The Elusive Canadian Housing Bubble

[santafe2]

Re: The Elusive Canadian Housing Bubble

Ya gotta wonder how many on the receiving end of this familial welfare rationalize it as "receiving their inheritance early".

The Mom and Dad lottery...

[don]

Re: The Elusive Canadian Housing Bubble

What happens when the 30, 40 and even 50 somethings that have moved back in with Mom, Dad, or Grandma see their room & board providers ride off into a nursing home or the great beyond?

[GRG55]

Re: The Elusive Canadian Housing Bubble

I'm not sure if the driver is parents wanting to get 35 year old Jr. out of the basement once and for all. Or Jr.'s virginal house lust because, well, "Everybody is doing it, and they all got help from their parents!"

Regardless, as I have posted before, up here in the cold, frozen North, the definition of homeless is someone who hasn't yet managed to coerce their parents into lending them the downpayment.

Ya gotta wonder how many on the receiving end of this familial welfare rationalize it as "receiving their inheritance early".
From Garth's GreaterFool blog:

Mommy-to-Market

April 23rd, 2015

Around this confused planet, people look at horny little Canada and shake their heads. The World Bank thinks we’re nuts. So does the International Monetary Fund. And The Economist, and US ratings agencies Fitch, Moody’s and S&P. Private and government-agency economists look at two or three ratios, and flip out.

But they have yet to discover the scariest numbers of all...

...these academic and economic measures miss the ugliest secret of the Canadian housing market, and the one true marker of its bloated excess: the Mommy-to-Market Ratio.

This measures the extent to which Moms (and Dads, to be fair) are messing with market forces and subverting supply and demand by shoveling their offspring into real estate ownership when they actually cannot afford it. A massive amount of money is being sucked out of inflated real estate and retirement accounts to be inserted back into the housing market in what could be the ultimate Ponzi of risk.

We’ve all marvelled at the rise of the Bank of Mom & Dad, but the latest numbers show it’s not only flooding the market with first-time buyers who shouldn’t be there (thus inflating prices), but also impacting the move-up market (inflating them more). Thanks to BMO’s ‘Home buying Report’ and the survey it did of a few thousand people we now (shudder) know this:

Almost half (42%) of all the moist Millennials and unsuspecting virgins aroused by the thought of a new mortgage expect Mom to fork over the down payment. That gift will be about $60,000 on a property costing an average of almost $315,000. The impact of this is awesome. For starters, the kids are nuts. They behave the way you’d expect others to when they’re given money for nothing. The bank found a stunning 48% are happily willing to enter a bidding war – up sharply from in the past.

Meanwhile 40% of the kids say that without this cash they wouldn’t even be considering buying...

...last year 481,162 resale houses changed hands. Almost 35% (according to the mortgage industry) of those deals were done by first-time buyers. So if 2015 is the same, and the bank numbers are solid, then 42% of the 168,400 first-time buyers will use the Bank of Mom. That’s 70,730 buyers snorfling an average of $60,000 – for a total of $4,243,800,000, or $4.2 billion. Generally speaking, that’s money which in normal circumstances (ie – young people not buying stuff they can’t afford) would not be spent on houses, and is swelling the cost of real estate for everyone...

...But it gets worse. The bank also found that sucking on the parental teat doesn’t end with a first house purchase. An astonishing (to me) 42% of current homeowners who want to graduate to a better trophy home are expecting Mom to step up to the plate once again. This time the kids (who should know better) expect her to provide 20% of the cost of a house averaging $474,000 – or almost $95,000. Half of these people say that without family dole they would not be moving...

...And, as we already know from a Genworth survey, about a third of all the kids getting pushed by Mom into real estate say they can’t make ends meet. Just imagine what happens when mortgage rates creep.

So there you go. A nation of the horny borrowing against houses they have puffed up so their lusty kids can buy more houses at inflated values after going through bidding wars, ensuring everybody pays greater than market price. And they think this is an act of love...

[santafe2]

Re: The Elusive Canadian Housing Bubble

(However, there is in my mind no need to get caught up in the bureaucracy and costs of buying Greek property. For most of the year Greece is suitable for a barefoot life aboard a boat, which offers a new and different waterfront view every day.)

Good call GRG.

[Milton Kuo]

Re: The Elusive Canadian Housing Bubble

Helloeveryone,

Whata weird and wonderful real estate market this is... ever-changing and alwayskeeping us Realtors (and Home Owners) on our toes!

...

If I didn't know better, the first sentence sentence reads as if it is from VancouverGoinUp.

[GRG55]

Re: The Elusive Canadian Housing Bubble

Not good news for Canada but it might just be time to buy a little place on a Greek Island...


Property puzzles

Housing markets across the globe both underperform and overwhelm

...

Below an amusing email on the local market I received this morning on my corporate email...no idea how they got it because I have had no dealings with realtors in years.

As for Greek islands, in a country absolutely full of spectacularly beautiful places, of all those I have explored by sailboat over the years abroad the Greek island of Symi in the Dodecanese chain in the Aegean Sea is the most memorable standout.

The contrast between the picture below and the nonsensical pap and breathless cheerleading from the realtor should be enough to convince me to chuck it all and run away to Greece. iTuliper gnk has it figured out!

(However, there is in my mind no need to get caught up in the bureaucracy and costs of buying Greek property. For most of the year Greece is suitable for a barefoot life aboard a boat, which offers a new and different waterfront view every day.)



Helloeveryone,

Whata weird and wonderful real estate market this is... ever-changing and alwayskeeping us Realtors (and Home Owners) on our toes!

Despitesome pessimistic reporting by the local media, the local real estatemarket remains quite robust with strong sales activity in themid to entry level segment of the market. If priced"well", these properties are selling quickly and in some instances,with competing offers. A great time to be selling if you are in this categoryand if you are looking to buy at these affordable price points, be prepared tomove quickly to win the best properties.

Unfortunately,as a result of Alberta's slower economic activity in the first quarter of2015, we are seeing a significant slowing of sales of homes in pricepoints over $600K, especially in the "Luxury Market" of over$1,000,000. It is thought that consumer confidence will return slowlyas oil prices inch up and we will begin to see that market strengthenover the next 6 to 12 months. If you are looking to "move up" to anexecutive/luxury home, now may be the best time to do so since 2009 as Sellersrealize the shifting dynamic and the more motivated Sellers are having to bemuch more flexible in their expectations on price.

As always, pleasefeel free to contact us anytime with questions or thoughts on thisdynamic real estate market. Also, a BIG THANK YOU to all of you WONDERFUL CLIENTS who have passed us on to your friends andfamily... we are so honoured and will work hard to help them make their moves...

[santafe2]

Re: The Elusive Canadian Housing Bubble

Not good news for Canada but it might just be time to buy a little place on a Greek Island...


Property puzzles

Housing markets across the globe both underperform and overwhelm

Apr 18th 2015



EXHIBIT A is a powerhouse of the world economy whose GDP has grown by 158% over the past ten years. Exhibit B is a basket-case whose economy has contracted by 18% over the same period and where a quarter of the workforce is unemployed. China may think Greece an unlikely bedfellow, but the weakness of their housing markets ties the two together in our latest roundup of global house prices.

The Economist tracks the health of housing in 26 markets around the world, encompassing a population of over 3 billion. Prices are now rising in 19 of these markets at a median pace of 5.2% a year. But in China, whose decade-long construction boom appears to be coming to an end, and in much of the periphery of the euro area, which is just starting to recover from an especially severe bust, prices are falling.

Although the nuances of each market are many and varied, a single unifying theme is the cheapness of borrowing. In their efforts to support weak global demand, central bankers have kept monetary policy ultra-loose. That has left mortgage rates at historic lows: the interest rate on a 30-year fixed-rate mortgage in America is just 4%. Instead central bankers are relying on “macroprudential” policies, such as stringent lending criteria for banks, to stem irrational exuberance in housing markets.

To test whether they have succeeded, The Economist’s housing index compares the path of house prices against two measures: rents and income. If house prices rapidly outpace either one, a bubble may be forming. According to our measure, property is more than 25% overvalued in seven of the markets we track, notably in Australia, Britain and Canada.

After a steep correction, prices are roughly at fair value in America, having risen 24% from their trough in 2011. But sales are running at around 4% of the housing stock a year, compared to an average of 6% between 2004 and 2008. In the 12 months to February, builders started work on fewer than 1m homes, a level that would once have signalled a recession. Completions have been below that level for 74 months.



Prices are rising fastest in Ireland, but they still have not reached their pre-crisis peak. Moreover, as in many countries with seemingly buoyant markets, the capital is doing much better than the rest of the country. Prices increased by 21% in Dublin in the year to the end of February, but by just 8% elsewhere in Ireland.

A similar story is true of Britain, where property is something of a national obsession. Prices in London have risen by 40% in four years, but by just 15% everywhere else. Prices have outpaced incomes in recent years, causing the proportion of households owning their own home to fall from 76% in 1999 to 64% in 2013. The current coalition government has done much to spur demand, reducing transaction taxes on cheaper houses and subsidising the mortgages of first-time buyers. Most parties promise more of the same after elections next month. But supply remains crimped.

It is in Australia and Canada, however, where prices seem most out of kilter. They are 61% overvalued relative to rents in the former, and 89% in the latter. Presumably the IMF had such places in mind when it warned this week that macroprudential measures might not be enough to prevent bubbles.

Meanwhile, although Spain’s economy is growing again, prices there are still falling, as they are in France and Italy. Spain’s population shrank by 200,000 last year, as the unemployed emigrated to find work. In the three years before the crisis it grew by 800,000 a year.

[santafe2]

Re: The Elusive Canadian Housing Bubble

i learned the hard way to respect bubbles by shorting housing around '05 or '06. "the market can stay irrational.." and so forth.

And I have had the opposite issue, I move to cash way too quickly. I was mostly out of the stock market in the late '90s and out of real estate in late 2003, early 2004. Real estate bubbles make me especially nervous because once you've missed the peak it's difficult to find buyers in a falling market. It will be interesting to watch as the CBs finally begin to raise interest rates and kill risk appetite.

[jk]

Re: The Elusive Canadian Housing Bubble

Without reason or articulation, he screamed his admonition to buy. He was a carny. Surely you of all people would not support that sideshow as more than a lottery pick. As you pointed out, a stopped watch is correct more than once.

lol. what was really lacking in vancouvergoinup's posts was a rationale. if he had said that asian and especially chinese would want a foothold out of their own country both as a way of holding [possibly ill-gained] assets and as a possible refuge if the political winds changed, THEN he would have earned more of a hearing. as it was, it appeared he was only [albeit correctly] interested in momentum. the real problem with riding a bubble is knowing when to get off.


edit: i learned the hard way to respect bubbles by shorting housing around '05 or '06. "the market can stay irrational.." and so forth.

[jk]

Re: The Elusive Canadian Housing Bubble

Without reason or articulation, he screamed his admonition to buy. He was a carny. Surely you of all people would not support that sideshow as more than a lottery pick. As you pointed out, a stopped watch is correct more than once.

lol. what was really lacking in vancouvergoinup's posts was a rationale. if he had said that asian and especially chinese would want a foothold out of their own country both as a way of holding [possibly ill-gained] assets and as a possible refuge if the political winds changed, THEN he would have earned more of a hearing. as it was, it appeared he was only [albeit correctly] interested in momentum. the real problem with riding a bubble is knowing when to get off.

[santafe2]

Re: The Elusive Canadian Housing Bubble

the stopped watch is right twice a day. how many years has vancouvergoinup been right?

Without reason or articulation, he screamed his admonition to buy. He was a carny. Surely you of all people would not support that sideshow as more than a lottery pick. As you pointed out, a stopped watch is correct more than once.

[jk]

Re: The Elusive Canadian Housing Bubble

Stopped watch analog.

the stopped watch is right twice a day. how many years has vancouvergoinup been right?

[santafe2]

Re: The Elusive Canadian Housing Bubble

I hope vancouvergoin up returns to collect on any bets. he was crazy, but he was right!

Stopped watch analog.

[aaron]

Re: The Elusive Canadian Housing Bubble

I hope vancouvergoin up returns to collect on any bets. he was crazy, but he was right!

[santafe2]

Re: The Elusive Canadian Housing Bubble

Hawaii and San Francisco have tied for most expensive housing for decades. In both places, you could make the
argument that "God is done making land". (Not done making steel reinforced high rise housing along earth quake faults, however)

PS, San Francisco is a city and Hawaii is a state with several islands. Compare Honolulu to San Francisco. There are many places to live in Hawaii at very reasonable prices. And, not to create a religious debate here but as we speak, "God" is creating more land on the Big Island.