Real Estate

Vancouver housing bubble?

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RBC releasing their housing affordability stats. No surprise that Vancouver is deemed the most unaffordable in all of Canada again.

Vancouver Housing Affordability Is The Worst In Canada: Royal Bank
Vancouver remains the worst place in Canada to afford a house despite slumping prices, says a report from the Royal Bank of Canada (RBC).

The costs of owning a detached bungalow in Vancouver take up 82.3 per cent of household income, while a standard two-storey home takes up 87.2 per cent, despite housing prices reaching 10-year lows, the bank's May 2013 Housing Trends and Affordability report shows.

"Extremely poor housing affordability in the Vancouver area still weighs heavily on homebuyer demand despite recent improvement, including in the first quarter of 2013 when most of the RBC measures declined slightly," the report reads.

The bank notes that Vancouver home resales fell to 40 per cent below their 10-year average in 2012, leading analysts to wonder whether the city might reach the lows it hit in the 2008-09 recession, when resales fell to 57 per cent below the 10-year average.

RBC also warns that the city's housing prices could slide even further than they have already, as buyers maintain the upper hand in the real estate market.
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Bernuserge wrote: Toronto is on a way of joining Vancouver. New home sales continue to crash! Down over 40% last april!
Like I said many months ago, this crash is going to spread from West-to-East. Toronto is exactly where Vancouver was last year (see my above post). Toronto is now seeing the same 40% sales drop Vancouver saw. And now, Toronto will see the same seller-withdrawal from the market, and stand-off between Buyers/Sellers that Vancouver has seen for the past year. Watch what happens to Vancouver over the 2nd half of 2013 for a "sneak peak" at what will happen to Toronto in 2014. Toronto home owners can't say they weren't warned.
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Apr 7, 2013
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Ceryx wrote: From what I read, it looks like Fed is looking to cut the QE to half during summer and end QE by the end of the year.

In my opinion, that's the perfect time to buy more US stock during that correction.

There is even possibility they will start raising interest rate next year. That's when every countries explode except US.

That's how American did it back in 90 (remember the asia financial crisis?) and I think they will do it again.
That's the thing though, you can't trust what they say. That's just like when they say, "By next year, the budget will be balanced". Or when they said during QE1 that it was a quick temporary measure and they would be discontinuing it soon. Look where we are now, QE1 + QE2 + OT + QE3. There was one small period of time with no fed intervention, and the markets were red the whole time. As soon as I hear that they're seriously cutting down on the QE, I am dumping everything I own, and I'm sure much of the market will follow.

We'll see how it plays out, but I doubt they're going to cut off the QE.
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cegli214 wrote: That's the thing though, you can't trust what they say. That's just like when they say, "By next year, the budget will be balanced". Or when they said during QE1 that it was a quick temporary measure and they would be discontinuing it soon. Look where we are now, QE1 + QE2 + OT + QE3. There was one small period of time with no fed intervention, and the markets were red the whole time. As soon as I hear that they're seriously cutting down on the QE, I am dumping everything I own, and I'm sure much of the market will follow.

We'll see how it plays out, but I doubt they're going to cut off the QE.
Yeah not really seeing where people get the idea that the US economy is improving. What's the 30-year US Treasury going to end up yield-wise if QE stops? 5%? 10%? 15%? If they even so much as minorly back off, it would seem that the US housing market and stock market would suffer severe consequences.
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adamtheman wrote: Like I said many months ago, this crash is going to spread from West-to-East. Toronto is exactly where Vancouver was last year (see my above post). Toronto is now seeing the same 40% sales drop Vancouver saw. And now, Toronto will see the same seller-withdrawal from the market, and stand-off between Buyers/Sellers that Vancouver has seen for the past year. Watch what happens to Vancouver over the 2nd half of 2013 for a "sneak peak" at what will happen to Toronto in 2014. Toronto home owners can't say they weren't warned.
I am not familiar with the Vancouver market
How is the inventory there compared with one year ago?
These days Toronto is experiencing less than usual inventory numbers
Also the sales numbers are less than the usual sales numbers for this season.

From what I am reading behind the lines the government is moving toward applying a new set of measures to tighten the credit and the price expansions.
I guess they have all the reasons to do that. I have not particularly followed the above of 1 mil $ market for Toronto but despite of INCREASED inventory on this segment and decreased sales numbers for the same, these sales are driving the average price up.
My guess is that there is still a good chunk of buyers who are able to steal good deals in an above 1 mil$ market that is falling but that is still predominant is $ volumes. Obviously in these conditions the house hold debt is still increasing.
These make me believe that the government will have to intervene again and that this will diminish the delay between the Vancouver and the Toronto market making the last to correct sooner in a shorter time than Vancouver's market.
I guess the first sign will come from the Condo market as the most regular Joes invested in that segment and they were caught with their pants off. Also the new housing starts that diminished drastically will impact the economy and send ripples downstream so...all in all I believe that we are behind with around 3 months now.
So far the May market confirmed the deceleration that I expected, I guess that by the end of September we will see big drops in the condo market and signs of correction in the SFH market.
RE Market melting down: YtoD GTA $volumes -4%, YtoD Toronto $volumes -7%. Read more here. Admins please read this before you consider further requests to ban me. If you are on this list do not expect replies.
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Flaherty hates us:

http://www.bloomberg.com/news/2013-05-2 ... -luck.html
Canadian Finance Minister Jim Flaherty says he wishes “bad luck” to short sellers seeking to profit from declines in the nation’s housing prices.
Disgusting! That a finance minister would offer up an opinion of the natural market mechanisms that control prices.

(but having said that, just how does one 'short sell' Canadian housing.... :lol: )
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PF4RedFlag wrote: I am not familiar with the Vancouver market
How is the inventory there compared with one year ago?
These days Toronto is experiencing less than usual inventory numbers
Also the sales numbers are less than the usual sales numbers for this season.
Inventory is about the same as last year, but sales are in the toilet.
May is shaping up to be one of the worst in over a decade.
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Magoomba wrote: Inventory is about the same as last year, but sales are in the toilet.
May is shaping up to be one of the worst in over a decade.
I asked about inventory because last year around this time the sellers were determined to remove their properties from the market and to wait for the market to recover.
That might never happen as a crash might never happen but.. in the mean time the sellers are holding the bag having to support negative cash flow investments (many of them).

I am really curious how long they can hold. From what I am read the condo market is correcting over there.
What about the SFH market?
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PF4RedFlag wrote: I am really curious how long they can hold. From what I am read the condo market is correcting over there.
What about the SFH market?
As Garth Turner's recent blog implies, spreads are now starting to increase against residential RE collateral as it goes into increasing oversupply. As this trend continues to accelerate, carrying costs (or the perception of much higher future carrying costs) are sure to eat into the psychology of the hoarders.

My comment on the blog:
Mark wrote:The ‘market’ will raise the rates for the BoC governor, by expanding lending spreads against collateral that is in oversupply (such as residential real estate, and even commercial real estate lately). The BoC governor doesn’t need to be obsessed with trying to target a specific bubble when the ‘market’ already has a mechanism, via spreads, to accomplish such.

However, it certainly would help if the CMHC would take a hike and stop putting the GoC’s ***** on the line in suppressing spreads on subprime mortgages. The CMHC is now a guarantor of $900B worth of subprime debt.
And on the previous entry:
Each type of collateral (ie: residential mortgages) has a different set of rates applicable to it, based on investor preferences and the credit-worthiness of the asset class. Since house prices are now going down in nearly all Canadian cities, and since the CMHC is no longer expanding its guarantees to prop up the market — those spreads are expanding.
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Ceryx wrote: From what I read, it looks like Fed is looking to cut the QE to half during summer and end QE by the end of the year.

In my opinion, that's the perfect time to buy more US stock during that correction.

There is even possibility they will start raising interest rate next year. That's when every countries explode except US.

That's how American did it back in 90 (remember the asia financial crisis?) and I think they will do it again.
Raising interest rates are most likely years away, if that even happens. With their current model of calculating inflation, interest rates may never rise.

Btw, unlimited QE will not end this year. There will be talk about tapering it, but it won't end this year. Once the needle is in the arm, there's no going back without some sort massive reset to the financial system or major world event.
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zoravar wrote: Raising interest rates are most likely years away, if that even happens. With their current model of calculating inflation, interest rates may never rise.
The private sector will raise the rates against specific types of collateral far before central banks end up acting, IMHO. That's what RE owners need to be worried about. Not central bank "policy" rates which aren't specific to their type of debt.

If the value of collateral is collapsing across the board due to oversupply, do you really think that banks will continue to give mortgages the 'best rate possible'? Of course not!
Btw, unlimited QE will not end this year. There will be talk about tapering it, but it won't end this year. Once the needle is in the arm, there's no going back without some sort massive reset to the financial system or major world event.
I disagree. QE stops, bond yields spike, people seek refuge in gold and certain other hard assets that are not propped up with credit. RE prices collapse, eventually the owners of things like gold take over. At some point, even if QE isn't removed, the market will develop a revulsion to it.
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zoravar wrote: Raising interest rates are most likely years away, if that even happens. With their current model of calculating inflation, interest rates may never rise.

Btw, unlimited QE will not end this year. There will be talk about tapering it, but it won't end this year. Once the needle is in the arm, there's no going back without some sort massive reset to the financial system or major world event.

"An improving labor market rather than accelerating inflation made the Federal Reserve decide to end its last three episodes of easy monetary policy. It may be about to happen again, says Barclays Plc strategist Barry Knapp".

www.bloomberg.com/news/2013-05-23/fed-h ... earch.html
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Motoss wrote: "An improving labor market rather than accelerating inflation made the Federal Reserve decide to end its last three episodes of easy monetary policy. It may be about to happen again, says Barclays Plc strategist Barry Knapp".
Except did the labour market really improve in 2004? Or did they, in hindsight, tighten way too early?

Remember that the post-2002 period was called a so-called "jobless recovery". And looking back, outside of construction, healthcare, and government, there were no net new jobs created. Some sectors, such as technology, actually lost net jobs once you accounted for immigration.
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Mark77 wrote:
I disagree. QE stops, bond yields spike, people seek refuge in gold and certain other hard assets that are not propped up with credit. RE prices collapse, eventually the owners of things like gold take over. At some point, even if QE isn't removed, the market will develop a revulsion to it.
There's no way they can stop QE, from the moment they started it there was no going back. The markets have become dependant on it, the moment they pull the plug systemic collapse takes over, which is the very reasons they started it in the first place.
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myst88 wrote: There's no way they can stop QE, from the moment they started it there was no going back. The markets have become dependant on it, the moment they pull the plug systemic collapse takes over, which is the very reasons they started it in the first place.
Ah, basically the drug addict analogy, where the addict gets to the point where they end up needing to consume so many drugs that such quantities are not even possible to obtain. Save, going into withdrawal.
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