House prices decline for third consecutive month; Major GDP miss in Britain; House price double dip accelerates in US

Teranet Index declines for third straight month

The November Teranet index released today registered its third straight monthly decline.

“Canadian home prices in November were down 0.2% from the previous month, according to the Teranet-National Bank National Composite House Price Index™. This retreat followed monthly declines of 0.4% in October and 1.1% in September after a run of 16 consecutive increases.

November prices were down from the previous month in four of the six metropolitan markets surveyed. Declines of 0.9% in Ottawa and 0.5% in Toronto were each the third in a row. The Calgary decline of 0.7% was the fourth in a row. Halifax prices were down 0.8%. Montreal prices were again flat from the month before. Prices in Vancouver were up 0.6%. After three consecutive months of decline in the composite index, Canadian home prices are still 4.8% above the pre-recession peak of August 2008.”

The rate of deceleration is certainly indicative of a rapidly cooling market.

 

Major GDP miss in Britain…standard of living to plunge at fastest rate since 1920s

With the full weight of the coming austerity budget measures yet to be felt, the British economy declined 0.5% in Q4 2010.

Bogged down by an over-indebted consumers, a cooling housing market, and weak demand from Europe, the growth prospects over the short term are not great absent significant monetary stimulus.  While some might argue that our recovery is on more solid footing, the same headwinds of lackluster consumer demand, a falling housing market, and a weak economic neighbour stalk us too.  It’s why I’m forecasting economic growth significantly lower than the current consensus.

Interestingly, mortgage lending by the major British banks sank to an 11 year low in December.  Here in Canada, we face new mortgage rules that will remove demand for credit and will pull at house prices.  As Britain is discovering and we’ll soon learn, it’s exceptionally difficult to stimulate a consumer-driven economy when consumers are maxed out and demand for credit dwindles.

To add to the gloom across the pond, the Bank of England chief declared yesterday that the standard of living in Britain has steadily eroded at a clip that is matched only by the erosion experienced in the 1920s.

“Families will see their disposable income eaten up as they “pay the inevitable price” for the financial crisis, Mervyn King warned.

With wages failing to keep pace with rising inflation, workers’ take- home pay will end the year worth the same as in 2005 — the most prolonged fall in living standards for more than 80 years, he claimed.”

In Canada we have the double-edged sword of a rapidly rising currency.  Though it pressures out exports, it also masks increasing import costs which would otherwise impact the CPI.

House price double dip accelerates in US

Things continue to get uglier south of the border.  House prices continue to fall, consumer sentiment towards real estate continues to sour, and foreclosures continue to mount. House prices dropped 4.3% in November from year-ago levels.

“U.S. home prices dropped 4.3 percent in November from a year earlier as the housing market struggled to emerge from the worst crash in seven decades, according to the Federal Housing Finance Agency.

Mounting foreclosures are depressing home values as unemployment above 9 percent saps real estate demand. The share of people who said they intended to buy a home fell to 1.7 percent in November, matching the level at the end of 2009 that was the lowest in more than four decades, according to the New York-based Conference Board.”

It’s hard to imagine the massive change in sentiment south of the border without having lived through it, but it’s a contrarian’s dream.  Momentum will no doubt take house prices lower, but there’s enough blood in the streets that patient vultures can scoop up houses at much less than comparables. 

I don’t expect sentiment to move to these extremes here in Canada, but they will fall from their current lofty levels….and they’ll fall hard.  Once the illusion of future price increases comes in to question and sellers significantly outnumber potential buyers, then the deals will be found. 

Cheers

Ben

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6 Responses to House prices decline for third consecutive month; Major GDP miss in Britain; House price double dip accelerates in US

  1. i.see.debt.people says:

    [quote]Once the illusion of future price increases comes in to question and sellers significantly outnumber potential buyers, then the deals will be found. [/quote]

    ..and sellers beating a mad rush to the exit without getting trampled.

  2. backwardsevolution says:

    After the stock market crash in the States, vulture investors did swoop in, thinking they got a great deal, only to be underwater themselves not long after.

    • rp1 says:

      This is very true, and one should expect a long downtrend. But if the price is right it can still make sense to buy a slowly depreciating house as opposed to renting. Not that I expect anyone to do math ;0

  3. DancinPete says:

    “there’s enough blood in the streets that patient vultures can scoop up houses at much less than comparables.”

    Hi Ben, any suggestions for investment vehicles to capitalize on the low US RE prices, without having to personally own it?

    thanks,

  4. Ardi says:

    I am sure once they update data trend would be differnt as of new year, I look closely GTA- Vaughn market (N03) and most of houses are getting multiple offers, specifically a house $689K sold $740K, another $717k sold $775k,
    it never goed down we are price out.

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