FFFA! Condos! Arson! Flat! Plummet!

It’s that time of the week again, time to our regular end of the week news round up and open topic discussion thread for the weekend.  Here are a few recent links to kick off the chat:

Great Canadian crash of 2013
Permits plunge into basement
BC condo market on fire
Prices falling faster than USA
Sales people say soft landing
Fence-sitters will be sorry
Price reductions by area
Inventory Graphs
Construction quality issue
Ending debt binge leaves $50bn hole
Ping Pong Pricing Principle

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

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“Another hole in the “people will just stop selling” argument is that most discretionary sellers are planning to buy another property, so if they decide not to sell they are also deciding not to buy” ~~Patriotz

That was an excellent comment Patriotz. It is worth repeating it again even though 5 others already referenced it. I think you have keyed in on one of the most important reasons for coming weakness in homes sales and ultimately prices. Sellers withdrawing from the market and limiting supply do not hold up the market. None of us believe that tripe. The reluctant vendors will only end up reducing gross numbers of sales further.


Where’s Drachen??


Re #119 kevin is brave haha… After all many people have guns in the US

604 Receding Gains

And here’s Dr. Housing Bubble’s Minsky Moment tale for housing/seller psychology (my apologies for posting this last week as well, but it is relevant to the comment stream at the moment regarding foreclosures and triggers):


604 Receding Gains

Anyone up for waving a red flag at some bulls? I came across the comment below from “Kevin” while checking Dr. Housing Bubble’s site about “Minsky Moments” in seller psychology. A dare you to do it bears. I might. If you do, please report back here with results. Grab a video of the faces of sellers and post to YouTube for bonus points. “Kevin said… In the Baltimore Housing Bubble, sellers are having a hard time understanding that their houses are not worth as much as they are trying to sell them for. What I like to do to fuel the soon coming onslaught of decline is to go to open houses and offer 50% of their asking prices. I know this seems cruel and unusually, but when the seller and their agents jaws drop, I simply point to the… Read more »

604 Receding Gains


Tax deductibility might explain HELOC vs. mortgage debt levels in Canada and US. Mortgage interest is of course deductible for US residents, while HELOC interest can be deductible for Canadians if invested (while mortgage interest isn’t). So Yanks load up on mortgage debt while Canadians load up on HELOC. Probably explains some of the difference….


“No we’re not, we are talking anybody who might find themselves in a severe negative equity position.”

The people that will find themselves in the most severe negative equity position will be first time buyers who bought over the past 5 years. That is well over 30% of home purchases. Not everybody who owns a home needs to walk away to make foreclosures sky rocket like in the US. In the US it wasn’t the home owners who owned houses pre bubble that walked away for the most part. Although, I do agree there will be many on the westside who will walk away once values plumet.

Ben Rabidoux

Oops…”not” = “now” in second sentence below…

Ben Rabidoux

@Reality Check

It’s true that on the basis of mortgage debt alone, Canada is still behind the US when comparing outstanding debt to GDP. When we factor in other consumer debt, we find we are not just slightly below where the US peaked and well above where they are currently.

There’s a chart in this post:

One interesting phenomenon is that HELOC debt is FAR higher in Canada….3-4x higher than in the US when compared to GDP. This is “technically” housing-related debt. If mortgage debt and HELOC debt were aggregated, we’d find Canada is well above US currently, but still behind Australia.

That chart doesn’t give me a whole lot of comfort.


@111: Except, unlike in residential real estate (where you can always rent), there are some teams (GMs) who simply “have to buy”. If you’re a GM whose team is in danger of missing the playoffs, and that means the difference between keeping your job or being fired, you’re a potential buyer. From that perspective, there is strong latent demand for the services of a goalkeeper of Luongo’s quality.

Since this topic was brought up, I think the best move would be to keep Luongo for the whole (lockout-shortened) season, unless Gillis gets an offer that’s too good to pass up. Either way, I’d be very happy if I were in his shoes right now.


“LOL ‘retirement savings’. We are talking first time home buyers who couldn’t even save a down payment or put all their savings into a down payment. ”

No we’re not, we are talking anybody who might find themselves in a severe negative equity position. Do you really think that all the people who’ve spent $1m+ on West Side homes are first time buyers? Or that the only people who suffered in the US were FTBs?

Many Franks

Oops, sorry about that missing close tag. More media:
Cooling in housing market seen as ‘healthy’

“Stepping back and looking at the market overall, it is clear now that it peaked nationally in the May to June time frame,” Royal LePage CEO Phil Soper said in an interview. “This cyclical correction is well under way, and I would expect that it would continue through the first half of 2013.”

Compare that to what he said about this time last year:

“Widespread calls for a major real estate correction in 2012 simply can’t be justified,” Soper said in a statement. “The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace.”

down in flamez

The best part of that article:

But what if you wait too long? Everyone knows what happened in Vancouver real estate. One day, the money turned off like a tap. What if teams interested in Luongo make alternate plans, unwilling to meet those Canucks’ demands?


@109: Anonymous Yes and the have nots that own houses and have to sell set the price of housing. Anyone that has to sell would set the market price. In this market, the haves who own their homes will have more dramatic effects. Imagine your primary asset being worth over a million dollars but depreciating 5-10k per month. Those are tax free gains for many, making those losses hurt twice as much. If you have no retirement savings and your only hope is to sell the home and take the proceeds and rent a smaller place (kids gone etc.) then you have some serious motivation to sell and take less than the comparables in your area since the longer you wait, the more you stand to lose. Village whisperer has been calling this the boomer trigger but my family has… Read more »


“I think in Canada we have the haves (paid off houses) or the have-nots (large mortgages)”

Yes and the have nots that own houses and have to sell set the price of housing.


“A walkaway probably won’t have started tapping their retirement savings, for example.”

LOL ‘retirement savings’. We are talking first time home buyers who couldn’t even save a down payment or put all their savings into a down payment. They have no savings to tap into. The group that walks away is living off credit. Remember our household debt levels are higher than the US was at peak.


This chart from the Bank of Canada shows we are presently less in mortgage debt than USA and this is after their crash.


Interesting stats indeed. I think in Canada we have the haves (paid off houses) or the have-nots (large mortgages). Very little in between. Any other way to explain this stat?


“Crashes don’t just happen in a vacuum, you need a trigger”

What was the “trigger” for the Alberta crash which started mid-2007? Keep in mind the price of oil kept rising until a year later.


“A walkaway probably won’t have started tapping their retirement savings, for example.”

Nor would someone who just stops paying and stays put until they’re kicked out, if they have any sense.

It’s not about whether they walk away or not, it’s about how smart they are.


“Crashes don’t just happen in a vacuum, you need a trigger”

I recall US stocks being quite overvalued in 1998. The Asian crisis hit in 1998 and the Fed eased. People jumped in and were saying exactly this in 1999 and 2000. Valuation was ignored, stupidity reigned, and the the whole thing boiled over. The S&P 500 returned to its 1998 level in 2009.


So… $10-15k “incentives” for holidays. I wonder what holidays? The Family Day in February?

Also, only $1k more for each floor? That seems a relatively good deal. Usually they go for $5-10k per floor at other projects.

Regardless, >$400/SF is still way overpriced for Coquitlam. Such prices can be found easily in Burnaby nowadays.


An email from Onni for the (presale) Westwood project in Coquitlam Centre: “Thanks for your interest in Westwood. Here is some more information regarding our project, please see all the details as below: Type Plan Size Starting Price Price after Prom. One Bed Plan A 595 S.F. – 600 S.F. $ 252,900 $ 242,900 One Bed Plus Den Plan G/J 695 S.F. $ 305,900 $ 295,900 Two Bed Plan B,D,D1&H 845 S.F. – 880 S.F. $ 349,900 $ 334,900 Two Bed Plus Den Plan C, E, F & I 975 S.F. – 1180 S.F. $ 402,900 $ 387,900 Westwood is offering very attractive incentives for holidays right now: $10,000 discount for one bed and one bed plus den; $15,000 discount for two bed and two bed plus den. Besides great location, unobstructed view, Club W amentities, and conveninent transit, for… Read more »

painted turtle

Are realtors interested in keeping the market prices at the top? Some are:
My understanding is that Claire Rockel is behind this project, and about to get burned.
These apartments are of poor quality, where built under the rain last winter, living space is very narrow (nothing like the pictures) and I suspect that the sound proofing is not adequate.
They look good only on paper and could attract foreign investors who buy site unseen. But surely not someone who intends to LIVE there.

Also, I had enough of MLS “townhouses” like this one = 2 bedroom ground level apartment.
Realtors are losing credibility.

Vote Down The Facts

It actually does make a difference, because borrowers are likely to have exhausted much of their wealth before the bank finally forecloses. A walkaway probably won’t have started tapping their retirement savings, for example.