Friday free-for-all
It’s Friday! ..and what a Good Friday it is! This is the open topic thread for Friday April 6th. Here’s what I’ve seen in the news recently:
-Young people: buy first, think later.
-Flood of used cars flow into Canada
-Economist Micheal Shedlock commments on Canadian Building Permit Plunge:
When things go bad blame the weather. I suggest this is the beginning of the end of the housing boom in Canada. Canada seems to be about 18 months or so behind the US and has a lot of catching up to do. It will be a painful process especially for recent buyers and trapped sellers, just as it played out in the US.
What are you seeing in the news? Post your links, anectdotes, comments and news stories here!
April 9th, 2007 at 8:27 am
Ten years of underdevelopment (most of 90's and early 2000's) in both housing and infrastructure does cause housing shortage at today's employement levelWhat makes you think there was underdevelopment in housing? Where are real rents now compared to 1990? Do you have any evidence that growth in housing stock has lagged population? The late 1990's bear market in housing is evidence of oversupply (might have something to do with all those HKers moving back).Underinvestment in infrastructure would result in imbalances in neighbourhood prices but not aggregate prices.Given the exodus of head offices and industry from Vancouver that has continued despite the change in government in 2001, it would appear that the growth in employment since then has been driven by construction, not the other way around. Sort of like another coastal city of the same size, San Diego.
April 9th, 2007 at 6:23 am
ego,The story in your link isn't all bad. Yes, those advocates seem confused on how to direct their fire, but they may indirectly do some good.The legal and political actions against the lenders will further tighten credit, thus helping to deflate the bubble.From the CNN story:"In many cases these loans were never a good fit," she said. "We have been warning that Latinos were getting bad loans. It should not be a revelation, but it has taken families being taken out of their homes to shed light on this issue."These groups do sorta get it. The bad loans are where the problem starts.Its just too bad that they can't simply say the main problem now is excessive prices and that they (and we) need to prevent this scenario from happening again with stronger lending regulations and better tax laws.I'm quite happy to see the lenders get kicked around in the media.
April 9th, 2007 at 4:48 am
"Double your investment in less than 6 month." Wow, 2 bedrooms in Vancouver will be going for $1.29MM in six months! Buy now!$645000 Pre Completion Special / amazing value——————————————————————————–Reply to: hous-308309976@craigslist.orgDate: 2007-04-08, 3:58PM PDTThe modern and elegant 03 unit at Elan with fantastic ocean view. Quality built, this 2 bedroom & den comes with stainless steel appliances & hardwood floors, floor to ceiling windows which covers almost half of the building toward ocean. Lowest price view unit in Yaletown. Completion September 2007 Double your investment in less than 6 month.
April 9th, 2007 at 12:49 am
Anecdote #1:Met a construction trades recruiter last month whose company is building several major condo projects locally. His exact words "If they show up 3 days in a row they're hired full time….we're not in a position to get choosy".Anecdote #2:On Friday night, 7 local 30-somethings with solid household incomes (read: 120K+) out for drinks. All but 1 are leaving Vancouver in the next 8-12 months for greener pastures. All but 1 have a "wall of money" saved to bring elsewhere where it will undoubedtly buy them more. The lone soul staying behind (without a penny in the bank) heavily mortgaged a dirty, festering 2 bedroom condo in East Van last summer….he's a "real estate believer". His exact works to the other 6 who are running for the exits "You just have to get into the market somewhere – it never goes down." Delusion is a powerful thing.
April 8th, 2007 at 10:00 pm
"Since prices are set by marginal pressures, once this exodus from Hotel Ma & Pa is complete, prices could take a sh*tkicking."Agreed. I argue Exodus is occurring now in greater numbers than say 5 years ago, as evidenced by the high school population hump that has recently crested. So the increased building rate is likely partially absorbed. Prices pressures downwards will be exacerbated once Exodus starts waning. It is also unclear if Exodus and net migration are balancing with the building rate. I agree with markx that unemployment will impede people paying rent when there are "free" rooms available back home.I think SFHs are becoming severely underutilised so yes there is a severe problem looming. I have not yet seen hard data on condo occupancy rates to know there is a looming supply spike on the immediate horizon. I will reserve determination until I see something concrete (so to speak).
April 8th, 2007 at 9:54 pm
Mold: A hell of a lot I'm sure and there arealot more jobs available. The two listingsI picked were not cherry picked just 2expensive 2 bedroom condos close tobig parks near downtown. Not reallymy price range just for interest sakelooking at apples and oranges.
April 8th, 2007 at 9:30 pm
folhaseca: Yeah, but whats the income difference between Wall St and Howe St?
April 8th, 2007 at 8:47 pm
Idiots want foreclosure moratorium: <a href="http://tinyurl.com/2dpldahttp://tinyurl.com/2dplda<br />(in US)
April 8th, 2007 at 4:57 pm
On the topic of peak demand, it is a bit disconcerting that a very long term asset intended for long term consumption is priced on short term supply/demand imbalance.If it was a smoking hot day in the desert, and the only seller of water asked obscene prices, I'd pay them, albeit grudgingly.However, if I was buying a big screen TV for the Superbowl and shortage of demand doubled prices, I'd hold off. The benefit of having the TV for one game does not justify overpaying. I will simply wait a week or two and buy it half price.It is even more true for real estate. Does needing a house NOW justify paying twice the price? Maybe for some it will, but for the most part I doubt it. So why do people pay it? Because they don't see it that way. The rising prices are extrapolated forward, so they see it as necessary expense at best, or great investment at worst. That is the cause of the paradox. Prices have detached from fundamentals. That needs to be questioned. I have provided a model as to how such mispricings can occur, and also how and why it will undo itself. The counterarguments seem vague and cliched.
April 8th, 2007 at 4:36 pm
I've been watching Queensborough townhouses for several months now. The 25 units of the final phase of Eagle Crest Estates have been on the market for over 4 months and not one has sold. Now many have been reduced by 20K. In total, there are 39 Queensborough townhouses on the MLS, and I predict many more added over the Spring with very few selling.
April 8th, 2007 at 3:50 pm
"I think you're right, and we're now overbuilding to deal with this peak demand."That is exactly how it should be viewed. It is about peak demand. We have many things which we can supply, from a total demand perspective but get caught in peak demand periods. An example is of course electricity. Sometimes it can be solved by regulation (alternate day lawn watering), sometimes by marginal pricing (peak vacation prices). I think we simply got caught in a short term demand squeeze that osciallated out of control. Even if the past demand does not undo itself, prices will.
April 8th, 2007 at 3:28 pm
FWIW, I've never seen a house with exposed "particle board". Particle board, or other fibreboard panels would be wholly unsuitable for use as sheathing.On the other hand, I've seen many many many places built with OSB (Oriented Stranded Board). OSB is a good, reasonably water-resistant building material.IMHO, OSB is at least as good as low-grade plywood, as it has relatively few cavities that can trap and hold water for a long period of time.
April 8th, 2007 at 2:43 pm
"I have a question for all you construction experts. I notice a lot of half completed houses everywhere that are essentially particle board shells."I see a lot of exposed plywood while SFHs are being built, but never particle board. It doesn't instill me with a lot of confidence, but nothing being built these days does. Give me something that's built during a real estate slump, when only the best builders are working. Now your place is being built by guys from labour ready… yikes!
April 8th, 2007 at 2:40 pm
In either case, this rush is what swamped the limited supply and sent prices to the moon.I think you're right, and we're now overbuilding to deal with this peak demand. Thousands of new condos being completed this year and our sales are already way down year over year while listings are up.
April 8th, 2007 at 1:53 pm
"They are more likely to be justified by junior finding a job, therefore affording to move out of the house. Thus, demand is a function of employment."I would add two other factors which interplay:1. Fear of being priced out. Parents fear that junior soon will never afford, so they motivate and assist him to buy now so that he can get on the proverbial property ladder.2. Social pressure. Those who are not influenced by employment and rush to get on the ladder may do so out of desire to fit in with their peer group. I also think that the 20 something couples (or even singles) who already flew the coup rushed from owned or rented apartments or shared housing to townhomes. Similarly, slightly further along in the family department rushed from townhome to SFH, and so on. Part of this must be tradeup, the other must be intergenerational wealth transfer. In either case, this rush is what swamped the limited supply and sent prices to the moon.
April 8th, 2007 at 1:23 pm
"Scary as it might seem to bears, part of the demand for housing could be justified insofar as junior wants to be out of the house."They are more likely to be justified by junior finding a job, therefore affording to move out of the house. Thus, demand is a function of employment. A bigger demand of rental might be immigrants cramped into basement suites. They are willing to pay more for housing if their wage is going up and their job seem secure. Again, supply is inelastic. Ten years of underdevelopment (most of 90's and early 2000's) in both housing and infrastructure does cause housing shortage at today's employement level. However, we'll see how the rental front does once enough housing gets completed. The real test will come at the completion of Canada Line, as a fair amount of condos around the stations are expected to complete around the same time. We'll see how that impacts the rent around existing skytrain stations.
April 8th, 2007 at 1:01 pm
"I noticed that the townhomes going up in Queensborough seem to have done just that for months. Can't be good."Freako, those are the ones I am thinking about as well. I see them when I drive from Delta to New West. They have been getting soaked for months now.
April 8th, 2007 at 12:54 pm
"I have a question for all you construction experts. I notice a lot of half completed houses everywhere that are essentially particle board shells."I noticed that the townhomes going up in Queensborough seem to have done just that for months. Can't be good."Scary as it might seem to bears, part of the demand for housing could be justified insofar as junior wants to be out of the house."Makes sense. BUT: If this did not happen in an orderly fashion, this cohort TEMPORARILY swamped inelastic supply. Since prices are set by marginal pressures, once this exodus from Hotel Ma & Pa is complete, prices could take a sh*tkicking.
April 8th, 2007 at 12:53 pm
I am pretty sure it is particle board and not plywood that these shells are made of. I have seen some that have been exposed for the last 3 months or so and must be absolutely soaked from all the rain. I would never buy one. I can't see mold not being a problem in the future.
April 8th, 2007 at 12:39 pm
"Can someone tell me why the particle board will not rot in the future?"For plywood, short-term exposure (several months) is OK as long as the ventilation after finishing is acceptable. If plywood sits in a permanently wet environment, mold will set in.For particle board/drywall I don't know for sure but I doubt they should be exposed to significant moisture. Likely if they can be properly dried and ventilated they should be OK for limited water exposure.