Real Estate

Property Bubbles Everywhere As If It Were 2007 Again

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Posted by MarketViews

on Wednesday, 03 May 2017 07:09


We are going to focus this week on two stories from the property market; one in Canada and one back home here in the UK. Property market analysis is not exactly the main focus of our day job, but these stories may well have important implications for financial markets, which of course is what our day job is all about.

It is no secret with our readers that we have had a bearish fundamental bias for quite some time now. We have tried our very best to supress these bearish feelings as financial prices move further into bubble territory supported by extraordinary central bank policies and also the activities of price insensitive buyers (central banks, companies buying their own shares and index providers). However, we do believe that these forces will ultimately dissipate and that there will one day be another bear market.

Nobody knows what will be the visible trigger or triggers for the next bear market (academics are still unsure of the cause of the 1987 stock market crash!). We still look back at 2007 and pinpoint the collapse of two highly leveraged Bear Sterns hedge funds in June of that year as the first visible evidence that the financial bubble was bursting (the property bubble began to burst in 2006 in the US). So, we present these two stories as evidence that leveraged speculation by unsophisticated investors is rife today, and that visible problems are emerging.

We will start this week on the story of the collapsing share price of Home Capital Group (HCG), the largest non-bank mortgage lender in Canada. The shares collapsed by over 60% last week after it emerged that the Company had arranged an emergency liquidity line via a C$1.5 billion loan facility. The reason for the liquidity need appears to be some C$600 million of deposits had been withdrawn and they had to plug the gap. As can be seen in chart 1 below, the 60% decline on Wednesday was not the start of the bear market for Home Capital Group; the shares have now fallen by 85% from the 2014 high. In our opinion, this story has an eerie parallel with Northern Rock in 2008 in the UK – a mortgage provider suffering a deposit run.

Chart 1 – Home Capital Group share price


...continue reading HERE


Real Estate

Canada 6-City Housing Prices & the Plunge-O-Meter

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Posted by Brian Ripley's Canadian Real Estate Charts

on Wednesday, 26 April 2017 07:07

chart-canada 3 orig-1

larger chart

In March 2017 Canada's big city metro SFD prices coiled about or slid off their near term highs except in Toronto where detached houses, town houses and condos fetched new peak prices; Vancouver strata prices also hit new highs as well. Strata is the new Canadian "can-do" "must-do" "will-do" affordability metric.

Anyone owning a house in the scorching hot Toronto  market is sitting on an unredeemed lottery ticket. In Vancouver scorched earth ruins are beginning to appear. In Calgary prices are labouring under the new Energy Sector 2.0 as the oil majors head for blacker fields; big money is fleeing Canada (and has been for nearly 20 years) and on the street, Calgary buyers are shunning strata units in favour of detached properties. 

...read more HERE

The Plunge-O-Meter is a fantasy model based simply on the current snapshot of how much of the correction has already occurred and if the rate of change continues at the same tempo. 



Real Estate

The Housing Bubble Is Back

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Posted by John Rubino - DollarCollapse.com

on Wednesday, 26 April 2017 06:59

Last week I ran into a friend whom I’d been worrying about. He’s a real estate appraiser and his work had been drying up as interest rates rose and homeowners stopped refinancing their mortgages. 

But now he’s back to being happily swamped because instead of refinancing, everyone is buying — often, he says, for above the asking price. 

A couple of days later my wife and I were at a slide show put on by friends just back from New Zealand. They’d heard that a neighbor was thinking about selling his house and on an impulse made him an offer. He accepted, and our friends became instant homeowners. 

The very next day my wife’s father called to say that the company running a gas station next to his house wants to expand in his direction. They made him an unsolicited – and very generous — offer, which he accepted. 

Then, I did an interview with Gordon T. Long’s Macro Analytics website in which Gordon told the following story: 

My brother just sold one of his properties in Toronto [Ontario]. He had bidding war with 11 bidders so he demanded cash. Several of the Chinese buyers were on the phone overnight raising the money, which they got. My brother’s still partying after that sale. 

It definitely feels like the housing bubble is back. Here’s part of a (factual rather than anecdotal) overview of the subject from Charles Hugh Smith:

Housing’s Echo Bubble Now Exceeds the 2006-07 Bubble Peak

If you need some evidence that the echo-bubble in housing is global, take a look at this chart of Sweden’s housing bubble.

A funny thing often occurs after a mania-fueled asset bubble pops: an echo-bubble inflates a few years later, as monetary authorities and all the institutions that depend on rising asset valuations go all-in to reflate the crushed asset class.

Take a quick look at the Case-Shiller Home Price Index charts for San Francisco, Seattle and Portland, OR. Each now exceeds its previous Housing Bubble #1 peak:




Real Estate

Real Estate Speculation – Boom – Bust – Just Insanity

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Posted by Martin Armstrong - Armstrong Economics

on Tuesday, 18 April 2017 07:32

Barlow-AdQuestion: What if you find yourself as I do with real estate being the MAJORITY of your portfolio?


""If you have the bulk of your assets in real estate, then one way to keep them is to run out and get a 30-year FIXED mortgage now while you can. You have sold the risk to a third party and it is now their problem. You have the cash and wisely use for investment into other movable areas."

"Real estate depends on how far down the rabbit hole we go. If government does not blink and it just keeps raising taxes trying to support a system that is unsustainable, then we end up in the full crash and burn and you are compelled to walk away from real estate. Hopefully, with education understanding the past, we can for once avoid the same outcome and advance in this learning curve of civilization.

Vacation properties are the worst to survive. I bought such a place to live in at about 50% of its 2007 high. So while high-end properties in cities were rising, vacation spots on the beach declined. I wanted beach front. So understanding the cycle helps tremendously for entry and exit points.

The risk of mortgages declining is real. As governments get in trouble, long-term confidence starts to decline...."

...more in this comphrensive article by Martin HERE



Michael Campbell & Ozzie Jurock more short term: Hot Properties: A Normal Spring Market?



Real Estate

Toronto Home Prices Just Jumped Another 33%

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Posted by Bloomberg

on Wednesday, 05 April 2017 06:59


Toronto’s residential housing market showed no signs of cooling last month, with the average sale price soaring a record 33 percent from a year ago, pushing the cost of a detached home in the heart of the city to almost C$1.6 million ($1.2 million). In Toronto and surrounding suburbs prices climbed by a third in every major housing category, including townhouses and condominiums, as demand rose and listings failed to keep pace, according to figures from the Toronto Real Estate Board.

...read more HERE


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