Green Chair Talks
Posted December 1st, 2009 in Real Estate, Real Estate Stuff | 
TD Bank’s Green Chair Uncomfortable
TD Bank’s Resale Housing Outlook report released today offers another market perspective. It joins in the recent trend of Banks offering cautionary notations. Following is a liberal quoted synopsis of that report.
Near-sightedness
- all is back to ‘normal’, whatever that may be
suggesting that it will be smooth sailing from now on - expectation from here onward is a steady uptrend
Affordability
- any improvements eroded gains erased by 2011
- nationally, homes over valued by 12%
- problem 1 – market momentum may carry this higher
- problem 2 – misalignment of home prices with their fundamental drivers, such as demographics and income, cannot last
- problem 3 – resetting of interest rates
- hope 1 – income grows in 2010- 2013
- hope 2 – supply side increases offering relief valve
TD’s Bottom Line
- market rebound overdone
- sales to listings still out of whack – no fast fix
- momentum not expected to last beyond 6 – 10 months
- *** if this market goes into 2011 it’s a bubble
- brakes are on – interest jumps coming
- new supply should weigh down price growth – might stagnate till incomes catch up
Biggest Worries
- market continues to be ‘hot’
- run in with monetary policy
- households need to ease debt growth
- warning – if you are maxed out on a mortgage better start thinking about reducing it as fast as possible.
*Disclaimer:Chair Logo, Statistics, graphs, Courtesy TD Bank – Pascal Gauthier, Economist, TD Bank, Mr. Gautier’s full report here – TD BANK Financial Group – Resale Housing Outlook
[...] Thanks to Larry Yatkowsky of Vancouver’s Yatter Matters for the heads up on this report. See Larry’s overview, “Green Chair Talks.” [...]
You know a massive correction is imminent when even the banking “professionals” get nervous.
Manfed,
Not so sure that they are nervous about their individual welfare as much as wanting everyone to understand that change will happen in the months ahead.
That being the case, I understand the cautionary tone being delivered from each bank as well as Carney, the BoC boss, as one that will preclude public backlash when the change occurs.
No consumer of bank services will be able to say “YOU didn’t warn us!”
Responsible marketing me thinks.
Larry,
Point taken – bankers never fret about their own personal welfare. Certainly with CMHC (ie, Canadian taxpayers) holding the bag on this bubble, what should they worry about?
The problem with these reports is that the only people who read them already know these things and just like people telling them they are right. Try asking the people in the presale lineup on the weekend if they have heard any of the recent bank reports. I am betting you will get a resounding “WTF are you talking about, real estate only goes up!”
David,
Telling the folks in line – some people just gotta drink the juice. Any good poker player knows when to fold them.
I view these reports much like a railroad crossing sign. It’s telling you to stop and look both ways. If you can see the headlight of the train – it’s probably not a good idea to drive across the tracks. Having said that, many proceed at their peril. Sadly, many of us have seen the results of those decisions.
Manfred,
The original premise of CMHC has helped thousands maybe millions of Canadians buy a home. Most of them appreciated the break and paid the loan. Many more are still doing the same thing. Unfortunately, there are always bad apples whether by choice or circumstance.
A little write-up on the CMHC that shows its gone from being helpful to hurtful very quickly:
http://americacanada.blogspot.com/2009/07/cmhc-and-our-government.html
Excerpt: “In 2008, Canadian home prices started to dip as affordability became the worst on record in many cities. CMHC admits that it was ordered to approve as many high risk borrowers as possible to prop up the housing market and keep credit flowing. 42% of all high risk applications were approved, a 33% increase over 2007.”
This is what is inflating the bubble.
Manstey,
Fascinating insight within the link. The question that remains unanswered is what would our world be like if CMHC wasn’t here to do the job?