Vancouver Condo Info

The BOC is holding interest rates at a record low .25% for now, but hinting that may change soon.  BC is doing some belt tightening now that the games are over, but in the rest of Canada the economy is growing surprisingly fast.  So when do rates start going back up, and how fast should they be raised to reign in inflation?

The C.D. Howe institute is recommending that they be raised sharply for every rate announcement for the year after their conditional July commitment.  This would mean the overnight rate would move from its current .25% to 2.0% at the end of 2011.

Well that was fun.  The games have wrapped up, but we’re not completely done yet – the Paralympics are up next, so still a chance to partake in some Olympic fun before 2012.  Hopefully everyone out there had a good couple of weeks, whether you stayed in town or skipped out to some holiday destination.

Despite a bad start to the games, we had some unseasonably beautiful weather and wrapped up with a nice amount of Gold for Canada. Overall a positive experience with an upbeat ending.

So now what? We’ll find out what bills are due soon, but what will be the long term economic result of hosting the games? Are there people out there that have just discovered Vancouver and now must move here and buy at any price?

A recent UBC study found that host cities see no measurable boom or bust in real estate values due to the Olympics, but maybe it’s different here.  Do you think the next few years will see an economic boom or bust in BC?

At the end of last year we had a post about contacting your Member of Parliament to find out their stance on Canadian Housing Economics and the role of the CMHC.  Did any readers out there contact their MP and get a response back?  If you did get a response, were there any suprises or did they see keywords ‘housing’ and ‘economy’ and send you back an unrelated form letter?

Are there any MPs out there that are actually looking at the Canadian Mortgage and Housing Corporation and the role they play in pumping up housing markets?

If anyone feels like contacting their MP, here’s a contact list for Vancouver area Members of Parliament.

Don sent in the link to this commentary on the mortgage market in the US and [the economy in] Canada.  Dave Rosenberg points out that there are some strange things happening in the spread between treasury bond yields and mortgage rates.

Once again, this Houdini recovery has involved a situation where mortgage rates have plunged and yet Treasury bond yields have been rising — 30-year fixed rate mortgages have fallen to 4.93% and are sitting are record-tight spreads over long Treasury bonds (see Chart 7). Historically, the average spread is 150bps and this differential is now 20bps. This is remarkable and our concern is that investors who may be exposed to mortgages are at serious risk because there is a considerable chance that these rates will be moving higher over the intermediate term — notwithstanding continued support from Uncle Sam’s pocketbook.

Investors must be reminded time and again that mortgages are callable, Treasuries are not; and we are now in a situation where net of fees, which average 70bps, anyone buying mortgage paper today is receiving a rate that is less than what the borrower is paying, How nutty is that?

He also comments specifically on the health of the Canadian housing economy:

All of a sudden, the Canadian economic data are coming a tad below expectations, including the 0.4% MoM advance in December retail sales, which just came up short from recouping the 0.5% decline the month before (revised from down 0.3%). Excluding autos, sales are running at a 2.1 % annual rate over the past three months, which can only be described as tepid in view of all the rampant monetary and fiscal stimulus percolating through the system.

Not only that, but the supply response in the Canadian housing market is beginning to, at the margin, alter the inventory balance. The number of new listings surged 4.0% in January and has risen sharply now in three of the past four months. After outpacing new listings over 90% of the time between January and October of 2009, sales has now lagged in each of the past two months and this has taken the sales-to-listing ratio down to 0.614x from 0.634x in December and the nearby October high of 0.683x (and now stands at its lowest level in eight months). Pricing is sure to follow suit. Better buying opportunities lie ahead for the fence-sitters, in our view.

David Rosenberg is the Chief Economist and Strategist at wealth management firm Gluskin Sheff.  Read the rest at Mish’s Global Economic Analysis.

Paul Jenkins, the senior Deputy Governor at the Bank of Canada has joined Flaherty and Carney in declaring that there is no Canadian housing bubble.  So many officials seem so desperate to make comments about this subject right now, but why are they so desperate to reassure us?  Of course there is no Canadian housing bubble, just look at house prices in Windsor.  What I’d really like to hear them say is that there is no housing bubble in Vancouver, then we could all relax.

The federal government said last week it will bring in new mortgage rules to cool the housing sector and prevent home buyers, tempted by record low interest rates, from overextending themselves.

At the same time, it said there was no housing bubble, a point echoed on Monday by Jenkins, who was speaking at a panel discussion at the Government of Canada and Financial Times Global Business Leaders Day in Vancouver, where the housing market is especially hot.

“At the moment, we are certainly seeing a certain amount of the recovery in the Canadian economy coming from the housing sector” he said.

“I would certainly not say we are looking at a housing bubble,” he added.

Article in the Vancouver Sun.

From the Vancouver Sun:

Although January construction numbers are up to 198,600 jobs, it is below the 202,100 jobs from a year ago, and a far cry from the 220,800 jobs during the boom.

The good news is that new construction is on the rise in the province, with the seasonally adjusted annual rate of housing starts reaching 186,300 units in January, a 5.8-per-cent increase from December.

That’s much better than the 149,081 housing units to begin 2009, but the construction starts have progressed steadily until now, according to the Canada Mortgage and Housing Corp. It’s even better than the figure that economists from financial institutions had been predicting.

The pessimistic CREA throws some cold water on this positive news by predicting that the HST and higher interest rates will push the real estate market down in 2011.

Anybody looking for a little local ski hill to call their own? Your timing could be just right.

WHISTLER, British Columbia – At the height of its Olympic glory, Whistler — the ski resort hosting glamorous Alpine events at the Winter Games — may be headed for the auction block.

It’s owned by a New York hedge fund that is reportedly behind on a $524 million loan payment, the result of flagging resort business and plummeting property values.

Creditors want their money back, and they’re playing hardball — calling an auction to put Whistler and other property up for sale Friday, the same day Bode Miller is scheduled to compete for his second Olympic medal in the men’s super-G.

Full article at MSNBC.

The Federal Government has just announced their anticipated changes to insured mortgage rules to prevent a Canadian housing bubble (which they see no evidence of yet).

The key changes are:

- borrowers must qualify for the 5 year rate even if they opt for a shorter term.

- on refinancing, the maximum amount of equity withdrawal is reduced from 95% to 90%.

- non owner occupied residences bought for speculation now require a 20% down payment.

More info in this Reuters article. There’s still time to buy (or sell) under the old rules, but you better hurry!

Domus pointed out this article in the Globe and Mail.  Former Bank of Canada governor David Dodge is adding his voice to the opinion that the federal government should act now to cool the Canadian housing market.

“These prices look pretty high by any conventional measure,” he said in an interview, citing measures such as the ratio of house prices to incomes and rents to house prices. “So, the likelihood of house prices falling a bit over the next few years is probably somewhat greater than that they would rise over the next few years.”

“Whether there’s a bubble or not you can only see after the fact,” he added. But it wouldn’t take a bubble bursting to cause consumers pain. If your house price goes down 10 per cent and you’ve borrowed 95 per cent of its value, all of a sudden you’d be in hot water, Mr. Dodge noted.

His comments come as Ottawa weighs action to take a bit of steam out of the housing market. While the government does not believe there is a bubble, it has been evaluating tools it could use to help ensure that more consumers don’t take on mortgages they won’t be able to afford when interest rates rise or if house prices fall.

The worst scenario would be if both of those things occur at once. Consumers would find themselves with higher monthly mortgage payments and less valuable homes.

While it’s virtually assured that interest rates will rise at some point, Mr. Dodge is of the view that it’s also realistic to assume house prices will fall. He notes that mortgage rates are likely to rise, which will put a damper on the market. Secondly, “we’re probably into a fairly long period of relatively slow income growth,” he said, and that too will curtail some housing activity.

Read the rest of Dodges comment in the full article here.