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Vancouver drops; Toronto faces Miami Problem


By thunderlips11   Follow   Wed, 16 Jan 2013, 6:46am PST   914 views   12 comments
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Keith Roy began warning his clients about a faltering Vancouver housing market in early 2012. The realtor says he was tipped off not by industry statistics, but by chatter across backyard fences. “When you hear about a homeowner who thinks his neighbour got too much money when he sold his house, you know there’s something going on,” says Roy. “That was the first clue.”

The next shoe to drop was a handful of homes in desirable west side neighbourhoods that took a few extra days to sell. Sensing a shift in the market, Roy put his own house up for sale in June and penned a blog posting the following month that advised people to “cash out.” Though he was criticized by fellow agents for breaking rank, Roy says he now feels vindicated after watching Vancouver home sales crumble to their lowest point in more than decade, with prices falling 3.5 per cent since hitting a high last May. The lesson? Recognizing a looming real estate downturn is more art than science; once it shows up in the numbers, it’s too late to do much about it. “One day the phone just stops ringing,” Roy says. “Then you’re in it.”

It’s not just Vancouver where realtors’ BlackBerrys no longer buzz. In Toronto, the city’s once insatiable demand for living in 650 sq.-ft. glass boxes has evaporated overnight. Condo sales are down by 30 per cent, while prices have fallen by 4.5 per cent. Some proposed projects have been put on hold, while some angry investors—like those who bought luxury suites at the Trump International hotel—are desperate to get their money out, and have turned to the courts. Even the Bank of Canada, which has helped inflate the bubble by tempting Canadians with years of rock-bottom interest rates, has issued a rare warning about the risks posed to the broader housing market of too many condo developers in cities like Toronto and Vancouver chasing too few buyers.

A housing correction—or, possibly, a crash—is no longer coming. It’s here. And you don’t have to own a tiny $500,000 condo in downtown Toronto or a $1.3-million bungalow in Vancouver to get hurt. With few exceptions, the impact will be indiscriminate as the euphoria of rising house prices is replaced by fear. The only question now is how bad things will get. If the decline picks up speed, as many believe it will, there could be a nasty snowball effect. Construction jobs will be lost. Homeowners will end up underwater. Consumers may stop spending. “I’m getting very nervous,” says David Madani, an economist at Capital Economics, who has been predicting a drop in housing prices of up to 25 per cent in Canada. “I know I’m a bear, but the housing market itself has the potential to put us in a recession, let alone what’s happening in Europe and the U.S.”

http://www2.macleans.ca/2013/01/09/crash-and-burn/

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thunderlips11   Wed, 16 Jan 2013, 6:55am PST   Share   Quote   Permalink   Like   Dislike     Comment 1

I remember seeing all those glass boxes as part of various TLC shows.

Buster   Wed, 16 Jan 2013, 1:24pm PST   Share   Quote   Permalink   Like   Dislike     Comment 2

I lived in one of those glass boxes for 6 years. Loved living in Vancouver but see the crash coming. Left in 2011.

Oxygen   Wed, 16 Jan 2013, 1:48pm PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 3

Ray Charles couldve saw this coming. When the US was deep in its own housing correction, Vancouver bucked the trend, but the main issue was income-to-housing ratio was still totally out of whack. I think i even read somewhere that Vancouver was more out of whack than Manhattan. If you didn't cash out, you were a moron.

curious2   Wed, 16 Jan 2013, 2:05pm PST   Share   Quote   Permalink   Like   Dislike     Comment 4

Copied from another thread:

http://www.crackshackormansion.com/

On Part II, I got 9/16. I misidentified the Bank of Canada, which the site argues persuasively is a lot like a crack shack.

APOCALYPSEFUCKisShostikovitch   Wed, 16 Jan 2013, 6:56pm PST   Share   Quote   Permalink   Like   Dislike     Comment 5

Cannibal Anarchy, eh?

lostand confused   Wed, 16 Jan 2013, 9:48pm PST   Share   Quote   Permalink   Like (2)   Dislike     Comment 6

What happened to all the Chinese rushing to buy housing ? Weren't they supposed to prop the real estate market for ever??

justme   Wed, 16 Jan 2013, 10:30pm PST   Share   Quote   Permalink   Like   Dislike     Comment 7

Any specific knowledge on what this will do to Canadian banks (like TD, for example), and how the carnage will spread around the world?

C Boy   Thu, 17 Jan 2013, 1:09am PST   Share   Quote   Permalink   Like   Dislike     Comment 8

The crash will no doubt effect the US.

2nd bailout of Goldman Sachs will occur in how many months?? 8? 12?

How many HGTV shows from Canada will be canceled??

C Boy   Thu, 17 Jan 2013, 1:13am PST   Share   Quote   Permalink   Like   Dislike     Comment 9

robertoaribas says

justme says

Any specific knowledge on what this will do to Canadian banks (like TD, for example), and how the carnage will spread around the world?

canadian banks aren't nearly as leveraged as american banks where, and I believe canadian loans are recourse loans; people will not be able to walk away as easily as in the US.

A careful review of bank profitability in both the U.S. and Canada indicates that Canadian banks have been more profitable than their U.S. counterparts in recent years. This gap has widened in the postcrisis years. This is partly because of Canadian banks' higher leverage that largely arises from structural differences.
http://www.standardandpoors.com/ratings/articles/en/us/?articleType=HTML&assetID=1245343976319

ELC   Thu, 17 Jan 2013, 3:56am PST   Share   Quote   Permalink   Like (1)   Dislike     Comment 10

robertoaribas says

if the stupid Canadians watched all this unfold in the US, and didn't learn any lessons, to hell with them...

What about the Americans that just went through a bubble and are already coming back for more. Now that's REALLY stupid!

kodiakbear   Fri, 18 Jan 2013, 4:33am PST   Share   Quote   Permalink   Like   Dislike     Comment 11

Yup, as all bubble watchers know, this is about 5 years late in happening, being 5 years behind the US bubble meltdown.

And of course the US bubble finally burst about 5 years after it should have, making this 10 years behind schedule. Unbelievable. But aren't most things these days.

REpro   Fri, 18 Jan 2013, 5:01am PST   Share   Quote   Permalink   Like   Dislike     Comment 12

ELC says

robertoaribas says

if the stupid Canadians watched all this unfold in the US, and didn't learn any lessons, to hell with them...

What about the Americans that just went through a bubble and are already coming back for more. Now that's REALLY stupid!

1. GREED
2. LOW RISK
- 0-3.5% down payment still available
- Banks may still forgive some principal through loan modification
- Government may still forgive tax on short sale

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