It’s different

“Maybe,” says Dave from Calgary, “some pictures would help people clue in.” You bet. As houses get more unaffordable and the masses grow greedier, perspective is sadly lacking. Too many people believe gravity has ended. They have faith that this time it’s different. That an asset can climb steadily, without end.

As strange as it may be, most people you’ll see today, at work, on the bus, in your bed, have bought in. They’re convinced interest rates will never rise, house values never seriously fall and that overpaying for an inflating asset is called ‘investing’.

They know history’s bunk. Prices don’t revert to a mean any more. There’s divine wisdom in crowds.

People, being people, are massively affected by what other people think, say and do. When a lot of people want something, like a house in Leaside or the west side of Vancouver, it has value. When most people shun something, like real estate in Florida, it has none.

Of course, there was a time when houses were just homes and everyone wanted Nortel. Or Bre-X. Yesterday they wanted LinkedIn. In 1637 they wanted tulip bulbs. In 1929 they wanted industrials. This year, they want single-family homes so badly that a half-decent digs in 416 or Van costs at least a million. Despite that, the average family earns $83,000, has record debt and a 40% chance of an empty bank account.

There’s no more reason to expect the status quo to stay the same in 2011 than there was in 1999. In the dot-com era, people invested in companies with no earnings because the share price was rising and everybody was doing it, many of them with borrowed money. The outcome was obvious. As it is now.

I’ve noticed lately that this blog, and its moldy author, have attracted a fair amount of dissing. I expect lots more in the denial phase to come. But expect this. Rates will rise. The Chinese will go home. Boomers will need cash. Debt will overwhelm. And house prices will fall.

All booms end. We know that much. How this ends for you is the question.

It’s different this time – 1637. A tulip bulb sells for a man’s annual wages, before plunging to almost zero.

It’s different this time – 1929. The stock market soars even as the economy sours, before losing 80% of its value.

It’s different this time – 1996. Bre-X lays claim to an improbable gold find and the stock vaults to $286, before going to zero.

It’s different this time – 2000. The NASDAQ leaps to 5,000 on the speculative tech boom, before losing 82% of its value.

It’s different this time – 2011. A Vancouver SFH tops $1 million for the first time in history, even amid a slagging economy, before…

177 comments ↓

#1 S.B. on 05.19.11 at 9:26 pm

First (again!) :)

#2 Tony on 05.19.11 at 9:36 pm

Primo

#3 b on 05.19.11 at 9:39 pm

hi, i’m new i have 250,000 cash saved she wants the house i need a plan, you out there garth… lol
please offer advice do you charge for help

#4 John Doe on 05.19.11 at 9:40 pm

S.B., you are ridiculous

#5 BraveSirRobin on 05.19.11 at 9:42 pm

I had a realtor today tell me our real-estate cycles have never followed the US cycles!

#6 Lisa on 05.19.11 at 9:43 pm

ThNk you thank you! Waiting for the day! Renting now and saving. Makes total sense to me. Toronto prices are WHACKED! Can’t wait to see all the slimy, smug RE agents eating their B.S.
Wish people would start selling houses Com Free…cut these cheap, good for nothing greedy middlemen OUT

#7 Tigger on 05.19.11 at 9:46 pm

Thanks for the graphs Garth. Could you elaborate confirm how rising prices on falling sales spells the end of a bull run?
-My understanding is the high-end stock always sell (regardless of market health). As the bull run ends (i.e. as the ‘consumer purchases’ ease) the high-end deals generally continue, which grossly skews the ‘average’ selling price.

That is my understanding, I will accept your soggy wit in exchange for more insight (punishment fits the crime…)

#8 squidly77 on 05.19.11 at 9:46 pm

It’s always different this time.
At least until you wake up one morning and realize it isn’t any different at all.

There has never been a commodity (Metals, Oil, Potatoes, Houses etc.) thats skyrocketed in price that hasn’t eventually returned to it’s long term mean price, and for a short time actually falls below it. Never.

There isn’t one person out there that can name one.

#9 Pete in Barrie on 05.19.11 at 9:52 pm

Nice graphs, Garth.

If there is one positive from this Internet age, it is that there is no excuse for ignorance.

#10 fiendish Thingy on 05.19.11 at 9:53 pm

…and neither one is wearing a helmet!

#11 2deep on 05.19.11 at 9:55 pm

How about getting everything balanced out with hyperinflation? Worthless dollars would pay off my mortgage in no time. Bring that mean line up in line with the mania.

How much do you figure hyperinflation in the US will effect us, I assume a mirror effect?

There will be no hyper inflation. — Garth

#12 fruitloops on 05.19.11 at 9:56 pm

A recent study conducted by Maurice Marchon in October 2010 shows that in the Montreal region (Quebec)the current price of houses relative to disposable income is now 11x while the historical average is about 7. The Canadian average is at 9.5 whereas in the U.S. this ratio rose to 8.5 at the top of the bubble to fall to around 6.0 currently.

We’re in deep troubles !

#13 Aussie Roy on 05.19.11 at 10:01 pm

“House values never seriously fall and that overpaying for an inflating asset is called ‘investing’.

They know history’s bunk. Prices don’t revert to a mean any more.”

One thing we can all learn from economic history is that at best most people dont learn from it, at worst think its irrelevent.

Great article again today, clearly shows how most people have no context of history past their own life experiences or very recent past.

I would suggest to everyone go back through history booms and busts have been with us since Adam was a boy.

IMHO a good historical economics background mixed with a strong understanding of human behaviour is all that is needed to understand what is currently going on as we live through this global credit bubble.

Aussie Update

When people become too greedy or too scared (buy now or be priced out forever) some will lie and cheat to get in.

Crackdown on Firsthome Grant.

http://theage.domain.com.au/crackdown-on-firsthome-grant-fraud-20110519-1eu7v.html

When all else fails there is still the old soft landing.

Property prices flat for a decade.

http://www.smh.com.au/business/property-prices-flat–for-a-decade-20110519-1eum8.html

The music is still playing, fewer are dancing but the party can’t and won’t end say the bulls.

Because its different here. – LOL

#14 Abitibidoug on 05.19.11 at 10:12 pm

Interesting graphs here. Now some food for thought, why don’t asset values work like a negative feedback loop? An example is an engine with a governor. If speed drops, such as from an increase in load, the governor pulls the throttle open more, so there is more power, and the speed increases to the desired value. If there is a load loss and speed increases, the governor closes the throttle, decreases the power, and again brings the speed back to the desired value. In an extreme over speed case, like driving a truck down a hill in low gear, the governor closes the throttle fully, so the engine uses compression and internal drag to absorb power and provide braking.

Now back to asset values. When something is cheap, like houses in 1994 or gold in 1999, why isn’t there a massive flood of money coming in which offsets the drop? Similarly, when something is pricey like tech stocks in 2000 or houses now, why isn’t there an increase in sellers. trying to take their profits, which holds asset values down so the above self correcting actions work like the governor? I thought I would ask this question to stimulate some thought.

Because we’re dumber than engines. — Garth

#15 not 1st on 05.19.11 at 10:13 pm

Comparing tulips, which have no intrinsic value, with a home, which is shelter from the elements, a roof over your head, a place to raise your family and a space to call your own is not even a remotely equal comparison. These charts are meaningless.

The charts are not about assets. They’re about you. You failed. — Garth

#16 Ben on 05.19.11 at 10:15 pm

I think LinkedIn’s site design was done by a 6 year old. Its clunky and a pain in the friggen ass

#17 T.O. Bubble Boy on 05.19.11 at 10:16 pm

China raised the downpayment requirement from 56% to 64% on second homes, and removed mortgage discounts, and the market kept on going:

http://english.eastday.com/e/110520/u1a5899049.html

Imagine if Canadian banks suddenly raised mortgage rates by 15% and required 64% downpayments?

#18 Makes Cents on 05.19.11 at 10:20 pm

Blah, blah, blah, YoY. When F faces facts that the ball is in his court then maybe things will change, or policy… Feds, I’m talkin’ to you …. until then … blah, blah, blah….

#19 nonplused on 05.19.11 at 10:21 pm

Nice graphs. But I liked yesterday’s picture better.

I still think your overall call is right Garth, but I think it could take longer to play out than we are thinking. Actually, it’s already gone on a lot longer than I thought it would. I thought the crash in ’08 would put things right, but I didn’t count on exactly how desperate the governments and central bankers would become. That desperation is still with us, and will be for some time. The US government and the Bernank will not likely take any meaningful action until after the 2012 elections, and Carney and crew will do what they can to keep the loonie from rising too much. In other words, lots more free money is in the cards for at least another year and a half.

Things that can’t go on usually don’t, but in this case I think it will go on until it can’t. They will play with more bailouts and stealth QE until it all folds in on itself. That could be some time away.

And the measures in the media are becoming increasingly harsh. Witness the take down of the head of the IMF. Not saying he didn’t commit the crime, I have no way of knowing either way, but why did Spitzer’s Madam come forward to say she was selling the IMF guy girls in 2006? She just incriminated herself and in a normal world that would have landed her in the hot seat and under investigation. Pimping and prostitution are still illegal. More likely she was told to come forward and promised immunity.

The play right now is to remember that government, any government, will do anything including turn on its own people to stay in power. Since 2008 governments around the world have “dropped the gloves”. Anything goes now. Whether it’s shooting Osama on sight with no intent to capture, or taking down the head of the IMF while Goldman just settles with a fine and “foreclosure-gate” runs unchallenged, there are no longer any laws at the top, only power.

In times like these, a good place to have some of your wealth (say 10%) is gold and silver. But that’s not going to happen for most people, because they only buy when the price is running up and then they sell every time the CME changes the margin requirements. This market will become increasingly volatile as the powers that be do everything in their power to scare you out or wear you out. But the people that bought gold at $450 and Silver at $6 are not going to budge. They will come for them later, in the middle of the night, with the swat team.

Jim Sinclair predicted the volatility in the precious metals markets years ago, and Zerohedge.com is on it now. The trend is still up, but expect big moves in both directions every other month.

A lot of people say you should buy silver instead of gold because it has better fundamentals than gold. While the fundamental argument is true, the mistake in the argument is that they ignore the fact that silver is a “supply and demand” commodity like oil or wheat or gasoline. Raise prices and demand will drop while supply increases. Lower prices and supply drops while demand increases. Gold, on the other hand, is money. The discovery of gold taught mankind the concept of money, and nothing has replaced it in that role. It’s the only thing that ever has been money, and it’s the only thing that ever will be. Paper money is more properly called currency. It is good only so long as it is current, and should be spent “currently”. Hence the name. A gold coin, on the other hand, is always a gold coin and there are no temporal concerns except in the short term as governments attempt to manipulate the “currency” price of gold.

Anyway, back to real estate in the Canadian market. I could see rising prices, declining sales, and declining listings proceed for an indefinite period. Not to spell it all out today at the end of an already long post, but it is a sign we may already be in the early stages of something we will recognise as a hyperinflationary event in some years. Hyperinflation does not necessarily involve any transactions, only people adjusting prices in anticipation of what all that money “should” mean.

#20 SMOKING MAN on 05.19.11 at 10:32 pm

Garth what’s with the fat chic pics. Man I need all the help I can get, two packs a day, and a bottle of wine, then the fat pic chic. Talk about a turning steel into mush.

O well, I see BMO dropped the rates, Carneys nuts in a knott as we speak.

The dumb ass mob will start buying like fools.

Was going to sell one of my condo’s ….. but going to wait just a wee bit more….. Need a pic of your fat lady’s to start singing.

And that’s now been pushed back….

It must be frustrating to know what you know, actully me too. But the MOB does not cooperate.

#21 squidly77 on 05.19.11 at 10:36 pm

Seatle House Prices

Nevada House Prices

Calgary House Prices

S&P 500 Chart

#22 Hoof - Hearted on 05.19.11 at 10:38 pm

#150 brainsail on 05.19.11 at 9:15 pm

My wife took a trunk load of usable stuff to Goodwill today. They document a value and it’s tax deductible as we live in the US. Can’t remember if we could do that in Canada. She came back LOL because this time they gave her a 30% discount coupon for GAP store purchases. Another marketer’s wet dream!

=======================

Good point…and no I am not aware of that in Canada

Why can’t a system be set up so that donations to these groups are evaluated , documented and a tax deduction garnered.

If the US allows it, why can’t Canada?

#23 Devore on 05.19.11 at 10:38 pm

#6 Tigger

The pattern is, first time buyers run out of money. They can no longer afford entry level properties. Move up buyers have significant equity (usually), so they can still swing large mortgages. In a hot market, move up (or down) buyers will often buy their second house before securing a sale of their current one.

This works fine when you have multiple offers on teardowns. Should the market slow (buyers disappear for whatever reason, typically affordability or availability of credit), if those homes do not sell, the move uppers are in a must sell scenario. They may be struggling, or not able to carry for very long, two mortgages.

Other would-be move up buyers stay put, as they realize they will not be able to carry two houses, and wait for their current house to sell first. This kills the move up market. High end deals die off, bring the average slamming down. Move up houses languish, because few sellers can sell their current house and move up. This drives asking prices down, and eventually sale prices as well, as “have to” sellers run out of options (and money).

Keep your eye on the first-time buyer market. The (non-investor) condos, townhouses, small cheap SFH. If this market goes, eventually the move up market will be affected by the chain reaction.

In markets that are already very expensive (TO, Van, Victoria, etc) look at what types of houses are selling, and what types are not. If crappy houses stay on market, things are slowing down. Buyers are getting more for their money. If suited houses are selling, but ones without a suite or a very crappy suite are not, that means people are running out of money. They need that suite to pay for the mortgage, but have no money to actually put in a suite.

Real estate takes a long time to change course. But change it will. With affordability tight, rock bottom rates, 70% ownership, anemic household formation, poor employment and wage growth, and lots of inventory coming to market, it will not hold, HAM or not. Until that trend is clear, expect the crowd to continue to be right (and to be pricks about it), until they’re not.

#24 HouseBuster on 05.19.11 at 10:41 pm

We are in the real estate crash cycle. 13 years of real estate gains are about to evaporate.

2003 prices – a bounce – and then 1998 prices.

And you can take that to the bank!

#25 Mr Buyer on 05.19.11 at 10:43 pm

I have to say that a house is a shelter and like all things deteriorates and collapses over time. I can understand the increase in new house prices due to an increase in salaries or number of salaries at least, but really 300k for a 40 year old house in a small town with half the population it had when the house was built for 15 to 20k and sold for 29k at that time. The problem is the supply of money. We have all heard about supply and demand, but the increased supply of money created the increased demand for it. No matter how this plays out I have a strange feeling that bank actuaries may have worked out that as the dust settles there will have been a tidy increase in interest payments. Shelter is a basic human need as are many other things that fall under the auspices of supply and demand but there is something not quite right about the supply of money itself taking precedence over basic human needs. I am starting to think that capitalists and private bankers in particular do not really have our best interests at heart. Perhaps we need to marginalize the so called free market to luxury goods and entertainment so the rest of us can live. Just because you can do something does not mean you should. As for human nature, well causing prices to skyrocket and then blaming borrowers, well that just smacks of being convenient propaganda. People need houses to live in and allowing them to be priced out of reach is an institutional problem.

#26 Hoof - Hearted on 05.19.11 at 10:44 pm

I’ve noticed lately that this blog, and its moldy author, have attracted a fair amount of dissing. I expect lots more in the denial phase to come. But expect this. Rates will rise. The Chinese will go home. Boomers will need cash. Debt will overwhelm. And house prices will fall.

——- Garth

========

Garth:
please explain what you mean by the Chinese going home.

Why would they?

#27 Hoof - Hearted on 05.19.11 at 10:48 pm

Revisiting demographics:

Another reason why the next decade will be nothing like the last
MAY 18, 2011

http://www.theeconomicanalyst.com/content/revisiting-demographics-another-reason-why-next-decade-will-be-nothing-last

Good graphs (per Province) to add to Garth’s thunder

#28 Cato on 05.19.11 at 10:49 pm

Was so hoping to short LinkedIn today – anyone questioning whether we have mania in market just needs to look at price action on the IPO. PE ratio of 1000 – feels like ’99 all over again.

This is end result of when system is overcapitalized and bursting at gills with liquidity. Canadians are about to get hit with triple whammy – simultaneous correction in housing & stocks plus healthy bout of inflation.

Canada’s fortune will probably be tied to whether or not US can get its fiscal house in order. At this point its doubtful, just call that whammy number four. At least this insane keynesian ride is finally coming to an end.

#29 GTA Crashing Sales on 05.19.11 at 10:52 pm

nonplused #18

LOL has the housing market gone that bad? Sales down for the last 12 months in a row. Prices are falling as the averages are being pulled up by the odd multi million dollar home. Price drops all over the GTA and for sale signs are everywhere which would explain the 12 months in a row of falling sales. I know a realtor who is selling his BMW as I doubt he can meet the payments anymore. Going to be hard times for realtors.

#30 Siddelly on 05.19.11 at 10:53 pm

#13 Abitibidoug

You are analogizing how an efficient market would operate, unfortunately there is the madness or the wisdom of the crowd factor involved. This is how value investors win over the long haul.

#31 Will on 05.19.11 at 10:53 pm

@not 1st actually tulips do have intrinsic value, there is demand from gardeners that wish to plant them and the flowers themselves can be sold.

@nonplused let me help you shorten your post, in summary you don’t know when the bubble will pop. For that matter niether does anyone else. Markets are driven by human emotion and sentiment, not the easiest things to drop into a mathematical model (not to say economisicts don’t try).

#32 Mr. Reality on 05.19.11 at 10:55 pm

#14 not 1st on 05.19.11 at 10:13 pm

Comparing tulips, which have no intrinsic value, with a home, which is shelter from the elements, a roof over your head, a place to raise your family and a space to call your own is not even a remotely equal comparison. These charts are meaningless.

Your bank account will be meaningless if that’s how you interpret these charts. Its called boom and bust. Its a reciprocating law of nature and us humans replicate the boom and bust cycle with everything we touch. History repeats itself. Always has always will……

Can i buy your house off you at the bottom??

Mr. R.

#33 BrianT on 05.19.11 at 10:56 pm

#13Abitibi-Vancouver homes are highly valued because an expectation of price appreciation is built into the sale price. Take away that expectation and the bottom falls out totally. If you take away the expectation of capital appreciation most people will only pay a small premium over the rental rate for the privelege of owning a home. In many US markets right now there is effectively no expectation of price appreciation (and a healthy fear of price decline) and this is reflected in a very low sale price premium over rental rate.

#34 Robert Dudek on 05.19.11 at 10:57 pm

“Raise prices and demand will drop while supply increases. Lower prices and supply drops while demand increases. Gold, on the other hand, is money.”

Wrong. In this respect, silver is much more like gold than it is other commodities.

1) When PM prices are high, both gold and silver get recycled (people sell their jewellery/silverware etc) but this represents a very small percentage of silver (and gold) supply.

2) Over half of the silver produced comes on the market as a byproduct: i.e. a mine will produce copper or zinc or gold as its primary metal, and silver as a by-product. Thus silver demand does not have a direct effect on this type of supply.

3) Silver is used in so many industrial applications and has such important and virtually unique properties, that there is no cheap substitutes. Silver would have to skyrocket in price (think $400+ an ounce in current dollars) before industrial silver users thought about switching.

4) Investment demand goes UP for silver when the price goes up (just as it does with gold). This has been shown to be true over the last two years, as coin and bullion demand has increased greatly in comparison to when silver was languishing near $5 an ounce.

5) It takes several years of development to bring a new primary silver mine into production, so increased supply in response to increased demand is very much a delayed effect.

#35 Hoof - Hearted on 05.19.11 at 11:00 pm

Buffets Boners

Check #5

http://money.ca.msn.com/savings-debt/gallery/investopedia/gallery.aspx?cp-documentid=28750418&page=1

#36 anonymous on 05.19.11 at 11:02 pm

People look at history —

But it’s the history of Cdn RE price in the past 10 years. (my friend used this argument a few times).

When you used Garth’s examples of other assets, e.g. US real estate, the argument is simpler

It’s different here AND this time :D

#37 JohnnyBGood on 05.19.11 at 11:04 pm

A very good refresher on manias.

I’d like to offer some additional info…

1. As the Dow chart shows, the Dow index actually declined over 89% between ’29 and ’32. But that’s not the whole story. While 1932 was a pretty good time to buy stocks, those who bought in ’29 (near the top of a “permanently high plateau”–Fisher) and held on, had to wait until 1953 or ’54 to get back to even (in nominal terms). And that’s assuming their stocks still existed in ’54. (Many stock certificates and Bloomberg machines were reported to have jumped out of NYSE windows long before ’32).

2. The NASDAQ is still nowhere near its all-time peak reached in 2000. Even with Apple and Netflix.

3. Same for the NIKKEI, which peaked, I believe in ’89. Japan in a 20+ year deflation and RE bear. This in a country that pioneered rotary parking systems because land is so limited. Oh, and GDP shrank 3.7% annualized in the first 1Q11.

4. And RE: Dutch irrational exuberance, real estate in the low country previously peaked in 1736 (yes, that’s 1736), and it would not reach and exceed that peak in real terms until this millennium. Talk about a bare market.

#38 Ben on 05.19.11 at 11:07 pm

#9 fiendish Thingy

…and neither one is wearing a helmet!

Only 20 of 46 states have helmet laws.

In Texas your not required to wear a helmet riding a motorcycle but you are riding a bicycle.

#39 Edward on 05.19.11 at 11:11 pm

Reading the comments here, it is very clear who has bought at the market top and is defending their illusion; hoping to hope the price higher or at least not lower. Animal Spirits in real estate; or perhaps this is a uniquely human trait–mania-depression cycles?

#40 Mr Buyer on 05.19.11 at 11:13 pm

I am taking a dimmer and dimmer view of investing as I dig deeper and deeper into these bubbles and crashes. As it turns out the stock market crash that kicked off the great depression was fueled by an increased supply of money by the banks to the familiar of tune of 5% down got your stock purchases financed. I hate to say it but I am starting to suspect that the banks learned what they could get away with and to blame the citizens rather than not to over inflate the economy to increase their share of people’s salary. What else are people going to do when the only game in town is leading to inflated prices all across the board in every aspect of life. You are almost (I say ALMOST) obligated to jump in and play the game. You know the saying fool me once shame on you, fool me twice shame on me well shame on all of us for not finding a better way than this and leaving this weight on the shoulders of our young. We were given a better situation by the generation that came before and we achieved little in the face of boundless opportunity. I am more than half serious when I say that it may well be time to limit the free market’s influence to luxury goods and entertainment. This will give the Ferengies something to do (to each other) while the rest of our society faces the hard challenges that face us over the next 4 decades.

#41 Devore on 05.19.11 at 11:15 pm

#15 Ben

I think LinkedIn’s site design was done by a 6 year old. Its clunky and a pain in the friggen ass

Right now their market cap is almost $9 billion. Ha! Shows how much you know.

#42 the_apocalyptic_one on 05.19.11 at 11:19 pm

#18 nonplused on 05.19.11 at 10:21 pm

Going back to Biblical times, both Gold and Silver have been used as money. Jesus was sold for 30 pieces of Silver. So your assertion that only Gold has been money historically is patently false.

#43 TaxHaven on 05.19.11 at 11:29 pm

The charts you posted illustrate the performance of a wide range of asset classes, from a range of times and locales. But we are talking about Canadian housing, so I am not at all sure these generalizatons hold.

If, regarding housing, it really *isn’t* “different this time”, it does seem that you are betting all asset classes are similarly bubbly and that correlation is everywhere at absurd highs:

Housing in Vancouver/Toronto? Housing elsewhere? U.S. housing? All stocks? Commodities? Precious metals? Silver? Oil? Japanese small caps? Tech?

ALL bubbly? (Why not REIT payouts & bond yields?)

IF one subscribes to the general upcoming worldwide deflation theory, yes, all these are likely to see falls at least in real terms, though some will suffer less than others.

The money supply, on a worldwide basis, is exploding: do you see inflation on the horizon at all?

The charts are about human behaviour. It has not changed. — Garth

#44 Mr Buyer on 05.19.11 at 11:29 pm

Scientific American Special Issue September 2005. Crossroads for planet Earth….
“The Climax of Humanity; September 2005; Scientific American Magazine; by George Musser; 4 Page(s)
The 21st century feels like a letdown. We were promised flying cars, space colonies and 15-hour workweeks. Robots were supposed to do our chores, except when they were organizing rebellions; children were supposed to learn about disease from history books; portable fusion reactors were supposed to be on sale at the Home Depot. Even dystopian visions of the future predicted leaps of technology and social organization that leave our era in the dust.
Looking beyond the blinking lights and whirring gizmos, though, the new century is shaping up as one of the most amazing periods in human history. Three great transitions set in motion by the Industrial Revolution are reaching their culmination. After several centuries of faster-than-exponential growth, the world’s population is stabilizing. Judging from current trends, it will plateau at around nine billion people toward the middle of this century(if we are lucky and because of sex ed in developing countries). Meanwhile extreme poverty is receding both as a percentage of population and in absolute numbers. If China and India continue to follow in the economic footsteps of Japan and South Korea, by 2050 the average Chinese will be as rich as the average Swiss is today; the average Indian, as rich as today’s Israeli. As humanity grows in size and wealth, however, it increasingly presses against the limits of the planet. Already we pump out carbon dioxide three times as fast as the oceans and land can absorb it; midcentury is when climatologists think global warming will really begin to bite. At the rate things are going, the world’s forests and fisheries will be exhausted even sooner”….
The problem here is the severe crimp economic constraints are placing upon technological developments. The market is an extremely slow innovator and drastic changes are required in the short term. It is not that we cannot build a safer nuclear reactor, it is that we cannot do so under economic restraints. Our very future left in the hands of institutions that rationalize any moral hazard.

#45 LJ on 05.19.11 at 11:43 pm

Could somebody please point out something that is “cheap” right now?

Bonds? -NO
Stocks? -NO
Real Estate? -NO
Commodities? -NO

Almost every graph you could present right now looks rather expensive (see Linkedin on its first day – insane). Cash might be the best alternative. Maybe bad advice is free, but who really needs that?

#46 Patz on 05.19.11 at 11:51 pm

You keep telling it like it is, Garth and they keep telling it like it isn’t. Today it was CBC radio’s turn. They had a guy on who touched all the bases for Vancouver’s red hot, gravity defying market. Chinese millionaires, check, get in or you’ll miss out, check, best city to live, check. The last one increasingly gets me. I mean haven’t these people lived or even traveled anywhere else? The guy even said it was because of our great weather. Like Dylan said, “You don’t need a weatherman to tell which way the wind blows.” And you don’t need one to tell you our weather sucks either. (And puhleez don’t tell me what a gorgeous day today was–Vancouverites are so pathetically grateful for single digit sunny days!)
/rant

#47 Mr Buyer on 05.19.11 at 11:55 pm

Money is a great unifier. Buying and selling, profit from the sale of goods, these are all net positives with proper oversight. I am guessing that a hand full of new laws would minimize the formation of these bubbles and the damage they do. I would start with making home equity loans illegal. A house is a residence, not a financial instrument. The get rich quick in the absence of production types will always be with us. Let them have their go at luxury and entertainments sectors and other discretionary elements of our economies. I fear however that this will not happen so I am left as an individual to find my way. That is fine with me, it is just that in the face of what is coming my fellow man with become a potentially extremely dangerous neighbor. We really must unite to insure our best chances of moving forward. 2050 is fast approaching.

#48 Tim on 05.19.11 at 11:56 pm

Garth, where are we in the business cycle? It seems as though the US has bottomed, corporate profits are humming along, we have averted a near disaster with the economy in 2008. Though things aren’t great, it would seem that we are on the upswing. Doesn’t this bode well for real estate, outrageous prices aside?

#49 Nostradamus Le Mad Vlad on 05.20.11 at 12:04 am


Re: The charts / graphs. The less said, the better. They always follow the same pattern — what goes up must come down.

“There’s divine wisdom in crowds.” — It’s called sheepshit, bullshit, horsefeathers or whatever you like to call it. The numbskulls (masses) are always wrong, so go against the grain.
*
Miss Airport 2011 Calendar Link in. Courtesy of Homeland Security Cheesecake.

Japan’s economy not doing so well, and Oregon gas at 20 cents a gallon? Where is the catch?

‘Quake and Shake Libya / Tunisia border. Amazing what TPTB can do with HAARP! HAARPQuake? Temp. became warm just prior to Japan ‘quake.

The Toilet and drug trafficking. When the Taliban was in charge, nearly 100% of drug trafficking had been eliminated. First sentence spells it out clearly.

The Titanic More to the sinking than meets the eye, not just a consp. theory.

DSK Uproar A little more accurate; Possible successors to DSK, but on the other side of the coin, this. he may not last much longer.

2:51 clip Further evidence that Bushama are one and the same.

Foreign Ownership of gold mines in the US. Links in.

Chinese inflation going nuts, and Tulip Mania reappears.

1:11 clip The battle for humanity. Count me out, ‘coz I’m not a war monger.

#50 Tim on 05.20.11 at 12:06 am

With the Fed not likely to raise rates for another year, what will the catalyst for the housing correction be?

#51 randman on 05.20.11 at 12:11 am

Nonplused

Ahh..but that’s the beauty of the white metal

It is both a commodity and money !!!!

#52 poco on 05.20.11 at 12:27 am

#130 Devore (last post)
Even Richmond’s 3 month boom is now decidedly over.
Just keep focusing on the average price, so you too can miss the forest.

Didn’t quite know how to decipher that last bit about missing the forest—
I don’t watch the forest –i’m after that single tree within the forest

I don’t pay too much attention to the average price because we all know it’s screwed by the sale of high end properties — i follow the number of home owners who are listing or have recently sold– for less, the same, or within 15k of what they bought for –trust me –there are many–this gives me a much better picture of what’s really going on

The tri cities stats are lumped in with Vancouver stats so our prices and sales get screwed from the get go. As i’ve said before, the stats (seperately)for all Van suburbs were at one time published in the local rags–this ended last Feb.2010 when numbers for Jan and Feb showed a negative in sales and prices–we can’t have that can we??

The condo market has been going down since last spring–townhome prices have recently (last 2months)shown an increase in a downward motion while SFH sales are basically still strong though i have seen an increase in price reductions in SFH–a sign of things to come
We need alot more SFH like this
mls#v888269–1260 Amazon-poco–bought feb08–578k–listed 625k now at 600k
mls#v870619–1925 Taylor-poco–bought june08-375k-listed-385k-sold for 347k
mls#v879275–579 Delestre–Coq–bought-aug 08–469.9k–listed579k–now at 469k
even though these are on the lower end of the SFH scale–the westwood plateau $million homes have sat and sat, with many price reductions
For May-up to the 17th — the tri cities properties have had over 200 price changes–and yes 2 were up–the rest down.
For the same period i have found over 100 properties that fit my criterea for being underwater–don’t think these are signs of a healthy market but you won’t here any of this from the RE pumpers
I’m not trying to convince anyone that this market started turning last year–you have to do your own research and make up your own mind.
One more –could be the buy of the week–“vultures” take note
mls#v873989–1801-555 Delestre–bought june-09–518.8k–foreclosure–now listed at 380k–tempting isn’t it!!!!

#53 Young Old Fart on 05.20.11 at 12:42 am

“…This market will become increasingly volatile as the powers that be do everything in their power to scare you out or wear you out. But the people that bought gold at $450 and Silver at $6 are not going to budge. They will come for them later, in the middle of the night, with the swat team….”

==============================

All I can say is HOLY CRAP are you ever retarded….

Sorry Garth but these people are so delusional….

Oh sure he says…what if…. I’ll tell you what if….

“If” it ever got that bad? I will rob your @ss of your gold!

As I sit and chuckle I think way back to a famous character and his saying…. “what a maroon” LOL

#54 Chaos on 05.20.11 at 12:54 am

Who: 3 dead guys and a truck driver
What: MVA involving 2 bikes and a 5 ton van
When: Spring 1988, 7 am
Where: Marine Way, Burnaby, just east of Boundary Road
Why: No one knows why a person decides to pin the tach and go for broke. Let alone 2 people.

Fade in

2 rice rockets racing hellbent on destruction west on Marine way in Burnaby, B.C. out of a rising sun.

They are 2 blocks away from Boundary road and a traffic light. These heroes were just seconds away from having to stop for a light.

But WTF they were pumped and invincible, (man there’s nothing like speed to make you feel like you’re alive) so they kept it pinned.

As fate would have it, there weren’t that many businesses down there at the time, but one of businesses operating down on the industrial lands is the flower auction.

For those of you that don’t know where your flowers come from, they come from the flower auction. This auction happens 6 days a week and starts at 4 am. This is because by 9 am these fresh flowers are at your local grocery store.

By 7 am the producers have unloaded their vans and sold their flowers and heading back to the greenhouse for another big day of making more flowers.

So what we had was energy hell bent on destruction and the other energy dreaming of creative production.

Opposites attract. The irresistable force and the immovable object.

It was over in the blink of an eye.

The truck driver looking into the rising sun couldn’t see the 2 missiles tracking westward on Marine Way. To the truck driver everything appeared to be safe.

To the bike riders it must have seemed obvious that the truck driver could see them, he was afterall at a complete stop, everything was under control, so much more fun to have, starting at the next light.

The next light never came to pass.

The 5 ton Chevy truck moved across the intersection and blocked the west bound lanes of Marine Way and became the immovable object.

The crotch missiles tracked into the truck and exploded. They had to, it was their destiny as the irresistable force.

One bike careered underneath the frame of the truck and came to rest 100 feet on the other side, the other bike came to a sudden stop when it hit the front axle. Helmets littered the road as a testament to a sense of misguided safety and protection.

Lights out.

Hundreds of motorist were subjected to this scene on that perfect spring day, so many years ago. Emergency personel had to respond and clean-up the tragic disaster and suffer the emotional insult and the truck driver was shattered, ICBC had some new files and the court system had a new customer.

Moral to the story….

The fat chick is dead, she just doesn’t know it yet.

The truck driver “didn’t see it coming”.

And we’re going to have to clean-up the mess.

“Time of your life, eh kid…”

Fade out

#55 Kits on 05.20.11 at 12:55 am

Correction: Bonds pay investors a steady and predetermined stream of income and return 100% of the capital upon maturity. If a bond is sold prior to maturity it may yield a capital gain or loss depending on prevailing rates. — Garth

Technically correct. That being said, how many people are going to hold a modestly yielding bond for a term of 10, 20 or 30 years (depending on the bond)? Even 5 years can be a long time horizon for many investors. The morale of the story is that bond investing is complicated and most investors would be well advised to retain a competent advisor (or put their money in a low MER fixed income fund managed by very reputable institutional investors – most will open an account for as little as $25k). Making light of bond investing could be, for the less informed, an expensive lesson … although it would, on average, be a far less expensive lesson than following the commodity investment herd ….

#56 Aussie Roy on 05.20.11 at 1:14 am

Aussie Update

Australias most high profile RE spruiker calls “Australian house prices have reached a permanent high plateau”.

A lot of fuss is being made about house prices doing, well, nothing. For the record, this is the outcome we have correctly predicted since early 2010.

“Year-on-year, Aussie dwelling prices have not budged (off by -0.6 per cent, to be precise). In the first quarter of this year, they have not moved at all, either in raw or actual value terms (-0.4 per cent). Seasonally-adjusted, the first quarter has been noticeably weaker, down about 2 per cent. But this seasonally-adjusted data is simply a ‘relativity’, adjusted to reflect conditions that normally prevail at this time. Actual house prices are not down 2 per cent. On the contrary, they are flat. Nominal dwelling prices will go nowhere or retrench modestly (eg, 0-5 per cent, year-on-year), depending on the exact number of hikes. That’s not a bad thing at all. ”

Can anyone show me at any time in history where “we have reached a permanent high plateau” has been correct?.

Free subscription required to read article
http://www.businessspectator.com.au/bs.nsf/Article/housing-interest-rates-property-prices-pd20110519-GZ6YG?OpenDocument&src=kgb

#57 They Call me Tim on 05.20.11 at 1:14 am

#5 Brave Sir Robin. Great name. Wish I thought of that!

Garth fantastic graphs, I had read about this concept just before the tech bubble burst and of course ignored it.

#58 lurker on 05.20.11 at 1:30 am

‘The charts are not about assets. They’re about you. You failed. — Garth’

LOL, well said.

#59 Canuck Abroad on 05.20.11 at 2:16 am

Happened across this article at another website and there is a great exchange in the comments on rent versus buy. The post itself is very good too I think. Enjoy!

http://blogs.law.harvard.edu/philg/2011/05/13/soft-housing-prices-maybe-americans-just-arent-dumb-enough-to-keep-buying-houses/

#60 farmboybc on 05.20.11 at 2:18 am

Bought nortel at 2.25,soldhalf at 5,soldthe rest at 10.Broker told me I was nuts,this baby is on the way back to121,same chart ,same story.

#61 Peter on 05.20.11 at 2:23 am

No one knows the future but here are a few observations.

Here in Calgary where prices first went crazy they are falling now.

Canadians on average have a lot of debt.

Revolutions are creating political and energy uncertainty.

Food and fuel are much more expensive then they use to be.

Stuff in Canada is too expensive. When I vacation in Florida I am amazed by how cheap it is to shop there.

I could not afford to buy my house today. I bought in 1998 and could afford it then but it is now crazy expensive despite the small correction Calgary had.

#62 dosouth on 05.20.11 at 3:18 am

Here’s one for you. CIBC has just sent me Visa cheques with 0% for six months. Now there is a 1% fee for admin but where else can you get free (almost) money for 6 months, make minimum payments and make 7% on their backs for a change.

RBC did this last year and I guess paying off the old credit card balance monthly has finally come back to reward us…..

#63 milos on 05.20.11 at 5:17 am

Great Forum

Australia is different LOL

#64 gentleInvestor on 05.20.11 at 5:17 am

The Vancouver chart is close but there’s a little more steam left in it yet, it’s not quite vertical. Couple more months, I’d say the wheels will fall off in the fall.

#65 Imstupid on 05.20.11 at 5:25 am

Nice blog. I noticed some people talking about hyper inflation. The problem with hyper inflation is that if it should happen this will drive interest rates threw the roof to offset the inflation rate. You can believe the banks forcast future inflation when determining the mortgage rate. As we all know wages are the last thing that increases and never at the rate of inflation. So you ll always be falling further and further behind. You can see this now with the inflation rate at 4% or something like that. But they stopped counting food and fuel in the calculation in order to maintain the low interest rates.

#66 Rocket Boy on 05.20.11 at 5:44 am

I was able to dig out one of my old term papers when I attending Western University. My 3rd year economics paper went like this…

People often define inflation as a general rise in prices, and economist themselves employ that definition – inflation is actually the increase of the money supply itself, [a perfect example currently with the Fed and the QE1, QE2 …]

Another problem is the inflation discourages savings. If people know their money will be worth less over time, they have a greater incentive to spend it right away rather than save it and watch is purchasing power decline. When the public realizes that the monetary authority intends to continue inflating the money supply [QE3..?] thus reducing its value, they scramble to unload their currency before it can lose any more purchasing power. It is what is commonly referred to as “flight into real value”, Only a fool would want to save his money during hyperinflation that threatens to rob that money of all its value – thus hard assets, such as a house – can actually be a very wise decision as the world moves forward into something never before experiencing – massive inflation compounded by governments desperate attempt to inflate itself out of this mess.

One final note – working in the insolvency industry – some here are way off mark when commenting that a mad rush to the exit – clients will come in, some spending nearly 70% on housing – a no brainer – sell it – nothing doing, they will cut everything else before they give up the house – so when the economy in general shows substantial decline (due to maxed out consumers trying the last ditch effort in saving the home) but even that becomes an inpossible challenge – then, and only then will we see a “true”correction in housing –

So stop holding your breath, some in here are turning green with envy – then blue due to lack of oxygen to the brain – Ah hah – I just figured out why some in here post retarded comments – no oxygen to the brain – (I just answered my own question)….

Great job with the site Garth!

#67 not 1st on 05.20.11 at 6:28 am

Garth states that emotion drives mania. It also drives other trends like stretching to keep your home. People will cut back in a lot of areas first before they let their home go, thats why we will see a retail and consumer spending collapse and stock market collapse BEFORE a RE collapse.

http://www.theglobeandmail.com/report-on-business/economy/housing/canadians-putting-more-cash-toward-homes-rbc/article2029516/

When people put 72% of their income towards maintaining a house, you know we have crossed the line. — Garth

#68 bob on 05.20.11 at 6:30 am

So what?
Sure let’s have a crash – a huge real estate crash. All those averages of $300K Canada wide should crash to $125K: 60% of home owners under water. Nothing sells no one wants to buy. Those Calgary homes are slashed from $600K to $200K. Everybody here happy now?
Is Garth happy? Everybody will be impacted but the renters. The renters will be cheering. Not.
What this blog is warning against will hurt everybody. Renters and owners alike. Careful what you wish for.
Garth: after predicting some crash in 2008-2009 and a correction in the past year, dude, you are a clown.
Thanks for not posting my comment again, moron.

A real estate correction is inevitable. Whether it’s a crash or not depends on how people react. If they’re as emotional and illogical as you, should be interesting. — Garth

#69 Mythbuster on 05.20.11 at 7:04 am

Garth: “They know history’s bunk. Prices don’t revert to a mean any more. There’s divine wisdom in crowds.”
====================================

I trust you know THE MEAN RISES WITH RISING PRICES. And it is therefore folly to think that a “return to the mean” means a return to some very low prices. It does not. What is true is that you can recognize a POTENTIAL bubble when prices cause the mean to rise at an accelerating pace. And the bubble is in danger of popping when prices start gyrating and the mean turns south. That’s all.

In other words, the notion of a ‘return to the mean’ only applies in stable markets WHEN THERE IS NO BUBBLE!

And therefore, talking about the ‘return to the mean’ when talking about a bubble is a contradiction in the logic of your argument.

Enough said.

#70 allister on 05.20.11 at 7:06 am

Great charts that prove timing is everything, and that includes RE.

#71 Publius Enigma on 05.20.11 at 7:12 am

Lots of fearful, over leveraged types around today.

Makes you wonder why they’re visiting.

#72 Live Under Your Means on 05.20.11 at 7:17 am

http://thechronicleherald.ca/brucemackinnon/mackinnon-cartoon-2011-05-20

#73 Optimist on 05.20.11 at 7:37 am

Using the tulip bulb analogy undeniably indicates that your thesis has hit rock-bottom. Throw in the towel Garth, you’re embarrassing yourself.

Tulips, Dow industrials, technology, precious metals, houses. If you cannot see the thread, keep the towel. I think you’ll need it. — Garth

#74 S.B. on 05.20.11 at 7:58 am

hehehe I found a chart…Silver…looks the same:
I suspect it will correct back to $20 at end of cycle.

http://stockcharts.com/h-sc/ui?s=SLV&p=D&yr=3&mn=0&dy=0&id=p56882683904

#75 Fractional Reserve on 05.20.11 at 8:06 am

Here is an excellent scientific study that shows how crowds behave as a herd and lack independent thinking skills. The collective wisdom of the crowd diminishes because the crowd is only concerned about what the rest of the crowd is thinking (real estate anyone?). This is a scientific explanation to the bubble phenomenas that have been generated by crowds (see the graphs in Garth’s blog today)throughout history.

http://www.wired.com/wiredscience/2011/05/wisdom-of-crowds-decline/

#76 Ratpick on 05.20.11 at 8:09 am

Mr. Turner, shouldn’t you add a chart showing the great “Tickle Me Elmo” bubble of 1996?

#77 SMOKING MAN on 05.20.11 at 8:12 am

The characteristics of a bubble head…….

1) Afraid for risk,
2) ill feelings toward other risk takers that won.
3) The time is never right.
4) Are Too Smart for own good.
5) I can’t vs an I Can Do attitude.
6) Follow the rules to closely.
7) Over schooled.
8) Jealous nature.
9) does not trust spouse
10) Thinks Garth is the second coming of GOD

#78 penpal on 05.20.11 at 8:37 am

# 71 Optimist

It is you, not Garth Turner that is embarrassing yourself by displaying a lack of even rudimentary reasoning skills.

I hope you don’t plan on reproducing!

Sheesh

#79 AACI-Okanagan on 05.20.11 at 8:38 am

The question one has to ask is simple. Do you own your home (live within your means) or does your home own you?

#80 penpal on 05.20.11 at 8:45 am

If there was ever a confirmation of a “bubble mentality” or “mania” it is the utterly ridiculous postings here by people who either don’t understand Garth’s historical examples (and their obvious applicability to the Cdn RE market) or don’t want to understand it.

#81 45north on 05.20.11 at 9:07 am

Chaos: The crotch missiles tracked into the truck and exploded.

good story

#82 AG Sage on 05.20.11 at 9:17 am

>#3 b on 05.19.11 at 9:39 pm

Bribe her with a nice vacation she can brag about.

If you are just being a tightwad, you are going to lose.

#83 Mikey the Realtor on 05.20.11 at 9:17 am

US policy is different then the Canadian, among the people foreclosing many are walking away only because they don’t want to pay not because they can’t. That has created a domino effect and actually created a bigger problem. Canadian laws make is a lot harder for people to walk away, and walking away just because becomes even harder.

As for rates, Carney has been going on about raising rates for 2 years now, and he had done nothing. I’m not sure why any reasonable person would follow his tongue. Carney is stuck between a rock and a hard place but his lips are always flapping.

#84 cialis on 05.20.11 at 9:18 am

It’s not over till the fat lady singes (sic)

#85 Rob on 05.20.11 at 9:22 am

From Calgary this morning!

http://www.edmontonjournal.com/business/Calgary+most+attractive+housing+affordability+Canada/4815785/story.html

Good thing she got in before prices and interest rates go up!

#86 fancy_pants on 05.20.11 at 9:27 am

RE affordability numbers by RBC:
http://www.cbc.ca/news/business/story/2011/05/20/housing-rbc-affordability.html

#87 45north on 05.20.11 at 9:31 am

Devore: Real estate takes a long time to change course. But change it will. With affordability tight, rock bottom rates, 70% ownership, anemic household formation, poor employment and wage growth, and lots of inventory coming to market, it will not hold, HAM or not. Until that trend is clear, expect the crowd to continue to be right (and to be pricks about it), until they’re not.

I am amazed how slowly the Canadian real estate market has declined. I can see that it will but it not on my timetable.

#88 Dontcallmeshirley on 05.20.11 at 9:32 am

Hmmm…today’s blog post betrays frustration, perhaps even anger.

Despair not Garth.

Review Canada’s debt capacity. The numbers, not “common sense” hypotheticals. It will comfort you.

You’ll see we’re at Defcon 2, about 75% from the top. another 2 years (2013) and you’ll be vindicated.

#89 Mr. Reality on 05.20.11 at 9:42 am

The increasing negative sentiment only solidifies the argument of the real estate decline. All the sheeple out there only have have a few options, get angry, be in denial and lose out in the end.

Anyone notice Japan was officially in recession reported yesterday! Their stock market went up! The macro picture globally is more screwed than the Canadian real estate market.

Mr. R.

Mr. R.

#90 Lara on 05.20.11 at 9:47 am

CBC radio from Vancouver this morning discussing real estate affordability: host Rick Cluff states “and there are no signs that prices are going to slow down in Vancouver” … sigh

#91 canali on 05.20.11 at 9:50 am

like, DUH as below this article from RBC:
http://www.vancouversun.com/business/Vancouver+remain+least+affordable+markets+country+report/4815507/story.html#Comments#Comments

#92 Blobby on 05.20.11 at 9:59 am

quote ” What this blog is warning against will hurt everybody. Renters and owners alike. ”

You do realise that the first thing that’ll happen if there is a crash is that rents will come down dont you?

#93 Christopher on 05.20.11 at 10:17 am

bc’s Real Estate bible?http://www.bcassessment.ca/Pages/default.aspx This is what makes people feel rich and it confirms their worth and if you ask these home owners they say it is carved in stone or something! It is like these people were paid to hold on to their properties and now are on top of the world. I would like to see 2.50 or 3.00 a litre for gas since these well to do can afford it now. Some of these homes went up 100,000.00 a year and I have to say I can not play this game but it is fun to watch! God bless the home owners.

#94 JoshL on 05.20.11 at 10:22 am

There are two types of people here … the ones claiming a housing correction is around the corner and the ones claiming that real estate is still “Safe”. A good read for both of you (aside from Garth’s books which I’m sure one day I’ll get around to reading) is the Black Swan by Nicholas Taleb.

In essense he examines our lack of knowledge and all of the false logic that people use to try to explain the world around them. In the book he explains that the best “investment” strategy is avoiding unstable situations. Nobody can tell you when a market will crash or even what will be the cause, although it’s rather easy to tell when a market is unstable and simply avoid it. Leverage, or debt, only makes the situation worse.

Taleb shows that if you take the 10 worst days out of the market in the last hundred years … you would be twice as far ahead. He maintains that all things in life (not just the markets) are shaped by rare, but extremely impactful events.

He is not against risk, but much like Garth he says it should be only a small portion of your exposure.

In his book he examines the “Turkey Fallacy”. For 363 days all the Turkey knows is that he gets fed and life is great. He has no reason to believe that the same thing won’t happen on day 364. It’s been confirmed 362 times (so it’s also known as the confirmation fallacy). What the Turkey doesn’t know is that the 364th day is not like the 363 days before it. The 364th day is Thanks Giving and he will end up on the plate.

It is a mistake to assume that because you have not seen something happen, that it can not happen.

#95 Mister Obvious on 05.20.11 at 10:24 am

#88 Lara

“CBC radio from Vancouver this morning discussing real estate affordability: host Rick Cluff states “and there are no signs that prices are going to slow down in Vancouver” … sigh”

I heard that too. However, I think that what Rick meant was there are no signs that Vancouver real estate prices “are” slowing down as opposed to “are going” to slow down. One word, big difference.

#96 Areekkal on 05.20.11 at 10:30 am

I like the graphs especially the one that shows the main stages of a bubble. Can we just extrapolate the graph to predict the future that is dependent on so many variables and unknowns?
I am trying to compare it with the graphs at http://www.housepriceindex.ca/Default.aspx
The one that comes close is Calgary. Why is Toronto graph so different? Am I looking at the wrong graph? Any guidance will be appreciated.

#97 clem on 05.20.11 at 10:39 am

Blobby on 05.20.11 at 9:59 am
quote ” What this blog is warning against will hurt everybody. Renters and owners alike. ”

You do realise that the first thing that’ll happen if there is a crash is that rents will come down dont you?

Why would this happen. Rents don’t always increase when property values increase.

#98 Roial1 on 05.20.11 at 10:48 am

http://www.pattayamail.com/moneymatters/warning-lights-are-beginning-to-flash-for-australia-3442

Good reading—– again.

#99 Fuzzy on 05.20.11 at 10:52 am

I’ve gotta laugh at all the suckers who bought LinkedIn IPO yesterday. At a starting price of $45, the P/E was already at a ludicrous 80 (any amateur analyst will tell you a P/E above 20 makes the stock overvalued and should be sold). Moron day-traders pushed the stock price up to the $120s (an utterly purely insane P/E of 240).

All those who bought, including those ‘lucky’ enough to get it at $45, will regret it when it eventually drops to $10. Book it Dano.

#100 AG Sage on 05.20.11 at 10:52 am

>#66 bob on 05.20.11 at 6:30 am
>Sure let’s have a crash – a huge real estate crash. All those averages of $300K Canada wide should crash to $125K: 60% of home owners under water. Nothing sells no one wants to buy. Those Calgary homes are slashed from $600K to $200K. Everybody here happy now?
Is Garth happy? Everybody will be impacted but the renters. The renters will be cheering. Not.
What this blog is warning against will hurt everybody. Renters and owners alike. Careful what you wish for.

There are unfortunately a lot of Bob’s in the world who don’t realize it’s the *run-up* that is the problem, the crash is just the point where it all becomes clear to the rubes in the room that they just got taken. The run-up is a massive transfer of wealth out of the middle class. All those house hungry households using debt freely shoveled out as fast as possible to bid up prices.

Every dollar of that excessive debt is a promise of future labor It’s self-enslavement.

All those people over the last decade buying into the pie-in-the-sky valuations of a speculative market have been getting screwed all along. The crash is just a relief valve that stops the underlying madness. The powers that be shouldn’t let the run-up happen in the first place. That’s the crime. Running it up longer because there are clueless Bobs roaming the earth, believing reality can be denied and the casino can roll on forever only increases the eventual pain. That pain will always come. No one in history has avoided it.

So, your suggestion, Bob, is what, exactly? We should be ignorant of history so as to be blindsided by the crash instead of prepared? Stunningly brilliant, Bob. What else do you have for us? (Let me guess, mortgage our houses and buy Linkedin stock…)

#101 vatoDETH on 05.20.11 at 10:53 am

Home ownership becoming less affordable: RBC

http://business.financialpost.com/2011/05/20/home-ownership-becoming-less-affordable-rbc/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NP_Top_Stories+%28National+Post+-+Top+Stories%29&utm_content=Google+International

#102 Areekkal on 05.20.11 at 10:58 am

Don’t blame the people. Fault is with Bank of Canada. If they say they will raise the rates, then, raise it. You can’t keep on saying ‘we are going to raise the rates soon’ and not raise it. The Bank of Canada screwed up. The only way to correct it is to shut up and hold the rates where they are now. To my mind, to keep the economy moving, Bank of Canada may go the Japanese way (which is screwed up) where the rates may decline even further: http://www.tradingeconomics.com/japan/interest-rate
People are not going to listen if the Bank says one thing and does something else. So, the Bank put themselves in a tough spot and they may not go anywhere with the interest rates. Were they not lying all these years with a veiled threat of rising rates that never materialized? So, why should I believe them now? What makes it different now? The last time we had the rates go up, the issues were internal, just to Canada. Now, the issue is global. There are lots more factors that need to be considered before raising rates.

Readers, if my arguments are illogical, please feel free to correct me.

#103 Mister Obvious on 05.20.11 at 11:11 am

#66 Bob

” Careful what you wish for.”

Nope. Wish for anything you want. Bull, bear, boom or bust. It wont have the slightest bearing on real world outcomes.

Markets don’t know or care what any individual is “wishing”. They are simply large collections of people each of whom is concerned with his/her own success. Centering on that fact leads one to more accurate predictions.

#104 Sid on 05.20.11 at 11:18 am

Garth, what does one do if they only have a small sum of money, perhaps 20K to invest? Are there any good diversified funds with low MERs out there?

#105 Devore on 05.20.11 at 11:34 am

#67 Mythbuster

Huh?

Have you had your morning coffee yet?

#106 Jim on 05.20.11 at 11:37 am

I love this frikken’ blog.

Van West houses prices are currently falling. Richmond has popped. A lot of over bids in West Van right now-pop to follow in June.

#107 Kitchener1 on 05.20.11 at 11:47 am

Garth, I too have noticed that amount of “haters” on the website lately. Its funny that even the most moderate person will attack with venom if their value system is at stake.

With 70% of people owning homes, when you say that housing will fall, it will deeply affect those persons lives. Just as it did in the US.

Nice charts and linked in was freaking joke yesterday but the algo’s that are buying are only do it on volume moves and not long term. Pity the fool that purchased that IPO with a long term view.

It seems to me that we have maximum particiption in the housing market. Same time we have maximum debt.

#108 BigAl (Original) on 05.20.11 at 11:54 am

Wouldn’t the oil price chart indicate a bubble too, being now at the “back to normal” bounce point?
http://futures.tradingcharts.com/chart/CO/M

Or is it “different” with all of the fear mongering about peak oil?

#109 Jim on 05.20.11 at 11:58 am

Of course I could be wrong. It could get ral bad in Vancouver.

http://www.vancouversun.com/business/Vancouver+remain+least+affordable+markets+country+report/4815507/story.html

#110 disciple on 05.20.11 at 12:00 pm

What makes gold more valuable than silver? In industry they are totally interchangeable with gold perhaps being more inert to oxidation, and silver can be used in mirrors. But there is so much more gold above ground and probably in the ground as well. P E R C E P T I O N. Mind-control. You fools just keep playing along with the bankers game because you have no balls to even acknowledge common sense, let alone change the game. Gold is “money”? WTF? Perhaps it is in your little shared illusory imaginary game, but it is not wealth.

#111 Hoof - Hearted on 05.20.11 at 12:06 pm

Vancouver…..Ground Zero…..Zombie Land started ?

Last night I had to drive to Vancouver approx. 11 PM

Drove over Oak Street bridge…up Oak…down King Edward…..down Cambie.

Basically east side of the west side, but also near Shaugnessy…still expensive part of town.

Lots of For Sales signs…saw only one sold..ironically a buddy had rented that same house from an offshore owner for over 15 years, but the owner evicted him and took several weeks to sell…aka this offshore guy is bailing

However, the latest McMansion style seems to be creating faux Victorian mansions with elaborate tile on walls….and these are SPEC houses…with For sale signs.

I say we are well into the crash…lots of these builders are screwed.

#112 disciple on 05.20.11 at 12:10 pm

There is so much confusion surrounding the definition of inflation and deflation. It depends on the context in which the label is applied. It is perfectly possible to have both at the same time, but you will find this out soon enough.

#113 Rocket Boy on 05.20.11 at 12:14 pm

Gotta agree with @BOB on his comment, I find it pathetic that some are hell bent on seeing any homeowner get royally screwed! Go figure – they must have issues that go beyond real estate and this blog is there outlet…. get some professional help – stop yapping about the markets – life is too short to worry about such things –

Some don’t get it – own real estate / don’t own real estate, as long as you live in this country – the after effects will hurt us all … aah dahhhhhh! And if things get real brutal, toss in daily car jackings as families are desperate enough to do whatever it takes to put food on the table – yeah – there’s alot of blame to go around – and in the end, we all will have a bloody nose from it….

And for those true haters in here – Karma is a bitch (enough said) !!

#114 BigAl (Original) on 05.20.11 at 12:25 pm

A post above refers to “bubbleheads” as being over-thinking, jealous, over-educated losers.

As someone who has thought like “bubbleheads”, I think he’s got a point, from observing the new world emerging around me.

Academics is losing respect in workplaces. As is experience (age). The new coveted employee is young (20’s, and no older than early 30’s), and can just “show me the numbers”. A person who doesn’t need to think too much, who is aware of the game of paying lip service to “rules”, but breaking them at every opportunity to achieve those numbers, etc etc. Academically trained people are perceived to be slow, awkward, in-the-way. Ethics is a laughable abstract. ‘Doing’ and ‘thinking’ are considered two polar opposites. “Doing” is success. “Thinking” is failure. We denigrate the boorish trades-people with nuts hanging off the hitches of the 60K pickups, while most degreed people are making half of their money. Most successful business owners don’t hold degrees. They tend not to over-think and just dive right into their projects. They thrive on solving problems and putting out fires day by day, minute by minute, incessantly on their cellphones, zipping around town all day taking care of this or that. The worrisome investor, or the salary-slave worker is not the life for these folks.

It is absolutely true that these types are generally more successful than their counterparts. But the caveat is that this has been the case in a run-up, extremely bullish overall economy. They might argue that it was their own personalities and action that caused the run-up. It will be interesting to see what happens in a downturn.

#115 Living in AB on 05.20.11 at 12:29 pm

How can you possibly compare Bre-x to housing, not sure if you looked around houses actually exhist. While I do agree with many of your theories they would only come to pass if our society wasn’t based on payments. At the end of day housing will only correct to the payments people can afford. Same goes for cars, beds, furniture, jewelery etc…

The fact so many believe I am talking about assets instead of behaviour bodes badly. — Garth

#116 disciple on 05.20.11 at 12:38 pm

Bob and RocketBoy…
I’m feeling you both…after the crash which WILL affect us all…what will happen is a spiritual awakening. The Pied Piper’s music will stop and the illusion of false profits will be made clear enough. Real wealth does in fact include Real Estate, but it must be free of “leverage” or imaginary “money” created out of thin air by the financial parasite class. I remain optimistic…

#117 realpaul on 05.20.11 at 12:55 pm

I met a guy who’d had to scrounge soggey tulip bulbs to eat after the Nazi’s had invaded Holland….he had a very sour look on his face.

I remember talking to people after they lost big on the past several real estates busts, tech bubbles and hype busts. They all have the same sour look.

The ‘dipstick gen’ of FTB’s has only known an up market…they have no comparables. Can you just see the look on their faces when the world they thought was stable comes crashing down?

A government makes all the bad stuff happen in the first two years of their mandate. Could it be that intrest rates and borrowing rules will be getting nasty real soon.

#118 Hoof - Hearted on 05.20.11 at 1:00 pm

#112 BigAl

Well said

Student loan debt now equivalent to more than 7 percent of U.S. GDP

http://investmentwatchblog.com/student-loan-debt-now-equivalent-to-more-than-7-percent-of-u-s-gdp/

=======

I think in the shadow of the shark of Housing Bubble is the remora of Academia/Post secondary.

These institutions IMHO, are on par with realtors insofar as promotion of debt to acquire a sheepskin that may add to an already flooded market, or be of dubious value.

These Ivory towers have effectively sold out. When I was at university, student debt was unheard of…a decent even minum wage summer job paid for tuition books, a beater for travel and pocket money .

Now, at least in BC…they milk their endowment lands for lease-hold condo at approx $1 Million?

WTF are they doing with the money…empire building ?

This is another scam ready to implode….Certain faculties, such as law… simply allow increased enrollment as a cash cow.

#119 Joe on 05.20.11 at 1:03 pm

#21 Devore

The whole point of moving up properties is not to gain equity so that you can have a bigger mortgage, it’s so that you can have a bigger, more expensive house with an equivalent mortgage. I completely agree with you that move-up buyers are stuck where they are. First time buyers aren’t running out of money per se, I think the tried and true “price out forever” rings true, at least for us.

We started out in a rented condo in BC, didn’t buy five years ago when we started out in our careers. We lived in that condo, but now that we have more stuff, hobbies, animals, children we have to rent a house to fit everyone/thing in. There is no way that we could go back down the ladder and buy a condo, build equity, then get a townhouse, then a house. We would be miserable. A house, whether it’s rented or owned, is what we need to maintain the lifestyle we enjoy, including gardening, building stuff, backyard barbeques. IMO, even if prices dropped, say 50% in the Fraser Valley, I’m still not sure we could afford a house and all the repairs and costs that go along with it. We’ve become to accustomed to saving and having a life that being tied down to a piece of property sounds like a life of toil and servitude. If I were to do it all over again I would have bought a condo five or six years ago and gone up the property ladder. If there was ever a time to do it, this was it, but we couldn’t afford to then with student loans, piss poor entry-level pay. Now that we’ve paid off the debt and built up a nice portfolio I’m not to eager to sell it off and put it all into a house.

#120 Bill Grable on 05.20.11 at 1:05 pm

Patz and a few other people (BPOE) keep talking about how Vancouver is the best place on earth, ad nauseum.

How about trying to fill out a Passport form (there are a few big words, but you should be ok) and seeing some of the World.

Vancouver is a nowhere backwater, full of self desluional drug addled, status chasing, poseurs.

The City Seal is a picture of Mr. Zig Zag.

Get a life and see the world, you xenophobes.

#121 JoshL on 05.20.11 at 1:15 pm

#106 Big Al,
I would argue that the oil bubble popped in 2008, starting a new cycle. This dip is the bear trap and the run up to a new bubble has just started. The smart money was in on oil at $40. We’re at the stage where oil’s about to shoot up as people pile on to a rapidly rising commodity. This will not be good for the rest of the economy and oil will quickly crash as a result.

One of the unforseen consequences of creating a system that’s overly complicated is that these cycles between bubble and bust have become much more rapid and extreme. It’s great for day traders and bad for your average investor who wants to do the “correct” thing and buy and hold.

There’s another chart that shows the value of a complicated system. At first the complications provide benefits in the way of efficiency, but they eventually reach a maximum and provide a net loss to the system as the complications cause more and more unforseen consequences. We’re at that stage of the game now.

#122 Junius on 05.20.11 at 1:34 pm

#115 Chia Pet,

If you think this Blog is about renters hating owners you haven’t yet learned to read. This the classic Re: Bull bull that bubble watchers are only jealous basement dwelling losers. This view adds nothing to the debate and only applies to an outlier group.

The point is that current housing bubble is not a normal cycle for housing or anything else for that matter. If it was this blog and others like it would be pretty boring stuff.

The reality is that the bubble was artificially fuelled by a once in a lifetime credit bubble that nearly destroyed the entire world economy. It was also propelled by gov’t policy initiatives designed to spur the economy by favouring banks lending practices over at the long term risk of the consumer and the tax-payer. As it recedes it will cause damage to Bears and Bulls, owners and renters and everyone in between.

#123 Bill Grable on 05.20.11 at 1:36 pm

Addenda – from Zig Zag Land – and if this doesn’t bring you around to what Mr. Turner has been trying to tell you – I give up –

“Home ownership became less affordable during the first quarter, especially in Vancouver where housing costs devoured nearly three-quarters of family income, and it could get even tougher for Canadians in coming quarters, according to an RBC report.

Costs associated with owning a detached bungalow in Vancouver ate up an average 72.1 per cent of income, an increase of 3.4 percentage points in the first-quarter of this year, the latest RBC Economics housing report found.

While Vancouver’s frothy market appears to be something of an anomaly — a phenomenon driven by foreign investment and limited space — housing costs in other major Canadian cities were also on the rise.

Housing expenses consumed an average of 47.5 per cent of income in Toronto, 43.1 per cent in Montreal, and 35.9 per cent in Calgary.

“Despite the latest erosion in affordability, provincial levels generally continue to stand near their long-term averages, suggesting that owning a home remains affordable or, at worst, slightly unaffordable across Canada — with Vancouver being a notable exception,” RBC senior economist Robert Hogue said in the report. ”

http://tinyurl.com/3o6ebmm

#124 Junius on 05.20.11 at 1:43 pm

#105 Kitchener1,

You said, “It seems to me that we have maximum particiption in the housing market. Same time we have maximum debt.”

The is the problem precisely. We have pulled forward demand by many years and at the same time filled the consumer with debt. Meanwhile we have a baby boom generation who will soon be looking to sell and retire. It is not a good recipe for a strong housing market for many years going forward.

#125 Junius on 05.20.11 at 1:49 pm

#100 Arrekkeel,

The BofC is trying to suck and blow at the same time. They want to keep rates as low as they can for now because the economy is so moribund. However they are worried that in the meantime people will continue to take on too much debt thinking that this is the “new normal” in the economy.

One thing is for sure and that is that rates are going up. It is only a matter of when and by how much. Everyone needs to be acting accordingly – at least if you live in the long term.

#126 Junius on 05.20.11 at 2:06 pm

#54 Aussie,

Love your posts. Please keep them coming. The similarities between Australia and Canada are scary.

The only permanent high is from spruikers like this dude down under or our resident BPOE. As for markets, clear market top and headed down in both countries.

#127 disciple on 05.20.11 at 2:10 pm

What is currently sustaining the liquidity in Canada’s financial system? Answer: the strong belief that inflation can be beaten by your continuing slave-wage. I don’t know whether to laugh or cry….Btw, I just found out that James Hewitt is Prince Harry’s real father.

#128 DM in C on 05.20.11 at 2:10 pm

#113 — At the end of day housing will only correct to the payments people can afford.

That would be terrific! Affordability = 3 – 3.5x income. Quite a ways to go in TO, Calgary, Edm, Saskatoon, Vancouver, etc.

Met with a fantastic financial planner last night. We discussed the 100 year trend in housing, and how emotional the asset is, and how her job was to take the emotion out of the equation. She’s also working on a plan where we don’t outlive our money (biggest threat to ppl retiring, in her opinion). Her advice to people who believed the 2008 crash was the end of the world — take your money and go buy chickens and a gun, cause looters are coming.

Yep, kinda in love now.

#129 betamax on 05.20.11 at 2:15 pm

#112 BigAl: “Academics is losing respect in workplaces.”

I don’t see it. Even tradespeople take courses, and university grads in applied sciences — engineering, computers, etc — are making huge money, as are doctors, lawyers, business people, etc. Most myths about higher education are propagated by people who never went, to make themselves feel better. The stats show that, on average, people with higher education make more money, plain and simple.

Aside from anecdotal reports of some dweeb with a PhD in Philosophy and no social skills who can only get a job as a barista, most grads are making more money at better jobs than they’d have otherwise. Even a lot of successful entrepreneurs have diplomas or degrees — they just don’t talk about it much.

Thanks to a decade-long credit bubble, there’s a slew of self-thought ‘geniuses’ who got lucky in a bull market. A bear market will separate the wheat from the chaff. In general, for every self-made millionaire, there’s a million self-made losers — but they generally sink without a trace and no-one tells stories about them. It’s called ‘survivor bias’ — we only hear about the ones who made it.

#130 betamax on 05.20.11 at 2:25 pm

#115 Chia Pet: “In the case of this blog it is the renters hating on the homeowners.”

You’re projecting your own thought processes on others. That’s a mistake.

#131 loueur on 05.20.11 at 2:37 pm

#115 Chia Pet: “Unfortunately it is the human condition for people to hate on those they percieve to be better off.
In the case of this blog it is the renters hating on the homeowners.”

Such impetuous and hasty assumptions… Why is that? Collective fear stimulates herd instinct and tends to produce ferocity toward those who are not regarded as members of the herd?

#132 RoninBC on 05.20.11 at 2:47 pm

Vancouver, especially west side Vancouver house prices will NEVER crash or burst or drop, however you want to say it, to a point where most of you can afford it. Even a 30% decrease would still put it out of reach. Get over it!

Too much demand, not just from the Chinese. I guess being the most liveable city in the world has its disadvantages.

http://en.wikipedia.org/wiki/World's_most_livable_cities

http://www.economist.com/blogs/gulliver/2011/02/liveability_ranking

http://www.dailymail.co.uk/news/article-1359139/Vancouver-voted-best-city-world-live-London-trailing-53rd-place.html

etc, etc

#133 Utopia on 05.20.11 at 2:52 pm

Royally Skewed in Housing

This post is a bit long. Just skip it if that really bothers you. I wrote it to try and answer the question of how the combination of declining sales and listings can result in rising prices.

I will agree that the premise is counterintuitive. It does not make immediate sense that prices should increase while sales numbers fall.

Yet they can and do at times.

My perspective here is to crudely compare housing sales to behavior in the stock market and touch on some of the broad trends suggesting the level of risk that housing in Canada now faces. Hopefully I can convey why this ascending market is actually one in peril and why it should now be avoided.

This is a story of “thin-trading”. It is about a period in time when vendors shy away from listing their homes while many buyers simultaneously withdraw to the margins. At times like these, the few remaining active market participants are capable of moving the market averages with just a small number of sales and trades.

Indeed, if you have been paying close attention you will already be aware that since the advent of Quantitative Easing, stock markets often rose on so-called thin-trading despite negative economic headwinds suggesting declines were more in line.

Hedge funds and investment bank-traders moved the daily charts while mutual funds, private investors and some institutional buyers stayed away in droves and avoided the hazards inherent in an unstable market coming off a crisis.

Plenty of money stayed in cash and on the side-lines or in low interest investments while the risk traders dominated the news while running up commodities and investing heavily in junk bonds and other low-grade high-yield plays. They chased return relentlessly all across the globe. It was greed in its finest moment and the bulls would carry the day. Right until the present in fact.

The spectacular advances seen since the credit crisis lows have ultimately drawn money back into the market that had been reluctant until now. Recently, mutual funds managers have jumped back into the fray with vigor and many now sit on positions with their lowest cash levels since prior to the credit crisis.

Bullish sentiment is unusually high and few believe this very long rally will end anytime soon (surprise, you are wrong!). This sets up an interesting omen for a sharp market decline (on the near horizon) but that is a story for another day. My point here is that little fear remains and we are now primed for a major correction in both stock markets and in real estate.

The thin-trading analogy presented is not perfect of course because it attempts to draw parallels between the lack of volume in a diversified stock market with declining sales in a single product category (housing). It is nonetheless instructive because of similar buying and sentiment characteristics. Some will argue immediately that while sales have fallen, they have not really fallen that extensively. The analogy is therefore not valid.

To some extent I would agree however what I am recognizing is patterns in mood and behavior that will lead to less than optimal outcomes for housing going forward. This is more to the point and so thin-trading helps me explain changing sentiments.

Lets first look at the definitions for thin-trading. Ask yourself if these match patterns you are seeing.

From the Technical Analysis Glossary: “A market in which trading volume is low, and consequently bid and asked quotes are wide and the instrument traded is not very liquid. Very little stock to buy or sell. Illiquid”.

From Investopedia: What Does Thin Market Mean?
“A market with a low number of buyers and sellers. Since few transactions take place in a thin market, prices are often more volatile and assets are less liquid. The low number of bids and asks will also typically result in a larger spread between the two quotes”.

YourDictionary.com defines thin trading as: “A condition in which there is little trading activity in a market because of a lack of buy or sell orders to drive up the volume. Thin trading usually occurs around holidays and sometimes in the doldrums of August. Thin trading conditions make it difficult for large buyers or sellers to execute orders because their trading activity may move prices.”

I am sure everyone gets the point here……

Now try to apply this idea to real estate where we currently have a situation of declining sales numbers nationally, declining inventory and concurrent rising home prices in key markets. Makes sense all of a sudden does it not? Sellers have withdrawn from the market (near the very moment of truth in fact). Buyers too, are suddenly in decline. Activity is falling.

Homes are sitting longer awaiting buyers in many centers and vendors are resisting lowering their price. They prefer to not list rather than to have to host open houses for months on end. It is not just the inconvenience. There is a widespread belief that better prices can still be had by waiting out the current slow period. The spread between bid and ask meanwhile has increased. The mood meanwhile remains stupidly bullish despite every major indicator shouting “bail.. bail… bail”.

In the dynamic situation mentioned above, it takes less leverage from the active participants to move markets. These big sales are taking place in the high-end price range. Their existence skews the average numbers for the overall market higher on declining volumes and leaves the false impression the market is buoyant.

Note that the definitions essentially revolve around volumes and thus their impact on pricing.

When a market is “topping” vendors may flee as a result of indecision, high costs of move-up properties, greed, herd behavior and false confidence in apparent market stability while buyers may exit due to regulatory changes, insufficient capital, affordability issues, fatigue, falling confidence and fear.

This is a period when buyers and sellers cannot meet each others demands to close the deal. Extreme behavior results. Bid and Ask prices can veer wildly and market distortions appear which only further confuses everyone. Witness bidding wars as one example. It is really a from of mania buying and seems insane to any normal outside observer. In the other corner we have vulture low-ball bidders taking aim at those who must sell but cannot get a bite when they need it most.

These are not the conditions that exist during a true balanced market where buyers and sellers willingly meet each other halfway to close a deal in confidence. Nor is it one where the market flows seamlessly with both healthy supply and demand fundamentals in place. It has been normal practice for decades when buying a home to place conditions on the purchase for example. It is not normal when bids are rejected simply because conditions exist.

This is, in fact, a market that has fallen badly out of equilibrium. There is a real irony in the words of our real estate cartels when they used the word “balanced” to describe the state of our current housing markets. It is anything but as the elixir of cheap money and the social pressures to conform with the mantra of home ownership converge in both herding and tribal behaviors.

This market is only balanced if you can appreciate that the simultaneous absence of healthy numbers of both buyers and sellers actually represents the moment of indecision when vendors, investors and families have all reached a crossroads of uncertainty and do not fully comprehend where the market is headed next.

It (the market) is going down of course. That event will be long, agonizing and almost certainly a slow ugly blood-letting. But down it will go. There is no doubt about that for anyone familiar with the usual metrics and measurements. And yet, amazingly, that is still not clear to some people as they withdraw to the sidelines and await signs of change and the markets next move up.

It is even less clear to those fully engaged in buying who live in the certainty of greater profits looming as prices appreciate further yet. Greed has a way of blinding those folks to clear headed thinking.

As we already know, the velocity of the all important “first-time-buyers” entering this market is officially in recession. Real estate is clearly overbought by any standard at 70% ownership rates while in the background, regulatory changes have driven away the remaining prospective buyers who were willing but are now insufficiently capitalized or qualified to participate.

Average prices are nonetheless moving higher. They are doing so on thin trading alone. CREA itself has recently acknowledged this when they noted that fewer “high end” sales were resulting in an increase in national-average-prices.

This is an important admission of the facts. We are discussing real estate statistics now and how those stats impact on the publics perception of pricing. The general public has been led to believe that prices are still ascending when in fact they are actually in decline in many key markets and also for certain categories of housing. The press releases of our many real estate organizations are therefore a great success where their interests are concerned and the reporting to date proves it. Housing is on the rise.

How can you even argue with them!

Getting at the correct information is clearly materially important for anyone who invests seriously though. Can you afford to not understand that your particular choice of home or location might already be in decline or at risk as you are contemplating a new debt obligation?

Not likely.

On the other hand, at key moments like this the possibility arises that an excess of sellers can rapidly
push prices down in the same way that just a very few high-end buyers have held the market up. We must remain wary of just such a possibility. This is now the American experience where supply has thouroughly overwhelmed demand and both buyer and vendor confidence has been crushed.

If economic circumstances were to change suddenly, a panic sell-off could also occur here. A sudden shock to stock markets and the financial system resulting in large scale layoffs as was witnessed during the credit crisis provides just such an example of an outside event impressing itself on our otherwise balanced market. If I am not mistaken, Vancouver prices dropped 16% on the heels of that event before recovering once heavy stimulus and low interest rates were liberally applied.

When selling pressures exceed buying pressures in thinly traded markets then supply can quickly exceed demand and bring about a change in direction and sentiments.

This kind of event forces prices down despite the fact most people remain outside the actively traded market. A housing decline then emerges to replace the surge that had preceded it. The worry is that this can happen with little warning and even without the participation of the vast majority of homeowners as weakening sales numbers meet heavier than usual supply.

That is a real possibility at this time and our greatest concerns naturally will derive from economic threats outside our own borders where serious cracks are already apparent in overseas credit and debt markets. I am of course referring to Greece, Ireland, Portugal and many other countries who now risk the debacle of a financial reckoning that could bring the European house of cards crashing down. The outcome will be contagion for the rest of us so we are by no means secure in a highly integrated global community of nations. In fact we are at greater risk when the unwind happens because of those close connections.

The outcome will result in program cuts and austerity here at home instead of stimulus as our debt to GDP numbers get twisted out of balance by a combination of falling economic activity in the face of rising debt burdens. We have already played the stimulus card and it is not likely that can be repeated without placing an onerous burden on the countries finances for many, many years into the future.

Back to housing though….this is actually a very dangerous period of the cycle we have now entered in my opinion. Buying pressure is fading because we have run out of steam. The energy of entry level participants is falling and indebtedness of existing owners is off the charts.

If confidence in the housing market fails (and it will from the current overbought levels) then we might also expect a reduction in so-called Hot-Asian-Money, immigrant investment dollars and foreign investment in property as word spreads that a top has been reached. If the belief in the fantasy of ever-rising housing prices fails we could rapidly lapse into a period where selling does indeed exceed buying pressures and outright declines would then become the new normal. End of the party.

A collapse of housing prices is not out of the question for major overpriced and overbought markets.

Collateral damage would then rapidly seep into smaller markets as the certainty of profitability waned and investment fear waxed. I do in fact expect that when the major real estate news makers (Vancouver and Toronto) show signs of fading that most other centers will follow suit and decline in tandem.

This is especially odd if only for the reason that the first signs of weakness have actually already appeared in our smaller markets. We should be concerned. Those smaller centers do not move national sentiments yet they do represent an early warning sign of our collective attitude to the high costs of home ownership.

Kelowna is a good example of a city where the wheels are coming off already. Even high-end homes that always had good demand sit unloved for months on end. Sales are down and so are prices in many categories. It is a canary. The warning is here.

Canadians cannot get too cocky. We are in a vulnerable stage where both our personal and public debt levels are historically high while our savings rates are very, very low.

There is therefore little latitude available to most families for managing a housing crisis without suffering financial hardships and facing sacrifices. Our country meanwhile can ill afford the negative consequences of a sudden drop in consumer spending as our debt burdens eat away at our disposable incomes.

We would naturally be thrilled with higher home prices as they enrich us. Right? We need to note here that not all homes in all price categories are actually rising though. High end homes are still selling of course in most “hot” centers. The buyers in this category of home purchase are not affected by the trend to a bubble though.

This money spends in all markets, at all times and it does not care for Greater-Fool theory because it can afford to ignore the outcomes others will suffer from.

So indeed, it is a fact that there are fewer sales in many regions of the country already and thus these few “high-end” numbers have skewed the averages to the upside. Prices appear to be rising. Confidence is instilled with the help of the media. Glory be, we are saved. Or are we?

There is a trap found in thinly traded markets where perceptions lead to dangerous conclusions. This is why it is important to pay attention to the language used by realtor’s when they bandy about numbers and say “mean” or “median” or “average” and where you must remain vigilant when reading comparisons of year over year versus month over month numbers.

They say statistics lie and perhaps there is some truth in that. It is incumbent on each of us to understand the terminology that is being used and to know how the numbers presented (while real) are often not presenting the honest picture required to make a good buying decision.

In summary, I think it should be very obvious that when home prices rise on falling sales that a problem is imminently on the horizon. Any person considering buying at such a time should carefully consider the added risks and attempt to understand how deceptive market behavior can trap them in debts at what is certainly a peak.

I personally believe it is very unwise to buy now for all of the reasons I have spelled out above. The decision to buy is always an emotional one and is somewhat akin to conceiving children. The outcome of hot impulsive decisions lasts for decades though. Homes are just as emotional.

So judge the market for yourself with a clear, rational and sober detached mind.

Then decide for yourself.

#134 Bonnie Jean Crites O'Grady on 05.20.11 at 2:58 pm

I don’t think owning a house is an asset. It is what we are programed to do. A true asset is one that makes money with NO outlay of expenses or fees.

#135 Contrarian on 05.20.11 at 3:05 pm

>>(Garth) A real estate correction is inevitable. Whether it’s a crash or not depends on how people react.

Is there any way to know which it will be? Don’t most bubbles end in crashes?

#136 MP on 05.20.11 at 3:06 pm

Give Squirrel a Whirl

http://eatocracy.cnn.com/2011/05/20/give-squirrel-a-whirl/#comments?hpt=C2

#137 45north on 05.20.11 at 3:07 pm

Ag Sage: talking about mortgage debt: Every dollar of that excessive debt is a promise of future labor

it sure is

Kitchener1: Its funny that even the most moderate person will attack with venom if their value system is at stake.

it’s very funny

some new posters on this blog see a glimse of the future and they don’t like it

Utopia posted a story of a gal from southern US. He asked her what it was like after the bubble burst. She said “you have no idea”.

#138 45north on 05.20.11 at 3:08 pm

oh yeah: squirrel meat:

http://eatocracy.cnn.com/2011/05/20/give-squirrel-a-whirl/#comments?hpt=C2

#139 disciple on 05.20.11 at 3:27 pm

Whoa!…and the award for longest post goes to Utopia…I think there will eventually be 80% price declines, but not before a global credit crisis crash crunch cruelly conceived comes.

#140 Hell in a Handbasket on 05.20.11 at 3:28 pm

@ #75 Smoking Man

I sold a few months ago, lucky for me. Our former neighbour put here 2 bed 1 bath townhome on the market last november at 349K. She is still up for sale at 314K and another 5 units in our former development (all 2 bed 1 bath) have come up for sale.

What are the chances she is going to have to drop her price again?

#141 Hoof - Hearted on 05.20.11 at 3:33 pm

Holy geez Utopia..mighty long post

Are you posting from heaven? I though I was reading the Bible for a second.

#142 Hoof - Hearted on 05.20.11 at 3:50 pm

Metro’s plan will bump housing costs

Affordable market, rental housing should be greater priorities in regional growth strategy

Read more: http://www.vancouversun.com/business/Metro+plan+will+bump+housing+costs/4815378/story.html#ixzz1MvVLkV2s

================

Metro Vancouver is going to have cruel reckoning.

So much smoke has been blown up peoples asses . The only truth that is oozing out is the we depended on HAM $$$’s

Metro Vans growth strategy is envisioning a 30 years crystal ball, which IMHO is a dangerous gamble of relying on HAM $$$.

Who seriously wants to buy a condo….they are a latent clusterf*ck of costs, ignoring the leaker etc .flaws.

Strata is socialist living masked as affordability.

Reminds me of the scene in BLADE 3…all those humans in ziploc bags being kept alive in a huge warehouse solely to provide blood for the Vampires.

#143 Hoof - Hearted on 05.20.11 at 4:09 pm

More of the Vancouver clusterf*ck tsunami

Canada Post to close downtown Vancouver facility and move mail processing to YVR

http://www.vancouversun.com/travel/Canada+Post+close+downtown+Vancouver+facility+move+mail+processing/4810750/story.html

The plan, announced Thursday, will see the transfer of 1,200 of the 1,700 jobs at the Vancouver plant. Canada Post said it is too early to say what will happen to the rest of the jobs, but an official with the Canadian Union of Postal Workers said his members are bracing for cuts as the Crown corporation proceeds on a plan to massively modernize its operations with new technology.

======

I will anticipate a mega ripple effect to local businesses.

My guess is Canada Post as a Crown Corporation was exempt from Property taxes.

However the fear for Vancouver is the buildings future use, as it could sit empty lacking a tenant, but would/could they tear it down ?

I don’t think McDonalds or Starbucks or any other McJob Inc. can fill the space.

Art Gallery?

This must come as a surprise, as this site must have been pre-designated as Commercial zoning/s. Smell of fear amongst COV politicians.

#144 jess on 05.20.11 at 4:09 pm

don’t forget to include the bubble in war tech…

Mexicans Reject US-Backed Drug War
Friday 20 May 2011

http://www.thenation.com/article/160566/mexicans-reject-us-backed-drug-war

The strategy to deploy the army and police to attack drug lords and intercept illegal shipments has led to the militarization of the country and triggered bloody turf wars between cartels.

..”But it took a high-profile tragedy to draw tens of thousands into the streets. On March 28 the son of well-known poet Javier Sicilia was brutally murdered along with six friends near the city of Cuernavaca, south of Mexico City…

In a packed central plaza, Reyes read the text of a new “citizens’ pact.”

The six-point pact demands justice in cases of assassinations and disappearances and the naming of victims; an end to the war strategy and adoption of a “citizen security” strategy; effective measures against corruption and impunity; measures to attack money laundering; reorienting the budget toward education, health, culture and employment programs; and mechanisms to increase participatory democracy.

#145 thinktwice on 05.20.11 at 4:11 pm

Garth,

You missed out on the biggest bubbles of them all.

– Printing of fiat paper money around the world and growing

– Over $600 trillion in derivatives and growing

Identify the cause and follow the money, if you just chase a single symptom like RE you are not much better off.

#146 jess on 05.20.11 at 4:17 pm

is a single payer health system coming to california?

The state spends about $200 billion on its health care system every year. Leno said the state would use the same money it now uses to pay for the single-payer system. “We will use that money much more efficiently,” he said.

The legislation is a two-year bill, Leno said, and its backers hope to have it on the governor’s desk in the summer of 2012.

A similar bill was introduced in 2006 and in 2008 by former Sen. Sheila Kuehl, D-Los Angeles.

The bill was vetoed twice by Gov. Arnold Schwarzenegger.

#147 Sail1 on 05.20.11 at 4:23 pm

http://www.moneyville.ca/article/994913–housing-affordability-deteriorates-rbc

#148 Junius on 05.20.11 at 4:37 pm

#131 RoninBC,

You said, “Vancouver, especially west side Vancouver house prices will NEVER crash or burst or drop, however you want to say it, to a point where most of you can afford it. Even a 30% decrease would still put it out of reach.”

Vancouver West side house prices will fall a lot more than 30% over the next 5 years. Without question.

#149 Hoof - Hearted on 05.20.11 at 5:40 pm

Spin City aka Victoria BC

Plenty of choice for island buyers

Little pressure and lots of residential options

Read more: http://www.vancouversun.com/business/Plenty+choice+island+buyers/4784559/story.html#ixzz1MvyXGHO8

Carol Crabb, president-elect of the Victoria Real Estate Board, has an explanation for what appears to be a slow spring. “Last year, the first three or four months were such a boom that everything at the beginning of this year is looking negative in comparison. But we’re still having a very good spring; things are moving right along.”

So while it may not be an exciting time for realtors and sellers, it’s good news for buyers -there are more homes to choose from and little pressure to buy before someone else does.

“It’s better for everybody, actually,” says Crabb, noting that the average listing is taking between 60 and 64 days to sell.

“I know some sellers would like to move along more quickly, but it’s a big decision for everybody and not necessarily something you want to happen in a day or two.”

===========

JUMP…RUN…..HIDE….!!!!

#150 ballingsford on 05.20.11 at 5:40 pm

Did she exude gas (fart)?!?!?! Or, is the pic trying to depict that the gas will soon be coming out of the housing market?

#151 Hoof - Hearted on 05.20.11 at 5:46 pm

Run Forrest Run !!!! Bubba Gump help !!!!!

More Olympic Village units up for grabs in Vancouver

Condos selling, but renovations behind schedule

Read more: http://www.vancourier.com/More+Olympic+Village+units+grabs+Vancouver/4811421/story.html#ixzz1Mvzm0H8L

QUOTE:

Brennan said resolving remaining problems in the suites is taking more time than expected because tradespeople need to coordinate with owners, reports of deficiencies are increasing as some owners approach their initial 12-month warranty period, and “in some circumstances, we are simply having difficulty contacting the owners to gain access to their units.”

The receiver is also fixing deficiencies in strata units just sold and those being readied for sale.

Translation: Must be local buyers out on long stroll…to Beijing

QUOTE:

“It’s very encouraging how the receiver is moving ahead with the sales and it vindicates council’s decision to negotiate the receivership,” said Vision Vancouver Coun. Geoff Meggs. “What’s been happening is a steady improvement in the occupancy and a very dramatic improvement in the conditions for residents who are seeing the deficiencies resolved very quickly.”

Translation: Bullshit

#152 Junius on 05.20.11 at 5:56 pm

#142 Hoof-Hearted,

The downtown post office building in Vancouver is one of a kind but not a good kind. I don’t see how it would work for any other tenant. I have been on the inside and it is hard to see how it can be converted easily for anything. Walk around it and you will see that it is right up to the sidewalk and much of it is loading bays on the East side.

Hopefully a future Art Gallery or other cultural site. It might be a good time to add some culture to the BPOE.

#153 ballingsford on 05.20.11 at 5:57 pm

#65 Response from Garth

When people put 72% of their income towards maintaining a house, you know we have crossed the line. — Garth

******

No shit, I almost choked when I read in an online news site today. What the hell are people thinking? Now that groceries and gas have gone through the roof, they must truly be regretting their foolishness! Kraft dinner is probably a luxury for them now!

I always go by these general rules for the income you earn.
25% for your shelter (home or rent)
25% for your bills
25% for gas, food, clothing, etc.
25% for saving

#154 Nostradamus Le Mad Vlad on 05.20.11 at 6:01 pm


#52 Chaos — “Moral to the story…. The fat chick is dead, she just doesn’t know it yet. The truck driver “didn’t see it coming”. And we’re going to have to clean-up the mess.

“Time of your life, eh kid…”

Whoa baby! Count me out, ‘coz I’m fully enjoying retirement, and am not intent on paying for other’s cock-ups!

#55 They Call me Tim — “#5 Brave Sir Robin.”

I detect a touch of MPFC here!

#75 SMOKING MAN — “10) Thinks Garth is the second coming of GOD”

That’s happening at 1800 hrs. Sat. evening. Has anyone bothered to tell Garth that he’s supposed to show up somewhere for some reason?!

#54 Aussie Roy — “. . . “Australian house prices have reached a permanent high plateau”.” — and — #144 thinktwice — “Identify the cause and follow the money, . . .”

Everything seems to be coordinated well in advance. Soros selling his gold ETF’s in one fell swoop a few days ago, wars in the ME, all of which are completely unnecessary, the fiscal takedown of the west and RE taking an unplanned dump — it kinda goes with #100 Areekkal.

Further to your post, an article in today’s KDC (surprised no one else picked up on this) was the head and subhead “Things not so rosy — Economist’s inadvertent email reveals a more pessimistic view from Mark Carney”

Now, everything that happens down here happens for a reason, so possibly Carney had a senior’s moment by inadvertently leaving this particular e-mail open to be read — the story comes from CP.

His view is negative toward the US and Europe, but because (as one poster said yesterday), 70% of our trade is integrated with the US, it means that if they tumble, we will be flattened by the elephant in the room, and it’s not going to take much to topple the elephant over.

#155 Two-thirds on 05.20.11 at 6:07 pm

And to top it all off, here comes austerity from Minister. Clements:

“Mr. Clement noted that his spending review will come up with $4-billion in annual savings that must come from the $80-billion Ottawa spends on direct federal program spending, and not transfers to the provinces.

“So we have to look at our direct program spending and that includes wages and salaries and professional services and grants and contributions and other operating costs,” he said.

“Yeah, there are going to be reductions,” he said. “I don’t want to sugarcoat that. There are going to be reductions and we’re going to try and make it as connected as possible to Canadians’ actual expectations of what they want government to do.”

Speaking in general terms, he said he agrees with those who argue it is better to cut entire programs when scaling back, rather than across-the-board cuts that can harm government services that are working well.

“It may well mean that some other things that perhaps were important 20 or 30 years ago are less important now and we can logically get out of those things without doing too much harm to the public or to people’s expectations of what government should be doing,” he said. ”

http://www.theglobeandmail.com/news/politics/from-tony-clement-a-commitment-to-cut-deeply/article2029172/

Tough times ahead.

#156 ballingsford on 05.20.11 at 6:13 pm

#100 Areekal

People are not going to listen if the Bank says one thing and does something else. So, the Bank put themselves in a tough spot and they may not go anywhere with the interest rates. Were they not lying all these years with a veiled threat of rising rates that never materialized? So, why should I believe them now? What makes it different now? The last time we had the rates go up, the issues were internal, just to Canada. Now, the issue is global. There are lots more factors that need to be considered before raising rates.

Readers, if my arguments are illogical, please feel free to correct me.
********************

No corrections from me. I’ve been telling and teaching my 3 yr old son the fable about “The Boy Who Cried Wolf” and it’s eerily similar.

#157 Utopia on 05.20.11 at 6:54 pm

#140 Hoof – Hearted on 05.20.11 at 3:33 pm

I though I was reading the Bible for a second.
____________

Ok, maybe I went a little crazy. Its spring though. I had extra energy. Maybe I need a new hobby………

#158 Josh on 05.20.11 at 6:56 pm

If only we knew what future holds! But we do not know the future, all we can do is live today and save for what may come tomorrow. Best to live with-in one’s means.

Garth I really liked what you said earlier in several posts about coveting and house lust. It truly is the phenomenon of this generation and of the last decade for sure. For those who do not learn from history, well history is doomed to repeat itself. Great illustrations.

#159 BrianT on 05.20.11 at 6:57 pm

#140Hoof-Anyone who has worked in a white collar environment has sat through countless meetings where idiots talk endlessly just to hear the sound of their own voice. With the popularity of Facebook and cell phones it has become the Look At Me culture-like Sly said Everybody is a Star.

#160 armageddon on 05.20.11 at 6:59 pm

the world ends at 6:00 pm May 21, 2011, so buy now or get priced out forever.

#161 BPOE evil twin on 05.20.11 at 7:04 pm

New health care card aims at fraud

VICTORIA – There are 9.1 million B.C. CareCards in circulation, but only 4.5 million people live in B.C.

That’s one reason why the province’s health care costs are so high.

http://www.bclocalnews.com/vancouver_island_south/goldstreamgazette/news/122325274.html

#162 S.B. on 05.20.11 at 7:19 pm

TMX GROUP INC. STATEMENT REGARDING MAPLE PROPOSAL

TMX Group Inc. responded today to the proposal provided by Maple Group Acquisition Corporation on May 13, 2011. The TMX Group board of directors has considered Maple’s proposal and has determined, after consultation with its financial advisers and outside counsel, that for purposes of its merger agreement with London Stock Exchange Group PLC (LSEG), the Maple proposal does not constitute a superior proposal nor could it reasonably be expected to result in a superior proposal.

“The board supports TMX Group’s proposed merger with LSEG to form a globally competitive yet domestically focused exchange group with strong opportunities for growth,” said Wayne Fox, Chair, board of directors, TMX Group. “The board’s view is that the merger with LSEG continues to be in the best interests of TMX Group and its shareholders and stakeholders.”

#163 S.B. on 05.20.11 at 7:31 pm

In a hot Toronto condo building – where are the bidding warz?

1. Was offered 375k, then 365k, now 354k…30k wiped out in only a short time:

http://www.realtor.ca/propertyDetails.aspx?propertyId=10572982&PidKey=-1159236439

2. Was 670k, now 660k

http://www.realtor.ca/propertyDetails.aspx?propertyId=10645521&PidKey=1746571115

3. Was 650k, now 637.5k

http://www.realtor.ca/propertyDetails.aspx?propertyId=10663628&PidKey=977443485

#164 Sunny on 05.20.11 at 7:33 pm

http://www.vancouverobserver.com/city/2011/05/20/leading-realtor-calls-vancouvers-housing-market-unhealthy

#165 ballingsford on 05.20.11 at 7:47 pm

Garth, sorry that I was so involved in reading the posts after I got home from work and commenting on some of them, that I forgot to say “thank you” for the graphs.

If they don’t get the thought through to the greater fools, then nothing will.

Oh well, they’ll learn these things another way. The reality of living through Hard Times because of bad decisions and maybe they’ll learn their lesson before it’s too late!!!

Wisdom comes from experiencing and living through a situation, not reading about it.

#166 45north on 05.20.11 at 8:05 pm

Utopia: A collapse of housing prices is not out of the question for major overpriced and overbought markets.

in the US, decline of house prices between 2006 and 2010 has been slow. One of the reasons is the depth of the US market. Prices were falling in Florida but rising in NY. Similarly prices were declining in California but rising in Oregon. Sales in Florida and California continuously declined as well sales in other states such as Illinois and Texas started to decline.

Canada just does not have the depth. As goes Vancouver so goes BC. As goes the GTA so goes Ontario. As Montreal, Quebec.

The other major difference is that in the US the banks were genuinely surprised. To a large extent they failed to protect their interests because they failed to recognize a broad decline in real estate. Of course the real attitude and thinking of the Canadian banks is unknown but it is reasonable to suppose that they would be quick to recognize a broad decline and would be quick to protect their interests.

#167 Aussie Roy on 05.20.11 at 8:26 pm

Aussie Update

So much for Sydneys housing shortage.

“With more than 120,000 unoccupied homes in the city and a housing crisis, it’s no wonder squatting is thriving, writes Erik Jensen.”

http://www.smh.com.au/nsw/the-art-of-setting-up-home-for-diddlysquat-20110520-1ewpa.html#ixzz1MwdjumSa

RBA (Aussie FED) refuses to release reports that Aussie housing is in a bubble – It would be bad for the market – LOL

“THE board of the Reserve Bank has received five briefings from its economists in the past year on bubbles in the global commodity markets, the risk of a serious correction in China and the extent to which Australian house prices are overvalued.

But the bank has denied access to all five documents despite a request by The Weekend Australian.

The analysis is likely to be more candid about the risks than the publicly available RBA reports.

But bank secretary Anthony Dickman said releasing the reports would “have the effect of inhibiting the full and frank nature of the advice provided to the board in future”.

RBA director Warwick McKibbin and US economist Nouriel Roubini have raised the spectre of another sharp correction like the global financial crisis.

http://www.theaustralian.com.au/business/markets/bubble-will-burst-rba-warned/story-e6frg926-1226059931631

#168 WesternCanadian on 05.20.11 at 8:38 pm

“The fact so many believe I am talking about assets instead of behaviour bodes badly. — Garth”

Typical Garth arrogance coming out again…

Of course its the readers who are misinterpreting your message Garth. It couldn’t possibly be that you have poor communication skills.

Sorry, I don’t speak cowboy. Pass me over to the horse. — Garth

#169 polecat on 05.20.11 at 8:47 pm

Keep up the good work Garth. I did buy last year in N.S. A bout 2.5 my income but comparable to rents. Property tax is fair but taxes period here are brutal for a have not province. I don’t understand how people afford the new homes here.I guess the crazy lendings have a hand, or out of province oil workers sending money home.Still glad I’m not in Vic or the others but this does not add up. I have a good job and find it nuts no matter where in this country. The middle class is on the breaking point I believe. We can’t keep this up, but it will get worse(nothing against my boomer parents). I came back to look after them…

#170 salonist on 05.20.11 at 8:56 pm

it’s different here
oakville
i see a neighbor vacuuming his lawn (today)
is that over the top?

#171 GTA sales crash on 05.20.11 at 9:00 pm

In a hot Toronto condo building – where are the bidding warz?

1. Was offered 375k, then 365k, now 354k…30k wiped out in only a short time:

http://www.realtor.ca/propertyDetails.aspx?propertyId=10572982&PidKey=-1159236439

2. Was 670k, now 660k

http://www.realtor.ca/propertyDetails.aspx?propertyId=10645521&PidKey=1746571115

3. Was 650k, now 637.5k

http://www.realtor.ca/propertyDetails.aspx?propertyId=10663628&PidKey=977443485
———————————————————-

Talked to my realtor buddy told me the market was soft and just getting an offer is hard enough. Price drops and product sitting on the market longer and longer is the new normal.

#172 jess on 05.20.11 at 9:27 pm

…austerity has a timetable ? the problem is austerity isn’t a new word or idea for most humans

Protests have been held in dozens of Spanish cities,
including Barcelona, seen here. They are urging a boycott of the country’s leading political parties. This sign reads: “Don’t vote for them.”

Mass protests have flared up across Spain during the past week over rampant youth unemployment and austerity measures imposed because of the economic crisis.
http://www.spiegel.de/fotostrecke/fotostrecke-68235-4.html

#173 45north on 05.20.11 at 9:35 pm

from a letter that the National Association of Realtors want people to send to Congress (US):

Implementing a new rule requiring a twenty percent or higher down-payments would stop the housing recovery in its tracks.

that’s the price you pay for lower housing prices, that’s the price we’ll pay

http://patrick.net/housing/crash.html#links

I am getting the feeling that things are moving fast. Here’s a link that links to a live feed of the protests in Madrid Spain:

http://globaleconomicanalysis.blogspot.com/

#174 Roy Stacey on 05.20.11 at 9:48 pm

Get used to seeing your listing languish for months. That has been the norm in the US for a while. First, mortgages went back to the bank -foreclosures- Then Banks were willing to negotiate on the prices. As this was happenning people started losing their jobs, then it wasn’t just the sub-prime idiot borrowewrs, they had already been largely wiped out. Now you are into the PRIME borrowers, where 2 income households reduced to 1 spells trouble. Sell the 2nd car, dip into your retirement account, negotiate -if you can- with a Banker. Sell the house, short sale, or anything is better than a -foreclosure. Some overburdened with debt mailed the keys back to the lender “jingle mail” as it is known here.

Others, with cash in hand, offered, and bought distress properties for 1/3 of the asking prices. There is a Bull mareket somewhere the pundit says….not sure I agree with him. Best idea: shed the debt, rent for a while, when the snowball starts rolling down the hill it may be too late to get the Hell out of its way, and your nice home becomes the Bank’s burden. Your nest egg scrambled. The Boomer too old to earn it all again.
Don’t believe me:? Ask Cleveland, Detroit, Miami, or even parts of New York, hundreds of cities great and small across the USA. By the way, the country is technically broke, and you idiots are selling us oil for dollars. Greater Fools, Indeed!!

#175 Where's the money Guido? on 05.20.11 at 11:55 pm

#150 Hoof – Hearted on 05.20.11 at 5:46 pm

More Olympic Village units up for grabs in Vancouver

Condos selling, but renovations behind schedule

QUOTE:

“It’s very encouraging how the receiver is moving ahead with the sales and it vindicates council’s decision to negotiate the receivership,” said Vision Vancouver Coun. Geoff Meggs. “What’s been happening is a steady improvement in the occupancy and a very dramatic improvement in the conditions for residents who are seeing the deficiencies resolved very quickly.”

Translation: Bullshit

Let’s look at it another way Hoof.
Since many prominant BCers and senators bought into this debacle originally, maybe they manipulated this development to lose money so they could swoop in and get the remaining suites at fire sale prices?
I wouldn’t put it past them. 30% off the top is pretty good on $1 million (including HST), and maybe even lower prices. Now they can have a condo for the relatives when they have their high class shindigs on the taxpayer dollar.
I’d love to see who’s money it is behind those sales right now!!! I bet you it’s some of those peeps……

#176 DJH on 05.21.11 at 12:34 pm

Robert Hogue may have referred to a “painful correction” in Vancouver, but his RBC report also predicts “near-term turbulence, but Canadian market to remain on track”. I believe that in the next year or two we’ll experience a moderate dip in prices (in some regions of the country) followed by a flat trend. And the interest rates will not climb to the point where everything turns sour and folks are leaping from their high-rise condo balconies. Relax – ain’t gonna happen.

#177 Real Estate 101 - Purchase and Finance - Hope to Prosper on 05.21.11 at 4:40 pm

[…] DINKS Finance – It’s Time to Buy a House Don’t Quit your Day Job – The Housing Double Dip The Greater Fool – It’s Different […]