Economist: Canadian housing bubble set to burst

You’ve probably heard of the Economist.

That magazine is the latest voice of doom when it comes to our housing market:

The magazine’s dire prediction comes as Canada’s mortgage brokers’ association is warning that the recent slowdown in home sales will continue and lead to large-scale job losses — though some parts of the country will continue to see growth in housing and related employment.

“A large bubble now looks set to burst,” The Economist predicts in its property markets report.

The U.K.-based business periodical found house prices in Canada are overvalued by 73 per cent when compared to rental prices, and 32 per cent overvalued when compared to household incomes.

Read the full Huffington Post article here and the original Economist article here.

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cabrinha98
Guest
cabrinha98

Of course Canadian Bubble will burst, after all it is larger than the US bubble in terms of national price appreciation. Check the graphs if you don’t believe me: http://www.torontocondobubble.com/2013/05/canadian-housing-bubble-exceeds-us.html

chilled
Member
chilled

Ohhhhhhhhhhhhh, my head is hurting this morning. Far, far too many ‘cranteenies’ yesterday evening.

Loon
Guest
Loon

China, cyber hacking and mortgage payments ?!??! It’s all here:

“The agent was a security engineer who owned two apartments in Beijing and had been under pressure to meet mortgage payments.”

http://m.theglobeandmail.com/technology/tech-news/not-just-state-sponsored-inside-chinas-hacking-culture/article12090161/?service=mobile

Anonymous
Guest
Anonymous

“In other jurisdictions like the US the baby would simply get no care and may die.”

Complete and utter nonsense! You have wholeheartedly swallowed the Kool aid doled out by successive governments bent on promoting the notion that high taxes are justified because Canadians have better healthcare (which in itself is complete BS). It’s time for Canadians to stop navel gazing and see what’s really going on.

N
Guest
N

The Sun has picked up on the CAAMP’s nonsense about “tightening” mortgage rules. A guy from a credit union randomly decided that, “”In Vancouver and B.C., it’s not a housing crash that we’re seeing, it’s a mild correction. In terms of prices, it will have a few more months to run, before prices begin to stabilize.” And good old Tsur is covering his ass by saying that its difficult to separate it from the general slowdown in the economy. The article is a great collection of the sort of random finger pointing that we can expect to see more and more of.

Read more: http://www.vancouversun.com/business/real-estate/Housing+slowdown+worsen+cost+jobs+mortgage+group/8419857/story.html#ixzz2U8M7uMMf
http://www.vancouversun.com/business/real-estate/Housing+slowdown+worsen+cost+jobs+mortgage+group/8419857/story.html

Lifetime Renter
Guest
Lifetime Renter
Does anyone else think that, for a speculative mania in housing, the bubble metaphor does not apply? Bubbles build over time and then they burst. This applies to most speculative manias where euphoria moves to panic quickly and prices collapse in a few days, hours or even minutes. But in housing, prices are sticky at the top. It takes time for those who put so much faith in the rising value of their homes, who usually have no other store of wealth, who are up to their necks in debt and who are lied to daily by all the major means of communication to admit that their property is not worth nearly what they thought. The tipping point is not, as with other manias, the disappearance of the last and greatest fool. There is an extended period in which there… Read more »
Many Franks
Member

@Lifetime Renter: Wouldn’t you say “bubble” is a perfectly appropriate term in the case of the US, Ireland, Spain, and others? It took years to become apparent there, too. It’s only in retrospect that it happens quickly.

space889
Guest
space889

Front page cover story on REW.CA weekly flyer – how buying a house together will help your marriage

http://issuu.com/rew1/docs/cq-may24

Joe Sitting On Cash
Guest
Joe Sitting On Cash

Majority of the people view home ownership as good.
Majority of the people don’t compare cost of homeownership versus renting. They view renting as paying off landlords mortgage.
What if they don’t see what “we” see? What if they just go on & the housing just keeps going with some ups & downs? Doesn’t our view only work if we get everyone else on board?

CullBull
Guest
CullBull

Give up like your fiends vancouverpricedrop and VHB who have stopped posting. They have probably bought real estate because they know that the minor price adjustment is complete.

This May will not be much worse than last May. It might even be better than last year. What is the trend bears? Be honest with yourselves. The market has been gaining strength since February.

You wish it was a spring bounce. You repeat the mantra that the real estate top is in. It is merely an article of faith. You bears are like religious nut jobs who ignore evidence.

Many Franks
Member

@CullBull: You forgot to include my humble contribution, Real Estate Agents In Their Cars, which I stopped posting to about 8 months ago.

I would explain why it makes sense to rent now, regardless of minor market fluctuations (which, by the way, pretty much everyone expects to be in the downward direction) — but you’ll just post the same message again tomorrow, so why should I bother?

Anonymous
Guest
Anonymous
From the last thread: “My focus is on the number of expired and cancelled listings. They are about 80 each day. Most of them represent unrealistic sellers, who can’t adjust to the reality of declining sales and prices. They will spent a few months in purgatory, then come back humbled and willing to accept lower prices.” Just came across this in Whistler. A property that was on the market for 18 months and did not sell. It was recently pulled off and the owner said “We are in no hurry to sell. The market is far too low right now so we will put it on when it recovers” He was already asking a shade under what he paid at the peak in 2007. I think this gentlemen will be waiting a long time for the market to “recover”. As… Read more »
Anonymous
Guest
Anonymous

CullBull

“This May will not be much worse than last May”

Which was the worst May on record.

Your arguments that this market is not correcting hard are becoming more and more desperate.

Real Deal
Guest
Real Deal

Bulls have got a point,

If this was a bubble, then a slowdown in sales by 50% should have caused a collapse.

It didn’t. Why?

Homeowners that were planning to sell just took their homes off the market

Maybe it wasn’t a bubble. maybe monthly payment is what matters the most.

CullBull might be right when he paints us with the “You bears are like religious nut jobs who ignore evidence” picture.

gokou3
Guest
gokou3

Re #9

“What if they don’t see what “we” see? What if they just go on & the housing just keeps going with some ups & downs? Doesn’t our view only work if we get everyone else on board?”

Explain US, Ireland, Spain, etc. Before you use the “poor economy” as a reason, in each case housing drops predates recession / financial crises.

An Observer
Guest
CullBull, I’ve been a home owner for 10 years. Not every bear is a renter and not every bull is an owner. That doesn’t stop me from saying the obvious which is 1) real estate prices are destroying the future of this province and 2) we’re clearly in a correction / crash phase – whether this ends up being slow or fast it is happening ad wishful thinking won’t stop it. I’ve been posting less on VancouverPriceDrop because it is time consuming and I’ve had less free time recently. The whole debate is also becoming less interesting – bulls talk about there not being a crash because sales aren’t much lower than last May, the worst May in a more than a decade. Or, they point to prices not dropping much over the past year despite it dropping faster than… Read more »
curious lurker
Member
curious lurker

the bull arguments are getting worse and worse.
“Now it’s a soft landing! It’ll be over before you know it!”
“There is a general weak economy, and we can’t really discern anything from anything else.”

But you know what, if Wile E Coyote kept running instead of looking down, he wouldn’t have fallen into the chasms, so if we can just keep believing in the housing market as a ‘good investment’ it will continue being so in perpetuity!

addair
Guest
addair

Nikkei plunges over 7% in hours.

Why?
Because of slower manufacturing report out of China.
Bernanke’s hint to end QE didn’t help either.
Despite efforts to downplay the deteriorating economy in China, the nail biting by Asian investors continues.

The flow of HAM into Vancouver housing that had already slowed to a trickle is about to stop entirely. The effect that will have on our market should not be underestimated…it could well turn out to be that single factor to push our market off the cliff which Tsur and Cam have claimed to be missing.

Troll
Guest
Troll

@an observer

Curious to know why you aren’t renting considering your certainty of a crash and the fact that renting is generally cheaper than owning? Your actions seem at odd with your beliefs.

N
Guest
N

“Maybe it wasn’t a bubble. maybe monthly payment is what matters the most.”

Monthly payments are already ridiculously high (often twice or even three times rent and always at least higher than rent). Even if it isn’t a bubble and, for the first time in the history of the world, it just keeps going more or less flat, it would still be stupid to buy. It only makes sense to buy if you are sure that prices will keep going up (again, something that has never ever happened) so that in ten years time the average price will be 2 million, and in 40 years time the average price will be 16 million and so on.

jesse
Member

May was definitely stronger than April. This may lead to a consistently stronger market as in 2009, which I think is a possibility, but there are some factors that concern me:
1) OSFI hasn’t followed up on its initial risk analysis audit of lenders. Either they are all in compliance to OSFI’s satisfaction or there will be more pain as the year progresses.
2) More new supply is coming online throughout this year compared to last year that will add to inventory
3) We may be seeing a slight post-HST bump in sales. This would mean that the sales level of 2013 will be better than Jan-Apr but worse than May. Not to say this is occurring, but I’m not completely discounting it either.

CullBull
Guest
CullBull
All of the “concerning” factors that Jesse mentions have been invoked by the bears over the last decade. There has always been lots of new supply comming. Stand on the sea wall of south false creek and look north. All you see is new supply that has been built in the last 10-15 years. There have been various post-regulatory-change bumps such as the bumps following mortgage tightening annoucements but prior to the change taking effect. But guess what? The strong market continues for years afterward and never fades away. Nothing OSFI does will matter. Look at all the credit tightenting measure that have been taken without cratering the market. These factors amount to nothing more than hope and prayers. Face reality. Look at the evidence. There is nothing in the data that suggests that prices will fall meaningfully in the… Read more »
CullBull
Guest
CullBull

“If you have taken the time to look at the other real estate crashes that have happened around us and how they evolved you will see the answer is pretty obvious but I guess we’ll see what happens”

In 2008, you probably said, “look at and the bank and financial company failures around the world tell me that it won’t happen here”. Well, it did not happen in Canada. It was, in fact, different here. And it is still different here.

“you will see the answer is pretty obvious”. It is obvious but you don’t see it. Candian banks did not follow the USA in 2008. Canadian real estate will not follow the USA either.

CullBull
Guest
CullBull

“The flow of HAM into Vancouver housing that had already slowed to a trickle is about to stop entirely. The effect that will have on our market should not be underestimated…”

Do not pray to the myth of declining HAM to save you bears. Rely on verifiable data.

An Observer
Guest
Troll, I have a family and a certain level of expectation in a home that would be hard to find in a rental in my area – I have looked. I’m also well diversified and have not relied on real estate appreciation to fund my future. If I was single with no kids I’d happily liquidate and rent. It’s also hard to sell at the peak and buy at the bottom – if the drop is 40% from peak to bottom, most people who try and time this will be lucky if they make 20% and then factoring in the costs of selling and buying (say another 10% or so) along with the disruption in life and I don’t think it’s worth it for me. On the other hand, people who are not currently home owners would be crazy to… Read more »
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