A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s.
A telling sign of how bad things have gotten for the housing industry: Prices have dropped more since the recession started, on a percentage basis, than during the Great Depression of the 1930s.
A study should be done to identify if the worst affected states are Liberal or Conservative.
Oh wait – it’s already been done. The worst affected cities and states across the US surprisingly happen to be “Liberal” strongholds. Who knew?
I don’t know if I am allowed to post a link or not so if I’m breaking a rule I’m sorry Kate. Anyhow before we smirk too much at our southern neighbor’s calamity with housing, we should take a look at our own developing story:
“So, from its high in May until now, that average detached home in the middle of Canada’s biggest real estate market has lost $176,083, or 22.7% of its value. If this were the stock market, it would be called a crash.”
http://www.greaterfool.ca/2011/08/23/surprise-3/
Saskatoon will be feeling this pain soon.
Most real estate markets are inflated out of all proportion – a natural side effect of the industrials market instability and slow growth/returns on most areas of the economy. As always when the greed head marketeers and loan mongers set their sights on something its real market value is cast aside for new inflated pricing that requires the credit markets to feed on the inflation. Prepare to see housing take the same excessive peak and valley cycles the DJ does.
Pierce, Getting facts from Garth Turner is like getting scientific evidence from Al Gore. The man likes to hear himself speak.
I’m not saying that housing is not affected by the economy, because it is in a major way, but most housing markets have their boom and bust cycles. Some of those cycles follow the general economy, others are government induced. Ask anyone who bought a house in Calgary or Edmonton just before the NEP.
I bought a new house 10 years ago and watched the value increase by 130% over the next 5 years. Now it’s dropped 20 – 25% from its stated high 2007. Whatever, it’s still worth twice what I paid for it, but so what, I need to live somewhere, and if the value dropped to zero I still have a roof over my head.
The key of course is to pay off the mortgage ASAP and stay out of other debt entirely. You can’t do that if you buy more than you can afford on ridiculously lengthy amortizations, say anything over 15 years. You may have to do without allot of things you wished you had in order to pay it off quickly, including a lower priced home that you wished, but that’s just common sense.
My first home was extremely modest and took 10 years to pay off. I lived in it for 14 years banking extra while I was mortgage free. My second home was/is well above a standard Canadian home, it took 4 ½ years to clear off the mortgage. I’ll never have another one and could care less what happens to housing prices – save for the idiots out there that bite off more than they can chew because they can collapse the rest of the economy due to their impatient entitled attitudes.
Housing after autos is the major expense/investment of most folks (except for that family that owns Seagrams). Economic/employment uncertainty inspires buyer caution.
Canadians are very affected by events in the US, whether they are well informed or not. I suspect most are consolidating their positions rather than making major investments.
As for the entitlement sector, they are blissfully stumbling along…thye don’t buy housing or autos anyhoo…unaware until their monthly stipends shrink or cease. I suspect most of the British rioters had clue 1 about coming cutbacks….ours are no different.
Housing has yet to bottom out in part because there’s still a -large- inventory of foreclosed homes that have yet to be put on the market. Banks are hoarding them to float the market artificially, and in some cases there is no clear title because the paperwork was never done.
One of the scandals was the chopping and packaging of mortgages into commercial paper meant that all ownership data was held in a bank-owned database, nothing on paper. Nice eh?
So yeah, she’s still taking on water in a lot of markets. One thing we will be seeing in the future is huge tracts of worthless houses bulldozed and built new in large Eastern cities.
My. That’s… unexpected.
“High unemployment, larger required down payments and tougher lending standards are preventing many people from buying homes”
Someone should mention that “larger required down payments and tougher lending standards” bit to the President ,perhaps he can fix that.
As has been said above, house prices fluctuate,my house is worth more than twice what I paid for it eight years ago,even after a 25% “correction”,so I’m happy.
Couple of things:
First, Pierce, I agree with Texas Canuck; Garth Turner is a blowhard. The Royal Bank just produced a report two days ago showing housing prices were still going up in Canada, and the percentage of after-tax income required to buy a home was still rising. In fact, in Vancouver, it takes 92% of average after-tax income to afford a home! I feel sorry for young people trying to start families there, unless they’ve got a lot of money in the bank.
Second, AP’s point about housing prices falling farther than they did in the 1930’s doesn’t surprise me. My family owned a cottage built in the late 1920’s on the shores of Lake Champlain. This is truly a “cottage” – no foundation, it was built on concrete blocks. We had running water, but only cold – no hot water tank. There were no doors to the bedrooms, just curtains. I’ve visited some of my friends’ cottages north of Toronto, which were built in the 1980’s, and they were nicer than the first home my family had in Toronto!
Both sets of my grandparents lived in detached houses in Hamilton that were built in the late 20’s. As a child, I thought they were impossibly small; a tiny parlour, a dining room, a small kitchen, a frighteningly steep staircase, and three small bedrooms and a bath upstairs. These places were modest in every sense of the word.
In the past 30 years, we’ve seen an explosion of 3,000+ sq.ft. homes, with three or four bathrooms, huge kitchens, two or three car garages, etc. Coupled with loose lending standards, of course these mansions would experience a greater rise in price than the homes built nearly a century ago. When the air comes out of the balloon, they have a lot farther to fall.
All Garth did in the quote above is pass along numbers from the Toronto Real Estate board.
Can you think of any reason why the RBC would want to mislead you regarding housing affordability? hmmmmm, do they profit if people borrow or don’t borrow?:
“Bank of Montreal raised its variable mortgage rate late Tuesday, following the lead of Royal Bank of Canada, which did the same earlier in the day citing higher borrowing costs.”
http://business.financialpost.com/2011/08/24/another-big-bank-raises-mortgage-rates/
As for proof of RBC’s report being misleading, read here:
http://www.theeconomicanalyst.com/content/why-housing-affordability-misleading-indicator