Sunday, June 16, 2013

Long Time Coming

Sometimes I think it's a sin When I feel like I'm winnin' When I'm losin' again --Gordon Lightfoot
I've been blogging since 2003, so blogger tells me, which means I've technically had a decade under my belt in terms of writing, posting, commenting, fighting, debating and, more accurately, ranting. For the most part, I've been mostly silent for almost 5 years, and really closer to 7. Basically, I started blogging generally because I was concerned with the political class in Canada, and more specifically the Chretien Liberals. Times have changed. A governing party, long in the tooth, has begun to succumb to ethical lapses. (Sound familiar?) Warren Kinsella was kind enough to address my wedding via recorded video. And I generally have given up caring about political issues in Canada. In relation to where I sat on the political blog spectrum in Canada (which was/is pretty meaningless anyway) I'm not conservative in any way shape or form. I'm socially liberal and fairly middle of the road when it comes to fiscal issues, but that's not really relevant now. My main concern is not political, but financial. Canada appears to be entering a very volatile period because of real estate valuations and personal debt levels. Things should have cratered in 2008-09, but they didn't and the party kept going. This song has been sung by many, including the Economist, Robert Shiller and the OECD. Domestically, there are a number of commentators, many of which mull over the statistics and add in depth analysis. Some of it is extremely granular, even analyzing or tracking daily price/sales data.
It's not in the paper It's on the wall -Sublime
My own challenge is to add something of value to this conversation, which nationally has begun to break through to the mainstream. Rays of light filter through the comments section of news stories where Tsur Somerville and Cameron Muir are quoted at length extolling the virtues of the real estate market. The gap between public perception and the reality of Canadian real estate is closing and that means the beginning of the end of the speculative mania - a mania based on myths, as they always are. Myth of the hot asian money (irrelevant, immaterial) Myth of the better Canadian lending practices (overrated - think about Scotiabank's "You are richer than you think" ad campaign) Myth of the immigrant inflows that support prices (again, not relevant) Myth that real estate is "different" (from other places and asset classes) in the context of modern Canada somehow (nope). What is relevant is that we have overlooked the fundamentals of our real estate markets. Canadian real estate is overvalued in comparison to other countries. Canadian real estate is overvalued in terms of its own market history. Canadian real estate is overvalued in terms of income. Canadian real estate is overvalued in terms of rent comparison. Wages have stagnated. Prices have skyrocketed. Borrowing rates are rising, whether or not the central bank raises interest rates. We are toast. We are simply sitting on death row and still coming up with reasons our appeal will come through. It's over, the only questions is when and how, not if. At dawn with a firing squad or at midnight via the chair.

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