Juggling Dynamite

Today Danielle was be a guest for a half hour on April 24 on the VoiceAmerica radio show, “Turning Hard Times into Good Times” with host Jay Taylor. The interview is available here after the show.

The Standard & Poor’s/Case-Shiller index this morning shows that US home prices dropped in February in 16 out of 20 major cities for a sixth straight month. The 20 city composite is now down to price levels from late 2002.  Here is the chart.

On the upside this means US home prices have now given back 10 years of bubbledom which means the housing market there is much further along in the necessary downside work and healing process, than the still nutty Canadian, Australian and Chinese markets.

For more on the Canadian market risks see this excellent article by housing and credit analyst Ben Rabidoux:  The under-the-radar changes that may soon deflate (or pop) the housing bubble. Here is Ben:

“The next decade for real estate in Canada will be fundamentally different from the last. Our aging population, a mismatch between where our prices are and where they should be based on our economic performance, and rising interest rates are all reasons for this. However, the greatest difference will be in the availability of credit going forward, and those who try to explain real estate prices in Canada without acknowledging the role of easy, accessible credit over the past ten years or so have completely missed the boat.”

Very disturbing is the fact that the Canadian government has increased the cap several times on the amount of mortgages back-stopped for Canadian banks by the Canadian Mortgage and Housing Corporation so that today Canadian tax payers have underwritten nearly 50% of the 1.1 trillion dollar mortgage market. An increase of 70% in just the past 4 years. And accelerating just as Canada has one of the most over-valued realty markets in the world. Here is the chart of CMHC (tax-payor) backed mortgages.

This is a track of train-wreck coming to the highly indebted, hopelessly naive and dangerously under-saved aging population in Canada. Of course, the bankers and politicians who orchestrated all of this genius could not possibly have seen these problems coming. Of course not.

I recently met with Marc Faber in Vancouver and we shot a segment for the Kelowna Wealth and Money Show that played this weekend.
Here is the direct video link.