Monthly Archives: March 2010

“I’ve been in Miami since 2003. It was obnoxious to listen to all the RE talk. Now I get the same thing from my Vancouver-based family.”

Josh at VREAA 31 Mar 2010 6:40 pm -

“I’ve been in Miami since 2003. It was obnoxious to listen to all the RE talk. Now I get the same thing from my Vancouver-based family.”

“An investor who bought into a rent to own home placed their own tenant in the building until they came up with the financing. They wanted to complete in October but now they HAVE TO complete before April 19th or will not qualify.”

joycer at vancouvercondo.info 30 Mar 2010 8:00 am -

“I know personally of an investor who bought into a rent to own home and placed their own tenant in the building until they could come up with the financing. They wanted to complete in October [2010] but now say they HAVE TO complete before April 19th or will not qualify. So it’s no surprise to me that sales are doing well (but still not containing listings), the question is how much future demand is being robbed.”

An Ex-Pat Comes Home – “I’ve been frustrated talking to friends and family in Canada about housing because I honestly feel like I’ve traveled backwards 5 years in time, to when reasonable discussion was impossible in California, and house prices were only going up-up-up.”

CalgaryLurker at greaterfool.ca 27 Mar 2010 7:55 pm -

“I want to share my experiences as a former expat coming back home. I lived in San Francisco/Bay Area for most of the last 11 years and recently chose to move back to Canada for family.  Since being back, I’ve been somewhat frustrated talking to friends and family about housing because I honestly feel like I’ve traveled backwards 5 years in time, to when reasonable discussion was impossible in California, and house prices were only going up-up-up.
I think what frustrates me the most though is knowing what it was like to live through the years after that peak, and the possibility of reliving them yet AGAIN here in Canada. The truth is I very much would like to own a home, I just am unwilling to sell my financial future to do it, which is what the last decade has asked of home ownership.
I am in my late 30s and have never owned a home, but instead chosen to rent. Financially I am certainly capable of buying, and came close on several occasions, but for various reasons ultimately decided it didn’t make sense for me. Our culture’s recent obsession that views homes as investments is an aberration in my view, and over the years I have chosen to put my money to work elsewhere. I suppose I developed this thinking during the 80s as I watched my father tried to sell our family homes during recessions in Alberta, usually at a loss. It certainly coloured his thinking.
After I moved to San Francisco in my late 20s, I watched the dot com bubble inflate and pop, lived through power brownouts, 911, antiwar protests, two terms of Bush, and saw the California real estate bubble inflate and pop, and the budget crisis that followed. What stayed with me is that nothing moves in a straight line for very long. It’s never different this time. People will always move en masse to find the next good thing (or avoid the next terrible thing) whether looking for a job or an investment. It has made somewhat cautious when dealing with my money and big social events like bubbles. Animal spirits be damned!
I do understand what the ride up feels like. It is exciting and it feels GOOD. I had to line up with 30-40 people just to see an apartment to rent, and usually had to overbid! In my industry, everyone was trying to figure out how to get an investment property or three. HELOCs were providing family trips to Hawaii and brand new cars. Every lunchroom conversation was about home reno projects. Etc..etc.. I chose not to buy back then even though a dozen of my friends and co-workers did because the numbers just seemed silly to me (perhaps being the son of an CPA something rubbed off). In retrospect I am very glad I didn’t cave to the pressure I was feeling at the time (though I went to open houses and talked to realtors, so it was close). Today many of my friends in California are underwater on their homes but making payments, some have lost their vacation and rental properties, and some are under threat of foreclosure. Many have had to scale back their lives. One even used to live in Stockton, the ground zero for the central valley collapse, where entire streets were gutted before he moved to Seattle. He lost about 200k of equity and considers himself lucky.
And these are not poor or dumb people by most standards. All of them work in software making 6 figure combined incomes, but they ‘caught the bug’ and started to believe the narrative. It is infectious. And, as you know from Garth’s site, the mortgages that have been issued over the past few years are stretched for perfection. If prices drop more than a few percent, or rates go up a little, or a few bad apples default, it starts a cascade. And although San Francisco proper was more shielded than further out communities from the declines, they eventually felt it too. This in the city that was’ jewel of the west coast’, and where ‘they are making no more land’, like so many arguments I hear now about Vancouver.
So, I recognise now I will likely have to rent until 2014-15 before the crash has played itself out here. Hopefully it will go quicker since the government has relatively fewer schemes left in its pocket to keep the prices high. I will be moving to Vancouver shortly (for business) and it is astonishing to me that prices are now HIGHER than San Francisco’s were, even at its peak. And I used to tell Americans friends about the sensibility of Canadians….
One side effect of the crash in California I noticed was the exodus of people. Either because they were broke, or lost their jobs, or didn’t like what was happening to the social programs, etc. Many people I know are now in Austin, Portland, and Seattle, cities which didn’t crash as mightily, but where housing is cheaper to begin with. (Actually look up the luxury 6000 sqft places with huge lot that you can get in Texas for the price of a Calgary condo. And that is simply what they cost, not crash pricing. Reminds you what housing SHOULD be.) These cities economies where buffered by the influx of people and I think are doing relatively better. The same might happen to Calgary and Edmonton when Vancouver starts to dip, but then again the American cities I mentioned have more diverse economies than in Alberta. If oil isnt high, the entire western provinces start to look like all of California.”

“There are jobs in Vancouver, but not what they use to be. I use to make 60K a year, but most jobs require a lot more for 45K a year now. Jobs are just lower pay in general.”

Sam at greaterfool.ca 31 Mar 2010 11:19 am -

“There are jobs in Vancouver but not what they use to be. I use to make 60K a year, but most jobs require a lot more for 45K a year now. This is what it seems like to me. Jobs are just lower pay in general.”

“A family in China intends to move to Vancouver. How are they planning to pay for a house there? By speculating on local real estate that rises 100% in 3 months.”

It is not clear in this anecdote whether the initial speculation would be done in Vancouver or China; but, regardless, the logic of making money speculating on RE appreciation in order to afford a house is worth documenting. -vreaa

Rich at greaterfool.ca 31 Mar 2010 10:22 am -

“Interesting story I heard the other day: a family in China wants to move to Vancouver. How are they planning to pay for a house there? By speculating on local real estate that rises 100% in 3 months of course! Vancouver is different because in most other markets people don’t save up their down payment by speculating on real estate bubbles. Interesting how deep it goes…”

“Talking with mortgage brokers you’re seeing a lot of cash brought to the table. People buying those properties over a million dollars are plunking down 50%+ on them. Yes, there is a lot of rich foreign money coming in.”

Agent Will is Will Wertheim, a local realtor who posts the Vancouver RE statistics each week on his indispensable blog, agentwill.com. Recently he shared his current experiences in the market. Here’s Agent Will reporting from the trenches, 25 Mar 2010 8:45 am -

Talking with mortgage brokers you’re seeing a lot of cash brought to the table. People buying those properties over a million dollars are plunking down 50%+ on them. Yes, there is a lot of rich foreign money coming in. I’m not selling those, though (not that I don’t want to). At the lower end we’re seeing buyers put down 10-15% on average and being pretty conservative with what they are buying. They may be approved for $500k but they’re looking at $400k or less as their max.

You look in the papers and media these past few months (at least what gets reposted on various sites in our community) and you see a lot of talk about prices, interest rates, and the future. I don’t understand that talk and I’ll tell you why. The Banks want to lend money. They only make money when they lend it. But they don’t just lend it to anyone… they only lend to those they deem credit worthy. They adjust the interest rate to reflect the risk. If the person is too risky then they won’t lend at all and the borrower has to go to a B or C lender which has far higher rates and will lend subsequently lower amounts of money. When media reports that “banks are worried” (and the reality for me is that I haven’t seen any worry) then I wonder if someone is saying a personal opinion or if the bank wants to reduce time spent on processing soon-to-be-rejected paperwork.

There’s also a lot of confusion about the HST and so many people think it applies to ALL housing. To every potential buyer I have had to explain (sometimes more than once) that it only will apply to wherever GST was applied (New housing over $525k, lawyers, realtor commissions paid by the seller, movers, materials for renos, contractors, strata management, utilities, etc.) and that means that purchasing a previously titled property will NOT pay HST.

[Results of a recent poll reported on in the G&M] jive exactly with what I’ve been seeing and saying here: “The survey showed six in 10 mortgage holders say they have taken advantage of current low rates to pay off more principal. It also revealed that 18 per cent of homeowners say they have made a lump sum payment on their mortgage and 16 per cent have doubled up payments to reduce the principal. ”

Again, 60% are paying off their mortgage faster, 18% have made lump sum payments, and 16% have doubled up payments. Question is if those 60% contain the 18% and the 16%, but still that is a very good number to see. And it only means that the other 40% have been going about their business and not taking advantage of the low interest rates. I wonder if maybe that is because the fixed rate still rules the vast majority of mortgages taken. Everyone I know on the variable is making extra payments or payments equal to what the fixed rate would be. Everyone.

Oh, and back to the “qualify for the higher fixed even if taking the variable”? I applaud that decision. But that’s just conservative lil’ ol Me. In my experience those who couldn’t really afford to buy are the least realistic, the biggest dreamers, and the greatest time wasters in my line of work. Yeah, they’re the ones watching the infomercials late at night.”

“I’ve been talking about selling my house for a couple of years in anticipation of the bubble bursting. Next week I’ll have it on the MLS. My timing is interesting. Yesterday had the feeling that it has definitely started. Perhaps I have missed the boat.”

This poster gives us the first taste of the opposite of the fear of being priced out forever, namely, the fear of missing out on profits by selling too late. -vreaa

Bailing in B.C. at greaterfool.ca 30 Mar 2010 10:11 am -

“I’ve been talking about selling my house for a couple of years in anticipation of the bubble bursting, finally about 3 weeks ago I started talking to a realtor and decluttering the house. Tomorrow I have a handyman coming over to do some exterior clean up. But I couldn’t wait. Yesterday afternoon I went outside and put a for sale by owner sign up. By next week I’ll have it on the MLS. My timing is interesting. Yesterday had the feeling that it has definitely started. Perhaps I have missed the boat. Oh well, hopefully there is still a couple of greater fools floating around. I’m just glad the house is paid off and I have a basement suite.”