Announcer: “Is the Canadian housing market a bubble ready to burst, or is it steady as she goes? Finance Minister Jim Flaherty is warning Canadians against taking too much debt against the value of their homes, but the latest report from the Canadian Mortgage and Housing Corporation is dismissing those fears saying there is no clear evidence of a real estate bubble.”
Tsur Sommerville: “There is clearly a slowing down in the market you see an increase in the number of listings, drop in sales, all things that create less pressure on the market.”
Announcer: “According to the Real Estate Board of Greater Vancouver home sales were down 19% compared with this time last year.”
Helmut Pastrick: “The comparison to last year was heavily influenced by the change in the federal government’s mortgage insurance criteria which pulled forward a large number of sales into early 2011. So we’re comparing that high point to activity so far this year.”
Announcer: “But don’t get too excited, even though sales are down, home price indexes show a 4% increase in the price of a home in greater Vancouver. … The message to buyers, the economy is in reasonable shape, there’s a lot of supplier there, and interest rates are low. So just because sales are slumping don’t bank on prices doing the same.”
Tsur Sommerville: “We don’t have a sort of financial environment where people are looking at major financial corrections, you know, double digit increase in interest rates, or, you know, huge tightening of liquidity, that just doesn’t seem to be on the horizon, you know, to expect across-the-board 10%, 15%, 20% drop in house prices, I think that being rather, er, hopeful, for a buyer to expect that.”
– from ‘No Bubble In Vancouver Real Estate’, Global TV, 16 May 2012
[hat-tip, and thanks as usual for the video archive, to Greenhorn.]
—
OK, predictions noted, for the record, namely:
1. Price drops of 10% or more are not to be expected.
2. Tightening of liquidity doesn’t appear to be on the horizon.
3. Again, No bubble.
We believe that the price strength predictions are extremely overly bullish, given the internal market action, and the national and global economic climate.
—
BTW, when Sommerville says “double digit increases in interest rates”, what does he mean exactly by that phrase?
Does he mean interest rates increasing to double digits or by double digits? – there is a massive difference.
Nobody, but nobody, is predicting the former: In fact, if we thought there was a chance of interest rates increasing to “double digits” we’d change our price predictions from 50%-66% off to 80% off. So, if Sommerville was implying that bears are predicting interest rates of 10% or more, he was just trying to make critics look foolish.
If interest rates rise by double digits, for instance from 3% to 3.3% (an increase of 10%), well, even such a small increase may be enough to speed a price descent.
– vreaa
Vancouver Real Estate Anecdote Archive 
I thought Sommerville looked like an idiot when I saw that on Global. How does this guy have any credibility? He scoffs at the possibility of prices going down 10% while the latest stats show average SFH down 9.8% in Vancouver. He comes looking like he hasn’t seen the latest numbers. He certainly didn’t come off looking like an expert on these matters. An expert should be in front of the story, with all the latest publicly available data–not behind the story, clearly in need of a news update.
The guy is clueless. We don’t need “double-digit” interest rate increases to pop this bubble. Nor do we need liquidity to disappear. U.S. housing was flooded with liquidity and, six years on, the meltdown drags on. Greed is a driving force. And when greed changes to fear, look out below.
On a separate note, who were Sommerville’s corporate sponsors again?
It’s all about “the message to buyers”. I guess sellers are behaving … for now.
My analysis definitely shows that the averages have come off their peaks. However, other than Richmond Detached (which is now starting to show some signs of cracks), prices are flat. Median prices have crept up about 5% in both Attached and Detached since Jan. However on a year/year basis, the averages are definitely down (Close to 10% in Detached and 2-4% for attached). In addition, although inventory has spiked significantly, this is really in a few areas (mainly Richmond and Van-West detached).
You can not say this market is strong – however, the sales pace is flat. Very very similar to 2008 right now – – we just have to see how the summer and fall goes as any decreases can no longer be counter-acted with credit condition loosening.
don’t forget … once you decide whatever you’re going to decide … your ego is going to try and get in the way … have a nice day 🙂
It’s Friday. I’ll see your QueSeraSera… and raise you a PerhapsPerhapsPerhaps… (which, not coincidentally, viz. QE3 will be decided over HotDogs&Suds @ CampDavid this weekend – caution, MenOnly, ExtravagantlyPrurientContent)…
it’s a travel day … tempo, tempo …
last ‘contribution’ for the week … ciao-out and have a great weekend 🙂
zh is starting to read like the onion … actually, everything is starting to read like the onion … those in cash had better think very carefully about the definition of cash …
http://tinyurl.com/822a8wo
Tsur seems to think that the interest rate sensitivity is about 2. I think it’s more like 30.
The Pain will come when people can’t get prime loans no matter how much they beg and plead. Some rise in rates will hurt but as vreaa has mentioned I don’t think higher rates are necessary for some severe distress.
We are in that transition phase now. Banks were ‘investors’, holding the purchase as collateral, and selling the debt as a derivative in lieu of interest. With 700trillion in debt-based derivatives unwinding and slowing worldwide gdp, banks here are becoming ‘lenders’ with the priority on repayment and securing their money. They used to be interested in what you were buying, now they are interested in how you will pay back. Next phase, govt taxes while the picking is ripe, then lay-offs. This weekend will give an indication if the Fedreserve will print more cash and nod to their central bank counterparts, or continue to deflate the cost of living until just before the US election. But this came to me in a dream and has no basis in reality.
funny … have sort of the same madness … folie a deux … well there’s quite a few more … so it’s more like folie a X … maybe it’s some sort of disease? oop ack!!
Neptune rules television, film, movie industry. Neptune’s dignity is in Pisces, (Western tropical astrology). Neptune, as I’ve said, rules the West coast. The planet primarily deals with illusions, spiritual matters, universality. Neptune rules the Pineal Gland, there is no ‘duality’. That the information was conveyed through television means you’re dealing with a message cloaked in deception. Some quotes come to mind: ‘The message is the media’ McLuhan… and ‘if I don’t mind, it don’t matter’ Aunt Jemimah
I’ve always been a big fan of the fabled ‘AuntJemimaTreatment’…
What did I just read?
That people in Vancouver deal best with illusions that are cloaked in deception and are ruled by their glands.
Sounds about right. 🙂
Bubbles are for bathtubs. Kapish?
So, no bubble in Vancouver real estate.
If “There’s a lot of supply out there,” we can expect prices to come down, according to the usual logic of markets. But this “news report” cites that fact in the service of an implied sales pitch: “don’t wait for prices to come down, there’s lots to choose from, it’s a great time to be buying.”
Yeah, shameless.
Remember the piece where Global hyped condos by interviewing a realtor as though they were a buyer? We were hoping they’d become somewhat contrite after that was ‘outted’, but it seems it’s business as usual.
Global TV has no shame, yellow journalism.
Put yourselves into Tsur’s shoes. He is a UBC prof, specializing in RE. He surely doesn’t want to look and sound too extreme. Coz if things don’t go according to his prediction, his academic credential and professorship will be questioned.
Good point.
We’ve heard academics describe those who see our market as a bubble as being “sensationalists”. Implying that they themselves are too modest to jump on that tawdry bandwagon.
In the Academy we used to draw a fine distinction between the ‘Sensationalists’ and the ‘Exhibitionists’… ‘Nem’ always felt more comfortable consorting with the latter… I put it down to the TawdryBeach you neglected to include in your ‘YVRBestOf’, IllustriousEd. 😉
When asked what will happen in the future, I wonder why most people don’t tell the truth (the truth being:”I have no clue”)?
omg … you are … him … the DUDE! … some may not know but have little bits of a clue … elsewhere, super big egos are super big on clairvoyance
If interest rates rise by double digits, for instance from 3% to 3.3% (an increase of 10%), well, even such a small increase may be enough to speed a price descent.
I’m certain it is not what he means, but instead he means from 3% to 13%. One could get really cute and say that a rise from 3.55% to 3.77% is a double digit rise because two digits are increasing.