Piggington “capitulates”

One of my long-time favourite bloggers, Professor Piggington of San Diego, has finally decided to buy:

After the recent leg down in interest rates, monthly payments are the lowest compared to incomes and rents than they’ve been in the history of the data, and are quite dramatically below their median historical levels:

But note another consideration, which applies only to the US where you can lock in rates for the life of the mortgage:

If this outlook is correct, as I believe it is, then today’s ultra-low rates make this an ideal time to take out a chunky 30-year fixed mortgage, and to sit back and let inflation hew away at the real value of the mortgage and the monthly payments over the years to come.

So even if the buy/rent ratio in Vancouver came down to what it is now in San Diego, buying would not be as favourable, because interest rates would certainly rise if we went into a period of long-term higher inflation.

Note that the graph above compares monthly payments against per capita income (not median household income). It would appear that it is now possible to buy a SFH in San Diego on a single median income.

But of course Vancouver can’t go the way of SD, it’s surrounded by ocean, mountains, and a border… um it has the nicest weather in the country and everyone wants to live here… um…

Well it’s just different here.

Piggington.com Jumps the Shark

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VMD
Member

[Property investor, definitely keep your day jobs]

– Epic title. (and what if That…Is their day job?)

01 February 2012

Business-for-self lending may, indeed, be headed the way of the dodo bird, with Firstline officially axing that segment of its business effective today, Feb. 1.

“Hello everyone, FirstLine will no longer accept new applications for stated income programs effective end of today also max loan amount is $1 million,” reads an email penned by one of the lender’s business development managers and sent to mortgage brokers Tuesday afternoon.

Many other FirstLine programs are: New Immigrant programs, non-Immigrant programs, equity programs (flex), Access low-doc programs, CMHC self-employed simplified program, Genworth Alt-A program, Canada Guaranty low-doc programs, Canada Guaranty Lifestyle Advantage and self-employed program.

http://www.canadianrealestatemagazine.ca/news/ite

jesse
Member

Toscano called the SD bubble and was proven right when it came to price/rent ratios.

And you will get near-angry denial by many Vancouver residents that San Diego's plight is close to Vancouver's situation. The biggest argument used is that SD supply was way higher and Vancouver has no subprime.

Make no mistake there are many investors so embedded in Vancouver they cannot — refuse to — see the semi barreling towards us.

Anonymous
Guest
Anonymous

VMD can you please post this link in some chinese forums?…it's a gooder!

http://www.moneyville.ca/article/1125067–mortgag

Anonymous
Guest
Anonymous

The part Professor Piggington misses is if interest rates do rise as he predicts prices will go down further. If they don't rise then buying may not make sense at this point. Either way he loses.

REpump
Guest
REpump
Greetings, friends. Don't panic with the news. There is no better time to buy a home now. The collapse of the ChinaRE market presents unique opportunities for those savy investors looking for security and stability that only Vancouver offers. Even YVR is anticipating the flood of rich investors and is taking the opportunity to increase the improvement fee it charges to travelers Helicopter companies have also reported a surge of bookings by anxious HAM not wanting to miss a beat. What city in the world can offer that security, confidence and stability ? Vamcouver has been deemed the second more unaffordable market in the world. This demonstrates (and don't take my word for it, there's a respected UBC economist with a track record of thousands of interviews) that everyone wants to live here, so any RE investment is guaranteed to… Read more »
Fixiee Guy
Guest
Fixiee Guy

@default name..So wait for interest rates to rise and prices to drop…Let me guess Math wasn't your best subject in school?…wow.

crashcow
Member

Video: Buying Real Estate Not Clever Move, Says Shiller
http://www.bloomberg.com/video/85273478/

Turkey
Guest
Turkey

I do believe it's time to start Suspicious Fire Watch again! Those of you around in 2008's mini-crisis will remember a rash of convenient fires in condo developments, construction sites, et cetera. While I'm not claiming all of them were arson, the higher frequency of blazes was suspicious. Are we ramping up again?

http://www.vancouversun.com/news/Huge+fire+hits+S

rob
Guest
rob

Good for Pig! He got a house that he wants to make a home and plans to live in for the long haul. He got super low rates for the life of the mortgage. He got a price that he is happy with. Anyone want to bet that home prices will not be higher than what he paid in 30 years? Didn't think so.

The problem with Canada is that we don't have fixed rates. We have fixed terms but the average "prudent" borrower will still face an adjustment every 5 years and that could get very expensive very fast. It's time we called the ministry in charge of truth in advertising on this scam in canada called "fixed" rates.

Fixiee Guy
Guest
Fixiee Guy

I mean why would anyone want to live in Vancouver when they could choose to live in all the other Mainland Pacific Coast Cities in Canada…It's insane!

jesse
Member

@DEFAULT NAME: "The part Professor Piggington misses is if interest rates do rise as he predicts prices will go down further. If they don’t rise then buying may not make sense at this point. Either way he loses."

If you read his post in full, he does cover that if interest rates rise then price-payment ratios won't go in the right direction. As patriotz mentioned he made the call not only based on personal reasons but also based on weighing the expected future outcomes.

He also stated that the relationship between prices and interest rates is ephemeral and much less coupled than what many consider.

But yes for Vancouver, FWIW, if interest rates rise with high prices, it's not purdy.

Anonymous
Guest
Anonymous

#10,

then what the fu$k are you doing here?

Anonymous
Guest
Anonymous

@rob: Did he really 'Capitulate'…for the reasons you stated:

"He got a house that he wants to make a home and plans to live in for the long haul. He got super low rates for the life of the mortgage. He got a price that he is happy with. Anyone want to bet that home prices will not be higher than what he paid in 30 years? Didn’t think so."

…I think 'capitulate' is the wrong choice of word. The person who sold him the house, however, likely capitulated.

Makaya
Member
Makaya

Have you bought your pop-corn yet?

"Yesterday, FirstLine Mortgages announced they were no longer offering mortgages for self- employed folks and for investors who have a rental property. Once the darling of the mortgage broker community, this company (interestingly, CIBC’s wholesale mortgage arm) has fallen off many agents’ radar over the past few months as their product line became increasingly uncompetitive.

Today, February 2, Street Capital Financial Corporation, currently the most sought after lender in the mortgage broker community, has also announced major lending guideline changes. Effective immediately, for their conventional product offerings (20% or more down payment) they will not accept rentals, stated income applications or equity based deals. Actually CMHC insures all their mortgages, not just the high ratio ones."

http://wheredoesallmymoneygo.com/breaking-major-c

There is less and less doubts that this bubble is exploding right before our eyes…

Best place on meth
Guest
Best place on meth

@Makaya:

It's not an exploding bubble, it's a deflating balloon.

Or a leaky condom, I'm not sure anymore.

Devore
Member
Devore

@VMD:

Many other FirstLine programs are: New Immigrant programs, non-Immigrant programs, equity programs (flex), Access low-doc programs, CMHC self-employed simplified program, Genworth Alt-A program, Canada Guaranty low-doc programs, Canada Guaranty Lifestyle Advantage and self-employed program.

These all sound like solid prime lending products! Only Americans stupid enough to make subprime house loans and then have the government guarantee them.

Anonymous
Guest
Anonymous

@jesse:

You'll know this market is toast when the trolls start calling people out for buying too early.

Don't time the trough. Buy the metrics. You can't lose (unless your math skills are in line with most of the bulls on this board).

FF

Fixiee Guy
Guest
Fixiee Guy

Man It's great they will be capping mortgages at a Million bucks..makes it easier for the Chinese with cash to come here..Great news.
http://www.realestatevancouver2010.com/blog/2011/

Bailing in BC
Guest
Bailing in BC

If I read the words "Dream" and "Home" used in conjunction one more time I will lose it. Seriously, what happened to aiming for a solid, comfortable, functional family home? Is there really a huge demand for turrets?

Fixiee Guy
Guest
Fixiee Guy

I'm sorry if you work for any level of Govt. Your neck is first on the chopping block.
http://www.timescolonist.com/life/Federal+cuts+wi

specialfx3000
Member
specialfx3000

@Best place on meth:

"leaky condom"

You may not realize the effect when it 'bursts' but you're stuck with the 'disease' for many years to come.

Fixiee Guy
Guest
Fixiee Guy

Rents spike up as housing crashes!? Well that sucks!
http://www.rentjungle.com/average-rent-in-seattle

Best place on meth
Guest
Best place on meth

@Fixiee Guy:

Why would that suck?

Anonymous
Guest
Anonymous

With these two mortgage companies stating that they will be cracking down on 'stated income' application…why is everybody assuming this will impact all 'self-employed' individuals?

'Stated Income', if I'm not mistaken, means they can't verify there income so they simply state how much they make with nothing to back it up. Most self-employed individiual in this country would be able to demonstrate how much they've earned over the past few years, so I don't see how they would be effected. Anyone have any thoughts on this?

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