Should incentives go to the supply or demand side?
The Canadian Mortgage and Housing Corporation (CMHC) is Canadas national housing agency.
The front page of their website says this:
Backed by more than 65 years of experience, we work with community organizations, the private sector, non-profit agencies and all levels of government to help create innovative solutions to today’s housing challenges, anticipate tomorrow’s needs, and improve the quality of life for all Canadians.
This is a bit vague, but let’s assume ‘today’s housing challenges’ includes the availability of affordable housing for all Canadians.
With this goal in mind there are two ways you could use government money to create incentives for housing: The supply side or the demand side.
CMHC works on both sides, but over the years they’ve shifted the bulk of their support to the demand side. This means that instead of directly funding the construction of housing or providing incentives to builders, they provide support to the buyer mainly in the form of mortgage insurance for risky loans. Of course this support is actually provided to banks to make their loans risk free, but the end result is that more people are able to pay a higher price for housing due to more availability of credit.
In concert with record low interest rates and a speculative mania this has driven housing prices to record highs in Vancouver and inflated prices across the country leading to talk of a national Canadian housing bubble similar to that seen in the US.
If we really want to use government to assist in the creation of affordable housing shouldn’t we be providing incentives to the supply side instead? It shouldn’t be a stretch to understand that building more housing and providing less credit to home buyers would drive prices down making homes MORE affordable.
But nobody really wants to drive prices down do they? So instead we get vague statements about housing challenges and smoke and mirrors attempts to improve ‘affordability’ by providing ever cheaper credit.
That hasn’t worked in any housing bubble yet, but hey! Maybe it’s different here!
October 24th, 2012 at 6:02 am 1
Why do we need incentives to build housing at all? Is there a shortage of housing? Quite the contrary, there is more dwelling space per capita in Canada than ever before. Are rents high relative to incomes in historic terms? No.
But current government policies encourage housing to be underutilized. Lots of people live in dwellings that are much bigger than they need. Some of them are owner-occupiers who are effectively speculating on price increases, some are seniors who are encouraged to stay in their houses by property tax deferrals, some are speculators who keep dwellings empty. Get rid of some or all of these policies and you will see better utilization.
There is no housing affordability problem in Vancouver or anywhere else in Canada. What we have is an income distribution problem – some households don’t make enough income to pay for a socially acceptable level of shelter. It might be because of some kind of handicap, or social disadvantage. To fix these problems government might want to help some people directly with income supplements and help others by supporting non-profit rental housing. And get smarter about immigration and about educating people in needed skills.
What we have a shortage of, as you can see from the news every day, is domestic capital for our industries. People should be investing more in Canadian productive enterprises, not more overpriced housing we don’t need.
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October 24th, 2012 at 7:00 am 2
Home prices 3.6% higher in September from a year ago
But not in BC:
Vancouver y/y -1.42% m/m -1.19%
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October 24th, 2012 at 7:44 am 3
“With this goal in mind there are two ways you could use government money to create incentives for housing: The supply side or the demand side.”
We don’t need CMHC period. Shut it down, sell the assets and tell the banks sorry your mortgages are no longer insured. Good luck.
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October 24th, 2012 at 7:57 am 4
Teranet Just released this—-
This year’s September prices were down from the month before in six of the 11 metropolitan markets surveyed, led by Victoria (−1.3%) and Vancouver (−1.2%). For Vancouver it was the second 1.2% decline in a row, a result consistent with the city’s rating as a buyer’s market since August by the Real Estate Board of Greater Vancouver
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October 24th, 2012 at 7:57 am 5
What an idiotic article and a false dilemma. There should be zero housing incentives from the government. The existing incentives are among the main causes of the current unaffordability.
Get rid of CMHC.
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October 24th, 2012 at 7:59 am 6
Teranet stats for VANCOUVER – we are now negative YoY, MoM, and YTD
% change y/y: -1.42%
% change m/m: -1.19%
Year to date: -0.60%
Whoot whoot!!!!!!!!
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October 24th, 2012 at 8:37 am 7
something that caught my eye, from garth’s latest post:
The financing of houses above 1M is 80% of the first M, and then 50% after that. This means that for 1M House, DP will be 200K, but for 1.1M DP is 250K (200K for 1M and 50K for the rest).
Obviously, for 1.5M DP is 550K or for 2M house DP is 800K.
Garth informs that this is something that banks are using in Toronto right now, getting in line with the new regulations.
IF this is true, Vancouver is f***d big time. Can anyone confirm these financing rules?
p.s. Its also interesting to analyse these numbers from banks perspective. Apparently, banks are expecting big drops on houses above 1M to ask for such DP (trying to protect themselves, and asking 50% DP).
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October 24th, 2012 at 8:53 am 8
@bubbly: re: “…idiotic article…”
Not an idiotic article! It’s a good article and false dichotomy both.
Demand side incentives amount to a net tax on renters by transferring a benefit from renting taxpayers to home owning tax payers. Renters can’t get easy high leverage government insured loans for what they want to speculate on, why should home buyers get this benefit? Are renters some low rung on society that must be erradicated? How did a home loan benefit for war veterans morph into a system of discrimination against those who rent their shelter?
Supply side incentives in the form of easier financing for certain types of housing, like purpose built rentals is a justifiable role for the CMHC if those types of buildings are in short supply.
Also, keeping a smaller supply side CHMC in existence (not leaving a vacuum) would establish a bureaucratic body with inertia that politicians would have to overcome in future should the public mood leans again toward the bad demand side policies. Further, if the CMHC is changed to supply side only, the law could be revised to reflect his policy by forbidding demand side incentives.
Hot debate. What do you think?
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October 24th, 2012 at 9:18 am 9
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October 24th, 2012 at 9:22 am 10
@More Data Please:
“Renters can’t get easy high leverage government insured loans for what they want to speculate on, why should home buyers get this benefit?”
I’m no fan of the CMHC, but if we apply this logic across the board, you would have to eliminate government backed loans of all sorts. Banks get subsidized for mortgages because the government wants more people to buy houses and, from the government’s point of view, there are advantages to people buying houses. We can argue against the policy of promoting home ownership, but if our line of attack is, “it’s not fair,” then we have to argue against every government incentive out there.
Hot debate. What do you think?
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October 24th, 2012 at 10:29 am 11
@N: “…to argue against every government incentive out there…”
To be clear, I’m arguing against discriminatory and distorted lending for certain types of loans to individuals, not unequal allocation of benefits to individuals. If I was against socially useful benefits, I wouldn’t have advocated CMHC supply side support for purpose built rental buildings.
I also support government supply side incentives for road works projects but would oppose loan default insurance for purchasing private automobiles.
Hot debate. What do you think?
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October 24th, 2012 at 10:37 am 12
@asalvari1: “Its also interesting to analyse these numbers from banks perspective. Apparently, banks are expecting big drops on houses above 1M to ask for such DP (trying to protect themselves, and asking 50% DP).”
It looks like banks think prices will decline as much as 50%. Seems about right. I wonder where they come up with such predictions? Could it be the same bank economists who publicly state housing will never correct?
Remember always look at what people do, NOT what they say to determine how they really feel about something. We now know how the banks feel about housing going forward.
Hot debate. What do you think?
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October 24th, 2012 at 10:52 am 13
@Anonymous:
Hold on, not so quick
First, lets get some confirmation that this is real. We will know soon enough.
Second, asking for 50% DP on higher then 1M does not mean that the houses will fall for 50% nor it means that banks are predicting it. It just means that banks are seriously worried and they want extra insurance.
The real punch line is that the extra insurance is definitely going to make their worries materialize… how funny, protecting yourself from something that is caused by your protective action.
Hot debate. What do you think?
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October 24th, 2012 at 10:53 am 14
National Post: “Hard-pressed homeowners just close their eyes and borrow some more”.
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October 24th, 2012 at 10:53 am 15
@More Data Please:
I’d love for the federal government to provide me with loan insurance for my margin account at TD Waterhouse. Then, TD would be able to reduce the % charged down to Prime.
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October 24th, 2012 at 11:04 am 16
@asalvari1: I apologize, my calculator was broken if used before the morning coffee:
Obviously, for 1.5M DP is 550K or for 2M house DP is 800K.
should be
Obviously, for 1.5M DP is 450K or for 2M house DP is 700K.
still, this is huge difference from the past where you could get in with 5% DP only.
1M used to be 50K new 200K
1.5M used to be 75K new 450K (200K or 20% on the first 1M and 250K or 50% on the last 0.5M)
2M used to be 100K new 700K (200K or 20% on the first 1M and 500K or 50% on the second 1M)
This are insane increases in the DP requirements.
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October 24th, 2012 at 11:05 am 17
@Bo Xilai: “I’d love for the federal government to provide me with loan insurance for my margin account at TD Waterhouse. Then, TD would be able to reduce the % charged down to Prime.”
You can do this with a HELOC. Just another silly thing CMHC insures.
Hot debate. What do you think?
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October 24th, 2012 at 11:07 am 18
@asalvari1: “This are insane increases in the DP requirements.”
To the contrary I would call them sane. The 5% down is insane.
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October 24th, 2012 at 11:28 am 19
The cartel is not in business to lose money.
Hot debate. What do you think?
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October 24th, 2012 at 11:50 am 20
Have the Americans learned nothing?
http://tinyurl.com/99dawxc
“Krugman explained why offering relief to homeowners is so crucial for an economic recovery:
Loosely speaking, excess debt has created a situation in which everyone is trying to spend less than their income. Since this is collectively impossible — my spending is your income, and your spending is my income — the result is a persistently depressed economy.”
Wow. Your income is my income and vice versa, so you better get in more debt so I can afford to earn a living. Have we gone mad? You don’t want to spend less than you earn because if we all did it then how could we afford more stuff? You can see the madness that has crept into our alleged leaders.
Hot debate. What do you think?
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October 24th, 2012 at 11:57 am 21
@Turkey:
Great article. It’s a direct attack against COC and the COC friendly media, and a total lack of personal accountability we all know is driving the COC phenomenon.
“You can picture the headlines — “Canadians driven from their homes by rise in interest rates” – and the panic in Ottawa. The papers – well, some of them, anyway – would be full of stories about innocent families who insist they had no idea they were getting into such a mess when they took out the mortgage on their “dream home.” ”
“New Democrats would be enraged. NDP leader Thomas Mulcair would probably find some way to blame it on Alberta or the Dutch Disease, or maybe both. But all those people (except Mulcair, of course) have been busy issuing warning after warning about the trouble we’re heading for. Mr. Flaherty has repeatedly tightened mortgage rules in hopes of stemming the enthusiasm of Canadians who seem willing to subject themselves to any level of borrowed money in order to move into a house they may never manage to own. Mark Carney, the Bank of Canada governor, has wagged his finger at big borrowers so often he seems almost sheepish about it.”
Hot debate. What do you think?
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October 24th, 2012 at 12:25 pm 22
Is there anywhere to access the actual unspun numbers in various areas of Vancouver, North Van, West Van…. that give the amount that the market has dropped, price wise or % wise.
Im finding it difficult to get a straight answer.
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October 24th, 2012 at 12:28 pm 23
@Can’t wait
I have sent that article to two COC’s this morning. No reply. Usually they reply to my email instantly but not this time. One is 80k heloc maxed an other is 5ok.
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October 24th, 2012 at 12:42 pm 24
@kenny: “COC”
Racist, dude. To me, “HAM” refers to where the money came from, not who the possessors of the money are. Unless “COC” means “Canadians On Credit”.
Hot debate. What do you think?
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October 24th, 2012 at 12:46 pm 25
Bull! Bull! Bull! is clearly rattled. His tone has changed. I guess the last Bull has been sent to the slaughter house.
Teranet – 1.1%
Closing costs -3.0%
Inflation -3.0%
Real Y/Y – 7.1%
Even that is a gross underestimation. I don’t think there is a Realtor out there who won’t admit the market is down at least 10% from its highs.
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October 24th, 2012 at 12:50 pm 26
Kenny don’t poke the animals!
In all reality if you want to keep your friends and associates you will stop sending them this information in the months to come. I have already had to stop as people are now aware its over and they don’t want to hear about it. Its sad becuase they gloated for years and now they are asking us to stop telling them we were right after a few months. Oh well they say the pain of losing a dollar is much worse than the high of making one.
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October 24th, 2012 at 1:03 pm 27
@More Data Please:
Fair Enough. So I take it thtat your underlying question was not so much, “why should home buyers get the a special benef?it” (which is easily answere by, “because the government has decided to promote home ownership”) but rather “why should the government promote home ownership?” That’s a reasonable question. One reason is that people vote for governments that promote home ownership (in part because they like the idea, and in part because they feel rich when home prices go up). Of course, we all know whe this gets us. Which I guess is my point: that there is not much mystery here.
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October 24th, 2012 at 1:03 pm 28
OK, off topic but this just made me laugh. It’s bad enough that apartments in “The Maynards Block” are using tiny appliances to try and make the place look bigger (good luck cooking a holiday bird in that oven…looks like a betty crocker appliance) but check out the slot in the shelving for the range hood of which there is non because they went with a rangetop with integrated ventilation. This is just poor lazy craftsmanship of throwing a place up in a hurry with specifications developed on the fly:
http://vancouver.en.craigslist.ca/van/apa/3358380790.html
Oh yea, have fun using that sink to wash your pots and pans right up against the fridge wall…does anybody think about function anymore?
Oh yea, these were built for flippin’ not livin’ so no.
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October 24th, 2012 at 1:04 pm 29
27 was me
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October 24th, 2012 at 1:14 pm 30
@mac:
It might help your critique of Krugman’s argument if you didn’t attribute to him a view that is the exact opposite of what he wrote! He’s arguing that ‘Mericans have too much debt; ergo, reduce the level of debt by forgiving a portion of mortgage debt. There is, admittedly, the potential of moral hazard if this is done.
You may not like Krugman but I think that all economists–Kenynesian, Monetarist, Austrian–that the main problem with the global economy is the tremendous amount of outstanding debt on the balance sheets of households, businesses (to a lesser extent), and governments. This debt has to be dealt with. Of course, the answers to how to resolve this issue vary. The track record to date suggests, however, that the “austerity” economics of the non-Keynesians is simply not working but is, in fact, having the opposite effect. Look at Greece and the UK, for example.
Hot debate. What do you think?
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October 24th, 2012 at 1:17 pm 31
@mclovin: McL you should talk to the agents pre-selling the units behind the OV. Sky’s the limit. We were looking at a 2-bed 1,150ish sq. ft. asking 849K and I asked if they accept “offers” and the agent firmly said no. I mentioned something about $500-ish per sq. ft. and he said never. $600ish… after all this is the West Side. Yeah. By one block.
Hot debate. What do you think?
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October 24th, 2012 at 1:17 pm 32
What is COC? (Forgive the ignorance, been away from civilization for awhile and it’s new to me….)
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October 24th, 2012 at 1:28 pm 33
@Guy Smiley: Canadians on Credit : COC
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October 24th, 2012 at 1:30 pm 34
@oneangryslav2: Yes but it just shifts debt around from homeowner to tax payer.
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October 24th, 2012 at 1:41 pm 35
@Chem Guy: How do you put a bed in that bedroom? lol…
Hot debate. What do you think?
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October 24th, 2012 at 1:41 pm 36
New Listings 149
Back On Market Listings 5
Price Changes 107
Sold Listings 49
ALL lower mainland
as of 1:41pm
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October 24th, 2012 at 1:45 pm 37
@Jesse
Of course, Canadians on Credit. Are we exceptional?
@Jesse: “To me, “HAM” refers to where the money came from, not who the possessors of the money are”
well to me it means who the possessors are. They are on the title.
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October 24th, 2012 at 1:49 pm 38
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October 24th, 2012 at 1:50 pm 39
@Guy Smiley: It’s Caucasians on Credit, as opposed to Hot Asian Money.
Hot debate. What do you think?
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October 24th, 2012 at 1:51 pm 40
@oneangryslav2: re: ‘…austerity economics of the non-Keynesians is simply not working…’
We can agree that Krugman is misquoted, but the “Keynesian’s” claim that austerity is not having the immediate desired effect could be disputed this way.
What evidence is there that cash hoarding firms aren’t simply waiting for the price action guidance as to where the next credit bubble will appear due to the next round of monetary stimulus?
Austerity “not working” is not fair. If there was no expectation of any future stimulus, firms would start making the best of the situation and trying as best they know how to make productive use of the cash they are now holding back.
Also isn’t Keynes really being misappropriated and misquoted by modern economists? Didn’t Keynes say, more precisely, that productive surplus should be taxed and held in reserve to smooth out consumption in leaner times? The interpretation we have now is that excess production is never taxed and we simply print more money to keep things going when it grinds to a halt. Governments go deeper and deeper in the hole because consumers never save anything – there is always more printed money around the corner.
Hot debate. What do you think?
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October 24th, 2012 at 1:51 pm 41
@mclovin: “In all reality if you want to keep your friends and associates you will stop sending them this information in the months to come.”
well if you keep quite how can i call them a “friends” anymore? It is not to late for them to change the course. if they get second job and if they become frugal they could pay off LOC in 4-5 years.
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October 24th, 2012 at 1:56 pm 42
@oneangryslav2:
There already exists a method of reducing mortgage and other debt that doesn’t create a moral hazard. It’s called bankruptcy, and rather than transferring money from taxpayers to speculators, it puts the consequences of bad debt exactly where they belong – on irresponsible borrowers and irresponsible lenders.
Hot debate. What do you think?
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October 24th, 2012 at 2:00 pm 43
@oneangryslav2: Right!
I’ve read a fair amount of Krugman (also a variety of austerity economists) and it’s clear that Krugman thinks the household debt was a terrifying imbalance leading to a Minsky moment. He clearly doesn’t think debt is a great positive.
Rather, he’s saying it was created and exploded like a great messy bomb, and now it’s time to do triage and start putting the body back together. If there’s an abyss at the centre of the economy on the household debit sheets, which strategy leads back to full productivity faster? Where lies the best strategy? Middle class households provide the vast majority of demand and monetary velocity in the economy but each individual engine works for a short time (people die whereas governments don’t); since middle class also depends on the jobs created by demand, it’s easy to get into a negative feedback loop.
I read it in non-economic terms. It’s like he’s doing skin grafts – not saying that it’s optimal for a system to have to graft butt skin onto one’s face, but having a smooth face is better for getting a job than having a smooth butt.
Anyway, I personally think this solution only works if you have some way to prevent households from digging more holes, or frankly, it’ll blow up in everyone’s face again. The free-market solution is to let banks choke on their risk so they stop handing out backhoes, which seems fair to me, only it’s not happening for fear of global collapse. The other solution has got to be legislation, and that’s not happening either because the cowboys with the backhoes have enough money to demand it doesn’t happen. ARGH. So it seems to me that until those profiting from recklessness are shut down, Krugman’s solution is dangerous. Otherwise it makes sense – move the disease to someplace less central to the organism.
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October 24th, 2012 at 2:00 pm 44
@Mick Murphy: Shouldn’t it really be HAMOC? Hot Asian Money on Credit as China printed ten times more money than the US did and there are numerous articles that point to family syndicates which lend money to each other. Plus HAM is rewarded for purchasing real estate here by Canadian banks because they will finance it up to 65%. Or used to under the old OFSI rules. (Don’t know about now… does anyone?)
So both are on credit as far as I can see.
Hot debate. What do you think?
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October 24th, 2012 at 2:12 pm 45
@Mick Murphy: HAM are also, for a good chunk of them, COC (Corrupted Officials from China).
Hot debate. What do you think?
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October 24th, 2012 at 2:16 pm 46
@ Bull! Bull! Bull!
Don’t worry there is more to come my bovine friend
Hot debate. What do you think?
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October 24th, 2012 at 2:28 pm 47
@Makaya: I meant Corrupt, not Corrupted lol…
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October 24th, 2012 at 2:31 pm 48
@Makaya: Or furniture in the odd shaped triangular living area, or sleep with the Cambie bridge noise.
As I’ve said before, I only hope the condo bacteria that has infested 2nd Ave had forthought in mind and built the units to be joined together in the future to make livable apartments.
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October 24th, 2012 at 2:32 pm 49
Some market comments with 16/22 days completed this month.
1.) On a seasonal basis, October in general is a strange month. In years where the market is very hot, October comes in with sales below Sep. Where the market is slower, it comes in slightly above Sep (on a sales per market day basis). Thus – when October has better sales than September, it’s actually not necessarily a good sign. This year we will come in approx 10% higher on a sales/day basis.
2.) We will come in at the 2nd worst October in 12 years. We will come in likey under 2,000 sales.
3.) There are about 15% more market days this month compared to Sep. So – given a 15% adjustment factor, who is up this month in terms of sales volume? Richmond Detached is one of the leaders. Easy to get big increase from low base in September. We have about 80 units projected to be sold. This will bring MOI down to approx 13. What we are getting now is big price decreases making transactions happen.
Van-West attached is up 27%. We had a slow September as the mortgage rules really affected buyers. We are seeing some price reductions now. MOI here will now come under 8, which is high for condos but is not a disaster.
Van-East detached – We could get 100 sales this month. MOI 7. Pretty weak for east van but House-Horny young couples are shelling out to get in to the Vancouver market but still live in s–t boxes in east side neighbourhoods.
North Van and Burnaby detached are having a bit of a bounce but from a very low base last month. North Van will be hottest market now but MOI is 6(down from 11) and Burnaby will have MOI of 10 down from 18 last month.
Who is having sales decreases?
Van-East Attached. Down with all comparative periods back to 2009 and a real slow-down from early this year. One of the few areas forecasting increase in MOI for Oct / Sep. However, only increasing close to 9.
Listings pace is right at the avg of the past 5 years but higher than the past decade. It seems that weaker years have higher lists in Oct (a last ditched effort to complete the sale by the end of the year).
On price – This month we again continue to see some very high priced detached homes sell. We also see a change in mix which is putting upward pressure on the average while decreasing the HPI. Does not appear that HPI will fall as much this month as last but should be down on detached. Possible to be down depending on the final few days but it is looking like avg price for detached up a bit on mix with decrease in HPI.
For attached, we are seeing weaknesses in average price and also some decrease in HPI. Overall, low interest rates and loose credit will continue to put a floor in the value of properties in Vanvouver. However, cost of renting to cost of owning continues to have a gap and this will have to narrow over the longer term either through price decreases, or rental rate increases.
We could be in for a very long re-balancing of prices as long as there are no more economic shocks or significant change in speculator positions. As long as people in Vancouver are willing to sacrifice consumption in other areas of their life to both live in Vancouver and live in a space which is much smaller than they could while consuming only rental costs, the prices will not fall at a rapid rate.
Happy end of Week Vancouver and I’ll be back this weekend for a week!!!
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October 24th, 2012 at 2:33 pm 50
This is an update on a small development about which I reported two months ago:
Below is my posting from 29 August 2012; all that has changed since then is that one of the realtors’ three signs is missing from its post and another one, that proclaimed ‘Price Reduced” is laying on the ground. The prices haven’t changed and all five units are unsold and vacant. How long will the developer pay carrying costs that I conservatively estimate at $12,000.00 a month before throwing in the towel, facing foreclosure or filing bankruptcy?
Original post: This is an interesting case study and a cautionary tale about the reality of the Vancouver real-estate market:
In the first quarter of 2012 a five-unit strata development (called, according to the on-site sign, ‘Strathcona Gateway’) was completed from assembled lots at the southeast corner of Gore Avenue and Union Street in Strathcona in Vancouver East. The five detached townhouses have ‘heritage’ architectural elements with a shared 4-car garage (parking pad for 312 Union) without storage. Floor plans available on various websites show very small rooms but an open kitchen arrangement. I have not toured these properties, but the interior photos appear to show average construction and finishing.
The situs is the southeast corner of Gore Avenue and Union Street. Gore Avenue is moderately busy; Union Street is lightly traveled and is a major bike route from the east to downtown; Prior Street is one-half block to the south and is a very heavily traveled street at all hours as it is a major feeder to and from the Georgia and Dunsmuir viaducts. There is a park across Gore Avenue, but all of this is subject to radical change as the City’s plans for demolition of the viaducts move forward. I would rate this a C- location.
Regarding the developer, Wadaco Development Corp.: A Google search turned up a Wadaco Development at 643 East Georgia Street, Vancouver, BC V6A 2A2 but the phone number, (604) 676-9266, is a private home and Wadaco Development Corp. was unknown to the woman answering the phone.
Searching the City of Vancouver website, nothing came up under ‘Strathcona Gateway,’ Wadaco Development Corp.’ or any of the individual street addresses of the properties (including variations of the names and addresses).
Here are the particulars on the development (all five listings were originally placed on MLS on 21 March 2012 and do NOT include HST):
308 Union Street is a 2-bedroom, 2.5-bath townhouse of 1,254 square feet currently listed for $828,000 as V939338 (originally priced at $898,000).
312 Union Street is a 3-bedroom, 2.5-bath townhouse of 1,258 square feet currently listed for $818,000 as V939353 (originally priced at $888,000).
808 Gore Avenue is a 2-bedroom, 2.5-bath townhouse of 1,076 square feet currently listed for $699,000 as V939337 (originally priced at $760,000).
818 Gore Avenue is a 2-bedroom, 2.5-bath townhouse of 1,078 square feet currently listed for $699,000 as V939341 (originally priced at $760,000).
828 Gore Avenue is a 2-bedroom, 2.5-bath townhouse of 1,110 square feet currently listed for $719,000 as V939354 (originally priced at $780,000).
As of the date of this writing (29 August 2012), none of the five townhouses appears to have been sold or occupied. Two of the realtor’s signs on the site have large ‘add-on’ signs proclaiming in big red letters ‘PRICE REDUCED.’ The main sign says: ‘Move in May 2012.’
Will this be a classic case of initially overpricing the units and then chasing the market to the bottom?
Hot debate. What do you think?
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October 24th, 2012 at 2:34 pm 51
@kenny: “well to me it means who the possessors are”
I guess I have a hard time distinguishing from the guy who lives in Asia, the guy who spends 4 months in Vancouver and 8 months in Asia, and the guy who lives in BC full-time but derives (or derived) most of his wealth from Asian investments, not least those who are selling Asia raw materials. To me it’s all “HAM”, but apparently my view is “disliked”!
Hot debate. What do you think?
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October 24th, 2012 at 2:41 pm 52
@Can’t wait:
“Great article.”
It’s a bullshit article. The massive increase in consumer debt is a direct outcome of the Cons’ strategy to juice the RE market and consumer spending using government debt guarantees. Yet the article pretends that Flaherty is trying to bring the problem under control when he’s responsible for it in the first place. To wit:
Hot debate. What do you think?
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October 24th, 2012 at 2:43 pm 53
@YVR2ZRH: “as long as…”
If it weren’t for those three words…
Like or Dislike:
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October 24th, 2012 at 2:46 pm 54
@RFM: I’ve been watching (and posting occasionally) about Strathcona Edge for quite a while now. There has been no price movement for months, and the “price reduced” stickers were removed a couple of weeks ago leaving an ugly adhesive smudge on the realtor’s signs. Nobody even bothered to remove the old “Move in January” and “Move in May” stickers on the development poster.
They’re doomed, and judging from the lack of effort involved in the sale, the realtor (at least) knows it. Since it’s a new build, perhaps the developers are holding out hope for the HST roll-back.
Hot debate. What do you think?
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October 24th, 2012 at 2:48 pm 55
@Yalie:
” It’s called bankruptcy, and rather than transferring money from taxpayers to speculators, it puts the consequences of bad debt exactly where they belong – on irresponsible borrowers and irresponsible lenders.”
As long as the government isn’t holding the bag on that debt.
Hot debate. What do you think?
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October 24th, 2012 at 2:56 pm 56
patrioz: ” The massive increase in consumer debt is a direct outcome of the Cons’ strategy to juice the RE market and consumer spending using government debt guarantees.”
here we go again with patriotz “It’s all Cons’ fault”..I mean do you really believe that the outcome would be different if Liberals were in power?
Hot debate. What do you think?
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October 24th, 2012 at 3:04 pm 57
New Massive flyer in the mail today from Rennie pumping the OV, according to the flyer only 177 homes remain! Its been about 5 years since they began presales and no where near sold out.
On the bright side you can take to flyer to the Terra Cafe for a free coffee on us IE; Vancouver taxpayer
Hmm it will be interesting to see the outcome of the 70 owners with a class action lawsuit against the city, maybe 70 more units available for sale….lol
Hot debate. What do you think?
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October 24th, 2012 at 3:09 pm 58
There’s so much more to the DeMarco story than what I first posted. Go DeMarco, go!! He’s a modest guy with a modest house who is the one being mischaracterized by Krugman as a GOP faithful trying to hamper Obama policy for the political gain of his party. Nonsense. He’s:
“A man with power over more than half of U.S. mortgages who lives in a 1961 brick split-level house. There’s a basketball hoop in the driveway and a green Subaru Outback in the carport. The homes on Edward J. DeMarco’s block are so close that neighbors see into each other’s windows. This surprised several dozen demonstrators, one in a vampire costume, who arrived at DeMarco’s residence in a middle- class Washington suburb last month to demand he quit his job as acting director of the Federal Housing Finance Agency. “My home is better-looking than this,” said Catrese Tucker, a Massachusetts toll collector whose property is in foreclosure. “I don’t believe this is his home.”
http://tinyurl.com/9s3p5hu
Hot debate. What do you think?
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October 24th, 2012 at 3:17 pm 59
@I don’t vote: Deregulation of the mortgage market, including relaxation of amortization periods up to 40 years, is a very Steven Harper’s Conservative Government™ move. Would a Liberal government have seen CMHC’s insurance limit cranked up this far? Would interest rates still have dropped to all but zero? Probably. But without the misguided and very Conservative mortgage deregulation that started it all off, I contend we wouldn’t be in this situation.
Hot debate. What do you think?
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October 24th, 2012 at 3:31 pm 60
Real estate is different in this way. Everyone expects, and is ok with, falling prices everywhere else. When the iPad is cheaper in 6 months and the new model costs less than the previous one, that’s great. When your car loses half its value when you drive it off the lot, that’s just normal. Things get cheaper (at least in real terms) due to advances in production and economies of scale.
But not houses. Houses getting cheaper is never good. Obviously part of is that they’re bought on credit, and leverage on a declining asset is never pretty. But there is also the belief that real estate ownership is the route to middle class wealth. Housing is not just a utilitarian thing, like a car or a computer or a phone or a plane trip. It’s a whole bunch of things, including a savings and retirement plan, wrapped into one package.
Deeply held beliefs and cultural mores are unassailable and politically untouchable (at least not directly). When you objectively prove them wrong, people just hold on tighter.
House prices will go down, dragging the home owners kicking and screaming all the way. Government will be propping up both demand and supply sides, however ineffective and wasteful that may be, because they must. Too many Canadians (ie voters) depend on the value of their houses. The trend is scary, because it used to be they wanted a paid off house for retirement, now it’s a pension plan too, and some people are starting to depend on rising real estate values for their daily expenses.
Should the incentives go to the demand or supply side? Ideally neither, because then the whole market becomes political football, but if they must, I subscribe to the Austrian school (production before consumption), so I think the supply side would be more effective to target and control.
Well-loved. Like or Dislike:
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October 24th, 2012 at 3:44 pm 61
@patriotz:
I agree in principle. And yet, as we know, the government already guarantees much of the mortgage debt out there and there’s not much we can do about that fact at this point. I suppose one might argue that there’s therefore no difference between the government paying out via mortgage insurance vs paying out through a principle reduction. Either way the taxpayer gets shafted for somebody else’s speculative loss. But I still prefer the first option, because at least it doesn’t create a moral hazard.
After all, I don’t recall homeowners offering to give the government their massive windfall gains back when the market was going the other direction.
Hot debate. What do you think?
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October 24th, 2012 at 3:50 pm 62
Hidden due to low comment rating. Click here to see.
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October 24th, 2012 at 3:55 pm 63
@I don’t vote:
“I mean do you really believe that the outcome would be different if Liberals were in power?”
What you or I or anyone else think the Liberals would have done is completely irrelevant. The fact is that the Cons have been in charge of CHMC policy since 2006 so they must be held responsible for the RE price inflation and associated rise in consumer debt since then.
“The buck stops here”.
Hot debate. What do you think?
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October 24th, 2012 at 3:56 pm 64
WOnder what made Tsur change his mind. Maybe because the market is already down 10% and he is trying to salvage a little credibility.
Well-loved. Like or Dislike:
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October 24th, 2012 at 4:04 pm 65
Price Changes from highs:
Edmonton: -11.0%
Calgary: – 6.7%
Victoria: – 4.5%
Vancouver: – 2.9%
The rest of the country is under a 1% drop.
New September highs in Hamilton, Winnipeg, Toronto, Halifax
Volume YoY: really dried up in the following cities (over a 10% drop in sales pairs)
Edmonton
Victoria
Vancouver
Quebec
Ottawa
Montreal
Well-loved. Like or Dislike:
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October 24th, 2012 at 4:09 pm 66
@Anonymous:
Tsur is following the same strategy as his counterparts in the US, which I call predicting the past. Simply predict the market will move in the same direction over the next year as in the last few months. Since RE cycles move so slowly, these “predictions” will be right most of the time, and useless all the time.
Since most people can’t or won’t put in the effort to match up the dates of the “predictions” with the market, they get the notion that these guys actually know something.
Well-loved. Like or Dislike:
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October 24th, 2012 at 4:33 pm 67
Tsur don’t know dick
Well-loved. Like or Dislike:
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October 24th, 2012 at 4:43 pm 68
A little off topic here, but the government guarantee fiasco/gravytrain is not only limited to the housing market.
Just came out of a meeting with the manager of an “Infrastructure Fund” that invests in “P3″ and other “infrastructure” projects. Turns out that the projects in question include selling $30/MW hour power to government electric utilities for 20 years at a contract price of $80 … or funding the building of white elephant bridges like the Golden Ears where the private operators’ revenue is guaranteed by the government (guess what, the revenue projections, originally supplied by the private developers, were over-optimistic and the government has to subsidize the developers to the tune of $30M per year).
“Guaranteed by the government” costs nothing to put in writing at the time, but costs billions to the poor shleps who pay taxes. And, importantly, stimulates the massive overbuilding of the subsidized items (houses, bridges, solar panel farms, etc.) so that it makes the underlying industries unprofitable for generations.
Well-loved. Like or Dislike:
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October 24th, 2012 at 4:44 pm 69
@ mclovin
Don’t get them upset.
http://www.youtube.com/watch?v=VWAIjYs9Lws
Like or Dislike:
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October 24th, 2012 at 4:56 pm 70
patriotz: “What you or I or anyone else think the Liberals would have done is completely irrelevant.”
it is not irrelevant. if Liberals would do the same then we would know that we live in corporate/bankster kleptocracy.
Hot debate. What do you think?
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October 24th, 2012 at 5:22 pm 71
I would agree that no one should vote for the Conservatives because they were in power when CMHC excesses were at their worst.
The problem for us bears is that no party has any record of opposing the CMHC, and the Conservatives are doing the correct thing at this point in time. Since doing the right thing is going to hurt some people (and regions, industries, etc.) I think it is only a matter of time before an opportunistic opposition starts to take the wrong side on the CMHC debate.
I predict I will have to spoil my ballot in 2015.
Well-loved. Like or Dislike:
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October 24th, 2012 at 5:25 pm 72
New Listings 168
Price Changes 142
Sold Listings 71
TI:18911
http://www.paulboenisch.com
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October 24th, 2012 at 6:04 pm 73
Nice to see sales figures back to 70′s. Yesterday was a bit of a scare. Yesterdays sales figures was the highest in the last several months.
My take:
Quality of listings is crap. Product on the market is very weak. On west side, there are still some new home transactions happening in the 4.5 million dollar level on a 66×120 lot size. This in turn is putting pressure on the lot value keeping lot values at 2.7-3.0 million level. Still leaves about a half million dollar profit for the builder for a years work.
Westside is going to go down kicking and screaming. Almost every lot has some sort of defect. Any softening on the westside will be in the south granville area between oak and granville, and between 57th avenue and 41st avenue. I agree the market is going down, but this month is somewhat disenhearting, especially on the westside.
I predict the market will shift when a new development goes into receivership, like last time and Bowra Group or Mac Marketing steps in. That’s when the market will truly shift. Until then, the difference month over month will be small 1-2-3% drops.
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October 24th, 2012 at 6:31 pm 74
“Oh yea, have fun using that sink to wash your pots and pans right up against the fridge wall…does anybody think about function anymore? ”
ugh, SUPER bad layout in kitchen, living room and bedroom. That sink placement is ridic. Bad angles for bed, couch, no wall for t.v….crap i’d be mad if i bought that sight unseen, no wonder they’re renting it out
http://vancouver.en.craigslist.ca/van/apa/3358380790.html
Hot debate. What do you think?
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October 24th, 2012 at 6:34 pm 75
Is it just me, but I see Mike Stewart’s ads so often. It’s on here, youtube, google, and etc.
Like or Dislike:
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October 24th, 2012 at 6:44 pm 76
Uninsured West Vancouver $430K Lamborghini seized after owner couldn’t or wouldn’t pay $568 fine! He said it was “too much”. Did he really think he could negotiate the price down?
http://www.cbc.ca/news/canada/british-columbia/story/2012/10/24/bc-lamborghini-insurance.html
Financing charges must be hitting pretty hard now if he can afford $430K for the car but has no money for insurance and fines. What happens when the car runs out of gas?
What is the background of a 22 year old living in West Vancouver thinks that his vehicle doesn’t need insurance and that he can negotiate lower fines with police? Is that how it worked in the old country?
Well-loved. Like or Dislike:
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October 24th, 2012 at 6:47 pm 77
@paulb:
It would be cool to hit 19K before the end of month just for the fun sake.
Hot debate. What do you think?
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October 24th, 2012 at 6:52 pm 78
@Vangrl
That is a BAD kitchen design. There should be counter space on both sides of a sink. I’m not sure I would like the dishwasher being right next to the stove either.
Note the ad says “no smokers please”. Most ads just say “non-smoking” like if you smoke, you better go outside to do it. In this case, they don’t even want a smoker who smokes outside!
Hot debate. What do you think?
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October 24th, 2012 at 7:34 pm 79
Hidden due to low comment rating. Click here to see.
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October 24th, 2012 at 8:08 pm 80
Hidden due to low comment rating. Click here to see.
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October 24th, 2012 at 8:38 pm 81
Hidden due to low comment rating. Click here to see.
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October 24th, 2012 at 9:16 pm 82
@More Data Please: All that is wrong with BC summed up in one news article. Sieze the car,sell it and use the proceeds to deport the idiot and his family.
Well-loved. Like or Dislike:
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October 24th, 2012 at 10:05 pm 83
@More Data Please: he is a cheena man
Like or Dislike:
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October 24th, 2012 at 10:26 pm 84
@Beuller: Idiot sons of foreign dictators.
When I wrote about the 22 year old uninsured West Vancouver Lamborghini driver who thought it was normal to negotiate fines with police, I had no idea that it would strike such a cord.
If you are concerned that people like this might be the new owner/managers of major Canadian firms please take a moment to read and sign the online petition to stop the China Canada investment agreement:
http://www.leadnow.ca/canada-not-for-sale
This agreement becomes binding on Canada in less than one week and there will NOT be a Parliamentary debate about it if you don’t make your voice heard now.
Well-loved. Like or Dislike:
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October 24th, 2012 at 10:50 pm 85
Question..
Anyone know if 4596 Windsor Street sold? If so for how much?
Cheers
Like or Dislike:
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October 24th, 2012 at 10:58 pm 86
@Anonymous: @VanGrl
Haha, so that’s what it means to “Live the Legend” in Vancouver.
Living in a badly designed overpriced condo watching the Cambie bridge traffic from the kitchen=living-room-den combo.
Like or Dislike:
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October 25th, 2012 at 5:26 am 87
@BLISTINGAGENT:
“the Conservatives are doing the correct thing at this point in time.”
But amortisations were always 25 years before the Cons took office. So by this standard they are the only ones who have done the wrong thing.
When Flaherty announced earlier this year that we would be going back to 25 year amortisations, Bob Rae noted in the House of Commons that this was a return to what existed in 2006 and suggested that indicated that the Cons’ lengthening of amortisations had been wrong. Flaherty replied that CMHC standards had to be adjusted to the needs of the day.
Hot debate. What do you think?
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October 25th, 2012 at 1:07 pm 88
“Should incentives got to the supply or demand side?”
It doesn’t matter which side, subsidies will end up benefitting the landowner, or the supply side.
Economic theory will tell you that land is inelastic or in fixed supply – after all, they aren’t building any more of it and there is a limited amount of land within a given area. Economically, inelastic goods are different from consumer goods like iPads or whatever.
In a competitive real estate market, people will pay what they can afford to live where they want. Subsidies to buyers will just bid up the market, while subsidies to sellers will just be pocketed and they’ll continue to charge whatever the market will bear.
This was all dealt with by the classical economists like Adam Smith, David Ricardo, Henry George and more, and more recently by the father of the institutionalist school, Thorstein Veblen. Veblen wrote about America that you can best understand politics by viewing it one big real estate promotion: ie. taxpayers pay for infrastructure which increases the value of real estate.
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October 25th, 2012 at 1:14 pm 89
Actually one of the biggest things in the way of more affordable housing is the tax favoritism given to capital gains.
If you build an apartment building and charge rent, you have to pay normal income tax on that rental income. But if you build condos and sell them, you earn capital gains and get a 50% discount.
Also, the housing bubble has contributed to this. Housing sales are not just priced on their fundamental use value or rental value, but are priced expecting future price appreciation. You can’t reap the bubble-inflated price if you’re just expecting to use it for rent. The loose monetary policy and the insurance guarantee given by the CMHC helps bid up the bubble value.
If CMHC continues to exist, they should really lower the criteria: for instance they should only insure the value up to ten times the rental value of an equivalent house.
When the bubble crashes or deflates, people who thought they were getting rich by doing nothing will be disappointed. People who already sold out of the market will be laughing.
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October 25th, 2012 at 1:25 pm 90
@HAM Solo: Very interesting account of your meeting. I work for an organization that would love to get evidence of investors saying their business model is charging the government $80/MW for something that costs them $30/MW to supply. Don’t suppose you could help me out? If so I’ll give you my email.
Like or Dislike:
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October 25th, 2012 at 2:33 pm 91
@ deanbc
@ HAM Solo
Veblen’s observations on the relationship of real estate, the financial sector, and taxpayers are even more true today than in his own time (b 1857-d 1929). The expansion of government spending as a percentage of GDP has enabled larger and entirely new diversions of taxpayers’ money to the financial sector’s coffers. The sordid history of the public-private partnership over the last 25 years is an example of same, and well-documented in its British incarnation in the journal “Private Eye”. Indeed, Western governments can reasonably be viewed as functioning as an enlarging conduit of wealth transfer from taxpayers to financial/corporate interests, long before 2008 and more so since. Conservative interests are in fact the biggest beneficiaries of this arrangement, although one would never guess that from their rhetoric.
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