Providing Thoughtful Analysis on the Housing Market
When is the O town completing?Should make the graphs jump (completions) and dive (under construction).
There are probably around 5,000 plus units completing in the next 4-6 months. O town included.I believe this is called 'cliff-diving' and it does not bode well for construction employment in the greater vancouver area.
Funny it still hasn't impinged the ability of the general Vancouverite to buy. You would think it should at some point as construction jobs were some of the best paying jobs. I knew interest rates mattered but I didn't think they could have such a large effect.
The level of starts is approaching a point where it is, by itself, below the pace population growth. I think it likely construction will remain subdued for some time as there is significant supply of under-occupied housing around the CMA. This is exacerbated during periods of high unemployment as people start using dwellings more efficiently (moving back in with mom and dad, finding a roommate, commissioning basement suites, etc.).RentingSucks, it has been pointed out that affordability has improved by over 20% in a very short period compared to 2007-8 due primarily to low mortgage rates. Even as employment is dropping by 5-10% that is still a gargantuan near-step-change along the demand curve for the majority who are still gainfully employed. Analysis on this and other blogs shows changes in prices, supply, and affordability are significant driving forces in quarterly market trends. It's also worth noting the bounce in prices is very much a global phenomenon, even in markets previously hammered when rates were higher. Note it's the change in prices, regardless of the absolute value, that are correlated.
While all charts I have looked at so far have for the most part lead me to believe that in 5-10 years prices will be higher and at very worst flat, one chart I'm VERY interested in seeing and I assume it will put a point in the bears camp (even though the points would still be in favour of the bulls) would be a chart of the historical price to income ratio for Vancouver or maybe just what the historical average of what the price to income ratio has been in Vancouver because I'm sure it is somewhat out of whack.
hey Chad, my friend, you are back. I thought for a second there that we lost you. People were bagging for you take on things. I was afraid that maybe the tough love I showed to you pushed you away. But you came back. Oh man, it's good to have you back. I see you are still doing what you do best: forseeing the future and reading up side down charts. You still got it , man.Who's the man? Chad is the man.
Your tough love? I don't reply to you because you can't construct an argument, live in your parents basement and don't have a job. Get a life and stop trying to stop message board wars and let the bears that actually have some facts on their side present them. If you're frustrated with how you have failed at life, go on the streets and pick and fight, stop hiding behind a keyboard and starting internet rivalries from your parents basement, it's pathetic.
RentingSucks, it has been pointed out that affordability has improved by over 20% in a very short period compared to 2007-8 due primarily to low mortgage rates. Even as employment is dropping by 5-10% that is still a gargantuan near-step-change along the demand curve for the majority who are still gainfully employed. Yes I realize that but still the gainfully employed should be negatively affected by:- friends and coworkers losing their jobs- scary economic news from here and elsewhere- the stock market collapse- the fact the Vancouver market was dropping precipitously before they dropped interest ratesThat should have taken the edge of the low interest rates but it hasn't seemed make a dent. That's what I don't get. That low interest rates could completely counter all the other negative factors. I guess when I said ability above I meant willingness.
Chad my friend, my good old sinister friendlet's calm down a bit. Don't bite the keyboard just yet. Why all this anger? I was just happy to have you back in my life. That's all.Ah, another thing, you forgot to mention that I don't have a girlfriend and that I masturbate every day. Please tell us again what will happen in 5 - 10 years.Who's the man? Chad is the man.
"That's what I don't get. That low interest rates could completely counter all the other negative factors. "As I mentioned, a strong clue is seeing the upswing in other areas of the world happening concurrently with what southwestern BC is seeing. Relative, not absolute, affordability seems to have a large impact on price changes. There does seem to be some indication that recent history -- a few years at most -- is used as a relative marker for what "normal" is.
Rentingsucks:I think the reason lower interest counters all the negative effects of a poor economy is that at the end of the day it still increases the amount of money people can get for a house. Most people have not lost their job and have not had their pay cut. Also most mainstream news these days says we are in recovery and the worst is over. They decide they want a house and the bank says we will give you X dollars. The go looking for a house at this price because people want the biggest most fancy thing they can get. They figure the banks know what they are doing so they dont spend much time worrying about what happens if interest rates go up or if they lose their job. Thats really all there is to it. Is it short sighted and uneducated? I think so, but that doesn't stop them.And ciprian and chad, stop the pissing contest, your are embarassing yourselves.
Interesting article about rational irrationality in the New Yorker:http://tinyurl.com/y8daj67One of the themes in the article is that it was somewhat rational for investment banks to climb on board the subprime mortgage train even if they believed it was a problem. Basically a CEO that was more prudent would have actually been out of a job sooner because his profits would look lackluster compared to his risk taking competitors. So he rationally made money while making money was easy. Trick is to get out before the music stops.Now I did realize this even in regards to the housing market. But my typical experience is that it is really, really hard to tell when the music stops (or starts for that matter). For example witness the Vancouver housing market. It looked a whole lot like the music stopped last year but some how it started again. So when is the music really going to stop and when. Well nobody really knows.In the article the also quote the job of the US fed as to take away the punch bowl when the party gets started. In Vancouver they waited until the party was winding down and they they spiked the punchbowl to get it going again. I really don't see how this is going to end well. But of couse I am a bear.
http://1.bp.blogspot.com/_rt16FZ_z1N8/STsd1GdXXjI/AAAAAAAABq8/uFfrOPkOhr0/s1600-h/Mortgage+Payment+vs+Monthly+Rent.jpgObviously this chart is old but I think it re-iterates my stance of flat to lower prices in the future almost identical to that from the early 90's.. anyone that thinks a collapse is coming like the 80's can see from almost any chart that today is nothing like then but almost identical to those of the early 90's. The market should be fairly flat with an upwards bias (10% higher in 5-10 years) and likely down in inflation adjusted terms which is the stance I have maintained from the beginning. If you want catalysts for this I would guess that people buying ahead of the HST and continued low interest rates could be the driver of higher prices then interest rates rising could be the main driver for lower prices leading to flattish to somewhat up prices in the future.
I find it interesting you feel the need to mention catalysts to support the chart. Does the power of the chart pull these out of the air when it needs it so it can follow it's previous pattern. Seems a little sketchy to me.The payment to rent ratio is still elevated at the lowest interest rates pretty much ever. So your argument distills down into interest rates will be low for the next 10 years because if they don't this will spike the chart. And even if they stay low that still may not be enough. I just can't believe in the magic of the chart. It misses too many of the other variables.The final thing about applying stock market type analysis to the housing market is that stock markets are far more liquid and efficient. Housing has high transaction costs and chunkiness (you buy a whole house not some small easy to exchange unit.).
RentingSucks,Please read what I wrote more clearly to decipher why I'm saying it. "If you want catalysts..." I threw the catalysts in there because I know this site puts value on catalysts more than they do chart analysis so I thought I would throw some catalyst thoughts into the argument. Sure the stock market is more liquid and a completely different market than equities but charting works on any asset class and is the best way to avoid a bias because people lie, charts don't. If someone wants to show me ANY TIME in ANY real estate market that crashed or wasn't higher/flattish several years later when YoY % appreciation went from over negative 10% to positive 10% especially without making new highs then please post it here because I have yet to see it anywhere. Like I said, the #'s and charts don't lie and I'm referring to real estate charts, not liquid equities.
there are 3 things that are confusing this process of forecasting.... 1. the actual effect the olympics will have when they are done. 2. the HST 3. low interest rates driving the rebound and not the actual market. I personally am buying a house and don't know whether to wait and see or buy now..... there are too many outside forces messing with the natural market cycle.
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