Stock, housing recovery seen by year’s end

Friday, January 30th, 2009

Home prices will drop at least 25% from 2008’s high, economist predicts

Scott Simpson

Stock and house prices will continue to tumble, but a general recovery could be underway in the United States as soon as August, veteran economic analyst Martin Murenbeeld told a mining conference on Thursday.

Murenbeeld told delegates to the Association for Mineral Exploration BC that he expects Canadian housing prices to drop at least 25 per cent from last year’s highs.

Murenbeeld, the B.C.-based chief economist for DundeeWealth, is a globally recognized commentator and expert on gold price trends, the subject of a separate seminar by Murenbeeld.

“Our house prices are going down,” he said in the lunchtime keynote address at AME BC‘s annual Roundup mining conference.

“In Vancouver and Calgary new house prices are negative year over year, and my off-the-cuff view on who caught the exact top of that housing market is that little company [Millennium Development] that bought that piece of land upon which the Olympic Games athletes village is going to stand. I think we will find out that these guys defined the top.

“House prices in Canada are still very much at the top of the range. They are going to come off.

“In terms of average house prices, we’ve got another 16 per cent to go. We are down already about eight to 10 per cent, so we are talking 25 per cent [overall] anyway. I thought that number was kind of obvious last year, but nobody wanted to face up to it.”

He said there is a 50- to 60-per-cent chance that a recovery will emerge in the U.S. as early as August but cautioned that Canada, because it fell into recession several months after the U.S., is not likely to follow suit until year’s end.

In the meantime, Murenbeeld said, U.S. housing prices are likely to suffer further declines — which would be bad news for B.C.’s struggling forest sector.

He has calculated they need to fall another 12 per cent to reach the absolute bottom barrier for long term fair prices.

That adds up to about a 30 per cent decline off the peak, he said.

Meanwhile, Murenbeeld is cautiously optimistic that signs of a recovery will emerge in the U.S. stock market, if not the economy, before summer.

“I think what’s going to happen is that we are slowly but surely going to eke out a recovery, and when I do this sort of counting up how many months equity markets lead the turn in the recession, it turns out to be about five months.

“If I’m right and the U.S. economy hits a bottom in August, then sometime soon, let’s say April-May, we should start to see more clearly that the equity markets are starting to eke out a rising trend. I do believe that later this year we are going to be okay.”

However, he cautioned that the average recovery of the S&P 500 index the year after a steep stock market plunge is 13 per cent — still far below last year’s market peak.

Meanwhile, he noted that the average drop in the Canadian stock market after a U.S. recession is 31 per cent.

Right now, the Canadian index is 35 per cent off its peak, he said.

“Unless this recession morphs into a depression, that is, we keep going on this depression cycle, this year we could potentially see some decent returns.”

He suggests investors looking for investment consider companies involved in gold exploration and mining, infrastructure development, alternate energy and defense contracts.

© Copyright (c) The Vancouver Sun


Comments are closed.