friday free for all!
Its Friday free-for-all time here at Vancouver Condo Info, but this time its only a semi-free-for-all. Let’s see if we can stay away from Hitler and religion on this thread and focus on economics and real estate. Here’s a few stories I’ve noticed recently:
- Interest rates going down
- Mortgage rates going up
- Coventree outlook not good
- Inflation lowest in BC
- PM: Economic slowdown likely
- Another day, another $20 billion
- Harper says NO to ABCP bailout
- Subprime infection in the financials
- Calling bottom on the US market
So what are you seeing these days? Post your Hitler-free anecdotes, interesting links and news here!
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December 26th, 2007 at 10:08 am
Merry Christmas….
lots of Holiday reading for you here:
http://money.cnn.com/real_estate/foreclosures/
December 26th, 2007 at 6:54 am
Patriotz said:
You couldn’t make a worse comparison. A handful of airlines selling a service which lasts only a few hours, with an adjustable supply (flight scheduling)and highly variable demand, versus a huge group of landlords selling a service which lasts for years, with a relatively static supply and demand.
I said:
But this is where you are misinformed. Rental units are never relatively static in supply and demand. During a housing recession, lenders may curb or stop lending, but the builders DON’T! They keep building, albeit at a slower rate compared to the boom. Statscan report showed it all from 1992 to 2000. How are you sure that some of these homes aren’t destined for rentals?
Homes and planes both share 1 thing in common. Fuel! You need fuel to heat the home in the winter and fuel to fire up those jet engines.
And what had airlines been doing lately?!? Buying or leasing new planes that are more fuel efficient and smaller planes so they can compete more effectively and fill seats easier.
In the real estate rental market, demand actually rises as the afford ability index rises as house prices keep dropping. Most people aren’t in the mood to buy than they are to rent. They like to sit on the sidelines. But of course, during a housing downturn and if history is of any indicator, our banks and our fellow Vancouver homeowners are mostly going to sit it out too, demanding “fair market value” for as long as it takes. If it took 8 years then, this time it may take longer! In the meantime, there’s going to be a glut of unsold homes probably destined to serve as rentals.
Here’s the problem. Just like the airlines, companies can charge only 1 market rate for fares, but they ain’t going to be compete fairly with older and non-fuel efficient planes. They want newer planes with in flight TV monitors.
In the rental market, this is going to happen the same way. If you have 2 buildings not separated from too far apart and one is very new and has the latest toys and energy conservation technology built-in, front loading washer and dryer, new fridge and stove and the works against an older “estabished” building or home with far less modern furnishings and energy conservation technology. So, how do you expect a renter pay the same 1 market price for an established rental unit to a new unit? You would expect to get a discount to market value on the “established” unit. And that’s what I think things may happen here. It did happen in late 80s and during the 90s. And that’s why I said renters pay a different market rate depending if they stay in an old established unit or a more modern one. The difference isn’t that much though, but it does reflect the fact that renters aren’t dumb!