The Economic Analyst

Exploring what a 'hard landing' in China would mean for the Canadian economy

MARCH 14, 2011

This is the title of a fascinating new report by TD economics. I have long warned that the possibility of a hard landing in China remains the greatest black swan event for the Canadian (and world) economy.

The purpose of this blog…

SEPTEMBER 06, 2010

Welcome to Financial Insights! The lofty purpose of this blog is to share ideas about the macro economy, savings, and investments. The idea is to preserve and enhance our wealth in the turbulent times ahead. In the coming days I will expand on what I mean by 'turbulent times'. I will post some primers to help everyone understand what I believe are the large forces that will shape the financial landscape for the next decade, namely deflation, debt-deleveraging, secular shifts in consumer attitudes, and demographics.

What is deflation?

SEPTEMBER 06, 2010

You'll hear lots of discussion on this blog about deflation, as I believe it will be the dominant financial force over the next several years. We should take a minute and understand just what it means.

Is Canada immune from a foreclosure wave?

SEPTEMBER 07, 2010

In the past few months, several articles have appeared in major  newspapers attempting to persuade Canadians that we will not  see a  foreclosure wave similar to that in the United States.  In every  case, the author  advances some pretty weak arguments along the lines of  “our banks are  more conservative&rdqu

Is there a housing bubble?

SEPTEMBER 07, 2010

Hello again In our last primer we looked at how money is created and destroyed in our fractional reserve banking system.  We examined the implications of this process on inflation (which buoys asset prices like real estate) and deflation (which crushes asset prices).

The dangers of mass psychology (or why overwhelming majorities are always wrong)

SEPTEMBER 08, 2010

Hello again

Daily round-up: Wednesday, September 8, 2010

SEPTEMBER 08, 2010

Hello all Here's a quick recap of the day's must-read articles:

Daily round-up: Thursday, September 9, 2010

SEPTEMBER 09, 2010

Hello all The big news of the day was the unexpected slip in new home prices in August, which fell 0.1% from July.  This represents the first such decline in 13 months.  This article is quite comical. Here's my favourite quote: "The  home price declines were led by Vancouver (down 0.8%) and the Ontario  centres of Greater Sudbury and Thunder Bay (together down 1.9%), and  London (down 1.8%).

CMHC- The enabler to Canada’s housing addiction

SEPTEMBER 10, 2010

Hello again

Can central banks ruin my thesis by stoking inflationary pressures?

SEPTEMBER 10, 2010

Daily Round-up: Friday, September 10, 2010

SEPTEMBER 10, 2010

Hello again

The ‘Hot Asian Money’ fallacy

SEPTEMBER 11, 2010

I can't help but chuckle at the increasingly far-out reasons the media is coming up with to justify home prices in Canada.  One that has been gaining traction over the past couple months is the inflow of 'Hot Asian Money'.  The theory goes that foreign investors, predominantly from mainland China, will continue to invest in Canadian real estate, thus keeping prices at a high plateau.

Late Daily round-up for Monday, September 13, 2010

SEPTEMBER 14, 2010

The content of this blog continues to go mainstream.  We had a couple of survey results released yesterday, the content of which supports what has been said on this wretched blog.  My brother used to post some of my email commentary on his blog.  You can look back through the archive to see for yourself that so much of what is now playing out in the media has been warned about for some time now.

Spinsters at work

SEPTEMBER 15, 2010

Check out the title of the following stories: Home sales rise for the first time since March Home sales up in August Home resales rise

Revisiting predictions

SEPTEMBER 16, 2010

Hello all

Daily round-up: Friday, September 17, 2010

SEPTEMBER 17, 2010

Hello again Time for your daily dose of reality: Four Things That Will Slow Canada's Growth

The media spin machine

SEPTEMBER 18, 2010

Hello all

The role of demographics in a Canadian housing bust

SEPTEMBER 21, 2010

New estimates suggest that 1000 Canadians every day will be turning 65 over the next decade.  One can't help but wonder just how prepared they are for retirement.

Behold the harbingers…the pale horsemen of the coming deflation!

SEPTEMBER 22, 2010

Dashboard lights…

SEPTEMBER 23, 2010

Have you ever been driving along when all of a sudden a light comes on your dashboard? What do you do? Do you keep driving and just hope it corrects itself with no effort on your part and no ill effect? What if several lights come on simultaneously...and there's someone in your passenger seat telling you to deal with the problem before it blows up in your face?

Weekend roundup: Are we really this dumb?

SEPTEMBER 26, 2010

I've been asking myself this question quite a bit today as I've been some perusing news stories from this past week. First let's start with the must-read of the day. Check out this fantastic blog post over at 'Whispers From the Edge of the Rainforest', where the author asks, "How can we be so blind?"

I’m alive….the canary is not!

SEPTEMBER 30, 2010

Well I've managed to survive the nastiest illness of my life.  I can't remember ever feeling as wretched as I did earlier this week.  I'm quite certain it was a real nasty case of food poisoning.  For those of you fortunate enough to not have ever experienced it, count your blessings.  It's awful.


Mini post: Will a hyperinflationary event in the US trigger hyperinflation here in Canada?

OCTOBER 01, 2010

Hello all

Statistical aberration or ‘the new normal’?

OCTOBER 09, 2010

Hello all Do we all understand supply and demand? You know, you take something that is in demand, be it a good or a service, and you compare the supply of that good or service to the demand for it. Very basic economics tell us that if demand outpaces supply, you get price increases. If supply outpaces demand, you get price decreases.

Random thought…if real estate is such a ‘safe’ investment, why won’t the banks touch it?

OCTOBER 05, 2010

Interesting thought, no?  I'm working on another primer, which I hope to post later today.  I came across this interesting chart in a recent CMHC publication.  You'll notice that the banks have not increased their holdings of residential mortgages one penny since 2007.  Why is that?

The Great Connection…

OCTOBER 05, 2010

One of the big goals of this blog is to examine the relationship between Canadian house prices, consumer spending, employment, and the Canadian economy in general. If you've been reading this blog for any time at all now, you'll know that I believe that real estate in much of Canada is significantly overvalued when compared to historical measures of fundamental value.

The chicken, the egg, or a bit of both?

OCTOBER 07, 2010

Hello all

Realtors….they’ve got your back!

OCTOBER 12, 2010

I had to chuckle when I saw this today. It's an advertisement taken out by US realtors in a newspaper in December 2006.

Deflation, gold, and other musings

OCTOBER 16, 2010

Gold hits an all time high while stocks and bonds rally in unison. Market watchers will know that the gold market, the stock markets, and the bond markets all tell different stories. You cannot have them all rise in unison; Something's got to give.

How did we get here?

OCTOBER 16, 2010

You know sales are drying up when…

OCTOBER 16, 2010

Wow.....begging for a low-ball offer. I guess you can't blame them for being desperate. 150 km to the north, Edmonton houses have been bleeding over $2000 a month since mid 2007. They're now almost $90,000 below their peak.

Revisiting fundamentals

OCTOBER 19, 2010

You know you're in an asset bubble when the price of that asset grows far beyond the fundamentals that support them. In the case of real estate, the fundamentals that drive long term growth are incomes, affordability (interest rates), rents, and inflation.

TD gets it. Do you?

OCTOBER 20, 2010

The social fallout of a dying credit bubble

OCTOBER 21, 2010

This post will ruffle feathers, but it's not my intention. I don't mind speaking the unpopular messages when I have to. Let me start by saying that I am a public sector employee. I have nothing against the public sector and those who work in it (how could I since I am one of them...). I think the vast majority of public sector workers are hard working and provide valuable services to the people of this country. But as a collective, the public sector needs to get its head out of the clouds and see what's coming.

Consumer confidence, leading indicators both falling

OCTOBER 22, 2010

As noted before, perhaps the greatest difference between the US and the Canadian economy is not our 'sound' banking system nor out 'conservative' consumers, but rather the fact that we still have confidence in our short term economic prospects, while they don't.

On credit, deflation, housing, and recovery…

OCTOBER 24, 2010

I had a nice discussion with a good friend of mine the other day. She knows my interest in economics and finance, and the discussion wound up making its way back to my main love, the future of the real estate market. It was a bit of an epic discussion. She is a long-time family friend and has 30 years more life experience than I do. As for me, I've read a few things and come to some rather unconventional conclusions. So it was perhaps the classic battle of the wisdom of age vs. the vigour of youth.

Ford sacks Toronto….and other signs of the times

OCTOBER 25, 2010

Yesterday I made the following statement: "We will see austerity either willingly by our elected officials or in a roundabout manner through higher bond yields on our debt, consuming more of our tax base. The accompanying attempt to curb public sector salaries or benefits will set the stage for nasty protests a la Greece, France, UK, Spain, and now in the US." Today we hear that self proclaimed fiscal conservative Rob Ford has taken the liberal stronghold of Toronto.

The big question

OCTOBER 26, 2010

I received this email today: "I have a question for your two cents - I figure Vancouver has a 20% + decline in it, but I can't see any reason for the decline until mortgage rates rise. As long as home owners can pay the bills, they will stay where they are. Granted a slowdown in housing will hurt the economy in general, (and a strong loonie won't help either), but if supply doesn't increase, prices won't come down.

Why the big banks have to lie through their teeth

OCTOBER 27, 2010

I noted in a post a couple days ago that CIBC recently concluded that real estate is about 12% overvalued in Canada. Now this is a country mile from what the big banks were saying last year at this time, and it's a country mile from what they'll be saying next year at this time.

We’re different!

OCTOBER 29, 2010

I was unable to find the time to write up a post yesterday, despite some interesting data points worth discussing. Luckily, others in the blogosphere were on the ball, so I'm not going to discuss topics that have been well covered elsewhere.

Mainstream!

OCTOBER 20, 2010

‘Vulching’ a rental home

OCTOBER 31, 2010

Over the past few weeks, I've received several questions related to renting a home. Let me summarize my current situation since it seems to be a topic of interest to a number of readers.

A Home Without Equity Is Just a Rental With Debt

NOVEMBER 02, 2010

Despite the unsubstantiated ravings of the real estate bulls who have stepped up their vocalizations of late, the facts surrounding the future of real estate remain indisputable. Debt levels remain too high, savings too low, home ownership at record high levels, global economy still surviving on government stimulus, fundamentals all well above long term means (with the exception of affordability which is at the upper range of its historic range, but only because of....) record low interest rates. None of this is sustainable.

Suggested reading

NOVEMBER 03, 2010

Yesterday I mentioned that my view on the sustainability of our debt-based economy in general, and real estate in particular has largely been shaped by a handful of books. I've received quite a few emails asking me for the titles of the books. Rather than emailing everyone, I'll instead list a handful of the important books that influenced my macro economic views, in no particular order. I've also included some commentary on the books and on how they've shaped my convictions in certain areas. Irrational Exuberance (2000)- Robert Shiller

A quick tour through the board stats- October 2010

NOVEMBER 03, 2010

By now many of the big real estate boards have reported their October numbers. Ottawa, Winnipeg, and Montreal being the notable exceptions as well as the national board, CREA. Let's take a quick tour across the country from west to east and see how things are shaping up using information directly form the horse's mouth (board press releases). Let's also watch for examples of the spin machines being put into overdrive! Victoria (VREB.org): Real estate sales rise in October

Housing starts down...but at least debt's not an issue

NOVEMBER 08, 2010

Lots of good info out today. Housing starts decline If you haven't yet read the primer on the importance that real estate plays to the health of the broader economy, you need to. Let me remind you of the experience of our neighbours to the south. When people stopped buying houses, it had wide-spread economic impacts on consumer spending, consumer confidence, economic growth, and employment.

Shocking report by CAAMP....part 1

NOVEMBER 08, 2010

So this morning I stumbled across a little tidbit from a report published by the Canadian Association of Accredited Mortgage Professionals (CAAMP). I haven't been able to get it out of my head. The report itself contains a wealth of interesting data, but there was one sentence that just tripped me up:

Shocking report by CAAMP….part 2

NOVEMBER 09, 2010

Yesterday I highlighted the latest CAAMP report which despite the best efforts of the authors to put a positive spin on the data, nevertheless contained some particularly troubling information. It was not all doom and gloom, but in the name of providing a balance to the biased spin, I will highlight some of the points that caught my attention.

Home owner equity...an indication of a healthy market?

NOVEMBER 09, 2010

This is the final post about the CAAMP report discussed in the prior two posts. I want to discuss the idea of home owner equity as an indication of a healthy market. In the CAAMP report, the discussion on home owner equity begins on page 27. First, a couple notes on methodology before we analyze the content. Flawed methodology

New home prices; Tough budget coming; Canada's trade deficit widens

NOVEMBER 10, 2010

Just a quick post to detail a few developments over the past couple days New home prices rise Stats Canada released its New Home Price Index earlier in the week. New home prices were up 0.2% in September.

Rate of US home price decline parallels Great Depression

NOVEMBER 10, 2010

We found out earlier today that the trade deficit in Canada rose significantly in September, largely on the back of meager demand south of the border. US home price declines accelerate...approach Great Depression levels

Public sector pension bubble; Is your retirement chained to your home?

NOVEMBER 12, 2010

Pension tension The CD Howe institute released an interesting report today in which they suggested that there is a bubble in federal public sector pensions. The report calculated that the government's federal pension unfunded liabilities are some $208 billion, which is $65 billion more than the government had calculated. The implication is that Canada's deficits and total debt have been understated for many years. From the report:

Lessons from the now toothless Celtic Tiger

NOVEMBER 12, 2010

Quick side note: As I noted yesterday, "If jitters persist in Euro-land, expect a strengthening greenback to take some substantial steam out of the rapidly rising commodity markets."

CNN article- "Canada's coming housing bust; MSM still swallowing CREA's spin; Swallowing the tough medicine

NOVEMBER 13, 2010

I came across a couple of articles worth mentioning: From CNN-Canada's coming housing bust

The Big Picture

NOVEMBER 14, 2010

Let's get something on the table once and for all: Are we facing an American-style housing meltdown? We are likely NOT! Any rational person who has objectively looked at some of the lending antics that went on during the American boom times has to concede that we never reached those same levels of irrationality. The US market experienced more speculation, more overbuilding, and more outrageous lending practices. Even the most ardent bear (and I count myself among them) has to admit this.

Rich Chinese investors back in the news...

NOVEMBER 15, 2010

More Hot Asian Money fluff

Commodities spanked; USD strengthens; Deflation in core producer prices

NOVEMBER 16, 2010

Commodities taking a bath! Things are starting to make a bit more sense again. Last week I said the following:

Canadian home prices should be ringing alarms

NOVEMBER 17, 2010

Yet more evidence that the presence of a significant housing bubble in Canada is blatantly obvious to every economist on the planet BUT those whose livelihoods depend on its continued existence. Dean Baker of the Centre for Economic and Policy Research has warned that Canadian home prices are unsustainable:

The 'soft landing' thesis: Valid, but highly unlikely

NOVEMBER 18, 2010

"Why we won't see a housing collapse"....more media nonsense

NOVEMBER 19, 2010

Tired, old adage: It's getting a bit old, yet we continue to find articles chanting the same old mantra to soothe edgy new home buyers: "The risk of a US style housing bust is remote" I've addressed both the inherent dangers in perpetuating a message that amounts to, "we're not exactly like the US, therefore we're fine", as well as the factual fallacies that generally accompany these arguments.

John VS. The Professor: More on the 'soft landing' thesis

NOVEMBER 21, 2010

I will be making an original posting later today. In the meantime, it's nice to have some insightful discussion on the comment section of this blog. Earlier in the week I set out to examine the likelihood of a 'soft landing' in real estate. The empirical data overwhelmingly rejects the notion that asset bubbles produce 'soft landings'.

Tough decisions for Canada; Shilling sees deflation in US

NOVEMBER 22, 2010

Tough decisions for Canada Could it be that our Progressive Conservatives are actually returning to their roots? After running the largest peace-time deficit in history, the Harper government is now actively trying to prepare Canadians for the difficult fiscal times ahead. Born again Conservatives?

New Conference Board of Canada report

NOVEMBER 23, 2010

Conference Board connects the dots... The economic headwinds lined up against the Canadian economy have often been discussed on this humble blog. It was with great interest that I read a new report by the Conference Board of Canada which largely supported these assertions. Yet I was a bit surprised at their ultimate conclusion, which is still forecasting fairly strong growth through 2011.

Teranet House Price Index shows widespread declines in September

NOVEMBER 24, 2010

The Teranet House Price index recorded broad month-over-month declines in September. This index calculates price changes by tracking the observed or registered home prices over time. Properties with at least two sales are required in the calculations. Such a “sales pair” measures the increase or decrease of the property value in the period between the sales in a linear fashion. It's methodology is similar to the widely referenced Case/Shiller index out of the US.

Guest Post: The unintended consequences of ZIRP

NOVEMBER 25, 2010

Note from Ben: This entry is actually a re-post (with permission of the author) from an entry over at Vancouver Condo Info. I have repeatedly warned of unintended consequences of excess government intervention in capital markets. The Zero Interest Rate Policy (ZIRP) at the US Fed, and our own low interest rate version has produced such unintended consequences.

Active vs. Passive management

NOVEMBER 25, 2010

Over the next few days I'm going to post about some basic fundamentals of investing and financial planning. Today I'm going to briefly discuss the active management vs. passive management debate. It's an interesting debate that has significant implications for your long-term wealth strategies. Although it may sound technical, you'll probably find that it's not that bad. If you invest in mutual funds, this is absolutely a post you'll want to read! Mutual funds in Canada

Eurozone coming apart at the seams; Spain and Portugal deny need for bailout.....spreads indicate otherwise

NOVEMBER 27, 2010

Another day, another rise in PIIGS spreads. A spread is just the difference in bond yield between one country's bonds and a 'benchmark' country's bonds. In Europe, the benchmark is the German Bund, considered the most solid bond in the European union. A spread of 4% indicates that one country is paying 4% more to finance their debts through their bond market than Germany is.

Housing and the future of Canada's economy

NOVEMBER 28, 2010

Why are you here? This is far from a philosophical question. This lowly blog is not yet three months old, yet readership continues to grow at a rate that has me pleasantly surprised. This site now frequently receives 2500 daily page views, nearly double from a month ago.

Housing affordability improves; Canada's trade deficit nears record; Banks still not touching residential real estate

NOVEMBER 29, 2010

Housing affordability improves RBC released their quarterly housing affordability publication today. The data was from Q3 of this year, representing the July to September period. Not surprisingly given the drop in bond yields and fixed mortgage rates and a slight decline in year-over-year home prices, the housing affordability measure actually improved for the first time since Q2 2009.

Headwinds revisited: Canada's Q3 GDP slows markedly, turns negative in September

NOVEMBER 30, 2010

It appears that the much-discussed economic headwinds to the Canadian economy are now being felt. Q3 GDP data was released today and significantly disappointed to the downside. Economists had been expecting nearly double the meager 1% reading. At least those economists who don't frequent this lowly blog. Even more 'surprising' was an outright decline in September GDP reading, which retrenched 0.1%. From RBC economics:

Video Primer: Does Canada have a housing bubble?

DECEMBER 01, 2010

My brother has finished his second video using information contained in the primers on this site. This one explores whether or not the Canadian housing market on aggregate is supported by measures of fundamental value. While some of the data is now slightly aged (particularly the housing starts, which we recently found out have plunged of late), it still serves as a standing challenge to the real estate bulls to formulate a rational argument as to why residential real estate in most centres represents a good near-term investment. Anecdotes don't count! Check it out!

Changing social trends in the news...

DECEMBER 01, 2010

'The times they are a changin' One of the topics that greatly interests me is the change in societal attitudes and norms, and how these affect the broader economy.

More red lights in China; House prices at a stalemate?

DECEMBER 02, 2010

Tomorrow we'll do another monthly round-up of the big real estate board stats. Victoria and Calgary are out already. Toronto and Vancouver come out tomorrow. Should be fun! Red lights in China...What's next for commodities? Hat tip to Donald for emailing me this story. China leading indicators flashing red lights

Quick tour through the board stats- November 2010

DECEMBER 03, 2010

It's that time of the month again. We once again turn our eyes to the big realtor boards and dissect the sales, inventory, and price trends in their real estate markets. Victoria Sales totaled 479, representing a rise over the previous few months, but remaining 21% lower than last year's numbers and standing at near decade lows.

Inflation, Hyperinflation, Deflation, Stagflation, Screwflation......what's in store for Canada?

DECEMBER 05, 2010

Gazing into the crystal ball... There is still a great deal of debate about what Canada's future monetary landscape will look like. It's should be a topic of interest for everyone as it absolutely determines which asset classes will outperform in real terms over the next few years. Now I don't have a crystal ball, but I will once again share my thoughts on what the future may hold with regards to monetary inflation.

Bank of Canada interest rate outlook; Consumer confidence in the dumps

DECEMBER 06, 2010

Bank of Canada rate outlook The structural issues with Canada's miraculous economic growth coming out of the recession has been painfully obvious to me for some time now. When one strips away the economic spin-offs of rising home prices and the associated wealth effect spending, inventory restocking by businesses, and stimulus spending by government, we find our growth miracle was largely a mirage.

Canada's credit bubble

DECEMBER 07, 2010

Stats Canada has released some updated data tables for consumer and mortgage credit. Let's have some fun and look at the growth in credit vs. the growth in income and inflation over the same period. Total inflation growth according to the Bank of Canada

Bank of Canada sounds alarm bell

DECEMBER 09, 2010

Bank of Canada sounds the alarm bell The Bank of Canada released their latest Financial System Review today. While they speak at length of the risks of European contagion, a weak global economy, low interest rates, and global imbalances, it is the section on household finances that caught my eye:

Canadian bankers fret over mortgage amortization lengths; China moves to quell inflation...will it squash the commodity rally in the process?

DECEMBER 10, 2010

Bankers seeing the light

"The greater the complacency, the more brutal the reckoning"

DECEMBER 13, 2010

Household debt hits new record Remember back in 2009 when articles like these were so prevalent? "Perhaps Canadians are inherently more conservative than Americans and that has kept the market steadier..."

Guest Post: How low interest rates screw up the economy

DECEMBER 14, 2010

Hat tip to Caleb over at TANSTAAFL CANADA! for this excellent post explaining how low interest rates screw up the economy, a common theme on this site. Caleb has given his permission for this re-post.

Are the big banks really concerned about the consumer or are there ulterior motives?

DECEMBER 14, 2010

Hat tip to John for this insightful comment in regards to Ottawa's discussions about changing mortgage requirements. I have added a few graphs to support John's position, which I fully agree with. It doesn’t make much sense to close the barn door after the horse is gone. The government, minority or majority, cannot kick the legs out from under the lower end of the housing market. Housing markets collapse from below.

The Great Mortgage Amortization Debate

DECEMBER 14, 2010

The Amortization Debate You'll recall that bank CEOs of all people are now putting pressure on Flaherty and Harper to curb debt levels by, among other things, raising down payment requirements and/or shortening maximum mortgage amortization lengths.

CREA releases November sales data: Real estate showing clear signs of strengthening, but questions remain.

DECEMBER 15, 2010

CREA released their final sales data for November. Needless to say, the market is showing some surprising strength, though some unanswered questions remain. Sales did register 9% below 2009 levels, but they were certainly not alarmingly low. However, with the exception of the panic-induced abysmal sales levels of 2008, they did come in at the lowest numbers in at least 5 years.

My Canadian economic forecast: Not particularly rosy

DECEMBER 16, 2010

After Canada's GDP posted a 'surprisingly' low 1% annualized growth rate in Q3, with September readings turning negative, economists went back to the drawing board to update their economic forecasts. Yesterday TD released its updated quarterly economic forecast. It provides some interesting thoughts, though I certainly don't agree with all of their views.

More media nonsense: "Our housing market to side step U.S. style bubble"

DECEMBER 16, 2010

More media nonsense Another "we're different from the US therefore we have no housing issues" article has hit the media, this time on the Moneyville website, which is associated with the Toronto Star. Our housing market to side step U.S. style bubble Author: Mark Weisleder

New signs of slowing global trade: What are the implications for Canada?

DECEMBER 17, 2010

Courtesy of ZeroHedge, we have two new signs of slowing global demand, both of which may indicate near-term pressure on Canadian exports and commodity prices. 1) Baltic Dry Index This is an index I enjoy tracking. Essentially the index tracks worldwide international shipping prices of various bulk cargo carriers. In other words, it is a representation of the change in price you would pay if you wanted to obtain the services of a bulk cargo ship and transport goods across the ocean.

"The challenges we face have only just begun"

DECEMBER 18, 2010

Reality bites!

No debt problem here!

DECEMBER 20, 2010

I want to start this post with the following quote: "Recent developments in consumer finances are characterized by an unusual combination of hopeful and worrisome trends. Consumers remain the primary source of strength for the economy, but rising consumer indebtedness is a source of concern. The reasons for increased indebtedness and the types of debt being accumulated, however, make consumer obligations somewhat less worrisome than aggregate statistics might suggest. Notably, strong income growth and a robust housing market have supported borrowing."

Don Coxe on the Canadian real estate market and implications for investors

DECEMBER 21, 2010

Coxe on the Real Estate Bubble If you're not familiar with Don Coxe, he is a respected Canadian money manager with 35 years of experience as an institutional investor. He is an outspoken commodity bull and noted inflationist.

Nicole Foss on Canadian real estate: "We are in a massive bubble"

DECEMBER 21, 2010

Deflation, austerity, and housing blues in the US; Risks to Canada's growth from the IMF

DECEMBER 22, 2010

Deflation in the US The January 2011 edition of the Bank Credit Analyst has been released (hat tip to DR for the head's up). For copyright reasons I can't link to it, but I will post a few interesting quotes. For more info on BCA Research, check them out here. They are a well-respected economic research firm. This latest issue provides an outlook to 2011. Some key quotes:

An alternate viewpoint on Canada's credit bubble

DECEMBER 25, 2010

Merry Christmas! I said I wouldn't post again until the 27th, but I noticed this gem of a comment from John in Ottawa. I've reposted a couple of his comments before. They are always well thought out, weighted, and insightful. This one is no different.

China raises rates: More thoughts on the China-Commodity connection

DECEMBER 27, 2010

China raises interest rates Two weeks ago I suggested that a rate hike was all but assured from the People's Bank of China. I expected the rate hike on December 11th. Instead, perhaps out of fear of causing a hard landing in their overheating economy­, the People's Bank stopped at raising reserve requirements at Chinese banks in an attempt to limit the amount of new credit entering the system.

UK house prices falling; Carney's debt conundrum; Is the smart money fleeing China?

DECEMBER 27, 2010

UK House Prices Falling You have to pity those poor homeowners who don't live in fairytale countries like Canada and Australia where fundamentals like price/income, price/rent, and affordability mean nothing. In countries where fundamentals do matter, like the US and evidently the UK, it's a different story. UK House prices fall for sixth straight month

Chamber of Commerce's Economic Outlook

DECEMBER 28, 2010

The Canadian Chamber of Commerce has released their economic outlook for 2011. You may recall that I released my own economic outlook a few weeks ago. Interestingly, both outlooks express concerns over the exact same issues, with the Chamber's forecast calling for fairly robust growth in spite of these headwinds. On the current state of the economy:

Building a winning investment portfolio: Part 1

DECEMBER 29, 2010

This is the first of a three-part series.  Please also check out part 2 and part 3. Investment portfolios I was inspired by a recent BMO press release to revisit the topic of asset allocation and building an investment portfolio.

Building a winning portfolio: Part 2

DECEMBER 30, 2010

In part 1 of this mini series, we looked at how to build the two portfolios every household needs: an emergency fund and a retirement fund.

Harper warns of mortgage rule changes; Canada's economic albatross; Amazing post by Mish

DECEMBER 30, 2010

Harper hints at rule changes An interview with Stephen Harper aired on Christmas day on CTV. The PM discussed a number of topics including the economy, Afghanistan, and US relations. While discussing the current state of the economy and upcoming budgets, Harper had this to say:

Happy New Year! What might 2011 hold?

JANUARY 01, 2011

Happy New Year to all! As we begin another year, it's always fun to contemplate just what the next 365 days might hold. Below are a few 'top 5' lists covering a range of finance and economic topics. Top global real estate stories: 1) Canadian real estate begins a protracted period of falling valuations. Sales remain weak. Listings gain steam throughout the year. I expect 10% off year-ago levels as a minimum.

Who's the 'hare-brained' one? More hot air from perma-bull Jay Bryan

JANUARY 02, 2011

Frustration in Europe's youth; Public unions under the gun in the States; China considering major property tax to squeeze bubble

JANUARY 05, 2011

European youth grow agitated Unemployment for the under-25 crowd is still stubbornly high across most of the Western world. As I've said before, young people with little by way of job prospects and facing the reality of a lower standard of living via rising taxes and shrinking government spending have a dangerous tendency to embrace radical ideals. The next few years will see the increasing popularity of fringe political parties in Europe, as they tap into growing resentment in generation Y'ers in particular.

"It's a great time to buy a house" -Royal LePage; Canadians opinion on the economy sours

JANUARY 06, 2011

As we anxiously await the December stats from the last few big real boards, let's turn our attention to the antics of increasingly desperate realtors. "Buy a house.....PLEASE" -Royal LePage I may have paraphrased it slightly, but that's the gist of a 'report' by Royal LePage predicting *surprise, surprise* that real estate prices will increase in Canada in 2011.

Canadian employment picture brightens...but questions remain

JANUARY 07, 2011

Employment picture brightens Stats Canada released the latest job figures today: Employment edged up for the second consecutive month in December, with an increase of 22,000. The unemployment rate held steady at 7.6%. Compared with December 2009, employment increased by 2.2% (+369,000), following a decline of 1.1% the previous year.

Watching for signs of a deflating Canadian debt/real estate bubble

JANUARY 08, 2011

One of the favourite pastimes of those who acknowledge the existence of a credit bubble in Canada (self included) is predicting what will cause its demise and what might give us an early indicator of debt fatigue. What will cause the credit bubble to pop?

Trends in the news

JANUARY 09, 2011

I thought I might take this post to highlight a series of articles that detail various trends that I see as being big stories over the next few years. The bolded titles are also links to the original article. Canadian pension plan funding dips in 2010 Back in my 2011 predictions I made the following statement:

Value of building permits plunges in November; Bank of Canada talks tough

JANUARY 10, 2011

Building permits plunge

December housing starts hit the brakes....again

JANUARY 10, 2011

Housing starts hit the brakes After the much celebrated November housing starts showed a pronounced spike over October's numbers, I suggested that this number was likely a one-time bounce off a declining trend line.

Survey of Forecasters data; From stimulus to restraint; China's empty malls

JANUARY 12, 2011

Survey of Forecasters The Conference Board of Canada has released their 2011 survey of economic forecasters (subscription required) in which they surveyed economists about the growth prospects for the Canadian economy in 2011. The average analyst estimate for final 2011 GDP growth is 2.5%. This represents a 26% adjustment from analyst expectations earlier in 2010 when they forecast 2011 growth in the 3.4% range.

More on demographics and the Canadian housing bubble; Rosenberg's new love affair with Canada

JANUARY 13, 2011

Demographics and the housing bubble

Housing: A bug in search of a windshield

JANUARY 16, 2011

Emotions...

Bob Farrell's 10 rules for investing...applied to real estate

JANUARY 19, 2011

It's worth remembering that when it comes to getting perspective on current events, humans have several major flaws. For starters, we have an uncanny ability to project our current reality into the indefinite future. In a related manner, we tend to believe that the era in which we are living is 'normal', when a study of history tells us otherwise. Even when we can clearly see that we live in extremely anomalous times, we can easily be convinced that we live in a 'new era' where the old rules no longer apply.

Toronto condo data; China about to hit a wall?; Fiscal austerity to weigh on public sector jobs; The Age of Deleveraging; Another video primer

JANUARY 20, 2011

Toronto condo data The Toronto Real Estate Board released their most recent rental market report yesterday. It showed both a substantial jump in rental transactions and a jump in rental inventory.

Do buyers or sellers determine real estate prices?

JANUARY 20, 2011

It's a question worth considering as we approach month 7 of the buyer/seller standoff. The new mortgage rules will certainly limit the ability of a number of would-be home owners to acquire the financing needed to keep house prices bid at their current levels. Home owners might believe that they set market prices and if no willing buyer can be found at their price point, they can simply pull the listing until prices firm. No doubt this is a motivating factor behind the massive decline in inventory nation wide over the last 6 months. But how rational is this move?

CAAMP puts the cart before the horse

JANUARY 21, 2011

New CAAMP report The Canadian Association of Accredited Mortgage Professionals was already in damage control mode prior to Flaherty’s mortgage rule change announcement. Earlier in the week, CAAMP chief economist Will Dunning released a report titled, ‘Good Lord please don’t change the mortgage rules!’…..more or less.

Guest Post: Bubbles and Blunderbuss

JANUARY 22, 2011

(Note from Ben: The following is a guest post from 'John in Ottawa', a frequent commenter on this site. I have added a few of my own thoughts at the end of the post) Recently, Canada’s Finance Minister Flaherty announced new regulations tightening CMHC insured mortgage and lending standards.

More thoughts on CAAMP report; RRSP use among younger generation at record lows;

JANUARY 23, 2011

Economic dynamics revisited

Demographia Housing Affordability Survey released

JANUARY 24, 2011

7th annual Demographia Housing Affordability survey released Demographia has released its 7th annual housing affordability survey. The report examines the housing markets across the English speaking world by comparing the mean multiple (essentially the house price to income ratio) of various cities, highlighting land use regulations, and looking at other factors that influence price.

Consumer confidence rises in January; Global food inflation concerns mounting

JANUARY 25, 2011

Consumer confidence rises in January The Conference Board released its January consumer confidence reading yesterday. The index rose 7.1 points to sit at 88.1, still well below the pre-recession average of +-100, but still much better than would be expected.

More on (the lack of) realtor ethics; CPI hit 2.4% in December

JANUARY 25, 2011

Realtor ethics....an oxymoron?

Asset bubbles according to Jeremy Grantham: Applications to the Canadian real estate market

JANUARY 26, 2011

Intro Jeremy Grantham is a living stock market legend. He is a deep value investor who has brought new concepts to the world of stock market investing. He championed the 'small cap value' approach and has a stellar track record. He is currently the Chairman of the Board of Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm. He currently oversees over $100 billion in assets.

House prices decline for third consecutive month; Major GDP miss in Britain; House price double dip accelerates in US

JANUARY 26, 2011

Teranet Index declines for third straight month The November Teranet index released today registered its third straight monthly decline. "Canadian home prices in November were down 0.2% from the previous month, according to the Teranet-National Bank National Composite House Price Index™. This retreat followed monthly declines of 0.4% in October and 1.1% in September after a run of 16 consecutive increases.

Household credit analysis: What the boom looks like before the bust

JANUARY 27, 2011

CIBC released their latest household credit analysiss report yesterday. It is full of interesting data points. Though nothing in the report is particularly shocking for anyone who has been reading this blog and is aware of the ongoing credit bubble in Canada, it acts as one more flashing neon warning sign. Though too early to tell for certain, it also may give us the first look at the slowing credit that precedes monetary deflation. What is peak credit and are we close to it?

The week that was

JANUARY 29, 2011

Lots of interesting happenings on the economics front from this past week. Here are a few that were on my radar: Canada's economic recovery not as strong as originally reported Canada no longer leads recovery standings

David Dodge interview on BNN: "House price to income, house price to rent at historic highs"

JANUARY 30, 2011

David Dodge, the former governor of the Bank of Canada, gave an interesting interview this past week on BNN where he discussed the new mortgage rule changes and the housing market in general. Thanks to VREAA for this gem and for transcribing the interview. Some of the key quotes:

Sunshine and lolipops! November GDP on FIRE

JANUARY 31, 2011

November GDP on FIRE! After recording a surprisingly weak 0.1% increase in October, the November GDP reading roared back to life to the tune of a 0.4% increase. The gains were driven largely by the FIRE group (Finance, insurance, Real Estate) which recorded their strongest showing since the Spring when the housing market was firing on all cylinders.

New CD Howe report: CMHC liabilities equal 30% of Canada's GDP

FEBRUARY 01, 2011

CD Howe released an interesting commentary on the current role of CMHC in the mortgage market. It is well worth the read as it not only highlights the potential (and unnecessary) risks to taxpayers, which we'll discuss, but also debunks the notion that high home ownership rates are beneficial to the broader economy. On the dominance of CMHC in the mortgage insurance market:

Is homeowner equity a predictor of future price movements?

FEBRUARY 02, 2011

There's been quite a buzz about Vancouver detached homes hitting a new all-time high. I will address that data in my monthly tour of board stats just as soon as the data packages are released at the other big boards, which should be on Friday. In the meantime, let's consider an article from the Globe and Mail (kind thanks to my number 1 fan Mango for the link): Why a rate hike won't be a blow to most

Canada's banking system: Solid as a rock?

FEBRUARY 02, 2011

Canada's big 5: The global darlings There's no doubt that our banks have been the darling of the world over the past two years. The world has been quick to heap praise on our banks, while our politicians have been quick to direct that praise back to their own oversight of the system.

Capital Economics report suggests that rising interest rates could trigger housing collapse

FEBRUARY 03, 2011

Rate hikes could trigger Canadian housing collapse At least that's the conclusion of a new report from Capital Economics who have calculated that home prices could fall 25-35% as the overnight interest rate from the Bank of Canada rises from its current level of 1% to closer to 3.5% by the end of 2012.

Misleading averages: Where the economic pain of a housing bust would be felt

FEBRUARY 04, 2011

More on the Capital Economics house price report

FEBRUARY 04, 2011

I was able to get my hands on the Capital Economics report (hyperlink removed at the request of the authors -ed._ . The report mirrors exactly what I've been warning about on this blog...nearly verbatim. You can understand then why I'm so smitten with it. Just for kicks, read this post before you read the Capital Economics report. Compare. Let's look at some key quotes and graphs: On the unprecedented rise in house prices

More lessons from the Irish experience

FEBRUARY 04, 2011

Ireland is a financial basket case. Yet only a few short years ago they were the envy of Europe. Ireland was dubbed the 'Celtic Tiger'. Strong economic growth had much of Europe caught in awe and envy. Ireland enjoyed budget surpluses. The good times were projected to continue indefinitely. In late November they received a bailout: An EU lifeline to protect them from creditors who increasingly viewed them as a default risk.

Quick tour through the board stats: January 2011

FEBRUARY 05, 2011

It's that time of the month again. Let's dive into the monthly board stats and see how things are shaping up. The board press releases can be found by clicking on the city name. Victoria Residential sales totaled 339, a decrease of 19% from last January's total of 418. Active listings rose slightly over December's numbers to sit just under 3300 units. This represents an increase of 15% over last January's inventory total of 2800 units.

Employment numbers rocking!; Building permits rise on new Ontario condo projects; Big banks begins hiking rates; Ignatieff warns on housing market risks

FEBRUARY 08, 2011

Employment numbers decidedly above expectation Expectations of 20,000 new jobs added in January were fully blown out of the water by the 69,000 new jobs added by the Canadian economy. Very impressive stuff. If we dig beneath the surface we do discover that while the headline number is still excellent, there are a few facts worth keeping in mind:

Housing starts flatline; Remax discusses past real estate performance; CREA updates 2011 housing forecast; China raises interest rates

FEBRUARY 08, 2011

Housing starts flatline CMHC released their January 2011 housing starts data today. Seasonally adjusted housing starts were virtually unchanged from December 2010 numbers, but down significantly from both the 12 month average and last January's numbers. From BMO:

Shiller weighs in once again on Canadian real estate

FEBRUARY 09, 2011

Robert Shiller, the Yale economist, famed bubble expert, and co-creator of the Case-Shiller house price index in the US has once again added his thoughts to the Canadians housing miracle: Canada is 'a purely random success story': Shiller On the broader Canadian economy....is it as strong as we often hear?

Credit risk across the nation: Who's most at risk from an interest rate shock?

FEBRUARY 11, 2011

TD has come out with a very fascinating report in which they've assessed the financial vulnerability of households across the country. It's full of interesting data, though some of them certainly questionable. Perhaps most interestingly, they have made easily available a range of financial data going back over a decade. The trends certainly speak for themselves, and we'll look at those in more detail in a moment.

Trade balance surprises to the upside: A new trend or a one-off reading?

FEBRUARY 12, 2011

The big news from this week was the shocking rebound in Canadian exports in December, which pushed the balance of trade (exports - imports) well into positive territory at a $3 billion surplus. From Stats Canada: Canada's merchandise exports rose 9.7% to $37.8 billion in December, led by a 16.5% gain in volumes of energy products. Export volumes, up 6.6%, increased in most sectors. Prices rose 2.9%. Both volumes and prices have risen in 8 of the past 12 months.

Guest Post: Social Issues Surface as Europe Considers Fiscal Austerity to Solve Debt Crisis

FEBRUARY 13, 2011

CREA releases final national resale numbers for January

FEBRUARY 15, 2011

CREA released their January Canadian resale numbers today.

Housing envy and the 'Joneses'...How a realignment in consumer expectations will pull at aggregate house prices

FEBRUARY 17, 2011

"A house may be large or small; as long as the surrounding houses are equally small it satisfies all social demands for a dwelling. But if a palace rises beside the little house, the little house shrinks into a hut." –Karl Marx Conspicuous consumption and the new consumer culture

Report highlights from 'The Current State of Canadian Family Finances'

FEBRUARY 18, 2011

The Vanier Institute of the Family released their annual Current State of Canadian Family Finances report earlier this week. It is well worth highlighting their important findings: Unemployment rate misleading: Considering the 'hidden unemployed'

Conference Board on housing; OECD leading indicators show a slowdown in emerging markets

FEBRUARY 22, 2011

Conference Board weighs in on housing The Conference Board of Canada has published their Metropolitan Outlook for 2011 (subscription required to read report). While the outlook for each city is interesting, I was drawn to their macro outlook for Canada as a whole where they chimed in on two topics that I often discuss on this blog: Consumer spending and housing. On consumer spending...

Teranet index reverses 3 month decline, posts positive monthly gains in December

FEBRUARY 23, 2011

The Teranet Index is an index used to calculate house price increases by using a paired-sales methodology similar to that of the Case-Shiller index in the US. It provides an alternate view of the current state of the housing market. Unfortunately, it is consistently 2 months behind as the data takes longer to process.

Capital Economics on the Canadian economy: Housing downturn to hit hard

FEBRUARY 23, 2011

Capital Economics back at it again Just a few weeks after releasing a controversial report suggesting that Canadian real estate was heading for a significant correction, Capital Economics is once again back at it, this time suggesting that this same downturn is set to hit the economy hard.

RBC releases latest housing affordability report

FEBRUARY 24, 2011

RBC has released their latest housing affordability report for Q4 2010. Key findings: Housing affordability improved modestly in Q4 2011 on the back of lowering fixed (qualifying) interest rates.    

Public sector and their unions put on notice; Humourous commentary about 'bubblebloggers'

FEBRUARY 26, 2011

Public sector and their unions put on notice

Debt Crunch: A look at Canada's record level of household debt

FEBRUARY 27, 2011

Action Canada Task Force releases final report The Action Canada Task Force on Canadian Household Debt released their final report on Friday. The report echoes many of the concerns I have expressed on this site, namely that high debt levels have the potential to cause significant and under-appreciated economic hardships when an inflection point is reached.

Why falling house prices will pull at employment (not the other way around)

MARCH 01, 2011

Why a housing downturn would hurt employment This is a topic I discuss often on this lowly blog. It's a source of confusion for many people as most see employment as buoying house prices, not the other way around. I take a decidedly different view on this. The argument typically runs along the lines of, "house prices won't fall until there's a fall in unemployment". Let me suggest that one of the problems with credit bubbles is that they mask the true employment picture, which becomes clear as day the moment the credit binge dries up.

Scotia calculates the risk of sharp housing correction is 'low'; Gaping holes in their logic

MARCH 02, 2011

I want to spend a bit more time looking at the Scotia Economics report on Canadian real estate trends released yesterday. The report can be found here. In particular I want to zone in on page 4 which has as a title for this section, "Risk of a Sharp House Price Correction Remains Low". I'm frankly quite shocked at some of the inconsistencies and glaring holes in the logic of the authors. Let's first highlight the key quotes from this section:

BMO's housing outlook; Bond yields explode....mortgage rates will follow; Food prices set to rise

MARCH 03, 2011

BMO releases draft housing outlook Thanks to TH for sending this my way. In keeping up with Scotia's housing forecast released earlier this week, BMO has released a similar draft document: Canadian Housing Outloook- 2011 Some key quotes:

''I should be very worried about Canada'' -Paul Krugman

MARCH 05, 2011

Well the monthly round-up is consuming a bit more time than expected. I'm hoping to release the final numbers tomorrow instead. However, I would like to quickly highlight a very brief blog entry by Nobel Prize winning economist Paul Krugman. Though our economic and political ideologies vary markedly, the man can nonetheless see the writing on the wall when it comes to our current housing market and debt situation:

Revisiting predictions: Commodities still hanging tough, public sector unions under fire, European debt crisis intensifies, interest rate predictions

MARCH 08, 2011

Revisiting predictions

New Video Primer- CMHC

MARCH 08, 2011

The 4th primer on the role of CMHC in inflating Canadian house prices has now been turned into a video. Enjoy.  

Should everyone rent? When does it make sense to buy? A closer look at the price/rent ratio...

MARCH 09, 2011

These are great questions. I receive a couple emails each week from people looking for advice on this topic. Some are potential first time buyers, but many are existing home owners. My advice to those people may surprise my readers as I have yet to explicitly suggest that it is in someone's best interest to sell their current home. Should existing home owners consider selling?

Employment number misses consensus; US consumers cutting back....will Canadians follow?; Another great CMHC video

MARCH 11, 2011

Employment misses consensus Stats Canada released their most recent employment numbers today. The headline stat reported in most media outlets is the 15,000 net new jobs created in February. However, aside from that stand-alone headline, the report is actually very weak. Let's look at the good news and bad news contained in the report. Good news:

Macleans: "Two charts you need to see about commodities and the housing market"; Shiller on the psychology of housing bubbles

MARCH 12, 2011

Hat tip to DR for sending this link: Two charts you need to see about commodities and the housing market- Macleans Veeeeery interesting article. Some key quotes and graphs:

Bank of America Merill Lynch weighs in on Canadian real estate

MARCH 15, 2011

Bank of America Merill Lynch has released a new report about Canadian real estate titled, "Our Homes Have Four Walls". Hat tip to Dylan for emailing this to me. The main conclusion of the report is as follows:

B of A / Merril Lynch on Canadian housing...part 2

MARCH 15, 2011

We're discussing the questionable findings of a Bank of America Merril Lynch report titled “Our Homes Have Four Walls" in which they argue that strict lending standards and the generally conservative nature of the Canadian consumer will allow house prices in Canada to remain at what the report itself notes are "stretched valuations metrics".

Why the housing market is now almost entirely at the mercy of the bond vigilantes

MARCH 17, 2011

Understanding the Mortgage Qualifying Rate I apologize in advance for a short post. I want to highlight a great article over at Move Smartly in which the author nicely explains the Mortgage Qualifying Rate.

Reckoning day for the mortgage market?; More on the price/rent ratio

MARCH 18, 2011

Reckoning day for the mortgage market? Today's the day that the axe falls on the 35 year amortization mortgage. As of today, being approved for a mortgage gets just a little tougher. In addition, the amount of home equity that can be pulled out is now limited to 85% from 90%.

Steve Keen discusses debt, housing, and the economy

MARCH 20, 2011

Steve Keen is a professor at the University of Western Sydney and is the author of several great books on economics. He also writes the fantastic economics blog, "Debt Deflation". If you aren't familiar with his work, you owe it to yourself to get acquainted with it. Keen recently gave a fantastic talk to the Mortgage Finance Association of Australia. The audio of the talk as well as the slide show can be viewed at the following link:

Understanding The Economist data on Canadian housing

MARCH 22, 2011

I have to apologize for my short posts lately. I will be back to more in depth analysis shortly, but this is a very busy time for me. I would like to very quickly discuss the cool interactive global property price feature over at the Economist. I've received a few emails from people asking why it shows such a tiny, insignificant rise in Canadian house prices compared to other nations. Here are some screen shots to show what I mean (thanks to JD for emailing them to me):

Scotia on the ‘Tapped out’ consumer; TD on Ontario’s debt problems

MARCH 24, 2011

The 'tapped out' consumer Scotia economics has reiterated a call that I've been sticking to all year: The Bank of Canada will be highly hesitant to raise rates later this year.....if at all. But for the housing bulls who frequent this blog, let's recognize that while the speed at which interest rates will rise will likely be slow, their ultimate direction is unquestionable.

House prices and per capita GDP: A sure sign of a bubble?

MARCH 25, 2011

I'm currently working with some data to show the historic relationship between house prices in Canada and various other factors such as inflation, population growth, immigration, income, mortgage debt, rents, etc. I'll share the data as I complete it and then compile it into one giant post that will become the next primer.

David Madani on CBC’s “The Lang and O’Leary exchange”

MARCH 26, 2011

You may recall that David Madani from Capital Economics released two reports earlier this year which were exactly in line with the preditions on this blog. In the first report, he outlined his concerns about the Canadian real estate market, focusing on the same measures of fundamental value often discussed here.

House prices: Examining inflation and supply/demand factors

MARCH 28, 2011

I continue to work with some CREA data to find historic relationships between house prices and other factors. I posted earlier on the historic correlation between house prices and per capita GDP, which shows significant overvaluation on a nation wide basis. Today we'll look quickly at inflation and then at some supply and demand factors.

So much for the ‘conservative’ Canadian consumer: Another look at Canada’s credit bubble

MARCH 30, 2011

The 'conservative' Canadian consumer has been often cited as one of the primary reasons for Canada's miraculous escape from the depths of the Great Recession. In fact, earlier this week, the deputy governor of the Bank of Canada attributed our ability to largely side step the worst of the recession to our, "relatively strong household balance sheets".

A regional look at Canada’s housing bubble: Part 2

APRIL 04, 2011

Note to my readers: Due to some technical problems, I was not able to make any posts this weekend. My apologies.

Another look at mass psychology, asset bubbles, and the Canadian real estate market

APRIL 06, 2011

Understanding the driver of asset bubbles Perhaps the greatest distinction between those economists who have correctly identified asset bubbles in the past and those whose economic models failed to identify them is the ability of the former group to recognize the role that mass psychology plays in building asset bubbles. My personal belief is that an asset bubble needs several key components in order to be birthed. It's difficult to say which comes first, but I do believe that an asset bubble requires the following:

What are the implications?

APRIL 07, 2011

I'm working on a neat series looking at the historical percentage of GDP derived from residential construction in different provinces and connecting that to the change in the percentage of the workforce employed in construction over time. It might give us some hints on how a potential housing correction might weigh on economic and job growth. Stay tuned for that.

Is a Canadian first time home buyer’s strike in the works?

APRIL 08, 2011

RBC releases first time home buyer survey As Australia wrestles with a housing bubble that dwarfs our own, home buyers in Australia have wisely clued in to the dangers of buying at such inflated prices and have been busy organizing a formal buyer strike campaign. It now appears that first time buyers here in Canada may be adopting a similar, albeit less organized approach.

"Housing: Real Insanity".....Great article in Canadian Business

APRIL 10, 2011

A quick note to my readers: Posts will be a bit sparse over the next two weeks while the final bugs are worked out of the new site. Within a couple weeks, this blog will exist no more. The transition will be a bit tedious, but it should pay off. The new site is much more user friendly and has some great features. Bear with me during the transition. I wanted to quickly highlight a great article from last week that should be mandatory reading:

Measuring the potential economic impact of a housing bust

APRIL 11, 2011

We do in fact live in unique times. While we can disagree on exactly what the future holds for real estate in Canada and what implications (if any) this may have on the economy, we can not disagree on certain facts.

Bank of Canada holds the line; Royal LePage releases ‘research report’; “Canadian 30 year olds are screwed!”

APRIL 12, 2011

Bank of Canada holds the line Those with variable rate mortgages can breathe a sigh of relief as the Bank of Canada held the line on interest rates today, as expected, keeping the overnight rate at a paltry 1%.

How important is construction to economic growth and employment across Canada?: Part 1

APRIL 13, 2011

Note:  Part two of this series can be read here.

Inflation tops expectations…is a rate hike all but assured?; Will Canada be ‘going dutch’?

APRIL 19, 2011

Inflation tops expectations Stats Canada released their March inflation readings which surprised significantly to the high side.  While economists were widely expecting a 2.8% year-over-year increase, the actual increase registered at 3.3%, the highest since mid 2008. Perhaps more significantly, the increase was widespread and not largely concentrated in the energy component of the Consumer Price Index.

More data on Canadian savers; Interesting Ontario renter survey

APRIL 21, 2011

MORE DATA ON CANADIAN SAVERS TD released an interesting mini report yesterday examining savings practices of Canadians.  While there were no particularly earth-shattering revelations, the report again highlights the ongoing plight of the Canadian consumer.  Some key points:

Looks like we've got the attention of Canadian Business...

APRIL 21, 2011

Well we got the attention of Larry MacDonald over at Canadian Business: Are house prices going to tumble?

Stats Canada discusses household debt

APRIL 24, 2011

Quick debt primer: Stats Canada released an interesting report last week dealing with consumer debt levels in Canada.  Before getting to that, it's worth taking a minute and discussing consumer debt levels in Canada by way of a quick primer for any new readers.  Most readers of this site know that aggregate consumer debt levels in Canada remain at historic highs.  As a measure of GDP, consumer debt levels are on par with those of our American neighbours prior to the implosion of their debt bubble.

Why investors favour Canada

APRIL 25, 2011

Note:  The following post is a guest post from John in Ottawa.  I've added a few thoughts at the end.  -Ben   Why Investors Favour Canada Canada is an attractive market for foreign investors looking for safe, reliable returns relative to investments made in the United States or in US dollars. Looking strictly from the point of view of an investor with US dollars to invest, consider what has happened in the US since 2000.

Keeping an eye on consumer credit expansion in Canada

APRIL 26, 2011

Consumer credit expansion slows in February I've been curious lately about the effect of the new mortgage rule changes on the expansion in consumer credit in Canada.  The new rules to limit home equity extraction to 85% of the value of the home I believe may have a significant impact in slowing the rapid expansion in HELOCs. Unfortunately we'll have to wait a few months to find out exactly what impact these new rule changes have had, as the data is several months behind. 

Examining house prices and income growth in Canada: Part 1

APRIL 27, 2011

Another look at the Canadian housing market NOTE-  Please check out the following post for an updated data set: House prices and income growth in Canada....bigger and better

Examining house prices and income growth in Canada: Part 2

APRIL 29, 2011

Intro: We noted in part 1 of this series that income growth is one of the fundamental determinants of real estate price growth.  It should be obvious that for real estate to continue to appreciate over a long time horizon, it must be matched by increasing incomes to support the necessary mortgage payments. With that in mind, let's have a look at provincial house price and income data from Quebec east.  

Reader question about stock picking and stocks I own

APRIL 30, 2011

Reader DB sent me the following email: "Hi Ben I'm really enjoying your website.  I noticed in your article about building an investment portfolio that you recommend using ETFs to build an investment portfolio but in other articles you talk about stock picking.  Can you share some of the stocks in your portfolio and how you chose them and perhaps explain when it makes sense to use an ETF and when it makes sense to pick stocks?" 

Mortgage arrears data across the nation: Visualizing Carney's interest rate conundrum

MAY 06, 2011

The Canadian Banker's Association released their latest mortgages in arrears data for February, 2011.  I thought it might be cool to visualize the data by province to see where the trend is rising, where it's falling, and where it's stable.  While this data should technically not influence the Bank of Canada's interest rate decisions, it must be hard to overlook the startling trend in a few provinces.   Before we get to that, it's worth noting the positive Canadian economic data out in the past couple days.

Globe and Mail poll on mortgage rules

MAY 08, 2011

The most recent data suggests that housing sales are cooling in most large centres.  The saving grace in many cities is the exceptionally low inventory reading for this time of year.  A case in point is Toronto...

Housing starts down; OECD leading indicators mixed; Benefits of the 'ownership society' revisited

MAY 10, 2011

Housing starts down:

Examining house prices and rents in major Canadian cities

MAY 11, 2011

NOTE:  For more on why house prices and rents should pace each other over time, check out this article.  You may also be interested in how house prices and rents compare in other Canadian cities.

Examining house prices and rents across the provinces

MAY 14, 2011

Prices and rents revisited: Earlier in the week, we examined the changes in house prices and rents in the largest cities in Canada.  We also spent quite a bit of time discussing why changes in rents are one of the measures of fundamental value when it comes to residential real estate.  If you are unclear on this, I suggest you re-read the post again.  It is important in appreciating the data I am going to present in this post.

House prices and inflation

MAY 16, 2011

Examining fundamentals: This will be the last post examining the fundamentals that underpin real estate across Canada.  Later this week, I hope to compile all the data we've examined thus far into a sort of comprehensive overview of the Canadian housing market....an über primer if you will. As a refresher, here is some of the data we've examined thus far:

CREA releases home sales data; New report highlights speculation in Toronto condo market

MAY 17, 2011

CREA releases resale data for April 2011 It was widely reported by all the big media outlets and it shouldn't come as a surprise to anyone who has read the latest tour through the board stats.  CREA (the Canadian Real Estate Association) has released their final April numbers and they are not pretty, though the weakness in sales was far from unexpected.  Some key quotes:

Revisiting demographics: Another reason why the next decade will be nothing like the last

MAY 18, 2011

Revisiting demographics:

Weekend reading and some dividend stocks worth watching

MAY 20, 2011

Weekend reading: I'm heading out to do some fishing for the weekend, so there will not be any posts until Monday at the earliest. Here are some articles worth reading over the weekend: RBC releases housing affordability measures

“The truth becomes less central if social influence is allowed”: More on the dangers of group-think and mass psychology

MAY 23, 2011

 "In economics, the majority is always wrong"   -John Kenneth Galbraith

OECD on interest rates; Investors Group on Canadian debt; TD and Hudak on austerity Canadian style...

MAY 25, 2011

Apologies to my readers: I have to apologize for the frustration some experienced when trying to comment on the post from Monday.  I inadvertently disabled comments on that article.  After a few angry emails and some emails to the developer, we figured out the bone-headed mistake.  I'm sorry for that.  Feel free to comment now.

Visualizing the dangers of mass psychology

MAY 27, 2011

The following is a snippet from the upcoming Uber primer, complete with some new and original graphs.  Enjoy!   Why overwhelming majorities are bad news:

Can immigration solve the looming demographic problem?

MAY 31, 2011

I recently explored the role of demographics in providing a strong tailwind to house price appreciation over the past few decades.  Now as the Boomers age and more of them reach the phase of their life in which they become net sellers of real estate (65+), demographics are set to exert a drag on asset prices estimated at 1% per year for real estate.

What a crazy few days: A plethora of data points for your consumption

JUNE 01, 2011

I've been quite busy working away on the book and the uber primer.  I feel bad that I haven't had the time to discuss some of the amazing data points that have materialized in the last couple days.  This post will be a round-up of the most news-worthy stories of the past few days (there have been many).    Greece gets downgraded....50-50 odds of debt restructuring

Book excerpt: The role of housing in boosting GDP

JUNE 02, 2011

The following is an excerpt from my upcoming book.  Enjoy!   The role of housing in boosting GDP:

Regulators to probe impact of foreign money on real estate; Reader question- What to do with real estate windfall...

JUNE 05, 2011

Have the mortgage rule changes led to an increase in forced sales?; The tale of three housing markets

JUNE 07, 2011

New mortgage rule changes = forced selling for 'habitual refinancers'?

Canadian trade balance deteriorates; Employment gains strength; Global real estate trends; CIBC on risks to China growth

JUNE 10, 2011

I apologize for the lack of posts the past few days, especially since there has been so much relevant data to explore.    Canada's trade deficit widens in April:

Helmut Pastrick and the Twilight Zone

JUNE 11, 2011

I had to make a short post to highlight a monumentally bad article over at the MoneyVille (Toronto Star) website.  You can't make this stuff up.  Reading this article is like passing through a portal to a parallel world...

Have Canadian consumers reached their limit? The must-read report of the year

JUNE 14, 2011

Fantastic CGAAC report:  Have Canadian consumers reached their limits? The must-read report of the year has been released by the Certified General Accountant Association of Canada.  It contains so much great information that I may have to revisit it over several posts.  Here are a few random snippets and some excellent graphs:

More from the must-read CGAAC report

JUNE 15, 2011

CGAAC report revisited: I’d like to revisit that fantastic CGAAC report I began discussing yesterday as there are some more key quotes and stats worth highlighting.  If you haven’t read the entire report yet, it is well worth your time.  Here are a few more quotes that jumped out at me:

Rough day for Vancouver: Boston Bruins, Mark Carney, and TD all rain on the parade.

JUNE 16, 2011

They say bad luck runs in triplicate.  That certainly was true yesterday in Vancouver.  Their team forgot to show up for game 7 of the Stanley Cup finals, Mark Carney delivered a speech in the city about debt levels and house prices in Canada obviously directed at the outrageous prices in Vancouver, and TD called for a 16% slide in house prices through 2012.  Rough day!   TD calls for 16% correction by the end of 2012:

Some Monday reading to start off your week...

JUNE 20, 2011

http://www.theglobeandmail.com/globe-investor/investment-ideas/lets-talk-investing/how-bad-could-it-get-in-the-housing-market/article2055856/ http://www.theglobeandmail.com/report-on-business/economy/no-global-double-dip-slump-oecd/article2067423/ http://www.theglobeandmail.com/report-on-business/economy/eu-debt-crisis-threat-to-canadian-economy-flaherty/article2067605/ http://www.statcan.gc.ca/daily-quotidien/110620/dq110620a-eng.htm?WT.mc_id=twtB0992 http://www.td.com/economics/comment/dp062011_household_acct.pdf

Risk.....a forgotten four letter word

JUNE 20, 2011

There is a well known saying, purported to be derived from an old Chinese proverb: "May you live in interesting times".  It's more of a curse than a proverb, really.  Regardless of its origins, it is most certainly true of the world today.  These are interesting times. 

The debt perception dichotomy....or why the road to financial hell is paved with good intentions.

JUNE 22, 2011

Debt perception dichotomy: It never ceases to amaze me just how staggeringly comfortable many people are with their massive debt burdens.  You may recall that the Bank of Canada recently ran a stress test scenario and determined that a 0.5% increase in interest rates would put 1.1 million Canadian households under significant financial pressure.  No kidding!  Let's do some simple arithmetic: Low interest rates....

What's really driving house prices in Canada? The must-see graph of the day...

JUNE 23, 2011

Do mortgage rule changes = market manipulation?; Consumer credit turns negative....will mortgage debt follow?

JUNE 25, 2011

Do mortgage rule changes = market manipulation?  More drivel from the Star. Let’s start with a bit of a chuckle before we jump into the heavy stuff.

New rule changes for investor immigrants

JUNE 27, 2011

New rule change for investor class immigrants:

Owe Canada! A look at our total outstanding debt as a nation

JUNE 28, 2011

Let's take a quick look at our debt situation here in Canada.  This is all CANSIM data available through Stats Canada: And perhaps more interestingly, let's look at the different components of debt as a percentage of GDP:

Interesting article on the potential housing bubble in the Globe

JUNE 29, 2011

I'll remind my readers to tune into Rogers (channel 10 I believe) tonight at 7pm as I will be a guest on 'Inside Toronto Real Estate'.  Should be fun. Readers may also be interested in an article in the Globe and Mail today, written by Stephen Gordon, professor of economics at Laval.  Gordon is also one of the authors of the interesting economics website, Worthwhile Canadian Initiative, a site I read daily.

It's getting hard to dismiss it entirely...

JULY 03, 2011

The existence of a serious overvaluation issue in Canadian real estate is getting harder to ignore.  Even the housing bulls (the honest ones anyway) are starting to get concerned.

CIBC on the vulnerability of Canadian house prices

JULY 04, 2011

The cold, indisputable reality of the arithmetic case for renting

JULY 05, 2011

I had to chuckle when I came across this amazing slide over at OREA's nearly comical, and clearly unbiased website, HomeOwnershipMatters.ca

Misleading averages and bad science

JULY 06, 2011

Don's really not a bad guy....confused, but nice.

Redux: House prices and income growth in Canada...bigger and better

JULY 07, 2011

Readers of this blog will recall that a few months ago, I did a two-part series on house prices and income growth in Canada.  My philosophy is that when better data becomes available, we analyze it.  In this case, that first series used a data set from Stats Canada that unfortunately only extended back to the early 90s.

The superficial appeal of the 'population growth drives Canadian house price' argument: Does it hold water?

JULY 08, 2011

It's amazing to me how often I hear this argument.  If you take a few minutes and read the comments posted on, for example, the Globe and Mail website every time there is an article about house prices in Canada, you won't have to read long before you find someone advancing an opinion along the following lines: "House prices in Canada have been rising because of rising population.  Population will keep rising, therefore house prices will keep rising."

Revisiting the most important graph in understanding the Canadian real estate market

JULY 10, 2011

It’s time to revisit a couple graphs I’ve posted here several times before.  I have had a few reader questions and numerous comments related to these graphs.  I think it’s extremely important to understand them inside and out and to understand the implications.  Here are the graphs:  

House price and income ratios in Canadian cities: Part 2

JULY 12, 2011

We continue on with part 2 of our three-part series examining the price-income ratio of various Canadian cities. 

TD predicts 'moderation' (read: correction) for housing; OECD leading indicators turn negtive

JULY 13, 2011

TD predicts ‘moderation’ in Canadian housing Readers will be interested in a TD report released today.

Shorting the Canadian housing market....Is it possible?

JULY 14, 2011

Reviewing the problem...

Rental Complex: A must-read article in Canadian Business...Recognize those graphs?

JULY 15, 2011

Readers may be interested in a fantastic article by Joanna Pachner of Canadian Business magazine: Rental Complex One of the dangerous misconceptions that I often address on this site is the notion that renting somehow equals throwing money away.  This is most certainly false, and, coupled with the new and prevailing stigma towards renting, it has no doubt played a role in buoying ownership rates in Canada to unprecedented levels.

Revisiting home owner equity: How do Canadians compare with those crazy yanks....and does it even matter?

JULY 17, 2011

On to more productive things... I was on a show in Toronto last month discussing whether or not the Toronto real estate market was experiencing a bubble (the video will be posted here this week).  It was an interesting discussion that pitted me 'against', so to speak, though the discussion was actually quite friendly, a well known mortgage broker, the president of a condo research company, and perhaps the most well known real estate expert in the country. 

Thinking outside the stigma: More excellent articles advance the case for renting

JULY 22, 2011

Breaking the stigma... I recently discussed an excellent Canadian Business article that I had the pleasure of contributing to.  This article did a great job of highlighting the social stigma associated with renting and provided an overview of the research that overwhelmingly concludes that renting is far from a poor financial decision....particularly in some of Canada's larger cities.

Subprime lending in Canada: Wading through the rhetoric

JULY 31, 2011

"Subprime lending is virtually non-existent in Canada"....Is it really?

The making of a bubble-Part 2: The rest of the ingredients...

AUGUST 03, 2011

This is the second part of a two-part series examining the necessary ingredients in an asset bubble.  Part 1 can be read here.   Bubble Condition 3:  Investors experience a significant shift in mass psychology, often with a “new era” or “this time it’s different” mentality.

Stocks crap their pants; A slew of articles hammer the bubble message home

AUGUST 04, 2011

Stocks hit the brakes... Today the big North American bourses lost the most since the panic-induced routes of 2008, with the TSX shedding 3.4% and both the Dow and SP500 down over 4%.  Quite the carnage. So what's the message? 

House prices and rents....the rest of the picture

AUGUST 05, 2011

Revisiting house prices and rents I was inspired to revisit the role that rents have in determining intrinsic value of residential real estate by an excellent article in The Economist.  The article is from 2005 but has just been made available to non subscribers.  Here's that excellent article for interested readers. The global housing boom:  In come the waves One pertinent quote jumped out at me:

S&P drops the bomb...Now what?; Am I softening my stance?

AUGUST 07, 2011

S&P Slaps US sovereign debt

Where to start on a day like today...

AUGUST 08, 2011

More thoughts on the S&P downgrade The media is full of commentary discussing the impact of S&P's downgrading of US sovereign debt to AA+ from the coveted AAA rating, largely blaming the stock market drubbing on this event.  The media doesn't get it.

Stocks worth watching...

AUGUST 09, 2011

I said yesterday that some babies were being thrown out with the bath water.  Let me highlight a few of the stocks I've been watching.

Canadian business confidence sinking; Housing starts remain strong; Fed to keep rates low through 2013...

AUGUST 09, 2011

Canadian business confidence sinking In possibly a bad sign for the labour market, the Conference Board of Canada has released the Q2 2011 reading of the business confidence index which showed a widespread decline.  I should point that this reading is from before the rush of negative economic data and market jitters of the past month.  For the second quarter in a row, business confidence eroded significantly.  I expect that Q3 will be even worse. From the Conference Board:

Export picture darkens; Leading indicators of industry profitability decline; Credit demand drops

AUGUST 12, 2011

Export picture darkens: Canada’s trade balance deteriorated markedly in June, widening to $1.6 billion from $1.0 billion in May.  From TD:

"Shall I rent or shall I buy"; Ottawa braces for austerity

AUGUST 14, 2011

"Shall I rent or shall I own"

Revisiting the "population growth drives house prices" argument: Still leaking like a sieve

AUGUST 15, 2011

Does an increase in population naturally lead to a rise in real house prices? If you listen to many news stories, the answer is yes.  Of course if you approach it from a more analytical perspective, things aren't so cut and dry.  Let's clarify exactly what this statement is implying, since it is often used as justification for the divergence between house prices and underlying fundamentals in Canada...and, of course, the argument suggests that prices will continue to defy fundamentals as demand will remain very strong. 

More signs of slowing economic growth as manufacturing sales fall again; CREA releases July resale stats

AUGUST 16, 2011

More signs of economic weakness: Stats Canada today released the most recent manufacturing sales data.  Manufacturing sales fell 1.5% (-$713 million) in June to $45.3 billion, the lowest level since November 2010. Sales have declined for three consecutive months after growing steadily since May 2009.

Lessons from Texas: HELOC growth and recessions...

AUGUST 21, 2011

Lessons from the Lone Star State:

More insight into the mass psychology driving Canada's real estate obsession

AUGUST 22, 2011

More insights into mass psychology and Canada's real estate obsession:

Revisiting stock picks; 5 articles well worth the read

AUGUST 23, 2011

Revisiting stocks worth watching: Two weeks ago on August 8, amid the market turmoil at the time, I suggested that some ‘babies’ were being thrown out with the bathwater and started writing a post suggesting some stocks worth a second look.  Early the next day, I made a post outlining some of the stocks that I had been watching.

'Affordability' measures.....still misleading; Consumer confidence tanking; Taking a page from the 'bull' play book

AUGUST 24, 2011

Affordability measures still misleading: One comment I often receive is that I don't give enough weight to the impact of purchasing power in analyzing the Canadian real estate market.  The argument is that since interest rates are falling, houses are more affordable, and therefore it should be expected that house prices show a marked dislocation from fundamentals like rents, incomes, and per-capita GDP.

BMO on HELOC growth- “Homeowners borrowing smartly”; Wall Street Journal on Toronto’s condo bubble

AUGUST 26, 2011

Are homeowners "borrowing smartly"?  BMO says yes.

European debt crisis deepens; Refinancing activity drops 40% in Canada...We now know why consumer credit growth is slowing

AUGUST 29, 2011

European debt crisis deepens On January 1, I wrote the following as part of my 2011 predictions:

Where housing goes, so goes the Canadian economy: Why a housing correction would CAUSE a recession, not the other way around

AUGUST 31, 2011

Canadian GDP contracts for the first time in two years: The big news of the day is that the Canadian economy contracted slightly in the second quarter of 2011.  While in recent weeks it's been widely suspected that GDP may come in flat to negative, that was not the case last year when most economists were predicting annual GDP growth in the 3% range. 

Mortgage crazy! A look at loan approvals by province

SEPTEMBER 08, 2011

Debt, psychology, and asset bubbles: We know that asset bubbles typically require widespread participation by the general public (i.e. a new and prevailing sentiment towards the asset class in question) and they are often fueled by cheap and readily available credit. 

Slew of negative data: Jobs, industry profitability, recovery in OECD nations all stall

SEPTEMBER 09, 2011

Jobs report 'surprises' to the down side

The confidence economy

SEPTEMBER 12, 2011

The confidence economy:

Leading indicators point to slowdown for Canada, US; Canadian debt burdens continue to grow

SEPTEMBER 13, 2011

Leading indicators point to slowdown in Canada and its largest trading partners: OECD has released their latest Composite Leading Indicator (CLI) readings for July 2011.  For those not familiar with the term, a leading indicator is something that tends to be correlated with movements in broader economic activity, but tends to move before the broader economy.  They 'lead' or foreshadow the movements in the broader economy.  As such, they are always interesting to watch.

Interesting insights from CREA: Is this what a market peak looks like?

SEPTEMBER 15, 2011

Interesting insights from CREA: Those awaiting part two of our series looking at the economies of various Canadian cities and which ones are most at risk from a housing correction will have to wait until tomorrow to see the craziness that is Western Canada.

How vulnerable are the economies of various Canadian cities? Part 2

SEPTEMBER 16, 2011

In part 1 of this series, we looked at the role that real estate has played in economic and employment growth in cities from the Maritimes east to Ontario.  Today, we examine a few more Ontario cities and then look west.

More thoughts on Canada's debt bubble; Moody's chimes in on Canadian banks; Other random data points

SEPTEMBER 19, 2011

If it walks like a duck and talks like a duck... Yesterday I highlighted a great presentation by Steve Keen.  In the write up, I mentioned that when compared to GDP, our consumer debt burdens in Canada are remarkably close to the US high point in their credit bubble, and are within spitting distance of Australia's.

Canada's economic prospects sour: IMF, BMO, Bank of Canada

SEPTEMBER 20, 2011

There was a slew of revisions to Canada's economic growth prospects today.  IMF warns of slower economic growth: The International Monetary Fund has released their latest World Economic Outlook publication.  Although the IMF has been notoriously 'behind the eight ball' in their forecasting, it's nonetheless worth hearing what they have to say.  The document is extensive, but here are just a couple key snippets:

Market panic, gray swans, and a eulogy for the debt-driven Canadian consumer

SEPTEMBER 22, 2011

Market panic as Fed disappoints:  Has the famed 'Bernanke put' finally been removed?  The US Fed made the widely expected announcement of 'Operation Twist' yesterday.  Earlier, analysts like David Rosenberg warned that unless Bernanke 'shocked' the market with something wildly unexpected, the reaction would likely be very negative.  Good call.

The rubber meets the road: Crucial weeks coming up for Canadian and global economies

SEPTEMBER 25, 2011

The next few weeks are shaping up to be the most important weeks for the Canadian and global economy since the end of the last recession.  Here's why:   Bailout on the way for Eurozone.  Will it address key issues? On the global front, there’s increasing pressure on the Eurozone from international leaders to put a credible plan in place to deal with Greece and to keep the contagion from spreading to Italy and Spain, the ‘too big to bail’ states. 

Credit markets show slack demand; Is a rate cut on the way?

SEPTEMBER 26, 2011

Credit markets show weakening consumer credit growth The Bank of Canada has released the latest consumer and mortgage credit data, which is as of August, 2011.  Those who understand the role of credit in our consumer-driven economy understand why these data releases give extremely important insight into the true state of the country.

OSFI warns on consumer debt; Confidence readings remain weak

SEPTEMBER 27, 2011

OSFI warns on consumer debt: The head of the Office of the Superintendent of Financial Institutions (OFSI), the country's top financial watchdog, recently gave a speech to the Economic Club of Canada in Toronto.  In that speech, superintendent Julie Dickson issued some strong warnings to financial institutions not to let underwriting standards erode amid declining profitability.  Some key snippets:

Excellent speech on housing and the economy

SEPTEMBER 28, 2011

Great speech on housing and the economy Eric Rosengren, President and CEO of the Federal Reserve Bank of Boston, gave a very interesting speech today in Stockholm.  It contains some wisdom and insights that Canadians would do well to heed.  The title of the speech was, “Housing and Economic Recovery.”  Fitting.

BMO's Canadian Housing Outlook; Speculative fever still reigns in Toronto condo market

SEPTEMBER 29, 2011

BMO's Canadian housing outlook: BMO is set to release its updated Canadian housing outlook.  It will be posted on their website tomorrow.  Here's a sneak peak at their conclusions, with a few of my own thoughts. Low interest rates have fuelled Canada’s housing market in the past decade, pushing prices to new highs in most regions. However, a weaker economy and new mortgage rules have dimmed activity recently.

House prices and rents: Why they should track each other and why it should concern us that they haven't

OCTOBER 01, 2011

This is part 1 of a two-part series.  Part 2 can be read here. Why wouldn't house prices go up?

Eurozone debt woes intensify....banks in the crosshairs; World markets roiled; Canadian CEOs bearish on economy

OCTOBER 04, 2011

Eurozone debt woes continue: No credible plan to deal with the spreading Eurozone debt contagion as of yet, and the markets are clearly getting impatient.  Or is it that they are waking up to the obvious?  There will be no lasting solution in the Eurozone until the most indebted nations restructure their debt (default) or a euro-bond is floated.  The politics of the situation make the second option seem all but impossible, leaving a restructuring as the most viable, though painful, long-term option.

Toronto condo mania continues while the Vancouver market hits the brakes.

OCTOBER 05, 2011

Toronto condo market: Still ruled by speculators While we await the final September Toronto resales figures due out any time, it's worth once again discussing the incredibly irrational entity that is the Toronto condo market. Yesterday, a great deal of buzz was generated by an article describing bidding wars in the condo RENTAL market!  Some key quotes:

Canadian "job boom" in September?; Leading profit indicators decline; TO new condo prices to stay high?

OCTOBER 07, 2011

Jobs boom in Canada....sort of The September labour market survey is now out from Stats Canada.  You may recall that August employment numbers 'surprised' to the downside.  At the time, I noted the following:

Housing cycles and a bird's eye view of global housing markets: Is Canada really that different?

OCTOBER 08, 2011

Is it different here?  Not if you ask an outsider... I've often said that when you're surrounded by crazy, it starts to seem normal.  It's part of the reason why a bubble is so notoriously difficult to spot from the inside.  We have a pronounced 'recency bias' that makes us believe that our recent experience can be safely extrapolated into the indefinite future.  It's never that easy.

A sky-high view of global real estate markets: Is Canada really different?

OCTOBER 08, 2011

TD on debt in Canada; OECD leading indicators signal Canadian slowdown

OCTOBER 11, 2011

TD on Canadian debt levels: The must-read report of the day comes courtesy of TD economics and is titled, "Canada's Aging Debt Burden." It's well worth the read in its entirety.  Here are a few snippets for the lazy reader... On rising debt burdens across age cohorts:

The week that was; Economics is all about "demand and demand"; Sherry Cooper sees positive demographic trends?

OCTOBER 14, 2011

What a week!

The housing affordability argument: Misleading, short-sighted, and just plain stupid

OCTOBER 16, 2011

Are houses really 'affordable' in Canada? One of the most short-sighted and misleading arguments used to justify house prices at current levels is the notion that the carrying costs of the typical house, in relation to the typical income, is nowhere near as high as was experienced prior to the last major real estate bust back in the late 80s.  While technically true, it is short sighted, dangerous, and highly misleading to suggest that this justifies house prices at current levels.  Here’s why:  

Can the Bank of Canada orchestrate a soft landing in housing?

OCTOBER 17, 2011

CREA released their latest resale figures and the Bank of Canada released some rather downbeat business outlook data.  Unfortunately, that will have to wait until tomorrow.  There’s only so much brain juice to go around.  Today, I’ve used my daily ration looking at soft landings in real estate.    Can the Bank of Canada orchestrate a 'soft landing'?

Ed Clark on the Canadian economy; Retail sales preview...blue Christmas?

OCTOBER 20, 2011

Note:  An apology to my readers for the lack of activity over the past few days.    Why Ed Clark, for a bank CEO, is alright: As far as bank CEOs go, Ed Clark is about as good as they come.  You may recall that Clark was an outspoken advocate of lowering the maximum amortization length back to 25 years.  This no doubt had an effect on on finance minister Flaherty who cut amortization lengths from 35 years to 30 years less than a month after Clark went on record with this statement.

Canadian inflation heats up; Why housing won't carry us through a recession; Positive mortgage in arrears data

OCTOBER 21, 2011

Canadian inflation heats up: Stats Canada has released the September reading of the consumer price index (CPI), which showed a strong bounce in both the core and all-item index.  The all-item index rose to 3.2% on a year-over-year basis while the core has finally breached the target 2% boundary for the first time since 2009:

Employment quality deteriorating; Business confidence drops again; Credit demand decelerates

NOVEMBER 03, 2011

Note:  I'm sincerely sorry for the lack of posts over the past week and a half.  It's partly due to the time expectations of my new position, but more so due to the fact that I have had an unbelievable string of bad luck with my health.  I've been fighting some nasty cold/flu mutant thing for the better part of two weeks now.  It's pretty much wiped me out.  I also want to thank my readers for the overwhelmingly positive response when I announced my new position.  It was much appreciated. 

Canadian employment withers; Vancouver and area inventory builds as prices feel the heat; China's property bubble deflating?

NOVEMBER 07, 2011

Canadian jobs report shows major weakness:

Europe heading back into recession; OECD leading indicators decline again; Interest rate cut still priced in

NOVEMBER 21, 2011

The Economist warns on house prices; RBC (un)affordability index released

NOVEMBER 25, 2011

The Economist warns on Canadian house prices: By now I assume many of my readers have seen this article over at The Economist.  If not, it's well worth the read.  Here are the key quotes:

Credit bites back

NOVEMBER 30, 2011

Readers may be interested in a fascinating paper by the Federal Reserve Bank of San Francisco titled, "When Credit Bites Back: Leverage, Business Cycles, and Crises."   It's a must-read. Some key findings:

Are vacancy rates a leading indicator of house prices?

DECEMBER 16, 2011

Here's a great reader comment that I've actually recently been doing some work on: "Vacancies were flat in Toronto until 1990, and flat in Miami until 2007, and I think I saw a few more examples (haven't gone after Vancouver's past data yet). But you would think that if there was oversupply as part of a boom, that vacancies would go up before the crash in prices hit."

Is Toronto in a bubble? Interesting discussion with a mortgage broker

DECEMBER 20, 2011

I had an interesting discussion with well-known Toronto mortgage broker David Larock.  It started with the following picture showing the real house price index I had created for Toronto:

House price to rent ratios in Canadian cities at alarming levels

DECEMBER 23, 2011

By now most people have heard that the IMF has released two excellent reports on the Canadian macro picture, with emphasis on our housing situation.  They can be read in full here and here.

Thoughts from CMHC's Canadian Housing Observer

JANUARY 01, 2012

Happy New Year!  I’m hoping to get a chance to post some 2012 predictions and review my 2011 predictions, which I’m fairly happy with. In the meantime, I just wanted to share a few thoughts on CMHC after reading through the 2011 edition of their flagship publication, The Canadian Housing Observer. Readers will know that I have been critical of CMHC over the following: CMHC’s mandate, which I believe is inherently self-defeating.

Where we stand

FEBRUARY 20, 2012

It’s been a while since I’ve found the time to do a blog post, and for that I apologize to my readers.  I figured I should give a quick update on the trends I'm seeing in the different markets across the country.

Population growth will NOT prevent the Candian housing bubble from going bust

FEBRUARY 29, 2012

If I read another ridiculous article proclaiming that Canadian real estate can defy fundamentals in perpetuity simply because we have a measure of population growth, I'm going to bang my head against a wall! This is the third time I've written about this topic.  New readers may want to check out these two prior posts to see why this 'argument' is completely ridiculous:

Canadian house price affordability measures are still misleading

MARCH 07, 2012

RBC has released their latest housing affordability report.  It shows an improvement in affordability, which was quickly trumpeted by media outlets without a fleeting though of perhaps checking the methodology of the index to make sure it made sense.  That's obviously way too much to ask of the media in Canada.  Here are some gems:

Canadian housing bubble in public consciousness; February new listings jump in key markets

MARCH 16, 2012

Canadian housing bubble in public consciousness An interesting chart below courtesy of Pacifica Partners.  Some may see this as a contrarian indicator but it sure wasn't in 2006 when all the searches were on the most bubbly regions of the US.  It’s hard to discount the role of perception and mass psychology when dealing with an emotion-driven asset like residential real estate, which represents the single largest purchase the typical household will ever make.

Credit tightening and the end of the Canadian housing bubble

APRIL 01, 2012

I’ve often said that the next decade for real estate in Canada will be fundamentally different than the last.  I’ve suggested that a demographic imbalance, dislocation between prices and underlying fundamentals, and rising instead of falling interest rates are all reasons for this.  However, the greatest difference will be in the availability of credit going forward, and those who try to explain real estate prices in Canada without acknowledging the role of easy, accessible credit over the past decade have completely missed the boat.

How might a Canadian housing correction weigh on the provinces?

APRIL 23, 2012

I've often pointed out that talk of "low Canadian federal debt levels" is quite misleading.  To give credit where it's due, we did experience an austerity drive in the 90s that saw federal debt-to-GDP levels fall from high water marks that have not since been revisited, a point I illustrated in a post last year.  However, Canada is unique in that the provinces are larger borrowers than the feds.  When provincial debt is added to the burden, the net debt

Vancouver housing in full correction mode: Implications for Canadian banks

AUGUST 03, 2012

A research note for my faithful readers.  This was first sent to clients in mid June, so some figures are slightly dated, though the numbers out of Vancouver ain't getting prettier.  It has been shortened and edited slightly, though the message remains the same.  I hope to touch on the Toronto condo market next week.   Vancouver crash would be major macro event with implications for Canadian banks:

"Balanced market" nonsense

AUGUST 15, 2012

I had to chuckle at the following quotes: "The vast majority of markets had sales-to-new listings ratios consistent with balance between supply and demand, including Toronto and Vancouver" -RBC "Based on a sales-to-new listings ratio of between 40 to 60 per cent, two thirds of all local housing markets were in balanced market territory in July" -CREA

A look at household balance sheets: Is Canada really that much better?

AUGUST 23, 2012

Below are some thoughts on a chart that seems to keep showing up in every bank report on housing in Canada.  I also wrote an Econowatch article for Macleans on this topic, which is free of some of the jargon contained in the article below as it was intended to be accessible to a wider audience beyond the econo-nerds who frequent this site.  Note that this is NOT an exhaustive analysis of similarities/differences between the housing and mortgage markets in C

Thoughts on house prices, credit growth, and excess volatility

AUGUST 27, 2012

Fed Reserve Bank of San Francisco on house prices, credit growth, and excess volatility Readers who have not yet seen it may be interested in a report by the Fed Reserve Bank of San Francisco: House Prices, Credit Growth, and Excess Volatility: Implications for Monetary and Macroprudential Policy   Some key quotes and thoughts as they pertain to the current situation in Canada:

In an industry not always known for integrity, a few stand out

SEPTEMBER 26, 2012

Below is a video I shot recently with my good friend, Bruce Joseph.  We shot a number of segments and the discussion was wide-ranging.  The clip below is one segment.  Bruce owns a mortgage brokerage in Barrie, Ontario (north of Toronto) and has been one of my best front-line contacts who has helped me understand what lending really looks like in Canada.  There are other very excellent mortgage brokers, lenders, and realtors who I work closely with, not all of whom want to be mentioned out of fear of repercussions from their industry peers, unfortunately.

More signs of market weakness in Vancouver, Toronto; Spin machine goes into overdrive

OCTOBER 03, 2012

Just a quick note to highlight the latest sales data out of Vancouver and Toronto.   Vancouver: September sales in Vancouver plunged 32% year/year and 42% below decade average:

Canadian construction slowdown in the cards; Catch-22s everywhere; Montreal the next shoe to drop

OCTOBER 10, 2012

Construction set to slow....implications on labor market: I noted in the interview above that by every possible metric, the Canadian economy has become more reliant on the current housing boom to generate economic and labor market growth than the US was at peak, despite the common misconception that the entire US economy was housing and consumer spending.  We're also at or near all-time highs in every housing-related metric.

I'm coming to Vancouver for a free real estate and investment seminar. Book your seat!

OCTOBER 26, 2012

Well I've been warning for some time now of the extreme risks facing the Vancouver housing market.  You can go all the way back to last year to read some of my thoughts on where that market was heading: Vancouver housing in full correction mode

Comments on CIBC's "no US-style crash for Canadian housing" report: Part 1

NOVEMBER 04, 2012

This is part one of a three-part series.  Please also see part two and part three. Comments on CIBC's "no US-style crash for Canadian housing" report

Comments on CIBC's "no US-style crash for Canadian housing" report: Part 3

NOVEMBER 11, 2012

This is the third and final post detailing my thoughts on the much-publicized "No US-style housing crash for Canada" report written by Ben Tal of CIBC.  Please also see part 1 and part 2.  The CIBC report can be read here.  

Scotia on BC's economy; Economists now expect 10% correction

NOVEMBER 09, 2012

I'm taking a quick break from my series commenting on CIBC's recent report to write a quick note on some headlines from today:   1)  Scotia comments on BC's economy An interesting report from Scotia today.  Some key quotes:

House sales in October: Better, but not quite as strong as reported

NOVEMBER 15, 2012

October resale numbers are out.  In general, the sales trend picked up in most metros relative to September, but the improvement was not quite as sharp as reported.

Mid-month Toronto resale numbers reveal deep sales slump; The Economist on global household debt levels

NOVEMBER 20, 2012

Mid-month Toronto resale numbers reveal deep sales slump Yesterday, TREB released their November mid-month sales figures.  A couple interesting points:

10 Canadian Housing and Economic Trends to Watch in 2013: Part 1

JANUARY 01, 2013

Part two of this series can be read here. First off, Happy Holidays and all the best for the New Year! On the housing and macro economic front, 2013 is shaping up to be…..interesting, to say the least.  While I no longer enjoy the free time to blog on a regular basis, I will endeavor to keep readers ahead of the big trends by posting as often as my schedule permits.  I do appreciate the loyal readership.

10 Canadian Housing and Economic Trends to Watch in 2013: Part 2

JANUARY 02, 2013

Housing and econo-geeks who find this stuff interesting may want to join me in Toronto in February for a free seminar on housing, the economy, and what it all means for your investment portfolio.  Details here. Part 1 of this series can be read here. Yesterday we looked at five trends worth watching in 2013.  Today, five more.  

Revisiting an important post on the impending construction slowdown and Montreal sales declines

FEBRUARY 08, 2013

Reminder to readers:  I'll be in Toronto later this month talking about housing, the economy, and investing trends.  Reserve your complimentary seats here.   Housing starts tank.  Economists caught off guard: I'd like to revisit an important post I wrote back in October predicting two things: 1)  A construction slowdown was in the cards

Home sales "increase" in January? Is the housing slow-down already over?

FEBRUARY 16, 2013

For readers in Toronto, I'll see you this week at the LePoidevin seminar.  Complimentary tickets can still be ordered.   Some short commentary on January's resale figures: January home sales declined 5.2% year/year, but "increased" month/month on a "seasonally-adjusted basis" according to the Canadian Real Estate Association.