You know what day it is and what that means .. Here’s your open topic for Friday March 30th. Whats going on out there?
- March numbers due out soon
- US Mortgage fraud investigation
- ARM fallout sad stories in Newsweek
- Purchase + improvement mortgages.
- Canadian 1st quarter sales still going strong.
- Bank of Canada concerned about US housing troubles
What are you seeing? Post your links, news & Anectdotes here!
on Days of ultra-cheap money coming to an end@Turkey: LOL...that is gold. This city is filled with people like that, that will refuse to accept responsibility for being on Days of ultra-cheap money coming to an end@Turkey: Ah. Well that clarifies things. Clearly this housing bubble is literally driving some people crazy. on Days of ultra-cheap money coming to an endI think the expression "bat-sh*t insane" is over-used and should be reserved for special occasions. On a completely unrelated note,
on Days of ultra-cheap money coming to an endhttp://www.bloomberg.com/quote/GCAN10YR:IND Suggested noted, OECD. 
on Big banks facing home credit risk@mac: @condo watcher: Wait! I don't think that was explanation enough for you. By PAST, I mean a few years
April 3rd, 2007 at 1:20 am
However you (or these people) are living here, creating housing demand, and yet complaining and wondering why anybody lives here.Nobody's wondering why anyone lives here – it's for the same reasons as anywhere else (jobs, etc.). What we are wondering about is why people are paying prices for housing that are way, way out of line with the economic yield of those assets. I don't see anyone wondering why people pay current market rents.
April 2nd, 2007 at 5:22 pm
Sure…Conventional lending is when the borrower puts down the traditional dpwn payment amount of 25% and the bank lends the balance, hence the loan would be at 75% LTV. Loan being the amount of mortgage and value the purchase price/appraised value.LTV's higher than 75% are considerded high ration and must be insured as per law (by cmhc/ge etc). Generally a rental property must be have LTV of 75% or less, and generally high ratio mortgages must be "owner occupied".This may may allow investors/specualtors to get into a rental/inv. property with less down than currently is required.
April 2nd, 2007 at 5:14 pm
LTV=The balance of the mortgage outstanding as a percentage of the home's price. Reknab can provide specifics on what is meant by "conventional lending."
April 2nd, 2007 at 4:27 pm
Reknab – what is LTV?
April 2nd, 2007 at 4:19 pm
I was told today that legislation could be in process that will raise conventional lending LTV from 75% to 80%.
April 2nd, 2007 at 3:28 pm
betamax:1. What is it about our clean water, relatively safe streets, social safety net, and rule of law that makes us a "backwater"?Nothing, because those criteria have nothing to do with how the term was used. When I hear "backwater", I think banjo playing, no sock wearing. If you mean "non-cosmopolitan", that's a fair comment in some ways, although for its size, I think Vancouver offers a pretty good lifestyle.They have all kinds of reasons for being here. My point is that our 'most livable city' ratings aren't necessarily one of them.Demand is still demand. I'm not saying Vancouver deserves its high "livable city" rating. The decision is so personal its not worth making.However you (or these people) are living here, creating housing demand, and yet complaining and wondering why anybody lives here. Can you see the sillyness of it?
April 2nd, 2007 at 9:01 am
"i've noticed that almost everything else that goes up for sale in the south granville area is selling fast"This seems reasonable as supply is still very tight on Westside.
April 2nd, 2007 at 6:08 am
Oh, yes, and3. Lack of cultural bias towards ownership among francophones. They're not the whole population of Montreal of course, but more than enough to affect the whole market.
April 2nd, 2007 at 12:54 am
My impression is that rent (Montreal) is similar to Vancouver, but purchase price is A LOT lower. Can anyone give me any insight to this?1. No expectation of future price increases – indeed fear of declines (political uncertainty, essentially zero population growth).2. Much higher property taxes than Vancouver (makes cost of owning higher than it would appear).Quebec also has much higher income taxes than BC, but this would impact both owners and renters.
April 1st, 2007 at 8:26 pm
I walked past the regular open house being held at Crystal Court, the ugly-as-sin development on the NW corner of Fir & 14th. The 4+ 'character' houses that were renovated are still unoccupied and i'm sure they've been finished for 4-6 months. I've seen several open houses with the withered and deflated balloons hanging limp outside.The ugly 12 storey building that was shoe-horned into the back area of the lot also appears almost empty, months after the builders left.As i walked past the houses with my kid, i took some pleasure in mentioning loud enough for the couple entering the open house that "yes, they've been on the market for months now. They can't seem to sell them." It was interesting to look back a few seconds later to see the couple head to head and the guy pointing at me as i walked away.On another note, i've noticed that almost everything else that goes up for sale in the south granville area is selling fast, though i've no idea if they are getting their asking prices. However, given the pace of sales it appears unlikely that they are having to reduce their prices.
April 1st, 2007 at 7:34 pm
The sales pace seem to pick up from anecdotal experience. Not much to report in as aspect, as many posters have reported similar observations. I'm in the process of moving to surrey to be closer to my job, and rents there seem to be similar to rents in Burnaby. It could be just an illusion, but are we hitting an affordability wall in rents? There seem to be a bit of price compression concerning rents in Surrey and Burnaby. Granted, they are nowhere near Vancouver rents. I guess the new jobs in Surrey does provide support for rent increases, as reverse commute is getting pretty bad these days. I plan to move to Montreal in the fall, and went apartment hunting online a while ago. My impression is that rent is similar to Vancouver, but purchase price is A LOT lower. Can anyone give me any insight to this? Shall I buy a place sight unseen in Montreal, before prices take off and I'm "priced out forever"(TM)?
April 1st, 2007 at 6:20 pm
I was bored to tears today at about 2 so the wife and I decided to go out and look at open houses on a lark.Well, when we got to the first one we noticed about 20 shoes outside and walked in. 400K was the asking price for a unit similar to mine, except it had an extra bathroom (i rent for 800). You can't judge a book by its cover but noone looked very bright except the realtor. The next place was 650, 4 bedrooms tear down status. This place was packed too. If this place sells I'm going to start a company selling time shares in Whalley.
April 1st, 2007 at 5:36 pm
I can’t see how a few criminals with big bucks can have a far reaching and long lasting effect. They can’t possibly be the fools engaging in bidding wars for hovels in Grandiew or Strathacona. I think the thousands of super rich jet set buying up Vancouver nonsense is as solid of an argument as the mountains, the Olympics and Lulu Lemon.The biggest con artists selling the real estate scam are Vancouverites themselves.A quick scan through Realtylink’s stats shows sales have been on the decline for 11 months, yet the general public’s perception is that the market is white hot.The farce is so seared into the hollow heads of Vancouverites that even when the realtor’s own hype machine is telling them the market is poised for a serous crash,they still choose not to see it.This emperor is naked.Tick Tock, Tick Tock
April 1st, 2007 at 4:33 pm
1. What is it about our clean water, relatively safe streets, social safety net, and rule of law that makes us a "backwater"?Nothing, because those criteria have nothing to do with how the term was used. 2. China and Thailand are still 3rd world status, sorry.As Freako suggests above, not all Asians are peasants riding bicycles, despite those 1960's National Geographic films. Shanghai popn. = 20m, Beijing 15m, and there are many other cities with many millions of people. 3. Why are all of these people here if its not where they want to be? Obviously they had a choice.They have all kinds of reasons for being here. My point is that our 'most livable city' ratings aren't necessarily one of them. 4. I'm sure the type of cities they want to be in don't rank too high on any "livable" lists.I'm merely reporting what other people say in significant numbers for reasons which are valid to them. Your indignant "Why do you hate America? Love it or leave it!" rhetorical response is misguided.
April 1st, 2007 at 1:52 pm
"2. China and Thailand are still 3rd world status, sorry."I think the intended comparison was Shanghai or similar, which is truly modern in many ways. To a cosmopolitan Shanghainese, it would probably be a backwater (just as it would be for a Manhattan hipster). However, for former resident of a dirty Chinese industrial town, it could be the term "paradise" would fit better than "backwater".As for the article, it originally ran in the Washington Post a week or so ago and was all about Vancouver as a refuge for wealthy fugitives due to onerous extradition laws.Obviously Vancouver is attractive to some, because people come here.
April 1st, 2007 at 1:45 pm
From my perspective, it's a backwater."Many Chinese coming from large cities have a similar perception.As much as we like to tout 'liveable city' poll results, a lot people don't give a crap about that. They want to make money and they want a vibrant downtown culture to spend it in. Vancouver is nowhere near the top of their 'best city' list.I have a few problems with this way of thinking:1. What is it about our clean water, relatively safe streets, social safety net, and rule of law that makes us a "backwater"?2. China and Thailand are still 3rd world status, sorry.3. Why are all of these people here if its not where they want to be? Obviously they had a choice.4. I'm sure the type of cities they want to be in don't rank too high on any "livable" lists.
April 1st, 2007 at 12:48 pm
From my perspective, it's a backwater."Many Chinese coming from large cities have a similar perception. As much as we like to tout 'liveable city' poll results, a lot people don't give a crap about that. They want to make money and they want a vibrant downtown culture to spend it in. Vancouver is nowhere near the top of their 'best city' list.
April 1st, 2007 at 12:40 pm
Just an interesting observation, I work for a big bank's western mortgage approval center and over the past year or so I have noticed 6-7 out of 10 deals are from Alberta. In the past it seemed it was BC/Vancouver that had this proportion. Of course this anecdotal info, and mainly my observation. It seems to me their market is more "hot" than ours now when in the recent past it was us.
April 1st, 2007 at 11:49 am
Isn't being a "backwater" for criminal and pseudo-criminal "entrepreneurs" a good thing?
April 1st, 2007 at 11:33 am
Great quote in yesterday's Sun…what do those rich foreigners really think of Vancouver?Fugitive financier Rakesh Saxena, under house arrest in Vancouver while fighting extradition to Thailand, says "With due respect, [Canada] is not the place I would choose to live. From my perspective, it's a backwater." But all things considered, he said, "I think I made the right choice."
April 1st, 2007 at 8:38 am
the one playing the music and the one guarding the door.And both of them bear a striking resemblance to our good friends at Rennie Marketing….
April 1st, 2007 at 8:04 am
Maybe 'musical people' would be more appropriate? good one!when the music stops everybody standing gets clobbered with a chair except for a couple of people… the one playing the music and the one guarding the door…..
March 31st, 2007 at 10:20 pm
"Why do I pay attention to the US market when this is a local Vancouver site? 1) We like thier money, if the subprime meltdown ends up having a bigger impact on the US economy we'll feel it.2) I dont live in a world where Vancouver real estate is my only option, I like to keep an eye on the alternatives."Thanks, Pope. That needed to be said. I laughed and coughed beer out my nose … wait a minute, that felt good.But, thanks again. As you pointed out – we do have alternatives. Lots of them.
March 31st, 2007 at 8:00 pm
"Of course that's not because the borrowers would become savers. The borrowers would just have to quit borrowing due to lack of net worth. The people who had been saving all along would account for the aggregate net positive savings."True enough, but I'd expect a shift across the spectrum. 70% of households do own real estate, and I'd expect even the most miserly saver to be at least marginally influenced by the wealth effect. If so, I would expect it to work the same in reverse, perhaps assymetrically so. A miser would likely be very aware of his/her papergains. Losing these might inspire even higher savings rate in compensation.
March 31st, 2007 at 6:51 pm
Re: BC savings rate -7%This may not be as bad as it looks, considering that the second largest segment of our economy is related to marijuana and that money is not accounted for.
March 31st, 2007 at 6:34 pm
household net worth would also be decimated. Something tells me that the savings rate would go positive in a jiffy if that were to happenOf course that's not because the borrowers would become savers. The borrowers would just have to quit borrowing due to lack of net worth. The people who had been saving all along would account for the aggregate net positive savings.
March 31st, 2007 at 5:44 pm
Couple tidbits this week:1. There were two large colour ads this week in Metro – one from CIBC, another from TD – advertising no-money-down mortgages. One of them broke down the amount of mortgage you could afford with your current rent payment.2. Houses in my area (East Van/Mount Pleasant) are selling fast, faster than I've seen the last 4 months, so things seem to be heating up here.
March 31st, 2007 at 4:18 pm
Gianni,Please do not post such facts.You will anger the couple of recent buyers (and the madman from east Van),which frequent this blog, and man can they get nasty.Tick Tock, Tick Tock.
March 31st, 2007 at 3:47 pm
CL posting Mar 21st, Burnaby condo listed at $189,900… same condo posted on the 31st for $169,900.http://vancouver.craigslist.org/rfs/297914319.htmlhttp://vancouver.craigslist.org/rfs/303776676.htmlCondo in New West posted originally at $165,000 Mar 2nd, now posted at $150,000 March 31st.http://vancouver.craigslist.org/rfs/303647781.htmlhttp://vancouver.craigslist.org/rfs/287577488.htmlBrand new house in Cloverdale, original posting was reduced price already from $489k -> $479k. 2nd posting was $469k.http://vancouver.craigslist.org/rfs/297948368.htmlhttp://vancouver.craigslist.org/rfs/303385390.html
March 31st, 2007 at 3:44 pm
"I bet a lot of the turnover is 'musical chairs'"Funny analogy! In musical chairs, there are more people than chairs. Maybe 'musical people' would be more appropriate?Your point is taken. Many people buy and do not move for decades, so it makes sense that other units turn over more frequently. For condos a high turnover would be expected and SFH less so. I cannot find exact stats but about 3-4K of the 15K of annual transactions are detached and 1-2K are attached (duplex). The rest are condo/apartment. Around 35% of Vancouver city housing stock is detached. One would also expect rental house turnover to be higher still so the owner-occupiers buying detached would be below the 3-4K.
March 31st, 2007 at 2:44 pm
"During their huge run up, the absolute value of home equity increased substantially, but the PERCENTAGE equity actually decreased significantly."Yes, I meant percentage equity. For example, imagine if it is currently 50%. A 40% price drop would wipe out 80% of home equity. Since home equity is the largest contributor to net worth, household net worth would also be decimated. Something tells me that the savings rate would go positive in a jiffy if that were to happen. And there the sales of big screen TV's would fall off a chart.
March 31st, 2007 at 2:00 pm
For the average equity of owners, the US bubble may provide some reference. During their huge run up, the absolute value of home equity increased substantially, but the PERCENTAGE equity actually decreased significantly. Of course, the NAR only focused on the new found wealth of Americans, while only bubbleheads worry about skyrocketing household debt. During that period, home equity debt in US increased slower than home price appreciation in absolute terms, but much faster in relative terms. Therefore Americans actually end up owning a smaller slice of their house than pre-bubble, even at the much inflated prices. Much of the negative saving rate can probably be attributed to this. See the similarities in BC, with our -7% saving rate? US national rate is 1%, if I remember correctly.
March 31st, 2007 at 1:37 pm
" so forgive me if I'm wrong, but didn't huge inflation help lift "us" out of that housing mess? "Well if huge inflation rears its ugly head, do you really think medium/long term debt will be available at 5%? Heck no. Huge inflation, huge rates. Huge rates at our affordability would be even more disastrous. No easy way out of this jam."Whether it makes the system stronger by diversifying risk or weaker because lenders aren't holding the bag is simply unknown."I think this puppy had a negative return to begin with, hence no amount of diversifying will make it attractive. The risk was systematic (cannot be diversifed away) and the business model flawed. How did it happen? The usual mistake of applying old truths to new situations. Anybody who uses traditional risk models to calculate default risk of subprime needs a kick in the head.As for the turnover, bccubbings, you make a good case, so you have convinced me that turnover is higher than I had thought.That brings up the concern that average equity has actually dropped even as prices doubled. That sets us up for an enormous reduction in household networth should we see a repeat of 1981. That would of course have disastrous consequences for decades to come. I do wonder how many boomers signed over part of their nest egg to help get junior in the market.
March 31st, 2007 at 1:35 pm
I also see that the competition bureau is investigating the Canadian Real Estate Association on complaints that recent moves to limit access to the Multiple Listing Service (MLS) are anti-competitive.The C.R.E.A. just wants to protect its trademark MLS system from independent discount brokers.
March 31st, 2007 at 1:15 pm
I see that the police sent 8 officers on a raid of the Downtown eastside residents association office on a tip that they had the stolen olympics flag! Eight!And this is for a peice of cloth worth, what.. $100 ?!? What happens if your bike or car gets stolen? They send 12 officers?If they keep sending out cops in that number to hunt down bits of cloth our property tax is gonna SKY ROCKET!
March 31st, 2007 at 12:48 pm
I was a wee lad in the 81-82 crash, so forgive me if I'm wrong, but didn't huge inflation help lift "us" out of that housing mess?You're wrong. The 81-82 crash, and subsequent recession, marked the end of the 60's-70's inflationary period, courtesy Paul Volcker. I personally saw a salary cut during this period, and so did a lot of people.Nominal prices did not recover until 1988 or so.
March 31st, 2007 at 11:49 am
betamax,I've seen delusional ads like that on Craigslist. What surprises me is someone paid to run that ad. Even more wasted money.Yeah, New West two bedrooms apts range from $750 (!!!) basement suites to $1500 upper end condos.I love this ad:"$900 The NewsHi, we are looking for a suite to rent in The News. We currently own a 2 br at 833, but have just sold because we have a crazy high mortgage. Lots of money in the bank, no worry about not getting your rent. We will respect your home as we respect ours."http://vancouver.craigslist.org/hou/303552166.html If this is true, they are looking for a former neighbour to subsidize their housing to the tune of over $1000/month. Sell your condo at the peak than rub it in the faces of the remaining FBs in your building.
March 31st, 2007 at 11:28 am
Anecdote: saw a condo rental ad in Friday's Sun – 2 bdrm highrise condo in New West for $2,600/mth.LOL! Some specuvestor is trying to cover their mortgage, but it'll never happen. You can rent a nice condo in New West for half that. Wonder how long it'll sit vacant bleeding money before they get real with the price.
March 31st, 2007 at 10:49 am
How can a "secondary suite" be privately owned?The Census term is actually "private dwelling unit", meaning that the occupants can get in and out without passing through someone else's dwelling. So a basement suite with its own entrance is a private dwelling unit. A basement suite where the occupant has to enter through the main part of the house is not.One interesting thing I noticed in the Census housing data… In 2001, 95% of Vancouver dwellings were "occupied". By 2006, that had dropped to 92.5%.The city has just posted its analysis of the 2006 Census data and CMHC construction data…first two documents at this link…http://vancouver.ca/commsvcs/housing/publications…The construction document indicates that there are over 7000 condos now under construction downtown.
March 31st, 2007 at 9:20 am
Jesse: secondary suites (basements etc) are privately owned by the house owner and not for sale, so they wouldn't be included in the sales stats.I think that we can't assume that a single unit has sold only once in the last 5 years. For instance a single unit at 674 W. 6th has been foreclosed at least 4 times in the last four years. I bet a lot of the turnover is 'musical chairs' – people buy a place and find it has problems so they sell it and move to another place since prices 'always go up'. The loss from commissions etc just gets paid for from the gains. When prices stop going up (they always do) I think some people will find themselves in places they don't like owing more than they're worth.
March 31st, 2007 at 8:30 am
"A large chunk of [privately owned dwellings] are non-strata rental apartments, cooperatives, secondary suites, or social housing units of various kinds."How can a "secondary suite" be privately owned?"Land Titles has 198,000 registered properties in Vancouver."So with 15K sales per year, about 7% turnover per year is about right then? Intuitively this seems reasonable. Of course many of these sales are trade-ups with high equity % so hard to say how the avg /median LTV has changed.
March 31st, 2007 at 7:24 am
Much talk about subprime meltdown but it's really impossible to say how these chips will fall. The degree to which loans have been made, packaged, sold and resold is unprecedented. Whether it makes the system stronger by diversifying risk or weaker because lenders aren't holding the bag is simply unknown.Some tidbits I picked up I don't know where in the blogosphere. Recent studies show 35% of Americans own their homes outright and almost 90% of subprime borrowers are not behind on payments. For now anyway.
March 31st, 2007 at 7:05 am
I was a wee lad in the 81-82 crash, so forgive me if I'm wrong, but didn't huge inflation help lift "us" out of that housing mess? With monetary policy being as loose as it is now, I really hope we don't go down a road we'll regret. I can see drastic action being taken say in 12 months time if things spiral down a lot from now.