The Elusive Canadian Housing Bubble

[GRG55]

Re: The Elusive Canadian Housing Bubble

And The Economist mag weighs in with an update. It often pays to bet against the verdicts of The Economist, such as in the late 1990s during the New Economy frenzy when it declared oil prices 'dead forever'. Oil went on to double and double again the next few years, and has never revisited the price at the time of the article since. But I am not so sure Canadian real estate prices are poised to double, and double again, in the next few years. But then what the hell do I know...


Global house prices

Mixed messages

Aug 31st 2013 |From the print edition

HOUSING markets are prone to boom-and-bust cycles, with prices overshooting then undershooting sustainable levels. To work out whether they are over- or undervalued,The Economist uses two gauges. One assesses affordability by comparing prices with disposable income. The other considers the case for investing in housing by comparing prices with rents. If these ratios are higher than their historical averages (since the mid-1970s) property is overvalued; if they are lower it is undervalued. On this basis, Canada’s house prices are bubbly whereas Japan’s are undeservedly flat (see table)...

[Milton Kuo]

Re: The Elusive Canadian Housing Bubble

The Economist's housing data seems highly questionable. China's housing stock is 36% undervalued against income?!

[GRG55]

Re: The Elusive Canadian Housing Bubble

Canada second-quarter household debt-to-income ratio hits record 163.4 percent

Fri Sep 13, 2013 8:38am EDT

OTTAWA The increase followed two consecutive declines. Statscan revised the first quarter ratio up from an initial 161.8 percent.

The news is unlikely to please the federal government and the Bank of Canada, which have both repeatedly warned Canadians against taking on too much debt - in particular cheap mortgages - at a time when interest rates are at near record lows.

The previous record was the 162.8 percent recorded in the third quarter of 2012. The 1.3 percentage point increase in the debt-to-income ratio in the second quarter of 2013 from the first is the highest such jump since the 1.5 percentage point advance recorded in the second quarter of 2012.

Mortgage borrowing led the demand for credit in the second quarter, rising by C$18 billion to a total of just over C$1.1 trillion.

National net worth in the second quarter rose 3.1 percent to C$7.31 trillion ($7.10 trillion) from the first.

[don]

Re: The Elusive Canadian Housing Bubble

When this debt bubble finally pops, expect it to take Canadian 2nd homes in Florida with it.

[Fiat Currency]

Re: The Elusive Canadian Housing Bubble

When this debt bubble finally pops, expect it to take Canadian 2nd homes in Florida with it.

No question. Like I said, our economies are heavily connected ...

Canadians still buying plenty of Florida real estate: BMO
More than 500,000 Canadians now own property in what was one of the hardest hit U.S. states in the 2008 housing meltdown.

Canadians’ unrelenting passion for sun and sand has helped drive a 12 per cent increase in Florida real estate over the last two years, according to a BMO report.

More than 500,000 Canadians now own property in what was one of the hardest-hit U.S. states in the 2008 housing meltdown. And snowbirds remain the biggest foreign purchasers of Florida real estate despite a surge in interest from Asian and South American buyers over the last year or so.

Canadians are already seeing payback from their purchases, says the BMO Financial Group report released Thursday.

The price of a single-family home has climbed 12 per cent since April 2011, with the worst of the collapse now well behind the U.S., according to a recent S&P Case-Shiller study of U.S. house prices.

The BMO report paints an interesting picture of where snowbirds have landed in the sunshine state, many of them what Florida Home Finders of Canada has dubbed “endvestors” — folks scooping up real estate while it’s cheap and interest rates low and renting the properties out until they can eventually retire to Florida for winter or vacation there more often.

Sarasota-Bradenton-Venice remains the most popular destination by far, says BMO. Some 17 per cent of Canadian purchasers have bought up homes and condos in the Gulf Coast area renowned for its sugary beaches, stunning keys and cultural offerings.

According to the most recent Florida Realtors statistics, released last February, demand remains strong in the state and has helped push median single family home sale prices up about 12 per cent just in the last year, to $168,000. Condo prices have climbed 8.4 per cent to a median price of $136,000.

Second-most popular is the more easterly destination of Orlando-Kissimmee, home to Disney and dozens of other amusements parks, as well as southern Florida’s Miami-Fort Lauderdale-Palm Beach area, with its vibrant nightlife and ocean vistas. About 13 per cent of Canadians have invested in each of those areas, according to the BMO study.

Orlando has seen gains of 6.6 per cent for single family homes and the median price as of the end of 2012 was $137,000. Condo sales have softened by almost 10 per cent there in the last year, but prices were up almost 17 per cent by the end of 2012, year over year, to a median price of $76,000, according to Florida Realtors statistics.

The hard-hit Miami area saw median house prices climb more than 10 per cent in 2012 over 2011, to $202,000. Condos jumped more than 21 per cent, to a median price of $103,000 although sales were flat.

Nine per cent of Canadians have opted for the bargain-basement Gulf coast areas of Cape Coral-Fort Myers, which was amongst the most overbuilt and hardest-hit areas in the Florida housing collapse.

Similar numbers of Canadians have bought in the Tampa-St. Petersburg and the upscale Naples-Marco Island areas as well.

Lee County, which includes Cape Coral and Fort Myers, saw single family home prices skyrocket by almost 30 per cent, the highest gains by far in the state, to a median price of $134,000 in 2012.

While the price of condos in the same popular snowbird nesting spots were up 15 per cent to a median price of $134,000, the number of condos sold declined by almost 2 per cent last year, statistics show.

The remaining 30 per cent of snowbirds are scattered in communities throughout Florida, says BMO.

While Canadians accounted for almost 40 per cent of all real estate purchases in Florida in 2010, they are now facing stiff competition from Asian buyers and domestic investment companies that have been scooping up hundreds of Florida’s remaining distressed properties in the last year or two, sensing that the market is poised for a major comeback.

Chinese the new Florida snowbirds


That’s making it increasingly difficult for companies like Florida Home Finders Canada to find formerly bankrupt development projects and properties under or just over $100,000, says company executive Wayne Levy.

“Banks also aren’t in a rush now to get foreclosures off their books because prices are picking up,” says Levy, and every month the banks hold back selling, the chances are better of recovering more of the mortgage money they are owed.

As a result, Florida Home Finders is moving more into sales of properties over $200,000 and $300,000 as the inventory of deeply discounted properties disappears.

[GRG55]

Re: The Elusive Canadian Housing Bubble

When this debt bubble finally pops, expect it to take Canadian 2nd homes in Florida with it.

And Phoenix. And Palm Springs. And a few other places in the sun.

I tell you, it is going to be a shocker for Canadians when we have to get used to living in igloos again...

[don]

Re: The Elusive Canadian Housing Bubble

Is most of the Canadian 2nd home purchases 1st home equity loans?

I assumed so.

[GRG55]

Re: The Elusive Canadian Housing Bubble

I tell you, it is going to be a shocker for Canadians when we have to get used to living in igloos again...

But the one good thing about igloos is that when the spring arrives, and the temperatures rise, Canadian homes become more liquid than most other forms of housing property. And in these uncertain times liquidity might be everything...

[don]

Re: The Elusive Canadian Housing Bubble

Seasonally liquid





Curiouser and curiouser . . .

[GRG55]

Re: The Elusive Canadian Housing Bubble

Seasonally liquid

Liquid seasoning?

(We might all need a bit of this before it's all over...)

[GRG55]

Re: The Elusive Canadian Housing Bubble

You just can't keep a good bubble from getting even bigger.

Apparently there's nothing more enjoyable during those lazy, hazy, crazy days of summer in Vancouver than flipping real estate. Unbelievable...

Home sales surge in August as buyers take advantage of low interest rates

Vancouver Sun, The Canadian Press September 17, 2013 2:05 AM

After staying out of the housing market for most of last year waiting for home prices to drop, homebuyers appear to be rushing back to lock in low mortgage rates, according to the British Columbia Real Estate Association.

The association recorded a 29-per-cent increase in home sales across the province in August, with 6,863 transactions cleared through the Multiple Listing Service compared with 5,337 in the same month a year ago.

The increase was driven by big gains in Metro Vancouver, where sales were up 53 per cent, and the Fraser Valley, where sales increased by 20 per cent. However, sales were also up 31 per cent on Vancouver Island, 20 per cent in Victoria and 15 per cent in the Okanagan Mainline area, which includes the city of Kelowna.

The provincial average price also rose, up 8.6 per cent to $533,400 in August compared with $491,145 in August 2012.

"Homebuyers were out in force during the summer months," association chief economist Cameron Muir said in a news release. "Fear of a housing market hard landing has given way to a sense of urgency to lock in mortgages at a low interest rate."...

[don]

Re: The Elusive Canadian Housing Bubble

sheep herding - keeping the instinct alive . . .

[GRG55]

Re: The Elusive Canadian Housing Bubble

But not everything is roses in real estate out on the Left Coast:

http://vancouverpricedrop.wordpress.com/

[don]

Re: The Elusive Canadian Housing Bubble

28% drop

the Great Wail

[touchring]

Re: The Elusive Canadian Housing Bubble

When I lived part time in London, UK in the middle of the last decade I thought the prices there were completely insane and the bubble would have to burst any minute. When the financial crisis hit I was certain that London, being a preeminent FIRE centre, would get hit pretty hard. Today? More insane than ever.

I keep thinking Vancouver and Toronto property just has to end badly. There just isn't any fear of losses out there any more.
Friend of mine dropped by this evening. He just sold his house in Calgary to a retired couple from B.C. They plan to rent it out because it's an "investment". They think Calgary housing is "cheap". I think they are completely nuts. But then what do I know...

I don't believe there's a place where there is less "any fear of losses" than the Chinese. I do know from a relative real estate broker that many Chinese speculators willing to pay the 18% tax on property purchases in Singapore.