Tuesday, July 27, 2010

Por Favor

Buyers -do your self a favour. Keep calm!
Just because the weather is hot doesn't mean you have to be frightened into thinking we are in a hot market...we aren't.
Sales are dropping fast.
Sure listings are not exploding but sales are dropping so fast that the MOI are moving up rapidly.
So if you feel the compulsion to buy...do this:
1) Ask how much the seller bought the property for. You may be shocked at the mark-up some people are asking for just a few years of sitting on a property with-out putting a lick of paint on a piece of wood.
2) Bargain! What can you possibly lose. There aren't thousands of buyers bidding against you now, so be cheap. Get a realtor who is on your side, and doesn't mind putting in a few low-balls.
That's if you feel you have to buy.
And just in case you think the listing price is arrived at by some scientific formula... There is a property, an Island in fact with a stunning house, which was listed for $29.8 Million just a couple of months ago, then it dropped to $19.5 M and is now a veritable bargain at $14.9 big M's....if the Max numbers come up for me this week-end, I may go over and have a look :)

Thursday, July 22, 2010


OK that was a very weak pun. I notice a lot of posts on various blogger sites decrying Keynesian economics as the cause for the financial mess the world finds itself in. Clearly they don't understand Keynesian economics or how we got where we are.
I am not going to waste too much of your time explaining it, there are many excellent sources of info on his theories, including Wikipedia.
However here is a breif summary, Keynes believed in a fairly well-regulated and Liberal form of capitalism. He believed that Government policy should be used to temper the more rabid and blood-thirsty aspects of free-wheeling capitalism and it should also be used to further equality in society.
Left to it's own devices Capitalism would devour the weaker members of society.
The free-wheeling Twenties which burst into the climax of the Great Depression proved him right and Governments embraced his principles.
However in the late 1970's Keynesian economics started to be abandoned by Western Governments, most notably Margaret Thatcher and Ronald Reagan. They fell under the spell of Milton Friedman, the anti-Keynes. He was a monetarist. His creed was a belief in the free market and it's self correcting mechanism, as well trust in man's greed as a force for progress.
His mantra was less or no Government intervention and regulation, back to the free-market days of the roaring twenties when the Rich and Powerful had very little to impede their wealth accumulation.
The period from 1979 to 2009 was pure monetarism in many countries. Even in Europe which was more Keynesian, they fell under the spell of monetarism- allowing banks, financiers, hedge funds and traders (AKA gamblers) free reign from regulation. An odd combination of rich social programs and reduction in taxation and regulation which inevitably leads to disaster- as it has done in The UK, Greece, Ireland etc.
Obviously it didn't work. Expecting people to self-regulate based on enlightened self-interest was as likely to succeed as Communism was, which was based on working for the general good. Both were flawed philosophies, except one failed before the other.
Iceland which followed Friedman's teachings slavishly is bankrupt, Sweden which rejected them has fared pretty well.
In the US there have been many cases of Hedge Fund managers reaping Billion Dollar pay checks for taking huge, unregulated bets and then when they lost the bet- the US tax payer ponied up the whole cost (via the $120 Billion AIG bail-out) leaving their fortunes and those of their high net worth clients 100% intact.
This is exactly the opposite of what should have happened. Free-market economics dictate that if you lose, you lose big and without intervention. What happened (under Monetarist Bush) was the exact opposite. The big players were not allowed to lose. Their deposits were protected, their institutions flooded with free money.
Keynesian economics is being attempted now in the US, but the country is too bankrupt from the failed Monetarist experiment.

I am not trying to put-down Friedman. He had some interesting views on liberty and on the anti-drug war. However his faith in greed alone being the best motivating drive for mankind was IMVHO erroneous.....

Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.
John Maynard Keynes

Tuesday, July 20, 2010

Well they did it...

Carney took a strong laxative and was able to squeeze out another 0.25%.
Now how will this affect housing? I think it will be a push. Rates are still low and in fact by raising short rates, long rates may stabilise as bond-holders buy into the B of C's inflation fighting rhetoric.
Though of course we are still, at 0.75%, well below the inflation rate.
So variable mortgages should go up, but fixed, long mortgages should stay around where they are now.
What happened in the US as Greenspan raised rates 16 X! (after telling folks to go short and variable in their mortgages - a criminal act IMVHO) was that the buyers were so marginal that they could not afford the increased variable rates or the leap to a fixed when their annual renewal came up.
We will have to see how strong the Canadian buyers are. In any case the message is out..rates are a movin' up.
Just got back from a short trip to the Gulf Islands. Talk about D-E-N-I-A-L. Some of these Islands have seen the complete disappearance of recreational and US buyers at the same time. Many properties have been on the market for...wait for it...three years and are getting shabby..
Unfortunately sellers are looking in the rear-view mirror for their price points and are very slowly following the market down. Instead of taking a good chunk off the price...like one place on Pender which sliced and diced from $1.78 to 990K and just got sold (don't know the price)
Of course the higher ferry prices are probably adding to the woes. Couple of hundred bucks for a family and car to go and come back to most of these places.

Tuesday, July 13, 2010

Going out of Town for a Week

Lets hope the stock-market stays strong enough for the B o C to acquire the cajones to raise another 0.25% (whoop de doo!) on the 20th.

We should have some interesting numbers for July with some areas of significant weakness showing up..look at Larry's Kitz condo prices for a taste.

No SFH sales in West Van yesterday with half a dozen listings and the same in price reductions.
Remember on this blog we are waiting for signs of a gradual correction, not Armageddon which causes wide-spread financial hard-ship and bankrupts the credit unions (that would be us).
We also don't blame any group for the lunacy that has led to this present situation where we are about the most unaffordable city in the western world. The policies that have helped us get here are about done. The local and Federal Governments are in trimming mode not spending and sloshing money around mode.

The Central banks of the world are tightening from their ridiculously low rates, realising late in the day that these low rates are encouraging the very speculative nonsense that got us here.

This credit crisis was caused by Governments in the US ignoring the huge bubble in housing and in fact fanning the flames. What did we learn from that? Nothing. we are heading the same way and when we burst our political leaders will be blamed, and tossed out. Rightly so. However our own greed will be papered over.

Instead people will be lining up to ask for bail-outs from their own mistakes.

This bubble is nationwide. We are at all time highs in Montreal and near that in Ottawa and Regina. Anyone wishing to blame one wealthy group or another, conveniently ignores the fact that it is a national phenomenon. They may affect small segments of the market, but this is the big kahuna jumping.
Keep them listings coming and stay well.

See you next Tuesday.

Friday, July 9, 2010

Bit and Pieces

Nice jobs reports.

93,000 new jobs in June for all of Canada. Mostly in Healthcare and Service industries, which are not really revenue generators.

Also most of the new jobs came in Central Canada whereas BC actually lost jobs and the unemployment rates inched up 0.3%.

The Canadian dollar ramped up the last few days (probably on leaked numbers) and then finished it's foray up today- all on the expectation that the B of C will push rates up another dizzying 0.25% when they meet on July 20th.

What now? Can the B of C Not raise 0.25%? Does it really matter either way? Will it effect housing in the slightest.

Who knows? It may bring out the last chicken little's squeezed into buying by the rapid rate rise 0.25% all the way up to 0.75%!

In any case, whether they raise or not, probably depends on what happens to the stock-market and price of oil and Re between now and then (only two weeks away I know) , since Central Bankers main job has now become proper-uppers of asset prices.


The BC Government has finally admitted that they spent 50% more than budgeted on the Olympics. Nearly a Billion bucks. Which is a lot, but is the same as the price tag for the do-nothing-G20-summit we had in Toronto.

Of course they did ignore all the money Crown corporations spent on the Olympics and the hugely expensive infra-structure projects because...well because...they could be ignored.

As Colin Hansen said - it was money well spent. Look at the huge rebound in RE because of the Olympics. Wait a minute, RE has been on a down-ward track since the big-O ended.


Victoria's not-so-Secret

The numbers from Victoria are out too. Much higher inventory and Much lower sales while prices stagnate.

A very odd state of affairs. Imagine you go to buy a hand-made Christmas ornament at a fair. You see the fellow has five for sale and you ask the price. "It's a bit expensive..I will think about it".

So you come back next week and the fellow has sold one ornament and meanwhile he has made 5 more. So now there are nine. You ask him the price and he sheepishly tells you the same amount. What do you do:

A) Pay the price he is asking.

B) Bargain a bit since he is obviously asking more than the market is willing to pay and his inventory is building up rapidly.

C) Forget about buying for now and wait and see what happens next week, or in a few weeks even.

The buyers now are doing A! Counter-intuitive IMVHO.

Here is the report from the VREB for June 2010:

Greater Victoria home buyers have a growing number of properties from which to choose as inventory levels rose to 4,730 properties available for sale at the end of June - up 25 per cent from the 3,794 available properties a year earlier. Sales, meantime, softened last month while overall prices showed little change.

A total of 625 homes and other properties sold in June through the Victoria Real Estate Board’s Multiple Listing Service® (MLS®), down from the 695 sales in May. There were 946 sales in June of last year.

25% more inventory than last June.

10% Less sales than May.

34% Less sales than last June.

Wednesday, July 7, 2010

OKANAGAN in full-out bear country

I was waiting for the Okanagan numbers patiently and was rewarded.

Here they are

Here's what the board had to say today:

July 7, 2010 Shuswap Housing Market Shifts in Favour of Buyers
Sicamous, BC

July 7, 2010 Central Okanagan Housing Market Moves into Buyer’s Cycle
Kelowna, BC

July 7, 2010 Buyer’s Cycle Continues in the North Okanagan Market

Here are some high-lights for the Central region ie Kelowna:

1) +5.7 % more listings than last June
2) -21.7% less sales than last year.
3) 346 sales with a total of 5793 listings = 16.7 months of inventory

In the North Zone the number is 2824 listings and 130 sales = 21 MOI

In the Shushwap Zone we have 29 MOI.

These numbers are so astounding that I have checked them several times. Please feel free to confirm or refute them

Despite lots of graphs on the site, there doesn`t seem to be a mention of average price, HPI, Median price etc. I guess there are too many sub-indices and smaller communities to make it useful.

The bull sure looks to have been slaughtered and slathered in BBQ sauce and is being cooked to a nice sizzle.

Monday, July 5, 2010

Some Honey for the bears

The benchmark is out and it shows enough divergence for both bears and bull to be able to toot their horns.

Benchmark is down. So was the average SFH BTW. But a few big sales skew average, so benchmark is even more reliable IMHVO.

Here is the whole package from Mike Stewart's site:

Nothing too dramatic. House prices have stalled and we are now waiting for the next move. No crash. No run-up. Just treading water. Maybe Chad will be right and we just stay here for two years.

A few comments:

Looks like the specuvestors have left Squamish. West Van is now down for the last three years on attached and detached and Maple Ridge is also down over the last three years.

Once again, nothing too dramatic. The market has definitely moved into a different place, with MOI in the 6's, prices stable at best and a huge swathe of listings pulled off the market...

RE moves at glacial speeds. 2008 was an anomaly, a once in a life-time event. The denouement of speculation, which was quickly aborted by the governments coming to the rescue of their pay-masters.
Here are some excellent graphs, as always, from Mohican:

Sunday, July 4, 2010

Speculation can kill...

The rampant housing speculation in this city has made it the number one industry, topic of conversation and has brought riches to some and misery to others.

There have been many examples in the blogs of locals who have bought multiple units, often with Government backed insurance (? Government blessing too) and have benefited, along with the RE-Industry from this speculation.

Clearly there is housing demand. Clearly the population is growing. So there is pressure on housing stock and prices. Since wages are not keeping up, a greater % of income is being spent by buyers to service their purchases.

The Government cares not one bit that buyers are having to spend 50,60, 70% of their after tax income on servicing mortgages for these bloated assets, but they will quickly run to act at the first sign of significant weakness.

Anyhow if you think that the system is rigged in favour of speculation, and that is causing those wanting to get into the market hard-ship..it could be a LOT worse.

How about speculation that leads to starvation and death. And I don't mean the international arms-dealers (some of whom I hear are based in Vancouver)

We are a global economy and a suspender-clad trader sitting in an investment bank in New York, buying grain for a bet, is literally taking that grain off the plate of a poor person.

And if the bet goes wrong, Uncle Sam will be there to help pay the Investment banks losses. Nice to have

Our current political system is set up to protect powerful speculators, here and in the US.

Thursday, July 1, 2010


Jigging is a form of fishing where the lure is moved up and down in the water until the fish strikes.

Looks like that is exactly what is happening in our RE market. A little movement up and a little down, until a buyer gives up and strikes...

We were down on detached in May but up in apartments. Now we have a reversal, down in apartments and up in detached.

These are average prices, and are from Larry Yatter...much kudos to him again for being the first out with these.

A little up and a little down - jigging. BTW- I will say it again, as I have said before, I cannot see how the B of C can raise rates. With a shaking hand and sweaty armpits they raised it 0.25% and now we have enough weakening to make them regret even that.

What we bears will need to depend on is (in no particular order):

1) Weakening economic out-look making housing even more unaffordable despite these low rates.
2) A change in investor sentiment. Two months of drops would have done it. And maybe bench-mark and median will support this. However we may have to wait another month. Even head-lines of economic weakness may bring caution.
3) A reduction in off-shore demand. Lets watch this as an indicator:

4) A retrenchment in Government spending. Harper is already talking about pulling out of deficit and you can expect Provincial cut-backs to continue too.

1 and 4 are double edge swords. Who wants RE to drop because our neighbours are losing their jobs? It would have been better to raise rates, nip the monster early and then drop rates again with the next weakness (which may be starting already)

But it was not to be. We can blame the politicians, but we want everything and they give it to us.