Canada, economy, opinion, predictions, USA

The everything bubble: how does it end?

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Does every major asset seem expensive to you right now?  Does it seem overpriced?

Well, what if it is, where do we end up?

The NY Times has an article titled How The Everything Boom might end: The Good, Bad and the ugly.

Basically it breaks down into (1) the good: Low price of capital unleashes productivity, economy grows into current valuations. (2) The bad: Japan style stagnation 15 years of low rates and low returns or (3) the ugly: spike in prices with a depressed economy.

But the pattern of the last few years shows that the “bad” scenario has been closest to the reality. That doesn’t mean the rest of the bad script will continue in the years ahead, but it should prompt those predicting the first or third outcome to wrestle with why they have been wrong so far.

So what do you think? Whats the future look like from your view point and would it have been any easier to predict the future in the past?

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realist
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You have posed the ultimate economic question of our time. Vancouver RE is but one bubble amongst many – a local manifestation of a much larger phenomenon. I do not pretend to know the future, but if prosperity is the outcome of massive money printing, it will be a remarkable first, and I’ll never criticize central bankers again. I look forward to the commentary.

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5 years 12 days ago
southseacompany
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“Many Canadian lenders ‘concerned’ about housing ‘bubble’: survey”, Global News.

http://globalnews.ca/news/1439207/many-canadian-lenders-concerned-about-housing-bubble-survey/

“Who still harbours such notions? Not U.S. investment banks, or European economists. It’s Canadian lenders.”

“A survey of risk professionals across Canada’s lenders found 68 per cent said they were “concerned” when asked if about the possibility of a property bubble forming in the housing market (32 per cent replied “not concerned”).”

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5 years 12 days ago
Oracle
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@ ROMEO JORDAN

you said

“Oracle,

Smells like a peak story, one you tell after the apocalypse, to me.

Your friend is a true idiot. He will get hammered.”

—> he bought tear down for $725,000 on a 90 x 110 foot lot in Oakville. Cost of 3200 sq ft home he is building at $125 per sq ft. equals $400,000.

—> The house will be finished in about 5 weeks time.

—-> Listing for $2 Million. Cost is $1.125 Million.

I will let you know how much he makes. Why so jealous with the name calling?

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5 years 12 days ago
Oracle
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“Does every major asset seem expensive to you right now? Does it seem overpriced?”

—> Lots of money chasing diminishing yields or is tied up in assets. The smart money doesn’t think rates are going up anytime soon, but does believe central banks will set the world awash in more money than ever before.

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5 years 12 days ago
patriotz
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@2: ” when asked if about the possibility of a property bubble forming in the housing market ”

This question pre-supposes that there is no bubble now.

The spirit of Jim Flaherty lives on.

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5 years 12 days ago
Bo Xilai
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From South China Morning Post… Whaaa! Chinese banks launder money? Whoodathunk?

Bank of China accused of money laundering for would-be Chinese emigrants: CCTV

http://www.scmp.com/business/banking-finance/article/1550351/bank-china-laundering-money-would-be-emigrants-cctv-reports

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5 years 12 days ago
mls watch
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@ oracle
Please let me know the name of the builder. I thought high end houses were at least 200 $ per sqft. What you get for $125 is very basic. But may be there is a market for 2 million dollar houses built on the cheap. If so, builders must make a killing.

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5 years 12 days ago
watcher
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Considering all the compaining Harper made when Russia went into Ukraine, wonder why he is keeping silent over Israel´s invasion of Palestine? Are three innocent Israeli lives the same as hundreds of Palestinian innocent lives?
Follow the money behind Harper from Joseph Oliver to Segal and you will see why he is silent. Shame on us we are no longer honest brokers in the world. We will sell out to anyone with money from RE to our politicians views.

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5 years 12 days ago
rp1
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http://asia.nikkei.com/Markets/Realty-Reality/China-s-property-policy-hits-rough-patch

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5 years 12 days ago
Bull! Bull! Bull!
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>Does every major asset seem expensive to you right now? Does it seem overpriced?

i guess the stock market is overpriced too? hey, haven’t you bears been bragging about how you plow your savings into “safe” stocks. oops! looks like you “sheeple”/”muppets” are participating in a bubble. d’oh!

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5 years 12 days ago
ILoveCharts
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Bull bull bull: I got a little nervous before the Alcoa earnings. Converted stocks to cash for $20 in a few minutes time. Let’s see you do that trick with a house.

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5 years 11 days ago
diversawhat?
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I did the same as I love charts, nice to be able to quickly sell part of your investment to take the profit and keep some of your money in the market instead of ‘all or nothing’

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5 years 11 days ago
Many Franks
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@southseacompany:

Who still harbours such notions? Not U.S. investment banks, or European economists.

That’s hilarious. “I’ve checked every corner of this cardboard box my head is duct-taped head into, and nobody here seems concerned.” Not the IMF, not BIS, not Moody’s…

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5 years 11 days ago
Xi's cab driver
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Chinese purchases of U.S. homes are likely to continue increasing as the country’s swelling ranks of affluent consumers seek refuge from pollution and political and economic uncertainty, according to Thilo Hanemann, who tracks cross-border investment for the New York-based Rhodium Group.

“A lot of people are trying to hedge against a generally bearish outlook for the Chinese economy,” Hanemann said in a telephone interview. “Buying real estate overseas has been in the past limited to a relatively small group of wealthy individuals and sometimes government officials. But it’s become a much bigger trend, involving affluent middle-class people.”

http://finance.yahoo.com/news/chinese-cash-bearing-buyers-fuel-144752068.html

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5 years 11 days ago
realist
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@4 Oracle “The smart money doesn’t think rates are going up anytime soon, but does believe central banks will set the world awash in more money than ever before.”

That indeed would appear to be the aim of central banks, & with today’s 10 yr bond yields for Spain (2.76%) and France (1.66%), they have so far been impressively successful. But can you imagine scenarios where they and “the smart money” might not be so?

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5 years 11 days ago
Bull! Bull! Bull!
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@ILoveCharts @diversawhat?

you aren’t denying my accusation that you are bubble chasing sheeple.

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5 years 11 days ago
mainlander
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@Bo Xilai

“It also claimed that one BOC branch in Guangdong alone had funnelled 6 billion yuan (HK$7.5 billion) out of the country this year.”

These are Cantonese people, not northern chinese mandarin people.

This is also in Guangdong. in the article they talk about “sothern Chinese”, really they mean Cantonese. The central government is trying to control them, but remember these people have a long tradition of lawlessness. You have seen this in North America in the form of Triads, gambling, prostitutes massage parlors. Macau is run by Cantonese gangsters.

Porcupines in cages, endangered tortoises in buckets and snakes in cloth bags — rare wildlife is on open sale at a Chinese market, despite courts being ordered to jail those who eat endangered species.

https://news.yahoo.com/wild-things-crackdown-chinas-animal-eaters-fails-bite-054203267.html

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5 years 11 days ago
realist
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@16 Bull!Bull!Bull! “my accusation that you are bubble chasing sheeple”

Illiquidity of an asset is generally viewed as undesirable (see Keynes’ “liquidity preference theory”), and often commands a “liquidity premium”. Also, liquid investments allow for the possibility of short-term trading, as opposed to so-called “investing”.

And if I may say so, your interesting comments might be better received if they were not posed as “accusations”.

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5 years 11 days ago
Oracle
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Mls watch:

$200 a square foot? Don’t ever become a builder.

SFD in surrey runs around $100 a square foot. But they will tell guys like you it is $200/sq ft.

Example: 2800 sq foot house costs $280,000 to build plus $450,000 for the lot. Equals $730,000.

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5 years 11 days ago
Bull! Bull! Bull!
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@realist

the only thing that your saying is that you are a more sophisticated bubble chasing sheeple.

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5 years 11 days ago
Long Time Watcher
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For all the apparent critical thinkers out there, I sincerely hope that you are not up voting any comments from Romeo Jordan. I have seen a disturbing trend of his posts getting up votes when it is clear that his comments lack any critical analysis, fact, or evidence – they are merely emotion laden rants. All I see is confirmation bias in anyone that up votes his posts. We are all quick to down vote pumpers that give their ‘anecdotal’ evidence of every rising prices. Yet, we up vote the same lack of evidence in ‘bearish’ statements. Take a minute or two and read a few of his posts, and let me know if you disagree with this posting. His up votes are either a sign of desperation of posters clinging on to bearish statements amidst a deluge of RE… Read more »
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5 years 11 days ago
mls watch
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@ oracle
name of builder so that I can get a quote?

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5 years 11 days ago
UBC in crisis mode
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HAM buying in US:

“Buyers from Greater China, including people from Hong Kong and Taiwan, spent $22 billion on U.S. homes in the year through March, up 72 percent from the same period in 2013 and more than any other nationality, the National Association of Realtors said yesterday in its annual report on foreign home purchases.”

http://www.bloomberg.com/news/2014-07-08/chinese-cash-bearing-buyers-drive-u-s-foreign-sales-jump.html

Let’s say Canada would get 10% of what US gets, e.g. $2.2 billion USD, roughly $2.4 billion CAD, and that will be 1,200 purchase of $2 million properties in Canada.

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5 years 11 days ago
UBC in crisis mode
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Vancouver recent price reductions for properties listed for $1-1.5 million: 3062 EUCLID AV, Vancouver, BC V5R 5E5 LARGE CORNER LOT 55 x 121.32 and large 4002 sq. ft. home with 9 bedrooms and 6 baths and 2 marble fireplaces. Entrance has 20 ft high House – 4,001Sqft. – 9Beds – 6.0Baths $154,000 (9.3%) June 28, 2014 $1,495,000 # 2801 950 CAMBIE ST, Vancouver, BC V6B 5X5 Point Claire” Penthouse two level unit, huge open deck (300 sf), fantastic view, spacious inside, bright and clean, ensuite storage, Condo/Apt – 1,777Sqft. – 3Beds – 3.0Baths $130,000 (8.8%) June 28, 2014 $1,350,000 1120 E 21ST AV, Vancouver, BC V5V 1S8 Part of land assembly in conjunction with 1112 E. 21st Ave. on west side of this lot. (See MLS#V1062299.) Cedar Cottage neighbourhood w… House – 1,600Sqft. – 2Beds – 2.0Baths $100,000 (8.3%) July… Read more »
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5 years 11 days ago
space889
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@patriotz – I think you are making the fata error of assuming all dwellings are the same and buyers have no preferences between types of dwelling and location, and also rent vs buy. If you ask people what their housing preference is, it would SFH in ideal locations – Van West, West Van followed by duplex/SFH in less desirable locations and then TH and condos. As far as I know, desirable locations have fix land area and SFH in those areas are decreasing. Demand is not. We have demands from locals and foreigners, that’s going to push up prices. For the same reason people will pay double or more for a white shirt with a logo relative to just a plain white shirt, they will also pay more houses based on preference, location, prestige, etc. You can build lots of… Read more »
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5 years 11 days ago