Monday Numbers

There were 254 new listings today, and only 80 sales, for a sell/list of 31.50%.  Inventory reached 9,133, of which 2,588, or 28.33%, were over 90s. 

Reading the comments on the last thread I noticed a few people pointing out a few month’s worth of declines in the UK.  I thing the underlying theme is the idea that we’re at the top of the market here.  We may be.  We’ve had a good run, after all.  But, the real estate market moves slowly.  One year ago we had witnessed detached benchmark prices decline from $659,269 in September until they reached $641,596 in January.  That decline had been preceded by a drop in July. 

That doesn’t mean that market hasn’t changed, or isn’t about to.  But it does seem to indicate that 4 months may not be a trend.  After last winter’s 4 month slide we arrived at a December ’07 detached benchmak price of $730,399 (+13.8%).

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149 Comments

Filed under Daily Numbers

149 responses to “Monday Numbers

  1. BOBBYBEAR

    The main reason real estate has gone up alot in the UK is asset boom….credit/low interest rates. The actual economy and social structure is rotting.

    Any idea why their stock market went up a huge amount on the last 4 years? What do you buy from the UK? Answer is NOTHING. They are in a long term slide…and it aint an upward one.

  2. BOBBYBEAR

    The west is very lucky to have the emerging economies to balance our decline. Hopefully, they will be nice to us.

  3. AmPa

    I received my copy of Ozzie’s Insider newsletter today. His first edition for the new year is always the most interesting.

    He exercises extreme tact in his use of words and composition of sentences. I don’t mean that he is misleading or imprecise in expressing his opinion. He just does not claim to forecast the market. And this is a guy who has carried hundreds of properties in his portfolio, and ridden through the best and worst of the markets. So much for the rest of us armchair RE gurus.

    Anyways, here are some interesting quotes regarding his expectations for 2008:

    “We have been there before… [crashes]… and we worked them out. But each time we had to ‘go thru the valley of readjusting’ before we went on our next leg up”

    “… after a strong spring [in] BC, selection selection selection. All listing inventories will rise. Particularly condos.”

    “There will be fewer investors. It is estimated that one half of all condo purchases in the last 3 years were to investors”

    “There will be a barrage of bad news about the ‘market'”

    “[In Vancouver] our prices are VERY high, our afford ability is zero…”

    “BC has a way to go – we have huge capital investment, large foreign investment, low, low unemployment, very low vacancy rates. However we would not be surprised to see a reversal sometime this year, but remain convinced that 10 years from now we will see prices higher yet”

  4. BOBBYBEAR

    I am not positive on this but I believe it is very possible that the stock market sell off around the world is similar to the violent cracking a giant douglas fir makes as it starts to tilt as the lumberjack backs away with his saw. Just starting baby. Takes time.

  5. benny lava

    Is there any market left that isn’t declining right now?

    I think maybe there’s Saskatchewan, us, and… and… Latvia maybe, or is that heading down the other side of the roller coaster now too?

  6. -A-

    Rob Says:

    “But, the real estate market moves slowly”

    Wrong again Rob.

    Bubbles and bear markets can last longer than what rational people would expect, but the switch from one to the other can be within a narrow window of time.

    When Vancouver RE switches from Boom to Bust, it will happen so fast, most of the Kool-Aid drinkers will get stuck.

    Do you still agree with your “worthy” colleague that price pressure will intensify as we get closer to the Olympics?

    Over to you Rob, let the spin begin

  7. coco

    “But, the real estate market moves slowly.”

    Yes and No, depends on how desperate everyone is to sell.

    We have a lot of speculators/investors out there and who knows what will happen if they see a declining market. We could be flooded with listings. I guess we will find out eventually.

  8. coco

    “The west is very lucky to have the emerging economies to balance our decline.”

    Not sure what your referring to. The U.S. buys more oil and gas from Canada than any other country. India/China are small potatoes. Check it out.

  9. coco

    “What do you buy from the UK? Answer is NOTHING”

    In 2005, Canada exported C$8.1 billion worth of merchandise goods to Britain, 5.7% more than in the previous year.

    ***Imports from Britain were valued at C$10.4 billion, a 7.6% increase over 2004, bringing total bilateral trade to just over C$18.5 billion.

  10. coco

    BC Softwood Lumber Exports by Destination

    http://tinyurl.com/2tjjy5

    (U.S. buys the majority of our lumber too)

  11. WoW

    Brrrr, its cooling out there in RE land!:))

  12. coco

    U.S. Housing prices to free fall in 2008
    According to a Merrill Lynch report, home prices will drop 15 percent this year, and declines will continue in 2009.

    http://tinyurl.com/275ozr

  13. coco

    U.S. Home price drop hits a new record low
    The S&P Case/Shiller report shows the biggest year-over-year price decline on record.

    http://tinyurl.com/27n4bs

  14. Popeye

    · Ampa, you said that Ozzie said “…but remain convinced that 10 years from now we will see prices higher yet”
    · Yes, and 10 years from now the minimum wage will be higher too, we can confidently predict. But what about 5 years from now? By using the 10-year measure you can see how this guy, Ozzie-the-guru Jurock covers his butt.
    · And you can be sure this guy will be well retired 10 years from now. He’ll sitting on his beach-front lanai in Maui sipping Heineken suds while the sun goes down, counting his millions.
    · Ozzie has made more money from selling real estate courses than doing real estate deals.

    And just out of interest, if you carry a condo for the next ten years waiting for a price rise, your jackpot at the far end of the rainbow will be zilch, and you’ll be lucky to show even a tiny gain. It won’t even be enough to pay your bus fare to Halifax, if that’s where you want to go.

  15. coco

    Vancouver housing ‘severely unaffordable’
    Survey ranks city’s affordability worst in Canada and 15th-worst worldwide

    http://tinyurl.com/9rjqa

  16. coco

    More from the one we love to hate…

    Our new $14 billion Provincial Transit Plan will add 600 frequent buses outside Metro Vancouver–a 60 per cent increase. No doubt, Chilliwack will certainly apply for a large number of these buses which will go a long way to addressing the needs of transit users. BC Transit will be working with communities on detailed planning in this regard.

  17. coco

    I wonder how much the property taxes will rise. At first 6% was mentioned, but rumors are floating it may run as high as 9%. Ouch!

  18. blueskies

    Fed generosity:

    http://tinyurl.com/2d4ssx

    “U.S. Fed loans $30-billion to cash-strapped banks”

  19. Mr. Maxwell

    I do not fully understand why so many of you on this site point to news stories about broad economic problems as though they will lead to the imminent demise of the Vancouver residential real estate market. The multitude of problems will utimately affect Canada (and most other countries) but no one really knows exactly how. Until we actually have a large inventory of homes for sale and few buyers there will be little change in this market. Can someone explain why I should think/believe otherwise?

  20. coco

    Pine beetle problem concerns all of B.C.

    http://tinyurl.com/244kgt

    That implies a contraction of 3.8 to 7.6 per cent in B.C.’s economic base, with the crunch coming around 2015, by which time 80 per cent of all Interior lodgepole pine will be dead.

  21. blueskies

    Mr. Maxwell:
    point to news stories about broad economic problems as though they will lead to the imminent demise of the Vancouver residential real estate market.

    actually no direct connection with Van RE…

    but when your portfolio is down due to world wide systemic credit problems tying your financial dreams to a RE Ponzi scheme is not good… all the spin in the world does not negate the truth… now is NOT the time to buy.

  22. -A-

    Mr. Maxwell :

    “Until we actually have a large inventory of homes for sale and few buyers there will be little change in this market. Can someone explain why I should think/believe otherwise?”

    Given what you think and believe, have you been buying up all you can afford to buy?

  23. coco

    Variety is the spice of life….

    Even Rob has been known to talk about other subjects. I don’t think many people would be here if we just talked about Vancouver real estate and the numbers everyday.

  24. Newcomer

    “Until we actually have a large inventory of homes for sale and few buyers there will be little change in this market. Can someone explain why I should think/believe otherwise?”

    This is true. But how does it come about that we have a large inventory (rush for the exits) and few buyer (spooked buyers)? Psychology. And stories in the newspaper and at dinner parties are what drive psychology.

    Because Vancouver RE is entirely disconnected from fundamentals. it is the story itself, rather than the thing that is being described, which will impact house prices.

  25. coco

    Well said, Newcomer

  26. coco

    The Muslim Canadian Congress wants the CMHC to stop a study considering the introduction of so-called “Islamic banking” to Canada.

    http://tinyurl.com/35c5tl

  27. Snick

    Rob indicated that RE markets move slowly. As I recall during the “pause” in fall 2004, prices dropped quite quickly for several months beginning in August.

  28. AmPa

    · Popeye, you said that …
    “· Yes, and 10 years from now the minimum wage will be higher too, we can confidently predict. But what about 5 years from now? By using the 10-year measure you can see how this guy, Ozzie-the-guru Jurock covers his butt.”

    You would be bold to try to discredit Ozzie of all RE proponents. If there is one guy that has credibility in Canadian RE, it would be him.

    You see, that’s what he also said 10 years ago. When in 2000 everyone would laugh at the idea of gobbling up RE in coal harbour, yaletown, or even Port Moody or Coquitlam, Ozzie was shouting “buy, buy, buy”. Back then, you could have cashflowed in all those areas. The price of not listening to his advice was not becoming a millionaire.

    Now he is telling us to thread carefully, and keep our outlook to 10 years from now. That’s also what he said 10 years ago.

    “· Ozzie has made more money from selling real estate courses than doing real estate deals.”

    Do you have some credible source to back that up? Oh of course he makes money by his courses, and I pay for his advice handsomely, because his advice also paid me handsomely over the years.

    “And just out of interest, if you carry a condo for the next ten years waiting for a price rise, your jackpot at the far end of the rainbow will be zilch, and you’ll be lucky to show even a tiny gain. It won’t even be enough to pay your bus fare to Halifax, if that’s where you want to go.”

    That’s one magic crystal ball you got there. Did that crystal ball also predict for you the incredible run up we had in the past 8 years? Too bad.

  29. coco

    Ampa,

    I thought the comments you posted from Ozzie’s newsletter were interesting. Thanks

  30. oh please

    Accredited Home Lenders has shut down its Canadian operation:

    http://tinyurl.com/3durq8

    Anybody know if they did much business in BC?

  31. canyongal

    Hi, Rob,
    It would be great to compare apples-to-apples yoy. Could you please fill out the data for Jan. 28 2008 comparable to same last year? Thanks!

    Today you wrote: Jan. 28, 2008 (Monday) : There were 254 new listings today, and only 80 sales, for a sell/list of 31.50%. Inventory reached 9,133, of which 2,588, or 28.33%, were over 90s.

    Last year at same time you wrote: Jan. 29, 2007 (Monday): There were 214 new listings and 97 sales today, for a sell/list of 45.33%. Of the sales 10, or 10.31%, went over list. Average list price of the sales was $492,856; average sales price was $479,258, a difference of $13,598, meaning the average sale went for 2.52% under list price. Average days on market to sale was 51.

    There were 72 price changes, of which 10, or 13.89%, were increases. The average original list price of price changes was $488,141; the average new price was $472,444, a difference of $15,697, meaning the average price change was -2.96%. Average days on market prior to price change was 70.

    The 14 day rolling sell/list rose to 46.88%.

    There were 9,281 active listings in my target area today, of which 3,099, or 33.39%, had been on the market at least 90 days.

    0.67% of all active listings in my target area had their prices reduced today.

    Again, I appreciate your time on this. Great to have this detail. I think sticking to data is always the best way to read trends.

  32. jesse

    Jurock:”but remain convinced that 10 years from now we will see prices higher yet”

    That can mean so many things: real or nominal, SFH or condo, Van West or Hope. Jurock-speak.

    coco: “We have a lot of speculators/investors out there and who knows what will happen if they see a declining market. We could be flooded with listings. I guess we will find out eventually.”

    I think we know what will likely happen based upon experiences in other markets. The market will move both fast and slow. Prices will most likely move slow but inventory can move very fast. I think a few on this blog have pointed out that most have forgotten (or don’t even know) what a bear market looks like. Interesting to ponder. You don’t really know until you experience it first-hand.

    Last year we saw MLS’s ability to post listings maxed out. I wonder if we will see the same thing this year, or worse? Maybe MLS has expanded its capabilities this year to handle sudden rushes of listings. Does anyone know if they have any such contingency in place?

  33. Mr. Maxwell

    -A- “Given what you think and believe, have you been buying up all you can afford to buy?”

    It is not relevant what I do personally. One person does not drive this market. There seems to be many people who still very much believe in the Vancouver market. They know it is high but they are willing to extend themselves to get in. So long as you have large numbers of those people in all segments of the market you will not see any material downward trend. I am making an observation. It really is supply and demand. You can look at the U.S. housing market to confirm that reality.

    Newcomer, I think you are correct about psychology but I’m not so sure a negative outlook has gripped potential Vancouver home buyers. With low interest rates, low inflation and strong employment, where is the panic? My guess would be that prices flatten because of affordability issues but that we will not see a downward trend until we have a significant increase in supply. -A-, do you think that is an offensive statement?

  34. Snick

    “With low interest rates, low inflation and strong employment…” – Mr. Maxwell

    We are merely “delayed” here. BC has usually been “the last in and the last out” of previous downturns/recessions.

    It’s already started. The BC Business Council numbers that Coco posted last week showed that this province has had extremely anaemic growth for the past two quarters. (.03%)

  35. jesse

    “My guess would be that prices flatten because of affordability issues but that we will not see a downward trend until we have a significant increase in supply.”

    Agree here. Food for thought: many jobs depend upon residential construction projects. If the day ever comes when there is oversupply the unemployment rate goes up as builders curtail their construction projects, unless there are other jobs to be filled (at about the same salary). Double whammy.

  36. BOBBYBEAR

    so coco what 10 billion dollar Cdn imports do we get from Britain? What type of stuff specifically?

  37. domus

    “There seems to be many people who still very much believe in the Vancouver market. They know it is high but they are willing to extend themselves to get in. So long as you have large numbers of those people in all segments of the market you will not see any material downward trend…..It really is supply and demand. You can look at the U.S. housing market to confirm that reality.”

    Maxwell,

    I liked your conclusion…..yes, let’s have a look at the US. Did anyone overextend themselves there in the past 4 years? How are they doing now?

  38. robchipman

    -A-

    If you look at what I wrote about Binnie’s comments you’ll notice that I didn’t subscribe to price pressure increasing as we approach the Olympics. I’m on record predicting slower (not faster) price growth through 2008. Thanks for demonstrating your predilection for ignoring facts when they conflict with your opinion.

    When you say that real estate markets don’t move slowly, aren’t you flying in the face of fact? We dropped in price 4 months in a row last winter, but the upward price trend continued. Still price growth did slow (and did so slowly).

    Aren’t you confusing whether the change happens slowly with whether at some future date you can determine the precise time that the market turned in the past? And isn’t that date itself open for debate? Did the market start going down when prices began dropping? Or when price growth lost steam? Ask WBWYCR for his take on that. He’s sold now, knowing that he may well have left money on the table. Was he afraid he’d be caught being unable to sell at all? Or did he simply decide that conditions for selling were favourable?

    coco:

    “Yes and No, depends on how desperate everyone is to sell”.

    It also depends how desperate people are to buy. You can’t have a succesful sale simply by listing. You need a buyer as well, every single time. In a buyer’s market the buyer becomes the deciding factor and calls the tune, plus, there are less of them. Volumes tend to drop, absent other motivations.

    Newcomer:

    “But how does it come about that we have a large inventory (rush for the exits) and few buyer (spooked buyers)? Psychology. And stories in the newspaper and at dinner parties are what drive psychology.

    Because Vancouver RE is entirely disconnected from fundamentals. it is the story itself, rather than the thing that is being described, which will impact house prices”.

    If you beleive that psychology drove the market up, and will also drive it down (and not to put too fine a point on it, but inventory is currently low, not high, and we don’t have a rush to the exits right now), then you can’t really dismiss a bull argument for price appreciation simply because it doesn’t hold up to critical analysis (same for bear arguments for price drops).

    If you buy the pyschology explanation then the efficacy of the cause depends more on what people believe than on reality. For example, if we think in migration is huge because of all the talk and the traffic, so prices rise, despite numbers showing lower than expected net in migration.

    Snick:

    “As I recall during the “pause” in fall 2004, prices dropped quite quickly for several months beginning in August.” And the pause didn’t result in a changed trend. You’ve kind of made my point, right? Watch out for -A-. He’ll be gunning for you.

    AmPa:

    “You see, that’s what [Ozzie] also said 10 years ago”.

    His best quote is that a forecaster should forecast often, and not give specific dates! I like Ozzie, btw.

    I won’ be so bold as to say that popeye is wrong in his ten year outlook, but I don’t buy it, and in fact will (and am) betting against it. Do the math, right? Buy a place in 2004 for 25% down and have it cash flow. Re-mortgage now for what the rent carries and you’ve recovered your downpayment and still have plenty of equity to survive most corrections. You’re into the property for a grand total of $0. Your money, and quite possibly a portion of your profit, has been recovered. So, when popeye says that your jackpot in 10 years won’t be anything to write home about he clearly doesn’t see the big picture.

    Canyongirl:

    I’d like to provide the full data, but I’m too busy these days. Despite what people want to believe, we’re making several sales. I will explore other ways to get it to you.

  39. Doug

    @bobbybear

    London is becoming the center of the world.

    Part of the key is the ability to travel quickly and cheaply to most major destinations.

  40. -A-

    “A-, do you think that is an offensive statement?”
    No I don’t.

    Also:

    “With low interest rates, low inflation and strong employment, where is the panic? My guess would be that prices flatten because of affordability issues but that we will not see a downward trend until we have a significant increase in supply. –“

    Bubbles often build up under those macro conditions. You don’t need double digit unemployment or interest rates, to pop this massive credit and re bubble. That is a myth created by the pumpers.

    It’s always that last straw that breaks the camel’s back. My observation of RE bulls is they seem to think that once the camel’s back is broken, they can simply remove the last straw, and the camel will just get up again.

    This camel won’t be getting up for years.

  41. Snick

    “As I recall during the “pause” in fall 2004, prices dropped quite quickly for several months beginning in August.” And the pause didn’t result in a changed trend. You’ve kind of made my point, right? Watch out for -A-. He’ll be gunning for you.”

    Not quite, Robbo

    It was a “double top” like in the stock market.

    After the second peak, prices decline.

    Dig?

  42. Mr. Maxwell

    Domus – “I liked your conclusion…..yes, let’s have a look at the US. Did anyone overextend themselves there in the past 4 years? How are they doing now?”

    You seem to distort things to fit your hopes for a future crash. Each market is different. Lenders here (Canada) are and always have been conservative in approving financing. We will not have f0reclosures resulting from ARMs. US markets in close poximity to us (Seattle, Portland) have fared well so far. Material numbers of people here will have to lose their jobs before we see the over extended put their homes on the market. At present, that’s not likely. Your only real hope for a rapid decline is if a material number of condo speculators start listing. That’s possible.

  43. WoW

    Snick/Rob – what do you fella’s (or gals) think prices will do in Jan – up MoM?

    Straw/camel – yup, agree with that…

    I’m thinking of taking my rent to $4k or so monthly and upgrade my living situation substantially (from decent to great)…will my wife tell me I’m throwing money out the window (answer – yes) – but – is she right?

  44. -A-

    “You seem to distort things to fit your hopes for a future crash. Each market is different. Lenders here (Canada) are and always have been conservative in approving financing.”

    That is another myth. Lenders are not more conservative in Canada. They knowingly approve credit apps based on made up t4 slips and overstated employer credit references.

    It’s part of the benefit package offered by low paying employers to help out the underpaid workers.
    Anybody can get a mortgage, a credit card, or a line of credit.

  45. Newcomer

    “If you buy the pyschology explanation then the efficacy of the cause depends more on what people believe than on reality. For example, if we think in migration is huge because of all the talk and the traffic, so prices rise, despite numbers showing lower than expected net in migration.”

    Quite true, but that doesn’t make bear arguments irrelevant. An argument to the effect than immigration is in fact low just needs to be seen as an argument to the effect that (because reality has a way of getting into the public mind sooner or later) people are likely to think immigration is low in the near future.

    By the way, why is everyone taking Ozzie’s prediction of price gains over ten years as bullish? I see it as exceptionally bearish. You’ve got the uber-realtor saying prices will fall and not recover to current levels for nearly a decade and the bears are not satisfied. Geez, what do you guys want?

  46. -A-Senior

    Sorry Relators, -A- has no school today.

  47. sidelines

    I’m a potential buyer, two small kids with a career in nursing. I’m finding it difficult to make the plunge. Affordability.. Affordablity !!

  48. -A-'s Mom

    I just switched the breaker off to -A’s room, hopefully, the laptop battery won’t last long.

  49. coco

    Bobbybear,

    This will give you a good idea what the UK exports in general (listed on pages 3-14)

    http://tinyurl.com/yvhdxd

    If you wish to see what Canada specifically imports from the UK, you can probably find it on a Canadian government trade website or google it.

  50. BOBBYBEAR

    Greenspan had it somewhat easy for most of his term as he simply rode the lower interest rate game down from the early 80s. And he still blew it before he left.

    Before Greenspan, Volker was strong because he broke the back of the inflationary spiral that essential began in the 60s after gold was unpegged.

    In my opinion Bernanke has it very, very difficult. Greenspan cut rates too low and too long. This caused the bubble along with the mortgage and various other farces.

    The interest rate game is coming near the end. When mortgage rates drop from levels a teenager leaving school would appreciate down to the level of a kid in kindergarden, you know baby, it is just about over. It is all over accept the crying.

    So what now? Well the credit game is suffering big time and lacks almost any confidence around the world. So what is the Fed’s plan?

    It is called money creation. Not credit creation, but money creation. With lending there is a lender and a borrower. This is not working well lately and with such low rates a very bad game for investors for a multitude of reasons.

    You see, the U.S. is broke. Now with the credit game getting pounded the Fed’s strategy, one would assume, is to continue or increase the creation of money. They simply inject it into the sysytem.

    For example, the Fed may decide to inject 10 billion dollars into the system on a given Wednesday. They might buy back $10,000,000,000 of the $9,000,000,000,000 in total federal government debt outstanding, in the open markets, of a 10 year bond. This a cash infusion to the markets and those 10 years bonds are now gone.

    This is what many refer to as printing money, or more accurately know as “monetizing the debt”.

    When the debt starts to crush the system, and the interest game is almost over,…it must be time to start larger efforts to monetizing the debt on a controlled basis as possible.

    This, ladies and gentleman, MUST be the Fed’s problem. The very rough markets last week were extreme nervousness about where the fiat system is going. And with all their research I am sure the Fed is very, very familar with the K wave theory. Scary stuff.

    So we should see the affects of the Fed increasingly monetizing the, as a very important strategy in offsetting the powerful deflationary forces, as well as interest rate cuts. The rising price of gold since the beginning of the decade reflects this.
    The increasing price of gold is the enemy of the Fed because gold is an alternate real money of last resort. The Fed knows this very well.

    The Fed works in tandem usually with the other Western cental banks.Funny how most of these western central banks were selling their gold reserves ,except the U.S. Federal Reserve, over the last several years. My guess is it was to keep the price of gold down which has obviously failed.

    A new inflationary cycle in the making? Or Japan here we come? Or some new combination? We will see. Nobody wants PAYBACK time. Easy answer is to reinflate. Does the Fed know what their doing? Who knows.

  51. -A-'s Brother

    Just a warning to the realtors, -A- really has it in for you.

    Apparently he was “caught in the act” with a realtor’s wife, and he didn’t fare too well in the fight, and well, ever since……

  52. Mr. Maxwell

    -A- “That is another myth. Lenders are not more conservative in Canada. They knowingly approve credit apps based on made up t4 slips and overstated employer credit references.”

    If you think Canadian financial institutions knowingly offer mortgage financing based on fraudulent information you are seriously deluded. There are many good arguments for why a correction should and will take place in Vancouver. Your unfounded claims do little to support a bear position or change psychology. You should stick with reality

  53. whybuywhenucanrent

    >>>It would be great to compare apples-to-apples yoy. Could you please fill out the data for Jan. 28 2008 comparable to same last year? Thanks!

    Today you wrote: Jan. 28, 2008 (Monday) : There were 254 new listings today, and only 80 sales, for a sell/list of 31.50%. Inventory reached 9,133, of which 2,588, or 28.33%, were over 90s.

    Last year at same time you wrote: Jan. 29, 2007 (Monday): There were 214 new listings and 97 sales today
    <<<

    Excellent suggestion. Rob, how about doing this on, say the first of each month, or the 15th or something. The old stats gave a lot more info, but I don’t think we need them every day.

    Again,
    Whybuywhenucanrent?

  54. Cympl

    “I’m a potential buyer, two small kids with a career in nursing. I’m finding it difficult to make the plunge. Affordability.. Affordablity !!”

    You could rent and use your savings for your kids’ education, and a few nice vacations together…would you rather have a house, with a load of debt and worries, or positive bank balance and nice emergency savings buffer? Just being a devil’s advocate…no one will sell you on this idea of renting since no one benefits other than you and a landlord with no advertising budget. Banks, mortgage brokers…now they have ad budgets…

  55. -A-'s cousin(aka...Snick)

    -A- uses a old blackberry I gave him. He is probably hiding under his bed with it right now.

    Snick(aka..-A-‘s cousin)

  56. coco

    Royal Bank of Canada confirmed it will take an additional write-down related to subprime investments in the first quarter of 2008.

    The bank’s chief financial officer Janice Fukakusa confirmed the bank will record a charge in relation to securities backed by a monoline insurer.

    The loss, which was widely expected among analysts and investors, is likely to be in the region of $100-million and is further to a hit of $357-million recorded by the bank in the final quarter of 2007.

  57. coco

    Business confidence in the Canadian economy has sunk to a nine-year low and many firms have cut back on investment plans, a survey by the Conference Board of Canada suggests.

    http://tinyurl.com/2h4kck

  58. domus

    “You seem to distort things to fit your hopes for a future crash. Each market is different. Lenders here (Canada) are and always have been conservative in approving financing. We will not have f0reclosures resulting from ARMs.”

    -A- gave you pretty much the heads-up on what’s happening with mortgages in Canada. If you think that people are not borrowing multiples of 5 or more their incomes in Vancouver, it means you don’t believe to StatsCan figures (divide mortgages by median income and see what numbers you get).

    By the way, no need to heat up so much, Maxwell. I am not distorting anything. I just asked you a question. I will ask it again: Did anyone overextend themselves there in the past 4 years? How are they doing now?

    Feel like answering?

  59. coco

    CIBC may take another further $4.1 billion in subprime writedowns in the first quarter.

  60. WoW

    Bulls – should these folks come to Vcr and flip RE for a living instead?

    Breaking News

    Dell Canada axing Ottawa jobs
    The Canadian Press

    Tuesday, January 29, 2008

    OTTAWA — — Dell Canada is laying off staff at its call-centre operation in Ottawa and scrapping plans to hire 1,200 others.

    A spokesman for Dell says the job cuts are the result of a company-wide decision to trim its overall work force by about 10 per cent.

    He wouldn’t say exactly how many people are being forced out the door in Ottawa.

    Little more than a year ago, the company announced plans to double the size of the Ottawa call centre, which employs about 1,500 people.

    A just-built 150,000-square-foot building in Ottawa that was to house the new hires will remain empty until the company decides what to do with it.

  61. coco

    Expectations lowered for Canadian Tire on U.S. economic concerns

    http://tinyurl.com/2aca54

  62. Johnnyrent

    Mr. Maxwell

    I concur with you that lending practices in Canada have not been nearly as loose as those in the US. That said, in this in this neck of the woods many buyers will be up to their neck in mortgage debt. 40 year amortization, 5% down loans aren’t exactly conservative, in fact I’d put them in the borderline reckless category.

    In any event responding to your comment about close proximity markets like Seattle faring relatively well, this is old news; the current reality says otherwise. Here is a chart of King County SFH median prices: http://seattlebubble.com/blog/wp-content/uploads/2008/01/nwmls_2006vs2007_prices.png

    Granted, Seattle’s YOY drop in median prices is far from crash proportions (so far). After years of high single and some of double-digit price gains in the King County market, however, it is a profound about face. At a minimum its the stuff of speculator nightmares. Same story in Portland, by the way.

  63. Snick

    Seattle and Vancouver are as apples are to oranges.

  64. coco

    Perhaps everyone is trying to figure out what will be the straw that breaks the camel’s back when it comes to our real estate market? Affordability walls? too many cost increases to bear on top of high mortgage payments with higher property taxes, utilities, etc. ? possible recession/job losses?

  65. robchipman

    Newcomer:

    “Quite true, but that doesn’t make bear arguments irrelevant”

    I agree. The logic of the argument is less important, though, if the psychology accepts it.

    Snick:

    I’ll admit that I haven’t paid a ton of attention to the timeline of your forecasts, but it sure seems like you’ve called double-top repeatedly. That said, my point is that the market moves slowly, and that you’re supporting my argument. You’re coming back and saying the decline was noted by you at the time of the double top, which began in 2004. That’s 4 years ago. Not exactly a quick change, eh wot? Anyway, thanks for backing me up on that.

    -A-:
    “Apparently he was “caught in the act” with a realtor’s wife,…”

    To quote from “Juno” : “I didn’t think he [-A-] had it in him”.

  66. Snick

    All of the above. They will all work in concert as in the past.

  67. Snick

    I never called for “multiple” double-tops. I have SAID before that the first peak was in the spring of 2004 and the second was in late 2006.

    So, don’t try to put words into my mouth.

    Any more complaints?

  68. Snick

    Say, Rob, is it because it’s a “snow day” or a “slow day” that you have so much time on your hands?

    Go sell some houses or something.

  69. Snick

    By the way, Rob, if YOU think 2-3 in RE is a LONG time-line, you’ve just contradicted YOURSELF – agian.

  70. Snick

    2-3 YEARS, that is. (long enough, no doubt, for a lot of people to get suckered in for the long haul by guys like you).

  71. Mr. Maxwell

    Domus “-A- gave you pretty much the heads-up on what’s happening with mortgages in Canada. If you think that people are not borrowing multiples of 5 or more their incomes in Vancouver, it means you don’t believe to StatsCan figures (divide mortgages by median income and see what numbers you get).

    By the way, no need to heat up so much, Maxwell. I am not distorting anything. I just asked you a question. I will ask it again: Did anyone overextend themselves there in the past 4 years? How are they doing now?

    Feel like answering?”

    I can assure you I am not heating up. I’m amused by your reaction. Many people here have taken on large mortgages, sometimes times in multiples 5 times their gross family income. Pretty crazy stuff. But that’s a lot different than -A- claiming Canadian financial institutions have been knowingly making loans based on false income statements. Even with CMHC insurance financial institutions in this country have been conservative.

    Many over extended families in the U.S. have defaulted and lost their homes. So far it has largely been poor folks who couldn’t afford their homes in the first place. A slowdown in the US will push many more over extended families into default. My point is that without widespead job losses people in Vancouver with big, big mortgages will not be the crack in the market that causes it to drop. They will eat KD for dinner, buy levis instead of 7s and they will vacation in Penticton instead of Maui. So long as they are earning the same or more $$ as when they obtained their mortgage, they will not default. They will not be happy they paid too much for their home, but they will survive so long as they work. What will crack this market will be the speculators dumping their condos. I can tell you from personal experience that high end condos are not moving at all. That end of the market is tanking and I’m starting to have serious doubts that spring will change that. I predict the high end projects downtown will have huge problems.

  72. jesse

    Mr. Maxwell: “US markets in close poximity to us (Seattle, Portland) have fared well so far. ”

    I’d look a bit deeper to really understand the NW market. Seattle and Portland lagged other US cities in terms of price changes but their inventory trends are now downright scary (i.e. high and going higher). In other markets an increase in inventories preceded price drops (even with strong local economic fundamentals). There is no reason to think things will be different in the NW.

    “If you think Canadian financial institutions knowingly offer mortgage financing based on fraudulent information you are seriously deluded.”

    I don’t think that is what you should take away from the discussion. It is possible to obtain higher loan amounts today than even 5 years ago. Incomes have not increased substantially during this time so something else changed to allow people to take on more debt relative to their incomes. It could be banks were overestimating risk but it could be not.

    Also there are now “stated income” loans readily available in Canada where before they were relatively hard to obtain. This is not the same as fraud. A lender will make its own determination on whether the stated income is properly accounted (remember expenses of those with stated income do not need to be reported nor does the consistency of the income stream). The banks take these loans with the knowledge that “stated income” results in a more variable income flow. They should know that some of these will go bad but I have no sense on how much risk is really associated with these types of loans. I can see how a Realtor, construction worker, or mortgage broker with a stated income mortgage could be in trouble if home sales drop off, if they didn’t properly provision through the bull run. And I am sure many did not provision; it’s a question of how many.

  73. vomitingdog

    Bobbybear a question for you.

    Is the Fed lowering interest rates so that some people who may be facing foreclosure in the coming year will be able to reset their mortgages at a rate they can afford and thereby stave off the rest of the foreclosures that are on the way?

    And is it reasonable to say that this might work and might prevent a total collapse of the US housing market?

  74. domus

    “Many over extended families in the U.S. have defaulted and lost their homes. So far it has largely been poor folks who couldn’t afford their homes in the first place.”

    One last clarification: it does not matter whether your income is 10k, 100k, or a million (that is, rich or poor). What matters is the leverage you are taking: if leverage by 5 times your income, small changes in prices can make you rich….or ruin you.

    The latter is the case for many people in the US. In fact, the most recent evidence is that middle-class people are voluntarily defaulting and leaving their homes behind, just to avoid the negative equity effects associated to high leveraging.

    In this respect I do believe that Canada is no different: there are some crazu multiples doing the rounds in the mortgage business. Often they are conceived by discounting “future” pay rises or other active entries. Ask people in the mortgage business privately and see what they think, if you don;t believe me.

  75. WoW

    Maxwell – I like the cut of your jib….

    Condos – yes, this is the canary….

  76. domus

    Just found this at Calculated Risk. Seems very good timing….

    “WSJ: More Criminal Inquiries into Mortgage Related Companies

    From the WSJ: U.S. Probes 14 Companies In Subprime Investigation

    Federal investigators have opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the subprime mortgage crisis, focusing on accounting fraud, securitization of loans and insider trading … The FBI wouldn’t identify the companies under investigation but said that generally the bureau is looking into allegations of fraud in various stages of mortgage securitization, from those who bundled the loans, to the banks that ended up holding them.

    This reminds me of Tanta’s excellent piece last March: Unwinding the Fraud for Bubbles

    There is a tradition in the mortgage business of distinguishing between two major types of mortgage fraud, called “Fraud for Housing” and “Fraud for Profit.” The former is the borrower-initiated fraud—inflating income or assets, lying about employment, etc.—that is motivated by the borrower’s desire to get housing (not the same thing as “real estate”), by means of getting a loan he or she doesn’t actually qualify for.

    Fraud for profit is simply someone trying to extract cash—not housing—out of the transaction somewhere.

    This new investigation is once again going after those involved in “Fraud for Profit”, possibly with a new emphasis on those involved in the securtization process. See also this recent NY Times report by Jenny Anderson and Vikas Bajaj: Reviewer of Subprime Loans Agrees to Aid Inquiry”

    Any of this stuff going on in Vancouver at all? Are we whither than snow…?

  77. Snick

    Mr Maxwell,

    It had to “begin” somewhere…I’m quite sure you are correct about the condo market tanking first.

    That is the first rung for many move up buyers.

    An important leg for a three-legged stool.

    Although…I’m sure there are a lot of buyers who jumped first into SFH and who now have HUGE mortgages.

    Don’t be so sure they won’t “walk” let alone “run” when they feel the need.

  78. Mr. Maxwell

    Thank you Jesse. My current understanding of Seattle and Portland is largley based on the recent Shiller report that advised Seattle and Portland were two of only three markets to have recently seen gains.

    Your point is well taken on the stated income borrowers who didn’t provision for a drop in their income. That really goes for any borrower. Again, unless we see signficant job losses from a slowdown I don’t think the “over extended” will trigger a slide in the market. They will be hurt in a slide and will likely become part of it, but I don’t think they will be the trigger.

  79. domus

    Maxwell:

    here is a summary of the US price dynamics in the past 12 months (again, thanks to Calculated Risk and Shiller’s people at Macromarkets).

    Here is the year over year change in both October and November for 20 large U.S. metropolitan areas (not the entire U.S.). Prices are falling in every city in the index (even the three cities with rising year-over-year prices are seeing falling prices on a monthly basis).

    City YoY Pr. Ch., Oct. YoY Pr.Ch., Nov.
    Charlotte – NC 4.3% 2.9%
    Seattle – WA 3.3% 1.8%
    Portland – OR 1.9% 1.3%
    Dallas – TX -0.1% -1.2%
    Atlanta – GA -0.7% -2.0%
    Denver -1.8% -3.1%
    Chicago -3.2% -3.9%
    Boston -3.6% -3.0%
    New York -4.1% -4.8%
    Cleveland – OH -4.5% -5.8%
    Minneapolis- MN -5.5% -6.6%
    San Francisco -6.2% -8.6%
    Washington -7.0% -7.8%
    Los Angeles -8.8% -11.9%
    Phoenix – AZ -10.6% -12.9%
    Las Vegas -10.7% -13.2%
    San Diego -11.1% -13.4%
    Detroit – MI -11.2% -13.0%
    Tampa – FL -11.8% -12.6%
    Miami -12.4% -15.1%
    Composite-20 -6.1% -7.7%

  80. Mr. Maxwell

    Snick “Although…I’m sure there are a lot of buyers who jumped first into SFH and who now have HUGE mortgages.

    Don’t be so sure they won’t “walk” let alone “run” when they feel the need.”

    What do you think in percentage terms?

    I don’t think your being realistic when you say a family will walk or run when they feel the need. What does that mean? Yes, a family with a HUGE mortgage will be forced to walk if they suffer a material loss of income. If the market tanks, a family with a HUGE mortgage but steady income sufficient to service the mortgage will continue to make payments and hope for a change in the market. Where would they go? Why would they run? People have roots, kids go to school, etc. Now speculators are a different matter.

  81. jesse

    Mr. Maxwell: “…unless we see signficant job losses from a slowdown I don’t think the ‘over extended’ will trigger a slide in the market.”

    The effects of profligate or mis-priced lending impacts future lending policies. If the default rate does not match lenders’ expectations it will make future borrowing more expensive for everyone and especially those that fall into the class that is defaulting en masse. This has the effect of removing even more potential buyers from the market.

  82. BOBBYBEAR

    VG This is just my opinion. I could be wrong.

    N0, the Fed is not lowering rates to help home owners in trouble. That is not the main or the real reason. It is to help the system in general.

    The Fed cut .75 percent because the markets were on the verge of a real meltdown. The pressure on the Fed to cut is huge even though it may or may not be the right thing given a longer term perspective. Low extended rates may cause a new bubble…..maybe in gold for example. On the other hand the debt problems are crushingly strong.

    The Fed could not even wait an extra week or so to make the cut.

    Any other comments?

  83. View

    Ten years into the future might not be all that optomistic either…

    From 2011 – 2029 the flood of elderly people selling their homes may lead to a drawn-out buyers’ market. Prices may fall further as younger people, perceiving a downturn, delay purchasing.

    America should be bracing itself for the end of the “generational housing bubble”, according to a new study by Dowell Myers and SungHo Ryu of the University of Southern California. As the country’s 78 million baby-boomers retire, the report argues, the housing market will change dramatically.

    http://www.economist.com/finance/displaystory.cfm?story_id=10534992

  84. s.p.

    go bernanke!
    how low can he go?

    its like watching a really awesome limbo competition*
    …where there is only one competitor – and hes had a many drinks and the mob is all chanting: GO GO GO GO!

    *is it me or were there more limbo competitions in movies/TV in the 80’s…limbo is still cool right?

    spark

  85. domus

    Maxwell, you are wrong again.

    This news are just 4 days old (from Sacramento, California):

    “From CBS: New Trend In Sacramento: ‘Intentional Foreclosure’ (hat tip Shawn)

    Linda Caoli helps lots of families on the verge of losing their homes, including a single mom working two jobs to pay her mortgage.

    “She says Linda the house across the street, same model, with more upgrades sold in foreclosure for $315,000!” explains Linda.

    Her client isn’t the only one thinking about ditching her house to buy the better deal across the street. A number of realtors CBS13 talked to say it’s already happening.

    This is similar to Peter Viles’ story in the LA Times: A tipping point? “Foreclose me … I’ll save money”.

    Wachovia is seeing this too (from their Jan 22nd conference call):

    “… people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity …”

    And from BofA CEO Kenneth Lewis in December:

    “There’s been a change in social attitudes toward default. We’re seeing people who are current on their credit cards but are defaulting on their mortgages. I’m astonished that people would walk away from their homes.”

    This change in social attitudes could lead to a flood of foreclosures. “

  86. domus

    And, to top it up, here are the new guidelines Countrywide Financial (largest mortgage lender in the US) sent to its brokers:

    “Countrywide Concerned about “Borrowers economic interest to repay”

    Countrywide sent out a letter on Jan 18th with their new Soft Market policies (hat tip ck).

    … 2008 is forecasted to be a challenging year for the mortgage industry, characterized by a declining Housing Price Index in a wide variety of metropolitan markets. In the context of the prominent threat to our industry of collateral values falling below outstanding loan balances, mortgage professionals must strive to ensure that borrowers do not take on loans that they do not have the ability or economic interest to repay.

    Note that last phrase: “borrowers do not take on loans that they do not have the economic interest to repay”. Countrywide is clearly concerned about the new trend of buyers “walking away” from their mortgages.

    The policy basically reduced the maximum LTV for various loans based on the county risk level.”

    Now, does this look like a situation in which middle-class families are unwilling to walk away from negative equity?

    And what does this tell you about future lending standards? Why is Canada different? People are more honest?

  87. Newcomer

    Mr. Maxwell:

    “Where would they go? Why would they run? People have roots, kids go to school, etc. Now speculators are a different matter.”

    Your thinking is sound. It just doesn’t apply to Vancouver. It applies to places where rents and mortgages are about the same. Here, they don’t have to _go_ anywhere when they walk. They can simply rent the house across the street for half of what their mortgage is costing them.

  88. tqn

    http://www.canada.com/vancouversun/news/business/story.html?id=855700c2-5bad-4b0f-9299-bd285a1e86bf&k=63310

    Retailers doing fine despite slowing economy in U.S.
    WHISTLER – A U.S. recession won’t automatically force a dramatic plunge in Canadian retail sales this year, International Council of Shopping Centers chairman Rene Tremblay said Monday.

    “We always have to be concerned about the impact of the U.S. market but things are going so well in Canada now that we should be fine,” he said in an interview after a speech to the ICSC Whistler Conference.

    Tremblay said Canadian retailers face a more “challenging” environment this year because of the slowing U.S. economy. But he insists several key Canadian economic fundamentals should ensure the industry remains vibrant and growing at a “respectable” pace.
    He said interest rates remain near historical lows — which is good news for consumers — and job growth and personal income growth should remain positive in Canada this year.

    “Consumers are still there and they’re still buying,” Tremblay said. “They’re very resilient and confident, especially in Western Canada. You’re in the right part of the country right now.”

    He said the Canadian housing market could slow down this year but a “U.S.-style correction” is not likely. Tremblay noted existing home sales in Canada rose by 7.9 per cent last year but fell nearly 13 per cent in the U.S.

    He predicts Canadian retail sales will grow by about five per cent this year, compared with 5.7 per cent last year and 6.4 per cent in 2006 — the best performance since 1997.

    Tremblay noted the strongest retail categories last year included pharmacies (up 9.1 per cent), furniture (up 8.5 per cent), building and home supplies (up 7.3 per cent) and clothing (up six per cent).

    Canadian shopping centre sales increased by 3.3 per cent during the first 10 months last year, with Alberta (up 6.8 per cent) and B.C. (up 6.2 per cent) leading the country.

    Tremblay said an aging and more diverse consumer base in Canada has made shoppers more knowledgeable and demanding — placing more emphasis on services, health, beauty and wellness.

    “We have to make our properties more fun and more comfortable because consumers want to feel like VIPs when they shop,” he said. “. . . Having spas in malls is not the norm yet but that’s where we’re heading, making more of those options available.”

    Tremblay also said 24-hour-a-day shopping is not far away in Canada, noting Wal-Mart recently introduced 24-hour-a-day stores in this country.

    “You can shop almost 24 hours a day in the U.S. and I think we’ll see it pretty soon in Canada,” he said. “It’s a new way to reach consumers and make sure you’re available when they want.”

  89. domus

    Sorru for posting so much, but this is almost unbelievable. Cannot make up this stuff fast enough, that reality beats you to it….

    Site of the Day: You Walk Away.Com

    http://tinyurl.com/2lsb67

  90. View

    People are not only walking away from mortgages…

    Broke U.S. homeowners linked to arsons as
    homeowners are searching for ways to escape from mortgages they can’t pay — or don’t want to. A few are turning to arson. Authorities in economically stressed U.S. cities see an increase in torched houses.

    http://finance.sympatico.msn.ca/investing/insight/article.aspx?cp-documentid=6100533

  91. tqn

    babies are born every second celebrating lives into the world – people also die of cancer and decease. now, what news do we want to dig?

  92. domus

    tqn,

    I respectfully point out that there are over 200,000 foreclusre per month (yes, per month!) in the US. The trend is going up and it looks like a wave.

    We are not cherry picking here: you are turning your head the other way.

  93. Mr. Maxwell

    Domus, Newcomer, do you appreciate the consquences of walking away from a mortgage? I think you’ll find that on “You Walk Away.com” you can escape paying a deficiency if you are eligible for bankruptcy. You can’t simply say: “Well, price of my house has gone down, I have no equity and so I’m going to let the lender foreclose and I’m gonna buy me the same or a better house for cheaper.” It doesn’t work that way. If you have a job a payment plan will be arranged to allow you to pay off your deficiency.

    I’m pretty sure “You Walk Away.com” is just another dubious company cashing in on the poor folks who were fooled into buying homes they couldn’t afford.

  94. Dave

    Domus
    Her client isn’t the only one thinking about ditching her house to buy the better deal across the street. A number of realtors CBS13 talked to say it’s already happening.

    So if you were a bank, would you lend $300K to someone who just walked away from their last mortgage???

    What happens in the U.S when people just walk away. Is it just bad credit rating or do they still owe the difference on what they owed and what the house sold for. anybody know??

    In canada I don’t think you can just walk away and not still be responsible for the debt??? Am I wrong on this??

  95. -A-

    Mr. Maxwell, bankers know that some of the documentation put together with the help of a broker is stretched. The bankers look the other way because they know the competition will take the business if they don’t.

    You have a calculator, you can figure out how huge the profit is on an average Vancouver mortgage.
    The banks also know some of these people will take a third job and eat rice and beans for 45years to avoid the shame of foreclosure as with some cultures some would prefer dying rather than loosing their home.

    The mortgage sharks in my view whether they be national banks, credit unions, or a quasi-mafia clique, are all criminals in a moral sense, as far as I am concerned.

  96. robchipman

    Snick:

    Its funny to see you foam at the mouth!

    I said the market changes slowly, and I said 5 years is overnight in long term real estate terms.

    If we saw your legendary double top begin in 2004, and its 2008 now, that’s 3.5 years for a change that isn’t finished yet. Seems like a slow change to me, compared, for instance to -A-‘s “overnight”. Like I said, you’re making my point for me. Thanks!

    Domus:

    I know its probably too early, but I want to see what the foreclosures get sold for, and what rate they get sold at.

  97. Newcomer

    “If you have a job a payment plan will be arranged to allow you to pay off your deficiency.”

    I’m not so sure. I know that people walked in droves in Calgary at their last bust.

    Rob, could you sort this out. What happens to the fellow who decides that home ownership is not for him after all?

  98. -A-

    Mr. Maxwell, bankers know that some of the documentation put together with the help of a broker is stretched.

    The bankers look the other way because they know the competition will take the business if they don’t.

    You have a calculator, you can figure out how huge the profit is on an average Vancouver mortgage.

    The banks also know some of these people will take a third job and eat rice and beans for 45years to avoid the shame of foreclosure as with some cultures some would prefer dying rather than loosing their home.

    The mortgage sharks in my view whether they be national banks, credit unions, or quasi-mafia clique are all criminals in a moral sense, as far as I am concerned.

  99. domus

    Maxwell,

    maybe so…..but why are lenders/banks fretting about people who can afford their payments and still walk away? Just being cautious? If you were down 200k, and you could walk away with your life intact and you credit record in tatters, what would you choose?

    In the US it takes 7 years to have a clean slate for credit after personal bankruptcy: I am not sure how long it takes in Canada. Do you know?

    If I were a homedebtor with large debt in the US I would walk away. It’s a no-brainer.

  100. domus

    Dave:

    “So if you were a bank, would you lend $300K to someone who just walked away from their last mortgage???”

    Aha! Here is the trick: what they are doing in the US is to buy the new property on credit, before stopping payments on the old one. May sound crazy, but if they kept their payments on the old one up to scratch, they still get credit for an “investment” property……..I have seen quite a few anecdotal stories of this type popping out in the US. They are mostly middle class people who simply refuse to take charge of the equity loss. I would do the same if I were them. It is legal for now……I don;t know if the government will change the rules.

    “In canada I don’t think you can just walk away and not still be responsible for the debt??? Am I wrong on this??”

    The way I understand from Mortgage Insider, these guys don’t lose their “new” home when they file for bankruptcy. They just foreclose the “old” home (the one with equity loss).

    Maybe someone may tell us what the equivalent Canadian treatment of personal bankruptcies is.

    Rob:
    “I know its probably too early, but I want to see what the foreclosures get sold for, and what rate they get sold at.”

    Probably at the beginning there will be people snapping them up like in the US a year ago.
    They usually see a small discount and think they have a bargain. Just a guess.

  101. LongTimeReader

    I own in North Burnaby, and I look south out to the newly constructed Legacy complex at Holdom Skytrain station. Tower One (of two) opened for occupation in late December or early January. Tower Two is not yet complete.

    I haven’t performed the industry-approved measurement of (lights-on/total suites) to determine occupation percent, but I have been keeping track of how many suites have ended up on MLS, and how many have been sold. Of the 25 listings for condos in Parkcrest, 20 are from Legacy. Since listing began about a month ago, not a single unit has sold (been removed from MLS). This may represent one data point in the predicted condo inventory expansion. Clearly these are flippers, but I don’t think the flip premium is all that high. I recall the cheapest presales listing for around 360k (1 bed, ~800sqft), but the cheapest current listing is 369k. This may even represent a loss, when accounting for realtor fees, GST, etc.

    From Craigslist, the asking price is 1700-2300/mo. Oddly, all of the craigslistings are for 2bedrooms. For example, 2bed+den, 1300 sqft, 25th floor for 2100/month.

  102. jesse

    “If you have a job a payment plan will be arranged to allow you to pay off your deficiency. ”

    Herein lies the trick: spend all your available cash flow on other “necessary” items such that you have little available cash to pay the mortgage. Garnishing can only be done in lieu of other more important obligations. After a certain point, for the lender, foreclosure is more economic than a near-zero cash flow; the lawyers at youwalkaway are experts at figuring out the banks’ tripping points and finding the point where the banks don’t bother pursuing any further.

    It could be argued this is illegal if the primary intent of the changed cash flows is to subvert the contract. Difficult to prove in court, especially with tens of thousands of similar cases. This trick is done all the time in the business world (e.g. judgement proofing business owners). Ah, lawyers.

    It does raise an interesting question, however. What rights to lenders have on a lendee’s other assets (like investments, cars, and other properties)? Judging by the mortgage application process it sure feels like they will take everything you own if you default and certainly the assets are used in calculating the amount you qualify for. But is that really the case? I thought mortgage insurance limited the exposure of other assets but I don’t know for sure.

  103. BOBBYBEAR

    Well…I mean…who knows for sure. I am wondering about the K wave and how much validity there is to it.

    Essentially, it is a theory (fact?) that there is a long term wave of around 70 years or so.

    The Great Depression apparently ended the last wave and gave birth to the current wave we are in. Of course 1929 and the eventual economic hard times completed the end of the roaring 20s.

    I believe it is a cycle in the Law of Nature. Like planting a new seed. It is not the end of the world but a cleansing of the system. Excesses will be eliminated. Hard medicine.

    I have no idea whether this K wave is true ot not. Looks about right so far.

    But I certainly do not know for sure. Any comments?

  104. Mr. Maxwell

    Newcomer, are you so naive as to think that a lender will forgive a debt? The lender will pursue the debtor for every penny of principal, interest and costs. Bankruptcy is the only escape.

    Domus, do you think it’s easy to claim personal bankruptcy? It’s not. If you qualify for personal bankruptcy your life is in the shitter. If you have a wife, children, other people depending on you? It’s not so easy to walk.

    I may be wrong, but I would say that most people who bought homes in Vancouver over the last 8 years (not speculators) are good, hardworking people who have no intention of claiming bankruptcy. As -A- said, “they’ll eat rice and beans” to get by. Pretty healthy diet actually.

  105. domus

    “I may be wrong, but I would say that most people who bought homes in Vancouver over the last 8 years (not speculators) are good, hardworking people who have no intention of claiming bankruptcy. As -A- said, “they’ll eat rice and beans” to get by. Pretty healthy diet actually.”

    Maybe…..or maybe you are daydreaming.

    For banks there is a cost in recouping losses: that’s why there was a bill on renegotiating foreclosures 2 months ago in the US (the Paulson bill).

    If there is a wave of losses, banks are better off renegotiating than pursuing thousands of court orders.

    Many people in vancouver were certainly honest and hard working. Some of them fell to external pressure and fear of being priced out forever. As if not buying now would mean not buying ever. Clearly an absurd statement.

    However I think you are deluding yourself if you believe that there wasn’t a very large of pure speculative buyers: a mixture of people who want to retire on real estate, flippers, RE agents turned short-term traders, and so on. These guys were riding the wave. Will they drown when the wave breaks? The smart ones will walk with a tidy profit, the not so smart….well.

    Victims: who is going to be loser in this whole circus? In my view, and I may be wrong, it will be young families who jumped into the market for the first time, maybe for fears of being priced out.
    They might be stuck with underperforming accommodation for a few years to come.

  106. Mr. Maxwell

    Domus, what you are talking about are speculators who lose it all speculating in this market and qualify for bankruptcy. I have no doubt there will be a group of those people. Some speculators will simply lose money and move on. You can’t simply “walk away” from your debts. My point is that real people who purchased homes and keep their jobs will hang in there. The alternative is too painful.

  107. $fromA$iatoyourpocket

    [From last thread]

    Rob siad, “Actualy witnessing a down market, and seeing what happens in one, will be very educational to serious investors who ahven’t yet seen one.”

    Thanks Rob.

    Thats most of the current pop with all or nothing mortgages.

  108. -A-

    Hey Snick,

    Any chance you can send me an extra battery for the BlackBerry?

    The same thugs that ran VHB out of town have cut the power to my basement.

  109. DaMann

    Mr. Maxwell

    Sounds like you don’t know many people who have declared bankruptcy. It’s beyond a joke. Sure your credit is gone for 7 years, but litterally a day later you are free and clear with good credit. I know three people who declared bankruptcy ( all did it in their 20’s, one in their 30’s) All three are doing better than I am! They kissed off their student loans, credit cards and miriads of bad debt. After one year of discharge they were debt free and just saved money and somehow got credit cards and started the credit building again.

    My wife and I would have bought a place in 2003 but since we had debts to pay like student loans we couldn’t buy until early 2005. Sound bitter? Damn right! Not cause we didn’t do it ourselves but because dishonesty seemed to be more profitable.

    I would never have done it myself but a lot of people do and it’s by no means puts your life in the shitter for very long.

    Let’s see , mortgage worth $700k and house worth $400k after a crash? 7 years of bad credit and zero debt seems pretty attractive to some of these people who bit off more than they can chew. People will be walking in droves.

  110. Snick

    Rob,

    Don’t make me laugh. I didn’t make any point for you. The only point you have is on the top of your head.

    Whoever said that a market peak had to be followed by a precipitous drop soon after? (You, I suppose)

    Things can go sidewise for a little while, and even trend up. So? A mere speck in time to perhaps gain, only to lose.

    And then, be a debt slave for a LONG time.

    You’re an idiot.

  111. Newcomer

    “Newcomer, are you so naive as to think that a lender will forgive a debt? ”

    No, sir, I am not that naive, nor does my mother wear army boots, so you can drop the ad hominems any time. You may be unaware of it, but in many places the bank cannot go after assets other than the house. It is not, therefore, naive for a newcomer to posit that the same may be true in BC. As it turns out, this is not the case (http://tinyurl.com/27cuxo) but this is a matter of local law, not worldly knowledge.

  112. -A-

    It will be interesting when the lawyers fight in divorce court not for who gets to keep the condo, but who gets to leave the mess behind.

  113. Dave

    -A- The same thugs that ran VHB out of town have cut the power to my basement.

    …….LOL

    -A- ,You need more tinfoil on your windows, that will keep them at bay.

  114. M-

    Here’s a link to last night’s Chris Olsen article on CTV.

    http://tinyurl.com/yumdct

  115. Mr. Maxwell

    Newcomer, I truly apologize. But I thought it was common knowledge that lenders in these parts do not grant limited recourse (i.e. limited to the house) mortgage loans. That probably wouldn’t work so well.

  116. robchipman

    A mortgage is a charge against a piece of land in return for a loan. If you don’t repay the loan its clear that the lender has recourse to sell the land & improvements that were mortgaged.

    Its not clear to me that the lender has recourse to other lands or assets simply by virtue of the mortgage alone. However, some mortgages, as I recall, contain other provisions such as assignments of rents, and personal covenants. I know I’ve signed personal covenants, but that could have been strictly for properties owned in company names, and may not apply to regular residential stuff.

    It may be easy to walk away from the mortgage, but it would be tougher to walk away from the personal covenant, I suspect. Now, if you have no money, and simply walk away and say “Sue me, see how much blood you can get from a stone” you’re probably only going to suffer personal bankruptcy. I wouldn’t recommend it, but perhaps someone can prove the benefit (I’ve seen friends go through it, and it didn’t look easy).

    If you’ve bought the house across the street the bank will find out. After all, when you tell them to foreclose they’ll have to serve you some papers. The more you resist the bigger the bill gets – its better to help pave the way. So, if they know where you live, and you have given them, by way of personal convenant or something else, a way of chasing you, they will. And because banks conduct internal audits, I think the bank will probably go after you pretty hard if you clearly poke them in the eye. You’ll get better treatment, generally, from a bank if you don’t piss the account manager off (they’re human that way). Maybe I’m naive, but I fear that, in Canada at least, the banks are likely to have bigger law firms on retainer than me, meaning clever tricks to leave them holding the bag had better be well thought out. But we’ll see.

  117. coco

    Will Vancouver’s red hot real estate market cool?

    http://tinyurl.com/yumdct

  118. Mr. Maxwell

    Rob – “Its not clear to me that the lender has recourse to other lands or assets simply by virtue of the mortgage alone. However, some mortgages, as I recall, contain other provisions such as assignments of rents, and personal covenants. I know I’ve signed personal covenants, but that could have been strictly for properties owned in company names, and may not apply to regular residential stuff.”

    Unbelievable. You should probably read a mortgage carefully given your chosen profession. All standard mortgage terms contain a provision whereby the Mortgagor (the borrower) covenants to pay the Mortgagee (the lender) the principal and interest. In other words, ALL standard mortgage terms contain a direct covenant to pay. Otherwise where is the obligation to pay? The charge against the property is security granted by the Mortgagor. The obligation to pay the debt is not limited to what is recovered from the sale of the property. Although that would be very nice in a falling market.

    With respect to a company, the lender is merely getting you on the hook personally. Call it a co-covenant or a guarantee. Again, it is not limited recourse.

  119. domus

    Maxwell,

    for your perusal, straight from the L.A. Times (few days ago):

    (b) More on Homeowners Walking Away (\b)

    Yesterday Peter Viles at the LA Times brought us a story of a homeowner planning to use “jingle mail”: A tipping point? “Foreclose me … I’ll save money”

    A commenter on L.A. Land this morning writes, “I am one of these people. My condo has dropped in value from $520K in 5/06 when I bought it to $350K now. My ARM payment will probably go up $900 per month in June.

    “I have purchased a cheaper place in a nearby area now, while my credit is good, and will stop making payments on house #1 after house #2 closes. I know the foreclosure will be on my credit for 7 years, but I will have saved a lot of money.

    Today Viles has a poll: Is walking away irresponsible? Or smart?

    There are other issues to consider than just a wrecked credit rating. There are possible tax consequences. And it is possible, depending on whether the loan is recourse or non-recourse – and the frame of mind of the lender – for the lender to seek a deficiency judgment against the homeowner. Also it appears the homeowner has not properly disclosed the planned foreclosure on his current home with his new lender.

    I’m not a lawyer or a tax advisor, and there may be other issues too. Hopefully the homeowner mentioned above has obtained tax and legal advice.

  120. Mr. Maxwell

    Sorry, I can’t contain my disbelief.

    Rob – “It may be easy to walk away from the mortgage, but it would be tougher to walk away from the personal covenant, I suspect.”

    I can assure you that lenders will pursue every last asset you have that isn’t already secured by another creditor. Your car, furniture, RRSP, life insurance policy, etc.

  121. domus

    Maxwell,

    don’t take this in the bad way. I am sure you are a very nice bloke: but what planet are you living in?

    Maybe I am overpessimistic, but I think Vancouver will see its fair share of people walking away and foreclosure within the next 3 years.

    Look at it in this way: it will be a great time to shop around for you. Loads of choice, no bidding wars and more square footage per dollar. Who said that downturns are necessarily bad?

  122. robchipman

    Mr. Maxwell:

    Pardon my ignorance, perhaps back the truck up a little, and at least try to contain your disbelief? As I said, the mortgage is the charge against the land, not the borrower’s other assests. The borrower covenants to pay the principal and interest. Failure to do so allows the lender to apply to the court for recourse against the borrower, but that does not, in and of itself, allow the lender to go after other assets.

    Not all mortgages are the same. There are minor differences. Not all contain assignments of rents, for example. I’m also not convinced that all mortgages contain a covenant that allows for unlimited recourse. I am, however, pretty certain that most do, and I know I’ve made them.

    I think I made it clear that I do not believe that I, personally, am only obligated to the bank for the OSB or the value of the property, whichever is the lesser. Its never been an issue for me, frankly. Why would I care? I’m not walking away from any bank, nor advocating that anyone else do so. In fact, I’m questioning the efficacy of buying a house across the street from one you’re being foreclosed on and assuming that you’ll get away with it.

    FWIW, I do read mortgage docs carefully, but once I’ve agreed to them I forget about them. Its not like they’re pressing, day to day business. They lend, I pay, everyone’s happy. What’s more, getting me on the hook personally for something is nothing “mere”; its a common safeguard used by banks to get around limited liability, and it arises precisely because of the kind of thought process that recommends borrowing from one bank while stiffing another.

    Bottom line, Mr. Maxwell, consider this: guys who don’t plan on crapping out on a deal don’t worry too much about the fine print. Read it once, understand it, sign the deal and move on. What I promised yesterday, or last year, or ten years ago, I do. And I advise everyone else to do the same. Why would I care about the lender’s recourse?

    BTW, when I say “I think the bank will probably go after you pretty hard if you clearly poke them in the eye” that’s the same as you saying “I can assure you that lenders will pursue every last asset you have that isn’t already secured by another creditor.” We’re on the same page. You’re just having trouble with my use of the word “may”. To be fair to you, saying it “may”be easy to walk away from a mortgage was cavalier of me. I’ve been involved in lots of foreclosures. Nothing easy about them if you’re on the respondent side of the equation.

  123. blueskies

    ,i>Nothing easy about them if you’re on the respondent side of the equation.

    good point… be true onto thyself……

    walking away would leave a psychic debt, bad karma if you will, so there is a cost involved

    unpaid debt = failure….

  124. WoW

    Rob – I note loads of condo listings and (what appears to me) not so robust sales – are you seeing signs of cracking in the market?

    Thx

  125. robchipman

    Domus:

    A couple of things to consider (and granted this is only based on my experience with run of the mill foreclosures, not huge volumes of them) – I think you’re glossing over the difficulties involved in “walking away”, and in my experience foreclosures aren’t always bargains. The price may be lower that current market value, but not by much, and the foreclosure process is not always predictable.

    Banks tend to try to get top dollar, even if it takes a lot of time (an internal audit that shows a bone-picker blowing out properties at rock bottom prices probably doesn’t look good on the evaluation).

    Now, if there are lots of foreclosures, and prices tumble, there will be deals to be had. But why not buy the place next door to the foreclosure?

  126. Mr. Maxwell

    Okay, let me back up the truck. A mortgage is much more than a charge against land. It is a comprehensive agreement which includes all sorts of important covenants and agreements of the borrower. The actual document charging title is a short document know as a Form B. In residential real estate the Form B refers to a standard set of mortgage terms of the particular lender. As a real estate broker that advises investors, you should really know this stuff.

    If there is a deficiency after court approval is obtained for a sale, the lender will obtain a judgment against the borrower. That judgment will allow the lender to pursue the borrower’s assets and to garnish wages.

    “Not all mortgages are the same. There are minor differences. Not all contain assignments of rents, for example. I’m also not convinced that all mortgages contain a covenant that allows for unlimited recourse. I am, however, pretty certain that most do, and I know I’ve made them.”

    True, not all are the same. Yes, minor differences. Assignment of rents are only relevant when the lender knows you are renting the premises. Unless you negotiate otherwise, all residential mortgages are unlimited recourse. Why would a residential lender limit recourse to the property securing the debt?

  127. canyongal

    Maxwell wrote: “Your only real hope for a rapid decline is if a material number of condo speculators start listing. That’s possible.”

    From an increasing number of conversations since last fall with several Asian clients who moved here over the past 10 – 15 yrs from HK, Taiwan, PRC and bought condos as investments…

    > one is selling his 3 condos because his Richmond business cannot sell product back in HK due to high CAD, and he needs the money while he folds the business down and waits it out;

    > one is selling RE here to move back to HK to work because “that’s where the action is in making big bucks;”

    > one will sell her condos this spring because family in Taiwan said the RE market here would sink soon and to get out fast;’ and

    > one told me that she and her friends were not going to buy anything in Vancouver, but rather were selling property bought several years ago in YVR in order to buy”two-fers” in places like SF and Palm Desert while the CAD is high and there’s a fire sale in the U.S.

    Anecdotal, yes, but many anecdotes are persuading me that we are done here, that condos are the canary in the mine, that the specuvestors are on to greener pastures. Three months from now, I’d guess we’ll be stunned by the inventory.

  128. Snick

    “WoW
    January 29, 2008 at 7:29 pm
    Rob – I note loads of condo listings and (what appears to me) not so robust sales – are you seeing signs of cracking in the market?

    Thx”

    You must be new on this site to ask a straightforward question like that.

    Are you expecting a straightforward answer?

  129. domus

    Snick,

    sometimes all one want is Yes or No……how I agree with you…

  130. Snick

    “I’d guess we’ll be stunned by the inventory.”
    – canyongal

    Just as most people were stunned by the ridiculously high prices and the intensity of this boom.

    A few short years from now, people will be wringing their hands, “What were we THINKING?”

  131. Snick

    “domus
    January 29, 2008 at 7:55 pm
    Snick,

    sometimes all one want is Yes or No……how I agree with you…”

    So, so true, Domus. I wonder what cagey response will bubble up? (Or, he WON’T answer, sending another message that such questions are beneath him and don’t deserve a response).

    A real slippery type.

  132. blueskies

    great blog on debt markets from a global perspective:

    http://theautomaticearth.blogspot.com/

    yeah i know Vancouver is on a different planet… but read it anyway you may just learn sumthin’

  133. Strataman

    Mr Maxwell “Even with CMHC insurance financial institutions in this country have been conservative.” Not likely mister, it is a really well known FACT in the industry that independent appraisers who evaluate a property to low to allow financing, are given a quick phone call by absolutely 100% of all Canada’s Chartered banks to re appraise the property to make it work. This happens absolutely every day and has led to many appraisers quiting and finding work else where( the good ones the crap stays on). If you didn’t know this that absolutely blows me away! Everybody knows that except the idiot FTB’s who live in dream world!

  134. Mightymouse

    Mo,
    It will be interesting to see this chart updated in a few months:

  135. -A-

    Snick and Domus:

    sometimes all one want is Yes or No……how I agree with you…”

    The pumpers don’t have the luxury of simplicity; they simply do not have truth on their side.

    You know what they say ….. If it walks like a duck, and it quacks like a duck…..

    I don’t believe the pumpers Muir, Chipman, et al, In fact If I had it my way. I would send them to some kind of moral rehabilitation.

    I know that habitual obsessive types often respond well to aversion therapy, so I would start there.

  136. Mr. Maxwell

    Strataman, I didn’t know that. Guess I’m an idiot.

  137. domus

    Maxwell,

    are you for real?
    Don;t let these things get you down…..just wait out for the good times when you can go shopping for some nice discounted housing.

  138. robchipman

    Mr. Maxwell:

    What exactly are you disagreeing with, or taking issue with?

    I’m saying that the mortgage is a charge against the land, or is an interest in the land, while the covenant is the promise to pay. The mortgage is limited to the land; the covenant is not. You’re saying the mortgage consists of both things together. I think we’re splitting hairs, frankly.

    “Why would a residential lender limit recourse to the property securing the debt?”

    I’m not arguing that they would. In fact, I’m saying that walking away isn’t as easy as some may suspect, and I’ve said that I’ve signed mortgage documents that contained covenants.

    You’re also limiting yourself to mortgages in BC. Remember, I deal with clients who arrange mortgages in many jurisdictions in order to buy property here, and domus is talking about mortgages in California.

    WoW:

    I’m not seeing a crack in the condo market (depending I guess, on how you define it – do you mean dwntwn, or all over, just apartments or townhouses too, etc). We sold one this week and another is in negotiation.

    Snick:

    I said the “the real estate market moves slowly”

    -A- said “Wrong again Rob….Bubbles and bear markets can last …but the switch from one to the other can be within a narrow window of time…When Vancouver RE switches…it will happen so fast, most of the Kool-Aid drinkers will get stuck”

    Then you said, “Rob indicated that RE markets move slowly…[but]…during the “pause” in fall 2004, prices dropped quite quickly for several months beginning in August.It was a “double top” like in the stock market….After the second peak, prices decline…I have SAID before that the first peak was in the spring of 2004 and the second was in late 2006.”

    Anyway you look at it the movement that you’ve predicted and can see so clearly is taking several years to complete. You’re making my point. Enjoy! 🙂

  139. blueskies

    possible crack at the upper end?

    http://tinyurl.com/ywlkp8

    court ordered sale
    foreclosure?

    tictoctictoc

  140. News Flash

    Did any bears see 60 Minutes on Sunday?

    There was a report on the US housing market tanking because of foreclosures. The ARMS in the US are being reset from 1% interest teaser rates to 10%+ (10%+ because they are subprime).

    I will do the math for you:

    Mortgage payment for 500K goes from $416 per month interest to $4166 per month. The peoples income only had to qualify for the $416 per month. Oh ya and no proof or documentation required of income of any kind so you could have been unemployeed. They said something like 2/3 of the houses on the market currently are from this situation.

    When peoples mortgage payments increase 10 fold here maybe we will see the same thing.

  141. Priced Out

    I looked at Rob’s 2007 numbers again. The bull market took hold at the beginning of February. In the next couple of weeks, I’m going to watch the numbers with great interest. If we don’t see some sort of bullish trend by Valentines Day, this will be a much different year.

  142. News Flash

    “FACT in the industry that independent appraisers who evaluate a property to low to allow financing, are given a quick phone call by absolutely 100% of all Canada’s Chartered banks”

    If an appraiser comes back with an appraisal too low to allow 100% financing he has either appraised the property incorrectly or the buyer is paying above market value for it. What percent of people are paying above market value? I would think few.

    Appraisers almost always appraise the home at what you are paying for it since it is the best valuation – exactly what it just sold for in the open market. They are simply there to verify it isn’t a wreck or some type of scam for a mortgage

    I guess conspiracy theories is all the bears have left.

  143. News Flash

    Domus: “Maybe I am overpessimistic, but I think Vancouver will see its fair share of people walking away and foreclosure within the next 3 years.”

    And what will cause the foreclosures?

  144. domus

    NewsFlash:

    last time I checked it was inability (or unwillingness) to pay back debt…

  145. domus

    Priced Out:

    yes, I think you are right. It is almost fun to be able to sit back and see whether this whole mess is going to unravel now later than later.

    It is like a movie where you know something is going to happen but you don’t know when!

  146. robchipman

    Blueskies:

    Foreclosure. Wanna buy it? 🙂

  147. jesse

    ‘They are simply there to verify it isn’t a wreck or some type of scam for a mortgage”

    Appraisers determine current value but make absolutely no comments or claims about future market conditions — that’s left to the lender to determine. You can claim the appraiser is making a crazy assessement on a property but you should separate appraisals that do not reflect current market conditions from the future appraised value of the property.

    A mortgage broker I know often complains that appraisers are often kiboshing deals so there appears to be some sort of check to prevent appraisers making crazy claims. Certainly I can imagine appraisers having to deal with angry agents and brokers when the appraisal comes in too low so there is certainly pressure for appraisers to increase values.

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