Friday free-for-all
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!
RSS 2.0 comments feed. Both comments and pings are currently closed.
March 30th, 2007 at 7:14 am
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.
March 30th, 2007 at 7:18 am
2638 WILLIAM ST, Renfrew, Vancouver East, $649,000.00
V637837
oct 2006: asking $525,000 sold$???
mar 2007: asking $649,000!!!
the flooring must be carved in gold.
March 30th, 2007 at 7:29 am
tqn: You mispelled Mold, cause I think thats more likely what the floors are made of in this town.
I’d love to see that episode of ‘flip this house’.
March 30th, 2007 at 7:39 am
What I’m seeing? I see me moving away from this stupid market that doesn’t seem to be slowing down.
March 30th, 2007 at 7:41 am
Seems to be a lot of bottom feeding going on. Sure houses are selling, but it seems to be the lower price levels 500k – 675k only.
One 988k property in our area dropped 120k in price recently. I guess people here just don’t have an endless supply of money or credit like the realtors think they do.
March 30th, 2007 at 8:12 am
Hey Pope, I have an idea for a thread.
I’ve been running it around in my head for a few days now and I can’t come up with a satisfactory answer so maybe you can open this question up to the floor.
How great an impact will say a 50% drop in prices affect the GVRD.
My worst case scenario is many/most of the expensive boutiques on 4th and on Robson are boarded up, many of the high end car dealerships go out of business, a big chunk of our famous restaurant scene goes missing…
What does everyone else think? Will it be smooth sailing even after $250,000 per family suddenly goes up in smoke? I know the money is fictional but to the people getting second mortgages it’s very real which makes it real in that it affects the economy.
March 30th, 2007 at 8:14 am
Lets not forget David Dodge : Refreshingly honest
http://ca.news.yahoo.com/s/cap.....e_americas
NEW YORK (CP) – The troubles in the U.S. housing sector triggered by a plunge in the market for so-called subprime loans could delay recovery and have “huge consequences” for Canada’s economy, says Bank of Canada governor David Dodge.
“Everybody else in the world looks at housing and says that doesn’t have much consequence for demand for us. But of course for Canada it’s exactly the opposite – it has huge consequences,” the central bank governor said Thursday after a speech to the Americas Society and the Council of Americas.
March 30th, 2007 at 8:23 am
“How great an impact will say a 50% drop in prices affect the GVRD”
you and I and the rest would be lining up for E.I and cash out RRSP? women and kids would be lining up for welfare cheques and foodbank? Think about it!
March 30th, 2007 at 8:41 am
tqn:
what are you talking about? It was at 50% of what is now just 6 years ago….
I do not recall any poverty stricken mothers collecting benefits back then….
Housing is not the pillar of the economy, it is rather its downfall…
March 30th, 2007 at 8:55 am
you and I and the rest would be lining up for E.I and cash out RRSP? women and kids would be lining up for welfare cheques and foodbank? Think about it!
What? Those crazy valuations only mean something when you sell. Prior to that they’re just numbers that let you feel smug.
March 30th, 2007 at 9:03 am
Paul: thanks for that link, I’ve added it to the post since it so eloquently sums up the dangers the US housing market slump poses to ours.
Drachen: Good idea for a topic, I think its worth discussing here and if there’s further interest I’ll give it a new thread. My feelings is that a 50% drop in todays prices would be bad for our economy overall, but I don’t think it would be world-ending. I think a lot of high-end shops would stay open (many investors have already cashed out of our market), and the only people who would really suffer are people that bought in the last couple of years and couldn’t cover their payments.
For most owners a 50% drop would only wipe out paper gains and not have a big impact- After all you haven’t made any money until you sell.
As domus points out a 50% drop would only take us back six years or so. This has just happened in Dallas TX, where prices are now at their 2000 level.
March 30th, 2007 at 9:11 am
From this article regarding Japanese land prices.
Benchmark bonds ended a four-day rally on March 23 after a government report showed commercial land prices in Japan’s three biggest cities rose 8.9 percent in 2006. The Bank of Japan wants to avoid a repeat of a real-estate bubble that led to more than a decade of economic stagnation.
“We aren’t yet in a situation in which land-price gains warrant concern of excessiveness, but we’d like to keep a close watch on them,” Fukui said in parliament yesterday.
Why couldn’t the rest of us have learned from the Japanese?
March 30th, 2007 at 9:25 am
domus aurea
“what are you talking about? It was at 50% of what is now just 6 years ago….”
Yeah and those price increases turbo charged the economy. To stick to the analogy a similar sized drop could be the equivalent of sugar in the gas tank…
marshall
“What? Those crazy valuations only mean something when you sell. Prior to that they’re just numbers that let you feel smug.”
Not entirely true, how many commercials do you see encouraging “house rich cash poor” people to take out a second mortgage? I think a lot of people in Vancouver owe a big debt on their house because they figure they have a million dollars on paper so they might as well start living like a millionaire.
A recent episode of “Buy Me” was in Vancouver where a middle aged woman was upgrading her house, 20 years ago she’d paid $250k and she currently owed $275k. I think that’s probably pretty typical. Most of that $275k probably went back in to the local economy and I doubt she’d have let herself borrow so much if she didn’t think she was “house rich”.
March 30th, 2007 at 9:29 am
Apparently the plans for the olympic village have been decided upon and they get a very negative review from Trevor Boddy in the Globe and Mail. Anybody seen pictures of these designs? I found the cities site, but they don’t have much in the way of informative design images.
http://www.city.vancouver.bc.ca/olympicvillage/
March 30th, 2007 at 9:55 am
I think the biggest effect of a 50% price drop would be to “trap” a very large number of FTBs in whatever they’ve bought in the last few years.
Think about it: 50% off would roll prices back to what…2003-2004 prices? How many people who bought in that timeframe would owe less than 50% of the current value of their home? Furthermore, how many of them bought something that they didn’t really want, but it was what they could afford?
A 50% drop in value would also tighten inventory. The only houses that would be up for sale would either be the gotta sells (i.e. death, divorce, job loss) or people who’ve owned their place since before 2002-2003.
Thankfully, this would never happen here. Vancouver’s so world class…like NYC and London.
March 30th, 2007 at 9:58 am
Anyone else watching the burbs of Burnaby and New West? Although I haven’t been tracking it officially, nothing seems to be moving and prices appear to be a smidgen lower then last summer.
So although I know properties are still moving in the city – it appears to me that the slow down is happening outside the almighty crackhouse that is Vancouver.
March 30th, 2007 at 10:14 am
Drachen:
a slow down in the economy is sometimes the best thing that you can wish for.
Better a bit of sugar in the gas tank now than a frontal crash later.
Do you genuinely believe that this situation is good for the economy, or even substainable?
March 30th, 2007 at 10:53 am
neither the current situation nor a 50% drop is good for the people, one side or the other.
the bears can always wish for x% decrease and the bulls can always wish for y% increase. however, as someone said, the market does what it does.
March 30th, 2007 at 10:56 am
Anyone else watching the burbs of Burnaby and New West?
In south Burnaby and NW I’m seeing a lot of ’sold’ stickers covering up the previous ‘new price’ stickers; so places are still selling, but the buyers probably imagine they’re buying the dips. Time will tell otherwise.
March 30th, 2007 at 11:04 am
Domus Aurea
No, I don’t think it’s good for the economy in the long term and I believe that by summer 2008 at the latest prices will have normalized at 40-60% below current levels.
I don’t think it’s a question of a slow down now vs a crash later. I think it’s a crash now. What I’m asking is how big the crash will be and what other areas of the economy will it affect.
I, like most people here am rooting for lower house prices so I can finally get some good family housing at a decent price but sometimes I think we’re all so busy crossing fingers for a crash that we overlook some of the negative ways it will affect us even if we don’t own anything right now.
It would be such a cruel irony for someone here to finally see house prices they could afford only to be laid off work.
Several people have commented in the past how the city has gone through a personality shift over the duration of the run up, I expect that too will change in a crash.
To rephrase my hypothesis.
I think a LOT of discretionary spending is going to disappear when people realize that their $500,000 nest egg they were counting on instead of saving like normal people is actually worth $-100,000 and suddenly they’re so deep in debt that even selling their house will leave them in the red. Even if only 10% of landowners are living that way it means a big cut in local spending, which affects business owners and employees of restaurants, fancy shops, spas etc. Now THOSE people have to cut back and you start to see a vicious cycle. (and that’s not to mention the likelihood of something similar going on in the states)
I’m not saying that’s what WILL happen but it certainly could happen.
March 30th, 2007 at 11:35 am
Anyone see the noon news on Global about Kelowna now the 2nd highest RE in Canada ?
The Remax guy says you better buy now cause it’s only going higher,LOL. This is bordering on criminal what these guys are doing trying to trap people into financial hell. They will wear it well when this all comes down.
March 30th, 2007 at 11:43 am
tqn, 2638 William sold for $505,000.
March 30th, 2007 at 11:48 am
“How great an impact will say a 50% drop in prices affect the GVRD”
you and I and the rest would be lining up for E.I and cash out RRSP? women and kids would be lining up for welfare cheques and foodbank? Think about it! “
Hmmm, lets see now, 4 years ago things were just humming along fine and houses were 50% cheaper. Maybe you mean the flippers and speculators will be lining up at the food bank and it will serve them right. Any of the dummies who over used their HELOC will be along side them with that Remax agent on the tube today who said prices are only going up they never ever go down.
March 30th, 2007 at 12:09 pm
Pope said…
For most owners a 50% drop would only wipe out paper gains and not have a big impact- After all you haven’t made any money until you sell.
As domus points out a 50% drop would only take us back six years or so.
I had a look at Land Title registrations…
41% of all properties have changed hands since Jan 1 2002. Breaking that down it’s 30% of all non-strata properties, 56% of all condos and a whopping 67% of all downtown condos. And those condo numbers don’t even include pre-construction sales which haven’t yet been registered with Land Titles. Anyone have any estimate of how many of those are out there?
So a 50% price drop would result in paper losses for a majority of condo owners and many house owners. And maybe 3/4 of downtown condo owners would be in the red.
Caveat…I couldn’t easiliy separate commercial properties from residential. But I suspect the residential-only percentages would be even higher.
March 30th, 2007 at 12:30 pm
Anyone see this yet today
Looking for Ways out of the subprime mortgage crisis
http://edition.cnn.com/2007/US.....index.html
March 30th, 2007 at 12:58 pm
Not all of the problem is in the subprime market. Many Americans with good credit but low income or no savings signed up for adjustable rate mortgages or interest-only loans to get into the market. As rates rise, they too feel the pinch.
At the nonprofit Consumer Credit Counseling Service in suburban Cincinnati, counselor Darcy Blankenship sees a steady stream of people who knew their payments would be going up, but signed the loan anyway because they just wanted a house.
“People are so excited about wanting that house, they don’t look at the whole picture. They just want the keys,” she said.
http://edition.cnn.com/2007/US.....index.html
Sounds like the same story up here,especially when Mortgage Depot lends money to kids making $12 hour as long as they have 10% down. Tell me this can’t create the same scenario here,throw in the HELOC’s and kiss this boom bye bye.
March 30th, 2007 at 3:44 pm
Tell me this can’t create the same scenario here,throw in the HELOC’s and kiss this boom bye bye.
Despite CMHC’s repeated bleating that we don’t have US-style subprime mortgages, we have our equivalents, with worse affordability.
I’ve heard of many recent college graduates who’ve purchased new condos and new cars while not making much money and having no job security whatsoever. Some of these people are working contract jobs!
Just like the US, we won’t need much of a slow-down before a vicious cycle kicks in and replaces the current virtuous one. Such is the boon and bane of leverage.
March 30th, 2007 at 6:31 pm
Betamax, you are absolutely correct.
Subprime lending is not an American exclusive.
I know people who have been able to get loans to pay overdue loan payments.
Some of the major banks have mortgage schemes that make the American sub-prime
seem conservative.
Variable rates, half and half, mortgages, mortgages that will allow the borrower to pay less than the interest payment and tack it onto the principle, which in effect means you tack on 25years of interest on the shortfall.
Mortgages that combine all your credit card debt, turning short term unsecured debt to secured long term debt.
The Canadians have finally outdone the American sharks.
Tick Tock, Tick Tock
March 30th, 2007 at 6:55 pm
Bank of Canada concerned about US housing troubles
Noooo. Chipman says that only stupid bears make such thoughtles arguments.
It’s all good…
March 30th, 2007 at 7:28 pm
“The troubles in the U.S. housing sector triggered by a plunge in the market for so-called subprime loans could delay recovery and have “huge consequences” for Canada’s economy, says Bank of Canada governor David Dodge.”
I just want to pick on the first part a little. The U.S. housing sector troubles didn’t get triggered by the plunge in subprime market. The trouble started the second borrowing standards dropped 4 or so years ago. The eventual meltdown was inevitable. The straw didn’t break the camel’s back, the load did. Much of the commentary seems to suggest that everything was going A-OK until that subprime thing came out of nowhere. No way, the fate of the market was sealed long ago.
March 30th, 2007 at 7:32 pm
“For most owners a 50% drop would only wipe out paper gains and not have a big impact- After all you haven’t made any money until you sell.”
True, but the negative savings rate suggests that many people were blinded by the wealth effect and will live a meager existence while they get their net worth back into reasonable shape.
March 30th, 2007 at 7:35 pm
“41% of all properties have changed hands since Jan 1 2002.”
Are you sure, that sounds very very very high. I truly doubt that anything close to 20% of homeowners increased their RE exposure (ie. FTB or trade up) in the past five years. I don’t even think it is 10%.
March 30th, 2007 at 7:37 pm
“Not all of the problem is in the subprime market. Many Americans with good credit but low income or no savings signed up for adjustable rate mortgages or interest-only loans to get into the market. “
Right now prices in most metro markets are only down single digits. If that starts getting into double digits and beyond all bets are off. As you suggest, there are a lot of shaky owners outside of subprime.
March 30th, 2007 at 7:38 pm
“Much of the commentary seems to suggest that everything was going A-OK until that subprime thing came out of nowhere.”
Freako,
you are right. Causality goes, in fact, the opposite way from what the media often says.
As soon as RE prices stopped growing people in the US found themselves in dangerous waters (equity-wise). They could not sell and fully buy back their mortgage(s) in many cases.
The subprime meltdown followed.
Slowing prices=>subprime meltdown, not viceversa.
NoticeL prices do not need to fall in nominal terms for a credit crisis, all it’s needed is a stop to the increases.
March 30th, 2007 at 7:42 pm
OT Look at the jump in San Diego foreclosures in the past 3 days. Holy crap!
Date, pre-foreclosure, foreclosure, foreclosure as percent of preforeclosure.
02/27/07: 1,879/5,008 (37.5%)
03/30/07: 2,845/5,223 (54,5%)
http://bubbletracking.blogspot.com/
March 30th, 2007 at 7:43 pm
Sorry, last month, not three days.
March 30th, 2007 at 7:50 pm
A 50% drop in value would also tighten inventory. The only houses that would be up for sale would either be the gotta sells (i.e. death, divorce, job loss) or people who’ve owned their place since before 2002-2003.
No it wouldn’t tighten inventory. You’re forgetting that the people who aren’t “gotta sells” are most likely trading in-market, so when you remove a seller you remove a buyer too. For what other reason would a person put a house up for sale when they don’t have to? I will concede that rational investors (concerned about yield) are more likely to sell at a market top and buy at a bottom, but there don’t seem to be a whole lot of them.
Inventory certainly didn’t tighten from 1981 to 1983 when prices dropped 45%. Indeed inventory grew due to foreclosures and drop in demand. And this is true in general for market cycles.
March 30th, 2007 at 7:56 pm
bcubbins: I stand corrected, if it’s really true that 41 percent of ALL properties here have changed hands since 2002 thats HUGE. I honestly thought it would be much less than 10 percent. What an enormous game of musical chairs!
March 30th, 2007 at 8:16 pm
41% of all properties have changed hands since Jan 1 2002. Breaking that down it’s 30% of all non-strata properties, 56% of all condos and a whopping 67% of all downtown condos.
Without an accessible reference, this should be considered a rumour. Not a fact…
If it is true, however, then it is beyond INSANE.
March 30th, 2007 at 8:17 pm
“bcubbins: I stand corrected, if it’s really true that 41 percent of ALL properties here have changed hands since 2002 thats HUGE.”
Well, let’s do some quick math. What has GV sales been? 3K a month or so, or am I way off? That would make about 180K sales over 5 years. What is total housing stock? As per the GVRD website, there are 870,992 dwellings in the GV. That would make about 20%, all assuming that no unit sold more than once. If we take investors out of the game and only look at homeowners, I suspect as mentioned above that around 10% increased their exposure in the past 5 years.
March 30th, 2007 at 9:16 pm
“I suspect as mentioned above that around 10% increased their exposure in the past 5 years.”
Don’t forget those who signed up for additional “home equity financing” during that timeframe, I suspect there’s at least another 10% there.
Personally I think that a pretty large percentage of people who own residential real-estate in vancouver are either short changing their savings because they already have a “nest egg” in their property or they’re borrowing against home equity.
March 30th, 2007 at 9:16 pm
hmm the drumbeats seem to be getting louder.
the impression I get is everything is priced for perfection and oddly enough we seem to have the perfect “shitstorm” approaching.
over on Ben Jones’ HBB the “vibe”
is increasingly pessimistic, practically every indicator either numerically or anecdotally points down.
the next quarter is going to prove very interesting
March 30th, 2007 at 9:35 pm
“41% of all properties have changed hands since Jan 1 2002.”
Are you sure, that sounds very very very high. I truly doubt that anything close to 20% of homeowners increased their RE exposure (ie. FTB or trade up) in the past five years. I don’t even think it is 10%.
Some US markets have a turnover of 15% PER ANNUM. So 40% over 5 years doesn’t sound too extreme to me on the face of it. Of course this would have to mean that the annual turnover is above 8%, as some properties changed hands more than once in the last 5 years.
So do we assume that the 40% is incorrect?
If so, what is the annual turnover for the GVRD?
Is it just 4% as per your figures, freako?
March 30th, 2007 at 9:39 pm
Are you sure, that sounds very very very high
Pretty sure. I left out an important fact though… those numbers are for Vancouver only, not the whole GVRD.
I would welcome an independent confirmation. But it seems reasonable to me. After all, those numbers cover a period of 5 years 3 months, and don’t people stay in their homes an average of only 7 years? Then consider the effect of an overheated housing market, and also add in all those investment condos downtown.
If you exclude the downtown area, then there was about 36% turnover.
Looking closer at just downtown now…
% of sales since Jan 1 of year:
2002 .67
2003 .60
2004 .51
2005 .40
2006 .22
Again, that does not count any units still under construction.
March 30th, 2007 at 9:42 pm
Dang, I forgot to change those numbers as percents, but you know what they mean
March 30th, 2007 at 10:48 pm
As per GVRD website, Vancouver has 273,804 privately owned dwellings (253,212 which are owner occupied). A cumulative 46% over 5 years is 8% a year turnover. If we again assume that no buildings were sold more than once, that is 21904 sales a year.
March 30th, 2007 at 11:04 pm
What about a government bail out of RE after a crash? It’s quite a hot topic south of border now, with both Dodd and Clinton proposing it. Dodd is the loudest, but Clinton is the only presidential hopeful that mentions it. Shall we jump in the market since we can expect taxpayers to bail us out when things go wrong?
March 30th, 2007 at 11:10 pm
Freako, going with very rough numbers here…
According to the 2006 Census data, Vancouver has 31% of the region’s private dwellings. So if there are about 3000 sales per month through MLS, then Vancouver’s share is about 11,000 sales a year.
Then add in new construction sales. Statscan says Vancouver averaged almost 5,000 new dwelling units a year between 2001 and 2006. Would it be reasonable to guess that perhaps 3,000 of those were non-MLS sales? (The remaining either selling through MLS or being purpose-built rental apartments.)
If 3,000 is a reasonable number then we’re up to 14,000 sales a year. The numbers I calculated from the Land Titles data came to just shy of 15,500 sales per year. But remember, that includes non-residential sales as well.
March 30th, 2007 at 11:23 pm
As per GVRD website, Vancouver has 273,804 privately owned dwellings
A large chunk of those are non-strata rental apartments, cooperatives, secondary suites, or social housing units of various kinds. Land Titles has 198,000 registered properties in Vancouver.
March 31st, 2007 at 3:05 am
Shall we jump in the market since we can expect taxpayers to bail us out when things go wrong?
The US politicos are just flapping their gums to get media exposure. Latest to get on board is Jesse Jackson, and when he joins in, you know it’s truly a lost cause.
There has never been any bailout of RE purchasers in Canada, including those hit by the 1981-1983 crash. Bankruptcy is the only way out. And by the way, a lot of people think that a mortgage is some kind of equity interest in the house by the lender, and they’re not personally responsible for the balance. They’re wrong.
Also an RE crash in BC is likely to be accompanied by a recession (just like the last time), and we all know what Gordo’s spending priorities are. And I can tell you right now that his line will be that the Olympics will save the day and make everything rosy again.
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.
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 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 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 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/h.....ations.htm
The construction document indicates that there are over 7000 condos now under construction downtown.
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 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 News
Hi, 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 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 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 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 1:37 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 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 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 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 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.html
http://vancouver.craigslist.org/rfs/303776676.html
Condo in New West posted originally at $165,000 Mar 2nd, now posted at $150,000 March 31st.
http://vancouver.craigslist.org/rfs/303647781.html
http://vancouver.craigslist.org/rfs/287577488.html
Brand new house in Cloverdale, original posting was reduced price already from $489k -> $479k. 2nd posting was $469k.
http://vancouver.craigslist.org/rfs/297948368.html
http://vancouver.craigslist.org/rfs/303385390.html
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 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 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 happen
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.
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 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 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.
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…..
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 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 11:49 am
Isn’t being a “backwater” for criminal and pseudo-criminal “entrepreneurs” a good thing?
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 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 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 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 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 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 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 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 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 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 2nd, 2007 at 6:08 am
Oh, yes, and
3. 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 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 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 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 4:27 pm
Reknab – what is LTV?
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 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 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.