Throwing Around The ‘B’ Word In Canada
The Ottawa Citizen reports on the housing bubble in Canada. “We Canadians love our shelter, and like many others around the globe, we’re increasingly willing to pay a whole lot of money for it. But in many hotspots, prices have started to slide, as has the number of home sales. Australia is well into a slump. Closer to home, the U.S. Northeast had 4.2 per cent fewer sales so far this year, the Midwest 3.8. In parts of California, home sales are down by more than 20 per cent. In Ottawa, there’s a definite cooling under way.”
“So even as we shake our heads at the exorbitant price paid for the dump down the street or calculate what our own fixer-upper might fetch, there’s a nagging sense that what goes up must come down here, too. The question is when, and how far? The question is when, and how far?”
“A housing market is considered to be in a bubble when prices increase rapidly to an unsustainable level relative to incomes. When do you know that has happened? After the bubble has burst, and people start selling because they can no longer afford their homes. Listings flood the market and prices take a dive.”
“Analysts also watch for signs of speculation in the market. ‘The minute people start saying ‘I’ll never get in if I don’t go now,’ that smacks of a little bit of speculation, a little bit of panic,’ says Carl Gomez, an economist who has tracked real estate for the major banks. ‘It’s like saying ‘If I don’t buy those tech stocks now,’ just before the crash.’”
“So far, little of that seems to happening in Ottawa and most of the rest of the country, with the exception of B.C. and Alberta, the only places where Gomez and others are willing to throw around the B-word.”
“‘In Vancouver, particularly the condo market, prices are not reflecting economic fundamentals whatsoever,’ says Gomez. ‘In the case of some condos, it’s simply not a rational choice to buy, renting is now cheaper than owning. You also hear anecdotally about the fear factor. Add those parts together and you’ve got the symptoms of a bubble.’”
“Another sign that the western markets are in dangerous territory is their score on the affordability index. The industry rule of thumb is that most households can handle spending up to 32 per cent of before-tax income on the cost of home ownership. Anything more than that, and decades of data suggest the likelihood of defaulting on the mortgage increases (even so, some lenders will go up to 40 and 50 per cent).”
“Market-watchers look at ‘the fundamentals,’ general indicators such as unemployment levels, inflation rates and interest rates. If any one of them starts to rise, talk of a bubble rises, too. A weak job market means fewer buyers will be on the hunt, while rising inflation means our money simply doesn’t go as far and climbing interest rates make mortgages more expensive; any of which can create an oversupply of houses.”
“That’s what happened in the last bubble market, in 1989-90. In 1989-90, the affordability index was more than 60 per cent in many parts of Canada, exactly where it is right now in Vancouver.”
What is happening in San Diego will never happen in Vancouver… the weather is so much nicer.
It proves that Canada is just a US colony and is populated by the same stupid people that in the states. Yes there is a bubble particularly in the West. We even elected a mini poodle that barks exactly the same way as George W. Bush.
That seems like trivialization. The boom in Vancouver is pretty big, and bigger than the expansion in most other areas. There are a lot of Chinese and other Asians there with strong connections to family in Asia, so there are family links that connect the Vancouver bubble to that in China and bubble action elsewhere also such as Thailand. It is no coincidence that speculation in similar glass tower condos spiked in all these areas at about the same time.
Read the Vancouver Housing Market Blog for a bearish take on those numbers. Net migration isn’t over 3% (not justifying the 20% YOY increases), median income has declined, head offices are leaving (30% decline), and foreign investment does not make up the lion’s share of the market. There’s a lot of buzz justifying Vancouver in the same ways the *exact same buzz* has justified every other bubble area, with only anecdotal support that “Asians” have anything to do with it.
I’m in B3K with a good view of the Basin. Looking north to just below Bedford, NS, there’s a cluster of cranes and a new luxury unit between the train tracks and the water that looks like a beached whale. In the last year, new projects have sprung up all over the peninsula — 6 stories at the site of the old Wrent-a-Wreck just south of the Hydrostone, 4 (barely) detached CAN$300k+’s and in back a half-done high-rise near the old Gladstone Stores military warehouse site. What’s happening to us??
WHAT!!!!!!!!!!!!!!
The number of condo projects in Halifax is overwhelming. I don’t know how they will all get sold. It seems like many thousands of new or upcoming units in a city of less than 350,000. Several current projects on the pennisula. Clayton Park-Fairview is getting a massive new development by the radio tower. Spryfield and Timberlea are growing by leaps and bounds. Hammonds Plains-Kingwood is covered with hideous McMansions. Massive new projects planned in Dartmouth too. And, of course, all the new buildings around the Bedford Basin. There will soon be no undeveloped land on the inner side of the BiHi. Environmentalists are engaging in a battle to save what’s left of the wilderness on the other side of the highway. It will be interesting to see how this all unfolds.
Read about Google has a nice finance section… never noticed this before, have you?.
Nice, didn’t know that was there thanks for the tip
Yea, now that Yahoo has forced the use of the “new and improved” message board format I think a lot people will start looking at Google. The Google site is very different for Yahoo but (IMO) more informative. Unfortunately, much less participation on the message baords at this time.
Puppet politician, Puppet canadian culture, Puppet international policy, Puppet economy, Puppet real estate market. Poodle or puppet ? It gives you a nice image of Canada. The only thing that is saving us for the moment are natural resources, the balanced budgets, and contained health care costs. As for manufacturing, it is getting really squashed. Let’s say that the bubble is more sustainable in Canada than in the US.
Using that description of a bubble, I still can’t believe that people in the US try to justify the prices here.
(The only thing that is saving us for the moment are natural resources, the balanced budgets, and contained health care costs.)
I’ll take it.
Dont’ mock your pols if you have #2 and #3. Mock ours.
Don’t complain Canada the four letter b word in the US is Bush. Hey, we have the worst of everything, the whole country is delusional. (political tags off)
“The industry rule of thumb is that most households can handle spending up to 32 per cent of before-tax income on the cost of home ownership. Anything more than that, and decades of data suggest the likelihood of defaulting on the mortgage increases (even so, some lenders will go up to 40 and 50 per cent).”
We wish. If lenders really did allow buyers a maximum of 40 to 50 per cent, there wouldn’t be a bubble right now. The reality is 80 to 90 per cent, and I’m sure there are plenty of cases where it’s 95. Stated Income loan (usually) means the buyer can’t afford it.
My bank says 28% gross income and no more than 36% total debt. I love conservative banks.
Gentle Ben putting the ARM on the flippers:
Long-term bond yields are barely changed, but short-term yields are up. That implies that 30-year mortgage rates are holding steady, while rates on ARMs are going up.
from bankrate.com
Exodus Continues at Troubled Fannie Mae
Chief Information Officer, Deputy General Counsel Are Among the Executives Planning to Leave
Rats always leave the boat before it sinks. And Fannie Mae is sinking real quick. Is there enough life boats on the ship ? I forgot it is unsinkable like the Titanic and the guarantees given by Uncle Sam and God.
Completely off topic but worth the read. I wonder if it’s one of our group.
Bitter Boston Renter
Thank gawd I didn’t have anything in my mouth. I was almost on the floor!!! I totally feel for this guy, I really do.
It’s the damn middle class that gets railroaded constantly.
Thanks for sharing.
What a loser. She ought to spend her energy improving her job skills and then getting more money. She can always move to North Dakota.
Too funny
A couple of interesting points on this article:
1) The Governor of the Bank of Canada has come down hard on CMHC (which is like Fannie/Freddie) for starting to insure I-O mortgages. linky
2) Carl Gomez used to be a bubble denier, but got religion with no small help from the posters at the Vancouver Housing Blog!
I live in Calgary.
Rampant speculation. Fear: “Better get in now before priced out forever”
50%+ appreciation over past year. Panic.
I’m not complaining about Bush or other officials, becuase this bubble was caused by same emotions that caused all passed bubbles in history: greed, fear, momentum, stupidity.
Check out my Calgary bubble blog @
http://www.calgary-housing.blogspot.com
And who encouraged and backed all this nonsense? These things do not happen by accident. Someone that knows, is always behind the bubbles. Try bankers to start with. Who watches these S.O.B.’s ? Nobody. The market will take care of itself. Yeah very funny! Who profits first from the greed factor and the stupidity ? The truth is that Greenspan and his bunch of morons bankers, lowered the interest rates to zero because his bunch of abnking S.O.B.’s, these pigs, were in deep shit with the Nortel Networks, Enron and Worldcon of this world.
Burst a bubble? Blow another one even bigger, no matter the eventual costs. That’s central banking and banking in general.
make that “past” instead of “passed”. sorry.
Isnt’ the situation in Calgary somewhat supported by fundamentals? Ie. everyone moving there at once because of oil and gas? Not that the fundamentals won’t shift eventually, either because energy calms down or the supply of housing goes up. But in the short run, aren’t rents rising too?
There is a very strong economy due to the energy sector. However, the panic in the RE market and rampant speculation are driving values up far beyond long term fundamental levels. Calgary’s incomes increased an average of 7% last year. That is excellent. But house prices when up over 50%. Lots of flippers here. Everyone is trying to get into the game and flip properties. So just like other bubble areas, demand is artificially inflated with “specuvestors.”
I think I’ve heard of this “Canada” place before. Where is it again?
Look south.
Superman goes there to charge his batteries in the winter. It’s near the North Pole.
Just past Hans Island…
OT..Found a flipper who couldn’t sell. Decided to rent it out with purchase option.
http://seattle.craigslist.org/est/rfs/182973014.html
The sad part was that he’s still thinking that the market will go up another 6%.
That almost looks like a mobilehome on dirt.
That thing is WAY overpriced. Period.
That’s it. I think there comes a time when every American needs to stand up and…
Blame Canada.
Now, we just need to ask ourselves ONE question. Come one, you all know what it is - sing it with me!
WHAT-would-Brian-BoiTANO-do?