Friday Free-for-all!

You made it to the end of another week! Lets do our regular end of the week news round up and open topic discussion thread for the weekend, here are a few recent links to kick off the chat!

Closer to paid off means more expensive to escape?
Low income and no savings? Vancity says buy a house!
Election to kill spring rate hike?
Anecdote on retirement planning through real estate
Shaw lays off 500, 90 in Vancouver
Hot Asian Money will prevent Irving California market collapse (2007)
8 Shocks about to hit Global markets
Catalytic Converter thefts rise with precious metal prices
A new collapse for US housing
Portugal may need US $99 Billion bail out

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

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1.am.furst
Guest
1.am.furst

w00t

cgh
Guest
cgh

In the story links, I think it should be "…prevent Irvine California market collapse…", not "Irving".

I have a stupid question: someone noted yesterday that the 19% median sales price declines in Irvine were nominal rather than real. In real terms, it was a 35% decline.

When talking about price declines, is it normal to speak in nominal or real terms? I assume nominal, but until you factor in inflation you are underrepresenting the gravity of the situation.

vreaa
Member

“Lesson To All” From A Vancouver Realtor: “Ignore My Prior Lessons”

Nice CYA stuff:

http://wp.me/pcq1o-22i

logic
Guest
logic

I love the Movahed story.

The bit no one seems to be picking up on is that an Engineer can't affor da 400k condo on one income.

Must be a crappy Engineering salary….

registered
Member
registered

#2 cgh: "When talking about price declines, is it normal to speak in nominal or real terms? "

Depends who does the speaking. The real estate industry loves nominal because it exaggerates increases and masks decreases in normal inflationary environments. However nominal makes as much sense as claiming the value of your house rises when priced in Lira instead of dollars because the number is greater.

'Real' properly maintains comparisons to other contemporary goods and the value of your work. Those making an $8 minimum wage aren't 3.75 times better off than the $1.65 I made in the 1970's. On average an hour's work still buys the same amount of goods.

Dave
Member

@fixie guy:

You have to use nominal dollars. Can you go back in time and buy a pack of cigarettes for $2? We all live in present time, so let's use nominal dollars.

carlk
Guest
carlk

The reference to the Hot Asian Money in Irvine is quite different to the Hot Asian Money in Vancouver West and Richmond. In Irvine, the reference is to American Chinese already living in California whereas the HAM we are experiencing is from Investor Immigrants from China. I think the majority of the Canadian Chinese population like everyone else in Vancouver and Richmond have been priced out by the HAM from China. Just my 2 cents!

Dave
Member

The biggest news story for real estate right now is political uncertainty. In the next six months, we have the following:

– Federal Election

– HST Referendum

– Municipal Elections

– Provincial Election

The effect of these changes will be to slow development.

cgh
Guest
cgh

@fixie guy:

Thanks, I agree that real prices make more sense, particularly when you're talking about price declines over several years or more. I suppose when talking about price changes over shorter time spans, nominal is fine.

And yeah, there is certainly propoganda value in using nominal terms to mask the severity of price declines, I hadn't actually thought about that before.

registered
Member
registered

@6 Dave Says: Like clockwork. I'm glad you keep posting that because for the life of me I can't think of a dumber proposition. So people making $8/hr today are ~4x better off than minimum wage workers forty years ago?

tokiwt
Guest
tokiwt

Check out the CBC Doc Zone's "The Gangster Next Door".

http://www.cbc.ca/documentaries/doczone/2011/gang

Best place on meth
Member
Best place on meth

U.S. housing market could still be 5-10 years away from bottoming with another 20% fall in prices.

http://finance.yahoo.com/blogs/daily-ticker/housi

No Money Down
Member
No Money Down

I saw this link to dumb money in the comments on the Irvine HAM blog post.

Investors from other countries are well known to be the very last participants to arrive at the scene of a financial bubble. They are the last to hear about all the riches to be made, the last to buy in, and the last to realize that the party is over.

Nice graphic on the NASDAQ bubble. Foreign money as a lagging indicator.

This obviously doesn't apply to Vancouver West and Richmond. We only allow smart, sophisticated and savvy international investors.

Flip Flop
Guest
Flip Flop

Friends of friends just bought a new place in north van.

She's a teacher whose about to get laid off, he just got a new sales job about 10 months ago. There have a 6 month old baby.

List price on the house was 1.3. 500 block of east 5th, if anyone wants to pull the al close price.

Granted they had made a little on the last place they owned, which probably sold around 500. You're only priced out if you want to be priced out. Still people out there getting in well over their heads.

tokiwt
Guest
tokiwt

re: Gangster Next Door

I forgot to add "billions in illicit drug money"!

+ HAM + the real estate always goes up mentality ++ dopey ftbs + condo flippers = D:

Sometimes I miss zany Vancouver. Just not enough to return.

Best place on meth
Member
Best place on meth

@No Money Down:

Great chart on that site of San Diego's price:income ratio peaking in 2006 at 14 and now sitting at 7.6.

Different parameters though as they use the price of an SFH, and the income per person (not household).

The ratio is now below the historical average.

space889
Guest
space889

Not to be left out, the Whistler Olympic Lodge was reported to be mouldy on last night's Global TV news.

http://www.vancouversun.com/sports/Olympic+Villag

space889
Guest
space889

Actually with regard to early pre-payment penalty, wouldn't it be possible for the penalty to be viewed as interest and possibly exceeding the 60% interest rate limit? I think there were cases a few years back that successfully argued that the fees charged by places like MoneyMart to payday loans are considered interest.

jesse
Member

@space889: Anonymouse on a previous post highlighted that the payments looked too high by conventional penalty formulas. Likely Scotia was trying to pull a fast one on the owner.

4SlicesofCheese
Guest
4SlicesofCheese
@carlk Its different this time 🙂 Do you not see they can replace HAM with anything, if you watch the google author videos it explains not only the numbers but also the psychology with bubbles. This is not theory, this is history repeating itself over and over again. http://articles.latimes.com/2008/dec/07/business/… "CARAVANS of cash-rich Chinese in Hummers and Lincoln Navigators have been weaving through US neighbourhoods in recent months, looking for foreclosures and other bargain properties to buy." "Mr Zhao's budget: $US1 million ($A1.5 billion). "LA is not bad; a lot of Chinese live there," he said, saying that he was interested in apartments and detached houses. The tours are a new twist on an old phenomenon. Overseas Chinese have been buying southern California properties for years. What's different now is that they are starting to do it in large groups and… Read more »
Best place on meth
Member
Best place on meth

@4SlicesofCheese:

Chinese real estate buyers will come and go, just like the Japanese did.

http://articles.latimes.com/1990-11-14/business/f

jesse
Member

@4SlicesofCheese: Notice the timing of that article: December 2008, when Vancouver's prices were falling significantly. Prices in upscale Asian-dominated US markets look ready to fall further despite the boundless amounts of Chinese cash exports.

$2MM+ for a new Van West house close to "good" schools, or $1MM for a new house in a nice part of a Cali neighbourhood. Choosing the latter leaves $1MM for sending kids to the best private schools and universities on the planet, and cello lessons from Yo Yo Ma to boot.

McLovin
Guest
McLovin
Sorry for the size. I couldn't provide a link. Very good reading on CMHC. David LePoidevin isn’t the first person to suggest Canada’s roaring housing market is headed for a U.S.-style crash. But he is a rare breed of money manager for daring to point a finger at the Canada Mortgage and Housing Corporation, the country’s biggest mortgage insurer. In a fall 2009 note to his clients, LePoidevin questioned what was underpinning the country’s skyrocketing home prices, aside from rock-bottom interest rates. “The stock market was sure not providing huge capital gains to the masses,” he wrote. “Did the banks all of a sudden open up the lending spigots? In fact banks have actually reduced the number of their mortgages held from the peak of third quarter of 2008. The smoking gun is the CMHC and its securitization policies.” As… Read more »
patriotz
Member

@cgh:

When talking about price declines, is it normal to speak in nominal or real terms?

It's normal to use nominal figures, because they're objective. Real figures are obtained by adjusting nominal figures by an inflation index which is arbitrary and which a lot of people don't agree with.

Do note that price/income and price/rent are the same whether you use nominal or real prices, i.e. the quotient of two nominal prices is always real.

registered
Member
registered

24 patriotz Says: "It’s normal to use nominal figures, because they’re objective."

Nominal is arbitrary when tracking price changes over time because it removes all information regarding the changing value of the dollar over time. What's important is the cost of a good or asset relative to other goods and assets and the equivalent unit of work to buy them.

What's the point of CPI at all if nominal is 'objective'?

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