Friday Free for All!
Those of you that are regular visitors know what this means. The ‘free for all’ post is a general news round-up and open topic discussion we do every weekend. Here are a few stories I’ve noticed this week:
-zero down mortgages ‘have been quite popular‘
-price drops on the outskirts and upper end
-cracks in housing market spur new rules?
-new rules won’t deflate market
-buy now, save later
-house sales slow across North Shore
-lower mainland house prices start to sag
-building still booms in Vancouver
-REBGV listings continue rapid growth
-leaky condo crisis far from over
-Bank of Canada urged to raise interest rates
-new Canadian bankruptcy laws
-six months, 343,000 lost homes
-Fannie Mae and Freddie Mac, too big to fail?
-Fannie Mae and Freddie Mac shares plummet
So what are you seeing out there? Post your thoughts, news links and anecdotes here and have an excellent weekend!
note: any conversation on real estate or economics is allowed, please keep it civilized. When posting articles please only quote pertinent points and link to the original instead of pasting the entire article here. Pasting a link will automatically create a clickable hot-link. Thanks!
July 10th, 2008 at 11:25 pm 1
Also, investments in a registered retirement saving plan, or RRSP, will be exempt from seizure, except for any contributions made in the year prior to bankruptcy.
This is already the case in the US (IRA's, etc).
But what's happening? There has been a big surge in early withdrawls from IRA's by homeowners trying to "save" their house or make payments on credit cards, etc.
Dumb-de-dumb-dumb
Like or Dislike:
0 
0
July 11th, 2008 at 1:04 am 2
FULL FLEDGED GOVERNMENT OF HOME OWNERS IN CANADA.
"A recent Statistics Canada report concluded that home ownership is at record levels, with over two-thirds of Canadians owning their own home".
Alright bears you can decide if you like to buy any unit or not it's not our problem because we don't need any independent (bear)mla's or mp's, owners government is a stable government that works 24/7/365 decades after decades.
Sweet!
Like or Dislike:
0 
0
July 11th, 2008 at 1:05 am 3
Home starts in the Metro Vancouver area were up nine per cent during the first six months of 2008 compared to the same time period the year before.
Combine this with skyrocketing inventory…
TGIR. (ThankGodIRent) Looking forward to buying in 2011!
Like or Dislike:
0 
0
July 11th, 2008 at 1:07 am 4
U.K. pound sterling has really seen the dark side of all the bright lights that shined on the currency about two weeks ago… Recall that then traders believed the Bank of England (BOE) would reverse their rate cut, and pound sterling traded at $2 again… Ever since then it has been in sell-off mode, and last night was no different as house prices keep tumbling… It was reported that U.K. house prices fell by 2.0% during June, and were down 6.1% in the last quarter. As I said the other day, the BOE has painted themselves into the same type of corner as their brothers-in-arms at the Fed… The BOE can't raise rates to fight inflation, and they can't drop them either as the economy teeters…
Like or Dislike:
0 
0
July 11th, 2008 at 1:15 am 5
Switching from Gold to Silver…."Stay alert for strong moves in the price of the white metal, especially those connected with minor changes in the price of gold. They may signal that we are on the brink of another spectacular, parabolic rise."
Like or Dislike:
0 
0
July 11th, 2008 at 5:40 am 6
“A recent Statistics Canada report concluded that home ownership is at record levels, with over two-thirds of Canadians owning their own home”.
Hey that sounds familiar… where did I hear something similar… oh yeah…
In the US two years ago!
Like or Dislike:
0 
0
July 11th, 2008 at 6:56 am 7
"In Vancouver and Victoria, prices also fell on a monthly basis, although they were still up 2.7 per cent in Vancouver year-over-year. In Victoria, however, prices were flat from a year earlier."
Victoria will be negative YOY in a month and Vancouver before Halloween.
TSIHTF folks.
http://www.reportonbusiness.com/servlet/story/RTG…
Like or Dislike:
0 
0
July 11th, 2008 at 7:52 am 8
This is simply a new wealth re-distribution scheme, and a clever one too.
All these people who were never meant to be "wealthy" to begin with are now going to give away everything that they "have" to the rightful owners of all the money in this world, plus interest.
That's all.
Good Bye fake middle class.
We're going to be waaay old school again – the LandLords and the Paupers. Nothing in between.
Like or Dislike:
0 
0
July 11th, 2008 at 7:54 am 9
"Within 12 months, it’s a safe bet to say everyone’s house will be worth 15% less, and some will be cheaper by a third. Meanwhile, lots of people are about to lose their jobs in sales, construction and finance."
"There is a big bubble here and it will burst" Bob Rennie
Like or Dislike:
0 
0
July 11th, 2008 at 7:54 am 10
Sorry, in my post above by "This" I meant the recent "housing boom"… and the fact that 3/4 canadians "own" their homes.
Like or Dislike:
0 
0
July 11th, 2008 at 7:59 am 11
Furthermore, I don't know if many people know it, but in this country nobody actually "owns" anything.
The charter of rights and freedoms cleverly forgets to include anything about personal property.
Even if you "own" your home outright (paid off and all) they can take it away from you as soon as they find oil under your lawn or a new Skytrain line has to go through it. We are a nation of Serfs. Get used to it.
Like or Dislike:
0 
0
July 11th, 2008 at 8:25 am 12
In order for the housing market to fail you need failures. Vancouver is a town full of winners so therefore the market cannot fail. Toronto on the other hand is doomed.
Like or Dislike:
0 
0
July 11th, 2008 at 8:58 am 13
Mr Simpleton,
Excelent analysis. I totally agree with the 'wealth redistribution' angle. The 'smart money' was out of the market a year ago. They went on to find the next bubble.
In Canada it is going to be even worse, since the bank will keep coming after the poor bastards for years after they lose their small cardboard box.
It is a lifetime financial ruin for anyone who bought with little down in the past three-four years. There is no way out. No jingle-keys. Just a lifetime (40 years) of servitude to the lords, without anything to show for it. Feudal times indeed.
As I have mentioned to Wow before, the house we will build in 2016 will be made out of concrete, and bricks. Nobody read the three little piglets here?
Best regards,
arit
Like or Dislike:
0 
0
July 11th, 2008 at 9:34 am 14
John = hilarious
Like or Dislike:
0 
0
July 11th, 2008 at 9:44 am 15
Hey John,
while you are at it. Why don't you say the people in Bc are sexy than Toronto. that is why BC will be immune to the Bust.
" and stop looking at my ass"
Like or Dislike:
0 
0
July 11th, 2008 at 9:46 am 16
ok…that was kinda mean
sorry
Like or Dislike:
0 
0
July 11th, 2008 at 10:38 am 17
Full time jobs tumble, Ontario hit hardest
Like or Dislike:
0 
0
July 11th, 2008 at 10:39 am 18
PRICE IS RIGHT
Current Canadian house prices are in line with economic factors such as low interest rates, rising incomes and a growing population, a view supported by the International Monetary Fund.
Mortgage term being chosed for convenient is not equal to servitude other wise no person is willing to chose occupation in any company- the way we chose our occupation same way we chose mortgage term.
"""Hey that sounds familiar… where did I hear something similar… oh yeah…In the US two years ago!"""-#6
Later those American discovered that Vancouver British Columbia is "the best place on earth"Till 2006 around 160,000 American moved to Vancouver and some other part of Canada to enjoy the title of Canadian home ownership more of them are up and coming.
Like or Dislike:
0 
0
July 11th, 2008 at 11:44 am 19
Jesus Christ, you really are deluded Thums up. Do you actually believe this crap you constantly spew? Sort yourself out mate, you're embarrassing yourself and anyone related to you.
Like or Dislike:
0 
0
July 11th, 2008 at 12:26 pm 20
Psychology seems to be shifting too. I just had a chat with a friend of mine who sold last spring (after I pointed her here and to several other blogs). For a year she's been enduring, "You'll be priced out of the market forever." and similar comments from friends and family. Now she says for the first time some of them are starting to say, "Hmm, maybe that wasn't such a dumb move after all…"
Another friend who was so confident in the market a year ago she bought a second condo is panicking over whether she can sell it in time (it needed rain shielding and is waiting on a couple more fixes before it can be certified). She's hoping to have it on the market by mid July.
Both of those represent a 180 turn in psychology from a year ago, if this is normal we're about to see that "rush for the exits".
I suspect (though I have nothing hard to back this up) that immigrants who are insulated by their communities will be the last to catch on.
Like or Dislike:
0 
0
July 11th, 2008 at 12:34 pm 21
Cameron Muir was on Breakfast Television this morning beating the RE drum – makes me thing they're moving to Defcon 1.
Like or Dislike:
0 
0
July 11th, 2008 at 12:35 pm 22
Patriotz,
In regards to your post #7, that StatsCan article is only talking about new home prices. The median price in Victoria is still up about 8% from last July. However, that's down from 11% a couple months ago and the trend is (obviously) downward…. I'd say end of September, middle of October maybe, for flat YOY in Victoria.
Like or Dislike:
0 
0
July 11th, 2008 at 1:17 pm 23
So Thums/Satv/Krissh/Time/Informer/Browntown/Nutslap
If the "PRICE IS RIGHT" what are you buying?
If you aren't buying do you know anyone else who's foolish enough to buy something that will go down for decades to come?
If yes what are they buying? The realtors I've been talking to can't find buyers, could I send some of them to your warehouse? I'm sure these buyers earn $150k and have $40,000 down and no debt? Right? If this works out you'll even get a referral commission! If you refer enough you can buy even more real estate! or use it to go to the CAFE!
Like or Dislike:
0 
0
July 11th, 2008 at 1:19 pm 24
I've said this a million times and I'll say it again. Canada's housing market is fine. The banks are saying, the government is saying and even more importantly, the Real Estate Boards are saying it. Let's see who should people trust?
Like or Dislike:
0 
0
July 11th, 2008 at 1:19 pm 25
BDK is right and a very dangerous player. Don't epect thumsup to reply because he has no money and doesn't know anyone stupid enough to buy so expect him to ignore the question.
Like or Dislike:
0 
0
July 11th, 2008 at 1:24 pm 26
I’ve said this a million timesyou exaggerate somewhat and I’ll say it again. Canada’s housing market is on a fine edge. The banks are saying, the government is saying and even more importantly, the Real Estate Boards are saying it.
we are scared Let’s see who should people trust?
Like or Dislike:
0 
0
July 11th, 2008 at 1:24 pm 27
Right John, because in the USA they had lots of warning from the banks, the government and real estate boards – they were all warning that house prices had gotten out of hand and were in danger of crashing, but nobody would listen right?
Like or Dislike:
0 
0
July 11th, 2008 at 1:29 pm 28
Finally I am reading about The Three Little Piglets – respect for arit.
My relative, a professional construction engineer from Poland with 40+ years of experience, was here visiting my family for the first time (his first time in North America). Once he saw few construction sites (SFH, lowrise and highrise ones) he wholeheartedly LOL about house quality and the building code. He could not imagine that people throwing away massive amounts of money to get a house that has warranty for max 10 years.
He and his family are living in an apartment building that was built about 140 years ago. For the whole lifecycle, the roof has been replaced once about 20 years ago, and there was no structural repairs. Sewer is still original and will be replaced in 10 years. Water pipes were re-done about 30 years ago. The 4-storey building still has the original stucco that have been painted every 6-7 years and the original wiring. Inside the apartment, all doors and hardwood (oak) and stucco are in the same shape as 140 years ago.
Anybody can say something similar about their dwelling in Van?
Like or Dislike:
0 
0
July 11th, 2008 at 1:41 pm 29
"I’ve said this a million times and I’ll say it again. Canada’s housing market is fine. The banks are saying, the government is saying and even more importantly, the Real Estate Boards are saying it. Let’s see who should people trust?"
I'm going to have to say "Someone who isn't trying to sell me real estate." Robert Shiller, for example.
Like or Dislike:
0 
0
July 11th, 2008 at 2:10 pm 30
Guys, John is just having a laugh. Don't take him seriously.
Like or Dislike:
0 
0
July 11th, 2008 at 2:16 pm 31
Partisan Spectator
I have the same with European friends. The main problem most of them have (and I'm sure your brother too) is that anything under 4-5 stories is built in wood here. Try telling the people in Sichuan Provence that stone is better than wood for building in an earthquake zone… Some parts of the building code are different for a reason.
Not that I'm saying there's no shoddy work going on, it's just that people from Europe don't have the same needs that people living in Vancouver have and they have a tendency towards close mindedness when it comes to these things.
Like or Dislike:
0 
0
July 11th, 2008 at 2:39 pm 32
Holy smokes, another 246 new condo listings yesterday (55 sales) as reported on Paul B's site. The big bearish headlines in the MSM are pushing investor sentiment past the tipping point.
Like or Dislike:
0 
0
July 11th, 2008 at 3:05 pm 33
Drachen,
Thank you for comments on my post. One small note about earthquake zone. AFAIK, in whole Canada and US buildings under 4-5 stories are mostly built of wood. Does it mean that the East Coast and central parts of both countries are in the earthequake zone?
Like or Dislike:
0 
0
July 11th, 2008 at 3:13 pm 34
There's certainly a lot more brick and stone as you move east. I'm not aware of any numbers but I believe wood construction is much more rare in Ontario from personal experience.
Like or Dislike:
0 
0
July 11th, 2008 at 3:32 pm 35
ING has already changed its mortgage rules to align with the Oct. 15th changes.
http://looniesandsense.blogspot.com/2008/07/ing-l…
Like or Dislike:
0 
0
July 11th, 2008 at 3:35 pm 36
Drachen – there's nothing to stop anyone from building solid earthquake proof stone buildings in Vancouver. We build leaky wooden buildings in Vancouver because wood is cheap, available, and quick to put up. (want to get that roof on before the rains start).
Like or Dislike:
0 
0
July 11th, 2008 at 3:41 pm 37
I lived in Mexico in a house built in 1910 made of stone. When the big earthquake of 85 hit the house didn't get a crack. It's still there, solid and safe. But wood is not a cheap and easily available material back there.
Like or Dislike:
0 
0
July 11th, 2008 at 4:11 pm 38
>>>>>>>>>>>>>>>>>>>>>>PUBLIC ANNOUNCEMENT<<<<<<<<<<<<<<<<<<>>>>>>>>>>>>>>>>>>>>>IMPORTANT NOTICE>>>>>>>>>>>>>>>>>>>>>>
>>>>>>>>>>>>>>>>>DON'T MISS THIS OPPORTUNITY>>>>>>>>>>>>>>>>
I think the elimination of the 40yr with zero down mortgage will actually put upward pressure on prices in thriving economic marvels like Kelowna, Victoria and Vancouver.
Now our highly skilled RE experts can concentrate at providing excellent investment opportunities in BC world class cities to better financially secured upscale investors, without wasting time with prospects that may otherwise not meet the standards required to participate in acquiring real estate in the best place on earth.
My advice would be to enlist the help of a professional who is a member in good standing with your local real estate board.
Just practicing my spinning….what do you think Rob?
Like or Dislike:
0 
0
July 11th, 2008 at 4:14 pm 39
It's not that they *can't* do a good job around here, it's just that if they do they can't charge you to rebuild in 15 years when it starts falling apart. Planned obsolescence. The dark cabal of developers in this town probably goes to bed each night praying for the big one to hit.
Like or Dislike:
0 
0
July 11th, 2008 at 4:30 pm 40
The FDIC in the States just seized control of IndyMac Bank.
Like or Dislike:
0 
0
July 11th, 2008 at 4:31 pm 41
Globe & Mail:
http://www.reportonbusiness.com/servlet/story/RTG…
Like or Dislike:
0 
0
July 11th, 2008 at 4:35 pm 42
I used to work in construction in Ontario. There is a lot more brick, but almost all of it is brick facade over wood frame construction.
Like or Dislike:
0 
0
July 11th, 2008 at 4:38 pm 43
Holy shhhhhht, here's a link to the IndyMac story:
http://www.msnbc.msn.com/id/25644988/
The bank is the largest regulated thrift to fail and the second largest financial institution to close in U.S. history, regulators said.
"This institution failed today due to a liquidity crisis," OTS Director John Reich said.
IndyMac had $32.01 billion in assets as of March 31.
Like or Dislike:
0 
0
July 11th, 2008 at 5:23 pm 44
I see Bubble Lad beat me to a IndyMac story link. Next week should be an interesting one!
Like or Dislike:
0 
0
July 11th, 2008 at 6:29 pm 45
Housing Bubble's Pop Could Doom Boomers
http://www.mainstreet.com/housing-bubbles-pop-cou…
"People took a very big hit," he says. "The problem is, coming off both bubbles, people were not saving. They had changed their behavior because they had thought all this money would be there, and then it wasn't."
Just like Vancouver, Kelowna and Victoria kool aide drinkers.
Like or Dislike:
0 
0
July 11th, 2008 at 7:12 pm 46
yeah nutsters, don't worry browntown is back! good time to buy now before halocopter ben in states gets uplifted! gold to the moon nutbars! look for money drop out of corner office window bdk!
Like or Dislike:
0 
0
July 11th, 2008 at 7:24 pm 47
Indymac Friday Night Dance Party
hey, your loss if you don't see these
Party Time
http://siliconinvestor.advfn.com/readmsg.aspx?msg… http://siliconinvestor.advfn.com/readmsg.aspx?msg… http://siliconinvestor.advfn.com/readmsg.aspx?msg… http://siliconinvestor.advfn.com/readmsg.aspx?msg… http://siliconinvestor.advfn.com/readmsg.aspx?msg…
Like or Dislike:
0 
0
July 11th, 2008 at 7:33 pm 48
Anon #39
I strongly agree with you about "planned obsolescence". While I accept wood as main building material, the quality of other materials and construction process rouses censure.
Nothing prevents builders from using galvanized copper for roofing instead of ashfalt shingles. There is no need to chop wood before making door frames and baseboards. It would not hurt to erect solid walls between rooms (sound insulation). No producer gives more than 10 years warranty for stucco – what a joke. The list can be extended…
My father once told me that it required skills to hammer in a nail into a wall in his old Polish building. If you happen to get into cement between the bricks – forget about it. The cement used to be poured with natural egg yolks. I guess for that reason the dishwasher manufacturers do not guarantee eggs removal from dishes.
If you compare Van to a city of similar size in Europe, there is substantially less related to construction and repairs businesses. This is for a reason. The quality of construction does not require that many as we have here. Construction for the sake of repairs. Repairs for the sake of construction. What a waste of resources and money.
Like or Dislike:
0 
0
July 11th, 2008 at 8:06 pm 49
Is she trying to say anything here?
yeah nutsters, don’t worry browntown is back! good time to buy now before halocopter ben in states gets uplifted! gold to the moon nutbars! look for money drop out of corner office window bdk!
OR is it trolling?
http://vancouvercondo.info/forum/viewtopic.php?f=…
Like or Dislike:
0 
0
July 11th, 2008 at 9:31 pm 50
I think this bank failure is further evidence of the strength of our market. Not one single bank has failed in this country.
Like or Dislike:
0 
0
July 11th, 2008 at 9:55 pm 51
sorry rx! Looking forward (gulp) to next week…
Like or Dislike:
0 
0
July 11th, 2008 at 10:05 pm 52
Not one single bank has failed in this country.
Ever hear of the Bank of BC?
History of Member Institution Failures. Since CDIC was created in 1967, 43 member institutions have failed.
Like or Dislike:
0 
0
July 12th, 2008 at 2:49 am 53
John,
Banks didn't start failing until after housing prices dropped. Wait a few years for the Canadian housing market to get really bad, and you will see plenty of bank failures here.
Like or Dislike:
0 
0
July 12th, 2008 at 4:34 am 54
Unlikely, because the banks aren't exposed to risky residential mortgages (guess who is). Also the banks are national in scope but the bubble isn't.
I remember reading that the 80's failures of CCB and Northland Bank in Alberta were due to risky commercial lending, including in the oil/RE bust US Southwest, and I think Bank of BC failed for similar reasons.
If you do some googling on the failed institutions in the CDIC link you will see similar stories.
I would not be surprised to see some small credit unions which have been overexposed to local RE developers go down, there is nothing new about that.
But the major banks? No.
Like or Dislike:
0 
0
July 12th, 2008 at 8:20 am 55
Guys, John is pulling your legs, don't rise to the bait.
Like or Dislike:
0 
0
July 12th, 2008 at 9:49 am 56
John may be, but Thums up2 worries me. I'd like to know where he frequents IRL, so I can stay away from there, because anyone that brain-damaged must be a danger to himself and others.
Like or Dislike:
0 
0
July 12th, 2008 at 9:59 am 57
browntown, I honestly love your posts, 'cuz they crack me up. But this time you went a little over my head. What exactly is this 'halocopter ben' in the states, and what does it have to do with anything?
Just curious…
Like or Dislike:
0 
0
July 12th, 2008 at 10:53 am 58
Removal of the 40 year mortgage is a huge psychological blow to the believers.
The home debtors believed, and were implicitly fed the BS from the RE pimps (Muir, Bill Good, et al,) that affordability was a non issue, because as the average home in Vancouver headed for the 1 million dollars by the 2010 Olympics, the 50 and then the 60 and then the 100yr mortgage would take care of things.
40 year mortgages, with zero down, and at introductory rates below inflation would have kept the bubble afloat just a few more months, but it would have blown up just the same.
35 year, with 5% down is just a smaller dosage of the lethal combination, but it’s still toxic.
Like or Dislike:
0 
0
July 12th, 2008 at 10:55 am 59
I think he means helicopter Ben (i.e Ben Bernanke).
Like or Dislike:
0 
0
July 12th, 2008 at 11:02 am 60
Browntown, Satv, Rob, is hanging on to the hope that the next 20 years interest rates will keep dropping has they have in the last 20 years.
He can’t get his head around the fact that inflation is so rampant; it can’t be hidden in the stats any longer.
Double digit interest rates are a real possibility if they can’t rein in inflation within a narrow window.
Yes Double Digit Mortgage Rates a real possibility when the bond market crashes.
Like or Dislike:
0 
0
July 12th, 2008 at 11:04 am 61
Anyone hungry?
http://vancouver.en.craigslist.ca/rfs/751033697.h…
"OPEN SUN 2-4 w/refreshments"
Vancouver has officially had its CUPCAKE MOMENT.
Like or Dislike:
0 
0
July 12th, 2008 at 11:34 am 62
If you own a home YOU ARE the problem in this cuntry. You and all your little friends will soon FAIL under the weight of JACK LAYTON and the communist steam roller of doom.
Like or Dislike:
0 
0
July 12th, 2008 at 12:17 pm 63
The cupcake moment! That's brilliant. I love it, PW. I'm on my way for my free paper cup of President's Choice Diet Cola.
Like or Dislike:
0 
0
July 12th, 2008 at 12:28 pm 64
umdesch
I know where he works. Here is a video of him at work.
http://www.videosift.com/video/Ultimate-Warehouse…
Like or Dislike:
0 
0
July 12th, 2008 at 12:31 pm 65
By the way you can skip the first minute of the video, the action starts just after a minute.
Like or Dislike:
0 
0
July 12th, 2008 at 12:31 pm 66
Wow.. check this out:
http://vancouver.en.craigslist.ca/rfs/745378371.h…
Half a million haircut. This is real loss people, not just cutting down asking price.
Like or Dislike:
0 
0
July 12th, 2008 at 3:09 pm 67
Seeing that video:
http://www.videosift.com/video/Ultimate-Warehouse…
I understand why Browntown is so confused about life. He was probably calling his co workers nutslap so they wouldn't hold the ladder for him, is that what happened Thums/Krissh
Like or Dislike:
0 
0
July 12th, 2008 at 6:38 pm 68
I don't mind that the US banking system is crumbling, its a beautiful day out!
Like or Dislike:
0 
0
July 12th, 2008 at 11:05 pm 69
John said:
I’ve said this a million times and I’ll say it again. Canada’s housing market is fine. The banks are saying, the government is saying and even more importantly, the Real Estate Boards are saying it. Let’s see who should people trust?
Then you should know our banking history then?!?
You see, banks make money by making a spread between the depositors' money and the money loaned. However, these days, the spreads are pretty pretty thin, as witnessed by our low prime rate. So, how do you explain the double digit P/E ratio of our major banks in the last few years or so?
If the spreads are so thin, where are they making the money from? By nickel and diming us on service charges? The American banks do that as well.
Here's another interesting fact. From 1988-1996, the 5 big Canadian banks' PE ratio has always been undervalued against the 6 US big banks. It's good to know also that one of the interviewed ROBTV financial guests brought this up during the QA period about Bank of Nova Scotia, and that it's multiples were double from that in the early 1990s.
What's also interesting is that, during the same period of time, there was no synergy between Canadian Banks vs American. During the 1990s, Canadian Bank outvalued their American counterparts. 1991, however, the situation reverses and it did so for the next 2 years and then reverses again until about year 2000 when they both seemed to have the same synergy.
Deep down below when you factor out the noise (the Canadian bank mergers and what not), both US and Canadian banks behave somewhat the same.
The PE ratio is based on reported earnings and discount to future cash flow, so basically investors pay bank shares based on their ability to deliver future cash flow. Where do they get this cash flow? From loans ofcourse, because how else are you going to pay to depositors who are sacrificing their current use of their money?
So to say that Canadian Banks are safe and relatively risk free is like buying a cover of Britney Spear's first single where she looked like an innocent school girl. We now know she also got a nasty side.
Let's face it. Our housing market didn't get so big because Canadians suddenly are flushed with lots of cash. Our banks had every thing to do with it, because without banks there wouldn't be a housing bubble of this proportion. Assuming that the bank loan every dollar to the individual. He will surely spend every nickel of it to buy the most expensive house that he can afford.
Canadian Banks are conservative? Now, that might be true in the past and judging by the average single digit P/E, earnings are less than their American counterparts right? Investors had rightly judged so right? I mean, if you earn less money, you are less risky. Makes sense. But wait a minute, Canadian Banks had been in double digit territory still and while some are, they are now dropping towards single digit. The timing is strange because it seems to coincide with the American counterparts, albeit with a slight lag.
So if investors were betting Canadian Banks to deliver solid quarterly earnings in the past, why are they now being beaten down like the Americans? I mean, if they are conservative as they say they are, then PE ratios and earnings should stay high wouldn't it?
Why are prices depressed? Does it mean that investors had now discounted the reduced future cash flow that can be generated by the banks through loans? Does this mean that our banks could be shouldering a vast amount of non-performing loans?!?
Sure, the loans by most account is insured, but a non-performing loan means no cash flow. How are you going to pay to your depositors who expect an annual GIC payout?
So therefore, a bank needs to make money off your money to pay you for your patronage.
I personally don't think our major banks will fail. They're too smart, simply because they learned their mistakes in the early 80s. That's why the government got so worried about the 40/0 — guess who's shouldering the risk? I still believe that 35-40 years AMO is silly. No one is staying for that long. Most of these people, like the Americans, only plan to stay there for 3-5 years, sell when it appreciates and make the profits.
Going forward, I would be worried with CMHC insured loans. These stand a chance of loosing in a housing bust, because of the low downpayment, there's every incentive for people to just walk away from the loan by selling low.
Like or Dislike:
0 
0
July 12th, 2008 at 11:21 pm 70
Hey, A question that I have had for a while but haven't asked.
When someone takes out a line of credit out on their house, is this also insured by CMHC?
Like or Dislike:
0 
0
July 12th, 2008 at 7:55 pm 71
[...] July 2008 · No Comments This from Drachen at Vancouver Condo Info on July 11th, 2008 at 12:26pm [...]
Like or Dislike:
0 
0
July 13th, 2008 at 4:09 am 72
From The San Diego Business Journal:
This can be republished for Vancouver in about 2 1/2 years!
“‘There’s a glut of condominiums downtown,’ said Mark Goldman, a mortgage broker with the local office of Windsor Capital Group Inc. and lecturer at San Diego State University. ‘A lot of condos are going into rental supply and that’s creating some softness in the market.’”
“In the past three years or so, Goldman said he’s noticed condominium prices drop an average of $150,000 per unit as inventories inched higher.”
“He philosophizes on the topic, blaming much of the downturn in the residential real estate market on ‘greed at all levels.’”
“‘The thing is, the money screwed the demand,’ he said. ‘It created an artificial increase in demand and now that the aggressive financing is down, we return to affordability again and that’s what is going to drive the market.’”
Like or Dislike:
0 
0
July 13th, 2008 at 9:52 am 73
'Middle class' millionaires facing foreclosure
http://www.bizjournals.com/sanfrancisco/stories/2…
"We've heard of the subprime crash. Next we'll see the residential real estate investors in trouble," he said"
Like or Dislike:
0 
0
July 13th, 2008 at 10:02 am 74
Ques."What are you buying?"
I have already bought what i suppose to but still have plan to buy house after adjustments
ques."If you aren’t buying do you know anyone else who’s foolish enough to buy something that will go down for decades to come?"
Why bother calling foolish to "Smart Buyers" People buying properties as necessity because there is always good time to buy- for vast majority of people time has more value than money and for the rest they will buy as long term investments.
Ques."If yes what are they buying?"
They are buying units according to what they can afford areawise,locationwise,adjusting for cumute cost etc.
Ques."The realtors I’ve been talking to can’t find buyers"
He should find another part time job because buyers not necessarily finding their choise according what they are willing to pay and vast majority of people don't necessarily have to sell so the realtors job is not guranteed.
Ques."Could I send some of them to your warehouse?"
Sure you can,Aren't you working for world's largest company and you are renting?may be they don't pay you large salary compare to their large size.So yes you can send them to warehouse atleast they would be able to buy studio or one bedroom appartment own their own.
#25 wisemancumbdk
"BDK is right and a very dangerous player. Don’t epect thumsup to reply because he has no money and doesn’t know anyone stupid enough to buy so expect him to ignore the question"-
Stop stealing dialogues the correct dialogue is
"I recomend you guys back off because krrish2 is very dangerous player,a rocket scientist."-based on orignal post.
Like or Dislike:
0 
0
July 13th, 2008 at 10:04 am 75
A.says.
"He can’t get his head around the fact that inflation is so rampant; it can’t be hidden in the stats any longer.
Double digit interest rates are a real possibility if they can’t rein in inflation within a narrow window.
Yes Double Digit Mortgage Rates a real possibility when the bond market crashes."
A,
Inflation: is a target for government for the entire country but real estate is based on city and buyers personal circumastances please live your life fear free.
Interest Rates:Banks are willing to act based on same personal circumastances like data with supportive income of previous buyer plus the increase in interest rates mostly effects the new buyers again hike is based on the current data-A.
Like or Dislike:
0 
0
July 13th, 2008 at 10:21 am 76
"Hey, A question that I have had for a while but haven’t asked.
When someone takes out a line of credit out on their house, is this also insured by CMHC?"
DoDo1975,
Line of credit:total value=total amount-25%down=what ever amount if cmhc was not involved in the left over mortgage or on free home in this case you are directly dealing with bank but you can buy insurance from any company through your bank(also recomend in the package)basic insurance cost 60 cents per 1000 around $20 per $100,000.this cost is based on the amount we borrow not on the total amount so that will increase and decrease when you borrow more or pay monthly to reduce the amount you have borrowed.
Like or Dislike:
0 
0
July 13th, 2008 at 10:46 am 77
Curious about something, After the housing crisis in the 90s (at least east coast side) Isn't there a rule in canada that you cannot walk away from a mortgage loan unless you declare a bankruptcy?
The person is responsible for the payment of the loan regardless. This was instated because there were people who would hand over the keys and simply walk away and the bank was left with the loss on the loan and the property (banks are in financial product business and not properties)
Does anyone know if this is true or not.
This could weigh in on people when they are deciding what to do in a market which is heading south.
Like or Dislike:
0 
0
July 13th, 2008 at 11:00 am 78
Q and Q, my understanding is "yes".
This is why I believe "wealthy" boomers are going to lose a lot more in the collapse than younger people.
A 20-something couple can declare bankruptcy and rise again in their 30s (when they should buy a home anyhow IMHO), hopefully a little wiser. For a lot of "wealthy" boomers, their illusions of a comfortable retirement will be shattered with not enough time to make up the loses.
Beautiful day, huh?
Like or Dislike:
0 
0
July 13th, 2008 at 11:01 am 79
Yes it's true. A mortgage is a personal debt secured with a lien against real estate. It's not an equity interest in the property by the lender.
Some US states, such as California, have no-recourse laws that say that the lender cannot recover the money paid to purchase the property, only the property itself.
To the best of my knowledge, the only province that ever had no-recourse mortgages was Alberta, and that was changed after the 80's bust.
Like or Dislike:
0 
0
July 13th, 2008 at 12:05 pm 80
Q and Q said:
Curious about something, After the housing crisis in the 90s (at least east coast side) Isn’t there a rule in canada that you cannot walk away from a mortgage loan unless you declare a bankruptcy?
The rule states that you are liable for the mortgage loan you took out. While you can still walk away from the loan, you are still responsible for the difference after the bank or court sold proceedings. There are a number of things to consider if you plan to declare yourself bankrupt. If you do declare yourself bankrupt, your credit score will be shot. For those who are relatively young (in your 20s), you can build it back slowly and painfully, but if you are in your mid 40s or 50s, then it is not so simple.
Secondly, I don't think most British Columbians will walk away from their properties seemingly because of the Olympics as much as the Chinese would in Beijing.
In the movie "Wall Street", Gordon Gecko made a reference to the painting he bought 10 years ago for $60,000. He said, I can sell it today for $600,000; the illusion is real and the more real it becomes the more desperate they want it.
British Columbians had for the most part living in an illusion created by easy money, provided by the banks and insured by CMHC. So really, the loosers in the game in the end is the buyer. The unfortunate part is that, the laws are created to protect the illusionists. They punish the suckers.
Like or Dislike:
0 
0
July 13th, 2008 at 12:13 pm 81
Victoria will be negative YOY in a month and Vancouver before Halloween.
Calgary – last year's average SFH for July was $505.
First 11 days of the month average SFH for July is $454.
That's 10% decline YoY.
Coming to your city soon.
Like or Dislike:
0 
0
July 13th, 2008 at 12:39 pm 82
"Calgary – last year’s average SFH for July was $505.
First 11 days of the month average SFH for July is $454.
That’s 10% decline YoY."
Must be a mistake, CMHC, et,al forecast called for single digit price appreciation for 2008, so I guess between now and the end of year, we will see 20% price appreciation, and why not, Calgary is so close to the 2010 Olympic city, has oil, no subprime, and a thriving porn industry.
And smart investors will know that when Atlantis emerges, Calgary will be an ocean front city, but please don’t tell Don Campbell about this, he will start marketing this idea at the expense of Rob Rennie.
Like or Dislike:
0 
0
July 13th, 2008 at 9:42 pm 83
Went for a swim in West Van today, on the drive home noticed a lot of very very very nice homes.. for sale.
Dont they want to live there anymore? Something wrong?
Like or Dislike:
0 
0
July 13th, 2008 at 11:40 pm 84
Tons of sale on the Island now. Always a good thing.
Like or Dislike:
0 
0
July 14th, 2008 at 10:09 am 85
Must be a mistake, CMHC, et,al forecast called for single digit price appreciation for 2008, so I guess between now and the end of year, we will see 20% price appreciation, and why not, Calgary is so close to the 2010 Olympic city, has oil, no subprime, and a thriving porn industry.
Oh, golly gee, I never thunk of that.
Well definitely a good time to buy then. I'm going to stop being a bitter renter now and buy the first house I see — I can probably see quite a few from my front door.
(btw, I didn't know about the porn industry)
Like or Dislike:
0 
0
July 14th, 2008 at 11:41 am 86
Anybody for "stump the chump"?
http://www.reportonbusiness.com/servlet/story/RTG…
Like or Dislike:
0 
0
July 14th, 2008 at 12:28 pm 87
Quite the dog-pile of economic "bad news" lately. Another BC industry falling on hard times?
http://www.theglobeandmail.com/servlet/story/RTGA…
Maybe a bit less cash out there for people to pick up their eighth condo?
Like or Dislike:
0 
0
July 14th, 2008 at 12:49 pm 88
Dumb question but with 40 year amort no longer available, will all those with existing 40 year amorts have to take on a shorter period when their renewal term arrives? I mean if you have a 3 year term on a 40 year amort, when the three years is up and you have to renegotiate what if the fed has tightened up even more and only allows 25 year amorts???
Like or Dislike:
0 
0
July 14th, 2008 at 1:04 pm 89
I think you're insured for the term Boomerang, you're just re-negotiating the interest and such.
Like or Dislike:
0 
0
July 14th, 2008 at 1:18 pm 90
"Mr. Emery identified three factors leading to the recent drop in grow-ops in B.C.: effective police enforcement has increased the risks; a strong Canadian dollar has made exports less profitable; and a downturn in the U.S. economy has led to many Americans trying their hands as suppliers."
I don't usually toot my own horn, but this is something I mentioned on this site a few months ago. ;^) I believe it was this site.
Like or Dislike:
0 
0
July 14th, 2008 at 3:02 pm 91
I think you’re insured for the term Boomerang, you’re just re-negotiating the interest and such.
Respectfully disagree. Yes, you'll insured, but the 40-yr term will no longer be available. They'll have to get a 35-yr, with no great difference to monthly pmt.
Like or Dislike:
0 
0
July 14th, 2008 at 5:28 pm 92
"I personally don’t think our major banks will fail. They’re too smart, simply because they learned their mistakes in the early 80s. "
I work for one of the Big Five and I can tell you first-hand the people who work here are not smart. Secondly, they didn't learn anything from the 80s. They're not going to fail, but the housing fallout is going to hurt them bad, at least here in Vancouver. All the big banks have driving revenue like crazy the last few years and now they're all freaking out because they're over-exposed and trying desperately to cut down their exposure any way possible.
Like or Dislike:
0 
0
July 14th, 2008 at 7:00 pm 93
VancouverBanker,
CMHC introduced mortgage backed securities way back in 1986 as a means to lower finance costs to home buyers. In 2001, they did one up better by introducing CMB (Canada Mortgage Bond), which is insured and backed by the government. It works like the ABCP (Asset Backed Commercial Paper), which is currently in trouble. There a lot of this being sold, almost record amount and big and small lenders turn to CMB, because sub-prime had dried up all other sources of funding. So, if Canadian home prices start to fall and fall steep, what would happen to bond holders of the CMB even if it's insured by the government. Will the housing fall out hurt the banks more or CMHC? Will it be a replay for the ABCP like we see now? Remember that all of this didn't get in trouble until house prices start falling. This is something I would be interested to hear from you.
Thanks.
Like or Dislike:
0 
0
July 14th, 2008 at 7:08 pm 94
. Yes, you’ll insured, but the 40-yr term will no longer be available. They’ll have to get a 35-yr, with no great difference to monthly pmt.
If you start with a 40 year amortization, after 5 years what you have is a 35 year amortization.
Like or Dislike:
0 
0
July 14th, 2008 at 7:38 pm 95
http://www.thestar.com/News/GTA/article/459084
Like or Dislike:
0 
0
July 14th, 2008 at 8:44 pm 96
Patriotz,Betamax,Drachen is right.-tu2.
Like or Dislike:
0 
0
July 14th, 2008 at 8:55 pm 97
Hi friends
You guys will never believe this but I bought into a piece of land NE of Husdon Bay SK a month ago. I paid 30,000.00 for it and its now worth about 100,000.00 in one month. Seems they found what might be the biggest coal find on the planet right beneath and there is talk of the value of my share going to 6.5 million dollars by XMAS
If anyone wants to look at this land its on Google Earth
53 degrees 10' 13" N by 102 degrees 03' 45.13" W
Like or Dislike:
0 
0
July 14th, 2008 at 9:13 pm 98
Q and Q
Banks only start their process when there is no response from the mortgagee,There are lots provision that can solve the problem but you must call your bank or lawyer in advance otherwise that could be too late.
Like or Dislike:
0 
0
July 14th, 2008 at 10:43 pm 99
Hey, a slow RE market brings out innovative sales techniques…this listing comes with a wife !
http://cnews.canoe.ca/CNEWS/Microgalleries/Deven/
Like or Dislike:
0 
0
July 15th, 2008 at 12:08 am 100
Middle-aged women w/ leathery skin and questionable intelligence are a dime a dozen.
Like or Dislike:
0 
0
July 15th, 2008 at 12:36 am 101
Anonymous:
So you've met krrrrish's mom then?
Oh way, she's a nasty old hag with leathery skin and there's no question of her intelligence. I mean look what she let slither out of her festering loins…..
Like or Dislike:
0 
0
July 15th, 2008 at 8:32 am 102
"Middle-aged women w/ leathery skin and questionable intelligence are a dime a dozen."
You'd pay that much? Even if she was throwing in the house for free I'd need some kind of time limit. At least the one in Florida was attractive by some people's definition (with her extended patio!)
Like or Dislike:
0 
0
July 15th, 2008 at 9:19 am 103
Bank of Canada has announced they're holding steady on the interest rate at 3%.
Like or Dislike:
0 
0
July 15th, 2008 at 9:32 am 104
i posted this on rob's blog:
from the Sun today:
http://tinyurl.com/wearedoomed
from the article:
….In B.C., the decline from the first to second quarter of this year was 5.1 per cent …..
…..this is the second consecutive quarter of decline and that is a concern……
….this could be an indication that the economic sands may be shifting in B.C……..
….Among metropolitan areas, 21 of 34 saw declines in the value of construction with the steepest being in Vancouver……
….A report by Reed Construction Data warned Monday Canadian home prices may be poised for a fall…..
….Prices won’t rise more than inflation this year and could fall as much as five per cent in inflation adjusted terms………..that paints a much darker outlook for the housing sector than the real estate industry is currently projecting……
….The real, inflation adjusted, change in housing prices this year is more likely to be . . . between zero per cent and minus five per cent for the country as a whole……
enjoy
Like or Dislike:
0 
0
July 15th, 2008 at 9:34 am 105
Uh oh
From the G&M
"Home prices slip for first time in nine years"
http://tinyurl.com/6xfm8v
Like or Dislike:
0 
0
July 15th, 2008 at 10:01 am 106
Sophia,
Imagine if your sister in ad is a con artist the new owner will be glad to ride her on highway all life long.
Like or Dislike:
0 
0