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April 14th, 2008 at 2:14 pm
read on-I agree! I rent in a townhouse complex in East Van where there are a couple units for sale around the high 300s. No surprise, they’re just sitting there, not selling. Meanwhile I’m saving more than $1000 a month to rent and not buy one of those units. Even with a 40 year mortgage and $50k down I’d be paying twice what I pay now. We have definitely reached the limit on affordability in this city. Game’s over.
I pity those landlords who bought recently and thought they could make a profit renting. Just check out craigslist for recently completed buildings and you’ll see what I mean. $1400/month for a condo in Whalley? It’s so funny…and yet….it’s not.
April 14th, 2008 at 12:52 pm
Great links! The funniest has got to be the article that lists why Vancouver real estate will not decline. The best one — we have potable drinking water!!! Is this guy for real? I mean, come on!!!
April 14th, 2008 at 12:10 pm
pay 1400 for a 700k 2-bed town house in Van West….
allows me to save 3 to 4 a month….
the P/E ratio is so silly in this town.
April 14th, 2008 at 12:06 pm
Did you guys get a chance to see this Ozzie video? He is very fair and rather bearish.
http://www.realestatetalks.com.....mp;t=29535
April 14th, 2008 at 11:14 am
“Robin, I pay just over $1100 for 700 sq. feet and parking in the West End. On a $400,000 mortgage, $1100 wouldn’t even cover the interest payments for the first 12 years or so. Add in strata and other expenses and I would be losing big time.”
But you can tell your friends you own a piece of the “greatest place on earth”
April 14th, 2008 at 10:46 am
“I live in Kits and a condo nearby that would rent for about $1,000/mo is selling for $399,000. Hmm… let’s see… that’s about $2,500/mo mortgage payments, plus $300 condo fees, property tax and maintinance.
I’ll hold off for now, thanks.”
Robin, I pay just over $1100 for 700 sq. feet and parking in the West End. On a $400,000 mortgage, $1100 wouldn’t even cover the interest payments for the first 12 years or so. Add in strata and other expenses and I would be losing big time.
April 14th, 2008 at 10:40 am
Franko, I was in Harrison two weeks ago and saw all the For Sale signs. I also saw a lot of building and For Sale signs in Agassiz. On one street in Agassiz I saw at least eight For Sale signs.
April 14th, 2008 at 12:39 am
The banks are running scared…Anyone else have that sense?
Yes. Why are those CDIC ads constantly running in prime-time, just to inform people that their savings (up to $100k) are insured? And why do the ING Direct ads now contain text stating they’re members of CDIC, when they never did before?
Those commercials are expensively produced, and prime-time air costs a lot of money.
The only logical explanation for spending all that money is (despite all the public “it could never happen here” rhetoric) because they’re scared of a run on the bank. They don’t want a local version of Northern Rock, and the marketing campaign is designed to keep the cattle from getting spooked into a stampede.
April 13th, 2008 at 8:40 pm
Americans who bought Can RE a few years ago at a currency discount of 20% or so are obviously trying to cash out before market turns.
This is happening all over BC, particularly in Whistler and Victoria.
These people have seen the writing on the wall in letters six feet high and they don’t buy the line that “the best place on earth” is “different”.
April 13th, 2008 at 8:12 pm
Interesting article above from the New York Times
“Now, though, thousands of those houses stand empty. The I.M.F. estimates that property is overvalued by more than 15 percent. With mortgages drying up and prices swooning, speculators who once viewed Spanish property as a no-lose proposition are confronting hard reality.
In 2005, Julian Felipe Fernandez bought three small apartments, as an investment, in a huge development being built outside Madrid. He paid 100,000 euros as a deposit for the units, and now he is eager to sell them to avoid having to taking on a costly mortgage. But with the market stalled, Mr. Fernandez’s asking price is what he paid for them.
“Three years ago, it looked like I would be able to flip them for a nice profit before they were finished,” he said. “I just want to get them off my hands, to get rid of this headache”
April 13th, 2008 at 8:00 pm
http://www.nytimes.com/2008/04.....ref=slogin
April 13th, 2008 at 7:49 pm
Took advantage of the weather today for a rare drive to Harrison Hot Springs. Upon a smile and a nod from a bored realtor on the steps of a (open house) duplex, we stopped for a look and a chat.
It turned out that owner of the place (as well as another 2 listings by this agent) are Americans trying to lock in profits from the rising Can$ over the last couple of years.
This guy said that about 30% of the current listings in HHS are from Americans, and that they’re bailing out in droves, or at least trying to.
Americans who bought Can RE a few years ago at a currency discount of 20% or so are obviously trying to cash out before market turns.
I wonder what %tage of downtown condos are owned by Americans, and what impact that could have on the direction of the market.
April 13th, 2008 at 5:55 pm
I have an abservation.
The banks are running scared. Scared shitless…..IMHO mortgage lending is down big time (with sales) and they see the writing on the wall as it relates to the present climate of lower sales meaning lower prices, meaning banks will be underwater even more than they are now.
Anyone else have that sense ?
I just finished watching a 30 second TV commerical for the CIBC. It had people “just like you and me” [colons added for sarcasm] making statements like “don’t buy for today, buy for tomorrow”…..”a home is for you and me”……etc, and then it cuts ot a shot of a CIBC loan officer acting very pompoous and self serving in front of a couple of clients as she says “we’ve shown you how to lower your payments and transfer your equity into your new house”…….blah, blah, blah…..
The RBC has commercials that say “Yes, John Doe in Surry your lack of a down payment is alright”…..”Yes Suzy Doe, you’re approved for that vacation property”……and so on.
They are trying hard to sway consumer psychology, because house prices are based solely on perception……there is really no intrinsic value, save for the dirt and a little bit of wood chips and shavings swept up from the shop floor, mixed with glue and water, pressed together until it dries and is called “wood”.
April 13th, 2008 at 1:26 pm
I found a place. It was very easy. Just simply look for something you like. You should have a good idea of what fair market value would be. Just offer what you think is reasonable. As long as you are a decent professional that will likely pay the rent on time and keep their place clean. Many landlord will take a hometown discount to rent to you. The price the landlord ask for is only asking. It is now becoming a renter’s market as thousands of unit start to come onto the market from construction and people leaving town. Many times, when landlord ask for crazy amount of money, no one is willing to pay them. Just offer them something reasonable. Taking a decent or fair rent is better than letting the place sit empty for months.
April 13th, 2008 at 12:20 pm
“Anyway, I’ve been shot down for raising this before, but the low and static rents people mention just don’t match my experience on the ground (and I happen to be actively looking for a place to rent while waiting for the crash.)”
Well, 3 years ago I found my place really easy (2 bedroom) for 1,200. But now that I’m looking for a 3 bedroom the prices seem to have gone through the roof. Walk around. You’ll probably find better deals that way.
April 13th, 2008 at 11:51 am
As others have said, you won’t find cheap rents from a property manager or apt. complex. You have to find an owner who bought years ago, isn’t trying to recoup high mortgage payments, and is more concerned about getting good tenants than getting market-value rents.
Also, it doesn’t hurt to be a white-collar professional couple that landlords want to rent to and are unlikely to raise the rent on later.
April 13th, 2008 at 11:21 am
I found my place ($1,000/mo 1br in kits) by walking around the neighborhood. Just a little sign out front. Similar apartments were going for $1250, so I snapped it up.
The rental market is an inefficient market. There are lots of lazy/cheap landlords out there who can’t even be bothered to properly promote their listings, or to research the market price before renting out.
April 13th, 2008 at 11:01 am
Why can’t I find places that rent for $1000 like everyone else?
Hate to tell you this, but it’s chance/luck usually. I once followed up on an ad, went to look at the place, liked it and when I asked how much found they were asking way below the going market rates in the area. Needless to say, my next words were “where do I sign?”
Tell everyone you see/know you are looking. People are often willing to rent for less if they have some connection, however tenuous, to the prospective tenant.
I’ve never had much luck with property management companies and preferred to rent from small landlords who maybe owned a building or a couple of houses. You’ll come across a lot of dumps, but if you’re persistent you might find what you’re looking for. This is particularly true in the more desirable neighbourhoods.
April 13th, 2008 at 10:34 am
Why can’t I find places that rent for $1000 like everyone else? I’m a long time lurker on housing boards, and I do see rents raising. Certainly not enough to justify current prices, but still significantly.
Anyway, I’ve been shot down for raising this before, but the low and static rents people mention just don’t match my experience on the ground (and I happen to be actively looking for a place to rent while waiting for the crash.)
April 13th, 2008 at 10:19 am
Sorry for being testy, but I think I’m still recovering from the “average Vancouverite spends 70% of income on housing” absurdity that was circulating not too long ago.
Being a rational person in Vancouver is a bit like being Mr. Spock on the Enterprise. No actually, it’s a whole lot worse – Kirk and crew were actually a pretty rational lot, just a bit heavy on the hormones.
April 13th, 2008 at 9:25 am
I live in Kits and a condo nearby that would rent for about $1,000/mo is selling for $399,000. Hmm… let’s see… that’s about $2,500/mo mortgage payments, plus $300 condo fees, property tax and maintinance.
I’ll hold off for now, thanks.
vancouversux.blogspot.com
April 13th, 2008 at 8:26 am
One last STIR: from page 18 of the study Sheepless referred me to:
Despite significant declines in their average STIRs in the late 1990s, renter households in 2001 spent a
considerably higher proportion of their before-tax incomes on shelter than owners. In most CMAs, differences
in the average STIRs of owners and renters amounted to 10 percentage points or more. These
differences largely reflected underlying differences in income. In many CMAs, the average household
incomes of owners were more than double those of renters (see Appendix Table A1.18). Although owners
also paid more for their housing than renters, differences in the shelter costs of owners and renters amounted
in most CMAs to between 20 and 40 percent, far less than differences in income.
I still think Freako and Patriotz made valid points. A little less condescension would be appreciated though.
April 13th, 2008 at 7:22 am
.
.
“I don’t really see the point of these STIR calcs. You can’t reall draw any meaningful conclusions from it”
Exactly. I was wondering when someone would hit the nail on the head.
Meanwhile, back to the market:
Have never seen this many “reduced” adds this early in the season. They don’t usually appear until August.
Sure looks like this is gonna be the year!
April 13th, 2008 at 7:20 am
Here’s my favorite and quite simple calculation……I’ll use my persnal circumstances for it….don’t know if it has been shown here before……
Rent in the west end of DT Calgary $1,125 a month or $13,500 per annum
Replacement cost of my dwelling $475,000
$13,500 divided by $475,000 = 2.8% annual cost of accomodations expressed as a percentage.
Now to “buy” the same place would cost me around 6.50% just considering the interest……then there is another 2-3% of utilities, taxes, condo fees, insurance, etc, etc…..all this BEFORE you build up any equity. Why should I buy again ???
GAWD I am bitter…..why on earth didn’t I go out and triple my cost of shelter like everyone else, I feel so left out………..heh.
April 12th, 2008 at 11:52 pm
Speaking of RE bubbles, Vancouver isn’t the only Olympic city with the problem.
http://tiny.cc/btuZ5
April 12th, 2008 at 11:15 pm
Quite the contrary, there was a large disparity only during the price bubbles of 80-82, the early 90’s, and post-2002.
That would explain my perception. I bought a place in the early 90′s, had a set-back and sold it. I then considered re-entering the market in 2003. It seems I’ve erroneously generalized my personal experience across too broad a time frame.
April 12th, 2008 at 9:16 pm
My landlord just announced my rent increase. $15/month or about 1.3%.
Considering that I think I already have good deal, I’m happy to have got off so easy. Like most places, I estimate I’m paying less than half of ownership costs if I bought the unit at today’s prices. Also, he is fair-minded about pets (not even a pet deposit), so he would rent this place instantly. Mind you, we are model tenants
April 12th, 2008 at 8:17 pm
It has always seemed to me that the disparity between the cost of owning and the cost of buying was so large
Quite the contrary, there was a large disparity only during the price bubbles of 80-82, the early 90′s, and post-2002.
The historic norm in Vancouver, like everywhere else, is that owning has cost about the same as renting. Do note that during the 30′s owning was only 1/2 as expensive (really) as renting.
April 12th, 2008 at 8:14 pm
It has always seemed to me that the disparity between the cost of owning and the cost of buying was so large that it would take many years before an owner was paying a similar portion of his income to a renter even though the owner’s payments remain relatively constant (pending the term of the mortgage) and the cost of renting increases.
Since only a small percentage of the population become owners in a given year, it is glaringly obvious that STIR in the aggregate will be HEAVILY weighted towards longer term owners who have a much lower cost base.
I don’t really see the point of these STIR calculations. You can’t draw any meaningful conclusions from it, and opportunity cost of long term owners is not part of the equation.
April 12th, 2008 at 5:46 pm
My STIR for renting is 14.6% Should I buy?
April 12th, 2008 at 4:50 pm
Sorry, what I meant say was
Those with higher incomes have a lower STIR whether they are owners or renters.
Those with low incomes have a higher STIR because their incomes are lower and those with lower incomes tend to be renters.
April 12th, 2008 at 2:53 pm
“No, it’s due to the fact that the average owner bought their first property (which may or may not be the current one) a couple of decades ago.”
Less than a couple of decades in some cases. Anyone who bought something within their means in 2002 could be looking at a 20% STIR today.
I know that because I’m one of them. My STIR as an owner is 20%. If I bought the same place today, it would be 40% or more and I’d need bigger down payment. Rent on the same place at today’s rents would be 20%.
Overall, those with higher incomes have a lower STIR whether they are owners or renters. Those with low incomes have a higher STIR because their incomes don’t provide the opportunity to be owners.
April 12th, 2008 at 2:24 pm
“The various stats end between 2001 – 2003 but it is very instructive from a historical point of view.”
There’s 2002 – 2004 data on the Stats Canada site.
http://tiny.cc/FzDiq
The document is called The Dynamics of Housing Affordability.
STIR is highest in Vancouver (we’re number one again!) and increased between 2002 and 2004. If I remember correctly, spring/summer of 2004 is when the RE market started to go crazy. Wish I could see the 2005 to 2007 stats.
The 4% restriction on rent increases partially explains why rents are more affordable in Vancouver.
One thing neither survey addresses is length of tenancy. Renters would pay a premium for moving frequently as landlords use that as an opportunity to increase rents. Assuming interest rates remain steady, both renters and owners are better off by not moving.
One advantage to owning is the build up of equity which you can always take some risks with (I’m not talking about buying depreciating assets). The bankers take more interest when you walk in the door. The other advantage is the non-rational appeal of home ownwership.
If you really want to own, you have other options. You could buy out of town property with good income potential.
April 12th, 2008 at 1:57 pm
Inventory levels have doubled YOY in parts of the Westside.
At the high end, Point Grey has exactly twice as many houses on MLS now (52) compared with exactly one year ago (26).
Small sample, yes, but that size change is significant nonetheless.
“The disparity between the the cost of owning and the cost of renting is worse than it has ever been.” « Vancouver Real Estate Anecdote Archive Says:
April 12th, 2008 at 1:52 pm
[...] 2008 · No Comments This story of a renter (who could be an owner but chooses not to) from Markoz at vancouvercondo.info 2008-04-12 07:01:05 [...]
April 12th, 2008 at 1:45 pm
Fun times…west side open houses – WoW – I’ll consider starting to look when that number hits 2,000
April 12th, 2008 at 1:14 pm
FWIW, I’ve noticed an explosion in Vancouver West open houses this spring. There are 437 this weekend. I think there were less than half that last year.
April 12th, 2008 at 9:45 am
I lived in Toronto where it made sense to own versus renting because owning was cheaper. Even when you included opportunity cost on equity. (Essentially 100% financed at current market value and still cheaper to own). That has changed in Toronto in the last 3 years but still almost the same to rent versus owning.
Try doing that in Vancouver.
April 12th, 2008 at 9:40 am
Patriotz – good point. The study does make the comment that rising home prices only affected first time buyers as lowering mortgage rates actually improved “shelter cost to income ratio” for people who already had purchased. I imagine people paying off their homes would also factor into that equation. I’m still surprised that renters spend a greater percentage of their income on shelter than owners in those statistics. It has always seemed to me that the disparity between the cost of owning and the cost of buying was so large that it would take many years before an owner was paying a similar portion of his income to a renter even though the owner’s payments remain relatively constant (pending the term of the mortgage) and the cost of renting increases. Rents don’t increase that much over time (unless you move) due to the legislated 4% cap.
April 12th, 2008 at 9:33 am
If anyone thinks the weather is nice today, you need to get out of Vancouver and see some other parts of the world. But at least it’s not raining… lol.
April 12th, 2008 at 9:29 am
Owning should cost less than renting. Until that happens fundamentals are upside down.
April 12th, 2008 at 9:00 am
Curiously, in Vancouver from 1990-2001 owners spent an average of 20% of their income on shelter while renters spent an average of 30%. Presumably this is due to the fact that average owners make (a lot) more money than average renters.
No, it’s due to the fact that the average owner bought their first property (which may or may not be the current one) a couple of decades ago.
I frankly don’t understand why this isn’t obvious to everyone.
April 12th, 2008 at 8:17 am
I know every so often we have these forecasts on GVREB inventory,so what is everybodys’ opinion now? I forecast we won’t reach 13,000 again this year.???
I mean it!
We won’t ever be below 13,000 again this year!
Strataman
April 12th, 2008 at 7:21 am
“even if the banks knew prices were about to correct by 20%, they might as well still write mortgages since they have nothing to lose when prices go down. Not sure what affect this will have when things do turn.”
I’m not sure what effect this will have either but banks DO lose if prices go down. CMHC may insure the balance but the bank is out the foreclosure costs which would make it a money-losing deal. Also — food for thought — banks will also start to lose if prices drop by more than 20%, since MI is now not required for down payments above this amount. Also I don’t know if home equity lines of credit are insured and apparently such LOCs are being tapped to some degree.
April 12th, 2008 at 7:01 am
Thanks for the link Sheepless. Made some interesting reading. The various stats end between 2001 – 2003 but it is very instructive from a historical point of view. One stat I found very interesting is “shelter cost to income ratio” (STIR) which they split between renters and owners. Curiously, in Vancouver from 1990-2001 owners spent an average of 20% of their income on shelter while renters spent an average of 30%. Presumably this is due to the fact that average owners make (a lot) more money than average renters. Anecdotally, anytime I personally have considered getting into the market my STIR would have increased dramatically. Due to my income, I guess I am not an average renter. It has always been the huge disparity between the cost of owning and the cost of renting that has deterred me. (That, and shoddy workmanship/design). Currently that disparity between the the cost of owning and the cost of renting is worse than it has ever been. I rent an old house just west of Main for $2050 per month. A virtually identical property just 2 doors down recently sold for $700,000. With 10% down my mortgage payments and property tax would be $4,335 per month (based on 6% and a 25 year term). The house is over 50 years old and will soon need a new sewer line (already cost estimated by a plumber at $4,200) and roof. We are in the midst (end?) of an unprecedented run up in house prices but owning has always seemed to me to command a much greater premium in Vancouver than other cities I have read about. I would love to see some stats on the cost of renting vs the cost of owning a similar property in various cities over time.
April 12th, 2008 at 1:20 am
I’m not sure that explains why Vancouverites continue to stay despite the high housing costs. A better life means different things to different people. If well paying jobs were the main attraction, we’d all be living in Fort McMurray.
The point is that historically high numbers are not staying. That’s precisely why net domestic migration is so low. Now of course people who bought before the bubble are OK and have no reason to move, unless they want to cash out.
And the issue is not whether we “all” are going to live in Vancouver or McMurray or whatever. The issue is the direction of migration and comparison to historic trends. People really are moving to Ft. McMurray, and they really aren’t moving to Vancouver in anywhere near the historical numbers. Jobs and affordability really do matter.
April 12th, 2008 at 12:36 am
“Surrey homeless numbers up 15%”
There was an article in one of the local papers where they asked local “experts” (politicians, social workers, etc.) why the homeless were moving to the suburbs. All gave different reasons, including unaffordable housing. Then they interviewed a homeless man in Surrey. His answer was that everyone was going where the resources (drugs) were.
April 12th, 2008 at 12:08 am
“I’ve got news for you: aside from the poseurs who are attracted to Vancouver like flies, “life is better” means people can afford the things they want on the jobs they can get.”
I’m not sure that explains why Vancouverites continue to stay despite the high housing costs. A better life means different things to different people. If well paying jobs were the main attraction, we’d all be living in Fort McMurray.
At today’s RE prices, I will not be surprised if some people leave, but I still think the long term outlook (ten years or more) for the West in general is looking much better than it is in the East.
The historical dependence on trade with the US in Central and Eastern Canada puts them in a precarious situation. Working in Vancouver and BC’s favour are the geographic proximity to Asia, the large population of Asian immigrants with ties to their country of origin and our resource base.
April 11th, 2008 at 11:29 pm
On the topic of inventory, we have averaged about 120 new listings per business day. We only need about 75 per day for the rest of the month to hit 15K. Pretty good odds.
April 11th, 2008 at 11:28 pm
“McGarry is a real estate analyst and agent in Coquitlam,”
Twenty bucks says that McGarry paid about that to plant his “analyst” piece on the newswires.