Vancouver Condo Info

There’s another one of those semantics question articles in the Financial Post:

Canadian Housing: Bursting bubble or gentle landing?

Here’s one chunk of that article with a few asides that always seem to be missed:

Lewandowski believes Canada will not suffer a U.S.-style housing crash simply because policymakers had the benefit of watching it happen next door.

“What we experienced here in the U.S. with housing markets and regulators goes directly to the attitude and changes the minister of finance has made in Canada. A regulator who is being proactive is taking Step One in making sure the housing market doesn’t find itself in a bubble,” Lewandowski said.

So often it seems that ‘bubble’ is used as if it refers to the collapse in prices. It doesn’t. The ‘bubble’ is the inflation of prices beyond reason. By the time the collapse comes the damage is already baked in, falling prices are a correction of the problem, not the problem itself.

Both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been on the march against a housing bubble for years, aware how low rates and loose lending standards in the United States ignited a boom and bust there.

Well, Carney and Flaherty have definitely been ‘warning’ of consumer debt levels for a while, but government policies like following the US into 40 year zero down mortgages didn’t help to prevent a housing bubble.

The central bank has held rates low since the global financial crisis because growth remains tepid and global woes weigh on Canada’s export market, and Canadians can find a five-year mortgage rate below 3%.

Meanwhile in the states you can lock in to a 30 year mortgage for 3.35%. In fact, while house prices in the US were correcting, interest rates were falling as well.

But the government’s gradual tightening of rules for borrowers — a firm admission that the market was hotter than anyone was comfortable with — has taken some steam out of the market, and economists, like Carney, seem to believe a soft landing may be at hand.

“We’re encouraged by the fact the level of housing starts has come down to slightly below demographic demand, as we see right now, there’s still more adjustments to go,” he said in testimony to Parliament last week. “We’re encouraged by the evolution of house prices in a number of markets. We’re on the path to a balanced evolution of the household sector and we all have to continue to be vigilant.”

Ok, we’ll continue to be vigilant then.

Here’s a weird scene from the aftermath of the US housing bubble…

You’ve all heard of underwater mortgages, but have you ever heard of a zombie foreclosure?

There are more than 300,000 properties in the US where the owner has abandoned the property but the bank never completed a foreclosure.

What does this mean?

Reuters revealed the plight of people who walked away from their homes not realizing that their names remained on the deed and that they were financially liable for taxes and other bills related to the abandoned property.

In some cases, homeowners vacated after receiving a notice from the bank of a planned foreclosure sale, only to find out later the bank never followed through.

Zombie properties can be easy to spot as they deteriorate into neighborhood eyesores and havens for criminal activity.

Read the full article here.

b5baxter updated his crash curve graph over at Vancouver Peak.  This is what he posted in the comments section on this site:

Latest REBGV HPI imposed on my price drop model:
http://vancouverpeak.com/Thread-Crash-Curve-Graph?pid=389#pid389

The HPIs continue to show remarkable correlation to the model.

I know some people feel that the bubble is “popping” very slowly here. But so far at least it seems to be following the same trend we saw in US cities that saw a 40% drop in prices.

If it continues to follow that trend we won’t have to wait 7 years to see bottom – just a little over two years.

…That’s right. The current rate of price declines in Vancouver that some have described as ‘flat’ is actually falling at the same rate that US bubble cities fell at their peak.

For all of you worried about a ‘housing bubble’ just stop and read this article:

No Housing Bubble Trouble.

At the national level, what could possibly kick national home prices downstairs? There is nothing to suggest massive job loss ahead or a huge oversupply of new homes. That leaves only the dubious assumption of a big increase in mortgage interest rates as the trigger for any nationwide decline in home prices. But national housing prices did not fall in the past when mortgage rates rose to twice their current level.

Oh, wait.. Sorry that’s from the Washington Times in 2005 and refers to the US market.

This is the one I meant to point to:

No Bubble, No Trouble.

A housing slowdown in Toronto and Vancouver could affect consumer confidence in regions with strong economic fundamentals like Calgary, Edmonton and Halifax, adds Don Campbell, best-selling author of Real Investing in Canada. But rather than a sharp decline, you’re more likely to see slower rates of price appreciation and home sales, says McKellar. “Overall the economy of Canada compared to other countries is still doing very well,” he says. “Housing markets are a function of the economy. Not the other way around.”

Hat-tip to Patriotz and Many Franks for the article links.

The more things change the more they stay the same.

The president is back in the white house and there’s rumbling of a fiscal crisis again.

Flaherty has said he’s not going to take another recession lying down.

Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney both pledged Wednesday to take action to support the economy if a shock from the U.S., or Europe, threatened to once again plunge the country into recession.

“We are a pragmatic, sensible government. If our economy goes into recession because of an external shock from the United States or the eurozone, or both, we will take steps to stimulate the economy,” Flaherty told the Commons finance committee in an evening session.

“What we have done before we will do again. We will not do exactly the same thing again…but we are not going to stand by and have the Canadian economy slip deep into a recession with high unemployment.”

If you’re wondering why we haven’t heard as much about wealthy chinese buyers lately as prices drift down in Vancouver, maybe it’s because they’re moving to the USA.

“California has always been popular with Asian buyers,” he told beyondbrics. “But whereas before it was mainly buyers from Taiwan, Hong Kong and Japan, now we are seeing more mainland buyers visiting.”

Reasons for purchases vary, say those who have dealt with overseas Chinese buyers. Some are buying because they want to emigrate or they have children who will go to school in the US. More and more Chinese millionaires are looking to settle in the US or at least secure residency rights.

Others buy because the numbers add up: the renminbi is relatively strong against the US dollar and property prices are cheap compared to Australia or Canada.

A new report issued by US ratings agency Fitch says that fast-rising home prices and record levels of household debt pose a threat to the credit portfolios of Canadian banks.

The agency examined the exposure of Canada’s six largest banks to mortgage risk and found that household debt fuelled by mortgage credit expansion in Canada is the largest threat to credit profiles.

“These are quite high levels of debt for households and the movement in house prices, we don’t think this is sustainable in the long term,” said report author Fabrice Toka, senior director at Fitch.

The six banks have a combined $730-billion in mortgage exposure and an additional $182-billion in home equity loan exposure, the report noted.

High unemployment or interest rate shock “could aversely affect the ability of leveraged homeowners to meet their mortgage obligations,” the report said.

The risk testing scenario looked at drops of 1 to 10% and sees CIBC and RBC as the most exposed to mortgage value risks. The debt-to-income ratio in Canada is currently higher than it was in pre-recession US, but Fitch points out that there are structural differences in our housing market.

Here’s the full article in the Financial Post.

Donald pointed out this discussion over at the SeattleBubble blog about 10 reasons NOT to buy a home:

10. Renters don’t have to fix leaky plumbing, pay for a new roof, or buy major appliances.
9. The moment you sign the closing papers, you lose ~10% of your home’s value.
8. Better job offer in another city? Hope you can afford to sell…
7. Lousy neighbors move in next door? Too bad, you’re basically stuck!
6. Your down payment and equity are anything but liquid.

Read the rest of the list at SeattleBubble.com.  One interesting thing to consider is this list is based on a theoretical situation where home prices are at reasonable levels and supported by local economic fundamentals.  In a hot housing market where prices only go up and people fight for the right to overbid on a teardown in a bad neighborhood it’s always a good idea to buy instead of rent.  Always.

For most people a home is the largest purchase they will make in their life.  And it’s so complicated!

Now you could do a bunch of research or you could relax and let an expert tell you what to do.

Fortunately there’s a whole bunch of people that specialize in the finer points of buying and selling real estate and they form organizations to help you, the potential buyer/seller.

In the USA there’s the National Association of Realtors or NAR and they put out this great ad in 2006:

LOL on bad timing.  In 2006 in the US only one of those options was a good move.  And yes, that’s a real ad.  Found it over at Burbed with thanks to gordholio.

Jesse pointed out this article bloomberg: Asian Buyers Buoy New Home Demand in California’s Orange County.  It turns out we’re not the only place that get’s the hype about suitcases of cash:

“You know why Orange County is doing better?” said Wang, a native of Taiwan who splits her time between Shenzhen in southern China, where she oversees a toy-manufacturing business, and Irvine, California, where she raised her three children. “It’s because all my neighbors are from China and Taiwan, and they all bought their homes in cash.”

And you know what ‘doing better’ means?  It means house prices dropping by ‘only’ 39%.

Demand has kept property values from declining as much in Orange County as in other regions. The median home price was $392,000 in January, down 39 percent from the June 2007 peak. That’s less than the 49 percent decline across Southern California and the 51 percent slump nationwide, DataQuick said.

Pretty good news eh?