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June 20th, 2008 at 12:03 pm
One thing I recall from reading stories about the Miami condo disaster was when people canelled their pre-sales, developers would applying their deposits towards the price for any unsold units, effectively undercutting the rest of the market by whatever the deposit was.
This allowed the developers to clear inventory off their books and keep their skin relatively intact, but must have just murdered the median prices for the area.
June 20th, 2008 at 11:57 am
VHB: “put pressure on developers to just SELL the turkeys that are left. Maybe bank forecloses on development and sells them off as REO.”
For the uncompleted units like Anvil or whatever, as we have seen, the bankruptcy proceeding merely auctions the partially completed assets to any other developer willing to take the job on. Units like these, where there is no legacy solvency issue and no desire to carry the property for any length of time, will mark the market when prices are obviously falling.
June 20th, 2008 at 11:55 am
19,000 UNITS CURRENTLY FOR SALE = S-U-P-P-L-Y
25,000 MORE UNITS CURRENTLY UNDER CONSTRUCTION =
H-U-G-E S-U-P-P-L-Y
LOOK OUT BELOWWWWWWWWWWWWWWWW!!!!!!!!!!!!!!!!!
Wrong. New home inventory is at record lows. See Slide 55
http://www.bcrea.bc.ca/economi.....hCheck.pdf
June 20th, 2008 at 11:51 am
Hillary
“I have no idea what you are trying to ask. Please clarify.”
He’s saying your statement has a certainty and a finality to it like you know for a fact that it’s true but you mysteriously fail (as always) to provide the reasoning behind your claims.
June 20th, 2008 at 11:44 am
Thums Up2: PLEASE take your lithium before posting!
June 20th, 2008 at 11:41 am
i know i’m no economic egghead, but doesn’t “speculator” imply some sort of risk? and you know this how?
I have no idea what you are trying to ask. Please clarify.
June 20th, 2008 at 11:27 am
if
NO SUPPLY=NO BUBBLE
then
SUPPLY = BUBBLE
19,000 UNITS CURRENTLY FOR SALE = S-U-P-P-L-Y
25,000 MORE UNITS CURRENTLY UNDER CONSTRUCTION =
H-U-G-E S-U-P-P-L-Y
LOOK OUT BELOWWWWWWWWWWWWWWWW!!!!!!!!!!!!!!!!!
June 20th, 2008 at 11:18 am
That’s a terrifying thought (though probably true). I’d rather see the speculators and developers in those tents, but what ya gonna do?
June 20th, 2008 at 11:18 am
One of the other shoes yet to really fall is credit tightening in Canada. At some point the lenders/insurers will need to account for the downside risk in the prices. In the States, the GSE’s are now the only participant evidenced by the dissapearance of non-conforming loans.
CMHC really should have been jacking up the premiums (by region if need by) as soon as the bubble was evident instead of loosening with product for 0% down and 40year terms.
June 20th, 2008 at 11:16 am
“The first is the risk of speculators not completing while the second is the risk of the developer not completing. My point was that the risk of the former is lower than some here are assuming.”
i know i’m no economic egghead, but doesn’t “speculator” imply some sort of risk? and you know this how?
June 20th, 2008 at 11:12 am
Bubble Lad, Yes those empty condos will be occupied by the homeless one day after the Olympics. Until then, they will be housed in tents 20 miles down a logging road outside of Hope. Compliments of Gordo.
June 20th, 2008 at 10:32 am
I agree with finklebean – Miami condo bust.
The only question is, when does the “tipping point” of come in your building? Because once you notice that it’s a problem, it’s probably too late. Add on Vanouver’s HUGE homeless problem, a militant housing and poverty lobby community, and you’ve got quite a stew (maybe a few Woodward’s style occupations of your local half-finished condo that the developers walked away from when they realized they weren’t going to make the massive profits they planned for).
Are those the rights of the speculators we’re supposed to be protecting in the previous posts? Just wondering…
June 20th, 2008 at 10:29 am
NO SUPPLY=NO BUBBLE
Dave,
Deposit for new project prior to 2007 was 25% after that 20%.Projects which begin around 2005-2006 has earned almost 20 to 35 percent appreciation depend on their locations.
starts are not that much when it comes to completion month or year.2008 already passed six month and lots of big name projects like spectrum one,two,three,four,raffles,la hermitage,elan,and king edward ville were already possessed successfully.
most of projects till 2011 were already sold,some project which start selling in 2008 are sold over 60-75%. in 2011 there is not enough supply for completion because that is a time to start non residential construction.
June 20th, 2008 at 10:27 am
I love in London, UK. You should see the meltdown happening here. All started just like what we are seeing in Vancouver now.
June 20th, 2008 at 10:19 am
The ride down is going to be just as exhilarating as the ride up, only more so. There have been some comments on the concern of buying condos once the price gets to realistic levels. Based on personal experience I would be leery of purchasing a place to live in any development that wasn’t occupied by a majority of owners.
Absentee owners may not be, and probably won’t be, as concerned with investing in maintenance as resident owners. Renters, frequent moves, the increased potential for criminal activity take a toll on the buildings and the conscientious owners.
From experience I can say that getting drug dealers out of your building once they are living there is no ‘walk in the park’.
Stuff to ponder as prices come back down to earth.
June 20th, 2008 at 9:50 am
RE: The front page of todays Sun.
MSM reports of fraud a sign of the top if you needed another one.
http://cowles.econ.yale.edu/P/cd/d16a/d1610.pdf
June 20th, 2008 at 9:48 am
Dave, What if you factor in developer financing? What happens if they get behind on THEIR payments?
Like most things… it depends. There are way too many factors to cast a broad generalization.
In most cases, the banks will extend the financing. In some cases (high risk situations), the banks will require secondary financing.
At the end of the day, banks are in the business of loaning money, not selling condos. The last thing they want to do is put everything on hold or own a partially completed building. That said, banks understand the concept of sunk costs quite well and will not throw good money after bad. But… the assumption in your question is that the development is already complete (i.e posession date). So, in most cases, the answer would be to extend the loan.
June 20th, 2008 at 9:43 am
Ted, we are talking about two different things. The first is the risk of speculators not completing while the second is the risk of the developer not completing. My point was that the risk of the former is lower than some here are assuming. I agree with your point that more developers are not going to be able to complete due to poor cost control.
Developers go under in all markets.
June 20th, 2008 at 9:27 am
developers have more of a buffer than many assume.
Yeah? Maybe some do, but even in a ‘hot’ market the Eden group couldn’t make it work – then there’s the receivership of H+H and Garden City, The work stoppages on that tower in Abbotsford, overruns on projects like Anvil in New West, etc. I have a feeling this downturn is going to show us some more of these types of stories.
Go by and check the activity of the Coopers Pointe development by the Cambie bridge. There is almost no work going on! And this is a site run by one of our “premier” developers who are well financed (apparently). Seems like they are trying to preserve cash! Too bad we don’t have any publicly traded home builders so we could have some transparency.
June 20th, 2008 at 9:12 am
Warren, is that really a dilemma?
1) Make sure you get a good deal and factor in the possibility of building envelope problems.
2) I’d use a buyers agent unless you’ve got a lot of experience with real estate transactions. With the slowdown you can cut a deal with an agent.
3) Do you really care if prices continue to go down after you’ve bought if your monthly payments are less than rent and leave you with plenty of headroom to save and invest? As long as you’re prepared for a personal downturn (i.e. job loss, illness, desperate need for a vacation, etc) you’ll be fine. And if you have a decent buffer and savings you can use additional price drop to invest – remember ‘buy low sell high’?
June 20th, 2008 at 9:03 am
the developers who know what they are doing will win out.
I Assume by ‘win out’ you mean ‘manage to avoid bankruptcy’.
June 20th, 2008 at 9:02 am
Dosh,
There is something called “rate of change”, maybe you know it by the mathematical terms “derivative” and “second derivative”….
Let’s play a little game:
Guess the next number in the series:
1000
1900
2400
2500
2200
1500
???
Best regards,
June 20th, 2008 at 9:01 am
Oh yeah, and local news:
Are you sure you still own your home?
a B.C. Supreme Court decision this month ruled that while a true owner could regain title to a property if it was fraudulently transferred, mortgages taken out on the property — even if fraudulently obtained — still stand.
June 20th, 2008 at 9:00 am
Fast forward 24 months, there are thousands of condos on the market, nobody is buying, etc. I will have plenty of money to purchase, but how does one deal with the following:
1) Analysis paralysis – there are so many condos out there, prices are all good, but every month a new report comes out about bad building quality, etc. How do you make what is still the biggest investment of your life?
2) Do you use a buyer’s agent?
3) How do you know prices won’t continue to drop?
June 20th, 2008 at 8:55 am
Here’s the problem with putting all your eggs in one basket:
Real estate mess hurts those in field twice.
Now Butterfield has become a poster child for the real estate slide: Her income has fallen 85 percent and her home is in pre-foreclosure, scheduled to be auctioned to the highest bidder in August.
Butterfield is hardly alone. Among the many victims of the housing industry meltdown, the millions of people who worked in the field are among the hardest hit.
In residential construction alone, nearly a half-million jobs have disappeared since the peak in September 2006. Membership in The National Association of Realtors, which nearly doubled over the decade ending in 2006 to about 1.4 million, is on its way back down.
June 20th, 2008 at 8:55 am
I am familiar with those failed developments. Yes, there are going to be a lot more of these stories becauase there are a lot of people in the biz right now who shouldn’t be. The rising market has saved quite a few of them.
Now that things look flat going forward, the developers who know what they are doing will win out.
Keep in mind that the vast majority of new home construction gets completed. These stories are the exception not the rule. The number could double and it would still be small.
June 20th, 2008 at 8:47 am
Dave, What if you factor in developer financing? What happens if they get behind on THEIR payments?
June 20th, 2008 at 8:42 am
developers have more of a buffer than many assume.
Yeah? Maybe some do, but even in a ‘hot’ market the Eden group couldn’t make it work – then there’s the receivership of H+H and Garden City, The work stoppages on that tower in Abbotsford, overruns on projects like Anvil in New West, etc. I have a feeling this downturn is going to show us some more of these types of stories.
June 20th, 2008 at 8:32 am
You guys sure get excited over nothing. The benchmark house price dropped by about $50 last month. Thats a drop of approximately zero percent. Is your plan to wait and hope that prices drop $50 a month for 100 years so you can swoop in and get a deal?
June 20th, 2008 at 8:29 am
I don’t agree with much of the commentary on the impending doom developers supposedly face.
If the market turns down (and yes I predict a small drop this Fall), then speculators who purchased assignments will lose out. But, the developers have more of a buffer than many assume.
Firstly, speculators pay a deposit (say 5 to 10%) to the developer. Secondly, the condo market has gone up 10% in the past year. In order for developers to lose out, the market would first have to drop at least 10 to 15%.
Although some speculators whose assignments are worth nothing will walk, it may not affect the developer substantially. The developer would have had to compete with those sales regardless seeing that all speculators were planning to flip to longer term owners anyways.
As discussed above, although a speculator may lose out, the developer can still be ahead because the market has mostly gone up since they initially sold the assignment.
IF, and that’s a big IF, the market drops to a level that the developer is in the red (at least 10 to 15%) from an assignee walking, then it won’t be worth their time pursuing legal options. The odds of getting any type of cost recovery are nil to none and not worth legal fees. The exception to this might be mega-purchasers who go in a buy a large number of assignments.
June 20th, 2008 at 8:14 am
too funny!
http://tinyurl.com/4myzhe
Con artists sell homes without owners knowing
June 20th, 2008 at 8:02 am
Great days, great days.
My observations:
1. It is happenning faster. Apparently the ‘bubble’ is already very experienced, and it unleashes itself very efficiently in the Nth market – especially in the LAST market. The fury of the bubble knows no limits. Take cover!
2. Richmond is still oblivious. Most “for Sale” signs have “Sold” stickers on them. Apparently the Chinese community didn’t hear about the bubble. Most realtors are Chinese, and the new (poor) Chinese immigrants buy from them.
). They sell to the new immigrants…
The rich Chinese immigrants are the ones selling (inside info
Regards,
June 20th, 2008 at 7:55 am
a) much higher percentage of renters; desperate flippers have low standards. Hello growups, hookers, and drugdealers.
Exactly. There are a couple of townhouse complexes I’ve looked at buying into when prices drop, but I’m also leery about the upcoming mix of tenants when flippers rent to whoever has the first month’s rent + deposit. There’s going to be some nice-looking slums in the GVRD, especially in outer burbs like New West, Surrey, etc. Collecting strata fees may also become problematic, which means that resident owners will foot the entire bill for the complex.
June 20th, 2008 at 7:39 am
I live in Burnaby, close to New West, and a recent duplex/townhome development has gone up behind our rental house. I believe there are twelve units in total, asking price starting at $688, 000. What a joke, this area is no better, probably even worse, than New Westminster in terms of lifestyle. Anyway, two of these units have been sold, the rest just sit there with no sign of activity whatsoever. Next street over there are four houses for sale on one block. Two have “new price” added to the for sale sign (although probably only a $10,000 drop, whoopee). Things are definitely getting interesting.
My girlfriend and I sit on the deck drinking margaritas and laughing at the rubes as our possibilities start to get bigger and sand their worlds starts to shrink.
The whlole lower mainland is sitting on an economic knife-edge and people are too blind with greed to realize it. I’ve seen it before too with other things. People get dollar signs in their eyes and irrationality takes over. Perhaps they can take a cue from Marie Antoinette when Vancouver is burning and eat cake to live!
Viva la revolution!
June 20th, 2008 at 7:18 am
That “Assignment Deals Still Available” article…why does it look so much like a newspaper article. It’s actually just an ad.
The description of New Westminster Quay area cracked me up the most. $628,450 for a townhouse there? Geez man, I live in that area now (for a few more weeks), and the way it’s getting there lately, you’d have to pay me that much to take a place there.
June 20th, 2008 at 7:12 am
Yes, as presale buyers don’t show up, many things will happen to some of these buildings
for example: See Miami.
Of course our market is different – we have the games coming which means increased demand for accommodation temporarily and then a big vacuum as everyone leaves town after.
June 20th, 2008 at 6:46 am
And that’s why I don’t really care too much about how tight the presale contracts are.
If the market price drops below the pre-sales price buyers will be unable to obtain financing at closing time. Won’t this release them from any contractual obligation to complete the purchase?
June 20th, 2008 at 6:45 am
“You can rent 22 floor units from Rennie in the mean time…”
Yes, as presale buyers don’t show up, many things will happen to some of these buildings:
a) much higher percentage of renters; desperate flippers have low standards. Hello growups, hookers, and drugdealers.
b) strata fees go through the roof as the total costs are divided by a smaller pool of owners
c) more owner occupiers want to bail because of a) and b)
June 20th, 2008 at 6:24 am
You can rent 22 floor units from Rennie in the mean time…
June 20th, 2008 at 6:19 am
I like L’Hermitage. Maybe I can get a deal.
June 20th, 2008 at 6:13 am
Already hearing about people walking away from deposits. All the units on the 22 floor at L’Hermitage were bought by one guy who failed to complete and walked. Anyone else hearing about uncompleted presales?
June 20th, 2008 at 6:10 am
Came across this article too recently:
http://www.canada.com/victoria.....e130250e5b
I wonder if this will eventually hold a realtor responsible for selling homes to criminals or allowing money laundering to take place under their watch. The courts will have to determine the standards once tested through litigation. Interesting read.
Titled: Tighter money laundering legislation on the way
“We know organized crime buys houses and they buy houses on a regular basis,” said Ken Fraser, executive director of investigations with the Financial Institutions Commission of B.C….
Under the new rules, real estate agents have to “ensure the person they are dealing with is the person whose ID is produced,” Fraser said.
Last November, police in B.C. froze $6 million worth of real estate they claim was owned by Yong Long Ye, the alleged mastermind behind a drug syndicate charged with importing thousands of kilograms of cocaine from the United States and supplying local methamphetamine and ecstasy labs with ingredients.”
June 20th, 2008 at 5:58 am
From the “BC On Pause” advertisement in the Sun:
“But this isn’t a bust — at least not yet: It’s a breather.”
Did I read that right? YET? They really suck at trying to massage the truth to their advantage! So essentially, it’s a buyers market, lots to choose, but not to worry no crash here just yet… so yes, go out there and buy now or you’ll miss the crash! Hilarious!
June 20th, 2008 at 5:58 am
note the provincial election is May 2009
June 20th, 2008 at 5:58 am
“HUGE pressure for them to let Joe Flipper off the hook and make someone else take the bath.”
And that’s why I don’t really care too much about how tight the presale contracts are. I don’t think the existing law will matter, because the law will change in the face of 10,000 BCLiberal voting angry flippers.
June 20th, 2008 at 5:55 am
“And the anvil is going to be people walking away from pre-sales”
Bingo. I’m fascinated to see how this will work out.
1. Prices fall by 10% (or more).
2. Some flippers decide that it is better to walk away from their deposit rather than complete and be stuck with a cash flow bleeding turkey.
3. Developers in a panic because a big chunk of their presales aren’t showing up.
4. Developer tries to enforce contract with joe retail flipper.
5. Joe flipper a) can’t be found (drug dealer; lives offshore; whatever b) has no $ and so either declares bankruptcy or developer stops pursuing. c) goes whining to the media / govt about the big mean developers.
6. Banks a) put pressure on developers to just SELL the turkeys that are left. Maybe bank forecloses on development and sells them off as REO. b) quickly pull financing on other condo projects just getting underway around Vancouver.
7. Legal proceedings continue to try to enforce contract. BUT–here’s the great and interesting unknown–what does the government do? I predict HUGE pressure for them to let Joe Flipper off the hook and make someone else take the bath.
Sounds like fun!
June 20th, 2008 at 4:58 am
I like this one from the Miami article: Paola Arboleda, manager of the Mark Yacht Club on Brickell Bay, said two months ago residents noticed someone hopping among various vacant units. A little snooping revealed the interloper was a mortgage broker
June 19th, 2008 at 11:36 pm
BC housing market ‘on pause‘
Yep, just like Wile E. Coyote is ‘on pause’ over the Grand Canyon.
And the anvil is going to be people walking away from pre-sales, as VHB has pointed out.
June 19th, 2008 at 11:17 pm
Holy crap! If the rest of the month keeps up like it’s been going so far, it looks like…
Sales will be:
DOWN 20% MOM
DOWN 40% YOY
(side note: this is assuming that PaulB’s daily sales numbers include condos, townhouses, and SFH)
I’m amazed at how quickly the market has turned– after months of wondering how long it would take, the turn happened over a one-month period.
June 19th, 2008 at 10:39 pm
This market is over. You can stick a fork in it. REBGV inventory is at 18898 units today and will hit 19K shortly. From there, inventory will hit 20K and who knows where it will go after inventory exceeds 20K.
Not to mention sales so far this month is almost down 40% compared to last June.
The exploding inventory won’t be absorbed for years to come as more and more flee for the exits.
Sorry specuvestors, your time is up.