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
2 years 9 months ago

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
2 years 9 months ago

I think total return should include income as well.

Pdub
Guest
Pdub
2 years 9 months ago

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
2 years 9 months ago

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

YVR
Guest
YVR
2 years 9 months ago

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
2 years 9 months ago
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… Read more »
Harvey
Guest
Harvey
2 years 9 months ago

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
Guest
MikeJ
2 years 9 months ago
bears
Guest
bears
2 years 9 months ago

“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
2 years 9 months ago
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,… Read more »
George
Guest
George
2 years 9 months ago

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
2 years 9 months ago

‘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
2 years 9 months ago
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… Read more »
Harvey
Guest
Harvey
2 years 9 months ago

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
2 years 9 months ago

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

elvince
Guest
elvince
2 years 9 months ago
@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… Read more »
Son of Ponzi
Guest
Son of Ponzi
2 years 9 months ago

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
2 years 9 months ago

BREAKING NEWS (detroit filed for bankruptcy)

Son of Ponzi
Guest
Son of Ponzi
2 years 9 months ago

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

Harvey
Guest
Harvey
2 years 9 months ago

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

Devore
Member
Devore
2 years 9 months ago
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… Read more »
Melba
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Melba
2 years 9 months ago

‘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
2 years 9 months ago

‘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
2 years 9 months ago

@23

have you been to Detroitshima recently?

Jack
Guest
Jack
2 years 9 months ago
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.… Read more »
s11
Guest
s11
2 years 9 months ago

@Jack,

I would like that to be true, but haven’t bond rates gone down short term since Ben Bernanke said no changes.

I know within the next few years interest rates will go up, but for the time being it doesn’t look there will be much change to the rates.

Regardless I think people are overspent and the market will go down before the rates go up, just my opinion.

paulb
Member
2 years 9 months ago

New Listings 180
Price Changes 113
Sold Listings 140
TI:18019

http://www.paulboenisch.com

Son of Ponzi
Guest
Son of Ponzi
2 years 9 months ago

Houses in Detroit for 10 bucks.
I buy ten, my sister buy ten.v

franko
Member
franko
2 years 9 months ago
The Next Detroit? Put me down for: Cleveland Cincinnati Buffalo New Orleans It’s much easier in North America to walk away and find greener pastures than in other parts of the world. Who knows what will happen to the mega-cities in China in 20 years. Spent a couple of weeks in Beijing and Shanghai 2 years ago…people squeezed in like insects gasping for air. Smog in B is unbelievable. Felt trapped while driving for hours in bogged down traffic. Easy to loose sense of direction with visibility reduced to a few blocks. Can look straight at the sun at 3pm… Read more »
billy
Guest
billy
2 years 9 months ago

Strong sales. 18k hanging by thread. Did you guys see oil today $108 awsome for petro power like canada

Son of Ponzi
Guest
Son of Ponzi
2 years 9 months ago

Felt trapped while driving for hours in bogged down traffic.

That’s what a friend who recently moved from Kamloops to Vancouver told me.

hardy har
Guest
hardy har
2 years 9 months ago

@25,26 I jotted down some periods that may dispel some common rate beliefs

‘65-’69 — 5yr mortgage rates soared from 7-10.5% , prices soared
‘72-’75 — rates soared from 8.5-12%, home prices soared
‘78-’81 — soared from 9-18%, home price soared
‘81-’84 — 5yr mtg rates plummet, home prices plummet
‘08 — rates plummet, home prices plummet
‘09-’11 — rates rise, home prices rise
‘11-’12 — rates fall, home prices fall

Takeaway — the link between bond (mtg) rates and prices does not always work the way everyone believes.

frank
Guest
frank
2 years 9 months ago

The Chinese are back buying on the North Shore. they had disappeared for a while but are back from what I can see. The ‘offshore’ Realtors. About 50% of west van sales and 10% of North Van.

hardy har
Guest
hardy har
2 years 9 months ago

The key to understanding what’s happening in #32^ *downvoters* is what is soaring even faster than soaring mtg rates, and plummeting even faster than plummeting rates.

If you said inflation, you win the fluffy unicorn.

I say we down vote reality itself!

pricedoutfornow
Guest
pricedoutfornow
2 years 9 months ago
As we prepare to leave our rental condo for a rental house, our landlord is freaking out because he doesn’t have tenants for next month. He’s trying to blame US, since we are in the process of moving, the place isn’t really in showable condition, he insists nobody wants to rent it “because they can’t see past the clutter” (though only 2 people have been to see it the whole time it’s been listed). I call BS and think he’s aiming to have an excuse to keep our damage deposit. Guess we’ll have to take it up with the tenancy… Read more »
Ralph Cramdown
Guest
Ralph Cramdown
2 years 9 months ago

“Otherwise, please inform me how I may obtain my suitcase of money”

I can’t promise a suitcase full, but a family with good credit can borrow a lot with credit card teaser rates for six months or a year. Your broker’s margin money should be well priced. Not free but very cheap.

rp1
Guest
rp1
2 years 9 months ago
#6 George: “China’s real estate bubble is reinflating. Is this bullish for Vancouver real estate?” Probably. Chinese (over)building has sustained high commodity prices, and with that comes a high Canadian dollar. Consider this argument: http://www2.macleans.ca/2013/07/17/a-high-dollar-means-higher-wages-not-lower-prices/ “I’ve been hoping that a correction in Chinese RE would lead to a correction in Van RE.” China is clearly overbuilding on a scale the world has *never* seen before. Economies are driven by credit which makes them susceptible to the dynamics of a Ponzi scheme. When the government prints money and prevents restructuring, the Ponzi dynamics are reinforced by reward, and the capitalist dynamics… Read more »
Laurey
Guest
Laurey
2 years 9 months ago

recently the comments are few. i guess dreams of crash and buying west side pad for 400k are shattered. oh well you can always rent 2 mil place for 1,200. can you?

Who is making money?
Guest
Who is making money?
2 years 9 months ago

“oh well you can always rent 2 mil place for 1,200. can you”

Maybe not $1200 but certainly $3000.

Sounds just fine to me.

Laurey
Guest
Laurey
2 years 9 months ago

hey you were posting about ficttious inflation. what are you talking about? we have deflation since 2008.

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