Vancouver ‘severely unaffordable’
News Flash! This just in, hot off the presses! Vancouver has become one of the most unaffordable cities in the world.
Vancouver not only has the least affordable housing of 28 markets measured in Canada, but of 272 metropolitan markets ranked in Ireland, the U.K., New Zealand, Australia, the U.S. and Canada, according to statistics compiled by the Winnipeg-based Frontier Centre for Public Policy.
We’re number one! We’re number one!
The numbers are calculated by dividing the median (or middle) residential house sale price from the third quarter by median annual gross household income. In Vancouver, for example, a median home price of $540,900 was divided by median household income of $58,200 to create a multiple of 9.3. The group describes as “severely unaffordable” any reading of 5.1 and over.
Not only that, it is “unprecedented in modern history,” the group said.
Ah! A brave new era! We’ve broken records and surely now prices have nowhere to go but up! Congratulations to everyone who took part in the contest by bidding up home prices, and a special thanks to the CMHC. I don’t think we could have done it without your generous support!
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January 25th, 2010 at 11:17 am
As XXXciting as you know what!
January 25th, 2010 at 11:23 am
Not only that, it is “unprecedented in modern history,” the group said.
Either we really are different or….. look out.
Time will tell.
January 25th, 2010 at 11:51 am
Two things
1. They are looking at price to income ratios. Why are they ignoring mortgage rates? There is a very good reason.
2. Vancouver is only unaffordable to BUY. If you don’t mind renting or living in a cooperative, the city isn’t as bad as they make out.
January 25th, 2010 at 11:57 am
Original article:
http://www.fcpp.org/publication.php/3153
Has more detailed info to read and compares against worldwide cities.
January 25th, 2010 at 12:01 pm
@jesse:
Aren’t the mortgage rates equal for the whole Canada?
We’re still “severely unaffordable” compared to everywhere else nationwide, regardless of rates.
January 25th, 2010 at 12:15 pm
I just puked on my desk.
January 25th, 2010 at 12:20 pm
@jesse: “1. They are looking at price to income ratios. Why are they ignoring mortgage rates? There is a very good reason.”
Umm, yeah. Like the fact that when budgeting a house purchase, relying on the lowest mortgage rates in Canadian history would be a pretty dumb thing to do.
“2. Vancouver is only unaffordable to BUY. If you don’t mind renting or living in a cooperative, the city isn’t as bad as they make out.”
Good luck getting into a coop, and neither coops nor rentals are particularly relevant to a study of the income adjusted cost of buying residential real estate. Assuming we were reading the same article, that is.
January 25th, 2010 at 12:40 pm
Are they saying Vancouver “affluence” (as measured by house prices versus incomes) is an illusion? That all our wealth is a… “house of cards”?
(gasps…staggers and stumbles…clutches at wall for balance)
My world is spinning…SPINNING!
January 25th, 2010 at 12:45 pm
Waiting…waiting for the crash.
And for those who say “Oh, well, it’s those rich foreigners who drive up the prices, the ones who don’t need to rely on local incomes to buy” well then, how come houses weren’t $900k before the takeover of Hong Kong in the 90s, when foreigners really WERE coming here in droves? Hmmm? Seems a little too coincidental that the house prices increase just as (almost) free money floods the market, doesn’t it? Forget the foreigners, they come here with not much money and have to make the same crappy wages as the rest of us.
January 25th, 2010 at 12:52 pm
I don’t have crappy wages (or a salary, as its know).
But I’m still not buying.
January 25th, 2010 at 1:13 pm
So I’ve been reading this blog for a while and while most commenters here tend to enjoy being Bearish, (and justifibly so in general terms), I’d like to hear ppl’s opinion on this case:
My wife and I have to move. Our commute to work is long (from Vancouver), we’re planning on having a kid so we need more space (1 brdm to 2 bdrms & den), and in that case we’re headed to Richmond so that we are close to my family (cheap daycare!). I’ve grown up there so I know the area.
Here’s the deal. We are renting in Fairview/South Granville area, great apartment for the last 4 years, $1100 in rent. Our landlords, once we move, can easily charge $1600. We are looking at buying in Richmond ~1 km from Richmond City Hall (& skytrain). This place is fully rain-screened, great strata, no huge issues. Meets all our requirements (2+ brdms, 2 baths, over 900 sq ft, storage locker, close to central Richmond, 2 parking spaces, top floor). The Master bedrom is a bit small, but not a big deal, we’ll manage. Built well by a reputable local firm. The building is 6 years with 300+ units total in the strata.
Price on the condo is $375K. Pricey! but owners looking for quick sale, so I might be able to get that down a few notches. $350-365K is manageable for us. May be able to put down 20% and avoid CMHC insurance costs (which will help as I’ve got to buy another used car!) but just barely.
So that’s the scenario. Should we hold out for the spring for more & better listings? This low interest rate is flooding the market with lots of FTHB’s like ourselves but we’re thankfully we’re no rush to buy (yet) but can’t put this off until next winter. We’ve been looking since last summer and this is only the 3rd condo in Richmond that fits what we want.
What would you do? When I compare the costs of renting right now and buying this place, it’s about a $600-700 more a month but would constitute 66% of my take home pay. And we still have my wife’s income as well so I think buying this condo is doable. Yes, in hindsight, buying 5 years ago would have been prudent but we wanted to travel while we were young and childless. We’re both now experience civic servants with stable incomes.
January 25th, 2010 at 1:22 pm
Hey 1st timer,
I would suggest you take a very serious look at this option,
http://public.metrovancouver.o.....fault.aspx
Before you buy the overpriced future-to-be-leaky-condo.
But if you have already made up your mind and are just looking for a confirmation on your decision, I guess you might not find it here.
Best regards
arit
January 25th, 2010 at 1:36 pm
@arit I don’t think this place will leak anytime in the next 10 years from what I’ve seen of it (but knock-on-wood, one never knows).
The thing I want to know from you all – if you had to buy NOW, what would you do to minimize yourselves from a downturn in the market? (Which, given this forum, sounds likely after interest rates increase in the Fall, the gov’t start cutting services/increasing taxes, and HST kicks in.)
Buying a place now with 5% down and supporting a family on one income is ridiculous but I see a lot of people doing it with the interest rates so low.
January 25th, 2010 at 1:37 pm
1700-1800 a month is 66% of your takehome pay?
To this you’ll have to add condo fees, insurance, etc etc, one assumes. And you are planning on having a kid, so your wife’s income will take a big hit while she is on maternity leave. Are you sure she wants to go back to work afterwards? Are you sure childcare will be free? (cos that can eat another 1000 a month easy with a young child).
I can’t tell you yes or no on your decision, but I would advise going over the math a few times, and build in a “what if interest rates go up to 6 or 7%”, and a “what if one of us gets sick” scenario into the math.
Best of luck.
January 25th, 2010 at 1:38 pm
“if you had to buy NOW”
——
But you don’t. Just rent somewhere bigger if you need the space.
January 25th, 2010 at 1:42 pm
@1st Time Home Buyer: You’re asking us if you should pay $600-$700/month more for an asset that will most likely depreciate? That question kind of answers itself, doesn’t it?
January 25th, 2010 at 1:55 pm
Based on the criteria that > 5.1 price to income ratio is ‘severely unaffordable’, we’ve been unaffordable since 1989. So what gives? Most of those bearish on real estate admit that prices made sense until sometime around 2002-2005.
Something is wrong with this analysis. Why 5.1?
Not disagreeing that the market is overpriced, but this article is a bit sensationalist in my view. Who is FCPP, and what is their agenda?
January 25th, 2010 at 1:55 pm
@logic Here’s my assumptions: 4.25% fixed, for 5 years. We’d pay $2100 for mortgage, insurance, condo fees, heat, cable & phone. That’s ~66% of my take home pay. Solely. Even with my wife on mat leave, we’d be fine on the budget. With her working right now, we’ve got a cushion to save. Right now we pay $1500 in rent.
@crabman Who knows what the future holds. Vancouver RE didn’t really appreciate in the 80′s & early 90′s until that interest rate dropped from 18% to 5%, right? I’m glad we didn’t buy at the peak of the market 2 years ago but wished we had maybe back in Feb/mar/April when there was 6+ months of inventory in Richmond. Right now, I think it hovers around 2-3 months for condos in Richmond.
January 25th, 2010 at 2:06 pm
Someone has to say it:
“It seems we have reached what looks like a permanently high plateau.”
January 25th, 2010 at 2:10 pm
Assuming the posters on this blog live here, I have one question: why?
If you own a house, why not sell it for an insane profit and move to a more exciting, warmer, higher income, less rain, much more affordable city? There are dozens of places that fit the latter description.
If you are renting, why not move for the reasons stated above?
With the most unaffordable RE in the world, cold, rain, lack of any world-class corporations, low salaries why stay here?
My answer, is: my wife is too attched to her Vancouver-based family to move. They all bought RE in the 1980′s so the bubble means nothing to them. If I had my way, I’d be in Seattle or Los Angeles in a heart beat.
January 25th, 2010 at 2:12 pm
Well, you’ve come on to a “bear” site to ask if you should buy or not. Very Gutsy! The simple truth is you get as much information for or against buying and make your decision. This is not like buying a toaster, you can’t return the condo to the seller if you don’t like the deal.
So here is another view. If your in your early twenties and you have to buy – then go big and have very little skin in the game. Buy in a new project, max out that mortgage and if things go sour in the market, stop making payments. The worst that will happen is a bad credit rating for a few short years and you will probably get to live in the condo for a year or more free.
Its happening in Vegas today. People have bought in new condo projects have not made bank payments for years. As long as they pay maintenance cost and keep the building heated the US banks are not evicting them. The banks prefer the complex to be maintained rather than vacant and deteriorating.
January 25th, 2010 at 2:14 pm
Take a look at the condo fees. That alone makes me want to continue to rent, or continue to save to buy a SFH. And keep in mind, stratas often like to hit you with “surprise” assessments, I often hear condo owners telling me they had to pay an extra $5k for a burst pipe, $15k for a new roof etc. Also consider, if the place goes down in value, you’ll in a sense, be “stuck” because there won’t be much equity left to upgrade (I assume you don’t want to raise your children in a condo forever? or who knows, maybe you do). I would say sit tight, wait until you actually have a child on the way (which allows you to save more!), or just find a rental in Richmond for the time being. There’s no rush is there?
January 25th, 2010 at 2:14 pm
@1st Time Home Buyer:
First time buyer,
I have the same dilemma.
Here is what I did – I used simple math using a very handy mortgage calculator I found on the web. According to it, here are the figures (but bear in mind this is very rough estimate – principal and interest only, no insurance, taxes or anything like that):
1. Buy now – pay $350K, get it on a variable rate – it’s about 2% at the moment, say it will get to 5% in 5 years, the average is 3.5%.
Your downpayment is 20% and you term is 25 years in both cases.
Here are the numbers: $1400 a month, $800 a month for interest, $600 for principal. After 5 years you would have paid off $38,000 of your mortgage, you have $242,000 to get refinanced after 5 years. @ 5.5% interest rates – your new payment is now ~$1470
2. Buy later- say the price drops to $250,000 after the “crash” but the interest rates are @ 5.5% now. Your payment will be $1220 a month, $900 goes to interest and $315 to principal. After 5 years you would have paid off $21,000 of your mortgage. Refinance after 5 years at 5.5%, your payment is less than $1100/month
Please draw your own conclusions, but this has helped me to make my decision if I should buy, or wait just a bit longer and see what happens. The rates aren’t going anywhere for a while anyway and from what I hear inventory just started to grow.
January 25th, 2010 at 2:16 pm
So here is another view. If your in your early twenties and you have to buy – then go big and have very little skin in the game. Buy in a new project, max out that mortgage and if things go sour in the market, stop making payments. The worst that will happen is a bad credit rating for a few short years and you will probably get to live in the condo for a year or more free.
I think a lot of that is already happening (young adult speculation) and why I think Canada’s crowing about subprimes in the States is going to shortly bite us in the ass
January 25th, 2010 at 2:20 pm
@1st Time Home Buyer: I’m glad we didn’t buy at the peak of the market 2 years ago
I’ll bet! You would have paid 1.1% more!
http://www.rebgv.org/housing-p.....2009-12-01
January 25th, 2010 at 2:36 pm
@1st Time Home Buyer:
Condos are worth 120x rent at the very most. What would the condo rent for? Well I doubt it would rent for more than this one:
$1595 / 2br – Richmond’s Finest Building Lotus
Which means the condo you’re looking at can’t be worth more than $200K in fundamental terms, and I’m as sure as I am about anything the market price will fall to that. Or less.
Oh BTW condo rents are falling.
January 25th, 2010 at 2:39 pm
@VRENGD Dude, Vancouver rocks. You’re talking to someone who’s born and raised here. Yeah, it’s expensive to buy here but hey, I’m not into moving anywhere else. I’d probably feel the same if I was in your position though. Each to their own, i suppose.
@crabman There was only one other realtor and their client at the viewing. Maybe 2-3 yrs ago there would have been 5. So let’s have it, if you had to buy, what would you do?
@Gordon C yeah, thanks. But not making payments b/c you’ve decided to back yourself into a corner financially is a chicken-shit move. If you’ve got extra $$ to blow on an investment like that, go for it, but that’s just something I’d remotely consider for my primary residence.
@smartypants Thanks for the info. Much appreciated. I’m ready to stay in this place even if the market crashes by a third.
January 25th, 2010 at 2:39 pm
1st time:
We’d pay $2100 for mortgage, insurance, condo fees, heat, cable & phone. That’s ~66%
These numbers don’t work for me personally, I do not know about you but it seems way less than the real values.
Two more things: a. If the condo leaks in 10 years, you still have to pay the fix since it’s your condo. Not if you rent.
b. Kids are VERY expensive. I envy you for having ‘free’ child care, but even with that, it’s a bottomless pit.
VRENGD
Why? Why do we stay here?
Our reasons are different than yours: We wanted to live in a boring place, where nothing really happens. We came from a place where buses explode.
We could have chosen the US, but we don’t like their flavor of capitalism and arrogance.
The final choice was the following three countries: Spain, Australia, Canada. Our magic ball told us the buses will sometime start exploding in Spain and Australia as well, so we chose Canada.
Out of all Canada, here is the least cold, and being from a warm climate, we don’t do well in snow. So for us it IS the best place on earth. But we are not buying.
Regards
arit
January 25th, 2010 at 2:42 pm
@1st Time Home Buyer: Are you paying 1100/month for rent or 1500/month?
January 25th, 2010 at 2:43 pm
@Starving Artist:
One, mortgages are recourse in BC (and in most of the US contrary to what people think BTW).
Two, the reasons why banks in the US are letting people get behind on payments without foreclosing are that in many cases they are just too busy to handle the foreclosure, and many of them don’t want to have the foreclosure losses show up on their books yet. In Canada the banks are national and have far more resources to handle foreclosures (more than 1/2 of which will be in BC), and CMHC insures the loan so they have an incentive to foreclose as quickly as they can and get their cash back.
Three, CMHC (or the credit agency which it sells the debt to) WILL pursue each and every defaulter until they pay up or declare bankruptcy.
But I think those buying today are thinking as you say. Well they have a few surprises coming.
January 25th, 2010 at 2:55 pm
Just for some clarification patriotz (#30), are you sure that bankruptcy will prevent any garnishment of wages due to defaulting and foreclosure on a recourse loan?
And for 1st Time, opinion from an anonymous internet site does not constitute real legal/financial advice. This is almost for entertainment purposes only. buying a home is generally one’s largest financial transaction in life. don’t go into it lightly. In the past, young/naive/uniformed people did fine because the market ran up and no one lost money. If the ride does go down, it definetly wont be as fun.
January 25th, 2010 at 2:56 pm
@1st Time Home Buyer: I feel bad for this next generation of kids, who live in a small apartment, have no yard, both parent’s are working, being raised in daycare.
I say this with 2 young kid’s myself who live in our smallish 1100sqft apartment. I feel pretty luck that we can survive on 1 income because we are in a non-profit family building and have plenty for a down payment when prices drop.
You need to seriously consider if you want to limit yourself to 1 child by buying a small 2 bedroom apartment. You need to realize even if you and your wife don’t think so now you have a very significant risk that your wife will want to stay at home with the kid(s). By buying a place you can hardly afford you are forcing her decision to go back to work immediately. You might be adding an enormous amount of stress on her self esteem as a parent and your relationship.
Buying is not the only option.
January 25th, 2010 at 2:57 pm
@Anonymous We are paying $1500-1600/mo total at the rental place. (Rent, parking, cable/internet/TV/phone, hydro/heat/gas, phone, insurance, misc expenses like new furniture over the years). That’s everything I consider MUST PAY expenses for a roof over my head and inside the apartment
For any potential condo that we are looking to buy, I calculate this to include Mortgage, strata fee, property taxes, cable/internet/TV/phones, hydro/heat/gas, insurance, & misc expenses like new furniture over the years). When I calculate the mortgage on the new place, I use a 4.25 fixed interest rate with a 20% DP on the listing price.
Gotta try and compare apples to apples. I found that the devil is in the details when it comes to the info in the RE listings.
January 25th, 2010 at 3:12 pm
@SD92129 Yup, I hear ya on the “website” thing. Besides reading this and Garth Turner, we’ve thought about it lots. Hard to hear dissenting opinions from family and friends and our realtor when everyone has bought and sold places. I find it useful to hear reasoned and valid arguments here.
@JordanClark This is the big reason for moving to Richmond. Family has told us that they are very keen on helping out with childcare. My wife likes to work and she’s very reasonable. She has the option to work part time when the kids “arrive”.
January 25th, 2010 at 3:17 pm
@SD92129:
A bankruptcy judgment is binding on the debtor and creditors. The creditors have to take what the judgment gives them and cannot come back and ask for more. Now the judgment could include garnishment of future earnings, but I don’t think that happens much.
But I’m not quite sure you and I are talking about the same thing. Bankruptcy is a legal proceeding, it doesn’t mean “I can’t pay my bills”.
January 25th, 2010 at 3:38 pm
@1st Time Home Buyer:
I wasn’t living in Vancouver when my sister and her husband decided to have children. Prior to that blessed event my parents and my sister’s husband’s family were also “very keen” on helping out with childcare. And they continued to be keen when the beautiful baby was born, just not “very” keen. But that keenness wavered even more upon the birth of child number two, and by the time child number three had arrived, I’d characterize everybody’s willingness to help out as…well, what’s an antonymic term for “very keen”?
This meant that my sister could not continue to work–even part-time–and their standard of living almost fifteen years on continues to be less than it would have been had the “very keen” help materialized as expected.
January 25th, 2010 at 3:41 pm
Patriotz, thanks, just read what you just mentioned. Future earnings can be considered part of teh bankruptcy settlement. Another juicy tidbit is that the previous 12 months RRSP’s are part of teh bankruptcy estate in non-RRSP exempt provinces. Not sure what BC’s status is on that. Either way, I have a feeling that they (the creditors lawyers) are going to try to get as much out of someone as legally possible in bankruptcy court.
January 25th, 2010 at 3:49 pm
@1st Time Home Buyer:
Everything else aside, crunch the numbers on a 20%-down mortgage and a <20%-down mortgage. With CMHC holding the bag for the latter and not the bank, you might find that you'll be offered a better interest rate (or, put another way since your quoted rate probably assumes a lower down payment, find out how much more the interest rate will be if you put 20% down).
January 25th, 2010 at 3:51 pm
@oneangryslav2 Ugh. That’s unfortunate. I see your point. My bro already has a kid and we’ve talked about the childcare situation. Having him and my folks nearby is a huge deal for all of us, so it hasn’t been a decision taken lightly either.
If anyone thinks getting an affordable place in Vancouver is an adventure, try finding reasonable and affordable daycare. From what my friends with offspring have told me, that’s a more of a challenge.
January 25th, 2010 at 3:55 pm
1st time home buyer:
Here is my opinion. Don’t compromise in order to buy. Only buy if you can get the place of your dreams. Otherwise, you should be renting. You will quickly find that 2 bedrooms is not big enough to raise a child once he starts running around. Only buy if the cost is comparable to renting. That means comparing renting in Richmond to buying in Richmond. For the money you are willing to spend on buying, you could rent an entire house in Richmond or a nice townhouse in Vancouver. If your salary is fixed, surely you want to keep your housing costs more or less fixed? Having a child can be a life altering event, it is impossible to predict what your life will be like with one. My advice, have the child in your current apartment, then move when your child is 12 months old or older to another place. But remember, do not compromise in order to buy, as you will be stuck there for many years – you better love the place!
How sad – it requires two good incomes to buy a nice condo in Richmond!
January 25th, 2010 at 4:19 pm
@Gordon C
“So here is another view. If your in your early twenties and you have to buy – then go big and have very little skin in the game. Buy in a new project, max out that mortgage and if things go sour in the market, stop making payments. The worst that will happen is a bad credit rating for a few short years and you will probably get to live in the condo for a year or more free.”
A few short years is 7 years, IF you’re allowed to declare bankruptcy. Otherwise the bank can seize all your assets (except RRSPs) and garnish your ages.
To declare bankruptcy you have to fail an income test. Thus if you qualified for the mortgage recently, and haven’t lost your job, most likely you’ll pass the income test and be subject to paying off your debts.
We’re often fooled by US statistics. The bankruptcy income test is much easier in the US to fail, thus why even Americans with recourse mortgages can walk away from their debt.
January 25th, 2010 at 4:24 pm
@1st Time Home Buyer
My parents rented when my brother and I were young. There’s nothing wrong with renting and having a family, especially in this market.
There is something wrong with paying 66% of your income towards housing. Do you want a family or a house? I’d rather have the disposable income to spend on my family, than some box in the sky.
Why do you want to own? Its no more secure than renting (actually less secure if you’re paying such a high percentage of your income to own), and its not like you can personalize a condo very much (especially when you’re unable to save $$$ for renos since its all going to the mortgage).
January 25th, 2010 at 4:29 pm
this is to say
“more stupid people in Vancouver”
January 25th, 2010 at 4:30 pm
@JordanClark
Don’t feel bad for this generation of kids. Both sets of my grandparents owned small (~1200sqft) bungalows and had 6 kids. They slept 2-3 kids to a room. My parents and aunts/uncles all turned out just fine, with tons of rewarding stories about growing up to listen to.
I shared a room with my little brother, we had bunk beds. I don’t feel deprived cause of it (except those times I fell off the top bunk while asleep
.
I feel bad for the parents. My grandparents paid very little for their homes and had enough money to spend on kids.
January 25th, 2010 at 4:52 pm
@Anonymous #44
Bungalows with yards, that’s a huge difference. We take our kids to the park across the street every day it’s not pissing rain (not many lately) but we can’t just let them go out and play in the yard on their own like your parents or grandparent’s used to be able to do.
Did your grandparents have a dog or cat? Its a luxury that not many rents or owners can have in an apartment.
Did both of your grandparents work just to afford to raise their kids? I doubt they packed all 6 kids off the daycare every morning.
Having 2 working parents is a huge strain. Childcare is very expensive, if you live downtown you have to sign up as soon as you are pregnant to get a spot. While going to elementary school requires camping out for 3 days in the snow for a spot. Then you get to call the boss a couple times a month that you couldn’t come in because your kid’s are sick so you have to take another personal day to stay home. Parent’s don’t have time to be good parents anymore.
Oh and one last thing, did you grandparent’s save money for retirement or have a pension plan? Probably. A shocking number of people have no long term savings, they don’t even have a little bit of money saved “just in case”.
January 25th, 2010 at 4:54 pm
I can tell you, this thing will end badly; no boom ends well. It was actually over in 2008 until the central bank stepped in and fuelled the economy with cheap credit. But it’s all artificial and once rates increase and the govt stimulus ends… watch out below!
January 25th, 2010 at 5:08 pm
@patriotz:
I think there’s also a misconception about “walking away” from you home if you end up underwater: it’s much easier in MOST of the U.S. – up here…not so much.
Correct me if I’m wrong. But maybe that’s a topic for an entire post on its own.
“In Canada the banks are national and have far more resources to handle foreclosures (more than 1/2 of which will be in BC)”
Is that an estimate? Can you elaborate?
January 25th, 2010 at 5:12 pm
you have so many unanswered question
if you only see the job career and property prices
I think developing countries will be the perfect answer for you
the question is
which developing countries offer you free schooling ? free medication ? free giving birth ?
which city in developing countries have a lot of parks if not only surrounded by mountains as well as next to the beach ?
which developing country could give an average salary as high (or as low as ?) as Vancouver ?
now you have too many unanswered question
btw, where do you live ?
and now I asked, why your city is not as good as Vancouver according to citymajors.com ? (I believe you don’t live in Vienna, Zurich nor Geneva, do you ?)
could you please answer to those questions instead of ‘just complaining’ ?
village idiot from Bandung
January 25th, 2010 at 5:28 pm
I know the article is discussing averages, but it is rather shocking to say the least.
The last time I bought a property was in 2003, the banks and mortgage lenders would only give me 2.5 times my gross income. That was the max and that was the standard, no one would give me more on the ratio. I had to get another income stream in order to borrow more.
9.3 times income? Again, I know it’s an average and plenty of homes have more than one income (spouses, mortgage helpers, grow ups, whatever) so it’s to be taken with a grain of salt, but it’s just so outrageous!
I did a quick search, curious to see how much I can borrow, since I’ve heard that everything has tightened up considerably. My wife and I can borrow 4.7 times our gross income. I ran some other numbers and reached 5.5 times income. So it looks like the banks are willing to lend you Mr. Borrower – 4.5 – 5.5 X gross income!
Just think about that for a second and read the part of the article where they say anything above 5.1 times income is “severly unaffordable”! Severely unaffordable? The banks are willing to lend you more than that right out of the gate! What the hell does that say? There’s a complete disconnect from what is prudent and what the banks are giving you, WTF??? Don’t bother explaining that to me, it’s just speculation by the banks/lenders. They’re looking at cashing in on this boom and they do it big, and simple, one word: VOLUME.
What happened to the 2.5 standard? There was a reason they used 2.5 times your gross. It was to protect Mr. Borrower from borrowing too much as well as to protect them from you defaulting. All the sudden, none of that is a concern, a new sheriff is in town with bags of endless debt to go around, come and git’it!
When this bubble pops (which you’ll only see after it pops by the way) there’s going to be so much blame to go around it’s going to get nauseating fast! Especially the MSM! I can already here the mindless news anchors on global tv reading their scripts… puke.
January 25th, 2010 at 5:41 pm
What constitutes a ‘lie’? When the government is lieing? When the press is lieing? When you’re covetous neighbor isn’t telling the truth? All three? Gold star on that choice.
We’re being told that Vanshithole ‘is the best place on earth’ via a propagandea campaign meant to keep the stupid spendin the government out of taking responsibility for its own mess. Are the sheeple falling for it? Yes they are. Why, because they’re lazy and frightened that the house of cards they’ve got sucked into better stay up or they are in big shit. So they have ‘some skin in the game’ to support the governments pbsfuscations when it comes to the truth.
Now , iof you’re like #48 RB who cames to us as a desperate drefugee of a country whos own culture , religion, people and government have made his own country an absolute shithole and he has had to run away from it, well, you are happy to br anywhere else aside from there. We all understand that.
But we are not frightened refugees running from assholes and bandits in Canada, or are we? Is the use of a public park enough to make you want to suck up all the bullshit that we are being deluged with? Not me? But some differ with me on this topic, especially those who are frightened , stupid or are some sort of ass damaged refugee from Bongo bongo land.
We see the local and national governments pissing the Canadian heritage down the toilet as we speak with a growing debt and phony money policy that will force taxes into the stratosphere. we already see how BOC Carney the Conman has been distancing himself from the zero rate policy and the hyperinflation it is causing.
I got a prop tax assesment in the mail and trust me, as a professional, it means nothing to me. I’m not proud to think that this ‘value’ is anything but a ponzi scam by the local government to screw me out of higher taxes so that they can’t balance another budget next year.
Reality is that jobs are going down, taxes up. I talkied to a cab driver at VIA thia am who told me that he worked 17 hours yesterday to make 85 bucks.he says he can’t find another job, hes an immigrant and he agrees that the governments sales job about Canada has all been a lie.
He told me that the cabbies have been screwed by Vanoc, that they are bringing 300 private cars and drivers from a company in the US (busses inc) and there have been major restrictions on cabbies access to downtown hotels. He’s pissed at the OY Oy show as a big scam.
He showed me the special side door they have constructed at VIA to shuffle the ‘family’ (mafia more like) past customs/immi and into waiting private transpo. No OY OY bonus for the locals there.
Guess who pays for the US drivers food and lodging….wait for it……you are fool!!!!!!!!!!!!!!!!!!!!!!!!!
Meanwhile the real story on post stimulus money is moving us towards a big double dip.
http://finance.yahoo.com/news/.....0&.v=6
January 25th, 2010 at 5:45 pm
Sorry that should read ‘Vanoc is bringing in 3000 (thousand with a T) to scurry the Vanco princes around town all with US drivers – zero Canadian content.
January 25th, 2010 at 5:55 pm
#17. Purp makes a good point about unaffordability since 1989. But there was a correction in the late 90′s. I have not analyzed the numbers but I do feel the correction wasn’t deep enough. But I always figured there was a discrepancy between incomes for the different generations. The boomers made good money in Vancouver. Mine made squat. So if you looked at the Boomers who were doing most of the buying price to cost of owining probably made more sense.
January 25th, 2010 at 5:57 pm
49 – vansanity:
I know what you mean. Last time I talked to someone at the back (about RRSP stuff) they asked me about buying and said I could borrow (according to their computer thingy) over $550k. Seriously, who wants that kind of debt as a single person? I told them thank you no.
January 25th, 2010 at 5:58 pm
bank* (although “back” works too)
January 25th, 2010 at 6:32 pm
I’m not the most articulate person but I think I get my point across. What does it say when your bank is willing to lend you a “severly unaffordable” mortgage? How can that possibly go right?
Welcome to Vansanity.
January 25th, 2010 at 6:35 pm
@crabman: good one
January 25th, 2010 at 6:41 pm
@Bubble Lad:
In the majority of US states (the recourse ones) mortgage lenders have essentially the same legal recourse to the borrowers’ assets as they do here. The reason people seem to be getting away with it (for the time being) is, as I said, the banks are either too busy or are trying to defer realizing the losses. Note also the “slice and dice” securitization of so many loans in the US creates legal and administrative problems with foreclosure and deficiency recovery. That is not the case here as CMHC is the direct creditor of securitized loans.
Of course it’s an estimate because it hasn’t happened yet. But nowhere else in Canada have prices been so inflated for so long as in BC, nor has so much of the economy become dependent on RE. We are Canada’s Florida – I don’t think a comparison even to California is appropriate.
Note also, the Alberta bust which began in mid-2007 and was reversed at the same time as BC’s by the low interest rates, i.e which ran for over a year, has already flushed out some of the weakest buyers. The bubble in Toronto and more recently Ottawa has not been around for long.
Take a look at this chart. Every city has higher household incomes than Vancouver, except Montreal.
http://www.chpc.biz/Major_Cities_Chart.htm
January 25th, 2010 at 6:45 pm
The most overpriced real estate in the world, and yet the worthless local cheerleaders keep telling is it can and should go higher because wealthy leprechauns and warlocks are oh so desperate to buy our million dollar shitshacks and we’d all better get in the market or we’ll never get another chance.
Honestly, these douche bags should kill themselves. Cockroaches are more useful than our real estate cheerleaders.
January 25th, 2010 at 6:50 pm
CIBC’s calculator said I was eligible for a mortgage in excess of 6 times my annual income at their 5 year variable rate.
Talk about financial suicide. Unless….it’s different this time!
January 25th, 2010 at 7:04 pm
@Anonymous: I understand that when you have kids the nesting instinct kicks in and makes you want to ‘own’ instead of ‘rent’, but you don’t really ever need to buy a place.
My parents rented up until I was 8 years of age and only bought when prices crashed in the early eighties. They got a house for less than half the price it had been just a couple years before, so it finally made sense to buy. I remember the ‘renting’ years as being completely happy, in fact if anything, my parents stress level went up when they bought (it was a fixer-upper).
January 25th, 2010 at 7:22 pm
@patriotz:
No, rents are not falling. The latest CMHC report showed that rents were increasing at faster than inflation.
January 25th, 2010 at 7:24 pm
This is soooo stupid.
I keep telling people that BC/Vancouver are the last in and the last out of any boom/recession.
Seen it all before.
Anyone who has bought in the past few years will regret it.
January 25th, 2010 at 7:26 pm
@patriotz:
Condos are worth what the market deems them to be worth. Condos has been valued at more than 120 times for quite a long time. I believe it was you who said we have to rewind all the way to the mid 80′s to get back to this valuation. You might be happy sitting out of the market for a quarter century, but not every has that kind of time.
January 25th, 2010 at 7:32 pm
dave 63. I don’t think that is true. I know its not scientific but the small sample of friends and acquaintances tells me otherwise. I knew of more than one person who owned an apartment that cost in the $100,000 range that could have rented out the places for $1000 a month in the early part of the decade.
January 25th, 2010 at 7:46 pm
@Dave:
That’s what they are worth to the seller. What they are worth to the buyer is the present discounted value of net rental income, i.e. fundamental value, unless a greater fool is willing to pay more. And greater fools always run out.
“Price is what you pay, value is what you get”
- Warren Buffett
January 25th, 2010 at 8:03 pm
For those who like to reference UBC – Sauder for stats, here’s another one for you. I assume this is backed by empirical evidence.
No evidence of a post-Olympics boom or bust for host city real estate prices: UBC study
January 25th, 2010 at 8:27 pm
there is increased leverage for renters currently, but rents aren’t falling. tens of thousands of tenants would have received rent increase notices last year. it’s a market, good deals can be found. a blanket statement stating that rents are falling is conveniently simple.
January 25th, 2010 at 8:34 pm
Garth Turner should be banned ! This truth telling shouldn’t be allowed. What happens to the expensive propaganda machine if the sheeple are told the truth?
“The current housing bubble has been caused by emergency interest rates engineered by the central bank. It’s the result of government-backed mortgage insurance which lets people without money buy houses. It has been pumped, promoted and pimped by the mainstream media, populated by home-owning producers and editors and run by advertising-starved, indebted corporations. It’s been desperately promoted by the feds through tax incentives and blanket approvals by the minister of finance. And it’s been fueled by self-dealing lenders, realtors, developers, real estate boards and huzzah-huzzah marketers who have told people, buy now or buy never.
In contrast, it has not been the result of an increase in disposable incomes, an influx of new investment and jobs or economic growth. And that’s why the thing cannot last.”
Now, I actually have a bone to pick with garth T, in that he has said the price/income ratio in Vanshitstain is 9.3.
The average income has been 57,000 for several years and recently it was announced with some farticulous fanfare that the ‘average price’ had hit 950,000 and set to broach the ‘psychologically important one million mark’.
Doesn’t that make the price/income ration 16.6666666666666 ? Devilish time to be ‘getting into the market’ isn’t it?
January 25th, 2010 at 8:39 pm
@Vansanity:
I’m envisioning Ozzie Jurock hastily fleeing back to Germany as hordes of pitchfork-wielding first time buyers chase him out of town.
January 25th, 2010 at 8:47 pm
@realpaul:
“The average income has been 57,000 for several years and recently it was announced with some farticulous fanfare that the ‘average price’ had hit 950,000 and set to broach the ‘psychologically important one million mark’.”
$950k is the SFH average (actually I think it’s median). He’s talking about housing as a whole, the average of Detached, Attached and Condos.
January 25th, 2010 at 8:55 pm
http://www.nytimes.com/2010/01.....uy.html?em
January 25th, 2010 at 9:23 pm
@Drachen:
950K is the average, benchmark is 766K, just 5K below the May 2008 peak.
http://www.rew.ca/marketstats.htm
January 25th, 2010 at 9:53 pm
@patriotz:
No, the market price is the price that both sellers and buyers are willing to accept.
January 25th, 2010 at 10:05 pm
“It’s the poster child for the entire housing bubble,” said Daniel Alpert, managing partner of Westwood Capital. “There’ll be some other spectacular blowups, but this will be at the top of the pecking order.”
Mr. McIlwain said it may take a decade or more for the prices to reach the levels they did in 2006.
Housing Complex Goes to Creditors
(New York…the Big Apple…but not here? RTP)
January 25th, 2010 at 10:16 pm
@Dave: “The latest CMHC report showed that rents were increasing at faster than inflation”
… for the City of Vancouver. The suburbs are seeing rent deflation. Anecdotal reports from property managers, and what I am observing, seem incongruous with the CMHC report. FWIW.
January 25th, 2010 at 10:43 pm
“News Flash! This just in, hot off the presses! Vancouver has become one of the most unaffordable cities in the world.”
Aha? ahan? excuse me please!
When bulls have been telling their bears friends that Vancouver real estate never goes down they mean it while bears were predicting crash!!!!!
What else on earth will convince the bears instead of truth itself?
None other than this Article,This news is a proof that hey…..@V R E N G D:
January 25th, 2010 at 11:08 pm
@bestplaceonmeth:
“950K is the average, benchmark is 766K, just 5K below the May 2008 peak.”
Yes, that’s the average detached. The ‘average’ Turner was referring to was the housing average ie. averaging all types of housing together, condos, attached AND detached.
January 25th, 2010 at 11:25 pm
Suburban Rents: As someone who has been renting out a basement suite in Burnaby for the past 18 months i can confirm rent deflation. I was able to get 900 + bills in Sept 08 and by Sept 09 i was lucky to re-rent for 850 all inc. I checked Craigslist and 850 was the going rate.
OtherTed: In 2001/02 one bedroom rentals off Commercial & 7th/8th sold for 90k and rented for 600 (150 times rent). I remember at the time that based on a 5 year fixed the rent almost covered mortgage, tax and strata.
January 25th, 2010 at 11:37 pm
@1st Time Home Buyer:
Check this out:
http://www.gailvazoxlade.com/r.....udget.html
2…The financial rule of thumb says you shouldn’t spend more than 35% of your net income on housing. (That includes mortgage/rent, condo fees/maintenance, property tax and utilities.) If you’re spending more than 35%, either you can look for ways to cut back on your housing costs, you can make more money, or you can trim in other areas (like transportation) so you end up balancing at the bottom line.
January 25th, 2010 at 11:44 pm
@VRENGD:If seatlle or los angeles were more attractive then Vancouver.
Why American people move here to live in Vancouver BC?
Only person ever moved to Los Angeles from Vancover was Re-Esteven (1st ever r.e. number publisher)He has sold his house in West Vancouver in 2007 for Two million Dollars and the place that he have bought in los Angeles is going down,down,down,and down.I am 100% sure that he has lost entire gain he has earned from West Vancouver Home and he had loss half of the principle amount as well.Now he don’t have any other credit card to fly back to Vancouver.
Those who don’t understand Vancouver economy can double check article for restriction of land,There is demand of more than 21,500 in Vancouver every year in normal time it ended up at 35000 unit sometime goes upto 60,000 unit.
Just buy and hand it over to next batch.
Intentional loss in emergency exit:$0-$10,000 on condo 0-25,000 on house.
Profit:$5,000-25000 yr on condo and $ 10,000 -$100,000. on House.
What is economy:Just buy starbucks,subway eat fresh and chill out.
January 26th, 2010 at 12:12 am
Fart-iculous * adverb
- a combination of indigestible bullshit that has by-passed the colon and stinks up an entire town. Causes mental fatigue, disgust,delerium, inflammatory speculation.
-origins
see: Bob Rennie, Tony Parsons, Ozzie Jerkoff , REBGV, CREA, and acilliory commentators and pretend economics professionals of Credit Unions and Banks.
history
pending mass insanity and screaming ‘I buy treeeeee, my huzba buy treeeeeee!
First postulated by Realpaul, Vancouver Condo Info.Expected to enter Wikipedia very soon and become common venacular for the mental state of real estate fools.
Ex: BOC governor says real estate is no where near farticulous in price, but we’re keeping an eye out due to ‘excitement’ in the Otttawa region.
January 26th, 2010 at 12:15 am
For what it’s worth, I have heard several (many) people I know well saying that rents are going down. In particular, a guy just moved to a different apartment in the same building (cool, hip place). The new apartment is larger and 10 floors (!) above the old: price difference? He is saving around $50 per month with respect to the old price.
Some rent inflation, uh?
January 26th, 2010 at 12:19 am
“You need to be allowing the land on the fringe to be opened up to development without the planners telling where the development must occur.”(paragraph from study)
Similar issue was introduced by Professor Robert Shiller in 2008 but Professor was unable to conclude desire to live in perticular place.
In result most of the pre-sale buyers in Dubai left their deposit with developers and their Cars on the Dubai Airport for free(nice building but no ass hemps in surrounding area).
Even some people who have thought that velley is within reach of Vancouver also withdrew their deposit from the left over Infinity Towers 3 hanging in the air 4th and fifth never commenced (Nice architect rendering on table but it was not close to Robson Street)in contrast to that Bessley in Vancouver was sold on cheated(artificial) low prices overnite.
If i was not in Vancouver i should have move to New Delhi because i can’t comporomise with anyother place in this world other than Vancouver.
But Brent Gilmour, acting CEO of the Canadian Urban Institute, said the report oversimplifies other factors that affect housing affordability, such as regional real estate markets and economic conditions.
The report also fails to include the financial, social and environmental benefits of “smart” urban planning. They include lower infrastructure costs, reducing the need for long commutes and cities designed for people who don’t or can’t drive cars, he said.
“You have to look at the quality of life in a neighbourhood. The ability to walk, to bicycle. Are there parks and recreational facilities that are nearby?” Gilmour said from Toronto.
“This study doesn’t take into consideration any of those things.”
January 26th, 2010 at 12:44 am
80 – “Only person ever moved to Los Angeles from Vancover”
———————
Don’t. Be. A. Fucking. Retard.
Slow enough for you?
January 26th, 2010 at 12:52 am
sweet “micro lofts” thats RE speak for broom closet
http://www.cbc.ca/canada/briti.....block.html
January 26th, 2010 at 12:53 am
rents-thousands either negotiated a reduction or got more for less but tens of thousands saw the standard increase and ergo overall rents went up. for the first time in awhile new renters likely faired better than existing renters. a bit of even up. i anticipate a lot of renters were cranky when they got the 3% increase this year, psychologically may have pushed some into the first time buyers pool despite the renters premium.
January 26th, 2010 at 1:20 am
Are Canadians rubes?
http://www.howestreet.com/arti.....e_id=12245
January 26th, 2010 at 1:44 am
@Dave:
No it wasn’t. I have said on this board that the price/rent for houses was 100 in the mid-80′s. As the other poster said, we saw a price/rent of 120 (or less) for condos as recently as the turn of the century.
Did I claim otherwise? What I said that what an asset is worth to a buyer, i.e. its economic return, is the present discounted value of its future income, unless he can sell it for more.
“Price is what you pay, value is what you get.” Get it?
Straw man much?
January 26th, 2010 at 2:04 am
@tim:
The headline does not reflect the actual conclusion, which is:
Somerville is saying that there is no evidence that the Olympics cause a boom or bust after the event, not that such a boom or bust never happens.
For example, there was a RE bust in Montreal shortly after the 1976 Olympics, but it had a lot more to do with the election of the first PQ government than anything to do with the games.
Similarly, there was a RE boom (or should I say bubble, it crashed in the early 90′s) in Los Angeles shortly after the 1984 Olympics, but that had nothing to do with the games either.
January 26th, 2010 at 8:17 am
@1st Time Home Buyer:
Sit tight until after the Olympics and rents come down a bit. Then enjoy your rental for a year or two until mortgage rates go up and force prices down.
Or not. Just don’t count on those mortgage rates staying down this low for much longer.
January 26th, 2010 at 9:12 am
Dave is looking at CMHC rental stats for purpose built apartment buildings. There haven’t been any built in decades (although some condos were converted to apartments due to lack of buyers) so of course they’re in short supply (compared to the horde of lower-middle class stiffs) and rents aren’t falling. CMHC tries to track the secondary market, but their methods are so flimsy as to be practically worthless.
So as usual, Dave is right on the money…
January 26th, 2010 at 10:31 am
@mino3:
Disingenuous Dave trots out the CMHC numbers on a regular basis. He knows they are a very narrow subset of all available rentals but this is the only argument
he can come with.
There will be a great selection of units available after the Olympics. “Mortgage helper” basement suites as well as condos held by newly minted reluctant landlords. ….gonna be fascinating to watch this tank…….
January 26th, 2010 at 11:05 am
I am raising my family in a small space – 944 sq feet to be exact. In this space I have a dog and a child with another one on the way. Do I feel guilty that I am raising my kid without a yard? Not on your life. I am walking distance to a kids waterpark, an outdoor pool, surrounded by playgrounds and dog parks and have only filled up my gas tank once in the last two months. I suppose some of you would say that I should have a little yard, but for what? So my kid can play alone? Forget it. I lived in the burbs, and I don’t have fond memories specifically of hanging out in the yard as opposed to the park or lake with other kids. This North American concept of the big house and mortgage is our undoing. We don’t need it to raise a family. Owning “stuff” doesn’t make anyone a better parent, and that includes a stinky little yard.
January 26th, 2010 at 11:27 am
@Vansanity said:
“9.3 times income? Again, I know it’s an average and plenty of homes have more than one income (spouses, mortgage helpers, grow ups, whatever) so it’s to be taken with a grain of salt, but it’s just so outrageous!”
No, it’s not averages. It’s much worse than you are suggesting.
It’s medians. Further, it considers median HOUSEHOLD INCOME, so spouses and the lot are counted.
Quote from financialpost:
In Vancouver, for example, a median home price of $540,900 was divided by median household income of $58,200 to create a multiple of 9.3.
January 26th, 2010 at 11:51 am
@bubbly: It must be because we’re running out of land. Canada has more people and less land than the US right?
January 26th, 2010 at 8:36 pm
@patriotz:
Montreal Housing prices had started to fall in 1975 and the correction was around 23% from 179.1K to 138.2K by 1978. That’s two years after the Olympics.
The Los Angeles stat that you mentioned, from 1984 to the early 90′s… that’s over 6 years of lag.
I think many here are under the impression that we just have to outlast the Olympics and there will be a sudden drop. If this study proves true, you should be thinking down a target purchase date of 2014-2018 for a… 20(?)% discount? Not that it’s anything to sneeze at, but I’m willing to bet some have been on these sites for 3-5 years complaining about real estate prices and hoping that it’ll drop to 40-50%.
Don’t hold your breath.
January 26th, 2010 at 11:38 pm
I wonder….Do you suppose that if you live in this city long enough, the constant rain eventually starts to short out those synapses responsible for logical deductive reasoning?
January 27th, 2010 at 6:18 pm
First time homebuyer….I cant sit here and tell you I know whats exactly the right think to do for you and your family. I am in the same position.
My thoughts are to hold out. I have a large downpayment saved up. I have a great job..which I hope hold out until after the olympics and for many years to come.
Unfortunatley, many of my customers are losing their jobs and are skilled trades people, managers, business professionals etc. If your parents are going to be providing daycare service please think about what could happen if they become ill suddenly, etc. Its something my cousin had to deal with.
Whatever you decide to do I wish you all the best and everyone else whos out there thinking about making a big step into homeownership.
Let the bubble burst!
January 27th, 2010 at 7:58 pm
Tim – The Montreal Olympics didnt face an Global economic situation as there is now all over the globe. Also there wasnt a US housing crash where some of our US neighbours have lost so very much.
The Montreal Olympics went ridicuously over budget and Canadians got stuck paying the bill. Which will probably happen a second time around come Vancouver 2010.
Certainly some are hoping for a severe correction. Who knows when it will happen. You dont know and I dont know.
The people who are on this site arent suking and hoping for a huge drop. The people on this site are educated university debt laden grads who are trying to pay off their student loans after obtaining their degrees. Hey some kids dont have mommy and daddy big bucks waiting in the wings to help them out. They are the young employed professional couple trying to raise a family and have jobs (EXAMPLE: The first time homebuyer on this site). Think about those hardworking immigrants that are trying to pay down their mortages.
But your probably a crusty old fossil who doesnt give a shit about his fellow human beings. You just think because you bought your home ages ago, your smarter than the rest of the folks on this site.