“We went to an Open House this weekend to gauge whether there was a rush to beat the July 9 deadline. Open House was on West 33rd and it was dead. We attended with approximately 1/2 hour to go and we were only the second name on the sign in sheet. Even the realtor admitted it was dead and asked us if he could send us some similar listings as “he had lots of time on his hands”.
Nice change from the 30 pairs of shoes and multiple offers you would have seen not too long ago.”
- MEM at VCI 25 Jun 2012 at 1:52pm
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Latest Anecdotes:
- “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.”
- 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.”
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Nothing a lower price can’t fix
people vote with their feet
Just spent the past week in Vancouver. It’s interesting talking to “normal” people there. Absolutely no one sees this coming… yet.
Either that, or it’s complete denial.
Maybe a bit of both. They have been very conditioned by the echo chamber.
So true EG. Nobody sees “it” coming….weird isn’t it?
Those of us who follow this drama closely heard thunder claps and saw lightening the day the announcements were made. We just kind of assumed others would see the significance. They did not.
Most still fail to recognize the danger. Nothing connected. Or if that, just a lazy yawn and a puzzled look asking why we are still on THAT subject. The thing is that we just had a major shift in attitudes towards inflating the economy via cheap credit and household debt acquisition. It was a big deal. A huge deal.
I believe it was also a landmark event and is one we will probably all remember as the moment when the various bubbles across the country peaked and a slow deflation in prices began.
Some few did “get it” though. You know who?…..First time buyers that’s who. And Realtors and Brokers and the Trades and Speckers and Flippers and Government agencies everywhere.
The man on the street is still oblivious despite the news reels but everyone who is even vaguely connected to the pulse of the market saw the signals change right away. And now they are rushing to compensate for the actions, meet deadlines, make last minute sales, get sold out of a spec property or even to prepare for the outfall in other ways.
Joe Bloke is still watching TV and ruminating on a bowl of Cheeto’s.
Most Vancouver market participants (owners with a great deal of their financial security riding on the market value of the real estate they own) haven’t yet heard of the mortgage rule changes.
Also, my most oft-heard cliche when people were talking about it… something along the lines of:
“Well, yeah, prices can’t go up forever. But you gotta live somewhere, right?”
True enough, but “living somewhere” does not necessarily mean:
a) living in the Lower Mainland or,
b) maintaining your shelter via an over-leveraged mortgage.
But, again, in the Vancouver area the thoughts of either moving away or of not owning your house (“if I get out now, I’ll never get back on the property ladder”) are anathema.
It is crazy isn’t it. But then, I suppose that is what makes bubbles so mystifying and why so few (with all the opportunity in the world) never actually benefit from the easiest money the market ever handed them. On a damn platter no less.
It’s almost inconceivable, but most are about to miss the top altogether. They would not hear the warnings all the way up. Too pigheaded. Now it looks like they will be equally blinded all the way down.
What’s that expression again? Oh yeah……..You can’t teach stupid.
(I admit, I foolishly thought they would all start to wake up)
That’s different from my experience. There were lots of traffic in the open house across the street from us this past weekend. Quiet East Van neighbourhood. Steady flow of people right up until the end. Realtor looked happy as he drove off.
Vancouver family couples’ median income posted the highest decline in Canada. http://www.statcan.gc.ca/daily-quotidien/120627/dq120627b-eng.htm?WT.mc_id=twtB2554
Congrats.
Thanks…?
LOL!
Those data are from 2010
How much of that is skewed by families ** minus the income earner ** moving to Vancouver. It’s also a huge reason why we have so many children “living in poverty” in their multi million dollar homes since that is also measured in Canadian declared income.
I wouldn’t put too much weight into it although I’m also not saying that things are great here from a family income perspective but imagine how much worse this is going to get in job losses and lower income when real estate comes back down to normal levels.
Interesting stat watchdog. You know, it has occurred to me that the decline represents about one weeks work. There are 261 work days in a year (excluding stat holidays from the equation) and so a 2.4% decline in median household income works out to 6 days work …..more or less.
As a 2010 stat it might actually be reflecting unpaid time away from work as people burned through their Helocs and extra credit acquired from equity gains. Just a theory of course. What I am thinking is that the decline in earnings is partially a result of people putting in fewer compensated hours by choice.
Did it not just seem like everyone was taking extra time off work to do a reno, build a new house, shop for a cabin, holiday in Europe or take the vacation of a lifetime to somewhere else?
The drop in earned income might just be reflecting the destruction of real wealth as owners skinned the extra benefit right out of their homes inflated value.
I’m not sure that it was such a big announcement. Yes, going from 30 to 25 years equates to an almost 1% increase in mortgage rates but we have historic lows in rates right now. That means it equates to about a 4% rate which is what we had when the market was flying just a couple of years ago.
I would have imagined that the last big mortgage rules change regarding basement suite apartments would have had a much bigger impact. Prior to that change if you were getting $1000/mo (potential) rent from a basement suite they just added that to your mortgage. Then the rules change said that the suite was income and therefore would equate to $12,000 more income which was applied to the debt ratio to give you the equivalent of only $4000/yr or about $300/mo more in mortgage room. The result is a drop in affordability by almost $200,000!
I guess when that really didn’t have the impact they wanted they just kept having to pile on the rules changes.
Let’s look at an “average” example.
Couple has combined pre-tax income of $72,000 with $50,000 to put down on a property. We’ll use a traditional debt ratio at 32% for convenience meaning employment income affords $1920/mo. The property has a basement suite with potential for $1000/mo. Current rates are 2.99% for 5yr and we will use that for convenience throughout the whole process.
40yr Amort (they still put $50k down even though 0 down is available): Can afford $1920+$1000 for a total of $2920/mo which grants them a mortgage of $819,000 plus $50k for a total purchase of $869,000.
35yr Amort: They still have $2920/mo and that gets them $761k of financing for a total purchase of $811,000.
30yr Amort – suite added to income: Suite is now $1,000/mo added for a total income of $84,000 and a monthly debt ratio value of $2240. They can now afford only $533k plus their 50K for a total purchase of $583k. This rule change wiped out 28% of affordability!
25yr Amort – suite added to income: They can now afford $473k plus 50k for a total purchase of $523k.
Yes, there are other factors like CMHC insurance premiums that affect this but for simplicity sake we can clearly see that the same couple operating under different rules have gone from purchasing a home leveraged at over 10:1 to 6:1 and the government wiped out 40% of potential debt from households. We also see that the biggest change they made was the way to treat suite income and that that had the biggest impact that never was.
We all panicked and said “the party’s over” when that rule came in. It wasn’t. What makes everyone so sure these rule changes will be the final nail in the stucco coffin?
All properties have suites. Oh no wait they don’t.
rob ->
Nobody can be sure.
But those of us who watch the market carefully had already seen the recent signs of weakness (increasing inventory, weak sales, slight pullback in prices in most sub-sectors) and knew that this move (driven more by developments in Ontario than the Westcoast, it seems) would have further downward effects on the market. So, in that context, the move was seen as significant; it came when the market was already losing balance slightly.
You could liken this to an old boxing match, where a blow is landed that, to 90% of the audience just seems like another blow, but to the 10% present who really follow boxing closely, the blow is instantly known to be a game changer (and a little gasp is heard from that 10%).
The rule changes were a bit like that. Sure, not necessarily the ‘final nail’, but definitely something significant.
We shouldn’t forget that payment ratios are still accommodative, even with a retrenchment to 25 year amortizations
jesse -> What does ‘payment ratios’ refer to, exactly?
The price to payment ratio is the price divided by the mortgage payment with a typical downpayment
Thanks.
Vreaa, your insights and your analogies are awesome. Reading Vreaa is more enlightening than any MSM Canadian news source that I know of.
“…..the blow is instantly known to be a game changer (and a little gasp is heard……)”
So well said. And Nem, your video was the perfect compliment.
A drop from $869k to $523k sounds pretty significant to me. IMHO, this is the difference between being able to buy a place with a suite and one without.
“You could liken this to an old boxing match, where a blow is landed that, to 90% of the audience just seems like another blow, but to the 10% present who really follow boxing closely, the blow is instantly known to be a game changer (and a little gasp is heard from that 10%).”
Good example. The proverbial “tipping point”
The knockout will occur when Canada gets downgraded by the ratings agencies next year.
“Nice change from the 30 pairs of shoes and multiple offers you would have seen not too long ago.”
try east side sub 900K if you’re looking for a shoe count.
i hope you go broke
Try counting shoes in se van.
East side sub 900K, the savior of the market.
Last beacon of hope and safety in these tumultuous times.
East side ewwwww…it’s like living in Squamish or Abbotsford…or Coquitlam. But I guess it’s still better than toilet challenged India or anywhere in China
East is the new black.
I have to be honest here, while some eastside houses are “solid” for the most part the construction quality isn’t as high as further west. I went to view a few a couple of years ago; the finishing was nice and the furniture was nice but it was obvious the original builders of yore had cash constraints. Nothing wrong with that, of course. Rustic is the new black. And austerity too.
Vancouver Specials are the new black.
Hell yes. Being “in the black” is the new black too.
http://vancouverspecial.com/all.php
Kinda like finding those camo pants in the back of the closet and thinking, what’s the worst that could happen?
http://www.contemporist.com/2009/02/02/vancouver-special-renovation-by-iconstrux-architecture/
So much untapped potential!