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this article shows what has been happening for the last few years. Developers have conscprited the realtors who are willing partners to get at their clientele by offering them in exchange for a middle man profit.
i find similarities to what happened in the brokerage industry when the big 5 banks took over all the brokerages and suddenly brokers had access to alot of the bank's capital investments from its clientele. Brokers made a lot of money. the banks made alot of money.
Similarly, developers make money, realtors make money, and the ultimate consumer pays more since layers have been added, all of which adds to price.
Still, despite all the projects, I believe that if the pre-construction boom is really back, which I don't necessarily concur with, some developers will be caught out as being late to the party as will some of the latest purchasers. History has shown that developers (due to the lead time from start to finished product) must be prepared to whether recessions, changes in market conditions. They will surely overbuild this time as they have in the past. The risk has just been transferred more from developer to investor/end users since they cannot break ground without a minimum of 60% sales in most cases and even approaching 70% now.
Urbandreamer does have a point. Dow is now 7% below the start of the year. In correction territory if one looks at the last 3 months (down more than 10%). Will it hit recession levels and down more than 20%, I don't know but a very real possibility in the next few months. The TSX is down 4% on the year so far again. In the past few months, it is down more than this not only giving up the early gains of the year but losing a fair amount. It appears China's growth may not be as robust as first thought. With withdrawal of stimulus, unless the private sector picks up the slack which is looking shakey at the moment at best, the economy is likely to faulter or at least not grow in the next few months/year.
So again, why shoud there be a boom being back on economic terms? and is it sustainable?. If the article is correct, investors are up to 50% of the market. Are these same investors seeking real estate now as it has continued to perform? bonds yields hit lows again last week. Stock market down, Cash bringing in nothing, wages not increasing, productivity not increasing, yet real estate continues to advance. At what point do the investors lack the cash, or find an alternate new investment, bringing a halt to the investor 50% purchases, with subsequent large fall in demand.
I am not saying it will happen now or when, I just fail to see what is driving this continuous price increase. also, as inventories continue to accumulate, there will have to be at least a pause if not a correction.l
The correction is normal - its cyclical. These are all normal seasonal trends, it'll all be better in the fall!
One of my favourite indy financial sites is www.dshort.com (the short is his last name)
He takes a very balanced approach, refrains from opinions, and provides extensive data in table form.
The following table is from a couple of days ago. It references the movement in the US WLI (Weekly Leading Indicators) data. In particular as a forecaster of recessions. You'll not from the graph that in previous instances when the WLI plummeted, the Federal Fund Rate (ie bank rate) was used as a key tool in juicing the economy back up to speed. But at present, the rate is effectively zero and thus cannot be used as a tool for economic stimulus.
Dave, a very useful unbiased approach to looking at the issue.
My question is however, where can you hide in this scenario? Stocks logically should drop, bonds may rise if demand falls off and people accept very low interest yield. Gold theoretically should go up. I am not sure what to expect for commodities since demand would presumably go down.
the real estate market should fall though financing would be cheap and remain cheap therby possibly sustaining real estate prices beyond when they should be maintained.
I guess I am asking you what you think would happen if the bear scenario plays out with respect to all these asset classes ande what the downside risk is to each of them. In other words, if a number of the asset classes will devalue, which will devalue the least and by what amount vis a vis each other?
Thanks,
I'm just an armchair theorist. But for what it is worth, here is my advice
-weight more heavily into self sufficient, decoupled countries (ie Turkey)
-longer term investments where a country can significantly improve their efficiency or contribute to the world's efficiency (ie rail travel in the US, the agricultural potential of the Ukraine
.
That's one interpretation. I am nowhere near as hopeful.
It is true that there is a normal seasonal trend to slower sales in summer as people have things to do such as enjoy the weather and travel and sales pick up in August. I am sure there will be some seasonal pickup but given the economic backdrop I have described, I do not anticipate it will be anywhere near as robust as previous years.
However, with the recent panic, some economists calling for a recession double dip, and the bond market at leaast in the US but also around the world indicating possi ble deflation with US treasuries below 3% for 10 years and below 4% for 30 year money, there may be some prolongation of the market as people guess interest rates will stay low for a protracted time and they can afford more.
This I believe would be flawed thinking since it actually represents worsening economy and likelihood of less raises and less jobs, which will ultimately catch up and render the reconning that much worse.
Almost every company is sitting on cash right now, esp banks in Canada. They all ready to expand and just waiting for the economy to stabilize before they spend their cash. Our economy might have slowed down but is no means heading for a double dip.
Tips:
Have a look at how the financial sector is doing. (which all are undervalued)
Have a look at oil prices.
Earnings.
Almost every company is sitting on cash right now, esp banks in Canada. They all ready to expand and just waiting for the economy to stabilize before they spend their cash. Our economy might have slowed down but is no means heading for a double dip.
Tips:
Have a look at how the financial sector is doing. (which all are undervalued)
Have a look at oil prices.
Earnings.
don't be fooled into thinking the Cdn banks are all that great of a position.
A relative works at a big 5 bank and she has had to write off lots of bad debt on their books from bad US mortgage debt, CDO, MBS, ABS, etc.
I work at another big 5 and seen the same thing.
we've had to settle with clients $$$ for improper investments and risk disclosure ... i won't say anything more.
TD’s Mr. Mulraine predicts the housing-start pace was as much as 195,000 in June, but warned “the road ahead for the Canadian housing market is likely to be layered with potholes, as the impact of the introduction of harmonized taxes in Ontario and B.C. in July of the year, tighter mortgage rules and higher borrowing rates put a damper on the once-buoyant demand for housing.â€
He agreed that the jobless rate likely stayed at 8.1% due to more people looking for work, but added that “brisk†job gains in the months ahead should help unemployment “revert to its downward trajectory.â€
The Canadian unemployment rate has been as high at 8.7% in August 2009 and as low as 5.9% in February 2008.
....
The slower pace of job growth in June compared to other recent months, he said, would help balance the “seemingly outsized†gain of 108,700 jobs in April.
http://www.remaxcondosplus.com/property.php?propid=EXC4843&agent1=limoochi
Just noticed a listing at Festival Towers at $ 900.00 per sq. ft. This unit can be bought on assignment also.
Is this the right asking price in the current environment?
