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!

Sort by:   newest | oldest | most voted
patriotz
Member

“But those predicting that Canadians will simply walk away are in for a surprise.”

In practical terms every foreclosure is the same as a walkaway – it makes no difference to the lender or the borrower whether the borrower simply takes off or gets booted out by the sheriff.

Do we have foreclosures in Canada right now? Of course, and the great majority of them are (surprise) in markets which have already seen substantial price declines.

That’s what matters.

Groundhog
Guest
Groundhog
@VDTF People walking away vs. not walking away has had no correlation to price drops in the US crash and I agree we won’t see the “jingle mail” happening here to the same extent as the states if at all. But….I can’t find it now but I saw somewhere that in previous RE crashes in Canada some people DID end up walking away and the CMHC/Banks did not pursue a lot of them due to the costs involved and low likelihood of ever being repaid. Take that with a grain of salt, I can’t find any sources for it right now but will look, but don’t be so sure that people won’t walk away here even with recourse loans. When you’re house is worth $300,000 and you have $600,000 in debt on it, some people will simply give up trying… Read more »
Anonymous
Guest
Anonymous

From slow sales to no sales at all on Van West, that will be a historical first. No one in the right mind would buy a SFH right now.

Vote Down The Facts
Guest
Vote Down The Facts

“According to this source only 12 states in the US are non-recourse, while the other 38 and DC are recourse. A quick perusal of each category suggests no clear association between extent of real estate bubble (and subsequent crash) and whether a state is recourse.”

Yup, this has been discussed before. But those predicting that Canadians will simply walk away are in for a surprise.

Danny
Guest
Danny

I don’t think Ben Tal’s trigger was required to pop many of these…
http://vreaa.files.wordpress.com/2012/01/k8947.png
…especially the one in the middle, nor the tech bubble. Eventually there’s simply no one left foolish enough to continue buying into the pyramid scheme.

YLTNboomerang
Member
@68 Anonymous: Don’t gauge rents by what Craigslist says, asking rent is not actual rent as everyone starts off asking for what they want and end up getting what the renter is willing to pay. When we moved into our current place just three months ago you had to be fast on your phone and offer to sign asap to get a place (we were looking for a place over 1200sqft downtown which are getting rarer and rarer with all the shoeboxes). I’m now seeing places that before would be snapped up now hang on craigslist for weeks and get price reduced. Add to this, the fact that your rent has stayed flat while we have had inflation means your rent has actually declined. If you don’t believe me, call up one of the places you see on Craigslist and… Read more »
oneangryslav2
Guest
oneangryslav2

@#91:

No Noise, you can’t just walk away like many people did in the US as Canadian mortgages, for the most part, are full-recourse.

According to this source only 12 states in the US are non-recourse, while the other 38 and DC are recourse. A quick perusal of each category suggests no clear association between extent of real estate bubble (and subsequent crash) and whether a state is recourse.

addair
Guest
addair

#87

“most discretionary sellers are planning to buy another property, so if they decide not to sell they are also not deciding to buy”

Good point patriotz.

The big surprise so far in 2013 is the low number of sales.

Vote Down The Facts
Guest
Vote Down The Facts

No Noise, you can’t just walk away like many people did in the US as Canadian mortgages, for the most part, are full-recourse.

Anonymous
Guest
Anonymous

“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.”

Exactly. Realtors know this so they will be pushing those who want to sell to drop their price pointing out the property they want to buy is now cheaper and will make up the difference. If realtors don’t do this they will starve.

patriotz
Member

“Also, when valuations drop below outstanding mortgages (recent low down payment buyers) these owners will be enticed to walk away from their “underwater” property.”

Owner-occupier walkaways are really the last phase of RE busts. The phases are:

1. People who have to sell drop their price because they have to.
2. Investors sell because they see prices dropping and don’t want to end up underwater.
3. Owner-occupiers who had planned on cashing out (e.g. for retirement) see prices dropping and decide to sell now.
4. Investors who didn’t catch on to #2 end up underwater and walk away.
5. Owner-occupiers walk away, usually because of job loss or condo assessments.

I don’t expect to see much of #5 until 2015.

Anonymous
Guest
Anonymous

Are rents dropping? I think so. The place I live in (2 bedroom downtown) I started renting 4 years ago and have not had a rent increase. I thought I got a pretty good deal on rent at the time. I always check listings and similar places have always been advertised for 20% or more higher. Just scanning CL and I see places with asking rents at what I am paying by property managers. This is the first time I have seen this in 4 years.

patriotz
Member

“There was no catalyst in the US in 2006. People just stopped buying”

Exactly. Somebody always has to sell. What happens if nobody wants to buy? Prices go to ZERO.

Now Vancouver isn’t Detroit and there is always somebody willing to buy at some price. But it’s what those people are willing to pay that sets the market price – not what sellers want to get.

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.

Anonymous
Guest
Anonymous

“Are stubborn sellers killing the real estate crash”

Vancouver is declining faster than most US cities did during their crash. The crash is on. Unless of course you don”t want to call what happened in the US a crash. Call it what you want real estate corrections almost never happen over a few months. It takes years. The end result is the same. Prices go back to normal or even over correct.

No Noise
Guest
No Noise

From what I’m hearing rents are really dropping (doesn’t help with endless condos starts/completions) – the CATALYST could be overextended speculators who can’t get required rents and are therefore bleeding cash and will be forced to sell. Also, when valuations drop below outstanding mortgages (recent low down payment buyers) these owners will be enticed to walk away from their “underwater” property.

jesse
Member

One interesting speculation on the lower listings volumes is the removal of “future” sales, ie places that are not finished construction yet, and this is done every year. If for some reason this stock is slow to be put back on the market it could lead to lower listings volumes.

I don’t think there’s too much in that, but something to consider. For Van West SFH I expect it’s simply low sales volumes gives few the incentive to have their places listed for many months before a sale, and not any concerted effort to withhold listings.

RFM
Guest
RFM

A sign of the times?

This ad on craigslist:

PT Position for Realtors To Bridge the Financial Gap Between Closings

http://vancouver.en.craigslist.ca/van/rej/3542304715.html

Doesn’t say what the ‘opportunity’ is, but perhaps a sign.

addair
Guest
addair

#81,

You are absolutely correct.
There was no catalyst in the US in 2006. People just stopped buying and we all know what happened to the financial markets because of that.
Like James Hodgins said recently, real estate related industries will send Canada into a recession as the housing marked dries up.

The best or worst thing for high prices is high prices depending on what side of the fence you’re on, and it looks like buyers have got the message. It’s only a matter of time until sellers do.

pricedoutfornow
Guest
pricedoutfornow
“From an article in the Financial Post entitled “Are stubborn sellers killing the real estate crash?” It’s only a matter of time….there are plenty of owners out there right now who can no longer sell nor rent their properties (it would seem). People can only go on so long paying 2 mortgages on 2 properties before they run into financial distress. Also people who NEED to sell (my parents for example, are currently holding onto two properties-one is a house recently inherited from my deceased grandfather-they just want to get rid of it and don’t really care how much it sells for). If I remember correctly, there was a period in the US as well where it seemed like the market would never fall, because buyers refused to buy at high prices and sellers refused to lower their prices. Then… Read more »
K
Guest
K

Just to be clear, I am not agreeing with the Financial Post article that says you need a catalyst to spark a crash. I was just posting the article, not endorsing it. But as commenters on this site have pointed out, listings don’t seem to be exploding in 2013. As someone here said, sellers really are “holding their cool”. So it appears the real estate cartel and the banks are going to jump on the sluggish listings growth to point as evidence that the market is not crashing. That’s what the CIBC economist did in the article. So this is an example of the kinds of arguments we will be seeing from the bulls.

addair
Guest
addair

Hello K,

The catalyst will be LOW sales growing to NO sales.

K
Guest
K

From an article in the Financial Post entitled “Are stubborn sellers killing the real estate crash?”

“The one thing missing from the market, for all those people looking for a crash, is a catalyst or an event that will force people to reduce their asking prices. Before this housing market burns up in flames, it needs some type of spark.

And, if you talk to some people, that key event — two that come to mind are a spike in interest rates or job losses — is not happening any time soon.

“Crashes don’t just happen in a vacuum, you need a trigger,” says Benjamin Tal, deputy chief economist with CIBC World Markets. “I can’t point to any crisis in the history of crashes that didn’t have a trigger.””

http://business.financialpost.com/2013/01/12/stubborn-sellers-killing-canada-real-estate-crash/?__lsa=b934-85dc

HAM Solo
Guest
HAM Solo

Is it just me, or does the flip of a commercially marginal bar/gallery hotel to some insane condo developer not warrant “lament”? Personally, I’m happy the for the property owner who got it off before TSHTF.

http://www.theglobeandmail.com/news/british-columbia/patrons-lament-closing-of-waldorf-hotel-after-sale-to-condo-developer/article7139364/

Girlbear
Guest
Girlbear

Was out with a realtor friend last night. He said everyone has been pulling their listings and plan on putting back on in spring when market is “hot” again. He is a friend so he didn’t pull the BS on me. Thinks it will be ugly. Said the hardest part is telling owners that their property is no longer worth what it might have been in 2011…most get so offended. But he also has no interest in trying to sell a house he knows won’t get sold as price is too high.

Maybe in 2014?
Guest
Maybe in 2014?
Had a courtesy visit by the real estate agent we had used to buy/sell in the past. After selling our place in 2011 we had indicated we would be looking to re-enter the market in 2013 (obviously not quite there yet) so he was just following up. Always been a little too optimistic for my liking but always worked extremely hard for us in the past and always found him to be honest. Anyway paraphrasing: 1). Last 1.5 to 2 years have been terrible for his company. 2011 was the first time in memory when the company was in the red. 2) Did not believe CNY was going to make much of an impact and thought going forward the market would be more dictated by local buyers than in years past. 3) Plenty of property speculation in both the west… Read more »