# Bed Rabidoux: Cdn Housing; The Good, the bad and the ugly



## andrewf (Mar 1, 2010)

Ben Rabidoux posted some new data on his blog regarding the Canadian housing market and the economy.

http://theeconomicanalyst.com/content/canadian-housing-
and-economic-trends-good-bad-and-ugly

Highlights:
* Things look rough in Vancouver/Victoria.
* Calgary's market seems to be robust.
* Toronto condo market is weak while SFH are still quite robust.
* As weak as Toronto's condo market is, those of Ottawa and Montreal are complete basket cases. Montreal has more active MLS condo inventory than Vancouver and Toronto COMBINED.

Based on this, I expect the Canadian economy to be quite weak, if not fall into recession, over the next three years. Credit growth has creaked to a halt, and there is relatively little the Bank of Canada can do to spur the economy without resorting to QE and/or trying to reinflate the real estate bubble.


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## Sampson (Apr 3, 2009)

Interesting that all things aren't equal across Canada ain't it?

I know this board is an Ontario and Vancouver centric forum, but there are other regions in our Country


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## Echo (Apr 1, 2011)

I guess it just depends who you ask; a bear, a bull or someone in between? - http://www.canadianbusiness.com/economy/trailing-indicator-2/


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## Berubeland (Sep 6, 2009)

I've been noticing a lot of empty commercial space lately, seems to indicate a weakening economy. Also noticing houses going up for sale and not selling as fast.


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## SpIcEz (Jan 8, 2013)

I can attest to the Montreal Condo market being batshit insane.

They are everywhere, and I mean EVERYWHERE.
They are building condo's like crazy, every corner street has a new condo complex.
Downtown, west island, south shore, north shore, near shopping center, in the boonies.
Its rediculous. And to boot, its the same further out.

I dont know where all this population is coming from.


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## Sampson (Apr 3, 2009)

Berubeland said:


> I've been noticing a lot of empty commercial space lately, seems to indicate a weakening economy. Also noticing houses going up for sale and not selling as fast.


Personally I am more interested in non-residential RE as a proxy for Canadian economic health.

Our economy is not as heavily dependent on local consumer spending, so if we experience a residential RE slump, that is no in synchronicity with a larger World economic recession, at least employment will remain strong and it should soften the blow.


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## andrewf (Mar 1, 2010)

Echo said:


> I guess it just depends who you ask; a bear, a bull or someone in between? - http://www.canadianbusiness.com/economy/trailing-indicator-2/


If you look at the people with the rosy forecast, their objectivity is questionable.


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## MoneyGal (Apr 24, 2009)

So The Economist is predicting GODZILLA!


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## andrewf (Mar 1, 2010)

I don't think The Economist is predicting that the market will correct all the way back to their estimate of fair value. But some corrections, like the US' most recent one, brought their house values below The Economist's estimate of FV.


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## mikestewartrealtor (Mar 20, 2013)

Here in Vancouver, things aren't that bad.

Here are the most recent numbers from the REBGV

http://www.mikestewart.ca/category/...ater-vancouver-rebgv-monthly-sales-statistics


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## meddlesomemarmots (Feb 16, 2011)

Thanks for the link - but I'm not sure I'd in in complete agreement Mike. The sales continue to be the big question in the Vancouver market - with March (which was admittedly quite a strong month) sales down. Over the past 3 years the March sales have registered:

2011: 4,080
2012: 2,874
2013: 2,347

Comparing 2013 to the last really strong year for Vancouver real estate, 2011, sales are down about 42%. According to the REB we're looking at 3-5% decrease in price YOY from 2012. I'm struggling to see how the weak sales stats can lead to anything other than further price weakening (but that said, as we all know the Vancouver market has acted anything but rationally over the past half a decade).


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## andrewf (Mar 1, 2010)

mikestewartrealtor said:


> Here in Vancouver, things aren't that bad.
> 
> Here are the most recent numbers from the REBGV
> 
> http://www.mikestewart.ca/category/...ater-vancouver-rebgv-monthly-sales-statistics


I again would have to question your impartiality. Your bread is buttered by real estate sales volume.


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## sags (May 15, 2010)

The theory is that price reductions follow sales..........and it makes sense logically, but prices seem to be pretty sticky in most areas.

How long do sellers hold out for "their price" until some capitulation starts the downward cycle?

Maybe when the boomers start selling to pay for their retirements?


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## nathan79 (Feb 21, 2011)

sags said:


> How long do sellers hold out for "their price" until some capitulation starts the downward cycle?


A very long time from my observations. There are several listings in my area that have been up for over a year, and the sellers have dropped their prices very little, and in some cases not at all. One of my neighbours actually took his place off the market rather than lower his price. He'd already turned down a perfectly good (in my opinion) offer. People don't seem to be in a hurry to sell. They seem to think they can just wait out the market.


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## Potato (Apr 3, 2009)

A rough guideline would be about a year between sales declines and price declines. Sometimes as little as 6 months, sometimes upwards of 2 years.


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## none (Jan 15, 2013)

It eventually happens and those hoping for 'the market to come back' are the ones that usually get the most burned. What people don't realize is the market dropping is actually 'the market coming back'. People who took their house off the market in 1990 were waiting 20 years 'for the market to come back'.


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## andrewf (Mar 1, 2010)

In the US, price declines came relatively easily as there were more 'motivated sellers' who had lost jobs and could no longer service the mortgage. There may be a tick up in unemployment in Canada due to a slowdown in the construction sector and reduction in credit growth leading to withering consumption. I don't think we'll have the kind of negative shock we saw in the US, so the effects on the real estate market may be slower. Usually once prices start declining, though, prospective buyers tend to wait (loss aversion).


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## none (Jan 15, 2013)

You could be right but I'm not convinced. we have about 10 years of ridiculous growth where the costs of buying/selling/owning were obscured by increases in house prices.

I wonder what people will do once people start losing a couple years of after tax salary on house sales. I wouldn't be surprised if herd mentality kicks in and people start to bail.

Of course there is the 2008 'recovery' that may give people hope and stop the stampede.

That's a funny thing about the soft landing. That simply means lots of people share in the loss of the market correction rather than the far fewer who jumped in at or near the top.


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## andrewf (Mar 1, 2010)

I don't think people are likely to bail on their primary residence and start renting. People only do this if they are forced to, financially. I do expect all the specuvestors with investment properties to be in a hurry to dump them, though. That means the bottom can fall out on condos pretty quickly, especially since there is a steady stream of them hitting the market. Many people who bought preconstruction will be desperate to unload before they have to close on a property that worth less than they agreed to pay.


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## Hawkdog (Oct 26, 2012)

none said:


> It eventually happens and those hoping for 'the market to come back' are the ones that usually get the most burned. What people don't realize is the market dropping is actually 'the market coming back'. People who took their house off the market in 1990 were waiting 20 years 'for the market to come back'.


I would think anyone who bought a house or took their house off the market in 1990 in Vancouver would be rubbing their hands together in glee (if they still owned it)
http://www.vancouverreflections.com/vancouver-real-estate-average-price-graph/


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## Hawkdog (Oct 26, 2012)

Housing prices in Smithers are crazy right now, the cheapest house on the market is over 200,000 and they are fixer uppers.

it costs about 1200 to rent a basement suite.

Smithers is a town of about 5000 people


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## meddlesomemarmots (Feb 16, 2011)

sags said:


> The theory is that price reductions follow sales..........and it makes sense logically, but prices seem to be pretty sticky in most areas.
> 
> How long do sellers hold out for "their price" until some capitulation starts the downward cycle?
> 
> Maybe when the boomers start selling to pay for their retirements?


I understand this line of thinking. However I do think that people are trapped into comparing everything to the housing market here, to the USA - which experience a very severe and sudden destruction of wealth.

Without the catalyst of the Global Fianncial Crisis, I tihnk it is more likely that attitudes transition gradually regarding housing. Over the last couple of years we've seen a real change in Canada in terms of economists and the media, shifting from 'the housing prices are backed up by demand, and there's no bubble' to 'there is a slight correction ongoing, but it is just going to result is a soft landing'. A couple of years ago it was unheard of people accepting less than assessed value - where now it is fairly prevalent. 

I think that by looking at a porential 5-10 year timeframe for any change in housing pricing, the altered expectations of what the housing market is like will mean that people will just be stuck with an illiquid asset if they are waiting for 'their price', or revise their asking to a pricepoint that matches the buyers. Obviously this time frame also fits nicely with your theory that the boomers selling could be a catalyst.


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## andrewf (Mar 1, 2010)

There have been dozens of real estate booms and busts, and not all busts were caused by global financial crises. I'm not even convinced that the US housing crisis was caused by the GFC--the housing market there burst well before 2008. House prices being well beyond fair value is enough to cause corrections.


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## mikestewartrealtor (Mar 20, 2013)

*commanded adoms*



meddlesomemarmots said:


> Thanks for the link - but I'm not sure I'd in in complete agreement Mike. The sales continue to be the big question in the Vancouver market - with March (which was admittedly quite a strong month) sales down. Over the past 3 years the March sales have registered:
> 
> 2011: 4,080
> 2012: 2,874
> ...


Hi Meddlesomemarmots,

Good to hear from you.

I would say the experience of the Vancouver market over the boom was not a normal market and now we are in a more normal market and that things are not quite as bad as the media portrays it. Keep in mind bad news sells more new than good!


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## mikestewartrealtor (Mar 20, 2013)

andrewf said:


> I again would have to question your impartiality. Your bread is buttered by real estate sales volume.


??


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## meddlesomemarmots (Feb 16, 2011)

Fair response Mike. I would debate that whether bad news sells better than good news - I think _extreme_ news sells better than mundane news. We've had quite the strong period, and coupled with that was a lot of news about people becoming part time landlords and renovating houses for profit. Now we've hit a much quieter period, the reports from most media outlets are about a downturn, and predictions about how far prices will slide during this period. Part of the issue now is that everybody is using a wide array of data to 'predict' the future and whilst some people are championing plunging sales and soaring listings as a sign of apocalypse, others are confident in the HPI© index, and that price declines appear minimal at this point during a supposedly weakened market. 

The current attitude is very similar to that after the Global Financial Crisis, and we know how strongly most markets rebounded the year after the stock markets fell, so anything is possible at the moment.

Personally I think that we are most likely to see a steady period of downward prices, and unspectacular sales figures - but I wouldn't count out the chance of a shorter, more pronounced crash, or a strong recovery. The latest stats I'm seeing however doesn't give me a positive short term outlook.


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## none (Jan 15, 2013)

Things do not 'recover' back to the top of a bubble.


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## none (Jan 15, 2013)

Hawkdog said:


> I would think anyone who bought a house or took their house off the market in 1990 in Vancouver would be rubbing their hands together in glee (if they still owned it)
> http://www.vancouverreflections.com/vancouver-real-estate-average-price-graph/


Sorry I was referring to Toronto.


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## crazyjackcsa (Aug 8, 2010)

From the local board themselves in southwestern Ontario:

Sales volume down 16% from March of last year. Inventory up to 6.8 months. Sale price up 9% over last March.


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## Cal (Jun 17, 2009)

mikestewartrealtor said:


> I would say the experience of the Vancouver market over the boom was not a normal market and now we are in a more normal market and that things are not quite as bad as the media portrays it. Keep in mind bad news sells more new than good!


In the GTA the media hasn't really been that bad in regards to the RE market. Perhaps it is due to the great % of advertising dollars that come to the papers from the RE builders/agents. But the market hasn't turned as much here as it has in the Vancouver area either.

Most here in the GTA do believe the RE market is overpriced, but not to the extent the market was on the west coast.


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## Hawkdog (Oct 26, 2012)

FYI an article for the globe and mail re condos - 

http://www.theglobeandmail.com/glob...orningBusinessBriefing&utm_campaign=103310196


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