Speculators: Flaherty will get you nowhere
Our Federal Finance Minister Jim Flaherty has something to say about the recent sales drop in expensive Canadian housing markets like Victoria, Vancouver and Calgary:
“I, for one, am not particularly concerned about the softening we’ve seen in some markets in Canada in residential real estate,” Flaherty told reporters, noting that Ottawa has twice tightened mortgage rules.
The most recent changes, which took effect in April, made it more difficult for some Canadians to qualify for a mortgage.
“This is entirely intentional, to tighten the market, so that we avoid the excesses that we’ve seen in other countries,” Flaherty said. “If we have to do more, we’ll do more.”
Quoted in the Calgary Herald. Read the full article here.
September 24th, 2010 at 5:08 pm
I was going to spend some time, reading this thread, but alas, i must go and update my database for my target market and log all of the price reductions and no sales.
Oh dear…………….
I will be a buyer when prices return to a sensible level, but there will be a lot of tears getting there, and lot of scratching of heads with people whispering, "whowouldathoughtitpossible"
September 23rd, 2010 at 5:09 pm
Bwahahahahahahahahahahahahaha….the value of your litter box in The Electra has effectively gone to zero….
http://www.vancouversun.com/technology/Residents+…
The COV paid the hotel bill for the interim based on 'the fire' but now the stink is so bad it unlivable ( says the owner)………bwahahahahahahahaha…..let the lawsuits begin over the non disclosure of the patent and latent defects by the original owners…….Just what was the ' mystery vault' and theneed to hide that mysterious 'said' vault that disappeared off the legal transfer docs when the building went strata?????This just gets betterer and betterer.
Even Mr. Runnie Farty Pants wouldn't try to flog this sick puppy….and never mind the litigation. But I'll bet there'll be a whole lot of listings coming up soon. wwwwoooooohhhhoooooooooooo !!!!!!!!!
September 23rd, 2010 at 4:43 pm
Nothing to see here….move along….
Bubble or not, Canadian markets in for rude awakening
David Rosenberg
The Bank of Canada's decision to embark on a series of interest rate hikes is already throttling back on growth. Thanks to those hikes, we have a Canadian dollar that is at least a nickel above any realistic estimate of its fair value, and a pace of overall economic activity that is now falling at a surprising rate.
The central bank’s decision to raise interest rates was based on Canada’s initially strong rebound from the depths of the recession. Unfortunately, the nature of that recovery may have sown the seeds for trouble ahead.
By my calculations, every basis point of the Canadian economic recovery was the result of the boom in the housing sector. That goose is no longer laying any golden eggs. In fact, from recent peaks, single-family housing starts have plunged 32 per cent, residential building permits have sagged 17 per cent and home prices on average are down 6 per cent. In the absence of an export resurgence, which seems unlikely given the ongoing sluggishness in the U.S. economy, the downturn in housing is bound to keep the pace of domestic activity rather sluggish in coming quarters.
I estimate real GDP for this quarter will grow at a meagre 1.5 per cent annual rate. That is a huge deceleration from the peak pace of 5.8 per cent in the first quarter of this year when Canadians were patting ourselves on the back for our apparent ability to “decouple” from the listless U.S. economy.
Canada’s economy is now slowing down at a more pronounced rate than is the case south of the border and the Bank of Canada's latest 2.8 per cent forecast for third quarter real GDP growth is looking stale, to put it charitably.
There is no doubting the fragility of the recovery, which suggests that the Bank of Canada should put further rate increases on hold for a while. But its recent decisions illustrate how difficult it is for a central bank to navigate the right path between stimulating the economy with low interest rates and cooling off irrational exuberance with higher rates.
Even though I was one of the “doves” advising the bank to refrain from raising rates earlier than planned, there was method in its madness. When the bank followed the U.S. Federal Reserve on the path towards microscopic policy rates in the opening months of 2009, it pledged to maintain such an unprecedented degree of stimulus “conditional” on a prolonged period of economic malaise.
The problem, especially for interest rate doves like me, is that instead of seeing a listless economic recovery in Canada, we saw a bounce back of massive proportions. In short order, Canadian employment has soared to record highs while the U.S. is still more than seven million jobs shy of its pre-recession peak.
Canada’s dramatic recovery has been taken as evidence of the fundamental strength of the country’s financial system – but the rebound was founded on a surge in credit growth and housing-related spending that must have the Bank of Canada feeling a bit uneasy.
Bank-wide mortgage lending has risen 10 per cent in the past year, compared with only a 4 per cent rise in wage and salary income. This is clearly not sustainable.
The ratio of total household debt to income has surged to 146 per cent, right where the U.S. peaked at the height of its credit bubble. Anecdotal evidence suggests that the home ownership rate has risen to record levels of 70 per cent, also close to where the U.S. peaked out during the housing bubble.
At the peak of our own mania last fall, home prices soared more than 20 per cent on a year-on-year basis and home sales skyrocketed 70 per cent. These data points all have a “U.S.A. circa 2005” feel to them.
Just to be clear, the Bank of Canada wasn't alone in spurring this huge – and unanticipated – housing boom. Canada Mortgage and Housing Corp. (CMHC) relaxed underwriting criteria in ways that made housing tremendously more affordable for marginal borrowers. Those home buyers could get a mortgage with almost no money down at near-zero short-term interest rates.
People can argue endlessly about whether the Canadian housing market constitutes a bubble. The reality is that we will probably find out at some time in the next year, as all the speculative high-ratio loans come due at interest rates above where they stood at the time of origination, courtesy of the Bank of Canada's tightening cycle, which may or may not have fully run its course.
Even if this correction in housing is only a fraction as harsh as was the case south of the border, the economy, and the financial markets are likely in for a rude awakening in coming quarters as lower home prices cut into household wealth, confidence and spending plans.
At the same time, housing deflation and a rising tide of mortgage delinquencies will bite into CMHC reserves and, at the margin, undercut the quality of Canadian banks’ seemingly pristine balance sheets, which hold $500-billion of residential real estate loans, equivalent to 30 per cent of total bank assets.
It may well be that Canada escaped a housing bubble and its inevitable aftershocks. But it is a close call. If it wasn’t a bubble, it was at least a giant sud.
September 23rd, 2010 at 4:34 pm
Yup, feet up, watchin cable, slapping the fools,,,,,sweet.
September 23rd, 2010 at 4:25 pm
I have been looking through Craiglist rent ads because I'm considering moving. Last time I looked this intensely was back in 2006-2007. There are way more pet-friendly apartments, or at least ads that don't specifically say NP or no pets. Its nice to see. Maybe there will be few less people who have to abandon their furry little friends.
Note: If I was irritated at all by the number of "no pets" ads, I'd come out and say it. I ranted about that a couple years ago here. At least in the suburbs, things have changed.
September 23rd, 2010 at 3:25 pm
Anyone catch the global 11pm OV story? What a mess! I would imagine any developer even considering buying the remaing inventory would want a minimum discount of 50%.
September 23rd, 2010 at 3:24 pm
@realpaul:
Who sits on a computer blogging while in Hawaii?
Your parents won't let you out of the hotel room?
September 23rd, 2010 at 3:07 pm
realpaul lets stop discussing your shared room in Richmond and back to Vancouver Condo. otherwise please go bye bye no one cares about your right wing rhetoric. it's sillier than dave claiming a line up at the ov
September 23rd, 2010 at 2:59 pm
@realpaul:
"guess where I am"
Hawaii. You already told us. You're obviously excited about it. Don't travel much?
September 23rd, 2010 at 2:46 pm
Dear Frank, the world is larger than the space up your ass…..too bad your education and smarts have served to stick you in that shithole you call a life.
Here let me help you…..WWWWAAAAAAAAAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHH. feel better…….. frankie?
The sun just went down here…..guess where I am….nope….. its not Newton.
September 23rd, 2010 at 2:12 pm
Realpaul- you are a little Bigot, and you would laughingly have us believe that you have lived in BOTH Hong Kong and India.
Sure buddy – whatever you say. Anywhere else you have lived, Monaco? Biarritz? Rio?
Wish there was some way to put your drivel on ignore.
Gusy please install an 'ignore' button
September 23rd, 2010 at 2:06 pm
The 'room for rent' signs are posted in the ethnic grocery stores…each room is usually asking 450 to 600 from what I've seen……shared facilities…own bedroom….I suppose the ensuite rooms fetch a slightly higher price.
Having lived in HK and India …I can say this is common. I saw a garage suite in Richmond not long ago…..I didn't see much insulation, it would have been drafty in the winter. I have also seen plenty of garage half conversions of townhouses with the tenant door leading into the rear yard. There are also 'mandarin schools' and math classes etc etc going on in converted garages…all unlicensed. The city is going to leave the immigrant lobby alone the same way that the language police only pick on white owned businesses selling packaged produts that don't have both official languages. Ever gone in to say Big Crazy or any other chinese business that sells 100% OF THEIR PRODUCTS that have neither French or English on the pacakge. Lets face it…the immigrant thing makes the country a double standard when it comes to licenses and by laws.
And…….It is a cheaper option than the standard apartment for a person wanting a sleeping room…they do save money on hydro etc and the cable is probably all on a splitter as would be the internet wireless. Why should everyone have to have a condo, a phone bill, a light bill, a gas bill ( you get the idea) and suck up the expenses when you don't really have to. Asians don't 'have people over' the way the white trash wants to do. Its very rare an Asian family invites anyone into the home…if you want to share dinner…you meet up at a restaurant and go out…right??? So who gives a fuck about where they sleep?
Revenue pits cut up into tiny bedsit rooms / shared facilities is also very common here in Hawaii ….rooms are like closets…slapped up with crap…often leaking.
The more Vancouver shifts culturally the more 'standard practice' zoning will be ignored. Who wouldn't when the permits and costs are what they are…….the lane house thing is too expensive when a bit of thin veneer will do for a bedroom wall….and much more profitable for the landlord.
The INDIAN mini hotels are strictly limited to the Indian market…that community has become dependant on the easy money that government has flushed into the real estate market….as it is, construction is dying and so will the Indian community cash flow…expect more crime from them and less RE development..they are primarily farmers and lousy business people with little of the sophistication of other immigrant groups. I expect the unemployment in that community is now higher than any other.
September 23rd, 2010 at 12:32 pm
Saw huge lineup at Library Square today in Vancouver.
I go see what the fuss is all about.
Oh, it's a little job fair. People waiting hours in line to apply
for $12/hr jobs so they can take out their first mortgage.
Buy now before these people do.
September 23rd, 2010 at 12:23 pm
Days elapsed so far 16
Days remaining 5
Average Sales this month 105
Average Listings this month 233
Projected sell/list 45.1%
SALES
Projected month end total 2208 +/- 75
95% Conf Interval lower bound 2132
95% Conf Interval upper bound 2283
NEW LISTINGS
Projected month end total 4896 +/- 91
95% Conf Interval lower bound 4805
95% Conf Interval upper bound 4986
MONTHS OF INVENTORY
Inventory as of August 31st 15962
MoI at this sales pace 7.23
Note: This is a simple linear projection of month end totals.
This provides the answer to the question
"What will month end totals be, if things continue
on the same pace we've seen so far this month?"
September 23rd, 2010 at 12:21 pm
http://www.vancouversun.com/technology/Photos+Slo…
September 23rd, 2010 at 11:47 am
It's all about the airport and Cape Fear college…eat your heart out Ian Watt.
http://www.youtube.com/watch?v=kHPge92bzag
September 23rd, 2010 at 11:41 am
"Larry thinks sales will spike in the coming weeks."
Does it really matter what Larry thinks?
September 23rd, 2010 at 11:33 am
@junius: How exactly is she freaking out? Please ellaborate.
September 23rd, 2010 at 10:54 am
@junius:
Did Larry hear that from Ian Watt?
September 23rd, 2010 at 10:34 am
@Best place on meth: Make sure you read it right because small numbers of sales can ignite the prices more higher than the large numbers.I believe bears in Canada are the only losers in this world since decades as they are surrounded by…..
☆**♥5 Vancouver BC*♥☆
*☆**♥☆**♥☆**♥☆**☆*
☆**♥WAVING FLAG**☆
September 23rd, 2010 at 10:28 am
Larry thinks sales will spike in the coming weeks.
Paulb, any thoughts on this?
Also, I miss the 300+ listing days – do you see a return to these glory days?
thanks.
My Mom in Edmonton (she's a realtor) is FREAKING OUT.
Yes!
junius
September 23rd, 2010 at 10:06 am
BIFF:
What I see in some locales is South Asians build a monster house using almost exclusively South Asian labour(including grandpa ), live in the place a few years then often sell it to Asians. Of course, this would be for capital gains, but it is quite a big racket. The downside is the dependency on the Asian market.
September 23rd, 2010 at 10:06 am
whats the inventory at paul? i think thats the real number we shoud be looking at, who cares if theres 200 listings in a day if 150 places expired or got pulled off the market
September 23rd, 2010 at 10:02 am
@paulb.:
Another day in bear paradise.
As always, thanks Paul.
September 23rd, 2010 at 9:59 am
New Listings 237
Price Changes 101
Sold Listings 78
September 23rd, 2010 at 9:48 am
@NO-LYMPICS: "rooming house…"
This is actually a good observation. I've seen a few sales take place where the owner (in this case born in Asia) judges the structure's ability to be subdivided to support multiple tenants. I don't think a lot of people who buy actually do this but they reason it's there as a contingency. Obviously a few people feel the need to get the extra money every month while sacrificing privacy.
The new business model du jour I've seen in the past few years is Chinese-style bed and breakfast boarding houses. I've seen a few places for sale marketed this way — the current owner has a "successful" B&B catering to Asian tourists/businessmen and wants to sell it off. They throw around silly massive monthly revenue numbers: 9 rooms times $50/room/night times 30 nights and 50% occupancy is $6,700 per month revenue! The place was selling for $900K in East Van.
A family member was interested in one of these places but further investigation showed the numbers weren't as rosy as were claimed, especially the occupancy rate. I'm sure some other entrepreneurially-inclined
suckerbuyer took it instead.It never amazes me what some people dream up for a business.
September 23rd, 2010 at 9:22 am
@Drachen: And it begins. Sooo easy to get the little people at each others throats, isn't it?
September 23rd, 2010 at 9:21 am
Chinese "buyer" is going to cushion crash here in the Lower Mainland to some dgree, not prevent but cushion. What you can see is a small part of the China's global colonization movement that keeps bringing people wherever is possible and permanently taking over already developed territory. It is the most sophisticated global conquest without weapon and casualties that human kind experienced thus far. In 50 years from now this will be hardly remembered but everything will be different, pretty much same what happened to aboriginals some time ago. Inevitable dialectical materialism at its best.
September 23rd, 2010 at 9:18 am
101
Try Surrey…
Try selling those "not built to official building code" monster homes to anyone other than East Indians…
They are like sports cars – a limited buyers pool
September 23rd, 2010 at 8:59 am
Larry's early today:
Vancouver All Areas*
New Listings – 227
Back On Market Listings – 1
Price Changes – 96
Sold Listings – 76
*Attached & Detached – Date: 09/23/2010 Time:16:51 PST YatterMatters.com
September 23rd, 2010 at 8:57 am
Crash:
4 anecdotes:
In-laws sold their house, and no sooner had they moved out that a constrcution crew was in there boxing in the open garage..guess why?
Their neighbours also sold and they went to have a peek and saw the house converted into rooming house.
Other family member has a rooming house owned by Asians across the street.
One of my neighbours has a large monster house,built in 1990's …tried to sell it, the only party interested was an Asian lady wanting to turn the home into a rooming house.
Ya gotta figure that the Monster house trend started about mid 1980's, these houses are getting 25 year old plus….starting to depreciate, and investors see them as rental stock, not personal residences.