“Substantial declines in home sales are usually a precursor of home price corrections.”

“Our in-house investment managers in NYC have a global portfolio of around $300bn USD; this was their take on Canada sent to me yesterday:
“It is reported that home sales in Vancouver and Toronto metropolitan areas dropped by 20-33% in September from a year ago. Substantial declines in home sales are usually a precursor of home price corrections. While almost all high loan-to-value mortgages in Canada have guarantees from government backed entities, a housing correction will likely impact consumer finances and aggravate credit card ABS credit performance”
Word is getting out there pretty fast now. Housing market correction = recession in Canada.”

Toronto_CA at greaterfool.ca 7 Nov 2012 10:04am

Price follows volume. The weakness we are seeing in sales will be followed by similarly impressive price drops.
And, yes, a housing market correction will have profound effects on our economy, particularly in areas like the lower mainland where we are sorely overdependent on economic activity either directly or indirectly linked to RE.
– vreaa

25 responses to ““Substantial declines in home sales are usually a precursor of home price corrections.”

  1. This will create interesting snowball effects.
    Remember the big Canadian ABCP freeze of 2008?

  2. Uh oh, no more HELOCs for overpriced luxury cars, vacations, and more prudence. The HORROR!!

  3. The correlation between price declines and sales slowdowns (high MOI) is well established for Vancouver. You needn’t know much more than if MOI is high, prices are going to drop, or are dropping. Because of the delay in Teranet reporting it looks like a lag but it’s actually almost coincidental.

    • That’s right. MOI is perhaps the most important KPI. Marry a high MOI with nearly huge 10:1 price:income ratio for a home and it’s done.

  4. http://www.vancouversun.com/news/Ferries+move+makes+waves+West/7516829/story.html

    Cities can not afford the upcoming real estate drop. They will be in the poor house.

    • Can I haz a $20 assessment too!

    • I am willing to buy the terminal for way more than it’s assessed value. Even 300% more.

    • Just imagine the effect that will have on Muni_Bonds… and their claimed market value… hee hee hee
      Levered in the market at the assessed rates… wonder what the financial penalty on the bonds will be for the loss in face value… oh I know we will raise property taxes to cover this…
      And every wanabe financial wizz in the municipal idiot financial department has sure as shit has levered them to cover their outrages wage and pensions… increase’s. Dumb asses.

      Also the ASSessment Review Panel is the source of all the counterfeit assessments, not the B.C. ASSessment Authority.
      … the Revue Panel is the Executor of the Property Trust. they can do whatever they want.
      … bc ASSessment is the trustee, the employee of the revue panel
      … and the city or municipality are the shareholders of the trust.
      You the Fee Simple Property owner “Do Not Own The Land… the “Crown” does and they can do whatever they want… fools. You only “rent from the crown, city, or municipality”.
      You “Own Nothing” about the property except the mortgage debt. Period.
      Dumb asses… pay slave.
      B.C. Supreme Courts Crown lawyers told me so…in no uncertain terms.
      and why would the crown pay tax on that what it already owns… when it can shift the cost to you slaves.


      • Rusty's Revenge

        wow, thanks for putting my family’s contribution to the nation in perspective

        178 years in Canada – ‘slaves’ according to silver.

      • Cyril Tourneur

        There more than a few “families” that have been in “Canada” far longer than 178 years. Most of them don’t hold allodial title to their land either.

      • Naked Official #9000

        i am not trivializing the first nations

        but thanks for implying!

  5. This is going to sound like greek, and it’s not actually that bad of a month, but speaking of Credit Card ABS:

    “Trends in collateral deteriorated slightly in September. Charge-offs and delinquency rose. Payment rate, portfolio yield and excess spread declined. Average charge-offs rose by 18 bps m/m to 4.61%. Delinquency rose slightly by 11 bps to 2.57% from 2.46% in the prior month. Average payment rate of 31.74% declined 100 bps y/y, the second consecutive decline after 30 months of y/y increases.” h/t BMO capital markets

  6. I guess the guy who owns the late model white Audi A8 I saw two days ago who had custom BC Plates “NO CASH” will be having some problems with this situation.

    • Naked Official #9000

      well, at least it wasn’t an R8 – seen enough 19 year old male anorexics parking those outside “Pop Opera” on Hastings friday and saturday nights..

      • Naked Official #9000
      • Thanks for the education.
        And, at the risk of parading my ignorance, I also learnt a new use for an old word:
        “If you don’t already (but I’m sure you do, especially if you’re a resident of Vancouver), I highly suggest you pregame before going. Thankfully, I did; I wasn’t about to fork over any more money to a place I’m not a huge fan of.”

      • I thought the hongers back in my high school days had nice cars. These mainlanders are 10 x as rich and it makes me sick seeing an N on Maserati or Ferrari.

        My friend works at VW and 2 teenage mainlanders went in and one was buying a Touareg. The 2nd kid wanted one too and called his dad. Daddy said so cheap? 2 sold on the spot in cash. Un fucking believable. These people should not be able to bring their illegal $ here. It’s killing the people that gave been here previously!

      • to want all these same things means you can be as easily bought … no better no different than those you’re complaining about

    • Increasingly Bitter

      Many places tax foreign investors. New to the group is Honk Kong. What are our f**king politicians doing?

      • Our politicians are so very much happy if the foreign investors are buying anything here! Yes, it increases the strain on the local buyer that has to keep up with the fat cash sales but our politicians could not care less – in the global crisis time when the government debt grows like crazy in the countries where stimulus are implemented, Canadian plan (that worked just fine) was to transfer the government debt to the citizen’s debt so the stimulus was (and is) provided by the people sinking deeper in debt rather than the country sinking into the debt. In my opinion it was intentionally done by lowering the credit rates (free flowing money) and by the opening the doors to a money from outside. They were and are very much congratulated for their plan on the economic forums, so why would they change what worked for them? I completely expect them to open more doors for the capital flow from outside since the local people’s limits are reached. It does not look like they have any other plan.
        In Richmond where I live there were few expensive properties for sale in my area that seemingly stuck on the market for a long time – SFH between 1.5 and 2.5 mln. Guess what? Most of them are recently sold (to my disappointment). I am willing to bet that none of them were bought by the really local buyer, what income do you need to be qualified for the mortgage like that? Corruption money from China are flowing in here coming in cash and although there is much less appetite from the local buyer to participate in speculation, the small developers that sell one big home – buy two big lots with the old house demolition – build two homes – sell them – and repeat – they are still in the game and distort the market very much.

  7. Pingback: REAL ESTATE: “Substantial declines in home sales are usually a precursor of home price corrections.” |

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