Canada's Housing Bubble

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).

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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.”

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

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Mohican 12/06/2008 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).

November 13th, 2008 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:

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.

May 22, 2008  globallongwavecycles.blogspot.com

Price to rent ratio/ Price to income ratio

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.

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.