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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 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 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 11:04 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 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 9:42 pm
Dang, I forgot to change those numbers as percents, but you know what they mean
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 9:35 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 9:16 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 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 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 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 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 7:43 pm
Sorry, last month, not three days.
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 7:38 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 7:37 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 7:35 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 7:32 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 7:28 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 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 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 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 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 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 12:09 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 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 11:43 am
tqn, 2638 William sold for $505,000.
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 11:04 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 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 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 10:14 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 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 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 9:29 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 9:25 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 9:11 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 9:03 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 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 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 8:23 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 8:14 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 8:12 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 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 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 7:29 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 7:18 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 7:14 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.