The "Forever" Canadian Housing Bubble

[GRG55]

Re: The "Forever" Canadian Housing Bubble

vancouvergoin'up did, that's who. -= can't say if 20 yrs, but certainly 10.

Yes he did. But I have to wonder if even he thought it would get as crazy as it did?

This was one of his last posts on Dec 22 2010, so it would seem he did:

Wow folks another phenomenal year in Real Estate in God Blessed Vancouver. Once again Shiller proved how wrong he was on Vancouver Real Estate by his uneducated comments regarding Vancouver being tghe bubbliest City in the World over a half decade ago!!! Anyone who listened to him lost out big time. Those who listened to me over the past years have made a fortune, their families and friends proud. 2011 and going forward is just going to be awesome for Vancouver. With home prices trending above 2 million on the West Side we are poised to see 10 million plus home prices as an average over the next 20 years. I haven't posted for awhile because I wanted to let the housing stats speak for themself. God Bless Vancouver the BestPlaceOnEarth

And my response at the time:

Waiting for the Vancouver property bubble to burst seems much like waiting for Godot...

Metro Vancouver stands out from the national crowd

High prices, strong demand, offshore investment skew Canadian numbers

By Derrick Penner, Vancouver Sun April 16, 2011

From Vancouver realtor Tom Gradecak’s perch inside the market that the Canadian Real Estate Association says skewed the national picture at the end of March, things seem to have cooled a bit — but in a relative sense.

“Earlier in the year you could pretty well list a house and almost there were going to be seven, eight, nine, 10 offers, sometimes more,” Gradecak said. “Now, we’re seeing two or three or four, which is still, relatively speaking it’s busy, [but] not quite as frenzied.”

Metro Vancouver saw 4,080 sales in March, according to the Real Estate Board of Greater Vancouver, which was a 31.7-per-cent increase compared with February’s 3,097 sales, a 30.1-per-cent increase from the 3,137 sales in March of the previous year and the third-highest for any March on record...

“...A record number of multi-million-dollar property sales in Richmond and [Vancouver’s west side] are pushing up average prices for Greater Vancouver, British Columbia and nationally,” said Gregory Klump, CREA’s chief economist. “If Vancouver is excluded from the equation, the national average price increase is cut by more than half.”.

Porter said that on a national basis, sales are generally trending downward, but Metro Vancouver’s 30-per-cent jump in March stands out in stark contrast.
“That absolutely is swimming against the tide, and that’s before you get into the whole issue of prices,” Porter said.

Porter said that for the most part, Canada’s overall market “looks to be headed for a soft landing, at least in the vast majority of cities” with respect to the market cycle.

However, he added that the risk of a severe correction in the market “looks highly concentrated in geographic terms.”

“Obviously Vancouver has very special and specific dynamics,” he said referring to the influx of offshore investment.

“I’m not here to say it’s headed for an imminent fall or anything, but it does seem to have diverged from underlying economic realities,” Porter added.

Not sure if we will see those $20 million average home prices. But there's still another dozen years left in his forecast horizon.

[jk]

Re: The "Forever" Canadian Housing Bubble

It's surreal that this chart is real. Who 20 years ago predicted the wanton insanity displayed there?

vancouvergoin'up did, that's who. -= can't say if 20 yrs, but certainly 10.

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

It's surreal that this chart is real. Who 20 years ago predicted the wanton insanity displayed there?

[GRG55]

Re: The "Forever" Canadian Housing Bubble

Vancouver was certainly Goin' Up. Now? Not so much.
But the late stage pop in condo and townhouse prices is pretty obvious - by that point they were the only things that anyone could "afford". And the BC Provincial Government goosed this late stage market with an utterly stupid incentive policy (the helicopter cash drop noted on the chart). As predicted it just sent the price of lower cost housing screaming higher.

A refresher here:
https://globalnews.ca/news/3130685/t...ed-by-experts/

"...Their plan is supposed to make it easier for first-time home buyers to enter B.C.’s hot housing market by using government funds to match down payments up to $37,500, or five per cent of the purchase price, for a maximum property value of $750,000. Clark says it’s an interest-free, 25-year loan with no payments due for the first five years...

...“It’s a pretty bad idea. It is counter-productive and if you give people more purchasing power, they will be able to bid up the prices of the homes that they’re looking at, and that price increase will eat up any benefit from the subsidy. The same people who were going to compete for a home at $500,000 are still going to be competing for that same unit, but at a higher price. They’re just going to compete away the benefit. The only people who gain are existing homeowners or developers who benefit from these higher prices.

“This is not going to improve affordability anywhere in the market and if anything will make it worse, for sure in the lower end and possibly creeping up above that $750,000 [cut-off price]. Different parts of the government’s policies really don’t fit together. They claim to want to promote affordability but they want higher prices. Well, higher prices are the opposite of affordability, so it just doesn’t fit together at all...

From Brian Ripley http://www.chpc.biz/

[GRG55]

Re: The "Forever" Canadian Housing Bubble

Overdue for an update from Brian Ripley. Data through November 2018. Dead cat bounce in Van? Maybe too early to tell. The Big Smoke (Toronto) looks to be holding up remarkably well. Maybe the Doug Ford effect?





Consumer Insolvency Filings Spike In Canada
12/10/2018 12:36 EST
British Columbia and P.E.I. led the way with jumps of roughly 20 per cent in insolvencies.

With rising interest rates putting financial pressure on households, Canada is seeing an increase in consumer insolvencies.

There were 11,641 consumer insolvencies in October of this year, up 9.2 per cent from a year earlier, according to data from the Office of the Superintendent of Bankruptcy. The insolvency numbers include both bankruptcies and consumer proposals, an alternative to bankruptcy that has become popular in recent years.

It's the largest number of consumer insolvencies for the month since at least 2010...

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

This is interesting: EXCLUSIVE: Secret police study finds crime networks could have laundered over $1 Billion through Vancouver homes in 2016
https://globalnews.ca/news/4658157/f...-police-study/

More detail. Start at 7min mark or so if interested. Upshot is that '86 expo puts Vancouver on the map. Hong Kong wealth flees there after '97 handover. Liberals come to power in '01 and see it. Make shell company real estate investing easier to spur money flow. Open casinos in '04. Casinos take big piles of cash no questions asked. NDP comes to power last year and new AG realizes no cases have been brought and a decade of obvious laundering had been going on. So casinos for cleaning small dollar street level dealing, real estate shells for moving big money, just like your link. Makes perfect sense. A huge part of economic inequality and real estate bubbles is always crime.

PS: For those of us to the south who had to throw all our romaine lettuce out again, get used to it. Recent FDA deregulation means nobody's inspecting the water, and they're gonna keep finding e-coli because they're using water with some percentage of cow dung in it now that nobody's watching. If the supermarkets and restaurants and health insurance companies take a hit, who cares? They usually can't trace it back to a single source, and by that time you already sold the lettuce and saved the money by not having a clean independent water supply. Deregulation in action, baby. Who knew?

[kriden]

Re: The "Forever" Canadian Housing Bubble

This is interesting: EXCLUSIVE: Secret police study finds crime networks could have laundered over $1 Billion through Vancouver homes in 2016
https://globalnews.ca/news/4658157/f...-police-study/

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

News from Seattle: Housing price dropping: https://www.seattletimes.com/business/real-estate/seattle-home-prices-drop-by-70000-in-three-months-as-market-cooldown-continues/

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

just a minor point- you're comparing a $30k 3 night hospital stay in the u.s., which presumably includes the physician fees, mri's, cat scans, meds, pulmonary therapy, etc, to an unbundled price list for the hospital bed alone. in general of course you're right.

re universities- the only down side i can see to a foreign university is having a smaller network of u.s. friends/contacts assuming the student eventually will live in the u.s.

You're not wrong. I'm sure there are more downsides. Plane tickets. Visa fees. Immigration troubles. It's not gonna be a cakewalk. The point is the brain drain. Only something like 35,000 American kids left the country for college in 2011-2012. More than 10 times that came to the US. That number has been dropping by 7% per year, while the number of Americans leaving has been increasing by more than 11% annually. If the trends continue, we're looking at the US becoming a net exporter of students somewhere in the 2030s. And I think it's largely past reputation holding things together as it is. Housing is worse yet. As the echo boom ages out of child-rearing age, the American Dream will leave them behind forever. I don't pretend to know the politics of resentment that will create, but I bet it will be nasty. Meanwhile, from what I can gather, Gen Z looks at them as a failed group they're desperate not to emulate. The new urbanism and techno-centricity predicted off millennial trends may prove to be nothing more than a temporary and desperate recessionary reaction born of hopelessness and lack of opportunity than genuine long-term trends and desires. And if that's the case, there's a whole lot of re-thinking that needs to happen about what the cities and markets of the future will look like. How many might have preferred cable, but only could afford Netflix? How many preferred to live in a house, but only could afford to share an apartment? How many preferred to live in the burbs, but only could find work in a major metro? How many want to have kids but can't afford housing? How many regret student loan debts?

The running assumption is that markets are about choice, but they never were even theoretically supposed to be that. They were supposed to be a way to allocate scarce resources; to force those who cannot pay to go without and reward those who can with endless bounty: a price-setting mechanism. If you stop to think for a second that they don't reflect choice, then trends--especially during and following major recessions--might be more reflective of decisions made under duress than decisions reflecting the true desires of people. And to the extent that's the case, a bunch of bad assumptions about what the future will/should look like are going to be made. Now, imagine it's your job to make long or even medium term speculative investments in real estate. Well, if you buy into the new urbanist mantra, Vancouver seems like a sure bet. Buy that busted down rubble pile that used to be a ranch for seven figures. Nobody will live in Saskatchewan in 20 years. But if it's all base on a false premise, then whoops! Ditto with the tech industry. Amazon was cool 8 or 10 years ago. So was Google. So was Facebook. So was Uber. So was Tesla. But if this were 1998, you could say the same thing about DeLorean. And Merry-Go-Round. And Atari. Even if you had dumped money in the market back then, you would have made more off buying M&T Bank than Apple. The popular narrative is skewed, not just with survivorship bias, but with tech bias. It's all very easy to walk away from, or for kids never to get involved with in the first place. They're making it harder, as my recent effort to de-Google-ify taught me. But it's certainly easier than changing home fuel sources.

The indispensable trillion-dollar companies of the now feel more dispensable than ever. And the groupthink feels as bad as ever. They say the gig economy is the future. But the stats say otherwise. They say dense urban cores are the future. But the stats say otherwise. They say smartphones and apps are the future. But the stats say otherwise. They say Facebook is the future. But the stats say otherwise. They say Netflix is the future. But the stats say otherwise. They say car ownership is passé. But the stats say otherwise. I seem to be the truly rare contrarian in even bringing this up to begin with, never mind in seeing it all as connected. But the really cool, exciting stuff is not going to happen on an app. It's not going to happen in self-driving cars. It's not going to happen in the gig economy. It's not even going to happen in Silicon Valley. That was the last chapter. I, for one, am actually really hopeful that the next one will be better. But it's not going to be easy, and it's going to be a fight. Yesterday's upstart garage innovators are today's entrenched monopolies. The only solace I take from history is that Americans, even without thinking about it, tend to be pretty good at finding a way around. And here's the real kicker: They're already doing it.

[jk]

Re: The "Forever" Canadian Housing Bubble

just a minor point- you're comparing a $30k 3 night hospital stay in the u.s., which presumably includes the physician fees, mri's, cat scans, meds, pulmonary therapy, etc, to an unbundled price list for the hospital bed alone. in general of course you're right.

re universities- the only down side i can see to a foreign university is having a smaller network of u.s. friends/contacts assuming the student eventually will live in the u.s.

[dcarrigg]

Re: The "Forever" Canadian Housing Bubble

Vancouver existing home sales fell -36.6% Y/Y in August. That's -25% below the 10-year August sales average. Moreover, the total number of homes currently listed for sale rose +34.2% Y/Y.

https://app.hedgeye.com/insights/700...lem?type=macro

For whatever an anecdote's worth, I met a couple kids just graduating college up here who were offered jobs in the Bay Area for bigger money and refused because they didn't want to deal with outrageous prices, and so became roommates and picked up jobs paying substantially less locally. And this area's not cheap. It's the first direct instance I heard of big tech actually losing talent because they refuse to expand out of their little bubble. The clustering effects were good, for a while. Anyone who got in and got a piece of property got to catch the ride up. But I have a feeling if the air ever gets let out of this thing, it could be a long time where reputation keeps people from considering moving to these places that everyone stereotypes as super-expensive. Just like Harlem hasn't been majority black in 20 years, and South Boston probably has more gluten-free Harvard grads than Will Huntings, the reputation a place gets can long outlive reality.

When kids at the top of their class in top 5 ranked universities say, "I'd never work at Facebook, I don't even want to move to the Bay Area" that's a problem. There maybe a generation coming up for whom places like Menlo Park and Mountain View are more or less synonymous with places like Wall Street and Greenwich Connecticut. Bougie; culture-less; not cool. Not sure how much of this translates to Vancouver. But reputation matters. If the first thing a 20 year old kid hears/thinks about a place is it's full of rich douchebags and boring old business assholes, it's not going to be a place they want to move. The "young West-Coast entrepreneurs" are looking a bit long in the tooth these days. Sure, they paper over it with botox and hair plugs, but kids can tell. San Francisco rode the 1967 summer of love thing a long ways. That image is pretty much dead now. Earth tones have long since been replaced with sterile blacks and whites and cold greys.

It feels more and more like a big shift is coming. Not just with housing prices. With preferences generally. Urbanism, economics, politics, culture, the whole lot of it in North America feels distinctly "stuck" and desperately holding on. News stories routinely use the word "young" to describe people in their 40s and 50s. Another anecdote--neighbor's kid just went off to college. Brilliant, great grades, great athlete, all around top-notch kid. Got into some top US universities. Eschewed them all for a foreign university. The second best one in its nation, so no slouch, but without the reputation of some of the American ones. The reason? Cost. Smart kid, so whipped up a spreadsheet and did the math. Student health insurance and health fees alone at the US school cost about as much per year as room and board at the foreign school, whose nation provides healthcare to students. Tuition was about 1,000% higher at the US school. Even the parking fee would have come out to $2,500 or so over the course of a degree. Free at the foreign school. Facilities were older, less luxurious. But the after tax total cost was only about 15% of the US school, for a place that offers a comparable education. So why the hell pay six or seven times more?

I was impressed to see a 17/18 year old thinking like this. But then I was at a graduation party and more were talking about it. In fact, all the kids were talking about their friends who chose foreign universities, and the kids younger than them were excited about the idea too. All of them worried about cost. All of them talked about having older cousins or siblings in their 30s who still can't afford a house, and how they don't want to live where that will happen to them. They seem to be increasingly likely to know people abroad, make friends with people abroad online, and consider leaving the US. The Chinese-American couple up the road is encouraging their kids to move back east for opportunity. The US is still the safest bet in the world for investors and wealthy people. But it's not so great for working or middle class people. And the smart ones with ability will figure that out and simply find ways to arbitrage the costs of living in the US by getting out of dodge, the same way wealthy people avoid taxes by using tax havens. I mean, hell, look at the uninsured prices for hospital care just 5 or so hours' drive north of here. That's a joke. Maybe 15% or 20% of US costs, not accounting for the CAD-USD conversion, which makes it 30% cheaper still. Imagine a $240 Canadian ambulance ride?! Or imagine a $2,800 Canadian night in the hospital? What is it here? $10,000 or so US per night, right? Imagine paying $20 CAD for a cast. They'll pork you for $7,200 USD just over the border. If you don't have any health insurance and you have any sort of injury/illness that can wait a couple hours' drive, you're guaranteed to be better off moving into a hotel and paying the uninsured fees up there. Anything but staying in the US of A.

I think the kids are picking up on that. College is the same way. Prices here are just so ludicrous that it's worth going to where they're not. And housing is similar, only not localized to the USA. You can buy a house for the price of a VCR in Cleveland (where you can watch the best NBA player maybe of all time for $5 a ticket), and not too much more in Trois Rivieres (which may have the lowest crime rate in the world), but you can't sleep rough in a tool shed for less than median family income in San Francisco and Vancouver. And what do you get for the pleasure? A city whose prices have driven out all reasonably priced culture, entertainment, and unique commerce--the weird and strange and interesting places--the really good things about capitalism. Instead you get restaurants serving black sea caviar and quail eggs and a whole bunch of boring chain luxury shops and everything closes early. The entire city's commercial district ends up looking like Foxwoods, because the city has basically become a speculative casino and that crap is all that survives in a place like that. And it feels just as plastic and fake. You been down to the new Seaport District in Boston, jk? Anywheresville. Maybe as well be San Jose. Or Singapore. Or Austin. Or Vancouver. Who cares? No culture. No character. LEED-certified platinum glass and steel buildings filled with coffee shops with fake brick walls and fake copper ceilings and fake wood framing pretending to be from an old city like...Boston...except...they're in...Boston. If it all burnt to the ground tomorrow, it'd probably be doing the city a favor.

Long story short, don't be surprised if the future holds more suburbanization than urbanization, an upcoming generation that eschews and avoids cities with a reputation for high prices like the plague (even if they move into smaller, neighboring places), and a prolonged period of bag holding, since prices tend to be sticky on the downside. Because talent is going elsewhere. The only question is whether and to what extent capital will move to meet it or stubbornly insist on staying put.

[jk]

Re: The "Forever" Canadian Housing Bubble

Vancouver existing home sales fell -36.6% Y/Y in August. That's -25% below the 10-year August sales average. Moreover, the total number of homes currently listed for sale rose +34.2% Y/Y.

https://app.hedgeye.com/insights/700...lem?type=macro

[touchring]

Re: The "Forever" Canadian Housing Bubble

The most delusional property market in the world marches on, apparently. If this picture doesn't represent how utterly ridiculous things have become in Vancouver, I don't know what else can.

However, the banks are becoming cautious and some new Federal lending standards that kicked in at the beginning of this year are starting to bite. July sales volume down 24% compared to a year ago across the Province of B.C. Condos have been the hottest market, as that is what most can afford since single family detached homes are in the stratosphere. Of course all that has done is push up the average cost of condominiums and narrow the gap with SFD prices.

Xi is becoming another Putin, going after businessmen arbitrarily, no one is now safe, expect more political refugees to Vancover.

NZ has closed the borders - https://www.theguardian.com/world/20...foreign-buyers

Even Malaysia is banning sales of property to the Chinese - https://www.scmp.com/news/asia/south...ty-residential

Can you imagine that? Malaysia. Not the best place to live in, but is the only option affordable to the middle class Chinese families that can't afford Vancouver or Melbourne.

[GRG55]

Re: The "Forever" Canadian Housing Bubble

The most delusional property market in the world marches on, apparently. If this picture doesn't represent how utterly ridiculous things have become in Vancouver, I don't know what else can.

However, the banks are becoming cautious and some new Federal lending standards that kicked in at the beginning of this year are starting to bite. July sales volume down 24% compared to a year ago across the Province of B.C. Condos have been the hottest market, as that is what most can afford since single family detached homes are in the stratosphere. Of course all that has done is push up the average cost of condominiums and narrow the gap with SFD prices.

[touchring]

Re: The "Forever" Canadian Housing Bubble

I read that the sydney market is already melting down.