Canada's Housing Bubble

Analysis of the real estate bubble in Canada -- http://CanadaBubble.com

Don’t believe the housing hype Print E-mail

June 26, 2009 Colin Campbell macleans.ca

Judging by the latest real estate data, the Canadian housing market could scarcely be better. Average home prices are up more than 16 per cent this year, and in May they hit an all-time monthly high, according to the Canadian Real Estate Association. By those numbers, Canada didn’t just sidestep the housing market crash that continues to plague the United States, it sailed right through it virtually unscathed. And yet, there are plenty of signs that the Canadian housing market is still sitting on some very shaky ground—and even the potential that Canada’s big housing crash is yet to come.

 
Housing bubbles around the world: looks pretty bad Print E-mail

Rebecca Wilder May 16, 2009  http://www.newsneconomics.com

The chart illustrates price-rent ratios for some of the most notorious housing bubbles - Ireland, Spain, the UK, and the US - indexed to 1997. The price-rent ratio can be compared to a price-earnings, or even better a price-dividend, ratio in finance. It measures the relative value of the asset: the price of the asset (purchase price of a home) divided by its flow of fundamental value (rental income earned or the value of having a roof over your head). As the price-rent ratio grows, the market value moves away from its fundamental value.

 
Canada's new home market is weakening Print E-mail

Rebecca Wilder  May 11, 2009 http://www.newsneconomics.com

The weak conditions in the labor market - dragging demand for new homes and input prices for building - and commodity prices (inputs) is driving down the value of new homes in Canada. From The Daily:

Contractors selling prices decreased 0.5% in March compared with a 0.7% decline in February. This resulted in a New Housing Price Index of 154.6 (1997=100).
 
Garth’s “Greater Fool” Theory Print E-mail

Jonathan Chevreau March 9, 2008  torontorealestatebuyer.com

Canada is not immune from the subprime crisis:  Garth Turner

The U.S. real estate crash is about to sweep into Canada, says Garth Turner in a just-published book entitled “Greater Fool.” Turner – the Liberal MP, entrepreneur and real estate investor – says the problems underlying the American subprime crisis “go far beyond mortgage products and also reach into Toronto, Calgary and Vancouver.”

 
Historical Prices and Inflation Print E-mail

Kevin Mar 4, 2009 edmontonhousingbust.blogspot.com

I had been meaning to do this one for awhile, but never got around to doing all the number crunching... hopefully you guys will find this entry interesting, cause it took a fair bit of work.

Edmonton Historical Prices

Edmonton Historical Prices

 
Canada's dirty subprime secret Print E-mail

Mar 14, 2009 Greg McArthur and Jacquie McNish Globe and Mail

From the ramshackle, plywood deck on Brad Goodyear's rural Vancouver Island home, most people see piles of trash, a mattress, abandoned appliances and heaps of salmon fishing nets.

 
Price-to-Rent Ratio For Housing is Like the Price-to-Earnings Ratio For Stocks Print E-mail

Lawrence Roberts

Just as stocks have price-to-earnings ratios (PE Ratios) used to establish relative value, houses have a price-to-rent ratio to establish relative value. Rent is the income or potential earnings a property can produce. It does not matter if the property is rented or if an owner lives in the property. The potential for rent is equal to the potential for earning.

 
Greater Vancouver Price / Rent Ratio Print E-mail

housing-analysis.blogspot.com

House prices in Greater Vancouver are overpriced and consequently the rental yield on properties is very low. The chart above (click to enlarge) shows the long term detached house price adjusted for inflation, the inflation adjusted rents for a 3 bedroom apartment and the price to rent ratio for the benchmark detached family home (I used a multiplier of 2 on the 3 bedroom apartment rent to represent the benchmark detached rent).

 
Global Real Estate Ratios Show Extent Of Bubble Print E-mail

www.tradersnarrative.co

Real estate, as an asset, derives its value from two sources: personal income and rents. The first makes it possible for an owner occupied property to be purchased while the second allows for an investor to purchase real estate.

The following charts show the relationship between real estate prices and these two variables:

 
No housing bubble in Canada: Flaherty Print E-mail

July 17, 2008 Carrie Tait, Financial Post

CALGARY - Federal Finance Minister Jim Flaherty shrugged off housing worries in Canada Wednesday, saying there is no bubble and that the subprime-mortgage woes crippling financial institutions in the United States are not threatening banks north of the border.

"There is no bubble in the Canadian housing sector," he told reporters after speaking to roughly 400 people at a Calgary Chamber of Commerce event.

 
Global House Prices/Price to rent ratio/ Price to income ratio Print E-mail

May 22, 2008  globallongwavecycles.blogspot.com

Price to rent ratio/ Price to income ratio

 
When Will Housing Bottom? Print E-mail

Mike Shedlock / Mish Oct 25, 2007 globaleconomicanalysis.blogspot.com

Those looking for a housing bottom anytime soon are likely to be disappointed. Let's see why from three different angles:

  • Mortgage Rate Resets in Conjunction With a Consumer Led Recession
  • Historical New Home Sales
  • Historical Housing Starts

On the basis of mortgage rate resets and a consumer led recession I mentioned a possible bottom in the 2011-2012 timeframe.

 
Renting Makes More Financial Sense Than Homeownership Print E-mail

Jack Hough April 18, 2007 smartmoney.com

I have something un-American to confess: I rent an apartment, despite having enough money to buy a house. I plan to keep renting for as long as I can. I'm not just holding out for better prices. Renting will make me richer.

I normally write about stocks for SmartMoney.com, but the boss asked me to explain to readers my reason for renting. Here goes: Businesses are great investments while houses are poor ones, so I'd rather rent the latter and own the former.

 


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