TREB taking a page from the NAR?
JANUARY 17, 2012
Greg brought this to my attention in a comment earlier today. It's worth noting in a post. I intend to follow up with TREB tomorrow.
Bottom line, the Toronto Real Estate Board (TREB) has released their mid-month sales data for the first two weeks of January. From their report:
Greater Toronto REALTORS®reported 1,506 sales through the TorontoMLS®system during the first two weeks of January 2012. This result represented a six per cent increase compared to the first 14 days of January 2011. New listings were also up on a year-over-year basis, but by a lesser 3.7 per cent.
“The market didn’t miss a beat after the holiday season, with robust sales growth continuing and sellers’ market conditions remaining in place. Strong competition between buyers continued to push the average selling price higher in the Greater Toronto Area relative to a year ago,” said Toronto Real Estate Board (TREB) President Richard Silver.
The average selling price during the first two weeks of 2012 was $444,473 – up by more than 8.5 per cent compared to the same period in 2011.
Below is a screenshot of the press release with the key figures highlighted. Note that when compared to the 2011 mid January report, sales and prices appear very strong.
Greg astutely pointed out that the original 2011 press release has been removed from TREB’s website, but was documented on another website. Below is the screenshot from the original 2011 mid January report. Note that sales and prices are both higher in the original 2011 mid month report, meaning if we used these numbers, they show a more muted rise in prices (albeit still a rise), but more interestingly, they show a decline in sales.
At first glance it certainly conjures up images of the National Association of Realtors in the US, who were forced to significantly restate sales data after it came to light that they had misrepresented them. There may well be a logical explanation for the difference in TREB’s data, so we’d be wise to give them the benefit of the doubt for now. I will follow up with TREB tomorrow. In the meantime, perhaps some Toronto realtors may have some insights.
Cheers,
Ben
UPDATE: Just got off the phone with TREB's data department. TREB began revising their monthly numbers to reflect final sales. As a percentage of 'sales' wind up falling through before completion, the issue was that if someone added up the monthly sales, they would not necessarily add up to the final year-end sales. The methodology certainly makes sense, but in this case we are talking about a 9% adjustment to sales, which is very high. The fine folks at TREB are looking into it further and agree that an adjustment of that size is highly unusual.
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Nice detective work!
Credit goes to Greg who brought it to my attention.
That Greg is one hell of a hard worker. He is in our blue ribbon class of real estate critics for sure.
Not only did NAR screw with the data, people had to deal with loads of spin. We better hope TREB is not taking a page from NAR by using misleading stats because TREB is already using loads of spin.
From ritholtz.com "How to read a press release from the NAR"
Pardon our belated look at Existing Home Sales (but we’ve been busy).
For this post, we will look at our favorite chart — Existing Home Sales (NSA) — and also teach you how to read a National Association of Realtors news release.
Our favorite chart, courtesy of Calculated Risk, is below. It shows the Existing Home Sales BEFORE they get seasonably adjusted. The pattern you see is the home sales pattern — bottoming in December January, and peaking in June/July/August. Note the ongoing weakness — until the tax credit kicked in. Now, in 2011, we see more signs of weakness.
As to the National Association of Realtors, there is a small secret to reading their news eelease: You need to ignore every other paragraph. It typically looks like this:
Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data
Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit
Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data
Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit
The secret is to focus on the data, and ignore the spin.
But when they manipulate the data itself, it becomes very difficult to read with any hope of accuracy.
Everything is "adjusted" these days, with multiple different adjustments available depending on the spin the pay-master wants.
Although this is not really new... "Figures lie, and liars figure" is a pretty hoary quote. But it does seem as though the data manipulation is more blatantly self-serving now.
Not only they change the numbers but the reference is always the most convenient one from their point of view!
This should be sent to newspapers, I am curious if they will rush to publish this mistake
Canadian Watchdog noted the exact same thing on Garth's blog:
http://www.greaterfool.ca/2012/01/16/dont-save/#comment-145539
and my comment:
http://www.greaterfool.ca/2012/01/16/dont-save/#comment-145556
but you know Ben, TREB cannot have it both ways, if the original figure of 628 sales in the 416 area is wrong then TREB has to say so. I may have missed a press release but underneath my mild patient exterior is a man of steel.
What an honor. Thanks Ben.
Let's revisit a few highlights:
1) This one started it all http://i40.tinypic.com/25k7c6u.png
2) I became more suspicious when TREB released their September stats and I compared their 2010/2011 reports and video promo which all had different figures posted. http://i44.tinypic.com/124frpy.png
3) And this is where it is today http://i39.tinypic.com/2ptxb15.png Here you can see where they went back and started revising January and February down, but they revised these numbers last month! If you look at my October chart, there had been no prior revisions to Jan-Feb. http://i44.tinypic.com/aot9co.png
Strangely, if you look at December, they actually under reported by stating sales were up 4% when it was 10%. Why? If they expect Jan and Feb sales to be low, 10% compared to a low sales month (maybe even negative) would seem to drastic, and not a great way to kick off the year, rather this works better "The market didn’t miss a beat after the holiday season." Looks like a bunch of kids are writing these reports.
I've only tracked this for my personal interest, but if I was a heavy RE investor/developer, I would confront TREB about it, being that it's very misleading and could result to bad decisions made amongst home buyers or even builders. I highly doubt TREB would admit anything other then saying it's just seasonal adjustments and some mistakes, but if they were confronted legally or by someone in the media (someone who could see the real stats), they would be quick to respond with an explanation.
We'll see what happens.
Average Sales Price do not indicate how much property values have gone up or down.
In that block of time if average prices rose, then usually higher end homes sold, if average prices went down then usually lower end homes sold.
To review what is happening with prices, you have to consult a Realtor, and review market data and trends on indiviual neighbourhoods.
My best explanation is that TREB is updated by the Realtors, in many cases a Realtor may not go back onto TREB to note that the sale took place and update the sale date and price unitl several days after the transaction has taken place, missing the mid-month cut-off. I imagine that TREB would revise their figures once these sales are in. However, that doesn't account for the fact that sales were LARGER in the first in comparison to the second, should be the other way around. Interested to see what TREB has to say about it.
A possible explanation? This is a disclaimer posted on the TREB Marketwatch section of the member's website:
"In conjunction with TREB's redistricting project, historical data may be subject to revision moving forward. This could temporarily impact per cent change comparisons to data from previous years."
It's brilliant. Keep comparing last year's number net of cancelled transactions with this year's, inclusive. Even if sales were flat, you'd be able to publish "sales are up" twice a month, every month.
TREB's also completely ditched median price stats, replacing them with vague handwaving about sales mix: "The average price of singles in the 416 area code was up by 22 per cent year-over-year, pointing to a greater weighting of higher end detached homes changing hands compared to the same time last year,” said Jason Mercer, TREB’s Senior Manager of Market Analysis. Wonder what they'll do if/when they have to publish an eye-popping negative number?
I matched the numbers for the last 3 years, comparing the sales reported at the time with the sales reported one year later. It looks like TREB started doing this in July 2011. Neither the mid-month nor monthly sales match starting from that time.
I suppose this could be a justified move on their part, if it's a one-time change. Starting in July 2012, they should not be altering any more of their past data. However, if they continue to report *all* sales rather than final sales, and thus keep revising the data forever, it will be an attempt to manipulate the numbers.
There's a great article from the September 16, 2006 Globe and Mail, "Your Realtor's Little Secret" (unavailable online, alas). It details TREB agents' habit of reducing the asking price, after the sale, to bump up their Sale/Ask % stats.
Whenever the Board talks about safeguarding the accuracy of their data as a reason for preventing FSBO listings on MLS, I always figure that they're worried about accurate data accidentally getting into the system and skewing their carefully tabulated factoids.
That's right Ralphy-boy. Everybody's gaming you. It's all a scam. The Toronto real estate market is actually crashing through the floor - but shhhh! Don't tell anyone.
Thanks for the update Ben. So in a sense we have 'channel stuffing' at play.
Or even better, Canada now has a Housing Futures Mercantile Exchange.
Anyone also notice the caved sales % change in 416 versus year ago? All except detached. What is going on?
Salute to you, Greg!
Nicely done Ben
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages...
Oh oh! More doom and gloom:
"Manufacturing sales in November rose to their highest levels since October 2008, Statistics Canada reported Thursday, rising by two per cent to $49.6 billion."
http://www.cbc.ca/news/business/story/2012/01/19/manufacturing-sales-nov...
That was mainly oil and mining industries, which doesn't help the financial and real estate sector or promote jobs in urban areas.
Sorry App, try to look for hope elsewhere.
No, of course not @Greg - because all oil and gas and mining company jobs are out in the field, right?
Oops, here's a list of Company head offices in the City of Calgary :
http://www.calgaryeconomicdevelopment.com/sites/default/files/topCalgary...
No urban jobs there I suppose? No banking or real estate interests either I suppose, because everyone knows that head offices and their thousands of employees don't need banking or real estate services, right?
What's the population in Calgary App? Now what's Canada's? The oil and mining industry will not make up for the rest of declining jobs. Canada needs to make 'stuff' that it can export to the world, not build homes into perpetuity.
Hey, I'm drunk. You are starting to make sense.
What do you think of 'Gart Squirmer' calling-you-out as a fear-monger? Huh. ?
P. S. Not that admire 'Gart's' opinion, or anything......
Everyone who warned of a collapse prior to 2008 was called a fear-monger.
Greg - absolutely great detective work! An industry who has a vested interest in the results should NOT be allowed to compile statistics like this and then hold them up as if they're the truth. I mean, come on, these are used-car salesmen types where the word "conscience" is spelled with "science" dropped off the end. If the stats don't look good, they just change the parameters.
I'm still interested in finding out about CMHC's Board of Directors. Here's the Chair of the Board of Directors:
"Dino Chiesa has been Chair of the Board of Directors of Canada Mortgage and Housing Corporation since March 2005 and a member of the Board since June 2001.
Mr. Chiesa is Principal, Chiesa Group commercial property investors and Chair of Leisureworld Caregiving Centres, one of Canada’s largest owners of longterm care facilities. He has previously served as ViceChair of the Board of Trustees of the Canadian Apartment Properties Real Estate Investment Trust (CAP REIT), one of the largest owners of multifamily rental communities in the country, Assistant Deputy Minister of Ontario’s Ministry of Municipal Affairs and Housing, Chief Executive Officer of the Ontario Housing Corporation, Executive VicePresident of Shiplake Management Company, and with CMHC from 1975 to 1987."
He has no reason to maintain the Ponzi, does he?
http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_010.cfm
Toronto condo market must be getting ready to implode - oh wait a second:
"For the second quarter in a row, the city with the most bustling economy in the country is Toronto."
"It tallied Canada’s fastest economic momentum in the third quarter of last year, according to CIBC’s ranking of the country’s 25 largest municipalities. Edmonton is second, followed by the tech hub of Kitchener, Ont."
http://www.theglobeandmail.com/report-on-business/economy/bouncing-back-...
http://download.isiglobal.ca/bocbdc/2012-01-18.html
Remember when a Central Banker says 'moderate', he really means worse.
Here's another member of the Board of Directors of CMHC:
"Brian Johnston was appointed to the Board of Directors of Canada Mortgage and Housing Corporation in January 2008.
A chartered accountant by profession, Mr. Johnston is the President of Monarch Corporation, one of Canada’s oldest and largest real estate companies. In addition to his responsibilities at Monarch Corporation, Mr. Johnston is an active member within the home-building industry. He is currently a Board Director of the C.D. Howe Institute and EnerQuality Corporation and is a Past President of the Ontario Home Builders’ Association."
http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_022.cfm
Who is Mr. Johnston most concerned with? The taxpayers and the risk OR the real estate and home-building industry?
The mud just keeps getting thicker. Here's another member of the Board of Directors of CMHC:
"André G. Plourde was appointed to the Board of Directors of Canada Mortgage and Housing Corporation in April 2008.
Mr. Plourde has been President of Montreal Real Estate Group Inc. since 2001, an important commercial real estate brokerage firm in Montreal. Mr. Plourde is active within the commercial real estate industry as a member of the Urban Development Institute of Québec and the Association des courtiers et agents immobiliers du Québec."
http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_023.cfm
And another member of the Board of Directors of CMHC:
"Michael Gendron was appointed to the Board of Directors of Canada Mortgage and Housing Corporation in June 2010.
A chartered accountant, Mr. Gendron is Chief Financial Officer and part owner of Mancap Ventures Inc., a privately owned venture capital company with majority equity interest in a number of homebuilding and support companies based in Edmonton, Alberta."
http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_027.cfm
And another member of the Board of Directors of CMHC:
"Rennie Pieterman was appointed to the Board of Directors of Canada Mortgage and Housing Corporation in June 2010.
A partner at Practical Plumbing Co. Ltd., Ms. Pieterman served eight years on the Board of Directors of the London Home Builders’ Association, including as President in 2003. She has been a member of the Association’s Renovators’ Council since 1994. Ms. Pieterman is also an active member of the Board of the Hyde Park Business Association."
http://www.cmhc-schl.gc.ca/en/corp/about/cogo/cogo_028.cfm
Can TREB and CREA be fined for false advertising? Is anyone going to report them? Report after report we see how they manipulate data and they give their spin.
Thoughts on the Crisis of Capitalism
http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10623
Yup - the condo market in Toronto sure looks unsustainable - say What!
“Toronto, January 20, 2012 — Greater Toronto REALTORS® reported the leasing of 4,664 condominium apartments during the September to December 2011 period. While the number of transactions was up, the number of apartments listed for rent dropped by seven per cent.”
“Average condominium apartment rents for one-bedroom and two-bedroom apartments rented during the September through December 2011 period increased by four and five per cent respectively in comparison to the same period in 2010.”
Seems like TREB's reports are becoming more opaque as every year they provide less data by district, along with new errors.
http://www.torontorealestateboard.com/market_news/release_market_updates...
It states 'Rental Market Summary Tables: September - December 2011' on the bottom chart but you'll notice on the side is says 2010. The only number I could verify right now is 343 townhouses leased that comes from last year's report. http://i41.tinypic.com/16c0035.png So what numbers are they reporting? Who knows..
Also if you add up the one and two bedroom leases from last year's report (image above) and compare them to this year's, there was 4345 leases in 2010 (Sept-Dec) compared to 4331 leases for 2011 (Sept-Dec). Hardly unchanged.
This implies that more sales are coming from bachelor leases, meaning more people are avoiding higher rent—not a good sign. The good news (or bad news) is average rent prices are up!
I'll look into it a little further but it's difficult when TREB keeps becoming less transparent with the data. Hence, the new reports in HTML only.
MLS-listed rentals account for a small fraction of the Toronto rental housing market, Appraiser. Listing a property for rent on MLS comes with a fee for the landlord, so rentals listed there tend to be primarily from absentee landlords or RE agents who can do the work for themselves. There are plenty of other places to list a Toronto condo for rent that are either much cheaper, or completely free, and they also tend to be more popular.
Because it is a bit player in the market, I wouldn't draw any meaningful conclusions from the number of MLS rental listings or the reported rents.
“Average condominium apartment rents for one-bedroom and two-bedroom apartments rented during the September through December 2011 period increased by four and five per cent respectively in comparison to the same period in 2010.”
Condo sale prices in the 416 increased 8-9% over the same period, about twice as fast as rents. Until rents start climbing as quickly as prices have, new buyers will have an increasingly hard time getting avoiding a negative cash-flow situation.
Wonder what the other cities are doing? I've lived in Calgary the last few years and I keep hearing how prices are rising. However, the prices appear to be flat.
Calgary house prices have been essentially flat (inflation increases) though some pockets have done well. The price increases you hear about are because a 400k property is being knocked down and two 700k townhomes are being built in its place. According to stats, that would show up as a huge increase.
Funny that Calgary is known as a boom or bust town, but right now its so steady.
Greg, you're doing a great job!
What you are doing is a systematic documentation of the bubble and the lies that have perpetuated this bubble!
http://globaleconomicanalysis.blogspot.com/2012/01/australia-roundup-oce...
I like the apple analogy. Sounds like something that can happen in Canada.
All we need is a prolonged credit tightening thanks to the over leveraged banks worldwide. Canada included. We need to remember our bond market is strong because of foreign money flying into Canada. What happens when that money needs to be repatriated back to other countries to 'pay the bills'? Our interest rates rise. What happens if and when credit events begin to occur and the $750 Trillion Derivative market begins to take hits? The Systemic Risk involved is unfathomable and unknown!
Just Wait.
Demographia is out with their affordability report for 2012 with data from the third quarter of 2011.
http://www.demographia.com/dhi.pdf
Canada: Housing in Canada is moderately unaffordable with a Median Multiple of 4.6 in major metropolitan markets and 3.4 overall. Housing was generally affordable in Canada as late as 2000. In the early years of the Demographia International Housing Affordability Survey, Canada was generally the most affordable nation. However, this year, Canada ranks third, behind the United States and Ireland.
I thought that the ratios reported in this report seemed low as well.
In BC there is no bottom. Severely unaffordable are Vancouver, Abbotsford, Kelowna and Victoria. If sales fall in Vancouver, they'll fall in the rest of BC too. Affordability is linked directly to price to rent ratio so people who have high LTV will not hold on.
Chart for TREB 1+2 Bedroom Condo Leases http://i40.tinypic.com/6ocu4y.png
As part of the prudent adjustments that will enable Canada to avoid a hard landing from what isn't a bubble (despite appearances), they recently lowered the maximum LTV for investors, right?
So how does a failed developer responsible for the City of Vancouver taking a massive financial hit get a 123% mortgage? Based on assessed value, 129% of price.
http://tinyurl.com/7fleac5
Interesting piece in today's G&M, Ben. He echoes many of your key points. The article is nicely written.
http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages...
Everybody and mother knows a correction is coming. Now it's just a matter of how the government will manage the situation from getting out of hand. It could be a 5% correction, or much worse. All depends on consumer sentiment and what the government throws at it.
One media reporter stated it best when he asked Carney about rising home prices and and household debt saying, "is it not a blessing and a curse?"
Only time will tell...
Statscan leading index suggests strong growth:
http://www.cbc.ca/news/business/story/2012/01/23/statscan-leading-index....
I hope the condo market in GTA can stay hot for another three years. I want the ones currently being built and the ones in the planning stage all get completed.
Toronto is no doubt going to Vancouver prices before anyone can raise a brow. Toronto is still cheaper and better place to live and work. I am waiting for the CN tower to turn into condos, I would buy one of those!
I'm taking orders for condos in my remake of the Eiffel Tower. All I need is 9k tons of scrap metal, an electric arc furnace and a beam extruder.
I knew some of the CN Tower architects.
Stumbled upon this little piece of news hidden away in the Globe today- "House prices slip". See http://www.theglobeandmail.com/report-on-business/top-business-stories/a...
I am convinced that the real estate groups and news media are in this together to downplay the impending correction/crash.
BTW, this is like deja-vu for me as I saw similar sequence of events when living in the US though the last decade.
@Rajiv Kaushik:
Month over month real estate price comparisons are for amateurs only. Especially when the "drop" was a statistically insignificant 0.2%.
I noticed that you skipped over the part of the report that indicated the year over year figures; which are:
"On an annual basis, though, prices were up across the board, though varied depending on the city. Toronto, at 10.8 per cent, and Vancouver, at 9.1 per cent, led the pack, followed by Winnipeg (7.5 per cent), Montreal (7.2 per cent), Quebec City (6 per cent), Hamilton (4.4 per cent), Ottawa (4.2 per cent), Halifax (2.8 per cent), Hamilton (1 per cent) and Calgary (0.5 per cent)."
I did and you have a good point. I am connecting all the dots though, positive and negative indicators.
Rajiv the problem with that report is real estate, esp. in Canada, is seasonal. Outside the crazy boom years, prices will rise in the spring as buyer look for properties. Prices slip in the winter as people as people don't want to move in the winter.
Not to say these reports are useless. If prices were down significantly I'd pay attention. But 0.2 is normal. Always look at year over year first.
With everybody reading the Globe & Mail as their main source of information, proves how effective a doctrine campaign could potentially be.
@Greg:
The G&M article is quoting directly from the latest Teranet - National Bank, "Composite House Price Index" released today.
http://www.housepriceindex.ca/
If that makes you feel any better.
From a Bank of Canada report http://i39.tinypic.com/6jokkw.png
I'm not too dependent on home price stats, rather I look at income growth and affordability. That's what matters.
With all that aside, let me ask you: How do you feel about the government possibly intervening in the housing market to dampen home appreciation? Is that fair to homeowners? And wouldn't that make buyers in the last few years the suckers?
The authorities have already intervened in the housing market three times in the past few years, and I dare say it has had a moderating effect on housing, as intended. Whether or not Flaherty will take further steps to cool the market remains to be seen.
Recent home buyers as suckers? You need to stop looking at homeownership as a short-term financial / investment product. Buying a home is not based on fretting over monthly or yearly price fluctuations, it is strictly a buy and hold strategy which consistently finds homeowners on the winning side in the long run.
Long-term planning is why 41% of Canadian homeowners are mortgage free, while life-time renters continue to pay rent in perpetuity.
By the way when you look at income growth and affordability measures, do you take into account borrowing costs? I hope so, because rates are going to be ultra-low for a very long time. Not only does this induce confidence in first-time home buyers, it also substantially reduces the risk of current mortgage holders having to renew their mortgages at higher rates down the road.
P.S. When was the last time your rental payment was reduced by 40%?
Why do I ask? Well, considering 5-year mortgage rates are 2 full percentage points below where they were 5 years ago. Since approximately 60% of mortgages in Canada are for 5-year fixed terms, there are millions of Canadians who are getting ahead faster than ever. Especially the ones who decide to keep their monthly payments the same as before, thereby substantially reducing the time it takes before they will be mortgage free.
http://www.bloomberg.com/news/2012-01-25/fed-says-benchmark-interest-rat...
"By the way when you look at income growth and affordability measures, do you take into account borrowing costs?"
I do, but my question is... are you only looking at borrowing costs? Since day one on this blog, that's all you've been calculating and have disregarded 'other' variables that are more important then borrowing costs. What other variables are increasing/decreasing that should be factored in?
Hint: Why is the US housing market not recovering with record low rates?
This is a good point that people miss. My most recent mortgage came up and I took the new rate but kept the same payment. In doing so, the principle I'm paying doubled and my amort. has gone down 4.8 years!
If you're thinking of buying, I think you should qualify based on a mortgage rate of 5.5%. Then, take the ultra low rate, but make your payments as if your rate was 5.5%. You'll pay off more principle and when you (likely) have to get a mortgage at higher rates down the road, it won't be an adjustment.
Forcing all new buyers to qualify at 5.5%, without exception, would crash many segments of the housing market.
A more salient issue is why did the U.S. housing market crash so precipitously in the first place and struggle to recover, while Canada experienced a 9 month hiccup followed by several years of robust growth.
Hint: At least 25% garbage home loans in the U.S. is your first clue. Strategic default is your second. Fear and angst is your third, which leads to the fourth, which is an out-of-control real estate death spiral that has sapped American consumer confidence and has lead terrified bankers to refuse loans, even to well-qualified applicants, only exacerbating the problem further.
It should be painfully obvious by now that analogies to the U.S. housing melt-down are simply old hat, as any meaningful comparisons grow less relevant and more ludicrous with every passing year.
Fine, suit yourself if you wish to buy the notion that Canada is different from the world.
So what about affordability? Are you only calculating borrowing costs? What other variables are you factoring in? I'd like your professional figures so this blog can hopefully take your seriously.
Professionally speaking?
O.K. here goes. Generally speaking a gross debt service ratio (GDS) of 32% and a total debt service (TDS) ratio of 40% are used by lenders when qualifying potential borrowers for a mortgage application.
So naturally, taking interest rates and income into account along with the above noted ratios, will determine the affordabilty factor for any given home buyer.
Is that what you're looking for @Greg, or did you want me to read palms and tea leaves as well? You know, out-dated metrics like mean reversion, price to income ratios and the like.
This is the new normal @Greg. Get used to it. Interest rates are going to remain at historically low levels for many years as the U.S. Federal Reserve made very clear yesterday. Stop fighting it.
Quit living in the past and try to keep up to the reality of the present.
LOL. I'm not talking about qualifying for a mortgage. What is the borrowers personal cost to maintain a monthly mortgage payment and what other variables (expenses) change over time?
Who was I kidding? I forgot I'm talking to a G&M headline junkie.
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/da...
That doesn't look like a successful retirement savings plan to me, considering the majority of 41% mortgage-free homeowners you mentioned, are over 45.
Who's living in fear now App?
Last week, economists Craig Alexander and Derek Holt of the TD Bank and Scotiabank respectively suggested the problem may be exaggerated.
"The household debt-to-income measure was deeply flawed, they argued, and a better gauge would be to assess whether Canadians can afford to make their debt payments. By that calculation, household finances are on firmer ground as long as interest rates stay low."
http://www.cbc.ca/news/business/story/2012/01/26/household-debt-cibc-stu...
Ya exaggerated.
You're world is shrinking App—Every credible investor, institution, hedge fund, bank, economist and others who don't buy into the headline dogma know, that Canadian homes are far overpriced relative to incomes, and the chances of the government lifting wages by stimulating (borrowing bonds) is zero, in fact, it makes it worse.
And good luck trying to convince the public now that they're lifting their heads out of the ground and educating themselves about what's really going on. But that's the threat right App? Don't lose the confidence of the next home buyers so the ponzi can keep going? Well, you're now working against a global marketing machine that is promoting the truth about how world governments have completely misguided the public into a fairytale of wealth, when it was really a mass transfer of wealth to the top.
It's on.
@Greg:
You remind me of an old sailor struggling to read the stars with a broken sextant, while everbody else has GPS.
@ Greg:
Seems that you missed the part of the report where it says that all of the debt is being piled up by those with the most debt already - not mortgage-free individuals, or those with low debt levels.
It seems that there will always be people who are bad with money. You just can't legislate against stupid.
For a renter, you sure pretend to know alot about owning a house.
Perhaps a renter, but an owner of many other investments and assets that work for me. GPS is for people who drive, I fly.
Charts Of The Week - Employment by Sectors - Source: StatsCan
Private Sector
Retail Trade - http://i39.tinypic.com/35c3cw2.png
Finance & Insurance - http://i40.tinypic.com/1491aty.png
Manufacturing - http://i43.tinypic.com/ranf2g.png
Real Estate, Rental & Leasing - http://i43.tinypic.com/34o521h.png
Mining, Quarrying, Oil/Gas Extraction - http://i43.tinypic.com/24g7xtx.png
Construction - http://i43.tinypic.com/j9vihz.png
Accommodation & Food Services - http://i43.tinypic.com/2pryddh.png
Management of Companies & Enterprises - http://i44.tinypic.com/2wokt4m.png
Trade - http://i42.tinypic.com/20saes8.png
Public Sector
Health Care & Social Assistance - http://i42.tinypic.com/fxz0cm.png
Educational Services - http://i44.tinypic.com/2s0mx60.png
Great charts Greg.
Interesting in that the only charts that are showing any growth in jobs are Construction, Trade and Health Care. All other charts are more or less flat since 2008. So if the jobs aren't growing, then where the heck are people getting money to buy houses?
Greg,
Why not cheer for the Real Estate?
I have decided to cheer for the people who buy. I feel so cheerful whenever I receive new Condo sales materials.
Let them build, build and build. You just keep your patience and remain humble. Maybe this thing (RE in GTA) is something that we have never seen before, that is, the price will only go up year after year. If it is true, so be it. We will have world's 8th wonder and the best part is we live in it!
Builders will be next get squeezed because i) they've hit the 450-500sq limit and can no longer develop smaller condos by code ii) 35-45% of building material costs are oil and metal related, which only in the past 18 months have started to increase from sustained oil and metal prices. http://i44.tinypic.com/149w0tt.png If they can't pass higher costs to the consumer, they'll have to take a hit on profits.
I do cheer for RE, a la Jim Leech style in some other emerging country.
Greg, please start a blog!
This blog is interesting, but getting one post per 10-14 days is truly not enough.
Sadly, Just a "blog-o-loo-saz."
You can be a playa' or a watcha'. You're choice.
Latest Canadian household credit statistics from the Bank of Canada (up to the end of Dec. 2011):
http://credit.bank-banque-canada.ca/householdcredit
I was a little curious as to why the government is proposing tighter rules for self-employed buyers. They must be seeing some vulnerability in this area. One interesting fact is that self-employed woman have been growing at double the rate over men. http://www40.statcan.gc.ca/l01/cst01/labor64-eng.htm Other stats show that self-employed individuals are spending more on housing over paid-employees. http://i39.tinypic.com/35lusux.png. I'm looking into this further and will have more information soon.
Is this what happens when woman watch too many episodes of Sex In The City?
U.S. economy growing at fastest pace in a year. Which is amazing considering the state of the real estate market down there. Bodes well for Canada.
http://www.cbc.ca/news/business/story/2012/01/27/us-gdp-economy.html
That's just inflation driving nominal GDP higher. Real GDP rose by 1.7% in 2011. http://i40.tinypic.com/13zwj5y.png
Sorry you're having problems and in deep denial. Try again.
And that was with an $800 billion stimulus package that Canada highly benefited from, along with Ottawa's $100 billion action plan. Well, it's all gone now with no further stimulus possible as republicans will block any more spending proposed by Obama's administration. That's what happens when the ponzi scheme stops—it's a free fall economy now.
Ponzi scheme: A fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation.
Widely recognized as the most overused and misused meme of the decade. Most people who use the term don't understand it, but rather use it to feign intelligence or relevancy.
According to you? Where do you pluck such BS from?
Re: the whole real-estate topic, did anyone know that there is a website that actually provides daily digest on every single real estate sold within GTA? I think it's an extract from the mls.ca for the properties sold, so it has 'price listed' & 'price sold', as well as other stats normally available only to the real estate agents (like DOM). It's quite interesting actually to observe the frenzy that is currently taking place in toronto, especially in some neighbourhoods. Prices are driven up by 10-20% on avg. Within last half a year, the prices in the uptown (north of sheppard, along yonge), went up from 600K-700K to over 1M now, and ppl are still buying... can't believe it can keep on going like that forever (though i didn't believe it half a year ago that crappy house that i won't buy for even 500K is now sold for close to a mill).
For those interested, the sites are: http://tosolds.ca/ - for house sales, http://tosold.ca/ - for condo sales.
PS: just got a newsletter - they need at least 100 new subscribers by Jan 30 in order to keep providing the service. So, it seems like it's 'now or never'...
PPS: i'm not affiliated with the sites in any way
@Vlad: The websites noted above are provide by Realty Sellers, a Toronto real estate brokerage that is currently involved in a law suit with TREB.
The data that they are providing is from the TREB MLS.
It has always been Realty Sellers contention that such information should be available to the general public, apparently for a fee. However, it appears that unless the information is free, the general public isn't very interested.
It's free actually. I personally won't mind paying for it or built an ad-supported service off their datafeed (ie, recoup the cost of data feed through advertisement). The detailed info on the specific neighborhood pockets within major city like Toronto is really priceless. All the things we speculate about can be deducted from the near real-time observation of the actual sales. For example, the recent trend I noticed is the property is published at, say 900K, then relisted in a few days for 1000K... And then it sits on the market for a long time. It tells a lot about potential motivations of the sellers & buyers. Or even how long and how many properties in each price category stay on the market. This is exactly the type of info i need to 'time' my entry on the market in the neighbourhood i'm interested in, but alas - it's almost non-existent (in fact, these two sites are the only ones i found that publish 'sold' listings on daily basis).
PS: looks like the service will keep on going for now! :)
What are people to think now that mainstream media is publishing conflicting bank and institutional reports calling or denying a housing correction? Just by reading comments, everyone knows something is very wrong.
The MSM, along with many others, have simultaneously been calling for and denying a real estate bubble in Canada for several years in a row. Which just proves that market timing is next to impossible.
With interest rates set to stay ultra-low for at least 3 more years, what will be the trigger to crash the market? A severe and lengthy recession is possible, but not likely. A sharp spike in unemployment? Maybe.
Whatever it is, it will have to be dramatic, because a property market correction will not occur on its own. In fact in living memory, we have never had a real estate crash or even a major correction without a recession.
If buyers expect interest rates to be low or even lower until 2014, why rush to buy a home when there's pessimism out there? What's the risk versus reward of not locking into today's rates versus home prices correcting by 10% or worse?
Overall I don't believe it's an affordability issue anymore, rather an income issue. The point you miss is that higher home prices require a higher down payment that buyers don't have or can't save for due to higher living costs. Here's one of many variables that increased by 30% since 2009, or 15% since 2010 effecting affordability http://i39.tinypic.com/21l0ccm.png
But who cares what their personal expenditures are—as long as the debt to service ratio qualifies them for a mortgage, you get your commissions right App? Wink wink ;)
@Greg wrote: "Overall I don't believe it's an affordability issue anymore, rather an income issue."
Say what? Yeah, because income and affordability are not correlated right?
P.S. You really seem to like charts and graphs. And it seems just about any any graph will do, no matter how irrelelvant.
Hey, have you shopped for a big sceen T.V. lately, or taken a look at the price of new appliances over the past few years? Wow, have prices ever come down!
Why don't you graph that?
Income is a source, affordability is a measurement! I can make anyone afford a mansion with a Ferrari when stretching out minimal payments into the future.
Big screen? Everyone has one already. Appliances? Isn't that priced into mortgage payments?
Great, we can all live in washer/dryer towers and watch TV. They found some people overseas to help us build all this stuff, so I get the day off from work at the factory (tomorrow as well). Which is great, I don't have to worry about cost of transportation going up. They must have added some new HST or something to my daily bread, it's gone up a bit, but I just pay with plastic. Darn, they say prices on washer/dryers are coming down even more, guess I can't take out that Appliance Equity LOC now :(
Hey, most of you around here seem pretty smart. I'd like to harness all of your brainpower to discuss the significance of this:
CMHC backing fewer loans
http://business.financialpost.com/2012/01/30/cmhc-backing-fewer-loans
"Canada Mortgage and Housing Corp. is cutting back on mortgages it insures as the Crown corporation edges closer to a $600-billion cap imposed on it by the federal government, the Financial Post has learned.
A CMHC spokesman confirmed that it had approached a number of lenders at the end of 2011 about reducing its “bulk or portfolio insurance” after third-quarter results showed the agency had committed to back $541-billion in mortgages. CMHC, which guarantees mortgages held by financial institutions, is ultimately backed by the federal government and needs approval to go over the $600-billion limit — something that would create greater risk for taxpayers should the housing market collapse."
So- does this mean banks are insuring lower- ratio mortgages to shift risks from themselves to the CMHC (the taxpayer)? Do they know something the taxpayer doesn't? Discuss.
@Jen: The best article on the subject can be found here: http://www.canadianmortgagetrends.com/
This blog should be shut down. It's been abandoned by its owner.
Because everything Ben said is now unfolding. It's a good time to make some popcorn and backtrack on his earlier articles.
It's becoming more evident who the sub-primers are:
"The mortgages, typically granted to the self-employed and recent immigrants, “have some similarities to non-prime loans in the U.S. retail lending market,” the documents show. "
Bloomberg Obtains OSFI FOI Documents: http://www.bloomberg.com/news/2012-01-30/canada-s-subprime-crisis-seen-w...
If you read beyond the headlines you'll discover some very salient points. The "self-employed and recent immigrant" mortgage market is very small in relation to the overall mortgage market (less than 5%), there is NO indication at all that it is truly sub-prime (ala U.S. NINJA loans), and there is no evidence of higher default rates amongst this segment of borrowers.
For everyone, App has been flying from blog-to-blog like a superhero (his special power is fluid name disguises) trying to stop the inevitable from happening. He's in deep denial and starting to show signs of Medomalacuphobia.
Relax App. You'll get your chance to come on this blog and tell us how you sold everything before the market crashed. We know already.
Unfortunately, our efforts and conversation on this site will have no effect on the housing market. I wish others had a better idea of how our economy works. Let's face it, we live in a lazy society where people think that purchasing a home is a 'now or never' proposition. There is seldom research done looking at what direction the housing market will turn, and like Appraiser said - "only looks at how much they are going to pay at this moment".
We'll let the 'inevitable' occur, prices will begin aligning with incomes and rent. First-time home buyers have all their chips in the pot with a single thought - that houses can never decline in value. They are in a world of inevitable disappointment.
http://www.photoblip.com/images/734/8c0a4fe3c5a6f817d5ba464bfed48769.jpg
Over the weekend I watched many conferences from Davos 2012. To my surprise, global leaders and CEOs are admitting how the public has hijacked mainstream media with social networks and technology. They also discussed how traditional marketing campaigns are not so effective and in some cases working against them by the public discrediting false or misleading advertising. The sentiment amongst most CEOs was "if you can't beat them, join them."
Herd Behavior http://en.wikipedia.org/wiki/Herd_behavior
Hundredth Monkey Effect http://en.wikipedia.org/wiki/Hundredth_monkey_effect
Events can unfold much faster then you think.
Is that the best you can do @Greg?
After I shredded your argument by illuminating the truth; that only a miniscule segment of the Canadian mortgage market "may have some similarities" to the U.S. sub-prime lending fiasco, the best you have to offer is the same old doomer dogma?
Get some meds buddy. Your incessant bouts of depression are worrisome.
You want another beating? OK.
Self-employed as a percent of the workforce.
"In 2010, there were 2.67 million self-employed workers, representing around 15.7 percent of all employed workers in the Canadian economy" http://www.ic.gc.ca/eic/site/sbrp-rppe.nsf/eng/rd02610.html
How many of those self-employed carry a mortgage? http://i42.tinypic.com/2qtiesy.png
StatsCan PDF: http://www.google.com/url?sa=t&rct=j&q=self%20employed%20with%20mortgage...
Got brains? Figure it out, then do your homework on how many immigrants carry mortgages, and when your done with that go read some more headlines on mass job cuts taking place.
Do you know the difference between self-employed and "stated-income" ?
Didn't think so. Do some more homework.
Statscan is looking for a new chief economic analyst. Thought of this site when I saw that headline - http://www.theglobeandmail.com/news/politics/statscans-chief-economic-an...
Maybe Ben can start giving us the goods, if he gets that position.
I know most people on this site focus on toronto's housing market,but start taking a look around Canada. Cracks are definitely starting to show. Calgary prices are down around 3 percent y/y and Victoria is down a staggering 9 percent. It may be worthwhile to watch a crash in action in canada by paying attention to Victoria.
You have to be carefull with these stats though Brett. I can't speak about Victoria, but while the average home price in Calgary was down 3%, the median was up 1%. Esp. in January when there is significantly less sales, the average price is effected by what homes are selling. The median price is a much better (though still not great) indicator of what has happened.
Greg - great posts and links. Excellent detective work. Crapraiser is getting all excited, and he's working overtime in the Department of Spin.
Have we been herded, or what? Imagine what the herd would have done had the media given both sides of the real estate story instead of just being shills for the industry.
Speaking of herding and the molding of minds, this is a good video (The Century of the Self) to watch re the origins of propaganda and its appeal to irrational, subconscious thoughts. You will see that we have been no more than pawns in the hands of governments and corporations.
http://www.youtube.com/watch?list=PL6DF72652E6FCFA44&v=TjP2gHoBLvA&featu...
Interesting quote from Statistics Canada report cited by @Greg above:
"The self-employed were wealthier than paid employees. At $520,000, the median net worth of the self-employed—the difference between household assets and liabilities—was 2.7 times that of paid employees ($195,000). The self-employed not only reported higher levels of business assets, but also higher tangible assets."
You forgot this:
"Most of the difference in average assets was due to differences in tangible and business assets. Tangible assets are non-financial assets that are not normally used for business and include housing, furniture, vehicles and other valuables."
Now what happens when their home, car and IKEA furniture value plunges? They go negative. But no need to worry because the younger generation will come save the day and be the next wave of home buyers to take the plunge, or maybe not:
Students Fight Massive Loan Debt—Average Canadian Student Debt Now $27,000. http://www2.canada.com/albernivalleytimes/story.html?id=def2f886-3c54-44...
Tick Tick Tick.
Be sure not to skip over "business assets" - oops! looks like you did. Spin much?
P.S. Still waiting: Do you know the difference between self-employed and "stated-income" ?
Didn't think so.
Back to square one now, more homework required.
Do you know the difference between income and net worth? http://i39.tinypic.com/x3c113.png
This is the problem folks. You have trained [so called] lending professionals who misguide borrowers by convincing them that the appreciation on their assets (homes) is considered 'income.'
Flaherty worried by banks relaxing their lending standards...
"Documents from the Office of the Superintendent of Financial Institutions, made public by Bloomberg News Monday, show the regulator began to worry in August some banks are relaxing their standards on HELOCs and mortgages to attract business."
http://www.theglobeandmail.com/report-on-business/economy/housing/ottawa...
The industry has known for quiet some time that lenders have been giving mortgages/loans to people who can't afford them, including self-employed and immigrants who didn't require to state their income—just sign here.
http://i44.tinypic.com/sv50kp.png
Is there a way to track how the amount of mortgage insured by the CMHC has increased over the years? Is the data available?
TORONTO, February 3, 2012 — Greater Toronto REALTORS® reported 4,567 sales through the TorontoMLS® system in January 2012. This number was 8.8 per cent higher than the 4,199 sales reported in January 2011.
The average selling price for January 2012 transactions was $463,534 – up by almost nine per cent compared to January 2011.
Let's try something different this time since you haven't been paying attention and think you're a genius. How did TREB get 8.8%? Calculate it for us please.
Simple arithmetic @Greg:
4,199 + 8.77% = 4,567.25. TREB rounded the number up to 8.8%.
Any further questions?
Read my first post up top, section 3. and keep in mind 4,199 is a final number now, while today's sales figure will be *revised* in the coming months.
Only a matter of time now before toronto begins to show weakness. With Canada generating no jobs, GDP going negative and Victoria's housing market collapsing with Vancouver next, it is only a matter of time.
More TREB data to chew on:
Active listings are down 9.1% versus same time last year.
Unless the listing inventory picks up, prices are going to continue to increase.
Come on App, the party just got started a few days ago when CMHC and the banks cutoff mortgages for those who don't report income. Active listings are down because apparently the new cool thing for RE agents is to delist then relist properties. You'll see them all in the next few quarters.
Here's the latest revisions from the previous months. December is interesting.
Jul 2011 21% (Revised 19.8%)
Aug 2011 24% (Revised 20.6%)
Sep 2011 25% (Revised 21.1%)
Oct 2011 17.5% (Revised 14.8%)
Nov 2011 11.0% (Revised 8.9%)
Dec 2011 4.0% (Revised 7.9%)*
BTW, your so cute flying around like a fairy from blog-to-blog trying to prevent the inevitable from happening.
Lenders are scared, Flaherty is scared, Carney is scared - the perfect storm acometh! Oh, there'll be listings.
Yet more TREB data:
Not only are sales and prices up, but the number of days on market are down by 9.9%. A seller's market for sure. Looks like the party doesn't want to end just yet!
P.S. The only people who are truly "scared" are the renters - who keep falling further and further behind in the GTA.
He He. So cute. Why don't you post that on Garth's or Rob McLister's blog? See what everyone says and you'll quickly find yourself in a very very lonesome place.
Ok enough of this...
Here's today's headline news folks.
Canada's unemployment rate edges up 0.1% To 7.6%.
Largest contributor sectors (lost jobs) on a year-over-year basis was i) finance, insurance, real estate and leasing -4.6% ii) utilities -4.2% iii) Business, building and other support services -3.8%.
Largest contributor sectors (jobs gained) on a year-over-year basis was i) Forestry, fishing, mining, quarrying, oil and gas extraction +8.5% ii) Accommodation and food services +7.9% iii) Other services (various) +5.5%.
Chart: Finance, insurance, real estate and leasing http://i42.tinypic.com/2qdrl92.png
Thanks Greg. Love your work. You're like a mini website inside the Economic Analyst website.
Great graphs on th eGTA rea estate market can be found at: http://guava.ca/indicators.html
Be sure to check out the listing inventory graph (lowest in 9 years).
Oh yeah, dont forget to check out the average and median price graphs (highest in 9 years).
I can smell the fear.
This is what fear looks, a man who begs for more fortune when he knows the end is near.
by Appraiser from another blog.
"Beware unintended consequences. The best defence in mortgage lending is strong underwriting, which we are fortunate to have in Canada.
Artificially toying with the market is never wise. There has been a great deal of noise but very little substance to most of the media hysteria recently surrounding the real estate market.
I trust that Flaherty and Carney can separate the signal from the noise and continue to be pruden as opposed to rash, regarding the property market."
Is keeping rates and dangerously low levels not artificially toying? You've gone mad.
BTW, Go to http://guava.ca/ and look at GTA listings soar the past few days with the latest PRICE REDUCTIONS!!!
Wow the 416 is on fire! Latest year over year TREB data breaks down like this:
Detached homes: up 15%
Semi-Detached: up 6%
Townhouses: up 7%
Condos: up 5%
Yet you completely ignored Rob McLister's first paragraph stating:
A mortgage executive at a major bank (who requested anonymity) wrote to us today saying:
“Mortgage policy decisions are being made that may lead to the very outcomes that we are trying to avoid.”
He’s referencing the potential rule tightening and new mortgage liquidity constraints that are making headlines.
Both of those factors could raise the cost of mortgages and adversely impact homebuyer demand. These are risks, he says, that could (READY?) cause a natural housing correction to snowball into something worse.
BOOM! You're retirement savings plan gonzo!! Don't worry, you have until the end of the year before it gets worse.
Charts Of The Week: Today’s TREB Data
Detached: http://i39.tinypic.com/n9jjn.png
Semi-Detached: http://i43.tinypic.com/bg5yc6.png
Condo: http://i41.tinypic.com/14y82o.png
Despite TREB reporting a manipulated 8.8% yoy increase for Jan 2012 sales (4567), the actual figure with revisions removed is an estimated 3.3%. This is compared to last January (revised to 4199 ) which was a lousy -13% yoy decline from 2010. Therefore over a two-year-over-year comparison, sales are down -5.37%. (Jan 2010 sales 4826 )
Revisions explained: TREB always includes additional sales (for some reason they haven’t explained yet) that will be removed over the next couple of months. I front-run TREB and remove the number of median revisions (230 sales) to get an estimate (shown as 3.29% on chart).
Low volume—high bidding—bubble confirmed. http://i40.tinypic.com/35jja6c.png
Sorry for abusing the blog Ben. I'll shut up now. LOL
Greg - please DO NOT shut up!!! Your posts are very illuminating, well researched, and I'm sure Ben greatly appreciates them, as I do. Thank you very much, Greg.
I think Ben should let Greg have his own page on this blog, that would be helpful...
Ben, you still post/write ? Its February now, and your last blog was 3 weeks ago!
How about something on CMHC, and whether they really will hit the lending ceiling?
Precisely as I stated about OSFI in the last post. We have a banking and liquidity issue in our bond markets. Without an exemption from the Volcker rule, Canadian banks will be left scrambling to raise capital.
http://www.reuters.com/article/2012/02/05/us-financial-regulation-et-idU...
Here's what I stated in the last post:
"Oh Boy, OSFI must have seen something they don't like because they've just sent a letter The US Treasury, Federal Reserve, FDIC and SEC regarding the Canadian banks risk exposure to Hedge Funds and Private Equity Firms. http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/media/rstrprttd_e.pdf"
And what I stated on Oct 17 2011 on this blog:
"How cute. Everyone just keeps going for the interest bait and doesn't realize tightening has already started amongst institutional funds and inter-bank lending. This is getting passé but I'll say it again: When the market stops lending, everything stops."
Ben what did you say to TREB? I think you scared them. TREB and the gang have a new index coming up with new features to filter bad data into glittering headlines for MSM monkeys. There's hope after all!!
http://homepriceindex.ca/coming_soon_en.html
"The MLS® HPI “provides a less volatile measure” of home prices and home price change compared to traditional average and median measures, which can swing dramatically in response to changes in the share of very expensive or inexpensive home sales from one time period to the next."
He he he... Little do they know what's lurking in the bond market.
He he he... Little do they know what's lurking in the bond market.
- Greg
Greg,
I have realized now that you are a very sophisticated finance person. I said that with respect.
I'm not a finance person nor am I an economist. I'm simply a discoverer that looks for misleading errors like this from CAAMP's report: http://i44.tinypic.com/35lvrdk.png
No wonder guys like App can't calculate and believe the market is going to boom—reading false data like this would make anyone believe it.
Is the Vancouver bubble finally bursting?
The slowdown continues to accelerate in Vancouver. From http://www.rebgv.org/news-statistics/selection-broadens-and-demand-eases...
"The MLS® HPI benchmark price for all residential properties in Greater Vancouver currently sits at $660,600, up 5.7 per cent compared to January 2011 and down 0.1 per cent compared to December 2011."
- Down from about 7.6% increase y/y in December.
More interesting:
"January sales in Greater Vancouver were the second lowest January total in the region since 2002"
- Yikes!
Even more interesting:
"New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,756 in January. This represents a 19.9 per cent increase compared to the 4,801 new listings reported in January 2011, and a 253.3 per cent increase compared to the 1,629 new listings reported in December 2011.
Last month’s new listing count was the highest January total in Greater Vancouver since 1995."
- People trying to get out of dodge? Sure seems like it. Will be very interesting to see if the new listings continue to explode. If they do give prices a few months before we start to see some y/y declines in prices.
Until I can get a clear explanation for that new "MLS HPI Index"...
Why do we suddenly have that HPI?
From their site:
"The MLS® HPI is based on the value homebuyers assign to various housing attributes, which tend to evolve gradually over time.
This means that price changes calculated using the MLS® HPI are less volatile than those derived using common measures like average and median, which can swing dramatically in response to changes with high-end or low-end sales volumes over time."
That's not clear for me.
It's as clear as can be. They're saying they will moderate an artificial average price because the 'real price' (the price buyers actually pay) is too volatile. We'll see if they provide raw data to the public, but I doubt it, this looks like a propaganda index that will be used by main stream media.
Interventions never work and always end up creating more uncertainty amongst the public/investors.
Interesting comments all around. I'm really sorry for my virtual absence. All of a sudden the world is waking up to risks in the Cdn housing market and suddenly looking to game it.
Greg, there seems to be demand from readers to hear more from you. If you're interested in contributing here, email me: ben@theeconomicanalyst.com
I'm particularly interested in chasing down potential funding risks to Cdn banks, something you alluded to above. The game ends very quickly if there is a major funding freeze...
I appreciate that Ben, however I prefer my anonymity—but the truth is.. "a blog without an owner is just a blog."
Considering the state of the market, your analysis is needed more then ever.
Here comes the fresh MSM headlines from TREB's 12pm press conference today. I'm watching headlines pop up in real-time all over Canada. Jeeesus. This was clearly a mass PR stunt to promote hope just when things are about to go very wrong.
Look at this first one below... Up 50.3% in 7 years.. Wow! It must mean it's priced at a good value and time to buy right? Oh my...the sad part is there are many who will react to reverse marketing and believe this is good news, when really the opposite is true.
Toronto real estate: Detached Toronto house hits average $606,600 -- up 50.3 per cent in 7 years http://www.thestar.com/business/article/1127194--toronto-real-estate-det...
House Prices Rise In Montreal, Toronto And Vancouver
http://www.huffingtonpost.ca/2012/02/06/canada-house-prices-real-estate_...
New index shows Jan. 2012 home prices up 5.2 per cent from 2011
http://www.canada.com/business/index+shows+2012+home+prices+cent+from+20...
House prices rise in Montreal, Toronto and Vancouver
http://www.cbc.ca/news/canada/toronto/story/2012/02/06/house-prices-janu...
I believe that pretending not to care for something one does not or cannot have, is referred to as sour grapes.
I believe that pretending not to care for something one does not or cannot have, is referred to as sour grapes.
I'm not concerned about the housing market App. Something much bigger is threatening your industry, and I hope you're not buying into the hype about Genworth stepping in to save the day—their credit ratings are polluted.
You can lead a horse to liquidity, but you can't make him borrow.
Yeah, something seems to be going on out there. Fixed rates going up with no significant change in bond yields. Also loc rates going up too.
We already know who's dumping bonds, but someone else keeps trying to peg yields to the floor.
FDI Flows: http://i40.tinypic.com/kylj8.png
Operation Maple Twist 2: http://i39.tinypic.com/2vltczo.png
Greg, what does that signify? Please explain to the economic ignorant.
It means institutional money is disinvesting in Canadian securities, forcing the Bank of Canada to accommodate banks by purchasing bonds to keep rates low. As I've recently learned, the entire dilemma behind the scenes is that Canada has no legislative protection for stakeholders' covered bonds within Canadian banks. The issue is similar to MF Global's case regarding reporting requirements in the event before bankruptcy, the creditors' priority and commingling-segregating regulations.
Here's what the Ontario's Teachers Pension Fund has to say about Canada's regulatory system, and why they've take 50% of they funds off-shore to emerging economies. http://i44.tinypic.com/1zv6160.png
Remember global pension funds is a $28 trillion dollar industry, so don't let anyone convince you the government can control lower rates for an extended period of time.
I have no clue what Huffingtonpost is talking about.
Our own RE board (REBGV) reports that we are down 0.1 per cent compared to December 2011:
More highlights:
a 4.9 per cent decrease compared to the 1,658 sales recorded in December 2011
a decrease of 13.3 per cent compared to the 1,819 sales in January 2011
an 18 per cent decline from the 1,923 home sales in January 2010.
January sales in Greater Vancouver were the second lowest January total in the region since 2002
New listings for detached, attached and apartment properties in Greater Vancouver totaled 5,756 in January
a 19.9 per cent increase compared to the 4,801 new listings reported in January 2011 a 253.3 per cent increase compared to the 1,629 new listings reported in December 2011
Last month’s new listing count was the highest January total in Greater Vancouver since 1995
The ‘new’ MLS® HPI benchmark price for all residential properties in Greater Vancouver currently sits at $660,600, up 5.7 per cent compared to January 2011 and down 0.1 per cent compared to December 2011.
Detached sales in January 2012 reached 659, a decline of 16.9 per cent from the 793 detached sales recorded in January 2011
Detached Benchmark price increased increased 11.3 per cent from January 2011 to $1,034,70011.2
Apartment Sales reached 657 in January 2012, a decline of 7.9 per cent compared to the 713 sales in January 2011
So I suspect that they are they just making this growth up?
SNAPSHOT OF THE WEEK
Harper says "Thanks for riding the fast-track immigrant-to-homeowner plan guys"
http://www.cbc.ca/gfx/images/news/photos/2012/02/03/hi-ship-jobs852-8col...
Little do they know where Harper's thumb is going next...
Two charts—no comment.
http://i43.tinypic.com/24pc9di.png
http://i40.tinypic.com/15ov7s6.png
I'll be posting my charts on Twitter for anyone who wants to follow. @CanadaWatchdog
Here Tweet this:
According to RealNet Canada Inc., BILD's official source of new home market intelligence, there were 45,926 new homes sold in the GTA last year, resulting in the second-best year ever for total sales. (P.S. TREB had its second best year ever too).
"The active supply for all new housing options are at near-record lows for new home purchasers, particularly in the low-rise sector where supply is down 73 per cent to 10 years ago. According to RealNet the active supply available in the low-rise sector is at a record setting low of only four-months of housing inventory."
http://www.bildgta.ca/media_releases_2012_detail.asp?id=866
Hey Appraiser,
Wondering your opinion on the market in TO (which I know nothing about). Was there just a chronic undersupply of inventory that is leading to all these sales? Or is their foreign money there?
@Dave:
There appears to be very strong demand for housing in the GTA, causing a chronically low inventory. The re-sale market and the new home market have both seen near-record sales.
Despite a plethora of new condos coming on stream in 2011, 28,000 were absorbed by the market last year. So it's not a supply problem from that perspective.
However, the re-sale market has supply issues which are quite inexplicable given record prices year after year. Normally such a market draws sellers to the table in droves. Maybe it's a boomer thing, in that the boomers (who dominate the homeownership space) are happy in their homes and just don't want to sell anytime soon. Who knows?
As I remember from the stats Ben quoted here earlier, there were not enough starts in Toronto area before, but it is going to be fixed soon:
- from what the CNN reported Tuesday Feb. 7, 2012:
"The new condo shortage OTTAWA — Construction plans heated up strongly in December as municipalities issued $6.8 billion worth of building permits, the highest level since June 2007.
Statistics Canada said Tuesday that was a jump of 11.1 per cent over November and was driven mainly by increased plans for apartments and condos in Ontario and commercial buildings in Alberta.
The value of residential sector permits rose 16.1 per cent to $4.5 billion in a second consecutive monthly increase.
Major projects in Ontario pushed permits for multi-family dwellings up 28.9 per cent to $1.9 billion, the highest level since December 2005.
Read more: http://www.ctv.ca/CTVNews/Canada/20120207/statscan-december-2011-buildin...
It looks like the overbuilding is going to arrive at the same time as the drop in investors demand...
@Olga:
It is wise to never lean too heavily on month-over-month stats for housing starts and building permits.
Due to many wide-ranging varaibles, they are subject to exorbitant percentage swings in both directions. Much better to concentrate on quarterly and annual results when attempting to identify trends or draw conclusions from these particular stats especially.
You probably missed this part:
"Major projects in Ontario pushed permits for multi-family dwellings up 28.9 per cent to $1.9 billion, the highest level since December 2005."
As I said, a few major projects getting under way at the same time tends to skew the percentages. Try to pay attention.
The amateurs are so easy to spot. 'Hair-on-fire' fanatics are to be ignored.
She's actually right App. LOL Do your homework buddy or I'm gonna slap another chart in your face!
What I know for fact that a few major projects getting under way at the same time tend to drop the prices. We saw the condo construction spike in Richmond, BC in the last few years with a few major (big scale) developments and as a result the prices for the townhouses declined 0.5 per cent between January 2011 and 2012.
GTA builders are assuming the same demand this year as there was last year, when really last year's sales soaked up the bulk of undecided, immigrant and self-employed buyers acting before the March 18 deadline. As you stated, if too many builders develop at once, it puts too much supply on the market, and if demand is low, that's where the problems start.
https://p.twimg.com/AlQNEWQCMAArG9W.png:large
Sounds similiar to what happened in Calgary a few years back. It a 2-3 year span, we went from an under supply to a huge surplus. Numerous builders went bankrupt, and not fly by night ones either. However, the smart builders saw it coming and they are now restarting these previously scrapped developments.
I don't always agree with Don Campbell's predictions, but I think he has it right now in TO. Price increases will probably continue for this year, before correcting, and in 5 years time be back to current levels. It's exactly what happened here.
Yep. The smart developers know how to time and size their projects, while the others build on greed, putting them into a 'too many, too late' scenario.
Hi all,
I am looking for some data on Toronto household formation vs housing starts for the past decade. Can anyone assist.
Thx,
Here is population and dwellings for major centers in 2011( compiled during the census last spring)
http://www12.statcan.gc.ca/census-recensement/2011/dp-pd/hlt-fst/pd-pl/T...
Here is population and dwellings for major centers in 2001.
http://www12.statcan.gc.ca/english/census01/products/standard/popdwell/T...
New home prices rose 0.1 per cent in December, following a 0.3 per cent rise in November, according to the report, released Thursday. Economists had expected a gain of 0.2 per cent.
That's the ninth straight monthly gain in the new home price index, the longest run since the middle of 2010.
http://www.cbc.ca/news/business/story/2012/02/09/statscan-new-home-price...
Hi App
I made a video of extrapolating the data (that you mentioned) from the last nine months of the new home price index and put it on YouTube. You might find the results intriguing - http://www.youtube.com/watch?v=IH8K0bPc-BE
Weren't you just ridiculing people for posting month-over-month housing-related stats?
It looks like this blog is dying a slow death as there has not been a posy in 3 weeks and is being haunted by comment followers. I have had to turn to Garth's blog and VREAA to get my sense of doom and gloom current.
The longer the rates stay low the longer Canadian pile on debt, just like the longer I drink the worse I feel.
Canada's trade surplus doubles in December. This news will probably blow the weekend for all the doomers out there. Maybe @Greg will even post a chart to "prove" it's all just smoke and mirrors.
P.S. "Both exports and imports posted their highest levels since October 2008."
http://www.cbc.ca/news/business/story/2012/02/10/biz-trade-surplus.html
You haven't learned on thing have you? Yet you still come on this blog and ridicule the 'amateurs' for looking at m/m figures, when in fact, you did just that. FYI, the m/m figure was actually -0.6%, 4.5% is seasonally adjusted.
Appraiser, your thick headedness is very amusing. When an average family is not able to afford an average home without getting neck deep into debt, this is not normal. Where does your confidence and fascination with Canadian RE as it is right now come from? Do you like to see your or anybody else's kids to never be able to afford a home in Canada? You are a moron, sir. A big, thick headed embecil.
5 Steps Of A Bubble http://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp#a...
Canada is at stage 4.
Toronto Bubble Risk Topping New York in Condo Market: Mortgages
http://www.businessweek.com/news/2012-02-13/toronto-bubble-risk-topping-...
“Condo construction has always been rather prone to boom and bust cycles, and this one seems particularly strong,” said Sheryl King, an economist with Bank of America Merrill Lynch in Toronto. “Builders seem to overestimate how much demand is going to be out there, and that’s when you tend to see some abrupt pull-back.”
“If builders stopped building today, there’s five years worth of supply that is about to be delivered, relative to what normal population growth is,” Bank of America’s King said.
“It’s going to be three-and-a-half to four years from now when these loans are all coming up and you’ve got a number of people who say they can’t afford to refinance it, so they’ll just sell,” Andrew said. “They’ll find out that 40 units in the building all went on the market in the same month, and now they’ve got a big problem.”
You bet, and that's why people need to stay out of this casino, cause when she goes, she blows.
Nice cherry-picking of quotes from the above article @Greg. Very fair and balanced - just like FAUX News.
A nice projection of future Toronto RE prices:
http://i40.tinypic.com/2hwzjur.jpg
Funny stuff. Everyone knows that house prices will double every decade, until infinity dollars.
Did you find that graph on the CREA website? Better buy a house now before I get priced out.
Figures were taken from some RE sites and I validated the chart's figures with the one found on the TREB's site after which I applied the 5.7% CAGR that went on from 1995-2010 to project to 2030
Bob, there's an easier way to render your data projections. http://i40.tinypic.com/2ytzait.jpg
Haha. Good stuff Greg. That's our inevitable future
Thanks for mocking the graph..
At least Appraiser and I agree with it
You are Appraiser you freak of denial who tried to plot his own graph..
Ben, it's been many weeks since your last post. Are you still alive?
Canada Mortgage and Housing Corp. is predicting the Canadian housing market will remain fairly stable this year and next, with little change from 2011 in prices, new home construction and sales of existing homes.
The CMHC says it expects the average house price in Canada to hit $368,900 for 2012 and $379,000 for 2013.
Housing starts are expected to be around 190,000 units this year and 193,800 units in 2013, while existing home sales are expected at about 457,300 units in 2012 and moving a little higher to 468,200 units in 2013.
http://www.cbc.ca/news/business/story/2012/02/13/cmhc-housing-market.html
Of course it will, but only according to their manipulated hedonics weighted index. I'm amused how CMHC and RE institutions now have opposing views to the Bank of Canada, IMF, The Economist Magazine and more credible sources. This is what creates confusion in the market, and what makes home buyers wait, cause after all (as they've been told), rates won't be going up for years, so what's the rush?
What happened App? You stopped debating and just copy and paste everything now. New job?
Hedonics: In economics, hedonic regression or hedonic demand theory is a revealed preference method of estimating demand or value. It decomposes the item being researched into its constituent characteristics, and obtains estimates of the contributory value of each characteristic.
Hedonic models are most commonly estimated using regression analysis, although more generalized models, such as sales adjustment grids, are special cases of hedonic models.
Hedonic models are commonly used in real estate appraisal, real estate economics and Consumer Price Index (CPI) calculations.
Precisely, like CPI as manipulated as it is. So now instead of home buyers knowing what the 'real' trending price is, they are going to dictate a benchmark price based on what they believe demand is. I call this, Realtocrisy.
They are stupid to believe they can dictate trends with such an index. This will only create more confusion, destroy market confidence and discourage buyers further.
Do some more research on how hedonics is applied. The definition you posted only describes a modest application.
Here's two videos explaining how hedonics works.
http://www.youtube.com/watch?v=h7CoQEgeuyA
At 5:40min http://www.youtube.com/watch?v=zPkTItOXuN0
Only morons would believe gas prices have risen by 2.3% in 2011. Now imagine what they'll do with home prices.
Hedonic multivariate regression models have long been used. One of the most famous is the Case-Shiller Index that uses the repeat sales method for index calculation, analyzing data on single-family properties that have two or more recorded sales transactions.
Changes in housing types and sizes, or changes in the physical characteristics, of houses are specifically excluded from the Case-Shiller calculations to avoid incorrectly affecting the index value.
The Teranet / National Bank index in Canada is similar. I rarely hear of anyone being critical of theses indexes, yet the new CREA / TREB HPI is based on similar methodology.
@Greg, if you wish to rely on old-fashioned and widely discredited techniques such as averages and medians to analyze the real estate market be my guest, along with your buddy "Gart Squirmer" who can't get his head around advanced statistical analysis either.
Remember this? http://i44.tinypic.com/29c3zi9.png Do we really need another index to complicate the market?
Advanced statistical analysis? Like advanced macro-risk free investing?; aka Black–Scholes options formula; that plunged the stock market in 1998, because they didn't calculate 'unpredictable events' (Russian bond default); yet we still use it today, even though everyone knows it's going to crash to market again? http://www.youtube.com/watch?v=PlVY-Cw1XRA
There is a fine line between being mathematically advanced and human nature. The former will never predict the outcome or decision of the latter. That is reality, and the reason why realtorcrats will fail miserably.
How about this one App?
OECD / Deutsche Bank
Canada's home prices are overvalued by 54%
http://www.businessinsider.com/the-most-overpriced-housing-markets-in-th...
It's irrelevant who's right and who's wrong. The problem is the dynamics of valuations that contributes to a buyers decision, which in this case, from opposing MSM headlines, is likely to discourage many.
Vancouver's future is very bright and marginally better than Toronto's prices
http://imgur.com/LGlek
So let's review shall we. Last year at this time all the doomers were certain that the real estate market was going to tank. The new mortgage rules were soon to take effect and that would be the end of the bull run in Canadian housing, right?
Well, here we are a year later and who's predictions were closer to the truth? CREA, CMHC and TREB; or the doomers?
I rest my case.
Google G&M, CREA, CMHC and TREB reports in 2008, before the market plunged in the fall to early 2009. They were cheering RE right until...well.. the unthinkable happened.
And since you love my work, I'll share one of many special charts with you.
http://i42.tinypic.com/1vyvr.png
"...The problem, say critics of the data, is that while the numbers tell a story of rising debt, they don't show whether Canadians are struggling to keep up with their payments.
“The debt-to-income measure is very imperfect. It's not the ideal measure, but it is the one that gets the most attention,” said Craig Alexander, chief economist at Toronto-Dominion Bank."
http://www.theglobeandmail.com/report-on-business/economy/the-debate-ove...
“Let’s imagine there’s a household out there that has an annual income of $100,000, but they have a mortgage of $153,000. Do you think that sets off red flags that this house is in trouble? I think most people would say no. If you have a 25-year mortgage, and you only have $153,000 of mortgage debt, you’re going to have no trouble meeting your financial commitments.”
Is this a typical household's income? No. Is $153,000 a typical mortgage? No. Is this another headline refuting the real debt situation. Yes.
http://i40.tinypic.com/2a5fbpf.png
Your glaring lack of real life experience and basic comprehension are showing again. The example provided was illustrative of the relevant ratios being discussed. "Typical" was not the point, which you clearly missed. P.S. and your graph is based on sale price, not mortgage amount. Try to keep up and start paying attention.
Apparently it is beyond your imagination to realize that there are many people who live in $500,000 homes, but only have a $150,000 mortgage remaining, or any of hundreds of other variations of similar magnitude.
Alas, ther are many others just as myopic and inexperienced, who simply can't grasp the basic concepts of the real estate market, or simple ratio statistics for that matter.
"Apparently it is beyond your imagination to realize that there are many people who live in $500,000 homes, but only have a $150,000 mortgage remaining, or any of hundreds of other variations of similar magnitude."
And it is beyond yours to realize that many people have a $500,000 home with a $550,000 in debts (or any of hundreds of other variations of similar magnitude) to take up the debt parade of those that don't have any (like me).
@reasonfirst:
Show me the bankruptcy and mortgage default stats to back up such a ridiculous claim. Gut-feelings, conjecture and hyperbole don't cut it.
Bankruptcy or default don't automatically happen when your debts exceed your house value. Are you seriously trying to say that these people don't exist and it isn't a risk IN THE FUTURE?
"In general, the growth in debt-to-income ratios is coming from those already highly indebted households"
http://business.financialpost.com/2012/01/26/boomers-drowning-in-punchbo...
Yes there are many who have 150k left, but how many? How many only have 20% equity? Did you read this part of the article?
"The problem, Mr. Shenfeld and other economists point out, is that such data are harder to come by. In Canada, the data economists wish they had are not tracked by Statistics Canada, and banks rely on poll data collected by Ipsos Reid on debt-servicing levels. That makes tracking the problem harder. "
Because we all know (heaven forbid) if CMHC provided the real numbers (which they continue not to disclose, even when the FSB has recommended to release this data for the public to manage risks), then surely we'd be able to quantify how many homeowners are about to go (or are) negative in equity, wiping out CMHC's 25:1 balance sheet. http://p.twimg.com/AlgHuGYCMAAwJZa.png:large
The least you can do is try to obtain raw data instead of posting polls and stories.
How about this reading:
"Apparently it is beyond your imagination to realize that there are many people who live in $500,000 homes, only have a $150,000 mortgage remaining, but are slowly eating their equity with HELOC approaching to a limit - $350,000".
Although I do not know how much of the equity banks would allow you to take in HELOC.
@Olga; Here's some in depth reading on Canadian HELOCs just released by rating agency DBRS: Which you clearly require.
Bottom Line: "HELOC products in Canada are generally underwritten without predetermined
amortization schedules, payable on demand and only available to prime borrowers, making them vastly different from similarly named products available until recently in the United States."
http://www.dbrs.com/research/244990/rating-canadian-home-equity-lines-of...
Debt-sevice is clearly not a major issue in Canada, otherwise the mortgage default and bankruptcy rates would be rising instead of falling, which they are.
I know positive data makes you cringe - but let's get real here. You have no information to prove otherwise, only 'spooks and goblins' about the evil CMHC. Ever so frightening.
lagging indicators
Mortgages in arrears is a leading indicator of future default and bankruptcy. Mortgages in arrears are 0.38% according to the Canadian Bankers Association and 0.42% according to CMHC.
The latest figures for the U.S. are 5.8%. Surely you can see the difference?
Mortgages in arrears is a leading indicator of future default and bankruptcy.
It wasn't in the USA. Mortgages in arrears actually decreased as their housing prices went stratospheric 2002-2005, then were relatively stable as their housing market turned and prices dropped, then only started increasing after a couple of years of price declines.
Of course, you're just going to comment (hypocritically) that "it's unbelievably stupid to compare the situation in Canada to the USA", so I'm not sure why I even bother.
Mortgages in arrears are 0.38% according to the Canadian Bankers Association and 0.42% according to CMHC. The latest figures for the U.S. are 5.8%. Surely you can see the difference?
I absolutely can. In the USA, house prices have been dropping for seven years. A huge fraction of mortgage holders are "underwater". Confidence in the real estate market is very low. Here, house prices are going up very quickly (far faster than incomes or rents) and everyone is still gung-ho about real estate. As others have said, everyone thinks RE is a good investment, until it isn't. Mortgages in arrears are a lagging indicator.
lagging also as indicated - the US figures are higher after the correction.
Actually defaults haven't changed if you include proposals. The reason:
Bankruptcy stats have fallen because a few years ago, the Canadian Supreme Court ruled in a favor of proposals to help debtors restructure and retain a small amount of equity from their creditors, but even so, they've defaulted. http://p.twimg.com/AlPunhaCEAA5Taa.png:large However the courts overturned this decision last month, so you can expect more 'bankruptcies' this year. To quote:
"More than 80,000 Canadians filed for personal bankruptcy in the year ended Oct. 31, 2011, while another 45,000 filed so-called consumer proposals to pay off their creditors.
Bankruptcy numbers are down since peaking in 2009. But the Canadian Imperial Bank of Commerce last week said insolvencies — which include consumer proposals as well as bankruptcies — are likely to rise modestly this year because of an increase in low-paying and part-time jobs, and cuts in the public service."
http://www.canadianbusiness.com/article/70577--bankruptcy-files-run-by-p...
Back to the lab App...
Woops, I almost forgot this one.
"The Office of the Superintendent of Bankruptcy Canada says about 400,000 estates were under its purview in 2008-2009, a "significant increase over previous years."
Hmmm..
400,000?
That's HUGE!!!
@Greg: Consumer proposals are nothing new. You clearly have no knowledge of the bankruptcy field or the law. You are embarrasing yourself badly on this one.
You're right. But I do know how to read and obtain good information, not like you who goes out to fetch the latest G&M headline everyday.
http://www.bankruptcy-toronto.ca/2011/09/07/bankruptcy-statistics-releas...
Go fetch another one Appoodle. Woof woof!!
@Greg: I'll consider that complete capitulation, as you are clearly out of ammo.
Capitulate to what? There are more foreclosures happening that do not show up in arrears payments because i) as I stated, consumers can shortcut a foreclosure by filing a proposal; this may relate to arrears payments in a HELOCs first, that is secured by the house ii) CBA stats do not include all of MBSs that account for 30% of mortgage credit; they only count the banks holdings which OBVIOUSLY, are lower LTVs because the banks know which pools have the highest LTVs, since they selected and issued them — even better, they are probably on the short side waiting for them to blow up on CMHC's balance sheet a la Goldman Sachs AIG style! This is all too familiar.
But you're right App, arrears rates are low, but let's not forget what it really indicates—the past, not the future.
And you know what the best part of it is? The banks are now going to blame the sub-primes on all the brokers! That's right, while all the hyenas were drooling and having a feast over low-standard mortgages (no stated income), banks were sure to keep a far distance from you guys by releasing reports like this. http://i44.tinypic.com/sv50kp.png
It's not going to fun watching brokers scramble for capital and no, Genworth is not going to save the day with their credit rating. Broker channels of off-line. Snap!
Capitulation? More like decapitation - of you - right below the knees.
Latest CREA Report: "sales activity was up by 4 per cent from a year earlier, and "stood even with the 5 and 10 year averages for January sales", according to the report."
"The average resale price rose by 1.2 per cent from a year earlier to $348,178, ranking among the lowest increases since late 2010."
http://www.cbc.ca/news/business/story/2012/02/15/crea-january-home-sales...
You guys are hilarious but very helpful. I am getting some very good indirect investment advice reading comments from Greg and App, both of whom seem to be highly educated in the RE arena. What I am concluding from "analysis" here and elsewhere is that worst case will be a residential RE market crash and best case it will stabilize with small incremental increases. Bottomline, housing in GTA is not a good investment right now. Rent I will (currently paying half in rent compared to insane mortgage + crazy taxes) for the next year or two to wait and watch while maximizing investments hedging against the CAD. Learned that lesson first-hand in the US.
Do you guys want to see some BC daily stats from Larry Yatkowsky web-site? Juat for entertainment:(
Vancouver All Areas:
New Listings - 308
Back On Market Listings - 2
Price Changes - 103 (reduced)
Sold Listings - 131
and it is about the same every day, there is about 3*times more homes listed than sold.
Yep. You can follow the GTA housing price slaughter here daily http://guava.ca/
"The day must surely come when politicians, bureaucrats and central bankers must be called to account by a fiscal crimes tribunal, and sent to prison for a very long time."
And no private prison either - in with all the other criminals.
http://www.youtube.com/watch?v=m5NuHOXWlgM&feature=player_embedded
Good one @Greg, the price "slaughter" graphs you refer to from http://guava.ca/ clearly indicate the highest average and median prices in the GTA in NINE YEARS.
Are you going all "bizzaro-world" on us?
_________________________________________________________________________________
P.S. Latest CREA Report out today:
"...sales activity was up by 4 per cent from a year earlier, and "stood even with the 5 and 10 year averages for January sales", according to the report."
"The average resale price rose by 1.2 per cent from a year earlier to $348,178, ranking among the lowest increases since late 2010."
http://www.cbc.ca/news/business/story/2012/02/15/crea-january-home-sales...
Oh I see you changed your strategy today by posting the unadjusted +4% compared to adjusted -4.5% (BTW what was Jan 2011?, go check), along with disregarding what you often advocate on this blog—average price vs median price.
"CREA cautions that average price information can be useful in establishing trends over time, but does not indicate actual prices in centres comprised of widely divergent neighbourhoods or account for price differential between geographic areas."
"Statistical information contained in this report includes ALL housing types."
You do remember what we've discussed here about averages correct? That homes selling for $1mil+ skews average prices for the majority of sales? Would you like to debunk that math? Speaking of $1mil+ homes... go back and check http://guava.ca/ at the end the of 2011 when prices were increasing compared to late January (when CMHC and the banks announced the slaughter to commence); we're now seeing daily price reductions for the first time in years! Damn, that must mean something...
You're trying to predict a trend by looking in the rear view mirror, there are many other factors that are already showing signs of a slowdown. Please App, stop pretending to be an economist and go back to your cubical, get on the phone and start chopping your commissions for sales. That's all you have left.
"...there are many other factors that are already showing signs of a slowdown." ? ?
Name them.
P.S. I notice no response regarding your totallt misleading "price slaughter" data on guava... did you mean slaughter or feast? Highest prices in nine years, after all.
Too many to list. But here's an example http://i41.tinypic.com/rlj5o3.png
What will housing demand be 2-7 years when you have a deadbeat generation whose unemployment rate is growing? Not to mention that within that group having students graduating with an average debt of $27,000? And last but not least, why are they not getting jobs or who's taking all the available jobs?
Tada! http://i42.tinypic.com/1ep3mf.png But don't these folks already own houses that they planned to retire on like you suggested?
That's just one of many problems...
"P.S. I notice no response regarding your totallt misleading "price slaughter" data on guava... did you mean slaughter or feast? Highest prices in nine years, after all."
Because I don't answer your stupid repetitive questions that I've debunked already.
Here it is again for blog's sake...What else has been going up for 9 years? http://i43.tinypic.com/10hm4y1.png
Now go read how to measure in 'real terms' instead of using that miscalculated TDS formula, you know, the one they told you to use at school.
In the 1980s, manufacturers of apparel began offshoring their production to underdeveloped countries, one of which was Bangladesh. Economists endorse this practice; they have a model that justifies it.
Offshoring production to underdeveloped nations gives needy people jobs, increases their incomes, reduces poverty, and expands their nations' GNPs. It also enables people in developed nations to purchase products produced offshore at lower prices enabling them to consume a wider range of things. As a result, everyone everywhere is better off.
Convinced? Most economists are, but it hasn't worked that way. Everyone everywhere is not better off—as the whole world now knows. Why?
In the latter part of the 80s or early part of the 90s, a large retailer (don't remember which one) thought it would be a good idea to bring an employee of a factory in Bangladesh to America to see how the clothing the factory was producing was being marketed to Americans. So a Bengali woman was selected to represent her factory and brought to America. This idea didn't work out well. The woman not only saw how the products were being marketed but how much they cost and she was infuriated. She knew what she and her coworkers were being paid, about two percent of the price of the garments. She did not remain silent and was quickly sent back to Bangladesh. Here is the gist of her story:
She said she and her coworkers were not financially better off after being hired by the factory. Yes, the wages were better than those that could have been earned before, but they weren't much benefit. Why? Because when the paychecks began to arrive, the local landlords and vendors increased prices on everything, so just as before, all of their incomes went to pay for basic necessities. The landlords and vendors got the money; the workers were not better off, and those in the community who were not employed by the apparel factory were decidedly worse off. It fact, it quickly became apparent that the workers were working for nothing. They did the work; the landlords and vendors got the pay. But, of course, the country's GNP was better, which is all that matters to economists who still claim that Bangladesh's economy is improving.
And although Americans were able to buy the apparel more cheaply than they could have before the manufacturing was offshored, the American apparel workers who lost their jobs are decidedly not better off.
Two conclusions follow from this scenario: employment alone is not a sufficient condition for prosperity; full employment can exist in an enslaved society along side abject poverty, and an increasing GNP does not mean that an economy is getting better. Remember these the next time the unemployment rate and GNP numbers are cited. Those numbers mean nothing.
How about we focus on the fact that on average over the last year Canadian homes only appreciated about as much as a high interest savings account? And after inflation everyone actually lost money?
See App? Brett understands what's going on, why can't you?
@Brett Wilde
Many don't understand the difference in nominal vs inflation adjusted terms, when the only equation one needs is R = N/PI *100. R being Real Price, N for Nominal Price and PI for Price Index. I'm working on charts for regional home prices—but here is one for income that reveals the true value of Canadian hourly wages. http://i43.tinypic.com/ivkgp1.png
As you stated, many are losing money.
So where's the bubble?
Here is something interesting.
http://www.cbc.ca/news/canada/british-columbia/story/2012/02/15/bc-okana...
The population of Kelowna, B.C. is one-half of Windsor, Ontario.
Conclusion: Irrelevant.
Next question.
Small population indeed, but here's the alarming part http://i39.tinypic.com/50pu8h.png
You're never going to see mass foreclosures until the last minute App; all sub-primes are starting to implode on CMHC's balance sheet; that's why they won't report it.
See App? Brett understands what's going on, why can't you?
"As you stated, many are losing money."
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So you never answered the question? Quite a conundrum - no ?
If, as you and @Brett Wilde argue, real estate prices are not even keeping pace with inflation; and as we all know, asset bubbles are defined by periods of rapid price inflation - Where Is The Bubble?
5 Steps Of A Bubble
Step 3. Euphoria: During this phase,caution is thrown to the wind, as asset prices skyrocket. The "greater fool" theory plays out everywhere.
"During the euphoric phase, new valuation measures and metrics are touted to justify the relentless rise in asset prices."
Definition of 'Greater Fool Theory'
The greater fool theory (also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a greater fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else at an even higher price[1].
http://en.wikipedia.org/wiki/Greater_fool_theory
http://www.investopedia.com/articles/stocks/10/5-steps-of-a-bubble.asp#a...
Harvard Law School: Identifying and Deflating Asset Bubbles
A bubble inflates as >>>public information<<< about an asset class diverges from >>>private information<<< possessed by the >>>public information’s sources<<<. Accordingly (READY?), the key to deflating a bubble is to gather relevant private information, compare it to the corresponding public data, and then publish the comparison for all market participants to see.
Consider, for example, the twin bubbles in home prices and securities backed by subprime home loans. High volumes of subprime loans made at low rates benefitted originators (who collected fees without bearing default risk because their loans were packaged and sold) and to a lesser extent their subprime borrowers (who in essence got cheap rent on homes they could not afford to buy).
http://blogs.law.harvard.edu/corpgov/2009/07/11/identifying-and-deflatin...
Ok App?
But since you'll say there's no sub-primes in Canada...
CMHC – THE HIDDEN RISK
I discovered something alarming this past week with a little research on CMHC’s LTV portfolio allocation, along with some major risks attached that should have been sounding off alarm bells like yesterday. CMHC claims its portfolio is risk-free to tax payers and is mitigated by hedging with derivatives and other protective measures, however one look beneath the layers reveals all that is there, or not.
Based on the information I could obtain from their annual and quarterly reports; in 2009 CMHC’s portfolio held approximately 38% of mortgages that were +80% LTVs; in 2010 that share increased to 43%, almost half its portfolio; in Q3 2011, the total share of +80% LTVs had decreased to 28%. Good news right? Not so fast.
In recent reports, CMHC stated borrowers have been adding more principle above their maximum payments, but with their share of +80% LTVs going from 43% in 2010 to 28% in 2011, it’s impossible so many could have contributed that amount, which leads to the next scenario; with the recent announcement of banks cutting out non-stated-income loans (you know all those freshly landed immigrants and self-employed individuals they were streamlining), begs to question if their lower LTV portfolio share was due to more quality borrowers. I highly doubt it.
https://p.twimg.com/AlLLkFBCQAMcMpM.png:large
So what happened? Their low LTV portfolio share increased to 72% because CMHC calculates appreciated home value as equity, so higher home prices shifted high LTV loans into the lower bracket, which is credible to some degree, but, this also means if house prices were to decline back to 2010 levels (5-10%), this would put their +80% LTV portfolio share back to a 35-40% range, and with the latest borrowers now underwater creating a snowball correction, anything beyond a 10% correction becomes a full scale AIG collapse.
------------------------------
And before you refute there are no foreclosures under CMHC, I leave you with this. http://i41.tinypic.com/4h8da8.png
Coincidentally, I just found this post on Red Flag deals where one poster asks:
How much commission does the CMHC give it's listing agents?
"When they are disposing of foreclosed properties? I bought a cottage and the remuneration was reported as 4.25% and flat $600. I didnt use a buying agent.
A buying agent would have got 3.22% on first $100k and 1.15% on anything over $100k"
http://forums.redflagdeals.com/how-much-commission-does-cmhc-give-its-li...
Disposing? That's interesting...
What a heaping, steaming pile of baloney. Let's get back to reality, shall we?
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Besides rapid price increases, true asset bubbles have another defining characteristic - they burst.
However, recent CREA data would indicate a rather controlled or "soft" landing is underway in the Canadian real estat market, featuring modest price increases and mildly subdued sales. No crash. Not very dramatic at all.
While doomers such as yourself are consumed with hysteria, wild claims of financial conspiracy and unrealized horrors of biblical dimensions, here's what we actually know:
Mortgage defaults are down. Bankruptcies are down. The real estate market is doing just fine.
The TREB mid-month numbers are in:
Toronto, February 16, 2012 – Greater Toronto REALTORS® reported 3,206 sales through the TorontoMLS® system through the first 14 days of February 2012 – up by more than nine per cent compared to the 2,933 sales reported during the same period in 2011. New listings were up by 13 per cent over the same period.
Oops! almost forgot: Further TREB data from today:
"The average selling price during the first 14 days of February was $491,493 – up by nine per cent compared to the first 14 days of February 2011. On average, sellers received 99 per cent of their asking price and their homes were on the market for an average of 25 days."
Read this post from top to bottom again, then look at this from 2011 http://i39.tinypic.com/eikoz4.png
To quote again:
"During the euphoric phase, new valuation measures and metrics are touted to justify the relentless rise in asset prices."
Nobody believes it anymore App, just you...
TREB provides the following disclaimer in their Marketwatch report:
"In conjunction with TREB's redistricting project, historical data may be subject to revision moving forward. This could temporarily impact per cent change comparisons to data from previous years."
_________________________________________________________________________________
In any case, sales and prices are still ahead of last year's pace, which was the second strongest year on record for TREB.
Yes but they are comparing seasonally adjusted figures to last year's unadjusted numbers, so today's 3,206 will be 100-200 less sales next year. TREB's sales data should interpreted with a +/- 3-5% error.
One more thing I discovered from TREBs new reports is that they consolidated condo apartment with condo townhouse prices starting in July, so this would make the average condo price look higher.
Overall, most of the volume is still in 500k+ detached homes, but this barrage will wind down soon. http://i40.tinypic.com/wb2b6r.png
Jay Bryan says the housing crash has been cancelled:
http://www.montrealgazette.com/opinion/Bryan+Inevitable+housing+crash+be...
I read that last night.. Very funny.
Go hype up another blog you superhero. Up-up and away....
Appraiser has now infested Rob McLister's blog (www.canadianmortgagetrends.com) hoping that his pumper style..head in sand.. views will find better reception. Sorry App, you cant hide..the sky (in this case the RE prices) is falling.
Funny? No. Insightful - Yes!
All that is needed to bring down the market is opposing views. There's a lot more psychology to a bubble then you think, and what you're doing is actually contributing to it, even though you don't realize it. That is the underlying truth of it.
Vancouver now a victim of its own success. Good luck Canucks, our prayers are with you.
http://www.youtube.com/watch?v=Ms8zTRMPzjs&feature=player_embedded#!
It's pretty difficult to clearly spot a bubble. I'm convinced that our housing prices are too high. Are we 10% or 30% too high? That's the question. At 10% it's merely a correction. At 30% we are americans!
One of these days the debt to income ratio will have to stop climbing. I think that everybody will agree that the end of climbing is pretty close. Again, how close? Could be today but could also be in 2-3 years. If our banks let us borrow more (with the help of our CHMC) than there is no reason for a housing crash.
Many factors could precipitate the correction/crash. 1) World economy slow down and Canada resources rich feel the pinch with higher unemployment. 2) Interest rates go up just 2 or 3%. 3) The mood of "buy now of get priced out forever" change for a more normal mood. 4) Banks/CHMC/Government make it more difficult to borrow.
Do not underestimate the fact that interest rates will go up eventually. If they keep the same 0% target rate, all our pensions funds are doomed as well as a large % of our seniors.
One think is sure IMO it's that we are at or near the top. The best scenario is no increase in prices for many years to let salaries catch-up with home prices.
Here are institutional definitions of a housing bubble:
There are three basic views of bubbles that are held by economists and the general public.
1) The dominant view among the general public and modern mainstream economists, including the Chicago school and proponents of Supply-Side economics, is to deny the existence of bubbles and to declare that what is thought to be “bubbles” is really the result of “real” factors.
2) The second view, which is espoused by Keynesians and by proponents of Behavioral Finance, is that bubbles exist because of psychological factors such as those captured by the phrase “irrational exuberance.”
3) The third view is that of the Austrian school, which sees bubbles as consisting of real and psychological changes caused by manipulations of monetary policy. This view has the advantages of being forward looking and identifying an economic cause of bubbles.
We have all three, it's a bubble alright...
True real estate bubbles present with two undeniable symptoms, rapid price inflation and unafforadability.
Neither exists.
App - Have you thought about doing a stand-up comedy show?
You're out of words. I rest my case.
You're out of words. I rest my case.
Appraiser,
" two undeniable symptoms, rapid price inflation and unafforadability.
Neither exists."
How do you call the price increase that we had in the last 10-12 years? That's not rapid price inflation?
App knows it's the end game, because even a grade school kid can tell you what the next sequence is in this chart . http://i44.tinypic.com/12387et.png
Luckily someone has TREB’s data plotted (wink* wink*) and can share statistics that nobody else has formulated. Below are Toronto zones ranked by the average number of days on the market from 2006 to present. The figures shown with * are the top three areas that had the fastest rise in number of days during the 2008 downturn (September 2008-May 2009).
Zone - Average
Toronto E02 17.8
Toronto E01 18.9
Toronto W01 24.5*
Toronto W02 22.3
Toronto C10 22.8*
Toronto E03 24.1
Toronto C08 25.2
Toronto E06 24.8
Toronto C04 27.2*
Toronto W07 26.8
Toronto C11 27.3
Toronto C03 29.4
Toronto C09 29.0
Toronto C13 27.9
Toronto C01 27.9
Toronto C02 27.9
Toronto C14 28.1
Toronto C15 29.4
Toronto C07 29.1
Toronto E05 29.7
Toronto E10 29.1
Toronto W08 30.7
Toronto C06 30.3
Toronto E07 30.4
Toronto E04 30.2
Toronto W03 32.5
Toronto W06 32.5
Toronto C12 35.9
Toronto E08 33.2
Toronto E09 34.0
Toronto W09 36.5
Toronto E11 36.9
Toronto W04 38.8
Toronto W10 39.3
Toronto W05 42.1
TREB Map (click zone to zoom in) http://www.torontorealestateboard.com/buying/district_map/index.htm
The bigger they bid, the harder they fall.
Another day goes by and rock bottom interest rates are still here...... and US predictions of higher interest rate increases get further and further out into the future
As long as interest rates stay at these low levels which I fully expect for the next 10 years, RE will be the best asset class to be in.. there are no other asset classes out there one can gain an easy +50% annualized gain in certain hot markets
Keep on dreamin' App. http://i41.tinypic.com/1913zs.png
And keep an eye on this page as mortgage brokers start dropping like flies. http://www.fsco.gov.on.ca/en/mortgage/news/Pages/default.aspx