Monday, March 11, 2013

March 11 Market Update

MLS numbers update 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.

March 2013March 2012 
Wk 1Wk 2Wk 3Wk 4
Uncond. Sales150

570
New Listings433
1385
Active Listings4137
 4274
Sales to New Listings
 34%
 41%
Sales Projection500
Months of Inventory
7.5

Relatively strong start to the month. Last year at this point we were running at 21.7 sales and 66 listings per business day, while so far this year we are seeing 25 sales and 72 listings.  Still 300 more active listings out there than the same time last year.

215 comments:

1 – 200 of 215   Newer›   Newest»
koozdra said...

Very optimistic.

House prices to be flat for 10 years, TD predicts

Just Jack said...

With all the wealth in real estate, it's time to tax the sale of the principle home. The government created the wealth, it should also be able to cream off a few percent off the top too.

The precendent was set years ago with the gains in the stock market. Why should housing be any different.

It's time to cook the Golden Goose.

Introvert said...

principal.

Introvert said...

In my opinion, if you're paying more than 25 percent of your income and have more than 15 years left in the mortage you are going to have a very tough time keeping your home.

How bleak! And unlikely.

koozdra said...

"How bleak! And unlikely."

Recency bias at it's finest.

dasmo said...

"it's time to tax the sale of the principle home" Now that's not even funny, it's just ridiculous....
"Recency bias at it's finest." More like realistic optimism....

koozdra said...

0-down 40 year mortgages are ridiculous and we had them for two years. No bubble here, move along.

Just Jack said...

-Precedent
-sentence starting with "Why" should have a question mark.

Introvert, you are slipping in you're old age.

caveat emptor said...

"it's time to tax the sale of the principle (sic) home"

So the homeowner would have to track capital additions and annual depreciation. Would be a boon for accountants anyhow!

Or you could (income) tax owner/occupiers on the implied rental value of their home. That is what Switzerland does, and may help explain why that country has one of the lowest ownership rates in the developed world.

dasmo said...

"0-down 40 year mortgages are ridiculous" That we can agree on!

Just Jack said...

I just don't trust the government. Unless home owners have some protection, the government is going to feast on their carcasses. There is just too much wealth in real estate.

And maybe the Swiss model is something to look at. Why should home owners have an untaxed benefit over renters? The government created the wealth with low interest rates and loan guarantees backed by the taxpayers. Why shouldn't the government get a piece of the pie on the sale of the home?

All home owners realize that the capital gains exemption for their home is a windfall to them. And history has shown us the governments willingness to tax these windfalls. I'm just thinking with all the government incentives paid by the taxpayer to get people into housing over the last decade. It's only logical that the principal home should be taxed.

When the government wasn't manipulating prices there may have been an argument for fairness. But when the government rigs the game so that almost every home owner wins, then the home owner should pay.

Alexandrahere said...

JJ: If the government ever decided to tax home sales, (BC taxes home purchases already while other provinces do not), they would probably allow current owners an exemption such as they did when they got rid of the first $500K exemption on capital gains. So probably when you eventually buy in at your hoped for ridiculously low level, that is if you ever save up the downpayment, you will know that when you sell you will have to pay the piper....but we current owners will get lucky once again. Too bad, I'm sad.

koozdra said...

Oh how far we have come. The mainstream optimistic outlook for real estate is a 10 year flat line.

The more we deny the existence of the bubble the less chances there are that one exists.

We have sacrificed our property virgins on the alter of real estate and now are now hoping for further appreciation ahead. Unfortunately the real estate god works in mysterious ways and is spiteful.

Al + TOH said...

it's time to tax the sale of the principle home.

If they do, like in US, then they would have to allow people to deduct mortgage interests payment from income tax, also like in US. That (tax deduction of mortgage interests) was one of the reasons why people like to buy big houses in the States before the housing market crash.

So do you know which way is more or less poisonous to the market?

dasmo said...

Speaking of Victoria's economy... I didn't realize that Pixel Union, Tumblr's most popular theme provider is based in Victoria as part of Metalab - the 55 person web / software company....

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

it's time to tax the sale of the principle home. The government created the wealth, it should also be able to cream off a few percent off the top too.

Government already costs too much. They tax away 40% of GDP and then debase the currency, lowering its value by 50% every 15 years or so.

And every dollar of that 40% of GDP that government consumes is considered a dollar added to GDP. You know: tax inspectors, bombing Libyans, filling potholes in Afghanistan, etc. LOL.

Adjust the the GDP according to the real value of government services and you can see government already consumes more than half the nation's output.

And that's under a miserable, hate-the-poor Tory government, so just watch out what happens when it's Justin or the NDP.

If you want to give a break to the house-less, raise interest rates to the point that savings yield a positive after-inflation return, then eliminate the tax on interest income.

Just Jack said...

At least you acknowledge that the government can tax away some of the profits from real estate.

It's just too lucrative for the government to pass on home owners. Easy money for the government. Pass a law and collect the money. Home ownership is just such a big untapped tax source.

Why should the windfall profits from home ownership not be taxed? They do it already with rental properties.

Captial Gains exemption is likely the last "freebie" people have left in Canada. It's only a matter of time, before that gets taken away or at least reduce the exemption.

Nothing says we have to follow the American system. We don't even calulate our mortgages the same way.

Maybe a universal lifetime $500,000 exemption for every person for stocks, houses or whatever. After that you or your estate pays taxes.

I just don't see why your principal residence should be treated any different from other investments.

Homeowners will just have to live with the tax. Call it the burden of home ownership. But, then again - you get the priviledge of painting your walls any color you want and it gives your children roots.

On the flip side, if you take a loss - you can apply it to a future gains. This would be the great equalizer in our society, steal it from the rich and give it to the bureaucrats to judicially dole out to the rest of society. Perhaps if their is any money left over - a statue of Harper with his boot on the throat of a prone Canadian.

Just Jack said...

Alexandrahere,

Is that a bitter home owner I hear?

A little guilt maybe?

But that's what happens when you flaunt your wealth. There is always someone willing to take it away from you.

Just the mere speculation that your home appreciation could be taxed away sends shivers up your spine and puts you in a defensive posture. Perhaps you should define yourself by who you are - and less by what you own.

It could all be gone simply by a grease fire on the kitchen stove.

dasmo said...

They do tax real estate. New homes are taxed, there is property transfer tax, and property tax. Commercial sales are also taxed...
It's a stretch to think the gov would go for such an overtly negative tax. They would be more likely to find a superstitious method of taxing the populous that would not cause such an uproar. I mean the HST wasn't that bad and look what happened there...

Marko said...

The mainstream optimistic outlook for real estate is a 10 year flat line.

Same article

The report does not predict a collapse in house prices as some analysts have suggested. In fact, it sees prices rebounding after a few years of a correction to as high as eight per cent.

However, the longer term trend is for home price gains to average about two per cent over the next 10 years — flat once inflation is taken into account, says TD chief economist Craig Alexander.

Doesn't sound too bad to me.

dasmo said...

What the? superstitious = surreptitious...

Just Jack said...

Either that or higher personal income taxes and user fees.

Every home owner in Canada, should send a hundred thousand dollars to the governement. That would only cost them another $500 a month on their mortgage. And the government could insure them through CMHC too. Canada would be out of debt and the government could reduce taxes and user fees. That might even make their homes go higher in value! What a wonderful thing!

Home owners have received more than their fare share over the years. It's time to pay the Harper.

CS said...

Why should the windfall profits from home ownership not be taxed?

Agreed, there are great inequities in taxation between one citizen and another, but I'd rather see the inequity addressed by lowering the burden on those most unfairly taxed, e.g., savers who pay tax on negative real returns, than by adding new taxes.

And although a tax-free capital gain on houses seems unfair, the fact is that the increase in house prices over the last forty years has been almost entirely the result of inflation. Real house prices have hardly increased at all, which means that a capital gains tax on property is a tax on unreal gains, like the tax on your miserable unreal GIC return.

The idea that folks are so helpless that the government has to spend half the citizen's own money on his behalf is not only absurd but it undermines the sense of personal responsibility that drives individual success.

We need lower taxes overall. Then we'd see more investment, more jobs and better incomes all around.

CS said...

Every home owner in Canada, should send a hundred thousand dollars to the governement.

LOL

You're trying to start a revolution.

Surely?

If you want to tax property, better to have a capital tax, as in very democratic Switzerland. One to one and a half percent. Then Mr. Buffet would find he really was paying, if not a fair share, at least many times as much as he's pretending he wants to pay now.

Let's see, 1.5% on $50 billion, that's $750 million.

Each year, that is.

O.K, Warren?

There should, naturally, be corresponding cuts in income tax.

Just Jack said...

Geez Marko,

Even the condemed man on death row is given the faint hope of a reprieve. It keeps them compliant with the guards.

If instead the article said house prices would fall for the next decade - what do you think the home owning masses would do?



Chris said...

http://www.timescolonist.com/business/canadian-house-prices-to-remain-flat-for-10-years-predicts-td-bank-1.89004

The TD report claims, “Canada is expected to embark a gradual, modest, downward adjustment over the next three years.” That’s code for “hold on to your knickers”.
Yes, ticker RE is what we call a secular dog with fleas. Someone mentioned graphene, GTI is a double in the 6 $ range, although it first likely dips below 5.

caveat emptor said...

I don't think we'll see a capital gains tax on principal residence anytime soon. I think it would be one of the most unpopular ways for government to increase taxes.

It would also have some negative economic effects. (1) It would decrease labour mobility. Why move for a better job if doing so means a massive tax bill (2) As CS pointed out it would be mainly a tax on inflation.

Introvert said...

I think we should tax whiny renters.

Introvert said...

We need lower taxes overall. Then we'd see more investment, more jobs and better incomes all around.

Right-wing blather.

Instead, check out the Economist's Where-To-Be-Born Index.

What do the top countries on the list have in common? They're big tax-and-spenders.

Sufficient and efficient taxing and spending equals better quality of life for people.

Introvert said...

Every home owner in Canada, should send a hundred thousand dollars to the governement.

That comma is a real head-scratcher.

Just Jack said...

Like it or not Introvert, you are the one that is perceived as the "wealthy" Canadian.

There is a resentment of the youngest of prospective purchasers that it is your greed that is to blame for their inability to buy a home.

And I don't think they'll let home owners have a free ride while they themselves pay higher personal taxes and get less than the generation before them. While you gloat and count your gold coins in a darkened room of your basement.

Because if a generation is deprived of what they consider the basic of needs - then they will just take it. Maybe it will start with a little shove on the sidewalk as you pass by them, or increased road rage, or maybe they will vandalize your garden gnomes.

That is a big reason why these house prices have to come down. And why the government has to devalue real estate. High prices are economically and politically de-stabilizing. And while the politicians don't care if you go bankrupt - they do care about not being in power.

And remember Introvert, they know where you live!

dasmo said...

I think I will invest in steel gate / fence manufacturers...

Just Jack said...

Think....

-razor wire

dasmo said...

Simple walls work in South Africa...

Marko said...

Because if a generation is deprived of what they consider the basic of needs - then they will just take it.

The problem is what many consider a basic need here is a luxury item in most other countries.

Introvert said...

Because if a generation is deprived of what they consider the basic of needs - then they will just take it. Maybe it will start with a little shove on the sidewalk as you pass by them, or increased road rage, or maybe they will vandalize your garden gnomes.

Basic needs:

-food
-water
-a universally affordable SFH in Victoria

Which one of those does not belong?

We're starting to see the depth of your resentment; and it appears to be greater than I imagined.

caveat emptor said...

JJ
Let us know when the barricades are going up!

"It's better to die on your feet than to live in a basement"

What Emiliano Zapata really said...

koozdra said...

"A severe economic shock, such as the kind that hit Japan in the early 1990s and California and Nevada in 2006, could knock Canadian housing prices down by 44%, according to a formula devised by Moody’s Investors Service to rate securities linked to mortgages."

Moody's is taking it to the next level.

Let's list off why we feel Moody's is wrong because I don't think they visit this blog.

- Canada is not Japan
- Canada is not California and Nevada
- Any comparisons with any other situation is absurd and should never be discussed
- the economy is strong and will not experience an economic shock


Canadian house prices could fall 44% with severe economic shock: Moody’s

koozdra said...

"Doesn't sound too bad to me."

Let's revisit the "expert" (bank employees) opinions in a couple of years.

"The problem is what many consider a basic need here is a luxury item in most other countries."

Right, this is why the bubble exists. People are willing to go into infinite debt and only consider their monthly payments.

This isn't a problem though because the government pretty much gave us a guarantee that interest rates will not rise... for a while.

Just Jack said...

Lowest price for a home in the core districts so far in March?

$300,000 got you a house on an 8,000 square feet duplex zoned lot in Esquimalt (Rockheights). You could be living the dream for just $1,200 a month in mortgage payments.

You have to go way, way back to May 2005 to find a property like this one that sold cheaper.

Cheapest strata condo this month so far - $120,000. High ratio finance at $575 a month for a one-bedroom love shack along Cloverdale Avenue.

And if you're worried about the oncoming apocalypse of a generation raised on zombie tv shows then there's a single wide manufactured home on Cooper road for $85,000. That gets you enough garden space to raise tomatoes and get a sun burn.

And now over to my non paid grammar checker.

CS said...

Right-wing blather.

You call that an argument? I call it left-wing er, well never mind.

Instead, check out the Economist's Where-To-Be-Born Index.

The Economist? LOL. A Rothschild property.

What do the top countries on the list have in common? They're big tax-and-spenders.

Yeah, like the Soviet Union. They were tops at spending the citizens' money. Now there's France bidding to outdo the Swedes, with a 56% take of the GDP.

No wonder French bureaucrats have a reputation for grotesque arrogance.

Sufficient and efficient taxing and spending equals better quality of life for people.

Agree with that. The question is what's sufficient. In the days of England's greatness, 10% was considered too much. William Gladstone, serving both as Prime Minister and Finance Minister (Chancellor of the Exchequer) went through the books demanding to know what this or that person did. If no satisfactory answer was available, that person was fired.

When Palmerston ran the Colonial office in the hey-day of empire, his total staff consisted of two under secretaries and five stenographers. They worked from Palmerston's official residence. If they arrived before 10.00 AM they were served breakfast.

After that they took dictation from the Minister, often until midnight.

That's what I'd call efficient administration.

koozdra said...

Don't take it personally JJ.

The Kübler-Ross model for dealing with grief has five stages. In our case we are grieving the death of 7% a year appreciation.

We are now past the first stage, denial. People are now coming to the realization that the rising prices in real estate are unsustainable. They still think prices are sustainable, but we'll get there eventually.

We are in the second stage, anger. Expect lots of angry posts in the coming months/years.

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

That is the problem. Canadians feel that owning a home is a right. Well at least 70 per cent of them do. But that's our society, lots of slick advertising that has turned owning a home into a need.

In other countries where a loaf of bread is 20 bucks and grasshoppers are a source of nutrition, I think they have other more pressing needs than "should I have granite counters?"

In no way are our kids suppressed in relation to some other countries. Yet this attitude of those that "have" telling those that "don't have" just to F-off persists. And thats the problem - you can't turn to the next generation and say I don't give a damn, I've got it and you don't deserve to have it. And expect there will not be any repercussions.

It really doesn't take much of an effort to get the bulls posturing for a fight. They have this sense of insecurity that can be easily played upon. Really anything I write has absolutely no effect on the market or the value of your home. Why a home owner even comes to this site baffles me.

You bought - its over for you.

A nickles worth of ink and you own a home. Whoopee! Nothing really has changed. If you were a pathetic loser before you bought a home - now you're a pathetic loser with a mortgage payment.

Leo S said...

Yikes. An agressive day on HHV.
Mondays are tough I guess

Introvert said...

I think daylight saving time is the reason...

Just Jack said...

True, there's always a Tuesday.

Introvert said...

That is the problem. Canadians feel that owning a home is a right. Well at least 70 per cent of them do. But that's our society, lots of slick advertising that has turned owning a home into a need.

A lot more than 70% of Canadians think it's a "right"; many just cannot afford to buy.

And thats the problem - you can't turn to the next generation and say I don't give a damn, I've got it and you don't deserve to have it. And expect there will not be any repercussions.

The next generation deserves to have "it," but sometimes people don't get what they deserve.

Really anything I write has absolutely no effect on the market or the value of your home.

That's correct. It's info's writing that affects the market.

If you were a pathetic loser before you bought a home - now you're a pathetic loser with a mortgage payment.

If you were a pathetic loser who rents, and now you're still renting...

Chris said...

From the Canadian house prices could fall 44% article:

“Think of it like an elastic [being stretched],” explains Mr. Connor of National Bank Financial. “The snap back is going to be a lot harder.”

It’s gonna hurt too... that is, if you forgot to cash in your tax-free lottery ticket.

Chris said...

Before I forget, Moody’s -44% shock is as impartial as you will find; unlike a bank report, whose butt is on the line.

Introvert said...

The Kübler-Ross model for dealing with grief has five stages.

Renters dealing with the fact that they rent also tend to go through five stages:

1. Resentment
2. Resentment
3. Resentment
4. Muttering something about shoving people over on sidewalks
5. Resentment

Introvert said...

Moody’s -44% shock is as impartial as you will find; unlike a bank report, whose butt is on the line.

Moody's. Now there's a ratings agency that inspires confidence.

"Rest assured. All those mortgage securities are AAA."

Introvert said...

Yet this attitude of those that "have" telling those that "don't have" just to F-off persists.

The converse is also true: those on this blog who "don't have" frequently tell those who "have" to f*** off.

Let's be fair, shall we?

subprime11 said...

"If you were a pathetic loser before you bought a home - now you're a pathetic loser with a mortgage payment."

I used to be a pathetic loser with a mortgage. Sold my place last year and now renting. Life is bliss except that I'm still paying a mortgage...just not mine.

Just Jack said...

The five stages doesn't apply to renters.

I suppose the big downer has been, that I have met so many people that are losing their homes in the last few months.

It's tough times for a lot of people. People who just a few years ago thought themselves lucky for getting into the housing market are now owing $75,000 to $100,000 on top of their mortgage in fees and penalties because they can no longer make their payments.

These people thought the fall in prices was just going to be temporary and they'd be able to sell in the spring for a higher price. Now the family has split apart because of the emotional stress.

-Empty trashed homes.

-Builders stripping the plumbing, electrical and cabinets of homes that they could not sell and are now under foreclosure.

-Squatters in abandoned million dollar homes.

I will iterate what I said before. If you're paying more than 25 percent of your gross income and can't pay the mortgage off in under 15 years the odds are against you in this housing market.

The best thing a person can do right now is learn to live with less, save and invest. And never get talked into buying more home than you can reasonably afford.

I suppose there may be a comma splice here or a run on sentence there. Enough for someone to attempt to obscure the message in this post. Shame on them. But, I suppose Ian Thow slept well at night too.

dasmo said...

"-Empty trashed homes.

-Builders stripping the plumbing, electrical and cabinets of homes that they could not sell and are now under foreclosure.

-Squatters in abandoned million dollar homes."

Where are you living?

totoro victoria said...

-Empty trashed homes.

-Squatters in abandoned million dollar homes.

Really? Where exactly would this be? Just seems a bit unlikely.

a simple man said...

Uplands road? I am sure some of those "owners" were looking shifty today.

koozdra said...

Just Jack is the ghost of christmas future.

patriotz said...

Moody's. Now there's a ratings agency that inspires confidence.

"Rest assured. All those mortgage securities are AAA."


So you're saying that Moody's has a habit of being too optimistic.

OK.

dasmo said...

They are more optimistic than me. They predict flat in real terms with increases matching inflation. I predict flat in nominal dollars for another four years and then climbing prices. Mind you over a ten year span it will probably work out to inflation....

Leo S said...

They are more optimistic than me. They predict flat in real terms with increases matching inflation.

That's TD, not moody's. And TD predicts declines in the near term, followed by increases, averaging out to 2% for the decade.

Introvert said...

I have met so many people that are losing their homes in the last few months.

...

-Empty trashed homes.

-Builders stripping the plumbing, electrical and cabinets of homes that they could not sell and are now under foreclosure.

-Squatters in abandoned million dollar homes.


Just Jack, are you a repo man? Why don't you tell us a bit more about these unfortunate people you've met and the nature of your association with them.

Otherwise I could just as easily say that I've met so many people who aren't losing their homes, who have good jobs, and who are quite happy not to be renting anymore.

Introvert said...

I suppose there may be a comma splice here or a run on sentence there.

Yes, almost everything that you write contains one or two errors.

I'm guessing your marks in high school English were not stellar.

Jack and Cate said...

Maybe Just Jack is relaying the days of Arizona and subdivisions stripped bare.

With all the doom and gloom being espoused in the media and blogs is it a matter of time before that occurs somewhere in a neighbourhood near us?

Just saying....

Introvert said...

A significant downside of renting

koozdra said...

Worse than renting is being a landlord.

Show: World's worst tenants

subprime11 said...

"I'm guessing your marks in high school English were not stellar."

Introvert lives with fear of judgement therefore shy's away from others. As a self defense mechanism to build his superiority he points out your grammatical errors and suggests that he was a superior high school student which is where his mind resides because that is where his phobia developed.

no judgement...just sayin...

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

That just goes to show how bad of a grammar checker you are, Introvert. I've counted more than one or two errors after submitting some of my posts. That this irritates you - just makes not correcting them more njoyable.

Introvert said...

shy's

Hope your day job doesn't involve writing.

Introvert said...

I've counted more than one or two errors after submitting some of my posts.

With this, let's go ahead and add Just Jack to the prestigious gang, "Defenders of Dumbness."

Mayfair Man said...

Has anyone else noticed that after a strong start, sales have slowed down this month? Also it seems that most sales close on a Tuesday or Wednesday. Is this due to buyers looking at a house on the weekend, then making an offer and getting the subjects taken off a few days later?

subprime11 said...

Thanks for the correction.
I rest my case.

a simple man said...

Mayfair man - I have noticed that for Oak Bay. Lots of shadow inventory as well - I know 4 houses on my block going up in the spring.

koozdra said...

The new Canadian dream.

1. Leverage yourself to the hilt in real estate.
2. Rent out the places.
3. Swim in money.

coming..
(4. cry when prices collapse)

We need to build more properties so that these kinds of people can buy them with record low interest rates and make money.

But surely things aren't this bad. This isn't common. People can't be this dependant on continuous appreciation. Surely not. This is an isolated incident.

We all know what comes next. Ignorants such as these will be destroyed from the prices collapsing.

Is this couple’s financial vision an impossible dream?

Leo S said...

Has anyone else noticed that after a strong start, sales have slowed down this month?

Weekly sales seem to vary wildly based on what shows up on PCS/matrix. Often I think little has sold and then the weekly sales numbers are normal or vice versa.

CS said...

The sales to list ratio is currently around three to one. Does this mean that most properties will be withdrawn from the market unsold, or that most properties are listed multiple times, or what?

And is there any consistent relationship between sales/list and MOI? For example, is there a sales/list number that corresponds with a flat MOI?

CS said...

Re: "-Builders stripping the plumbing, electrical and cabinets of homes that they could not sell and are now under foreclosure ... families broke and splitting up, etc."

This certainly happened in the 1980's, but Intro ridicules the suggestion that it is happening now.

Who's right?

Does anyone have numbers on monthly foreclosures, and any related stats?

koozdra said...

"Does anyone have numbers on monthly foreclosures, and any related stats?"

The CMHC does, but apparently they don't want us knowing about it because that would invite low ball offers.

Us information proletariat can only gleam limited information from the sanctioned PCS accounts. I love monopolies.

totoro victoria said...

Mortgages in arrears data is here: http://www.cba.ca/en/component/content/publication/69-statistics

info said...

"Same article

The report does not predict a collapse in house prices as some analysts have suggested. In fact, it sees prices rebounding after a few years of a correction to as high as eight per cent.

However, the longer term trend is for home price gains to average about two per cent over the next 10 years — flat once inflation is taken into account, says TD chief economist Craig Alexander.

Doesn't sound too bad to me."

Again, you must consider the source. This is a Canadian bank that is being quoted. Canadian banks are normally very bullish on Canadian real estate. For them to admit that the next decade will be flat for Canadian real estate is actually very bearish.

Normally Canadian banks are talking about gains in Canadian real estate each and every year.

This is, perhaps, the most bearish outlook I have seen from a Canadian bank when it comes to predicting the future of Canadian real estate.

TD might as well come out and say that the Canadian real estate market is extremely weak and that the next decade looks dark and negative to them.

info said...
This comment has been removed by the author.
Alexandrahere said...

JJ: those remarks towards me makes you look just plain silly and extremely envious. I don't flaunt my "wealth". I contribute my experience and thoughts as a homeowner and previous landlord so that others perhaps won't make some of the mistakes I did. As well, I think it is just so very hard for you to accept that although you may be considered an academic to many....( I only wish I had your intelligence),you just don't appear to have what it takes to take calculated risks. You sit on the fence, whine and through those green eyes hope to see successful entrepreneurs fall flat on their face. Guess what?....successful people, get up, take notes, brush themselves off and go to work.

Oh ya....I'm just awatin to someday jump in again and make some more money so that my grandchildren will not have to struggle as I and my parents did before me....and I am prepared!!

Just Jack said...

I would like to hear a bull try to explain those mortgage default rates.

Dave said...

The strange thing for myself, between the TD and Moody's report, is it hardly changes our fridge poster savings - moreso just the timeline.

If flat, we save $19,633/yr TD 10yr flat, save $196,330
If -5% for 5yr, we save $35,657/yr
Total savings by waiting to buy til 2018 = $178,285
if Moody's -44% by 2018 = $225,556

Specially if you give another $30k savings to the TD line, as they said first 3 years would see shallow declines. Note - my poster assumes no rent increases, but then I see a snowball's chance in hell of any sort of inflation this decade.

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

Many house flipper that have made money over the past decade did so with dumb luck.

In 2006, after Victoria house prices more than doubled in 3 years, the housing market had started to decline. Along came the government with 0-down, 40 year mortgages to turn it around. They also changed the debt service levels to allow more borrowing at this time.

House flippers could have easily lost everything they had in 2006 had it not been for government intervention. Nobody could have predicted that intervention.

Fast forward to 2009. Again, the Canadian real estate market had turned south and was headed for disaster. Again, the government intervened in a huge way to turn the market around. Self employed mortgage applicants did not have to show proof of income and recent immigrants were given mortgages despite having very limited work history. Let's not leave out the fact that interest rates were slashed to extreme, emergency levels.

Instead of house flippers losing everything in 2009, the government turned the housing market around and flippers, once again, had the potential to sell for gains instead of big losses. Again, nobody could have predicted that intervention.

You hear flippers bragging everywhere. The fact of the matter is that many of them were very lucky. I assume that many of these same people are holding out right now for the Victoria housing market to rebound.

I think they will finally learn the lesson that they should have learned in 2006. They may never know that they were lucky that the government intervened in 2006 and 2009, turning their high-risk gambling into capital gains.

I think many of them will lose everything this time, especially those most highly leveraged.

The days of almost anyone making easy money from house flipping are over as this country moves from 13 years of credit expansion to a prolonged period of credit contraction and goes through a major, multi-year housing market correction followed by a multi-year melt.

Perhaps some of these house flippers will turn to flipping burgers. Having said that, the economy is tough and I'm not sure that Micky D's is hiring right now.

dasmo said...

We are running at 0.44% Mortgages in arrears hear in BC. How does that need explaining? The US was around 10% in the heat of collapse...possibly even more. One would need to research that to provide actual numbers but go ahead and dig if you want em.... the difference is big enough that the actual figure is not as important as the distinction that it's different here ;-)

koozdra said...

Great news everyone!!!

The experts are telling us that the bubble won't happen here. I'm just so happy to hear that. I was getting worried and everything.

Canadian house prices to stay flat, but Victoria will outperform, says TD report

patriotz said...

We are running at 0.44% Mortgages in arrears hear in BC.

And we already have around 20% price declines from peak all over BC except in the two biggest cities, and those are down too.

Just Jack said...

Alexandrahere, I had to go back and read your original comment.

-it seems you're critizing and bullying me for not having the guts to just jump in and buy damn it! Essentially, stop wasting people's time with all this mumbo jumbo crap about risk! Who cares!

Well Alexandrahere, I doubt you would say to your daughter as she's going out on a date - forget the condom - just do it!

Why - because you know that if she has unprotected sex - your going to end up raising her kid! Her actions will affect your life - that makes you wise to risk. Pregancy alters a persons entire life. Maybe she'd have to put off university or trade school, never get a good paying job, have to settle for guys who biggest challenge in life is winning at Donkey Kong, and pass on job promotions outside of the city.

Why would you not want to impart that same wisdom about car back seats to your daughter in other things.

You may have bought your first home for a $100,000. And it was tough on you - even spending only 2 to 3 times your income. But it was only a matter of a few thousand bucks if you missed a payment. Now your daughter is going to commit most of her adult working life to paying off a $500,000 debt. And the fees and penalties are not just a couple thousand anymore. Like I said, people that default on homes today, face another $75,000 to $100,000 added to their mortgage by the banks and their attorneys.

And until she makes a substantial dent in that mortgage - never be able to sell the home - which is about the time her kid will be going out on her first date.

If they had condoms for houses - I'd bet you would make sure she used one.

Introvert said...

Well that was a weird comment.

Introvert said...

More lecturing from the renter-class. And they accuse owners of being condescending know-it-alls...

koozdra said...

"condescending know-it-alls"

You forget deluded.

Alexandrahere said...

JJ: Actually my daughter and family is doing quite well. They both have good jobs and have a home on the mainland. Their house is worth approx one million and they have a mortgage of approx $200K. I did help with the down payment of $50K. I tried to talk them into selling 2 years ago....but no go.

Actually I bought my 3rd home home at $56k....and that is a long story.

I do not think it is a good time to buy a home right now. I would advise to rent and save.

Anyway....gotta go.

Just Jack said...

I think when you are quoting 10 percent in the USA what you are quoting is 10 percent of the homes listed for sale were under foreclosure.

The 0.44 percent is for total mortgages. I think the highest that figure has gone in Victoria is 0.65 during a recession such as we had in 1991. The lowest was 0.15 during the boom in 2007.

Right now about 1 percent of the total listings in Greater Victoria are advertised as foreclosures. The actual number is higher as some agents will not advertise the fact. In contrast a little more than 5% of the homes listed for sale today are available for immediate occupancy. Of course that doesn't mean every empty house is a foreclosure. But, I would suspect that our foreclosure rate may between 1 to 5 percent of total listings - like maybe 2%. One in every 50 homes. Far, far better than our cousins to the south.

And the foreclosures are all over the map and in every income group.

Rich people, poor people, even people who have had many homes in their lifetime. They simply got behind in their payments, maxed out the line of credit and extended the amortization. Then they decided to do something about it.

Just Jack said...

See Alexandrahere- we all jump to conclusions.

Wouldn't it be responsible for all of us to practice "safe" house hunting. No one wants to end up with a Single family Terminal Debt (STD).

dasmo said...

Nope, plane old mortgage delinquency rates are/were extreme down south. Serious Delinquency Rate being 15% - 25%

The data is here

This is why my pal can live for free in his own house that he defaulted on. The courts are so backlogged they haven't processed his case in all this time. That's right, an honest to goodness strategic default. That's why the rate is so high there, once the idea got out there, people followed suit even if they could make the payments... Now if only you could get that going here. I don't think info's infomercials will do it though....

Introvert said...

Times change. In certain cities, houses become much more expensive. People necessarily take longer to pay off their mortgages. The world doesn't end.

Yes, they may have to use their home to partially finance their retirement (see Rob Carrick's column today), but that change isn't the end of the world, either. Sorry!

Just Jack said...

It aint just that our default rate is three times more that it was in 2007. We also had a much higher volume of sales in 2007 as well. A 0.65 default rate would be quite serious for Victoria. I don't think the default rate even during the 1980's housing collapse went as high as 1%.

What a 0.65 percent means is that every person will know of someone who is in foreclosure. That makes a lot more prospective purchasers hold off on buying. And we should all know by now - what that means.

-It may mean a lot of prospective buyers will be sporting latex suits with reservoir tips come this spring.


Leo S said...

Mortgages in arrears data is here: http://www.cba.ca/en/component/content/publication/69-statistics

Very interesting, thanks. It is clear the delinquency rates are low when prices are rising, and increase when prices decline. It is also clear that they are a lagging indicator. Prices decline first, then delinquencies increase.

Just Jack said...

That seems like quite a complicated formula to get a percentage. Maybe someone on youtube can explain it to me.

Just Jack said...

I would probably go one step further and say unemployment and vacancy rates increase then defaults increase. Then as the number of defaults reaches significance in the marketplace - prices decrease.

Most of those that were in default in 2007 would have been able to sell their home at full market value without going into foreclosure.

Of course today, that is a different story as fewer buyers means those people that are simply in default move into foreclosure.

In some cases, abandoning the property and just walking out the door.

totoro victoria said...

Delinquency rates are different than foreclosure. My understanding is that the delinquency rate is much higher than the foreclosure rate.

Canada has a much much lower foreclosure rate than the US.

In addition, CMHC is not required to advertise foreclosed properties as foreclosures - nor is anyone else. Some choose to use this as a sales tactic and others don't.

Finally, I don't agree that it is ethical to stay in your home for free in the event of foreclosure in the US. Just my two cents, but someone is paying for that.

Introvert said...

JJ, you work as a janitor at a local law firm, don't you? That must be where your knowledge on the subject of foreclosures comes from.

Leo S said...

The experts are telling us that the bubble won't happen here. I'm just so happy to hear that. I was getting worried and everything.

Canadian house prices to stay flat, but Victoria will outperform, says TD report


I'll repost my comment from VV on this report:

I find their line of reasoning quite strange. TD says that because national appreciation has averaged 5.4% since 1980, that means we must have a period of decline and slower growth to get back to the long run average of 3.5%. This makes sense.

Then in the next breath they come to the exact opposite conclusion for individual cities. They say that because prices in certain cities have appreciated very strongly since 1980 (like Vancouver at 6.4%, or Victoria at 5.5%) that we should expect to see them continue to appreciate strongly.

Just Jack said...

It would be nice, if those provincial figures were broken down by cities. In that way one could compare cities. Most think Windsor prices are in a slump - I wonder what their default rate is compared to ours?

All we can tell is that BC's default rate is twice that of Ontario.

Leo S said...

Canada has a much much lower foreclosure rate than the US.

Foreclosure is a lagging indicator. Foreclosure rates in the US were also very low before their crash. It's clear from the data that the same applies to canada. Arrears rate went from 0.12 at the peak of the 90s runup to 0.65 at the end of the correction.
That correction was quite mild, and prices stayed basically flat while inflation caught up. If we see an actual extended nominal decline we'll see the arrears rate rise higher.

Leo S said...

Delinquency rate for Fannie Mae's portfolio in 2007 (after their decline had already started): 0.64%.

So you see, a low delinquency rate means nothing until after a significant decline.

Leo S said...

Also this gem of a comment from that TimesColonist article deserves a repost:

Lament of the Real Estate Agent, by Angelique Troyer

Real Estate agents actually recieve very little of the commission, most of which goes to cover overhead, taxes, and other expenses. They are also held to the same fiduciary responsibility as lawyers, doctors ect. The course is extensive and difficult and for those that spend the time to learn the material, much longer than 5 weeks. There is a very high failure and drop out rate and those that complete the course work must then pass a 4 hour exam, with many requieing several attempts. Then it can take years of hard work and additional educational upgrades to succeed. Those who are forced back to driving taxis are just part of the large number of wash outs. Real estate agents answer to rigourous ethical obligations and can be held liable for the dishonesty of their clients. Please do your research. Undoubtably, there are always a few bad apples in any proffession, but real estate agents are required to be honest and a re the first ones accused when anything goes wrong, even when it has absolutely nothing to do with them, which is part of the reason for the commission rates. Insurance is expensive.

totoro victoria said...

http://ca.finance.yahoo.com/news/vast-majority-canadians-keeping-mortgage-payments-arrears-rate-144535740.html

Chickinvic said...

Totoro,

I agree completely that it is wrong for that person to just be living for free and choosing not to pay their mortgage when they could just because they are getting away with something. That would tell me everything I'd need to know about that person. They signed up for it and they should be repaying their debt if they are able to. I've heard other stories like this out of the US too. I think it is immoral.

LeoM said...

This Blog is always interesting, entertaining, educational, and humorous. Thanks to everyone for the laughs and enlightenment.

'JustJack' will be deemed the wise old sage if interest rates ever double because all his dire predictions will come true. On the other hand, if interest rates stay low, inflation goes to a steady 3%, and wages keep up to inflation, then in about seven years, JJ will be given the pointed hat and sent to the stool in the corner.

Every future prediction made on this blog is dependent on what happens to interest rates, inflation rates, wages and unemployment levels. In a few years, some blog posters will be deemed sages and other will be dunces.

Interest rates, inflation rates, wages, and unemployment rates dictate what will happen next. All we can do is watch and wait.

totoro victoria said...

"Then it can take years of hard work and additional educational upgrades to succeed."

Are you kidding me! I should leave this for introvert, but someone who cannot spell the word "profession" yet waxes on about the stringent requirements of the five-week course... and expensive insurance.

Insurance and licensing is about |$600 a year btw. http://www.recbc.ca/licensing/fees.html

dasmo said...

"the U.S. arrears rate in the second quarter of 2012 was more than eight times higher at 3.04 per cent."

koozdra said...

95% financing?

A real man gets 100% financing!

I keep forgetting how amazing of a deal this is. The banks are being so nice to trust us like this.

Just Jack said...

Interest rates rising - that's too easy.

I say vacancy rates are what you should be concerned about.

Windsor tanked with low interest rates.

Leo S said...

http://ca.finance.yahoo.com/news/vast-majority-canadians-keeping-mortgage-payments-arrears-rate-144535740.html

You'll notice though that BC is the exception. Arrears rate went from 0.15% in 2008 to 0.49% in 2011, and is still almost at that level. I would expect it to start increasing again soon.

caveat emptor said...

Totoro, chickinvic

I don't agree that strategic default is unethical. If the bank gives someone a secured loan (secured by the house) it can be a simple business decision to stop paying and turn over the security to the bank instead. Certainly I wouldn't condemn a corporation that defaulted on a secured loan as "unethical"

Continuing to live in the house does has an element of "something for nothing". However it may be a victimless "crime". I suspect the former owners take better care of the house for the bank than vandals and squatters would.

totoro victoria said...

My view is that if you sign up for a loan that undertake to pay, you pay it or you have a darn good reason not to - meaning that you are at bankruptcy for real reasons and not strategic ones. This is part of the reason student loans are not discharged by bankruptcty - too many strategic defaults by privileged folks.

Strategic default makes a game of real life and there are no victimless crimes that I have ever come across. Maybe that is the problem, we are extending the corporate to the personal. Ethics become meaningless.

Marko said...

The REALTOR® article is awesome on so many fronts...before I became a REALTOR® I didn't pay taxes? Really?

caveat emptor said...

Totoro

A strategic default on a secured loan doesn't imply bankruptcy at all (in a jurisdiction where the loan is non-recourse). That is the beauty of strategic default.

Dealing with a bank in your own best interests within the law is just good sense. I wouldn't expect a bank to treat me extra nice due to some supposed ethical concern. I would expect the bank to act in its best interest as permitted by the law.

That said I don't see how strategic default is unethical. The bank took your house as security should you fail to pay. You fail to pay - the bank gets your house

I agree that corporate ethics shouldn't take over personal values. However when you deal with a corporation like a bank it seems appropriate to act in your own best interests

Introvert said...

Windsor tanked with low interest rates.

That's because it's Windsor. There's a reason Stephen Colbert called Windsor "the earth's rectum."

Not all cities in Canada are equally desirable. Windsor is one of the least.

Introvert said...

Strategic default makes a game of real life and there are no victimless crimes that I have ever come across.

Here is my opinion. I believe stealing is wrong. But some wrongs are worse than others. Right?

For example, stealing from a mom-and-pop shop is way worse than stealing from TD Bank. The amount of money the victim possesses is inversely proportional to the degree to which it is wrong to steal from him/her/it. When we're talking about banks that make billions in profits each quarter, it's very hard to point to victims that are deeply impacted.

That said, I believe this clip is an appropriate coda.

Axis said...

If I bought a condo where I was promised a 282% return over 10 years that was worth less than initial value halfway through I might not feel too bad living in it for free.

The old adage 'Two wrongs don't make a right, but three rights make a left.'

patriotz said...

http://www.cba.ca/en/component/content/publication/69-statistics

Take a look at the numbers for Ontario. During the Toronto/southern Ontario bust of the early 1990's, which was one of the biggest RE busts ever seen in Canada post-WWII (30% nominal decline), the arrears rate peaked at .7% in 1992-02.

Clearly the arrears rate in Canada has different implications for the market than it does in the US.

Why are US numbers so much higher?

- the longer it takes to foreclose, the higher the arrears rate will be for a given number of foreclosures. Remember the arrears rate is the number of properties that are in arrears at any given time. Once a property is foreclosed it stops being in arrears. Canadian banks do not have an incentive to delay foreclosures and the legal process generally moves faster than in the US.

- Non-recourse laws (in about 1/4 of US states) and mortgage remediation plans in the US provided an incentive for owners to go into arrears.

patriotz said...

For example, stealing from a mom-and-pop shop is way worse than stealing from TD Bank.

Failure to repay a debt, whomever it's owed to, is not stealing.

Leo S said...

That said I don't see how strategic default is unethical. The bank took your house as security should you fail to pay. You fail to pay - the bank gets your house

Exactly. If the bank can't get their act together to sell the place or kick you out then that's their problem.
Nevermind that you living there is actually doing them a favour. If you left the place would be abandoned and fall into disrepair, lowering the property value even further.

a simple man said...

Stealing is wrong - black and white.

If a property is foreclosed upon then you should ask the bank to remain until it is sold. If they say yes, then stay, if not then it is not your right to stay and any depreciation that occurs as a consequence is the responsibility of the bank - the new owners (who were really the old owners, mostly).

koozdra said...

"Stealing is wrong - black and white."

There is no objective morality. Nothing is black and white. Stealing is justified in certain situations.

The person continuing to live in the residence without paying the bank is playing a zero sum game. If the bank felt the need to kick him out, they would. He is not stealing anything.

a simple man said...

We are all different and that is what makes the world a beautiful place.

subprime11 said...

Vive la difference!!

dasmo said...

I wouldn't call it stealing since they are doing nothing illegal and plan to leave when they are requested. He even finished the kitchen reno. Hard for me to say he did the wrong thing for his family.

a simple man said...

I did not mean to imply that I thought your friend's situation constituted stealing, dasmo. Sorry of it came across that way.

As long as both parties know he is there and the bank is ok with it, then it is fine.

dasmo said...

NP Simple. No offence. I put it out there for the dogs to chew on ;-)

totoro victoria said...

I don't view it as illegal, but rather as unethical.

A mortgage is promissory note. It is a contract where the owner promises in writing to pay money to the another under specific terms.

Strategic default can occur when your home value drops and, although you can afford to pay, you do not as you know that foreclosure takes ages and the mortgage is non-recourse (ie. the debt can only be satisfied by the property and not everything you own).

IMO, intentially allowing your home to go into foreclosure when you are able to make payments is unethical. It is the system as a whole that suffers and the collective actions of these individuals contributes to a decline in societal standards for integrity imo.

There are plenty of legitimate reasons why an owner might face foreclosure: death of a spouse, divorce, loss of job, reduction in pay, illness, and so on. When an owner is able to pay but chooses not to, that's unethical.

The owners executing a strategic foreclosure are asking the lenders to absorb the loss of a property's value in a declining market. If the property's value had risen and the owners had made a profit, would they have shared the profits with the lenders?

That all said, this could probably be solved if the loans were recourse loans that forced an individual to choose between bankruptcy and meeting the payments.

CS said...

Re: That RE exam

There is a very high failure and drop out rate ... Those who are forced back to driving taxis are just part of the large number of wash outs.

I think this is a slur upon the character of taxi drivers, as if their greatest aspiration is to be RE agents.

LeoM, has it right about the future: from tsunamis to hperinflations, and from earthquakes to N. Korean nukes on LA, and even a small bump in interest rates, no one knows what's going happen. Those who have invested in a bright future for highly leveraged Victoria RE are, for the most part, talking up their own investments, just as the bears are, for the most part, talking down the price of their hoped for future investments.

Info, rationalizes the success of the bulls by invoking government market manipulation. But to a wise bull, market manipulation by the government is a given — provided it serves the interest of the party in power.

The reason this is not obvious to most people is that most people are not psychopaths and therefore, the natural behavior of the ruling elite is less that obvious.

If you think you suspect you are not really psycho, and hence perhaps not the most well qualified person to engage in highly risky speculative markets like Victoria RE, check this test.

a simple man said...

Funny - I seem to remember Marko commenting that the course was quite simple.

StalJ said...

Canadians RE & RRSPs are now taking it on chin. Check out the Royal Bank, Suncor & GoldCorp trifecta today.
Banks, oil, metal & house humping...what else is there in the great white north? Beer?

dasmo said...

He did declare Bankruptcy. I would also hesitate to call his actions unethical considering what he did it was by the letter of the law. It's more akin to playing poker and not cheating. Taking everyone's money in that case is not unethical. Cheating to do so is... If we are going there however, I would say it was more unethical for the bank to foreclose on his neighbour and then dump the property for 15k. How was that supposed to affect my pal and others in the building? He Who had 90k mortgage? He no might have an opportunity to have his wife buy back the property if it goes to auction like the neighbours place did. I don't think the banks are in a big rush anymore mind you, thus not kicking him out....

koozdra said...

The situation is totally different here. Our good friends the banks will not be taking any losses. They will take over the property, sell it for pennies and recoup the entirety of the difference from the CMHC. No deductible required.

Now that's what I call ethics!

Just Jack said...

Although the Oak Bay residential market is considered soft but with stable prices - a few good deals still can be found. You just have to find the gaps between groups of buyers.

One such gap may be found in starter homes in Oak Bay. Too small in floor area for a middle income family and too costly for a first time house buyer. That's what happen to a property along Kings Road this week.

This 920 square foot home on a 6000 square foot lot previously sold in August 2007 at $509,000 when the median price of a home in the core was $550,000.

Now after being renovated it sold once more at $488,000 and at 91.1 percent of the assessed value. t
The current median being $565,500.

I would also suspect that this may have been the vendors only offer as it was listed for over 250 days.

I think this is one of the better purchases relative to other properties in Oak Bay's current market.

If you're looking to find a deal today, you have to seek out those gaps. If you continue to follow the crowd - then you're likely going to have to pay full market value when buying in the city.

totoro victoria said...

If he declared bankruptcy then he is probably in a different boat than a strategic default - which is what I thought we were talking about.

As far as the relationship between ethics and going by the letter of the law, you can be unethical and not break the law. They are not the same thing all the time.

For example:

1.Most kinds of lying are perfectly legal, but lying is generally recognized as being unethical;
2.Breaking promises can be legal, but is widely thought of as unethical;
3.Cheating on your husband or wife is legal, but unethical;
4. Using company time for your own pursuits may not break a law; but it is unethical.

In addition, sometimes it can be ethical to break a law. For example, speeding to take your child to ER might be illegal but would not be considered to be unethical. Some might consider euthanasia ethical, but it is illegal. Some think they have it a moral duty to break any law that is unjust. This is the basis for many civil rights actions.

Laws are clearly written, maintained, and agreed upon. Ethics are subjective, based in large part on individual belief systems.

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

I know the difference between obeying the law and ethics... Even you condone risking the lives of others for the well being of your family in your speeding example. That might even be worse because you are risking others safety. Remember the banks screwed everyone en masse by foreclosing and dumping the properties for pennies on the dollar. They set the cut throat tone that canged the parameters on which to judge the ethics of his actions...

caveat emptor said...

"IMO, intentially allowing your home to go into foreclosure when you are able to make payments is unethical. It is the system as a whole that suffers...."

Sure there are some 'strategic defaulters' that are flush with cash and could easily keep paying. But the reality is that most "strategic defaulters" are under some financial stress before they make that decision. So is it really more ethical for them to tough it out till they actually do go bankrupt at the cost of much more hardship for their families?

And is the "system as a whole" better when more people go bankrupt or are chained to houses with underwater mortgages?

totoro victoria said...

Yes, you have a good point. I was more setting out that they are not always the same just to get it straight for myself in response.

The bank's role in the US might have changed the ethical backdrop. I probably don't understand this enough and your friend who declared bankruptcy might have felt quite ethical doing so.

As far as speeding, I do that sometimes without a really ill child in the car... I've got some stuff that I feel strongly about for my own set of ethical reasons, but it has more to do with fairness/human rights than the letter of the law. Financial responsibility happens to be one of them.

I wouldn't want to be in a systemic where strategic default was condoned and encouraged - there is a cost. This is why we have bankruptcy laws - there needs to be an out for people who get in over their head and there needs to be a limit to how much they can borrow too.

On a similar ethical side, I think it was okay to remove strategic default through bankruptcy for student loans. Nothing like racking up debt through school and then declaring bankruptcy at a cost to taxpayers. By the time you've saved for a home it is off your credit rating.

totoro victoria said...

"And is the "system as a whole" better when more people go bankrupt or are chained to houses with underwater mortgages?"

I think so. When bankruptcy is the alternative there is a lot of incentive to trying harder before walking away. You'll rent your home out and wait for a recovery, or make your payments. A little hardship is not a bad thing and bankruptcy is not the worst thing.

I've read stories from the US where folks will buy a second home in a different area and then do a strategic default on the first. They walk away from a debt they could pay for a better situation.

Owning a house is a luxury and not one that I am willing to pay for as a taxpayer. I wouldn't support non-recourse mortgages in Canada.

Marko said...

Canadians RE & RRSPs are now taking it on chin. Check out the Royal Bank, Suncor & GoldCorp trifecta today.
Banks, oil, metal & house humping...what else is there in the great white north? Beer?


You are right....I don't know how I will survive; my portfolio dropped 1% today which means I am up only 59% + dividends.

Introvert said...

4. Using company time for your own pursuits may not break a law; but it is unethical.

Then I am unethical a lot!

dasmo said...

BlackBerry was up 8.15% today :-)

totoro victoria said...

Yes, working for myself takes that ethical dilemma out of the picture :)

Introvert said...

Yes, working for myself takes that ethical dilemma out of the picture :)

Oh, it's not a dilemma for me. ;)

caveat emptor said...

Anyone who thinks a 1% down day on the TSX is "taking it on the chin" should probably avoid equity investing...

Probably a good thing that people can't get real time ticker quotes on the value of their house.

patriotz said...

Our good friends the banks will not be taking any losses. They will take over the property, sell it for pennies and recoup the entirety of the difference from the CMHC.

Lenders have a legal obligation to both the borrower and CMHC to make a best effort to sell a foreclosed property for market price.

The borrower can sue and CMHC can refuse to cover the shortfall if there is evidence to the contrary.

koozdra said...

"Lenders have a legal obligation to both the borrower and CMHC to make a best effort to sell a foreclosed property for market price."

I guess it all boils down to this concept of "fair market value".

Our housing market was healthy when risk was being removed from the banks by the CMHC. What happens when the CMHC starts to wind down?

If people can't get access to huge insured amounts of money they can't pay "fair market value" anymore. What happens then?

Option 1 (la la land):
We take a break from real estate for a couple of years (say 10) and wait for wages to catch up. That is if wages will continue to increase in the coming recession.

Option 2:
Prices plummet so that people can start buying again.

If prices plummet who determines what is the fair market value of a property? A condo bought a couple of years ago that is selling for much less is considered by the seller to be selling for pennies (nickels, thanks JJ) on the dollar.

What is the lawsuit going to be about? "you didn't find a buyer that will pay what I think the property is worth"?

totoro victoria said...

So much speculation and hyperbole. Chicken little talk is good if you like to live in a future that may never occur.

koozdra said...

"Chicken little"

Are my predictions so far fetched?

Explain to me what will happen without the CMHC.

Maybe we don't need first time buyers? Who will feed the move-up game?

Just Jack said...

There will always be high ratio insurers - just not CMHC

I deal with private mortgage insurers - they don't charge 3 percent.

They charge 9% But they don't have CMHC to bail them out either.

StalJ said...

@marko, dasmo, caveat

I just like rubbin it in a little how egotistical us canuckleheads were.. thinkin we were better than rest of world. Now we are eating our humble pie ..watching our stuff fester as our neighbour soars. We will get there too some year.

A propos, the newspapers could not have announced any clearer when to start selling... May 2010 for home owners who paid attention.
http://www.theglobeandmail.com/report-on-business/top-business-stories/why-this-could-be-canadas-decade-for-economy-stocks/article4320858/

StalJ said...

950 Terrace Avenue
“An $800,000 price reduction makes this an outstanding opportunity!”

30% off...I will pass. At least there are signs some inflated heads are decsending from the clouds.

caveat emptor said...

StalJ
I agree that Canadians should lose the hubris from avoiding the last recession. That was a fair bit of luck and circumstance.

However we needn't stop thinking we are better than the rest of the world, becuase in actual fact we ARE better than most of the world in the sense of being a better place to live. Canada has pleny of warts just like other countries. But any objective assessment would say that being born or living in Canada is a stroke of luck that will likely get you a better than average life expectancy, better than average education, better than average health care, better than average natural environment, better than average acceptance of whatever minority you might belong to, better than average public institutions.... I could go on!

StalJ said...

"becuase in actual fact we ARE better.."

I respect your opinion caveat, however I do not agree with many of your points.
Above average education & health care? Possibly.. but incredibly expensive and abused. Do we really get our taxes worth?
Natural environment...easy to maintain when we have the lowest population density.
On education, the average Canuck’s math and financial skills is appalling...does it contribute to the size of our bubbles?
Even the things we are supposed to be good at and spend big on, like hockey.. we can't win a medal?! And don't get me started on our national symbol the Bieber, he is a mess too ;)
You may say, "Why don't you leave then?" Answer, "working on it... sure won't miss the tax burden."

patriotz said...

If people can't get access to huge insured amounts of money they can't pay "fair market value" anymore.

Fair market value is simply the highest price the seller can get from the public with a reasonable amount of effort. Reasonable being the amount of effort a normal seller puts in.

A seller can always get fair market value, by definition.

CS said...

Freddie Mac: Mortgage rates jump; 30-year fixed averages 3.63%

"Mortgage rates moved sharply higher this week" so the LA Times reports, although a 30-year loan at 3.63% still looks like a terrific deal in an era of ad lib money printing.

koozdra said...

From the article above:

"When major stock market indicators run at or near record highs, it's a fair bet that mortgage rates won't be running toward record lows."

It's a really good thing our economy has been doing so poorly for so long. Apparently all that growth we've been experiencing was on the backs of all the ignorant Canadians that decided to go into insane amounts of debt.

Here are three reasons for one to have confidence that our current situation is not a bubble.

1. There has never in the history of this country ever been a time when prices suddenly collapsed.

2. Nowhere in the world has a bubble been identified and has popped.

3. The economy is strong because we "weathered the storm".

Well we weathered the storm but at a price. We will now be paying this price for years. As they say, "there no such thing as a free lunch".

Is Canada an amazing place, yes! Will it be better when prices reset to be supported by salaries, yes!

Leo S said...

TC reports downtown commercial vacancies increased from under 3% in 2007/8 to over 7% now.

koozdra said...

"Almost half (46%) of Canadians believe that today’s record-low rates will stick around for at least one more year. That’s almost double the 24% who, in 2011, said the same thing. (This data comes from a new CIBC survey released today.)"

Just when you think the average Canadian can't get any dumber, you get a survey that says people don't "think" interest rates are going to rise. I would want them to ask how they come to this opinion when interest rate movements are a mystery to even the experts.

"Uh, my mom said like that our economy is like doing bad and stuff and she said that a mortgage is like a good thing right now and I need to live somewhere so you know I like wanna jump in and make money. Worst case I just sell it later and make mad money like she did on her place..."

"Rates have a long track record of defying expectations."

Not in Canada. Why? BECAUSE that's why.

More Canadians Adopt a Low Rate Mindset

Leo S said...

Just when you think the average Canadian can't get any dumber, you get a survey that says people don't "think" interest rates are going to rise. I would want them to ask how they come to this opinion when interest rate movements are a mystery to even the experts.

All the experts make miserable forecasts for the interest rate all the time. Why aren't regular people allowed to make their own forecasts? Thinking that rates will stay low for a year seems like a very solid bet to me.

dasmo said...

It's an issue but not a death knell... Look at how much retail space has been added in the last ten years to the CRD. This is an obvious result of that. The lost of the three other Christmas stores was also inevitable. "According to the latest Colliers market report, the number of empty retail storefronts in downtown Victoria decreased slightly in 2012 to 7.1 per cent from 7.4 per cent."
" The 10-year average is 5.9 per cent." Sorry, I still see downtown as healthy especially considering what's been going down since 2008...

dasmo said...

I agree, people think they will stay low for another year because they have been crying wolf that they will raise for two years now and they haven't. Not to mention the Gov is walking a tight rope with cooling the market vs crashing it. My money is on low rates for this year too. I also predict when they raise them they will eventually relax the 25 year limit back to 30....

koozdra said...

"stay low for a year seems like a very solid bet to me"

Exactly, it is a bet. If you are betting man this is a great situation.

When interest rates move, they will move up not down.

Plus these people aren't making an informed educated decision. They are listening to the mortgage brokers, realtors and banks.

The BOC is now encouraging people to jump in with faith that rates won't rise. This is irresponsible. Most Canadian's aren't aware what the factors are that determine mortgage rates. They just think it's what the BOC sets and that's what we pay.

Is that really the situation? Maybe I'm wrong. Maybe the gov't is in full control of rates.

Leo S said...

I also predict when they raise them they will eventually relax the 25 year limit back to 30....

I also predict that the government has learned nothing from their mistakes and will continue to make the same mistake forever.

dasmo said...

"I also predict that the government has learned nothing from their mistakes and will continue to make the same mistake forever." now that is a safe bet!

Introvert said...

I also predict that the government has learned nothing from their mistakes and will continue to make the same mistake forever.

I hope you're being serious. Because it's true.

subprime11 said...

The government is not making any mistakes. They are simply puppets on a string acting in knee jerk fashion,responding to conditions set by privately owned central banks, world bodies and multinational corporations.

Introvert said...

The government is not making any mistakes. They are simply puppets on a string acting in knee jerk fashion,responding to conditions set by privately owned central banks, world bodies and multinational corporations.

Can't argue with that.

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

"rates have nowhere to go but up"...and yet they continue to go down. A 5 year fixed can be nabbed at 2.79%. That's approximately 15% less than the five year rate was a year ago. About $7600 less in interest on a 350k mortgage....

Marko said...

All those who bought at the first peak in 2008 are re-financing at quite a bit less plus they've paid off a bit of their principal.

Those who bought in 2003 refinancing for the second time have been quite lucky.

info said...

A very interesting and informative article from the whisperer.

In 2008, Murray Dobbin, formerly with the Financial Post, had exposed that there had been a re-write of the CMHC page on Wikipedia. It was, as the whisperer wrote, "a sanitization which, among others things, removed a notation that CMHC had been directed by the Conservative Government to change policy to approve more high risk borrowers" (in 2008).

Affordability had nosedived in 2008 because of soaring bubble house prices in Canada. There was, of course, no mention of a housing bubble by the government at the time. Their solution to the loss of affordability was to direct the CMHC to start insuring even more high-risk mortgages.

How risky and irresponsible was this? Well, by mid-2007, the average share of home equity as a percent of home value was down to 6%. In 2003 it was 48%! The year 2003 was, of course, when the bubble started to inflated in Canada. In 2008 the Canadian government chose to inflate housing prices even more despite obvious signs that a housing bubble was present.

info said...

How big of a housing bubble do we have in Canada?

It is certainly much bigger than that which had formed in the US by 2005.

In 2009, Murray Dobbin wrote an article entitled, "Why Canada's Housing Bubble Will Burst".

In it, he notes that at the peak of the U.S. housing bubble, house prices were 5 times the average American income. In Canada (in 2009), house prices were 7.4 times the average Canadian income. That number is much higher in Canada today, as house prices are much higher overall compared to 2009.

So Canada is currently in a bigger housing bubble than that of the U.S. at its peak.

The price-to-income ratios of Victoria and Vancouver are, by far, the highest of all Canadian cities. As we saw with the U.S. housing crash, the U.S. cities that peaked with the highest price-to-income ratios crashed the hardest.

House prices in Victoria will certainly correct/crash dramatically over the next couple of years without the government intervening again in a big way. I doubt this will happen though, as it would be a lot more dangerous to do so now. I think they tightened mortgage regulations last year because they knew that they had to. I think they realized that the Canadian economy as a whole could have met with very serious and devastating consequences if the mortgage rules were not tightened immediately. I, personally, think it was too late and that our economy will face years of negative consequences as a result of 13 years of intentional house price inflation.

House prices in Victoria will correct/crash down to the level where they are met with support in terms of income and other fundamentals. We saw this with the U.S. housing crash.

Already, house prices in Victoria have corrected significantly from peak levels. Houses are down -12%, townhouses -16% and condos -15% in Greater Victoria.

This is just the start. There will be much more in terms of price declines in Victoria over the next couple of years and then a slow price melt for many years after that.

Just Jack said...

As a thought.

Maybe when we compare current prices to other time periods we should relate them to typical mortgage terms of 1, 3 and 5 years.

This is for condominiums in the core.

The 4 month median price for condominiums in the core is $249,150 with sales volume of 286 and an average exposure of 75 days on the market.

Today
$249,150
286 sales
75 days

One year ago
$278,500
457 sales
63 days

three years ago
$299,900
563 sales
38 days

five years ago
$298,500
571 sales
46 days on the market

dasmo said...

Sounds like the time to buy a condo...

koozdra said...

Why not 40 years?
Lower payments are a good thing, right? After all that is exactly what low interest rates do.

Someone explain to me why we shouldn't bring back 40 year amortizations.

Leo S said...

How risky and irresponsible was this? Well, by mid-2007, the average share of home equity as a percent of home value was down to 6%. In 2003 it was 48%!

Source? Sounds like BS.

Just Jack said...

And houses in the core using the same 4 month median

Today
$564,500
392 sales
63 days

1 year ago
$583,000
644 sales
43 days

3 years ago
$600,000
685 sales
38 days

5 years ago
$580,000
802 sales
29 days on the market.

Should we toss peak price and go to something that is relative to those that are refinancing?

info said...

How much does the Canadian economy rely on the housing industry? It is actually quite shocking.

Murray Dobbin recently wrote an article in The Tyee entitled, "Canada's Reckless Banks Inflate House Price Bubble".

Quoting from the article:

"While most people would assume... that we are a "resource-driven" economy, the truth is that resources pale in comparison to housing and related financial services. According to the Conference Board of Canada, the resource sector (energy, forestry, mining, agriculture) accounted for a mere seven per cent of GDP in 2012 while housing (finance, real estate, construction) accounted for 27 per cent."

Canada currently has a "housing market economy". This is not sustainable. It has never been sustainable in any country in the world.

I think that bubble housing prices inhibit economic growth. It is no secret that since housing prices in Canada reached bubble territory, many factories have closed and many corporations have left this country for cheaper operating costs in other countries. The same thing happened in the U.S.

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

"How risky and irresponsible was this? Well, by mid-2007, the average share of home equity as a percent of home value was down to 6%. In 2003 it was 48%!

Source? Sounds like BS."

I provided the source in a previous post. "Why Canada's Housing Bubble Will Burst", by Murray Dobbin, formerly with the Financial Post.

Quoting:

"By mid-2007, average equity as a share of home value was down to six per cent -- from 48 per cent in 2003."

dasmo said...

"By mid-2007, average equity as a share of home value was down to six per cent -- from 48 per cent in 2003." must mean new mortgages. No other explanation is possible for that statement.

Leo S said...

That contradicts other equity stats. Is that supposed to be for new buyers? New buyers that need CMHC? A certain age range? It's not clear. By source I meant source of the data.

Leo S said...

must mean new mortgages. No other explanation is possible for that statement.

I doubt it's true even for new mortgages. Since when did new buyers have 48% down payments in 2003? No way.

Chris said...

To buy, or not to buy, that is the question
Not whether it’s Nobler in the mind to suffer
Paying twice for the same the renter does,
For it is in that sleep of debt, what nightmares come
That makes acceptance of the herd so hunted,
For who else would bear the banker ball and chains of time
In such Seas of Depreciation to the distant horizon.

Just Jack said...

Reviewing those median prices for the last 1,3 and 5 years it seems that it was a failed strategy to buy into the market in order to move up to a better home through price appreciation in your purchase.

And if you had bought a condominium, you would be farther away from owning a single family home today than if you had not bought at all and continued to save and invest.

CS said...

Murray Dobbin, formerly with the Financial Post, had exposed that there had been a re-write of the CMHC page on Wikipedia.

Wikipedia ain't known as Trikipedia for nothing.

CS said...

Cool stats, JJ

And good to have the Danish perspective, Chris

As for Info's dire prediction, I feel ’t upon my bones as the bard put it, that she must be right.

I mean, who in their right mind will pay a million, four, for a clunker in N. OB?

Might as well invest the money in a portfolio of blue chip stocks and go and live somewhere warm and cheap like Mexico or Arizona.

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