Olympic rental market ‘oversupplied’
This article is a few days old, but still interesting and worth discussing. It seems that if you haven’t rented out your home or condo yet for the winter games, you may be facing a lot of competition and have to ramp down your expectations of getting rich off the games.
Metro Vancouver homeowners desperate to rent their properties to Olympic Games visitors have scaled back their golden expectations.
An abundance of Games-time accommodation rental options has forced asking prices down and increased the likelihood that many properties won’t attract any Olympic renters.
“Don’t base your food budget on the prospect of renting your home,” said Mark Szekely, site administrator for listing service rent2010.net. “It’s still a realistic possibility but if you’re outside downtown Vancouver or Whistler, you might not find a renter. It’s an oversupplied market.”
Anyone out there subletting their owned or rented house or apartment for the games (or trying to)?
January 14th, 2010 at 5:50 am 1
http://www.youtube.com/watch?v=J6_1Pw1xm9U
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January 14th, 2010 at 8:03 am 2
How many tenants were needlessly evicted?
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January 14th, 2010 at 8:36 am 3
I have my place subletted so i can get away for 4 weeks – i didnt try for an outrageous rent, so maybe thats why i was able to do it. I don't own my place, I'm a renter, so my bills are low by comparison.
I feel sorry for the suckers that thought the had to BUY a place to rent it out for the games and will be stuck with a mega mortgage after everyones left town.
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January 14th, 2010 at 8:59 am 4
I love the taste of Olympic tears.
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January 14th, 2010 at 9:34 am 5
A friend's apartment is being subsidized by his employer. The plan is to allow employees to pickup/store equipment downtown without having to drive their service trucks. Downtown access is going to be difficult, so with equipment already downtown they can still make service calls on foot/bus.
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January 14th, 2010 at 9:59 am 6
I am shocked — shocked — that the people of the Lower Mainland displayed a lack sense and logic about their housing.
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January 14th, 2010 at 10:20 am 7
I have family member work in a downtown hotel (you know the one at English Bay). The kitchen has to cut hour stating this week.
I wish it is pre-olympic blue, but business is slow.
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January 14th, 2010 at 10:20 am 8
I have family member work in a downtown hotel (you know the one at English Bay). The kitchen has to cut hour stating this week.
I wish it is pre-olympic blue, but business is slow.
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January 14th, 2010 at 10:21 am 9
I havn't got a single email or phone call on my 2 bedroom for rent for the olympics. And i've been trying to rent it for 2 months. The market for olympic rentals is so gone. I can't wait for the post olympic condo market selling it should be equally dead.
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January 14th, 2010 at 10:44 am 10
"I feel sorry for the suckers that thought the had to BUY a place to rent it out for the games and will be stuck with a mega mortgage after everyones left town."
We ran into this mentality when we were checking out open houses for condos, even in buildings that did not permit any rentals. The prevailing attitude seemed to be "there is huge money to be made".
We know of 1 couple that had a furnished apt downtown
for rent, after about eight months they had to move back into the apt as they were bleeding cash.
Very sporadic for furnished rentals right now.
After the Olympics furnished rentals will probably
be as bad as the current Haitian disaster.
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January 14th, 2010 at 10:49 am 11
A unit at 555 Jervis advertised in Craiglist for the past year has been asking from $3,5000 to $5,000 and now $3,000. It was previously rented for a paltry $2,000.
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January 14th, 2010 at 10:50 am 12
@SD92129: with regard to a reply to my post on the last topic – Hi, the main point I was making is not La Jolla is same as GVRD, it's not since it's only a subburb of SD, but rather offering another counter-argument about this everyone wants to come to Vancouver because it's the best place on Earth BS. Now I used to believe Vancouver is a great place to be, not the best but great, and I refused to move to US early in my career for better opportunities because I liked it here so much. But again, in the last few years, I don't feel that anymore. In fact I think about moving away a lot! Especially now I'm not anchored down by a mortgage! That feel so good…really give you a sense of freedom! Damn I feel sorry for anymore who owe more than $300K unless they are speculators through and through.
Anyways, back to topic. Honestly, how many people can really deep in their heart and brain believe that people from nice climate areas like California, Medditerians, Hawaii etc will think Vancouver is not only better than their home but is the best place on Earth??!!
Richard Russell don't pump real estate because his focus is investments with regard to stock market, bonds, etc and he comments current and potential future economic and market trends. He's basically using the increase Chinese presence in La Jolla as evidence that flow and make up of wealth is changing towards Asia. Oh and this might be impossible for a lot of Vancouver bulls to believe but this guy honestly believe (along with most of the residences in La Jolla) that La Jolla is one of the best places to live on Earth due to its great weather, rarely rains! Good year round temperature, right next to the Pacific Ocean and beach, low crime rate, and tons of hot ladies in bikinis virtually all year round! Somehow I think he will have a big laugh at the notion that Vancouver with all its rain can call itself best place on Earth.
As well look at the real estate prices there! For the price of an average home ~$1.5M to ~$2M asking! in my area of Fairview, Ontario St to Oak, 16th Ave to 25th Ave, you can get a home there right by the ocean front with an actual ocean view or at least walk to Beach in 10 minutes. Not this 10 minutes drive to the beach where you can't find parking. But actual ocean front beach within 10 minutes!
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January 14th, 2010 at 10:50 am 13
@Tor:
Well I admire your compassion, but I think these people are getting exactly what is coming to them. Remember these people are not bystanders, but active participants in this idiocy.
There will be much moaning and gnashing of teeth in the coming year.
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January 14th, 2010 at 10:50 am 14
"After the Olympics furnished rentals will probably
be as bad as the current Haitian disaster. È
———–
Good, because I need a new one come August. Hopefully plentiful pickings.
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January 14th, 2010 at 11:53 am 15
Shifting bad policy onto even more suckers has the city 'planners' proposing 4 more rabbit warren towers in downtown Shitsville. "View corridors? We don't need no steekin view corridors" This is all about 'building' extra tax revenue into a failed city budget. Why do you think they've already reduced livable area guidelines (that were also written in stone until more money was desired)
Instead of firing all the parasites currently sucking the blood out of the tax payer we have a new system that mandates that everyones brother in law 'must' recieve a city job and full pension. What a fucking joke!!!!
Of course they're selling this as 'Oh we're going to make them soooooo green". Boob Rennie dissed the sheeple with his 'our neighbourhood' ads re the DTES. Doesn't this population ever learn? Its all bullshit designed to juice up city revenue without having to manage a city budget. Everyone knows now that the whole climate change routine has all been a big scam to drive up tax revenues. Selling green now is like a pervert in a jail cell flashing his cock on the library web cam. It's over.
The shoebox condo's that can't be lived in and the green bullshit is sooooo over.. That is until the suckers line up in the rain to
"My huzba buy treeeeeee, I buy treeeeeeeeeeeeeee!!!!!"
http://www.vancouversun.com/news/Four+massive+hig…
You have to be a real loser asshole to be falling for these scams.Oh, has anyone wondered if the phony intrest rate scam is just about ready to stick a fork in? Bought any groceries lately?
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January 14th, 2010 at 12:04 pm 16
Survey by 'Mortgage Brokers' (how balanced would that be) says that borrowers are just fine, not taking any chances. Excuse me? The average mortgage is over 1/2 a million and the wage is what? Under 70K? Nope, everything is just fine…… at zero percent!!!!! lolololololololol
http://www.financialpost.com/news-sectors/economy…
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January 14th, 2010 at 12:20 pm 17
There's gotta be something in the water here, I swear. People in this town are simply U N B E L I E V A B L E !
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January 14th, 2010 at 12:22 pm 18
RP,
just for clarification for me (and to spare me googling),
70K, is that the average household income in YVR? (such that average income per person would be about 2.5 times less)
In any case, it sure doesnt fit the traditional 32%/39% of gross monthly income formula that loan officers used to follow (in the US anyways).
Then again how much income is unreported supplemental in the form of a illegal suite. we may never know.
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January 14th, 2010 at 12:36 pm 19
I rented all five of my units for $15000 for the olympics no problem long time ago money in the bank. Easy to do if you're smart like me. It's usually only whiteys who lose the money on this game. 1 of the units I rented is a sublet from a whitey who charged too little!!! You snooze you lose.
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January 14th, 2010 at 12:49 pm 20
I'm thinking of sub-letting my rented West End apartment for at least 2 weeks, but am not sure. I'll see what demand is like in February. I know that I'll definitely take one week to find some sun, but do want to be back for the semi-finals and finals of the men's hockey competition.
A colleague, who is from a Scandinavian country, just rented his 1BR and den on Pt. Grey Road for $2000 for the week. He did it by going onto a Norwegian web site (don't know which one) and found somebody relatively quickly. That may be an avenue. If anyone's interested, I can find out the URL and pass it along. The Norwegians love their winter sports.
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January 14th, 2010 at 12:52 pm 21
rich asian,
just curious, how much profit will you make? you mention 15K for 5 units, but what are the costs that you will incur? or has that already been factored in (ie. take out from your figure of 15K).
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January 14th, 2010 at 1:01 pm 22
@SD92129:
"just for clarification for me (and to spare me googling),
70K, is that the average household income in YVR? (such that average income per person would be about 2.5 times less)" (I presume you mean to say the average household income = 2.5 x the average individual income)
Average is actually below 70k, household income is based on occupied dwellings so the individual average income is probably more like 65-75% of the average household income since there aren't very many homes with more than two incomes and there are a fair amount with only one income.
Also, "2.5 times less" is not mathematically correct in any sense unless the number you were multiplying was a negative one.
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January 14th, 2010 at 1:03 pm 23
@shikko:
I am shocked — shocked — that the people of the Lower Mainland displayed a lack sense and logic about their housing.
Shocked? You don't think that all the weed grown here goes to the US do you?
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January 14th, 2010 at 1:13 pm 24
Scotiabanks has decided to do a little "freestyle" Olympic promotion:
http://www.cbc.ca/canada/british-columbia/story/2…
Let's see if VANOC has the stones to pick on someone their own size, or if bullying artists, free speechers, and small restaurant owners is more their speed.
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January 14th, 2010 at 1:18 pm 25
More good Olympic news: NBC predicts it will loose money broadcasting them:
http://sports.yahoo.com/olympics/news;_ylt=AquMqd…
…but they say coverage will be unafected….right!
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January 14th, 2010 at 1:20 pm 26
RENT YOUR UNIT FOR $7000-$15,000
I don't think Olympics rental are over supplied because there are tonz of sites for listing so one unit is listed atleast 1*10 times and with lots of different titles and pricing where 100 will look like 1000,Few things to keep in mind.
1. Lots of pimps from usa are using lots of excuse to get your unit at cheap prices,They will rent your unit for $1500 and they will hand it over to their corporate clients for $10.000 it's like buying cheap stock and sell it on high prices.
2.Keep the posted prices firm,keep using same patren,address,and detail on all the listing sites.
3.Vacation rental had lots of issue's with Owners insurance it not worth renting your unit on cheap prices because you may have to pay higher prices to cover any kind of damage to fully furnished unit.Vistors may not be familiar to policy and procedures and they may not be familiar how to use your utilities,if someone lost their game your units are in danger.
4.If any fraud tenant is using your unit any object removal from the unit can cost you atleast $10k ie computer,tv etc.
5.Those who want to win humantarian award can rent out their units for free and those who are unable to rent it out on posted prices just leave it empty to save after game hassel,Do not plan for clean up after dogs.
Technical point for the flop show
Olympics dates are patial in two sets 12-4 and 4-21mental disorder,venues are split in five directions time consuming process,These games could be a flop show with under supply or over supply.
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January 14th, 2010 at 1:23 pm 27
Last link, promise:
Majority of Canadians are locking in their mortgages at current rates.
Do they know something the rest of us "confident" consumers don't? I thought there was no way the BOC would raise rates…
http://www.cbc.ca/money/story/2010/01/14/mortgage…
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January 14th, 2010 at 1:40 pm 28
I rented out parts of the my Richmond rental apartment to some Chinese corporations . They have too much stimulus funding floating around so it was easy to get the full listing price – between 3000-5000 per week depending on the unit. They are not too good at negotiating, or at identifying value. My chinese tenants were not too happy when their lease was up last year. I offered to extend it at the same rate as the corporations but they don't have the money. It is amazing how many people in Richmond just project wealth when they are struggling so much. Oh well, I get to enjoy the games from my point grey place – cannot wait for the English Bay light show!
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January 14th, 2010 at 1:48 pm 29
SD92129 Says: Just curious, how much profit will you make? you mention 15K for 5 units, but what are the costs that you will incur? or has that already been factored in (ie. take out from your figure of 15K).
*****
Dude, just for clarification, he is a troll. I know you do not live here, but you cannot take anything he posts at face value.
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January 14th, 2010 at 2:22 pm 30
Big John,
Just for clarification, dont worry, I dont take anything here at face value. Like most bright and successful individuals on this site, we did not get to where we are listening to some anonymous poster and acting on his "tips", "stories" or "BS". Nothing wrong with a little polite dialogue. But I imagine situations where your concern is well placed like for those who are easily decieved.
Probably like for most people here, this site is for entertainment, sharing a few stories and interacting/discussing/arguing with other people in an anonymous fashion.
Trolls have their function also. When things get dull, they leak a little stupid juice from their pie holes to get things fired up. Although some do it more offensively than others (probably do to poor upbringing, low self-esteem, false sense of being, etc.)
Anyways, for all those Olympic landlords, I hope your business plan included contingencies/insurance for things like a U.S. Men's Hockey Nagano-type incident.
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January 14th, 2010 at 2:25 pm 31
22 Drachen – I don't know if this is what you're referring to (I think it was posted on this site a month or so ago…)by a guy named Denninger:
"It's worse in places like Vancouver – there the ratio is over 10 (!) for single-family homes and about 8x for all residences.
Let me be clear, strictly on the numbers:
Canada is in for a housing bust WORSE THAN OURS."
Beware Canadians….. you can argue over the timing of the outcome here, but if you think the "bad event" won't happen and act on that belief, don't cry when a year or three down the road I start piping up with "I told you so!"
Link to full article:
http://market-ticker.denninger.net/archives/1737-…
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January 14th, 2010 at 2:43 pm 32
Looks like all those "rich asians" are causing problems back home as well.
http://www.washingtonpost.com/wp-dyn/content/arti…
"With China acting as a key engine of global growth, a bursting of the Chinese real estate bubble could be a pop heard round the world."
"But it won't break because there is lots of support beneath the bubble because buying power is really strong"… with people willing to sell themselves to prostitution to own a little concrete box in the sky.
Hmmmm…. must be that China is the best place on earth and all rich westerners want to live there.
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January 14th, 2010 at 3:02 pm 33
@SD92129
Mortgage rules in Canada are currently 35%/44%, not 32%/39%. They used to be 32%/40% 6 years ago when I bought my house.
Worse, they are not strictly 35%/44%.
- With a credit score of 680+ the 35% becomes unlimited (essentially up to 44%)
- With a credit score of 720+ the 44% can be raised to 46-47% (and thus the 35% is essentially unlimited to 46-47%)
Scary eh?
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January 14th, 2010 at 3:17 pm 34
@Bubble Lad:
I was actually just correcting the math in a previous post. But yeah ratios here are way out to lunch but all three methods of determining fundamental value of real-estate show about a 2.5-3x difference between where we are and where a "normal" market rests. Using the standard methods for arriving at a fundamental value I find that the last year in which houses were appropriately valued in Vancouver was around '86-87, which happens to coincide with the timing when the CMHC started insuring mortgages.
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January 14th, 2010 at 4:08 pm 35
taylor,
How different are the mortgages from the bubblicious days of 2004-2005 in the US vs non-bubble we have today?
I recall an option ARM (yeah, its negative amortization, but it gets you the most house that you can qualify for) offer at 1.2%. Lets assume 70K annual (YVR average from above). 32% of you 5833 gross/month is 1867 which at 1.2% ($331/100K/month) allows you to take on 564K.
Today, checking in with PC mortgages, 1-year variable is 2.15. So your 44% of $5833 is 2567 which at 2.15% ($377/100K/month) allows you to take on 681K.
As you can see, my back of the envelop says that we are giving away mortgages just like Countrywide back in the good ol' days. Arguably, we are letting people take on more debt than before. Now, can we make the same comparison for Alt-A (no doc loans)? Do they have those here? I thought someone said that CIBC had these "hassle-free loans" that have "streamlined" application processes.
What do you know…just checked it out and found it. There is nothing more annoying that having to prove your ability to repay a loan. Thanks CIBC.
https://www.cibc.com/ca/mortgages/self-employ-rec…
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January 14th, 2010 at 4:45 pm 36
@SD92129
We certainly are giving away mortgages like back in the day. Today's mortgages can be compared to option-ARMs in that they will reset to higher rates when renewed. The difference is I doubt the rate increase will be as much, and definitely not as quickly. Most mortgages here reset every 5 years, so those with fixed mortgages (70% of us) have 5 years to plan. In addition, those of us with fixed mortgages will probably only see a 1-3% increase as 4% fixed rates reset to 5-8%. This is not as bad as the option ARMs that reset quickly from 1% to 6%.
Variable rate mortgages will be most affected, yet even then its not as bad as everyone things. To qualify for a variable rate mortgage, most banks will qualify you at the rate + a percentage to account for the rate possibly rising. Thus your math isn't exactly correct since the bank wouldn't use 2.15%, they'd more likely use 4% reducing the $681K amount to $450K. That's still a high figure though and should be much less.
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January 14th, 2010 at 4:45 pm 37
@Bubble Lad:
What percent of the BC real estate market is Vancouver SFH's? 5%? 10%? So what sense to use average BC family incomes to judge affordability of this market subsector? In other words, who cares what the multiplier is when judging a Vancouver SFH?
The average BC home is something around $450k, but maybe only 1/2 of the housing in BC is SFH. And we have to remove renters from the equation (1/3 of people). Thus, the average homeowner isn't your average demographic. Roughly, your average SFH buyer is in the upper 1/3rd of income earners.
Not so scary any more, is it?
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January 14th, 2010 at 4:55 pm 38
@Dave:
I was just pointing out the link I thought would be helpful, not trying to start a bun fight.
But personally, I do think that maybe spending 10x your annual income on a house might be a tad foolhardy.
But hey, it's your money, spend it how you like. Best of luck.
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January 14th, 2010 at 5:05 pm 39
@Bubble Lad:
My motivations are the same as you… just trying to be helpful. I agree with you that spending 10x you income on a home would be foolhardy.
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January 14th, 2010 at 5:12 pm 40
@Dave:
"You just demonstrated that your method of valuation has been useless for 24 years."
How many times do I have to say it. The man who predicts the sun will rise is not wrong between midnight and 6 AM, only to suddenly be right when the sun does rise. This is not a method of valuation, it is a method to predict FUTURE valuation.
Personally I think predicting the future is pretty useful but if you want a method to predict what the market did yesterday by all means everyone listen to Dave because he apparently considers that "useful" and predicting the future "useless". IF you win our little bet then you can again attempt to lecture me on these things, but as of now you are sitting at 0 for 5 in the prediction game so I think my odds are pretty good.
Right is right, fundamental evaluation does not tell you what the property will sell for TODAY it just tells what the fundamental value of an asset is and therefore the price to which it will certainly return in the future. Again this is how Warren Buffet made his money and as the saying goes, "37 billion dollars can't ALL be wrong can they?" He's either the most phenomenally lucky person in the history of everything or fundamental analysis WORKS.
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January 14th, 2010 at 5:17 pm 41
@Drachen: Right on! If the insanity lasts longer than anyone would have predicted, does it mean it is no longer insanity?
If you want to look at the past 10 years and extrapolate over the next 10 years, do so at your peril. And, please, don't say that you were not warned.
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January 14th, 2010 at 5:18 pm 42
@Dave 38/40: So considering that price/income ratios have been trending upwards for 20+ years, what do you consider a reasonable value in today's environment, 6x, 8x? Or do we just throw this metric out the window and use different metrics for valuation?
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January 14th, 2010 at 5:19 pm 43
@Drachen:
You are 0 for 24 by your own math.
I called the correction, I called peak listings, I called the bottom and I called the recovery. That's 4 for 4.
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January 14th, 2010 at 5:26 pm 44
@Purp:
I think affordability is the best metric. And of interest, we are still within historic norms at present.
I think that over time, affordability will naturally decline due to higher density. I think a better affordability metric would be to separate each class of real estate (SFH, attached and condo) and apply average family incomes for that particular demographic that is BUYING real estate.
I don't think averages work well anymore because there aren't enough SFH lots to go around.
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January 14th, 2010 at 5:28 pm 45
@domus:
That cuts both ways. There are risks to waiting as well.
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January 14th, 2010 at 5:42 pm 46
@Dave:
Wow, man you could give the "No terrorist attacks during Bush Presidency" Righties a lesson in revisionist history Dave.
"You are 0 for 24 by your own math."
Seriously? Is the sunrise analogy too much for your brain to handle? I thought I was dumbing things down enough for you, apparently not…
Look, every prediction you made and the bet you made with Freako were substantially wrong.
Yes you called for a correction but you said it would correct and stabilize, it did not, it spiked which means you were WRONG.
You called a listings peak time and you told us how much it would fall by a given date, you were off by a month (or was it two) on your peak call and off on the amount of the fall. How you can put that in your win column is beyond exaggeration, it's absolutely not true.
You may have called the bottom accurately, I was on a bit of a Hiatus from this site during that time, but given the accuracy of your recall I doubt it.
You may have also called a recovery to peak prices but if you did it was a revision of an earlier call you made (market would be relatively flat after the fall) so if you WANT to call every possible combination of events I suppose you will be right some of the time.
Again, not one accurate prediction, you occasionally are not laughably wrong but mostly you're only half right or you're just plain wrong.
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January 14th, 2010 at 5:49 pm 47
taylor:
"Thus your math isn’t exactly correct since the bank wouldn’t use 2.15%…"
I got this from:
http://www.banking.pcfinancial.ca/a/rates/theUnbe…
I thought the 2.15% that they are advertising for the variable 5 year term is their index + margin (in this case, 2.25% – 0.1%).
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January 14th, 2010 at 6:01 pm 48
http://www.cbc.ca/fp/story/2010/01/14/2440804.htm…
It's official,no housing bubble in Canada.
And we do trust the pimps who put out this report don't we.
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January 14th, 2010 at 6:07 pm 49
@Drachen:
Missing a bet and being incorrect are different. My prediction was correct, my 'bet' was not.
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January 14th, 2010 at 6:19 pm 50
@SD92129
You are correct, the advertised rate is 2.15%. That is the rate of the loan, not the rate used to calculate if you qualify for the loan. You will have to qualify at a higher rate since its variable and can go up as the prime rate increases.
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January 14th, 2010 at 6:32 pm 51
In general, what will the qualify you at? a 5 year fixed?
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January 14th, 2010 at 7:34 pm 52
@Dave:
"Missing a bet and being incorrect are different. My prediction was correct, my ‘bet’ was not."
What planet do you come from, seriously? You MADE the prediction THEN Freako made the bet that you'd be wrong (and I believe I took you up on it after him). How can you possibly claim that even though you lost the bet you weren't really wrong. I'm seriously beginning to wonder about how your brain is wired, there's some loose connections upstairs.
You're starting to go into your bizarre-erratic mode again, it usually comes up when you're in the middle of being conclusively proved wrong or a liar (or, as in this case both). Are you going to be like this when you lose our current bet too?
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January 14th, 2010 at 8:06 pm 53
It's so great to watch greedy Vancouverites get totally screwed.
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January 14th, 2010 at 9:01 pm 54
oh yeeaah nutslaps! OHlympics almost here! lets hope LOUngo's not goaly for shootout! Drackens' wife say
"browntown i want to party like its' 1988"
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January 14th, 2010 at 9:55 pm 55
@browntown: Drachen also owe big chunk of money from the bet he lost to his fellow bloggers, size of that payment is equal to 25% of then required payment almost $350,000. 25% value of the house that drachen is currently renting,Oh yeah if you don't believe me you could ask Drachen about his prediction that went otherway around,Down side UP.
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January 14th, 2010 at 9:58 pm 56
@Dave – how are you defining affordability, monthly payment vs income? What would you consider the range of historic norms for affordability?
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January 14th, 2010 at 10:20 pm 57
@Purp:
I think RBC uses a good measure. It uses a 5 year fixed rate, 25% down, 25 year mortgage and average household income.
http://www.rbc.com/economics/market/pdf/house.pdf
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January 14th, 2010 at 4:48 pm 58
@Drachen:
At what point do you re-evaluate your analysis? You just demonstrated that your method of valuation has been useless for 24 years. I would hate to be the guy who listened to your advice in 1988.
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January 15th, 2010 at 12:12 am 59
Apparently the banks are following up hard on people who inquire about mortgages, with the old "what can we do to get your business" calls. I guess that's when they offer you the 7% cash back on the 5% 35 year mortgages.
I assume that the big 5 banks will all have booths at the PNE next summer— strategically located between the Pink Solution and Shamwow.
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January 15th, 2010 at 12:38 am 60
Apparently the banks are following up hard on people who inquire about mortgages, with the old "what can we do to get your business" calls. I guess that's when they offer you the 7% cash back on the 5% 35 year mortgages.
I assume that the big 5 banks will all have booths at the PNE next summer— strategically located between the Pink Solution and Shamwow.
I can hear it now:
"STEP RIGHT UP!! Get your government guaranteed mortgage. Loans up to 5 times your income.
Is a 5% down payment too much? Well, this is what I'm gonna do for ya' today: Not only will I give you back 100% of your down payment, I'll through in an extra 2%!!!
Yes that's right— you heard it here first. But this offer wont last long, so you better take advantage of it while you still can.
What sir, you don't have a job…No problem, did you know that the fastest growing group of workers are self employed? Our mortgage broker will take care of all that for ya' with a few strategically placed smudge marks— if you know what I mean.
So come on!! Whatta' ya' have to lose. The tax payers are willing to take 95% of the risk, and we'll pick up the rest. So whatta' ya' say, that $350,000 studio apartment doesn't look so expensive now, does it!!!
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January 15th, 2010 at 12:54 am 61
@Drachen: Ach, don't let Dave get to you! He's just the slightly more well spoken version of richasian.
We know Dave's thoughts: monthly affordability. And he's right on the most basic level, insofar as People Are Buying Houses right now, and they're doing that because they can afford (right now) the monthly payment. Where "afford" means not miss their payments and still have enough combined cash and credit left over to feed themselves.
That's fine. We've heard that argument and seen the disproof in places all over the planet. (Or at least, I have heard the argument – I've been watching the states since 2003, and this is a very tired old saw.)
Even IF home prices never dropped here, it wouldn't be because Dave's argument makes sense.
He appears to have another argument – we don't have lots of land. And I suppose the corollary: developers and government here are too goddamned stupid to make rowhouses or family sized condos at a reasonable price point or employ any other density-necessary solution as used the world over. Doesn't work because condos are overpriced too – moreso, in fact – & all those new builds commanding premium prices are starting to get shabby starting yesterday.
And the nail in that coffin: I'm renting a house. Moved in during the summer – market prices at the time. So the SFH is not such a rare and precious bird as to be out of reach for the working stiff… Bloody goofy argument. Like those landlords downtown losing in court and saying it's unfair because the renters are paying only half their carrying costs. Hint: it's not their fault you paid too much.
Jack the rents, the vacancy rate goes up, and you linger with empty suites.
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January 15th, 2010 at 1:20 am 62
@Absinthe:
Would you care to clarify? Which landlords? I'm curious. And who has been suing whom?
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January 15th, 2010 at 3:36 am 63
@Dave:
Why don't we forget about "affordability", which is based on conjectures about which households with which incomes are buying which properties, and just look at price/rent for a given property, and its reciprocal, yield, which are completely objective?
Price/rent for any kind of property in Vancouver is comparable to the highest priced markets in the US in 2006. And net yield, i.e. (rent – expenses)/price, for any property in Vancouver is below borrowing costs, which today are at historic lows.
If that's not a bubble, I would like to know what is.
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January 15th, 2010 at 4:45 am 64
http://www.calculatedriskblog.com/2010/01/manhatt…
But that can't happen here, because we're a "world class" city and we're running out of land.
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January 15th, 2010 at 8:29 am 65
@oneangryslav2: Seafield Apartments – their building was bought a couple years ago now and right after the new landlords came in, they wanted to increase people's rents by something wild like 78%. Housing Analysis featured the RTO decision … um, in the spring? I don't really know. The RTO allowed some rents to be increased. Anyway, the Supreme Court overturned that decision yesterday because of too few comparables. Sounds like the tenants had comparables, too, that the officer didn't look at.
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January 15th, 2010 at 9:45 am 66
@Dave — Thanks for the link to the RBC report. I'm not sure it really makes your point about affordability though, quote from the Vancouver section (pg. 4) — "This near frenzied tone to the market is occurring despite still historically poor, and now deteriorating, levels of affordability….even though the affordability measures fell substantially during 2008 and early 2009, they remain well above long term averages."
Interestingly when you lay the 'affordability' graph overtop the 'price/income ratio' graph for Vancouver you get pretty much the same shape. Both have long term increasing trends. It's obvious this trend is not sustainable long term, but the question is what is the new 'normal'? I doubt we will revert back to the days of 4x income and <30% income anytime soon. Wishing away the CMHC and cheaper money is probably not going to work, so where do we end up, 7x income, 60% affordability?
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January 15th, 2010 at 9:47 am 67
absinthe- re jacking the rent and house sits vacant-
I have rented for the last 4 years in both Ireland and Canada in 2 different houses. I get the feeling there are a lot of amateur landlords out there based on the prices I see them asking.
My current landlord undercharges me by a few hundred a month- which is a wise strategy.
Ever heard of "work to rule?" If he jacked the rent on me I would be all over him about every little thing that needs fixing.IT would not take much of my time or energy, but it would make his life miserable, and that would be the point. For the extra $200 a month he got from me I would extract $500 worth of pain in the neck.
But because he undercharges me, I let it slide or fix it myself, and I don't leave because he knows I am paying less than anywhere else.
I look at the prices landlords are asking and wonder what they are thinking… do they actually get these rents or do people talk them down? I'd like to find a bigger house, but landlords are still asking too much IMHO. I generally offer 85-90% of the asking monthly rent. some refuse right away, some think about it- none have accepted yet.
Anyone have any experience/anecdotes on the asking vs agreed rents?
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January 15th, 2010 at 12:00 pm 68
@Purp – The problem with permenantly higher arguments is that RE doesn't operate in an economic vacuum.
We can't have 60% of income monthly housing cost long term and have a healthy economy! People need to pay for other things for the economy to work. We can have pockets of gentrification and expensive cities compared to income, for sure, but after a point – when the credit needs paying and is not an increasing influx stimulating the economy – you cannot keep climbing. We're spending more than we make. Someday, we're going to have to make more than we spend in order to service that debt.
Of course, in some developing nations RE sits at 60% or 200% or whatever. So, sure, if we're aiming that direction. End of the first world and the middle class – all of us living in shantytowns? I think it an unlikely scenario in the near term.
There is a finite pool of money+credit. Credit's been growing. Money hasn't. We're spending more than we make. Unless incomes suddenly and shockingly reflect productivity gains for the middle and working classes, and there's no sign of that happening, a contraction of some sort is a mathematical certainty. Because demand will drop for everything.
There's a kink in the demand chain when people are spending too much on housing. It's only been possible re: credit.
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January 15th, 2010 at 4:21 pm 69
[...] Olympigs 14 Jan 2010 10:49 am – “A unit at 555 Jervis advertised in Craiglist for the past year has been asking from $3,500 to $5,000 and now $3,000. It was previously rented for a paltry $2,000 p.m.” [...]
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