Monday Numbers

There were 189 new listings today and 79 sales, for a sell/list of 41.80%.  Inventory hit 7,620, of which 2,148, or  28.19%, were over 90s.

I read something interesting in the weekend Post. Apparently, adjusted for the rise in the Canadian dollar, the S&P 500 is down 13% over the course of 2007.  And here I thought buying Spiders was a good way to go! 

I also saw an ad for Costa Rican real estate.  I lived in Costa Rica for several years and would love own some good property there, and now that I know strataman has a place in the Chilcotin I might try to work out a vacation property swap with him.  If you want your own  place in the sun take a look :  http://colinasdelsolcr.com/location_about_costa_rica.html

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33 Comments

Filed under Daily Numbers, National Post

33 responses to “Monday Numbers

  1. bearish

    Anyone have a feel for commercial real estate pricing going forward 08, 09 ?. Owned since 2000 in Mayfair business park, paper value has doubled in that time, so nice little gain. If and When do you sell?

  2. Snick

    Sell it. Now.

  3. Mightymouse

    Are the requirements for purchasing commercial real estate the same as residential (do you need a bigger down payment etc…)?

  4. Newcomer

    Thanks for the numbers, Rob.

    Has everyone seen this:
    http://tinyurl.com/2ge6gd

    Martin

  5. Are the requirements for purchasing commercial real estate the same as residential (do you need a bigger down payment etc…)?

    My understanding of commercial loans is that not only do you need a bigger downpayment, the interest rates are considerably higher (unless a well-established entity). I believe that the rationale is that commercial ventures fail more frequently than personal/residential.

    I wonder if the specuvestor class falls under commercial loans stricture, or personal loans stricture.

  6. …the strongest sign yet that the gloom on Wall Street…

    Oh, but I like the sound of gloom on Wall St. Do ye think I need help?

  7. Strataman

    “I lived in Costa Rica for several years” when and where Rob? Do you know that area on the link?
    On the US recession I also feel that they are actually in one stats seem to lag these events. It’s been a lot of years since I have had just a lousy gut feeling about the economy, I think Canada will be hit worse then most other countries cause we are truly tied to US trade. Strangely being a real estate bear that I am, I no longer much dwell on housing, feeling it will be just collateral damage (as the Yanks say). I especially worry about Vancouver as it is usually the luxuries, or optional services that suffer the most, and because Vancouver has no critical productive industry I can see it being hurt far more then the rest of Canada. People will continue to buy oil, wheat and even automobiles, but tourism and conventions are hardly necessities don’t you think? 🙂 I forecast 1/2 as many Starbucks in two years! 🙂 And NO more attempts by Wal-Mart to enter the Vancouver market. That followed by El Nino in 2010 could mean economic disaster. 🙂 The house of cards!

  8. Newcomer

    “…Vancouver has no critical productive industry…”

    This is what always strikes me. BC is basically forestry and mining and nothing else, unless you want to count movies/TV and, of course, real estate itself. With forestry tanking, this is an exceptionally dangerous time for BC.

  9. chip

    It always strikes me as odd that when people discuss BC’s economy they always mention mining, film, real estate etc but they never mention the affirmed number two industry in this province: drugs.

    It’s anywhere between $4 and $7 billion of recession-proof cash. On top of that, we’re world leaders in money laundering and fraud.

    Scratch your heads in amazement if you like, but it’s pretty obvious that this is one of the major underpinnings of the local market.

  10. Annon

    Rob, any comments on the real cost of keeping a vacation house in Costa Rica? Please include worse case scenario. Thanks.

  11. -A-

    “…Vancouver has no critical productive industry…”

    Maybe the situation is not as dire.

    We have a thriving mortgage brokerage industry in the Nordel Way area, a flourishing Pawn Brokerage industry in East Vancouver, and Meth Labs sprouting like mushrooms in Yaletown.

    The payday loan industry seems to be expanding at warp speed as well. But for the less adventurous there are plenty of “opportunities” (yes opportunities, not service job slavery), in the hospitality industry.
    Rob:
    thanks for the numbers, but I am still at a loss as to their significance.

    Perhaps there is more to be predictive value in a couple of stories recently in the media. One reported on the fact British Columbians carried a huge and disproportionate mortgage debt, the other was about a couple who were raising a child in a closet(pardon me, a condo), I believe the square footage was 515sqft.,possibly 550.

    Can you see trouble up ahead?

  12. WoW

    Home sales sink, outlook darkens
    11:38am: Realtors now see biggest drop in home values starting this year; forecast for price rebound pushed back to ’09.

    CNN headline – but not here, right!:))

  13. robchipman

    Strataman:

    I lived in the Central Valley, but I’ve been all over that place. I know the area that is being advertised, and would personally pick another area, but that’s personal preference, nothing more. The whole country is a great place, imho. I first went there in ’77.

    Annon:

    Costs of keeping a vacation property in CR will vary. Worst case scenario? You buy something but don’t get title (there is title insurance now, however, to reduce that problem), you buy land that is subject to squatters, you get something that gets stripped while you’re away, access to the place is denied, or water, sewer, or other utilities are denied, etc. Everyone is different, obviously, and so want other things, but an easy solution is to buy something that has title insurance and that is part of some sort of community. I’m not sure how financing works there now (I smiled at the old school approach in the ad – pay 65% now, and the balance when construction on the clubhouse starts in a few months! 🙂 ) , but there is, as I say, title insurance, plus lots of banks.

    The other concern is access. Right now you can fly to San Jose, which is in the center of the country, but a few hours from beaches. You can also fly to Liberia, a town in the north, which is as close as 45 minutes to the beaches of Guanacaste province. I saw flights to Liberia recently for $198! The point is, although its a small country, its not always easy to get around. The area I like is literally a day’s journey from an international airport.

    -A-

    What can I say? The numbers reflect what has happened here recently, and are independent (there are too many participants to generate a fake spin). They are markers of current activity, nothing more. You seem very concerned with the correct prediction of a specific outcome, regardless of what the objective facts are, so I’m not surprised that you don’t see their significance.

    Like you say: “Perhaps there is more to be predictive value in a couple of stories recently in the media” Maybe there is. If you’re approach is to predict a specific outcome and base your investment approach on that prediction, great. Put all your eggs in one basket. If you hit a home run you’ll be a genius. If you don’t, well lets face it: you’lll explain it away.

    I predict a wider range of less specific things: the market will change, we won’t be able to accurately predict many outcomes, tough times and down markets will come just as surely as good times and up markets, and if you plan to be around for any length of time you better prepare for more than one outcome. To do that I look at a lot of things, not only daily numbers. If you prefer a simple answer, buy a newspaper and run with it.

  14. watching the market

    Hi Rob,

    Appreciate your work and posting publicly — just wondering, any chance of summarizing your daily/anecdotal data in graph form……? Would be really useful to follow listings/sales/% over 90 at a glance, to see trends as we move through the year? Thanks!

  15. Robert

    Housing not so affordable any more

    Price increases hurt buyers looking outside Metro

    http://tinyurl.com/2bafm7

  16. WoW

    Breaking News from The Globe and Mail

    Countrywide Financial stock slides on bankruptcy talk
    Reuters

    Tuesday, January 08, 2008

    NEW YORK — — Countrywide Financial Corp. shares slid as much as 19.9 per cent to their lowest level in nearly eight years on what traders called speculation that the largest U.S. mortgage lender might seek bankruptcy protection.

    The company did not return a call seeking comment.

    “There is renewed speculation that Countrywide will declare bankruptcy or have some default action,” said Al Greenberg, head options floor trader at broker-dealer BNY ConvergEx Group in Chicago.

    Like many U.S. mortgage lenders, Countrywide has struggled with the U.S. housing slump.

    Borrower defaults have soared as falling home prices and tighter credit markets led it stop making many of its more profitable home loans. The refusal of many investors to buy all but the safest mortgage has led to write-downs of loans on its books.

  17. robchipman

    Watching the Market:

    I actually track those numbers, but I don’t generally post them anymore because it takes too much time. They are useful, I agree.

    I made a mistake on the S&P quote. Levi Folk in the Post reports it as being down 25% since the June high, when converted to Canadian dollars.

    WoW:

    Its kind of ironic, isn’t it? What would you rather invest in? Countrywide shares or a new mortgage? Regardless of the sub-prime and credit crunch, a mortgage remains a good loan, especially if you maintain a drect connection between borrower and lender.

  18. WoW

    Mortgage remains a good loan – I’m rolling on the floor on this one, thanks Rob, you made my day!:))

  19. WoW

    Bullish or Bearish – you decide.

    News from Reuters

    Bank of Canada’s Kennedy says downside risks bigger

    08/01/08

    OTTAWA (Reuters) – Economic and financial market developments since October suggest that the downside risks to the Bank of Canada’s economic outlook have increased, Deputy Governor Sheryl Kennedy said on Tuesday.

    Kennedy’s remarks came in a speech in Montreal, and is likely the final opportunity for the central bank to send a message before its January 22 interest rate decision.

    “The downside risks prevailed,” she said, explaining how the bank’s outlook worsened in December from October, when it had judged the risks to its inflation projection to be “roughly balanced, with perhaps a slight tilt to the downside.”

    Her remarks echoed comments in the central bank’s December 4 statement accompanying its interest rate cut.

    Governor David Dodge was also dovish this week. He told reporters on the sidelines of a central bankers’ meeting in Basel, Switzerland: “The downside risks to Canada from slower U.S. growth in the first half of 2008 are probably greater than we estimated in October.”

  20. robchipman

    WoW:

    Figure it out. You maintain a good connection between the borrower and the lender. You negoatiate the terms and the loan to value. The lender gets a charge against the property and an assignment of rents. Would you loan me 50% of the value of my rental properties right now? Or, if the crash you anticipate occurs, would you lend me 75% of the value in the future, if, say, today’s value drops by 25%?

    Mortgages are good loans because there is a hard asset with value that is not going anywhere. The key is to determine the value of the asset and the creditworthiness of the borrower. In the sub-prime situation which was the larger problem? Value or credit worthiness?

  21. robchipman

    In terms of whether Kennedy’s comments were bearish orbullish, who was it who said CBs would continue to cut rates to try to get us through the credit crunch, picking inflation over recession? I don’t think that the comments are so much news, as more evidence of how the BoC will likely respond to what we all fear is coming.

  22. jesse

    “who was it who said CBs would continue to cut rates to try to get us through the credit crunch, picking inflation over recession?”

    The problem now is that a lot of the collateral used for taking out debt is mis-priced and until the values stabilise there will be problems regardless of what CBs do with overnight rates. The last time CBs cut rates there was still a (mild) recession.

  23. Priced Out

    I think this market crashes when the boomers panic.

    Boomers have a herd mentality and you should see the way their expressions change when you say the R word. All the “its different here” talk goes away.

    Its like a bad flashback to the 80s.

    So many boomers have more than enough equity right and can drop prices quickly. They could drop their prices 30% and still make out like bandits.

    Watch the boomers.

  24. robchipman

    Jesse:

    I’m not sure that “a lot” of the collateral is mispriced. The securities that the collateral back is mispriced, and can’t be redeemed (at least that’s my understanding of it). Let’s say we have 100 mortgages that have to re-set, and they back a certain amount of securities. How many of the 100 have to go into foreclosure to screw up the valuations of the securities? Probably not a lot. They were supposed to be AAA, remember?

    That said, I’m not trying to downplay the challenge. Its real, and will continue, and is the reason that CBs will continue (imho) to keep rates low.

    When you say that the last time CBs cut rates there was a mild recession, what time are you referring to? (And to be clear, I’m saying that CBs will choose the danger of inflation rather than recession; I’m not saying their choice will be honoured).

  25. WoW

    Yup – I will lend at 50% ratio. I see your point.

  26. Annon

    Thanks Rob, your input gives me enough information that this is NOT for me. The risk of losses is too high for me.

  27. jesse

    Rob:

    “When you say that the last time CBs cut rates there was a mild recession, what time are you referring to?”

    CBs cut rates in 2001 and in the US there was a nominal recession. Canada had a real recession (GDP below inflation). I don’t think the choice is “recession or inflation” but “inflation or deflation.” Recessions will happen regardless. If inflation does take hold I wouldn’t bet on long term rates staying low, unless you know something I don’t. 😉

    Ultimately, in the US, there were misallocations of jobs in the past few years in construction overbuilding and speculative debt products that need to be transferred to other areas of the economy. The ability and speed of other areas of the economy being able to absorb this is is the essence of whether there is a recession or not.

    “The securities that the collateral back is mispriced”

    I think both are. In essence a bunch of California properties were appraised in 2005 and now are appraised for less. If appraisals remained at their peaks the sercurities would not have been devalued as much.

    But yes of course mortgages will always be available to those the banks feel are capable of servicing them. There are people with “jobs for life” that can service a mortgage regardless of the surrounding economy. The worry is the rest of us may be seen as not having a steady enough cash flow in recessions, so while I may be deemed AAA in good times (like today), the lender (and buyer of the MBS) may get nervous when they determine my job is not recession proof, with a potential slowdown on the horizon.

  28. robchipman

    Jesse:

    I think you pretty much nailed it.

    Annon:

    The risks in CR exist, there’s no question. The key is how you mitigate them. I’m in the process of exploring that more right now. There are great, safe products to be bought there, however.

  29. Strataman

    Rob; do a quick search using downtown as your search criteria on Craiglist. I fully realize that there are hundreds of re-posts daily. In your opinion is this a renters market or a landlords market? I bring this up for one reason, this was no where near this level last year. Do you think this means anything or is it seasonal? Be honest now! 🙂 http://tinyurl.com/3btbfu

  30. robchipman

    Strataman:

    I think that using Craigslist as an indicator of vacancies can be deceiving. The number of listings goes up as listings get re-posted (as you point out, and I’m sometimes guilty of), and the service gets used by an increasing number of people (I didn’t use to use it, but I use it a lot now).

    The reason I think this is that despite reports that vacancies are high downtown as evidenced by C/L, I generally have one showing to multiple people and get the place rented after one showing (I think I did that today, for example, and I did it last month as well).

    Now, maybe my downtown places are under-rented. Maybe other people post the same stuff time and again without renting it. I don’t know. I do know that at a traditionally slow time of the year (January 1 move in date) I got everything rented out and had no actual vacancies except a beauty salon. That might just be me. Any tenants have stories from the market to share?

  31. Strataman

    “I think that using Craigslist as an indicator of vacancies can be deceiving” true for total vacancies it would be unreliable, however if you look at the percentage that are “available now” compared to the ones who are renting a unit where notice has just been given, I find an incredibly high amount (quick calculation 60%) that are vacant indicating at the minimum a 2 month renting period. Not healthy for investment income. I would bet yours were not sitting empty more than a few days.

  32. The Original Joshua

    “Any tenants have stories from the market to share?”

    Quick anecdote – I am a renter, hope to be a FTB soon (sure wish that crash would happen soon, LOL)… I found my current place about a year and a half ago when I moved to Van from Victoria – it was crazy, twenty people at every showing, a dogfight to even get the attention of the landlord (pick me! pick me!)… I was able to get a place because I have good references, a small family, and excellent income… but it was tough.

    I am currently looking to move (for various reasons which I won’t detail), and it seems a bit easier right now. A house that previously would have been snapped up was recently re-listed on C/L at a lower rent (“Trendy Main St!!!” haha). Seems like there is more choice.

    Purely anecdotal, draw your own conclusions…

  33. robchipman

    Strataman:

    Actually, when I refer to my “vacancies” they aren’t even vacant. They’re places that will turnover at month end with no cashflow interruption. Vacant places are only new accounts or problem properties (more of the former, fewer of the latter).

    I think that you’re right: “available now” could be a good indicator of vacancies. No matter what the market, the price has to be right.

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