Stockton, CA: Will Canada get a Ground Zero in 2009?
Exactly a year ago this week I started writing a book on why the Canadian real estate market would collapse in 2008. Five weeks later I was done, and the first copy sold in March. Sadly, it was prophetic. The housing market has followed the path I foresaw, which is a close parallel of the American one of about two years ago.
This means there’s more anguish to come. A lot more. The price decline in Canadian real estate in 2009 will at least match that of 2008, and sales volumes will continue to erode.
And while we’re in the crazy prediction business:
* The biggest house price drops will be in early summer. This will happen after tens of thousands of wanna-be sellers dump their houses on the market in late February and March, hoping to catch the Spring market. But, there won’t be one. When that sinks in, prices will crumble.
* A disturbing number of retail outlets will be closing in January. One of them (I’ll wager) was the ladies apparel store I bought Dorothy’s present in on Tuesday. After I wandered in a clerk told me the item in my hand was 50% off. “Actually,†she said, “everything in the store is 50% off the sale price marked on the tags.†So I bought three pairs of pants, four sweaters and three blouses. Next month, there will be a jarring red Available sign in the window.
* Most at risk are the Big Box operations. Linens ’n Things is already embroidery-side-up and you can certainly expect others in the home decor, furnishings and electronics sectors to follow.
* More than a few of the 60 car assembly plants across North American now closed will not be reopening. The auto bailout package will not work. None of the Big Three will be ‘viably restructured’ by the end of March, as they were asked. But then, who really expected that to happen?
* The biggest first story of 2009 will be unemployment, since so many job losses announced in the final months of 2008 will start to materialize. The biggest second story will be the impact of the financial crisis on government. In the US almost a third of all states have already started to cut back on social welfare payments – a hurtful thing punishing the poorest citizens after some of the wealthiest were bailed out. In Canada, the federal government will run a deficit of at least $20 billion, which could actually hit $30 billion the following year.
* Interest rates will remain at the lowest level in half a century all year. But it won’t help much.
* The media will be shocked to hear of negative equity and mortgage defaults in Canada. The potential exists for Canada to develop its own version of Stockton, California, the Ground Zero of foreclosures. One good candidate is Milton, Ontario.
* The new year will finish off the condo business for a long time, maybe a decade. A massive oversupply of new units will meet a crash in demand. Several landmark projects will never make it above the parking garage level, and tens of thousands of units that speculators never figured on carrying will hit the rental market, tipping the scales massively in favour of tenants.
* Stock markets will be choppy, volatile, dangerous and unpredictable, save for the underpinnings of a massive recovery rally. They will be in place by year’s end.
* Oil will be a major story, depending on how much below $30 it might touch. The Alberta Moment has passed, cowboys.
* It will be an important year to talk with your spouse about what’s really important; to be realistic and flexible; to work as hard as possible at taking back some control over your life; and to develop a sense of humour.
After all, whatever we have lost or are about to lose, the most precious and irreplaceable commodity is time.
