Wednesday, February 28, 2007

The Bear Cave

Update: I am awaiting the release of the Fraser Valley Real Estate Board and Greater Vancouver Real Estate Board statistics for the month of February and I will post when I get a copy and I am able to do my analysis for month end.



Hey, its time for the bear cave again. In the spirit of all things bearish we could talk about the following:

  • How real estate prices must decline 20% - 25% so normal, hard-working people can afford to purchase a home.
  • How yesterday's selloff on the market was really no big deal - at least to the bulls - because as all bulls know - all you need is unbridled optimism for the market to continue to rise. Forget about those fundamentals since it's just about the spin.
  • How rampant speculation seems to be par for the course these days whether we are talking about real estate, stocks, mortgage backed securities, high-yield debt, etc?
  • Whatever else has got your knickers in knot. Just don't ask me to untie them.

18 comments:

Warren said...

Are there any statistics on who owns all of these mortgage backed securities? The way mortgages get sold, packaged, re-sold, etc. I imagine there are investors in China who might think they are holding Manhattan commercial land when in fact they are holding some guy's overpriced Whalley condo.

Maybe not to that extent, but you know what I mean.

Pondering said...

It will be interesting to see who is left holding the bag as all of the defaults work through the system. With all of the packaging and repackaging of risk it seems like it is hard to say.

OnTheIsle said...

What pisses me off is I heard my first commercial on Victoria radio from a sub prime lender calmly telling me how easy it is to get into the market with nothing down as if you are out to buy a pair of shoes. All those young people sitting on the fence could easily be reeled in like sheep and I found it disgusting.
It's one thing for a low budget car lot to advertise easy credit for a $5-10,000 car,but a $300,000 layout that could effect the rest of your life ? Shows how desperate the RE bizz is getting.

Lets not forget this mornings USA new house sales down 16% the lowest in 13 years. Down 37% in the west USA alone,if that aint alarm bells for BC then I am lost for an answer what will be the trigger.

There's my vent, I feel better now,sorta.

Rantenki said...

I am really surprised by how long this market is holding on. To be honest, when the Shanghai stock exchange took a header yesterday, I started hoping that it would prick the stock bubble a bit here as well, and result in an opinion change on RE. Time will tell on that one, although the stocks seem to have stabilized as of right now.

Really, we need this bubble to pop ASAP, before we end up with any more people burdened with unfeasible loans, and an economic situation that results in long term stagnation.

OTOH, Since the economy is (for the short term anyhow) doing fairly well, and oil prices are on the way up again, maybe this bubble hasn't finished expanding yet. No way to known when it will go, just that it eventually has to.

mk-kids said...

we are looking for an apt to rent in port moody (we're getting married in april & we both can't fit into my little studio). as a long shot i posted an ad to craigslist & the only response i got was from a real estate/ finance co agent who wants to "help" me buy something for what i would pay in rent but i should hurry... he only works with a few select clients at a time!!! disgusting.

Freako said...

OT - Look at the increase in LA inventory over the last 28 days. Something is up. Never seen anything like it.

01/01: 35,646
01/10: 35,949
01/20: 36,478
01/31: 36,715
02/10: 36,872
02/20: 40,736
02/28: 41,251

care of http://bubbletracking.blogspot.com/

Freako said...
This comment has been removed by the author.
Warren said...

freako,

I can't argue that those are increasing levels, but the market being cyclical like it is, I don't think we can read too much into them just yet.

When its June and we are looking at Feb-May y-o-y stats from 2007 vs the past few years I think we'll have a better idea. But prices are sticky.. so what if inventory is way up but prices *still* aren't coming down.

aetakeo said...

It will be interesting to see who is left holding the bag as all of the defaults work through the system. With all of the packaging and repackaging of risk it seems like it is hard to say.

Doubtless, it's my RRSP mutual funds, and the saving my family's been doing will be rendered irrelevant.
I think I've gone from bearish based on my own perceptions of the local market, to downright *cynical* as I've become more educated.

mk-kids said...

awww, who are we kidding? the stats for feb will be good. the spin will be market heating up again for 2007 so best buy now or be priced out forever.

i'm so depressed.

mohican said...

mk-kids - I think you are right about the Feb stats
- prices will probably be up from Jan but still down from Sept
- inventory will be up MOM
- sales will be up MOM

Don't be too depressed, everything will happen in its own time. Markets always revert to the mean but not on anyone's timeframe or scedule. Patience is the word.

OnTheIsle said...

Victoria numbers out. Sales up 60%,inventory up 25%,prices flat.

www.vreb.org

Cecil said...

Look at the Victoria release a bit closer; sales are up only 7% from Feb/06. The 60% quoted is compared to Jan/07. Most of the time reports compare year-over-year sales and listings, unless of course the numbers don't look good, when the agencies revert to month-over-month or year-over-2 years ago, 3 years ago, etc. It peeves me how they can pick and choose the percentage they like best.

As for average prices in Victoria, the graph is flat for almost a year. I realize there is volatility in averages/medians compared to benchmark prices, but the lack of price growth is obvious.

I'm looking forward to seeing the Greater Vancouver and Fraser Valley numbers.

Freako said...

"I can't argue that those are increasing levels, but the market being cyclical like it is, I don't think we can read too much into them just yet."

Well it is still up from 29,000 YOY. And climbing fast.


"But prices are sticky.. so what if inventory is way up but prices *still* aren't coming down."

So what? WTF? Are you trying to create an argument of some sort?

As for prices not coming down, remove incentives, and I am not so sure. Check the foreclosure stats from the same website. There is something like a 8 month interval between first NOD and auction. Motivated sellers galore on the horizon. Here are the foreclosures for LA:
Los Angeles County
08/25/05: 144/12,060 (1.2%)
06/15/06: 698/13,712 (5.1%)
10/31/06: 725/12,136 (6.0%)
11/30/06: 922/13,357 (6.9%)
12/30/06: 1,115/11,451 (9.7%)
01/30/07: 1,306/11,733 (11.1%)
02/27/07: 1,654/12,201 (13.6%)

Ulsterman said...

Rantenki said...
I am really surprised by how long this market is holding on. To be honest, when the Shanghai stock exchange took a header yesterday, I started hoping that it would prick the stock bubble a bit here as well, and result in an opinion change on RE.


One possible risk to a stock market crash is that it makes ordinary people believe in real estate even more than they do already. This is just one of the factors that helped the RE market shoot up after the dot-com bubble burst. Many people who lost money then decided that RE was a 'solid', tangible investment which they could rely on to fund their pension needs.

Food for thought...

rebytes said...

Freako,

Nice to have you back. Not having VHB has been like a druggie with out crack--and then you pretty much disapperared too....

WoodenHorse said...

Has VHB put his excel sheets up on google pages yet?

I'd like to continue tracking the inflation adjusted benchmark prices.

patriotz said...

Doubtless, it's my RRSP mutual funds, and the saving my family's been doing will be rendered irrelevant.

Mutual funds, especially fixed income funds, are a ripoff. Buy fixed income directly and equities through ETF's.

Anyway, I have never seen MBS's listed as holdings of a Canadian mutual fund. Canada Housing Trust bonds yes, but these are direct obligations guaranteed by GoC, not MBS's.

South of the border is another story.