“Here’s some bearish gossip for you as you wait for the decline. A friend of mine, who used to work in banking, called his old boss who is now in Alberta. He called her about the mortgage changes because he is gleefully waiting for prices to deflate and wanted to solicit her opinion. She said something along the lines of hang onto your hats. The banks (like hers) may choose to no longer offer 30 year mortgages on non-CMHC-insured mortgages. They are intending to comply not just with the letter of the OFSI guidelines but with the spirit of what Flaherty is trying to achieve. That’s because…
Apparently, the word on the street is Flaherty got wind that BMO was about to launch a 5-yr mortgage at 2.09% and he flipped. He was already pissed at the endless development he was seeing in the Toronto condo market and the high level of speculation. He called all the bank heads into a meeting and told them to cut out all the shenanigans. Then the next day, to everyone’s surprise, he announced the end of the 30-yr amortizations.
This nice-lady-at-the-bank has been declining HELOCs and mortgages ever since. Everything iffy that comes across her desk is getting kaiboshed. She thinks Alberta will get creamed if other banks are doing what she’s doing.”
- mac at VCI 25 Jun 2012 8:46pm
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- 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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Credit freeze, yippee! //sarc
(Anyone “gleefully” waiting for prices to deflate has no idea what deflation really entails.)
After a decade of house porn and listening to co-workers talk real estate and brag about their “equity”, some of us are indeed ready to cut off our noses to spite our faces. My knife is sharpened.
Alberta’s a bit of a unique case because of their non-recourse laws with certain mortgage types. If CMHC is clamming up lenders in Alberta need to find other avenues to hedge.
If today’s numbers are any indication….
It’s looking rather 2008, given lending is slated to be pulled back very soon. Still, I would never underestimate the power of liquidity!
I am not sure how much of this hearsay is accurate but if it’s true, it is very telling of the mess we are currently in.
Wow. This anecdote today relates to what I just heard too. I talked to my bank lady. Refi’s are going to be dead is what she told me. That’s the chatter inside about where the pressure will be relieved. No more toys, trips, fancy renos for ego and all the other superfluous lending. I didn’t ask for details…just listened. And there has not been a big rush of applications to meet the deadlines either. What a difference one week makes.
So I might not have to listen to my coworkers blab about their HELOC-financed trips anymore? This RE crash thing keeps looking better. I wish it would hurry along now though.
It’s about time.
We might just see some financial responsibility among the populace (and banks), even if it has to be mandated by the state. I’m all for free markets, but they have become anything but.
The market has become juiced to the demand side, complements of removing lender risk from the lender and putting it on the books of the CMHC, backed by the taxpayer. Some market discipline right now it exactly what the doctor ordered.
As I’ve always said… There are no victims as a result of credit freezes, just volunteers.
It’ll be interesting to see how Alberta is affected, if at all. Local incomes are far more in line with prices. Both are high, one still probably too high as its regained the peak. That was when oil and gas prices could only go up, though, and thousands were pouring into the province. With continued weakness in o&g prices, smaller companies are cutting capital budgets and many projects are under pressure. The perils of following the drama of Vancouver’s bubble makes the local situation seem reasonable by comparison, though!
Natural gas prices are at multi-year lows and will probably go up from here.
Comment posted by cbgb on Vancouver Condo Info yesterday regarding the Alberta economy:
“Just got back from visiting friends in Calgary, lots of young rich oil guys…. many are very nervous. One guy, who is part owner of an oil services company, admitted is having trouble sleeping. He was looking at mercs, beemers, lexus’… ended up buying a used KIA! Another guy was in exploration, part owner of a company. They are currently just sitting on cash waiting to vulture, they go to work everyday and do nothing. His thoughts were that the Bakken field in North Dakota was going to kill alberta as it was cheaper to get the oil out and it is closer to markets.”
Many of the SAGD projects being planned are viable at $60 per barrel of bitumen. The price is currently $50. Unless the market turns, lots of work may dry up this fall. Unemployment in Alberta could move up from 4% to 7 or 8%, putting pressure on local house prices.This could also kick the legs out from under prices on Vancouver Island and the Okanagan.
Joe Blown makes a good point about the poor profit prospects of oil sands operations that would likely surprise people not in the business.
And what a juicy tid bit of bearish gossip it is. Has the ring of truth to it, but maybe that’s just because it reinforces what I already want to believe. I am human after all.
Here is an email I received from a mortgage broker who sends me spam emails in disguise of information….just though you may find it interesting…
Dear xxxx:
Last week the Ministry of Finance and OSFI (Office of the Superintendent of Financial Institutions) announced several new tougher guidelines for mortgage qualification. This week it’s apparent that many borrowers are unaware of 2 important details:
1. The Effective Date of the new rules is July 9th (in 7 business days). * Applications must be submitted before this date;
2. BOTH Insured and Conventional (Uninsured) mortgages are affected.
http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/guidelines/sound/guidelines/b20_e.pdf
Briefly, the major changes are:
REFINANCE
* Maximum LTV (Loan-to-Value) reduced from 85% to 80%.
* Maximum Ammortization reduced from 30 to 25 Years.
* Maximum GDSR (Gross Debt Service Ratio) reduced from 44% to 39%
PURCHASE
* Maximum Ammortization reduced from 30 to 25 Years.
* Maximum GDSR (Gross Debt Service Ratio) reduced from 44% to 39%.
* Maximum Purchase Price now $1M.
Additional Changes:
* Line-of-Credit LTV reduced from 80% to 65%.
* Increased Qualifying Interest Rates.
* Increased income verification / reasonability tests for ‘Stated Income’
* Cash Back programs may no longer be used for Down Payment.
Some affects of the new rules are obvious, such as greatly reduced purchasing power. Example: A borrower with an annual income of $65K and 5% Down Payment can purchase a $500K home before July 9th and a $410K home after the deadline. However, many of the affects aren’t as apparent for existing borrowers. Example: If the same borrower with an annual income of $65K purchased a home 4 years ago at $500K with 10% Down Payment and Variable Rate Mortgage at Prime -.75% with 35 Yr. Ammortization, even with a 5% Property Value increase ($525K), the current Loan-to-Value is 83%. After July 9th, the borrower would Not qualify for their existing mortgage both because their service ratios and Loan-to-Value are exceeded. Therefore, they are unable to shop competitively for Refinance, Transfer, Debt Consolidation, Equity Take-Out etc. and most likely limited solely to the Conversion and/or Renewal offers (ie. Posted Rates) from their existing lender.
Considering the new rules are intended in part to cool the housing market (and possibly reduce values), an increasing number of borrowers could be affected.
Today’s Best Fixed Rates:
1 Year @ 2.89%
3 Year @ 2.69%
4 Year @ 2.95%
5 Year @ 3.05%
10 Year @ 3.83%
Very Best,
xxxx
Thanks.
An interesting historical document; will headline as such.
http://vancouvercondo.info/2012/06/new-mortgage-rules-make-buying-hard.html/page-3#comment-163296
Thanks. Good example of a guy’s experience with a sad phenomenon.
Oh-oh, I was expecting that the changes are mostly going to affect the PURCHASE situation but from this e-mail I can see that there are lots of changes affecting REFINANCE situation…means large numbers of the homeowners affected…I am now worried about my friend that took HELOC on her primary residence for a downpayment hers kids home. They might not survive the refinancing after she pulls her HELOC money out – she already asked them for the money, assuming they build enough equity in their home as the price incerased in about 4-5 years they own the home.
I am wondering what number be used by the banks as the home value when refinancing – the yearly assesed value from the BC property assesement office or they are going to make a guesstimate based on a declining market?
Unable to qualify for a mortgage… OneEnglishman’s CreativeSolution to OverpricedHousing… (almost a ‘SideBar’ in it’s own right, eh wot Ed?)..
[DailyMail] – Property hunter spends £11,000 turning double-decker bus into his new home after being priced out of housing market
…”Daniel Bond, 28, spent four gruelling months and £11,000 turning the neglected vehicle into a luxury two bedroom home. The self employed auto-electrician was desperate to move in with girlfriend, Stacey Drinkwater, 20, but the young couple were left stumped by ‘ridiculous’ house prices.”….
http://tinyurl.com/cj2fwxe
In other news ‘creative housing solutions’, heir presumptive to China’s presidency, Xi Jinping apparently has so many homes he’s forgotten about some of them… Well, at least he doesn’t have to worry about qualifying for a mortgage on a VancouverSpecial under the NewRules…
[BloomBerg] – Xi Jinping Millionaire Relations Reveal Fortunes of Elite
…”While the [Xi's family] investments are obscured from public view by multiple holding companies, government restrictions on access to company documents and in some cases online censorship, they are identified in thousands of pages of regulatory filings. The trail also leads to a hillside villa overlooking the South China Sea in Hong Kong, with an estimated value of $31.5 million. The doorbell ringer dangles from its wires, and neighbors say the house has been empty for years. The family owns at least six other Hong Kong properties with a combined estimated value of $24.1 million.”…
http://tinyurl.com/6ra3xyf
Much as I’d like to believe this anecdote there is no way that any major bank would offer a discounted rate at only 75 – 100 bps above the 5yr CGB. I call BS.
bcj,
I agree with you. However, there must be some smart people out there who are working inside the lending operations of big banks. PLEASE POST and tell us what is going on.
A surprising number of the ‘smart people’ have been replaced by algorithmic ‘expert systems’/AI, HAM Solo… accordingly, if any of the algos would care to respond to HAM’s request… it would be a splendid opportunity for the VREAA community to conduct a crowd sourced TuringTest.
Come on algos, ChipUp, SpillTheBeans!