How to prepare for a housing bust

Garry Marr writes about the situation in Alberta over in the Financial Post. The drop in oil prices has hit their economy first and hardest with sales down by 30-40% over a year ago and growing listings.

So how do you prepare for a surprise economic hit like that?

Simple. Save up to cover for job loss, keep your debts and bills manageable and  don’t get into a situation where you have to sell when everyone else is selling.

Unfortunately Canadians aren’t doing so well on the debt front:

Debt reached an all-time high in the fourth quarter, relative to income. Statistics Canada says the debt to disposable household income ratio is 163.3%, much of it attributable to housing costs.

Read the full article here.

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Son of Ponzi

#34
HAM is making hay, while the grasshoppers play.

Ulsterman
Member

Vangrl: “wow, those co-op owners scored!”

“Tax records show that the sellers, Alex Zhang and Lucy Xu, assembled three commercially zoned lots between January and May of 2014 for a total of $19.95-million to clear the way for a single listing”

One has to give Alex and Lucy their dues. They had the balls to buy the place for $19.95m, spend a few hundred grand on architects and rezoning, and then made a quick $6m in a year or two. They’re making hay while the Vancouver real estate boom continues.

patriotz
Member

@31: FP: “Homebuyers needed 25% down in 1985 compared to only 5% currently.”

Well no. In 1985 you needed 25% down to buy without mortgage insurance. The comparable figure today is 20%.

I believe in 1985 CMHC insurance required a 10% down payment.

I was actually in the housing market back then, unlike (it appears) whoever wrote this article.

southseacompany
Member
southseacompany

And for laughs, here’s a funny guy who used (perhaps not too accurate) subtitles to make fun of Van’s RE market on YouTube.

“Vancouver Realtor Deals with First Time Home Buyers”

https://www.youtube.com/watch?v=wcAMtvNfp78

southseacompany
Member
southseacompany
Financial Post asks; Now and then: Do Canadian homes really cost that much more than 30 years ago?” http://business.financialpost.com/2015/03/24/now-and-then-do-canadian-homes-really-cost-that-much-more-than-30-years-ago/ “Let’s focus on the particulars for the country’s largest city and one of the two crown jewels of the real estate market – Toronto (the other being Vancouver, of course).” “In 1985, the average home price was $109,094 according to the Toronto Real Estate Board. Currently, the average home in Toronto will set you back by $566,696. Prices have therefore risen by 5.65% annualized over the past 30 years. ” “Back in 1985, the median Toronto family income was approximately $31,965. So a house cost 3.41 times the median family income. Currently, family income in Toronto is about $74,366, meaning the home value to income ratio currently stands at 7.62 times income – more than double the ratio from 30 years… Read more »
Oracle
Guest
Oracle

PaulB:

Do you have info on that house in Van West that sold for $800,000 over asking?

southseacompany
Member
southseacompany

“If you thought your housing market was bad, check out Fort McMurray, the heart of Canada’s struggling oilsands”, Financial Post

http://business.financialpost.com/2015/03/24/if-you-thought-your-housing-market-was-bad-check-out-fort-mcmurray-the-heart-of-canadas-struggling-oilsands/

“MLS sales of single-family homes in Fort McMurray and its surrounding area have plunged this year. In February, sales were down by a whopping 66% from a year ago, at just 48 units. That followed an annual decline of 53.19% in January.”

“Year-over-year, Grand Prairie had a 37.1% decline in sales during the month while Lloydminster was down by 46.7%.”

“The average price for a single-family home in Fort McMurray in February was down 5.5%, to $746,202.
Active listings of 980 at the end of February were up by 11% while new listings of 215 were down by 23%.”

southseacompany
Member
southseacompany

“Genworth braces for downturn in Alberta real estate”
“Mortgage insurer worried about defaults because of lower oil prices”, CBC News

http://www.cbc.ca/news/business/genworth-braces-for-downturn-in-alberta-real-estate-1.3007917

“Mortgage insurer Genworth is making changes to its underwriting practices in Alberta as it braces for an increase in delinquencies in the region.”

“President and chief executive Stuart Levings said Genworth is exercising “heightened vigilance” in underwriting home purchases in Western Canada in light of the sharp decline in oil prices.”

patriotz
Member

@24: “Also, what was the government thinking with their 20 mil bid to CP?”

As the article points out, the city is thinking that the transport zoning of the CP corridor (which was upheld by the Supreme Court of Canada) prevents it from being developed.

If CP thinks it’s worth $200 million they are welcome to find a buyer who thinks it’s worth $200 million.

CanuckDownUnder
Member
CanuckDownUnder

I can’t tell if that article is from the Financial Post or the Onion.

That guy has insured himself against a downturn in the Alberta property market by buying multiple rental properties? But he’s not worried because he’s built up some equity in his own home? Unbelievable.

RFM
Guest
RFM

“Five years ago, I wrote an article for Reuters titled “Goldilocks and the Three Fuels.” In it, I discussed what I call the Goldilocks price zone for oil, natural gas and coal, a zone in which prices are “just right” — high enough to reward producers but low enough to entice consumers. Ever since the start of the fossil- fuel era, such a zone has existed. Sometimes price boundaries were transgressed on the upside, sometimes on the downside, but it was always possible to revert to the zone.

But now, the Goldilocks zone for oil has ceased to exist. This will have staggering consequences throughout the economy for the foreseeable future.”

Read the full article at Reuters:

http://blogs.reuters.com/great-debate/2015/03/24/goldilocks-zone-for-oil-prices-is-gone-for-good/

vangrl
Member
vangrl

http://www.theglobeandmail.com/report-on-business/economy/housing/the-real-estate-beat/developer-pays-big-premium-in-hunt-for-vancouver-land/article23604767/

wow, those co-op owners scored!

Also, what was the government thinking with their 20 mil bid to CP? that one block on 6th between Cypress and Burrard is probably worth more than that.

Randy Randerson
Guest
Randy Randerson

Who here thinks Poloz will drop rate again this year, since our economy is going down the crapper than a piece of turd. I for one think he’ll drop another quarter of a point to appease his Master Harper to keep this RE bubble going.