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

Labour vs Capital

7/29/2013

CLICK CHARTS TO ENLARGE

Flipping Assets is Not Working for Labour

The series of charts gathered by Lance Roberts in his July 26, 2013 post "Housing" - Is It Really Recovering? demonstrate that in the U.S. the so called Housing Recovery is mislabeled and perhaps is more an example of Capital leverage over Labour.

I took at look at some Canadian charts (left) and see that in Canada a similar condition is occurring with the Balance of Trade being stuck in a negative channel for the last 5 years (in the U.S. it's been negative since 1980's). Canadians are regularly consuming more than they produce and in the last year and half, Labour costs for Capital have plunged back to 2005-2006 levels.

Can Canadian Labour learn how to leverage Capital to create long term value in the social contract?

US Housing Recovery Limited

7/24/2013

CLICK TO ENLARGE CHARTS

REO to OREO to IPO

The Maps show houses for rent in the Phoenix AZ area owned by Silver Bay Realty Trust Corp. which issued its Initial Public Offering (IPO) December 2012 at $18.50/share.

The top map shows their listing stock for rent in March 2013; the bottom map is 4 months later (July 23, 2013) showing their huge listing pile for rent.

It reminds me of Monopoly half way through the game when one or two players have their properties fully developed and are waiting for the remaining players to capitulate before the battle to the finish takes place.

The lower chart shows the percentage price change of Silver Bay (SBY down 14%), the iShares Dow Jones U.S. Real Estate Index ETF (IYR up 13%) and the yield on the U.S. 10 Year Treasury ($TNX up 51%) over the last 8 months. Notice that the Silver Bay stock price did not get a lift with the 10yr Treasury yield's most recent correction. Cash buyers preferred the broader ETF IYR.

There are going to be winners and losers in the corporate rent and flip game and like Monopoly the really big money will probably end up with all the houses.

The housing recovery is for a few shareholders based on the belief of future capital gains. For the rest of society, it's just a different landlord.

My thanks to Barry Ritholtz's So You Want To Be A Landlord? for his observation July 23rd, 2013 of the massive inventory Silver Bay is promoting on their website.

REO = Real Estate Owned (usually by a lender after foreclosure)
OREO = Other Real Estate Owned (financial statement notation)

Urban Myth Detroit

7/19/2013

CLICK IMAGE TO ENLARGE

In Detroit fundamentals were replaced "by Belief".

Fundamental Real Estate Appraisal is done by Comparison, by Replacement and by Income. If you do the analysis you can form a snapshot opinion on market value. If you rely on belief, then good luck to you.

"As part of a reorganization plan agreed to with the U.S., Canadian and Ontario governments, and the company's unions, General Motors filed for Chapter 11 Bankruptcy protection in a Manhattan court in New York on June 1, 2009." It was the fourth-largest bankruptcy filing in U.S. history, following Lehman Brothers Holdings Inc., Washington Mutual and WorldCom Inc. (Wikipedia). Chrysler had filed for Chapter 11 bankruptcy protection a month before on April 30, 2009.

Do you remember that in 2009, the internet was full of photos of rows upon rows of unsold Hummers? Crude Oil had peaked in July 2008 at $147 a barrel. Apparently GM management believed in super sizing cars.

Now Detroit is filing bankruptcy and it is by far the largest of its kind in U.S. history with respect to a city population of about 700,000 and the amount of its debts and liabilities, could be as high as $20 billion according to Emergency Manager Kevyn Orr on July 18th, 2013 (USA Today).

Detroit is going to transform debt into equity. There are 2 ways. Pay it all back to the lenders, bond holders and claimants over time or do what Iceland did in 2008 and default. Since 1980, Argentina has defaulted three times on its domestic debt (Mises.org).

Myth "An unproved or false collective belief that is used to justify a social institution."

Employment Update Canada

7/15/2013

CLICK CHART TO ENLARGE

Part Time-Full Time, Male and Female Employment in Canada

STATS CAN Employment Data: In Canada, more women than men work at part time jobs (+/- twice as many) and both older men and women (45 years and older) are more employed part time than younger men and women (age 25-44).

In the category of full time employment, there appears to be a declining number of younger men (since about 1990) employed relative to full time older men who appear to have made and kept the biggest percentage gains in job acquisition.

With full time employed women the story is similar except that BOTH younger and older women have made large percentage gains in getting employment and for 20 years during the period between 1983-2003, younger women were getting more jobs than older men.

If the trend continues of greater productivity through technological advance and the wage disparity between men and women is not erased, we could see more full time jobs auctioned off to women who live longer than men.

The chart above (updated annually) is also located on the Earnings Page.

GDP Since 1962

7/10/2013

CLICK CHARTS TO ENLARGE

Optimism Bias

HSBC group chief economist Stephen King points to the stock market’s multi-year advance and the under performance of the (U.S.) economy as a growing gap between hope and economic reality by BOTH policymakers and households in his new book When the Money Runs Out: The End of Western Affluence.

King says "We’ve been wrongly budgeting for a return to 3.5% per year average real growth."

Ok lets look at some 50 year charts all with a start date of 1962 to see what the trend is. Down.

The shaded areas on the chart all touch Zero to 5% per year GDP growth at March 31/13 on the right hand % Y axis. All 4 developed economies have the same degree of slope down on lower highs and lower lows.

Australia gets the closest to policy desires but has dropped to 2.5%. Both the United States and Canada are under 2% and Great Britain is under 1%, way under.

If the housing inflationists want to keep chasing real estate prices higher, I suggest they start buying a lot of goods and services otherwise the GDP charts are going to continue eating away at employment, wages and income distribution.

Read the whole July 8/13 interview of Stephen King, by Michael J. Casey, The Wall Street Journal.

Attention Snow Birds

7/9/2013

Sell Your Florida Real Estate BEFORE 100,002,013 AD

You are in a flood plane. Toronto, Detroit and Chicago, you should think about buying property further west and Vancouverites you might want to buy a few more boats. Note to people of Manhattan, the global financial centers are going to move from their present locations. Timing is everything.

"Earth 100 Million Years From Now" Youtube by SpaceRip

Earth's landmasses were not always what they are today. Continents formed as Earth's crustal plates shifted and collided over long periods of time. This video shows how today's continents are thought to have evolved over the last 600 million years, and where they'll end up in the next 100 million years. Paleogeographic Views of Earth's History provided by Ron Blakey, Professor of Geology, Northern Arizona University.

Image Credit MorgueFile.com

ADDENDUM July 15, 2013
Miami is on its way to becoming an American Atlantis.

The following snippets are taken from the July 4th, 2013 issue of Rolling Stone article by Jeff Goodell

Goodbye, Miami

Miami is on its way to becoming an American Atlantis. It may be another century before the city is completely underwater (though some more-pessimistic scientists predict it could be much sooner), but life in the vibrant metropolis of 5.5 million people will begin to dissolve much quicker, most likely within a few decades.

"Miami, as we know it today, is doomed," says Harold Wanless, the chairman of the department of geological sciences at the University of Miami. "It's not a question of if. It's a question of when."

The Organization for Economic Co-operation and Development lists Miami as the number-one most vulnerable city worldwide in terms of property damage, with more than $416 billion in assets at risk to storm-related flooding and sea-level rise.

South Florida sits above a vast and porous limestone plateau. "Imagine Swiss cheese, and you'll have a pretty good idea what the rock under southern Florida looks like," says Glenn Landers, a senior engineer at the U.S. Army Corps of Engineers.

The 5.5 million or so people who now live in South Florida consume more than 3 billion gallons of water every day (including industry and agriculture). Almost all of that is pumped out of the aquifer, drawing it down and allowing more and more salt water to move in.

Since taking office in 2011, Governor Rick Scott, a Tea Party Republican has targeted environmental protections of every sort and slashed the budget of the South Florida Water Management District, the agency in charge of managing water supply in the region, as well as restoration of the Everglades.

"If you live in South Florida and you're not building a boat, you're not facing reality."

Whenever there is a full moon and a high tide, the sea water comes up on the west side of Miami Beach through the old storm drains and flows into the streets. In some places, it bubbles up between the street and the sidewalk.

"God destroyed the Earth with water the first time, and he promised he wouldn't do it again. So all of you who are pushing fears about sea-level rise, go back and read the Bible." Florida State Commissioner

Read the whole article here.

The Perfect Tide: Sea Level
and the Future of South Florida

Rolling Stone Senior writer Jeff Goodell has been following the story of sea-level rise around the world for several years. Independent videographer Peter Sinclair followed Jeff on a tour of America's most vulnerable metropolis. Thanks to Peter Sinclair Dec 5, 2016

CLICK IMAGE TO ENLARGE

ADDENDUM September 4, 2016

Snippets from the New York Times Info Graphic:

"A Sharp Increase In ‘Sunny Day’ Flooding" on the east coast of the USA.

Global warming and rising seas are increasing the amount of tidal flooding on the Atlantic and Gulf Coasts. Flood levels are different from city to city, but the trends are similar.

Boston
The city has not been hit by tidal flooding as hard as cities farther south, but it is working on a plan to combat flooding and sea-level rise.

The Battery, New York City
In 2012, Hurricane Sandy laid bare the city’s vulnerability to storm surges and tidal flooding. The city is spending some $20 billion on a resilience plan.

Atlantic City
The Jersey Shore was badly damaged by Hurricane Sandy, and fierce fights have erupted about how to rebuild.

Annapolis, Md.
High tides now regularly flood the old City Dock, the heart of downtown. A statue commemorating the historic television series “Roots” is sometimes under water.

Norfolk, Va.
Rulers at low-lying intersections help drivers figure out if floodwaters are safe to plow through. Some cars go too fast, creating wakes that damage nearby property.

Wilmington, N.C.
The city and points nearby have been among the worst-hit parts of the country by the increase in tidal nuisance flooding.

Charleston, S.C.
At high tide, water can back up in the old sewers and bubble into the streets. The city is spending more than $200 million on improvements.

Fort Pulaski, Ga.
The road to nearby Tybee Island is being closed several times a year during tidal flooding, and can be scary to drive on even when it remains open.

Miami
Miami Beach plans to spend at least $400 million to raise streets, install pumps and elevate seawalls.

Key West, Fla.
Researchers are studying ancient coral reefs here to determine how fast sea levels rose between the last two ice ages, about 125,000 years ago.

See the original and complete New York Times Info Graphic.

Canada Viewed from the South

7/9/2013

CLICK TO ENLARGE IMAGE

Joshua Brown a Forbes.com columnist and creator and author of TheReformedBroker.com makes the observation in a geographic representation of the world that investors view Canada as defined by:

Oil Sands,
Liars standing in front of "Gold Mines" and a
Real Estate Bubble

View the WHOLE GLOBE as a single 1018 x 481 pixel image.

Great Wall of Vancouver

7/8/2013

CLICK CHART TO ENLARGE

Pride and Prejudice

Here is an excellent chart from Andrew Yan, an urban planner with Bing Thom Architects who plotted out the July 2012 Tax Assessed values of homes in Vancouver BC over and under $1 million. Vancouverites always knew that Main Street was an important demarcation between west and east as it was roughly where the line was drawn for map makers and the post office to differentiate between avenues west and east (streets run north south) and west was-is the best for an address. It is striking that this value border remains so well defined. There are pockets in the east that have created islands of million dollar plus assessments but Vancouver City planners are moving to increase densities in the east in an effort to get more "affordable" housing there and to compete with even more easterly city planners like Burnaby.

Snippet from the July 2013 Globe & Mail The $1-million white picket fence "Seeking to spur builders to pack extra density on valuable land, Vancouver city council in May approved new zoning rules for the Norquay neighbourhood on the East side."

Snippet from June 2013 The Tyee At Ground Zero for Vancouver's Towering Debate "High-rises up to 36 storeys proposed for Commercial and Broadway neighbourhood raise looming citywide question: who decides?"

Snippet from the April 2013 Burnaby NewsLeader Lougheed's turn to become high-density neighbourhood "In Burnaby, we don't just make plans, we follow them..."

CLICK CHART TO ENLARGE

For Whom the Bell Tolls

Since 2009 out of the crash into the pit of gloom, I have been tracking listing prices along the west-east demarcation line with the notion that real estate prices in Vancouver will eventually deflate to long term averages. The rally out of the gloom has been so successful that listing prices remain very sticky and "low" rates hypnotize buyers into ignoring the fundamentals (negative yields) because their faith is that inflation will raise their boat no matter how high the tide is when they launch.

I am not convinced that the Main Street fence will fall anytime soon; my apologies to Jane Austen and Ernest Hemingway.

Toronto Condo Fundamentals

7/2/2013

Image Credit MorgueFile.com

Oh, oh. The mainstream press is looking at fundamentals.

As regular readers of this page know, the investment case to buy a condo as a rent to hold asset is a losing proposition even at our historically low borrowing rates as demonstrated by my recent Vancouver Condo Case Study.

Now that we have bond yields zooming, the alternative to real estate term risk is to sell.

Sheryl King, Special to The Globe and Mail, July 2, 2013: "Prognosis grim for Toronto condo investors" makes some relevant points:

Sheryl's sober math produces a net rental yield of 0.16% per annum on her Toronto condo example.
New regulations: shorter amortization periods result in 100 beep increases in the 5yr rate.
Price correction fears: condo prices up 1.5% Y/Y, but sales down 11% Y/Y in May 2013.
Stats-Can Household Formation demand for condos could be wrong by 50%
Condominium builders are adding 3 more years of supply to the existing 3yrs of supply.

Full Globe & Mail Article here.