New mortgage rules affect first time buyers

Remember when we saw all the fun the US was having with crazy long amortization terms and teaser cash-back zero down mortgages?

Oh yeah, we couldn’t be left out of that action!

That’s why in 2006 we cranked CMHC max amortization terms from 25 to 35 to 40 years. We got rid of any upper limit to insured mortgages and allowed zero down deals with interest only payments for the first 10 years.

It was the only way to compete with the Americans!

And now we hear that we’re supposed to be ‘responsible’ with our debts and ready for interest rate increases.

The government has been ramping back the gravy train over the last couple of years though, trying to engineer a ‘soft landing’ for the housing market.

And they’re succeeding, it keeps getting softer and softer.

So now we’re back to the 25 year cap. Everything old is new again.

And apparently reducing amortizations is starting to have an effect on first time buyers causing some to wait:

First-time homebuyers were expected to be the most affected by the new rules, which included reducing the maximum amortization period for a government-insured mortgage from 30 to 25 years, and also dropping the upper limit that Canadians could borrow against their home equity from 85 per cent to 80 per cent.

A year later, about 66 per cent of buyers said the changes had not affected their timeline on buying a first home, according to a survey by BMO Bank of Montreal.

But first-time buyers in B.C., where Vancouver prices were considered particularly overheated, were most likely (33 per cent) to say they would wait longer to buy their first home. That compares to 11 per cent of Ontario buyers, 25 per cent in the Prairies and 28 per cent in Atlantic Canada.

read the full article over at the CBC.

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Low Rates
Guest
Low Rates

1st time homebuyers can go fuck themselves. Nobody owes them the right to lever up their rent money into CMHC real estate casino chips for ante into some ponzi palace game.

Seriously. Fuck them and the horse they rode in on. If they want to pay triple what a house is worth then they can bloody well figure out their own financing to buy it.

Democrass
Member
Democrass

Two recent sales of houses I was interested in. Sellers got burned in both cases.

3675 SW Marine Drive
Asking $1.398,000 sold for $1.300,000
105 days on the market sold June 14/2013
Assessment: $1,307,000
Bought in 2012 for $1,490,000.00

6128 Crown At least 6 months on the market
Asking $1,288,000 sold for $1,288,000
Assessment: $1,346,000
Bought in 2011 for $1,288,000

Democrass
Member
Democrass

By the way 6128 Crown was completely renovated and sitting vacant. The SW Marine house was vacant the entire listing period.

Democrass
Member
Democrass

The Crown street house was listed for 1,396,000 for most of the last six months. They dropped their price to below assessed and got a sale.

An Observer
Guest
An Observer

6128 Crown listed for:

1.598M in april 2012
1.478M in february 2013
1.396M in march 2013

The renovation was 3 years ago – they changed their description to “Newly Renovated” in February…

gordholio
Member
Here’s one idiot reader’s comment to that CBC article: “No pain no gain, it just doesn’t take that long to save 50,000 for the down payment if you work at it. Give up the cell phone don’t go to Starbucks, movies etc. and before you know it your in your own home. The second job also helps if you are a go getter.” Ah, the Canadian dream. Forfeit all of life’s pleasures/necessities and work like a slave to merely scrounge up a downpayment for some sadistically overpriced craphole. Brainwashed lemming or slimy realtor? Given the lousy punctuation and grammatical errors, my bet’s on the latter. Anyway, it’s been a helluva long time since I posted here. Amazing how this site just flies along once the garbage is taken to the curb. Just wanted to offer a quick update on my… Read more »
data junkie
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data junkie

“No pain no gain, it just doesn’t take that long to save 50,000 for the down payment if you work at it. Give up the cell phone don’t go to Starbucks, movies etc. and before you know it your in your own home. The second job also helps if you are a go getter.”

Ah, Canadian math, where giving up $100 a month of incidentals will get you $50,000 in ‘no time’ (or, you know, forty years).

I think I’d rather just rent and catch the odd movie and drink a latte a few times a month, thanks.

Turkey
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Turkey

@gordholio,

Nice to hear from you. Strathcona is ticking along, too, with the same idiotic listings. Lots of shadow inventory, lots of 8’s moving around as sellers fiddle ineffectively with their prices. Some large-scale renovations. Very few sales. (And who’s buying? First-timers getting into this market must be certifiably insane.)

Seems like lots of long-time bears have found a healthy indifference. For a long time, we were the ones worrying; now, it’s everyone else’s turn. Besides, it’s sunny and warm outside.

oh silly bears
Guest
oh silly bears

here we go again, another bunch of angry bears jealous over the home buyers.
and yes, you people are the worrying ones still. It’s sunny and warm outside, and you people still bitch about lives in this best place on earth. You are born to hide in your mamas’ basements.
look at other cities flooding with water, you dont even appreciate this city has given you!

b5baxter
Member

The World According to Investors:

http://www.ritholtz.com/blog/wp-content/uploads/2013/07/world-investors.png

I love the labels for Canada and Vancouver/BC.

jesse
Member

gordholio, it appears the number of single/semi detached houses sitting around has been increasing of late. See the completed and unabsorbed graph here (third graph):

http://housing-analysis.blogspot.ca/2013/07/may-2013-housing-starts-and-permit-data.html

Semi and single detached completed and unabsorbed is currently over 1500, compared to about 1000 a year ago.

Burnabonian
Guest
Burnabonian
“6128 Crown listed for: 1.598M in april 2012 1.478M in february 2013 1.396M in march 2013 The renovation was 3 years ago – they changed their description to “Newly Renovated” in February…” I AM BULL hey berrrs were is ur crash now? My hostility and vitriol are as inflated as my (would-be) (clients’) (current) (paper) net worth! My free time is maximum! I spend it trolling bear blogs due to having Much! Frustration! to Release! for some reason. I see all these anecdotes of properties selling for hundreds of thousands less than they were bought for, but I Cling! to the official story told by the holy trinity of Tsur and Bob and REBGV, which says that nobody has lost money and nobody will! And there is no crash! And there is nothing to fear! Which is in curious contrast… Read more »
Not much of a name...
Member
Not much of a name...
I’ve got my flame retardant suit on. Well, our personal circumstances have changed where we have now succumbed and purchased a condo. Family changes as well as work commitments that will see us out of the country for extended periods all happened way sooner than what we expected. Our initial plan was to wait about three more years, but this was not the case. Condo living was where we were bound in any event. When all this happened, literally within a week, we were looking to rent a condo and move from our current rental house. After looking at some numbers based on rents for what we were looking at we decided to look at the comparative for a purchase of an equivalent unit. Much to our surprise, the purchase actually came out to be cheaper than renting. I don’t… Read more »
Not much of a name...
Member
Not much of a name...

Should read “extended periods”.

Devore
Member
Devore

How much to bet the ex-owner of 6128 Crown is telling his friends right now… “At least I didn’t lose any money.”

Many Franks
Member

@Not much of a name…: Second bear capitulates! Is this the end?

In what ‘burb did you manage to find that kind of price/rent ratio? Those kinds of numbers are inconceivable around Vancouver proper, unless you pulled off a pretty good lowball.

jesse
Member

Not much 13, that is a price-monthly of 180. There was a comment yesterday about a similar purchase purporting price-rent “approaching 150”. Given your low cost of capital for five years, and what I assume is a tacit understanding you may permanently lose some capital on this investment, it sounds like a plan 😉

I think there is still some ways to come down by way of falling real prices and increasing rents. Worth a read, here is an assessment by Rich Toscano for the San Diego market, close to when he bought a couple of years ago:
http://piggington.com/shambling_towards_affordability_yearend_2010_edition

b5baxter
Member

@Not much of a name…: How many sq ft is the condo?

With a price / rent ratio under 200 that seems like a reasonable deal. There is nothing under 200 based on my rent in the area I live.

jesse
Member
@b5 18, was conversing with a bona fide property investor on twitter and, after talking a bit, it became clear to me there was a disconnect between prices and rents for higher-priced units in certain areas. He was giving examples where he was purchasing with around 4-5% cap rate, and given current financing terms and expected rent increases he was happy with that. I disagreed, but this guy is what I would characterize as a “professional” real estate value investor, so what do I know?!? But what I found interesting is, to validate his cap rate claims, I started poking around on MLS to find some listings with cited rents to figure out the price-rent ratios. It became obvious quickly that, below $400K or so, the cap rate was around 4-5% if I squinted (this is downtown Vancouver) but that… Read more »
gokou3
Guest
gokou3

@Not much of a name… 6.5% cap rate… doesn’t seem your place would locate anywhere remotely near metro vancouver based on this number alone.

Good that you get a rate hold for the 2.94%. Don’t think you can find that anymore.

Not much of a name...
Member
Not much of a name...
@jesse 17 We are prepared for the potential for the permanent loss of capital. However, we looked at the scenario of repurchasing (10 years is the plan) but if this is the scenario, then other properties will also have experienced the same loss of capital. No actual loss then. If we stay longer than that, which is also a possibility, then the loss of capital is somewhat “irrelevant”. We figure that we can confidently plan for the ten year timeline to be in the unit. @b5baxter 18 The unit is about 850 square feet two bedrooms. The funny part is that the rooms that are used in our current rental house are the same size as the condo (living room, bedrooms, and kitchen). @jesse 19 This is where our past calculations always went wrong. Anything newer and over the $400k… Read more »
Not much of a name...
Member
Not much of a name...

I will only say that it is in Metro Vancouver and not a far flung ‘burb.

Joe Mainlander
Guest
Joe Mainlander

@ Not much of a name.

You need to let folks know where this condo is located; where a 850/sf condo that rents at $1800/mo can be bought for $330k.

I live in a 630 sf concret condo, ocean view, well maintained, in the West End and pay $1300/mo ($2.06 /sf). $1800/mo for a 850 sf condo would = 2.11/sf, so those are downtown rental prices. Downtown condos selling at 390/sf? Do I have my math right?

yvr2zrh
Member

#13 – – Just my two cents on the Price/ Rent.

First – Price is $330,000 as this is the value of property. $255,000 is only the mortgage.

Second – The rent is actually 1,450 less strata and taxes. This is 1,090. So – The Price/Rent ratio is actually

303.

303 – – Not less than 200. Now 303 is not terrible. Some properties are close to 500. However, I still question whether it is cheaper to own this. Do the math with a 3.6% Cap Rate and the cost is probably still more to own.

I don't think so
Guest
I don't think so

A place that rents for $1,800 selling for $330,000?! It’s either a coop, on leased land or BS.

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