Stable And Cheap Is Not An Incentive
BNN reports from Canada. “The man dubbed Toronto’s ‘Condo King’ says Ottawa’s efforts to cool red-hot housing markets in Toronto and Vancouver will amount to no more than a symbolic gesture. ‘A lot of people are making noise about trying to slow down real estate in Toronto and Vancouver. You’re not going to slow them down through government intervention, unless it’s draconian and stupid,’ said Brad Lamb, the president and CEO of Lamb Development Corp in an interview with BNN. ‘When you were buying a $999,000 condo or house you used to have to put down $50,000 down, now you have to put $75,000 down. When you’re buying a million dollar house you can find another $25,000.’”
“Lamb says the federal government should embrace rising demand for condo housing, rather than putting up roadblocks for homebuyers, in order to guard against a weaker economy. ‘What’s carrying the Canadian economy is my industry, the construction industry. I don’t think you want to monkey with it, or you’ll have a recession for sure,’ he said.”
Radio Canada International. “Canadians are carrying ‘extremely high’ levels of debt and a good New Year’s resolution would be to reduce it, says personal finance expert Jean Freed. The average debt-to-disposable income is 165 per cent, according to government statistics. That is, if a Canadian has $1,000 of disposable income, they likely have $1,650 of debt. There are several reasons for that, says Freed. ‘One is, in general, we spend too much…(and) one of the main reasons is that Canada’s had very rapidly rising real estate prices.’ She says about 60 per cent of total consumer debt is in mortgages and another 40 per cent is other consumer debt.”
“‘I think the consequences are going to become clear in everyone’s mind when interest rates start to go up,’ says Freed. And she says they will. ‘I think that when interest rates start to go up, Canadians with their very, very, very large mortgages are going to be sorry.’”
“If people’s houses are worth more than what they bought them for, Freed suggests it might be a good time to sell, downsize, or rent accommodation and see whether what she calls a housing bubble bursts. At all costs, people should avoid situations where they have to borrow, to pay debts, and Freed says Canadians are getting close to that point. ‘It’s frightening and it’s insidious. It keeps happening. It encourages, it almost obliges people to run up more and more debt.’”
From CBC News. “The real estate outlook in the rest of the country might be rosy, but a Dartmouth realtor is predicting that Nova Scotia’s housing market will continue to be slow in 2016, continuing a two-year trend. Although markets are static elsewhere in Nova Scotia, numbers from that activity are too small to offset a slowdown in the Halifax area itself, he said. ‘We’re one of the few markets in Canada that has seen a significant slowdown,’ Re/Max realtor Al Demings told CBC’s Information Morning.”
“First-time home buyer activity, which acts as a catalyst to the rest of the market, ‘has been almost non-existent,’ Demings said. That’s partly a result of changes to lending regulations that make it more difficult for buyers to qualify for mortgages, he said. A slowdown in military transfers to Halifax has had an impact as well, as has the drop in oil prices, he said. Paradoxically, the continuation of low interest rates is also responsible, as fluctuations in rates can be a signal to consumers that they need to act, he said.”
“‘When the market is stable and cheap it’s not an incentive. When the rates start to go up people think, ‘I’d better buy now’,’ Demings said. The price dynamics involved in buying a condo in Halifax just don’t make sense — and the market may be oversupplied with condos as a result, he said. ‘We’re at the saturation point. I would suggest that we have way more than we need,’ Demings said.”
From Global News. “Inventory is up and sales are down in Alberta’s capital city when it comes to real estate. That is the takeaway from the fourth quarter results from the Realtors’ Association of Edmonton. ‘2015 was a steady year for real estate in Edmonton,’ said Association Chair Geneva Tetrault. ‘Edmonton and the surrounding areas experienced a decline in sales due to economic uncertainty, but we saw a slight increase in price that demonstrated that the market remained relatively stable. This began to cool in the fall months as inventory remained higher than normal.’”
The Airdrie Echo. “Prices for the typical home (benchmark), in the region are comparable to last year’s prices, despite an increase in supply and slowing demand, according to the latest statistics from the Calgary Real Estate Board (CREB). ‘It’s a buyer’s market, and prices have come down, but not to the extent that people expected them to,’ said Lowell Martens, of Mountain View ReMax Real Estate, who sells homes across the region, from Okotoks to Springbank and Bragg Creek to Airdrie and north Calgary.”
“Lowell said prices fluctuate month to month, but housing prices are down this year between three and five per cent when compared to the start of 2015 due to an increased supply and weaker demand. The biggest hits have come to the high-end market, with homes in the $700,000 plus range taking longer to sell. Supply was up across the region in the third quarter, including in Airdrie where much of the gain was attributed to a high inventory of apartment and attached homes, which saw the highest levels since 2008. In Airdrie, benchmark (typical housing) prices for apartments were down five per cent from the previous quarter and one per cent when compared to last year’s levels, averaging $203,967.”
“Martens believes that investing in a home is a good move, even if prices should fall. ‘We have got to start thinking like our grandparents—their goal was to pay off their mortgage,’ he said.”
The Calgary Herald. “After a record year in 2014, MLS sales for properties of more than $1 million plunged in Calgary in 2015. According to the Calgary Real Estate Board, there were 511 luxury home sales in the city last year, down from a record 846 in 2014. It was the lowest level of sales for that price market since 2011. ‘No question we’ve seen less activity in the higher-end market,’ said CREB’s chief economist Ann-Marie Lurie. ‘It’s not a surprise given if you look at what happened in employment overall year-over-year.’”
“The luxury home market in Calgary has grown dramatically in the past decade with sales in 2005 of 139. ‘With the current market conditions, the most important factor for luxury properties is the right exposure and marketing is key,’ said Grace Yan, a realtor with Sotheby’s International Realty Canada in Calgary. ‘We can no longer just rely on local buyers and need to expand marketing to worldwide exposure.’”
“Mark Evernden, president of sales for Engel & Volkers in Calgary, said the overall real estate market in Calgary is still ‘challenged’ and more so in the luxury sector. ‘However, the buyers are still out looking for that ideal property and feel that they can get more for their dollar now,’ he said. ‘Yet there is still the position of wait a few more months to get a clear understanding of where market value is going.’”
Salem, OR Housing Market Craters; Prices Plummet 13% YoY
http://www.movoto.com/salem-or/market-trends/
‘Paradoxically, the continuation of low interest rates is also responsible, as fluctuations in rates can be a signal to consumers that they need to act, he said…‘When the market is stable and cheap it’s not an incentive. When the rates start to go up people think, ‘I’d better buy now’
‘When the market is stable and cheap it’s not an incentive’
There’s something about this statement that jumped out to me.
He is close to putting the pieces together, just not there yet.
“The price dynamics involved in buying a condo in Halifax just don’t make sense — and the market may be oversupplied with condos as a result, he said.”
__________________________/
Is there ever a time when it makes sense to buy a condominium in Halifax, Nova Scotia? I’ve never been there, but it’s not a city I’ve heard associated with that kind of living.
“‘What’s carrying the Canadian economy is my industry, the construction industry. I don’t think you want to monkey with it, or you’ll have a recession for sure,’ he said.”
So, what is - at root - carrying the construction industry?
Hint: “‘When you were buying a $999,000 condo or house you used to have to put down $50,000 down, now you have to put $75,000 down. When you’re buying a million dollar house you can find another $25,000.’”
Pssssst … the answer is borrowed money. The asset-rich Canadian economy is a borrowed-money economy, meaning what is keeping the economy going is borrowed money, which makes the Canadian economy a dangerous economy.
‘With the current market conditions, the most important factor for luxury properties is the right exposure and marketing is key,’ said Grace Yan, a realtor with Sotheby’s International Realty Canada in Calgary. ‘We can no longer just rely on local buyers and need to expand marketing to worldwide exposure.’
And they talk about Asians. That’s the answer? It’s houses Grace, not Picasso’s that can be moved around.
“We were already conservative about the first quarter,” said analyst Kylie Huang at Daiwa-Cathay Capital Markets in Taipei, in response to Foxconn’s Lunar New Year plans. “It’s not just iPhone slowdown, but all of the Chinese economy.”
‘China is a key growth market for Apple and the world’s biggest smartphone market.’
http://finance.yahoo.com/news/apple-expected-cut-iphone-6s-025621980.html
Bahahahahahahahaha …
“At all costs, people should avoid situations where they have to borrow, to pay debts, and Freed says Canadians are getting close to that point.”
“Canadians are getting close to that point.” = Victory is at hand.
“‘It’s frightening and it’s insidious.”
And it’s lucrative, it’s very lucrative.
“It keeps happening.”
Yes!
“It encourages, it almost obliges people to run up more and more debt.’”
Yes! and Yes!
What an orgasmic article! I now have an urge to smoke a cigarette.
Bahahahahaha … whenever I am in need of sex all I have to do is come to this message board and read a couple of posts.
‘Canada’s largest bank is raising mortgage rates. RBC will boost discounted rates on its two-year fixed-mortgage 0.10 percent to 2.39 percent. Rates on the three, four and five year rates will also increase by 0.10 percent to 2.74, 2.84 and 3.04 percent respectively. Rates on its five-year variable closed mortgages will rise by 0.15 percent to the prime interest rate minus 0.10 percent. The new rates come into effect on Jan. 8.’
‘The increase comes as Ottawa moves to try to cool Canada’s red hot housing market. Last month, Canada’s Finance Minister Bill Morneau announced that Canada Mortgage and Housing Corporation will require homebuyers to put a 10 percent down payment on the portion of the price of a home over $500,000. The changes come into effect in February.’
‘Those changes may not cool the housing market, but they could make it more difficult for first time homebuyers to get into the market, says Elton Ash, Regional Executive Vice President, RE/MAX of Western Canada. “When you are in the market when prices are up you are going to sell more and pay for more and if prices go down you will sell for less and pay for less,” he told BNN. “It’s getting into the market that’s always that toughest spot.”
I’m having trouble associating “first time homebuyers” and “houses over $500,000.” What’s the median income in Vancouver and Calgary?
‘Those changes may not cool the housing market, but they could make it more difficult for first time homebuyers to get into the market, says Elton Ash
Wouldn’t that latter phrase demonstrate fairly convincingly that the initial phrase is completely incorrect—at least for the entry-level portion of the market? First time homebuyers not being able to buy will certainly cool the market for houses that first-time buyers typically buy.
‘A new petition urging B.C. politicians to limit offshore investment and exploitation of tax loopholes in Vancouver real estate is getting a cool reception from Victoria as provincial coffers overflow with property transfer tax revenues in a red-hot housing market.’
‘The new petition urges politicians to intervene to make housing affordable for “the next generation” and claims “foreign ownership” in Lower Mainland real estate “is destroying our cities” and “the hopes and dreams of countless families.”
‘It is the latest of several online petitions circulated in B.C. as home prices continue to skyrocket in the Vancouver area. Metro Vancouver home sales set an all-time record in 2015, the region’s real estate board said Tuesday, with the benchmark price for detached properties surging 24.3 per cent year-over-year in December to $1.248 million.’
‘While the real estate industry and B.C. government have claimed the impact of offshore investment on B.C. home prices is minimal, many residents and analysts believe the driving force in price gains has been a flood of money connected to Mainland China.’
‘Jurisdictions with real estate investment markets similar to Vancouver’s, such as some Australia cities and Hong Kong, track and attempt to limit foreign ownership of homes. But Canada does not even collect data on offshore buying.’
‘Vancouver Mayor Gregor Robertson on Tuesday acknowledged — apparently for the first time — concerns about foreign investment, citing “stark and alarming” proof that Lower Mainland housing is “divorced from local incomes.”
‘The new B.C. petition says foreign investors are increasingly using Vancouver homes to store wealth “in lieu of banks,” and “many of these offshore investors are taking advantage of loopholes to reduce or eliminate taxes paid on the sale of these houses, thereby denying the Canadian taxpayers any benefit from their purchase.”
‘The petition asks for legislators to immediately collect data on foreign ownership of homes and catalogue how many of these homes are vacant, and to “limit purchases of homes by non-Canadian residents for income tax purposes.”
‘Several months ago, de Jong had seemed to acknowledge an unfair playing field in B.C.’s housing market, reportedly telling the Globe and Mail that he planned to close a property transfer tax loophole that allows some wealthy foreign investors to dodge taxes.’
‘Studies at that time had suggested that buyers believed to be transferring or borrowing against funds from Mainland China increasingly dominate Vancouver’s single-family home market and that significant portions of these buyers could be avoiding provincial and federal taxes by the ways that they represent their occupations and ownership.’
‘Pundits have noted that B.C.’s budget surplus this year was largely supported by a massive increase in Victoria’s property transfer tax take, which is projected to be $1.1 billion for the fiscal year — an amount fuelled by Metro Vancouver’s housing market. That could explain Victoria’s reluctance to look at foreign ownership.’
“…..What’s carrying the Canadian economy is my industry, the construction industry. I don’t think you want to monkey with it, or you’ll have a recession for sure,’ he said……”
What a great strategy. It seems to be working for China. Or is it? Or, or, or……Ordos?
‘As the Fed began to taper its quantitative easing strategy, the dollar began to strengthen. Beyond the pressure placed on the complex by stagnating or falling demand, the resurgent dollar weighed on prices. The Fed ended the dual stimulus, and left the world in an unfamiliar position—without China and without the Fed.’
‘To a degree, no one has seen this before. There are certainly correlations to be drawn with different points in recent economic history (and it always rhymes), but there has never been an investment boom like China circa turn of the twenty-first century. The United States following World War II could be pointed to as a parallel, but the scales are wildly different.’
‘Commentary by Richard Fisher, the former president and CEO of the Federal Reserve Bank of Dallas from 2005 to 2015.’
‘While I would not completely pooh-pooh the effect of developments in China on the rest of the global economy, I believe another factor is of greater importance in pricing the U.S. stock market going forward: the effect of accommodative Federal Reserve policy.’
‘I spent 10 years (through last March) as a participant in the deliberations of the Federal Open Market Committee, setting monetary policy for the U.S. The purpose of zero interest rates engineered by the FOMC, together with the massive asset purchases of Treasurys and agency securities known as quantitative easing , was to create a wealth effect for the real economy by jump-starting the bond and equity markets.’
‘The impact we had expected for the economy and for the markets was achieved. By February of 2009, the Fed had purchased over $1 trillion in securities. With interest rates throughout the yield curve moving in the direction of eventually resting at the lowest levels in 239 years of history, the stock market reacted: It bottomed in the first week of March of 2009 and then rose dramatically through 2014. The addition of a third round of QE, which had the Fed buying $85 billion per month of securities to ultimately expand its balance sheet to over $4.5 trillion, juiced the markets.’
‘I voted against QE3 but the majority of the committee embraced it. One could argue — as I did — that QE3 and its predecessor rounds front-loaded the equity market. Stated differently, I believe we engineered a version of the “Wimpy philosophy”: We gave stock-market investors two hamburgers today in exchange for one or none tomorrow. We pulled forward the price-reaction function of markets.’
‘We will see what ensues. But one thing to bear in mind is that the Fed is focused on the real economy looking out to the intermediate term, not necessarily on sustaining the stock market today. In an effort to revive the economy, it floated all boats with its hyper-accommodative monetary policy. The real economy has been extensively repaired. And the easy money in investing has been made.’
Now we will see who the truly smart investors are and who merely looked smart by having ridden the rising tide engineered by the Fed. As Warren Buffett has often said: “you only learn who has been swimming naked when the tide goes out.” My guess is that, going forward, the view will be quite revealing.’
‘The purpose…was to create a wealth effect for the real economy. The impact we had expected for the economy and for the markets was achieved.’
And this guy is supposed to be a “hawk”? Creating money out of thin air doesn’t create wealth, it only increases the claims on wealth. It also distorts, deceives, re-directs resources where they wouldn’t otherwise go. Let us not forget the US was not alone in ZIRP/QE/debt; China really blew up the money supply/debt. That’s all it is really, debt. That’s the only way central banks can create money. Right now we are basically pretending that this debt will be repaid.
We are right in the middle of unprecedented.
Creating high prices creates wealth thus creating higher and higher prices creates more and more wealth.
It is a true miracle that is performed right in front of our eyes. And what makes this miracle of ever increasing prices spring into being is the reinterpretation of the word ” affordable”, a word that in the past - during the pre-miracle days - was something that was associated with PRICE but is now something that is associated with MONTHLY PAYMENTS.
The seller is the one who gets the price and the buyer is the one who gets to do the monthly payments. And, interestingly, both the seller AND the buyer want the price to be high.
“We are right in the middle of unprecedented.”
And stupid, we are right in the middle of stupid.
“Right now we are basically pretending that this debt will be repaid.”
That’s the money-shot right there.
‘We will see what ensues. But one thing to bear in mind is that the Fed is focused on the real economy looking out to the intermediate term, not necessarily on sustaining the stock market today. In an effort to revive the economy, it floated all boats with its hyper-accommodative monetary policy. The real economy has been extensively repaired. And the easy money in investing has been made.’
The Fed greatly damaged the ‘real economy’ with their easy money. And they certainly did not institute policies that ‘floated all boats.’ Easy money destroys the value of savings.
He is a liar like all the others.
But what did he lie about? He basically admitted that they pulled demand forward. He said everything except “SELL, SELL!”
Easy money destroys the value of savings.
Worse: easy money dramatically mis-prices RISK—as many are soon to learn.
(Ok, I’m probably being too optimistic again on that last bit).
The purpose of zero interest rates engineered by the FOMC, together with the massive asset purchases of Treasurys and agency securities known as quantitative easing , was to create a wealth effect for the real economy by jump-starting the bond and equity markets.’
OMG, Ben—that is the money-quote right there!
Intentional mis-pricing of financial assets—this is historically unprecedented, and they are flat-out admitting that that is what they did.
IMO, this is a staggering admission.
We all knew that that was what was going on, of course—but the fact that they would admit it publicly astonishes me.
Polls are still open for Ben Jones’ next big adventure.
Where is Ben gonna go next?
“I think that when interest rates start to go up, Canadians with their very, very, very large mortgages are going to be sorry.”
Wait, what? All other variables held equal, rising rates means falling prices? Say it isn’t so!
Mortgages are short term, 3 or 5 years. Rising rates are a disaster for anyone on a tight budget with a big mortgage. The rising cost of food is already a pressure with the currency off 30%.
Most mortgage owners rent from the bank…for life! Suckers.
The Great Canadian Crater is just beginning to form as is the China Crater. It’s all falling prices in the US here on out.
Get what you can get for your depreciating house today because it’s going to be much less tomorrow for years to come.
‘In 2015, we learned that for offshore drillers like Transocean (RIG), Noble (NE), Diamond Offshore Drilling (DO), and Ensco (ESV) a contract is never sacrosanct as long as the customers have all the leverage. If anyone needed a reminder, well, Ensco provided one this morning, after announcing that Petrobras (PBR) declared a contract void. Citigroup’s Scott Gruber explains: “This morning, Ensco announced that on January 4th the company received notice from Petrobras that the contract on the DS-5 (Ultra-deepwater drillship) is void. Petrobras alleges that Pride (which Ensco acquired in 2011) had knowledge that the shipbuilder of the DS-5 made improper payments to a third party marketing consultant who then shared the improper payments with former employees of Petrobras. Petrobras also asserts that Pride may have assisted in or facilitated these improper payments. As a result, Petrobras believes they are within their rights to cancel the contract.”
“Ensco disagrees with Petrobras’ assertion that the DS-5 contract is void and intends to assert its legal rights under the contract. The rig contributed an estimated 6% of EBITDA in 4q 15. The contract on the DS-5 was set to expire in July 2016 so the backlog reduction and impact on future EBITDA is limited. That said, this event marks the release of another ultra-deepwater rig into an already oversupplied market with poor prospects for finding new work near term.”
http://blogs.barrons.com/stockstowatchtoday/2016/01/06/offshore-drillers-petrobras-strikes-again/?mod=yahoobarrons&ru=yahoo
These things unwind unpredictably. Maybe better not to go down this road, huh Bernanke?
That’s about as bland a description of corruption as you’ll ever see.
Oh dear…
http://www.marketwatch.com/investing/index/shcomp?countrycode=cn&mod=MW_story_quote
Limit down in less than one hour.
The one year charts a beaut. A real beaut.
http://www.rutherford.org/…/the_state_of_the_nation_a_dictatorship_without_tears - 38k -
http://www.zerohedge.com/news/2016-01-11/state-nation-dictatorship-without-tears - 178k -