Thur Post #1: CTV BC: Experts predict BC's real estate bubble will remain intact (played to the tune of 'when you wish upon a star')

Oh Tamara... really?

Is this the price we pay so that you can hang out regularly in Aquilini's box at Canuck games?

CTV BC came out with the above shill piece for the real estate industry's on-going campaign to tell you the real estate bubble won't burst - so you best buy now.

Sigh.

And the reason?

Supposedly, according to one real estate agent, there's "optimism in the air.  People are feeling happy, phones are ringing, it feels like we're back into selling real estate."

So it that what were hanging our hat on right now?  Attempts to manipulate buyer confidence?

Then we are fed the BS line that "new numbers are out today from the BC Real Estate association that back this up... signalling better times ahead"

Oh?  And what numbers are those?

Well BCREA pumper in chief, Cameron Muir, tells us that "the fundamentals in the market suggest that home sales should be stronger, higher than the levels were currently seeing."

Based on this wishful thinking we are shown this highly manipulative graph which - as the narrator tells you - is that "based on this, homes sales SHOULD be higher this year and next":

Really? Cameron claims his fundamentals say sales SHOULD be higher so we therefore forecast a 5.6% increase in sales this year and a 6.1% increase in 2014?

Then comes the gushing excitement that based on the fantasyland belief that sales "should be higher", then this means this "forecast uptick in sales is great for developers"  

Completing this daisy chain of fabricated logic is the Omni developer who says "we're seeing some real positive movement that buyers are coming off the fence."

Huh? OMG!

So... it's all about wishful thinking, now? That's what is going to make it all happen? And this passes as NEWS???

Incredibly that seems to be the level of desperation we're at.  Play the media with nothing more than BS to create the ideal that the market has no place to go but up in the hopes of creating some kind of buying frenzy.  Then you hype the 'fantasy frenzy' to manufacture the belief that a real estate uptick is underway and about to crest in the Spring air.

As always - you best buy now or be priced out forever.

Riiight. I truly believe we hit a new level in pathetic with this one.

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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?

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Are we heading for a Cataclysmic Correction? "That's bunk", says Sommerville

The war of words is heating up in Vancouver's housing bubble.

Yesterday it was CBC's profile of Vancouver and today CTV picked up on the story.

Former Member of Parliament, and noted critic of the Canadian housing bubble, Garth Turner was profiled on CTV with his warnings about our overblown Vancouver Real Estate.

CTV told viewers that Turner's message was simple: Metro Vancouver's real estate market is about to collapse.

"I hope people are listening. This message needs to be heard. Sales in August were pretty awful and they continued to deteriote through September. But you know what? This is going to be a year or two or three before we hit bottom. And I think the market could lose 30 or 40% of it's value."

To balance Turner's warnings, CTV turned to the resident market defenders we have come to know and love the last few years: Tsur Sommerville  - Associate Professor, Real Estate Foundation Professorship in Real Estate Finance; Director, UBC Centre for Urban Economics and Real Estate (As one VCI contributor said... can we possibly use the term 'real estate' any more often in a title?) and Helmut Pastrick, Chief Economist for Central One Credit Union.

CTV tells us these local economists are shrugging off suggestions that our real estate market is setting itself up for a collapse.

Our buddy Sommerville doesn't mince words as he tries to deflect the rising angst about the worsening market dynamics by attacking Turner directly.

"He's being saying this for like four or five years. So if you keep saying this then possibly one time you could be right and then you get to be a genius."

Oh? What are you saying Tsur? That the reality is that - at some point - the market is going to collapse 40% in value and that it's a no brainer Turner will be right if he keeps repeating this mantra?

It begs the question, if you believe the market will collapse by 40% at some point, when do you think that will occur?  But I digress.

As for suggestions that the market collapse will be triggered by rising household debt, Sommerville is even more blunt:

"That's bunk. In order to get dramatic change, dramatic drops in housing markets, there has to be... the market has to be pushed."

And rising, unsustainable household debt isn't the lever that will push the market?

Next we cut away to Helmut Pastrick to pick up the theme dismissing a possible collapse as a result of rising household debt:

"It could only be the result of a major economic recession, a downturn, or perhaps a financial crisis, a political crisis, typically outside of BC's borders."

Garth Turner counter's that our region is so overvalued, the outside forces Pastrick refers to aren't needed.

"The world doesn't need to change, the ground doesn't need to shift, interest rates don't need to pop up to have a cataclysmic correction."

CTV then quotes several 'average' people and captures them in quintessential denial that any such  collapse is possible. The whole dilemma is summarized as divergent opinions common to the spectre of real estate.

But the mere fact bubble busting news is now common place on the nightly media and that gloomy sales statistics are undeniable means it is clear the desperate fight for market perception is ramping up to new level

If you want to see the full CTV story, it could not be embedded. You can watch it here.

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The media discusses the August 2012 real estate numbers... lipstick anyone?

It seems there's no way to put lipstick on the horrid real estate statistics for the month of August.

If you didn't catch it, the lead story on CTV Vancouver news tonight is the slumping Vancouver real estate market. Unfortunately I can't embed the clip here but you can click on the link to see – CTV profiles how experts are beginning to wonder if Vancouver’s real estate bubble is going to burst"

Meanwhile the Financial Post headlines Vancouver home sales plunge, posting second-worst August since 1998.

How bad are the numbers?

As VanPro over on the blog Real Estate Talks notes the overall Months of Inventory (MOI) is approaching 11 months.

• August 2012 has now posted the second lowest sales totals in the last 15 years.
• When it comes to sales of Single Family Houses (SFH), there were only 75 sales on the West side of Vancouver in August 2012 (there were 995 available for sale). That's down a shocking 42.3% year-over-year!
• On the east side of Vancouver there were only 79 sales, down an even more shocking 46.6% year-over-year!!

As we said at the start of summer, the numbers from July and August were going to be fascinating to watch... and they were.

Normally listings drop of dramatically and sales slow. What we got was only a slight pull back in listings and sales plummeted. 

Prices in areas like Richmond, with homes that are actually selling, have begun dropping below assessed value. We are seeing sales activity pick up a bit as the price point has been reached for a few that are hovering (one of the signposts we look for as the market begins it's collapse).

A larger number of high end sales were completed last month (another of those signposts). But even here prices are dropping. A few days ago we provided you with stats of the high end sales in August up to August 22nd - one of them for just over $12 million. As the month came to a close, we now know there was a second $12 million sale. But these two properties started off with asking prices of $16 million and $14 million.

They say on the way down, prices are very, very sticky. But they are starting to move.

Normally listings really start to pick up in September and sales remain constant through September. With the current steady diet of bearish real estate news, the September surge in listings will be met with more dismal sales as the negative feedback loop picks up momentum.

We are currently sitting on an all time record streak of 16 consecutive days with daily sales totalling less than 100 per day - despite the fact that we just passed a three day weekend (when normally we see a bump in sales from the longer non-reporting weekend sales.

But the streak remains unbroken.

The real estate propaganda machine has been forced to finally declare our's a 'buyer's market'.

Problem is... no one wants to buy.

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Fri Post #2: "It's just how it is!"

Interesting housing story over on CTV.  You can click here to see the clip.

The segment is titled 'Generation Squeezed' and it profiles a young family who question whether they will ever be able to own a home in Vancouver.

28 year old Derek Atkinson is interviewed.

Derek and his wife have a combined income that would allow them to buy a $500,000 home but a minimum 5% down would require a downpayment of $25,000.

The problem is, saving up $25,000 will take as much as six years... and that's a stumbling block.

But the Atkinsons are privileged. CTV tells us the average family only makes $67,000 per year, enough to qualify for just a $300,000 mortgage... and in Vancouver $300,000  doesn't go very far.

It prompts CTV to ask, "do young Vancouver couples have a right to home ownership in the City they grew up in?"

Which brings us to Tom Davidoff from the UBC Sauder School of Business.

Davidoff tells us;

"There's not going to be any free lunch in the Vancouver.  There's not going to be any free lunch to own a home in the most Beautiful Place on Earth... so I think people need to be prepared they are just going to have to accept that reality."

CTV then drops another great stat. Average household incomes are no higher today than they were in the 1970s. And with those stalled incomes they need to pay for those housing prices which have gone up 76% across the country and almost 150% right here in BC.

CTV concludes that it all adds up to a growing sense of frustration and hopelessness for an entire generation of Canadians like the Atkinson's.

The story closes as Atkinson says;

"it is just a big challenge... you know... right now you just get resigned to it... it's just... how it is."

It's just how it is... that's the message.

This... after a week long orgy of doom and gloom about real estate and the potential for a collapse in housing prices?

Interesting.

More on this later on the weekend.

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Tues Post #1: So what happened to all the Asian Money flooding into Vancouver?

Remember when HAM or 'Hot Asian Money' (and not cheap credit inducing Canadians to overextend themselves) was supposed to be the reason the Vancouver Real Estate market was remaining buoyant?

Back in June of 2010 we were told that Vancouver Real Estate had recoverd from the recession and that a surge in sales in the high end market was supposed to be trickling down to the lower levels and thus keeping sales up across the board.

And the source of that high end money?

China... or so we have been told by the media and Cameron Muir, Chief Economist of the BC Real Estate Association (BCREA) as this Global clip from June 12, 2010 attests to:

The clip tells us that all the money flowing into our Real Estate market is coming from Mainland Chinese who were buying homes here, upgrading their homes here or buying homes for investment purposes.

Muir is very specific, telling us that not only are the largest proportion of buyers of high end homes coming from mainland China, but their presence is what has been maintaining property values.

Global TV summarized and stated, "it means the rush of buyers from China is keeping the Lower Mainland housing bubble from loosing air."

Hmm... okay.  And since early 2010 that's all we have heard about in Vancouver:  'Chinese buyers are snapping up properties and keeping the market strong. No need to worry about a market collapse here, hot asian money is pouring into Vancouver.'

Translated... the message for you and I is the same as it always is from the R/E propoganda machine - buy now or be priced out forever.

Fast forward a year and a bit to today and the myth of HAM remains. Talk to anyone on the street and their view is that 'hot asian money' continues to flow into the market.

But wait! The tune from the likes of Cameron Muir has changed dramatically.

Over on the local CTV station, the dinner hour news last night had a segment on concerns our housing bubble is about to burst. You can find it at this link and watch the video broadcast itself (CTV News - Is Vancouver's housing bubble about to burst?)

CTV's story notes that our astronomical real estate prices combined with global instability have many locals wondering if the bubble is about to burst in Metro Vancouver.

Naturally CTV pops by to have a chat with Mr. Muir.

And the chief cheerleader for R/E in BC does not disappoint. "I guess the first question is - is there a real estate bubble at all?" says Muir.

Cameron goes on to tell us there is no bubble; that the average home price is actually being skewed, inflated by skyrocketing prices for detached homes in Richmond, West Vancouver and the West Side where prices have soared nearly 80% over five years - 27% in the past year alone.

A result of 'hot asian money', right?

It doesn't make the written transcript in the link above, but if you watch the actual clip there is a very insightful exchange at the very end.

The newscast host (Tamara Taggart) asks, "What about offshore people are they jacking up prices?"

Reporter: "That's kind of a fiction. The Chief Economist of the BC Real Estate Association says a lot of people have heard these rumours but he says only 2-3% of the buyers are foreign investors from mainland China"

Say wha????

Gee Cameron... and where would these 'rumours' have gotten started to begin with?

Muir quick shifts gears and attempts to belay concerns about a looming collapse by saying, "we had a financial crisis, the largest we've seen since the great depression, we had an ensuing global recession, and if that isn't a trigger or a tipping point for any kind of over-inflated market to see a major correction, I don't know what is."

Wow!

First off HAM is a myth, and now you're telling us that because the bubble hasn't popped yet, there isn't one?

One thing I can agree with Muir is that we did have a financial crisis, and it was the largest we've seen since the great depression. 

We also had an ensuing global recession.

But as the mainstream is starting to appreciate, that recession is nowhere near being over.

Up until now our government has moved heaven and earth to forstall its effects by slashing interest rates and coaxing our citizens to plunge themselves into record levels of debt by buying real estate and delaying the consequences of that financial crisis.

But the global recession marches on and we can't hide from what's coming.

Muir says, "if that wasn't a trigger or a tipping point for any kind of over-inflated market to see a major correction, I don't know what is."

Again, he's right. But the problem is that the trigger hasn't been pulled yet. Muir makes it sound as though the time for the trigger to be pulled has past us by.

It hasn't.  And when it does get pulled, we will see that tipping point.

It may already be upon us.

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