There were 275 new listings Friday and 88 sales, for a sell/list of 32.00%. Inventory hit 8,598, of which 2,444, or 28.43%, were over 90s.
As mentioned in the previous thread’s comments, the TSX is taking a beating this morning. Will it rally, or close down? The NSYE is closed today for the MLK holiday, but there was plenty of speculation on the weekend about where it was going. Tomorrow will be interesting.
There’s been lots of talk about President Bush’s plan to jump start the economy, and I think its fair to say that the majority of obsdervers are in the doubtful camp. Coco and I discussed Mr. Harper’s rejection of a Canadian government bailout for sub-prime victims last month. I was impressed that the item made it to the government agenda to begin with - I think that indicated that the problem is pretty big. I was also happy that the government has, so far, at least, adopted a hands off approach. Its enough, I think, that the central banks are intervening as much as they are.
Will the president’s plan work? Writing on the weekend, Terence Corcoran, FP editor, suggests not. I think he goes further, indicating that the attempt itself is wrong headed. Its an interesting read, whether you agree with Corcoran or not.
So, what are we faced with now? Stock markets are crumbling. The US dollar has weakened considerably. Interest rates are poised to fall further, but that may not be enough (and in fact may simply magnify the problem). Anyone with a financial planner has probably heard from them recently, and learned that times like these are why we bought those bonds. We find ourselves in a very different place than the one we were in when I began blogging.
In December 2005 I commented on the gains that we had made that year, and pointed out that those gains would help offset the effects of the coming correction. A few people heard me mention the gains, but few heard the talk of correction. Having witnessed both a crash and a few down markets I’ve always acknowledged the possibility of another crash (in excess of 40% downward) and the inevitability of a correction (20% or more downward) at some point in time. (For those who see an about face here, remember my oft repeated advice: buy for the long term, buy only what you can hold, prepare for down markets, because the market will change).
In the intervening time we’ve seen two arguments leading to negative outcomes for Vancouver real estate. The first is that the more prices rise and outstrip fundamentals the more likely a correction/crash. The theory is fine, but the real challenge has been when? We’ve watched the marker defy the theory for several years. The second argument runs along the lines that the global economy has seen an unprecedented amount of liquidity injected, and that the ineveitable result is a catastrophic collapse. According to many, this is a much longer term problem, and began prior to the dot.bomb. The credit crunch, US housing decline and the sub-prime mess are just the results (and not the final ones, either).
As investors rush to sell stocks and move to cash, what will happen to local real estate? Will it weather the storm? Will it continue to defy some pretty rational observers (as well as downright rabid observers?) Will it suffer price retreats because local fundamentals no longer support it? Or because global events catch up? Or because of both? Interesting times indeed.
The coincidental nature of their contct with me, the US opportunity angle, the idea of buying outside Vancouver to find growth, and the simple fact that they can offer insights into markets that we often comment on makes their presence very valuable.
