Archive for the ‘BC’ Category

Does the Bank of Canada Think Real Estate Buyers are Suckers?

Wednesday, December 10th, 2014

Some of you are under the impression that Bank of Canada Governor Stephen Poloz does nothing but sit around all day eating Doritos and watching The West Wing on Netflix, but you are sadly mistaken.

He also issues reports that freak out Realtors.

Consumer debt loads and house prices that could be as much as 30 per cent overvalued are the two biggest risks to Canada’s economy, the Bank of Canada warned in its semi-annual Financial System Review on Wednesday.

Yeah, but “up to 30 percent” includes zero percent over-valued too you know? Surely not everyone is overpaying for Canadian real estate.

The bank says it’s about 95 per cent sure that house prices have been overvalued by an average of about 10 per cent since 2007. That’s based on a new forecasting model the bank says it created, which incorporates existing data from private banks and other government institutions.

Huh. 95% Sure? really? I bet it’s all a’cause of those wealthy foreigners right?

And a lot of those inflated house prices are coming at a cost of rising debt loads. About 12 per cent of Canadian households are considered to be extremely indebted — which means they have a debt-to-income ratio of at least 250 per cent. That ratio has doubled since 2000, the report notes.

Oh.

But that’s ok because younger buyers are building equity right?

Young homeowners, the bank added, have become even more vulnerable to negative shocks to income and to higher interest rates.

Wow. What a buzzkill.

*For those who followed the foreigner link we would like to offer our sincerest apologies.  If you are a glutton for punishment, here’s a video of our prime minister singing Guns n’ Roses “Sweet Child o’ Mine“. If you watch the whole thing you earn a cookie! If you cut it off at 3:33 you have to go to work at a Tim Hortons in Fort Mac. You have been warned.

 

New Record $1.513 TRILLION in Canadian consumer debt

Thursday, December 4th, 2014

Just how fat can this debt pig get before it’s stomach explodes?

You thought this nation had impressive debt levels before? It’s now topped One and half trillion dollars and an astounding 65% of that is mortgage debt.

In one report, Equifax Canada said that “Canadian consumers have yet again tipped the scales setting a new benchmark of over $1.513-trillion in debt.”

That third-quarter figure marked an increase from $1.448-trillion in the second quarter and $1.409-trillion a year earlier, according to Equifax, whose numbers are based on more than 25 million unique consumer files.

Excluding mortgages, average debt held by Canadians has increased 2.7 per cent to $20,891.

The good news is that 27% of Canadians apparently don’t believe that a mortgage is debt, so we shouldn’t really even count that part.

Vancouver Realtor Hunger Index November 2014

Wednesday, December 3rd, 2014

RFM has updated the Vancouver Realtor Hunger Index for November 2014 over at Vancouverpeak.com

The index is creeping up from its mid levels, but nothing too dramatic at this point.

The VANCOUVER REALTOR HUNGER INDEX for November 2014 was 62%. How does this compare? The 17-year average for November is 54%. At 62%, the 2014 November VRHI equaled 1999’s figure and was higher than 10 years and lower than 5 years since 1998.

Details and comparison data for 17 years at:http://vancouverpeak.com/showthread.php?tid=64

Lessons to learn.

Monday, December 1st, 2014

No matter how much you know, there’s always something new you can learn.

From this article in the Vancouver Sun there are at least 3 lessons we can learn:

1) Shaughnessy is a ‘tony’ neighborhood:

Laura De Munain moved into her family’s Oak Street house on the outskirts of the tony Shaughnessy neighbourhood in April. While working from home, the pregnant lawyer soon noticed groups of two or three people regularly stumbling around her back alley in a daze.

2) You can’t force absent owners to evict partiers from their property:

Police answered her first call to their non-emergency line and toured the property, but they “said they didn’t see any evidence of consistent living here,” according to De Munain. She says city staff referred her back to the police when she complained about drug users and squatters in June and asked the city to force the owner to board the home up properly.

3: Government hears you, but they’re not sure you mean what you say:

In the weeks leading up to this month’s civic election, a blog showcasing “beautiful empty homes” of the west side and a proposal from COPE mayoral candidate Meena Wong for a vacant home tax gained support from residents simmering with anger over Vancouver becoming a “hedge city” for foreign real estate investors.  A poll last month showed 72 per cent of respondents thought such a tax a “very good” or “good” proposal, and only 18 per cent deemed it “very bad” or “bad.”

Vision Vancouver Coun. Geoff Meggs said he, like many, finds it offensive when a perfectly good home is held empty for speculative reasons, but he doesn’t know that such a tax is “legally possible or even desirable.”

You’ve either learned something new from this writeup or it’s been a complete waste of your time. In either case you can read the full original article here.

CBC discovers the fun of ‘Compare and Despair’

Wednesday, November 26th, 2014

We’ve played this game before.

When you compare what you get in Vancouver for your housing dollar vs. some other locations you get some interesting comparisons.

The CBC has an article looking at the cheapest houses in Vancouver and how they compare to some US locations.

A new CMHC report says Canadian home prices are moderately overvalued in some cities, but Vancouver is labelled as low risk by the Crown corporation in its latest housing market assessment.

One measure used by economists is the amount of income earned by the average family compared to house prices. By those standards, prices in Vancouver are some of the most expensive in the world.

See their gallery here.

Builders stop building in a bubble?

Thursday, November 20th, 2014

Markoz left this comment in yesterdays thread, but it got held up in moderation because it had more than two links:

My wife works at a bank and her boss sent a link to this BIV article entitled, “Nobel economist housing bubble formula shows Vancouver resistant.

Here is a copy of my response (unfortunately the charts I clipped won’t paste into the comment section):
His theory (as presented by the article’s writer at least) is that builders are smart enough to stop building before/when a bubble pops. I’m not sure if he means that a slow down in building is a precursor to a bubble popping or if he means that when sales drop so do housing starts. In Vancouver, housing starts only dropped off significantly well after sales did in 2008.

Vancouver sales began to tank in March or April of 2008.

Residential property sales in Greater Vancouver totalled 2,997 in March 2008, a decline of 16.3 per cent from the 3,582 residential sales recorded in March 2007, and a decline of 25.7 per cent compared to the 4,033 sales in March 2006.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver totalled 3,218 in April 2008, a decline of five per cent from the 3,387 sales recorded in April 2007, and a 3.8 per cent drop from the 3,345 sales in April 2006.

VANCOUVER – The Greater Vancouver housing market continued its re-balance between sales and listings last month. The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver declined 30.7 per cent in May 2008 to 3,002 from the 4,331 sales recorded in May 2007.
All of the above is from the REGBV website: http://www.rebgv.org/monthly-reports?month=May&year=2008
It just kept getting worse:http://www.huffingtonpost.ca/2012/07/04/vancouver-home-sales-10-year-low_n_1649539.html

“This summer, sales went off a cliff,” added Somerville, who is director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.:http://www.canada.com/vancouversun/news/business/story.html?id=e6e0c211-fddd-413b-9a94-3564e20567d8

The financial crisis did not start until Lehman Bros failed on September 15, 2008.

Here are the housing starts specs:

Apparently our builders aren’t as smart as the Nobel Laureate. Starts for all types of homes stayed above the average for 2004-2008 till the end of 2008. They plummeted after the fact. Perhaps the writer is putting his own spin on what Smith said. I wasn’t there so I don’t know.

The other thing to note is that the writer never actually asked Smith if he thought Vancouver was in a bubble. He did a follow up interview with him but seems to have avoided asking the question directly. He says, “Using Smith’s formula for housing bubble-burst scenarios, B.C. and Vancouver do not appear threatened, despite record-high prices in the latter. B.C. housing starts this year are up 3.1% from 2013 and forecast to rise a further 1.4% in 2015, according to Canada Mortgage and Housing Corp.” Why not just ask him what he thought instead of making a supposition?

BC Ferries: Losing money by cutting service

Wednesday, November 19th, 2014

Think of the money the government could save by closing down the Trans Canada highway! No more expensive road maintenance, and the land could be sold off to build more condos!

…Of course there may be some negatives associated with closing that highway.

Here on the coast much of our province is across water, which means the transportation system we rely on is BC Ferries.

An economic analysis shows that the expected $725k savings from recent cuts is actually causing a loss of $870k in tax revenues as tourism plunges $3.9 million following deep service cuts.

About one in five tourism- ism-based businesses in the Coast-Chilcotin region report foreclosure is a near-term possibility.

More than 40 per cent report losing most or all of their tourist bookings when agencies couldn’t sell the Discovery Coast package due to worries over ferry service.

And three in four businesses report decreased income in the year after the service cuts, according to the report by Larose Research Strategy.

Read the full article here.

Vancouver Housing Myths

Wednesday, November 12th, 2014

Crabman pointed out this article in BIV: Conference torpedoes Vancouver housing myths

Metro Vancouver housing is affordable. The market is stable. There is no glut of new condominiums looming. And foreign investors are not driving sales and prices higher.

I believe those are not the myths being exploded, but meant to be statements of fact at the beginning of the article. As for the ‘affordability’ issue, the cities top condo salesman says simply omit SFH and disregard the top 20% of the market and things don’t look so bad.

Rennie said media and pundits concentrate on the average price of single-family detached houses in the City of Vancouver, which consistently average in the million- dollar range, with condominiums north of $440,000. But, he said, such higher-end sales represent only 20% of the overall market.

For the remaining 80% of buyers, the average detached house is around $670,000 and the average condominium is $316,000, Rennie said.

But there seems to be some question about how that math works out. Crabman claims to have done the math and come up with a different result:

There are also 383 houses listed over $670k in East Van. When I removed the most expensive 20% of listings, the median price of the bottom 80% was $1,088,000.

And on the west side, the median price for the “cheaper” 80% of listings was $2,888,888.

But even if Crabman is mistaken and Rennie has the math correct, there’s this:

Of course, once you also exclude the top 20% of incomes, $670,000 is anything but affordable.

 

 

Oct 2014 Vancouver Realtor Hunger Index at 54%

Wednesday, November 5th, 2014

RFM has updated the Vancouver Realtor Hunger Index which currently stands at 54%.

That takes it almost squarely into the middle of historical data:

The VANCOUVER REALTOR HUNGER INDEX for October 2014 was 54%. How does this compare? The 17-year average for October is 50%. At 54%, the 2014 October VRHI was higher than 8 years and lower than 8 years since 1998.

Details and comparison data for 17 years at: http://vancouverpeak.com/showthread.php?tid=64

Here’s how that number is calculated:

I start with the total reported sales from the REBGV. I assume 5% of those sales were ‘double ended’ (one realtor kept the entire commission by ‘representing’ both buyer and seller) and add to the number of ‘double ended’ commissions the number of split commissions (which I reduce by an assumed 15% ‘earned’ by realtors who handled multiple sales). I divide the resulting number of commissions by the total number of realtors and subtract that fraction from 1 to yield the percent of realtors not earning commissions and therefore going hungry. In symbols: (((sales x .05) + (sales x 1.615))/(# realtors)) – 1 = VRHI; (1.615 = .95 x 2 x .85). The REBGV website reveals neither the exact number of realtors at any particular time nor the percent actively engaged in selling residential property. I used 11,000 for 2014, 2013, 2012 and 2011; 10,000 for 2010, 9,400 for 2009, 9,500 for 2008, 9,000 for 2007, 8,200 for 2006, 7,800 for 2005, 7,100 for 2004, 6,700 for 2003, 6,500 for 2002, 6,700 for 2001, 7,200 for 2000, 7,800 for 1999 and 8,500 for 1998.

CMHC: Lower house sales in lower mainland over next 2 years

Monday, November 3rd, 2014

The CMHC is predicting declining house sales in the lower mainland over the next couple of years due to higher mortgage interest rates.

“Total housing starts will edge higher as resale market conditions remain balanced and the supply of completed and unabsorbed (unsold) new homes trends lower,” said CMHC B.C. regional economist Carol Frketich.

“Housing demand will be supported by employment and population growth, but tempered by gradually rising mortgage interest rates.”

They are predicting price growth of 1.2 and 1.7% (unclear if this is before or after inflation) and they forecast this based on an assumption of a shift to ‘lower cost housing’.

Which might be good news for anyone trying to sell ‘lower cost housing’ since prices on Vancouver homes under $1.1 million have gone essentially nowhere over the last four years.

 

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