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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.
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.
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.
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”
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.
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.
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.”
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.
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.
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.
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.
July 3rd, 2009 at 5:54 pm
The fact is this bubble has not burst yet, not by a long shot.
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?
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.
July 3rd, 2009 at 4:38 pm
realpaul: Realpaul, this
reminds me of a quote from Charles Dickens…
July 3rd, 2009 at 4:20 pm
B.C. leading Canada in household debt growth
http://news.sympatico.msn.cbc......;date=True
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……
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.
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.
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.
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.
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).
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.
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.
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.
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.
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.
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
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!
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?
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.
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.
July 3rd, 2009 at 1:56 pm
@ pimppin tom you said it…. status status status status status status
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.
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.
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 $800k houses with 30% or 40% down? I think most are lucky to get 5% down.
Can’t believe that the US could be in better shape than us on these mortgages.
July 3rd, 2009 at 12:31 pm
So should couples like Morettie and Wilson think twice before taking advantage of the low rates, if they’re dependent on them?
Absolutely not, says the CEO of the Greater Vancouver Home Builders’ Association.
On a side note, the CEO of the coffin builder association would like to remind you that bulletproof vests shouldn’t be used in case someone shoots you, and the CEO of the association of chemotherapists reminds you that smoking is permitted during your complimentary trip to tchernobyl.
July 3rd, 2009 at 12:23 pm
@Bubble Lad: The relationship is easy:
1-You get a 5 year, 100k$ 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.
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.
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.
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…
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.
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.
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
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????
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.
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.
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”.
July 2nd, 2009 at 11:24 pm
Oops, i should have read the articles first – this link is already there!
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!