More on the Canadian Housing Bubble

Several people wrote in and posted a link to this article in Macleans about the Canadian housing bubble.  It’s an interesting read and a good introduction to anyone who wonders what all this bubble talk is about.

Room 32 of the B.C. Supreme Court in Vancouver is where dreams of owning a home go to die. It’s the main foreclosure court in the Lower Mainland, where banks and other lenders ultimately turn when homeowners can’t keep up with their mortgage payments. The homes get seized, then sold off. “There are many tears on that carpet,” says Andrew Bury, a partner at Gowlings and the top foreclosure lawyer in the city. But lately the cramped courtroom has come to represent something else entirely—the utter insanity of Canada’s red hot housing market.

Last week Bury was in court to seek approval for the sale of a one-storey foreclosed home in central Richmond for $670,000. That was already $40,000 more than the house had been valued at two months earlier. Then, as he always does, Bury asked whether any other bidders were interested in the 2,000-sq.-foot home. Ten hands shot up. What happened next left him stunned. After a secret auction, the winning couple offered a whopping $852,500. “That’s an extreme case, but it’s the kind of thing we’re seeing all the time now,” says Bury. “It’s a feeding frenzy out there.”

The article points out that we have many scary similarities to the US housing bubble and excessive household debt levels that have raised alarm from many corners.  All the same arguments have been made for why ‘it’s different this time’ from ‘wealthy foreigners’ to ‘drug money’ to that old ‘running out of land’ gem.  Meanwhile the elephant in room keeps getting bigger and bigger.  Interest rates going up just a few percentage points ( a near certainty ) will push many people into deep financial trouble.  Unfortunately as the situation down south showed us, it’s not just first time home buyers and recent purchasers that get hurt when speculative housing bubbles collapse.

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neeo
neeo
10 years ago

This is spin doctoring pure and simple by a shyster group of politicians and the media whores who say they are starving for revenue. Its misdirection for local consumption just in case the ‘bad stories’ are being read and discussed around the water cooler.

………………

neeo

uk mortgage

FromTheStates
FromTheStates
10 years ago

@Due Diligence

I'm not "defending the value of my 'asset'". I'm just wondering whether Vancouver will suffer a similar 40% drop. Did you even read what I said?

About the US/CAD dollar, I am well aware of the current exchange rate. But commodity prices are dropping currently, add to that the flight to safety as people by US dollars, and it's just as likely the USD goes up compared to the loonie as the other way around.

I'm not arguing it's not a bubble. I'm saying that US and Canadian economies are different (US is 10x the size of Canada, reserve currency, and all that), and the bubble may not play out in the same way in both countries.

logic
logic
10 years ago

Ha, good on the ozzies. Hope the tell VANOC to "take a flying fuck".

GreenAndGold
GreenAndGold
10 years ago

Olympic team defies order to take down flag

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

Anonymous
Anonymous
10 years ago

@Starving Artist:

9

X Starving Artist Says:

February 4th, 2010 at 2:15 am

Ten hands shot up. What happened next left him stunned. After a secret auction, the winning couple offered a whopping $852,500.

Seriously, who the hell are these people and how can they be so stupid??

============================

Hey, I bought a car last week! The MSRP was $32,000 and I got it after a bidding war! I only paid $38,000!!! The salesman told me to "get in now" or I'll be bussing it until the day I die.

I'm both lucky and brilliant!!!

logic
logic
10 years ago

"@FORREST: “Who are they gonna sell stuff to if nobody gots any money left?”

They can start buying the stuff themselves. In a bizarro world. Chinese citizens have high savings rates for a reason. "

—————–

Well, they used to. That was before the xplosion of credit there in recent years that has turned their new middle classes into debt-slaves just like the West.

Also, one has long needed saving in China, as there is little or no social safety net – no EI if you get laid off, no old age pension. You either save when u are working or you starve in bad times.

usnews
usnews
10 years ago

Friday’s unemployment numbers will reveal that government has under estimated job losses by nearly 1 million jobs!

The end result will continue to panic investors, trigger a drop in consumer spending, and shred profit margins as consumers pull back their horns finally realizing the recession is far from over.

And while I can’t tell you exactly how many more jobs will be lost in this month, I can tell you this: the nearly 1 million jobs that were under reported from April 2008 through March of 2009 won’t be coming back for a very long time.

!(EconomicsDegree)
!(EconomicsDegree)
10 years ago

@Its All In the Name: "Look at RICHmond in Metro Vancouver and RICHmond Hill in the GTA "

How do you explain MARKham?

!(EconomicsDegree)
!(EconomicsDegree)
10 years ago

@FORREST: "Who are they gonna sell stuff to if nobody gots any money left?"

They can start buying the stuff themselves. In a bizarro world. Chinese citizens have high savings rates for a reason.

logic
logic
10 years ago

52. yes.

FORREST
FORREST
10 years ago

I would "short" China. Who are they gonna sell stuff to if nobody gots any money left? They will ultimately be just as f**ked up as the rest of us debt whores.

bestplaceonmeth
bestplaceonmeth
10 years ago

Gonna be a lot less rich Asians around with the Asian stock markets plummeting.

Ah yaa!

Its All In the Name
Its All In the Name
10 years ago

Look at RICHmond in Metro Vancouver and RICHmond Hill in the GTA – there is truth behind why certain groups reside in these communities…

logic
logic
10 years ago

from article @45

"China, poised to overtake Japan this year as the world’s second-biggest economy, may boost exports by 20 percent during the first quarter as the global economy recovers"

————–

If! "If" seems not to be in their dictionaries!

mino3
mino3
10 years ago

Canada real estate, and BC real estate in particular is seriously f**ked. As a Canuck who has been stateside (california) for the last 5 years, I guarantee when this is all over there will be lots of tears. The housing crash will end up taking down the REST OF THE ECONOMY. Consumer spending and business revenue has been juiced by massive numbers of loans guaranteed by the good old CHMC (i.e. the taxpayer). Down here the economy is more or less finished. It's like a mental post-apocalypse, I'm sure just like Japan was post '89. Hosting Olympics almost always stimulates the economy in the short term, driving speculation, but almost all of them end in a post-Olympic bust (SLC recreational property comes to mind). The entire western world has gone gaga over debt loads and it is going to bring… Read more »

patriotz
10 years ago

@patriotz:

Forgot to add, if government really wants to spend money on something that would deliver positive economic externalities to everyone in town and visitors too, it should get the homeless off the streets.

Apropos the topic, you do know that the present convention centre has lost business (explicitly) because of this problem.

patriotz
10 years ago

@oneangryslav2:

Answer me this: what percentage of the positive economic externalities of hosting events in the convention centre would a private company procure?

You could make the same argument for any business which draws visitors (i.e. exports services) – sports arenas, race tracks, etc. or exports goods for that matter. It's really just an export subsidy which is a form of protectionism, and like all forms of protectionism it's negative sum because everyone ends up getting in on the game.

Let them pay their own damn way.

Jim
Jim
10 years ago

Of course this might hurt Warrn B, but no impact to Vancouver port trafic, right?

http://www.businessweek.com/news/2010-01-31/cheap

patriotz
10 years ago

@Drachen:

A friend of mine in HS had parents who’d emigrated from China, his mom chose the anglified name, “Penny”, because it’s money.

Sounds better than "Loonie" I guess.

Did his dad call himself "Buck"?

Reminds me of the nutty names people used in the early days of the USSR (from "Stalin" on down). Materialistic ideologies are big on them.

patriotz
10 years ago

@FromTheStates:

Those are just details (or excuses). The only things that really matter are price/income and price/rent, and these ratios are as high in Vancouver today as in any US city in 2005.

Period.

oneangryslav2
oneangryslav2
10 years ago

@Anonymous:

"Of course, we all know that if convention centers were anything by revenue losers the private sector would have kicked in to pay for it,"

Public entities and private entities are very different creatures. Answer me this: what percentage of the positive economic externalities of hosting events in the convention centre would a private company procure? The answer is zero. You put 10,000 conventioners into the city and of all the hotel taxes, and liquor taxes, and taxi license fees, etc., waiters' and bartenders' income taxes generated off-site, not a single penny would redound to the private company. All of that money, however, does flow into public coffers.

Due Diligence
Due Diligence
10 years ago

40 was for 26 – From the States

Due Diligence
Due Diligence
10 years ago

If you don't even take the time to do a little due diligence to defend the value of your "asset" up here, don't even post. First, we do have "sub-prime like" mortgages and the interest "teaser-like" rates. For 2.5 years we had 0 down/40 year amortizations. We now have a minimum of 5% down, but with "cash back" mortgages from the bank, they are effectively 0 down mortgages. And unlike you with your 30 year fixed term amortization periods, the most you can get up in this fair country is 10 years, with most people opting for 1 year to 5 year mortgages. In essence, the current rates are historically and artificially low, and hence "teasers." When people go to renew their mortgages in the coming years they will face a new rate as interest rates only have one direction… Read more »

Drachen
Drachen
10 years ago

@White Payer:

"Must be the status thing. RICHmond… get it?"

You do know that's why there's so many Chinese people living there right? No joke.

A friend of mine in HS had parents who'd emigrated from China, his mom chose the anglified name, "Penny", because it's money.

realpaul
realpaul
10 years ago

Gordo on the CBC lashes out at international news organizations. He says that 'exercise is a better investment than healthcare'. He says 'mentally ill people are choosing to live outside'. He laughs at the idea that the hundreds of thousands of jobs that haven't come out of the projections is an issue.

Bwahahhahahahahahahahaha , what an idiot. I'm sure the gov is going to be spending millions on advertising the lies so that the locals have no idea whats going on. The local press of course is going to read everything they're handed. Sluts and fools , what a great combination.