it's not that the foreigners - whoever that may be including canadians - are speculating on future land value as much as they are comparing the purchasing power of their own currency and the safety of their own capital.
"If you did not want much, there was plenty." Harper Lee
Posting this here since there was some Vancouver housing talk recently.
http://business.financialpost.com/pe...s-tech-economyMillennials fleeing Vancouver for cities with more affordable housing, threatening city’s tech economy
Kevin Oke had a Vancouver millennial’s dream job, working as lead designer at a video-game company whose clients included Atari and Ubisoft Entertainment SA, but he still couldn’t afford a house. So he left his native city.
“Housing in Vancouver is insane — it was insane when I left and it’s more insane now,” said Oke, who co-founded educational-software company LlamaZoo Interactiveafter moving to Victoria in 2014. “If you’re trying to do the startup thing full-time, it would have been really difficult with all the expenses.”
Oke, now 33, is part of the millennial retreat from a city where housing prices have skyrocketed at a faster pace than even in San Francisco, another North American technology locus. Rising costs are putting Vancouver’s vaunted growth engine at risk as the city hemorrhages people employed in tech and new media for more affordable locales, including Victoria and Kelowna. The flight of millennials from Vancouver is similar to trends found in other cities with soaring home prices.
Any bets of timing the peak in various cities across Canada?
On Vancouver, IMO, it depends on two factors: value of CAD (for international/Chinese investors) and fate of China's economy.
For CAD, I am short-term bearish but longer term bullish. So probably a year from now would be a good time to cash in.
On China, reading the recent Politboro developments (yes, you have to follow that nowadays if you are a true capitalist and care about investing!), they seem to have adopted a two step forward, one step back. As the economy faltered, they are stopping reforms and want to keep building more ghost towns, railroads etc in the short term. Mr. Xi says it is "impossible" to miss the GDP target. Again, a short term bullish event if Chinese investor want to risk bringing their money back. Already Shanghai and other tier 1 city real estate prices have rebounded, indicating money is being invested.
So putting it together, I think within a year Vancouver prices will start to fall as some speculators will cash in. However, as safety of capital is also a concern, not everybody will follow and thus Vancouver will remain over priced, a bit less than before though, in the foreseeable future. Good luck to residents!
Last edited by FamilyMan; 17-03-2016 at 12:15 AM.
^Chinese foreign company investment/purchases are over $85 billion. More than double all of last year.
There is this manic thing happening in china right now. And the powers that be are having a hard time keeping control of that particular ship. I still think they've infrastructure bubbled themselves with the ghost cities and roads and freeways, instead of investing in clean energy, cleaner industry, large infrastructure projects that deal with their HUGE air, soil, and water pollution problems.
My whole thing about Van being irrational is that you can account for the market as a whole and still have irrational moves being made. There is a notion of rationalized collectivism whereby - because everyone is doing something and agrees it's the best course of action. Just because you make that statement doesn't make it rational or correct. Market moves can be seen in whatever sphere they are best viewed in for that particular persons perspective (and given inherent biases and self selections that can really throw things for a curve). Rationality is like morality; they are fuzzy states of logic that don't represent objective conditions and instead are subject to the inherent flaws of perspective. A markets rational behaviour is only rational so far as people agree that it is behaving as it "should". The second the trust relationship of an agreed state/status of homeostasis is broken irrationality can take over as the perspective of moves performed by agents within the system become cloudier to understand. It's a common problem in economics, sociology, social psych, predictive analytics, forensic psych, behavioural modelling, statistical mechanics, physics, geology, various fields of biology, medicine, epidemiology, etc. etc **See game theory**. Defining context to actions and deeming those actions as rational or not is an exceedingly difficult task. There are plenty of theories of how to define it and little consensus. One of the common ones is to say that 'given the knowledge, experiences and available information an agent in a system has if they perform an action based upon a reasonable biological and psychological model that conforms to the majority of agents tested then the action can be classified as rational'. The problem lies when you take a closed system and open it up. That same reasonable behaviour is now consider irrational and outside the norm and thus dangerous (see sufferers of PTSD). It's easy to sit and say that because there is a demand for product and people are willing to pay for it a market is behaving rationally. On the surface that could very well be the case. There may be other things that make that cause-effect not balanced. Hidden agents, malicious intent, randomness, etc.
I still think that the housing prices in vancouver is a bad thing. Given things like buildings being bought up with no one living in them, speculated exaggeration, but if you look at the below links 1/8 to 1/4 of condos being empty isn't indication of a good or healthy market place (especially not one that is reacting rationally, once you introduce hoarding then the stability of the market becomes exceedingly questionable and there are new market forces at play)...
There is a reason for things like a devils advocate doctrine: http://www.brookings.edu/~/media/res...uperwasser.pdf
Oil prices have found some traction, the dollar is also up quite a bit from its bottom. I hope prices drop a bit for just a short while. Would like to upgrade to bigger digs on the cheap. Would be nice to find a great character home that needs some love.
My 2 cents at least (educated but opinionated).
"On the sellers’ side, houses are still moving, only nine days slower on average year-over-year for all residential types. And we’re seeing pockets of actual strength in the Edmonton market: certain neighbourhoods close to downtown, detached homes under $500,000."
I wonder which "certain neighbourhoods" he is referring to in the article? In Riverdale, Westmount, Oliver, Rossdale - the more prestigious close to DT neighbourhoods, sub $500,000 is maybe 4 detached houses combined right now. Most of the sub $500,000 single detached neighbourhoods are the usual suspects: McCauley, AA/Parkdale, Spruce Avenue, Delton.
Hmmm....following the trail of Chinese buyers, (mainland) Chinese developers are coming too...and favorable exchange rate features high in the following article. I recall a condo with no #4 and #13 floor buttons in its elevator when back in the days I was looking to buy a condo in Vancouver. It might become a more common sight elsewhere, it seems.
Wall Street Journal, 5-Apr.-2016
Chinese Developers Aim to Expand in Canada
....Some developers have been forecasting an increase in demand among Chinese and others for houses and condominiums in North America, both for residences and for investment purposes. “Because of our deep relationship with many of the broad network of Chinese home buyers, we feel we can harness some of that opportunity when we go outside the country,” said Kai-Yan Lee, managing director for Vanke Holdings USA, which has invested about $1 billion so far in San Francisco and New York projects valued at more than $3 billion.....
Montreal-based Tianco Group, the Canadian subsidiary of Gansu Tianqing Real Estate Co., is among those plotting more growth in Canada. Since 2013, Tianco has invested just shy of 200 million Canadian dollars (US$152.8 million) with one project each in Vancouver and Montreal....
The Vancouver project, which is rezoning, is set to be a six-story condo development in the city’s Cambie Corridor. Tianco’s Montreal project is 38-story luxury condo tower and townhouse complex called YUL, a nod to the city’s airport code.
Currently under construction, and 55% presold, the downtown building will open in 2017. Tianco is the first Chinese-controlled company to fund a high-rise condo in the province.
“We are looking at projects right now in Quebec City,” said Mr. Di Fruscia.
The foreign-exchange rate represents a “substantial savings” for the company, and also encourages condo purchases by Chinese buyers, Mr. Di Fruscia said. “Not only is their money safe here, but their money can buy a lot more here.”....
“Greenland Group targets the world’s megacities with large tourism and business growth potential,” said Henry Cao, president of Greenland Group (Canada) in an emailed statement.
“We believe Canada is a great country for investment. All major cities in Canada will be attractive to us,” he said.
^reminds me of a Van Halen song... "Panama..."
^ reach down between my legs...and ease the seat back
The world is full of kings and queens, who blind your eyes then steal your dreams.
It's heaven and hell!
Makes you wonder if people are behaving rationally...
Real estate 'chaos' sends millennials scrambling before they're priced out - Business - CBC News
Not sure this is the best thread for this post, but you may find this analysis very familiar in discussing Edmonton vs. Vancouver in numerous occasions on C2E.
Wall Street Journal, 18-Apr.-2016
Why the Great Divide Is Growing Between Affordable and Expensive U.S. Cities
Here is a link to the original research this article was written about, where you can find more details, including policy discussion (urban sprawl debate) and charts like the following.Across the country, a divide is emerging between cities that are growing outward and remaining affordable and ones that are hemmed in by geography and onerous zoning codes and are becoming more and more expensive....
The developed residential area in Atlanta, for example, grew by 208% from 1980 to 2010 and real home values grew by 14%. In contrast, in the San Francisco-San Jose area, developed residential land grew by just 30%, while homes values grew by 188%.
The developed residential area in Raleigh, N.C., grew by 219% in the same period, while home values grew by 27%. In Seattle, the developed area grew by 69%, while home values grew by 119%.
^Its interesting, although I don't agree with conclusion middle class are being driven out, in the article. Rather, they are having a different form of housing (row housing, condos, etc.). And, that form, is a lot healthier. Another article from that site, discussing the $1 trillion cost of sprawl to the US economy (a big chunk of it is car accidents):
One thing I do agree with, is cities can choose constricted growth through regulation - it doesn't have to be geographical constraints. Its a smart move, properties rise in value, property tax revenue goes up relative to costs (as less area to service versus a bigger city with the same revenue base), neighborhoods can be improved, and much more efficient transit options available due to the higher density.
Last edited by moahunter; 18-04-2016 at 05:01 PM.
^ Sure, I get your point.
This is a topic I learned a thing or two about here on C2E. I think it is a tough multi-dimensional problem and that's why it is hard for policy makers to get it right. A policy on densification vs. Sprawl takes a long time to filter through the housing market and that's why any missteps are so hard to rectify. For example Vancouver has no easy option to address its affordability problem in short term without causing sever pain economically. Fascinating stuff on policy front!
Have they stolen our motto?
Thank you for your opinion on Vancouver’s empty homes
Please do not let the fact that you may be uninformed, misinformed or “haven’t thought much about it” dissuade you from providing us with your input. The appearance of public input is important to us.
Vancouver filmmaker makes haunting documentary on abandoned mansions (CTVNews Video)
Last edited by KC; 06-05-2016 at 06:47 PM.
http://www.cbc.ca/news/business/crea...nomy-1.3580780Governments terrified of popping foreign-buyer housing bubble: Don Pittis
There's a bidding war for government action on Canada's soaring housing market, but as fingers point to foreign buyers as a reason for escalating prices, governments at all three levels are not yet motivated to cool the market down.
Young Canadians complain home ownership is increasingly beyond their reach. Governments fear rules to put a lid on stratospheric prices — expected to show another strong increase in today's real estate data for April — could have an an economic impact far beyond the first-time buyer market.
The difficulty governments face is that while Canadian manufacturing and exports fall, while oil and resources crash, the property market has become the spark plug of the economy. The proverbial engine of growth is firing on a single cylinder.
Related to the above post, documents obtained by Globe & Mail show government is not taking a proactive role in safeguarding taxpayers. The so-called "high-ratio mortgages" have ballooned in Vancouver and Toronto, in effect banks are using tax-payer protection as an insurance policy to bet on ever more price appreciation. Not too dissimilar to what happened in US a few years back.
Globe & Mail,
Ottawa aimed to tread lightly with new mortgage rules, documents show
...In December, Mr. Morneau announced the government would increase the minimum down payment for insured mortgages from 5 per cent to 10 per cent for the portion of the home price between $500,000 and $1-million, saying the change would affect an estimated 1 per cent of the country’s housing market.
In the memo, obtained by The Globe and Mail as part of an Access to Information request, federal officials raised concerns about the “pronounced increase” in the volume of insured mortgages with low down payments in Canada’s two most expensive cities, citing a 20.9-per-cent jump in Vancouver and a 9.4-per-cent increase in Toronto in the first three quarters of 2015 compared to the same period a year earlier. That contrasted with an increase of just 3 per cent in the volume of high-ratio mortgages in other parts of the country....
Yeah. After seeing in 2008 how prices can actually drop, show no pity for anyone caught with a million dollar plus shack bought in the subsequent run up in prices.
How much of a red flag does it take to get people and banks to act a bit more conservatively. Beyond showing no pity, if we taxpayers end up on the hook for all this leverage we should be absolutely ruthless in recovering what we can on failing debt and taking equity and debt-holder value on any failing institutions.
And closer to home...
^ the problem is taxpayers don't have any tool to exact their right. Like I said, banks seems to be drawing a lesson from too-big-too-fail fiasco in US and giving low down payment mortgages. I posted this story before, but now it makes a different meaning. A "student" buys a $31.1 million house in Vancouver. Previously such deals were All Cash, now the banks are jumping in:
An effective regulatory system will quickly raise the red flag and gets in touch with the bank offering this mortgage.Mortgage documents attached to the land title papers show that a mortgage of $9.9 million was taken out by Zhou and Feng from the Canadian Imperial Bank of Commerce on April 28. The bi-weekly payments are listed as $17,079.41.
BTW, the fact that the "seller" of the above property is the founder of Canaccord is a scary signal in itself. Often, the best indicator of a market turning is when well-connected insiders start to sell.
According to https://tranio.com/canada,new_zealan...estments_5131/ Canada is the fifth most popular country with Chinese property investors who is interested in purchasing condos for their children near universities. As a result, single-detached homes move further into luxury budget territory leaving first-time buyers with funds enough for a condo.
At the same time, I don't think that the property market in Toronto is a bubble. The reason is the stable level of demand supported by the solid job market, low interest rates, and foreign investors' activity.
http://www.theglobeandmail.com/real-...ticle31131589/Calgary and Edmonton
While home prices in Calgary have fallen this year, they are still higher than the city’s weakened oil economy can support, CMHC said. The vacancy rate jumped above 5 per cent in October and has continued to rise, leading to what CMHC said was a concern about overbuilding and “strong evidence of problematic conditions.” In Edmonton, the risks remained “moderate,” largely because home prices have not fallen enough to reflect the slowing economy.
^those four conditions are a little contradictory I think. If there is Overbuilding from 4., its unlikely you will get 1. (Sales exceeding listings). 1. and 2. seem to be more indicators of a speculator boom, whereas 3. and 4. are indicators of problematic economic fundamentals. I'm guessing Edmonton and Calgary are being pulled down by 3 and 4, and Toronto and Vancouver by 1. and 2.
Hmmm, rising house prices and "healthy job growth"
One obviously tends to fuel the other. Hopefully, they are aware of that simple reality. Our exalted Alberta leadership didn't seem to get that concept and the downside associated risks.
With no name or face, foreign investor is selected as Canadian Press business newsmaker of the year
Alexandra Posadzki, The Canadian Press | December 28, 2016
"...Experts say it’s possible that the rate of foreign ownership is higher than the available figures suggest. However, they’re also cautioning against turning non-residents into scapegoats, arguing that they are not the driving factor behind rapid price growth.
“It’s really hard to argue that it’s the major reason that prices are increasing,” says Andrew Scott, a senior market analyst for the Greater Toronto Area at CMHC.
“There’s lots of other things that are going on at the same time. It’s definitely a factor though. I’m not saying it’s insignificant … but it’s definitely not the major force that some people think it is.”
Scott says supply has simply been unable to keep up with demand, which has been fuelled by low interest rates and healthy job growth in Ontario and B.C.
Read More:Edmonton housing prices will eventually collapse, expert says
Real estate prices will eventually collapse in Edmonton, says an Alberta investment manager who says prospective homeowners should consider the merits of renting for a few years.
"There's lots and lots of issues with the Alberta economy, being a boom-and-bust economy. We're not through the worst part of it yet," said Hilliard MacBeth, an Edmonton-based portfolio manager.
"A lot of people are saying that 2017 could be the bottom for the economy, and it certainly could, but that doesn't preclude the likelihood that housing prices will drop more before they finally bottom out."
The housing market correction has been remarkably mild in Edmonton, given the economic tumult seen in the last year, said MacBeth. Alberta has lost 120,000 jobs since 2015 as a drop in oil prices sent the province into its first full-blown recession since 2009.
Though Edmonton has so far escaped the brunt of the downturn, MacBeth says homeowners will eventually feel the impact. He has no doubt housing prices will decline in the coming year.
[QUOTE=Kitlope;805177]Edmonton housing prices will eventually collapse, expert says
"Because the market has been strong for decades, many Edmontonians believe the sector is recession-proof. MacBeth says this optimism is misplaced."
Can any Edmontonian who has been living here since 2001 tell me what's wrong with this sentence?
Please, if you are going to provide a link to an article avoid the clueless types.
Last edited by BoyleStreetBoy; 29-12-2016 at 07:29 PM.
...From this ragged handful of tents and cabins one day will rise a city...
So because you don't agree with it I shouldn't post or link the article?
You need to spend more time in the politics forum.
I'm not saying it was a quality, insightful link but if you don't think we're living in a bit of a housing bubble I have news for you.
And anyway, don't tell me what to do. You might be a big tough guy with your Boyle Street homies but to me you're just another annoying internet poster.
I have to agree with the critiscm of that one line though he also noted that we are a boom bust economy. Nonetheless, the market hasn't been strong for decades. Huge weakness in the early 80s, again more in the mid 1990s and then a bit of weakness in about 2008. Our young population though has helped sustain housing growth for decades. However, because so many Edmontonians are younger and/or immigrants many may not generally think that our housing market could ever be vulnerable to a price drop.
Seeing how far below we are to other markets, I could see a lot of investor buying putting a floor under our prices.
The article is actually quite thoughtful. In the end, he may not be right, but at least he's thought things out.
MacBeth points to the housing market curve between 1979 and 1998 when — adjusted for inflation — house prices dropped in value over the 19-year period.
Last edited by KC; 30-12-2016 at 09:16 AM.
theres nothing in that article thats well thought out. Some random fear mongering a#/hole shares some dooms day predictions all just to see his name in the news.
Old news story (August) but somewhat interesting...
Chinese Media Warns Canada's Housing Crash Will Put U.S. To Shame
Posted: 08/05/2016 11:23 am EDT Updated: 08/05/2016 11:59 am EDT
I think it's scare mongering. I do think housing will drop, but it will happen in Calgary first because of the higher unemployment. It hasn't happened much for single family homes yet, I believe because people are hanging on with employment insurance and mortgage insurance, but that has to run out at some point. I think a good indicator is the condo market, my condo has declined to about the price I paid for it in 2011. It has gone down about 20 percent from its value in 2014/15. I think that's a reasonable predictor for housing also, where it hasn't already dropped it might drop by 10 to 20 percent, hardly an earth shattering crash though, and for people with jobs, it shouldn't matter.
Vancouver is a bit more interesting because we can clearly see now, with foreign investors leaving, the buyers aren't there from middle to top of market (the prices there were never sustainable given the economy / salaries) and a price decline is happening. It was a speculator bubble market. That's not really an issue in Calgary and Edmonton though, where people with jobs can afford their mortgage and still afford to buy into the market.
Last edited by moahunter; 30-12-2016 at 10:02 AM.
I know not directed to me specifically KC but...And why do you call his comments "dooms day predictions"?
Because some people think the average price of $440 000 for the Edmonton area with all the debt people have in a boom/bust economy isn't kindling for a correction and is the norm. That was the point of the article. And for good measure lets start talking about the 20% wage cuts that the Building Trades are now taking (not 5% like the teachers took 20 years ago during Klein Cuts) but 20%. That's a pretty damn good chunk but the mass media don't give a **** about blue collar workers in this province. Calgary, especially the $600 000+ homes is already seeing price drops along with condo's all around the province. If things don't change in this province, specifically in the oilpatch, we're going to start seeing a housing correction. My brother works for a builder (he's the guy that signs off the houses, not just some framer plug) and he's already seeing it and says if it wasn't for Ft. McMurray rebuild he doesn't know where his builder would be at the end of the year, so the fires helped bring a little extra "lag time" to an industry that's about to start going south in a big way. Some say Edmonton is affordable compared to.... you guessed it, Vancouver & Toronto, two of the most over inflated & expensive markets in the entire world. So of course Edmonton is affordable compared to other (relatively) large urban centers like those. And just ask the 50 - 70% of Canadians that live paycheck to paycheck with lots of non mortgage debt on top what affordable is, especially when interest rates start to tick up slightly some banks are already incurring.
Like I said, if things don't change for the better in Alberta in the next couple years it's going to start happening. I'm a realist, not some doomsday prophet, just noting what has happened here in the past. We all know Alberta has a boom & bust economy, I mean it's pretty freakin obvious... so why wouldn't this apply to housing? It has in the past, right?
Last edited by Kitlope; 30-12-2016 at 10:09 AM.
If house prices fall it just makes them cheaper for future buyers. In general, it makes those buyers better off. It may be bad news for builders and parts of the economy that have benefitted from all that goes with rising prices but in many ways they've just made money faster (at least they did in the bubble years) than they would have in a slower but more stable growing market. It's irrelevant to people staying in the local housing market. It's bad for those that may have to sell though, but if prices have risen more than they should have, and they sell before prices fall further, then their bad luck translates into relatively good luck.
Rising foreclosures in Alberta: a cautionary tale for indebted Canada
Posted on December 23, 2016 by Danielle Park
Alberta and Saskatchewan are the only two Canadian provinces that allow underwater homeowners to leave keys for the bank and “walk away” from their mortgage obligations without further recourse or damage to their credit rating. ...
Human life is full of great risk. Health problems, accidents, breakups, job losses and economic downturns are all regularly recurring events. The mean reversion of over-exuberant asset prices that have been enabled by debt is not random, bad luck, but rather a normal, foreseeable part of the credit cycle. The longer the rising phase, the deeper or longer the mean reverting phase. Wise people plan for the downturns, foolish people hope they won’t happen.
House prices have already dropped significantly in many places in AB.. im not sure why some are posting that prices may drop soon. Will they continue to drop a bit? Maybe... but 50% is a total whack job prediction backed by absoluyely zero insight on what will have to happen for that to take place.
Use some common sense.. if you think prices may drop great! But if you agree on a 50% drop then your a total whack job.
Last edited by KC; 30-12-2016 at 10:31 AM.
As far as a housing bubble... This thread has been forecasting a tumble/bubbleburst/whatever for almost 7 years. Keep clucking, Chicken Little. I'm pretty confident that what we'll see is an historic repeat of a long period of no growth instead of a dramatic price drop.
But internet Ph.D's like you probably disagree.
...From this ragged handful of tents and cabins one day will rise a city...
they probably post on the one local realtors blog that i stopped following for exactly this non sense. For years people would post that the xrash will happen but it never did... its like bickering children of doom sayers vs those living in reality.
Your mentally challenged if you think prices will drop 50 percent.
We all have to make decisions and so we need to have some idea of the good and bad things the can happen to us in order to prepare and hedge our bets on the future. Things never have to get as bad as the past, or they could get worse - and the same for good things.
A for 50% drops. I have no idea. Nominal or real? From here or from their peak?
Last edited by KC; 01-01-2017 at 11:21 AM.
He's saying 40-50% "from their peaks." No one can predict the future, but I don't think that's an outrageous totally unprecedented price movement.
Boomer-aged investors are dangerously overexposed on real estate
Investment adviser Hilliard MacBeth believes we’re in a housing bubble, and, worse, that it means many investors are under-diversified
Mar 31, 2016 Bryan Borzykowsk
All he has to do is drive around his hometown of Edmonton, or Calgary three hours away, to see what happens when the cracks in an overheated real estate market start to show. “It’s strange,” he says. “I can see it happening.”
The housing bubble already popped in some parts of Canada
MacBeth, the author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash, expects residential values to ultimately fall back 40% to 50% from their peaks. He’s already seen luxury homes in Alberta do that. ..."
There's a chunk of that phantom value that's based on low interest rates, and those charts don't reflect that at all. They also don't take housing stock into account....
In general, that average house may be 60% overvalued compared to 35 years ago, but it's not the same house, and neither does it cost it'sowner the same.
Some proportion of the increased value is based on that, and is real. To some degree, home prices SHoULD be higher now than then, and that value won't evaporate as easily.
I think 40% down from peak would be absolutely worst case without a global depression, and would require both sustained double-digit unemployment and increased interest rates, to to point where mortgage rates have roughly doubled.
There can only be one.
Originally Posted by BoyleStreetBoy
Basically this. I think we'll see a long period of stagnation in real estate values that will over time chip away at their value relative to other parts of the economy. No collapse, but a long, slow deflation. That's assuming that interest rates remain fairly low, and when they do start rising, that they rise fairly slowly and predictably. If there's a sudden jump of a few percentage points in only a year or two, then things could get ugly. But most expectations are that interest rates are likely to remain fairly low for the foreseeable future.
i did read about a short seller day trader whos retired
claiming the housing crash will drop by 80 percent right away.
Makes this 50% drop seem less crazy.
"If there's a sudden jump of a few percentage points in only a year or two, then things could get ugly."
I can't forecast the future, so your forecast is as good as any other. But you say 5 years is a long time to be wrong but things could get ugly in a year or two? How so?
If rates start to rise, the prediction becomes a reality so everyone on the edge just sells their house or pays off or pays down their mortgage, right?
My point being that we seem to have differing views on the time people require to change direction or even simply realize what the downside risks are compared to their ability to escape that downside. If every mortgaged homeowner changed direction on a dime, then I'd agree that the relevant time apse is only months to a year or so.
I like the doom and gloom housing forecast arguments, following historical national wide housing crisss in the states and europe, not because it guarantees it will also happen here, but because it gives no one any excuse if it does happen. Everyone has been warned.
I think enough time has now passed following the US housing/debt crisis and following similar warnings for Canada that there's no way taxpayers should ever be asked to jump to the aid of indebted homeowners and bankers in Canada.
Last edited by KC; 02-01-2017 at 02:51 PM.
None of it matters if you can withstand this or that shock and ride it out. (In investing everyone takes losses but they are usually diversified. However, those that put 100% of their life savings into one stock and borrow to do so, need to understand their downside risks if their stock hits a bump. Similar for those borrowing out 25 years to buy a house they can barely afford in good times and can't afford in bad times.)
Originally Posted by KC
I'm not sure what isn't clear about what I said. If interest rates suddenly go up 2-3% in only a year or two, that would have a huge impact on the housing market and indeed the entire economy. If they go up 2-3% over 5+ years, that gives the market and individuals more time to adjust gradually. What is difficult to understand with that statement?
And I'm not sure why you're conflating or contrasting that particular time frame with how long MacBeth has been screaming at the rooftops about the impending bust. One has nothing to do with the other. The fact is, Hilliard MacBeth has been forecasting doom for years now, and he's been totally wrong. Much like Peter Schiff in the US, who made a career out of predicting doom while being totally wrong, until suddenly in 2007-2009 he was proven right. Much like weather forecasting, timing is arguably more important than the prediction itself. Whether the housing market, or banking sector, or tulip futures or whatever are going to up or down is fairly useless information if the forecaster botches WHEN that's going to happen. And in Schiff's case, a lot of his reasons WHY the bust was inevitable were outright wrong as well. His predictions on the price of gold are hilarious in hindsight, and yet he continues to double down.
As the saying goes, fling enough feces at a wall and some will stick. MacBeth has sure flung a lot of manure these past 4-5 years.
Nonetheless, everyone out there has in their head some sort of forecast of the future - it may be based on some other forecaster's forecast, or media, or history and further reinforced by their own decisions. (Someone that bought a house, or upgraded to a big new house in the past 5 years likely had a view as to what they thought was going to happen and they used that as justification or assurance in their decisions. Probably a positive view of the future.)
So the reason to listen to any of these forecasters should NOT be with a view as to them having some sort of crystal ball. Their only value is in challenging one's belief and or the conventional wisdom guiding the masses behaviour. If their reasoning and logic is somewhat sound and they understand how dominos fall then that's worth acknowledging but not adopting according to some faith that they will ever actually be right - especially in terms of timing and magnitude. So in terms of housing, people make huge life changing commitments that can't be altered very easily so the time people require to protect themselves is years, not months. Thus who cares if MacBeth is wrong. His warnings 5 years ago might just have had the effect of tempering peoples expectations for house prices and helping a few people at the margin prepare for some less than ideal market (say here in Alberta, but not in Vancouver or Toronto). If he'd made the prediction 5 years ago and it came true within a year, he'd be considered a great forecaster. Big bloody deal! To even those that thought he was bang on, they'd still face financial destruction. Like someone on fault line forecasting an earthquake, ten minutes before it actually occurs. Its totally useless. Now someone telling you the reasoning to an earthquake occuring might convince you that that is a distinct possibility and preparations should be made.
All I Want to Know is Where I'm Going to Die so I'll Never go There - Charlie Munger
Look at what I just found:
All I Want To Know Is Where I'm Going To Die So I'll Never Go There: Buffett & Munger – A Study in Simplicity and Uncommon, Common Sense
This book is about the fictitious Seeker, who has known a lot of misery, and his visit to the "Library of Wisdom" where he meets another fictitious character - the Librarian- along with Warren Buffett and Charles Munger. The Seeker learns how to make better decisions to help his children avoid doing the dumb things he has done. For instance, he learns from Buffett and Munger the best way to prevent trouble is to avoid it altogether by learning what works and what does not. They do so in the spirit of the anonymous man who said: "All I want to know is where I'm going to die so I'll never go there." Additionally, the book provides examples of pure folly and some lessons on how to make fewer dumb mistakes than other people. And then how to fix mistakes faster, should you make them. The major lesson is "ignorance removal" and the notion that decision-making is not about making brilliant decision, but avoiding terrible ones. This is not a book for those who like complexities or advanced math - rather it's for those who love efficiency, simplicity and common sense or judgment - hallmarks of Buffett and Munger.
Again. This guy might also be totally wrong - for years and years too. But that's not the point. The point is, what if he could be right, sometime. What does that mean?
It's like developing an understanding that the 100 year flood may never occur, or it may occur tomorrow, and again the year after - and determining whether or not you live on a flood plain. Any forecast that says it's going to be "x" feet of water occurring within this month or that, is rather useless but learning that you may live on a flood plain that may be at risk is valuable. The sooner you learn that, the better off you potentially may be.
'All hell is going to break loose in Vancouver': Ex-trader's real estate forecast
Sarah MacDonald, Reporter
"It's going to blow to complete and utter smithereens," Cohodes predicts.
"I think the market probably topped in the spring of '16 and I think all hell is going to break loose in Vancouver in 2017."
Cohodes is so confident in his prediction that he's betting against one of Canada's biggest alternative mortgage lenders, forecasting a housing crash similar to the one south of the border in 2008.
"I witnessed some of the U.S. housing fiasco here, and I said to myself, if I ever see it again, I should speak out louder than I did," he told CTV's Sarah MacDonald.
So this time he's speaking out, and his predictions are drastic.
Cohodes, who is now retired from trading, predicts that all of Metro Vancouver's multimillion-dollar homes will see their value plummet by as much as 50 to 80 per cent.
Last edited by KC; 05-01-2017 at 12:46 AM.
Neil Mohindra: No joke — B.C. seriously just decided to actually raise housing prices in Vancouver
Toronto-area home sales sets record high in 2016, average selling price soars
The average home in the GTA now costs $730,000
The Canadian Press Posted: Jan 05, 2017
That was up 8.6 per cent compared with December 2015 — despite a tight supply of properties for sale.
The board's MLS house price index — which adjusts for the different types of properties — was up 21 per cent in December.
For the full year, TREB members had 113,133 sales through the MLS system — up 11.8 per cent compared with 2015, which had the previous record high.
"A relatively strong regional economy, low unemployment and very low borrowing costs kept the demand for ownership housing strong in the GTA, as the region's population continued to grow in 2016," TREB president Larry Cerqua said in a statement Thursday.
The board says upward momentum on pricing accelerated as the year progressed and the overall average selling price for the calendar year was $729,922 — up 17.3 per cent compared with 2015.
Last edited by KC; 05-01-2017 at 09:04 AM.
Price change in Edmonton is hardly worth noting, except in comparison to the leaders...
Edmonton home values see biggest drop in Canada in fourth quarter
Calgary will see a greater rebound than Edmonton in 2017, Royal LePage says
Jan 12, 2017
Home values in Edmonton fell by a wider margin than in any other Canadian city in the final three months of 2016, Royal LePage reported Thursday in its latest house price survey.
Edmonton house prices were down 2.1 per cent in the fourth quarter of 2016 compared to the same period of 2015, the survey found. By comparison, Calgary home values fell by 1.0 per cent while nationally, values were up by 13.0 per cent — the highest year-over-year national increase seen in more than a decade.
Across the country, the highest increases in home values were seen in West Vancouver. B.C., where prices shot up 32.8 per cent compared to the fourth quarter of 2015, and Richmond Hill, Ont., where they increased 30.1 per cent.
The average home prices in West Vancouver in the fourth quarter of 2016 was $3,573,148. In Richmond Hill it was $1,138,826.
Edmonton home sales surge in January
Edmonton home sales staged a rebound last month, rising 19 per cent from the previous January, new figures from the Realtors Association of Edmonton show.
There were 738 home sales in January. The 2,185 residential listings were down 7.6 per cent from the same period last year, and the average price for all types of housing rose 4.8 per cent to $355,841.
The average single-family home sold for $416,859, virtually unchanged over the last 12 months, while the $246,727 average condo selling price was up 8.7 per cent.
“2017 has started strong, with an increase in year-over-year unit sales and prices remaining,” association chair James Mabey said in a news release.
“While it is still early in the year, the rise in sales suggests that consumer confidence in the housing market is on the rise.”
Nothing new here but just an update on pricing and theorizing...
History Repeating Itself? Toronto's Long Record Of Housing Busts
The Huffington Post Canada, Daniel Tencer, 01/18/2017
That’s about as unsustainable as a housing market can get. Yet at this point, the experts who've long predicted a crash -- and who should now be shouting louder than ever -- have gone quiet.
The bubble-mongers had been making dire predictions for Toronto and other parts of the country since around 2010, when price growth began accelerating. But being proven wrong year after year tends to take the wind out of your sails.
In the case of the bubble-mongers, though, they may not have been wrong. They may have simply underestimated just how long this boom would go on. If history is any indicator, when the boom busts out, Toronto will be in for a long decline. It's just a question of when.
...It turns out the Toronto housing market is a repeating pattern of spiking price growth, followed by prolonged periods of decline and stagnation. ..."
‘The housing bubble has burst’: Economist warns market imbalances are threat to economy in long runToronto isn’t growing fast enough to justify its bubbly house prices
The latest census figures show Canada’s largest city growing at its slowest rate in 40 years, yet home prices are still booming. That isn’t sustainable
Feb 14, 2017 Jason Kirby
"... as CMHC has noted, staggering price gains have spilled out of Toronto into its environs.
Never has there been a five-year stretch when Toronto house prices soared as fast as they did between..."
However the peak may have come. Madani pointed to the steep decline in housing sales in Vancouver, which have fallen 44 per cent since February 2016, noting that no macroeconomic shocks explain the drop. Mortgage rates remain incredibly low, despite mortgage rules being tightened by Ottawa. Meanwhile, employment growth has been relatively strong in that city. He also argued that the foreign buyer tax, introduced last August, doesn’t fully explain the collapse in sales either. “We simply think the housing bubble has burst,” he wrote. “Housing bubbles are, of course, inherently unstable because they are largely driven by unpredictable investor mania.”
And that brings us back to Toronto’s housing market, which Madani believes is being driven by “increasingly riskier” lending practices; the average home loan has ballooned relative to household incomes, he said, while mortgage lending is shifting away from traditional banks to unregulated firms.
All of this should be a concern for Toronto, as well as the Canadian economy at large, he concludes. “The abrupt slowdown in Vancouver’s housing market should serve as a warning shot. As things stand now, the economy’s performance this year could hinge on Toronto’s overheated housing market.”
When the bubble bursts my prediction is that it will erase the last year of growth basically. I do believe both Vancouver and Toronto may be to the point in both their cities where they won't see a massive retreat more then 5% if things cool slowly. Barring a collapse in the economy or some other dynamic which seems unrealistic at this point of time( like oil going from $107-$30). There are policies that have pushed ownership of "land" in these to cities a need for some.
so what policies or consequences have driven up prices?
- green belt around Toronto, so I hear?
- commute times have exploded from the suburbs. Over a generation( I read an article even how Edmonton has eliminated left turns at some intersections( this slows down traffic)wasn't Edmonton in the running up for increased commute times recently?
-vancouver is restricted in how it can expand
- was it the olympics that helped drive up demand?( I have read this can be a positive consequence from hosting the olympics) it is clear from an investment point of view Vancouver is on an international market.
bank of Canada keeping interest rates low for such an extended period.
im sure there is a lot more that can be added to this list
In hindsight, I am actually fairly pleased we are year 3 into our flat market and haven't participated in the insanity of the other markets. When their bubbles start to burst, it will make our oil price shock look like child's play.
"Men never do evil so completely and cheerfully as when they do it from religious conviction" - Blaise Pascal
I am sure high housing prices have caused many young people in Toronto and Vancouver to move to more affordable places like Alberta over the last five years, but that too has greatly subsided recently as our economy has slowed due to lower oil prices.
Vancouver was obviously propped up by foreign speculation, its not a coincidence that as soon as the tax came in, sales plummeted, and prices started dropping. Toronto may be feeling the same international pressure, hence the price increases. As to the, "Toronto and Vancouver are going to crash", I'm not so sure. They might, but its just as likely they won't or will just flatten in Toronto's case. Keep in mind these are highly desirable cities, New York and San Francisco are pretty expensive as well, and didn't really collapse when the US housing crises happened.
Not sure that's true at all. San Francisco had a 20-30% decline in the 2007/8 crisis, based on a quick Google. They also had a bubble inflate and pop in relation to the late 90's/2000 dot com bubble.
Of course, who knows exactly when this will happen. I think we are getting close to the end of the price appreciation cycle in TO (usually close to the top there are some big increases) - maybe it has another year or so to go or maybe less.
Last edited by moahunter; 14-02-2017 at 03:02 PM.
I don't think anyone predicted how high and how long the housing growth phase would have lasted, so I don't think anyone can predict how far it might fall. Falling prices are rather irrelevant to most people in the market anyway, unless they planned to go back to renting or they loose their jobs. When they bought they were happy with whatever level of debt they took on, so being underwater on a mortgage is also rather irrelevant as long as the payments can be made. It just means that you may need to stay an owner in the market for some more years, or decades, which most people planned to do from the start.
The main thing is to recognize that they can't predict the future and so should be prepared for unexpected things to happen to prevent forced sales.
Now, for those buying their first home, that's a firstly different matter.
A collapse though, throws a whole lot of losses in the direction of the banks and CMHC. That could hurt us all if they themselves haven't prepared for a substantial collapse. This is also unlikely because we have the US / Euro housing crisis as an example and we've had s decade to shore up the systems. No excuses for being unprepared there now.
Last edited by KC; 14-02-2017 at 06:52 PM.
Edmonton's historic housing prices have been closely connected to the price of oil, taking into account that the housing market isn't quite as mercurial in it's peaks and valleys. The two graphs below seem to reflect that argument.
I've posted this Edmonton Real Estate Values graph before...
And this Crude Oil Prices 70 Year Historical...
These graphs corroborate my memory of house prices being pretty soft in the 1960's, and then steadily increasing in the first half of the next decade and by the end of the 1970's starting to accelerate, then going flat at the start of the 1980's. They stayed soft through the late 1980's but rallied briefly and then sputtered in 1990 to languish in the doldrums for the remainder of the decade. Then began the climb in the 2000's, peaking at 2008.
The killer interest rates during the late 1970's/early 1980's caused a lot of folks to walk away from their mortgages exacerbating the crisis, but even then it was more of a deflation than a pop, a slide rather than a tumble.
The drop of oil prices to $29.01 in February, 2016 and it's recovery to the current $53.20 seems to have happened so fast that the market hasn't really had time to react with full crisis mode. Thank God/Fate/Karma/Bank of Canada's low interest rates for that.
My crystal ball says we're going to be sailing the doldrums for a while. But I'll keep my fingers crossed for good measure.
Last edited by BoyleStreetBoy; 14-02-2017 at 09:22 PM.
...From this ragged handful of tents and cabins one day will rise a city...