Housing market keeps on cooling

The Globe and Mail has an article about the drop off in real estate sales across the nation.

It’s got some gems in it for predictions from bankers and real estate associations, but it’s also got the standard partial information about ‘government interference’.

As evidence mounted that rock-bottom interest rates were fuelling house prices and consumer debt loads, Mr. Flaherty has changed mortgage insurance rules four times, each time making it more difficult for consumers to take on housing-related debt.

While the three previous rounds crimped both housing activity and the demand for credit, economists and real estate industry experts say this latest round, which took effect July 9, looks as if it is having a bigger impact.

And off course what’s missing is any mention of the government previous moves to make it easier for consumers to take on housing-related debt: moving amortization from 25 to 30 to 35 years, dropping down payment requirements all the way to zero down and shoveling money into mortgage buybacks via the CMHC.

So anyways, it’s getting harder to buy than it was when you could get a zero down mortgage with a longer amortization schedule.  And what sort of horrors has this wrought?

A number of economists, real estate agents, and industry observers say that many prospective first-time buyers have found themselves unable to secure a mortgage, especially in Toronto and Vancouver, and are therefore remaining renters.

Paula Roberts, a mortgage broker based in Markham, Ont., said one of her clients, a young teacher, was preapproved under the old rules, but now that she has found a home she likes, is having trouble securing the mortgage. She will likely have to get someone to co-sign the loan, or come up with a larger down payment, Ms. Roberts said.

“It’s really hindering people,” she said. “Her rent is basically the same as her mortgage payments.” In Ms. Roberts’ opinion, “it’s always better to try to buy something instead of rent.”

Of course, it’s always better to try to buy ..Says the mortgage broker.  Business slowing down Paula?

But this article ends on a bit of a down note for those hoping for a ‘plateau’

David Madani, a bearish economist at Capital Economics, reiterated his forecast Monday that house prices will fall 25 per cent in the next year or two. “The first sign of trouble at the peak of the U.S. housing bubble was that home sales began to drop in 2005, well before house prices began to fall in 2006,” he wrote in a research note.

Read the full article at the Globe and Mail.

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gokou3
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gokou3

And then the BNN guy says 25% drop is conservative…

http://watch.bnn.ca/#clip762533

Bo Xilai
Guest
Bo Xilai

There’s no constitutional right for first-time homebuyers to buy a 3,000 square foot house…

There’s a reason why “starters” used to be called “starters”.

“Starters” are now called “tear-downs”…

patriotz
Member
This post from fatjay at HHV gives you an idea of what Vancouver is in for: I think that Kelowna (and probably most of the Okanagan) has a lot further than 5% to fall (this is in response to another poster), even without any rise in interest rates. It has been steadily dropping about 5-10% per year for 4 years and people are really just starting to clue in now that house prices aren’t going up any more. A couple years ago a lot of people still thought house prices were rising, and last year I spoke to a lot of owners who pulled their houses off of the market to rent out “until prices come back”. With the new changes I’m seeing a lot more deals fall through as well. 11 of 14 houses were for sale on my… Read more »
rp1
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rp1

The “BNN Guy” runs http://www.chpc.biz/

joe_blown_away_by_high_housing_costs
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joe_blown_away_by_high_housing_costs
Vancouver Sun article on the Little Mountain redevelopment: http://www.vancouversun.com/business/Developer+inexperience+behind+Little+Mountain+delays/7256600/story.html That article states: “Four years ago, BC Housing started moving the 224 residents of a social housing project into other subsidized homes.” In fact, the displacements from Little Mountain started over 5 years ago in March 2007 when BC Housing opened the Relocation Office on the site. The fact that a major redevelopment would start off with mass displacement before any consultation with the community (which did not start until 2010–after all but these last few tenants had already been displaced) makes this redevelopment look like it is straight out of the 1950s/60s like urban renewal. This redevelopment was justified in part on the basis that the new mixed income community (about 90% condos, 10% social housing) would “integrate” the tenants, but displacement has separated them from friends and family and… Read more »
pricedoutfornow
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pricedoutfornow
@patriotz: Kelowna’s real estate isn’t going up anytime soon, yet a whole group of my friends who live there, FTBs, suddenly decided that NOW is the time to buy. Perhaps it’s all the media attention about foreclosures there? I suspect they think they’re getting a good deal, yet to me, prices still look expensive, and I don’t really see many hot deals on MLS. So a couple of these FTBs now own houses (paid around $300k, whereas in 2004 these same houses were about $100k less, though at the peak the prices were more like $500k). Nobody listened when I told them to wait. I still think prices will head lower. These FTBs may end up disappointed, I think there are still drops coming. But what do I know? At least they aren’t buying $1million crack shacks, $300k does look… Read more »
Keeping An Eye On The Pimps
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Keeping An Eye On The Pimps

My guess is Cameron Lereah is negotiating an exit strategy.

Second guess is the clown economist from Central Credit will take his place or maybe somebody from Global, or Corus.

Ben Rabidoux
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Ben Rabidoux

Anyone have a data set of monthly median OR avg resale prices by segment in Vancouver? Looking specifically for condo apts and SFH prices. Hoping to find one going back to at least 2000.

Thanks

jesse
Member

@Ben Rabidoux: Try the files in this post over at vancouverpeak: http://vancouverpeak.com/groups/inventory-graph/forum/topic/stitched-together-hpi-graphs/#post-2565

Contains historical MLS-HPI by sub-region and dwelling type (det/att/apt).

jumpin in
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jumpin in
frank
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frank

David Madani has consistently been the most up-front and honest economist. That’s because he isn’t paid by a bank or real estate association or a university dept which gets all it’s funding from RE sources.

Ray
Member
Ray

Two replies from CBO:

Where is the article Canada’s Housing Crash Begins?

=-=

Ray,

Sorry for the inconvenience. The online stories follow a publishing schedule and that story in question was unintentionally released early. It will be available again on Monday.

Regards,

Don Sutton

Online Managing Editor,
Canadian Business

=-=

Hi Ray,

It’s on newsstands everywhere. If you’re looking for it for free online, I’m afraid it’s not there (at least not yet). We’re offering less free content now and will soon be moving to a pay model where only a few articles will be free each month. Thanks for your interest.

C.
Conan Tobias

=-=

Pick which response you like.

buffates
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buffates

I always get frustrated how they portray the 35-40 year amortization as the norm. No one focuses on the decades where we had 25 year ams as the norm. We are back to where we should be people!!!

s
Guest
s

@buffates

What I really hate is realtors, mortgage brokers, TV analyst etc… saying the government shouldn’t interfere with the market and let the market decide the prices.

Yet the whole reason home prices went up was because of government interference, get rid of government subsidized mortgage (CMHC) and home prices would come crashing down, guaranteed.

vangrl
Member
vangrl

@s
“What I really hate is realtors, mortgage brokers, TV analyst etc… saying the government shouldn’t interfere with the market and let the market decide the prices.”

what I really hated was hearing/reading realtors say “NO OFFERS ACCEPTED BEFORE MON AT & 7.p.m!”

won’t miss that…assholes

Signs of the End
Guest
Credit is till way too easy which is why great and greater fools are still bidding up prices in Toronto and burbs like Markham. I have lived in Markham for 20 years and it is a dive pretending to be Manhattan. I do not believe the Greatest fools will be found until interest rates rise. And that hand of the BOC may be forced more by infinite QE in Europe and America than anything else. Canada will suffer the fate as Florida in the 1920s. Florida did not see 1925 prices again till the early 2000’s. By the time this epic Canadian bubble has burst, it may take half a century for prices to return where they were in 2011-2012. If we learn anything from history it is that we learn nothing from history and thus history repeats itself. In… Read more »
real_professional
Member

Over at the huffington post we have a headline that reads:
“Vancouver Housing Bubble: Prices Decline By 25 Per Cent”

Amazing how alarmist the headlines are getting :). The headline doesn’t match the story perfectly because “…the dollar value of homes sold through the Multiple Listing Service (MLS) dropped 25 per cent to $2.6 billion last month”

Not really an average detached house price measure. But you have to love the alarm bells.

http://www.huffingtonpost.ca/2012/09/17/vancouver-housing-bubble_n_1890553.html?utm_hp_ref=canada-business&ir=Canada%20Business

Signs of the End
Guest
Signs of the End

BTW I know Paula Roberts; her and the hubby opened up this posh new Mortgage broker office a couple of years ago after being on the 2nd floor of an old building for many years; business must have been good! Sadly mortgage brokers, realtors, construction workers, truckers, lumberjacks and all the people in industries related to the RE industry will suffer. MBs and Realtors in particular will soon be looking for Real employment since Real Estate will be not so Real anymore as an occupation!

Troll
Guest
Troll

@real_professional:

The headline doesn’t match the story perfectly

There’s an understatement. What a horribly written article, shameless doom-mongering by a bearish outfit. If there was a story in the Sun the other way around, with total $ increase being quoted as a price rise, I doubt you would use the same phrase “doesn’t match perfectly”.

You can do better.

Signs of the End
Guest
Signs of the End

@pricedoutfornow: I was visiting the Okanagan earlier this month, and it is not cheap by any means! Our perception of value has been so distorted by the drug of cheap credit that people think that 500,000 is reasonable for a plywood and gyprock dwelling! That’s HALF A MILLION dollars! How long would that take you to save and pay off in after tax earnings after paying all your other expenses, and that is without including the interest? Average house price in Canada should be in the 100K range and in major cities in the 350K range, no higher! That is what Canadian incomes can support!

patriotz
Member

@Troll:
The only think wrong was the headline, which almost certainly was written by someone other than the author. The article is factually correct in all respects.

You are clutching a very thin straw.

Best place on meth
Member
Best place on meth

@real_professional:

If the dollar volume of sales in BC dropped 25% then that will put an even bigger hole in the provincial budget due to lost property transfer taxes.

This is on top of the giant hole already created by plummeting natural gas royalties.

Now add in steady price drops in real estate and the hole gets bigger yet.

The NDP are going to inherit a gigantic mess in May.

mac
Member
mac

@Signs of the End: I wouldn’t hold my breath. Housing isn’t just sold to Canadian wage earners–houses are on the open market, the global one. Unless you’re predicting draconian legislation forbidding foreign ownership and/or Japanese style deflation for 17+ years, I’m afraid you’ll be blue in the face before this happens.

Troll
Guest
Troll

@patriotz: LOL, oh come on, this coming from someone who pounces on anyone who makes as much as a spelling mistake in their post. However, here you just casually dismiss a headline which couldn’t be more wrong. And also an article which refers to average prices, which are also roundly (and correctly) denounced by bears.

Alls I’m sayin is if you and others want to be taken seriously you need to at least make a token effort to be objective and skeptical, for both bullish AND bearish stuff.

Best place on meth
Member
Best place on meth

@Troll:

It seems that right off the bat the article says Vancouver prices plummet but then in the next sentence they give the average price for all of BC.

That right there is misleading.

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