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Friday Free-for-all!

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159 Comments

It’s Friday!  That means it’s time for our regular end of the week news round-up and open topic economic discussion thread.  Here are a few recent stories to kick off the discussion:

–Phil Soper: expect more buyers due to “anticipated higher borrowing costs.”
–The most affordable homes in the lower mainland
–Vancouver real estate sales dip in 2010
–CREA starts letter writting campaign to stop mortgage rule changes
–A form letter for those who support mortgage rule reform
–‘Hare-brained’ comments on Canadian housing bubble
–Winnipeg set to be hottest housing market
–

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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jesse

@patriotz: "But the impact will be slower and limited mostly to the little guys"

An extreme example would be moving to 25 year ams from 35 on all government backed mortgages, which I think will happen eventually anyways. On paper that has a huge effect across the board.

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crashcow

@fixie guy: Add to that income comparison the fact that mortgage interest is tax deductible in the US.

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patriotz

@jesse:

The government and Bank of Canada knows this and will force Canadians to save one way or another, by raising rates or by tightening borrowing requirements. Either way is fine by me.

Business will go ballistic if rates are raised. Higher borrowing costs and perhaps more importantly a higher CAD.

Tighter mortgage requirements will bring on a RE bust that would happen eventually anyway. But the impact will be slower and limited mostly to the little guys, i.e. RE speculators, realtors, etc. and mostly in non-Con voting areas. And it won't be felt until after the next election.

I expect the latter.

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jesse

@blammo: "If you kept your place and renewed your mortgage in 2008 at 3.5% you would now be in a much better situation"

This is a great point and precisely why low rates today will only lead to more and more debt. The government and Bank of Canada knows this and will force Canadians to save one way or another, by raising rates or by tightening borrowing requirements. Either way is fine by me.

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scullboy

@Girlbear: Holy cow, what a craphole! I love how amateur landlords try and sell an apartment like it's a home.

Yes, you too can walk around with your nose in the air claiming you live in a "prime Westside address."

Never mind that it's a shitty basement in a shitty bungalow. I guess that's what "Nice period size correct rooms" means.

How can they say "Brand new appliances" in one line, then "newer" further down? Nice cheap ass stove, too…. cook's nightmare that is.

Anyone who thinks Vancover's rental market is in line with anywhere else is incorrect. The price of apartments may be, but I assure you the price per square foot is not, and that's without considering quality.

Good grief.

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Best place on meth

@vreaa: #148

That was me.

And that goes for other places in the U.S., especially after seeing the post by crashcow comparing San Jose to Vancouver.

The Vancouver listing makes me angry at what an insane shithole this city has become.

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Anonymous

sell california home and buy a few hundred homes in Kabul.

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JR

@crashcow: I think that is about the most obscene comparison I have ever seen. There must be a drug in the air up here, a damn powerful one too.

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blammo

@M-: If you kept your place and renewed your mortgage in 2008 at 3.5% you would now be in a much better situation (using your figures): Strata fees: $260/mo = $3100/yr Mortgage Interest: 3.5% (this is being conservative for 2008) on $400K = 12.5K/yr Property taxes: $1200/yr Electricity: $0/mo = (renters pay electricity too) $0/yr Maintenance (plumbers, etc) = $200/yr Estimated annual cost: $17,000 Estimated monthly cost: $1.417 As per your example, I’m not including mortgage principal paid because as you said you get to “keep it.” At this point (2011) you would be paying about $950/mos against your principal (ie. forced savings). Your ‘rent’ at this point would be about $1417/mos ($400/mos cheaper than your current situation) plus you would be ‘saving’ $950/mos. By banking this $950 every month you get a 3.5%/yr protection against price declines. At this… Read more »

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fixie guy

@#147 crashcow

You forgot the other half of the equation. From WikiP for San Jose:

"According to a 2007 estimate, the median income for a household in the city was the highest in the US for any city with more than a quarter million residents with $76,963 annually."

From StatCan the equivalent year figure for Vancouver is $66,330.

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patient renter

I can't believe they are asking over 1 mill for that tear down near the Kingsway.

He'd be lucky to get $600 000 for it. And I mean LUCKY

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vreaa

@crashcow: One of the most persuasive arguments about our prices being unsustainable was the one made here or at another site that went some thing like:

"If you own a home in Vancouver, sell it, buy 4 homes in California (or six in Arizona, or ten in Florida), live in one, rent out the others, retire."

This kind of price differential can't last, and it's not about to be resolved by surging US prices (bottom not yet 'in' for US RE).

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crashcow

400K in San Jose vs $1M in Vanc. Hmmm…
http://tinyurl.com/25mvzb6 http://tinyurl.com/2ccfags

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patriotz

@kaiser solce:

From that I would presume that buying today would make no sense either as a residence or investment, but anyone who bailed with a crash in mind, did so in vain.

That's a contradiction. If buying makes no sense, then selling does make sense. One side of the transaction has to be right.

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Girlbear

It's back!!! I remember when this guy was asking $2k last summer…

http://vancouver.en.craigslist.ca/search/apa/van?…

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scullboy

@joycer: I learned that one the hard way! I decided that I had to "grow up" so I bought a place. I had a secure job and the funds so I figured it was time. There was no way to know I'd get laid off just under a year later. I'd been working for the company for 5 years and figured I was bulletproof. Turns out that wasn't the case, and eventually when I found a new job (in Vancouver) I had to sell the Toronto place and move. I could have rented a place at about the same place and saves myself the transaction fees etc. I ended up making some money, but only a few grand. I'm not sure if I'll ever own again. The fact is, being highly mobile is a distinct advantage especially in a dodgy… Read more »

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patient renter

Please no one explain the situation about this $5000 loss anymore. I get it. If you don't get it, you have limited reasoning and analytical abilities. Stay out of real estate.

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kaiser solce

Drachen:

Just when are prices going to fall 20 to 40 %? Am I wrong or have you been predicting this for at least the last four years? I certainly am not a bull, but as a casual and probably uninformed observer I have not noticed any huge decrease in the area surrounding me(DT). It seems the assessors agree, no real change in the last four years up or down. From that I would presume that buying today would make no sense either as a residence or investment, but anyone who bailed with a crash in mind, did so in vain.

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Absinthe

@arit: I have standard tenant's insurance through TD. It's not too costly, but my landlord shouldn't depend on it. Here's what I've got. It has "all-risk contents coverage" for my OWN stuff, should I or someone else or circumstance do something to my property (with some exceptions). If the downstairs neighbours had a fire, my stuff would be covered. (Also things like earthquake and flooding.) I also have "personal liability". That second's the only one that could help anyone else. If you broke a leg because I didn't shovel the stairs, it'd help recoup your losses. Maybe it would go to my landlord, if in my negligence a fire was started… but not to any level that would help if I negligently burned down an entire complex! I wouldn't want to try to fix up this SFH for that coverage.… Read more »

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joycer

@M-: I put these numbers in the VCI Calculator, $100 monthly taxes, $250 strata, 5% interest rate and 10% put down buy your buyer, With a 25 year ammortization they will have paid 74210.54 in interest and 16800 in strata/taxes = 91010.54 With a 35 year ammortization they will have paid 75767.72 in interest and 16800 in strata/taxes = 92567.72 Over 48 months that's 1900 and 1930/month (respectively) in money they will never see again (like rent). In addition, as you've mentioned, if they sell at 459k (full asking price), there will be $17,770+HST = about $20,000 in realtor fees (using a 7/3 commission structure). So from 459 – 20 = 439 means they just about broke even, but with closing costs and the land trasfer taxes when they purchased, they are most likely taking a small loss. I'm sure… Read more »

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McLovin

Hey tell Pope to fix the CULT index! It must be broken, its showing Green. LOL

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Economics Major

, “Demand always exceeds supply,”

Frist of all. Demand never exceeds supply. Supply never exceeds demand. Transaction occur where they intercept.

I recommend you take intro economics one more time. The definition of "Demand" is able and willing. When prices gets too expensive, fewer people demand real estate, even if they want to buy. This is because they are not able to buy. Demand and able and willing. And must have both. That is why the demand curve slopes down.

I really want a Ferrari. I am really willing to buy a Ferrari. But guess what? I am not in the demand because I am not able to buy it.

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Anonymous

see what i mean…

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Anonymous

see what I meant …

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Steve

@s: Sure, you generally have to pay utilities no matter where you live, but what about:

-transaction fees
-strata fees
-maintenance
-interest
-property tax
-repairs
-legal fees
-opportunity cost

This is the amazing thing about the amateur real estate investor, they really believe that the difference between purchase and sales price is the only thing that matters.

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