Low rates forever

Looks like the US fed isn’t very optimistic about the recovery. They say Japan style interest rates until 2014. Will this help a US house price recovery, or will buyers wait if they know there’s no rush for bargain rates?

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[…] having a clue about this, even when their Kool-Aid drinking parents ought to know better.” – JR at vancouvercondo.info 26 Jan 2012 9:13pm Share:TwitterFacebookRedditStumbleUponDigg This entry was posted in 02. Profiting from the Boom, […]

mac
mac
8 years ago

@DEFAULT NAME:

Default Name,

As I've said before, you're a light in a dark sea, but a dim one.

VMD
VMD
8 years ago

Just started a thread in the forum to help RE newbies (myself included) understand the linguistic intricacies in a typical MLS listing (especially for Vancouver). To start off:

"Handyman's Special": looks bad, smells bad, has at least one major system that doesn’t function

"Motivated": seller gives the impression that he is under pressure to reach a quick deal

perhaps someone can continue on by defining "Vancouver's Special"..

http://vancouvercondo.info/forum/topic/mls-lingo-

Curiosity
Curiosity
8 years ago

Quoting what Makaya had to say: Makaya Says: January 26th, 2012 at 4:29 pm Lots of worried realtors in the marketplace these days… Here are a couple of comments taken from Larry’s blog: If we have rich and savvy Chinese buyers keeping the top end of the RE market busy, and we have next-to-nothing interest rates keeping the mid-low range busy, then we have a robust housing market. Be calm. There is no cause for concern. My opinion: Chinese buyers may keep the top end moving but cheap interest rates may not do the trick if your mortgage is $500k and you make pennies for wages. So if you've maxed out on your mortgage to buy your overpriced Vancouver mutt house on low interests, you're still barely scraping through. Any unforeseen economical event can still wipe you out. With a… Read more »

Makaya
Makaya
8 years ago

And another must read! Jeez, it's a flood of bubble talk these days… Today from MacLeans What happens when Canada’s housing bubble pops? So, are we literally living in a bubble? And when it bursts, will it get as ugly as it did south of the border? Here’s where the most recent speculation is pointing: Yes, we’re in a bubble, and it will probably pop soon. [bold in the original text as well!] The signs of a bubble are unequivocal. At 13 years and counting, Canada’s current housing boom is one of the longest-lasting in the world, the Bank of Nova Scotia noted in a recent report. The real price of Canadian homes has increased by 85 per cent on average since 1998. Prices stagnated in 2008, at the height of the financial crisis, but they were back on the… Read more »

TPFKAA
TPFKAA
8 years ago

looks like Jesse was right RE: listings being pulled forward for CNY. Definite slump in listings the last couple of days. Sales not boosted either (yet), but listings do seem to be down.

bailinginbc
bailinginbc
8 years ago

@Makaya:

"There is no cause for concern" – a sure sign that now is the time to panic.

Anonymous
Anonymous
8 years ago

@JR: "A lot of people think that they have a lot of money because they own a house on the Westside." Yes a friend of mine is a builder on the Westside. He laughs at the amount of debt people are going into to move up and build a new house. Long term Westside residents feel rich when their tare down is worth 1.5 mil and go and borrow to the max to move up into a new house with all the bells and whistles. He tells me everyone is maxing out because they think prices will continue to go up forever. It is an "investment". Million dollar mortgages are nothing even with middle class incomes. The Westside will be worst hit area in the lower mainland in my opinion. Easy 60% correction coming without rates rising. Worse when rates… Read more »

Anonymous
Anonymous
8 years ago

@mac: "I wish I could be as confident as you but the guy has made a fortune several times over in this market and in Toronto."

I always laugh at comments like this. Anyone who made a "fortune" many times buying and selling could have made way more by buying and holding. Buying and selling has a very high transaction cost to it and is way more work. You need to find a different guru to idolize.

Anonymous
Anonymous
8 years ago

@mac: "And you know how it is in this city, if you’re a renter, you’re a curiosity, especially at dinner parties. It’s like being Bridgett Jones with the smug marrieds."

You obviously have low self esteem if this concerns you. Tulip bulbs were all the rage some time ago too. How did that turn out for the bulb barons?

JR
JR
8 years ago

@mac: Take it from a born and bred Westsider, who has owned more than one house on the Westside. A lot of people have made a lot of money in residential real estate on the Westside. A lot of people think that they have a lot of money because they own a house on the Westside. Some of them are right, depending upon their equity levels, some of them are wrong for the same reason. Some of them will get out while the getting is good, some won't care or don't need to. Many of them on the lower end of the scale, however, will hold out and be absolute toast. What I can tell you from long, direct experience is that the Westside of Vancouver is now and always has been ground zero for real estate corrections as it… Read more »

mac
mac
8 years ago

@patriotz:

Patriotz,

I wish I could be as confident as you but the guy has made a fortune several times over in this market and in Toronto. The fact is, he has been righter than I have, if there was such a word. And I no longer believe that my view will prevail to the extremes that I thought it would. And you know how it is in this city, if you're a renter, you're a curiosity, especially at dinner parties. It's like being Bridgett Jones with the smug marrieds.

Anonymous
Anonymous
8 years ago

this graph is a pretty clear indication of "what goes up the most will fall the hardest"

look out Vancouver!

http://www.doctorhousingbubble.com/wp-content/upl

Eddie
Eddie
8 years ago

I still don't understand why all these bubble warning articles and experts are pointing at interest rates being the main culprit when in fact it's the CMHC (taxpayer) backing that has really kept this madness going.

Canada's dirty little (big) secret I guess.

patriotz
8 years ago

@mac:

"I always fear that the westside here can just resist all pressure."

Sure didn't in 2008, 1990's, 1980's. The fact is that the West Side has equalled or exceeded the % decline region wide in previous downturns.

Does your friend have an explanation of what has changed in the last three years so that this can't happen again?

mac
mac
8 years ago

@WS:

Hmmm… food for thought WS. I will check out the drhousingbubble blog later tonight. Looks like I'll have a poor defence when the guy strays into comparing SM to Westside Vancouver. I always fear that the westside here can just resist all pressure. We'll have to see. Looks like sales/list ratios are starting their spring climb. Will it never end?

WS
WS
8 years ago

This guy says Santa Monica is off 20-25% and heading down further.
http://www.santamonicameltdownthe90402.blogspot.c
http://www.westsideremeltdown.blogspot.com/

paulb.
paulb.
8 years ago

New Listings 176

Price Changes 66

Sold Listings 95

TI:13218

http://www.laurenandpaul.ca

WS
WS
8 years ago

@mac I know Santa Monica very well. It is probably the last place I would touch in Southern California precisely because it has corrected the least. I see tremendous downside risk. Yes, SM is probably is one of the most desirable areas to live in LA and thus one of the most expensive. And your friend has a valid claim as prices have not corrected near as much as other areas (yet). It is just a more illiquid area. SM was (and still is) extremely bubbly. The wealthy areas take the longest to correct. But be sure that SM is slowly correcting. A 15% correction on a $2M house is pretty painful I might add. I often look at the median price trends by quartile in Southern California. The bottom quartile was fairly flat in 2011 as it has corrected… Read more »

Makaya
Makaya
8 years ago

@patriotz: Agree with you, but it's better than nothing. At least the word "bubble" is in the title, which is what people will remember. One year ago, you would not have found one article talking about the bubble. Now, it's like there is a competition among them to put the most dramatic title. The tone has changed, people's perception of RE will follow, and then the bubble bursts. How long will it take? I don't know, but my guess is that it will be much faster and deeper than ever the bears think.

patriotz
8 years ago

@mac:

"I have only the info Zillow supplies, like Santa Monica is down by 11%."

Zillow says SM is down 18% from the peak in early 2006. Look at the price history chart on this page.

http://www.zillow.com/homedetails/1032-6th-St-UNI

Santa Monica is an incorporated city and the Zillow numbers are for the city proper.

Raz
Raz
8 years ago

@Makaya:

I am surprised that they haven't use the weather as an excuse yet.

3. The butts of potential buyers are still waiting to thaw out from the snow.

patriotz
8 years ago

@Makaya:

"Pending housing bubble"?

"Risk of a housing bubble…what lies ahead"?

Like we don't have one already?

Canadian Business can come out and say so right on the front page, can't these "experts" do the same?

Makaya
Makaya
8 years ago

@MadasHell: From the article you referenced: Patti Croft, recently retired from being chief economist for RBC Global Asset Management, cited the risk of a housing bubble as among Canada’s biggest issues. Part of the problem, she said, is exceptionally low mortgage rates, due to the Bank of Canada’s low interest rate of one per cent — a level intended to support the economy. “Historically, after a long period of low interest rates, what lies ahead is some kind of speculative excess,” she said. (…) There was some concern expressed about the economic effects of the federal government’s coming spending cuts, but Ms. Croft said “the greater concern is the looming housing bubble that we see, particularly in cities like Toronto and Vancouver, because I think that is where the speculative excesses lie.” The tone has changed quickly in the MSM… Read more »

Makaya
Makaya
8 years ago

Lots of worried realtors in the marketplace these days… Here are a couple of comments taken from Larry's blog:

If we have rich and savvy Chinese buyers keeping the top end of the RE market busy, and we have next-to-nothing interest rates keeping the mid-low range busy, then we have a robust housing market.

Be calm. There is no cause for concern.

and

Two things that matter:

1. Buying season in Vancouver does not get into full swing until the spring time. There will be inventory build-up due to holidays, cold weather and the selling/buying season is setting itself up for,

2. The lowest interest rates in lower mainland history.

Also backstop from financial markets and resolutions from Eurozone will help. US getting back on track will only support these levels, not deteriorate them.