Thursday, July 12, 2012

Wall Street Journal picks up on Rosenberg's analysis of Canadian Housing Market

The Wall Street Journal is picking up on Gluskin Sheff economist David Rosenberg's recent analysis about the Canadian Housing Market.

In case you missed it, yesterday the Financial Post covered Rosenberg's analysis that Canadian housing prices are not sustainable.

Jumping on the story, the Journal headlines: Bubble vs. Rubble? Rosenberg Weighs in on Canada-U.S. Housing Divide.
Many economists balk at using the “B-word” to describe Canada’s housing market. Gluskin/Sheff’s David Rosenberg doesn’t.

And remember, he was the guy who called the U.S. housing bubble.

In a report out this week, Mr. Rosenberg describes the different real-estate market landscapes on either side of the Canada-U.S. border–”bubble versus the rubble.”
Rosenberg is highly respected in the United States as an economist who pulls no punches and he gained a high profile in financial markets when as the chief economist of Merrill Lynch he rang some early warning bells on the housing market crisis and subsequent recession in the U.S.

Mr. Rosenberg’s message now: Housing prices in Canada and the U.S. have never been this polarized, with Canada’s prices on average twice that south of the border. Historically, they have been close to parity, he says, and they can’t stay this far apart forever.
Toronto and Vancouver are “undeniably desirable places to live,” but that doesn’t mean that prices in Vancouver should be 4.4 times above the U.S. average, and Toronto three times higher.

Activity in the Canadian market should cool off, with condo sales vulnerable to a 20% drop in hot spots like Vancouver and Toronto. And another tightening of Canadian mortgage rules—which went into effect this week–is sure to bite into demand.
Our friends over on VREAA have summarized Rosenberg's report and his comparative graphs.

If there was any doubt before, you can't ignore it now. The word is out across America and the world about our housing bubble and that a crash is not only imminent, but expected.

Rosenberg summarizes the situation succinctly by declaring; “Not sustainable, my friends.”

Wasn't it Tsur Sommerville who insisted that wealth would continue to pour into Vancouver to support our housing prices?

I wonder if the Sauder School of Business will come out with a report analysing how wealth ignores the evidence when making investment decisions.

I mean, don't they already believe fundamentals don't apply?


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  1. Yes Tsur did say it was different here in Vancouver.
    Apparently we have a disproportionate amount of people here willing to put their entire net worth into a moss covered shack.

    1. Actually, Rosenberg played it pretty safe on the subject of a Canadian housing bubble. It was not so long ago that he referred to Vancouver and Toronto as mere "suds" in response to R/E bear-sites insistence that a bubble was forming. If I had a criticism of him it is that he came to this party very late with charts that really surprised nobody but the Wall Street Journal. It strikes me that David is collecting the baton after the race has already been run as his forecasting analysis was lacking along the way. Anyone can call these prices "unsustainable" after they actually start falling. Sorry....but that is not a special talent in my books.

  2. Tsur backwards Rust. His act is growing old.

  3. hahahaha 'rust' hahahahhaha

  4. Somerville is a "bought and paid for" shill for Vancouver real estate developers and real estate agents. He's Canada's David Lereah - the former "economist/apologist" for the US National Association of Realtors.

  5. Sauder. is like a curse word. Try saying it without feeling embarassed at a mixed party.

    Sauder! Sauder! Sauder!

    Nobody takes them (or Somerville) seriously anymore. Can you imagine actually having to go through life with one of their diplomas?

  6. A zero interest rate policy (ZIRP), which manipulates interest below market levels, leads to misallocations of capital. This leads to asset bubbles and untold misery for those, especially pensioners, trying to live off the interest income provided from below market rates. There has never been so much financial risk associated with massive debt and deficits, yet interest rates are at the lowest levels in history.
    The fact that we have university professor who can not see the disaster taking place does not say much for higher education.