Archive for the ‘Your Shelter’ Category

For all those the-housing-market-is-different-here-in-Canada folks this one’s for you, courtesy of the Bank of Canada. BoC made this working paper entitled “Housing Market Cycles and Duration Dependence in the United States and Canada” available in February 2007 to very little fanfare. If this is old news to some then I’m sorry for wasting your time, but since I frequent many Canadian RE websites I see nary a mention of it, and its findings are IMHO quite pertinent. So here are some of the highlights (bolding and comments within square parentheses are mine):

From the abstract:

  • Using a panel of 137 cities, we examine the duration, size, and correlations of housing market cycles in North America. [Although mostly secondary, the research does go back as far as 1870.]
  • We find that North American housing cycles are long, averaging five years of expansion and four years of contraction, and there is a fairly high degree of correlation in house price cycles between U.S. and Canadian cities. [Ahem, to those few Canuck RE bulls still in denial out there, please take note — NEWS FLASH! WE’RE NOT DIFFERENT.]
  • … to the best of our knowledge, this is the only study that tests specifically for duration dependence in housing market cycles.

From the summary:

  • Housing cycles in the U.S. and Canada are quite similar overall, but Canadian housing market cycles are more volatile than those in the U.S. Most notably, Canadian housing market contractions are somewhat shorter and sharper than those in U.S. cities. [Sharper, as in we Canadians will see bigger housing price drops than what we’re seeing in the U.S. which, three years later, is still in freefall.]
  • In both countries, real house prices decline by 10% to 11% during an average contraction. [So since average prices in the U.S. have so far dropped by 20% with no sign of stopping we are obviously entering an abnormal price decline. How abnormal? Just keeping watching the Case-Shiller’s U.S. home price index to get an idea of the minimum drop we’re going to see here in Canada.]
  • This price decline however, occurs more rapidly in Canada since the average contraction lasts only 3.5 years in Canadian cities compared to 4.4 years in the U.S. cities. [This should be good news for those young Canadians smart enough keep building their nest eggs and not succumb to realtor wiles. Since most analysts put the current U.S. housing top in summer of 2005, Canada seems to be a little bit behind schedule with a spring 2008 top. The paper’s data seems to suggest a bottom in the U.S. around Christmas of 2010 and for Canadians the end of 2012. Remember however, this is based on an average correction and so far the housing bloodbath going on down south is anything but normal.)

In the interests of brevity I’ve only highlighted the abstract and summary. However for the avid RE blog reader there is plenty of interesting tidbits in the 40+ pages in between. All in all a really interesting study, and I would like to thank the folks and the BoC for doing the work. (Thanking a central bank–ugh!–but credit where credit is due.) The BOC link to the working paper is here . Enjoy!


From a Vantage Point in Coquitlam BC Canada One Looks Up in the Sky to See Six New Condo Towers Feverishly On The Way…

Six New Condo Cranes In Coquitlam BC, May 16, 2008
Photo 1 of 3: Six New Condo Cranes In Coquitlam BC, May 16, 2008

… And Another Trying to Sell (Is “Open Daily” Realtor-Speak For: “Please Buy!” ?) …

Almost-Completed Condos For Sale In Coquitlam BC, May 16, 2008
Photo 2 of 3: Almost-Completed Condos For Sale In Coquitlam BC, May 16, 2008

… But Down on the Ground We See This. (Pick a Condo, Any Condo)

Photo 3 of 3: Existing Condos For Sale In Coquitlam BC, May 16, 2008

My 2-Bits: Three photos that summarize how truly blind Vancouver real estate developers must be. If these images don’t speak volumes to present-day large mortgage holders and would-be new homeowners, then nothing will. Nothing more need be said.

Special Thanks to MandyCat for the Photos!

” Total REBGV Listings On May 6: 15309 On May 12: 16426″
My 2-Bits: 15000 was unknown territory that was broken through only a week or two ago. To be at almost 16500 less than 10 days later indicates the onslought of people trying to get out may be upon us.
” This second image does a good job illustrating how a condo tsunami might work. Thanks VHB. It shows the massive amount of condos under construction in the Vancouver area. One could call it a tsunami of condos. Watch out when it lands on shore when these condos start completing. It could be very dangerous. “
My 2-Bits: A couple of local REBs, VanHousingBlogger (or VHB) and Mohecan, have been putting together some really interesting work of late: the latest is a chart on the condo-building volume is that looks eerily similar to 2-D representation of a massive tidal wave. Fantastic (and IMO) mandatory reading for any homeowner (or would be) homeowner in the lower mainland. Remember: the first out will get the best prices.
Anecdotally, my morning half-mile stroll through new housing developments has seen the number of for sales signs rise from 8 to 15 in the last two months. During that time one sign went down and 8 went up. Interestingly the one that went down has no sold sign in front of it, nor is occupied yet (or has ever been occupied since it was built and listed last summer).

[New York Times] City Council in Bay Area Declares Bankruptcy
” What worries some experts is that some of the problems here are all too common, a steep decrease in property and sales taxes and transfer fees as a result of weakness in the housing market. “
My 2-Bits: In another article on the same topic … Moody’s calls this a ‘unique case.’ Time will tell… [Hat Tip: Cambler!]

[CTV News] More homes are for sale and fewer people are buying in Metro Vancouver
” As the housing market changes, it’s leading analysts to ask whether real estate is the slam dunk investment it used to be. “

House prices fall as bank predicts credit crunch will hit UK hardest
” House prices have recorded the first annual decline since 1996 as a leading investment bank gave warning that the economy would be the worst hit by the global credit crisis. … David Blanchflower, a member of the Bank of England’s Monetary Policy Committee (MPC), said earlier this week that a 30 per cent fall in house prices by 2010 was not implausible. “