The Elusive Canadian Housing Bubble

[ST]

Re: The Elusive Canadian Housing Bubble

http://www.ft.com/intl/cms/s/0/59991...#axzz2qZJE2mAc

January 16, 2014 6:07 pm
Canada’s property boom

By Camilla Hall

Record house prices and low interest rates have fuelled fears of a bubble that has excited hedge funds


Skyward limits: Toronto’s prices are up 37 per cent since 2008

Ben Rabidoux was teaching at Georgian College, a small university an hour’s drive from Toronto, when he started writing a blog about the Canadian housing market. His job teaching economics and finance gave him access to reams of real estate data, which he used to back up his contrarian – and unpopular – case that Canada was in the midst of a housi

The blog won a small but loyal following. In late 2011 Mr Rabidoux received a call from one fan, Mark Hanson, the analyst known for forecasting the US housing crisis. Soon, Mr Rabidoux realised many of his avid readers worked for hedge funds and were eager to bet against Canada’s housing market.

-continued at link-

[GRG55]

Re: The Elusive Canadian Housing Bubble

[GRG55]

Re: The Elusive Canadian Housing Bubble

it's interesting that fertilizer demand is down in em's. anyone want to posit a theory about that? lowered income, and so lowered food demand as the developed world slows imports?

lowered incomes (mainly due to currency depreciation?) which forces curbs on imports (and substitutions), which manifests itself in those areas where immediate impact is less notable...cutting back on fertilizer has an effect on crop yields, but that effect is usually muted in the first season of the cutback.

[jk]

Re: The Elusive Canadian Housing Bubble

it's interesting that fertilizer demand is down in em's. anyone want to posit a theory about that? lowered income, and so lowered food demand as the developed world slows imports?

[GRG55]

Re: The Elusive Canadian Housing Bubble

OK - I can't resist throwing this one on the Barbie



On that last point ... I once made a Select post regarding the BoC and Mark Carney. I said that they would keep interest rates near ZIRP until 2015. (Perhaps, GRG55, you would be so kind as to check the date on that one for me) I'm going to guess ~4 years ago. At the time, that was a controversial statement for some, or at least a little hard to believe.

Now it's simply an inevitability - unless of course everything blows up by then. After all ... $855K for an "average house" in Toronto is more than reasonable.

Not sure if this is the thread you were looking for. Regardless, an interesting discussion on the topic at the time...and which of us could have imagined they would be able to re-inflate the bubble to the degree they have post-financial crisis?
http://www.itulip.com/forums/showthr...Housing+Market



"...Bank of Canada Governor Stephen Poloz says there is no bubble..."

I'm sure every one of us can't wait for the day a Central Banker declares there IS a bubble in some asset class or another...

And:

"...It’s either a sign that the housing market is healthy and resilient, or a sign of irrational exuberance along the way to a housing bubble.

Either way, Greater Toronto home sales and prices soared in November, according to the city’s real estate board, with prices jumping a breathtaking 11.3 per cent from the same month a year earlier.

The average price of a detached house sold in the city of Toronto reached $855,188, with condos averaging $385,968. For the GTA as a whole, prices averaged $681,597 for a detached home and $354,864 for an average condo.

The total number of home sales also soared, by nearly 14 per cent compared to November of 2012..."

Fear is the great motivator of irrational exuberance now. Fear that "If I don't buy now I'll never be able to afford a house (not that they can afford one now, mind you). Fear that the brother-in-law, who is leveraged up to his eyeballs and thinks "his" vinyl clad granite countertop house is his retirement plan, will tell them they are idiots as prices keep going up just a wee bit longer. Fear that mortgage rates might go up and...horrors..."owning a house" becomes "more expensive"



In the meantime (but not to worry...we are all going to get rich trading our stucco boxes and concrete condos to one another, and then retire after selling them to the insatiable Chinese)...

Sears Canada to lay off almost 800 people

Published on Tue Nov 26 2013

...The job losses at head office are to bring the organizational structure in line with the new, smaller Sears, which is selling off store leases and closing stores in major urban markets...

...The layoffs come hard on the heels of an announcement that approximately 1,000 jobs will be lost as a result of the sale of leases at five locations, including the Eaton Centre, for $400-million.

The company announced in August that it cut 245 jobs at head office, in IT, finance and payroll...


BMO Layoffs: 1,000 Jobs Cut As Bank Hit Record Profits

CP | Posted: 12/03/2013 4:23 pm EST

TORONTO, Ontario — Bank of Montreal quietly made swift and widespread staff cuts the fourth quarter, reducing its workforce by the equivalent of nearly 1,000 positions...



Disney’s Pixar studio in Vancouver to be shut down

Bloomberg News | 09/10/13 12:09 PM ET

Walt Disney Co., the world’s biggest entertainment company, said it will close its Pixar animation
studio in Vancouver to focus the business at its main site in Emeryville, California...


Potash Corp slashes 18% of its workforce because of weak demand

03/12/13 7:04 AM ET

Potash Corp. of Saskatchewan Inc. has announced plans to slash 18% of its workforce as fertilizer demand in emerging markets remains at extremely sluggish levels....


Sun Media Layoffs To Hit 200 People Across Country

Posted: 12/04/2013 11:33 am EST | Updated: 12/04/2013 4:03 pm EST

MONTREAL - Sun Media Corp. is cutting another 200 jobs across the company, of which about a quarter will come from its editorial operations outside Quebec...

...The cuts announced Wednesday are just the latest round at Sun Media.

The company slashed 360 jobs and shut down 11 publications earlier this year and cut 500 jobs at Sun Media newspapers last November...

[don]

Re: The Elusive Canadian Housing Bubble

Here in the Sunshine State, among the sheeple, home prices are forever front-loaded into their 'brains'. Rising home prices - always good. Can't tell you why. Nobody cheers here when gas goes up or groceries or the A/C bill. Only houses. This among people 90% of whom have no intention of selling. Rising home prices are good - for the lenders, the real estate industry, developers - all made wealthier from whom? Bingo, the sheeple. Now I understand . . . .

[Fiat Currency]

Re: The Elusive Canadian Housing Bubble

... Here's a couple of more additions for those in need of some cheap entertainment ...

OK - I can't resist throwing this one on the Barbie

Toronto House Prices, Sales Soar In October: TREB

It’s either a sign that the housing market is healthy and resilient, or a sign of irrational exuberance along the way to a housing bubble.

Either way, Greater Toronto home sales and prices soared in November, according to the city’s real estate board, with prices jumping a breathtaking 11.3 per cent from the same month a year earlier.

The average price of a detached house sold in the city of Toronto reached $855,188, with condos averaging $385,968. For the GTA as a whole, prices averaged $681,597 for a detached home and $354,864 for an average condo.

The total number of home sales also soared, by nearly 14 per cent compared to November of 2012.

LOOK: 9 Signs Canada Has An Epic Housing Bubble
Condo Overbuilding, Yes, But No Housing Bubble: Report

“Annual home price growth remained well-above the rate of inflation in November,” Toronto Real Estate Board senior analyst Jason Mercer said.

But Mercer said the spike in prices and sales “makes sense given the fact that competition between buyers increased last month.”

New listings of homes for sale fell 4.4. per cent, the board noted, and month-end active listings were down more than 12 per cent. So even as prices soar, fewer people are putting their properties up for sale.

Some market observers have questioned the accuracy of housing data coming from the country’s numerous real estate boards, suggesting numbers may be getting inflated due to errors in the way home sales are counted. Others are pressing Finance Minister Jim Flaherty to do something about the country's lack of data on foreign investors in housing. Unlike many other countries, Canada doesn't collect data on foreign buyers of housing. That's a key part of the puzzle to understanding the housing market, critics say.

But even errors or gaps in measurement couldn’t account for the strong growth seen in the housing market in recent months. Some market analysts will likely point to the strong numbers as another sign of a housing bubble in Canada. But though he acknowledges the risks to the economy from an overheated housing market, Bank of Canada Governor Stephen Poloz says there is no bubble, as the market still reflects economic fundamentals. “Our judgment is (the housing market) is a situation that is improving, this is not a bubble that exists here that would have to be corrected,” he said.

That’s also the view of a recent Royal LePage report, which argued there is overbuilding in the condo markets in Canada’s three largest cities, but not enough of it to conclude there is a condo bubble. But Nouriel Roubini, the financial analyst who rose to fame by correctly predicting the U.S.’s housing bubble and subsequent financial crisis, recently named Canada as one of nearly a dozen countries where a global housing bubble is forming. Roubini says persistent low interest rates across many countries have inflated prices into bubble territory. A collapse of so many real estate bubbles could harm the global economy, Roubini argued.

But Roubini says the bubbles may not be ready to burst just yet, "because the forces feeding them – especially easy money and the need to hedge against inflation – are still fully operative." Along with Canada, Roubini named Australia, Finland, France, Germany, New Zealand, Norway, Switzerland, Sweden and the London metropolitan area as being in bubble territory, along with some emerging markets, including China. The U.S., where prices and sales are growing but are still low compared with historical norms, was not on Roubini’s list.

The Bank of Canada on Wednesday decided to keep its key interest rate at one per cent, a level it has been at for nearly four years. The bank said there isn’t enough inflation in the economy to justify raising rates.

On that last point ... I once made a Select post regarding the BoC and Mark Carney. I said that they would keep interest rates near ZIRP until 2015. (Perhaps, GRG55, you would be so kind as to check the date on that one for me) I'm going to guess ~4 years ago. At the time, that was a controversial statement for some, or at least a little hard to believe.

Now it's simply an inevitability - unless of course everything blows up by then. After all ... $855K for an "average house" in Toronto is more than reasonable.

[GRG55]

Re: The Elusive Canadian Housing Bubble

Yes, and jk's post on The Crisis in Europe, and, and, and ...

Always a gentle reminder that FIRE/FED/BoC/BIS/IMF/Oligarchs/etc. can kick the can much longer than even sane, logical, well-prepared people can believe.

Perhaps we should start one of those famous Canadian pools. You know, the one where everybody picks a date & time guessing when "the barrel" will fall through the lake ice - signifying the arrival of Spring...

Ah yes, the Arrival of Spring Breakup pool. Having grown up in Vancouver, one of the few places in Canada with no natural ice in winter, I was not introduced to this legendary Canadian pastime until I moved to Alberta. In the oil patch, overpopulated with engineers that it is, I discovered that the "proper" way to do this is to set up a circular gas chart recorder on the bank of the local river or creek (crick?), drive a steel rod into the ice in the middle of the waterway, and run monofilament fishing line to tie it to the differential pen arm on the chart...thus giving a precise time for the arrival of breakup at that location. I don't care to divulge how much money I have lost in such pools over the past 34 years.

When the bottom falls out from under each of these things is anybody's guess.

But, like you, I have noticed that the tone, frequency, and volume of things is ramping up. It appears to be getting sporty again.

I think the day all the bloggers give up trying to predict the crash and throw in the towel, stop posting and perhaps even shut down their sites, will mark the top.

[Fiat Currency]

Re: The Elusive Canadian Housing Bubble

Three years and 8 months since this thread was started and still going strong...sort of...

Yes, and jk's post on The Crisis in Europe, and, and, and ...

Always a gentle reminder that FIRE/FED/BoC/BIS/IMF/Oligarchs/etc. can kick the can much longer than even sane, logical, well-prepared people can believe.

Perhaps we should start one of those famous Canadian pools. You know, the one where everybody picks a date & time guessing when "the barrel" will fall through the lake ice - signifying the arrival of Spring.

When the bottom falls out from under each of these things is anybody's guess.

But, like you, I have noticed that the tone, frequency, and volume of things is ramping up. It appears to be getting sporty again.

[GRG55]

Re: The Elusive Canadian Housing Bubble

The comparisons keep coming. This one references the Irish experience:


Timing is Everything

Now that we are on the seasonal down ramp into the 2014 spring bottom for sales and listings, it might be worthwhile for those Canadians who are heavily debt encumbered to look at what happens to a "C" class income generating country after their real estate bubble gets pricked by a swift change in buyer sentiment.

As for The Irish Miracle "The case is clear: an economically challenged government, perniciously influenced by the interests of the housing lobby, blew it. The entire Irish episode will be studied internationally in years to come as an example of how not to do things." (David McWilliams Irish economist writer, broadcaster and journalist)...

[GRG55]

Re: The Elusive Canadian Housing Bubble

I thought the Canadian crowd might like this ...

The Elusive Canadian Housing Bubble

by Alexandre Pestov - Schulich School of Business

(P.S. - Uploading the PDF kept failing - so you'll have to use the link)

Three years and 8 months since this thread was started and still going strong...sort of...

The number of amusing blogs and links is increasing. Here's a couple of more additions for those in need of some cheap entertainment, at the expense of newly minted home"owners" in Vancouver...the most bubblicious city on earth since Dubai (or Shanghai? or Hong Kong? or Singapore? or ???):

VancouverFlippersInTrouble

A couple more condos featured on VFIT have sold. Over in Coal Harbour, Sapphire Investment No Gem looked at 2601-1188 W Pender Street.

Stylish & sophisticated living at the Sapphire, located in Vancouver’s premier Coal Harbour neighborhood. This 2 bedroom plus den suite, sized at 1010 sf, enjoys beautiful NW corner unit! Stunning North Shore mountains & water views from the 26th floor in Coal Harbour! Gourmet open kitchen w/ granite countertops and Bosch S/S appliances. Building has concierge, sauna, gym & media room. Steps away from coffee shops, restaurants and shopping centre! Easy walk to Stanley Park and Robson Street.

The final sale price was $59k less than the asking price.

• Purchase Price: $933,238
• GST: $46,662
• Asking Price: $849,900
• Sold Price: $790,000
• Property Transfer Tax: $17,665
• Real Estate Commission: $31,150
• Loss: ($181,780) ($238,715)

whispersfromtheedgeoftherainforest






In today's Vancouver Sun there is an article titled "Housing affordability not as cut-and-dried as it seems. Complex issue: The figures look daunting, but somehow Vancouverites have been coping with the cost"


The Sun reports that the simple numbers on housing affordability in Metro Vancouver are unequivocally alarming: It costs just over 8½ times the median after-tax household income of $61,975 to buy a home for the median price of $517,677.34.


Compared to the norm in banking circles just a generation or two ago when low-equity borrowers were likely to be denied a mortgage if the cost of the house they wanted was more than three times what they earned in a year, this seems insane.


But the article argues that if you look at the issue more closely, the message is nuanced and somewhat mixed.

Today's 8.5-to-one ratio is, to be sure, quite a bit worse than 20 years ago when it was 6.6 to one, and even worse still than the 5.9 to one figure in 2003. But ...

These historical ratios, though lower than today's, were still very high by any conventional measure, and they never once dipped to a low or even "normal" level during the entire duration of the last two decades. Yet Vancouverites still coped, and the population still grew by well over 500,000 in that 20-year period...

Half the reason for a high priceto-income ratio is not the cost of a home, but rather the lacklustre growth of personal incomes in Metro Vancouver over recent years to the point where we trail most major cities in Canada. If this turns around - and, once again, there are no guarantees - the affordability squeeze will ease.

The central message?

Robert Helsley, dean of the Sauder School of Business, added an additional perspective when he spoke last week at a UBC-sponsored symposium on affordability. He suggested Vancouver's high home prices are "the price of admission" to this amenity-rich little corner of the world.

Similarly highly priced real estate is found in other places where people really want to live - Hong Kong, San Francisco, London and New York, to name a few.

"If you want affordable housing," Helsley said, "go to Detroit."

Instead of calls to halt the easy credit and low interest rates that fuelled and created the unaffordability to begin with, we get sermons to 'let them eat cake'.

Marvellous.

[Fiat Currency]

Re: Canadian homeowners are feeling the pinch of rising prices, mortgage rates

Oh ... I guess it's official then ...

According to the IMF, Canada has the most overvalued housing market in the world

While housing markets across the globe slowly recover, it’s no great secret that some seem crazy overvalued.

Take London, for example, where asking prices jumped 10% in October alone andforeign buyers are swooping in to buy.

Hites Ahir and Prakash Loungani at the International Monetary Fund are out with a new report that puts global housing markets in perspective.

Global housing prices rose in the second quarter of 2013, the sixth straight quarter of growth.

“House prices rose in 32 of the 51 advanced and emerging market economies in the IMF’s Global House Price Index, compared with increases in 9 countries in the second quarter of 2009, when the housing crisis was in full swing,” according to the report.

For many OECD countries, however, “the ratio of house prices to rents—a typical measure of house price valuation—remains above historical averages, leaving room for price corrections down the road.”

Take a look at Canada in the chart below. The country’s ratio is 85% above the average.

IMF

[Fiat Currency]

Canadian homeowners are feeling the pinch of rising prices, mortgage rates

Some simply analogy like F=ma comes to mind ...

Mobious House 98x98.jpg

Canadian homeowners are feeling the pinch of rising prices, mortgage rates

OTTAWA — Higher prices and an increase in mortgage rates have made home affordability more of a problem for the average Canadian family, says a new report from the Royal Bank of Canada.

The level of deterioration differs from region to region and between types of homes, but for the average bungalow the affordability measure rose 0.7 of a percentage point to 43.3% nationally in the third quarter, after a 0.3-percentage-point gain in the second quarter.RBC’s latest research on the portion of average household income needed to maintain a home shows that affordability deteriorated over the summer, the second consecutive drop in as many quarters.

That means the average household would have needed to devote 43.3% of its pre-tax income to service the cost of owning a bungalow at current market values, including mortgage payments, utilities and municipal taxes. The higher the rating, the less affordable a home is to any particular family.

For two-storey homes, the affordability reading rose 0.6 or a percentage point to 48.9% in the July-September period.

Owning a condominium was the most affordable option, with a cost measure of 28% of pre-tax income, and the most stable, up just 0.1 of a percentage point from the previous period.

RBC chief economist Craig Wright attributed the deterioration in affordability to higher prices and what has been a tightening mortgage market reacting to an expectation of firming interest rates.

“By the third quarter, strong resale activity across Canada heated up home prices a few degrees,” he explained. “At the same time, Canadian bond yields rose in tandem with those in the U.S., climbing in anticipation of the Fed (U.S. Federal Reserve) tapering its bond buying program.”

The most recent Canadian Real Estate Association report pegged the average resale price of a home at $391,820 in October, 8.5% more than a year earlier.

Wright said recent months has seen a divergence in prices for Canadian homes, with price gains for bungalows and two-storey structures outpacing condominiums.

Affordability deteriorated in many of the large markets, but while the average number is only moderately higher than historic norms, RBC notes there is a wide disparity in the associated costs depending on markets, with some appearing out of reach of the average family.

It would take 84.2% of an average household’s pre-tax income to maintain a home in Vancouver, a rise of two percentage points from the second-quarter reading.

In Toronto, the affordability measure rose 1.3 percentage point to 55.6%, the second worst in the country.

Most other major markets had affordability scales that were closer to historic norms: Montreal rose 0.3 of a point to 38.3%; Ottawa was up 0.4 of a point to 37.3, Calgary up 0.7 of a point to 33.7 and Edmonton up 0.5 of a point to 32.9% of household income.

The report says the biggest risk to maintaining manageable affordability levels would be a sharp rise in interest rates, but many analysts believe that is unlikely to occur as long as global economic growth remains moderate and inflation pressures soft.

The RBC says it does not expect the Bank of Canada to start hiking rates until sometime in 2015 as bond yields, the main driver of fixed mortgage rates, are projected to drift only “gently” upwards in the next year or so.

[vinoveri]

Re: A Possible Needle in the Hay Stack?

hey 'lek, but at least we live where the whether is nice, huh? (east coast FL for me) Warmth, sunshine, and water is NICE ... even with all the BS going on

[lektrode]

Re: A Possible Needle in the Hay Stack?

that's so cynical it just may be true

Fraud and looting is a win-win: Feds celebrate all the windfall tax revenue we get from prosecuting those banks who have a "rogue trader" here and there doing something improper (but overall the system is clean save a few bad apples). Reminds me of the celebration around how the government actually made money on TARP (even though we destroyed capitalism and institutionalized "moral hazard" as a result - but who cares - as long as we can fund the Treasury)

+1
if cynicism had calories, i'd be a fat guy...

and i get the biggest kick out of 'profits from TRAP' ... uhhh... i mean tarp.

sure, if ya dont count the downtick in the dollar from printing trillions to pay for it.

just like the "...CELEBRATIONS OF THE DOW HITTING 16000..." and 'breaking record after record' over the past few sessions?

and still not being higher in real terms, than it was in 2007?

never mind 1999/2000...

The Game (of sucking in the dumb money) is now well underway - esp since i'm now getting into it again - if this isnt a sign of it getting toppy, dunno what would be (tho i'm trying to bet the opposite way that the bullhorn is touting, and betting on miners like CDE, PGLC & CCJ)

but hey TSLA IS 'ON FIRE' !!!

sigh....