Aggressive Lending In Canada – “My family was severely bugged by mortgage brokers recommending us to get a fatter mortgage.”

Easy lending has fueled the price run-ups in Vancouver RE. This relevant anecdote comes from dimon at Vancouver Condo Info 2008-04-29 15:04:35 –

“I’ve lived in Canada since 2001. When we started looking for a mortgage, the rules were quite strict. With our verified!!! dual income we could not get mortgage more than 200k. As first home buyers we needed at least 5% downpayment. Within this price range we could not find a suitable SFH, so we went for a townhome in decent area.
To my big surprise, just a year or so later, my family was severely bugged by mortgage brokers and financial advisors recommending us to get a fatter mortgage. And even our income did not change much, we were offered 400+k mortgage. I now feel lucky I did not go for it.”

“Anyone have relatives in Alberta that want a downtown condo?”

The Vancouver Sun article ’15 Real Estate Myths and Realities’ is getting an appropriate amount of coverage and an even more appropriate amount of criticism in the local blogosphere.

See the links at RE Talks, condohype, vancouvercondoinfo & the Sun itself for this discussion.

vreaa harvested this anecdote from ‘BUY MY CONDO!’ at Vancouver Sun ‘Soundoff!’ Tue, Apr 29, 08 at 01:05 AM –

“I am selling a condo because I am getting transferred. When giving the listing out, my realtor tried to low ball me for a fast sale. I priced it competitively and less than recent sales on a lower floor. To date I have no offers and only excuses from my realtor that the market is slowing, that it is changing, there are more listings and that I need to reduce the price. I’ve paid property taxes, strata fees, mortgage payments and I have to pay a realtors commission so I don’t want to lose money on this purchase. I feel like I live in a different city than what was described in the article because people are not lining up to buy my place. The realtor tells me that it is too expensive for an owner user and investors want presales where they don’t have to pay for the condo for 3 years. Anyone have relatives in Alberta that want a downtown condo?”

“I have no problem being a renter in this ridiculously overpriced market.”

This from ‘wtm’ at RE Talks Wedn Apr 23, 2008 4:10pm –

“I am renting in the West End, West of Denman in a “boring/somewhat unsightly walkup”. Common areas are nothing to write home about either….but I have a beautiful, approx 700 sq ft 2 BR for $1380 a month, which includes heat, hot water and covered, secure parking. I have hardwood floors and reno’d kitchen and bathroom. The suite is very very clean and quiet. Owner’s have live-in landlord couple who take care of every little problem within a couple of hours. Given the assumption that material capital gains in RE are off the table for at least the next 5-7 years (this is my view), there is no way it makes sense to buy when I can rent on a tree lined street in a beautiful quiet neighbourhood, a couple of blocks from the beach and Stanley Park, for such a low monthly cost. No taxes, no strata fee, no unexpected costs or assessments. When I can get in the market, in this neighbourhood, for something less than $375 a sq ft, that is when I will consider buying (I think that is possible btw, but will take 3-4 years of downward price drift). In the meantime I am saving and investing…..I have no problem being a renter in this ridiculously overpriced market.”

The Down Side Of Having A Tenant ‘Pay Your Mortgage’

This gem from Lady Luck at RE Talks, Tue Apr 22, 2008 9:29am –
“We used to rent a suite in our home. A new tenant came home blind drunk. Let himself into our part of the house (door was unlocked). I went to check on the baby at 3am. He was passed out on her bedroom floor, had vomited and pissed his pants. I recognised who it was and called the police. They ran his name and it turned out there was a warrant out for his arrest. Police came with guns drawn and removed him from the house. We called the RTA and were told that this was not grounds for eviction. The police let him go the next day, he returned to the suite and physically threatened my husband. Luckily “Uncle” is a biker and brought a few buddies to pay him a visit. The tenant was convinced that it was not in his best interest to stick around. Since then we have never rented a suite in our home. I always lock my doors. And I always do a police record check on new tenants.”

Ownership Premium – “It can’t be all about money.”

This from asha at RE Talks Thu Apr 17, 2008 8:29am –

“We bought at Christmas.
We sold our condo too early at the end of 06 in December, but what the hey!
We went walkabout for a year and watched as prices climbed and climbed.
But we were buying a smaller cheaper house in a small town.
So we bought a nice 1950’s home in Powell River. 2000 square feet, a nice backyard, some fruit trees and a view of the ocean.
We waited and waited for the downturn which didn’t happen during that time and then stumbled upon this house which was just the right one for us.
Because it is cheaper it seems that it all works out. We could have made more money, we could have saved more money, but i have learned that is you are buying for your home timing the market is probably not worth it.
We got a great place out of it and in the end, it can’t be all about money.”

“The disparity between the the cost of owning and the cost of renting is worse than it has ever been.”

This story of a renter (who could be an owner but chooses not to) from Markoz at vancouvercondo.info 2008-04-12 07:01:05 –

“One stat I found very interesting is “shelter cost to income ratio” (STIR) which they split between renters and owners. Curiously, in Vancouver from 1990-2001 owners spent an average of 20% of their income on shelter while renters spent an average of 30%. Presumably this is due to the fact that average owners make (a lot) more money than average renters. Anecdotally, anytime I personally have considered getting into the market my STIR would have increased dramatically. Due to my income, I guess I am not an average renter. It has always been the huge disparity between the cost of owning and the cost of renting that has deterred me. (That, and shoddy workmanship/design). Currently that disparity between the the cost of owning and the cost of renting is worse than it has ever been. I rent an old house just west of Main for $2050 per month. A virtually identical property just 2 doors down recently sold for $700,000. With 10% down my mortgage payments and property tax would be $4,335 per month (based on 6% and a 25 year term). The house is over 50 years old and will soon need a new sewer line (already cost estimated by a plumber at $4,200) and roof. We are in the midst (end?) of an unprecedented run up in house prices but owning has always seemed to me to command a much greater premium in Vancouver than other cities I have read about.”

Will be archived here: 09. Delaying Buying (archive)

“He stared at me like I was one of those weirdos”

This from pricedoutfornow at vancouvercondo.info 2008-04-08 19:11:57

“It won’t crash here. This is Vancouver. We are different. So said my co-worker today at work. I said “oh ya? they said that in Florida too. And California. And Spain. Because “everyone wants to live in (fill in the blank)” He looked bewildered and stared at me like I was one of those weirdos seen talking to themselves on the Skytrain.”

Will be archived under 01. He said, She said, I said (archive).

Delaying Buying – “It’s hard to believe the there won’t be a market correction”.

This was posted to the ‘9. Delaying Buying’ thread by ‘lousyspellr’ –

“Married 10 years, my wife and I have both been working and saving while renting our home. We live in a fantastic suite in an older, but well-maintained house. We’re in a great location and love everything about it. We had our first child 2 years ago and are expecting another in a few months. We hope to be able to make it work, but it’s starting to feel a little tight. We have been in a position to buy for many years, and have watched in dismay as prices have soared beyond our reach. I try not to have regrets, we have been very happy in our rented suite, and haven’t EVER seen a rent increase. Our savings are good and we have no debt. Have made some good investments, but lately other investments (mutual funds mostly) have not performed so well. I find myself at a loss as to what to do with our saved downpayment. I do not want to risk it, but would of course like it to earn as much as possible while not tied-up in RE. It’s hard to believe the there won’t be a market correction at some point given what we’re seeing: US economic crisis, the forestry sector downturn, an Olympic world party that will come and go leaving the province significantly in debt and Olympic ’speculators’ sadly disappointed (I hope), ever increasing housing supply with little change in demand, the completion of many large construction projects leading to increasing unemployment in that sector… I’m sure you can think of many more.”

Commit Crime To Buy A House

This remarkable story from M- at rob chipman’s blog (04.04.08 at 11:50 am) –

” I have some friends who recently bought a house. Their annual combined income is $80-90K. They had a ~$250K down payment. In order to finance their house, they took out a $900K loan, secured against the house. Loan, not a mortgage. Interest-only. Since they are calling their house an “investment,” they will deduct the loan interest off of their incomes (never mind that this is illegal in Canada– you can deduct interest incurred for investments, but not for your primary residence). The house does not have a rental suite, and they are not planning on installing one.

To summarize: 90K income, $900K loan, so no principal payments. $50K per year in interest payments. $10K remaining after legit taxes will likely go towards taxes, insurance, heat, electricity, maintenance. Living expenses will come from illegal tax writeoffs.

And did I mentioned they’re planning on having kids soon? That was the whole reason behind the purchase of a house…”

M- later (04.04.08 at 5:10 pm) added –

“One of their parents has a fair bit of savings– when they run into financial problems, they could probably call on part of their inheritance early. …So the downside risk of buying now probably looks limited. There was a lot of pressure from their parents to buy a house. I don’t know why they didn’t buy something a little more modest, though.”

“I’ve never been more poor in my life.”

This from DaMann at rob chipman’s blog (04.04.08 at 10:30 am) –

“My wife and I bought 3 years ago, a very modest TH out in Steveston. It was only $270 k at the time, which for us was more than we wanted to pay. We had only one child at the time and my wife was working part time. Now we have two kids and my wife is not working. I make above the average household income for Vancouverites, not by much but definitely more, and we are barely living above the poverty line. I’M serious! We haven’t bought clothes for ourselves in almost a year. All we do is pay a mortgage, strata and taxes. I’ve never been more poor in my life. Now the place is worth $380k and I honestly don’t think we will see these prices again for 10 years ( after the crash comes). There will be no more Olympics to hype things up, we have borrowed most of the young buyers for the next 10 years to service the current boom. So many people are going to be hurting that have bought at the peak that RE will be a dirty word in Vancouver. So yes we will probably sell and get out of this insanity and just rent or move to the island and rent and wait. Then maybe we can start living again. (Keep in mind this was a $270k place. I have no F#$%^ clue how people are buying $500k places. I know people doing it and they are barely getting by, but they will certainly not be able to have families or change their income levels ( 2 people working). They are mortgage slaves.)”

CMHC and the Vancouver Housing Boom

This from Strataman on Rob Chipman’s blog 04.01.08 at 6:41 pm:

“(That’s) assuming that CMHC treats the same applicant in different areas the same. It doesn’t. My son is pre-approved for a CMHC mortgage in Vancouver and has been for some time, he had the offer of an equivalent job/pay in Williams Lake. Same down payment half the mortgage in Williams Lake..turned down by CMHC…probably because CMHC is basically a speculator and WL properties are expected to stagnate. Interesting isn’t it? Half the debt (roughly) same income, same downpayment (much larger percentage) and no go? If CMHC really believed Vancouver properties would stagnate, a lot of approved financing would dissappear, so in effect CMHC is creating the bubble and feeding it, the minute they have to admit or are forced to admit that prices will stagnate, watch out! Freeze on lending bigtime.”

[Will be archived under ‘Where Do They Get The Money?’.]