All posts by VCI Admin

Interest Rates, Price Plunge & CMHC Losses

Southseacompany linked to this article in the Globe and Mail that talks about the CMHCs vulnerability to rising interest rates:

The most dramatic scenario involved a severe and prolonged global economic depression that sent unemployment soaring to 13.5 per cent and triggered a 25-per-cent drop in national home prices.

In that case CMHC said its mortgage insurance business could lose more than $3.1-billion over five years. However CMHC said it would have more than 200 per cent of its required minimum capital, even after accounting for stricter capital requirements that OSFI is expected to introduce in January. Insurance companies are required to stop writing new insurance business if their capital ratio falls below 100 per cent of its required minimum level and are insolvent when their capital levels hit zero.

CMHC’s stress testing comes amid heightened concerns over the health of the Canadian housing market. Last month, the housing agency issued its first “red” warning for Canada’s housing market as a whole, saying it now sees “strong evidence of problematic conditions” in six of the country’s largest housing markets.

In yet another scenario the Crown corporation said its insurance business would lose more than $2-billion if Canada experienced a “U.S.-style” housing correction, where home prices drop by 30 per cent and the unemployment rate rises to 12 per cent.

Read the full article here.

Vancouver Down, Toronto Up.

House prices never go down in Vancouver, except when they do.

But what about Toronto? The city that seldom thinks about BC?

Prices are up 11.8 per cent from a year earlier.

“In fact, there’s anecdotal information that suggests that foreign investors … are now turning to other cities that are not as expensive as Vancouver, because even that market’s gotten out of reach for wealthy foreign buyers.”

A separate report from real estate agents showed a 2.4 per cent monthly rise in sales in October and a 14.6 per cent surge in annual prices as buyers rushed to get into the market before tighter mortgage rules could take effect.

Taken together, the data showed Canada’s market cooling in most markets outside of Toronto, where a building boom and rising household indebtedness have spurred fears of a U.S.-style collapse if borrowing costs, already rising, spike further.

“Almost all seems to be well in Canada’s housing market, with most regions enjoying moderate sales activity and price gains, Alberta’s hard-hit market stabilizing, and Vancouver’s zany market returning to earth,” Guatieri said in a research note.

“However, accelerating prices in Toronto and its surrounding areas will only increase the chance of a correction if interest rates rise too sharply … and the chance of that happening is now somewhat higher under a new U.S. president.”

Read the full article over at

Houses selling at a loss

The great real estate market pause of 2016 seems to be creating some losses out there. Southseacompany pointed out this article that finds 3 homes selling for less than they were purchased for:

Vancouver real estate often gets hailed for excellent returns, but this one has us scratching our head. Three single family detached homes have listed for less than the owners paid for them. The kicker? They were all purchased less than 8 months ago. Is this the beginning of the end for Vancouver’s market or are we just insanely good at finding deals? Check out the listings and you can decide.

The rough estimated losses on those properties range from $73k to $125k if they sell for asking. View all three listings over at BetterDwelling.

Friday Free-for-all! February 11 2016

It’s that time of the week again, time for another Friday Free-for-all!

This is our regular end of the world week news round-up and open topic discussion thread for the weekend.

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

Empty home tax fine $10k a day
Vacant house fires
Higher Rates Coming?
West Van sales avg 16% below list

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

Big Drop in October BC Housing Starts

Sales are down and prices have been flattish lately, but developers seem to be taking a ‘wait and see’ approach as BC housing starts saw a big drop in October.

CMHC says the pace of urban housing starts picked up in Ontario last month but there were declines in Quebec, the Prairies, Atlantic Canada as well as British Columbia

The annual pace of urban starts in B.C. fell to 25,517 in October compared with 46,294 in September.

Bank of Montreal senior economist Robert Kavcic said British Columbia was the big story.

“We’ll see if this level of activity, particularly in Vancouver where starts fell to the lowest since 2011, holds in the months ahead in response to softening demand conditions,” Kavcic wrote in a note to clients.

The drop in home starts in Vancouver comes as real estate sales in the region have also fallen sharply in recent months.

Read the full article over at BNN.