Speaking of rising household debt...

Yesterday we posted about CTV squaring off Garth Turner vs Sommerville/Pastrick over the topic of a real estate collapse over rising household debt.

It's not a theme exclusive to Garth Turner.

In fact CBC was, on the very same day, discussing that very topic.

Reporter Neil MacDonald (pictured above) was describing how a US style housing nightmare could hit Canada and how Canada resembles a slow motion replay of the American crash.

Stories are now routinely surfacing in the Canadian media suggesting collective madness when it comes to affordable living. I watched America's nightmare unfold, and it appears pretty evident to me that a sequel of some sort is coming to Canada. So I ran that thesis past Robert Shiller, of Yale University, probably the foremost authority on real estate in America. He co-founded the Case-Shiller Home Price Index and predicted the American collapse in 2005, a year before it happened. "I worry," he told me, "that what is happening in Canada is kind of a slow-motion version of what happened in the U.S."

The worries Shiller was getting at — and the Bank of Canada — is the debt Canadians are carrying. Contrary to Sommerville and Pastrick, both Carney and Shiller agree with Turner that rising household debt is a serious threat.

Household debt in Canada has grown by leaps and bounds. In the early 1990s it was a manageable 75% of household income. Today it has ballooned to 150%. That's just about exactly the level Americans were at when everything imploded there in 2006. Worse, there are concerns about the way the debt is concentrated.

As the Bank of Canada has been pointing out, Canadian debt is disproportionately concentrated in the most vulnerable households, defined as those devoting 40% or more of household income to paying interest charges. That means those households are extremely sensitive to any sort of shock — be it a rise in interest rates, a drop in home prices, or, worst of all, job loss. The central bank's analysis suggests that if interest rates rise to 4.25 by mid-2015, fully one fifth of all Canadian debt would be held by those households least able to finance it.

Don Drummond, a former chief economist of the TD Bank, says that's "rather scary."

Robert Shiller says;

"People are investing in real estate that is tough for their budgets because they think it will make them rich, and that can continue only as long as [prices] keep increasing. "When they stop increasing," he says, people back off, and the bubble then collapses. "So it has its own internal dynamic."

And it's that internal dynamic which Turner was warning is the trigger which is starting to send values cascading down today.

Of course who are you going to believe? The likes of Garth Turner, Mark Carney, Don Drummond and Robert Shiller?

Or a man you makes his living teaching university courses in Real Estate Finance and depends on a growing real estate market for his academic income?

Not really a tough call to make now, is it?

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

CBC National: Vancouver Housing - Bubble or Bust

 

Last night on CBC's The National, Vancouver's overheated market was profiled.  Above you can watch the full segment.

As you watch it, however, you might be interested in this update to the story.

One of the key interviews is with Philip Chan, a realtor who also developed and built a house at 2575 West 7th Avenue in Vancouver which he currently has for sale.

Chan is trying to sell a new 1,700 square foot unit in this house which is part of a triplex. Originally the unit was listed for $1,790,000.

As the CBC piece outlines, Chan cut the asking price to $1,570,000...

... a price cut the National notes amounts to a drop of 12%...

Chan describes the $200,000 price drop as an adjustment, a classification CBC pounces on as a "sugar coating which attempts to cover the reality that prices are tanking".

Chan disagree's and argue's that it can't possibly drop much more.  The story then cuts away to Garth Turner who explains that the market can - and will - drop a lot more.

At the end of the piece, CBC tells you about a confident Philip Chan who doesn't believe the market can drop much more below the 12% it already has for his property.

What the story doesn't tell you is that Chan's property has in fact already dropped - a lot more.

As you can see here, the property's asking price has been cut significantly below that $1,570,000 asking price and is now on the market for $1,373,000...

Even more interesting is the fact this lower price is not recent.  As noted on Observer's excellent website Vancouver Price Drop, this property was profiled in the 17th position in the Observer's Weekly Drop segment for September 10th.

At the end of the CBC segment (and what they described was a 12% drop in the value of his property), Mr. Chan is quoted denying the market can drop much more.  He asks, "how much more can it drop?"

Well... that drop is now 23% and still no buyers in sight.

Why CBC was hesitant to profile how dramatic the collapse is becoming is unclear.

But one thing you can be sure about is that there is no doubt Mr. Chan is a lot less confident now than the CBC story would lead you to believe.

(hat tip s Says on VCI)

 ==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Thurs Post #1: BC Real Estate Association declares, "there will be no price drops" - CBC

 

So CBC-TV ran a story yesterday titled "Vancouver home sales drop sharply in June" and is embedded above for your viewing pleasure. The central theme of CBC's piece is to determine if we will see lower real estate prices. Check out the very last portion of the story where the reporter closes by stating:

"So does all of this supply mean there are going to be bargains? An economist at the BC Real Estate Association says 'NO', that the price drops of 3.5% earlier this year are going to stay there."

It would appear the BC Real Estate Association is drawing a line in the sand on all this talk about a 'depressed' market and declining prices by declaring it simply won't happen. Contrast this with realtor Keith Roy who yesterday told his clients that, not only had he sold his house, but he was recommending that now is the time to "cash out" and sell your home. More significantly Roy said:

"if the media picks up on this story, you can be sure the rest of the market will follow the west side (with declining sales and exploding inventory)."

Well it certainly seems the BCREA is moving to quash this very outcome. After going through all that work to redefine the way the HPI benchmark price is calculated (twice this year, actually), it's clear they will brook no perceptions that house prices will go down.

You have to wonder how long before Roy receives a 'snot-a-gram' from the BCREA about his advice to clients.

==================

Email: village_whisperer@live.ca Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Sun Post #1: Vancouver has "too many sellers trying to cash in at the same time."

The falling Vancouver market continues to make news in the mainstream press.

Yesterday it was CBC with a story lamenting that Vancouver has "too many sellers trying to cash in at the same time."

The Mother Corp tried to balance the negativity by looking for the silver lining in a market with a huge decline in sales and a massive increase in listings.

But the best they could do was headline the bad news by saying, "Uncertain fate for Vancouver real estate prices".

While the fate of the current downward trend may be uncertain for CBC, they do tell us exactly what you have been reading here on an almost daily basis:

Vancouver's real estate market has taken another interesting turn, with listings up and sales down during what is usually a busy time of year.

In May, average prices for houses have dropped about $150,000 compared to one year ago. That 12-per-cent drop wiped out two years of price increases. The reason appears to be that too many more sellers are trying to cash in at the same time. Listings are up by 23 per cent, but fewer are buying: sales are down 24 per cent.

Probably, on average, about a 150 or 160 homes in Vancouver are reducing their price every day in the hope of catching, getting ahead of the train and maybe get out before they can't," said realtor Larry Yatkowsy.

Reality is starting to set in.

The Spring Market is not going to arrive this year. Sellers are starting to slash their prices.  The Boomer Trigger is being pulled.

Is the market starting to crash? We will see. As economist Tom Davidoff, of UBC’s Sauder School of Business says,

"It’s going to take several months of data-confirming of what we seem to be seeing before I would be anywhere close to be prepared to say, 'That's it, we had a bubble and now it's bursting.'”

But if you're a Boomer sitting on the sidelines who plans on relying on the bubbilicious values for your retirement fund... do you wait to see?

Or do you jump in, list your house with the others and pull the trigger by slashing your selling price aggressively before another 12% evaporates from the market?

And what of the ones already listed but watching a market drop while listings stagnate? Time to cut and run?

We shall see.

The video from CBC...

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Blindsided?

Sigh.

Everywhere you look these days, it seems the media is screaming about the housing bubble.

The latest is CBC who tell us the Canadian housing market is overpriced and bubbly in many areas.

Meanwhile real setae sales data from Vancouver is just plain ugly.

Listings are shooting upward and sales are slowing dramatically. Sales for April 2012 are down 13.2% from April 2011. They dropped 2.6% from the March 2012 total, a month which was down 29.6% from March 2011.

Detached home sales are down 19.7% and the average single family house price has plummeted by $100,000 so far this year.  The surprising gain of last month has been quickly and suddenly wiped out as you can see in realtor Larry Yatkowsky's graph (click on image to enlarge):

The always strong 'Spring Market' is a complete no show.

Garth Turner reports that in the Vancouver suburb of Richmond over 75% of property deals are now going for less than the assessed value. Says Turner:

Forget bidding wars. This is becoming a realtor graveyard. Suddenly owners are doing what always happens in a market dive – realizing their paper profits will turn vaporous if they don’t cash out. Listings rise, sales don’t and prices fade – the classic vicious cycle.

But despite all the media hype, the average joe on the street is still oblivious to what is going on.

In the US, when the real estate bubble burst, many real estate investors found themselves blindsided. When everything fell apart, they never saw it coming.

Chatting with a few people today... despite all the media attention, so many are going to get blindsided by what's coming.

No one wants to see it.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Thurs Post #1: Mudslinging

Bubble, bubble, everywhere it seems everyone is talking about the Canadian housing bubble.

Even the international magazine, 'The Economist', is taking a poll of it's readers asking if they think Canadian housing prices are about to burst.

The Canadian Housing Bubble (with its two star children Vancouver and Toronto) is going viral in the international and American press. You have to believe, at some point, all this 'bubble chatter' is going to have an effect.

Everyone says Vancouver, especially the west side, is dependant on HAM (Hot Asian Money) to sustain values that local wages simply cannot afford.

So what happens to all that money as Asians (who contrary to local myth can read) begin to realize the Village on the Edge of the Rainforest isn't such a great place to park their funds?

And it's only going to get worse.

The pack mentality of the mainstream media seems to have kicked into overdrive and the thirst for bubble stories seems insatiable.

On Monday we talked about Kelowna and how a local realtor characterized the exploding foreclosure situation there. Yesterday the CBC picked up on the story and headlined 'Home Foreclosures Skyrocket in Kelowna'. 

The CBC article interviews Elton Ash, the vice-president of Remax Realty in Western Canada. He says most of the foreclosed properties are from people who were trying to flip homes during the hot market a few years back.

"People weren't able to achieve their goals in doing this and so they quit making payments."

Okanagan real estate agent Kent Jorgenson is asked about the situation by the CBC and says:

"The market in the Okanagan has really come to a standstill on that speculative investment front, and that is really what has been a major portion of the court-ordered sale thing that has increased so dramatically."

Ash goes on to say many Canadians are now buying vacation homes in the U.S., where prices are astonishingly low compared to British Columbia.

Everyone seems to think the Asian money tap will never end. But as the negative press compounds, will Hot Asian Money turn Vancouver into Kelowna?

Or, as this Global TV news story tells us, will Vancouver remain the most expensive housing market in North America?

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Meltdown: The Secret History of the Global Financial Collapse Part's 1, 2, 3 & 4

The latest attempt to cover the Great Financial Crisis of 2008 is this excellent by the Canadian Broadcasting Corporation (CBC). Yesterday we noted that Al Jazeera had been broadcasting the series, but the documentary is actually a CBC production.

Titled Meltdown: The Secret History of the Global Financial Collapse, the series is a four-part investigation that takes a closer look at the people who brought down the financial world. Here all all four parts of the series.

PART 1

The first episode of the series was posted yesterday but we are reposting it today for continuity.

Titled 'The Men Who Crashed the World', we hear about four men who brought down the global economy: a billionaire mortgage-seller who fooled millions; a high-rolling banker with a fatal weakness; a ferocious Wall Street predator; and the power behind the throne.

PART 2

Here is the second episode of the series, 'A Global Tsunami'.

This epispde looks at how the financial tsunami swept the world, how a renegade executive nearly destroyed the global financial system and how the US treasury secretary bailed out his friends.

PART 3

Next up is the third episode of the series: 'Paying the Price'

In this episode the effects of the global collapse are looked at.  In Iceland, protestors force a government to fall. In Canada, ripped off autoworkers occupy their plant. And in France, furious union workers kidnap their bosses.

PART 4

Finally we present the fourth episode in the series, 'After the Fall'.

In this episode investigators begin to sift through the meltdown's rubble. Shaken world leaders question the very foundations of modern capitalism while asking: could it all happen again?



==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.