Oh, Canada...

[What_Goes_Up]

tribune.ie/business/internat … s-fears-o/

**Bank of Canada interest rate pledge sparks fears of a house price bubble **
December 20, 2009

House prices rise 21% as bank governor pledges to freeze interest rates at current record lows until June. Greg Quinn and Alexandre Deslongchamps report

Bank of Canada governor Mark Carney’s pledge to freeze record-low borrowing costs until June may be raising the chances of a bubble in home prices even as it helps the economy recover from its first recession in 17 years.

Sales of existing houses rose 74% in October from the January low, with prices up 21% from a year ago to a record C$341,079 (€220,000), partly because of Carney’s promise. To prevent the economy from overheating, Carney will raise his benchmark rate by 125 basis points to 1.5% in 2010, while US Federal Reserve chairman Ben Bernanke will keep his key rate at 0.25%, said Stephen Gallagher, chief US economist at Société Générale.

“The worry has got to be that you might be getting a housing bubble out of this,” said David Laidler, a former visiting economist and special adviser at the Bank of Canada and now a fellow at the CD Howe Institute, a Toronto research group. Laidler is a member of the institute’s Monetary Policy Council, which studies central-bank decisions and said earlier this month that a “possible unintended effect” of Carney’s commitment is “the buoyancy of mortgage lending, particularly variable-rate mortgages, and the housing market”.

…(cont’d)

[yonexsp]

Cautious Canada to the rescue:

google.com/hostednews/canadi … 4qBmAtAOng

Again, Canada proving that being conservative is the right way

[What_Goes_Up]

theglobeandmail.com/report-o … le1407223/

Cure for housing market carries risk
Monday, Dec. 21, 2009
Steve Ladurantaye, Tara Perkins and Bill Curry

The housing market that led Canada out of recession is now so hot that Ottawa is talking about doing something to cool it off, a move economists say carries risks for the economy.

Fuelled by record low interest rates, residential real estate prices have gained 20 per cent this year. And Finance Minister Jim Flaherty is now warning he will step in if prices get too high by tightening the rules for borrowers, by increasing the minimum down payment and shortening the maximum length of mortgages.

Such a move would have to be done cautiously, economists say, because the real estate market touches all parts of the economy, and anything that caps its growth could also temper the recovery.

Policy makers are concerned homeowners will take on more debt than they’ll be able to afford when interest rates rise again, possibly leading to a painful correction later.

The Bank of Canada has vowed to keep lending rates low into the middle of next year, limiting its options for taking the pressure off a hot market.

…(cont’d)

[yonexsp]

I think the bubble is growing faster where I live now. Houses in my neighborhood stay on the market less than a week now.

cbc.ca/fp/story/2010/01/15/2447336.html

The heated debate about whether the Canadian housing market is in the midst of a bubble is likely to continue into this year, thanks to December sales that set a new record for the month.

Existing homes recorded their best December ever as the recovery in the Canadian housing market saw sales climb 7.7% last year from 2008, according to the Ottawa-based Canadian Real Estate Association. Despite the impressive rebound, the 2009 market saw a decline of 10.7% from the record-breaking pace set in 2007.

The stakes are high as the Canadian housing industry battles the government, which has not ruled out tougher requirements for homebuyers to cool the market. Two scenarios rumoured to be under consideration include increasing the minimum downpayment from 5% to 10% and shortening the length of amortizations from 35 years to 25 years — moves that would drive many consumers out of the market.

This past week the mortgage brokerage industry produced a report showing much of the Canadian market has opted for locking its rates into longer terms, thereby providing a shield against rising interest rates that most predict will come by the middle of this year.

“We think that dismissing housing risks is being a tad Pollyannaish, but it’s all the rage in Ottawa circles these days,” said Derek Holt, an economist with the Bank of Nova Scotia. “The industry is full of talk of an unsustainable non-bubble, whatever that is, and driving a message that borrowers are all acting out of utter forward-looking brilliance.

“A key debate is whether housing will experience a soft-landing toward lower volumes and prices, which is possible, or experience a more sudden decline in activity in the back half of the year and into 2011, which we think is likely.”

Mr. Holt is suggesting that as short-term interest rates go up as much 200 basis points by the middle of next year and supply finally builds up in the Canadian marketplace, prices will drop by as much as 10%.

“If you blinked during this cycle, there was no correction,” said Mr. Holt, who believes the market needs to have more of a pullback than it did in late 2008 to early 2009. Home prices in Canada climbed 5% in 2009 after falling less than 1% in 2008 — the first annual drop in prices since 1998.

The Canadian housing market has now had 11 consecutive monthly sales increases on a seasonally adjusted basis, but CREA chief economist Gregory Klump noted the pace has been slowing down for months. “CREA’s latest statistics will no doubt spark further bubble talk amongst the usual suspects,” he said. “Cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer.”

CREA is still forecasting sales will jump by 7% this year, much of that because the first few months of 2009 were relatively weak. Prices are expected to rise 4.7%, but Mr. Klump said forecast will be updated next month. Historically speaking, 2009 finished up strong, but it’s still only the fourth best year for sales since 1980. “It’s not even a podium finish,” he said.

But there is no arguing housing has had a strong run. The average sale price of a home climbed almost 103% over the last decade, compared to about a 40% increase for the S&P/TSX composite index. By comparison, the average house price increased just 8% during the 1990s.

Financial Post

[yoganmahew]

What on earth are those bank economists in Canada doing? Talking down the economy an’ all…

[yonexsp]

Further expalnations Banks in Canada are a bit stodgy

montrealgazette.com/business … story.html

Still time to ward off a bubble

Home prices are up by more than 13 per cent in the past year.

By JAY BRYAN, The GazetteJanuary 16, 2010 12:18 PMBe the first to post a comment

MONTREAL – Not too long ago, there were those who predicted that Canada’s housing market would inevitably follow the U.S. into the same sort of catastrophe that began there more than three years ago.

And about a year ago, it looked as if they were right. Prices here finally went into a steep decline late in 2008, about the time Canada was falling into recession.

But as it happens, the Canadian collapse was merely a hiccup. Ironically, as home prices stay severely depressed in the U.S, economists here are worried by the prospect of a housing bubble.

By our most widely-watched measure, the Canadian Real Estate Association’s raw average of home transactions across the country, the average price in December was up by 19 per cent from a year earlier, perching at about the same elevated level it reached at the 2008 peak.

The truth is a bit less dramatic, because this national average is pushed up when there’s a particularly big jump in the number of transactions in high-priced markets like Vancouver and Toronto, as there has been.

But even when you hold the weight of different cities constant, home prices are up by more than 13 per cent in the past year, a figure that’s clearly unsustainable.

Why unsustainable? Because average incomes are rising at a small fraction of this pace. When prices rise faster than incomes for long, homes become unaffordable, sales falter and prices stagnate. Sometimes they fall sharply.

By early this week, the Bank of Canada felt compelled to deny that there’s a home-price bubble in Canada, and some think it’s right. But even so, it could be only a matter of time, worry a number of private-sector analysts - and quite probably the central bank, too.

It may seem shocking that conditions could be so different in this country and our closest neighbour, but it’s not really much of a puzzle.

Banks in Canada are a bit stodgy, and so are regulators. That’s not always a good thing, but it saved our bacon during the housing meltdown that struck the U.S, Britain, Ireland, Spain and other countries.

In Canada, sub-prime loans represented only about one-quarter the proportion of lending it did in the U.S, and sub-prime in this country had a different meaning: it included people who didn’t quite qualify for prime loans, but were never hopeless deadbeats.

As well, the securitization phenomenon that let U.S. banks sell dubious mortgages to unsuspecting buyers never developed in Canada. Only about one-quarter of Canadian mortgages were securitized in 2007 (it was 60 per cent in the U.S.), and they were solid, government-insured mortgages, not sliced, diced, leveraged subprime junk.

Which brings us back to the potential housing bubble.

Ironically, you could say it’s the strength of Canada’s banking system that is to blame for the worries about an overheating housing market.

In the U.S. and elsewhere, near-zero interest rates haven’t inflated housing prices because the banking system is so sick that there just isn’t much lending. In Canada, monetary policy still works normally, which means that when you hand out nearly free money, it’s like jabbing a syringe full of adrenaline into the housing market.

Up to now, the effect has been almost entirely positive. Revived housing prices have given consumers the confidence to begin spending more freely and homebuilders the incentive to rehire many of their laid-off workers, creating 33,600 jobs in the past six months.

The problem occurs when housing stays too exuberant for too long. This scenario, which is one of the things economist Derek Holt at Scotia Capital has been worrying about, would raise the prospect of a nasty crash in home prices if it continues until next year or the year after.

But there’s still a good chance that the problem will prove to be self-correcting. There are several factors that could conspire to bring this about:

First, high prices bring new sellers into the market and spur increased home construction, easing the supply shortage that’s been behind a lot of the price gains.

Second, mortgage lending regulations, loosened not long ago, could be tightened a bit in this spring’s federal budget.

Third, low interest rates and impending real estate taxes in the big markets of Ontario and British Columbia will stop supercharging the market by late summer, when the rates could be rising and the taxes will have arrived.

If markets cool by then, it’s quite likely that the market will work off its excesses by simply standing still for two or three years, believes economist Benjamin Tal at CIBC World Markets.

If they don’t cool, it could indeed be time to worry about a bubble and a future crash.

jbryan@thegazette.canwest.com

[yonexsp]

Agghhhh!!

theglobeandmail.com/report-o … le1460610/

A bubble is a bit like the famous description of hard-core pornography uttered by the late U.S. Supreme Court justice Potter Stewart, who could not come up with a definition: “I know it when I see it.”

Or do we?

Bubbles remain hard to define, difficult to measure and, like recessions, can only be accurately assessed after they have burst. Economists have wrestled with bubbles for generations, but have yet to devise an adequate scientific means of analyzing them, comparing them or providing us with an early warning system that would safeguard from their worst effects.

Are we in a housing bubble?

But lately, bubbles – or bubble fears – seem to be everywhere. From Chinese real estate to U.S. Treasury bills to global commodities, analysts point to a flood of easy credit that has helped to inflate values.

Now, soaring prices are triggering bubble fright on the Canadian housing front.

For much of the global downturn and financial crisis – which was triggered by the bursting of the U.S. housing bubble – Canada stood as an island of calm. House prices never reached the stratospheric levels of the subprime era south of the border and their decline was nowhere near as precipitous when the Canadian economy weakened.
Investor Education:

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* Understanding house prices
* Is it better to buy a home, or choose some other investment? Charlie's story
* What makes buying a home different from other investments?
* What are some renovations that add value to my home? 

Most housing watchers insist Canada is not in a bubble just yet. But they acknowledge there is no precise science that determines exactly when a market shifts from merely heating up to bubbling over.

“If it walks like a duck and quacks like a duck … ” said David Rosenberg, chief economist and strategist with Gluskin Sheff and Associates in Toronto.

Mr. Rosenberg pronounced Canadian housing in a bubble late last year, fuelled by the usual culprits: tight supply, extreme valuation, and dramatic credit expansion.

Mix in easy mortgage conditions luring more people to jump into home ownership – the current national rate of 68.4 per cent stands at an almost 40-year high and a full percentage point above the U.S. level – and you have the recipe for a classic bubble.

“Housing values are anywhere between 15 and 35 per cent above the levels that I would label as being consistent with fundamentals.”

When it comes to housing bubbles, Mr. Rosenberg’s opinions carry some weight. He began his career as a housing economist.

And as a Wall Street strategist in 2004, he correctly called the U.S. bubble and its eventual devastating impact, at a time when other leading analysts were almost uniformly bullish.

“If price increases come down and we see the sales numbers moderating, then I won’t be so worried,” said Tsur Somerville, an associate professor of real estate finance at the University of British Columbia.

“If things continue at the pace they’ve been at the last six months, that’s a lot of cause for worry.”

While much of the focus is placed on national housing data, Mr. Somerville noted that only a handful of U.S. states, led by California and Florida, truly had housing bubbles.

But the damage they did spread everywhere by way of mortgage-backed securities and other financial products.

“Another element is that the [Canadian] government is driving this,” he added. “CMHC has been buying so much product. Functionally you’ve had this huge liquidity dump from the government into housing finance.”

The largest program Finance Minister Jim Flaherty unveiled to combat the crisis and ease the flow of credit through the recession was Ottawa’s Insured Mortgage Purchase Program, which has bought more than $65-billion worth of mortgages from the banks.

The Finance Department announced last fall it would extend the program until the end of March.

If you want to locate a bubble in the making, following the money, or at least the credit, is the best road map.

“There is always excess leverage involved,” said Arthur Heinmaa of Toron Capital Markets in Toronto.

“Where the credit is greatest, that’s always where you will find the bubble.”

Just don’t expect any policy maker to acknowledge that misguided government policy typically aids and abets bubble formation.

Nor will they ever agree publicly with the notion that a bubble mentality has taken root and that it has to be nipped in the bud.

“Imagine the political backlash if a politician or central banker told people their house is worth 20 per cent less than they think it is – and they’re prepared to do everything in their power to ensure that it is worth less,” Mr. Heinmaa said.

[What_Goes_Up]

nytimes.com/2010/03/20/busin … f=business

**Some See a Real Estate Bubble Forming in Canada **
Published: March 19, 2010
By IAN AUSTEN

OTTAWA — Marie-Yvonne Paint, a real estate agent in Montreal, has the kind of problem most of her counterparts in the United States can only dream about.

“We have a shortage of inventory right now,” said Ms. Paint, who focuses on the exclusive and expensive municipality of Westmount. “It’s very annoying. We have buyers ready to buy and not much to show.”

Ms. Paint’s experience is not an isolated example. Like most of the world, Canada’s real estate market slumped during the recession. But now, instead of worrying about the recovery of the real estate market, some Canadians are concerned about the prospect of a price bubble. The Canadian Real Estate Association reported that the average price of existing homes rose 19.6 percent in January compared with those in the month a year earlier, the latest in a string of substantial gains dating back through last autumn. By contrast, the average price of existing homes rose 2.6 percent in the United States in the same period, according to the National Association of Realtors.

Such drastic percentage gains are not just a reflection of the market’s earlier depths. In some Canadian cities, particularly Toronto and Vancouver, prices appear to be heading toward record levels.

“It’s no surprise the housing market responded to low interest rates,” said Craig Alexander, the deputy chief economist of the Toronto-Dominion Bank. “The real question is what’s going to happen in the next year. It can’t continue at the current pace, otherwise a bubble will form.”

…(cont’d)

[Ardillaun]

In my remote town (take the remotest corner of Ireland and cube it) population has been static at around ten thousand for decades, we have no new major employers, our hinterland is ageing rapidly and ITS industry (fishing) has all but disappeared - and yet we too have a building boom. Ten years ago the most expensive house in town was 270,000; now that gets you an entry level new bungalow. The town councillors boast of our new ‘industry’ and pocket all the new municipal taxes and the handful of big builders make a killing. Nobody except me seems worried yet.

[Coles2]

That sounds very familiar.

[yonexsp]

yourhome.ca/homes/moneyshopp … gage-rates

Big banks hike residential mortgage rates

Three big Canadian banks increased interest rates on residential mortgages Monday, moves that are likely to become more common as worries over international debt push up prices in the bond market.

Royal Bank of Canada, TD Canada Trust and Laurentian Bank hiked rates on closed mortgages with terms of three, four and five years.

The increases ranged from two-tenths to six-tenths of a percentage point. The biggest rate hike was on five-year mortgages.

All three banks increased their posted rate by 0.6 per cent to 5.85 per cent from 5.25 per cent.

That means a homeowner with a $250,000 mortgage at the new rate of 5.85 per cent with a 25-year amortization would pay $1,577 per month. That’s up $88 from $1,489 a month, prior to the hike, which is to take effect Tuesday.

The increase does not stem directly from moves by the Bank of Canada, but rather anticipated central bank rate hikes, economists said.

The bond market is moving on speculation the Bank of Canada will raise rates sooner than expected to put the brakes on inflation.

“Bond yields have risen over the last several weeks so it’s not surprising that mortgage rates are tracking them,” said Eric Lascelles, chief economics and rates strategist at TD Economics.

“Markets are anticipating that the Bank of Canada will make a move ahead of its current pledge date,” said Sal Guatieri, senior economist at BMO Capital Markets.

Prices in the bond market are moving down as investors expect interest rates to increase in the coming months, he said. In the background are concerns about sovereign debt, Guatieri added.

While an agreement reached last week to provide an aid package to Greece appeared to improve investor sentiment, there is still considerable anxiety about the country’s long-term ability to finance itself.

In the U.S., anxiety over rising interest rates is matched with concern about the massive government deficit, Lascelles said.

That has bond market investors demanding higher interest rates.

“Given the almost unanimous view that central banks will begin increasing interest rates in the next three to 12 months depending on what country you’re talking about, it’s not a surprise that the banks are anticipating this and responding to their own cost pressures,” Lascelles said.

“Keep in mind, banks are borrowing in the market themselves to fund those mortgages.”

The Bank of Canada made a pledge last year to keep its key overnight rate at a historic low of 0.25 per cent until the beginning of the third quarter to help stimulate the economy.

Over that time, observers have been surprised by the strength of the domestic Canadian economy.

In recent months, inflation has spiked higher and the central bank has signalled to markets inflation-fighting remains its top priority.

In a speech last week, Bank of Canada Governor Mark Carney said his pledge to keep the bank’s benchmark rate on hold until July is “expressly conditional” on inflation, which he acknowledged has been “slightly” stronger than anticipated.

[BoyRacer]

Dollar parity keeps Canadian buyers in U.S. real estate → marketwatch.com/story/dollar … =afterbell

TORONTO (MarketWatch) – As the Canadian currency reaches parity with the U.S. dollar, more of that country’s residents, like the bird represented on its coins, are flocking south to find a second home in the sun and sand.
Lawrence Yun, chief economist at the National Association of Realtors (NAR), says about 27,000 Canadians bought vacation homes in the U.S. last year, and that it looks like the Canadian influx is slated to continue through 2010.
Experts expect the currency known as the loonie to continue to appreciate over the next several months, sending Canadian buyers on a shopping spree in Florida, California and Arizona.

there is more

I know it gets real cold in Canada for much of the year, but, would cheap money fuelling bubbles have anything to do with this?

[BoyRacer]

Housing boom shows no signs of slowing → yourhome.ca/homes/newsfeatur … of-slowing

Greater Toronto housing prices jumped 20 per cent in March compared with the same time last year, the Toronto Real Estate Board reported Tuesday.
Continuing an upward trend, the average existing house price hit $434,696 last month – up from $362,052 during the economic recession one year earlier, figures show.
First-quarter sales numbers proved the best on record since the real-estate board’s boundaries changed more than a decade ago, said Jason Mercer, the board’s senior manager of market analysis.
Realtors registered 10,430 sales through the Multiple Listing Service, lifting total sales for the first three months of 2010 to 22,418, TREB figures show.
“We’re still going to see prices growing,” Mercer said looking ahead. Ontario’s harmonized sales tax takes effect July 1, adding to purchase costs, and mortgage rates are heading higher, perhaps creating a drag on the market.

there is more

[BoyRacer]

Home prices in Vancouver hit million-dollar landmark → news.sympatico.ctv.ca/Home/Conte … &date=True

Vancouver’s super-hot real estate market has hit an expensive milestone, with the average price of a home reaching $1 million for the first time.
More than 1,300 single detached homes were sold in greater Vancouver last month, for a whopping total of $1.35 billion.
That puts the average sale price tag for a home at slightly more than $1 million – an achievement that the B.C. Real Estate Association says is unprecedented.
“It was the first month ever we saw that price crest a million dollars,” said Cameron Muir, the association’s chief economist.
The $1-million average includes high-end homes. But the average price for a single, standard detached home in the city reached $800,341, the Real Estate Board of Greater Vancouver said Tuesday. That’s up from $650,000 a year ago.
The soaring prices have local realtors like Paul Eviston feeling good.
“If you look at our market in the last 12 months, (it’s) probably the hottest real estate market in the world,” he said.

there is more

[Coles2]

[*‘CrackShack or Mansion?’ * (https://www.crackshackormansion.com/) - So you think you know the Vancouver property market?

[What_Goes_Up]

@Coles2

[*‘CrackShack or Mansion?’ * (https://www.crackshackormansion.com/) - So you think you know the Vancouver property market?

Excellent!

[Kate_P]

@What Goes Up...

@Coles2

[*‘CrackShack or Mansion?’ * (https://www.crackshackormansion.com/)

• So you think you know the Vancouver property market?
  Excellent!

+1

Just wait until someone this side of the water thinks it’s a good idea to start ‘certifying’ crackshacks here, and those who can’t make a living out of certifying BER ratings feel the need to diversify. FAS will be offering courses and Gormley will be offering grants to owners and NAMA or some newly formed quango wil take them over to have them razed with the other shite.

I can see it all, and the long queue of NE FTBs lining up during night to be first on the list.

[wii4miinow]

@Coles2

[*‘CrackShack or Mansion?’ * (https://www.crackshackormansion.com/) - So you think you know the Vancouver property market?

Superb that.

Just a few comments about Vancouver. I’ve been to the city first back in 1988 and later then many times during the early parts of the 2000’s.

This city is very abnormal in a few ways from the rest of Canada. The city is effectively the US mirror of Hong Kong. By this I mean that it is heavily populated by Chinese, and also Indian, persons. Furthermore, it is bounded by a mountain range that tends to squeeze the easily developable land to a few limited regions.

This is no way explains what is going on but does in some way outline where some of the money is coming from (the East!). I remeber being there in 2002 and just how few people who I met who were of European origin.

[BoyRacer]

@Spinnaker

Canada just seems to have actually learned lessons from the recessions of the 1980’ and 1990’s and then when the dot com bubble popped in the US, she didn’t follow the US misfortunes (despite the fact there is a significant technology industry around Mississauga, Toronto). Compare those experiences to Irelands inability to learn lessons from our past economic woes.

Canada, like Australia and Saudi Arabia is an economy based on the supply of certain commodities such as timber, oil, gas, and wheat, this does not make them immune from booms and busts, but it does provide a cushion in the event of one sector of the economy failing.

Canada’s Housing Bubble: It’s Not Different This Time → network.nationalpost.com/NP/blog … -work.aspx

I reckon once the China bubble pops, that the Canadian and Australian housing bubbles will follow in quick succession.

[yonexsp]

@BoyRacer

@Spinnaker

Canada just seems to have actually learned lessons from the recessions of the 1980’ and 1990’s and then when the dot com bubble popped in the US, she didn’t follow the US misfortunes (despite the fact there is a significant technology industry around Mississauga, Toronto). Compare those experiences to Irelands inability to learn lessons from our past economic woes.

Canada, like Australia and Saudi Arabia is an economy based on the supply of certain commodities such as timber, oil, gas, and wheat, this does not make them immune from booms and busts, but it does provide a cushion in the event of one sector of the economy failing.

Canada’s Housing Bubble: It’s Not Different This Time → network.nationalpost.com/NP/blog … -work.aspx

I reckon once the China bubble pops, that the Canadian and Australian housing bubbles will follow in quick succession.

More accurately to be fair, the Vancouver & Toronto bubbles