Phony Appraisals and Mortgage Investments

Canso Investment Counsel has released a study about mortgage securitization in Canada:

The “securitization” of mortgages that many economists blame for the housing collapse and subsequent financial crisis in the U.S. is now a runaway problem in Canada, says a new study that also casts doubt on whether Canadians can trust the house price information they are seeing.

The study from Canso Investment Counsel, a corporate bond management firm, says mortgage securitization — bundling mortgages together and selling them to investors — has spiralled out of control in Canada in recent years.

On a side note, how many renters out there are buying MICs as a hedge against high property prices?

Sort by:   newest | oldest | most voted
VanRant
Member
VanRant

#24
Like the part about foreign buyers “Buy up everything – they give back nothing. Its time to crack down on foreign owernship”

arit
Member

Off-topic, one for AngrySlav,

Please let me taunt you a bit, with full respect 🙂

Regarding your post:

“In math, minus+minus != positive. 😉
minus * minus = positive.”

arit adds: in math != does not equal .
You must be a software programmer.

Which reminds me:
What’s the difference between a novice programmer and a burn-out programmer?
The novice programmer thinks there are 1000 bytes in a kilobyte.
The burnt-out programmer thinks there are 1024 meters in a kilometer.

Cheers

arit

arit
Member

Hey the blog ate my greater-than-smaller-than signs thus converting my post into incomprehensible gibbrish! Let’s see if this works.

in math != does not equal ‘does not equal’

just another random poster
Guest
just another random poster
Best place on meth
Member
Best place on meth

Sales continue to be unseasonably high (ie July stronger than June) as they should be with potential buyers scrambling to use their soon to expire rate holds, but the stuff that’s now selling is the cheapest ugliest crap on the market.

It’s the $600K East Van shacks, the $800K West Van shacks and the $180 downtown leaseholds that are moving.

I suppose we should commend these desperate buyers for clearing all those disgusting eyesores from the MLS.

Son of Ponzi
Guest
Son of Ponzi

Regarding the collapsing building.
Soon to be sold to Tom Chow, owner of Double Happiness Food.

Son of Ponzi
Guest
Son of Ponzi

How many renters are hedging against higher property prices?
Renters are already hedged against rising property prices.
With the glut of rental units, rentals will be stable, or even go down in the forseeable future.

franko
Member
franko

@ #31
You nailed it Bpom.
As a retired builder, I’ve been shaking my head over the dumps that are being sold for some time.
they’re not only teardowns, but most of them are on busy, noisy, smelly streets.

jesse
Member

A VanEast place I’m familiar with sold in June. It was in rough shape and had undergone some questionable renos. It had 2BR up and 2BR down, and the downstairs had leaks. It sold about 20% higher than 2007 prices. The owners are renovating it, not tearing it down. Hard to see what their plan is, as a 4BR plot is massively underusing the land. Developers weren’t interested in it AFAIK.

Still a lot of money looking for a home…

crikey
Guest
crikey
@Jesse #35 So, selling at 20% higher since 2007 prices… if they had been investors that bought it in 2007 and sold in now, they would be hovering around a price gain in the neighbourhood of the rate of inflation. But if you subtract the costs of their “questionable renos”, yearly property taxes, property transfer taxes, real estate commission fees, mortgage interest costs, regular maintenance, etc, etc, then strictly from an “investment” point of view they have lost significant amounts of money. And that is without even considering the hassle & grief of having gone through all that stress(yes, leaks are fun!). The odd part is that many “investors” and used house salespeople would refer to such a situation, with 20% property value gain over 6 years before big expenses, as if it were something to boast about. Even funnier,… Read more »
paulb
Member

New Listings 210
Price Changes 99
Sold Listings 143
TI:18065

http://www.paulboenisch.com

Son of Ponzi
Guest
Son of Ponzi

Here’s the link to Bruce Allen’s Reality Check.

http://www.cknw.com/Episodes.aspx?PID=1103

Son of Ponzi
Guest
Son of Ponzi

I believe that poor public transportation and road infra structure will eventually drive the nail in Vancouver’s RE coffin.
Projections are for 1 million people moving into the region in the next 10 years.
Today, the CEO of Translink pretty much admitted that Translink is broke.
No money for new buses.
The Canada Line is already running at full capacity. Wait until all the new high-rises on Cambie are coming online. chaos.
People in Port Moody and Coquitlam are waiting for the Evergreen Line to come to the rescue in 2016. Good luck.
The Expo line is getting old and needs major upgrades.
As for road and bridge infra structure, the Pattula and the Massey Tunnel are way past their prime.
So, I guess the only way to get around for these 1 million newcomers is by Bicycle.
Welcome to Beijing/Shanghai on the Fraser.

jesse
Member

Crikey, they cleared about $100K capital gain net fees. They were cashflow breakeven give or take $5K or so. In terms of ROE they didn’t do too badly, and all thanks to those wonderful buyers!

As a postscript, they are not looking at buying anything else. They’re done with Vancouver real estate investment for the foreseeable future and not because they’re bearish. They just don’t think prices are going to go up. Read between the lines: they knew they made money solely on the capital appreciation and don’t think it’s likely to be a repeat performance any time soon. (In fairness I remember people saying and doing the same thing in 2006. Whoops! 😉 )

crikey
Guest
crikey

jesse:
Thanks – though I can’t see how a price only 20% higher than six years previous is considered a good ROE, a decent amount of capital appreciation… especially to other, much less risky investments. And perhaps they were fortunate enough to have a steady rental income that made up for some of the expenses?

I’m not sure what $100K net fees means since I don’t know how much money they risked/committed into the venture to begin with.

jesse
Member

Crikey the basic math, and made simple, not by me but by these investors, is:
Buy 550 including closing costs, sell 680 net fees, cash flow about net zero. 200 down. They now have about 370 after closing the mortgage.

Can’t argue too much their return was decent. I cannot elucidate to them the risk they took because RE only goes up or something to that effect.

George
Guest
George
@Son of Ponzi I agree with you that transportation infrastructure in this region is a mess! It’s only going to get worse if they demolish the Georgia Viaducts. As a regular skytrain rider, it seems to me that Translink is using more 4-car trains these days. For a few years after the Olympics, 6-car trains were most commonly being used. Now it seems like they’re going back to a mix of 4-car trains and 6-car trains, even during rush hour. The 4-car trains are a joke! They are totally packed like sardine cans before the train even leaves Surrey (all the bikes and massive strollers don’t help–why are strollers these days the size of small cars?). Good luck getting on the train in New West or Vancouver. Commercial and Broadway is a complete joke–the trains are totally packed by that… Read more »
George
Guest
George
@Son of Ponzi Something else about transit. I’ve noticed that Geoff Meggs can’t stop talking about the Evergreen Line. He mentions every opportunity he gets. You see, the Evergreen Line is a key plank in his argument for demolishing the Georgia Viaducts. He believes that once the Evergreen Line is complete, more people who are commuting from Coquitlam to Downtown Vancouver will take skytrain, meaning less cars going over the Georgia Street Viaduct, which in turn means they can demolish the viaducts without causing more traffic to go to nearby streets. I think Geoff Meggs head is in the clouds when it comes to the Evergreen Line. First of all, how many drivers on the Georgia Viaduct are even originating from Coquitlam? I think most drivers on the viaduct are coming from East Van or Burnaby. So even if all… Read more »
George
Guest
George

I just looked it up. There won’t be any transferring at Lougheed because the Evergreen is being built is a spur line off of the Millenium Line. At least they got that right.

http://www.evergreenline.gov.bc.ca/documents/InformationSheets/130607_LougheedTownCtrStation.pdf

That doesn’t change the thrust of my argument. How are all these additional skytrain commuters coming from the Evergreen Line going to transfer at Commercial and Broadway–the trains at that point are already too full. I can’t see how this will relieve traffic from the Georgia Viaducts as Geoff Meggs is promising.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

what about the great white hope of higher rates? have we abandoned that already?

what’s the next great white hope? that people are buying now because they’ve locked in and then there are no more buyers left in vancouver?

Who's making money?
Guest
Who's making money?

Bull! Bull! Bull!

ING rates for 5yr and 10yrs have gone up 0.30% in the last month.

The US 10 yr. is at 2.63%.

May 1 it was 1.63%

You are an idiot.

Democrass
Member
Democrass

“but the stuff that’s now selling is the cheapest ugliest crap on the market.

It’s the $600K East Van shacks, the $800K West Van shacks and the $180 downtown leaseholds that are moving.”

If this is true, we will might see a sharp drop in average prices, as long as there are no (or much less than normal) mega-million sales this month. Anyone have data on the latter?

Can anyone post hard numbers on sales in various price categories?

Many Franks
Member
Active Member
This article just screams “bubble”: Canadians getting richer, average net worth tops $400,000 In the meantime, we can feel smug having broken the $400,000 net-worth barrier before them. In fact, all of the report’s key statistics – net worth, liquid assets, real estate assets, and debt, too – are at an all-time high. “Everything tends to be the highest these days,” Mr. Miron says. The good news about the debt, he says, is that low interest rates are making their way through the system to consumers, who are able to pay down debts more easily, slowing the national rate of debt growth. Pride goeth before a fall. And wasn’t that BMO telling us just yesterday that we’re overwhelmingly paying off less debt even than we were last year? Vancouverites can boast the highest net worth of all Canadians, largely thanks… Read more »
crikey
Guest
crikey
Vancouver Sun headline: “Vancouver a bargain compared to world’s most expensive cities” Very interesting, right? Event moreso when you realize that the headline is NOT referring to the cost of buying. You have to read the article to realize they are referring to the cost of renting. Even then, the article refuses to spell that out clearly for the reader. The word ‘rent’ is even conspicuously absent. I wonder why? “Vancouver… doesn’t crack the top 10 as one of the costliest cities for expatriate employees to be transferred to because of their jobs.”…”The study also says the cost of housing for expats is usually the biggest expense for employers.” So, why wasn’t the headline explicit about the Vancouver “bargain” being rental prices vs. purchase prices — given that the article is comparing Vancouver with ”expensive’ cities? Heaven forbid they scare… Read more »
space889
Member
space889
In theory, the Millenium line can be extended down to UBC with Evergreen Line passengers transfer at Broadway to Canada Line which currently is not as jam packed as Expo @ Broadway & Commercial. If you look at the tracks at the VCC terminal station, I think that was the original plan but I guess that just isn’t as sexy and nice as a big tunnel under Broadway. Also, Canada Line once it hits capacity will have an extremely difficult time to expand capacity. Frankly I don’t know why they didn’t built longer platform so it has the potential to accommodate 4 cars. How much more expensive could that have been. Alternatively, turn West Coast express into a full commuter train and I think that’s probably a much cheaper option than the $1.6B Evergreen Line cost. Redirect $600M into a… Read more »