Welcome!
VancouverPeak.com- admin replied to the forum topic Sandbox. in the group Housing Data
- admin posted an update:
- jesse and Makaya are now friends
- jesse replied to the forum topic Sandbox. in the group Housing Data
- jesse posted an update: CMHC starts, completions and under construction in Vancouver […]
- The Ant started the forum topic BC Population Growth in the group Housing Data
- jesse and The Ant are now friends
- jesse and wreckonomics are now friends
- wreckonomics posted an update: New Year, New HPI. ”Selection Broadens and Demand Eases to […]
- Best place on meth and admin are now friends
Wordpress theme by Abhishek Tripathi of Mediawick Digital Solutions
October 22nd, 2009 at 8:27 am
Dave,
see the posts by Patriotzed and others, which explain more eloquently than me.
My simle answer to you: most recent loans, and therefore most recent transactions, would not exist without the CMHC. In a working market there would be price (interest rate) discrimination: people with low downpayment would have to pay a higher interest, which would mean a lower loan size. This would immediately reflect in lower number of transactions and lower prices.
This is a market on drugs, where the drug is subsidized credit. It cannot, and will not, last much longer.
The crash had started eagerly in 2007 and by now it would have erased 1/3 of nominal valuations. Concerted government intervention, in Canada and abroad, has backstopped the market and temporarily halted the slide. Governments were scared of the huge negative ‘wealth’ effect that a drop in house prices would have on consumption and the economy in general.
October 22nd, 2009 at 8:13 am
@patriotzed: Yes, you are correct. So what has changed is that the banks off loaded their riskier mortgages to the crown but as you say the crown was backstopping everything in either case regardless of who owned the mortgages. The other thing that has changed is that the banks have more leg room to underwrite more mortgages as a result. In hindsight, this may turn out to be an action which in the long run produces more risk of a collapse and hence more risk for the crown/taxpayer. Ultimately, it is a policy decision by our government.
October 22nd, 2009 at 8:10 am
@Dave: If you really want to understand the CMHC issue, it is spelled out in detail here.
October 22nd, 2009 at 7:17 am
@observer:
And that was my point. Nothing changed with the CMHC last Fall. So we can’t claim they are responsible for having ‘intervened’ or ‘backstopped’ the falling market.
October 22nd, 2009 at 1:01 am
Dave, you little pudle! I just came to the office thinking you are working hard so I should give you a massage to realize that you actually left right after lunch break. Shame on you.
October 22nd, 2009 at 12:58 am
@observer:
If you’re implying a sequence of events from that wording it’s incorrect.
The order of events is that the mortgages are insured by CMHC at time at issue, and later some of them are purchased by CMHC (Canada Housing Trust). Since the Crown has been the guarantor from the beginning, the subsequent purchase does not create any additional exposure for the Crown. CMHC (or any other Crown agency) does not purchase uninsured mortgages.
October 22nd, 2009 at 12:35 am
@observer:
It is if you pay a reasonable price for it.
This is the basic truth that so many people somehow don’t seem to get – whether RE, or anything else, is a good investment depends on how much you pay for it. Buying an overpriced, leveraged asset at a time of record low interest rates is not a hedge against inflation. Or deflation for that matter. It’s just stupid.
We don’t “love” renting for its own sake, the point is that we just want to get our money’s worth, and you can only get your money’s worth today by renting.
October 22nd, 2009 at 12:09 am
@Dave: To answer your question: the CMHC was the vehicle by which the government and banks were able to keep credit flowing to buyer’s who would otherwise would not have been able to get a normal bank mortgage. So although they did not initiate any new action last fall except to expand their operations, they were an essential part of the mechanism. To make an analogy: the banks and government pulled the trigger, the weapon was the CMHC, and victim will be the taxpayers and our future economy. The beneficiaries will be homeowners who contributed little to the economy.
October 21st, 2009 at 11:57 pm
It has been said the RE is a good hedge against inflation. Even if you brush aside the issue of mortgage rates rising with inflation, here is an article which suggests otherwise.
Metro Vancouver predicts 50-per-cent tax increase over five years
http://www.vancouversun.com/ne.....story.html
Seems like poetic justice to me. Now all we need is a specuvestor tax and requiring 40% down payment for RE which is not for personal use (like they do in China).
October 21st, 2009 at 11:15 pm
@ReadyToPop:
#128, Finally, a voice in the wilderness. Dianne franci is actually read. Unfortunatley, Garth, although he was spot on is not popular with the liberal media in Toronto. But…they cannot avoid Diane Francis. This story will have political ramifications no doubt. The Feds have re directed the ‘stimulus funds’ to this housing scam, all for political gamesmanship, keeping the facade of stability while Rome was burning.
The opposition finally has the publics attention and will fire all guns at this one. There is one thing Canadians hate more than a housing crash and thats a waste of money supporting someone elses gain.
Why this story has been kept quiet by the media is the real question. The Cons agreed to a 55 billion dollar deficit , what happens now when its made public that they’ve added a 600 billion dollar bloody mess on top of it? Christ, who the hell is going to pay for this mess? ARRRRGGGGHHHHHH, it’s us.
October 21st, 2009 at 11:14 pm
@Dave:
Are you really that thick Dave? CMHC is allowing the banks to make loans on RE without regard to default risk. You don’t call that backstopping or intervention? Do you really think the flood of capital going into RE could continue if the taxpayers weren’t holding the bag? Would you loan your own money out to someone at 3% to buy an overpriced Vancouver crapbox?
October 21st, 2009 at 11:08 pm
@Dave: Let’s hope you are right so rates can move back to historical levels! On the other hand, the yield curve has gotten ever so slightly flatter so you know what that means.
The government bought mortgages from banks and insured them through CMHC if I recalled correctly. Also, as the article of this thread states, the size of CMHC limits has increased.
It isn’t hard to witness this first hand. If you go to any bank and have a fair amount of money in your accounts, you will almost invariably be asked if you are interested in their mortgage products (together with possibly some encouragement that this is a good time to buy due to the low rates and softening prices).
Until I see the stats which consistently show a more narrow spread between % price below and % price above list prices, I am suspicious that what is really happening is that some smart owners are cashing in on their profits to unsuspecting FTB’s before the final slide downwards.
October 21st, 2009 at 11:06 pm
@domus:
You are dodging the question. How does an insurance provider cause the market to go up and how did THEIR actions ‘backstop’ or ‘intervene’ in the market? Your words, not mine.
October 21st, 2009 at 11:00 pm
A few posters have wondered why i would be “obsessed” with buying because they simply love renting. What i want is for house prices to return to fundamental levels of even say, 150 times annual rent. This way i could buy my rented house and when i retire in 25 years (and have the mortgage paid off) i will only have repairs and taxes to pay, not 2400/month from my pension.
Also, owning my rented house would mean i could make changes beyond paint colour. This isn’t so important to me, but ask my other half.
Renting would take away the concern that i get an eviction notice when the landlord’s mother passes away in her nursing home and he decides he may sell the place. Sure i could find another home, but it’s a huge pain in the ass to move a family.
I just don’t see the appeal in renting. As i said in my previous post, i’m skeptical that Burnaby prices will ever revert to values even close to fundamentals. I recon my rented house would have to fall 44% to make it 150 x rent.
Here’s wishing
October 21st, 2009 at 10:57 pm
@Purp:
The real price peak of 1995 was nowhere near the peak of 2008 or today’s real price. It was about the same as 2005′s real price, at which time most of us were just starting to call a bubble in Vancouver.
Also note that the 90′s saw declining interest rates which improved affordability and softened the price decline. And during the 90′s the economy was much less dependent on RE (high tech did very well for example) which meant less of a snowballing effect from a declining RE sector.
Today we have almost record high real prices combined with record low interest rates and a record high % of the local economy based on RE. There is only one credible outcome – a massive bust.
http://cuer.sauder.ubc.ca/cma/.....couver.pdf
October 21st, 2009 at 10:38 pm
Dave,
you mighty mind and great entrepreneur…..the CHMC increased lending guarantees by an unprecedented amount over the past 12 months. The majority of new mortgages extended in Canada now enjoy full tax payer backing. Is that enough for you?
Given your brilliance and work ethics, can I ask you a simple question: what do you think the interest rate on a 5% down, 35 years mortgage should be? Should it be 4.1%?
The low mortgage rates (and interest) paid by new buyers with little downpayment are nothing but a net transfers by tax payers, who are providing the guarantee….if these guys default, we all end up paying their bills. However, if the market goes up another 15%, they get to keep the gains. Are you getting it now?
October 21st, 2009 at 10:15 pm
@mk-kids:
I think the economy is picking up. I know it is just one data point, but it’s 10 pm and I am still sitting in my office.
October 21st, 2009 at 10:11 pm
Another doozy… this house of cards is coming down and taking Harper with it.
http://thetyee.ca/Opinion/2009.....WillBurst/
October 21st, 2009 at 10:07 pm
@Drachen:
That doesn’t address his statement. Domus said the CMHC ‘intervened’ and ‘backstopped’ the market. Presumably, that means the CMHC did something since last Fall while the market was correcting. I’m just curious as to what that was because it is news to me.
October 21st, 2009 at 8:37 pm
How can one quibble with Garth’s timing when the Feds keep shifting the rules ?
Also: Good article by Diane Francis
October 21st, 2009 at 8:30 pm
the cmhc is a mammoth cash cow for the federal government. tons of revenue and any obligations can be monetized. never forget, the cmhc is directly linked to the central bank of canada. conveniently the cmhc is a beast of reflationary power to boot. the cmhc didn’t even have to dip very deep into the tool box to add lots of fuel. the bears vs. cmhc battle will rage for years.
October 21st, 2009 at 8:19 pm
ReadytoPop 128:
great link. It was posted already (see post 116 above). Great article, she is making sense. Let’s hope someone hears her.
October 21st, 2009 at 8:07 pm
Diane Francis: Says it all doesn’t it?
CMHC: Canada’s Freddie and Fannie?
October 21st, 2009 at 7:30 pm
@Dave:
They’ve nearly doubled their cap in only two years. They’ve lowered the very reasonable requirements to practically nothing.
Pick one, that’s what he meant. And probably the other one too (and maybe more). That’s the topic, how on earth did you miss that?
October 21st, 2009 at 6:28 pm
@Right Said Fred:
I agree. It’s easy to be wrong with timing. I think it is better to stick with personal metrics that you can control (e.g. what you can afford).
October 21st, 2009 at 6:25 pm
@domus:
What do you mean by intervention?
October 21st, 2009 at 5:59 pm
@Anonymous:
#123 Thanks but did you catch the news footage of the ‘brave members’ in Algergrove who stomped and kicked the face down surrendered victims on the news tonight. It would be so cool to have a gun out and continue to kick and stomp a guy who’s surrendered when you know he can’t fight back. How cool and brave is that?
Are there right wing seniors homes in Richmond? I gotta see that. We’ll watch the police violence videos on the news and cry for the Canada we thought we had worked and died for.
October 21st, 2009 at 5:08 pm
Is realpaul just satv?
What are you doing here realpaul go hang out with your right wing buddies in the low income seniors home in Richmond.
October 21st, 2009 at 4:18 pm
I have never been a big fan of Garth, but to his defense I have to say that the only reason there was no big correction in house prices was for the unprecedented, and distortive, intervention of CMHC which backstopped the RE market.
This is not only unusual, but highly harmful to the regular working of the RE market.
It is hard to make predictions when the rules of the game are changed during its course.
Write to your MPs and let them know that you want them to raise the issues about the role and oversee of CMHC in parliament (I know, I am boring, but I will repeat this in every post I write).
October 21st, 2009 at 3:56 pm
What I find hilarious is that this is as hysterical as what the bears claim housing bulls to be. Is it not rational for the bears on this blog (or Mr. Garth Turner who got it wrong and is losing credibility – and book sales – by the day with his dire previous ‘predictions’) to try to generate the animal spirits that will make people sell. Why? Because they didn’t buy real estate, got caught, simply because they were not critical enough to consider the possibility they were wrong. It never pays to time the market.
October 21st, 2009 at 3:53 pm
Interesting history of past Olympics leading up to ours:
http://sophrosyne.radical.r30......ss/?p=1666
October 21st, 2009 at 3:38 pm
@domus:
My riding is in a by-election. I think I’m going to call the candidates with some questions.
October 21st, 2009 at 3:25 pm
@FORREST:
#96 ……… Maybe we will get the first ever First Nations Prime Minister? Any takers?
++++++++++
Robbie Robertson? Maybe he can sing “Somewhere down the Crazy River” at the opening of parliament?? LOL
October 21st, 2009 at 3:20 pm
What happens if we get a crash that everyone is calling for and the government can’t stop, even after trying everything in the US government intervention playbook and some homegrown creative policies? Chances are that some banks are going to go under, and if one’s warchest is in one of those insolvent banks, they’ll be waiting at the line at the CDIC to get back their downpayment/cash purchase lumpsum. Or, maybe one will have already spread their money around to other investment vehicles like precious metals/stocks or whatever, but are those assets somewhat inflated? and when a market/economy crashes, those holding drop in value also, because everyone is scrambling for cash to pay off short-term debt so they are liquidating their quality assets at firesale prices because the market is flooded with everyone doing the same.
so i am hoping for an orderly decline in prices. Besides, as the masses will agree, a rapid run up, will result in a rapid run down. So what does a rapid run down give you: that’s right, the basis for another bubble. Prices will over correct downward so houses are super cheap, people will be out in droves buying, and suddenly, prices are headed up again…back to the 110% of gross income kind.
October 21st, 2009 at 3:09 pm
CHMC: an interesting article on the National Post
http://tinyurl.com/yfket9w
It starts by saying: “Ottawa has been creating a housing bubble in Canada with taxpayer money which is why residential real estate prices rise in defiance of high unemployment and recession.”
Write to your MPs…..
October 21st, 2009 at 2:54 pm
http://americacanada.blogspot......-rise.html
Quote:
In 1985 we borrowed 45% of our gross salaries and wages to pay for housing. By April of 2009 we borrowed 110%. This of course is an average of our entire country including those without mortgages.
Two assumptions are made in the model.
The first is that incomes will continue to see compounded growth of 2.4% each year. This is the average post recession growth rate between 1991 and 1996.
The second is that an acceleration of credit growth of just 0.8% each year will cause home prices to continue to rise. This is the average acceleration in credit growth between 2001 and 2008.
Using this model we can clearly see that by 2016 Canadians will owe an average of 263% of their gross incomes to residential mortgage debt.
It’s impossible figure I know. But that is the point. In fact it is unlikely that we will go above 125%, something that will occur by mid 2010.
To the bulls and bears, please put aside your emotions. A real estate correction is written into the cards. It’s a mathematical must.
In the next few years the economy will surely hit a debt ceiling. Where that is depends on interest rates, demand and supply of credit, and income growth. But it will and according to this model, within the next year or two.
At that point home sales will begin to rapidly slow. This will result in falling prices. The two will reinforce each other.
This next correction will be unstoppable by traditional government stimulus. Interest rates have only one way to head this time.
With debt levels this high, why would you want to stop a correction? Knowing that the only solution, that is to accelerate the growth of credit, is far from sustainable and will result in more severe punishment on families and taxpayers?
What if interest rates rise? It took only a 2% rise in interest rates to bring down Japan and the United States.
Families will get hurt by all this debt and seeing that, frugality will make its return. The demand for debt will fall, further hammering the cycle.
Regards,
Jonathan Tonge
http://www.americacanada.blogspot.com
=============
So anyone got any comments on this article..ie the SHTF in 2010 ?
October 21st, 2009 at 2:06 pm
@NO – LYMPICS:
The very sound of the name ” The Fraser Institute’ brings about a knee jerk howl and war cry from every special intrest group out there.
You could ask for clarification on the Institutes address and the howls of indignation would be heard from every union funded cry baby in the province.
Its politically correct to hate anything that hasn’t been spoon fed, filtered and vetted by a special intrest group, whether you understand the issues or not. Individual and objective thought is a rare bird around here.
October 21st, 2009 at 2:03 pm
#95 patriotized
QUOTE:
As I have said, the longer the bubble lasts, the more people will buy at inflated prices. Every purchase of a house at an inflated price (as opposed to just renting) reduces the future purchasing power of the buyer, and thus overall demand in the economy, for decades. This will remain the case whether or not house prices come down.
Fat lot of good an “orderly decline” did Japan. The sooner this idiocy ends, the better.
Vancouver saw a very rapid bust in 1982-83 and it was the best thing that could have happened to the city. Housing that was affordable to the middle class was an important factor in the diversification of the local economy into high tech, film making, etc. – a diversification which has largely been reversed over the last decade.
Regarding bailouts, the banks have already been bailed out in advance by CMHC, and the only bailout John Q. Homedebtor is going to see is in bankruptcy court. Once again, the faster the price drop, the lower the overall cost.
===================
Excellent point/summary !
I look back at the early 1980′s RE collapse as a correction that was overdue and occurred when natural forces were allowed to play out. Unfortunately , some suffered, but things did stabilize and life went on.
However, this recent bubble has been allowed to continue, doing the exact opposite of what happened in early 1980′s ie interst rates did not rise to 20%, instead they have been kept low and the CMHC (ie us) has been brought in as the ultimate insurer.
This will not end up well, no matter what voodoo economics they throw at it. There is no appetite for a federal election by either the voters or the opposition parties…the Tories are supposed to be fiscal conservatives but are instead into massive deficit financing. Seems like we are all on the same Titanic and no one is willing nor able to stop it.
October 21st, 2009 at 1:49 pm
Yeesh !
All I asked was for comments on the FI’s recent report on the ALR, not your opinion on the FI.
October 21st, 2009 at 1:36 pm
#107@Purp
IMO a devastating crash is really what we need. Yes, it will wipe out the people who (foolishly) stretched themselves so thin, that they cannot afford to pay their mortgage in a more reasonable economy. It will wipe out their equity so they cannot play the RE game like it is some kind of easy lottery for many years.
And that is a good thing. Even for them.
A devestating crash has a far better chance of burning itself into the collective memories of the culture, than the slow decline. Following the excesses of the Wiemar republic and devestation of two world wars, Germans were tremendously credit shy. That is gradually easing as the collective memory fades, but it still has had a balancing effect on the economy and the general attitude of fiscal responsibility of the people.
It seems that 90% of people are too stupid and greedy to remember gentle corrections. We need something that will smack them upside the head like a hurled brick and make it spin for years. Only then will they be able to have any kind of skepticism towards the tits of the RE pumping marketing machine to which they so eagerly suckle.
October 21st, 2009 at 1:24 pm
#86, Chris. Too bad you have to live in fear. You call the decision not to buy into the Vancouver RE casino a fatal mistake at worst? How;’s that a mistake?
They also have the pleasure to shovel snow, clean the stairs outside, fix each and every thing that’s broke around the house and in the apartment. Paying 1280 a month with *everything* included (cable/www/hydro/ect…), the place is on the hill, between North and West Van. Home prices have to drop significantly for me to give up this little piece of paradise to buy something.
You must be one of these people that think life is about owning some RE and if you don’t you failed.
Can only re-iterate but this ownership thing that’s going on is a hype driven by fear of ending up without RE or making less money from RE than the neighbor. Gosh get over it. It’s about quality of life and what it means to you, not home ownership – get that?
I’m a renter and loving it. *Only* reason it’d ever buy would be to have my own Garden but even that I get by renting right now. Renting a beautiful 2bdr suite, garden level, nice lush Garden and it’s all ours since the owners never ever have time to use the Garden (to busy working their asses of for the mortgage) nor are they into gardening except for mowing the lawn for me
So Chris, i think key is to not make your happiness dependent on owning something overpriced. For me a large loan/mortgage on an overpriced asset like a house/car would impact my quality of life negatively for obvious reasons. btw, bought all my cars that i owned so far with 100% cash down and have a substantial down payment if ever needed…
October 21st, 2009 at 1:22 pm
logic 108,
in addition, most researchers or professors (at all levels of tenure) move because they are getting a better deal somewhere else (title, pay, lab space, university direct funding, more graduate students, better standard of living, etc.)
BTW, professors in BC are considered public employees and their salaries are available on the web. A lot of established ones make 6 figures and as high as 500K (and I presume that is before consulting fees).
October 21st, 2009 at 12:40 pm
You know your city is in trouble when school teachers, firemen, and tradespeople can’t afford to live in it.
———-
Dude, it’s not just the “little people”. UBC loses valuable research staff on a yearly basis as even university profs can’t afford to live here.
October 21st, 2009 at 12:20 pm
Some great comments about the damage of a high real estate market. I wish this was more widely discussed rather than the sometimes gleeful boasts of “my house has doubled in value” during the far too frequent conversations about real estate in this city and the shameless RE pumping in the local papers.
@ patriotized & no longer looking: Do you think the Japan ‘lost decade’ is a good comparison? I was thinking more along the lines of the stagnant local prices during most of the 90′s, which didn’t have the crippling economic malaise. I agree that even a slow crash would cause damage, but I still think this is the better of two bad options since it allows prudent people some time to make orderly changes in their lives. A fast crash like the early 80′s, in which interest rates spiked, has the potential to wipe out almost anyone who can’t absorb doubling or tripling mortgage payments or has to sell during this period to find work or other reasons. A crash like this today I think would be even more devastating. Since we are talking about people’s homes and not investments, a more stable, predictable RE market both when it’s rising and falling I think is preferable.
For the record, I count myself as a bear.
October 21st, 2009 at 11:59 am
101 Other Ted – makes a good point.
It seems like the only question people buying RE are asking is “will it go up”, not “do I really want to live in a city with serious drug, gang, and homelessness issues, no industry besides the 100 employees of EA Sports they troop out every election as our “success story”, no discernible culture or nightlife, and is run by a bunch of soulless RE pumpers, PR twats, and general low lifes.
You know your city is in trouble when school teachers, firemen, and tradespeople can’t afford to live in it. You know, all the “little people” who actually DO things, instead of flipping their crappy Yaletown condo to somebody even dumber than themselves.
October 21st, 2009 at 11:56 am
Economists and pundits ‘out’ BOC as being false rhetoric and in ‘planning a sneak attack on interest rates. Nice to see that not everyones stupid.
http://www.financialpost.com/n.....id=2128184
#104 L, I think you’re seeing RP crawling under your skin, the FI string was in reply to an OAS comment re FI & schools. So, either bark up the right tree or admit that I fascinate you and that you love me.
October 21st, 2009 at 11:46 am
parent Says:
October 21st, 2009 at 10:35 am
@logic:
#84
RealPaul is quite right.
—————–
He may well be – I care not.
The point was (and is) that it is OFF-TOPIC. go rant elsewhere.
October 21st, 2009 at 11:27 am
Higher interest rates are now a matter of ‘when’ not ‘if’. The BOC is being exposed as liars. What a surprise.
http://www.globeinvestor.com/s.....8/GIStory/
October 21st, 2009 at 11:16 am
@FORREST:
96, The most effective and PC PM should be an indigenous immigrant refugee of colour disabled lesbian single parent speaking french vegan left leaning union supporting tree hugger anti business anti nuclear bicyclist anti white luddite with cats.
October 21st, 2009 at 11:00 am
Purp one more point. Even if Vancouver corrects super fast I still might not buy because for me real estate is not just an investment but more importantly its about where I live. If vancouver doesn’t have any career prospects well then I will only buy if it corrects below fundamentals which isn’t likely or if I can retire outright. The most likely scenario is I will move back if I can get the same money in vancouver. So there you have it there are many bears who won’t benefit even if there is a crash. Well indirectly I will as it might allow other industries to flourish as Patriotz pointed out.