CMHC mortgages based on posted 5 year rate
When Flaherty announced new rules for CMHC insured mortgages in Canada a few weeks ago, there were a lot of questions that remained unanswered. One of the big ones was about the new rule requiring approval based on the 5 year interest rate. The question was which 5 year rate would that be, the posted rate or the discount rate?
Canadian Mortgage Trends is reporting that it will be the 5 year posted rate, which makes sense since the discounted rate is infinitely variable, whereas the posted rate is consistent across all lenders. The posted rate can be found on the Bank of Canada’s website. That rate is posted weekly on Mondays, and as of Sunday night it is 5.39%. The current rule, set to expire April 19th allows lenders to approve insured mortgages based on a discounted 3 year rate, which is currently 3.29%.
This means that as of April 19th, buyers who don’t have at least 20% down and require a CMHC insured mortgage will be approved based on a rate that is more than 2% higher than it currently is to ensure that they can weather rising interest rates.
Just to illustrate what that 2.1% represents in real money, I used the ING mortgage calculator and plugged in some round numbers:
Household income: $100,000
down payment $30,000
Monthly loan credit card payments: Zero
Term: 25 years Property taxes: $2000 Condo fees: Zero
3 year discount rate: 3.29% – you can borrow $491,551
5 year posted rate: 5.39% – you can borrow $397,349
As always, corrections to my math or reasoning is welcome in the comments section below!
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March 7th, 2010 at 10:00 pm
The market is driven right now by people convinced that real estate never goes down. If real estate never goes down, the more you borrow the more you make. Therefore, people want to borrow as much as the bank will let them. Rational metrics may rule in the long run, but for the past few years these guys have been pushing things ever higher.
This reform means they can’t borrow as much as before. That’s why this matters.
March 7th, 2010 at 10:07 pm
OK. If this rule stays in place and the real estate market in Vancouver isn’t lower in 1 year, then I’m willing to believe all the it’s different here/ illegal drugs/ wealthy foreigner arguments.
..even though every other market that’s used those excuses has dropped.
March 7th, 2010 at 10:12 pm
Why $30k down in your example? That’s a different percentage of each loan, shouldn’t it be an even 10% or something? Also people can take out loans for longer than 25 years and afford more. I can’t see 2 percent making a big difference in the market.
March 7th, 2010 at 10:16 pm
indeed this lowers what the demand can afford, prices should drop. unless this is some sort of government plot to lower the inflation numbers so that they can lower/maintain current interest rates.
March 7th, 2010 at 10:30 pm
@gonecoastal: Well as he said, he’s just plunking in some round numbers. But even still, if this hypothetical couple has $30k for a downpayment on April 18, they almost certainly have the same $30k on April 20.
And if you can’t see 2% making that big a difference, can you also not see $100k in mortgage eligibility making a difference?
March 7th, 2010 at 10:32 pm
@gonecoastal:
I worked through an example with 5% downpayment, 6K/year property taxes and 5.4% vs 3.3%. I get a drop of 23.9% in the price you can pay if you are maxing out.
Here is my example:
income=100K
monthly income=8333
40% TDSR (assume no other debts) = 3333 max payment
500 month for property taxes = 2833 for mortgage.
35 year amm means max loan of 707,875 at 3.3% and 538,797 at 5.4%.
Assume 5% down, so divide loan by 0.95 gives max price at 745,131 for 3.3% and 567,155 for 5.4%. (745131-567155)/745131 = 0.2388
Does that look right?
March 7th, 2010 at 10:39 pm
But the bigger point here is that it underscores the *insanity* of the local market with prices set by the looseness of credit rather than value.
It is loopy that prices are likely so sensitive to arcane rules governing how much rope banks are willing to give you to hang yourself with.
Why one why to shelter yourself (renting) is reasonably prices while the other way of sheltering yourself (owning) requires you to sign your soul to the bank is just silly. But, it ends soon.
March 7th, 2010 at 10:42 pm
“Going forward, mortgages with terms of five years or more will use the contract interest rate. This is key because it suggests lenders will still be able to qualify insured 5-year fixed borrowers using heavily discounted contract rates (e.g., 3.75% instead of 5.39%, as of today).”
What about that paragraph from the Canadian Mortgage Trends website? Doesn’t that imply that for terms over 5 years it will be the discounted rate?
I would love it to be the posted rate, I think that would mean insta-crash … but I’m still not convinced.
March 7th, 2010 at 10:48 pm
#8 @acefupn: I read that too. However, 3.75% is not far from 3.29%. That’s what, a 15% drop in purchasing power?
March 7th, 2010 at 10:52 pm
From ING: 100k income, 31k down, 5-year fixed @3.89%, (estimated) $2100 in property tax – you can borrow $550k with 35 year amortization.
March 7th, 2010 at 10:54 pm
Of course, with a 5-year fixed @4.89% it’s 483k. And at @5.89% it’s $428k. It’s all about the interest rates.
March 7th, 2010 at 11:08 pm
Craigslist Vancouver has over 1000 suites for rent posted today.
http://vancouver.en.craigslist.ca/apa/
March 7th, 2010 at 11:11 pm
@VHB: I don’t know, I’m not a mathematician, frankly that stuff just goes over my head. I just don’t see how you can talk about hundredthousands of dollars dropping in price just because the interest rate changes by 2 percent. 2 percent is just a tiny change.
March 7th, 2010 at 11:12 pm
2% a very large *relative* change though. It wouldn’t matter much if rates were 10%. It matters because they are 2%.
March 7th, 2010 at 11:20 pm
2% is a tiny change when you’re going from 20% to 22%. 2% is a HUGE change when you’re going from 3% to 5%.
March 7th, 2010 at 11:24 pm
Rp makes an important point, and to be fair to ‘gonecoastal’ I think it unfortunately is not understood by the majority. It sounds like a tiny number, but an additional 2% represents a DOUBLING of interest rates if you start from a rock bottom 2%.
Interest rates have to return to normal from their emergency lows. I think these new rules are just the right move to make sure that buyers are ready for that transition.
March 7th, 2010 at 11:25 pm
@acefupn:
Hmm. Reading the Canadian mortgage trends blog entry, it does say the rule applies only to terms <5 years. So, you can still get qualified on a 5 year term.
The best I can see for a 5 year is around 4%.
I crunch that through as a 9.1% drop in bid price, using 3.3% vs. 4.0% interest rates.
Not as big as above, but still relevant.
Question: Is there a reason why someone *wouldn’t* take the 5 year fixed given that you can qualify for it more easily?
March 8th, 2010 at 12:11 am
I work for a big bank. Based our internal policy, we will use 5 year posted rate to qualify anyone who apply for a mortgage starting on Apr. 19. CMHC will also use 5 year posted rate. I discussed with my friends in other banks, they haven’t heard anything yet. But at least one credit union already started using 5 posted rate for any mortgage applications.
March 8th, 2010 at 12:17 am
is gonecoastal just pretending to be innumerate?
March 8th, 2010 at 12:18 am
@VHB:
If the market was sane and a buyer could qualify for more than enough to buy something, they could qualify for enough at the posted rate and then go variable. Since we aren’t in a sane market, this will probably push everyone into a fixed mortgage because it will allow them to borrow more, which of course is the only thing that counts.
Unfortunately, it also means significantly more money (in the short term) out of peoples pockets to the banks.
For the person who thinks 2% isn’t a lot. Ignore compounding and principle payoff. Multiply $500,000 by 2% and 4% and 6%. You will see that it equals $10,000, $20,000 and $30,000.
If you think $10-$20k per year (thrown away in interest to the bank) isn’t very much you make a lot more money than me.
March 8th, 2010 at 12:24 am
The Building Bubble in China | Businessweek March 1, 2010
http://tinyurl.com/yd2ngyd
March 8th, 2010 at 12:27 am
Blood in the water?
http://vancouver.en.craigslist.....13668.html
the above listing is from Crosby Management offering 2 weeks rent free in downtown Vancouver!!
March 8th, 2010 at 12:29 am
@gonecoastal: Hi, gonecoastal. You’re right; you’re not a mathematician. Neither am I, but I do know something about math and you have made a common mistake. The difference between an interest rate of 3.29% and one of 5.39% is a 2.1 percentage-point increase. As a percentage, it is (5.39-3.29)/3.29, or 63.8%!
Look at it like this: Let’s assume you had borrowed 100,000 dollars from your loan-shark brother and he was charging you a monthly interest rate of 3.29%. Your monthly payment would to your brother would be $3,290. If your brother then increase the interest rate that he was charging you to 5.39% per month, you’d be doling out $5,390 dollars a month in interest–a 63.8% increase.
March 8th, 2010 at 12:33 am
@logic: Having reread gonecoastal’s post, I now have the same impression. S/he’s either a moron, or does good snark.
March 8th, 2010 at 1:00 am
@VHB:
Yup! I hope that Mortgage Trends is getting it right. If true, then the game is over.
Great post, Pope.
I look forward to more details as they emerge. Very eager to learn more about implementation.
March 8th, 2010 at 3:15 am
This seems like a crafty political move. It appears innocuous on the surface but, in fact, will be the pin that pops the bubble. Yes, blood will flow through the streets of Vancouver, but it will much less dramatic elsewhere, and it will be hard to point the finger of blame at the Conservative government.
March 8th, 2010 at 4:14 am
Past few years? Didn’t you start your blog way back in 2005 VHB? That’s half a decade ago!
March 8th, 2010 at 7:20 am
@Wreckonomics: I think what is important is that the instant drop in purchasing power will cause a sudden change in market psychology. A sudden one month fall in prices has a chilling effect on buyers.
March 8th, 2010 at 7:26 am
Oh BTW I just secured a new rental with a free month of rent. The building (it has two suites) grosses 5.5% before expenses, but when you include taxes and assume 5% vacancy (which is understating things) the return is under 5%.
Question: would it be worth it to buy this building?
New Mortgage Rules Will Result In 20-25% Drop In Purchasing Power For Most FTBs « Vancouver Real Estate Anecdote Archive Says:
March 8th, 2010 at 7:42 am
[...] The Pope, at vancouvercondo.info, 7 Mar 2010 – [...]
March 8th, 2010 at 8:42 am
@Rocker Guy:
Because you can borrow money for less than that. Five year rates can be had for less than 4%. Not only that, your income will increase each and every year as rent goes up. On top of that, you are building equity with each and every payment made. And finally, the value of the investment will go up over time.
March 8th, 2010 at 9:00 am
@Dave: Also, if you leave a bottle of milk on the front doorstep, then pixies will come in the night and take care of all the building maintenance for free!
March 8th, 2010 at 9:16 am
Dave
Ten years ago that would be sound advice today I am not so sure. But keep cheerleading. No one can rock pom poms and a little skirt like you.
March 8th, 2010 at 9:24 am
As long as people can still get a contract rate on the 5-year for less than 4%, I’m not sure it will make that big of a difference. But since we’re already on the edge, it could be just enough to finally end this thing.
@Rocker Guy: Question: would it be worth it to buy this building?
We need more details. (Dave doesn’t because he’s a realtor and knows real estate is always a great investment).
The current yields on the downtown condo I’m renting are 3.12% gross, 2.22% including expenses and 5% vacancy.
My old place is rented out at maximum possible rent, and yields 3.3% net.
Then again, the additional details on your building probably don’t matter. Vancouver real estate is headed for a crash and most of us know it. Since an ebbing tide sinks all ships, it’s most definitely not worth it to buy in your building. Try plugging in 30%+ depreciation in your investment decision calculator and see what it says.
March 8th, 2010 at 9:25 am
dave…. (how is your day today mr troll?)
[1] rents have been decreasing
[2] prices have more downside risk than up at this point in the cycle
[3] what happens after yr 5 year fixed rate runs out and you refi at 8%?
[4] stop being a troll.
March 8th, 2010 at 9:48 am
@logic:
1. Rents are still going up. All the data supports my position.
2. Risk cuts both ways and in an efficient market, the price reflects the markets best discounting of risk with all known factors accounted for. It’s your speculation that there is more risk at this point. The market does not agree with you. It may come as a surprise, but I am on your side of the risk equation. I think there is more downside risk than upside and I think we are nearing another pricing peak. Where we probably don’t see eye to eye is downside risk. I imagine you foresee nothing short of devastation and completely collapse. I foresee single digit drops (this Fall) after we reach another peak (this Summer).
3. Five year rates are highly unlikely to be at 8% in five years. If they are, then we will have experienced significant inflation. Significant inflation would carry over to rent, so the income on this property would be much higher. The relative level of debt would also be deflated.
4. Who’s the troll? I have been pretty cordial in the face of persistent bear anger. I have always stuck to the debate and I have always backed up my claims and assertions. Can you say the same?
March 8th, 2010 at 9:56 am
@Dave: @Dave:
Rents going up?
Which data? Can you give us a link? A document? Something?
All I hear and see is an oversupply of rentals which cost as much as they did 3 years ago, sometimes even less.
Prove me wrong by providing some hard evidence.
As for rates, we will see. People are so squeezed that really small changes in interest payments will bear big effects.
March 8th, 2010 at 10:04 am
@Dave:
“And finally, the value of the investment will go up over time.”
No. It won’t. Historically apartment buildings drop in value except during bubble periods.
But again, I love how you spew these incorrect statements as though they were fact without even bothering to find out the truth. Of course never-mind that you’re making predictions about the future as though they were absolutes.
March 8th, 2010 at 10:13 am
The rising/fall rent question is interesting, because we’ve got Dave claiming rents are going up and Patriotz and others claiming that rents are falling. There’s data out there which supports both positions:
Sauder Business School Data (falling rents) : http://cuer.sauder.ubc.ca/cma/index.html
CMHC Data (rising rents ~1%/yr) : http://vancouver.ca/commsvcs/h.....hcdata.pdf
So it seems to depend on assumptions used, showing either a slight increase rents or a slight decrease…..
March 8th, 2010 at 10:20 am
@Anonymous:
https://www03.cmhc-schl.gc.ca/catalog/productDetail.cfm?lang=en&cat=59&itm=19&sid=f58e37cfa9454d1f8aa428902e877b16&fr=1268068800139
March 8th, 2010 at 10:21 am
@Purp:
Your link shows rents going up in nominal dollars, which is what I have been saying all along. Drachen even agreed that I was correct on this point previously.
March 8th, 2010 at 10:23 am
@Dave: Risk cuts both ways and in an efficient market, the price reflects the markets best discounting of risk with all known factors accounted for.
IMHO the Efficient Market Theory is total crap. It says that all information available is immediately acted upon by investors, and no investment strategy is better than a coin toss. If you believe in it, you also have to believe that Warren Buffett has merely been lucky. You also would have to believe that Robert Shiller was lucky when he correctly called the dot-com and housing bubbles in the US.
People with enough skill are able to consistently outperform the market. This would not be possible if markets were efficient. BTW, Shiller calls Vancouver the bubbliest market on the planet.
March 8th, 2010 at 10:28 am
I agree this will cause an impact to prices. I do have to point out that VHB after about 8 years of being wrong, will finally get it right! Nice work! Now what? Is there a valuation that will make sense for you to buy? The prices back when you started your blog look amazingly cheap now but I guess those levels are still too high in your books? Maybe your looking for prices like $275,000 for a 1000 square foot, 2 bedroom, 2 bath in downtown Vancouver? As mentioned I agree the changes will have an impact on prices but to what effect? 20% off results in prices that are still out of whack to the historical norms. Are we seriously looking for a 50 – 60% reduction in prices?
March 8th, 2010 at 10:35 am
@Dave:
“I have always backed up my claims and assertions. Can you say the same?”
Sure, anyone can SAY that. Especially if they’re deluded or lying like you.
Where’s your back-up for the statement that apartment buildings as an investment will go up in value over time?
Answer: It’s an unprovable proposition, yet you stated it like it was a fact, therefore you CAN’T back up that claim can you? This is only the most recent in a pathological string of such statements from you.
Conclusion: You are deluded or a liar.
March 8th, 2010 at 10:42 am
@BoB:
“I do have to point out that VHB after about 8 years of being wrong, will finally get it right!”
We were right then and we are right now. The fact that the market remains overvalued for longer than many thought possible does not mean it is at the correct valuation. It is the extreme failure of minds like yours to understand such a simple concept that has led to this situation.
Further. I say the market has been significantly overpriced since the early 1990′s, wow, 20 years! It hasn’t fallen back in line with fundamentals. Am I wrong? How can you tell by looking to the past? Can’t you see how wrong-headed it is to say that predictions of the future are wrong if they aren’t correct today? It doesn’t even make any sense.
March 8th, 2010 at 10:42 am
#6 VHB after taxes a 100K income is only going to net 6200 and change. Don’t forget the parasites in Ottawa. Property taxes and utilities are all fixed costs as well. 8300 p/m is gross income.
18-24 yr olds ‘likely to buy’. 91% think house will be maajority of retirement ‘income’. Thats a lot of 18-24 tr olds selling 40+ yr old houses at the same time isn’t it. Won’t that replicate the problem thats moving in right now?
http://network.nationalpost.co.....homes.aspx
March 8th, 2010 at 10:49 am
@realpaul:
I’m not the one who decided to use gross income in the mortgage calculation. I’m just following the rules that the banks/CMHC use, as far as I understand them.
March 8th, 2010 at 10:52 am
@Mr. Reasonable:
You will lose your shirt and T Back again and again.
Vancouver RE is well supported by wealthy Chinese Officials and their offspring and concubines who is seeking a safe place for their new-found wealth under the back door.Recently, I discovered on every weekend ,bus load of mainland Chinese herding three million plus house like buying toys.
March 8th, 2010 at 11:00 am
@BoB:
“Are we seriously looking for a 50 – 60% reduction in prices?”
This seems like a ridiculous idea from where we’re standing right now, doesn’t it? However, I don’t believe that it’s beyond the realm of possibility. People in Phoenix also thought that RE couldn’t possibly go down that much. Now look at it, I know Canadians who are eagerly buying up the RE there for at least 50% off. I know people who are buying 3 bedroom houses for $115k that were over $300k a few years ago. So really, you never know, do you? We can hope…
March 8th, 2010 at 11:17 am
Ashes to ashes, dust to dust.
The real estate bubble is now a bust.
~ R.I.P. 2002 – 2008 ~
March 8th, 2010 at 12:01 pm
@BoB:
On being right: The prediction that prices will drop is not a point-in-time prediction.
Think of a boy holding onto a helium balloon that is taking him skyward. The prediction is that at some point he will fall. Now, I might think that this will happen at 1000m, or 1500m, but that is a secondary concern. The bigger picture is that–at some height–he will fall.
If balloon boy somehow makes it to 2000m, does that mean the prediction is wrong? No.
The fun thing is that the bulls have to be right forever and the bears only have to be right once. I know which bet I think is better.
March 8th, 2010 at 12:06 pm
Woodward’s rental:
http://vancouver.en.craigslist.....92695.html
Slightly off topic, but…
I checked out the new Woodward development last week, and while I have to admit it some ways they did a great job with things like integrating the NFB, SFU, and services into the complex, and that despite its looming presence in scale to everything else in the area, I found the building itself reminded me of Disneyland – in scale (bear with me).
Everything on the main building seemed about 3/4 scale – as if they’d intended to build in inches, but used centimeters by mistake. Like the place was built for midgets. The suites seem to be right on top of each other – like if your downstairs neighbor lit up a cigar to celebrate their thirtieth b-day, your entire place would stink like an old stogie for weeks.
I know Ulsterman (?) lives there. What’s your take.
But by and large I’d have to give the place a two thumbs up. I’m not a fan of gentrification, but at least they decided to tie in some MUCH needed services to the DTES – so people aren’t paying double or triple for a quart of milk or peanut butter for their kids when they’re already broke. They’ve put in a TD bank on Abbot, a London Drugs, a grocery store, coffee shop, all of which I think is great. But I still wouldn’t want to live in their bizzaro tiny-town condo. Maybe if I was 23 it wouldn’t phase me hearing and smelling my neighbors 24/7.
The other thing that blew my mind was the fact that the strip on the south side of the development (on Hastings), which for decades looked like a war was fought there, is all being redone and leased out. Again, I don’t care for gentrification, but I don’t think abandoned buildings really help anyone.
Long story short, I guess I’m saying I think they did a fantastic job on the project as a whole…but I still wouldn’t want to live there.
March 8th, 2010 at 12:50 pm
Sorry little bears but these rule changes will have ZERO effect. You can still qualify for a 5 year fixed at discount rates even after April 19th even if you need CMHC insurance.
March 8th, 2010 at 1:22 pm
@Bubble Lad:
No not me. I moved from the rarified atmosphere of Granville & 14th to the suburbs of Burnaby a couple of years ago. It is closer to work and i now rent a house.
As i walked to Kensington Plaza on Sunday i reflected on the strange world in which us lower mainlanders live. Here i am walking through an average burb 15km from the city centre and the shitty 1960′s houses i pass by sell for 800k. The new houses in North Burnaby are well over a million. I accept that i cannot live in Kits Point on my income – fair enough – i should have gone to medical school if i wanted that lifestyle – but Burnaby North? Come on!
The other strange dichotomy is that my neighbourhood (like so many others) is divided into ordinary joes living in houses they’ve owned for 20 or inherited from parents, and affluent professionals who were able to buy an 800k home. Then there’s just ole me, renter man!
March 8th, 2010 at 1:26 pm
Sorry Superdub I work for a big 5 lender here at a western mtg approval center and I can confirm that we will be using 5 year POSTED for qualifying buyers with the new rule changes
March 8th, 2010 at 1:37 pm
@reknab:
Nope you’re dead wrong. If you want a 5 year fixed term mortgage you can qualify under the discount rate. It’s only if you want a term under 5 years or a variable product that you need to qualify under the 5 year posted.
March 8th, 2010 at 1:39 pm
In addition there iwe will also be using the 5 year posted rates to qualify all deals including conventional as well.
March 8th, 2010 at 1:49 pm
@superdupe:
Poor cheerleader is in denial.
Don’t worry little cheerleader, it’s not too late to change jobs.
You can go from real estate agent to foreclosure specialist quite seamlessly.
March 8th, 2010 at 1:51 pm
i tink i heard a pop.
March 8th, 2010 at 1:56 pm
Drachen Says:
March 8th, 2010 at 10:42 am
How do you manage your stock portfolio? Missing out on huge gains over years means you are WRONG! The market sets a value and is always right. You would like to buy a home but haven’t been able to bring yourself to pull the trigger because of “over-valuation”. Can you not admit it was the wrong choice 5 or more years ago? It was!
March 8th, 2010 at 1:58 pm
@averagejoe:
That was just Dave bursting a blood vessel as I incontrovertibly demonstrated once again that he is either lying or completely lacking in the ability to think rationally.
March 8th, 2010 at 1:59 pm
@BoB:
Who cares about 5 years ago.
Buying today is clearly the wrong choice.
March 8th, 2010 at 2:04 pm
@Drachen:
As long as there is inflation, my position is supported. The onus is on you to show that the phenomena of inflation is going to go away.
March 8th, 2010 at 2:05 pm
Here is an excerpt from bulletin issued by the bank.
“There are three different changes. All are aimed at keeping the housing market stable and consumers’ debt loads manageable, even if interest rates rise. Discussions are still going on that could fine-tune changes, but here’s a brief summary of all three updates:
• First, in order to qualify for any kind of mortgage, borrowers will need to have the income to qualify at the five-year posted rate – even if the rate they’re being offered is less than the posted rate, whether for a fixed or variable-rate mortgage. For example, we currently have a
seven-year mortgage on special at 4.95%, but a borrower would need to meet the income test to qualify for the five-year posted rate of 5.39%.
• Second, investors who want to buy a home that they don’t plan to live in will have to make a minimum down payment of 20%, up from the 15% currently required.
• And third, homeowners who want to refinance will only be able to borrow 90% of the value of their home, down from 95%.
These changes will take effect for transactions started on or after April 19, 2010.”
Interpret this as you wish
March 8th, 2010 at 2:07 pm
Who cares about 5 years ago.
The bears have been stating the same arguments for years – is this really the time for some huge crash? Finally? I’m just much more skeptical now than back when I was reading VHB. Yaletown Park – everyone’s going to lose their shirts, Woodwards – everyone’s going to lose their shirts, etc. etc. etc. As I mentioned one day bears will get it right but they have missed out on insane appreciation while waiting.
March 8th, 2010 at 2:08 pm
What angers me most about the CHMC is that they insure investment properties. What a load of crap.
March 8th, 2010 at 2:09 pm
@BoB: “Are we seriously looking for a 50 – 60% reduction in prices?”
Yes, quite possible, why not?
Fundamental support comes in at 50-66% off.
And remember the overshoot that often happens once a bubble bursts. All the ‘investors’ dump, every boomer with retirement funds solely in RE bails, RE ownership loses its cult status, the few prospective buyers sit on their hands, seller urgency, irrational fear, etc.
http://tinyurl.com/prediction2010-2019
March 8th, 2010 at 2:15 pm
@best_place_on_meth:
I think anybody who has been waiting for 5 years or more should care. Doomsayers like VHB were simply wrong. Values will never return to the levels when they claimed this market was in a bubble. The analogy of a helium ballon is disingenuous.
March 8th, 2010 at 2:32 pm
@BoB:
“How do you manage your stock portfolio? Missing out on huge gains over years means you are WRONG!”
That’s not the way Warren Buffett makes his money in the stock market. Since he’s the most successful investor in the world I’d have to say he probably knows better than you.
If I buy a lottery ticket and win have I made a good financial decision or was I just lucky?
March 8th, 2010 at 2:32 pm
I’m a bear and I know this is a bear blog, but the posts and analysis on here are getting worse. Sad considering this is supposed to be a bastion of critical thinking and analysis. This is the second article on the mortgage changes, and they both have problems with the math and interpretation.
If you actually read the link to canadian mortgage trends (which outlines the purported changes) it says that for terms less than 5 years, the posted rate will be used. But for terms of 5+ years, the discounted rates will be used. All this will do is push marginal buyers into 5 year terms since then they can qualify under the <4% discounted contract rates. All in all, not much of a change.
March 8th, 2010 at 2:38 pm
Of course, these new rules are just a window dressing.
This is a good article to start with, if you are interested in what REALLY is happening:
http://www.atimes.com/atimes/G.....9Dj02.html
March 8th, 2010 at 2:39 pm
@Dave:
“As long as there is inflation, my position is supported. The onus is on you to show that the phenomena of inflation is going to go away.”
So you’re saying that a 20 year old apartment building is worth exactly the same (or more) than a brand new one?
Simply not true (as you know damn well).
Buildings like that depreciate in value over time, inflation increases the value by about 30% over 20 years while depreciation drops the value 50% or more. Find me a 20 year old condo or apartment building that’s otherwise comparable to a brand new one. You’ll see very quickly that the value is less than half on the old ones.
This really is not rocket science Dave. It’s above your level apparently but it’s not that complicated.
March 8th, 2010 at 2:43 pm
dave 36:
You were making a decent argument untill you spewed this:
“3. Five year rates are highly unlikely to be at 8% in five years. If they are, then we will have experienced significant inflation. Significant inflation would carry over to rent, so the income on this property would be much higher. The relative level of debt would also be deflated.”
8% is historically pretty normal, it’s as good as a guess as any. Truth is no one has any idea what the rate could be. It could stay this low for 15 years or it could shoot to 21%. To say it is unlikely for the rate to go up 3-4% in 5 years is a stretch. I would say it is less likely that the rate will stay here for 5 years, but thats really just an opinion.
If the rate is 8% it doesnt really mean inflation has occured. Even if inflation does occur, there is no guarentee it will have a direct effect on rents. The past few years have shown that rents are relativly independant from the price of other assets, especially homes. Rents are more likely tied to incomes than inflation. If the price of things like food goes up and incomes are stagnent, people have less money for rent. Supply and demand…
And who really cares about “the relative level of debt?” This house cost 500K and an apple is a dollar. Next year an apple is $2. But the house is still worth 500K. You still have to pay the same mortgage. If the price of everything else doubles but the value of the house doesnt change, then the house is effectivly worth less. If you are buying it as an investment then the only thing you really care about is what you can rent it for, or the value of it. If rents stay the same or rise slower than inflation (likely during inflation, as rents can really only rise 4% as per RTA) then you are getting screwed.
March 8th, 2010 at 2:44 pm
70
I have to agree with you.
I think all the critical thinking bears have already bought, and all that are left are the bears with a superficial level of knowledge that uncritically glom on to past bear arguments. It is almost as if the bears are desperate to cling to any reason why the market will turn this year.
First, the inevitable interest rate hikes would crush the market. Never materialized and it looks like they won’t for some time. Then the focus turned to the much anticipated mortgage requirement changes, which as you have pointed out, really won’t dent the market. Then the very much anticipated flood of post-Olympic listings. I don’t think that will materialize either because the event actually re-energized the market and reinforced the belief that this is the “best place on earth.”
Oh well, I guess everyone can wait for that flood of listings from the retirement of cash strapped baby boomers. Oh right, that one has been around for a while as well. Maybe in another 10 years there will be a correction….
March 8th, 2010 at 2:44 pm
@Dave:
“Values will never return to the levels when they claimed this market was in a bubble.”
Show me your proof. You claimed earlier today that you always back up your claims and assertions, time to put your money where your mouth is.
You don’t have any. Because it doesn’t exist.
And yet you have the temerity to use the word “disingenuous” while being the most disingenuous person here. It’s second nature to you, I imagine you can actually be disingenuous in your sleep you’re so practiced at it by now.
March 8th, 2010 at 2:50 pm
Why devolve into personal insults all the time Drachen? You got schooled by Dave over the whole constant dollar issue (many bears pointed it out), then you hide for a few days and lick you wounds, and then come out swinging like a child again assuming your “knowledge” is superior.
I guess one of the poster’s assessment of you was right – you must be an inexperienced grad student or sessional that cannot handle the insights from those with experience in the real world.
March 8th, 2010 at 2:58 pm
I think real estate prices are irrelevant in the larger picture of globalization and eroding living standards in the West. High real estate prices only benefit one generation and impoverish the next one. Who is going to buy a house in Vancouver in 20 years when the average wage is 50% less and taxes are 50% higher? People will line up to emigrate to China, where there are more jobs and lower taxes. By that time, China will be a full-fledged democracy. Buckle your seat belts, we are in the beginning stages of the great world-wide equalization of living standards.
March 8th, 2010 at 3:00 pm
@#70 Purp
I agree that the change will not have a large affect if the banks can use the discounted rate. It only represents a 15% change in purchasing power for those absolutely maxed out on amortization and TDS, which does not represent the majority.
- Sure many are choosing 35yr mortgages, yet according to my broker they are not maxed out against the 44-46% TDS. These people will have room to make up for this new rule.
- It will lower the amount some can borrow, yet not drastically enough to price them out of the market. Instead they’ll just buy further out in the burbs.
- Lastly brokers will find ways to make the deals work by fudging a few numbers.
A bigger rule change is needed, or an emotional swing.
March 8th, 2010 at 3:16 pm
This is just slightly of topic, but still very relevant.
I live steps away from a brand new development in Burnaby and the second phase was just completed which resulted in a bunch of people moving into their brand new digs last weekend.
I was walking my dog right along the place e few times and made some very interesting observations.
First of all, when the place was sold (or pre-sold) the buying public was overwhelmingly Asian, each of the couple of open houses at the sales center I did attend feature mostly Asian buyers.
Now, people who were moving in are actually evenly split between your typical Mainland Chinese New Canadians and a young white families consisting of a pregnant wife and a dude wearing Ed Hardy attire.
My guess is that the units are 50/50 owner/renter occupied and so it looks like quite few of them were either re-sold before completion or rented out from the getgo.
What’s common however and quite revealing was that absolutely all the moves I’ve seen were done with U-Haul vans, family minivans and small trucks/SUVs packed to the brim with miscellaneous household items, mostly of very low apparent value and second-hand store appeal. None of the fancy, metro sexual decor we are fed at the staged sales centers. More like hand-me-downs from parents and friends with some isolated electric guitar or a decent speaker set for a good measure.
Now, these guys are moving in to $550K plus (yes, you read it right!) townhouses that they are going to enslave them until death and have no decent furniture or anything worth hiring a moving company for… no plasma TV’s, no modern danish design pieces, no artwork, nothing…
Just piles of old smelly crap.
Judging by their possessions all there new owners looked broke or nearly broke to me. Thank god for the credit cards. Oh wait, theses are maxed out to…
It was funny, as I walked down the street the next day I saw the same trucks and SUVs pulling up from emergency trips to IKEA hauling in some cardboard boxes containing cardboard DIY furniture, as certainly the new homeowners realized that they new digs were empty and there was nowhere to sit to enjoy the warm bowl of home-made Kraft dinner prepared on their new stainless steel gas ranges…
It all made me so sad, but on the upside I noticed some encouraging displays of “new owner” camaraderie, as they made friends, exchanged smalltalk and let their dogs sniff each other. I’m sure they will get to know each other really well soon, as the walls are paper thin and the units are only a few feet wide so you can see inside your neighbor’s place once you lean out of your own half a million dollar window.
Take this for what it’s worth, as it is purely subjective and anecdotal but judging by the initial impressions, if the rates go up by a SINGLE DIGIT, most if not all Lower Mainland’s first time homebuyers will STRUGGLE to make payments and are very likely to become homeless.
I’m sure the ones that are renting, have no such worry.
March 8th, 2010 at 3:25 pm
One thing that no one here seems to be talking about is how the inclusion of rental income is getting the hammer. In Rob’s example, 1000/month rent qualifies you for an extra 150K-180K depending on the ammortization. The new rules will only allow you to qualify for an extra 33K-40K.
http://www.yattermatters.com/r.....more-11531
I can’t tell you how many single family homes I know of that are really just an apartment block in disguise with 3 families renting a coach house, basement and main living area. Have you ever tried to find parking in one of those neighborhoods?
As far as using the posted rate goes, we only have one source so far, a blog just like this one (a husband and wife team by the look of it). I will wait to see the interpretation of the new rules from more sources before I jump to any conclusions. One poster here (@reknab) has already contradicted canadian mortgage trends.
March 8th, 2010 at 3:26 pm
79
Its called “House Poor” – pretty common in many communities in the lower mainland. Most homes have IKEA at best, and there is nothing wrong with that. And the Asian community values ownership over high end furniture, despite the cultural need to project wealth at all costs. Quite the contradiction no?
March 8th, 2010 at 3:27 pm
Investing in the stock market over the last 5 years should have paid off handsomely for anyone who followed advice to buy low and sell high. Lots of great cash flow stocks out there too. The examples are endless. The same rationale applies to Vancouver real estate. Investors with properties that have poor cash flow should be looking at dumping them. Waiting for further capital gains at this point is a major gamble.
If you bought an investment property in ’04 and had it 100% paid off now it may only be producing a yield of 2% to 5%, but you’re sitting on a massive capital gain. Give me the cash please. I’ve made a killing and I can get a better yield in almost any other real estate market in Canada.
The only people who would suggest you buy real estate in Vancouver at this point have some personal gain to get from selling it. Smart investors are quietly reducing their exposure to this game.
March 8th, 2010 at 3:35 pm
@The Poor Man’s Friend – Ikea:
Ikea has quite the spread when it comes to prices (and quality). There are some very decent looking and well designed/executed pieces, but they will cost you a pretty penny, actually…. and then there are the paper-mache $10 dollar stools that end up being used as side tables and such… And the biggest crowds at any Ikea are found at the restaurant and the As-Is clearance.
March 8th, 2010 at 3:50 pm
@White Payer:
My god those bear sores sure run deep. Big deal when new households form and are just starting out it’s common to have poor furnishings. However, unlike bitter, forenting losers over the years this will improve.
March 8th, 2010 at 3:54 pm
@INX:
“come out swinging like a child again assuming your “knowledge” is superior.”
It has nothing to do with knowledge. So I got a minor term wrong? Is that relevant?
The issue in this case with Dave has to do with logic. He says he can back up any claim he makes. He’s making claims about the future as though they were facts.
Ergo he lies.
Unless he has a time machine I suppose.
It’s not name calling it’s merely factual representation (something bulls seem to have trouble with).
“Dave is a liar.” is a simple statement of fact. Deal with it.
Notice also that although I’ve called him twice today on his “claims” he hasn’t bothered to provide proof for either one. In spite of the fact that earlier today he said he always backs up his claims. Hmm seems disingenuous to me, maybe you define it differently.
March 8th, 2010 at 4:02 pm
@Drachen:
You got more than a minor term wrong. LOL.
I never claimed I could back up the future. You have strange expectations. My opinions are always founded on facts and I am always happy to share them. For example, I have shot down claims by Patriotz regarding falling rents and a reduced industrial base. The facts speak for themselves.
The value of apartments and rentals has gone up over time. A muppet could figure that one out. For some reason, you seem to struggle with it.
March 8th, 2010 at 4:06 pm
@Dr. Know: I think all the critical thinking bears have already bought, and all that are left are the bears with a superficial level of knowledge that uncritically glom on to past bear arguments.
I rent a west side house for $2200 (same for the last three years). It was assessed this year at $1.2M. Maybe my knowledge is superficial but I don’t understand how it is in my best interest to buy, so feel free to enlighten me. Seriously. I don’t want a townhouse/condo because we like the yard, basement and garage, and I don’t want to move to the suburbs because I like walking to work. Sure, I’d like an updated bathroom and the motivation to re-do the garden, but it’s not worth another $4k a month or whatever it would be.
March 8th, 2010 at 4:22 pm
@superduperbulltime:
Please excuse my language, but anyone who thinks a young family should have to ‘start out’ in a 900sqft row house in the suburbs that cost $550,000 plus GST is fucked up in the head. This situation is unique in that it is both funny and tragic, and to think that there are actually people who think this is normal (like yourself) is even more bizarre!
You must be a REALTOR, because without exception Vancouver REALTORS are the sleaziest, most arrogant and stupidest salespeople in existence. I guess making $30,000/hr does that to you. In fact come to think of it I think you guys make more money than whores or drug dealers… Wow! there truly isn’t such thing as free lunch, is there?
March 8th, 2010 at 4:26 pm
80
From Larry’s post:
“The proposed new policy will now add 50% of rental income to qualifying income. This will negatively affect anyone who is relying on “suite” income as a mortgage helper, or for anyone who owns or was planning to buy revenue property.”
Umm, only allowing 50% of rental income to be added to your qualifying income was the rule in 2002/2003. That was a change from the old lending requirements. I was not aware that banks had changed that policy between 2002/2010. If anyone can show where they changed that rule, I would be appreciative.
March 8th, 2010 at 4:26 pm
@Dave:
“And finally, the value of the investment will go up over time.”
“Values will never return to the levels when they claimed this market was in a bubble.”
“I have always stuck to the debate and I have always backed up my claims and assertions.”
“I never claimed I could back up the future.”
So. Let us see. You claim prices will go up. You claimed prices will not drop to what bears call the “pre-bubble level” and you claim to always back up your claims and assertions.
Now you’re claiming you can’t back up the future? Of course you can’t. Nobody can. But you make factual claims about the future. Don’t you see the problem with that?
So:
1) You lie, you do not always back up your claims and assertions as evidenced above.
2) You are disingenuous, making claims about the future as though they were facts while knowing they are not facts and cannot be verified.
This is all pure logic, you don’t even need to look further than your own words to see how wrong you are Dave.
Finally:
“The value of apartments and rentals has gone up over time. A muppet could figure that one out.”
Okay, again, when pressed for backup you fail to present anything and just drop to the level of insults. I thought you were above that sort of thing? Hmm?
Show me historic data proving that the value of rentals and apartments goes up over time. Other than in a bubble situation (obviously you cannot use Vancouver as an example because that would be a tautology). You can’t because you are wrong. Tell me how a condo in a 50 year old building is worth more than a brand new but otherwise equivalent one Dave. Think about what you’re saying man!
March 8th, 2010 at 4:30 pm
@davers:
Have a look at rental growth vs. the rate of inflation. This is a pretty high level of correlation.
http://cuer.sauder.ubc.ca/cma/.....an-nom.pdf
http://cuer.sauder.ubc.ca/cma/.....tional.pdf
As you say, rent is tied to income, but rent hasn’t kept up with nominal income growth over the last 20 years. That means there is a lot of room for rental rates to outgrow income for some time.
March 8th, 2010 at 4:34 pm
@Drachen:
Wow, that was hard:
http://cuer.sauder.ubc.ca/cma/.....couver.pdf
See the trend? Here’s a hint… UP.
March 8th, 2010 at 4:39 pm
@Drachen:
Obviously any reference to the future is a prediction. Anything can happen. Prices could drop to zero, or prices could go into the millions. Everything between those extremes is opinion. Is that really a revelation for you? Is that your only criticism? Yawn…
March 8th, 2010 at 4:46 pm
Dave, please go away.
This chart shows that real rents have been decreasing for a long time in this crappy city.
http://cuer.sauder.ubc.ca/cma/.....couver.pdf
Now watch Dave try to blow some smoke about why real (i.e., corrected for inflation) measures should not apply. Go take your meds Dave, you’re losing it.
March 8th, 2010 at 4:48 pm
All I know is this – Dave and Drachen has way way too much time on their hands. We know that Drachen is a grad student, so fair enough, he has time on his hands. I hope that Dave is retired for his sake, or at least self employed, because any employer would not put up with this level of posting.
March 8th, 2010 at 5:06 pm
@dave the retard:
See post 91. Rents have not dropped in nominal terms since the data started being collected. People take out mortgages in nominal dollars and rents keep going up in nominal dollars. It’s that simple.
March 8th, 2010 at 5:14 pm
Gee…the bears are getting stupid on this site, especially if one lone bull can outsmart and out argue the lot of them. Maybe its a sign of fatigue, from being wrong for six plus years….
March 8th, 2010 at 5:14 pm
Well, I just got off the phone with 3 “mortgage specialists” from 3 different banks in an effort to end this debate.
My question to all 3 was “After April 19, if I want a mortgage what will be the rate you use to determine the maximum amount I can borrow?”
None of the 3 could tell me for sure and all said they would look into it and call me back.
I’ll post the results when these so called professionals get back to me.
March 8th, 2010 at 5:15 pm
@Dave:
“Wow, that was hard:
http://cuer.sauder.ubc.ca/cma/…..couver.pdf”
Umm you don’t pay much attention do you? First off that’s house prices, not rentals. Secondly you’re using Vancouver as an example to prove something about Vancouver. It’s a tautology. It’s like me saying Dave’s an idiot. I know he’s an idiot because he’s so stupid.
You can’t reference the very trend you’re trying to classify as “not a bubble” and then use it as proof that it’s not a bubble. Don’t you see the problem with that.
Finally, the discussion was about depreciation. That graph shows housing as a whole and does not show how the value of one unit changes over time as it ages.
So, in such a short message you managed to get three major logical/factual errors in there. Congratulations, you may have a new record.
March 8th, 2010 at 5:17 pm
@Lone wolf:
There is no such thing as a real estate bull in Vancouver.
Only useless cheerleaders.
March 8th, 2010 at 5:21 pm
I think we need to set guidelines on using either real dollars or nominal dollars. Dave likes to switch back and forth and use whichever one supports his argument the best. Please stick to one and use it.
March 8th, 2010 at 5:24 pm
101
Please, Drachen does the same thing….
March 8th, 2010 at 5:27 pm
Note taken LW…
How about ground rules need to be set for everyone.
March 8th, 2010 at 5:49 pm
@Lone wolf:
I prefer to work with real dollars. I can’t think of any time(certainly not recently) where I’ve put forward an argument using nominal dollars. If you can find an example I will stand corrected, but I don’t think you can.
March 8th, 2010 at 5:52 pm
@Anonymous:
“Dave likes to switch back and forth and use whichever one supports his argument the best.”
That applies to everything in the world of Dave. Not just money.
New construction numbers are up, it’s proof that the market is solid! Lots of employment!
New construction numbers are down, it’s proof the market is solid! Less supply!
March 8th, 2010 at 6:30 pm
@Purp: If you actually read the link to canadian mortgage trends (which outlines the purported changes) it says that for terms less than 5 years, the posted rate will be used. But for terms of 5+ years, the discounted rates will be used.
I think the problem is we don’t actually have an official word yet. The linked article says that, but it makes no sense. Banker, er sorry ‘reknab’ says that his bank understands the rule to be 5 year posted rate for ALL insured mortgages, no matter what the term. I guess we’ll just have to wait and see until someone has a link to an official source that lays the question to rest.
The topic is still interesting, particularly if the linked article is correct. Being allowed to qualify for ANY discounted rate makes no sense, since it wouldn’t give any solid number to qualify against. If this change allows that, it’s really not much of a change at all. If it doesn’t its a pretty major change. You say theres a problem with the math, but you don’t specify what it is. The math seems correct to me.
March 8th, 2010 at 6:55 pm
@Drachen:
I can’t think of a time where you have demonstrated that you understand the difference.
I think it is best for you to stick with just one type of number.
March 8th, 2010 at 7:01 pm
@Anonymous:
Both numbers serve a purpose and hence both should be used.
Nominal dollars are generally the better term to use because they are representative of what people actually experience. Every financial transaction is done in nominal dollars. Hence, people can relate directly to it. Nobody goes out and buys a car and says they paid $5,000 real dollars fixed to prices in 1972. It’s stupid. The same applies to real estate. You buy and sell in nominal dollars.
Only dummies and academics stick to real numbers.
March 8th, 2010 at 7:12 pm
My landlord gave me some good news yesterday. He is not going to raise the rent as he had been suggesting he would. I have a very luxurious waterfront 2 bdrm condo with 1010 sq ft for 1650.00
Living the good life with not a care in the world and lots of cash in the bank
March 8th, 2010 at 7:15 pm
I like John Hussman’s thesis (from ZeroHedge). He’s talking about the stock market, but it seems to apply to every market now.
http://www.hussman.net/wmc/wmc100308.htm
Over the past decade, it has been an uncomfortable lesson to accept that investors can be relied on to behave in ways that are ultimately unsustainable and destructive to their wealth, as long as market internals are temporarily supportive. It’s one thing to say, “From every historical precedent, we know that this is going to end badly, and investors will lose a great deal of their wealth, but for now, they are speculating anyway.” It’s another thing to add, “and since they are, we are actually going to rely on investors to continue behaving dangerously, and join them.”
March 8th, 2010 at 7:20 pm
Charts Don’t Lie
See:
http://www.patspapers.com/imag.....h_game.jpg
[OT, okay, but you gotta see this!]
March 8th, 2010 at 7:23 pm
#107 @Dave: So, which was the most prosperous society in history?
1) Germany in 1923
2) Hungary in 1945
3) Zimbabwe in 2007
March 8th, 2010 at 7:26 pm
@Dave:
“I have been pretty cordial in the face of persistent bear anger.”
“I can’t think of a time where you have demonstrated that you understand the difference.”
“A muppet could figure that one out.”
Yes… Cordial. Do you resort to physical violence when your anger gets the better of you?
You still haven’t shown that an ageing apartment building appreciates in value. Let’s see some data Dave! I thought a muppet could figure that one out. If you don’t produce soon I’ll have to assume you’re dumber than a muppet.
March 8th, 2010 at 7:27 pm
“Dave likes to switch back and forth and use whichever one supports his argument the best.”
Hmmm… maybe he needs a new name.
How about this: “Ujjaldossanjhmichaellevydave”
Seems to fit. Has a nice ring.
March 8th, 2010 at 7:31 pm
” I hope that Dave is retired for his sake, or at least self employed, because any employer would not put up with this level of posting. ”
you’re assuming he’s not paid for this, or somehow profits from doing so. I bet dollars to donuts you’re wrong.
March 8th, 2010 at 7:52 pm
@Anonymous:
Perhaps he’s just a masochist? If he lived in New York he’d move to Harlem and start putting up posters for the local chapter of the KKK.
Nah, you’re probably right.
March 8th, 2010 at 7:56 pm
I see SUPERDUMBBULL is still at it.
Let’s put him down like the antiquated realtor he is.
If house prices keep going up at 6-9 % every year and wages only go up 0-3 % per year within 10 years the discrepancy is 60 % (6% per year x 10 years).
We have already seen 10 years of this disparity from 2000 to now. Are we to assume that the market can handle 10 – 20 more years of this?
I am an owner but I am also a realist and you don’t have to have a PHd in economics to realize that this trend is untenable.
My child attends a private school (1 of the best) here in Vancouver and as you can imagine a good percentage of the students are asian (chinese). I speak with the parents everyday and they all say the same thing.
Vancouver is great for living but terrible for business. They are not investing anymore in Vancouver because they “don’t buy at the top of the market”.
The apartment I purchased in ’98 which I now rent for $2k a month pays the mortgage but if I were to buy it at todays prices I would never be able to cover the mortgage with the rent. It would be a negative cash flow investment. which what one should expect if they are “investing” in the Van real estate market now.
Dumb bull loves to denigrate the non-owners. So lets do the math and see who is wiser in the long run.
Owner: purchase home for $800,000. 10% down. $720,000 mortgage. 5% interest x 30n years is about the amount of the mortgage again $720,000. lets calculate the property taxes paid over the next 40 years @ 2.89% per year again almost the purchase price again. Now lets multiply $720,000k x 3 = $2,160,000
Rent: $2000.00 a month x 12 = $24,000 .00 a year x 30 years = $720,000
Lets not forget that property values go up and they go down. I know because I have owned houses for the last 25 years. Prices went way down in the early ’80′s and agin in the mid ’90′s.
March 8th, 2010 at 8:01 pm
Interesting thread, I actually find the discussion about the new rules very helpful.
I said it before and I will say it again: until the government (Flaherty) and the CMHC do not clarify the actual implementation of the new rules, there is space for subjective interpretation.
Could it be that they are not setting down the rules clearly so that they can play it by the ear? Wait until early April, see how things look, then set the standards for implementation.
With this government I would not be surprised. They are masters of spin, but the substance seems to be lacking.
March 8th, 2010 at 8:04 pm
Would those be real donuts or nominal donuts?
March 8th, 2010 at 8:08 pm
or tims donuts?
March 8th, 2010 at 8:26 pm
@Furlong is Paranoid:
Wow a waterfront condo, you must be a real pimp. Your more annoying than the bulls…
March 8th, 2010 at 8:40 pm
Patrick
That is the truth plain and simple. Lots of luck trying to convince Dave and other thick skulled bulls on here.
March 8th, 2010 at 8:46 pm
Domus 118 “…Could it be that they are not setting down the rules clearly so that they can play it by the ear? Wait until early April, see how things look, then set the standards for implementation…” — I was wondering about that as well, pretty shrewd politically if it’s true.
March 8th, 2010 at 8:55 pm
Mark Downs 106 – I should have been more clear, there isn’t really a problem with the calculations, just the assumptions. Until we know for sure what the changes are in terms of qualifying interest rates, these crazy calculations are just ‘bear porn’.
March 8th, 2010 at 9:24 pm
You know what isn’t “just bear porn”?
Another round of severely BEARISH daily numbers.
Vancouver All Areas*
Attached & Detached
as of:03/08/2010
New Listings – 335
Back On Market Listings – 1
Price Changes – 102
Sold Listings – 63
That’s just the BEAR naked reality.
March 8th, 2010 at 9:26 pm
@Patrick: You forgot about the opportunity cost of not investing the original down payment (80,000).
March 8th, 2010 at 9:48 pm
Someone posted this eastvan listing on Garth’s blog. Check out this sweet eastvan estate, only $580k:
http://www.realestateburnaby.c.....viewdetail
What I like best is the dramatic, emotional panning of the camera. All it needs is a soundtrack.
I’d have to ask the listing realtors if it was really necessary to include all those interior shots. How about one shot of the exterior, say “land value only” and leave the rest up to the imagination.
March 8th, 2010 at 10:18 pm
Oh tincup,
How will I sleep at night after seeing that?
What were they thinking? Did they never ever clean that house?
My wife wouldn’t take it for free (but she is ‘a bit special’).
Can someone explain to me what is up with the bull attacks? What? Is it too lonely at the open houses? The phone doesn’t ring at the agency?
If we bears are so deluded, and ‘only 37 crazy contrarians’, so be it! Go buy three, tell your huzbah to buy three and put your money where your mouth is.
What are you doing here? We bears are insignificant, a tiny blip in the radar… Why do you care about us? Go invest in real estate and make sure to take a big fat mortgage before April 19th. Leave us alone to ‘cry in our basements’. Don’t waste your time here, the boat is sailing, you don’t want to miss it. RealEstateNeverGoesDown ThereIsNoLandMakingMachine VancouverIsLandlocked TheRichasiansAreBuying and TheOlympicsAreComing.
Best of luck,
arit
March 8th, 2010 at 10:19 pm
On the discussion re: 5-year posted vs. 5-year discount, let’s look at what the Minister’s backgrounder says:
Note: (1) it doesn’t say that the 5-year rate only applies to terms less than 5 years, (2) while it doesn’t say “posted” or “discount” the analogy would seem to be to the three year rate under the existing rules which is the posted rate.
It’s not conclusive but I would say this lines up better with the release from reknab’s bank (no doubt reviewed by their legal department) than the Mortgage Trends blog posting.
March 8th, 2010 at 10:29 pm
1) Interest rate continue to go DOWN
2) Vancouver condo market continue to BURN RED HOT LIKE FIRE
3) Olympic distraction over buyer back in buying mood
What does it all mean? It means it’s time for another vancouver boom time. Because remember bears VANCOUVER REAL ESTATE NEVER GO DOWN
March 8th, 2010 at 10:32 pm
I’m a big mortgage borker and I talked to my bank reps and they all said that the 5 year discount rate will be used for 5 year terms or greater. Most people get 5 year fixed anyway.
March 8th, 2010 at 10:49 pm
131
So that means the new rules will have zero effect. Maybe next time bears…so sad
March 8th, 2010 at 10:54 pm
@bigtimemortgageborker: Just how does one go about borking mortgages anyhow?
March 8th, 2010 at 11:07 pm
Bork you.
March 8th, 2010 at 11:08 pm
@Mark Downs:
“bork
/bɔrk/ Show Spelled[bawrk]
–verb (used with object)
to attack (a candidate or public figure) systematically, esp. in the media.”
March 8th, 2010 at 11:09 pm
I should add – Dictionary.com
March 8th, 2010 at 11:58 pm
Or in this case, a systematic attack on a blog. Dave’s multiple personalities are really stinking up this place.
March 9th, 2010 at 12:15 am
That explains a lot. The bulls are borking each others brains out.
March 9th, 2010 at 7:32 am
@crabman:
You can’t have an efficient market if:
1. Bears can’t sell short.
2. Bulls can get financing not properly priced for risk (CMHC).
The RE market is not efficient because it can’t be.
That’s not a claim that any other market is efficient BTW.
March 9th, 2010 at 4:03 pm
As much as I would like to see the Vancouver RE drop like a rock due the new rules inposed by the government, at least I feel better that some potential buyers won’t get caught in the buying frenzy and experience financial hell in 5 years time.
April 19th effect on presales | Vancouver Condo Info Says:
April 19th, 2010 at 7:34 am
[...] talked a lot around here about the new rules and how they’ll affect interest rate approvals and how suite income is calculated, but there’s one aspect of the new rules that I [...]