Builders stop building in a bubble?

Markoz left this comment in yesterdays thread, but it got held up in moderation because it had more than two links:

My wife works at a bank and her boss sent a link to this BIV article entitled, “Nobel economist housing bubble formula shows Vancouver resistant.

Here is a copy of my response (unfortunately the charts I clipped won’t paste into the comment section):
His theory (as presented by the article’s writer at least) is that builders are smart enough to stop building before/when a bubble pops. I’m not sure if he means that a slow down in building is a precursor to a bubble popping or if he means that when sales drop so do housing starts. In Vancouver, housing starts only dropped off significantly well after sales did in 2008.

Vancouver sales began to tank in March or April of 2008.

Residential property sales in Greater Vancouver totalled 2,997 in March 2008, a decline of 16.3 per cent from the 3,582 residential sales recorded in March 2007, and a decline of 25.7 per cent compared to the 4,033 sales in March 2006.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver totalled 3,218 in April 2008, a decline of five per cent from the 3,387 sales recorded in April 2007, and a 3.8 per cent drop from the 3,345 sales in April 2006.

VANCOUVER – The Greater Vancouver housing market continued its re-balance between sales and listings last month. The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver declined 30.7 per cent in May 2008 to 3,002 from the 4,331 sales recorded in May 2007.
All of the above is from the REGBV website: http://www.rebgv.org/monthly-reports?month=May&year=2008
It just kept getting worse:http://www.huffingtonpost.ca/2012/07/04/vancouver-home-sales-10-year-low_n_1649539.html

“This summer, sales went off a cliff,” added Somerville, who is director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.:http://www.canada.com/vancouversun/news/business/story.html?id=e6e0c211-fddd-413b-9a94-3564e20567d8

The financial crisis did not start until Lehman Bros failed on September 15, 2008.

Here are the housing starts specs:

Apparently our builders aren’t as smart as the Nobel Laureate. Starts for all types of homes stayed above the average for 2004-2008 till the end of 2008. They plummeted after the fact. Perhaps the writer is putting his own spin on what Smith said. I wasn’t there so I don’t know.

The other thing to note is that the writer never actually asked Smith if he thought Vancouver was in a bubble. He did a follow up interview with him but seems to have avoided asking the question directly. He says, “Using Smith’s formula for housing bubble-burst scenarios, B.C. and Vancouver do not appear threatened, despite record-high prices in the latter. B.C. housing starts this year are up 3.1% from 2013 and forecast to rise a further 1.4% in 2015, according to Canada Mortgage and Housing Corp.” Why not just ask him what he thought instead of making a supposition?

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Whistler or bust?
Guest
Whistler or bust?

I wonder if HAM will ever start moving the market in Whistler? I see them on the ski slopes but from what I understand they haven’t begun buying.

Whistler or bust?
Guest
Whistler or bust?

Chinese Doctors don’t go into Oncology, because it’s bad karma to be too close to dying people.

Now that is just stupid and untrue.

Son of Ponzi
Guest
Son of Ponzi

#35
my point exactly.
That’s why the portion in Richmond and Vancouver West is probably around 60%.

patriotz
Member

@33: “It said immigrant households accounted for 29% of the increase in home ownership between 2001 and 2011.”

But that’s about the proportion of immigrants in the big cities, where almost all of the increase in home ownership took place. In other words per capita they aren’t more responsible for the growth in home ownership than the native born population.

paulb
Member

New Listings 130
Price Changes 52
Sold Listings 94
TI:14001

http://www.paulboenisch.com

Shibor this!
Guest
Shibor this!

“CMHC’s research also suggests that immigration to Canada is one factor underpinning the unexpected growth in the country’s housing market. It said immigrant households accounted for 29% of the increase in home ownership between 2001 and 2011.”

…according to WSJ article.

Son of Ponzi
Guest
Son of Ponzi

The media is finally noticing that morale at BC’s Cancer Agency is dangerioulsly low.
Doctors and nurses are getting burned out because having to deal with too many patients who don’t speak English.
Chinese Doctors don’t go into Oncology, because it’s bad karma to be too close to dying people.

kabloona
Member
kabloona

Food prices rising to the moon…? I’m still waiting for it. I’ll probably starve to death if those kiwi fruit prices keep rising…

😉

Ask yourself why house prices in Saskatoon rose faster than Vancouver…? Government backed mortgage credit is responsible, I reckon…unless HAM are stampeding to the frozen Prairies and I missed it on the News.

Anyway, the HAM argument has been debunked by Ben Rabidoux, among others…google it yourself. I don’t have time to look it up for ya… too busy drinking Garth’s Tasty Koolaid™…yummy!

😀

Son of Ponzi
Guest
Son of Ponzi

Space,
HAM does not take Skytrain.
Must drive around in endless circles until a spot closest to the entrace of the mall is found.

Wow
Guest
Wow

Main reason for high prices is concentrated immigration. Read this Kabloona.

Wow
Guest
Wow

And kabloona, I think you drank Garths koolaid. Even he is firm that no crash now…after 6 years of blabbering nonsense.

Wow
Guest
Wow

@kabloona,

Free Trade and China and India emerging middle classes will put an enormous pressure on food prices. Kiwi fruit are expected to rise in price five fold in the next 5 years.

Why? The masses are uneducated.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

@22

>Seriously, if you live in a condo on #3 Road why would need to drive for shopping, restaurants, fun?

if you can’t speak chinese you’d have to drive a few kms to find a business where you can read the signs.

space889
Guest
space889

@Son of Ponzi – Or even more horrifying, a 6 year BC girl potentially contracting HIV from a nurse during a vaccination shot, and the clinic didn’t inform the parents until 1 week later. Apparently there is a drug that could prevent her from contracting it if given in the first 24 hours.

What is even worse is that the clinic can’t disclose who the nurse is nor preventing her from giving shots to other children because of her right to work! But apparently the rights of the patients don’t matter.

http://news.nationalpost.com/2014/10/29/parents-horrified-after-botched-vaccination-exposes-six-year-old-b-c-girl-to-hiv/

space889
Guest
space889

@kabloona – that’s a load of bullshit. There obviously isn’t a housing oversupply in Vancouver with the sky high prices. Nor do I see Apple IPhone or IPad prices going up.

The world is only awash in garbage not actual real essential stuff like clean water, clean air, safe food. In fact, prices of food has been going up a lot, even low quality stuff. Heck, even McD with their wood pulp meat glue semi-real food prices are going up.

The only reason you aren’t getting the load of $$ is simply you don’t have the right connections to get the free central bank money.

kabloona
Member
kabloona

#16, you’ve got it backwards……the World isn’t “awash in money”, it’s awash in goods.

The cost of production is falling, stuff is being produced cheaper and cheaper everywhere, energy prices are falling, and wages are under negative pressure – look at Japan falling back into recession and Europe poised on the brink.

Governments are increasing liquidity in an effort to stop deflation from biting in hard….and yet here in Canada, house prices keep rising ever upwards.

Geez, I wonder why….? (cough!) CMHC (cough!!

😀

space889
Guest
space889

I thought the whole point of all those condo towers in Richmond is so that you live near all your amenities and don’t need to drive everywhere. Seriously, if you live in a condo on #3 Road why would need to drive for shopping, restaurants, fun? Unless walking is just too damn uncool or physical exerting for you? Heck for some places like Richmond Public Market, you don’t even need to leave the building complex for a lot of stuff….

Son of Ponzi
Guest
Son of Ponzi

First a basement dentist, now a acupuncturist with Hep.
There goes our first class health care system.

Joe Mainlander
Guest
Joe Mainlander

Since developers pre-sell the vast majority of units in a project before starting construction starts, it’s not a surprise that sales are tied to housing starts. That is built into the pre-sale system.

If sales fall, then there’s less starts, as developers won’t pre-sell, won’t get financing, and won’t start construction.

Since there can be a 2-3 year rezoning process, during which the developer is lining up pre-byers, then even if sales drop any current projects would have been pre-sold and will go ahead. So, there would be time lag before the effect of lower sales would hit pre-sales and therefor housing starts.

The pre-sale system provides a cushion for the developer and passes on the risk to the pre-sale buyer.
That doesn’t mean that there is no bubble.

Slagathor
Guest
Slagathor

http://www.cbc.ca/news/business/cmhc-probing-canadian-house-premium-to-u-s-prices-1.2843924

….Canada Mortgage and Housing Corp. says Canadian housing prices have been higher than U.S. prices in real terms since 2006, an indication that the market here may be overvalued….

Gee, do ya think?

World is awash in money
Guest
World is awash in money

And don’t worry about traffic gridlock. It’s not your problem. Let it become totally worse. Just worry about yourself.

This is the type of thinking that gets bears in trouble. Do not care what happens to Vancouver.

MarKoz
Member

Here is the link to the video that Boombust is talking about. A lot of it is about the US housing market but the first 30 seconds and the last 30 seconds are most applicable to here.
http://www.vancouversun.com/business/affordability/Video+Understanding+housing+bubbles/10395336/story.html

World is awash in money.
Guest
World is awash in money.

S&P hits new record high.

Royal Bank Market cap hits $120,000,000,000 USD. Yes, over 120 Billion.

New luxury car sales at a record high.

Ever think that the gov policies are not favouring you? Join them if you can’t beat them.

MarKoz
Member

Thanks for posting my comment!

The chart for housing starts in Vancouver is here:
http://www.rbc.com/economics/economic-reports/pdf/other-reports/vancouverhouse.pdf

Look for Chart 7 on page 3.

Boombust
Guest
Boombust

#5

I don’t get your point. It would be like comparing apples to oranges.