Logic has left the housing market
Our bubbly market has been featured in Macleans again: In Vancouver, logic has left the housing market.
And so it is with Greater Vancouver’s real estate market. People are indeed clinging by their fingernails as they try to meet their mortgage payments. The anecdote archive tells an all-too-typical story of a couple who bought a $1.2 million house with a $700,000 mortgage. The husband was laid off last month and the wife isn’t sure if her job is secure. Others like Pospisil despair of ever getting into the market. Certainly if you have to fall $700,000 into debt, why would you want to?
But in some parts of the Lower Mainland those sorts of mortgages are the price of admission. North Vancouver, the poor cousin of the three highest cost areas, had a benchmark price in March for a typical detached home of $927,122. A similar benchmark or typical house in neighbouring West Vancouver sold for $1,440,747. And in Vancouver’s west side it went for $1,656,986, according to the latest figures from the Greater Vancouver Real Estate Board. True, there was a dip in housing prices in late 2008 and much of 2009, but it was temporary, and relatively minor in nature. It was certainly not the burst housing bubble that many predicted, and still predict, will hit. By rights the housing prices should have peaked, but logic has long since left the market place.
Read the full article at Macleans, and congrats to VREAA for the mention in that article!
April 22nd, 2010 at 4:05 am 1
Last Wednesday, the best discounted rate at my Credit Union was 3.69%. Today it's 4.49%, an increase of 22% in a week. It's becoming very obvious that we have reach the bottom of the barrel of buyers. Naive, innoncent or just plain stupid is what's left.
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April 22nd, 2010 at 4:29 am 2
Expect a wave listings. Once it hits a widely circulated magazine, the boom is DEAD.
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April 22nd, 2010 at 5:07 am 3
too bad they choose to get the numbers from 2006 (6.6 vs 9.3) saying Van is the 15th most expensive city in the (english speaking) world, whereas now it is THE most expensive city.
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April 22nd, 2010 at 6:39 am 4
16,396 total inventory.
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April 22nd, 2010 at 7:11 am 5
FYI 2 bedroom unit a nicer condo building just off of Lonsdale just sold for 550k. The kicker, it sold for 580k exactly 2 years ago.
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April 22nd, 2010 at 7:16 am 6
There is no 'value' to real estate in Vancouver. The concept of ownership has disintegrated in a relationship of permanent debt. Most people who have purchased a mortgage over the past few years will NEVER own the roof over their heads. Therefore I say that there is no value in real estate it is a monthly payment much like a car lease and therefore the underlying asset is worthless.Read the back of your credit card, it says "This card is the property of so and so, now read your mortgage document. Oops that 700,000 mortgage is just the lease differential, you own nothing except the right to speculate on interest rates for the next 35 years.
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April 22nd, 2010 at 7:19 am 7
@paulb: Thanks Paul. You add that example to Larry's (small sample) evidence that prices are dropping on the westside + the huge volume of price changes and I have a suspicion that price drops are happening already. This shouldn't be happening yet according to the Mohican model, but I think we might be in circumstances not captured by the model.
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April 22nd, 2010 at 7:19 am 8
And therefore, logic has left the market.
What would fundamentals (plus a little extra for the rain) suggest pricing should be?
10, 20, 30, 40, 50, 60 or 70% price drop?
The pimps in Vancouver are touting the same reasons, why it's different here, this time, as their counter parts in the US.
Could the same dishonest logic lead to the same results?
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April 22nd, 2010 at 7:20 am 9
The sad thing about the coming few weeks is that sales will continue to be strong as some people with pre-approvals will jump in head first to ensure that they don't miss the last train. If they would only read the sign on the platform, they would see that the destination is: hell.
On second thought, scratch the 'sad' part. These people deserve every bit of it. Those that ignore the warning signs just need to learn the hard way.
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April 22nd, 2010 at 7:29 am 10
We are finally going to find out how much "shadow inventory" (such as unoccupied condos) exists in Vancouver. I wonder: as prices plummet in Vancouver, will Calgary follow suit?
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April 22nd, 2010 at 7:51 am 11
@Dan #10: Vancouver and Calgary are 2 different beasts. Calgary might follow suite (or not) for different reasons. In any case, people in Calgary won't be losing 10 years of wage if the price of their homes collapse.
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April 22nd, 2010 at 7:51 am 12
Thanks for the congrats, Pope.
VREAA has its uses.
But when it comes to sane discussion of Vancouver RE, VCI really is the only game in town. So, congrats and thanks to you.
–
Agree we're already seeing 'stealth' price drops.
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April 22nd, 2010 at 8:17 am 13
"We are finally going to find out how much “shadow inventory” (such as unoccupied condos) exists in Vancouver…"
Tons.
Especially in the highrises surrounding Coquitlam Centre and the Newport/Klahanie neighbourhood of Port Moody.
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April 22nd, 2010 at 8:18 am 14
@elvince:
The Canadian RE bust in fact started in Calgary and Edmonton in summer 2007. There was a weak really starting in late 2008, but prices never returned to peak. They will certainly go down some more, but even at the 2007 peak Calgary was nowhere near as overpriced as Vancouver.
http://www.chpc.biz/
BTW, it won't be for "different reasons". There is only one reason for RE busts, and that is prices out of proportion to rents and incomes. Always.
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April 22nd, 2010 at 8:20 am 15
The only problem with mainstream articles like this one is that they are 5 years too late.
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April 22nd, 2010 at 8:32 am 16
@vreaa: Agree we’re already seeing ’stealth’ price drops.
I mentioned before about 14 properties I USED to manage,well we exceeded a 50% sales in two weeks, there are 6 left. The investors who are selling are pricing just below the last sale price of similar units. They have room to move and aren't in the least bit worried.
The buyers 100% are FTB's. Every one of them looks stressed to the max!
I am arranging for the tenants to leave (none of them want to buy the units they are in and most have the money to meet 20 % down payment status). None of the tenants are upset actually (me included), most are stunned that somebody would actually pay the price they(the investors) are selling for, and that is telling because if you have several years (all are long term tenants)renting a place and you have the funds to buy it but you are not the least bit interested….well that says it all doesn't it!
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April 22nd, 2010 at 8:42 am 17
@bubbly:
And how many years have we been hearing the horror stories coming out of the US, where price/rent and price/income in markets like LA were about the same at peak as Vancouver is now?
No clearing warning could possibly have been given. People who ignored the coverage from the US are not going to pay any attention to what Canadian media say, either.
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April 22nd, 2010 at 8:46 am 18
When the specter of appreciation disappears that is when you have the start of a market correction.
When the majority vendors that do not have to sell, pull their homes off the market leaving only those who have to sell ie re-location, divorce, court sale, estate etc to dominate the pool of sellers, that is when you see a real estate market fall.
So, you would watch for an increase in listings to signify a market correction followed by a drop in listings to signify a ….
Again, an opinion of a guy who is just too good looking for Canadian television.
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April 22nd, 2010 at 8:54 am 19
To see a few misguided souls still buying might be understandable, but with the LOUDEST storm warning and the biggest listings surge EVER, it is truly baffling to see hundreds of blind lemmings still marching towards the cliff.
So, believe it or not folks, there is still time to sell.
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April 22nd, 2010 at 9:02 am 20
Here's an article [21 Apr 2010] from the US based CEBR (Center for Economic and Policy Research) discussing price:rent multiples that suggests that "a balance between owning and renting" is achieved at 15:1 price:annual-rent (or 180:1 price:monthly-rent).
Their math is interesting, take a look.
Again, this suggests we're at least two times overvalued here, likely more.
http://www.cepr.net/index.php/blogs/beat-the-pres…
Fundamentals rule!
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April 22nd, 2010 at 9:20 am 21
Strataman: Thanks for the update from the trading pit! Currently they have a 'partial fill' but should 'execute' fine.
And it does sound like a form of 'execution' is indeed taking place…
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April 22nd, 2010 at 9:23 am 22
@specialfx3000: When you say these people deserve it, just remember that it will be us (the taxpayer) who foots the bill.
The one thing the credit crunch taught me is that our governments will do anything in their power to support house prices. If prices start to collapse, and they should, watch for more stimulus.
Watch for more and more government intervention, fiscal and monetary stimulus. They will continue to punish savers to bail out borrowers. Costs will rise.
I suspect we'll see a 20% pullback. Any more than that and they government will blow up our currency to prevent prices from falling further. We've entered the death spiral.
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April 22nd, 2010 at 9:32 am 23
@Mike:
What do you mean "we", white man? The federal government is only concerned about Toronto, and you probably won't see more than a 20% drop there in the near future, which is all they care about.
This city is going to crash and burn, the Cons know it, and they don't care.
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April 22nd, 2010 at 9:33 am 24
In 2008 listings were pulled off the market because of a drop in sales, and a promise of a huge payoff after the olympics.
This is the time to dump, buyer demand will dry up with a rise in interest rates. 20,000 listings will be seen in June.
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April 22nd, 2010 at 9:42 am 25
@vreaa: good find. His math is roughly correct and people should read how he thinks.
1) I think their ratio is too general as it doesn't take into account different dwelling types.
2) He forgot about depreciation which will add 1-2% on top of his calculations.
That puts the cap rate close to 8-9%, which is about right, on average. Condos will have an even higher rate.
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April 22nd, 2010 at 9:46 am 26
Why are people down-modding Mike for pointing out the obvious? Our federal government has been punishing savers to prop up debtors, full stop. And if they thought they can do more of it, they probably would. I'm not happy about it, but at least I can acknowledge it as the truth.
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April 22nd, 2010 at 9:52 am 27
The only thing more astonishing than the number of sales is that they keep getting dwarfed by the landslide of listings.
(Though predictable given the April 19th apocalypse of our own West Coast Real Estate version of Sodom and Gomorrah).
Sales may peter off, but if the panic selling continues, we're in for a real treat.
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April 22nd, 2010 at 9:52 am 28
@sluggo:
I saw a news bit on CBC couple of days ago (Monday, when the new rules started) and they were showing a young couple in Vancouver (she was pregnant with their first child) who just made it getting "into the market" before the new mortgage kicked in. They said they were so happy they timed it just right, and they were so lucky to have found this place in the last minute, as they would no longer qualify for the mortgage as of this week.
The place was a run down shack with a dingy looking basement suite they bought for $750,000. These people were genuinely happy and excited. They think they managed to "beat the system" or something.
W H A T T H E F U C K ? !
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April 22nd, 2010 at 9:54 am 29
I don't know about the sell is still high in April.
My hood is Killarny areas. Only 4 units were sold up to April 20. In March, there is 13.
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April 22nd, 2010 at 9:55 am 30
@Mike:
Sadly, I agree. Our government simply doesn't understand that it is not possible to manipulate the RE market over the long-term.
All it will do is ultimately bankrupt more Canadians. But expect to see the Stimulus anyway (new homebuyer incentives, tax breaks etc).
Still, unlikely it can save Vancouver.
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April 22nd, 2010 at 9:56 am 31
"Logic has left the housing market"
Oh really?
Hey Bears,
What were you doing here? saying that Logic has left the housing market means you guys have no idea why the market is getting stronger every day.
Real estate market is totally connected electronically,Once the guy pick 2ltr pop on the ground that will fuel 100 top dogs to use their fingers to enter the information in the system economically.Once a buyer pick up any unit on the floor that will fuel 100 employees to use their fingers to enter the information into the system realestatically.As long the sales are smooth economically and realestatically there are lots of sector and different type of employee will always make money out of it that way buyers and sellers will transfer from one sectors to another sector.Why? Because people who earn money today they must invest it in the market.Their own jobs and yearly income is not guaranteed so they must think about their future.It doesn't even matter if they end up in crash but there is no other way to give life to your desire.the story will be countinue.So bears go work and make money then buy real estate.Bloggers are short on information and are in entertaining self filling bs,their thinking never ever touch the realty going back or fourth.When ever there is no logic Always take a toke to get back in sense tomorrow.By the way isn't this logic was an idiot poster on vci? Market is better since the logic poster has left.
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April 22nd, 2010 at 10:08 am 32
@Nero:
Sure they do. That's exactly the reason why they brought in the new restrictions on CMHC qualifications. They knew prices would inevitably come down to normal (I mean "normal" in the sense of circa 2004 real prices), and they wanted to stop further appreciation so the public would not perceive a US-style bust when it happens. And the public probably won't in most of the country.
Only problem is that Vancouver passed the soft landing point years ago. But that's a problem for the locals, not the government, because they don't stand to lose more than a few seats here in any case.
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April 22nd, 2010 at 10:17 am 33
http://www.youtube.com/watch?v=bNmcf4Y3lGM&fe…
so confused, are they talking about the US or vancouver? "buy now or be priced out forever"
its chilling.
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April 22nd, 2010 at 10:18 am 34
@jesse:
His math does not agree with yours. An annual price/rent of 15;1 is a gross yield of 6.7%, which would be a cap rate of 5.5% or so for a SFH and lower for a condo. That is below the historic norm for mortgage rates during periods of low inflation.
A cap rate of 8%, which I agree is the point at which buying makes sense, is more like an annual ratio of 12 or 13:1.
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April 22nd, 2010 at 10:26 am 35
@patriotz: His end number is incorrect but, IMO, the general way he analyzes housing as an investment is sound. His mistake was not his methodology but omitting costs that would push the ratio lower. If he includes them his answer would roughly agree with mine.
I agree 12:1 or 13:1 price to gross annual rent ratio for a condo is about right.
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April 22nd, 2010 at 10:27 am 36
The feds weren't trying to save a housing market – they were trying to save an economy.
The Fed's gambled on a short recession and put all the chips on the housing market.
Maybe, after a royal commission looks into why our financial system failed so badly, one of the recommendations would be that CMHC can not be used as a political tool and a return to their original mandate of helping Canadians buy homes rather than subsidizing investors in order fill the government coffer with CMHC premiums.
chime in
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April 22nd, 2010 at 10:28 am 37
I think that most of vancouver is overpriced. But downtown will not go down in price very much or at all because (and can even go up again before long) it is a highly desirable place to live. there is always so much to do and so much going on, downtown is where the action is.
That's what people want so they will always pay more to live in downtown vancouver, especially the highly educated provessionals like myself who desire the downtown lifestyle.
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April 22nd, 2010 at 10:29 am 38
I know it's kinda heresy to mention RE Talks here, and rightly so, but you have got to see what's happening over there, where some rabid bulls are playing CYA and trying to position themselves as though they've been calling for price drops of up to 30%.
http://www.realestatetalks.com/viewtopic.php?f=8&…
—
So now we have folks who very recently were mocking renters for not having the courage to buy, talking about magnitudes of price-drops that would be absolutely devastating for leveraged buyers.
How two-faced is this?
Before the bottom is reached I absolutely guarantee you that we'll have eyesthebye, jimtan, and all the other usual rabid bull suspects telling us sagely that, of course, they'd predicted >50% price drops.
And you know what is worse?… they'll actually believe that they did!
You gotta love people for the remarkable stories they sell themselves.
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April 22nd, 2010 at 10:33 am 39
@patriotz:
…..The federal government is only concerned about Toronto, and you probably won’t see more than a 20% drop there in the near future, which is all they care about.
This city is going to crash and burn, the Cons know it, and they don’t care…..
Except the PC's don't have any seats in Toronto so they don't give a rat's behind about them either.
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April 22nd, 2010 at 10:43 am 40
@patriotz:
Couldn't agree more: there's been this underlying assumption in Vancouver that if things get really bad, the Feds will step in. They won't.
I think this goes hand in hand with the entire "Best Place on Earth", "compared to New York and Paris we're not that expensive" delusion. The same sort of delusion of self importance that keeps twelve year old girls preening themselves in front of the bathroom mirrors for hours and hours.
Vancouver is the ass end of the universe, and not even on the political radar of the power centers in the east. If you're waiting for the cavalry to arrive, you're going to be waiting a long, long, while.
If it's not happening in Toronto or Quebec, it aint happenin'
Good night, and Good Luck.
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April 22nd, 2010 at 10:46 am 41
@Hula:
I meant the Greater Toronto Area (GTA) not the City of Toronto, which comprises only half its population.
The non-CoT part of the GTA, aka 905, is where Canadian elections are decided and you'd better believe the Cons care about it.
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April 22nd, 2010 at 10:51 am 42
@Bubble Lad: I agree–while there may be attempts at a bailout to soften the edges (e.g. a new homebuyers credit or something) it's not like the GUV is going to come in and subsidize your losses on your investment condo.
Imagine that there are 100K homeowners who suffer $100K in losses on their home equity. This is TEN BILLION DOLLARS of 'wealth' that is wiped out. No one is going to cut homeowners a cheque for that. It will be GONE.
AND there are more than 100K homeowners who will lose more than 100K in equity, so this is a vast understatement of the loss in wealth that is about to occur around here.
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April 22nd, 2010 at 10:52 am 43
@patriotz: I'm not quite sure what the 'White Man' query is all about. By 'we', I mean citizens and residents of Canada.
I think Toronto will see similar percentage drops in Real Estate prices. They've observed quite the housing boom there too. I do agree though that Vancouver ought to feel the most pain.
Make no mistake though. 'We' are up to our eyeballs in debt. Like it or not (and I don't), the government wants inflation, which would reduce the real value of all this debt that needs to be paid back. Ben Bernanke famously commented that in order to prevent deflation, he'd drop money from helicopters. Mark Carney is cut from the same cloth.
Expect more intervention, more stimulus and more intrusion. It has already started and it is something that cannot be unwound without considerable pain.
This is something I do not wish for. I sincerely hope I'm wrong. Credit expansion brought forward years and years of consumption. We either need to pay back all this credit, or default.
Unfortunately, the government has shown that it is willing to absorb private sector losses. We're all in this together now…and we can default the honest way or the dishonest way (i.e. inflating our debts away).
Any meaningful price declines will be met with more stimulus and more inflation. Whether it will be sufficient to rescue a falling housing market, I'm not sure.
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April 22nd, 2010 at 10:52 am 44
Man you guys are setting yourselves up for a major FAIL.
I'd be extremely surprised if things don't take a turn for the worse in BC. If they don't, I can't imagine anyone wanting to live in such an expensive city…unless they are a bunch of snobs and douches who feel entitled to do so…much like San Francisco and Manhattan.
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April 22nd, 2010 at 10:53 am 45
@patriotz:
Absolutely correct. That is the sole cause of all RE busts. We often mistake the trigger for the cause. One has no way of knowing a priori what the particular trigger in any situation will be. None of us knew six months ago that the trigger that was going to burst the Vancouver RE bubble would be a change in CMHC lending requirements. (Of course, I'm assuming that the market really has reached a top.) But we all knew that prices had moved well beyond what could be justified on the basis of rental income and that any one of a number of events could potentially trigger a bursting of the Vancouver RE bubble.
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April 22nd, 2010 at 10:57 am 46
@White Payer:
For the sake of their child, I hope they find a tenant for that suite AND it's not the kind of tenant as seen in "Pacific Palisades"…..
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April 22nd, 2010 at 10:59 am 47
BTW, I just had a birthday, I'm no longer a cub!
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April 22nd, 2010 at 10:59 am 48
"A cap rate of 8%, which I agree is the point at which buying makes sense, is more like an annual ratio of 12 or 13:1."
But you are not making a difference between a new unit versus a 30 year old condominium, a condominium in a complex with amenities like pools and tennis courts versus one without, or a condominium with a view or without a view. None of these will have the same cap rate. So you are going to have to have an extremely wide range of cap rates from the poorly run complex at 12% to the shiny new one at 5%.
And what if your in an area with a tight rental market, but a recently completed high rise condominium tower that have just gone into receivership? Something that may soon be coming to a neighborhood near you.
I mean why go there. Buy when it makes sense to you.
I'll start
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April 22nd, 2010 at 11:05 am 49
@Nero: Governments can do the following:
(1) Redistribute wealth. They can tax those who earn and redistribute to those who don't.
(2) Misallocate capital. They can encourange investment in one less productive industry at the expense of another more productive industry. This can be accomplished through regulation, subsidies, grants or insuring one's debt. The private sector is incapable of fulfilling all of society's needs (i.e. police, fire, education and property rights). Some of this is required. The CMHC is a perfect example of this. It is a government creation which encourages banks (i.e. the private sector) to lend money to people who they would not lend to otherwise. This leads to out-of-balance investment in housing and rising prices. Make no mistake, this occurs at the expense of other industries. Earned wealth would have been invested elsewhere if not for the CMHC.
(3) Bring forward consumption. This is accomplished through fiscal stimulus, low interest rates and tax incentives (i.e. the Home Improvement tax credit).
This is really all the government can do. Make no mistake, intervention in free markets has consequences and creates unproductive misallocations. Venture capitalists cannot find funding. All our wealth is being allocated to Real Estate, consumption and housing. This misallocations can last for a very, very long time. The PRIVATE credit bubble lasted 25 years before it finally popped.
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April 22nd, 2010 at 11:06 am 50
@Noz: Things will turn much worse. Not only for housing.
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April 22nd, 2010 at 11:07 am 51
@Mike:
I’m not quite sure what the ‘White Man’ query is all about. By ‘we’, I mean citizens and residents of Canada.
http://en.allexperts.com/e/w/wh/what_you_mean_we,…
The Lone Ranger and Tonto are out riding one day when they are attacked by Indians. Cornered and running out of ammunition to defend themselves, the Lone Ranger turns to Tonto and says "It looks like we will be killed by the Indians." Tonto looks at the Lone Ranger and replies "What you mean 'we', white man?"
The Lone Range is Vancouver and Tonto is… Toronto. Get it?
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April 22nd, 2010 at 11:37 am 52
Downtown lifestyle, la la la…
Let's wake up in a shoebox and check out the fabulous view.
Oh, I see all my neighbours.
I guess they can see me, too.
Time to go to work, gotta pay off my huge mortgage.
Oh I forgot I am mostly paying the interest.
Who cares at least I am a owner baby, not some poor souls who rent.
Grande skinny latte no foam, please.
Look at me, I am walking with a giant paper cup with a corporate logo on my way to my tiny cubicle.
Trying not to spill on my nylon pants.
Isn't that cool?
At a watercooler, yack about my fabulous condo and nearby restaurants
Just don't ask me how often I go, cuz I can't really affrod it
Break time, let's go to a "cafe" and have a fabulous cappuccino in a paper cup
Time to go home
How lucky am I to be in downtown. The whole world is here.
Hang out with my cool friends to do cool things.
Look at all the numbers on my iPhone.
Ring ring
What do you wanna do? I dunno.
How about you? I dunno it's raining…
Why don't we go for dinner? (My kitchen is too small anyway)
Earls, Cactus club, Milestones, Moxies?
How cool are we!
Come home and got my mails.
Bills, bills, bills.
Another 10 days till the payday.
Just pay the minimum. Should be ok.
My condo is going up and up, nothing to worry about.
Time for bed.
I hear my next door neighbours.
They must be gettin busy.
Wish these walls weren't so paper thin.
But it's ok, I am a condo onwer.
Downtown living, la la la…
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April 22nd, 2010 at 11:43 am 53
The unprecedented credit expansion over the last two decades has led governments to interfere in various markets. Rather that stick to the basics such as National Defense and infrastructure. Without easy credit and low interest rates, prices of all assets must fall. Not just real estate, but cars, washing machines, etc. We have mostly outsourced those semi-durable goods to third world countries where a leather club chair only costs $30 to make and a wine glass 3 cents. And that leaves real estate.
Real Estate in Canada has only dodged the bullet temporarily. If Real Estate in Canada had taken a hit three years ago, we might not now be looking down the barrel of a tank with only a remote chance to side step out of the way.
Save you money, the price of hard assets has only one way to go. The best paying job in the future may be a car repo man rather than a banker.
I'll start again
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April 22nd, 2010 at 11:45 am 54
@Mike:
Mike, one thing for sure is that it ABSOLUTELY WILL NOT STOP PRICE DECLINES.
Government intervention never does. It'll pull forward some demand, cause a short-term sales spike, etc etc, but the end result never changes.
Free market forces always win in the long-run, no matter how hard politicians try.
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April 22nd, 2010 at 12:03 pm 55
@Nero: I agree. Prices will fall.
All I'm saying is be prepared for the government's response. In 2007, I sat around thinking, "Vancouver's housing market is doomed." Sure enough, it started to crash.
Then came global policymakers with tools I'm not smart enough to think of. Quantitative easing, buying mortgage back securities, ZIRP, homebuyer tax credits, renovatation tax credits, etc. etc.
In the US, they are talking seriously about mortgage modifications and compensating banks to write-down principal balances. Don't underestimate the radical actions these people will take.
Let's hope that the Democrats get crushed in November. Not because the Republicans are any better, but because it will take away Obama's free pass to advance all of this nonsense and perhaps we might see some normalcy in the global financial markets…
You are right…market forces always prevail. That said, the government can bankrupt us trying to prevent them.
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April 22nd, 2010 at 12:07 pm 56
"The Lone Ranger and Tonto are out riding one day when they are attacked by Indians. Cornered and running out of ammunition to defend themselves, the Lone Ranger turns to Tonto and says “It looks like we will be killed by the Indians.” Tonto looks at the Lone Ranger and replies “What you mean ‘we’, white man?”"
I get the joke, I just don't understand what the Lone Ranger and Tonto were doing in India?
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April 22nd, 2010 at 12:14 pm 57
@Mike:
"In the US, they are talking seriously about mortgage modifications and compensating banks to write-down principal balances. Don’t underestimate the radical actions these people will take. "
They have talked about this, but have you actually seen the numbers for how many mortgages have been modified? VERY few.
Again, 100K households x $100K is TEN BILLION. They will not be cutting cheques to homeowners.
They may very likely bail out banks, which may moderate the fall somewhat, but homeowners won't be getting any cheques from Ottawa to compensate for their losses. They will take a big haircut.
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April 22nd, 2010 at 12:26 pm 58
@VHB: What about principal reductions, as they have also talked about?
Say, you as a homeowner owes $500,000. Your house is only worth $350,000. They've talked about encouraging banks to reduce the principal balance to fair market value. Would they go this far? Hopefully not, but they've talked about it….and they will if they have to.
These guys will do anything and everything…
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April 22nd, 2010 at 12:31 pm 59
@VHB:
"May"? The banks have already been bailed out. They are already guaranteed repayment on their mortgages.
There is nothing the Cons' core supporters in Red Deer, Peterborough, etc. would like to see more than see a bunch of sushi eating, latte drinking, BMW driving West Coasters get cleaned out. When Flaherty said, "People shouldn't buy houses they can't afford", he wasn't just shooting from the lip. That is going to be the Cons' strategy in dealing with the bust – blame it on individual irresponsibility, not systemic mismanagement.
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April 22nd, 2010 at 12:32 pm 60
I'm loving this 'buy now or rent forever ' spin. At the current time the smart people ARE the renters. Its obviously 50% cheaper to rent a living space than to own a mortgage. The rates of preferred shares ar paying low tax dividends instead of massive strata fees and prop taxes, never mind the financial overhang in a falling price and rising rate enviornment.
The CBC couple gushing about 'getting in' are going to be 'staying in' for the next 40 years. The income on the 700K is great for the bank but a net loss to the buyer. For people like this it doesn't matter if prices appreciate, the interest on the mortgage will exceed any gains over time. Talk about a Faustian bargain. They will pay close to two hundred thousand in intrest AT TODAYS RATE over the next five years. Ya…..they won the lottery alright. But what will happen as rates adjust up and the 5 year fixed rate is up again when they have to requalify. I hope this guy is a neurosurgeon because he'll need the money. It might be amusing to read about these people who are trying to drill icepicks into themselves for being so gullible.
KD forever winners, oooooooooo soooo gooooood. Bwahahahahahahahahahaa
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April 22nd, 2010 at 12:46 pm 61
@Mike: cramdowns have been attempted in the US but very few lenders have bothered because it means immediate writeoffs on the balance sheet. Instead there is massive shadow inventory of properties with nonperforming loans marked to model.
Given the banks' profits even through the recession I would find it hard to believe the government will offer to fund cramdown writeoffs. The CMHC backed loans are another story. At this point it may be in the best financial interest of taxpayers if the government will cram down nonperforming loans. You can bet if that happens CMHC is going to have its policies radically changed for the better.
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April 22nd, 2010 at 12:47 pm 62
@Mike: Mike: you're right that there have been a lot of headlines about help to modify loans in the US. But when you look at the numbers, it is pee in the ocean.
Here is something from Calculated Risk. He has dozens of posts on the HAMP program. Only 116K mortgages have been modified so far. The issue is that the program only applies very narrowly. You have to be in severe distress to qualify.
You're right that there are incentives in that program for short sales–but recall what that means–you are selling your house to someone else for today's market value. The short sale just means you walk away with **nothing** rather than a big debt.
The problem has been that banks don't want to do a short sale, because then they have to recognize the loss in their accounting. Right now they still have overpriced assets on their books. This is the 'extend and pretend' thing you may have heard about. See CR here.
Ok. To summarize my points.
1) Fiscal actions by the govt cannot and will not keep house prices from falling lower than today's peak levels.
2) Fiscal actions announced with great fanfare will be mostly window dressing. They may enrage the bears, but the actions will be toothless. (Why? Recall my ten billion number. They can't afford to do something for everybody.)
3) The actions may help the banks, which indirectly will help the market find a bottom more quickly than it otherwise might.
So, you can tell me the feds might take some action to moderate the fall, but they simply do not have the money to reverse a big fall. We are talking hundreds of billions here.
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April 22nd, 2010 at 12:58 pm 63
@Anonymous: Love that post. I know a guy like that. Could visualize him all the way till going to bed. LOL
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April 22nd, 2010 at 1:00 pm 64
realpaul @7:16:
Outstanding comment. Outstanding. The present situation is a form of expensive renting. It is utterly irrational. This is yet another financial mania.
What is most frustrating is the way in which this harms low income households. Even the middle class. You can never get ahead (unless you reject the whole "homeowner" concept, as have I).
Cheers.
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April 22nd, 2010 at 1:02 pm 65
New Listings 115
Price Changes 72
Sold Listings 96
Will listings make a comeback and crush sales like yesterday? Or will sales pull up their skort and deliver a bear beating? My money is on the former.
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April 22nd, 2010 at 1:12 pm 66
downtown is the place to be, for people in the know.
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April 22nd, 2010 at 1:12 pm 67
@Mike – Not sure why you where voted down on so many of your comments! They are valid points as to what governments can do to slow the pullback in home prices. Here's a few more:
Federal:
1) Government could issue a personal stimulus to every citizen, much like the $600(?) Billion given out by Bush and Co. Most US citizens received around $600 or so.
2) Federal home buyers grant – $10,000 or so to every first time home buyer, later this could be modified to 'any' home buyer.
3) Tax credits – we've seen some already like home improvement/reno tax credits, but they could conceivably come up with more.
Provincial:
1) Provincial home buyers grant – Same as above a la California.
2) Tax Credits – same as above, but add to it builders as they are BC Businesses and the Prov Gov needs to keep them going.
Municipal will have ways of intervening also, look at the Olympic Village. If they are smart, they will want to increase their tax base, so they will find incentives to grow their populations.
The problem with all this government interference is it is really powerless in the face of market forces. It merely delays the bottom of a market cycle.
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April 22nd, 2010 at 1:13 pm 68
@jesse:
The problem here in Canada is:
1) Government assistance for mortgages would go on the government spending account, increase the deficit, and be recognized as robbing the non-bubble (i.e. mostly rural, i.e. mostly Conservative) parts of the country at the expense of the bubble (i.e. urban, Liberal, NDP parts). It makes no political sense.
2) Any government assistance program would amount to an admission that there was a bubble, which the Cons have denied. IOW it would be an admission that that Cons were lying.
3) The Crown has a contractual obligation to guarantee CMHC-insured mortgages (i.e. almost all the ones likely to default) and so there is no incentive for the banks to go along with any cramdown program.
I will also note that from mid-2007 to the end of 2008 RE prices in Calgary and Edmonton declined by 20% and the Cons didn't even acknowledge it was happening. As I have said I don't think it's likely that markets outside BC will see a greater decline in the short run. You are not going to have a serious default problem at that level. And as for BC, well tough beans.
I really think the Cons will do nothing, as it's in their best interests to do so. I think it's also in the best interests of the country, but that's just a coincidence.
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April 22nd, 2010 at 1:15 pm 69
@paulb fan: Love that post. I know a guy like that. Could visualize him all the way till going to bed. LOL
There he comes:
http://condohype.files.wordpress.com/2008/05/stel…
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April 22nd, 2010 at 1:19 pm 70
There has been a lot of talk in the media lately as to how high the Canadian dollar will go, and the fact that the Canadian Government `needs` to get the dollar down. Is this bearish for the CAD dollar? Media pumping a dollar bubble? Will the gov punish the dollar via inflation?
Well former Prime Minister/Finance Minister Paul Martin can't even explain inflation in this movie interview:
http://www.ohcanadamovie.com/
lol
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April 22nd, 2010 at 1:31 pm 71
Carney is cautioning markets not to be so sure Canada's central bank will raise its key interest rates in a matter of time.
As long we have a big hole in Global Economy, Governer is in need of lots of guts to beat Bernanke till then the advantage will go to Vancouver,Calgary,and Toronto.Once the interest rates hike by .25 in June that will raise the future of Vancouver real estate as Short selling Calgarians and Torontorians will countinue moving to Vancouver along with other investors from within and out of Canada.
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April 22nd, 2010 at 1:33 pm 72
Good testimony about the RE collapse down south.
http://videosift.com/video/Bill-Black-s-Testimony…
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April 22nd, 2010 at 1:38 pm 73
"The problem has been that banks don’t want to do a short sale, because then they have to recognize the loss in their accounting. Right now they still have overpriced assets on their books. This is the ‘extend and pretend’ thing you may have heard about."
Don't or Can't. Correct me if I am wrong – and gawd I know you will BUT:
The lenders sues for the money in court and may get conduct of sale of the house. The house is put up for sale, exposed to the market, and sold at fair market value. If and most likely there is a shortfall between the proceeds of the sale and the mortgage plus court and administrative cost, they go after the mortgagor for the difference.
Why would they not? Do they not have an obligation to the shareholders to recover the balance outstanding. Eventually, they may have to right off the debt, but under CRA rules they have to try for a certain amount of time, like a year, to recover that debt? So, the lender CAN'T go directly to a short sale.
How I understand a short could happen, is that you realize that things are going very bad and you put your home up for sale. The best offer you get is less than the mortgage. You go to the bank and try to negotiate on the difference. However, the bank doesn't have to take the deal and the bank may not allow the sale to occur.
Yeah, that's right the bank may not let you sell your own house! Well, heck it wasn't really your house anyway, you were just only renting it from the bank.
I suppose they could give you a unsecured demand loan for the difference, but they don't have to. That means you might have to go to Bob's Bank of Nevada and their terms have you taking out a life insurance policy.
I suppose if the government wanted to bail out homeowners, the government could strong arm the lender into giving you a loan at a secured rate amortized over 25 years. That might work and save a lot of Canucks some grief.
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April 22nd, 2010 at 1:58 pm 74
@spitfires: Thanks! I agree with everything VHB and others are saying. I've trolled this blog for a couple years (on and off). I stopped reading this blog in the past year because I got bored with the rising real estate market, but things are starting to look interesting again! This is really the first time I've commented.
I can say with a straight face that I've earned money every year on my investments. You need to understand two things:
(1) What ought to happen…and I think the prevailing consensus on this blog is bang-on; and
(2) What the government's reaction to it will be.
I think the government will tolerate a 20% drop in prices before it takes action. The provincial government is even introducing property tax deferrals. This will open up more room in one's monthly budget to pay for houses one cannot afford! The government has many tools in its toolbox. Each tool comes with considerable expense to the taxpayer, especially our nation's savers.
It will rack up ungodly levels of debt (as is happening in the USSA). The banking interests and economic pundits, who control the politicians, will tell us we need more stimulus and more intervention to prevent an outright collapse. Bankers will be bankers, and they do what they do because they can. And they will until they can’t. And it won’t be government that stops them…it will be a collapse of the currency system. And we will all suffer as a consequence…although some will suffer much more than others.
We are trouble. The sooner we deal with our problems, the better…
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April 22nd, 2010 at 2:03 pm 75
@spitfires: I'm dumping most of my Canadian dollars now that we've reached par. If we have a housing correction, as we all predict, I predict we will see the government step in, which will devalue our currency. The Americans are more than 1/2 through their housing bubble. We're just on the edge of ours.
The argue to own the Loonie is commodities. Why not just own commodites and companies who produce commodities? I do.
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April 22nd, 2010 at 2:04 pm 76
#65 AN, thx for the props. A lot of the time my comments go underappreciated, much like a hot poker to the eyeball. The truth is very hard to swallow for a lot of people who are mathematically and common sense challenged, who instead want to live inside the smoky dreams of the spin machine. The fact is (as I truly believe) that the majority of people in this country have no ability to concieve of the world outside the medium of advertising television. They get their thoughts, history, emotions, personality and sense of self worth directly from the advertisers. This is why you constantly hear the most insane ideas regurgitated on forums like this by people who have swallowed the kool aid without a filter. Reality creates such extreme disonance when it opposes the rose colored world of the pimps that these same sheeple begin to experiance psychic discomfort when anything other than the bullshit they've swallowed is heaped on their plate.
You call the current mortgage scams 'expensive renting' I call it an 'induced slavery'. I firmly believe that this enslavement is part of a greater social engineering complex that has begun to move populations in historic new directions in every G8 country. The new debt regime is a means to ensure that government programs are easier to ram down the throats of debt ridden and desperate sheeple. But…..that way too big a topic for the Soupnuts of the world. This concept is the Keynsian philosophy taken to the extreme. It is one where government will do away with money all together and drive the economy based on government requirements. They want us to deride the value of money alltogether and so are moving to make everything worthless.
Got Gold?
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April 22nd, 2010 at 2:13 pm 77
I don't know how much that property tax deferral will help.
According to your mortgage agreement the lender is in first position to be paid and all taxes must be paid each year. -So, there is a reason why they offer PIT (principle,interest and taxes).
But, let's say you did defer your taxes for 18 years and then went into "foreclosure" or what if you wanted to borrow more money but you had a charge on your title for $50,000 in deferred taxes.
Man, this is like passing a bylaw that people can't smoke in public parks. It looks good – but totally unrealistic.
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April 22nd, 2010 at 2:20 pm 78
@Gordon C.: The smoking by-laws is something to distract people from the problems at hand. Have you not noticed how everytime something goes bad, somebody stirs up a Polygamy debate?
I've learned to filter through all that BS. I don't pay attention to the 6 o'clock news. You gotta go underground.
Forums like this provide a place for the truth to be told.
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April 22nd, 2010 at 2:26 pm 79
@Gordon C.: I agree with the property tax deferral. If homeowners defer and can't pay up when they sell, the bank holds the bag. That can't be good for future borrowers if the banks get burned. Check out the interest rates on the deferral! Now the BC government is getting into the subprime loan racket.
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April 22nd, 2010 at 2:31 pm 80
@Gordon C.:
No it couldn't. That's the whole point. CMHC guarantees are Crown obligations, and there is no way that the Crown can abrogate an obligation to a financial institution. It simply cannot be done.
The banks have a guarantee to get their money back in full, on the terms of the mortgages as they stand, and nothing is going to happen to change this. If the government wants to soften the terms for borrowers, it's going to have to pay for every penny of it. And in practical terms, that cannot be done either.
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April 22nd, 2010 at 2:34 pm 81
@Gordon C.: re short sales. The bank will take a short sale only if they can't see any other reasonable way of squeezing more blood from a stone. Effectively it's a cramdown: a way of avoiding foreclosure and possible knock-on damage that often accompanies foreclosures.
And of course short sales only happen when the market value is lower than the outstanding loan. Adding to the confusion there are often second and third mortgages on many defaults so the dispensation is not necessarily in the sole hands of the first mortgage issuer.
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April 22nd, 2010 at 2:35 pm 82
@jesse:
Banks have the right to call the mortgage balance at renewal (or even before) if any property taxes are outstanding. They are simply not going to sit back and let unpaid taxes encumber their right to the collateral. If the mortgage is insured by CMHC, they also have the obligation to not let CMHC's position be encumbered.
Absolutely will not work unless the deferred taxes are junior to mortgages.
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April 22nd, 2010 at 2:39 pm 83
@Mike:
Like that's not a serious issue? Do you think child slavery, which is what we are really dealing with here, is OK?
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April 22nd, 2010 at 2:53 pm 84
Child Slavery??? Polygamy?? Small rodents and Richard Gear??
huh, huh, did I miss something here.
Mike are you a polygamist, slave owner or have you ever been a member of a communist party?
Or have you ever invited a communist (no matter how cute she is) to a party?
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April 22nd, 2010 at 3:06 pm 85
It's fine being bearish. I am actually quite bearish as well.
There is a lot of the uncertainty everywhere in the world right now. Government printing money like there is no tomorrow. You have to taken account of the inflation pressure, debt level and etc… However, you have to remember for the moment, governments want to reward those who make investments in a lot of ways. You have to keep buying and selling at the right time.
It's important to keep up with the market instead of being so scared and keep standing on the side line shouting it's the end of the world. It's not happening "yet". Otherwise, you will end up not being able to make the potential profit during this long period of time before market takes another dive.
Have to keep buying and selling. Keep making the profit governments want to give you to make. NOT SAYING NOW IS THE RIGHT TIME TO BUY.
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April 22nd, 2010 at 3:10 pm 86
patriotz what happened to the first part of my sentence?
You know the one that started with:
"I suppose if the government wanted to bail out homeowners,
and the last part of the sentence which was:
at a secured rate amortized over 25 years."
What did you edit for time?
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April 22nd, 2010 at 3:29 pm 87
I was told by a whistler realtor that the fire-sale has started. Some units has been marked down by $100k's. This is just the beginning.
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April 22nd, 2010 at 3:39 pm 88
I wasn't very interested before – but now I'm hooked on numbers. Any updates? Could some of the sales be from before the April 19th deadline??
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April 22nd, 2010 at 3:50 pm 89
AverageJoe re Whistler
Been looking myself. I've gone to see several "oldschool" places that were built in the late 60's early 70's that are for sale by the original owners. Their cost base is so low that when we won the Olympic bid they figured they'd just keep them until it was all over so that their extended families would have a place to stay during the festivities. I actually talked to two of the owners who said their kids families can't afford to ski and that they only go themselves several times a year. To rent one of these places would be 1500/month but to purchase with a minimal dp and 35 yr amort would be about 2000/month – figure includes 200 taxes + 200 strata. When they get back into line I will buy. ie when they go from low 4's to low 3's.
The realtors I spoke with said that in each case that the sellers will have sold by next fall no matter what and that the market will be under pressure.
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April 22nd, 2010 at 4:00 pm 90
New Listings 201
Price Changes 108
Sold Listings 130
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April 22nd, 2010 at 9:14 am 91
[...] Strataman at vancouvercondo.info 22 Apr 2010 8:32 am – [...]
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April 22nd, 2010 at 4:40 pm 92
@Mike:
Your views are intriguing to me and I wish to subscribe to your newsletter.
Heh, I do appreciate your comments here. I grow alarmed as I consider the various choices the government could make vis-a-vis taxpayer-backed interventions. For me, I worry specifically about health research funding (which is already in decline). But there obviously are several other constructive endeavours that may be harmed, depending on government decisions.
I've asked this of friends lately: are we setting the stage for a Vancouver brain drain? First, prohibitive RE pricing limits the talent that can be brought in to do things like research (those who did come/stay usually did so because of existing local ties [including my wife and I]). Then the RE crash – and attendant financial hardship – causes government spending cuts and reduced personal donations, things that are the lifeblood of efforts like cancer or heart health research.
I haven't determined where to draw a line and say that below it lies my walking papers. But I'm keeping my eyes and ears open and I'm starting to think about where that line might fall. If some of what's been said here comes to pass, our days here are probably numbered. That sucks.
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April 22nd, 2010 at 4:44 pm 93
LOVES IT….
You are a true comedian this is bang on and factual!!
Downtown lifestyle, la la la…
Let’s wake up in a shoebox and check out the fabulous view.
Oh, I see all my neighbours.
I guess they can see me, too.
Time to go to work, gotta pay off my huge mortgage.
Oh I forgot I am mostly paying the interest.
Who cares at least I am a owner baby, not some poor souls who rent.
Grande skinny latte no foam, please.
Look at me, I am walking with a giant paper cup with a corporate logo on my way to my tiny cubicle.
Trying not to spill on my nylon pants.
Isn’t that cool?
At a watercooler, yack about my fabulous condo and nearby restaurants
Just don’t ask me how often I go, cuz I can’t really affrod it
Break time, let’s go to a “cafe” and have a fabulous cappuccino in a paper cup
Time to go home
How lucky am I to be in downtown. The whole world is here.
Hang out with my cool friends to do cool things.
Look at all the numbers on my iPhone.
Ring ring
What do you wanna do? I dunno.
How about you? I dunno it’s raining…
Why don’t we go for dinner? (My kitchen is too small anyway)
Earls, Cactus club, Milestones, Moxies?
How cool are we!
Come home and got my mails.
Bills, bills, bills.
Another 10 days till the payday.
Just pay the minimum. Should be ok.
My condo is going up and up, nothing to worry about.
Time for bed.
I hear my next door neighbours.
They must be gettin busy.
Wish these walls weren’t so paper thin.
But it’s ok, I am a condo onwer.
Downtown living, la la la…
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April 22nd, 2010 at 5:00 pm 94
Interesting reading the comments about the Whistler market cracking as they did not have a huge price run-up in the last 7 years. The market in Whistler ran-up in the late 90's and early 2000's but has been flat to declining since about 2003. I sure hope Vancouver doesn't stagnate for 7 years before it starts to fall.
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April 22nd, 2010 at 5:24 pm 95
My wife is currently in China and says the housing bubble there is already collapsing after the govt. increased downpayment requirements. In other words, all those reputedly cash-rich Chinese were actually playing with borrowed money after all. So much for the Chinese propping up Vancouver prices indefinitely.
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April 22nd, 2010 at 5:48 pm 96
************* 1/1/2010 / 4/22/2010 / % change
Bowen Isld 46 / 108 / 134.78%
_Bby East 68 / 156 / 129.41%
_Bby North 345 / 742 / 115.07%
Bby South 362 / 718 / 98.34%
Coquitlam 531 / 1129 / 112.62%
Van.&Gulf 215 / 265 / 23.26%
___Ladner 65 / 156 / 140.00%
MapleRidge 575 / 985 / 71.30%
_New West 262 / 568 / 116.79%
_North Van. 412 / 937 / 127.43%
OutofTown 105 / 73 / -30.48%
_Pitt Mead 121 / 192 / 58.68%
_Port Coq. 237 / 463 / 95.36%
PortMoody 213 / 433 / 103.29%
_Richmond 893 / 1780 / 99.33%
_Squamish 402 / 499 / 24.13%
Sunshine C. 656 / 1054 / 60.67%
_Tsawssen 98 / 182 / 85.71%
__Van East 767 / 1403 / 82.92%
_Van West 1396 / 3191 / 128.58%
_West Van 386 / 641 / 66.06%
__Whistler 569 / 767 / 34.80%
_____Total 8724 / 16442 / 88.47%
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April 22nd, 2010 at 5:50 pm 97
About the property tax deferral – the province pays the taxes to the municipality. The mortgage will always reflect that the taxes have been paid, The deferral programme is a government loan, repayable to the province when the house is sold. It has nothing to do with the bank loan. The taxes, by the way, will be repaid the province before any other debts.
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April 22nd, 2010 at 5:54 pm 98
@RoyceMcCutcheon: Haha…no newsletter. No time for that. Things are a bit quiet for me over the next couple of weeks, so I've found a bit of time to put my thoughts to the keyboard!! I invest in things and I'm finding it increasingly difficult to buy things which meet my simple investing criteria; 1) high quality, 2) limited quantity, 3) attractively valued.
Rural farmland is of pretty good value. Farmers are eager to rent this land for pretty decent returns.
I think the situation we face is dire and unlike in the great depression, we're not equipped to deal with it. Our global leaders don't really understand the problem. In fact, those who were part of creating the problem have all received promotions. Bernanke, Carney, Geithner, Larry Summers, Jim Flaherty, etc. etc. are tasked with solving the problems that they not only created, but didn't even see.
People were largely agrarian in the depression. They knew how to take care of themselves. They knew how to hunt and to farm, and they didn't expect, nor want anything from the government. Times have changed.
We've entered the death spiral. House prices may rise over the next five years, but they won't rise in real terms. They'll most certainly fall first.
Our living standards are unsustainable. Easy monetary policy coupled with credit cards, insured mortgages, etc. brought forward years of consumption. We've incurred more debt than we can possibly repay honestly.
The government will continue to devalue the debts which need to be repaid. Their answer is inflation, especially asset price inflation. Savers will be punished. They do not understand that savings and production is the key to a sound economy, wealth creation and growth.
Housing is a very bad investment at this juncture. All I'm saying is that the next round of government meddling will occur when home prices fall 20%. Politicians can't get re-elected when home prices are falling.
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April 22nd, 2010 at 6:01 pm 99
New Listings 273
Price Changes 144
Sold Listings 188
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April 22nd, 2010 at 6:02 pm 100
@Rent-o-rama: 1990s run-up in Whistler pricing was due to US investment. Wealthy Americans were the marginal buyer. Back then the loonie was 65 cents on the dollar. Ski passes for Aspen were $100 US versus $50 US for Whistler.
This was before 9/11 too. There were no travel restrictions. You didn't need a passport. You were allowed liquids in your check-on bag. Getting to Whistler was easier than getting to Montana.
Americans rushed to Whistler. Now they are selling. The dollar is at par. They've made their money on the FX alone. It is also a pain in the a$$ for Americans to get to Whistler. Border lines, security lines, passports, etc.
Whistler had a whole different element going on.
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April 22nd, 2010 at 6:04 pm 101
"About the property tax deferral – the province pays the taxes to the municipality. The mortgage will always reflect that the taxes have been paid, The deferral programme is a government loan, repayable to the province when the house is sold. It has nothing to do with the bank loan. The taxes, by the way, will be repaid the province before any other debts."
The loan will have to appear on title some where, even the government will not be that silly.
The banks are in first position to be paid. A first mortgage, is the first charge on the mortgage. In order to get the tax deferral in first position to be paid, you will have to first pay off the mortgage. Like I said, not many are going to be taking advantage of this tax deferral.
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April 22nd, 2010 at 6:06 pm 102
Inventory only goes up and up, because its different here
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April 22nd, 2010 at 6:14 pm 103
Royce, re brain drain, I don't think anyone is too worried. I have found being smart and having a good education to be a disadvantage here. There's a reason productivity levels are so low in Canada.
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April 22nd, 2010 at 6:27 pm 104
@paulb: oh those sales are driving me nuts. I have had enough.
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April 22nd, 2010 at 7:07 pm 105
@Inventory: I love the area breakdown…
Find it very interesting that N. Van is up more than the average. When I was looking at rentals, the market in North Van seemed really Olympics geared. I wonder if that area was more affected by Olympics based psychology…
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April 22nd, 2010 at 7:09 pm 106
@Mike:
Re: Whistler
I too have been watching that market. For the last few years it looks like the Lower Mainland has picked up the slack for the lack of global demand. The last stats I saw on Whistler had BC residents making up 75% of all buying the last year or so.
That said, I have no idea if it will ever make sense to buy. The maintenance fees on some of these properties are flat out ridiculous.
At Natures Door is a high-end luxury fractional. One-tenth fractional. What's the maintenance fees on one-tenth you may ask? How does $600+ a month sound? Yep. If you owned all ten shares, you are paying $7,200+ a month in fucking strata fees alone. How anyone can justify that is beyond me.
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April 22nd, 2010 at 7:10 pm 107
Last Whistler post was me.
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April 22nd, 2010 at 7:49 pm 108
http://www.greaterfool.ca/
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April 22nd, 2010 at 7:50 pm 109
don't worry
we'll hit 17,000
then 18 and 19 (yawn)…before the end of May
June brings 20,000 and a mad rush to 25,000 begins in July
Sales will be strong in April. Less so in May, but solid. Weakening in June. Cliffdive thereafter.
Didn't you read the coles notes?
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April 22nd, 2010 at 1:06 pm 110
[...] Most of us cannot explain things in rhyme, but ‘Anonymous’ can and has. Very nice. From Anonymous at vancouvercondo.info 22 Apr 2010 11:37 am. The author deserves to be named. [...]
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April 22nd, 2010 at 8:14 pm 111
For the past several days, my VOW auto-update for SFH listings in the Tri-cities has been phenomenal.
Today, I received 28 alone! Yesterday, there were 26.
Interestingly, the prices are WAY too high, other comparables have been sitting a long time….
I am beginning to wonder…are most of these people serious? Or, could many of them be listing just for kicks…to see what happens?
Any thoughts on this?
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April 22nd, 2010 at 8:17 pm 112
New Listings 368
Price Changes 156
Sold Listings 241
The gap is growing in favour of listings. 17k is still attainable by months end.
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April 22nd, 2010 at 8:18 pm 113
boombust
they are desperate, as they realize that after re-doing the roof and kitchen, after realtor commissions they are already underwater – its a desperate attempt to get out whole.
The whole frikin mess is doomed.
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April 22nd, 2010 at 1:18 pm 114
@Mike:
“When you say these people deserve it, just remember that it will be us (the taxpayer) who foots the bill.”
Reminds me of the moron who skies out of bound and we have to send a rescue team for him.
Pisses me off that we (the taxpayers) have to flip the rescue bill, but the evil side in me am glab that bastard broke his leg in the process.
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April 22nd, 2010 at 8:20 pm 115
yowzer Paul!
Yes yes yes! (no, that was not an orgasim…OK, well, kind of one).
I'm seeing (in a creeping up gradually kind of way) more and more For Sale signs around!
but I don't think any but the most informed are yet aware of the coming downturn.
Paul – what do you think the average:
realtor is thinking
buyer is thinking
seller (or wanna be seller) is thinking?
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April 22nd, 2010 at 8:21 pm 116
paul, i still think a lot of the listings are pre-19th activity
the the bulk of the rest are beat the rising rates desperados
and in any normal market there is buying….to me, the bear begins in earnest when the dailies fall below 150 on average
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April 22nd, 2010 at 8:24 pm 117
I know of three friends that bought in the past month. All first time buyers buying low rise apartments in Vancouver.. Stealing demand from the future!
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April 22nd, 2010 at 8:29 pm 118
What creates a housing bubble?
1. Record low rates
2. Poor lending rules
3. Record high debt
4. Huge transaction volume and property turnover
5. Widespread media coverage, speculation, bandwagon jumping, condo line-ups, bidding wars, testosterone.
What causes a bubble to pop?
1. Ultra low affordability and rental yield
2. Record inventory that is rapidly growing
3. Stricter mortgage rules
4. Steep increase in interest rates & taxes
5. Panic selling
Sounds like Vancouver alright.
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April 22nd, 2010 at 8:29 pm 119
no offence anon, but your friends are (real estate) losers
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April 22nd, 2010 at 8:30 pm 120
crashcow,
the headline on the vancouver sun is "Vancouver Housing Bubble Crash Imminent"
Never thougth I'd see that headline, but here it is.
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April 22nd, 2010 at 8:30 pm 121
@paulb: Love the listings, but man, those sales numbers are still pretty strong. Interesting.
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April 22nd, 2010 at 8:32 pm 122
LOVE the huge sales number. As a recent first time homebuyer this makes me feel a lot better! Loving home ownership in the greatest city in the world baby!
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April 22nd, 2010 at 8:43 pm 123
@me: link please?
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April 22nd, 2010 at 8:45 pm 124
Sales are being driven by panic, future demand is being eroded because of it. As far as I am concerned I want sales to be strong until June. Better to get rid of all the dumb money up front before price are well info their decline.
The dumb money is jumping in right now, even with the writing on the wall. The jesters and specuvestors will continue dumping until they receive their payoff. What other choice do they have?, this isn't 2008 you know.
June 2010…….20,000 Listings
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April 22nd, 2010 at 8:45 pm 125
@me: got a link?
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April 22nd, 2010 at 8:47 pm 126
@Anonymous:
Very strong sales numbers, but they still can't dam the flood of listings and were expected. Listings are still coming in and climbing every single day…I will get you a number for 9pm. 16,500 is within reach today.
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April 22nd, 2010 at 8:59 pm 127
Amazing story in the Vancouver Sun!!! Housing Crash!!!!!!!!
The sheeple will shit in their cereal tomorrow morning.
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April 22nd, 2010 at 9:00 pm 128
http://www.vancouversun.com page 2
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April 22nd, 2010 at 9:00 pm 129
16497!
New Listings 391
Price Changes 156
Sold Listings 241
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April 22nd, 2010 at 9:03 pm 130
paulb you rock
sorry, not the sun, that headline was in the globe.
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April 22nd, 2010 at 9:03 pm 131
What was the all time high inventory figure…?
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April 22nd, 2010 at 9:08 pm 132
April 22nd
14,729
2009 15,417
2010 16,500
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April 22nd, 2010 at 9:09 pm 133
First number was April 22 2008. Formatting crisis
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April 22nd, 2010 at 9:09 pm 134
@reknab: i think 21,002 on Sep 30, 2008.
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April 22nd, 2010 at 9:11 pm 135
Link to the juicy story anyone?
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April 22nd, 2010 at 9:12 pm 136
@me: No such headline.
Not funny!
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April 22nd, 2010 at 9:28 pm 137
@paulb: Watch this, paulb!
Apr 1995 19298
Apr 1996 19374
Apr 1997 18969
Apr 1998 20578
Apr 1999 16958
Apr 2000 15823
Apr 2001 14921
Apr 2002 12275
Apr 2003 10213
Apr 2004 9913
Apr 2005 11637
Apr 2006 9638
Apr 2007 12135
Apr 2008 15216
Apr 2009 15332
Source was 'inventory' a few weeks ago.
These were END of April numbers.
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April 22nd, 2010 at 9:28 pm 138
me thinks @me was pulling people's legs after having one too many glasses of wine. I couldn't find anything through Google News. Unless @me works as a copy editor for the Sun, that is.
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April 22nd, 2010 at 9:30 pm 139
@paulb fan: That's likely the biggest in 10 years, but in the mid-late 90s inventory got over 20K as well. I don't know where it peaked out, though.
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April 22nd, 2010 at 9:40 pm 140
the creator of Crack Shack or Mansion tells me he will post part II in about 30 mins
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April 22nd, 2010 at 9:40 pm 141
Re: 108 – Fractional Fees being insane
I don't know, but I suspect the fees are so high because fractional Real Estate in Whistler gets business property tax rates, not residential. I believe Vancouver's rates Business property tax rates are about 5 times as high as residential – I suspect Whistler is the same. For example:
http://www.juneconway.com/market_update_391.html
Some condos aren't worth purchasing at any price.
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April 22nd, 2010 at 9:41 pm 142
@VHB:
Wow! 20k in April of 08. Nuts
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April 22nd, 2010 at 9:47 pm 143
Bubble crash article here:
http://www.canada.com/topics/news/story.html?id=0…
but 18 month old
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April 22nd, 2010 at 9:47 pm 144
@paulb: 20k in April 98
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April 22nd, 2010 at 9:51 pm 145
@paulb:I believe at the rate of sales numbers around 3000 per month the current pool of motivated sellers will dry very soon.The current market buyers already knew very well what they doing in regards to new rules,qualification,and the possibility of interest rates increase.they also knew the difference to afford monthly cost on highest point.so they won't be joining the sellers pool for long term.Seasonally sales and listings looks very normal,most of the listings are double counts when expiry and price change hit back in the market.In a results: listing gain is not that large compare to numbers of listing seems to be hitting in a shape of flood.I believe sell list ratio is also very high but just because of tripple count of listings it looks like 52% only.Once the sellers start measuring the sale strength they will join the reserved priced sellers.I believe that would be the time when listings activities will have to slow down.One of the important point is that listings will have to disappear from the market after September 2010.
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April 22nd, 2010 at 9:54 pm 146
Interest rates in year 1999/2000 when inventories were comparable.
http://www.primerate.ca/
No matter what happens, have fun and hang on for the ride.
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April 22nd, 2010 at 9:55 pm 147
ya, that's what I meant. Thx
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April 22nd, 2010 at 9:59 pm 148
@paulb:
I think that was Apr '98
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April 22nd, 2010 at 10:03 pm 149
Prime looks to have been at "least" 6 at that point '98 so one can correlate the two potentially.
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April 22nd, 2010 at 10:09 pm 150
Edward Jones on the Canadian Housing Bubble
"What Should You Do?
We believe investors concerned about the possibility of
house price declines should consider two key actions:
1. Avoid investing more money in housing. Instead, use this
opportunity to review and possibly reduce your housing
investment exposure, if necessary. Because we don’t
consider home ownership part of an investment portfolio,
we aren’t advising you to sell your house. In fact, many
investors may need to take no action.
2. Call Eddie J asap!
http://www.edwardjones.com/groups/ejw_content/@ej…
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April 22nd, 2010 at 10:13 pm 151
@VHB: quite possibe vhb, but 10 years ago, real estate was least of my concerns, so for mesep 2008 is all time high
.
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April 22nd, 2010 at 10:17 pm 152
Mid '90s listings were higher, true. I assume the data covered the same geographic area. Any data on the number of sales? We know population growth was high through the mid '90s so a high level of property transfers isn't that unreasonable.
Inventory around 20K with strong sales around 3-4K puts MOI at around 6 or so. That seems to roughly line up with price declines during that period.
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April 22nd, 2010 at 10:19 pm 153
************* 1/1/2010 / 4/22/2010 / % change
Bowen Isld 46 / 109 / 136.96%
_Bby East 68 / 159 / 133.82%
_Bby North 345 / 747 / 116.52%
Bby South 362 / 715 / 97.51%
Coquitlam 531 / 1134 / 113.56%
Van.&Gulf 215 / 265 / 23.26%
___Ladner 65 / 156 / 140.00%
MapleRidge 575 / 988 / 71.83%
_New West 262 / 570 / 117.56%
_North Van. 412 / 941 / 128.40%
OutofTown 105 / 73 / -30.48%
_Pitt Mead 121 / 192 / 58.68%
_Port Coq. 237 / 463 / 95.36%
PortMoody 213 / 440 / 106.57%
_Richmond 893 / 1797 / 101.23%
_Squamish 402 / 502 / 24.88%
Sunshine C. 656 / 1055 / 60.82%
_Tsawssen 98 / 183 / 86.73%
__Van East 767 / 1400 / 82.53%
_Van West 1396 / 3192 / 128.65%
_West Van 386 / 642 / 66.32%
__Whistler 569 / 771 / 35.50%
_____Total 8724 / 16494 / 89.06%
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April 22nd, 2010 at 10:19 pm 154
Yesterday, in the course of my job I worked in a new, funky condo in the south False Creek area. I'd love to live there, but would not ever pay a Kings ransom to do so. In dealing with a strata person who bought in, pre construction, I gained some insight. This very optimistic and intelligent professional person said to me; "there is nothing wrong with renting, I wish I still rented." "I so overpaid for this place, similar units are currently selling for 100K less than I paid" "I believe the market is going to crash." I was working, so I lent a sympathetic ear and displayed empathy while quenching my urge to say, "I've been saying that for the last 5yrs."
Can I now have my title changed from "bitter renter" to "spiteful vulture?"
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April 22nd, 2010 at 10:20 pm 155
@reknab: Since 2008 housing numbers might have increased by 100,000 more units.based on that current listings percentage is at least 10% lower than 1998 .In 1998 5yr fixed rates were between 5.50%-7.50% depend on credit or high ratio mortgage and 25% down to avoid cmhc.
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April 22nd, 2010 at 10:22 pm 156
I think we'll see an all time high soon enough at the rate things are going.
500 in four days! That could put us at 17,500 by May 1 and the 20k party might come before the end of May!
Any bets on whether or not we hit 25k this year? That would be a huge milestone.
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April 23rd, 2010 at 12:56 am 157
I need to see sales cool before getting overly optimistic over price declines. 200+ sales per day is still a blistering pace. In the next week or two we'll know whether the rule changes had any effect on the greater cash renters.
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April 23rd, 2010 at 8:32 am 158
Re #141
I just read the article you linked to and I can't help but wonder if this 'hotel' tax won't eventually filter down to all the 'Furnished, short-term rentals' that have sprung up on Craigslist since the Olympics. It almost seems as if there are more of those than unfurnished suites – at least in the downtown core.
Like the judge in the article said, "If it looks like a hotel, and smells like a hotel it gets taxed like a hotel".
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April 23rd, 2010 at 12:09 pm 159
Fractional Ownership may not be what you hoped it would be:
A lot of hotel chains are opting for this type of ownership in resort areas. It's good for the hotel as the cost of construction are recovered immediately and the hotel becomes profitable sooner.
But how about you. Is it wise to buy a quarter ownership where you get the right to occupy or rent out the condominium for a specific 3 months of the year.
I spoke with one young energetic fellow who was determined that buying a fractional ownership was going to make him rich as the suites rent for $250 a night. That was until we looked at the vacancy rate for hotels, costs and taxes.
Seek professional advice before buying into a fractional ownership. They are very difficult to re-sell. Comparing what one condo sold in one hotel to another hotel will not work. The costs and fees and efficacy of management can be quite different. And the value of a fractional quarter is not one-fourth the value of a similar condominium.
You should get the last three years of income and expense statements in order to make a sound decision.
Be wise, be informed and always use sunblock.
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April 24th, 2010 at 9:18 pm 160
@patriotz:
And how many years have we been hearing the horror stories coming out of the US, where price/rent and price/income in markets like LA were about the same at peak as Vancouver is now?
Watching the US market a few years back helped me realize I was the sane one in a pile of delusion.
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