I've added a couple of interesting weblinks to the right hand side of the blog. You may have seen them on other sites or in the commentary.
- The New York Times Rent vs. Buy calculator. Thanks to QL.
- Walk Score website - Find a walkable neighbourhood. It's fun to play with. Thanks to Housing Panic.
- Garth Turner's website. I don't agree with all that he says and stands for, but I have been reading it almost daily. He doesn't sugarcoat the current economic and housing situation.
Also, check out MLS 248177. This house just sold for $422000. That's $93000 off the asking price!
Thursday, July 17, 2008
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104 comments:
Missed you tonight at the real estate bears get together.
As for mortgage calculators, rent vs buy etc... one of the local credit unions (Coast Capital)has a number of tools too.
Wonder what the neighbours who just bought a similar property at $529,000 (MLS 243848) will think when they see that sale price!
Other than the BC Assesment website: http://www.bcassessment.bc.ca/asba/index.aspx (Data is all from 2007)
Where/how does one find info on how much a house sold for? Anybody have a link?
All land title information can be found at BC Online but you have to pay for it.
The realtors also have the sales information for any property sold by them.
BC Assessments has all the free information you're going to get.
anon said:
Wonder what the neighbours who just bought a similar property at $529,000 (MLS 243848) will think when they see that sale price!
Here is the rest of the story:
MLS 248177:
4009 Blackberry Lane
DOM 29; Sold July 15, 2008
4017 Blackberry, Saanich East
Asking Price: 515K
Sold Price: 422K
Assessed Value 2007: 433K
MLS 243848:
4017 Blackberry, Saanich East
DOM 9; Sold April 15, 2008
Asking Price: 530K
Sold Price: 529K
Assessed Value 2007: 478K
Here's another one:
MLS 228085:
4056 Blackberry, Saanich East
DOM 14; Sold April 27, 2007
Asking Price: 455K
Sold Price: 450K
Assessed Value 2007: 430K
The discussion will be interesting at the neighbourhood block party.
Re:
MLS 243848:
4017 Blackberry, Saanich East
DOM 9; Sold April 15, 2008
Asking Price: 530K
Sold Price: 529K
Assessed Value 2007: 478K
the buyers obviously never found these blogs (at least not in time)-- and the sellers must still be having uncontrollable giggling fits
Island boy, you can also go down to the BC assessment building on Douglas. They have binders, and believe it or not, 70's style Micro-film with all the assessments for each year dating back a few decades.
If you do your own searches via binders or microfilm, it is free of charge; if you need a lot of assistance they may ask you for a samll fee. Likewise if you are in a hurry, they can print off the info you want for a small fee (they have it all on THEIR computers).
What I find strange is that this is public and free info if you go there in person, and they even publish the info online from January to March of each year. So the question I have is why do they not leave it online for the other 9 months of the year? Don't we pay for their salary with tax dollars (house + income taxes)?
Anybody know the official explanation as to why the public can't access this for free all year round?
Mr.4am said:
So the question I have is why do they not leave it online for the other 9 months of the year?
They changed their policy this year. Assessments and some sale data is now available all year round @ http://142.32.78.110/index.asp
Oh, that's great! I guess I hadn't been to the site in a few months.
Thanks Roger.
Mr.4AM
Is it possible that there's anything unusual about the 4017 Blackberry Lane house which apparently sold twice within a short time, with the $107k loss the second time??
WHY would anyone "willingly" accept such a steep loss?
Could it be that the seller sold to a related party in order to write off a big capital loss against a big gain elsewhere? I'm really interested in this scenario.
For instance, if the seller held #4017 as an INVESTMENT property and was liable for Capital Gains tax on other investments, could the seller not deliberately 'pass on' this house to (let's say) his child at a big discount, therefore 'enlarging' the child's inheritance and mostly keeping more of 'his' money by saving income taxes now?
Possible, or non?
That's not an arm's length transaction and the capital loss would be disallowed.
That kind of transaction would not be on the MLS, anyway.
I don't think 4017 sold twice, it looks to me like Roger garbled things a bit.
patriotz said:
I don't think 4017 sold twice, it looks to me like Roger garbled things a bit.
You misread my post. I posted the details on three different house sales on Blackberry Lane (4009, 4017 & 4056).
No Roger,We did not misread. You listed #4017 twice: You said:
Here is the rest of the story:
MLS 248177:
4009 Blackberry Lane
DOM 29; Sold July 15, 2008
4017 Blackberry, Saanich East
Asking Price: 515K
Sold Price: 422K
Assessed Value 2007: 433K
MLS 243848:
4017 Blackberry, Saanich East
DOM 9; Sold April 15, 2008
Asking Price: 530K
Sold Price: 529K
Assessed Value 2007: 478K
just asking,
You are absolutely right. I cut and pasted incorrectly. Sorry that my mistake led you to a false conclusion. Should have read:
MLS 248177:
4009 Blackberry Lane, Saanich East
DOM 29; Sold July 15, 2008
Asking Price: 515K
Sold Price: 422K
Assessed Value 2007: 433K
MLS 243848:
4017 Blackberry, Saanich East
DOM 9; Sold April 15, 2008
Asking Price: 530K
Sold Price: 529K
Assessed Value 2007: 478K
Here's another one:
MLS 228085:
4056 Blackberry, Saanich East
DOM 14; Sold April 27, 2007
Asking Price: 455K
Sold Price: 450K
Assessed Value 2007: 430K
Blackberry lane?!?
Oh man...Now I know why sales are down across the board for the past few months. This just goes to show you that these developers and marketing people are completely out of the touch with reality!
Everyone knows that if you want to get people's eyeballs and free advertising a la viral marketing, you should have made every single house 100% cookie cutter on the street (no exceptions!), made sure they were all portable homes with 1 window and 1 door max, and that none of them had any replaceable parts that could be purchased at the local hardware store. The colors for every internal and external wall should have come only in two options - black or white; and lastly, and most importantly they should have made sure that the name of the street was instead.... iPhone Lane!
With such a name, they could have easily raised all the house asking prices by at least 50%, added insane monthly strata and property tax (usage) fees, and still, I’d bet even the bankrupt Americans would manage to get another loan just to be able to come back to Victoria and line up at 4AM to be the first 10 to participate in the guaranteed bidding wars.
Developers could have also made a killing in the selling process by not having to pay any realtor commissions at all and instead sell all the bragging rights to a single firm like ReMax. Surely they would have easily dropped 50 Million just for the honour and privilege of being the official seller of iPhone lane housing products and more. Yes, for an additional $200K, you could own one of the brand new iCars which comes in loud orange, purple or green colors. Remax would have a field day with this, because it would be practically guaranteed their stock price would jump a few notches against the collapsing market. People would be calling them the "New Gold" on wall street.. no wait... the "iGold".
Yep, that’s it! In the next real estate boom, I'm going to get a job in real estate marketing.
Art Deco ain’t got nothing on me baby!
Mr.4AM
Thanks Roger,
FYI, the original seller/owner of 4056 Blackberry doubled her money on that one. It sat on the market for a few months in Spring of 2006, to my surprise. It was beautifully decorated and tastefully furnished.
The (second) buyer paid $410k, then sold it soon after for the price you reported, $450k. I'd heard that some 'improvements' like new countertops were made, although I personally didn't see the need, as it was immaculate before that.
That Blackberry Lane is strange. The little cul-de-sac off it, #4073, named the same, originally sold for about $200k each in 1999 or so. They are 12 joined-at-the-hip duplex/triplex townhouses, with every 2-3 joined together, unlike the street , where each TH is free-standing.
Anyway, after dropping in value around 2000-2001, the prices suddenly went to $265k about mid-2003. By Spring of 2004, one sold for $330k.
I attended the open house and asked the agent WHY? Her answer: Market conditions. There were new ones being built in the steep lane behind these, in the $330k price range.
BTW, this whole development, incl Rainbow, looks like a shanty town/slum, when you glance off the highway. But that's an aside!
Then, in August 2005, one sold for $347k, and the non-res owner was ecstatic, having paid about $230k. I was further blown away to see that just last year,4073 #7 on the LANE sold for $437k. This #7 is the only one which is 3 joined together. It is no different from the other 12 in size, etc.
A prime example of irrational exuberance. The free-standing ones along the STREET, (not LANE) used to go for around $400k, including the nicely-kept #4056. But there were crappy ones in-between, some split into 2-3 suited rentals. One or two of these rentals took a long time to unload in a brisk market back then.
Just shows ya. This market has been insane. Many, many greater fools have taken former owners out of their misery by buying from them.
The area is 'cute', but VERY noisy & dusty from traffic on MCKenzie, Douglas/Pat bay. All you hear is sirens and traffic all day. Can't even open windows on summer nights.
There's NO PARKING, except in driveways or on Douglas. What a pain.
Confused on what people who are sitting on a pile of cash waiting for the market to fall should do? We've been waiting nearly five years now. Finally given up and are heading to London Ontario where the market is still increasing. And sitting on cash doesn't give me a warm fuzzy feeling either given the direction banks are likely to take.
"We've been waiting nearly five years now."
You don't have much longer to wait, this market is turning quickly as we can see with the big reductions. If you could wait 2 more years I think you would see 50% reductions from late '07 prices.
anon 9:19 said:
Confused on what people who are sitting on a pile of cash waiting for the market to fall should do? And sitting on cash doesn't give me a warm fuzzy feeling either given the direction banks are likely to take.
Where you park your cash depends on when you plan to buy. Someone buying this year might look at RBC's Premium Money Market fund paying 3.2% (100K minimum). Not great but fully cashable anytime. They might also consider spreading it around in wholesale GICs staying under the CDIC limit of 100K. Walk-in traffic at a bank will get retail GIC rates. The best rates are at a GIC broker or discount brokerage firm (pdf).
For longer terms, those seeking relatively safe investments might look at corporate bonds issued by banks. These can be purchased from your full service or discount broker. This is a great site with daily quotes on popular issues of all kinds. Before buying tradeable bonds one needs to do some research and understand the terms like coupon, yield, YTM, call features etc. A full service broker will help you but will charge a higher commission than a full service broker.
Those willing to take on more risk will be interested in looking at the stock market but that is not the focus of this blog so I won't go there.
We've been waiting nearly five years now. Finally given up and are heading to London Ontario where the market is still increasing.
London is an attractive city and has had moderate real estate price increases - no speculative bubble there. There is a good blog site for the London area. You do get plenty of snow but everything is a tradeoff. You will get a great house there for a fraction of Victoria's prices. Best of luck with your move.
In the spring I had a slideshow that showed some sales in Victoria with big price reductions. I decided to update it and found lots of candidates.
In order to see the prices clearly you need to run the slideshow full screen by clicking the big X in the upper right hand corner. There are also controls to Pause, Forward and Reverse the slides.
Let me know what you think and if you want to me to keep this slideshow updated.
Real Estate Haircuts starts with light trims and ends with brushcuts.
That slideshow is great Roger, I'd love it if you kept it updated. With your agreement I'll share it with KIV - I know some of the posters there said they were quite shocked by the much-reduced price of that Blackberry sale.
As to the original story at the Garth Turner blog - what I like best about it is that it gives a national perspective.
Olives,
I updated all my PCS screenshot slideshows this afternoon and added a new one on Oak Bay. Here are the links.
Recent Price Reductions
Real Estate Haircuts
Oak Bay Trend Setters
You are welcome to post the links on KIV but I do not recommend it. I suspect you will get considerable backlash and drama from the resident RE agents, homeowners and real estate believers®.
Tony Joe says:
"In May, the number of properties available for sale in the Victoria region was up 25 per cent from a year earlier, to 4,332. Of those, 1,850 were new listings, "the highest number for a single month in over 18 years"
http://tinyurl.com/64q824
re gics and where to park your bucks while waiting for RE fire sales.
many banks are now offering variations on high interest savings accounts which are usually only accessible on-line and pay rates similar to short term gics. with NO minimums and completely cashable in whole or part anytime.
Also CDIC guaranteed.
I particularly like the HSBC "direct savings " account because you can attach it to your debit card and use it to pay bills etc. with no charges.
You can see rate comparisons and discussion group here.
http://www.highinterestsavings.ca/
For some reason they dont have Canadian western bank om their list but they also have a similar account called "summit savings" and they're currently at 3.05%.
Not too bad if you want complete liquidity. The credit unions on the island, Canadian tire financial and presidents choice all have similar accounts.
Looks like that calculator should have been around before these stupid suckers bought their homes.
Tough sh5t for me...good for me.
It's too bad though that some real sharks and scumbags made out like bandits in this market....alot of people through sheer stupidity got hurt...but alot also through sheer crookery made alot of money. Too bad.
Wow, Roger, thanks. $70,000 reductions on some properties and they STILL AREN'T SELLING!!!
(Roller coaster scream)
Uh oh....someone trying to beat the rest of the sheep that will be lead to slaughter dumping very soon!
This guy is probably going to lose 80K!
Im giggling as I type this....stoopid dumshit speculators!
http://victoria.en.craigslist.ca/rfs/760373311.html
$1 Takeover Assignment TWO Luxury Condo's Brand New (Victoria)
Reply to: hous-760373311@craigslist.org
Date: 2008-07-18, 1:15PM PDT
Here's a chance to save some money if you are looking for a higher end condo.
I've got 10% worth of a deposit on two condo's in a prime project.
They are 4th floor level both are two bedroom condo's 903 sqft and 963 sqft. I had the best picks of the projects since I bought on opening day
They are scheduled to complete in September so if you're ready to move in and ready to buy I'm offering a you a discount on the deposit so you finish and close the transaction on the apartment.
the Sales Agreement will be transferred to you.
Take one or both. I originally bought for investment but want to use the money for something else so if you're interested my losss is your gain.
Here is the website http://www.lakesidevictoria.com/
Please take a look and contact me if you're serious and I will give you more details. I'll let you keep some of my deposit and let's work out a deal.
NO AGENTS OR BROKERS Serious inquiries only and you MUST BE ready to buy so please don't waste my time.
I sure get a kick out of these agents trying to dump their listings on usedvictoria and craigslist.
Im sure that is the first place people turn to when they shop for million dollar properties and used toasters.
anon 7:40 said:
$1 Takeover Assignment TWO Luxury Condo's Brand New (Victoria).
Please take a look and contact me if you're serious and I will give you more details. I'll let you keep some of my deposit and let's work out a deal.
I think the person posting this ad on craigslist unwittingly set the right price for the assignment - $1
Given the current condo glut if they could get out of closing on these units, lose their entire deposit (less $1), and run away they would have found a greater fool.
Prices are dropping and lots of new projects will be ready this fall. I suspect, in a few months, many of these presale buyers will be sleeping like a baby. Waking up in the middle of the night and crying themselves back to sleep.
I would be careful with bonds as a place to park your money over the next while. Bank of Canada is holding rates now, and the next move is likely to increase rates, this will drive bonds down. Though i think a lot of that has already been priced in.
Bonds have been terrible the last few years.
Island Savings used to have a good high interest savings account, I don't see it on their webpage anymore so maybe its walk in only or they pulled it.
The investment world is kinda on its head at the moment, investments normally considered safe and secure (bonds, blue chip and financials) are all in the toilet. High risk markets like commodities, oil, gold etc are all sky high. People on fixed incomes are getting slammed by poor investment performance and price inflation.
The only decent advise I can think of is diversify diversify diversify.
metaldwarf said:
I would be careful with bonds as a place to park your money over the next while. Bank of Canada is holding rates now, and the next move is likely to increase rates, this will drive bonds down. Though i think a lot of that has already been priced in.
I agree and suggest people parking cash and wanting to use bonds pick a maturity date that coincides with when they intend to buy a home. If one buys a quality bond (Canada's, major bank etc) and holds it to maturity (1 to 30 years) they will get the yield-to-maturity (YTM) quoted at the time of purchase. If you try to sell before maturity you may lose money depending on the interest rate conditions at the time of sale.
Bonds have been terrible the last few years.
I respectfully disagree with this last statement. Some bonds have done well - others have performed poorly. Bond performance depends on term, quality, issuer category and a host of other factors. Then there are the capital gain vs. interest tradeoffs. There are also real return bonds which have performance tied to inflation. Since this is a housing blog I won't go into this any deeper. Interested readers might like to get a copy of this book by a leading Cdn. bond expert.
metaldwarf, unfortunately there is NOTHING to diversiy into. ALL PAPER is headed for the biggest crash in history, and governments don't even begin to have enough reserves to bail it all out. At the end of it all, since oil as fuel and commodity investment is going the way of the dinosaur, will be a currency based on the gold standard. Again.
There's really nothing else.
Humanity's experient with fiat currency has finally come to its inevitable and, for many, horrific end.
I have followed a lot of the articles which talk about the failure of fiat currency, while I can see where they are coming from I can't see it happening. Regardless of how far the market declines, or what governments do to bail out or not bail out (I prefer no bailout BTW) the total market cap of the western world is far larger and while we might have a depression the western world isn't going anywhere.
I can see a shift in world power away from the USA and into a more homogeneous and even power structure with China and India taking a more prominent role.
The next big conspiracy is that the USA will bomb/embargo any country or economy that threatens it. Nothing short of World War 3 is going to change the fundamentals of the world econamy.
"I know not what weapons World War 3 will be fought with, but World War 4 will be fought with sticks and stones" -Albert Einstein
by diversify I mean to own all types of investments, bonds and other short term fixed income, stocks, both large cap and small, dividend paying stocks, all market sectors, commodities, some gold, as well as cash, and all of the above held in Canada, USA, Asia and Europe. if the global fiat currency (US Dollar) fails utterly and completely as some have speculated then the your investments mean nothing and the only thing of value you will have is the vegetable garden in your back yard and the knowledge in your head.... since the alien overloads love carrots and brains.
I have to agree with metaldwarf, I have read a ton of articles as well over the years on this subject and the demise of the fiat currrency is tin foil hat material in my opinion. Will gold rise higher ? sure it will if the US dollar starts to break below 70 cents but there seems to be a concerted effort by all G7 countries to keep the US buck afloat no matter what.
Note the Plunge Protection team that consistantly shows up just when the worst case secenario seems imminent.
The conspiracy stories out there have some intriguing stuff in them but the reality is if you buy those ideas then as metaldwarf says you may as well pack it all in cause everything will go down the tubes and we'll all be pushing shopping carts down Pandora St along with anonymous.
ROFL!
- Anonymous (a different one)
I guess you fiat flacks havent't heard that the alien overlords like gold far more than carrots and brains.
The days of "bombing" countries into submission is over. Iraq will probably be the last pathetic attempt by America to subdue anyone by military might...a truly pathetic testament to 250 years of white ruled history of the new world.
Instead, if the US has any hope of surviving, it will try to (and already does) unbalance countries economically. This is already happening with China as both China and the US are quietly battling each other economically. India is kept at bay by the US via US corporations creating and destroying jobs at whim (i.e. outsourcing) and moving jobs around.
Any country that follows US philosophy and the US path is doomed IMO. The US has destroyed any reputation is had in the last 8 years of absolutely pathetic rule.
This country had enormous potential to step up and be a leader in alternative energy, bettering its social infrastructure, improving its schools, its health care system...etc etc...but it didn't.
Instead, it pissed away a trillion dollars on creating incredible suffering and misery in the already inebriated Middle East. While at the same time pumping billions into its henchman and side-kick Israel. Our hard earned tax dollars by the way.
What a shame.
Bonds have been terrible the last few years.
That just isn't true.
See for yourself
Are you looking for a "deal" in Saanich?
Saanich bargain
All the good stuff is gone
Roger, I suppose I shouldn't laugh at someone else's marital misery, but still...that's pretty funny....
"If it's at the end of the driveway, you can take it." heh-heh!
metaldwarf is right-in the kind of apocalyptic scenario being described gold is worthless.
barter would be the method of exchange and food the currency.
a songhees condo will trade for a sack of potatoes and a gun.
toss in the end of a computerized world like some of the actual dire predictions at the millennium and you have the makings of a great sci-fi novel.
thats just a little TOO bearish
That Broadmead home will end up selling for $500,000. Everything else there is sticking too, and horrifically overpriced. Led by one on the market going on FOUR YEARS.
When prices drop to where families can afford to live in those 5 and 6 bedroom 70's-90's McMansions again, they'll sell.
Hey, maybe since they're dumping everything at the end of the drive out of spite, this might be the first one to hit the MLS realistically priced for mid-2009 at $500,000.
Boomer, I agree. If they bit off pieces of gold coins to trade in the Wild West, I can't see things going back much further technologically than that.
Even Mad Max had cars.
People will always trade gold for goods if there's little or no infrastructure.
those are some unbelievable haircuts roger, the one for $140,000 was a doozie. Whats it going to be like in October when the first hints of winter coming sets in ?
Are you ready for interest rate increases? Inflation numbers are out tomorrow and they are heading up. Here is the CBC story:
Consumer prices on the rise around the world
The Consumer Price Index was running at 2.2 per cent year-over-year last month. A new rate from Statistics Canada is expected this week, on July 23, and should be higher as energy prices take their toll on food imports and the like.
But even this new rate for June 2008 won't tell the full story. As Bank of Canada governor Mark Carney noted last week, core inflation in Canada will likely rise to about four per cent by early 2009.
So a four per cent inflation rate in January or February of 2009 would represent a four per cent increase in mainstay consumer prices over what they were in the same period in 2008, when high oil prices were already starting to push up the cost of living.
<< stagflation >>
inflation risng--economy slipping
its a mild version of '78 and for similar reasons
deja vu all over again?
Forgive me, as I was young in '78, but are these times not totally different in the sense that we have a massive deflationary credit unwind going on? Or were there similar circumstances then? Because I am sympathetic to Mish's argument that notwithstanding current inflationary pressures, the bursting of the credit bubble is massively deflationary and will outweigh the inflation pressures in due course.
Put another way, his argument is that sure corn may have doubled in price from $1.50 to $3.00 for a basket, and your giant car costs $60 to fill up instead of $40, but your house is worth $200,000 less, and your line of credit has been yanked. The latter is presumably a lot more important economically than the former.
Also look at the utter collapse of the consumer in the US and the UK, where consumption is the lion's share of the economy, as in slow-to-catch-up Canada. This is not an inflationary phenomenon, rather deflationary.
We could be facing 1990s Japan more than we are facing 1978 USA.
1990's Japan but with no household savings and more personal debt, AND a GLOBAL slowdown. Yeah us! :(
1970s was not a credit contraction.
the bursting of the credit bubble is massively deflationary and will outweigh the inflation pressures in due course
We are not going to get consumer price deflation. The BoC simply will not allow it to happen.
Asset price deflation is another story. It is beyond the control of central banks because asset prices always revert to fundamentals.
We had asset price deflation (stocks, bonds) in the 70's at the same time as high consumer price inflation. House prices didn't go down then because wages were rising faster than consumer prices. What happens to house prices when CPI rises faster than wages? Look south of the border.
Asset price, consumer price, and wage inflation/deflation can move and have moved in different directions and it makes no sense to talk about "inflation" or "deflation" as though all of them move in lockstep.
b2b
the main similar reason i was referring to is the price of oil which simultaneously feeds inflation while slowing economic growth.
30 years ago it was middle eastern production cutbacks which created the problem--now it could be nothing more than a speculative bubble but, for now, it is what it is, and has a similar effect.
I personally think that the price of oil is due for a major downwards correction but most giant throbbing brains are still beating the "increased demand with insufficient supply" drums-so who am I to argue.
The US Fed is certainly doing its best to ensure that the "credit bubble burst" doesn't cripple their economy so who knows how things will shake out.
Rising inflation -not deflation is the current norm worldwide and predicting a trend reversal is always a tough call.
boomer,
I agree, I see oil declining to around $100 as they pump up the US dollar. Any signs of China's ecomomy slowing then this party is over,especially for BC's commodities boom. Natural gas has taken a big hit the past week but I see the agriculture plays like potash still holding up with the shortages. The markets in my opinion will be stuck in a range for several years making it a stock pickers market where you will be on the ball to play the short term trends. The sleeper here is how many more US banks will tank before year end.
patriotz,
are you an economist by any chance or work in the industry ? your posts are so well detailed.. and interesting too.
"We are not going to get consumer price deflation. The BoC simply will not allow it to happen. "
are you referring to the CPI? If the price of oil corrects, won't the CPI go down? How can the BoC control that? Why would they want to?
With regard to B2B's comments re deflation, I'm pretty sure he was referring to deflation in the monetary sense, not prices. I understand credit contractions always lead to deflation, and many would say that the trend changed a while ago.
Indeed I was referring to deflation of the money supply and credit, and how it can be argued that eventually a massive deflation in the same will cause consumers to run out of steam, and CPI to mellow.
Put another way, monetary deflation such as we are seeing with the credit crunch and asset price bust is the leading phenomenon in this scenario, and CPI is just a sideshow, driven as it is largely by oil, which runs completely independently due to supply/demand pressures. As Patriotz pointed out correctly, certainly CPI and monetary inflation/deflation are entirely separate. I wasn't trying to conflate the two but rather spin out Mish's argument that CPI is a somewhat irrelevant sideshow to a massive deflationary shitstorm coming our way.
In discussions such as this, if we don't take the time to define the terms we're using, we'll either be agreeing although in reality we don't, or we think we may be disagreing, but in fact we're on the same page.
Deflation = lowering in price of MAJOR assets such as stocks & housing.
Inflation = rise in prices of everyday consumption items such as food, clothing, transportation, oil, etc.
So this is how "deflation" and "inflation" are possible at the same time.
Agree with above, there is no single thing called "inflation" or "deflation" - you have to be clear what you're talking about.
are you an economist by any chance or work in the industry ?
Well thank you. I studied economics at university although I am not employed as an economist. But as I manage my own investments I spend a lot of time following the "big picture" and the internet blogs are a valuable part of it.
I don't claim to have any special insights, but I can tell you that having seen both the 1980 Vancouver RE bubble and the dot-com bubble, and now the US bubble, it's become pretty easy to know one when I see one.
anon, the problem with using those definitions is that I hear people say we have inflation (really increase in CPI due to oil), and so we need higher interest rates to slow down the economy (as in the 1970s). In actual fact we are beginning a contraction and the price of eggs is completely irrelevant.
It is when people use "inflation" in this context that it doesn't make sense to me - it is either "price inflation" (if you wish) OR "monetary and credit inflation".
But the problem is you can have a slow economy and consumer price inflation at the same time. Too much money will produce CPI inflation whether the economy is growing or not. For an extreme example, look at Zimbabwe. Their economy is at a standstill but it certainly isn't stopping CPI inflation.
IMHO the oil price rise, which is working its way into inflation of consumer prices, was caused at least in part by too much money.
The question is whether the necessary reduction in money supply will happen due to debt writeoffs (credit destruction) or whether the central banks will have to raise interest rates. If CPI inflation doesn't fall off really soon the central banks are going to have to do something about it.
BTW mortgage rates are set by the bond markets, not the central banks, and if the central banks are seen as soft on inflation the bond market will raise mortgage rates on its own. This is happening in the US right now.
Woes Afflicting Mortgage Giants Raise Loan Rates
from wikipedia
"Stagflation is an economic situation in which inflation and economic stagnation occur simultaneously and remain unchecked for a period of time. The concept is notable primarily because, under normal circumstances, inflation and recession are regarded as being mutually exclusive.
Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when an economy is slowed by an unfavorable supply shock, such as an increase in the price of oil in an oil importing country, which tends to raise prices at the same time that it slows the economy by making production less profitable. This type of stagflation presents a policy dilemma because most actions to assist with fighting inflation worsen economic stagnation and vice versa. Second, both stagnation and inflation can result from inappropriate macroeconomic policies. For example, central banks can cause inflation by permitting excessive growth of the money supply. Both types of explanations are offered in analyses of the global stagflation of the 1970s: it began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession."
Speaking of CPI :
"Soaring gasoline prices fuelled a 3.1% surge in Canada's headline inflation rate in June, its highest level in almost three years. "
http://www.economicnews.ca/cepnews/wire/article/101887
But the problem is you can have a slow economy and consumer price inflation at the same time. Too much money will produce CPI inflation whether the economy is growing or not. For an extreme example, look at Zimbabwe. Their economy is at a standstill but it certainly isn't stopping CPI inflation.
IMHO the oil price rise, which is working its way into inflation of consumer prices, was caused at least in part by too much money.
The question is whether the necessary reduction in money supply will happen due to debt writeoffs (credit destruction) or whether the central banks will have to raise interest rates. If CPI inflation doesn't fall off really soon the central banks are going to have to do something about it.
This is a good discussion that's raising some interesting ideas.
In Zimbabwe the problem is indeed too much actual money, that is, the government has been quite literally printing money to the point they're running short on paper.
But in the West, we have a lot of banks and entities that are actually insolvent. They don't have money per se, they have a load of credit derivatives, much of which are worthless. It's not money at all, but credit. The amount of actual money is far lower than the amount of credit. To boot, the US has not been printing money, but has actually been doing the opposite, contracting the money supply. Mish has shown this reasonably conclusively. There is, by contrast, a widespread myth that the US is printing money.
I don't believe there's a choice about writing down the debt that banks hold. Much of it is garbage paper that is destined to be written down as soon as they are willing to admit reality.
And the current oil price palaver could well die right down as soon as demand dies out due to global recession. I understand this happened (oil prices dropping) in the aftermath of the 70s oil crisis and we could be closer to '79 or '80 in that sense than '72.
On a different subject, here's two interesting articles from the Telegraph:
Home improvements are a waste of money
and
Housing downturn faster than 1990s
On the CBC this morning they said CPI would be only 1.8 percent if not for oil prices.
Zimbabwe has monetary inflation (along with price inflation as a side-effect).
The reduction in the money supply is occurring here (North America) because of debt/credit destruction.
And I still don't understand what the Central Banks can do about the price of oil - although you indicate they will have to do something Patriotz.
I believe N.A. in the 70's had both monetary (and price inflation). I think what is termed stagflation is an inflationary recesssion, whereas we are entering a deflationary one.
Does this make sense? It makes a HUGE difference if you believe monetary deflation is beginning to occur - particularly to those who think housing prices will only suffer a 25 percent correction and then start increasing again in a couple years. In the last deflation prices dropped over 75 percent and the depression lasted over 10 years.
Now if you don't believe the monetary deflation will occur, then that is an entirely different matter.
Great links, b2b. My God, what will Kirstie and Phil say?? Ha-ha!
Prior to putting my place on the market last year, I completed all the painting and installed some new carpet (had to do that, the old one was shot to hell), plus updated the bathrooms myself (paint, tile refinisher, new plumbing fixtures, and granite counter-top from Home Despot)....so no big expenditures (except for the carpet...that was a couple of thousand $). I think I got a decent return since it got sold May 22nd for 97% of asking.
Some good discussion here re. stagflation and mortgage rates. Personally, I think we are looking at higher rates and tighter lending standards in the near term as the American credit crunch rolls across the border into Canada, so say goodbye to the first-time buyer, folks. That means the move-up buyer will get cut-off at the knees.
As patriotz sez, the BOC won't allow deflation...they'll just inflate the money supply as required to prevent that scenario, but that doesn't mean the stock market or the housing market have to inflate. I think the last time there was a true deflation was the Great Depression, and the central bankers just aren't that stupid anymore.
Just my $0.02....
And I still don't understand what the Central Banks can do about the price of oil
The general price level is determined by the ratio of the amount of money to the output of the real economy.
If you reduce the money supply, the price of everything will go down.
Central banks can't affect the relative price of oil with respect to everything else, which is determined by supply and demand, but they certainly can affect the general price level, which includes oil.
US Fixed-mortgage rates soar on inflation fears
Freddie Mac: 30-yr fixed-rate mortgage up on inflation woes
July 24, 2008Comments: 14
SAN FRANCISCO (MarketWatch)
Freddie Mac said Thursday the 30-year fixed-rate mortgage average was up from last week to 6.63% with an average 0.6 point for the week ending July 24. Last week, the average was 6.26%, and the year-ago average was 6.69%.
"Market concerns about rising inflation, further weakness in the housing market and greater probability that the Federal Reserve will raise short-term rates this year all combined to push mortgage rates higher this week. Some of the key drivers to these concerns were consumer prices jumping 1.1% (annualized) in June - the largest increase since September 2005 on a year-over-year basis - coupled with consumer prices growing at a 5% clip (on a year-over-year basis), the strongest since February 1991," said Frank Nothaft, Freddie Mac's chief economist, said in a statement.
Inflation/Deflation US
Interesting YouTube Video
Interesting to see in that connection that Jumbo mortgage rates in the US are now up to 7.8% or something of that magnitude. And "Jumbo" mortgages are what, something like $480k - a crack shack in Vic or Van.
The bears are running rampant over on the Real Estate Talks forum.
Just Jack and others will find this post by a real esate agent interesting:
Langley sales plummet
wow Roger - 6 1/2 years of new condo inventory! Even with those numbers he thinks the climate is still "positive".
Caught a segment on CFAX this morning... with the bigwigs from tourism Victoria.
Tourism numbers are down 8% across the board this year. And this is AFTER a horrible year last year.
Would somebody PLEASE tell those Americans and Japanese that we are a "World Class City", and part of "The Best Place on Earth" already?
Something tells me if even a few of them thought so, we wouldn't be having these problems.
-Percival
Vancouver just hit 20,000 units for sale, AN ALL TIME record. Vancouver has NEVER had 20,000 units for sale before. You can see the numbers for yourself:
http://www.northshoreproperties.ca/aPage.jsp?aPageId=8
This week ends with more price reductions in all price ranges.
Only one week to go until we get the new VREB stats for July. Anyone prepared to make a prediction??
what's your prediction Roger?
China is not interested in Canada at the moment. Within 10 to 15 years they will invade Siberia and take over that resource rich territory. The US will not fight China for save Putin. Canada is due for an invasion perhaps 40-50 years from now. Be warned, have your children speak Mandarin, because that's the language of the future (and will be official here at the dawn of the next century). English will become folklore and fossilized, a patoie of sorts.
Olives,
OK - Here is my prediction:
(June numbers in parentheses)
Total MLS inventory - 4725 (4513)
Total MLS sales - 650 (723)
Total sales SFH - 360 (395)
Average price** SFH - 575K (580K)
Median price SFH - 530K (538K)
Condo sales - 170 (180)
Average price** condo - 315K (319K)
Median price condo - 290 (295K)
** The average price will fluctuate considerably month-to-month over the remainder of the year. This because a few high end sales (or lack of sales) will have a significant effect on the average due to the low seasonal unit sales numbers in fall and winter months. However IMHO , the future overall trend, will be down and this will be seen in the 3 month rolling average as shown in these SFH and Condo graphs.
My usual prediction : sales down, prices down and the Victoria media headlines screaming " SELL NOW before it's too late, we were wrong about that buying thingy last year and we effed up, sorry bout dat ! ". ;)
So you think the U.S. economic (housing-bubble-sparked) problems have just about run their course? Guess again - It looks like the problems are only just beginning...
"The National Australia Bank's decision to write off 90 per cent of its US conduit loans will have dramatic repercussions around the world. Wall Street will be deeply shocked when they understand the repercussions of what NAB has done."
...
"NAB says that it is suffering a 55 per cent loss on American housing loans – an event that has never happened in the history of a developed country in recent memory. This is an unprecedented event and means that the cost of bailing out the US financial system is now far beyond the highest estimates."
...
"How did NAB get caught in $1.2 billion mess?.... They were sucked in by the 'triple A rating' given to the securities by the rating agencies. They did not take into account that the monoline insurers who guaranteed some of the loans had no substance."
...
"US banks have written down $450 billion in bad housing loans. The revelation from NAB means that they will now certainly need to take provisions to $1,000 billion. But write-downs of $1,300 billion and perhaps even more are on the cards."
...
"Where will the equity come from to cover these bad loans? The world has never attempted a rescue effort of this size and it will make liquidity in the globe very tight. That’s why corporates will be hit."
http://www.businessspectator.com.au/bs.nsf/Article/NAB-will-shock-Wall-Street-GV4M7?OpenDocument&src=stf
Happy Friday!
-Percival
anonymous 12:49-
What place does any of your post have to do with the real estate market or economy today?
>>English will become folklore
>> and fossilized, a patoie of
>> sorts.
I think you mean "patois", but not that it matters since you are definitely out to lunch with your post.
>>Canada is due for an invasion
>> perhaps 40-50 years from now.
Well then, you better start digging yourself a bunker! Good luck with that! Need a spoon? ;)
The rest of us will realize that China, or India, (or Brazil or whatever) IF indeed it does achieve economic dominance will not need a single bomb (or invasion)to do so. Commerce and economics are all that will be needed to dictate what the language of "choice" of the day is. English is not the language of choice in the world today because foreigners are threatened with death if they don't learn it. It is the language of choice because it is the current symbol of economic power, and the current language of business.
If the world language of business changes to Mandarin, or Russian, or Swahili, or Japanese, or what-have-you, so what? Canada will remain Canada.
In the 80's and 90's, when many thought that Japanese was an essential business language to learn, did Canada spontaneously combust?
>> Be warned, have your children
>> speak Mandarin, because that's
>> the language of the future (and
>> will be official here at the
>> dawn of the next century).
Even if I were to take your mad rantings seriously, by your own prediction if my child were born today, he/she would be 92 at the dawn of the next century when the Mandarin language will be official. I don't think my child will have much use for the language at that age.
Oh, and about the language being useful today...Yes, please be sure to teach your children Mandarin today so that they will only have 1.4 BILLION native-Chinese speaking people to compete with in the job market, whom demand only a fraction of the salary you need to pay for basic living necessities. Not to mention the countless other fluent foreign-born Chinese speakers (eg. Vancouver and San Francisco).
If you ask me, it is by no means a slam dunk that China will be the next "world leading economic power". It is easy to lazily assume so, because they manufacture so many cheap items now... but there are many factors that could stand in the way.
- if 1.3 BILLION people in China are to rise to the economic equivalent of the G8 countries, WHO is going to build THEIR gadgets at third-world wages?
- what role will automation of manufacturing play in the continued need to pay China to manafacture so many items
- China has proven itself as being good at mass-producing items very cheaply, because of the great number of (comparatively) poor people in the country who are historically paid nearly slave wages. BUT even with 1.3 BILLION people China has yet to prove itself at being capable, as a whole, of being able to transform itself into a leading nation of cutting edge technologies and research (which is where the real money and economic power lies). People often foolishly point to Japan when they show the path that China will supposedly follow to world economic dominance, but you only need to know a little about both countries social, cultural, and historical backgrounds to realize that such comparisons are bunk. Japan is completely different on oh so many levels from China.
- what about India? and Russia? And much of south america? And why would current G8 countries simply roll over and let China take over economic dominance?
- for all the U.S. dollar wealth that China has, what is it worth if they will never be able to cash most of it in? (unless they want to devalue the currency and get back only a fraction of the value they are owed?)
what's your prediction Olives?
May I make a quick prediction for July?
MLS inventory 4600
Total MLS sales 700
Total sales SFH 390
Average price SFH $590k
Median price SFH $540k
Condo sales 190
Average price condo $325k
Median price condo $290k
Just a hunch.
Roger,
I don't follow the numbers closely enough to be able to make the kind of detailed monthly predictions like you do, but given the price reductions you post on the PCS, I'm hoping that your predictions turn out to be conservative!
I would kinda think that the sales would have dropped more (from June to July given the drop off in sales in outerlying areas), but are these sales stats actual closings?
for all the U.S. dollar wealth that China has, what is it worth if they will never be able to cash most of it in?
The interest payments of course. This is a continual drain of wealth from the US to China.
The US can of course just devalue its currency to to reduce the real value, which is exactly what it's been doing since 1971.
Anon 12:49, long before China invades Canada, China will have been knocked back to the stoneage in a mutually destructive nuclear and scalar and pulse weapon all out war with the suicidal US over Iran's oil reserves and future control of the Mideast.
China will be invading the Mideast on Mongolian horseback for oil, NOT Canada.
Canadians will never have to learn to speak Chinese, just be able to survive nuclear winter. And we will, with our natural resources. The Chinese won't even want the glowing black glass hulk of the US; what they will want is Mideast control and Mideast oil.
Horseback works, but it takes a lot of oil to rebuild back industrial infrastructure to even 20th century levels.
Olives said:
I'm hoping that your predictions turn out to be conservative!
I would kinda think that the sales would have dropped more (from June to July given the drop off in sales in outerlying areas), but are these sales stats actual closings
After two months of drops in median and average price I think we will have a moderate negative change in July. The average price could even go up if a few high end homes sell. As far as sales go I based my prediction on previous years and the 2008 trend as shown in this graph.
Pretty quiet on the blog the last while so I thought readers might find this commentary on the local market by Tony Joe of VREB interesting.
Housing market softens slightly
Average sale prices were down in June, as the number of active listings reached the highest level in years, according to figures from the Victoria Real Estate Board.
The average sale price for a single-family home was $580,000, down from the $600,000 average over the last six months. Condo prices cooled a bit less, down to $320,000 from a $331,000 six-month average.
The softening growth in prices seemed to be largely driven by increasing supply. There were 4,500 active listings in the Victoria market last month, compared to just under 3,600 in June 2007.
But the six-month average price itself is still tending up, notes VREB president Tony Joe, climbing $14,000 since January. He expects to see the market level-off at current prices.
Is this true??
6 month averages from VREB
------------------------------
January - 586,338
February - 588,826
March - 591,439
April - 606,429
May - 606,985
June - 600,740
Like all good spin there is a grain of truth. The 6 month average is up 14K but trending down not up as stated by Tony Joe.
These folks at VREB are really clutching at straws. The median and average prices have fallen two months in a row so they try using 6 month averages and even have to misrepresent this stat.
If July's average and median prices are down again they may have to resort to using Toronto's REB year-over-two-year stat.
Average sale prices were down in June, as the number of active listings reached the highest level in years, according to figures from the Victoria Real Estate Board.
Just when actually were the listings this high? 10 years? 20 years? Anyone know? Anyone have a active listings from VREB for the last 30 years?
Is it just me or does anyone else think that government, special interest group, and corporate (including VREB),"spin" has increasingly replaced reasonable discourse and valid differing opinions particularly in the last decade.
From the RE industry, we've gone past outdated YOY numbers(now that theyre not looking so great) and are getting 6 month averages, and median price comparisons (when they look better)or average price comparisons (when they look better) and 2 year averages (when that suits), and (pick a)segment comparisons when they find one that looks ok. Cant wait till listings start dropping(maybe this month) and that will be trumpeted as positive for prices-after months of lauding "balanced" markets with the listings run up.
God-even CMHC spokespeople sometimes indulge in the spin.
(And our various governments, and competing political parties have no shame whatsoever- its ALL spin---dont get me started)
Mortgage crisis building in Canada
Too many housing starts means crunch 'may come soon,' says report
http://www.canada.com/theprovince/news/story.html?id=59d18372-95ff-48dc-95b3-4bf9bfbd6f9e
boomer - in general, I agree with you
Today's Financial Post front page:
Housing Malaise spreads across the country
Brief Summary:
Real estate sales across the country down over 13%, and average prices have increased just $35 (not a typo) YoY, which I would interpret as those 3.6% price increases for the first 6 months of the year eroding in a single month (the 7th).
Mr.4AM
>>prices have increased just $35
Considering that is nowhere even near the rate of inflation, it is definitely a loser's game to be a real estate investor/flipper right now.
Nevermind all the OTHER costs involved with investing in property... and the non-liquidity dangers that are involved with holding an investment property.
...
Anybody thinking of buying an investment property right now has to be a complete IDIOT
Mortgage Crisis Building in Canada
"Canada's turn may come soon" for a housing crisis.
...
The report came in the wake of the Canadian government's attempt to avoid a housing crisis by no longer insuring mortgages with more than 35-year amortization periods and less than five-per-cent down payments as of Oct. 15.
...
http://www.canada.com/theprovince/news/money/story.html?id=59d18372-95ff-48dc-95b3-4bf9bfbd6f9e&p=2
Lots of price reductions in the last few days in Victoria and Saanich.
Here are a few of the haircuts from the last few weeks. Use the pause, single step and big X buttons to control the slideshow.
From the Vancouver Sun:
Real Estate Council of B.C. ratchets up realtor® discipline
The Real Estate Council of British Columbia has handed out some of its stiffest penalties ever for the transgressions of realtors in a year that has been busier than 2007's record pace for disciplinary action.
Cool, Victoria becomes a trendsetter....
Vic leads the way
Let's keep the party going...
TD Canada Trust introduces $300,000 Great Mortgage Giveaway
TORONTO, July 30 /CNW/ - TD Canada Trust announces The Great MortgageGiveaway. From now until October 24, 2008, customers who apply for a mortgage or home equity line of credit will automatically be entered for a chance to win $300,000.
Funny thing is you anyone can enter that contest.
NO PURCHASE NECESSARY — ALTERNATE MEANS OF ENTRY: To enter the Contest without performing the described transaction (see section 3), legibly print your first and last name, complete mailing address and daytime telephone number on a 4 x 6 piece of paper and mail it to:
“TD Canada Trust GREAT MORTGAGE GIVEAWAY Contest” – Entry Request
P.O. Box 10001, 5576 Yonge Street
North York, Ontario, M2N 0B6
Yeah Beagle, free money, let's all do that.
Wonder if they'll throw out all the postcards they get from Ethiopia and Kenya...
woo gonna win me a crack shack condo
I like this part though
"The winner can use the money any way they like, whether it's to pay down or
pay off their mortgage, do some renovating, or even buy appliances - it's
their choice."
I've entered, and if I win I'm not giving TD their money back as a mortgage.
Probably reasonably better odds than the lottery since many people won't realize you can enter by post. Thanks for the tip -I've sent one in. If I win, I guarantee I will use some of the winnings to finance a big pissup at the Bengal with all the bears!
Prepare, all, to be added to TD Canada Trust mailing lists ad infinitum...
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