HISTORY & READINGS at Brian Ripley's Canadian Housing Price Charts & Plunge-O-Meter

US Housing Update

5/22/2014

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Pimp that loan U.S. style

There was a regime change, January 2014, at the Federal Housing Finance Agency where Ed DeMarco (higher credit scores required for Fannie & Freddie insurance) was replaced with Mel Watt (reduce F&F requirements) that will keep the tax payer goosing itself in the housing market.

Apparently the housing "recovery" isn't. The mortgage lobby loves credit risk when the co-signer is the tax payer. The chart mashup:

Housing Affordability has dropped +/- 19% since 2012
Real Income Growth has dropped +/- 7% since 2009
Available Housing Credit (Debt) plunged from the peak in 2006
U.S. Student Debt (Credit) zoomed up 35% from 2005-2012
The 25-34 Age Cohort's Real Earnings dropped 2.2% '05-'12
Existing House Sales have plunged & bounced 3x since 2006
The Mortgage Refinance Boom of 2010-2013 has crashed

"It's Hard Out Here for a Pimp"
(Featuring Shug) from Hustle & Flow 2005

Exit Through Gift Shop

5/14/2014

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"Hedge Fund guys are the new Japanese."

Old time realtors who worked through the flat market of the 1970's and the 1980's bust in Canada will remember offers made on over priced listings that included some cash, some financing and lots of jewelry, boats, cars and overvalued art. It's what happens when over leveraged investors realize that a declining asset price without an income stream would be better traded for over priced real estate.

The chart above shows the share price of Sotheby's Auction business since the later 1980's. Five peaks have been set and the last three since the 2008 blowout have been on a trend of lower highs. In the pit of gloom of 2009, the BDI share price hit the 2003 and 1988 lows.

The chart captions on the 5 peaks refer to the 2011 New York Magazine article by Marc Spiegler; "Five Theories On Why the Art Market Can't Crash and why it will anyway." In brief Marc underlines the bull argument for investment in art:

1) The Expanded Art World
"...the global market is up to twenty times as large as it was in 1990."

2) The Art World’s Gone Global
"...the next big collectors will emerge from Russia and China, yes, but also India and various Arab emirates."

3) Art Is the New Asset Class
"...it’s a trillion-dollar asset class that in many ways works a hell of a lot like real estate."

4) Diversification As a Safety Valve
"...there’s a constant process of mini-corrections, as some genres rise while others fall.)

5) The Japanese
"...there’s plenty of other clueless money in the market... the hedge-fund guys are the new Japanese."

At the time of the NY Magazine article (May 2011), BDI was in an early sell-off phase and went on to become a 50% art lesson.

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The chart above shows Sotheby (BID) and its anagram BDI (The Baltic Dry Index) heading south as the Shanghai Composite Index (SSEC) collapses into 2006 and 2001 lows.

The reversal is underway even as headlines trumpet new highs on selected pieces of art.

"Christie's racks up $745m in one night (a record) and the bubble keeps inflating: This week's mega-auctions are once again reaching obscenely high prices, with a Barnett Newman selling for $84.2m and a Bacon triptych close to that. Why is there no sign of a crash?" Jason Farago, May 14, 2014 TheGuardian.com

Jason answers his own question with:
1) There is only one art world now,
2) Enough people believe the hype,
3) You've got to put your money somewhere,
4) Art isn't part of the real economy,

I think he means "Hedge Fund guys are the new Japanese."

An observation from February 2014 on the Vancouver Gallery scene by artist Win Seaton:

Many of these properties (Art Galleries along Granville St) have been purchased by offshore owners and as a result the average gallery space on the street is more than $10,000 a month. This increase combined with the decline in art sales makes it is easy to see why the migration (of Galleries) away from the area. Of course a few of the major galleries remain run by the same owners, like Heffel Fine Art Auction House – the key word here being ‘auction’. Along with ownership changes of these properties, the market has changed to reflect the demands of offshore buyers with deep pockets.

The auction is replacing the gallery as an expedient method to monetize art. As Win points out "Rental fees for Canadian art is a tax deductible business expense and the purchase of Canadian art can be a depreciable asset."

Clips from the movie "Exit Through The Gift Shop"

Realtors at Risk

5/10/2014

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"2 deals make $50,000"
Lawrence Dale (opponent of anti-competitive MLS practice)

When I saw this chart of Canadian Realtor Population growth which in the last 40 years has spiked by 336% or six times our civilian population growth of 55%, I am reminded of Marc Andreessen's 2011 quip that "software is eating the world" which lit up the Twitter-sphere and led to a Wall Street Journal article sounding the warning bell to workers who are incorrectly trained and educated.

More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

Many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. This is a tragedy since every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high. This problem is even worse than it looks because many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again. There's no way through this problem other than education, and we have a long way to go.

As data become more accessible, realtor services become less valuable. Have you noticed that most realtors have trouble answering simple questions for fear of being challenged by litigation.

Nearly half of American jobs today could be automated in "a decade or two" according to new research. The Atlantic Jan, 2014

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Here is Thomas Frey (Innovations Editor for The Futurist Magazine) with his view of just a few of the skills (162) that will be highly prized in the future.

Meanwhile in Canada, if we have not already had our brain's drained into a Silicon Valley somewhere, we leave our homes and go toil in the muck of the Athabasca. (Alberta Earnings are 22% above Canada's average - April 2014 data).

Whale Watching

5/2/2014

33 British Homes sell for £1 million+ Every Day

A 16,000 sf unfinished penthouse shell gets "snapped up" by an "eastern" European at One Hyde Park in London for £140 million with finishing costs expected in the range of £175 million and a "stamp duty" possibly as high as £21 million. All four penthouses in the development are now spoken for.
Source: The Daily Mail. More Whale Watching Here.

"Mystico & Janet - Flats Built by Hypnosis"
Monty Python 1972

Rumors of War

5/2/2014

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Mommie Dearest

The Asian Miracle is not going to be canonized this year.

The chart mashup shows that commodity returns can peak during war and the rumors of war.

Since the Arab Spring, the Tiger Mom has become Mommie Dearest.