Friday Free-for-all!
It’s Friday! And that means it’s news round up and open topic economic discussion time! Here are a few stories I’ve noticed recently to kick off the discussion:
-BC RE Sales driven by consumer ‘momentum
-Finance minister says NY & Toronto give us a thumbs up
-A few million here, a few million there..
-Olympic street closures relocate homeless
-Runaway loony puts BOC in ‘a bit of a box’
-US Foreclosures: worst 3 months of year
-Buy a $750k house with your $8k tax credit
So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!
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October 20th, 2009 at 11:05 pm
@Dave: This is average weekly wage – which is different than income earned – and still comes out to under $40K per year.
Plus it’s not household income.
Real wages or not, gain or not, this wage isn’t terribly helpful to your case vis house prices. ‘Sides, Statscan is reporting what’s *really* earned, and you can find it for metro vancouver, which matters – since the wages in Prince George don’t really mean anything to Vancouver’s housing market.
Your chart shows lower wages than Statscan, being BC wide.
October 19th, 2009 at 6:32 pm
@logic:
None of that is true.
Year over year, the average income in BC is up 2.5%, which is greater than the inflation rate.
———
Dave, you an illiterate retard.
I said between 2000 and 2005, as they are the most recent relaible data available – as “kill dave” quoted.
October 19th, 2009 at 11:31 am
In the real world everyone gets paid in real dollars. On payday the real value equals the nominal value. The next day the value of that money may have changed; nominal is just a very special and fleeting case of real value, and of little use, except to the sophist.
October 19th, 2009 at 11:28 am
It doesn’t matter how you look at income and RE growth. RE growth has far outstripped income growth in both real and nominal terms.
October 19th, 2009 at 11:07 am
@Dave:
Let’s let Dave argue why “real” prices, incomes, etc, are irrelevant to any discussion of real estate like he has in the past numerous times, and we can all laugh at him.
The point Dave, is that if incomes were stagnant in Vancouver in real terms from 2000-2005, why have house prices increased, say 60-70% in real terms in the past 7 years.
A point of reference in regard to Purp’s point. If house prices increase at 5% nominal per year and incomes increase at the rate of inflation, say 2.5%, in 30 years house price growth will have doubled income growth. Anyone wishing for ever-increasing house prices (above wage growth) is implicitly wishing for new home buyers to be impoverished.
October 19th, 2009 at 10:44 am
@Kill Dave:
Isn’t it obvious?
The point is that ‘real’ dollars are imaginary dollars. In the real world, people get paid in nominal dollars.
October 19th, 2009 at 10:42 am
Regarding income and home price, remember we are dealing with exponential functions. If they are increasing at even small differences say 2% income vs 4% home prices, people are priced out of the market in a small number of years. In terms of absolute dollars this effect becomes more pronounced the higher prices go, especially with 10% annual home price increases as we’ve seen recently. This can be offset by making money cheaper through lower interest rates, which we’ve also seen in the past few years, to keep this bubble inflated. However, rates can’t go any lower, and I just can’t see incomes increasing significantly, so the pressure on home prices should be down. I’m not sure what data is available to lead someone to believe the opposite? If it’s out there I’d love to see it.
The question is when and how fast? I’m concerned that government will do everything in their power to keep this thing going as long as possible.
October 19th, 2009 at 10:00 am
@Dave:
What is the relevance of your question? The aggregate data for BC is quite poor, and since it doesn’t fit with your contrived set of facts (real estate always goes up here, the economy has great future prospects, people are so wealthy here, blah, blah, blah)you question the data.
October 19th, 2009 at 9:39 am
@Kill Dave:
Do you know anybody who gets paid in nominal dollars?
October 19th, 2009 at 9:38 am
@Disbelief:
Wages and wage growth:
http://www.bcstats.gov.bc.ca/p.....pdf#page=3
Use any mortgage calculator to see what $9000 per year can get you at the five year rate. ING Direct has a good one. http://www.ingdirect.ca
October 19th, 2009 at 9:29 am
Dave is misrepresenting things, again. Average employment income and median employment income decreased in Vancouver from 2000 to 2005 in real terms.
http://www12.statcan.gc.ca/eng.....0&d5=0
October 19th, 2009 at 9:22 am
@Dave: 116
Great, average wages increased 27%…how much did the price of RE increase in that time frame? Much more than wages!
October 19th, 2009 at 9:13 am
“we should just take yours.”
maybe we should. maybe dave is a realtor. or he could be working for the CMHC, or the BOC, or some other place he could get data. of course, he could still be pulling numbers out his @$$ and he could still be a shill.
i don’t believe his numbers though. i know my pay hasn’t gone up 2.5% every year for the past few years.
October 19th, 2009 at 9:08 am
@Dave:
Dave, you are saying that there is no bubble already ?
TD pointed to recent statements by the central bank that hinted that it would seek to lean against signs of emerging asset bubbles.
http://ca.news.finance.yahoo.c.....es-td.html
October 19th, 2009 at 8:50 am
Dave
Let see some proof for the figures you throw out so candidly. You are always denouncing other peoples data and we should just take yours. Is the $800 a weeks salary and how much will it take to service $170k mortgage?
October 19th, 2009 at 7:57 am
@asalvari1:
asalvari, are you saying that:
1. they are creating more land;
2. wages will stop growing or that the phenomena of inflation will go away; and/or,
3. our population / total number of employed will stop its long term growth trend?
Dream on indeed.
October 19th, 2009 at 7:52 am
@logic:
None of that is true.
Year over year, the average income in BC is up 2.5%, which is greater than the inflation rate.
The average wage in 2000 was $639 and is now $810, a 27% increase. Over the course of the year that is an extra $9,000 in each and every pocket. Or in mortgage terms, that would finance about $170k worth of mortgage at the current five year fixed rate.
October 19th, 2009 at 1:12 am
I’m not surprised that the landlord knew about the operation (typical sleeze). But did the Atira Property Management and Strata Council really know and do nothing? Why not?
http://www.vancouversun.com/ne.....story.html
The Mohans, acting on their own behalf, also named the owners of the rented suite in which the murder took place, the strata corporation that owns the highrise Balmoral Tower and Atira Property Management, the company that looks after the building.
The suit says that the Mohans lived across from the death suite from Sept. 15 to Oct. 19, 2007, without any warning that the tenant, Cory Lal, “used Unit 1505 as a site from which to manufacture and sell illegal drugs.”
“The illegal activities of Mr. Lal in Unit 1505 were known to the defendants Caesar and Myrna Tiojanco [the owners of the apartment], to the defendant Strata Corporation, and to the defendant Atira, but notwithstanding this knowledge, and the knowledge that this illegal activity gave rise to heightened risks of violence and injury for the immediate neighbours of Unit 1505, neither Caesar or Myrna Tiojanco, the Strata Corporation nor Atira warned Christopher Mohan or his family of Mr. Lal’s activities in Unit 1505,” the suit says.
October 18th, 2009 at 10:02 pm
@Dave:
Dave, are you saying now that:
A) the prices will not go down ?
B) the prices will not go down and the interest rates would go up?
C) the prices will not go down and the interest rates would stay low on current level?
If you have picked A), B) or C) you are living in your dreams dude. It has been elaborated enough why neither A) B) or C) is very unlikely.
October 18th, 2009 at 10:01 pm
Only in America the Land of the Free. First they drop their sick and elder, now they drop the house insurance… LOL
Insurers dropping Chinese drywall policies
http://news.yahoo.com/s/ap/200.....se_drywall
…Because mortgage companies require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations…
October 18th, 2009 at 7:25 pm
@betamax: #110
+1
Spot on.
October 18th, 2009 at 6:42 pm
Canada ranks last in holidays
“Employees in Singapore also get 25 days, while Chinese employees get 21 and Canadian employees only get 19. Excluding public holidays, workers in Canada and China each get just 10 days, the lowest allotment of any countries in Mercer’s study.
http://finance.yahoo.com/news/.....0&.v=4
October 18th, 2009 at 4:19 pm
A very successful realtor I just talked to said: “Last year, everyone was afraid to buy. Now everyone is buying because they’re afraid they’ll be priced out.”
Further conversation revealed that most buyers thought they’d be priced out later primarily because of rising rates, though none of them seemed to consider that they’d have to pay those rates at some point anyway.
When fear is running the market then you know a correction is still nigh. Yes, it’s been a long time coming, longer than most of us thought or would like, but I think that when the market finally corrects it will not be a Japan-like decline but a rapid fall when expectations of constantly rising prices aren’t met and the bottom falls out of this fear-based demand.
October 18th, 2009 at 4:07 pm
“are expecting some semblance of annual raises”
- average incomes in Vancouver dropped between 2000 and 2005, and we are now in a deflationary environment re salaries and wages. While some (maybe even most) people will increase due to career progression, many really won’t.
It will be very interesting to see how this all pans out.
October 18th, 2009 at 3:27 pm
@No Longer Looking: “Shouldn’t this be a reason not to buy?”
I guess most recent FTBs are expecting some semblance of annual raises, enough to “limit” the downside if rates rise a few 100 bps. Prices falling are of little concern to these types because the desire to own now is so high. Having such a constraint is turning out to be extremely expensive.
That said, nobody mentions the risks with a 25+ year debt commitment. Death, divorce, job loss, or sickness all would be devastating yet many don’t let that stop them. That’s why many FTBs report it being so “scary” when buying. It is for a reason: some don’t make it or will need to sacrifice their lifestyles for years to come.
Many commenting on this blog chosen not to risk owning at high prices and rent instead, despite their (sometimes overwhelming) preference to own. Owning seems a gamble with huge downside risk but is apparently “manageable” for those who have bought in the past few years (and avoid coming up craps).
October 18th, 2009 at 3:01 pm
^^ except for the fact that this scheme has been running for years, no? I thought this year’s announcement was simply a continutation of the scheme.
LOL – also, theya re there to “help us”
http://www.cmhc-schl.gc.ca/en/.....se_001.cfm
Funny.
October 18th, 2009 at 1:47 pm
Interesting quote from ‘Sukhbir’ on garths comment section.
“* And through CMHC, Ottawa has bought up tens of billions in existing high-risk mortgages from the banks, even though there was no default, which opened up their balance sheets and allowed them to make even more high-ratio loans.
I think this is key to the bubble. The govt has made $125 billion dollars available to the Emergency MBS purchase program. The banks have sold $65 billion so far to the govt. Mortgage interest rates are so low that investors are still not buying mortgage backed securities. The federal government has agreed to be the purchaser of last resort to keep the bubble inflated. There is no risk for the banks, so there is no sanity in the lending policy.”
Bang on Suhky
October 18th, 2009 at 1:41 pm
Re: immigrants. Fair enough, immigration is the wild card here. Who knows when the next huge wave hits our shores. Or we could see weak immigration for years. But market is not so hot in immigrant-heavy areas like Richmond and Surrey.
October 18th, 2009 at 1:31 pm
perhaps somewhat, but people have been waiting for it for twenty plus years. basically the immigrants that come here pool their monies and buy, i don’t see a cultural/economic shift that will change it.
October 18th, 2009 at 1:29 pm
“A lot of people aren’t willing to wait a few years and rent, only to be no better off than today and several years older, which is a real possibility.”
Shouldn’t this be a reason not to buy? How could you buy at a time like this unless you are expecting to do a heck of a lot better down the road?
October 18th, 2009 at 1:21 pm
stagnate and logic, you think this narrow demand might get exhausted easily?
October 18th, 2009 at 1:21 pm
“So, if the factors turn out in 2 years, the market is going to reflect it much sooner then the 5 year timeframe you made up of thin air. “
A hypothetical 5 years is a typical mortgage term. I’m not justifying why prices are high or why they won’t fall fast, only trying to explain why people are buying today. I would not presume they are all idiots. If you want reasons why people are buying today it’s because rates are low and affordability improved close to 25% since last year. That’s huge.
The logic — and I don’t subscribe to this personally — is that you either buy now at low rates or buy later at higher rates for the same monthly cost. Further, their logic extends to say that if rates stay low it will be many years before prices fall so waiting will be no better than buying now. Maybe.
There is little provision given to paying today’s incurred debt at tomorrow’s interest rates should rates spike, at least from what I see. Why is that? Higher rates will hurt in a few years’ time but from these people’s perspective the worst that can happen is that normal salary increases will help ease the pain. In many cases it’s a calculated hedge undertaken with eyes open. A lot of people aren’t willing to wait a few years and rent, only to be no better off than today and several years older, which is a real possibility.
It doesn’t make sense from a strictly financial point of view. People are obviously willing and able to pay a premium and waiting — say — 2, 4, 6, or whatever years is calculated to be less favourable than overpaying.