Saturday, December 13, 2008

Comparing Benchmark to the new HPI

Following mohican's post on the new HPI from National Bank Financial Group and Teranet it is worthy to compare the data to the so-called "benchmark" indicator published by the GVREB. Below is a graph comparing the normalised benchmark data released by GVREB to the Teranet - National Bank House Price Index(TM).

Indeed the two track each other reasonably well. It is probably too much to ask that the conspiracy theories surrounding the opacity of the benchmark data will disappear.

Edit: here is the series going back until December 1998. Still not much difference.


RentingSucks said...

Article in today's globe and mail:

I'm a little stunned to tell you the truth. No subprime here. No wait a minute yes there is oh and it stoked the housing market at exactly the wrong time and it was wrong. This article is basically saying what all of us bears have been saying for a couple years. They don't even touch on mortgage being allowed to be the whole 44 percent of your gross debt service ratio either. I think I said over a year ago that this should be front page scandalous news. Well now it is finally.

mohican said...

Thanks rentingsucks.

That article is one of the best investigative articles I've seen in a long time.

tulip-Mania2 said...

"Article in today's globe and mail:"

This sure brings back memories.

When I was a kid, my folks used to play their 8track tapes, one of the songs,went something like :

"except for the names, and a few other changes, the story is the same one"

Tick Tock Ti

jesse said...

Hey RS, the article seems to miss the big problem, that it's not just the "subprime" market that's the problem. Credit scores have been artificially inflated with low unemployment, meaning many a borrower considered "prime" in '06 and '07 will be nothing but in '09 and '10.

I love the statement at the end: "The retreat by international insurers means that CMHC's dominant grip on the mortgage insurance market is expanding again." Not to worry, folks. CMHC will be there to fill all your subprime needs when the private guys "fail". I was starting to think the G&M was finally starting to "get it" but I think it's going to be another while, when supposedly prime borrowers start defaulting as well, before we'll hear a proper analysis of the whole mess.

RentingSucks said...

"Credit scores have been artificially inflated with low unemployment, meaning many a borrower considered "prime" in '06 and '07 will be nothing but in '09 and '10."

I think it's all the same human problem. We extrapolate and don't save for a rainy day. Many decisions were made because houses were going up, the job market was hot and interest rates were low that would not have been made otherwise. If most people had some foresight and common sense we wouldn't be in the mess we are in now. So yup a lot of people are going to become bad credit risks because they just can't make enough money to stay a good credit risk.

Thing that's not good is that they're taking us all down with them. Even if a house becomes affordable again you might be so worried about your job you can't make the decision to buy. Theoretically housing will drop even further to compensate for this perceived risk. That could mean 60 percent or more which is going to be ugly.

I'm actually quite worried right now as it seems many of these problem are starting to chain react. It's starting to look like events starting to cascade and feed off each other. I saw the housing bubble but I didn't see how far it would bleed into everything else. It's going to be interesting times for sure.

patriotz said...

Further to the previous post, note that the 80-81 bubble and subsequent bust had few macro effects:

1. Because of the very fast rise in prices and historically high interest rates, comparatively few people bought in at the top. Also true for pre-sales.

2. For the same reasons, very few people refinanced for consumption purposes or to buy speculative properties.

3, Consumer debt was relatively low and interest rates declined substantially into the mid-80's.

4. There was not the shift of employment toward RE that we have seen in the current bubble.

All of which are different this time. We will be carrying the burden of the bubble for many years to come, just as in the US.