"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey'
Demand is Local
Supply is Global
As the USD strengthens, the U.S. consumer inflation rate continues to drift down as it takes fewer greenbacks to buy imported goods. I guess it's too soon to yell deflation or pull out the Japan chart, but down is down.
Meanwhile in Canada and Australia where they dig the earth, the strengthening USD is producing the opposite effect, the CAD and AUD are weakening which is good for exporting the stuff coming out of the ground but with it comes more imported goods price inflation (buyers require more CAD & AUD dollars to buy the same amount of stuff) and that has egged on the real estate inflationistas who continue to drive the price of their local real estate up the left side of the Eiffel Tower. Sure, those imported countertops, appliance suites and appurtenances are going up in price; but that stuff is a wildly depreciating asset.
What about China? The bottom panel of the chart mashup above shows us that the CNY is also being depressed (via FX markets and the Princeling cliques) against the USD and that drives up their import costs on global resources and reduces the value of their already imported commodity stockpiles used to bankroll the shadowy (unregistered? - unregulated?) secondary financing market.
The weakening CNY is pushing imported Chinese consumer costs up and producer prices down. (March 2014: Chinese consumer prices were up 2.4% Y/Y and producer prices were down 2.3% Y/Y and down for the 25th straight month)
The Chinese housing index has rolled over on a steep dive (bottom panel of chart above and below is a China chart mashup from Bloomberg's Tom Orlik showing the ongoing Chinese deceleration).
Oil Can Economics
The image of enthusiasm for tangible asset speculation rippled through the twitter-sphere this week with the chart above showing the well known disparity between Canadian and U.S. housing prices. One can compare Canada's housing premium to almost anywhere and be impressed with the northern naiveté that passes for Johnny-come-lately investment. Less impressive are the non-arm's length analyses that come attached to these charts that tout the long term safety of real estate by citing the current pickup in the hot metro prices and seasonal upswing in sales now that the polar vortex has stopped blowing. I won't pick on any particular high profile media economist that has been interviewed about the chart except to say that YOU FORGOT ONE VERY GLARING DATA SET... total residential Canadian national MLS sales are down 16% from the 2007 peak over 6 years ago. That's a big momentum drop over a chronic period of time. See my 6 Metro Canadian Housing Chart.
As noted in the Oil Production chart above, there is more than just housing cost disparity between the U.S. and Canada. Sunshine and employment opportunities are still a very large part of the Canadian emigration drive south.
of the 2-3% of Total Residential Sales made to Foreigners:
in 2010-2012, Canadians constituted the biggest segment of the market, followed by Europeans, Asians, Central-South Americans, Chinese, and Mexicans.
of the Canadians who bought U.S, Residential Real Estate:
Diane Francis "Merger of The Century"
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense