Friday Free For All!
It’s time for our end of the week news round up and open topic discussion! Here are a few stories I’ve noticed, feel free to comment on these or add your own links in the comment section:
- Canada in a recession?
- Brace for inflation
- The stink of corruption?
- Job Market better than it appears
- Dropping house prices increase inflation?
- Vancouver homeless rights complaint
- You’re richer than you think.
- BC: Number 1 in property crime
- Flaherty: No housing bubble in Canada
- Bay Area prices drop 27% in one year
- Pitfalls of a cheaper US market
- US Rate hike debated
- Merrill Lynch: 1 year, $19.2 billion lost
So what are you seeing out there? Post your 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!
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July 17th, 2008 at 10:11 pm
Which is wrong. The cost of shelter for an owner-occupier is exactly the same as for someone renting the same house. By living in the house you are foregoing the money you could have gotten by renting it out.
The difference between rental costs and ownership costs (either positive or negative) is an investment return on the house net of financing. A house is an investment that yields shelter, a marketable service whose value is the market rent.
Nobody would claim that my returns in the stock market had anyone to do with my cost of living, even if my returns were used to buy food or rent accommodation.
July 18th, 2008 at 12:42 am
Year:Price
1:100
2:100
3:100
4:100
5:100
6:100
7:100
8:100
9:100
10:200
Due to previous owners holding houses in year 1-9 the price is not reflected on the CPI calculations for 10. Thinking about this at first it seems correct because the economy is treated as an aggrigate so at one point in time you get the average change in cost of living however this is problematic because inflation will not show up until *years* after the orriginal increases occurred. Also if I am correct prices could be going down but this formula will indicate inflation is going up.
Am i getting this all correct?
July 18th, 2008 at 7:29 am
July 18th, 2008 at 7:31 am
Bay Area home prices plunge 27% in last year
Carolyn Said, Chronicle Staff Writer
Friday, July 18, 2008
(07-17) 12:20 PDT SAN FRANCISCO — Double-digit drops in median home prices hit every Bay Area county in June, even the ones that had seemed Teflon-coated.
Across the nine counties, the median price paid for resale homes, new homes and condos in June plunged 27.1 percent from a year ago to $485,000, dipping below the half-million-dollar mark for the first time in four years, DataQuick Information Systems of La Jolla (San Diego County) reported Thursday.
Among resold homes, bank-repossessed foreclosures - which usually are discounted - accounted for 28.7 percent of all existing-home sales, up from just 3.5 percent in June 2007. Solano County, with foreclosures at 57.7 percent of all resales, had the highest percentage; San Francisco, at 3 percent, had the lowest.
Affluent areas such as Marin County and San Francisco, which until now had resisted most price erosion, saw existing single-family home median prices fall by about 11 percent. Including new homes and condos, the Marin County and San Francisco medians fell about 12 percent to $846,000 and $726,750, respectively.
“This is pretty grim; double digits across the board,” said Christopher Thornberg, principal at Los Angeles’ Beacon Economics. “It was eminently predictable if you had a realistic view of the world. I heard a lot of people say the Bay Area was never going to see prices fall, San Francisco was untouchable; in San Mateo, it was impossible; San Jose, not with all the tech money, blah, blah, blah. But prices at the peak relative to people’s incomes never made any sense.”
Full article here:
http://www.sfgate.com/cgi-bin/article.c … 11QRVS.DTL
By the numbers
27.1% Drop in median price for Bay Area
$485,000 Bay Area median (first time under $500,000 in 4 years)
28.7% Sales involving foreclosed homes
7,178 Number of new and resale homes changing hands in June - the lowest June since 1993
July 18th, 2008 at 7:47 am
July 18th, 2008 at 8:16 am
http://tinyurl.com/5ph4he
July 18th, 2008 at 8:27 am
July 18th, 2008 at 8:52 am
This is the median. What happened in the Bay Area is that sales at the low end dropped off first, so the decline in the median lagged the actual drop in value as reported by Case-Shiller. Of course the REIC used the small decline in the median to trumpet that the BA was bulletproof.
Now the sales volume at the low end has more than caught up, particularly in high foreclosure areas like outer Contra Costa and the ghettoes, so the median is now outpacing the actual decline.
But as Thornberg said, prices are down everywhere. He was the most prominent economist on the West Coast to have called the bubble early and interestingly “left” his position with the UCLA business school not long thereafter. Too bad nobody up here is made of the same stuff as him.
Note BTW that the market in SF proper for both sales and rentals is one of most atypical in the US (rather like Manhatten). SF proper has only 10% of the Bay Area’s population.
July 18th, 2008 at 9:30 am
Roger that on the post…cheers
July 18th, 2008 at 11:38 am
https://secure.globeadvisor.com/servlet … RCARRICK15
Aspiring first-time home buyers, it’s time to discover the lost art of saving up to buy a house.
It’ll be tough. You may not be able to get the house you want as quickly as you want. But in the end, you’ll save tens of thousands of dollars and have a lot more financial flexibility in your life than you would otherwise.
Saving to buy a home used to be a rite of passage for twentysomethings. But as house prices soared in the past several years and it became increasingly hard to build the necessary hoard of cash, the mortgage industry came up with solutions like zero-down payment mortgages and 40-year mortgages.
July 18th, 2008 at 11:40 am
A more urgent reason is to protect taxpayers – you and me – from possible losses if too many stretched borrowers default on their 40-year mortgages.
The federal government is on the hook financially because it guarantees 100 per cent of the mortgage insurance claims paid by Canada Mortgage and Housing Corp., a Crown corporation.
It also stands behind the claims paid by CMHC’s private-sector rivals, such as Genworth.
Ottawa backstops 90 per cent of private mortgage insurers’ claims to make it possible for them to compete effectively with CMHC.
July 18th, 2008 at 12:40 pm
http://www.vancouverreflections.com/200 … elf-later/
July 18th, 2008 at 12:45 pm
How about just getting CMHC out of the mortgage insurance business and letting the private sector price the risk appropriately?
July 18th, 2008 at 12:46 pm
July 18th, 2008 at 12:52 pm
Canada has a lower default rate and no adjustable rate mortgages, resulting in a different “culture of debt” as Canadian mortgage payments are not tax deductible.
No adjustable rate mortgages? You mean I pay the same rate for the whole 40 years? Where do I sign up?
And if BC’s -8% savings rate isn’t a “culture of debt”, what would you rather call it?
But not to worry, because:
Robyn Adamache at CMHC says we have no real estate bubble in Vancouver.
July 18th, 2008 at 1:23 pm
She’s talking about ‘teaser rate’ mortgages. The first two to three years you pay just enough to balance interest (or even less in some cases) then after the teaser rate expires your payments increase to 150-200% of what you were paying. Often they were sold without anything but fine print explaining how the payments would balloon in a few years.
We don’t have those here. She’s right on that.
Problem is, adjustable rate mortgages didn’t pop the bubble in the states, if anything they kept it going for longer. Unreasonable prices did.
July 18th, 2008 at 1:31 pm
“If you don’t buy now, you’ll hate yourself later.”
How will I feel about you?
July 18th, 2008 at 1:43 pm
I see local newspaper ads from time to time that offer developer financing at low rates for an initial period of time (eg. 2.85 for first year). Are these not “teaser” rates… although not offered by the banks directly? I’m unsure of how these work - anyone have any insight?
July 18th, 2008 at 2:15 pm
http://www.spiegel.de/international/bus … 01,00.html
July 18th, 2008 at 2:17 pm
Yeah but she’s so wrong. BMO offers a 3 month teaser rate mortgage. I have heard of others offering up to a year below prime. The enablers for the bubble are different in Canada but the result was the same: high prices and poor affordability with lots of debt.
July 18th, 2008 at 2:19 pm
the developer would buy down the rate for a given period of time as an incentive to buy…..
similar to the Florida story where you buy a
house and a “wife” is tossed into the deal….
buy now or forever hold your own….indeed!!
July 18th, 2008 at 2:38 pm
ABSOLUTELY. The peak of adjustable rate mortgage resets is just happening NOW. House prices have been falling in the US for about two years now. This is all besides the point though since we definately DO have teaser rate mortgages available in Canada.
July 18th, 2008 at 3:52 pm
If I don’t buy later, I’ll hate myself now!
Nice photo on that blog site though. Wow….. people would have to be rock stupid to fall for these lines.
July 18th, 2008 at 4:01 pm
“What is worse, however, is that the crisis has by now infected the entire country. Nowhere else in Europe in the last decade did the construction sector boom as it did in Spain: Real estate prices shot up by as much as 500 percent. The country invested in property, betting that prices would rise and rise. But, now the bubble has burst and the losers are those who did not sell in time.”
…exchange “Europe” for “Canada” and “Spain” for “British Columbia” and the statement fits….well maybe not 500% increase.
July 18th, 2008 at 4:09 pm
“I am unsure about your math:
strong local economy + good job growth + market fundamentals + sustainability = no real estate bubble
I understand that if you work in the Business of Real Estate it is in your best interest to keep the positives in the fore-front. However, in the last 20 years - our economic dependencies are no longer local. Like a Biological Web, we are attached/connected to more than whats in front of us. The spokes of our web touches all economies everywhere.
So instead of painting a rosy picture without having a full understanding of ‘the real world’ - it may have better served you to - be more realistic in your opinion piece.”
-i wouldn’t mind trying what ever…’she is on’.
July 18th, 2008 at 4:26 pm
http://vancouver.craigslist.org/search/ … ry=reduced
Sept. 26 2006 : 37
http://vancouver.craigslist.org/search/ … ry=reduced
Sept. 28 2006 : 42
http://vancouver.craigslist.org/search/ … ry=reduced
Oct. 04 2006 : 40
http://vancouver.craigslist.org/search/ … ry=reduced
Oct. 06 2006 : 44
http://vancouver.craigslist.org/search/ … ry=reduced
Oct. 013 2006 : 49
http://vancouver.craigslist.org/search/ … ry=reduced
Oct. 25 2006 : 65
http://vancouver.en.craigslist.ca/searc … ry=reduced
July 18 2008 : 355
————–
so from 06 to now…one could say more people are ‘reducing’ their price. this is by no means scientific - duplicates may be included in the query.
neat huh?
July 18th, 2008 at 4:56 pm
July 18th, 2008 at 5:48 pm
July 18th, 2008 at 10:12 pm
Inventory rise to 19,788 !!
Sales / list: 20% (SFH) 32% (Condo)
…. only 212 to 20K !
July 18th, 2008 at 11:20 pm
Also, only 24 SFH and 69 condos sold today…..not much commissions for the realtors…..hopefully most of the realtors have been saving their money as many of them are not collecting much money lately!
July 19th, 2008 at 12:08 am
July 19th, 2008 at 2:00 am
July 19th, 2008 at 2:04 am
July 19th, 2008 at 7:18 am
Home Buyers take the upper hand
http://www.canada.com/vancouversun/news … 6f3096&p=3
July 19th, 2008 at 7:20 am
July 19th, 2008 at 8:47 am
A. Yes, we did. A “bubble” is created when many people believe that an asset’s price, which has already greatly increased, must keep on rising, and that it therefore makes sense to borrow in order to buy it-for example, to buy a house with no down payment. Speculators acquire loans that can be repaid only if the asset is sold for a higher price, temporarily driving up prices and debt; lenders grow confident that it is attractive to make such loans. As long as the prices rise, borrowers, lenders, and investors all make money. But bubbles, by definition, come to a sad end, with defaults, failures, dispossessions, scandals, and late-cycle political and regulatory reactions and often overreactions.
http://tinyurl.com/54udux
Mostly US focussed, but recommended if anyone is still unclear on exactly how bubbles grow and pop. Even though so obviously wrong and dangerous once the clarity of hindsight takes hold, yet they still happen. Over and over, and every time the same type of people engineer them, take profit and let poor schmucks take the pain.
We are going hike in camping to Elsay Lake. Long and brutal hike to get there, gorgeous and all alone once there! And the fresh trout for dinner! If anyone wants to meet me in person that’s where and when. LOL. Don’t try it without steep snow experience and regular grouse grind type training, I don’t want to see your corpse on the way back.
Sitting at the computer, hitting “refresh” every 5 minutes and asking other educated guessers when the crash will complete won’t won’t change things at all. We sold last summer, and I’m pretty sure the time to buy isn’t this weekend! Have some nice spitting matches detailed here when we get back, OK? For amusement only.
July 19th, 2008 at 9:37 am
July 19th, 2008 at 9:55 am
good move…grab the money and run
enjoy your camping we’ll keep the market from collapsing in your absence…..
July 19th, 2008 at 10:03 am
I’d like to suggest a Vancouver Sun “greatest hits” contest from their RE puff piece archives. Maybe Condohype would take it on?
July 19th, 2008 at 10:13 am
I like the quote: “OK, maybe we need a backup plan.”
I’d like to propose it as the official motto of the bubble.
July 19th, 2008 at 10:14 am
What happened to the international buyers/investors? The oil rich beer gut sporting Albertans bidding up prices?
Perhaps when the world receives our calling card, and is made aware of Vancouver-the Olympic city, the rush of rich tycoons will once again ignite the market, and perhaps if we can bring back the 40/0 down mortgage at 1% , we may be able to prevent huge lay offs in construction and Re related industry.
No, not different this time, same old pattern: hype, boom, bubble and bust.
July 19th, 2008 at 11:26 am
July 19th, 2008 at 11:40 am
July 19th, 2008 at 12:18 pm
July 19th, 2008 at 7:20 am
BTW, where is the “rush of greater fools” that was expected before the governments new mortgage restrictions kick in on October 15?
According to previous posts on these blogs, sales take a week or two to be posted. The new mortgage rules were just posted. IF the new rules cause a rush to buy, we won’t see it in PaulB’s numbers for a few weeks. Chill.
July 19th, 2008 at 12:30 pm
July 19th, 2008 at 1:46 pm
I will only come to view the property if they are willing to entertain a sale price of 1/2 the current listing price.
I wonder what kind of reactions one would get by simply saying “Oh the property is listed for 650, but would you entertain 225?”
No seriously, I want to try that… but I’m afraid they’d say YES and I’m not in a position to take them up on that!!
July 19th, 2008 at 1:50 pm
I can’t believe how fast prices are dropping.
Not sure if people who have already bought are desperate to sell before closing, but askinkg prices are being slashed at an amazing rate. If this is not the main topic around the water cooler, it certainly will be…very very soon.
July 19th, 2008 at 2:42 pm
I can’t believe how fast prices are dropping.
Um were down 0.5% MoM and still up quite a bit YoY. I wouldn’t get too excited just yet you may have to wait a while for any real declines. Just make sure you have a down payment in a safe place and be ready to move quickly when you see a good opportunity.
July 19th, 2008 at 3:32 pm
This market is falling apart much faster than you think.
BTW, What buyer in their right mind would be eager to move quickly in a falling market. There won’t be any competition.
July 19th, 2008 at 3:51 pm
Sir John Templeton