Thursday, September 20, 2007

Confusion


I really want to comment on the dollar's value and how it will impact the local real estate market. I'd like to say that with our dollar worth so much the foreign buyers--largely assumed to be the one's driving prices upwards ;-)--are being slowly priced out forever. But I can't with any confidence.

I'd like to say that I agree with the JP Morgan analyst who says that the parity-thingy is the same as a 4.4% interest rate hike on our economy. But I don't. Rather I agree with the TD Economist that says that parity is only making inflation worse than it already is, which is already not being dealt with.

I'm really confused. I'm thinking if I had a clearer memory of 1981 (I was 6) I'd be feeling the same confusion my dad was feeling as he lost the liquid part of his business to inflation and unpaid accounts receivable. Why is this happening? Isn't someone in control?

This man has made me a lot of money in the past 2 years. I listen to what he says. But even he won't say how this will impact the economy, let alone real estate.

So the only real piece of information about local real estate that tells me how things aren't always as "torrid" as some claim them to be: Tuscany Village is still just over 50% sold. Which means they haven't sold much since I was last there, 2 MONTHS AGO, when they were still just over 50% sold.

19 comments:

Justin said...

Our dollar hasn't gone up at all, at least compared to the Euro, on the 25 of Oct 2000 we enjoyed our last high of 1$ CN = 0.80 Euros.

BTW I got the info from this site:

http://www.bankofcanada.ca/en/rates/exchform.html

You can get your daily rates as far back as 10 years.

I think Frank Mersch in the FP article hit the nail on the head when he said that we've had a solid financial policy for the past 10 years, I'd probably venture back further and say that since 1993 we've had a solid policy.
Health care and the military probably suffered the most during those years but our economy is that much better for it.

Village said...

It's less our currency going up, and more USD fast becoming worthless. Unfortunately, since we are tied to the US whether we like it or not. I don't foresee this as boding well for our economy in general.

Eventually, factory shutdowns in Ontario/Quebec and forestry jobs lost here do their own housing collapse will start to be felt be felt by everyone. It seems we are starting to hear the oil sector of Alberta isn't exactly as hot as they say.

Do rich foreigners really by regular everyday houses? I have to think a truly rich foreigner is financing condo's and complete subdivisions, not dinky 3bed/2bath house.

vg said...

good points village,the rich foreigner is not supporting the average joe's case for higher housing prices. All this negative news the past few weeks has to be starting to take a toll on our housing market psyche, even if it is in baby steps. Wait til the first monthly drop in prices,the media will be the sleaze bags that they are and change their tune and run hard with it. Afterall doom and gloom is what they live for.

greg said...

I would just point out the Canadian dollar is up against the Pound Sterling about 5% in the past week, as the Northern Rock fiasco has knocked the pound down a notch.

If Canadian financial regulators are smart they will realize that a little housing downturn is nothing compared to the damage that will be done if they let this bubble inflate further. Look out when your financial institutions start dealing the crappy financial products with CMHC guarantees and no money down and 100 year amortizations - with unspoken rationalizations like it's the only way to save the boomers who didn't save anything anywhere but their housing ATMs - we don't want to pay so inflate the housing market at all costs.

Not a good plan.
Hopefully, rates will be going up in the near future.

But as anonymous has pointed out lately here and at Victoria's Truth, we are immune to those pressures and somebody will continue to pay more for our houses.

Too bad jmk already bought last year, I'm sure he'd love to buy in today's market....

Anonymous said...

greg said

Too bad jmk already bought last year, I'm sure he'd love to buy in today's market....

jmk: Are you planning to buy more property as an investment or perhaps move up in order to make more money?

Inquiring minds want to know.

JMK said...

No, I'm not planning to buy an investment property or "move up to make more money"

a) because I want my portfolio to be diversified, which it certainly wouldn't b if I put the rest of my savings into a property. Ask me when I have a few hundred more $k stored up.

b) moving up is very expensive - I bought for the long term (>10 y) - moving up has a considerable expense. Furthermore you don't realize a benefit from not paying rent if you buy a place that is far more expensive than what you would otherwise rent. The place we bought is very nice, but not beyond our means.

Would I buy today if we hadn't 6 months ago? Absolutely. There is a tremendous advantage to owning over renting, which so long as you don't overleverage.

Even if I had the few hundred k would I invest right now? Probably not. Without the strong bias of tax-free rental income it makes real estate investment more risky.

Anonymous said...

I just posted this at PB's blog, but had to bring my morning rant over here, too.

Here's what I don't get:

An entire lending sector (subprime) vaporizes within weeks...but long-term mortgage rates stay low.

The global credit market seizes to the point where even the banks won't loan to each other for fear of the slime that lurks deep within their collateral...but long-term mortgage rates stay low.

The last three years' runup in US housing prices has now been shown to have resulted from system-wide fraud and collusion...but long-term mortgage rates stay low.

The US economy is frying so fast that Bernanke hits the big red panic button, lowers rates further than even the Street expected, and causes the US dollar to sink faster than a goodfella in cement overshoes...but long-term mortgage rates stay low.

Anyone on the planet with two brain cells knows that the CPI and core inflation are rigged, massaged and manipulated beyond having any relevant indicative value regarding risk pricing and assessment...but long-term mortgage rates stay low.

Greenspan is zipping around the global lecture circuit predicting double-digit drops in global real estate prices as well as double-digit Fed funds rates "velly soon"...but long-term mortgage rates stay low.

WHY?

stan said...

WHY?

Don't know mate but this interesting ron paul rant sheds a little light on it.

Worst is I kinda agree with what he says but the politician in front of him cannot stop smirking

http://www.youtube.com/watch?v=138LMjiBQ4g

Stan

stan said...

Even better one here, thought these were very interesting, I am pretty anti american, but this is the first american politician I have not wanted to slap.
Why have I never seen him on TV?
How the hell did he get voted in as senator in texas?
How do we get one of these?

Sorry if all this is off topic but these clips really made me sit up.

http://www.youtube.com/watch?v=LhglwvE50cg

Stan

Roger said...

hhv

I am also confused. jmk and others have often stated that the "boomers are coming" to Victoria to buy their retirement homes. However, I found this disturbing article about Canadians starting to buy homes in the US due to the low prices.

http://tinyurl.com/22f542

What is happening? I thought everyone wanted to move here!!

JMK said...

Roger,

It would be inane to say that "everyone" wants to move to Victoria, and the only people I've seen say it are people wishing to erect a flimsy strawman. Canada has a population of >30 million people. If 1% of those people retired a year that would be one Victoria every year. Unlike VG's stock portfolio, there is no way Victoria's population will double this year, or any other year.

I have said that there is a positive population pressure, to a large part caused by retirees, that has caused house prices to outstrip wages over the last 30 years. This only requires a tiny fraction of retirees to want to move here. I don't see any reason why that trend would reverse over the longterm.

Anonymous said...

I do. It's too damned expensive here. You can't sell a house in Winnipeg and get something here. Not happening.

vg said...

Interesting numbers on MLS SFH's. for all Victoria under $450,000 there are 15 pages of houses. Under $475,000 it jumps 25 % to 19 pages of listings. But when you move it up to under $500,000 it jumps to 24 pages of listings.
So a mere $50,000 difference is a 60% increase in competition and you get much more house for that extra 50 grand. Looks to me like alot of competition for a small price range. Someone is gonna have to start lowering their prices sooner or later if they are serious sellers.


JMK, portfolio is doing fine thanks and on track for that next 100%. ;)

JMK said...

VG,

JMK, portfolio is doing fine thanks and on track for that next 100%. ;)

I didn't doubt it for a second. Forget boomers and oildrenched Albertans. Its guys like you who are driving up the price of houses.

vg said...

Forget boomers and oildrenched Albertans. Its guys like you who are driving up the price of houses.


thats a good one jmk,can't recall the last time I bought a house with my profits. I take high risk and I get rewarded,and then when the housing market tanks here all those like you who bought at the top will want a bail out on my tax bill cause you couldn't figger out economics 101. Too funny.

greg said...

This only requires a tiny fraction of retirees to want to move here. I don't see any reason why that trend would reverse over the longterm.

Try this one jmk - they start to die and the Gen-xers and other smaller following cohorts do not have the wherewithal to purchase the property in question at current prices.

If you doubt this is likely, check out some research from the US federal reserve I summarized here.

vg said...

CNN just had a segment called
"What if We Stopped Spending".
Bottom line of the segment was we wont stop spending but we will slow spending,in other words the psychological effect may kick in and we cut back on all those extras and the toys that have been helping drive this economy. Imagine that eh,we actually slow our spending and save cash.

And they pointed out the housing inventory increases and showed Seattle's up 56% the past year.
Since we are a CNN watching society in Canada you know stuff like this has to be sinking in to many right now.

Village said...

Greg, I'm glad someone has studied the demographics of the boomers as they pass on and possible effects. I've wondered how they would ultimately affect assets.

To me, on the simplistic side. It makes sense that as they retire, no longer earning and contributing to savings/stocks. They become net sellers, pressuring assets lower as they liquidate to consume. The first effects should be beneficial, companies earnings increase as you only live once lets buy the Lexus and RV and the ... For a while. Eventually, those coming behind even with equal earning power are fewer and therefore have less money to spread around forcing prices down. *shrug* I see this as mostly a NA/Europe problem. India and China should be fine.

Aleks said...

Japan is like a case study on the perils of a low birthrate and an aging population.