Thursday, May 12, 2011

Would you buy this investment?

I have posted the widely available VREB average price chart. Lets forget that this is housing and assume it is a stock that your brother-in-law suggests you buy. You pull up the price chart and see the vertical explosion, the singularity above...would you buy it?

We know all the reasons, HAM, land, low interest rates, CMHC etc etc. However this is the typical chart of a bubble reaching it's final and ultimate pinnacle. Where exactly that final point of maximum lunacy is, no-one knows, but when it reaches that point- the descent is USUALLY fast and furious.

If I had any cojones I would call this the top. In fact maybe I will anyway. Victoria is struggling, the OK is sitting on huge MOI, and in Whistler they had 7 sales last week with a 728 strong inventory. It would take them over two years to sell out at that rate. The Sunshine Coast sits at another huge MOI.

So here it is..I thought RE was over-priced in 2007/8 and a crash was coming. It came and was stopped dead in it's tracks by the government shenanigans. I posted that the crazy low rates and the games with the CMHC may arrest the decline and some people may want to to buy in here. It did and prices were off to the races. With hindsight I should have listened to my own advice.

Now I think we have reached the maximum point of unaffordability. I could be wrong. There could be another huge influx of Chinese investors, or the Government could back-track and reverse the few changes it made to reverse it's own mistakes, or the Bank of Canada, having talked the talk on inflation could cave in completely.

All of that is possible, which is why prognosticating is so hard.

However I think we have reached the high-water mark on average price in Vancouver.

If May is not the highest point, then the blog will shut down in July after the June numbers come out.