Friday Free-for-all!

It’s that time of the week again.. Free-for-all time!

This is our regular end of the week news round up and open topic discussion thread for the first weekend of October 2012.

Here are a few recent links to kick off the chat:

Everything about Canadas bubble
Sales plunge: normal or bursting bubble?
Industry tries to paint positive picture
They always say the same thing
Buy one get one free
A sad day for data
High end homes take a hit
A guarantee against price drops?
Gen Y renting?
Not in My Back Yard 

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

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rp1
Guest
rp1

@Anonymous: I was referring to bond markets, which seem to be broken.

Anonymous
Guest
Anonymous

@rp1: “that’s the market IMHO”

Maybe time for you to go “all in” on real estate. Sounds like real estate can’t lose.

rp1
Guest
rp1

#196 @patriotz: “And Wall Street could put Canada on a credit watch. IMHO the threat of this happening is what has brought on the current restrictions. Neither households nor government can increase their debt indefinitely.”

They must not understand the game. Inflation wins and austerity loses, every time. I think it’s an artifact of extremely short-term narrow minded thinking, but that’s the market IMHO.

jesse
Member

OH: engaged couple, one owns YT condo, just bought in at RMD condo at $10K less than last sale (to be completed in 4 months), she can’t sell YT condo for what she paid for it.

Guess what she’s doing with the YT condo?

Anonymous
Guest
Anonymous

@rp1: “We saw the opposite here in 2008.”

In 2008 they dropped interest rates (along with QE) which brought the mortgage rates from 5% to the current 3%. That is a 40% reduction in interest which juiced the market. Mortgage rates today would need to drop to 1.8% to match that. With the US Fed all in with QE for infinity there is nothing left to move mortgage rates lower.

Anonymous
Guest
Anonymous

Just looking through the MLS at properties and noticed a lot of completed new homes for sale. These obviously must be sold ASAP as developers can’t afford to hold these indefinitely considering they are getting no revenue and have to pay interest, taxes etc. Just a quick search in North Vancouver and Burnaby shows about 10% of the detached homes are new spec homes for sale by developers. With the current sales this inventory will sit for a long time. Also keep in mind this new inventory is at the high end of the market generally 1.2 million and up which is moving even slower than the stuff under 1 million. This is not going to end well for these developers.

Anonymous
Guest
Anonymous

@rp1: “We saw the opposite here in 2008. If the government lifts the CMHC insurance cap to, say 800 billion, the show could go on. They could also loosen lending standards.”

Except the banks are tightening the non CMHC loans. Not in the governments control.

patriotz
Member

@rp1:
And Wall Street could put Canada on a credit watch. IMHO the threat of this happening is what has brought on the current restrictions.

Neither households nor government can increase their debt indefinitely.

rp1
Guest
rp1

#181 @Anonymous: “And I will add this correction is not only about CMHC anymore. ALL lending has tightened. It is now out of the governments hands. Even if they reverse course on the CMHC rules the banks will not lend. We saw this in the US.”

We saw the opposite here in 2008. If the government lifts the CMHC insurance cap to, say 800 billion, the show could go on. They could also loosen lending standards.

Patiently Waiting
Member
Patiently Waiting
“I am not building condominiums. I am building three sculptures for people to live in,” said a proud Mr. Mirvish of his new project.” Err whatever … “tens of thousands of new condo units are being built in a market with fewer buyers. There were a record 196 condo projects under construction in the Toronto census metropolitan area at last count (the end of June). … But residents weren’t that interested in access to games at the ACC. The builders had leased private boxes in the arena that residents could use for a fee, “but the funny thing is, hardly anybody used them,” Mr. Fenton said. “I could never figure it out. What I think was more successful was that we provided TTC passes to everybody for a year. We were one of the first developments to do that.” Free… Read more »
McLovin
Guest
McLovin

Happy Thanksgiving all!

I am hosting 11 people which can all fit on my patio overlooking False Creek on this beautiful day.

Did I mention that the place I rent is 31% of the cost of owning it and I just signed another 2 yr. lease and the landlord was thrilled to have me do it? In her words “the market has softened”.

This time next year the feeling among the average person towards Vancouver RE will be very very different. This is but one thing I am thankful for!

Anonymous
Guest
Anonymous

@Patiently Waiting: “It depends when she bought. She talks like she owns her places outright or at least has a large amount equity. She has no idea how quickly her equity will melt away now.”

She is still subsidizing them through poor returns.

Anonymous
Guest
Anonymous

@Patiently Waiting: well, at least, she does not have people peeing infront of her place. do you have to powerwash your rental place everyday? you get used to the smell then.

watcher
Guest
watcher

My apologies for being a bit curt, but I have done a lot of work with this type of modelling and am certain

watcher
Guest
watcher

actually – you need to read the literature and any real estate economics text on modelling -see Wheaton as an example. It has been shown that hedonic estimators are superior to repeat sales indices. The reason it is not used more widely is a problem of data availability and cost to obtain the information. It is built on Automatic Valuation Models used by insurance groups.

The MLS HPI is modelling characteristics on actual prices, so I am not sure what you are talking about here. The benchmark is an estimated prices given all transactions and constrained to certain “benchmark” attributes.

patriotz
Member

@watcher:
I would say the opposite, since Teranet uses actual prices, while REBGV HPI uses hedonic criteria to impute prices. The “if modelled correctly” is a very big if since this can’t be verified until well after the fact.

In any case every metric is clearly headed down and it will be interesting to compare them.

watcher
Guest
watcher

@jay:

Thanks for posting this. As I said before, the MLS HPI is statistically valid, transparent and an excellent tool. Most people do not understand statistics and hedonic modelling. It really is not that complicated. They are using a multiple linear regression model, coding for qualitative factors, and include a time-dummy variable for different periods. The data is scrubbed to ensure that the data is complete.

The document Jay linked provides the basic set up of the model and methodology. It is actually statistically superior to the Teranet repeat sales index if modelled correctly, since it uses more information about housing characteristics.

Patiently Waiting
Member
Patiently Waiting

@Anonymous: It depends when she bought. She talks like she owns her places outright or at least has a large amount equity. She has no idea how quickly her equity will melt away now. 🙂

Anonymous
Guest
Anonymous

@Patiently Waiting: “She has no doubt lived off the rents of young working families while, no doubt, failing to take care of their living conditions. I will laugh my ass off as people like her miss the chance to sell and go down in flames. Happy retirement, you hag.”

Relax buddy. Lived off of rents or subsidized rental accommodation through negative cash flow investments. My guess is the latter.

Patiently Waiting
Member
Patiently Waiting

@VMD: Previous to real estate, Pauline Kendall was into multi-level marketing http://en.wikipedia.org/wiki/USANA_Health_Sciences (checked her Linked-in).

In other words, a pyramid scheme.

She has no doubt lived off the rents of young working families while, no doubt, failing to take care of their living conditions. I will laugh my ass off as people like her miss the chance to sell and go down in flames. Happy retirement, you hag.

yvr2zrh
Member

@Joe_blown_away_by_high_housing_costs:

Insurance fire in the future???

Anonymous
Guest
Anonymous

@Anonymous:
“I would happily join you for a walk but I can’t afford coffee on my budget; mortgage payments, taxes, insurance, you know how it is to own a little piece of the BPOE …”

then you have not done things right. should move to ottawa.

Anonymous
Guest
Anonymous

@Anonymous: “Wow…this market is toast.”

And I will add this correction is not only about CMHC anymore. ALL lending has tightened. It is now out of the governments hands. Even if they reverse course on the CMHC rules the banks will not lend. We saw this in the US.

More Data Please
Guest
More Data Please

@jesse: re: “…decrease appreciation a tad…would have reached the same erroneous conclusion…”

Really? Give that calculator a try with a modest rate of appreciation 3.0% instead of 5% and keep everything else they’ve filled in the same.

http://www.getsmarteraboutmoney.ca/tools-and-calculators/rent-vs-buy/

The outcome is EXTREMELY sensititive to appreciation assumptions. An asset at 0% appreciation is a total wipeout, but even a modest 3% is a loser, unless it is somehow a good thing to tie up your finances in a mortgage.

Maybe there is something different about the assumptions in the other calculators you’ve tried, but this one is pretty dramatic when you move the appreciation slider only very slightly.

Anonymous
Guest
Anonymous
@VMD: And although Kendall wasn’t applying for a CMHC-backed loan the rule changes have had a “trickle-down” effect to other major lenders, who are tightening their requirements for mortgages – which was the roadblock she faced. Rental income of $1,000 per month can pay for a mortgage worth around $200,000, according to Ellis. But to the CMHC, the value of that rent is only enough to qualify for a mortgage of about $34,000. Wow…this market is toast. If $1000 rent only gets you a 34K mortgage even outside CMHC lending ‘investors’ will need massive personal income (with free cash flow) to buy an investment property. A Westside home which rents for to 4K would only qualify for a 136K mortgage which is like 5% of the purchase price. That is not going to work. Imagine how many presale buyers are… Read more »