Don’t be too bearish

Pimco says US and Canadian investors working under the assumption of a Canadian housing bubble may be too bearish.

“The great white short” is gaining popularity amongst hedge funds, but maybe they are being too pessimistic?

“Our secular view is that housing in Canada is overvalued and due for a correction,” he said. “We believe a 10%–20% real decline in national housing prices over a five-year period is very realistic, with much sharper corrections in some local ‘hot’ markets such as Toronto, Vancouver and Montreal.”

Read the full article in the Financial Post.

Meanwhile in yesterdays thread who is making money shared HPI results from the most recent 1, 3 and 5 year period:

For those of you who didn’t get the memo:

HPI INDEX June 2013 Lower Mainland (Total return)

1 yr. return -3.0%
3yr. return +4.6%
5 yr. return +5.7%

Total return with inflation
1 yr. -5.5%
3 yr. -2.9%
5 yr. -6.8%

I ask again, “WHO IS MAKING MONEY?”

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Ralph Cramdown
Guest
Ralph Cramdown

Who’s making money? People who bought 3-5 years ago and are leveraged. Looks like they’re only ahead by enough to cover the eventual selling costs, but still…

Cash buyers are behind.

elf
Guest
elf

I think total return should include income as well.

Pdub
Guest
Pdub

Not long ago Pimco would have been considered bearish for calling for a 10-20 percent drop. Today they are considered bullish. The mood has certainly changed. I wonder if investor psychology has any impact on markets…

Ponzi
Guest
Ponzi

I agree, total return should include income. But at recent prices, owning is more expensive than owning, so income is negative.

YVR
Guest
YVR

elf: “I think total return should include income as well.”

Income = revenue – expenses

With Vancouver housing over the past 5 years expenses are always higher than revenue so there is no positive income to include. What should be included is the negative income which makes the return much worse.

George
Guest
George

China’s real estate bubble is reinflating. Is this bullish for Vancouver real estate? I’ve been hoping that a correction in Chinese RE would lead to a correction in Van RE. According to Zero Hedge, the Chinese real estate bubble is back on again:

“Chinese home prices have now risen year-over-year for the sixth month in a row and June (at +6.8%) is the fastest rate since January 2011. As Reuters reports, the incessant rise in property prices across 70 major cities hides the real bubbles in Beijing (+12.9% year-over-year) and Shanghai (+11.9%) which, as we noted in detail previously, reflects the apparently unstoppable exogenous hot money (credit) flows that the rest-of-the-world’s-central-bankers are pumping into the markets.”

http://www.zerohedge.com/news/2013-07-18/chinas-housing-bubble-re-inflates-fastest-30-months#comments

Harvey
Guest
Harvey

didn’t the bears parroting that china is crashing? man,wrong again. please guys give somebody else to manage your money, just not to Chanos. He is already broke by now shorting it.

MikeJ
Member
MikeJ
bears
Guest
bears

“didn’t the bears parroting that china is crashing? man,wrong again. please guys give somebody else to manage your money, just not to Chanos. He is already broke by now shorting it.”

do bears have money leftover after paying rent?

George
Guest
George

Can some bears respond to my comment #6. So far the only responses have been from bulls.

The Zero Hedge article makes a good point. Central bankers around the world are printing money like there’s no tomorrow. That money is keeping asset prices high. That is why the Chinese real estate bubble is growing again. Ben Bernanke just basically said that he’s going to keep up with QE. Nothing is really changing. The world economy is one big debt ponzi scheme and there are no signs that it is coming to an end anytime soon. Although I am a bear, I think that is the best argument for the bulls.

George
Guest
George

The politics of class, bike paths, and property values all wrapped up in this one flash point. Only in Vancouver.

http://www.vancouversun.com/news/metro/Vancouver+Point+Grey+Road+become+park+rich+with+plan/8673535/story.html

Democrass
Member
Democrass

‘We cannot afford the houses we are living in’

That’s the conclusion of this well-researched and quite alarming summary of the Canadian housing market and the risks it presents to individual and government finances, as well as the economy. A must-read if you believe the stronger sales numbers of the past month mean it’s onward and upward for housing. The authors of the report are the people at Canso Investment Counsel, a firm that specializes in managing portfolios of corporate bonds.

The Canso report is here: http://www.cansofunds.com/wp-content/uploads/2013/07/Canso-Px-The-Canadian-Housing-Market-July-2013-Revised-2.pdf

http://www.theglobeandmail.com/globe-investor/personal-finance/carrick-on-money/carrick-on-money-we-cannot-afford-the-houses-we-are-living-in/article13296040/

Democrass
Member
Democrass
From page one of the Canso Report: Imagine two cars in a race. One is the Canadian housing market and the other is the American housing market. The Canadian racing team is continually losing to the American. The Americans have developed a new type of engine, called “securitization”, which has allowed them to reach much higher speeds than the Canadians. The securitization engine uses a fuel called GSE that can only be found in the United States. The Canadians study the American design and come up with their own version of the securitization engine. Since the Canadian teams cannot use the GSE fuel, they develop their own variety called CMHC. They do this by modifying an existing lower octane fuel called BHA (Boring Housing Agency) and turn it into a much higher octane fuel using the “bulk portfolio insurance” process… Read more »
Harvey
Guest
Harvey

what is this Canso Report bullshit. today just one word for bears: Detroit as i write this filling for BK. US engine is already blown in pieces.

It's simple
Guest
It's simple

I love that report #13 bull’s are going down

elvince
Guest
elvince
@George #10: I’m bearish but I do see your point. It seems like since we’re slushing in money and every investment class should skyrocket upward. This is certainly true for bonds, which are at (almost) record low yields. But you have to keep in mind that rents are not skyrocketing. They are actually stable throughout most of canada, and heading sightly down in Vcvr. Why is that? 1-Overbuilding. You’ve seen those cranes in the sky, they were there for a reason. New units have outpaced new household formations in the last few years. Realtors can sing songs about chinese immigrants and the echo boomer generations, but numbers are numbers, and more living units have been built than the number of household that has formed. Now, no matter how much money you send into the system, if you have an oversupply… Read more »
Son of Ponzi
Guest
Son of Ponzi

2 articles in the G&M today.
1. Property puchases at all time high in Toronto.
2. Toronto condo sales fall 46%.
Which one is it?
My advise is : Stop listening to the experts. Do your own research. Look what’s happening in your community.
And always remember, what goes up must come down.

It's simple
Guest
It's simple

BREAKING NEWS (detroit filed for bankruptcy)

Son of Ponzi
Guest
Son of Ponzi

#18
Bye, bye Miss American Pie, drove the Chevy to the levy but the levy was dry.

Harvey
Guest
Harvey

Is it clear now for bears why houses in Detroit go for 10 bucks?

Devore
Member
Devore

The problem with “world awash in printed money” is that it isn’t. Extremely few people in the world are in a position to get 0% interest loans from the government or able to trade in toxic assets for face value to the central bank. Actually, the number is roughly zero. Only (some) corporations are allowed to do this. So even though the monetary base might be exploding, almost no one has actually received this free money. Much of it is ending up filling in holes in government budgets left by the absence of growth, so it is being misallocated on a gross scale, but that’s about it. Otherwise, please inform me how I may obtain my suitcase of money to buy a trophy house on Bike Lane Road. Where is this money being handed out?

Melba
Guest
Melba

‘BREAKING NEWS (detroit filed for bankruptcy)’

If they only had mountains, ocean, rain, traffic congestion, bike paths through exclusive residential areas, extensive drug dependencies, oddball soft drinks, the Olympics, large rat population, HAM, yellow helicopters, skiing, overpriced tear-downs, gangs, Victorian liquor laws, riots, crappy transit, rain (I know, I said it twice – sue me), crappy hockey teams, AA baseball, more bridges, RE agents moonlighting as actors, and a few other things, then Detroit would be: The Best Place in Michigan ™.

Melba
Guest
Melba

‘Is it clear now for bears why houses in Detroit go for 10 bucks?’

Totally!

What’s not clear is why similar houses in Vancouver go for $10M

billy
Guest
billy

@23

have you been to Detroitshima recently?

Jack
Guest
Jack

George: “Ben Bernanke just basically said that he’s going to keep up with QE. Nothing is really changing. The world economy is one big debt ponzi scheme and there are no signs that it is coming to an end anytime soon. Although I am a bear, I think that is the best argument for the bulls.”

Except the fact real estate is supported by consumer debt which is limited. It does not matter how much money they print people can only service so much debt. The only way consumers in Canada can go in more debt is to lower rates. That jig is up and rates are heading the up now. At least the bond rates are which are what mortgages are correlated with.

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