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 15th, 2009 at 10:11 pm
First
October 15th, 2009 at 10:39 pm
I just love the CNN story about Noel Delisle and Mike Spence buying the 750,000 house. Mmmmmm, i thought – look at that smiling yuppie couple living just outside SF. Bet they’re Lawyers, dentists, or finance types given how much they can afford. But no. Noel is a hairdresser and Mike operates a crane. No, not a scalpel…a crane. That’s right, good ole working plebs who feel like it is a good idea to buy a 750k mortgage when interest rates are as low as they’ve ever been.
To add to the stupidity, Mike admits:
“The $8,000 tax credit is saving us. Wedding, new house, we’re tapped out.”
Tapped out. Yep, that’s right, smiling, party-people Noel and Mike are well prepared for unforeseen financial events.
October 15th, 2009 at 10:49 pm
“[However] by the time we get into the new year, (Cameron Muir, chief economist for the B.C. Real Estate Association, said in an interview) home sales in [Metro Vancouver] will start to ebb and reflect more the underlying fundamentals of the economy around wage growth, job growth, that kind of thing.”
Yeah. “..that kind of thing.” The ‘kind of thing’ that Cameron Muir and all the other RE pumpers have ignored for the last 5 years or so.
“Wage growth, job growth, rent/price ratios, income/price ratios, yada, yada, yada…”
October 15th, 2009 at 10:55 pm
somebody wake me up, this is a joke gone bad.
The article about the Bank of Canada having a balancing act between booming house prices and needs of the Eastern industrial belt is the climax: are they willingly inflating yet another RE bubble? Is there no economic development without overpriced RE?
October 16th, 2009 at 1:30 am
Domus,
Yes, they are trying to inflate another bubble because, as in your second question, there is no economic development without overprice RE. Well, there is always the marijuana industry.
October 16th, 2009 at 6:44 am
I just listened to a report on CBC Radio 1 about housing prices in the Main Street and Commercial Drive areas.
One realtor interviewed had sold 2 homes for a combined $400,000 over ask, after 30 offers.
1910-style homes with 3 bedrooms on the same floor are the most desirable, and the benchmark in the Mt. Pleasant area is $40,000 over last year’s peak.
Which, to me, begs the question:
How short are people’s memories? Honestly. I’d love to live in a fantasy world where prices went up forever, and where I could borrow seemingly endless amounts of cheap money, and I’d love to believe that no matter when I purchased a home, it would appreciate ad infinitum untilI sold.
But a bubble and a bust fueled by loose monetary policy has been followed by a fix of looser monetary policy. The cure seems worse than the disease to me.
Take a guess how this one turns out.
October 16th, 2009 at 7:48 am
@Ulsterman:
Remember in the US you can lock in the interest rate for the entire amortization period of the mortgage. So if this couple can make the present payments, and don’t run into any contingencies like job loss or having to move (underwater house), they will probably be OK.
Without a doubt today’s stretched-to-the-limit buyers in Vancouver are getting a 5 year term at the most. They are lighting a time bomb with a long fuse. Sit back and wait for the blast. The ingredients are different, but we’re essentially creating the same exploding mortgages that the US did a few years back.
October 16th, 2009 at 8:32 am
@Heinz Skitzvelvett:
Okay, here’s a second-hand but completely reliable anecdotal tidbit that sheds some light on the impulsivity driving the current Commercial/Main bidding frenzies mentioned above:
AFTER successfully winning a bidding war, one new-owner in that area told a colleague of the recent purchase:
Colleague: “How big is the lot?”
New owner: “I dunno”.
I KID YOU NOT.
(Needless to say, it was not a regular sized lot).
This stuff all smacks of the kind of thing you see in the last stages of a bubble, and the charts look like the top of the bull-trap/sucker rally.
October 16th, 2009 at 9:13 am
I’m starting to wonder if this flippin bubble will ever pop. Without high interest rates I don’t see it happening anymore, this city has lost the plot, I can’t believe the morons overbidding past last years peak prices.
October 16th, 2009 at 9:21 am
“lots of westside basements (kits, point grey, etc) go for 1500.”
Or, as in my case, entire houses go for $1500 on the west side.
October 16th, 2009 at 9:40 am
HK government seeks to avoid another bubble after a record high apartment purchase.
http://english.ntdtv.com/ntdtv.....33449.html
In his annual policy address this week, Chief Executive Donald Tsang said the government was ready to reign in property prices.
[Donald Tsang, Cheif Executive]:
“The relatively small number of residential units completed and the record prices attained in certain transactions this year have caused concern about the supply of flats, difficulty in purchasing a home, and the possibility of a property bubble. The Government will closely monitor market changes in the coming months.”
The city’s last property bubble burst with the Asian financial crisis in the late 1990s, triggering a 70 percent plunge in apartment prices over six years that slammed the economy and local property owners.
No need to worry about Vancouver prices though, cuz we’re different.
October 16th, 2009 at 9:53 am
Those old overpriced places near commercial drive, who is buying them? More FTB, that only care about the monthly payment right now? Did buy it with a huge 2.35% variable rate mortgage?
I had a friend who is a FTB buy a place in Maple Ridge, got a 300k mortgage @2.35% VR. When rates go up he’s going to be so screwed. Are sheeples just dumb, or is it just because their sheeples and the herd has lost its mind.
October 16th, 2009 at 10:01 am
I have a feeling that this is the last of the bubble, wait until the new year when rates go up. The reporter who did the CBC news clip on the market in East Van seemed to be rolling her eyes when she said “Houses in East Van are going for a million these days” Yup, people are nuts and I’m hearing more and more of people running into problems with their mortgages because they never realized just how expensive it is to carry a mortgage of $500k+ on a rickety old house. Ooops! Oh well….suckers. We’ll buy on the way down. I can’t see this lasting, but I never thought it would last this long either. Then again, I have cash in the bank and all those FTBs have is a huge mortgage and value on paper. Guess who will come out ahead?
October 16th, 2009 at 10:23 am
Regarding coming interest rate rises:
Volcker: Fed can’t wait too long for policy shift
15 Oct 2009, Reuters
Excerpt:
“You have to act against what seems like common sense. If you wait, it’s too late,” Volcker said.
October 16th, 2009 at 10:39 am
Any thoughts re the BOC having to raise rates despite the strong loonie?
I don’t think that such a move is out of the question.
Here are a few thoughts, FWIIW:
1. Part of the loonie strength MAY represent the currency market ALREADY pricing in coming rate increases. (In which case rising rates will not necessarily immediately strengthen the loonie further).
2. If we don’t raise rates, how are we going to service our debt? We need to attract buyers with competitive rates. Doesn’t Australia’s debt already look a lot more attractive to investors than ours?
3. It looks to me like the USD just may have put in a short-term or even intermediate term bottom at 75.2 yesterday, in which case a bounce in the dollar (with a concurrent pullback in stocks, gold, oil and loonie) would possibly offer a good backdrop for the BOC to tighten, or talk tightening.
4. Lastly, to consider again an analysis I recently mentioned that talked of how rising rates slow the economy (9 month lag) and thus actually end up WEAKENING the currency. And perhaps some aspects of the markets see that coming. The relationship between rates and currency strength is not a simple one.
October 16th, 2009 at 10:47 am
With regards to the couple purchasing a $750,000 home with their $8,000 credit.
From our friends Wikipedia:
FHA loans have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford.
This totally goes against what the FHA was originally set up for. Subsidizing blue-collar citizens so they can purchase 3/4 million dollar homes in a bankrupt state is idiocracy in its purest form.
Well done Feds.
October 16th, 2009 at 11:02 am
My friend owns one of those old overpriced places near commercial drive. She has just put it on the market (divorce). The realtor said she would list at $760K but wouldn’t entertain offers less than $840K. She bought 10 years ago for $309K and the house hasn’t needed much work over the years…
$309K for that house actually seems reasonable. $840K is kool-aid drinking self-induced psychosis money.
A 70% price plummet is so overdue…
October 16th, 2009 at 11:03 am
Here’s another scenario that I think everyone is overlooking.
With the Canadian dollar near par, a large number of Canadians are going to do their holiday shopping across the border. I already know a bunch of people getting Nexus passes so they can shop more easily.
This could be a VERY painful holiday season for Canadian retailers.
October 16th, 2009 at 11:08 am
@mk-kids: “A 70% price plummet is so overdue…”
+1
heck, +10…
October 16th, 2009 at 11:15 am
Friday Free for all? Hardly. The active censorship on this blog is specifically designed to keep a few naive potential buyers on the hook until the advertising sucks up a new sucker. If you haven’t got that by now then , I have a nice bridge to sell. Anyone wants buy it? Huh Huh Huh?
Its a scam site.
October 16th, 2009 at 11:24 am
No matter what name RP puts behind his posts, his venom and extreme cynicism comes out. Hint – look for the postings on cop abuse stories, censorship, rants about democracy, the poor state of Vancouver, Canada, etc…
October 16th, 2009 at 11:48 am
@ Starving Artist
I was in Seattle on Thanksgiving and coming back the lineup at the Nexus line was substantial. Perhaps it’s time for Super-Nexus for Really Special People.
October 16th, 2009 at 11:54 am
Just got off the phone with ING, under no circumstances would they allow me to access my money expediently
They have conveniently forgotten the link to the account that sends them a monthly check for savings. I have been hearing rumours about ING’s solvency lately and do not want to have to wait for CDIC to get my substantial savings back?
Any recommendations for safe places to park my cash?
Need 3 banks minimum at the moment, with savings rates the way they are, I am just tempted to buy a modest quantity of gold and put in my deposit box with 10k in cash.
I am not a gold bug by any means, but that phone call frightened me.
October 16th, 2009 at 12:22 pm
@Salubrious Stan: There’s plenty of good corporate bonds right now yielding 5% and above.
October 16th, 2009 at 1:08 pm
#23, not sure i get this: They have conveniently forgotten the link to the account that sends them a monthly check for savings.
mind explaining further?
October 16th, 2009 at 1:45 pm
I’m wondering how much of this supposed bidding war at Main Street and Commercial Drive is actually baloney cooked up by real estate agents. Is anybody checking the facts on the transactions?
I walk by the “District” condo pre-sale office at Main and 7th twice a day. The District is at the supposed heart of the buying frenzy. It is as dead as a doornail. The only human activity is a bunch of sleazy looking agents milling about talking to each other and the occasional Chinese speculator dropping by to turn up their nose at the project.
October 16th, 2009 at 2:12 pm
Squeak is sensing a bad winter coming up..and will not transform into a spring.
I have been stashing away nuts and seeds for a long time now, laying low, in a stealth mode, big bulky belongings have been liquidized so can move at a moments notice, I am not interested in paying for others bad spending including olympics. My spending have been frugal as possible for a few years. I made a point out of looking like a poor scruffy squirrel, but I have a plan and dont others to make plans for my finances (ie “borrow” or begging)
Just watching the drunken pseudo hollywood stars continuing their denial, staying clear out of the way, just monitoring for the sake of my own survival.
I lived low on the totem pole for a reason, a good reason.
October 16th, 2009 at 2:20 pm
Owner A and B have houses C and D. Each is worth 600K. Owner A sells house C to owner B at a price of 700K. Owner B sells house D to owner A at a price of 700K. They repeat at a price of 800K, returning the houses to their original owners. But now it has been established in the market that house prices have risen and that the recent sale prices of houses C and D is 800K. FTB who are looking to get in now accept as fact from their realtors that houses in that neighbourhood are worth 800K because this is based on market sales history. Repeat with N houses and N owners.
October 16th, 2009 at 2:34 pm
Thats the old WorldCom method for selling services to juice their revenue numbers. Selling bandwidth back and forth to other companies.
October 16th, 2009 at 3:52 pm
Realpaul, if you’re serious about having a point to get across you’ll do much better with a proof though logic rather than petty name calling. Such behaviour simply makes you look like you have nothing useful or important to say.
October 16th, 2009 at 4:03 pm
Judging by RP’s rant, I think he got called out…
I really hope this chap is a teenager and not a grown adult banging away angrily at his keyboard. He sounds a lot like the next unibomber….
October 16th, 2009 at 4:05 pm
Quick anecdote from the trenches:
Today, while I was waiting in line at the bank, a couple of gentlemen in their late 30s/early 40s were having a chat about real estate, only the last little bit of which I heard. Anyway, one of these geniuses gave the following advice to his interlocutor: “I you love the place, buy it! No discussion of mortgage rates, value, etc. Maybe he’s right–if the money’s there for the taking, why not tell the bank “thank you very much, and may I have some more to boot?”
Strange, strange, times.
October 16th, 2009 at 4:36 pm
I spoke with my banker at Vancity in Richmond today. I asked “what type of mortgages are most new buyers taking.” She said without a doubt it was at least 95% “variable with the 5 year term” I said “quite risky”. She says no, because they can lock into a 5 year fixed at any time. This rate of course being double what they are paying now. Most current buyers only qualify @ the current 2.25% rate. If rates go up, I think all these current buyers will be broke.
October 16th, 2009 at 5:49 pm
@Anonymous:
#35 – Or the price of pot will hit the skids as grow ops outnumber all other ‘business” in Van?
October 16th, 2009 at 6:00 pm
37 Another RP post…
Dude, you are the ONLY one obsessed with the RCMP and police accountability. Give it a rest. Go post on a political blog, and ignore your mantra that EVERYTHING in the world is linked to real estate. How many times do you need your comments voted down????????
October 16th, 2009 at 6:30 pm
@Once again…:
Getting to you am I? Seeing me under the bed. Think that every negative comment you hear on the news and in the coffee shop is me following you around? Pally you the shakes for sure. Hey I don’t care if you want to hide under the bed, go ahead.
#32, D, if news reports from local, national and international organizations aren’t good enough for you then I can’t help you either. ALL the reports I have lodged have been DIRECTLY lifted from the reporters, justices and parties directly involved with the incedents. Trying to ‘vote’ me down is hardly an responsible response to the events that are taking place. What kind of an asshole are you (generally) if you can turn your head to incidents of insane violence against your neighbours?
If you found out that there were a few of these thugs in a particular neighbourhood would you buy a house there and want your children exposed to that trash? Do you want to live next door to the asstrash that murdered or beat or raped a person you saw on the TV or came to know through the media? Most normal people wouldn’t want to be in the same city as those ‘brave memebers’ who beat down the newspaper delivery guy.
What if you were South Asian and the guy who kicked and punched your neighbour while screaming ‘Fuck you raghead’, is this the king of guy who should be walking the trails behing your house. Shouldn’t we know that these savages are walking free?
If the truth bothers you so much then I actually feel sorry for you. It will certainly be a shock to you if it is one of your family memebers is murdered, beaten or savaged by someone you know will never face justice.
I love the goofy comments that there are ‘anti police sentiment’ in any of these comments. What should be happening is that the exposed criminals within the police departments should be taken out in chains and replaced by men who respect the law. We are witnessing the death of democracy in Canada and as Global TV reporters said tonight ‘ a broad range of people are excpressing grave concern’. If you aren’t concerned , well then, what happened to you?
October 16th, 2009 at 6:34 pm
no, you are just boring and off topic.
October 16th, 2009 at 6:42 pm
@Salubrious Stan:
Do you mind elaborating on the ING subject a bit? What kind of rumours? Any link to credible source? TIA
October 16th, 2009 at 6:43 pm
http://www.bloomberg.com/apps/.....s0rpuaOw50
It’s stunning just how much prices can fall and also just how little a condo can cost in other markets. In Vancouver we become so used to lottery-win type prices being the average. Check out Fort Lauderdale…85k…and falling. Wow.
Over the past 12 months, condo prices fell 15 percent in the West Palm Beach-Boca Raton area to a median of $112,200, 36 percent in Fort Lauderdale to $85,100 and 31 percent in Miami to $144,700, according to Florida Association of Realtors data.
Those prices are likely to fall more when the $1 billion portfolio of South Florida condos financed by Corus Bankshares, the Chicago lender seized by federal regulators, goes on the market, Zalewski said.
October 16th, 2009 at 7:06 pm
I just came to the conclusion that I don’t want interest rates to go up just yet.
I want to suck every last stupid motherfucker into the market until sales dry up completely.
Give me bidding wars, give me 20% over asking, give me $80K earners buying $800K houses, give me everyone taking out 35 year mortgages at variable rates.
When it’s all done, THEN I want to see interest rates go sky high.
ALOHA, SUCKERS!
October 16th, 2009 at 7:32 pm
The link to my TD bank account (where the monthly deposits come from) is apparently “no longer active” despite no activity or change on my part.
Because of this I cannot expediently access my money as they cannot “prove my identity” despite having all available security codes until they receive and approve a voided cheque to re-establish the link.
This sudden need for ID is not in keeping with ING’s usual practices and enters a 1-2 week gap before the money starts to be transferred.
Add to this the wait for a service representative was an unusually long 15 mins, after being unable to complete the transaction as normal on the auto service.
The wife also called and was told she must jump through the same hoops to get her hands on her money, though I must add it is the link to the same joint account that has disappeared.
Ahh well, nothing tying me to ING which is the beauty of internet savings institutions – anyone any thoughts on PC?
Gotta do something with the vulture fund.
Moved this batch of money from Achieva after discovering that its deposit insurance was only backed by the credit unions of manitoba ???
As for the rumours, they stem from the parent company offloading ING canada at a steep loss earlier in the year, there was some speculation as to the insurance side of the business liable for losses on US CDS and CDO instruments, but I have been unable to find any more.
http://www.thestar.com/Business/article/582157
October 16th, 2009 at 8:09 pm
Don’t worry, we’ll all be donating our tax money to bail (err.. help restructure mortgages) for people who have fallen on “difficult” times. I mean, who could have foreseen not being able to make a mortgage payment @6% interest?!
Sadly, the irresponsible usually ride off the backs of those that have some sense of responsibility.
I do wonder though how many are locking in versue variable. Pricing adjusting to some form of reality might still be a few years away. It’s hard to time the market. The market will stay irrational a lot longer than most people can stay rational (as I’m sure many people here have experienced).
October 16th, 2009 at 8:21 pm
Greg, why try to time the market? If you find something that works for you and something you can afford, then why worry about it? Here is a good article on that very topic
http://vancouvercondo.info/200.....e-yet.html
October 16th, 2009 at 8:30 pm
@Salubrious Stan:
I work in that industry, I think you are confusing ING Canada Inc. the General Insurance Company, with ING Direct the online banking company. Before Feb 2009 they were all owned by the dutch conglomerate ING Group.
Not to say that ING Direct doesn’t have any problems, I’m not aware of any, but I have read that all our banks are in far worse positions then we’ve been led to believe. RBC being the worst.
ING Canada Inc. has now changed their name to INTACT. Irony, anyone?
Anyway, back to RE, 2 things to keep in mind: 1) Olympics and the post-Olympic dumping that is coming. I know it’s coming, it’s simply a matter of time. I think we’ll see some record breaking numbers of supply out there, remember hitting 18,000? I’m thinking double that by the spring 2010. 2) Interest rates are already rising on fixed mortgages. This indicates the banks are salivating at the notion of raising prime, and it’s coming. Again, just a matter of time.
Patience hungry bears… patience.
On a side note, I won’t buy in Vancouver unless a crash occurs and the provincial gov’t lifts that price freeze on property taxes from 2008. IF not, I will rent and most likely, move far, far from the best place on earth. LOL!
I can’t stop, lastly, for the bulls… if you’re so right about where prices are going, why are you so insecure about it? Gloating? I truly hope you realize any gains before you count those chickens. Capice?
“What type of mortgages are most new buyers taking?” « Vancouver Real Estate Anecdote Archive Says:
October 16th, 2009 at 9:33 pm
[...] October 2009 · Leave a Comment This in the trenches report on risk taking from Anonymous at vancouvercondo.info October 16th, 2009 at 4:36 pm [...]
October 16th, 2009 at 9:53 pm
Ha ha ha exactly. READ MY LIP YOU MUTHERFUCKING BULLS : NO BAILOUTS FOR YOUR SMUG PIECES OF SHIT. You looked down on us renting savers for years and when the crap hits the fan you deserve to be in the soup lines.
October 16th, 2009 at 10:02 pm
@Dave:
Sure, if you have a few hundred thousand dollars to spare why not?
Personally I’d rather have a nice retirement rather than living off a reverse mortgage on what little equity I’d have built up then being forced into living in an east side dump when that money ran out.
So… In essence, if you’re a millionaire and don’t care about anything under 7 figures, go ahead, buy now. But if you want that property for half off or less, wait a few years. Patience as they say is a virtue.
October 16th, 2009 at 10:22 pm
http://vancouvercondo.info/200.....ment-54556
Drachen,
More than a few years have past since you suggested to “wait a few years” for the correction.I have taken this and other opinions to heart and held off purchasing, but must admit I am becoming frustrated. Perhaps Vancouver is unlike anywhere else on the planet, where should I put my down payment savings, a 3%( if lucky) GIC? The probably over corrected stock market?
October 16th, 2009 at 10:31 pm
Dude look into a corporate bond ETF like Barclay’s High Yield bond ETF (JNK). It yields like 10%. I wouldn’t buy a GIC right now at all.
October 16th, 2009 at 10:51 pm
AH YES…….THE REAL ESTATE MARKET HAS “RETURNED TO NORMAL”. NEXT STOP: “FEAR – CAPITULATION – DESPAIR” (THE REWARD FOR THE GREEDY AND LAZY)
October 16th, 2009 at 11:27 pm
“More than a few years have past since you suggested to “wait a few years” for the correction”
Oh, just wait a few years more. And then maybe a few years, and … ok, a few more years after that….
Irrationality is going to persist longer than you can wait. You are a renter and there’s nothing wrong with that. You have actual bankable tappable capital. Enjoy.
October 16th, 2009 at 11:59 pm
@confused: “but must admit I am becoming frustrated. “
If prices fall significantly in the next few years it will likely be coupled with higher interest rates. If you have cash on hand you’d make a killing but if you need financing to buy, you won’t be much better off on a cash flow basis compared to what you would experience today.
Or we could end up like Japan but the property market deflated over decades, not in a few years. Can prices fall significantly and quickly when interest rates are low? We’re about to find out in the next few years.
October 17th, 2009 at 1:48 am
#52 the answer to your question is yes prices can fall quickly with low interest rates just look south of the border. But I do believe Vancouver’s fake socialist economy allows many public sector workers to hang on to their jobs. Thus it will take interest rates to kill the market here.
But I do believe that higher rates are coming. The big news today is the US made it official that the defit was 1.4Billion for 2009.
October 17th, 2009 at 6:34 am
@rentah:
Not quite sure who you mean by “we”. The bond market sets interest rates. The fact that you can get a VR mortgage for 2.65% or whatever means that someone is willing to lend money to the bank for less than that. That someone of course is bank depositors and bank bondholders.
What I’m saying is that “we” don’t set interest rates to attract buyers for debt, it’s the debt buyers themselves (depositors and bondholders) who determine at what interest rates they are willing to lend money. If they don’t like the market rates, there are other places they can put their money – foreign currencies, stocks, gold, yes even RE.
As to why debtholders are willing to accept such low rates, it’s because they are expecting the buying power of the CAD to remain very strong, i.e. they are expecting the CAD to strengthen versus the USD and consumer price inflation to remain low. If either of these turns out to be not the case, you will see a flight from the CAD and higher interest rates in short order. An oil price bust would bring on a decline in the CAD, for example.
October 17th, 2009 at 6:49 am
@PorkyFlu:
Well the ticker symbol says it all doesn’t it.
Current price of 38.90 is near the 1-year high. Last winter you could get it for 25.55 . That’s when I was buying corporate bonds and preferreds. Buy low, sell high. One more thing – that’s a US ETF and you’re getting USD exchange risk on top of the default risk.
http://www.globeinvestor.com/s.....i_sponsor=
I do not recommend anything other than government insured deposits and bonds for those saving for a house purchase.
October 17th, 2009 at 9:29 am
http://tinyurl.com/yjqf66v
Good article from G&B about exponentially increasing balance sheet over at CMHC.
This summer’s boom financed and risk-transfered to you by your own government…
October 17th, 2009 at 10:04 am
@confused:
This probably goes without saying, but… while there is lots of interesting analysis on this site and others, you really should understand the reasoning for yourself. In the end, think how foolish you will feel if all these bears are wrong and when someone asks why you didn’t buy your answer is “I was following the advice of anonymous people on the internet.”
Even if you don’t buy and time the market perfectly and people are congratulating you on your real-estate savvy, the same words would still be kind of embarassing.
October 17th, 2009 at 10:37 am
@skiff: Well, whose advice do you follow then? Realwhores? Homoaners? Banksters? Politicians?
Don’t follow anyone’s advice. Do your own research and make your own conclusions.
Myself, I made my decision in late 2006 when I returned to Vancouver after being away for many years. I decided not to buy then and I don’t regret it.
Why?
I was laid off a couple of months ago. Because I’m a renter, my expenses are low, cash is available and mobility is high. If I had bought, I would have shown some modest appreciation (but really the same as my GICs) but would have been crushed financially at this time. The appreciation would have only been on paper too, and would be partially eaten by realtors if I sold.
Nope, no regrets at all.
October 17th, 2009 at 10:53 am
I stumbled on this article called The world’s best places to retire on MSN Money today.
Vancouver or Victoria are not on the top ten list, which comes to no surprise if you look at the list. I guess Vancouver will remain a coveted destination only for slave-factory millionaires who can freely come here to invest but not pay taxes. It’s a “Uin-Uin” situation for them!
Also, I thought “Everyone wants to come to Vancouver”! Wrong, if you read this article from “International Living” website. Everybody Wants to Come to Uruguay… And they got the hard numbers to back their claim, instead of some wane wishful thinking we see here.
October 17th, 2009 at 10:55 am
@patriotz: Thanks for clarification request. Agree with your statements.
I was referring to the Bank of Canada’s sales of treasury bills, and the way in which the market automatically requires that we keep those rates attractive compared with similar bills issued by other countries.
So, even though ‘we’ (Canada the country, the Bank of Canada) may not like it, ‘we’ may have to raise rates to service debt despite a currently strong loonie.
October 17th, 2009 at 11:07 am
#43 Dave. Nice how you encourage the impulsive buying of real estate. Some quality advice right there…that is if you got 500K to spare.
Fool.
#57 Skiff. Gosh even more of the brilliant advice. Well you go and trust the ‘economists’ and ‘RE specialists’ on TV, that’s fine. As for me I actually do trust a healthy non biased discussion between folks online (or any media for that matter) that back up their points by proveable facts and fundamentals and thus prove their expertise in the matter that way. I guess key is to find this kind of healthy discussion for the subject you’re interested in. This blog has had some good runs with lots of great points made backed by facts, with people arguing with fundamentals in mind, not using gut feel.
Skiff, i vote you the fool of the day. Go get he crown from Davie.
October 17th, 2009 at 11:16 am
“#43 Dave. Nice how you encourage the impulsive buying of real estate. ”
that’s why i could never shake the feeling dave is in deep with the RE industry in some way.
October 17th, 2009 at 11:32 am
@No Longer Looking:
New credit is available to the desperate.
http://www.nbcsandiego.com/aro.....atrick.net
October 17th, 2009 at 11:38 am
Olympic city welcomes oversight. lol
http://news.yahoo.com/s/ap/200.....Nob290ZG8-
October 17th, 2009 at 12:25 pm
@Salubrious Stan:
#41The link to my TD bank account (where the monthly deposits come from) is apparently “no longer active” despite no activity or change on my part…
++++++++++
Me thinks you might have an individual issue. My account at ING and external links all seem to be working fine.
October 17th, 2009 at 12:36 pm
@Drachen:
Eventually those owners pay off their mortgage and after that, they are basically rent free for life.
Considering that you think this ‘bubble’ started in the early 80′s, I seriously doubt that you will ever buy.
The odds of real estate dropping 50% is close to zero.
October 17th, 2009 at 12:56 pm
Reading Dave’s comments, I’ve decided the debate comes down to this:
Bears on Canadian real estate, Vancouver in particular, think that the economic *system* is out of balance and RE is implicated – that just because our bubble wasn’t structured in the same way or burst at the same time as the states’ bubble, doesn’t mean that it won’t, because fundamentally an economy with real estate at 400X rental multiples is a broken economy – like a pickup truck with one monster truck wheel and the other three normal.
Okay, say the bears, maybe it’s working right now – but the moment you try to corner the thing or take it above a certain speed it’s going to explode or flip the truck. It can’t be sustained.
This is what I believe: the economy’s hugely unbalanced, especially Vancouver, and we have a demographic bump, and a sustainability curve in the road coming that’d challenge a well balanced vehicle.
Bulls, on the other hand, don’t see a systemic issue. As far as I can tell they think, overall, the vehicle has just evolved, and that those of us who are pointing at the current economic vehicles as unbalanced just don’t “get” that things have changed. In the bullish view, bears expect a hovercraft to look like a 4X4. Sure, prices might drop a bit, as they do in every market, but we’re not seeing anything extraordinary, just the sign of something new, a new way of being capitalist.
Now, certainly, real estate isn’t held to one paradigm. Serfdom used to be the name o’ the game, for example; real estate was traded differently in those days. In some other place, private real estate isn’t run the way it is here – if you’re not using your lawn, someone’s welcome to farm it or build a house there. So, it’s possible that a new paradigm of real estate will show up.
Problem is, bulls aren’t talking about the larger economic SYSTEM. You can’t run a hovercraft down Granville St. Got to have infrastructure to allow it to function.
October 17th, 2009 at 12:56 pm
Dave. I too live rent free, as the income from my savings pays my rent. And it took me much less than 35 years to put myself in this position.
Next fallacy please.
October 17th, 2009 at 1:31 pm
@gorky: #61
Well said. The point I was trying to make was that the poster should work through and understand the rationale of the arguments themselves, not to disparage the great discussion that happens here (which I’ve been following since the days of VHB). My comment was poorly thought out. Mea culpa.
October 17th, 2009 at 2:13 pm
“I’m starting to wonder if this flippin bubble will ever pop.”
One rule of bubble economics is…the bubbles always last longer than expected. It’s an interesting rule since even if everyone knows the rule, and adjusts their buying/selling behaviour to compensate for it, their adjustments actually reinforce the rule! I love it…
October 17th, 2009 at 3:56 pm
@rentah:
#61, R, it is obvious that the petulant failure of the Treasury auctions and the CSB rate are concerted actions to force international investors to look elsewhere. No one is going to accept .4% when competing rates are so much more attractive. Savings are currently paid 4.25% in Aussie for example. Anyone can buy Aussie bonds through the Forex dept of HSBC Singapore , applied for in any HSBC bank branch locally.
Boy, are the Canadian seniors ever getting screwed. Anyone expecting an inheritance is going to sucking up a dry straw the way the seniors are having their savings clawed back into taxable income just to pay the rent and put a bowl of macaroni on the table.
What the outcome of this is though is that Canada is having to raise funds through restraint and taxes whereas Aussie ( for example) has money flowing in from overseas. Canadians are the loser all around in the attempt to keep the $CDN below the USD. The $CDN is one of the worst performers against the USD, look at the Real, Peso, Rand etc for comparables.
The push by the Government of Canada to stop foriegn money flow into Canada is quite obvious. For why you ask. The deniers and the unionists will tell you that Canada will die without a weak loonie. Tell that to the specialized Scadanavians, the Italians or the Germans. All high wage countries based on specialized manufacturing.
The Canadian dollar is rising not because of faith in the economic prospects of the country but instead it is exchanged for foriegn currency as foriegn entities buy commodities in Canadian transactions. It has nothing to do with confidence. Consumption has created the demand not the good policies of the politicians. Foriegners are buying commoditities as alternatives to the USD. Its all about the real inflation that your government says doesn’t exist.
The ‘horrible’ prospect of raising interest rates will really put a damper on the governments race to the bottom aagainst the USD. The BOC I’m sure is desperate and frantic to see a recovery in the US to raise rates as quickly as they can. Our trade surplus is decidedly negative and the lack of investment is drainging the treasury and can only force up taxes and force a rapid cut in all services. When the BOC talks of halting the dollars rise with ‘Quantitative easing’ you should be howling at your MP to stop such idiocy. QE is the effective devaluation of your life savings and the permanent increase in your taxes that will erode purchasing power.
For all those anto patriotic Canadians shopping ‘across the line’ now good for you. It will put additional pressure on the government, probably by Christmas when the big retailers start to fail. For all those really bright Canadians who have been buying USD hand over fist, aren’t you the little smarty pants. This evidence is also being reported in the media ( CBC for example) and gutting the lies that the BOC has been putting out about the ‘confidence’ that CDN’s have with the economy. Like most other entities and agencies in Canada they hate being outed for their idiocy and nefarious deeds, they prefer to operate on the basis of an ignorant and complacent population of deniers and sheep.
October 17th, 2009 at 4:07 pm
RE: CHMC. This was originally posted on Chipman’s blog.
Yes, CHMC is a big scam. Thanks for the article and tips GG.
The insurance provided by tax payers through CHMC reduces the interest rate charged to people with low downpayment.
In short, this means that tax payers are takingon part of the ownership cost (interest) which should be paid by new homeowners.
Write to your MP and make yourslef heard. This is a scam and it won’t end well.
Once we hit the affordability ceiling (5% down, 40 years seems hard to strecth further) the whole domino will come crashing down.
The only thing left to do for politicians and buraucrats wil be to have a spurt of inflation, which hopefully will erase all nominal debts and liabilities.
Time will be our judge.
October 17th, 2009 at 4:09 pm
@Anonymous:
Garth has more bad facts, should he die?
http://www.greaterfool.ca/2009.....ment-46712
October 17th, 2009 at 5:00 pm
http://www.youtube.com/watch?v.....ature=fvsr
“You have a job and then you don’t even make enough for the sh*t you don’t even own…You don’t even get the pride of saying, ‘I have this job, and because I have it, I have this car’”.
Funny, sad and true.
October 17th, 2009 at 6:28 pm
@other ted: “But I do believe Vancouver’s fake socialist economy allows many public sector workers to hang on to their jobs. Thus it will take interest rates to kill the market here.”
Well the money has to come from somewhere. From what I’m seeing the government is cutting back spending, not increasing it. There is a huge deficit but government revenues are down even more. It’s funny how the government cuts back in areas like health care and education on one hand then “stimulates” the economy with infrastructure on the other.
Apparently net budget cuts == stimulating the economy in BC. Don’t believe a word of it.
October 17th, 2009 at 6:32 pm
@realpaul: Thanks for the insightful and on topic comment. I come here for commentary like that, rather than the rants about police corruption (even though I agree with you on that topic as well).
Are many people here buying USD? I’m a bit foggy on how their deficit is going to affect the value of the the USD vs CAD going forward. I am taking advantage of some of the price discrepencies by shopping in the US right now, just not sure how much USD I want to hold for the next year or so.
Last time the CAD shot up I bought at 1.10 and sold at .85 which was a nice easy return. It was a bit of a fluke though, wondering if an oppourtunity like that will repeat itself again.
October 17th, 2009 at 6:44 pm
@realpaul:
65
“Rio state Gov. Sergio Cabral grimly told reporters that Rio’s security challenges can’t be cured “by magic in the short term,” but he said money is being poured into programs to reduce crime and authorities are prepared to mount an overwhelming security presence at the sporting events to ensure safety.
“We told the International Olympic Committee that this won’t be an easy thing, and they know that,” Cabral said. “We can put 40,000 people on the streets — federal, state and municipal police — and pull off the event.”
-Looks like the only people attending will be the jailers. Would the 6 to 7 billion equivelant they pissed away here have ‘been poured’ into hospitals, schools and facilities where people could have some benefit? Its not like no one knows where Rio is because of the Carnival. They need the Olympics like a hole in the head. I guess a whole lot of Brazillians are going to die because of the Olympic sports business aspirations. What BS.
October 17th, 2009 at 7:22 pm
For some reason there is a recent frenzy in “SFH” sales but not for condos:
http://www.nvcondos.ca/page_content-10.html
I wonder what’s going on. I know its only one week, but this seems odd.
October 17th, 2009 at 7:23 pm
@elise:
#76 E, If you see things as a tangled contiguous and synchronous web of macro socio economics the vagaries of politics and application are impossible to ignore as irrelevant in the larger scheme of things. Of course this is way too big for the deniers and bashers who find solace in the void. But do I care, no, not a whit.
This is the Socaratic method where the process of teaching is too push the limits of a students comfort zone by aggressive ‘in your face’ tactics until epiphany occurs. Either that or the student slinks away angry with a very sore ass, as was the case with Socrates. People are going to learn to accept the truth or they are going to continually wake up from a nightmare screaming for my head at 3 AM until they do. Such is life. Truth can be uncomfortable and making excuses about time and place is silly. This is not your mothers internet etiquette I know, but do I care….nope.
My read on the CDN/USD dichotomy is that the US is at war, as usual, with themselves. The Obama administration has picked up right where the Bush administration left off and will manipulate American society to its own ends. The USD will continue to be allowed to swoon until the late fourth quarter of the third year of the Obama term. This will drive up US exports and begin to balance the trade deficit while also growing the jobs numbers.
This is a media driven ‘sweet spot’ for the Dems to go into the fourth and vitally important ‘Presidential year’ will sugar coat the history of the administration with headline numbers which look positive. This is all a set up for the 2nd term Obama administration. I believe the Obama took the initiatives created for them by the BUSH administration. The Bushites were driving the population into fear and tension, and as such were much easier to control. Very Stalinist. The Christian crazies were actually in sight of the ‘end days’, resurrection and all.
It has worked out well for Obama as he inherited a population on shaky ground and desperate for leadership even though its only the voice of a decent speech writer through the mouth of a politically correct drone being. The population is on its back foot and reeling, seeing bug a boos and terrorists under every bed. Good set up for a totalitarian to take control and lead the sheep to safety.
Economically Canada is a headless chicken, powerless without the focus of direction comiing out of the USA. The USA has adroitly engineered a deflationary enviornment which will be set up as a ‘recovery’, Canada has foolishly done the opposite and price inflation is running uncontained ( food, real estate etc all up double digits)so that no recovery scenario is possible without even further cost escalation , taxes and higher interest rates.
This business exposed by Garth Turner regarding the Conservs trebling the risk to the taxpayer from behind the CMHC to falsely support a declining real estate industry should be treasonous but the condo drones will walk over a dead body to get a ten cent uptick on their assesments, such is the canadian no-mind set.
As I said, foriegners have to buy Canadian dollars to buy Canadian commodities, this will continue to put demand into the money supply forcing the dollar up through daily requirements for a finite supply of dollars. The bottom line is that the $CDN will continue to strengthen until the US decides to turn the tables.
I am not intending to give anyone investment advice.
October 17th, 2009 at 8:07 pm
@Gary: It works until it doesn’t. Or put another way. If it is clear to everyone that the bubble will persist longer than you think and people keep on buying on that basis, the parameters of the situation will simply move to a point where it is no longer clear the bubble will persist even if one thinks bubbles persist longer than they should. It is more like looking across a lake and realizing it is further than you think rather than a mirage which never can be reached.
October 17th, 2009 at 8:14 pm
No Longer Looking 78 says: wonder what’s going on. I know its only one week, but this seems odd.
Golden week holiday, people from China buying SFH. This should be the week subjects are completed and closed.
October 17th, 2009 at 9:04 pm
@Depeche a la Mode: You know, I wasn’t sure about that rumour. But now, yeah, I guess there’s some truth to it. No doubt it inspired a frenzy among local buyers too.
Could this be the blow-off top? http://www.answers.com/topic/blow-off-top
October 17th, 2009 at 9:42 pm
@Depeche a la Mode: Depeche a la mode, do you think they mainly bought in prime areas like COV? Were they the nuts bidding well over a million for East Van houses? What a way to spend your holiday…messing with a real estate market across the ocean. Time for some laws on foreign speculation?
October 17th, 2009 at 9:49 pm
A somewhat vague train of thought.
I was watching the news about how our internet broadband is slow and expensive when compared to many other countries (some surprising rankings). It got me thinking there is a pattern here. Our cell phone service is also not very competitive. For that matter, one could also say the same of our banking system. Closely related characteristics are a lack of transparency and accountability.
Although we seem to have weathered the financial crisis relatively well, I wonder if this is simply because of this lack transparency, accountability, and competitiveness in our market places. Namely, because our markets are not as free and efficient as in other countries, the effects are just taking longer to take foot and to be reported. And when they finally do, it will take us longer to get out compared to other countries for the same reasons.
October 17th, 2009 at 10:07 pm
Why you never really own your home:
http://www.ctvbc.ctv.ca/servle.....lumbiaHome
Eight Coquitlam homes to be expropriated for the Evergreen Line. What Tang doesn’t realize is she’s one of the lucky ones. Other people around her won’t have the good fortune to be expropriated. Nope, they will get to wave to the passing Skytrain as they eat their breakfast. No more suntanning on the back deck, I guess.
October 17th, 2009 at 11:22 pm
86 = not so. She will get current maket value (ie: far more than it’s really worth), and thus be forced to sell at the peak. Good fortune for her really.
October 17th, 2009 at 11:25 pm
X elise Says:
October 17th, 2009 at 6:32 pm
Last time the CAD shot up I bought at 1.10 and sold at .85
———————————-
Hope you declared the profit. We are watching.
October 17th, 2009 at 11:57 pm
@logic: What do you mean by “not so”. I agree with the rest of what you say. She is lucky for both reasons (gets to be expropriated unlike some of her neighbours and gets to be expropriated at this time), and does not realize it.
October 18th, 2009 at 12:34 am
Real Paul: I think there is something to consider re: the CHMC case. Assuming the CHMC = Government of Canada, the ability to bear risk is more robust than for individual banks that can be subject to runs. There’s an implicit diversification function by having backing from a pool of tax payers under a democratic system with property rights. This also lowers required returns since the overall risk profile is more diversified than otherwise (i.e. less). The government is the ultimate risk manager which can shepherd the economy to a improved state when things go awry (like we’ve seen over the past few months). What the government is doing is exactly what we need on a rainy day.
October 18th, 2009 at 1:34 am
@Van Housing Bull:
What you are describing is Utopian Socialism which negates the market economy of the ‘democracy’ that you also mention. If there is a ‘right ‘ to home ownership and that right is supported by government programs which interfere with market economics, then what is the value of your property? Ask yourself, will a change in government policy negate the value of your holdings when the election cycle brings in a new ideology?
At the current time the government is effectivley purchasing real estate for unqualified buyers who cannot support the purchase without subsidy. This is a bit like the valuation of a business which includes ‘goodwill’ and ascertained as an accounting feature and does not represent true value as expressed on the P&L.
What is the goodwill value in the current market? I suggest that it is manipulated interest rates and the CHMC subsidy, both of which saddle the debt onto the taxpayer and away from the marketplace in which values are truly formulated by willing and able buyers and sellers.
Every application of socialism has failed historically. The burden on the individual becomes too excessive as revenues shink due to the lack of an incentive to produce goods or services ( aside from bullets and prison camps) in abundance. What you are describing is a pyramid scheme not a model of democratic government. Rather it is a grotesquery of the old Tommy Douglas model of coopertive insurance for the nation.
OK, we have Medical and EI, but does anyone really think that the government can artificially support and increase in real estate values ad perpetuum? If it is true that every new home buyer is withing 1% of being underwater in their mortgage currently will the government ‘chip in’ to refinance the second mortgages that will be legally neccessary when the Bank Act cannot support negative equity applications every time a refi comes up short?
In every experimaent of socialism the pattern is the same, the state becomes burdened with unsupportable costs and in turn removes the right to ownership from the citizen. Then there is the blood and the secret police period until the inevitable revolution. And all this blood loss was for what? So a few lazy shirkers could do less and get more while the diligent are stripped of their honest labour?
You would do very well at a labour or an NDP weekend. I always remember the words of Churchill who said
” If you’re not a socialist at twenty , you have no heart. If you’re still a socialist at thirty , you have no brain”.
And the keen words of W.A.C. Bennett
” Those assholes couldn’t run a lemonade stand”.
What the government is doing now is very short term thinking and the consequences will dig directly into your pocket by way of increased taxes, higher costs and less competition. The downward spiral has already begun from a macro economic perspective. All that money that you suggest comes out of the pocket of the ‘democracy’ is actually coming from where? Higher taxes equal fewer jobs, less economic activity and fewer prospects for your children.
I think the government sees this and is planning for it all. Many civillibertarians can also see it and are concerned about the encroaching state suspension of rights and an ominous development of a police state. But you don’t want to think about that and I don’t want ot rattle the clown master.
October 18th, 2009 at 4:01 am
@!(EconomicsDegree):
You really didn`t think we`d let this canard go by, did you?
As I have already said upthread, someone buying now at a high price and low rates will almost certainly face higher rates – and much higher payments – upon mortgage renewal.
So who ends up paying less – the person buying at a high price and low rates, or the person who waits to buy at a low price and high rates?
Think real hard.
October 18th, 2009 at 6:16 am
Patriotz: people buying using other people’s money could well find affordability at low rates and high prices similar to the opposite for some time.
I have little doubt those who wait for low prices will be financially better off but those who desire to buy have different constraints that make purchasing today at high prices/lower rates tolerable, most notably not wanting to wait five more years to buy.
October 18th, 2009 at 8:00 am
@!(EconomicsDegree):
How you figured out the wait of 5 years ?
there will be no need to wait 5 years to see lower prices. The prices follow the market dynamic, and they depend on the current rates, affordability and economic situation in general. 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.
October 18th, 2009 at 9:15 am
@asalvari1: Right, and on the same token, it could take longer than 5 years. It completely depends on your family situation too.
October 18th, 2009 at 9:17 am
@asalvari1:
As opposed to the ‘impending’ drop in prices which is grounded in fact?
October 18th, 2009 at 11:34 am
Hey boys and girls, there are more mainlanders from China invading Vancouver in the next 6 months, good luck with all your price drop fantasies.
October 18th, 2009 at 12:31 pm
What I find so odd is how this latest spike is so concentrated in Van West, Van East, and North Van SFH (stats show this). You don’t have to go far out into the suburbs to find prices like last year. I wonder why the craze is so much more narrowly focused than it was pre-2008.
October 18th, 2009 at 12:49 pm
no longer looking, demand for sfh’s far exceeds supply for the areas you mention. low interest rates mean more of that demand can move into the supply.
October 18th, 2009 at 12:51 pm
“more of that demand can move into the supply”?
–
What now?
October 18th, 2009 at 1:09 pm
logic, not much is going to happen now until there is either an inflationary or deflationary shock. some of the recent demand was pushed from last fall into this year, more noticeable results from premium markets like north shore and vancouver proper.
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.
October 18th, 2009 at 1:21 pm
stagnate and logic, you think this narrow demand might get exhausted easily?
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 1:31 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 1:41 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 1:47 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 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 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 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 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 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 7:25 pm
@betamax: #110
+1
Spot on.
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 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 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 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 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 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 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 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 9:22 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 9:29 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 9:38 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 9:39 am
@Kill Dave:
Do you know anybody who gets paid in nominal dollars?
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 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 10:44 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 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 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 11:31 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 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 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.