‘Nowhere near a bottom’

In the news: 31% plunge in BC ‘just a breather’

No hope until bloated home inventory wanes

(Bloomberg) — Every time a housing statistic emits a faint heartbeat — last week’s 6.3 percent increase in the April pending home sales index, for example — there’s a flurry of pronouncements that the residential real estate market has bottomed.

Hope springs eternal. Housing has been down so long it looks like up, especially with the graph turned upside down.

New and existing home sales peaked in July and September of 2005, respectively. It took a while for homebuilders to catch the drift: Starts didn’t top out until January 2006, leaving a huge inventory of unsold homes in their wake.

Single-family starts, which are the most sensitive to changes in interest rates, are down 63 percent from the January 2006 peak, easily topping the 38 percent peak-to-trough decline in 1973-1975 and 57 percent 1984-1991 dive, and vying for first place with the 65 percent plunge in 1977-1981.

No wonder homebuilders are glum. In a departure from normal practices, the National Association of Homebuilders elected to release its monthly builder survey to the media via conference call on Monday. I received so many advance e-mail alerts I was starting to wonder if the index had sunk to zero in June, and the NAHB wanted to soften the blow.

The quantitative results weren’t that bad: The housing market index fell 1 point to 18, matching the all-time low of December 2007.

The qualitative context was awful. David Seiders, NAHB chief economist, called the “persistence of the low level” of the HMI, a measure of housing demand, “pretty troublesome.”

Price Option

The index “has been in a tight range for a 10-month period,” he said, “unlike the 1990s, when there was a quick rebound. None (of the news) is encouraging at this point.”

As downbeat as Seiders was on the June survey results, the builder responses preceded “the run-up in interest rates,” he said. “I haven’t factored that into the outlook yet. The risks are piling up to the downside.”

While homebuilders are pressuring Congress to enact a tax credit for first-time buyers, they are resisting the one thing that requires no legislative action to spark buyer demand, according to Thomas Lawler, founder of Lawler Economic and Housing Consultants in Leesburg, Virginia: Cutting prices. “Builders are reluctant to do that” to compete with the growing volume of distressed sales of properties in various stages of foreclosure, he said.

Forget the Granite

In Southern California, for example, one of the areas where the bubble started early and ended hard, median home prices are down 27 percent in the past year, Lawler said.

“If you look at observed transactions on distressed sales, you could make a case that we are closer to a bottom because prices have plunged so rapidly,” he said. “But that’s no solace to non-distressed prices.”

In Florida, another epicenter of the boom-bust in real estate, “sales are 20 to 30 percent below year-ago levels, but prices haven’t moved very much,” Lawler said.

Builders have been reluctant to slash home prices for fear of alienating previous customers and encouraging current buyers to wriggle out of their contracts.

“Once clearing prices are way down, you can’t attract buyers with granite countertops and gold trim,” Lawler said.

Foreclosures rose to a record 2.47 percent in the first quarter, according to the Mortgage Bankers Association.

Future Inventory

Using the MBA and other data, Lawler calculates that there are 1.34 million one-to-four family first-lien mortgages in the foreclosure process, which amounts to 27 percent of the inventory of existing unsold homes. A year ago, foreclosures represented about 18 percent of the unsold inventory, he said.

As scary as that number sounds, so far it’s just on paper. It takes about a year for today’s foreclosures to be dumped on the market, adding to the already-bloated inventory of unsold homes, according to Michael Carliner, a former NAHB economist and now an independent housing economist in Potomac, Maryland.

The foreclosure process varies from state to state and in the length of time it takes from the first default notice to the assumption of the title of the property by the bank.

A few relationships are constant. New home sales lead housing starts. It is starts (residential construction) that contribute to gross domestic product. Housing’s drag on growth won’t lift until builders whittle away their backlog. Lower prices seem to be the quickest means to that end. (At lower prices, the quantity demanded increases.)

“We are unlikely to see a sustained increase in nationwide new home sales until builders are willing to cut prices to match the plunge in the prices of existing homes in seriously distressed areas,” Lawler said.

If and when they do, you might not have to turn the home sales graph upside down to see the improvement.

(Caroline Baum, author of “Just What I Said,” is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at [email protected].

40 comments ↓

#1 My_view on 06.18.08 at 10:52 pm

Read this article, the whole world will be affected but not Canada.

http://tinyurl.com/5qckkp

#2 Peter on 06.19.08 at 12:37 am

Now there so called Provincial REAL Estate association has nothing to say now except saying “MARKET IS BALANCED !” Another joke of the day, as things comes out slowly and more nasty, I guess will they talk to the big real estate developers and builders by saying its time to offload all your existing inventory and cash out and let these little families suffers the PAIN or else you all would suffers!!!

#3 the guy, with the thing, from that place on 06.19.08 at 1:03 am

Garth, if real estate is local, why do you keep posting articles about the problems in the US? What happens there is not our fate. Ours could be worse (or better). Lets keep it in Canada eh. Beyond that, where do you see oil going ($ per barrell) and do you think that japanse car that runs on ocean water, tap water, or even tea could be massed produced? There are a lot of scary stories “peak oil” and all….but dont you think innovation will win out, simply because it has to, and our collective instinct is to survive and thrive?

#4 the guy, with the thing, from that place on 06.19.08 at 1:05 am

BTW that car is real (google it), it looks like a smart car and can run at 80kph, for one hour, on one litre of water (even ocean salt water) and works buy separating the hydrogen and oxygen and using the hydrogen to charge batteries …..or something…im no scientist heh

#5 Jim on 06.19.08 at 8:55 am

It’s amazing how so many Canadians think that “this time ” we will be exempt from the problems in the USA. I have given up trying to tell people how to prepare for the coming problems. My wife and I have been preparing for the coming debacle for several years.We sold our home in 2003 and have rented ever since.We have never been able to save like now and have zero debt(great feeling). Keep up the good work Garth.Our local bookstore just recently received three copies of your book and I bought all three for my sons. They are still willing to listen.

#6 PBrasseur on 06.19.08 at 8:58 am

So the number of sales drops, inventory rises but at least for a while prices are still climbing. It this the way it normally works when bubbles burst? Is that what occured in previous RE bubbles and around the world?. I presume with less sales and inventory rising prices are bound to come down at some point right?

Another question. Does anyone know what portion of the Canadian economy is held by residential RE activity. Apparently it may vary a lot, in Spain it’s 20%, in the US only 4%. What is it for Canada? Does anyone here knows?

From where I sit in the Montreal suburbs it looks like residential RE occupies a very large part of the (both above ground and underground) economy which means that a lot of the growth we’ve seen in the past few years is based on morgages (ie: debt). If that sector slows drastically I wonder what it will do to the economy. Apparently the government is picking up some slack by starting infrastructure projects (howevever thoses are also funded by debt and a lot of them do not really create new wealth as they involve reparing old crumbling ones).

Not a very bright picture is it?

#7 Al on 06.19.08 at 10:02 am

to the guy,

I think it’s worth reading the articles about the US as we are following the same path. The details are different (of course the details in the US vary considerably region to region, same for here) but the overall trends are clear. Since we have a crystal ball, why not use it?

#8 Leah on 06.19.08 at 10:47 am

The B.C. Real Estate Association says urban markets in the Lower Mainland are “balanced,” but markets are not stagnant. Buyers and sellers should brace themselves for what could be a long run of rebalancing.

Gotta love it! Long run of rebalancing. They see the writing on the wall and are trying soooo hard to spin thing. Rebalancing????

#9 pjwlk on 06.19.08 at 11:26 am

To “the guy, with the thing, from that place”: That car and any other HHO device you see on the Internet is total bullshit. You can’t change the laws of physics with electrolysis. It takes more energy to create the hydrogen then the energy you get back from it when it burns. That’s the bottom line…

http://en.wikipedia.org/wiki/Water-fuelled_car

#10 kabloona on 06.19.08 at 11:39 am

Separating the hydrogen from the oxygen (electrolysis) requires energy, i.e. electricity. That process has been suggested to produce the fuel for hydrogen cars (which burn clean, obviously, producing water vapour). The big problem is distribution of hydrogen…and it doesn’t make sense if you’re burning natural gas to produce the electricity which then produces the hydrogen – the best solution is hydro-electricity! And I am seriously off-topic…..

To get back on-topic: I watched that clown Brad Lamb (the Big City Broker) on HGTV last night saying there was a chronic “under supply” of condos in TO and that’s why people should just “suck it up” (his words) and pay wahtever they had to so they could “get into the market now”….B-wa-ha-ha-ha-ha!!!!!

The show was copyright 2008….but shot last year so I wonder whut ol’ Brad is saying now…..???

#11 pjwlk on 06.19.08 at 11:42 am

Garth, I too would prefer to see more Canadian content. I think you have clearly demonstrated what the future holds for us by comparison to the US and those issues are already being reported daily in the news.

I’m hear to read and to ponder the sharp incite you’ve shown over the last year of so on how our own market is insidiously effecting us as Canadians.

Would you also please at least make it more clear that any US related article posted is actually about the US so I don’t have to read 2/3rds of it to find out?

Thanks for a great website Garth! I’ve been following you since day one.

#12 Jen on 06.19.08 at 11:57 am

Those cars are $200,000 and they have only produced 20 of them and do not expect to mass produce for another decade.

#13 Future Expatriate on 06.19.08 at 12:24 pm

About that cute little water-burning Japanese car. With the oil companies still firmly in control of things down south, and our own Alberta oil economy driving things here, by the time all the tarriffs and taxes are slapped on that poor car, what sells by the millions in Japan for $25,000 would run $100,000 or more here.

So don’t count on the water car solving any problems in this part of the globe (other than South America) for quite some time. Not as long as oil companies exist.

#14 David on 06.19.08 at 12:25 pm

There is a considerable amount of talk these days about the New Urbanism, dead suburbs and revitalised rural communities.
The down side of the housing bubble is a whole lot worse than most would like to acknowledge.
Canadian and USA markets are very similar demograpically and all the it won’t happen here in the world won’t correct structural problems.
There are some really great articles to read and if one cannot see the obvious patterns, too bad.
http://www.prospect.org/cs/articles?article=the_meltdown_lowdown_061208

#15 SMWhite on 06.19.08 at 12:43 pm

#3, our banking system works the same as all other anglo-saxon country’s banking systems do, the coercion between the Federal reserve and all other central banks shows that what happens south of the border has a direct impact on our lively hood!

Its no coincidence that two major industries have announced numerous lay offs in Canada because of the lack of available funds south of the border. It’s spilling over to our own countries manufacturing and now into tourism and business travel and we haven’t even heard mention of the “R” word.

If you really want to understand what will happen(and not the real estate and banking industry mantra of a “the bottom” every time we hit new lows) you have to look at both micro and macro trends and not just in Canada, I mean if an oil rig in Nigeria can be shut down because of rebels and cause fuel at a pump in Nova Scotia to go up, I think its safe to say Canada isn’t as shielded from an American downturn( as us Canadian’s that like to think we’re morally and intellectually superior to Americans) as we WANT to believe. We are not different and I dare anyone to put up that stupid ass graph from the IMF that says Canada and Austria are RE havens safe from the pain happening in USA and Europe.

Keep believing everything you read in the mainstream press…

The problem was that most of the herd ignored the warning signs(rock bottom interest rates and how they lead to inflation and rising prices in commodities) because they were happy to be on their way to being millionaires for just owning a home (or two or five).

Before Chancellor Bush was elected for the second time he stated that “more Americans now share the American dream of home ownership then ever before” and the public ate it up, life was great, everyone was rich(Thanks for the extra dollars Greenspan).

Get ready for at least 4 years of a stagnate economy worldwide, meaning things are moving sideways (expect for the cost of borrowing money which will go through the roof) and whomever the sacrificial lamb is as the enxt president of USA, they will have one term, and will be punted out; the same Bush/Chenney/Rowe neo-cons that caused this problem, will be voted back in to do more damage/save the day, mark my words.

Stagflation has been here in Canada for the last year, look at the TSX, its up only 500 points in one year, that’s 3.5%; just covering inflation thanks to our lucrative stock market based on oil and metals…

The DOW to finally go under 12K this summer, maybe even before the end of the week!

As for oil, peak oil is a load of crap, what we’ve witnessed this past couple of years is “demand destruction” of petroleum products; and its only in its infancy!

PS

Garth, if Dion tries to implement this carbon tax crap in the middle of a stagnation period, you can rest assured the Liberals will never get a seat in the house of commons again, bad timing to announce taxing the public and telling us we’re going to raise fuel costs(Seeing as they’ve already gone up 100% in the past 3 – 4 years). I’ve heard the phrase his plan “could” lower taxes for some, but we all know that’s a steaming pile… Any favor that was curried by incompetence on the Conservative side has been wiped out with the Dion “plan” to destroy the Canadian economy.

#16 brazer on 06.19.08 at 12:46 pm

Charges at Bear Stearns linked to subprime debacle
http://biz.yahoo.com/ap/080619/bear_stearns_investigation.html

“The FBI announced Thursday that it had arrested about 300 real estate industry players since March — including dozens over the last two days — in its crackdown on incidents of mortgage fraud that have contributed to the country’s housing crisis.”

#17 JB on 06.19.08 at 1:08 pm

To the guy, with the thing, from that place.

I think Garth is posting it because of the parallels betwen the US a few years ago, and Canada at present.

For example:

“New and existing home sales peaked in July and September of 2005, respectively. It took a while for homebuilders to catch the drift: Starts didn’t top out until January 2006, leaving a huge inventory of unsold homes in their wake.”

We seem to be past our peak for sales, and starts seem to be up a bit still… and inventories are getting huge.

#18 Dan on 06.19.08 at 4:03 pm

Yes, that car runs on water and my current car runs on air. Let’s keep the idiocy to a minimum.

#19 sss on 06.19.08 at 4:16 pm

Those “green” technologies will be another dot-com-style bubble. Hey, flippers! Time to switch to green-tech.
Mr. Garth loves to draw only bad pics, therefore he feels better, talking about US here. But even in troubled US, there are many places, where property goes up, disregarding all mentioned troubles. Would be curious to hear Garth’s opinion on that.

#20 poorguy on 06.19.08 at 7:01 pm

http://yourhome.ca/homes/article/445655

Its coming faster than I was hoping.

#21 peter on 06.19.08 at 7:16 pm

Jim,
one question,
you sold in 2003 and are now renting?
Not that I think that is a bad idea, but the timing was a bit off, wouldn’t you say?
I have considered the same thing the last year or so. But I am sure your rent is more right now than if someone had a mortgage from 2003. I bought in 2003 and my mortgage is 800/month with a bungalow fully developed with a garage.

But to be out of debt is good thing.

#22 smwhite on 06.19.08 at 9:44 pm

sss, here’s my opinion,

Why don’t you start listing those spots in the USA…

Wanna know why you didn’t or can’t, because there aren’t any left, your talking out of your ass as per usual.

Both North Carolina and Washington states were the last of the safe havens in the USA, they have since succumbed to the inevitable. Even the bullet proof NYC market has since tilted…

As for Canadian content on housing, you’ll not find any until the tide turns and the media HAS TOO report the obvious. The USA media didn’t even admit problems until the past fall, they continued to claim the “soft landing”. So if you want content you’ll have to read between the lines of reports from the big banks, CREA and CMHC…

I think the lack of super happy real estate stories like the ones we’ve been bombarded with for the past 5 years says it all…

#23 Sam on 06.19.08 at 10:25 pm

Yes I agree too. I myself look for content purely focused on Canada than U.S. Let the U.S bastards rot and focus more on Canada. :)

#24 Suzukimum on 06.19.08 at 11:30 pm

Below is news release from OREB indicating the Ottawa RE market is still doing well. I am waiting for the prices to come down and wonder if it will be wishful thinking on my part. Has Ottawa’s economy been always more resilient than other cities in the country when there is an economic downturn? Can someone shed some light how the Ottawa RE market faired when there was a downturn in the Canadian RE market in the past?

Housing Market Flowers under May Showers

June 6, 2008 : Members of the Ottawa Real Estate Board sold 1,900 residential units in May through the Board’s Multiple Listing Service® system compared with 1,852 in May 2007, an increase of 2.6 per cent. There were 1,561 sales in April 2008

“Just when you think condos are going to drive the market forever, freehold properties make a comeback. We saw the most growth over last May in the 2-storey detached and 3-storey row unit categories, though apartment-style condos are holding steady,” said Board President Heather Skuce. “Prices are nudging upwards, but at a sustainable pace – in fact, Ottawa is Canada’s most affordable big-city housing market right now, according to the World Bank, so buyers and sellers can both feel confident about this market,” Skuce added.

The average price of residential properties, including condominiums, sold in May in the Ottawa area was $296,373, an increase of 7.4 per cent over May 2007. The Board cautions that average price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average price is calculated based on the total dollar volume of all properties sold.

#25 David on 06.20.08 at 5:57 am

Sam, all fine to say let the so and so’s rot etc. Their rot equals fewer sales for me and a lower family income, because the rotten so and so’s will not be spending their money buying what I sell. The same rot in the USA will be visiting Canada in the very near future and the results will not be pretty.

#26 smwhite on 06.20.08 at 8:55 am

Suzukimum, there has also been a surge of properties come on to the Ottawa market, up 16% during that time, we’re just behind the big markets out west and TO for increases in new listings at #5 in Canada the past month.

Funny how that article doesn’t talk about the growing supply, wonder why?

ttp://www.canada.com/ottawacitizen/news/bustech/story.html?id=e59603a2-d93d-4795-908e-490da1eed2bc

#27 Al on 06.20.08 at 9:13 am

Suzukimum,

I live (and own) in Ottawa, though I’m not an expert. I think Ottawa RE has tended to appreciate more slowly due to having the Quebec border so close. With the higher property and income taxes in Quebec, the houses have to stay cheap. But with their housing being so cheap, Ottawa housing prices tend not to appreciate so quickly. Just a theory.

For the economy, I’m guessing that we’ll tend to fair better because govt jobs are slow to be affected by recessions. If this downturn turns out to be big, then it’ll will hit govt jobs as well eventually.

According to the study in the link below, Ottawa’s housing price to income ratio was only 3 in the 3rd quarter of 2007. That’s not bad (Toronto: 4.8, Edmonton: 4.3, Vancouver, 8.4). Having said that, incomes will likely fall and people will become more conservative in their spending pushing housing prices down. I’m going to guess a 15% decline from peak, but I won’t offer a guess on timing (which is the hard part).

PS. My guess is BC is going to plummet big time, biggest in the country. Think 40% in some areas.

http://www.demographia.com/dhi-ix2005q3.pdf

#28 JB on 06.20.08 at 9:30 am

Suzukimum,

What the don’t state it in the article about Ottawa is that in April 2008’s the average price was: 295,144 – essentially a flat month-over-month price ‘increase’ ( in May: $296,373). Almost a loss when you factor in inflation.

What is interesting about this is that housing prices stayed roughly the same, even though almost 300 more units were sold in May than April, this year.

Keep in mind that May is the biggest selling month of the year, as well.

What does this mean? Well, according to the ‘Technically Screwed’ article Garth Posted recently:

“In an upward trending market, rising prices must be accompanied by rising volume; during a short corrective period, the lower prices are accompanied by lower volume. A negative trend change is signalled when prices advance on lower volume, or if prices decline on higher volume.”

So, we are precariously close to having prices decline on higher volume, which signals a ‘negative trend change’.

Time will tell.

#29 jp on 06.20.08 at 11:11 am

The housing crisis will not migrate over to Canada because we don’t have the same level of government control/mis-control in the sector. Not yet, at least.

Fannie Mae, Freddie Mac, the FHA, FHLBanks, Ginnie Mae, VA, and RHA control the market down south. They all made it easy and cheap to buy, subsidizing the bubble.

All we have is the CMHC, and it has been far more conservative.

Unfortunately the CMHC is moving in the direction of Fannie Mae and Freddie Mac by relaxing standards. If a bubble does emerge, it will be courtesy of them, with a helping hand from the Bank of Canada.

Of course Garth won’t talk much about government’s distortionary interference in the housing market. But that’s because he is part of the government and therefore part of the problem.

#30 anonymous on 06.20.08 at 12:24 pm

Jim,

You were way too early when you sold in 2003. What a wasted opportunity. I bought in 2003 and sold in 2008, have no debt and made a pile of money too. Never even had to save up. My debts are paid off and I’ve got a bank account full of money.

The problem with bears is they are WAY too early, too scared to profit and can’t seem to spot the turnaround point.

And forget oil. Take profits and move on. It’s time to start looking at distressed US financials. But not all at once… largecap financial stocks have a way to go before we hit bottom.

#31 David on 06.20.08 at 7:17 pm

JP, you have it all wrong totally. What you are saying is that there was no asset bubble, even though empirical evidence suggests the contrary. All levels of government in Canada make microscopic budgetary commitments to housing needs, which have totally been in the hands of the private sector for ages now. If the market is distorted you really can not honestly blame government other than for pursuing policies of laissez faire benign neglect. Canadians can buy and sell their primary residence tax free of capital gains incidence, so by your standards the transaction is friction less and free of distortion through taxation.

#32 Jim on 06.20.08 at 7:43 pm

To Peter and Anonymous: In answer to your question about selling in 2003 and then renting, there was actually more to our decision to sell and rent. At the time , I was 60 years old and retired. My wife was 55 years of age.She was stilll working but was offered a job back in our home town.So we sold and moved back after nine years away, during which time we sold three homes.We were not anxious to buy here because this city is primarily an industrial city with a history of booms and busts.Also, at our age,we were content to go the rental route. We are now more free to travel and see our grandchildren(much more important to us than whether we sold too early).But, we have always been prudent SAVERS and wise investors.I would rather be early than late to this party because we have not seen anything yet.

#33 Mike on 06.21.08 at 4:14 pm

Jim

Very wise words indeed. As I grow older…now 46… I do feel we get far more intuitive about things in life.. instinct say for lack of a better word… A wise and wealthy man from New York once told me in regards to real estate
“better to be two days early than 2 seconds late”.
We sold our house to developers last year for almost twice market value. Although we will miss the house and location the alternative.. crowded and noisy… surrounded by condos… is much worse.. We have looked but in T.O. it is still too much cash for ONE asset
indeed so we will take Garth’s advice and rent for another year and see where that takes us.
Jim…. better to be early than late… you did the right thing…. you left the table a winner… maybe not as much as you could have but still a winner. In my books that is wise indeed.

#34 WetCoaster on 06.21.08 at 7:18 pm

The problem with bears is they are WAY too early, too scared to profit and can’t seem to spot the turnaround point.

This is what is so disgusting about the credit bubble. All of a sudden we are deluged with pretend property magnates who think they, alone, are responsible for the global sea of liquidity – as though, they were sheparding the yen carry trade and steering the central banks through their machinations.

Everyone has a different life circumstance; but not according to the anon poster. He’s sharp as a tack and everyone else is just plain stupid.

Future generations will probably look back at this era as The Dark Ages.

#35 Terry on 06.22.08 at 1:22 am

Suzukimum
“My guess is BC is going to plummet big time, biggest in the country. Think 40% in some areas”

There is still a huge baby boomer generation in Canada that will retire over the next few years. BC is still the choice of many for climate and view. Areas like the Okanagon will see prices come down but not as much as you might predicate. There is a lot of money in Alberta with wealthy boomers waiting to sell there homes for a warmer climate.

#36 PoppingBubbles on 06.22.08 at 12:29 pm

Anonymous… WOW, what AMAZING market insights you must have to maximize your gains by selling in 2008. Apparently you must have known that:

(1) CMHC would start allowing 40-year amortization and zero down-payment mortgages in 2006 to 2007

(2) The 2007 liquidity crises was going to happen but that pain would be delayed the U.S., Canadian and other central banks printing massive (beyond comprehension really) amounts of money

(3) Oil and commodity prices would boom to unprecedented levels, thus providing the only real lifeline to the Canadian economy and dollar.

I’m in AWE of your ability to see into the future to time the top of the bubble.

#37 Lawrence on 06.23.08 at 11:35 am

Garth;

Here is some “good news” to balance off your selective and negative (might I also suggest self serving – book sale related) approach to Real Estate News.

Having completed my purchase this spring in Palm Springs, I am happy to see volume pick up and the perceptions begin to change.

Picking the bottom in a real estate market is not nearly as important as avoiding the top. When I purchased US dollars for my transaction on February 28, the rate was sitting at 1.028. Since that time, the CAD has sagged and money saved on the “buy” would be lost on the currency conversion so I am happy with the timing. I purchased highly desireable condo at a very good price – 40 percent less than the price in 2005 with currency that was 30 percent stronger than in 2005.

All the chicken little’s of the world, most of whom have cleaved to your ample chicken little bossom will miss the opportunity to make a smart purchase during this time. From coast to coast to coast, your advice is all the same – rent don’t buy – and it is not good advice.

There is money to be made in real estate right now and places like Toronto, Calgary, Victoria, and Edmonton stand to shake off the over supply quicker than you realize and will make gains of 5 – 10 percent in the coming year.

Here is some news of interest to Canadians.

Coachella Valley – Palm Springs Real Estate News

April housing sales strongest since September 2005

April’s housing sales marked the strongest year-over-year showing the Coachella Valley has seen since September 2005.

The 912 homes sold in April reflect a 3.8 percent drop from the year before – a marked improvement compared to typical year-over-year declines that have hovered around 30 percent.

The sales also mark a 25.1 percent increase over March, according to a monthly analysis of the valley DataQuick Information Systems released this week.

A bulk of April’s sales were resale homes, which made year-over-year gains.

It comes as median prices are down to $301,000 – the lowest since September 2004 – and as local real estate agents are touting the Coachella Valley as a prime buyers’ market.

“We’ve seen little baby steps, little baby steps (in the market upswing). Now you’re starting to see full strides,” said Sam Schenkl, executive officer of the Palm Springs Regional Association of Realtors, which represents 1,500 agents and brokers.

DataQuick’s April analysis also shows:

The resale market continues to drive housing sales.

A total of 496 existing single-family homes sold, up 2.5 percent from April 2007. There were 276 resale condos sold in April, up 1.5 percent from a year ago.

New construction continues to struggle, though sales rose over previous months. A total of 140 new homes were sold. That’s a 27.1 percent decline from April 2007.

The valley’s median price of $301,000 was down 22.8 percent from April last year.

The most expensive home sold in April was a $7.7 million home in Indian Wells.

April’s sales continue an upward swing that began in the fall. It’s the highest number of monthly sales since July.

Coldwell Banker’s local offices recorded about 300 open escrows in April, regional vice president Ron Gerlich said.

The company is “right on track” to see the same in May, Gerlich said.

He noted there continues to be a number of people looking at homes but not quite ready to commit to a purchase.

“Second quarter, I’m sure we’ll be in better shape,” Gerlich said of the increasing sales trends. “There’s all sorts of activity.”

Experts credit renewed confidence from investors, notably Canadians, for helping boosting April’s sales.

Many visitors who have enjoyed the desert all season want to buy before they leave and summer starts.

“People have been holding off; now they’re ready to make the move,” Schenkl said.

#38 nonplused on 06.24.08 at 2:43 am

jp,

I think if you look at the behaviour of CMHC during the last 4 or 5 years, you will find that they have been every bit as reckless as the US financial system collectively and have been a major factor in driving real estate higher. 40 year, zero down (the famous 0/40) floating interest rate mortgages???? A person buying a house at 30 would not pay it off until they are 70, a full 5 years after they retired and 10 years after the OSB was past it’s expected lifespan. (OSB is the glued particle board they replace much better plywood with, which was what replaced much better solid wood.) It takes a new home buyer with a 0/40 46 months to pay off the CMHC premium before they even start eating into the real principle. It was and is just nuts and our regulatory bodies should have stopped it.

PS if we do get a forclosure crises in Canada similar to the US CMHC will not have the capital to fulfill thier mandate. What affect that will have on our banking system should be interesting.

Lawrence,

Congrats on the condo. You might want to thing about a Smart Car to get there as well as with oil at $140 it may get pretty expensive to fly or drive down there multiple times per year.

Oil Sands Haters,

No doubt it’s a messy and C02 emiting process. But it’s the major forward supply of Canadian oil now as conventional oil production in Alberta is in decline (peak oil may be crap but Alberta has peaked already and is in decline and there doesn’t seem to be any technical ideas to reverse that fact). There is talk around building Nuclear (horors!) plants near oil sands recovery operations, using the plant to power the grid and then using the byproduct steam to replace the natural gas fired steam process. This wouldn’t get the CO2 emissions down to conventional levels but it would help. But then unfortunately you add a nuclear waste problem to all the other waste problems in the area. Yuck. Plus those reactors aren’t cheap. We need $140 oil to build them.

Garth,

No doubt your market calls have been pretty good over the years, and your call on iterest rates has been right so far. However, with real rates already negative, I don’t think they can still “have nowhere to go but down” indefinately. Maybe they won’t go up for a while, but they are already headed higher in Europe and with real inflation at levels not seen in generations I think it’s only a matter of time before they have to rise here and in the US too. Otherwise the dollar is toast and we’ll have a far worse crises than the debt deflation the Fed is currently attempting to fight. Eventually they will realize they are pushing on a string and something has to be done about dollars that only go down and prices that only go up, which hurts everybody. But when I don’t know. But no trend lasts for every. Interest ratees have been generally declining since Volker left the Fed, but there is only so close to zero you can go before there isn’t any more down for them to go. Just a thought.

#39 SMWhite on 06.24.08 at 10:51 am

“April housing sales strongest since September 2005”.

Yeah, and still losing $! And your proud of it? Man are you in denial, you think that a few thousand Canadian baby boomers with too much money are going to save the American RE market? Ha ha ha I’m peeing my pants your so funny.

http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_History_062418.xls

http://money.cnn.com/2008/06/24/real_estate/home_prices_CaseShiller_April/?postversion=2008062410

http://www.bloomberg.com/apps/news?pid=20601103&sid=amwWvnNh92tg&refer=us

http://www.forbes.com/afxnewslimited/feeds/afx/2008/06/24/afx5147119.html

http://www.marketwatch.com/News/Story/Story.aspx?guid={EB1B0595-37FA-4542-88A2-CE470ACAF101}

Nowhere to go but up Lawrence, you should keep buying more American RE. All from just one article that you “hand” picked to show us how smart you are buying right in the middle of the downturn. You realize they are officially heading into recession, and we’re following suit? I know CTV and CBC aren’t announcing it, but they will, when its old news(The kind you like).

Ironic how you call anyone that says housing in Canada is a Chicken Little because of RE being overpriced yet to quote you “Picking the bottom in a real estate market is not nearly as important as avoiding the top” yet you recommend purchases in some of the most over-flambeed markets in Canada, “There is money to be made in real estate right now and places like Toronto, Calgary, Victoria, and Edmonton stand to shake off the over supply quicker than you realize and will make gains of 5 – 10 percent in the coming year.”

Yeah their is money to be made by those selling their spec property, that’s it that’s all.

Lawrence because you don’t understand inflation and apparently asset bubbles maybe you should do a little research on the RE and stock bubble of Japan in the late 80’s, let us know what you find out. If you were half as smart as you think you are you would be dangerous.

You do realize we are entering a global recession. Stop doing your economic research from the Vancouver Sun.

#40 SMWhite on 06.25.08 at 11:27 am

Lawrence keep waving the flag buddy.

One article from a Palm Springs RE agent and we’re supposed to believe the worst is behind us in the US? You are joking right because your post is hilarious. I’ll take economic advise from somebody like Robert Shiller before I take advice from a specu-flipper like yourself.

Congrats on buying into a market where consumer confidence is at a 16 year low and housing is only halfway through its self-purge and the economy has started into recession(Look at the DOW, NASDAQ, DAX, HANG SENG, FTSE they all have moved sideways from the past year).

You have the raisins to say ” its not important that you buy at the bottom, just don’t buy at the top”. Then you go and say these super overvalued and inflated markets (Toronto, Calgary, Victoria, and Edmonton) still have lots of money to be made in them, I do agree with you on that, people in those markets will make money, by selling their overpriced property.

Your the same guy that was scoffing me for warning about inflation and that it wasn’t in check. Yet 3 – 4 months later here we are, its a large problem for all industries, RE included.

The sky isn’t falling folks, just the equity you plan on using to retire as a millionaire is. Homes in Canada have 5 -10 years of speculative pricing built into them right now depending on what part of the country you live in…