What to do about falling prices.
No Longer Looking points out this great editorial in the Vancouver Sun. I’m trying to figure out if it’s intent is the calm people about the Vancouver real estate market slow down, or freak them right out:
I penned this editorial to calm fears that the real estate market in Vancouver was collapsing and I’ve added some brief comments at the end.
Living in Canada’s most expensive housing market, residents of the Lower Mainland are obsessed with real estate prices and mortgage rates.
And no wonder. The benchmark price for detached homes in Metro Vancouver last month was $793,193. A down payment of 25 per cent would leave the buyer with a mortgage of $594,894, in which case a difference of just one percentage point in the interest rate can vary monthly payments by $500.
In comparison, the average price of a house in the Greater Toronto Area is $420,482. The standard down payment brings the mortgage to $315,316 and the interest rate impact to $260.
They recommend NOT walking away from an underwater mortgage – just keep paying more than they house is worth, after all:
..it might be a few years, perhaps a decade, before real estate prices return to the heady levels of 2007. But there’s a good chance they will.
August 10th, 2010 at 9:06 pm 1
Wow. This guy is claiming real estate appreciates at 8% per year. Pardon me if I ignore everything else he has to write.
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August 10th, 2010 at 9:15 pm 2
First! The Editor is a real estate pimp. Doesn't talk about the risks of renewing oversized mortgages at higher interest rates…instead, Just be happy!
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August 10th, 2010 at 9:16 pm 3
correction.. 2nd!
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August 10th, 2010 at 9:54 pm 4
USA: Feds rethink policies that encourage home ownership
http://rss.usatoday.mlogic3g.com/Money/1948432/fu…
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August 10th, 2010 at 10:03 pm 5
Grammar error: "has been", not "is".
Anyway, it's incorrect. The long term total return on stocks to date has been much higher than for RE in Vancouver or anywhere else in Canada. Even taking into account the inflated market price for Vancouver RE today.
And more importantly: the total return to date for any asset is not in any way indicative of the return going forward. Ask someone who bought Nortel in 2000. Or a house anywhere south of Zero Ave in 2006.
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August 10th, 2010 at 10:13 pm 6
@Jimmy:
The US government started intervening in favour of home ownership in the 1930's.
This was the right thing to do, because buying was seriously under priced compared to renting. Even though the monthly payments would have been much cheaper, people couldn't buy because banks wouldn't lend.
Helping renters become owners increased their disposable income which meant they could spend more on goods and services, which created jobs.
The economic distortions which justified government intervention in favour of home ownership ended around the mid-1950's when the postwar housing shortage was eliminated, and the intervention should have ended at that time. Both in the US and in Canada. Now the effect is the opposite – renters are sacrificing their long-term disposable income to become owners.
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August 10th, 2010 at 10:13 pm 7
@patriotz: The author's misuse of grammar is at best incorrect and at worst deliberately misleading. His statement as it stands is not correct and readers are meant to infer future gains will come in around 8%. I give no quarter on this one.
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August 10th, 2010 at 10:16 pm 8
Look out bull. Word about slumping Vancouver real estate spreading like Russian wildfire. Pimps tried to lie to foreign investor by saying ‘its different here’ & ‘no more land’. But asian hot money buys Iphone 4 and sees news podcast for himself. Not happy with pimp. Decides to sip cranteeny in Seattle condo for half the price.
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August 10th, 2010 at 10:35 pm 9
"I penned this to calm fears"
Bwahaahaa, if I was the typical head up my ass Vancouver speculator who had bought into all the "best place on earth" "asians coming" "RE only goes up" etc. hype, this editorial would scare the hell out of me not calm me!
Only two slow months and the pumpers are in full panic mode.
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August 10th, 2010 at 10:52 pm 10
I think we are in yellow alert territory.
If things get worse we will have to get Bill Slut to host a special program with impartial experts.
My suggestion:
Cameron, Rennie,and perhaps also the infallible Tsur.
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August 10th, 2010 at 11:11 pm 11
"I penned this editorial to calm fears that the real estate market in Vancouver was collapsing…"
Friends, Vancouverites, home debtors, lend me your fears,
I come not to praise rational thought but to bury you (in more debt), …
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August 10th, 2010 at 11:57 pm 12
Wow, what an ego, the guy thinks his editorial can "calm fears" and prevent a real estate collapse….
Good luck with that.
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August 11th, 2010 at 12:06 am 13
"What to do about falling prices."
Respect the money by picking it up specially in Vancouver oppertunity hardly knock on the tenants door.
GO GET IT!
A0
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August 11th, 2010 at 12:16 am 14
B.C.'s economic boost from marijuana in jeopardy
It's been said California's referendum with the intent to legalise marijuana will spell a death knell to British Columbia's economy in the lower mainland, an economy similar to another Columbia far further south a decade ago which depended on cocaine to boost it's coffers.
http://www.examiner.com/x-29795-Vancouver-Social-…
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August 11th, 2010 at 12:38 am 15
What's the deal with listings like this:
V842480
Lists June 1 at 1,298,000
Drops to 1,288,888 a month later on July 4th (big deal)
Drops to 1,188,888 on July 19th
Re-lists today back at 1,288,888
Personally I'd offer the owner no more than 650,000 for this dated townhouse with a "peakaboo" view…
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August 11th, 2010 at 12:46 am 16
http://www.6717000.com/1501howe/listings/
So many for sale, all in one place.
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August 11th, 2010 at 12:48 am 17
Oh, and apparently it comes with magic winged shoes, since the 7 block walk to the Granville Island Ferry takes "1 minute".
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August 11th, 2010 at 12:57 am 18
The building is called 888 Beach? That is a selling point right there!
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August 11th, 2010 at 12:58 am 19
@YLTNBoomerang:
Lists June 1 at 1,298,000
Drops to 1,288,888 a month later on July 4th (big deal)
Drops to 1,188,888 on July 19th
Re-lists today back at 1,288,888
Now where have I seen that before?
http://www.zerohedge.com/article/its-not-market-i…
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August 11th, 2010 at 1:04 am 20
Ontario Speculator Example Laughably Prudent by Vancouver Cowboy Standards
http://wp.me/pcq1o-1bG
$303K condo; $242K mortgage; $80K income; $176K non-RE savings.
The financial advisor is worried about her 'whopper mortgage'.
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August 11th, 2010 at 1:09 am 21
From the The Central Zone of the Okanagan Mainline Real Estate Board (OMREB)
“Home sales in early 2010 made up for the ground lost during the poor market a year ago, but consumer demand in most BC markets has now slowed for the summer as people are busy with vacations and yard work rather than thinking about buying or selling,” says Brenda Moshansky, OMREB President and
REALTOR® in the Central Zone. “With continued economic recovery and job growth, and interest rates rising slower than anticipated, consumer confidence and buyer interest are expected to pick up again in September – slowly returning to post-recession demand patterns with a gradual increase in sales.
However, buyers should not wait too long while the market is in their favour as they may not have the same options available in the coming months.”
The spin is in!
Yes I was too busy mowing my lawn to think about buying a house.
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August 11th, 2010 at 1:16 am 22
From Garth's site:
Here's the full report he refered to, chocked full of charts and tables:
http://www.scotiacapital.com/English/bns_econ/ret…
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August 11th, 2010 at 1:18 am 23
Price Drops Will Beget Price Drops
http://wp.me/pcq1o-1bS
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August 11th, 2010 at 1:22 am 24
@McLovin:
He he
and there was no lawn to mow in June.
Better buy now cuse 20+ MOI can dissappeAr in an insant LOL…Does this guy even see the amount of new projects hitting the sales floor?
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August 11th, 2010 at 1:23 am 25
@McLovin:
What did I tell you, a bottom call already.
Bring on the threat-o-graph.
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August 11th, 2010 at 1:49 am 26
We should track the threat-o-graph quotes in the forum.
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August 11th, 2010 at 1:57 am 27
@Anonymous:
Here you go:
http://vancouvercondo.info/forum/topic/threat-o-g…
Thanks McLovin!
Anyone find any good threat-o-graph quotes for the Vancouver market?
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August 11th, 2010 at 2:02 am 28
@ YLTNBoomerang
Here's another bizarro price increase, but in New Westminster. It was $618,000 two weeks ago and now its $625,000. This house has been on/off the market for two years according my realtor.
It was first put on the market 2 years ago at $625,000. This seller is an idiot…wonder why there are no phots of the inside…hmmm
V807467
http://www.realtor.ca/propertyDetails.aspx?proper…
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August 11th, 2010 at 2:05 am 29
For what it's worth, I posted the following comment on the Vanc Sun's site at link provided above. In case, it isn't clear enough, I thought the article was rubbish…
—————————————————————
Harvey: the 45% decline in sales volume in July (and corresponding drop in MLS listings) tells me that not only are there no buyers, but also no sellers willing to adjust their prices to more accurate market levels yet. Until we see some level of capitulation, the market will remain quiet. I also don't think the massive inflow of capital into bonds (which has pushed yields lower) is necessarily a good thing either. For those that are in great shape financially, now is maybe a good time to start looking (especially if they never plan to move like you say). Unfortunately, many that bought in the last few years chomped off way more than they could handle as they became seduced by the idea of making some quick and easy money and never planned for a period of falling prices (yes, this does happen in Vanc from time to time). By the way, when you talk about 8% returns on Vanc RE vs stocks over the long term, I hope you are making an apples to apples comparison. According to most analysts, stocks have outperformed RE over the long term. The way I see it, this isn't a meaningful comparison anyway. If you started with $100k cash and had the option to (a) buy stocks or (b) use as a dp on a home, which would give the better return? After you factor in all the other costs involved in owning a home (ie. mortgage interest, maintenance, property taxes, transfer taxes, agents fees, utilities etc…), the answer becomes more obvious.
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August 11th, 2010 at 2:08 am 30
@The Ant:
Does any have or can find quotes from 2008 as things started to slide so that we can compare with current ones?
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August 11th, 2010 at 2:15 am 31
@Jonathon: I'll bet there are some around.. I'll try to take a look around if I get a chance later.
In the meanwhile, if anyone is wondering what a 'threat-o-graph' is, here you go.
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August 11th, 2010 at 2:18 am 32
@ YLTNBoomerang August 11th, 2010 at 8:38 am
These old tricks won't cut it anymore, especially in the current market environment. Everyone has access to all the information and can clearly see when a listing has simply been refreshed.
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August 11th, 2010 at 2:21 am 33
11:41 AM Eastern Daylight Time Aug 11, 2010
11:41 (Dow Jones) Canadian home-improvement products retailer Rona's (RON.T) 2Q earnings disappoint, with EPS of C$0.52, below mean estimate of C$0.59. Desjardins Securities believes sales "fell off dramatically" after mid-May, following Rona comments at the time that sales were satisfactory. "Unfortunately, it now appears to us that underlying consumer demand is much weaker than we expected, despite the increase in home values in Canada and the year-over-year increase in employment," firm says. Recently in Toronto, Rona down C$0.50 to C$13.75 after earlier trading as low as C$13.17. (andy.georgiades@dowjones.com)
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August 11th, 2010 at 2:32 am 34
All this time, I've not been terribly impatient – instead I've been saddened by people leave and bemused at how silly it all is – but now that the drops have started I want to have the next four years of slide squished into a couple of months, my impatience finally kicking in and yelling "LET'S GET THIS DONE! BOOYAH!"
The next several years are going to make me nuts.
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August 11th, 2010 at 2:37 am 35
#28…does the term 'money pit' come to mind. I have heard realwhores quote reno costs as if they knew anything about what it was going to cost to upgrade a substandard pit such as the one you posted. Nothing is going to cost more than 'a few grand'. Bwahahahahahahahahahaha…..any pit of this vintage is looking at at least 100 thousand…even for a half assed reno…it still doesn't justify spending 600K on a 'banger' in a shithole like N West. Don't you just love it when these delapitated dumps, built by an amateur, are pimped out as 'character'. Sure …..like a crack whore has 'character' because her teeth have fallen out and large gaping holes have opened up on her face…..still a crack whore right.
Any time you see 'character' listed on a realwhores add run the other way….before he tells you…."it'll only be a couple thousand to fix that".
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August 11th, 2010 at 2:50 am 36
"A house is not a stock, to be sold when earnings disappoint or a sector falls out of favour."
So says the calming calmer man from the Vancouver Sun.
Sure, that's the way it should be but that's not the reality in Vancouver. The reality is that speculators ARE treating houses like stocks and it will be those very speculators who will crash the market for everyone who owns.
The happy families in their cherished homes can't do a damn thing about that.
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August 11th, 2010 at 2:55 am 37
@Absinthe:
My prediction is a steep decline in values during next two years followed by a much less dramatic slide downhill for who knows how long after that. The point being, once the drop becomes readily apparent, AND before there's a desperate call for recovery, you can get great bargains by making lowball offers. I don't think we have to wait years for that.
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August 11th, 2010 at 3:04 am 38
First he says:
"This all means that buyers have a window of opportunity to buy a residential property at a price below what they might have paid a few months ago and negotiate a mortgage at a slightly lower rate than what was offered a few weeks ago."
then he says:
"it might be a few years, perhaps a decade, before real estate prices return to the heady levels of 2007."
Considering that prices are now quite a bit higher than 2007, how can he, in good conscience, call this a "window of opportunity"?
–NLL
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August 11th, 2010 at 3:07 am 39
I guess if you're so F-ing stupid you bought a house you could never actually afford based on what these RE pimps and idiots told you in the first place, you might ACTUALLY be stupid enough to take their "advice" a second time and keep bleeding money into an underwater mortgage for the next decade HOPING it appreciates back to where you started from!
I guess it's the same math that sees 6 billion in Olympic spending return as 60 million in new business as a good "investment".
I mean, I knew Vancouver was clueless, but COME ON!
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August 11th, 2010 at 3:22 am 40
I was told by someone working inside the real estate division of one of our major bank that there is a major real estate crash coming to Canada and that they are trying to prepare for it.
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August 11th, 2010 at 3:36 am 41
@ Bubble Lad
Unfortunately the advice to keeping putting money into an underwater mortgage is probably good advice. In Canada, we no longer have the option of handing the bank the keys and walking away from the debt. Mortgage holders are on the hook for the mortgage amount and generally speaking, a mortgage carries a lower interest rate than a personal loan. And if one sells at a loss, one must pay the difference to the bank (or get a personal loan for that amount).
One can always try to declare bankruptcy but that isn't usually a great option.
Basically, the math on which option is best if your mortgage is underwater is pretty complicated in Canada — although some may be getting more practise with it soon. It is very likely the case that `marginally' underwater mortgage holders are better off sinking money into that mortgage.
Of course, they would have been better off still if they hadn't promised so much to the bank. Buying a house with 10% down is equivalent to promising 90% to the bank plus interest. Rather like indentured servitude. Doesn't sound so great to me.
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August 11th, 2010 at 3:42 am 42
The saga continues on the overpriced, listed until last week @ $495k, now for rent "penthouse"…
Within 3 days they have dropped asking rent from $2,000/mnth to $1750/mnth.
http://vancouver.en.craigslist.ca/search/apa?quer…
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August 11th, 2010 at 3:49 am 43
This is awesome. If no one is calling to view your rental, first thing to do is try RAISING the rent. Maybe that will make them think the property is in hot demand…
http://vancouver.en.craigslist.ca/search/apa/van?…
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August 11th, 2010 at 3:51 am 44
@anonymous: in the immortal words on Homer Simpson: "D'OH!"
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August 11th, 2010 at 4:05 am 45
@Absinthe:
All this time, I’ve not been terribly impatient – instead I’ve been saddened by people leave and bemused at how silly it all is – but now that the drops have started I want to have the next four years of slide squished into a couple of months, my impatience finally kicking in and yelling “LET’S GET THIS DONE! BOOYAH!”
The next several years are going to make me nuts.
I know the feeling. My favorite activity to make waiting more bearable is looking at homes for sale in the $700,000 range trying to make up my mind which oneI will be buying for $350K in a couple of years. Makes me giggle.
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August 11th, 2010 at 4:09 am 46
@VanRant: I was told by someone working inside the real estate division of one of our major bank that you are an idiot
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August 11th, 2010 at 4:37 am 47
51% of surveyed Californians say legalize marijuana.
http://www.sacbee.com/2010/08/08/2944518_a2943411…
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August 11th, 2010 at 4:47 am 48
"What we had was a government-prescribed course of amphetamines (to keep it up), antibiotics (to prevent infection) and antidepressants (to make it feel better). It endured regular steroid injections from both monetary and fiscal authorities. And it still has no real muscle."
- Caroline Baum, Bloomberg
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August 11th, 2010 at 5:20 am 49
#21 McLovin
Good find and did you check out the other 2 press releases from the North and Shuswap?
Howard Neufield and Karen Singbeil said almost the exact same thing, nearly word for word, including mentioning yard work.
Got to keep the pimps on message, bwahaaha.
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August 11th, 2010 at 5:31 am 50
@ crashcow August 11th, 2010 at 12:47 pm
"What we had was a government-prescribed course…" should read:
What we HAVE IS a government-prescribed…
Obviously, the silliness is still ongoing:
http://www.businessweek.com/news/2010-08-11/hud-o…
http://washingtonindependent.com/93795/the-return…
I am betting those rumors of a big round of mortgage cramdowns in the US will come to fruition, much to the dismay of those that actually have equity in their homes and continue to pay their bills. Hey, desperate times call for desperate measures. I am just waiting to see what sorts of crazy things we'll resort to up here in Cda especially when it comes to the first time home buyers (who else is going to buy right now?)
Interesting to see the equity markets close on right on their a$$es today (and continued to drop after hours)
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August 11th, 2010 at 5:34 am 51
@anonymous:
Owner-occupiers are the very last mortgage holders to give up paying. Because of their emotional attachment they will hang on as long as they can and convince themselves that the market will turn around. You won't see them walking until the market is down at least 25%, except for those who lose their jobs.
Specuvestors are another story and just as they are the first to sell when prices start falling, they are also the first to walk away from underwater properties. And there are enough of them to collapse the market no matter what the owner-occupiers do.
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August 11th, 2010 at 5:47 am 52
@metalhead:
If there was only some way that I could know a year in advance how much yard work people will have to do, I'd have a sure-fire method of predicting sales.
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August 11th, 2010 at 5:48 am 53
Elections BC to rule on anti-HST petition today
http://ht.ly/2ohWl
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August 11th, 2010 at 5:50 am 54
Dumping money into an underwater mortgage in a falling market with rising inrest rates is a mugs game. You'd have to be insane to fall for that saw. What a joke. Downturns in Canada have lasted as long as 15 years and average 10 to 12. The intrest paid historically is obscene but under todays outrageous amounts the combination of falling prices and compounding intrest will kill you faster than a bullet to the groin. Historically people have had skin in the game when traditionally they had at least 25% equity in the property…the owner could absorb quite a hit and recover after the decade past if he kept his job…but todays dynamics are a completley differant story and the old rules don't apply. Isn't it funny how the pimps are trotting out these ancient files to apply the same game to an entirely differant situation…..Wlak away is the best option.
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August 11th, 2010 at 5:58 am 55
For the deflationistas:
http://video.ft.com/v/507019432001/Dr-Copper-meta…
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August 11th, 2010 at 6:06 am 56
@bullwhip29:
My place sat on the market for four months back in 2007, when my agent suggested I lower the price I raised it and suggested she do a better job of marketing it. The unit sold a month later, turns out she had a buyer lined up but was playing the dual agency card. After this experience, I decided that when I am starting to think about buying, I will go and take the real estate exam as the time spent studying will be well offset by the savings from self representation (and access to MLS). As for the putz I referenced, you're right, lowering and raising doesn't work unless without information asymmetry however it is irritating as my tracking spreadsheet highlights increases in red and this guy ruined my perfectly green (price reductions) dominated spreadsheet!!!
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August 11th, 2010 at 6:13 am 57
@anonymous:
I'm interested to know what happens in Canada when someone seriously underwater lists and you make an offer such as:
Principle remaining: $600K
Purchase price: $400K
Does the bank not have a lien on the property? Why would any other bank offer you a mortgage to purchase this property if another has interest in it?
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August 11th, 2010 at 6:15 am 58
@logic:
"Oh, and apparently it comes with magic winged shoes, since the 7 block walk to the Granville Island Ferry takes “1 minute”."
7 blocks?! You're talking about 1501 Howe? Check your map again.
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August 11th, 2010 at 6:21 am 59
@Girlbear:
Wow, that place in Shaughnessy is a subterranean dump, for the same price I'd go for the place in Kits
Actually, I'd go for neither but the Kit's one is interesting as the management company is charging $1750 so the owner is getting even less, how much was it last sold for again?
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August 11th, 2010 at 6:30 am 60
OK, sorry for all the posts, I should have compiled all my ideas first, won't happen again.
Regarding my last post, the place listed with Sunstar for $1750/month sold last for $477,000. Assuming they put 25% down (unlikely) and using a 25 yr amortization and TD's special 5yr rate of 4.19%
http://www.tdcanadatrust.com/docs/mortCalc/Mortga…
Their monthly payment is $1,919 not nearly covered by rent less management fee (not even considering strata, insurance, and taxes!).
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August 11th, 2010 at 6:33 am 61
@ YLTNBoomerang
It is an interesting question. I think it goes like this. The bank doesn't let you sell until you can pay the 200K or else take out a personal loan to pay it back. But even the loan is risky to the bank because it is no longer secured so I think the terms would be prohibitive if even offered. I think there is a judgement call here by the bank holding the existing mortgage — to let you sell either demand cash or else agree to some loan. I imagine most will demand cash. If you can't pay then you can't sell.
The other option is to not pay your mortgage, let the bank foreclose and sell your property for you. Then my understanding is that CMHC picks up the difference and then initiates a judgement against the mortgage holder for any remaining assets you own to cover the difference. I wonder if this includes RRSPs.
But not having experienced this myself, I wonder if there are other options.
And also I think I may have been wrong about the marginal underwater household comment. The value of the CMHC guarantee (i.e. lowering your interest rate) is higher the more underwater a mortgage is. So I suspect the optimal decision is rather non-linear in terms of the key variables.
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August 11th, 2010 at 6:50 am 62
@ oneangryslav2 & metalhead
In case BCREA runs out of excuses for poor sales, here are more for the coming months:
September: Kids starting school
October: Halloween decorating and costume design
November: Free time spent "remembering"
December: Its Christmas
January: Shoveling snow
February: Shoveling snow
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August 11th, 2010 at 7:04 am 63
@ YLTNBoomerang & @anonymous
Existing RRSPs are safe – but most likely you won't be able to contribute additional funds to the RRSP until payment is mad: retirement plans will be hosed.
@Kim Jong-il buy 3 Says:
Januar and February: No, not shovelling snow – replacing the rain screen due to all the molds.
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August 11th, 2010 at 7:15 am 64
I suspect that the "walk away" strategy here will require the additional step of declaring personal bankruptsy. Otherwise, you're still on the hook for the full amount of the mortgage whether you sell, go through foreclosure, or whatever. There's another option which is like partial bankruptsy that I'm not really clear on. Some friends of mine went that route 10 years ago to get out of a leaky condo, and as a result had to get a parent to co-sign the mortgage so they could buy a place in Montreal. But apparently it was less severe than full bankruptsy.
I suspect a lot of people are going to declare bankruptsy because they have very little to lose and a whole lot of liabilities. They have less than 10% equity in their home, they have a loan for their car(s), they have student loans and credit card debt. What do they have to lose in bankruptsy? There aren't a lot of FTBs with zero-down mortgages who have $100K in investments that they chose not to use because interest rates are so low.
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August 11th, 2010 at 7:30 am 65
@YLTNBoomerang: fine you save a bit a month but then your renting….renting sucks. You can't renovate the place to your liking. Can't have pets. And most landlords in Vancouver are jerks. I would rather pay a bit extra. At the end of the mortgage I will have a paid off property…
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August 11th, 2010 at 7:30 am 66
@Kim Jong-il buy 3:
…..
December: Its Christmas
January: Shoveling snow
February: Shoveling snow
Shoudln't January and February be: 'Repairing ubmrellas'?
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August 11th, 2010 at 7:34 am 67
@Vanrod:
How much extra are you willing to pay to own vs. rent? $300 a month? $1000 a month? $1500 a month?
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August 11th, 2010 at 7:36 am 68
@Vanrod:
…. I would rather pay a bit extra.
This preference is stupid but it would be at least understandable is " a bit extra" didn't mean double or more.
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August 11th, 2010 at 7:37 am 69
@YLTNBoomerang: I love how they suggest it for "corp rentals"….if my corporation furnished me with that dump I would quit !
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August 11th, 2010 at 7:47 am 70
@Vanrod: Most landlords have no problem with tasteful updates to rental done by tenant. Case in point: I have a buddy, who incidently is in commercial real estate, who decided renting was preferable to owning at this point. (Believe me he has the dough to buy). He wanted hardwood. He told landlord he would pay for it. No problem with landlord. And hardwood he now has.
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August 11th, 2010 at 8:03 am 71
@Jonathon: I would be willing to pay up to 30-40% more to own
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August 11th, 2010 at 8:04 am 72
"And hardwood he now has."
Minor correction: and now hardwood his landlord has. I've heard other cases of tenants doing significant free renos on rentals, but never outside of Vancouver.
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August 11th, 2010 at 8:05 am 73
@GB: So he spends 5 grand on hardwood. Now the landlords says he wants to sell the place you will have to be out in 3 months. Nice gift to the landlord
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August 11th, 2010 at 8:12 am 74
@Vanrod: If landlord says he's selling then he has to give one month free to tenant. And good luck selling. Plus I think it was a little more like $2000 for the floors…my buddy has contacts in the biz.
He is paying WAY less than what he would to buy it. And in his professional opinion market going down….so what if he pays $2k to live the way he wants.
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August 11th, 2010 at 8:12 am 75
The 'bankruptcy' boogie man is another scare tactic used by the pimps to keep the effectively moral Canadians in financial pergatory long after they should have bailed. Don't fall for it. Within 60 days the same institutions will be sending you pre approved credit card apps in the mail.
You forget….the banks don't hold any of the paper as they did 20 years ago…they have farmed it off….100% to the CMHC…they don't give a fuck how much you burned the CMHC for. This bogus idea that you burn your credit for seven years is totally false.
20 years ago the banks held mortgages in the range of 100 to 200 thousand for people with 25 to 75 % equity in properties worth an average of $275,000. Today people have zero equity holdings with $700,000 mortgages against them. Using an example where some rube is holding a property he paid 750 for and is now worth 450 he is underwater 300 thousand dollars. The Bank Act does not allow chartered banks to re finance zero equity first mortgages and there is no way they can fiddle a HELOC for 300 grand. The sap has to find a second mortgage for the 300 before he can refinance the first..effectively making him the proud owner of one million fifty worth of paper.
What he has to pay for the risky second…thats the question…will the Bank of Mom and Dad come through as was done traditionally…probably not…the numbers are just too big…it would wipe them out if they co signed.
Lets say he does get the refi….now his mortgage is a million fifty on a property worth 450 and the payments ( in the range of 8 grand a month in this case at current 5 year rates) are going through the roof….he can't hang on because the compound intrest is cratering the ghost principal every month….it makes no sense to hang on…nor can he/she if the down turn lasts the average 10 years….the intrest on the two mortgages will effectively double the debt within seven years….its a ride to hell and at the end of the decade long downturn he would own 2 ++ million in debt on a house worth less than half that. Now lets say that prices would continue to crater even marginally 1 to 3% a year until the market found a bottom ( as they did in the last 12 year downturn where the lateral trough alone was 36 months long before equillibrium was established) Walk away.
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August 11th, 2010 at 8:16 am 76
@4slicesofcheese: HST isnt the single reason prices are dropping (though im sure it helps). Ie Prices are dropping in provinces that dont have HST as well.
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August 11th, 2010 at 8:21 am 77
@Vanrod:
Average SFD is what $850k
20% down, $680k mortgage over 30 years at 4%
Is almost $3500 a month plus taxes, strata; say $4000 a month
$2857 rent would be equivalent, $4000 is 40% more.
$1143 extra! Yes, you'll be paying down a small amount to equity a month but in a year that's $13716 a year, over 5 years almost $70k and you'll have paid down almost nothing.
Is it really worth that much extra to you just to own the same place as opposed to rent it?
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August 11th, 2010 at 8:43 am 78
@buff_butler
If HST does get overturned I hope it does not give a surge on new home sales.
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August 11th, 2010 at 8:53 am 79
@YLTNBoomerang:
You mean some realtors are dishonest? *shock*
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August 11th, 2010 at 8:57 am 80
@buff_butler:
Prices aren't falling because of HST itself, at all. There is no HST on used dwellings which are 90+% of the market and which new dwellings must compete against.
How HST affected the market is that there was a surge in buying before July 1 in the mistaken belief that prices would go up after July 1. which drove prices up before July 1. Well once July 1 arrived there was nobody left to buy so prices went down.
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August 11th, 2010 at 8:58 am 81
It's pretty questionable whether the HST has any effect even on NEW home prices, never mind resales. It's possible it had the effect of pulling demand into May and June even though it's effect on prices is not a given. However, price is set by buyers, it doesn't matter whether the developer's costs just went up because of the HST or materials prices or cost of labour, the selling price is the price a buyer is willing to pay. If the developer has to eat a loss, they have no choice.
Far more important were the changes to CMHC rules, particularly the ones that make it harder for speculators to buy "investment" properties with little money down and no income to support the mortgage. HST or no HST, that group of buyers is gone, and once the crash becomes obvious they will become a group of sellers.
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August 11th, 2010 at 9:00 am 82
New Listings 191
Price Changes 86
Sold Listings 98
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August 11th, 2010 at 9:13 am 83
@paulb.:
It could be my bearish slant, but I cant help but feel like higher sales means more sellers accepting lower prices.
It seems counter intruitive, but I just bet that prices will have a fairly large drop this month.
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August 11th, 2010 at 9:27 am 84
@Best place on meth:
I commented on that in yesterday's post.
Only amateurs sell when a stock takes a beating. Presumably, they also buy when it's red hot and everyone else is buying. Then they wonder why they can't make money in the stock market, and think it's rigged against them. Buy high, sell low, like sheep lining up to be fleeced, as the sheep herders laugh all the way to the bank.
There are two main rules in investing:
Buy when everyone's selling, sell when everyone's buying.
And, only buy when you don't need to buy, and sell when you don't need to sell.
In any market, bulls can make money, bears can make money, and pigs get slaughtered. Which camp are these people in?
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August 11th, 2010 at 9:32 am 85
OK, now this si bullshit. If you or I walked into the emergency ward at Victoria general, the treatment wait time is more than eight hours. You can literally die before your number comes up. Now they say that they are clearing the decks to treat a boatload of Tamil Tiger terrorists who have illegally entered the country using Canadas soft policies against us???????? The government should do what the Aussies have done and simply turn the people smuggling ship back and disallow them entry. The Tamils have a homeland….its called INDIA.
http://www.vancouversun.com/Victoria+hospital+pre…
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August 11th, 2010 at 9:52 am 86
Check this out..an article in the Bangkok Post. The Tamil Tiger ship was actually turned away by the Australians and it reversed course, picked up more illegals in Thailand and headed for Canada. Now why isn't this story being told by the Canadian media????????????? Why are we going to get stuck with these assholes??????? Every refugee claimant is going to get $1350 a month plus everything else the bleeding heart liberals can throw at them until their claims are processed and that could take take years or more WTF???????????
What about the seniors, the children , the sick and the poor that are here…..????????
http://www.bangkokpost.com/news/world/190733/thai…
The Tigers are dead right….we're soft AND stupid. Canada is an easy target for scumbags and terror.
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August 11th, 2010 at 9:56 am 87
@realpaul:Are you suggesting that there are lots of stress on employers to hire more workers so they can form a line with merging patients and consumers?
You are right,First thing for employer is to cut the jobs to increase the future of bussiness,When well dry up against the status of service they must hire more employees.There is similar process apply everywhere else when it comes to necessity for consumption for example:Housing,food,and cloths.
ON other note:Libretion tiger of tamil elim(LTTE)is belongs to Sri Lanka not India.If there background is Tamil Nadu India they are just Tamil over there not LTTE.In otherwords: Tamil(language,Community)People from India does not need any asylum unless they are from Sri Lanka.
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August 11th, 2010 at 10:11 am 88
@Aleks:
"There’s another option which is like partial bankruptsy that I’m not really clear on."
It's called a consumer proposal, where the debtor negotiates with creditors to get a partial forgiveness of the debt amount in order to avoid bankruptcy.
The problem is that your credit rating is screwed just as bad as a bankruptcy so it only benefits the creditors.
So, if you know anyone who is offered this 1/2 way solution to their debt problems, tell them to tell their creditors to get fucked – take the bankruptcy.
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August 11th, 2010 at 10:13 am 89
@patriotz:
"There is no HST on used dwellings"
But there is HST on all the services associated with buying any dwelling, used or new.
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August 11th, 2010 at 10:36 am 90
North Shore News article titled: "North Shore home sales drop sharply"
http://www.nsnews.com/business/North+Shore+home+s…
The reporter briefly talks to the president of Landcor and good 'ol Tsur Somerville.
Landcor guy says prices "could level off" but sees no big downturn. Why?
a)they're not making more land!
b)everyone wants to live here!
c)there are other places that are more expensive!
Geez, makes me wonder if the guy owns a house here.
Somerville gives some reasons why prices might be sticky, but as usual makes no real predictions.
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August 11th, 2010 at 10:43 am 91
@Kim Jong-il buy 3: everyday since April has been Christmas
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August 11th, 2010 at 10:50 am 92
I don't quite get why people living in charished family homes would give a rat's ass if their home suddenly decreased 30% in value. I know my parents wouldn't. But then, a 30% drop wouldn't come close to touching the price they paid for the pace in 83 when they bought for 100k on a listed price of 225k.
The 30% of todays market value wouldn't bother my siblings or myself either, though we know the house will eventually come to us, as we don't intend to sell it…reason being that it is a cherished family house.
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August 11th, 2010 at 11:05 am 93
Astonishing NY times article on americans who won't pay back a dime on money they owe. Friends of mine in LA just walked away from a house that they paid $650K for, and is now worth $425K. Oh, and they had $42K HELOC as well for a boat that they 'had to have'.
But it's okay they are renting now in Calgary now…they just see their two years of mortgage payments in LA as rent. Funny how they don't understand or probably care that the 'bank' has lost over $200k on their little adventure.
http://tinyurl.com/268h2g7
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August 11th, 2010 at 11:20 am 94
@Vanguy:
California law says that mortgages made to purchase property (not refinances) are non-recourse. That means the borrower has the legal right to either pay the loan back or give the property back.
The reason this law was passed (years ago) was to protect people from RE scams. It prevents the lender from recovering more money than the property is worth.
The bank had the choices of refusing to make the mortgage loan due to overvaluation or requiring a large down payment. They decided to take their chances on RE continuing to go up, and they lost. That's what happens when you get greedy.
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August 11th, 2010 at 11:27 am 95
Wealthy Asian Index (WAI) down sharply this evening.
http://finance.yahoo.com/intlindices?e=asia
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August 11th, 2010 at 11:31 am 96
Anonymous said:
If you can’t pay then you can’t sell.
Could this help hold prices from falling with the velocity that they did in the US?
Home much inventory could potentially be held back from sellers that have to hold, cuz the bank won't release the lein on the asset, cuz they can't cover the outstanding balance?
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August 11th, 2010 at 11:38 am 97
Home (how?) much inventory could potentially be held back from sellers that have to hold, cuz the bank won’t release the lein on the asset, cuz they can’t cover the outstanding balance?"
This has not stopped market slides in the past; particularly, 1981-82.
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August 11th, 2010 at 12:25 pm 98
@Best place on meth: Whoaaaaa Meth. Shanghai is only down 12 pts as of now. It's holding in very well given NYSE today. And don't look for China to implode just yet. The Chinese gov't will print insane amts of money to keep their GDP growth 9%+….they will make the US look like they are hardly trying. If they don't, they will have a revolution.
In any event, as to how this ties to here….I don't buy into the "Wealthy Asians" being the prime reason for Van real estate being so overpriced. It's the local speculators dude. Sure, the Asians have some impact, as does the illegal drug industry…but mostly it's those cheeky speculators.
Doubt very many chinese were buying those Woodwards or Espana units that were all bought as flips…
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August 11th, 2010 at 12:34 pm 99
If your house is under water…and you cannot pay your mortgage…how many months of not paying have to go by before the bank just forcloses on you…if you aren't paying your mortgage are you likely paying taxes? strata fees?
If your mortgage was backed by CMHC why would any bank let you stop paying and not call in your loan? The CMHC will pay the bank and then go after the borrower won't they?
So the borrower will declare bankruptcy because like realpaul says…your credit is only defunked for two months if you declare bakruptcy…lol
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August 11th, 2010 at 12:42 pm 100
There are generally two types of people who sell. Those who "must sell" and those who "want to sell". The must sells – death, divorce, loss of job, health reasons, etc. will still sell regardless of the market even if they are underwater.
Those who "want to sell" are typically people who are going to buy a new place anyway. In most cases they are move up buyers or even a presale flipper. This just takes two transactions out of the market for those who "want to sell" but can't due to being underwater. One reason why sales volumes plummet in a declining market.
We may be seeing the volumes slip now is there are already plenty of "want to sells" around today who can't just based on little or no appreciation and having to cover transaction costs putting them underwater. With sub 5% down and factoring in PPT, legal fees, real estate commissions plenty of people are already underwater depending on when they bought and how poor of a deal they got (ie paid above market in a bidding war or bought an over priced presale like the Olympic Village).
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August 11th, 2010 at 12:42 pm 101
@Best place on meth: I see red people.
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August 11th, 2010 at 12:54 pm 102
"I see red people.
Well, "Better red than Socred" as many used to say in this province.
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August 11th, 2010 at 12:58 pm 103
"Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and the collateral in the homes backing the loans has often disappeared.
The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up."
-Calculated Risk
Yep. I owe $100,000, and I'm the one to worry, I owe $100,000,000 and YOU worry!
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August 11th, 2010 at 1:09 pm 104
I love this listing for a completely overpriced house near Commercial Drive.
899 000 for such an average house. Absolutely absurd, I wouldn't pay more than $550 000 for it.
But the last line in the listing is priceless:
http://www.realtor.ca/propertyDetails.aspx?proper…
'Live in this home today and build a massive apartment building in the future.'
Who writes these things???!!!
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August 11th, 2010 at 1:24 pm 105
@patient renter:
Now I agree that is bad copy. But in the same area I think this stinks worse:
"only steps away from infamous Trout Lake"
see http://www.realtor.ca/propertyDetails.aspx?proper…
What sort of idiot agent/seller refers to the lake adjacent to the listed property as "infamous"?!?
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August 11th, 2010 at 1:33 pm 106
@VultureBoy: Lmao!!
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August 11th, 2010 at 1:39 pm 107
@Vulture Boy
That's good.
I also get a chuckle out of ads that talk about houses in the "HOT Renfrew area".
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August 11th, 2010 at 2:00 pm 108
@VultureBoy: That is freaking hilarious!
I remember touring a few places like this: newly renovated with laminate flooring throughout and undeniably vacant. That was enough of a taste that these places are for mugs. Check the walls for moisture damage is all I can say.
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August 11th, 2010 at 2:02 pm 109
Paulb & PW:
So perplexing to me…why would they have to drop the price 20k on a place when it is sitting beside an "infamous" lake? (LOL)
798k here (june 30): http://vancouver.en.craigslist.ca/van/reb/1819452…
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August 11th, 2010 at 2:14 pm 110
Infamous is when you're so famous, you're INfamous!
http://www.youtube.com/watch?v=egLjBsK9K8o
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August 11th, 2010 at 2:16 pm 111
VultureBoy, that one was first listed on May 17th for $818k.
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August 11th, 2010 at 2:32 pm 112
Yalie, that video is *perfect*. very funny.
tincup: thanks! I have been watching this one for a while, but had completely forgotten the starting price.
Jesse: Good points. Something doesn't seem quite right, beyond just the description.
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August 12th, 2010 at 7:31 am 113
'..it might be a few years, perhaps a decade, before real estate prices return to the heady levels of 2007. But there’s a good chance they will.'
I agree. Given enough time house prices will get back up to that level – it's the nature of inflation. 10 years at 3% per year inflation should bring them down to a more affordable level.
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