US real estate prices just passed their previous price peak, for the first time since the Great Recession. The S&P Case-Shiller Index shows January just printed an all-time high, for the first time since 2006. That may ring alarm bells for many markets, but this peak took over 75% longer to reach than last time.
The Case-Shiller… What?
The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index, is one way to measure US home prices. The index measures prices in 20 of the largest metro areas across the United States. It’s inflation adjusted, so you don’t have to worry about adjusting it yourself. It’s the gold standard of measuring home prices in the US, and is used by fancy agencies like the US Federal Reserve. If you’re looking to gauge the whole market for broad economic analysis, this is where you would start.
US Real Estate Prices Are Now At The Highest Ever
Real estate prices across the US passed the pre-Great Recession peak for the first time. January saw the index reach 207.40, a huge 0.75% jump from the month before. This brings the 12 month change to a 6.34% increase. Are US home prices as frothy as they were in 2006? Well that depends on how quickly home prices should rise.
Source: S&P Global Markets. Better Dwelling.
It Took Over 77% Longer For Prices To Rise This Time
The rise to this peak was a lot slower than it was pre-Great Recession. Peak to trough, it took 71 months, which is almost 6 years. To contrast, it took only 40 months to make the similar increase that resulted in the 2006 peak. Prices took ~77.5% longer this time around, which likely means it’s a healthier increase. That said, it doesn’t necessarily mean it’s justified.
Source: S&P Global Markets. Better Dwelling.
The rate increase is still pretty steep, even though it climbed slower than the previous peak. Prices increased 51.5% over nearly 6 years, which works out to a 7% compound annual growth rate. At this pace, home prices would double every 11 years in real terms, which isn’t all that realistic. You know… since rents don’t move nearly that fast.
Price are increasing slower than they were pre-Great Recession, but still very fast. Even for metro areas that are booming, prices can only sustainably move with incomes. When prices move much faster than incomes, you find yourself with population outflows. A problem even New York is currently dealing with.
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You can already start to see people leaving Toronto and Vancouver for the US. Prices are driving talent south, and neither of these cities offer the lottery tickets San Francisco does, so there’s not even that attraction.
Free health care? That takes months to get an appointment, and no one has a doctor? That’s your differentiating factor, Canada? fml.
And the US economy, Trump especially, is chasing the smart ones to Canada. The brain drain has been reversed.
Yuuuup… Good one JT
By the way, you will find that Canadians, as a whole, are quite immune to your American fake news propaganda. Stick to the American press, don’t pollute our Canadian blogs with your crap.
Yeah, I’ve never understood how the majority of Americans believe in rubbish just because Hilary wore pants. Then again, the Russians own their asses so all you can do is LULZ.
Hilarious, there was an article not even a week ago about tech workers flocking to Canada. So what is it? And don’t confuse it with capital flight which is a reaction to the looming economic crisis. I don’t know anyone Canadian, unless they are head hunted, flocking to the US. I like the states, love the north east, but it is more of a summer house thing not a ‘put with all the crap on the reg’…
What are they coming up there for? Toronto has the worst tech wages in North America. And it sure isn’t for the healthcare. Any decent job in the US means you have better health insurance than what you would get up here.
And when Amazon comes to Toronto because Trump hounded Bezos once too often, THEN what is your line?
You never know, Bezos might wish to take advantage of those low wages. Apparently Amazon would save $1.5 billion per year in wages alone if their second HQ were set up in Toronto. Part of that savings is the lack of need to pay for employer-sponsored health insurance in Canada, but part of it is drastically lower wages.
https://www.ctvnews.ca/business/amazon-would-save-1-5b-a-year-if-new-hq-located-in-greater-toronto-area-clark-1.3637519
We’re back to the 90s, when our politicians bragged about our low wages and low dollar being a competitive advantage. You’re too young to remember those days obviously. I’m not. And I’m not happy to see them return.
How are your state pension systems holding up?
Another reason why Canadians need to stop comparing their real estate markets to ours. The peak was reached, failed, and is back up to that level. This is CONFIRMATION that the market can go this high.
Canada has just been a series of monetary manipulation. You have no idea what your market is worth, until it corrects, and rises again to test the previous peak.
Yeah there are 6 major markets in bubble territory. Tick tock.
Interesting. Do you always wear your pointy peaked hat when you talk?
‘That you don’t know what you’ve got. Till it’s gone. They paved paradise. And put up a parking lot.’
Joni Mitchell.
She nailed it about the American psyche, way back in the 80’s, and you are just realizing it now?
WRONG!!!!!
The prices will only recover when they account for inflation.
Just getting to the same price as in 2007 is STILL a loss.
Did you read the same article, or just the headline?
“It’s inflation adjusted” are confusing words, but I think, just maybe, it means the numbers are inflation adjusted.
Nice one. Go umerica! Seriously though, your handle suggests retard but you seem to post at quite the non-retard level… Did someone go to one of those fancy pants state colleges? Seriously though, and I mean it this time:fuck off. What’s next letting hamsters post on BD?
In a football game, you take a loss of 20 yards on the first down. By the fourth, you are back at the line of scrimmage. Sorry, no cigar. You still lose the ball. Even if you got back to the line of scrimmage plus 9 yards, you still give up possession. (American rules, the scenario is American. And why haven’t Canadian field markings gone metric?).
Same with investing.
If you can buy ‘x’ amount of stuff (the CPI basket of goods) with the value of your house in 2008, but in 2009 you only have enough to buy half of the goods, your house has lost Purchasing Power Parity. In 2018, if your house can now buy the same ‘x’ amount of stuff, your house has now regained the same PPP. That, roughly, is what ‘adjusting for inflation’
is supposed to account for. However, in terms of an investment, it is still a loss. You are just back at the line of scrimmage. You have paid a considerable amount of money in interest on your mortgage. Getting back to the original PPP means you have still lost all of that interest. You have gained nothing. Sorry, you lose. No first down. Even if you gain slightly in PPP, you still have lost. An investment is supposed to GAIN in PPP. Your house has to be worth the original PPP PLUS the interest you paid on the mortgage, in order to be even.
So even if you are ‘even’ by some ‘inflation tweaking’, you are not ‘even’with where you SHOULD be. You haven’t made ‘first down’. Your house has still lost PPP value.
Inflation tweaking only works for investments (anything that should make or requires an interest payment) if it ALSO includes an ‘interest’ component. Otherwise you have still lost. You are not where you should be, only where you were.
Just like football.
You don’t win by getting back to where you WERE after a loss.
Again, the index is inflation-adjusted, so you’re talking out your ass.
The S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index, is one way to measure US home prices. The index measures prices in 20 of the largest metro areas across the United States. It’s inflation adjusted, so you don’t have to worry about adjusting it yourself. It’s the gold standard of measuring home prices in the US, and is used by fancy agencies like the US Federal Reserve. If you’re looking to gauge the whole market for broad economic analysis, this is where you would start.
Well, that must have been embarrassing for you.
U.S. median incomes have gone up a few hundred bucks since 2000,
virtually unchanged.
So aside from super low interest rates, now on the rise, there
really is no justification for it. Reasons sure, but justification?
The median house cost south of the border is $188K (U.S.)
about a third of what it is in Canada.
We’ve either been doing something really brilliant and productive compared to our southern neighbours, or we have really been screwing things up, too dumb to recognize it, and are now in way, way over our heads.
Because “We are Special” and “This Time it is Different”.
Haven’t you heard? Toronto is the next financial center, technology meca, artificial intelligence hub, and media conglomerate, etc. Where thousands of immigrants, carrying bags filled of million dollars in cash, are flooding in and screaming to buy real estate. Your local RE agent has been telling you this for years.
BTW, what the article does not really mention, is that housing prices were going up unevenly across the country. Some areas like NYC, SF, etc. benefitted early from a credit boom and low interest rates in financial and tech sectors, before other areas. But overall many real estate prices increased b/c of investors looking for a higher yield than investment grade government securities.
Ding ding ding…. They are 12-18 months away from a debt related recession but shhhh, don’t tell them. The wrinkles should appear next year as the fed mandate continues unabated. Unless Trump starts a war. MAGA bitches!
Trump has already started a war. The next major war will not be fought with bombs and rifles, it is being fought with tariffs and economic sanctions. Destroy a country’s economy is even more effective than destroying property. Essentially, every war has been won by destroying the other country’s economy, such that they can not afford to defend themselves any more. China is just bypassing the expensive hardware. This is a war that China has every intention of winning. They will keep squeezing the American economy until America can not afford to fight any more, and America becomes essentially a branch plant operation of Chinese corporations.
And, before you say it, I am NOT a China-worshiper, I just call it the way it is. Ignoring China’s strength and success is not going to make them go away. The more America underestimates their ability, the quicker America’s demise is going to be. Whatever China is doing, and however they are doing it, they are winning the war, and American capitalism just doesn’t have the tools to stop them. No country can muster the clout to defeat an economy the size of China’s, when the Chinese economy is entirely consolidated under unilateral state control, as long as that country (America) remains divisive and internally in conflict. All America is doing, is shooting economic popguns, when China is firing economic howitzers.
With the economic clout the Chinese state has, they can pick off any economy at will.
Weather the West likes it or not, Socialism with Chinese Characteristics is the new world reality, and it will be far less painful if the West actually understands how potent it really is.
In that respect, by traditional warfare, Trump is calling it correctly. A full retreat, and then retrench, regroup and reorganize. Try to preserve whatever is left. Leave the battlefield. But make no mistake, Trump has given up the fight, and conceded the battle to China.
From that perspective, Condos may as well be wooden horses stamped Made in China.
And why stuff them with soldiers when you can use gullible local mercenaries ?
And don’t forget our healthcare. Millions of people would be honoured to come here and wait in the hallway for 48 hours for a hospital bed, while the government finds other more important things (like child care and gender equality) to spend money on.
And when the limits on your health care plan run out, you die.
‘In the middle of the operation, “Sorry, Mr. Smith, you have used up your coverage. Sign over your house, or we close you up and kick you out”.’
Yah, because that happen….. never.
Actually, Alistair, it does.
The limits on health care plans are cast in stone.
When the limit is reached, payment stops.
When the payment stops, private hospitals want guarantees of payment,
You literally sign over any assets as collateral.
Just in case you die, you understand.
I’ve been wanting to buy a condo in Toronto for the past 2 years, but have been sitting on the sidelines as I felt the market was inflated. Unfortunately though even as detached houses have been correcting, the condo market continues to get hotter (and further out of reach). I was testing different assumptions on NYTime’s Rent or Buy calculator, and the gist is that even at current prices it would make sense to buy if the prices continue to rise by 5-6%. Have any economists or banks made projections on condo price appreciation/depreciation? What do the suits on this website think?
i recommend you go buy some concrete/steel/ cabinets/ a toilet etc. Leave it in a shed where it will stay dry and away from the elements for the next ten years and your investment will hold up way better then anyone buying a condo today
That is absolutely the BEST advice I have seen. At least that way, you can go out to your shed and dream of what you WILL have, instead of having your condo foreclosed and you end up looking at what you DID have.,
What country Canada !! Thanks to the government puppets in the hands of banks and developers it has become impossible to buy a house now it is becoming impossible to buy a flat shoe box !! Maybe instead of trying to buy a flat would be better to take a second passport just in case ……
I so agree with you on that one!!!! I’m looking for “outside of Canada” for my retirement. Don’t want to end up committing a suicide after realizing I can’t keep up on paying crazy property tax on a house with a crator size pothole on the street road at my front door and the “economise line” of street lights that are there … but not operating – for “saving on electricity sake”. What’s the option for a good retirment?
Good healt care (way better than Canada)
Safe, good food,good weather………… Umbria (Italy) just attached to Tuscany !!
Also with the same amount of shoe box apartment in Vancouver you get a villa with a swimming pool. I am thinking to organize a business how to help people to retired in many wonderful small village in Italy, after almost 18 years living in Vancouver I understand the opportunity for Canadian looking for retirement place. I also want to buy a villa and run it as bed & breakfast……………well for me it is easy because I am Italian so I have double Citizenship.
You do realize that it was Canada that has given you people these opportunities,
and yet you complain it’s not good enough.
When the going gets tough, it’s not just the tough that get going, the cowards flee. Good riddance, enjoy, don’t come back, we’re way better off without you.
Sal,I call your bluff. Your accent is not Italian, your alleged Italian cultural identity is phony, your knowledge of Italian-Canadian heritage is phony. I grew up in ‘Little Italy’.
No ‘Italian’ needs to use a ‘business’ to retire to the ‘old country’. Every Italian/Canadian knows how to do it. It is very common for Italians to come to Canada for work, start a family, then retire back to Italy, collecting their Canadian pensions. They do not brag about it, they just do it.
Every Italian consulate in Canada knows the routine.
And Italian dual citizenship is common – they allow dual citizenship by descent.
If Canada can not provide immigrants with the opportunity to buy a property, a house where they can raise a family, then they will retire elsewhere … and will be absolutely right to do so. I say so after renting for 18 years and my time to buy is running out. I came here with no enheratance like you, Canadians, majority of you get from a family or parents. I came here with nothing but my university diploma that nobody cared about and had to start from zero.
Dear Justin
I was born and grow up in Italy till the age of 33 years. I studied and lived and worked there but I am the different immigrant generation from Italy. My generation is different because we chose to come here while in the past many italians they had to leave Italy for different reason as Job opportunity, earthquake and lost of home and everyone of the family, also unfortunately because they were poor and not got a good school education etc etc. Accordingly to the way of thinking of Mr vnm they were coward because they left Italy and come to Canada or moved to others country around the world to look for better opportunity. Italy population is around 60 milions but there are another 60 milions live outside Italy (so many coward Mr. vnm). All these immigrants had the privilege to come to Canada and Canada had the privilege to have them because they worked hard and many times improved economy and create job around the world as well. Today many young Italians with University degree are leaving Italy for better job opportunity around the world (again all coward Mr vnm)!! Dear Justin Italy does not have only the consulate to help the Italian abroad but there are also INCA offices which help the Italians to collect the pension from Italy or from others country they lived. About me I had so many wonderful friends here in Canada (Canadians, Iranians, Chinese……) very good friends. I worked 7 days a week for many years to pay off my mortgage. In my comments Mr vnm I never offend people I blame banks and bad government for the mess we have today in Canada. You agree or not agree with me and I understand that even I appreciate your different opinion, you know is called democracy, but I will fight till I can be free express myself and you are be free to express yourself and never called you coward if you have a different opinion than mine. Today Canada unfortunately does not offer the same opportunity as before like Maria said if this country does not give the possibility of a better life people will not come here.
Dear Justin you want to bet I am not Italian ? I will give all my money in my bank account
but you have to bet yours !!
VIVA I’Italia and all Italians all over the world and Bless You for your honest answer!!!!!!