Archive for the ‘prices’ Category

TD outgoing CEO wants tighter lending rules

Thursday, September 18th, 2014

Ed Clark is the CEO of Canada’s 2nd largest lender: TD Bank, but he’s heading out in November.

He has some interesting things to say about mortgage lending in Canada:

“It’s just not realistic in a competitive marketplace to say, ‘Why doesn’t one bank lead the way and change the rules?’ It won’t happen. This is a responsibility of the government,” he told Reuters.

“I get why they keep worrying about doing it. But I think you have to just keep touching this brake. As long as you run low interest rates, you then should be continuously leaning against asset bubbles.”

Why is it not realistic for an individual bank to change lending rules? Because they would be the chump to leave money on the table.  If your business had an oppourtunity for income which the government would insure against loss, how much sense would it make to not take advantage of that business?

And you’ve got to love this seemingly prerequisite paragraph that comes next in all of these articles:

Canada’s Conservative government has stepped in four times since 2008 to tighten mortgage lending rules to cool a real estate market that flourished as the financial crisis ebbed.

It is accurate to say that the government has stepped in four times since 2008 to tighten mortgage lending rules, but it omits the change before 2008. For those of you just tuning in they look something like this:

•March ’06: CMHC change to allow 0% down, 30 year Amort.

•June ’06: Allow 35 year amort & interest only payments for 10 yrs

•Nov. ’06: Aw heck, lets go all out and allow 40 year amorts!

•April ’07: Insured min. down payment moved from 25% to 20%

•Oct. ’08: 5% down allowed, amort moved back to 35 years

•April ’10: Require approval at 5 year fixed rate

•March ’11: Drop back down to 30 year amorts.

•July ’12: Drop back down to 25 year amorts.

Shouldn’t we take into account how much gas was applied before we started tapping the brakes?

Politicians shouldn’t meddle with housing market

Wednesday, September 17th, 2014

This is probably the first housing editorial in The Province that most readers here can agree on.  Well, the headline any ways:

Politicians shouldn’t meddle with the housing market.

Imagine a world where the government didn’t meddle with the housing market.  There would be no CMHC insuring close to $600 Billion in mortgages, instead lenders would loan based only on their own assessment of risk.  There would be no HBP, no HOG. In 2006 there would not have been the rule change that allowed zero down 40 year mortgages with interest only payments for 10 years. After 2008 the CMHC wouldn’t have purchased $69 billion of mortgages off bank books.

But of course you’ve probably figured out that this Province editorial isn’t about that. No, this editorial is about someone suggesting we should levy a tax on vacant properties, likely the tiniest possible example you could find for ‘meddling’ in the housing market.

Wong is not alone in unfairly blaming foreign investors for Vancouver’s high housing prices. The reality is that real estate is a commodity whose price is set in a free market, appropriately, through the forces of supply and demand. No one has a “right” to own a house in a particular city or neighbourhood, and it’s about time that people like Wong and her COPE and NDP pals stopped promoting such notions, especially when it involves taking money from one group and giving it to another. You want a house? Work hard and buy one — or move somewhere cheaper.

Read the full editorial here.

 

Global RE frothy again

Monday, September 8th, 2014

After housing markets slumped around the globe governments and central banks did what they could to reinflate them, driving down the cost of debt.

Well it worked.

The US market is down a bit from their precrash highs, but Canada is sailing high.  What’s the endgame?

With global monetary conditions so loose, governments are using regulatory tools to cool overheated housing markets. In Canada, for example, the maximum term of the riskiest mortgages has been lowered from 40 to 25 years. Regulators in both Hong Kong and Singapore have repeatedly raised stamp duties and tightened lending restrictions. The measures seem finally to be working, especially in Singapore, where prices are now falling.

So as potential home buyer on planet earth, what’s your next move? Do you go with low interest rates forever as a way to keep prices up, or do you stand back and wait for a price correction?

As an aside its interesting to note one nation whose market isn’t doing so well is Japan, where they’ve had rock bottom interest rates for a really long time.

Most ‘overvalued’ housing markets

Tuesday, September 2nd, 2014

The Economist magazine has named the Canadian housing market among the most overvalued in the world. (Even though they love our cities)

Measured using price-to-rent and price-to-income ratios, the Economist says housing markets are at least 25 per cent overvalued in nine of the 23 economies it tracked.

When comparing the relationship between the costs of buying and renting, it cited Canada, Hong Kong and New Zealand as “the most glaring examples” of overheated markets.

“The overshoot in these economies and others bears an unhappy resemblance to the situation that prevailed in America at the height of its boom, just before the financial crisis,” the magazine states.

Read the full article here.

Hat-tip to kabloona for the link.

Buy in the suburbs, prices dropping like crazy.

Sunday, August 24th, 2014

Astute reader ‘reveal the truth‘ pointed out a few similarities between a recent Business in Vancouver article about people buying in the suburbs and an earlier article published in June:

Millenials Decamp to Suburbs”, published August 20, 2014, sure sounds a lot like “First Time Homebuyers Driving Surrey Market”, published June 24th.

Let’s see:
June 24th: Shayna Thow, director of sales for BLVD Marketing Group – which handles marketing for two Surrey developments for Vancouver’s Fairborne Homes Ltd. – said Surrey has become a viable option for first-time homebuyers who can’t afford to buy in Vancouver. While the average price for a single-family detached home in Greater Vancouver has soared to more than $1.36 million, the average price in the Fraser Valley is still under $655,000.

August 20th: Shayna Thow, director of sales for BLVD Marketing Group – which handles marketing for two Surrey developments for Vancouver’s Fairborne Homes Ltd. – said Surrey has also become a viable option for first-time homebuyers who can’t afford to buy in Vancouver. While the average price for a single-family detached home in Greater Vancouver has soared to more than $1.36 million, the average price in the Fraser Valley is still under $600,000, she noted.

Uh-oh. The only thing that stayed the same was the word for word structure. The PRICE however showed a DROP of nearly 10%! Yikes!!

!

Foreign buyers in the USA

Wednesday, August 13th, 2014

Move over China, Canada has become the top foreign investor in US real estate.

A report from commercial brokerage Marcus & Millichap, as reported by the Tampa Bay Times, found that, “an influx of cash-laden foreign investors, especially from Canada and South America, are targeting assets in Tampa Bay for lower entry costs and higher initial yields.”

It’s all pointing to signs of limitless, massive growth opportunity.

While opportunities across the United States are, in fact, limitless for Canadian investors, the key to investing well is to identify hot spots others have not identified. Take Phoenix, Arizona, for example, where Talia Jevan Properties Inc.’s High Income Real Estate has been aggressively buying property.

“Phoenix became one of the most battered real estate regions in the country,” noted Harmel Rayat. “Nowadays, the region just finished securing $430 million in deals in 2013 alone thanks to higher occupancy rates, falling unemployment, and opportunities for strong population growth.”

Read the full article here.

Americans moving for affordable housing

Monday, August 4th, 2014

The fastest growing cities in America are now the ones where housing is more affordable than average.

This is a change from the early part of the millennium where credit was easy and mortgages were easy to get.

Rising rents and the difficulty of securing a mortgage on the coasts have proved a boon to inland cities that offer the middle class a firmer footing and an easier life. In the eternal competition among urban centers, the shift has produced some new winners.

Oklahoma City, for example, has outpaced most other cities in growth since 2011, becoming the 12th-fastest-growing city last year. It has also won over a coveted demographic, young adults age 25 to 34, going from a net loss of millennials to a net gain. Other affordable cities that have jumped in the growth rankings include several in Texas, including El Paso and San Antonio, as well as Columbus, Ohio, and Little Rock, Ark.

Newcomers in Oklahoma City have traded traffic jams and preschool waiting lists for master suites the size of their old apartments. The sons of Lorin Olson, a stem cell biologist who moved here from New York’s Upper East Side, now ride bikes in their suburban neighborhood and go home to a four-bedroom house. Hector Lopez, a caricature artist, lives in a loft apartment here for less than he paid to stay in a garage near Los Angeles. Tony Trammell, one of a group of about a dozen friends to make the move from San Diego, paid $260,000 for his 3,300-square-foot home in a nearby suburb.

Read the full article in the NY Times.

If you’ve tried to hire someone from outside Vancouver for a position here, you may be aware of the challenge presented by expensive housing.

Who wants a housing market crash?

Monday, July 14th, 2014

You might want a housing market crash (or ‘correction’ if the word ‘crash’ is too strong), but that’s likely because you want to buy a house.

It’s not hard to believe that the majority of Canadians don’t long for a housing market correction, especially those who own property.

It feels good when your equity rises right? What’s not to like?

The Financial Post looks at these feelings, and whether they are sensible or not.

They split home-owers into three categories: First time buyers, young owners with growing families and older owners thinking about downsizing.

They say the first two groups would actually benefit from a crash.

If you’re wondering why most homeowners should be begging for a housing market crash read the article here and let us know if you agree with their reasoning.

 

Could we get some big companies here?

Wednesday, June 25th, 2014

This is an interesting post over at medium- basically positing that high home prices in Vancouver threaten it’s future, and proposing a tax to try to change that risk:

The secret that no-one actually wants to talk about is that the quality of a city is mostly determined by a simple factor — the number of smart, ambitious people who live there. These people are the ones who want to drive that city forward by investing in opening businesses, donating their time to the arts & community, participating in city planning, etc… Without them, growth wouldn’t happen and you wouldn’t get all of the benefits that great cities enjoy.

The biggest contributor to the decline of a great city is simple — it’s the decline of those smart people. When they decide that the cost of living in a place outweighs the benefit, they move. They don’t just take their money with them, they take their intellectual and future capital with them. This is dangerous. When people aren’t willing to make an investment in a place to live any more, the city doesn’t just lose their taxes for the year, they lose a massive function of potential jobs created, culture added and future capital they can put to work.

There are two issues here: the generation of local business opportunity and an attempt to draw established business head offices to town.

What do you think of a proposal for a housing tax that attempts to encourage economic development?

A future based on past results

Thursday, June 5th, 2014

Here’s an extrapolation for you: Altus group does home appraisal and valuations.

They looked at the numbers and say if everything carries on as usual the average home price on the west side will be 7 million in 10 years.

“If [the current] trend continues, in the year 2024 the average price for older [detached housing] stock could be greater than $2 million on the Eastside and $7 million on the Westside of Vancouver. We are not saying this will happen, we are simply applying the math from the past decade and extrapolating forward to the next decade,” said Pedro Tavares, Altus Group’s director of research, valuation and advisory.

And as any investor will tell you, past performance practically guarantees future results right? So what are you waiting for? Get out there and buy something!

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