Friday Free-for-all
Here’s your open-topic post for Friday June 22nd:
-Genworth predicts ‘relief’ for buyers, offers mortgages.
-A rant against ‘eco-density’ in the Province.
-Is Edmonton’s red-hot market melting?
-Sub-prime collapse may kill a bear.
What are you seeing out there? Post your news, links and anecdotes here.
UPDATE: I thought this link from Reductimat was worth highlighting:
-God is punishing Florida Realtors.
(No Ratings Yet)
Loading ...
June 21st, 2007 at 10:10 pm
From Edmonton (thanks to albertabubble.blogspot.com), a CBC news story quoting the Edmonton Real Estate Board saying that average house price has dropped from $426k to $412k in only 3 weeks.
squidly77 on that blog prepared a stat showing that there is one home for sale per 30 families in Calgary, and one home for sale per 24 families in Edmonton.
another blogger quoted Bob Truman (the stats-oriented realtor) as saying that 34% of Calgary condos on MLS are vacant, and that 23% of houses on MLS are vacant.
It’s getting interesting. We’re moving there and have found rental supply increasing over the past month in areas where we want to live.
June 22nd, 2007 at 7:16 am
Good luck with your move wg2c, may you find lots of supply with insufficient demand.
June 22nd, 2007 at 7:23 am
If their prediction turns out to be true, NOW would be the worst time to buy - I can get that return in cash, and the price difference between renting and buying right now would mean I lose TONS of oppourtunity cost. You could gather a much larger down payment and be way ahead in the next four years with a much lower cost of living and more flexibility.
Maybe some people just feel they NEED to buy?
June 22nd, 2007 at 7:32 am
It’s being followed in many cities in US where the population is not large enough to warrant NYC or SF style high-rises, but city planners don’t want to pay for new schools, as well as all the political headache that come with parents. (”It’s for OUR CHILDREN.” tend to be a pain in the butt for politicians.) Thus the new phenomenon of High Rise, Low Density.
June 22nd, 2007 at 8:45 am
June 22nd, 2007 at 8:57 am
The Edmonton development is significant because it at least indicates stabilization and inventory is growing quickly. This after steadily rising values causing prices to basically DOUBLE in TWO YEARS. I thought Vancouver would go first.
June 22nd, 2007 at 8:57 am
June 22nd, 2007 at 9:08 am
“After a robust decade, the vital softwood lumber industry may be a turning point with sawn lumber production down almost nine per cent in the last year and weaker softwood lumber prices.”
June 22nd, 2007 at 9:09 am
Then the question is, without zoning restrictions, what types of buildings would builders build?
Ironic that the Vancouver School Board is having to build schools in areas like Yaletown and Coal Harbour because families end up in condos in these areas due to SFH unaffordability. The Board and their advisors never saw it coming; now they have to close schools in one part of the city and build brand new ones elsewhere.
There was a discussion in Port Moody about schooling for condos, where the board is not anticipating the need for new schools in areas with high density like Newport Village but are likely closing other older schools only 1-2 miles away!
June 22nd, 2007 at 9:16 am
True enough, except it’s almost 6% in three weeks, which is exceptional in magnitude for noise in recent Alberta RE. It’s also associated with a rapid runup in inventory, which seems to be getting some local press as well.
More importantly for me, I see psychology is being a huge price determinant. The Edmonton Real Estate Board said it. The CBC reported it. In the public’s mind, this makes it credible, and it may encourage a few more amateur investors to head for the exits. Subsequent chain reaction? Maybe, maybe not.
I didn’t verify the houses per family stats put forth by another blogger, but the “one house per 24 families in Edmonton” number is stunning. The Bob Truman quote that 23% of Calgary houses on MLS are vacant means there are roughly (.23 x 7000) = 1400 vacant homes in Calgary. If that starts to seep in to rental supply, then the staggering and debilitating rental increases that have characterised Calgary in recent years will come to an end.
A few examples of this: (a) A friend’s sister had her rent (high-end community, modern home, 2-car garage) raised from $900 to $1200 this month because the landlord (her friend) decided he couldn’t in his heart ask her for market value (about $1600 to $1800). (b) We offered to rent a 2000 sq.ft. plus house in the same community for $1850, $100 less than the asking price of $1950. During negotiations it accidentally spilled out that the existing tenants, who’ve been there less than a year, are paying $1500. Big increases!
June 22nd, 2007 at 9:21 am
Demand for lumber for the U.S. housing market has disappeared, because the U.S. housing market is falling into a great abyss. When U.S. demand for lumber returns, American builders will likely turn to Russian and Finnish lumber providers. I suspect we can’t compete with the Russians who have big forests and who would appear to be indifferent to environmental issues. I doubt that the B.C. lumber industry will return to its glory days for many, many, many years.
June 22nd, 2007 at 9:24 am
Sorry, I mixed up some numbers, taking the SFH vacancy rate x the total inventory including condos. Let’s say the avge vacancy rate is about (34+24)/2 = 29%. So that makes about (.29 x 7000 = ) 2000 houses or condos sitting vacant.
June 22nd, 2007 at 9:56 am
June 22nd, 2007 at 10:04 am
Without zoning restrictions, developers will build as dense as they can, as cheaply as they can, subject to building code. The competition drives prices down, and market end up with mid-rise, “view blocking” apartment blocks that are decent sized in floor size, relatively low in green space, and fairly affordable. Such areas generally attract lower income, working class families, which is not trendy at all. Also, places big enough for families with teenagers, and cheap enough for working class families, generally end up with more bad new, as any trouble teens get into generally gets headline news.
Problem is, when every municipality starts building vasectomy housing, do people actually start getting vasectomies? That’s a million dollar question. It would be interesting to see how Yaletown and Coal Harbour fares once all the toddlers turn into teenagers and start getting into usual teenager problems.
June 22nd, 2007 at 10:06 am
True enough, except it’s almost 6% in three weeks, which is exceptional in magnitude for noise in recent Alberta RE. It’s also associated with a rapid runup in inventory, which seems to be getting some local press as well.
It’s 3.5%. Not that it matters too much…
We need to wait a couple more weeks to see where this is going….
June 22nd, 2007 at 10:09 am
Well, this is a real estate town, as spinners for Capitol Residence called it. We don’t need to sell trees, as money grows out of our condos faster than it could ever grow on trees.
June 22nd, 2007 at 10:58 am
If just one/two years ago she had a problem finding normal tenants at 630/650 for 1 bedroom apartments and 750 for 2 bedrooms, now all the apartments are rented out and she is renting out one bedroom apartments for $700 and two bedroom for $800 to $850.
This is by far not the best area of Maple Ridge.
The apartments are old, a lot of them have smell from the previous tenants who smoked. You get absolutely no frills: cheap carpets, cheap white paint on the walls, common washer and dryer, plus a lot of weird tenants. I’m not sure if I would live there even if someone paid me for it.
The inflation is probably somewhat higher then what the stats are saying. An average family income, from what I see, is much higher then $60-$65k reported by the stats.
I’m not saying that real estate is not overpriced. It is. But I’m saying I wouldn’t expect a huge drop in prices, just a correction. Rents are rising.
June 22nd, 2007 at 11:22 am
The inflation is probably somewhat higher then what the stats are saying. An average family income, from what I see, is much higher then $60-$65k reported by the stats.
I’m not saying that real estate is not overpriced. It is. But I’m saying I wouldn’t expect a huge drop in prices, just a correction. Rents are rising.
Thanks for the anecdotal stats. One question comes to mind regarding that landlord.. if we are seeing such a slowing of immigration, why are these places being snapped up at increased prices? Its puzzling when the stats don’t mix with what we see out there. Does anyone believe there are thousands of empty dwellers out there?
I also agree with the 60-65k figure. Unless there are a lot of single-parent families out there, the number seems a little low.
Remember rent raises are slowed by the RTOs guidelines on increases if the same tenants continue to rent there.
June 22nd, 2007 at 12:08 pm
The mere fact that the market has defied all wisdom based on fundamentals over the last 3 years, only serves to make it more irrational and more vulnarable to a bigger crash than before.
Without elaborating on the growing list of fundamentals like unaffordability, diverging currencies, reduced immigration, the aging populaton, jittery stock markets and the threat of a slowing economy, it could take a single catalyst or a series events like rising rates or increased RE turmoil in the US to drive us closer to the cliff.
I remain convinced that the biggest threat to our market will turn out to be the unravelling of the subprime mortgage fiasco down south, as the worst is still to come.
Under most US jurisdictions, foreclosure is commenced when a loan becomes 3 months delinquent by the holder of a mortgage by appointing a trustee to record a notice of default. The borrower then has 3 months to reinstate, at the conclusion of which a sale date is set. The sale then needs to be publicised for some minimum duration, before marketing or auction can proceed. Even without counter charges or delaying tactics by the victim, it would take at least 7 or 8 months for conclusion of the process.
The real shockwaves will hit after the stats are reported (another month later) by the monthly US housing report. Foreclosures can only increase and feed the momentum when it becomes pointless to hold onto property where debt continues to grow with rising rates, and equity continues to declie for the same reasons.
I can’t see any miracles on the horizon to fix the problem that has the potential to drag us into the biggest RE crash ever.
June 22nd, 2007 at 12:10 pm
This is gold Jerry, gold.
June 22nd, 2007 at 12:19 pm
Jesse, I fixed the typo’s.
June 22nd, 2007 at 12:36 pm
typo’s? The typo’s what? What belongs to the typo that you fixed?
If you’re going to be snooty about other people’s English at least make sure you’re not an equal offender.
June 22nd, 2007 at 12:43 pm
I work for VFX industry and we do have more people coming from States, UK and Japan. A couple of vfx studios from States created secondary offices here in Vancouver subcontracting work from LA.
June 22nd, 2007 at 12:53 pm
I’m being snooty because I’ve been down this path before many times here.
People have an amazingly hard time understanding that there are families that actually want to live in Yaletown or Coal Harbour.
Reason didn’t work the first time. Granted, I may have mixed up the order, but I was certain snootiness was the course de rigueur the second time around.
June 22nd, 2007 at 1:21 pm
“typo’s” = Objects belonging to typo
typos are keyboard-finger-brain malfunction artifacts.
Random apostrophes bother me.
June 22nd, 2007 at 2:34 pm
Machoslob: What portion of the public? Unfortunately its probably the majority
June 22nd, 2007 at 4:03 pm
Well, to a complete outsider, who do they believe when they see total opposite views: a real estate blog filled with essentially anonymous commentors, or the Vancouver Sun?
June 22nd, 2007 at 4:45 pm
During the short term, some landlord tried to pass on the expense to the renters by increasing the rent. But if you look again, the price of rent is coming back down. It’s pretty much the same as it was two years ago. My rent hasn’t increase and I could still find similar location for the same price. Rent is driven mainly by the demand curve. If landlord tries to force price increase when the labour market doesn’t justify it, people will just move to a smaller place or share accomodations or move to another city. Unlike the demand for owning real estate, renting has no gain speculation component. The benefit is short term. So if renters can’t afford it, they will move. So for any landlords who are trying to pass on the high cost to their tenants, good luck. You might be able to find a sucker short term, but they are just going to move out shortly.
The prior posting stated that Vancouver downtown is the most expensive RE per sq ft in North America and ranked 4th in the world. But if you take the same equation and compare that to average income after tax. Vancouver downtown is the most expensive in the world. THE MOST EXPENSIVE!!!!
In 2002, real estate was overpriced. Now, it’s just insane. I’ve sold my place and now renting. I know the real estate market is turning. Why? Because the biased people (realitors, Real Estate Board, and CMHC) are all revising their outlook downwards.
I am so certain the market is going to crash. But just for argument purposes, unless a homebuyer has significant down payment (50% or more) why would anybody buy now. People that are totally biased are saying the market is going to grow at approx 5%. And how much does it cost for you to borrow? And how much equity have you gained? Absolutely nothing!!!!! You borrow at 6% to 7% to gain 5%. If you lock in your mortgage, you will lose about 2% per year. If you keep it variable, you take on the risk of losing anywhere from 1% to 4%. And that is under the assumption that the market will increase 5% annually. But it’s going to crash! So you’ll lose more than your shirt.
It makes no sense to buy. Pretty much a good rule of thumb is the total cost of owning with a 10% down payment should equal to the cost of rent. I didn’t miss the boat. I sold when the market is good. So I’m not an angry renter. I just think some people are insane.
I seen a posting where someone said Real Estate is the safest investment. This person should qualify that. For those who do not outright own the place, with no mortgage, Real Estate is the most risky investment. (Other than short selling at the stock market or Derivatives) REAL ESTATE IS THE MOST RISKY!!!!!
Why? Because you can lose up to 20 times what you’ve invested. If you bought a place for 1 million dollars with a $50K down payment, you are in $950K debt. If for some reason your place became zero value, you just lost 20 times what you’ve invested. Now, this is not likely going to happen. But the market could easily dip 15% to 20%. This is not only very likely, but is going to happen. In this situation, you owe $950K but your house is only worth $800K. You just lost $200K or 4 times what you’ve invested. Is that not risky? Edmonton just dropped 6% in three weeks. Even if the market only dropped 6%, you’ve lost more than your equity. And there is Real Estate Agent fee. That is very risky.
Unless you get into funky derivative or margins, the stock market is alot less risky. If you buy shares in a Blue Chip company, it is impossible for you to lose 4 times what you’ve invested if you didn’t go on margin. Even if you were on margin, the broker should do a margin call well before you lose 4 times your investment.
Conclusion:
Real Estate is very risky. Real Estate is not liquid. I believe the current averge days to sell is past 30 days now. There is high transaction cost. It will pretty much cost $12K to sell an average home. Historically, over the long run, the stock market out performs the Real Estate market. There are many other risk to owning real estate. Earthquake or other natural disaster risk. Should you buy the insurance or should you not. The premiums are crazy. Normal home insurance doesn’t cover natural disaster. There is the risk of significant repairs. Anybody looked into how much it cost to fix a roof? There is risk of buying a home with mold, leaks and infestation. There’s the risk of losing your job and forced into a foreclosure. There is a risk of lien placed on the property after you’ve purchased it. Contractors have up to 45 days to file a lien. The list goes on and on. Does that mean people shouldn’t buy Real Estate? No. Of course you should buy Real Estate. But only and only when it makes cashflow sense to do so. Right now, it makes no sense.
For those who are speculating or considering to sell, SELL NOW!!!! Take whatever you can. Don’t try to make a gain. Don’t try to cover your cost. When the market turns, it’s too late.
June 22nd, 2007 at 5:39 pm
Good thing you don’t have editing rights to the posts
Many families, given the choice between Langley SFH and downtown condo, will take the latter. Living in the burbs for many is not a reasonable option so they are priced out of SFH, from a certain point of view.
June 22nd, 2007 at 6:19 pm
“The Real Estate Prayer Luncheon was organized in hopes of breathing life and positive thinking into the area’s slumping housing market.”
This is funnier n’ folk. Talk about real estate being a bona fide religion.
Kinda sad, in a way.
June 22nd, 2007 at 6:49 pm
If you’re going to be snooty about other people’s English at least make sure you’re not an equal offender.”
I can’t not be pedantic.
Apostrophes not only indicate possession, they also indicate contraction - as in can’t, won’t, gov’ment, etc. Typo’s, to me, indicates a contraction of typographical errors.
June 22nd, 2007 at 6:54 pm
This is a link to another article on most liveable cities. Vancouver does not fair as well, Vancouver’s population is listed at 2 million. I find it interesting this confusion between Greater Vancouver and Vancouver proper which is not that large of a city, and I suspect it is neither the economic centre of the region and to a lesser extent the cultural centre of the region.
June 22nd, 2007 at 7:13 pm
The US companies are opening secondary offices here to take advantage of our canadian Labor tax credit, where they get a kickback for hiring Canadian employees and such. So most of the people working in those offices are already Canadian and the VFX producers that run the offices probably from what I’ve seen aren’t buying here.
June 22nd, 2007 at 7:44 pm
Aren’t I a ray of sunshine today?
June 22nd, 2007 at 8:16 pm
Typo’s, to me, indicates a contraction of typographical errors.
Shouldn’t it rather be typ’ical errors?
June 22nd, 2007 at 8:29 pm
June 22nd, 2007 at 8:30 pm
June 22nd, 2007 at 8:37 pm
For some reason my links ar messed up.
June 23rd, 2007 at 3:47 am
I think its 75% of Canadians, which includes other parts of Canada as well: Montreal, Toronto.
…and some of them did buy…
Patiently Waiting
well, the government did promise 3000 units of affordable housing before Olympics.
but.. yeah.. this might be a hell of a ride.
June 23rd, 2007 at 9:09 am
One would think that anyone can find out by reading through the financial reports from the big banks, but since I’m no accountant, they all look like Greek to me
June 23rd, 2007 at 9:19 am
50% decline is excessive… I am calling for 20-30%. This could change negative cash flow to break even depending on how high mortgage rates go from here.
5% gain if possible would actually be amazing on most 2-bedroom condos. Even a 1-2% gain could allow break even cash flow. However, I agree with you that the decline from here is going to be significant so buying would be wrong.
June 23rd, 2007 at 10:04 am
K financial,Wg2c
good try and attack of discouragement,try again later.while you were writing your comments affordability eroded what did you do,see here.
first of all homelessness province have to spend $80 millions to buy homes for.
city bought drake hotel for 3.2 million construction will commence soon.
BC salesup 17.5%
average 454.945 14% up
monthly carring cost 114.400
21.150 more than begining of year
back to Kfinancial and wg2calgary…….
June 23rd, 2007 at 10:22 am
Thanks for a rear view mirror report. But looking at the rear view may keep you from seeing cliff up ahead.
(but you are in the business, you kwow right well many people are going to get hurt, how do you sleep at night?)
Tick Tock, Tick Tock
June 23rd, 2007 at 10:23 am
Oh yeah? Right now prices are 300x rent and up. A 30% decline gets us to 210x rent. That’s a gross yield of 5.6%. NFW is that cash flow break even unless rates go down to 4% or so.
In 1984 prices went all the way down to 100x rent, granted with higher interest rates. With 6% rates break even is around 150x rent.
June 23rd, 2007 at 11:19 am
‘Believe’ indicates faith - Thinking critically about what you are reading and where its coming from is more important to me. I don’t think there’s any more accuracy on a blog than in the Vancouver Sun, but I do like to see a variety of points of view.
When did basic math become too tricky to involve in real estate only to be replaced by glowing verbage about ‘lifestyle’ and unwavering faith in constant price increases?
June 23rd, 2007 at 12:48 pm
Oh no doubt. I try to explain things to my friends and family in terms of rental rates vs. sale prices, but I get a lot of blank looks, and a lot of “well rents are going up too”. Ok, whatever you say…
June 23rd, 2007 at 2:57 pm
K financial,Wg2c
good try and attack of discouragement,try again later.while you were writing your comments affordability eroded what did you do,see here.
first of all homelessness province have to spend $80 millions to buy homes for.
city bought drake hotel for 3.2 million construction will commence soon.
BC salesup 17.5%
average 454.945 14% up
monthly carring cost 114.400
21.150 more than begining of year
back to Kfinancial and wg2calgary…….
My dream is far from over. I’ve got my reward already buddy. You wanna pay so much for real estate, take it. I sold my place for a pretty good gain. Thanks to people like you SATV. Guess what, my parents are selling their place too. You wanna buy it? It’s just simply economics. And do you know how the homeless issue is going to drive the market? DOWN!!!!! Why? Because the government is going to buy and build more homes for them. That takes away the stress on the demand curve, hello!!!!!! This will also lower the demand on the rent. Thus producing more negative cashflow for those real estate investors. You like it or not. The market is going to crash!!!
Originally, I had a mortgage on my place. But when the market crash, I’m gonna have a paid off place, sweet!!!!
Some the people that bought high is gonna have a huge mortgage with negative equity. That must be fun!!!!
And SATV, going up, Whatever!!! Even if it does, like I said, by how much? Borrow at 7% to gain 5% does not make sense. Nice and simple. Even if the market is going to gain 8% year over year, you not gaining anything. The Agent is going to eat away any gain made.
I totally agree with Wg2c. I don’t beleive 50% is excessive at all. Just simply do a cashflow analysis. 50% drop is not even the break even point yet. The bubble is form by speculation. Once speculation is gone, it’s back to basics. In fact, it will shoot downwards past equilbrium point. Markets tend to overshoot, both upward and downward.
In addition, developers have built way too many homes. BC’s net migration is not very high. It barely covers our natural shift in demographics.
June 23rd, 2007 at 7:38 pm
June 23rd, 2007 at 7:50 pm
digi said - maybe everyone’s out enjoying the weather?
Yeah, and they don’t know what to do with their umbrellas as they hurry by.
June 23rd, 2007 at 7:51 pm
June 23rd, 2007 at 7:53 pm
7% up 7% mortgage isn’t some one living free of rent and free of mortgage,and property is your to tell.
who needs migration and immigration when you can manage your property by staying back where ever you are.
axl rose,pavel bure never lived in that 5-7 m condo which is selling for 18 m.
g2c I am not a realtor.
kfinancial you have sold your prop. in speculation also now you recomend crash.
what about buying your place back if you were holding a single property who cares if that goes up or down that was your place to live.
June 23rd, 2007 at 8:21 pm
“Wg2c, good try and attack of discouragement”
huh? what attack? what discouragement? this seems an emotional response.
“g2c I am not a realtor.”
ok, i hadn’t entertained serious thoughts that you might be. come to think of it, it would never occur to me in a million years that you were a realtor. i just didn’t consider it. at one time i asked along the lines of what you found interesting in life. i was curious if there was anything other than RE or money that caught your attention. did i ever tease you about being a realtor? don’t think so, if i did it was just a tease. You know, like “that is s-o-o-o 1990s” or “you sound like a realtor.”
p.s. insightful shortening of wg2c to g2c!
your comments on the other hand are more inciteful than insightful. i’m just teasing
June 23rd, 2007 at 8:33 pm
so i have decided to buy around boxing day if that can come down few bucks or will keep on checking graiglist.
June 23rd, 2007 at 8:53 pm
—————
This is good example of wisdom, to make plans using brain.
Foolish man is like those who wait that a rabbit will collide with tree and be killed so that they can catch it. No plans made with brain, only wait with hoping (for thing that is hopping). For RE this means crash like rabbit but no happy ending.
June 23rd, 2007 at 9:03 pm
Just when i give up on you, you show good sense. I think this year will be a repeat of last year, where (in the U.S. at least) it was only the big ticket door-crasher items (like the big TVs) that were selling early in the shopping season. The way the U.S. economy is going, I expect that this year’s door-crashers will have even greater discounts. I don’t think you’ll have to wait until boxing day though. Probably November or a bit later, which is only a few months away.
So if you understand about the big-ticket TVs, can’t you see that house prices are going to follow the same model?
June 23rd, 2007 at 9:30 pm
property get appriciation,even leaky condo has been sold on dub,trip.
June 23rd, 2007 at 10:13 pm
One of the opens had 2 other Realtors that were selling in the same building… all 3 of us had advertised our open houses… in Yaletown… and no one came.
We are expecting the market to go silent from here… and the free fall in prices to start in September.
I hope to be ahead of the curve with my clients so that I can get them out of the market before it gets really ugly.
Christmas is going to be a really sad time for sellers who are stuck holding properties that they need to unload. But on the bright side… they should still make a killing compared to what they paid. I just hope they listen to me and get out before the herd. I expect by January everyone will be heading for the exits.
June 23rd, 2007 at 10:20 pm
I thought pricing and the US situation would kill the market… but looks like rates are going to do it.
June 24th, 2007 at 4:50 am
where city planners force developers to build extremely expensive housing in not so dense areas. The townhouse at bottom, tall condo on top design actually don’t have a very high Floor-to-Space Ratio (FSR), but rather pushes up construction prices artificially as cost skyrockets with each additional floor.
It’s developers who push these plans, not city planners.
Increasing a tower’s height is nearly free (you just have to jack the crane up another story) but it means a lot of profit… at $5,000/unit increase/floor, adding 4 floors with no change in floor space may result in $400,000 instant profit.
This is precisely what happened in one of Peter Wall’s buildings: he got the planning dep’t to approve an extra 4 floors which pissed some people off as it interfered with a sight line.
June 24th, 2007 at 7:40 am
“I hope to be ahead of the curve with my clients so that I can get them out of the market before it gets really ugly.”
That of course implies a victim, how do you feel about that?
Also, you seem to be an intelligent person, why don’t you consider another career?
After all, even if one is not religious, there is something to think about with reference to:
“For what has a man gained, if he gains the world, but looses his soulâ€