Friday Free-for-all!

It’s that time of the week again…

Friday free-for-all time!

This is our regular end of the week news roundup and open topic discussion thread for the weekend.

Here are a few recent links to kick off the chat:

Sceptical of CMHC data?
Langley Condos at 2006 prices
Canadas random success story
A bubble in renters?
Market peak
Oil prices on housing a ‘wild card’

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

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Web Page
Guest
Web Page

I have tried using “bring layers forward / backward” but still do not work.

Mortgageslave
Guest
Mortgageslave

I’ve read the term “soft landing” brought up alot recently from people in the Real Estate Market. I did a search and here is what I found:

Soft Landing – Flat prices
Hard Landing – Falling Prices
Vancouver HPI (12 months ago) + 5.69 %
Vancouver HPI (6 months ago) + 2.14 %
Vancouver HPI (3 months ago) + .9%
Vancouver HPI (1 month ago) 0 %

From the looks of things the soft landing hopes/dreams will be squashed in 2015. Happy new year everybody!

bullwhip29
Guest
bullwhip29
@ #107 wasnt following his activity closely enough to know all ins and outs of trade; that said, stock has taken a big hit in recent months relative to overall mkt “Also, not all detached house repairs are deferrable indefinitely. You’d generally have to repair then or discount heavily before sale in either case” – the point is that owner of det home doesnt have to rectify problems prior to sale. many strata corps are effectively sweeping known problems under the rug by deferring preparation of the so called mandatory depreciation report to a later date. current owners and prospective buyers of such properties can (and likely will) be blindsided without notice @ #108 sounds about right. with prices flat to slightly down in some mkts, many owners with cmhc insured mortgages are somewhat underwater. what happens over the next… Read more »
Mortgageslave
Guest
Mortgageslave

@soft landing

nufio
Guest
nufio
So I had been renting a 2 br condo in yaletown for the past two years ( before I got the hell out of vancouver). So I did the numbers for the condo I was staying in. The owners tried to sell the condo at 450K and couldnt so they rented it to us. I did the numbers for the condo and here is what I came up with. If I paid down 20% , principal = 360K The strata fee was 350 . Property Tax: 150 Interst at 3% = 900$ /month Opportunity cost of 90K at 3% = 225$/month (I was assuming I can get 3% on my money which I have probably exceeded in reality but thats what I accounted for) Now If I amortized transaction costs over 5 years (assuming I would stay in the condo… Read more »
Shut It Down Already
Guest
Shut It Down Already

Bullwhip, pretty sure the split-adjusted price at time of short was $27. Current price is more like $47, and there have been at least 2 dividend hikes. I’m not aware of anybody indicating an intent to short CWB back then either. Just sayin.

Strata owners will often have opportunity to vote on special assessments at AGMs and SGMs, so it’s not quite like you describe – these things don’t quite come completely out of the blue. Also, not all detached house repairs are deferrable indefinitely. You’d generally have to repair then or discount heavily before sale in either case.

Obviously big special assessments make the news – but that doesn’t mean they’re as common as you’d like to imply.

bullwhip29
Guest
bullwhip29

@ #103 cont’d…

it’s not a question of whether or not a spec assessment should be factored in, but rather the timing and $ amt involved. owners of det homes can put off repairs and what not til the cows come home (not recommended of course). strata owners, on the other hand, have to always be looking over their shoulders for the village rapist to come knocking.

http://www.vancouversun.com/technology/Leaky+condo+crisis+rears+head+again/9871711/story.html

bullwhip29
Guest
bullwhip29

@ #103

with HCG.TO down > 20% since early Nov, his short appeared to work out OK

CWB.TO is also down > 30% since the summer on weakness in the oil patch

just sayin…

bullwhip29
Guest
bullwhip29
@ #94 a significant % of these highly leveraged condo buyers were most certainly betting on some quick capital gains (and/or bought as rental) and likely paying interest only. the exercise was really never about building equity, but rather executing a quick hit and run. it is not hard to deduce that without a reasonable increase in sticker price, these owners would all be underwater after all standard costs were factored in (not talking about spec assessments and the like). so, what it all boils down to is that there are now 1000’s of owners just in the d/t region alone who bought condos in the last 5-10 yrs who have no other option but to keep pumping in several hundred $ a month or more (as they are cash flow neg) while they wait for the market to turn.… Read more »
Shut It Down Already
Guest
Shut It Down Already

Patriotz, I like the way that you overlook the fact that bear posters don’t know what “underwater” means but rather than take them to task in your usual nitpick fashion you find some dumb edge case to dissect my argument instead.

Tell you what, if you’ve got some stats on special assessmenta then I’ll gladly factor them in to all future calculations – until then stop wielding them as a magic number you can put any value you chose against. I’d wager that even with an “average” special assessment that $500k property would still be nowhere near underwater – and I think you know it too.

Oh, and you never told us how shorting HCG.TO worked out for you.

Westside Realtor
Guest
Westside Realtor

I suspect that there will be a lot of stressed households in Alberta this Christmas.

Doesn’t make me feel good, at all, to know this is likely the case. I lived through it myself as a youngster in the early 80s..

But, that is how these Boom/BUST situations play out.

The music has stopped and there are not enough chairs to go around.

Westsiders hoping to cash out jig this spring will be met with tempered expectations, as I think we see 10% come off damn fast

Jmho

WSR

Softy
Guest
Softy

“That follows several years of the same pattern, which means overall condo prices are now seven to eight per cent lower in inflation-adjusted dollars than they were at the recent peak of the condo market in 2009, says one analyst.”

It’s a soft landing. So soft that condo owners who are probably all fixated on nominal prices don’t even know it’s happening.

Egg Hunt
Guest
Egg Hunt

>@90

To buy condo, you have to pay legal cost, CMHC premium,
possible GST, possible PTT.
To sell condo, legal cost, agent fee
plus while you own it, home insurance, strata fees(this one is very big), property tax, opportunity cost on D/P.
As such, owners’ premium can be tens of thousands of dollars.

Your calculation makes total sense,
but what if $500K condo sold for $503K in five years?
Cond owner would claim, they made $3,000 profit!
(in fact s/he is underwater)
That’s R/E world.

patriotz
Member

@98: “Nobody who bought 5 years ago could possibly be underwater unless they’d taken out a 2nd mortgage or HELOC.”

Or unless they got hit by a special assessment. You didn’t think of that, but no buyer does.

Shut It Down Already
Guest
Shut It Down Already

If somebody is underwater they cannot sell, by definition.

Nobody who bought 5 years ago could possibly be underwater unless they’d taken out a 2nd mortgage or HELOC.

But what would I know – I’m “not so good at math”, right?

@90
Guest
@90
@94
Guest
@94

“you’re ignoring the fact that over 5 years there would have been about $50k in principal payment.”

Yes but that principal paid is over above rent costs. Interest, property tax and strata fees are much higher than rent alone. As well you are assuming 25 year amortization (which wasn’t mandatory back then) and the person didn’t do the annual skip a payment thing which is so in vogue these days. Oh and you assume they made all their required payments. I think you will find most who bought a condo 5 years ago with 5% down are underwater now if they sell.

@90
Guest
@90

Vancouver condo market stays flat

Although Vancouver has a reputation as one of the most expensive cities in North America for housing, condo prices stayed flat or even dropped last year, according to recently released assessment numbers.

That follows several years of the same pattern, which means overall condo prices are now seven to eight per cent lower in inflation-adjusted dollars than they were at the recent peak of the condo market in 2009, says one analyst.

Shut It Down Already
Guest
Shut It Down Already

93, you’re ignoring the fact that over 5 years there would have been about $50k in principal payment. So given the scenario you describe the buyer would be nowhere near being “underwater” – unless you’ve concored a new definition of the word. All you’ve demonstrated is that holding real estate for 0 days before re-selling isn’t a wise move – no surprises there.

@90
Guest
@90
“I think you’re first person to even claim that nominal prices have declined.” You’re not so good at math are you? On a $500K condo with 5% down ($25K) minus RE commission to sell ($18K), sunk costs such as PPT ($9K), CMHC Insurance fees ($15K), legal fees ($2K), possible special assessments ($3K), for a condo which has gone up zero is underwater ($25K – 47K = $(22)K. You lost $22K even with no nominal price decline. You can also add GST on top of that loss if the place was new. The place needs to be up 10% just to break even on a used place and more than that on a new place without factoring in opportunity cost on the downpayment. Condos have been flat for 7 years at best. No nominal price decline needed to be underwater after… Read more »
Westside Realtor
Guest
Westside Realtor

Alberta listings crushing higher.

I suspect this will hit northern bc/kelowna etc soon as well.

Westside sfh mkt of slow, prices softening. But no panic. Yet.

I am betting it comes in the new year.

Chinese real estate prices declining, new cra riles, etc. Iip, ham in short supply.

Are people still saying that ham are going to come here and buy everything in sight? That is so yesterday. What are they smoking?

It’s game over, ham are no longer flooding over here. Just ain’t happening anymore.

A shot storm of pain is next in the menu

bullwhip29
Guest
bullwhip29
@ #88 i know many that bought out in various vanc suburbs around that time. when the final bill is tallied up, they are all underwater by amts in the low to mid 5-figures (so far) and have also racked up other debts to boot (cars, renos, furnishings etc). imho, most of these folks are still in a state of denial and tune out any news that could be be deemed to be market bearish. it’s too bad given that the window to exit out the back door with most/all limbs still intact is nearly closed. after reading this article (and looking at the photos) one can conclude that Gr Vanc home prices are even more out of whack than those in silicon valley all things considered. yes, a crack shack in dunbar or kits is apparently worth double what… Read more »
Shut It Down Already
Guest
Shut It Down Already

88, you seem to be living in a dream world. Double the cost? Only if you falsely include the mortgage principal as an expense or overestimate the property taxes and insurance. Underwater? I think you’re first person to even claim that nominal prices have declined.

JR
Guest
JR

#81 Good for them. Its cold comfort to know that you’re able to renew at a low interest rate when since the Olympics, given maintenance fees, taxes and interest you’re likely underwater in equity. Speaking of water, without a view of same you’re probably looking at a bunch of other suckers living in the modern equivalent of a housing project.

@81
Guest
@81

“People who bought right before the Olympics are now renewing for another 5 years at <3%. I'm sure they're glad they never listened to the doomers."

If they did the math they sure wished they had of listened. The cost of owning for the past 5 years was at least double that of renting. Now they renew at 3% they will still pay more. If they sell after transaction fees, PPT, Realtor commissions, etc they will be lucky to walk away with their original down payment. If they bought a strata as most buyers do they will have lost all their downpayment and may be underwater. Next year it will get worse.