http://haddowdrive.com/2006/albertas-housing-bubble/ a co/blog Thu, 20 Nov 2008 10:41:16 +0000 http://wordpress.org/?v=2.0.2 http://haddowdrive.com/2006/albertas-housing-bubble/#comment-8440 Tue, 04 Dec 2007 01:48:15 +0000 http://haddowdrive.com/2006/albertas-housing-bubble/#comment-8440 This "Boom" will go bust like all the others. The difference this time as compared to the 70's boom is the price of housing as compared to wages. Canadian wages have not increased in 30+ years when inflation is factored in. Yes you read that correctly real infation is not the official core inflation that stats Canada and the Bank of Canada trot out for the public consumption. How can these morons afford a $400,000 house a jacked up diesel 4x4 that cost $60,000 a quad a Harley ect. on a tradesmans wages? They can't and soon will find out they can't. Everyone thinks what is happening in the States will not affect Canada. We are the Americans biggest trading partner next to China,[ China beat us out this spring ] and when the foreclosures and layoffs start we will feel it here. Our rising dollar actually just reflects the Yankee dollar dropping and a high Canadian dollar hurts our exports. Everyone says China still needs our oil so Alberta will never suffer. Fat chance on that! China's economy is tied to the U.S. when the Yanks slow down China will slow down plus Russian oil is a lot closer to China than Alberta oil. Russia has scaled back on oil production because oil is traded in U.S. dollars and the Russians don't want to get stuck with rapidly devaluating money. Syenco's Chinese backed upgrader near Redwater is cancelled now and some of the other projects near Fort McMurray are looking for more partners to help with the funding. The Bank of Canada is mulling over the idea lower the interest rate to try and devalue our money and help out Ontario's manufacturing sector. Problems will really start in about a year when inflation goes nuts when people realize that debt backed money is really worth nothing and the National banks raise interest rates to stop inflation and $1800 dollar mortgage payments go to $4000 a month and more. It happened in the eighties and will happen again only the recession will be for 5 to 10 years maybe more this time. Dave This “Boom” will go bust like all the others. The difference this TIME as compared to the 70’s boom is the price of housing as compared to wages.
Canadian wages have not increased in 30+ years when inflation is factored in. Yes you read that correctly real infation is not the official core inflation that stats Canada and the Bank of Canada trot out for the public consumption.
How can these morons afford a $400,000 house a jacked up diesel 4×4 that cost $60,000 a quad a Harley ect. on a tradesmans wages? They can’t and soon will find out they can’t. Everyone thinks what is happening in the States will not affect Canada. We are the Americans biggest trading partner next to China,[ China beat us out this spring ] and when the foreclosures and layoffs start we will feel it here. Our rising dollar actually just reflects the Yankee dollar dropping and a high Canadian dollar hurts our exports.
Everyone says China still needs our oil so Alberta will never suffer. Fat chance on that! China’s economy is tied to the U.S. when the Yanks slow down China will slow down plus Russian oil is a lot closer to China than Alberta oil. Russia has scaled back on oil production because oil is traded in U.S. dollars and the Russians don’t want to get stuck with rapidly devaluating money. Syenco’s Chinese backed upgrader near Redwater is cancelled now and some of the other projects near Fort McMurray are looking for more partners to help with the funding.
The Bank of Canada is mulling over the idea lower the interest rate to try and devalue our money and help out Ontario’s manufacturing sector.
Problems will really start in about a year when inflation goes nuts when people realize that debt backed money is really worth nothing and the National banks raise interest rates to stop inflation and $1800 dollar mortgage payments go to $4000 a month and more. It happened in the eighties and will happen again only the recession will be for 5 to 10 years maybe more this TIME.
Dave

]]> http://haddowdrive.com/2006/albertas-housing-bubble/#comment-6574 Tue, 11 Sep 2007 21:54:17 +0000 http://haddowdrive.com/2006/albertas-housing-bubble/#comment-6574 Worry? As a homeOWNER, you're right, maybe not so much. Hope you can keep your job, just don't move, remember to pay your bills, and weather out the storm. But if you're not in the market you're completely boned, and if you've been flipping houses, it's time to look for a better line of work. <BR>Personally, I agree, I think the local market has played a couple years of catch-up and is now on par with many other major urban centers in Canada. The question is, if oil completely flopped tomorrow, would we still call Edmonton and Calgary major urban centers? Far-fetched hypothetical, I know, but we have put a lot of eggs in one basket, so to speak. Fact is, we're land-locked and don't have a water port. We only have a couple piddly little airports. And the railway here would never cut it for any significant manufacturing culture. Infrastructure is pressed to keep up with population, in Calgary in particular, and the only thing driving the economy in any significant way is the wake of oil and construction. We're not a self-sustaining society by ANY STRETCH of the imagination. We have a public transportation system that would barely receive a passing grade for a small town in Europe or Asia. Agriculture and food processing is heavily subsidized in dire need of a labour injection. And the bulk of the population is in (bad) debt up to their ears from depreciable, consumer goods. <BR>Take a drive around any new neighborhood and there are $600K homes packed full of cheap IKEA furniture and using bedsheets for drapery, and a brand new BMW in the driveway. I'd wager the majority of those people have less than $25K in the bank -- and a significant chunk have nothing or even OWE. Paycheck to paycheck, I think is the term. <BR>Sure, people flocked here from all over to get work, drove a construction boom, but then take their money and head back East. Many of those "amazing gains" are cashing out and going back to the Maritimes. Good on 'em for a smart investment, but that money doesn't come from nowhere: the next guy is paying that, and more and more the next guy is a young Albertan who has a six-figure salary at 21 but barely graduated high school. Watch the market pull back and that's who's holding the bag: young families who were lured out of a long term career by the siren call of a steaming hot economy. Then what do you do when someone won't pay you a hundred grand to drive a truck? What do you do when people want college degrees again? <BR>And big business is even more vulnerable. Just because large companies are building processing facilities, plants, factories, and showrooms does not make us a long-term strategic society. Corporations have less to loose: shut the door, walk away, and let the governments and banks fight over who pays the tab. <BR>I suppose if you're on the right side of the rich-poor gap, you can think there is nothing to worry about. I suppose if you've got a stable income and you haven't squandered you'll be fine. But then I've never lived in a society where a large chunk of the population suddenly goes broke, loses their homes, and gets desperate, so I probably don't have a clue what the impact on my life will really be. Worry? As a homeOWNER, you’re right, maybe not so much. Hope you can keep your job, just don’t move, remember to pay your bills, and weather out the storm. But if you’re not in the market you’re completely boned, and if you’ve been flipping houses, it’s TIME to look for a better line of work.

Personally, I agree, I think the local market has played a couple years of catch-up and is now on par with many other major urban centers in Canada. The question is, if oil completely flopped tomorrow, would we still call Edmonton and Calgary major urban centers? Far-fetched hypothetical, I know, but we have put a lot of eggs in one basket, so to speak. Fact is, we’re land-locked and don’t have a water port. We only have a couple piddly little airports. And the railway here would never cut it for any significant manufacturing culture. Infrastructure is pressed to keep up with population, in Calgary in particular, and the only thing driving the economy in any significant way is the wake of oil and CONSTRUCTION. We’re not a self-sustaining society by ANY STRETCH of the imagination. We have a public transportation system that would barely receive a passing grade for a small town in Europe or Asia. Agriculture and food processing is heavily subsidized in dire need of a labour injection. And the bulk of the population is in (bad) debt up to their ears from depreciable, consumer goods.

Take a drive around any new neighborhood and there are $600K homes packed full of cheap IKEA furniture and using bedsheets for drapery, and a brand new BMW in the driveway. I’d wager the majority of those people have less than $25K in the bank — and a significant chunk have nothing or even OWE. Paycheck to paycheck, I think is the term.

Sure, people flocked here from all over to get work, drove a CONSTRUCTION boom, but then take their money and head back East. Many of those “amazing gains” are cashing out and going back to the Maritimes. Good on ‘em for a smart investment, but that money doesn’t come from nowhere: the next guy is paying that, and more and more the next guy is a young Albertan who has a six-figure salary at 21 but barely graduated high school. Watch the market pull back and that’s who’s holding the bag: young families who were lured out of a long term career by the siren call of a steaming hot economy. Then what do you do when someone won’t pay you a hundred grand to drive a truck? What do you do when people want college degrees again?

And big BUSINESS is even more vulnerable. Just because large companies are building processing facilities, plants, factories, and showrooms does not make us a long-term strategic society. Corporations have less to loose: shut the door, walk away, and let the governments and banks fight over who pays the tab.

I suppose if you’re on the right side of the rich-poor gap, you can think there is nothing to worry about. I suppose if you’ve got a stable income and you haven’t squandered you’ll be fine. But then I’ve never lived in a society where a large chunk of the population suddenly goes broke, loses their homes, and gets desperate, so I probably don’t have a clue what the impact on my life will really be.

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