David Rosenberg on ‘The Giant Canadian Housing Sud’

Kudos to the few who are speaking out. Note his reference to fundamentals like price:rent and price:income. -vreaa

From David Rosenberg, Gluskin Sheff, 17 May 2010 daily letter –

“NO HOUSING BUBBLE, EH?
Well, that is the message out of Ottawa.
Don’t buy into that. It was Ottawa’s policies, namely allowing near 100% LTV mortgages insured by the CMHC and 40-year mortgages that triggered the bubble to begin with. (Okay — we’ll call it something else: a giant sud). Home prices have surged to record levels relative to incomes or rents so call it whatever you like.
The just-released existing home sales report showed that resale home sales fell 2.6% MoM in April (on a seasonally-adjusted basis) and are down three of the past four months. On a year-over-year basis sales are up 20% partly due to easy comps but this will slow dramatically in the months ahead. Average prices are running at about 12% YoY, slowing from the 20%+ rates seen a few months ago.
New listings continue to rise – up 0.9% MoM and up nearly 30% from year-ago levels. The inventory of unsold homes moved up to 5.3 months (on a seasonally-adjusted basis) to the highest level in almost a year. This higher inventory build is consistent with what we are seeing in the new housing market, where housing starts having been running above household formation rates for about 7 months in a row. All of a sudden, the inventory landscape is beginning to change and we would expect prices to follow suit. Just in time for the Bank of Canada’s rate-hiking cycle too. If you’re a renter, start licking your chops — this is about to become a buyer’s market (hey — CMHC didn’t boost its reserves against default for no reason).”