Friday Free-for-all!

It’s the end of another week and that means it’s time for our weekend news wrap up and open topic discussion thread! Here are a few links to kick off the chat:

Condo markets in Toronto and Vancouver at risk
Vancouver 2011 market update video
-What $1.8 million gets you in Arkansas and Vancouver
Nine wonderful bubbles
Condo risk bubbles up
Royal LePage says banks are wrong, prices will not drop in 2012
Bernanke saw ‘relatively soft landing’ in 2006

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

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patriotz
Member

"Bernanke saw ‘relatively soft landing’ in 2006"

This isn't news at all, Bernanke was publicly saying the same thing in 2005.

Bernanke: There's No Housing Bubble to Go Bust

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

Jim
Guest
Jim

"Widespread calls for a major real estate correction in 2012 simply can't be justified," Royal LePage CEO Phil Soper said in a statement. "The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace."

Strange to use newtonian mechnanics as a metaphor. I guess we are supposed to believe that the housing market is a sphere, rolling on a frictionless surface. Albeit it is simultaneously 'buoyed'. Odd.

Interesting that the guy doesn't quote any data. Sales figures from many areas don't look good. It's easier to lard your rhetoric with talk about 'momentum'.

Dave
Member

@patriotz:

Well the fact that somebody was wrong about something in the past surely supports your predictions for the market. Pin your hopes on that.

crabman
Guest

@Jim: Mr. Soper also predicted that 2008 would be fine.

“Canada’s housing market in 2008 should continue to thrive on a balanced diet of strong economic fundamentals, including high levels of employment, resilient consumer confidence, modest levels of inflation and the relatively low cost of borrowing money,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services.

Canada’s House Prices Forecast To Rise By 3.5 Per Cent In 2008

crabman
Guest

@Dave: Actually, I think he's "pinning his hopes" on a return to fundamentals. Like what happened in San Deigo, for example.

http://northamericaneconomics.com/2012/01/06/vanc

jesse
Member

@patriotz: The 2006 FOMC minutes were just released online hence the renewed interest. Geithner and Yellen also said some gems.

Sh!t reserve bank economists say

Troll
Guest
Troll

WWDD

What would Drachen Do?

Anonymouse
Guest
Anonymouse

@Jim:

How's it any different to using refrences to 'gravity' when projecting downwards price pressure?

paradox
Guest
paradox

Watch for the idiots go out and bid up the prices by 20% more…
http://ca.news.yahoo.com/bmo-cuts-5-mortgage-rate

Boombust
Guest
Boombust

"Watch for the idiots go out and bid up the prices by 20% more…"

Or, to entice new customers as "owning" a home becomes increasingly toxic.

Best place on meth
Member
Active Member
Best place on meth

@paradox:

They'll need to hurry, the special offer expires in 12 days.

Meh
Guest
Meh

@paradox: I thought it was news of rising rates that got people buying. I'm not sure what this will do for demand in an already falling market.

Important point is the required 25-year am for this mortgage which might mean the banks are preparing everyone for new rules from CMHC.

jesse
Member

CalculatedRisk highlights some great quotes from US federal bank economists in 2006
http://www.calculatedriskblog.com/2012/01/fomc-20

Oopsies!

jesse
Member
CBC: Mortgage rates dropping due to cheap bonds A strong international demand for bonds from Canada's biggest banks is trickling through the system and pushing mortgage rates to record lows at the consumer level. The Bank of Montreal moved its benchmark five-year fixed mortgage rate to 2.99 per cent late Thursday — the lowest posted rate from a major bank in Canadian history. BMO announced Thursday it was slashing the rate by a half a percentage point, a move expected to boost competition among the big banks vying for real estate customers. Some conditions are attached to the offer, which ends Jan. 25, including that lump sum payments are limited to 10 per cent of the principal each year. The mortgage is also based on a 25-year amortization period. 3% for a 5 year fixed at 25 years. Hm. Those… Read more »
Vansanity
Guest
Vansanity

The shoe has yet to drop. Mortgage rates staying historically low will keep this afloat for longer than anticipated. I see nothing changing in 2012.

Best place on meth
Member
Active Member
Best place on meth

"Economic conditions could force changes to mortgages rules"

http://www.canequity.com/blog/2012-01-economic-co

For some reason I don't think it's going to happen this time, but if it does I'd expect an announcement Monday.

Clebo
Guest
Clebo
The shoe has yet to drop. Mortgage rates staying historically low will keep this afloat for longer than anticipated. I see nothing changing in 2012. ________ Finally, a bear that gets it! Bears must just grind their teeth when then think back and realize that the uneducated realtors were right when they predicted rates would stay low. And now we are in year 4 of low rates! Ah, I remember the cries from bears of "remember the 1980s" with their massive increases in interest rates in 2008 Imagine if you had bought 3 or 4 years ago, and had the opportunity to both pay down your mortgage at super cheap rates as well as see massive price appreciation! The best of both worlds. Now bears will continue to watch a flat market or a slow slow bleed, all the while… Read more »
Troll
Guest
Troll

@jesse: The 25 year amort. is the key to this deal. In terms of debt growth, this won't have much effect, since the amount you'd qualify is lower than an existing 30 year mortgage. 2.99% (25 yr) is $472 per $100K. 3.34% (30 yr) is $439 per $100K.

Good effort from BMO though, to try and gain market share by getting existing 25 year mortgage holders to switch from other lenders.

DaMann
Member
DaMann

@Clebo:

3 or 4 years ago puts you at 2008 peak Einstien. If it was a condo you bought you wouldn't be ahead at all after 3-4 years, especially if you wanted to sell it now and have to pay the fees to do so. If you bought at the bottom of the small trough you might be looking good. Could have gone either way. Luck has more to do with it. The agents didn't know shit, ask any of them and they will tell you low rates are here to stay for ever.

Anonymous
Guest
Anonymous

what happens when bears are performing tender loving care to their parners? one says to the other "mania, pop, pop, pop …oh no…"

jesse
Member

@Troll and BPOM, the 25 year stipulation is a bit of an odd duck, isn't it?

If there is going to be an announcement it will be before mid-February. There are competing goings-on in Europe that may affect the timing of a press release.

Debt levels are at a tipping point in the eyes of the Bank of Canada. Even with amortization changes they will be advocating to the Department of Finance they need to be absolutely sure debt doesn't grow more than incomes. That means careful and close monitoring of new issuance, in my view they will require banks to meet but not exceed a quota for the next while, if absolute certainty is required.

Burbs Boy
Guest
Burbs Boy

Not of any real consequence but interesting to me as an anecdote…. chatted with a gentleman in Langley yesterday who bought his townhome about 8 months ago before it was completed. He paid about $400,000 for it (very nice place) and now 8 months later the developer is selling exact units to his for about $350,000. The owner feels that this is a temporary blip and that the value will come back to his place in a year or so. Perhaps he is right, perhaps not, I can't say… but I was surprised that there was any kind of weakness in the Langley market as there is still a TON of building going on out there.

registered
Member
registered

@16 Best place on meth Says: "For some reason I don’t think it’s going to happen this time…"

Tough call. Working from a hypothetical model that the federal government is looking for a blameless out from a quagmire of their own creation, the build up of blame on external circumstance and those darn consumers could signal an intent to finally pop this bubble.

Guy Smiley
Guest
Guy Smiley

Low rates are only one ingredient in the chowder (mortgage rates in Japan have been under 2% for many years with no appreciation in prices). Perception and hype are more important and they are quickly turning negative. Once common sense re: price vs income and fear of huge losses on a massively leveraged purchase start it rolling, no degree of rate cut will be able to stop this snowball from going downhill.

patriotz
Member

@Guy Smiley:

Rates aren't low relative to net rental yields. In other words, owners are paying substantially more than renters every month, and can only recoup this loss by selling at an exponentially increasing price. That's all it takes to bring about a downturn in the market, because it's not sustainable.

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