A few more things an informed public should know, in random order. I dedicate this to Jamie, a thirty-something from Langley who sent in this comment yesterday:
I’ve been following this blog for 7+ years. Same message is being pumped today that was being pumped 7 years ago. People on this blog talk about all the “spinning” that the real estate pumpers do, but at least they sell homes that people are living in! What has Garth done? He’s made people poorer who listened to him. Listen Garth, if I would have waited for your predictions to be right I would be an old man by now. Thank god I never drank your “kool aid” and bought when I did, we’ve made over 100K on our home and own two-thirds of it outright. I know you won’t post this, because your narrow little view of the world can’t handle criticism that is backed by historical data. The truth is you are a failed Nostradamus. End this blog, it’s getting ridiculous. No end in sight for the rise of Vancouver real estate prices, no mercy for those who never bought. Life is cruel and you haven’t even turned out to be right like a broken clock is right (twice a day). A broken clock is better than your old ass!
See what real estate does to people? Young Jamie must feel so insecure in her mortgaged house in a declining market that she lashes out at a saint like moi. And I note the comment about reading this blog for three years longer than it’s existed. It makes everything else so damn credible.
Anyway, this is for you.
The world‘s looking at Canada, and marveling at people like Jamie. Wall Street’s been busy constructing what are now known as ‘great white shorts’ – hedge fund plays betting against the value of houses in places like… Vancouver. Here is what Pimco had to say this week (the world’s largest bond fund, if you had to ask):
“Our secular view is that housing in Canada is overvalued and due for a correction. We believe a 10%–20% real decline in national housing prices over a five-year period is very realistic, with much sharper corrections in some local ‘hot’ markets such as Toronto, Vancouver and Montreal.”
And that’s the dovish view. The dudes at The Economist think 50% is more like it. Meanwhile this report was causing many ripples as it became more widely circulated. Written by Toronto-based Canso Investment Counsel, it concludes starkly: “We hope very much to be proven wrong, but the analysis is clear. Canada borrowed its way out of the 2009 Recession by stoking our residential housing market to absurd levels. We cannot afford the houses we are living in.”
Even starker: Canso has no confidence when the crash hits (there appears to be little doubt in the company’s position), that CMHC would not blow up. More consequences. The feds have insured at least $200 billion in mortgages on houses where the owners have 80% or more financing – equity that would be wiped away in any meaningful decline.
Just imagine what a default of that magnitude would do to the economy.
On a lighter note, it’s great fun watching what realtors across the country must do these days to flog houses, with slagging demand and greedy little owners who think prices only go up, then stay aloft forever.
Here’s a house in the beautiful hicksville of Smithers, BC. Realtor Jeremy has promised to reduce the price by $1,000 a week, until it’s sold. “Don’t be caught saying ‘I should have!’” he cries. At $374,000, that could take a while.
Meanwhile, blog dog Gregg has just come back from a trip to the Okanagan Valley. “We spent a few days in Kelowna. There are “For Sale” everywhere. It’s pretty unbelievable. But, the new construction is even more unbelievable. As expected, the new projects are trying desperately to lure in buyers. This one project near the shores of the lake (but right in Kelowna) really seems desperate. Check out their new marketing slogan.”
And back in Ontario, how do you move a house ‘loaded with extras on a premium pie-shaped lot’ when it’s in a graying, post-industrial community like Grimsby? You list for a great price – in this case, one dollar. “My client will work with any offer,” realtor Marc says. “Houses on the street/area range from $450K-$550K.” Talk about bait & switch.
Of course, prime real estate is all about location, and in Toronto it’s always a plus being near a major transportation route. Every agent knows that. So just imagine being close enough to the Gardiner Expressway to commute to work easily – by walking on the hoods of the cars grinding past your window. Hurry. Only $249,900.
Finally, for those who think this blog’s yammering about the perilous future of real estate is just my contribution to global warming, consider the latest new home sales numbers from the nation’s biggest market – released a few hours ago. Condo sales down 46% from this time last year, and running 38% below the 10-year average. Total new home sales off 30% from 2012, and 36% below the average.
It’s worthwhile knowing these things. Then make choices.
I emailed the Langley kid shortly ago. ‘When you grow up, Jamie, you will know better.’
Might be sooner than later.