Phantasmix Stock Market Blog

Those crazy Australians. Wonder if this ad ran on TV? Probably not.

This is safe to watch at work. I think.

Epic Home Sale Commercial – Watch more Funny Videos

NEW YORK – Former Federal Reserve chairman Alan Greenspan, whose legacy has been tarnished by the global financial crisis, on Thursday laid out a scholarly defence of why Fed policy did not fuel the housing bubble.

He did offer somewhat of a mea culpa, though, noting that the regulatory system failed by not demanding financial firms hold much larger capital buffers. Mr. Greenspan, who led the U.S. central bank from 1987 to 2006, has been criticized by some analysts who argue he kept short-term, benchmark interest rates too low for too long in the early 2000s.

The former Fed chief defended the central bank’s actions, saying that the seeds of the housing boom were sown by geopolitical events that were out of the Fed’s control, an argument he has presented a number of times in the past.

The fall of the Soviet Union led to hundreds of millions of workers entering the global marketplace, he said in a paper to be presented to a Brookings Institution conference. This new market-based workforce, Mr. Greenspan said, helped push up growth in the developing world. This in turn fuelled a global savings glut that drove down long-term interest rates, leading to an “unsustainable boom” in house prices, he said.

Source: Financial Post

Source: http://blog.buzzbuzzhome.com/2010/02/ottawa-considers-making-it-harder-to.html

Kiyoko Fujimura
Buzzbuzzhome Corp.
February 12, 2010

You can’t read about Canadian real estate news right now without hearing the word bubble. While we’re still unsure whether or not a bubble is truly in our midst, Finance Minister Jim Flaherty is considering policy options to curb a bubble in the housing market. With Toronto housing prices up as much 19% (by some estimates) in one year, it seems like the market needs a readjustment.

Under consideration are two policies. First, an increase in the minimum down payment. Second, a decrease in the maximum length of mortgages (amortization period). The larger down payment or the increase in monthly payments associated with a decrease in the amortization period would leave some potential buyers unable to purchase. This, in turn, should lead to an easing of demand and cooling prices.

Peter Aceto, head of ING, said:

“There are some concerns because of what’s going on with real estate, in terms of rapidly increased property values and the theory they’re being fuelled by very low interest rates, that a bubble is being created similar to what happened in the U.S.” Yourhome.ca

Interest rates have sat at record-low’s for a while now triggering what some are considering a bubble. For further analysis of this trend see my previous blog post here.

Discussion

Given Flaherty’s track record (I, of course, mean the Income Trust debacle), he’s very much capable of doing something drastic.

I’ve been a nervous wreck trying to decide if it’s the time to sell our condo. Real estate agent promos tell me I should sell now!

Future potential negatives for the Canadian, and in particular Toronto, real estate are:

• Property taxes in Toronto are set to increase soon.
• Then we have that stupid HST this summer – instead of 5% people will be paying 13% on closing and legal fees. Not to mention a reduction in disposable income due to all these extra levies and taxes.
• Interest rates, supposed to increase this summer.

By the way, did you notice, they’re heavily advertising government tax relief programs? I see what they’re doing though! Instead of waiting for the income tax revenue (which would probably be lower this year), they will now take their share “on the spot”. You won’t have a choice but to pay.

They end up looking ‘kind of’ good because of the temporary income tax cuts, yet they get to eat their tax pie thanks to the HST.

I know I’m over-simplifying.

Ok, let’s assume they really raise the minimum downpayment or decrease the amortization period. Wouldn’t it mean that people would buy smaller, more affordable units?

What are the signs of a real estate bubble? Everyone says it’s a bubble, and sentiment-wise, I don’t think bubbles are that obvious, right? Or have people wisened up after the US real estate crash?

I need some input. If you were patient enough to read this, please take a minute to voice your opinion. Is Canadian real estate in a bubble? Why or why not? And what would happen if there was another “Flaherty massacre”?