An Unsustainable Real Estate Bubble Is Inflating
The Rakyat Post reports on Canada. “Demand for high-end real estate in Canada continues to rise as low mortgage rates and international buyers spur demand and boost prices for million-dollar homes. Sales of houses valued at C$1 million and more in Toronto, Vancouver, Calgary and Montreal climbed 32% in the the first six months this year over the same period in 2013, according to Sotheby’s International Realty Canada. ‘People are realising that a big chunk of their net worth is in real estate and they’re renovating to increase that. You also have a lot of wealthy international buyers,’ said Ross McCredie, CEO of Sotheby’s International Realty Canada.”
“Foreign interest in Canadian luxury housing will remain strong in its largest cities as the removal of the immigrant investor programme failed to slow sales this year, the report said. The programme, which helped foreigners immigrate to Canada if they were worth at least C$1.6 million and would invest C$800,000 in the country, was terminated in February.”
From Global News. “A report shows many within one influential group who are ‘concerned that an unsustainable real estate bubble is inflating.’ Who still harbours such notions? Not U.S. investment banks, or European economists. It’s Canadian lenders. A survey of risk professionals across Canada’s lenders found 68 per cent said they were ‘concerned’ when asked if about the possibility of a property bubble forming in the housing market.”
“The FICO survey was published the same day Moody’s cut its outlook for the domestic financial sector to ‘negative’ from ’stable.’ That gloomy revision stems from Moody’s new view that Ottawa wouldn’t be so quick to act to bail out Canadian banks and credit unions should there be crisis such a housing crash.”
The Globe and Mail. “Toronto-Dominion Bank still expects a soft landing in Canadian housing, and predicts the shift to a buyer’s market over the next 18 months. That matches what many other observers project. ‘As home buyers have more choice, they will also have more bargaining power and price pressure will ease,’ economist Diana Petramala said, citing softer demand and more listings. Her take on the condominium market is interesting as ‘the implications of overbuilding are already starting to be felt.’”
“Condo resale listings have doubled in some cities, and there’s also an ‘ample supply’ of new but unoccupied units. This is already a buyer’s market, with just modest price growth, said Ms. Petramala, who expects condo prices to fall by about 2 per cent next year and who cites the 135,000 units now under construction. ‘The economics of investing will likely continue to deteriorate with the rental market well supplied, the rental vacancy rate rising and rents stagnating,’ she said. ‘Meanwhile, softer conditions in the condo market will eventually have knock-on effects to the single-family home market.’”
Mortgage Broker News. “Brokers are once again venting their frustration with the discrepancy between appraisal prices and sale prices of homes; though it isn’t the appraisers’ fault, according to one broker. ‘The value of properties is one of the most frustrating things I’ve faced in my business; a lot of times clients engage in bidding wars and in many cases the offer comes in and it is well above the appraisal value,’ Christine Xu of Mortgage Architects told MortgageBrokerNews. ‘Many people are over-paying for homes.’”
The Times Colonist. “Victoria’s real estate market typically peaks in May, but those involved in the buying and selling of homes in the region say May bled into June this year as the first half of 2014 finished strong. ‘It’s definitely been busy. Most agents I’ve been talking to are busier than they have been in years,’ Victoria Real Estate Board president Tim Ayres said. ‘Housing prices have come down in the last few years, and all that’s come together to [suggest] it’s not a bad time to buy or sell.’”
“‘[Buyers] are not willing to compromise on higher prices, and for those sellers not willing to come down to market prices, there’s little tolerance among buyers,’ said Nicole Burgess of Pemberton Holmes Real Estate. ‘But good product in a good area at market value — it will sell.’”
The Pique News Magazine. “The average overall sales price for the first quarter of the year in Whistler was roughly $644,000, down from just over $827,000 in the same period in 2013. It should be noted, however, that the average sales price can fluctuate dramatically in Whistler due to the small number of transactions in each quarter. RE/Max agent Ann Chiasson attributed the average sales price drop partly to the Phase 2 condo market, which has seen a significant decline in value, she said.”
“Chiasson sees Whistler’s continued reliance on the regional buyer as a sign ‘that we’ve hit a price point that appeals to people who live here.’”
The Brooks Bulletin. “During the community information meeting in Bassano, the mayor dismissed allegations from a former councillor that the town is dying and broke. During the meeting which was held to explain how Bassano’s municipal tax dollars are spent, former councillor Ed Maurer said after six years on council he can stand by the fact that the two things the town hasn’t got are land and water. ‘The Town of Bassano is a dying community. Look at the housing. How much is it worth today as it was five years ago? Property value rates are in the tank,’ said Maurer, who failed in his attempt at re-election in October’s municipal election.”
“But mayor Tom Rose says none of that is true. ‘I’m sorry Ed. I don’t agree with you. We’re not broke. We have bills to pay and debentures to pay, yes. But I’m not prepared to move away thinking that we’re destitute and we’re flat broke. That’s just not the case,’ Rose told Maurer. ‘We could not collect enough property tax in town to do everything that needs to be done. Every community in the province, every community in Canada is under the same constraints of trying to get things done,’ he added.”
“The new asset bubbles blown by the Fed and its ECB accomplices are hiding epic levels of false valuations and outright fraud,”
Truth and wisdom from a user right here on this blog yesterday. You’d all be wise to take heed as it will crack as it always does.
Crack as it always does??? Real Estate is like any other venture, it has peaks and valley’s. Houses where 18% interest remember and the so called homeownership was dead forever, I bought several and waited, the dead market came roaring back, I retired at 45 because of it.
BTW same nonsense when stock market wax 7,500 it is going to crash I bought in, now near 17,000, bad news is always good news to me for investing, you wait and pounce like a animal waits, they also don’t catch prey everday.
Housing depreciates. Don’t mix investments with losses like stocks and houses.
housing appreciates when the dollar is devalued by printing.
It doesn’t work that way Amy/$house/Poet.
HA, how do you define “investments?”
‘it has peaks and valley’s’
‘It’s Canadian lenders. A survey of risk professionals across Canada’s lenders found 68 per cent said they were ‘concerned’ when asked if about the possibility of a property bubble’
Do you understand the difference between peaks and valleys and a bubble?
A bubble is just a name Ben, like theatre of war is a war zone, back in the 1970’s CA. Real Estate went thru inventory issues, jobs, high interest rates, nobody used the word bubble it was a “prolong downturn ” that was the frightening word of the day back then.
Doesn’t matter what you word is used, when sells drop in any business a cause most be identified, a strategy must be put in place,and improvement must show results in a given time or the business fails.
Real Estate is based on buyers perception of the market, the banks willingness to loan, the value of the location and zip code of a property, fraud and gov involvement is low on the scale of real estate improvement because wide spread mortage fraud and federal gov acknowledgment of the 2008- 2010 collaspe highly unlikely to happen again in the 21st century.
Banks shriver to think they will have to deal with the fed ’s, matter of fact, banks are to cautious now they have caused this slow down? Take care
‘A bubble is just a name’
So you don’t know the difference.
Ben you know and I know a so called bubble may be hard to define as it can be as local as a three block area of homes that suffer from comp issues to inflated prices that people are willing to pat to live in desirable locations.
Housing bubble of 2008 was unstainable pricing of 2005-2007 based on fraud, liar loans, appraisals, banks selling junk loans to unsuspecting investors, overseas etc.
We can’ t have a bubble now, we can have a downturn why you ask because the definition of a bubble can’t be met.
Banks or mortage companies can’t sell junk loans anymore, obtaining a loan is stricter, fraud as to getting loan from a bank with the pretex of home improvement and run away with the money doesn’t happen today.
Inflated pricing is not a bubble, it is a sellers world of trying to get from under a no equity postion to break even or
small profit.
It is the buyer who must decide if a home is a good buy or not, dropping prices wholesale won’t happen because most sellers are in a better postion to wait or reduce at a normal 3 to 8 % which is not a bubble but expectation in the Real Estate business of price reduction. Bubble’s of 50% off is a pipe dream that happen in 2008 when people should have bought, now a 25 to 50 % would send the country into a epic depression, America the world can’t let that happen, how you say can they stop it, by better police of the industry and a better business outlook that is coming when this administrtion is dumped.
In the mean time watch for a pick- up in late August of sales, the traditional fall season will start early this year.
You’re in a fantasy world. Snap out of it.
‘the definition of a bubble can’t be met’
I have a couple thousand blog posts that suggest otherwise. First, the bubble never went away. Second, are there not enough speculators in the past two years? Not enough flippers? Not enough record high prices? How many thousands of condos are being built in Miami and LA? Did you know the price per square foot for Miami condos is much higher than what it was a few years ago? And condo-tels, they’re back!
If these loans are so sound, how come the government has to back nearly all of them? Have you looked at the HARP/HAMP loan terms? It makes subprime look triple A. Check the foreclosure numbers; more than twice what they were pre-bust. And this is with foreclosure timelines exploding all over the country.
Why are interest rates being held low, at the cost of trillions of dollars? Why is the central bank buying mortgage backed securities? Why aren’t they planning on selling what they have?
I don’t have to convince you or anybody. Time is on my side, so all I have to do is sit back and watch it fall apart. Heck, it’s already started.
Fun fact: A ‘twerp’ is someone who bites fart bubbles in the bathtub.
Then you’re in for the surprise of your life because housing just resumed it’s price discovery which was delayed by manipulation of supply.
And a houses “value” is never based on some vague notion that you assign it. A houses price is founded on input costs. Lot, labor, materials and profit. And the reality is those input costs don’t exceed $50-55/sq ft, irrespective of location.
doom: “Real Estate is based on buyers perception of the market, the banks willingness to loan, the value of the location and zip code of a property, fraud and gov involvement is low on the scale of real estate improvement because wide spread mortage fraud and federal gov acknowledgment of the 2008- 2010 collaspe highly unlikely to happen again in the 21st century.”
Translation? Anyone? It’s funny, but I’m not even sure why.
Presuming those accounts are true, I love how you think you’re the equivalent of a leopard when all you’ve done is benefit from larger forces, most of which are artificial and the product of people a fair number of whom are sociopaths. Enjoy your good fortune while it lasts.
This announcement was sponsored by the National Association of Realtors™.
‘Foreign interest in Canadian luxury housing will remain strong in its largest cities as the removal of the immigrant investor programme failed to slow sales this year’
Money launderers don’t really care about immigrant programs.
‘Investor ratings service Moody’s has changed its outlook for Canada’s biggest banks to negative from stable, citing concerns over the Canadian government’s plan to implement a “bail-in” system in the event of a bank failure.’
‘The “bail-in” rule, included as part of the 2013 omnibus budget bill, asserts that the federal government would not necessarily bail out a bank on the brink of failure with taxpayer money.’
‘Instead bank bondholders would be expected to assume the risk, though there is no guarantee that deposit-holders would not be hurt if they had more money in the bank than the $100,000 guaranteed by CDIC.’
‘Moody’s senior vice-president David Beattie, author of the report, said he believed the risk of a bank failure was remote, but was concerned about the trend of governments worldwide to provide for bail-in measures, instead of the bailouts seen in 2008.’
“They [Ottawa] want to make sure that senior creditholders of banks and debtholders of banks would share the burden if a Canadian bank needed to be recapitalized in the future,” he said in an interview with CBC News.’
“Moody’s also notes that while the potential for external shocks to the Canadian economy has receded, high household indebtedness and elevated housing prices remain key risks to banking system stability in Canada,” the ratings agency said.’
‘Last month, Moody’s downgraded its outlook on debt and deposit ratings at Canadian banks.’
‘The City of Regina issued building permits for projects valued at $41.9 million in June, bringing the yearto-date total to $265.5 million, according to the city’s monthly building permit report. That’s down 27 per cent from $57.7 million in June 2013 and down 19 per cent from $328.9 million for the first half of last year.’
‘Residential permits were down 22 per cent to $32.9 million in June, while nonresidential permits fell by nearly half to $6.7 million, compared with the same period last year. For the year to date, residential permits were down 36 per cent to $138.9 million.’
‘The Royal LePage House Price Survey and Market Survey Forecast released today showed slight year-over-year price increases across housing types surveyed in Regina. “We are seeing marginal price increases in Regina due to higher than normal inventory levels, which is made up of both resale and new construction units,” said Mike Duggleby, broker and managing partner, Royal LePage Regina Realty. “Sales volumes are tracking consistent with 2013 levels, but the elevated supply of homes is helping buyers and keeping prices in check.”
Two reasons it’s still different here. Most, if not all housing sales, inventory, days on market statistics are controlled and released by real estate boards and brokers. The news media is owned by a couple of companies. The staff has been cut. Much easier to reprint realtor copy. Realtors lie. This industry is not regulated like the financial industry is. Canada Mortgage and Housing Corporation (CMHC) presently insures 95% of primary mortgages up to $1,000,000. That’s correct. One million. Interest rates are less than 3%. What’s there to lose. The banks are covered. Mr. Banker would love it up here. That’s why this knock down is going for, well take a look.
http://beta.realtor.ca/propertyDetails.aspx?PropertyId=14555235
‘Not A Teardown, But Can Be One.’
No wonder the phrase “soft landing” remains in vogue. We should come up with our own realtor slang dictionary.
Foam the runway baby! That’ll make it soft.
in the US we’re told can has firm down payments and no hanky pank. Plus it gets cold so everyone has to work or freeze. Everyone is too polite for a housing crash etc………
“An Unsustainable Real Estate Bubble Is Inflating”
Any thoughts on for how many more years we will be doomed to reading headlines like this one before the Housing Bubble era is a receding bad memory?
If you had asked me back in 2007 whether I thought there would still be “An Unsustainable Real Estate Bubble is Inflating” headlines coming to press in 2014, I would have predicted ‘no.’
Lesson learned: Bubbles can last a lot longer than you can stay solvent.
Well, this is from a survey of Canadian lenders. And with 70% “concerned”, how many are stopping the loans? 0%.
Any-who, outside of the major cities, prices are in trouble or falling.
As stated above, the lenders are fully insured by the taxpayers of Canada, through CMHC, a federal agency, to the tune of $1.1 trillion cdn. Nothing to lose. Profits galore. Banks in Canada have not underwritten uninsured mortgages since 2008.
‘Big city prices are skewing housing data across Canada according to research released Wednesday by Royal LePage. While prices increased 5.2 percent nationwide to an average of $406,454, the highest ever year-over-year gain, a closer look reveals those numbers were largely driven by urban centres, specifically Toronto and Vancouver.’
“If you pull Toronto and Vancouver out of the numbers you see a full two percentage point drop in the average home price in Canada,” said Phil Soper, president and CEO of Royal LePage in an interview with BNN.’
‘Soper also blames media organizations centred in metropolitan markets for inflaming the public’s hysteria. “If you look at the Toronto numbers and certainly headlines about real estate, you’d think that the market as a whole is on fire or in bubble territory,” said Soper, who worries that such headlines are encouraging intervention from Ottawa through mortgage insurance policy.’
“If you pull Toronto and Vancouver out of the numbers you see a full two percentage point drop in the average home price in Canada,” said Phil Soper, president and CEO of Royal LePage in an interview with BNN.’
Precisely whats happening in the US. Prices falling in every state yet outliers skew the average.
“Suckers rally”. Don’t be a sucker and pay over retail.
Only dumb money (debt) buys now.
Chinese Cash-Bearing Buyers Fuel $22 Billion in U.S. Home Sales
Henry Nunez, a real estate agent in Arcadia, California, met with so many homebuyers from China that he bought a Mandarin-English translation app for his phone.
The $1.99 purchase paid off last month, when he sold a five-bedroom home with crystal chandeliers, marble floors and two kitchens, one designed for smoky wok cooking. The buyers were a Chinese couple who paid $3.5 million in cash.”
To bad they can’t buy water rights with that much money.
Bulletin Fed prepared to complete asset-purchase taper in October: FOMC minutes »
July 9, 2014, 7:26 a.m. EDT
Foreign home buyers flock to U.S.
Canadians buy the most properties, followed by China, Mexico, India
By Amy Hoak, MarketWatch
Home sales made to international buyers rose about 35% for the year ending March 2014, as people took advantage of favorable exchange rates and affordable prices, according to a report released by the National Association of Realtors on Tuesday.
Total sales to foreign buyers reached an estimated $92.2 billion from April 2013 through March 2014, up from $68.2 billion the previous year, according to NAR’s 2014 Profile of International Home Buying Activity report. That’s about 7% of the total U.S. existing home sales for the period.
Four states — Florida, California, Arizona and Texas — accounted for more than half of the total reported purchases to international buyers, the report found. Twenty-three percent of foreign purchases were in Florida. The top five cities searched by international buyers: Los Angeles, Miami, Las Vegas, Orlando and New York, according to data from Realtor.com.
Buyers from Canada made the largest share of purchases (19%), while buyers from China led in dollar volume, buying up $22 billion in property (with an average price of $590,826). Other common places where international buyers hailed from included Mexico, India and the United Kingdom.
…
‘We could not collect enough property tax in town to do everything that needs to be done. Every community in the province, every community
same is US- if gov workers (hardly) can retire at age 55 everyone will be broke
‘Brokers may be split on the issue but a new study found that 56 per cent of mortgage industry respondents in Canada and the United States fear that “an unsustainable real estate bubble is inflating.”
“As consumer confidence picks up and people increase their borrowing, lenders are understandably concerned about growing indebtedness,” said Mike Gordon, FICO’s executive vice president of Sales, Services and Marketing. “For the last two quarters, around 65 percent of our respondents said they think credit card balances are headed higher. Those are the two highest figures we’ve ever seen in this survey. When I talk with bankers, they tell me they’re happy to see growing consumer optimism, but they’re wary of a return to reckless borrowing.”
The other day I spoke to a wealthy friend who lives 30 miles outside of Toronto. He said “We’re not in a bubble, you see, because they’re not building any more land. We’re looking at a 10% drop at most.”
I can almost foresee instant sub-prime loans (underwritten by taxpayers, naturally) for all the new DNC Supermajority-for-Entitlements voters flooding into Texas. No child (or mortgage broker) left behind!
http://www.theguardian.com/world/2014/jul/09/central-america-child-migrants-us-border-crisis
Obama’s new pick for Housing Secretary says taxpayers will not be put on the hook again to bail out Freddie Mac, etc. And Obama is going to bring hope, change, and the most transparent administration ever…he said so.
http://www.theguardian.com/world/2014/jul/09/julian-castro-confirmed-department-housing-development
“…taxpayers will not be put on the hook again to bail out Freddie Mac, etc.”
For the record, there was no guarantee on the books to put taxpayers on the hook until the moment when Fannie Mae and Freddie Mac simultaneously blew up in Fall 2008, at which point it became essential to bail them out in order to prevent the entire global financial system from collapsing.
Of course, this could never happen again, as the PTB have offered their personal assurances.
Bubbles? What bubbles? Old Yellen doesn’t see them.
http://www.businessinsider.com/cynk-technology-2014-7
A sharp drop in lumber prices was a leading indicator of the 2007 housing bubble implosion…history may not repeat itself, as Mark Twain said, but it often rhymes as Lumber Liquidators is tanking after a profit warning.
http://www.businessinsider.com/lumber-liquidators-warning-2014-7
http://libertyblitzkrieg.com/2014/07/09/chinese-purchases-of-u-s-real-estate-jump-72-as-the-bank-of-china-facilitates-money-laundering/
American citizens already have a hard enough time affording a home. Squeezed out by financial oligarchs buying tens of thousands of properties for rental income, and faced with real wages that haven’t budged since the mid-1970s, the demographic of U.S. citizens that historically dominated the new home market has been forced to live in their parents’ basements. Just to kick em’ when they’re down, Americans now face the impossible task of competing with laundered Chinese money.