Friday Free-for-all!
It’s Friday and that means it’s open topic free-for-all news round up time! Here are a few stories I’ve noticed this week:
-Lower mainland house prices drop below 2007 levels
-Shiller: Canadian housing bust looms
-Plunge-O-meter: Van prices down more than $30k
-Quattro: Yaletown comes to Surrey, burns down
-Vancouver homeless top priority for Mayoral candidates
-55% of Canadian workers live paycheque to paycheque
-Ottawa: No need to boost deposit insurance
-Calgary house prices keep on dropping
-The next bubble: Equity and commodity markets?
-IMF: US likely headed for deep prolonged recession
-Global recession could drive oil to $50 in 2009
-Michigan home sells for $1.75
So what are you seeing out there? Post your news, links and thoughts here and have an excellent weekend!
note: any conversation on Vancouver, 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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patriotz Says:
October 3rd, 2008 at 12:05 am
From the deposit insurance article:
Boosting deposit insurance would be a good way for the federal government to reassure Canadians about the security of their funds, Mr. Georgetti said.
Really Ken? How much of your membership has that kind of loot sitting in the bank? I think you’ve been away from Trail too long.
People with over a million bucks kicking around (100K per bank) don’t need hand holding.
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patriotz Says:
October 3rd, 2008 at 12:21 am
From Calgary article:
“Clearly, it’s still a buyer’s market and the opportunity for first-time homebuyers, to get into the market, is better than it’s ever been,” said CREB President Ed Jensen.
Better than it’s ever been, Ed?
How about “the worst time to buy ever except from 2007 up to now”.
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Gadwin Says:
October 3rd, 2008 at 12:26 am
Companies are starting to lay people off now in Vancouver. My friend’s company is a small company, with about 30 people. They layed a few people off today because business has been so bad with their U.S. customers.
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Gadwin Says:
October 3rd, 2008 at 12:36 am
I’m guessing at the rate our businesses are suffering, the big price drops will occur in 2009. The following will happen next year:
1) Inventory from this year will carry over to next year. While there may be a drop of inventory as we approach December, we will probably hit 20K again by March of 2009. From there, inventory will spike like crazy and we’ll probably exceed 25K inventory during 2009
2) The demand will drop next year as Canadian banks tighten their lending standards and many Canadians are layed off.
Much of this depends on how bad the U.S. economy gets. Right now, it’s not looking too good in the U.S.
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ted Says:
October 3rd, 2008 at 1:55 am
I don’t see what the big deal is about increasing deposti insurance. The argument that it will discourage people from making riskier investments doesn’t hold any water as most people are incapable of saving as it is. But us savers should not be punished as we are not the ones that created this mess. I have more than $100,000 in a bank account waiting for prices to drop. Mind you if I was really concerned a Canadian bank would fail I could easily split my accounts. Well I already sort of have my banking split but the point is we should be giving reassurance to the few Canadians who are living within their means. I am by no means rich.
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jesse Says:
October 3rd, 2008 at 6:47 am
“I don’t see what the big deal is about increasing deposti insurance.”
There are good arguments that the limit would have to be raised substantially to stave off a bank run. There are many depositors with silly amounts of $ sitting in the bank that would be wiped out. The $100K limit is to ensure the little guy isn’t thrown on the street; the rest of us can live without gravy.
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jesse Says:
October 3rd, 2008 at 6:54 am
“Inventory from this year will carry over to next year. While there may be a drop of inventory as we approach December, we will probably hit 20K again by March of 2009.”
There has been talk around local blogs about discretionary versus non-discretionary sellers and how much inventory there “really” is, the theory being that most people trying to sell are doing so on a lark but will revert to holding when they don’t get their price.
The December inventory numbers will be an indication on how much truth there is to the discretionary seller argument.
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alexcanuck Says:
October 3rd, 2008 at 7:29 am
My work entails me visiting a diverse range of businesses, mostly small/med manufacturers. Almost everyone is slow, and worried about the future. The more export- oriented ones are really hurting.
Overheard coming down the tram from the Grouse Grind: “I don’t know what they are going to do. They can’t afford the mortgage, and they can’t sell it until the market recovers.” I had to bite my tongue.
The awareness of the troubles are truly gaining critical mass in the public eye. I don’t find myself treated as some dour loony ranting on about imaginary disaster anymore. I just hate it when people roll their eyes at me!
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dbcooper Says:
October 3rd, 2008 at 7:47 am
The awareness of the troubles are truly gaining critical mass in the public eye. I don’t find myself treated as some dour loony ranting on about imaginary disaster anymore.
you just need a way of saying:
“nyah! nyah! I told you so!” without
being impolite….
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It was a bubble and it burst Says:
October 3rd, 2008 at 7:53 am
“Much of this depends on how bad the U.S. economy gets. Right now, it’s not looking too good in the U.S.”
The run up in prices began when the economy was still in the dumps, after the dotcom bust.
The bubble has burst while the “real economy” is relatively not bad.
Bubble prices are not a result of sustainable economic factors, and therefore, a bad economy, or a good economy only affects the psychology of the market players only in terms of how long the party will go on, but it does not change the result- big time hang over coming up.
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Dave Says:
October 3rd, 2008 at 8:08 am
Jesse, I think high gas prices in the spring caused many people to put off buying. Once inventory started to rise, I think the speculators started to list to get out early. I don’t think people try to sell on a ‘lark’. You buy into the same market you sell. There is no point in losing equity to a realtor if you don’t need to.
I do think a lot of people will just sit tight and not sell. Inventory will undoubtedly be lower come December. I think the real test will be next spring / summer.
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M- Says:
October 3rd, 2008 at 8:28 am
Through 2009, as condo construction slowly completes (new starts will fail to keep up with completions) and Olympic-related construction completes, a big void will develop in many companies’ checkbooks, leading to layoffs.
Lots of people won’t be able to sell due to the market dropping below their mortgage value, and they’ll have trouble keeping up with the mortgage payments. While they struggle with their payments, and hope and hope for the market to recover so they can escape, it’ll only get worse, leaving them facing bankruptcy. It’s all too predictable of a pattern. Those troubles won’t significantly start affecting the market for another 2-3 years.
It’s going to implode regardless of the larger credit-market troubles.
(incidentally, last weekend I hiked the grind, and heard a number conversations about stock markets and drops)
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ant Says:
October 3rd, 2008 at 8:57 am
I work for a local company that has seen way too much work drop off this year, not just from US customers, but from Canadian customers slowing down as well. We’ve laid off almost half our small staff in the last month in an office of around 20 people (temporarily we hope) and cut back the hours on several others. My position is relatively stable there, but I’m not sure how long we can hold on without getting more business in, so I wouldn’t be surprised if I get laid off as well, or the company goes under.
My wife works in an office that is having similar problems, if they don’t pick up more customers in the next few months her job is at risk as well.
It’s times like these that make me glad that we’ve been saving cash for the last several years instead of taking on a bunch of debt. If we’re both laid off, we’ve decided that we’ll leave Vancouver and do a bit of traveling to figure out where we want to live next. Vancouver’s nice and all but there’s no reason to stay here without two decent incomes. Thank goodness (and common sense) for the savings account!
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Dyugle Says:
October 3rd, 2008 at 9:18 am
The problem with deposit insurance limit being only 100K is that most payroll accounts exceed of that amount. Wipe out payroll accounts and lots of small people get hit. Withdraw these accounts and you have a bank run.
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For Sale By Owner Says:
October 3rd, 2008 at 9:31 am
Good Morning Satv/aka Rob:
American Bail Out have need to understand, it give time to old money to put pants on and shoes to run out of big fire to come.
Then when Wall Street Gang out of danger of blaze, inflation report show interest rate must move up, and not good news for mortgage renewal at high rates when big job loss in Vancouver.
Then price drop , and can’t sell, but not can rent high enough to pay mortgage.
And not renew at 45 yr. Then subprime lend you 2nd mortgage to keep you stuck, while new developer sell unit like yours at ½ price and free trip to view bargains on Vancouver Island.
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Anonymous Says:
October 3rd, 2008 at 9:48 am
How to make a million. You start with 35 and then “invest in real estate”.
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patriotz Says:
October 3rd, 2008 at 10:20 am
the theory being that most people trying to sell are doing so on a lark but will revert to holding when they don’t get their price.
Such people are almost always planning to buy another property if the old one sells, and often a more expensive one.
Thus if they withdraw from the market it’s neutral to negative for net demand.
As usual, evidence for this theory can be found south of the border.
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jfk Says:
October 3rd, 2008 at 10:29 am
A friend who works for an engineering co just got his layoff notice.
Most of the talk on BNN the last couple of days seems to be about RECESSION, RECESSION, and more RECESSION, and it’s not just about the US, it’s global….no wonder the commodity heavy TSX is leading the market retreat as demand for commodities will dry up. It might take awhile, but western Canada (which is all about nat resources) could be hit harder and longer than any other area on the bloody continent….you just have to revisit previous recessions and stop believing our politicians.
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Gadwin Says:
October 3rd, 2008 at 10:48 am
When the bubble burst this year, it was because the demand disappeared from speculators believing the market can only go up.
Unfortunately, when the economy grinds to a halt, we will have artificially low demand because non-speculators – people that really want to buy a place to live – will hold off their purchase if their job is on the line.
I am prediciting that as the U.S. economy plunges and the Canadian economy follows, we will see even lower sell/list ratios than the 30% sell/list of the last two months.
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Mr. Market Says:
October 3rd, 2008 at 11:00 am
Remeber, a significant portion of sellers bought houses 15-20 years ago. They are sitting on enormous profits right now. Even if they sell after prices are down 50% from the February 2008 peak, they will be laughing to the bank.
These sellers want to sell but have such a big capital gain cushion they can affort to wait in the greed induced hope that prices will recover. When they see reality, they will sell at a lower price, somewhat disappointed they did not sell earlier but pretty happy with their relatively fat, tax free capital gain.
I would say most RE inventory currently for sale was purchased before the current boom (no data to back it up). These sellers will still sell in a declining market because they sill have a big tax free gain and they want to the money to retire or whatever.
Conclusion: there will be no derth of sellers.
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jesse Says:
October 3rd, 2008 at 11:09 am
“I don’t think people try to sell on a ‘lark’. “
To those with two viable paths forward (sell or stay for owner-occupiers; sell or rent out for investors) it is entirely discretionary on achieving a “good” price. My argument is that those more desperate to sell will be more likely to keep listings around through December and January.
“Thus if they withdraw from the market it’s neutral to negative for net demand.”
Sales are levered off market entrants. Demand dropping 40% is not FTBs dropping 40% but the entire property ladder hinging on finding FTBs buying at the bottom. In terms of listings, the question is how quickly will prices drop and how substantially December inventory drops may be an indication of the volume of “motivated” listings.
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beta Says:
October 3rd, 2008 at 11:14 am
The December inventory numbers will be an indication on how much truth there is to the discretionary seller argument.
People have been listing ‘on a lark’ for years now, posting a ‘wishing price’ and seeing if they’ll get it, so I don’t believe that the recent spike in inventory reflects insincere sellers. Rather it represents people who need to sell or want to sell at the perceived peak, and the 50% drop in sales volume ensures that inventory will spike up.
A lot of legitimate sellers will delist over the slow winter months with the intent to relist in the spring, so spring will tell all — but we already know what it will say, and it won’t be pretty.
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beta Says:
October 3rd, 2008 at 11:18 am
a significant portion of sellers bought houses 15-20 years ago. They are sitting on enormous profits right now. Even if they sell after prices are down 50% from the February 2008 peak, they will be laughing to the bank.
I take your point, but many have borrowed against those gains and all have counted on them as ‘money in the bank’. They’ll chase the market way down, and they won’t be laughing.
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patriotz Says:
October 3rd, 2008 at 11:37 am
To those with two viable paths forward (sell or stay for owner-occupiers; sell or rent out for investors)
You should have said cash flow positive investors. For cash flow negative investors, the paths are slightly different – sell or walk.
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jesse Says:
October 3rd, 2008 at 11:40 am
“For cash flow negative investors, the paths are slightly different – sell or walk.”
I don’t know if “walking away” is a viable option. It is an option but it can’t get much worse than that with the threat of recourse.
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bdk Says:
October 3rd, 2008 at 11:46 am
“big tax free gain and they want to the money to retire or whatever.”
Mr.Market, what happens when the Baby Boomers start selling their houses (say for $1.2 mil and up) who is going to step up to buy them? It’ll be interesting to see how many land rich and cash poor boomers are planning to downsize in order to fund their retirements and how it’ll pan out if a bunch of neuro surgeons (or whatever job earns $250k plus) line up to buy the house or if they decline to a level more in line with the average pt grey residents ($115,000), furthermore anyone who’s bought a condo now has a $2,000 per month liability (to subsidize the tenant) which’ll affect their debt ratio.
The boomers created the demand for housing initially and if they all head to the exits what happens?
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beta Says:
October 3rd, 2008 at 11:48 am
The awareness of the troubles are truly gaining critical mass in the public eye. I don’t find myself treated as some dour loony ranting on about imaginary disaster anymore.
Yes, the other day at work I mentioned waiting to buy till prices drop further and was surprised to find the other person immediately and enthusiastically agreeing. Apparently the coming crash is “obvious” these days.
I heard people talking about the markets on the Grind also…a lot of people are worried now, rightly so. Bears are everywhere!
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For Sale By Owner Says:
October 3rd, 2008 at 11:58 am
“Conclusion: there will be no derth of sellers.”
There will be no derth of buyers . You borrowed demand from the future.
What very little demand there may be going forward, will be met by hungry builders, and lot’s of owners who bought before the bubble.
The fools who wait until the 11th hour, and 59th minute, will have to compete with the Marketing Machine and Low, Low Prices.
Conclusion:
You are screwed.
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patriotz Says:
October 3rd, 2008 at 12:10 pm
I don’t know if “walking away” is a viable option. It is an option but it can’t get much worse than that with the threat of recourse.
Recourse against what? If you have no assets to go after (and RRSP’s are protected now) you had might as well take the BK hit sooner rather than later. And if you lose your job that decision is going to be made for you.
There were a lot of foreclosures in the 80’s bust and remember the previous runup only lasted a year and a half.
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Macronomics Says:
October 3rd, 2008 at 12:13 pm
quoting Jesse: There has been talk around local blogs about discretionary versus non-discretionary sellers and how much inventory there “really” is, the theory being that most people trying to sell are doing so on a lark but will revert to holding when they don’t get their price.
Those blogs couldn’t be more wrong.
The carrying costs for investors is just too steep at our price levels. People cannot afford to hold.
Our drop is looking like it will be faster and even further down than what’s happened in Calgary. At least there, the prices are low enough and the income high enough that they can sit pat and rent it out and not bleed too much month to month.
Somebody said in RET the cure for higher prices is higher prices. Once the music stop, there’s nothing that can stop the slide until the prices are sound again.
Everyone thinks we’re not in a recession, but I highly doubt that. The numbers posted by the government are spun so many times and in so many ways, the public has no idea what’s going on.
Check out http://www.shadowstats.com
For example, you can’t look at job numbers alone because if you lose 10 high paying jobs but then add 13 part time or lower paying jobs, your net job growth is +3 but in fact total real wages and salary (wealth) have declined.
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Mold City Says:
October 3rd, 2008 at 12:20 pm
The humongous US bail out bill has passes with a good ol’ fashioned helping of pork:
Another one of those provisions is $478 million in tax breaks for film and television production that’s shot in the USA. With the near parity dollar already hurting the Vancouver film production industry this certainly doesn’t help our local outlook.
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Anonymous Says:
October 3rd, 2008 at 12:24 pm
If you have no assets to go after (and RRSP’s are protected now) you had might as well take the BK hit sooner rather than later. And if you lose your job that decision is going to be made for you.
A really bad idea if you’re overextended and facing the possibility of bankruptcy is to raid your RRSPs to pay your bills. Not only will you be depleting your retirement funding and take a tax hit, you’ll be moving your money out of safety and into an asset that will be lost in bankruptcy and is facing years of decline in its value.
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jesse Says:
October 3rd, 2008 at 12:36 pm
“If you have no assets to go after you had might as well take the BK hit sooner rather than later.”
Many have more net worth than just a house (though many, especially in BC, do not). I won’t belabour the point, only that those with some equity built up, in the house or elsewhere, and needing to sell will want to get to the front of the line.
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bearette Says:
October 3rd, 2008 at 1:02 pm
So the Bailout passes and markets go down? Not even a day-long spike? Wasn’t this supposed to “save” Wall Street. Uh-oh.
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ellesmore Says:
October 3rd, 2008 at 1:11 pm
All this talk about deposit insurance has me curious.. I’ve got a bit more than the 100k limit in an ING account. To make sure the whole amount is insured do I have to move money to an account at another bank or can I just open a second ING account attached to the first one?
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Mr. Market Says:
October 3rd, 2008 at 1:14 pm
For sale by owner,
“You borrowed demand from the future.”
Doesn’t that statement mean that there WILL be a derth of buyers? If you borrow demand from the future, there is less demand now, meaning less buyers and lower RE prices.
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Alexcanuck Says:
October 3rd, 2008 at 1:18 pm
A really bad idea if you’re overextended and facing the possibility of bankruptcy is to raid your RRSPs to pay your bills. Not only will you be depleting your retirement funding and take a tax hit, you’ll be moving your money out of safety and into an asset that will be lost in bankruptcy and is facing years of decline in its value.
A very good point! Can someone with accurate knowledge comment? Are RRSP’s are fully protected against mortgage recourse? With a period, or with caveats?
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BBY Says:
October 3rd, 2008 at 1:24 pm
To make sure the whole amount is insured do I have to move money to an account at another bank or can I just open a second ING account attached to the first one?
Had this discussion at work recently, and the consensus was that the $100K deposit insurance was per institution (NOT account) per individual. I have my powder store in a handful of institutions. Only one instution exceeds $100K, but enough is held in investment funds to keep the cash and trading account total below $100K.
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No surprise Says:
October 3rd, 2008 at 1:25 pm
“So the Bailout passes and markets go down? Not even a day-long spike? Wasn’t this supposed to “save” Wall Street. Uh-oh.”
Bearette
As explained above:
“American Bail Out have need to understand, it give time to old money to put pants on and shoes to run out of big fire to come.”
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Anonymous Says:
October 3rd, 2008 at 1:27 pm
Does anyone want to read more dosh quotes?
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jesse Says:
October 3rd, 2008 at 1:29 pm
“can I just open a second ING account attached to the first one?”
That would be way too easy and the answer is pretty much no.
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BBY Says:
October 3rd, 2008 at 1:37 pm
Had a worrying thought the last few days regarding the practical reality of the $100K deposit insurance. Here’s the scenerio:
A person has $500K distributed equally in 5 institutions (BankA, BankB, BankC, BankD and BankE), so that there is $80K in each bank. We enter into difficult fiscal times and BankA goes belly up. The person retrieves their $80K from the deposit insurance, but needs to put it into another bank. However the number of available institutions if falling due to banks collapsing, so this money is distributed into one of persons other banks. Now all the accounts are at or above $100K. Times get rougher and now another one of the banks has collapsed which erases anything over $100K in that bank. And then two other banks have merged, leaving only two institutions to distribute the $500K minus the loss from the second bank collapse. Suddenly, this person is only insured to $200K. Kinda scary, isn’t it.
So, raising the deposit insurance limit seems like a good idea to me.
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john Says:
October 3rd, 2008 at 1:40 pm
Ok let’s get some facts out there for all the fence sitters. As you have seen here the bears are truly delusional. You’ve seen Vancouver and how great it is. We all know that this is the best place on earth.
Fact #1) Bears don’t own real estate and instead rent and “invest” in the stock market which is currently down about 10% on the year at least. Looks like this was a poor choice.
Fact #2) Bulls own REAL ASSETS that don’t decline in value in a single afternoon. Sure some houses sold for less than they did before but overall the owner made a killing and at worst broke even.
Fact #3) Rents are high vacancies low and the economy is BOOMING.
Fact #4) Rich Albertans and asians are selling their risky stocks to buy stable financially stable robust vancouver condos. Surrey is not on the list of places to buy in due to the fires.
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airborne canine Says:
October 3rd, 2008 at 1:42 pm
RRSP’s are fully protected against mortgage recourse, under the new legislation, unless the money was put in during the last 12 months, in which case creditors can go after them.
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Clam Chowderhead Says:
October 3rd, 2008 at 2:06 pm
I haven’t met too many people with over 100K in their bank accounts, no offense but that’s not a very good place for the money. If you have a sizeable amount you are always better off investing it then having it sit in the bank where it isn’t even keeping up with inflation. There are many stocks still making money, there are even stocks that pay higher divends then the bank pays in interest. In these times of stock market turmoil there are still stocks that are a safe bet, as are certain commodities. If the market begins collapsing the best thing is to buy real assets, rare rural land is among one of the safest investments in rough times.
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Clam Chowderhead Says:
October 3rd, 2008 at 2:08 pm
Friday afternoon… mind already in weekend mode.
Above should say raw land not rare land.
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Gadwin Says:
October 3rd, 2008 at 2:16 pm
Wow, listening to John is almost as good as listening to David Lereah. Look at the latest economic indicators:
1) HUGE DECLINE in auto sales:
http://www.ctv.ca/servlet/Arti.....name=Autos
2) 159,000 U.S. jobs lost, worse job loss in last 5 years:
http://www.marketwatch.com/new.....ist=msr_17
3)U.S. GDP revised DOWNWARDS:
http://www.forbes.com/markets/.....ets25.html
Add on top of this, the recent financial crisis and recent bankruptcies!
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Beavis Says:
October 3rd, 2008 at 2:22 pm
I prefer my land medium well… for the right price.
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Gadwin Says:
October 3rd, 2008 at 2:29 pm
California can’t pay it’s bills because of the financial crisis! Governor Schwarzenegger asks for emergency loan from Treasury!
http://biz.yahoo.com/cnnm/0810.....risis.html
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beta Says:
October 3rd, 2008 at 2:46 pm
“There are many stocks still making money”
Good luck picking them. I’ll keep my meager 3-4% from the bank; it’s looking a lot better than double-digit losses right now.
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Mr. Market Says:
October 3rd, 2008 at 3:12 pm
Why not short the market? So many people I know have been short all year and making bundles of money.
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jesse Says:
October 3rd, 2008 at 3:23 pm
“There are many stocks still making money”
Yeah the stock that paid a yield of 5% then drops 10% in value and still pays 5%. Sounds like a great investment.
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Drachen Says:
October 3rd, 2008 at 3:26 pm
BBY
Don’t worry that much (or worry, but for different reasons). If one of your banks fails it’s quite likely that it will take most of a year for you to get your money back, if not longer, in that time the other banks should have collapsed or not depending on their merits. Any surviving banks at that point are probably safe.
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freako Says:
October 3rd, 2008 at 3:27 pm
The MSM coverage of YOY decline is another major milestone. There probably are a few oblivious individuals who haven’t realized that the gig is up, but their numbers are dwindling FAST.
What do you guys think will happen to demand (and hence sales) next month (sales over the next few weeks have already occured and are just waiting for removal of subjects).
My guess is an even sharper drop in YOY sales, perhaps 60%. I mean who in their right mind would stretch affordability to this degree in a declining market? Only somebody who REALLY wants to own NOW, or who simply doesn’t care about money. Expect MOI to go to the moon at end of November. 18 MOI+ me thinks.
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YLTNBoomerang Says:
October 3rd, 2008 at 3:39 pm
John, 10% drop in the market, assuming you are long, well that sucks but at least you can cash out at any time and accept your losses. 10% down in real estate, well, one word: leverage. That 10% loss doesn’t come off the mortgage and if you want to get out fast you are going to have to drop a lot more than your neighbors.
I sold my townhouse in March 2007 (took 9 months on the market). The $/sqft I sold at was $869. Average listing for townhouses in the area is now $830/sqft, average selling is even lower. My place was 1897 sqft so that means my selling price today (assuming I could sell at average listing) is $74K lower. Taking the proceeds and putting it in a mix of high and low risk investments, only the high risk investments have dropped (down $30K) but the low risk have actually provided me with about $40K per year. So, doing the math: I have earned 60K less 30K capital loss for net $30K on top of the proceeds of my sale. Had I held on, I would have $74K + $30K or $104K less cash in the bank then I have now. I’m not even looking at the difference between my $2K/month rent today vs my $3K/month mortgage + $685/month strata fee.
Hmmm, was I dumb to sell?
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Deja Smart Poster Says:
October 3rd, 2008 at 3:53 pm
23 Scullboy Says:
December 1st, 2007 at 2:36 pm
Satv:
You know the old saying: The game’s up when shoe shine boys/cab drivers are giving you tips.
I mean it’s true. At that point the wealthy (developers, banks) have collected their “bets” (multiple hundreds of thousands of dollars).
So then, the banks have a commitment from the lower classes to pay a set amount on a certain asset till the end of time.
The asset then loses value, till it’s worth oh… say half what the sucker paid for it.
Who comes out ahead?
Well the banks keep getting their mortgage payments, which are outrageously high.
the developer got his money, so he walks away ahead of the game.
However, the “investor” is left holding the bag. Yeah he’s got his condo….. but he paid twice as much as he can get for it now.
This leaves him with 2 choices:
1) Sell it at a loss and spend the rest of his life making up the difference.
2) Hanging on to it, which is basically selling his labour to the bank.
To put this another way: If those waiters and drapers are smarter then we are, why are the spending their lives serving food or measuring drapes?
I mean not to toot my own horn dude but I have a pretty respectable resume. My bank exec buddy has an even more impressive resume.
so joke number three is while window dressers and waiters are buying at the top of the market, my bank exec friend is saying “these people are going to get screwed”.
I think I’ll go with his advice. If I need to know whether to serve guests from the left or right, I’ll ask a waiter. If I need to know how to hang a window treatment, I’ll ask a draper.
Current score: 0
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MickeyFinn Says:
October 3rd, 2008 at 3:58 pm
Patriotz et al said, “the theory being that most people trying to sell are doing so on a lark but will revert to holding when they don’t get their price.”
Okay, I know I have been harping on this but I have pretty solid evidence that significant amounts of Vancouver real estate is owned by non-resident investors. A large segment of that is Chinese, Taiwanese, Korean etc. And again, you may be getting tired of me saying this but the Asian economies are being hit right now just like the rest of the world and their stock markets are down significantly from their highs (in fact, the Shanghai index has dropped the most of any major index and is off something like 70% from its highs.).
For me, this spells a true tipping point… it is this kind of investment real estate that could end-up being sold at “any price.” And as I previously mentioned, back in the winter of 1998/1999 some of the killer deals were had at the expense of speculators/investors who were “pinched” by the drop in the Hong Kong stock market in the fall of 1998.
In January 1999 – 1149 Connaught Drive sold for $540k… the tax assessment was like $900k and the asking price had been $880k
Also in early 1999 – 5809 Athlone Street sold for $588k… the tax assessment was also over $900k and the vendor had dropped his asking price multiple times within a matter of weeks as he tried to press for a sale.
I know because I was trying to bottom-feed on both of those places… I just didn’t have enough coin to end-up as the winning bidder.
Both of those are nice Shaughnessy addresses… and I believe it can happen again, albeit not at those prices but at perhaps 50% off from the highs we have just seen in the past year.
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Rob A. Says:
October 3rd, 2008 at 3:59 pm
I’M GLAD I SOLD WHEN I DID, I MADE OUT LIKE A BANDIT! LOL.
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John is a nut Says:
October 3rd, 2008 at 4:17 pm
John: you forgot one more fact. Canada will be insulated from the rest of the world’s RE bust because we have oil, and that is why Re in Alberta is still appreciating double digit.
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bdk Says:
October 3rd, 2008 at 4:22 pm
Mickeyfinn, Another aggravating factor that caused those houses to be dumped (Granville to Arbutus particularly) was the change to how grow ops in rentals were treated.
There were quite a few Hong Kong owned rentals that ended up being sold in 99/00 because insurance started to exclude the damage and the city made the owners pay the cleanup costs. it seems trivial but it was the straw that broke the camels back.
It was a perfect storm but it’s going to look minor compared to what’s happening now!
Maybe the pink mcmansions around King Ed and Arbutus will go for $600k again??
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JB Says:
October 3rd, 2008 at 4:29 pm
Can the bailout work? Fat chance
It should be seen in the context of a decisive, coordinated effort by governments worldwide to manipulate stock markets higher by every means possible without regard to such niceties as fundamentals, the rights of shareholders or the laws of financial gravity.
http://articles.moneycentral.m.....hance.aspx
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Anonymous Says:
October 3rd, 2008 at 4:37 pm
I know someone who bought a couple years ago and sold this year. They are being trumpeted by some as geniuses for this move. They paid realtor, lawyer, etc.. and had pocketed $25K! Move over Trump! YET… When I asked how much interest they had incurred during the time they lived there, we calculated their costs to be around $45K. Now… I’m not certain but a net loss of $20K and people think they have been wise, even my worst investments over the last few years didn’t lose anywhere near that amount… maybe $2K at the most!
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Partisan Spectator Says:
October 3rd, 2008 at 4:53 pm
If you invested $1000 in FNM a year ago and sold today, the return would be $20.29.
Should you invested the same $1000 in a good beer (say $4 a bottle) and recycled all bottles, the return would be solid $25.
Happy weekend and reasonable investments to all
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The Pope Says:
October 3rd, 2008 at 5:02 pm
Partisan Spectator, that sounds like excellent financial advice. I’m off to invest in beer. Happy weekend everyone!
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arrogant twit Says:
October 3rd, 2008 at 5:09 pm
Wow, listening to John is almost as good as listening to David Lereah.
No, it’s better. And John would never quote the articles you quoted. Doom and gloom! We need cheer instead. Com’on John, post some good news for us all.
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jesse Says:
October 3rd, 2008 at 5:18 pm
Has anyone tried the new mls.ca site? Overall it’s a HUGE improvement for what I want to use it for. I hope they keep improving it.
Still doesn’t justify high commissions though
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Clam chowderhead Says:
October 3rd, 2008 at 5:59 pm
The following post seems odd
“I know someone who bought a couple years ago and sold this year. They are being trumpeted by some as geniuses for this move. They paid realtor, lawyer, etc.. and had pocketed $25K! Move over Trump! YET… When I asked how much interest they had incurred during the time they lived there, we calculated their costs to be around $45K. Now… I’m not certain but a net loss of $20K and people think they have been wise, even my worst investments over the last few years didn’t lose anywhere near that amount… maybe $2K at the most! ”
So even in that scenario that you say they lost $20K, they had a place to live for those 2 years. The rent someone would’ve paid in 24months would be more then that.
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alexcanuck Says:
October 3rd, 2008 at 7:01 pm
Read this. Carefully and slowly. Now come back and say your not a bit more scared.
I’ve been following this persons writings, he is very well-informed and connected. I believe him.
http://londonbanker.blogspot.c.....n-for.html
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The Pope Says:
October 3rd, 2008 at 7:08 pm
Alexcanuck, your comment was hung up in the spam que, I’m not sure why probably something to do with the link. If it happens again you could try running it through tinyurl.
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patriotz Says:
October 3rd, 2008 at 8:32 pm
If one of your banks fails it’s quite likely that it will take most of a year for you to get your money back,
Most strongly disagree. Any foot-dragging by CDIC on deposit holders of a failed bank would bring on a run on all other banks.
If and when any failures occur in Canada, the model followed will be that of FDIC (small US banks fail regularly) where the bank will stay open under trusteeship or a quick takeover by another bank and all deposits will be honoured as usual.
If your response is “where will they get the money”, well they don’t call it fiat money for nothing.
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ILoveING Says:
October 3rd, 2008 at 9:01 pm
“can I just open a second ING account attached to the first one?”
“Any foot-dragging by CDIC on deposit holders of a failed bank would bring on a run on all other banks.”
I still see a benifit in having money spread out amongst different banks. You simply never know, if all your money is in ING and it goes down you will be at the mercy of the government of the day. Sure I agree that you are 99.9% likly to get all your money back in a few days but you may need it that day. Given that most accounts with that sort of balance are free I would spread it around. Personally I have 3 accounts all at different banks all well under 100k sadly.
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Lager not logger Says:
October 3rd, 2008 at 10:28 pm
Here’s what happens when you stretch too far in good times and make assumptions things won’t change. A story of foreclosure in Oregon:
http://www.getrichslowly.org/b.....reclosure/
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Macronomics Says:
October 3rd, 2008 at 10:31 pm
quoting john:
Fact #1) Bears don’t own real estate and instead rent and “invest” in the stock market which is currently down about 10% on the year at least. Looks like this was a poor choice.
What an outrageous generalization.
That’s like me saying Bulls take an advance on their five credit cards to purchase pre-sales in Quattro.
I started becoming bearish on Vancouver at the end of last year. But I do own real estate in some smaller towns out east. Appreciation is around inflation, but it’s steady and the tenants pay the rent and then some.
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patriotz Says:
October 3rd, 2008 at 11:21 pm
Bears don’t own real estate and instead rent and “invest” in the stock market
It’s been pointed out before but, er, bears repeating.
Nobody is a “bear” or a “bull”. People are only bearish or bullish about particular assets at a particular time. You are bullish about the assets you hold, and bearish about the assets you don’t.
An RE bear can be a stock market bull OR bear.
Since prices are relative, SOME asset has to be the right one to hold going forward. If the price of everything goes down. that’s cash.
I actually enjoy the straw bear arguments as it shows that the RE bulls know that they have lost the real debate and are trying to invent spurious ones.
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Vansanity Says:
October 3rd, 2008 at 11:32 pm
Through my work I have noticed a slow down with suppliers to construction developers. I have friends that are now worried about a slowdown, worried that their companies may be shutting down in 2009 because they don’t have further projects to keep them busy. They are genuinely scared.
I’ve also seen some developers getting anxious over their security deposits on their warranties. Some of you know that the legislated 2-5-10 warranty requires a security deposit, normally through a letter of credit. Just a different need from some developers to get their money back, nowadays, compared to the past few years where there was no such urgency.
Take it for what its worth. In my circle, the perception of a lot of people I know, mostly connected to construction, has changed. Where once there was a sense of never ending projects, today, there is worry about their job security.
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dbcooper Says:
October 3rd, 2008 at 11:53 pm
Take it for what its worth. In my circle, the perception of a lot of people I know, mostly connected to construction, has changed.
…t’ain’t the same no more…
….paradigm shift anybody?
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tacoman Says:
October 3rd, 2008 at 11:55 pm
“I know someone who bought a couple years ago and sold this year. They are being trumpeted by some as geniuses for this move. They paid realtor, lawyer, etc.. and had pocketed $25K! Move over Trump! YET… “
These people should read Chapter 33, “Sixth Century Political Economy” of Mark Twain’s “A Connecticut Yankee in King Arthur’s Court” for a no-frills course on net income fundamentals.
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Brittanny Says:
October 4th, 2008 at 2:01 am
The next 20 years will not be like the last 20 years.
It will be better.
NO MORE HUMMERS,OR TRADING UP THE BMW’S EVERY SECOND YEAR. NO MORE THINKING YOUR RICH WHEN YOU ARE NOT. NO MORE CELL PHONES WITH 50,000 OPTIONS JUST BECAUSE THEY ARE ARE THE LATEST TOY. YOU WILL SAVE YOUR MONEY BEFORE YOU BUY SOMETHING AND THINK TWICE BEFORE YOU NEED IT. NO MORE $7 COFFEE’S AND $200 DINNERS.
IN 60 YEARS WHEN THE NEXT BUBBLE APPEARS, IF YOU ARE STILL ALIVE, YOU WILL TELL YOUR GRANDCHILDREN TO SAVE THEIR MONEY.
THEY WILL TELL YOU THAT YOU’RE AN OLD FOOL THAT HAS NO CLUE.
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Anonymous Says:
October 4th, 2008 at 4:20 am
There has been talk around local blogs about discretionary versus non-discretionary sellers and how much inventory there “really” is, the theory being that most people trying to sell are doing so on a lark but will revert to holding when they don’t get their price.
This person even have a brain? Its like saying buyers will not buy until selling price comes down. Buyers will just hold their bid low. Econ 100 anyone?
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patriotz Says:
October 4th, 2008 at 9:22 am
Let’s not forget one thing: not everyone may have to sell, but nobody ever has to buy.
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VanTOVan Says:
October 4th, 2008 at 10:38 am
I work for a large company and we’ve just been sent out a mass memo reminding us to use our corporate charge cards responsibly and to keep our accounts current. I’m thinking Amex (who holds the account) is starting to get a little nervous…
So am I–one of my coworkers is on a long-running project for the unit of Lehman Bros that was bought out by Barclays. Christ I hope they don’t start cutting out the IT spending along with the layoffs of the acquired employees.
That said, I saw an ad for getting my realtor’s license on a telephone poll. In two weeks, I could be well on my way to becoming the next Fay Leung. (except I’m not a woman–or Chinese; but goddamn I love crazy hats)
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Vansanity Says:
October 4th, 2008 at 10:59 am
“Let’s not forget one thing: not everyone may have to sell, but nobody ever has to buy.”
Well said.
Along the same thought… the other day while on my way home, I realized that there are a lot of places in Vancouver that I could live in, but that I would never want to buy in. Where am at, for example, cheap, convenient, close to d/t, walking distance to the drive, etc. I saw a house for sale (8 months on the market now, btw) and asked myself, would I ever buy it? The answer was no, the thought of buying a home, for me, connects me to the area beyond what I’m comfortable with. Maybe I just take buying a home too seriously…
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lbj Says:
October 4th, 2008 at 11:35 am
FINALLY, awareness of that inevitable recession seems to be kicking in…hard to believe it took so long.
Vancouver RE price drops will resemble an avalanche as the last few buyers get scared out.
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betamax Says:
October 4th, 2008 at 12:20 pm
“IN 60 YEARS WHEN THE NEXT BUBBLE APPEARS”
Make it 20…the public has a short memory.
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No hope for Humanity Says:
October 4th, 2008 at 12:53 pm
What is the average IQ of people who get drawn into this BS?
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who ami Says:
October 4th, 2008 at 1:05 pm
What happened? The $700b rescue plan was finally passed and the stock market fell!
As it has been pointed out, the bailout rescues the financial sector but foreclosures continue. Only a rescue of homeowners will slow the economic decline.
Moreover, the details of the bailout have not been unveiled. What price is the government paying for the toxic mortgages? Apparently, the money may not be spent till January!
Note that oil and gold are down. So, the financial crisis is abating. However, confidence in the credit markets has to be restored before a full recovery is possible.
As I pointed out, there will still be a recession to reckon with after the financial crisis. We have yet to see the cycle bottom.
Interestingly, Warren Buffett is investing in Goldman Sachs and General Electric. I posed this question weeks ago.
‘You will ask, ”You’re the guy who said that the trend is your friend. Why are you stock picking?”.’
Have a good weekend everyone.
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dbcooper Says:
October 4th, 2008 at 1:20 pm
Warren Buffett is investing in Goldman Sachs and General Electric.
ol’ Warren got a call from GE and decided within
10 seconds to invest $3 billion in GE w/o
referring to his board of directors……
I take longer to decide what kind of pizza I want for delivery…..
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MickeyFinn Says:
October 4th, 2008 at 1:37 pm
Two words: “Months of Inventory”
Okay, maybe that’s three words.
Anyways, I was just checking out the “Listed versus Sold” graphs that have just been updated on Realtylink.org and the picture tells the tale (I.e. the September data is now included). I would encourage you to take a look for yourself.
For detached homes in West Vancouver it appears that there is something like 30 months inventory. For the West Side it is over 20 months. That’s a lot of inventory.
What also stands out is the stark difference between September 2008 and September 2007… active listings have doubled and sales have plummeted. Speaking of “plummeted…” that is a word that will be getting more use amongst Vancouver real estate agents in the near future.
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bcubbins Says:
October 4th, 2008 at 1:52 pm
Bob Rennie is quoted in today’s Sun…
”That’s it. For a city like ours. . . We’re at a time when everybody is looking for fundamentals and nobody has better fundamentals than downtown, for the investor or the homeowner.”
http://www.canada.com/vancouve.....e06bf4e85d
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Chincy Says:
October 4th, 2008 at 2:19 pm
Bob Rennie is a sales guy, of course he is going to say the ‘fundamentals’ are good…what fundamentals is he talking about? Here are my fundamentals…what happens to the 30,000 construction jobs when the cranes come down…construction was our economy for the last 5 years and it is now at the end of the cycle…delfation and dark times ahead.
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jesse Says:
October 4th, 2008 at 2:21 pm
“nobody has better fundamentals than downtown, for the investor or the homeowner”
Wrong fundamentals, Bob. Downtown has close to the worst fundamentals going.
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Gadwin Says:
October 4th, 2008 at 2:48 pm
>Vansanity Says:
>
>Along the same thought… the other day while on my way
>home, I realized that there are a lot of places in
>Vancouver that I could live in, but that I would never
>want to buy in.
You have around 20K selection from GVREB to choose from. Add to that the roughly 12K in Fraser Valley, and that makes 32K units in total – quite a number of selection for you to pick from
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stagnate Says:
October 4th, 2008 at 5:46 pm
speaking of downtown, will be interesting to see how sales pan out for the richards development (went on sale today). seems the aquilini’s are a bit late to the pre-sale party. at least the canucks are looking good, although i could see a recession putting some bite in canuck ticket demand.
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ILoveING Says:
October 4th, 2008 at 7:38 pm
“Wrong fundamentals, Bob. Downtown has close to the worst fundamentals going.”
Actually downtown is the strongest fundamentals in the lower mainland no question.
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I LOVE MONEY Says:
October 4th, 2008 at 8:05 pm
downtown is the strongest fundamentals
Seriously?! Explain. Please.
Use numbers and stuff.
I look forward to hearing this one.
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dbcooper Says:
October 4th, 2008 at 8:40 pm
show me the money
Mr.Rennie walks the talk
he drinks the kool aid
if he said anything else
all hell would break loose
hoist on his own petard…..
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Mold City Says:
October 4th, 2008 at 10:27 pm
I look forward to hearing this one.
somehow I suspect that’s one analysis that won’t be forthcoming
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ILoveING Says:
October 4th, 2008 at 11:07 pm
It is a simple calculation of prices vs. rent. Where do you think is stronger?
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MickeyFinn Says:
October 4th, 2008 at 11:14 pm
Rennie doesn’t “walk the talk”… he “stumbles the mumble”
He’s just like any good marketer. In politics it’s called spin.
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Raincouver Says:
October 4th, 2008 at 11:18 pm
Bob Rennie is quoted in today’s Sun…
”That’s it. For a city like ours. . . We’re at a time when everybody is looking for fundamentals and nobody has better fundamentals than downtown, for the investor or the homeowner.”
God, this guy is the RE Energizer Bunny … just keeps on spinning and spinning and spinning…
People acutally listen to this nob :O
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Raincouver Says:
October 4th, 2008 at 11:23 pm
Rob A. Says:
October 3rd, 2008 at 3:59 pm
I’M GLAD I SOLD WHEN I DID, I MADE OUT LIKE A BANDIT! LOL.
Shouldn’t you be blowing off your big bazoo over at RET? They love this kinda shit.
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ILoveING Says:
October 4th, 2008 at 11:36 pm
“God, this guy is the RE Energizer Bunny … just keeps on spinning and spinning and spinning…”
Can someone tell me where in the lower mainland has better fundamentals then downtown Vancouver?
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patriotz Says:
October 4th, 2008 at 11:44 pm
If you want some real entertainment go to realtor.ca and check out the ghost towns along highway 3.
My favourite – Greenwood, population 656, Canada’s smallest incorporated city.
33 listings – one for every 20 people. Look what you can get for just 390K LOL!
http://www.mls.ca/propertyDeta.....Id=7495149
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ILoveING Says:
October 4th, 2008 at 11:49 pm
“Look what you can get for just 390K LOL!”
“and the original gun turret”
Wow that has to be the first use of the term gun turret in a real estate listing. Awesome.
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I LOVE MONEY Says:
October 4th, 2008 at 11:51 pm
No, Seriously dude.. You’re trolling right? I asked for numbers, anything that would show downtown has what you call ‘good fundamentals’.
Look, I’ll just grab a quick example off craigslist. Spectrum is downtown right? Here’s a two bedroom for rent at Spectrum for $1850 (one of many up for rent):
http://vancouver.en.craigslist.....62507.html
And look! here’s a two bedroom at Spectrum that’s up for sale and its even listed below market value so you know you’re getting the best deal for it at the low low asking price of $449,900.
http://vancouver.en.craigslist.....52290.html
Some real quick math: Lets go for the longest amortization period you can go for, 35 years at zero down. If we assume we can get an average rate of 6% on that mortgage we’ve got a monthly payment of $2543.07. Maintenance is another $300 each month which means as long as you don’t end up having to pay any special assessments or extra repairs you’ll be paying about a grand a month over your rental income.
That’s some strange fundamentals you’ve got there!
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ILoveING Says:
October 4th, 2008 at 11:57 pm
Can you not read? I said “STRONGEST FUNDAMENTALS IN THE LOWER MAINLAND” not “GOOD”. Seriously learn to READ before you freak out. DUMBASS.
My question waits.
Also if you are paying over 4.5% your credit sucks.
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I LOVE MONEY Says:
October 5th, 2008 at 12:07 am
I know what you said, but you can’t possibly believe it. Do you seriously believe you can’t find anywhere else in the lower mainland with better fundmentals than downtown? I suspect even the fundamentals in Port Moody are looking better now that the benchmark price there has dropped 20% year over year.
Yes, if you’re paying more than 4.5% percent right now your credit sucks, but look around. Wake up and smell the credit crunch, do you really think you’ll be able to get an average of 4.5% over the next 35 years?!?
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I LOVE MONEY Says:
October 5th, 2008 at 12:09 am
Ozzie Jurock said he wouldn’t touch downtown condos with a ten foot pole even if his ‘life depended on it’. That should give you a rough idea of the sort of fundamentals that are downtown right now.
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ILoveING Says:
October 5th, 2008 at 12:19 am
The thing is you can’t assume rents will stay the same over 35 years either so you need to look at the current conditions.
449,900 = 2130/month + 365strata + 150 taxes = 2645/month
The rental you listed is fair but smaller than the unit for sale adjusting for the size diff you get a rent of 2162/month which puts you down $500 a month. Which everyone agrees is not good but I’ve seen a lot worse elsewhere. Hence my question.
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I LOVE MONEY Says:
October 5th, 2008 at 12:32 am
Ok, Fair enough. I think we’re both saying the same thing in the end – the fundamentals for investment downtown suck right now. They suck all across the lower mainland. I haven’t done enough research on the matter, but I have a hard time believing that downtown has the ‘best’ fundmentals in the Lower Mainland. If that’s true we’re in worse shape than I thought.
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Raincouver Says:
October 5th, 2008 at 12:53 am
#103 says…
“Look what you can get for just 390K LOL!”
“and the original gun turret”
jeezuz h tapdancing christ. just shoot me now.
390K in the middle of nowhere? why on earth would anyone want to be there…other than to die of cabin-fever?
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Patiently Waiting Says:
October 5th, 2008 at 3:36 am
“the thought of buying a home, for me, connects me to the area beyond what I’m comfortable with. Maybe I just take buying a home too seriously…
”
I know what you mean. Also, I worry about some parts of the city declining in hard times.
The area I rent in is OK for now, but the longer I live here, the more I see the rough edges (gas thefts, shifty characters, police incidents in the middle of the night, pitbulls next door). If it gets to be too much, I can move with a few months notice. Despite some conveniences, no way would I buy here.
The idea of buying at all, has lost its luster. Even my wife has lost interest in ever owning again
We’ll see what she says if we have children 
Anyone else see the latest stats on Agent Wills site:
http://agentwill.com/weekly-stats/
I know these are volatile weekly numbers, but this blew my mind.
Attached down 14% YOY
Detached down 18% YOY
Attached only up 7% in three years. In other words, if you bought a condo three years ago, you’ll lose money selling it today when you consider transaction costs. :O
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Garth Says:
October 5th, 2008 at 4:32 am
The downtown fundamentals are better than anywhere else in the sense that when you get kicked out of your condo your heroin fix and cardboard box are only steps away.
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Vansanity Says:
October 5th, 2008 at 9:28 am
Patriotz – I go back and forth to my old hometown in the West Kootenays a few times per year (heading there next weekend) and have done so far over a decade now. The last time I went, I have never seen so many for sale signs in my life. Talking to people in Osoyoos and Grand Forks, they were all saying how the market dried up. Talking about how so many people took out home equity loans to buy their big truck, boat, seadoo, skidoo, etc… Bottom line is most of the interior cities and towns of this province is already in recession and they will be getting slaughtered.
I saw places in Nelson for sale that have similar prices to Vancouver! That is outrageous! The prices are so out of touch! This was just a classic bubble, greed, fear, speculation, low interest, zero down mortgage, strong unsustainable economy, you name it, it all has had an impact on it and the good times are coming to an end. This is the mother of all housing bubbles. The pop will likely echo for years to come.
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MickeyFinn Says:
October 5th, 2008 at 9:59 am
One more thing as regards the following:
“the theory being that most people trying to sell are doing so on a lark but will revert to holding when they don’t get their price.”
The main reason the inventory of unsold homes has grown so rapidly is that the buyers have gone on strike. So even if some sellers pull their properties we will likely still see prices decline.
And, it only takes a few sales at the margin – at low prices – to set the new “average” price.
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Ben Says:
October 5th, 2008 at 10:29 am
http://www.cbc.ca/arts/artdesi.....unday.html
This was worth it for the mention of
“Zombies in Condoland”
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Central Bankers Are Powerless Says:
October 5th, 2008 at 11:20 am
Interest rates may be set to drop, however, it won’t matter much.
Why have the American politicians surrendered to Socialism?
They have voted to pass a trillion dollar bail out, rather than let Bernanke print more money and reduce the Fed rate further?
Because it’s useless to print more money.
The real bank rate has been less than zero for some time, yet the economy has lost steam and is headed for a severe depression.
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dbcooper Says:
October 5th, 2008 at 11:28 am
missive from Mish:
http://tinyurl.com/3lsqfs
There has never been hyperinflation in history with falling home prices. And home prices will continue to fall
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Dave Says:
October 5th, 2008 at 11:32 am
Or… Home prices have never falling during past periods of hyperinflation.
Hard assets do well in times of high inflation. It’s cheaper to buy something in small nominal dollars today than inflated dollars tomorrow.
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Central Bankers Are Powerless Says:
October 5th, 2008 at 11:45 am
Hello Dave, or should I say Rob.
I knew I could draw you out with my last comment.
So you think hyperinflation will save the bubble from bursting in Vancouver?
You must also think there is no subprime in Vancouver.
Just a bit of a mystery how $10.00/hr vegetable wholesaler workers got strapped to a ½ million dollar mortgage.
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Dave Says:
October 5th, 2008 at 12:00 pm
CBAP… of course there is some percentage of low quality mortgage loans in the Vancouver market. The only question is what percent and is it comparable to the US. I don’t think so.
The number one cause of foreclosures in the US is due to health care bills. With our universal health care system, people don’t go bankrupt when they get sick.
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ILoveING Says:
October 5th, 2008 at 12:03 pm
“Ok, Fair enough. I think we’re both saying the same thing in the end”
I think we are. The point I’m trying to make is that everyone is saying downtown condo’s are the worst of the bubble and I just can’t see it. I don’t know the local situation on the greenwood listing but I be willing to bet that the rent wouldn’t even cover heat on a 111 year old log cabin. Forget about carrying cost of the 390k or maintanence for that matter. If you look at the condo examples you posted taking into account the principle payed off every month the owner is losing $250 dollars a month. Again not an investment I’d make but not even close to the level of stupidity of the shack in greenwood.
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Central Bankers Are Powerless Says:
October 5th, 2008 at 12:05 pm
Rob, so predictable when confronted with the truth, you automatically default to the usual tactics.
Conversation is over BS man.
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Dave Says:
October 5th, 2008 at 12:14 pm
The rental you listed is fair but smaller than the unit for sale adjusting for the size diff you get a rent of 2162/month which puts you down $500 a month. Which everyone agrees is not good but I’ve seen a lot worse elsewhere. Hence my question.
Good posts ING.
I think it shows the downtown market isn’t nearly as out of whack as many would wish it to be. You also have to consider that every year rent keeps going up while your mortgage remains at the same level. The value of you home will go up over time and you also get to build equity each and every month. On top of that, there is a value to owning your own place rather than renting.
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Central Bankers Are Powerless Says:
October 5th, 2008 at 12:16 pm
From BS man’s own blog
“On the other hand houesprices are falling at an annualized rate of 12% and everyone in Britain expects this to last at least a couple more years….an haircut of 30% nominal value on housing, together with inflation in the 5% range gives you an HALVING of real capital value of housing over the next 3 years. Anyone interested in Rob’s “metrics”? You’ll need a lot of luck to find something good for the foreseeable future.”
http://robchipman.net/blog/?p=135#comments
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bdk Says:
October 5th, 2008 at 12:17 pm
Downtown rents cover 1/3-1/2 of the mortgage payments with 5% down ( I know 25% percent is required but people lie).
$600 per $100k on a $489k (oops $450 now) plus strata fees ($230),maintenance and insurance is over $3,000 per month.
The rent for this unit (and there are hundreds so this is a fair sample) is $1300-1500.
This puts the landlord in a situation where they must pay $1,500+ when the unit is rented and over $3,000 when it is vacant. Factor in that the same unit is now “asking” close to 10% less than June 2007 and you’ve got close to $6,000 in combined losses per month.
Obviously there are a few “investors” who can afford this but there are also a lot of “Joe Six Pack” buyers who cannot and the shit is hitting the fan right now and even the most ignorant Vancouverite won’t touch real estate so things will not be improving now (or gently plateauing for a few months before the next leg up) or when 8,000 more units hit the market or when unemployment creeps up and historically high construction wages start reverting back to the norm.
Hopefully the rich asians will hurry up!
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Central Bankers Are Powerless Says:
October 5th, 2008 at 12:18 pm
Does the UK have massive subprime?
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buff_butler Says:
October 5th, 2008 at 12:38 pm
“So, raising the deposit insurance limit seems like a good idea to me.*
I disagree. Say economic times get tough such as your example and bank A fails the government may have to cover a little bit. The next time a bank fails (bank B) theyll have to cover even more because funds have been redistributed from the bank A failure. Now say this continues to bank C the bill would grow exponentially. The result of all this is the government to cover the loss would have to take out a discusting ammount of dept (exponential each time) to cover this loss and it would be put on the hands of the taxpayer. To cover this dept they would likely print money and deflate the dollar so all that money youve protected would have been a waist. The number must be chosen to curb risk in the worst of economic times such that it will not worsen the situation. Logic dictates this number would be lower rather then higher.
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John Says:
October 5th, 2008 at 1:22 pm
If it makes bears feel better to claim that the stock market declines are GOOD for them then hey keep saying it. We all know what the truth is here. The bears are now scared half to death. Gone are the bear bravado about being able to snap up multiple houses for cash. Meanwhile the bulls are still ahead because real estate is still solid and will always be. Gee looks like the experts were correct. What a shocking turn of events.
Bears current score : -100
Bulls current score : many million and climbing daily
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Anonymous Says:
October 5th, 2008 at 1:59 pm
“bdk Says:
October 5th, 2008 at 12:17 pm
Downtown rents cover 1/3-1/2 of the mortgage payments with 5% down ( I know 25% percent is required but people lie).
$600 per $100k on a $489k (oops $450 now) plus strata fees ($230),maintenance and insurance is over $3,000 per month.
The rent for this unit (and there are hundreds so this is a fair sample) is $1300-1500.”
- No one is paying 6% on a mortgage not even close.
- A 20% downpayment is required to avoid CMHC costs.
- While you can rent downtown for $1300-$1500 a decent sized 2 bdrm in a new building with a pool is a different story.
- Vacancy is low enough that you can assume full rental all year right now.
So in the examples posted the owner is losing $250 dollars a month. Hardly the 1/3 to 1/2 you claim.
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Anonymous Says:
October 5th, 2008 at 2:08 pm
“- While you can rent downtown for $1300-$1500 a decent sized 2 bdrm in a new building with a pool is a different story.”
That is a 1 bedroom price in coal harbour, those numbers make sense it’s a $2,000 loss to the landlord every month
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Dan in Calgary Says:
October 5th, 2008 at 2:12 pm
My favourite – Greenwood, population 656, Canada’s smallest incorporated city.
33 listings – one for every 20 people. Look what you can get for just 390K LOL!
Thanks for bringing this listing up. I’ve driven by many, many times and wondered what the history of this building was … it’s described in the MLS listing. Bet that’s about all you know about Greenwood, a city rich in history. Regarding “LOL”, you big city folks are all the same … full of yourselves.
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bdk Says:
October 5th, 2008 at 2:21 pm
Alright Annonymous I shouldn’t rise to your troll bait.
Here’s a unit that would cost over $400k if available right now for $1400 (650 sq ft) in Coal Harbour with pool.
“$1400 1br – 1 Bedroom w/View at Coal Harbour for Rent (#1204-1328 W. Pender St., Van, BC) (map)Well designed 1 bed suite, 7 appliances, granite countertop.
12/Fl, view of Coal Harbour, Park, marina and mountain.
Building has Resident Manager, concierge service, indoor swimming pool & full rec facility.
Come with 1 parking and 1 locker. ”
So what is it you are trying to say?
Are you suggesting it’s only a loss of $250 if you buy it outright? What about the opportunity costs of putting up hundreds of thousands?
If vacancies are so tight in coal harbour why do I have my pick of hundreds right now?
You actually need 25% down for an investment property, which you must know. The fact that people lie and put 5% down and then rent them out isn’t a secret.
If you can find me a place and then rent it out at a loss of only $250 per month I’ll write you a cheque.
The truth is it’s a loss of $1500 per month and since the market will tank anywhere from 20-40% it’s a paper loss of thousands per month which requires a further cash injection of another fifteen hundred just to avoid foreclosure, hurry there are rich asians coming to buy them so if you don’t buy now they will!
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JB Says:
October 5th, 2008 at 2:35 pm
Germany seeks to reassure savers
German Chancellor Angela Merkel has moved to reassure savers in German financial institutions that their deposits are safe.
The BBC business editor says the biggest worry is now in Iceland, where the government is trying to shore up the entire banking system before markets open on Monday.
http://news.bbc.co.uk/2/hi/business/7653317.stm
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patriotz Says:
October 5th, 2008 at 2:50 pm
I’ve driven by many, many times and wondered what the history of this building was … it’s described in the MLS listing. Bet that’s about all you know about Greenwood, a city rich in history.
I grew up in the southern Interior, wise guy, so I’ve known about Greenwood since I was a kid.
If you think being “rich in history” makes a house in a ghost town worth 390K, go ahead and buy it.
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sluggo Says:
October 5th, 2008 at 3:06 pm
Been waiting eagerly for pope to implement the “thumbs down” option for instant relief from the nagging of a couple of bulls still stuck in denial.
Well, sumbith, I was so pumped to blast away at the first sight of Dave and John that I hit the wrong damn button…that feels even worse than the agony of not having the “thumbs down” option.
O man, will I be waiting for you creeps the next time.
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Dave 3 Says:
October 5th, 2008 at 3:08 pm
CPAB, why are you accusing me of being Rob Chipman and why is the text in my posts so small above?
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subpriming the pump Says:
October 5th, 2008 at 3:48 pm
A friend of mine bought in Vancouver at the beginning of summer. She and hubby got a mortgage from a broker in Alberta. I can’t even believe the terms: 5% down, and 60 year amortization! I didn’t even know this was possible… (on their mortgage papers, they are “self employed”.)
The rationale is to keep the monthly payments within their range, and longterm they’re counting on appreciation… I tried to get them to read this and other bear blogs, but they wouldn’t do it. I guess they’re not that worried, they’re in for so little it will be easy for them to walk away if things get tough.
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punface Says:
October 5th, 2008 at 3:51 pm
Whenever I see an MLS listing where the description includes what the unit currently rents for, I always do a quick calculation of what the unit would yield and how much the new owner would lose if they kept it as a rental.
The results vary greatly – but I’ve never seen a montly loss as low as $200. I would say $500 minimum (this would be on a smaller 1BR.)
If anyone sees any listings like this, post them … they are interesting!
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Rob the Shyster BS man Says:
October 5th, 2008 at 3:57 pm
Vancouver investors recognize good value, and the solid fundamentals of the Vancouver market make investing in the best real estate anywhere an undeniably great investment for investors from abroad as well as local.
The metrics tell the tale:
S/L ratio: in the high 90’s
MOI : 1.5
And let’s not forget, the shortage of land, the fact that Vancouver is a world hub of business, and did I mention we are the California of the North?
(maybe I shouldn’t use the California of the North thingy anymore)
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punface Says:
October 5th, 2008 at 4:08 pm
Are Dave’s comments above in a small font because they are getting ranked lowly?? That is childish – I like it! But can his comments please get marked in a way that is still readable without copying the text into another program – say put them on a darker coloured background?
I like to follow both sides of the conversation, and I don’t think it does us any good to completely shut out the bullish views. And since we are all fairly certain that Dave is somehow involved with real estate in his professional life, his comments are a useful way for us to see how the dishonest and/or clueless members of these professions are currently tricking people into buying.
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pricedoutfornow Says:
October 5th, 2008 at 4:54 pm
For $390k you should be able to buy the whole city of Greenwood! Seriously, I checked out real estate out that way a few years ago, a typical house in Greenwood was about oh, $40,000. About a year ago people realized the RE out there was dirt cheap and rushed in to buy. Too bad they didn’t realize the RE market there is pretty dead, hard to unload that shack you bought these days. All those for sale signs along the highway makes me laugh. Suckers!!!
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Falling on one's sword Says:
October 5th, 2008 at 4:57 pm
“Are Dave’s comments above in a small font because they are getting ranked lowly?? That is childish – I like it!”
Unlike his blog, where he censors the truth, here, the posters decide.
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browntown Says:
October 5th, 2008 at 6:14 pm
hey nutslaps! i see signs bears starting to panic! like printing press coming into den! try to shrink bull rocket!
hey! if you like canucks this yr press green arrow below
!
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!
!
!
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John Says:
October 5th, 2008 at 6:50 pm
The great bear panic is underway big time. How are those paper investments doing bears? Us bulls have a nice cozy house for the winter and lot’s of real assets instead of a depreciating bank stock.
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jesse Says:
October 5th, 2008 at 6:54 pm
“The main reason the inventory of unsold homes has grown so rapidly is that the buyers have gone on strike.”
Actually it doesn’t take much of a strike at all for sales to drop off a cliff. For every new buyer there are 2-3 that rely on that buyer to sell their own properties. Take away only 15% of demand and that’s your 40% drop right there.
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Not Rob and his many handles Says:
October 5th, 2008 at 7:09 pm
Satv,Rob,:
You see the connection between the money printing presses and inflated asset prices, yet you fail to see the event that always follows the inflation phase.
But no problem, you will see if first hand – inflation, recession, panic selling.
In California prices are down 47% in some markets, even with Bernanke putting an extra graveyard shift on the money presses.
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MickeyFinn Says:
October 5th, 2008 at 7:43 pm
It seems to me that a characteristic of balloons and bubbles is that they never pop just a little bit… it’s pretty much all or nothing.
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Anonymous Says:
October 5th, 2008 at 7:43 pm
is it just me or does the up arrow add 2 points to the score?
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dbcooper Says:
October 5th, 2008 at 8:25 pm
satv was right!
john was right!!
dave was right!!!
Believe it or not, house prices are going to soar
With developers unlikely to respond quickly when the market bottoms out, prices may recover more quickly than people imagine.’
That price rise may be every bit as large as the current price falls.
http://tinyurl.com/4ug4t6
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Anonymous Says:
October 5th, 2008 at 8:33 pm
Worst-case scenario is approaching rapidly
The credit crisis, which has been building slowly for the past year, is now moving so fast that governments around the world are finding it impossible to keep pace.
http://business.timesonline.co.....888251.ece
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betamax Says:
October 5th, 2008 at 9:10 pm
Sluggo – John is deliberately satirical for laughs, unlike Dave who either drank the Koolaid or thinks facile blog posts will prop a falling market.
One is intentionally funny, the other is just funny. But enjoy them both while they’re here; they’ll both disappear in a couple of months.
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Vandude Says:
October 5th, 2008 at 10:08 pm
60 YEARS? Are you sure you or your friend isn’t fibbing? I have a couple of friends who are mortgage brokers and 40 years is the MAX.
Stop trying to make the bears feel happy.
“138 subpriming the pump Says:
October 5th, 2008 at 3:48 pm
A friend of mine bought in Vancouver at the beginning of summer. She and hubby got a mortgage from a broker in Alberta. I can’t even believe the terms: 5% down, and 60 year amortization! I didn’t even know this was possible… ”
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subpriming the pump Says:
October 6th, 2008 at 1:20 am
Vandude:
As I said, the notion that 60-year mortgages are on the table is hard to believe… but my understanding of the maximum amortization period in Canada is that it’s only a maximum if you want/need government-backed insurance. If you want a longer term than 35 years, you just have to pony up for (more costly) private insurance.
From the BCREA website, there’s info on how the “outlawed” 40-year products offered by name-brand brokerages are still, in fact, available:
http://www.bcrea.bc.ca/economi.....rtgage.htm
“Private insurers are still free to insure 40-year amortization and 100 per cent loan-to-value mortgage products, but the lack of government backing will lead to sizeable increase in risk. This may mean the elimination of these products after October 15, or a higher insurance cost for the borrower.”
I haven’t found anything in a google search about 60-year products per se, but I will ask my friend for more info. My guess is that it’s not offered by name-brand institutions, but sketchier companies. In the meantime: anyone else know about the availability/popularity of crazy-long mortgages in Canada? If there’s something you can point to on the web that definitively says these are unavailable, that would be helpful, too…