Chiller Shiller

Just in tiime for Hallowe’en! The latest authoritative charting of US house prices – and a further glimpse of what the Canadian market likely has in store. BTW, average prices in the Monterey area of California have dropped 65% from the autumn of 2007, taking the average price from north of $700K to south of $300K. Hang on!

59 comments ↓

#1 smwhite on 10.31.08 at 10:31 am

If you look at that chart you’ll notice that housing prices have fallen to 2003 – 2004 norms, just like the stock market…

#2 Panic Profit on 10.31.08 at 10:49 am

In your opinion…what will be the ultimate buy signal?

All the top investment gurus recommend to by “When their is blood on the streets”

OR

“Be greedy when others are fearful”

So what events or indicators will you look for to tell you that their is “Blood on the streets” and the time is right to buy everything – stocks and real estate – at a major discount?

Help a “Panic Profiteer” out, guys.

#3 arthur on 10.31.08 at 10:52 am

smwhite – but by the curve of it – looks like it’s definitely
going for minimum year 2000 level if not worse

#4 Peter in TO on 10.31.08 at 11:17 am

Unfortunately if you look at 2000 and consider a 3% CPI we should be around the 130%. Unfortunately we are way above this point. So we still have a ways to drop.

#5 Rich Grover in Van on 10.31.08 at 11:44 am

I don’t know about you guys, but all this talk of the pending apocalypse is great news. I am just starting out, no debt, good job (nothing to lose). I live in BC, where it has obviously been out of control for years. It may sound selfish and unsympathetic, but I am rooting for a complete collapse. This couldn’t be happening at a better time!

#6 pbrasseur on 10.31.08 at 11:58 am

@ Panic Profit

When should you buy? When everyone’s selling like crazy.

Typically when people start buying again you know the bottom has been reached. Obviously the tough part is to differentiate between real pickup and temporary rebound, this is especially true for the more volatile stock market.

For RE I suppose you should look at inventory, sales and construction permits, all of which seem to (very tentatively ) indicate a bottom has been found in the US.

Not so in Canada however where the crisis is still developing.

Lately I’ve been selling bonds to buy US stocks, now I will (slowly) start buying Canadian stocks.

#7 Rasputin on 10.31.08 at 12:15 pm

#2 Ultimate buy signal. When you go to Chapters and the only book on Real Estate Investing is Garth’s book, and other get out of real estate books. That would be a good sign. Also when the dudes on Flip That House start making “guest appearances” on Bounty Hunter.

#8 smwhite on 10.31.08 at 1:38 pm

Yep, that chart is heading south fast, will it drop to levels before the last “mini” recession in 2002? In Canada I’m “guessing no” and I have been as bearish as anyone in the past two years. In the USA, quite possible and we’ll eventually get a better idea when we’re out of the fourth quarter which means this coming spring.

If you feel the need to put money in the stock market first off figure out your time frame for being in the market and what is your exit point either up or down. Buy solid companies with cash in the bank and decent earnings potential during a recession, P/Es and future P/Es of 7 or less. Look for solid balance sheets, dividends and DRIPs help. Companies like Enbridge will still be selling gas to the consumer in a recession where Lu Lu Lemon might take a hit on their high end yoga pants when people just settle for something at Sears or Wal Mart.

Remember that the markets are based mainly on human emotion and at times they are over bought and over sold… I think that Canadian RE will be at a fair and sustainable price when it gets back to the levels of 2006, before the inception of the 0% – 40 joke. Some markets will continue their decent and others will level off in and around that time frame.

I suggest reading any book written by the late “Benjamin Graham”, some of his best reads were written after the biggest recessions and its great to get his take on how to protect your investments.

Don’t hold your breath for a total economic collapse, if there is its because the world has gone to shit and you won’t be worrying about whether to buy a home or not, it will be how do I feed myself today, is that what you want?

Good luck to all!

#9 smwhite on 10.31.08 at 1:51 pm

We wouldn’t have been in this mess if government had have just buggered off and let the market do its thing in 2002, the more we try to avoid recession the more trouble we cause by interfering.

There used to be a time when you purged the system for the good of the system, clean out the crap and the strong survives, and flourishes.

Now we have people in power that can’t even say the word recession, like its blasphemy…

Let it happen and lets move on!

Garth, I had been thinking more about some comments from a few on here about a book you wrote on the DOW hitting 30K(I’m too lazy tight now to do anymore homework so my apologies if I mis-speak). With the amount of money being printed, I’m wondering if that’s not as much crazy talk as it might have been a couple years ago? Hyperinflation scenario?

#10 dd on 10.31.08 at 1:52 pm

#2 Panic Profit,

When is the time to buy? When everyone want to sell. I don’t think we have reach that point in the real estate market in Canada.

You could look at historical averages or means for asset pricing to help you make your call. The Earnings ratio for the S&P/TSX is about 9x now. Average (I hear) is about 15 x. So things are undervalued today in general. Housing: Look at price/salary or rent vs mortage etc.

#11 Panic Profit on 10.31.08 at 1:54 pm

pbrasseur #6

Thanks for your feedback.

* I wouldn’t be buying US stocks right now (I’m short US and CDN market and have been for a year) for 2 reasons:

1. We are NOT even close to the bottom.

I know everyone around you including your advisor say “Stocks are cheap” – they are sheep – and when the herd of sheep bleat you best do the opposite.

BTW – these temporary, head fake market recoveries cleaned out the remaining wealth in 1929. Take a good look at a chart.

2. The US dollar is going to fall hard and suddenly. Don’t ask me when. (I’ve sold the last of my US equities while I get a great exchange premium)

So let’s say US stocks manage to beat the odds and go up – you have the very real US dollar collapse to factor in.

Watch this quick US Dollar Collapse Video
http://www.panicprofit.com/when-will-the-us-dollar-collapse/recession/

* Also, I can’t agree with you that buying when all the other sheep are buying is a ‘Buy Signal.’ That’s how our real estate turned into a bubble.

BUY SIGNALS
* Realtor/speculator/developer suicides become frequent news
* Newspaper & magazine headlines and commentaries “Real Estate/Stocks Are Dead”
* We see ‘soup lines’ grow and multiply

Any more ideas, guys?

#12 dd on 10.31.08 at 2:00 pm

#2 Panic Profit,

Have a plan. Do a lot of research. You will have time to cash in on this misery. Read read read. I like to start at the macro level … Get to know the big stories about why things are happening in the economy. From there you can start to look at areas that interest you or you believe hold value in the short or long term. What is you intestment style? That is a great question to start with.

#13 Panic! on 10.31.08 at 2:16 pm

Canadian real-estate never inflated remotely as much as the US market did, immediately making these dire fixated-on-the-US predictions a little suspect. Our housing will fall, but to think that we’re just trailing the US is nonsense.

#14 nonplused on 10.31.08 at 3:38 pm

Panic!,

Calgary prices followed Califoria almost 1 for 1, just 18 months late to the party. We’ve had over 100% appreciation in 4 years! It was just as crazy.

Sometimes I think the strong Canadian beer prevents Canadians from observing in themselves what they can clearly see in their American counter parts.

#15 smwhite on 10.31.08 at 3:41 pm

#13 Panic!

You and your likes are oh so very wrong, remember we propped up our market in 2006 – 2007 with the 0%/40 year mortgage bomb.

To add to that Canada had its largest surge in resales EVER in 2007 because of this. I agree that we were safe up to 2006, but Jim Flaherty bent many Canadians, that had been conservative in RE over, allowing people with no equity to push the market to unsustainable levels.

We might have gotten away with a flattening in 2007 – 2008 instead this time next year we’ll have at a minimum a 10% YOY decline nationally, if we’re lucky.

If you think there are a lot of houses on the market today, wait until next spring as people follow the old RE story that the spring is the best time to sell. There isn’t a good time to sell anymore because there aren’t anymore buyers, and those that are considering, are losing ability to obtain credit.

Add to the fact declining stocks/mutual funds, boomers are going to have to work a few years more, keeping the younger folks out of gainful employment and stuck in shitty retail and service sector jobs, causing an even further reduction in potential buyers at these levels.

That chart is a chart that could be applied to almost every country at varying degrees around the world. Its a Global recession, not a Global recession minus USA’s biggest trading partner, Canada.

We’re on the same planet as everyone else, we aren’t special or immune, get over it, we’re all human, and greed is a part of our inner workers.

#16 charliegosurf on 10.31.08 at 3:41 pm

thx Lord garth for the graph, you blog faster than your shadow.

but really their are always the same, always full of mountain and valleys. What we need is a world with graph that are flat like a sea, wont get much swell to have fun with but at last, people could relax.

You guys know that your life is such on the edge nowdays, imagine the fuel truck not coming to town tomorrow, or the day after, and your whole universe would come crashing down….

as simple as that, you gotta love those semi filled with refine candy…! keep on truckin for now, and remember about that edge, what’s down there migth scare you, but scary makes you feel alive, but, oh, rigth, you guys are just zombies in the matrix… happy trick or treating!

#17 gold is money on 10.31.08 at 3:50 pm

I’m going to start a website about negative and disapointing news about the world and see if i get this many hits LOL!! and maybe write a few books about it so i can make big money.

#18 john on 10.31.08 at 3:56 pm

Looks like the markets have been stabilized to me.

#19 Jimster on 10.31.08 at 4:00 pm

This wont end until world war is ‘declared’, lawfully.

http://www.breitbart.com/article.php?id=081031180559.hq1yll01&show_article=1

#20 kitchener1 on 10.31.08 at 5:59 pm

The guys calling a bottom are way to early, we are only 6 months into the real estate bust. Look at the charts and when prices from 96-06 are averaged with inflation you are looking at a average real estate price of SFH of 285-330K for the GTA. When the average SFH is in the mid 350’s, that should be close.

The bottom won;t be in for at least a year, the economy is tanking and taking jobs with it, these job losses will take time to work through the economy.

That with the banks tightening credit available for mortgages will really hurt the market. Look at it this way, I would say that at least 30% of the people in the RE market(in the GTA) should not be in it to begin with and would not have qualified without the easy loans. Those loans are now history and so is a a large portion of the pool of would be homeowners.

#21 Rick on 10.31.08 at 6:23 pm

#20 kitchener1 on 10.31.08 at 5:59 pm ……. I would say that at least 30% of the people in the RE market(in the GTA) should not be in it to begin with and would not have qualified without the easy loans…..
——————————
What is it about the working middle class owning thier own homes that you find disagreeable? Bums and the unemployed NEVER qualified. I’m suggesting ‘they’ SHOULD be ‘in it’ but prices should not have escalated as they did to the point where home ownership becomes elitist. (or for those with well off parents.)

#22 Rob on 10.31.08 at 6:29 pm

assuming the deflation/inflation [or even biflationary] scenario, what kind of inflation levels – relative to the current level of printing – can we expect coming our way at this point? 10%? more?

anyone econ. types care to weigh in?

#23 squidly77 on 10.31.08 at 7:36 pm

in the mean time this monster is sharpening his hatchet

you need to look at this for a minute or so to see clearly what its saying..and its saying a lot
http://2.bp.blogspot.com/_pMscxxELHEg/SQpCsNiVWuI/AAAAAAAADrc/UFK8UWbFW_w/s1600-h/SP500Crashes.jpg

#24 squidly77 on 10.31.08 at 7:37 pm

you need to look at this a while to understand what its saying
http://2.bp.blogspot.com/_pMscxxELHEg/SQpCsNiVWuI/AAAAAAAADrc/UFK8UWbFW_w/s1600-h/SP500Crashes.jpg

#25 Spiro Agnew's neck crimp on 10.31.08 at 8:30 pm

Templeton said buy RE @ 90% drop from high in the worst hit U.S. regions. That seemed too out of whack a year ago but now…

#26 anonymous on 10.31.08 at 9:08 pm

Panic Profit,

The ultimate buy signal is running to the bathroom to puke your brains out, start crying uncontrollably, and general mental breakdown 10 seconds after signing the paper.

It’s helpful if family want to commit you to a mental hospital because you want to buy a house.

That’s the blood in the streets, bottom.

While some people can actually spot a bottom, few have the guts to actually pull the trigger and buy.

The stock market is the same.

I sold a bit of stock yesterday and today. On the next major drop, I’m all in. And the worst stuff… US banks, energy (ex. tarsands), consumer disc. (Macy’s, JCP, etc.), and general technology.

The Canadian dollar keeps getting ripped, the TSX is dropping, Canadian housing is crashing, etc.

#27 Charles on 10.31.08 at 9:27 pm

It looks like the hangover from the debt fueled party we have all experienced over the last few decades is just getting started. With stories like this in the media, I think it is far too early to even consider purchasing equities or real estate.

The following is from an article posted today on the Reuters web site. The article is titled “Citigroup Loses $1.4 Bln On Securitizations”

“NEW YORK, Oct 31 (Reuters) – Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) lost $1.4 billion from packaging credit card loans into bonds in the third quarter, a regulatory filing showed on Friday.

The loss reflects in part the worsening performance of credit card loans as the U.S. economy deteriorates. In the third quarter of 2007, Citigroup earned $169 million from packing credit card loans into bonds.

Citigroup said earlier this month that global credit card revenue had declined 40 percent, partly due to lower securitization results, but it did not disclose at the time the precise figure.”

Credit card lenders are broadly expected to suffer higher credit losses as rising unemployment makes it increasingly difficult for some borrowers to pay their bills.

The following is the link to the article:

Citigroup Loses $1.4 Bln On Securitizations

#28 kitchener1 on 10.31.08 at 10:01 pm

What is it about the working middle class owning thier own homes that you find disagreeable? Bums and the unemployed NEVER qualified. I’m suggesting ‘they’ SHOULD be ‘in it’ but prices should not have escalated as they did to the point where home ownership becomes elitist. (or for those with well off parents.)

Rick, I am one of those middle class (former homeowner) that you speak of. In my opinon, to own a house one should have at least 20% downpayment and be able to carry a 25 year ammort. Without that they have no business buying a house( no more then 40%max net monthly salary should go to the mortgage). That is how it has been the last 30 years with the exception on the last five.

As for bums and unemployed not getting mortgages, EVERYONE qualified in the last 3-5 years, their was no income verification and a slew of mortgages available from lenders to cater to this crowd( ie. self employed mortgage, new immigrant mortgates etc.) There was no income verification. How do you think that all of these new home flippers got into the RE game?

To many people I know and work with got into the market with 5-10-15K down, thats just crazy if you have 5-15K you go buy a car not a house.

The 20% down 25 year mortgage is their to protect the buyer. What is going to happen to those folks who purchased with 0 down-40 year mortgage in 12-24 months when the price of real estate in the GTA drops of by 25-40% and they have to sell due to job loss or economic circumstance?
There only option will be personal bankruptcy.

The irony is that if these folks buying houses is what pushed the price up to begin with, now the same will happen when they all sell

#29 David_#3 on 10.31.08 at 10:51 pm

#20 kitchener1 on 10.31.08 at 5:59 pm …….
What is it about the working middle class owning thier own homes that you find disagreeable? Bums and the unemployed NEVER qualified. I’m suggesting ‘they’ SHOULD be ‘in it’ but prices should not have escalated as they did to the point where home ownership becomes elitist. (or for those with well off parents.)
—————————–
Nobody is against people doing what they want with their money and their life, no matter how wealthy they are…

What pisses me off is that the government is co-signing on mortgages (via the CMHC) for stupid people and then we’ll all have to bail them out!!

I’ve always told myself that I would save my money to be able to buy a house without CMHC premium, well… guess what? I just so happens that banks would prefer that I give a cashdown of 5%+CMHC instead of a 25% cashdown. Why? Well, using CMHC, the loan is 100% garanteed by the government while with a 25% cashdown they have to support 75% of the risk meaning that they can’t give me their best rate!

At some point even banks will stop trusting CMHC loans (default rate will go sky high and CMHC insolvency will become evident), prices will drop since less people will qualify and then banks will be begging for a 25% cashdown. By then I’ll most likely be able to buy it outright…

#30 dotava on 10.31.08 at 10:54 pm

Garth,

This is unbelievable – I was receiving e-mails from Realtor and they where seating on the my provider server and I was about to show to my wife (since they are new 1-2 days old they can’t be aged and BTW my other messages with same timeframe are there) suddenly ONLY those messages disappear – is there any place in this rotten system that such things can be reported and that someone will STOP THE GREEDY BUSTARDS TO ROB ORDINARY PEOPLE.
Most likely story is about house in Ottawa 3bdrm (double garage) first price was $279,900 was “hanging” on market for about a year then price went down last week to $249,900 and yesterday to $239,900.
Please comment.

This defies comment. — Garth

#31 Gord In Vancouver on 10.31.08 at 11:09 pm

#13 (Panic!)

Canadian real-estate never inflated remotely as much as the US market did, immediately making these dire fixated-on-the-US predictions a little suspect. Our housing will fall, but to think that we’re just trailing the US is nonsense.

You’ve obviously never visited Vancouver, BC.

#32 dd on 10.31.08 at 11:17 pm

#22 Rob,

Great question Rob. How does one even begin to answer that?

#33 dd on 10.31.08 at 11:18 pm

#18 john,

So you can make that call because markets have been ok for a week?

#34 Kilt on 10.31.08 at 11:27 pm

I find the interesting thing is that prices are up over 35% for most places over a 8 year period. That’s a 4% compounded annual return. Better than a T-bill.
My point being, only those who have bought in the last couple of years have truly been hurt. Friends of ours put their 1 bedroom condo up last week for $299K. They had 35 couples visit over 2 days of open house. Today they sold for $293. Not exactly a buyers market yet.
Kilt

#35 charles on 10.31.08 at 11:40 pm

Garth, today’s
The Automatic Earth
has a great
Article
in it written by David M. Walker. I think Mr. Walker (while he is writing about the U.S.A), brings up a subject which should be being discussed in Canada.

The question I have Garth, is why aren’t the unfunded liabilities we in Canada are facing in Medicare and the Canada Pension Plan put in the budgets of our Governments. It seems to me these unfunded liabilities are being treated as off balance sheet entities. A lot of promises have been made to Canadians with regards to Medicare and the Canada Pension Plan. I think we should be putting some money in the bank to fund these promises.

The following is taken from The Conversation on Health web site (B.C. Government)

42% – the percentage of total government spending that goes to health care this year

$3,157 – amount spent by the province annually per person on health care in B.C.

$2,364 – average spent by the province annually per person aged 45 – 64

$5,224 – average spent by the province annually per person aged 65 – 74

$9,841 – average spent by the province annually per person aged 75 – 84

$20,878 – average spent by the province annually per person aged 85 or older

14% – percentage of B.C. population over the age of 65 today

24% – percentage of B.C. population expected to be over age 65 by year 2030

The following is the link to this site:

B.C. Conversation On Health

As far as the Canada Pension Plan goes, the 23rd Actuarial Report on the Canada Pension Plan gives the state of the Canada Pension Plan on Dec. 31, 2006. This report was tabled before Parliament on Oct. 29, 2007.
On page 66 of this report, it states the unfunded liability of the Canada Pension Plan on Dec. 31, 2006 was 619.9 Billion $.

The following is the link to this report”

23rd Acturial Report of the Canada Pension Plan

Garth, I think you should become the David M. Walker of Canada, and start screaming to the high heavens about the unfunded liabilities of the promises Governments have made to Canadians.

#36 dg on 10.31.08 at 11:42 pm

Nice graph.
Now this informative. Anyone who has taken Statistics 101 can see that Garth is at it again.
He has taken the best and the worst and smacked us with the worst case scenario. If you look at it objectively we can see that most of the citys are gravitating towards the 2005 – 2006 price. If Garth was a good guy he would also let us know how these indices are calculated. Some of these markets contain high end homes that could skew the data as most of us live in average homes and have average lives. So, what can we conclude from this graph. Well if you bought a home between 2005 and 2008 in the USA you paid too much. As Canada operates in unison with America you can probably bet that you paid too much for your house if you bought it in the last 2 to 3 years. For the bottom feeders be careful. In the last few recessions it took a few years before we hit the bottom and even if you bought at the bottom you had to wait a longtime before we started to see an upswing.
Just trying keep Garth honest.
I know he has a lot of fans. It’s so pleasurable to wallow in other people’s misery.
My father lost everything in 1984 based on banker’s advice and being a little too optimistic. His losses started in 1982. He kept fighting until 1984. People don’t just throw in the towel. And when they do it hurts. For those that haven’t experienced it you may want to step back from the whole capitalist economic system and ask what you are doing and why?
Capitalism needs growth. Growth comes from debt.
That’s why they are slashing rates now. They need to get the growth(debt) machine chugging again.
Enjoy the ride.
Cheers.

Hey, why do you think it’s called the S&P/Case-Shiller graph? Sheesh. — Garth

#37 George Walford on 10.31.08 at 11:43 pm

The time to buy is subjective. That is, it depends on what you are looking for, and what your purchase criteria are.

If I found a property in this market that had a positive ROI, and otherwise met my criteria, I would buy it. However, I have not seen such a property in over 2 years. Thus, no sale as the math does not add up.

Stocks however, are another matter entirely. I have been buying up stocks left right and center because of the fire-sale mentality.

I did not get the “best” price on most of my purchases, because I can’t tell from day to day what “Mr. Market” will do. However, I saw stocks that were at incredibly low valuations, and I started buying. Perfect price? Again, no. Still, talk to me in 10 years time about the price I paid for the stocks I picked up, and I will be happy.

So, for real estate, you want to buy when the numbers work, when you can get insane deals and a good ROI, just like what was available just recently in stocks.

#38 No_offence on 11.01.08 at 12:17 am

No Offence to anyone,

Garth .. I’ve been reading your books and blog for a long time now … you are awesome.

Lots of people on this blog seem to say, I’ve been saving money because I can’t buy squat.

If you are making 60K .. well dude.. get your shit together and starting making 150 K so you can buy the nice home in the right place and home prices going up or down … who cares …. you buy a place live in with your family fgr 20 years and be free from the banks.

If you buy a home made from presswood 100 KM from work … well you are seriously low in IQ and deserve 30% devaluation in your home price and good luck to you.

With this in mind 20K from work ain’t so bad in a city like Ottawa that takes 20 minutes to get anywhere and the average townhome is < 250, average home is less that 400 and the awesome home being 600K.

People in Calgary, Vancouver, Toronto … sorry for your misforntunes…

#39 David on 11.01.08 at 2:27 am

The Bank of Canada sets the short term interest rates. The Finance Dept. under Harper allowed the 0/40 mortgages to grow like bacteria in a petri dish with little regulatory oversight. Short term interest rates were at historical lows and even the most unqualified home buyers became eligible for mortgages far beyond their capacity to ever pay off the debt. Canadians were making wagers on increasing home prices and low interest rates on long term debt instruments with no money on the table. This type of speculation only works as long as the bubble keeps inflating. The bureaucrats in Ottawa poured rocket fuel on a minor blaze and will now have to live with the consequences as the housing bubble unwinds. The marginal buyers actually increased the systematic risk to the financial system in Canada with all these voodoo mortgages.
It is pretty much official news now that the housing bubble is starting to unwind in Canada and will have serious consequences for the real economy.

#40 Winnipeg is No Different on 11.01.08 at 3:03 am

The Winnipeg Free Press continues to take a critical look at the city’s housing market. In no way should they be accused of printing CMHC news releases supplemented with courtesy calls to the Real Estate Board, one of their largest advertisors. Their strike is over. The professionals are back on the job. It’s difficult to type with pom-poms, so I credit the author for actually completing the story before deadline.

Here’s the article:

It’s the housing market that won’t die.

Although house sales and starts are expected to tank in most regions of Canada next year, Manitoba’s venerable housing market is projected to emerge relatively unscathed from the economic slowdown.

In its fourth-quarter housing market forecast, issued Thursday, Canada Mortgage and Housing Corp. predicts Manitoba will record the smallest decline in new-home construction next year. And it will be one of only two provinces to post an increase in sales of existing homes.

It predicts housing starts will decline by 4.6 per cent to 5,200 units from a projected 5,450 units this year. And it predicts sales of existing homes will climb by 1.4 per cent to 14,100 units from a projected 13,900 in 2008.

Jeff Powell, CMHC’s senior market analyst for Manitoba, said homebuilders here didn’t overbuild the way they did in some other parts of the country, so they won’t have a big inventory of unsold homes to carry over into 2009.

Employment levels also remain high and the provincial population continues to grow briskly, Powell said, which fuels demand.

“So there is ample reason to believe Manitoba’s housing sector will be fairly well off,” he said. “We’re just positioned to weather it (the housing slowdown) better.”

The president of the Manitoba Home Builders Association said local builders are also anticipating another busy year in 2009.

“Many of the builders I’ve talked to have a backlog of orders from this year that will carry them through to June of next year,” Michael Moore said. “And we expect we’ll have enough new orders (in 2009) to still make it a very good year.”

He said that’s one of the benefits of living in a province with such a diversified economy.

“The consistent message is that we don’t boom, but we don’t bust, either.”

The president of the Manitoba Real Estate Association said MREA officials also remain upbeat about the market prospects for 2009.

Dave Mackenzie of Sigmar Mackenzie Real Estate Services Ltd. said there’s still a bit of a pent-up demand for existing homes. And some properties continue to sell for more than the listed price.

“We have to recognize there will be some slowdown…,” Mackenzie said. “But I think there is still room to grow, although at a slower pace.”

CMHC predicts selling prices for existing homes will climb in 2009, although at a much slower pace than in recent years — 3.4 per cent compared to this year’s projected 13.2 per cent.

It said the average selling price in Manitoba is expected to hit $191,500 this year, and $198,000 in 2009.

And even then, it will still be the third-biggest price increase in the country after Newfoundland and Labrador’s projected 6.2 per cent and New Brunswick’s projected 4.8 per cent, the agency said.

Nationally, CMHC predicts housing starts will moderate to 212,200 units this year from 228,343 in 2007. And they’ll dip to 177,975 units in 2009.

It will be a similar story with sales of existing homes, it said. They’re expected to fall to 452,225 units this year, and to 433,375 units in 2009.

[email protected]

While Winnipeg housing prices may look inexpensive to those in other provinces, I estimate that they are at least 25% overpriced, judging by historical inflation-adjusted prices: (from UBC: http://cuer.sauder.ubc.ca/cma/data/ResidentialRealEstate/HousingPrices/housing-pri-winnipeg.pdf)

#41 Inventory on 11.01.08 at 4:10 am

Greater Vancouver Real Estate sales

OCT 2008 REBGV SFH+TH+APT
Gross Sales 774,344,287 (-57%)
Units Listed 5,070 (+1%)
Units Sold 1,391 (-55%)
Sale Success Ratio 24%
Sales to Listings 27%
Avg Price/Unit 556,681 (-5%)
Active Listings 20,407 (+76%)

OCT 2007 REBGV SFH+TH+APT
Gross Sales 1,826,654,804
Units Listed 4985
Units Sold 3093
Sale Success Ratio 55%
Sales to Listings 62%
Avg Price/Unit 590,577
Active Listings 11,551

#42 Bailing in B.C. on 11.01.08 at 6:26 am

#21 Rick

Home ownership has always been historically elitist. The idea that everyone should own a home (whether they can afford it or not) is a relatively new idea, which has not worked well in the recent past, i.e. the last 6 months.

In times gone by people used to rent their homes no stigma attached. It’s only recently that people have felt that they had to own because HGTV told then they needed to

In times gone by people used to rent their homes no stigma attached. It’s only recently that people have felt that they had to own because HGTV told then they needed to

#43 brazer on 11.01.08 at 8:26 am

TSX posts 93-point loss, drops 17% in scary October
http://www.thestar.com/Business/article/528572

The Toronto stock market ended one of the worst months in its history with a fizzle yesterday, after swinging wildly most of the week amid upheaval in the world’s stock, currency and commodity markets.

The main Toronto index fell 17 per cent in October and is now down more than 4,000 points since the beginning of 2008, or about 30 per cent.

#44 brazer on 11.01.08 at 8:37 am

Safe as houses?
http://www.reportonbusiness.com/servlet/story/RTGAM.20081031.wrcover01/BNStory/Business/home

One wonders: What might have happened if the CMHC had not retreated from its more relaxed insurance guidelines? By Mr. Hsu’s estimate, 12.1 per cent of Canadian mortgage holders have an LTV of 80 per cent or more. A mortgage holder with a thin equity base in, say Vancouver, is most at risk of falling into negative equity. “I’m expecting the peak to trough – the high-to-low decline – to be about 20 per cent,” Central 1’s Mr. Pastrick says of house prices in B.C. “If some borrowers were highly leveraged … by that I mean perhaps zero down or 5 per cent down, that kind of thing, with prices dropping let’s say 20 per cent, obviously there’s a negative equity position.”

CMHC will not break out the data on the number of interest-only mortgages it has insured, nor a breakout of how many mortgages were insured under the 30-, 35- and 40-year amortization periods. “CMHC’s business activities are confidential,” an agency spokesperson said by e-mail.

#45 Downsized and Delighted on 11.01.08 at 9:40 am

Years ago, you bought a house, you maintained it, maybe decorated a bit, and sold it when your needs changed. The average house price on the mls reflected an actual increase in real estate values (as opposed to reflecting capital improvements).

Today, so many houses have been totally gutted and renovated adding hundreds of thousands of dollars to the value and then put back on the market for resale. Do the mls statistics attempt to factor this in when they calculate their average house prices? No. All of the older homes in the neighborhood benefit from the “perceived” increase in value, but when the market cools the renovated house will decrease in value (mostly from depreciation on capital improvements like trendy kitchens) whereas that older home may level off, but you won’t see the big drop in value that many of you are anticipating.

Look for the solid, liveable home in the best neighborhood you can afford and you can buy in any market – but in a hot market you’ll have 6 other offers bidding against you. So, I wouldn’t be waiting for the price on that kind of home to go down very much – you will miss out if you wait too long.

#46 OntarioHouse on 11.01.08 at 10:44 am

No Offence #36
Even if someone was a millionaire there’s still the principal of not wanting to pay for something thats overpriced. It doesnt matter how much money you make. Its all about principal and not wanting to be ripped off!
I dont want my money in somebody’s else’s pocket, I want it in mine. With your thinking everyone who’s rich would just blow their money away. They wouldnt be rich for too long!
Im not going to fill up the pocket of some old guy who bought his house for 300,000 and now wants 600,000. Shame on him for wanting to rip off young people. Shame on his greed.

#47 wealthy renter on 11.01.08 at 11:16 am

Years ago, you bought a house, you maintained it, maybe decorated a bit, and sold it when your needs changed.

Hi Downsized,

I can’t help nod in agreement with everything you said. Unless a place is a firetrap or damaged by the elements, I truly cannot understand the gut everything at all costs mentality of this last housing boom.

My retired parents were playing with the idea of refinishing their kitchen cabinets. My dad is a tradesman and can build anything from the top of his head [I hate him :)] The cabinets were looking tired.

He searched the net to learn how to clean them properly. He refinished the battered insides (easy to do,) changed the hardware, and changed the countertops (not granite.) The results are magnificent for very little money. It is a place whre a family with kids could live in comfort and style.

The housing-related marketing machine has turned some consumers into idiots. The costs of some needless renovations could send a couple of kids away to university to get their degrees.

I guess we are all wealthy now.

#48 Downsized and Delighted on 11.01.08 at 12:11 pm

Wealthy Renter: Don’t even get me started on the housing related marketing machine (HGTV). The absolute worst result of all this is the number of people who have their self-worth wrapped up in their “things”.
When I hear someone say they like to “entertain” I immediately translate that into “they like to have as many acquaintances as possible over to see all of their overpriced crap, which they themselves will tire of in 6 months anyway”. Even if you can afford to buy a bunch of stuff you don’t need, it will leave you feeling empty and the lesser for it!

There is a mantra for relaxation that goes “Everything I need I have; Everything I have I need.

My biggest reason for downsizing was to get my life in order with that last statement “everything I have I need”. I learned alot from my visits to Vancouver where I saw for the first time people making the most of very limited space. To tell you the truth, it made me feel like an a….hole to be taking up as much space on this planet as I was. So I got rid of all my “crap” and went looking for something that truly met my needs.

So, yes, I am wealthy now too.

#49 $fromA$ia on 11.01.08 at 12:12 pm

Garth, have you heard those advertisement on the radio about Rich Dad’s Concept about making money in any market or economy?

I think it’s a farce to come up with a line like the one in the add… goes something like this…

” Find out why savers are losers and what you can do to be rich!!!???”

Crazy? My concept now is to save while RE drops. How could I lose with this strategy in these times?

I’ve read Rich Dad Poor Dad’s books, In his books he mentions how to think differently about making money and how the rich think that way.

I’ve read in other books where it mentions when the shoe shiner tells you to invest in RE then its time for you to sell and run!!!

Rich Dads views are right but I totally disagree in trying to buy in RE now to rent it out to make money.

Whats your opinion GARTH?

No-money-down real estate shill. — Garth

#50 Calgary rip off on 11.01.08 at 1:15 pm

Garth,

perhaps those statistics will be reflected in the Canadian housing market.

It is true that market values are not in line with incomes, especially in Calgary.

It is unclear though whether the market values will decline or go up, owners not forced to sell or with multiple properties may simply opt out of the market and choose to rent their second home instead of selling. This already is occurring in Calgary.

As far as things being dismal here, the only situation that is bad is for persons that have purchased homes far above their incomes in which if the interest rates were to change upward they would be in dire straits, and/or when they have(if) to refinance their mortgage and the house price is far below what they bought it for. Most homeowners in Calgary are NOT in the above situation, so the emphasis on continually wanting to paint a rosy picture in the Calgary Herald is especially baffling.

If you read publications in Calgary or talk to many persons living here its almost as if living in Calgary is an exclusive club designed to keep out the newcomers(snobs anyone?). That is baffling and incongruent with wanting the economy to grow further.

What awaits the housing industry other than reduced housing starts and vacant condos remains to be seen.

I will be purchasing a house once I have enough down payment and the square footage is reasonable compared to the actual cost. As of right now despite this circus hoopla about 60K$reduction in Calgary, you still are in a situation where you can rent more for less money than acquiring a ridiculous mortgage.

Perhaps if the three minority parties were to form a coalition that would throw out the true minority conservative government here in Alberta and true positive change would happen where the focus is not just on oil. By the way, gas prices here in Alberta are the same as everywhere else, so it is truly unclear why the majority of the individuals here support the oil industry like it is their new God(or idol). Perhaps in the future Harper and Bush should form their new coalition entitled: “Bird has flown”.

#51 Selling out in BC on 11.01.08 at 1:44 pm

“CMHC Tries to Give Canadians the Impression Real Estate will Moderate–not implode!” This comes from an update on the future of home sales in 2009 out of Kinston, Ontario–After having read your book, I laughed out loud at how hard these groups are trying to down play the severity of the economic hardship on the horizon. A quote from the chief economist of CMHC

“High employment levels, rising incomes and low mortgage rates have continued to provide a solid foundation for healthy housing markets this year,” said Bob Dugan, Chief Economist for CMHC. “Housing starts will moderate to 212,200 units in 2008 and 177,975 units in 2009.”

http://kingstonrealestatenews.com/2008/10/national-news-housing-starts-to-moderate-in-2009/

We feel like we have dodged a bullet as we were able to sell our condo a month ago in Vancouver for $3,000 under our asking price. We priced it appropriately and staged the home well. We are know going to move to Kingston, ON and wait it out in a rental property until things reach rock bottom there. Thank you for your candid review of where things are headed. It has been an extremely beneficial eye opener.

#52 Jen on 11.01.08 at 3:39 pm

Calgary rip off

That is so true. Anyone who has been “outside” of Alberta knows this province is a rip off. Gas, groceries,entertainment, cars, services and Timmies all more expensive! They have no clue. For a province without PST…??

#53 van-zee on 11.01.08 at 4:08 pm

Tyger Tyger, burning bright…

It’s interesting too see the look of symmetry in the rise and fall in the graphs.

#54 Chip Oatley on 11.01.08 at 5:53 pm

No Different in Winnipeg:

Yes, they sniff a lot of glue in Winnipeg. But — keep in mind that the single largest source of spending, almost recession proof (at least for now) is government expenditure 80% funded from Alberta and Ontario (equalization and other transfer payments). Manitoba is not affected by economic downturns the way all other welfare cases are immune….

#55 Charles on 11.01.08 at 6:13 pm

The following is from a (commentary) article posted Oct.30, 2008 on the Bloomberg News web site. The article is titled “Wachovia Shows Why No Bank’s Books Are Trusted”, and was written by Jonathan Weil.

“Oct. 30 (Bloomberg) — Often when people have near-death experiences, they resolve to change their ways. That’s not the case with the folks running Wachovia Corp., which experienced the financial equivalent.

In their starry-eyed world, Wachovia’s net assets still were worth $50 billion as of Sept. 30, according to the balance sheet the Charlotte, North Carolina-based bank released last week. Never mind that, on Oct. 2, Wachovia’s board approved Wells Fargo & Co.’s offer to buy the company for $14.8 billion in stock, saving it from the clutches of Citigroup Inc. and the undertakers at the Federal Deposit Insurance Corp.

Taken literally, the timeline suggests two scenarios. Either Wells Fargo is getting about $35 billion of stuff for free. Or the value of Wachovia’s equity plunged $35 billion during the first two days of October. Neither of those happened, of course.

The reality is that Wachovia’s management, including Chief Executive Officer Robert Steel, still won’t admit the company’s balance sheet is a farce and has been for a long time. More worrisome, though, is that nobody with any authority is calling them on it, even today. That includes Wachovia’s auditor, KPMG LLP, as well as the Securities and Exchange Commission and banking regulators such as the Federal Reserve and FDIC.

If those lapdogs won’t stop Wachovia from conjuring up bogus asset values, it’s only prudent to assume they’re letting lots of other companies bake their books in less obvious ways. The banks know this, which helps explain why they’re reluctant to lend to each other, and why the credit markets remain so tight.

Same Story

The story’s the same at National City Corp., which is audited by Ernst & Young LLP. On Oct. 21, the day it released third-quarter results, the Cleveland-based bank said its shareholder equity on Sept. 30 was $17.2 billion. Then on Oct. 24, it said it would be sold to PNC Financial Services Group Inc. for about $5.2 billion in stock.

The way the accounting rules work, some assets must be carried on the balance sheet each quarter at fair value, a process known as marking to market. Other assets can be shown at historical cost, unless they’re impaired, in which case they must be written down to reflect current reality. Most of the assets at Wachovia and National City are carried at cost.

The two banks would like you to believe the rules are to blame. There’s almost always a difference between book value and market value, they say. The buyers just have a different view of the asset values than what the balance sheets show. That the sellers accepted the buyers’ low offers is incidental.

Get a Better Deal

“Our balance sheet was not and does not purport to be a market-value balance sheet,” National City’s interim chief financial officer, Tom Richlovsky, told me. He pointed out that the PNC deal hasn’t closed yet. Until that happens, he said National City “has no basis or intent to change the value of its assets.”

A Wachovia spokeswoman, Christy Phillips-Brown, gave a similar explanation. “Wachovia is required to report shareholder equity based on accounting principles that do not include the use of fair-value accounting for its entire balance sheet,” she told me. “Accordingly, Wachovia’s allowance for loan losses is recorded only for losses incurred at the balance- sheet date. This would not reflect how a third party might value Wachovia on a fair-value basis.”

Nor would it seem to reflect that Wachovia agreed to Wells Fargo’s price. If Wachovia and National City executives believe their balance sheets, they should seek better deals.

Goodbye Goodwill

The worst affront is Wachovia’s claim that, as of Sept. 30, it still held $18.4 billion worth of the intangible asset known as goodwill, which is a few billion more than what Wells Fargo agreed to pay for the whole company.

Goodwill is the bookkeeping entry one company records on its balance sheet when it pays a premium price to buy another. We know Wachovia’s goodwill is worthless because the company is selling itself for $35 billion less than its supposed book value. National City’s $4.3 billion of goodwill — which is almost as much as the company’s sale price — probably is worthless, too.

By telling us their goodwill is worth billions, Wachovia and National City just confirm that the rest of their numbers aren’t credible either.

If these banks can’t be compelled to get the easy confessions right, there’s no telling what madness lies buried in the rest of the industry’s books. And just when it seemed the banks have boundless leeway already in how they cook their numbers, they want more.

Last week a group of banking and insurance lobbyists, including the Financial Services Roundtable and the Mortgage Bankers Association, sent a letter to SEC Chairman Christopher Cox requesting “an elaboration on the use of judgment in fair- value accounting.”

“We do not believe that management, preparers, auditors and investors understand what is expected of them, or whether and how the needed judgments can be exercised,” they said.

Loosely translated, here’s what they meant: The bosses want a free pass from the government to use “judgment,” so they can say without fear of liability that their companies’ assets are worth much more than they are in real life.

The troubling part is they may have such a pass already.”

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

The following is the link to the article:

Wachovia Shows Why No Bank’s Books Are Trusted

#56 CTA on 11.01.08 at 9:45 pm

Now..I can buy in California…..keep the prices falling…northern California here I come.

#57 JO on 11.01.08 at 9:58 pm

Hi Garth, Case Shiller index is the most accurate gauge in the US. I think we will see similar declines in many areas in Canada. While no one wants to see any fellow citizen get hurt after buying, the RE game was obviously out of control. The people getting hurt the most were in fact the prudent ones saving and waiting for a better market. I had a couple of friends who jumped in in 2001 and made a bundle after they sold in 2006, so those were the lucky ones. Good for them. For anyone who bought 2005 onward, it will likely be ugly in the next 3-4 years. Imagine the picture by 2011 if things pan out the way I am guessing they will: 1) The average house down 40-50 % and the TSX down 60-80 %, 2) Unemployment over 10 % or more, 3) Canadian dollar down to low 60’s or worse with oil in 40’s and gold in low 600s, 4) Many Canadians having pensions cut with large numbers of employers going bankrupt and the government forced to “bailout” many pensions, 5) Serious pressure on health care and other social networks as cuttbacks and increased demand put the system on life support. No, I am not preaching Armaggedon, nor am i an alarmist, but with the significance of the trends occuring under the surface (credit destruction on record levels of debt and very negative mood of the public), any of these items are likely. Of course, my guess is as good as anyone else’s but housing is illiquid and the asset most affected by the debt contraction now happening. I would guess 2007 prices will not be seen until the 2020’s if past bubble behaviour is repeated.
JO

#58 Ultraman on 11.01.08 at 10:01 pm

Downsized and Delighted, good for you.

There’s a lot of wisdom in you comments and certainly not a bad way to be wealthy. Like someone said you’re rich for the things you don’t need.

#59 Panic Profit on 11.03.08 at 1:17 pm

Kitsilano Vancouver Character Home (premium neighbourhood)…

…Listed 6 months ago for $1.1 just sold for $875 000! A 20% drop!

Take the numbers you read in the newspaper and wipe your you know what with them – do your homework and get the real numbers.