Significant discounts in the Okanagan
The boom has gone bust inland and we’re starting to see more and more of these news stories about it. Jimmy pointed out this link to some coverage over at news 1330:
RSS 2.0 comments feed. Both comments and pings are currently closed.Advertised prices on many new developments are down between 20 and 30 per cent, six-figure savings in some cases. And if you really hunt, developer Matthew Hay says deeper discounts can be had.
He says too much inventory was built up before the recession hit, and the newly imposed Harmonized Sales Tax is not helping the market either. “So now not only is there a surplus of product on the market, but you’ve got a whole buyer demographic that is nervous, cautious, sitting on their wallets, waiting to see how things shake out.”
Some of the developers are offering incentives on top of the discounts like covering the HST, or the GST. Hay says some developers are desperate to sell and that is putting downward pressure on the Okanagan market.
July 22nd, 2010 at 1:14 am
What will Vancouver pumpers say about such a proximate market hitting the skids? “It may be the same Province, and outside of the United States, and with the same ‘foreign buyers’, but here is different!”
World class my ass.
July 22nd, 2010 at 2:49 am
Welcome to No Fun Vancouver
July 22nd, 2010 at 6:16 am
I have friends in Kelowna. They are in total denial.
They have been told and brainwashed by the pimps that Kelowna is immune from any serious long lasting correction and view this as a “market is taking a breather”
They too believe in the Phantom International Buyer.
They too actually believe there is a shortage of land, and will tell you 10 times over dinner “they are land locked”.
They believe there is not subprime in Canada, only in the USA.
They still don’t think we can have a serious recession because China and India need us.
They believe the government won’t let prices drop because homeowners are voters. (This one is my favourite)
Some of them have actually told me, they expect to see intergenerational mortgages-you buy now, and the kids end up paying the mortgage during their lifetime, and tell me this is how it is in other places.
Yes, they still believe in the 100 year mortgage.
July 22nd, 2010 at 7:33 am
@Keeping an Eye on The Pimps:
Sorry to say this about your friends, but how stupid are they? Kelowna is landlocked?
Guess they’re running out of land in Timbuktu as well then.
July 22nd, 2010 at 7:36 am
@specialfx3000:
Sorry, regarding the Kelowna comment, I meant we’re not running out of land there. Ooops, Kelowna is landlocked. I need another coffee.
July 22nd, 2010 at 8:06 am
Again, we are seeing a huge drop in Condo Tracker.
Who ever designed it, tried to encourage bears. This is a failure. As we speak, it reaches the low of 372. Used to be above 600 couple of months ago.
This means buyers are not obliged to sell their property. They are not in a disastrous financial situation like the U.S. They simply take their house off the market and enjoy rental income.
The drop in the inventory guarantees there will not be more price drops and increases are imminent.
July 22nd, 2010 at 8:26 am
@Alum:
Too bad for you Alum but many of those listings are still there. The deep drop in number of units relates to a glitch on the tracker itself.
http://www.6717000.com/spectrum-b/listings/
For Spectrum 2, the tracker shows 3 listings but there are actually 60. The 3 that the tracker picked up are the 3 ‘exclusive listings’. You sure about that guanrantee now?
July 22nd, 2010 at 8:31 am
@Keeping an Eye on The Pimps: well I wouldn’t be surprised if the 100 years mortgage or pure interest only mortgage gets roll out in Canada. These type of products almost guarantee profits for the banks into perpetuity and I don’t see why they wouldn’t like that. Canadian banks really have a sweet deal on mortgage and getting people to stop paying back the mortgage ASAP would just increase their profits all with less work. Why not?
As well, with all the talk about not leaving the kids anything except a bounced check for funeral by some boomers, I can see that they would be this as one of the perfect tools to do. Spend all the savings and money and leave all the debt to the children.
however, I don’t know if laws need to be change for this since I think you actually have to sign on a debt to be liable for it? If the kids didn’t sign then they might not be liable for it.
Also, not sure how it would in Vancouver where I honestly don’t see how 90%+ of the new housing would last 20 or 25 years, much less 100 years. however other parts of the country might be doable.
July 22nd, 2010 at 8:35 am
Pope, typo in the headline, it’s “Okanagan”. Love your blog, I visit pretty much daily for a dose of reality.
July 22nd, 2010 at 8:38 am
@Alum: It’s obvious the condo tracker isn’t working right (because Les Warthog’s site is messed up). I checked my old building (Pinnacle) – Warthog shows 4 listings, I found 6 on mls.ca.
July 22nd, 2010 at 8:40 am
thoughts from throne
market constipated
Carney holds prune
July 22nd, 2010 at 8:42 am
I drove through the Okanagan last week from Oliver to Vernon and couldn’t get over the amount of “For Sale” signs… Supply is overwhelming…
As well, there are tons of “For Sale” signs advertising 5 – 50 acre parcels which abut Highway 97… The only problem is that they are on the side of a mountain, have no flat areas and have a 40 degree slope… Talk about delusional…
July 22nd, 2010 at 8:50 am
Yes, “Okanogan” is a place in Washington, while “Okanagan” is here in BC.
I know quite a few people in Kelowna. Many, many people have way too much mortgage debt. How does $700k for a person who makes $55k sound to you? Another guy has nearly $900k in mortgage debt and he’s never made more than $50 in the past 3 years. From what I hear, listings are lingering on the market for a long time. One guy I know from Vancouver has been trying to sell his “investment property” since the early spring-not one person has called to view it. Rents are dropping as well, I know some people who have scored great deals on rentals in the past few months!
Personally, I think things are going to get pretty bad in Kelowna. Just take a look at the measles MLS map of condos for sale. And this is just Kelowna, I was in the Shuswap last week and was surprised to see a lot of for sale signs on new developments. Okanagan=Florida of the north.
July 22nd, 2010 at 8:53 am
@space889:
Going from 35 year to interest only reduces payments by 14% with 6% interest. In other words it’s not really a significant difference to the borrower or significant support for prices. It does however make a significant difference to guarantor (CMHC) risk and I don’t think even the Cons would bring it in.
The banks will be quite happy to give you interest only on a low ratio mortgage (in fact I had one years ago) but that’s not relevant to the bubble.
Parents cannot leave their debts to their kids or anyone else. However if they have SFA in their estate that’s all anyone is going to get.
July 22nd, 2010 at 8:59 am
@Keeping an Eye on The Pimps:
I know your pain…
I honestly just do not discuss house price direction with anyone anymore. I was talking with my brother in law who is trying to sell his home. I remember when he put it on the market last fall. I was so pumped…I told him to be agressive…well its still for sale. I so often hear all the same arguments.
All the arguments you put up with are fairly illogical if you take the time to actually think about it.
1) market is taking a `Breather`
- well…when the only justification for higher prices has been higher prices (for the last 4-5 years), and there is no fundamental support, guess what a breather means in a low yield environment?
2) “international buyers”
- Even if this were true, things are not looking too good overseas on the economic front. Secondly, take a look at the furious population growth in Phoenix over the last decade…more than here, and prices still crashed in the second half.
3) “Shortage of land”
- They must mean like Tokyo?
4)No “Subprime”
- Ah, the semantic jungle. Perhaps not by name, but certainly by economic substance. For example, trans fat is not saturated fat, but it turned out to be just as deadly. The core economic substance is a removal of risk by govt Guarantee. Yes—the mortgages are still on the “books” of our banks but the risk of ownership is not; prime moral hazard. It’s in a grey area of accounting, where the rewards of owhership are there, but the risks are not.
5) GUV will save us.
They will try…and not because of votes. They will try because they are on the hook for part of the losses. Unfortunately (or fortunately), the age of stimulus seems tapering off. Govornments around the world are beginning to walk on eggshells around the Bond market. They will fail because they do not have the money, and I believe that selling debt in the next ten years will look a lot different than selling debt in the last ten years.
July 22nd, 2010 at 9:07 am
One more thing about all the dumping on pre-sale buyers. I was thinking about the topics on my way home and I think the dumping on them are just way too much and unwarrented. Yes, there are A LOT of speculators buying multiple units to flip, however there are also a lot of actual honest people who are buying to live in as their own home. A good percentage also come from places where the concept of leaking condo is just foreign to them. For example, people in HK, taiwan, Japan, even mainland China are sometimes shocked that the high rise tower would leak after 5 or 10 years simply because it rains a lot here. To them, Vancouver would be very good at prevent leaks in building because it rains a lot here! So there are some basic stuff that people might not think about due to their basic assumption and you can really say it’s their fault for having that assumption and they deserve a leaker.
Anyways, that wasn’t my main point. My main point is that you can’t dump on all pre-sale buyers for being stupid to sign the contracts, being speculators, and they deserve what they get. A lot of them are also hard working people who are making what they think is the best decision and I would say best of a list of bad options. Take one of my co-worker for example. Moved here with wife 2001 to work in IT with some savings and not sure about staying for more than 2 years. They started looking in 2003 when they did decided to stay and prices were going up at a good pace and more importantly, growing at a much faster rate than they can increase their savings. They thought it would slow down in 2004 since it can’t increase 8% every year while average person’s salary is going up at 1-3%. But it keeps going. So what are their options? Keep renting for another 5 to 10 years and hope price falls back down and I have a big enough downpayment? Or buy a pre-sale now at the current price which will be ready in 2 years, possibly using CHMC finance which allows me to lock in the current price and fix my downpayment amount, and still having a total ownership cost roughly equal to renting cost? Looking back now, if the long term goal is to own, option 2 would seem to be a better choice. Well I know a lot of bear here would say option 1 is the right choice and I was of the same opinion, but is it? So let’s fast forward from 2004 to 2009, they have rented for 5 additional years and prices kept going up. At this point, if they were to wait for 2001 prices again, it could well be another 5 to 10 years and they have 2 kids now. So from their point of view, they might have been better off if they bought back in 2004 as a pre-sale buyer rather than renting cost wise. They did end up buying an older building because in part they are tired of waiting and in part 2009 had a price drop. While I think they bought high but I don’t think they are stupid or necessarily wrong for buying now. They can either pay another 5 to 10 years of rent or they can buy now and probably suffer a drop in equity of the same amount. Either way it’s expense they have to pay, just in different forms – rent or equity drop. There are a lot of people like this and simply blindly say you should just rent and wait for price drop is not always going to be right for everyone.
The second point I want to make is that most developers cannot build anything unless the place is 60% or 75% pre-sold. They jsut can’t get financing. So all those “stupid” pre-sale buyers you love dumping on actually perform a needed function. Without them the new housing stock might be extremely limited and we can get high housing price not just from speculation but also from a shortage of housing! Yes I know some will argue developers will just build more purpose rental housing. But again they have to find someone who will pay the cost. Are there that many big REITs, rich people, corporations who can step up and completely replace the void left by pre-sale buyers? As well in that case rents can be higher and/or housing quality will suffer (well maybe less granite & stainless steel but also less leaky building). Lastly I think a lot of bears on this blog do want to buy and be owners, not renters for their entire life. However with mostly purpose build rental buildings that’s exactly what you might get. So don’t think if all pre-sale buyers just smarten up and stop buying, everything will magically resolve it. There may be a lot of unexpected/unintended consequences that you didn’t foresee.
So while I tell my friends not to buy right now due to high prices and just astrocious building quality, I also don’t think everyone who buys is a speculators or just plain dumb and deserves whatever ill fate may heap on them. Everyone is different and have to do what the best they think is for them given the hands they are dealt with. Sometimes they just have to take the least bad option of out of all the bad choices they have. There is no one right way for everyone and to simply insist my way is the only right way and if you don’t follow my way then you deserve what happens to you is simply wrong.
Why not actually try to improve things for everyone? Instead of saying pre-sales buyers are all bad, why not advocate better legislation and regulation so people are not automatically taken advantage of? Why not call for better inspection and enforcement departments for new constructions?
Do I sound like a socialist? yes I am because I still believe the best society is one where everyone works for the common good, not a capitalistic dog eat dog, wealth at all cost one. But that’s just me.
July 22nd, 2010 at 9:09 am
@space889: Damn the last post was so long….need better concise writing.
Anyways, any chances for more regular posts and expose from Strataman about his experiences as a condo manager?! Seriously, I love his stories. maybe there is an e-book opportunities too there1
July 22nd, 2010 at 9:27 am
Real Estate Porn – an excerpt from Garths blog.
““Straight from the horse’s mouth, the Toronto Real Estate Board, Toronto prices in May averaged $446K, and in the first two weeks of July they’ve crashed down to $427K, putting Toronto prices on a pace to hit $340,000 in 1 years time— but in my experience, the acceleration of the downward trajectory will increase exponentially once the mortgage holders attempt to get out of their mortgages. I foresee prices breaking below $400K by Christmas, and then a steady progression towards below $300K for most of 2011.
He continues: “Canada will see the same housing crisis as the States has been, and for the naysayers, must I remind them that Canada did and does have subprime mortgages— 0/40 & 5/35 mortgages (with the 5% downpayment amortized across the mortgage essentially resulting in 0-down mortgages), artificially and historically unprecedented interest rates, and a general mentality that Canada is different, that housing prices can only go up. But we all know how that ended in the States. In Spain. In Australia. In Japan. In Ireland. Sigh.”
Couldn’t have said it better eh?
July 22nd, 2010 at 9:34 am
http://www.6717000.com/spectrum-b/listings/
Wow 60 units for sale at the Spectrum complex. Granted there are 4 towers, but lots to choose from, or low ball from.
July 22nd, 2010 at 9:47 am
Quick market pulse check – what other new developments do you guys see dropping their prices, specifically around the lower mainland?
We’re starting a family, selling our condo, and wanting to move to a larger home, and if I can get a great deal then I’ll wait.
I’m not trying to time the market, just get the best deal for my family
thoughts?
cheers,
July 22nd, 2010 at 9:50 am
@“A-sharp” Accountant:
That is what is going to stop the Cons from turning on the taps to try to delay the inevitable.
This country cannot take a sharp increase in interest rates, and we are not the US which has other countries (e.g. China) taking an interest in supporting its currency and bond market. Nor are we the troubled EU countries, which have a common currency and stronger partners to come to their rescue. If the bond market turns on Canada we are toast.
July 22nd, 2010 at 9:55 am
@space889: “So from their point of view, they might have been better off if they bought back in 2004 as a pre-sale buyer rather than renting cost wise.”
When I was kid, from my point of view, monsters were under my bed. I guess that made it kind of truthy.
July 22nd, 2010 at 9:55 am
Gotta love this headline:
http://www.canadianbusiness.co.....t=b4006486
6 months ago the real estate bulls were all claiming that the only way for prices to go was higher because rates would remain at historic lows going forward. They also said the only way the BOC would raise them is if the economy regained its former strength which would also mean more demand for housing. So you would either have a weak economy and low rates or higher rates and a strong economy. It turns out your going to get the complete opposite, and it’s not just some blogger saying it, it’s the BOC.
July 22nd, 2010 at 9:56 am
@space889:
If pre-sale buyers paid the right prices, i.e. a fair price based on rental value (~100x rent) discounted to reflect the risk of future delivery, yes they would be playing an essential role in supporting the functioning of the RE market. But if they are willing to pay absurd prices, they are just more players in the cast of fools driving our economy to ruin.
Also, I don’t aspire to “own” a condo because you don’t really own one. If they got really really cheap, I might consider buying one as I would a stock. But that’s just a matter of numbers, not “pride of ownership”.
July 22nd, 2010 at 10:12 am
Anyone got examples of any cut-rate okanagan condo developments that are on sale? I wouldn’t mind taking a look.
July 22nd, 2010 at 10:14 am
Vancouver has the cone of silence and it can put on it’s bubble protecting force field.
Shield’s up! DEFCON-3!
July 22nd, 2010 at 10:14 am
@space889: “they have rented for 5 additional years and prices kept going up.”
So let me get this straight: they thought prices were high in the early part of the last decade and decided to bet on prices dropping. Now they feel they lost and are desperate to get their life back since they want to own so badly. They misunderstand how housing bubbles work just as much as the guy who bought and thinks he’s sitting on a windfall. I certainly have sympathy for them and criticize the government for allowing resources to be mis-allocated so badly, but I do not sympathize with them for buying at a high price, rather I hope they understand they overpaid and get on with their lives.
“They jsut can’t get financing. So all those “stupid” pre-sale buyers you love dumping on actually perform a needed function.”
I disagree. Developers currently pay through the nose for the land. If buyers aren’t willing to pay high prices, land costs plummet until developers offer buyers a fair discount given the risk. If land costs go low enough, investors, not necessarily banks, will be lining up at the door to finance construction projects.
There is no “needed function” for people who overpay for housing; they are simply giving their money to someone else for little financial benefit.
July 22nd, 2010 at 10:26 am
@space889:
Pre-sale buyers are not being dumped on just for simply being pre-sale buyers.
Conditions and reasons have been given.
One that i can recall:
A pre-sale buyer takes on more risk than a completed unit buyer. The pre-sale buyer should be compensated for the risk (changes in the area, construction, market, etc…) between sale and completion.
If a pre-sale buyer pays more than the current comparable for a pre-sale, then they’ve overpayed.
July 22nd, 2010 at 10:29 am
@arbitrage:
whoops, got distracted for too long before posting. Many rebuttals already posted.
July 22nd, 2010 at 10:36 am
@Keeping an Eye on The Pimps:
Shortage of land in kelowna? Wow, you’re friends are a bit thick:
June numbers for lots in the Central Okanagan:
Inventory: 864
Sales: 17
MOI: 50!!!
May Sales: 18
Apr Sales: 28
Mar Sales: 24
Feb Sales: 21
Jan Sales: 16
That inventory doesn’t even include unreleased lots from the bigger developments like Wilden (2000 homes planned) that have slowed down their phases over the past 2 years.
Even without those lots that will eventually hit the market, MOI for lots ranged from 25-50 so far in 2010.
So much for the big rush to build before the HST.
July 22nd, 2010 at 10:38 am
And the Central Okanagan lots that already have buildings on them aren’t doing much better.
June numbers:
Condos
Inventory: 1196
Sales: 50
MOI: 23.9
Townhouses
Inventory: 568
Sales: 45
MOI: 12.6
Detached Residential
Inventory: 1925
Sales: 175
MOI: 11
And in May/June the market was still moving. VERY curious to see the July numbers!
July 22nd, 2010 at 10:54 am
@900kCrackHouse:
You could check out Rennie’s http://www.invueliving.com
But the prices really aren’t that great yet…cheapest one is a studio for $179k. Big deal. I’m waiting for condos to hit $50k in Kelowna. According to a realtor friend of mine (who laughed heartily when I told him jokingly “real estate only ever goes up!”) there are many condos sitting vacant in Kelowna-boomers from out of town who bought, thinking they’ll make their fortune. Now they’re just sitting vacant, not on the market, perhaps in the short-term vacation rental market. Eventually I think these people will have to sell-with higher interest rates, need to cash out for retirement etc. It will come.
July 22nd, 2010 at 11:02 am
Another sign of slowing Vancouver real estate interest… People searching Google for vancouver real estate has dropped since 2004.
http://www.google.com/insights.....amp;cmpt=q
July 22nd, 2010 at 11:04 am
Hey I found a new (to me anyway) place to search for rentals.
Here’s the info in case any of you are also keeping an eye out for a good place to move to: http://www.rentersden.com.
Still only the two showings for this place we’re renting ,it’s for sale, and it has been on the market close to a month now.
July 22nd, 2010 at 11:06 am
@VancouverGuy(a): LOL, not sure about others here but I know scads of pumpers who’ve bought pre-sales/vacation condos or “retirement” properties in the Okanagan in the past couple years. I’m not sure how all of the deals have been financed but I would imagine many of them are secured by a HELOC on primary residence.
Many people in the lower mainland will get their fingers burnt in the Okanagan before they’re fully engulfed in the flames of the Metro Vancouver RE inferno to come.
July 22nd, 2010 at 11:08 am
Vancouver has the cone of silence and it can put on it’s bubble protecting force field.
Shield’s up! DEFCON-3!
@Spectrum:
I got news for you, that’s 60 listings for Spectrum TWO alone!
Not for the entire complex.
There’s a ton of more listings for tower 1, 3, and 4!
July 22nd, 2010 at 11:13 am
@Spectrum:
I got news for you, that’s 60 listings for Spectrum TWO alone!
Not for the entire complex.
There’s a ton of more listings for tower 1, 3, and 4!
July 22nd, 2010 at 11:14 am
@space889:
You’re buying something you have never seen, and will not see until completed, something that can be modified and changed, even substantially, with no notice and no recourse. We’re not talking a pair of jeans here, we’re talking 100s of thousands of dollars.
There is nothing wrong with the pre-sale concept itself, you’re basically financing a part of the project, it could be a great investment, but people signing those contracts as they currently are.. insane, and not much sympathy.
July 22nd, 2010 at 11:14 am
@Bilbo Bloggins:
“I got news for you, that’s 60 listings for Spectrum TWO alone!”
Wrong. Check the addresses.
July 22nd, 2010 at 11:16 am
@Bored:
Very interesting.
Searches coming from China are way down the list, barely even registering.
They’re even behind Mexico and Netherlands.
We’ve been duped!
July 22nd, 2010 at 11:17 am
@crabman:
Les’s site isn’t “messed up”, the code written to scrape the data from it is.
July 22nd, 2010 at 11:18 am
#26 J, the reason Carney is talking down the market at the same time as raising rates is what economists call ‘jawboning the market’. It is a well used technique of suasion where a bank governor will attepmt to quell the hawk/dove/complacency of the market by making antipodal statements.
a) G20 produced a consensus on ending stimulus and national debts and deficits. Rates internationally are going up in lock step within the new framework.
b) Carney wants to send a message dissuading investors from piling into the Canadian dollar by sending out messages of weakness rather than underlying strength. The Canadian government spends billions of dollars every year buying the dollar down, Increased investment (capital flow) into Canada cause the government to short the dollar more than they already do at great cost to the taxpayer.
c) Economic numbers in Canada are secret and available only through FOI inquiry ( made worse on every level of gov in recent years) so that the true state of government finances are a closely guarded secret unavailable for public knowledge. While the government refuse to issue statements regarding the state of the economy aside from the propaganda quotient we and investors receive it is impossible to know how truly bad the economy really is. We do know that twice in the past three months that IMF has chastised Canada on the imbalances of the national economy. We are seeing some austerity measures begin to surface below the radar, but I believe that the finance department is a pure function of the PMO and until Harper gets his majority the Cons will continue to burn through the coffers and keep it under wraps.
July 22nd, 2010 at 11:22 am
@Best place on meth: Hong Kong was #2 but only with 8 (whatever 8 means) I did the chart with Richmond and Burnaby (should be a higher chinese interest in those… )
http://www.google.com/insights.....amp;cmpt=q
Still the same… DOWN big time since 2004
July 22nd, 2010 at 11:23 am
@realpaul:
“Toronto prices in May averaged $446K, and in the first two weeks of July they’ve crashed down to $427K, putting Toronto prices on a pace to hit $340,000 in 1 years time”
Way to take a 1 month trend and extrapolate it over another 12!
July 22nd, 2010 at 11:26 am
@Bored: Whereas “Free Porn” continues on a long upward trend…
http://www.google.com/insights.....amp;cmpt=q
July 22nd, 2010 at 11:32 am
@Peter Pan: It appears ‘burger sales and free porn’ was the combo that put it over the top (point A).
July 22nd, 2010 at 11:33 am
@Bored:
Pretty much everything appears to be down since 2004 on Google’s searches.
July 22nd, 2010 at 11:42 am
@Anoymous: lol.. with respects to real estate.. yes.
http://www.google.com/insights.....amp;cmpt=q
Clearly you’re not following the current trends here..
July 22nd, 2010 at 11:47 am
It’s not just Kelowna… Looks like Rennie has been quietly busy here as well. Agentwill twittered that the Fairmont Residences have had their prices slashed 40%!:
http://twitter.com/agentwill/status/19275515619
and
http://twitter.com/agentwill/status/19275664725
July 22nd, 2010 at 11:51 am
It makes me laugh that everyone feels their different. The comment about people in Kelowna running out of land is gold. I was at a wedding a few weeks ago and heard two RE agents from Victoria talking about how Vancouver appears to be slowing” But it won’t affect Victoria because Vancouver is much larger and has much more land, Victoria doesn’t have as much so we will be fine”
Professionals indeed…
July 22nd, 2010 at 12:08 pm
@Anoymous:
I remember last year, Willie Mitchell of the Canucks had a goal and an assist on opening night. Based on his performance in game 1, I extrapolated that he would win the NHL scoring title, finishing with 82 goals and 82 assists. Was my reasoning sound?
July 22nd, 2010 at 12:13 pm
@Peter Pan: What would account for that outrageous spike in searching for “free porn” in 2005? Did the Chinese authorities relax censorship at that point? I’m truly curious.
July 22nd, 2010 at 12:17 pm
@Anoymous: you wouldn’t happen to be Leslie yourself would you?
July 22nd, 2010 at 12:24 pm
@oneangryslav2: It appears it might be the chinese authorties themselves: http://www.redherring.com/Home/15108
July 22nd, 2010 at 12:40 pm
The pathetic flipper had to reduce the price from $400k (!!!) to $379k…
Oh baby, you’ll go below $290k, below what you paid for three months ago.
http://tiny.cc/3s9c7
July 22nd, 2010 at 12:54 pm
@oneangryslav2: I guess employees at the SEC found out their porn filters didn’t work…
http://www.news.com.au/busines.....public_rss
July 22nd, 2010 at 1:03 pm
@Tony Danza:
“@Anoymous: you wouldn’t happen to be Leslie yourself would you?”
No, I’m not. But it does amuse me that there’s an ongoing trend here of accusing posters to be realtors.
July 22nd, 2010 at 1:27 pm
#55 TB, what a freaking joke, even at 290K. C’mon $319 strata fees for a ground level 500 sq ft 29 year old catbox??????? Bwhahahahahahahahahahah. You’d have to be freaking nuts to buy this dump. I say $179,000 or less by the end of the year. Probably $120 is a price that makes more sense if you think of it ROI as a rental. Manm $319 p/m for strata…this is what you call ‘fee creep’ thats gone out of control.
July 22nd, 2010 at 1:29 pm
@jesse: No, I think what happened is that they thought the prices were too high, especially compared to Toronto and what they were making so they figure the prices would have to come back down. However after 5 years+ of waiting and starting a family in the meantime, what they find is that prices just keep on going up. During the interim the amount of rent they are paying is probably at least $30K/year for a 2 bedroom apartment in Fairview area. So I don’t know exactly what prompted the guy to buy in 2009. Maybe it’s the ultra-low rate + finally a price drop. Maybe they got a relatively good deal. I think a large part is also that they don’t want to keep on moving with 2 kids around on a 1 or 2 months notice because the landlord keeps selling the place.
So looking at their option, they can either keep waiting another 5 years and wait for price to drop and possibly pay another $200K+ in rent during that time. Or they might have decided screw it, Vancouver is nuts but we are living here, wrong for the last 5 years, so might as well just bite the bullet and buy a place so we don’t have to move on a short notice and can renovate the place to what we like. If we are going to lose $200K in equity because price drops 20%, 25%, or 30% (I don’t know what they paid), well that’s about the same as what we would have paid in rent if we wait another 5 years for price to drop. So either way we have to pay $200K+, either in form of rent or equity loss but still cash out of our pockets.
Therefore yes I think they know they are paying a high price for something they could have gotten cheaper if they bought ealier or probably waited. However, given that even if they waited and price drop, they would have paid a lot in rent anyways and they would still have to get a mortgage (though at a much lower amount) at a higher interest rate. So to them the overall benefit might have outweight the extra cost.
July 22nd, 2010 at 1:48 pm
“If we are going to lose $200K in equity because price drops 20%, 25%, or 30% (I don’t know what they paid), well that’s about the same as what we would have paid in rent if we wait another 5 years for price to drop. So either way we have to pay $200K+, either in form of rent or equity loss but still cash out of our pockets.”
And there you go bears, the reason why sales will always stay strong because of the simply old mantra that its better to pay yourself than someone else’s mortgage and because the ownership premium outweighs everything else when you will lose the same amount of money either way in the next five years – rent or own.
Ah, but the bears will be “liquid” and “mobile” to strike at the right time if they continue to rent during any downturn
lol
Face it bears, you are waiting another 5 years no matter what…
July 22nd, 2010 at 1:56 pm
@Anonymous: #60
Yeah, except that the fools would also pay interest on that extra $200K of the purchase price which they wouldn’t pay on 200K rent.
And that’s why sales have been strong up until now, because people in this city are too fucking stupid to understand basic math.
Thank god the idiots have finally run out of money.
July 22nd, 2010 at 1:59 pm
@realpaul:
re #55 and you don’t even get your own laundry facilities. These prices are absolutely ridiculous. I will enjoy watching them fall
July 22nd, 2010 at 2:04 pm
@Anonymous:
Hmmm…something seems to be missing in this calculation, but I can’t quite figure it out. Maybe you can help me, Anonymous?
It’s good to know that they’ll be living rent-free during those five years. Oh, wait! You mean regardless of whether they “own” or rent, they’ll still have to spend money consuming housing over that five-year period. Well, that may change the equation a little bit won’t it. Oh, and how many years worth of rent are the closing costs on the purchase of real estate? And it it’s new, might one also have to pay HST? 750K*.12=$90,000. How many years of rent will that buy for you.
July 22nd, 2010 at 2:06 pm
@space889:
It doesn’t cost 2500 to rent a 2br in Fairview.
More like 2000 to 2200.
If they bought a place, the interest alone plus the taxes and maintenance would have been the same or more.
So your point about them loseing 30K a year is moot.
July 22nd, 2010 at 2:10 pm
@DaMann: Moreover, check out what you can get in Downtown Seattle for 354K: 740 sq. ft.
http://seattle.craigslist.org/.....54863.html
July 22nd, 2010 at 2:13 pm
If the price of a property drops 200K, the interest saved over 5 years on a 30 year am at 4.5% is in the neighborhood of $43K.
Total savings by continuing to rent in this scenario: $243K.
We’re not even getting into opportunity costs if we invest the savings elsewhere.
July 22nd, 2010 at 2:14 pm
@space889: One word solution to the stability/affordability problem: co-op. They aren’t low-income slums. Lots of middle class families with children live there.
Your co-worker fell for every Vancouver housing fallacy going. I only have sympathy for him if it was to save his marriage. And then, only so much.
July 22nd, 2010 at 2:20 pm
@oneangryslav2:
“Oh, and how many years worth of rent are the closing costs on the purchase of real estate? ”
For a FTB buying a principle residence, resale not brand new, under $425K? Probably about 2 weeks rent.
July 22nd, 2010 at 2:30 pm
@space889:
If rent is less than interest portion of the mortgage then the home owner is throwing away more money. Taxes and condo fees add to the cost for the owner.
Check out rents vs. owning costs in Vancouver, the renter is saving more money.
July 22nd, 2010 at 2:40 pm
@oneangryslav2: It is a used condo so no HST. However I have heard that it has been repairs at a huge cost (as much as the original purchase price) for leaks. Anyways I would have told them not to buy that building if I knew they were thinking about it before they bought it.
But it’s their choice to make and I think they probably looked at all the factors and decided it was probably the best choice, not just in terms of numbers but other factors like family, stability, etc.
I’m just trying to say it’s not correct to blindly say/judge everyone who buys now instead of rent and wait for price is stupid. Sometimes they are stupid, sometimes it’s not, it’s not simply black and white with no shades of gray in between.
No one can tell the future, they made what they think is the best choice for them and time will tell how right or wrong they were.
July 22nd, 2010 at 2:44 pm
It’s awfully realtory in here today, no?
July 22nd, 2010 at 2:45 pm
@Beatbox: Nice one. Keep commenting
July 22nd, 2010 at 2:47 pm
@space889: Yep, being inelastic in your demand can really suck. Vancouver is a great place to own if you can wait a generation or two
July 22nd, 2010 at 2:48 pm
@Anoymous: You’re right. What I meant to write was realtor’s commission. That’s worth more than a few months of rent.
In addition, if they were renting a similar place for 2500/month, no way is it “worth” only 425K. That’s not even a 200 price/rent ratio. We know that the current ratio in Vancouver is well north of 200.
July 22nd, 2010 at 2:59 pm
@space889:
Two points: first, just because they “think” something is true, does not make it so. I may think that using that ab-slimming belt will give me six-pack abs, but what I think is moot–apart from any placebo effect, of course.
Second, this decision may have been good for them from a psychological perspective–the trauma of not being able to decorate as you wish (also a canard–I’m pretty much allowed to do anything I want to my apartment within reason), or of fearing a landlord’s eviction notice. This is part of what is referred to as the “owner’s premium”.
It is unquestionable, however, that the decision was bad for them from a financial perspective. If your friends are happy (and continue to be happy in the future) with their choice to purchase then the theory of revealed preferences would suggest that their implied ownership premium is exceedingly high; so much so, in fact, that it cancels out a huge amount of negative utility derived from the current financial costs of ownership versus the alternative–renting. The utility that I attach to owning is not nearly as high, which is why prices will have to drop dramatically before I consider purchasing.
July 22nd, 2010 at 3:30 pm
Excellent article on the bursting property market bubble in China. What is suprising is how similar all the numbers are to Vancouver and the Ponzi like nature of the onset. Also interesting is how the governments augmented failing revenues by juicing real estate sales in the same way as Canada only to find that at the end of every ponzi rainbow is a dearth of greater fools. Now the revenues from land sales have dried up. Sales are down 40%++, prices are sticky but off and sliding, rents are very low in Beijing. I had a friend send over some addresses in average complexes and found that rents in most areas ( outside of expat accomadation) are below $200 per month while price to income has surpassed 22 times ( gee same as Vancouver sfh numbers)
http://globaleconomicanalysis......using.html
Simultaneous burstings?……..it seems so.
July 22nd, 2010 at 3:34 pm
Quick question regarding yesterdays topic of leaky condos.
I know the government pulled the plug on the assistance program, but do they now also add insult to injury by charging HST to the cost of repairs?
July 22nd, 2010 at 3:37 pm
@Jonathon: “If rent is less than interest portion of the mortgage then the home owner is throwing away more money. Taxes and condo fees add to the cost for the owner.Check out rents vs. owning costs in Vancouver, the renter is saving more money.”
Hi Jonathan,I reply to this…
If you change the words “interest portion of the mortgage” to “cost of capital” then I agree with your post.
You are only looking at cash flow, which is independant of yield (yield is the “saving more money in the long run” part of your post). Cash flow is important for liquidity and flexibility, but cash flow does not mean that one option is a better investment than another. Cash flow is a side consideration.
July 22nd, 2010 at 3:41 pm
@realpaul:
Yes, China our savior – heading for disaster.
http://www.caseyresearch.com/displayCwc.php?e=true
July 22nd, 2010 at 3:47 pm
Fecalpaul,
This will make you happy.
CA city seeks resignations of high-paid officials.
http://news.yahoo.com/s/ap/201.....l_salaries
July 22nd, 2010 at 3:57 pm
@oneangryslav2:
“@Anoymous: You’re right. What I meant to write was realtor’s commission. That’s worth more than a few months of rent.”
The seller pays both commissions. Yes, technically these are included in the purchase price.
July 22nd, 2010 at 3:57 pm
Re; Okanagan
Shouldn’t be a surprise…
Historically, the area was basically orchards and a nice place to visit in the summer.
As I stated before, IMHO, the Coquihalla highway was conceived as a feeder route for Vancouverites to cash in and bail out after the Hong Kong issue. In the Okanagan, you can enjoy a warm summer, full of crowds, snob filled wineries, forest fires, and strip malls.
There is no high paying jobs per se, as little industry exists. The area is primed for a “correcetion” ,as I can’t see new buyers able to prime the RE pump to maintain current prices, let alone “up” them.
July 22nd, 2010 at 3:59 pm
Hmmmm, what happened in the U.S. in 2007?
http://www.google.com/insights.....amp;cmpt=q
July 22nd, 2010 at 4:16 pm
Pretty much all for today:
New Listings 141
Price Changes 80
Sold Listings 63
July 22nd, 2010 at 4:24 pm
@paulb
Nice, sounds like they are finishing early at the board due to the lack of sales to enter!
July 22nd, 2010 at 4:30 pm
@paulb.:
wow.
speechless am I.
awesome, thanks for continually posting the stats PaulB.
you da man!
July 22nd, 2010 at 4:32 pm
@oneangryslav2:
That’s still way overpriced. Although better than here it’s still way too high, at least you can swing a cat in it though.
July 22nd, 2010 at 4:35 pm
Why is inventory not growing? We are putting on 100-120 listings a day, most delists or expires happen at the end of the month. Seems as though there is a net gain of 100 listings in one day then 100 delists a day? Why is it stuck at 18000 when I have been watching at least 100 a day net gain. Are there normally that many delists? I understand the sudden drop at the end of everymonth but it seems to have stalled even with a good sell list ( good for bears I mean). Ideas?
July 22nd, 2010 at 4:44 pm
@DaMann: “Are there normally that many delists?”
No. I don’t think there is as much of a solvency crunch as there was in 2008 due to lower interest rates.
Remember, though, that whether a listing is added or removed, the total dwelling supply remains constant. And by that measure there is significant oversupply, nothing like what was and is being seen in some US cities but it’s still going to take some years to work it off.
July 22nd, 2010 at 4:47 pm
Based on Agent Will’s stats 482 units were removed last week, and he looks at a smaller area than PaulB. So there you have it.
July 22nd, 2010 at 4:52 pm
To expand on that last post, last weeks stats look like this:
835 new listings – 454 sold – 482 removed = -101 total listings
July 22nd, 2010 at 4:58 pm
@paulb.: Looks like sales for this month will be less than 50% of last year. Its party time!
July 22nd, 2010 at 5:00 pm
@paulb.:
Wow.
July 22nd, 2010 at 5:08 pm
@DaMann: It shows that people can afford to keep their homes, and won’t sell in a down market. Exactly what everyone has been telling you…we don’t have subprime here. That was the gasoline on the fire in the states.
July 22nd, 2010 at 5:13 pm
@ Vanrod
Hint: subprime was fuel on the fire of appreciation (see: too much credit/liquidity/etc.)
July 22nd, 2010 at 5:15 pm
@Best place on meth: uhm…how are you saving $234K? Don’t you have to pay rent during that 5 year? @2200/month which I think is at least what they were paying back in 2004, that’s about $26K/year, so 5 years would be about $130K at least in rental expenses as well. So if you net $130K rental cost against say $250K loss from equity, interest, etc, it’s net $120K which is also a guess about what the loss might be of buying over rental since I’m assuming a lot of numbers here. Yes it could also be much higher than that.
Personally I would have told him to wait another 2 years or so before taking the plunge, and definitely not buy in that building due to the age of the building and that it has leaked.
However he’s been paying attention for a long time now to housing and I’m sure he’s crunched a lot of numbers. Maybe they just decided continuing renting doesn’t make sense to them with their 2 kids and that prices might stay high for another 5 or 7 years since they have been wrong for the last 5. Or maybe based on their actual housing cost, they decided that buying now or buying 5 years later at say 25% lower price they would end up in the same financial position.
My point is that everyone has different situations and simply painting all recent buyers with one brush as speculators or stupid is not right. It might very well be the case that for some people buying when they did make financial sense to them based on their personal situation. Maybe the pure number don’t work for them but there are other non-financial aspects to it that they are willing to pay extra for. You know like people buying brand name items over cheaper no name brands (eg. $400+ luxury brand name sunglass instead of $200 brand name pair over $50 no name ones) granted this is for a higher amount.
The world is not simply black and white, right or wrong. There is no 1 right answer for everyone at any given moment. I think buying right in the last 3 years isn’t a smart thing to do for more people but it doesn’t mean that applies to everyone because everyone’s circumstances is different and different factors are in play in different people’s lives. That’s all I’m saying.
July 22nd, 2010 at 5:26 pm
@van rant: Have to average 90.5 sales a day over the last 6 days of the month in order to beat 2008. Otherwise, worst sales for July in at least 10 years.
July 22nd, 2010 at 5:44 pm
@Vanrod:It shows that people can afford to keep their homes, and won’t sell in a down market. Exactly what everyone has been telling you…we don’t have subprime here. That was the gasoline on the fire in the states.
How about the ones who are speculating and can’t break even by renting units or flippers who are over-leveraged and can’t break even renting? These people who must sell will set the market and there are not enough buyers for listings out there.
July 22nd, 2010 at 5:48 pm
Developers push wave of pre-sales into slowing market
http://www.vancouversun.com/Me.....story.html
July 22nd, 2010 at 6:06 pm
@Jonathon:
“How about the ones who are speculating and can’t break even by renting units or flippers who are over-leveraged and can’t break even renting?”
For arguments sake, let’s say somebody is losing $200/month renting out their unit. Meanwhile, the value of their property has dropped $20,000. Do they sell and realise an immediate $20K loss, or hope that things even out within a timeframe of 100 months, which would be the time required to take the same loss by sitting tight?
July 22nd, 2010 at 6:20 pm
@Anoymous: For arguments sake, let’s say somebody is losing $200/month renting out their unit. Meanwhile, the value of their property has dropped $20,000. Do they sell and realise an immediate $20K loss, or hope that things even out within a timeframe of 100 months, which would be the time required to take the same loss by sitting tight?
Ask that same question to people in Phoenix and Miami right now? What do you think they’d say? The rental difference will be a lot worse based on what rent to price rates are here and the loss could be much worse than $20K. Look at those cities.
July 22nd, 2010 at 6:27 pm
So, the Keysian model is officially dead. Governments who loved the concept of ever increasing the balance sheet by expanding inflation never conceived of the day when it would all add up to 100%. It all seemed so distant that the future was inconcievable.
““We will not have any more crashes in our time.”
- John Maynard Keynes in 1927
I guess that todays reality proves out the old adage ‘liars can’t figure and figures don’t lie’.
With Keynes and world leaders swept up in the airy fairy socialism of big government ( in Canada government is the biggest employer and the largest advertiser in dollar terms)the ponzi scam must have seemed brilliant, just tap the fools a drip at a time. It would appear that time has caught up with the greatest fools of all….thats us for defending the policies set forth by these idiots by voting them in.
Spain is a great example of a country running with scissors in the dark. The real estate industry financing grew to consume 45% of the country’s GDP, now 40% of the loans outstanding are non performing. There are more than 1 million vacant properties for sale….huge developments of thousands sitting empty…developers are bankrupt, the banks are facing a ‘stress test’ coming in the next weeks which will expose the depth of the red ink. This could take Spain as we know down the drain on the plain with the rain. They have zero ability to borrow outside the Euro Zone emergency fund.
Canadas ‘sub prime crisis has yet to be exposed, although we have been twice warned by the IMF who seems to have better insight into the state of our national economy than the public. The 800 billion at the CMHC if upset by a crash in RE prices will sink the governments ability to support new debt. Don’t forget the deficit, officially running at 57 billion is only the tip of the ice berg with all the cities and municipalities also borrowing at record rates.
I’m going to go out on a limb and suggest that the real deficit is probably five to ten times higher than suggested by the propagandists ( if the official number is 57 billion from one department , can you imagine what is really is when its all added together for the final audit?) I think that the multi trillion dollar debt that we have in secret if made public, would sink Harpers chances of a majority and so will remain Canadas most closely guarded secret. Well……..until the shit hits the fan of course as it is in every other country that based its economy on real estate.
Don’t forget , this was a globally coordinated bubble. We see the simultaneous fall out in every economy….except Canada ?????? The coordinated crash will be just as vicious as we see happening elsewhere. Its all been based on governments inability to reign in spending. The idea that it has all been ‘the banks fault’ is a red herring that history will uncover once the current regime is retired and floating around in luxury and no longer seeking votes. Unfortuneatly, its you and I that get left holding the shit sack.
July 22nd, 2010 at 6:29 pm
@DaMann:
“Are there normally that many delists?”
Looks to me like fed up sellers are stamping their feet and pulling their listings, vowing to be back in a few months time when the market turns around.
Stupid fuckers don’t have a clue that it’s not coming back this time.
I will joyfully watch them suffer as prices fall month after month after month after month with no rebound in sight.
July 22nd, 2010 at 6:39 pm
@realpaul:
You keep talking about Harper’s majority – are you on crack?
He’s NEVER getting a majority, you can take that to the bank.
July 22nd, 2010 at 7:00 pm
Keynes said that governments should run a surplus in boom years and a deficit in recessions. Governments around the world are following only half of the theory.
July 22nd, 2010 at 7:45 pm
The BOC says the economy is slowing but still signaled that another rate hike(s) is coming.
http://ca.news.yahoo.com/s/cap.....oc_economy
Now, what could be missing from this list of risks to the Canadian economy?
“It highlights risks stemming from the European crisis, lower growth in China, high unemployment, loss of confidence, weak consumer demand and businesses too fearful to invest in the future.”
I don’t know, how about a collapse of the housing price-rent ratio to its historical mean? It does seem to have happened in a country or two over the last couple of years.
What does it take for a 30-40% fall in house prices to get on this vaunted List of Risks?
July 22nd, 2010 at 7:48 pm
@No Longer Looking:
No Longer Looking Says:
July 22nd, 2010 at 2:14 pm
@space889: One word solution to the stability/affordability problem: co-op. They aren’t low-income slums. Lots of middle class families with children live there.
++++++++++
X-nay on the po-oc say, eh!!!!!
July 22nd, 2010 at 7:50 pm
@vibe: Agreed. In addition, Keynes argued that economies did not approach their potential level of long-run growth as the result of a shortage of aggregate demand. This is the role of G–government spending–during an economic downturn. Governments around the world have borrowed money recently but have not used it to boost aggregate demand. What effect did Bush giving US banks $800 billion (who then are sitting on it and not lending) have on aggregate demand. It would have been better for that money to have gone directly to consumers to help them with their indebtedness.
July 22nd, 2010 at 7:55 pm
@NO-LYMPICS:
81 NO-LYMPICS Says:
July 22nd, 2010 at 3:57 pm
Re; Okanagan
……..snipperage……….
There is no high paying jobs per se, as little industry exists.
……..final snipperage
+++++++++++++++++++++++++
BULLSHIT! There are PLENTY of high paying jobs in Kelowna
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
You just have to join the hell’s angles to get one!!!
July 22nd, 2010 at 7:56 pm
Off topic: Irish are leaving home
“Statistics show that the shift from an immigrant-receiving population to a largely outgoing one began just as Ireland suffered the continent’s most precipitous economic collapse – a freefall that began with the collapse of a real-estate bubble, which in turn set off bank collapses and government-debt emergencies. The result has been double-digit unemployment.”
http://www.theglobeandmail.com.....le1649063/
July 22nd, 2010 at 7:56 pm
angels
July 22nd, 2010 at 7:59 pm
paulB, incredible.
What are YOUR thoughts with respect to where we are now and how things will unfold?
July 22nd, 2010 at 8:09 pm
@vibe:
vibe Says:
July 22nd, 2010 at 4:47 pm
Based on Agent Will’s stats 482 units were removed last week, and he looks at a smaller area than PaulB. So there you have it.
+++++++++++
Yeah, those units showed up on Craigslist rentals. You can currently rent an apartment in Vancouver if you have a quarter horse as a pet.
July 22nd, 2010 at 8:15 pm
@bumncream: Real estate stats comes through the gauge from the type of properties that get sold in any perticular time,It does not mean that sky is falling.
You are standing close to higher interest rates and high prices surrounded by hst.If you believe in upturn or downturn it will not make any sense to you because vancouver real estate, Rock solid heart touching thus far it will never go down.
July 22nd, 2010 at 8:20 pm
@Jimmy:
Jimmy Says:
July 22nd, 2010 at 5:48 pm
Developers push wave of pre-sales into slowing market
http://www.vancouversun.com/Me…..story.html
+++++++++++++++
I wonder which Canwhip Global employee(s) get their pee pee whacked for publishing that article.
July 22nd, 2010 at 8:27 pm
@realpaul:
It isn’t “airy fairy socialism” that got the world in this mess, it was unfetted capitalism and improperly regulated financial markets, under primarily ‘CONSERVATIVE’ governments. You’re not paying attention.
July 22nd, 2010 at 8:27 pm
@chilled: Those are tact to bring crowd from the bears,There is a lots of hype that amzn fall 15% to 104 while profit is up by 46% that will bring all the bears in the market to spin demand and supply rules.I think bears love that catchy headlines to tick the market up.
July 22nd, 2010 at 8:52 pm
@Argentina Zero:
Oh great, superduperbullshitter has a new persona.
July 22nd, 2010 at 9:06 pm
@oneangryslav2: Keynes also said people saving money is bad, ie paradox of thrift. Where did he think investments and loans come from, the tooth fairy?
There is so much more to an economy than aggregate demand. It’s like measuring an economy solely by its GDP. In theory, GDP = C + I + G, but what makes anyone think G(overnment) is able to stimulate or produce aggregate demand at all? Do they have a long history of picking winners? Or would they just spend money on politically favored projects? And does not G get its money from C and I anyways, by necessity decreasing C and I in the equation?
Keynes handed governments and voters around the world a loaded gun in the form of his economic theory.
July 22nd, 2010 at 9:09 pm
@chilled:
“It isn’t “airy fairy socialism” that got the world in this mess, it was unfetted capitalism and improperly regulated financial markets, under primarily ‘CONSERVATIVE’ governments. You’re not paying attention.”
Good grief. Obviously you’re not aware that the govt-backed companies Fannie/Freddie held or guaranteed 59% of all subrime and Alt-A loans in the US, and they were encouraged to do so by a Congress that oversaw them. When asked about risk they were incurring, Dem. Housing Committee member Barney Frank famously said he was “willing to roll the dice.”
The implied government guarantee to these loans created what was perhaps the biggest market signal in economic history. The worst case scenario on the bailout required for Fannie/Freddie is now $1 trillion.
As for the failure of regulation all of these loans along with the credit derivatives that insured them, they were all vetted and approved by the regulatory agencies involved.
Incidentally, the head of the Senate’s banking and finance committee, Dem. Chris Dodd, took a sweetheart mortgage from Countrywide, a lender he was charged with overseeing.
And Dodd and Frank just wrote the financial reform law which, while devoting much attention to shoe-horning affirmative action into financial institutions, somehow had no time to address Fannie and Freddie.
Some private banks were reckless, others like JP, BB&T and Goldman saw the bubble and were more prudent. Almost no politicians saw the bubble – Lib or Con – and most of them gave drunken sailors a bad name. And still do as the lake of red ink washing from coast to coast demonstrates.
July 22nd, 2010 at 9:11 pm
I think PaulB should get his own spot on the front page to update his dailies, he deserves it and it would be easier for people to find. Could also include MTD and projections.
July 22nd, 2010 at 9:27 pm
@Devore: The problem with gov’t stimulus is it’s difficult to know when to stop it to allow private investment to take over. Right now it looks like it’s too soon to remove it as unemployment is still relatively high, though the only way to tell is to stop it for a time and see what happens. It’s back on life support soon unless private investment picks up (the engine turns over).
July 22nd, 2010 at 10:36 pm
Devore, The paradox of thrift says that saving money during a recession is bad because it decreases economic activity at the precise moment when it is needed most. What you don’t seem to realize is that Keynes assumed that savings have been accumulated during the good times. You could just as easily talk about a paradox of extravagance, where people spend too much when times are good. The point is that when money is easy to get people spend too much, and when money is hard to come by they save, exacerbating the problem.
Keynes’ theory isn’t meant to increase overall economic activity but merely to smooth out the ups and downs. Yes the government would dampen private sector gains but also the losses. The point is to avoid bubbles as well as busts. Dropping interest rates and cutting taxes while unprecedented bubbles are raging is exactly the opposite of what Keynes advocated. Most Keynesians today really don’t follow his theories very closely. Just like those who quote Adam Smith in regards to the “invisible hand of the market” often ignore his more populist ideas.
July 22nd, 2010 at 10:42 pm
Another net 100. Ho hum. Is this the new normal?
100 net new daily
1% of total inventory dropping their prices daily?
Honestly, I respect the bull opinion on this site as I never saw the 2009 bounce back coming but how can even the most bullish person see anything but disaster coming?
July 22nd, 2010 at 10:44 pm
Why doesn’t the person who is making all the money off of this site give Paul B his own stats on a column on PG 1 and fixed the condo index?
July 22nd, 2010 at 11:06 pm
“It isn’t “airy fairy socialism” that got the world in this mess, it was unfetted capitalism and improperly regulated financial markets, under primarily ‘CONSERVATIVE’ governments. You’re not paying attention.”
And England? They were under a pinko government where the state accounted for 50% of GDP. Did they perhaps have a bit of a bubble and maybe a of a financial crisis too.
It’s all very simple. If the state steps in to make borrowing easy, people borrow and you get a bubble. It’s not like the capitalists aren’t involved. There is nothing corporations like more than a rigged market. But it’s the commies who come out in favor of rigging the markets time and time again.
If you want efficient pricing, the market has to be free. If you don’t want efficient pricing, that’s another story.
July 22nd, 2010 at 11:14 pm
….and no apostrophe.
Hells Angels
July 22nd, 2010 at 11:35 pm
@McLovin: Hah! All that money, today google ads made a good six bucks here. Not bad, but Robin Leach won’t be visiting anytime soon.
Coincidentally, I did spend some time this evening looking into graph/ stats plugins to see if we could rig up a simple system for pauls stats, but it will only work if it’s as simple as posting a comment and I’m not sure if he’s even interested in doing that. There is no shadowy cabal here trying to keep pauls stats out of the light.
c0der also did some work on the CULT index and I believe that’s working now, but only time will tell. The code was fixed days ago, the delay in updating on the site is my fault.
Believe it or not everything doesn’t happen automatically here, it’s a labor of love and a work in progress. I do appreciate all the feedback though, and try to work it into the site even if I don’t always reply directly to it.
July 22nd, 2010 at 11:49 pm
http://vancouver.en.craigslist.....49463.html
This would be cool. Kinda like living in the desert similar to Mohamar Quadafi.
July 23rd, 2010 at 12:10 am
Exactly how many sides does an “Okanagon” have anyways?
July 23rd, 2010 at 12:12 am
@chilled:
I nominate your post for the most ignorant of the day.
July 23rd, 2010 at 4:57 am
@Jonathon:
The Big Lies refuse to die. One, housing busts are never caused by owner-occupiers having to sell their homes (other than for the usual reasons like death, moving, etc). They start when the market simply runs out of buyers, and accelerate when speculators (“investors”) start bailing. Owner-occupiers start defaulting only toward the end.
Two, the bust in the US had nothing to do with “subprime” lending, which accounted for a minority of mortgages in most markets. The bust in the US, like all busts, was due to prices simply being too high in relation to rents and incomes. Regardless of what label was applied to the mortgages. Many of the most overpriced markets in the US, such as Marin County north of San Fransisco, had almost no subprime lending at all.
July 23rd, 2010 at 8:13 am
@patriotz:
Right. The main problem with subprime was that it was one of the factors that put undue credit into the system, which inflated prices. The prices themselves were what produced the instability and the collapse. You don’t need subprime for instability and collapse. All you need are hight prices. And we got ‘em.
July 23rd, 2010 at 8:43 am
Newcomer Says: The prices themselves were what produced the instability and the collapse. You don’t need subprime for instability and collapse. All you need are hight prices.
Nope. You need subprime for high prices. High prices alone didn’t cause the problems, the discover that high risk subprime had been bundled and resold as AAA debt poisoned the credit system and ground it to a halt. Once historically cheap and free flowing credit – including subprime loans – dried up the writing was on the wall for housing.
Anyone pulling a Glenn Beck about ‘elive socialists’ really needs to read a detailed account of the history. Recommendation: 13 Bankers. In the US all administrations since about Nixon worked hard at dismantling the financial regulations and protections imposed after the Great Depression and reaped the natural reward of bending over for Wall Street. In fact the authors build a strong case that Wall Street loves the regulatory structure because the morons in charge continuously flipped ‘industry experts’ through it, who naturally did whatever their future employers on Wall Street wanted.
July 23rd, 2010 at 10:53 am
@fixie guy:
“Nope. You need subprime for high prices.”
So I guess Vancouver must have an awful lot of subprime. And I guess all the other bubbles, like the Vancouver 80s bubble, were caused by subprime. I learn something every day.
July 23rd, 2010 at 1:57 pm
I learn something every day.
Debatable. You need the infusion of credit subprime in part permitted to cause that kind of rapid appreciation. That it collapsed when the tap was turned off I thought to be obvious by now. The extent of Canada’s ‘subprime’ – low/no interest 35-40 years terms to the marginally qualified – has been hashed on various RE forums for years. Either way it’s the same infusion of cash into the RE system, the same crazy appreciation, and the same collapse when it’s shut off.
Clearer? Any other straw man arguments you want to toss out there?