Houses for half off!
Patriotz points out that Phoenix Arizona has just become the first US city on the S&P Case Schiller index to have house prices drop below 50% of their peak value. Prices in Phoenix have now dropped 50.8% from the June 2006 high followed closely by Las Vegas.
Could it happen here?
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May 1st, 2009 at 1:01 am
Anonymous:
Any reference to Tim Hortons is an implicit sarcasm indicator,
April 30th, 2009 at 11:57 pm
Please, someone tell me Sally (29) is trying to be sarcastic or facetious. I’ve had a few drinks tonight and can’t tell but she can’t be serious.
April 30th, 2009 at 11:16 pm
RE: Post #31 by karl
Congratulations karl,
In one statement, you managed to show what a bigot and ignorant P.O.S. you are.
It’s not all your fault though.
After all, the family dog did beat your dad up the stairs that faithful night many years ago.
April 30th, 2009 at 7:13 pm
http://business.theglobeandmai.....iness/home
Banks applaud planned mark-to-market rules
Maybe we should impose a one time flat tax on people who made money from the bubble and use the money to finance the stimulus packages. Those who caused the trouble are those who pay for the clean up. Problem solved.
April 30th, 2009 at 6:57 pm
For all you bimbos real estate in vancouver is driven by chineese. If you are waiting for prices to fall them keep waiting as some chinesse wil sell his mum and if need be his daughter and gran to buy a home in Richmond which has fallen by a few dollars. Thats why house prices are still rising in the worst recession the western world has seen
April 30th, 2009 at 6:54 pm
Chinese came upto me last month and asked me to park her 500sel mercedes in front of joye tomatoes. I was in my nissian and gladly did it fro her. She handed me a 20 dollar bill for doing it and said that she has a problem parking. I asked her what profession she was and she smiled asnd said vancouver real estate had been real good to her.
made me really wonder !!!!!!!
April 30th, 2009 at 6:43 pm
How can anyone compare Phoenix with Vancouver.
Vancouver is a world class city with world class people.
We have People from rich countries like Indian, China and (i cant think of any more sorry!!). Vancouver has no gang crime. There is very litlle drug problem here. We have very few people without jobs as most people with jobs are emplyed by wends and Tim hortons and support ($750,000) mortgages (don’t ask me how but they do). We have professionals like pharmacists and dentist earning as much as what store managers earn in other countries like (London ,England).
So how can home prices go down in vancouver.
Its not logical , sorry you guys Vancouvers home prices will stay even if it is flat for a few years. These people who spent over 750,000 on their homes worked very hard at places like timmys and they would rather die in their home than sell it a cent less.
April 30th, 2009 at 12:21 pm
jesse Says: “That’s what I thought in Januray! Boy is my face red.”
But I DIDN’T say that in January. YOU DID AND THEREFORE YOU DESERVE A RED FACE!
April 30th, 2009 at 11:43 am
Rates can go down more if we have deflation (so real interest rate would still be high).
April 30th, 2009 at 11:32 am
“Rates can’t go any lower than today’s, folks! “
That’s what I thought in Januray! Boy is my face red.
April 30th, 2009 at 10:12 am
It’s obvious that the flurry of realwhore ads about the ‘great time to buy real estate’ are abating to a signifigant degree. Are they finally running out of money or is the general feeling that reality is winning setting in?
The stats indicate that anyone who bought in the past 8 months has been a gig loser and the further out we go the more money the sheeple lose. Oh Oh, Cameron Muir you fucking whore, what have you got to say now.
http://www.vancouversun.com/Bu.....story.html
April 30th, 2009 at 8:55 am
hey friends,
just an FYI – Ozzy has become a real bear now.
I recommend checking out his latest newsletter.
xoxo
romeo
April 30th, 2009 at 8:22 am
rp:
Prices will not fall as quickly in Canada because in Arizona (and California) mortgages are non-recourse so the underwater buyers can walk away.
Recourse or not, when you’re jobless and have no income, you can’t pay your mortgage.
This brings up another point. Why did Canadians, particularly in BC, flip houses with recourse mortgages in the last few years? Are they insane? Were they aware that all Canadian mortgages are recourse and did they even understand what that meant? I bet many of them are learning about it when the bank goes after their other assets and garnish their wages, if any. Or perhaps they have already transferred their bank accounts to Hong Kong. Even worse, there’s no 30-year fixed rate mortgage in Canada, unlike in the US. If they’re stuck and lucky enough to rent it out, they’ll still be hit with a higher payment when they renew their mortgage about 5 years from now. Rates can’t go any lower than today’s, folks! You can take that to the bank (pun intended) And there’s nothing they can do because they have locked-in the high principal by buying at the top while the sky is the limit as far as how high mortgage rates can go. Their only hope is a bigger fool, usually a newbie, who can be suckered in to pay what they paid so they can break even. Otherwise, they’ll have to wait for decades for prices to come back, if at all. Those who bought at the top in the 80s waited for 20 years to break even, thanks to this bubble. Without it, they would still be waiting today.
Smart money during those times would’ve invested in microsoft or cisco or s&p, and made 10-100 fold returns. Why do you think Warren Buffett, the most successful investor and the richest man in the world, is still living in a house he bought in the 50s. He has seen real estate booms and busts in the last half century and yet he never flips a house. Instead he invests in solid companies and turns $100K into $50B. Had he come from Hong Kong, he would’ve been a real estate maniac and put it all into a mansion which is now worth only in the tens of millions, if he’s lucky. That’s why it’s hard for the Chinese to get rich. They fail to realize that they can’t make money on their house. It’s only a place to live and is a drag on growth. The money used to buy a house (or principal portion in monthly payment, if bought with a mortgage) earns nothing until the house is sold. By then if the house is worth many times over the purchase price, every other house also has appreciated by that much. How is that making money? If you were offered a $1M/year job, would you be happy? What if I told you when you got the offer that a big mac cost $10,000, would you still think you got a good job?
April 30th, 2009 at 12:00 am
Assuming this turns out to be the obligatory spring bounce and prices increase, it seems to me that once the price increases balance out the recent drop in mortgage rates (this can be calculated: present value of difference in interest paid at the two rates), the crash will resume its momentum, but by then it will be even more difficult to drop mortgage rates lower to sustain entry of FTB.
Another possibility is that sales will continue at these levels but only if prices continue to drop.
April 29th, 2009 at 10:14 pm
You’re starting to sound desperate Patriotz. Don’t worry, there’s low mortgage rates, a decent amount of product and some negotiating power for today’s buyers.
April 29th, 2009 at 9:45 pm
crabman:
It’s not just Phoenix, the lower priced homes in San Diego have also fallen 50%.
Look at the graph and see what the categories are (Feb 09 prices):
Low: under 278K
Mid: 278K-409K
High: over 409K
That’s detached houses in San Diego, folks. That’s a metro of about 3 million with great weather, between the mountains and the ocean and the border.
Can’t happen here?
April 29th, 2009 at 8:26 pm
Anonymous:
$6500 / 2br – Waterfront Luxury! #902 – 1139 W Cordova (Coal Harbour)
Bedrooms: 2
Bathrooms: 2.5 <br. Sq Footage: 2400
Truly exceptional suite over $4million value!!
Gee, do you think the high end got a bit overbuilt?
Miami North.
April 29th, 2009 at 7:39 pm
rp:
Prices will not fall as quickly in Canada because in Arizona (and California) mortgages are non-recourse so the underwater buyers can walk away.
Florida is recourse. How’s that working out?
Let’s also not forget that prices fell at a tremendous speed in the 1981-83 bust here in Vancouver. And prices are falling faster in BC and Alberta in the current bust than in any US state.
Recourse or not, if you can no longer pay the mortgage (i.e. lose your job) you are going to walk.
Actually it isn’t really a matter of foreclosures, it’s simply a matter of what buyers are willing and able to pay. If the amount a buyer is willing to pay for a house drops 50%, house prices will drop 50%. Even if there is not a single foreclosure. Houses will sell only for what someone is willing to pay for them. And before someone brings up “well people just won’t sell”, somebody always has to sell.
April 29th, 2009 at 6:33 pm
$6500 / 2br – Waterfront Luxury! #902 – 1139 W Cordova (Coal Harbour)
Bedrooms: 2
Bathrooms: 2.5 <br. Sq Footage: 2400
Truly exceptional suite over $4million value!!
Do the math!! A mortgage on this suite at the best rate would be almost $20k plus $1k maintenance fee + taxes and don’t forget the $1million dollar downpayment!!
Huge open rooms with floor to ceiling windows
Brand new, never lived in
Panoramic unobstructed views to the N.E. to the harbour, Stanley Park and the mountains
Steps to the Pan Pacific hotel and the new Convention Centre
Located on the Golden mile of Coal Harbour
Air conditioned
Italian smoked oak Snaidero cabinetry
Mile & Sub Zero Appliances including built in expresso maker
World class amenities at the Indoor Health club including pool,steam/sauna, hot tub and gym
Golf practice room!
Guest suite
2 parking spaces
24 hour concierge
For photos and contact information please click on the link: http://listings.downtownsuites.....amp;RID=14
DOWNTOWN SUITES LTD.
April 29th, 2009 at 5:08 pm
What you get for $225,000
http://tinyurl.com/d2lx2l
April 29th, 2009 at 4:43 pm
rp:
#13 rp, I like the idea that anyone could suddenly cough up whatever the loss spread was ( 100K in your example) to balance out thier debt and keep it at a relative constant. Where do we as innocent taxpayers get all that extra dough? Does evryone in Vancouver have that extra 100K in a savings account? Are they using it to pay down the realtive debt they have incurred this year with the drop in prices? If so, I’m buying bank stocks tomorrow because with that kind of spending money getting pumped into the big 5 the profits are going to scream back next quarter. Thanks for the tip btw.
April 29th, 2009 at 4:38 pm
depressionwatch:
#5 DW, don’t forget that the Feds unemployment numbers are ‘seasonally adjusted’ numbers not the real number of jobs lost. Remember the last issuance Feb they fed us was 64000 jobs lost and the real numbers came in at 129,000. The feds had dummied up the data by subtracted the part time jobs from the loss of full time jobs and further replacing ‘ghost jobs’ which they ‘assume’ will come back once the weather and other factors normalise. What crap.
if they are admitting to 80,000 jobs lost this time around it’s a safe assumption that the actual numbers are double that. This would be the equivalent of 1.6 million jobs lost in the US.
April 29th, 2009 at 3:00 pm
Prices will not fall as quickly in Canada because in Arizona (and California) mortgages are non-recourse so the underwater buyers can walk away. How far prices will ultimately fall is anyone’s guess. In Japan it was 90%. See the absolutely fascinating presentation at:
http://www.csis.org/component/.....w/id,1828/
One idea is that if someone buys an asset and the price decreases 100k, they are 100k further in debt relative to their peers. This prompts them to pay off the extra debt. Unless the deflation is countered by government spending in the same asset class (ie: the government buys homes or otherwise subsidizes housing) then the price will fall.
April 29th, 2009 at 2:43 pm
Unemployment tops 20% in some US cities
http://cbs2chicago.com/busines.....97271.html
April 29th, 2009 at 2:38 pm
#10 , I guess they’re defaulting not because of the intrest rates but because the values continue to fall below the purchase price. No one wants to sit on mortgage payment for 500,000 when the place is only worth 250,000. It’s much easier to walk.
Garth had an interesting video clip posted on his sight about a multi hundred unit subdivision that was being torn down by the bank which owned it because it couldn’t sell the units and wouldn’t pay to finish the neccesary apps to the county to keep them up for sale never mind rent. It simply isn’t worth the carrying costs to them and they choose to destruct the problem back to zero. In this case they just made the entire bubble vanish so I guess the house prices in this case went down 100%. Now thats Bubblenomics 101-the redux.
April 29th, 2009 at 1:17 pm
With respect to US house prices, it’s not even close to being over. There is a second wave of mortgage resets that is set to peak in the spring/summer of 2011! And this is when the mortgages reset; it takes another year or so for the inevitable foreclosures of these resets to start coming down the pipeline.
I first saw this Credit-Suisse mortgate reset chart (see the link below) either in late 2006, early 2007. By that time, the real estate market had peaked in most of the US and my colleagues were asking me (they knew that I followed this kind of stuff closely) when real estate would bottom.
I told them that it would hard to tell for sure, but certainly not until abou 2013-2014 at the earliest. Their shocked expressions were noticeable and I simply referred them to the chart in question.
Moreover, this from a December episode of 60 minutes:
“”Exactly. I mean, you can look back at what was written in ’05 and ’07. You can look at the reset dates. You can look at the current default rates, and it’s really very clear and predictable what’s gonna happen here,” Tilson says.
Just look at a projection from the investment bank of Credit Suisse: there are the billions of dollars in sub-prime mortgages that reset last year and this year. But what hasn’t hit yet are Alt-A and option ARM resets, when homeowners will pay higher interest rates in the next three years. We’re at the beginning of a second wave.
“How big is the potential damage from the Alt As compared to what we just saw in the sub-primes?” Pelley asks.
“Well, the sub-prime is, was approaching $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That’s probably another $500 billion to $600 billion on top of that,” Tilson says.
Asked how many of these option ARMs he imagines are going to fail, Tilson says, “Well north of 50 percent. My gut would be 70 percent of these option ARMs will default.”
“How do you know that?” Pelley asks.
“Well we know it based on current default rates. And this is before the reset. So people are defaulting even on the little three percent teaser interest-only rates they’re being asked to pay today,” Tilson says.”
http://www.calculatedriskblog......chart.html
http://www.itulip.com/forums/a.....-7023.html
April 29th, 2009 at 1:15 pm
It’s not just Phoenix, the lower priced homes in San Diego have also fallen 50%.
http://www.voiceofsandiego.org.....042809.txt
April 29th, 2009 at 10:32 am
Thanks! Great article, patriotz. FYI, Fitch is calling for another 12% drop in NATIONWIDE home prices from today’s level, due to worsening economic outlook. Also, now that the foreclosure moratoria in California by the State, Fannie, and Freddie have ended, foreclosures there are about to soar in the coming months. Prices have already plummeted more than 40%. If the additional 12% is nationwide, I’d say it’ll be more than 20% in California. Factor in 11.4% unemployment “officially” according to the government (more than 16% according to Benjamin Tal of CIBC), I’d be curious to see where home prices will bottom when history is finally written on this biggest bubble. I pick California because it’s similar to BC lower mainland: coastal, sunny, and full of Hong Kong real estate maniacs who will pimp their daughter, wife, or girlfriend if they can buy their megahome and drive their oversized and overpriced luxury car even though they still don’t know how to park it.
April 29th, 2009 at 10:05 am
Hovering:
The excel docs contain the index numbers for all the metros.
You might want to look at this thread in Calculated Risk:
http://www.calculatedriskblog......-data.html
April 29th, 2009 at 9:39 am
I followed the link but I’m flummoxed.
What part of the webpage tells me about Phoenix?
I have seen some large excel docs and some of the tabs explain the index in general…
Thanks
April 29th, 2009 at 9:24 am
Anonymous:
#4 The new numbers represent only the ‘truthiness’ practised by a jaundiced government who still employs the same tactics of obfuscation they enjoyed before information age took away that extreme advantage. Like the citizen journalist who ‘outed’ the murderous cops in the act of torturing Robert Djikanski to death at the airport, people are just not that stupid or uninformed anymore.
“Almost 80,000 jobs lost in February, Statscan says
Economic slump has claimed 296,000 positions since October; manufacturing hit hardest
Article Comments (20) The Canadian Press
April 29, 2009 at 11:33 AM EDT
OTTAWA — Non-farm payrolls lost 79,600 jobs in February, with manufacturing taking the worst hit, Statistics Canada reported Wednesday.”
So, even if you believe the government and are empathetic with thier perogative to sell ‘optimism and confidence’ the fact is that the demographic multiplier is 10X’s to the US numbers. 79,600 jobs lost is the equivalent of 796,000 jobs lost in the US, which means that we are in fact in much worse shape.
The BC economy is tottering on collapse, we are losing one major industry after another. Losing 50% based on our real estate market having increased 100% is to be expected. We are going to see a transition of reality after the BC election. Can West Global is applying to charge an extra fee to your cable bill for you to watch the news or cut the news programming altogether and focus on local production, I wish them good luck with that. The final roll over to internet based news gathering will mean that most people will have ralit based information and not the canned and fried bullshit from the local advertisers and the whores whop support the idea that BC is a small world and the people , if kept uninformed can more easily be manipulated.
If there weren’t so many condo towers sitting unsold I’m sure the direction of the advertising wouldn’t be so real estate supportive, don’t you agree. I still can’t figure out why CKNW and Corus have taken it upon themselves to flood thier airwaves with real estate hype, whats in it for them?
April 29th, 2009 at 8:26 am
At this rate, we’re going to lose between 400k and 500k jobs by next year, consistent with a forecast I read last Dec. Our population is only 4 million, many of whom are elderly, so that kind of number sends chill down my spine. Who’s going to pick up the slack and rehire these people? In the meantime we have college graduates, young workers, and newcomers entering the workforce? We have only have a handful of large employers here. The rest of them are small businesses, many of whom have had their line of credit cut.
I’m trying to find a light at the end of this dark tunnel here and I can’t find any. Home prices have doubled in 8 years and I’m hearing realtors and current homeowners saying that those prices will hold. Who can afford A HOUSE, let alone a $1M one, if he is jobless? Am I the only one in BC who’s not making extra (unreported) income, like growing “products” in my basement or pimping Asian hookers in high rise condos?
April 29th, 2009 at 8:01 am
Oops, it’s 5 months, not 6.
April 29th, 2009 at 7:56 am
What’s happening there will happen here. BC home prices haven’t dropped meaningfully because we’re just starting to have layoffs. Statcan just reported 28,400 jobs lost in BC in Feb. Add that to 69,000 losts between Oct 08 and Jan 09 and you get the picture. It doesn’t seem big but in the context of BC with 4 million people, it is a big number especially only in 6 months. And it’s going to get worse. As long as we are losing jobs month after month after month until who knows when, home prices have nowhere to go but down as foreclosures will rise. I don’t care how upbeat you are about home sales activity this spring.
April 29th, 2009 at 7:50 am
Phoenix is not encircled by mountains and the ocean, have an influx of rich foreign investors, is not a world-class city and doesn’t have the Olympics coming! This time it’s different, I swear!
- This message brought to you by your local REALTOR(R).