Saturday, January 23, 2010

We've Moved!

Moving Day
So… we’ve moved!

We’re now operating solely at edmontonhousingbust.com, moving over from blogspot. I’ve tried to make the transition as painless as possible and mimic the old appearance/navigation. Also should have an automatic redirect sending ya’ll this way. There are still a few kinks to workout, so if you notice something I missed fire me an e-mail or leave a comment and I’ll get on it… but at least from my brief stint troubleshooting we at least appear to be functional (I’m working on updating the backlinks, but it’s slooooow going).

Other than updating your bookmarks, hopefully there isn’t much that should change for you guys. In the weeks and months to come I’ll be playing with some new features that are now available thanks to moving to our own domain. Again, if you have any suggestions in that regard, by all means get in touch with me. So, yeah, that’s about all I have to say… hope you all are having a good weekend!

Thursday, January 21, 2010

National bankruptcy rate hits record high

Today the Office of the Superintendent of Bankruptcy Canada released the November insolvency figures. We had touched on this topic a couple months back, but largely focused on Alberta, today we're also going to add the nationwide numbers into the mix. We'll start with Alberta again though and make you wait for the good stuff!

Alberta - Consumer Bankruptcies
This is the total number of declared bankruptcies in the province in any given year (and since it's only through November 2009, I've done a projection for December). As we can see here depending on just how the December numbers turn out we will either set an new high or come very close, at least in nominal terms. Though since the population has grown since '96/'97, proportionately we're not as bad off, as we'll see in the final graph.


Canada - Consumer Bankruptcies
Now we have a look-see at the national numbers, and we can see we are already WAY beyond any previous highs. Even through just eleven months we've already had over 18,000 more bankruptcies than 2008 (which was the previous high water mark), so once the December figures come in we'll likely be in the 25-30K range.

Again though, these are just nominal figures and to get a true idea of the significance of the problem in historical terms we must account for population changes. For our purposes we'll adjust it to a rate of bankruptcies per 1,000 people.

Bankruptcy Rate
Thus we have this (note: there are actually two of those dotted lines representing averages, they're just so close they appear almost as one).

For Alberta we can see we're obviously much above the rate during the boom years, but still within a range that was normal during most of the period from '94 thru '04. While well above the long-term average, that average seems heavily skewed by the much lower rates from the 70's and 80's, which it would seem are probably not all that relevant nowadays, for whatever reason. So, for now in Alberta at least it seems we're still doing alright on the insolvency front.

The national rate on the other hand has blown way past any prior record highs, and now sits around 3.46 (previous high was 2.85 in '97) including the December projection. Just through November alone the number is already at 3.21, so even if there was a miraculous December and not a single further bankruptcy, we're already well above any prior highs.

Given the economic crisis and recession such spikes in '09 are not unexpected. Going forward we can expect to see comparatively high levels of bankruptcies as even when the economy starts to recover, the jobs lost will not return nearly as fast as they were lost. Beyond that, many consumers have been burning through their savings and/or relying on EI to keep their heads above water, but those eventually run out. So the full effects of the recession have not yet been realized.

We know that bankruptcy rate and arrears/foreclosures are not particularly highly correlated. Regardless, high and rising levels of insolvency is obviously a sign of a weakening consumer base, and thus should have some effect on housing prices. So it really begs the question of how sustainable is a 20% increase in national home values over the very same period unemployment rose in a big way, incomes dropped, and insolvencies hit record highs.

It's really a testament to just how powerful the influence of interest rates have on real estate values. Every other fundamental factor at best held, and for the most part got worse. This last year has been as good a change to observe the effects of interest rates in a vacuum as could ever be practically achieved.

Of course the really scary part is that from here, interest rates have no where to go but up.

Monday, January 18, 2010

Sticker Price

Sticker Price

Don't really feel like running a bunch of numbers today, so I thought I'd mix it up and write something of a guide to comparing rentals. Not because I'm an expert by any means, but I have made some errors and learned some lessons over the years... and thus, probably would have found this at least a little helpful. Obvious much of picking a place to live boils down to individual taste/preference, but we're going to focus on the more quantitative elements... and that you often need to look deeper than just the monthly rent.

When comparing rentals from a monetary perspective once you know the monthly charge, the first thing you need to look at are utilities (power, water and gas/heat). Some units will include all three in your rent... others will include none... and yet others, any combination in between. So this can make a big difference beyond just looking at the sticker price.

These can be difficult to account for if you've never had to cover them before. I know in my case while in university both the apartments I had included water and gas, so when I was looking for my last place I really didn't know how much to budget those for as it included none. But over the last couple years I have tracked my payments, and while they obviously fluctuate to varying degrees depending on the season, I found that a good rule of thumb for an average apartment is about $50 a month each.

So if you were comparing two otherwise equal apartments, one including all utilities for $1,000 a month, against one not including any utilities buy renting for $900... you'd probably end up about $50 a month better off renting the $1,000/month unit, as after utilities you'd be paying about $1,050/month on the other unit.

This is as stated talking about apartments, mine being about 1,000 sqft it's a fairly average two-bedroom size. If one was renting a house though, gas would certainly be more expensive, and increasingly so the larger the place is. Power would also cost you a bit more, and water is really more dependent on how many are living there so it wouldn't really change. If you're renting an entire house though, I doubt there would be many the did include utilities anyway.

I've never rented a basement suite, but looking at the ads online it seems many of them offer a deal where utilities are split along some lines with those living upstairs. As service charges make up a significant portion of monthly utilities, these should save you some money over paying them yourself. Like I said, I don't know from experience, but as a guesstimation I'd say your monthly costs will be about $25-30 per utility.

Some buildings also include items like cable/satellite television and internet access with rents. These you know of have to factor for yourself, as if you don't watch much tv, that obviously wouldn't be worth anything to you. For someone like me though who would take advantage of both tv and internet, that could represent a value added of $100 or so. In some cases you'd have to make sure the packages were to your liking though... just in my case I have a Shaw PVR, which when not connected to Shaw doesn't do a damn thing. And as anyone who has used a PVR can attest, once you start watching tv that way, you cannot go back to the old way. So, you need to find out those things and budget in cost of new equipment, and even that you're losing a degree of control over those elements.

Then of course there are the other tangibles like location, parking, laundry facilities. Those a little harder to quantify, and higher dependent on personal valuations... but they are considerations you should try to account for when making your decision. In my case, when I was younger I lived in a couple places with common laundry rooms, and while they served their purpose I much prefer to have it in-suite.

And finally, with the market being pretty soft we're starting to see significant incentives offered. Just in my complex they've offered all sorts of things, Oilers tickets, televisions, first month free, and now they're just flat out offering $200 off per month (if you don't know why they don't just drop the price, go take a marketing class).

I don't know if I'd call it a strategy, but I can't think of anything better to call it, so here it is. First, figure out what you want in way of size, location and amenities, and find your target properties that share those. Then you compare costs, and remember base cost is only part of the story. You need to know what's included, what's not, and what incentives are offered for each, and allocate costs accordingly.

Once you've done that, you should have a very good idea of what costs come with each property and can make a sound decision based on total cost, rather than just the sticker price.

Thursday, January 14, 2010

Circle the Wagons!

Circle the Wagons

Seems the feds wondering aloud about tightening up mortgage lending requirements has predictably got the dander up of those in the real estate/lending industries up. Rapidly they have began circling the wagons, and now we're starting to see the PR counter assault.

The builders, lenders, and brokers wasted no time squealing when the rumours first started to circulate, and today we saw one of the first of their more official responses with CAAMP pumping out a special report to protect the shield and tell the world (and more specifically Jim Flaherty) there is apparently no need for concern and that everything is rosy.

Not sure words can really do justice to the simple gesture of rolling ones eyes as far back in their sockets as humanly possible. It's about as blatantly slanted a 'report' as one is likely to find. One must wonder how many showers it took Will Dunning to feel clean after signing his name to such tripe.

The report could have offered some real insight, but instead resorted to cherry picking data that met their pre-determined narrative... and even at that, it needed to employ some amazingly convenient assumptions just to get that far. Loaded with vague language, and immediately dismissive of anything that would poke holes in their rice paper castle of a hypothesis.

Most glaring was their refusal to discuss the potential effects of fixed rate mortgages going up to a significant degree... instead, conveniently assuming they will go no higher than 5.25%, a level WAY below the long term average, and overly optimistic even in the era of rock bottom rates of the last decade.

Or that the rush of buyers trying to 'take advantage' of the all-time low rates this last year has effectively left us with a made-in-Canada version of the ARM disaster that contributed to the US housing collapse. Rather than lender offered teaser rates, we had record low market rates bound to rise to a significant degree when these loans come up for renewal in five years.

And thanks to nearly half of all first-time-buyers flocking to 30+ year amortizations and other exotic arrangements, come renewal they will have made up minimal equity and will thus bear the full brunt of higher market rates. If that's not scary enough, according to today's report somewhere between 50-60% of the record sales this year (or any year) are made by first time buyers.

But of course such talk doesn't further their agenda, even if it was in the long-term interest of the market (and their own members) to tighten lending... that would cause short-term pain to the mortgage brokers out there, and CAAMP can't have that. But why should they be different than anyone else whose sight can't seem to extend past the end of the current quarter.

Tuesday, January 12, 2010

Here comes the BOOM!

Today we're going to take another look at demographics, and more specifically the pending wave of baby boomers into retirement. We touched on this last month, but just in regards to Alberta. Today we'll do all the provinces and territories and see how they all stack up heading into the unknown.

Demographics - Atlantic Provinces
The dotted line is the national average... so ones position relative to that line tells us how much better or worse off they are then the average province. We'll start out east with the Atlantic provinces.

We can see they all chart fairly similar patterns. Typically below average levels of twenty somethings (likely having moved elsewhere looking for work), and conversely above average levels of fifty-somethings. This would suggest they're probably going to get hit harder than most when the boomers start retiring en masse.

Demographics - Ontario, Quebec and the Territories
Now we'll look at Ontario, Quebec and the various territories. I probably should have broke these up as the territories figures are more or less their own animal(s), but alas I wanted to cram them all into three graphs.

Ontario is the red line, and Quebec the blue, we'll start with those two. Being by far the largest province it's no surprise Ontario plots a line very close to the national average... and when it comes to boomers they'll actually fare slightly better than average. Quebec also charts close to the national average, but a little above average once you get past 45 year olds, so they'll feel the effects a little worse than Ontario.

Like I mentioned the three territories are their own animals. The Yukon appears to have the pattern most similar to the rest of the country, but has a very big spike of boomers. Relatively speaking both the NWT and Nunavut have very young populations, and see a very big drop off once they hit 50 and 40 respectively.

Demographics - Western Provinces
Finally we'll look at the western provinces. We see a few interesting trends here. As we discussed last month, Alberta has seen a big influx of twenty-somethings during the economic boom, thus we can see a noticeably higher proportion of twenty- and thirty-somethings... which also causes a downward shift in the proportion of older people. But as we discussed in a follow up, those that moved here can be a fickle bunch, and can leave as quickly as they came.

Saskatchewan is another interesting case, where their levels of 30-50 year olds are noticeably low. One would suspect this is likely a result of the flip-side of the effect Alberta experienced, that being Saskatchewan having relative economic difficulties for much of the prior two decades and thus a fair number of their young people left and didn't return. Of course Saskatchewan's economic situation has took a real turn for the better in the last couple years, so it'll be interesting to see how they chart in the future.

Now British Columbia, which while it has a reputation for attracting retirees, they seem to track remarkably like the national average. Of the Western provinces they appear like they'll be hit hardest by the boomer exodus from the work force, but only slightly worse than the national average. And finally Manitoba, who don't seem to go right up the middle of their Western cousins on the demographic front.

Demographics - Median Age
And this is a graph of the median age of the respective provinces. Whether it adds anything to this article I don't know, but I prepared it, so here it is. We note the larger the wave of baby boomers present in the earlier graph, the higher the median age is. The Atlantic provinces are the oldest, followed by Quebec and B.C. whom we noted were both above the national average line when it came to boomers.

Then you Ontario and the western provinces below the national median age by varying degrees, Alberta coming in the lowest. Yukon is mixed in with the western provinces, but NWT, and Nunavut in particular, are drastically lower. Alberta has again been affected by the resent influx of young people looking for work, so if they start leaving we'll soon find ourselves back in the range Saskatchewan and Manitoba are in currently (and Saskatchewan may actually shift lower depending on how their economy weathers the financial storm).

In any case, it will be interesting to see how the exodus of baby boomers plays out. The governments have enjoyed a steadily increasing population base of working age people for over fifty years... and that's not just going to start to slow, but eventually it's going to begin to shrink (in about 10 years). That these are also generally the biggest earners, and thus biggest tax payers, only adds to the discrepancy.

We're going to see a significant reduction in tax revenue at the very same time demand for services will be increasing in a big way. Thus we're on the cusp of a new paradigm, and one that is very different than what we've become accustom too.

Thursday, January 7, 2010

The Perfect Storm

Greetings all! We're going to do something a little different today, and that's very interesting... or at least I think it's interesting. I'm going to take a look at the changes the CMHC made, how it affected lending and even touch on why what happened here wasn't all that different than what happened in the US. I was meaning to get this done a bit faster, but turns out it's a little more time consuming than I thought it would be, 'tis complicated stuff.

Before we start, I compiled this little graph as something of an all-in-one backgrounder for this post. The contents are nothing that hasn't been discussed ad nauseam already on this blog. This is just so you can consult for reference. So here that is.

Background Info
This is all concerning Edmonton. We have median household incomes, median single-family-home prices and average 5-year fixed rate mortgage interest rate. Incomes and home prices are inflation adjusted, and are in 2007 dollars. Why 2007? Well, that's what the data set came in for incomes, and to compile the final graph I could not adjust it... and frankly it's close enough to today's dollars, All figures in this post are in 2007 dollars.

CHMC Changes and Effects
Enough of that, on to the good stuff. This is a graph documenting the changes in CMHC lending standards, and it's effect on how much money a person could qualify for. These percentages hold true whether you make $1/year or $1,000,000/year, so income level have no effect on this measure.

We set our base effect (0%) as the maximum amount one could qualify for going into 2006 when amortizations were limited to 25 years. We're using 6% as a steady interest rate through the entire period. We know in reality they float, but for theoretical and practical purposes we'll use 6%, and as we could see in the first graph interest rates were generally right around 6% from '03 through early '09 (and are likely to return there once the "emergency rates" expire).

For example a person, lets call him Dave, is making $60,000 a year, could qualify for about $250,000 in financing assuming he has no debts in January of 2006 or any time early. Just for example purposes, and to use a nice round number.

In March '06 we saw the first mandated change, and that was extending amortizations to 30 years. That change allows Dave to qualify for ~7.5% or ~$18,500 more than he did before. They also dropped the need for a 5% downpayment, unfortunately the effects of that can't really be quantified. We'll discuss it's grander effects a bit later, but for our purposes here we just kind of ignore it.

So we jump ahead a few months to June. Here Harper and Co. really open the flood gates. Sure they again extend amortizations another 5 years, now to 35... but the real coup de gras was insuring interest-only mortgages. That one blew the doors right off.

Here I split the line just so we can see the effects of the amortization extensions (green line), as other wise they would be lost in the effect of interest-only payments. The move to 35 year ams would have allowed Dave to borrow another ~5.5% above and beyond. So he could now borrow 13% or $32,500 more than he could five months earlier.

We follow that green line a little further, and in November the feds started insuring 40 year amortizations. That allows Dave to borrow another 4.1% (notice the diminishing returns on the 5 year extensions?), and that's 17.1% more than he could borrow less than a year prior. For a guy making $60,000/year, that's another $42,750 in financing he could qualify for. No small increase.

Of course that's nothing compared to what the interest-only option offers. That route offered 28.9% more financing (or about $72,000 for Dave). Now we consider that this financing wasn't just available to Dave, but to everyone in Canada.

We recall that real estate in Edmonton (and Alberta as a whole) was pretty hot in '05. It was the talk of the town, everything was selling and the economy was cooking... then we hit '06 the feds take an axe to lending standards, and over the first six months all these hormonal consumers find themselves with greatly increasing levels of available financing.

Now go back to the first graph, and notice that is right when real estate prices start going vertical. It's not a coincidence. Real estate was on hot, but a controlled burn and sustainable... but all this suddenly available financing just threw gas on it... and at this point it just became a perfect storm.

Buyer Pool
Obviously when available financing increases in a big way... so does the pool of potential buyers. I apologize that you need to use your imagination a little with this graph. The incomes breakdowns are only available on an annual basis, so gains made over the year really cannot be represented other than those jumps. Really we're only focusing on 2006 though, the rest are just there for reference sake.

This is a graph of the percentage of households that can qualify for $200,000 of financing at 6% interest (again, assuming no other debts). Up until '05 it was steadily around 57% of households as incomes were stable. Then in '06, incomes jumped an impressive 8.5% ($4800) YoY... this yield a 3.8% improvement in households that qualify. It's important to note that relationship. If we follow the blue line further (it's conditions are held constant with 25yr ams) we could see another 4.2% ($2600) YoY improvement in incomes in '07, yielding a 3% improvement in qualifications.

Now we compare that to the effects changes in lending standards had on qualifications. Extending amortizations to 30 years increased qualifications by about 2.6%... 35 years was another 2.4%... and finally 40 years was another 1.5%. So if amortizations were merely lengthened from 25 year to 40 years it would have increased qualifying households by 6.5% in total. In Edmonton that represents about 32,000 households, which is by itself a VERY big one year increase in potential demand.

But again, like the prior measure, it was the interest-only option that blew the doors off. That option rocketed up the qualifying population to 74.4%, an increase of 14.1% over what it was just five months prior, and representing an influx of roughly 69,000 households that wouldn't have otherwise qualified for that much financing.

Obviously that figures is theoretical, as credit scores would disqualify several, most already own, some aren't looking, etc etc. So, you can just throw out that 69,000 figure. But assuming standard distribution the percentages should be fairly accurate over what had previously been available... in fact, if anything they're understated.

You see, typically the required downpayment would be a limiting factor to buying. So, even if one could qualify for sufficient financing to purchase, they still needed to have a downpayment and this kept many potential first time buyers from buying... but one of the first lending requirements stripped was effectively removing the need for downpayments by allowing them to be borrowed. This not only further opened the door, but opened it to much riskier borrowers, ones without a established savings and those without skin in the game.

Obviously that effect can't be easily quantified, but it was just one more control eliminated that allowed the housing market to bubble out of control. People no longer needed to plan or save to earn the right to buy... they could just pop down to the bank, piggyback a couple loans and have themselves a house. Hell, they didn't even have to be able to cover closing costs.

That's why those that argue that the mere absence of widespread "subprime" loans means we're not in a bubble like the US is missing the forest for the trees. Look at their overall effect... they allowed people to a) borrow more money than they would otherwise have, and b) allowed more people to borrow money. So maybe we didn't have as many "subprime" loans... instead we just kept lowering the bar for prime until it had the same effect.

They had an influx of new demand, and with it an expanding pool of available financing (of which lowering interest rates only further expanded)... that will heat up real estate markets, and then it just becomes a vicious cycle and feeds itself until all fundamentals have been so far bypassed the only thing supporting the market is it's own momentum... and when that runs out, Wile E. Coyote meets gravity.

That's not to say the effect of these new loans, or "innovations" should be ignored, their entrance into the market will certainly an increase in prices and new equilibrium... the problem is they also often cause overheating of the market and drastic overshooting of the that new equilibrium (remember these innovations also come with increased risk).

For example, in Edmonton prior to the boom typically 60% of households could finance and amount equal to the median home value in the, city and that number was steady for many years... at the peak even using the most exotic financing arrangements, only 39% could. If you limited to the loosest of what is offered today after the feds tightened standards that would drop to 36%. A very big shift, and unsustainable.

Today with "emergency" interest rates and prices having fallen from the peak and figuring in continued income growth the median home can currently be financed by about 50% of households. Better than it was, but still a ways to go before getting back to 60%... and interest rates shoot up much (even back to historical norms) it would take a great big bite out of that improvement (not to mention if amortizations get shortened to 30 years or tighten up downpayment rules).

The exact causes here may have varied between nations in name, but the effects were all the same. One must focus on the big picture and not tiny details. The lending bar was lowered... the amount of available credit exploded... demand explodes... supply is pinched short term... prices start rising... and the bubble becomes self feeding. Then add to that our human behavioural economics... mob mentality, speculation, irrational exuberance, etc, and it's a lethal brew.

About the only thing that actually is different here is we don't have to worry about our entire financial system collapsing as a result of the housing bubble popping... you see, the taxpayers have been on the hook for this one all along. Lucky us!

Tuesday, January 5, 2010

December numbers are in...

The EREB released the December resale numbers for Edmonton today. We're continuing to see the expected seasonal trends for sales and inventory, both typically dive off a cliff in December... prices largely held, except condos where they took a BIG bounce after two months of sharp falls.

Prices
With condos apparently decoupling in October and November and seeing rather large month over month declines while the rest of the market held, you had to figure either they'd bounce back up or SFH's would shortly start to follow the same trend... and we got the former, to the tune of a rather massive 5.4%. This is actually fairly normal behavior after sharp drops (>2% MoM), they'll often bounce back to their prior level or close too it. Given the holding of prices in the SFH category, and even the appreciation of prices in Calgary the condo price dive did seem to have all the marks of an abberation.

It's been an interest year, as a year ago prices were nearing their bottom before interest rates took a big dive in the spring and really spurred the Canadian real estate market. So year-over-year we're starting to see rather a decent appreciation, while over the last six months prices have merely held. Now we're left with a waiting game to see what happens with interest rates... when will they jump, and more importantly, how high.

Inventory and Sales
Like I mentioned, as is usual for December inventory and sales take a big dive. Seems a large percentage of listings expire at year year, thus we typically see a big wave of delistings the last week of December... then several get relisted immediately in the new year, while others trickle in through winter and spring.

Sales also typically are at their bottom in December, and I think we could fairly safely reason that is due to the extended holiday period and everything that comes with that. Relative to past years, December '09's sales were fairly strong, high end of average.

Absorption Rate
And here we have the absorption rate. It continues to settle back towards the normal range. This will be very interesting to follow once rates start going up. That will of course soften sales, but I also suspect we could see another explosion of listings somewhere along the way when market sentiment swings. Perhaps not to the level seen in '08, but approaching that territory.

Finally, and as always, here are the hard numbers:

Sales = 948
Since two years ago = +10.6% (+91)
Since one year ago = +55.9% (+340)
Since last month = -24.8% (-313)

Active Listings = 4,037
Since two years ago = -43.1% (-3,057)
Since one year ago = -36.1% (-2,279)
Since last month = -22.8% (-1,189)

Single Family Homes Median= $351,350
Since peak (May '07) = -12.2% (-$48,650)
Since one year ago = +6.5% (+$21,350)
Since six months ago = +0.5% (+$1,850)
Since last month = +0.4% (+$1,350)

Residential Average = $319,201
Since peak (July '07) = -10.0% (-$35,517)
Since one year ago = +2.6% (+$8,227)
Since six months ago = -2.8% (-$9,098)
Since last month = +0.2% (+$719)

Single Family Homes Average = $366,761
Since peak (May '07) = -13.9% (-$59,267)
Since one year ago = +4.2% (+$14,891)
Since six months ago = -0.8% (-$3,098)
Since last month = -0.3% (-$1,257)

Condo Average = $244,174
Since peak (July '07) = -10.2% (-$27,734)
Since one year ago = +4.2% (+$9,888)
Since six months ago = -1.2% (-$2,897)
Since last month = +5.4% (-$12,490)

Sunday, January 3, 2010

Bailout Nation

Bailout Nation
Welcome back! We're just going to do a quick post tonight, cause the December resale numbers should be out in the next two days and I have a neat little analysis on tap for later in the week. Hope everyone has recovered from all the merriment and revelry of the holidays. Things were good in the EHB household... though I do suspect that some of Santa's elves broke in here and systematically shrunk all my pants in the last week or so. Not that I have any proof, but that's the only explanation I can think of for them to suddenly be more snug than usual.

As I've gotten older I've noticed that my list of people I need to buy for keeps growing, all the while my list of things I want keeps getting shorter. This year it was just a couple books, couple movies.. but chiefly Megan Fox complete with a pool full of chocolate pudding. Admittedly there may have been some practical limitations on that last one, and judging from the dirty look the girlfriend flashed me after giving her the list, possible some issues above and beyond those.

Regardless, the good sport that she is, she came through with the books. I was particularly excited about the Barry Ritholtz tome about the financial crisis, 'Bailout Nation'. Those who have explored my "recommended reading" blogroll would have noticed the link to his blog 'The Big Picture'... and my tweets are also continually directing people to his entries. Anyone who likes this blog would surely enjoy his. Tons of stats, analysis, macroeconomic discussion, clever, practical, and a vastly better writer than yours truly.

I could hardly put the book down, tore threw it about a day and a half. It was fascinating, and a great play-by-play for all the who's, what's, where's, when's and why's of the financial crisis. A big part of that being the housing bubble in the U.S., which he discusses at length.

Which while we find ourselves in a different boat here in Canada insofar as the impact a housing bust would have on our financial sector (the taxpayers are already on the hook here should boom go bust... whereas in the U.S. it was the instrument holders holding the bag, at least initially before the government bailed them out to a large extent), the housing sector itself appear very much in the same boat. Prices suddenly and severely got out of line with everyone from income and market rents right up to GDP (speaking of which there is a fascinating look at the housing booms effect on GDP growth, something I'm going to try to replicate for Canada).

If you find yourself wandering through a bookstore and have a few minutes, I suggest picking up a copy (it would be in the finance and/or investing section) and read through Chapter 21 - The Virtues of Foreclosure. It's only ten pages, and at least two of those are graphs, so it's not heavy reading. You'll notice he hits many of the same points I've been hammering on here, only far more eloquently and succinctly. In fact, I'll probably be stealing and paraphrasing much of it in the future.

In conclusion, it's a great and very informative read for any of your arm-chair economists out there, or just anyone interested in finance. Like I said, it's an easy read, he's got a very pragmatic viewpoint, writes in a conversational style and the chapters are relatively short so you just fly through it. And no I'm not getting paid for all this gushing, I just think that for anyone that enjoys my blog here it's something should read and would enjoy.

Bailout Nation