Learning from the neighbors

There’s another one of those semantics question articles in the Financial Post:

Canadian Housing: Bursting bubble or gentle landing?

Here’s one chunk of that article with a few asides that always seem to be missed:

Lewandowski believes Canada will not suffer a U.S.-style housing crash simply because policymakers had the benefit of watching it happen next door.

“What we experienced here in the U.S. with housing markets and regulators goes directly to the attitude and changes the minister of finance has made in Canada. A regulator who is being proactive is taking Step One in making sure the housing market doesn’t find itself in a bubble,” Lewandowski said.

So often it seems that ‘bubble’ is used as if it refers to the collapse in prices. It doesn’t. The ‘bubble’ is the inflation of prices beyond reason. By the time the collapse comes the damage is already baked in, falling prices are a correction of the problem, not the problem itself.

Both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been on the march against a housing bubble for years, aware how low rates and loose lending standards in the United States ignited a boom and bust there.

Well, Carney and Flaherty have definitely been ‘warning’ of consumer debt levels for a while, but government policies like following the US into 40 year zero down mortgages didn’t help to prevent a housing bubble.

The central bank has held rates low since the global financial crisis because growth remains tepid and global woes weigh on Canada’s export market, and Canadians can find a five-year mortgage rate below 3%.

Meanwhile in the states you can lock in to a 30 year mortgage for 3.35%. In fact, while house prices in the US were correcting, interest rates were falling as well.

But the government’s gradual tightening of rules for borrowers — a firm admission that the market was hotter than anyone was comfortable with — has taken some steam out of the market, and economists, like Carney, seem to believe a soft landing may be at hand.

“We’re encouraged by the fact the level of housing starts has come down to slightly below demographic demand, as we see right now, there’s still more adjustments to go,” he said in testimony to Parliament last week. “We’re encouraged by the evolution of house prices in a number of markets. We’re on the path to a balanced evolution of the household sector and we all have to continue to be vigilant.”

Ok, we’ll continue to be vigilant then.

71 Comments
newest
oldest most voted
Inline Feedbacks
View all comments

You are so interesting! I don’t believe I’ve read through something
like this before. So wonderful to find another person with genuine thoughts on
this topic. Really.. thank you for starting this up.
This site is one thing that’s needed on the web, someone with a bit of originality!

Read the Full Article

I wanted to thank you for this very good read!! I absolutely enjoyed every bit of
it. I’ve got you saved as a favorite to check out new things you post…

medicare supplemental

Does your blog have a contact page? I’m having a tough time locating it but, I’d like to
shoot you an email. I’ve got some recommendations for your blog you might be interested in hearing. Either way, great website and I look forward to seeing it grow over time.

โสด

I like the valuable information you supply on your articles. I’ll bookmark your weblog and test again right here frequently. I’m relatively certain I will be told lots of new stuff right here! Good luck for the following!

My sister advised I may like this web page. He or she was entirely perfect. That distribute essentially produced my day time. You can’t visualize the way in which a whole lot moment I did spent with this details! Appreciate it!

patriotz

“This is what the case for the Bulls is built on:”

You forget the landlords who are willing to take huge operating losses on their rentals indefinitely. They do exist in your scenario, don’t they?

Generally I don’t learn article on blogs, but I wish to say that this write-up very compelled me to check out and do so! Your writing taste has been surprised me. Thank you, quite nice article.

data visualization

Helpful info. Lucky me I found your web site accidentally, and I am shocked why this accident didn’t came about in advance! I bookmarked it.

gokou3

“1) Interest rates, hence mortgage rates, are not going up for a long time. Bond/stock holders (the rich, homeowners (majority voters) and government (debt servicing) won’t let it happen.”

As someone above said, lower interest rate didn’t save the US RE market.

“2) Inventory will be below last years level as of tomorrow. Will stay like that for the remainder of the year. Note prices really have not budged.”

Baseless opinion.

“3) Metro Vancouver will grow by about 500,000 people over the next 10 years, YET WILL ROUGHLY HAVE THE SAME NUMBER OF DETACHED HOUSES. Think about that for a moment.”

I don’t remember we have ever had 50k people moving into Vancouver in any single year…

N

“Looks like people are coming to their senses and remember the 1990′s when we were the laughing stock of BC.”

BC was the laughing stock of BC? I don’t believe it. One thing about BC, it always takes itself seriously.

ArthurFonzarelli

McLovin – were we really the laughing stock of ALL OF BC when we, in BC, had that shitty government in the 90s? I think you meant Canada. But anyways. I agree. Stupid 90s! I remember one time I went to Cape Breton in 1997 – they’d jeered me straight into the alley outside the restaurant – wouldn’t even serve me. Then throw salted cod at me, just for my socialist ways. Don’t even get me started on Saskatoon in ’93. Vicious Ayn Rand clubs marauding the streets.

Anonymous1

For the Bears, here is the troubling scenario which I think will happen in Metro Vancouver over the next 2 decades. Housing stock comes in primarily 3 types: Detached, Attached (Townhomes) and Condos. The latter is just a box in the sky. Plus there are many basement suites Presently, I estimate that about 60% of the cities total housing stock is detached homes (anyone with accurate figures??). There are very few lots left in Metro Vancouver on which to build a detached home. Add 500,000 to 1 million people to our population over the next 10-20 years and —> the proportion of detached houses becomes less and less of the total housing stock. The immigrants that will comprise this additional population value land and ownership. Hence detached homes. (Did you know a Indian guy can’t even get married in Vancouver… Read more »

mac

Best post for me today was by Brian Ripley. Thanks Brian for posting here.

Anonymous1

This is what the case for the Bulls is built on:

1) Interest rates, hence mortgage rates, are not going up for a long time. Bond/stock holders (the rich, homeowners (majority voters) and government (debt servicing) won’t let it happen.

2) Inventory will be below last years level as of tomorrow. Will stay like that for the remainder of the year. Note prices really have not budged.

3) Metro Vancouver will grow by about 500,000 people over the next 10 years, YET WILL ROUGHLY HAVE THE SAME NUMBER OF DETACHED HOUSES. Think about that for a moment.

onthemarc

OMG…IF THE PARTY HASN’T STARTED….THE NEIGHBOURS ARE GOING TO HATE WHEN IT GETS LOUD!

http://business.financialpost.com/2013/01/23/toronto-housing-sales-plummet-50-in-a-year/?__lsa=7d12-00ad

Vote Down The Facts

McLovin, probably a film crew.

mclovin

Looks like the NDP and Libs are now neck and neck. Looks like people are coming to their senses and remember the 1990’s when we were the laughing stock of BC.

It is going to hurt you Commies so much when you form a minority gov’t after leading by 25 points!

mclovin

There is a yellow helicopter that has been buzzing over my townhouse in Yaletown for the last 20 mins. I wonder if its another Cam Goode publicity stunt?

Yellow Helicopter

Voting works for me on the iPhone now.
Where is VHB and his daily stats in response to Paul’s? I’m missing those- but hope VHB is sipping mohitos on a beach somewhere… Just come back!

No Noise
auric goldfinger

Vote Down The Facts Says: 48

Voting doesn’t seem to work on iPhone either, neither does viewing hidden down-voted comments.

– Voting for ipad 3 doesn’t either.

– Voting NEVER worked for the 1st Samsung Tablet, android 2.xx based

auric goldfinger

#12 VanRant Says: @Anonymous1

Holy Crap, $566 Billion and CMHC is not in trouble!

CMHC is not the only one. There is also Genworth and Canada Guaranty.

https://www.cibc.com/ca/mortgages/mortgage-resources/high-ratio-mortgages.html

Vote Down The Facts

Voting doesn’t seem to work on iPhone either, neither does viewing hidden down-voted comments.

ipad user

Thank you VCI Admin for hosting this amazing site! Thank you also for attempting to improve the format for ipad users.

I just want to provide some helpful feedback that you may be unaware of unless you are looking at this site on an ipad. Unfortunately, with the recent changes, ipad users can no longer see the time stamp of comments and the number of comments. It’s not a huge issue, but it would be nice if ipad users could see the time when comments are posted.

oneangryslav2

Yup, VDTF. You’re right. So we’re in a “one-the-one-hand-but-on-the-other-hand” phase of this market right now. Bulls can take solace in the fact that inventory levels (and sales, presumably) are not appreciably different from last year. Thus, no imminent crash. Bears, on the other hand, can argue that the “I’ll wait until the market turns around until I list” mentality becomes harder to defend with each passing day.

We’re in a stand-off with both sides looking at each other waiting to see who is going to draw his gun first.