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Australia’s House of Cards is Collapsing: Recession Coming Up

December 14, 2018

Australia’s House of Cards is Collapsing: Recession Coming Up

Australia’s housing collapse is now in full swing. A recession will follow shortly.

Inga Ting, Geoff Thompson and Alex McDonald provide and excellent set of graphics and information on the bursting of Australia’s housing bubble at House of Cards.

Home prices in more than four out of five council areas have reached their peak and are sliding towards an unknown nadir, according to the latest figures from property market analyst CoreLogic.

As the slump moves into its second year with little or no prospect of rebound, the downturn in capital city property markets threatens to drag down the rest of the economy.

And with a mixed outlook for the global economy, doubts are surfacing about where Australia is going to find the fuel to extend its near-record run of 27 years of unbroken economic growth.

Yearly Change in Median Dwelling Value

​The graph in the article is interactive with a choice of eight cities. Sydey displayed above.

Major Declines Since 1980

Click on the graph for an even larger image.

Perth and Darwin have been clobbered. Sydney is in the works.

Every Bubble is Different

Lindsay David on Twitter

…click on the above link to read the rest of the article…

Canada’s Housing Market- Ready to implode!

July 12, 2018

Canada’s Housing Market- Ready to implode!

Despite what the mortgage companies and loan-sharks tell you: All’s NOT hunky-dory with the Canadian real estate scene. Even the government, at all levels – Federal, Provincial, Municipal – are trying desperately to put on a brave face on the impending market correction. However, the numbers never lie.

Here’s why many analysts believe that Canada is heading for a housing bubble crash that could be much bigger than what our neighbours to the South experienced in 2008-09!

Facts and figures

When Royal Bank of Canada (RBC) pushed out its Housing Affordability indicators for Q4-2017 a short while ago, it indicated that there was some improvement in the average Canadian’s ability to afford a home. This was the first good news in over two years. RBC’s Canada-wide affordability indicator stood at 48.3% in Q4 2017, compared to an average of 39.4% since 1985.

So, what do these facts and figures mean? Well, in simple terms: Higher is bad. Lower is good!

48.3% means that, for the average Canadian household, 48.3% of their household budget will be consumed on home ownership spending. That includes utilities, property taxes (not to mention HST/GST and other taxes) and yes – especially mortgages! Back in 1985, only 39.4% of a household’s income went towards affording a home. To put things in perspective then, Canadian’s spend 48.3 cents, on the average, out of every dollar they earn on housing affordability.

Posing a rhetorical question: “Are we at a turning point for affordability?”, the RBC report offers us this gloomy outlook for Canada’s real estate market:

“No… Rising interest rates will put upward pressure on home ownership costs, and recent policy measures are more likely to reduce household and market risks than provide material affordability relief”

…click on the above link to read the rest of the article…

Housing Collapse Coming Right Up

March 8, 2018

Mortgage rates are high and rising. Refinancing opportunities are nonexistent; home affordability has collapsed.

The latest Black Knight Mortgage Monitor is worth a very close look.

Here’s what the report says about the feature chart.

  1. Recent rate jumps coupled with climbing home prices have increased the cost to purchase the median home by $67/month (+6 percent) over the past six weeks.
  2. Overall, it costs $1,141 in monthly principal and interest to purchase the median home using a 30-year fixed mortgage with 20 percent down, the largest monthly payment required since late 2008.
  3. It currently takes 23 percent of the median income to purchase the median home, the highest share since 2009.
  4. However, overall affordability remains better than long-term historical averages, even taking the recent rate jump into consideration. Purchasing the median home requires one percent less of the median income than 1995-1999, three percent less than 2000-2003 (before the sharp run-up in home prices) and two percent below those combined benchmarks (1995- 2003).
  5. Average incomes are more than 20 percent higher today than in 2006 (according to the Census Bureau) and interest rates 2.3 percent lower. As such, affordability remains much better than at the pre-recession peak, even though today’s home prices have surpassed 2006 levels.
  6. Assuming all else remains equal, to return to 2006 affordability levels, interest rates would have to climb north of 8.0 percent or the median home price increase to $420K.

Statistical Nonsense

Black Knight is correct on points 1-3. Statistically, it is correct on points 3-6. However …

Regarding point 5: It’s not average incomes that matter, it’s median incomes.

Regarding points 4 and 6: Those who want a home and can afford a home have a home. The rest struggle because incomes have not kept up with home prices.

Notions of affordability are statistical nonsense. Black Knight does mention some of these issues in relation to other charts.

…click on the above link to read the rest of the article…

Housing Collapse Coming Right Up

March 5, 2018

Mortgage rates are high and rising. Refinancing opportunities are nonexistent; home affordability has collapsed.

The latest Black Knight Mortgage Monitor is worth a very close look.

Here’s what the report says about the feature chart.

  1. Recent rate jumps coupled with climbing home prices have increased the cost to purchase the median home by $67/month (+6 percent) over the past six weeks.
  2. Overall, it costs $1,141 in monthly principal and interest to purchase the median home using a 30-year fixed mortgage with 20 percent down, the largest monthly payment required since late 2008.
  3. It currently takes 23 percent of the median income to purchase the median home, the highest share since 2009.
  4. However, overall affordability remains better than long-term historical averages, even taking the recent rate jump into consideration. Purchasing the median home requires one percent less of the median income than 1995-1999, three percent less than 2000-2003 (before the sharp run-up in home prices) and two percent below those combined benchmarks (1995- 2003).
  5. Average incomes are more than 20 percent higher today than in 2006 (according to the Census Bureau) and interest rates 2.3 percent lower. As such, affordability remains much better than at the pre-recession peak, even though today’s home prices have surpassed 2006 levels.
  6. Assuming all else remains equal, to return to 2006 affordability levels, interest rates would have to climb north of 8.0 percent or the median home price increase to $420K.

Statistical Nonsense

Black Knight is correct on points 1-3. Statistically, it is correct on points 3-6. However …

Regarding point 5: It’s not average incomes that matter, it’s median incomes.

Regarding points 4 and 6: Those who want a home and can afford a home have a home. The rest struggle because incomes have not kept up with home prices.

…click on the above link to read the rest of the article…

Toronto Housing Market Implodes: Prices Plunge Most On Record

August 3, 2017

Toronto Housing Market Implodes: Prices Plunge Most On Record

Until mid 2017, it appeared that nothing could stop the Toronto home price juggernaut:

And yet, In early May we wrote that “The Toronto Housing Market Is About To Collapse“, when we showed the flood of new home listings that had hit the market the market, coupled with an extreme lack of affordability, which as we said “means homes will be unattainable to all but the oligarchs seeking safe-haven for their ‘hard’-hidden gains, prices will have to adjust rather rapidly.”

Exactly three months later we were proven right, because less than a year after Vancouver’s housing market disintegrated – if only briefly after the province of British Columbia instituted a 15% foreign buyer tax spooking the hordes of Chinese bidders who promptly returned after a several month hiatus sending prices to new all time highs – just a few months later it’s now Toronto’s turn.

On Thursday, the Toronto Real Estate Board reported that July home prices in Canada’s largest city suffered their biggest monthly drop on record amid government efforts to cool the market and the near-collapse of Home Capital Group spooked speculators.

The benchmark Toronto property price, while higher 18% Y/Y, plunged 4.6% to C$773,000 ($613,000) from June. That was biggest monthly drop since records for the price index began in 2000, according to Bloomberg calculations, and brought prices down in the metro area to March levels.

More troubling than the price drop, however, was the sudden paralysis in the market as buyers and sellers violently disagreed about fair clearing prices and transactions tumbled 40.4% to 5,921, the biggest year-over-year decline since 2009, led by the detached market segment.

Separately, the average price, which includes all property types, rose 5% to C$746,218 from July 2016, less than a third of the 17% increase at this time last year.

…click on the above link to read the rest of the article…

The Toronto Housing Market Is About To Collapse By This Measure

May 5, 2017

The Toronto Housing Market Is About To Collapse By This Measure

With the collapse of Home Capital Group focusing the world’s attention on the Canadian real estate market, nowhere is the subprime debt time bomb more likely to go off than Toronto, which as we recently noted “has gone nuts.”

Even Bank of Canada Governor Stephen Poloz (who declined to comment on questions about Home Capital Group and whether he’s worried about contagion), noted that Toronto is out control tonight while answering questions following a speech in Mexico City…

“pretty sure recent gains in Toronto home prices were not sustainable and that the city’s housing market had elements of speculation“

“Financial stability is part of the Bank of Canada’s monetary policy decision making, but the central bank’s primary mission is inflation targeting,… it would be odd to use interest rates to target home prices in just one city.”

Perhaps Mr. Poloz… But, as we noted previously, it doesn’t take a genius to figure out that this will end in tears.  Even the big Canadian banks are fretting. “Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble,” Bank of Montreal Chief Economist Doug Porter warned clients. But the bubble’s deflation would push the city into a fiscal and financial sinkhole

Jason Mercer, TREB’s Director of Market Analysis, explained the basic supply and demand problem:

“Annual rates of price growth continued to accelerate in March as growth in sales outstripped growth in listings,” he said.

“A substantial period of months in which listings growth is greater than sales growth will be required to bring the GTA housing market back into balance.”

…click on the above link to read the rest of the article…

“The Stage Is Set For A Massive Housing Market Correction in Canada’s Oilpatch”

February 3, 2015

“The Stage Is Set For A Massive Housing Market Correction in Canada’s Oilpatch”

Two weeks ago we reported that “the next victim of crashing oil prices has been identified: housing“, particularly non-residential construction among the energy producing regions, where the capex collapse reality is already being felt far and wide. Eventually, once the overall economy of these same oil producing regions is impacted sufficiently, the pain would spread to residential housing as well, as the energy boom that kept the local economies humming for years, turns to a bust. But while the US patiently, and nervously, awaits the outcome of the crude crash, one place is already starting to suffer the consequences of the price collapse is Canada’s energy Mecca, Calgary, where as the Financial Post reports, “the stage has been set for a massive correction in the oilpatch.”

To be sure, just like with US production, nobody is quite ready to pull the plug just yet and indeed, “the price correction hasn’t happened”… yet. “The average price of a home sold in January was $460,933, down 0.5% from a year ago. The median sale price climbed 1.1% from a year ago to $417,500.”

But it’s just a matter of time, and as FP adds, “the stage has been set for a massive correction in the oilpatch.New listings jumped 37% from a year ago while the overall inventory was up 113.4% during the same period. A year ago, based on market conditions at the time, there was 1.52 months of supply in the system. At the end of last month, that number was 5.29 months.”

…click on the above link to read the rest of the article…

 

Prepare for Property Prices to Fall in U.S. and Globally

January 6, 2015

Prepare for Property Prices to Fall in U.S. and Globally

At the start of the New Year, there are increasing signs that the recovery seen in property prices in many cities in western countries — namely New York and other U.S. cities, and Dublin, London and other UK cities — is beginning to peter out.

 

Many cities have seen speculative frenzies return in recent months which led to price surges which would appear to be unsustainable – especially given the uncertain and poor geopolitical and economic backdrop.

This has been the case in the UK and Ireland, the U.S. and indeed in Canada, Australia, New Zealand and a few other markets.

The question at the start of 2015, is whether we are likely to see continued price gains or falls. There are all the hallmarks of an echo bubble akin to the one that burst so painfully in the ‘noughties’.

In the UK, the respected Centre for Economic and Business Research (CEBR) has predicted a decline in British property prices this year. Prices rose 8.8%, on average, in 2014 with prices in London ballooning another whopping 20%.

…click on the above link to read the rest of the article…

 

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