Vancouver Condo Info » charts

Historical Sell List Ratios

TDK1138 — Wed, 04 Jan 2012 08:40:01 +0000

VHB has a post over at Housing Analysis looking at the last few years of sell / list ratios in Vancouver. He’s got two charts there, one based on daily data in the VCI forum and one going further back to 2001 based on REBGV data. Interesting to see the difference in years like 06, 08 and 2011.

This post was submitted by TDK1138.

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Mortgage loan approvals by province

Fri, 09 Sep 2011 07:15:52 +0000

One metric that nicely captures both the credit and mass psychology components of the current Canadian real estate craze is the total dollar amount of mortgage loan approvals as a percentage of GDP.

[...]

The total amount of mortgage debt would be expected to rise, but in a healthy and sustainable real estate market, it would rise in tandem with GDP growth, meaning loan approvals as a percentage of GDP should stay range bound. That they haven’t is but one more indication that this is a market driven by unsustainable dynamics.

http://www.theeconomicanalyst.com/content/mortgage-crazy-look-loan-approvals-province

This post was submitted by Mansur al-Hallaj.

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Global Price to Rent Ratio

Starving Artist — Mon, 22 Aug 2011 08:19:29 +0000

According to fundamentals, Canadian RE ownership continues to be significantly overvalued compared to rental cashflow. Even the bubbly Australian market has started to correct, but with interest rates low for at least 2 more years, who can predict how long the plates can continue spinning?

You can play with The Economist’s house prices chart yourself here:

http://www.economist.com/blogs/freeexchange/2011/03/global_house_prices

© Starving Artist for Vancouver Condo Info, 2011. | Permalink | 111 comments | Add to del.icio.us
Post tags: Canada, compare

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In came the waves

patriotz — Wed, 03 Aug 2011 08:15:44 +0000

The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops

So begins the Economist’s landmark article on the global RE bubble from June 2005. It’s now available for free viewing after years behind the pay wall.

This is the classic analysis of the housing bubble IMHO and the one that made me bearish on RE. Its arguments are my arguments.

“The most compelling evidence that home prices are over-valued in many countries is the diverging relationship between house prices and rents. The ratio of prices to rents is a sort of price/earnings ratio for the housing market. Just as the price of a share should equal the discounted present value of future dividends, so the price of a house should reflect the future benefits of ownership, either as rental income for an investor or the rent saved by an owner-occupier.”

And there you have it. It’s possible to ascertain whether housing is over-valued because it’s an investment, whether or not its owners think of it as one, or what they mean by an “investment” in the first place. Eventually market forces and marginal pricing must prevail and that means that prices must fall back to a level justified by rental value.

Do read the article if you haven’t already, and try adding Vancouver (or other major Canadian markets, or just the Canadian average) to the graphs. How do we look compared to the US and other countries in 2005?

This post was submitted by patriotz.

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What if the last 30 years happens again?

doubleplusgood — Mon, 18 Jul 2011 08:01:24 +0000

If Vancouver house prices increase by the same amount they have since 1982 the average house price in 2038 will be almost $4 million dollars. Sounds reasonable, but what about interest rates? In the same amount of time interest rates have fallen dramatically. If they keep dropping at that rate they’ll break the zero bound soon and become negative.

Then what happens?

The bank will pay you to hold a mortgage.

The future is bright.

Here’s the link to the video on YouTube if you want to comment there.

This post was submitted by doubleplusgood.

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Paul Is Back with the Data

The Pope — Tue, 21 Jun 2011 08:43:24 +0000

Realtors. Some of you love them, some of you hate them and some of you are them. But there’s one thing that it seems we can all agree on: We appreciate it when a realtor takes the time to share market data with us.

One Realtor that has consistently shared market data with Metro Vancouver residents is Paul Boenisch. Paul has been sharing daily sales and listing numbers with us for a while and is now establishing a market data section on his site along with a new partner.

At the moment their market trends section is in its beginning stages, but Paul has a well established history of reliably providing data and promises to continue posting daily numbers here as well.

For more Metro Vancouver market data you may want to also check out the Realtor sites of Agent Will and Larry. For the bigger picture there’s CUER/Sauder at UBC and for great analysis check out the Economic Analyst. Lauren and Paul will be posting local real estate market data here.

Do you have a favorite source of market data that isn’t listed here? Drop it in the comments below!

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Few macro observations today

crashcow — Mon, 09 May 2011 01:04:32 +0000

Quick roundup of tidbits I collected:

First, notice the striking correlation between the %YoY change in Canada and Australian home price indexes:

Graph sources:
AUS Price Index (fig 1)
CAD Price Index (comminuques->april)

Second, look at the similarities between today and summer 2008:
- Both Aus & Canada %YoY home price trends are following the trend set in ’08.
- USD index came within a hair of its summer ’08 lows and has started to rally
- Commodities have started to tank and have registered their largest 1 week plunge since ’08

Third, QE2 comes to a close end of June. No more $4 billion of liquidity pumped into the markets daily to goose commodities and other risk assets. This also gives further fuel to the USD rally.

A crash this time around would be uglier as interest rate ammo worldwide is thin. So buckle up and let’s get the remaining world housing bubbles popping at warp speed scotty!

Submitted by crashcow

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US real estate, Vancouver, and Currency

real_professional — Sun, 01 May 2011 01:43:07 +0000

Foreign investors coming to Canada must be either oblivious to the relative valuations of Vancouver vs US real estate or are as dumb as a post. The chart below demonstrates just how much of a spread has developed between Vancouver home prices and US home prices in Canadian dollars. For a rational foreign investor buying investment property the decision should be a no-brainer: World class US cities priced at distressed multiples and in “cheap” greenbacks ,or an over inflated Vancouver market which is priced at unsustainable income multiples and in a currency that has seen strong appreciation. As you can see from the chart the relative valuations have gone from pillar to post – with US home prices at one time valued at approximately 2X Vancouver to now being valued at roughly 1/2 of Vancouver prices.

What is it then that makes foreign investors ignore the fire sales across the border? Is it our free health care system that they are coming for??? If the rich immigrants are as rich as we hear, why would they need a free health care system especially when an affluent individual can set themselves up to receive better health care in the US. Are there massive tax differentials on foreign owned property to justify the spread? It is most likely the “buy in” to Canadian citizenship which is the draw for many. As well, the herd mentality must also be a contributing factor.

In any event – I doubt that these relative valuations can be maintained – What do you think?

© real_professional for Vancouver Condo Info, 2011. | Permalink | 54 comments | Add to del.icio.us
Post tags: 1990s to now, Canadian dollar, canadian real estate, Chicago, LA, Los Angeles, Miami, Portland, relative valuation, San Francisco, Seattle, US real estate, vancouver

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Real Estate vs Stocks

real_professional — Mon, 21 Mar 2011 14:19:36 +0000

Chart 1)

The chart above displays Vancouver, Toronto, Calgary, and Montreal home prices vs. the TSX index.

The purpose for this measure is to understand the relative performance of two regional asset classes. Both asset classes should, over the long term, be correlated to fundamental Canadian economic characteristics; Such as, interest rates, wages, GDP growth, productivity, and even themes such as Chinese growth, global inflation, energy demand etc.

Over the long run you should expect equity markets to outperform real estate for a number of reasons, but most importantly these two points:

1) A higher return for equities is necessary to compensate investors for the higher risk profile
2) Over the long run no asset should be worth more than the present value of their future generated cash flows.

I re-based both measures to the late 90s when each market appeared to have reached their relative lows simultaneously. This time period is also significant because it marked a period of calm before a few very important changes to the Canadian economic landscape, including:

Interest rate cuts – Post 911
Energy Bull market and resulting “economic multiplier”
Chinese growth demand of commodities
Canadian currency bull run – related to a couple of points above

What I would have liked have done is to look at the ratio of total Canadian Real Estate values in nominal terms vs total Canadian equity index market capitalization. I leave that to someone else if they have the time, resources, and interest.

I used a moving three month average for both the price index and the tsx in order to smooth out the volatility. I didn’t bother looking at a “Total Return” measures for either asset class since their ability to generate future cash flows should be, at least partly, reflected in the price of the asset. All other notes are on the chart!

Image 2)

I hear a lot of different stories about sales volume – so to clean out the noise, I took the data from Teranet National Bank House Price index on “Sales Pairs” used for calculating their price index. It isn’t total sales volume but it does give us an idea of trend. I took the average sales volume each year and in each season in the 1990′s and compared it to the corresponding season over the last decade. Other than that initial quick burst during the 2009 recovery, sales volume has not recovered to what it was prior to the recession.

Keep in mind, since there are obviously more homes now than there were in the 1990s you should expect some level of inflation in the volume percentage. However, we really aren’t seeing it. Sales are pretty similar to 2001 at best.

© real_professional for Vancouver Condo Info, 2011. | Permalink | 51 comments | Add to del.icio.us
Post tags: multiple ratio, stocks, tsx

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But, it’s different here!

crashcow — Tue, 15 Feb 2011 08:00:07 +0000

Why did Canada’s housing market not suffer (yet) as much as the US? The media will tell you it’s our top-notch banks, prudent lending system and strong fundamentals. But take a close look at the graph below:

The US and Canada both had an uninterrupted housing boom that lasted 7 years, with US starting and ending roughly 2 years before Canada. After US banks began failing and world stock markets collapsed in Oct 2008, unprecedented stimulus measures were taken simultaneously by Canada and US.

The key point the above graph illustrates is that by the time stimulus was started, US home prices had already been falling for 3 years while Canada had just started their decline 1 year prior. As a result of the shorter stimulus response time in Canada, our housing prices and banks took a smaller hit.

Notice how similar the effects of this stimulus have been to home prices in both countries. By slamming interest rates to the floor, injecting $110 billion into Canadian banks ($65B from the Insured Mortgage Purchase Program and $45B from Bank of Canada) and creating home buyer incentives (US), housing demand was dragged forward and created a temporary rally in home prices. Even more interesting is how the stimulus effects have started to wear off at the same time in both countries.

And are our banks really more prudent than those in the US? As Ben Rabidoux noted on his blog, take a look at the bank leverage ratios (courtesy of Eric Sprott):

The media is right – it’s different here. It’s worse.

submitted by: crashcow

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Silly Math for Speculators

jesse — Wed, 09 Feb 2011 09:00:52 +0000

If I had a nickel for every time I had to endure some property investor telling me about how much money they made, I’d have enough to buy a condo in Phoenix. But just for fun I decided to run some numbers on a stereotypical flipper and what conditions s/he would require to make a “profit” on a flip. Before beginning, remember the mindset: opportunity cost stays in the textbook — what is being measured is whether or not the flipper has more money in a year than when he bought. So we can calculate the approximate profit of a flipper, assuming he bought a year ago and sold today. The profit reaped is therefore:

Profit = Sales Price – Purchase Price – Interest – Expenses + Rent – Sales Fees

Sales Price – Purchase Price = Pi*(1+a), (where Pi is purchase price and a is annual appreciation)

Rent-Expenses = Pi*CR, (where CR is the cap rate (generously about 5%))

Sales fees = Pi*f, (where f is the sales fees from a sale (say about 3%))

Interest = Pi*LTV*i, (where LTV is the loan-to-value ratio and i is the mortgage rate)

It is approximated, for simplicity, the loan is interest-only (which is reasonable with a 35 year am). We sub:

Profit = Pi*(a + CR – f – LTV*i)

To achieve a positive return, a+CR-f-i*LTV > 0; solving for a,

a> LTV*i – CR + f

So we have a required capital appreciation to ensure the flipper makes money on paper, a huge psychological barrier needed to elicit a sale. We can plot appreciation versus LTV for various interest rates, assuming 5% cap rate and 3% closing costs:

So what do the numbers mean? Well at current interest rates of 4%, a flipper requires capital appreciation of 1.3% to ensure he doesn’t lose money. I ran the numbers with a 3% cap rate (typical of some detached dwellings and some condos):

And assuming the flipper keeps the unit vacant:

If the unit is at 3% cap, the 20-1 leveraged flipper requires a 3.8% annual appreciation; when the unit is held vacant, this increases to 7%.

This cursory exercise shows how leverage with low earnings requires continued capital appreciation to stave off a paper loss, a case made clear when analyzing the simple case of a flipper with a 1 year tenure under various scenarios. When interest rates go up, the required capital appreciation increases at a time when we expect increasing costs of capital to weigh heavily on upward price movement. With high leverage, interestingly, it is an absolute necessity to have prices increase, even for those with variable rate mortgages at around 2%.

© jesse for Vancouver Condo Info, 2011. | Permalink | 136 comments | Add to del.icio.us
Post tags: charts, flippers, leverage, mortgage rates

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Canadian Mortgage Rates in 2011

The Pope — Tue, 08 Feb 2011 05:36:24 +0000

Last weekend during the free-for-all discussion two readers – Best Place on Meth and Troll predicted that mortgage rates would be going up this week, and lo and behold Monday saw an announcement from both TD and CIBC that they were raising their rates. How did they pull off this prediction?

Does it have anything to do with those mysterious 5 year bond yields?

Thanks goes to VHB for the graphs!

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Help Wanted: Okanagan Real Estate Math Expert

Alpha_Bear — Wed, 12 Jan 2011 18:52:47 +0000

This is a follow up to an earlier posting about discrepencies in dollar sales figures released by the Okanagan Mainline Real Estate Board.

I’ve taken another look at the OMREB statistics, and have come across yet another anomaly. Their own numbers for the inventory of unsold single-family residential listings do not agree with one another. If you get the inventory from their monthly statistics releases, the number is different from their monthly statistics graph releases.

The numbers match up until July of this year, and then they diverge, with the monthly statistics numbers being reported as 5% to 8% lower than those in the statistics graphs reports. It sure looks like they were trying to make the inventory increase this summer appear less bad than it really was. You’ll notice that they did not include a number for December’s inventory in the just-released statistics graph report. (typical sloppiness!)

I have emailed OMREB previously regarding other discrepancies, and received a less than forthright answer. I’ve basically written them off as incompetent at best. I also have another graph showing the same problem in the Central Okanagan, if you’re interested.

This post was submitted by Alpha_Bear.

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Vancouver Land Development Guide

The Pope — Mon, 23 Aug 2010 08:04:32 +0000

The Vancouver Sun has an interesting series of articles starting up on the myths of real estate which so far falls a little short of the promised “2 million reasons for the high price of Vancouver real estate” but has some interesting stats courtesy of the groundbreaking research out of the UBC Centre for Urban Economics and Real Estate.

“Depending where you draw the circle,” Somerville says, “70 per cent of the land isn’t developable. It’s mountains or water or the United States.”

Now I caution you all that this is preliminary data fleshed out with our best guess-work, but it’s ground breaking stuff to be sure. This new paradigm may be the difference we need to make the ‘running out of land’ meme have the holding strength that is hasn’t had in so many global real estate bubble markets before.

We suspect that this data may also come as a surprise to many of you who live on the north shore mountains, or who were under the impression that the “United States” was an entirely different country rather than a chunk of land to be considered in the development of the city of Vancouver. Some newcomers may also be surprised to see water mentioned as “undevelopable land” but most people who’ve been to Granville Island or Coal Harbor know it’s important to differentiate between water that is developable and water that is undevelopable.

In the end those are all just details. The important thing is the math:

“The higher the population of a city, the higher the house prices,” he says. “If we lose 70 per cent of the land, our metropolitan area of two million will have the same house prices as a seven-million metropolitan area. Because people have to commute the same distance.”

This simple equation makes determining the true value of a Vancouver house simple. Because of Mountain/Water/USA land, our prices should be much higher than a metropolitan area with a population of only 2 million and equal that of a population of 7 million. Chicago has close to 8 million people and a median listing price of $229,900.

*Graph neither endorsed nor condoned by the REBGV, UBC, The Mayors Office, The Illuminati or the wookie-busker. Please take with a giant grain of salt. If rash develops, discontinue use. See a physician before taking any expired prescription medications you may find in second-hand stores.

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Treasure trove of mortgage data

The Pope — Mon, 19 Jul 2010 09:27:06 +0000

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.

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Is there an echo in here?

The Pope — Thu, 15 Jul 2010 08:03:35 +0000

Jonathon sent in a link to this great ‘blast from the past’ interview with developer Sam Zell about whether there was a real estate bubble in Miami. He makes some very compelling arguments about why there is no real estate bubble, and some of them sound remarkably familiar somehow.

Q But U.S. home prices are up about 40% in three years. How can this not be a bubble?

A Econ 1001: Prices have gone up because the demand has been much greater than the supply. The country is producing all it can in terms of supply, but what you see is more demand. Over the next 10 years we’re going to add a million new household, much of that’s due to immigration.

Econ 1001 is very advanced, so you may not understand that. Here’s something you will understand:

Q How bad could it get?

A Worst-case scenario? A flat housing market. Look, all I can tell you is we’re the largest owner of apartments in the U.S. and among the largest converters of apartments to condos. If there was a danger of a bubble, would we be in this business? I’ve never been accused of being a Pollyanna, I’m the Gravedancer. Americans don’t understand that we have the cheapest housing in the world. London and Tokyo are more expensive than New York. Why do you think everyone is going to South Florida from Europe? It’s because prices here are cheap compared with there.

Understand? South Florida is cheaper than other places, and everyone wants to live there. Ergo, there is no housing bubble in Miami condos. All of those arguments just happen to be applicable to Vancouver BC as well.

Here’s the ‘flat market’ in Miami since that argument was made, but always remember: ‘it’s different here’.

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Downtown Vancouver Townhouse Listings

The Pope — Wed, 14 Jul 2010 08:50:29 +0000

YLTNBoomerang just sent in an update of their Downtown Townhouse listings graph:

Like most other market segments we’ve hopped up close to the high number of listing we saw sitting on the market in 2008, though inventory growth has moderated lately. YLTNBoomerang attached the following note:

I’ve had some time to update my tracking sheets for townhouses downtown this week and thought you might be interested in the attached graph. Basically, this is a plot of the number of townhouses downtown that are listed on a daily basis – well it started out as a daily basis in 2008 then slowed down to bi-weekly updates in 2010 as I was working out of town and didn’t have time. I’m back to weekly updates now…

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Downtown condo listings hit a high

The Pope — Wed, 30 Jun 2010 08:43:06 +0000

We may be running out of land, but we sure aren’t running out of apartments for sale. Just in case you haven’t noticed, VHB has been tracking downtown / False Creek North condo inventory in the forum and we’re seeing quite a number of places for sale there:

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Downtown Condo Unit List Tracker Index

The Pope — Tue, 25 May 2010 09:22:14 +0000

This one is for all the data hounds out there. The VCI Condo Unit Listing Tracker (CULT) index is a snapshot of inventory available at a few select downtown Vancouver condo towers. The widget you see at the upper right hand corner of this page shows the overall number of units and percentage of total that are available in the index.

At time of posting on Monday evening there are 568 units available for sale in the 27 towers that comprise the index. This is 6.66% of the total number of units in those towers, down from 6.79% last week. You can click on the widget at any time to visit the detailed breakdown page at http://vancouvercondo.info/cult-index.

The 27 towers in the index are: Brava, Carina, Cascina, Conference Plaza, Elan, Erickson, Espana, Fairmont, Flagship, H+H, Hudson, Koret, Lions Towers, Melville, Pinnacle, Qube, Ritz, Sapphire, Shangri-la, Smart, Space, Spectrum, The Park, TV Towers, Vita, Woodwards Towers and Yaletown Park towers. The current leader in percentage of units available for sale is The Erickson with 14 of 61 units or 22.95% available for sale.

This index was built and generously donated to the VCI community by c0der, the same programmer who gave us the comment rating system used on this site. c0der is a Systems Architect who works with Linux, Security, Oracle Fusion and PHP/MySQL technology stacks. If you have a project you’d like him to consult or program for you can email him directly: coder@vancouvercondo.info.

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USA bubble peak vs. Canada today

The Pope — Mon, 03 May 2010 09:56:11 +0000

Vibe posted an interesting comparison of the 2006 US bubble peak to the present day Canadian situation in the forums this weekend. The local Vancouver market is bubblicious, but is there a national Canadian housing bubble?

Everyone pretty much agrees about Vancouver, but here are a couple of points that were made about the national scene:

1.It is reasonable to claim that there is not a housing bubble in Canada because only certain areas are over inflated.

2.Vancouver’s very high prices skew the national average and cause Canada to look worse than it really is.

One thing I think we can all agree on is that the US did have a housing bubble. Well I put together a spreadsheet that I feel shows that affordability is about as bad across Canada as it was in the US at their peak. It also shows that Vancouver is not skewing our national data any more than the most overpriced cities in the US were skewing their data.

In order to measure affordability I used house price to personal income ratios. I compared the 20 cities used in the Case Shiller Housing Index to the 6 cities used in the Teranet Housing Index. The US data is from 2006 while the Canadian data is from 2009.

I think the following graph most clearly illustrates my point:

Vancouver is the only Canadian city with a ratio over 9, while the US had 3: LA, San Fran and San Diego. Toronto is the only Canadian city with a ratio between 5 and 9, the US had 9 in this range. The under 5 range looks bigger for Canada but we have more population covered by our index than they do by theirs. The important thing is that the percentage of each nations population living in cities with elevated ratios is similar.

The distribution and average ratios for both countries are almost identical. I did a population weighted average of the ratios and this gave a higher value for the US than Canada, 6.3 versus 5.6. Keeping in mind that the Canadian data comes from 3rd quarter 2009, during our recent price dip, I don’t think this is a huge difference.

Now I don’t know what the future holds, but to me this data suggest we are in a very similar situation to the US at their peak. We might not take the same path down (we already had a double top) but I don’t see why our eventual bottom should be much, if any, higher than theirs. And any price drops should be distributed across the nation in a similar fashion as well.

Here is a link to the data for anyone interested.

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Downtown Vancouver: If listings were buildings

The Pope — Tue, 27 Apr 2010 17:07:50 +0000

If listings were floors in a building Spectrum would be the tallest building in Downtown Vancouver. This infographic shows an imaginary skyline based on number of units for sale in a few of the new buildings downtown based on Supersogs post from Monday.

Lots of properties out there for sale, not just in the downtown core. Listings for the entire REBGV region have been accelerating lately a lot faster than they did in previous spring markets. We’re close to adding 1000 new listings a week. Even the spring before the 2009 market dip didn’t see listing rise this fast. As of last night the inventory count was at 16,741.

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Ride the great RE roller coaster

The Pope — Mon, 26 Apr 2010 08:50:46 +0000

Laadies aaand Gentlemen! Step right up, one and all and ride the bubbliest market in North Americaa!. The Great Vancouver Real Estate Roller Coaster is now open for bizness! Experience the thrills! The Spills! The mind-boggling economic waste of it all!

Front row seats for you only my friend, here’s your tickets:

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huge prices drive listing boom

The Pope — Thu, 15 Apr 2010 08:12:12 +0000

REBGV Inventory chart created by vibe in the VCI forum.

Wow, it was just six days ago that we had a 15k party in the forum to welcome the fifteen-thousandth property available for sale in the REBGV area, and now I see that we’re already closing in on 16,000 listings.

We’ve got two regular posters here who have been providing regular updates so data addicts can watch the listings grow through the day, let’s hear it for paulb and inventory! As of the end of Wednesday listings sat at 15,789.

At this rate there’s a possibility that we’ll add more than 2000 listings in the month of April, despite a healthy number of sales. We’ve already surpassed the supply available at this point in the last five years. The only year that listings growth looked anything like this was during the micro-crash of 2008 where prices bottomed out at a 10-15% loss and have since recovered.

It looks like many people think that right now is a good time to cash in that million-dollar property. Please no pushing or shoving, we are civilized people. Head to the exits in an orderly manner, there are plenty of lifeboats for everyone.

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House Prices vs. Population Growth

The Pope — Wed, 06 Jan 2010 17:32:15 +0000

The REBGV December 2009 stats are out and the average Vancouver House price has reached a mind-boggling $952,927 despite less than peak population growth rates.

Don sent in the information above – this chart shows Vancouver average house prices from 1977 to 2009 superimposed on a graph of the BC population growth in percent from BC Stats. The $300k price point correlates to 3% population growth.

One thing to keep in mind is that some divergence is only natural: one percent population growth in 2009 represents more people than 1% in 1977 because we’re starting with a larger base population. It’s still interesting to see the correlation between population growth and house prices. There was actually very high population growth in the late 70s and early 90s that relates to those housing booms. By the middle of the 90s this growth had real house prices nearly back up to what they were in 1981,

You can see the correlation between the housing market decline in the mid nineties and the drop in population growth. We’ve never recovered that high rate of population growth (as high as 3% in the mid nineties). We seem to have peaked at 1.7% in 2008. It will be interesting to see what BC and Vancouver population growth does going forward – will ‘everyone want to live here’ or will we see a a decline in population growth with fewer infrastructure project jobs and less construction?

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Inside the CMHC and interest rates rising

The Pope — Tue, 22 Dec 2009 01:06:34 +0000

Canadian Mortgage Trends has an interesting interview with Pierre Serre, the Vice President of Insurance Products and Business Development at CMHC. The upshot of the interview is that the CMHC has plenty of dough in reserve and poses no threat to the Canadian taxpayer in the event of a housing market crash. There are some other interesting figures in that interview: currently 9% of Canadian mortgage holders have less than 10% equity in their home. They also remark on default rates during previous rate increase periods, which seems topical since Carney is planning on raising the benchmark rate by 500% in 2010 (from a rock bottom .25% to a still low 1.5%)

CMT: Can you tell us, what were default rates in past periods of large rate increases (like 1980-81 or 88-89)?

Pierre: According to the Canadian Bankers Association, the highest rate of mortgage arrears—which is, greater than 90 days–occurred in 1982 and in 1983. The rates were 0.96% and 1.02% respectively, compared to today’s rate of 0.43%.

CMT: Mortgage arrears are currently around 0.4% in Canada—exceptionally low, especially for a recession. I assume CMHC’s risk analysts have calculated what would happen in a worst-case scenario of mass defaults?

Pierre: CMHC internal analysis supports CMHC being able to cope with a variety of economic scenarios, including some rather severe ones.

By ‘rather severe ones’ I assume he means a US-style cliff diving real estate market. Speaking of cliff-diving and on a whole different topic, check out this graph of US commercial real estate.

Thanks to Don for the links!

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