Saturday, April 19. 2008
The National Post is running an article entitled, " Canada's Housing Boom Is Officially Over."
The Canadian housing boom was declared officially over Thursday.
A slide in existing home sales that started in the West late last year spread to Toronto in the first quarter of 2008, taking the heat out of prices nationwide and driving the ratio of new listings to sales to a nine-year high, figures released Thursday showed.
"Canada's six-year housing market boom is officially over," said Douglas Porter, deputy chief economist at BMO Capital Markets. "There's no question the numbers were probably distorted by a few feet of snow in the first quarter of the year, but I think there's some very real underlying cooling underway here."
The Canadian Real Estate Association reported 75,476 homes changed hands in the first quarter of 2008, down 13% from the first quarter of 2007. In March, sales dropped 18.7% from the same month the year before, including a 39.7% slide in Calgary, a 34% drop in Edmonton and a 22.2% drop in Toronto.
Average prices rose just 5.5% to $327,620 in the first quarter over the first quarter of 2007, the smallest price increase since the fourth quarter of 2001. Prices rose 11% last year and 10% on average in each of the prior five years.
I am quite happy about this news, and it further lends ammunition to us who don't believe the lies that real estate people say, like housing prices will keep going up. In this report, price rises are decelerating, and it's only a matter of time before they start declining.
People looking for houses, stay strong, it will be a buyer's market soon. Lets hope we return to a time where housing is actually affordable.
Down here in California, the real estate market is a slaughter. One of my friends who bought a house as an investment, way the heck in the middle of no where, has already seen the bank foreclose on three of her neighbours. Forests of "For Sale" signs are cropping up all over the place.
Check out this map of foreclosed properties in California.
Thursday, April 10. 2008
As you may or may not know, Microsoft has been trying to buyout Yahoo. The plot has thickened immensely in the last week. A disclaimer before we start, the opinions expressed in this article do not reflect the opinions of Yahoo; these are my opinions and mine alone.
Lets start by introducing the actors of this plot.
- Jerry Yang, CEO of Yahoo
- Google, needs no introduction
- Steve Ballmer, CEO of Microsoft (featured in the video below)
- Rudolph Murdoch, Evil Emporer and CEO of News Corp. Owner of the Fox Network and MySpace
- Time Warner, who owns AOL (I'm surprised that they're still around too.)
So a few months back, Yahoo had already rejected Microsoft's bid of $31/share for Yahoo. On the weekend, Microsoft sent a letter to Yahoo telling us to stop dragging our feets and accept the offer. The letter says that Yahoo has no other viable alternative. The offer would expire in three weeks. This threat was supposed to scare us into submission because many believe that Yahoo's stock will plunge from $28/share now to $19/share if Microsoft pulled the plug on the deal.
At this point, things were looking kind of dark since it looked like Yahoo was out for the count, and resistance against Microsoft was futile. It was inevitable that they would take us.
That's when Jerry Yang of Yahoo launched the counter attack.
Friday, April 4. 2008
So in my last blog article, I was talking about this blog article from the Royal Bank (RBC) blog entitled, " Just Give Me Four Walls" where they're talking about how students can get a mortgage. The discussion was about what a great investment housing currently is, and how we can take out mortgages with no down payments. One of the RBC bloggers responded by saying how great real estate was because in the last 10 years, housing value has increased by 65% (or 5.3% per year). I responded that it wasn't that great considering the Canadian stock market in the same amount of time had increased by 296% (or 11.1% per year).
A new guy named Scott decided to counter my arguments:
Home ownership is with out a doubt one of the best investments you can make. [...] What I present as my argument for the home ownership is this:
1 - Not only do you have the value of your house increasing over time, providing more cash in your pocket when you sell, but you also have to factor in the money that is not going to rent as savings in your pocket. Sure you dont see it until you sell, but future you will be happy.
2- As for Chris' point about a mutual fund being better, I must argue against that. Yes, investment products such as mutual funds are great, and you should have these as well (consult your local RBC banker for your own tailored plan), however the housing market is no where near as volatile as an index linked fund (find me a year in the last 10 where the average home price has dropped in Canada? The same cannot be said for an index fund). And if you can only afford one option, if you take your hard earned money and put it into that fund, you are still needing to pay for somewhere to live (unless you are ok with your parents basement, thought it does make meeting girls harder)so there goes any profits you could have seen in the way of rental payments to a landlord you probably don't even like.
There were several points that are completely untrue:
- The housing market is no where near as volatile as the stock market.
- Home ownership is the best investment you can make.
- The average home price has not dropped in the last 10 years.
I keep hearing similar arguments over and over, and they're just plain wrong. I decided it was time to bring in the big guns. Please help me welcome our guest blogger, Myron, who's my senior housing bear correspondent. (Housing Bear denotes someone who's negative on housing).
Thursday, April 3. 2008
It was brought to my attention that Royal Bank has recently started a number of blogs which feature a bunch of hip young adults trying to juggle life and money. There was a blog post entitled " Just Give Me Four Walls", which talks about how students can get a mortgage to own a place to live.
The Mortgage Question
I had the opportunity to speak with Bernice Dunsby. She’s RBC’s Senior Manager of Client Acquisition, Home Equity. Basically, she knows Mortgages. She assures me that purchasing a home (or apartment or condo or loft, etc.) is still a stable investment in today’s market.
“Over the past ten years, there’s been a 65% increase in the value of homes,” she says. “If you think about increase value, does it mean a good investment? Yes.” [...]
I wanted to know whether it was even a possibility to for a University student to think about signing him or herself up for a mortgage.
It’s Possible. Even individuals with little income can qualify for mortgages nowadays. “In the past, banks required a minimum of 20% on the down payment of a mortgage,” Bernice tells me, “but today you can own a home with no money down. You can literally purchase with no down payment.”
While this may seem like a gift, Bernice heeds warning that 'no money down' means you are financing more over the term of the mortgage, which means it's going to cost you more in the long run. But, that may be ok depending on the way you look at it: when you start paying off your mortgage, you build equity. Equity is the value of your home in the market, less what you owe in mortgage payments. So, every time you make a payment, your house increases in value because there's less money owing on it.
This article really rubbed me the wrong way because getting a mortgage with no money down is exactly the reason that fueled the Subprime Crisis in America, and pushed them to the brink of recession. Basically you're lending money to people who you really can't afford to buy a place! They obviously can't afford it because they can't even pay the downpayment on a house.
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