Thursday, October 2, 2008

Is there subprime in....?

I talk to many intelligent people in the Canadian financial services industry. Despite their intelligence, and this is admittedly anecdotal, I keep hearing opinions that housing in Canada (and in particular Montreal) will slow down and maybe go down a little, but nothing too serious. Why do you assume that I ask? It usually comes down to some variation of "our banks and regulations were sound and we have no subprime"

Was there subprime in the UK? Down 13% YoY

Was there subprime in Spain? Down to -0.3% YoY (supposedly understated and dropping rapidly)

Was there subprime in Ireland? Down double digits YoY (I've seen reports of -14%)

Was there subprime in New Zealand? Down single digits YoY

Was there subprime in Portugal? Down single digits YoY

There are reports of falling prices in many other countries in Asia and Europe.. Was there subprime there?

Every country had its own problems that can be summarized as follows: Time and price.

When prices go up forever (time), it encourages people to pay too much thinking prices will continue to go up, borrow too much and the financial sector lends too much and levers up too much. Pretty much everywhere in the world. The boom was global and the bust will be global.


matt said...

In Vancouver we're now down -1.6% YOY and -6.1% from peak just 5 months ago. Our average has plummeted from a record $920K set earlier this year to $790K (-16.5%). And to top it off, we're making Shiller proud - after all, we are the bubbliest of the bubbles.

jen said...

More completely unsurprising news:

Home-price slide in double digits in Calgary

"Median sale prices for single-family homes in Calgary have plunged in the range of $45,000 to $66,000 in September from their peaks just over a year ago."