John Davies at VREAA 3 February 2011 at 11:19 am-
“Back in 2007, I bought a house for 725K$ in North Vancouver, put 70K$ in materials renovating it and sold it for 925K$ 8 months later which netted me 100K$. I had to change the closing date 3 times because the purchaser had problems closing (financing) and I was very reluctant to keep his deposit. This purchaser loved the renovations and the sale price was an area record.
So one would think end of story, No it gets worse for very nice couple.
These buyers that the bank reluctantly approved got hold of a builder that quoted them 200K$ and 3 months to renovate again. So they are renting as we speak.
They ripped out all the renovation that I did (new kitchen, new bathrooms, new flooring, everything) and are up to 350K$ in this new renovation.
They joking tell the neighbours that they are wondering if the bank will finance this.
Meanwhile, I am happily renting and although we are all adults and each person has a head on their shoulders, I wonder what some people are thinking.
Now they have about 1.3 million into a house that might be worth 1 million tops AND they still need bank financing.
I hope this ends better for them than I think it will!”
We agree that the RE market is vulnerable to a collapse; we don’t think that rate hikes are absolutely necessary to bring that about. The market will begin to collapse under its own weight, and price drops will beget further price drops as sellers stampede. Rate hikes would speed the process but aren’t necessary.
It may be a landmark to have the G&M headline even the possibility of a ‘house price collapse’. -vreaa
Excerpted from G&M 3 Feb 2011 -
“Any move by the Bank of Canada could “easily” cause house prices to collapse, Capital Economics warns in a bleak report that suggests the Canadian housing market is likely to suffer the same sort of crash that has plagued countries such as the United States.”
“Even small rises in official interest rates have been shown to have a big effect on homeowner confidence in other countries under similar circumstances as they can change perceptions towards the housing market very quickly,” said economist David Madani. “If the Bank of Canada does resume its monetary tightening this year, this could easily prove to be a tipping point for a house price collapse.”
“Capital Economics also warns that a crash in prices could cost Canada Mortgage and Housing Corp., which insures high loan-to-value mortgages, to lose as much as $10-billion.”
Posted in 05. Where do Buyers get the money?, 08. Overextended Buyers
Tagged Anecdotes, Banks, British Columbia, Bubble, buyers, Canada, Debt, Economy, Government, Housing, Interest Rates, Real Estate, Sentiment, Vancouver
Thetruth at greaterfool.ca 31 Jan 2011 4:43am – “So two new friends have decided to buy houses in Surrey before the elimination of 35 year mortgages. They’re immigrants via the temporary workers program. They’re not investor immigrants, etc. but they have immigrated via the temporary channels and somehow think that will eventually mean permanent status. And yes they have money. Their arrival is not reflected in any statistics. It is Scotiabank that is helping them out.”