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Baby, we got a bubble!?
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TorontoMike$$
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daveto
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azureray
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I'm continuing my research, and will post what I find along the way. Primarily Im trying to find correlations between population growth, asset / debt growth, interest rates, immigration and other key factors and the housing market overall trends in the course of past few decades.
Here's one more chart.
Here's one more chart.
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azureray
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A few population growth related charts:
This chart below shows two critical events that are in close correlation to the downturn of housing market in 1974 and 1989.
A sharp decline in natural population growth triggers the bubble burst.
However in around 2001 there was also a sharp decline in population growth, but we didnt see housing crisis, instead we saw tech bubble burst, I wonder if that was too close to the previous housing bubble that people diverted their investments to tech instead of housing, therefore avoided a housing crisis but triggered a tech stock market crisis.
This chart below shows two critical events that are in close correlation to the downturn of housing market in 1974 and 1989.
A sharp decline in natural population growth triggers the bubble burst.
However in around 2001 there was also a sharp decline in population growth, but we didnt see housing crisis, instead we saw tech bubble burst, I wonder if that was too close to the previous housing bubble that people diverted their investments to tech instead of housing, therefore avoided a housing crisis but triggered a tech stock market crisis.
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azureray
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azureray
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azureray
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Here's the housing price historical chart of Vancouver:
We see there's a difference between Vancouver and Toronto trends. In general Toronto's housing price trend follows one velocity (illustrated as the red reference line), this velocity pretty much follows the GDP growth. While Vancouver had two velocity lines, one before 2001, and one afterwards. The latter was much more steep. This is artificial, not following the actual GDP growth trend. This is because Vancouver is much smaller with less than 1 / 3 of Toronto's population and a constrained RE market. It was much more volatile to foreign influence. We see there has been a huge influx of foreign investment post 2001. Businessmen from HongKong and rest of the world diverted their investment from Dot com bubble to RE market, making it following a totally different and artificial growth trend, the one that does not reflect the actual GDP growth. Thats why although housing price in Vancouver went higher, it did not create many new jobs. It became a stock market alternative. This was further evident during 2008-2009 when Vancouver's bubble burst, largely due to the global financial crisis. While Toronto during the same period, only had minor corrections as oppose to a crash.
We see there's a difference between Vancouver and Toronto trends. In general Toronto's housing price trend follows one velocity (illustrated as the red reference line), this velocity pretty much follows the GDP growth. While Vancouver had two velocity lines, one before 2001, and one afterwards. The latter was much more steep. This is artificial, not following the actual GDP growth trend. This is because Vancouver is much smaller with less than 1 / 3 of Toronto's population and a constrained RE market. It was much more volatile to foreign influence. We see there has been a huge influx of foreign investment post 2001. Businessmen from HongKong and rest of the world diverted their investment from Dot com bubble to RE market, making it following a totally different and artificial growth trend, the one that does not reflect the actual GDP growth. Thats why although housing price in Vancouver went higher, it did not create many new jobs. It became a stock market alternative. This was further evident during 2008-2009 when Vancouver's bubble burst, largely due to the global financial crisis. While Toronto during the same period, only had minor corrections as oppose to a crash.
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Riverdale Rink Rat
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The Economist has updated its int'l home price comparisons. As it's the countries I have first-hand knowledge about, I narrowed to Britain, France, US, Canada. The last tab (percentage gains) is interesting -- while Canada is as out of whack as UK/France, the gains have been almost all in the last ten years (slide the bottom slider to Q3 2002 to see what I mean.)
The other real eye-opener is the own vs. rent in Canada -- renting is way, way cheaper on a nationwide scale. I'd say that's two good indicators that house prices are well overvalued in Canada. We'll look to rent for at least a year when we get home.
The Economist has updated its int'l home price comparisons. As it's the countries I have first-hand knowledge about, I narrowed to Britain, France, US, Canada. The last tab (percentage gains) is interesting -- while Canada is as out of whack as UK/France, the gains have been almost all in the last ten years (slide the bottom slider to Q3 2002 to see what I mean.)
The other real eye-opener is the own vs. rent in Canada -- renting is way, way cheaper on a nationwide scale. I'd say that's two good indicators that house prices are well overvalued in Canada. We'll look to rent for at least a year when we get home.
Kenny
Active Member
I wonder if there's any similar bubble talk in Belgium and Sweden. Their house-price index maps to ours almost exactly.
Burton Realty
New Member
I just dont see it. Toronto is expensive, but all I see here is the simple concept of supply and demand. Get outside the city and there are some very affordable options. Our economy is not perfect, but there is no need to lose any sleep. Graphs and statistics can prove the point either way.
The bottom line: Wait 5 years to buy your home because you're afraid of a bubble, and pay $70,000 more than you would today. This has been proven time and time again. You cant time the market so dont try. Warren Buffet will tell you to invest and hold when you can afford to do so.
The bottom line: Wait 5 years to buy your home because you're afraid of a bubble, and pay $70,000 more than you would today. This has been proven time and time again. You cant time the market so dont try. Warren Buffet will tell you to invest and hold when you can afford to do so.
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Kenny
Active Member
I don't see that as a bottom line at all. Prices are not always up by $70K after five years - where do you even get that number?
If it smells like a bubble, then seeking other investment options is a viable strategy. For example, people who switched to equities in the past year have done quite well. The smart move is usually to avoid following the herd. Real estate is way too full of sheep for my liking.
azureray
Active Member
This is a direct quote from a CCPA research paper: Canada's Housing Bubble - An accident waiting to happen.
A few key findings:
- A housing bubble is inevitable
- Average price is always higher after the bubble comparing to before
- The recovery can take up to a two decades or more
A few key findings:
- A housing bubble is inevitable
- Average price is always higher after the bubble comparing to before
- The recovery can take up to a two decades or more
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azureray
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However I would like to add, saying a bubble is inevitable is like saying a bear market is inevitable for stock exchange. Of course it is inevitable, it's a simple supply v.s. demand rule by the 'invisible hand'.
The real question is when will it happen. Is it now, 2014 or 2018? The current cool down is a necessary step to keep us sane and keep the price increase inline with GDP growth. We almost would like to see a flat market for two years before it picks up steam again. If this is the case, we probably wont necessarily see a crash until much much later.
The real question is when will it happen. Is it now, 2014 or 2018? The current cool down is a necessary step to keep us sane and keep the price increase inline with GDP growth. We almost would like to see a flat market for two years before it picks up steam again. If this is the case, we probably wont necessarily see a crash until much much later.
Wooba
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Blanket statements like this make you look like a fool and make all realtors look bad. Millions of Americans would strongly disagree with your statement. I'm sure quite a lot of Canadians in the mid 90s would not have seen it your way either.