The Global Housing Bubbles

[kevsta]

So back to Aus - Aussie homeowners worried about a loss of equity could now hedge, by shorting the new home price index

http://www.debtdeflation.com/blogs/2...e-price-index/

If Steve Keen is anywhere near right over the longterm (cue SkepticPK interjection ) being short the index by a comparable amount as your home could be a smart move

Quote:

STEVE KEEN: As I've always said I expected houses prices to fall something like about 40 per cent over a 10 to 15 year time period. (inaudible) between the Japanese and the American situation the Americans have been very ground down very slowly and then very rapidly and it's fallen quite substantially over about a four year, five year time period. The Japanese have fallen very slowly, very regularly for 20 years. I think we'll fall somewhere between the two extremes.

[kevsta]

Originally Posted by Corsair 115

When you say things like, "you obviously prefer to believe the views of the people who are financially dependent on the markets they are defending", you are verging close to conspiracy thinking. You are taking an 'us against them' mindset. You are ascribing motives to those who disagree with you without offering any proof of those motives. It can't be they disagree with you based on a rational, impartial analysis of the data. No, they must disagree with you and your selected sources due to ulterior reasons. The opposing sources must necessarily be tainted by other motivations.

You provide yet another example of this when you accuse me of the very same thing: "your spirited defense leads me to believe you also have a financial interest in me being wrong". I can't disagree with your view based on an impartial, rational analysis of the data at hand. No, my view must be motivated by something else.

It would seem you think you have the truth, and thus anyone who disagrees with you must necessarily be lying since they are not expressing the truth as you know it. So you look for ulterior motives to explain how anyone dare challenge the truth. If you continue to take such conspiracy-tinged approach, then there will be little point in continuing.

(And for the record, your claim of an alleged financial interest motivating my views on the matter are not just wrong, they are laughably wrong.)

Yet another bit of evidence which seems to illustrate your thinking has much in common with conspiracy theorists. They too look for evidence which supports their view—and reject any evidence which has the temerity to challenge their views.

You realize you have it backwards, right? You don't look only for evidence which supports you views. Rather, you examine all the evidence and then come to a conclusion on what it says.

when something seems very clear to me based on what I can see now, and have known before, then when people seemingly want to just disagree for the sake of it, with no substance other than attempting want to nitpick about sources, then yes I do wonder why that is.

no, not necessarily lying, confirmation bias and normalcy bias are the two usual suspects.

I fully accept this charge (confirmation bias) could be leveled at me also, in fact you are, however I have a track record of successfully predicting a housing pullback and evading it in the UK, to the absolute ridicule of most everybody I knew at the time until it happened - do you?

if you don't have a financial interest in the opposite of what I think being true, then all well and good, but how about explaining to me why:

"this time IS different"

like stillicho has attempted to, rather than just nitpicking about sources and methodology and flaws in my character, because yes, that is what it is.

[Corsair 115]

Originally Posted by stilicho

One peculiarity of the Canadian economy is its rough segmentation along geographical boundaries. The conditions in Toronto may not apply in Winnipeg, Yellowknife, Moncton, or Prince Rupert.

This is a point worth repeating. The geographic/regional pecularities of the country undoubtedly factor into things. Consider, for example, that the three largest metropolitan areas in Canada (Toronto, Montreal, and Vancouver) contained 11.7 million people in 2011; that's 35% of the population of the entire country. (That'd be the U.S. equivalent of New York, Chicago, and Los Angeles metropolitan areas having a combined population of over 100 million.)

Incidentally, to put numbers to the amount of population growth in the Toronto metropolitan area, from 2006 to 2011 it grew by 469,915. In percentage terms it was a 9.2% increase. Source.

Of course, that's total population, not just those of adult or home-buying age. But it should be illustrative nonetheless of how much the area is growing.

[Corsair 115]

Originally Posted by kevsta

when something seems very clear to me based on what I can see now, and have known before, then when people seemingly want to just disagree for the sake of it, with no substance other than attempting want to nitpick about sources, then yes I do wonder why that is.

Hand-waving and conspiracy thinking. When you outright state you are seeking evidence which only confirms your views, when you state that your views trump any evidence to the contrary, then I've read all I need to read. I'm out.

[kevsta]

Originally Posted by Corsair 115

Hand-waving and conspiracy thinking. When you outright state you are seeking evidence which only confirms your views, when you state that your views trump any evidence to the contrary, then I've read all I need to read. I'm out.

that isn't what I said at at all, (its actually what I'm accusing you of) but if this is all you've got to contribute then I don't have any more to say to you either.

seeya

[stilicho]

Originally Posted by kevsta

yes, but this is far from the only information and data out there, isn't it?



stillicho, I accept that you have provided your best counter argument as to why "this time is different" - I just don't happen to believe that it is, because any number of unforseen situations or unintended consequences can affect the situation and start a negative feedback loop.

so lets address your bullet points



this is like saying there is no proven correlation to teeting on the edge of the cliff, and falling off. it might be that teetering on the edge of the cliff does not cause the falling off, but you certainly have to be there teetering for a gust of wind to blow you off.

if something is at the top end of a basically unsustainable (under duress) range, to assume it will stay there indefinitely through thick and thin is naive IMO

plus the IMF seem to have concerns about it too (Dec 2011)

....


I'll still be here, and you can ridicule my views endlessly if none of it comes to pass.

You know what? It would be a lot easier to discuss things if you stopped spamming the threads and instead replied to what I've written. Nobody here has disputed that price:rent ratios or household debt in Canada is high. Nobody. Not me. Not Corsair. Nobody at all.

What you're missing and continue to miss are the essentials of the Canadian real estate market, Canadian institutional realities and regulations, and the economic situation as a whole. Do I have to repeat them in every post until you take them into account?

You started this thread by asking for help in understanding what "bubble bubble" guy was telling you. I provided ample evidence that he has extremely limited understanding of the Canadian real estate market. You even confirmed that this was the case.

If you want to bicker then that's fine. Just admit that you aren't interested in learning anything. All I want from you is an iota--an inkling--of evidence that any of my indicators are wrong. Easy one: show me evidence that any Canadian financial institution typically offers variable rate mortgages to applicants who have no job, no income, no assets, and no prospects. Just show me one.

[kevsta]

Originally Posted by stilicho

You know what? It would be a lot easier to discuss things if you stopped spamming the threads and instead replied to what I've written. Nobody here has disputed that price:rent ratios or household debt in Canada is high. Nobody. Not me. Not Corsair. Nobody at all.

What you're missing and continue to miss are the essentials of the Canadian real estate market, Canadian institutional realities and regulations, and the economic situation as a whole. Do I have to repeat them in every post until you take them into account?

You started this thread by asking for help in understanding what "bubble bubble" guy was telling you. I provided ample evidence that he has extremely limited understanding of the Canadian real estate market. You even confirmed that this was the case.

If you want to bicker then that's fine. Just admit that you aren't interested in learning anything. All I want from you is an iota--an inkling--of evidence that any of my indicators are wrong. Easy one: show me evidence that any Canadian financial institution typically offers variable rate mortgages to applicants who have no job, no income, no assets, and no prospects. Just show me one.

you are like arguing with Roger Irrelevant, I think your "indicators" are useless and have explained why in reasonable depth, point by point.

I have zero interest in digging further into useless irrelevant indicators, nor wasting any more time discussing Canada with any more stroppy Canadians.

nor did I "ask for help" - do not flatter yourself, I know what I think, and now I know what you think too, so lets just let history take it's course and check back annually eh?

and I humbly look forward to my scorn from you if I am wrong.

[Francesca R]

Originally Posted by kevsta

So back to Aus - Aussie homeowners worried about a loss of equity could now hedge, by shorting the new home price index

There is also a contract on the S&P-Case/Shiller home price index in the US (launched by Robert Shiller's firm), and it's long been possible to short the UK Halifax house price index via spread-betting (which is not legal in the US).

But the basis risk on using a national index to "insure" the price of one's house is pretty huge. The cost of carry for running the position is also rather high. Plus it isn't clear what the true economic need for a regular citizen is to do this, since arguably the long term neutral position of someone is to be long of housing.

I would be suspicious of anyone recommending these derivatives to regular folks as a smart move.

[kevsta]

Originally Posted by Francesca R

There is also a contract on the S&P-Case/Shiller home price index in the US (launched by Robert Shiller's firm), and it's long been possible to short the UK Halifax house price index via spread-betting (which is not legal in the US).

But the basis risk on using a national index to "insure" the price of one's house is pretty huge. The cost of carry for running the position is also rather high. Plus it isn't clear what the true economic need for a regular citizen is to do this, since arguably the long term neutral position of someone is to be long of housing.

I would be suspicious of anyone recommending these derivatives to regular folks as a smart move.

haha, well I would just assume you were suspicious of me anyway Francesca

so ok retracted, I'm not recommending it, t'was just a (possibly silly) thought, I haven't looked into costs / risks.

are you going to short it?

[Francesca R]

Eh, in a PA sense I've never shorted residential housing which is rather hard to predict and central London where I live behaves rather differently from national averages. Prices would need to fall 65% to take me underwater (Dec 1999) but I woudln't mind if they did (apart from the attendant nasty economic effects likely to accompany that).

For funds I manage I have traded US and UK commercial real estate, long and short, using total return swaps linked to the NCREIF (US) and IPD (UK) real estate indexes, but commercial indexes are all appraisal-based and therefore they lag prices so the spreads on such swaps vary widely and that is how the market pricing reflects everyone else's predictions. None of that is appropriate for retail investors though.

[epepke]

Originally Posted by Corsair 115

I think the first thing to note is that Canada is not the United States. There are a great many differences between the two nations in terms of how the financial system is set up, operated, and regulated. There are have already been concerns expressed by the government that house prices may be climbing too quickly and it has taken action accordingly, for the simple reason that a crash is in no one's interest, least of all the government's.

I find it a bit naïve to say that it is in no one's interest. People with a lot of cash who want to buy property cheap like it rather a lot. Of course, in the US, such people were essentially running the show, especially after the laws preventing financial institutions from doing too much were replaced in the late 1990s.

Still, overconfidence and an "it can't happen here" syndrome can be as or more dangerous than alarmism. I'm sure that, at the beginning of what is now called The Great Recession, a lot of people in the Eurozone had a lot of fun pointing at the US and laughing. They don't appear to be laughing much now.

[kevsta]

Originally Posted by Corsair 115

So pointing out one of your sources provides no citations the numbers it uses is "nitpicking"? Wow, just wow. You realize that without citations the numbers could be entirely made up?

not that this was in any way an important part of the conversation, but just in case anybody else was jumping to conclusions about this website making information up because they have the word "ponzi" in their name, they replied to my email today with sources for their figures.

as stated at the top of their page

http://www.greatponzi.com/reports/cd...-20110626.html

Quote:

All data comes from public financial reports (bank web sites and OSFI web site).

but specifically, from here

http://www.osfi-bsif.gc.ca/osfi/inde...?ArticleID=554

from which you can select individual banks or totals and pull up pages like this

http://www.osfi-bsif.gc.ca/WebApps/T...ncialData.aspx

and in the meantime another Canadian who didnt want to get involved in the thread but broadly agreed with my views sent me these links by PM of some more utterly bubblicious behaviour

http://www.greaterfool.ca/2012/02/22/crazy-anxious/

http://www.greaterfool.ca/2011/02/13/omnipotent/

so fairly clearly (as stillicho said) Vancouver & Toronto have got a correction coming, but if it follows anything like the American model, it doesnt stop there, because its far from being just a subprime or variable rate mortgage problem.

http://www.nytimes.com/2011/02/14/bu...p.html?_r=2&hp

Quote:

The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.

In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.

“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off

[kevsta]

http://www.telegraph.co.uk/finance/p...t-to-rise.html

Quote:

Home owners have had good reason to feel smug over the past three years, but the smiles could soon be wiped from their faces. Bank Rate may have been kept on hold at 0.5pc yet again this week, but mortgage lenders are starting to raise their interest rates.

This week Halifax and Bank of Ireland announced that they would soon be raising their standard variable rates (SVRs).

Around 850,000 borrowers will be affected by Halifax's decision, predicted here last week, to increase its SVR by half a percentage point – from 3.5pc to 3.99pc – on May 1. Meanwhile, 100,000 borrowers with Bristol & West and Bank of Ireland-branded mortgages will be hit with an even steeper increase in rates. In June Bank of Ireland's SVR will increase by one percentage point from 2.99pc to 3.99pc, then in September it will increase by a further half a percentage point to 4.49pc.

[Mikemcc]

Originally Posted by kevsta

yea, there's always reasons, (usually policy meddling) but they weren't lending to just tramps, it was always strictly 3x (proven) earnings back then as I remember.

there was also the Thatcher privatization of council houses along the way slowing down the bounceback wasn't there?

BTW here's Ben @ Positivemoney.org.uk 's take on the most recent UK bubble causes

http://www.positivemoney.org.uk/2012/01/housing-bubble/

http://www.positivemoney.org.uk/wp-c.../01/chart2.gif

Unfortunately many mortgage suppliers swapped to 'self-certified' mortgages. Where the lenders were happy to lend on the promise that the folks could repay, at the same time the credit card companies were happy to throw zero-interest cards at the same people. Their ever-growing debt just cycled arouind the cards. When the banking crisis hit, all of a sudden there wern't new zero-interest cards and eventually the old schemes reached the end of their terms. Unsurprisingly folk couldn't pay the debt off.

[kevsta]

Originally Posted by Corsair 115

This is a point worth repeating. The geographic/regional pecularities of the country undoubtedly factor into things. Consider, for example, that the three largest metropolitan areas in Canada (Toronto, Montreal, and Vancouver) contained 11.7 million people in 2011; that's 35% of the population of the entire country. (That'd be the U.S. equivalent of New York, Chicago, and Los Angeles metropolitan areas having a combined population of over 100 million.)

Incidentally, to put numbers to the amount of population growth in the Toronto metropolitan area, from 2006 to 2011 it grew by 469,915. In percentage terms it was a 9.2% increase. Source.

Of course, that's total population, not just those of adult or home-buying age. But it should be illustrative nonetheless of how much the area is growing.

Did I just hear a *PoP!* ?

[daenku32]

Originally Posted by kevsta

Did I just hear a *PoP!* ?

Can you explain how that is an example of a PoP? All I see is an ad for a single house that is so new it has yet to have a clear market value (other that claimed by the owner), and the owner is attempting to dump it ASAP?

[kevsta]

Originally Posted by daenku32

Can you explain how that is an example of a PoP? All I see is an ad for a single house that is so new it has yet to have a clear market value (other that claimed by the owner), and the owner is attempting to dump it ASAP?

that looks like a panicking speculative flipper to me. I could of course be wrong, but its not exactly a bidding war is it?

[Gord_in_Toronto]

Originally Posted by kevsta

that looks like a panicking speculative flipper to me. I could of course be wrong, but its not exactly a bidding war is it?

If you want just one contrary example, I can give you my experience. I just sold my house in the GTA within a week at $30,000 over the asking price. This is typical for houses in my neighbourhood. My wife and I are now looking for a new smaller, place. I have seen no evidence of panic selling. If the market collapses in the next couple of months, I shall be overjoyed.

It has to "adjust" at some point and, based on the number of condo towers being built, they will be the first to go.

[kevsta]

Originally Posted by Gord_in_Toronto

If you want just one contrary example, I can give you my experience. I just sold my house in the GTA within a week at $30,000 over the asking price. This is typical for houses in my neighbourhood. My wife and I are now looking for a new smaller, place. I have seen no evidence of panic selling. If the market collapses in the next couple of months, I shall be overjoyed.

It has to "adjust" at some point and, based on the number of condo towers being built, they will be the first to go.

nice timing, why not rent for a bit and see?

[Gord_in_Toronto]

Originally Posted by kevsta

nice timing, why not rent for a bit and see?

I'm not too sure on the timing. I have a friend who became rich is real estate and about 10 years ago she sold her house and moved to a rental because she knew the market was about to collapse the next year. We are both still waiting.

Statistics for Toronto here: http://www.randi-emmott.com/market.htm

My wife and I are considering renting but, at the same time, continue to look for the "perfect" house that satisfies at least 39 of our 40 criteria.

[daenku32]

Originally Posted by kevsta

that looks like a panicking speculative flipper to me. I could of course be wrong, but its not exactly a bidding war is it?

Maybe he had to suddenly pack his bags and disappear.

[kevsta]

lol www.crackshackormansion.com

- can you tell the difference between an average looking rest of world crack den, and a $million "mansion" in Vancouver?

[Stylesjl]

Originally Posted by kevsta

lol www.crackshackormansion.com

- can you tell the difference between an average looking rest of world crack den, and a $million "mansion" in Vancouver?

I managed to get 9 out of 16. Guess Vancouver is a special place

[Demografix]

Originally Posted by kevsta

So back to Aus - Aussie homeowners worried about a loss of equity could now hedge, by shorting the new home price index

debtdeflation.com/blogs/2012/03/02/rp-datas-tradeable-australian-house-price-index

If Steve Keen is anywhere near right over the longterm (cue SkepticPK interjection ) being short the index by a comparable amount as your home could be a smart move

Steve Keen has been wrong more often than he has been right according to this.....

australianpropertyforum.com/topic/9527896/2/#post8306936

01 - In 2006, Keen said we may already be in a recession
02 - In 2006, Keen said the Australian Debt/GDP ratio would exceed 160% by 2007
03 - In 2006, Keen said Australia will be in recession long before our Debt/GDP ratio falls
04 - In 2008, Keen said interest rates would be at 2% by 2009, and ZIRP by 2010
05 - In 2008, Keen said we would have double digit unemployment (up to 20%)
06 - In 2008, Keen said we would have a severe recession, possibly a depression
07 - In 2008, Keen said house prices would be down 40% within 'a few years'
08 - In 2008, Keen admitted he was hopelessly wrong on house prices after losing a bet with Rory Robertson
09 - in 2008, Keen sold his Sydney home at a cyclical low point, just before prices rose 20%
10 - In 2010, Keen predicted an accelerating rate of decline in Australian house prices
11 - Between 2008 and 2011, Keen claimed the Australian property bubble began in 1964, 1983, and 1988
12 - In 2008, Keen said his biggest regret was not buying property at the start of the property bubble in the 1970s

Maybe he'll be right this time, but then again he could find himself climbing up another mountain wearing a t-shirt proclaiming how wrong he was about Aussie house prices!

[kevsta]

Originally Posted by Demografix

Steve Keen has been wrong more often than he has been right according to this.....

yes I'm aware that his timing has been out and he didn't account for Government largesse and interventions to forestall the inevitable.

seeing what has to come is one thing, adding an accurate timeline to predictions is another thing entirely.

but with China's boom finally rolling over, and their real estate bubble unraveling, it should be becoming clearer to even the slowest of greater fools now?

Canberra property bubble to burst

a guy in the trading room I'm a member of is in an RE agent in Aus (Sydney) and was giving me the lowdown only yesterday (they are scared but pretending not to be, but buyers are fading fast)

[kevsta]

Originally Posted by kevsta

Did I just hear a *PoP!* ?

there it was again, definitely a *Pop!*

Quote:

The past 24 hours may have brought the end of real estate as you know it.

The changes are as I forecast over the past months. The 30-year mortgage is dead, which has the same impact on borrowers as a rate increase of almost a full 1%. Home equity loans are curtailed again. CMHC reforms – no insurance for mortgages on houses selling for more than $1 million – massively impacting Vancouver (2,500 listings are over that limit).

You were also told that OSFI, the bank regulator, would enact new guidelines. That happened as part of a 1-2-3 series of punches yesterday. Home equity lines are tightened even further – right down to 65% of a home’s value (from 80%). If you want to go higher, then banks will be forced to give you an amortized mortgage on top of the line. Cash-back mortgages are kaput. So property virgins can no longer get 100% financing for that new condo, and the banks who gave out these bribes are forced into responsibility.

No more stated-income mortgages (called ‘liar loans’ in the States) because now entrepreneurs and commissioned salespeople will have to haul in their tax returns to verify earnings. And tougher hurdles for first-time borrowers looking for a cheap VRM, who now have to qualify for the Bank of Canada benchmark 5-year rate (currently 5.44%).

F’s mortgage changes come into effect in two weeks (July 9th). The OSFI rules become law for the banks at the end of October, but expect them to be adopted almost immediately.

I'm sure it will be fine though, after all Canada is not the USA

Quote:

More than half of B.C. homeowners have refinanced their home or property, a new survey by Mustel Group for the Society of Notaries Public found.

Of those who have refinanced, 49 per cent used the money for renovations; 23 per cent to buy other real estate; 23 per cent for other investments; 10 per cent to purchase a new car; and 8 per cent to consolidate or pay off other debts.

I also liked this RE opinion poll

Quote:

Homeowners were split on whether the value of their homes would go up in 2012, with 44 per cent saying they expect an increase and 52 per cent expecting prices to stay the same.

In Metro Vancouver, 54 per cent said they expect prices to go up, with 34 per cent not expecting increases in the next year.

so 96% aren't expecting any price drops, so it will be fine, as the herd generally have a wonderful predictive record.

[Gord_in_Toronto]

Originally Posted by kevsta

there it was again, definitely a *Pop!*



I'm sure it will be fine though, after all Canada is not the USA




I also liked this RE opinion poll



so 96% aren't expecting any price drops, so it will be fine, as the herd generally have a wonderful predictive record.

I suppose that people who believe in Garth Turner might now be running for the hills but pretty much everyone else in Canada thinks that the changes are minor and will have a positive impact -- albeit with a negative effect on some groups of people.

http://news.google.ca/news/story?pz=...0mz71lbaeIMHYM

[kevsta]

Originally Posted by Gord_in_Toronto

I suppose that people who believe in Garth Turner..

.. I'm pretty sure he's real

Originally Posted by Gord_in_Toronto

..might now be running for the hills but pretty much everyone else in Canada thinks that the changes are minor and will have a positive impact -- albeit with a negative effect on some groups of people.

Originally Posted by kevsta

so 96% aren't expecting any price drops, so it will be fine, as the herd generally have a wonderful predictive record

doesnt sound like we disagree much on this?

[kevsta]

Originally Posted by kevsta

not necessarily, no, but Canadian banks are possibly not as safe as you think.

they have off balance derivatives exposure in the $trillions (who doesnt)

http://www.greatponzi.com/reports/cd...-20110626.html

Total exposure $16.77 T - OTC $14.84 T

a declining market (and global counterparty problems) will stress this.

http://business.financialpost.com/20...osfi-official/

Quote:

Canada’s banks, ranked the soundest on the planet by the World Economic Forum, aren’t immune to collapses triggered by falling housing prices, according to the government official implementing new mortgage rules.

Previous failures of Canadian financial institutions were due to bad real estate lending and sharp falls in housing prices, and these can happen again, Vlasios Melessanakis, manager of policy development at the Office of the Superintendent of Financial Institutions, wrote in documents obtained by Bloomberg News under freedom-of-information law. The last failure in Canada was in 1996.

“Canada is not immune,” Melessanakis wrote March 21 in internal notes responding to a posting on a mortgage-industry website. “Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”

Quote:

The REAL 2008-2009 Canadian bank bailout:

The story this data seems to tell, is that during the financial crisis, when it was suddenly plausible that homes to fall significantly in value and lenders might take large hits on their uninsured mortgages, CMHC allowed Canadian banks to transfer the risk on over $90 billion of previously uninsured mortgages from their balance sheets on to Canadian taxpayers. This likely benefitted the banks in two ways:

1) It provided additional liquidity that the banks could use to support mortgage lending. CMHC-insured mortgages, in fact, can be pooled together and sold to investors in the form of so-called mortgage-backed securities.

2) Thanks to the accounting rules that the banks were using at the time (and these have since changed), mortgages that were insured and subsequently securitized would no longer show up on thier balance sheet.

All this looks very much like a simple ploy to strengthen Canadian banks’ balance sheets by offloading risk to the Canadian taxpayers. This is the real Canadian bank bailout.

[Gord_in_Toronto]

Here is a long commentary on the mortgage rule changes on a site run by a couple of mortgage brokers:

20 Observations on the New Mortgage Rules

http://www.canadianmortgagetrends.co...age-rules.html

After reading the whole thing and most of the comments I was not much wiser.

[kevsta]

So this:

Originally Posted by Corsair 115

Is "significant decline" a drop of 10%? 25%? 50%? Until you provide a specific definition the use of the word significant has little practical meaning.

Originally Posted by kevsta

ok, as you also seem highly fixated on me inventing some numbers for you, lets say 35% on average, more in some areas, less in others, over a period of 3-5 years.

still looks to be on track to me. if it were a trade, I would be doubling up right about now.

Canada housing outlook from Pacifica Partners estimated 28%-40% correction (chart)

Quote:

Why is debt so important to Canadian Real Estate? As the charts below demonstrate, the decade long bull market in Canadian Real Estate has not been the result of "healthy drivers" such as income growth, growth of the economy, nor is it the result of housing scarcity. In fact, housing price growth has outpaced wage growth (see Chart 6 below) and GDP growth (see Chart 5 below). In addition, most major Canadian cities are significantly over-supplied (see Chart 3 below). Instead, housing price appreciation has been made possible in large part due to rampant debt accumulation, both mortgage and personal credit (see Chart 5 below). Thus a lack of future debt accumulation by households implies that the key driver of past real estate performance may no longer be available to stimulate real estate going forward.

Shifting sentiment: As with all bull markets, changes in sentiment are a key indication of whether an inflection point has been reached. Our Real Estate Sentiment Indicator (see Table 1 below) shows that the six cities with the highest search volume proportions for the combined terms of "Housing Bubble" and "Real Estate Bubble" are now all Canadian. We interpret this as a noteworthy sentiment shift within these real estate markets. Effectively, the locals of each of the indicated cities are now searching for bearish real estate terms in proportionally more volume than other topics when compared to other cities around the world. The increase in use of these search terms indicates a potential change in consumer sentiment which may then extend to a pause in real estate's upward price momentum.

How overvalued are Canadian Real Estate markets? We have attempted to quantify the necessary price drops to bring specific real estate back to historical average multiples of discounted rental income. The findings of Table 2 below indicate a required 30% to 40% correction in home prices in some major Canadian markets to achieve a return to long run averages.

and (IMO) this is the chart to be checking in on periodically.

[kevsta]

http://www.businessweek.com/news/201...s-mortgages#p1

HK, Switzerland and Norway all bubbling up nicely thanks to our wonderful CB activities

[kevsta]

Originally Posted by stilicho

That said, I do not disagree that localised real estate prices will be lower in the short-term. The two locations most sensitive to this change are urban Toronto and urban Vancouver. The prices have some room to move and this could be up to 20% based on the price:income ratios of similar urban centres in the US and globally. This is a far cry from the minimum of 75% predicted by your source and half what you've predicted.

Originally Posted by kevsta

ok, but this is your prediction, mine and others are different, because I (and they) see more on the macro horizon than you do.

you are saying 20% tops in your most bubblicious areas, I am saying (minimum) 35% average across the country and probably significantly higher in the areas you mention.

...moving out of "soft-landing" mode and into crash-landing territory..?

Vancouver & surrounding listings - prices dropping fast, reductions of between 22% - 36% since March 2012

and, hardly a condo amongst them.