2013 real estate and economy predictions | MetaFilter

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I've linked to Turner's blog probably half a dozen times from here over the last few years, and read it regularly. His detractors argue that he's just a doomsayer and iconoclast, and a stopped clock is eventually right.

Me, I reckon he's been pretty much spot-on, and it should be astonishing (but sadly, isn't) what a distorted picture the Canadian media (at least until the last couple of months) paints of the real estate and overall economic situation there.
posted by stavrosthewonderchicken at 7:52 PM on December 31 [3 favorites]

The problem with real estate in Canada is that there is no one market - there are only local markets, so it's difficult to get an overall picture of what's going on.
posted by KokuRyu at 10:02 PM on December 31 [2 favorites] KokuRyu,

Yes. I'm tuned to hear 'Toronto condo market' when I hear 'Canadian real estate'. Myself, both my wife and I are professionals who have pensioned public sector jobs in Victoria. We're 37 and have two small children, so well in the 'fucked' category, if you believe him. We own a house right near Oak Bay Village, I'm mortgaged to the tits (about $550K left to go on a house that's probably worth $615-$620K). I'm floating at 2.15%. Am I worried? No. It will be painful if my rate goes to 5%, but I can't see that happening without the corresponding US recovery and inflation well over 2% consistently. It's not happening for a while, and meanwhile I'm paying $1200/month to principal.

SFH in Victoria/Vancouver isn't going anywhere anytime soon. It's land value that causes the high prices, and in the warmest place in one of the best economies in the world with an abundance of single family houses so close to the core it's not really the houses that are overvalued - it's that the land is underused and has been protected by a lack of political will to infill these inner city neighbourhoods with higher density, more affordable housing.

If you're worried about year-over-year in the real estate market....well...that sounds like a baby boomer talking. Fuck I hate these jerks with a bunch of money and a paid off mortgage looking down their noses at us 'wasting the year by paying off 2% house mortgages'. Fuck you. I have kids and I'm trying to give them a good life. It wasn't me who ran the market up. I had to get two degrees to do the job that you did with one, work my ass off to be where I wanted only to buy a house that's twice as much as when you did.
posted by jimmythefish at 11:42 PM on December 31 [4 favorites]

The problem with real estate in Canada is that there is no one market - there are only local markets, so it's difficult to get an overall picture of what's going on.

It is a truism that real estate is local, but the systemic changes in this decade-long runup in Canada means that even though the fallout will reach varying depths in different places (the Maritimes are not as exposed as Vancouver or Victoria or Kelowna or Toronto, for some examples), there's still a Major Event that's just getting underway, and it's going to have an impact everywhere.
posted by stavrosthewonderchicken at 11:44 PM on December 31

there's still a Major Event that's just getting underway, and it's going to have an impact everywhere.

Even Turner calls it a 15% correction. I hardly see this as being a 'major event'. People point to the income:debt ratio as a predictor, but I'd argue that it's much better mortgage debt than the US had. My income:debt ratio is huge right now, but I own land in Victoria. I don't own a ghost that's been leveraged on a bogus future value like what happened in the US. There aren't the same mechanisms at work here. Land has historically been undervalued and things are changing.

Take a look at real estate prices in Paris. Crazy right? Is there a bubble there too?
posted by jimmythefish at 11:51 PM on December 31

His detractors argue that he's just a doomsayer and iconoclast, and a stopped clock is eventually right.

They argue that because he keeps making the same predictions year-in year-out. Last year's predictions are right here: the condo market crumbling (hasn't happened yet), house prices collapsing (nope), asset prices falling (nope), the Bank of Canada hiking interest rates (hasn't happened yet), and the markets will be volatile but a diverse portfolio will see you through it (this is barely even a prediction).

It doesn't take a genius to say "look, eventually the Canadian housing market will eventually have to drop its prices in order to survive, and interest rates will have to be hiked" because no fucking shit, okay? Reading long-term macroeconomic trends isn't that hard. But Turner's schtick is to pretend he's the only person who realizes this and then claim that this is the year it's all going to go tits-up and you'd better be prepared. That's why he gets called out for being a doomsayer: because he claims to predict the future. Except he's not really any good at it.
posted by mightygodking at 12:01 AM on January 1 [4 favorites]

There will not be another 2008 in this generation as Europe has a further year of stabilization, the US economy grows, unemployment falls, American house prices and sales rise and corporate profitability augments

He's wrong about that. He is just wrong. 2008 was a direct consequence of the bailouts of 2000, and 2000 was a direct consequence of the bailouts of the mid-90s. There will be more bubbles and more pops and more destruction, because that's what printing money does. Liquidity seeks inflation, and exacerbates it, causing bubbles and collapses.

Each new bailout/inflation/collapse cycle gets bigger. Eventually, we will transition from 'too big to fail' to 'too big to save'.
posted by Malor at 12:30 AM on January 1

I can't see Victoria experiencing a correction for residential real estate. We live on an island, and are surrounded on three sides by water, with mountains to the north. The economy is doing fine, with very low unemployment. Condos, on the other hand, are going to slow down - they are slowing down. The Duet project in my neighbourhood has stalled after a tremendous amount of hype. I'm just thankful the Union project at the foot of Discard is still chugging along.
posted by KokuRyu at 12:33 AM on January 1 But Turner's schtick is to pretend he's the only person who realizes this and then claim that this is the year it's all going to go tits-up and you'd better be prepared.

Well, no, it really isn't. But shrug. I have no skin in the game in Canada, and will continue to watch and wait.
posted by stavrosthewonderchicken at 2:20 AM on January 1

As the saying goes, Garth Turner has predicted 12 out of the last 3 housing market drops.

I have an ex-colleague who hangs on Turner's every word and is always sending his posts out and repeating his wisdom back to the rest of us. If I hear the words "preferred shares" once more my eyes will roll out of my head. He has been looking to by a house for years here in Toronto but is waiting for the big crash GT is always predicting. Meanwhile the house I bought despite my friend's dire warnings has increased in value such that even if it were to reduce by 50% at this point (beyond anything even Garth predicts I think) I'd still be in good shape, not that it makes any difference to us anyway as we're not moving.

It's great to be risk averse and well read but I am very wary of the enthusiasm of these doom-mongers rubbing their hands together. I am Irish and used to have friends who subscribed to and read The Property Pin - a the-end-is-nigh property forum in Ireland - and their delight, glee, and gloating when the bubble there finally popped (despite their friends and family being in a world of pain which most of them are still in) was pretty ugly. I know Garth and his commenters will be the same.
posted by jamesonandwater at 5:22 AM on January 1

The condo market in Toronto isn't as fragile as everyone thinks it is, simply because it's not a market for buyers; it's a market for renters. There has been pretty much zero rental housing built in Toronto in the last 20 years. Most new condos end up with 40-50% their units rented out. The demand is so strong that even the current pace of construction isn't keeping up.

Plus, the choices in the Toronto area are pretty stark: live in a condo in a dynamic neighbourhood with good transit, or a remote cookie cutter subdivision on the suburban fringe. More and more young people are indifferent to car ownership so a condo is the logical choice.

Unlike the US in the aughts, the things fueling the demand for condos aren't illusory. Canada doesn't have NINA loans.

As for Turner, in the same post he says that condo dwellers won't be able to afford to "upgrade" to single family homes because of their falling equity, while simultaneously saying retiring boomers will flood the market with single family homes in their attempts to downsize. Give me a break.
posted by dry white toast at 5:53 AM on January 1

The thing that killed residential real estate was easy credit; loans going to people who shouldn't get them, and so on. That doesn't mean that the urbanization trends that have been holding for the last century are going to stop or that people who can buy something won't. Cities like Toronto are a lot less likely to have a bubble pop than cities built on suburban models.

I don't doubt that some of those condo towers won't get built?permitting is a long and painful process?but I doubt it'll be because of lack of demand.
posted by sonic meat machine at 6:36 AM on January 1

Born in the Seventies? Too bad. A grovely economy with imperceptible job growth...

The *what* economy now?
posted by rodii at 7:54 AM on January 1

I'll believe that Toronto's housing market is going to pop - and I'm talking a real pop, not a wimpy 2% or whatever reduction like we had a few years ago - when it actually happens. I've been reading these predictions (by Turner and many other people) for going on ten years. There aren't even enough houses/apartments for people to rent, let alone buy.
posted by The Card Cheat at 8:48 AM on January 1 As Garth would say - Victoria ain't Paris.

I never said it was.
posted by jimmythefish at 12:26 PM on January 1

? Older Raynoth and Zelanna are buddies, play videogames t...??|??If you think you can magic us ... Newer ?

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