The Most Splendid Housing Bubbles in Canada Deflate

How do they measure up against the most splendid housing bubbles in the USA? Oops!

In Greater Vancouver, BC, Canada, house prices fell 0.5% in March from February, the eighth month in a row of declines, according to the Teranet-National Bank House Price Index released this morning. It was the sharpest eight-month decline since February 2013. The index is now down 4.3% from the peak in July 2018. And it’s down 2.1% compared to March last year.

This housing market had been on an extraordinary ride: From January 2002 to the peak in July 2018, the index skyrocketed 316% — meaning that prices more than quadrupled. And some of those gains are now unwinding:

Canada’s housing markets barely dipped during the Financial Crisis when US housing markets ran into deep trouble, causing the Mortgage Crisis that begat all kinds of other crises. Canadian homeowners and banks watched the mess from across the border and shook their heads. But now, after an 18-year housing boom, the downturn has arrived in Vancouver and Toronto, among the formerly hottest housing bubbles in the world.

The Teranet-National Bank House Price Index tracks single-family house prices, based on “sales pairs,” similar to the S&P CoreLogic Case Shiller index for US housing markets. It compares the sales price of a house in the current month to the prior sale of the same house years earlier (methodology). Using “sales pairs” eliminates the issues that affect median-price indices. But the median-price data for Vancouver is a lot more disconcerting than the Teranet data.

So let’s compare how Vancouver’s housing bubble stacks up against the legendary but now also deflating housing bubble in San Francisco.

The Teranet-National Bank HPI and the Case Shiller Index are both based on “sales pairs” and are comparable metrics. So I converted the index data of both into “percent change from January 2002.”  Same data, but denominated in “%-change.” Even the individual charts look the same. This allows me to put both indices on the same %-change scale on the same chart.

And it shows how Vancouver house prices – having skyrocketed 316% from 2002 through the peak in July 2018 – completely blew away the legendary mind-boggling housing bubble in the San Francisco Bay Area where house prices soared 121% from 2002 through the peak in September 2018:


House prices in the Greater Toronto Area fell 0.3% in March from February and are down 4.3% from the peak in July 2017, the steepest 20-month decline since May 2009.

From January 2002 through the peak in July 2017, the index soared 218% — meaning that house prices more than tripled. But that pales compared to Vancouver, where house prices more than quadrupled. I left the charts on the same scale, and so the Toronto chart below shows more white space. Note the totally crazy spike from January 2016 through July 2018, topping out at a 40% year-over-year gain:

I converted this Teranet index for Toronto house prices to “percent-change since January 2002” and overlaid the insane mind-boggling housing bubble in the San Francisco Bay Area, and it shows just how majestic the 18-year Toronto housing bubble has been:


House prices in the Winnipeg metro area dropped 0.3% in March, and are down 2.2% from the peak in September 2018, according to the Teranet House Price Index. It remains up 189% from January 2002, and that gain blows away San Francisco. Note how Winnipeg and San Francisco surged at the same pace from 2002 until 2007, when San Francisco’s housing market came unglued:


The Teranet House Price Index for the metropolitan area of Montreal inched up to a new record in March and is up 159% from January 2002, without having experienced a noticeable dip over the 18 years. What Financial Crisis? Even this 159% gain, as lackadaisical as it was compared to Vancouver, blows away San Francisco’s gain of 121%. But note how the white space is starting to dominate the chart:


The Calgary housing market is dominated by oil booms and oil busts. When the price of oil collapses, the housing market goes south. House prices surged through the oil boom till mid-2007. When the price of oil collapsed, house prices went south. This was followed by another oil boom that powered the index to a new peak in October 2014, up 140% from January 2002. Then, as oil prices collapsed, house prices began to drop.

In March, house prices fell 0.5% from February and were down 7.0% from the peak in October 2014, according to the Teranet House Price Index. But it remains 123% up from January 2002 and is still beating San Francisco. And white space has taken over:

These house price indices that are based on “sales pairs” measure how the price of the same house changes over time – a house that didn’t grow in size or opulence. What has changed is the purchasing power of the Canadian dollar with regards to houses in Canada, and the purchasing power of the US dollar with regards to houses in the US. During the bubble era, this purchasing power has dwindled. And now, as prices drop, all it means is that the dollar gains purchasing power with regards to houses. In this manner, the “sales pairs” indices are a measure of house price inflation, which completely spiraled out of control in Canada’s hot housing markets.

San Francisco Bay Area House prices are down -4.3%, condo prices -5.7% since July; Seattle house prices -5.9%, most since Housing Bust 1; Los Angeles, San Diego, Denver, Portland, New York condos, Boston decline. Dallas ticks up. Read…  The Most Splendid Housing Bubbles in America Deflate Further

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  109 comments for “The Most Splendid Housing Bubbles in Canada Deflate

  1. qt says:

    I see no bubble in Vancouver or Toronto. What’s the problem?


  2. Javert Chip says:

    The thought that there are people on the planet whose real estate gambling casino is more extreme than San Francisco is both highly comforting…and highly disturbing.

    • SocalJim says:

      Just look south to Los Angeles. The index for the Los Angeles metro is higher than the SF index. And, the Los Angeles index is holding up better than SF.

      • SocalJim says:

        Just to give you an idea … Currently, first place for home appreciation goes to Los Angeles with an index value of 281. For second place, we almost have a twp way tie … SF at 258, San Diego at 251. Seattle is close behind at 244. The recent weakness in SF means it is possible that San Diego may snatch second place from SF. Clearly, Los Angeles was the best place in the country to buy a home with SF and San Diego the second best place. This also means that, at this time, Los Angeles may have a higher index value than Vancouver. Looking at your chart, it appears Vancouver prints at 280, which is 1 percent lower than Los Angeles. The crown goes to Los Angeles for the best real estate investment since 2001.

        • SD has a perfect recipe to replace SF in hyperinflated home values; a somewhat geographically isolated area, (ocean, mexico, and fire danger brushlands) public pushback on growth, income inequality, and the government response which is to build more affordable housing, a policy response which takes up available land. We haven’t the water, or anyplace to put the water when we are done (the ocean is filling up). There is no room for freeway expansion, and the distances make rapid transit less viable. We used to have cable cars which went all the way to La Jolla (Nob Hill).

        • Richmond Hill, Ontario Canada from early 1984 to April 2017 the average 3 bedroom detached bungalow went forty fold from $30,000 to 1.2 million dollars. These were the identical bungalows new in 1984 that all sold in 2017.

        • Jim says:

          SoCal real estate can never go down
          We are different

        • Rcohn says:

          LA county recently has had an outbreak of typhus , a disease which ravaged cities in the Middle Ages.
          San Diego recently had to bleach their streets to reduce the incidence of hepatitis A.
          SF is literally a ****hole and has issued an online map showing areas of defecation.
          As more and more people crowd into smaller areas, the situation is only to deteriorate in all three cities. That along with the price.

    • China’s crackdown on video gaming, could extend to gam(bl)ing. They are already chasing this capital flight forcing offshore RE buyers to sell and making their citizens repatriate the cash.

  3. nicko2 says:

    Oil increased 40% in a year, immigration will gradually increase to over 350K a year, Toronto is now home to the largest number of active construction cranes in North America — not to mention, various cities are significantly investing in mass transit mega projects. I don’t see a bubble.

    • But the average wage earner can’t even afford a studio condo.

      • Phillip is horner says:

        We can supply you with several million people all wanting homes. None of them have any money or job skills much beyond baby making. But they’ll all promise to pay for the house.

        • Renata says:

          In Canada, mortgage delinquency rate is less than 1%. In 2008, people in the US were getting loans to pay off loans using the same property for collateral. Banks and the government hammered this idea that the bubble in Canada will pop so they can raise interest and banks make more money. If the delinquency rate was at all somewhat significant, then I would have believed the hype.

    • MD says:

      “Toronto is now home to the largest number of active construction cranes in North America…”

      Yup, that’ll happen at the peak of, errr, a real estate bubble.

      I expect there were a great number of ‘active cranes’ in Tokyo in 1990, too…

    • Dsharmon says:

      “immigration will gradually increase to over 350K a year,”

      This is what friends hammer at me about getting in the market. With all those new people housing can’t _possibly_ go down. All in their 30’s. They’ve seen nothing.

      My parents grew up in the great depression then Nazi occupation. Lost people and family. These kids have no perspective whatsoever.

    • Shawn says:

      What does oil have to do with housing prices? And dispite the rise in immigration, Toronto’s population growth rate is bottoming out. It is less than 1% now.

    • David says:

      Libya notwithstanding, where do you see oil in ten years?

      Re immigration, yeah, people thought that was a guarantor here in Sydney. We’re off 10% since the October 17 peak

      The only game in town is the fundamentals….. property value divided by income. If it’s more than four it’s unsustainable.

      • California Bob says:

        re: “Libya notwithstanding, where do you see oil in ten years?”

        In Euros? Rubles? Renminbi?

        It won’t be USD.

  4. Chris Garbor says:

    Lots of micro homes being built for homeless in Seattle. Check out KOMO 4 News report (“Seattle is Dying”) about the massive drug/homeless issue impacting Seattle. Can watch it (“Seattle is Dying”) on YouTube or go on KOMO 4 News website. Well worth watching if you have a homeless issue nearby you.

    • California Bob says:

      I checked it out–hard to watch (I spent time in Seattle a few years ago; lovely city then). We’re seeing the start of it in my current town (Modesto, CA). IIRC, it all started when Saint Reagan declared ‘Government IS the problem,’ then shut down all the institutions that used to house these people (face it, some are not going to become ‘productive citizens’ no matter how much you try to help them; it’s just nature).

      Life is hard, one way or another, ancient or modern. Nature used to deal with the weak and the unproductive; we’ve interrupted the system but have no solutions.

      • Sam Lowry says:

        The recent and unprecedented explosion in the homeless population cannot be explained away so easily.

        The word ‘inflation’ used to refer to the expansion of the money supply. It is theft by those who get to spend the central bank’s freshly-printed magic tokens first (the bankers and the politicians), from whoever is forced to use those magic tokens as money. Wage earners are last in line.

        To disguise this blatant act of theft from poor to rich, ‘inflation’ has been redefined to refer to rising prices, notably in a way the government gets to define. See in particular “owners’ equivalent rent” (which keeps house prices out of the measure), and “hedonic regression” (which is used as an excuse to ignore what stuff really costs).

        Since the 70s when Nixon “closed the gold window,” real wages have stagnated. Since the bank bailouts and “quantitative easing” following the collapse of the real-estate bubble, real wages have declined. This is why the homeless population has exploded. This also happens to be why the “deplorables” in fly-over country are told their economic plight is to be blamed on immigrants.

        “Presidents don’t have power; their job is to draw attention away from it.”—Ford Prefect

        • California Bob says:

          Did you watch the video? It wasn’t about economics; it was about drug abuse and the mentally unstable roaming the streets.

  5. Just Some Random Guy says:

    “But now, after an 18-year housing boom, the downturn has arrived in Vancouver”

    18? Try more like 40.

  6. Just Some Random Guy says:

    Certain cities in the world will always be absurdly expensive. New York, London, Tokyo, Vancouver, San Francisco, Miami, Paris.

    Prices in those cities go up 40% then down 10%. Rinse, repeat forever.

    • SocalJim says:

      New York, London, Tokyo, Los Angeles and Paris are world class international cities. San Francisco is in the Boston and Seattle league, which is a tier or two down … they are premier US cities, but not in the international league.

      However, all upper tier international or US cities appreciate in the long term because of inflation. Central banks make it that way, else the world economy will collapse. Nothing magic with central bank induced inflation.

  7. Paulo says:

    In a sense I disagree with the article. It’s a bubble increase when an owner does nothing but sit and flip over a short time frame, but every property has a unique circumstance that is governed by outside forces. There is of course the money laundering and low interest rates of recent times, but it might also be the case that the property had been undervalued to begin with.

    My parents sold a home in Walnut Creek CA in 1968. It was on 1/2 acre, had a pool (so damned hot in the ygnacio valley), olive trees, walnuts, almonds, and a fruit orchard. It is worth millions today. Millions. They sold it for $48,000 and bought a brand new home on Vancouver Island for $27,000, and that was when the Cdn dollar was worth $1.03 US. Call it half price of CA. Sure, it appreciated in the 10 years they owned it, but it was under valued compared to California.

    I sold a home 14 years ago and realized a 600% increase over the 18 years I had it. Was this a bubble? Assuredly not, as I renovated the beejesus out of it and it was on 1/2 acre. The community grew with retirees and weather refugees. I have been in my current home for 14 years and it has increased roughly 500%. Is this a bubble? No, as I have renovated the hell out of it and bought low. It is on a river and the property doesn’t flood (good elevation). Do you know how many folks have said to me over the years they could have bought the place for _________, but just didn’t? Thought about buying it, (but didn’t). 20? 30? Lots. These people all made more money than I ever did, but they did not buy when they should have.

    I knew a guy who bought 3 condos in Whistler at 50K a pop. I guess he’s a millionaire many times over by now.

    You can still do very very well in Canadian RE, right this minute, in this so called bubble market. But you don’t buy down Island, or Vancouver, Kelowna, or Toronto. You buy something in Tahsis or Holberg and wait. They were giving houses away in Kitimat and Terrace a few years ago. Now, the LNG plant is under construction. Guess what? You could buy a home in Sask for peanuts 15 years ago. The place is booming, now. Look for a mining town that is shutting down not too far in the boonies. You’ll double your money in short order. My wife has an aunt who bought 3 homes in Tumbler Ridge when the coal mines shut down. She reitired there. I think she paid about 50K apiece for them. They’re worth 600% more, easy, because retirees who like wilderness have moved in. Tumbler Ridge? People laughed at her and thought she was nuts.

    The places to buy are the ones no one talks about, the places people laugh at. They used to make banjo noises when people from Cumberland (BC) walked in. Now, they ask if they need anything sir? when they hold open the door. In 1995 a friend of mine bought 3 old heritage houses there for next to nothing. They were od miner homes. I guess he’s a millioinaire, too.

    (Some of you might want to Google the towns I mentioned.) They’re pretty interesting if you like rain :-)

    • Prairies says:

      Saskatchewan isn’t booming….

    • Dsharmon says:

      You know, some of us actually prefer to work for a living.

    • Eamonn Harter says:

      They better cash in their chips for Canadian pesos soon before the market tanks in earnest and their paper wealth goes bye-bye.

    • Jeff says:

      Paulo, hate to break it to you but Holberg is now a logging camp and barely exists, Tahsis cannot support local jobs and houses in Tumbler Ridge have been sitting idle on the market for years. These are probably the worst examples possible in British Columbia.

    • Dale says:

      Yes, everything you described equates to “bubble”.

      The only question is whether that bubble will actually pop. The Federal Reserve, along with all other central banks, is determined that it shall not. This causes the bubble to inflate further. Since a proper recession has not been allowed since the early 1990s, the problem has grown exponentially more difficult to resolve.

      At this point, the only options are (a) massing cascading deflating of bubbles (stocks, real estate, and other markets), or (b) monetary reset (which probably will result in totalitarian governments around the globe to deal with the resulting chaos).

      The only question is which one.

      • andy says:

        Why not both?

      • Saveus says:

        Dale: Your comment hits the nail on the head.

      • Jack says:


        All bubbles burst, they can tweak, regulate, Programm, tune, extend, continue to inflate it… IT WILL BURST.

        They are kinda akin to physical things you know, and just like them the bigger one do go “ Super Nova Style”!

        Don’t worry you’ll enjoy the fireworks.

    • LessonIsNeverTry says:

      Doesn’t matter how many words you write…. BC real estate is in a bubble. Buying low and selling into the bubble is smart (or more likely, lucky) but it does not negate the bubble.

  8. Augusto says:

    I live in Calgary and house prices are high considering the wage levels for younger people who are looking to buy a house. The existing boomer owners want too much. Also, so many older homes in are now owned by speculators, rented out now with the hope of flipping in the future. Even without an oil boom or bust, the Bank of Canada has to keep interest rates low if they want to avoid crashing the housing market. For me, just let the free market loose, and prices would fall and millennials would be able to afford a home at a decent price…as to boomers and speculators, well they would take one for the future….

    • Rcohn says:

      Boomers are ageing and dying . That is SET IN STONE. With that comes more and more houses for sale. Millennials outnumber boomers and would like to buy houses, but can not afford anywhere near the prices that boomers are asking .IF you add to these facts a further crackdown on outflows of money from China,what is the inevitable result ?.
      POP GOES the HOUSING PRICE . Buckle up and get set for a ride on the downside of the real estate roller coaster

      • Dale says:

        Millennials outnumber the boomers. At some point, not too far away, GenX and millennials will simply outvote the boomers. And then the real estate will change hands at affordable prices, and the investors will be bankrupted.

        • Raging Ranter says:

          Problem with that thinking is Canada has the highest home ownership rate among millennials in the world. Many millennials are already in the housing market in a big way, and most GenX. They’ve got every bit the vested interest in keeping prices high and climbing that the boomers do.

          Also, you are making the typical mistake of believing that some future government of your choosing has the answers to your problems. I was once in the grips of the same delusion. I eventually realized that such a government does not exist. I also realized that that is not politicians’ fault, but my fault for believing otherwise. Take it from a 50 year old who had been frozen out of the housing market his entire adult life (when houses were cheap I was too poor, and now that I earn a good income houses are so scary expensive I don’t dare), no government is ever going to fix things for you. That’s not cynicism, that’s realism brought by age and experience.

          You will never vote your problems away. Focus on fixing your own situation. I wish someone had said that to me, instead of having to take decades to figure it out.

    • RagnarD says:

      I was Just up in Banff skiing at revelstoke Lake Louise etc.

      Driving Back from Banff to Calgary, I was amazed at the housing for it’s muted colors; there seems to be only tan, darker tan lighter tan and if u want to go crazy, a very brownish tannish red.

      And they other thing I noticed Was the fact that one could build a house anywhere, so why our house is expensive in Calgary? I could not understand some big houses in exceptional locations. But Calgary looks like a wide-open town very egalitarian, like at city on wavy prairie.

      I believe in the USA the only cities that get really big housing bubbles are ones that are constrained by water such as: New York Boston Miami Chicago LA San Diego, Etc.

      That seems to hold in Canada to, as the most expensive cities or Vancouver and Toronto, which are constrained by water. And yes Calgary is much cheaper than Van. & Tor,
      The catch show price performance comparable to SF.

      • Augusto says:

        One advantage of this city is land all round, lots of open space. The problem is Calgary is a one trick town, its all down to Oil and Gas, Right now we can’t build new Pipelines, so any new oil is landlocked, or no new money coming in. Also, if the price tanks, as many expect it will later this year as new Pipelines are coming on in the Permian Basin in the US, then we will get even less for existing oil (we get half the price of oil/gas we got at the peak here). Oil companies are cutting back on people and when they do hire pay 1/2 what they used to. Right now, lots of expensive homes which are falling in price because there are fewer and fewer with the money to afford them. Now if rich people want to move North or set up high tech companies in our empty office tours, great……but you may not like the long winters and -20 weather……

  9. Mr.Jolly says:

    Teranet is synonymous for “Out of Date” or “Highly Manipulated.”

    Vancouver house prices are down WAY MORE than 5-10%. 20% absolute minimum. And now Condos are falling at a faster pace than Detached due to a ridiculous amount of supply combined with epic speculation via assignment flipping.

  10. Snowden says:

    Vancouver is a safe heaven for money laundry and famous for underground criminal activities in large scale. The gov does nothing to stop this! But they go after hard earning poor individuals and families. It’s a a shame!

    • Snowden says:

      Foreign buyers and money laundry in Vancouver are the main reasons why real the estate is so high and low affordability for the locals.

    • robt says:

      The big laundering facilities, the government casinos, have been ‘outed’ recently due to chip washing.

  11. Gorbachev says:

    So much of all of this is due to the cost of money ,

    money laundering. and stock options.

    There is always a point when the masses stop wanting it

    and then things change-for a while.

  12. Bankers says:

    Pots calling kettles with these markets, and stats being what they are. For example if you set ’95 as 0% SF meets up with Vancouver for increase at current date (using e.g. fred and Teranet-National Bank House Price Index at because the seems down), but correct that if wrong as only did rough calculation.

  13. KPL says:

    “And some of those gains are now unwinding”

    EVER SO SLOWLY. As of now, the unwind amounts to nothing (316% gain – 4.3% unwind)

  14. timbers says:

    I live in Boston. All I see is rising real estate prices.

    I think you need to re-think your stats, Wolf.

    Super Ultra Dove Powell has did a complete U-turn. He is flooding assets with massive increases in liquidity.

    We are all Super Ultra Doves now.

    • Jon says:

      A year back no one would think that Toronto and Vancouver real estate would ever go down in price.. M it’s just a start .
      Wait for a year or town

      The same movie would be coming to Boston and other USA cities as they are not so special

    • Shawn says:

      Did you even bother to read the article?

      “according to the Teranet-National Bank House Price Index”


    • Wolf Richter says:


      I go with the data not with the hype. And I report the data. This was about Canada’s housing markets. I have no data on Boston seeing big declines. I don’t know where you think you saw that. The Case-Shiller has Boston flat with May last year. But other markets in the US have fallen. Each market on their own. Australia’s housing market got pricked DESPITE a dovish central bank that has maintained its record low interest rates to this day.

    • SocalJim says:

      Boston is seeing a wave of bidding wars. According to NAR, it is the second hottest market in the US.

    • LessonIsNeverTry says:

      You may want to look at what 10 year rates did during the great recession, as well as what the Fed did in terms of QE. Then compare to RE returns from 07 until 11/12. I know this is a bit flippant, but it shows that while CBs can inflate bubbles in a willing environment, once buyer psychology turns negative the price reflects the buyers and not the Fed’s desires.

      • SocalJim says:

        That is because the spread ( OAS Spread ) between the 10 year Treasury and mortgage paper widened drastically during the financial crisis. In Bloolberg, use the OAS1 functon. Looking at the 10 year vs. home prices without considering the spread will trick you.

    • Bobber says:

      Do you understand the problems behind the Fed’s strategy, or do you just assume things continue bubbly for some indefinite period? If you can’t say how long it will continue with any certainty, what gives you confidence it won’t collapse tomorrow?

  15. William Wilkie says:

    Have you compared Canada’s house prices with Australia and New Zealand? They seem to have followed the sama pattern, especially those of Sydney and Melbourne. The other capitals not so much.

  16. Jc Osorio says:

    Didn’t mentioned the very scary housing bubble situation in Australia.

  17. Alphazu says:

    In 2006 a 30 something friend was looking for investors to help him purchase land in FL. He was flipping houses in OH and doing well using shaky financing. We were waiting to tee off at the golf course and as he walked by I stopped him. I said J, when we lived in FL our neighbor told us what his father, a FL native, said about real estate. He told his son to remember one thing about FL, it is boom and bust, boom and bust and will likely stay that way. I said we could be in the biggest boom ever and it could be the biggest bust ever. I had no idea how prophetic it was. My young friend laughed in my face and said, while laughing, “Alpha, housing prices never go down!!” His partner filed bankruptcy and lost a big beautiful home. J came close to bankruptcy, but his wife’s pharma job saved them.

  18. Augusto says:

    Vancouver is a house of cards. It’s all service industry and movie jobs, or kids hoping to get into the movies doing the waiter and waitress thing. The real money is from people moving there, rich Canadians and rich Asians, building, renovating. That’s dropped off, and now that the words out that prices are falling on homes, the rich as well as everyone else will wait. Not sure what would be worse, a crash or slow death, with housing falling a little, month after month, after….

    • kam says:

      Movie jobs in Vancouver are all subsidized by the government. The Clintons Canadian bagman became a billionaire from his subsidized movie business and, ahem, mining activities.

  19. Petunia says:

    I just heard developers in Toronto are suing buyers who put down deposits on pre-build condo plans and can’t close. Those buyers now don’t qualify for mortgages. It seems the banks have new requirements, that didn’t exist at the time the deposits were placed, and buyers no longer qualify. The story I heard was about a buyer who lost C$150K and is being sued for the rest, about a million all together.

    If the market was rising the developer would simply refund the deposit and resell the unit, but in a sinking market he can’t unload the unit, even with a 150K head start. It’s a very bad situation for the buyers that can close.

  20. Rodger says:

    Given how fast prices in YVR rose to how slowly they are declining – even with restaurants on first time home buyers, foreign buyers sales tax, and now the removal of laundered money from the market, it is clear there are non market forces propping up the value of real estate in BC. Sales volunes are at decades low, yet prices only down 0.5 percent. If this isn’t pre crash then theres something amiss here. If interest rates were to keep increasing, I think the downward slopes on those graphs would be steeper than a black diamond run at Grouse Mountain.

  21. Unamused says:

    =>The Most Splendid Housing Bubbles in Canada Deflate

    In equity investing it’s called ‘profit taking’. Similar principles apply: the more assets can be manipulated higher, the greater the profit when reality reasserts itself.

    Free markets (1) those that can be freely rigged to maximise returns (2) objects of religious adoration among freshwater ‘economists’.

    The Devil’s Dictionary of Finance and Economics

  22. breamrod says:

    north Atlanta is still hot as a firecracker. Son sold house in 3 days with 8 offers all over listing.
    only owned it for 4 1/2 years and made 38%.

    • LessonIsNeverTry says:

      Thanks for the info. There does seem to be the expected Spring and rate decline pop that many of us anticipated. Also, the price declines seem limited to the coasts (for now). The real question is if buy volume has staying power into the summer. If not I expect to see a resumption of price declines (at least here in Seattle).

    • SocalJim says:

      I heard a story from Detroit … many offers on a run of the mill suburban home. This real estate boom is hitting many cities. There is a chance the Fed will see this and slam the brakes on … but that would take the stock market and economy down. Here comes slow growth and inflation. I have been talking about this for more than a year. That was my base case, and the odds are I am right.

  23. Bet says:

    Out here on the Olympic peninsula in Sequim RE hot again. HOmes in the 400k to 700k being snapped up quickly, looks like the cash outs from the over bloater areas continues and the flight out here
    Picks up Rats more people

  24. SocalJim says:

    What is unusual is CNBC and Redfin are reporting bidding wars way down. However, I see fierce bidding wars in Boston like never before, in Los Angeles beach cities ( under 2M ), and I am hearing stories from Detroit suburbs. In Newport Beach, under 2M decent single families go very quickly. People in this blog claim the same in Atlanta, and in Seattle. Something is funny because people are witnessing something very different than stories from CNBC and Redfin. What gives?

    • Bobber says:

      I see evidence of a mild dead cat bounce in demand in Seattle. That’s it. Inventory is still rising.

    • Rowen says:

      What i’m seeing in my mini-bubble (Charleston) is that the houses that are moving are the ones the seller repriced to the new normal, especially within reasonable commute to real jobs.

      Megahomes in retirementville are beyond hopeless.

  25. A realtor says:

    The author has no idea. There is no buble in Toronto. The only reason prices are flat in Toronto are two artificially introduce limitations from the liberals both in Ontario and federally. The stress test must go and it will go when we kick the liberal scum out in October. Also the foreign buyer’s tax in Ontario must go. After that the market will be back to growing at 9-15% a year as it should.

    • Wolf Richter says:

      “After that the market will be back to growing at 9-15% a year as it should.”

      Do you understand just how hilarious this is? At the spit out coffee level. But I’m not sure you meant to be funny.

      • Gold is says:

        …no reply from ‘A Realtor’ to your comment? Or did you exercise your absolute censorship rights as the owner/dictator of this blog? Just wondering.

        (I actually don’t have a problem with that as I’ve long wanted to have similar powers…I live in hope)

        • Wolf Richter says:

          I only deleted two comments by the same new commenter that viciously insulted the RE-bullish commenters here, using words you cannot use here :-]

  26. LouisDeLaSmart says:

    One must sometimes take into account more then just numbers. Canada is far north, and habitable areas are far too few in between, due to the severe weather conditions. Hence the Vancouver area is so prevalently populated. The vicinity ot a metropolitan area provides many amenities small environments cannot support like teater, concerts, nightlife, diversity of food and life choices. Also, the new LNG hub with the pipeline will be a national source of income with high priority. Though the prices might fall, Canada’s healthcare system, social security network and education make it a place to be for the next 50 years (immigration from the US will soon become an interesting topic).

  27. Anthony says:

    Just to mention that here in little old Manchester UK, all you can see out of my front door after dark is the red lights on top of cranes. Last count it was 38….

    • Bankers says:

      …that’s well bad, best put wood ‘int ‘ole an give yer ‘ed a wobble.

  28. Just Some Random Guy says:

    A bubble is a short term speculative event. Think .com bubble that lasted, what 3-4 years? But real estate in N. America has been steadily appreciating for the past 40-50 years. That’s not a bubble. That’s reality. Even the 2008/9 crash was just a blip on the long term trend of real estate appreciation.

    2018 had a mini-crash in a few cities. But that’s long gone as well. 10 years from now you’ll wish you had bought at the 2019 “bubble” prices.

    • Bankers says:

      So “this time is different” ?

      Maybe, maybe not, but the long term trend is near to 0%, which is ok if your home is for living in AND you don’t buy at a ridiculous price but one that can realistically be afforded.

      • Just Some Random Guy says:

        I didn’t say since 1900. I said 40-50 years. There are some exceptions like Detroit and I dunno, Gary, IN? But those oddballs aside, the median price of a home in the 60s was $20K. Today it’s $300K. That has outpaced inflation considerably. And it’s even more pronounced since the size of a median house today is 2X that of a house in the 60s. Which effectively means the price per sq ft has increased by 30X since the 1960s.

  29. Bobber says:

    The bubble has gone on a lot longer than expected. The longer it goes, the higher the risk. The population of buyers is dwindling because people can’t afford it, but also because many who can afford it don’t want to take the financial risk. Meanwhile, you have speculators deciding to cash in on supply side. The candle is burning hot on both ends.

    • Unamused says:

      =>The candle is burning hot on both ends.

      And when it blows up the rentier class will bail themselves out with everybody else’s money. Same old same old.

      We have these discussions about financial bubbles, with PowerPoint presentations with all the latest statistics and trends , but never seem to get around to talking about how and why they are engineered, the techniques used to exploit these bubbles, and the social damage they cause on multiple levels. It’s like I’m talking to a bunch of MBAs with one thing on their minds, and all I can do is take a pill twice a day so I won’t care too much about the carnage.

      End of rant. Sorry. Do carry on.

  30. Sameer says:

    As much as I would like to believe the charts implying a bubble growing since 2002, I don’t think reality is such for few reasons:
    1. Money supply grew, depreciating the currency. These numbers should be adjusted for inflation.
    2. Charting from 2002 all they way to 2018 gives an impression that bubble has been 16 years in the making, and 4-5% drop in past year is now the undoing of that 16 year bubble. However same impression could’ve been implied for the drop from peak around 2008 Great recession. But thanks to natural inflation + QE, prices did not drop all the way to 2002 despite severe recession.
    I understand and agree the long term of RE prices can’t be more than 5x median wages, but median wages increase in desirable places/job-centers/school districts in most of tier 1,2 cities.

    So while the charts look dramatic, I am not holding my breadth for RE top drop beyond 10% upto the depths of upcoming recession. Any bigger drops will only happen due to massive inventory increases (due to boomers/Blackrock etc unloading en masse).

    • Wolf Richter says:

      “These numbers should be adjusted for inflation.”

      Nope. As I said in the article, these numbers ARE a measure of inflation: house price inflation. They measure the price of the same house over time (“sales pairs”). What they in effect measure is the loss of purchasing power of the dollar with regards to houses. Houses don’t get bigger. The dollar just loses its purchasing power. That’s all it means when house prices rise. This is not magic.

      It’s also the definition of a bubble: it takes more and more dollars to buy the same asset, and as labor isn’t paid more and more dollars for the same output, it is not sustainable.

      • Sameer says:

        Am not arguing if this is a bubble or not – it feels like a bubble to me , since my wages has not kept pace with house appreciation in my area.

        What I am pointing out is using 2002 is arbitrary to dramatize the uptrend. You could have just as well taken 1900 as the baseline – am sure labor’s earnings has far lagged the RE price increase since 1900.

        “it takes more and more dollars to buy the same asset”

        By your statement above, it takes far more dollars to buy the same 1960’s built house today than it did it 1960’s. But just like dollar purchasing power has depreciated, wages in absolute dollars have also increased since 1960’s.

        What is unsustainable is increase in RE prices vs lack of corresp wage increase. To actually point to bubble, maybe you can compare house price indices against the backdrop of household income (or a related index).

        Also, using 2002 as the baseline for bubble implies prices will fall closer to 2002 once the bubble bursts. That simply will not happen realistically speaking because labor’s wages are much more than what it earned in 2002, and even in 2008 recession RE prices did not fall to 2002 levels.

        • David English says:

          Agreed that more data is needed to truly make sense of what’s going on. Housing price increases do not stand on their own.

          Comparable charts showing how much money increased over the same time would significantly flatten the chart.

          Charts showing wage growth would show how much housing is actually becoming unaffordable.

          Charts showing the value of manufactured items would show how cheap things are getting, thus masking how badly wages have fallen behind.

          Charts showing how new home construction costs are going through the proverbial roof, with new building techniques and standards, thus making new homes that much more expensive, which drives up the cost of older homes even though they’ve not been built to the new standards.

          Charts showing…

          The point being that housing does not stand alone. It’s investment, money, power, wages… and for some, a place to live.

          And… that last one. A good place to live. Any major disruption around the world and the rich there will look to move. Guess where? Likely, all the cities with charts above. If the US degenerates too much farther, Canadian house prices could go through the proverbial roof.

          And, even if things stay peachy everywhere, eventually all the people making money all across the country will want to retire, and enough of them will choose the coasts to drive prices up disproportionalty.

          Housing prices are impacted by everything. Good luck predicting the results.

          And, yes, starting at 2002 is silly, at least around here. People were selling their houses and renting, expecting the “big correction because it was totally unsustainable”… in the 90’s

          As others have said, wash, rinse, repeat.

        • realist says:

          “What is unsustainable is increase in RE prices vs lack of corresp wage increase.”

          As a highly leveraged asset, RE appreciation has been driven by falling interest rates – so long as rates are low, higher prices are sustainable.

          As to local wages, they are of import only to the low end of the market in Vancouver, from even which the locals are excluded to an ever increasing degree. For decades, Vancouver has been flooded by hot foreign capital searching for a home – literally.

      • Bologna says:

        It’s also the definition of a bubble: it takes more and more dollars to buy the same asset, and as labor isn’t paid more and more dollars for the same output, it is not sustainable

        Question, would it be sustainable if the fed would start to drop interest rates into negative territory and the removal of cash preventing you from pulling cash out of bank due to negative interest deposte rates it would force people to spend money faster and eventually negative mortgage interest rates like Denmark

    • Bankers says:

      You can look at the data both ways, but it is not usually a good idea to mix them as you lose track of what meanings you are looking at. Nominal data is the starting point for all other calculation so it is fine to present it that way, but obviously we are often used to real data, especially aggregate (all kinds of spending) data like gdp. Housing is a single “commodity” so it understands well as nominal.

      In Canada I think they mostly avoided major price drops during gfc, which is why it looks so continuous. If you want to count in wage inflation you have to start looking at who is receiving wage inflation and who not, you have to estimate what other price inflation will detract from the extra income, you have to look at interest costs on mortgages, and so on. It gets complex I think.

      So above I threw in a link of inflation adjusted prices, but just to clarify how past real return has played out in practice and where we are now in comparison. You can use that to better guess where values might be in future in terms of real returns/price change or you can use nominal data to get a sense of how much financial pressure is built up in the prices. The chart in that link ends after the bust and does not show the recent ramp up in prices, if it did it would be showing a second peak. I expect a similar chart for Canada would show something like still being on a single peak.

      (Before anyone starts on CPI measurement being off etc. it is known that all of these measures are quite broad)

      • Bankers says:

        I’ll reply here to Sameer so as not to but in on the conversation with Wolf. Wolf presents it his way, to his theme, and I think we agree it is good and unconfused because what he talks of is a lot more on the market. At other sites there are many different kinds of studies that present the info in different ways, even just looking for price to income ratio charts you’ll find different ones which give very different pictures depending on what series of data, means or averages, etc. etc., are used. After that there is disparity across the population, across age groups, to take into account also – bubbles are good for some but not for others. Then there is hedonics, quality improvements and so on. I don’t think you can expect anyone to provide a picture of it all, it all varies right down to each person’s experience also . You can read up on the web though over time and build up your own ideas, your own view, I just don’t think you can go to any site and read an article and come away knowing what it is all about. Here is another side to it to make think, just because it came up now while searching

        there you are looking at history and culture, productivity, to a degree. When viewed with that in mind for example, different perceptions and meanings appear. I just say all this for encouragement, it is a form of knowledge that is generally not much taught to people for whatever reason, and it takes a bit of slow perseverance over time to piece together.

  31. Nicko2 says:

    The median net worth of Canadian families is around $300K (CAD), vs. $97K (USD) median net worth of American Families.

    Canada is simply much wealthier with a more equitable distribution of wealth than the US. Add in other perks like universal medicare and education. On a proportional basis, Canada also has over double the amount of immigration than the US. There are many factors for high priced real estate, but quality of life and sheer amount of wealth are two big reasons for the difference.

  32. red pill economics says:

    Are we still debating whether or not there’s a global housing bubble exists? Asset bubbles have been around since at least the Dutch tulip bubble of 1634-37.

    A good reference on the subject from a Canadian here:
    The anatomy of a housing bubble
    Why do we repeatedly fall into the trap of inflating bubbles even though history shows they always end badly? Blame your brain.
    Bob Thompson
    May 21, 2016

    “Let’s talk very little about real estate, and a lot about people’s behaviour and the anatomy of bubbles throughout history. The anatomy is shockingly the same no matter what asset we are talking about.”

    “When an asset is overly popular, it is most likely overvalued. You can’t find value in anything that is popular. However, you can almost always find value in things that make other people queasy. That’s why I have been buying gold stocks lately. By definition, nothing that is unpopular is in a bubble. That’s my next rule of investing: sell hubris and buy humiliation. This bubble cycle has only repeated itself 100 times or so in the last few hundred years, but I am sure “this time is different.” People have somehow got smarter.

    If you believe that, I have a bridge to sell you.”

    Debt is not prosperity. Fiat money is not sound money. Invest accordingly.

  33. realist says:

    In considering the magnificent levitation of Vancouver RE: a couple of underappreciated facts:
    1. Capital gains tax introduced in Canada in 1972, from which principal residences have always been exempt – one of few such assets. Vancouver’s first housing bubble occurred a few years later (1979-1980) – and rapid RE appreciation since has generally prevailed.
    2. Canada’s active recruitment of wealthy immigrants, coupled with its ignoring tax evasion and money laundering in respect to foreigners, created an irresistible lure to foreign investment in RE. For decades, most new money in RE market has entered at the top, so the mechanics and behavior of the market are decidedly different from conventional RE markets.

  34. Nick says:

    “Isaiah Boodhoo, 22, thought it was a “complete hoax” when he saw a rental listing on Facebook for a bedroom in a Vancouver mansion for only C$1,100 ($825) a month. It turned out the glass chandeliers, luxurious blue drapes, steam room and billiards table were for real. The nine-bedroom home, dubbed “The Castle” by the 14 students who share the property, is apparently owned by an Afghani pop artist, according to Boodhoo.”


    Maybe a small Canary in a Coal Mine.

    But on a slightly separate note. Over the past decade, a lot of post production moved to Vancouver with the help of gov subsidies. The CA BC gov imported high paying jobs by fronting +45% of salaries in tax rebates and we are talking about entertainment/techie professionals making in the 100-200k/year.

    I’m proud to announce that even with the abundant work in post production, what with Disney remaking all their animated hits in “live-action” form and the myriad of television show volume, the work in Vancouver seems to be slowing. There’s an active push to move some of the industry over to Montreal and Toronto (to maybe help keep the RE markets up there).

    High levels of uncertainty in the air.

  35. Eric says:

    Great article. I’ve been expecting a pull back in Canada for the past couple years.

    I follow various sites that aggregate re data. Zolo is showing 6% increase for this time in April 1-year ago. Data is roughly inline with what you published for end of March.

    Maybe this is just a seasonal thing, but the bubble seems to continue.

    • Wolf Richter says:

      Zolo is like Zillow in the US, a real estate site with its own algos. That 6% was an average home price increase per those algos.

      According to the Toronto Real Estate Board (TREB), the average price in March in the Greater Toronto Area ticked up merely 0.5% from March 2018 but was down 14% from March 2017.

      Here is what the Toronto home price situation looks like going back 5 years:

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