Category Archives: debt

The Little Mountain that Couldn’t

Apparently Vancouver has an affordable housing problem.

For buyers housing affordability is at a new low despite our problems with construction quality.

And lately we’re seeing more news stories about more families leaving BC due to the high cost of living.

So are we building more affordable housing?  Well, we’re trying I guess, but if you live in Vancouver you may have noticed a big vacant spot for homes just up Main street near Queen Elizabeth Park.

Several years ago the housing units at Little Mountain were torn down to make way for a new higher density housing development.

So why has nothing happened over those years?

According to Michael Geller it’s developer inexperience.

“The developer … doesn’t fully understand how to do business here,” Geller said in a phone interview.

Four years ago, BC Housing started moving the 224 residents of a social housing project into other subsidized homes. Now, only four residents remain in one building on the 6.2-hectare site by Queen Elizabeth Park and bounded by 37th and 33rd avenues and Main Street.

In June, a city report said there was a blueprint for Holborn Properties to redevelop the site with as many as 1,800 units in stepped towers up to 12 storeys, most buildings being four to 10 storeys in height. The province has committed to replacing all 224 social housing units plus another 10 for aboriginal residents. Most of the buildings at Little Mountain were demolished in 2009.

Geller also referred to the years of delays Holborn has faced in building a proposed 64-storey hotel and residential tower at West Georgia and Thurlow.

“If one wonders why this one is taking so long, one might also wonder why the same developer’s project on West Georgia took so long — although I see construction is finally underway,” he said.

“All of these things are symptoms of the lack of experience with high-profile, highly complex undertakings.”

So apparently we sold that land to a developer that doesn’t know how to get things done and to make matters worse, they bought it for an undisclosed sum right before the mini market crash of 2008.  If prices keep falling as they are now is anything going to get built there?

And if it does get built how much responsibility will the city end up taking for falling profit margins or ‘developer inexperience’? Are we looking at the potential for another Olympic Village scenario?

Housing market keeps on cooling

The Globe and Mail has an article about the drop off in real estate sales across the nation.

It’s got some gems in it for predictions from bankers and real estate associations, but it’s also got the standard partial information about ‘government interference’.

As evidence mounted that rock-bottom interest rates were fuelling house prices and consumer debt loads, Mr. Flaherty has changed mortgage insurance rules four times, each time making it more difficult for consumers to take on housing-related debt.

While the three previous rounds crimped both housing activity and the demand for credit, economists and real estate industry experts say this latest round, which took effect July 9, looks as if it is having a bigger impact.

And off course what’s missing is any mention of the government previous moves to make it easier for consumers to take on housing-related debt: moving amortization from 25 to 30 to 35 years, dropping down payment requirements all the way to zero down and shoveling money into mortgage buybacks via the CMHC.

So anyways, it’s getting harder to buy than it was when you could get a zero down mortgage with a longer amortization schedule.  And what sort of horrors has this wrought?

A number of economists, real estate agents, and industry observers say that many prospective first-time buyers have found themselves unable to secure a mortgage, especially in Toronto and Vancouver, and are therefore remaining renters.

Paula Roberts, a mortgage broker based in Markham, Ont., said one of her clients, a young teacher, was preapproved under the old rules, but now that she has found a home she likes, is having trouble securing the mortgage. She will likely have to get someone to co-sign the loan, or come up with a larger down payment, Ms. Roberts said.

“It’s really hindering people,” she said. “Her rent is basically the same as her mortgage payments.” In Ms. Roberts’ opinion, “it’s always better to try to buy something instead of rent.”

Of course, it’s always better to try to buy ..Says the mortgage broker.  Business slowing down Paula?

But this article ends on a bit of a down note for those hoping for a ‘plateau’

David Madani, a bearish economist at Capital Economics, reiterated his forecast Monday that house prices will fall 25 per cent in the next year or two. “The first sign of trouble at the peak of the U.S. housing bubble was that home sales began to drop in 2005, well before house prices began to fall in 2006,” he wrote in a research note.

Read the full article at the Globe and Mail.

Renovation Time!

Sales have dropped off a steep cliff in Vancouver.

Last July came in more than 30 percent below the 10 year average.

But one thing is picking up: Renovations.

Instead of upgrading to a better home more people seem to be staying put and trying to make their home better.

The amount spent on renovations has gone up every year for the past several years, Simpson said, but added that he isn’t sure if that’s because more people are renovating or because they’ve become more expensive.

Canada Mortgage and Housing Corp’s third-quarter Housing Market Outlook, released in August, said renovation spending in 2011 was $61.7 billion in Canada. CMHC says that amount will moderate in 2012, growing to $63.3 billion, but is expected to strengthen in 2013 to $65.6 billion.

In B.C., spending on renovations in 2011 was $7.6 billion. Spending is expected to remain stable in 2012 and grow to $7.8 billion next year.

For the most part, business is good for contractors, even in this year’s moderate market, Simpson said.

“One contractor I talked to said he’s having his best year ever,” Simpson said. “He said one client bought a home and they’re spending money to update it, but most clients want to stay where they are and bring their homes up to date.”

I guess the advantage of living in a construction zone is that you can do it a little bit at a time when you can afford it, like buying a little bit of a house at a time instead of all at once.  Sounds like some people are also finding it harder to get financing for their dream homes:

Another contractor told Simpson he’s had some customers having a harder time borrowing money from the bank, which may be a result of new mortgage refinancing rules. “Some people seem to be getting a little pushback from the banks, or they might not be able to borrow as much as they want,” Simpson said. “If they can’t obtain the financing, they just have to scale it back a bit. With a renovation, you don’t have to do it all at the same time.”

Read the full article over at the Vancouver Sun.

Second worst August since 1998

The REBGV has released their Vancouver stats package for August 2012 and it’s a bit of a downer for the true believer.

Sales down, prices down, lots of use of the term ‘buyers market’.

In fact the home sales plunge just made last month the second worst August since 1998.

The group’s composite benchmark price for all residential properties in Greater Vancouver is $609,500 which is down 0.5% from a year ago and 1.1% from July.

Supply seems to be slowing with new listings for detached, attached and apartment properties 4,044 in August for a 13.7% decline from a year ago. New listings were down 15.8% from July.

At 17,567, the total number of residential property listings on the MLS was up 13.8% from a year ago but down 2.8% from last month.

Courtesy of Good Format, here’s the month drops and what that number looks like annualized:

            MLS® Home Price Index  

           July 2012     Aug 2012   Chg(%)  Annualized(%)
Detached     950,200     942,100     0.86       10.32
Attached     468,700     462,300     1.38       16.61
Apartment    374,300     370,100     1.13       13.61

Scubasteve shares some of the worst hit areas for prices:

-3.7% = Richmond
-3.7% = Vancouver West
-1.3% = Maple Ridge

-8.0% = Burnaby South
-7.9% = Port Coquitlam
-6.4% = Burnaby East

-8.8% = Tsawwassen
-8.3% = Burnaby North
-4.5% = Maple Ridge

And the worst areas for sales:

1) West Vancouver (-65.6%)
Aug/12 = 34 sales
Aug/11 = 96 sales

2) Burnaby (-47.5%)
Aug/12 = 174 sales
Aug/11 = 331 sales

3) Coquitlam (-41.6%)
Aug/12 = 122 sales
Aug/11 = 209 sales

4) Richmond (-31.2%)
Aug/12 = 179 sales
Aug/11 = 260 sales

5) Vancouver West (-31.0%)
Aug/12 = 362 sales
Aug/11 = 524 sales

6) Vancouver East (-29.6%)
Aug/12 = 169 sales
Aug/11 = 240 sales

7) North Vancouver (-29.0%)
Aug/12 = 113 sales
Aug/11 = 159 sales

Read his full comment here.

If we don’t see a flood of listings in the Fall then that will help to let some of the downward pressure off the market, but there isn’t much looking up in the outlook.  We’re now a couple of months into the new mortgage rules that have taken out some first time buyers and put pressure on $1 million houses.

With housing affordability in Vancouver at a record low it’s only going to get trickier to find a buyer unless we get a new flood of credit or higher paying jobs.


The pros and cons of a fixer-upper

Looking for a bargain?

Why not buy a disgusting heap of a house that no one else wants and turn it into your dream home?

The Financial Post has an article about the pros and cons of buying a fixer-upper.

It’s a first-time homebuyer’s dream: Snag a rundown house in a terrific neighborhood, and then revamp it to your heart’s content.

But fair warning, that fixer-upper could become your worst nightmare.

“You have to really know what you’re getting into,” says real estate expert Brendon DeSimone. “It could be the case where it seems like a good price and then you dig deeper and find that the windows are off, the electrical foundation is messy, and so on.”

Translation: You could wind up spending more than you bargained for.

Read the full article here.