Category Archives: Correction

“Good news like strong home sales is potentially bad”

Skeletons2Anyone who’s followed the forecasts of the well-educated economists,  the pundits like Garth Turner, crazed attention-seeking bubble bloggers, or lowly realtors, the housing market predictions have been a comedy of errors(except for the realtors). Most would excel at being contortionists. Reversing direction so many times has produced dizziness and clouded analysis(see quote on blog header from Calgary Rip-off).

Porter: Strong sales means we’re drunk

The graveyard of bubble blogs

The graveyard of bubble blogs

All the bases are now covered. After reading for eons from guys like Garth Turner that the precursor to a crash is lower sales combined with higher prices, we now have Bank of Montreal chief economist Douglas Porter taking the opposite view, saying strong sales are bad news. “Canadians are already drunk on housing, so imbibing more means the inevitable hangover will be all that much worse.”

Madani: Persistent, consistent, and always wrong

“It’s astonishing to me that people are not picking up on this. If you see volumes crash and prices still rising, you shouldn’t be thinking everything is fine, you should see that as a warning sign.” David Madani from Capital Economics has been predicting a 25% drop in prices every year for as long as I can remember, and true to form, he’s back with the same prediction. I won’t be too hard on him, however, since he’s a Bugs Bunny fan. “Homebuilders are having a Wile E. Coyote moment” as when the perpetually ill-starred cartoon character realizes he has overshot the cliff and looks down to see nothing but air under his feet.

lucy-footballGarth Turner: I didn’t say crash

If Garth were a cartoon character, it would have to be Charlie Brown. He’s been ready to kick the football many times, only to have it pulled away at the last second, time and time again. Every year, some new development is the harbinger of the long-awaited crash: Higher interest rates. 35-year amortizations. Mandatory 5% down payments. 30-year amortizations. Unemployment. 25-year amortizations. Lack of first-time buyers. Now, this year, the silver bullet is the recent capping of CMHC guarantees. For six years he’s been lining up in anticipation of a big score, but rather than kicking the ball through the goal posts, he’s tripped at the line of scrimmage.

Most predictions could have been made by a monkey(Photo from the GreaterFool.ca)

Most predictions could have been made by a monkey(Photo from the GreaterFool.ca)

His futility has resulted in him saying that he never wanted to kick the ball in the first place. When confronted with the truth, he blames the victims for listening to him: “it was your decision.” Never one to be encumbered by facts, he has managed to keep a loyal following with his fantastic writing ability, sexual connotations, and lewd pictures. If nothing else, he knows that sex sells, understands herd mentality, and that people easily forget. In other words, he’s another Smoking Man but with good grammar and spelling, but not as intelligent. Cult followers have a difficult time thinking for themselves, but they should pay attention to these 10 warning signs. For example, #4  “Unreasonable fear about the outside world, such as impending catastrophe, evil conspiracies.” Yikes.

From the Calgary Herald: Canadians appear to be drunk on housing and approaching a hangover

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The Economist: “Canadian housing bubble set to burst”

…and here’s a comment from a reader:

‘The problem with all this talk of a “bubble bursting” in the Canadian real estate market is that the Economist have been saying this for many years now. How many years will they keep this up until it actually happens?..’

Read more Canadian housing bubble set to burst

RBC has a completely different take on the situation:

Calgary-area buyers continue to benefit from a strong provincial economy,  accelerating population growth and attractive affordability,” said Craig Wright,  senior vice-president and chief economist, RBC. “RBC (affordability) measures  for Calgary compare favourably against both historical norms and the national  average, keeping it one of the more affordable housing markets in Canada.”

Read more:  Calgary more affordable

Some meltdown

Douglas Porter, chief economist with BMO Capital Markets, said evidence  continues to mount that the Canadian housing market seems to have pulled off the  fabled soft landing.

He said surprises on the sales data in recent months have consistently been  on the high side of expectations, not the low side.

“While some are highlighting the fact that prices are now rising at ‘their  slowest pace since the 2009 recession’ the plain facts are that: a) they are  still rising, and b) faster than inflation, and c) prices are at all-time highs.  Some meltdown,” he said

Read more in the Herald:  Calgary a bright light among Canadian housing markets.