Vancouver Condo Info

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?

Ladies and gentlemen, please bear with us for a moment, we seem to be experiencing technical difficulties with the Crystal-rear-view-mirror ball. For whatever reason it appears that BC house prices have not continued their ever upward climb to the stars. This temporary setback has caused the CREA to readjust the national forecast in a downward direction.

Here is a CBC news video about the local Vancouver market ‘cooling’. It features many pretty faces such as Cameron Muir, Jake Moldowan and Larry Yatkowsky.

Thanks to Anonymous and Jesse for the links!

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?

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.

CIBC World Markets has just released a report calling Canadian home prices ‘overvalued’ and forecasting falling prices:

CIBC World Markets economist Benjamin Tal said Tuesday that prices could decline by as much as 10 per cent in the next two years, but that a “violent” correction similar to the one seen in the United States remains unlikely.

“We are more likely to see higher interest rates causing a modest decline in prices,” he said. “Because we lack the driver for a more violent decline, we should expect a more orderly rebalancing.”

That’s in the nation as a whole, where median price to income ratios in the five largest cities combined have reached 5.62 (the US market peaked at 5). Here in Vancouver we’re currently running at a ratio higher than 9, similar to where Miami was in 2006.

Last week, TD Bank issued a report that suggested prices could fall by 2.7 per cent in 2011. The Canadian Real Estate Association expects to see a decline of 1.5 per cent. Among recent forecasts, only the Canada Mortgage and Housing Corp. calls for higher prices in 2011, with an anticipated gain of 1.3 per cent.

..of course the Canada Mortgage and Housing Corp. is the one pumping government money into the housing market. They’ve gone from $138 billion securitized in 2007 and jacked that up by more than double in just a few short years with close to $500 billion in Canadian mortgages securitized today. Do they have the power to make their contrary prediction come true?

Observer pointed out this blog article over at the Vancouver Sun, which does an excellent job of rounding up some of the issues we’ve gone over about the CMHC and the Canadian Banking system:

Not only has the Harper government felt it necessary to prop up Canadian banks it was this same government which created financial system risk in the first place. In 2007 the Harper government allowed US competition into Canada which prompted the CMHC to dramatically change its rules in order to compete: it dropped the down payment requirement to zero per cent and extended the amortization period to 40 years. In August 2008 Flaherty moderated those rules in response to the US mortgage meltdown. CMHC then “securitized” an increasing number of its loans into bond-like investments (if you have a typical Canadian mutual fund, you’ve got some.)

At the end of 2007 there were $138 billion in securitized pools outstanding and guaranteed by CMHC –17.8 per cent of all outstanding mortgages. By June 30, 2009, that figure was $290 billion and by the end of 2010 it was $500 billion.

Read the full article, it’s full of interesting facts and figures.

Landcor data is out and in the first three months of 2010 both the number and value of BC real estate transactions dropped more than 25% from the previous quarter.

The results quantify the trend economists such as Cameron Muir, chief economist for the B.C. Real Estate Association, have observed occurring since January.

Landcor’s numbers “certainly support the data we’ve been looking at that shows that obviously the pace of sales have slowed since the last quarter of 2009,” Muir said in an interview.

Last year’s “fourth-quarter peak is unlikely to reoccur in 2010.”

Landcor president Rudy Nielsen said B.C. home sales typically slow at the beginning of the year, but the first-quarter of 2010 slowed more than usual compared with the last decade of results. This is in part, he believes, because of the Olympics.

Nielsen added that consumer uncertainty over a host of issues, ranging from the global economic situation to unknown effects of the harmonized sales tax, have consumers sitting on their wallets.

The agency, which insures almost $500-million of Canadian mortgages, said the average cost of a home by the end of 2011 should be $350,000. That would be a gain of 1.4 per cent over April’s record high of $344,968.

Forecasting higher prices next year puts the agency at odds with the Canadian Real Estate Association and Toronto-Dominion Bank, both of which are calling for prices to drop by 1.5 per cent and 2.7 per cent respectively in 2011.

Ok, this should hopefully be the last Olympic Village story for a while, but manx posted a link to more coverage of the uphill climb that the city faces to break even on construction costs and get paid for the land:

Inside city hall, officials are encouraged by the interest in the Olympic condos. But privately they express fears the city won’t recover the $170 million it is owed for the land on which the Olympic village stands.

Taking the land costs out of the equation, there may be the prospect for break-even, or a slight profit, on the construction price tag. But some serious challenges remain for this star-crossed real-estate deal.

The first is the HST, which will be applied to the new condos July 1.

Early buyers will no doubt be spurred on to make a deal before Canada Day, to escape the added HST costs. But the post-HST world could dampen buyer interest.

Vancouver city hall certainly thinks so. Officials have been lobbying the provincial government for an HST holiday, to help the city minimize the $1-billion project’s losses. The province has responded with a flat no.

The other challenge is the time frame of the Olympic sales plan.

It’s anticipated that sales of the remaining 474 condos will be stretched out over two years, to ensure there is no glut that might push down prices. The problem is the rising cost of credit.

Read the full article over at the Vancouver Sun.

Vansanity pointed out this article in the Vancouver Sun.  Canada has the highest level of household debt amongst developed nations and right here in BC we have the highest willingness to go into debt in all of Canada.

“It’s difficult to make a simple judgment [that B.C. is] better off or worse off,” said Elena Simonova, senior research and policy analyst with the association, because provincial figures on household debt are not available.

Across Canada, however, the CGA association was able to observe that by 2009, consumer debt in Canada had more than doubled since 1989 to $1.44 trillion -$41,740 for every single Canadian. By the end of 2009,

Canadians’ debt-to-income ratio reached 144 per cent. And household debt, expressed as a ratio compared with household assets, ranked as highest among 20 countries in the Organization for Economic Cooperation and Development.

We’re number one! We’re number one!

Painted turtle pointed out this article in the Vancouver Sun: Yes, there’s a housing bubble in Canada – but only in three cities.  You read that correctly.  The Vancouver sun printed an article calling the Vancouver market a bubble.  I hope Beelzebub has some of those left over Olympic mittens.

According to a national study released last year by Pitney Bowes Business Insight, the average household income level in Calgary topped $113,000, while the average in Edmonton exceeded $90,000.

Vancouver was well behind both Alberta cities, at $82,300. That’s about $2,000 higher than Windsor, Ont., which has some of the lowest house prices in Canada. Toronto boasted average household incomes of $101,400.

Let’s look at it another way.

When U.S. house prices got to their most extreme levels during the U.S. housing bubble, the ratio of average household income levels to average local house prices got to 10 times or more in overheated markets like Los Angeles and Phoenix.

In Vancouver, the average detached bungalow now costs roughly 11 times the typical average local household income level, based on the data above.

Read the full article at the Vancouver Sun website.