Monday, July 16, 2012

July 16: Monday Market Update

MLS numbers courtesy of the VREB via Marko Juras. These numbers are for the Victoria Real Estate Board's reporting area, including Sooke, Shawnigan Lake and the Gulf Islands.


July 2012 month to date  (previous weeks in brackets)
Net Unconditional Sales: 258 (120)
New Listings: 606 (306)
Active Listings: 4868 (4827)
Sales to new listings ratio: 43% (39%)

July 2011
Net Unconditional Sales: 523
New Listings: 1374
Active Listings: 5094
Sales to new listings ratio: 38%
Sales to active listings ratio: 10.2% or 9.7 MOI

The SFH median is $527k, with an average of $570k, while condo average is at $342k so far.  

A sales boost over the last week as sales from before the mortgage rule changes are showing up as unconditional.  According to Roger this could continue this week, so it will be interesting to see if there is any significant dropoff in sales the week after.  Of course we are passing the peak sales period, so sales will naturally slow going forward.  I think our month end sales and listings will hit very close to last year's again.   August, September, and October have been sales dead zones the last couple years, I predict that this year will be even worse.

121 comments:

Just Jack said...
This comment has been removed by the author.
Just Jack said...

Lots of odd ball sales.

Like the recent one of a condo in Songhees that was purchased in June 2007 for $820,000 and now five years later re-sells for $580,000

Once again, most of the value of this property was in the water view which would be the strata land component. The value of a water view is what most buyers, that are not from Victoria, will vastly over estimate. Especially if they are coming from areas of higher prices than Victoria.

Someone from Vancouver, only has there frame of reference of what water view condos in Vancouver are worth. And before we call them morons, let's remember all the Victorians that are now buying in the USA.

Leo S said...

And I don't see the possibility of a dead cat bounce either because so much of our demand was brought forward.

We've had our dead cat bounce in 2009 (rubber cat).

In 2009 there were tons of people that took their properties off the market for a year. 3 years later, I don't see that happening again. Many of the listings are already recycled from last year, or the year before. People are starting to realize that waiting longer means lower prices, not higher. So unless you can wait 5 or 10 years, you might as well drop the place quickly.

mrmike said...

Allot of people can handle a 50% correction and still have equity.
They're not gonna just dump it, they'll just stay put.
I have my house on the market right now, you think I'm going to freak out and fire sell it? No...if it sells, great! if not, oh well.
I bought back in 98 because I liked the house and it seems like just yesterday...I can do another 10 years standing on my head.
I think most will be just fine.

Leo S said...

@mrmike Everything you said applied equally to the US market. Most people there were fine. Most people there were not forced to sell. Most people there continued paying their mortgage.

True, and irrelevant.

Just Jack said...
This comment has been removed by the author.
seosky said...

nice man

house in kathmandu

patriotz said...

l.I bought back in 98 because I liked the house and it seems like just yesterday

So why do you have it up for sale anyway?

Marko said...

Interest is still too cheap for people to start dropping prices significantly. A lot of people will just rent out their properties if they can't sell.

In my own building I sell quite a few units and all the sellers already have the back-up plan of renting before they even list. Just sold a unit the other day for $238,000 that rents for $1,100. Have another one listed $379,000 and it rents for $1,500. If it doesn't sell $1,500 almost covers everything at these interest rates.

patriotz said...

A lot of people will just rent out their properties if they can't sell.

And borrow to the max to buy their new residence?

This doubling up on debt and RE exposure also happened in the US around the peak of the market and will simply magnify losses as prices decline.

DP said...

Marko,
It must be "different" at your building since the stats show vacancies rising and rents falling.
Renters gaining upper hand in Victoria


Al Kemp, CEO of the Rental Owners and Managers Society of B.C., said Victoria’s vacancy rate is “significantly understated.” Following conversations with owners and managers of rental properties, he estimates the figure is closer to four or five per cent across the entire rental market.

He said it's now more common for landlords to maintain their rent prices or even drop them in an effort to deal with longterm vacancies.

Marko said...

^ In the same article you just linked it notes:

Victoria's average rent rose by 1.6 per cent since April 2011. Renters can expect to pay an average of $874 per month, compared with $851 last year.

Read more: http://www.timescolonist.com/Renters+gaining+upper+hand+Victoria/6774611/story.html#ixzz20tWrzwLU

Marko said...

"And borrow to the max to buy their new residence?"

Many people don't have to sell. For example out of my 21 listings 13-14 don't have to sell nor rent. I have a couple of listing contracts longer than a year. People thinking they might want to sell if the right buyer comes along but in no hurry and certainly won't be dropping prices to a great extent. I typically do 90 day contracts but these individuals request 1 year as they know the market well.

Many own multiple properties and are selling one. They've owned multiple properties for years.

Some own rental properties and will get out at the right price.

People buying a second property with bridge financing is not the norm, I've dealt with it only twice in the last two years. Typically people don't do this; they make offers subject to the sale of their place.

Even those having to sell have the back-up option of renting. 6 months ago when I sold a new home in Fernwood for my father we had a doctor wanting to rent the upstairs on a 1 year lease for $3,000/month and the new 2 bedroom suite would have rented for about $1,300.....why would you panic with money so cheap? He sold the house but the back-up option was cash flow positive by almost $1,000 for him. Now, if interest rates were 10% I am sure things would be different.

Leo S said...

Have another one listed $379,000 and it rents for $1,500. If it doesn't sell $1,500 almost covers everything at these interest rates.

Sounds awesome. Where else can I take on a third of a million in debt to lose money every month?

People thinking they might want to sell if the right buyer comes along but in no hurry and certainly won't be dropping prices to a great extent.

So those people don't sell, and therefore don't have an affect on the market.

why would you panic with money so cheap?

Because when you do have to sell, you have to sell. It's not panic, it's just prices dropping.

DP said...

Marko,

You should read up on what "real" interest rates are. They have been rising even as the rates you hear about have fell.

As an example you noted from the article rents went up 1.6% from April. "Really" they went down 0.4% as y-o-y inflation to April was 2.0%. Besides, Al Kemp was merely pointing out how quickly vacancy rates are rising and rents falling in the last few months (not whole year). iow- things are deteriorating for landlords.

patriotz said...

People buying a second property with bridge financing is not the norm, I've dealt with it only twice in the last two years.

But you just said:

A lot of people will just rent out their properties if they can't sell.

Are these people renting out their old residence and renting the new one?

Just Jack said...

Technically speaking buying one home while renting out the other is NOT bridge financing.

Bridge financing is when you have an accepted offer on your home and have bought another home, but there is a gap in the closing dates. You need short term financing to bridge that gap.

What you're talking about is owning two homes. And that means that you have to qualify with your income including the rent for your original home to cover both properties.

What some lenders have been doing, is giving bridge financing without an accepted offer and for an extended period of time. That loop hole is something OSFI will likely close.

So what happens if an agent gives you bad financial advice and you inadvertently own two properties or you can't complete on a deal and lose your deposit?

Probably nothing as their job is to facilitate a trade between buyer and seller. It's up to you to clarify any financial requirement with your bank. Because they are sales people not bankers.

Alexandrahere said...

I agree that the stated rental vacancy rate in Victoria is significantly understated.

Just look at Craigslist Victoria. Today alone so far there are approx. 120 new listings (some are repeats), and less than 10% of these are for suites in apartment blocks. Most of the apartment block rentals advertise in the TC or on the net under the various apartment manager names such as Pemberton Holmes, Brown Bros., Cornerstone etc, etc. So the great majority of the Craigslist or Used Victoria listings are for private homes, condos and in-law suites.

On another note: Does anyone know why my quotation mark and question mark keys are not behaving properly...I am getting a number sign using the quotation mark key and an accented e when using the question mark key. Thanks if anyone can be of help.

Wendyriffic said...

I use padmapper.com to hunt for (and compare) rentals. It looks at Used Victoria, Craiglist, and Kijiji and plots them. Always love a plot!

We look at larger places (3 bedrooms) and I rarely, if, ever see an apartment building.

backinVictoria said...

@Alexandrahere,

Your keyboard has gone to the french side. Hit the left ctrl and shift keys at the same time to toggle back. I find sometimes it takes a few tries.

Alexandrahere said...

Thanks back in Victoria. Tried that but still isn/t (see!!) fixed. But will keep trying.

Alexandrahere said...

"back in victoria" Got it working. Went into control panel settings and changed to English Canada. Thanks once again.

Just Jack said...

The CMHC vacancy rate shows the lowest rung in the rental market. These are generally the lowest paid people, the waiters, waitresses and store clerks.

The vacancy rate for this type of accommodation should be very low. And it has been for most of the last 30 years at less than 2 percent. Anything more is symbolic of an anemic city economy.

Marko said...

"Are these people renting out their old residence and renting the new one?"

Some sellers have two or more properties to start. For example, they will have had a personal home and a rental property for the last 15 years, if they can't sell their rental they just continue renting it.

Marko said...

"Marko,

You should read up on what "real" interest rates are. They have been rising even as the rates you hear about have fell.

As an example you noted from the article rents went up 1.6% from April. "Really" they went down 0.4% as y-o-y inflation to April was 2.0%. Besides, Al Kemp was merely pointing out how quickly vacancy rates are rising and rents falling in the last few months (not whole year). iow- things are deteriorating for landlords."

Maybe you can clarify this concept for me? If a house this year is $500,000 and it goes up to $550,000 (hypothetically); however, at the same time we see 20% inflation I am better off waiting 12 months to buy as "really" the home will have dropped in value?

Last time I checked my folks have been collecting $1,000/month from their Fernwood basement suite going on 15 years...things are deteriorating for sure. How will they manage with two solid incomes, a paid off home (largely thanks to suite), and a near guaranteed rental income (1 month vacancy in 15 years)...

common, the world is not ending.

Marko said...

"Sounds awesome. Where else can I take on a third of a million in debt to lose money every month?"

Well, you can always take $300,000 of money you don't have and get 6% to 10% per year return with no risk.

Leo S said...

Some sellers have two or more properties to start. For example, they will have had a personal home and a rental property for the last 15 years, if they can't sell their rental they just continue renting it.

This is the exception though. Most people don't own rental property.

common, the world is not ending.

Let's review.

Well, you can always take $300,000 of money you don't have and get 6% to 10% per year return with no risk.

Now you have me confused with Garth? That's odd.
Regardless, you could put your down payment in the bank, collect 2%, and still be better off than renting at a loss with zero risk.

Marko said...

^If I use my condo as an example.

$40,000 down at 2% equals $800 per year.

Or I could rent it at approximately $200 or more cash positive (mortgage, taxes, strata fees, all accounted for) per month plus $300 and growing onto principal per month.....

Not sure how the money is better in a bank at 2%, as a posted noted above, inflation is 2%?

Marko said...

The $379,900 condo owner will also make a decent tax free profit due to attractive 2009 pre-sale purchase.

DP said...

Marko said,
“Maybe you can clarify this concept for me? If a house this year is $500,000 and it goes up to $550,000 (hypothetically); however, at the same time we see 20% inflation I am better off waiting 12 months to buy as "really" the home will have dropped in value?”

I’m happy to clarify it for you. Rather than hypothetical, let’s use the reality of what really happened from this past year. A house that was $568,950 a year ago is now only $520,000 as shown from VREB total SFH median price June ‘11 vs. June ‘12 (latest stats).

Factor in inflation of roughly 2%, as well as a currency drop of 7% over last July, for about 9%. Victoria SFH are of course denominated in CAD. Subtract 9% of $568,950, or approximately $51,200 from the $520,000, and you get $468,800 in real terms.

So the typical home owner has lost $100,150 of their wealth over the last 12 months. A home owner for example who sold a year ago and bought a home in Hollywood with the proceeds has saved over $100,000 of their wealth, even if that said home has only risen at the rate of inflation of 2% over the past year. If the same pace continues going forward, that‘s $8346 per month that the average Victoria owner is losing each and every month.

Roger said...

Marko,

You may have read some of my previous posts with Totoro Victoria concerning rental income. I firmly believe that "back of the envelope" calculations can lead an investor to false conclusions when purchasing investment properties.

To that end I have developed another spreadsheet which takes all the necessary factors into account to assist in the purchase of rental properties. Net annual income, capitalization rate, cash-on-cash return and gain/loss on disposition are all calculated.

I used your listing for $379,900 for my analysis. Lets say a buyer negotiates the price down to 365K and gets a 5 year mortgage at 3.09%. You posted that the rent is $1500 and I see from the listing that the condo fees are $228 per month. Your listing didn't have the taxes so I used 2K per year. The complete analysis is a pdf here.

Assuming the property is sold in five years the sale price must be 381K just to break even - compared to investing the down payment in a 3% GIC. If the place is sold for 365K the loss is 12K. In both cases the investor is making taxable income but is cash flow negative due to principal repayment.

This is typical of most condo investment deals in Victoria. The cap rate is too low at 3-4% and should be over 6% before it is a solid investment. At these cap rates it is really speculation hoping for a big capital gain.

DavidL said...

The Consumer Price Index (CPI) in Canada is currently pegged at about 1.2%/year.

However, numerous studies have shown that the calculations used for the CPI do not reflect the reality of most peoples' purchases. For example, energy and food costs have gone up considerably in BC over the past year.

AIER developed the Everyday Price Index (EPI) to address the widespread perception that the Consumer Price Index (CPI) does not reflect the day-to-day experience.

In the US, the 2011 average annual inflation rate was 8 percent as measured by the Everyday Price Index, compared to a mere 3.1 percent from the CPI.

DavidL said...

@DP

Can you explain the "currency drop of 7%" ... is the house is being bought by a US buyer with US dollars?

Leo S said...

^If I use my condo as an example.

We're not talking about your condo. You said a $379,000 condo that rents for $1500, which is less than ownership costs. In other words, losing money, and a large liability.
Any non-negative return is better than that. 2% > 0%

Leo S said...

I’m happy to clarify it for you. Rather than hypothetical, let’s use the reality of what really happened from this past year.

You're not answering Marko's question. You're just changing the question completely.

If price drops are only due to inflation, is one better off waiting or buying? As with all other questions, the answer is: it depends. If your rental costs are less than owning, then renting is better.

Leo S said...

$8346 per month that the average Victoria owner is losing each and every month.

That's some extreme cherry picking of numbers...

DP said...

It is cherry picking, but it still stands that an owner who was smart enough to sell a year ago and buy a US asset (home) that kept up with inflation would have saved 100 thousand; approximately 50 from our falling prices and 50 from inflation and falling currency. There are smart people who know how to time these moves, I know some of them.

Does anyone have any reasoning why a similar scenario won’t happen again this next year in Victoria? ie. minus another 50k median price here, 7% further drop in our currency and continuing inflation, for a further loss of 100k?

DavidL, the US home or other asset would be bought by the Victorian seller of a year ago, whether they converted to US dollars before or during the purchase.

totoro victoria said...

Roger, not sure why you are calculating lost opportunity costs on principal payments for rental property if that is what is occuring as it states on the graph.

Principal payments are paid through rents which you would never otherwise receive on an investment of your intial down payment.

In my view, only your down payment is properly the subject of lost opportunity costs. Different if the mortgage is paid by you.

In addition, you also make assumptions about the use of a realtor. I and a growing number of folks don't use one. A mere listing on MLS is readily obtainable for $600.00.

Just as you can invest funds yourself and cut management fees you can cut some costs with rental properties which improves the cap rate. In addition, you can generate more income with some properties.

I do not buy condos because the cap rate is too low with monthly maintenance fees and I feel pretty restricted about . I prefer duplexes or triplexes, but that is just me.

You also assume a lost opportunity cost for funds invested otherwise. Maybe, but if you are saving up for a home I'm not sure what you would put your money in that would be safe and liquid enough? I know many folks who make not much on their investments, although this is something that could be improved with some effort I'm sure.

Another point is that those that own rental property may be invested for the long-term. The longer you do the calculation and the more the principal is paid down and the more chance of appreciation. Add appreciation into the equation, even ten years out, and the calculation changes radically because you are using leverage to buy and receive appreciation on the whole asset.

If you plan to sell your rental at a certain time it might be worth it to look at moving in and deeming it your principal residence. The capital gains from the time you move in to the time you sell will be tax exempt.

If you are able to live on a more modest budget in retirement, rental income will be taxed minimally.

I'm not saying go out and buy and it will all work out great - but I am saying that I have been researching this and other investment strategies and I'm satisfied with the rental properties I have and have no plans to sell to invest in something else.

Just a different view.

Roger said...

Totoro Victoria,

Roger, not sure why you are calculating lost opportunity costs on principal payments

The opportunity costs in my example are on the lost interest on the 90K down payment and the principal payments minus income taxes. Both are included because any money "invested" in the condo is not being used for other investments and is an opportunity cost using accepted definitions and standards.

In my view, only your down payment is properly the subject of lost opportunity costs. Different if the mortgage is paid by you.

Is the renter paying your bank directly - NO. The renter is paying rent which is considered income used to offset expenses like interest and condo fees. This is just basic accounting. The owner is paying down the principal whether there is a renter living there or not. The amount of principal paid can be varied by changing the amortization schedule.

In addition, you also make assumptions about the use of a realtor. I and a growing number of folks don't use one. A mere listing on MLS is readily obtainable for $600.00.

Try selling a condo as a mere posting or as a FSBO. Good luck in anything but an overheated market. And feel free to set the fees to whatever you like in the calculations and adjust the gain/loss result.

I do not buy condos because the cap rate is too low with monthly maintenance fees and I feel pretty restricted about . I prefer duplexes or triplexes, but that is just me.

That is the conclusion I came to for Victoria condos. Nice to see you agree with me.

You also assume a lost opportunity cost for funds invested otherwise. Maybe, but if you are saving up for a home I'm not sure what you would put your money in that would be safe and liquid enough?

This spreadsheet has nothing to do with buying a home to live in. I posted one for that and debated it with you several weeks ago.

Another point is that those that own rental property may be invested for the long-term. The longer you do the calculation and the more the principal is paid down and the more chance of appreciation.

That is usually true. But looking at this case would you be cash flow negative for 10 years and not making more than a 3% GIC.

If you plan to sell your rental at a certain time it might be worth it to look at moving in and deeming it your principal residence. The capital gains from the time you move in to the time you sell will be tax exempt.

Sure if you are concerned with capital gains. But would you move into a 800 sq. ft. condo like this one after 5 or 10 years to save taxes?

I'm satisfied with the rental properties I have and have no plans to sell to invest in something else.

Hope it works for you. But having the bulk of one's net worth in real estate that is highly leveraged is not for everyone

Roger said...

Totoro Victoria said Another point is that those that own rental property may be invested for the long-term. The longer you do the calculation and the more the principal is paid down and the more chance of appreciation. Add appreciation into the equation, even ten years out, and the calculation changes radically because you are using leverage to buy and receive appreciation on the whole asset.

Things don't change too radically. Just the expectation of making a capital gain. When you extend the analysis to 10 years you have to consider the interest rate risk. I know you like 10 year mortgages so I ran the spreadsheet again with a 10 year term of 3.79%.

Click here for pdf

You will note that the selling price has to be even higher than the 5 year case to break even. This is due to the higher mortgage interest rate.

And things will be even worse than I have shown because maintenance costs increase in as the years pass by. Appliances fail, new paint job, carpets etc. Of course you can do this yourself if your time isn't worth much to you.

Another thing that wasn't factored in was the changes to the opportunity cost. In a few years the financial crisis will fade and interest rates will go up. Returns in the stock and fixed income markets will go back to historical levels. Therefore the opportunity costs will be much higher than shown in my spreadsheet.

totoro victoria said...

It still does not make sense to me that there is lost opportunity cost on principal payments which are paid off by rents.

I would agree that this would be the case with a mortgage which is being paid by a homeowner with no rental income as this is money that could otherwise have been invested.

The bottom line is that I would never have the principal payment money at all if not for the leveraged asset paid off through rental income. Without this particular asset I would not invest this money at all because I would not have it.

I don't see that this is an accurate comparison between buying a rental property and not buying a rental property at all and investing the down payment in something else.

Your characterization of basic accounting may be skewing the comparison under these circumstances.

totoro victoria said...

Also, you are right IMO about the condo example having a potential to go negative. I believe that without appreciation condos are not the best investment properties.

I was not specifically referring to that example as it is not my scenario, but was interested in your rental property graph.

Roger said...

Totoro Victoria,

Here is another way to look at it...

Assume that the bank gives the buyer an interest only demand loan like a HELOC using their home as collateral. The money is used to buy the condo in my example. Since they are not paying off any principal the interest on the loan does not go down over time like it does on a conventional mortgage. When this is done there is no principal repayment and the opportunity cost is only the lost investment return (i.e. interest) on the downpayment.

The net income is now the rental income less expenses. In the example that I gave the annual rental income was $17,100 and the annual expenses $13,788 for a gross income before tax of $3312. After tax (at a 37% marginal rate) the net is $2087.

Now what happens to the 2K? One option is to invest it in something like a long term GIC at 3%. The other is to pay down the HELOC loan and reduce the interest expenses thereby increasing the gross income. However if it is used to pay down the loan one has to keep track of what would have been made as GIC interest because this represents an opportunity cost. To really increase gross income one might take some money from another investment like a maturing GIC and apply that to pay down the demand loan as well. However one has to keep track of the lost interest (by not renewing the GIC) as an opportunity cost and factor it into the condo investment analysis.

Now the only difference between this example and the fixed mortgage case is that one is "forced" to pay principal every month by the bank instead of choosing to do so. In both cases there are opportunity costs associated with the down payment and the principal repayments.

Roger said...

Totoro Victoria said The bottom line is that I would never have the principal payment money at all if not for the leveraged asset paid off through rental income. Without this particular asset I would not invest this money at all because I would not have it.

That is because you invest in properties that are not only gross income positive but cash flow positive (cover your principal payments too). Speculators will tolerate being cash flow negative hoping for capital gains. Foolish buyers will be cash flow negative and also have a gross loss (expenses exceed rental income) hoping for a big flip opportunity.

totoro victoria said...

Roger we will just have to agree to disagree. My view is that in a situation where rental income covers principal and interest there is no lost opportunity cost on the principal payment.

Again, you would NEVER have this payment at all if you did not buy the property and you only have your down payment and purchase costs to use for lost opportunity cost comparison.

Your interest only payment scenario is a bit of a red herring. It is not the same scenario at all. In addition interest on borrowed from a HELOC for investment purposes (like a rental property) is tax deductible.

Interest only loans create a false sense of cash flow for many. The interest costs over time remain high cutting into the power of compound interest reduction.

patriotz said...

My view is that in a situation where rental income covers principal and interest there is no lost opportunity cost on the principal payment.

You are at complete odds with basic principles of finance and accounting.

This allows you to kid yourself into thinking that your return on investment is bigger than it is.

Sorry if this sounds blunt, but I have less patience then Roger, who knows what he's talking about and has spent more effort expaining this than he ought to.

dasmo said...

Roger, Where does the negative cash flow of 4K come from in your spread sheet? I tried to scan the discussion to see but couldn't find it.
Looks like a useful spread sheet. I was poking around at income properties a couple years ago and my napkin calculations concluded NO WAY. It's even worse when you look at Industrial or commercial because the tax is so much higher and so are the strata fees.

Does your spread sheet only look at the short term? I'm curious if anything changes over the longer run due to the fact that the bank front end loads their interest.

dasmo said...
This comment has been removed by the author.
Mindset said...

MrMike said: I have my house on the market right now, you think I'm going to freak out and fire sell it? No...if it sells, great! if not, oh well.

I bought back in 98 because I liked the house and it seems like just yesterday...I can do another 10 years standing on my head.


You're obviously not an investor.

Buy low, sell high. This age old advice makes a lot of sense, and has made a lot of people wealthier.

What makes no sense with any investment is waiting a decade for another high, when you are currently selling when the market is high and could move your money somewhere with a better likelihood of a solid return, or even buy back in after the correction.

I can't say I've heard that one before.

It sounds like you are saying that this age old advice of buy low, sell high should be reworded something more like:

"Buy low, try to sell high, but if you don't get the exact peak, sit on an investment you agree could be in a loss position for as long as a decade while standing on your head?"

Getting 10-15% off of peak prices today is not a 'fire sale' either, it's just a sale, and probably the best sale you will get for a while.

Marko said...

"What makes no sense with any investment is waiting a decade for another high, when you are currently selling when the market is high and could move your money somewhere with a better likelihood of a solid return, or even buy back in after the correction."

Impossible to know when the next high will be....for example, 2000 was a very slow year in real estate transactions in Victoria - people predicting that a massive spike in prices was coming? I think not.

There are no solid returns out there without risk.

Buy back after the correction? The correction has been coming for 5 years now....factor in commissions, moving costs, PTT, you really need a 20% drop to make it worthwhile.

Roger said...

dasmo said Roger, Where does the negative cash flow of 4K come from in your spread sheet?

The negative cash flow is how much the investor has to take out of their pocket every month to support the property. This calculation includes principal payments. I have annotated the spreadsheet to show the calculations here

Does your spread sheet only look at the short term? I'm curious if anything changes over the longer run due to the fact that the bank front end loads their interest.

Yes it does account for this. The spreadsheet has a Cdn. mortgage amortization scheduler built in (not shown in pdf) that calculates the annual mortgage interest, principal payments and mortgage balance for each year. Here is an annotated screenshot of the pdf output click here

Leo S said...

The correction has been coming for 5 years now

The correction has been happening for 4 of those years. The correction happened in funding costs more so than house prices, but it is still in progress.

For example, the poster here that bought the place they were renting by Dallas road (Just Janice?, I don't recall) at a 10 year rate of 3.something. In terms of total cost to buy, that place dropped about 30% from the price in 2008. I'd call that a significant correction.

Mindset said...

Impossible to know when the next high will be

I appreciate the service you provide to this blog Marko, but the world is full of unknowns.

This doesn't mean that some times are more clearly better times to sell and worse times to buy, and other times are more clearly better times to buy and worse times to sell.

Can we ever be 100% sure? Of course not. We wouldn't make a single decision in life if we had to wait for certainty.

Your 'you can't know anything for sure' argument sounds like a tactical PR message deployed to circumvent the real and important point here, which is:

Is now a better time to sell than buy?

From everything I have seen, yes, it is. If you are selling, price it right and move it. It isn't going to get any better than today anytime soon. Especially with the prime sales months moving into the rear view mirror.

Correct me if I am wrong, but I believe in one of your videos you said it was a buyers' market now and that sellers should lower their prices to move their homes.

If nothing else, at least we both agree on this point. ;)

totoro victoria said...

"You are at complete odds with basic principles of finance and accounting.

This allows you to kid yourself into thinking that your return on investment is bigger than it is.

Sorry if this sounds blunt, but I have less patience then Roger, who knows what he's talking about and has spent more effort expaining this than he ought to."

I wouldn't say blunt. I would say arrogant. Sorry, but that is how you come across.

Perhaps this is a result of a personality short on patience. Whatever the reason, it seems rude whether you intended that or not.

In addition, if this issue does not make sense to me after looking at it, I would guess it would not make sense to many others.

To say it is at odds with accounting and finance principals explains nothing. You quote no specific sources that back you up. It smacks of "I'm so much smarter than you - you should listen to authority".

Sorry, I may not be an accountant but I do fairly well. Might have worked better before I had to deal with "important" people on a regular basis.

reasonfirst said...

Opportunity cost of principal payments...

http://www.planandact.com/Public/Info_HiddenCosts.aspx

patriotz said...

You quote no specific sources that back you up

I said that Roger had already gone to a good deal of effort to explain it on this thread. You are the one who is being rude, by claiming that his careful explanation makes no sense.

In addition, if this issue does not make sense to me after looking at it, I would guess it would not make sense to many others.

I agree wholeheartedly. However that has nothing to do with whether it's correct or not.

You have the world's biggest RE bust south of the border to show you that agreeing with most people does not make you right.

dasmo said...

@ Roger, got it... I just read it without the separation between the total mortgage payment and your expenses so saw the cash flow positive. You had removed the principle from the equation....
I thought it was odd since I could not find a single cash flow positive property in town. I hear there are some in Nanaimo...

It does seem like most who invest are hoping for capital appreciation. That said, if they hang on their kids will benefit 25 years from now if the property get's paid off.

Mrs. W. said...

Just Janice here -
Question for our insurance guru - my husband and I just bought a house this past May. As mortgage insurance isn't great (every month the amount your covered for goes down while your premiums remain the same!) - we decided to apply for insurance through the Canadian Bar Association. His life insurance was approved, mine was declined. This make me nervous - the reason mine was declined was because in my last pregnancy I was a gestational diabetic and I am currently pregnant. I note in the current pregnancy - I have not developed gestational diabetes (screened and am fine). What should we do? I really do not like the idea of not being covered - I can reapply 3 months post-partum, but if something were to happen between now and then we'd be screwed.

What do you suggest?

a simple man said...

Just Janice - I think we may have a common ex-lawyer friend in New York.

Wendyriffic said...

Just Janice, I got great term coverage during my last pregnancy (with gestational diabetes). I don't know how thorough your screening was, but ours was very thorough. I used "Apple a day financial" as our broker, but the insurance is Royal Bank.

They knew I had gestational diabetes, but I was approved. At their normal rates.

http://www.appleadayfinancial.ca/

Wendyriffic said...

Just Janice, my actual point was: with a very thorough medical screen, they weighed all my healthy lifestyle pluses against the GD minus, and decided I was a great risk not to die in the next twenty years. I think their underwriters are right!

BCAccountant said...

FWIW, I am an accountant and I Roger and Patriotz comments are accurate. These theories are complex and not readily understood by the majority but that doesn't mean they are wrong. Roger has explained them quite well and in a very clear way.

I have done some analysis lately on rental purchases for clients and over the last year, after going over the numbers with them, not one decided it was a good financial decision. Some started out very eager and positive about the venture.

All except one rental were profitable for tax purposes but were cash flow negative. This was the hardest concept for most clients to grasp.

totoro victoria said...

reasonfirst, thanks for the link.

This link states:

"3. Cost of loafing assets (opportunity cost). Making extra principal payments means you are forfeiting the gains that could be earned by investing the money in something outside your home."

However, this example applies to where a homeowner is paying off the principal themselves with their own funds and would have otherwise have had the cash in hand to invest elsewhere.

Without my rental property I would have NO principal payment nor other funds to otherwise invest. It is the asset which generates the income and pays down the principal to my benefit.

It might be better to compare an interest only mortgage and take what would have been the additional principal payment and compare investing it otherwise to paying down the equity and subsequent interest reduction and the ROIs for both.

Mrs. W. said...

Wendyriffic - I will look into them - I'm a little choked because other than being pregnant, I'm pretty healthy (low blood pressure, good pre-pregnancy body weight, etc.). The medical didn't seem to flag anything other than pregnancy and GD in a prior pregnancy.

A simple man - that would be interesting - off the top of my head I don't know who it would be (more likely an online acquaintance)...

Wendyriffic said...

Just Janice, the fact that you haven't developed GD in this pregnancy speaks of your good health. Good luck (with the insurance, and the pregnancy).

Househunters, sorry to highjack your thread!

reasonfirst said...

"Without my rental property I would have NO principal payment nor other funds to otherwise invest. It is the asset which generates the income and pays down the principal to my benefit."

Without your rental property means you would sell it and invest the net proceeds (including paid down principal) in something else. What this would earn you is the opportunity cost. It doesn't matter how the deal is finanaced or the principal is paid down - it is still capital that could earn something elsewhere.

DavidL said...

A few years ago, I was paying just 1.45% interest (prime - 0.8%) on my mortgage with ING. At the same time, I was earning 2% with and ING Investment Savings Account (ISA). At that time, it made financial sense to save up a little extra cash in the ISA, rather than making extra principal payments on my mortgage. Once the prime rate increased by 0.75% and I renewed at prime - 0.6% (currently 2.4%) - it would have been better to pay down the mortgage.

However ... as my investments made ~7% in 2011 - it really doesn't make any sense to pay off my mortgage any faster than needed.

totoro victoria said...

thanks reasonfirst. I can understand that this is a way of accounting for lost opportunity costs that is a snapshot in time with alternates for the equity.

the source of the funds is relevant big picture. there is a difference for me between principal payments generated by the asset itself and principal payments paid out of pocket for the asset.

patriotz said...

All the money is coming out of your pocket. It's your money. A dollar does not have a label on it saying where it came from.

There is no objective difference between saying that the source of a debt paydown came from income generated by the asset associated with the debt, some other asset, your salary, an inheritance, or whatever. It does not affect the financial outcome.

totoro victoria said...

I can see that it does not affect the outcome from an accounting perspective.

What does affect the analysis for me is this payment does not come out of my pocket and without the asset itself I would not have the funds to pay it or invest elsewhere. It also was not part of my out of pocket expenses to buy like the down payment.

For me, perhaps me only :), it does not make sense to assign lost opportunity costs to principal payments covered by rental income for this reason. The source of the funds is relevant, although may not be for accounting purposes. Part of my real life analysis is how the income stream is generated.

Most of the calculators out there for rental property analysis seem to mirror this take on lost opportunity costs. I can see how it would be very helpful to include lost opportunity costs on principal payments where not covered by rental income.

Alexandrahere said...

I'm not an accountant and I certainly don't have the obvious academic taining/education that most of the bloggers on here appear to have.

But I do know that if you put $20,000 down on a home, and that home has an inlaw suite that is generating $1200 per month income ($14,400 annually), then that is more, much more than you would get for that $20,000 income of say in a 3 year locked in GIC. I would wager a bet with anyone out there that most people with in-law suites that are not deemed "legal" suites are not declaring the income. Of course this stirs up further debate that I won't go into right now.
The income on the GIC would get you $400 per year and I would say the average blogger in here would clear around $280 of that. All of the rest of the talk around the pros and cons of buying real estate versus renting and investing savings is a matter of the degree of risk that you are willing to take. There are people that do and people that sit and talk about doing it. There are people that teach.....and

reasonfirst said...

Yes, discussions about good financial analysis have no place on a house buying blog. (sarc off)

SilverSurfer said...

Alexandrahere said: "But I do know that if you put $20,000 down on a home, and that home has an inlaw suite that is generating $1200 per month income ($14,400 annually), then that is more, much more than you would get for that $20,000 income of say in a 3 year locked in GIC"

You should also know that a $20,000 downpayment is against a $400K to $600K mortgage that you are on the hook for. The yield is very high, because it's a high leverage and many would argue on here right now that it is also a very high risk,investment. GIC by contrast is a near zero leverage and near zero risk investment.

If your hypothetical $500K house drops in value 15%, you still owe $480K on your mortgage while your house is now only worth $425K. That means you just lost your $20,000 of savings + you are now the not-so-proud owner of an asset that is worth $55,000 less than when you bought it. With a $75,000 loss, you will now have to deal with tenants for roughly 5 years just to break even (aka. 0% return investment) not accounting for inflation erroding your buying power when you sell, property taxes, mortgage interest, house insurance, repair costs, and loss of investment oportunities if you had put that $20,000 elsewhere. etc.

Some times I think the only reason housing valuations went up is because so many people can't seem to do basic math. Just like the video game though, in the end, all the lemmings walk off the cliff.

Alexandrahere said...

Silver Surfer: Well, I'm not stupid. But I do agree with some of what you said. I wouldn't buy in the price range you are talking about and I would be paying cash for the house. However, I wasn't always in that comfy situation.. with alot of common sense thinking and the willingness to go the extra mile, I am in that position now.

Look at 1822 Fairhurst out in Gordon Head. Just went for $445K, assessed at $661K. Three baths, four beds, nice cul-de-sac. You slap in a bachelor using the family room and bath. Collect $600 per month. Or rent out the rec room and bedroom on lower level to uvic students for $1200 per month. You clean up the upstairs having 3 beds, 2 baths, kitch. dining room, deck etc using some elbow grease and paint and just live in it. It wouldn't be much of a hardship.

At this time with the financial crisis seething throughout the world, I can definitely see the advantages of holding out and renting. But if I were young and really wanted a home in a decent area to raise a family, and there were two good incomes coming in, maybe I would take a calculated chance and buy. Maybe.

AandJ said...

"Just went for $445K, assessed at $661K"

A great example of how useless/skewed assessments are.

DavidL said...

Re: 1822 Fairhurst

It looks like the sale price of $445K was $5K more than asking. I wonder is the agent suggested to price low to try and create a bidding war?

Looking at the photos (only an exterior photo was on my PCS), it looks like a fair chunk of coin might be needed to get the house rent-worthy, and doubtful that it could be done in time for UVic renters in September. Who knows, perhaps there was vermiculite with asbestos in the attic?

DavidL said...

A few blocks away from 1822 Fairhurst, A-1704 Feltham Road (MLS 299427) has been on the market for 308 days at a firm $635K. Obviously no rush to sell, particularly when $70K+ avove the 2011 assessment ...

Introvert said...

I would wager a bet with anyone out there that most people with in-law suites that are not deemed "legal" suites are not declaring the income.

Yes, I'd be interested in knowing how many folks are above board when it comes to declaring suite income.

I live in Gordon Head and I declare my illegal-suite income. Wouldn't be able to sleep otherwise.

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

Alexandrahere,

The topic we have been discussing this week is buying a property strictly as an investment - not living there.

Several weeks ago we had a long discussion about buying with a home to live in with a rental suite. I posted a spreadsheet for that scenario. You can read the entire discussion by clicking here. I went back and didn't see any comments from you on this subject. Maybe you were away and didn't see any of this.

My conclusion was: In the last couple of weeks I have posted several pdf's with examples that included rental income. In many cases, not all, it works out better to buy now even if prices are falling. This is because the renter is missing out on this revenue stream.

Frankly I found your statement a bit condescending - "There are people that do and people that sit and talk about doing it. There are people that teach....." Maybe you didn't mean it that way but that's how it comes across.

Many of us here (myself included) have bought and sold property over the years and have some experiences or analytical skills to share. I think it is useful to discuss the pros and cons of buying or selling in the current climate. People can talk to realtors or read the BCREA/VREB press releases if they just need to talked into buying and want minimal analysis done of their finances.

Alexandrahere said...

Roger: I'll read your spreadsheets and comments over. Sorry if I appeared to offend your good work and analysis. I always enjoy them and from what you said above, I agree with you.

I guess I was re-acting somewhat to Patriotz comments directed at Totoro. She seems intelligent and has some good points as well and it is refreshing to see others points of view.

DavidL: 1822 Fairhurst. I only see the one pic of the exterior of the house too. The yard is a little messy, but the house from the pic looks fairly sound. Also, the streetview shows a seemingly quiet cul-de-sac with other decent homes on it reflecting at this point homes in the $580K price range. As for the university student comment, I meant just renting out two rooms (bedroom and family room) as bedrooms and sharing the downstairs bath. There are so many scenarios with a home such as this.

I will probably never buy another SFH or rental property. I can understand the frustration however of young couples that want a family home desperately and have been waiting for so long in this stagnated market.

Mindset said...

This was just fired over to me on an email (its from GT's blog), its a concept of peak, balanced and trough pricing when it comes to averages. The logic seems to be sound. Anyone care to comment on whether or not his is statistically valid? Leo?

"Real Estate values have truthfully fallen far further than is being reported in both Vancouver and the GTA (even Oakville). The public, through marketing vehicles like average home prices, regional real estate association average monthly home sales statistics and most recently the HPI, are having their attention diverted from reality to a statistic that holds little value.

In a rising market, like the one the GTA has seen since 2000, the actual market value of a home is established from the last sale price of a similar home. It is not an average of the last 3 sales, but rather based on how high the last one sold for and can we get anymore. Where 3 similar homes over the last 45 days sell for 300,000, 305,000 and then $345,000 (the last in a competitive bidding war) the next home listed (assuming no big negative features) will not be the average of $316,666 but rather $349,900. After that 345 sales takes place buyers, sellers and agents all assume the next sale will be even more and act accordingly. THIS SHOULD BE VIEWED AS PEAK PRICING

In a stable market, where the buyers and sellers are under equal pressures, the average sale price is valid. So, in the example above the next home listed would probably be $319,900 at list with a willingness to accept anything over $305,000 being the understanding of buyer, seller and agent. THIS SHOULD BE VIEWED AS AVERAGE PRICING

In a declining market, where sellers outnumber buyers, the average sale price is again not valid. In the above example the next home listed would be $309,900 with the seller and agent praying to get an offer of $300,000 but with a buyer thinking $295,000. THIS SHOULD BE VIEWED AS TROUGH PRICING.

So how does this apply to the market as it exists now? It was not unusual in the GTA to see homes sell for 15% over list in competitive bidding wars. Those wars have basically ended (unless the home is truly under priced). That $345,000 home has quickly returned to $305,000 or a reduction of $40,000 overnight. The math quickly adds up to an 11.6% drop.

So the truth is, the bubble burst the day the bidding wars stopped. The unlucky few who purchased at PEAK PRICING have already lost about 12% equity and in most cases are already living in a home 7-9% over mortgaged (as they bought with 5% down). In some cases where Fees and Cash back was involved, they are already in a 10-15% negative position.

I wonder why CMHC or any other real estate voice doesn’t communicate this truth. The truth is: “If you bought at PEAK PRICING” with less than 15% down, you are already under water with your mortgage, even if that purchase took place one month ago.”

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

There are two parts to everyone's hypothetical scenarios: one, that prices drop; and two, that you sell after prices have dropped and before they go back up.

So let's say the probability that prices will decline over the next five years is 7 out of 10. And let's say the probability of your having to sell your newly bought house in the next five years is 3 out of 10.

If you accept my made-up probabilities, it works out to a 21% chance that a bad situation comes to fruition.

Mindset said...

And bank rates going up when you renew is 10/10, and the chance that if you are patient and smart you can get a better house than you could just 3 months ago is 9/10...

Hmmm, I get 90%. That's wierd.

I wonder if that's because the chance of determining if now is a good time to make one of life's biggest purchase decisions (or to stick with a significant investment) by comparing two simple factors on the back of a napkin is 1/10?

Leo S said...

The logic seems to be sound. Anyone care to comment on whether or not his is statistically valid? Leo?

I think it's nonsense and wishful thinking. In the end, the selling prices of the entire market is reflected in the average price. This guy's premise is based on his statement that bidding wars have ended and things are now going for under ask. That may be partially true, but if it is, it will be reflected in the next month's average prices (well, it will be reflected in the multi-month trend, since single month averages are not very useful).

Leo S said...

So let's say the probability that prices will decline over the next five years is 7 out of 10. And let's say the probability of your having to sell your newly bought house in the next five years is 3 out of 10.

If you accept my made-up probabilities, it works out to a 21% chance that a bad situation comes to fruition.


Sounds about right. And given that most here have solid down payments, I doubt that the bad situation would even be that bad. Say it is you in that situation. Chances are you will absorb the loss and move on. You won't be trapped in the house, you won't be bankrupt. But it still sucks.

We're not renting because we're scared that we'll be foreclosing on the house. We're renting because we're not really interested in losing a lot of money. So given your probabilities of 70% chance of further decline, say 20% chance of flat, and 10% chance of rising values, I think it's a pretty safe bet to wait a bit longer. If I already owned a house, I wouldn't sell it to try to lock in a profit though. Too risky and too much hassle for me.

Leo S said...

So, stupid question time. What's up with this chart of CMHC rates?

Since when is there CMHC required for less than 80% LTV?

Mindset said...

I think it's nonsense and wishful thinking. In the end, the selling prices of the entire market is reflected in the average price. This guy's premise is based on his statement that bidding wars have ended and things are now going for under ask

Thanks Leo. I had the same feeling, but still think there is a partial truth in the extreme example. I have relatives that bought a house in the crazy time ('05), lined up to put in their offer on a SFH, and just hoped they offered over asking enough that they would make it to round 2.

Today, they would make an offer, and probably be the only offer (unless the property was priced to sell), and wouldn't have near the same stress levels as there are other options out there.

Long story short, today they would probably farm around most bids under asking, where as before all of their bids would have been over asking.

So looking at the average today, is the average just the point to bid below, where as it used to be the point that you would bid above?

I've never heard that angle before and found it an interesting fundamentals piece, especially for a post on Garths Blog.

Leo S said...

So looking at the average today, is the average just the point to bid below, where as it used to be the point that you would bid above?

Well I think that part is certainly true. During the frenzy the last sale sets the bottom for the next one. Now the last sale is a good starting point for the listing, and you'll want to offer significantly less. Your relatives bought in the frenzy, but average prices were significantly lower then. Very unlikely that they would get a lower price today even being the only bidder.

It's just the jump from that to the market being down 12% in toronto is where I don't agree. The market is down as far as the prices indicate, no further. Average prices can be skewed, but if you're not focused on individual months they track medians pretty darn well.
Thank god the VREB is still publishing real data, and haven't adopted this silly MLS HPI.

Mindset said...

We're renting because we're not really interested in losing a lot of money. So given your probabilities of 70% chance of further decline, say 20% chance of flat, and 10% chance of rising values, I think it's a pretty safe bet to wait a bit longer.

If you have a place to rent that you enjoy but are looking to buy, my guts say to wait at least another 6 months or so. Having lived through the 80's downturn, my spidey sense is telling we are just on the edge of something similar here.

Just read the global economic news every day and it is pretty obvious this global downturn is not a shallow long trough like the 90's and is just hitting Canada.

Trades rates and availability, housing materials costs, RE inventory, interest rates, debt levels... pick your favorite RE indicator, they all point to a significant slowdown and reduction in prices.

Mindset said...
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Mindset said...

It's just the jump from that to the market being down 12% in toronto is where I don't agree

True. But I'm guessing that the likelihood of getting the bottom of the trough in an up market is zero, but in a down market it becomes much more probable?

An interesting train of thought none the less.

patriotz said...

I would wager a bet with anyone out there that most people with in-law suites that are not deemed "legal" suites are not declaring the income.

It is very unlikely that someone who bought post-2006 will have any net suite income in the first place. Remember income = revenue - expenses, and all house expenses including interest can be prorated against the rental revenue. In many cases owners would be getting a loss which they could deduct against their other income.

I agree with you that a lot of people are not reporting, no doubt because many are ignorant of this. But you are required to report whether you have net income or not and there is a penalty for not filing.

patriotz said...

"Since when is there CMHC required for less than 80% LTV?"

It isn't by the government. However the lender can require it if they so wish.

That a lender would require insurance for < 80% LTV should tell you something.

Just Jack said...
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Just Jack said...
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jesse said...

"Since when is there CMHC required for less than 80% LTV?"

As patriotz mentioned, banks have been in the habit of hedging their near-high-ratio portfolios. Here's how it works, roughly:

A bank makes a loan. When it does so someone (the bagholder) needs to retain some capital in case the loan defaults and they have trouble recouping the loan amount, and is known as a capital reserve ratio. Depending upon the risks associated with the loan, more capital needs to be retained.

In the case of mortgage loans, if the LTV is higher banks need to retain more capital against default or put a hedge in place. One of these hedges is mortgage insurance policies, ergo with these policies in place they need to retain less capital and the counterparty picks up the risk by charging insurance premiums. In the case of mortgage insurance in Canada there is CMHC, which is 100% guaranteed by the government (and considered a "perfect" hedge) or private insurers who are 90% hedged. Banks with CMHC insurance do not need to provision for counterparty risk because the hedge is "perfect". But they still need to provision for the 10% that isn't covered with private insurers, so they will prefer CMHC loans.

Now when CMHC stops insuring low-ratio loans through a government-imposed cap (that applies to all mortgage insurers not just CMHC), lenders have to find other ways of hedging. None of them are "perfect" so this will increase funding costs. We have already started to see this take effect and mortgage spreads have been kicked out through offering fewer discounts to prime rate, but with the new OSFI regulations this effect could be increased as there are provisions for requiring additional reserves in areas of the country deemed to have elevated valuations. Like -- oh I don't know -- Victoria and Vancouver.

In short the government hasn't been asleep at the wheel notwithstanding its moves to move amortization and DSR limits a few weeks ago. It has been actively trying to push up mortgage borrowing costs through other means. Look at the yield curve bump at 5 years for some additional clues as to what they've been doing. All this does, alas, is counteracts the recent downdraft in real rates we've seen recently. Make no mistake, rates are very low right now and we should prepare for the possibility that they remain low for an extended period, ie years.

jesse said...

Clarification, the 90% hedge by PMIs is on counterparty risk; the loan is typically 100% insured except if the insurer defaults, then it's only 90%, hence the need to provision for it, and banks don't like doing it because it reduces the amount of capital they can lend.

Roger said...

Leo S, Patriotz and Jesse,

Banks also used to use CMHC insurance for under .8 LTV HELOCs until Flaherty put a stop to it a while ago. The HELOC was registered as a mortgage against title and .5% paid to protect themselves. I recall Flaherty saying CMHC insurance was not there to facilitate loans for TVs, cars and vacations.

Just Jack said...
This comment has been removed by the author.
EagerBuyer(Not) said...

Can zero or 5% down come back to bite you?

Answer is here

patriotz said...

Also, all RRSP held mortgages must be CMHC insured regardless of LTV.

jesse said...

" I recall Flaherty saying CMHC insurance was not there to facilitate loans for TVs, cars and vacations."

Of course it might be there for a rolling investment arbitrage scheme, but he didn't touch that with a barge pole.

JustWatching said...

Here is a BC lawyer's article on what happens when you try to sell your house for less than the outstanding mortgage..

http://tinyurl.com/screwed123

Distressed Sales: Options for Sellers of Distressed Property

patriotz said...

Neither (A) nor (B) is what is called a "short sale" in the US. In that case, the lender agrees to take a haircut on the mortgage and leaves the owner without any obligation to pay.

Most likely to happen in non-recourse states where the lender can't go after the owner anyway. But also where the owner has few assets to go after and the lender wants to avoid foreclosure and other legal costs.

Also for an insured mortgage, no lender is going to go for (B) because they can get their money back guaranteed by foreclosing

robert reynolds said...
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Robert Reynolds - HMR Insurance said...

@ Mrs. W

I am an independent insurance broker in Oak Bay, I've even set up policies for a few people on this blog.

Most carriers I use would postpone the policy till 3 months after birth. here is an underwriting guide from Industrial Alliance the 4th biggest insurance company in Canada, and one of the best companies for forgiving underwriting. gestational diabetes is on page 10

http://tinyurl.com/ca66z3a

you might be able to get an accidental death policy, or a short term special risk policy (expensive) which excludes death due to diabetes.

If you have any questions I would be happy to help.

(disclosure: I am paid by commission)

a simple man said...

Mrs. W:

For Gest Diab:

Life and critical illness coverage:

- Current: Postponed until 3 months after birth

- History only and not currently pregnant: standard if normal blood sugar after pregnancy

- History of and currently pregnant:
Possible offer after 24+ weeks pregnant subject to confirmation of no diabetes

Leo S said...

Thanks patriotz, jesse. Just odd how they state it on that page. "Remember: without mortgage insurance you may avoid the insurance premium but you’ll typically pay much higher interest rates and additional administrative fees."

As far as I know banks aren't in the habit of charging higher rates on 20%+ down if it isn't insured. However perhaps this is changing now that they can no longer do the bulk insurance on their conventional mortgage portfolio.

seosky said...

thanks for the share it,real estate value is decries in now.

seo in nepal

Marko said...

Monday, July 23, 2012 8:00am

MTD July
2012 2011
Net Unconditional Sales: 371 523
New Listings: 857 1,374
Active Listings: 4,900 5,094

Please Note
Left Column: stats so far this month
Right Column: stats for the entire month from last year

Marko said...

SFH Average MTD = 580k
SFH Median MTD = 532k

Condo Average MTD = 331k

Roger said...

Sales dropped considerably last week.

July - 1st week - 120
July - 2nd week - 138
July - 3rd week - 113

Looks like a pre-July 9th rush to get a 30 year amortization followed by a slow down.

Marko said...

June 2010 = 625
June 2011 = 618
June 2012 = 637

July 2010 = 527
July 2011 = 523
July 2012 = 510 to 540

If July 2012 is >527, 6 of the 7 months year to date will have exceeded unit sales compared to 2011.

By no means is the market hopping, but we have been in a slow market since May 2010, I don't think the new mortgage rules have had a sudden impact.

Robert Reynolds - HMR Insurance said...

@ Just Janice / Mrs. W

Special Risk Policy Term 20 (covers diabetes)
Female 35 non-smoker (just a guess)
$44/m per $100,000 coverage.

Keep it till you are 3 months post pregnancy then reapply for the standard policy. Once approved for the standard policy, terminate the special risk policy.
Quote engine here
http://www.quote-hunmcc.com/

Standard Term 20
female 35 non-smoker
$12.33/m per $100,000 coverage.
Market Survey

you can also run surveys yourself using http://www.winquote.ca/quotes/term_life_single.html
they default to "preferred rates" which are really hard to get, so I suggest using "standard" for more realistic numbers. It is also worth noting that not all carriers are equal, but there is usually a good in in the top 5.

You might also see if the bank will extend their insurance to you since they often don't require medical evidence and then cancel when you are able to get a better policy.

Just Jack said...
This comment has been removed by the author.
DavidL said...

@Just Jack

What's going on with all of your deleted posts?

Just Jack said...

Keep finding grammatical errors. The only time I notice them is when they are on the bigger monitor screen. So, I delete them with the intention of re-posting but get busy doing something else.

Just Jack said...

I don't see a significant difference in the number of pre and post CMHC changes in house sales either. But the inventory of unsold homes is steadily increasing with 112 homes listed in Oak Bay and 174 in Victoria.

That is quite a bit, usually the number of listings in each hood runs at half these numbers.

Relative to the inner districts, there are some good buys at under half a million happening in areas like Brentwood Bay and Sidney.

The District of Saanich is the most desirable area of housing for middle income households. There are 483 houses for sale today just in Saanich alone. And 88 sales in the last 30 days with the typical home selling for $595,000. With about the same volume of sales and around the same median price as one year ago.

Maybe the demand-driven downturn has ended with the volume of sales stabilizing. Now comes the flood of listings that will drive the market with high inventory. With too much selection, you will see wild anomalies in the marketplace.

Properties along busy streets may not get any offers at all. While similar homes one street over will get multiple offers. And as the inventory continues to rise so does the number listings under duress.

While too early to tell, if inventory continues its ascent, we may be looking at a "Foreclosure Market" and trough pricing by agents.

Alexandrahere said...

For your infor my pcs stats:

SFH, min 2 beds & 2 baths, priced between 375K & $775K in Vic,OB,Esq,SE & SW.

Week of 16-22 July 2012:

Sold: 19
Avg Price: $553K Med: $543K

Week of 18-24 July 2011:

Sold: 24
Avg Price: %552K

Week of 19-26 July 2010:

Sold: 26
Avg Price: $553K

On paper these stats are looking pretty "yawn worthy"

Inventory for these SFH is rising. For the week of 9 Jan -15 Jan 2012 the inventory within my criteria stood at 246; 17-13 May 2012 366, and last week the inventory was at 464.

For townhomes and condo's within the same municipalities, with a min of 2 beds and 2 baths priced between $248K and $550K:

Sold: 12

Avg condo price: $354K; Med: $365K
Avg t/h price: $369K; Med: $478K