“There is no art which government sooner learns of another than that of draining money from the pockets of the people.” –Adam Smith
May 14, 2022
- CRASH OF TERRA/LUNA/UST WILL CRASH REAL ESTATE?
- INFLATION TO STAY FOR YEARS?
- TIMING? IT’S OVER
- TREND IS YOUR ENEMY
- CYCLES HAVE A WAY OF CYCLING UP AND DOWN
- TRILLIONS LOST IN STOCKS AND CRYPTO WILL IMPACT US BIG TIME
- DEVELOPERS OFFERING LOW DOWN, RAFFLE CARS
- ASTOUNDING: NEW LISTINGS LOWER AGAINST 2021 BUT HIGHER AGAINST PREVIOUS 4 YEARS
- EXPECT LISTINGS TO CONTINUE TO INCREASE
- SF SALES PLUMMET IN VANCOUVER AND THE VALLEY
- THE NUMBERS: APRIL 2022, 2021, 2020, 2019
- US DOLLAR NEW HIGH
- US DOLLR INDEX ALL TIME HIGH
- US PENDING SALES SHARPLY LOWER
- CANADIAN DOLLAR AS PREDICTED
- INTEREST RATES – NEW STRESS TEST
- QUESTIONS, QUESTIONS
- SONG/MUSIC OF THE MONTH – OK, NOT EVERYONE’S CUP
- TALEB BOOK
The questions and comments on the ‘budget issue,’ the implications, the ‘high is in place’ comments, inflation/deflation etc. were many and always welcome. However, by far the most asked questions and YES/NO comments came in regard to “wither the market,” which actually is always the most asked – both on the way up and on the way down.
Of course, it is very understandable. The war, inflation rates soaring, 50% of S&P stocks fell more than 50%, etc. Plus, an outlandish stablecoin collapse could raise anybody’s eyebrows. Add crashing home sales and US mortgage rates doubling in 4 months all that leaves us wondering: Wither the market here? To me, actually, it is not just the interest rate increases themselves but the speed at which they are increasing and the speed at which stocks and crypto are falling that has you my dear readers and me in such a “question frenzy.”
WHITHER THE MARKETS IN THE US AND CANADA?
My views on deflation/inflation are clear and have often been stated for 20-plus years. My prediction in my 1998 book “Forget about location, location, location” stated that if we kept on printing money for the next 35 years (which we did leading up to 1998) hard assets would boom and houses in Vancouver would be worth $5 million. (We actually reached $4.4 million last fall on the Westside.) The average price in 1965 was $13,500 and in 1998 it clocked in at $278,000. Just extrapolate to today.
In the meantime – now everyone talks inflation. Some of you don’t agree with my take and have your own views…and that is as it should be. However, my non-economist view that we have lived and are living in the most unreported hard asset inflation of all time – thus buy real estate – has been proven correct.
You don’t have to buy my book REAL ESTATE ACTION 2.0 to check me out just go to OzBuzz issues 39, 40, 41 and 42 (ozbuzz.ca) and my explanation as to the different kinds of names for inflation and/or why we could have inflation and deflation at the same time.
I have always published this in writing, in my speeches and of course on my audio USB (25 secrets): I use 4 – macro – pillars to predict the basics of ANY real estate market. And added the 4 local pillars.
- Inflation or deflation?
- Inward migration? Job creation?
- Interest rates?
- Supply and demand?
Dear Reader, I am loathe to repeat myself here and in the 4 issues of OzBuzz I have spelled out my views in far more detail. Here then my conclusions on the current local and world situation based on the details you find in my philosophy.
(Go and read issue OzBuzz 39 – December 2019 – for a lengthy discussion.)
Major Point: Inflation of hard assets will continue forever over time. It has for 50 years and it will -barring a collapse- continue. But not in a straight line. Think about it: If inflation is 8% today (based on April 2022 over April 2021) and next year the headlines will proclaim that inflation is down to 6% (April 2022 to April 2023) there will be much chest thumping on – inflation is down. Actually, prices would then be up 14% plus (over April 2021). If governments bring the rate down to 4% in April 2024 – more chest thumping but prices are now 19 percent higher. The value of your money is down in 3 years by almost 20 percent. Real Estate prices LONG TERM thus will be higher – even if inflation is reported lower. Read issue 39 for comparison to past years.
Prediction? Inflation will be between 6% and 10% right thru to mid 2024! Yes. But it may not show up in your much inflated house prices until later.
Only way to stop this runaway inflation is to crash the economy and stocks. If the FED and BOC stick to their guns we will maybe see a peak (in inflation) sooner. But then their numbers cannot be trusted … there are soo many things no longer in the basket that is being measured. Wanna see the real inflation numbers – which include all of the past? Go to www.shadowstats.com
NOTE: I SAID 4 PILLARS!
TIMING (Read details in OzBuzz 40 – January 20, 2020 – this is vital!)
Major Point: My headline on February 8th 2022 newsletter was “The high is in place”. Several of you took issue with that. But my reasons are clear. Sales started to slump and active and new listings while lower over the peak of 2021, were lower against 2018, 2019 etc. So, inflation will continue – yes, but timing is taking over. From here, buyer fatigue, crashing stock markets with billions lost, will see us turn over from here. As in lower prices (look at Surrey SF prices below). It is not going to happen; it is happening now.
TREND (Read Issue 41 – February 2020 – continued)
Major Point: The out-of–town trend will reverse (higher gas prices). Electric cars and total mad focus on environment will take a back seat (I know, I know) when people realize EV charging issues, soaring cost of electricity and crazy stock prices for companies not even in production like Rivian. (Valued more than Mercedes without actual production). Actually, Ford Motor Co sold eight million shares of electric-car maker Rivian Automotive Inc (RIVN.O) for $214 million last week.
Trend? People may buy electric but run away from fad EV stocks (Rivian is down 88% today). People will buy homes near TOD transport-oriented developments. High tech darling ‘Ark Investments’ touting ‘future profits’ is down 78%. Millennials are the ones burned in the mad dash down and will get back to basics – back to the city.
CYCLES (Read OzBuzz issue 42 – March 3, 2020 – it’s eerie.)
Major Point: CMHC had a cycle of condo construction of 4.2 years (a long time ago). They no longer produce that. But the cycle described in the OzBuzz 42 makes the point that – first we don’t build, then we start building and then we build too much and then we don’t build for a while again.
Major Point 2: We talked last month abut being cautious – rising costs etc. We now see some developers getting to the front in their marketing. GO WEST offers 5% down, with a 5% GST rebate (to owners) and a raffle for a TESLA 3. Others offer paying 5 years of strata fees or including GST in price. So, the cycle is coming full circle. Nothing bad here. Just weekend blow-outs are over. Nothing wrong. It gives buyers more time to shop and compare. Back to a normal market, away from mad weekend blowouts.
End of a cycle also means that construction workers will become more plentiful, production materials will get back to normal and with government loans and programs ending, the mad dashing will stop. Of course, OFSI announcing May 11 that the stress test (as we predicted) is now 6.19% adds fire to buyer fatigue.
DEVELOPERS MUST SHARPEN PENCILS
Discussion with marketing ace Pete Ryznar of Ryznar Media Inc. on the new reality facing developers. Blow out sales are over in Vancouver. Says Pete: We saw a softening in the Presale market about 1-week prior to the half point interest rate increase in early April.
Overall, there has been a “slight” decline in registrations across the board, although some of the newer projects and out of town properties have bucked the trend. Inflation concerns, negative news from the mainstream media, the war in Ukraine, the stock market crash/selloff, future interest rate increases have all contributed to people taking a wait and see approach. The froth is off the market. The Radley in Surrey was probably the last big weekend sell-out that we’ll see for a while.
Major Point: Developers need to be more creative with their incentives while marketers need to be more strategic in targeting audience segments that are most likely to lead to a conversion. One example is an offer for 5% down and a raffle for a new Tesla offered to buyers.
As far as the 4 local minor pillars are concerned here is our take:
Will remain a pillar. But note: Not as much as we might think. When we dig into the ‘100,000 immigrants’ coming to BC’…yes big number, but 70% were already living here. Seventy per cent! Why? Because they were students and other temporary residents that instead of leaving after their visa expired, were invited to stay. It is not a bad thing of course, the advantage of this source of new immigration, is that they are already here, they speak the language, are employable and can participate in the housing market. So good, but most of them were part of tenant/owner boom of 2021 and won’t need to have new units. (Same applies to 2023.) So, good, but not as good as we thought.
BC new jobs are up 84,000. Good stuff. However, there is a shift underway. Some people don’t want to get back to their old jobs, some don’t like the new (warehouse type) Amazon jobs. Some want to stay working from home. We need to know what impact the stopping of subsidies will have. People adjusting to much higher living costs will strike for more money. Some industries can’t find new workers.
For Vancouver, Toronto, and others it was never an issue. Vancouver has NEVER been affordable in 50 years. There are UBC studies from 15 years ago, that showed that 60% or more people in Vancouver cannot afford the house prices (even then). If anything, that is higher now. You want to live in Vancouver, London, New York, or Hong Kong … it will never be affordable. Affordability however matters much in small towns. Ask: Is there enough work now and in future? Is it a one-horse town, etc.?
INTEREST RATES/SUPPLY AND DEMAND / THE NUMBERS are covered below.
INTERNATIONAL – THIS AFFECTS THE WHOLE WORLD
This Black Swan that may kill the real estate market and no one talks about it!
You wondered about the big sucking sound lately? Well, it’s the staggering loss in stocks, bonds and crypto sucking the very essence of money out of people’s wallets. You have heard my views over the last 3 years on all things crypto. It surprises me how little older people know – or care about this new technology and how easy it is for millennials to get roped in. Its not just bitcoin that crashed from $69,000 per coin to as low as $25,400 per coin on the 12th, (someone – not the big boys – lost 1 trillion dollars or so in a few months) the broader ‘stable coin’ market crashed more and faster. In fact, total selling has roughly halved the global market value of cryptocurrencies since November, but somewhat ‘orderly.’ Last week it turned to outright panic in ‘stable’ coins. What is different is a) the speed at which that market crashed (like $500 billion in a week – $10 billion in a day in one coin and b) who are the buyers/losers?
What is a stablecoin? First, they are anything but stable! In theory stablecoins are tokens pegged to the value of traditional assets, like the U.S. dollar, and are the main medium for moving money between cryptocurrencies.
For a larger outline on this go to the bottom of this blog … 2nd half of this item
TERRA/UST – this particular very popular stable coin crashed. A meltdown … extraordinaire. It lost a staggering billion dollars in 30 minutes when it went from 99 cents (losing its 1-dollar Peg) to 92 cents. It saw a staggering loss over 3 days (3 DAYS! When $50 billion was lost!!!) End of the day it lost 99% of its value in a death spiral.
50 billion dollars of capital destructed. Largest crypto collapse ever. A lot of people have lost a lot of money. Suicides and years of savings wiped out. It’s horrible.
Why should we real estate investors care?
- Bitcoin went from $69,000 to $25,000 – losing 1 trillion dollars (since November).
- Stable coins lost $500 billion in a week.
- Total losses in all crypto exceeded $800 billion in one month.
- Millions of people are invested in LUNA.
- LUNA went from $41 billion to $1 billion in days.
- UST stablecoin went from $18.7 billion to $5.2 billion.
- Over $50 billion lost in a few days.
- This textbook crash happened too fast (3 days).
So, why should you/we/us care? Well, the total losses in crypto this month exceeded $800 billion. 800 BILLION! While there were some smaller funds that went under MOST of the money was lost by the 2xers, 5xers, 10xers that I wrote about in the last two months. They now have 2x-5x times loans on their margin debts. (One acquaintance reports a $180,000 loss and another $2 million!)
The same people that buy your house … or would have bought your house … and now need to sell theirs. So, it matters!
Add to that the stock market astounding losses. $35 trillion lost in 5 months. Netflix is down 73%! No safety in Apple – down 20%, Amazon etc. In fact, 50% of the S&P stocks lost more than 50% of its value! Volatility is nuts!
You get my picture:
ALL OF US ARE ALREADY FEELING A LOT LESS WEALTHY THAN WE DID LAST YEAR.
THIS CRYPTO CRASH IS NOT OVER … IT WILL HAVE AN IMPACT ON ALL ASSETS AND IN PARTICULAR OUR REAL ESTATE MARKETS.
Twelve major developers have defaulted in China. Fifty are in various stages of default. The backbone of China’s economy is real estate. The book on all defaults is still being written, waiting yet as to the final outcome. China is undergoing massive changes because of Covid lockdowns, currency draws and a sharp decline in GDP. We will be affected by those changes more than we think. China will take its reserves out of dollars! Looking at the Russian example, realizing the implications of sanctions if you are going into war. More next month.
The 30-year mortgage rate doubled to 5.6%. In January it was still available at 2.7%. With that the housing market is cooling sharply. (Less in low tax states.)
Pending Home Sales in U.S. slip again in March – deals are cancelled because of soaring mortgage costs (Phoenix has seen an average increase in monthly payments of $462.)
Based on CoreLogic’s latest Single-Family Rent Index (SFRI), U.S. residential rent prices continued their double-digit gains in February 2022, rising 13.1% from one year earlier to hit another new record. Warmer areas of the country again posted the largest price hikes, with rents in Miami up 39.5% from February 2021.
The US dollar index (against all currencies) is at an all time high (briefly touched 105). The US dollar is soaring right along our long term forecast the last 4 years. The US dollar remains the world’s reserve currency and as I predicted people are fleeing into it in tough times. These are tough times. US dollar today is higher against all currencies again but read the next item.
NOTE: MAJOR POINT ON RESERVE CURRENCIES
The war in Ukraine and the sanctions the world imposed on Russia will change perceptions on reserve/stable/Guaranteed currencies FOREVER! Anyone having their cash in another currency is now running scared. Individuals and countries!
Russia realized that what it thought was an asset, well, wasn’t! The US froze its reserves! Russia’s reserves. The whole world froze US dollar bank accounts of oligarchs, etc. This put the whole world on notice – particularly China, to get out of US dollars.
INTEREST RATES – GENERAL
I said last month: Last year in several Oz buzz blogs I asked you to watch the 10-year bond rate for several reasons:
- If it inverts with the 2-year rate, it foretells a recession and,
- Rates over 2% will affect our long-term mortgage rates dramatically.
Now, the ten-year treasury yield has jumped from 1.7% only 2 months ago to 3.2% now. Already we see the result in soaring long term mortgage rates. With inflation remaining high – more increases are coming.
The 5-year fixed mortgage is available all around the 4%+ mark. OSFI announced on May 11 that the stress test would be increased to 6.19%, as we forecast last month. That will increase in June.
Prediction: Like the US the next increase (June) will be .50%. That plus the new stress test, plus scary world events will further cool sales and now- prices.
Since August 2018 we have forecast a lower dollar – one that is tied to commodities and oil. Last month we said: “With commodity prices cooling we continue to expect a lower Canadian dollar.” Today (May 11) our dollar clocked in at US 76.4 cents. (Read the reserve currency item – this may change our premise in a few months.)
“The 400 plus economists at the FED worry about climate change and are worried about teaching gender and social issues. Not one of them got the forecast of inflation right, nor advanced A WORKABLE response to fix the problem.
“Climate change and gender issues are not the FED’s mandate.”
–Professor Steven Hanke
COMMENTS, QUESTIONS AND ANSWERS
Qs: THE PSYCHOLOGY OF BUYERS USED AGAINST THEM
A: Lots of comments. Nothing to add.
Q: Curious Ozzie, do you think Kelowna can sustain the billion condos that are either under development or being approved over the next 1-2 years? Finally, do you think that the perpetual smokie summers in Kelowna will eventually have an impact on prices? We bought in Sept 2020, in a great location downtown at 805k and since then the price has risen about 500k. We’re starting to think that pulling the plug now might not be the worst idea, but at the same time we are located at xxx (– upside0. Our current mortgage is $2700 and we’re bringing in over 40,000 incomes from suite downstairs thru Airbnb. So, maybe holding not the worst idea, but 400+k tax free has a nice ring to it as well.
A: In another lifetime I ran 3 offices in Kelowna, Westbank and Rutland. I have always loved it. Kelowna has had problems in the distant past with overbuilding. Read the piece on trends. The answer is there – as everywhere. It is your call…you spell it out well. Don’t worry about the market, worry about how you feel about your personal world. You have the best of all possible options in front of you.
Q: I have been listening/reading your content for a long time now and always enjoy hearing your take on the markets. My neighbour just sold his family house for $4m, you can imagine the conversations my wife and I have been having the last couple of weeks, on top of that our son will move out later this summer and we are empty nesters! We are thinking of selling and renting for a year then buy back something smaller with an Ocean View. Do you think the Luxury space will also trend down?
A: Same answer. I used to own a Fish n’ Chips shop in White Rock on the beach. Love the place. But you also have the best possible personal options.
Q: I sold two of my rental Townhouses in Feb and now have the money earning 9% USD, no tenants, no strata just monthly cheques. I know I probably hit the peak as you have mentioned several times.
A: What’s the question? I would worry about earning 9%. Is it real? Remember LUNA paid 20% interest.
Q: Your advice to buy in Phoenix has worked out very well for us. Thank you! We purchased three properties in Phoenix starting in 2011. For making our next investment purchase to hold and rent out, would you recommend staying with Phoenix, or would you go with another area such as Taylor, Texas? Thanks!
A: Texas and Arizona are my favorites for upside and taxes and population growth. No opinion on Taylor.
Q…also my friend who is looking at Courtney Comox area on the island stated thru his realtor that prices are not only going below asking, but sometimes 15-20% below in May, truth, or bull$shit?
A: The board numbers do not show this. Maybe in one overpriced development, but certainly not the general market.
Q: Thank you for your continual information through video and text. It is always valuable receiving. Would you have some time to reply with your thoughts on this article: URL follows. Do you have your sights set on investing in industrial in Alberta?
A: If you send me articles to read, or other forecasters opinions or copy of listings, MLS numbers of what you want to buy or sell… I cannot review. In fact, I can only answer a real question. Also, sending questions to me on Facebook, LinkedIn, Twitter, and Instagram will not be answered. Join the livestream.
However, Alberta is undergoing a marked turn around residentially and the psychology is shifting to positive. I love industrial … if it is specific, occupied with triple A tenants in any big town/suburb. Alberta is too big to comment on.
Q: Ozzie, I’m probably stupid but if the Fed just reduces the M1 money supply by SELLING bonds to the banks (or buying less) won’t inflation eventually auto correct?? And what’s wrong with 8% inflation anyways??
A: There is no ‘auto correct.’ The very people that politicians tell they want to help suffer the most in 8% and more inflation.
“PLANS ARE WORTHLESS BUT PLANNING IS EVERYTHING” –EISENHOWER
BOOK OF THE MONTH
I have often been asked by investors : Ozzie do you have ‘skin in the game.’ In his recent book SKIN IN THE GAME, Nassim Taleb (Author of “The Black Swan”) challenges many of our long-held beliefs about risk and reward, politics and religion, finance and personal responsibility.
In his most provocative and practical book yet, one of the foremost thinkers of our time redefines what it means to understand the world, succeed in a profession, contribute to a fair and just society, detect nonsense, and influence others.
Always wanted to sit on a throne:
SONG/MUSIC OF THE WEEK
Several comments on the ‘classical music’ I recommended in the last two issues.
I did get a lengthy but thoughtful note, the upshot of which was: “I looked at your playlist on blip.fm – not one classical favorite listed, but a lot of Rammstein, Oomph, Metallica, Led Zeppelin, and other heavy Metal bands, which is my preference. Maybe, you don’t dare introducing the Metal to your older audience? I forgive you, but which is your favorite heavy band?”
Ok, first blip.fm is now defunct, but you are right, few classical nights. But the older audience probably would have liked heave metal much better, certainly better than rap.
Ok, I bite. My favorite music of all time is not metal but remains to be by the Rolling Stones, Bob Seger, Elton John, Bachman Turner Overdrive, others and Rod Stewart (will see him live on June 10) but for metal it is still Rammstein (I know, I know I am losing some of you).
Rammstein: Mein Herz Brennt (My heart it burns) https://www.youtube.com/watch?v=WXv31OmnKqQ
Rammstein: New album ZEIT (time – please stand still) can grow on you: https://www.youtube.com/watch?v=EbHGS_bVkXY
Why such variety? I am eclectic … so are you … just let it out. Live life large.
RANTS OF THE WEEK AND THE REVENGE
This section was meant to be “little man/woman against corporation – large entities” not personal rants. Most this month were ‘hobbyhorses.
Next month. You are being trained like a seal. Yes. Worse, you don’t see it!
TORONTO IS ON STRIKE
Approximately 15,000 construction workers have walked off the job. Multiple bargaining units have all rejected contract proposals and opted to initiate strike action as of today.
- “Right now, all high-rise sites in the GTA are completely shut down.
- Low-rise sites are also severely impacted because of the framing strike that is ongoing,”
Currently, there are six different sectors on strike. Issues are compensation and the rising cost of living.
Strike could delay some projects.
There are approximately 30 unionized trades that work in residential construction and all of their collective agreements expired on April 30.
Major Point: We mused last month that some developers will face problems completing projects if costs keep rising. Having workers strike is “almost a perfect storm.” Negotiate a collective agreement right now with building costs going “through the roof” and inflation adding to the cost of living for workers.
Even with just a one-month-strike you are looking at something like a two-month-delay.
RENTS ARE SOARING!
National Overview – From rentals.ca
This fine website shows most cities and suburbs in Canada. CMHC also has a rental survey – usually some 6 months behind, but very fine, showing rental price and vacancy rates by 1,2,3 bedrooms.
Averages never tell the whole story. If you are looking to rent drill into your suburb numbers. For instance: While generally 2-bedroom units show a higher percent increase. But some show the opposite … look at Burnaby, where 1-bedroom units show a steeper increase.
Q: I heard that you can 3d print a house for under $500,000. Possible?
A: There are massive 3D printer at work in China. Also, in the US. The idea is that the printer uses a cement-based material and can ‘print the outside walls of the house in 24 hours. At a foot, a second! Right now, in Virginia they are building 200 homes by 3d printing them. Here is a YouTube video showing a house finished at $220,000 US. https://www.youtube.com/watch?v=wmqidUlCTd4 If you hear of one that is doing it in Canada let me know .
Q: Any news on the cooling off period announced in BC and Ontario?
A: I am not aware of any such period in Ontario. However, Alberta said: NIX! Not here!
In BC it has been passed by our government. However – unbelievably – the details ae not in the legislation that was passed. Even our BC world is getting weird. Passing a law about a cooling off period without them (or us) having an inkling about how it will work. Dizzying!
Q: I HEARD THAT THERE IS A TENANT’S UNION IN BC. HOW CAN I JOIN?
A: Nope, there is not. At least not yet. The rumour is based on the first law of its kind passed in the U.S. San Francisco indeed passed a right-to-organize ordinance in March, requiring large corporate landlords to recognize tenant associations on their properties, attend at least four tenant meetings a year and bargain with tenant unions “in good faith.” If proprietors fail to comply with the ordinance, renters can apply for a rent reduction as a penalty. BC tenant organizations are organizing to use this example to perhaps create a union for tenants seeking to mobilize renters looking for protection from unreasonable rates and conditions.
The NUMBERS TORONTO, VANCOUVER, and FRASER VALLEY
8,800 homes sold through TRREB’s MLS® System in April 2022 down 41.2 per cent decrease compared to April 2021 and a 27 per cent decrease compared to March 2022.
On a year-over-year basis, the decline in sales was greater in the ‘905’ area code regions surrounding Toronto, particularly for detached houses.
The average selling price, at $1,254,436, was up by 15 per cent compared to April 2021, but down compared to the average selling price of $1,300,082 in March 2022.
Major Point: The market in TO is somewhat worse, a) in that price never rose as much as Vancouver, b) all construction is on hold c) active listings are actually rising.
Again: Remember to take the 2020 comparisons with a grain of COVID salt! Snapshot:
SF: (REBGV) reports SF sales of 967 in April 2022, a 42(!)% decrease from the 1,662 sales recorded in April 2021. Best sales year: April 2016 with 2,150 SF sales.
CONDO: REBGV reports condo sales of 2,818 up from 2,313 in March 2022, but down 17% over April 2021 sales of 3,140.
- SF home prices were 22% higher in February (2021), April clocked in 16% higher (over April 2021). Condo prices clocked in 15% higher.
- New listings for SF were 20% lower than April 2021, yet they were higher than in 2020 and 2019.
- Condo new listings also were down over 2021 but UP over 2020 and 2019.
Vancouver Major Point:
The absolute high in volume and sales was March 2021 – we have come down steadily since then.
- February SF sales were down a whopping 37%; in March down by 33%.
APRIL? Down 56%!! Condominium sales are down 20%.
- NOTE: SF Prices are still up by 18% but $170,000 down over February’s $1.9 million
- February: $1,928,000, March $1,818,000 – April $1,757,000:
OWNERS SHARPEN PENCILS?
- SF and new condominium listings are STILL WELL LOWER than last April but still higher than 2019 and 2020!
MAJOR, MAJOR POINT: As we said on February 9: THE HIGH IS IN PLACE.
SF: The Fraser Valley Real Estate Board reported that SF sales in March 2022, were down a firm 33%. In April they were down a whopping 56%!!!
CONDO: The FVREB reports condo sales of 557 in April 2022, a 20% decrease from the 690 sales recorded in April 2021. Still, last month’s sales were second best in the 10-year March sales average. Best? 2021 with 810 condo sales.
MAJOR, MAJOR POINT
The Real Estate Market is not just numbers. Here are some truths.
- Before you invest, analyze who you are: Investor, Flipper, or Shark (read my story in Donald Trump’s book: “The best real estate advice I have ever received”.)
- You do not buy the market, you buy an individual property in a specific town and then suburb, with specific features.
- You make the most money on the day you buy.
- Markets become the stories people tell about them.
- People go where jobs grow; values grow where people go.
VITAL: Always preserve and protect what you have first. This is more important than ever!
Cash is not trash! Revisit my outline on how much cash you should have at a given age.
CRYPTO – PART 2
Worse – if there is anything worse?! While UST was in the top 10 trusted stable coins, TETHER which is 10 times the size and had run-ins with the SEC being fined millions for lying on how its coin was backed by US dollars (not!)…
See this video on Tether done 6 months ago https://www.youtube.com/watch?v=Jk23kA3yeDY and worry!
Why is it important? Well, it lost its peg May 11. (Just how TERRA/LUNA started.) As of this writing it is down to 95 cents.
If it goes, it will take down the whole crypto market even further, if that’s possible.
The total stable coin market is what I am concerned about for ‘all of us.’
You see, as of March 2022, there are 18,465 cryptocurrencies in existence. All, or most of them backed by algorithm/faith/trust and nothing else. Half of them already dead after wiping out its ‘trusting’ millennials. Of the 10,000 or so still active, players have been in these ‘communities against the man. Against ‘the establishment’ and felt like they were riding down but also up over several months. But last week 2 stable coins in the top 10 of these 10,000 shook all to the core.
TerraUSD (UST) based on nothing but a complex stability mechanism (computer generated algorithm between TERRA/LUNA/UST) was supposedly pegged always to the dollar. Last week it broke its 1:1 peg.
The coins which involved balancing with a free-floating cryptocurrency called Luna, stopped working when Luna plunged close to zero in a day. Reddit website is full of people committing suicide, losing tens of tens of thousands of dollars.
But stablecoins are likely to face further tests if spooked holders and traders keep selling, that stress could spill over into money markets if there is more and more liquidation. The biggest worry is another stablecoin called Tether. It says it has necessary assets in Treasuries, cash, corporate bonds, and other money-market products. However, it has been caught by the SEC that this was a lie.
Here is a video with details:
I mean look, we have been in a capitulation phase in Bitcoin. Even long-term holders sell at even or a loss.
We went from $69,000 to $25,400 (May 11, 11 AM) per ‘coin’. A 54% loss from the high. Falling down as fast as it went up.
Forecasters that saw a $20,000 (or less) bottom are close to being proven right. It needs time to find a new bottom and then a lot of time to bring back the disappearing buyers. Other big names also faced steep losses. I.e., Ethereum was at a low of $1,700 down from over $4,000.
But these losses are nothing … NOTHING … compared to the losses in so called stable coins. Unlike Bitcoin and many other crypto currencies that are backed by real money (i.e. US dollars) stable coins (could be) but most are not backed by anything but trust. They are supposed to be pegged for 1 US dollar even. Thus, if they sell for less … value is lost. There are complicated algorithms designed the keep UST at $1, but they did not work anymore. Thus, no backing.
For more google: Luna/Terra/UST.
Also, no government wants unregulated stable coins – this will be used to regulate this market … and it needs regulating.
They call it a black swan. I think, it was a well coordinated attack. Someone made $900 million of profit or more, on a $100,000 investment . The terrible thing was that Terra and Luna targeted the retail investor. They lost most. Not just some nameless funds – your neighbours!
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