Is it possible that the stock markets are getting bubbly, ie disconnected from the fundamentals, due to people fleeing the housing market and looking for another investment? This may continue to push the markets higher for some time, but what is the long term result?
If you look at the TSX, it's dominated by Oil&Gas and Minerals, which by all accounts left fundamentals behind a long time ago.
To get a true bubble in the stock mkt, wouldn't you say that massive speculation would be necessary? I don't know that people are speculating that O&G will go up so much as just be a good long term investment, same for minerals.
It will be interesting to see what happens when some of the news of a slow down in production come out.
The RE and stock mkts have been mirroring themselves for a few years now, which is not a normal thing. I think we're seeing something we haven't seen before. If the US is an example, it could mean trouble ahead in both mkts?
You're right hhv, massive speculation is required for a bubble. Shoot, the NASDAQ is only half what it was at the peak - that was massive speculation. The example of massive speculation for RE was the line-ups for condo tower pre-sales.
Everything is connected in today's global market. The housing downturn in the US will lead to further poor retail sales numbers, which account for a huge percentage of the GDP, resulting in more layoffs, lower revenues, lower stock market, and this spreads everywhere. Certain segments will do well (oil and energy?), but most will be quite affected. Canada is not immune, we will follow at some point.
Since the forum is open today I thought I would post a quote that I saw on MSN Money.
"Write about money, and you're going to tick someone off.
Write about poverty, affluence, whether the middle class is disappearing and if so, whose fault it is . . . and people go berserk."
but I'm going to change it to:
Write about real estate, and you're going to tick someone off.
Write about a real estate correction, and people go berserk.
And believe me, they do. Ha, ha.
S2
Write about money, and you're going to tick someone off. Write about poverty, affluence, whether the middle class is disappearing and if so, whose fault it is . . . and people go berserk.
You are right. AT my kdis school I was just saying I thought real estate was going to go down. It was an off the cuff remark. This couple won't talk to me now. He is a builder and a RE agent.
I have mentioned this before but during the Tech Stock Bubble my husband was on Bay Street. He remembers analysts in the US getting death threats if they even suggested that there was a Tech STock Bubble. When people mentioned it on Bay Street there were no death threats but anger and friendships were over.
"It was an off the cuff remark. This couple won't talk to me now. He is a builder and a RE agent."
Definitely the wrong people to drop the bomb on though they could have admitted things are getting top heavy. I just heard from my significant other how some relatives who are sitting on a house in a nice area but in the process of alot of renos are convinced the market is going to keep going up forever with no concern about affordability to the average person in the least and they work in the humanitarian field as well. The worst part is being treated like some charity case cause we rent.
Just another bubble sign as there is panic buying happening in Nanaimo now cause "prices are going up forever". I smell global meltdown coming,wait til the US takes on China over this major currency differences in the next month or two,the US dollar will tank hard and will push the US into a recession and Canada will not be immune.
This is an interesting article from today's Vancouver Sun:
"Homebuyers want sale honoured
People who signed purchase contracts in 2005 have been told they must pay 2007 market price Derrick Penner, Vancouver Sun Published: Saturday, May 12, 2007 Stephen Bulat still hopes he and his fiance will move into a home at 227-3000 Riverbend Drive in Coquitlam, although the builder has cancelled their contract and returned their deposit.
Bulat is one of 32 purchasers who signed pre-sale contracts in 2005 to buy homes in the Riverbend development. They're now being told the builder, CB Development 2000 Ltd., has hit financial difficulties and must put the units up for sale at current market prices.
"We're not backing down," Bulat said in an interview. "We're not really acknowledging it's legal for them to breach this contract. We haven't cashed any cheques that were given to us. This contract still holds."
Stephen Bulat is one of 32 homebuyers in the Riverbend development in a dispute with the developer, who is having financial difficulties. Steve Bosch, Vancouver Sun
Bulat and his fiance agreed to buy a three-bedroom, three-level house for $349,900, which they expected to be complete in June 2006.
The project hit delays, however, and Bulat said the builder extended the delivery date several times with a final deadline of mid-June this year.
Bulat said he and his fiance were excited about moving in. They had participated in the building process, choosing the fittings and finishings they wanted, including having speaker, microphone and computer ethernet cable running through the walls.
The couple sold their condominium 20 months ago in preparation for their move, and though they were losing equity gains on that property during a fierce run up in Greater Vancouver property values, Bulat said they were comforted in knowing their yet-to-be complete unit was also rising in value.
Now, they are among at least six buyers suing CB Development in the hope of forcing the company to honour its contracts.
Their lawyer, Shane Coblin, has filed the actions in the B.C. Supreme Court in Vancouver and registered certificates of pending litigation on the property titles in question. The certificates serve as a warning to any potential purchasers of the units that there is a dispute over their ownership, and essentially ties them up until the suit is resolved.
Coblin, in an interview, said the remedy the buyers want is called specific performance, which means they want a judge to order CB Development to fulfill the pre-sale contracts.
"There is no provision for the builder to back out of these agreements, to all of a sudden say they don't want to do it any more," Coblin added. "They are binding contracts."
However, CB Development's president Grayden Hayward said the company's lender forced it to cancel the contracts.
Hayward said in an interview that the Riverbend project ran into problems as rising construction costs raced ahead of pre-sale prices which were set after the company started building the three-phase development in 2002.
Hayward is also a chartered accountant, director of the Vancouver Airport Authority and secretary treasurer of the Vancouver Board of Trade. He said that in January, CB Development had to seek refinancing of its construction loan for Phase 3 of the project, which was begun in 2005. By then costs had again exceeded prices. In April the lender Carevest Capital Inc. delivered its ultimatum -- it would refuse to discharge the loan "unless the purchase price for such properties reflected fair market value" of the units.
Homebuyers want sale honoured People who signed purchase contracts in 2005 have been told they must pay 2007 market price Derrick Penner, Vancouver Sun Published: Saturday, May 12, 2007 "That wasn't our doing," Hayward said. "I guess at that point, it's their call. If there's a shortfall, they can go foreclosure."
News of the Riverbend case has made it all the way to the floor of the provincial legislature with opposition MLAs demanding action to protect consumers. Finance Minister Carole Taylor said the provincial superintendent of real estate is looking into the situation.
Peter Simpson, CEO of the Greater Vancouver Homebuilders' Association, said the case has raised uncertainty about pre-sales in the minds of buyers, and a lot of his members aren't happy about that.
Simpson added that all companies face delays and cost overruns, but they "suck it up, they fulfill their obligations to buyers and move on to the next project with their integrity and reputations intact."
Don't know if any of you read this blog but Ben Jones has to be the best USA housing blog site and anyone who hasn't seen the light on the downside possibilities has to read this site once inawhile to see that yes, a good party can end ugly and right in your own town.
Some suggestions for discussion:
14 comments:
Is it possible that the stock markets are getting bubbly, ie disconnected from the fundamentals, due to people fleeing the housing market and looking for another investment? This may continue to push the markets higher for some time, but what is the long term result?
PB, I'd say that's a definite possibility.
If you look at the TSX, it's dominated by Oil&Gas and Minerals, which by all accounts left fundamentals behind a long time ago.
To get a true bubble in the stock mkt, wouldn't you say that massive speculation would be necessary? I don't know that people are speculating that O&G will go up so much as just be a good long term investment, same for minerals.
It will be interesting to see what happens when some of the news of a slow down in production come out.
The RE and stock mkts have been mirroring themselves for a few years now, which is not a normal thing. I think we're seeing something we haven't seen before. If the US is an example, it could mean trouble ahead in both mkts?
You're right hhv, massive speculation is required for a bubble. Shoot, the NASDAQ is only half what it was at the peak - that was massive speculation. The example of massive speculation for RE was the line-ups for condo tower pre-sales.
Everything is connected in today's global market. The housing downturn in the US will lead to further poor retail sales numbers, which account for a huge percentage of the GDP, resulting in more layoffs, lower revenues, lower stock market, and this spreads everywhere. Certain segments will do well (oil and energy?), but most will be quite affected. Canada is not immune, we will follow at some point.
Since the forum is open today I thought I would post a quote that I saw on MSN Money.
"Write about money, and you're going to tick someone off.
Write about poverty, affluence, whether the middle class is disappearing and if so, whose fault it is . . . and people go berserk."
but I'm going to change it to:
Write about real estate, and you're going to tick someone off.
Write about a real estate correction, and people go berserk.
And believe me, they do. Ha, ha.
S2
Write about money, and you're going to tick someone off.
Write about poverty, affluence, whether the middle class is disappearing and if so, whose fault it is . . . and people go berserk.
global stock markets will follow shanghai stock market down (as they did in late February), and which is in a massive bubble.
Anon 9:18.
You are right. AT my kdis school I was just saying I thought real estate was going to go down. It was an off the cuff remark. This couple won't talk to me now. He is a builder and a RE agent.
I have mentioned this before but during the Tech Stock Bubble my husband was on Bay Street. He remembers analysts in the US getting death threats if they even suggested that there was a Tech STock Bubble. When people mentioned it on Bay Street there were no death threats but anger and friendships were over.
Today's Times-Colonist
http://communities.canada.com/victoriatimescolonist/blogs/news/pages/homelessness.aspx
"It was an off the cuff remark. This couple won't talk to me now. He is a builder and a RE agent."
Definitely the wrong people to drop the bomb on though they could have admitted things are getting top heavy.
I just heard from my significant other how some relatives who are sitting on a house in a nice area but in the process of alot of renos are convinced the market is going to keep going up forever with no concern about affordability to the average person in the least and they work in the humanitarian field as well. The worst part is being treated like some charity case cause we rent.
Just another bubble sign as there is panic buying happening in Nanaimo now cause "prices are going up forever". I smell global meltdown coming,wait til the US takes on China over this major currency differences in the next month or two,the US dollar will tank hard and will push the US into a recession and Canada will not be immune.
http://www.canada.com/vancouverisland/nanaimo/story.html?id=69b37a9c-06b1-47f4-a445-77e76e878cb2
This is an interesting article from today's Vancouver Sun:
"Homebuyers want sale honoured
People who signed purchase contracts in 2005 have been told they must pay 2007 market price
Derrick Penner, Vancouver Sun
Published: Saturday, May 12, 2007
Stephen Bulat still hopes he and his fiance will move into a home at 227-3000 Riverbend Drive in Coquitlam, although the builder has cancelled their contract and returned their deposit.
Bulat is one of 32 purchasers who signed pre-sale contracts in 2005 to buy homes in the Riverbend development. They're now being told the builder, CB Development 2000 Ltd., has hit financial difficulties and must put the units up for sale at current market prices.
"We're not backing down," Bulat said in an interview. "We're not really acknowledging it's legal for them to breach this contract. We haven't cashed any cheques that were given to us. This contract still holds."
Stephen Bulat is one of 32 homebuyers in the Riverbend development in a dispute with the developer, who is having financial difficulties.
Steve Bosch, Vancouver Sun
Bulat and his fiance agreed to buy a three-bedroom, three-level house for $349,900, which they expected to be complete in June 2006.
The project hit delays, however, and Bulat said the builder extended the delivery date several times with a final deadline of mid-June this year.
Bulat said he and his fiance were excited about moving in. They had participated in the building process, choosing the fittings and finishings they wanted, including having speaker, microphone and computer ethernet cable running through the walls.
The couple sold their condominium 20 months ago in preparation for their move, and though they were losing equity gains on that property during a fierce run up in Greater Vancouver property values, Bulat said they were comforted in knowing their yet-to-be complete unit was also rising in value.
Now, they are among at least six buyers suing CB Development in the hope of forcing the company to honour its contracts.
Their lawyer, Shane Coblin, has filed the actions in the B.C. Supreme Court in Vancouver and registered certificates of pending litigation on the property titles in question. The certificates serve as a warning to any potential purchasers of the units that there is a dispute over their ownership, and essentially ties them up until the suit is resolved.
Coblin, in an interview, said the remedy the buyers want is called specific performance, which means they want a judge to order CB Development to fulfill the pre-sale contracts.
"There is no provision for the builder to back out of these agreements, to all of a sudden say they don't want to do it any more," Coblin added. "They are binding contracts."
However, CB Development's president Grayden Hayward said the company's lender forced it to cancel the contracts.
Hayward said in an interview that the Riverbend project ran into problems as rising construction costs raced ahead of pre-sale prices which were set after the company started building the three-phase development in 2002.
Hayward is also a chartered accountant, director of the Vancouver Airport Authority and secretary treasurer of the Vancouver Board of Trade. He said that in January, CB Development had to seek refinancing of its construction loan for Phase 3 of the project, which was begun in 2005. By then costs had again exceeded prices. In April the lender Carevest Capital Inc. delivered its ultimatum -- it would refuse to discharge the loan "unless the purchase price for such properties reflected fair market value" of the units.
Homebuyers want sale honoured
People who signed purchase contracts in 2005 have been told they must pay 2007 market price
Derrick Penner, Vancouver Sun
Published: Saturday, May 12, 2007
"That wasn't our doing," Hayward said. "I guess at that point, it's their call. If there's a shortfall, they can go foreclosure."
News of the Riverbend case has made it all the way to the floor of the provincial legislature with opposition MLAs demanding action to protect consumers. Finance Minister Carole Taylor said the provincial superintendent of real estate is looking into the situation.
Peter Simpson, CEO of the Greater Vancouver Homebuilders' Association, said the case has raised uncertainty about pre-sales in the minds of buyers, and a lot of his members aren't happy about that.
Simpson added that all companies face delays and cost overruns, but they "suck it up, they fulfill their obligations to buyers and move on to the next project with their integrity and reputations intact."
depenner@png.canwest.com"
60 Minutes had a good one on real estate agents and their 6% gouge and low cost online agent Redfin.
http://www.cbsnews.com/sections/i_video/main500251.shtml?channel=60Sunday
Don't know if any of you read this blog but Ben Jones has to be the best USA housing blog site and anyone who hasn't seen the light on the downside possibilities has to read this site once inawhile to see that yes, a good party can end ugly and right in your own town.
http://thehousingbubbleblog.com/
Anon 9:07 - there is a thread about that on the Real Estate Talks Index Forums.
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