Thursday, December 20, 2012

"The price increases of the last decade are long gone."

You've got to wonder just how significant the shifting mindset amongst the public is regarding real estate when even Global TV is now openly saying the following:
"... there hasn't been a crash, thankfully, but Ottawa and the Bank of Canada are desperate to raise interest rates once the economy improves. Economists are expecting the rates to start inching upwards by late 2014 - meaning the price increases of the last decade are long gone."
Kinda kills the whole campaign to get people to buy the current dip, doesn't it?

Of course the same talking heads who want you to buy the current dip also want to insist there is no dip - prices are just flat and will remain flat (real estate never goes down, don't you know?).

Meanwhile Cameron Muir wants you to know that:
Last year’s figures must be taken “with a grain of salt,” Muir said because the prices were inflated by a large number of luxury homes for sale in West Vancouver, Richmond and Vancouver’s West End.

In all the breathless monthly reports we saw last year from the BCREA, does anyone recall being told to take those figures with "a grain of salt?"

Muir also wants you to know that:
"The federal government’s decision to reduce the maximum amortization period for a government-insured mortgage to 25 years from 30 years also affected home sales.

That could add up to $160 on the monthly payment of a $350,000 house.

That no doubt has squeezed some potential buyers out of the market."
So buyers are extending themselves so thin that an extra $160 a month collapsed the real estate market?

If so, imagine what a few interest rate points might do?

(hat tip to LM and GreenhornRET)

On another note, isn't the world supposed to end tomorrow?


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  1. The following link is to a credit market summary data table (as of Sept. 30, 2012) on Statistic Canada's web site.

    The total debt outstanding in Canada was 5.17 Trillion $ (bottom line of the data table). From Jan. 1, 2012 to Sept. 30, 2012 (a period of 274 days) the total debt outstanding increased by 194 Billion $. Over that 274 day period it increased at a rate of 708 Million $ per day.

    With a total credit market debt of 5.17 Trillion $ and a gdp of 1.75 Trillion $ Canada's total credit market debt is approximately 2.95 times the size of our gdp.

    The United States total credit market debt is 3.5 times the size of its gdp, which is not too far off our 2.95 times. The following link from the St. Louis Fed shows the ratio of the United States total credit market debt to its gdp over the last several decades:

    The following link from the St. Louis Fed plots the United States total credit market debt and its gdp over the last several decades on the same graph:

    This huge build up of debt in Canada, the United States and the rest of the developed world has been going on for several decades. The situation with our debt sort of reminds me of the old story of what happens when you put a frog into a pot of water and turn on the heat real low.

    One of these days our financial system which has had our total debt growing significantly faster than our gdp for a long time will hit the wall, the second great depression will begin, and the Canadian people (along with the citizens in the other so-called advanced economies of the world) will relearn the lesson the world was taught in the 1930's depression, that being there are very severe and very painful consquences to having a society which lives way beyond its means for a long period of time. Generally speaking economic depressions are very bad news. However there is one silver lining to this depression which is coming up. When the masses suffer big time economic hardship, you can bet there will be a complete reset of our entire system.

  2. "Grain of salt": You just gotta love how those industry talking heads like to rewrite history after the fact.