Vancouver Condo Info

Hey look, it’s a mortgage broker referring to a huff-post article about TD bank comments on potential mortgage rule changes.

Alexander believes the most likely scenario would be the decreasing the maximum amortization period for a government-insured mortgage from 30 years to 25 years, the report said. Furthermore, Alexander said prospective homeowners who can’t afford a 25-year mortgage against a 30-year agreement probably aren’t in a financial position for home loans anyway.

Pretty thin rumor chain for more mortgage rule changes, but what do you think? Any chance we’ll return to the traditional 25 year amort for insured loans?

This post was submitted by Scott.

There are a few banks out there making noise about the Canadian housing market. Let’s see, what are their names again? Oh, here they are.. Some place called CIBC and Royal Bank and then one called Toronto Dominion. They seem particularly concerned about the market in Vancouver and Toronto.

CIBC chief executive officer Gerry McCaughey told analysts and investors in Toronto that the housing market is “leaning heavily into an area that might be peaking,” and instead will begin to soften.

His comments came as the heads of Royal Bank of Canada and Bank of Montreal also expressed concern over cooling housing prices, particularly in the condo markets in Toronto and Vancouver, where capacity is significantly overbuilt.

And from the second link:

British Columbia is forecast to have it worse, said senior economist Jacques Marcil, and will likely see “a signifcant correction” this year. Indeed, he said in a report today, the Vancouver market likely peaked last year.

The report, which examined the country’s provincial economies, projects home resales in British Columbia will sink 3.7 per cent this year, while prices decline 3.5 per cent.

This post was submitted by Eddie.

Over at the Financial Post there’s an editorial that’s pessimistic about the Canadian real estate market:

The arithmetic is simple, and some of the warning signals look uncomfortably like those of the days before the market implosion that brought the 1980s to a thumping, crashing close.

Start with resale home prices. A “matched sales” approach to measuring prices tracks, over time, multiple sales of the same properties — this reduces the likelihood of measurements getting skewed by cyclical or regional shifts in the price mixes of homes that happen to be selling. Over the past ten years, prices so measured, in Canada’s major markets, have doubled, increasing at more than 7% per year, at a time when consumer price inflation generally had been running at about 2%.

So why is that a problem? Because average wages have not been running much ahead of inflation, and that means that house prices have steadily been bubbling out of reach of workers’ abilities to afford them. The house price-to-income ratio last peaked and then plummeted from 1989 to 1991, and the ratio regained its prior peak in 2004-05. Since then? It has climbed steadily higher yet, the ratio now far outstripping anything seen in the past 20 years.

Eventually that makes housing affordability a problem, and quickly so when interest rates start to rise. Housing looks affordable now, given that mortgages remain on the market at rates near their all-time lows. However, carrying costs relative to income would rocket upward, were rates one or two percentage points higher. Such rate increases are not in the cards in Canada today — but they will arrive all the same, and sooner rather than later if inflation continues to test the upper bound of its target range, as it did through 2011.

Read the full article here.

This post was submitted by Karl Marx Carney.

Breath easy my friends, Vancouver Sun says no second recession in 2012:

The Conference Board of Canada, for instance, ruled out a double-dip recession for Canada, although it qualified the forecast, noting that it relies on the assumption that the European Union will successfully resolve its sovereign debt problems

BMO slightly more pessimistic, but still 60% no problem!

BMO puts the odds of the U.S. slipping into recession next year at roughly 40 per cent with depressed consumer confidence and ongoing foreclosures. A financial shock from Europe could tip the U.S. economy over the edge.

RBC thinks we should have kept the HST:

Royal Bank of Canada noted in its provincial outlook that the rejection of the harmonized sales tax in last summer’s referendum has added to the down-side risk in its forecast as the return to the provincial sales tax and the shift of the tax burden to business could slow the pace of business investment and job creation. RBC has lowered its growth estimate for 2012 to 2.3 per cent from an earlier forecast of three per cent.

But on a bright note we get those seaspan jobs!

Seaspan’s federal shipbuilding contract and the provincial government’s commitment to bring new mines into production should boost B.C. employment; how-ever, these will take time to materialize. Nevertheless, resource industries hold the most promise for robust growth for the rest of this decade with the greatest share of benefits skewed, for a change, to northern regions of the province.

Now which of these forecasters was most accurate going into 2008?

This post was submitted by Scott.

A very sensible forecast from Tsur Sommerville:

“We start off by saying I have no idea,” Somerville told the Georgia Straight in a phone interview. For him, forecasting is a risky business because “you’re wrong more often, even if you’re intelligent”.

An economist who earned his PhD from Harvard University, Somerville said that he prefers to evaluate what others have projected for the new year.

“The general trend seems to be that it’s going to be a slower market than 2011, and I think the combination of lingering economic unease and uncertainty is consistent with that,” the UBC academic explained. “The other thing is 2011—if you take away Richmond, the West Side [of Vancouver], and West Vancouver—was not some amazing prices-going-through-the-ceiling kind of year. In general for most places, things are going to look like 2011. Maybe a little bit slower.”

Asked about the biggest risk to the market, Somerville responded: “The economy, the economy, and the economy.”

Full article in the Georgia Straight.

This post was submitted by Karl Marx Carney.

Do echo boomers have different attitudes towards home ownership than generations that came before them?

The lack of assets isn’t the only encumbrance to housing: Echo Boomers value education, people and leisure more than other American generations. Of the Echo Boomers I spoke with, 13% were homeowners, yet less than a third reported interest in owning a home someday (with female Echo Boomers wanting homes more than male Echo Boomers). They preferred graduate degrees, living in social areas (not suburbs) and freedom instead of homeownership. A few of these Echo Boomers will need a decade to pay off their student loans after which another large loan, like a mortgage, might lack appeal.

From Forbes.

This post was submitted by Kingston.

At least one person thinks that Global Recession MkII is about to cause Mr. Carney to slash interest rates in Canada. The prediction is a 75% drop from the rock bottom 1% to a rocker bottomer .25%

This could be really good news for the few people who’ve built up good credit and cash. I can think of at least two cases where debt levels rose so high that property prices were crashing while interest rates were dropping.

There are many places in that big country just to the south of us where you can buy a house for half what it cost a few years ago and you can lock in for ridiculously low mortgage rates. Japan also saw home prices dropping while interest rates fell. Heck it even happened here in Vancouver at the start of the eighties.

Only a moron would think that a housing market crash means no one is buying and everyone loses their job. Someones always buying, they just don’t always pay the same price.

BCREA in a recent report is forecasting “stability” in the housing market, but at the same time is also forecasting (average) price drops in most areas:

After declining 12 per cent in 2010, residential unit sales through the Multiple Listing Service® (MLS®) in BC are forecast to rise by 3 per cent to 77,000 units in 2011 and a further 4 per cent to 80,000 units in 2012. However, BC home sales will remain relatively low by historic measures, falling short of their 10-year average of 87,600 units. While low mortgage interest rates are expected to persist through 2012 accommodating housing demand, headwinds in the global economy will act to restrain BC economic and employment growth.

BC economic growth slowed from an Olympic charged 3.8 per cent in 2010 to a forecast 2.1 per cent this year. Lackluster economic performance is largely the result of weaker than expected US economic activity, some belt tightening and deleveraging by households, and the Euro-zone debt crisis. Employment growth in the province is estimated to fall to 1.1 per cent this year. While emerging Asian markets have tilted some BC exports in an upward trajectory, domestic demand has stagnated. Retail sales in the province are estimated to increase just 1.5 per cent this year after climbing 5 to 6 per cent per annum over much of the last decade. Against this backdrop, moderate consumer demand for housing and relatively flat home prices are forecast through 2012.

Despite more moderate consumer demand, average home prices have climbed dramatically this year. The average annual BC MLS® residential price is estimated to increase 12 per cent to $564,600 in 2011. Rather than reflecting market conditions, the upward skewing of average price data was the result of a change in regional demand patterns and a shift in the mix of home types sold rather than as a result of a return to pre-recession market froth. By the winter months, most of the upward bias in average price data will have dissipated which will contribute to the average annual BC MLS® residential price decline of 2.5 per cent to $550,500 in 2012.

For flat to falling prices, that means months of inventory averaging about 6 for the entire year. That means longer times to sale and more delistings.

How much are home owners betting on the past being repeated into the future?

King says roughly two out of three mortgages underwritten this year have been for a variable rate term, compared to a typical 25 to 30 percent share. She says this is part of a larger trend of homeowners opting for variable rate mortgages.

“Over the past decade or more, rolling a variable rate mortgage from month-to-month has consistently been less expensive than a fixed mortgage rate. In essence, a generation of homeowners has experienced nothing but declining rates and lower monthly interest payments,” she says.

“This expectation will be hard to change.”

As evidence of the damage a low-interest rate policy causes, King says we only need to look at the U.S. real estate bubble.

“The U.S. homeowner was lured down a very similar path by the Federal Reserve at the turn of the century. Indeed, in late 2000 the spread between a 1-year ARM [adjustable rate mortgage] and a 30-year conventional mortgage was as narrow as 30bps…households did not start to sour on ARMs until 2004 when the Fed finally started to raise the funds rate. By that time longer term mortgage rates were also on the rise and moving out of the affordability reach of many U.S. homeowners.”

As for Canada, King believes a 2-percent rise in interest rates will push a fixed rate mortgage beyond the reach of the average home owner.

From the article ‘Canada’s House of Cards‘ on BNN.

Inflation is surging ahead, but as long as we can keep the global economy nice and F***ed up, interest rates should stay at record lows. Free money!

Core inflation, which excludes volatile elements such as gas and food, surprised economists by jumping to 2.2 per cent in September annualized from 1.9 per cent in August. Headline inflation also surged higher, to 3.2 per cent annualized, as clothing, tuition fees, car prices and transportation costs all contributed to higher prices for consumers.

Economists had expected an overall annual rate of 3.1 per cent in September and a core rate of two per cent.

Jimmy Jean, economic strategist with Desjardins Capital Markets, called the CPI “pop” a short-term issue as tuition is a one-off event, clothing prices are seasonal, and auto prices are playing catch-up.

“From the Bank of Canada’s perspective, we don’t believe this to be much of a worry as it is not indicative of broad-based accelerating price pressures,” he said in a note.

Mark Carney, governor of the central bank, is universally expected to maintain the benchmark lending rate at one per cent, with many economists now projecting a resumption in policy tightening no earlier than the second half of 2012 as external headwinds are still the most pressing issue for the Canadian economy.