Paul sent in this link to an article in the Globe and Mail about Decembers unexpected drop in building permits across Canada. Economists had been expecting a drop of about 2 percent, but permits actually pulled back 7.8 percent.
Most experts expect construction activity to ease from last year’s 2006 blistering pace amid higher mortgage costs, though overall activity is expected to remain strong.
â€œThe data is in line with our view that the residential sector is likely to continue to cool…although only modestly in 2007,â€ wrote Dawn Desjardins, senior economist at Royal Bank of Canada, adding that â€œnon-residential investment will continue at a solid clip backed by firm corporate balance sheets and decent profits.â€
The article points out that last year saw a huge number of permits in western canada, so it will be interesting to see what happens when the record number of projects under construction complete in the next year or two.
The Real Estate Board of Greater Vancouver have released their stats from January 2007 and according to them the ‘benchmark’ quality adjusted price of a detached house in Vancouver continues to drop. Here’s my updated graph of the REBGV benchmark price including the most recent price peak of September 2007:
Graphs can be deceptive, and this one looks like we’ve lost a lot of value. We are about $20,000 down since September, and below my July 2006 start date, but in the big picture we’re still way way up. If you’re unfamiliar with the Vancouver housing price run-up you should check out the Vancouver Housing Blog for a bigger picture.
So which is more likely to happen? Prices continue to drop to get more in line with rental values, rent prices increase by 200% to catch up with real estate prices, or a combination of the two?
Note also: last month detached houses took the greatest price hit – attached (townhouse) prices are nearly at the September peak, while apartments (condos) are also up from last month. Whats happening there? Are people ‘priced out’ of the detached market and buying condos and townhouses instead? Why are we seeing this steady price drops in single family homes right now?
There’s an article in the sun about the large number of houses in the lower mainland with sub-par or dangerous electrical wiring that often requires work to be insurable.
Dangerous electrical wiring exists in the majority of pre-1950 homes in B.C., especially those with secondary suites, according to preliminary findings by a Vancouver company.
Of 104 older homes inspected by last year by PowerSafe Inc., 60 per cent had electrical problems requiring immediate attention.
Hazards that could lead to a fire zoomed to 84 per cent in 30 homes with secondary suites, said Brian Cook, co-founder of the firm.
I know a couple of people who bought houses in the last year that required re-wiring before they could be insured – depending on the size of the house this can run from around $15,000 and up – a good thing to be aware of and budget for when shopping for an older house.
Personal savings in the good ol’ US of A have dropped to their lowest levels since the great depression. According to this article on MSNBC “The savings rate has been negative for an entire year only four times in history â€” in 2005 and 2006 and in 1933 and 1932. However, the reasons for the decline in the savings rate were vastly different during the two periods.”
During the Great Depression when one-fourth of the labor force was without a job, people dipped into savings in an effort to meet the basic necessities of shelter and clothing.
Economists have put forward various reasons to explain the current lack of savings. These range from a feeling on the part of some people that they do not need to save because of the run-up in their investments such as homes and stock portfolios to an effort by many middle-class wage earners to maintain their current lifestyles even though their wage gains have been depressed by the effects of global competition.
The article goes on to point out that the timing of this low savings era could be particularly bad with an estimated 78 million baby boomers approaching retirement. Instead of saving for retirement many boomers are spending all of their income and then some.
Unfortunately Americans aren’t the only ones with this problem. From the most recent data I could find The BC provincial savings rate was -7.9% in 2004.
Yesterday I posted a link to a report by Genworth Financial that declared that “over the next four years, Vancouver condo demand is expected to slow to balance with supply, although a correction is not expected.”. As one poster commented, Genworth Financial was one of the first in Canada to insure zero-down and 40 year mortgages as part of their goal to “make homeownership more affordable and accessible throughout Canada”.
I’m not entirely clear how helping to drive up debt levels is helping this goal, but every company needs a slogan.
I see now that this story is running in the Province, pretty much verbatim from the press release. The story subtitle is ‘growth to continue without any correction’ which, though slightly plausible, is still surprising to see as a statement of absolute truth. Imagine a company issuing a press release with a prediction that their stock price will “rise about 6.2 per cent this year and average 4.4-per-cent annual growth through 2010”.
I don’t doubt that its difficult work being a reporter, but wouldn’t it be more efficient and cheaper for the paper to just reprint the press release without the byline? If the market does correct, I expect we’ll see a lot more of these press releases from real estate agencies, banks, mortgage brokers, etc. If we hit year over year price drops then we’ll get the ones that say ‘the worst is over!’.
Paying reporters to retype these press releases over and over seems inefficient at best.