Readers who follow the financial markets will likely know of Karl Denninger’s widely read blog ‘The Market Ticker’. Denninger today [8 Apr 2010] saw fit to step up and make comments about Canada’s housing boom, and his prediction is even more severe than anything we Vancouver bears foresee. -vreaa
“The latest median household income I can find for Canada is closer to $53,000 – or about half of what it should be [to support these housing prices]. That is, homes in Canada – on the whole – are selling for double reasonable “fair values.” I’m willing to bet that in Vancouver they’re overvalued by a factor of five – or more. I can’t tell you when it will blow up, but I can tell you with absolute certainty that it will.”
By historical standards including a premium for no Canadian winters, it’s now over 2.5 and approaching a factor of 3.
LOL factor of 5. It is over valued, but 5x???
That means the million dollar houses in the west side should be worth 200K? And 1 bedrooms in yaletown should be sub 100K?
I dont see it happening. A 50% drop is a bold but possible prediction, but an 80% drop? Not bloody likely.
“I can’t tell you when it will blow up, but I can tell you with absolute certainty that it will.”
From his quote above, this guy must have a crystal ball. quick everyone sell before it blows up! =)
KD lives in Florida, so he’s seen a R/E meltdown close up. By the way, mortgages are recourse in FLA, just like here…..
5x? I’ll take that bet!
He thinks a 1 bedroom downtown apartment should sell for about $80K? How much would that same apartment then rent for? Let’s say right now it would be $1300/month and people consider that to be a fair price. Even if your mortgage rate was 10% you’d have it paid off in 7 years with 0% down at $1300/month!
Who in their right minds would stay renting on those sorts of terms? The implication here is that market would self-correct before it ever got that far.
$1800 for a one bed downtown is steep! A luxury building in Yaletown, maybe. West End survey 2 years ago had 2 bedrooms around $1600-.
Sorry, whoops! I shouldn’t comment while tired! Same survey had $1100 for sizable 1 beds. But yeah, I don’t think 5x is reasonable, either. That’d be cheaper than ’02.