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September 1, 2016 | Data Dump

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.

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Big day tomorrow. Not, not because it’s the start of the last long weekend of the summer and you need to get serious again, but because of data. Lotsa data.

First up will be the monthly jobs report. It’s called the ‘non-farm payrolls’, and this one will be exciting. No, really. Economists and traders everywhere will hardly sleep a wink with visions of labour participation rates and headline jobless numbers in their little noggins. This survey got real after Fed boss Janet Yellen said last week ‘the case is strengthening’ for the next US rate increase, which everyone thought was off the table after Brexit. No more. It’s coming.

So the guessing is how many new jobs it will take to convince her to pull the trigger in September as opposed to after the comical US election in November. The magic number (depending on who you believe) will be between 180,000 and 250,000. Much below the first, and rates pop in December. Above the second, and they go on Wednesday September 21st.

Given the fact the Fed’s two main targets have largely been met – unemployment below 5% and inflation at 2% – there’s not much of an argument left for keeping rates in the ditch. But, as usual, there’s wide disagreement on when the punch will come. What is clear from visiting the steerage section of this blog, or talking to any Millennial, is that most people think the cost of money will never rise. Good luck with that.

Also on Friday we should get the latest trauma report from the Vancouver Real Estate Board’s Triage Unit. Sales are a disaster. But will prices follow? If so, how quickly? Should puffed-up YVR property barons have bailed when this pathetic blog issued its ‘get-out-now’ final warning during the first few days of July?

Well, housing analyst Ross Kay asserts boldly, “Vancouver home prices have now retreated back to June 2015 levels in the last 45 days.

“Your previous term Frankenumber,” he says to me, “will best describe ‘Benchmark Prices’ which tomorrow will be announced to have increased yr/yr at the same time home prices have crashed. The spin will be fun to watch.”

You bet. Here’s what we know (or have heard) so far:

In Burnaby sales last month declined by just over 80%, while the number of price reductions ballooned by 1,600%. No, that is not a typo.

In Richmond, the number of houses trading in August was also down 80%, and 68% lower than the average of the past five years. Price reductions increased by 2,900% (this is getting ridiculous).

In East Van, where all the poor people live, sales toppled 69% and the price reduction increase was as bizarre as in Richmond and Burnaby. Meanwhile in the west end of YVR, deals have fallen almost 76% and the price reduction increase is irrelevant, because last year there were none, and this year three dozen.

As for prices, below is the latest snapshot from aggregator site Zolo.ca. You can 100% bet that nothing remotely like this will be in the real estate board’s official report. But a 40-year chart showing VYR house prices are ballistic will be. Plus, as Kay surmises, a Frankenumber showing the market is ‘balanced’ and ‘stable.’

Yup, just like the SpaceX rocket loaded with the new Facebook satellite yesterday – before it turned into a smoky hole on the launch pad.

ZOLO

Local Van realtor (& blogger) Larry Yatkowsky calls the current situation “chaos.”  He writes:

In July 2016 the average price for a Vancouver detached was recorded at $1,764,682. In less than a month (post Tax proclamation), the average price gain over the year of approximately $300,000 has been wiped out. August 2016`s average price for a detached home flat lined at $1,470,265 to settle below August 2015`s average price of $1,474,475.

While that price drop is worrisome more critical is that the number of sales has tanked to 44% below August 2015. Price is one thing but when there are no sales you don’t have a market. A certainty rests in this dramatic lack of sales. Should it continue future market predictions become more tenuous than ever. More curious will be the evolution that is about to take place. What will be the result from the multiplier effect of this drop in price and sales?

The chaos created by our government fiddle playing will I suspect, continue for the next months ahead. At some point it may become clear that elements beyond the currently perceived influence of foreign buyers could have played a greater part in determining the market place.

YATTER

And let’s not forget the poor cowboys. Condo prices in Calgary and now down more than 7% from last year, and back at 2013 levels. After factoring in closing costs and commission upon selling, we’re closer to 2010. And no bottom yet. The inventory of condo listings is near a record high, promising more declines to come. At the same time, owners of detached homes have been wary to list, since buyers are scarce – and the price of oil has been grinding higher (sort of).

So far, no sign Chinese dudes turned off by Van’s 15% head tax have decided to flock to Cowtown, as local realtors warned. Like that was ever going to happen. The FOMO gig is up. Everywhere.

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September 1st, 2016

Posted In: The Greater Fool

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