Leaky condos, tourists, HST & forecasting
So it’s official. That silence coming from the Homeowners Protection Office regarding leaky condo loans was the BC Government killing the leaky condo loan program. The good news is that you can get a really good rate on a hotel room in Vancouver since business travelers and other tourist visits have dropped right off. The new hotel visitor in Vancouver is the local family on a ‘Stay-cation’.
But Hey! Next year’s going to be more economically awesome than this year! At least according to this oddly written forecasting article in the Province. And even more good news: The extra money you pay for the HST is going to help bring down the deficit! The $1.6 Billion transition payment from Ottawa is going to help ‘bring this years deficit down’… The deficit that was going to be “$495 Million maximum”… From the government that promised to not implement the HST, or run a deficit for that matter.
Enjoy your Stay-cation!
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August 3rd, 2009 at 10:33 am
back in Vancouver for a staycation right now – staying with family. all would be great but they’re still on “you never lose with real estate” motto. its like nothing outside of the lower mainland matters and what is happening in the US is of no significance to anything.
August 3rd, 2009 at 10:46 am
you know what my response to the HST is going to be? Spend less money in BC. I’ll continue to buy clothes on trips overseas (and wear them, then put in suitcase), and trim down my week-to-week spending in the province.
Screw the libs and this blatant cash-grab.
August 3rd, 2009 at 10:49 am
Just back from my anual vacation in the Shuswap. Unbelievable number of for sale signs compared to previous years. Even compared to last year.
Checked out MLS.ca and most of the listings I wanted to look at are not there! Wonder why?
It is clear to me that vacation properties are now being dumped in BC. Expect a slow RE season this winter with significant price declines a la California, Nevada, Florida.
August 3rd, 2009 at 2:51 pm
Spitfires: “Checked out MLS.ca and most of the listings I wanted to look at are not there! Wonder why?:
Yes, actually. I don’t know if that question was rhetorical or not, but I do wonder why the listings weren’t on MLS. Was it all private sales or something?
August 3rd, 2009 at 3:38 pm
I’ve noticed a lot of listings don’t show up on MLS.ca – I think the process is for the listing agent to try to sell to someone he’s representing first (double commission). If that doesn’t work then they list through a VOW on other realtors web sites. For whatever reason listings don’t seem to show up on MLS until they’ve been sitting around for a while on the market.
August 3rd, 2009 at 3:39 pm
read on: You may be able to afford to do this, but the Gov knows that most people can not. They’ll rake in more money off the backs of the working poor who can’t afford to take trips overseas.
August 3rd, 2009 at 3:53 pm
I mentioned in another previous post that I had just gotten back from the Shuswap.
What I found interesting is the demographics of the tourist base. Seems the majority of them are in late 20′s to late 30′s….big PU’s, powerful boats, 5th wheels and/or RV trailers. WTF is the money coming from? These are seasonal toys that are parked for most of the year. My guess is any combo of these toys just mentioned must be in the $100,000 range. My guess is they are heavily financed. These types of items depreciate rapidly in value. Many are from Alberta, but still many from B.C. as well. When the economy tanks, these toys will be flooding the market.
Real Estate wise, watch recreational property become a leading indicator of the overall property crash. When your non – primary residence starts to fall in value, it will be the first to go.
Another phenomenon to note is that retirees that buy up in these more rural areas eventually move closer to urban areas, to be closer to better health care. In fact, I had to drive someone to the nearest open hospital last week at around 10 PM…which ended up being in Salmon Arm and took an hour’s drive.
August 3rd, 2009 at 4:32 pm
Digi – yup. It is the “working poor”, as you put it, who get most screwed by HST. It really is an insidious tax change, and one that the Libs promised not to introduce. I just hope that voters actually REMEMBER this at the next election, rather than being the goldfish* that they tend to be.
* and yes, I know the goldfish 5 minute (ooh, a rock…swim… oh a rock) thing is a myth, but it’s still funny.
August 3rd, 2009 at 10:24 pm
Leaky condos? Thank goodness it never rains in our city of eternal summer!
August 3rd, 2009 at 11:37 pm
http://albertabubbleblog.blogs.....ature.html he was my nemises
August 4th, 2009 at 8:18 am
Interesting that they were funding the leaky loan program through a levy on new construction. Is that levy now gone? If so then brand new condos just got $750 cheaper. Whoop-dee-doo!
August 4th, 2009 at 8:55 am
Digi:
Any MLS listing agreement includes an obligation by the listing agent to list the property on mls.ca and all other media normally used by the agent. Any attempt by the agent to restrict the viewership of the listing by failing to list on mls.ca or in any other way, in an attempt to increase his commission, constitutes a breach of trust and is grounds for a lawsuit by the seller and possible criminal prosecution.
August 4th, 2009 at 9:04 am
Is ther a “public” MLS where listings are late to show up and “agents’MLS” version, where they show up immediately?
August 4th, 2009 at 9:05 am
Is there a “public” MLS where listings are late to show up and “agents’MLS” version, where they show up immediately?
August 4th, 2009 at 10:45 am
Yes, agents get access first. I think it’s just a few days.
August 4th, 2009 at 11:40 am
patriotzed:
If the property sells and it wasn’t listed on MLS I suspect the Seller wouldn’t care. If the property did not sell and the Realtor hadn’t put it on MLS then the Seller would probably either
a) fire the Realtor and get another or
b) tell the Realtor to list it on MLS immediately.
Once the property sold, the Seller would have to be able to show that he or she lost money due to the Realtor not listing it on MLS in the first place. Then launch a civil suit versus the Realtor for that money. Breach of contract maybe..
Perhaps not listing the property on MLS could be a criminal fraud but I doubt the police would care much about the above scenario..
August 4th, 2009 at 12:24 pm
No matter what the agency agreement says, there’s always a delay before listings show up on the MLS. If you sign up with an agent you’ll see listings at least a few days before the show up on mls.ca. Do the agents have any control over this delay or is it always the same?
August 4th, 2009 at 1:07 pm
The True Cost of Home Ownership
http://biz.yahoo.com/pfg/e10buyrent/art011.html
==================================
Suze Orman speaks to strapped realtor
http://www.youtube.com/watch?v=c1g15SJacxY
August 4th, 2009 at 1:59 pm
^^
And we don’t even get the tax break.
August 4th, 2009 at 2:29 pm
From Calgary:
Arriva Phase 2 in receivership
http://www.calgaryherald.com/b.....story.html
According to the receiver, about 50 per cent of the 221 units had already been sold in the 42-storey second tower, with deposits totalling about $6 million.
August 4th, 2009 at 2:40 pm
Beijing worries about another market crash
Government tries to cool off stocks rally caused by stimulus spending
http://www.msnbc.msn.com/id/32....._business/
BEIJING – The middle-aged crowd in the packed Guosen Securities office jostle around buzzing printers that spit out receipts for their share buys, hoping to cash in on China’s stimulus-fueled stock market boom.
“The central government has to fulfill their promise of 8 percent economic growth,” said Wu Jun, 62, a retired civil servant who invested part of his life savings of 50,000 yuan ($7,300) and lives on a 2,000 yuan-a-month ($290 a month) pension. “They’ll come up with measures to keep the market in good shape.”
But while investors expect the market — up more than 80 percent this year — to keep rising, Chinese leaders are alarmed. They worry that too much of the $1 trillion lending binge by state banks that paid for China’s nascent revival was diverted into stocks and real estate, raising the danger of a boom and bust cycle and higher inflation less than two years after an earlier stock market bubble burst.
=====
I’ve read similar articles that question China’s true solvency and/or it’s ability to lead the world in an economic recovery. They may be in worse shape than the Western “democracies”.
August 4th, 2009 at 3:37 pm
NO -LYMPICS:
From Calgary:
Arriva Phase 2 in receivership…”
Anyone else find it hilariously ironic that the bankrupt developer is something named “Torode Realty Advisors Ltd.”?
More like Erode, or even Two Rotten Realty Advisors. I mean, the name of this entity implies that they are there to give professional advice on RE. I guess their advice is to go into receivership?
August 4th, 2009 at 5:54 pm
NO -LYMPICS:
Suze Orman is usually such a flake, but it seems that article was written around the peak of the US bubble a few years ago, so she gets points for being bearish when the masses were still delusional.
That said, I still remember her on CNN last September pleading for people to support TARP to save the stock market. She looked so scared – oh no, I’m going to lose millions, DO SOMETHING! TARP passed and the stock market nosedived even faster. Take that, Suzie!
August 4th, 2009 at 7:56 pm
From David Rosenburg today:
Canadian Monthly GDP Weaker Than Expected
We also received Canadian GDP data today for May, which came in weaker than expected at -0.5% MoM (the consensus was expecting -0.3%) and we saw April revised to now show -0.2% instead of -0.1%. Therefore, despite all the bravado over the end of the Canadian recession, what we are seeing first hand is that any recovery is coming off a much deeper hole. It looks as though real GDP in Canada contracted at an annual rate of at least 3.0% in the second quarter — *** triple the decline in the U.S.A. ***
August 4th, 2009 at 9:05 pm
#13
Realtors have access to the MLCxhange.
The public shouldn’t have access to that but sometimes realtors give out their passwords.
It takes a few days for a listing to show up to the public.
August 4th, 2009 at 9:27 pm
mino3
You may be right re: Orman…but the advice she gave on the topics I referenced are quite straight up.
Her interview with an underwater realtor is a prime example of how clueless a koolaid drinking professional can be.
People always forget the hidden costs when they buy anything…and RE is one of the worse re: this. Property taxes, utility costs , insurance, strata fees …etc. etc…are never mentioned in lowball financing, and an increase in any of these can put you “underwater”.
PS I know the Yanks take a shine to brassy know it all types, even morseo if they are gay.
August 4th, 2009 at 9:51 pm
Notice how Suze Orman pushes the FICO score so much? I would too if they employed me. Nothing is as it seems … cough Van RE Market cough.
August 4th, 2009 at 10:21 pm
Oh, yeah, the recession is over…
http://www.investorsinsight.co.....-thou.aspx
Canadian Monthly Gdp Weaker Than Expected
We also received Canadian GDP data today for May, which came in weaker than expected at -0.5% MoM (the consensus was expecting -0.3%) and we saw April revised to now show -0.2% instead of -0.1%. Therefore, despite all the bravado over the end of the Canadian recession, what we are seeing first hand is that any recovery is coming off a much deeper hole. It looks as though real GDP in Canada contracted at an annual rate of at least 3.0% in the second quarter — triple the decline in the U.S.A.
August 4th, 2009 at 10:42 pm
This is for Drachen, the average Greater Vancouver price seems to show that home prices are down about 15% from 2007, did you not predict over 40% by the end of 2009? Do you expect a 25% decline in the next five months? Should I hold off my purchase until 2010?
August 4th, 2009 at 10:59 pm
Confused, you can either buy and pray, or wait and see. It’s up to you to decide!
August 5th, 2009 at 12:44 am
confused:
As we have gone over in this forum before, the question is not “when” but “how much”. It is impossible to predict the timing of market cycles. It is easy, on the other hand, to know when prices are at historical multiples of rents and incomes, which is a reasonable time to buy, if not the market bottom.
Why are so many people in such a panic about buying? Every month you rent while it costs less than mortgage interest, etc, you get farther ahead of an “owner”. Isn’t that a good thing?
August 5th, 2009 at 12:50 am
It’s not dead, it’s just, er, sleeping.
Harper and Gordo insist the parrot, er, the Evergreen Line, is alive:
http://ca.news.yahoo.com/s/cbc....._translink
August 5th, 2009 at 5:47 am
Confused, prices are currently above 2007 levels. You’re more confused than you thought.
August 5th, 2009 at 8:27 am
I would predict that this time this really is new territory for the world economy. It’s hard to tell whether prices will go up or down. How do we know for example that the recent stock market uptick is a fad? Now I’m not so sure about housing.. it’s hard to believe Vancouver can go this high, but it’s even harder to believe that Vancouver is some kind of an anomaly.. ?
August 5th, 2009 at 8:33 am
Anonymous: You’re forgetting about the Virtual Office Website (or VOW). Listing show up there after MLX, but before they show up on MLS.ca.
August 5th, 2009 at 10:58 am
patriotzed:
I agree with the sentiment above. Right now I feel the same way I did at the end of 1999 when the NASDAQ was climbing to ever new highs. Friends and acquaintances were pouring live savings into Internet stocks and I just shook my head at the irrationality of it all. I remember when the NASDAQ was at 4500, I said to friends that it could not go lower, but ended up losing some money by shorting it as it climbed a further 10% in the early part of 2000. Boy my friends sure felt smug then! Well, we all know what happened next.
I was with my sister and her family this past weekend and she mentioned that a house a couple of doors down from there (they live in the Harbourview area north of Como Lake Road in Coquitlam, where the houses are mostly 1 and 3/4 story 1950s-era homes), was sold a mer 4 days after being put on the market. Another house just down the road is for sale for the 2 million dollars. It was purchased 10 years ago for 400,000. Crazy times.
August 5th, 2009 at 11:18 am
oneangryslav: Oops! Should have previewed my post before sending–it should say “I I said to friends that it could not go higher…”
August 5th, 2009 at 11:28 am
ABC:
Every sequence of events has a start and a finish. Its not an anomaly for the last bowling pin to fall any more than for the first, and it’s not an anomaly for Vancouver to be the last city to fall any more than it was for San Diego to be the first. It has to start somewhere, and it has to end somewhere. As to why it appears that Vancouver will be the last, I’ll let Robert Shiller (2005) do the talking:
“This is the biggest national bubble that the US has seen in over a century.” This is “not a sustainable situation,” claimed Shiller. Then he directed his attention to Vancouver. The bubble was especially extended in “glamour cities and glamour vacation areas,” he warned, and, “Vancouver is the most bubbly city in the world.”
August 5th, 2009 at 12:18 pm
Re: the health of the RE market:
This weekend we drove through many of Vancouvers main drags which have rental apartments. I have never seen so many ” For Rent ” signs before. Why higher vancancy ? Are these people now buying ? Indications are rent is going down, while housing prices are still at surreal levels.
In a truly healthy economy, vacany should be low as it attracts a representation of the broad spectrum of income and housing needs. These renters have either lost their jobs, moved elswhere or found better rental deals This current economy is disconnected from this. IMHO, the higher vacancy is a sign of a declining economy and thus more evidence of a bubble.
Historically, we have the Spring RE season, to be followed by the Fall RE season. It will be flat between October and Feb/March. Prices have dropped even if # of sales have gone up , hence prices have little reason to go up. This will repeat in the Fall of 2009.
I really can’t see why ” should I buy ? ” types can’t see the crack cocaine of cheap money is the only thing keeping the bubble from busting, and no bubble ever lasts long.
All the warning signs indicate buyers should wait….the RE bubble popping virus has hit many markets, Vancouver has no resistance nor immunity .
Remember Bank of Canada governor Mark Carney is a Goldman Sachs alumni, and Goldman Sachs alumni have infiltrated Gov’ts to an epidemic degree. If you think it has anything to do with public service ….God help us.
August 5th, 2009 at 12:31 pm
http://www.guardian.co.uk/busi.....lrecession
check this out!
August 5th, 2009 at 1:10 pm
NO -LYMPICS: There is so much rental inventory out there. When I arrived in Vancouver last summer, there wasn’t a single 1BR in Yaletown (for example) listed below 1500/month. Now, you can find relatively new and nice 1BRs in Yaletown for under 1200/month (at least a 20% drop for the year).
You’re right that there is a tremendous disconnect between the real economy and the real estate market in Vancouver. In today’s Vancouver Sun, there are two articles with incongrrous titles: “Busiest July ever for Metro Vancouver real estate sales” and “Canada’s office vacancy rate surges to 8.5 per cent…and still climbing.” [By the way, lest some of you begin to argue that "Vancouver is different", the office vancacy rate here increased from 5.0% one year ago to 7.4% now--an almost 50% rise!]
Oh, and by the way, which of these articles do you think received front page billing on the Sun‘s web site?
August 5th, 2009 at 1:12 pm
Oh, and here’s a link to the press release of Avison Young’s mid-year report on commercial real estate, which has links to the full PDF version of the report.
http://news.prnewswire.com/Dis.....amp;EDATE=
August 5th, 2009 at 1:19 pm
re: For Rent signs. I’ve been living in Van West (upper kits, sth of B-way) for nearly 4 years, on and off, and this is the first summer that I’ve even seen for Rent signs. normally places go so fast that signs havent been needed, but some have been up for weeks now.
August 5th, 2009 at 2:17 pm
43 – That means everyone is buying. Same thing happened in Kits in 2006/07. Sales for July and price increases reflect this trend.
August 5th, 2009 at 2:24 pm
Hate to be the “bearer” of bad news….
http://www.vancouversun.com/Bu.....story.html
“The benchmark price for the typical property sold across the region hit $528,821 in July, which is still off five per cent from price levels a year ago, BUT IS UP 9.2 per cent from the bottom of $484,211 in January.”
The only bear spin on this one is that prices are still down Y-O-Y EVEN with this unprecedented surge in sales and the lowest interest rates in history….
Looks like cheap rates are here for some time and with them, the continued RE frenzy known as Vancouver…
August 5th, 2009 at 2:28 pm
oneangryslav and read on:
Those are the kind of indicators I look for.
The same for Commercial vacancy.
Ads in the paper are not cheap…..CanWest ie Sun and Province charge $44+ for a 3 line ad.
Besides apartments, I am seeing many SFH with scribbled ” For Rent” signs out on front lawns,…. either renting out rooms or the whole house.
A 12 unit condo project near me just sold its last 2 units after approx. 1 year on the market. realpaul had noted that the builders profit is generally realized once the last 25% is sold. So, did this builder make a profit ? , certainly much less than projected. After these last 2 sold,almost immediately a “used” unit is now for sale.
I think that developers and buyers are drinking from the same kool-aid. They are still building and still buying, oblvious to the ground -zero evidence and indicators around them.
August 5th, 2009 at 2:52 pm
# 45 DD Says
How can you tell me rates are going to be low for “some time”. The only way rates will stay this low is if we STAY in recession – pls help me understand how this is good for asset prices?!?
Mtge rates are dictated by bond prices which the gov’t doesn’t control or you can play the variable rate game based off of prime rates … let’s see overnight rates at 0 (Zero!!!) which way will they go from here.
August 5th, 2009 at 3:13 pm
Post # 47 cashisking:
Exactly !
Do people still forget what happened in the early 1980′s?..when interest rates jumped to 22%.
That’s the scary thing, why haven’t the interest rates jumped up in this heated RE market? Money is a commodity…if it is in demand the cost(ie interest rates) should rise. I seem the recall all other commodities had risen over the past few years as housing rose…..ie metals, gas, etc.
IMHO, Gov’ts etc are showing themselves to be in desperation , creating this disconnect, and manipulating the delay of the inevitable .
August 5th, 2009 at 3:20 pm
#47
Bond and mortgage rates are influenced by the US Fed, and it is in their interest to keep rates low in order to engineer a bottom to the US housing collapse and stimulate corporate investment. They need cheap, easy credit to get people spending again.
The BOC follows the US direction, and if the US keeps rates low, then the BOC will as well. Unfortunately, while the low interest rates were designed in part to create a bottom to the US market, it re-inflated the Canadian RE market. It will be some time before the US raises rates. By the time it does, the Canadian market may have surpassed its 2007/2008 highs.
Yes, the rates will go up at some point – but when, and how much. That is the million dollar question. We might have Van RE prices flatline for a few years or go up if interest rates remain low, or we could see prices rapidly drop IF for some reason the BOC and major banks raise their rates. In the mean time, we could see the 7 year run up in Van RE prices continue for several more years. If that is the case, then all those on the sidelines will have missed the largest run up of RE in their lives (most likely at least a decade), the liking of which will not be seen for many years to come.
Think about it – a decade on the sidelines, waiting for prices to come down! I hope all the sideliners were continuing to live their lives to the fullest while waiting….
August 5th, 2009 at 3:37 pm
DD
There are many factors…
Anyone recall the book Boom Echo Bust Echo by economist David Foote.
Years ago he predicted much of what is happening now. The Boomers will get old and want to retire. They got spoiled via the inflationary times and their asset appreciation. However, they also need to liquidate and find a ready willing and able buyer. He didn’t feel it was at all sustainable and that there would be a glut of housing in the market, or else prices would would have to drop. I don’t recall him mentioning/predicting subprime loans etc., which only exacerbates the problem.
Gov’ts and their affiliates have proven beyond any reasonable doubt they are crookeder than a dog’s hind leg and incompetent. IMHO, they saw this disaster coming 20 + years ago and realized they had a limited bag o of tricks to try and fool us(ie dot.com bomb, relaxing or elimination of rules established since the last Depression etc).
Money always finds its rightful owner…that day of reckoning is gonna happen sooner than later.
August 5th, 2009 at 4:07 pm
NO-LYMPICS 50: Gov’ts and their affiliates have proven beyond any reasonable doubt they are crookeder than a dog’s hind leg and incompetent. IMHO, they saw this disaster coming 20 + years ago and realized they had a limited bag o of tricks to try and fool us(ie dot.com bomb, relaxing or elimination of rules established since the last Depression etc).
You don’t honestly believe this do you? Sounds like a conspiracy theory!
August 5th, 2009 at 4:10 pm
For all RE greater fools and fence sitters
” BUYING PROPERTY NOW OR WAITING ”
A spreadshet analysis
http://members.shaw.ca/needinb.....buy-v6.pdf
August 5th, 2009 at 4:15 pm
Look what I just read:
VANCOUVER (NEWS1130) – The Greater Vancouver Real Estate Board has had its busiest July on record, with more than 4,100 sales–approximately double the number of sales in July 2008.
Board president-elect Jake Moldowan says hardly anything was moving in the spring, so the jump in sales was not unexpected, as we enjoy record low interest rates and lots of reasonably-priced inventory. “The consumer is telling us that right now is a good time to buy. We don’t dictate the market, we just keep the stats.”
Moldowan warns the market is still price-sensitive, and the homes that sold in July were still five per cent lower in price than homes that sold a year ago. The Fraser Valley Real Estate Board also saw a record July for sales.
Really now – who is buying??
August 5th, 2009 at 4:15 pm
DD Says: Reply to this comment
August 5th, 2009 at 2:17 pm
43 – That means everyone is buying.
———
No, not from what I hear from friends who own basement suites in the area. Many of their (ex) tenants have left the city as construction work etc has dried up, and they are moving elsewhere.
August 5th, 2009 at 4:34 pm
@43 – CMHC’s most recent numbers confirm a higher vacancy rate than is usual for us. I’ve been watching the rental market really closely and just before the rental signs started springing up there seemed to be some serious price compression going on. I attributed that to a flood of novice landlords.
August 5th, 2009 at 4:38 pm
#53
Who is buying? Anyone with a pulse!
Every 20 something and 30 something talks about real estate in this city. Every cabbie, barista, construction worker, teacher, and government employee “knows” that “now is a good time to buy.” Compared to other cities, RE always emerges as a topic, even in the most mundane conversations.
RE is a game for ALL to play now, regardless of income, job stability, and/or credit history. With almost zero down mortgages and variable mortgages available at 1.50% or five year at 3.85%, the question is WHO IS NOT BUYING.
Banks are tripping over themselves to provide cheap, easy credit, as traditional lending rules have been relaxed to the point of being comatose. Unemployment in BC has “only” doubled in the last year, but it is still relatively low historically. There are still plenty of employed people competing for the opportunity to “own” in the “best place on earth.”
I don’t know about the rest of the posters here, but this “recession” has been incredibly mild compared to past ones when I look around at spending patterns and business activity. Whether it will get worse, who knows. Despite being the “worst recession” since WWII, we see RE rise, we see consumer spending maintain its pace, and the stock markets rally to almost the point they were in August 2008.
All I know is that government intervention with artificially low interest rates propped prices back up in Vancouver, and prevented Vancouver from having the most rapid decline in prices in North America. In Feb 09, we were down 14% Y-0-Y. Now, as the REBGV reports, we have only had approximately 5% decline Y-0-Y with the “spring bounce” in RE prices.
This city is obsessed with RE, to the point where the first priority of every recent graduate entering the workforce is to buy RE before it is too late….
August 5th, 2009 at 5:06 pm
^^^ what a load of crap.
most of my colleagues earn 100k plus and are not buying. maybe because it is because we actually THINK. we might not be the norm, but it is far from “Anyone with a pulse”.
And if you are trimpeting zero downs, I suggest you are trolling, as anyone who takes zero down when interest rates can only go one direction is a fricking idiot.
August 5th, 2009 at 5:21 pm
^^^^ zero down = rent
August 5th, 2009 at 5:35 pm
C’mon DD…
Many of us lived through the 1980′s RE collapse and the insanity that lead up to it. The irony is that often the most educated people got sucked in than the blue collar crowd. A good reference bible is ” Liar’s Poker ” circa mid 1980′s by Michael Lewis. Preceding this was the fiat money economy when the gold standard was ended.
Near zero interest rates are simply bait. There is A-B-S-O—L-U-T-E-L-Y no concern for the buyers fate…if there was then there would be higher interest rates. This would be a natural Darwinian weeding -out process to keep out the fickle and the wreckless and protect those that actually bought a home on merit(ie 25% down…good credit and employment record etc. etc.).
This economic zombie movie is simply desperate Gov’ts in bed with the vested interests. As “read on” says…the current rates have only one way to go..up!. I’ve already posted a chart a few topics ago that shows what incremental increases do to a mortgage payment. It is very painful to read what even 1 – 2 % increase will do.
QUESTION:Who is buying?
ANSWER: ..the greater fools shaken from the idiot tree.
Why didn’t they buy last fall or winter..such deals out there……..oh yeah…herd mentality.
Morons buying now screw not only themselves but the rest of us as well.
August 5th, 2009 at 5:38 pm
57/58
Whether its zero, 5 or 10% down, the vast majority of FTB’s have eschewed the principle of putting 20-25% down on a house and are putting down as little as possible. With interest rates so low, asset valuations mean nothing because of the perceived need to capitalize on cheap, easy credit before its all gone (the cheap rates and all the “cheap” houses” the credit can buy).
“we might not be the norm”
Bang on! You are not the norm – either in terms of your income when compared to average incomes in Vancouver or in your ability to critically THINK about the RE market.
Most FTB’s have seen 7 years of price unmitigated appreciation and grew up with baby boomer parents and relatives who praise the value of RE by pointing out their house has increased 5 fold since they bought it back in 1975.
Ever watch HG RE porn, where the realtors show the prospective couple 3 homes and then say which one of the three do you want. Well, its the same here. Most buyers fail to think critically about their purchase, because, hey, why bother when real estate only goes up!
I think that you give too much credit to your average buyer. Most people, if not most buyers, are financially illiterate, and are prone to societal pressures (ie I bought one, you should too; owning is a sign of maturity and responsibility; its the adult thing to do; why pay another person mortgage through renting, etc…). You have seen a generational shift away from debt aversion to one where debt is embraced, and long term risk assessments are clouded by the need for instant gratification and asset valuations based on “monthly” costs.
Thinking critically, and being financially prudent may be the right thing to do, but when you have herd mentality taking over Vancouver, you are simply swimming against the current. For now that is…
August 5th, 2009 at 5:50 pm
59
I agree with looking at past historical precedents (ie. 1980s), and concur that interest rates only have one way to really go – up!
The question is, when and how much, and whether or not we will all be here five years from now hoping for the “inevitable collapse” of Vancouver RE.
In five years from now, when all these FTB’s go for renewal at ostensibly higher interest rates (no guarantee and yes, many are not on 5 year fixed rates), maybe we will see the correction that took place last year resume its course. If that were to occur, then we would have had a boom that lasted 12 years. Such a boom is hardly the 81/82 boom bust, and it would surely take some time to deflate, perhaps several more years.
If this scenario plays out, then many people will have been on the “sidelines” for more than a decade!
I don’t believe in new paradigms where RE prices are fundamentally disconnected from economic fundaments in perpetuity. All I am saying is that, this crash “SHOULD” have happened already, and that current monetary and fiscal policy may create the conditions for the unnatural run up in prices to continue for some time, especially if interest rates remain low for any extended period of time.
August 5th, 2009 at 6:32 pm
DD
I agree with much of your last post.
However,….In a reducto ad absurdum argumment, what if Gov’t legislated zero interest payments ? People still need an income to make payments and pay down the debt incurred from the original purchase price. How secure are their jobs as unemployment mounts ?
Everybody is h-a-p-p-y if:
(i) The seller can sell
(ii) The buyer can buy
in some sort of equilibria.
Will the Buyer pool continue ad infinitum ?
I submit not enough exist to maintain the current prices.
Then the Sellers get upset because they didn’t get peak price or lost out.
In my view… , demograpically, there will be a large wave of sellers (boomers and older)in the next few years wanting to downsize…the market will flood.
In the 1980′s, local RE prices did bubble and collapse to 50% off peak.
IMHO, people are buying because they feel prices will go up, a combination of fear (of missing out)and greed. Low interest rates, the key to this, can’t continue, as to do so will make an already bad situation even worse. I’m not even sure there are that many greater fools left .
August 5th, 2009 at 6:49 pm
I would love to agree with you regarding the depletion of the FTB pool and the impact of the baby boomer property dump. Since late 2006, I thought that the FTB pool was depleted, but each year they seem to come out of the woodwork.
When I repeatedly chat with 20 year old baristas strategizing on how to get their condo now, or 25 year old cabbies living with their parents to save for a DP, I walk away with the distinct impression that RE is what Vancouverites live for.
I don’t know about you, but at 20, I was worried about finding a summer job, not what colour I was going to paint my aspired condo. RE, in my opinion, has become a defacto “value” of our little society here. You are judged by whether you are an owner or renter, and social stigmas have been created to facilitate RE purchases. People are not viewed in terms of their experiences or character here as much as they are by the title “owner” or “renter.” When a value becomes part of a society, it takes some time for it be modified or altered. It is a sad commentary on Vancouver, but nowhere else have I seen such an enduring fascination with RE.
As for the timing of the market, I think you have implied several more years as you mentioned that “there will be a large wave of sellers (boomers and older)in the next few years wanting to downsize…the market will flood”
That is my point – we may see another 5 years become the inevitable crash comes…
August 5th, 2009 at 7:13 pm
DD: Good joke,”there will be a large wave of sellers (boomers and older)in the next few years wanting to downsize…the market will flood” what about more than 8000 sellers who just did exactly like that and listings are down compare to July 2008.DD do you love to rent laneway housing?
August 5th, 2009 at 7:17 pm
From Victoria Re blog
http://www.househuntvictoria.blogspot.com/
Median Greater Victoria price in October 2008: $495K
Median in June 2009: $530K
July numbers are out, along with hyper-spin, and the median price dropped to $520K. My earlier guess was off, I had expected price hikes, avg and median prices both declined MOM. What this indicates is that it is properties priced below $500K that continue to fly off the shelf as fast as they are listed while properties priced $600K or more move slowly if at all. Official sales stats are: 516 single family homes, 252 condominiums and 103 townhouses or 933 in total–the highest July sales volume in 19 years.
The “buying opportunity” in housing occurred exactly 3 months after the fall declaration: interest rates dropped to equal the lowest on record and buyers bought. But real estate analysts should be concerned that previous high water marks weren’t surpassed–considering the frenzy during the fall of 2007 and spring of 2008 was happening with interest rates more than 2% higher than today’s.
======
I will admit I don’t have the data readily at hand…but I will assume that the numbers are correct..ie that interest rates were 2% higher at the peak of the bubble.
Thus, they are dragging the absolute bottom to acquire current buyers. Where were these buyers before ? This is a scary sign !
I agree that RE In BC is like a religion..or is it more like a cult ? I guess it gives people some faux hope that BC is a good place to work and live,FLIP YOUR HOUSE for Big $$’s !!! even if the rest of the economy is tanking or getting offshored. When I was 20, most homes were still priced within the reach of the average middle class couple. After the Hong Kong expatriate invasion to BC ….it became a luxury.
IMHO….there will be (2) collapses…which may be stand alone collapses or perhaps integrated. The bubble will burst when interest rates rise ( my guess is within the next year) . The wave of boomers etc. will be selling soon after . However the boomers may bail more quickly if they see the bubble burst ( like rats leaving a sinking ship )and want to cut their losses .
Vicious circle, and Ugly either way.
August 5th, 2009 at 7:37 pm
64
Ahhh… the manifestation of intelligence! Look at the due diligence of Thanks Dave, Supraboy!
”there will be a large wave of sellers (boomers and older)in the next few years wanting to downsize…the market will flood”
That was a QUOTE from No-Olympics (#62). I guess you just don’t understand quotes or grammar…
To No-Olympics:
“I will admit I don’t have the data readily at hand…but I will assume that the numbers are correct..ie that interest rates were 2% higher at the peak of the bubble.”
Just look up the BOC tables – you will see that rates were higher at the peak years.
Attention Thanks Dave, Supraboy! Note the above QUOTE referencing No-Olympics again. That means, in plain English, that those are his words. Just a reminder.
PS – Yes, listings are down from the 19,000 in late summer 2008/early Fall 2008, but you will note that they are still above the average listing numbers during the boom years (on average 8500 compared to the 12,000 now).
August 5th, 2009 at 8:21 pm
DD: You did not add numbers of new homes in your account that has changed from Vancouverboom1 of this century,You did not recognized numbers of small lenders who are willing to nail down top banks for interest rates.Interest rates will never go up above 5.5% yes you have read it here first.Listings are down from 22,700 from september 2008 peak however they are depend on buyers time of thinking.It does not cause constriction on the prices and if pressor increase it will stop the highend sales to affect the acceleration but this pressor is unable to nail down prices specially in VANCOUVER because hey Vancouver Real estate……………
August 5th, 2009 at 8:26 pm
citizen’s bank selling off its mortgage and real estate related stuff because, you know, it’s such a good business to be in these days. And
freddie mac and fannie mae make over?
August 5th, 2009 at 9:32 pm
DD – I do agree with your observation/opinion that Vancouverites are obsessed with RE. Other than that, I disagree with your “analysis” of the current market.
FTB’s that can afford half a million dollar mortgages are becoming extinct. Mainly because most do not have a family combined income of 110K with excellent credit. And most do not have any savings at all. Forget the chat’s with the barista’s and young cabbies. If they are from another province, they are living here alone, no parents or grandparents to help and they are simply dreaming. You said it yourself, they are in their 20′s. You know what they are doing this weekend, meeting all their friends at Glowbal for dinner, then off to George for a few drinks, then ending the night at Bar None. Sunday all day, paying for their $300 hangover. That’s about what they make in wages a week. Don’t worry, they’ll end up paying their share of the rent, they just don’t eat for the last two weeks of the month.
Now, not everyone in their 20′s fits this profile, my neice and her fiance are in their mid twenties, are wanting to buy their first place, but they decided to wait it out because they know the market will shift. They have some savings, but at least one parent is going to co-sign the mortgage. Her brother on the other hand, bought 4 condo’s in LV with 3 of his friends. No, not Vacouver, Las Vegas. My spouse and I where considering buying a condo as an investment, but my cousin just bought in Arizona, and since we are 17 yrs away from retiring, we’re seriously thinking to do the same. Why would I buy here and now?
August 5th, 2009 at 10:51 pm
Piddlesbby
One contributing reason why real estate in Vancouver is so expensive is the number of young adults staying at home until they secure a reasonable down payment.
We have the highest proportion of “young adults” (18-30) in Canada living with their parents rather than starting out on their own two feet. The number of late 20s and early 30 year olds living with their parents, or “sharing a house” as they like to call it, is significant.
Even with a mediocre wage, you can save significant amounts of money when you have no living expenses (rent, groceries, utilities). You can even party every weekend and pay for your designer jeans, while banking a tidy sum. As such, you can come to the table with large DPS that allow you take out large mortgages.
You do not need the 110K income to afford half a million mortgage when you have lived at home and saved for numerous years. Throw in a parent’s willingness to continue to coddle their “child” through a contribution to the DP, and things become very “affordable.” Take a poll of any FTB, and I bet you that the majority of have been given parental assistance (whether they want to admit that is another story).
“Forget the chat’s with the barista’s and young cabbies. If they are from another province, they are living here alone, no parents or grandparents to help and they are simply dreaming”
You are right with your qualified “analysis” that young FTBs from other provinces are largely incapable of affording RE here. But the majority of FTB’s are from this province.
Explanations for this delayed adulthood and social retardation stem from the expense of real estate in Vancouver down to cultural values of ethnic groups. However, IMHO, it is attributable to a loss of the independence drive of young people, and the desire to maintain their parent’s lifestyle. They will sacrifice their independence and the “joys” of making it on one’s own rather than rent some dumpy first apartment and eat KD.
Young buyers today are largely making the transition from their parents home to their own homes, bypassing that pesky renting and independence thing.
Unless this trend abates, real estate will continue to be expensive compared to those other areas where youth are willing to leave their parents nest and start living.
After all that, I do agree with you that opportunities abound for RE in other jurisdictions.
August 5th, 2009 at 11:21 pm
^^
so they get homes but remain socially retarded? that actually explains quite a few of my experiences since moving to Van.
August 5th, 2009 at 11:59 pm
DD: “We have the highest proportion of “young adults” (18-30) in Canada living with their parents rather than starting out on their own two feet. The number of late 20s and early 30 year olds living with their parents, or “sharing a house” as they like to call it, is significant.”
I’m guessing you are referring to Richmond and maybe East Vancouver? Curious to know where you got these statistics.
Speaking of statistics, I can give you one that I am positive on. I run a dept with 200 employees, so let’s call this a statistical sampling. All live in the lower mainland and 90% of my staff are 18-30. I know most of their personal situations, who is engaged, getting a divorce, having a baby, mourning a death, coming out of the closet, etc. Let’s say my role is more HR than Managing. Out of these 200, only 20% live at home. They come from all cultural backgrounds and there is a 60 female/40 male split. Only a handful own a home and the rest rent. Their salaries range from $35K – $50K. Most of them can’t save and therefore feel that they will never own a home. We have brought in a professional to help them with their Retirement planning, but only a dozen were interested, even though the company would match their contribution. I have personally come to the conclusion that most young people are living in the now and if their behavior and attitude doesn’t change, they will be on welfare when they retire.
As you can see, this is where I am mostly influenced by my opinion. By the people around me, my friends and family and their experiences.
I propose that your opinion is influenced by the people in your life. Young adults who live at home and save money so that they can put a DP on a house that they will lose in 5 years because the interest rates will shoot up.
Seriously, either way you slice it, the future looks pretty grim for 18-30 year olds, doesn’t it? And for what, to line the pockets and graves of greedy investors, developers, and friends of the government. This is what Vancouver has become.
August 6th, 2009 at 7:27 am
Piddlesby
I will dig out the statistics for you. It was a stats can census report conducted about a year ago. Give me a day to find it as I have a hard copy in my files.
In short, the large number of “young adults” living at home in the Metro area was indirectly attributed to the large number of ethnic minorties living here. It was hypothesized that cultural values, where kids stay at home until they are married, was the explanation for the delayed development.
As for my opinion, it has been shaped by my professional employment as opposed to my social circle (as they left home early). I worked in the post-secondary education sector, privy to enrollment information at the graduate and undergraduate levels. Professors and associates at the AUCC have also commented on this trend of delayed development out here, and impact of “helicopter” parents on the system. I work in government relations know, and often discuss this trend with HR managers like yourself in public agencies.
That being said, I really appreciate your example. It is good to see some young people trying to live on their own.
As for the future of 18-30 year olds, if prices stay high, yes its grim. I am more of the opposite belief that they will be superbly positioned to reap the rewards of any bubble collapse, and may get to enjoy a situation where incomes match prices.
August 6th, 2009 at 7:47 am
DD:
I appreciate your further explanation and detail regarding the statistics. In my world, they seem off and especially when looking at the 18-30 year olds that I know of and not through work, there is only a couple that have flown back to the nest, but just temporarily. I was born and raised in Vancouver, with an Eastern European background as well as my spouse and in our circle the younger generations couldn’t wait to leave the family home. Most did by the time they were 25 (about the age they completed college/university and found their first real job). However, within our circle, we have many Asian and East Asian friends who would agree with me, I would say though, that the main difference is that all their children were born here, so they grew up with different influence; with the pressure to move out of the family home.
I’m not disagreeing that there are young people staying at home longer and relying more on their parents, but I feel that they are socially behind, most likely without partners or even never dated, and they may just stay home to eventually care for their parents as they age.
You are “bang on” with your statement at the end of your post where you say: they will be superbly positioned to reap the rewards of any bubble collapse, and may get to enjoy a situation where incomes match prices.
The key phrase is: “where incomes match prices”. Knowing that we pay our 200 employees in our department, most will never qualify to buy a home, even with a co-signer, if the prices remain at this ridiculous and irresponsible level.
August 6th, 2009 at 9:26 am
Piddlesbby said “Their salaries range from $35K – $50K. Most of them can’t save and therefore feel that they will never own a home. We have brought in a professional to help them with their Retirement planning, but only a dozen were interested, even though the company would match their contribution.”
I’m glad you said this Piddlesbby. On this site i feel there is a tendency for people to claim that because the condo they’re living in would cost them $1000/month more to buy than rent, they are saving $1000 / month. It’s as if they are actually saving this money. As your example suggests, your employees aren’t able to save anything on their 35-50k and the $1k / month rent is all they can afford.
It seems that everyone on this site is socking away thousands a month by not buying – except me. For me, my 75k salary gets sucked away renting my house, running my 5 year old car, going back to the UK once per year to visit family, and going out for a meal maybe once a month. I wish i new the secret to accumulating the six figure downpayments that so many here appear to save while they wait for the crash that appears to never come. BTW my trip home costs me all of $1200/year before anyone explains away my lack of saving that way.
August 6th, 2009 at 11:29 am
Piddlesby
Thanks for expanding on your experiences with young adults, particularly around your ethnic minority associates. And I agree with your statement that they are “socially behind.”
As an aside, three former work associates, not friends, are either still living at home or just moved out. One was of Scottish descent, 32 and moved from his Dad’s home to his own condo; another Fijian, 34, moved from his parents house to his wife’s condo after marriage; and one East Indian, 34, just laid off, and still living at home. When questioned on how they could still live at home, they said, “we don’t know any better, so don’t know what we are missing”
I am quite shocked that none of your younger staff took on the matching employee pension contribution. Every job I have gone for, I have looked for matching pension contributions from the employer. In fact, soon as I go my first job after grad school (23) I immediately went to the bank to set up a financial plan and retirement program because I was schooled with the “knowledge” that OAS and the CPP might not be around when I wanted to retire. Fortunately, while having worked in the private sector, I have largely worked in the M.U.S.H sector which has generous defined benefit plans.
#75 ulsterman
“my 75k salary gets sucked away renting my house”
Ulsterman, if you are single, why are you renting an entire house? And if you have dependents, then that is why you may not be saving buckets of money every month like a lot of posters here.
However, if you are single, then a 75k salary is above the median FAMILY (2 person) income in Vancouver of 62k. So, you are ahead of game in income, whether single or with dependents. This is by no means mean-spirited, but you should be able to sock quite a bit away with that salary if you are single.
August 6th, 2009 at 1:08 pm
real world example: we’re renting a beautiful garden level suite in a house for just under 1300 a month, ALL inclusive (cable, www, heat, water…everything).
It’s ~1200sqf or so with one large and a smaller den like bedroom (our guestroom for visitors, soon to be kid’s room), living room with fireplace. We get to use the whole, rather large Garden for ourselves for planting things like tometoes, salad ect., BBQ parties or just to hang out with our little one. In the meantime the landlords are working both their asses off to pay for the house (North V., 650K, bought 1.5 years back), they don’t even have time to ever use their garden.
Anyways, this is easily be doable with family income of 75K while still being able to stash away some money. In our case what’s really noticeable is that the quality of life we enjoy is waaaay better than our landlords’ as they struggle to get by, making the payments. And isn’t that what it’s all about – quality of life. If renting allows for better quality of life compared to owning then I’ll rent forever, simple as that. Oh yeah and the landlords are obviously in charge of shoveling snow, cleaning common walkways, paying for repairs….nice! So in a way they are mortgage slaves but also ours
…and yes, they do drive an SUV bought new not too long ago.
August 7th, 2009 at 8:50 pm
We need to hold the Provincial Government accountable for the fact that their prescriptive building codes is what caused the leaky condo problem in the first place. In most cases the builders built the way they were told to. It is the building codes at fault and the only body to be held accountable is the Government. Downloading this responsibility to societies seniors or those falling on hard times is unconscionable.
Sean Wiens
President – SENWI House Inspections
August 10th, 2009 at 9:28 am
“We need to hold the Provincial Government accountable for the fact that their prescriptive building codes is what caused the leaky condo problem in the first place. In most cases the builders built the way they were told to. It is the building codes at fault and the only body to be held accountable is the Government. Downloading this responsibility to societies seniors or those falling on hard times is unconscionable.
Sean Wiens
President – SENWI House Inspections”
Give your empty head a shake Sean! It’s the Government’s fault that it rains in Vancouver?? Taxpayers bail out Governments so when you suggest that the Government should pay, you’re saying that I should pay. What’s unconscionable is jerks like you suggesting that it was somehow the Government’s fault (because they have the deepest pockets) that people were stupid enough to buy leaky condos. I wouldn’t take a condo in this city (or any other city for that matter) if it was free, and I’m certainly not willing to pay for someone else’s stupid mistake (i.e: the moron who bought the condo in the first place).
August 10th, 2009 at 9:48 am
No it is not the Government’s Fault that it rains. It is their fault that they do not take the rain into account when designing the building codes. Yes the cost of the Government’s mistakes is born by the taxpayer. When has this been different. You would think that the voters would start to hold the Government accountable.
People need a home. Most cannot afford to buy a detached home in this city. What other choices do they have. They are not moron’s, they are usually desperate, a position I hope that you, with your high standards never find yourself in.
Sean Wiens
President – SENWI Home Inspections
August 10th, 2009 at 10:31 am
“People need a home. Most cannot afford to buy a detached home in this city. What other choices do they have.”
Hmmmm, ever heard of a thing called: ‘RENT’? Forget owning; start renting and save yourself big $’s over the long term. It’s the desperation to own that pumps up the prices and makes others ever more desperate!
It’s not enough that people are stupid enough to pay way too much to own condos in this city, they add insult to injury after the fact by suggesting that taxpayers (not the Government) should pay for their maintenance.
August 10th, 2009 at 11:02 am
Sean,
Most people in Vancouver are better off in rental or non-market housing. Unless prices plunge 50%, home ownership is too risky.
Do you recognize that condos are inherently a problem? They are built for short-term profit and there is no way to hold the builders accountable. If buildings were built by those who would own them for decades, I can guarantee they would be properly designed with higher quality workmanship.
Its really too bad that the rental stock is growing old, and all we can replace it with is these bloody condos.
August 10th, 2009 at 11:23 am
@Ulsterman – you’re not alone! We’re saving a tiny amount per month (RRSPs, RESPs, but nothing like 1K per month) and paying off a student loan, and otherwise squeaking by.
August 10th, 2009 at 12:48 pm
buyers don’t make conscious, educated decisions but they buy based on gut feel or hype. I’ve seen it amongst friends and workmates. My take on this, if they are willing to take the risk then they have to deal with the consequences.
people just don’t do their homework, reading the contract, asking questions, researching ect…
anecdotal:
One time I made an inspection because the friend that bought was out of town for a while and it was shocking how many fails there were in his brand new Firenze ‘luxury’ condo. Bought a while back at 450$/sqft, presale takeover/unseen. I doubt they would have bought upon actually seeing the thing but presale is hoe they got the ‘great’ price.
Just a few gems:
- huge gap in balcony door letting air and water in (1 inch on the top)
- carpet wasn’t glued to the floor everywhere (you could see wave bumps)
- brand new fridge had a huge dent on the side
- about 50 minor to medium things like scratches, loose power outlets, ect ect…
They thought they’d be priced out soon and felt they have to rush into the market. The big selling points from the brochure had to be removed to to space issues so i doubt they could sell at the same price even if the market went sideways.
- fireplace: removed to allow for more room in the tiny place (mind you it was an electrical one, kind of looked like a closet with an artificial fire in there…pretty tacky…it looked so nice in the brochure…)
- ‘solarium’ was 2 glass walls built in WITHIN the living room. They had it removed so they could actually fit a couch in the living space
- the grande balcony: it’s almost unusable since they way the door opens to the outside only one person can get out and would have to shut the door to get behind the door on the outside to let a second person out. Bigger folks cannot use the balcony.
- the awesome ‘walk in’ closet: about 50 cm deep and yeah you can walk in as long as there aren’t any clothes in there. Basically a regular closet.
-no basement storage room at all
August 10th, 2009 at 12:51 pm
bandit: Hahah wow some luxury. I guess that “new condo smell” is worth the extra thousands per month.
August 26th, 2009 at 10:18 pm
Why would anyone risk buying a condo in BC? With leaky condos, antiquated strata legislation and escalating strata fees due to the HST the alternatives are looking more attractive.