It's clear the US market is toast. It's clear the Alberta bubble has EXPLODED (Updated 05/11/08; H/T to Island Boy at VT). It's clear the Ontario market is turning.
Ours? Not so clear. Yes, inventory is piling up. Yes, sales are declining. Yes, new condos aren't selling anymore. But prices remain slightly up. I know, I know, things take time to develop.
Nation-wide, the US market took about 6-8 months to unravel. But it didn't take that long in Alberta. It's not taking that long in Ontario. And these are facts that the bulls will use to justify their argument that Victoria is different.
Wednesday, May 7, 2008
Tuesday, May 6, 2008
Open letter to the Ministers of Finance and Human Resources/Social Development Canada
Dear Jim and Monty,
I’m writing to you today because I am gravely concerned about the exposure that Canadian taxpayers have to the quickly changing Canada-wide real estate bubble, indirectly through the Canada Mortgage and Housing Corporation (CMHC). As the ministers responsible for Finance and Human Resources and Social Development in Canada, you are both acutely aware of the importance housing and markets have to the Canadian people in general and the wider-economy. You are also directly responsible for CMHC.
Over the past 8 to 10 years, many regions in Canada have experienced unprecedented escalating house price valuations. As a result, one fact has become glaringly obvious: The median family in Canada can no longer afford the median property in many urban centres. These same regions are home to the greater percentage of the Canadian population.
Beginning in 2006, perhaps as a result of your political party forming Canada’s New Government™, CMHC began liberalizing its standards for mortgage insurance. Come to think of it, personally I can’t see much difference between your government and its Liberal predecessors, so I’m more inclined to think that the liberalization of standards at CMHC was the result of internal management processes and not applied-from-above political forces.
I’m not exactly sure when the private mortgage insurance companies began providing competition—and I hesitate to use that word because statistically CMHC still has an effective monopoly on the mortgage insurance market. Regardless, the effect of private mortgage insurance companies like Genworth and GMAC on CMHC’s policies couldn’t be more pronounced. But this isn’t news to you, nor should it be.
In a remarkably short period of time for any government entity, even one governed, so-called, at arms-length of elected officials, CMHC has first stretched out amortization periods from a long-held standard 25 years to 30, 35 and ultimately 40 years. They have also dropped the minimum down payment from 25 per cent to 20 per cent in an effort to “absolve” one from purchasing mortgage insurance—retrospectively this may be a prudent decision that benefits taxpayers as it potentially reduces the total number of default mortgages that taxpayers may end up subsidizing through CMHC. They even took the sub-prime equating step of dropping the 25 per cent minimum downpayment for "investment" properties. I use quotes because I fail to see how properties purchased for valuations far above what rents will support qualify in any financial circles as investments.
One fact remains undeniable: never before has the Canadian taxpayer been more exposed to private lending practices than it is today. And as the real estate market winds down and inevitably contracts from its unprecedented expansion, Canadian taxpayers may well end up “insuring” the bad lending practices of banks, private mortgage lenders, the speculative buying activities of would-be real estate investors and the poor insurance decisions of CMHC who agreed to back them.
The governors and management of CMHC may have enough investment reserves to handle the mortgage defaults inevitable as people face higher interest rates, rising inflation and decreasing house valuations. They may not. CMHC may be able to sell enough new mortgage insurance premiums to cover increasing defaults, although common market sense suggests they won’t in a declining market.
The Government of Canada, specifically the Department of Foreign Affairs, has recognized the world-wide real estate asset bubble and acted prudently by selling off many millions of dollars of real estate at a time when it made great fiscal sense to do so; despite the fact that one can dispute the political or diplomatic sense of these decisions until the cows come home. I am asking that you please also act with the same fiscal prudence and privatize CMHC, now while the market still maintains some outward appearance of stability.
This action may cause a short-term, collective WTF with the general electorate, but given that it looks as though the combination of you governing like Liberals and the Liberals being an ineffective opposition will lead to you staying in power until October 2009, you should be OK. I believe, rightly or wrongly, that many economists who don’t depend on real estate for an income will applaud your decision publicly which should mitigate the negative effects of the public outcries from the ones who do depend on the Canadian Real Estate Association for a paycheck.
This anonymous blogger—like more and more people around him, a fact which is slowly being reflected in the mainstream media—believes that in 2009 real estate valuation schadenfreude will be as mainstream as the real estate valuation love-in that was 2007. During your election campaign in that fall you will be able to get up on your soapbox and pat yourselves gleefully on your backs while chanting, yes chanting!, “we saw this coming and we acted to protect you, the average working family heroes. The corporations will be held to account for their loose lending ways.”
To summarize, the taxpaying many must be protected from the actions of the few and the only clear way to do so is to privatize the CMHC. Who knows, CIBC will likely line up to buy it, they seem to have a way of ignoring the underlying issues present in their investments.
Respectfully,
HouseHuntVictoria
I’m writing to you today because I am gravely concerned about the exposure that Canadian taxpayers have to the quickly changing Canada-wide real estate bubble, indirectly through the Canada Mortgage and Housing Corporation (CMHC). As the ministers responsible for Finance and Human Resources and Social Development in Canada, you are both acutely aware of the importance housing and markets have to the Canadian people in general and the wider-economy. You are also directly responsible for CMHC.
Over the past 8 to 10 years, many regions in Canada have experienced unprecedented escalating house price valuations. As a result, one fact has become glaringly obvious: The median family in Canada can no longer afford the median property in many urban centres. These same regions are home to the greater percentage of the Canadian population.
Beginning in 2006, perhaps as a result of your political party forming Canada’s New Government™, CMHC began liberalizing its standards for mortgage insurance. Come to think of it, personally I can’t see much difference between your government and its Liberal predecessors, so I’m more inclined to think that the liberalization of standards at CMHC was the result of internal management processes and not applied-from-above political forces.
I’m not exactly sure when the private mortgage insurance companies began providing competition—and I hesitate to use that word because statistically CMHC still has an effective monopoly on the mortgage insurance market. Regardless, the effect of private mortgage insurance companies like Genworth and GMAC on CMHC’s policies couldn’t be more pronounced. But this isn’t news to you, nor should it be.
In a remarkably short period of time for any government entity, even one governed, so-called, at arms-length of elected officials, CMHC has first stretched out amortization periods from a long-held standard 25 years to 30, 35 and ultimately 40 years. They have also dropped the minimum down payment from 25 per cent to 20 per cent in an effort to “absolve” one from purchasing mortgage insurance—retrospectively this may be a prudent decision that benefits taxpayers as it potentially reduces the total number of default mortgages that taxpayers may end up subsidizing through CMHC. They even took the sub-prime equating step of dropping the 25 per cent minimum downpayment for "investment" properties. I use quotes because I fail to see how properties purchased for valuations far above what rents will support qualify in any financial circles as investments.
One fact remains undeniable: never before has the Canadian taxpayer been more exposed to private lending practices than it is today. And as the real estate market winds down and inevitably contracts from its unprecedented expansion, Canadian taxpayers may well end up “insuring” the bad lending practices of banks, private mortgage lenders, the speculative buying activities of would-be real estate investors and the poor insurance decisions of CMHC who agreed to back them.
The governors and management of CMHC may have enough investment reserves to handle the mortgage defaults inevitable as people face higher interest rates, rising inflation and decreasing house valuations. They may not. CMHC may be able to sell enough new mortgage insurance premiums to cover increasing defaults, although common market sense suggests they won’t in a declining market.
The Government of Canada, specifically the Department of Foreign Affairs, has recognized the world-wide real estate asset bubble and acted prudently by selling off many millions of dollars of real estate at a time when it made great fiscal sense to do so; despite the fact that one can dispute the political or diplomatic sense of these decisions until the cows come home. I am asking that you please also act with the same fiscal prudence and privatize CMHC, now while the market still maintains some outward appearance of stability.
This action may cause a short-term, collective WTF with the general electorate, but given that it looks as though the combination of you governing like Liberals and the Liberals being an ineffective opposition will lead to you staying in power until October 2009, you should be OK. I believe, rightly or wrongly, that many economists who don’t depend on real estate for an income will applaud your decision publicly which should mitigate the negative effects of the public outcries from the ones who do depend on the Canadian Real Estate Association for a paycheck.
This anonymous blogger—like more and more people around him, a fact which is slowly being reflected in the mainstream media—believes that in 2009 real estate valuation schadenfreude will be as mainstream as the real estate valuation love-in that was 2007. During your election campaign in that fall you will be able to get up on your soapbox and pat yourselves gleefully on your backs while chanting, yes chanting!, “we saw this coming and we acted to protect you, the average working family heroes. The corporations will be held to account for their loose lending ways.”
To summarize, the taxpaying many must be protected from the actions of the few and the only clear way to do so is to privatize the CMHC. Who knows, CIBC will likely line up to buy it, they seem to have a way of ignoring the underlying issues present in their investments.
Respectfully,
HouseHuntVictoria
Thursday, May 1, 2008
Journalistic Integrity?
In light of the much bandied about hullabaloo going on over at VancouverCondoInfo and to a more limited extent at CondoHype, I figured I'd weigh in, but more importantly direct traffic to this issue on the other blogs.
Does the MSM, and specifically in this case, the VanSun, owe its readership the debt of integrity-based journalism, or owe its advertisers the opportunity to market themselves virally under the guise of a story?
We likely all saw, and more likely didn't finish reading, this weekend's piece titled 15 Real Estate Myths and Realities. We didn't finish reading it, because as bears, it read like advertising, or as bulls it simply reinforced what you already know and are "profiting" from. I don't think anyone, except a minor few, read it as a well written source of advice backed up by unbiased experts at arms length from industry--be it RE or media.
I don't think I need to answer my rhetorical question from above. I think that CondoHype has done a more than adequate job of doing so in his post; and that perhaps, if one sentence stands out above all else, it's this: "When it comes to real estate, the assumption is that the reader is in the market and is looking to invest."
I think the assumption is fair, well researched, and true. The reality is, more people own their own homes in BC than don't. I'd even go so far as to suggest that perhaps right now, more so than ever before in the history of BC, home ownership is likely at an all time high. Goodness knows that we citizens of the best place on earth have been given more opportunity and reasons to buy now (or be priced out forever) than ever before. I'm also willing to go out on a limb and suggest that more homeowners than renters, again defined in terms of percentages, not only subscribe to, but actually read, the Sun.
I'm not suggesting that renters are a bunch of illiterate chumps, but I am suggesting that simply by analyzing why people choose to rent (forced to economically, move around too much, etc) will point to the obvious fact that homeowners are more likely to get a paper delivered. And subscription equals delivery. Furthermore, the number of subscriptions directly correlates to advertising income. Circulation definitely factors in here; but I believe, rightly or wrongly, that subscriptions likely hold more weight with advertisers concerned about the demographics of the readership due to the information gathering capacity of knowing who's account information is available.
To me the problem doesn't lie in and of itself in media funded by advertising. The collective "we" have become very savvy in recognizing, and resisting, marketing. As a result, the collective "them" (in this case advertisers) have become more sophisticated in their marketing efforts. Remember that companies like Google and Facebook get their major revenue streams from targeted advertising based on what they know about their users. And more and more, this advertising is going "underground" or viral; like the Pepsi can on the kitchen counter of a TV show about a group of kids living in Orange County. Am I the only one who remembers when the cans were just labeled generically "beer" or "soda" in TV shows about a group of kids living in a 90210 zip code?
The Sun story was, and likely was recognized as such by most readers, inundated with viral marketing from RE industry "experts." It was a story that reinforced the common myths and masked over the increasingly visible realities of RE as an investment. And that is the true problem: the vast majority of people who own their own homes are not RE investors. The word, in my mind, should never be mixed in with anyone who owns only one property. Nor should it be misused to describe someone who owns a property that does not pay for itself AND generate a return on investment not only today, but growing into the future. Everything else is speculation and very few people like to be labeled a speculator in Canada as it seems to offend our more "moderate" and "risk-adverse" financial "sensibilities."
If people truly crunched numbers on their 2nd and 3rd RE purchases, then took five minutes to look-up what those numbers meant in the land of investments, they'd quickly learn that they are exactly like they were during the dot-com era: over exposed to "investments" whose market values were not nearly supported by their underlying economic fundamentals. Imagine if your shares of Nortel had been bought with your line of credit at their peak?
Does the MSM, and specifically in this case, the VanSun, owe its readership the debt of integrity-based journalism, or owe its advertisers the opportunity to market themselves virally under the guise of a story?
We likely all saw, and more likely didn't finish reading, this weekend's piece titled 15 Real Estate Myths and Realities. We didn't finish reading it, because as bears, it read like advertising, or as bulls it simply reinforced what you already know and are "profiting" from. I don't think anyone, except a minor few, read it as a well written source of advice backed up by unbiased experts at arms length from industry--be it RE or media.
I don't think I need to answer my rhetorical question from above. I think that CondoHype has done a more than adequate job of doing so in his post; and that perhaps, if one sentence stands out above all else, it's this: "When it comes to real estate, the assumption is that the reader is in the market and is looking to invest."
I think the assumption is fair, well researched, and true. The reality is, more people own their own homes in BC than don't. I'd even go so far as to suggest that perhaps right now, more so than ever before in the history of BC, home ownership is likely at an all time high. Goodness knows that we citizens of the best place on earth have been given more opportunity and reasons to buy now (or be priced out forever) than ever before. I'm also willing to go out on a limb and suggest that more homeowners than renters, again defined in terms of percentages, not only subscribe to, but actually read, the Sun.
I'm not suggesting that renters are a bunch of illiterate chumps, but I am suggesting that simply by analyzing why people choose to rent (forced to economically, move around too much, etc) will point to the obvious fact that homeowners are more likely to get a paper delivered. And subscription equals delivery. Furthermore, the number of subscriptions directly correlates to advertising income. Circulation definitely factors in here; but I believe, rightly or wrongly, that subscriptions likely hold more weight with advertisers concerned about the demographics of the readership due to the information gathering capacity of knowing who's account information is available.
To me the problem doesn't lie in and of itself in media funded by advertising. The collective "we" have become very savvy in recognizing, and resisting, marketing. As a result, the collective "them" (in this case advertisers) have become more sophisticated in their marketing efforts. Remember that companies like Google and Facebook get their major revenue streams from targeted advertising based on what they know about their users. And more and more, this advertising is going "underground" or viral; like the Pepsi can on the kitchen counter of a TV show about a group of kids living in Orange County. Am I the only one who remembers when the cans were just labeled generically "beer" or "soda" in TV shows about a group of kids living in a 90210 zip code?
The Sun story was, and likely was recognized as such by most readers, inundated with viral marketing from RE industry "experts." It was a story that reinforced the common myths and masked over the increasingly visible realities of RE as an investment. And that is the true problem: the vast majority of people who own their own homes are not RE investors. The word, in my mind, should never be mixed in with anyone who owns only one property. Nor should it be misused to describe someone who owns a property that does not pay for itself AND generate a return on investment not only today, but growing into the future. Everything else is speculation and very few people like to be labeled a speculator in Canada as it seems to offend our more "moderate" and "risk-adverse" financial "sensibilities."
If people truly crunched numbers on their 2nd and 3rd RE purchases, then took five minutes to look-up what those numbers meant in the land of investments, they'd quickly learn that they are exactly like they were during the dot-com era: over exposed to "investments" whose market values were not nearly supported by their underlying economic fundamentals. Imagine if your shares of Nortel had been bought with your line of credit at their peak?
For the record, the stocks that I purchased recently using a value investment strategy are also speculative buys and not stable investments. I am counting on capital gains to make them worth the risk. The difference is, their underlying price-to-earnings ratios are vastly better than any RE in BC and therefore, in my mind, far less risky in both the short and long terms.
When someone uses an extended amortization, low-down payment mortgage product to buy a second condo to rent out at roughly 50% of what it costs to carry it, they should never be called a real estate investor (and given recent data released by ScotiaBank "someone" is roughly 60% of all mortgage holders) . They should be called a fool. And you know what they say about a fool and his money. I wonder how "soon", soon will be?
UPDATE: seems like D.Penner felt some "pressure" to provide a more balanced follow-up story.
Also see J.Chevreau's piece in the post Saturday if you're thinking about an extended amortization mortgage product.
Also see the effect that bloggers are having on the big bad MSM. I've got to say this: when someone resorts to a character smear, by accusing their "attackers" of a smear, well, isn't that kind of like the pot and kettle thing? Maybe I'm just missing the point?
When someone uses an extended amortization, low-down payment mortgage product to buy a second condo to rent out at roughly 50% of what it costs to carry it, they should never be called a real estate investor (and given recent data released by ScotiaBank "someone" is roughly 60% of all mortgage holders) . They should be called a fool. And you know what they say about a fool and his money. I wonder how "soon", soon will be?
UPDATE: seems like D.Penner felt some "pressure" to provide a more balanced follow-up story.
Also see J.Chevreau's piece in the post Saturday if you're thinking about an extended amortization mortgage product.
Also see the effect that bloggers are having on the big bad MSM. I've got to say this: when someone resorts to a character smear, by accusing their "attackers" of a smear, well, isn't that kind of like the pot and kettle thing? Maybe I'm just missing the point?
UPDATE: From time to time I get press releases in my email. I won't publish marketing, but some are public service announcements. I won't put them up unless the readers of this blog want me to. What say you?
Monday, April 28, 2008
Say we bought last year?
For fun. Let's say we bought a condo last March. We stuck to our "fundamentals" and paid $225,000 for a dumpy place in Central Park. We had to pay 1.5% in closing costs for $1250.
Ms. HHV gave us reason to sell this year in March with her big-time move up in her career. We won't pay rent in one town and mortgage in another, so we sell. We have no interest in being landlords and the building (as do most older buildings in Victoria) has rental restrictions, so that option is out.
The condo market did roughly 11% between March 2007 and March 2008. Our place? We'll, I painted it out at a cost of under $200 and about 4 weekends worth of my time. I got a great deal on some new cabinetry for the kitchen and single bath at a cost of about $4500. My family assisted me with the install at a cost of two dozen beers, a bottle of Crown, and 5 steaks ($200) and another two weekends. I went to The Brick and picked up all new stainless appliances and did the buy now don't pay til 2021 deal (hey, I'm selling my condo, I can't lose can I?) at a cost of $4500 for 5 appliances. I figure I'm getting at least 15% or more because I've made so many improvements.
I've paid out just over $800 in property taxes and another $2400 in condo fees this year. So before we talk about mortgage payments etc, let's add up the total. I'm out of pocket $238,850.
We list the place with a Realtor for $259,900. It's a nice place in a dumpy building in a not-so-nice neighbourhood, but there is still demand for low end properties in town and our Realtor thinks we have the nicest unit on the market within a few blocks of downtown in this price range. We're skeptical, but hey, we made a huge investment and we owe it to ourselves to get as much as the market will bear.
We get an offer after the first week. It's for $252,000. We counter with "yes" but no appliances. They counter with $254,000. We accept the offer. They go get financing. Can't get it. Deal falls through. We're bummed because there's a time pressure with our upcoming move and we were happy that we had an offer so soon.
Another week, another offer. This one from a qualified buyer. They do their homework and read the strata minutes for the past two years. They have trouble with some of the questions unanswered from the engineer's report dated November 2007. They offer $245,000. We counter $254,000. Eventually we settle with $250,000. Deal goes through. And we made only 9%. Not the market 11% and we made improvements. Man, are we jaded now.
Then we start crunching the real numbers. $250,000 less the Realtor's commission is $241,000. We "made" $2150 or approximately 0.9% on our "investment." In a market that reported 11%. Where did it all go?
Thank goodness we didn't throw that $5000 we actually built up in equity payments on the mortgage away on rent eh? We would have made over $11,000 in interest payments.
In that same period we made $9600 in rent payments and will have added $6400 to our $20,000 down payment. I know where I'd rather be right now. Do you?
Ms. HHV gave us reason to sell this year in March with her big-time move up in her career. We won't pay rent in one town and mortgage in another, so we sell. We have no interest in being landlords and the building (as do most older buildings in Victoria) has rental restrictions, so that option is out.
The condo market did roughly 11% between March 2007 and March 2008. Our place? We'll, I painted it out at a cost of under $200 and about 4 weekends worth of my time. I got a great deal on some new cabinetry for the kitchen and single bath at a cost of about $4500. My family assisted me with the install at a cost of two dozen beers, a bottle of Crown, and 5 steaks ($200) and another two weekends. I went to The Brick and picked up all new stainless appliances and did the buy now don't pay til 2021 deal (hey, I'm selling my condo, I can't lose can I?) at a cost of $4500 for 5 appliances. I figure I'm getting at least 15% or more because I've made so many improvements.
I've paid out just over $800 in property taxes and another $2400 in condo fees this year. So before we talk about mortgage payments etc, let's add up the total. I'm out of pocket $238,850.
We list the place with a Realtor for $259,900. It's a nice place in a dumpy building in a not-so-nice neighbourhood, but there is still demand for low end properties in town and our Realtor thinks we have the nicest unit on the market within a few blocks of downtown in this price range. We're skeptical, but hey, we made a huge investment and we owe it to ourselves to get as much as the market will bear.
We get an offer after the first week. It's for $252,000. We counter with "yes" but no appliances. They counter with $254,000. We accept the offer. They go get financing. Can't get it. Deal falls through. We're bummed because there's a time pressure with our upcoming move and we were happy that we had an offer so soon.
Another week, another offer. This one from a qualified buyer. They do their homework and read the strata minutes for the past two years. They have trouble with some of the questions unanswered from the engineer's report dated November 2007. They offer $245,000. We counter $254,000. Eventually we settle with $250,000. Deal goes through. And we made only 9%. Not the market 11% and we made improvements. Man, are we jaded now.
Then we start crunching the real numbers. $250,000 less the Realtor's commission is $241,000. We "made" $2150 or approximately 0.9% on our "investment." In a market that reported 11%. Where did it all go?
Thank goodness we didn't throw that $5000 we actually built up in equity payments on the mortgage away on rent eh? We would have made over $11,000 in interest payments.
In that same period we made $9600 in rent payments and will have added $6400 to our $20,000 down payment. I know where I'd rather be right now. Do you?
Wednesday, April 23, 2008
Is the market about to become ugly?
Here's a quick recap of what we're seeing:
Anecdotally, in my PCS I still see, especially with condos, high asking prices and very little price reductions ($5K or so). I'm not seeing much activity in SFH listings in the $400K range.
Looks to me like the bulls are digging in their heels in this game of tug of war.
- record inventory
- lowest monthly sales numbers since 2001
- lowest prime interest rate since 2001
- divergence between the BoC interest rate and the mortgage companies' posted rates nearing 3%
- MSM publishing regular stories in western cities about record employment, "we're different here" etc.
Anecdotally, in my PCS I still see, especially with condos, high asking prices and very little price reductions ($5K or so). I'm not seeing much activity in SFH listings in the $400K range.
Looks to me like the bulls are digging in their heels in this game of tug of war.
Monday, April 21, 2008
Realtor Ethics and Contracts
A family I know want to move. They called a Realtor to help them purchase a new house. Realtor finds out that they currently own their own home and sees an opportunity to get two commissions. So Realtor comes round to discuss their options.
This family is looking for a pretty specific scenario. They want to downsize but stay in a SFH. They have about 85% equity in their current home and when they sell they ideally want to spend no more than 85% of the sales price on their new place thus freeing themselves from a mortgage.
Their plan was to take their time finding a new house that fits their needs and make a conditional offer subject to them selling their own place. Their Realtor's plan is to sell their house first, thus creating a pressure situation that will force them to buy a new place quickly. This family feels like this situation could at best get them into a house they aren't completely satisfied with and at worst get them into a financial situation that has them in worse shape than the current good state of their financials now.
Somehow in the confused state of the arguments for and against the Realtor's advice, this family found a sign on their front lawn and copy of a contract that they don't quite understand why and how they agreed to sign in the first place.
Here's my question to Realtors reading this blog: what happens if a seller decides to break their contract in the immediate week after singing it, prior to the listing going on MLS? Should Realtors be subject to a "grace period" or "cooling off" period where there is a reasonable time limit on buyer's or seller's remorse, say like a week? where the seller can change their mind consequence free?
To me, the whole scenario paints an ugly picture of the industry. These people were told by the Realtor that in this market, conditional offers aren't being accepted. They were told that they should prepare themselves for bidding wars on good properties.
It seems to me that the Realtor could have secured two commissions by giving good service. Instead, hopefully, this Realtor will lose out on two commissions by being a snake. The trust is blown for these people. They have already told the Realtor that they won't be buying through them now.
Let's hear your thoughts and advice...
This family is looking for a pretty specific scenario. They want to downsize but stay in a SFH. They have about 85% equity in their current home and when they sell they ideally want to spend no more than 85% of the sales price on their new place thus freeing themselves from a mortgage.
Their plan was to take their time finding a new house that fits their needs and make a conditional offer subject to them selling their own place. Their Realtor's plan is to sell their house first, thus creating a pressure situation that will force them to buy a new place quickly. This family feels like this situation could at best get them into a house they aren't completely satisfied with and at worst get them into a financial situation that has them in worse shape than the current good state of their financials now.
Somehow in the confused state of the arguments for and against the Realtor's advice, this family found a sign on their front lawn and copy of a contract that they don't quite understand why and how they agreed to sign in the first place.
Here's my question to Realtors reading this blog: what happens if a seller decides to break their contract in the immediate week after singing it, prior to the listing going on MLS? Should Realtors be subject to a "grace period" or "cooling off" period where there is a reasonable time limit on buyer's or seller's remorse, say like a week? where the seller can change their mind consequence free?
To me, the whole scenario paints an ugly picture of the industry. These people were told by the Realtor that in this market, conditional offers aren't being accepted. They were told that they should prepare themselves for bidding wars on good properties.
It seems to me that the Realtor could have secured two commissions by giving good service. Instead, hopefully, this Realtor will lose out on two commissions by being a snake. The trust is blown for these people. They have already told the Realtor that they won't be buying through them now.
Let's hear your thoughts and advice...
Thursday, April 17, 2008
...in most markets, renting wins: Redux
Mrs. HHV moved to Vancouver. She found a rental in the West End, exactly one block from Stanley Park. It's a beautiful, character one bedroom apartment. Great building, great location, wasn't the easiest search, but it took only a week and she got the place and it's about as perfect as one can get for a rental.
We pay $900 in rent, $25 for parking, $25 for hydro and $50 for cable/internet. This is more than we paid in Victoria at our old place by about $100 per month (I still live in Victoria, but found a zero rent family place). The place is about 100 SF smaller than our old place, but at 650 SF is big in relative terms for a one bed suite.
Let's take a look at the competition: MLS # V701479. 508 SF at $284,900. $125 Strata fee, roughly the same $100 per for bills, plus mortgage of $1650 (25 year amortization with 10% down) for a total of $1875 per month compared with $1000 per month for renting a slightly larger place on a slightly better street in the same great neighbourhood of town.
Ask yourself if you'd rather have that $875/month invested in a rapidly building condo market that is demonstrating some economic cracks or in something safer, like say, a balanced mutual fund? We did, and even in this market, renting won.
I'll be back in Victoria in the next week or so (politics ended my trip to the top of the world prematurely) and will continue this blog's focus on the Victoria real estate market in these most interesting of times. Thanks for the great commentary in the previous post. I haven't read them all, but it looks like this blog didn't die a fast death after all.
We pay $900 in rent, $25 for parking, $25 for hydro and $50 for cable/internet. This is more than we paid in Victoria at our old place by about $100 per month (I still live in Victoria, but found a zero rent family place). The place is about 100 SF smaller than our old place, but at 650 SF is big in relative terms for a one bed suite.
Let's take a look at the competition: MLS # V701479. 508 SF at $284,900. $125 Strata fee, roughly the same $100 per for bills, plus mortgage of $1650 (25 year amortization with 10% down) for a total of $1875 per month compared with $1000 per month for renting a slightly larger place on a slightly better street in the same great neighbourhood of town.
Ask yourself if you'd rather have that $875/month invested in a rapidly building condo market that is demonstrating some economic cracks or in something safer, like say, a balanced mutual fund? We did, and even in this market, renting won.
I'll be back in Victoria in the next week or so (politics ended my trip to the top of the world prematurely) and will continue this blog's focus on the Victoria real estate market in these most interesting of times. Thanks for the great commentary in the previous post. I haven't read them all, but it looks like this blog didn't die a fast death after all.
Subscribe to:
Posts (Atom)