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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JD
Member
JD

Any predictions on when our first 300 listing day is?
My guess is next Friday, the 18th.

JD
Member
JD

Updated economist magazine housing data for comparison: http://www.economist.com/blogs/dailychart/2011/11/global-house-prices

Short'em High
Guest
Short'em High
http://www2.macleans.ca/2013/01/10/tiff-macklem-end-of-household-debt-binge-will-leave-50bn-gap-in-the-economy/ Deputy BoC Tiff Macklem: …We can’t count on the housing market and overstretched consumers to keep propelling economic growth. Eliminating Canadians’ private net debt alone would leave a $50bn gap in the economy… Duh, but that’s something at least! The problem with Carney evidently, was that he was protecting his future political career(s). What I find remarkable about the whole situation is that Carney wasn’t able to squirrel away billions and that he actually needs the future earnings of his brand rather than a well deserved punch in the face and kick in the ass on the way off the stage. The biological model provides poor guidance with respect to those things that must remain in the gene pool structurally, yet must be suppressed at every opportunity. What biology and markets provide is only the guidance on that which… Read more »
K
Guest
K

Jim Flaherty bills tax payers for his make-up. From the Toronto Sun:

“Documents tabled in the House of Commons revealed Canada’s finance minister, who makes about a quarter of a million a year, charged taxpayers nearly $130 to pay for makeup. For him. To be precise, Flaherty expensed $119.15 on “cosmetics” and $9.99 for “beauty supplies.”

He bought Cover Girl loose powder, Maybelline loose powder, Maybelline concealer, Maybelline “Min Blush,” Maybelline LMU, Smashbox concealer, cosmetic wedges, a powder brush, a foundation brush and “SBM Top Zip Shave.”

http://www.torontosun.com/2013/01/04/politics-isnt-so-easy-breezy-beautiful?utm_source=facebook&utm_medium=recommend-button&utm_campaign=Politics+isn’t+so+easy%2C+breezy%2C+beautiful

patriotz
Member

Canada’s trade deficit soars in November

Canadian exporters took a hit in November, partly on trade with Europe, while imports climbed, leading to a sharp increase in the country’s trade deficit.

The trade gap swelled in November to about $2-billion from $552-million a month earlier, Statistics Canada said today.

Which means that Canada’s “strong” economy is still running on debt. Look for the next consumer debt figures to take another jump.

Manna from heaven
Guest
Manna from heaven

But I thought this was a sure fire way to save money for retirement. How many other people in our fair city are in the same predicament? Many I would guess.

http://business.financialpost.com/2013/01/11/bad-real-estate-investments-leave-couple-with-1-5-million-in-debt/

Anonymous
Guest
Anonymous

@manna, wow! 1.5 million in debt and 2k in cash, it’s the picture of wealth in BC!

I know several people who are burning up not only their own retirement, but their parents as well having spent their inheritance on overpriced falling down houses.

Groundhog
Guest
Groundhog

@Manna

Most in this situation will be surprised to learn leverage is a double-edges sword. When we’re seeing articles like that after only a 10% drop just imagine a 33%+ drop.

Many Franks
Guest
Active Member
Many Franks

Here’s a morning chuckle for you: Looking Back at Real Estate in 2012

Sales remained steady! Great price gains across the board! Wow, 2012 was fun, and 2013 is gonna be even better. I’m so high right now.

hi
Guest
hi

Hi I was googling and found this site. I’m interested in buying a place. Do you think it’s a good time to buy?

b5baxter
Member

Here is my latest crash curve graph:
http://vancouverpeak.com/attachment.php?aid=11

The HPI continues to show a strong correlation to my model. This suggests that we will see a pattern similar to what happened in US cities during their crash. If this trend continues we should see prices bottom out in the spring of 2015.

Bag it and tag it
Guest
Bag it and tag it

#11 b5Baxter
That link takes me to a logon page for VancouverPeak. I was under the impression a logon for VP is only required for leaving comments…

b5baxter
Member
Vote Down The Facts
Guest
Vote Down The Facts

Could easily golf, ski, and sail today – just sayin’

😉

HAM Solo
Guest
HAM Solo
As I look at 5 year Canada’s touching 1.5% yield going up today, I have to scratch my head at the “financial institutions” still offering 5 year mortgages at less than 3%. 2 points: First, writing these mortgages is a very marginal activity. Assuming costs of funding are now 2.40% for a 5 year GIC, then the lender is only making a 60bps spread. If we assume a $300K mortgage, that’s only $1800 per year or $9000 for the full term. Against that the costs of appraisal, underwriting, maintenance must be at least a few thousand. Without even considering credit risk, this is probably just above breakeven activity. Second point: Think about what kind of return on equity this loan would earn in a traditional banking environment. For a $300K exposure, if a bank were assigning 15% equity, then there… Read more »
Crikey
Guest
Crikey

@Vote Down The Facts: “Could easily golf, ski, and sail today – just sayin’”

Don’t forget go swimming/tanning at the beach too, lol. Which after all is the impression that some (but not all) ppl/organizations give of Vancouver as well.

VMD
Member

The Economist: Jan 12, 2013
“Over-valuation is especially marked in Canada, particularly with respect to rents (78%) but also with respect to income (34%). Mark Carney…may have shown good market timing with his move to London as well as a deft hand in negotiating his lavish remuneration.”
http://www.economist.com/news/finance-and-economics/21569396-our-latest-round-up-shows-many-housing-markets-are-still-dumps-home

Vote Down The Facts
Guest
Vote Down The Facts

“Now let’s for the sake of argument say that 5% of these loans go bad in any given year”

5% was the peak rate in the US. In Canada right now it’s less than 1%, and I’ve seen figures as low as 0.38%:

‘As of the end of 2011, Canada’s severe mortgage delinquency rate
was a Lilliputian 0.38% compared to the peak 5.02% rate in the U.S. In Ontario, it was a mere 0.28%, and it was a bit higher in British Columbia at 0.47%. Basically, Canadians rarely default on their mortgages.’ – http://www.bmonesbittburns.com/economics/bottomline/20120329/bottomline.pdf

But of course the US default rate was also low – until it wasn’t.

Crikey
Guest
Crikey

@b5baxter: Thank you for that – interesting graph. I’ve been thinking that a bottom in early 2015 is likely too.
(I can’t make out the percentages out very well, and clicking on the graph goes to the login page).

BTW the US markets your are comparing to never had to deal with rising interest rates, which it is increasingly likely we may have to do.

Wakeup call
Guest
Wakeup call

JD #1

Just a thought.
I wonder if we might be focusing too much on blowout listings and not enough on those declining sales.

Last year at this time folks were still giddy after the big runup in 2011 and were listing for windfalls at ridiculous prices. Needless to say, that crowd has pulled in their horns as reality kicked in.
I would take 200 motivated listings a day over 300 of those crazies any day.

I think those dwindling sales are even more important to drive prices down.

jesse
Member
@HAM Solo, this is what Basel III is supposed to address, at least in part. The writing of loans, in total, is not risk-free because if credit conditions tighten we can expect banks to collectively balk and borrowers must liquidate or pay a higher spread. If you look at the spreads from risk-free right now, it should be no surprise banks are lending everything they can, from what I can see primary-borrower spreads are richer now than they were post-GFC bolstered mostly by low real rates. I blogged about it last September: http://housing-analysis.blogspot.ca/2012/09/mortgage-spreads.html I’ll update the graphs when I get a chance but I think the spread is still very healthy. In my opinion it should be seen as no coincidence that bank earnings are going gangbusters. If banks are now required to hold more capital against certain loans that… Read more »
Troll Feeder
Guest
Troll Feeder

@VDTF “Could easily golf, ski, and sail today – just sayin’”

I could, but I don’t have a large mortgage to cover 🙂

Crikey
Guest
Crikey

I said: “BTW the US markets your are comparing to never had to deal with rising interest rates, ”

Correction: part of the meltdown in the U.S. was due to ARMs and other such sources of increasing interest rates baked into mortgage agreements. But base rates did not increase.

Van Coffee
Guest
Van Coffee
Off-topic question on personal banking. This is going to sound naive, but I am honest with myself. I have very little practical experience borrowing money personally, so I am looking for some comps from those of you that have recent personal banking experience. FWIW I am a renter (hopefully this will not get me voted down as much…..). I have a reasonable amount of equity (cash / stocks / short term bonds) totaling over $2.0 million. Anyway – I borrowed some money recently from a Canadian Chartered bank only to establish some credit (because I have never borrowed money). Not a lot of money ~ $100K They are charging me Prime + 1.0% which, in my opinion, is totally ludicrous given that I can borrow from my broker at CAD libor + 100 bps (yeah, I know, better security). Anyway… Read more »
Aleksey
Guest
Aleksey

@VDTF “Could easily golf, ski, and sail today – just sayin’”

Nope. No sailing today and even next week. Check out a forecast
http://www.windguru.cz/int/index.php?sc=3610

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