CBC 29 June 2011[hat-tip ams] -
“Canada’s housing market is in a bubble that’s set to burst and prices could plunge by as much as 25 per cent, a major independent research firm warns.
“Housing valuations have lost all touch with fundamentals and household debt is at a record high,” economists at the research consultancy Capital Economics say in their most recent Canada Economic Outlook, issued Wednesday.
“Our fear is that, with the housing bubble now close to bursting and commodity prices retreating, Canada will go from leader to laggard.”
The report predicts a fall in house prices by as much as 25 per cent over the next three years.”
Many readers will already be familiar with the predictions from ‘Capital Economics’: their economist David Madani made the 25%-drop prediction in a recent interview with Rob Carrick from the Globe and Mail.
We record the fact of the CBC story here, for the record, as it is noteworthy that they run a headline featuring the words ‘housing bubble’ and ‘bursting’. All part of the apparent steady increase in bubble-talk in MSM. – vreaa
UPDATE: This story was also run in the Vancouver Sun 29 Jun 2011, a similarly noteworthy occurrence. Interestingly, it isn’t featured on the online front page, or in the ‘Business’ headlines, but it was found second on the ‘most read’ sidebar.
Some might shrug off the 25%, saying that their home value “grows at 4% a year.” It bears to reason that a 25% drop means that your home value will need to rise 33% from that low to return to break even. The larger the drop, the larger the % rise needs to be – 50% drop means that your home will need to gain 100% to get back to value. 75% drop = 300% gain.
This is exactly what I pointed to at VCI yesterday – the words “housing,” “bubble,” and “bursting” in a single headline. And at the CBC no less.
It’s the *perception” that counts. The bubble we’re currently in has been driven, to a large degree, by the perception put forth in the mainstream media. Slimy Cam Good choppers people of Chinese descent over White Rock as a pure media stunt, and the *perception* put forth in the mainstream media is that hordes of Asians are buying everything in sight. ReMax press releases are posed as “news,” and the *perception” is that ReMax speaks the gospel truth. A trumped-up condo lineup somewhere in Burnaby is somehow featured on the Vancouver evening news, even while real estate is dying in the peripheral areas, and the *perception* echoes the news anchor’s words: “Real estate is HOT!!!!!”
But lately – and I’m talking the last few weeks – there’s clearly a change in the tone, and in the message coming from the MSM. Now, if Joe Average sees a real estate-related headline, chances are he’ll see something that points ot the dark side of ownership and the destructive reality of the situation. And maybe Joe Average, who doesn’t dig into the reality as hard as some of us here but instead trusts what he sees in the MSM, thinks a bit before plunking $700,000 into a decrepit tear-down on some godforsaken street in East Van.
Never underestimate the power of the mainstream press.
It’s not a bubble until Vancouver magazine makes it a cover. Then it’s a massacre. I can’t wait.
What I thought was funny was that this article made it onto the cbc.ca/bc shortlist.
I wonder when these messengers of doom will be branded traitors, leeches, evil people who joyce at other’s misery, and be taken out and shot for causing a housing crash here.
wouldn’t surprise me in the least
to ignore fundamentals (and historical precedent) and blame a web page.
just look at the uproar over the riots – people are already comparing our pyromaniac friend to jesus christ.
This was a headline last night on vancouversun.com. From my browser history, I read it at 9:25PM last night. At the time it was one of the 4 center column featured stores, with the rotating image/headline.
Seeing open talk of real estate bubbles in Vancouver is a new thing, eh? I found it quite noteworthy.
Right now the equivalent headlined story under category “Real Estate”:
http://www.vancouversun.com/business/Home+prices+rise+cent+this+year+report/5030251/story.html
“Home prices in B.C. to rise 13 per cent this year: report”
I’m not trying to construct a narrative where the night editor let the ‘Vancouver Bubble’ story become a headline, then the morning editor came in, freaked out, replaced it with a pro-RE fluff piece. But when it seems so obvious, that might actually be what happened.
you should’ve screen captured that!
I will next time.
Didn’t expect it to disappear like that.
And once again, it’s Vancouver Sun staffer Brian Morton entrusted with re-vamping ever-so-slightly the typical ReMax/Cameron Muir bullsh*t and presenting it as “news.” I wonder if Mr Morton enjoys being a ReMax goon or if the duty is forced upon him? I’ve written and asked him. Never did get a reply.
Whatever – it doesn’t matter. The words “bubble” and “correction” are out of the closet now in the MSM and, IMO, today’s “press release posed as news” comes across as pure, slimy desperation.
HOW MANY WEALTHY CHINESE MAINLAND BUYERS ARE THERE? MORE THAN THE ENTIRE POPULATION OF CANADA. EVEN IF IT IS ONLY 1% OF THEIR POPULATION, IT IS STILL A LOT OF BUYING POWER. UNTIL WE HERE WORD FROM THE COMMUNIST PARTY IN CHINA DISCOURAGING BUYING ASSETS AROUND THE WORLD, THEN YOU CAN BE SURE THE HOUSING MARKET IN VANCOUVER AND REGIONS WILL REMAIN ROBUST AND STRONG. COMMODITY PRICES WILL ALSO CONTINUE TO BE STRONG. THERE ARE BILLIONS OF PEOPLE THAT WANT WHAT WE HAVE IN NORTH AMERICA. CONSUMER GOODS. DOOM AND GLOOM GO ELSEWHERE.
caps lock is cruise control for cool
what if china’s a bubble?
what if the peasants revolt?
etc. etc. there’s lots of variables. you seem to not want to hear any opposing view points.
i would rather we severely limited foreign (specifically CCP) ownership – our cities are for canadians first. fuck all this hippie one world bullshit, it’s not helping anyone except the realwhores.
john cave – are you living in a fairy tale?
As soon as the MSM says stridently; it’s a bubble -its time to buy.
…it’s been 2 days..
here is a headline from 2008. The bubble burst then too. This “bubble” will burst and shed some 10-15% in time. So what, it’ll take just 10x annual income to buy a home instead of 11x. How many of you will be buying your dream home when this times comes? Zero is the correct answer. Declines in prices in this city are never more than short lived.
“The Vancouver housing bubble has finally burst and here is just some of what I have seen in the past month or so that has led me to this conclusion:
* Year over year sales dropped 30% in May 2008 and “Listings [are] up. Way way up!”.
* Inventory levels are crazy…check out the mid-May 2008 inventory chart for the entire GVRD and the mid-May 2008 inventory chart for Vancouver West.
* A local realtor is selling a house on my street and has been trying to sell it for a long time. Looks like a lot of his properties are selling at a “reduced price”!
* Anectodal evidence of prices dropping in Port Moody and Coquitlam and empty open houses.
* Foreclosures have doubled since last year.
* MSM (main-stream media) is reporting on it. Two more articles just appeared in the Sun one day apart: “B.C. Housing Sales Slow” and “Eroding consumer confidence puts a pause in B.C. housing market“. Sure, these articles are mostly just reporting on recent real estate data but, there are some comments like this: “For the past six years there’s been a remarkable boom in the residential real estate market. Booms can go bust. But this isn’t a bust — at least not yet: It’s a breather.” That’s they type of comment that you would have a hard time finding in the MSM over the past 6 years. It’s basically saying, in MSM-speak, the bubble has popped.
* More evidence: I was recently watching 6 homes in Vancouver West on MLS. It only took 3 days until this 3 bedroom 3 bathroom townhome dropped its price from $1,025,000 to $995,000, a 2.9% decrease”.
BeeBoi -> When bubbles burst, prices never just lose 15%.
2008 was not the bursting of our bubble… 2008 was the very beginning of a burst that was then bailed out with free-money interest rates… the mania hit the afterburners and went to new highs. Stepping back, 2008-2009 now looks like a small pullback in a speculative mania…
When bubbles burst, prices return to levels determined by where they would be if prices had increased all these years according to fundamental values… in fact, prices tend to overshoot those targets on the way down.
So, bearish prospective buyers are not awaiting a 10% price pullback (not really worth the trouble…)…. Bears are anticipating a crash. We’ll be vaguely back in the value buyer range at 50%-66% off. Our taget used to be 50% off, but recent spiking action has suggested bigger drops on the way down. 2003 or 2001 prices (real).
didn’t every renter and media agent proclaim 2008 as a bubble bursting? Champagne was flowing as I recall. May not been much of a burst for your liking but in terms of Vancouver real estate this is probably the most dire you’ll ever see.
rusty, your prediction is noted: You see a 15% pullback as ‘dire’, and don’t expect any pullback to be over 15%.
Just out of interest, you should take a Vanc.RE price chart, strip it of it’s labels and show it to anyone you may know who studies/trades markets. Ask them what magnitude of pullback could occur given that price action..
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Why did the bubble burst in 2008? what were the causes? Specifically in comparison to the housing prices in 2011.
I am a McGill student, writing a paper on the canadian housing market.
Any insight and comments would be appreciated!
Well to begin, Ashley, the Canadian housing bubble did not burst in 2008. Nor did the US bubble. Look at the country charts for average home prices beginning in 2005 and you will get a better picture of what has happened.
In Canada, we had a setback following the financial crisis (GFC) where home prices declined suddenly but these same prices quickly recovered with Federal stimulus efforts, as CMHC guarantees were expanded and when interest rates were lowered significantly.
The combination of readily available mortgage insurance over 40 years, easy borrowing terms, the lifting of billions in mortgage obligations from Canadian banks balance sheets and promises of a low rate environment fired up our credit markets and have led to one of the biggest housing bubbles this country has ever experienced.
Hopefully that helps. Tell you what, Ashley, why not pose your questions on a current thread. The folks who write in here daily are a very informed and intelligent lot (you might even be surprised who they are). I am sure they will help you if they see your request for info on the background of all our troubles with housing….
Give it a try.