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The Ascent of Money. Wow! What a book! I read this book when I was away in Mexico growing this crazy red beard you see me with in all my recent videos.
Niall Ferguson is an Economic Historian at Oxford and Harvard Universities and the authour of several books. In The Ascent of Money, he accurately predicted the Credit Crisis of September 2008 in early 2008. Very impressive!
In Chapter 4 of his book he discusses Real Estate. If you are interested in why property prices go up and down, this should be required reading…
Have a look at the television version of The Ascent of Money on PBS.
I’ve posted some recent videos of him discussing The Financial Crisis and would love to hear your thoughts.
Tags: ascent of money, economic history, economics, Financial Crisis, good books, niall ferguson, prices, property market, real estate, realtor
Hey Mike,
This is an excellent explanation about the current economic crisis and also the fact that IF these bailouts do ‘help’, it’s a band aid on top of a HUGE problem.
The current Harper budget has been said that it will help keep people working. If you analyze the budget it may help fill a void with low skilled jobs but CEOs will be making all the profits from winning the few contracts that are available.
Canada is an export nation and we are exporting MUCH less than we were. Everyone needs to ask themselves, how will infrastructure jobs that are created from this budget help the IT guys, sales, retail, export manufactures etc? We aren’t building houses here, we are building roads, bridges and new buildings.
You may or may not like this one Mike:
As for real estate in Vancouver many Realtors are saying we are close to the bottom and now is a great time to buy. If you think that we are at the bottom then, sure… mortgage rates are low, and prices are at 2006 pricing.
BUT:
If you have read the news lately you’ll see job losses EVERYDAY and in the masses. Now these aren’t just in the US (which own many Vancouver companies), but they are local jobs that do ANY type of exporting. IMHO, Vancouver hasn’t felt the full effect of job losses and housing prices are strictly dropping due to the ‘fear’ of falling prices. We won’t feel the full impact until job losses in Vancouver are more wide spread; and all those investors that were ‘flipping’ houses (some numbers say that as much as 40% of condos downtown are investor owned) need to cut their losses because their financial portfolio is on the ground.
NOTE:
The US economy is still going to be in the crapper for another 3-4 years and thats if the worlds credit markets can tolerate their enormous increasing national debt. If it does pickup in 3-4 years it will be a gradual increase and won’t be the V shaped recovery that realtors will have you believe.
If you’re lucky enough to get a realtor to sell your place in this market (most are looking for buyers), get out NOW. Price it at high 2005 pricing and you might just have a chance if you stage it. Buyers, hang on to your seats, there will be many claims that we are at the bottom; wait until you see ‘new jobs’ filling the headlines before you make your next purchase.
Hi Rod,
Thanks for your for your well written and thoughtful comments! I would love to hear more!
I respectfully disagree with you about a domestic stimulus package.
Canada is an exporter and exports are a large part of our GDP. BUT, domestic demand is a huge part of GDP far outweighing exports and will continue to do so.
I think a Federal domestic stimulus package that involves spending over tax cuts will be effective in stimulating the economy in general and boosting Canadian employment in particular. This is especially true if the spending is on things like expanded public transit, road building & repair, and other infrastructure projects.
The reason I say this is that tax cuts either get saved (saving isn’t a stimulus) or it gets spent by consumers on consumer products. Canada imports a large portion of its consumer products therefore a large portion of the benefit of a tax cuts is exported.
The Federal Government realises that the majority of the money expended on publicly funded on construction and infrastructure gets spent on the wages of Canadian workers and materials that are sourced in Canada. CIBC has recently released a report saying that public spending is the best way to stimulate growth and rejects tax cuts as a solution.
A domestic stimulus package will help all those people you mention because all the skilled, unskilled, and professionals working on the publicly funded projects spend their money locally.
Bottom of the Vancouver Real Estate Market…
If I knew the answer to that question I would not be working for a living anymore!
The consensus is that prices will continue to fall this year. Prices are coming down in an orderly manner. We are not in a panic, we are not in the US.
Sellers are advised to move quickly and decisively if they want to sell and buyers have some great opportunities to get great deals.
I also agree that job losses will accelerate and this will have an impact on the real estate market.
That said, its not the end of days. There are lots of buyers out there (I’m very busy with buyers) and properties that are priced right are selling.
You mention that buyers should wait to purchase until they see “new jobs’ filling the headlines”… This is not the best time for a buyer to get the best deal.
The best time for a buyer to get the best deal is when sellers are seeing nothing but bad news now and going forward… This is whats happening right now.
Once good news comes, sellers will feel more optimistic about the future and the economy and will want to wait for those higher real estate prices they think will come down the road.
Sellers will not give the buyer the low price the buyer seeks because sellers will no longer think their property will be worth less tomorrow than it will be today.
Fear and greed move markets and right now smart buyers are benefiting from sellers fear.
Hey Mike,
I hear what you’re saying as far as public spending being the best way to stimulate growth, but I don’t think it’s going to be because of this budget.
Sure we may be selling more domestically but most businesses in Canada are setup for exporting to the states, their contacts, accounts etc Business will have to adapt for this to happen and lots of business just wont adapt.
The prices are going down now because of fear, fear that it will get much worse. I am sayign that until we know the full effect of the job losses we are at the beginning of the ‘U’ and not even close to the bottom. I have been watching the sales charts in vancouver and they are dismal. You’ve got to be the only realtor selling anything as the total number of sales downtown was – 32. Four sold under $300,000. 17 sold between $300,000 and $400,000. 9 sales between $400,000 and $500,000 and one over $500,000 and one over $2m. That’s from a total of 545 listings! How many realtors are there in Vancouver? An average realtor sells and buys about 45-60 homes a year? Id say there will be a lot of realtors that will need to do something else.
You’re right that people can get good deals if you think the fear is overrated or that the current budget will indeed have an immediate impact on jobs and credit problems from increased bankruptcies.
The facts are:
We are losing jobs (unemployment rate jumped .5% in December)
Bankruptcies are rising
Vancouver Real Estate Prices are dropping
Massive developer selloffs wont drive prices up!
Good deals today might not be a good deal tomorrow.
There will be a delay from the beginning of the good news (job creation) to housing starts and house pricing increases. People have to make money and save it before they can get the credit to spend what they dont have.
Rod
Oh, sweet beard by the way, very impressive.
LOL!
Thanks Rod. I had to shave it, the wife didn’t like it anymore… 2 weeks for a good one, you should try!
I am one of the few realtors still doing deals Downtown and in markets like this a good plan coupled with hard work and determination will be the path to success for realtors.
You are already seeing a lot of realtors leave the business, which will increase the quality of the profession and up the levels of service for consumers.
45-60 deals a year for the average realtor?
Try less than 10!
I did 50 deals in 2007 and about 40 in 2008 and I was in the top 3-5 in my office and top 10% of Vancouver realtors by volume.
I am expecting to do less deals this year, but predict I will around the top of the pack as I was in 2007-2008. I am not denying things are bad, because they are, but deals are still getting done and its not the end of the world.
At the end of the day, nobody knows how things are going to turn out in this present downturn. I am an optimist and like to hope for the best!
PS I agree there will be a delay from the beginning of the good news to the good times, but it will come quick and those looking to hit the bottom of the market will be disappointed. We will know the bottom has been hit months after we hit it and prices will be on their way back up…
[...] is a question I get asked all the time. Like I have said in comments my post on Why Vancouver Real Estate Prices Go Up and Down, if I knew when the Vancouver Real Estate Market was going to bottom, I would no longer be [...]