Wed post #2: Another realtor telling it like it is... and in the process basically says the HPI is "horsesh*t" - updated

So how is the downtown Vancouver condo market doing in this 'softening' period we're going through?

Meet Shaun Kimmins, a realtor who specializes in downtown condos. His take on the market right now?

"Sales volume is down considerably. Sharpen your prices if you want to sell."

Kimmins, like many realtors, puts out a monthly market update. This one is dated July 25th, 2012 and his snapshot of the downtown core is not a pretty one.

Kimmins wants you to know that when it comes to downtown, the sales climate is abysmal. Ignore all those press releases from the REBGV... they don't capture the downtown market in any way shape or form:

"It's always interesting for me to read the Real Estate Board of Greater Vancouver's (REBGV)stats and see media reporting on the "Vancouver Market." The reality of the current market is that different sub-areas and property-types are experiencing very different activity levels and resulting pricing trends and these trends do not always relate closely to the Board's averages."

What Kimmins is referring to is the downtown market, a market exclusively comprised of condos. And when he says downtown doesn't relate to the REBGV's averages, he's not kidding.

According to the REBGV's stats summary there has been a year-over-year decrease of 18.8% in sales volume for the condo category and an increase of 0.3% in the Benchmark Price of condos for June 2012 vs June 2011.

But as Kimmins tells us, that doesn't tell the downtown story in any way, shape or form.

How bad were sales in June 2012 in downtown?

In the uber high-end district of Coal Harbour there were 212 active listings for this period. Kimmins tells us this is actually down from the same period last year when there were 275 listings. The major difference is sales. 

How many condos sold in the 30 day period? 8.

Last year in the same period there were 37 sales. This means there is 27 months of active inventory (MOI). More significantly it translates into a 78% decrease in sales volume year over year!

Ouch.

The West End is not much better. There are 275 active listings and only 18 condos have sold in the 30 day period (June 2012). Last year 51 condos sold in the same period. MOI ballooned to 15 months of inventory and sales volume decreased 65% year over year!

Looking at all of downtown, active listings sat at 1,402 in June 2012 with 99 condos having sold in the previous 30 days (last year 216 sold). MOI sat at 14 months of inventory and sales volume had plunged 54% year over year.

Kimmins then offers this critique of those nefarious REBGV statistics:

"So, in the 'Downtown' area, sales volume is off between 54% - 78% while according to the Board's latest stats summary they publish a year-over-year decrease of 18.8% in sales volume for the condo category and an increase of 0.3% in the Benchmark Price of condos for June 2012 vs June 2011.

Given these stats and the recent sale of a north-west corner suite at Fairmont Pacific Rim at a price more than $1,000,000 below two more or less identical suites that sold in the same building a year and a half ago, it's difficult to convince Coal Harbour buyers that prices are up."

Can't say we disagree with your take on those REBGV statistics, Shaun.

(Whisperer's note: Kimmins update was put out at the end of July [July 25th, 2012] and summarizes the data for June 2012.  Kimmins has not released a summary of July data yet. Presumably he will do so towards the end of August 2012.)

In another section of his website, Kimmins looks at data for all of Vancouver:

Detached Housing Listing/Sales activity in the following areas:

East Vancouver: Active listings for the end of June 2012 were 722. Sales June 2012 were 59 (last year 152, MOI sat at 12. That’s an 61% decrease in volume year over year.

West Vancouver: Active listings for the end of June 2012 were 550. Sales June 2012 were 22 (last year 114, MOI sat at 25. That’s an 80% decrease in volume year over year.

North Vancouver: Active listings for the end of June 2012 were 416. Sales June 2012 were 44 (last year 102, MOI sat at 9.5. That’s an 57% decrease in volume year over year.

Vancouver West: Active listings for the end of June 2012 were 1038. Sales June 2012 were 48 (last year 151, MOI sat at 22. That’s an 68% decrease in volume year over year.

Kimmins editorial on the statistics:

The Board publishes a 37.4% decrease in sales year-over-year for detached houses with an increase in values of 3.3%. Again, it might be difficult to convince a West Vancouver detached buyer, where there are 25 months of active listing inventory, that prices are up. I’m not in any way suggesting that the Board is incorrect or inaccurate when it comes to board-wide averages. What I am suggesting is that different properties in different areas may not be experiencing fluctuations in value in line with the averages so one must look at each property on a case-by-case basis.

I don’t want to set off alarm bells but this current market has created a moving target in terms of valuations and in the minds of most buyers I have spoken to recently, prices are well off their previous highs. Condo-buyer motivation seems to be quite low.

The media is not affecting values positively, at least not from a seller’s point of view. Where the market goes from here is unclear but it is becoming clear that in order to sell in the current market one must price sharply and be willing to adjust if one wants to sell within a reasonable time frame.

Kimmins says, "I’m not in any way suggesting that the Board is incorrect or inaccurate when it comes to board-wide averages."

But you can see he is clearly frustrated when the board comes out and sales sales volume is only off 18% across all regions of the REBGV and the benchmark price is actually up!

For a realtor like Kimmins, this isn't an accurate reflection of his downtown market at all.

Kimmins is clearly frustrated by the REBGV attempts to spin the current news because that news is unmistakable... Iit isn't a 'buyer's market' downtown right now - it's a vultures's market.

And for potential buyers there's still lots of circling to be done before moving in to pick at the carcass.

Convincing sellers that have to set their asking price for the market is difficult when the REBGV is so desperate to paint the market as 'balanced'.

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Wed post #1: What constitutes a price drop?

As we pointed out yesterday, Ozzie Jurock advised his followers that the recent 'adjustment' in average Vancouver prices is far worse than the spin would have you believe:

The real estate market is down 12% on the average price - July over July ... but down a whopping 20% in price over May 2011!!!

July 2012 - $669,000 to July 2011 - $762,000: down 12%

July 2012 - $669,000 to May 2011 - $834,000: down 20% !!

Volume is down too. Listings are higher.

As Ozzie succinctly notes, the average is down 12% on a simply year to year comparison, but go back a couple of months more and the reality is that the average is down a full 20%.

It is in this milieu that some sellers, those hoping to ride the bubble frenzy, are forced to come to grips with reality.

No blog is better for charting this that Vancouver Price Drop.

One faithful reader termed the site 'price drop porn' and it's an apt description as we watch wild real estate speculation crash on the shores of market reality... a trend with are seeing at all levels of the market as asking prices begin to melt to assessed value levels (or in the case of Richmond, often below assessed value).

One can only imagine how huge the drop end up being if we were charting the plunge from asking price to what a property actually sells for.

Take, for example, the land in the outlying suburb of Maple Ridge.

Promoted as a potential high rise site in the town core, the asking price on June 14 was $3,900,000!

Currently the asking price is $1,750,000... a 55% drop.

The assessed value of the property is only $898,000. 

If this property eventually sells at, or near, the assessed value... the asking price will have fallen an astounding 77%. 

If we do have a significant property value correction, this property could conceivably drop over 90% from it's June asking price.

Such is the breadth and depth of the wild speculative mania in our housing bubble.

Ultimately the true measurement of the collapsing of the bubble will be measured by what people paid for a property at the height of the mania vs what they end up selling the same property for once the mania fully implodes.

In the meantime, the blog Vancouver Price Drop is like watching a train wreck.

You are simply mesmerized by what you see.

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CMHC insists there will be no housing crash in Canada

The Canada Mortgage and Housing Corporation (CMHC) insists there will be no housing market crash in Canada.

CMHC has been saying for some time that it expects housing prices in most local markets will grow more slowly than they have been recently.

The Ottawa-based federal agency isn’t calling for a major decline, but its latest forecast suggests next year will be somewhat softer than estimates CMHC issued in June while 2012 may be somewhat stronger than previously expected.

(In other words, they keep getting it wrong and have to 'revise' their forecast constantly)

Mathieu Laberge, CMCH’s deputy chief economist, said:

“Balanced market conditions in most local housing markets will result in a slowing in house price growth”

Is that why they call it right now? A 'slowing in house price growth'?

(Prices never go down, you see... growth simply 'slows')

Contrast this with the normally always upbeat and optimistic Ozzie Jurock. On August 4th, Jurock pulled no punches in analyzing what is currently happening in the real estate market.  Rather than spin the numbers, he offered a very succinct (and negative) take on the drop in the average price.

The real estate market is down 12% on the average price - July over July ... but down a whopping 20% in price over May 2011!!!

July 2012 - $669,000 to July 2011 - $762,000: down 12%

July 2012 - $669,000 to May 2011 - $834,000: down 20% !!

Volume is down too. Listings are higher.

As Ozzie succinctly notes, the average is down 12% on a simply year to year comparison, but go back a couple of months more and it's down a full 20%.

So if a 20% decline in prices is a 'softening', what will they call a decline of 50%?

One thing we know for sure... they won't call it a 'crash'.

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Half of all job losses that occurred in Canada, happened in BC

Perhaps one of the most chilling statistics for the real estate industry came out late this past week.

Many in the real estate industry have comforted themselves lately by saying prices in Vancouver aren't going to fall significantly. They rationalize prices will just stabilize or maybe they will drop a bit.

One thing R/E people insist is that prices in our little Village on the Edge of the Rainforest will not crash. They insist "you won’t see a crash here in Vancouver unless there economy takes a sudden turn for the worse."

Well Stats Can just announced that BC lost half of all the jobs lost in Canada last month.

Statistics Canada says of the 30,400 jobs that disappeared across Canada, 14,500 were in B.C., pushing up the provincial jobless rate four-tenths of a point to an even seven per cent in July.

And the bottom line is that people who don't have jobs... they don't buy houses.

Things get more interesting with each passing day.

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"Housing Sales Plummet"- the media stories intensify as one expert says we're at a turning point.

The nightmare scenario for the real estate industry is starting to take hold as another dreadful headline trumpets the obvious in the mainstream media.

This time it's the NOW chain of municipal newspapers (which serves Coquitlam, Port Moody, Port Coquitlam, Belcarra and Anmore). The latest real estate healine screams "Housing Sales Plummet" and the article starts off telling us:

If you've been eyeing the housing market in Metro Vancouver with astonishment over the last few years, that feeling could soon change.

Last month, property sales in Metro Vancouver fell to a 10-year low, and parts of the Tri-Cities were in the same basement.

Of course the spin-meister's are out in full force.

Sandra Wyant, president-elect of REBGV, tells us that:

"July is typically a slow month for real estate sales. Buyers and real estate agents alike often tend to be on holidays. In the case of Port Coquitlam, the community is attracting more first-time buyers because of the price. The sluggish sales haven't been reflected in a major adjustment in home prices just yet.

Ahh, yes... not just yet!

The real kicker in the article comes at the end as SFU professor of Finance, Andrey Pavlov, utters words that will have bears everywhere salivating:

But one financial expert believes Lower Mainland real estate has reached a turning point.

Andrey Pavlov, a professor of finance with Simon Fraser University, noted prices in Vancouver have rocketed past those in places like New York and San Francisco, and in the case of the Tri-Cities, are comparable to suburbs of those major cities.

He suggested the pace will not continue and predicts prices will likely drop in the Vancouver area.

Pavlov argued home prices rose dramatically in the Lower Mainland, not out of income or general economic growth, but rather debt accumulation.

With low interest rates and easy qualification terms, people have been taking on more and more debt.

"I think this engine of real estate price growth is now done," Pavlov told The NOW in an e-mail.

"So I don't see where the future support for real estate can come from."

And he's especially concerned for the condo market.

He explained that singlefamily properties would always hold their value to some extent because usable land in the Lower Mainland is limited.

But he contends condos have absolutely nothing that can support them. And in cases where the quality of a new development might be in question, he can see prices of condos in the suburbs dropping by half or more.

Prices dropping by half or more, eh?

Betcha our buddy Tsur Sommerville won't be inviting this guy over for lunch at the UBC Sauder School of Business anytime soon.

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Did the Greater Vancouver Home Builders’ Association just have the rug pulled out from under their media offensive?

On Wednesday we told you how Peter Simpson, president and CEO of the Greater Vancouver Home Builders’ Association, had launched a bit of a media campaign to try and apply some public pressure on Federal Finance Minister Jim Flaherty.

Simpson was hoping to play the 'economic' card and frame the recent mortgage issue as an economic threat for the government:

"The real threat to the economy is if a real-estate slowdown leads to a sharp reduction in housing starts. That’s because new-home construction stimulates the sale of appliances, carpets, and other products. For every housing start, there are 2.8 person years of employment that are create.That’s direct and indirect jobs. If it continues to fall, they’re going to have to take a good hard look at what their actions have caused — and be prepared to make some adjustments. I don’t know what those adjustments are.”

Even the headline tried to create the impression Flaherty's resolve on the issue was not that strong:

"Finance Minister Jim Flaherty may intervene in amortization period for home mortgages"

Somehow it only seems fitting that, only a day later, Bank of Canada Governor Mark Carney comes out with a strong statement on the topic of real estate and advises Canadians to "invest in 'productive capital,' not houses or condos."

How's that for a kick in the gonad's, Peter? Apparently your entire industry has been written off as the centre of massive Canadian mal-investment.

You could see the footprints of the spin machine in high gear in the Globe and Mail article:

Canada Mortgage and Housing Corp. reported that construction starts slipped in July to an annual pace of 208,500 from June's 222,100. That was largely due to a decline in multiple units, such as condominiums and apartments, in British Columbia.

"Canadian housing starts, particularly the multi-unit sector, have ebbed from extremely robust spring levels," said Robert Kavcic of BMO Nesbitt Burns.

"With stricter mortgage rules likely to cool demand in the remainder of the year, construction activity should moderate further to a more sustainable pace."

Seems Simpson's challenge to government that "if housing starts continue to fall in a declining real estate market, then government is going to have to take a good hard look at what their actions have caused", has been met and rebuffed.

The message: construction activity should reduce to a more 'sustainable' pace.

If Simpson thought he had Flaherty's ear on this topic, then Carney just played the role of Lucy to Simpson's Charlie Brown.

And just like in the Peanuts classic, you just knew what the outcome was going to be... and it still made you smile.

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Richmond realtor warns:"price declines in excess of 30% coming, price collapse looks inevitable!"

Two months ago we introduced you to Richmond realtor James Wong.

Mr. Wong was the first of a growing legion of realtors we profiled in the Greater Vancouver area who have been telling you that if you want to sell "deep price cuts are needed."

He's out with his latest monthly report and comes to a conclusion that should send a chill down the back of any Richmond homeowner looking (or planning) to sell.

"In Richmond, there is a high probability of a price decline for detached homes in excess of 30%."

Wong sees the events over the next few months following the pattern we saw in 2008/2009. But, instead of a recovery like 2009, Wong thinks sales will stay at their current dismal rates with home prices declining even more.

As that happens, Wong finally connects the dots to paint the picture we know all too well is coming:

"Sellers who need to sell will have to cut their prices more deeply to attract buyers. This could be the beginning of a real estate down cycle. The momentum will pick up when more sellers realize that a real estate downturn is in motion."

And by then, of course, it will be too late.

The writing is on the wall. More from Wong:

"The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further... The in-balance in supply and demand is massive for million dollar homes in Richmond. A price collapse in Richmond detached homes looks inevitable!"

That imbalance Wong speaks of is epic.

There are a total of 722 listings in Richmond right now for homes over $1,000,000. With average sale around 27 homes the past 2 months, there are 27 months supply of homes.

For detached homes over $1,500,000, the past 2 month’s sale averaging 11 units against 361 listings. This translates into a staggering 33 months supply of homes.

As prices implode on the million dollar homes in Richmond, sub-million dollar homes will be dragged down accordingly.

And as Richmond collapses, the contagion will spread quickly around the Lower Mainland.

Here is Wong's full July 2012 month end report....

July home sales in Richmond turned out to be worst than in June and the month before in May. The number of homes sold for the month was 216 which was 13% lower than the previous month sales of 248 homes. Active listings for detached homes, townhomes and condos/apartments in Richmond at the end of July, 2012 totalled 2,700 units, just 30 units shy of the previous month high of 2,730. Home sellers are faced with a dilemma, cutting prices more aggressively to sell or to take their properties off the market.

The real estate market in Richmond deteriorated further at the end of July. The supply of homes now reached 11.02 months compared to the previous month of 9.93 months of supply. The higher ratio was due to lower average sales, although the total listings were around the same level as the month before. Some home sellers were making drastic price reductions and generous concessions in selling their homes. More homes were now listed and sold at prices significantly below their city assessment values for 2012.

Richmond real estate market outlook

The next few months are expected to remain lacklustre. The next few weeks and months would probably follow what happened in 2008. But, instead of a recovery like 2009, home sales could stayed low at current level with home prices declining. In Richmond, there is a high probability of a price decline for detached homes in excess of 30%, and attached homes in the range of 20% or more over the next 3 years.

The biggest problem faced by home buyers are getting their mortgages approved. Canadian banks are now required to underwrite their mortgages based on borrowers’ ability to debt service their loans”.

The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further. Unlike 2009, even if home prices drop 20% or more, many home buyers and investors would be prevented from buying due to the difficulty in getting financing.

Richmond detached homes over $1,000,000 are not seeing much buying interest. With total listings of 722 and average sale around 27 homes the past 2 months, there are 27 months supply of homes. For detached homes over $1,500,000, the past 2 month’s sale averaging 11 units against 361 listings, translates into 33 months supply of homes. The in-balance in supply and demand is massive million dollar homes in Richmond. A price collapse in Richmond detached homes looks inevitable!

Sellers who need to sell will have to cut their prices more deeply to attract buyers. This could be the beginning of a real estate down cycle. The momentum will pick up when more sellers realize that a real estate downturn is in motion. This could take a few years for home prices in Richmond to reach a more sensible level.

The smart Richmond Boomer is making that minimum 30% price cut right now.

Because, as Wong says, when "sellers realize that a real estate downturn is in motion" - a 30% reduction in asking price won't even begin to attract interest. "The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further."

Can you say 'Boomer Trigger'?

Sure you can.

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Home Builders plead for Flaherty to make housing affordable. Don't worry, the process to create it is well under way.

Check out the tweet above sent out by CKNW this afternoon to promote a segment on one of Vancouver's foremost talk radio stations.

You have to marvel at how the mainstream media is completely on the 'bursting' bandwagon these days. No wonder sales are stagnating with these types of media stories. One can only imagine poor Bob Rennie positively tic-twitching up a storm at these developments.

Meanwhile the offensive to try and sway Federal Finance Minister Jim Flaherty into backing off on the recent mortgage changes has begun.

Peter Simpson, president and CEO of the Greater Vancouver Home Builders’ Association, was using the Georgia Straight newspaper today as the vehicle for his efforts.

In a piece titled "Finance Minister Jim Flaherty may intervene in amortization period for home mortgages", an attempt is made to create the impression that Flaherty is closely monitoring the situation and he will review what impact the new amortization period is having... with an eye to raising amortizations again. Simpson says:

“I hope he looks at markets where affordability is already an issue, like Vancouver."

To Simpson the dreadful real estate market is of major concern.

Builders are trying to rationalize that during the summer months, home sales traditionally slow down. But this summer's sales have been horrendous. And there is valid concern that if the monthly sales volume continues to tank after the Labour Day weekend, the situation will become dire for home builders.

And so Simpson is trying to frame the issue as an economic threat for the government.

"The real threat to the economy is if a real-estate slowdown leads to a sharp reduction in housing starts. That’s because new-home construction stimulates the sale of appliances, carpets, and other products. For every housing start, there are 2.8 person years of employment that are create.That’s direct and indirect jobs.”

Simpson is hoping to create public pressure on Flaherty and the prime minister so that they will have to assess whether to take action.

“If it continues to fall, they’re going to have to take a good hard look at what their actions have caused — and be prepared to make some adjustments. I don’t know what those adjustments are.”

What he's hoping for is that the government will go back to increasing the amortization periods for CMHC insurance.

And it just goes to show the level to which so many have become addicted to the crack cocaine of easy credit.

The problem is Flaherty and the Conservatives know all too well that they cannot turn back.

The easing that began when amortizations were originally raised from 25 to 30 then 35 and finally 40 years were an attempt to get us through a financial crisis that was supposed to be over by now.

The average recession lasts 5 years, max.

But this isn't your average recession.

And our real estate bubble wasn't created out of economic growth and the spinoffs of increased jobs and higher incomes.

Our current state of affairs were created with debt. And that debt has reached outrageous, unsustainable levels.

The latest changes to the rules governing mortgage were made when Flaherty returned from Europe and got a glimpse of how serious the world economic situation is.And no amount of petty, partisan media ploys is going to move the government on this issue.

Simpson decries the changes and pleads "affordability" are the reason government should restore the real estate liquidity punch bowl.

The good news for Simpson is that a collapsing real estate market means the wise developers (those not caught flat-footed by the storm that is coming) will be able to pick up properties at massive discounts soon.

And there is no better way of building "affordable" housing than by having initial real estate costs plummet.

See Peter? Problem solved.

But I don't think that's going to do it for Mr. Simpson. Somehow I suspect Peter is actually more concerned about asset price-protection than he is about seeing "affordability" come into play.

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Thought of the day - How bad is it in Burnaby for high end sales?

A brief, quickie post for you tonight.

Interesting statistic for you from Observer, who puts together the blog Vancouver Price Drop.

The Vancouver suburb of Burnaby sold 5 "high-end" homes in July that were valued at $1.4 million or higher.

There are currently 154 homes in Burnaby listed at $1.4 million or more.

That's a shocking 30.8 month of inventory for these "high end" homes.

Meanwhile VMD has grouped together the July 2012 sales data and taken the total inventory and divided it by the published sales figures. Here is what he gets for Single Family Houses (SFH) and months of inventory (MOI):

Richmond SFH: 19.5 MOI
Van West SFH: 12.5 MOI
West Van SFH: 11.5 MOI
Burnaby SFH: 10.5 MOI
Coquitlam SFH: 8.2 MOI
Van East SFH: 6.7 MOI

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Mon Post #2: The Canadian Banking System - a myth built on quicksand?

Long time readers of this site know that on numerous occasions we have talked about the Canadian Banking System and the myth of it's stability.

It was on December 7th, 2009 that we quoted a Sprott Asset Management report and discussed how the Canadian banks escaped the 2008 meltdown unscathed.

Few realize all five Canadian banks are levered at an average of 31:1 and that if tangible assets were to drop by 3% in value, tangible common equity would effectively be wiped out.

Nor do many realize that Canadian Banks were bailed out by receiving $65 billion in liquidity injections from the Insured Mortgage Purchase Program (IMPP) in 2008 - Canada's version of TARP - whereby the CMHC purchased insured mortgages from Canadian banks to provide additional liquidity on the asset side of their balance sheets.

No one seems to be aware that the Bank of Canada then gave our Canadian Banks an additional $45 billion in temporary liquidity facilities or that the Canada Pension Plan, through the purchase of $4 billion in mortgages prior to the IMPP program, raised the total government bailout to $114 billion.

Back in 2009 we talked about how we have been fed almost daily fed propaganda that tells us that the dramatic performance of our nation's real estate during this worldwide economic crisis is all a result of the solid foundation of our nation's banks and the virtuous conservatism of the Canadian financial system.

And that's it is... propoganda.

Earlier today on of the contributors to our first Monday post left a link to an article titled "Canada's Housing Bubble Blow out amid Global Collapse".

The article provides an interesting analysis of the recent downgrading of Canada's banks by Moody's and the reasons behind the downgrade.

The move by Moody's marks the first of what will, no doubt, become widespread worldwide realization that the stability of Canada's Banks is more myth than fact.

The article is a great read and while the blog doesn't agree with all of it, it does articulate many of the points we have attempted to make in the past.

For your consideration:

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Canada’s Housing Bubble Blow Out Amid Global Collapse.

Sunday 24 June 2012, by Christiane

By Matthew Ehret-Kump

While this shouldn’t come as much of a surprise, the long-standing myth, proclaimed by official talebearers, that the Canadian banking system is the most “stable system in the world” due to its “conservative banking culture”, has been seriously undermined. Moody’s Investors Services recently spooked the Canadian banking community when it announced in a June 25 [1] report that the emergency “corrections” being made to the overblown Canadian real estate bubble to deleverage itself from oblivion, has come too late.

What happened?

In April of 2012, the Canadian Centre for Policy Alternatives (CCPA) issued a report called “Big Banks Big Secret” which demonstrated the sleight of hand $114 billion of bailouts of Canada’s five biggest “too big to fail” banks which had found themselves loaded with worthless assets from November 2008 until 2009 [2]. As the CCPA report documented, these bailouts were initiated by the Canadian government directly via the Canadian Mortgage and Housing Corporation (CMHC), which produced $67 billion to clear the books of private financial institutions of their toxic paper, followed up by the Federal Reserve’s 0% open discount window of 2011, which was tapped heavily by those same five banks who all the while maintained that they were in perfectly sound shape, and didn’t need any help yet took liquidity injections nonetheless. This Fed scheme, as well as a similar operation conducted by the Bank of Canada represented the remainder of the $114 billion bailout (figure 1).

Defenders of the bailout from all sides of the aisle in Canada, much like their American counterparts, will defend the scam by first calling it either a “liquidity injections” or “investment”, and then stating that they actually turned a profit after the initial capital was returned with interest! However, like in the United States, what tends to be avoided is the fact that those toxic assets covered by taxpayer revenue, represented magnitudes more than their nominal value due to infamous leveraging practices on the national and international derivatives scene. In the case of the USA, actual assets associated with those bailouts were in fact over $29 trillion [3]. This begs the question: how much fictitious speculative capital was actually represented by the underlying $114 billion?

Figure 1,

Canada’s Real Estate Crisis

Canadians have swallowed hook, line and sinker the story that ours is “the finest banking system in the world”. As a by-product of such a delusion, a great number of citizens have allowed themselves to get caught up in a gigantic real estate bubble where prices have doubled on average since 2002, although countless cases of quintupling or sextupling prices over the same interval exist (figure 2*). This bubble has resulted in average real estate values having surpassed even those of the United States at its peak as of June 2011 (see figure 3). When this is combined with the personal debt to GDP ratio of $1.50 to $1.00 as one of the highest of all Western countries, the image of Canada’s “conservative” financial culture no longer holds, and in its place, the dark shadow of a predatory banking system is expressed in the great northern dominion of the British Empire.

It now stands that total assets associated with securitized mortgages have stretched beyond $1.1 trillion dollars, and it is important to keep in mind that this is happening, not within a vacuum but within the context of the hyperinflationary meltdown of the trans-Atlantic monetary system.

Figure 2.

Figure 3.

What has kept this bubble growing?

In the immediate maelstrom now at hand, the chewing gum holding the hull of the Canadian financial system together is to be found in a few key factors, but not least among them is the ultra low interest rates being maintained by the Bank of Canada. These low interest rates of nearly 0% (figure 4) make borrowing cheap; attract international speculative agencies resulting in an ever stretched bubble. Insiders in the Canadian government have revealed to this author that during internal briefings, Mark Carney himself has pointed out that should even a small increase in interest rates occur, an immediate 10% default of houses across the board would follow resulting in a vacuum much greater than its $110 billion dollar nominal value.

These interest rates have been kept artificially low primarily as a function of the unprecedented taxpayer-backed insurance scheme provided by the Canadian Mortgage and Housing Corporation which was created in 1946 as a federal insurance agency modelled on the American Fannie Mae and Freddy Mac, but which under the current liberalized order, now behaves as a monster used only to prop up a dying system, evidenced by its astronomical insurance cap of $600 Billion dollars (a ceiling that had been increased several times by the Harper government in recent years from its $350 billion limit in 2007, and $50 billion in 1988 (see figure 5)). The other major mortgage insurer Genworth Canada, while remaining private, also has a cap of $250 billion, 90% of which would be covered by the Canadian government were it to go under.

Figure 4.

Figure 5.

To restate the formula: risky assets are guaranteed by the government on the condition that interest rates are kept nearly nil by the government such that exponential profits may occur as out of thin air. For this scheme to function, however, a highly centralized top down meshing of government and private finance must occur. As historian Tom Taylor wrote in 1976; “The political power of the larger banks and of the Bankers’ Association can hardly be exaggerated. The bank acts were written largely by the very banks supposedly regulated by them [4] .”

While it is important to understand the current chewing gum holding the ship of Canadian finance together, it is vital to keep one’s mind on the more important question “who designed the ship, and sailed it into the maelstrom?”

For this to be understood, it is necessary to look back a little farther into history and recognize the treacherous effects of the Mulroney governments’ destruction of three of the four pillars of banking in 1987. It is demonstrable that those speculative practices underlying the current bubble which Canadian financial cartels have been complicit in creating, both at home and internationally alike, could not have occurred were it not for the repeal of those laws which forced the separation of commercial banking, trusts (which were the sole issuers of mortgages), securities dealers, insurance companies and which had been maintained for decades following World War II, otherwise known as the “Four Pillars”. After the repeal of those pillars all of the above financial institutions could all mingle under one roof and waves of mergers of the already cartelized financial institutions during the 1990s resulted in a new type of beast which could take legitimate deposits and create the means of leveraging risky securitized debts (as well as other insured liabilities) as “universal banks”, much of which would be now backed by tax guarantees. To re-emphasize, mortgage related securities could not have existed had the Four Pillars not been repealed.

This was the Canadian experience of the same essential process which lead up to the repeal of the Glass-Steagall under the Gramm-Leach-Bliley Act in the United States in 1999 orchestrated by the City of London centred oligarchy around Lord Jacob Rothschild’s Inter-Alpha Group of banks.

Today, this system has inflated itself beyond all containable limits. The Canadian Council of Chief Executives has implemented a veritable coup over the past several decades for their London masters. The time has come to decide whether Canada will move with the LaRouche three-step program of a Glass-Steagall-like bank separation, the adoption of a public credit system and the North American Water and Power Alliance (NAWAPA) or abandon all remnants of national sovereignty as it follows the City’s crazed British financial empire faction into hell.

*Graphs 1, 3 and 4 were taken from www.theeconomicanalyst.com and Figure 2 was taken from www.mjperry.blogspot.com

Footnotes

[1] “Moody’s Warns on Mortgage Debt” June 25 2012, www.globeandmail.ca

[2] “Big Banks Big Secret: Estimating Government Support for Canadian Banks During the Financial Crisis”, by David Macdonald, Apr 2012. www.policyalternatives.ca

[3] “$29,000,000,000,000: A Detailed Look at the Fed’s Bail-out by Funding Facility and Recipient” by James Felkerson Dec 2011. www.levyinstitute.org/

[4] History of Canadian Business: 1867-1914, 1976

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Mon Post #1: August 2012 real estate market report from a west side realtor who calls our conditions 'a bubble'.

On July 29th we introduced you to Andrew Hasman, another realtor from the west side of Vancouver who has been calling the market for what it is... a bubble.

A year ago, when prices were going crazy on the west side, he wasn't one of the cheerleaders for what was going on. Quite the contrary, he was calling the market 'unhealthy' and warning about the consequences:

"The local person is completely out of this market," he said. While skyrocketing prices have made business good, Hasman said that the current market, with housing prices rising 10-15 per cent each year, is unhealthy.

"Anytime you have extremes in markets, it's never healthy," he said. "You end up with a bubble. If the local economic base can't support these levels, then at some point you're going to have a lot of people burned big time. It's not sustainable."

Last month he told us that:

This feels like the first Normal Real Estate market in many years. That is if you can even define or remember what 'Normal' really feels like.  Gone are the bidding wars and gone (for now) are the days when homes were selling in mere days. For buyers there is now good selection and no pressure to make that big commitment... Sales of homes across the Greater area of Vancouver are at levels not seen since 2000!

Overall, prices still seem to be holding with some price softening in specific markets only. Vancouver’s Westside looks to be one of those markets.  Fewer buyers from China, tougher mortgage regulations and concerns over the global economy are all weighing on consumer confidence. I predict these market conditions will continue through the balance of 2012 with further price softening.

Hasman is out with his August market report. Here are some of the hilights of the results from last month from a realtor who seems to recognize this bubble market for what it is.

Take note of the statistics about Single Family Homes on both Vancouver's west side and Greater Vancouver. They are quite striking:

As expected ( after four months of declining sales ) the Summer market continues to chug along with house sales at levels not seen since 2009. There are now 12.5 month’s supply of houses for sale on the Westside which technically puts us in a Buyer’s Market. This is quite a change from where we were one year ago when we had 4.5 month’s supply. I expect the level of homes on the market to remain stable though August with sales hovering around 70 to 90 sales for the month.

September and October typically bring an increase in demand but also an increase in inventory. This year may see many home owners de list their properties not willing to sell at prices the market is willing to pay. If this is the case we should see inventory levels remain stable.

On Vancouver’s Westside home prices continue to be far out of line with economic fundamentals meaning we have become fully reliable on foreign buyers supporting our current price levels. If we continue to see an absence of these buyers then prices ( in my opinion) will trend lower. You only have to look at the High End of the market above $ 3 million and there is a glut of homes for sale. Where have all the buyers gone?

Here’s how the numbers stack up for Vancouver’s Westside:

Single Family Homes:

• During the month of July there were 83 homes sold versus 139 one year ago. A decline of 40%. Year to date home sales are down by 41% compared to 2011.

• Average selling price of a home was $ 2,397,045 almost unchanged from 1 year ago. Year to date the average sale price is also even with last year at $ 2,415,050.

• There were 1038 homes listed for sale at July 31st this year compared to 632 1 year ago. That is an increase of 64%

• There were 12.5 month’s supply of houses at July 31st versus 4.5 month’s one year ago.

Greater Vancouver Real Estate Market (single family houses)

• Sales of all detached properties on MLS in July fell 28% from 1101 units last July to 790 units this year. Year to date sales are down 26%.

• Average selling price has fallen by 8% from $ 1,133,357 to $ 1,041,325.

• The supply of houses has increased by 24% and the month’s of supply has increased from 5.8 to 10 month’s this year.

Overall our market seems to be gradually cooling . That being said, it is summer and this is probably what a “Normal Summer” market should feel like. For most Vancouverites this market feels slow but remember so many of the past years we have had booming conditions. A Booming market is only sustainable for so long.

Wow!

Westside Single Family Home (SFH) inventory has increased 64% from a year ago. The months of inventory (MOI) has increased from 4.5 MOI to 12.5 MOI in that time period.

In Greater Vancouver the SFH inventory has increased from 5.8 MOI to 10 MOI.

Imagine what it will be like if the traditional post-summer inventory surge materializes?

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Will slashing 35% off bubble Vancouver prices become the norm?

As we noted yesterday, the mainstream media is now openly telling us that the Vancouver Real Estate Market is in "full retreat".

The 'average' single family house is now down 15.7% from the highs of February 2012 and the writing is on the wall.

But will those property owners who bought years ago (and with room to move on price to close a sale in this dismal market) recognize the market for what it is?

Will they cut price and run?

We may be starting to see that happen.

Check out 2785 Chelsea CS, Chelsea Park, in West Vancouver. (hat tip G says) 

Here is a screen shot of the link for posterity:

2785 Chelsea is a huge 35,153 sqft property with spectacular panoramic ocean views. On it sits a 4,888 square foot 5 bedroom, 5 bathroom split 3 level home.

Originally the property was listed for $2.48 million.

The assessed value of the property is $2.15 million.

The asking price was cut several times, and recently fell to $1.99 million.

The property finally sold... for $1.61 million. That’s 25% off the assessed value of the property and 35% off the original asking price!

As we read yesterday the 'average' SFH has dropped 15.7%.

But that drop is nothing compared to what owners of high level homes need to do if they want to sell their homes in the current market.

By the end of summer, slashing 35% off some of the outlandish asking prices of Greater Vancouver properties may only be just the start of the cutting required to sell.

It will be interesting.

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Vancouver Market in "Full Retreat"

For the past few years the central focus of the real estate market has been the all important "buyer confidence."

Hundreds of hours through press releases and millions of dollars have been spent by the Real Estate Industry on advertising, etc.  All to build up that crucial "buyer confidence."

And a crucial component of massaging that confidence has been the mainstream media (MSM).

While there have been countless articles this year about Housing Bubbles and the threat of a collapsing market, the person on the street has been somewhat oblivious to what is going on.

But this may well be the week in which Joe Q. Public truly begins to take notice of those negative real estate stories in the MSM.

I don't think anything can compare to the headlines that have come out in today's papers.

You can't ignore paper's like the National Post screaming "Vancouver real estate market in full retreat", it's a moniker that says it all:

Realtors are calling it a “summer lull,” but the latest statistics show Vancouver’s housing market is mired in a 10-year low for sales with no immediate end in sight.

Each month is starting to look worse than the previous one for Canada’s most expensive housing market as property sales in July dropped 11.2% from June — marking a decade low for activity.

The Industry can't hide the reality of the market any longer.

The Real Estate Board of Greater Vancouver reported the worst July since 2000, and 31.2% below the 10-year average for the month of 3,051 sales.

The board said there were 2,098 residential property sales of detached, attached and apartment properties in July — off 18.4% from a year ago.

Things are getting so bad that Vancouver's average detached home price declined for five straight months now.

The average price is now down 15.7% from February's high of $1,235,244 to sit at $1,041,325 - a plunge of $193,919!

And as the August month kicks into high gear, sales are truly collapsing. Results today for all sectors of the market totalled only 49 sales!!

It's the first sub-50 sales day of the year.

If this keeps up for the rest of the month, July's numbers will look like a sales bonanza in comparison.

What were sales in July like?

Single Family Home sales in July 2011 vs July 2012:

Richmond: -51%

Jul/12 = 60 sales

Jul/11 = 123 sales

West Van: -47%

Jul/12 = 46 sales

Jul/11 = 86 sales

Coquitlam: -43%

Jul/12 = 67 sales

Jul/11 = 100 sales

Van West: -40%

Jul/12 = 83 sales

Jul/11 = 139 sales

Burnaby: -39%

Jul/12 = 58 sales

Jul/11 = 95 sales

North Van: -35%

Jul/12 = 60 sales

JUl/11 = 92 sales

East Van: -24%

Jul/12 = 109 sales

Jul/11 = 144 sales

(Hat Tip VMD)

Ugly doesn't begin to describe these numbers. As the Financial Post screamed, the market is in full retreat.

All that remains for the perfect storm is seller panic.

And the dog days of Summer may well provide the fuel to incite pandemonium.

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As we enter August, the heat rises on a stagnating Vancouver market

As July comes to a close and we enter the dog days of summer, let's recall our post about the seasons of real estate last week.

Summer, with its high humidity, roasting temperatures and long hours of daylight; this sense of seasonal freedom translates into cottage escapes, playtime, reunions, weddings, and beers/barbecues.

And, when it is summer leisure versus business, leisure usually wins - with good reason: we spend all winter dreaming of those lazy days of summer. With this pleasant distraction present for buyers, the business of purchasing property diminishes dramatically. In fact, the demand during summer for real estate can be so limited, many realtors will dissuade their clients from listing or recommend they postpone coming to market until autumn. As a result, the only properties which do come to market tend to be either relocations or changes in household status (the arrival of a newborn, co-habitation or divorce).

For real estate in Vancouver, Spring was a bust: sales tanked, listings exploded.

Summer has seen sales continue to tank.  But instead of the usual concurrent dramatic drop in listings, properties continue to be put on the market - albeit at much slower pace.

As we enter the first day of August (traditionally an extremely high day of listings expirations), we are only 370 listings ahead of last month's first day total.

You may recall that the first day of last month saw a massive number of listings expirations, a total of over 900 listings melted from the total as some property owners choose to remove themselves from the market for summer.

Thus it is conceivable that when today is all said and done - and the results are in - we could see our first month-over-month decline in total listings this year.

Even if this happens, the unavoidable fact remains... each and every sales day this year has seen more listings come onto the market that there have been sales for that day.

Plus, consider these two points (click on image to enlarge):

The seasonal declines in listings are expected. The fact is that there have been far less expirations than there should be for a normal month of July. Far from being a harbinger of a market that may be recovering, the mere fact total listings have not plunged from their levels going into Summer is evidence that the bear conditions march onward.

The large number of listings that have been pulled from the market for Summer have simply been absorbed, the horrible sales rate unable to dent the huge year long buildup in listings.

The dog days of Summer are here. The heat is rising. And the real market pressure about to begin.

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