MarketWatch – “No real estate bubble pop expected in Canada” – Source: Two Realtors

“What makes the big picture unclear is that a lot of new homeowners in Vancouver aren’t leveraged at all. Realtors tell me that a lot of their recent sales are to buyers fresh from China and flush with cash.”

“Housing in Vancouver still seems cheap to many of my Chinese clients,” a Realtor here told me. “That’s because in some cities in China, housing is two or three times more expensive than here.”

“I lived in the San Francisco Bay area for over 20 years, and I’ve seen skyrocketing real-estate prices firsthand. I’ve also watched the price of the wine-country home we sold there in 2006, near the top of the market, drop by 60 %. The current Vancouver run-up looks eerily familiar — like those new ‘For Sale’ signs here that reflect the “Buy low, sell high” truism.”

“The current real-estate market here is reminiscent of the one I experienced a few years ago in California, when a few were poised and ready to sell at the top of the market. We nearly succeeded, but we were able to become what Washington state Realtors call California “equity refugees.”
One old-pro Vancouver Realtor told me, “Look, interest rates are going to go up in Canada. Maybe later than sooner. We all know that. But you’re not going to see a real-estate bubble pop, like it did in the United States. What we’re starting to see here now is some of the air slowly coming out of the bubble. We don’t do things here the way you do in the States.” Thank heavens for that.
A soft landing for Canada’s real-estate market, in other words, is expected by many.

‘No real estate bubble pop expected in Canada’, Bill Mann, Marketwatch 24 May 2012

“In the USA, you have humans; here in Canada we have… wait a moment!”
No mention of fundamentals; pretty much a non-article.
Noted as yet another external mention of Canada’s RE bubble.
– vreaa

16 responses to “MarketWatch – “No real estate bubble pop expected in Canada” – Source: Two Realtors

  1. Renters Revenge

    So were still going with the China will save us meme. Awesome.

    Odd coincidence that at the bottom of that article, this little clip was recommended:
    China Fears Lead to Muzzling Shanghai Market Talk
    http://www.marketwatch.com/video/asset/china-fears-lead-to-muzzling-shanghai-market-talk/CECDD171-C350-439E-A1FF-9066F9A302FB?link=MW_article_tbo2x2

  2. maybe a good time to start calling in loans … things are getting tough, pfffft! … no, not jp delicacies … http://tinyurl.com/6smfxkj

  3. A quarter of BC home owners rent space to non-family members.

    http://ca.finance.yahoo.com/news/nearly-one-quarter-bc-house-130000691.html
    VANCOUVER, June 4, 2012 /CNW/ – In the past 8 months, Square One Insurance has talked to over 850 BC house owners and has found nearly 25% of them rent out a portion of their home to non-family members. This could be a basement suite in the home, or a garage converted to a “coach house”. Square One’s findings reinforce a 2009 study completed by the City of Vancouver, which estimated between 23% and 27% of single-family houses have suites. Square One says that while mortgage-helpers are well, helpful, there are home insurance implications that house owners need to be aware of.

    “The high percentage of people renting out a portion of their houses is understandable given today’s economy and the high price of real estate across the province,” says Daniel Mirkovic, Square One’s President & CEO. “In fact, we suspect the actual percentage is considerably higher. Some people may be reluctant to disclose this information to their home insurance provider if they haven’t secured necessary municipal approvals and permits.”

    The rental income from your tenants can be a great help in paying off your mortgage. But if you’re considering renting out part of your home, be sure to discuss it with your insurance advisor first. A rental suite may or may not be allowable under the type of policy you have, and adjustments may need to be made in order for coverage to remain in place. Here are some things to keep in mind when you’re considering renting out a portion of your home:

    •If you built a rental suite in your home, you’ve likely increased the value of the property. Most insurance policies require you to advise them within a certain period of time of any improvements over a certain amount. If you fail to do this, you may find yourself underinsured in the event of a loss. Your insurance agent can help you determine the new replacement cost of your home.

    •Your home insurance policy likely requires you to advise your insurance agent if you are going to make any significant changes to the building, or to how it’s used. Your policy was sold to you based on the fact that it was a single family dwelling. If it becomes a two family dwelling, and if you neglect to advise your insurance agent, your policy could be invalid.

    •More people living in the home may mean an increased liability risk. If your tenant, or a guest of your tenant, trips on a ladder in your backyard, or slips on an icy step, you can be sued for their injuries. You may want to increase your liability coverage, and may pay a slightly higher premium due to the increased risk.

    •Your home insurance policy will not cover your tenant’s property, nor will it cover your own property in the unit, such as window coverings, appliances, or furniture in a furnished suite. You may need to add “landlord’s property” insurance to cover anything owned by you. And make sure your tenants carry their own insurance. This will cover their personal property, and it may cover your property, if they unintentionally damage your home.

    •A number of municipalities have changed their bylaws to allow the conversion of a garage to a coach house. The insurance on your garage will need to be upgraded to cover a secondary dwelling to protect it to its full replacement value.

    •If you’re counting on that rental income to help pay your mortgage, you should purchase insurance to protect you in the event that income is lost. If there is a fire or other insured loss, and your tenants move out while the property is being repaired, your insurance can replace the income you’ll lose while the property is uninhabitable.
    Since more and more people are opting to create a rental space in their homes, it’s important to have the right insurance coverage in place. Always consult your insurance advisor to ensure you have the insurance coverage you require. For additional home insurance tips, visit http://www.squareoneinsurance.ca.

    Established in 2011 and based in Vancouver, British Columbia, Square One Insurance provides Canadians living in urban centres with modern, relevant home insurance. Square One is one of the few insurance providers in Canada specializing in home insurance and offering truly customized policies that can be purchased over the phone and online. For more information about Square One, visit http://www.squareoneinsurance.ca.

  4. ‘we don’t do things like here the way you do …” …. we do it better … pffffft!!!
    http://tinyurl.com/6uxlsoy

  5. A customer of mine came in just a few minutes ago and tells me he is still trying to sell his Richmond home at the assessed value over the past year. No bites. His realtor said if he wants to sell he’ll have to go below assessed value. A builder offered 10% below assessed value but he declined. He is still under the impression that the market is going up and HAM is still coming. I didn’t have the heart to tell him but my co-worker blurted out: “Sell now before the 50% drop comes” and his face just went white, his eyes glazed over, and his jaw was hanging open. I had a real difficult time keeping my expression composed. It’s going to be real bad when these people sober up.

    • Ralph Cramdown

      So here’s a key date: When are the first Richmond tax assessments due that will show values down YoY? That might make some previously optimistic homeowners flinch! But would they talk about it with each other? Or would each consider it their own personal dirty little secret?

      • Tax assessments will come out early next year, in the middle of winter. Based on what happened in 2008/09, the media might be very bearish on RE at the time, which could result in some seriously-started home owners…

      • Lurking Lola

        In Victoria, the assessment numbers are searchable online. Yep, you can check out the values of all your neighbours’ and friends’ houses. Quite a sport, really.

  6. “But you’re not going to see a real-estate bubble pop, like it did in the United States. What we’re starting to see here now is some of the air slowly coming out of the bubble. We don’t do things here the way you do in the States.” Thank heavens for that. A soft landing for Canada’s real-estate market, in other words, is expected by many.”

    I often wonder exactly what is meant by a hard or soft landing. Does this refer to the actual % drop in values, or is it the rate of change that really counts? In my mind, the rate of descent would seem to have the biggest psychological effect.

    • I always wonder when I hear a realtor or commentator talking about letting air out of the bubble– that implies that there *is* a bubble. But don’t worry everybody, it’s OK because like a slowly-leaking tire, it’ll take some time to deflate all the way.

      I guess I’d rather have a slowly-leaking tire than a catastrophic failure while I’m driving down the highway, but as I’m sure is the case with most people, they’d rather not have a leaky tire at all!

      Moral of my rambling: don’t buy a leaking tire! (or a leaky condo, for that matter)

    • It is rate of descent. If that rate is slow enough, inflation and imputed rent bring the annual loss into the realm of an expense. If your house loses $20000 per year for 10 years, sure it’s a bad investment but maybe it’s a nice place to live. Shelter is expensive anyways and inflation works its magic. If it loses $200000 in two years, everyone will see that as a pile of cash and it becomes a mistake to hang on. And if you owe more than your house is worth, then it becomes a significant burden.

      I think people are just negotiating with themselves that a soft landing is possible. Vancouver is more expensive than New York. Bulls have been driving so long they don’t realize where we are.

    • Where the economy is concerned, a hard landing is one that results in negative growth. In other words, a recession. Soft landings imply that expansion continues or that GDP is still positive.

      The thing is, recessions are very much expected following a national housing bust. We may not have that experience in Canada though and the primary reason is that is because the whole country is not in a bubble.

      Vancouver and Toronto are still the price-stupid hot-spots but many other cities and regions comprising millions of other home owners are not enjoying anywhere near the appreciation in values that those two cities are seeing. I think this gives us a little hope that even after Vancouver’s bubble pops that much of the rest of the country will remain relatively insulated and not be materially affected.

  7. In the US the head realtor said there was going to be a ‘soft landing’
    http://www.forbes.com/2006/01/25/existing-home-sales-cx_gl_0125autofacescan08.html

    There has never been a soft landing

  8. idiots … you can’t believe anything a realtor says about the bubble. It is in their best interest to make you believe there is no bubble.

  9. Discussing psychology in the investments is interesting, and seems like always up-to-date. The housing bubble in Canada and possibly the U.S. is most probably already reality, though it does not mean it is not good time to buy real estate there. Denial may be one of the reasons people behave in Canada now. I feel it’s better to be more careful and beneficial to reflect on the situation in the U.S., there is a lot to learn.

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