The hot labour market just got even hotter. Check out these recent numbers from the Vancouver Housing Blog.

Wow! Check out the leap in the employment rate and the sharp drop in the unemployment rate. With seasonal adjustments, weird weather, etc., it's hard to know what to make of month-to-month jumps in these figures. But still. Unprecedented.

What do I mean by unprecedented? Check out the graph going back to 1976.

Since things on the national front look similar, I think you can kiss good-bye to any hopes for B-o-C cuts anytime soon.

Canadian Financial Stuff had a post a while ago about unemployment numbers going up in Canada. I don't think that small upward blip in January is an indication of an upward trend. If you look at his graph the trend is clearly downward and there are upward blips (some larger than the January one) all over the place. If the numbers were taken every 5 months instead of every month, his headline would be the opposite, "Unemployment down in January."

The discussion quickly turned to housing. I'll copy & paste a few interesting comments below:

Someone named dave said:

lj - yep, I hear you. OTOH it's worth remembering what happened to Isaac Newton during the South Sea Bubble. He saw the crash coming and sold in time, making some good coin. But when everyone else continued making money he bought back in, and of course got nailed in the crash. The crash is happening now in some of the previously hot markets south of the border. The early warning signs are everywhere else, including in Canada. Will it be different in Vancouver? Heck, anything is possible. But it isn't that likely, especially given BC's boom/bust history.

fcf said::

Remember, there IS a huge demand for RE “ownership” but NOT for shelter. There is a big difference there. Real rents have been stagnant for years. That tells me there is no true demand for shelter above new supply. The huge demand for ownership based on the thinking that it’s the greatest-can’t-lose-investment-ever is what the boom has been all about (and its a global phenomenon). Price/rent ratios are way too high. It costs nearly twice as much to own than to rent. This disparity can’t last. People have been making more money on their homes than in their jobs! This is what’s been fueling this bubble. It amazes me that even rational analysts are predicting long term RE price growths of 5% a year. What the heck for? Are rents going up by that much?

I have a friend in Sacramento who owns 4 houses. He is obsessed with RE. He intends to buy more since the prices there have dropped a tad. I urged him to sell but he thinks I am retarded. He quotes the usual myopic RE bull arguments, “they are not making enough land anymore…etc”. I said to him, if there is such huge demand for housing, how come rents haven been stagnant. He just can’t fathom that. He equates price increases with demand for housing. In fact one of his houses has been empty for a year. He doesn’t care because its been going up far more than the carrying costs.

Renters, stay cool. Don’t make the mistake Isaac Newton did. After his investment loss he was quoted to have said “… I can predict the motion of planets and stars but not the madness of men…”.

Martin said:

I must say that I don't fully understand the despair of the reluctant bulls. If purchase prices belong where they are, then rent and get the deal of the century, and put your money in another investment. No skin off your nose.

alpha_bear said in reply to betamax's comment:

"...i would be more miffed at waiting on the sidelines for 10 years for the perfect moment to buy (saving a $100,000 in the process) and putting my life on hold in the meantime. life is short."

I don't understand why the bulls equate renting with sitting on the sidelines. It seems to me that the bulls are the ones whose life is on hold, while they pray for housing prices to rise.

I'm so happy renting that I don't care if it takes 10 years or more for the inevitable crash. I'll buy back into the market when prices are more justifiable. In the meantime, my capital is working for me, and I have more cash available than I did when I rented the money to "buy" my last house from the bank.

Life is too short to spend underwater in a large mortgage.