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Originally Posted by Radley77
Well, all the graphs are Calgary specific regarding what I believe is an overvaluation in real estate in terms of price to earnings ratios. Also, affordability indicators, and carrying costs point to a situation that is unsustainable.
The subprime mortgage issue applies (albeit to a lesser extent) to Calgary due to the fact that money is financed globally and there are now higher risk spreads between government of canada bonds and mortgage interest rates. In fact, risk spreads are at the highest since the 80's recession. And the relationship between higher interest rates, generally has the effect of reducing property values.
The Canadian mortgage-backed securities market has "vapourized." No one's trading in it anymore and there's only five key institutions left to support it.
I am very skeptical how the current house prices will be supported considering all these factors, I would imagine that there are significant risks to the downside, and little to no upside potential.
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While I think some of your graphs and arguments are interesting I've got to question your objectives.
From the Blog you linked
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Radley77 said...
Bears,
Your mission, should you choose to accept it, is to make three posts on blogs other than this one. Preferably real estate related, to explain about what you understand to be an overvaluation in real estate. Use graphs, and persuasive arguments.
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Why?
Posts like yours make you look just as bad as the bulls who can only see the good.