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Friday Free-for-all!

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Friday means free-for-all time!  Let’s do our regular end of the week news round up and open topic discussion thread.  Here are a few links to kick off the chat:

–b5baxter latest updated inventory graph
–..also new: the bubble-o-meter
–Property sales dip in Van and Fraser Valley
–Vancouver most expensive city in North America
–New American dream is renting to get rich
–Investing in a low interest rate environment
–Is it time to change how we measure CPI?
–Toronto condo bubble tops New York in risk
–Americans growing more optimistic on economy

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

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AG Sage
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Quiet today.

Silliness in the Montreal Gazette. And it's Friday.
http://worldhousingbubble.blogspot.com/2012/02/on…

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7 years 5 months ago
jesse
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A new phrase, AG Sage: "speculative instability."

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7 years 5 months ago
Anonymous
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Sorry if it's been posted before, but this is an interesting "affordable housing" project.

http://www.tekalproperties.com/

It's going to face tremendous headwinds, but the idea does sound good on paper. I'm as bearish as it comes, but I wish this project succeeds.

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7 years 5 months ago
Anonymous
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@DEFAULT NAME:

Re: Tekka

With no overhead (office and staff expenses), and no profit-driven investors to worry about, I can provide roughly 240 units (1, 2, and 3 bedroom units) at cost plus a small percentage for coordinating, designing, and developing the project.

Gotta love that. No profit driven inventors to worry about. Just pay me a small fee. Oh ya and you take all the risk at cost plus. That has to be the worst money losing idea I have ever seen. The developer makes a guaranteed profit as a percentage and you pay all costs no matter what they are. How much control would 240 individual owners have over the project? Virtually none.

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7 years 5 months ago
patriotz
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@DEFAULT NAME:

It's just another condo project dressed up in socially responsible clothes. Buyers would go up to their ears in debt to live in a crap neighbourhood. The project may appear non-profit on paper but the principals will draw big salaries and consulting fees, and the buyers will end up with negative net worth when the market tanks.

And maybe, just maybe, the propoents are connected with the present owner of the property who would stand to make a lot of money if it's rezoned.

The answer to inflated RE prices is for people simply not to buy until they come down.

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7 years 5 months ago
Makaya
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@DEFAULT NAME: I see that as a gimmick to have a guaranteed 100% pre-sale. This guy takes 100% of the profit ("small fee") and none of the construction risk. Yeah right…

As said below, the only way to get affordable housing in Vancouver is to pop this bubble. It'll take a bit of time and patience, but we're getting there.

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7 years 5 months ago
Anonymous
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@AG Sage:

"At the TD Bank, senior economist Jacques Marcil predicts flat sales and average national prices creeping up by 2.5 per cent this year. Given this benign outlook, it's a little baffling that we're still seeing scary reports about Canada's bubble – a situation where price gains accelerate as they feed on themselves."

I love how this reporter takes one person's view as gospal, and based on that view determines that it's 'baffling' that anybody else could have a different view.

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7 years 5 months ago
Dave
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@Makaya:

There are lots of ways to create affordable housing within the current market.

These are choices that we make as taxpayers and citizens. As long as we have HST on new homes (hopefully gone today), Property Transfer Taxes, Transit Taxes, Development Cost Charges, unreasonable development and zoning contraints, demands for amenities, then it won't be possible for developers to build affordable housing.

As long as people think that municipalities create money out of the air by taxing developments and getting in the way, then we won't have affordable housing.

It blows me away that one hand of bureaucracy will take about affordable housing, while the other hand is responsible for driving prices up.

These are choices. But most people don't see that.

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7 years 5 months ago
Troll
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@Dave: So in your view, what were the offending tax/regulation changes that were put in place about 10 years ago that caused the current decade long spike in prices?

Your view is a tough sell.

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7 years 5 months ago
Absinthe
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@Dave: Or, check this out, a buyer's strike and some rational consideration of the numbers before people pour credit like oil into the fire.

I grew up in cities with tough zoning and all sorts of taxes and infrastructure costs, yet somehow the prices weren't irrational. Go fig.

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7 years 5 months ago
patriotz
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@Dave:

"It blows me away that one hand of bureaucracy will take about affordable housing, while the other hand is responsible for driving prices up."

Me too. So let's get rid of government guarantees for mortgage financing and tax policies that encourage speculation by both locals and foreigners.

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7 years 5 months ago
Not much of a name...
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@Dave:

As long as we have HST on new homes

This always amuses me when you bring up this argument. There isn't HST on affordable homes. In fact, the HST will be a benefit as the builders of these lower priced units will get ITC's that weren't available with the GST/PST. This will actually reduce costs that could be passed on to the purchaser…but are they??? It's always nice to blame the government isn't it? Yup, we'll keep that money in our pocket as profit. Screw the buyer.

Next…

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7 years 5 months ago
Best place on meth
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I just got a letter from my bank which made my eyes nearly pop out.

According to them, they are raising the interest rate on my LOC due to "increased funding costs" on their end.

Fair enough, with all the debt out there money is getting harder to find but I would have thought the increase would have been .25 or .5 percent. Maybe even as much as 1%.

No, effective immediately the rate increases by a further 2.75%.

Looks like I'll be paying off the balance effective immediately and never using it again but seriously, what's going on in the world of lending?

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7 years 5 months ago
patriotz
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@Best place on meth:

"what’s going on in the world of lending?"

Rising default risk.

Unfortunately, this is going to get the banks to put even more effort into making loans which are guaranteed to be repaid. Like you know what.

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7 years 5 months ago
Best place on meth
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@patriotz:

That will depend on the CMHC raising the $600B cap which is not a given.

Perhaps there will be some surprises in the spring budget that have already been leaked to the banks.

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7 years 5 months ago
rp1
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Bloomberg: http://www.bloomberg.com/news/2012-02-17/canada-h…

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7 years 5 months ago
jesse
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@patriotz: "Rising default risk."

And rising accounting standards for default risk. Another thing to watch for is what will happen to HELOC spreads if CMHC titrates its mortgage insurance.

Exciting times!

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7 years 5 months ago
Disbelifn
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The Greatest Threat to our little piece of paradise is this huge ever increasing debt. The banking industry and the CMHC has created this false security that relatively free money and unlimited credit will be endless. This myth would be impossible of continually growth with an incredible risk. We need to realize that a half a million dollars for a dump in the valley is overvalued and while it is sad that false hope and increment wealth is the norm it must be materialized. A feeling is not worth going into major debt for. Morons like Dave and SATV or whomever heis calling himself thesezdays will come to realize this. It is much better to be in cash than in debt.

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7 years 5 months ago
rp1
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#13 @Best place on meth: Watch out for hidden fees if you close your LoC. Banks are trying to get $500 for nothing. Might be worth closing now if you can avoid paying anything.

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7 years 5 months ago
DaMann
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Just to show how bad people's mindset has got. My wife was talking to a friend who is thinking of moving to Kimberly. She mentioned that you could get a nice little home for $250k or a really nice home for $400k and she thought that was reasonable. Are you f#%^& kidding me??!!? A house in Kimberley for $400k!?! That is by far, more insane than any $1 million crack shack in Vancouver. I had no words. I said to my wife " You do realize Kimberly is about a 10 hour drive in the middle of no where with pretty much no economy. My word!

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7 years 5 months ago
Makaya
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@rp1: Thanks for the link! Another MSM article on the upcoming real estate burst in Canada… From that article: Canada may be on the cusp of a “severe” housing correction as real estate investment surges above a tipping point relative to economic output, according to George Athanassakos, professor of finance at the Richard Ivey School of Business. (…) “Eventually, everything boils down to demand and supply,” Athanassakos said in a telephone interview from Western University in London, Ontario. “Whenever this ratio goes over 7 percent, it signifies overinvestment in housing and two or three years later, we have a severe correction.” Canada’s housing market is booming as historically-low interest rates fuel purchases, driving up home prices and adding to record household debt. Canada’s ratio of housing investment to GDP has averaged 5.8 percent over the last 50 years and is… Read more »
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7 years 5 months ago
rp1
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#9 @Troll: "So in your view, what were the offending tax/regulation changes that were put in place about 10 years ago that caused the current decade long spike in prices?" I'll take a crack at this: 1) Top marginal tax rates were lowered to provide excess investable income to the wealthy. The tax burden in BC actually shifted to become regressive in the middle. 2) CMHC removed the price ceiling and started underwriting the entire market. Downpayments were lowered to from 20% to 10% and then to 5% and 0%. Despite their supposed mission to help first time buyers secure sound credit, they instead began providing leverage to move up buyers, investors, and speculators under the guise of "helping" the housing market. 3) Property taxes in Vancouver were held constant, so that as a percentage of value (i.e. holding costs)… Read more »
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7 years 5 months ago
rp1
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@DaMann: "You do realize Kimberly is about a 10 hour drive in the middle of no where with pretty much no economy. My word!"

But they have rich people coming to pay 400k!

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7 years 5 months ago
rp1
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#15 @Best place on meth: "That will depend on the CMHC raising the $600B cap which is not a given."

I'm sorry but it is a given. No government will risk turning off the taps. Expect another $150 billion.

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7 years 5 months ago
Turkey
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@rp1,

3) Property taxes in Vancouver were held constant, so that as a percentage of value (i.e. holding costs) they decreased substantially. Businesses shouldered an excessive tax burden which ultimately harms wages. A fairer distribution of municipal taxes might have allowed wages to rise more and property to rise less.

This is the only sane thing for the city to have done. The city's obligations aren't directly linked with property values, so why should they increase their income just because property values rose? (Moreover, the city missed an opportunity to stealthily raise taxes, and you're complaining?)

If the city *had* scaled property taxes with value, then during a crash, their income would take a serious hit. That would be make an already tough time even harder for a city drunk on amenity contributions.

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7 years 5 months ago