Friday Free For All!
It’s Friday! Let’s do our end of the week news round up and open-topic discussion. Here are a few stories I’ve noticed lately:
-Vancouver house market jumps in June
-Americans now saving more than Canadians
-First time buyers can handle rates up to 4%
-Canadians falling behind on credit payments
-Province headline still says Van prices up 16%
-Housing recovery expected to be tepid
-Recession about to hit BC businesses?
-US Jobless rate hits 26 year high
-Manhattan home prices plunge
-California runs out of money
-Air Canada union threatens olympic strike
-Canadian jobless benefits below average
-Wealth in stocks, not real estate, key to consumer spending
So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!
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Ulsterman Says:
July 2nd, 2009 at 11:22 pm
I got the tail end of the previous post, so i’m reposting this for your amusement and horror:
First-time buyers profiled in the Georgia Straight this week
http://www.straight.com/articl…..mers-rates
Here are a few choice excerpts:
“What really helped? The 2.75-percent interest rate they were offered. It ultimately allowed them to move from a $1,800-a-month apartment into their own home.
“But we don’t have a lot of [wiggle] room,” Morettie said. “We can go up to four percent, but then we’re done.”
XXXXXXXXXXXXXXXXXXXXXXX
“Similarly, the executive director of the Mortgage Brokers Association of B.C. said interest rates are not something to worry about.
“I don’t think anyone wants to see what happened in 1981,” Tamera Olsen told the Straight. “The lenders are aware; they don’t want to see anyone lose their homes.…What I’m hearing is that any increase in rates will be gradual. Very gradual.”
She also said that 10 years is too far away to worry about”
Like the lenders have any control of rates!
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Ulsterman Says:
July 2nd, 2009 at 11:24 pm
Oops, i should have read the articles first – this link is already there!
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gvrdpropertyowner Says:
July 3rd, 2009 at 7:59 am
I wonder why the Sun’s article didn’t mention B.C.’s negative 2.9% savings rate.
So let me get this straight, B.C. has the best economy in North America, while its citizens are the only group of people who spend more than they earn month after month?
New real estate marketing slogans: “Most in-debt place on earth”, “Everybody wants to go broke here”, “Were running out of land and money”, “B.C.’s different- just don’t ask why”.
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The Pope Says:
July 3rd, 2009 at 8:10 am
Ulsterman: Yes, but you highlight some gems from that article. Does the executive director of the Mortgage Brokers Association really think that lenders have any control over rates? Yikes.
..Another interesting bit:
Yes, I remember the story about how Peter Simpson scrimped to get his first home: He sold his brand new convertible Corvette. Time’s were tough.
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patriotzed Says:
July 3rd, 2009 at 8:33 am
The Pope quotes:
Back in 1981, when interest rates jumped into the 20s, Peter Simpson got caught in that recession-related blip himself. Peter Simpson got caught in that recession-related blip himself. At the time, he also felt like throwing up. But he made it work on his $38,000 home by scrimping
That 38K purchase was made in 1970, 11 years of high general inflation before 1981. That price was impossible in 1981 as anyone who was around at the time knows. Check the link in Pope’s post above mine. This reporting is either incompetent or simply lying.
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Anonymous Says:
July 3rd, 2009 at 9:10 am
They forgot to mention that Peter Simpson’s new neighbour that bought after the crash bought two homes for $38,000 and kept his Corvette. And guess what, he built equity every year since. Do you want to be Peter Simpson or his neighbour????
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Anonymous Says:
July 3rd, 2009 at 9:26 am
why do people believe home buying advice from people who build and sell houses? Is it because they feel sorry for the builders since 2008 was such a hard year?
After all, builders need a roof over their heads too:
http://www2.canada.com/theprov.....1c6c617480
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Anonymous Says:
July 3rd, 2009 at 9:29 am
patriotzed: The article doesnt say he bought in 1981, just that he got caught in the interest rate increases. It’s deceptive since the article is about buying in a bubble like now or 81, but it’s not a lie.
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patriotzed Says:
July 3rd, 2009 at 10:50 am
Anonymous:
Read the quote again. It says that “Back in 1981″ Simpson had a “$38,000 home”. That’s just plain incorrect. You could just as well call a mansion in Shaughnessy a “$10,000 home” because that’s what the owner had paid for it in the 30’s.
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Bubble Lad Says:
July 3rd, 2009 at 11:45 am
Ulsterman – that article does seem to imply that the lenders simply pick the interest rate out of thin air, and have god-like powers to make it rise or fall.
So what exactly does determine interest rates? There does seem to be a public perception that the Central Bank picks a number out of thin air, and that they can make the rate go up or down to suit their needs.
I’ve read that it’s determined by (government) bond rates, but could not find exactly how. In his book “The Ascent of Money” Niall Ferguson alludes to this relationship, but doesn’t really spell it out.
Beuller…Beuller…anyone…Beuller…anyone…
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Anonymous Says:
July 3rd, 2009 at 12:02 pm
” In Las Vegas, there is a huge condo complex called Meridian at Hughes Center located 2 blocks from the Strip. 2BR 2BA condos that sold for $540K in fall 2005 were going for about 120K at the beginning of 2009. ”
http://tinyurl.com/lekwkj
Interesting comment on an always interesting blog.
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BBY Says:
July 3rd, 2009 at 12:21 pm
Should add this article about Canadian credit payment delinquencies to the Friday list as well.
http://www.news1130.com/news/l.....42325_8416
“Of all major Canadian cities, Vancouver saw the third largest rise in credit delinquency coming in at 22%.”
Vancouver continues to unravel. Slowly but surely, like the tide.
The fact that Vancouver has the THIRD HIGHEST delinquency rate reinforces the notion that the burden of mortgages on insanely over-priced RE in this World Class ™ village of hype but no wages is eroding population’s ability to maintain mortgages.
The purple RE hype kool-aid foisted on the denizens of this place is more toxic than the waters of false creek.
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bof Says:
July 3rd, 2009 at 12:23 pm
@Bubble Lad: The relationship is easy:
1-You get a 5 year, 100k$ CD at your local bank.
2-The bank has 100k$ to lend, for 5 years. Either it buys 5year govt bond or it lends it to a poor vancouverite through a 5 year fixed mortgage.
3-The guy who sold the house now has 100k$ in his pocket. He can either buy a CD, a govt bonds or a corporate bond.
So you see, they’re all related. The guy at #2 will get a mortgage for a rate higher than the bank gives you for your CD (the bank needs a profit). And the guy at #3 (suppose he wants a 5-year investment) will choose the best rate between a govt-backed bond or an FDIC(govt)-backed CD. Therefore the bond and the CD will move in lockstep. So all three will move in lockstep.
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bof Says:
July 3rd, 2009 at 12:31 pm
So should couples like Morettie and Wilson think twice before taking advantage of the low rates, if they’re dependent on them?
Absolutely not, says the CEO of the Greater Vancouver Home Builders’ Association.
On a side note, the CEO of the coffin builder association would like to remind you that bulletproof vests shouldn’t be used in case someone shoots you, and the CEO of the association of chemotherapists reminds you that smoking is permitted during your complimentary trip to tchernobyl.
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52pickup Says:
July 3rd, 2009 at 12:46 pm
Did anyone else notice the paragraph in the Manhatten home price artilce that talked about Jumbo loans (those over $729k) that require buyers to put at least 30% to 40% down — some need 50%.
How many Vancouver buyers are are buying $800k houses with 30% or 40% down? I think most are lucky to get 5% down.
Can’t believe that the US could be in better shape than us on these mortgages.
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pimppin tom Says:
July 3rd, 2009 at 12:52 pm
The problem with Vancouver is that ordinary people try really hard to follow the example set by the rich and famous. They strive to reach the status enjoyed by those who couldn’t care less about interest rates or condo prices. There are billions of illegal dollars sloshing around here and its owners do not have the same worries “plain folk” face daily. It’s pathetic how everyone wants to join the bandwagon and be part of the happy, successful, beautiful Vancouver image.
But sadly you just can’t do it on an average salary. And there’s no room to grow dope in a 500sqft condo. You could still try meth – a bathtub and enough floorspace to fit a few buckets is all you need…
Sad.
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Dave Says:
July 3rd, 2009 at 12:54 pm
In case you missed it:
“Second busiest June on record for Greater Vancouver real estate sales
76-per-cent jump over a year ago attributed to lower prices, low mortgage rates
METRO VANCOUVER — Greater Vancouver realtors had their second busiest June on record this year as buyers jumped at lower property prices and near record low mortgage rates, the Real Estate Board of Greater Vancouver reported Friday.
http://tinyurl.com/n7ebrc
The SFH benchmark was up 3% this past month. Wow.
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Skye Says:
July 3rd, 2009 at 1:56 pm
@ pimppin tom you said it…. status status status status status status
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Skye Says:
July 3rd, 2009 at 1:58 pm
I don’t know why everyone is modding Dave down, it’s true there seems to have been a lot of pent up demand and people more than willing to catch a falling knife this Spring/Summer. Crazy but true – there are going to be a lot of people like the couple in the Straight that are jumping in and probably shouldn’t be.
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stan Says:
July 3rd, 2009 at 1:58 pm
The article about the first time buyers is amazing! So this couple stretched themselves to the max by taking on a huge debt and making a 20 fold leveraged investment in a depreciating asset, at near peak price. They also expect to have a couple of children “imminently”.
They were not able to save for a decent down-payment with the cheaper rent, no kids and in a growing economy, but expect to be fine now in a recession, with higher monthly housing payment and supporting two children!
I hope it works out for them, because all those quoted “experts” in the article will certainly not be there to help them once they get their commission from the transaction.
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oneangryslav Says:
July 3rd, 2009 at 2:03 pm
Dave: Dave, a couple of questions for you:
1) Why are higher housing prices, ceteris paribus a good thing? I mean, let’s assume that I “owned” the apartment that I’m currently renting. It’s still the same 2-BR 900-square foot apartment, and I get the same utility out of it whether it’s worth $250,000 or $500,000, right? Or do I get better utility out of it if it’s “worth” twice as much?
2) What happens to those individuals for whom “buying” has been made affordable only because of these extremely low interest rates, when interest rates rise in the near future?
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RennieWhereRU? Says:
July 3rd, 2009 at 2:08 pm
Never realized how much of a tool Peter Simpson is, my bagging usually goes to Tsur, Rennie or Cameron but this guy is right up there with them. “there are some screaming buys out there”, “houses are on sale”. OK buddy, even with artificial low interest rates, owning your own place is still twice as much as renting it and still what eight times gross income? But you better get out there and buy, never mind if you loose your job or if your income is cut in half, just be like Pete and sell your new Corvette and make your family live on beans and water for five years or so. I think I would rather be his neighbour as wonderfully wirtten by #6. Vancouver is going to get ravaged in the fall, and I cannot wait!
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Anonymous Says:
July 3rd, 2009 at 2:13 pm
Dave admitted to being a troll, he also pretended to be borderline retarded and enthusiastic but dim, he’s admitted he’s a troll just ignore him and don’t feed the troll.
He’ll go away eventually
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The Pope Says:
July 3rd, 2009 at 2:32 pm
BBY & Dave – added your links to the list.
I would request again that you don’t vote comments down that are factual even if you disagree with their point of view. Dave never admitted to being a troll, someone else admitted it on his behalf. Lets address issues instead of slinging mud.
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oneangryslav Says:
July 3rd, 2009 at 2:46 pm
I agree with Pope; if anyone it is we bears who are more likely to be “bordeline retarded”, given that the reality of the last couple of months has obliterated our forecasts. I still think that this is another case of “the market can stay irrational a lot longer than you can stay solvent.”
Those wanting in on the property train are getting a whole lot of last-minute reprieves in the form of slightly lower prices, exceptionally low mortgage rates, etc.
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Dave Says:
July 3rd, 2009 at 2:49 pm
Peter isn’t a tool. He’s a good guy.
Slav, Utility is the same either way. The amount of equity for the person who realized the gain is obviously much higher. That might afford them more utility in other areas of their lives, but that would be at the expense of the subsequent purchaser. I never said higher prices were a ‘good thing’, nor have I advocated for them. I appreciate that home affordability is a difficult challenge in Vancouver. But this is a free market and supply and demand ultimately determine price. If you want to point fingers, I would do it at municipal governments who create too many rules around developments and think that concessions (e.g. new public facilities) come at no price.
What happens when interest rates rise? We can run all sorts of hypothetical’s on this, which may or may not reflect reality. We do know that the BOC is keeping rates at present levels for at least one more year. We do know that historically, the spread between short and long term rates is relatively consistent. Based on that, I think short and long rates are likely to remain at similar levels a year or two from now. Over time, rates will go up as the economy improves. An improved economy implies higher inflation which implies higher income growth. Will one outgrow the other? Probably. Which one? Who knows. But, to some extent they will offset one another.
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realpaul Says:
July 3rd, 2009 at 2:52 pm
I was standing behind a postal worker today at the Superstore. He had a load of groceries bagged up and ready to go. He pulled out his credit card to pay and it was denied, so he pulled out another and that too was maxed out. He did this FIVE times before he had to walk away without his weeks groceries. Too bad for the kids I guess.
I see this more and more, people with no cash money, for anything, cars parked, standing in line at the food bank, average working people. You’ve got working people with mortgages and car leases that are so unaffordale that they can’t make it from paycheque to paycheque. Household debt is now stated at 138%, personally I suspect it is much higher as it is in the US at 175% because we have a parallel consumer economy and the CDN government always lies about everything. Truth is a very rare commodity in this country because of the dearth of competing media organizations.
The cashier said to me ” I thought workinig at the post office paid pretty good?”
I replied ” It isn’t what you make that breaks you’ it’s what you spend”. We shared a second of knowing nods.
I listened to Jeff Rubin at a VBOT lunch recently. he speculated that the distant suburban popcorn shacks would be reduced to zero value in the future because of the reverse trend in macro economics vis a vis the price of oil making it to expensive to continue to outsource labor because of increased transportation costs. he makes a good point as always. Chilliwack we revert to farmland because it will become too expensive to continue to import the bulk of our food. The same phenomena with the restarting of steel mills in the rust belt. Money has a funny way of doing its own thing. If the postie can’t afford to feed his family because hes maxed out, what does that say to the future of ‘affordability’. Like the old stock market joke goes ” Sell…. to who?”.
I grew up with a cop in the family, my uncle; he became a chief in eastern city. I knew a lot of cops growing up. back then, not a single one of them would draw their weapons over the course of an entire carreer, not once. Now we see sociopathic cowards blasting away with no care for the consequence. It’s brought Canada and especially BC down to par with Mexico or Honduras, shame on us all.
http://www.vancouversun.com/Ta.....story.html
Yesterday there was a editor from the Globe and mail discussing this on the self styled social concious radio station 1410. The Globe guy says that all Canadians are sickened by the actions of the cops, specifically the RCMP, and that this mood to get rid of the RCMP was a national movement. So for the two guys who ‘want to make a formal complaint to the webmaster’ about comments made here. The two of you should get a life and get with the people of Canada and not your own self interested little program. Boo Hoo if you get your feeeeeeeeelings hurt, you pussies.
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Dave Says:
July 3rd, 2009 at 3:06 pm
realpaul, have a look at this article regarding Canadian debt levels:
http://tiny.cc/WvSEf
The premise is that on the balance, Canadian households don’t owe money, but actually are owed money.
Another interesting fact is that the debt service ratios for Canadians has been DROPPING over the past 20 years. We spend less on debt servicing now than we did in 1990 or 2000.
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Dave Says:
July 3rd, 2009 at 3:11 pm
The Pope:
Good thing you linked it above because my post will vaporize before dinner.
And you are correct that my post had no commentary, aside from ‘wow’, which I think both bear and bull alike would agree with.
The reality is that last month was a VERY strong month for real estate. Personally, I think we are making up for lost sales from last Fall. I think sales going forward will probably flatten out between the two(seasonally adjusted).
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FoRenter Says:
July 3rd, 2009 at 3:29 pm
It’s clear now that Vancouver real estate never goes down. I buy two condo for me and one for my brother. No one ever lose the money on condo in downtown Vancouver.
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RennieWhereRU? Says:
July 3rd, 2009 at 3:40 pm
A tool is probably too kind a word for Peter Simpson, and his fellow band of real estate pumpers. Dave, can you please give me some good reasons why now would be a great time to purchase a house? I mean Peter Simpson said the housing market is on sale and absolutely now is a great time to buy.
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Dave Says:
July 3rd, 2009 at 3:57 pm
RennieWhereRU?:
I don’t think you can generalize like that. Now is a good time for some people and not a good time for others. It really depends on personal circumstances.
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RennieWhereRU? Says:
July 3rd, 2009 at 4:12 pm
Sorry, anyone that lies to benefit themselves is a complete tool, especially when it comes to encouraging people to get into an abscene amount of debt at one of the worst times in recent history. I guess its up to the sheeple to see past that, but unfortunatley, people seem to lose their brain when they make buying decisions in respect to real estate.
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blueskies Says:
July 3rd, 2009 at 4:18 pm
An improved economy implies higher inflation which implies higher income growth.
…when will this improvement start?
and no green shoots bs please……
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Anonymous Says:
July 3rd, 2009 at 4:20 pm
B.C. leading Canada in household debt growth
http://news.sympatico.msn.cbc......;date=True
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oneangryslav Says:
July 3rd, 2009 at 4:38 pm
realpaul: Realpaul, this
reminds me of a quote from Charles Dickens…
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Aleks Says:
July 3rd, 2009 at 5:00 pm
“I don’t think anyone wants to see what happened in 1981,” Tamera Olsen told the Straight. “The lenders are aware; they don’t want to see anyone lose their homes.…What I’m hearing is that any increase in rates will be gradual. Very gradual.”
She also said that 10 years is too far away to worry about”
This sounds like the same BS as when people were denying the possibility of the bubble bursting. The thinking seems to be that if something is too horrible to think about, it can’t happen. If interest rates go up to seven percent, we’ll lose the house, therefor interest rates won’t go up that high. If the price of our tiny condo drops 10% we’ll be underwater and we’ll never be able to move up to the house we really want, therefor prices won’t drop 10%.
It’s completelly illogical, but I see it again and again. Personally, I believe in the old adage “hope for the best but plan for the worst.” A lot of people seem to be basing their plans on the best-case scenario, and it’s tight even then.
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realpaul Says:
July 3rd, 2009 at 5:50 pm
Dave:
#28 Sure Dave and if we divide the national weatlh per capita and compare ourselves against the potential output of Yemen we all become billionaires. Tell that to the postie who can’t afford groceries this week, I’m sure he’ll feel a lot better.
BTW, how do I collect my share?
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Skye Says:
July 3rd, 2009 at 5:54 pm
The fact is this bubble has not burst yet, not by a long shot.
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Little Says:
July 3rd, 2009 at 6:14 pm
I am glad to see people like Dave posting information that maybe the rest of us reading this blog don’t necessarily like. Some perspective is important when looking at this issue, and I am assuming that many of you, are like myself average income earners saving up hoping to buy something one day too, and are completely blown away by this RE activity. What I find the most fascinating about this recent jump in sales is just how panic driven it is. I was at a dinner party the other night with a group of pals, all thirty somethings, in similar situations to the article in the Straight. A couple of them were discussing their recent house hunting ventures and how freaked out they were that they were not going to find a home in time to take advantage of the low interest rates, and they would therefore miss their opportunity to buy. In other words, they are going to make a completely hasty decision on a home that they cannot afford when the interest rates go up. Vancouver seems to be the only place that I know of where people will hurridly and blindly make a commitment to purchase a home they cannot afford because they HAVE to, they just HAVE to. I don’t understand how a home purchase is something you rush into. I seem to be on the minority in my age (mid thirties), and class (middle) that feels this way. People I know have been so quick to jump on this low interest rate and simply don’t care about five years from now. Seems bizarre to me.
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drugs "r" us Says:
July 3rd, 2009 at 6:19 pm
This bubble will not burst as long as Vancouver and British Columbia remain the number one location in North America for illicit drug trade.
And as far as I can tell, there is no visible effort present to change that whatsoever.
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Dave Says:
July 3rd, 2009 at 6:24 pm
In other news, the insulation union guy was full of it regarding the Olympic village site.
VANCOUVER – A preliminary review of the pipes installed at the Olympic Village site in Vancouver has found nothing to substantiate concerns raised by a union official earlier this week.
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Buy or not buy Says:
July 3rd, 2009 at 6:26 pm
You can afford it you buy it, you can’t afford it then just keep waiting and hoping for one day you can afford one. Simple as that.
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gvrdpropertyowner Says:
July 3rd, 2009 at 7:36 pm
“I seem to be on the minority in my age (mid thirties), and class (middle) that feels this way. People I know have been so quick to jump on this low interest rate and simply don’t care about five years from now. Seems bizarre to me.”
Well Little, as I see it, you can either heed the advice of Professor Robert Shiller, or emulate the behaviour of individuals who will never know who he is. Proper due diligence might be a pain- but is sure beats the alternative.
In case we all forgot:
Mr. Shiller, co-founder of the S&P Case/Shiller Home Price Index, said psychology is the primary driver of bubbles and it appears that Canada has been caught up with home buying fever just as the United States and other countries around the world.
Asked whether that meant Canada could face a similar bust Mr. Shiller said: “Yes, especially in places that went up a lot like Vancouver and Calgary. I don’t think Toronto has been quite as extreme.”
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davers Says:
July 3rd, 2009 at 8:06 pm
Buy or not buy:
That is some crap you are spewing. I can afford a condo in Surrey, should I buy it? I dont really want to live there, i would rather rent in Van for the same price as owning there. I can even afford a bachelor in east van, but i would rather rent a 2 bed place for way less. Just because you can afford something doesnt mean you should necessarily buy it.
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anon Says:
July 3rd, 2009 at 8:55 pm
Why buy a million dollar place when you can rent it for 2k a month. People who can afford to buy such places but don’t are considered premium renters. They are in high demand and get smashing good deals on renting houses.
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browntown Says:
July 3rd, 2009 at 9:41 pm
oh yeah nutslaps! barbiecue time! browntown say bring on the deflation bugaboo becaus
“i’ll take positive cash flow over green shoots”
tell the postie
“there is nothign to fear but fear itself”
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VanBanker Says:
July 3rd, 2009 at 11:06 pm
“oneangryslav Says:Reply to this comment
July 3rd, 2009 at 2:46 pm
I agree with Pope; if anyone it is we bears who are more likely to be “bordeline retarded”, given that the reality of the last couple of months has obliterated our forecasts. I still think that this is another case of “the market can stay irrational a lot longer than you can stay solvent.”
Those wanting in on the property train are getting a whole lot of last-minute reprieves in the form of slightly lower prices, exceptionally low mortgage rates, etc.”
Excellent post oneangryslav, you’re one of the few people on this forum anymore with anything valuable to say.
On a personal note, another guy at my office caved and he’s now looking to buy. He said he is “forced to” because he wants to stop “throwing away money on rent.” Therefore spending say $3,000/month on a mortgage is not a waste while spending half that on rent is money in the toilet. At least this kind of behaviour makes me very optimistic because I’m really getting the feeling lately that the barrel of greater fools is almost empty.
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other ted Says:
July 3rd, 2009 at 11:09 pm
drugs “r” us you make a good point about the drug business in BC. I guess criminals have to launder money somehow and real estate is one way. The other illegal activity that doens’t get mention in this blog yet I think also helps prop up real estate is the massage parlours. I was reading last week how illegal asian girls were robbed in their condo. They were prostitutes and were operating out of a condo. I wonder if this helps explain the unusually high amount of condos that appear to have no tenants.
I am not advocating to buy vancouver real estate. In fact this illegal activity is one more reason to move from vancouver. But it could also be a factor help push demand higher than what would seem more in line with fundamentals.
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Ulsterman Says:
July 3rd, 2009 at 11:53 pm
Peter Simpson talks about buying his first HOUSE way back when. I noticed that he described the mortgage as “Crippling”, so i did the math to see how crippling it really was:
$36000 (purchase)/($160(weekly income)x52)=4.32PE
I would LOVE to take on that kind of “crippling” mortgage today if my single income could get me into a HOUSE for so little.
Hey Pete! Try 10 times my single income and then come talk to me about crippling mortgage payments.
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Boombust Says:
July 4th, 2009 at 11:22 am
Hey, I can beat that…
My parents bought a brand new house in 1966 in Coquitlam for $16,250.00. A 25 year fixed rate mortgage of 6.25% paid it off in 1991.
Nevertheless, they sold it in the 1973-74 boom for $48,000.
Imagine that!
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realpaul Says:
July 4th, 2009 at 12:44 pm
Are you feeling safe? Are ‘things going to roll along and be ‘hunky dory’ forever? Not according to the macro guys like George Ure.
In case you’ve been sleeping, America is going down the crapper by fits and starts due to the fact that America’s Framers had in mind the design for an ‘independent’ kind of America, one where self-sufficiency, freedom, minimal governance, and oh, did I mention the pursuit of happiness? was the goal.
—
I’ve proposed that there are seven major physical support systems which define the physical quality of one’s life and that each of these has be undergoing dramatic change over the last year to the point where it’s tearing the country apart despite the best intentions of those who would pretend to lead us.
Food: Over the past year, millions of American families had to make the once ‘unthinkable’ decisions – “Do I feed my family or make this house payment?”
Shelter: Thanks to the government-sponsored (starting with Greenspan et al and their ‘easy money, non-regulation of housing lenders) we’re still in the opening portion of the Second Depression with housing prices down nationally almost 33% (*S&P/Case-Schiller this week) since most markets peaked in mid-2006.
Transportation: Ford skirted financial death, but GM and Chrysler have been bankrupted.
Communications: Television, once mandated by the Communications Act of 1934 to serve the public need, interest, and concern, can now no longer be had “free”. You have to either buy an analog -digital converter, or put on the yoke of a monthly cable or satellite bill to get your news. The corporate hijack of communications is nearly complete. Where else, but in America, would the public supposedly have ‘free access’ to what goes on in Washington, but then have to pay to have a corpgov ‘provider’ move the signal to the home? And it doesn’t stop there: Censorship of the internet is coming along nicely too, in places like Australia which are test beds for the limited or corporate domination of sheepish people.
Energy: We’ve been fighting in Iraq – ostensibly for freedom – yet strangely as the energy deals come together for the multinationals, the war ‘winds down’. It’s a shocking coincidence.
Environment: Health care reform is coming, along with taxes on cow-farts, or anything else that Al Gore and his cronies can sell as ways to ‘Save the earth from global warming’. Reality check: It’s summer. And in case you didn’t notice, the “Health overhaul in Senate bill imposes penalty on those refusing affordable medical coverage.” Affordable? In whose book? Meantime, notice how the ‘avoid crowds or swine flu might get’cha’ meme effectively killed the “Tea Parties”? Might as well set up an exchange to trade wife-beating credits while we’re at it.
Finance: The country is essentially broke. Unbelievable as it is, the people who are trying to monetize misery are still spending far beyond the ability of the country to pay – unless, of course, they plan a massive hyperinflation starting as early as late fall this year. Of course, that would fit nicely, since hyperinflation now won’t take as much equity out of the pockets of the PowersThatBe since the weakest of our countrymen have already been foreclosed upon before paying back their mortgages with hyper inflated (thus widely available cheaper money) will be one of those fire exits that’s been conveniently chained shut.
It might be a brave new world after all.
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Anonymous Says:
July 4th, 2009 at 1:20 pm
The suspension of work at the Echelon is only one sign of larger problems in Las Vegas. Three million square feet of retail space now stands vacant, and nearly $10 billion in commercial property is in financial distress. In 2008, more than one in 12 of the city’s houses received a foreclosure notice.
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Vansanity Says:
July 4th, 2009 at 1:40 pm
Vanbanker – ask your coworker if paying interest on his mortgage is “throwing money away”.
What’s the difference really? A cost of living is a cost of living, emphasis on the cost. Lower the cost and you should increase your savings, pretty simple.
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observer Says:
July 4th, 2009 at 1:42 pm
This has been brought up many times before in various forms but I can’t help but wonder that we are simply setting ourselves up for a Canadian variant of subprime crisis.
The low interest rate policies promoted by government and banks was meant to keep the economy from free fall and to preserve wealth stored in RE due to its importance to the financial sector.
But the low interest rates are also inducing FTB to buy overpriced RE without regard to the intrinsic value of the RE. The current rationale is that our banks are more prudent in lending so mortgagees should be able to handle the inevitable future rate increases and all is in order. If our banks are really prudent, then the pool of quality FTB will become ever more scare as more and more enter the RE market, unlike what happened in the USA where they keep the pool growing by decreasing quality.
Another line of thinking is that rates won’t increase until the economy picks up anyways. But there is still the risk of a scenario where rates increase before the economy can support current RE prices due to inflation (either anecdotal or official) or that the economy stagnates and slowly kills off overstretched mortgagees through unemployment and reduced opportunities to make money (look at japan’s housing prices since it burst).
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pricedoutfornow Says:
July 4th, 2009 at 2:36 pm
observer:
I agree! It seems like we’re getting ourselves into a subprime situation here-teaser interest rates offered for a short period of time, then BAM! up they go. It’s not true that the lenders (banks) want interest rates to stay low, I recently read a paper put out by TD that was making a case that the banks were AGAINST low interest rates-how will they charge fees on those money market funds if the bank rate is 0.25%? Not enough room to maneuver in that case. And the banks definitely don’t have any input on whether interest rates go up or down. And they won’t stay this low forever, that’s for sure.
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other ted Says:
July 4th, 2009 at 3:33 pm
real paul good post. We here in Canada are not far off from these problems as we are just a satellite of the US.
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rp Says:
July 4th, 2009 at 4:43 pm
I think it’s more likely that housing will crash before the rates go up, although the couple needing 4% or lower are screwed. I think the average person has capitulated and is no longer thinking 5-10 years out, due to all the uncertainty and nonsense in the media. There is very little acceptance of the financial crash and the probable consequences (deflation, unemployment) that could be with us for a while. People are in denial.
So we’ve got another chance to board the Titanic before it goes down. Rates won’t go up until there is competition from investments, or the government starts issuing outrageous levels of debt. I doubt the Conservatives would do that, and Canada paid down a lot of its debt in the last 15 years or so, relative to GDP. So rates should be low for a while. It could be 4-5 years, certainly two. But people without jobs can not pay mortgages, and most mortgages now need two full time incomes to pay. A 10% unemployment rate could wipe out 20% of young families. That is not a gamble I would make.
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rp Says:
July 4th, 2009 at 4:49 pm
Another reminder, just to clarify what the risks are. In Canada mortgages are non-recourse, so if you default on your mortgage and they foreclose, the bank will take your house, you will lose whatever money you paid into it, and you will still have debt if the value dropped by more than what you paid in total, and your credit will be ruined.
I want lower house prices, but they are going to ruin people. The prospect makes me sick.
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pricedoutfornow Says:
July 4th, 2009 at 5:36 pm
What I keep wondering is how people can watch housing prices crash all over the world-then run out and buy themselves a house in Vancouver with a massive mortgage. Hello? I mean even if it doesn’t crash here (which seems unlikely) wouldn’t you want to err on the side of caution and not buy, maybe wait just a little while and see what happens? If all the airplanes in the world suddenly started plummeting to the ground, why on earth would you decide a trip to Paris (via plane) was suddenly a great idea? Why, why, why?
Oh, I forgot…we are “special”
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observer Says:
July 4th, 2009 at 5:42 pm
It’s possible that US rates will jump due to their massive debt load, thereby putting pressure on our interest rates.
Agreed. The problem with the RE market is that we are currently at unusual extreme point where conventional advice no longer applies and where it is important to apply more objective measures of value.
The group think wisdom is luring people into borrowing large sums of money to buy an asset whose price no longer corresponds to objective measures of value but only to subjective perceptions of value.
It is sickening that many innocent people will get ruined, but as Margaret Atwood aptly notes in her payback, no one is completely innocent and even the innocent play their part.
If as a group we do not listen to reason and learn to value things more objectively, and do not weed out those who would try to convince us otherwise, the only way to correct things so the economy doesn’t completely collapse is for some people to get ruined.
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mino3 Says:
July 4th, 2009 at 7:17 pm
I think the resurging bubble in Vancouver is a sign that our standard of living is declining and people see no other way to get ahead in life. They feel entitled to some lifestyle (out of their reach) and they know they can’t attain it the conventional way from their insecure low paying jobs, so they throw caution to the wind and gamble on RE. The worst that can happen is everyone else pays for their stupidity, right?
The sad part in all this is the government is encouraging it every step of the way.
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goldie Says:
July 4th, 2009 at 7:27 pm
Dave said: “I don’t think you can generalize like that. Now is a good time for some people and not a good time for others. It really depends on personal circumstances.”
I wanted to re-post that because the “See No Evil, Hear No Evil, Speak No Evil” blog monkeys seem intent on modding him into oblivion regardless of the point he tries to make.
Mod away, bears.
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pricedoutfornow Says:
July 4th, 2009 at 10:44 pm
mino3:
I think this has been a sign of a declining standard of living for the past 30 years-they call it the disappearing middle class. Our jobs certainly won’t lead us to great wealth, stocks don’t always do so well, things just get more and more expensive, we take on more and more debt just to maintain the standard our parents had….what’s left? Oh! Buy a house and you’re set for life! Too bad that party’s over…some people are predicting the middle class will disappear completely and we’ll be no better off than the rest of the world with huge gaps between rich and poor. By the time us in our thirties are set to retire, there will be no such thing as retirement (unless you’re one of the super wealthy, not like us working stiffs)hmm…gotta get me one of those senior-level public sector jobs…
Gloomy way to think, but that’s what it seems to be coming to…
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Stu Says:
July 5th, 2009 at 1:32 am
Listen gang, Stu here’s lots of dumb excuses here but it is as simple as this. When Stu came to BC Coquitlam was half bush. They could build houses to meet immigration demand. Try that now. Stu gets hassled trying to drive his auto around town. Now they want to close a lane on the Burrard bridge. Supply and demand, Stu gets cranky.
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Anonymous Says:
July 5th, 2009 at 6:44 am
stu forgets that rents need to cover carrying costs. Ain’t nothin to do with traffic man.
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patriotzed Says:
July 5th, 2009 at 8:55 am
bof:
2-The bank has 100k$ to lend, for 5 years. Either it buys 5year govt bond or it lends it to a poor vancouverite through a 5 year fixed mortgage.
It does not buy a 100K govt bond, for the simple reason that the interest rate on that bond is lower than on the GIC. The GIC has a higher rate because it is illiquid. The bank loans the money to a private sector borrower.
Government bonds have the lowest yields of any debt securities because they offer both security and liquidity. Unless they are parking money short term, banks do not buy government debt because they can’t make a profit on it.
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patriotzed Says:
July 5th, 2009 at 8:59 am
observer:
It is sickening that many innocent people will get ruined
What innocent people? If you buy a house at an inflated price you yourself are responsible for the inflated price, and you are without doubt expecting to sell it later for a higher price, which makes you a speculator.
The innocent people are the ones south of the border and here who did not participate in the RE bubble but will face loss of work because of its collapse.
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observer Says:
July 5th, 2009 at 9:58 am
Dave said: “I don’t think you can generalize like that. Now is a good time for some people and not a good time for others. It really depends on personal circumstances.”
It’s a slippery slope. Once you say this can be a good time to buy for some people and not for others, some people will buy even though it is not a good time for them. More to the point, many people will buy even though it may not be a good time to buy for anyone.
I don’t think the issue is really about the decision being dependent on one’s circumstances.
Because one can simply ask if it makes sense for someone with enough cash to buy RE (with no financing) at current prices versus renting. If the answer to that is yes, then Dave’s comment could be relevant because then one would have to look at how much financing one needs and what its costs are, etc.
But if it doesn’t make sense for someone with enough cash to buy RE clear at current prices, then it certainly wouldn’t make sense for someone to buy with financing.
Of course, with the low interest rates acting as a mirage these days, many people would say it is better to buy RE rather than rent if you have enough cash because the cash is earning very little interest. But we all know the hidden traps and pitfalls behind this simple reasoning.
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blueskies Says:
July 5th, 2009 at 10:09 am
re: standards of living
http://tinyurl.com/kly965
fascinating read on the worlds’ standard
of living and changes that we in North America
are facing based on the lack of availability
of cheap energy…..
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observer Says:
July 5th, 2009 at 10:18 am
patriotzed:
You could be very cut throat and say those innocent people who did not participate in the RE bubble directly might possibly have had a hand in benefiting from it indirectly in the following sense. If they lost their job due to this downturn, then maybe the job they were doing wasn’t providing enough true value to the economy and was only being maintained through the bubble anyways. It’s cruel thing to say to be sure and I’m not saying that this is the case. But it is a possible viewpoint.
Ultimately, I think human nature is such that we all want to get something for as little as possible. If current policies continue to encourage this to an extreme point, then we (will) have a problem. The only way for this to correct itself is for some people to suffer some financial pain if no reason or sense will sway them. Hopefully, the policies will be such that those who are more valuable are rewarded, or at least by putting many capable people into debt at inflated prices, they will create such a class.
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Deliverator Says:
July 5th, 2009 at 10:54 am
2-The bank has 100k$ to lend, for 5 years. Either it buys 5year govt bond or it lends it to a poor vancouverite through a 5 year fixed mortgage.
It does not buy a 100K govt bond, for the simple reason that the interest rate on that bond is lower than on the GIC. The GIC has a higher rate because it is illiquid. The bank loans the money to a private sector borrower.
Government bonds have the lowest yields of any debt securities because they offer both security and liquidity. Unless they are parking money short term, banks do not buy government debt because they can’t make a profit on it.
A simple description of how banks lend money for mortgages would be the following:
Assuming a 10:1 reserve ratio is required of the banks, bank A borrows $100,000 from the BoC at interest rate X. This money is ‘created’ out of thin air, with the stroke of an electronic pen, by the BoC.
It then proceeds to lend $9,000 to each of 10 individuals at rate (X+Y)%, holding $10,000 in reserve. These individuals use the money to purchase their homes.
The sellers of those homes then deposit $9,000 each into their banks, each of which proceed to lend $8,100 to each of 9 individuals, holding $900 in reserve. $72,900 is thus created out of thin air with the stroke of several electronic pens.
And so on, until $900,000 is lent out against $100,000 of reserves.
The banks, using their rights to borrow in the short term directly from the BoC, earn the ’spread’ in the interest rate between the BoC’s short term rate, and the longer-term rates they charge their customers.
Often, the mortgages created are then packaged and sold as mortgage bonds. The price the market is willing to pay for these bonds sets the rate of return, which in turn determines the rate the banks will set for their lending requirements.
In Canada, since all mortgages are essential ARMs that re-set every 3-10 years, banks are largely insulated from changes in interest rates in the long term, and since the CMHC insures all mortgages, they are largely insulated from default.
Nice work if you can get it.
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patriotzed Says:
July 5th, 2009 at 11:00 am
observer:
If they lost their job due to this downturn, then maybe the job they were doing wasn’t providing enough true value to the economy and was only being maintained through the bubble anyways.
That is certainly true for those working in RE, construction and finance.
But the real problem is much larger. The RE bubble has diverted investment and labour from the productive sectors that provide real income in the long term and support secondary industry. The restaurant or travel industry employee who loses his job in this recession does so because the primary economic sectors such as manufacturing and high tech have atrophied (both here and elsewhere) due to so many resources having been diverted into this bogus RE boom, both here and in the US.
BC had a lot more people working in real industries that produced tradable products 10 years ago. BC’s “golden decade” has been nothing but fool’s gold. These sectors have been losing jobs but the loss in employment has been masked by the rise in RE-related sectors. This mirage will not remain in place for much longer. They have gotten the message south of the border, but we haven’t here – yet.
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rubberduckie Says:
July 5th, 2009 at 11:00 am
As I stand by watching friends buy real estate, I admit I feel tempted. Tempted to lower my standards.
We humans are equipped to deal with changing environments by discarding unattainable goals and making new lower ones. Can’t afford a house with a yard? Screw it. Buy a tiny condo and fill it with monotone furniture and bowls of wicker balls. Got nowhere to garden, entertain, build things, or do any sort of hobby at home? Go out shopping and buy more stuff. An enormous t.v. to bathe you in unnatural blue glow late into the night. High-calorie food to eat when you’re bored or lonely. New wardrobes in progressively larger sizes.
*SIGH*
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No Longer Looking Says:
July 5th, 2009 at 11:02 am
“If they lost their job due to this downturn, then maybe the job they were doing wasn’t providing enough true value to the economy and was only being maintained through the bubble anyways. It’s cruel thing to say to be sure and I’m not saying that this is the case.”
I question the value of the North American economy itself. Very few people do anything that’s of true value these days, in my humble opinion.
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No Longer Looking Says:
July 5th, 2009 at 11:10 am
“Can’t afford a house with a yard? Screw it. Buy a tiny condo and fill it with monotone furniture and bowls of wicker balls.”
Or you could just rent a nicer house than you could ever buy
Seriously, your post is another example of our pointless society and economy. *SIGH* indeed
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observer Says:
July 5th, 2009 at 11:47 am
patriotzed: I agree that we have a lack of true diversity in BC economy and if you cut out RE related sectors then you are pretty much left with very little of consequence. Unfortunately, I don’t believe this will ever change unless people get ruined by RE investments in a way that leaves deep scars. Policies have been such that it has been simply easier to make money on RE than to go into these other sectors.
Even we did have the human capital to be world class in other sectors, the group think peer pressure to buy into RE is definitely taking its toll in diverting resources into what essentially amounts to a socially acceptable form of a ponzi scheme.
But again, we all have a part to play in this (small or large) and we will all have a part in the consequences.
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realpaul Says:
July 5th, 2009 at 11:51 am
One decent question is ” How long can the Feds keep up the charade?” The smiling impish face of Jim Flahrety laughs in the face of the bad economic numbers while BOC governor states that ‘the pot is empty and risk is growing’. The bankruptcy, welfare and EI numbers tell the real story, don’t they.
Some interesting infighting shaping up south of the border with Biden announcing that ‘we fucked up’ in the read on the economy. Colin Powell turned on Obama recently stating that the cupboard is bare and spending is so out of control that the great great grandchildren are now officially screwed.
The buisness numbers are failing ( except on the front page of the Province of course), in fact the real estate sales numbers continue to show aggregate weakening accompanied by falling prices. The hype is temporary. Cash is King, don’t get lost in the smoke effects. Buying now is like getting drunk and taking home the fat chick standing by the mens room door at closing time.
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observer Says:
July 5th, 2009 at 12:09 pm
Deliverator: I’m curious how widespread this packaging of mortgage bonds is here in Canada, because I for one don’t know where I can buy these mortgage bonds as an investment.
Are these mortgage bonds the same as CMHC bonds you can buy on the bond market? If so, are they structured like the ones in the US where if defaults rise, the bonds become toxic assets, or are they a different instrument?
Exactly how would CMHC handle a situation (what would happen to bond holders, bond prices, yields) where widespread defaults happen. Have they been stressed tested against worst case projections for unemployment?
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rubberduckie Says:
July 5th, 2009 at 12:49 pm
No Longer Looking:
We are renting a lovely house with a big yard. I’d like to say renting is exactly the same as owning, but it isn’t. You don’t have control over your situation, which is mostly just a brain block, but it’s a block all the same!
If I owned this house, I’d extend the back deck, do some serious landscaping, etc. I actually enjoy doing that stuff.
I’d also kick out the Tenant from Hell who rents the other part of the house… but that’s another story!
Owning is about control.
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Deliverator Says:
July 5th, 2009 at 12:52 pm
Deliverator: I’m curious how widespread this packaging of mortgage bonds is here in Canada, because I for one don’t know where I can buy these mortgage bonds as an investment.
Ever invest in a REIT? The CMBs are not the same thing as these packaged mortgages. Rather, they are a way for the CHMC to raise money to fund its insurance business. In a way, all these bonds are related: federal government bonds, ostensibly being the most secure, command the highest price (the lowest return), and therefore set a floor for expected returns for other bond issues.
I believe the mortgage bonds are structured much the same way as they used to be in the US, before the ‘innovations’ that took place in the 2000’s. The general idea of these ‘innovations’ was to package sub-prime mortgages along prime mortgages, tack on some insurance, wave a dead chicken over the result, and get Moody’s or S&P to give it a ‘AAA’ rating so that retirement funds and other large conservative pools of capital would be able to invest in them. To my knowledge the Canadian banks stayed away from such bold new ideas.
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Deliverator Says:
July 5th, 2009 at 1:00 pm
Oops. Looks like I was wrong about the CMBs:
http://findarticles.com/p/arti....._86042874/
They are a form of these packaged mortgage bonds. Sorry for the error.
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No Longer Looking Says:
July 5th, 2009 at 1:15 pm
I live in a four-plex where a couple other tenants do serious landscaping (their choice). Nobody has built anything yet, but my deck is huge (a requirement for me).
I garden on my deck to my hearts delight and BBQ and let the cat out (on the deck). We hang art as we wish, and don’t get too stressed about holes in the walls.
I get to do all the extras while not worrying about boring basic maintenance and repairs. I did that stuff as a home owner, and didn’t care for it.
Extending a deck is outside of my skill-set, but I’m sure its fun.
Home owners rarely get to avoid cohabitants in Vancouver, sadly. And they will come to you for repairs and maintenance. And you have to jump through legal hoops to evict a Tenant from Hell. So much for freedom
Different kinds of freedom in ownership vs. renting, that’s all.
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Neptune Says:
July 5th, 2009 at 1:18 pm
drugs “r” us:
You remember Miami in the 80’s, I guess not. The cocain train eventually derailed.
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observer Says:
July 5th, 2009 at 1:33 pm
Deliverator: Interesting. The article states these bonds are guaranteed by the government and my interpretation is this makes it different than a true mortgage bond. In a mortgage back security MBS, if your mortgagees defaults, that would mean you don’t get any payments or even possibly your principal back, right?
It appears from the article that the CMHC uses this money to fund residential mortgages but it is the CMHC who is responsible for maintaining the interest payments to bond holders. But of course one has to read the fine print. If that is the case, there is an added layer of security to these bonds. This essentially means the government has to bear the consequences if things go wrong, perhaps through higher debt servicing costs if CMHC gets into trouble, so in a sense we are back to square one.
Is the buying and selling of true mortgage bonds happening only between large institutions (pension funds, CMHC, banks, etc)?
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Deliverator Says:
July 5th, 2009 at 1:49 pm
Interesting. The article states these bonds are guaranteed by the government and my interpretation is this makes it different than a true mortgage bond.
It would appear to be so. Assuming the mortgages backing the bonds are CHMC-insured, they would be de facto government-backed. At any rate, since the CMHC is federally-backed, the bonds they issue amount to federal government debt, though that debt does not appear on the books as such.
In a mortgage back security MBS, if your mortgagees defaults, that would mean you don’t get any payments or even possibly your principal back, right?
Typically, they are divided in tranches, with the highest rated (and therefore lowest-yielding) tranches being payed out first. Since default rates have been extremely low over the past 20-odd years, typically the principal has been safe in these instruments, and even in the lowest-rated tranches interest payments are rarely not met.
Is the buying and selling of true mortgage bonds happening only between large institutions (pension funds, CMHC, banks, etc)?
In general, yes. Though the general public has been able to participate somewhat through REITs.
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rubberduckie Says:
July 5th, 2009 at 4:47 pm
No Longer Looking – that’s it, I’m moving to your house!
You lucked out, sounds like. And with a pet, no less. Lord knows the 10% of rentals that allow pets are typically the least desirable 10%. I think they say “It’s already soaked in cat pee and dog smell so who cares.”
When we viewed our house, the windows were all open and the house smelled great. The reality is it took 3 coats of urethane (put on by me) after we moved in to make it nice.
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Bubble Lad Says:
July 5th, 2009 at 5:25 pm
Apologies if anybody already posted this.
It’s from today’s Province, and concerns how that condo presale you “sold” to someone else, may not actually stay sold:
http://www.househunting.ca/hom.....e2325338e3
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realpaul Says:
July 5th, 2009 at 5:35 pm
Deliverator:
#86, you can also buy individual second and third mortgages through a plethora of mortgage brokers and second tier lenders . You still have to do your homework and realise you either know people or not before going into this buisness. At todays rates I wouldn’t touch one with a ten foot pole as you can get better returns in dividends with less risk. In the old days when 155 was the norm on a second it was not too bad as that was a few points above the T-Bill rate.
As I said earlier I will be surprised to see the low interest charade last much longer and things will get rocky.The most recent wave of FTB’s are barely working their mortgage at 5%. Anything above the and things are really going to fall apart. The Feds know this and are walking the tightrope hoping the economy improves so that they can get the higher earners borrowing again. The recent economic news has been so bad that they’re discussing a second stimulus. I don’t think that will fly. If it happens then look for some serious kickback from the bond holders.It doesn’t matter who you are, risk is risk. Even the Chinese will reach an inflection point where the US market stops to matter. The billion dollar question is where is that point?
Feds worried and Flarhety can’t say Canada in a sentence without scowling.
http://www.theglobeandmail.com.....le1205586/
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realpaul Says:
July 5th, 2009 at 5:36 pm
Thats 15% not 155% BTW
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LordHuggington Says:
July 5th, 2009 at 6:53 pm
So, does anyone want to take a stab at when we may see interest rates may start going up, or what we’ll need to see happen to cause such a thing? I’m not a finance guy, so have no idea. I just hope we don’t see the same thing here as has happened with interests rates in Japan, where they’ve been non-existent for ages. =(
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Disbelief Says:
July 5th, 2009 at 7:34 pm
Renting sucks…. I know but how would you feel to face foreclosure. This will happen to many FTB’s that have got in at the top. It’s simple it is not the time to buy if you have to get a high ratio mortgage it is just too risky. If you have just sold and are looking to buy then that is very different. I have bought and sold many homes and will never put any less than 25% down. I will not pay the CHMC blood money they demand that is a waste of money. Just flush that right down the toilet. I like how Dave makes statements like the bank won’t raise rates over the next 2 years. He is always badmouthing others on their opinions and that is pure oral sewage. The fact is none of us even Dave knows what interest will look like in one year leave alone 2. FTB’s unless mommy and Daddy dumped a whole lot of money on you then no it’s not a good time to buy.
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observer Says:
July 5th, 2009 at 8:03 pm
LordHuggington: The prolonged low interest rates in Japan didn’t save the housing market there. Actually, if you look at the graph of the Japanese housing prices, it’s pretty astounding.
http://en.wikipedia.org/wiki/F.....050615.jpg
It goes to show that you can’t have sustained growth in house prices over long periods of time, so eventually the thing collapses. Not even low interest rates can keep it up. And if you think the old adage that there is only so much land in Vancouver, you certainly cannot deny the adage should apply to Japan, yet even that didn’t save them.
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Stu Says:
July 5th, 2009 at 9:47 pm
Listen son, the Japs don’t do immigration like we do here. The Shinto spirit must be preserved at the expense of any immigrant stimulis. If it was the same here Coquitlam would still be half bush.
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Vancondobear Says:
July 5th, 2009 at 10:21 pm
Boombust:
You said your parents bought a new house in Coquitlam in 1966 for $16,250.
To put that in perspective, the average income in the US for 1966 was $6,900. Sorry couldn’t find Canada for that year but prob not far off of that.
So that NEW house cost approx 2.4x avg income.
Try finding that these days.
Declining standard of living…
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No Longer Looking Says:
July 5th, 2009 at 10:42 pm
rubberduckie,
We had to give a little on location to find places like this. Our rent would get us a rathole in Kits/West End/The Drive.
In our previous place we had a Tenant From Hell upstairs. We’re so glad we left.
This is a great time to find a better place. Lots of good stuff is coming on the market after being foolishly abandoned by FTBs.
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observer Says:
July 5th, 2009 at 11:03 pm
Stu: Sounds to me more like an immigrant rip off than immigrant stimulus.
Anyways, it isn’t clear to me that Vancouver will be able to continue to grow in population if it doesn’t have a meaningful economy to support it. Having the economy based on housing people and swapping RE isn’t enough.
It could go the route of a resort city but then eventually the population would plateau in that case.
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patriotzed Says:
July 6th, 2009 at 3:23 am
observer:
Exactly how would CMHC handle a situation (what would happen to bond holders, bond prices, yields) where widespread defaults happen.
CMHC is a Crown corporation and its obligations carry a Crown guarantee, no ifs, ands, or buts.
If CMHC got into a position where it was unable to pay its bondholders due to mortgage defaults the GoC could advance it the funds to do so, or CMHC could simply sell more bonds on the open market. The GoC could either lend the money or grant it (purchasing equity in effect). The BoC could also purchase CMHC debt but cannot buy equity. If CMHC were lent the money either by the GoC, BoC, or the bond market it would have to recover it though higher premiums which would be just desserts IMHO.
There is no doubt CMHC will suffer big losses in BC but the question is how big these will be compared to its reserves. The last major bust in Canada was the Toronto bust of the early 90’s, so they should have a good sized war chest. Note, again, that the RE market in the rest of Canada is nowhere as inflated as in BC. IMHO the CMHC will suffer the majority of its losses (in dollar terms) in this bust in BC alone.
I think if the GoC chose to grant CMHC taxpayer’s money to cover losses it would be politically explosive. It would be seen as a bailout of BC and to a lesser extent Alberta and Toronto by Canada’s non-bubble regions – in particular Quebec. Just imagine Gilles Duceppe taking that one on.
My views on the irresponsibility of the “Conservative” government on this issue are well known on this board and I think they deserve to be defeated on this issue alone.
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Anonymous Says:
July 6th, 2009 at 9:55 am
I just came across this and had to laugh. I live about half a block away from this listing in a large one bedroom apartment. I rent for $780 a month. Even if someone had this place paid off, their maintenance and tax every month would be about $558 a month, plus any other expenses. Granted it’s a bigger, nicer place than mine, but $555,000?
http://www.6717000.com/mls/V75.....ro-st.html
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rubberduckie Says:
July 6th, 2009 at 11:40 am
NLL – I live in one of the primo locations. I’ve lived all over the city and I know what I like.
Most of our friends agree that although it’s smallish and old, our rental has some charm and we’ve done a nice job. You know who practically insulted it outright? Our realtor. He said “I can’t believe at your age you would sell your lovely townhouse and live like students.” This same realtor would probably be singing the praises of this house’s stained glass etc. if we’d bought it for $1M!!
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Van Man not asian Says:
July 6th, 2009 at 3:45 pm
Word to all you over educated underpaid vancouver rental people, from a so called blogg trogg.
Does it make you’all feel better to cut down the city you live in and call home.
I’m sure any of you could afford to buy a home in any other city in Canada!
Have you ever been invited to a barbeque in Van with the outdoor speakers blasting good tunes, hottub/pool maybe,neighbors are guests, well behaved adult social gathering.
Then you go home to your stinky,smokey/curry/noisey apt, that is a $great deal? C’mon, get real!
If you could afford to buy a detached home in The Lower Mainland, without being financially stretched, who wouldn’t.
LIFE IS TOO SHORT TO LIVE IN A STINKY RENTAL APT/CONDO LISTENING TO YOUR NEIGHBORS NASTY NOISES!
Yes, waiting for RE prices to come down in Van is a financially smart idea, but when prices bottom out interest rates will be maxed out.
You will never see 1998 home prices at 4-5% int rates.
Vancouver RE has always been $$$ more than the rest of Canada!
So, my question to buyers waiting?
You will either be unemployed, or have to deal with 10%+ interest rates when RE prices enter your realm.
Good luck buying a home here!
It just doesn’t matter.
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/dev/null Says:
July 6th, 2009 at 3:56 pm
I’d rather buy when rates are at 10% than at 3%. The prices will drop to keep the monthly payment in the same range and there is less chance of rates doubling over the course of the loan.
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Vancondobear Says:
July 6th, 2009 at 5:18 pm
Somewhat unrelated…but I was in the lovely vacation-y area of Semiahmoo this weekend. There seemed to be a lot of for sale signage…
So I went to Trulia. There are a total of 657 residences for sale. Then I checked the census and the Blaine area constitutes 1496 in total households. 657 out of 1496 – 44% !! WOW.
Guess the second home thing for Seattlelites and Vancouverites is off. Possibly some good summer rentals to be had! Good for me so I can get out of my half a mill box in the sky.
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Anonymous Says:
July 6th, 2009 at 5:28 pm
#101 this is a blog about condos
condo means shared ownership, which means neighbours regardless of whether you rent or own. thanks for trolling
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observer Says:
July 6th, 2009 at 5:38 pm
patriotzed: If the CMHC were smart, they would increase their premiums for BC properties due to the bubble risk, just like bad drivers need to pay more for their car insurance.
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patriotzed Says:
July 7th, 2009 at 3:07 am
observer:
This is yet another indication that CMHC does not provide insurance in the true sense at all. CHMC charges the same premiums everywhere in Canada, all the time. It’s like an auto insurer charging the same premiums to a guy with 5 drunk driving convictions and several major accidents and a little old lady (and before someone gets smart, no ICBC does not charge these people the same).
CMHC’s de facto mandate today is simply to pump as much capital into the RE industry as possible. Go to their website and look at their board of directors and you’ll see why this is no surprise.
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observer Says:
July 7th, 2009 at 10:16 am
patriotzed: It’s even worst than that. A guy with 5 drunk driving convictions and several accidents would be put in jail but the guy who ruins the economy by using our currency to feed the RE bubble gets further encouragement from the government and banks.