Excerpts from ‘No solid basis for scary speculation’ by Jay Bryan, Montreal Gazette, 30 Dec 2010 -
“One of the biggest business stories of 2010 was one that never happened: the disastrous Canadian housing bubble and crash that never came to pass.
Of course, we know this now. Canada’s hot housing market has settled down without any serious slump in either prices or sales. It’s hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two.” …
“The roots of bubble hysteria are understandable. After the terrible experience of the U.S., it made sense that many would be hypersensitive to any evidence that something equally disastrous could happen here. What’s not so understandable was that journalists working for some of the best newspapers in North America would give credence to such a hare-brained idea without finding any evidence that it was actually happening.” …
“As investors become more or less optimistic, the price of an asset -stocks, commodities or real estate -constantly moves up and down. Sometimes it’s too high and ripe for a fall -but that’s not a bubble. And unlike stocks or commodities, homes are an asset that’s resistant to big drops in value. Many owners are perfectly willing to wait if they don’t get a satisfactory price.”
It’s worth taking a look at the entire article.
Complacency comes before a fall.
Labeling concerns about a bubble in the Canadian RE market as “hare-brained” and “hysteria” are examples of bull hubris.
A home is by no means “an asset that’s resistant to big drops in value”.
How can anyone seriously write that while witnessing so many examples of housing prices plummeting around the globe?
It reminds one of the ‘scientist’ centuries ago writing that nothing heavier than air would ever be able to fly (while birds settled on his windowsill).
And folks, when “It’s hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two” – Run for the hills! This kind of market complacency always, always, predicts coming volatility. The evidence is overwhelming that the moves will be to the downside.
[Update 2 Jan 2011: For an excellent and comprehensive dissection of the Jay Bryan article, see 'Who’s the ‘hare-brained’ one? More hot air from perma-bull Jay Bryan' by Ben at financialinsights.com.]