Tuesday, July 10, 2007


OK, this is anecdotal, but I wonder if it is a sign of the beginning of the end.

My "neighbour", whose property I have written about here, here, and here (and maybe a few other places), told me today that his deal to sell his house had collapsed. It seems that the RE agent (he is also an agent) who was going to buy his place for $795K, has backed out of the deal because the person that was supposed to buy her place (another realtor perhaps?), couldn't sell their place (and so on).

The price point is in the high "low end", so I wonder if this is a sign of shaky knees in the market. Finally.

I must say that I do have a certain schadenfreude about it, as I and my family have been living in a construction zone for the past 9 months. Flat tires, noise, damage to my (rented) property, etc. It is unlike me to have those types of emotions, but...

It will be interesting to see if he can flog it without losing too much money. I will keep you up to date (whether you are interested, or not), and will probably feature the monster in the curb appall series.


So, the BoC hiked rates by a quarter point today, and the reaction was interesting. I don't know if it was a reaction, or just the normal inscrutability of the markets, but the Dow was down, TSX was down, and the dollar was down a half cent. I don't know about oil. It was interesting to me that the dollar actually went down.

The BoC is kind of stuck - with over a quarter million jobs lost in the Ontario and Quebec manufacturing sectors in the last three years (some 39,000* jobs lost just in June), while the West continues to be smoking hot. Alberta is hot on oil and gas, and BC is hot in ...construction (those Microsoft jobs are meaningless in my HO).

The housing market in the US is still in the process of shaking itself out, and I think that it is starting here.

I wonder if rates will rise again in September. I'm not sure that they will, because the East is kinda hurting, and receives more attention in these things than does the West. It's further interesting that the East has lost so much with rates low - that should have dinged the dollar a while ago, no? (presuming that it was the high dollar hurting exports)

I have a feeling that things are about to get really interesting. The bankruptcy rate is double what it was a couple of years ago, and it won't be just mortgage rates going up. How about all those HELOC's, LOC's, credit cards, etc. being hiked too.

Gotta go and pay off my credit card, and look for the best plan for my cash.

*working from memory - it might have been 31,000 jobs lost in June.

I grabbed the picture from this blog - red guy blue state - who grabbed it from somewhere else. The red guy is blogging on RE in the US, and is worth perusing.

I like the "Doh!" take on Munch's The Scream, which I have used somewhere here before.


Anonymous said...

I'm in Victoria and know of a couple of deals that have collapsed here also but I don't know the price range.

I think this is the banks starting to tighten their lending. First time home buyers can't get financing so they can't buy that typical first time home from the seller who then can't move up to the next house and then that person can't move up and so on and so on.



I really think things are starting to get interesting. As I said before homes for over $1 million are just sitting, sitting, and sitting.

Anonymous said...

I went to an open house in Victoria last week, but the house had already sold, but the agent had already advertised it, so felt obligated to have the open house anyways.

The house sold for $20,000 over the asking price.

Anonymous said...

There's a sucker born every minute.


Anon at 8:50

How much was the house? Homes over $1 million in Victoria are just sitting and lower their amounts.

seen this before said...

First time home buyers can't get financing so they can't buy that typical first time home from the seller who then can't move up to the next house and then that person can't move up and so on and so on.

True but the real crunch for SFH will come when the would be trade upers can't get 300k but only 145K for little leaky boxes.

Anonymous said...

The house in Victoria that sold for $20,000 over asking price, was originally asking $530,000, but ended up selling for $550,000. It was a 1940s house in rough shape, but on a great street in Fairfield.

With that said, I can think of 3 houses in Uplands that were built last year, and seemed to sit on the market for almost a year after being completed. Priced in the $3 million range.

Warren said...

I think the Bank of Canada decision was priced into the market long ago. The TSE may have dropped on news that they hinted at another increase. The dollar.. who knows.

Nice to see the BOC paying attention to the west. We've been ignored before (rate increases while our economy flounders).

At this point I would see propping up eastern manufacturing as destined to fail in the long run. The east must not be hurting that bad (despite the numbers) for the Bank to raise rates.

patriotz said...

The BoC does not set mortgage rates. The bond market does. The BoC tries to control inflation, expectations of which are factored into the bond market, but it does not set rates. Price expectations in housing also affect mortgage rates, as they affect perceived risk.

If you want to know the sort of thing that really affects the bond market, look at this.

So much for "containment".

solipsist said...

"The BoC does not set mortgage rates."

I was aware of that, but also aware that the commercial banks set their rates in reflection of what the BoC does.

"Price expectations in housing also affect mortgage rates, as they affect perceived risk."

This is what gets me. The enormous risk that I saw for the last 3 or 4 years has been occluded by sugar plum fairies and such in the larger herd.

Those that bought at the margin that long ago are going to be caught with their pants down in the next year or so, and are likely to lose a lot of equity. It smells like trouble to me.

I read somewhere a while ago that debt is the biggest industry that there is, and it has amazing growth. It's getting more like the Matrix all the time. I guess I took the "wrong" pill somewhere along the line.

"I think the Bank of Canada decision was priced into the market long ago."

How long ago? Since things started slowing down, and even reversing vis-a-vis sales #'s and prices?

I'm not sure what you are saying.

solipsist said...

Thanks for that link patriotz. That explains the market action on Tues. to me. Quebecor should have been up more than 12 cents on that news.

That story is more profound than presented, I feel.

It was interesting to me that the Ontario Teachers' Pension Fund is lining up to buy BCE. I think that they are making a big mistake. When that goes sour, and all those teachers lose their pensions...ouch.

The kaka has been carelessly tossed towards the fan, and it is going to hit soon.

Albuquerque real estate said...

The picture really says it all. Great post!

Anonymous said...

talking about worthy investments.. i've been pondering over the best investments i could make in the next few years that A) could be liquidated at any time for reasonable value B) wouldn't lose value over time C) could be carried on the person or stored easily without being stolen by other investors or interested parties.

in the past few hundred years people have used gold as the standard "stable" investment, as well as other raw commodities like wheat, silver, sugar, titanium etc. Real estate has also been a stable investment over the years. However, these investments can be stolen by others (read: the government) or simply lose value overnight.

cash itself is unstable as an investment as cash *represents* value but isn't valuable in and of itself (paper/coin money only holds the realtime value of paper/metal and ink, and possibly the production costs associated with printing/pressing it).

after much thought it has become apparent to me that the old standard investments are no longer valid or as valuable as they once were.. and i suddenly realized that one of the best and most easily transferable/liquid assets that can be invested in - both now and in the past - is intellectual property. specifically, one's own inherent intellectual property: your own brain.

simplistically speaking, the best investment anyone can make these days is enhancing your own brain power, thereby raising the value of your manlabour/brainlabour.

all a longwinded way of saying "screw investing in material property and start investing in self-education".

a human being may own many houses and be worth many millions of dollars, but take away his material property and he is worth virtually nothing, himself.

myself, i may not own any property but i am able to double the value of my inherent intellectual property in a matter of months, even days. i don't have to pay property taxes, i don't have to worry about storage and upkeep, i don't have to hire a manager to take care of my brain. best of all, i can take it wherever i go and don't even need to fit it in a suitcase.. it's all up there, millions of dollars worth of smahts.. right there in my own freakin' noggin.


least, that's how i sees it.