Sunday, November 13, 2016

Extrapolations of a Housing Crash

This is it boys, this is war!

Last month a standard Unionville house was going for $2.3 million, with people killing each other with offers.

Today -- no offers.

Let's look at physics of froth, and a crash.  It all has to do with hot money, which is the oxygen for a wet wood burner.  It's only 20% of a market, but it's enough.  Hot money (hm) is defined as very twitchy international money, which is probably also very dirty.  Hot money piles in and whooshes out very quickly, even down to a few days.  Every country and every commodity has suffered from this.  hm comes in when money is made very quickly with no questions asked, like the tulip bubble.

BC started the crash when they went all poopie over hm.  The feds were suddenly looking at bc realtors who were laundries for huge amounts of dirty money from China.  This was the first shoe.  The second shoe dropped when they declared war by their tax.

The final nail in the coffin for Toronto was with election of Trump.  This was now major war against China. Hm not only stopped dead, but the worst thing is that hm is always willing to take a haircut to get out, mainly because they got other places to go.  So for Toronto housing, we first get all the oxygen cut off, they then take away all the dry wood.  This is an immediate 20% price cut.

When this happened with the big US crash, the central bank dropped interest rates by more than a factor of 2.  This allowed people to keep their houses with a 20% cut, and soon hm was coming back, and then everybody and their dog stretched themselves with houses.

We don't have that interest rate leeway.  Toronto housing will drop 20% but then what?  There are things to look for:  frothy condos, all glass, all balconies, costing a couple mill.  The last one sold out Before Trump (bt), but you look for the next one.  Don't forget that they sell when it's all paper, so they can just fold up their tents and walk away.  It's hard to find out these things.

The big crash all depends on the distress of people caught between houses without conditional offers, which was the norm this past year.  This will crash the prices 50%.  This will take months to figure out.  Right now, people are in shock, and holding on to their high prices.  The first thing is that sales volumes will drop tremendously, like in BC.

And all you young people, don't be happy that prices will drop.  The last couple of years, the only things hiring young people have been the banks for processing housing loans.  Ha!  The banks will soon be calling in all their business loans to cover housing.

This a Trump Earthquake.  The real earthquake will be in Oklahoma, and then Toronto will get worried about earthquakes.  Nobody will touch a cheapo condo because it is a seismic death trap.  Price goes to zero.

***as usual, if this bothers you, believe the real estate agents.  I'm always wrong.  :)

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