Vancouver Condo Info

It’s the end of the week and that means it’s time to do our regular news round up and open topic discussion thread.  Here are a few stories I’ve noticed lately:

-BC kills leaky condo loan program
-Teranet: 11th straight month of Vancouver price declines
-The house price bounce
-The rational for an extreme rent / mortgage spread
-Successful flipping: Get the buyer to overpay
-Builders oppose BC’s Harmonized Sales Tax
-Translink proposes toll on all Metro bridges
-Canada’s GDP drops .05% in May
-The Winter Games call for 1,500 volunteers
-Housing Market outlook in the USA
-Sometimes real estate goes down.  Is that a typo?

So what are you seeing out there?  Post your news links, thoughts and anecdotes here and have an excellent weekend!

If you were paying attention to the news over the last couple of years, you may have noticed a bit of a global financial hiccup that brought down house prices, stock markets and some banks while driving up unemployment.  Subprime mortgages where blamed, because apparently loaning people money they can’t pay back to buy houses that are priced on enthusiasm rather than fundamentals is not a good long term business strategy.

Fortunately as of late some soothsayers are seeing green shoots that indicate the recession is nearing an end.  This would mean that even if prices and economic activity don’t shoot back up to boom levels they would at least stop falling.

Unfortunately other soothsayers are seeing yet another problem on the horizon before this whole situation calms down: The bulk of Option ARMS are going to reset in 2011.  These are the ‘pick a payment‘ mortgages that are perfect for sophisticated buyers with growing incomes, but can quickly get out of hand if the buyer chooses the negative amortization route.  In the US about 40% of these loans made in 2006 – 2007 are already delinquent.

New Barclays Capital research from Sandeep Bordia and colleagues shows that the recasts in the next year or so are expected to be a minor event. But by mid-2011, these borrowers are forecast to see payments that are 50% to 80% higher than what they are grappling with now. (Many of these option ARMS are concentrated in former hot-spot real estate markets, such as California and Florida.)

Modification don’t seem to be working with these particularly noxious loans. In the face rising payments, borrowers don’t have an incentive to keep up with their current payments for homes that are already so horrendously under water, i.e. the loan amount is far above the current value of the property. Bordia says that many of the option ARM loans that do get modified turn delinquent soon after anyway. They’ve crunched some numbers and forecast that 95% of the loans that are slated for modification will eventually default. If you think that sounds bad, get this: They say that 80% of the option ARM loans out there that are ok and up-to-date as of right now will eventually default, too.

So are the coming resets in Option ARMS going to be another sub-prime crisis, or is this just a ‘sky is falling’ redux of the Y2K hype?  Either way I hope somebody is watering those green shoots.

Patriotz posted a link to this article in the Globe and Mail about proposed Laneway housing for Vancouver.

The laneway house: A novel solution to Vancouver’s real-estate crunch

As he points out:

Note bogus headline. Is there a RE “crunch” in Vancouver? Of course not. Rents are falling.

Read the article and you will find that cash-strapped homeowners are planning to build laneway houses to recharge their finances. Running out of land? Nope. Pent-up supply? Yep.

Build baby build.

From the article:

Homeowners who can’t afford to pay their mortgages, parents who want to give their struggling children a place to live, and recession-strapped boomer retirees who want to lower their costs by moving into their own backyards showed up to make the argument that this is a great option for Vancouver.

Builder Jake Fry, whose company Smallworks has been gearing up to build the laneway houses, said he’s getting calls from families like the Woodmans “who are just finding it hard to get by, so they want to downsize and move in with the kids.”

Some residents, including Linda MacAdam, were adamantly opposed during last week’s public hearings. She complained bitterly that the “Vancouver we know and love now will no longer exist” once 65,000 homeowners potentially get the right to add another small house to their yards.

So what do you think about laneway housing?  Will this be a good or bad thing for the city and why?

End of the week, you know the drill..  Lets round up some recent economic and real estate news to kick off the open topic weekend discussion:

-Condo owners sue developer and city of Kelowna
-Burnaby is the “Best run city in Canada!”
-Commercial real estate – the other bubble
-Get ready for basement suites in the sky!
-The recession is dead! Long live the recession!
-When can you ask for your pay cut back?
-Record low interest rates to tempt unsure consumers
-Vancouver sees largest drop in hotel rates for 2nd month
-US: which cities will, and wont, recover fastest

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

Several people pointed out this story – it appears that businesses are leaking out of the downtown core pushing metro office vacancy rates up to 7.4% from the 5.4% they started the year at.

..Avison Young expects that rate to rise as a result of further office closures that have been announced, but where tenants have yet to leave.

Online auction firm eBay, which announced it is closing its Burnaby operations, is one example of still-occupied space that will become available.

“I don’t know that we’ve felt the full impact of that [space] becoming available yet,” Darrell Hurst, principal of Avison Young’s Vancouver office, said in an interview. “There is still more to come.”

Hurst said the downturn has hit Metro Vancouver businesses across the board, including financial services, the resource sector and other service businesses. But he said there are longer-term signs of life. More prospective tenants are starting to view available space compared to earlier in the year, and some firms are committing to taking significant blocks of space in 2010 and beyond.

“So we’re reasonably optimistic for the latter half of 2010,” Hurst said, “and we may be pleasantly surprised by [the second quarter] of 2010.”

Avison Young broker Matthew Craig said that downtown, office tenants had vacated 487,775 square feet (45,315 square metres more office space than they leased in the first half of 2009, which is “roughly equivalent to the size of a new office tower.”

Full article in the Vancouver Sun.

Chincy shared this link to a post on the CMHC over at the America Canada blog. It’s one of the clearest looks at factors driving the Canadian housing market that I’ve seen in a long time and it’s well worth reading in it entirety. Here’s an excerpt:

CMHC indicates in its plan that it will insure $813 billion via a combination of mortgage insurance and mortgage-backed securities (MBS) by the end of 2009. Looking at 2008 and 2007, one can clearly see that CMHC has drastically exeeded their planned figures. 812 billion is more than likely a minimum target. At this rate the Government of Canada will be insuring over $1 trillion in mortgages and loans or 77% of GDP by the end of 2010. That is double what Fannie Mae and Freddie Mac insured on a per capita basis or the equivalent of the entire mortgage debt of the United States on a per capita basis.

Even at the zenith of the US housing bubble, prices peaked around $250,000 US while incomes were around $47,000 US. In Canada, incomes are $44,000 and prices are now at $342,000. If I have evidenced to you at this point how risky our lending has been, how are we so different than America? One might even say that we are much worse.

Read the whole post and see what you think about his conclusion. It’s a convincing argument that the CMHC has strayed far from their original mandate of making homes affordable for Canadians and engaged in activity that has the opposite effect, encouraging speculation and overlending and insuring it with your tax dollars.

According to a study released by Environics Analytics, Our fair city surpassed Calgary in 2008 when it comes to net worth.  This is due to a number of factors, including increased household debt and rapidly dropping houseprices in Calgary compared to a slower drop in house prices here.

Net worth, which measures someone’s assets minus debts, dropped 6.2 per cent for Canadians as a whole last year. But Calgary residents saw their wealth plunge 12.3 per cent, while Vancouver’s residents were able to hang on to much of their riches. There, net worth fell just 3.1 per cent between December, 2007, and December, 2008.

Though house prices in both cities continue to drop, they are dropping faster in Calgary which makes the Vancouver numbers look better by comparison.  The report draws no connection between an economy based primarily on a real estate and it’s risk for a downturn in net worth, though it does mention the local obsession:

Vancouverite Sebastian Albrecht rode that Pacific wave. He has a lot of his money tied up in real estate. And it’s these investments – with prices down less than 10 per cent from their peak last year – that has made the city surrounded by mountains and ocean the richest in Canada, supplanting the country’s energy capital Calgary.

Mr. Albrecht bought his first condo a decade ago, after university. He stretched himself – and slept in a sleeping bag on the floor for a couple months in the unfurnished home.

A decade later, he lives in a $600,000 home that he bought two years ago for $500,000 and also owns – and rents out – a $350,000 town home and a $300,000 condo. He has some money in stocks, but only about 10 per cent of his net worth.

The three leading provinces for net worth also lead for household debt levels: BC, Alberta and Ontario.  Each province has it’s own particular challenges.  Alberta has a boom and bust economy based on energy prices, Ontario has been hit hard by a manufacturing downturn and locally we’ve seen job losses in resources, tourism and the entertainment industries.

As the recession and real estate market correction grinds on it will be interesting to see where the stats put us in a year as the report points out that it’s only current up until the end of 2008:

The survey doesn’t cover 2009. In the first six months of this year, prices for existing homes were down 8.6 per cent in Vancouver from the same period of last year, and 9.8 per cent in Calgary, resale statistics show.

The weekend is nigh!  Let’s do our end of the week economic news round up and open topic discussion.  Here are a few stories I’ve noticed lately:

-Canadian consumers rated ‘remarkably resilient’
-City Hall seeks Federal help to boost rental stock
-Metro Vancouver health cuts include layoffs and increased fees
-Advertisers not so hot on the winter games
-TD: All provincial economies to decline in 2009
-Merril Lynch: Get ready for 10% gdp growth!
-Conference Board: Lukewarm recovery coming soon
-Boomtime building and Chinese toxic drywall
-US Foreclosures at record high despite aid
-Paulson hid facts to ‘protect taxpayer’
-US 30 year fixed rate mortgages near record low
-Nothing will stop housing prices from tanking, but rates help

So what are you seeing out there?  Post your news links, thoughts and anecdotes here and have fun-tastic weekend!

Laid off? Downsized? Turn that frown upside down with the latest hit buzzword in this recession: FUNEMPLOYMENT!

What is funemployment?  Why that’s the positive way to look at losing your job.  It’s not just a downturn, it’s an oppourtunity!  (Just don’t try this at home with a onerous debt load).

But out of the smoldering ashes of lost jobs, a burgeoning scene of independent, arts-loving entrepreneurs are turning unemployment on its head and ushering in a new era of “funemployment.” The term became an overnight viral sensation thanks to a widely-circulated June 3 article in San Francisco’s SF Weekly, chronicling the experiences of recently laid-off people who were collecting unemployment benefits and using their newfound time to reassess their career goals, and then launch their own creative businesses.

With the proverbial pink slips piling up and EI lines wrapping around city blocks, more and more Vancouverites are facing similar challenges, leading to our very own funemployment phenomenon.

Full article in this weeks Westender.

RE/Max has just released a report that the Vancouver housing market is surging – I think the gist is that NOW is a FANTASTIC time to buy the product that they are selling.

According to the report, the surge in resale activity can be attributed to three key factors: pent-up demand, low interest rates and greater affordability. “The combination — in conjunction with declining inventory levels — has created heated market conditions in hot pocket neighbourhoods, prompting a resurgence in multiple offers in June. Average prices are holding steady or climbing, days on market are down, and inventory levels continue to tighten, especially at entry-level price points.”

The report stated that while average price is still significantly lower than a year ago, declining inventory levels have been placing greater upward pressure on values.

“First-time buyers are driving freehold housing sales at the $600,000 price point, while those looking at more affordable alternatives are considering condominiums starting at substantially less,” the report said. “Pent-up demand has also been building, with local purchasers and international investors both active in the market.”

I believe this blog and its readers are an example of ‘pent up demand’. Anyone out there bought a house or condo recently?