As a child, everyone has seen the picture above which is the visual definition of "perception".
Some see the image of a young woman. Others can clearly see the image of an old woman.
Same image, two different perceptions.
And the same can be said of real estate in the Village on the Edge of the Rainforest. Yesterday the little red-headed girl told me she spends her weekends going to open houses, house lust working it's elusive magic.
Don't people see the picture I see?
Bouncing around the Internet today is like going from site to site with confirmation of so many of last year's blog insights playing themselves out in living colour.
Aren't they evident to all?
You've often see me refer to the Vancouver Real Estate Anecdote Archive, a blog which collects anecdotes found on various blogs or in mainstream media. Since most are anonymous, it is impossible to confirm the validity of the comments but they are interesting. What stands out are the number of comments being made by people who are starting to worry about their real estate purchases.
Some recent comments (click on first two words for link):
- “A buddy of mine on the Island put his home on the market in August…..not a sniff. He is freaking out as he had hoped to ‘move-up’ and is carrying a big monthly mortgage.”
“I’m in the financial industry. People are one or two paycheques or missed mortgage payments away from real disaster. I think that bankruptcies will unfortunately become commonplace.”
These comments are reflective of events now unfolding as many of us in the blogosphere have predicted. Yesterday the chief economist of Gluskin Sheff + Associates, David Rosenberg, came out with a report that notes that housing starts, building permits and home prices have slipped.
Canada's recovery from the recession has been fuelled by the boom in the housing sector, a boom which was driven by the emergency level interest rates that sucked so many Canadians into the overpriced housing market over the past year. But that 'stimulus' has run it's course, the 'recovery' is now slowing, and "that goose is no longer laying any golden eggs."
Rosenberg foresees that same scenario we have been fearful of. He expects that a "rising number" of Canadian homeowners won't be able to meet their mortgage payments as interest rates rise and real estate values sink.
"Housing cycles, both up and down, tend to go further than anyone thinks, as we saw occur in the United States, which is still suffering from a post-bubble hangover three years after the initial turn down. Even if this correction in housing is a fraction as harsh as was the case south of the border, the economy, and the financial markets, are likely in for a rude awakening in coming quarters as lower home prices cut into household wealth, confidence and spending plans," said Rosenberg.
This comes out on the same day as a report from the Royal Bank of Canada that says home ownership costs in B.C. are quickly nearing record highs and that the result is that home ownership costs are testing the limits of household budgets. More importantly the report notes that “the Vancouver market is clearly vulnerable to a price correction."
“Generally, we have dismissed the case of housing market bubbles in Canada, but the situation in Vancouver is probably the closest to one in the country,” the report stated.
Interestingly the report calculates that the tenuous Vancouver market chews up more that 65% of pre-tax family income (the highest in the country). But this conclusion is based on buying a house at current prices with 25% down and a 25-year amortized mortgage.
Ummm... does anybody out there have a friend or acquaintance who has bought a house in Vancouver in the last five years who has paid a quarter of the purchase price in cash and has taken out a mortgage that was less than 35 years in length?
Royal's skewed analysis allows it to temper conclusions. Economist's like Rosenberg do not colour their outlook with such diversions.
The fact of the matter is that the finances of most Canadian households are in abysmal shape. As other economic reports have noted, debt is out of control in this country as Canadians have saddled themselves with record mortgage debt (household liabilities now equal 145% of earned income). Six in ten Canadians now live paycheque to paycheque. 40% are not even trying to save money anymore because there is no money left over after daily expenses.
The writing is on the wall for real estate in our little hamlet which sits on the Edge of the Rainforest. We will be ground zero for a massive real estate collapse.
Don't you see what I do?
Meanwhile... more on 'all that glitters'
Bloomberg reports that the U.S. Mint has suspended sales of its 1-ounce American Eagle gold coins after soaring commodity prices led collectors and investors to deplete supplies. It is the first time in two decades that the Mint halted sales of the coins.
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