Wednesday, May 05, 2010

TD Bank Predicting House Prices to Drop

From TD Economics.

Our existing home sales and average price forecast for 2010 is largely unchanged since December 2009. We still expect 475K transactions to take place, with an average annual price
nearing $350K, an increase of 9% over 2009.

However, this hides an underlying shift occurring over the course of this year. While we anticipated sales and prices to be strong in the first half and to cool in the second half, we now expect this contrast between the two halves will be sharper.

A surprisingly robust economic recovery provides some offset in the form of higher employment and income, but a combination of factors suggests a weaker handoff to 2011 than previously expected.

One crucial factor is the supply side response (listings) to higher home prices. While it was slow to appear, it is now stronger than had been expected. Housing starts have also been slightly higher than anticipated at 200K units in Q1/2010.

While we previously expected the average home price to gain a modest 1.6% in 2011 (stagnating in real, or inflation-adjusted terms), we now expect a modest pullback of 2.7% at the national level, with 7 out of 10 provinces experiencing lower prices.


Anonymous said...
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Anonymous said...

These are realistic predictions, 2-5%, the issue I think many people have with bears are the absolutely ridiculous 50-70% drop forecasts.

Tony Danza said...

That's 2.7% nationally, unfortunately the rest of Canada will rise by ~3% while Vancouver drags the national average down to -2.7%.

first_time_buyer said...

That's 2.7% nationally, unfortunately the rest of Canada will rise by ~3% while Vancouver drags the national average down to -2.7%.

besides, wait for that forecast to change on weekly basis. Their forecast does not mean damn to me. My 4 year old can do a better job. Bloody shills.

first_time_buyer said...

oh yeah, mr parrot is missing from here. pleasant surprise. good riddance. squaarrrrk.

RentingSucks said...

These are realistic predictions, 2-5%, the issue I think many people have with bears are the absolutely ridiculous 50-70% drop forecasts.

We've already had an example of an extremely rapid 15% drop in Vancouver. So 2-5% might be considered a little low for here. Most compelling argument was that this drop was arrested by extremely low interest rates (equivalent to an additional 30 percent drop if you just consider your monthly payment). With interest rates going up there is going to be significant downward pressure on prices.

It's impossible to predict with certainty where will reach equilibrium. I would say 50-70 percent has a significant non-zero percent chance of happening. My gut feel right now is about 20 percent. 60 percent chance of a 30 to 40 percent decline and 20 percent chance of a 10 to 20 percent decline. These can change as new information presents itself. What are your percentages?

mohican said...

Traditional economists, including bank economists, assume the market is full of rational actors and that people are not (at least en masse) prone to herd behaviour or irrational excesses. We know this is false.

This is why the econometric models they use predict small changes in economic activity, house prices, etc because they don't believe that bubbles can exist or that self-feeding loops of behaviour will occur. Most people know this is ridiculous.

david said...

As far as I can tell these guys arent any better at predicting the market than the average blogger.

When prices were going up, they predicted further rises. (but gradual ones). They were wrong, they went up fast, then dropped fast. When they dropped, they predicted further drops, and prices recovered. Now prices are up and they predict virtually flat prices (as it happening now).

Aint gonna happen, the only thing that will hold this market is further rapid gains to make people jump in. The gains seem to have stopped and rates are on the up and up.

I think flat prices are the least likely thing to happen in the next few years (Vancouver or national). Drops are likely (IHMO) but if rates somehow stay low there could be further gains as people panic buy. Flat prices for a year would kill the investors bleeding cash every month and they would slowly bail.

Then again, what do I know, I am just a random internet person. :)

JimTan said...

Canada adds stunning 108,700 jobs
Employers hired four times as many people as expected; jobless rate falls to 8.1%

Globe and Mail Update
Published on Friday, May. 07, 2010 7:06AM EDT

The Canadian economy created a whopping 108,700 jobs last month – more than four times as many as expected – the largest monthly gain on record as the services sector added to payrolls.

The jobless rate fell to 8.1 per cent in April from 8.2 per cent a month earlier, Statistics Canada said Friday. Economists had expected just 25,000 jobs in the month with the rate holding steady...

Canadian employment has now tallied four straight months of gains and recouped 68 per cent of the total jobs lost during the recession, he added

JimTan said...
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macho slob said...

Trust Jim Tan to continue his blind pursuit of desparate logic to keep his dreams alive.

Who else could remain so sadly unphased by the glaring turn of the tide, by the sudden realization that the financial debacle of 08 hasn't been fixed, that the gap between income and housing cost in Vancouver defies all logic, and that the only thing that saved our market from further collapse in 08 were record low rates that are no longer sustainable.

Instead of trying to impress us by coppying cherrypicked financial theories from economists on the net, please just stick to painting.

first_time_buyer said...

squaarrrk!!! new jobs!!new jobs!! raaaark!!!! all fine !!! all fine !!! Raaark! Squuaaarrk

JimTan said...

I'm sorry, parrots ... ahem ... boys!

I just like to tell the truth.

patriotz said...

Here's a truth for you - an asset can only return, to its owners in aggregate, the income that it generates.

That's what matters, not things that happen to be true but are irrelevant. Take it from there if you can.

Traditional economists... assume the market is full of rational actors

Well not really, they just assume that rational actors exist and can act, i.e. trade on rational expectations.

The problem with RE of course is that you can't short it, so the rational actors can't move the market. Add to this the fact that the government is arming the irrational actors with guaranteed credit, and you have a monster that can rampage out of control for quite a while. But the rampage must eventually end - going back to what I said at the top of this comment.

JimTan said...

“The problem with RE of course is that you can't short it, so the rational actors can't move the market.”

Oh Dear!

This is incorrect.

Markets have functioned for ages before there were futures markets. In fact, futures markets represent a unique opportunity today for amateurs (bulls and BEARS) to lose their shirts!

Anyway, RE markets allow rational owners and landowners to sell into the trend. If they are right, the trend turns. If they are wrong, the trend rolls over them!

Examples include the Calgary and |American markets that turned before the general economy. Examples include the markets that have survived multiple tests. That is why you need to understand your RE market. Don't just parrot the trolls or chicken littles, and don't assume that Vancouver is like Vegas or Miami.

macho slob said...

Hi Jim Tan,
You may very well have slain all dragons with your paintbrush and conquered all doubters of your art, but c'mon now, ya really think you can accomplish the same with your perplexing take on economics?

Off topic (and no offence intended), I'm intrigued by your piece of the rat and the candle
If there's a message there, mind sharing it with us klutses?

macho slob said...

OK, try

macho slob said...

Ah screw it.