“A friend of mine, a small business owner who reports annual income of about $20K (not true income) from his business received a $550K INTEREST ONLY MORTGAGE in 2007 and bought a house in Westwood Plateau Coquitlam. Fast forward 5 years later, HE STILL HAS INTEREST ONLY mortgage at variable 2.00% rate, he can barely keep up with payments, he has 5 credit cards all maxed out, and 6 month ago he asked me to lend him some money.
Next time someone tells you there is no SUBPRIME in Canada, PLZ punch them in the teeth for being ignorant or lying straight to you face.”
- SunBlaster at VCI, 21 Apr 2012 9:29pm
Most Recent Comments:
- Cleta on David Dodge – “Look mister borrower, you’ve gotta have an equity stake in this as well… so that if things go really bad, it’s not all on the Canadian taxpayer, part of it is on you.”
- These Compare Favorably With The Other Home Affordability Services Offered, Such As The Washingtonmutual Mortgage Loan Modification ! | vybogyciqony on Author Of ‘Real Estate Investing for Canadians for Dummies’ “jumped into the market 3 years ago with a 2 BR apartment in Mount Pleasant”; Reports Ownership Cheaper Than Renting; Leaves Out Math
- Real Estate Tsunami on Chat Thread
- Nemesis on Chat Thread
- Nemesis on Chat Thread
- jj on Chat Thread
- ANON on Chat Thread
- Real Estate Tsunami on Chat Thread
- bailinginbc on Chat Thread
- Nemesis on Chat Thread
- Any mouse on Chat Thread
- Hymie Garshman on Taking A Break
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- 22. RE References In Popular Culture (41)
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Blogroll
- 01 Vancouver Condo Info
- 02 AmericaCanada [retired, no archive]
- 03 Housing Analysis
- 04 RealEstateTalks BC
- 05 Vancouver RE and then some
- 06 Whispers from the Village on the Edge of the Rainforest
- 07 Greater Fool
- 08 Canada Bubble
- 09 Rob Chipman's blog
- 10 YatterMatters
- 11 condohype [retired; archives available]
- 12 vancouver (un)real estate
- 13 Agent Will's Stats [retired]
- 14 Landlord Rescue
- 15 The Economic Analyst
- 16 Canadian Housing Price Charts
- 17 Hoodsurf [retired Jun 2011]
- 18 World Housing Bubble
- 19 Vancouver Price Drop
- 20 North American Economics
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Latest Anecdotes:
- Chat Thread
- Taking A Break
- “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
- Graphic – Degrees of Housing Overvaluation in Canada
- 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.”
- “What’s the worst that can happen? You can’t pay your mortgage, so sell your house! No fear.”
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Tags
Anecdotes Banks Bears blogs British Columbia Bubble Bulls buyers Canada Capitulation China CMHC Construction Debt Economy Employment Fear Foreign buyers Fundamentals Government Housing Interest Rates Landlords Life Media Mortgage brokers Okanagan Olympics Ownership Prediction Real Estate Realtors Relationships Rent Retirement RE_ATM sellers Sentiment Speculators Toronto US Vancouver Victoria Visual Anecdote Whistler
Ah yes stated income. OSFI no likey.
What’s this? You say he’s not BUILDING EQUITY?
Well, hmph. I plumb don’t believe it.
Well… It could be worse. For example… What if SunBlaster’s pal was the Governor of The Bank of Kenya?
“I was told that the governor of the Bank of Kenya isn’t paid enough to get a mortgage in Africa.” [Note To Ed: I am reliably informed that the Governor of Kenya's central bank has some 'off balance sheet' perks which more than ameliorate his paltry recompense of record]
But here’s your real Quote ‘O The Day…
“When people can live fairly well, in large numbers, close to their places of work, the economy functions far better. When a few of us are making useless paper profits from our homes and the rest are stuck outside the market, it hurts everyone.” – Doug Saunders, G&M Columnist
[G&M] – A housing crisis of global proportions
http://tinyurl.com/6rnyll3
UsefulBackgrounders (some previously headlined/quoted in these august ‘pages’ – but re-linked here for your convenience, DearReaders)…
[VancouverCourier] – Vancouver realtors cater to wealthy offshore Chinese as middle class gets squeezed: Premier Christy Clark, Mayor Gregor Robertson watch from the sidelines
http://tinyurl.com/7ltxoz3
[VancouverCourier] – Reader Soapbox: Concern about foreign Chinese buyers in Vancouver based on facts: Debate about housing prices comes from full spectrum of community
http://tinyurl.com/83mhmjb
[VancouverCourier] – Chinese investors shutter Vancouver neighbourhood while apologists cry ‘racism’: Real estate elite profit, politicians ignore middle class
http://tinyurl.com/76c9sua
Thanks, Nem.
As you know we haven’t tried to cover every exchange of this important discussion (which could merit a useful history/archive in its own right).
Will perhaps headline a list of the urls you’ve been posting, as a ‘portal’ to the debate.
I tell you…Land Value Tax…
“Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground. More or less can be got for it according as the competitors happen to be richer or poorer, or can afford to gratify their fancy for a particular spot of ground at a greater or smaller expense. In every country the greatest number of rich competitors is in the capital, and it is there accordingly that the highest ground-rents are always to be found. As the wealth of those competitors would in no respect be increased by a tax upon ground-rents, they would not probably be disposed to pay more for the use of the ground. Whether the tax was to be advanced by the inhabitant, or by the owner of the ground, would be of little importance. The more the inhabitant was obliged to pay for the tax, the less he would incline to pay for the ground; so that the final payment of the tax would fall altogether upon the owner of the ground-rent.” – Adam Smith, Wealth of Nations
respectfully disagree. the root cause is credit unbacked by real savings. raising taxes to address the issue of excess easy credit risks many unintended, undesired consequences
cor. not the least of which is to further empower those who deserve it least
An exorbitant stamp duty (property transfer tax) would do it too. And just to be fair about it we can recycle all PTT proceeds into the affordable housing initiatives that governments are so keen on funding.
on taxes, agree to disagree, dr. j. 1st, it does not address the root issue, which continues to infect other areas – such as higher ed in maple south. 2nd, it requires that the new custodians of policy remain uncorruptible, unlike the previous. even where well-intentioned, the folly of central planning is in believing the a priori assessment and solution(s) are not too far from an optimum … then supposing not, that the custodians, forever virtuous, can successfully adapt to change. to give to one, you must take from another. from whom, to whom, how much and in which form? very difficult questions. the excellent mr. hazlitt has provided one superior lesson on these.
OT sunday interest piece – i find the premise highly distrustful but know little of the details …
–
The Trust Molecule
Why are some of us caring and some of us cruel, some generous and some greedy? Paul J. Zakon the new science of morality— and how it could be used to create a more virtuous society.
http://tinyurl.com/7ux65e8
there are people in Canada who are not good with money. There are few subprime mortgages. Or perhaps you can tell me which lender is granting mortgages to buyers with these low credit scores, and at higher interest.
“Borrowers with credit ratings below 600 often will be stuck with subprime mortgages and the higher interest rates that go with those mortgages”.
This is the exception, not the rule.
how do you know? show me the money
f1 -> “There are people in Canada who are not good with money.”
- What percentage, in the lower mainland?
–
f1 -> “There are few subprime mortgages.”
- How few?
- What exactly is a ‘subprime’ borrower? One who cannot tolerate ‘y’ increase in interest rates?
–
How many distressed ‘owners’ does it take for a market to crash ‘x’ percent?
Once a market has crashed ‘x’ percent, how many more owners, fearing evaporating equity, would decide to sell?
–
See how many of these variables are difficult to quantify?
I see the burden of proof changes when somebody is arguing from the opposite side…
anonymouse, how can you accept any argument as self-evident? the burden of proof remains a constant (on either and any view) … show us where an argument is unsupported and on that there can be a discussion
burden of proof on the original contention.
Show me with data.
hint…it’s all on mortgagetrends.com
During the time 35 and 40 year amortizations were available they represented more than 33% of newly minted mortgages. (See CAAMP surveys from that era). Lots of Canadians have little interest in paying down principal.
funny you should site CAAMP without actually posting the data. And you are way off on your assertion that 33% of all “newly minted” mortgages are 35 year+
Here it is:
2011 data
-22% of all mortgages have mortgage length greater than 25 years
-for year 2011 86% of all mortgages are 30 years or less.
-fixed rate mortgages – 60% with an additional 8% having mixed (fixed and variable) mortgages
-the vast majority of homeowners (88%) have $750.00/per month room for mortgage rates rise before owners become concerned
-the amount of equity Canadians have in their housing = 68% of the total value.
-78% have more than 25% equity in their home
-2% have negative equity
-4% have less than 10% equity
there is a wealth of information here. I stuck with the hard data to avoid a future debate.
Pretty clear from the data that posters here are crying wolf.
“Annual State of the Residential Mortgage Market in Canada – Nov 2011″
http://www.caamp.org/index2.php
“During the time 35 and 40 year amortizations were available they represented more than 33% of newly minted mortgages”
They had 40 year mortgages in 2011?
He should sell his home. He will make money on the home since he bought at a good time. And he should cut up a few credit cards. I dont get how people get into so much debt. my wife and I are 30 and we make combined 90k and have a net worth of 250k. No debt and 2 cars paid off worth 30k. We have 1 child and expecting. Rent lower suite of parents home. If you rent, and have the option of renting from family, why not? I don’t get why people choose to buy or rent and then pick up massive debt. Live within your means and living with patents ain’t so bad. Buying now just to look cool, will screw your life up. Unless of course, you get rich somehow. Anyone can dis me for my decision, but u have a nice buffer in the bank.
Wise approach.
i would love to be able to live off my patents
one of my patents is dead, and the other is a deadbeat.
Mooch off your parents for as long as possible – it’s the asian way.
If you require CMHC or private market loan insurance to get a mortgage approved you are a SUB-PRIME borrower………I don’t care what any property pimp driving a LEXUS SUV and wearing cufflinks says.
SUB-PRIME money is what drove the market to the heights we are seeing, that ,and the “passport property” phenomenon.
We tend to lean heavily towards agreeing with you.
Not quite all would be genuine subprime — a buyer putting 20% down, with assets in other investments, could be argued to have an adequate buffer…
But all the years of 5%, 10% down buyers, with their net-worth one tenth or one twentieth of the value of RE they’re carrying, and with the inability to tolerate interest rate increase of 1% or 2%, absolutely.
‘Subprime’ already has a definition. You don’t get to make a new one.
Sure.
Why, do you figure, would we need a government agency to insure borrowers if they were of the prime kind?
Or is it maybe, possibly, because banks would rather not have 5% down borrowers, amortized over 35 sometimes 40 years on their sheets? How can you logically call someone who needs to amortize a house over 35 years or more a prime borrower.
Its simple, can’t afford 20% down over 25 years, you’re not prime.
@anon. what is this ‘subprime’? and what is the term intended to describe? enlighten us
Subprime already has a definition?
“A type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.”
Well put me in a dress and call me Suzy.
this is your own opinion on subprime. Not widely shared
Actually, it does seem to be widely shared. The rest of the world doesn’t seem to agree with formula1.
http://tinyurl.com/cddnzj4
But I suppose a reliance on ones own belief system with a fanatic avoidance of any contrasting data is par for the course here.
What’s in a name?
In the end, the crucial thing will be how holders of property behave when prices fall and/or when carrying costs rise, regardless of what we care to call any of them.
It did take me a while to understand what “We’re all subprime now” means.
“Well put me in a dress and call me Suzy.”
You sure, Jesse?
Well… ok then…
http://tinyurl.com/cadnolv
[NoteToEd: She is the original SubPrimeSuzie aka Mei Sze Chan. Married 'well', evidently]
CommentzDerStuken!
Backgrounder: Mei Sze Chan Courtesy of Jezebel.com
http://tinyurl.com/yaa685b
[relates to prior comment currently in BlogWerksHell]
very hot. sir_nem, i must confide that if dr. j were anything less than a woman, my persona shall be gravely disappointed. how is that? simple-minded discourse to demonstrate an elementary economic principle. the supply of praise is finite; hence, to elevate one, i must denigrate another.
I’m a size 3. Blame domestic austerity. And heroin.
Ya know, J/Chub – from a writers POV… I still can’t make up my mind whether DEVAN SIPHER and MIREYA NAVARRO (writing for the NYT in the linked piece)… were in FullOn [AmericaF**kYeah!] hagiography mode or had quietly [while chortling, ChugaLuggin' CompedCristal and KnoshingDownRighteous on WhiteTruffles&Beluga] slipped one past their SocietyPages Editor… Only my IlustriousEd and our EsteemedHost VREAA would know for sure…
PS – Calvet’s MostExcellent&Cheap Bordeaux is on sale this week @ ChristyClark’s CornerStore [aka BC's most 'popular' WineMerchant]. Sir Nem. I like that, Chub… I’m thinking the OrderOfTheGarter [thematically, it would 'Suit you, Sir!']
http://en.wikipedia.org/wiki/Order_of_the_Garter