Today's feature comes courtesy of regular poster 'woodenhorse' and here are some much anticipated and newly updated VHB "You Are Here" graphs with inflation adjusted real estate prices. These price graphs use the quarterly Royal Lepage data set, which is quality adjusted then the prices are adjusted for inflation by the Stats Canada published CPI.
As of Q1 2007:
Nominal Prices for Bungalows are up 18.18% Yoy, real prices up 16.38% yoy
Nominal Prices for Condos are up 14.29% Yoy, real prices up 12.54% yoy
Thanks for the updated data and charts woodenhorse.
20 comments:
A note about the real prices - they are in 1992 dollars.
Thanks for updating the graphs. Everytime I look at these it just reinforces my belief that this is a big bubble, and it will crash hard.
Thanks for the graphs. I have to agree with clarke on the conclusion.
I like the new look too.
Many thanks for this graph, I'd been missing it. I have to agree with clarke and warren regarding conclusions. (this could be the beginning of a long 'string').
The new look is a little like a pamphlet for a new condo development.
If you can't beat-'em, join-'em.
Only kidding, the look is good and a shake-up in format is a good periodically, just to keep us from getting complacent.
Thanks Woodenhorse for the updated charts!
I like the new look. Fresh. Clean. Green.
I like your content too.
With regards to the charts: I'm planning on constructing the same as the first for East Van Bungalows and Std. Condos.
Also, I'll be updating the cpi to the 2002 = 100 index. I don't have that series in hand yet, but will update the graphs as soon as I get it.
WoodenHorse said...
Urgh....sorry about this mohican:
These prices are indeed in constant 2006 Q4 dollars. In the future it will always be in current period dollars.
Don't know what I was thinking that made me think this was all in 1992 dollars. However I thought of a way that would make it current, only to review VHB's excel file and discover that he'd already done it that way.
However, I still will be updating the charts to use the new 2002 cpi basket because the cpi series that VHB used is being discontinued. This will have a miminal impact on the graphs appearance.
Sorry for the confusion.
Nice work Woodenhorse and Mohican! Like the new site look and the graph updates.
Its always interesting to see the history of our local market graphed out- have yet to see a spike thats not followed by a drop, but hey, maybe its different this time!
"have yet to see a spike thats not followed by a drop, but hey, maybe its different this time! "
Given the lack of corrobarting fundamentals, I find that highly unlikely.
Has there ever been a case where high price to rent ratios were NOT followed by nominal and/or real price declines?
"corroborating fundamentals" is what I intended to write.
Freako: I kid. Its always 'different this time' until it suddenly isn't. But you knew that didn't you?
what does July traditionally do for sales? Do people really buy much in the summer?
Seeing those charts again is like hearing Dream Weaver, or something else nostalgic.
Has there ever been a case where high price to rent ratios were NOT followed by nominal and/or real price declines?
And, even more generally, can anybody cite a market anywhere, ever, in the total history of all markets, that went parabolic and then plateaued rather than fell back?
Has there ever been a time in history where, after a parabolic move, something really did become 'different' and supported a new plateau?
Yes, at the end of WWII house prices zoomed up and stayed up.
But that was a return to fundamentals, not a depature from them. The price/rent ratio through the Great Depression was abnormally low (rent was about 2x the mortgage payments for the same house). Also incomes and family formation rose greatly at the end of the war. Put that together and you had support for much higher prices.
Need I add that all fundamentals are pointing in the reverse direction today.
At the risk of being labelled a loon by referencing a gold site, here's a very clearly written article that could have been titled 'Collateralised Debt Obligations for Dummies'
I found it useful. Enough said.
"At the risk of being labelled a loon by referencing a gold site"
I don't think your a loon - one of my fav reads is Mike Shedlock.
I love the updates he posts from Mike Morgan - a no bull (in all senses) real estates broker.
Check this one out... Mike Morgan June Update. It contains the following jem:
What Was He Thinking Quote - "We do think if you're dumb enough to buy a home builder, you ought to buy us," Ryland Group Inc. Chairman and Chief Executive Officer R. Chad Dreier, at the JP Morgan Conference this week.
BABY BOOMERS: This is an article that Garth Turner wrote back in 2006. (sorry I have to copy and paste)
REAL ESTATE NEWS
February 5, 2006
Last week in this column I posed the question of whether or not a politician - a Member of Parliament - should also be a newspaper columnist. This was in my own naked self-interest, of course, since right now I am both. Actually, I enjoy both. I also believe that being elected to represent other people is an honour, not a punishment. Fortunately, you agree with me. Since writing that, I have been buried in reader response, without a single negative comment.
So, sucks to the establishment. Write, I shall. And when the last politically-correct editor and pablum-loving publisher shuts the lights out on me, my words will still be there online. Want advice on your variable rate mortgage or retirement savings? Then let freedom reign, baby! (Maybe I'm taking this way too seriously...)
In any case, being a columnist-MP had nothing to do with a revolution that bubbled over within the professional real estate community in Toronto last week. In response to a column I wrote on January 22nd for fifty-something Baby Boomers who typically have all their assets in real estate, some realtors become downright revolting. One of them started a chain letter of protest, which spread through the community in hours, engendering responses like this: "Talk about biting the hand that feeds you! Here we are in the heat of what appears to be a hotter than ever real estate market and not only does Garth Turner write this article about not putting your money into real estate and putting it in stocks and bonds, but somehow this article manages to get into the paper!"
Another realtor responded, suggesting I was less than a dog for penning the offensive words. But there were some dissenting voices, like this: "That is what freedom of speech is all about. We need different points of view, whether the pubic takes note is up to them. Most people these days are living beyond their means and Baby Boomers are no exception. Thanks for not being afraid to voice your opinion."
So, what the heck did I say to inflame real estate passions? Here are the offending words, after I reminded readers that 90% of Canadians have virtually no retirement savings, although they may own a house:
"Hey, I know it's hard to make the decision to downsize your real estate and give up that trophy house. I know it's scary to jump into stocks and mutual funds whose value changes every hour. I am aware how much guts it takes to sit down a write a honking big cheque to a financial advisor. I know that proactive investing is against the Canadian grain, and that friends and family members will cling to their houses and their pathetic-yielding GICs, and tell you you're going to lose your shirt.
But be brave. There is no doubt in my mind anyone today in their fifties with a home and a bunch of equity in it can achieve financial freedom. But it will not come through inaction. Nor will it arrive by doing what you have been used to doing. Millions of others will, sadly, fail. They will not enjoy their retirements they envisioned."
My point was a simple one: The bulk of net worth of average Canadian families now sits in residential real estate. The housing market is at high tide, with prices currently higher than every before. And while some will tell you real estate values will go up forever, history says otherwise. Just imagine, if nothing changes, what will happen in 10 years when nine million Boomers figure they'd better sell the house because they have no financial assets to live on, and no pension.
So, prudent financial planning, Garth Turner-style, is this: Yes, make real estate the cornerstone of personal financial wealth. After all, it's a solid and investment and you need a place to live. But you also need cash, and - most importantly - an income stream in retirement. That might come from an apartment building or a portfolio of rental properties, but not everyone wants to be a hands-on landlord or tie that much capital up in just one asset class (or enjoy fixing toilets).
So, how about diversifying, borrowing against the newly-created equity in your home and investing that in a portfolio of quality stocks, bonds, trusts and mutual funds? That will give you a broader base of wealth, appreciating assets which can be turned into cash with a phone call, capital gains tax deferral, and a loan with deductible interest, dropping your income tax burden. Plus, you still get to keep your home.
This is radical advice? I'd say the people telling you to keep 100% of your money in bricks and mortar have some serious explaining to do.
Garth Turner is MP for Halton, and a financial author. There's more heresy at www.garth.ca.
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