Saturday, May 9, 2009

The Implications of Rising Interest Rates

There has been plenty of discussion recently on whether rising interest rates will have an impact on the real estate market in Victoria. Some people have argued that interest rates will have a limited impact on the market or the government will step in and protect homeowners if rates rise too high. I thought it would be good to look at two examples where rising interest rates did have a dramatic impact on housing demand and prices to see what we can learn.

The first example is the early 1980s, when after sharp real estate price gains in the late 1970s we saw interest rates skyrocket in 1981 and 1982, causing many people who had their mortgage come due to default on their homes. Real estate prices dropped between 25% and 50% across BC communities as many homes went into foreclosure. People often tell me this example is pointless as we will never see these interest rates again. So let’s focus on something that is comparable and that is how much in percentage terms an average family’s mortgage payments rose when they renewed their mortgages.

The second example is the recent US housing implosion where home buyers were sold adjustable rate mortgages (ARM) which had teaser interest rates for the first two or three years and then rose to “market” rates thereafter. LIBOR rates to which these ARMs were tied increased as we moved into 2007 and 2008 so when the interest rates reset on these mortgages (sub-prime and non sub-prime) not only did the teaser discount go way, but the base rate had risen causing a massive jump in mortgage payments. The result has been massive mortgage defaults both for sub-prime and non sub-prime mortgages. House prices in markets where these ARMs were common have dropped as much as 50% and some feel the bottom still has not been reached.

The table below compares the average mortgage payments at the initiation of the mortgage (1977 for BC and 2004 for US) versus the reset cost (1982 for BC and 2007 for US).

Considering the high level of inflation in the late 1970s and early 1980s, we can discount the 48% increase in the BC example conservatively to 40% to be more comparable to today’s lower inflation levels. This analysis demonstrates two real examples when mortgage payments rose by 40% the real estate market collapsed.

A mortgage broker I spoke to recently told me with these low interest rates far more people are renewing or renegotiating mortgages today than they are selling mortgages for new home purchases. Combine this with the fact that the BoC plans to keep interest rates low over the next year, I expect there will be at least 20,000 mortgages in Greater Victoria being placed at these low levels before rates start to rise. But what happens when interest rate do rise? The chart below takes a 3.75% five year mortgage today with a 35 year amortization and assumes a reset at varying interest rates in 2014 to determine how much payments will rise relative to today’s cost.

What this chart tells me is that if interest rates rise to 7% or higher over the next five years there is a high likelihood we will see a serious real estate price correction and prices could correct by 30% to 50%. If interest rates rise say to 6.0%, which is where I would forecast assuming we achieve a “soft landing” as Alan Greenspan would define, then we are in the danger zone. In this danger zone a large number of home owners will be in trouble when they renew, but it will not be widespread across the market. In this case price reductions will likely be dictated by how many willing and able buyers there are relative to defaulting homeowners.

ABOVE POST BY REID

128 comments:

Inglishmagor said...

I agree with your entire post. What leaves me dark and broody is that I'm left in an even longer holding pattern than I'd ever imagined. In 2005 we were in a position to purchase, but analysis of the market made me chose not to.

Now 4 years later high level manipulation is pushing back affordability for another 4-5 years. That's an 8+ year wait.

I still can't argue with my view of the market at any point. It's completely fabricated and built on straw. The protection of the keep cash flowing mentality is not sustainable, and will not even generate growth over the next 4 years. Now it's just about squeezing enough out of the foolish to tread water.

I've seen the graphs of the housing prices for Japan after the 90s collapse. It's looking like we will follow it with a slow 10 year decrease.

http://en.wikipedia.org/wiki/File:EconomistHomePrices20050615.jpg

Jack said...

Yes, I have come to the same conclusion/worry--what does that mean for those of us who thought we would wait one or two years for this correction to set in, and then buy at a discount?

Do we now wait 5 or more years?

Maniac said...

Actually, you could be in for a lifetime of waiting. You've already wasted 4 years. Think about your life. Do you want to be a FoRenter? I don't think you do. So now you have to evaluate what you want to do. Is Victoria worth the wait? Not really. So buy now or start looking elsewhere. That's the conclusion I've come to.

roger said...

Maniac,

I do agree with you about getting on with life and that Victoria may not be worth the wait. I strongly disagree that buying in the peak spring sales season is a good idea.

Sales will fall off starting in June just like they always do. The sellers still left will keep reducing prices just as the overpriced listings are doing right now. Prices will resume their slow downward drop.

Will you still be giving the same advice in July when prices are lower than today? Or do you think it just ain't worth waiting anymore?

Jack said...

But roger, even past the spring peak, who would buy on the continuing downward slope on the other side? especially given the near certainty that starting in 2014, the slope will also be punctuated by sharp drops in price--to add insult to injury.


So can I ask--if this prediction posted by hhv is probable, what is the new expected purchasing window for bears? 7 years out?

Rhino said...

I don't know why everyone is so obsessed with owning a home. I have owned 1 condo and 1 house, and wasn't happy in either. The first weekend in my condo, I was woken up at 3 AM by loud music downstairs. Its a pretty crappy feeling after forking over all that money for downpayment, PPT lawyer etc to know your living next to some idiot. It was basically a war with this guy the whole time and made life unpleasant.

For my house, busy body neighbors, and when stuff goes wrong in these old houses its big money out the door that you never accounted for.

They only good that came out of these place was obviously the money. But I happened to be owning in a bubble. Now, when your looking at basically dead money for the foreseeable future whats the point?

Maybe I just got unlucky with my situations, but renting I have never had any problems. If you got a problem thats really bugging you just leave. Your only out a few hundred bucks at worst.

And freeing up all your equity you can invest or maybe start a business, doing activities that actually add value to the economy. Inglishmagor, I think your lucky to have an 8+ year wait. But I don't have any kids maybe that changes perspective.

Russ said...

Does anybody know what percentage of people have a variable rate mortgage versus a 5 year mortgage? Obviously as interest rates rise, those in variables will get into distress much quicker than those who are protected for 5 years.

Also, I'm not a macro-economist but i don't think you should brush off the prospect of 80's type interest rates so quickly.
If you believe even a fraction of the hyper-inflationists (schiff etc) arguments then interest rates will have to rise to try to tame the coming inflation beast.

Just because rates have been in the 3-7% range for the past 25yrs doesnt mean we can't go back to 18% rates in the future. Its never truly "different this time."

PS You should see the RE media pumping down here in Australia, shameless

omc said...

Maniac,

Your thing about the FoRenter is complete garbage. We were ready to buy 2 years ago, but did the math and waited. The houses we are looking at (now over $750k, we were looking much higher before) have dropped at least 25%. A house in queenswood we have been watching started at 1.1mill and just sold at $830k. Well below assesment. We have an extreme deal on a rental and only pay $1200 a month for a house.

Do the math! I think you can see how much our deposit has increased in that time (we banked the diff in payments) and the prices are still dropping. Where is the time we wasted? We are now going to make much lower payments for a far shorter time. Keep your FoRenter stuff for the idiots who are running around buying crack shacks for $500k with unsustainable mortgages. I assume you are a realtor.

aston said...

Inglishmagor, I'm in the same boat as you and I also fear that I'll have to wait much longer for prices to fall to a sane level.

However, I suspect we'll see those price drops sooner than we think. Governments are inflating the money supply at unprecedented levels, printing money out of thin air to keep failing industries afloat and to buy toxic assets from the banks. So you can be sure inflation is going to rear its ugly head soon enough, just like it did in the early 80s.

If that happens, we can forget about any BoC promises of low interest rates -- their first priority is to keep inflation in check, and they will raise interest rates to do it.

Already the yields on BoC bonds have shot up this past week, so lenders will be under pressure to raise rates soon.

roger said...

Maniac,

I hope you answer my question later today or tomorrow. When you do I have another question for you.

I am curious where you are coming from. Are you a homeowner, realtor or a renter? (I am a renter but have owned several houses in the past.)

Just Janice said...

In Economics we have a concept of 'sunk costs'. Costs that occurred in the past are 'sunk costs', there's nothing that can be done about them so they really shouldn't enter the analysis of what should be done going forward. The rent that has been paid in the past is a sunk cost.

You do an analysis about what you should do now, going forward based on the information you have about now going forward. If the cost of owning (mortgage interest, taxes, and maintenance minus anticipated housing appreciation or plus any housing depreciation) exceeds the costs of renting the same property, you are better off renting. If the flip is true (interest, taxes, and maintenance, plus the anticipated housing depreciation or minus anticipated housing appreciation) are less then renting then buying makes sense. A home is a place to live, bottom line, and you can choose how to meet the need for housing.

HouseHuntVictoria said...

Credit where credit is due, this post was Reid's.

I think it's a really good analysis of the potential problem of rising interest rates. But I don't think it means bears will have to wait for 5 years to see prices fall.

As I've said numerous times, if you know you can afford a place, can afford to have costs rise over time (as in can handle a rising interest rate), know you'll be happy there long term 7-10 years minimum, then current conditions shouldn't really matter.

omc said...

I don't necessarilly agree with Reids post. Read my post above, we are in a drasticly different financial situation by waiting. This will be felt over the rest of our lives. We are even considering having a second child.

patriotz said...

I don't know why everyone is so obsessed with owning a home....


I don't either. What I care about is not what I own, but how much I own, i.e. my net worth, and how much I can spend, i.e. my disposable income.

And maximizing those numbers is best served by not buying a house right now.

BTW did anyone else buy BMO for $25 a couple of months ago? And I can sell those shares in a few seconds for $9.99. And until I do I get a 7% dividend.

Jack said...

HHV--I sense then there may be 2 distinct flavours of bear these days,

--those who would own, so long as they can afford it, even with falling prices and rising interest-- bears who despite their best instincts, put a premium on owning vs. renting.

--and those, who make the calculation purely financially? i.e. those who would obviously wait at least 5-7 years for prices to truly bottom out?

Is it innapropriate to ask HHV--which kind of bear are you? and Roger you? and Reid you? well, hell, anyone else care to declare?

Me? I'll have a huge problem buying until I know the bottom has hit--and i am pretty damn sure there is no bottom until these 5 year rates reset.

J

patriotz said...

--and those, who make the calculation purely financially...

That's me. I consider a house to be just another investment and I'm not buying one as long as something else is a better investment.

Right now I can get a 6-7% tax advantaged dividend yield on many preferred and common shares and I'm not buying a house until I can get a similar net yield. Which means a gross yield of at least 8% or price/rent of 150.

Jack said...

I think I'm with you patriotz--next question is--even if buying a house was going to give you that price/rent in 1-2 years, would you buy knowing that in 5-6 years your house was bound to drop another 30-50% in value according to Reid's prediction regarding interest rates?

patriotz said...

I have to compare buying a house with holding my existing investments which are mostly preferred shares with some common shares and some fixed income.

Any change in interest rates or other economic parameters which would make a house drop below 150 price/rent would be likely to affect my portfolio more adversely in my estimation. Thus the house would be a better investment going forward at that point.

And yes I saw my holdings take a beating last fall but I bought some more at the bottom and things are looking a lot better now. That strategy is certainly not for everyone but that's the way I'm doing it.

Someone with house money in guaranteed investments, or someone with a minimal down payment, would have different parameters of course.

Vic said...
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Vic said...

"If you got a problem thats really bugging you just leave. Your only out a few hundred bucks at worst. "



Exactly, you can leave when you want and not be out a hundred grand or more.

A house is four walls and a roof. Wait til you get stuck in one and can't sell it cause no one wants it, then you suddenly find out that's all it is.

It would be nice to own one but it isn't the end of my life if I don't because I will be able to afford to do many more life fulfilling things than pay 40 years of interest to my grave.



manicac is joe dirt and all those other sitting pretty aliases with low self esteem who gets their rocks off riding people who don't own an overpriced box to make themselves feel better.

Wait til the election is over and they get laid off from their slack ass job,then the whining will really heat up here.

omc said...

I guess I am the type of buyer who would rather wait, but my other half is now wanting to start looking this winter. We have already waited 2 years and houses in our price have come down sustantially, so I have to be reasonable. In the event of futher reductions the upper end will still be hammered more than the upper end though.

Where did the 5 year thing come from? You are talking in the event of a complete collapse, but houses could drop a fair bit before then. One economist tells me that no one really knows what will happen as this is a fairly emotional market. I don't think you have to wait 5 years, if the interest rates start to go up (even the 5 year terms) prices will come down.

omc said...

yeah where is this maniac guy? I am still waiting to have him explain to me how I have been wasting my time and I am a FoRenter.

Vic said...

"yeah where is this maniac guy? I am still waiting to have him explain to me how I have been wasting my time and I am a FoRenter."




maniac/joe dirt/sitting pretty doesn't answer questions. Last time I asked him some direct questions he went AWOL for over a month. He's obviously sweating bullets as the spring fling crowd dies down into the summer swoon.


When the stock market corrects in the next two weeks all the doom and gloom will be back in the forefront and owning a half a million dollar box in need of a hundred grand gut job will be out of vogue for any first time flipper/owner.

roger said...

I am willing to give Maniac the benefit of the doubt. Maybe this person only stops by the blog every few days. So I will repeat the questions and hope Maniac will do the courteous thing and reply.

Questions:

1. Will you still be giving the same advice in July when prices are lower than today? Or do you think it just ain't worth waiting anymore?

2. I am curious where you are coming from. Are you a homeowner, realtor or a renter? (I am a renter but have owned several houses in the past.)

roger said...

I can certainly understand why Patriotz, Just Jack and other bears will sit tight and not buy until renting and owning are financially equivalent options. As to my own intentions I am a bear but prefer owning over renting. In fact I place a premium on owning and will pay more than the rental equivalent in order to do what I want in my own place. My wife likes gardening and there is no way we are going to beautify the landlords property and be turfed out at the end of the year.

That said I am not prepared to buy an overinflated house in Victoria. Victoria is just not that important or special to me. That is why I am looking up island where the market has cooled.

Jack said...

HHV says, if you know you can afford a place, can afford to have costs rise over time (as in can handle a rising interest rate), know you'll be happy there long term 7-10 years minimum, then current conditions shouldn't really matter.But how can you know what you can afford?

If we take Reid's post to heart, then one needs to take into account the very real possibility of back breaking interest rates in 5+ years time, and the risk of an "implosion" of the market.

I suppose you could lock into a 10 year fixed rate to mitigate risk, but that's a hefty premium to pay given how low 5 year rates are at currently. And that still wouldn't protect you from the implosion.

Reid's post I believe puts bears to the test--if he's right about where rates are headed and the risks associated with the rise, there won't be a good time to buy in victoria in possibly the next 5-10 years-- until the interest rate 'bubble' finally works itself out.

And finally--won't this problem of rate hikes affect real-estate values up-island as well Roger? Is there anywhere to run? I hear the falklands are nice...

roger said...

Jack said,

And finally--won't this problem of rate hikes affect real-estate values up-island as well Roger?--

Yes, higher rates will have an effect but less than Victoria. You can still buy a nice home for 300-350K. Prices went up considerably since 2001 but not like bubbletown. If one is planning to buy and hold for 10 years, like me, rising interest rates and their effect won't be as severe.

And what about 10 year mortgages? If you expect rates to be higher than 6.2% five years from now take out a ten year as shown in this table.

5 Yr. vs. 10 Yr. Fixed--

Art Vandelay said...

Patriotz writes: "That's me. I consider a house to be just another investment and I'm not buying one as long as something else is a better investment."

That's your blind spot, right there.

Many people see a house as a home. And they prefer a house to a box in the sky.

Roger's take is so asinine that I wonder if he's ever read an economics text. If the government is pumping money into the economy (I'd agree that it is), one day MAYBE we'll see higher interest rates but FOR CERTAIN the inflated money supply will show up in higher prices - in the stock market, in groceries and yes, in houses.

roger said...
This comment has been removed by the author.
roger said...

Art Vandelay,

Let me see if I understand you correctly..

If the government is pumping money into the economy (I'd agree that it is), one day MAYBE we'll see higher interest rates but FOR CERTAIN the inflated money supply will show up in higher prices - in the stock market, in groceries and yes, in houses.--

Are you saying that all that money the government is pumping into the economy will show up as higher prices for assets (houses) and consumables (groceries) but interest rates won't go up very much at all?

And exactly which asinine comment(s) were you referring to Art. :>)

roger said...

Canadian Mortgage Trends is reporting...

A Turning Point?--

Keep an eyeball on the bond market. Five-year government bond yields rose to a 70-day high yesterday.

Today they’re up again to 2.14%, after breaking a 4-month high this morning. Yields have been steadily climbing for five weeks

As savvy readers are aware, bond yields influence fixed mortgage rates. One capital markets expert told us that rates have reached an “important threshold.” Based on current 5-year yields, “lenders should be thinking of moving rates up,” he said.

We also saw the following email yesterday from a mid-size lender: “Keep an eye on lenders’ rates--especially quick close offers”…the “increase in bond yield (and the decrease in spread--down 10 today) is something to watch…If the bond yield continues to go up, this could be a trigger for interest rates to rise.”

roger said...

More on interest rates....

10 Yr. History of Fixed & Variable Interest Rates--

Olives said...

The trend of bond yields does appear to be up and away.

Did someone say stock market bottom? Futronomics (link on this blog) has something to say about that and the credit markets in general in his last two (as always) brilliant blog posts.

patriotz said...

Many people see a house as a home. And they prefer a house to a box in the sky....


What does that have to do with buying versus renting?

Anyway, if it gives you an emotional boost seeing your name on a deed, go ahead and buy now. Just be warned it's likely to be followed by the emotional bust of negative equity.

Nick said...

I do place some premium on owning instead of renting, but I'm not interested in placing a financial anchor around my neck. If I can buy a decent place in a decent neighbourhood and still have enough money left over to save for retirement and pay for things like sports for my kid, I'll do it.

PainInThe said...

Hey, you DO know that's a gold helmet "Bear is Ready" is wearing, don't you?

(Sorry, had to post something with gold in it because Greg is going through PainInThe withdrawal.)

maniac said...

Sorry bears I don't live my life online all the time. Sometimes real life gets in the way of my internet life. Anyway I'm a bear but I own. Silly I know but I bought a place early and I pay less than rent for my place. I do need to move to a bigger place eventually but I really don't want to blow half a million doing it. I play devil's advocate here and elsewhere though.

I think I can wait at most another 2 years for house prices to come down. If they don't then I either have to make due where I am or move away. All I'm saying is think about what happens if we're wrong. What if the crash never happens here. Do any of you really want to wait around for another 5 years? No way in hell I'm doing that.

Metaldwarf said...

The bond yields mean that fixed mortgage rates might go up. Which means more buyers will probably take variable rates.

It also means that BoC may have its hand forced to start quantitative easing and buy up Govt. bonds, to push the yields back down.

I posted a National Post article a few weeks ago which estimated that it would cost approximately $26Billion to achieve the equivalent of a 25 base point drop.
Hello higher taxes...

The election should be interesting, I don't think it is as close as the media is portraying, but that is not as good a story. I think the Liberals will win, thanks to the Greens splitting the Left vote and stealing a lot of votes from the NDP.

One last point, taken from Womp's last post on his blog, www.restats.ca

Womp uses a formula to calculate a fair price, as he mentioned in his post, the effects of interest rates and the cost of money hugely swings his calculation. Price and interest rate are inversely related, the lower the rate the higher the price, and the higher the rate the lower the price. If inflation does come in a few years, rates should go up, prices should fall, but in an ideal world they should be proportionally the same, and affordability should not change.

I think we may see many here and elsewhere that will see lower prices, and higher rats, but will hesitate to purchase because rates are too high. Those who rely on monthly payment metrics ( and we all do to some extent) will argue "rates should fall in a few years, so I will wait".

Now IS a better time to buy than in the last few years. I am still not going to do it yet, but I can understand why people have. If new buyers are smart they will be able to cope with any change in rates to come. I think some will cope other will not. I think it will be a better time to buy in a few years, mostly because of the high price now, higher interest rates later vs. lower price now, higher interest rates now argument.

My aim is to buy fall 2010, as that is when my life will allow. my plans are well in motion to make it happen.

HouseHuntVictoria said...

Latest VREB Stats since May 1st: New sales: 225 New listings: 456 Total active listings: 3805

From REALTOR Tim Ayers on Twitter.

roger said...

Maniac,

Thanks for taking the time to reply. It is nice to know where folks are coming from....

Olives,

Good to see you posting again. Thought you had disappeared.

Vic said...

I think I can wait at most another 2 years for house prices to come down. If they don't then I either have to make due where I am or move away. "


Thats real funny cause thats what most of the bears logic is here for as long as I can remeber but maniac tells us a few posts back to just "get the hell out of here if we don't like it". Hmmm, sounds like the meds are kicking in.



I love to see all the sold signs out this weekend. That means the pool of FTB suckers remaining are getting lower as all these places sold were on very busy roads and looked dumpish.

VillageBC said...

I'd rather pay high interest and low price then the reverse. I will always owe the principle, but rates can go down and save me some money. Purchasing now is dangerous, low rates have put a false(imo) floor under an inflated market.

I don't see the low rates continuing to maintain price levels. Eventually slowing construction, lower tourism and consumers spending less and lack of confidence will take over.

Maybe anyway. =/

Rhino said...

Latest VREB Stats since May 1st: New sales: 225 New listings: 456 Total active listings: 3805

From REALTOR Tim Ayers on Twitter.
Having not studied the market at this level of detail, what would be considered a bearish list to sales ratio?

HouseHuntVictoria said...

That's 50% which is neutral. Really bearish would be under 20% IMHO.

HouseHuntVictoria said...

reminder about beers thursday. for those there the last time, it's the same place at 4:30. if you're new to the event, or can't remember, send me an e-mail househuntvictoria@gmail.com. i'll be letting everyone know where tonight.

Olives said...

Thanks Roger. I'm technologically challenged - it took me a while to figure out the new system.

HHV you are missing a real estate post on KIV under Rants & Raves.

Reid said...

Someone over the weekend asked what type of bear I am. Well I am already a homeowner. I have owned numerous homes for 20 years and real estate has been very good to me. I was very bullish of real estate up until spring on 2006 at which point I felt BC real estate had become too overvalued. My opinion changed when I felt things had gone way out of control after years of 10%+/yr gains; prices no longer were sound and people all around me were obsessed with owning homes and taking on way too much debt to accomplish it. At the time I owned two homes and decided I had to sell one of them. I decided to add a suite to the second home (as it enhanced value about 5x what it cost; lesson for those buying houses with suites today) and sold it in the summer of 2007. I still own the other house and do not plan on selling it for personal reasons. I fully accept the fact that my current house is likely to go down in value if and when interest rates rise or the recession deepens. My house is not in Victoria and we rent a place in Victoria. I have no mortgage and can pay cash for the majority of a $500k piece of crap in Victoria (but that cash is my non sheltered retirement savings).

I will still not buy a house in Victoria unless prices back off because there is too much risk of prices dropping. I cannot predict what will happen to interest rates or unemployment numbers, but I can run numerous scenarios which I have done and few if any allow for house prices to continue to climb (unless you believe we can have higher inflation while maintaining these low interest rates).

A lot of people today are comparing the cost of owning to the cost of renting. I believe one should be willing to pay a premium over rent when they buy a house, if they feel that real estate values will climb. As a matter of fact I believe you should ideally buy houses when interest rates peak (as values are always lower) and in this scenario you almost always pay far more to own than rent, but chances are your home will appreciate in value as interest rates drop. But I do not believe that one should pay a premium to own over rent when almost every economic scenario suggests prices will drop or at best case remain stable over the coming years.

If you do your homework on future economic possibilities and their implications on real estate prices, have enough of a down payment, are able to deal with a rise in interest rates and can still put aside enough money for retirement, then I would still support someone buying a house.

In my post I did not want to suggest that you need to wait five years for prices to drop, but rather show that if rates stay low for a year, then in five years we could have a serious problem on our hands. If interest rates rise say in 2011 to say 6.5%, it will dramatically affect the pool of buyers out there. Many of today’s buyer may not have to sell as they still have 3 yrs left on their mortgages, but there will be fewer buying who can afford a $500k+ house and therefore prices should drop.

patriotz said...

I think the Liberals will win, thanks to the Greens splitting the Left vote and stealing a lot of votes from the NDP....


According to the polls I've read, second choice for Green voters is about 50/50 between the NDP and Liberals. The Greens do not consider themselves to be a left party nor do their supporters consider it to be one. Actually GP leader Jane Sterk has said she once voted Reform.

That's not meant to be an endorsement of the Greens or anyone else BTW.

wompeter said...

HHV - sorry I won't be able to make it Thursday, I have a dentist appointment at 4:45. :( Second one in a row I've missed. I'll be there in spirit though.

Metaldwarf said...

Dang, I don't think I will be able to make it for beers on Thursday either, I have a client appointment at 4:00.

:(

Reid said...

If five year mortgage rates were 10% today and I had 10% down, I would need a family income of almost $160,000 per year (even with the 35 year amortization) to secure the mortgage to buy a $500k entry level home in Victoria.

What percent of families in Victoria earn $160k or more?

Today with a 3.65% five year mortgage rate and 10% down, I can buy that same $500k house with a family income of only $87k.

I suspect there is a much higher percentage of households in Victoria that have $87k or better income levels.

Tony Danza said...

Today with a 3.65% five year mortgage rate and 10% down, I can buy that same $500k house with a family income of only $87k.

I suspect there is a much higher percentage of households in Victoria that have $87k or better income levels.
+1

PainInThe said...

Maniac, I own too. Free and clear. That's why I can wait until hell freezes over for prices to get real if I have to.

And for this place, in this time (and the next couple of years) that's at the very least a 50% drop from where they are now.

And I'll be doing the seller a favor then, for prices will be dropping even lower.

Just Janice said...

What about the implications of rising unemployment? Or the implication of falling wages? Or the implications of cheaper substitutes (Phoenix, Hawaii, Califonia). We may not need high interest rates to sink this unsustainable ship...

Too bad about bear beers, I'd like to go but my nuptuals are on Sunday so I'll be neck deep in bride2being....

Metaldwarf said...

HHV looks like a lot of regulars can't make Thursday, I know I would personally like to come if possible.

Any chance of rescheduling?

Dave said...

Patriotz - The Greens do not consider themselves to be a left party nor do their supporters consider it to be one. They might not consider themselves to be left of centre, but I would say the public does.

Their policy platform is very radical and would be a massive economic change to the Province. I wouldn't call that mainstream by any means.

Some of the policy platform is quite left wing. For example:

- End homelessness and poverty;
- Guaranteed livable income;
- Cutting education costs;
- Support 'fair trade' versus free trade;
- Triple bottom line management.

I don't see much right wing stuff in the platform other than reducing the size of the Premier's Office.

Overall, I would call them left of centre.

Bubble 'n Fizz(le) said...

HHV-so sorry my hubby and I can't make it on Thursday for beers! We're too busy looking at all the "sold" signs in Oak Bay! Who would have thunk the bitter basement renters would be so wrong about buying Oak Bay waterfront for 20 cents on the dollar? Oh well, there's always Comox/Courtney for you lot. I hear there's an OK stripper bar there, and it's only an hour's drive to the big box shopping in Nanaimo. See ya!!

omc said...

no problem bubbles,

Yep there are sold signs in oak bay, but the houses in my price range have come down over $200k on average in the last year. I made the right choice not listening to the likes of your type. See ya!!

roger said...

Bubble 'n Fizz(le),

I think your name says it all when referring to OaK Bay. Lots of bubbling while prices fizzle...

Oak Bay Falling Prices

Just Jack said...

Love ya Roger. Read 'em and weep B & F.

S2 (using Just Jack's logon)

Bubble 'n Fizz(le) said...

Yep there are sold signs in oak bay, but the houses in my price range have come down over $200k on average in the last year. I made the right choice not listening to the likes of your type. See ya!!But have you bought now? Of course not. Your dreams of home ownership are wet dreams, that's all! Oh, I forgot, like VG you have banked your down payment and are making 150% return per year on that! Not!

omc said...

Nope bubs, we did bank the money but it is in high interest savings. Not going to risk our down payment as no one seems to know whats coming. Why would I buy when the prices are dropping? Can't find any report from any chartered bank or reputable source that doesn't predict further drops.

I get the feeling you bought right at the peak. Why else would you be so bitter?

Do a bit of math please. The houses we are looking at have dropped over $200k this year. Our deposit increased by $50k. How are you lording this over us?

Tell you what, get hhv to reschedule the beer thing to next friday, I'll come. I'll persent my professional credentials, and my wifes. I will then show you our bank balances.

If your not into it, then crawl back under your rock.

Vic said...

Bubble 'n Fizz(le),

I think your name says it all when referring to OaK Bay. Lots of bubbling while prices fizzle..."


Isn't it "plop plop, fizz fizz,oh what a relief it is" to not buy one of those moldy Oak Bay shacks a year back when the crack pipes were making their rounds at 20% higher than today and still another20% downward to go.

Reid said...

"Your dreams of home ownership are wet dreams"

It is a lot harder to not buy when you are financially capable of doing so. You need to be disciplined, patient and have a good partner. The weak and uninformed cave and buy and they may be the ones getting wet when they are thrown out of there houses.

PainInThe said...

Bubble and Fizzle is our former nemesis, Shitting Pretty, here to cackle at us hapless bears all the way to the bitter bottom.

Now you KNOW things are REALLY getting bad on LALA ISLAND...

HouseHuntVictoria said...

re: the requests to postpone the bear beers: i don't know we'll ever find a time that works for all, so i apologize for not changing it to be more accommodating. we'll just have to do it again soon.

omc said...

Yeah, it is harder not to buy whe you are ready and able. You kind of plan your life events around your housing sometimes and that is turning out to be a problem now. Our rental is too small for a family if we have another kid (only 2 Bed 1 bath) and I will have the time coming up to do renos. If the gov't hadn't started messing with things we would have had a smaller corection back in 2006 and we could all move on.

Now I am scared as hell at the prospect of buying with all those people who can't afford their homes in the market. I am now fearing a US style crash, not a correction. I was hoping to buy this winter, but my gut says no.

Reid said...

omc, I hear you. I know you have the ability to get above the entry level and that may be an option as prices have clearly come down more here. I think houses that require renovations, cost more and have no suite option are going to be a lot harder to sell in this market even with the all the 5/35/5.5x's.

I have gutted and rebuilt a few of my houses in the past and would also consider doing it again for the right location.

Problem right now is that sellers are still dreaming and they see the crazy behavior at the entry level and I am sure it holds them tighter on price. Therefore you have to wait until a listing has been around for a while and then determine if the seller is serious. Maybe by this winter things will improve at least for the houses I describe above, but I am not sure about the $400k to $500k boxes that support suites.

omc said...

Buying a no suite house in need of fixing up or just updating was/is our plan. There is very little activity above $750k, and add the need for the work and you exclude even more people. Plus I don't really want to pay for the 20 year old cheap crappy kitchen and inefficent furnace.

In the event of a crash this type of house would plummet in value though. Mid/upper falls further even in a % wise. West side vancouver dropped to near 50% in the 80s crash. I am getting alot more scared as time goes on, not calmed. That bubble is getting bigger all the time. I used to lean to the bearish on RE, now I am all the way over.

Maniac said...

Now that the election is over I think the floodgates will really open up and everyone will be out buying condos and SFHs all over Victoria. I think there were lots of people worried about a networth destruction party victory and that fear has now been put to rest. The STV defeat is also reasuring for real estate buyers. Looks like I might have to move away after all.

Reid said...

omc, the scariest part I see in what is going on is that in the US the government is borrowing heavily to get out of this mess, but the US citizens are deleveraging. Average people cannot get credit and when they do get a mortgage banks are limiting the amount, so this keeps housing prices and debt levels in check. When this thing is over, the US government will have massive debt, but the average person will have less debt and they will have learnt a tough lesson.

In Canada, our government has gone to the banks and bought up the high risk mortgages (0%/40yr), asked the banks in return to ensure the average person has access to credit and then simutaneously pushed down short and medium term interest rates. The net result is that our government borrows a lot LESS, but the average person will end up in MORE debt and no lessons are being learnt.

So in Canada, we get out of this recession by pushing debt onto the average person. They say between $50k and $60k in economic activity results from every home purchase in Canada. We use credit and rediculously low interest rates to make it happen. You have to give Ottawa credit, their plan is working. If your time horizon is only one to two years until the next election it looks brilliant. Looking at the long term implications on the average person and our economy it is terrible.

Problem is that it is exactly what Greenspan did in the US after the tech meltdown. He pushed interest rates to nothing and banks were providing easy credit. Guess what happened to housing prices three to four years later when interest resets kicked in.

Reid said...

US Foreclosures Rise to Record Levels:

US Foreclosures

patriotz said...

Patriotz - The Greens do not consider themselves to be a left party nor do their supporters consider it to be one. Dave: They might not consider themselves to be left of centre, but I would say the public does.Results of the election:
Con 2%
Liberal 46%
Green 8%
NDP 42%
Other 2%

Looking at the numbers, yes I would say it's correct to say that the Greens were regarded as slightly left of centre by most voters, since parties to their right got 48%.

By the same comparison the federal Liberal party is and has always been left of centre, since the Conservatives (+Reform) have always received more votes than the NDP.

But that is not in any way the same as being a "left party", i.e. one with an avowedly socialist or social democratic agenda.

roger said...
This comment has been removed by the author.
roger said...

Garth sure knows how to speak his mind.....

So why are people back into bidding wars for houses just six months after the world was ending?...

Simply that interest rates have crashed, house prices have dipped a little, and real estate affordability has jumped. So, if you take your news from Royal LePage, Re/Max, CKNW, CTV, the Toronto Star or Jim Flaherty, you actually think this is a generational buying opportunity. Of course, there are no sage or responsible realtors, mortgage loan officers or media commentators to tell you otherwise. So why not offer $40,000 more than the asking price? It’s a bargain!

It’s telling, by the way, that almost all of the frenetic house-buying now going on is being driven by first-timers. Kids are always useful when old generals need soldiers or broken-down realtors seek the gullible.

roger said...

REMINDER...

Today the bears will be having the spring get together @ 4:30. It will be held at the same place as last time. If you need directions email HHV (see link on this page)

I enjoyed the last event and hope to see many of the regular posters and meet some of those who post infrequently or "lurk".

roger said...

Vancouver Sun reports..

B.C. MLS sales price to slump in '09, climb '10: CREA forecast..

PDF News releaases

MLS home sale forecast..

CREA's stats and graphs for April 2009..

VillageBC said...

HHV, other then hopefully recognizing some people. There going to be another way to tell which random table I should join?

Metaldwarf said...

I will try and join in after my appointment but I might be late.

last year there was a stuffed bear on teh table.

greg said...

Thanks for the cameraderie, beer was very enjoyable - maybe have the next meeting before another year goes by (or we all buy)?

Cheers.

roger said...

It was a great to meet everyone and exchange ideas and experiences. Looking forward to the next one...

Nick said...

Yeah, it was great to meet so many of you in person and put a face to a name. How about the first person to capitulate hosts the next meetup at their new house? :)

Dumb Canuck said...

Beer - great
Bears - great
Roger - didn't know he had a beard
Sitting Pretty - how did she get the e-mailed location?

Vic said...

I guess I got the wrong emailed location, thought you said it was at The Fox. No bears there but lots of beavers. ;)

Maybe next time. :)

roger said...
This comment has been removed by the author.
roger said...

Printed in today's TC

House sales prices slide 8%..

Capital region average is $455,143 compared to $494,204 last April..

The average sales price of all types of Greater Victoria homes slid by almost eight per cent in April compared with the same month last year, says the B.C. Real Estate Association.

In the capital region, the average stood at $455,143 in April, down from $494,204 in the same month last year, the association said yesterday. Province-wide, the average slid by six per cent to $449,372.
..

And now for the usual RE industry spin..

But in both the Greater Victoria and nationally, sales have been surging in recent months, prompting some real-estate analysts to say the market's direction is changing.

The bulk of price reduction in B.C. has already taken place, Cameron Muir, B.C. Real Estate Association chief economist, said from Vancouver. Average prices will be lower for 2009 than last year, but "most of that price decline has already been realized," he said.
..

Here are the facts:..

Take a look at the Single Family Detached sales and the Total MLS Sales charts.

1. Sales in the first three months of the year were dismal compared to 2008 and the average of the last 7 years!! Note that even 2008 was below the seven year average.

2. Sales always rise sharply, every month, in the January to May period. This year is no exception but reading the press you would think something real special is going on this year.

3. April sales were up considerably from March but were still around last years levels. Reported may sales so far this month are comparable with those seen last May.

So what to make of all this hype? If I was a real estate agent I would be happy to see my commissions back to last year levels after a poor 1st quarter but to claim the market is on fire is ridiculous. Be prepared for lots of hype in the next month or two but starting in August, when July sales are reported, things won't look as rosy. July sales will be down from June and it will only get worse as sales keep dropping every month just like they do every year.

I expect that prices will resume their falling trend as demand starts waning in the summer.

omc said...

Well, I am glad that sitting pretty made it the proper meeting place and didn't get mixed up ending up with vic. That could have turned ugly fast.

The realtors will probably start going year to year, averages or what ever looks good when month by month drops off.

The problem with this years stats is that they all happened at the same point in the market. I am now seeing ugly 70s basement homes in gorden head asking $100k above assesment. If they have a suite they are selling for near that. Lots of stupid people out there.

Vic said...

I hope sitting pretty didn't get you guy's barred by running around the place with her fingers at her head pretending she was a bull. ;)


As per the new spin,get used to it. More to come til reality of the next leg to drop which is commercial real estate. Layoffs galore,car dealerships closing buy the hundreds,even Nike laying off their slave labor.

Yep,just keep on buying those moldy old Victoria boxes for a half a million bucks and a lifetime of finanical pain. Oh yeah, Canada bankruptcies up huge,not sure if anyone posted that.

StargazerXL said...

Indeed it was a pleasure to meet HHV, Roger, Metaldwarf, Dumb Canuck, Greg, Nick and Village yesterday evening. (Would have liked to have met you too, Vic.) Thanks again to Roger and HHV for setting it up.

BurnsideEqualsFairfield said...

A few nights ago I was at the movies and it was packed. I overheard lots of people talking about buying houses and condos. No recession at all here in the Burnside/Gorge area of town. I'm sure other places have been hit but the Burnside/Gorge area and Fernwood area of town have been spared so far. Also now that the pig flu scare is over more people are buying houses and condos and visiting stores around the area. I was just in the bank and there was a large lineup to get into the mortgage specialist offices.

Rhino said...

"A few nights ago I was at the movies and it was packed. I overheard lots of people talking about buying houses and condos. No recession at all here in the Burnside/Gorge area of town."

So your saying we are now recovering from the recession that has hardly hit the city. As a Victoria resident I hope you right, but being realistic I doubt it. The provincial government has pledged to cut 1.9 billion dollars worth of spending. American consumers are still de-leveraging so I don't see tourism gains in the next few years. Those are the 2 biggest inputs to our economy.

victorianna said...

I am travelling in Oregon and California. Here are some observations. San Francisco--for sale signs, multiple, on every street. Anecdotal discussion of crashing prices, houses sitting for months, low sales, etc. etc. When I was there exactly three years ago, the headline of the San Francisco Chronicle was SELL NOW! A lot of people are wishing they had.

Everywhere--tourist sites dead. No lines, anywhere, to get into anything. Disneyland--no waits for any rides, even on the weekend. Couldn't believe it. I've never seen it like that. Oregon Shakespeare Festival--has a loyal following of well-to-do people, and even they are down.

Everywhere we go, we talk to people who have lost their jobs, who are freaking out because they don't have health insurance, etc. Sure don't see the "well into recovery" attitude the president of Barclay's bank was talking about on the news last night.

All I can say is, it sure isn't making me want to jump into the Victoria housing market. I have changed from a "look until I can get the house I want at the price I am willing to pay" bear into an "oh boy this is looking really bad I think I'll just wait until we have some idea of where this is all going" bear. I am just not willing to commit myself and my capital to this market. I really think I may end up renting until I leave Victoria and go to a place with more realistic ideas about real estate and affordability. That used to depress me, and now it means I can sleep at night. What a difference a change in attitude (and evidence) makes.

Mr.4AM said...

Thanks the economic meltdown, the Times Colonist will stop printing newspapers each Monday starting June 22nd.

Makes me wonder if:
A) We're going to start seeing even more uncontested realtor "expert" advice in the Tue-Sun columns to drive up revenue.

or

B) If less issues will translate to slightly less kool-aid pumping, and somehow impact public perception of the real estate market.

Mr.4AM

roger said...

There was a lot of interesting chat aroound the bear table last night. The beer and friendly atmosphere definitely got everyone saying exactly what was on their minds.

One point that came across loud and clear was that the market was now being driven by buyers that are only focused on monthly payments.. Real estate stats, newspaper and TV reports are probably having minimum effect.

Cheap, easy credit is classified as an opiate and there are lots of folks loving their first time experience. Unfortunately the nasty effects of withdrawal come later when rates go up. So far now, common sense and rational thinking are being left on the sidelines.

By the fall the future of the economy and housing market will be much clearer. In the interim I hope everyone keeps posting so that this blog continues to be the source of alternative views on real estate in Victoria.

Vic said...

So $455,000 is the "real" average price in Victoria ? Get real,most houses in that price range are borderline junk or in need of $100,000 reno.


Have you seen Garth's latest on the Ontario goverment new real estate tax ? Wait til Captain Gordo gets off his cloud and lays down the "new" taxes on BC. If he follows the same path as Ontario the knife will be in the back of the RE bizz.





"Just to recap for those who were in the john:


First, Ontario passed the legislation necessary to allow a second tier of land transfer tax to be imposed. And so the real estate-hating junta running Toronto did exactly that. Now when you buy a home in 416 country you have to pay this levy twice, once to the province and again to the city.

For example, to buy a $500,000 home (which will not even get a half-decent semi in most areas), the charge is $6,475 for Ontario and $5,725 for Toronto, for a total theft of $12,200. This, of course, is in addition to city property taxes, provincial sales taxes and every other tax.

Second, the McGuinty government has decreed it will harmonize the PST with the federal GST. That means provincial sales tax of 8% will now be levied on all charges associated with buying a home. So, on that $500,000 unit, this means an extra eight points on the commission (which the seller will want to recoup in the sales price), or $2,400 on the standard 6% levy, plus tax on legals, moving costs and all else.

Worse, the PST also clicks in on the full purchase price of new units costing more than $400,000. So, in the case of our example above, this adds another $40,000 to the cost.

Having fun yet? "

Vic said...

The Green Energy Act is even better,now how can BC not have this too if we are the "greenest" place in North America ? I smell scamsters potential all over this like vaccum cleaner salesmen. I guess all those RE agents without a job can now have some hope of a new career.




"Third (as of hours ago), the province’s new Green Energy Act requires that anybody selling a single-family detached or semi-detached home must provide an energy audit to the buyer. This will cost $300 – but that is hardly the point. This added requirement has the potential to scuttle a deal once it is already inked, if a buyer decides they don’t like the audit results. It makes virtually every offer conditional, since getting an energy audit could now take weeks – precious time a buyer has to change his mind, shop the market for a better deal, or use to hammer down the seller’s price. It adds complexity, uncertainty and redundancy – since most buyers already know enough to request a building inspection."

roger said...

Vic,

The 455K that was referred to in the article is correct but misleading. It is the average residential price which is calculated by dividing total MLS sales dollar volume by total MLS sales. So it doesn't represent any specific class of property because it is a combination of all property types.

Not very useful, IMHO, and joe public hasn't got a clue what they are talking about. But then what do you expect from a self serving industry association representing a bunch of commissioned sales people.

roger said...
This comment has been removed by the author.
Vic said...

roger,

this is the problem,the industry pumpers like Muir are back on the tube today telling everyone they can hop back in and there won't be any more price declines. What people will say to keep their jobs. I have experienced that much too often lately and it's pretty despicable.

patriotz said...

Worse, the PST also clicks in on the full purchase price of new units costing more than $400,000. So, in the case of our example above, this adds another $40,000 to the cost....


It doesn't add anything to the cost. Because the buyer is already paying the highest price he can afford (i.e. highest monthly payment), such taxes simply reduce the nominal selling price - i.e. the buyer is paying the same total price as he would without the tax.

It's the seller and the realtor who take the hit, which is why the RE industry hates these taxes so much.

Such taxes should be higher. They are an effective way to fight speculation.

omc said...

just reading the online TC taday about the voluntary prov gov't unpaid leave. They also talk about projections of a 37-50% decrease in the work force in the next ten years. You won't be able to run radio ads that say were different and our main industries are.... if that was to happen.

Vic said...

What did I tell ya ? Didn't take long for Gordo to kick in Stage 1 of sticking it to us by using the union workers first. Next comes "new and inventive" green taxes to pay for the Olympics hosing we will be taking.


What will sitting pretty do for 4 days every month with no pay ? Ouch !

omc said...

I doubt very much that sitting pretty has a decent paying job, or even works period. She comes off as a bitter, aging stay at home who thinks she is royalty based upon where they bought their home 25 years ago. Oak Bay is full of these people. Most people who live here couldn't afford to buy here now.

PainInThe said...

"What will sitting pretty do for 4 days every month with no pay ? Ouch !"Annoy us here with her usual lying bullshit... what else does she ever do?

Vic said...

I have to laugh at the Michael Campbell show once again. He has an interesting guest on who is well versed in how crappy things are out there in the world markets and believes that the US real estate market is going to be in an "L shape"/flatline for up to possibly 10 years. But then he can have that idiot Ozzie Jurrock on there week after week and he agrees with Ozzie that this is a great time to buy.

Note: Ozzie mysteriously was missing this morning without a mention he couldn't make it,but only saying the guest is going to stay on longer.

Was it because the guest's comments for US real estate were so nasty and Campbell agreed with him that there was no frigging way he could have Ozzie on there right after with the total flip flop that "we are different/time to buy " mantra ? It appears so. What a joke this MSM is when their own investments are at risk.


I'd love to see Garth on as a guest but that aint gonna happen.

Vic said...

I think this is a sign of bad times in the real estate bizz when these type of US style companies show up. This is in Kelowna. Funny how Lepage is connected to it.


http://www.mintinsider.com/

Metaldwarf said...

HHV

That thing we talked about. It shouldn't be a problem.

Give me a call Tuesday.

NeedsAnalysis said...

Have you ever dreamed of owning a single family home in beautiful James Bay? Well this could be the day your dreams come true! This beauty has just been reduced in price to 439K.

James Bay Dream House..

Nick said...

LOL, what a beauty! That's only a few blocks from my place, I should check it out. :)

Seriously though, that place looks like it should be bulldozed and replaced. Hypothetically, what would the additional cost be to knock it down and build a moderate sized new house? Another 300k? I'm wondering what a builder would have to charge to make a buck on a project like that.

StargazerXL said...

It's a teardown special!

"This home can be purchased with 137 Michigan St to give you side by side 5400 sq. ft. lots."

$459K, jeez louise...

Bubble 'n Fizz(le) said...

I doubt very much that sitting pretty has a decent paying job, or even works period. She comes off as a bitter, aging stay at home who thinks she is royalty based upon where they bought their home 25 years ago. Oak Bay is full of these people. Most people who live here couldn't afford to buy here now.I doubt very much that omc has a decent paying job, or even works period. He comes off as a bitter renter who thinks he is royalty based upon where they didn't buy 25 years ago. Fernwood is full of these people. Most people who rent there couldn't afford to buy anywhere. Loser.

Bubble 'n Fizz(le) said...

HHV

That thing we talked about. It shouldn't be a problem.

Give me a call Tuesday.

Sounds kinky! Can I get in there too??!!

PainInThe said...

RE: James Bay Dream House..

"easy floor plan" = three tiny rooms.

"Gramma.... GRAMMA, get out o' the bathroom!!! Grandpa's pissin' in the kitchen sink again...."

PainInThe said...

"Sounds kinky! Can I get in there too??!!"Nah... too "stretched out" from all that "pretty sittin'."

omc said...

seems I hit the nerve with sitting pretty. :)

omc said...

I wonder if sitting pretty (or lets say her hubby as she is just a bitter stay at home) could afford to buy in Fernwood if they had to start all over again. I am thinking they are more the Tillicum types. She would have to get a job to help out with the payments. Repeat after me; "would you like fries with that sir".

DDMyHero said...

It's clearly a buying kind of time of the year. The good weather is here again and everyone is in the buying mood. My friend just bought two condos and I'm thinking about one for myself. Just saw the Day team report and he's saying prices will sky rocket. I think he's right. He's a genius.

PainInThe said...

Me too! Why, I just bought five condos, and between the five of them, I'm only down about $100,000!!

Happy days are here again! Nowhere to go but down from here!

Remember, folks! Real estate always goes up.

Except when it doesn't.

omc said...

WHO IS BUBBLENFIZZLEI smell a rat. We all know now that the infamous drive by- sitting pretty is bubblenfizzle. bubblenfizzle used to have a blogspot bubblenfizzle.blogspot.com which had stats and stuff. Metaldwarf you make reference to bubble's page earlier on march 3 08. Who is bubblenfizzle, I strongly suspect a trolling realtor (oak bay to be precise).

BreathingisGood said...

Think about your breathing
Normally your breathing is an unconscious action. Now thanks to this post you will think about breathing for the next few minutes. It's highly annoying.

Vic said...

we have "maniac" posting under 3 or more aliases,could easily be the same troll with no life.

PainInThe said...

Bubble 'n' Fizzle IS "Sitting Pretty".

And yep, he is a realtor.

Nick said...

Another good post by Garth. I particularly like this quote from the letter writer that he quotes:

"I keep hearing that Cambridge is immune to lowering housing markets because we are the fastest growing area in Canada as the technological triangle with KW and Guelph."If I ever get the time, I'd like to do a thorough Google search and compile a quote library of places that said they were immune to downturns in the real estate market. That seems to be a rather strong meme in Victoria...

Bubble 'n Fizz(le) said...

seems I hit the nerve with sitting pretty. :)

WHO IS BUBBLENFIZZLEI smell a rat. We all know now that the infamous drive by- sitting pretty is bubblenfizzle. bubblenfizzle used to have a blogspot bubblenfizzle.blogspot.com which had stats and stuff. Metaldwarf you make reference to bubble's page earlier on march 3 08. Who is bubblenfizzle, I strongly suspect a trolling realtor (oak bay to be precise).
Hmmm. Seems like I'm the one who hit a nerve! FYI, I'm not a realtor and I killed my blog when I realized my audience consisted of several basement-suite dwelling juveniles with nothing better to do than pick their noses and shout "Ha Ha!" at my examples of RE idiocy. I have found it more entertaining to provoke howls of outrage from you bears as a bull-provocateur. Of course, you can ban me (like Greg did from his blog), but you'll get fewer "shitting pretty" posts to laugh at, so you choose.

Sitting pretty (for it is she)

Metaldwarf said...

There used to be a blog called Bubble n' Fizzle

It was actually one of my favorites, it was very entertaining, funny commentary. They actually went out and took pictures of some of the insanity around town and commented directly on it.

The current Bubble n' Fizzle/SP/Maniac/et al could easily be the same person as the former blog poster. The blogger had a twisted sense of humor, which I enjoyed immensely, trolling bears for fun sounds about their style.

Speaking of lunacy around town.
These two properties had film crews crawling all over them this weekend.

MLS 250245 $1.8M MLS 258566 $3.5M They have both been on the market a long time. I guess the owners were looking for an extra cash infusion.

The film is apparently a low budget, made for tv movie called
"Sorority Showdown"

Reid said...

Was visiting a friend this weekend. She and her husband want to upgrade from the house they own outright and need about $200k to buy the new home. On Friday she and her husband had appointment with a mortgage broker to secure financing. He did not show up on time, so broker went ahead with application based on her income which is $45k. She got preapproved for $280k on her own. Now this is 6.2x her income. I had thought banks were drawing the line around 5.5x income. By the time her husband showed up and they upgraded the application, they were approved for over $800k.

She was talking about a rate of 3.45% over five years. Things are now totally out of control; banks are lending way too much money. If this keeps up, soon a couple working at 7-11 will be able to buy a SFH with 10x their income in mortgage debt.

Vic said...

sorry squatting ugly, the CMHC just pissed in your cornflakes as house prices will decline at least 7% nationally (and most likely way more in the overpriced west coast bubbles) and any increase in home starts in 2010 will result in zero price increases.

Looks like you will be wasting alot of energy in the next couple of years here convincing yourself your shack is actually a ball and chain and not a ladder. Seek some psych help before the line ups build.

PainInThe said...

Film crew properties... those two Addams Family mansions are no better or more perfect example of everything that is wrong with Victoria.

"Their house is a museum, when people come to see 'em. They really are a scree-um, the Victorian Family."

Makes the Dynasty mansion look like Frank Lloyd Wright.

"Who!?!?!!??"

Exactly.

Can we please move out of the turn of the LAST century and meet somewhere in the middle?

Say, 1972?

The only movie you could shoot in one of those places would be an Agatha Christie mystery, and they haven't even made one of those fossils for major release (outside of the BBC) for 25 years.

Tell us, are those places wired for electricity with wires on the INSIDE of the walls, or do they still use gaslight?