Vancouver Condo Info

It’s Friday and we’re going into a long weekend!  Lets do our end of the week news round-up and open topic discussion thing. Here are a few stories I’ve noticed recently:

-Falling Van house prices bad for both sides
-Paying a price for houses that aren’t homes
-Translink: $11 million surplus actually $3 million deficit
-Flocks of speculators & presales vanish
-Vancouver: We’re still building lots of condos
-RBC: BC economic picture darkens
-Banks only pass on half of rate cut to customers
-Flaherty: No bailouts for Canadian banks
-Carlton’s Nick Rowe on Canadian housing market
-Washington Mutual Exec predicted collapse

So what are you seeing out there? Post your news, links, thoughts and anecdotes here and have an excellent long weekend!

note: any conversation on Vancouver, real estate or economics is allowed, please keep it civilized. When posting articles please only quote pertinent points and link to the original instead of pasting the entire article here. Pasting a link will automatically create a clickable hot-link. Thanks!

The Bank of Canada is predicting a ’soft landing’ for the Canadian housing market as the national real estate boom cools. The central banks deputy governor Sheryl Kennedy gave a speech yesterday in Banf Alberta where she referred to the cooling trend in the Canadian real estate market as both ‘expected and welcome’.

As one of the country’s largest housing booms loses steam, most economists are forecasting a small increase in prices this year that will keep pace with the central bank’s 2-per-cent target for inflation.

In similar news Federal Reserve Chairman Ben Bernanke is predicting a soft landing for the US market as well:

“Our assessment at this point … is that this looks to be a very orderly and moderate kind of cooling,” Bernanke said.

Though it is a minor concern, both the Bank of Canada and the Fed see potential problems when it comes to new mortgage products:

Despite her fairly positive outlook, Ms. Kennedy cautioned that Canada can’t afford to become complacent about the real estate market, noting it took a decade for prices and sales to rebound after the bust of the late 1980s.

To that end, the central bank is keeping an eye on “challenges,” including ensuring that mortgage innovations, including 40-year amortization products and “near-prime” mortgages, don’t detract from prudent lending practices.

While Bernanke had this to say on the topic:

On the issue of risky home mortgages, Bernanke pointed out that the Fed has issued some guidance for lenders and he underscored the importance of borrowers making sure they understand how interest-only and other non-traditional mortgages work.

“We’re not saying you shouldn’t make these loans. What we’re saying is that they be done the right way,” Bernanke told the banking conference.

Wait a minute.. I just noticed that US article is a bit out of date – it’s actually from 2006, sorry about that. Here’s a more recent article on the US market:

Home prices in 20 U.S. metropolitan areas fell in April by the most on record, signaling the housing recession is far from over, a private survey showed today.

The Case-Shiller home-price index dropped 15.3 percent from a year earlier, less than forecast, after a 14.3 percent decline in March. The gauge has fallen every month since January 2007. The group began keeping year-over-year records in 2001.

Mortgage defaults and foreclosures are adding to the glut of properties on the market, while stricter loan rules are making it more difficult for prospective buyers to get financing. The prolonged real-estate slump, along with higher fuel prices and a shrinking job market, is taking a toll on consumers and the economy.

Thank goodness it’s different here eh?

According to an article in the Globe and Mail the CMHC is partnering with Genworth and US based Countrywide financial to offer innovative new insurance products in Canada:

The new insurance products offer coverage for a range of situations beyond the current batch of taxpayer based financial products that cover zero down and 40 year mortgage terms.

“The CMHC is proud to be able to offer these new products to help to fulfill our mandate of ensuring every Canadian can buy their own home” says Chuck U. Farley, VP of marketing “Where ever there are markets with affordability concerns the Canadian Mortgage and Housing Corporation will be there to lend a hand.”

Along with the new products the CMHC will relax limitations further when it comes to down payments and mortgage approvals.

“Today’s sophisticated investors know that credit is the best way to acquire the ‘pride of ownership’ without paying in advance.  This is an obvious improvement over the inefficient older style of ’saving’ to pay for a major purchase.  For this reason we will now permit down payments to be made on credit cards and we are excited to announce a new CMHC ‘buyers pride card’. These ’scratch and win’ style cards will not only give buyers a chance to save on mortgage interest rate, they will also give buyers a chance to win loan approval without the the lengthy and demeaning traditional process of a credit check.”

Chuck U. Farley points out that this will be a positive boon to hot western housing markets where ‘unaffordability has reached record levels’.

The site was down for most of the day, perhaps in sympathy with world markets. I’ve got it mostly restored, but lost a fair amount of comments and a few posts. Let me know if you find anything not working, other than that its back to normal.

I’ll try restoring the market prediction thread comments soon, but they come from individual email backups so its a time consuming hassle. I’m working on a more consistent automated backup system. Just goes to show, the crash can come out of nowhere!

How much will a house or condo in Vancouver cost after the winter Olympics? Will prices crash or increase forever? Who knows. I’m not going to predict where Vancouver real estate prices will go in the next few years, but I did find some interesting info about one prior host city.

Apparently Salt Lake City Utah is a tremendous ground floor investment opportunity, currently undervalued compared to other US real estate. You may want to cash in on the ‘Olympic effect’ and the great exchange rate by buying property there now. According to this article in the Salt Lake Tribune (pdf) their housing market had a post games slump, but in 2006 they started to see price appreciation again.

Four years after the slopes around Park City attracted international attention for hosting many of Salt Lake City’s Olympic events, the area has shaken off the financial curse that has often hit host cities following the Games and is undergoing a real-estate boom.

So why won’t I predict where Vancouver prices are going and when? Because its too tough to get the timing right, and sometimes you get the timing dead wrong. Then you get quotes like this one from Bruce Benham, Chief Operating Officer of RE/MAX international posted on realestatevancouver2010.com:

We’re all aware of the dramatic headlines proclaiming the inevitable “housing bubble” that will reportedly cripple the real estate industry, and the entire U.S. economy, when it eventually bursts. But you know better. And I hope your clients do too.

That article was from july 29th, 2005. Anyone know how their market has done since then? hint: not great.

The Canada Mortgage and Housing Corporation (CMHC) is facing a class-action lawsuit from leaky condo owners in the lower mainland and has a message for the people who suffered from this billion dollar debacle: F##k Off, its not our problem.

The lawyer for the CMHC argued on monday that his client shouldn’t be on the hook for the leaky condo crisis since it owes no “statutory duty of care” to homeowners.

Lawyer Ross Clark argued in B.C. Supreme Court Monday that the housing department is under no statutory obligation to Canadians in the wake of the billion-dollar housing construction disaster that first surfaced in the early 1990s.

Many families were left in financial ruin, forced either into bankruptcy or saddled with repair bills ranging from $25,000 to more than $250,000 per household.

Clark urged Supreme Court Justice L. Smith to dismiss the latest effort to certify a class-action lawsuit against the housing agency. The same court denied an effort for certification in 2002.

Why yes, now that you mention it, this is the same CMHC that claims on its website to be “committed to helping Canadians” by improving “building standards and housing construction” and providing “policymakers with the information and analysis they need to sustain a vibrant housing market in Canada.” It just so happens that this is also the same CMHC that was made aware of concerns about housing construction practices in coastal Canadian climates in the early eighties.

The CMHC isn’t to blame, Clark said, for the water-logged walls and mould-infested interiors of condominiums and townhomes built during the 1980s and 1990s. That responsibility rests with those behind the “poor design and construction.”

Peter Simpson, of the Greater Vancouver Home Builders Association, said he was puzzled by the CMHC’s arguments in court. “I think it was an unfortunate comment to place the blame squarely at the feet of two members of the whole building community.”

Simpson said the leaky condo crisis was a “systemic problem and so there’s no shortage of blame to go around.”

Have you got your inoculation? Article in todays Vancouver Sun: Condo fever predicted to spread.

The Lower Mainland’s seeming addiction to condominium living will continue to spread to other desirable regions of the province, Canada Mortgage and Housing Corp. reports in its latest British Columbia forecasts.

We just can’t get enough of ‘em! Its the lifestyle!

However, on cost, Frketich added that keeping housing “at a price that people will buy is the main motivator behind that move to multi-unit starts.”

“There is no sense in building housing that people can’t buy, and this is a response on the builders’ side to bring forward product that people can buy.”

In Kamloops, for instance, the average home price will climb 17.2 per cent to $305,587 in 2007 compared with 2006.

And what about mortgage rates? They’ve got a prediction for everything!

Frketich said she expects mortgage rates to edge up in 2008. Rates will remain historically low, but she expects they will put a dent in housing resales, which will spill over into less demand for new homes.

She added that for the past few years, B.C. has been building new housing faster than its population growth warrants. And as employment growth slows, Frketich expects new housing construction to remain at a still relatively high 30,000 units per year over the next five years.

Thank goodness housing prices can’t actually go down or we might really have a problem with the combination of high prices, all that supply and slow population growth.

So what are the symptoms of condo fever? I feel a bit dizzy, but maybe its just the spin.

Karen wrote in to let everyone know that the CBC show B.C. Almanac will be focusing on real estate today between 12:00 and 2:00 pm on CBC radio one (690 AM). It could be an interesting show to listen to, and its interactive with the open line segment!

If you have questions or comments during the show you can give them a call on their open line Numbers:
LOWER MAINLAND: (604) 669-3733
TOLL FREE: 1-800-825-5950

I hope to catch some of this show – it looks like they have an online archive if you miss the live broadcast. I’m curious to hear what the general opinion is of the market out there beyond the market watching boards and blogs.

Well the REBGV has just released their sales stats from april – thanks agentwill for my copy. So where did prices go last month according to the Real estate boards benchmark figures?

Up.

Yep, thats right – we have a new ‘high score’ in every category – The detached benchmark was at $695,069, the attached benchmark hit $432,490 and apartments where at $355,108. Here’s my standard short-term tracking graph updated with last months numbers:

Real estate in the GVRD is now more expensive than its ever been with prices drifting farther and farther away from rental values – one of my favorite examples was a house listed through Rob Chipmans office. It was rented for $1200 per month and was put on the market with an asking price of $620k. I’m not even going to bother running the numbers on that.

Apparently its not even worth building new rental property in Vancouver anymore – you just can’t get the cash you can from condo-hungry buyers.. So where does it all end? Your guess is as good as mine, but the number of listings are going up and the number of sales are dropping so I guess eventually we’ll figure out if there’s anything to that old ’supply and demand’ theory.

So there you go – Numbers up in every category, this must be an interesting time to be a speculator.. Deal or no deal? Do you let it ride? Can prices go up even more? .. We’ll just have to wait until next month to find out.

There’s an article in the sun about insurance companies not wanting to insure buildings with rooftop gardens, also known as ‘green roofs’.

The plans of dozens of developers poised to put green roofs on their condo buildings — the Olympic village being the most prominent among them — are now in limbo after the province’s Homeowner Protection Office sent out a letter to all municipalities warning that local insurance companies are mostly unwilling to insure green roofs on multi-unit residential buildings that will be sold as condos.

So are there extra risks posed to building integrity from rooftop gardens? Probably not:

No one who works in the green-roof industry had heard of any other jurisdiction in North America or Europe where insurers were refusing to insure green roofs.

But in B.C., where problems with leaky building envelopes in condo buildings provoked a major crisis among consumers and the construction industry, anything involving water in proximity to residential building walls provokes nervousness.

What a shame to have the leaky condo crisis prevent us from creating rooftop greenspace. Hopefully this is something that developers and insurance companies can work out, particularly since it doesn’t seem to be a problem in any other city.