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April 7, 2016 | End Badly

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

 

How do we know when we’ve bounced off the top? When you can actually expect house prices to start that inevitable decline?

Beats me. But we might already be staring at a few harbingers.

Like a boring, badly-reno’d, crappy little bung on a 44-foot lot in the Westside of Van that sold for a million over the outrageous asking price of $3.1 million. Now, tell us with a straight face there’s no bubble.

Would you pay $4.19 million for this?

DUNBAR HOUSE

Or how about a new reality TV show which will focus on house flippers – who are between 12 and 15 years old? “This,” says blog dog Doug, “in my opinion is the proverbial canary in the coalmine.” Here’s the official (sick) media release:

FYI Network is casting kids ages 12-15 all over USA and Canada who live for real estate for a new exciting home flipping show where aspiring young home flippers are mentored by industry pros. Are you obsessed with real estate, home reno and home flipping shows? Can you see a house and know exactly what needs to be done to it to turn a profit? Are your parents flippers and do you dream of following in their footsteps? We want to hear from you.

BTW, if you’ve produced children desperate to be realtors or speckers, and actually admit it, you can arrange for them to apply here. I mean, why aspire to be prime minister when you can be Brad Lamb?

And how about this sign that we’ve all jumped the shark? Royal LePage is actually playing the Trump card when it comes to pumping houses in its latest property-pimping report.

“The economic miracle that is contemporary Canada is driven in significant measure by our success at attracting quality immigrants to our land,” says boss Phil Soper. “While this is not new news, the possibility of a Donald Trump presidency has put renewed global focus on the often stark differences in opportunity and attitude that exist on either side of our huge border. In what started as a media prank, Canada’s attractiveness as a more realistic place to pursue life, liberty and happiness is gaining traction even in America.”

Of course, Trump won’t win. But if he did, what weird Americans would wish to move from, say, Chicago (average house price $330,000) to Toronto (average detached $1.2 million), or from Seattle (median price $496,750) to Vancouver ($1.78 million)? Would we want such mental defects?

And how about the “economic miracle Soper is taking about? Our economy will grow this year (if we’re lucky) by half the US rate, with a federal government about to plunge into deficit and household debt at off-the-chart levels. Personal taxes are dramatically higher, wage growth is non-existent, and our biggest export commodity lost 70% of its value. Of course, we do possess a leader who has a tat, smokes weed and poses steamily with his hot wife in Vanity Fair, so I guess that evens things out.

Well, we don’t know where this is all going in the short run, but eventually it’ll end badly. That’s been the boring refrain here for a few years as the risk in an inflated market built, and now it’s being shared by a bank economist. Looking at the latest market stats, showing a 15% hike in year/year prices in Toronto and a bizarre bloat of 23% in Vancouver, Beemo’s Bob Kavcic says this: “Odds are that if this kind of price growth (especially Vancouver) continues, it will end badly.” But not yet.

In a research note, Kavcic figures the bubble will continue to inflate until the economy grinds lower and unemployment grinds higher, interest rates increase, more housing hits the market, the government steps in, or affordability just evaporates. The trouble is, he observes (and the Dunbar house above is a good example), that “rising prices don’t slow activity, but rather beget even higher prices.” It’s the buy-now-or-buy-never factor – a visceral fear of being “priced out forever” which has people paying insane prices and shouldering toxic levels of debt.

That, as you know, was the topic yesterday. Human nature. We want what everyone else wants. We shun what they shun. The bank guy is perfectly correct in his assessment – there are too many hormones flowing for the market to reverse soon. But it will. And the last ones in will be the greatest fools.

Good luck Skyping the TV show.

VAN-TOR PRICES

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April 7th, 2016

Posted In: The Greater Fool

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