A Little Bit Irresponsible And A Little Bit Crazy
Global News reports from Canada. “First-time buyers are screwed. Many young families who’ve bit the bullet on oversized mortgages are dangerously vulnerable in the event of a downturn, while the whole creaking apparatus of Canada’s gilded housing market could be overpriced by nearly a third. At least that’s what the Bank of Canada now says. Last month, the House Price Index (HPI) benchmark price for a residential property in Canada’s energy capital reached $454,200. That’s a jump of 109 per cent compared to February 2005, when $215,400 got you a mid-market single family home.”
“Meanwhile, home prices in Vancouver and Toronto — the country’s two most expensive markets — have bloated 68 per cent and 71 per cent over that time, respectively, to $641,600 and $522,200 (benchmark price, across all housing types). Incomes haven’t come close to keeping pace. And filling the void has been an ocean of low-interest debt. Household debt has grown 80 per cent since 2005, to $1.8 trillion, most of it — $1.2 trillion — in mortgage loans.”
“‘Canadian housing prices are almost double U.S. housing prices,’ said Hilliard MacBeth, a portfolio manager from Richardson GMP in Edmonton. ‘What makes us think we can afford double?’”
From CTV News. “Depending on where you live in Canada, a million-dollar home can be either a mansion or a fixer-upper. The average price of a detached home in Vancouver reached almost $1.4 million last month. And last month, the city saw 3,000 properties change hands — a 60 per cent jump from January. That can mean waiting as long as six months to get a winning bid on a home, as was the case for Vancouver native Neil McIver. ‘We made bids on three different places, every one of them went above what the asking price was,’ he said. ‘I think it is a little bit irresponsible and a little bit crazy but that is the marketplace in Vancouver (that) you are dealing with,’ he added.”
The Leader Post. “The good news (especially if you’re buying a home) is that housing was more affordable in Saskatchewan in the fourth quarter than in third quarter of last year, according to RBC Economics Research. The bad news (especially if you’re selling a home) is that prices and sales are down and listings are way up over the same period last year. ‘Confidence in Saskatchewan’s housing market appears to have taken a hit, largely in the late stages of 2014, and the significant drop in oil prices was no doubt among the factors behind it,’ said Craig Wright, RBC’s chief economist. ‘Home resales fell by 4.6 per cent in the fourth quarter and by a more substantial month-to-month rate of 19 per cent in January 2015.’”
From News Talk 650. “It’s getting cheaper to rent property in Saskatchewan’s oil patch. During the boom, Estevan had the highest rental costs in the province and it was comparable to bigger cities like Calgary and Vancouver. The semi-annual rental market report from the Canada Mortgage and Housing Corporation (CMHC) shows the vacancy rate in Estevan shot up from 1.8 per cent in the spring of 2014 to 12.5 per cent in the fall of 2014. That’s mostly due to newly completed condominium apartments, but also because the price of oil plummeted around the same time as the completion of the Boundary Dam project which temporarily brought in hundreds of construction workers.”
“As a result, landlords are now asking for about 25 per cent less in rent than they were last fall. ‘There’s a good collection in just about anything you would be looking for, for a rental property available, which is new for Estevan,’ said Lynn Chipley with Century 21 in Estevan.”
The Globe & Mail. “Calgary’s condo market has taken a major hit as a result of diminished consumer confidence, say the analysts closely watching its vital signs. In February, the number of condo sales dropped almost 40 per cent compared with the same time last year, and active condo listings went up 105 per cent, according to Calgary Real Estate Board stats. The benchmark price for February is down 4.34 per cent compared with the same time last year. For the first week of March, condo sales are down 67 per cent compared with the same time last year.”
“Real estate agent John McDonald has seen a bank appraisal already affect a recent sale. In January, he found a condo for a client that was listed at $500,000. The buyer offered $488,000, but the bank refused financing based on an appraisal of $475,000. The seller came down to that amount in order to complete the sale. The condo had been on the market for 45 days. ‘This was a purchaser, a guy in his 20s, who saw the place, loved it, and he wanted that property.’”
“However, other buyers are already expecting hefty discounts, and the market isn’t there yet. Some of his clients have lost out on purchases because they came in with lowball offers or held off on an offer for too long. Most homeowners aren’t at that need-to-sell point yet. A lowball offer is often a turnoff. ‘Some people are looking at an unrealistic offer, and it’s too low,’ Mr. McDonald says. ‘They are expecting a little bit more deal wise. There is some downward movement, but nothing like some buyers expect.’”
From Reuters. “A year ago, one of the hottest parts of Canada’s red-hot housing market was Alberta’s oil capital of Calgary, where cash-rich consumers fought for the fanciest home on the block. Now, a plunge in crude prices is pulling the housing market with it. While realtors in Calgary are loathe to admit the tide has turned, sellers are no longer in the drivers’ seat and buyers are biding their time in hope of a real estate slump.”
“‘We have a plethora of houses, it’s like a beauty pageant of beautiful houses, out there on the market. We know there are lots of people wanting them, but they are waiting,’ said Shirley-Anne Jacques, owner of Parkhaven Designs Inc, who has been building houses in Calgary for 27 years.”
“In Altadore, an upscale neighbourhood in southwest Calgary, one prospective seller said she and her husband were unwilling to take less than the C$855,000 they paid for their four-bedroom house in 2007. The mother of two, who declined to be named, said they decided to sell last summer because they thought the Calgary housing market was overvalued, but delayed after her husband lost his job as a general manager at Devon Energy Corp. ‘We discussed it with realtors and they did not think prices were going to fall,’ she said. ‘Looking back, I wish we had sold in the summer.’”
“First-time buyers are screwed. Many young families who’ve bit the bullet on oversized mortgages are dangerously vulnerable in the event of a downturn, while the whole creaking apparatus of Canada’s gilded housing market could be overpriced by nearly a third. At least that’s what the Bank of Canada now says. Last month, the House Price Index (HPI) benchmark price for a residential property in Canada’s energy capital reached $454,200. That’s a jump of 109 per cent compared to February 2005, when $215,400 got you a mid-market single family home.”
Too bad, so sad. I’m guessing that nobody put a gun to any young family home buyer’s head and forced them to sign on the dotted line?
Homeownership is apparently as much of a biological imperative as spawning.
Too bad, so sad. I’m guessing that nobody put a gun to any young family home buyer’s head and forced them to sign on the dotted line?
What happens in Canada if you’re foreclosed? Can they come after you for the loss after auctioning the property? If they do, what protection do Canadian BK laws provide?
“‘Canadian housing prices are almost double U.S. housing prices,’ said Hilliard MacBeth, a portfolio manager from Richardson GMP in Edmonton. ‘What makes us think we can afford double?’”
You can even get stucco. (Boy, can you get stucco!)
Geez, we covered this last week:
This is CANADA- Its CANADIAN here!
Is it as much of a banker’s paradise in the Great White North as it is here south of the 49th parallel?
I gotta believe it: Didn’t Carney go from Finance Minister of Canada to Govenor of the Bank of England? More than just a little in-breeding and group-think in that incestuous marriage between Goldman Sachs and Central Bankers of the entire world.
The guy has a very fascinating life story, to be sure!
Mark Carney: The George Clooney of finance
The new governor of the Bank of England, the Canadian Mark Carney, has been hailed as the saviour of the British economy. But who is he – and is his record that good?
by Alex Brummer Published 20 June, 2013 - 09:04
The wounds are still deep. Defeated rivals to succeed Sir Mervyn King as the 120th governor of the Bank of England resent the way that the government settled on the Canadian Mark Carney –who takes office on 1 July 2013. Carney, now 48, was fast-tracked through the interview process, allowed to choose the length of his term of office (five years instead of the statutory eight), handed a handsome salary of £624,000 and a “London” housing allowance of £250,000 and, as one candidate told me, “launched on the nation as a messiah”.
“He is a good banker and competent regulator, but not a messiah,” the candidate said. Indeed, there is concern that by describing Carney as the most accomplished central banker of his generation the Chancellor, George Osborne, has raised expectations far too high. As King made clear at his final Inflation Report press conference on 15 May, there is only so much that monetary policy – low interest rates and buying UK government bonds through the quantitative easing programme – can achieve on its own.
Nevertheless, there are elements of Carney’s humble early beginnings that have a feel of the messianic about them. His birthplace of Fort Smith, in Canada’s Northwest Territories, is about as distant from the world of high finance that he now bestrides as you can get. To reach his native town, the traveller must fly from Yellowknife, the provincial capital, or drive 17 hours from Edmonton before happening upon the frontier town, which sits on a bend in the Slave River.
It’s a remarkable journey that Carney has made from Canada’s frozen wastelands to the antique splendour of the governor’s parlour in the salubrious inner court of the Bank of England. But not more so than the journeys of other messianic figures in finance, including the sage Warren Buffett, the world’s most successful investor, who still runs his empire from the cattle town of Omaha, Nebraska, in America’s Midwestern plains.
The choice of Carney as governor (the appointment was in fact made by the Queen on the recommendation of the Prime Minister) has much to do with the Chancellor’s tendency to equate style and the ability to talk a good game with judgement and substance. On the morning of Carney’s appointment, Osborne personally rang leading City journalists to sell the appointment of the first foreigner to be picked to lead the Bank of England since its foundation in 1694. He stressed Carney’s British credentials. By an accident of history, the governor of the Bank of Canada is also appointed in the name of the Queen, Osborne pointed out. Carney is married to a Brit, gained his Master’s and PhD at Oxford, and is almost an honorary citizen.
It is a susceptibility to hero worship that led Osborne to become the first western finance minister to back the appointment of the elegant former French finance minister Christine Lagarde as managing director of the International Monetary Fund in 2011. The outcome of this has been distinctly mixed, as recent self-flagellation over the handling of the Greek bailout, the Cyprus banking fiasco and overoptimistic interpretations of austerity have demonstrated.
Similarly, Carney’s relative youth, amid the older eminences of the financial world, his matinee idol looks (he has been referred to as the bankers’ George Clooney) and his seemingly impeccable CV drew him to Osborne’s attention. Of medium height and athletic build, Carney speaks rapidly, reeling off facts and acronyms as if answering questions against the clock for a TV quiz show. Sometimes the answers come so fast that they are difficult to catch and become a blur. What is clear, however, is that he is a zealot for cleaning up the mess in the financial markets following the Great Recession.
Carney’s sporting passion is ice hockey; you could say that at times he speaks at the same speed as the puck skids across the ice at games with his home team, the Edmonton Oilers. His all-time sports hero is his fellow Canadian Bobby Orr of the Boston Bruins.
He is a “cleanskin” as far as the British public and parliament are concerned. He carries no taint from the 2007-2008 meltdown in Britain or the LIBOR and money-laundering scandals that have so undermined the reputation of British banking. However, lurking in his background are his 13 bonus-filled years as an insider at Goldman Sachs – which critics regard as the shrewdest but most toxic brand in global finance.
Osborne’s admiration for Carney is based on his near-six-year stint as the governor of the Bank of Canada. Carney joined the bank in November 2007 as the United States subprime mortgage crisis began to rock global banking. He was among the first central bankers to recognise the fragility of the financial system. He followed the classic prescription of the renowned scholar of the “Great Crash” Charles Kindleberger and immediately moved to cut Canadian interest rates to the bone. He was way ahead of the pack; the European Central Bank, showing the anti-inflationary zeal of its Frankfurt masters, was still raising rates. And at the Bank of England Mervyn King held off on cutting rates to record low levels until March 2009. This was despite the determination of one of his colleagues on the Monetary Policy Committee (MPC), Professor David Blanchflower, to force his hand.
Indeed, so impressed were finance ministers and his central banking colleagues by Carney’s skills in riding out the crisis from his Ottawa eyrie, that in November 2011 he was put in charge of building a safer architecture for global banking as the chairman of the Financial Stability Board, an institution born of Gordon Brown’s reforming zeal in the spring of 2009.
Clearly, Carney believes he can do what is necessary at the Bank of England. He exudes an inner confidence that some veteran observers argue verges on smugness. Yet there is evidence that he is fragile when it comes to taking criticism. There were flashes of this when he appeared before the financial media at the National Press Club in Washington in April this year, on the fringes of the spring sessions of the International Monetary Fund and World Bank.
Interviewed sympathetically by his fellow native Canadian Chrystia Freeland of Reuters, Carney looked on top of his game and praised the US Federal Reserve and its chairman, Ben Bernanke, for providing forward guidance on interest rates. “I think the Fed’s . . . guidance helps a lot on this,” he said. But when the Canadian governor was confronted by a Sky News journalist who quoted an argument that questioned the value of guidance and then revealed that the words were Mervyn King’s, Carney snapped back, using the word “sneaky”.
The new governor’s previous experience of life in Britain, at Oxford and working for Goldman Sachs, was suddenly far from public view. He may prove to be a little unprepared for the intense scrutiny of the UK’s probing and competitive financial media.
…
As his hometown team found out… it doesn’t matter how many promising young top draft picks you throw together on your team if you refuse to acknowledge your fundamental flaws.
“He is a good banker and competent regulator, but not a messiah,”
‘es a very naughty boy. Now clear off!
‘Canadian housing prices are almost double U.S. housing prices,’ said Hilliard MacBeth
If that isn’t terrifying, I don’t know what is.
We complain about prices being too high in the USA (and they are), but compared to just about every other industrialized nation (and more than a few that are not) the US is actually cheap by comparison. You can buy a house in flyover for less than a comparable house in just about any major third world city.
Which just goes to show how bad the global bubble really is. There won’t be any place to hide when it all comes crashing down. But before that happens there will be plenty of kicking the can, with central banks lowering interest rates so much that you’ll have to pay banks to keep your money.
Safety is a relative thing, but where ever you are it will be better when the cascading defaults start if you;
Are out of debt (mortgage debt included).
Have some poof shielded savings.
Avoid the leveraged gambling casinos.
Have or be ready to have a very low cost lifestyle.
Are not in a bubble job.
“‘We have a plethora of houses, it’s like a beauty pageant of beautiful houses, out there on the market. We know there are lots of people wanting them, but they are waiting…”
For lower prices, eh?
For the sellers to “give it away!”
and to take back their notes to the squirrels…
Less than 5% chance of housing correction in Canada
http://www.newswire.ca/en/story/1498561/market-manuscript-by-fortress-real-developments-reports-less-than-a-five-per-cent-chance-of-a-major-housing-correction-in-Canada
Soon to be heard often and loudly, after the correction: “No one could have seen it coming!”
7 months ago, what were these genius’ predicted probabilities of a 50% drop in oil prices?
They are always looking for investors for their real estate projects.
If you look hard you will find info on them that is not pretty.
“A year ago, one of the hottest parts of Canada’s red-hot housing market was Alberta’s oil capital of Calgary, where cash-rich consumers fought for the fanciest home on the block…”
Resplendent in their jewel-encrusted thongs, the uber-rich Brazilians and Chinese fought vicious cage-match bidding wars over dilapidated Calgarian hovels, where they offered 1,000x the asking price and threw sweets to the filthy street urchins as they were toured the city upon the shoulders of the Village Idiot.
‘Estevan had the highest rental costs in the province and it was comparable to bigger cities like Calgary and Vancouver. The…vacancy rate in Estevan shot up from 1.8 per cent in the spring of 2014 to 12.5 per cent in the fall of 2014′
Things can change pretty quickly. Here’s another:
‘The Kurdistan Regional Government has always got a better press than the Baghdad government, particularly since its oil boom got under way in the past five or six years. They pointed to new five-star hotels, shopping malls, roads, bridges and apartment buildings sprouting on every street in Irbil, the Kurdish capital. There was a boom town atmosphere, and there were very few places on earth of which this could be said in the wake of the financial crash of 2008. Delegations of foreign businessmen, many of whom could not have found Iraqi Kurdistan on the map a couple of years earlier, poured into Irbil. Local managers complained that they could not find rooms for them despite all the new hotels. It seemed to go to the heads of Kurdish leaders who spoke of KRG becoming like an oil state in the Gulf, a landlocked version of Dubai.’
‘Visiting KRG a couple of years ago, I felt that it was alarmingly similar in mood to Ireland pre-2008 at the height of the Celtic Tiger boom. In Irbil as in Dublin it was a feeling conducive to delusion and a belief that “the Kurdish tiger” would bound forward for ever. What those plane-loads of over-optimistic foreign government ministers and businessmen never understood was how fragile all this was.’
‘In August, they discovered they had made a calamitous error when Isis launched an ambitious offensive that came close to capturing Irbil. The United States and Iran rushed to help, while the KRG’s new ally, Turkey, found itself unable to.’
‘Irbil today looks like Pompeii or Herculaneum in which a sudden disaster – in the Kurds’ case military rather than volcanic – has frozen all activity. The city is full of half-completed hotels, shopping malls and apartment buildings. Some of these are crammed full of refugees living in huts provided by the UN High Commission for Refugees. These are the people who are paying the price for the Kurdish leadership’s delusions of grandeur and security.’
http://www.unz.com/pcockburn/war-with-isis-the-kurdish-tigers-roar-is-worse-than-its-bite/
‘Estevan, the city at the centre of Saskatchewan’s oil boom, is now grappling with a bust. Early March is usually a busy period for drilling in southeastern Saskatchewan — right before the spring thaw.’
‘That’s because once the ground begins to soften, road bans force most oil companies to stop working for about six weeks. But with the ground still frozen more than half of the drilling rigs in the province have already been shut down.’
‘Brent Gedak Welding is just trying to stay afloat. He used to receive 90 per cent of his business from the oil patch. Gedak had 27 employees, but he has laid off two and is trying to find work for the others. “I don’t want to scare people with layoffs. I mean, we’re doing our best that we can,” Gedek said. “We’ve had a couple small ones, so far. We’re going to continue on cutting maybe some hours, maybe do job sharing. We’re saving money with trucks, parking them, trying to save fuel bills.”
‘Darryl Shirley, who’s part owner of Bert Baxter Transport, says the trucking business has cut 40 jobs since Christmas. “Last year, the year before, at this period of time, they’d be putting in 80 or 100 hours a week. The trucks were always gone. Right now, I got more trucks in the barn than I got on the road.”
‘Another company, Dayman Trucking, has closed its doors and put 12 trucks up for auction. It had been in business in Estevan for nearly 60 years.’
Estevan is the epicentre for the ability to work with high pressure down hole air - probably the start of fracking. With fracking they had become rejuvenated - until now.
They sit on a thousand year reserve of coal, probably three billion barrels of oil - and by the simple math involved with oil they become relegated back to their history. What a shame.
A lot of good people in that town. Great stock car racing.
Coming soon to a strip mall near you! Refugee huts, the only housing YOU can afford!
‘Most homeowners aren’t at that need-to-sell point yet. A lowball offer is often a turnoff. ‘Some people are looking at an unrealistic offer, and it’s too low,’ Mr. McDonald says. ‘They are expecting a little bit more deal wise.”
’she and her husband were unwilling to take less than the C$855,000 they paid for their four-bedroom house in 2007. The mother of two, who declined to be named, said they decided to sell last summer because they thought the Calgary housing market was overvalued, but delayed after her husband lost his job as a general manager at Devon Energy Corp. ‘We discussed it with realtors and they did not think prices were going to fall,’ she said. ‘Looking back, I wish we had sold in the summer.’”
∆Thats funny chit right there. Exactly what Im hearing here lately.
Ladies and Gentlemen, please rise for the International FB’s anthem-
http://www.sadtrombone.com/?autoplay=true
Delayed selling your overpriced shack BECAUSE your husband and main bread winner LOST his job????
Immobilized by crushing debt.
think about it. If they didn’t overpay $650,000 they would be able to weather the adjustment.
With the job gone, the house was their only source of income!
Yeah, an unemployed oil guy, in an oil town, with a bust in full swing. Oh, but the use house guys say prices won’t go down!
“We discussed it with realtors”
http://tinyurl.com/k338o4o
That’s it! A realtor and a dumbass!
They’re sitting on a granite mine.
San Francisco And Los Angeles Foreclosures Skyrocket 35% YoY
http://www.realtytrac.com/images/reportimages/foreclosure_trends_20_largest_metros_jan_2015.png
‘A Q&A with Richard Koo, one of the world’s top economic thinkers on the dangers of debt and deleveraging—and why Canada should watch out’
‘For those who are not familiar with the concept, how do you define a balance sheet recession?’
‘A balance sheet recession typically happens after the bursting of a debt-financed bubble. In the bubble days, people leverage themselves up, and once the bubble bursts, liabilities remain, asset prices collapse and people realize their balance sheets are underwater. When that happens, people start repairing balance sheets by paying down debt or increasing savings, which is basically the same thing. That’s the right thing to do at the micro level: everyone in that situation has to get their financial house in order. But when everybody does it all at the same time, then we enter a massive fallacy of composition problem [in other words, while individuals are correct to save and pay down debt, if everyone does this at the same time it hurts the economy by lowering consumption]. If someone is saving or paying down debt, you’ve got to have someone on the other side borrowing and spending money. But when a debt-financed asset bubble collapses, everybody could be paying down debt and no one is borrowing money, even at zero per cent interest rates. In that case, all the savings that are generated and all the debt that’s repaid comes into the financial sector but won’t be able to leave the financial sector. That becomes the leakage to the income stream. And this can happen even with zero interest rates.’
‘What leads you to think Canada has the ingredients for falling into a balance sheet recession?’
‘Your house prices have gone up quite steadily even after the Lehman shock. Since 1997, Canadian households have been in deficit all these years. And that means a huge buildup of debt over this period. Now as long as house prices are rising faster than your debt levels, balance sheets will still look fine for individual households. But if something should happen to house prices, if they should start falling, then suddenly some of the people who bought these houses realize their balance sheets are underwater. And if they all start paying down debt or increasing savings, Canada could fall into a balance sheet recession.’
‘Canada’s federal housing agency said Monday the annual pace of new housing construction slowed materially in February, with far fewer multiple-unit projects such as condos and apartments breaking ground.’
‘Housing experts at Royal Bank of Canada said the pace of construction last month hit lows not seen since the last recession.’
“Homebuilders significantly curtailed residential construction activity in February, breaking ground on the lowest number of housing starts since July 2009,” Laura Cooper, an economist at the Royal Bank of Canada, said.’
‘As the country’s property market has boomed over the past decade, residential construction has grown into a major source of employment — but is now a sector that could be in for job losses as the market cools, experts say.’
the irony of it all is that anyone who bought a house in the last 15 years has a balance sheet blood red.
Just ask this question. “if you liquidated everything you have in your posession today and pay off all your debt how much money would you have?”
even the most optimistic answer is “break even.”
Debt is for fools and the hopeless.
Ben:
Is Richard Koo still with Nomura?
I believe so.
He wrote a very good article a while back - I want to get this to you this week - I will have to go through my stack of stuff - article on the finance crisis developing world wide but wrote this several years back - give me a bit and I will see if I can find it.
‘Of the 10 most expensive homes now for sale in St. John’s, not a single listing comes in at under $1 million. On housing starts in St. John’s, the average price anticipated by CMHC landed at less than half of what a home would need in order to be listed on the Point2 Homes Top 10.’
“The average single-detached price for a new home will be around the $400,000 level this year, $405,000 in 2015 and $410,000 in 2016,” the report stated. “Stable economic conditions will continue to be supportive of the in-migration of workers to the St. John’s region. House prices may discourage some from accessing homeownership as they could perceive renting as a more affordable alternative.”
‘Pacific Investment Management Co.’s Ed Devlin is getting out of Canadian government bonds, and Bank of Canada Governor Stephen Poloz is the reason why. Devlin, who oversees about $17 billion, including the Canadian portfolios for the world’s biggest manager of bond funds, said higher yields are needed to compensate for the risk of buying debt whipsawed by Poloz’s policy pronouncements.’
“Investors should require a bigger risk premium to invest in these bonds,” Devlin said by phone from Los Angeles Friday. “If you don’t know what they’re going to do, you should get paid more money to invest in them than if they were fairly predictable.”
‘The comments followed Poloz’s decision in October to abandon so-called forward policy guidance. Prior to the change, the central bank had indicated whether it had a bias toward lowering or raising rates. “I fundamentally question someone who doesn’t want to do forward guidance but speaks,” Devlin said. “If he doesn’t want to do forward guidance, why is he speaking?”
In other words - Thank you Bill Gross for leaving me with this pile of you know what to divest!!!
More analysis; less guessing
More truth; less lies