Vancouver Condo Info » predictions

Mortgage Changes? thin rumour gruel.

Scott — Mon, 16 Jan 2012 08:02:47 +0000

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.

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Big banks and the housing market alarm

Eddie — Wed, 11 Jan 2012 08:35:12 +0000

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.

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Feeling bearish on Canadian housing?

Karl Marx Carney — Thu, 05 Jan 2012 08:18:52 +0000

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.

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2012: Another recession NOT coming.

Scott — Mon, 02 Jan 2012 08:03:41 +0000

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.

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Forecasts for 2012 housing market.

Karl Marx Carney — Thu, 29 Dec 2011 08:12:17 +0000

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.

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Young Americans don’t care for home ownership

Kingston — Wed, 21 Dec 2011 08:49:21 +0000

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.

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Going down?

wreckonomics — Mon, 14 Nov 2011 16:20:01 +0000

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.

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BCREA Calls for Price Drops. WAIT WHAT?

jesse — Thu, 10 Nov 2011 16:54:44 +0000

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.

© jesse for Vancouver Condo Info, 2011. | Permalink | 47 comments | Add to del.icio.us
Post tags: bc, economy, prices, rebgv, sales

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House of Cards

wreckonomics — Mon, 31 Oct 2011 18:27:35 +0000

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.

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Hello Inflation.

wreckonomics — Mon, 24 Oct 2011 07:01:54 +0000

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.

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Boomers should consider ‘for sale’ signs

wreckonomics — Tue, 18 Oct 2011 07:23:26 +0000

Interesting bit over at the Globe and Mail: Nearly a third of our population is boomers who will be nearing retirement soon. Should they be cashing in on the housing boom and sell early to fund retirement?

This could be one of the most important questions that baby boomers deal with as they enter retirement, and the financial impact will be widely felt. Expect a slowing in today’s hyperactive housing market, but not right away.

“There’s this idea that when the kids leave home, boomers will downsize,” said demographer David Foot, author of the influential book Boom, Bust & Echo and professor emeritus of economics at the University of Toronto. “Well, that doesn’t happen. You hold on to the family house, probably into your 70s because you want grandkids to come and visit.”

So figure on having about 10 years before a downsizing bulge alters the balance of sellers and buyers in our housing market. Should retiring baby boomers wait that long? Mr. Foot’s analysis certainly doesn’t suggest a bright future for house prices.

Read the full article here.

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Zero west side new home sales

The Pope — Mon, 26 Sep 2011 13:11:10 +0000

It hasn’t happened yet, but it’s possible that this could turn out to be the first month on record to ever have zero new home sales on the Vancouver west side. Check out the comment from inventory:

Worst New Home sales in September in Vancouver West?

Where are the buyers? Currently there are NO sales of “NEW” HST Homes. there are 71 units available. Five more days to go for a sale. There has never been a ZERO New home sale in Van West since 1994 (Records only go back to 1994).

Vancouver West
New home sales
Sept 2010 / 2011
Listed 61 / 71
Sales 9 / 0 ***As of Sept 25, 2011

Van West Sept new home sales:
2008 = 4
2009 = 11

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Heading into a recession with record debt

Jacko — Wed, 14 Sep 2011 07:28:54 +0000

Troll posted a link to this article: Canadians are getting carried away with debt in the current low interest rate environment and may be particularly unprepared for a recession.

At the Toronto edition of the MoneyShow last week, TD deputy chief economist Derek Burleton warned we are in a “balance-sheet recession that will take years to shake off.” As a result, Burleton said, interest rates will stay “very low for a long time.”

At the same show, Danielle Park, of Barrie, Ont.-based Venable Park Investment Counsel Inc., told attendees to “keep your powder dry, pay off debt and use these record low interest rates to get debt free and downsize real estate sooner than later, where necessary: Canada has gone on longer than it ought to have in this cycle.”

So are you taking advantage of record low interest rates and loading up on debt or are you ‘keeping the powder dry’ in the assumption that we’re heading into another recession? As a nation we keep loading up on more debt.

This post was submitted by Jacko.

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The Fall

The Pope — Wed, 07 Sep 2011 07:32:20 +0000

Well, It’s back to school and back to work time.. unless you can cash in a Vancouver property lotto ticket and retire.

Looks like a lot of people have decided its time to try to cash out, yesterday saw a big listing day, Paulb says 356 new listings with only 103 sales.

Inventory posted numbers by area and a lot of places, including west van, burnaby, Vancouver West and white rock saw a sales to list ratio of 25% or lower.

Is this the start of a slow sales autumn or just a post holiday blip? Is it the right time to try to sell, or should you be buying investment properties in hopes of future gains?

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CMHC breathes a sigh of relief

Teekay — Thu, 25 Aug 2011 08:01:17 +0000

The CMHC is revising it’s forecast for housing starts in the slightly upward direction thanks to the US decision to keep interest rates at rock bottom levels:

The outlook runs contrary to a report in July from TD Economics, which projected that Canada’s housing market was poised to correct over the next two calendar years, with resale activity falling 15.2 per cent and average prices dropping 10.2 per cent.

“A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first-time home buyers are expected to be the chief culprits behind the slowdown,” said the report, prepared by deputy chief economist Derek Burleton and economist Sonya Gulati.

Earlier this summer, BMO Capital Markets warned that the Canadian market could suffer a price setback if there is a rapid rise in interest rates due to higher inflation, an increase in unemployment because of a weak U.S. economy or a slowing in foreign investment.

CMHC, however, projects that despite a slowing in the second half, average resale prices will deliver an overall increase in 2011, and continue to rise, albeit at a more modest pace, in 2012.

Laberge said the key reason for CHMC’s positive outlook is the call later in the summer from U.S. Federal Reserve chairman for interest rates to remain at rock-bottom rates into 2013.

As a result, he said, “We expect mortgage rates will be flat this year and to start increasing only later in 2012.”

Read the full article here.

This post was submitted by Teekay.

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Avg house price dropped $10k in July

The Pope — Thu, 18 Aug 2011 08:47:11 +0000

The CREA has released stats and a forecast.. Apparently house prices are down and the expect them to stay that way.

“Earlier this year, the national average price was being skewed upward by sales in some expensive Vancouver neighbourhoods, but this factor is now diminishing,” CREA’s chief economist Gregory Klump said. “Upward skewing of the national average price is also shrinking due to overall sales trends in Vancouver, and most recently in Toronto.”

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Has inventory peaked?

The Pope — Thu, 11 Aug 2011 16:20:36 +0000

As of yesterday inventory was a few hundred over 16,000. Will we see 17,000 places for sale again this year or has inventory peaked?

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Up, Down and Sideways

testing — Mon, 08 Aug 2011 08:05:45 +0000

Global markets look to be in roller coaster mode – as of Sunday afternoon there’s lots of red in the market futures, the recent downgrading of US credit probably doesn’t help things. Are we heading into a 2008 replay?

When markets collapsed in 2008 they took real estate markets with them, both locally and in other nations. Canada pumped lots of money into housing via the CMHC and dropped interest rates to their current bargain basement levels which managed to not only restore house prices locally, but pushed them to new record highs.

What happens if we get another global economy crash and don’t have the same tools to fight it?

I can’t tell if we’re looking ahead to big inflation, Japan style mega deflation or a hither-to-unseen market plateau but these sure are interesting times. Are you cashing out of equity markets, playing with shorts or seizing a buying opportunity right now?

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RBC Economist on Canadian housing and debt

The Pope — Wed, 27 Jul 2011 08:30:25 +0000

Regular commenter Troll pointed out this article in the Financial Post: Just more clanging warning bells about Canadian consumer debt loads and house prices:

Central to Eric Lascelles’ concern is that the availability of cheap credit has driven household debt levels to record highs and soon-to-be-rising interest rates will bear a “palpable” impact on individuals as well as the broader economy.

“The very source of Canada’s relative success during the worst of the credit crunch — a banking sector that kept on lending and households that kept on buying — could yet spell its undoing if newly enlarged household debt loads prove too onerous to bear,” Mr. Lascelles says in a report issued Tuesday.

Further, he adds: “There is a popular misconception that the Bank of Canada cannot afford to raise interest rates because this would prove too damaging for mortgage holders. The opposite is in fact true. The reality is that the Bank of Canada cannot afford to delay raising interest rates, for precisely the same reason. The longer the bank delays, the more marginal borrowers will enter the market and be walloped when rates rise, and the further home prices will go above their equilibrium levels, only to tumble later.”

Once the Bank of Canada raises its key lending rate from the current “astonishingly cheap” one per cent, rising costs of servicing mortgage and other debts will sap consumer spending. Housing prices will fall as lower-tier buyers are forced out of the market by diminished affordability.

The strength that the housing market now provides the economy will morph into an “outright drag” on Canada’s overall growth rate, or gross domestic product, Mr. Lascelles concludes.

Read the full article here.

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What if the last 30 years happens again?

doubleplusgood — Mon, 18 Jul 2011 08:01:24 +0000

If Vancouver house prices increase by the same amount they have since 1982 the average house price in 2038 will be almost $4 million dollars. Sounds reasonable, but what about interest rates? In the same amount of time interest rates have fallen dramatically. If they keep dropping at that rate they’ll break the zero bound soon and become negative.

Then what happens?

The bank will pay you to hold a mortgage.

The future is bright.

Here’s the link to the video on YouTube if you want to comment there.

This post was submitted by doubleplusgood.

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TD: Vancouver house price to drop $133,400

The Pope — Thu, 14 Jul 2011 08:01:16 +0000

Sensational headline no? Here’s the deal: The REBGV benchmark price for a Greater Vancouver house is $901,680. TD Bank economists have just released a report in which they predict Vancouver house prices to drop by a remarkably precise 14.8% in the next two years. Based on the current benchmark price for a detached home that would be a loss of $133,400.

Now I know that for most of you $133k is nothing, but for some of us that’s real money.

“A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first time home buyers are expected to be the chief culprits behind the slowdown,” TD says.

Vancouver’s real estate market will fare the worst in the next two years. TD predicts a 25.4-percent peak-to-trough decline in sales and a 14.8-percent pullback in prices by 2013.

Of course everyone knows that different housing sectors drop at different rates and TD is predicting the worst carnage in the Condo market. What do you think will suffer the largest price drops – west side houses or east side condos?

Hat-tip to Real Professional for the link.

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Canada Housing Bubble close to bursting

The Pope — Thu, 30 Jun 2011 08:10:23 +0000

Capitol Economics are the latest group to issue a warning about the Canadian housing market claiming that it is set for a 25% plunge in prices.

“Housing valuations have lost all touch with fundamentals and household debt is at a record high,” economists at the economic research consultancy Capital Economics say in their most recent Canada Economic Outlook, issued Wednesday.

“Our fear is that, with the housing bubble now close to bursting and commodity prices retreating, Canada will go from leader to laggard.”

The report predicts a fall in house prices by as much as 25 per cent over the next three years.

A domestic housing boom coupled with high commodity prices worldwide have spared the economy the severe recession felt by other developed countries.

Hat-tip to Gordholio for the link.

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USA vs CAN: Different here?

wreckonomics — Wed, 22 Jun 2011 08:07:47 +0000

Chip pointed out this article at the Mises Institute on the CMHC. How bad does the author think it is? Pretty bad:

The Canadian mortgage market is dominated by the Canadian Mortgage and Housing Corporation (CMHC) and this government-owned company operates in much the same way as Fannie Mae and Freddie Mac. The CMHC insures and guarantees mortgages as well as buys mortgages from banks in order to issue mortgage-backed securities that trade in the secondary market. In comparison to Fannie Mae though, the prognosis of the CMHC is notably worse. For instance, at the height of the housing boom in 2007 Fannie Mae had guaranteed over $2.3 trillion in mortgages, nearly a quarter of the market. As of 2009 the CMHC guaranteed over $900 billion in mortgages, about 90% of the market. Fannie Mae had approximately $44 billion in net assets to cover those guarantees, giving them a leverage ratio of about 50:1. The CMHC has about $9 billion in net assets to cover theirs, with the ratio working out to a staggering 100:1. To make matters even worse, 74% of the CMHC’s assets are invested in those very same mortgage-backed securities. If the Canadian housing market ever took a dive the CMHC would be bankrupt in the blink of an eye.

Are the new measures to undo the old measures and scale back CMHC exposure too little too late? Check out the full article here for the analysis.

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Is there an echo in here?

Karl Marx Carney — Mon, 20 Jun 2011 08:56:53 +0000

BOC Governor Mark Carney has made some comments on the Canadian housing market being overheated lately. The first paragraph of this Vancouver Sun article sounds kind of familiar:

The Canadian housing market is overheated, but everything is in place for it to moderate naturally with no further need for government intervention, according to the governor of the Bank of Canada.

It was Patriotz that pointed out this Washington Post article from 2005:

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

Of course where those two articles differ is the comment on local markets. Bernanke specifically did not address local market bubbles, where Carney calls them out specifically:

“Given such developments, one cannot totally discount the possibility that some pockets of the Canadian housing market are taking on characteristics of financial asset markets, where expectations can dominate underlying forces of supply and demand,” Carney’s notes say. “The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear – greed among speculators and investors – and fear among households that getting a foot on the property ladder is a now-or-never proposition.”

But monetary policy is Canada-wide, Carney said.

“We can’t manage monetary policy for a specific housing market or specific province. We’ve got to manage it for the country as a whole to achieve the inflation targets.”

This post was submitted by Karl Marx Carney.

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Stay Classy Vancouver

Scurry — Thu, 16 Jun 2011 05:30:37 +0000

As the smoke from burning cars rises above the downtown vancouver skyline it’s time to mark the peak of the vancouver housing bubble. Hype and excitement can only get you so far, eventually the bill has to be paid.

Downtown will get cleaned up pretty quickly, broken glass will get replaced, the fires will be put out. Our reputation as the worlds biggest sore losers may last a little longer, but that too will fade.

The ride down for house prices? Thats going to take longer and hurt a lot more people in the long run, but eventually the bill has to be paid.

This post was submitted by Scurry.

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