Thoughts and Bubbles

Bubble Thought

Bank of Canada governor Mark Carney’s pledge to freeze record-low borrowing costs until June may be raising the chances of a bubble in home prices.

Thoughtful Bubbles

  • “The worry has got to be that you might be getting a housing bubble out of this,” – David Laidler, a former visiting economist and special adviser at the Bank of Canada and now a fellow at the CD Howe Institute
  • “The challenge now is getting the economy going and dealing with any potential bubbles down the road,” – Ian Nakamoto, director of research at MacDougall MacDougall & MacTier.
  • Bubble thoughts with names
  • “It is time to break the daisy chain of asset and credit bubbles and the global imbalances they spawn,” “If we fail, there may not be another chance.” – Morgan Stanley Asia chairman Stephen Roach.
  • “It makes perfect sense that there is a good appetite for the housing market.” What isn’t clear is “whether this is a bubble in the making or simply a recovery from earlier softness” says Eric Lascelles, chief economist and rates strategist with TD Securities in Toronto.
  • “once-in-a-lifetime opportunity” – Peter Gilgan, chief executive of Ontario-based Mattamy Homes
  • “an element of pent-up demand” – “Rates are exceptionally low, affordability has improved in part because of the low level of interest rates and in part because of some former price adjustments, and we are seeing a housing-price response.” – Bank of Canada governor Mark Carney
  • “I don’t believe that there’s a bubble,”… “Most stories I hear are just typical Canadians trying to buy their first home or move up.” “When Canadians are waiving conditions and paying 10% more than asking for a home, it does give you some pause,” – Peter Aceto, chief executive of Toronto-based ING Direct Canada
  • “If policy makers are concerned about a bubble, they might look to tools other than interest rates to cool the market” “They might encourage lenders to be a little more circumspect in their mortgage qualifications; they may look at the amortization periods on mortgages” “I don’t think they can control housing through fiddling with interest rates.” – Brian Johnston, president of Monarch Corp,
  • “Where else is the world do you have agents lining up overnight to buy a condominium?” – Paul Lai, estate agent.
  • “The reality is we have low mortgage rates … so we can expect some upward pressure on housing,”…. “That’s OK, as long as it doesn’t become a bubble.” – Finance Minister Jim Flaherty.
  • “If we have to, we’ll do what we did last year and limit the rate of amortization further than we already did, and require higher down payments,” – Finance Minister Jim Flaherty.
  • “People have to make sure that the mortgage on their home that they’ve put on today will be affordable at higher interest rates in the future.” – Finance Minister Jim Flaherty.
  • “Maybe” – Me
  • “reserved space for comments below” – that’s You!

*Disclaimer: Quotes courtesy the Sunday Tribune, and The Vancouver Sun – While believed to be accurate they are not guaranteed.

About Larry Yatkowsky

Larry is a recognized real estate expert. A veteran professional, his experienced counsel leads Vancouverites in his west side community to place their trust in a man passionate about his work. Uncompromising ethics bring a balanced approach to realizing your real estate dreams.

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*Disclaimer: Statistics Courtesy REBGV. While believed to be accurate they are not guaranteed.
**Numbers provided may vary as they are dynamically posted by the REBGV.

Reader Comments:

Boombust Says:
December 21st, 2009 at 10:43 am

Where have all these idiots been in the past few years? It’s not like this RE bubble is NEW.

December 21st, 2009 at 10:57 am

Boombust,
far be it from me to suggest that they have been living in a bubble 🙂

Chris Taylor Says:
December 21st, 2009 at 11:49 am

Can we expect a post about Flaherty’s comments: decreasing amortizations or increasing downpayments.

Its interesting that a perfect storm is brewing:
– Olympic slump
– HST, property tax (and maybe income taxes) increase
– raised rates
– higher downpayment
– shorter amortization

That ought to scare off some of the >50% of new buyers that have 35yr – 5% down mortgages.

Sold and Waiting Says:
December 21st, 2009 at 11:54 am

We all know what is going to happen when to housing prices the rates go up. What we don’t know is HOW MANY people aren’t going to be able to pay their mortgage when the rates double/triple. That will determine the amount of the collapse.

The ultimate key factor when interest rates rise:

MOI

December 21st, 2009 at 1:32 pm

Chris,

What can be said about Flaherty et al. His statements as do Carney’s, stand clear. A wild card guess is that Flaherty awaits the poll survey to find out if the motion is popular.

What really matters is what do “you” the people think will happen. Those are the critical thoughts that need reflection as it will be the decisions formulated by those thoughts that will determine the outcome of the market in 2010.

So Chris – start the ball rolling and let’s see who chimes in. It will be these ‘street’ opinions that matter most, in particular those that come from those who are contemplating a home purchase.

**Caution – let’s all play nice – after all – ’tis the season’.

December 21st, 2009 at 1:35 pm

Rodf,

Not certain that “we all know”. Me thinks it’s more a speculative discussion/projection at this point.

Care to add specifics?

Chris Taylor Says:
December 21st, 2009 at 3:56 pm

Larry,

Merry Christmas!

You hit the nail on the head, its what the people (or more appropriate: sheeple) think that is important.

People are still thinking there’s riches to be made in real estate, lining up outside new developments and taking part in bidding wars. Until this stops, prices will continue up.

The “bubble” comments once only spoken by us skeptics are now being eluded to by our leaders and the media. They wish to slow the pace of the herd of sheeple as they see the flock has headed in the wrong direction. Whether they are successful or not remains to be seen.

What’s important is that they’ve spoken. They have acknowledged the herd of sheeple are headed in the wrong direction and something must change. All the important leaders have now chimed in that the sheeple are headed for a cliff: So what happens?
Do the sheeple stop cause they see the cliff?
Do the sheeple stampede ahead, refusing to follow the lead?
Does the government forcibly corral the sheeple?
Do the sheeple smoke the BC herb, grow wings, and fly off in dream land?

Cheers,
Chris

December 21st, 2009 at 4:44 pm

Chris

Good start and Merry Christmas to you and yours as well.

‘sheeple’ – isn’t that a Garthism? Wonder if it will make the 2010 Oxford Dictionary list?

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