Sunday, September 07, 2008

Wild week, wot?

TSX gives up 6%, and with it, all of the gains of the last year. Gold way down, oil down, and like the TSX, RE has pretty much given up its gains YOY. This game has not even started yet.

The bulls are not saying any more that there will be no losses, now a bullish statement seems to be "we'll see a 10% correction, then the cycle will start again", or other such drivel. What happened to flat prices, and plateaux?

How quickly the MSM reports the turn-around. The US is in its economic death throes, and will see no recovery in their economy until the RE market finishes unwinding. It has been said that they are only half-way there! The US government has finally had to take Fannie Mae and Freddie Mac into "preservership" (WTF is that?), and so add another few trillion to the national debt. Egads.

So what for us? Well, we just follow in the footsteps of our corpulent cousins, so in the next couple of years, there will be lots of social housing owned by CMHC, unless, of course, there is no government left to meet CMHC's liabilities. Harper has committed the ritual hari kari, and we are on our way to a "new" government, of some sort. What a freaking mess. Nobody is steering any of the ships of state anymore, except for guys like Putin, Ahmenibidijab (or whatever), Zeng Chow Min (Ka-pow, or whatever), lots of nut-bars here and there, and a deep ennui, and hypnosis in most of the "free world". The media directs us (as a society), and that has been evident so often. It will be interesting to see who wins this election, but judging from what I have heard so far, I fear that it is a foregone conclusion.

The media hyped the RE market up, and will now hype it down, and it is going down fast already, down 4-something% since May. My neighbour has now taken her place off the market because she cannot sell it without taking a loss. I presume that bankruptcy looks better. There is always the CMHC, I guess.

Just a random, unattributed quote for dessert;
Adrian Mastracci, president of KCM Wealth Management, said this may not be a time to panic, but it is a time to be cautious. "...a global slowdown and investors are waking up every day to a new piece of data" which affects markets. His advice is you don't like the risk, stay out -- at least for now. Bebee suggests re-examining your tolerance for risk. "How much money can you really lose and still sleep at night?" she asks. She also advises if you have money to invest, consider using it to pay off debt, especially high-cost debt like credit cards..."
Sounds good to me.

19 comments:

Luc said...

I've been following the condo market downtown Vancouver and I'm afraid that the prices haven't fallen even to 2007 levels.
When you write RE has pretty much given up its gains YOY - I'd like to see the numbers and the area you're referring to.
I'd be very happy if the prices returned to pre-Olympics hype because I'm looking for a place to live, not as an investment, but all I see is anecdotal evidence.

markoz said...

I'm thinking it will still take some time, Luc. We live in a society of real estate "fundamentalists" who believe prices can NEVER go down. There will be a lot of denial over the next few years manifesting itself in the form of unrealistic prices. Houses and condos are just slowly deteriorating (OK - some rapidly deteriorating) heaps of particle board and plastic. Will prices ever reflect that fact? Depends on the depth of the "fundamentalism". We can only wait and hope.

patriotz said...

luc, take a look at the "Case-Shiller Total Decline from Peak" graph from Seattle Bubble:

Seattle Bubble

See how the declines start slowly and then speed up? Vancouver (SFH benchmark) is down 4% in 4 months, that's faster than any US city at the start of its decline.

I bet you that Vancouver's decline will be faster, i.e. lower on the graph, than any US city. This market is toast, have no doubts. It is impossible to maintain such a high ownership/renting cost discrepancy one prices start falling.

HKoldmanin TW said...

"It is impossible to maintain such a high ownership/renting cost discrepancy"

I disagree, because landlords can simply increase the rent up to the level to eliminate discrepancy to achieve equilibrium. So, price can't fall for sure; the worst is only plateauing for few yrs. Once the economic situation has improved,Van RE market will take off like a flash.
I

solipsist said...

I disagree, because landlords can simply increase the rent up to the level to eliminate discrepancy to achieve equilibrium.

Rent control legislation keeps that to inflation plus 2%.

So, price can't fall for sure; the worst is only plateauing for few yrs.

Well, for sure, prices have already fallen. The worst is yet to come.

HKoldmanin TW said...

Is van has rent control?

HKoldmanin TW said...

If it does,it doesn't matter because the Fed election is looming around and CP will win a majority which for sure will favor landlords and business. Actually, it is the best time to jump in while RE is flat so I am sure your investment will be doubled after Olympic Game.
There is no land in Van and its huge Chinese and Indian population who treasure hoarding houses more than eating and their life . There will be buying houses for profit. Buy now and sell to a Chinese or Indian after Olympic Game.

Carioca Canuck said...

Went to a great party last night. A Brasilian friend of mine is packing up and moving to the US. He is a doctor and couldn't get a good job here....a shitty job in the ER of a hicktown yes....but not a good job. So he took a 5 year 6 figure annual contract (he'll get 20% income more than here BTW) with a US hospital doing what his specialty is. He's moving to Arizona where he already knows that he can buy three times as much house for 1/2 the price of his place that he just sold in Calgary.

Now here's the story....he sold his place in Calgary in 3 days.....we're close friends, so he talked to me a month ago. Apparently he then priced out the comps in his area. Undercut them all by $50K on his list price and SOLD in 72 hours....and paid his realtor only 3%.

At this same party there was a friend of my wife's who has had her townhouse for sale for 4 months now....she was amazed....he told her to price her house relatisically. She said she cannot as she owes too much and also has a line of credit on it that is maxed out.

The wife and I went back by taxi to our rental place very content, walked along the river for a bit, then went home and checked our bank balances.

Gawd I AM SOOO BITTER.

solipsist said...

hkoldmani, or whatever - you sound like satv's uncle.

Tell you what, you scoop up all those places while they are "flat", and sell them to rich foreigners after the Olympics.

By the way, the federal government has no say whatsoever on whether there are rent controls in Vancouver, or not.

Hmm, maybe I should buy up some places, and rent them to you and your friends - seeing that you don't know that "is van has rent control". I can raise your rent 25% a year!

Strataman said...

"CP will win a majority" Well thats what he's trying to do cause he knows damn well that in a year whoever is in power better have a majority because if they don't they wont have a job due to the coming economic disaster. Four years is at least some job security after which they or whoever wins a majority will be demolished at the polls by an economy with 10% unemployment, housing crash, and bankrupt governments. Powder is dry and paid for! :-)

solipsist said...

Something like that strataman, but I hope not. The pre-eminent CP are a bunch of hideous deviants in my estimation, but Canadians prove to be ever more apathetic, and the thugs depend on that. Those who are not apathetic, are often informed by partisan media, and know little history, and have little common sense. These are the same people who buy RE in droves. Sound bytes are repeated over and over in Goebbelsian and Orwellian inspiration until they become real in the minds of the mindless. "No more land, Olympics, it's different here, blah, blah", and people still lap it up. Witness the satvian above (unless it is just someone good naturedly pulling our collective leg). Nobody remembers anything. I despair for us all.

Voting is like having children, or buying RE; there are no prerequisites, just have at 'er, and hope that it all works out.

I'm going to Montana soon...

solipsist said...

I had an after thought about Uncle Situp above - what if he really doesn't know about rent controls? If he has tenants, do they know?

Does he run an ESL school? Is he an immigration "consultant"?

Is he a tenant?

Scary.

HKoldmanin TW said...

No, I am a wealthy old immigrant from Taiwan owning 7 houses since 1996. Van RE will never go back to 2006 level. Chinese alone can support Van ER.Rent control doesn't me at all cos all my tenants pay cash. Next month I will raise the rent 8% .

Anonymous said...

hkoldmanin - wealthy old Taiwanese businessmen don't use slang like "cos". You're more likely some young, highly-leveraged specuvestor scared sh*tless at the very real prospect of RE prices retreating to 2006 levels (and beyond). Good luck to you...

Anonymous said...

I agree with anon 3:17.
Except the part where he says "good luck to you".

These confused bull types always seem to wander in from out of the blue and float around like a t**d in a punch bowl.

They do manage to derail the flow of information, though.

lol said...

"Anon @9/09/2008 12:41 AM
Rent control doesn't me at all cos all my tenants pay cash. Next month I will raise the rent 8% ."

woW! Dhumpson, is that you? $_$
don't you know that it's illegal to discriminate tenants if they are old or have lived-in children?

Anonymous said...

Anon 6:45... they can only derail the flow of information when people can understand what the heck it is they're trying to say.

Luckily most people just shrug and go on to the posts in English.

The crash is worldwide; we can kiss the foreign investor myth, as well as the tiny handful of actual foreign investors, good-bye for the forseable future. No investor, no matter how foreign, buys in a crashing market.

jesse said...

"because landlords can simply increase the rent up to the level to eliminate discrepancy to achieve equilibrium"

Not possible. Rent control is a red herring. Landlords haven't even been able to raise rents AT rent control, let alone above it. Something to do with supply and demand, they say.

On a related note you can apply for special dispensation to increase rent above rent control limit if you can prove the market rent is significantly higher.

"So, price can't fall for sure"

You haven't been to Sacramento. Or Phoenix. Or Miami. Or San Diego. I guess they just don't have what it takes to make it in this business.

Anonymous said...

What a freaking mess.

my sentiments exactly!

blueskies