“One of my younger colleagues can barely keeps up with his mortgage at 3.85%.
When I asked him what is he going to do when they raise the rate, he said “I am just gonna sell the place, and I will get the money back anyway”.
This make me think, how many Canadian homeowners have this idea in mind? And when this actually happens, what would be the magnitude of listing waves?”
- azenis at RETalks 15 Dec 2011 6:26pm
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- LadyInWaiting on “My neighbours, in their late 60s, just put their house on the market. They had said they would die in that house, but now they are worried that with the housing market going south they may be losing a lot of equity and they better sell now before it gets worse.”
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- Chat Thread
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- “My best guess: this property is now an ‘investment hold’ and will be built ‘when prices recover’. Good luck on that!”
- Man Loses $745,000 Vancouver Condo Deposit
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- The Rare Individual With A Negative Ownership Premium
- Advice Regarding Renting In Vancouver, Please – “Unfortunately, the Vancouver rental stock is absolutely atrocious. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income.”
- “I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island. Compare to Vancouver. It simply doesn’t compute.”
- Ben Rabidoux In Vancouver Next Week
- “The mortgage company told me they were calling in my 40-year, 0-down mortgage. I have paid nearly sixty thousand dollars towards it, but, nearly five years in, I have yet to touch the principal.”
- ‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version
- “My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”
- “Rent for $2,200 a month or buy and have a mortgage of $4,310 per month. Why would anyone buy?”
- “They were talking about two couples they knew who had recently bought a lot and planned to each build a house on it and live as neighbours.”
- Greater Vancouver Home Builders’ Association Annual First-Time Buyer Seminar Attendance Plummets
- Mom and Pop Get It Wrong In All Markets, Time And Again
- The average British Columbian homeowner is not going to pay off their mortgage by the time they retire.
- “He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”
- “One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”
- “I know someone who just declared bankruptcy because her condo was assessed at $150k and she bought it presale north of $250k in 2005 or 2006.”
- Sturdy, With Views – “Calling Froogle Scott!… Is Dr. Scott ‘In The House’?” [Not In This One, Certainly]
- “She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”
- Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”
- “A beautiful Belfast home, in the equivalent of 1st Shaughnessy, bought at their RE peak in 2007 for £3.5 million, has now sold for £800K, almost 80%-off. The market didn’t suffer any significant economic shocks. Rates & unemployment didn’t skyrocket. They didn’t build more land. Sentiment just changed and the prices fell and fell.”
- “Two family members of hers are trapped, underwater, in condos on the East Side.”
- “Interprovincial migration is not saying good things about BC’s economy.”
- Vancouver RE: Not As Expensive Provided You Don’t Think – “It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.”
- More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”
- Rumor that some OV units will be reduced by 20%.
- Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”
- “My buddy was looking to upgrade to a house in the Coquitlam area. With 200k extra for a home, that’s half of lifetime saving between him and his wife.”
- “I was walking in the Fraser neighborhood yesterday, I noticed that the population, on average, seem to be composed of workers. I belong to the top 5 percent in terms of income. Nevertheless, I cannot afford any of the houses for sale in that neighbourhood.”
- “Vancouver is an urban resort whose value mostly resides in its real estate and not much else.”
- “Rogers Communications is expanding into RE; aiming to relaunch website; providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.”
- I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”
- The Vacant Lot of Versailles, Richmond.
- “I don’t think that most people think things are going to crash, just that there is going to be a slight correction, but it was amazing to me how sentiment has changed, and the fact Vancouver RE is too high was just understood.”
- “The ‘investor’ who purchased our house put it up for sale two months later, in January 1981, but the bubble had burst.”
- For A City To Have That Kind Of Vacancy, It’s Like Cancer – “Downtown, the vacant unit rate is so high that it’s as though there were 35 towers at 20 storeys apiece – all empty.”
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Wait until spring sale season, and we’ll find out….
I don’t think too many Canadian homeowners have this idea in mind. The population has been well and truly brainwashed into believing that the right number of properties to own is either ‘one’ or ‘more’.
and they’re shifting uncomfortably, or laughing nervously, or smiling anxiously, or relating their story trepidatiously .
One big LOL for you renters who think that homeowners aren’t exactly where they want to be.
People talk big now, but just like stocks, we shall see how disciplined RE owners are when equity starts melting away.
It’s more than you think. Most people when confronted with questions like what do you do if the interest rate goes up or if you lose your job or if a recession hits, the answer is almost always I will just sell, pocket the profit, and downsize. At worst I will get my money out and not lose any.
“Most people when confronted with questions like what do you do if the interest rate goes up or if you lose your job or if a recession hits…”
yes, of course they’re shifting uncomfortably, or laughing nervously, or smiling anxiously, or relating their story trepidatiously
I’m STILL getting emails from clients who believe the magic way to make money is to invest in real estate. One client emailed just last week and asked what I thought about her buying a property in some small-town in Ontario, renovating it and flipping it. Um, what? Bearing in mind they currently “own” a principal residence in the Okanagan which I’m pretty sure they have ZERO equity in (they took out all the equity with a HELOC to finance their struggling business). But they still have this idea that if they just buy the right property and renovate it (with very little down, the DP will come from RRSPs) it will be a quick flip and they’ll be in the $$$. It took me days to figure out how to write a tactful reply which didn’t include phrases like “are you out of your mind?” and “what have you been smoking?”
“I am just gonna sell the place, and I will get the money back anyway”
Ah yes the “free option” removing the final sliver of doubt about joining the road to riches with minimal effort. Serendipity will save most but not all, only a chosen few are needed to revert prices, according to the textbook Fundamentals of Marginal Pricing.
Hmm, the answers I usually get are:
a) Interest retes won’t go up.
b) We are going to sell in 5 years anyway, so interest rates don’t matter to us.
Well, they may be right that rates won’t go up. But that will be because the second global recession is hitting, and the central bank desperately cuts rates to the bone, just like the Fed in the US. It’s the “global recession” part you have to worry about.
Frankly, if I were exposed to Canadian real estate, I would be watching Europe, China and the US real closely right now. I’m not yet sure in which order the US and China dominoes will fall, but we all know who is going first.
my two cent guess:
the Eurozone: within 12 months; my best guess is that the US will double dip a bit in response to the world situation — mostly more stagnation in the US. Meanwhile China’s loan to GDP issue becomes a problem by early 2013.
This is somewhat off-topic, but it’s another great The Effects of A Speculative Mania on Current Renting in Vancouver story. A friend told me recently about the experience of another friend who rented a place from someone she quite naturally presumed was the owner. Much to her surprise, she only discovered she was subletting from another renter when the actual owner showed up at her door and told her she had to leave within a few months, as he was selling the place.
Somewhat related topic and query: a financial advisor we know said that people in Vancouver do things that would land them in jail anywhere else in Canada. Did anyone see the Vancouver Sun David Baines story a few days ago about a “Howe Street fixture,” last name Dion, apparently a stock pumper-and-dumper, who was arrested in an FBI sting in New York City for the same issues?
Also, re: leaky condos — another person we spoke to recently said that even with the severe weather in Toronto, there are not similar catastrophic problems with poorly-built housing stock there.
Does anyone else have these impressions of Vancouver currently being a crazier and more lawless place than other major cities in Canada? I’m curious about others’ impressions and experiences wtr to this possibility.
I think it’s part of the great Liberal policy of making the BC business and investment friendly.
At a kid’s b-day party, a parent I talked to was telling me how Gordon Campbell apparently make it illegal to sue roofing companies/contractors for shoddy construction/repair work.
@Space889 — Thanks, it would be interesting to investigate this!
I don’t think it’s significantly more “lawless” and “crazy” than anywhere else, but margins are cut thin enough to the bone that malfeasance tends to show a bit more skin. JMHO
One thing I have noticed is that dwellings in obvious disrepair are still livable in Vancouver due to its more temperate winter climate. People can afford to be lazy about capital replenishment without rendering a house unlivable. Given that many houses won’t last more than about 50 years before being torn down it’s not surprising that a large swath of the market is unwilling to pay for capital that will last much longer than this.
Housing stock here is generally in poor repair but agree with Jesse that this is primarily a function of climate more than anything else.
As far as lawless and crazy, c’mon! Vansterdam, if you haven’t seen it I’m sure you’ve smelt it!
Just check out the installation of your typical patio sliding doors in Vancouver. Almost always installed backwards so that it’s easier to remove from the outside!
“Does anyone else have these impressions of Vancouver currently being a crazier and more lawless place than other major cities in Canada?”
have you driven in Vancouver? Complete lawlessness where a red light is a suggestion rather than an obligation.
It’s the flashing green that causes the biggest chaos in my car, with everyone screaming at me that it means something different.
i dont know where youre driving there buddy, Vancovuer has the best drivers around.
get you head out of your ass for once,, just once, get your head out of your ass and quit crying
One that I hear is, “No problem! We’re going to make monthly mortgage payments higher than what is required. When rates go up we will already be used to paying the higher amount”.
On the surface this is a pretty good idea – but I worry that an extra payment of $200 a month will be quickly wiped out by even a 2% interest rate rise. On a $500,000 mortgage a 2% interest rate rise could be an extra $600 a month (give or take if you move from a 3.5 – 5.5% rate). I doubt they’re paying that much extra every month.
It’s one thing to say you can handle the additional payments, quite another when you see the additional outlays, both expected and unexpected, when balancing the checking account.
“even a 2% interest rate rise”
Trouble is, that won’t happen for a very long time. Canada and the US are in no hurry to raise rates at all. Decades-long emergency rates are really the new normal.
I think Basement is correct. Asset price deflation and the global flight to safety aren”t going to put pressure on rates any time soon. The Great Unwind has got to finish and we’re what, maybe 1/4 of the way through?
So, interest rates won’t be the trigger in Canada for a return to rational prices, recession and an uptick in unemployment is more likely to start the wave of forced sales.
Some renters of the new microlofts – CBC news report on the micro lofts. I think there was a couple in there as well. The interesting thing is that one lady claimed she couldn’t find anything under $1200/month. Not sure if she meant the cool parts of downtown only or all of Vancouver. I’m pretty sure you can rent decent 1 bedroom places in Vancouver for under 1200/month still.
http://ca.news.yahoo.com/video/canews-22424922/micro-apartments-27643164.html#crsl=%252Fvideo%252Fcanews-22424922%252Fdivers-search-for-boy-27649819.html
In the ‘fun while it lasted’ column we have the death of the prime-minus variable rate:
http://www.vancouversun.com/business/Variable+rate+loan+longer+rules/5876980/story.html
I’m going to miss my 2.1% interest rates in an asset inflationary environment when I renew.
Was just having the whole rent-vs-buy debate at work today. Went through a worked example (the spreadsheet is available through google docs) with my office mate, and he said that ok, if you assume a rate of 5% starting in 5 years, it doesn’t make sense to buy, but that rate was crazy high! He has a mortgage at 2.2%, and that’s “never going to go up. Not with the debt in the US.” I pointed out that 25 years is a long time, didn’t quite have the heart to tell him that you already can’t get a 2.2% rate, the discounts just aren’t there any more.