Vancouver Condo Info

Another warm sunny day in Ottawa. Here’s what I get for having given up on the “best place on earth”:

- more cultural activities
- people who are polite and say hi to you on the street
- neighbourhoods that feel like neighbourhoods
- ethnic diversity but not segregation
- no homeless people outside of downtown
- breakins are regarded as newsworthy
- much better job opportunities

I can break the RE market into three sectors:

- Gatineau, Quebec
Prices that are actually reasonable. $200K gets you this in the English-speaking community of Aylmer:

http://passerelle.centris.ca

- Generic Ottawa
Overpriced but if you really want to buy, you won’t become a debt slave. $300K gets you this in Silicon Valley North:

http://www.realtor.ca

- Trendy Ottawa
Definite bubble territory, but still more for your money than Vancouver. This $1.2 mil house in the Glebe likely would not rent for more than $3500/month:

http://www.realtor.ca

Compare with this rental:

http://ottawa.en.craigslist.ca

Or you can rent, there’s lot of quality stock, the landlords aren’t psychos and people don’t treat you like a leper.

Enjoy the rain.

This post was submitted by patriotz.

Huh. Even with high oil prices and rock bottom rates homeowners in Alberta don’t seem to all be paying their bills on time:

Homeowners in the province are nearly twice as likely to fall behind than those in the rest of Canada. And the proportion struggling to make mortgage payments is the highest it has been since at least 1990, according to fresh data from the Canadian Bankers Association.

The rising rate of delinquency comes as economists warn that Canadians are under increasing pressure when it comes to servicing their debts.

As interest rates move higher in the coming months, many could find it even harder to make their monthly payments.

The main problem for the province has been Calgary’s housing market, which has struggled since a boom at the start of the decade caused massive price gains in a short period. In 2005, prices were up 10 per cent. The following year, home prices surged another 50 per cent.

The gains came to a halt five years ago, when the market began to weaken. Then, when the recession hit in 2008, panicked homeowners rushed to sell in near-record numbers, flooding the market with inventory and putting renewed pressure on prices.

This issue also seems to be negatively affecting Genworth.

This post was submitted by TKO.

Alright, let’s talk politics. Who do you think will best guide the economy through any future troubles and which party will best handle the housing market from your point of view? Is that the same party you normally vote for?

This is the thread to tell us who your voting for and why, or who your voting against.

..Ok, that’s not actually true, the Canadian Real Estate Association is actually just urging the federal government to leave everything as status quo so they can sell lots of houses, but it’s fun to imagine the first paragraph of this Globe and Mail article is meant to be taken literally:

The Canadian Real Estate Association has cautioned the federal government to stay out of the mortgage market until the effects of recent changes can be gauged, as it suggested buyers are racing to secure 35-year mortgages before they are banned in late March.

Imagine the mayhem that would be unleashed upon the Canadian housing market if the government via the CMHC ‘stayed out of the mortgage market’. The end of that sentence is also completely inaccurate, as 35-year mortgages obviously aren’t going to be ‘banned’ in late March, they simply won’t be eligible for tax-payer backed mortgage insurance anymore.

As Paulb points out, the remarkable thing about that article is the comments. Twelve hours after being published there are close to 300 comments, most of them unhappy with the CREA and the CMHC.

As you’ve probably heard, the Canadian Real Estate Association is asking it’s 100,000 plus members to send in a form letter to their MPs in reaction to rumored changes to mortgage finance rules.  In the form letter they say:

In particular, we are concerned about the negative impact modifications to the allowable amortization period or minimum down payment requirements would have. These changes would create affordability problems, especially for first-time buyers. First-time buyers are the first link in a chain reaction of real estate activity.

But let’s be clear – the ‘allowable amortization period or minimum down payment requirements’ are not proposed rules that will prevent private lenders from offering any deal they want, they are a reduction of excess government credit pumped into the housing market over the last few years.  What the CREA seems to be proposing is the conflicted idea that our housing market is stable and not in a bubble, but that minor changes to down payments or amortization terms on government insured mortgages could cause a collapse (of that non-existent bubble).

Also from the CREA form letter is this justification:

The housing sector played a key role in Canada’s economic recovery. In fact, a report published by Altus Group in 2009 found the typical MLS® home sale and purchase between 2006 and 2008 produced $46,400 in spin-off spending. Based on this research, forecast annual sales in 2010 generated an estimated $20.5 billion in spin-off economic activity and over 185,000 jobs.

Sounds like a good spin off, but according to this article in the CBC, the issuance of CMHC mortgage backed securities in 2010 is estimated to be $100 billion.  Are we really getting the best sustainable economic spin off from that money?

For all the CREA claims to care about first time buyers, they are who would be most protected by adjustments to government backed mortgages.  If you can’t afford a down payment right now maybe you shouldn’t be buying.  As we’ve seen all around the world from the US to Dubai to Ireland, Spain and Portugal, rocketing property values without income growth is not sustainable, no matter how much governments or real estate associations would like them to be.

This is a small local blog, we get less than 4000 readers a day which is far less than the CREA’s 100,000 plus members, but that doesn’t mean your voice shouldn’t be heard.  If you want to make your views known to your MP you are welcome to use this form letter written by Jesse in the forums.  You can find contact info for your MP here.

Many people have pointed out this link: Fortune Magazine on the likelihood of a major Canadian housing market crash:

Canadians easily obtained mortgages with only 5% down and payments running out 35 years. More than 65% of Canadian mortgages are fixed for five years (and now face more stringent renewal terms and likely higher interest payments). But variable rate mortgages offered in Canada were at least as creative as those doled out in the US, with banks allowing terms as short as six months. Unlike in the US, people who default on mortgages in Canada don’t just lose their houses, they risk other assets as well.

A fast or unexpected rise in interest rates (Canada was the first G7 country to begin moving them higher following the recession) could leave Canadians with little cushion. Last year the IMF noted that, by some measures, Canadians were paying a larger percentage of their income for housing than Americans did prior to the housing bust.

That level hasn’t improved. Recent government data shows that the average Canadian with a two-story home spends almost 50% of his household income on mortgage servicing, with the average is closer to 70% in red-hot markets like Vancouver. “By and large the affordability situation remains within a safe range in Canada; however there are local markets where the share of household income taken up by homeownership costs is at worrisome levels,” the Royal Bank of Canada wrote in September, adding that the situation in Vancouver raises “a red flag.”

Timely warning or sour grapes because our housing market is strong while the US market sags?  You can read the full article here an make up your own mind..

Commenter painted turtle pointed out a couple of interesting news items. First off, a survey by The Economist shows Canadian real estate overpriced by 23.9%, which is high, but not as high as Australia, Hong Kong and France.

“Singapore, Hong Kong and Australia boast the gaudiest year-on-year price increases, even if the rate of appreciation is down a bit from the summer,” the report states. “House prices in China rose by 9.1 per cent in the year to September, compared with a 12.4 per cent rise in May.”

The Economist’s analysis of “fair value” of housing is based on comparing the ratio of current house prices to rents, with the long term average.

Simply put, the purchase price of a house is divided by the rent it could have earned per year, and the result is the price-to-rents ratio.

A high result could mean a house is overvalued, while a low number means it could be undervalued.

You can see the list over at CTV.

Averaging home prices across an entire country must be kind of tricky though. Especially in a country as big as Canada there’s a big difference between the market in Vancouver and Windsor.

All this talk of overpriced real estate must be getting to Mark Carney, because the Bank of Canada governor just said out loud that an abrupt correction in Canadian house prices is a possibility:

Bank of Canada governor Mark Carney agreed Tuesday that an abrupt correction in Canada’s housing market is possible.

Appearing before the Commons finance committee and responding to a question from Nova Scotia MP Scott Bryson, Carney said he was not predicting a significant drop in prices, but given how far prices have risen and the high level of Canadians’ household debt, it could not be ruled out.

Carney told the committee the bank is limited in what it can do to use interest rate changes to encourage Canadians to reduce their debt.

Read the full article over at the CBC.

ReadytoPop posted a link to this Financial Post article that portrays what it looks like when a real estate bet turns bad:

Erica and Jeff Manger never thought the price of their house could drop.

The Alberta couple bought a condominium in the Rockies resort town of Canmore three years ago and when they decided to move in 2008 to Sylvan Lake in Alberta, where they could afford a detached home, they kept the condo as an investment.

“It never occurred to us that we wouldn’t be able to sell for what we paid,” says Ms. Manger. “People were making $100,000 [on paper] a year on their condos.”

Now they’d be lucky to get the $315,000 they paid for their condo, even though it may have fetched $345,000 in 2008 when they were thinking about selling it to help pay for their new home. Instead, they’re getting $1,100 a month in rent for an investment that costs them $1,800 a month to carry and isn’t going up in value.

It gets worse. They have to sell the house in Sylvan Lake because Jeff, who is a helicopter pilot, is looking for a better location for work. They paid $375,000 for the house and fixed it up. Not even counting Jeff’s labour, the couple spent another $30,000 on supplies.

“We tried to sell it and put it up for $409,000. We lowered it to $385,000 when we hired a realtor, but that didn’t work,” says Ms. Manger.

Read the full article over at the Financial Post

VHB pointed out this site on Thursday: Canequity provides actual data for their mortgages across Canada including here in Vancouver.  One of the frustrations of anyone trying to study the housing market in Canada is the dearth of publicly available data compared to the United States, so it’s nice to find a source of some data when it comes to Canadian mortgages.  Here’s their chart of product inquiries as one example:

Take a look through all the data they make available – here’s Toronto and here’s Alberta.  Locally there’s info for BC and Vancouver.  If anyone wants to do a breakdown of anything interesting that they find, we’ll be happy to publish that here.

realpaul pointed out this Vancouver Sun article. The day after we got the news that house prices are falling in Vancouver, Royal LePage has released a market survey predicting house prices and sales will ‘decline towards the end of the year’.

However, he pointed out, “This should not be interpreted as a severe correction but rather a natural reaction to the market having peaked quite early this year.”

This outlook is at odds with the BCREA and CREA market surveys released a few weeks ago that predict flat or rising prices for 2010 and then falling prices in 2011.