The Elusive Canadian Housing Bubble: Summer 2010 Edition - Canary In A Coal Mine

Tyler Durden's picture

Our friend Alec Pestov has just completed the follow up to his original in-depth analysis of the Canadian housing market: "This second edition of the report is the first of the semi-annual sequels for the original paper to provide timely updates on the state of the housing market in Canada. This document introduces a structure of the semi-annual releases, and your comments and suggestions regarding it are always welcome." For all in the market looking to buy or sell real estate in Canada, this is a must read.

The Elusive Canadian Housing Bubble: Summer 2010 Edition - Canary In A Coal Mine

 

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Segestan's picture

a nation of 33 million and they talk about a bubble. Who cares about a tiny market smaller than California?

Shameful's picture

Well they do have one edge.  When the US collapses a lot of us will turn our eyes to the north.  We will discover out love of maple syrup and hockey and hop the border :)

Gully Foyle's picture

Shameful

Fuck dude then Canuck ICE, probably with members of Alpha Flight and Wolverine supported by Mounties, will rou8nd your ass up. They will crash the home you and your twenty family memebrs live in devouring the delicious back Bacon.

While you are still muttering "eh, bring me a Molson hoser" you will be whisked across the Peace Bridge to one of the retraining camps. Then you will be shipped to Colorado or Kansas to fight the Mexican border wars.

If you are lucky you may have seen the stampede, but more likely you will have spent your time doing lawn work and shovelin the mountains of winter snow.

How about them Maple Leafs?

Shameful's picture

That was excellent, get some Alpha Flight!

Spitzer's picture

What does the Toronto Maple Leafs and the Titanic have in common ?

 

the both look good until they hit the ice.

Frank Owen's picture

When the US collapses a lot of us will turn our eyes to the north.

I'm not sure we should be letting any of you in without an intelligence test...

"One adult American in five thinks the Sun revolves around the Earth"  WTF?!

http://www.nytimes.com/2005/08/30/science/30profile.html?_r=1

Vampyroteuthis infernalis's picture

It is how idiot politicians stay in office. If a portion of the voters are clueless, you just need to manipulate them with emotions.

MountainMan's picture

Well, we do happen to be your biggest trading partner and biggest supplier of crude.

russki standart's picture

Well said. The most notable thing about canada is the montreal strippers.. they are dirty!!!

Spalding_Smailes's picture

Get out the popcorn...

Azannoth's picture

After the 2012 pole shift Canada will be directly under the North Pole, and in a few centuries unde 1 mile of ice, I would not wanna buy property there ;)

Ethics Gradient's picture

It's probably worth a mention. I think you may have logged into Zero Hedge by mistake.

VWbug's picture

whaddya mean?

'the end is near' is a very common theme on zh.

 

Ethics Gradient's picture

Sure thing. And I like it, though usually it's better argued than "The Mayans had a rudimentary date denomination system therefore we're all going to die". 

robobbob's picture

the magnetic north pole has been shifting at a rate of 40KM per year. Around 1100 KM over the last hundred years, though it is heading more towards Russia than Canada.

and its power is decreasing.

but that wouldn't have any impact on anything like say global temeratures, unless of course deflecting high energy particles were important.

Ethics Gradient's picture

Its not global temperatures you have to worry about with a sufficiently weakened magnetic field. We'd get bombarded with radiation and the atmosphere would be torn away.

I'm not disputing that. Nor am I disputing that it is changing and always has done.

All I was suggesting was that the Earth has it's own schedule and it's not telling.

This never happened:

From: gaia@solsystem.org

To: balam@mayantempletrust.org

Subject: Calendar

Dear Balam

I'm impressed with your work on a new calendar system. Very forward looking. Mind you, just so you know and don't put too much effort into it, you don't need to be too forward looking. You might as well only count up to the end of the 13th b'ak'tun.

Your ever giving,

Gaia

whatsinaname's picture

Major housing bubble being brewed in Indian real estate as well fuelled by cheap funding from western banks.

Eternal Student's picture

Here's a point not many realize. Newfoundland used to be an independent country. Then they ran into a credit crisis, and Canada took them over. The source is "This Time is Different", though I see that Martin Armstrong ripped off that book entirely without attitribution recently (of course, what does one expect from a Con in prision, I guess).

My point here is that the way things are going, perhaps we'll get to own both Canada and India. That would be interesting.

VWbug's picture

i saw some program on tv that showed million dollar (!!) condo buildings going up in the midst of the slums of mumbai...totally anecdotal, but didn't look like a good sign to me

Leo Kolivakis's picture

No, no, no, there is no real estate bubble in Canada! Just like Greece, prices will keep going up forever...D'OH!!!!!!!!!

Ragnarok's picture

The Calgary Condo situation disgusts me. What's an extra couple hundred thousand? It's got granite counter-tops.

Ragnarok's picture
Alberta headed for record deficit

http://www.financialpost.com/news/Alberta+headed+record+deficit/3442324/...

 

Eat shit Ed Stelmach, go Wildrose Alliance!

Slartibartfast's picture

No surprise there that Stelmach runs a deficit...it's what neo-cons do, isn't it? Federal finance minister Flaherty isn't called 'Deficit Jim' by the boys on Bay Street for nothing...the guy couldn't run a yard sale. Typical neo-con...takes over with a surplus, slashes taxes he was warned against slashing (all for votes), does a vicious flip-flop on taxing income trusts, and tells everyone that a) there won't be a global financial crisis (wrong!) and then says Canada won't run a deficit (even wronger!!).

So inept, if you gave him a year of free lunches he'd still manage to starve to death.

Ragnarok's picture

I don't believe the term "neo-con" correctly applies to conservative gov't in Canada, though there is some overlay.

 

  http://en.wikipedia.org/wiki/Neoconservatism

 

Remember Harper telling the libertarians in the party to shove it?  Ottawa has a strange effect on those who go there.

 

 

Slartibartfast's picture

Copy that.

Harper had his own 'Night of the Long Knives' when he purged the party of the 'Progressives' and even went so far as to dump the term from their name. I expected a much smarter performance from him...always thought that when he got in power he'd be more subtle, but he's been anything but. The whole census debate is astonishingly stupid...a total non-issue that was unbelievably unimportant but totally mishandled. And by silencing the RCMP on the gun registry, he's turned what was going to be a cakewalk vote into a possible defeat. It's not a confidence issue and I think the opposition parties are gonna bury him on it. Harper has never heard the term 'kill them with kindness'.

kinetik's picture

Fwiw, Harper and Ignatief are both neo-cons.

fxrxexexdxoxmx's picture

runs a deficit .it's what neo-cons do,

What with liberal policies driving growth and tax revenues what else could happen? Have you ever been to California or Illinois? Neo Con strong holds both.

Fred Hayek's picture

All those grainy pictures of Willie Brown partying with Bill Kristol,  Norman Podhoretz and Paul Wolfowitz, frankly, sickened me.

Ragnarok's picture

Speaking of Canada, check out PHYS in August..... nice.

Tybalt's picture

When's the silver PHYS coming out?

nope-1004's picture

My understanding of the Canadian housing industry is that on April 14, 2010 the gov't changed the rules for first time homebuyers, making qualifying much more onerous.  If you look at the sales stats across the cities, from May onward sales tank.  Seems to me that new entrants into the market have a tougher time qualifying, so upward mobility has to slow if the pool of first-time availables to buy your current home diminishes.

Nowhere do I see this important development mentioned in the article.

 

Leo Kolivakis's picture

You are correct. They tightened the rules for first time homebuyers in an effort to curb any speculative activity taking place.

walküre's picture

yes and two consecutive rate hikes by the BOC on top of that would kill any real estate market mood.

come 09/22/10 we'll see if their rate hikes are motivated by bullshit inflation or by pure greed to sell bonds and ensure massive public service sector pensions are being paid.

the BOC killed the real estate market in Canada in the Eighties. They caused alot of financial harm to many Canadians.

BobPaulson's picture

So they should cut rates and puff up the bubble? No thanks. By the way, 5% interest rate isn't "high" in a non-ZIRP normal world where people have to pay for what they buy.

FranSix's picture

No, they tightened rules to make it difficult to proceed further with the housing bubble, knowing full well that the legerdemain instituted in the face of the U.S. would have the exact same result, a bubble and  a deflation of that bubble.  Once the bubble proceeded to highs, they instituted 'new safety measures' which were really designed to favour insurers of risk.

They even managed to wrangle higher money-market rates and kept up the band playing the higher interest rates theme, even though long term rates are at historic lows.

Not very well known is how the banks are ebullient on the sales of their "covered bonds," which are Asset Backed Commercial Paper by another name, derivatives with tranches of mortgages and credit.  And here we have the Ontario Teacher's Pension Fund clamouring up and down, wanting to "insure" mortgages.  

Banks are prevented from engaging in legerdemain by law, but are in behind the scenes backing the scheme with derivatives, while pensions are big buyers of the fraudulent paper.  Sounds awfully familiar.

So the young, who have little to go on in this market are walking into the trap, writing mortgages they can't afford, unaware that their interest rates can rise along with credit default swaps "insuring" their mortgages, despite historically  low long term bond rates. And the retired are looking to back covered bonds in the scheme,  appropriating risk from the unwitting who never realizes that their risk trades on Bay St, not knowing that the whole scheme can go illiquid.  And the taxpayer, the ever gullible source of fresh capital for this insane bubble is none the wiser, because in Canada, 'the banks are sound.'

A monthly updated average Canadian housing  price chart is available here:

http://www.gettingtechnical.com/01_home/market_commentary/can_en.html

Stats Can is the source for money supply:

http://www40.statcan.gc.ca/l01/cst01/econ07-eng.htm

P.S. If you travel to Canada, do not mention the housing bubble, because you'll be treated as if you were insane.  Interest rates are going up apparently, the economy is robust because of Tim Horton's, and we're buying fighter jets. 

fxrxexexdxoxmx's picture

Buy our fighter jets cause they are made in America. hahahahahahahhahahhahahahahhahahah made in America hahahahah

Hidden Assumption's picture

This was another case of closing the barn door after the horses have already left. HST, rule changes and "pending interest rate hikes" pulled demand forward, leaving a vacuum on the other side. This isn't the cause of a downturn, just the spark once an overvalued, overbought market is already vulnerable.

MountainMan's picture

They have been saying its a bubble for 20 years.

romanko's picture

I remember hearing that too, back in '01 when I put a deposit down on a $155K condo - it's now worth $265K, would have done better piling that 155K into gold but hindsight is 20/20...

that said, I'm seriously considering selling NOW, not necessarily because I think the Toronto market is in a bubble - annual increases have been at the "real" inflation rate - but because I'm worried that a fall crash in the _____ markets might lock up credit availability - I paid cash when I bought, most buyers today don't and can't

Spitzer's picture

Thats right and the only thing that will pop it is higher interest rates.

This bubble will last as long as the US treasury bubble

VWbug's picture

exactly.

affordability is a problem already, but seems to be manageable (so far, although i don't see how). But i liked his analysis of what happens with a 200 bp rise in rates...look out below

chet's picture

Visited Vancouver lately.  It's is without a doubt 110% in a bubble, that is in fact already deflating.  All of the endless talk about real estate, the "must get in now" frenzy, the "it's different here" rationalizations, was exactly like what you heard in the States in 2005.

Based on a comparison of median home price to median household income, Vancouver BC is the most unaffordable city in the world.  More unaffordable than New York or San Fran.

The tighter lending standards may protect the banks a bit more than in the US, but that just means it will be the homeowners themselves who take the whole hit.

Spitzer's picture

yeah thats why I went short the candian banks(via etf) after they rocketed through pre lehman prices.

walküre's picture

MFC was a great short. Eerily similar to AIG.

TSE:HFD was good until this morning.

 

BobPaulson's picture

My friend with a single income family just bought a 2 bedroom in Gastown for 800k. I can't figure out how that makes sense. That graph showing 70% of income going to mortgage servicing was no surprise to me.

Double down's picture

A new "Vancouver Mansion or crack house" has come out.

http://www.crackshackormansion.com/ 

Slartibartfast's picture

I know the exact subdivision he mentions in Huntsville (Muskoka). The prices are so far out of the range of local affordability that the only people buying are affluent retirees looking to dump their overvalued Toronto homes. The Canadian market is indeed due for a sizable correction; many young families choose to just build from scratch on property away from the villages...and there's almost no way they can afford waterfront.