Vancouver Condo Info

North America isn’t alone in struggling with the combined challenge of inflationary pressure and economic stagnation.  The fed recently decided to keep interest rates steady, while in the UK they are edging up.  At the same time the ‘credit crunch’ is being blamed for a downturn in Britain as retailers and house builders start to report problems:

The credit crunch hit the high street with a vengeance yesterday as shock figures from Marks & Spencer wiped £4 billion off the value of Britain’s leading retailers.

The grim news from Middle Britain’s favourite store marked a new phase in the economic downturn and threatens the high street with its worst slowdown in 20 years. Adding to the gloom, one of the country’s biggest housebuilders revealed that it was teetering on the brink of collapse. Taylor Wimpey’s value more than halved after it failed to secure rescue funding and said it would cut 900 jobs.

As the global economy is faced with more challenges can BC stay unaffected?

On a side note it’s interesting to see how competition from other locales is showing up in our housing market.  I’ve noticed recently that the ‘for sale’ section of craigslist has been listing a number of properties in Arizona, Florida, California & Ontario.

-thanks to JB for the Times story link.

This is a pass-off post to Paul Boenisch at nvcondos.ca who has just posted some dramatic month-end June stats on his blog.

If you haven’t seen these numbers yet, or if you have any doubt that the Lower Mainland real estate market is undergoing a dramatic shift, check them out now.  Supply continues to grow while sales keep dropping.

Here are a few highlights:

Sales down 41% from June 2007
Inventory up 53% from last year
North Vancouver inventory up 113%

Check out Paul’s blog for all these stats and more graphed out for some dramatic visuals.

So far prices haven’t been impacted much at all, but increasing supply and decreasing demand will put pressure there unless this dramatic shift reverses soon.  Could we be in danger of tracking the US market?

Friday means open-topic time here at Vancouvercondo.info, so lets do a round up of some stories from the week:

-National housing boom has come to an end
-Rental restrictions dampen market
-Speculator tax a bad idea?
-No easy fix for affordable housing
-Investing for stagflation
-Oil above $140 a barrel
-How will gas prices affect real estate?
-Selling in a changing market: be patient
-Downtown is the place to be!
-BOC Speech on real estate & monetary policy
-Rising rates could slow US recovery

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

note: any conversation on 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. Thanks!

Renewed concern over an old mortgage fraud problem has been in the news lately and that attention has people flooding the title office with calls from homeowners.  Last Friday the Vancouver Sun reported the story of a Retired Richmond man who discovered his house had been sold without his knowledge and a large mortgage taken out on the home:

It’s all part of an elaborate scheme that has surfaced recently in B.C. in which con artists are attempting to sell homes without the owner’s knowledge, leaving the homeowner off the title but with hundreds of thousands in new mortgage debt against the property.

In the latest variation of the scheme in B.C., a would-be seller contacts a notary or lawyer to carry out the sale of a home.

A buyer, who is thought to be in on the deal, applies for a mortgage on the property and if the transfer is successfully carried out, the mortgage funds are paid to the seller. The buyer and seller disappear and so does the money, often leaving the homeowner to discover the ruse only when the bank notices the mortgage payments aren’t being made and comes looking for its money.

While such fraud is not new, title insurance company First Canadian Title said B.C. has seen a jump in suspicious cases this year. And a B.C. Supreme Court decision this month ruled that while a true owner could regain title to a property if it was fraudulently transferred, mortgages taken out on the property — even if fraudulently obtained — still stand.

Unfortunately the only way to discover that you are a victim of this sort of fraud is by checking records with the title office, which has set off this recent flood of calls:

“A lot of people have been wanting information, and the calls are backed up for at least a day,” Ian Smith, director of land titles for British Columbia and registrar in the Land Title and Survey Authority’s New Westminster land title office, said Wednesday. “We had 180 I believe yesterday, and that was just in the New Westminster office.”

Meanwhile, the authority launched an appeal to a recent B.C. Supreme Court decision that ruled that while a title that had been fraudulently transferred should be restored to the rightful owner, a mortgage then taken out against the property would stand. The ruling suggested that the owner of the property could seek compensation from the land title assurance fund.

If you are concerned about this sort of fraud and own your home outright there is a way to protect yourself:

Homeowners who are worried, though, can request a duplicate certificate of indefeasible title, which can only be issued for titles that have no financial charges against them, useful perhaps since the con artists target homes that are mortgage free. New Westminster real estate lawyer Alex Sweezey said strata owners also are not a target because on a condominium sale lawyers also have to deal with the strata management company.

The cost of the duplicate title is $50, but once it has been issued nothing can be registered against the title until it is surrendered to the land title authority. Smith said homeowners can get a form to request the duplicate from the land title office or from most lawyers or notaries. However, if it goes missing, replacing it can be costly and time-consuming, involving affidavits and other requirements.

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?

During this weekends open-topic post ‘tacoman’ noted that someone has started up a Victoria area flippers in trouble blog modeled after the original Sacramento area flippers in trouble and Phoenix flippers in trouble.  These blogs all track drops in asking prices and where available show recent sales activity.

The Victoria area blog isn’t yet showing drops anywhere near as dramatic as the US based blogs are tracking but it will be interesting to see where this goes as the market changes.  On the Sacramento blog the first listing is a house bought in March 2007 for $1,308,000, currently sitting on the market with an asking price of $600k.

The weekend is nearly here so lets do our regular end of the week news round-up and open topic discussion. Here are a few stories I’ve noticed this week:

-BC housing market ‘on pause‘
-Gas and food costs blamed for RE slowdown
-Assignment deals ‘still available‘
-Realtor fired for false statements
-Shaky markets make retirees nervous
-US trouble rains on our parade
-Hundreds indicted in US mortgage fraud
-UK house prices will fall by 30%
-Really, really, really easy credit
-Condo bust draws scams and squatters
-Brace for global stock and credit crash
-Write downs may reach $1.3 trillion

So what are you seeing out there? Post your news, links and anecdotes here and have a great weekend!

Canada’s inflation rate hit 2.2% in May, jumping from Aprils official rate of 1.7%.  The dramatic increase is blamed mostly on increasing fuel cost:

Statistics Canada said gas prices rose 15 per cent in May from a year earlier, up from a year-on-year pace of 11.6 per cent in April. Excluding gasoline prices, the 12-month growth in the CPI in May was 1.6 per cent, it said.

Meanwhile core inflation, which excludes volatile energy and food prices and which the central bank monitors for underlying price pressures, rose 1.5 per cent in May from the same month last year - the same pace as the 12-month increase in April.

“Lower prices for passenger vehicles dampened the upward pressure on the core index,” the agency said.

Last week, the Bank of Canada surprised markets by not cutting its key interest rate and expressing concern over growing inflationary pressures. The key rate remains at three per cent.

Thursday’s CPI number surpassed the central bank’s two per cent target.

Most economists had expected May’s inflation rates would be around 1.9 per cent.

We could always deal with inflationary concerns the way Argentina does - They’ve managed to maintain a remarkable 0.6% official inflation rate in May thanks to the innovative way they calculate the figure:

According to the new methodology, every time a product’s price rises too sharply, it will simply be removed from the index on the ground that consumers will be deterred by the expense and switch to other goods.

Vision Vancouver mayoral candidate Gregor Robertson has proposed that Vancouver implement a speculator tax to deter condo speculation. In this case speculation is defined by the condo unit being left vacant rather than by flipping or simply taking on more debt than you can handle based on the hope of future gains.

Robertson justifies the need for this tax by referring to the BC Hydro grow-op study that found 18,000 vacant condos in Vancouver, which is equal to half the total number of condos in the Downtown Westend. This number is said not to include units that are part-time occupied as second homes or vacation properties, only units that use no electricity through the year.

The obvious difficulty comes in defining the criteria by which condos would be taxed at the business rate. Taxes on speculation are often based on ‘flipping’ rather than holding an empty condo. How do you determine if a condo truly is empty? Would there be penalties for ‘faking’ occupancy? What are your thoughts on this proposal, would it help or hurt the Vancouver housing market?

There are increasing indications that our reputation of being a financially conservative in Canada is more myth than reality.  As a group, we’re taking on more debt than ever before and finding ourselves with less of a personal safety net should the economy take a dive.  Since 2001 the number of people over 60 that still have a mortgage has been steadily increasing, and the mortgages that we all hold are of more and more exotic varieties.  From todays Vancouver Province: Why we’re up to our necks in debt.

A rash of recent reports paint a scary picture of Canadians as spending like drunken sailors, leading to the prickly question of whether we should be forced to save money.

A Statistics Canada study showed Canadians are finding themselves with two mortgages and deeper in debt than at any time in their lives. They are increasingly house poor, and with housing values sliding, they often owe more on their properties than they’re worth.

…

The StatsCan study came out at the same time that the Office of the Superintendent of Bankruptcy Canada reported that personal bankruptcies reached their highest level in more than four years during April, up 19.3 per cent over the previous month and 18.3 per cent over the previous April.

And things will only get worse if recent numbers showing a gross domestic product decline during the last quarter continue, signalling an economic downturn, and if unemployment rates should start to rise.

As it is, mortgage payments make up 37 per cent of average household spending in 2007, up from 32 per cent a year earlier.

And those mortgages are getting more ‘interesting’.  The common refrain that the Canadian housing market is not as vulnerable to downturn as the US market  because we don’t have ’sub-prime’ mortgages is only part-true.  What we do have is an mortgage insurance market that was liberalized in 2006 and has dramatically changed the landscape in the last few years with the introduction of zero-down, 40 year terms and adjustable ‘teaser’ rate mortgages:

With interest rates dropping, consumers might consider a front-loaded variable- rate mortgage.  This option gives you a larger-than-normal discount from the prime interest rate for an initial period, say six months, before you decide whether to lock into a fixed rate.

Longer amortization periods, now up to 40 years, also are new.  Holt estimates longer-term mortgages now account for three quarters of monthly insured purchase applications in Canada, with 40-year products accounting for half of that.

So will following the US lead into the area of ‘exotic’ mortgages lead to a similar result?  Only time will tell, but it is interesting to see that this topic seems to be getting more attention within the government.  That first article had this bit of info that was new to me:

Finance Minister Jim Flaherty recently suggested it might be wise to outlaw 40-year mortgages.

With up to a third of new mortgage applications opting for the longest term, removing that option could have a dramatic impact on our housing market at a time when it appears to be already slowing due to affordability concerns.