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.
June 28th, 2007 at 11:39 am
Jim: Sounds like you’ll be fine even if our market corrects a bunch, First time buyers have more to lose in that situation, or at least less of a buffer to weather the loss.
Not sure if you’re serious or not, but I think the blog is a great idea. I’d read it.
The pro’s and con’s of living in a reno sounds like it would provide some interesting material. If you don’t feel like running a full blog I’d be happy to publish occasional updates from you here.
June 28th, 2007 at 8:54 am
Freako:In 1982 I was 25,so I was in party mode, although I did own a house in Richmond on St. Albans. Bought for $41k 1979 sold for $58k in 1983.
Rentah: my c.o.c. is a low 4.5% and I will live in it while I reno, as it has 2 kitchens and 5 bedrooms. Our kids just left.
Your numbers are close(bit high) but if the market corrects I will be into it for $144m -its today comp is 1.5 to 1.6 post reno. If the market corrects by less than 9% in 6 months I am still ok. I will also happily live in it since the reno will be pretty swish. Not sure what you mean by “transfer cost”? Legal is $600, tax is $23k, I get afairly good discount on RE commish, ?
I was thinking of putting up my own blog: “I bought at the top!”
digi: I can do a home inspection if needed. I am a sales exec with a local firm and my wife is an exec. Our family income supports these investments.
I am bearish-which is why I divested of some property in Calgary,and Dunbar. I bought recently in the Gulf Islands and this house is a fairly big step down for us so I feel ok.
How do you like my bog idea? Or how about “Over My Head Reno”?
June 26th, 2007 at 8:38 am
Jim, I thought you had said previously that you worked as a house inspector – does that really bring in enough to pay 5k a month on rent, or am I mistaken about your vocation?
June 25th, 2007 at 11:26 pm
jim:
I rent on the westside.
Last house was at 1:533 rent/price ratio.
Current house 1:400.
You figures work out to 1:273, so your rent comparison figure may be higher than current market rents.
Regardless, you’re talking about being into this house for:
1300K purchase,
plus 120K (renos),
plus carrying for a year (say 80K),
plus transfer fees
plus agent’s fees (?)
plus property taxes
minus rent if you’re actually crazy enough to live there through the renos.
So this house will have cost you more than 1500K by the point of next sale, and you say that the current comps are going for about that.
This isn’t just a lot of work, it’s also a large bet on market direction.
June 25th, 2007 at 8:27 pm
I was paying $4750 in rent plus utilities for a comparable house. My basement suite rents for $1200.00. I will general contract the renos myself.
Just curious Jim, how did 1982 treat you?
June 25th, 2007 at 8:10 pm
rentah:
I was paying $4750 in rent plus utilities for a comparable house. My basement suite rents for $1200.00. I will general contract the renos myself.
June 25th, 2007 at 8:01 pm
The more of the low life bastards get caught with neg cash flow little boxes,when the bubble bursts, the better.
No I won’t shed a tear.
That’s what I love about your posts, Tulip. You’re such a ray of sunshine.
I, on the other hand, don’t harbour such fine sentiments. When I see my old neighbourhood degenerate into the debacle of a twin 30-odd story towers ‘Silhouette’ lifestyle, I can only hope that the developer has his nads crushed. Twice.
But, I’m kind of old-fashioned, in a way.
June 25th, 2007 at 4:02 pm
patriotz said…
“ Tulip, if you owned Nortel in, say, June 2000 and decided to sell because you thought it would tank, would you feel guilty?â€
No guilt whatsoever.
I see Nortel speculative shares, and residential Re as two distinct things.
I won’t sugar coat my feelings on this.
If Jeff could assure me that he was selling to speculators, I would gladly give him a hand at marketing to them.
The more of the low life bastards get caught with neg cash flow little boxes,when the bubble bursts, the better.
No I won’t shed a tear.
June 25th, 2007 at 4:00 pm
Just looked it up how long it took to
build the Empire State building.
Quite impressive time-wise they must
have saved time by not installing the
granite countertops.
June 25th, 2007 at 3:51 pm
“Freako: I had always thought that construction cost increases exponentially with height, as the weight of each additional floor need to be supported by every floor underneath, and supported by the foundation.”
I am no expert, but from what I gather it is cheap to add floors within an existing design. If a given design can go up to say 40, and you manage to get zoning for 35 instead of 32, the extra three floors come at low marginal cost.
However, if you wanted say 45 floors, you’d have to go to a more expensive design with the additional support you mention. A bit of a duality. Overall, the greater the height, the greater the marginal cost.
I don’t think marginal cost will ever decrease for the support/evelator issues mentioned, but I am wondering if new technology will dramatically reduce total cost. Construction technology has advanced dramatically, but yet costs per sq foot have outpaced inflation.
Some trivia (I think most know the answer):
How long did it take to build the 102 stories of the Empire State Building (completed 1931)?
The answer must surely annoy those are a year plus behind schedule on their DT condo.
June 25th, 2007 at 2:14 pm
“Hard as it may be to belive but with the basement suite rented its break even versus renting the similar house.”
This is possible but depends upon the size of your mortgage.
June 25th, 2007 at 12:36 pm
That of course implies a victim, how do you feel about that?
Hey Tulip, if you owned Nortel in, say, June 2000 and decided to sell because you thought it would tank, would you feel guilty?
And I seem to recall Freako saying he shorted a lot of tech stocks around them. Are you going to rag on him too?
Or if you owned a mutual fund would you want the manager to sell a stock that he thought was overpriced? That’s what you’re paying him for, isn’t it?
Don’t ever forget RE agents work for the seller, not the buyer. An RE agent has no obligation to the buyer except to accurately represent the property for sale. It’s up to the buyer to decide what price is worth paying.
June 25th, 2007 at 12:28 pm
Another presale dispute, now in New West,Group of presale buyers have been told their contracts are void
June 25th, 2007 at 11:27 am
SATV is a strange person.
I am here to report what I am seeing.
June 25th, 2007 at 11:24 am
Freako: I had always thought that construction cost increases exponentially with height, as the weight of each additional floor need to be supported by every floor underneath, and supported by the foundation. The current design of high rises don’t have as high FSR as equal height buildings in NYC or Tokyo, as the base of building contains townhouses and green space. Thus my belief for the conspiracy.
On a second thought, it’s possible that the increase in height brings in lower labour cost per floor, as only one foundation need to be laid. As labour in Canada now is extremely costly on a global scale, the incremental cost in construction material and equipment becomes inconsequential.
June 25th, 2007 at 10:56 am
Rents have been rising, but only sharply in the past year or two. What a coincidental mirror with Florida! The bulls were hoping for rents to skyrocket, as rental apartments were converted to condos, and bitter renters were at the brink of driven to the street. Then all of a sudden the market just crashed, forcing flippers into “accidental landlords”.
To all renters: be prepared to check the credit of your “accidental landlord”. Don’t rent a place that’s being foreclosed on.
June 25th, 2007 at 10:27 am
“…do you know the way you running your bus people don’t want to be there thats why your open house’s were flop show..”
You know, at least Jeff’s said he’s a realtor, so maybe he knows what he’s doing? And how would you know the reasons why attendance was low? You weren’t there.
You on the other hand, we’ve got no idea what the heck it is you do other take potshots all the time.
June 25th, 2007 at 7:05 am
jim said: Hard as it may be to belive but with the basement suite rented its break even versus renting the similar house.
—
jim, could you please break down the numbers? I can’t see how it’d be break even.
June 24th, 2007 at 10:22 pm
runaway realtor(jeff)
jeff you have come all the way from toronto.seems like you are such in hurry to go back,do you know the way you running your bus people don’t want to be there thats why your open house’s were flop show.even people don’t know your full name and your website address,otherwise your liecense should have been provoked so far.
current market rating(does not mean can’t buy/can’t sell)
west vancouver status(buyers market)
sales stable condition 4\10
prices in the middle little up by 6\10
vancouver westside status (sellers market)
sales up 7\10
prices up 8\10
vancouver eastside status (sellers market)
sales up 6.5\10
prices up 6.5\10
north vancouver status( sellers market)
sales up 8\10
prices up 8\10
June 24th, 2007 at 9:01 pm
jim i thought you stand by vance but you are a clever fox.
would you mind runing your own top 20 countdown here.start from 1 to 20.
June 24th, 2007 at 8:36 pm
I bought last week. But since I downsized I can still sleep at night. Bought a fixer upper in Point Grey(I love renos). Cost: just north of $1.3m. I will replace all the floors with new hardwood, new kitchen, remove some walls, gut 3 baths, paint in and out, landscape. Cost about 120k. Todays FMV for the as renovated comps are $1.5m to $1.6m. Hard as it may be to belive but with the basement suite rented its break even versus renting the similar house. However its not for the faint of heart, and this is reno number 21 for me.
June 24th, 2007 at 5:18 pm
try again wg2c
OK, let me try one more time to be helpful:
incorruptibles of some scarcity that have monetary value generally appreciate;
corruptibles of similar scarcity and of monetary value generally depreciate.
of course this is a generality, but applicable to real estate except under special circumstances (e.g., RE in resource-based towns such as Gold River and Riondel).
over long term, land will generally increase in value;
over long term, buildings on land will generally and eventually decay physically and fall down, having no value.
land appreciates,
buildings depreciate.
it’s really quite a simple and fundamental truth, and thus reflected in accounting principles.
June 24th, 2007 at 2:49 pm
“I’ve seen a graph for greater vancouver going back to the ’60s, it’s a very gentle rolling downhill slope up until the current run up.”
Sorry I didn’t make it clear. I meant per square foot of LAND. Or acre or whatever.
June 24th, 2007 at 12:57 pm
freako
“The one number I’d like to see is average rental revenue per square foot over time (in real terms) for prime downtown.”
I’ve seen a graph for greater vancouver going back to the ’60s, it’s a very gentle rolling downhill slope up until the current run up. Even so current rents are not even hitting ’80s numbers for inflation adjusted value. I think the graph was over at VHB’s so I’m not sure if I can find it again, if I do I’ll let you know.
June 24th, 2007 at 12:41 pm
“Look how well John Talbott did with his book, and how many people in the US he probably prevented from financial suicide, although his background was not in RE. “
As I have pointed out many times, reality will have to be imposed from the outside. Nobody in the industry has the incentive or knowledge to call a spade a spade. And that is one reason why things have gotten as bad as they have.
June 24th, 2007 at 12:39 pm
“Also, you seem to be an intelligent person, why don’t you consider another career?”
There are valid reasons for buying and selling real estate. There are equally valid reasons why there needs to be individuals who facilitate this. Hence, it is possible for a realtor to provde a valuable service, for which he/she is fairly remunerated. I agree that realtors may find themselves in a conflict of interest at the present time.
Personally, I think realtors should be concerned about knowledgable and involved in the minutiae details that buyers and sellers are interested in. For example, questions about construction, strata minutes, legal issues, location of schools etc etc. But I think they should shut the f**k up about where prices are going. In the aggregate at least (the realtors oft quoted research). If any individual realtor wants to flap his gums about market direction, that’s his choice. But the carefully worded “return to balanced market” misinformation that the realtors associations disseminate are complete bullsh*t. If I was a realtor, I would have to disown my own association to stay in the business.
June 24th, 2007 at 10:46 am
Drachen:
I’m inclined to think Jeff is an honest person, that’s why the plea.
Jeff:
Sounds to me you truly enjoy the “providing shelter†aspects of your job. Ever thought of using your knowledge of the RE industry to counter the “usual suspects�
Look how well John Talbott did with his book, and how many people in the US he probably prevented from financial suicide, although his background was not in RE.
June 24th, 2007 at 10:12 am
Freako
well done your comment is so refreshing.
totaly diffrent point of view to realize us the trueness of current market which is great base to predict future.
sorry short on time I like to review your comment again and again then will try to respond
good job freako hats off.
June 24th, 2007 at 9:50 am
Tulip, I actually love my career. I am probably the most honest person I know. I point out a properties features to buyers and I laugh at the current state of prices when asked my opinion. I help sellers price their properties well and in fact usually set new price records.
Lately, I have had a few listings that have gone over 60 days on market, even after reductions. I find out the sellers need to sell and let the seller decide on reducing.
As for another profession, well yes I have had several and I am easily employable. I could probably make more money in another profession but I have found all other lines of work meaningless. I enjoy RE, because it feels real and I enjoy working with people. I don’t know… do you have any ideas?
June 24th, 2007 at 9:34 am
It is not a useful truth to say “Property appreciates”. It is better and truer to say: “Land appreciates, buildings depreciate”.
only assessment value can tell you appreciation of land and building’s.
thats what we call cost of construction and matterial try again wg2c.
June 24th, 2007 at 9:30 am
“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…”
This is an interesting topic, and in the big scheme of things, developments in urban real estate economics can hold the key to future RE prices.
Historically, as you probably know, additional height came at marginally higher cost. Combine that with the fact that pre-elevator, prices dropped for each higher floor, and marginal cost met marginal revenue fairly quickly.
Now we have elevators of course. And for a given construction techology, additional floors come without increasing marginal cost (as grant points out).
Remember, one big reason for the real price increases over the past 100 years has been density increases. Going from SFH to forty story increases the density by a factor of almost 100. The million dollar question: Can that trend continue, and for how long? I don’t think it is humanly possible. At the same rate, we would hit 1600 floors by the year 2107. With current technology, elevators become a serious constraint around 100 stories. To move more people, we need more elevators, but more elevators take up more floor space. There are clever ways around it, including double decking and higher speed, but still a hard nut to crack. Then there are of course a million other issues. I would like to see the traffic jam trying to get 10,000 cars out of the underground parking at the same time. Maybe we will have new transportation technology by then, but still what a headache.
What about the cost side? While it is true that marginal cost of additional floors are low, overall per square foot costs of high density have outpace inflation. Therefore, high density is normally only economical where land prices are very high, which is of course near economic ground zero (downtown). The suburbian towers are all located near rapid transit, so in that sense, it is “downtown” by proxy. Why then are towers popping up in places like Maple Ridge. A market gone mad, I presume.
That may change if high density construction technology is drastically reduced. I have pointed out new developments such as the contour crafter in the past. It is a robot that lays down its own concrete, and can in theory “print” a floor a day. Wouldn’t that be something? Hit print in autocad, and a highrise takes shape. Such developments would lower the cost of high density dramatically, and skew the equation. It would make it a viable solution even in areas with mediocre land prices.
Hence if we have physical density constraints downtown, and lower cost high density elsewhere, the city skyline would flattedn out (peak at 100 stories, and widen outwards) as the city grows. If that is true, the relative winners would be near burbs, and the losers downtown (physical density limit caps returns) and far burbs (outcompeted by low cost near burb high density).
There are of course many other factors:
1. Population growth. Without, who cares about density? It can also go the other way. Ample and cheap high density encourages inmigration.
2. Psychology and propensities. Right now, many are foregoing land for shorter commute. Also, maybe it is a social trend. These are fickle factors. As the baby boomers die off and are replaced by immigrants, will these parameters change.
3. Other aspects of technolgy and our economy. Will telecommuting finally become a reality. If the economic umbilical cord is cut, would people really pack up and move to places like Banff in signficant numbers. Who knows?
The one number I’d like to see is average rental revenue per square foot over time (in real terms) for prime downtown. Whatever that number is, I doubt that its growth rate will continue. Yet, prices which are based on past growth rate, expects it to.
June 24th, 2007 at 8:45 am
satv wrote “no wg2c tv’s and cars get depriciation.“
Sorry satv, I misunderstood. I took you at your word about buying the tv.
property get appriciation,even leaky condo has been sold on dub,trip.
It is not a useful truth to say “Property appreciates”. It is better and truer to say: “Land appreciates, buildings depreciate”.
Otherwise novices get too confused and think a condo is as good an investment as a house, or that a big house on a small lot is as good an investment as a small house on a big lot. They see all the glitter on the building and think they’ve just won the Jackpot on Jeopardy.
The old wisdom says “Buy land”, not “Buy homes”. The new wisdom is merely folly wearing a disguise.
In any case, today’s truth is that a big screen TV might be a better investment than any home in today’s market, whose value may soon fall into the Great Abyss. At least the monthly payments will be smaller for the big screen TV.
June 24th, 2007 at 8:33 am
Tulip, I think Jeff has a right to make money in his chosen profession.
It sounds like he’s been in RE since before the run-up and he’s doing what any moral agent should do, looking out for HIS clients and telling them the truth. As long as he doesn’t have to lie or exaggerate the market to make sales I think his soul is in the clear. The buyers will only buy from someone else and if he wasn’t convincing his clients to sell it would only mean a longer and stronger inflation of prices before things return to sanity. He’s only an agent of the free-market not a motivator. It’s Rennie and his clones, the people in the media and the RE agents who know it’s unsustainable but keep spreading the myth in order to line their own pockets who are the problem.
June 24th, 2007 at 8:14 am
I see that Mayor Sullivan has applied to trademark the term ‘ecodensity‘ in his own name:
“The wares that go with that trademark include publications such as books, periodicals, newsletters and blogs on urban design, housing density, neighbourhood diversity and ecology. Services around promoting awareness of the concept are also covered.”
June 24th, 2007 at 7:40 am
Jeff said:
“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€
June 24th, 2007 at 4:50 am
MarkX,
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 23rd, 2007 at 10:20 pm
with mortgage rates higher, first time homebuyers… the ones who prefer fixed rates… are disappearing almost entirely and immediately.
I thought pricing and the US situation would kill the market… but looks like rates are going to do it.
June 23rd, 2007 at 10:13 pm
certainly a lull in the market… I did 2 short open houses today and they were quiet. 1 visitor!
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 9:30 pm
no wg2c tv’s and cars get depriciation.
property get appriciation,even leaky condo has been sold on dub,trip.
June 23rd, 2007 at 9:03 pm
satv said “so i have decided to buy around boxing day if that can come down few bucks.”
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 8:53 pm
kfinancials: “I’ve sold my place and now renting.”
—————
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 8:33 pm
wg2c this sony bravia gbr 3 52inch cought my attention, but no money to buy on high prices.
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 8:21 pm
satv said,
“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 7:53 pm
a room to live free(no rent no mortgage)
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.