Ride the great RE roller coaster


Laadies aaand Gentlemen! Step right up, one and all and ride the bubbliest market in North Americaa!. The Great Vancouver Real Estate Roller Coaster is now open for bizness! Experience the thrills! The Spills! The mind-boggling economic waste of it all!

Front row seats for you only my friend, here’s your tickets:

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Ahab
Ahab
10 years ago

@Absinthe: Which is causing me to somewhat scratch my head because I’d think it unnecessary here, with the underwriting. Is the program to address a liquidity issue for the banks? (?!) I’m not sure what the program addresses, really, other than a cattle prod to the banks against freezing credit… but why with a program that looks so much like what just sunk the states? My lack of understanding of the program is why I’m confused as to the significance and effect. Yes, the program was to address a liquidity issue for the banks in the wake of the Global Financial Freeze that occurred in early 2008 and went ice age late that fall. The hope was that with the mortgages off the banks' balance sheets, they would be free to lend to businesses, etc., to keep the economic gears… Read more »

Ahab
Ahab
10 years ago

@Absinthe: @Ahab: This program differs from the base issue of CMHC underwriting risky loans, however, yes? This seems to me like the repackaging of derivatives that the American giants were doing.

EXACTLY. This program is precisely what Fannie and Freddy were doing for the banks in the US, as well as the banks themselves through the sale of mortgage backed securities.

That is what makes it so infuriating. This program was started with the results of the same policies in the US IN FULL VIEW. It is criminally negligent, in my opinion, as there is no credible excuse for Flaherty/Carney/The CMHC to say that they could not foresee the outcome with any certainty.

Absinthe
Absinthe
10 years ago

@Ahab: This program differs from the base issue of CMHC underwriting risky loans, however, yes? This seems to me like the repackaging of derivatives that the American giants were doing. I had thought the 40 year, 5% down underwriting of loans was the easy credit that really fueled the bubble and is ongoing, only first pulled to 35 years, and now with the April 19th changes. Which also will have a cooling effect. This seems to me like a different (equally silly) program: one where the taxpayer is ALREADY buying the mortgage, as opposed to waiting to insure the bank upon default. The Cdn taxplayer playing the repackaged shitty mortgage as well rated bond shell game… Which is causing me to somewhat scratch my head because I'd think it unnecessary here, with the underwriting. Is the program to address a… Read more »

Ahab
Ahab
10 years ago

@jesse: @Ahab: So you’re saying a program that came to an end 3 weeks ago is the reason the banks just raised rates yesterday and today? I’m not trolling; I’m trying to understand the causality of the most recent move and your post offers little to reconcile that.

Interest rate hikes started earlier than just this week.

You don't turn off a $125B dollar tap overnight.

golden
golden
10 years ago

"A Sharp" – 2 short answers for your question:

1. Too low interest rates kept for too long.

2. Government intervention in the RE market in favor of buyers/owners – home renovation tax credits, home buyer plan from RRSPs, government guarantee on risky mortgages (issued through CMHC), etc.

These have substantially distorted the markets and I believe are on their way to be corrected, forcing a market correction with them.

jesse
10 years ago

@Ahab: So you're saying a program that came to an end 3 weeks ago is the reason the banks just raised rates yesterday and today? I'm not trolling; I'm trying to understand the causality of the most recent move and your post offers little to reconcile that.

Ahab
Ahab
10 years ago

@Absinthe: However, it seems a pretty new program so I wouldn’t guess it was a root cause.

It was THE cause of the runup after the start of the recession. And it's effects did not go unnoticed:
http://americacanada.blogspot.com/2009/07/cmhc-an

vanboy
vanboy
10 years ago

Can some of the techy masters build a real time listing widget and put it on the website? That'd be a cool thing to watch. 🙂

Ahab
Ahab
10 years ago

@jesse: "So banks didn’t have mortgages on their books before? I’m trying to understand what has changed in the past few weeks that has caused banks to increase their spread above securitization. " Did you bother reading my first post at all, or are you trolling? Follow the link. Read. THEN respond, if you care to. http://americacanada.blogspot.com/2010/04/housing… Here is the highlight for you: "Canada's Economic Action Plan's $125 billion Insured Mortgage Purchase Program finally came to an end yesterday [Mar 30]. The program eliminated the risk to banks, encouraging them to extend credit. In the event of a credit shock the banks could strengthen their balance sheets by offloading insured mortgages onto taxpayers. " The CMHC bought the mortgages off of the banks and then sold them off as bonds. Therefore, those mortgages were no longer on the banks' books.… Read more »

crazy talk
crazy talk
10 years ago

Vancouver rollercoaster only go up to the moon like kite. I live in cartboard box with big rent. Rent go up every week and twice every day. But I savng for buy my own cartboard box in sky excatly the same. I buy 3, bride I get in magazine buy 3. Then I rent because rent always go up and rainy city always full of good renters.

vreaa
10 years ago

@VHB: One consolation: The fact that we can't take short positions in the Vancouver RE market means that the fall will be that much harder. In the general markets short covering provides demand at the bottom. Here… nada!

Absinthe
Absinthe
10 years ago

@jesse: America Canada blog was pointing to a change/end to the insured mortgage purchase program as having something to do with it. To tell truth, I'd never heard of this program before, so I'm don't have a clue at what level it affects the market, but I also tend to trust America Canada blog as having greater savvy than myself. However, it seems a pretty new program so I wouldn't guess it was a root cause.

Anyone else with an understanding of this program?

jesse
10 years ago

@Ahab: "Since the mortgages are now on the books, their supply of money to lend out is no longer effectively infinite."

So banks didn't have mortgages on their books before? I'm trying to understand what has changed in the past few weeks that has caused banks to increase their spread above securitization. I don't necessarily disagree with you. I think the chance of price drops and arrears that hit banks' balance sheets is real. The mortgage bond market seems unaffected so it must be the banks being aware of additional risk through their internal research.

Couldn't it be as simple as them closing the gap after the BoC comments last week were confirmed?

Bob Arctor
Bob Arctor
10 years ago

"Yes, there's a housing bubble in Canada — but only in three cities"

http://www.edmontonjournal.com/business/there+hou

realpaul
realpaul
10 years ago

Ths classic bubble forming as rates rise in the international arena due to the risk and massive soveriegn debt overhang forces rates on a spiral upwards. http://www.vancouversun.com/business/down+Greek+d… And the fools continue to rush in. Anyone who has read about historical manias can transport themselves back into any of them and watch as the piling on effect escalates towards a maginificent collapse. http://www.vancouversun.com/Luxury+homes+sales+si… In the 'Gee Duh' file this morning i notice that an increasing number of seniors are retiring still encumbered with mortgage debt. A couple will receive $1800 between them on Canada Pension etc. What happens to them as rates rise. Was it wise to borrow againsy equity for that 'trip of a lifetime' or subsidize juniors mortgage dreams? There are so many ugly aspects to the coming bust I am setting up a snack tray AND a George… Read more »

Ahab
Ahab
10 years ago

@jesse: @Ahab: “it’s the re-introduction of risk that has rates increasing”

Maybe. But what risk exactly? That prices fall more than the downpayments? That banks can’t quickly sell foreclosures?

The risk is that they fill their balance sheet and fun out of money to lend out. Since the mortgages are now on the books, their supply of money to lend out is no longer effectively infinite.

crabman
10 years ago

@astarte: If you put an expected appreciation that is higher than inflation and mortgage rates, a buy/rent calculator will always tell you it's better to buy, even in the most overpriced markets!

trackback

[…] If listings were floors in a building Spectrum would be the tallest building in Downtown Vancouver. This infographic shows a skyline based on number of units for sale in a few of the new buildings downtown, based on Supersogs post from Monday. […]

Boombust
Boombust
10 years ago

I heard Michael Levy actually use the "Bubble" word on CKNW this morning.

He was excreting how "remarkably different" the US and Canada RE markets are.

No mention of WHY, of course.

Sounds like he is positioning himself.

jesse
10 years ago

@“A-Sharp” Accountant: It is encouraging to see the sane RET members migrating here. Obviously the monkeys haven't figured out the cage door is open.

PS I enjoyed your playing when you put up the videos.

"A-Sharp"
"A-Sharp"
10 years ago

@vreaa:

When you consider that a very large part of our economic growth was a result of our housing upswing, it makes an inverse position look pretty good.

disclosure: I am inverse the TSX as of Yesterday and Friday.

I'm up about $800 as of right now. I see some possible resistance at about 8-12% off this point. It wont go down to there in a straight line however.

vreaa
10 years ago

BTW, big action in the markets today –

Portugal and Greece debt issues

Stock markets down hard; possibly the beginning of a significant pullback

Loonie down a very large 1.6% at this point

VHB
VHB
10 years ago

@“A-Sharp” Accountant: Welcome! Hope you'll stick around here.

Two things explain what has happened.

1. Unsophisticated momentum investors have been funded by banks/CMHC to take horribly large and nonsensical risks.

2. The normal financial market forces that prevent these kinds of excesses are not present in the residential housing market–Goldman can short crazy CDOs, but I can't easily take a short position on Vancouver housing.

Add these together, and you have a market dominated by credit-doped fools.

The rest of us just have to wait around until they pass out in a credit-drunk stupor. Then we get to clean up the mess.

Re-diculous
Re-diculous
10 years ago

Now edward Jones suggests that a Canadian Housing Bubble is in the making…I guess they don't provide mortgages

http://www.edwardjones.ca/groups/ejw_content/@ejw

"A-Sharp"
"A-Sharp"
10 years ago

Hey everyone. For those of you who ever make it to Real Estate Talks, I was Pianoexcellence there for about 1200 posts…and have left in boredom. My main thought on the BC real estate bubble can be summed up in one question…WHAT HAS CHANGED TO REMOVE THE RISK? more on this: Back in the earlier 2000's when I first bought, people were just getting over their skepticism about RE in general. Word on the street was that with the leaky condos, et. all, RE was a risky place to put your money. …at that time, yields were fabulous. You did not need capital appreciation to make a very nice return. It really was a "can't miss". On top of that, we had known for years that Van was a beautiful place, We were a fabulously livable city. We knew that… Read more »