Baby, we got a bubble!?

[Eug]

Slower sales typically precede a market correction. That is what I would be most concerned about.

Yes, but then again it's no surprise that it's lower than a previous all time record.

OTOH, if a pullback were to happen, I'd expect it'd start in Vancouver and Calgary, and...

Alberta's delinquent homeowners lead the pack

A growing number of homeowners in Alberta are struggling to meet their mortgage payments as Calgary suffers a six-year real estate decline that is only recently showing signs of improvement.

Homeowners in the province are nearly twice as likely to fall behind than those in the rest of Canada. And the proportion struggling to make mortgage payments is the highest it has been since at least 1990, according to fresh data from the Canadian Bankers Association.

The Canadian Bankers Association said 0.83 per cent of mortgage holders in the province had not made a payment for three months or more, a marked increase from the beginning of 2007 when 0.17 per cent of mortgages were in arrears.

The situation is worse in Alberta than the rest of the country, where, historically, default rates average 0.45 per cent. In the United States, by way of comparison, close to 8 per cent of all mortgage holders are late on their payments.

 

[Kenny]

April's numbers are shocking indeed. Prices up 9% YOY, but also, listings are nearly 30% below the April average and a real outlier. Why is inventory so low I wonder?

I would guess that we're reaching some kind of peak capacity. What are the incentives to move when 70% own their homes? Increase in family size, change of employment, increase/decrease in income, etc. These external factors are being stabilized by high prices, high debt and uncertainty in the economy. People are stuck where they are.

 

[drewp]

I think the term bubble occured in late 2009 to spring 2010. After that there was a huge correction. Prices balanced out in the fall, and the increase from year to year started from october to now. Right now I don't believe we are in a bubble, as some would like to think. Do I think prices will increase 9% again, I don't think so. I think with the rise of inflation and the bank of Canada increasing there rates will slow down to more of a balance market until the unemployment rates decrease. After that we will see a healthy rise again.

But with the housing cycles it is hard to predict where things are going, but I don't believe we are going to see a drop of 25% like some are saying. The reason for low inventory becuase so many people put there properties for sale last year, and there were a lot of buyers. There are still a lot of buyers lookiing for properties but becuase of last years spike in housing starts this year has seen less people in need selling. Just balancing itself out.

 

[daveto]

The reason for low inventory because so many people put there properties for sale last year, and there were a lot of buyers.

Drew, sorry to be a stickler, but the inventory for sale has been below average for the past two years. There was no spike in listings last year. The graphs at guava illustrate that fact.
http://guava.ca/

 

[drewp]

From what I see last year there were close to 20000 housing starts compared to less than 15000 same time last year. There was a buyer frenzy last year which contributed to that mini bubble.

 

[KA1]

Thanks for your thoughtful comments, CN Tower. I guess we have no choice but to wait and see the universe unfold as it should.

 

[TCW]

Ontario sees impressive job growth in April
http://www.thestar.com/business/article/986858--ontario-sees-impressive-job-growth-in-april

 

[KA1]

Ontario sees impressive job growth in April
http://www.thestar.com/business/article/986858--ontario-sees-impressive-job-growth-in-april

I guess bubble won't bust any time soon?

 

[detroitbootybass]

Ontario sees impressive job growth in April
http://www.thestar.com/business/article/986858--ontario-sees-impressive-job-growth-in-april

While the headline seems to be "WOW", the content is a bit more muted.

The overwhelming majority of the jobs were part-time. Pretty much only Ontario (and Newfoundland) saw gains - the rest of the country was "flat" or down.

The final paragraph is interesting: "April was less kind to much of the country. While Newfoundland and Labrador saw a significant 3,100 jobs increase, six out of 10 provinces experienced an overall drop in employment levels, although all were modest relative to their population."

 

[redfirm]

QUOTE from the article above:
"Almost all of the gains in April — 54,800 — came in the province of Ontario and most were in the services sector. In particular, finance, insurance, real estate and leasing saw a 19,000 jobs gain, and business, building and other support services chipped in with 17,000 new jobs. In the goods sector, employment in natural resources increased by a modest 6,600 jobs, and the key manufacturing and construction sectors were mostly flat."

I agree this job growth in April is positive news, but lets not call increase in part-time, service sector "impressive". 41,000 people got jobs at MickeyDs, lets not translate that into: median house price of $400,000 is bullet-proof.

Again, this is positive and lets hope we have even better news in the coming months / years.

BTW, seems Toronto Police got just under 3% annual increase for the next 4 years and many people think this is too much. Well, r/e prices are moving up at 9% ... how do we reconcile these two?

 

[KA1]

http://www.theglobeandmail.com/repo...al-estate-market-bounces-back/article2014530/

 

[interested]

Interesting article KA1 about the dichotomy between London and pretty much the rest of England/Great Britain.

Do I take it from this article you are of the view that perhaps Toronto and perhaps Vancouver enjoy the same world "stability" and will therefore continue to prosper. I note they do say a banking crisis or downward European economy could derail the London market again. Again, there is only one London and one New York as the prime tier financial markets but still.....

 

[KA1]

Interesting article KA1 about the dichotomy between London and pretty much the rest of England/Great Britain.

Do I take it from this article you are of the view that perhaps Toronto and perhaps Vancouver enjoy the same world "stability" and will therefore continue to prosper. I note they do say a banking crisis or downward European economy could derail the London market again. Again, there is only one London and one New York as the prime tier financial markets but still.....

The purpose behind posting a link to the article was to draw attention of this cyber community to it and let them make their own opinion.

On a personal level, I have always maintained for quite a while that prices -- especially in core downtown -- will stay stable and move sideway. And if they did go down, then, perhaps, only by 2/3 %. Not upto 25% down, as posted by some others.

 

[daveto]

On a personal level, I have always maintained for quite a while that prices -- especially in core downtown -- will stay stable and move sideway. And if they did go down, then, perhaps, only by 2/3 %. Not upto 25% down, as posted by some others.

KA1, does that meant that you think prices outside of downtown Toronto will decrease?

 

[daveto]

http://www.theglobeandmail.com/repo...al-estate-market-bounces-back/article2014530/

One of the interesting similarities between the UK and Canadian housing markets, is that the mortgages in both markets are fairly short term at 3-5 years. This contrasts with somewhere like the US with 25 year terms. As such, mortgage rates in Canada and the UK are much more responsive to changes either lower or either. The relevance of mortgage rates is not just that they are at a low point, but also that they have been MOVING lower since 2008. The housing market is a marginal market, where a small amount of transactions set the market price. As purchasing power increases due to decreasing rates, that puts upward pressure on the price of the marginal supply. The proof of the pudding is what happens when rates move upward. Nobody disputes that rates will eventually move back up. The only question is when.

As far as the UK housing market, I don't know a lot about the differences between London and the rest of the UK. Its sounds a little bit like "its different here", and I note that the article is built mostly around quotes from a real estate company. The graphs I've posted below don't show a lot of difference between th UK nationwide and London.

Here are some other links

UK Housing remains weak
http://online.wsj.com/article/SB10001424052748703864204576312521949053028.html

A comprehensive UK housing bubble sites
http://www.housepricecrash.co.uk/

A graph of London prices (looks a lot like what has happened in Canada since 2008)
http://www.housepricecrash.co.uk/indices-dclg-london.php

A graph of UK nationwide prices (again, looks similar to Canada since 2008, and looks similar to the London graph)
http://www.housepricecrash.co.uk/indices-dclg-national.php