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!
(No Ratings Yet)
Loading ...
December 20th, 2007 at 9:24 pm
170,000 (more or less) municipal bonds downgraded
December 20th, 2007 at 9:29 pm
Banks will soon fail
December 21st, 2007 at 10:13 am
One of the most interesting arguments for why it was a good investment right now was ‘look at all the towers under construction’.
Not clear on the supply/demand dichotomy I guess.
December 21st, 2007 at 10:21 am
I’ve heard that one too, how does anyone think that more inventory is good?
December 21st, 2007 at 10:21 am
December 21st, 2007 at 11:05 am
I’m noticing the occasional foreclosure on the MLS. Never saw those until recently.
December 21st, 2007 at 11:13 am
“And while mortgage interest went up 7.0 per cent in Canada, it went up 4.6 per cent in B.C.”
…
“Pastrick said posted mortgage rates are the same across the country but he has noticed that discounted rates tend to be lower in B.C.’s large metropolitan areas, compared to outlying areas of the province, thanks to competition among lenders in bigger markets.”
Maybe someone could explain this?
December 21st, 2007 at 11:14 am
1.Merry Christmas and Happy New Year to all the readers and posters of
2.and ofcourse year is coming to an end so
3.Vancouver R.E.Countinue to climb
from the forecast list average price in 2008.Cmhc.$623,000+9% Royal Lepage$587,500+4% Credit union central bc$597,000+5% Re/max $560,000+7% B.C.Real Estate$620,000+8%
4.Housing sales in 2007 in 11 months beat the record Canadians bought and sold 345,577 homes in 11 months smashing the previous annual high of 336,646 during 2005. Rebound boost b.c.housing sales with 82,715 sold in 11 months.
5.Poeple who can afford monthly payment for term is the best answer to any thoughts.
6.There use to be issue in the past Video kill the radio star,in housing luxury killing the junk yard.
7.Arguments probe that age is a one way exit,not a cyclical.
6.Housing sector stands on it’s own economy and status,Rental yield stands for nothing.
8.Fear of Recession,Depression,Natural Disaster,Threat of Terrorism,Bubble,Ghost,Crash is just a fear because homes are basic necessity so person will be living in it one way or another way.
9.All biggest bulls of 2007 are celebrating at 125% of 5 year, can’t be better than this”lets rock” (dhoom machale)Satv,bulls party 2007
10.2007 is happy ending for bullsVancouver Rocks
December 21st, 2007 at 11:29 am
December 21st, 2007 at 11:52 am
That said anyone looking at buying in a crashed US market? What are the tax implications for a Canadian owner of US property?
December 21st, 2007 at 12:43 pm
December 21st, 2007 at 12:57 pm
Gee, i don’t know. Who wants to live in a building you know for sure is 1/3 to 1/2 targeted at people with mental health issues?
So some buildings have retail on the ground floor and 1/3 to 1/2 the tenants have issues… hmmm… they are not going to be in the retail business for long, if you ask me…the shrinkage would have to be something to see
December 21st, 2007 at 1:19 pm
December 21st, 2007 at 1:29 pm
Competition pressures are possible (but this implies an inefficient market). Affordability is better outside the cities these days to borrowers can afford to pay more. If the markets are efficient, it could be there’s a higher loan-to-agent ratio in cities so the servicing costs would be lower.
December 21st, 2007 at 4:55 pm
We have daily, weekly and monthly numbers for the entire REBGV. Updated every day. It is not perfect but will improve with time.
Also inventory charts for each sub area in the REBGV. These go back 3 years each. If your interested please come by. It will be interesting to see where the inventory goes in the new year.
http://www.northshoreproperties.ca
Come say hello on my blog. It won’t be like this place but I will try to add some content.
December 21st, 2007 at 7:39 pm
Meanwhile for 12K more you can get a SFH with a suite like this in a desirable central area.
Buying a condo because houses are unaffordable is one thing, but Toronto condo buyers are even nutter than the ones in Vancouver.
December 21st, 2007 at 10:20 pm
I didn’t say it made sense but I think this is what people who keep buying “investment” properties think.
Actually, I know they do because I talked recently to someone who bought a condo and is renting it out at a loss. His (tired) argument was that everyone wants to live here.
S2
December 21st, 2007 at 10:54 pm
December 21st, 2007 at 11:10 pm
I think there’s another interesting emotional thing happening with prices and thats that people believe rent prices are higher in Vancouver than they actually are. There are a lot people trying to rent out suites in new towers downtown with a minimum of loss. If you look at craigslist (and didn’t notice that they are relisting every week and going begging) you might think you could get 2 grand a month for a small one bedroom downtown. Unfortunately people aren’t taking out mortgages to rent so the actually price paid for rent is tied to income and not going up like specultive buying prices.
December 21st, 2007 at 11:14 pm
He kind of looked at me a bit shocked when I told him the rate of appreciation this year.
Poor sap.
S2
December 21st, 2007 at 11:19 pm
December 21st, 2007 at 11:32 pm
I don’t have rich parents so buying a place to live is up to me. I’ve been saving what I can but I can’t afford to buy even a small apartment and what if I want to raise a family? I’m thinking this city may not be for me.
December 22nd, 2007 at 12:04 am
Odds are that some ignoramus of an “investor” made a similar argument circa 2005 in places like San Diego, Las Vegas, Phoenix and Miami. Does that ever sound like a dumb argument now.
December 22nd, 2007 at 8:48 am
http://tinyurl.com/2c62ng
A snipet: “…The board’s monthly survey shows confidence plummeted 11.2 points on the West Coast, where consumers are the least likely to say this is a good time to make a major purchase such as a house, a car or other big-ticket items.”
December 22nd, 2007 at 9:19 am
Hi Paul; Using your stats I see a big differance in MOI between SFH and Condos, MOI for SFH = 3.5 months, MOI for Condos = 9.3
Using November total sales and inventory today! Seems a trifle high for condos don’t you think? This is the market to watch for leading indicators of where we are going.
December 22nd, 2007 at 12:24 pm
Nobody is subsidizing the renter. He’s paying the market rent, the same rent he would be paying if the buyer had paid a sensible price (say in 2001) and were making a profit.
The buyer is subsidizing the developer or previous owner, by paying more than the place is worth.
December 22nd, 2007 at 1:22 pm
You won’t find any of the greatest fools here Dosh (except perhaps Thumbs and he doesn’t need convincing). Go peddle your pyramid scheme to your naive client base. Or are you so desperate for clients that you’re heading to the one last bastion of non-owners? You won’t win any converts here because we know that we’re all farther ahead renting EVEN IF prices fail to plummet.
December 22nd, 2007 at 2:48 pm
“LANGLEY - A 43 YEAR OLD LANGLEY MAN HAS SERIOUS HEAD INJURIES AFTER BEING ATTACKED BY A GROUP OF TEENS AT THE MAIN BUS LOOP ON LOGAN AVENUE AT GLOVER ROAD LAST NIGHT.
HE GOT INTO AN ARGUMENT WITH FOUR TO FIVE YOUNG PEOPLE.
A 17 YEAR OLD GIRL STARTED PUSHING HIM.
THEN A 15 YEAR OLD BOY SLAMMED HIM IN THE HEAD WITH A SKATEBOARD, CRUSHING HIS NOSE.
THE VICTIM IS IN CRITICAL BUT STABLE CONDITION AT ROYAL COLUMBIAN HOSPITAL.
HE IS IN A COMA.
POLICE ARE LOOKING FOR WITNESSES TO THE ATTACK.
IT HAPPENED AROUND 730 LAST NIGHT.
THE TEENS REMAIN IN CUSTODY.”
December 22nd, 2007 at 2:55 pm
RCMP investigating possible drive-by shooting
Dec, 21 2007 - 8:50 AM
SURREY/CKNW(AM980) - Surrey RCMP are investigating what appears to be a drive-by shooting near 68th Avenue and 148th Street just before 2am.
Residents report several gunshots followed by 2 or 3 vehicles speeding away.
Police found several bullet casings but no victims.
—————————-
Mounties looking for man who tried to abduct an eight year girl
Dec, 21 2007 - 1:10 PM
COMOX/CKNW(AM980) - The Mounties in Comox are looking for a man who tried to get an eight year girl into his car.
Police say the man approached her as she was walking to her school, Puntledge elementary.
She ran off and was able to give investigators a good description of the suspect.
He has short, dark hair …spiked in the front and he was driving a mid -size black car.
—————-
Man in serious condition after being dragged by car last night
Dec, 20 2007 - 8:40 AM
BURNABY/CKNW(AM980) - RCMP in Burnaby are trying to figure out what led to an accident just after midnight in which a man was dragged by a car.
Police say the incident occurred on Imperial between Central and Boulevard.
The man, believed to be in his late thirties, is in serious condition and they haven’t been able to talk with him.
Several witnesses say the car that hit him didn’t stop, but police have spoken with the owner.
No on is in custody as then investigation continues.
——————
Dial-a-Dopes busted in sting
Dec, 20 2007 - 11:50 PM
RICHMOND/CKNW(AM980) - Another Dial-a-Dope operation has been busted, this time, by police in Richmond.
Corporal Nycki Basra says seven people have been arrested, but the Mounties are still tracking as many as 30 Dial-a-Dope operations in that City, “No, we’re not going to go out of business chasing this kind of crime, but we are making all efforts to catch whoever we can, as much as we can, and are looking for the public’s assistance in doing that.”
Speaking on CKNW’s World Today with Jon McComb, Basra says callers placed orders for heroin, crack or cocaine over the phone, then agreed to make the exchange in public, “Where we wouldn’t suspect them, to schools, playgrounds, parks, public shopping malls, you know, in front of businesses, in front of residences, you name it, they’ll meet you.”
The 11-month investigation ended with a raid on three homes last week. Two in Richmond and one in Vancouver.
—————-
Another case for better cabbie protection
Dec, 20 2007 - 11:40 PM
LANGLEY/CKNW(AM980) - There has been another assault on a cab driver in Langley. It happened Wednesday night when a cabbie dropped a man off at a seniors residence.
RCMP say the man tried to borrow money from his elderly father but when the father refused, he broke a window with a shovel. After a fight, the bleeding man tried to take off in the cab.
When the cabbie refused, the man grabbed the wheel from the backseat and tried to drive the car himself. But RCMP say the man drove the taxi into several cars and the airbags deployed, injuring the cabbie.
The fare was also hurt and taken to hospital where he is recovering.
—————-
More than 20 charges laid against suspected gangsters in the last month
Dec, 20 2007 - 12:10 PM
VANCOUVER/CKNW(AM980) - A gang task force set up last month to reduce violence across the lower mainland has seen more than 20 charges laid against suspected gangsters.
Since the Violence Suppression Team started patrols November 14th, more than 26-hundred people have been checked.
Inspector Dean Robinson says 74 tickets and 28 roadside suspensions have been issued.
“Sixteen warrants have been effected and criminal charges totaling 23.”
Police have also taken two armoured vans off the road.
“There’s been seven firearms seized and there’s been several sets of body armour along with two armoured vehicles that have been seized.”
The armoured vehicles have been impounded because they do not meet inspection standards for ICBC
—————–
Teen gets 4 years for sexual attack on elederly woman
Dec, 20 2007 - 4:00 PM
KAMLOOPS/CKNW(AM980) - A 17 year old convicted of sexually assaulting an 85 year old woman has been handed a four year jail term.
In sentencing the teen today Justice Richard Blair described the attack as terrifying, brutal, and degrading.
The youth will serve his sentence in a youth centre and a federal adult facility.
The 17 year old pleaded guilty to last December’s attack.
————————–
WELCOME TO VANCOUVER….NOW GO HOME!
December 22nd, 2007 at 3:04 pm
December 22nd, 2007 at 4:54 pm
buying now is buying into the “buy high sell higher” paradigm in other words “gambling”
stay out of the market!
unofficial buyers strike in progress
blueskies
December 22nd, 2007 at 4:55 pm
December 22nd, 2007 at 6:23 pm
December 22nd, 2007 at 9:00 pm
This in a nutshell is why people are homeless - they have personal problems. It’s got nothing to do with the RE market.
There are lots of people with the same income as Steve who are not homeless. They share rentals with other people.
If you put on your economic thinking cap for a moment, it’s clear that a glut of housing, which is the root cause of the RE crash and foreclosure boom in the IE, cannot cause homelessness. Quite the opposite. All that extra housing is going to have to be rented out to someone.
That said, local governments have been negligent in not imposing greater obligations on owners of foreclosed properties. They can follow the example of one city in the central valley, which is imposing fines of $1000/day on negligent owners. A great incentive to unload the property pronto to someone who will make use of it.
December 23rd, 2007 at 11:08 am
I’m not sure I understand your point. The government should force owners to allow people who “cannot work” like Steve there to live in their foreclosed homes?
All of that extra housing WILL be rented as soon as owners who are bleeding money lower their rental rates until they get to the level that people “on social assistance who cannot work” are willing to pay.
They can follow the example of one city in the central valley, which is imposing fines of $1000/day on negligent owners. A great incentive to unload the property pronto to someone who will make use of it.
What is a negligent property owner? As long as they are following the laws I don’t see any issues here. If they are not making their mortgage payments that’s the bank’s problem. I like to think we still live in a free society that protects the property rights of individuals.
December 23rd, 2007 at 2:52 pm
December 23rd, 2007 at 4:51 pm
http://www.canada.com/victoria.....0519af63cd
December 23rd, 2007 at 7:06 pm
No. I am saying that owners of foreclosed properties should not be allowed to let them become neighbourhood hazards occupied by squatters, infested with mosquitos etc. These properties should be properly secured or sold ASAP to someone who will live in them or rent them out.
And let’s not hear anyone say “nobody will buy them”, drop the price enough and there will be a buyer.
I think most of these empty houses are just pieces in the shell game that the finance industry is playing in an attempt to hide its losses.
What is a negligent property owner? As long as they are following the laws I don’t see any issues here.
A negligent property owner is someone who is not following the law. I thought that was self-evident. but I guess not.
December 24th, 2007 at 8:12 am
The buyer is subsidizing the developer or previous owner, by paying more than the place is worth.
Patriotz,
Why chose the year 2001? Why not choose the year 1994-1997? when prices were more sensible?!? Is it because you bought in 2001 that you think prices were sensible then?
Even people who attended Tom Vu’s real estate seminar could not even use his techniques to buy properties at cheap prices that will ensure a profitable investment. And that’s in the early 90s. The RE market then fell out of its shoe and bottomed out in around 1994. I was in the market then. Where we you?
Unless people bought foreclosed homes from the banks or at a deep discount to real asset value, you will be subsidizing the renter in Vancouver at market rent prices.
Here’s why.
The owner pays the mortgage, but chose to amortize it probably 25 to 40 years. Most likely 40. So, he’s basically renting his place from the bank for about 20-25 years to pay off the interest before he starts building a little bit of equity. Right now, most condo owners who rent out don’t have squat in terms of equity. Maybe 5 to 10% the most. The problem is, his payments are already exceeding the 30% comfort limit based on 2007 income, or worst could be faked so his or her mortgage payments could be higher than 30%. I hear 50% is the norm now. Unfortunately, he also needs to live to, so he or she’s got expenses to pay. These are not fixed expenses. These fluctuate, usually going up with inflation. Unless you work for a union or a multi-corporation, you rarely get a 2 or even 5% annual increase in wages in order to keep up with inflation. So eventually, more and more of their money money goes into discretionary spending and ofcourse investment mortgages, leaving little money left. This was partly why Americans and Canadians are now negative savers. Their debt is eating into any money left earmarked for savings.
I know of a couple who bought and paid for their home in 1997, bought another in 1999, another in 2001 and lastly in 2003 are now telling me that they’re really really tight in their finances. If they are so tight now in a booming economy, what happens then if the economy goes in the recession?
You could say, why not raise rents to meet inflation? Problem is, the rental board only allows rent raises of current inflation + 2%. That’s almost like 4% a year. Anymore, then you need a written permission from the board, which I can tell you from personal experiences isn’t easy to get. But even if you get your way, your renter doesn’t always get a 4% a year raise every year on his or her job. He or she’ll be lucky to get even 2%! If you’re doing this to him or her, the renter will simply look elsewhere to find cheaper rent.
The current market value being set right now are based on real estate values that some investors bought during the bottom of the 70s (most famous and well known Lougheed family or Bill Lougheed whose kids now own a big pie of the Kits area), the bottom of the 80s and the bottom of the 90s! I don’t consider 2001 as sensible nor bottom. I would consider 2001 as the bottom for the tech bubble though. You would probably made easy money if you would have bought the TSX index then and sold it today. You can sell an ETF fund faster than you could with a house.
There are no lousy renters to deal with either.
If Japan is of any indicator, we could see a prolonged housing deflation. Or debt deflation, where prices keep going down and down as there is no end in sight.
December 24th, 2007 at 11:07 am
I guess it depends what you mean by subsidize. From the renters perspective, paying market rent means you are not subsidized.
Once the baby boomers start to retire and sell their real estate, I think we’ll see endless real estate deflation. Of course, as the boomers start to see their “investments” deflate the pressure will be on to get out while they can still make money. Further deflation.
If I buy real estate in the next ten years, I’ll buy assuming that it will deflate. Hmmmm, I may never buy.
“the rental board only allows rent raises of current inflation + 2%”
In the case of deflation, can tenants apply to have their rent decreased? HA HA, just kidding.
December 24th, 2007 at 11:16 am
I was in Vancouver, Planet Earth, where the RE market peaked in 1995 after rising for about 10 years, and then fell for about 5 years.
Apparently there is a Vancouver on another planet which you are referring to.
December 24th, 2007 at 11:25 am
IThat means that the 150k detached median in 1987 would be about 242k today.
December 24th, 2007 at 11:37 am
Yeah I agree, because according to family incomes, most SFH in Vancouver should be in the 242k range. That mean our real estate is 3x or 4x overpriced. Wow, just wow. I’m glad I’m on the sidelines, just watching.
December 24th, 2007 at 1:59 pm
Look out below!
December 24th, 2007 at 5:49 pm
what a coincidence! this is what is happening now in the US and elsewhere
they don’t see a bottom to the problem anywhere….. so yes we potentially have long term depreciation for the entire RE asset class….
California is a warning to us, the market is screaming “GET OUT” maybe we should listen.
blueskies
December 24th, 2007 at 6:25 pm
Apparently there is a Vancouver on another planet which you are referring to.
Hmmm, I see. Don’t get too excited buddy. I just put a test on you to see where you’re getting your ideas from. Now, I know where.
Statscan article # 11-010-XIB under the title the “West Coast Boom” written by P. White, P. Cross and M. Michalowski in May of 2006.
And no, I live in the same Vancouver as this article described.
First of all, congratulations on your purchase of a home in 2001, or eh super excellent timing. Very few real estate moguls could time it just as well as you do. Before that article came out, however, a few of the real estate investors I know thought that 1994 was the inflection point. Of course, some were proven wrong, but then even Warren Buffett wasn’t perfect either.
Vancouver was never an affordable city to live in. In the early 90s, the affordable index was at 65%. Only in 2001 when the affordable index came down to about 44.7%. Again, articles like that mentioned above give you all the stats. But why would I say the best time to buy is in 1994?
A couple of reasons. During the early years of the housing bust as I recalled from 1992-1994, there would be available few foreclosed properties at very good prices. They are extremely hard to come by. You really need to get to know key bank personnel to give you a heads up and sell at below fair market value. And most of them are not in the greater Vancouver area. But even then, it’s a joke.
Google David Folster’s letter to John Reed about his dealings with the Vancouver RE after taking Tom Vu’s seminar summed it up quite well. He practically gave up. Which means that even buying at year 2000 prices, you are still not getting a good investment deal.
Living is ok.
As a renter turned homeowner, 2001 can be said to be a good year. Whether or not people took advantage of that during the middle of the recession is another matter all together.
Why? Simply because, while BC did generate new jobs during the 1990-2000, maintaining an average GDP growth of 2 something %, they were mainly part time jobs. These people would probably be interested in renting rather than home buying. Unless you have a keen eye, they will sit on the sidelines. This also explains why so few ever thought the TSX would ever go to such lofty heights and that our Canadian Banks after been punished by the Enron and Global Crossings accounting problems soared to new heights too not until the latest ABCP scandal.
So why did I say 2001 is a renter turned home owner year?!? It’s because, the affordability index had lowered to 44.7% after the high of 65%. While higher than Toronto and Montreal, it’s better. People with jobs see this as an opportunity to buy a home. Do they see this as an opportunity to buy an investment property? Not really, not at least in the beginning. Finally, homes have became affordable. Finally interest rates had came down so low. You put 2 and 2 together and you get a deal. Remember that interest rates and housing prices all balanced out in a sane economy.
Lower housing prices with high rates and higher housing prices with low rates. It’s all relative.
You picked 2001, because you know that’s when the inflection point of interest rate turned.
Anyhow, a pleasant discussion with you and I wish you and your family a Merry Xmas and Happy Holidays.
Cheers!
December 25th, 2007 at 11:26 am
December 25th, 2007 at 11:26 am
http://tinyurl.com/2ll926
December 25th, 2007 at 3:05 pm
“Unless people bought foreclosed homes from the banks or at a deep discount to real asset value, you will be subsidizing the renter in Vancouver at market rent prices.”
I guess it depends what you mean by subsidize. From the renters perspective, paying market rent means you are not subsidized.
But what is market rent? Imagine an airplane full of passengers and all are sitting in the same economy class. Are all of them paying market rate for their fares? Not necessarily.
Because airlines need to fly with a full load to justify its operating costs, they need to fill all of the seats by any means possible. So, some passengers pay full rate, some pay more than full rate and some pay less or even none because of air miles. In a way, some of these passengers are subsidizing a few others who would otherwise have to fly at full rate.
In a sense, the real estate rental market operate like an airline. An empty house can become victims of vandalism and therefore difficult to insure, so landlords always want to fill it with people.
In the case of rental apartment complexes, every tenant pays a different market rate rent. Some of them who had lived for years pay a market adjusted rate subject to inflation + 2%. Some inherited the lease from the previous tenant (a family member or relative) and will enjoy the same affordable rent. It is the new tenant that will face the current market value. But many of these apartment complexes are owned by owners who own them 100% outright. They have 100% equity, so really all these buildings are doing is collecting rent minus building and management expenses and the remainder goes to the owner or owners.
Owners of RE who have very little equity, usually 0 to 10% or even 20% usually end up subsidizing these renters. The key word here is “equity”. How much equity you’ve got in the home translates to how much debt you need to service on your rental property. Real investors usually fork out a huge sum of cash to secure enough equity to get better financing in form of lower interest rates much better than most people get who have no cash, poor FICO scores or nothing to show for.
And don’t forget that in any market sized correction, even a small 20% market price correction puts A LOT of people into negative asset territory. If your half a million dollar rental condo is 100% leveraged after a 20% price correction, who is going to be footing this mortgage bill now? The renter with a lower paying job, whose in essence is being asked by the landlord to pay the full 100% of the mortgage for him or her?
Rent - Mortgage Payment (more than the collected rent itself due to negative asset possibility in the future) - operating expenses is what many of these highly leveraged specuvestors are going to be facing. You can slice and dice it all you want, but people with very little equity is going to end up subsidizing renters regardless.
To answer your question about the impending baby boomer generation and their need to sell which can depress home prices..
I think we need to the remember that the price of the house reflects upon the price of money, or the worth of money itself. Ever since the inception of the Fed Reserve of 1914, money always get cheaper through fractional banking.
In a way, the true price of the house reflects the true financial fundamentals at the time. But people have a choice to sell their homes at fair market value or at a discounted value.
So why would these baby boomers sell their homes at discounted values when most of them own them outright. There is no reason for most of them to do that, unless they are in a financial mess.
A lot of books and speeches had been given by a lot of financial gurus, none other so valiantly as Garth Turner in the late 90s, when the tech boom was rampant. He convinced many of these folks that their homes would be worth nothing when the boomers start selling. In the end, most of them ended up loosing their homes anyhow, not due to boomers selling, but due to massive losses incurred by them speculating on Nortel and 360 Networks.
Again, I think the boomers selling out is a myth simply because, when you own something outright and you’re financially ok to survive, there’s really isn’t any incentive for anyone to sell their homes at insanely cheap prices.
December 25th, 2007 at 10:08 pm
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.
In the case of rental apartment complexes, every tenant pays a different market rate rent.
Wrong, there is only one market rate, the rate that an apartment will rent for when advertised openly.
Some sitting tenants may be paying below market due to rent controls, of course.
December 26th, 2007 at 6:54 am
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!
December 26th, 2007 at 10:08 am
lots of Holiday reading for you here:
http://money.cnn.com/real_estate/foreclosures/