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Friday Free-for-all!

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186 Comments

It’s the end of the week, and that’s traditionally when we do our weekend economic news round-up and open economic discussion thread. So without further ado, I present a few recent news links:

–Peter Simpson thinks of HST as a ‘death tax’
–Interview with new CREA chief
–300 sq foot house for under $200k (in Toronto)
–BC housing suing DERA
–Bear Mountain under creditor protection
–Scotiabank predicts cooling market
–Australian savers strike gold with high interest rates
–US gov tries to help bubble-buyers

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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Starving Artist

Considering how crazy the housing market is I find it interesting how many in spite of dire situations are “keeping up appearances”.

Welcome to Vancouver………….

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Vansanity

me – Thanks for the link to juggling dynamite! Great interview with Danielle Park on the Sterling Faux show.

Here's the link directly to the interview. Good listen for bulls and bears alike.

http://www.howestreet.com/goldradio/index.php/med…

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satv trying to rent

http://vancouver.en.craigslist.ca/search/apa?quer…

If you want to make more money just raise the asking rent and someone will pay just keep spamming?

isn't that right Dave/Kite/Supra

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squeak

Considering how crazy the housing market is I find it interesting how many in spite of dire situations are "keeping up appearances". I know of two guys that are broke, have pitiful incomes but still do the show. Guy #1: No work, had a small business that was actually costing money, not making money. Lives in old mom's basement that is filled with stuff, some costly stuff, but a mess. Drives a BMW, bought ex gf a 17K diamond ring, then somehow lost it, got insurance money, bought a blingier diamond ring as the gf did not think it was blingy enough. This is an "organic chick" that likes to have an organic garden, buy organic products, but still flies to mexico to have a massage/health holiday. When the guy's money was gone (apparently did make a tonne of money… Read more »

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Starving Artist

Paged, reverse-order comments? I kinda like it, the page loads faster anyway.

Disqus integration would be even better…. http://disqus.com/

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Supraboy

dave, you are my retarded bastard son

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domus

Dave, regardless of what people do in practice (i.e. cheating and borrowing beyond what their incomes allow them) may I notice that you are suggesting to break the law?

Illegal suites are often associated to cheap, unlivable quarters with fire and health dangers. Of course, everything goes in the rush to get rich with RE.

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vreaa

@Dave: "Of course the banks should allow rental income in their calculations. It creates affordable housing. Bears of all people should support this."

We bears want affordable housing by the simplest, most straightforward and most honest method, namely, plummeting prices. That'd sort everything out.

Any convoluted increasing-rental-income-by-tax-scams or bank-paperwork-massage or other manipulations simply prolongs the BS, and puts hoards of amateur speculords at risk of future implosion.

Let's just crash, flush it all out, and start again from a sounder foundation.

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Anonymous

Burnaby does not allow secondary suites unless for an immediate family member or a care giver. I received a letter from them this year insisting on an inspection due to an anonymous letter of complaint. My tenant had to go but i've been fortunate enough to have a family member who wanted to move to Burnaby from Edmonton.

The city said they do not actively search for illegal suites and know that there are 1000's. Of course they have to act on complaints. I have no idea what prompted the complaint because there is no parking issue, no parties etc.

Bizarrely Burnaby allows secondary suites in highrises so long as the minimum sq footage available is 240sqft. No to single family homes but yes to condo secondary suites – it's a strange ole world.

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me

http://jugglingdynamite.com/

third item down

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jesse

@patriotz: "Allowing rent from illegal suites to be included in qualifying income makes housing less affordable."

This seems like a temporary effect. There are diminishing returns from renting out parts of a dwelling since the utility is decreased for the owners. Investors know this: try renting out the top level of a house with the condition of 2 students living in the back room and see what rent you get.

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Best place on meth

Just for reference, here is the schedule for the BOC's rate announcements for the rest of the year.

20 April

1 June

20 July

8 September

19 October

7 December

It would be very interesting if they decided to raise rates at their next meeting, 1 day after the new mortgage rules take effect.

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jesse

@No Longer Looking: "My understanding is that practically all formerly illegal suites in the City of Vancouver have been considered legal since 2008." According to CMHC they require the suite to be legal. I don't know what sort of legwork they do however if a suite is found to be illegal and the bank didn't do its DD, CMHC can refuse an insurance claim. Non-insured or privately-insured loans can do what they want. 70% offset is apparently standard for these loans and that won't change come mid-April. You hit on a huge point though. This is effectively stated-income. The bank does a cursory audit of the property and determines if part of it can be used as rental income. Whether or not people actually produce the rental income is another story. When people read mortgage contracts more carefully, they'll understand… Read more »

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patriotz

@Dave:

Allowing rent from illegal suites to be included in qualifying income makes housing less affordable.

The more people can borrow, the higher house prices get. But owners still get the same income from the suites no matter what the house sells for.

In general, the freer the loan qualifications, the less affordable housing gets. No more clearer lesson can be drawn from the bubble in the US and in Canada.

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Dave

@patriotz:

And no municipal government would dare do it. Of course the banks should allow rental income in their calculations. It creates affordable housing. Bears of all people should support this.

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girlbear

@XXX: Yes, that is a good one. Agreed.

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XXX

Girlbear

Home Capital Group symbol HCG

I shorted it last time around and took 35% out of it. It's now rebounded to its highs 43 and change … Read there business plan … GREAT SHORT

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domus

"The Blossoming of Finance"

And think that this guys was the most powerful central banker in the world for decades. What a load of rubbish!

http://timiacono.com/index.php/2010/03/28/greensp…

We are rich because assets are priced above fundamental value!

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observer

@patriotz: Agreed. The original post was about shorting re, so what I was suggesting one could try to short reits. But with yields close to 5-6%, there is some ways to go before they look more expensive relative to other asset classes. Actually, it appears almost asset is overvalued at the moment, which is ominous as it suggests we are reaching a saturation point before a super critical transition. I've also heard arguments on this blog and elsewhere that re will not collapse in price but simply reach a price equilibrium once the effect of the decrease in interest rates has played out its effect (prices have almost risen to that point now). It sounds somewhat plausible but my feeling is that our current system doesn't allow for price stability due to the large influence of investors. The presence of… Read more »

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No Longer Looking

@jesse: "A VERY important point is that CMHC only uses LEGAL suites in income calculations. In Vancouver I’m guessing the significant majority of houses with suites are not considered legal so the rental income will not be (and have not been) used." My understanding is that practically all formerly illegal suites in the City of Vancouver have been considered legal since 2008. When we bought a place in Halifax, the suite was in a bit of a grey area. The neighbourhood was zoned SFH but the suite had existed before the zoning laws (since the WW2 housing crisis in that city). The bank basically took my word on it that it was legal, and it sort of was, and the suite income was allowed. Note, the CMHC was not involved due to a 25% down-payment. But would the CMHC have… Read more »

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joycer

@patriotz: This is how it was explained to me… by a realtor though I might add :). Just to play devil's advocate though, in practicality, how many people do you know who've had an illegal suite shut down, it is a reliable stream of income. The standard form letter for Surrey basically states: "We believe that an unauthorized suite is being rented in your home. If you would like to prove otherwise you have 30 days to file for inspection of your home. If you do not reply, we will begin taxing you at the rate of _____ to include the secondary residence." I've had several family members tell me that's all that happend to them and now they pay an extra $1000/year in municipal taxes. No inspector came and the suite was never shut down. I totally agree with… Read more »

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patriotz

@Joycer:

The only difference between an illegal an a legal suite (aside from the building codes) is the loss of tax revenue for the municipality.

Well no, the other difference is that an illegal suite can be shut down by the municipality at any time (by definition), so the income stream is not reliable. No responsible lending institution or insurer should make any allowance for income from illegal suites or any other illegitimate activity IMHO.

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me

http://agentwill.com/weekly-stats/

looks like the end is near

listings rising, one more month of strong sales and then things taper and year over year will look horid in a couple of months

it has arrived

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Joycer


The expaination I got was that CMHC is a government run entity and so it would not want to step on the toes of municipal governments by allowing illegal suites, they're suppose to work together. The only difference between an illegal an a legal suite (aside from the building codes) is the loss of tax revenue for the municipality. CMHC would not want to encourage that sort of thing at the expense of the municipality. To the landlord though, the income is the same whether it is legal or illegal and can offset the cost of the mortgage regardless.

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patriotz

@observer:

Although one doesn’t have to buy, it is simply a fact of life that our society has equated security with home ownership

Wrongly so. Never since the Great Depression have people buying houses at current prices been less secure. Shouldn't that be self-evident when the cost of ownership is well above rent, even with record low interest rates? Shouldn't that be self-evident from the years of horror stories we've been hearing from south of the border?

If people choose to ignore this evidence staring them straight in the face, they are going to get exactly what they deserve IMHO.

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