates may not go on an upward tear any time soon, but with the slow advance of the US recovery there is no way they can go any lower. The next move is definitely up.
Of course Carney or his successor will have no choice but to follow the FED even with a tanking Canadian economy. Their job is not difficult. Heck, anyone could handle it by followin the FED…well maybe not Bull Bull Bull, but almost anyone.

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