CREA preannounces....

Funny how this slipped out Friday from the G&M "Cooling Vancouver leads fall in house price"

LORI MCLEOD AND NORVAL SCOTT September 12, 2008"

National sales numbers for August, to be released by the Canadian Real EstateAssociation (CREA) on Monday, will disclose the third consecutive monthly drop in existing-home prices and the largest decline since prices slipped in June for the first time in more than nine years.

Nationwide, the price of a resale home fell more sharply in August than the 2.4 per cent year-over-year drop posted the month before, mainly because of softness in Vancouver, the country's most expensive residential real estate market, said CREA chief economist Gregory Klump.

Sales activity fell by 53.4 per cent in greater Vancouver in August, compared with the year before, and average prices there dropped by 4 per cent for both detached homes and condo units, to $737,985 and $374,366, respectively.

In July, overall housing sales in Vancouver dropped by 44 per cent, while the average price declined by 1 per cent.

Hmmm, prices fell by 4% YoY in Vancouver in August (vs 1% in July). Since Vancouver has the highest prices in Canada, this will drag the overall number down for August.

And CREA will likely spin away 1) saying that the market is now balanced and a great time to buy, 2) the number is skewed by Alberta and BC and 3) this is just a healthy correction and that Canada is nothing like the US.

To which I will say 1) the market is beginning to become more balanced after being a sellers' market for about 7 years. Hence, we need a buyers' market for a number of years to return prices to reasonable levels (i.e. not a few months of "balance" after the biggest bull market in history)

2) Yes, Alberta and BC are dragging things down just as they brought things up in 2006/07. I expect their markets to eventually drop more than others but their crash has only begun. Wait until the foreclosures get started...

3) This is not a healthy correction and Canada is exactly like the US except with a one year lag and overprime instead of subprime

Also, notice how CREA has not updated their 5% figure for 2008. Why should we believe CREA since they have yet to admit we have a problem? The US real estate associaton did the same thing back in 2006 & 2007.

As I said before, once this storm that started in the US in 2005/06, washed up in Alberta late last year and has now spread to BC really hits the center of the universe (Toronto), it is game over for the Canadian housing market.

Plus, what has happened in recent months (and likely with only limited impact in August)?

1) The awful July employment numbers: That is likely to impact housing this fall
2) Commodity and TSX crash/correction since July: Going to make things even worse out west...
3) Credit spread widening making mortgages more expensive and harder to get
4) Fannie & Freddie, Lehman, WaMu only makes 3) worse
5) October 15th mortgage changes AND

what may happen in coming months:

6) Another huge leg down in the overall stock market

Based on the preannouncement from CREA, I now expect August to be at least -5% for the country overall. My projection of -6% to -9% by December is looking more likely and perhaps skewed to the low side of that projection. When I started this blog, I had a question mark on the title. Perhaps I can finally remove that question mark....