“I don’t come across people very often who are limiting what they do from a lifestyle perspective so they can have more Real Estate.”

From the experience of realtor Mike Stewart (and contrary to the opinion of many), very few buyers are overextending themselves. This from RE Talks 21 Nov 2009 10:14 pm-

“The people I am working with are not at the limit, I would say 70%+ are low ratio and most of these people are working with a lot of equity.  I don’t come across people very often who are limiting what they do from a lifestyle perspective so they can have more Real Estate. People tell me they want to have money/time to do the things they value and they buy property they can comfortably afford. The people I work with see the low rates as a way to pay off their mortgages quicker or keep payments lower than they normally would be and don’t use it as a means to buy something they couldn’t afford. These people tend to be very cautious with property transactions and how they finance these transactions. This caution could be seen in how rare foreclosures were in my market during the economic crisis. This prudence and caution was the reason for this.”

“They didn’t have to come up with a down payment.”

Money is free and you don’t even need a downpayment. The only thing good about this is that it is almost impossible to make monetary policy any looser without some kind of obscene give away program that’d likely stir objections. This from casual observer at greaterfool.ca on 21 Nov 2009 at 4:40 pm -

“If you go into one of the big five banks, and take their posted rate on a mortgage, they will GIVE you the 5% down payment. CMHC is happy because the 5% DP has been paid, the bank is happy because they get a higher rate on the mortgage, and the buyers are happy because THEY DIDN’T HAVE TO COME UP WITH A DOWN PAYMENT. And it’s all legal and above board. CMHC just charges a premium for a “NON-STANDARD Down Payment”. Now if that’s not a zero down mortgage, I don’t know what is. I know people that have done this within the last couple of months, but none of the media seems to want to bring attention to this.”

Audio anecdote: “Hey, would you like to kick yourself?”… “Today’s real estate market could be at rock bottom, and when markets hit bottom, the winners are buying.”

At this point in the real estate cycle, to be luring individuals who are “worrying about living paycheck to paycheck” into RE ‘investment’ could be seen to be imprudent.   Listeners to Vancouver Radio station ‘CKWX News 1130′ this week (16-20 Nov 2009) were exposed to this 60 second ad about once an hour. The meaty bits are italicized -

“Hey, would you like to kick yourself? That’s what you would be doing if you ignore this opportunity. Today’s real estate market could be at rock bottom, and when markets hit bottom, the winners are buying. Come to a free learn to be rich workshop and discover how to join the winners based on the teachings of Robert Kiyosaki, best selling author of ‘Rich Dad, Poor Dad’, the number #1 book on personal finance. Rich Dad’s learn-to-be-rich workshop is free and happening in the Vancouver area today through Friday. This totally free workshop will introduce you to tools and strategies that could create extra cash flow and free you from worrying about living paycheck to paycheck. Don’t kick yourself next year saying “Why didn’t I invest when I had the chance?” This is your chance. Register now online at richdad*******.com or call 800-399-****. Get a free gift for attending. Registration is free. Call now 800-399-****.”

Higher Down Payment, Higher Interest Rate? – “Don’t try to fight the government.”

Risk is being abnormally underpriced in the Canadian mortgage market. Despite the Bank of Canada’s call for prudence, there remains an apparent open invitation for buyers to overextend themselves. This from German Guy at robchipman.net 19 Nov 2009 at 12:44 pm

“I hear a lot of talk about how CHMC is the Canadian version of American sub-prime so, since I don’t have much to do in this never ending rainy place, I decided to go and apply for a mortgage to find out what is it all about.
I asked for a 5 /35 year fixed rate with minimum 5% down payment and 5/35 with 300k down as well as a VMR and wanted to know how much money I would qualify for. Here are the figures I gave the banker (the figures are imaginary and have no relation to my real revenue):
Gross annual income: 95k, estimated purchase price 800k
Expenses estimated by banker: Monthly heating costs $67; annual taxes $2500, loan/credit card monthly: $360

In the case of 5/35 with 40k down he qualified me for loan of $538,842, with $2,404 monthly payment and 4.20% interest rate. In the case of 5/35 with 300k down he qualified me for a loan of $798,842 with $2,534 monthly payment and 4.20% interest rates.

I asked to get a lower interest rate in the second case where I put a bigger down payment since the bank was not taking as much risk as with the first one.
Answer: We take more risk when you put a bigger down payment because your loan does not have to be insured by CMHC, so if anything your interest rate could be higher because the bank is taking more risk. We are not in the business of foreclosing homes and selling to get paid, we prefer when you have a CHMC insurance as our risk is much lower than when you have a pig [that's 'big' -ed.] down payment above 20% of purchase price.

I asked for a VMR then, he quoted me a 2.25% interest rate for 35 years and qualified for $665,000 loan with 5% down payment.
I asked could put a bigger down payment ?
Answer: No. We will not give you a VMR loan if it is not CHMC insured!

I pointed out the absurdity of the situation in his reasoning, with taxpayer taking all the risk and the banks making risk free profit. All he said was don’t try to fight the government.”

“This well heeled Asian investor’s belief was that there were better opportunities in the U.S. real estate market over the long term.”

This from Ziggy at robchipman.net on 18 Nov 2009 11:36 pm -

“I had an interesting discussion with a well heeled Asian real estate investor (tens of millions invested) a few months back. His belief was that as an investor, there were better opportunities in the U.S. real estate market over the long term. His views on Vancouver was that a correction would eventually occur and could be partly triggered by the exodus of large scale Asian investors to American markets that have retrenched and now offer better prospects for longer term returns than Canada. While Vancouver has a large Asian population, many large scale Asian investors have bought properties throughout the country over the last ten to twenty years. Rebalancing their portfolio is largely a business rather than an emotional decision.”

“60% of the listed homes are over $1M when maybe 6% of the recent sales have been over $1M.”

This from Barbara Samson at robchipman.net 18 Nov 2009 1:45 pm -

“The tiny slice of market (Upper Lonsdale) that I follow is right now critically short of properties under $900,000, but glutted with properties over $1 mil. 60% of the listed homes are over $1 mil when maybe 6% of the sales since Sept 1 [2009] have been over $1 mil. Right now you could buy a crack house for $800,000 or spend 25% more for something really nice. And all the buyers are opting for the crack house?? This is not a balanced market and I can’t believe there are many who are spending their own money in it.”

Purp added the following 18 Nov 2009 8:37 pm -

“I’ve heard some anecdotal info that homes in the $800-900K range in the Main street corridor have also been selling with multiple offers, while more expensive properties close by on the West side are sitting longer.”

Asalvari adds 18 Nov 2009 10:45 pm -

“[I am seeing a similar effect] in Dunbar, Point Grey and Kitsilano. The most prolific selling realtors are moving from Dunbar and PG to Kitsilano townhomes.”

“I haven’t really been paying attention to fixed rates with variables so low.”

Are current buyers following the recent BOC guidance to be ‘prudent’? This admission from Vancouver Realtor MikeStewartRealtor at RE Talks 18 Nov 2009 10:21 pm, in response to a poster’s question about ‘best 5 year and variable rates’ currently available -

“The best variable I’ve seen is prime -0.1%. Haven’t really been paying attention to fixed rates with variables so low. I’d use a mortgage broker. Talk to a few to see who can get you exactly what you want.”

“I’m single and have a salary that is in the high five-figures, which puts me up in the top 20% of households in Vancouver, yet I can’t afford to purchase a SFH in East Vancouver.”

This from oneangryslav2 at vancouvercondo.info 18 Nov 2009 11:42 am -

“Please let us in on the secret. How is it that people can afford million dollar homes? I still don’t get it. I’m single and have a salary that is in the high five-figures, which puts me up in the top 20% of households in Vancouver, yet I can’t afford to purchase a SFH in East Vancouver.”

“Bankruptcy for two swinging 20 year olds and two aged Mainland Chinese folks (the parents who funded them)”

This from Strataman at vancouvercondo.info 8 Nov 2009 at 7:34 pm -

“Looking after a bank repo at King’s Landing. Bankruptcy for two swinging 20 year olds and two aged Mainland Chinese folks (the parents who funded them)! The old folks are dumping their other two condo’s cause they co-signed! All heading back to China it seems. 500K loss after mortgage was paid off.”

“I keep trying to tell my wife that Vancouver is a city living on credit and home equity loans, the music will stop soon. She doesn’t buy it anymore.”

This account of RE related spousal discussion from DaMann at vancouvercondo.info Nov 6th, 2009 at 12:01 pm -

“I really don’t get this silliness. My wife says “I don’t care what anyone says, there is no recession in Vancouver”. All she comments about is the wealthy cars, and stupid prices of RE. I keep trying to tell her that Vancouver is a city living on credit and home equity loans, the music will stop soon. She doesn’t buy it anymore. She IS starting to believe it’s different here. Shit, so am I!!!??!?!? EVERYTHING is defying all logic and reason. Sure, I know people are buying places based on variable rates of 2% but even at that, I still can’t fathom how ( or why) people are buying and getting $700k mortgages on $100k household incomes. Man I can’t wait for rates to go up!”

“No, the market is not going to go down, these units will be worth more by the time they are finished”

Those selling real estate do not take a neutral position regarding market direction. This from joycer at vancouvercondo.info on Nov 6th, 2009 at 9:00 am -

“Went by Maple on 84 in Surrey last weekend…. Someone mentioned that they were considering the D plan, which was the most expensive. The realtor said that would hold the most value and appreciate the fastest with the market. When the parent of that person (first time buyer…) said it would also fall the fastest if the market came down again, the realtor quickly corrected them, and said “Oh, no, the market is not going to go down, these units will be worth more by the time they are finished”. If they are so confident, why the low prices?”

“Who can afford to buy a nondescript house in the $1,000,000 plus range in Vancouver or the Okanagan? – And why would they?”

This from Roches Moutanee in the Comments section of a Globe & Mail ROB article dealing with the ‘great’ rural BC recreational property ‘bust’, Oct 30, 2009 -

“I now live in Ontario but grew up in BC and will soon move back for the last phase of my career and to be with family and friends. … This summer I was visiting my old neighbourhood in Richmond and went to an open house. It was 25 years old and in need of updating – a minimum of $100k. They were asking $1,130,000 (with a straight face). I live in a neighbourhood in the GTA where people have serious jobs – VP’s of major corporations. The homes are in the $500k – $700k range. Who can afford [to buy] a (nondescript) house in the $1,000,000 plus range in Vancouver or the Okanagan? – and why would they? The residential real estate industry in BC, and in particular Vancouver and the Okanagan, are simply ponzi schemes. Everyone is washing each other’s laundry and counting on people with surplus equity to move there and pay big money for homes. If people can’t sell their house in Toronto, Winnipeg, or Edmonton, etc. and purchase a house in the Okanagan for the same cost, or less, then where are the people going to come from? – and don’t count on international money, as even that has limits. My colleagues in BC say that the market is different this time around. I disagree, and can’t wait for the big correction which will take place some time next year and will persist for 4-5 years.”