3 ways to join the MemberVenue:

$25/month Annual Membership  or  $35/month Quarterly  Membership or  $50 Project Access-fee

password reminder

About    Contact

Media Access

Speaking Engagements

Let's keep the site ad free ... please consider subscribing to the MemberVenue or a donation to assist my research!

FreeVenue:   PeakOil   Economics   ClimateChange   Elections

Beware ... the Lunatic Fringe

MemberVenue:   PeakOil   Economics   ClimateChange   Elections

  Canada Flag
Trendlines Research  ...  Providing macro-economic charts & guidance for Legislators, Policymakers, Investors & Stakeholders
long-term multi-disciplinary perspectives by Freddy Hutter since 1989

United States Flag United Kingdom Flag Australia Flag France Flag Germany Flag Spain Flag Italy Flag Japan Flag India Flag Singapore Flag  I'm pleased to tell TRENDLiners this past Summer 85% of visitors were International (120 nations:  most from USA, UK, Australia, France, Germany, Spain, Italy, Japan, India & Singapore)

My status
clik to follow @TrendlinesDotCa for new chart alerts

Members & Media with query/comments are welcome to email or  skype   me (freddyhutter) for chats, phone & video-cam

 

[New!]monthly update of TRENDLines Realty Bubbles Monitor:   Australia, Canada,  UK  &  USA

  

see also:   G-20 Recessions Monitor

 
this MemberVenue guidance is posted to the FreeVenue after 90-days   ~   Please Donate & let's keep the site ad free...

 90 days too long to wait?  View our current guidance charts via:  (a) Annual-membership special of $25/month or (b) $35/month Quarterly-membership or (c) $50 project access-fee

Visit MemberVenue for archive of these two charts:  2013-2012-2011-2010-2009-2008

 Australia's Realty Bubble rose to $178,000 in April ... home price up $7k over Last Year

Australia's 2013 annual median price (year-to-date) of $415k is 75% ($178k) above the value ($237k) indicated by the traditional price/family-income ratio trend and an incredible 131% premium over its American counterpart.  Prices are running $7,300 above Spring last year (3.5 P/FI ratio).  As shown by the trend trajectory in chart#1, it is probable new highs will not be set 'til 2028.

Australia's median home price detached from the long-term Price/Family-Income ratio of 2.0 way back in 1997.  The onset of record low interest rates shortly thereafter enabled consumers to buy more expensive homes w/o increasing their mortgage payments.  Subsequent irrational exuberance swept the P/FI ratio to an unsustainable bubble high of 4.8 in 2007.  2007 is considered the Bubble Peak as Price in that year was 137% ($249k) above the P/FI ratio trend.

~

  UK's Realty Bubble stable @ £81k in April ... home price up £1k over Last Year

The UK's 2013 annual avg price (year-to-date) of £163k is 98% (£81k) above the value (£82K) indicated by the traditional price/family-income ratio trend.  Prices are running £900 above Spring last year (4.0 P/FI ratio).  As shown by the trend trajectory in chart#1, it is probable new highs will not be set 'til 2053.

The UK avg home price detached from the long-term Price/Family-Income ratio of 1.9 way back in 1997.  The onset of record low interest rates shortly thereafter enabled consumers to buy more expensive homes w/o increasing their mortgage payments.  Subsequent irrational exuberance swept the P/FI ratio to an unsustainable bubble high of 4.9 in 2007.  2007 is considered the Bubble Peak as Price in that year was 145% ($107K) above the P/FI ratio trend.

~

  USA New Home Realty Bubble rose to $28k in April ... price up $24k over Last Year 

  USA Existing Home Realty Bubble rose to $6k in April ... home price up $19k over Last Year

 New Homes:  The USA's 2013 annual median price (year-to-date) for New Homes of $258k is 12% ($28k) above the value ($230k) indicated by the traditional price/family-income ratio trend.  Prices are running $24,200 above Spring last year (2.9 P/FI ratio).  As shown in chart#1, this year's price is running $9k higher than the (soon to be obliterated) 2007 annual record.

Record low interest rates coming out of the 2001 Recession enabled consumers to buy more expensive New Homes w/o increasing their mortgage payments.  Pro home-ownership incentives plus the pent-up demand caused median price to quickly detach from the long term Price/Family-Income ratio of 2.6 in 2002.  As slack lending guidelines and outright fraud became entrenched, irrational exuberance took the P/FI ratio to an unsustainable high of 3.1 in 2005.  Annual median price rose to $241k in 2005.  The monthly record  was $263k in March 2007.  Despite still rising for two more years, I consider 2005 as the Bubble Peak as the 2005 price was a record 26% ($50k) above the trend line.  Except for longtime Trendliners, it is little known the New Home price correction completed its return-to-mean way back in 2009.

For purposes of measuring the economic recovery, it was prudent to also monitor New Homes sales volume.  The 1.4 million units/yr build pace during the 2005 high plummeted to a mere 336k annualized seasonally adjusted rate (SAAR) by Jan/2009.  Stimulus prompted a 408K pace by Aug/2009, but sales plunged to a troubling five-decade low 270k pace in the Feb/2011 pause.  It's up 68% from there to a 454K pace today.


 Existing Homes:  The USA's 2013 annual median price (year-to-date) for Existing Homes of $180k is 4% ($6K) above the value ($174k) indicated by the traditional price/family-income ratio trend.  Prices are running $18,600 above Spring last year (2.1 P/FI ratio).  As shown by the trend trajectory in chart#1, new highs will probably not be set 'til 2025.

Record low interest rates coming out of the 2001 Recession enabled consumers to buy more expensive New Homes w/o increasing their mortgage payments.  Pro home-ownership incentives plus the pent-up demand caused median price to quickly detach from the long term Price/Family-Income ratio of 2.0 in 2002.  As slack lending guidelines and outright fraud became entrenched, irrational exuberance took the P/FI ratio to an unsustainable high of 2.8 in 2005.  Annual median price rose to $219k in 2005.  The monthly record  was $229k in June 2007.  Despite still rising for two more years, I consider 2005 as the Bubble Peak as the 2005 price was a record 34% ($74k) above the trend line.  It had appeared a correction was virtually complete by January 2009, but a new monthly low in Jan/2012 made it apparent median price was still exercising a classic "return to the mean".  My analysis reveals the Existing Home price correction finally bottomed in 2011 and has resumed its secular uptrend.

For purposes of measuring the economic recovery, it was prudent to also monitor Existing Homes sales volume.  The 7 million units annualized seasonally adjusted rate (SAAR) pace during the 2005 high plummeted to a mere 3.77 mu/yr by Nov/2008.  Stimulus prompted a 44% surge to a 5.44 mu/yr pace by Nov/2009, but sales plunged to a troubling five-decade low 3.39 mu/yr pace in the July 2011 pause.  It's up 47% from there to a 4.97 mu/yr pace today.

May 23 2013 monthly update ~ Realty Bubbles Monitor

Overpricing of Median/Avg Home in April 2013

Bubble Today

price rise/fall from same season last year   Bubble @ Peak
$178,000 & 75% up $7,300 Australia $249k & 137%  (2007)
$ 80,000 & 28%  up $3,300 Canada $94k & 35%  (2011)
$  6,000 & 4%  up  $18,600 USA $75k & 52%  (2005)
£ 81,000 & 98% up £ 900 UK £107k & 145%  (2007)

Aug 23 2013 delayed FreeVenue public release of May 23rd MemberVenue guidance ~ The Realty Bubbles Monitor calculates the variance of a nation's annual home price from the trend of its historic Price/Family-Income ratio.  Of the four monitored nations, only the USA price has resumed its secular uptrend after completing in 2011 its 25% reversion to mean.  Alternatively, it is seen Australia, Canada & UK are engaged in generally sideways corrections one to five decades in length.  The weight of excessive mortgage and rent payments faced by families in these jurisdictions continues to be so great a headwind that economic growth will be damped for several years to the point where this factor can facilitate or prolong future Recessions.  That said, comparing this past Spring to last year the median/avg price was up for all four countries. 

By this P/FI metric, lofty home values are most vulnerable in the UK where the avg home is overpriced by 98%.  Double.  Thus it is hardly a surprise its economy suffered GDP contractions in five of the last eight fiscal Quarters.  The Australian median home is currently 75% overpriced.  Their proximity to Asia has assisted in maintaining economic growth but the once robust GDP has slipped to an avg 2.6% over the past twelve months.  Canada's housing bubble was the last to burst (Aug/2011).  The Canadian economy has suffered seven monthly GDP contractions since Sept/2010 and the TRENDLines Recession Indicator projects annual economic growth will not exceed 2.5% within its 2020 horizon.  Canada's Great Recession lasted only ten months, but the short duration feat was not accomplished by clever fiscal management but rather due to Federal Gov't & CMHC decisions to prolong its housing bubble whilst other jurisdictions were mitigating corrections.

These three national realty corrections are going relatively unnoticed by the lamestream media who instead are hysterically disseminating an groundless rumour of the entrenchment of a new housing bubble in the USA.  In May 2012, Gary Shilling made the case USA homes will drop another 20%, whilst in March 2012, Robert Shiller proclaimed it could be five decades 'til American homes re-attain their old highs.  All three extreme views are wrong.  My analysis reveals American home prices completed a classic return-to-the-mean correction in 2011; are presently a mere 4% ($6k) above the 2013 target; and will set a new high in 2025.

This price escalation will occur despite an inevitable rise in interest rates.  The USA TRI model forecasts FOMC will commence normalization of its key rates in Dec/2014, resulting in a 2% rise in 5-yr mortgage rates by late 2016.  International interest rates will likely rise ahead of the USA and these external influences may accelerate the housing price corrections in Australia, Canada & UK.  After Canada's first realty bubble burst (55% 1989), prices declined only 6%.  It took ten years for the inflated prices to become generally re-affordable.

 Canada's Realty Bubble rose to $80,000 in April ... home price up $3k over Last Year

Canada's 2013 annual avg price (year-to-date) of $365k is 28% ($80k) above the value ($285k) indicated by the traditional price/family-income ratio trend and an incredible 103% premium over its American counterpart.  Prices are running $3,300 above Spring last year (3.5 P/FI ratio).  As shown by the trend trajectory in chart#1, it is probable new highs will not be set 'til 2022.

Canadian home prices detached from the long-term Price/Family-Income ratio of 2.7 way back in 2002.  The onset of record low interest rates shortly thereafter enabled consumers to buy more expensive homes w/o increasing their mortgage payments.  Subsequent irrational exuberance swept the P/FI ratio to an unsustainable bubble high of 3.6 in 2011.  2011 is considered the Bubble Peak as Price in that year reached a high of 35% ($94k) above the P/FI ratio trend.

For over two years the Conservative Federal Gov't & Bank of Canada talking points have been blaming the Japanese earthquake, Eurozone issues, the American fiscal cliff, bitumen prices & Justin Bieber for the ailing domestic economy, but CMHC is clearly at fault for this situation.  Canada was the last G-20 nation to fall into Recession in 2008 and the first one out ... not by clever fiscal/monetary policy but rather 'cuz CMHC facilitated the growing domestic real estate bubble by condoning 5% minimum downpayments for its high-ratio mortgage insurance coverage.  The realty bubble financed Canada's false good fortune while other nations addressed housing price corrections.  Data smoothing hides the fact Canada's monthly GDP was negative 22% of the time since Sept/2010.  The present economic softness is clearly a "made-in-Canada" malaise which was foretold in this venue as far back as March 24 2010.

Canada's 1989 bubble may indicate an unfolding scenario.  After surging 55% above trend, prices underwent a lost decade as home values basically went sideways 'til family incomes finally caught up to overpriced inventory in 1999.  In this process avg price dipped only 6% as metrics re-achieved affordability levels.

It is scandalous the measure of underwriting 5% purchases continues and unfortunately the Crown corporation has put Canadian taxpayers at risk.  CMHC expects the Canadian taxpayer will bail out its insurance losses, as was done in the USA with FNMA & FHLMC.  If there is any sense of accountability in Ottawa, look for heads to roll at CMHC.  Why?  Despite Canada's avg home price at the abyss, the following was CMHC's response to my on-going analysis in their Q3 Financial Statement release (2011/11/29):  "At the moment, there is little evidence of a significant over-valuation in the Canadian housing market overall, although some centres warrant close monitoring. CMHC expects housing markets to stabilize next year, and house prices to grow modestly going forward."

"There is No Real Estate Bubble in Canada"  ~  Wall of Shame

As mentioned above, there exists in Canada an extraordinary denial of the housing bubble.  We have seen these rationalizations of unsustainably high prices in North America before:  1989 Canada with its 55% ($53k) episode & the USA's 51% ($74k) event in 2005.

Here are some of the current members of our Wall of Shame:

Canadian Real Estate Assoc  (2012/3/5)  “CREA also said the average home price this year is expected to fall 1.1 per cent from 2011 to $359,100, down from $363,116 in 2011. In 2013, the average price is forecast to rebound 0.9 per cent to $362,300.” - Globe & Mail

Royal Lepage  (Phil Soper, President & CEO - 2012/1/10)  "In the recovery period following the 2008-2009 recession, I found myself repeatedly speaking of ‘irrational exuberance’ in the Canadian housing market.  Expectations were too high and the pace of expansion unsustainable. With this report, I find myself in exactly the opposite position. Widespread calls for a major real estate correction in 2012 simply can’t be justified. The industry has significant momentum entering the year, and is buoyed by the stimulative effect of very low interest rates; we expect the market to continue to expand — albeit at a slower pace.  I expect a 2.8% increase in housing prices nationwide." - Winnipeg Sun

CMHC  (Q3 Financial Statements - 2011/11/29)  "Analysis suggests house prices are in line with demographic changes and economic growth.  CMHC, in consultation with the Bank of Canada and the Department of Finance, is continuing to refine models and techniques used to help identify risks of house price bubbles.  At the moment, there is little evidence of a significant over-valuation in the Canadian housing market overall, although some centres warrant close monitoring.  CMHC expects housing markets to stabilize next year, and house prices to grow modestly going forward". - Globe & Mail

RBC  (Robert Hogue, senior economist - 2011/11/15)  "The average price of a detached bungalow is forecast to rise in all regions, expect B.C. alone, where prices are projected to slip by 1.7 per cent." - Globe&Mail

CMHC  (Mathieu Laberge, Deputy Chief Economist - 2011/11/04)  "House prices and sales will remain stable through 2012.  In its fourth quarter outlook, CMHC predicts the average price will increase 1.2% from $363,900 in 2011 to $368,200 in 2012.  Despite continued uncertainty in the global economy, Canada’s economic fundamentals remain positive, particularly with respect to interest rates, employment and immigration,  These factors will continue to support Canada’s housing sector in 2012.” - CanadianRealEstateMagazine.ca

Canadian Real Estate Assoc  (Gregory Klump, CREA Chief Economist - 2011/10/15)  “Canada’s housing market remains stable amid continuing financial market volatility, contributing to Canadians’ confidence in the economy and providing support for Canadian economic growth.” - CREA.ca

Gov't of Canada  (Jim Flaherty, Federal Finance Minister - 2011/10/6)  "The country's housing market has cooled somewhat but there's no clear evidence of a bubble at this point, not planning any further moves to cool the real estate market down" - Globe & Mail, NYC

Royal Lepage  (Phil Soper, President - 2011/10/05)  "A broader slowdown is expected in the months ahead but fears of a U.S.-style correction are completely unfounded" - CBC.ca

BMO Capital Markets  (2011/3/3)  "There should be no major correction if going forward prices stay in line with income growth." - CBC.ca

Bank of Canada  (Paul Jenkins, Senior Deputy Governor - 2010/2/22)  "I would certainly not say we are looking at a housing bubble" - Global Business Leaders Day panel discussion sponsored by Gov't of Canada & Financial Times, via Vancouver Sun

BMO Capital Markets  (Michael Gregory - 2010/2/15)  "He also concludes that there's no bubble and, furthermore, that there is very little chance one will appear.  His prediction:  talk of a housing bubble, which has become bit of a bubble itself, should deflate by summer" - Vancouver Sun

Bank of Canada  (Timothy Lane, Deputy Governor - 2010/1/11)  "It is premature to talk about a bubble in Canadian housing markets" - Financial Post

Gov't of Canada  (Jim Flaherty, Federal Finance Minister - 2009/12/21)  "We always watch the housing market to make sure that we do not see the development of an asset bubble.  Record Canadian home prices partly reflect a stabilizing economy and don't constitute a bubble right now" - Bloomberg

Gov't of Canada  (Jim Flaherty, Federal Finance Minister - 2009/7/16)  "There is no bubble in the Canadian housing sector.  That has not been our concern" - Calgary Chamber of Commerce speech, via Reuters

BMO Financial Group  (Paul Ferley, Asst Chief Economist - 2005/8/11)  "The rise in housing prices over the past several years does not reflect a housing market bubble.  The rise is indicative of strong underlying economic fundamentals." - Real Estate Monthly Online

Top

  Realty Bubble Monitor

FreeVenue Economics-Home • Realty Bubbles Monitor • G-20 Recessions Monitor • TRI Canada • TRI China • TRI USA • Real Unemployment Rate USA • Debt Wall USA

 Economics  @  FreeVenue

FreeVenue Home • Peak Oil • Economics • Climate Change • Elections

1989-2013)

~
3 ways to join the MemberVenue:

$25/month Annual Membership  or  $35/month Quarterly  Membership or  $50 Project Access-fee

password reminder

About    Contact

Media Access

Speaking Engagements

Let's keep the site ad free ... please consider subscribing to the MemberVenue or a donation to assist my research!

FreeVenue:   PeakOil   Economics   ClimateChange   Elections

Beware ... the Lunatic Fringe

MemberVenue:   PeakOil   Economics   ClimateChange   Elections

  Canada Flag
Trendlines Research  ...  Providing macro-economic charts & guidance for Legislators, Policymakers, Investors & Stakeholders
long-term multi-disciplinary perspectives by Freddy Hutter since 1989
send email to charts@Trendlines.ca with questions, comments or navigation corrections with respect to this web site[Under Construction]
Copyright © 1989-2013 Trendlines Research ~
Last modified: November 03, 2013