Starting To Get Nervous About Prices
CNBC reports on Colorado. “Houses have been flying off the shelves for the past six months, but the sales pace is starting to slow, and could in fact decelerate more dramatically in some of the hottest markets come winter. Real estate agents and homebuilders say they are starting to see more buyers balk at high prices and shy away from bidding wars. ‘We definitely saw a bit of a cool toward the end of July. People started to get nervous about rising prices,’ said Jill Schafer, an agent at Kentwood Real Estate in Denver.”
The Boston Globe in Massachusetts. “For several years, wealthy Chinese have been snapping up homes in high-end neighborhoods from Cambridge to Wellesley, while institutional investors, such as some of China’s big insurance companies, have provided financing for pricey condo towers under construction. There is anecdotal evidence of some pullback. Patty Chen, a Wellesley entrepreneur who helps Chinese investors find houses in the Boston area, said she has seen some would-be buyers hold off this summer. ‘Some are nervous because of the stock crash,’ Chen said. ‘I think we are in a ‘buffer period’ where Chinese just want to wait out the volatility.’”
The Midland Reporter Telegram in Texas. “Warren Ivey, a Midland Realtor with the Texas Association of Realtors, said buyers are still hesitant because of the oil economy but still want to move out of rentals and into a home. Ivey said that there is still no pattern for why sellers are offloading their homes. While the number of homes on the market are nearly 70 percent higher than the same time last year, they are still below the year’s peak of 533 homes on the market in March, according to the PBBOR’s figures.”
“‘Some of our buyers, in the past, when they make an offer on a home, and they discover that they got beat out because there were three other offers on a property. When that happens to them, they get discouraged, and, a lot of times, they say never mind, I don’t want to play that game,’ Ivey said. ‘So with this increase in inventory, this might be enough to push those people back into the home buying market.’”
From Michigan Live. “Ann Arbor’s annual fall housing shuffle is in full swing, with University of Michigan students flocking back into town and other renters beginning new apartment leases. But even with the start of the fall semester just around the corner, many apartments near downtown and campus are still available to rent. Landlords who are used to having fall leases signed long before now say this is a new phenomenon, and some are lowering prices to stay competitive.”
“‘It doesn’t take a rocket scientist to figure out there’s been an unbelievable increase in the supply of downtown apartments in the last few years,’ said Jason Costello, co-owner of Cabrio Properties, which has about 350 rental units in Ann Arbor. ‘It’s certainly quite a different landscape out there than it has been in the last few years for sure. We’ve reached — or probably surpassed — a saturation point of rental housing in Ann Arbor, both in the downtown area and campus area, but also just throughout the city in broader terms.’”
The Florida Times Union. “One sits on the river in San Marco, the other on the ocean in Ponte Vedra Beach. So one has docks, the other a beach. And they’re both for sale, the only two homes in Northeast Florida listed at more than $10 million. Owner Don Brindley listed the Ponte Vedra house in April and admitted there hasn’t been a lot of interest. ‘It’s a pretty small group that can afford to live out here,’ he said. ‘“It’s really a matter of luck. It could be day one, it could be year two. I’m motivated, but I don’t have to sell. I don’t owe anything on it. I can stay here until the day I drop dead.’”
“James Mussallem said he had the same problem McAfee did when it came to comparing recent sales. Still, he’s reduced his price from when he first listed it last year at $14.85 million. He had it listed with a real estate firm then. Now he’s selling it himself. ‘I interviewed brokers and asked them what’s the most expensive home they’ve sold,’ he said. ‘They $1 million, $2 million, $3 million. I sell paintings for $10 million, $20 million,’ he said. ‘I’m used to selling expensive items to rich people.’”
WIVB 4 in New York. “Local leaders expanded their ‘bank shaming’ initiative, Friday, taking aim at a ‘zombie property’ in West Seneca. The property has been vacant for about 5 years, but Town Councilman William Hanley said, there is no shortage of interest. ‘We all know somebody that would love to purchase one of these houses. For the banks to sit on them just to help their bottom line is a shame.’”
“Town officials said West Seneca is a hot real estate market, and with about 90 vacant properties in town, Town Supervisor Sheila Meegan said zombies are killing the American Dream of home ownership. ‘It is a missed opportunity for another young family to come in and enjoy this community. It is an easy fix, and that is why we don’t understand the banks’ posture.’”
PBS News Hour. “Founded in 1920, National Bureau of Economic Research is a private nonprofit research organization devoted to objective study of the American economy. The following summary was written by the NBER and doesn’t necessarily reflect the views of Making Sen$e. We will tell you, however, what the takeway is: The U.S. foreclosure crisis, so commonly referred to subprime mortgage crisis, was not in fact, just a subprime event. While it began that way, it became a much broader phenomenon and mainly included prime mortgages. The findings suggest that effective regulation cannot just focus on restricting risky subprime contracts.”
“There were only seven quarters, all concentrated at the beginning of the housing market bust, when more homes were lost by subprime than by prime borrowers. In this period 39,094 more subprime than prime borrowers lost their homes. This small difference was reversed by the beginning of 2009. Between 2009 and 2012, 656,003 more prime than subprime borrowers lost their homes. Twice as many prime borrowers as subprime borrowers lost their homes over the full sample period.”
“The authors’ key empirical finding is that negative equity conditions can explain virtually all of the difference in foreclosure and short sale outcomes of prime borrowers compared to all cash owners. Negative equity also accounts for approximately two-thirds of the variation in subprime borrower distress. Both are true on average, over time, and across metropolitan areas.”
“None of the other ‘usual suspects’ raised by previous research or public commentators — housing quality, race and gender demographics, buyer income, and speculator status — were found to have had a major impact. Certain loan-related attributes such as initial loan-to-value (LTV), whether a refinancing occurred or a second mortgage was taken on, and loan cohort origination quarter did have some independent influence, but much weaker than that of current LTV.”
“The authors’ findings imply that large numbers of prime borrowers who did not start out with extremely high LTVs still lost their homes to foreclosure. They conclude that the economic cycle was more important than initial buyer, housing and mortgage conditions in explaining the foreclosure crisis. These findings suggest that effective regulation is not just a matter of restricting certain exotic subprime contracts associated with extremely high default rates.”
“Negative equity also accounts for approximately two-thirds of the variation in subprime borrower distress.”
People who borrowed that much would have been in distress without negative equity, but perhaps they would have been willing to suffer more. Instead, you ended up with lender distress.
“Instead, you ended up with lender distress.”
Is that true even if the loan is federally guaranteed? I had been under the impression that the point of federal guarantees was to encourage private lenders to make more low-interest loans to people with bad credit buying homes they can’t afford (aka “subprime loans”) by shifting the default risk liability onto tax payers.
My misunderstanding!
Denver, CO Housing Prices Fall 9% YoY As Housing Bust Resumes
http://www.movoto.com/denver-co/market-trends/
‘Ivey said that there is still no pattern for why sellers are offloading their homes. While the number of homes on the market are nearly 70 percent higher than the same time last year, they are still below the year’s peak of 533 homes on the market in March, according to the PBBOR’s figures’
I’m not saying anyone’s a lion or anything, but excluding ranches and lots:
803 properties found Midland, TX Real Estate and Homes for Sale
http://www.realtor.com/realestateandhomes-search/Midland_TX/type-single-family-home,condo-townhome-row-home-co-op,multi-family-home,mfd-mobile-home
371 properties found Midland, TX Price Reduced Homes for Sale
http://www.realtor.com/realestateandhomes-search/Midland_TX/type-single-family-home,condo-townhome-row-home-co-op,multi-family-home,mfd-mobile-home/show-price-reduced
‘I think we are in a ‘buffer period’ where Chinese just want to wait out the volatility.’
A big overhang of underwater margin debt can definitely put one in the mood for waiting out the volatility.
‘Afternoons in the Chinese stock market have turned into a waiting game for the state-backed funds to arrive.’
‘Over each of the past four days, China’s SSE 50 Index of large-capitalization companies has rebounded by an average 6.4 percent in late trading from session lows. The gauge surged 15 percent over the four-day period, its biggest rally since 2008 and twice the 8.1 percent gain by the Shanghai Composite Index. The SSE 50 climbed 0.9 percent at the close on Tuesday, erasing an earlier loss of 4.8 percent.’
‘The rallies are driven by government-backed funds buying shares to stabilize the market before a World War II victory parade on Thursday, according to IG Asia Pte.’
“When you see a straight line buying pattern in the last 45 minutes, that’s usually the national team supporting the market,” said Michelle Leung, chief executive officer of Xingtai Capital Management Ltd. in Hong Kong. “When you track market opens or you track outstanding margin balance, we could see the bulk of retail investors selling.”
No one is a lion here either:
http://www.bloomberg.com/news/articles/2015-09-01/china-traders-spot-afternoon-pattern-in-state-buying-of-stocks#media-2
Is there a perceived advantage to convincing Muppets that the state has no role in market levitation?
If the MSM is reporting a story, then it’s not secret.
International Business Times
Economy
China stockmarket rebound the result of ’secret’ government intervention
By Bauke Schram
August 27, 2015 12:07 BST
The 5.3% rebound of the Shanghai Composite on Thursday (27 August) has allegedly been fuelled by measures from the Chinese Government
(Reuters)
The Chinese government is suspected to have secretly intervened in the declining stock market in Shanghai, according to unnamed sources in the country.
Bloomberg reported that people familiar with the matter said the 5.3% increase in the stock market was a result of intervention by China’s communist government, which allegedly bought stocks from big companies on Thursday.
The rebound of the Shanghai Composite was originally attributed to a jump in Wall Street stocks, which in turn responded to positive data from the US Department of Commerce.
…
‘The New York Stock Exchange invoked Rule 48 for the fourth time in two weeks.’
Notice it’s only “volatile” when it’s going down, not when it shoots up for 6 years straight.
How’d today’s invocation of Rule 48 work out to quell “volatility”?
On the subject of China, and I wrote this yesterday:
“Serious reflection.” Come on now, anyone engaging in that kind of thinking would come to the prohibited conclusion that China is hosed. This is a country that blocks the internet and restricts square dancers to state-approved routines. Serious reflection, unless it endorses the status quo and pays the requisite obeisance to leadership, is a one-way ticket to a prison camp.
Right on cue, a journalist for the very publication that used the phrase “serious reflection” has confessed to his crime. I’m guessing this wasn’t discussed at Jackson Hole. Hat tip to Mish’s blog:
A leading journalist at one of China’s top financial publications has admitted to causing “panic and disorder” in the stock market, in a public confession carried on state television.
The detention of Wang Xiaolu, a reporter for Caijing magazine, comes amid a broad crackdown on the role of the media in the slump in China’s stock market, which is down about 40 per cent from its June 12 peak. Nearly 200 people have been punished for online rumour-mongering, state news agency Xinhua reported at the weekend.
“I shouldn’t have released a report with a major negative impact on the market at such a sensitive time. I shouldn’t do that just to catch attention which has caused the country and its investors such a big loss. I regret . . . [it and am] willing to confess my crime,” [said Xiaolu]
…
“Do not conduct in-depth analysis, and do not speculate on or assess the direction of the market,” it reported an official directive as saying. “Do not exaggerate panic or sadness. Do not use emotionally charged words such as ‘slump’, ‘spike’ or ‘collapse’.”
http://tinyurl.com/q3yyrqt
Is ‘CR8R’ considered to be emotionally charged?
HA would be arrested in China.
Crater
Boston Metro Housing Prices Fall 9% YoY
http://www.zillow.com/ma/home-values/
“I’m used to selling expensive items to rich people.”
I don’t know why, but that comment almost made me spit my coffee.
He is a narcissistic dick-head…
He’s a carpet salesman.
There is some truth to that statement. Everybody cannot be an Elephant hunter.
“The authors’ findings imply that large numbers of prime borrowers who did not start out with extremely high LTVs still lost their homes to foreclosure. They conclude that the economic cycle was more important than initial buyer, housing and mortgage conditions in explaining the foreclosure crisis. These findings suggest that effective regulation is not just a matter of restricting certain exotic subprime contracts associated with extremely high default rates.”
So handing out loans like candy to anyone who can breathe was an insignificant factor in the foreclosure crisis?
Or could it be that the high priests used a research methodology that led to spurious conclusions, or at least misinterpretation of the results?
And was this research funded by a source that expected a particular conclusion to come out of the study?
I look forward to any insights on the above.
‘So handing out loans like candy to anyone who can breathe was an insignificant factor in the foreclosure crisis?’
Pretty much. It was the prices falling that caused most of the damage.
07/17/14
‘One thing that has not changed is the footprint of toxic loans that led to the housing price bubble and helped trigger the Great Recession.’
‘Most of the loans going into default in the second quarter are still from the 2005-2007 period when the market was overheating.’
http://www.dailynews.com/business/20140717/foreclosure-activity-in-california-remains-at-8-year-low
This “footprint” was when prices were at a peak. This line that dodgy loans were the housing bubble is a lie (exposed many times, BTW), made up by the REIC. It goes like this: house prices can never be too high. As long as we don’t have certain loans to certain people, trees can grow to the sky and your house will make you rich.
Never mind that repeated rounds of looser loan standards and trillion$ in QE are necessary to keep these prices going up (and shadow inventory - see post above), that’s because lending got too tight. The pendulum swung too far! (My favorite).
The bubble is in the prices. If there were no loans and everyone was paying cash you could still have a bubble. But of course, the presence of loans makes it quite a bit easier. OPM and all that. It also makes the crash more painful.
“The bubble is in the prices.”
Hey, what a coincidence, equity is also in the prices.
Take away the prices and you take away the equity. Take away the equity and you take away wealth.
Personally I think all of this is nuts, but … what do I know?
There is no “equity” in a depreciating asset.
Back in the day, I was telling people here borrowers would walk away from houses. When it happened some posters were really surprised. I wasn’t predicting anything really; I had seen it in Texas in the 80’s. We started to see reports of this millionaire or that handing in the keys. Pretty soon, everyone was doing it.
Most people are speculating, expecting to make money, on their house. When that prospect seems lost, off they go. It doesn’t matter what kind of loan they have.
“It was the prices falling that caused most of the damage.”
This may well have been the proximate cause, but starting out with high LTV loans and low downpayments increases the risk a buyer will find themselves in an underwater position in the next recession when prices decline. Whether or not explicitly labeled ’subprime,’ high LTV / low doc / low downpayment/ payment-option, etc. mortgages also enable any given to borrow at a higher multiple of household income, exacerbating bubble pricing in the boom, similar to Chinese households using margin loans to lever up their stock purchases when prices are going stratospheric.
“any given buyer”
‘exacerbating bubble pricing in the boom’
There isn’t any question about that. Did subprime make a bad situation worse? Absolutely. But as the numbers show, minorities didn’t default at a higher rate. It was across all lines, region, what have you.
I once had a post titled something like, “if you have flipping you have a bubble.” Over a year ago I found an LA Times report saying “flippers were selling to flippers.” People should never be doing this in a rational world. Paying a million over asking? That was just a couple months ago.
“People should never be doing this in a rational world.”
“… rational world”.
The joke of the day.
People should never be doing this in a rational world. Paying a million over asking? That was just a couple months ago ??
Only speaking for my area here…People with these kind of resources do not rationalize the way most people do…Its more like; I want it…I can afford it…I am going to buy it…
My son has worked in Human Resources for sometime…He has told me many times…”Dad, you just can’t believe how many twenty something and thirty something people around here that are worth 10-mil +….When great wealth comes quick, the willingness to spend some of it quickly is not uncommon…Look at Lotto winners…
Doubtful.
‘Most of the loans going into default in the second quarter are still from the 2005-2007 period when the market was overheating.’
High LTV / low downpayment / interest only loans are especially essential to get people into the market at the late stage of the bubble, when less risky multiples of household income no longer enable buyers to “afford” a purchase.
“If there were no loans and everyone was paying cash you could still have a bubble. But of course, the presence of loans makes it quite a bit easier.”
IMHO, we had a bubble in financial markets (specifically with respect to mortgage backed securities), which caused a bubble in home prices.
If you take away the liar loans, no doc loans, etc., in addition to taking the Casey Serin’s out of the market (who are buying more than one home speculatively), you also eliminate a HUGE number of buyers who should never have been buyers.
This whole chunk of demand missing from the market would have made a big difference in where prices went.
I do agree though, without prices being too high (and thus having pressure to go down), the risky loans wouldn’t have made much of a difference–as evidenced by the fact that the risky loans were around for years before they became a problem in conjunction with falling home prices.
3.5% FHA mortgages are the definition of subprime Rental_Fraud.
Down payments matter.
1. If you put a significant amount down, you are less likely to simply roll the dice on a home without thinking about it.
2. If you put a significant amount down, it means there is either someone with resources supporting you, or you have the income and financial discipline to save some money.
3. If you start with a good amount down, a small downtick in prices won’t cause you to become a forced seller if you run into a difficult financial time for your family, or mail the keys back.
‘We definitely saw a bit of a cool toward the end of July. People started to get nervous about rising prices,’ said Jill Schafer, an agent at Kentwood Real Estate in Denver.”
Woah, now there’s a shift of sentiment. In a speculative market rising prices is the attraction. Now rising prices in this speculative market is making people nervous.
Hmmmm … I suspect a turning point is at hand. If so then two things are about to happen:
1. Potential buyers who were possessed by the ruinous psychology of buy-now-or-be-priced-out-forever syndrome will all of a sudden begin to balk at buying and …
2. Potential sellers who were holding off on putting their houses on the market because “they did not want to leave money on the table” will - en mass - decide to put their houses on the market and will want to try to scrape off the table any money that they can possibly get.
Number 1 will reinforce the actions of number 2, and number 2 will reinforce the actions of number 1.
Fun times!
Oh, is this a good time to bring up the value of EQUITY, the value - the wealth - of those who were neither buyer nor sellers but the bystanders who stood by and watched as others - complete strangers - bid up prices and thus bid up the values of their equity, which in turn created for them WEALTH as if by magic.
What does one suppose they will now do? What they will do now?
What will they do regarding their spending when Zillow who previous told them that they were getting richer and richer begins to tell them that they are getting poorer and poorer? Hmmmm?
Stay tuned.
‘Oil falls more than 4 percent on weak Chinese data’
‘the global market is still heavily oversupplied.’
‘Oil producers in the Organization of the Petroleum Exporting Countries are pumping over 2 million bpd more than required, forecasters say, filling oil stockpiles worldwide.’
‘Global demand is also faltering in some regions.
Monthly surveys show manufacturing struggling across Asia: an 11th successive contraction in Indonesia, a sixth contraction in South Korea and the weakest reading in nearly three years in Taiwan. Activity in India also slowed from July.’
Now where’s rental watch? Off looking for crow relish?
‘Government data confirmed Tuesday that Canada fell into a recession in the first half of the year marked by the weakest output since the 2008 global financial crisis.’
Is it a ‘technical recession’ or just a plain old recession now?
The geological reasons for the production slowdown seem to have vanished over night!
Time to blame the weather.
Can you look farther ahead than the next trading day?
You’ve said before that by the time the trends become apparent to the world, it’s too late to get into the trade, or avoid the carnage.
What do the following MONTHLY changes in production tell you about how US production is changing with current drilling/fracking activity?
Aug 2015: -93k BPD
Jul 2015: -91k BPD
Jun 2015: -91k BPD
May 2015: -86k BPD
Apr 2015: -57k BPD
Mar 2015: +1 BPD
Feb 2015: +68 BPD
Jan 2015: +103k BPD
Patience…patience…I know it’s hard to take a medium-term view, but it does pay off.
15% of total US production and a fraction of that in terms of global oil production is raindrops in the desert my friend.
Remember….. global oil demand is falling.
Sell what China buys.
http://www.wsj.com/articles/huge-purchases-by-chinese-oil-trader-raise-prices-confusion-1441103201
Marketwatch dot com
Growth fears slam U.S. stock futures; Dow futures slump 400 points
By Anora Mahmudova and Sara Sjolin
Published: Sept 1, 2015 8:53 a.m. ET
Reuters
Disappointing Chinese manufacturing data weigh on global stock markets on Tuesday.
U.S. stocks looked set to plunge at the open Tuesday after another set of weak Chinese economic data roiled global financial markets.
Energy stocks were among the steepest decliners.
…
Suck them in, shake them down, spit them out…
Marketwatch dot com
Futures Movers
Oil futures retreat after impressive 3-day rally
By Myra P. Saefong and Eric Yep
Published: Sept 1, 2015 10:36 a.m. ET
Weak Chinese data helps pare recent spectacular gains
Shutterstock/zhengzaishuru
Oil futures fell on Tuesday, with weak Chinese manufacturing data dulling the outlook for energy demand and prices pulling back after tallying a three-session climb of more than 27%.
October West Texas Intermediate crude CLV5, -5.28% declined by $2.79, or 5.7%, to $46.43 a barrel on the New York Mercantile Exchange. October Brent crude on London’s ICE Futures exchange LCOV5, -5.26% fell $2.93, or 5.4%, to $51.20 a barrel following a two-session climb of more than 15%.
“The oil drop is normal technical selling and not a surprise after 3 days of big gains,” said Colin Cieszynski, chief market strategist at CMC Markets. “Short-term momentum swing traders would want to step out at some point.”
Cieszynski said this week’s U.S. petroleum-supply data from the American Petroleum Institute late Tuesday and from the Energy Information Administration early Wednesday “could be interesting and may spark more action.” Analysts polled by Platts are looking for a weekly decline of 800,000 barrels in crude supplies.
U.S. oil prices tallied a total gain of 27.5% on Thursday, Friday and Monday—their largest such rally since Iraq’s invasion of Kuwait in August 1990.
…
As mentioned yesterday, I expect this whole oil glut to take 3-5 years to sort itself out.
The question yesterday was “why did oil prices spike” recently, and I noted that I thought it was because of the production numbers in the US, and OPEC talking about production cuts.
With US production falling at a rate of 100k BPD per month, eventually we will get back to a market where prices justify fracking again.
Keep the crow warm for me. I’ll eat it in 3 years if we haven’t seen rig count dramatically increase again in the shale plays in the US by then.
Dance Rental_Fraud dance…..
You only have this fantasy because you have no idea that an epoch collapse of credit is underway.
Sarasota, FL Housing Prices Plunge 20% YoY; Foreclosures Loom
http://www.zillow.com/sarasota-fl/home-values/
“People started to get nervous about rising prices”
I’m speechless. There IS intelligent life out there.
They aren’t nervous because their house is “worth” too much. They’re nervous because other people’s houses are worth too much.
Yes! I’ve been saying this AND waiting for this for months and months! FINALLY!
“Town officials said West Seneca is a hot real estate market, and with about 90 vacant properties in town, Town Supervisor Sheila Meegan said zombies are killing the American Dream of home ownership. ‘It is a missed opportunity for another young family to come in and enjoy this community. It is an easy fix, and that is why we don’t understand the banks’ posture.’”
This arrangement was worked out between banks and the Obama administration. It’s a deliberate effort to interfere with markets.
Tx Ben ,that’s a nice round the country tour
Sherman Oaks, CA Housing Prices Crater 11% YoY
http://www.movoto.com/sherman-oaks-ca/market-trends/
Dow is down 2200 pts. from highs earlier in the year.
Thanks Obama!!! You f….ing dolt. Six and a half years of continuing misery built on the errors of RINO Bush and idiot Clinton and his hoarde.
And for those of you who want to say - it ain’t the bummer’s fault - well I got one word for you - policy.
Bad policy = bad economy
Good policy = good economy.
Falling prices is positively bullish and good for the economy.
Those recent sessions where the indexes dived near the end foretold future weakness. It’ll be interesting to see what happens at the end today. One chartist said then, “the damage (psychological) has been done.”
It didn’t sell off right at the end. Closed near the lows but didn’t collapse.
Any connection between Obama and the stock market is tenuous at best. And we’ve had an extended period of bad policy, which I trace to the deregulation of Wall Street and the propagation of a poisonous economic ideology, acts in which both parties, long before Obama, were complicit. Do you think the administration should try to prop up stocks, like China?
Every policy is good for some people and bad for others. Right now our policies encourage debt-based consumption over savings. What would the stock market look like if people saved 10% of their incomes, refused to go into debt, and only bought things they could afford and really needed?
Aurora, CO Housing Prices Plummet 19% YoY
http://www.movoto.com/aurora-co/market-trends/
Buyers are scared to buy market priced homes why, there are so many overpriced properties that sell, they don’t know the real value. The principal of comps is out the window. When a house sells for 200k more than a like home because a RE agents talked the the buyer into it and it actually closes at 200k more buyers are just shaking their heads and walking away. When a buyers smell that something went down that wasn’t kosher they envision sub- prime again and run away.
IMO it’s that strange time of a mania. The saying applies; people lose their sanity in a herd and regain it one by one.
Denver housing madness is not only ending and a reminder of 2007 -08, but the impending bloodbath I fell will be even worse in the coming months and years.
It’s going to get really interesting once the lagged spillover from the recent weakness in U.S. and Chinese stocks spills over into housing. By early 2016, nobody will be able to deny it (except for professional denialists, that is).
I stumbled across Ben’s blog a couple of weeks ago. I lean towards this view and find the blog and comments educational and interesting. I would appreciate the author’s and audience’s take on the proceeding news article found this morning.
Canadian housing markets mostly stable; hot pockets in Toronto, Vancouver: banks
Business
by The Canadian Press
Posted Aug 31, 2015 8:05 am PDT
Last Updated Aug 31, 2015 at 9:00 am PDT
TORONTO – The cost of owning a home has been holding steady in most parts of Canada, but affordability declined during the second quarter in the two most expensive markets, Vancouver and Toronto, a report by Royal Bank says.
In its latest analysis of housing trends, RBC also said Monday it expects prices will continue to rise in Toronto and Vancouver in the short term because of tight supplies of detached homes for sale.
The bank said supply and demand are more balanced in other Canadian markets and affordability has been close to the long-term average since 1985.
In a separate report, TD Bank (TSX:TD) said it expects a decline in Canadian borrowing rates in the first half of 2015 will likely boost demand into the early fall, but then have a waning effect in the late stages of this year.
It says the low-rate environment has helped to keep markets “humming” in hot markets and reduce the impact of low commodity prices in other markets, particularly in Alberta and Saskatchewan.
TD said commodity-dependent regions such as Edmonton, Calgary, Regina and Saskatoon “have weakened considerably so far this year, but to a lesser degree than was originally anticipated.”
“Elsewhere, markets that had embarked on soft landings over the last few years, including Ottawa, Montreal and Quebec City, have seen activity either stabilize or perk up,” TD said.
The RBC quarterly report takes into account income, property prices and the typical costs of home ownership, such as mortgage payments, utilities, taxes and fees when calculating its affordability measure.
“The central theme for housing affordability in Canada continues to be the wide divide between stretched conditions in Toronto and Vancouver, and fairly neutral conditions in the rest of the country,” RBC said in its report.
“The split, in fact, widened during the second quarter of 2015, with strong price increases for single-detached homes in Toronto and Vancouver squeezing affordability further in these markets, whereas a slow pace of appreciation — at best —kept the cost of home ownership mostly stable in the majority of other markets.”
RBC said there was evidence that buyers were more confident in Alberta than they had been in the previous two quarters as a result of the dramatic decline in oil prices, but “prices still remained under slight downward pressure for the most part . . . “
“The picture was a little different in Saskatchewan where a recovery in single-detached home prices negatively affected the affordability of bungalows and two-storey homes.”
In Quebec, RBC said home prices were “quite stagnant” and that contributed to improved housing affordability.
“Widespread improvements similarly took place in Atlantic Canada, although there remain few indications that housing demand is turning a corner in the region.”