“I’ve lived in Vancouver most of my life (>50 years) and what’s going on here is completely irrational.”

This from West Coast Woman at greaterfool.ca 30 Nov 2009 12:07 am -

“I’ve lived in Vancouver most of my life (>50 years) and what’s going on here is completely irrational. The various levels of government hyping that the Owe-limpics are going to bring in all these new people, and people are buying into it and paying ridiculous prices for housing. The house across the street was last purchased 2001/2002 for $445,000, and sold last month for $1,588,000. This house had been nicely renovated with a basement suite added. The house two down from me sold two months ago for $1,560,000 and is now back on the market for $1,888,000. Nothing has been done to it in the interim. The house around the corner was bought for $998,000 at the beginning of this year and just sold for $1,790,000! This house was updated (a bit) and had a bachelor basement suite. In 2001/2002 a well-maintained house in this neighbourhood cost about $500,000. The current price for a knock-down in this neighbourhood is now $1,500,0000+, with new houses selling for $3,200,000 to 3,500,000. These are on lots approximately 50′ x 120′. Have people gone insane just because interest rates are low? Do they really think that people are going to move here because Vancouver looks pretty on the TV?”

“Give me strength and stop me from stabbing them both with my fork.”

It is often lonely to be a contrarian. Bears who see the Canadian RE bubble for what it is are emotionally depleted and extremely frustrated. This bear exhaustion is sometimes taken by contrarians to be a sign of a market top. To be fair to the bullish argument, however, is to note that some bears in Vancouver have been exhausted for years.

This from Jonas at greaterfool.ca 30 Nov 2009 at 12:06 am -

“I was at a dinner party and a stupid couple that recently bought were there. Someone other than me had the sense to ask  “What if the rates go up?”. (There is a god, I thought.) Then the morons actually said they think that rates will go down from here, and stay down for years. Give me strength and stop me from stabbing them both with my fork. I attempted to explain that rates were basically zero and Carney has already alluded to the plan that he will begin to raise rates at some point in the summer, but why fricking bother? About half of the people thought that prices will continue to rise as the economy continues to grow. I tried to explain that rates are historically low, will not go lower, and that incomes are flat to down, and that employment is down and getting worse. I asked them where they thought house prices would be when the variable rate is 5% and rising, and the fricking dumba$$ actually said higher. I swear to god it’s like living in a bad zombie movie. They are every where, stupid people without a brain that God gave a gnat. These will all be the same people with their hands out when the shit hits the fan, and [every] last one of them with a surprised stupid look on their faces will collectively say “Wow, huh… I didn’t see that one comin’”

“This means that, for a non-owner occupied $1,000,000 property, HSBC is asking for 45% down.”

Even though the BOC rates have yet to rise, there is evidence of tightening from lenders. RBC recently increased terms on LOC loans (from prime +1% to prime +2% for many borrowers). This without a change in prime. Now comes news that may herald the beginning of hard times for speculators.

This from McLovin on robchipman.net 29 Nov 2009 12:29 pm -

“An interesting side-bar on “banks tightening up”… HSBC will [now] only finance 60% of the first $500K for a non-owner occupied [investment] (Rental unit), and 50% of the remainder. Even to a mega-bear like me that is excessive. Either they don’t really want to lend money, or they see bad things coming. This means that, for a non-owner occupied $1,000,000 property, HSBC is asking for 45% down.”

“A lot of our clients do have a huge amount of equity, especially if they are in the market, trading up.”

During asset bubbles, it is relatively easy for participants to almost imperceptibly leverage themselves into more and more exposure to the inflating asset class, thus putting themselves at risk of complete wipe-out when the bubble pops. Participants actually believe that they are being prudent, and their ever expanding paper-profit bottom line reassures them and reinforces their behaviour. The fact that they are taking substantial risk and speculating on ongoing price appreciation may not be obvious to them. -vreaa

The Bill Good show on CKNW Friday 27 Nov 2009 at 10.30 am featured discussion with Garth Turner (greaterfool.ca) and realtor Tony Ioannou of Dexter Realty Vancouver (author of ‘Buying and Selling a Home for Canadians For Dummies’). These excerpts -

Tony Ioannou – “[We are] dealing with a lot of people who think that they have to buy now because the market is running away from them. Most of the people we are dealing with are buying a property to live in… a principle residence… very little speculation in the market.. Very few of our clients are going to ‘the end’ of what they can afford.. They might be approved for a 500K mortgage, [but] they’re taking out a 300K mortgage.. They’re not overextending themselves as they might have done a couple of years ago… We still have some off-shore money coming into Vancouver and the lower mainland but much, much less than in the past. Most of the people we are dealing with are local people just upgrading, mostly move up buyers from a small apartment to a townhouse, townhouse to a house, or up to a bigger house. We’re still dealing with a lot of first time buyers.. [they are] very cautious,… they’ve worked hard to make a downpayment they’re not going to throw it away… So they’re very very cautious and slowly entering the market.”

Garth Turner, in response to the above, said that there was a “giant argument that interest rates would not stay low”. He also pointed out that the average abode cost “between 7 and 10 times the average family income” in Vancouver which was “by world standards, severely overpriced”.

Tony Ioannou continued – “A lot of our clients do have a huge amount of equity, especially if they are in the market, trading up. One quick example, I’d sold a property to a young couple in 2000, a $300,000 townhouse, [with] conventional financing, I went to meet with them last week, they now have paid off their mortgage, [their property is] now worth about $500,000 , they now have a half-million-dollar down payment to go and buy their first house”.

Garth Turner retorted – “Well, that’s exactly what scares me about this whole thing, when you have people who are taking… and in the case of that couple, I’m sure that constitutes the bulk of their net worth… anytime I see people taking the bulk of their net worth and dumping it into one asset and then trading up exactly the same asset class, and increasing their exposure as they go on and on and on…// If we do have an interest rate increase,.. if we have taxes go up,.. I cannot see the Vancouver real estate market sustaining its value going forward.”

“Third offer on my place has fallen through. Reason was the same each time. Failure to get financing.”

Comments section at robchipman.net (26-28 Nov 2009) is liberally peppered with anecdotal observations of slowing RE markets in and around Vancouver. Perhaps it’s all attributable to the 25 days straight of heavy rain we’ve endured. This from Anonymous 28 Nov 2009 6:57 pm -

“Third offer on my place has fallen through. Reason was the same each time.  Failure to get financing. Banks may be tightening up.  I know my line of credit interest rate just went up. I’m dropping my price on Monday and will get out fast before this market turns sour on me.”

CAVEAT: Rob Chipman, in a posting at his blog (the source of this anecdote) 29 Nov 2009 10:04 am, expresses doubt regarding the veracity of this anecdote (based on IP address of a multiple-poster). Híppos Purrós in the same thread 29 Nov 2009 11:08 am also expressed doubt but, interestingly, added their own anecdote – “Both of [my] girlfriend’s recent YVR RE disposals have fallen through. Buyers’ financing was withdrawn at last moment by lenders concerned about pending special assessment”.

RBC report – “The near-frenzied tone to the market is occurring despite still historically poor, and now deteriorating, levels of affordability.”

The RBC has release its ‘Housing Trends and Affordability Report’ for November 2009.

Unsurprisingly, Vancouver leads the pack nationally, with an average Detached bungalow requiring 66.8% of the average household income to service a 25-year mortgage loan at a five-year fixed rate after a 25% down payment.

Here is an excerpt from the report -

“Vancouver — Heating up rapidly
The Vancouver housing market continues to roar back in a spectacular way and property prices are now heating up closer and closer to a boil.  Resale activity has surged since spring and the rebound has more than fully reversed the dramatic drop that occurred in 2008. The concomitant rise in the number of units available for sale has been more subdued, which has considerably tightened the market.  In fact, the ratio of sales to new listings has returned to levels last seen in 2005 and early 2006 when prices were rising at a double-digit annual pace. This near-frenzied tone to the market is occurring despite still historically poor, and now deteriorating, levels of affordability.  In the third quarter, RBC’s affordability measures for Vancouver worsened for the first time since early 2008, rising between 1.7 and 4.3 percentage points.  These increases were, in fact, the biggest among major cities in Canada.  Even though the affordability measures fell substantially during 2008 and early 2009, they remain well above long-term averages.”

Toronto Anecdote – “There hasn’t been a lot of time spent on discussing the human side of investing in a real estate bubble”

VREAA is a collection of anecdotes from Vancouver and its immediate surrounds. Occasionally, however, an anecdote from elsewhere in Canada speaks so powerfully of issues that are relevant to our market that they merit mention here. This anecdote from Garth Turner’s greaterfool.ca article 24 Nov 2009 crosses that threshold, so I post it here, with it’s out-of-province source (Toronto) clearly noted. It speaks to the financial and social risks of being a young FTB in a RE bubble market. A mortgage broker in Toronto describes their children’s friend’s travails -

“House purchase summer of 2008.   100% financing, 40 year amortization.  Husband a carpenter, wife at home with the new baby.  November 2008, husband laid off, wife goes back to work for minimum wage. Still not enough family income to pay the mortgage and buy groceries. Value of house has dropped 10%.  Payout of mortgage was higher than the purchase price the day they completed, by virtue of 100% financing and the CMHC fee.  Real Estate commission 7% on the first $100,000, 3.5% on the balance.  Shortfall would be $49,000.  Couples’ families want to help.  Daughter and baby move home with her parents.  Son moves home to his parents.  Duplex is rented out to cover the mortgage payment. This doesn’t work.  Husband moves in with wife and her parents.  This doesn’t work.  Couple rent cheap apartment. This doesn’t work.  Mother and child leave after 8 year relationship. There hasn’t been a lot of time spent on discussing the human side of this recession or investing in a real estate bubble but it is important to note the consequences are not [limited to] a loss of money or investment.”

“I think people have lost their minds. I know several people who are in their early 30s or even 40s who are running out and buying not just one, but 2 or 3 houses.”

This from Anonymous at fishyre.blogspot.com 19 Nov 2009 9:22 am -

“I think people have lost their minds. I know several people who are in their early 30s or even 40s who are running out and buying not just one, but 2 or 3 houses! All in the name of “investment” with huge, long term mortgages. If that isn’t the sign of a bubble, I don’t know what is.”

“Prices have been climbing since the spring, and yet many recent owners I know are on edge. Worried about interest rates and job loss.”

From kansai_92 at RE Talks 23 Nov 2009 10:47 pm -

“Prices have been climbing since the spring, and yet many recent owners I know are on edge. Worried about interest rates and job loss.”

“My unsecured credit line is going up a full point in January to prime + 2%. Still ridiculously low, but a true sign of what is to come.”

This from RennieWhereRU? at vancouvercondo.info 23 Nov 2009 10:33 pm -

“Got a lovely letter today from RBC. My unsecured credit line is going up a full point in January [2010] to prime + 2%.  Still ridiculously low, but a true sign of what is to come. Why can’t CMHC insure my credit line, so I don’t have to get this increase in rate and go up to my tits in debt? Not fair.”

“Does it make sense to other people that the variable rate right now is a pretty high risk play with a slight chance of coming out ahead and pretty big chance of losing?”

A mortgage holder chews over whether to lock in or not. This from kramster at RE Talks 23 Nov 2009 9:29 am -

“I’ve been trying to do some research on historic interest rates to assist in determining whether or not I should lock in to a 5 year rate.  What I’m wondering is if the current difference between the BOC bank rate and the banks’ posted prime rate is typical. Currently I believe it’s a 1.75% difference (0.5 vs 2.25 prime). source http://www.bankofcanada.ca/en/rates/interest-look.html (bank rate monthly). Currently I can get prime -0.25%, for a closed variable rate of 2%. The best 5 year rate I can find is 3.99%. (I’m not with Sutton, so I can’t get their rate [3.69% - ed.]). If the spread is consistent, it would require the target bank rate to be about 2.5% or more for the fixed rate to beat a variable. According to the chart I downloaded from the BOC website, [apart from] December 2008 when the rate was dropped to 1.75%, there has never been a time in the last 10 years where the rate was better than 2.5%. I know you used to be able to get prime -1%, which would change things a little, but to get even prime -.25 requires a 3 year term. This leads me to believe that the likelihood of paying less than the current 5 year fixed rate, if I choose the variable rate, is slim to none averaged over the course of 5 years. Am I making sound assumptions here? Does it make sense to other people that the variable rate right now is a pretty high risk play with a slight chance of coming out ahead and pretty big chance of losing? The idea of going variable and locking in later is there, but will you get a chance to do this before it rises? And to me this is a little like trying to pick a bottom of a stock price. When do you jump in? There’s also the problem that the lender with best variable may not be the one with the best 5 year fixed, so if you want to change from variable to fixed you are already at a disadvantage.”

BeatBox adds, 23 Nov 10:18 -

“You can get variable at 2%. Fixed is 3.99%. A difference of 1.99%. Why would you not go variable? The spread is almost 2%. That would require the BOC raising rates significantly. Not likely to happen within the next year. A slight increase, maybe. Then you’re paying maybe 2.5% and still significantly below fixed. BTW: This doesn’t grant you the ability to max out your borrowing based on 2%. Doing that would be foolish. Maybe max out borrowing at the 3.99% allowance, and then go for the Variable. Apply the difference into your payments so that you are paying down your principle much quicker and when it comes time to renew you owe far less. I mean, the difference is about $100/month for every 100k borrowed. Over 12 months, that’s about 1% more of the principle paid down every year. That’s what I would do.”

“I read a realistic and balanced RE article in the Vancouver Sun” – vreaa

The Vancouver Sun has unexpectedly published a sober and cautious article about Real Estate. This contrasts with years of articles that have most often read like RE promo brochures. The article is from the 20 Nov 2009, Vancouver Sun Business Section, with no apparent byline. Excerpts below, full article is reproduced as first comment in the comment section -

“In B.C., which has the highest prices and biggest mortgages, buyers seem more confident than other Canadians that prices will continue to rise. Even if they are right it would be prudent to remain cautious.”

“Low interest rates have been a godsend for mortgage borrowers, and a curse for savers…. But interest rates can change in the blink of an eye.”

“Financial advisers warn that real estate valuations can go down, as well as up, and people should diversify their investment portfolios, especially in retirement when a house should represent no more than 25 per cent to 33 per cent of total wealth.”

“Would-be buyers should enter the market with eyes wide open and view their purchase first as a place to live, and only second as a store of wealth.”

VREAA editorial comment -

1. What percentage of Vancouver owners are on target to have their house represent no more than 33% of their total net wealth by retirement?  Answer: Very few. Currently, for many owners, their home value represents greater than 100% of their net worth in that the outstanding mortgage is larger than their other savings and investments. And rising RE prices have further decreased the sense of need to build savings outside of RE equity.

2. What percentage of Vancouver owners currently view their homes ‘first as a place to live, and only second as a store of wealth’?  Answer: Very, very few.

“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.”

The Globe and Mail – “In Vancouver, House Prices On A Tear”

In parts of Vancouver, such as the Vancouver Eastside, the market has reached fever pitch.  This article in the Globe and Mail by Kerry Gold, 19 Nov 2009 6:03 pm, has so many important anecdotal points regarding sentiment and market activity that vreaa has archived large swatches in this post, and highlighted two stories from it in the posts above.

“In the last three months, a heritage house at 274 E. 20th Ave. was listed for $959,000 and sold for $320,000 above asking, after eight days on the market. A heritage fixer-upper at 265 E. 24th was listed for $749,000 and sold for $1,033,000 within a mere 13 days. A month later, another house nearby at 214 E. 24th, was listed for $749,000 and sold for $950,000 within six days. A typical Vancouver Special at 4554 Walden St. was listed for $730,000 and sold eight days later for $958,000. All those houses were in the trendy Main Street area.”

“It’s very topical,” says realtor Rod MacKay. “Other places [in the country] are strong, but nobody’s seen anything like this. What’s really surprising is nobody anticipated the six-month dry spell being as slow as it was, and prices coming up as much. No one anticipated it bouncing back so far and so quickly.”

“At the beginning of this spring’s buying frenzy, buyers were offering $100,000 above asking in some cases. But by September and October, there were buyers – no doubt tired of being repeatedly out-bid – who are making offers so far above the asking price they couldn’t lose. In the case of the house at 265 E. 24th, it went for $284,000 above asking. “That takes a lot of stones to do that,” says the selling agent Darryl Sjerven. “There were 18 offers on that house. So you go in there, write an offer, and there are 17 other offers and you don’t know what any of them are. They could all be just $10,000 over asking. To go and write $284,000 over takes a lot of guts.”

To describe the bidding mentality these last few months, Mr. Sjerven uses the analogy of a “hang loose” hand gesture – with the three middle fingers curled under and pinkie and thumb sticking out.“Say you get five offers on a house, and suppose the house is listed at $750,000. The guy with the pinkie does not get it, he doesn’t know what’s going on,” says Mr. Sjerven. “Even though there are four other offers, he’ll offer you $700,000 subject to sale of his home and if he gets financing and everything. Then you get the typical pack in the middle, they’ll go around $785,000, or something like that. There’ll be a cluster of those people. Then there’s the thumb. It sticks right over the side and says, ‘this is my house. I want this house.’ He’s far enough ahead that it doesn’t get into further bidding or anything like that. And he buys that house.”

A few months ago, it seemed like the only houses being sold in bidding wars were the “hot properties,” the ones with three bedrooms up, new granite counter tops, and a gleaming in-law suite downstairs. More recently, the bidding wars have been over houses that aren’t so hot, such as that Vancouver Special that went for above asking.“The house wasn’t renovated or anything,” says selling agent Kenny Wong. “It was 37 years old. It had the original “shagadelic” carpets. It was on a 33-by-110 lot. It wasn’t even a standard lot. “I had a hard time selling a Vancouver Special in the winter – a lot of people made low-ball offers,” he adds. “Now they are going over asking.”

Although overall prices aren’t quite at pre-correction levels, for buyers it has felt like the spring of 2008 again.

As to where the market will be in early 2010, the current frenzy appears to be abating and realtors like Mr. Sjerven expect the lull to last over the winter and through to the end of the Olympics. Not many people like to list or buy homes around the holiday season, and few are going to want to sell around the time of the Games, when it could be hard to get around. That five-month lull will create “pent-up demand” that will trigger another frenzy, says Mr. Sjerven. “Once you clear the Olympics out of the way and we’re into April, it will be a race to those listings. Spring is going to rock.”

“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.”

“My wife, young daughter and I are quite content to rent a place for $1,450 a month that would easily list for $700,000 (and probably go into a bidding war to sell for more).”

This from Contrarian in Vancouver, on greaterfool.ca, 20 Nov 2009 11:54 am -

“I live in Vancouver. My wife, young daughter and I are quite content to rent a place for $1,450 a month that would easily list for $700,000 (and probably go into a bidding war to sell for more). Our landlord arranges for the lawn to be cut, landscaping taken care of, and immediately takes care of any repairs. Got to admit, he’s great…kinda makes me feel like I’ve got it too easy. We’ve got a couple hundred thousand sitting on the sidelines in safer investments earning a little interest (aside from our RRSPs which are very diversely invested, life insurance and no debt).  I’m a 40 year old investment advisor with a contrarian and value based philosophy. As I tell my older clients when recommending laddered GICs as part of their portfolio, it’s not just paying 3.35%, you’re getting 103.35% as you know you’ll get your money back. Can’t say that about many investments these days – especially real estate. Heck, the cap rate’s got to be close to that but the risk is huge (oh wait, I forgot real estate only goes up!! – Hasn’t anybody looked at a graph of real estate in Vancouver for the last 40 years?) Luckily for me most of my clients are much older and have no debt. Bad for them is that their kids (in their 50s) can’t say the same, and of course it gets downright worrisome when grandkids (who are in their 20s and 30s) situations are brought up.  Meanwhile the plan for my family is that we’ll keep socking away into our RRSPs, keep building our down payment and in a few years when the @#!$ is really hitting the fan, pick up a pretty nice place and pay it off in less than 10 years. (Hopefully the banks won’t have a problem accepting a 30-40% down payment then! lol).”

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. Or click here to subject yourself to the AUDIO -

“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.”

“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.”

“They were beginning to get freaked out by the prospect of losing their jobs while trying to pay their mortgages.”

This from logic at vancouvercondo.info 16 Nov 2009 3:53 pm -

“I was sitting in the Starbucks on the corner of Denman and Davie this morning, doing a bit of work and listening to a group of 4 construction tradesmen at the table behind me talking about all the layoffs in the places they work, and stating that they were beginning to get “freaked out” by the prospect of losing their jobs while trying to pay their mortgages. They were most worried by the fact that it’s not just the new hires being let go, but also people with “seniority”. I felt sorry for them, as they genuinely sounded worried, and seemed like nice enough guys.”

 

“I just don’t get it… why the rent is so low, or why the sale price is so high?”

Gloria, at robchipman.net, on 16 Nov 2009, 9:27 am, discovers that Vancouver RE price to rent ratios make no sense. The unit that she describes has a price:rent ratio of 390, and that’s before any talk of maintenance fees (which would put the ratio well above 400).  These ratios would imply that, from a historical perspective, the sales price is over twice what it should be.

“Luxurious ‘O2′ on Davie / Denman St. has several units for sale, and one of them (2bdr/2bthr, 975 sq.ft)  is both for sale and for rent. The sale price is 975k, and the rent is $2500 per month.  I just don’t get it… why the rent is so low, or why the sale price is so high?”

“A guy just bought a house with a mortgage and was checking with his friends if the bank would lend him another $6K for CHMC insurance”

This from Anonymous at vancouvercondo.info 15 Nov 2009 10:13 pm -

“I was at the Daiso $2 shop to buy toilet brushes and brooms. And I overhead a conversation. A guy just bought a house with a mortgage and was checking with his friends if the bank would lend him another $6K for CHMC insurance.”

“Yes, the interest rates will rise, but my salary will also increase. If I’m laid off, or my mortgage skyrockets, I’ll work my ass off to keep it all together.”

Vancouver RE currently demonstrates historically record high price-to-rent ratios. Despite this, very, very low interest rates continue to make buying look attractive, especially if one only considers monthly payments. This illustrative example from Beth (2009 Nov 13, 20:27) in the comments section of the 12 Nov 2009 ‘Vancouver RE market bounces back’ article in the Georgia Straight, by Charlie Smith -

“My rent was $975 a month for a crappy, 35 year old one bedroom that didn’t have insuite laundry or anything, and where the landlord would knock twice then enter my suite without advance notice for non-emergencies, once even while I was on the toilet. Now, my mortgage is the same for a 12 year old one bedroom with laundry, fireplace, dishwasher. This includes maintenance fee. And I can have a pet. And no landlord can come in because he feels like it. Yes, the interest rates will rise, but my salary will also increase. If I’m laid off, or my mortgage skyrockets, I’ll work my ass off to keep it all together. I am confident in my ability to make it work. Downpayment? Some people work two jobs and weekends for years and years and years to save up for one; others inherit it when a loved one passes away; others borrow money interest-free from family, and others have it handed to them by well-to-do parents who would rather their kids have a condo than live in a dump run by a slumlord. Do you blame them? It’s not really anyone’s business where a downpayment comes from. It’s not a crime to have a downpayment.”

Personal Growth Through Real Estate Purchase – “His friends look at him differently now that he’s a homeowner”…”You have plants. You look after them. It’s like you’re an adult.”

A 24 year old pharmacist buys a downtown condo for $508K, and reaps the admiration of his friends. This from the Georgia Straight cover story ‘Vancouver real-estate market bounces back’, by Charlie Smith, Nov 12, 2009 -

“Even though he had never purchased real estate before, Alym Abdulla could sense that the market was heating up as he began looking at downtown condos last spring. The 24-year-old pharmacist started seeing suites in late March, and before long he realized that some of the units were receiving multiple offers from prospective buyers.

“I must have looked at close to 50 places,” Abdulla told the Georgia Straight in a recent interview in his living room. “I put in offers on two other places that didn’t go through because the market started to pick up.”

He said he was getting discouraged and was ready to quit when his real-estate agent, Stu Bell, recommended that he check out a home in a Bosa-developed building near the corner of Hornby and Smithe streets. When Abdulla entered the suite in the middle of May, he was immediately impressed by the layout, which featured two full bedrooms, each with an en suite bathroom, on either side of the living room. “The thing that really sold me on this place was the balcony,” he said. “It’s quite large. It makes you feel like you’re not trapped in your little shoebox downtown.”

Abdulla ended up paying the $508,000 list price. He said he bought then because he wanted to take advantage of the low interest rates. With a smile, he acknowledged that some of his friends look at him differently now that he’s a homeowner: “One of my friends who I used to live with in university, he’s like, ‘I feel since you bought your place, you’ve matured. You’ve completely changed in the way that you are. Before, we used to live the student lifestyle. Now, you’re always cleaning your place. You have plants. You look after them. You’ve even got a cat now. It’s like you’re an adult.’ ”

“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!”

“The interest rate on their mortgage? Just 1.5 per cent.”

This from ‘Easy credit, soaring prices raise new housing fears’ by Tara Perkins, Kevin Carmichael and David Ebner, Globe and Mail Update, Friday, Oct. 30, 2009 7:52pm -

“Nick Burzese and his fiancée Di Pham recently realized the North American dream – they bought a house of their own. And the couple’s new home is not just anywhere. It’s in Vancouver, one of the country’s priciest markets. Having rented for years, the couple, who both work in the mortgage business, thought they’d never be able to afford a house in the city. They were doomed, they felt, to live in a distant suburb. As they house-hunted, they saw to their disappointment that the recession hadn’t dampened the market much. “Everywhere we went, there were so many people there,” says Mr. Burzese, 36, a broker at MPRO Mortgage Architects. Eventually, they came across an old 11/2-storey “character” home on a leafy street of detached houses near the Pacific National Exhibition grounds, on the city’s east side. “We immediately fell in love with it,” Mr. Burzese says. “It’s really an area that’s starting to transform.” Ms. Pham, 28, and Mr. Burzese put $57,000 down on the $570,000 house early this year. The couple says they’re comfortable with the debt. They make good money and are installing a basement apartment as a “mortgage helper.” But they might not have been able to get into the market were it not for the intervention of the Bank of Canada and the federal government – in the form of a continued low interest rates and federal policies aimed at maintaining the flow of lending and spending. The interest rate on their mortgage? Just 1.5 per cent.”