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December 13th, 2009 at 3:23 am
The simple truth from Mish. Substitute “Harper, Flaherty, CMHC”, etc. for “Obama, HUD”, etc. and delete “The ultimate irony is that prices are falling yet still not affordable by any means” (absurdly, prices in Canada are rising again) and you describe the situation north of the border perfectly:
http://globaleconomicanalysis......color.html
Price that are out of whack with rents and incomes are not sustainable, period.
December 13th, 2009 at 1:20 am
Real estate never go down. all you fools renta paying $1,400 a month on a $650,000 house are stupid idiots, buy that $650,000 house now or be priced out forever! ha ha these time will not be repeated in our life time. the cards are a collapsing, be prepared, this comes from the very highest level………….
December 12th, 2009 at 10:44 pm
Was at dinner tonight with a friend who works for the post office, he is a supervisor there. He said they aren’t hiring casuals this year for the busy holiday season (first time ever since he started working there) and parcels are WAY down from last year (over 20 million less).
I also noticed on Google Finance they have a new feature called domestic trends that lets you see how/what people are searching on google.
For example, note the clear effect of Cash for Clunkers:
http://www.google.com/finance?....._US:AUTOBY
Here’s electronics and computers which I believe is a large part of retail for the web.
http://www.google.com/finance?....._US:COMPUT
You can clearly see the spikes for Thanksgiving and Christmas shopping but the spikes aren’t nearly as high this year. Recovery?
December 12th, 2009 at 9:34 pm
Calgary and Edmonton have higher family incomes but people aren’t willing to pay as high a portion of their incomes to rent as do Vancouver residents. I assume this is because both cities are considered, on average, less desirable places to live than Vancouver.
There is less speculation. Why? There’s less crystal meth in the water supply. That, and most people are making better scratch from oil and gas.
December 12th, 2009 at 5:32 pm
back in vancouver for a couple of days. The transit is still a joke. I was starting to believe all the hype how the transit situation has improved unitl I got stranded. Skytrain closed at 9:45 and had to wait a half hour for a bus downtown. then it slowly made its way until I got as far as I could go as buses were no longer running to get my last connection. You would think with no traffic at night I would be able to make downtown to coquitlam in under two hours.
December 12th, 2009 at 3:22 pm
@Disbelief:
For immigation, that’s true. But until quite recently they have been the leading destination cities for domestic migration in Canada. In aggregate they have been growing much faster than Vancouver for over a decade.
The view doesn’t buy the groceries. Calgary and Edmonton have about the same rents as Vancouver. Three guesses why. Extra credit – why are purchase prices cheaper (but still overpriced).
December 12th, 2009 at 3:05 pm
loan*, obviously.
December 12th, 2009 at 3:03 pm
In New Zealand, when the credit crunch hit a year or so ago, the banks moved rapidly from a 5/25 or even 0/25 to 20/25 as a minimum. Stalled the market fast, but stopped people getting over extended as interest rates went down.
This is what happens when there is no artificial governmental backstopping of load risk. A good thing too, imho.
December 12th, 2009 at 2:15 pm
@rp: I think you got the gist of it. longer amortization should be allowed only for those with larger downpayments. In a world with undistorted risk pricing, that would be the case. In Canada, where the CMHC actually ENCOURAGES low downpayments (you don’t get the government-backed low rate otherwise!) this is just a hypothetical consideration.
The CMHC has achieved the exact opposite of its mission: it was supposed to make housing more affordable to low-income people, but it has pushed prices so much that their mortgages mean they are effectively ‘renting from the governemnt’. Write to you MPs!
December 12th, 2009 at 2:10 pm
Re: CMHC. I think we all agree that the combination 5/35 is terrible. Maybe a good way to reign in risk would be to offer 10/35 or 5/25, with payments limited to 36% of income. That way, people who need the lower monthly payment from long amortization (expensive house) would have to save more, whereas someone buying a cheaper house would have an easier time. This might be a good way to curb risk with a softer touch. What do you guys think?
December 12th, 2009 at 1:05 pm
Both Calgary and Edmonton are boom and bust towns. Only fools or new immigrants that don’t know history, only the limited time they and their circle of friends have. Neither Calgary or Edmonton are destination cities. Get off a plane in either winter or summer and it is ugly as far as the eye can see and it’s flat so that’s pretty far. Vancouver is overpriced no question but at least it’s beautiful for a few months.
December 12th, 2009 at 9:34 am
@Firmaa:
Same reason as in the US I think – oversupply. Net population growth in Alberta has slowed to zero (even worse than BC because they get far fewer immigrants) and you can build a lot of housing really fast on the prairie.
No one left to buy all those houses and condos. Note that Albertans don’t have the “everyone wants to live here” West Coast delusion, so the speculators have headed for the exits and stayed there.
December 12th, 2009 at 9:26 am
Comments above by Re-diculous and GR archived as great examples of current activity and sentiment in our market.
http://tinyurl.com/y8agrw4
http://tinyurl.com/yc57em5
BTW:
Flaherty says you’d expect homeowners to go into more debt in a recession. I suppose that’d be okay if our savings rate hadn’t been NEGATIVE before the recession even began.
Two New Yorkers Move to Vancouver – “We bought a place downtown, because we are real estate investors. Vancouver is a good place to invest.” « Vancouver Real Estate Anecdote Archive Says:
December 12th, 2009 at 9:08 am
[...] from Re-diculous at vancouvercondo.info 11 Dec 2009 10:23 am [...]
December 12th, 2009 at 8:32 am
patriotz:”Do note that the earliest and biggest bust to date in the current cycle (starting summer 2007) has been in Calgary (all Con MP’s) and Edmonton”
what is your take on why low interest rates in the last year did not change anything in terms of downward price spiral in these two cities from 2007?
is it just simple explanation that these two cities run out of new buyers and low interest rate was irrelevant in their case. or is there something more than that?
thanks
December 12th, 2009 at 1:15 am
Only on his way out the door does the police complaints commissioner tell teh truth. Talk about a self serving denier. Now he he calls the RCMP a substandard police force, fuck ups, hide outs and killers. Where was he when the activities needed to be dealt with? To say that the Djikanski inquiry was a travesty of justice is failing all Canadians.
Here again is another example of a psycho killer using a taser on a fifteeen year old girl who was already handcuffed and being held down by three officers. What kind of an asshole do you have tobe to do this kind of thing? Or is this secretly an RCMP policy to terrorize the people?
Either way we need to get rid of these cowards and substandard fuckwits.
http://www.theglobeandmail.com.....le1397185/
December 12th, 2009 at 1:03 am
yawn – and the retards come out to play
December 11th, 2009 at 11:07 pm
@ReadyToPop:
D:It’s written so does vancouverboom2.
Boc DJ is telling the financial DJ to twist the track there is nothing that they can’t twist.
LOONEY?
DOWN
OIL?
DOWN
Affordability is improving within seconds.
Between Tomorrow never die,Only you and me won’t be here.
Oh yeah!
please check your handle again,You are already there to pop while entering into sixth year.
One should use his/her sixth sense that says hey!
Vancouver real estate never goes down.
December 11th, 2009 at 10:20 pm
@ Bdk toll
That’s actually a good article for bears…thanks for posting it. When you read further on, you can see that the BoC is getting increasingly nervous.
December 11th, 2009 at 9:13 pm
GIVE UP BEARS
Talking about bubble means housing prices are going up!
Do you admit that? VANCOUVERBOOM2?
Alright 5 years and still up
Flaherty says won’t put brakes on housing
http://ca.news.yahoo.com/s/reu.....g_flaherty
December 11th, 2009 at 5:35 pm
@D. Bone:
Do note that the earliest and biggest bust to date in the current cycle (starting summer 2007) has been in Calgary (all Con MP’s) and Edmonton (all Con save one lone NDP) and neither the federal nor provincial governments have even acknowledged it never mind offering anyone assistance.
If Harper & Co. won’t do anything for Albertans, what makes anyone think they will do something for Canada’s more liberal city dwellers?
http://cuer.sauder.ubc.ca/cma/.....algary.pdf
December 11th, 2009 at 5:25 pm
@D. Bone:
Asset busts happen because the market runs out of new purchasers, not because existing purchasers have to sell. This is true of all Ponzi schemes.
Rising interest rates will choke off new purchasers of course.
But note that interest rates were far lower at the end of 1982 than in early 1981 (bottom and top respectively of the last big Vancouver bust).
December 11th, 2009 at 5:19 pm
From the NP article:
Graham Withers, a film and TV editor in Toronto, said the Bank of Canada’s warnings are justified. He and his wife, Heather Harding, just bought a house — but not after nearly a half-dozen failed bids in the past month in which properties sold for at least 20% over asking price.
=====
So let’s get this straight. The guy agrees that housing is in a bubble and that mortgage debts are too high – then proceeds to engage in several successive bidding wars until he “wins” one?
That’s like holding a gun to your head, announcing that “bullets are bad for your health”, and pulling the trigger.
December 11th, 2009 at 4:11 pm
@patriotz
I was referring to the number people with mortgage troubles vs. the number of people waiting for this overheated market to correct itself, not the part of the population who are current on their mortgages.
So in other words, the government is making it tough for those waiting for reasonable prices at the expense of the few who need an historically low rate to keep their homes (or get into one). On the upside, if you are about to retire and need to sell your home, you are lovin’ it.
you are right, the banks have already reduced their exposure, but the government is probably trying to protect the CMHC by keeping rates low so people who reset dont get foreclosed with the CMHC picking up the tab.
December 11th, 2009 at 4:06 pm
As much as it pains me, I fear that “bailouts” and “government intervention” are becoming the norm….
Have no fear; there won’t be a bailout. First off, the government is broke; what are they going to bail with? Second, if rates go up a few points, it may be expensive but most Canadian either aren’t affected as they don’t have mortgages or they can handle the increased payments. Only a few thousand morons in Toronto and Vancouver who purchased at the peak will be affected (enough to crash the market though). Do you think a government would risk printing money and increasing taxes so that all Canadian can bail out the morons (living in mainly Liberal strongholds I might add)? Bailout? Don’t count on it!
December 11th, 2009 at 4:05 pm
Any curtailment of CMHC would ABSOLUTELY mean mortgage rates are going up.
When the banks have to take on the risk, then they will require a better return on their money.
That’s why many believe these low rates are artificial and temporary.
December 11th, 2009 at 3:45 pm
@SD92129:
Even in BC, there will be far more people without mortgage difficulties than those with them.
Any assistance program by government would be an admission that the government ignored and even fostered the bubble in the face of clear evidence of the consequences from south of the border. And robbing ten Peters to pay one Paul.
The politically astute position is simply avoid any hint of government complicity and leave FB’s to their fate, as has happened in every previous bust The banks already have their bailout and that’s all that matters. All mortgage assistance programs in the US are aimed at supporting the banks, not the FB’s who would be better off walking.
December 11th, 2009 at 2:52 pm
As much as it pains me, I fear that “bailouts” and “government intervention” are becoming the norm. Debt is not solved by more debt, but moving it around and managing the pain and symptoms can delay it for awhile, until the next election anyways just like when dealing with any incurable disease.
How about that for that for a bearish sentiment on the whole effing mess.
I hope the politicians hear it, but there may be many people in financial trouble for every bear waiting for the market to correct itself.
December 11th, 2009 at 2:49 pm
My impression is that most of the recent noise about risk in our housing market is from entities who are trying to cover their backs. They probably won’t do anything significant, but can still say ‘I told you so’ (BofC, civil servants, banks, etc). So it will be the government and CMHC who are left to blame.
December 11th, 2009 at 12:05 pm
I am in government relations, with experience at the federal, provincial, and local government levels. I have vowed for the past two years that should the federal government contemplate any type of homeowner bailout, I will be organizing a “grass roots” campaign to lobby against said type of bailout. I am looking forward to putting my two cents in on Monday’s post.
December 11th, 2009 at 11:28 am
I love this bit about Rosenberg’s excellent article:
What is fascinating is that mortgages on the books of the chartered banks have actually declined over the last 12 months, while the issuance of securitized mortgage products has ballooned by nearly 40 per cent and 100 per cent of them been insured by the government (over the past two years, 90 per cent were insured).
What happened here was the Canadian government’s move to save the housing market from a collapse via the Insured Mortgage Purchase Program – currently, if you have only have a 5-per-cent down-payment for a home, you are eligible for an insured mortgage with a 35-year amortization to boot, which, along with record-low mortgage rates, has dramatically improved the financing costs in residential real estate. For current borrowers, carrying costs are very low, but here is the rub, rates have nowhere to go but up; only the timing is open for debate.
Pope: I look forward to the post about writing to our MPs. If we can mobilize enough people maybe they will understand it might be ‘popular’ to scrap the CMHC. These guys usually don’t care much about right or wrong, but rather about their political careers. Let’s give them reason to thrive!
December 11th, 2009 at 11:28 am
@Gary R. Scobie, BSc., CFP: You argument does not explain why previous housing crashes happened in Canada. If you start to cite other reasons, then it means your set of factors is not complete.
If an apple fails to fall to the ground, you may say that there is no gravity. But the real reason is that the stem hasn’t rotted enough for the apple to follow its natural path to the ground.
December 11th, 2009 at 11:05 am
@Re-diculous: This is classic ‘emotional investor’ behaviour! Most people make investment decisions based on recent performance and emotions, not fundamental value analysis. Emotionally they think, “Prices are high, so it must be a good investment!”. Then when prices are dropping like crazy, they panic and sell.
I’ll bet this woman thinks that California is a bad investment right now because prices are down, and Vancouver must be a safer or wiser investment because it hasn’t crashed.
I guess it’s good news for those who can invest rationally, since we are definitely in the minority!
December 11th, 2009 at 10:23 am
So I was at a bit of a networking session last evening and met a pleasant enough woman (with MBA etc) who moved here with her husband from NYC 4 months ago. When we were comparing costs of the two cities I mentioned the word “rent”, to which she replied- “no, we bought a place downtown, because we are real estate investors etc, etc and were looking at California but didn’t think that was a good place to invest but Vancouver was…”
I guess they missed the “buy low, sell high” philosophy of investing. I’m proud to say that I did manage to bite my tongue throughout the conversation.
December 11th, 2009 at 9:42 am
9 – what kind of pretentious wanker puts “BSC” behind their name? I mean really, they give them out in cereal packets these days.
December 11th, 2009 at 9:25 am
It seems that BOC head Carney has seen a rise in speculation in his Ottawa backyard and determined that there is ‘imprudence’ in the market. Wow! Is this how isolated from the ROC these idiots really are?
Did Carney miss the jump to over 12 times income that Vancouver realestate debt now represents when you look at the bulk of sales in the new condo and t/h buyers as opposed to the misleading ‘average’?
If rates go up one percent then 85% of all recent 5% (who am I kidding with the HELOCS being the real down) FTBs in BC will be underwater.
I’ve got a lovely pair of Whellies waiting for the storm of wet shit that will flow through Yaletown etc.
December 11th, 2009 at 8:18 am
@nonymouse, vreaa: and SQuatchi: Thanks for the great links, I’ve added them all to the main list.
I think Monday we’ll do a thread about writing your MP, sound interesting? You can help by posting a contacts list or any other pertinent information and ideas. If you post it in the wiki then it will be easier to find in the future. Unfortunately you’ll need to sign up for a specific wiki user account to edit there.
December 11th, 2009 at 7:46 am
Check out David Rosenburg’s guest column in the G&M Floating high on a delicate housing bubble
Finally some unbiased opinion.
December 11th, 2009 at 7:15 am
Forgot to add that Jim doesn’t seem to understand that a “fixed rate” mortgage is fixed only until the end of the term.
December 11th, 2009 at 7:13 am
From the G&M story:
OK Jim, so why don’t you tell CMHC to change its rules on mortgage qualification to base its maximum debt service ratio on historically normal interest rates, not today’s low rates?
Or do you have a problem with acting responsibly for once?
December 11th, 2009 at 3:16 am
@Gary R. Scobie, BSc., CFP:
Sorry Garry, but the facts show otherwise. If you take out non-bubble Canada (Quebec, East Coast, Ontario outside Toronto, Manitoba) you will find that the rest of the country is acting just like the US, contrary to your points (1) and (2) above. The numbers speak for themselves.
December 11th, 2009 at 1:40 am
Two important factors missed in this otherwise excellent report.
1) Canada does not allow mortgage interest payment deductibility. Thus, there is no tax benefit in having high mortgage payments or a high mortgage for that matter.
Canadians tend to want to pay their mortgages off and eliminate debt while Americans don’t seem to mind mortgage debt as they age.
This tends to make Canadians more conservative (no surprise) about home ownership and creating high debt that goes on and on forever.
2) Canadians cannot walk away from their mortgages by handing in the keys to the house, as Americans can. This makes home buying in Canada a little more thoughtful and planned as to the consequences (positive and negative). Consequently, and because of the tax issue mentioned above as well, Canadians don’t treat their homes as piggy banks to be raided when the paper value goes up by increasing the mortgage. Just not a thing Canadians do in general.
These factors also played a part in the differences in housing crises in each country.
Gary R. Scobie, BSc., CFP
Burlington ON
Canada
Read more: http://advisoranalyst.com/glab.....z0ZMrHC7QQ
December 11th, 2009 at 1:17 am
By now almost all of us have seen the National Film Board of Canada’s three short films on Vancouver Realtor Keith Roy.
As this is a choice ‘story from the Vancouver RE bubble’, we’ve archived full text transcriptions of the films, with highlighted extracts, at VREAA.
Title:
“I am Realtor. Nothing Realtorian is Alien to Me.”
http://tinyurl.com/ya9mvk5
Dressing for ‘gravitas’, becoming a celebrity, poaching assistants, ‘taking it up a notch’, quick profits, bribing tenants. As the NFB site itself puts it: “Did somebody say bubble?” -vreaa
December 11th, 2009 at 12:05 am
asp:
can you post a link? From what i understand from that letter, it seems that standard financial regulations and accounting rules which are routinely applied to banks/lenders will now have to apply also to CMHC-related loans. Is that the juice of it?
If these rules’ application is discretionary, meaning that the government can veto them (or not) it does make sense to write to our MPs and Flaherty himself.
When i have written to my MP I have stressed that the original ‘mission’ and objective was that “CMHC’s current securitization program supports affordable housing”. However, based on current evidence, it seems that the outcome has been that of supporting a large increase in house prices and delivering LESS affordable housing to Canadians. CMHC securitization should be scrapped or dramatically reduced.
December 10th, 2009 at 11:54 pm
I’ve gone and actually read the OSFI draft and what it seems to be saying is that – starting January 1st, 2010 – financial institutions will be recording any securitization on their books. And it’s not up to parliament, these are international banking regulations coming out of the crisis.
So, no. It does not look like rates will be going up January 1st. Any affects will take a few months to work into the system.
December 10th, 2009 at 11:36 pm
would be interesting to see if anything comes of this osfi policy, for now this is a bunch of federal beauracrats engaging in a pissing match. the affect on bank stocks would be interesting, their current valuations are based on being backstopped by the central bank as can’t lose propositions.
December 10th, 2009 at 10:51 pm
CMHC in a nushell:
CMHC’s current securitization program supports affordable housing by enabling banks and financial institutions to issue more Government guaranteed loan products, thus making it possible for these institutions to provide credit to Canadians at lower interest rates as the securitization frees up space on their balance sheets. This allows these institutions to meet the demand for more mortgage loans than they otherwise could if they had to hold all the loans on their balance sheets, which are subject to several restrictive regulatory capital leverage ratios.
The OSFI’s proposed policy will effectively tighten the capital governance rules and reduce an institutions capacity to generate these government backed mortgages.
I love the OSFI !!! Finally something that stops the backstop!
Write to your MP: they will get your vote if they support the OSFI !!!!
Heck, write to Flaherty, just like this guy in the article did!
December 10th, 2009 at 10:30 pm
Another MSM warning about rising debt.
“Ratio of household debt to income has climbed to “historically” high levels of over 140%”
http://www.nationalpost.com/ne.....id=2325273
December 10th, 2009 at 10:26 pm
That first link, about the curtailment of CMHC’s securitization program, would mean that mortgage rates are going up the 1st of January, no?
And parliament is on their xmas break, so they are not going to do anything.
December 10th, 2009 at 9:42 pm
Suggestion for all:
since a bill of some kind seems to be working its way through parliament (or whatever government subsidiary) why don’t we do some lobbying? We can use Drachen’s email addresses of local MPs and write to them requesting support for this bill. This is a concrete and simple step we can take to support the elimination of market distortions which help pushing prices to the sky in Vancouver (that is, get rid of the CMHC!!)
Drachen, could you post the links again?