Vancouver Condo Info

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

Like that battery-marketing bunny, the leaky condo crisis keeps going and going.

Owners in a 71-unit building in Cloverdale say their builder repaired some leak problems a few years ago. At the time, the work was covered by warranty.

But recent testing found moisture in the building’s walls, and homeowners learned that they would be hit with a bill of about $45,000.

For some owners, that was too much to handle, and they just walked away. Eight owners have yet to come up with the necessary cash.

“They’re going to be foreclosing. I have until the end of December to come up with any monies,” owner Shirley Hall said. “I guess I have to walk away from it.”

The building was built in the 90s, at the height of the leaky condo crisis. For 11 years, the province gave interest-free loans to those facing massive repair bills.

A 2008 report done for the government said that after 2012, anywhere from 14,000 to 24,000 leaky condos would still near repairs, and that the demand for loans would be high until 2017.

..but as you all know, that interest free leaky condo repair loan program has been axed.  Housing minister Rich Coleman suggests taking out equity to pay for repairs saying “Even seniors can get reverse mortgages — they’re pretty economical”.

Hat-tip to Bizznitch for the link.

Canadian Mortgage Trends has an article about getting your mortgage approved before prices fall.

When home prices do fall, it makes it tougher for certain people to qualify for a mortgage—especially for refinances. When prices start dropping, appraisals come in lower, insurer valuation systems become more conservative, and lenders tighten up in general.

Vince Gaetano, a broker with Monster Mortgage, tells the Financial Post that people are already trying to get approved “before there is a correction in the real estate market.”

Of course prices may fall in the rest of Canada, but we all know they won’t fall here in Vancouver right guys?

We posted this in the free for all, but it’s worth taking a closer look: Eleven pre-sales buyers at the Vancouver Olympic Village are unhappy with their units and are trying to get out of their contract. They complain about changes to plan and faulty fireplaces. Presales contracts of course always favor the developer, and these issues aren’t enough to break the agreement, so the approach their lawyer is taking is to claim that the City of Vancouver took over as developer. Since they aren’t listed on the paperwork this would be a technicality that could nullify the contract. If they manage to make this argument work and other buyers want a way out of their purchases it could be more trouble for the O.V.

The buyers put down deposits of between $60,000 and $300,000 for False Creek condos priced from a low of $550,000 to units that sold in the millions of dollars.

They’re being asked to close their deals by the end of the month.

On Thursday, Baynham filed writs in B.C. Supreme Court against developer Millennium Water on behalf of six of his clients, who have addresses in Vancouver and West Vancouver.

Baynham says the City of Vancouver is the owner of the property, after bailing out Millennium when it couldn’t get financing. But that’s not disclosed in the sales agreements, he says, so the contracts are invalid and should be rescinded.

The city argues that Millenium still owns the project and is the developer, the city is simply the bank.

We saw a lot of pre-sales buyers try to walk away from their contracts during the mini-crash a few years ago, and developers suing the for the difference between their deposit and the current market value. It’s interesting that these buyers are trying to get out of their contracts while the stats still show that Vancouver property prices are still at an all-time record high.

One reason Canadian cities can never have a housing bubble like they had in the US is that our lenders are much more diligent and properly manage risk. At least that’s what I heard, so you can imagine my surprise when I read this article where two different Canadian banks gave mortgages to a grow op owner with no proof of income:

Alarm bells should have gone off the moment Hai Le walked into the Bank of Montreal and asked to refinance the mortgage on his million-dollar home in Vancouver’s up-and-coming Marpole area.

His alleged inability to provide proof he had the means to make the hefty monthly payments of about $4,000 should have been reason enough to crumple up and toss the application into the nearest trash can.

Le, a “sales manager,” was also asking the bank to mortgage the property for its full value, a strategy that authorities say marijuana growers often use to minimize their losses should and when they get busted.

Yet despite these blatant red flags, the bank approved Le’s application for a $976,000 mortgage on Oct. 22, 2008, some 15 months after he’d bought the house from a Viet Van Truong for $980,000.

Ten months after the purchase, in August 2009, Vancouver police raided Le’s West 63rd Avenue home and uncovered a massive grow-op. Two days later, Le sought and received a $70,000 mortgage from the Royal Bank of Canada.

The Forefeiture Office is now seeking to have the mortgage proceeds seized from the bank. Read the full mind-boggling article in the province. Thanks to Jimmy for the link!

No, not the little half-million dollar mortgage debt you may be carrying, I’m talking about the big debt. Government debt. Everybody’s doing it, but there isn’t a lot of comfort in the numbers right now. Investors around the globe are showing more and more fear of big unmanageable debt loads and defaults.

A recent report out of BMO Capitol Markets goes so far as to recommend moving into ‘cash or cashlike instruments‘.

So lets presume you’ve got money rather than debt. What are you doing to protect it and make it grow? Are you moving into or out of equities or are you burying it in a jar in the backyard?

Woodrow pointed out this excellent article over at News1130.com on how to get a good deal with these new high interest rates. Here are a couple of gems:

The easiest thing to do is to put down a larger down payment, which will help you pay less interest over the life of your mortgage — or make payments weekly or bi-weekly.

Well that’s easy! Just put down more money! But what if the credit card companies won’t let me take out another cash advance? Do you have any other advice on how to save money on a mortgage, perhaps in a jumbled form?

Bank of Montreal’s Carolyn Heaney says within in the next couple of years we’ll see more increases in the prime lending rate, so people may want to consider a fixed rate mortgage. “Let’s say we take an average 30 year and reduce it to 25, how much interest can we potentially save off on a $200,000 mortgage? The answer to that is roughly around $53,000.”

Heaney explains another thing people can do is cut their amortization by five years, from 30 to 25. She says potential homeowners can save over $50,000 on a $200,000 mortgage.

..Perhaps we’re all just too busy flipping condos to edit the news?

That’s right, the Bank of Canada just DOUBLED the overnight rate, which would be oh so much more impressive if we weren’t starting at .25%

The overnight rate is now one half of a percentage point. Was it in anticipation of these new dramatically higher interest rates that the Average Vancouver house price dropped by about $45,000 last month?

And how are the banks reacting? By dropping mortgage rates to give you “one last chance” at the easy money. But Check out Mr. Mark Carney, he’s all “caution this and caution that“. Rock bottom rates may be with us for some time yet!

I know many bears out there are dreaming of the American bubble situation, where house prices plummet AND interest rates stay near record lows. Could it happen in Vancouver?

Tickets are still available to the Vancouver Real Estate Roller Coaster. Critics are calling it the Summer blockbuster that’s not to be missed!

“..a useful image when thinking about asset prices in general today and always. Human behaviour and leverage drive our asset price cycles. If we always keep the roller coaster image in mind, we will never be able to relax and fall asleep after a period of very steep climbs; nor will we be as inclined to throw in the towel after a period of very steep falls.”

Danielle Park – Juggling Dynamite

“..a wonderful illustration of financial storytelling. Metaphor can be a wonderful tool, the reason this one works is that it takes an over used cliché and makes it real.”

Stewart Marshall – Financial Storyteller

“A vomit inducing ride.”

The Georgia Straight

“The only thing I had a problem with is that [it implies] what really is going to happen is we’re going to fall off the roller coaster and sink into the water. Investments are volatile. If you want low volatility then buy low-volatility GICs.”

Tsur Sommerville – UBC Center for Urban Economics and Real Estate

Household debt levels in Canada are at record levels, higher than Greece. The Canadian reaction to recession has been to take on more debt, which has some worried about the impact that will have on our economy going forward.

Household debt has more than doubled from 1989 levels and now stands at a record $1-trillion – or $1.47 for every dollar of disposable income. With the Bank of Canada expected to raise interest rates, perhaps as early as next week, vulnerable Canadians could soon find themselves emptying their pockets to cover higher interest payments.

“The high rate of household indebtedness is a source of risk” to the Canadian economy, the Organization for Economic Co-operation and Development cautioned in a report Wednesday. It noted that household debt has swelled further in recent months – an unusual development. People usually save during recessions.

Read the full article in the Globe and Mail.