Harry Dent Jr. was interviewed by Roy Green today, a follow-up to this recent article. He’s definitely an interesting fellow who had much to say.
Much of his focus was on the U.S. and Europe but there was this interesting/scary tidbit about Canada in 2012:
When an asset bubble bursts, prices often return to where the rapid, price runup began, he said. “Look at what your real estate was worth between 1996 and 2000. That is the range it will fall to … I think housing in Vancouver and Victoria could decline 60 or 70 per cent, while Toronto is more like 50 per cent, and Montreal a little less.”
The EU is looking real bad. Greece is paying over 400% on its 1 year bonds to attract ivestors to finance what is left of its welfare state. http://globaleconomicanalysis.blogspot.com/2012/01/greek-1-year-bond-yield-tops-408.html
Too bad we don’t have a brainy Pulitzer Prize winning economists in Canada. Like that ‘gov’t-can-fix-all’ Paul Krugman guy at the NYT. He wrote, in August 2002:
[ To fight this (2002) recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.]Krugman
So there you have it. Left wing nut case Krugman suggested that gov’t policy should encourage consumers (aka subprime) to borrow, spend, borrow against their houses and spend, buy into the housing bubble.
And then when we arrived at the day of reckoning he writes that since the collapse, starting in 2008, the govt’s simply did not borrow and spend enough. I kid you not.
http://www.nytimes.com/2002/08/02/opinion/dubya-s-double-dip.html
If the Fed launches QE3, there may be enough money to float the economy another year.
http://www.cnbc.com/id/45977098
(Drudge)
Oh, puuuh-leeeeeze
Anyone who’s followed any of Harry Dent’s advice over the last 15 years is broke. Here’s a summary of his predictions:
n 2000, based on his forecast that economic growth would continue throughout the 2000s, Dent predicted that the DOW would reach 40k, a prediction which was repeated in his 2004 book. In his book, he also predicted the NASDAQ would reach 13-20k. In late 2006 he revised his forecasts to much lower levels, estimating the Dow would reach 16-18k and the NASDAQ 3-4k. In January 2006, he predicted that the DOW would reach 14-15k by the end of the year. It ended 2006 at 12,463, 11% below the lower end of his prediction. It ended 2007 at 13,264, again significantly lower than Dent’s revised prediction of 15,000 by early 2008. Since then, the Dow crossed 14,000 in late 2007 before retreating.
This guy’s a loser who’s not even interesting.
I could be wrong but I believe there is a big difference in mortgage rules between the US and Canada.
In the US, if the house value drops below the mortgage amount, the home “owner” can simply hand the bank/lender the key and walk away.
In Canada, the bank will take the house plus your vehicle(s) plus savings/investments and anything else of value you may have until the mortgage is paid off.
I would think Canadians will be a lot more diligent in maintaining their house payments, and house value. Am I wrong?
It is much more difficult to get a mortgage in Canada. Therefore Canadians who have mortgages are more capable of making payments. As long as interest rates don’t rapidly climb into double digit territory, then a slump in the rising value of houses won’t be a big problem.
Vancouver, Victoria and Toronto are definately in a bubble. Wages have been flat for 10 years and Canadian credit card debt is at a all time high. The cost of living continues to creep upwards and taxes/user fees fuel the angst. I think there will be a moderate crash but nothing (yet) like the USA. Ontario will take the biggest hit due to McGuinties relentless pursuit of green energy policies. BC is the other province being nickled and dimed to death. So much of what happens here is dependant on the USA which is our largest trading partner. If Obama gets back in we will all be toast.
Meanwhile got right out of the marker and he sold his Miami home and is renting in Tamp Fla. waiting for the crash to buy his house back at what … 30 cents on the dollar? He will still be living among a large mixed population of desperate and perhaps violent people ….. where’s the gain?
Most people will be unprepared. If and when the shit hits the fan to the degree he is talking about, law and order will be in short supply.
When someone goes this haywire on a prediction, I think of an old man in a gray robe and long white bread shouting ‘repent’ on the street corner.
Vancouver is not a bubble,never was.It is a safe,stable, reasonably accessable adjunct to the orient . as those countriers grow in economic clout then so shall thier impact on desirable places, to call home.like safe, clean cheap vancouiver,
Vancouvers bubble can not be solved until there is political will to pinch off foreign ownwership with confiscatory taxation or intrusive municiple decrees,and that just a’int gonna happen
The ‘bubble’ in Vancouver is the result of MalWart shoppers giving the Chinese more money to spend on private land ownership which isn’t allowed in China.
Vancouver is rapidly becoming the capitol of “New China”
Seeing more and more articles like this.
Probably time to buy in.
Prophesier of men!
Just in the last 30 years-
We are going to have another Ice Age and millions will freeze to death!
We are going to have Global Warming and millions will starve to death!
We are going to have Carbon Dioxide smother the planet and millions will quit breathing!
We are going to have Global Climate Change and millions will move to death!
-YK2-
All the computers will shut down and we are going to have billions of people sleeping/dying in road culverts and caves because they can’t use their moving vehicles!
Pres. Oblamer says we are going to have Global Climate Disruptions and millions will be bullshitted to death!
Praise Allah it will all end in 2012!
Please list any other millions/billions of deaths here.
-?
-?
-?
-?
In Canada, the bank will take the house plus your vehicle(s) plus savings/investments and anything else of value you may have until the mortgage is paid off.
Nope, can only take what they have as security.
My brothers house in WI has already lost over 40% of its value in the last year and a half. If that happens here in Canada most people are in big trouble.
Thank you Fearless Leader for outlining some of the possible nasty endings of the human race. lol Personally I intend to go out happy – as in eat, drink and be merry. Figure it will take more that one calendar year for mankind to exit the planet in a blaze of despair. Cheers.
fiddle,
Correct they can only take the security, but the unpaid debt is still owed.
I believe in some jurisdictions in the US if you give back the house you don’t carry the obligation.
As always, you can decalre bankruptcy. That is a situation where other assets are taken into account and may be part of a deal to let the borrower out of their complete obligation.
As for bubbles…..well, Victoria condo prices have already fallen significantly in the last 2 years. The fall is likely due to supply and demand issues. Not sure if there is a bubble that is supporting them at these prices.
Toronto condo is likely a bubble, but I heard that 6 years ago. Right now, one factor supporting Toronto condo prices, particularly at the luxury end, is the Euro meltdown. Numerous wealthy Europeans are finding safe havens in hard assets like Toronto condo’s. If Europe was magically fixed tomorrow you might have a problem. But the market, houses and condo’s, (houses in particular, is still demand of those seeking to buy exceeding those willing to sell.
Prices are always determined at the margin.
The housing bubble in the US started when FedGov insisted that the banks make more mortgage loans to Preferred Species, even if there was clearly no way they could pay the note. Unless Canada’s FedGov drove the banks to the same position, and unless your Preferred Species percentage of the population is significantly larger than I suspect, your “reset” should not be as deep as ours. Of course, our “reset” hasn’t even STARTED yet, since the vast majority of homes with past-due notes has not been turned over to foreclosure. After all, once they foreclose, the banks have to list the foreclosed value of those assets. And that would NOT look good on their books.
In addition, the feeding frenzy off subprime loans made MANY institutions lax when handling the paperwork. It appears that for MANY of these delinquent loans, the banks do NOT have clear title. Just to show how little Rule of Law means stateside, that has not stopped SOME courts from finding in favor of the bank anyway. But OTHER courts have required the financial institutions to present the legally-required documentation before foreclosing on the property. That has put a MAJOR dent in foreclosures processed through THOSE courts.
“I think housing in Vancouver and Victoria could decline 60 or 70 per cent”
I have heard that prediction dozens of times in the last ten years.
Meanwhile, the $350k condo purchased in downtown Vancouver in 2000 now lists for $1,250,000,000.
Y2Condo Crash . . . will happen right after Global Warming kicks in.
Reading these comments I am reminded of the pre-crash debates of whether the US housing market was a bubble. The bulls of course had their reasons why this market was different was different and how old indicators are obsolete.
Fred, you’ve changed my mind. At $1.25 billion it just might be a bubble
KevinB is right, Dent is not to be taken seriously. There’s a few things wrong with that Dent said in the article. Europe is already in recession, not simply slipping into it.
Second, a large part of China and India’s economic slowdown is self-induced through measures to restrict their very high inflation. Both countries have seen a very large growth in internal demand from their own rapidly growing middle-income earners. So the loss of export markets in Europe will not hurt nearly as much as it might have 10 years ago.
Third, his recommendation about buying US gov’t securities is mostly silly. All too often the returns are negative interest rates these days. Far better is long term, dividend-paying blue chip industrial bonds. And his expectation that gold and silver prices will collapse under a severe recession is also silly. Those are used as hedges against inflation which is certainly going to come at some point from all the money-printing that’s been going on from quantitative easing.
Methinks that Harry Dent is looking a little too much at residential devastation in Florida and imagining that it’s true everywhere.
I’ve been expecting a crash/correction for awhile. People who say it isn’t a bubble and that the prices are stable aren’t looking at the wages to job field in the areas. A 780k-1m home, in an area that’s only paying 55-80k is not a sustainable market. That means the people buying in to those are? Well I’ll let you fill in the blank(s), but you saw the same in the US.
World debt will at best cause a recession and at worst a multi decade depression in most major markets. Until governments are prepared to tell the people who elect them that they cannot spend more than what is brought in. Most Canadians have no idea how much their debt obligations total. I even suggest that many think the deficit is the debt total and after all the conservatives tell us that they will pay that off by 2016.
Who really knows what the total debt picture is? On a per capita basis Canadians owe more than Americans. The inherent strength of our society is our ability to extract our resources and export them for a $. Does that ability stand up well in the coming recession/depression? I think not.
In a normal repossession, all the lender gets is the house. There may be some situations where other things are held as security including any and all property.
Also, the insurer CMHC, being a government agency, will not let you walk away from an insured mortgage without declaring bankruptcy.
Look at the charts posted below and if you can see a bright future in them, you are a lot more optomistic than I am.
http://www.scribd.com/doc/76802342/11-Trends-Over-Last-11-Years
Fiddle:
I can only speak for Ontario but banks don’t normally foreclose; they prefer power of sale whereby the bank will force the sale of the property to recover their debt (plus all ancillary costs like legal, appraisal). If there is a shortfall, the bank (or mortgagee) will then sue the owner for the balance. Any excess value will be the owner’s.
If Dent is right, you’ll see massive defaults.
I own a home in a “bubble” city. Since 1997 it has appreciated 2.5x, a growth rate of 6.5% annually. Some bubble.
Dent is right about demographic change but has gotten the booms wrong and I suspect the busts too.
The baby boomers will ultimately bail the economy out by having to keep working, though interest rates will surely rise within the next 5 years and beyond.
The solution continues to be: hold quality securities and real estate and search for value. Be a contrarian, buy when there’s blood on the street and hold through the panic sells.
Yes, we’re in for a big downturn. The problem is the Dents of the world have been crying wolf for so long nobody believes them, with good reason IMO.
Vancouver property (my place on a 33′ lot is assessed at $2.1 million which of course is proof positive that I am a genius) is in a bubble
….. if China is in a bubble.
But not to worry. The Chinese are financial supermen like the Japanese in the mid 80s. Ask Tom Friedman. As someone indicated above, the Chinese government supermen are on the job heroically fighting inflation which of course is something that just happens like a earthquake.
I have to say that I’m always amused at anti-bubble anger from folks who are wont to believe that “it’s different this time”.
Some wag once said that if you do predictions you should give a number but not a date. Examples: gold will reach $2,500; a Republican will become POTUS again some day.
As for Victoria, bubble, well?
As far as condos, was there a bubble? Perhaps, but the leakage down has been slow and slight. Most of the bubble was in the brand new product, and, these buildings are largely still 25-50% vacant, and prices have corrected. Existing stock has been pretty stable, given a slight, and not unexpected decline of 10%.
When talking condos, there is the Victoria market (City) and the Greater Vic market. The City market has been slow and stumbling. The Langford and Saanich markets have been strong and steady. Prices are less there, and reasonable to the first time buyers.
SFDs (houses) have been steady.
The biggest impact on the market has been the HST, and its regressive effect on brand new SFDs. It has brought that market to a standstill, and unemployed thousands of tradesmen (thanks Crispy Crunch!)
In BC, we are in a government created reccession by the Liberals and their disastrous HST.
To be fair, this recession has taken the froth of off the real estate market.
Vancouver is a whole other matter
Mark Matis:
Your sense of what caused the mortgage bubble in the US is completely wrong. I’ve written numbers of long posts here explaining what happened, so I shan’t waste Kate’s bandwidth repeating myself. Do a search if you want enlightenment.
Ron in K:
Only 16 states in the US are “non-recourse” states, including California. Some states are non-recourse if the lender opts for quick foreclosure, but allow for recourse if the slower “judicial” foreclosure is used. And note that non-recourse only applies (usually) to first mortgages; if you’ve taken out a second, or have a home equity loan, you can be pursued for those.
But, in general, your main point is correct. Since no Canadians have access to non-recourse mortgages, they tend to be much more cautious about taking on such debts, and the banks tend to be much more cautious about lending the money.
This is not really news. Financial news letters have been predicting a rationalization of housing prices to their place before the high risk easy-money real estate bubble started. There is no escaping a rationalization to prices that reflect what the market will bear without high risk finance – and the fact mortgage shoppers haven’t had an income increase to match inflation in 10 years. Many can’t make the 5% down let alone compounded interest over 2%. Housing prices will reflect the reality of middle class incomes in protracted stagflation era.
Is this the same Harry Dent that in the summer of 1999 predicted that the Nasdaq index would go to 9,000 and then in the year 2000 promply fell to 1450 and has languished ever since? Easy to predict, hard to predict with any accuracy that will be of benefit to anyone (except of course to the person selling the prediction)
Is this the same Harry Dent that in the summer of 1999 predicted that the Nasdaq index would go to 9,000 and then in the year 2000 promply fell to 1450 and has languished ever since? Easy to predict, hard to predict with any accuracy that will be of benefit to anyone (except of course to the person selling the prediction)