Markets keep dropping.

So much for the subprime problem being ‘contained’. Marco sent in these links to coverage of the ongoing fallout from the US housing market problem:

Coventree’s problems continue: can’t find buyers for debt.
-Vancouver based mine developer Redcorp Ventures caught up in credit mess.
-The credit crunch is global.
-But hope looms in talk of a Canadian bailout.
-Meanwhile down south: US housing slump starts in July

How much longer will our real estate market exist in a vacuum?

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Patiently Waiting
Patiently Waiting
13 years ago

I know pet owners are paying big premiums. Its sad. I was just talking to my barber, and she is about to get evicted. She's overpaying rent beyond her means because she won't give up her cats. Eviction shouldn't happen to someone who works 60 hrs/week and lives modestly.

freako
freako
13 years ago

chipman is even posting crap on his site to this effect. Chipman has posted this in the past, and I refuted him using the most clear cut logic I could muster up. Lost cause.Rents will absolutely NOT go up because landlords need more money. It is supply and demand pure and simple. Landlords compete for tenants and tenants compete for rentals. There may be some mispricings due to market frictions and imperfections but these in no way or form constitute increasing rent levels.

mk-kids
mk-kids
13 years ago

"As mentioned, the #1 clue is lagging rents. It is such a strong bearish argument, that the onus is on the bulls to explain it away. In the absence of such an explanation, the crash is waiting, albeit patiently it seems. Mystery reasons don't cut it."freako, i think the realtors(tm) are on to this. i've been watching craigslist for sometime & see a lot of the overpriced rentals on there are posted by realtors & their agencies/ partners, etc… the effect of this is that amateurs see these overvaluations & post their places at a premium. renters who are too stupid or lazy or desperate rent this crap and it becomes a self-fulfilling prophecy. chipman is even posting crap on his site to this effect. i'm so sick of the manipulation. why are people so stupid.

freako
freako
13 years ago

Also,We hardly see snowing in this beautiful city.Such advantage warrant a high premium.Yeah, everytime it snows in San Diego or Miami I laugh at those poor cold soulds.

TheVanMan
TheVanMan
13 years ago

Patriotz said:Yes of course I am. But you said "people sell only when they have no choice". I.E. all people. That's just not true.Oh by way, there's another group of people who always have to sell. They're called "builders", and you can see them keepin' on keepin' on south of the border, even as prices tank.I say:Let's no feed words into my mouth alright.Here,Let's assume that you have 80 percent debt on your home and the market price drops say by 10%, you have just absorbed at 50%, yeap that's a 50% drop in the value of your equity. Do the math. Assume a $500,000 home with the initial equity of $100,000 (your downpayment) and a $400,000 mortgage. 10% down from half a mil would be $450,000. Since you don't own that $400,000 in money, you are only left over… Read more »

fgah
fgah
13 years ago

US houses keep dropping but it will never happen in Van because you can't compare a apple to a rotten egg such as NY and other major US city.Where in Canada you can have flowers growing all yrs long?Also,We hardly see snowing in this beautiful city.Such advantage warrant a high premium.RE price is still far lower than London,Hong Kong,Japan and other major world-class city.Houses will costs 1 million dollar for sure in 2010.Get in guys before it is too late.The current RE price is still a bargain.

patriotz
patriotz
13 years ago

You are talking about people who already have a significant stake of equity in their homes. People who downsized or move to a different locale had built-up equity to cash in. People who buy homes these days DO NOT. That is the difference.Yes of course I am. But you said "people sell only when they have no choice". I.E. all people. That's just not true.Oh by way, there's another group of people who always have to sell. They're called "builders", and you can see them keepin' on keepin' on south of the border, even as prices tank.Markets are set at the margins. If a significant number of discretionary sellers head for the exits, that can be enough to stop price appreciation. And then new buyers sit back and ask themselves what is the point of buying. And the downward spiral… Read more »

freako
freako
13 years ago

not are our interest payments tax deductable.The more reason for our prices being out of line. Our affordability has to THE worst in North America by a good margin.

freako
freako
13 years ago

I don't mind that some of my arguments get taken apart – that's why this board is for. I wasn't refering to your arguments in specific, but any argument from anybody. What is left over will hopefully be closer to the true picture, which I imagine is the ultimate goal of most posters.But what I am trying to say is that something is missing in this analysis. Something that would explain the change in attitudes and acceptable prices/debt levels.I see things which explain the insane valuations, but nothing that justifies them.As mentioned, the #1 clue is lagging rents. It is such a strong bearish argument, that the onus is on the bulls to explain it away. In the absence of such an explanation, the crash is waiting, albeit patiently it seems. Mystery reasons don't cut it.Remember, we don't have the… Read more »

Warren
Warren
13 years ago

macho slob:I'm reminded of the backwater that we still are, when folks in Florida ask me if I mean Vancouver, Washington after I proudly tell them where I'm from; or when I discover that I cannot book a direct flight to HawaiiGet a new Travel Agent. Air Canada does daily flights (non-stop of course) to Honolulu and Maui. I do a lot of travel for business, and one thing you can't knock is our airport. Its fantastic when compared to others. We aren't a major hub city, but the flight options are decent considering we are in the far corner of civilized North America.Almost everyone I talk to around the US knows where Vancouver is. My flights home are typically filled with tourists in the summer.I'm sure you know from travel to Florida that they probably don't know where Atlanta… Read more »

OWG
OWG
13 years ago

Doubt it, they looked like sincere opinions. It is good to have devil's advocates on each side. The weak arguments will get picked apart, and we will all have a better understanding of what is going on.I am more then sympathetic to the people who would like to see a correction. Honestly, I am shocked at what people are paying for their homes. When I bought the first place here I was slightly worried by my 150K mortgage and I worked as hard as I could to pay it off as soon as possible. And now? People take 400-500K in mortgages without blinking. I travel to Texas on business from time to time and what I see there makes me wonder why am I bothering to live in Vancouver. Vancouver is not 5 times better to live in then let's… Read more »

Patiently Waiting
Patiently Waiting
13 years ago

Basically, you can't easily compare the current Vancouver housing market to anything in living memory. Even many bulls I know were caught off guard by how long this has gone on and how high the prices climbed. In my experience, the slight aware average person just declares it "insane."

freako
freako
13 years ago

But you guys are interpreting any new information out there as a sign that the boom is over and yet they keep going up. I think people are looking for the trigger that will set in motion the long overdue correction. Sooner or later they will be right. The wolf did come.

freako
freako
13 years ago

OWG = satv or rChipman, maybe geezer got tired of rattling cages over at the other board?Doubt it, they looked like sincere opinions. It is good to have devil's advocates on each side. The weak arguments will get picked apart, and we will all have a better understanding of what is going on.For example, the observation that 1982 was the result of an quick up down market was interesting. As mentioned, I don't agree with it, but still worthy of consideration. On that topic, as I posted at vannumbers, I think the percentage of housing stock that paid signficantly above long term trendline is much much larger now than in 1981. In that sense, this is a much more precarius situation.

OWG
OWG
13 years ago

Yes, as soon as somebody has a different opinion he must be banished from the board. Look if you guys want to sit here and convince yourself that the prices are going to fall I am not going be in your way. But you guys are interpreting any new information out there as a sign that the boom is over and yet they keep going up.

Tony Danza
Tony Danza
13 years ago

OWG = satv or rChipman, maybe geezer got tired of rattling cages over at the other board? owg if prices aren't going down then why don't you just go out leverage yourself to the hilt and buy as many condos as you can instead of wowing us with your profound analysis.

OWG
OWG
13 years ago

Landcor released some data in 2006 showing 94.4% of BC residential property was bought by BC residents, with a further 2.4% bought by Albertans.So you are telling me that this type of property (http://tinyurl.com/2oleqv) is being bought by local folks? Condos ranging from 1.4 to 13mil? Secondly, they may be local as in having Canadian Passports, but they may not be living here. Those 300,000 Hong Kong residents with Canadian Passports perhaps? Have you seen Coal Harbour towers at night? Very few lights and activity in general, especially in the winter. Now compare that to towers where people actually live (West End, Metrotown).Don't take me wrong here, I would like nothing more than to be able to buy myself a brand new house in Vancouver for $200,000 like I can in Austin, Texas – but that ain't gonna happen.

TheVanMan
TheVanMan
13 years ago

People starts selling only when they have no choiceNot true. Downsizing is an obvious exception, as is a move out-of-market to a cheaper location. Also investors may choose to get out if returns look unattractive going forward – especially if they are cash flow negative.I say..You are talking about people who already have a significant stake of equity in their homes. People who downsized or move to a different locale had built-up equity to cash in. People who buy homes these days DO NOT. That is the difference.People who have no choice but to sell realize that, negative equity will hurt them more but since they didn't put into the homes much, it's less painful to bail out. Whereas, if you actually put 25% to 40% cash down on a home and the price went upside down however, it will… Read more »

patriotz
patriotz
13 years ago

I suspect Canadian Banks are not in the mood to lend much right now except to persons with close to 60% equity.Why not, as long as CMHC and Genworth are the parties actually holding the bag? Come to think of it, they might just prefer to loan >80% LTV just to get the insurers on board. Moral hazard, anyone?People starts selling only when they have no choiceNot true. Downsizing is an obvious exception, as is a move out-of-market to a cheaper location. Also investors may choose to get out if returns look unattractive going forward – especially if they are cash flow negative.Once price appreciation stops, the bell starts ringing for many of these people as they realize that it's now or never. And the race for the exits begins.

freako
freako
13 years ago

I have looked at prices in Florida (http://tinyurl.com/2ftrmn). The condos are down 1% YOY and houses are down 3%. Souther California is actualy up YOY by 3.7%. LA County is up 5.5%. Hardly doom and gloom. And yes, the sales are down.Nice catch, Patriotz, I missed that the first time around.OWG, here is your chance to learn something new, (unless you are playing games with us). I posted on this just the other day. NAR's median has San Francisco up 7.4% yoy, whereas Case-Shiller has it down 3.4% yoy.Now that is some huge discrepancy. Which is more accurate? Which is more accurate? Case-Shiller of course, as it measures apples to apples. The median is totally distorted as a result of the low end drying up due to subprimce.The U.S. is a slaughter, and it will get much worse. As patriotz… Read more »

patriotz
patriotz
13 years ago

The Sun has an article with usual suspects telling us that our economy is just to hot for prices to go down. Gee I heard that in 1981 too. Did they use the old articles as a template?

patriotz
patriotz
13 years ago

I have looked at prices in Florida (http://tinyurl.com/2ftrmn). The condos are down 1% YOY and houses are down 3%. Souther California is actualy up YOY by 3.7%. LA County is up 5.5%. Hardly doom and gloom. And yes, the sales are down.BWAHAHAHA!Come on guy, don't peddle crap like that on this board. Florida is a bloodbath, off 25% already in many areas. California Central Valley and Inland Empire are in similar straits, San Diego and outer Bay Area (Sonoma) falling, only a matter of time till the illness spreads to LA, OC and inner Bay Area.I don't give a hoot what someone's aggregate statistics say, look at same-unit prices. It's ugly.Oh, and pardon me for asking the obvious, but if prices aren't falling, why are foreclosures exploding and the secondary mortgage market tanking?

TheVanMan
TheVanMan
13 years ago

People seemed to have forgotten that when people are willing to carry a high leveraged insured mortgage, they are willingly in doing so because of the high confidence they have with their employment. You really can't buy a home if you don't have a source of income. This is not a problem not in BC in 2007. That wasn't a problem then in BC in the early 80s either even with double digit inflation plus double digit interest rates. If some of you could clearly remembered. Or err I'm sorry, many of you were probably still in diapers? Right now, mortgage payments for most BC home owners have passed 50%. I'm not surprised if some are at the 70% mark. Which means, having a good source of income every month helps keep the mortgage in check.Canadians, like our American counterparts… Read more »

Cecil
Cecil
13 years ago

"Except that instead of rich Russians moving in we have Asians and some Europeans."OWG,Thanks for trotting out that old "rich foreigner" myth. I hate to say you're wrong, but you are.The last I heard, most real estate in Vancouver is bought by locals, who make local salaries. Vancouverites love to drive up the price of real estate and then watch it crash back to earth, as has been done about once each decade.Landcor released some data in 2006 showing 94.4% of BC residential property was bought by BC residents, with a further 2.4% bought by Albertans.Here are some choice quotes from an article on the report:"Nielsen says he's not surprised that B.C. residents still account for the lion's share of all the real estate buying activity in B.C. "In all my speeches for years I've been saying the biggest buyers… Read more »