Daily roundup- Monday, September 6

Here are some of the must-read stories from the past few days along with some of my own commentary. This will hopefully be a daily feature on this blog.

“Toronto home sales plunge after rush to buy”

Key quotes:
“Toronto area fell by 22 per cent in August compared with last year”. This is the third straight month of significant sales drop.

“Average price for August was $411,012…At the peak in May, average prices were $446, 593.”

Some of the other big realtor boards released their data earlier this week:
Vancouver- Prices down 3% from previous month, sales drying up, inventory on the decline.

Same story for Edmonton: Down 2% from July. Sales down sharply.

….And Calgary got equally shellacked

A nice reality check courtesy of the Grope and Flail:

“Sellers’ market over for housing”

And another interesting piece:

“Favourable US data suggest Canadian rate increase”

I’m going to take the opposite view on this story. I have been surprised all along that Canada would raise its rates, as I’ve seen that the ‘recovery’ has been smoke and mirrors, driven solely by inventory restocking and the associated spin-off from the housing ‘rebound’. The economic data out of Canada has been weak at best lately. Ultimately it is a moot point. We will see the emergency low rates of 2008-2009 again before a serious rate tightening cycle.

This one is flat-out wrong:

“Beware the bond bubble”

Also complete bunk. Every piece of data I have read has suggested that boomers nearing retirement are substantially underweight in fixed income (bonds) in their portfolios. We are only mid way through a significant shift towards income-producing assets. The bond rally still has legs. Bonds will see a strong bid as the economic news continues to sour both north and south of the border.
Also, as an aside, while we did see a rally in the stock market and a selloff in bonds on Friday, that was on extremely weak volume on the indexes. The conviction is not there. Lately it has been the selloff days on the market that have been marked by substantially higher volume.

Finally, a nice piece from Macleans:
“Avoiding the crash”

I love this piece of logic. The basic premise is that the government will step in to ensure an ‘orderly correction’. Bull! The government has already fired their major bullets in late 2008-2009 in the government-induce reflation. Had they not, we would still be experiencing the correction that had started in 2008. But, as you will learn in the coming days, this has done nothing more than pull demand forward and kick the can down the road a bit further. Fundamentals have not been changed. At best the government can only prolong the bubble, not stop it altogether. If it was in their power to do so, would the US housing market still be tanking? Come on!
Vancouver Real Estate Anecdote Archive, a blog I enjoy did a good commentary on this story. I’ll let them do the talking from here.

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