Category Archives: economy

Falling, not crashing.

Here’s a nice article that should reassure you.

The housing market in Canada is forecast to fall, but not crash like in the US.

In fact the first three paragraphs each repeat that this will NOT be like a US style crash.

Canadian housing prices will fall 10% over the next several years and homebuilding will slow sharply in 2013, but the country’s recent property boom is not expected to end in a U.S.-style collapse, according to a Reuters poll.

The survey of 20 forecasters published on Friday showed the majority believe the Canadian government has done enough to rein in runaway prices, preventing the type of crash that has devastated the U.S. market for years.

“This isn’t a sharp correction, this isn’t a U.S.-style correction, it’s just simply an unwinding of the excess valuation that was created by artificially low interest rates for a long period of time,” said Craig Alexander, chief economist at Toronto-Dominion Bank.

“I would emphasize that while a 10 % correction sounds scary, in actual fact, this would be a healthy outcome.”

Just a gentle feather slowly drifting to the safety of the ground.

Read the full article here.

How much more will Vancouver prices drop?

Scotiabank is now warning about the housing market falling across Canada.

They are predicting a nationwide drop of 10% over the next two to three years.

That’s the national drop they predict, saying bigger drops are coming to Vancouver and Toronto.

But how much more overvalued are we on a national scale and what sort of drops will we see here and in Toronto to drive national prices down 10%?  They don’t say, but they do remark on how long it took earlier market declines to recover:

The report notes that previous housing market downturns — in the 1970s and 1990s — took eight or nine years to bounce back to price levels seen before the decline.

“Historically, long cycles of rising home prices have been followed by extended periods of persistent softness, allowing affordability to be gradually restored and generating renewed pent-up demand,” the report stated.

The bank also warned that “balance sheets heavily skewed to real estate leave Canadians vulnerable to an adverse shock, including a sharp rise in unemployment and/or a sharp drop in home prices.”

The report predicts a “spillover effect” into construction employment, which — thanks to the massive run-up in house prices — has seen employment grow twice as fast as the economy as a whole.

However, “the full impact of the slowdown may not become fully visible until mid-decade,” the report stated.

Read the full article here.

 

Flaherty won’t ‘stand by’ in recession

The more things change the more they stay the same.

The president is back in the white house and there’s rumbling of a fiscal crisis again.

Flaherty has said he’s not going to take another recession lying down.

Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney both pledged Wednesday to take action to support the economy if a shock from the U.S., or Europe, threatened to once again plunge the country into recession.

“We are a pragmatic, sensible government. If our economy goes into recession because of an external shock from the United States or the eurozone, or both, we will take steps to stimulate the economy,” Flaherty told the Commons finance committee in an evening session.

“What we have done before we will do again. We will not do exactly the same thing again…but we are not going to stand by and have the Canadian economy slip deep into a recession with high unemployment.”

Bear vs. Bull in the Battle of Vancouver

Haven’t you always wanted to see housing market data presented as an exciting battle map?

Somewhat more exciting than your average excel sheet, VMD has started a Battle of Vancouver thread over at Vancouverpeak.com where he’s got maps showing the ups and downs of the market for condos and single family homes.

It’s interesting that you really get a sense of things changing on the periphery first.

There’s a stripe of red in the centre where prices are still up year over year. Here’s the map for Single Family Homes:

There’s a similar thing happening in Condo prices, although more areas are Year over Year negative there.  Oh, and for extra excitement on this map there’s TANKS! (each tank represents a single percent point up or down):

Click here to view the full thread on Vancouverpeak.com

..And if you have stuff to share over there, here are a few more invite codes to register for a user account:

p3k0-icze-u2up
yktv-exfc-01ge
2pss-bm1u-2lhp
fpc5-sef1-42bu
vaw6-smid-p49u
30v5-2sfh-6ozj
xukn-ohyt-qkac
k3oq-6jj9-1de2
9mjt-op5r-1vwp
sknv-ook0-sqpj

BC has the highest personal debt loads

We’re number 1!

The province of British Columbia has the highest level of personal debt anywhere in Canada and it’s still growing.

With incomes low and house prices high, it’s not an entirely unexpected result.  But even if you remove house debt we have very high levels.  Not including mortgage debt, simple consumer debt averages $37,879 in BC.

And that of course has led to a rising number of bankruptcies. In the last four years bankruptcy rates across Canada have gone up 11%, here in BC the number is up 42%.

That Province article also talks about the ‘elation’ of declaring bankruptcy, but that usually only occurs after some one has used up all their other options and burnt up money they could have kept:

“People often come to see a trustee as a last resort, when credit is turned off and they can no longer borrow from one card to pay another,” Mantin says. “They come in and say ‘I regret that I didn’t know about these options sooner. All I’ve done over the last two years is tread water.'”

Frantic people make decisions that will compromise their future, Mantin says. One of the worst is cashing in RRSPs.

For one thing, only the last 12 months of RRSP contributions need be surrendered in a bankruptcy. And those who sacrifice an RRSP without learning to live within a budget are not facing the underlying issue, Mantin says.

“Unless they’re forced to make a behavioural change, I often find they’re in the same position a year or two later,” he says. “They’ve dealt with the short-term debt but haven’t solved the budget problem so they run their debts up again.”

Read the full article here.