Garth Turner on the housing market

I'm somewhat indifferent to former Conservative, now Liberal, MP Garth Turner, but I have to admire his candour and bluntness in assessing the current state of the Canadian housing market in the Globe and Mail online chat.

Best quote:

"Sue W: We might never be able to sell, except to a greater fool? Never Sell? Please Mr. Turner, could you please provide a few examples of some properties which have NEVER sold.

Garth Turner: Did I say that? Think not. As with stocks and mutual funds, there's always a buyer for real estate, at a current market value. For example, a share of Bear Stearns was worth $170 last year and $30 last week. On Sunday it sold for $2. If you think real estate is different from every other asset, and that this boom is never-ending, you must be from Vancouver."

Why you'd better hope it's different this time - Vancouver housing edition

Mohican provides a nice concise summary of the current state of the Vancouver housing market, complete with lots of to-the-point charts. I recommend that anyone in (or potentially in) the Vancouver housing market give it consideration prior to deciding their next move. Ironically, the collapse of the U.S. housing market, the subsequent economic troubles and the subsequent interest rate cuts may actually keep the Vancouver housing market going a little longer, I guess we'll see.

Anyway, Mohican's post in short:

* Prices have risen dramatically, to say the least, in recent years
* Prices are above the long run inflation adjusted trend
* You'd need an annual income of $113,400 to qualify to buy a typical Vancouver condo with a 25 year amortization and no down payment.
* Price/Income ratios are higher than they were in previous market peaks
* Price/Rent ratios are well above historical averages
* Mortgage Payment/Rent ratios are also well above historical averages
* Population growth is below historical averages
* Housing construction has been above historical averages for the last few years

You know, if there was a media in B.C. that actually had the knowledge and the will to do it's job properly you'd think that some part of this analysis might have shown up once or twice in the thousands of minutes and column inches devoted to the local real estate market. Oh well, thank god for the internet.

Because it's different here / this time / etc.

Via the comments at Vancouver Condo Info, here's a funny article from the CBC on how B.C. is protected from any fallout from the economic problems, with the biggest concern being that people might lose a little confidence because they see all the negative headlines.

"On Tuesday morning the main Canadian index, the S&P/TSX composite, was up 337 points to 12,467 by 11 a.m. ET after it had tumbled 605 points on Monday, while the U.S. market opened with a nosedive after being closed on Monday for a holiday.

Mutual funds and other investments are taking a hit, but B.C.'s economy is relatively protected, say economists.

"We have this commodity and construction boom of epic proportions which is keeping the western provinces essentially at full employment," Aron Gampel, the deputy chief economist of Scotiabank told CBC on Monday."

So the U.S. is going into (is already in) a recession, but it won't affect B.C. because of the commodity boom (and these commodities are being sold to who, exactly?).

Meanwhile, how long will 'a construction boom of epic proportions' last when house prices drop in B.C. like they did in the U.S.?

Consider this chart of U.S. housing starts.

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"SFU business professor Lindsay Meredith sees no black clouds on B.C.'s economic horizon. And he predicts consumers — especially cross-border shoppers — might actually benefit if retailers in the U.S. begin slashing prices."

So, if people cross the border to do their shopping somewhere else, that will be *good* for the B.C. economy? OK then.

I've heard of 'every cloud has a silver lining', but sometimes it seems like the media in B.C. thinks that clouds are actually made of pure silver. The fact is, sooner or later we'll see the impacts of a U.S./global slowdown here in B.C.

For example: Canfor closing two mills in Fort Nelson, B.C. ... "The PolarBoard oriented strand board mill and the Tackama plywood mill are closing indefinitely, with the firm blaming poor wood product markets"