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October 23rd, 2009 at 2:16 pm
@Supported By The Taxpayer:
This couldn’t be further from the truth. Yes, my taxes will have to bail out the CMHC, but so will the homeowners’ taxes. I’m currently renting an apartment. If I “owned” the same place my current housing costs would be about double. I’m saving the difference.
If the shit hits the fan as we all–save Dave–think it will, then I’m in a much better position to withstand the inevitable hike in income taxes and economic deterioration than a home owner who has bought in the last 5 years or so.
October 23rd, 2009 at 2:00 pm
@Supported By The Taxpayer: The worry isn’t that you have to pay as a taxpayer. The problem is that you will have to pay as a homeowner whose property has lost half its value and rates have doubled while at the same time your income has deteriorated or run dry. In other words, the worry is that you are essentially transferring your wealth to the sellers of the overvalued property that you buy.
If you believe housing prices will not drop and interest rates will stay low for a long time, then yes, it may not entirely irrational to buy, depending on the circumstance. Personally, I think there is a lot of risk to one or both conditions not being met and that we will see evidence of this very shortly.
October 23rd, 2009 at 1:56 pm
@Anonymous:
How dows a death in a house affect its value in this day and age. Many years ago there was a ‘ghost house’ on the corner of Cambie and 25th. It was so popular that bus tours from HK and Korea used to do a drive by. Tje house say empty and vacant for years until it was eventually torn down. Appaprently a house maid had been murdered and buried in the back yard. Now, I don’t know even if the story was true but it affected that property and the property around it negagtively even in the are boom of the late 80′s.
We currently have many houses where viol;ent death and murder are taking place like this one.
http://www.theprovince.com/new.....story.html
With the the shootings by cops alone there are dozens of properties every year tainted ny this ‘ghostly’ phenomena. I know from my contacts that Oriental people won’t buy a ‘death house’ for any money. What about the rest of these properties?
I know of a great many police killings locations alone. There are at least several every week reported in the papers.The number of these properties must go back on the market after police bullets put them on the market.
Do cops buy them and consider them ‘prizes’? Who buys them is the question. With number of this category of killing grounds coming on the market is there a disclosure line item like “Previuos owner had his head blown off in the living room”, as a latent defect?
October 23rd, 2009 at 1:21 pm
@Play By The Rules:
http://www.youtube.com/watch?v=Q5im0Ssyyus
October 23rd, 2009 at 1:16 pm
@Starving Artist:
Sure it’s a quarter million for 329 square feet but it comes with a “LARGE STORAGE LOCKER”.
I work in that building, the offices are quite small so I totally believe the size, in fact it would be hard to build an apartment much larger in those spaces, have a look at it sometime it’s a very thin building. It’s just across Burrard from the church (don’t know it’s name) just north of St Paul’s.
October 23rd, 2009 at 1:15 pm
Who cares if the CMHC backstops more and more mortgages. The taxpayer will fund everything, so no need to be worried.
Can anyone actually give a reason why they should be worried? Logically, this “could” end badly, whatever that means. Logically, the market should not have ballooned during a recession, but that does not stop market realities.
Getting a house cheaply has never been easier, whether you are a six figure banker or a 5 figure waiter. If all of us are going to pay for this “eventually” why not all benefit by owning our own houses now.
You can be a smart renter sitting on the sidelines with a big cash down payment, but you are still going to have to pay for this “mess” as a taxpayer if things go sideways, or you still have to sit and watch prices go up if it doesn’t go sideways and continues for years and years and years.
And if that happens, well then, that would have been a 10 year bubble, which makes me think that maybe it was not a bubble.
Either way, you are not any better off than the “greaterfools” jumping in today or in the last six months. Sorry.
October 23rd, 2009 at 1:13 pm
The more I read about the backing of the feds to the CMHC, the more I realize the rules have changed, the more I realize that being financial prudent was and is the wrong move.
This recession and housing bubble has taught me that individuals that engage in “risky” practices will be bailed out “somehow” either by the banks (e.g. mortgage relief) or by joe taxpayer through the CMHC.
It is exactly this type of moral hazard which makes more and more “play by the rules” Canadians lose faith in their government, which creates a greater degree of alienation, and eventually a compromised normative order.
I told our director of finance that if individuals who lived beyond their means and threw caution to the wind via excesses debt loads did not get “penalized” during this recession, then all I learned is that I need to take out as much free money as possible and speculate in every sector where bubbles can form.
I will be the eternal optimist from this point forward, knowing that there will never be any repercussions…aaahhh….you have to love this country
October 23rd, 2009 at 12:34 pm
@vreaa:
No I didn’t ask ING if the amount would have been higher with a lower downpayment because it really didn’t occur to me until all this talk about the CMHC recently.
October 23rd, 2009 at 12:33 pm
Surely this must be a mistake?
http://www.6717000.com/mls/V79.....on-st.html
A quarter million dollars for 329 sqft???
Plus of course $180/mo strata fees
————
In other news, Alberta’s finances not looking so rosy. Nat gas still quite low, can’t see them going up any time soon in the face of the shale gas discoveries and strong loonie.
http://www.calgaryherald.com/b.....story.html
Not to mention…
Wide swings in oil prices are difficult for industries to manage costs and the U. S. government is concerned about another price spike like the one that sent prices soaring to $147 last summer, Chu told an energy summit. “Even $80 is making me nervous,” Reuters reported him saying.
I would bet on the US curbing energy speculation sooner rather than later.
This house of cards is teetering more and more every day.
October 23rd, 2009 at 12:32 pm
@@Realista:
The numbers were as follows:
2 years ago: Income (single) = $80K, Downpayment = $25K, Loan approved for $450K
Recently: Income (household) = $120K, Downpayment = $90K, Loan approved for $375K
October 23rd, 2009 at 12:21 pm
Oh sorry, my question for anonymous anecdote.
October 23rd, 2009 at 12:19 pm
Hi what was combined household income when approved for a mortgage of $375K if not a secret. This numbers are sort of making some sense. Thanks.
October 23rd, 2009 at 12:13 pm
Heh, in the 4 minutes since I checked Craigslist the first time there have been 12 new postings.
Ok, 3 in a row is too many, I’m stopping here
October 23rd, 2009 at 12:11 pm
Upon random sampling it appears that about 10% are for the olympics, which was actually much less than I’d initially thought.
October 23rd, 2009 at 12:09 pm
Just for kicks I thought I’d check how many rentals there are on Craigslist. I know it’s getting more popular and some of the advertisements are for Olympic rentals which are in high swing right now… There’s 475 rentals available so far today. And it’s just noon.
It’s been a few months since I checked but there wasn’t even a full page (of 100) then.
October 23rd, 2009 at 12:08 pm
@No Longer Looking: I strongly suspect the rate for private rentals must be higher.
According to Michael Geller, property managers operating in Vancouver agree that the rental vacancy rate is between 5% and 7%. At that rate there will be little upwards pressure on rents. AND NO RENTAL SHORTAGE.
October 23rd, 2009 at 11:47 am
re rents, and thus down down down go rents… more pressure on :loan-lords:.
October 23rd, 2009 at 11:46 am
@anonymous: This exact paradox has occurred to me, as I’m sure it has to others here: Rare citizens who may currently have large downpayments will ironically be seen by the banks as higher risk borrowers. The banks will actually be stricter with them, because, in this case, they’re not playing with other people’s money.
Great anecdote, especially if you have one extra piece of information:
Did you ask ING if the amount would have been higher with a lower downpayment?
I suppose we could ask any borrower about this now.
October 23rd, 2009 at 11:44 am
That is, the CMHC official vacancy rate will be 4 or 5% for purpose-built rentals. Obviously much higher for new condos (we can only guess at that).
October 23rd, 2009 at 11:40 am
@vreaa: BTW that article also said there’s a 3% vacancy rate in public housing. I strongly suspect the rate for private rentals must be higher. I’ve heard of long waiting lists for public housing in the past, indicating a 0% vacancy rate. I would have to guess that we could see the overall vacancy rate of 4 or 5% for Metro Vancouver this year, and increasing.
October 23rd, 2009 at 11:32 am
@anonymous: crazy stuff indeed. I think you might be right. At the end of the day, you are riskier to a bank if you have a 20% downpayment, as you are off the CMHC books.
Put this evidence together with the fact that low income people (who qualify for housing assistance, that is, they cannot afford market rents) are flocking to buy RE at subsidized 2.25% and you have substantial evidence that we are in a colossal bubble.
The BoC is being reckless by allowing this craze to go on unabated. This is obviously an unsustainable state of affairs. The only thing which could avoid a crash in the next 24 months is a bout of high inflation, resetting all debts to more manageable levels. Is that the BoC plan?
October 23rd, 2009 at 11:21 am
Here’s an anecdote for you. A couple years ago when we applied for a mortgage pre-approval from Scotiabank, based solely on my income (not the wife’s) we were approved for a mortgage of $450K (and probably could have asked for more if so inclined). A couple months ago, we applied for a mortgage pre-approval from ING, based on our combined household income (approx. $40K more than our income two years ago) and were only approved for a mortgage of $375K. At first I thought this was an indication that ING is a more cautious lender than Scotiabank but it just occurred to me that our application two years ago was with an assumed 5% downpayment, thus insured by CMHC, and our application two months ago was with an assumed downpayment of 20% without any CMHC backing. So I’m now thinking that banks are just more reckless with their lending provided the CMHC is providing insurance on the loan. Ironically, this would mean the less you put down, the more you could borrow.
October 23rd, 2009 at 11:14 am
@oneangryslav2:
I was thinking the same thing. Isn’t “affordability” a rather nebulous term?
I find it rather ironic how prices of RE can keep increasing, yet “affordability” is improving. I guess to most people, it all boils down to what are my monthly payments today. Never mind what my payments will be in 5 years when my mortgage is up for renewal and the interest rates will be much higher than today.
October 23rd, 2009 at 11:00 am
@vreaa: A subprime by any other name is a subprime.
October 23rd, 2009 at 11:00 am
@Dave:
In the middle of a debate I often cause it to stop dead in its tracks by saying something like “Shiggateer is a direct consequence of the flistaslack being too low.” The point being that there is no way anybody can assess the veracity or the logical consistency of my statement if they don’t know what the terms shiggateer and flistaslack mean.
So, Dave, what is your definition of “affordability” as it applies to residential real estate?
October 23rd, 2009 at 10:19 am
One more damning piece against the CMHC, just out to press today.
“It’s that simple”
http://tinyurl.com/yf43ak3
Some excerpts below:
It’d be hard to make this stuff up.
* One of Canada’s biggest banks is slapped with a debt review and a likely credit downgrade.
* The country’s biggest province says half its business taxes vanished, and doubles its deficit. It, too, gets a debt downgrade.
* And it’s taken a mere 12 months for Ontario and Canada itself to pile $83 billion more in debt on taxpayers’ shoulders. In fact Ontario alone figures new debt will hit $70 billion over the next three years, while the national government heaps on $200 billion.
The reason government finances have fallen off a cliff, along with those of carmakers, resource companies, steelmakers, tool and die companies, casinos, exporters and a host of other folks is simple. The economy sucks. People are out of work. Businesses losing money don’t pay taxes.
But meanwhile, two things are booming: Real estate and lending money. House sales are up by a third nationally. The average price is ahead 11% on average. Mortgage loans have hit an all-time high – rising an estimated 12% in 2009 alone. Consumer credit has soared 9% during the recession. And we now owe more, per head, than the Yanks. Household debt in Canada is 140% of income. Down south, it’s 132%.
So why do we have a real estate boom, when they are still wallowing in their bust?
Simply because CMHC, a federal government agency, backs all high-risk mortgages with taxpayer dough. By removing all risk from the banks, it lets them lend to people without money and little prospect of paying their loans off. It allows them to give the cheapest, lowest rate to those with the highest default risk. In case that sounds familiar, we used to call them ’subprime.’
October 23rd, 2009 at 9:30 am
“To claim that the whole market will come crashing down due to possible interest rate rises is far too simplistic.”
really? but don’t today’s buyers sort of reduce the buying decision to the simple terms of “howmuchamonth”? As in, they don’t want to bother with complex issues such as “howmuchamonthwhenihavetorenew”?
October 23rd, 2009 at 9:02 am
Dave,
When something is a certainty, it can not be described as “risk”.
October 23rd, 2009 at 8:54 am
@vreaa:
Affordable and risk are two different animals. I am simply pointing out is that real estate is still affordable.
I agree that there is a risk that interest rates will go up. We can debate how much, when and who it may affect, but that is a separate discussion. To claim that the whole market will come crashing down due to possible interest rate rises is far too simplistic.
October 23rd, 2009 at 7:53 am
@Dave: Affordable?
Lenders, backed by CMHC, are allowing people from lower income groups to put nooses around their necks based on criminally-low free-money teaser variable rates based purely on monthly carrying costs that’ll only apply for about the next 6 months. Then they are definitely going to rise, BOC has told us so.
Do you think that these low income buyers, many of whom are financially illiterate, are heeding Carney’s hopeful cautions about “prudence from Canadians” and his specific warning that “borrowing is for the period you are going to borrow, not just for the moment you take out the loan.”? (Gee — I wonder what that means?).
So, yes, affordable — IF THEY CONTINUE TO RENT.
If they buy, they’ll end up a very early statistic (and go back to renting).
October 23rd, 2009 at 7:53 am
This will be way worse than a bust. Atleast in a bust you are at rock bottom and you can only go up. This will be a slow decline for 5 years after the Olympics, more like a depression with negative growth
October 23rd, 2009 at 7:06 am
@vreaa:
Or put another way, real estate is still affordable to lower income groups.
October 23rd, 2009 at 6:49 am
Garth has written an excellent post on this CMHC nonsense just today.
However, as Patriotized has said, the masses still won’t get it.
Dumb is as dumb does.
October 23rd, 2009 at 6:38 am
Rates So Low Renters Forgoing Subsidized Housing To Buy
23 October 2009
http://vreaa.wordpress.com/
When low income individuals are forgoing subsidized rentals to buy, how far can a market be from a top? These excerpts from an article that ran in the Georgia Straight 22 Oct 2009, by Carlito Pablo -
The Metro Vancouver Housing Corporation [mandated to supply affordable rental to families with low to moderate income] is losing many of its moderate-income tenants to the housing market. With variable mortgage rates going as low as 2.25 percent, plus incentives being offered by sellers, families are buying homes and moving out of affordable rental properties operated by the public housing body, according to a report by regional housing manager Don Littleford. The housing body has seen two consecutive quarters of increasing vacancy in its properties. “With the efforts of the Bank of Canada and the chartered banks to create economic activity, they’re offering very low-cost money on everything.” — “the next several rental quarters are expected to be challenging until mortgage and consumer-borrowing interest rates return to more normal levels”.
October 23rd, 2009 at 5:16 am
@No Longer Looking: Rather than “would” I should say “could”. Obviously, not all landlords have massive mortgages on their properties.
October 23rd, 2009 at 4:59 am
@asp: I don’t agree. Rents are set by the market not the landlord’s expenses. If landlords could pass on all their expenses, rents would be double or triple what they are now.
October 23rd, 2009 at 4:52 am
@observer:
Applied to myself, as a happy renter, what would I gain by not sharing my knowledge?
@No Longer Looking:
Property taxes are hidden in the rent. As well, resident owners get a refund from the provincial government, so renters land up paying more tax than owners.
October 23rd, 2009 at 4:28 am
Easy sleazy lending lures tenants out of public housing
http://www.straight.com/articl.....s-vacating
Demand is almost done.
October 23rd, 2009 at 12:07 am
@gvrdpropertyowner:
More like 50% down payments I would say (although legally they would have to require just 20%). The banks aren’t dumb at all, they know how risky RE lending in Vancouver is right now and they’re only keeping the party going because the taxpayers, not them, are going to get the hangover.
October 22nd, 2009 at 11:35 pm
To partially offset the pain of higher property taxes, the City of Vancouver will be offering free blowjobs to anyone living west of Main street. Condo developer Bob Rennie loves the plan, exclaiming “Oh Yeeeeaaaaaah!”. “Unfortunately there are not enough resources to offer blowjobs to everybody”, said Mayor Gregor Robertson. Residents east of Main street will have to make do with free police beatings instead.
October 22nd, 2009 at 11:28 pm
I have often told people that government programs— such as CMHC’s mortgage underwriting— merely inflate markets, while promising affordability.
Abolish the CMHC tomorrow and Vancouver real estate price drop 50% in one day. Why? Because banks would start requiring 25% down payments.
However, if you try to explain this to most Vancouverites, they will stare at you with a dumbfounded blank look that suggests they don’t possess the cognitive resources to comprehend such a complex argument. So I just wish them luck with their 35 year mortgages and move on.
October 22nd, 2009 at 11:19 pm
@observer:
The idiots who have been buying here have been ignoring the massive (and well-reported) RE bust going on just south of Zero Ave for the last few years, so what makes you think they would pay attention to anything anyone says in a blog? They certainly haven’t paid attention to anything on this one or its counterparts.
October 22nd, 2009 at 11:15 pm
Bad News, $5.4 billion dollar complex in New York is on the rocks:
http://www.nytimes.com/2009/10.....wn.html?em
October 22nd, 2009 at 10:45 pm
Is it me, or are there more and more critical articles about the CMHC? Is public opinion and MSM waking up to this big scam?
Maybe, only maybe, we are getting a whiff of genuine discontent over this absurd subsidization from tax payers to home buyers?
Please report any more articles on the big CMHC scam and write to your MPs. Even a few complaints can trigger an avalanche.
People have to know what is going on, they have to know that the RE market in Canada is being propeed up with tax payers money, they have to know that this cannot last.
October 22nd, 2009 at 10:31 pm
Here’s a thought blog. Suppose you knew there was going to be a housing crash and it was going to begin in a few months time. Would you write it on this blog and get word out for the greater good or would you keep it secret so there would be fewer buyers to compete with when the time came. Would you even try to promote RE like a bull to suck even more FTB into the vortex?
October 22nd, 2009 at 10:28 pm
Well there you go Dave, are you still unclear on how the CMHC has been propping up the market?
October 22nd, 2009 at 10:24 pm
@kansai_92: Another argument for remaining a renter. Landlords have to suck up the tax increases in a weak rental market.
October 22nd, 2009 at 10:14 pm
best services in the world?
pull the other one, it’s got bells on it….
October 22nd, 2009 at 9:57 pm
Higher taxes here we come!
METRO VANCOUVER – Metro Vancouver homeowners may face higher rates for sewer, water and garbage pickup in the future, but in return they will get some of the best services in the world, regional directors say.
http://www.vancouversun.com/te.....story.html
October 22nd, 2009 at 9:55 pm
oh yeeah nutslaps! fastin your’ helmut for next leg up! your tax dollhairs at work
“AT The CMHC”