Monday, April 12, 2010

Canucks are nuts!

Sometimes you feel like a nut... sometimes you don't.

Remember that jingle?

It was from an ad for Almond Joy and Mounds candy bars, manufactured by Hershey's, that ran during the 1970s.

I was reminded of it when I read this commentary from Karl Denninger on the US website market ticker.

Karl took a look at some Canadian real estate statistics and succinctly concluded that "the Canucks are nuts"

Noting that the average two storey house across Canada was going for $365,000 with an average price of $355,109 in Montreal, $562,150 in Toronto and a whopping $987,500; Denninger was compelled to ask the logical question. How is this supportable?

To properly carry mortgages on these prices, the average annual family income would have to be $118,000 in Montreal, 187,000 in Toronto and $329,000 in Vancouver?

Is it?

As Denninger candidly notes, this notion is "in a word, bullshit"

  • "The latest median household income I can find for Canada is closer to $53,000 - or about half of what it should be. That is, homes in Canada - on the whole - are selling for double reasonable 'fair values'. I'm willing to bet that in Vancouver they're overvalued by a factor of five - or more.

    I can't tell you when it will blow up, but I can tell you with absolute certainty that it will. If you have a nice big fat profit in your house up there in Canuckistan, you better sell now while you still have it.

    Ignore this warning at your own peril."

Now... where have you heard this advice before?

I'm happy to report that one colleague I work with recently heeded this advice and sold the home he originally bought for $64,000 for about $680,000. At 60 years of age he can see the havoc that the coming wave of boomers downsizing and rising interest rates are going to do.

Sadly, most 'canucks' cannot.

Almond Joy will be my treat of choice to give out this Halloween because I wholeheartedly agree with Denninger... most Canadians buying real estate right now are nuts.


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  1. I think you need to take the median income case on a city-by-city basis. My understanding is that the median household income in Toronto is around $80k, and in Vancouver it's around $70k. Not sure about Montreal.

    Not that it makes your commentator's argument any less valid, but attaching local numbers helps clarify things (especially in the case of Vancouver).

  2. I think you meant Karl Denninger and not Ken.

  3. Median total income, by family type, by census metropolitan area for 2007 from Statistics Canada:

    Canada - 66,550
    Toronto - 66,560
    Vancouver - 66,330
    Montréal - 63,790

  4. It is Karl, I have corrected the post. Thank you.

  5. And thanks for the median stats as a comparison.

  6. Good post. Great blog. I check it daily, thanks again.