Friday Numbers/TSX Drop/National Post

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.



Filed under Daily Numbers, National Post

103 responses to “Friday Numbers/TSX Drop/National Post

  1. s.p.

    my 2cents.
    i think that 2008 will see a 3-5% increase in the local housing market.
    typically we are ‘dragged’ along by what happens in the US but usually are delayed a bit. i predict that the vancouver housing market will dramatically begin to correct in late 2008 and onwards.

    this is merely a guess – i have been wrong (if you ask my wife she will say i am wrong 90% of the time 😉 )



  2. Tony Danza

    I have a hard time believing that a significant number of the speculators that are driving Lower Mainland RE appreciation are affected by the stock markets. I would imagine they are “all in” or doubling down on condos. However maybe buyers at the margin will be affected by banks lending standards tightening this spring?

    Either way it will be an interesting spring session.

  3. s.p.

    hello mr. danza,
    i dont believe that the stock markets will affect lower mainland housing – but what the stock market does affect is the mood.
    mood/perception of recession/doom+gloom does have an affect on how people invest.


  4. AmPa


    Let the good times roll. I sold all my stocks last week.

    Sitting on cash here, and I’ll be ready to pounce in once the correction is in full force. But then again, won’t also be so many other, hence drive the market high soon afterwards?

    It’s a good motto anyways, “Sell when they are yelling, buy when they are crying.”

  5. househunter

    I agree with s.p.

    There will be no major effect of the stock crash on Lower Mainland real estate. I think its going to push some people to move into harder assets if this is prolonged which means more demand on real estate. BUT people who have been hurt badly by the stock crash may get cold feet. Either way, we need a local economic shift to bring down these insane prices. Will the local economy get affected? No idea.

  6. Annon

    I didn’t reply to $fromA$ia earlier but I think the cracks in Vancouver RE have already started. They have started with the number of job losses and much slower business expansion plans from corporates and lots of vacancies in retail office spaces (perhap Rob can confirm the retail space shortage?).

  7. Anonymous

    January 21, 2008 at 11:08 am

    “Let the good times roll. I sold all my stocks last week.”


    Sold just before the decline or during the decline?

  8. robchipman


    In my area (East Van) there have been lots of commercial vacancies for a long time. I think that’s typical of a few areas. New building sells out the residential, while the commercial hangs around a while.

  9. passerby

    > Will the president’s plan work?

  10. Annon

    It’s funny and even sad to watch US voters to even consider Clinton, McCain, or Romney. No wonder their ship is sinking and quite a few of them still have no idea.

  11. Annon

    Thanks Rob for the comments on retail units. I do expect short term rebound on stocks though.

  12. TI

    Real estate will be the worst investment during recession because of its liquidity and high leverage. Comparing to securities, real estate could be easily sold on big discount (50%) for valuable cash.

    Stay away the housing market and lenders who will be next victims (big bad debts waiting ahead).

  13. Dyugle

    People will soon enough start hoarding cash and sell all negative cash flow investments. I am waiting for top quality income trusts to yield 15% then I may start to invest again. For now though I am sitting in GOC bonds at a poor 3.25%. In the next year I expect the yield on the bonds to drop to around 2% so I can sell it and get a capital gain on the sale boosting the return to 4.5%. At that time the trusts should have additional yield. Remember markets usually rally from an oversold position. However all market crashes have happened when the market is oversold. Crashes are rare but it is still something to consider when you hear a talking head say that the market is oversold.
    Good luck all I believe we need it.

  14. fish10

    good post Rob.

    I will put a link to it from my own blog and add my comments on this debacle.

  15. AmPa

    January 21, 2008 at 11:40 am

    “Sold just before the decline or during the decline?”

    Sold after a 2-3% decline.

  16. blueskies

    i’m willing to bet TSX will hit 9000 before it hits 14,000

  17. chip

    Moved everything into cash from equities in late November. Sold our property in 2005, so I guess I’m one for two on the timing.

    My feeling is that these kind of stimulus packages have little effect unless they are permanent. If they’re temporary, people will save rather than spend.

    But I’m not too bearish on the US economy. It was due for a shakeout and we’ll probably see a slower first half before recovering.

    Canada is a different story. Commodities are great in runups but the crashes can be severe. It will depend on how much the slowing US economy impacts growth elsewhere, particularly in China.

  18. jesse

    “We’ve watched the marker defy the theory for several years.”

    To be clear, the theory is that fundamentals such as housing affordability limit the long-term average market price. The theory is clear that the timing of the reversion to the “mean” is unknown but, so goes the theory, the end result is that the prices will revert to bring the fundamentals back in line with the long-term average.

    The basic contention of this theory is that “things are different this time.” For example, people will now permanently a larger slice of their money into housing so affordability is permanently worse, interest rates are permanently lower so people can afford to carry higher principals, globalisation has opened the door to a new generation of landowners, etc.

    The theory will be proven correct if, in some time in the future, affordability falls back to the long-term average. This is accomplished by falling prices or rising incomes. Unfortunately, the way the theory is worded (without a time limit), it is only proven wrong after the fact. For practical purposes this is why a time limit to the theory comes into the discussion because one prefers to be proven right before one dies.

    Of course if the theory is proven right in the next 10 years, it means the explanations for why “things are different” are wrong.

  19. Anonymous

    “Sold after a 2-3% decline”

    Good foresight!

  20. NOTHING will stop this train crash. Not a cut in interest rates. Nothing.

    The domino effect is already starting. RE needs an outside force to send it into shock, so that fundamentals return to sane levels.

    It has been said that every RE collapse has been preceded by a sharp dip in the stock markets. Is today Canada’s day of reckoning, Mad Monday January 21, 2008?

    Rob, I am reading not just between your lines, but your lines themselves. How come everyone else who’s a bull here cannot understand your dire prediction? Fear? Denial ? Both of those will not change the details of the apocalypse.

    Even if you wish something away, it does not mean it WILL go away. Too bad, I hear you.

  21. robchipman


    I’m not making a dire prediction. Markets go up and down. I don’t think we’re going to see another Depression like the one my old man lived through. I think the US is going into recession (we used to say that a recession was 2Qs of negative growth – now we seem to get info so fast that we recognize the recession earlier), and the fallout from that is unknown. Will emerging markets continue our commodity economy? If so, good for the West, bad for Ontario and Quebec, and certanly something new: the US will get a cold and we won’t get pneumonia. Again, some suspect that will happen, but we don’t know, and if it does that will be a huge change.

    Take note that I don’t think that the national Canadian market moves in lockstep, either, so this won’t be (imho) “day of reckoning” for Canadian real estate. We’ve had a good run around here. It has to end some time. This stock market melt down may be enough to do it. But maybe not…


    I guess I can blur cash flow fundamentals and affordability. There have been some big changes that we can’t deny that do make it different this time – and of course I’m referring to increased liquidity, hidden inflation and easier lending practices. By “different”” I mean different in degree, not in kind. I think we’ve made some shifts in where the goal lines are, but the game still follows the old rules. The numbers have to add up in the long run.

    And you’re right: the market defying the theory for several years has to take into account the long term nature of the theory’s application. We don’t revert to mean in the matter of a few months, at least not in RE. That makes it a little easier for a market to “defy” the theory.

    If we agree that we’ll revert to mean, what does that imply? We exceed affordability now, right? Will we revert to owning being a little more expensive than renting? Is that the mean? Or will we see a pendulum-like swing? I think we’ll see the latter. Keep your powder dry – buying opportunities lie ahead!

  22. beans

    Prettywoman: While I am not a bull, it is true that in the last 25 years, each drop in BC real estate values were associated with a sharp drop in the stock markets. However, large declines in the TSX have not always yielded massive declines in BC real estate. Early 1980’s, early 1990’s, mid 1990’s all had a positive association of a stock market drop and declining real estate values. At the same time, significant declines in the TSX occurred in 1987, 1998/99, as well as 9/11 which were not followed by dips in real estate. Obviously there are time lags with everything. Another note, almost all of these RE dips were strongly associated with large hikes in interest rates. Currently, yes, the credit risk premiums are rising for mortgage (lower bank discounts), but this is in part counteracted by recessionary tendencies and lower overnight rates.

  23. Snick


    Slippery as always. The connsumate politician.

    Now, your readers are supposed to look at you as “The Prophet” who warned us all along.

    You’re full of it.

  24. Drachen


    “RE needs an outside force to send it into shock, so that fundamentals return to sane levels.”

    You’re putting the cart before the horse there. I think it’s the fundamental weakness in housing causing the markets to drop.

    All of these processes feed on each other, it’s really not possible in such a complex system where everything is interrelated to say A causes B, in this case B caused A even though B hasn’t really happened (in Canada anyhow) yet. That’s the predictive nature of the vast organism consisting of thousands of intelligent minds that control the markets…

  25. rjamer

    Regarding interest rates,,Joe and Jane six pack are mortgauged to their eye balls now,,along with credit card debt,lines of credit,, $1.10 litre gas and God knows what else.. You don`t need 18% interest rates to wipe them out now,,, a few more points would probably do it.. JMHO

  26. beans

    rjamer: True, for those that bought at the margin of affordability 3-5 years ago and have their renewals coming up. At the same time, part of the increase due to mortgage rates on the fixed terms will be offset by income gains during this same period.

  27. Anonymous

    Australia is down 5% in early Tuesday trading


    Index Value: 5,347.50
    Trade Time: 7:32PM ET
    Change: 283.40 (5.03%)

  28. patenttranslations

    Korea is down more than 4% and Japan nearly 4%, this on the back of yesterday’s losses. Tomorrow on Wall St. is going to be interesting.

  29. Cympl

    A bit worrying to hear about people selling all their holdings…no one can predict the market. Tomorrow it could go up 6% or down another 6%…just keep investing your long term money on a regular basis to get cost averaging. If you sell now, you could miss that ONE big day that accounts for 50% of a year’s return…keep money you’ll need in the next 10 (or even more) years out of stocks or you could lose a great deal.

  30. -A-'s Economics Prof.

    USA and many parts of Canada have been in recession for quite sometime.

    The GDP growth is bogus, it is mainly inflation reported as growth.
    If the slowdown is “officially” labeled as a recession it would probably rival the Great Depression.

    The traditional meters have been tampered.
    But not to worry TQN, Vanreal, et, al, Vancouver is immune we have the Olympics, and by the time that bill is sent to the taxpayers, the 15 billion transit bill will seem like spare change.

  31. Domus


    however much I enjoy the discussion on this blog, I am surprised of your turn-around.

    It is true to say that markets are cyclical, they go up as well as down.

    In fact one has to be blind to have missed the up…..
    However I do not remember ever hearing you say anything about large, long-lasting down swings, possibly lasting years and generating large losses for the buyers, who will not recover to the nominal level for many years.

    There is always this `mantra’: long-term buying is never wrong. Let me tell all the readers loud and clear: long term buying would be stupid right now!! And you can come up with all possible stories about being cash positive, and low interest rates or whatever else you want to throw in.
    Dear readers, especially if you are young families or first time buyers: do not buy now or for the next year. You will thanks me……

  32. Domus

    …by the way, for those who have not yet figured it out: this mess all over the world is because of housing!

    The stock market collapse today is due to global recession fears, which are due to the full, unambiguous crash of inflated house markets in places like Florida, California and parts of Europe/Canada.

    The notion that Vancouver RE will stay at its current valuation is laughable. Not debatable: laughable.

  33. -A-

    What about the innocent victims who signed up for 40 year mortgages.

    That is an additional 15 years of life stolen from them by the RE pumpers.

    The pumpers should have to face “ethics court”
    and ordered to live and aid the impoverished.

  34. -A-'s mother

    Well, this goes to prove that I sure won out renting all my life. To think all that money I would have lost if I had bought in the peak of the market back in the 1960’s.

    As a bonus, now I won’t have to leave a estate to my disgruntled children.

  35. -A-

    The Central Bankers meddling cannot work, because central bankers can restore confidence in the system only if it is a “perceived” problem.

    In this instance it is not a “perceived” problem. It is a real credit crunch problem created by the biggest bubble maker in history Mr. Maestro Greenspan.

    Biggest Bubble in history=Biggest Crash.

  36. Domus


    those who signed on the dotted line for 40 years amortization are better off defaulting… is already happening elsewhere.

    You take the hit, destroy your credit record but can start again with a clean sheet after 4 years.

    You can live without credit card for 4 years, can’t you? It sure beats stagnating equity for the next 20 years.

    Trust me on this: history teaches one thing only about today….central banks will have to inflate their way out of this eventually….it’s too big a mess to go by the book.

  37. Domus

    This is from Bloomberg’s site:

    “….Fed funds futures show that 72 percent of traders expect the Federal Reserve to cut its benchmark rate to 3.5 percent from 4.25 percent on Jan. 30. Banks and consumer stocks have failed to recover even after policy makers lowered the target rate for overnight loans between banks three times since September from 5.25 percent…..”

    Inflate, inflate, inflate………

  38. -A-

    Domus, our locals have overdosed on the Koolaid, they will hang on for a long time. They will wait in vain for a market turn around. Muir, Bill Good, Debra, Jurrock et al will keep the hope alive.

  39. -A-

    Inflate, inflate, inflate………

    it can only delay and make the problem worse.

  40. Domus

    Muir, Bill Good, Debra, Jurrock et al……sounds like small fish in this big tsunami.

    I am not sorry for brokers, agents and sector workers who will lose their shirts. I am really sorry for illiterate first time buyers who are pushed into the market by their wives/relatives/peers……

  41. Domus


    inflating won;t save housing, which is doomed for the next 5 to 10 years. For the US, however, it will erase large liabilities in Treasuries towards China, Japan, Arab countries……easy way out for them.

    The economy, of course, will suffer in the long-run…..inflation ain;t cheap in real terms, you always pay for it.

  42. -A-

    Domus, agreed, on your above points.

    Do you see why I have been beating the “ethics and moral” drum so loudly?

  43. deb

    how long is a quarter? Is it a quarter of a year? I have never really known this. Thanks

  44. Anonymous

    hopefully, this will cause continued drops in the bank of canada rate until it sits around 2.5%. The US will not only give tax rebates but they will drop their rates significantly. This is an election year and the republicans are in major trouble. interest rates should tumble! I also don’t agree with pretty woman that stock market crashes equal vancouver real estate crashes. It sure didn’t happen in 87 in fact I think it helped cause the bubble of the late 80’s as people were looking for anywhere but the stock market to put their cash. Interesting times.

  45. Domus

    1 quarter = 3 months

  46. Domus

    Rates could go to 1% and you still would not have banks lending like before.

    There is now a disconnect between central bank’s rate and lending rates. The disconnect is called `default risk’.

    Hard to see where money is safe: apart from treasuries (which always pay, as they can print the money anew), I would say that commodities and food will recover. Tangible, necessary and in high demand from the East.

    Housing is dead for a few years. Let’s talk again around 2014 for investment opportunities with real terms capital gains/upside.

    Yes, interesting times.

  47. robchipman


    Take a look at the graph of Vancouver prices since the 1980s. Up and down markets last years. That’s self-evident. When I say buy according to smart metrics, and prepare to hold for the long term through down markets the clear implication is that the market will go down at some point, and the downturn could last years. If that wasn’t the case I’d say “Buy whatever, whenever”. You’ve never heard me say that.

    In terms of the mantra that long term buying is never wrong, that is in direct conflict with “buy according to specific metrics”, which is something I advocate.

    None of that translates into a turnaround on my part. We’re coming off a smoking year in price and volumes. The market is still strong. Inventory is low. Interest rates are low. The local economy is strong. We’re seeing big losses in the stock market. Not to put too fine a point on it, but actual losses in the stock market vs. actual gains in the real estate market.

    Those stock market losses, and the events which caused them, may translate into losses in local real estate. Some have opined here that they won’t. Regardless, you can’t buy Lower Mainland investment property today at metrics which make sense. The key word is “regardless”. It’s been that way for probably 18 months.

    So, here’s my position: the current real estate market is still strong. It may change, and recent events may mean the change will occur sooner rather than later. We’ll see in the fullness of time. Buying opportunities await, because we haven’t had any for quite a while (and the market always changes, blah blah blah). Where’s the turnaround? Everything I’ve written on the blog is still here. Find the quote where I say the market goes up forever, buy anything, anytime, reverses will be temporary and won’t hurt anyone. If you can’t find those quotes, can we agree I haven’t actually said them and you’re confusing me with someone you met at a party? 🙂

    BTW, if central banks inflate their way out of this mess, what will that do to my rents and my mortgage payments?

  48. Domus

    BTW, if central banks inflate their way out of this mess, what will that do to my rents and my mortgage payments?

    It will make them numerically large, practically worthless…..

    By the way, would you advise a first time buyer to get into the market in the lower mainland in February 2008? Let me rephrase it: what if that ftb was your brother?

  49. -A-

    BTW, if central banks inflate their way out of this mess, what will that do to my rents and my mortgage payments?

    Better question:

    What will happen when the central bankers have to deal with stagflation?

  50. Domus


    in response to your previous post. I remember posting the Sauder real price chart for Vancouver almost a year ago. I also remember the following discussion, when I was making the point that the appreciation was unsustainable.

    You made similar remarks to the ones you made tonight. Quote:

    “We’re coming off a smoking year in price and volumes. The market is still strong. Inventory is low. Interest rates are low. The local economy is strong. We’re seeing big losses in the stock market. Not to put too fine a point on it, but actual losses in the stock market vs. actual gains in the real estate market.”

    Are you standing by these remarks? The way I read them is: yes, an housing crash in not impossible, but there is no evidence pointing in that direction. Shall I read them that way?

    If not, how should I read them?

    It is well possible I misinterpreted you in the past. If it so, I apologise. In order to avoid such occurrence again, I would like you to assign a probability (between 0 and 100), to the following 4 price events:

    1) Vancouver’s RE is on average between 20% and 30% lower in real term in 3 year’s time;

    2) Vancouver’s RE is on average between 10% and 20% lower in real term in 3 year’s time;

    3) Vancouver’s RE is unchanged in real term in 3 year’s time;

    4)Vancouver’s RE is on average between 10% and 20% higher in real term in 3 year’s time.

    Please, give me your quotes. In this way I will not misinterpret you in the future.

  51. Wet Coaster

    There will NEVER EVER be a decline in Vancouver RE market even if (or as) US descends into a depression (not recession). Why? Because, repeat after me: “Real estate never goes down and Vancouver is the most desirable place on earth to live!” Let the panic begin!

  52. Domus

    OK, Rob. I want to start things up, so that we can compare our views without ambiguity.

    Here are my wild guesses of the probabilities 1) to 4):

    1) 5o out of 100 that crash is between 20 and 30%;

    2) 35 out of 100 that correction is between 10 and 20%;

    3) 15 out of 100 that prices are unchamged in real terms;

    4) 0 out of 100 that we have any appreciation.

    My numbers sum up to 100, which means they are easy to compare. They are guesses based on the information that I have available and based on my judgement.

    Please, I invite you to provide your numbers, for future records. Talk is cheap, and the discussion goes nowhere.

  53. Domus

    ….and please, do not tell me that you are not in the business of making prediction, that would be a cheap way out. I would lose consideration.

    If you want, just give me your gut feelings. I am sure you have them like everyone else. Give us numbers!

  54. Newcomer

    Domus, do you seriously believe there is a 0% chance of a drop of more than 30%? Not even, say, a 5% chance of a 40% drop. You’re pretty optimistic.

  55. Domus

    Newcomer, you are right. There might be a chance of that, especially in the light of what has been happening in the world in the past few days.

    I must admit that the above multiple choice is for Rob’s perusal: I don’t want him to look too bearish to his potential customers. However, Rob, if you want you can change the catgeories as you wish…..

    Just for fun: I thought 30% drop in real terms would give a realistic target price for Van Re in 2011. Given recent news on slowdowns in China, Japan, Europe and full collapse of the credit system based on “originate and distribute” which kept mortgages low, I think there is now an outside option of about 10 in 100 chances that the drop might substantially exceed 30%.


    I believe there has been quite a few purchases of housing, lately, financed by exotic type mortgages. Thank you CMHC.

    I believe that the credit bubble unwinding will continue to a level where ultimately only conventional type mortgages/low risk loans will be offered. The rest of the higher risk morgages/loans will survive this crisis somehow …or will be VAPOURIZED over a period of time. Bank shares are reflecting this probability rather obviously. A new era for awhile.

    Lower future earnings means lower stock price and layoffs by companies. Builders will continue to build anyways. WHY? All companies continue to do their business until there is little or no profit left in it. So as the world starts to unwind Vancouver will keep pumping out the new units until exhaustion sets in.

  57. Strataman

    Todays figure 44% list/sell condos and29% SFH. Strange SFH seems to be doing worse then condos..maybe because they are past the affordability level? From Pauls daily stats!
    Great to see the breakdown between condos and SFH!

  58. robchipman


    “The way I read them is: yes, an housing crash in not impossible, but there is no evidence pointing in that direction. Shall I read them that way?”

    The answer is “no”. I’m saying, as I’ve said for a long time, that a correction is coming and a crash is possible. I don’t think a crash (more than 40%) is likely, but I could be wrong, and you and I came to that conclusion last April. That’s a lot different from “There is no evidence pointing toward a possible crash”. Take note that I wrote “recent events may mean the change will occur sooner rather than later”. There is clearly evidence pointing to a “possible” crash; if there wasn’t I wouldn’t entertain it as a possibility!

    The point of the remarks is that in the face of real stock market losses some people are saying that local real estate is crashing. I don’t see the crash yet. People are still calling me to buy. I’m just pointing out the difference.

    “It is well possible I misinterpreted you in the past. ” Could be. I don’t know. But you have said that you think I’ve changed my tune on the nature of the market, and I disagree with you on that. Don’t you think its incumbent on you to make a case for your claim? If you can find a quote of mine from a year ago stating the truth (I was accurate, wasn’t I?) surely you can find one that shows I’ve changed my position. Here’s the cool part: I said what I said and its still there for you to quote. We don’t have to wait for any time to pass. You can back up your claim about my change of heart simply by providing the facts.

    Now, if you can’t do that maybe you’ll just admit that I haven’t changed at all. You up for that challenge? 🙂

  59. Anonymous

    Oceania/Asia stock markets continue downward trend; wonder how bad it’s going to be in Europe markets and on Wall Street (futures already down)

    ^AORD All Ordinaries 5,261.60 11:55PM ET 369.30

    ^SSEC Shanghai Composite 4,714.30 10:30PM ET 200.13 (4.07%)

    ^HSI Hang Seng 21,904.13 11:41PM ET 1,914.73 (8.04%)

    ^N225 Nikkei 225 12,652.90 11:36PM ET 673.04 (5.05%)

    ^KS11 Seoul Composite 1,592.56 11:56PM ET 91.00 (5.41%)

    ^TWII Taiwan Weighted 7,568.87 11:56PM ET 541.33 (6.67%)

  60. M-

    Rjamer: “mortgauged” …I like that! I’ll have to use that when I talk about RE around the office!

  61. Domus


    can you give us all some numbers/probabilities (the best guess you can come up with) for the events I have listed above.

    Please, I would be satisfied with that. The sticky point here is that you want evidence of something that cannot be shown, as you have always refrained from making a statement of your views of where the market might be heading. This is what I asking you to do now.

    Trust me, I don’t like to accuse people of cheating. I do not want to accuse you: so, for honesty sake, write down some numbers to the list above.

  62. Domus


    have you seen my previous posts? Any numbers you want to put next to the list of events? You are the star, give us guidance!

  63. DeeDub

    …you have always refrained from making a statement of your views of where the market might be heading…

    Rob has said all along that he doesn’t guess at short term movements because he knows his guesses are as bad as yours (and A’s and Freako’s and etc). That isn’t dishonesty – it’s humility.

    You should try it some time.

  64. jesse

    “What will happen when the central bankers have to deal with stagflation?”

    The answer, as you know, is high interest rates, both long and short term. FWIW, the bond market is not pricing in stagflation. I don’t buy that the central banks will “inflate” their way out of a downturn. The medicine for high inflation, high interest rates, is a bitter pill and probably more destructive than a “low inflation” recession.

    “There have been some big changes that we can’t deny that do make it different this time – and of course I’m referring to increased liquidity, hidden inflation and easier lending practices.”

    It is different now, and although the easier lending practices can continue with more consistency and frequency than ever before, there could still be periods (i.e. years) of tightened lending that can cause significant damage (witness the US where FICO scores required to obtain a loan are now higher than a year ago so lending has tightened), even though eventually the lending standards return. So it is not necessarily different every second from now until infinity.

    “Will we revert to owning being a little more expensive than renting? Is that the mean?”

    There are areas in North America where it has been “cheaper” to own versus rent for decades at a time though I forget what areas. I put cheaper in quotes because I do not know the rent vs own calculations they do and whether they take into account all costs of ownership.

    I believe that people place a premium on ownership — the ability to customize, renovate, and being able to stay indefinitely without fear of eviction. These are real benefits that deserve a real premium. The tightness of Vancouver’s land supply (part geographic part regulatory) with positive population growth puts an upwards bias on property (land) prices.

    The problem comes when property prices are declining. At this point, if prices decline for long enough, people will discount ownership as they are taking the full risk of further declines and buy the adage opposite to today’s: “RE only goes down”. At this point the premium awarded to owners evaporates and becomes a discount. Such a situation is usually left for areas of the world with declining populations, including Japan and the Rust Belt in the US. Even areas like Vancouver, with positive biases in prices, may not be immune, if their values have increased far enough to bias things a bit too optimistically.

  65. robchipman


    Twice recently you’ve said I’ve changed my tune. I think that statement is contrary to the facts. If you disagree, and stand by your statements, just show me a little evidence.

    You say: “The sticky point here is that you want evidence of something that cannot be shown, as you have always refrained from making a statement of your views of where the market might be heading”.

    If that’s true, how can you logically claim that I’ve changed my tune? If you can’t show the evidence its because I haven’t said what you claim I’ve said.

    Again, my advice has always been buy wisely, according to disciplined metrics, prepare for downturns (they will come), prepare to hold long term, and try to avoid putting yourself in a position where you can be forced to sell when the market is down.

  66. robchipman


    Re: changes in lending practices, its tough for me to imagine that they can continue to become more liberal. It has to end sometime.

    “Even areas like Vancouver, with positive biases in prices, may not be immune, if their values have increased far enough to bias things a bit too optimistically.”

    Again, an interesting vision of the future, and one I’ve heard applied to other areas.


    Dow Jones Industrials futures contracts indicate that on Tuesday the index will be down well over 600 points…………..HELP

  68. WoW

    Mkts will likely be down tomorrow, Asia getting hammered again. Won’t go to zero.

    Now, as for those RE numbers, anything telling in them?

  69. craigy


    why don’t you answer domus’ probabilities? it does hurt your credibility for you to simply ignore/avoid it. you can qualify your answer if you want and, in any event, it is just your best guess. does it make you uncomfortable (professionally or personally) to make guesses such as this? if so, why? you don’t seem shy about implying where you stand…

  70. This is “The Road To Hell”

    “And all the roads jam up with credit
    and there’s nothing you can do
    It’s all just bits of paper flying away from you.
    Look out world, take a good look what comes down here.

    You must learn this lesson fast and learn it well.
    This ain’t no upwardly mobile freeway

    Oh no
    this is the road
    this is the road
    this is the road to hell”

    Good old Chris Rhea, a bit prophetic eh?

  71. Popeye

    Househunter, when there is panic in the stock market, people do not move into real estate. They move into cash. All asset classes take a hit. And if you really are a ‘house hunter’ this should be good news for you.

  72. Domus

    “Rob has said all along that he doesn’t guess at short term movements because he knows his guesses are as bad as yours (and A’s and Freako’s and etc). That isn’t dishonesty – it’s humility.”

    Hey, have been wrong in the past and I am the worst market timer. Have I ever said otherwise?

    Rob shoudl answer the questionnaire above, it has nothing to do with being right or wrong. It has to do with finally clarifying where one stands in terms of expectations. We all have them, even if they are wrong.

    “If that’s true, how can you logically claim that I’ve changed my tune? If you can’t show the evidence its because I haven’t said what you claim I’ve said.”

    This is rather empty sophism. Your posts are long and full of words. They say something, and then they cover the opposite of something.

    If I tell you: “the sun will rise tomorrow, then again it might be cloudy”….am I telling you anything about the weather tomorrow? No, I am just covering all angles. That’s your average post. Some people may buy it, I don’t.

    I am sorry Rob, if you don’t answer with numbers to the list of events I posted above, one can interpret that as the biggest piece of condemining evidence.

  73. sidelines


    How is Rob’s statement a sophism exactly?? If you claim that he contradicts himself, please cite some of his past statements to support your position or let up re your “questionnaire” I’m bored.

  74. DeeDub

    Some people may buy it, I don’t.s…

    Maybe that’s because you’ve made such a botch job of your own guessing you want others to do the same so you don’t look so foolish…?

    The biggest piece of “condemning evidence” here is your continued failure to provide even one historical quote to back up your assertions. You ain’t fooling anyone, Domus…

  75. tqn

    “Vancouver is immune we have the Olympics, and by the time that bill is sent to the taxpayers, the 15 billion transit bill will seem like spare change.”

    still sour about that $14bil spending on transit arent we? Owning properties is priceless, for everything else, there is always central bank.

  76. Annon

    After the Fed emergency rate cut, Dow is still down. But TSX is up on a mere .25% cut. Wonder if TSX traders are just too optimistic or simply clueless about what is really happening.

  77. Noname

    TSX is not up because of the .25 cut.

    TSX is up because the DOW did not plummet 5%+ which is would have if there was no rate cut.

    All other Asian and European markets will be up tomorrow, as long as the DOW doesn’t drop something like 5%+.


  78. Noname

    My apologies, it looks like the European markets somewhat recovered due to someone leaking the upcoming rate cut.

    But, my above statement regarding the Asian markets still stands.


  79. Annon

    I guess from Noname’s comment, that’s to say that Asia and Europe won’t save the world if US is in recession. Just look a the last few days of stock sell-offs.

  80. Domus


    sophism means “a confusing or illogical argument used for deceiving someone”.


    I have been wtrong in the ‘timing’. I think the jury is still out whether I will be wrong in the emergence of a crash.

    So, if Rob does not answer the questionnaire above, can I ask you guys to tell me what you think Rob’s opinion on the current market is? Maybe I am too dumb to figure it out….since you seem to understand his points, can you generously enlighten me?

  81. Domus

    ….and Rob, yes, I am still waiting for your answer on the above list of events. I truly want to know what you expect… more words, some numbers…..

  82. Domus

    This is an excerpt from today’s Wachovia conference call with analysts (it is a lending bank):

    “Part of one of the challenges is, and we’ve mentioned this before, a lot of this current losses have been coming out of California and it’s — they’ve been from people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity, value in their properties, and so in a way, we may have — it’s hard to know right now, but we may have seen somewhat of an acceleration problem loans as people have reached that conclusion and we’re just going to have to see how the patterns unfold here.”

    This is the comment, available at Calculated Risk:

    “As I’ve noted before, one of the greatest fears for lenders (and investors in mortgage backed securities) is that it will become socially acceptable for upside down middle class Americans to walk away from their homes. These are homeowners with the “capacity to pay, but have basically just decided not to”.

    Wachovia is seeing that happen now. Imagine what will happen as house prices fall this year and next.”

  83. Domus

    By the way, these defaults will make mortgages much more expensive also for those guys who still pay… crunch. Globally…..and last time I checked Vancouver was still on planet earth!

  84. Sidelines


    Thanks ever so much for your definition of “sophism.” It’s now clear that you know the meaning of the word. Excellent. However, you’ve misused it here: there is nothing deceptive or false about Rob’s arguement.

    Now, either cite some of his past statements to prove your point – or move on.

  85. tqn

    just curious,
    why do Rob have to make a prediction based on the questionaire and to prove what? as he said many times, he makes money on both up and down market…we all know his stand on this market.

  86. robchipman


    “I think the jury is still out whether I will be wrong in the emergence of a crash”.

    I agree with you on that. In fact, I agreed with you back in April of 2007 that while I didn’t expect a crash and you did, I could be wrong and you could be right. In other words, 9 months ago I allowed the possibility of a crash, despite your contention that this is a recent change on my part.

    “So, if Rob does not answer the questionnaire above, can I ask you guys to tell me what you think Rob’s opinion on the current market is?”

    My opinion of the current market is no mystery. We’ve talked about it several times. A correction is coming, a crash is possible. Conituned double digit price appreciation is unsustainable. These are the obvious implications of statements like: the cure for high prices is high prices, we are out of whack with fundamentals, buy wisely, prepare for down markets, and hold long term.

    The question, as always, is when will the current trend change direction? I don’t want to hazard a guess on that. This market has defied fundamentals for some time now, and may well continue to do so (the implication being that it may not contine to do so, as well). No less an authority than the Bank of Canada has presented studies indicating that expansionary periods don’t react in predictable fashion to external stimuli. If the BoC says its hard to predict when the change to a negative trend will occur, why would I hazard a guess? Better, it seems to me, to limit yourself to sharing solid information, even if its limited.

    Sophism is illogic portrarying itself as logic. It is not witholding an opinion which in all likliehood will be worthless. You say that “We all have [expectations], even if they are wrong”. I disagree to an extent. I expect, long term, that real estate will appreciate, and I could be right or wrong (Jesse touched on this in an earlier comment). However, I don’t have short term expectations about the direction of the market. Short term thinking doesn’t enter my calculations. I’ve been clear about that. If you’ve missed that it isn’t my fault. Stating that one doesn’t know the answer to a specific question is honest. Preferring an answer, even if the answer is wrong, to no answer, is delusional. Correct answers are good. No answer and wrong answer are essentially equivalant.

    Now, I’ve answered a few of your questions. You haven’t answered mine. You say that I’ve changed my tune, and you seem to look upon that as some kind of vindication. Do you have any evidence that I’ve changed my view of the nature of the market? If your answer is no, why do you imply that I’m a sophist or dishonest?

  87. tqn

    “Hey, have been wrong in the past and I am the worst market timer. Have I ever said otherwise?”

    You said many times in the past. Hope your family and friends did not take it seriously.

    Can anyone predict if the Feb gonna cut more rate end of this month?

  88. Annon

    Another fed rate cut is on the table. TSX is already assuming the worst is over.

  89. Anonymous

    January 22, 2008 at 11:15 am
    “Another fed rate cut is on the table. TSX is already assuming the worst is over.”

    Then, are you going to invest so new money?

  90. robchipman

    I can’t see the conclusion as being the worst is over. In terms of the sub-prime issue we’re what, 1/3 of the way through the re-sets? Last week we saw two interesting things: Manulife, OMERS et all bought CIBC at $67.05. That was reported as a deeply discounted price, and they were apparently buying value for the long term. At the same time Dyugle dismissed the idea that CIBC had a good P/E, and pointed out that when earnings dropped in the future the obvious mathematical result would be a higher P/E. He recommended a lower P/E prior to buying.

    That looks a lot like 2 smart parties coming to different conclusions. (Right now I think Dyugle looks smarter than Manulife, et al). However, there were good prices on the TSX to be had today, so it rallied. I’m sure there are some guys out there waiting for a rally in order to move to cash. We’ll see more down days, and we might see worse than yesterday(imho).

  91. Domus


    answering the questionnaire does not mean being delusional. It means associating a number (measure) to an event. Nobody knows the future. A measure is rarely one: it is just a way to express individual opinions.
    You obviously do not want to make yours completely known. For whatever reason.

    As for the long-term: I think pretty much anything will appreciate long-term. it is called inflation.
    The question is: will it appreciate relative to everything else? I think housing won’t, for a good lenght of time. Not forever, but definitely a few years.

    Finally, for the cute little posters who keep on swaying their words (sidelines, tqn, you are great guys!): the reason no single post can be shown to express Rob’s view fully is that he never expressed it. Or better, he always left enough ambiguity to be able to go both ways. I don;t blame him for it: in fact, I even insist he answers the questionnaire giving measures (so that he does not have to commit to one view, just say what is most likely in his view).

    He has repeatedly refused to do that. it is baffling…..but you guys (sidelines,tqn) at least
    make up for a funny sideshow and a piece of comedy…..

  92. Annon

    Note that I use “assume” in saying “TSX is already assuming the worst is over.”?

    I don’t agree with TSX’s going up today as I am still pretty bearish on global market. Having said that, I have been also expecting short term rebound and I think that is a reasonable assumption too.

  93. Sidelines

    The only joke here is you and your assinine posts and postering.

    Rob keeps giving you his position: he expects RE to appreciate long term; short term, he doesn’t consider. WTF is so difficult to understand?!

    And “baffling?” Baffling is how you keep going on with your “Rob’s being not clear.” “Rob won’t answer my questions” “Blah, blah, blah”.

    Sweet jesus, man, get a life.

  94. robchipman


    Are you really baffled? Think it through:

    You admit that you’re a terrible market timer and have been wrong with a lot of your predictions. I take you at your word. I can’t see your experience as a strong recommendation to engage in the practice of prediction.

    I’ve told you, repeatedly, that I have no faith in my ability to predict specific outcomes and so recommend preparing for multiple outcomes. I have a method for doing so. Contrary to your experience, my approach has paid off quite well over multiple decades.

    You still want me to predict set outcomes so that later you can decide whether I was right or not.

    We’re faced with your approach, which you admit has been ineffective, and my approach, which has been very effective (and you don’t dispute that), yet you don’t understand why I don’t abandon my approach and adopt yours.

    What is the possible pay-off for anyone? We don’t need to establish a benchmark of my views. Everything I’ve written on the blog back to 2005 is still up and accessible. You’ve admitted as much, and quoted me. The real issue is that you’ve reached insupportable conclusions, and you both refuse to back the conclusions up or back away from them. That’s simply unreasonable.

  95. Annon

    So cool, Fred Thompson dropped out. Sorry guys, can’t help it.

  96. Annon

    So cool, Fred Thompson dropped out. Sorry guys, can’t help it.

  97. Tony Danza


    You’re one to talk about market timing. We may be holding the same hopes for your family and friends in the near future…

    “You said many times in the past. Hope your family and friends did not take it seriously.”

    “Owning properties is priceless…”

  98. Annon

    Rob, please remove the double posts from me and this message as well. Thanks.

  99. Domus


    I was not aware that you know the details of my portfolio and investments…….your method of course is ‘effective’…I hope to read the book some day!

    I want to spell, one more time, my position for the perusal of the people who seem to be upset: I am convinced that the city of Vancouver will experience a general, substantial and protracted downturn in the real value of RE.

    I am aware that, eventually, there will be a recovery. This, I expect, will also take years. So, if you are in for the very long run (meaning decades) and you are oblivious to any other type of investment, you should definitely see RE as the best a person can do with money. Fair enough.

    The fuss here is about a simple fact: I did not remember any posts by Rob discussing the details of a prolonged and substantial downturn (a bit like the one in the US). I might have missed those posts, but my impression was always that Rob was bullish on RE. It’s not a sin: I don;t think that being bullish on RE is particularly bright now, but there are still many people who are…..good luck to them!

  100. blueskies

    the reason no single post can be shown to express Rob’s view fully is that he never expressed it.

    domus you are wasting your breath,
    rob will never paint himself into a corner verbally. he is to cagey for that maybe that RE sales background……

    but he sure enjoys yanking your chain 🙂

  101. blueskies

    You admit…..SNIP……. That’s simply unreasonable.

    rob..step away from the keyboard!

  102. robchipman


    You’re squinting too hard to read between the lines again and reading what was never there. Your investments outside of real estate may be doing great. However, you’ve said, yourself, that your predictions on the RE market have been wrong so far, and that you’re a bad market timer. I’m just quoting you, not making any comments on your other endeavours. And of course, “my method” (as I’ve explicitly stated) really isn’t mine, and is simply common sense.

    You are correct that I haven’t posted anything on the details of a long and protracted downturn in real estate values here, other than anecdotal stories of what we experienced in ’82. Nobody ever claimed I did, least of all me. Are you raising a new complaint? (“hey, no fair, Rob never made my views known! He hasn’t posted the details of an event that hasn’t occurred yet!”)

    You claimed I’ve recently changed my tune about the possibility of a crash. That’s simply inaccurate, and I’ve presented evidence to back that statement up. You can’t present any evidence to back your statement up. You’ve admitted that.

    Rather than simply owning your unsubstantiated claim you’ve compounded it by adding that a) I think a crash is probable (again, innacurate) b) that I’ve have implied that the market can’t go down for anything other than a short period (again, innacurate), that I’m not on record with my views on the market (the record in fact goes back to 2005 on the net, and longer in other printed material), that I’m dishonest and a sophist and that I’m bullish on real estate (a pretty all encompassing, and essentially meaningless charge). Oh yeah, you also changed the subject and submitted a fun survey.

    The survey is great, btw, and it does look fun. I think its a better job than my earlier requests for 2008 predictions. My point remains: can you back up your claims, or is that even important to you?


    I have to ask the obvious: should I paint myself into a corner by saying foolish things? Or should I admit that I don’t know what the future holds? In this case is being cagey a bad thing, or a wise thing? Are you recommending stupidity as a better course of action? 🙂

  103. tits

    boobies are noice

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