Sales boom sparks bubble fear

Rock bottom interest rates are working their magic as real estate sales leap up to record levels. Was that the shortest correction ever? Even as unemployment levels creep up, house sales are brisk and prices are rising, leading some to believe we’re in a housing bubble.  Scotia Capitol is the latest to use the ‘B’ word in public:

“Is Canada in a housing bubble? Probably, but low rates, mortgage innovation and a relative shortage of new supply are likely to keep it going for a while yet,” Scotia Capital analysts wrote in a report.

And as CREA economist Gregory Klump points out, when it comes to people losing their jobs it’s more of a glass-half-full scenario:

“If we have 10-per cent-unemployment, that means 90 per cent of people are employed,” he said. “People are re-entering the market – they have the confidence to take advantage of bargain-basement prices. There’s been a release of pent-up demand, and that has a long time to play out. Prices have gone as low as they are going to go.”

Whatever is in that glass, it’s working.  Sales in BC hit record levels in October.  And every real estate sales organization and mortgage broker seems to think that it should pretty much carry on indefinitely, and this enthusiasm seems to have been absorbed by the population in general:

According to the CAAMP report, Canadians are increasingly confident that the value of their homes is rising and optimistic about their local housing markets. It also said that the Canadian mortgage market is rebounding and will surpass the $1 trillion mark in 2010.

Scotia Capitol economist Derek Holt points out the obvious when it comes to record low interest rates:

Mr. Holt expects the average mortgage to creep toward 5 per cent within three years, which could mean hundreds of dollars more a month for the average mortgage holder.

For example, a five-year variable rate mortgage at 2.25 per cent on $300,000 would carry a monthly payment of about $1,300, assuming a 25-year amortization period. A move to 5 per cent would boost the payment to $1,750.

“I think that causes a slight pullback on prices,” he said. “Right now, you have conditions that only come around once in a century and it can’t stay that way forever.”

But it’s not like Canadians aren’t used to dealing with heavy debt loads, and we have a distinctly Canadian way of dealing with debt-based money problems: more debt.

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Supraboy
Guest
Supraboy
6 years 5 months ago

When things are called a bubble, it really isn't until you get a parabolic move. Expect the run to continue. Anyone who's knowledgeable and serious about the housing markets know it's stupid to stand in front of a moving freight change. Bernanke already mentioned that he will keep rates low. These 'bubble' talks are a bunch of jokers trying to shake people out so they can get in. Until a massive flood of buyers on condos and properties are seen, I don't see a top yet.

Boombust
Guest
Boombust
6 years 5 months ago

"I don’t see a top yet. – Supraboy

Does that means there is such a thing as a bottom?

Chilled
Guest
Chilled
6 years 5 months ago

I think this thing will carry on – forever, or until the average single family home tops a billion dollars and unemployment hits 100%. That's what I learned at the Warsaw School of Economics and I'm sticking with it.

rp
Member
rp
6 years 5 months ago
#1 @Supraboy: "Anyone who’s knowledgeable and serious about the housing markets know it’s stupid to stand in front of a moving freight change." That's great advice, I'm going to stay the hell away from this one. My dreams of buying cheap real estate are over. I don't need to own, and current buyers are far crazier than I would have *ever* expected. We just witnessed a worldwide financial crisis – the biggest in 80 years – and they are lining up to mortgage their lives away for a dream. Casting themselves onto the rocks is more like how I see… Read more »
rp
Member
rp
6 years 5 months ago

It just isn't funny anymore. It's like if everyone started coming to work in chicken suits. First it's funny, then it's a bit disconcerting, then it's hysterical, but now I am deeply concerned. The media is all chicken suit all the time. Everyone in a chicken suit insists they're still having fun, but I don't really believe it. Getting into the suits is getting harder and harder. More and more commitment is required. Some people glue chicken suits to their bodies for the next 35 years!

Wreckonomics
Guest
Wreckonomics
6 years 5 months ago

Rp: 100, best analogy ever.

rubberduckie
Guest
rubberduckie
6 years 5 months ago
I wish there were something like an MLS, but for rentals. There are sites here and there, but not one single, clean, organized and up-to-date site that everyone uses. I would be willing to pay an agent to help me find a nice long-term rental. My biggest obstacle is I have a cat, and it seems 90% of rentals don't allow pets. Should I apply anyways and hope they like me so much they'll allow it? Should I lie? If legislation passed tomorrow that landlords couldn't discriminate against pet owners, do you think it would have an effect on real… Read more »
No Longer Looking
Member
No Longer Looking
6 years 5 months ago
"My biggest obstacle is I have a cat, and it seems 90% of rentals don’t allow pets. Should I apply anyways and hope they like me so much they’ll allow it? Should I lie?" Maybe 90% in premium rentals, but the numbers are much better in the burbs. I think the numbers are getting better too. If you are unsure about their policy, don't bring up the cat at first. Do that after you've impressed them with your income, references, etc. Lying is a common strategy for pet owners. Even if the lease species against pets, the landlord still has… Read more »
Vic
Guest
Vic
6 years 5 months ago
Could this be another case of the "too big to fall"? Could the housing market be something that is so big that if it fell, then the government would bail us out? The only way I can see this playing out…without complete self-implosion is gradual increase in interest rates (like 0.25 or 0.5% a year…over 10 years) and a slow steady decrease in housing prices (~5 to 10% a year) and modest salary increases (like 3% a year). Anything more drastic would cause complete mayhem. Of course…to pay for all this mess, my taxes should go back to year 2000… Read more »
domus
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domus
6 years 5 months ago

Inflationary effects of easy money:

http://tinyurl.com/yg65q3j

When central banks and governments tell you we have a deflation, do not believe them…

domus
Guest
domus
6 years 5 months ago

@Vic: If people pay back, the creditors are the banks. if they don't, it is the CMHC.

it is a win-win game for the banks: they only get the upside. I know it sounds crazy, but this is what is happening right now in Canada.

Information is power. The governments are selling this as a 'necessary' policy. It is a scam to keep this circus going (after all, aren't they up for re-election…?).

No Longer Looking
Member
No Longer Looking
6 years 5 months ago

@domus: Yes, I notice the mysterious shrinking boxes of food at the Super Market 😛

rubberduckie
Guest
rubberduckie
6 years 5 months ago

@No Longer Looking: I don't want to compromise my location. I'm comparing buying versus renting, not buying in a nice location versus renting in some godawful suburbs or rundown part of town. 🙂

scullboy
Member
6 years 5 months ago
People have lost their fucking minds, especially in this province. Let's recap shall we?? Scotia says were in a bubble. The crea says even 10% unemployment is ok because that still leaves 90% of us available to sell our lives for shelter. The first poster here is a full on typical BC real estate zombie who assumes the current circumstace is a good idea. I am so glad to be getting out of here. BC is so obviously past the point of no return. It's like watching a bunch of rowdy, drunken frat boys piled into a BMW flying 100… Read more »
HappyRenter
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HappyRenter
6 years 5 months ago

@rp:

RP, people are being sold a dream by developers, agents and bankers but borrowing a nightmare. The only people getting wealthy from real estate at these insanely unaffordable prices are the three previously mentioned parties, as they take their profits at the top of the market. No dream of mine involves taking on 35 years of debt.

Boombust
Guest
Boombust
6 years 5 months ago

Supraboy,

I just received an e-mail alert from "Silhouette" in Burnaby.

Seems the units are "newly-priced at 299,900"

With things a flyin' off the shelf, I'm surpired to see any reductions AT ALL!

No Longer Looking
Member
No Longer Looking
6 years 5 months ago

@Boombust: "Silhouette" pre-sales started at 295K back in 2006, according to one article I read. All that risk for no profit. It'd consider renting there, though, at the right price.

DaMann
Member
DaMann
6 years 5 months ago
@rubberduckie: I knwo how you feel about the pet situation. I just rented a sweet place on the westside, gorgeous roof top deck, view , everything. Current tenant said he would not allow pets. I called him, told him our situation and what we wanted to rent, he said I like you guys let's do the paperwork. It was then that I told him we had a dog, he said no way, sorry no pets. I sweet talked him for a good 15 minutes, finally he caved. Having a good long term tenant who really wanted to look after the… Read more »
rubberduckie
Guest
rubberduckie
6 years 5 months ago

@DaMann: Good strategy. There's a lot of legwork in being a renter!

The path of least up-front resistance is buying. Eager Realtors drive you around to showings on your schedule. Property sellers scrub every inch and bake apple pies to try to get your interest!

It's a vastly less glamorous experience when you're renting.

I recently viewed 2 apartments for rent. Both places, completely independent of each other, had dirty underpants on the bedroom floors.

duru2000
Guest
duru2000
6 years 5 months ago
My landlord( a realtor agent btw) is selling the house expecting the prices to go down in 2010. I was thinking to buy at the end of next year, but since Bank of Canada kept the party running with crazy low rates i will have to wait a little longer. So i took craigslist and there are plenty of places to rent in my range (1000$) right now, not like two years ago. I was playing with the idea of buying a place right now but i'm not going to do it, i rather have a 200K mortage at 7%… Read more »
Absinthe
Member
Absinthe
6 years 5 months ago
After a lifetime of stable renting, my family and I went through some serious bubble related instability with our rental last year. Now we're paying just slightly more for more bedrooms and a yard, so it's turned out for now- but I must admit for the first time getting grumpy about this bubble. The insanity in the housing market is making rental feel insecure, and I'm having trouble feeling settled. That, I don't like. But I realized there's your self perpetuating mechanism: newbie specuvesting landlord runs all over his business obligations, makes the renter feel insecure, the renter jumps into… Read more »
No Longer Looking
Member
No Longer Looking
6 years 5 months ago

I'll be honest, this is another reason I'm nervous about owning a structure in BC:

http://www.cbc.ca/canada/british-columbia/story/2

ReadyToPop
Guest
ReadyToPop
6 years 5 months ago

“You only find out who is swimming naked when the tide goes out.”

Warren Buffett

Bizznitch
Guest
Bizznitch
6 years 5 months ago
Drachen
Member
6 years 5 months ago
@Absinthe: The no-cat landlords are really showing their amateur status I think. Our landlord is semi professional, he's been doing it for 20 years but with just one house of 3 units and everyone in the building right now has a cat (I think he actually prefers tenants with cats). At the end of the day he's happy because of the new rules that allow him to hold double the damage deposit for pets, which is really what all landlords should be looking at, it's your insurance that you won't get totally screwed by a tenant, the risk of having… Read more »
nonymouse
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nonymouse
6 years 5 months ago

@Bizznitch:

Yet somehow nobody will see it coming.

trackback

[…] November 2009 · Leave a Comment This from rp at vancouvercondo.info 17th Nov 2009 10:31 am […]

Bizznitch
Guest
Bizznitch
6 years 5 months ago

They never will. Harpoo will have a bit hand print on his forehead when he slaps himself and says "I had NO clue this was going to happen!"

dmus
Guest
dmus
6 years 5 months ago

@Bizznitch: Great post…and yes, when it happens, they will say: "who could have known???"

Supraboy
Guest
Supraboy
6 years 5 months ago
@scullboy: You've been complaining night and day, you missed out on the real estate run and now you're a bitter loser. Life sucks doesn't it. Why can't you just accept reality? Instead, you come here with your jealousy and drivel hoping that everyone is on your side, which they are because they are obviously bearish and they also missed the run. You are so one-sided in your nonsense and using four letter words wouldn't help your case. The city is better off without jealous people like you. There's a reason why people can afford million dollar homes. They found a… Read more »
Supraboy
Guest
Supraboy
6 years 5 months ago

@Boombust:

Yes, there is such a thing called a bottom. It is spelled with a "Z" and the word is ZERO.

Supraboy
Guest
Supraboy
6 years 5 months ago
I shouldn't ruin all the dreams of the Bears here. You can all continue to dream about a market crash. As Martin Luther King says in his speech, "I Have a Dream". This is one of the few places online where bears gather together with a dream, a dream of a property at fire sale prices, a dream where Vancouver rid itself of mainlanders from China, and a dream that one can own a BMW without being jealous at others. Let property prices come down Let mainlanders leave this town Let the BMWs come to me without hard work Let… Read more »
No Longer Looking
Member
No Longer Looking
6 years 5 months ago

You know what would be a neat improvement to these boards? If you could auto-block postings from certain people (for those of us who sign-in).

logic
Guest
logic
6 years 5 months ago

ditto

Chilled
Guest
Chilled
6 years 5 months ago
@rubberduckie: #7……..My biggest obstacle is I have a cat, and it seems 90% of rentals don’t allow pets. Should I apply anyways and hope they like me so much they’ll allow it? Should I lie?……. =============================== Do like my partner and I did. We took the two cats to a taxidermist, did the deed and lo and behold, two critters that no longer shed, nor need feeding and that nasty litter box – a thing of the past. We can go on holidays for weeks with no worries or concerns!! No critters "hogging the bed" either!!! The only disadvantage is… Read more »
nonymouse
Guest
nonymouse
6 years 5 months ago

Vancouver running out of land?
http://tinyurl.com/y9avzx7

other ted
Guest
other ted
6 years 5 months ago
I have been watching this nightmare for so long I feel that once the bubble pops it will be anticlimatic. I have moved on literally and won't be buying as I no longer live in Vancouver. If it wasn't for family constantly prodding me to buy in a city I no longer live in I would not be following this. Yes Vancouver you are in a bubble the fact that some banksters are admiting it is the fat lady singing. Look out below we are only a few months from the olympics once its over its too late specuvestors. Sell… Read more »
Bizznitch
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Bizznitch
6 years 5 months ago
Boombust
Guest
Boombust
6 years 5 months ago

"Boombust:

Yes, there is such a thing called a bottom. It is spelled with a “Z”

Okay okay. Zottom it is.

joycer
Guest
joycer
6 years 5 months ago

And as CREA economist Gregory Klump points out, when it comes to people losing their jobs it’s more of a glass-half-full scenario:

“If we have 10-per cent-unemployment, that means 90 per cent of people are employed,”

That's a nice spin on the 10% unemployment, they sound just like my mortgage broker "It's not a half million dollars of debt you're taking on, it's a half million dollars of equity you're building".

Supraboy
Guest
Supraboy
6 years 5 months ago

This board is so one-sided. When will you people crawl out of your own box and see why people can afford million dollar homes instead of screaming crash for the past 3-5 years?

EB
Guest
EB
6 years 5 months ago

Supraboy – that's what's so great about the net. You are totally able to start your own blog, with ease, on which you can give a detailed analysis of your case and encourage discussion (ala Mish). You could present cases, statistics, trend projections, etc. I'd quite like to see that.

nonymouse
Guest
nonymouse
6 years 5 months ago

Supraboy put up or shut up. Where is your blog?

rp
Member
rp
6 years 5 months ago

For what it's worth, I enjoy most of Supraboy's posts. They're a good counterbalance that keeps this place interesting.

Anonymous
Guest
Anonymous
6 years 5 months ago

And considering the shape of our RE market, Supraboy seems to represent the majority – like it or not…

oneangryslav2
Guest
oneangryslav2
6 years 5 months ago

@Supraboy: Please let us in on the secret. How is it that people can afford million dollar homes? I still don't get it. I'm single and have a salary that in the high five-figures, which puts me up in the top 20% of households in Vancouver, yet I can't afford* to purchase a SFH in East Vancouver. So, Supraboy, lead me to the holy grail.

*I suppose that I really can "afford" to "own" real estate, if I use Dave's "affordability" criteria, or (more accurately) criterion.

Purp
Guest
Purp
6 years 5 months ago

You guys are looking at it all wrong. Bubbles don't pop until the last bear has capitulated. Supraboy is providing a service by working hard to make that happen. 🙂

No Longer Looking
Member
No Longer Looking
6 years 5 months ago

@Purp: But that didn't happen in the US or anywhere else in the world. 😛 Or are we different?

be afraid
Guest
be afraid
6 years 5 months ago

Corruption rife in Canadastan. Fuck ups in health car prove the point.

http://www.vancouversun.com/health/Quebec+nurses+

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