Borrowing demand from the future

House sales have gone up recently even if prices haven’t.

After last years rock bottom sales numbers this year saw a big jump in summer sales.

If demand is increasing more price increases can’t be far behind right?

RBC economist Craig Wright says nope, expect further softening.

Interestingly enough they don’t mention interest rate increases, simply ‘strained affordability, slowing population growth and empty condos’:

Craig Wright of the Royal Bank says “activity now is borrowing from the future… that, alongside of a still-strained affordability environment suggest, to us as least, that the housing sector will continue to soften rather than accelerate from this point forward.”

Wright also sees new home construction being limited in the short term by slowing population growth and unoccupied condos in Vancouver.

They predict small growth in the province over the next couple of year and note that BC created no new jobs over the last year so retail sales are not moving much.

Read the full article here.

 

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ipscotch
Guest
ipscotch

I think that’s the first time I’ve seen a bank economist warn that we’re borrowing demand from the future.

As clockbike pointed out in the last thread Canada keeps building houses faster than our population grows.

http://www.statcan.gc.ca/daily-quotidien/120208/dq120208a-eng.htm

“The number of occupied private dwellings in Canada continues to grow at a faster rate than the country’s population, as it has since 1971. Occupied private dwellings are separate living quarters with a private entrance in which people permanently live.

While the population rose 5.9% between 2006 and 2011, the number of occupied private dwellings increased 7.1%. The 2011 Census counted 13,320,614 occupied private dwellings, compared with 12,435,520 five years earlier.”

Many Franks
Member
Straight from the horse’s mouth. Returning to Natural Economic Growth (Stephen Poloz/Bank of Canada): I anticipate that the Canadian economy will normalize and growth will become natural, in contrast to the economic activity of the past six years, which has been fuelled by policy, including record-low interest rates. Natural growth will be self-generating and self-sustaining, and the economy will be growing at its potential, as its productive capacity expands. Inflation will be back to our target of 2 per cent. As I have said before, policy rates in Canada will be higher than they are today. We can expect that short-term interest rates, as is normal, will be above inflation. Long-term rates will settle into place along a natural, upward-sloping yield curve. Interest rates above inflation. It’s telling that those words feel so unfamiliar in combination. Not to mention the… Read more »
sunnyonbestplaceonearth
Guest
sunnyonbestplaceonearth

by borrowing from the future, i know that the loan will be paid off soon enough that my children wont have to worry about their shelters. how about you whinning and complaining group of people? what will you have left for your children beside …whinning!

Softy
Guest
Softy
Softy
Guest
Softy

““The number of occupied private dwellings in Canada continues to grow at a faster rate than the country’s population, as it has since 1971.”

As it has since 1971?

If this is normal, it is not a sign of a bubble.

elmer flood
Guest
elmer flood

“which has been fuelled by policy”

wtf? anyone here get an invitation to the policy meeting? Agenda 21 indeed.
anyway, fuel is important to Canada, it gets us around in our trucks and airplanes, especially that 500 mile commute to the oil field job.

elvince
Guest
elvince

@sunnyonbestplaceonearth: Personnally, I have:
Pipelines;
2 oil companies;
1 biotech and one pharma company;
a fast-food company;
2 tobacco companies;
2 banks;
a railroad;
a commercial real estate investment trust;
and the list goes on…

All of these generate more than enough cash flow to pay the rent, and the stream is growing every year faster than both rent or inflation.

Laurey
Guest
Laurey

FED REFRAINS FROM QE TAPER, KEEPS MONTHLY BUYING AT $85 BLN

Dave was right again. Flat prices until wage inflation picks up.

Laurey
Guest
Laurey

“All of these generate more than enough cash flow to pay the rent, and the stream is growing every year faster than both rent or inflation”

oo yeah. we are all millionaires. but live in moldy basement suites just because of that price/rent formula.

elvince
Guest
elvince

@Laurey: Actually I live in a condo. It just isn’t in Vancouver. It’s nowhere near BC.

I just don’t get the whole hype about living in basements you BCers have. Just about nobody lives in basements here, even the poorest peoples.

hardy
Guest
hardy

Well, we know why Dave isn’t making the big bucks in fixed income. Loving the Dow today 🙂 but I’d hate to be in Dave’s TBT boat.

Softy
Guest
Softy

“Flat prices until wage inflation picks up”

Mortgage rates will now fall. We should get another round of rate holds as people buy the dip in rates. That will keep the buying frenzy gong throug the fall and winter just in time for the natural spring buying season.

I would not be surprised to see the bull market get another leg up.

hardy
Guest
hardy

Sorry Softy, but it’s the opposite. Falling rates have meant falling prices for a while now. Why? Cause your inflation rate is so weak.

May ’11- end of ’11 — rates fell over 100bps, house prices fell hard
March ‘12 – Aug ‘12 — rates fell over 50 bps, house prices fell hard
Heck, even late ‘08 rates and prices fell hard together.

What do you think has happened every time rates have risen past few years? You guessed it, prices have firmed 🙂

Mortgage Borker
Guest
Mortgage Borker

No Tapering for you bears.
i guess that billionaire was right. we are heading to the collapse of the dollar.

Dave
Member

hardy, I haven’t been in TBT for weeks. I maintain there still might be a good entry point coming up here if it turns before 76.5. Just because I mention a stock, doesn’t mean I currently have a position in it. Sometimes I go in, sometimes out.

I’m happy with the Fed decision because I picked up a double S&P ETF a couple days ago.

I hold pretty much zero bonds or fixed income instruments. I’m all equities and sometimes levered at that. It’s not the kind of portfolio Jesse would endorse.

dyugle
Guest
dyugle

Well Bill Gross’s call on the bond market being finished for the next few years, proved to be a buy signal as it pretty much called the recent bottom. Kidding aside, the collapse in the RO-RO trade is signalling that the recent top in the bond market should hold till another recession looms. Damn I need to find another way to hedge my stock exposure as bonds and stocks are moving in unison.
Anyone have any opinion on VQT?
Thanks.

Harvey
Guest
Harvey

Gold 4% up, i did leveraged ETF yesterday 8% up. Thank You.
Who said that home owners can not have full fridge? AA that Best Place of Shit guy.

Dave
Member

dyugle, I think there is still room for bonds to move. The move is delayed as of today, but eventually it’s going to come and think that’s before a recession occurs.

VQT as an investment or trade? As an investment, it seems strange by mixing VIX into it. Over time, VIX degrades naturally (contango), so you are losing that return, which presumably gives you less risk exposure. Yet, it doesn’t seem have less volatility than the S&P either. As a trade, obviously, you could just play each component unto itself. So, I’m not sure I see it either way.

dyugle
Guest
dyugle

Agreed Dave. I have been using a bond position to hedge my stock position and during the RO-RO trade it worked like a charm.
It is not working anymore so I am looking for a replacement hedge.
All stocks and some cash till the yield curve inverts or stocks and VQT. Not looking to trade just lower risk and re-balance as necessary.
That is all.
Thanks for the input.

Dave
Member

When the bulls are running, I run with the bulls. Throw a stop loss in there and I think the risk is acceptable. If I think the market is correcting, I cut my exposure and move into cash.

The way I see it, is that the 13 year bear market just died when we took out the prior peaks and we are now into a secular bull market for stocks. So my bias is equities and risk. Zero bonds for me.

mac
Member
mac

I voted Dave down. Not because I disagree with anything he says or even read what he wrote but just because that’s what we do here on VCI.

vangrl
Member
vangrl
D.Pratt
Guest
D.Pratt

still waiting for house gurus jesse and patriotz to explain to us what Ben did today..you know that “yield curve” and all that jazz…

chin
Guest
chin

ben spanked your assand that’s what he did

softly
Guest
softly

I voted Dave down too, but it was because he still has my ladder that he borrowed, and he won’t give it back! Dave!

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