“Talking with mortgage brokers you’re seeing a lot of cash brought to the table. People buying those properties over a million dollars are plunking down 50%+ on them. Yes, there is a lot of rich foreign money coming in.”

Agent Will is Will Wertheim, a local realtor who posts the Vancouver RE statistics each week on his indispensable blog, agentwill.com. Recently he shared his current experiences in the market. Here’s Agent Will reporting from the trenches, 25 Mar 2010 8:45 am

Talking with mortgage brokers you’re seeing a lot of cash brought to the table. People buying those properties over a million dollars are plunking down 50%+ on them. Yes, there is a lot of rich foreign money coming in. I’m not selling those, though (not that I don’t want to). At the lower end we’re seeing buyers put down 10-15% on average and being pretty conservative with what they are buying. They may be approved for $500k but they’re looking at $400k or less as their max.

You look in the papers and media these past few months (at least what gets reposted on various sites in our community) and you see a lot of talk about prices, interest rates, and the future. I don’t understand that talk and I’ll tell you why. The Banks want to lend money. They only make money when they lend it. But they don’t just lend it to anyone… they only lend to those they deem credit worthy. They adjust the interest rate to reflect the risk. If the person is too risky then they won’t lend at all and the borrower has to go to a B or C lender which has far higher rates and will lend subsequently lower amounts of money. When media reports that “banks are worried” (and the reality for me is that I haven’t seen any worry) then I wonder if someone is saying a personal opinion or if the bank wants to reduce time spent on processing soon-to-be-rejected paperwork.

There’s also a lot of confusion about the HST and so many people think it applies to ALL housing. To every potential buyer I have had to explain (sometimes more than once) that it only will apply to wherever GST was applied (New housing over $525k, lawyers, realtor commissions paid by the seller, movers, materials for renos, contractors, strata management, utilities, etc.) and that means that purchasing a previously titled property will NOT pay HST.

[Results of a recent poll reported on in the G&M] jive exactly with what I’ve been seeing and saying here: “The survey showed six in 10 mortgage holders say they have taken advantage of current low rates to pay off more principal. It also revealed that 18 per cent of homeowners say they have made a lump sum payment on their mortgage and 16 per cent have doubled up payments to reduce the principal. ”

Again, 60% are paying off their mortgage faster, 18% have made lump sum payments, and 16% have doubled up payments. Question is if those 60% contain the 18% and the 16%, but still that is a very good number to see. And it only means that the other 40% have been going about their business and not taking advantage of the low interest rates. I wonder if maybe that is because the fixed rate still rules the vast majority of mortgages taken. Everyone I know on the variable is making extra payments or payments equal to what the fixed rate would be. Everyone.

Oh, and back to the “qualify for the higher fixed even if taking the variable”? I applaud that decision. But that’s just conservative lil’ ol Me. In my experience those who couldn’t really afford to buy are the least realistic, the biggest dreamers, and the greatest time wasters in my line of work. Yeah, they’re the ones watching the infomercials late at night.”

8 responses to ““Talking with mortgage brokers you’re seeing a lot of cash brought to the table. People buying those properties over a million dollars are plunking down 50%+ on them. Yes, there is a lot of rich foreign money coming in.”

  1. good you nailed him. He is just one in the herd. Anytime you post anything not to his liking, it will get censored heavily. Only pleasers get posted there. Has his vaguest theories about everything. Inventory rising steeper than last bust is not steep enough for him. Low sales / list ratio, no problem – compare sale with December listings. No matter what stats say, his anecdotal experiences are always rosy. ppl paying 10-15% average? and being conservative in their payments?? Who are you kidding.

  2. For the record, Will’s account of recent activity was not archived here to ‘nail’ him but rather to record his report of one realtor’s current experience.

    Like ‘whatever’, I also suspect that most buyers in the LML are not plunking down large amounts of cash for down-payments, and suspect that many are not being ‘prudent’, but we should still take seriously Will’s account of the buyers he is privy to.

  3. He is full of it. Good luck finding a new career.

  4. I believe his numbers. Among the people I know who bought in or moved up early (2002-2005) pretty much all of them have been paying down their mortgages like mad. Even in a severe correction they are unlikely to feel a loss, since they are in houses that they want to keep.

    The problem is that recent first time buyers (2006-now) and anyone who gorged could find their balances are just too high. You need super low rates to pay off massive loans “normally”, because prices literally doubled.

    These people are probably cooked without a big promotion or a six figure gift. It may take them a while to see it, but they are walking a tightrope for at least 10 years.

  5. There’s an old saying in the markets, and I think it is the one that the masses tend to forget.

    “It takes a lot of buying to push a market up. It merely takes a lack of buying to push a market down.”

  6. I don’t know if this is the reason for Will’s observation about the large down payments being made by ‘rich foreign investors’ but friends of mine just moved here from Europe and, as a non-Canadian, in order to qualifyfor a mortgage they were required to put 40% down.

    Does anyone here know if that’s standard?

  7. I don’t know if there is any validity to what Agent Will is saying, but why is it that any anecdote that doesn’t claim the sky is falling considered manufactured or misleading? Because it differs from your sentiment? What is this, Fox News? Maybe he’ just calling it the way he sees it, regardless of the overall situation.

  8. I appreciate including anecdotes from “the other side of the fence”, as it were. However, Will’s missive just shows the limit of anecdote.

    To paraphrase: lots of wealthy buyers putting 50% down. I don’t actually know any, but I know they’re out there!

    The other statements are gut feelings and intuition. Will believes that most LML buyers are conservative and prudent. This ain’t data. Data tells us that, collectively and on average, Canadians are more leveraged than they have ever been, and more than Americans on the eve of their crash.

    But, whatever: anecdote is fun. When it confirms your take on the world, you nod and chuckle. When it is counter, you think the speaker is either lying or represents an unrepresentative case.

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