Canada's 'housing bubble' deemed close to bursting

[geotag277]

Originally Posted by cornholio

it is however a bad sign for the market and indicates in not so many words that the Banks are no longer optimistic about the future.

I think you are reading what you want to read into the off handed comment from the CEO, and projecting several multiples of your own assumptions onto that one sentence he said.

I do not read "less aggressive lending" as being "less optimistic about the future". It is simply re-calibrating their mortgage policies for the two markets which have the highest average mortgage servicing costs in the country (with Vancouver being a staggering 50+% AVERAGE mortgage servicing cost of total income).

It is no different than CMHC re-balancing their mortgage rules to respond to a market which has a different risk profile. It could be said that even allowing 50+% mortgage servicing costs in the first place demonstrates rather preposterous overwrought caricatural fantastic optimism - so even maintaining it at that level as home prices rise (which could just as easily imply less "aggressive" mortgage lending) is a rather fanciful endorsement of the future.

[cornholio]

Originally Posted by geotag277

I think you are reading what you want to read into the off handed comment from the CEO, and projecting several multiples of your own assumptions onto that one sentence he said.

I do not read "less aggressive lending" as being "less optimistic about the future". It is simply re-calibrating their mortgage policies for the two markets which have the highest average mortgage servicing costs in the country (with Vancouver being a staggering 50+% AVERAGE mortgage servicing cost of total income).

It is no different than CMHC re-balancing their mortgage rules to respond to a market which has a different risk profile. It could be said that even allowing 50+% mortgage servicing costs in the first place demonstrates rather preposterous overwrought caricatural fantastic optimism - so even maintaining it at that level as home prices rise (which could just as easily imply less "aggressive" mortgage lending) is a rather fanciful endorsement of the future.

Reading more in to it. Who knows. But when a CEO of a big bank speaks, every single word, moment of silence, droplet of sweat on his forehead matters and means something and markets and investors listen. And part of the CEO's job is to know this and use it and that means thinking long and hard about every word and their impact. But we will see how the other banks react over the coming months and especially after the next interest rate hike in the US, possibly in two weeks.

[dleung]

If the same CEO said everything is fine, Cornholio will find a way to question his credibility. Quick, everyone cash out and sell at once! so he can finally get into the market

2 fun articles:

'Student' owns $31.1-million Point Grey mansion
http://vancouversun.com/storyline/student-owns-31-1-million-point-grey-mansion

In Vancouver, house owners made more sitting on their assets than entire population did by actually working last year
http://www.scmp.com/comment/blogs/articl..._medium=&utm_campaign=SCMPSocialNewsfeed

[casper]

Originally Posted by dleung

If the same CEO said everything is fine, Cornholio will find a way to question his credibility. Quick, everyone cash out and sell at once! so he can finally get into the market

2 fun articles:

'Student' owns $31.1-million Point Grey mansion
http://vancouversun.com/storyline/student-owns-31-1-million-point-grey-mansion

In Vancouver, house owners made more sitting on their assets than entire population did by actually working last year
http://www.scmp.com/comment/blogs/articl..._medium=&utm_campaign=SCMPSocialNewsfeed

Personally I find it disturbing that the information used as a basis for the first article is in the public domain.

Someone buys a house in BC they have to list their occupation on the land registry papers. We should stop that. When I purchased my property my realtor basically said, I need to put something down on the offer, I usually just do "business person" since what business is it of the sell what your actual occupation is.

From a journalism perspective we have a news paper that:
- Decided to write a story about "Tian Yu Zhou" buying a home.
- The new owner has no interest in talking to the Vancouver Sun.
- The lawyer is not going to talk to the press about a client out of respect for client privacy.
- The realtor is not going to talk to the press.

End result is the NDP critic David Eby is being interview and answer question on if Tian Zhou has the money to but the property, can afford the mortgage payments.

The fact the previous owner donated money to the Liberal party also appears to be an issue. Most property sales the seller and buyer never talk to each other of meet. That is what the realtors do. If I buy property I have no idea what political party the seller supports.

I have to ask the question, why is the Vancouver sun writing this new article about "Tian Yu"? Why pull a random home-owner and write an article about them buying a house, especially if they appear interested in talking to your paper.

[rbt]

Originally Posted by dleung

If the same CEO said everything is fine, Cornholio will find a way to question his credibility. Quick, everyone cash out and sell at once! so he can finally get into the market

In Vancouver, house owners made more sitting on their assets than entire population did by actually working last year
http://www.scmp.com/comment/blogs/articl..._medium=&utm_campaign=SCMPSocialNewsfeed

Paper gains. As you say, everyone cashing out simultaneously may cause some value loss.

[cornholio]

BMO chief economist had something to say as well.


http://m.huffpost.com/ca/entry/10266552?utm_hp_ref=canada

Porter said year-over-year debt growth of 5.1 per cent was driven largely by a 6.2 per cent increase in mortgages.

That growth is well above that of disposable income, which only increased by 3.4 per cent year over year.

And things can only get worse, given soaring home prices in Vancouver and Toronto, he added.

“It’s tough to see anything turning this canoe around,” the economist said.

New figures for Canadian debt are set to be released on June 14. And Porter, for one, expects things to look pretty grim.

June 14 will be a interesting day I suppose with interesting data releases from Canada and the US and a possible interest rate hike in the US to top it all of.

[lio45]

Originally Posted by dleung

In Vancouver, house owners made more sitting on their assets than entire population did by actually working last year
http://www.scmp.com/comment/blogs/articl..._medium=&utm_campaign=SCMPSocialNewsfeed

As rbt points out, it's on paper only if you don't sell.

[geotag277]

Originally Posted by lio45

As rbt points out, it's on paper only if you don't sell.

That really doesn't seem to be a problem considering listings are falling and sales are up.

It seems the state of the market in Vancouver is that the people who wanted to "cash out" did so already over the past few years and now we are reaching a critical point where people just don't want to move out of their homes which is driving inventory down to record low levels.

The "problem" with wanting to cash out in a hot real estate environment is that your house might be worth a lot, but so is every other house, so if you don't actually want to leave Vancouver, there is zero point.

[someone123]

Originally Posted by geotag277

The "problem" with wanting to cash out in a hot real estate environment is that your house might be worth a lot, but so is every other house, so if you don't actually want to leave Vancouver, there is zero point.

A lot of people downsize or just move to a cheaper part of town. The West Side is super expensive despite not actually having all that many tangible benefits over other parts of town for a lot of people.

I know of one recent example that's probably pretty typical. The owners are an older empty nester couple and they sold a place for $4M (1950's vintage teardown fronting onto a park) then bought a $2M place of similar size maybe 20 blocks farther east.

One argument out there is that foreign buyers are buying property in their own special luxury market that has negligible impact on the level of affordability of the city as a whole. This phenomenon of people cashing out and buying cheaper places goes against that theory.

[geotag277]

Down sizing is not a Vancouver phenomenon, it is happening all over the country with boomers. The unique thing about Vancouver is that once the added boomer volume of inventory down sizing dries up, that is yet another critical source of new listings especially for single family detached homes which is never going to come back or be replenished through any other source.

[someone123]

Originally Posted by geotag277

Down sizing is not a Vancouver phenomenon, it is happening all over the country with boomers.

I agree, but I was responding to your previous post where you said "if you don't actually want to leave Vancouver, there is zero point [to selling your house]". I was just suggesting there are scenarios where it makes sense to sell your property and buy back into the same market.

The unique thing about Vancouver is that once the added boomer volume of inventory down sizing dries up, that is yet another critical source of new listings especially for single family detached homes which is never going to come back or be replenished through any other source.

The baby boomers are the last generation ever who will go through the process of wanting to downsize and sell off their house?

An alternate theory I have heard is that demand for these houses might drop as the baby boomers get older and we end up with a younger generation in its peak earning or home buying years that has a lot less money and fewer children. The corollary to this theory is that we're more or less hitting "peak house".

Maybe the stream of Chinese buyers (which definitely definitely doesn't exist, but let's imagine that it did in some alternate universe) will completely swamp this effect, but that seems hard to predict too. Foreigners without strong local ties tend to be capricious.

[CanSpice]

Originally Posted by someone123

The baby boomers are the last generation ever who will go through the process of wanting to downsize and sell off their house?

They may be the last generation to have a single-family house, at least in Vancouver.

[someone123]

Originally Posted by CanSpice

They may be the last generation to have a single-family house, at least in Vancouver.

They may be the last generation to almost universally want a house. A lot of younger people today don't; they want affordable housing but they're not lusting after the neighbourhoods of 1980.

Vancouver may be spared this but I think a lot of cities and certainly towns and rural areas will find that they have an oversupply of large houses. Large houses that are dated, expensive to maintain and not strategically located may not keep going up and up in value. The house-as-retirement-plan model may not work well for people who own those sorts of properties.

Even in Vancouver, if you stripped out the prospects of the properties generating returns as investments, would young people be fighting tooth and nail for dumpy 70's houses in Burnaby?

[lio45]

Originally Posted by geotag277

That really doesn't seem to be a problem considering listings are falling and sales are up.

It seems the state of the market in Vancouver is that the people who wanted to "cash out" did so already over the past few years and now we are reaching a critical point where people just don't want to move out of their homes which is driving inventory down to record low levels.

The "problem" with wanting to cash out in a hot real estate environment is that your house might be worth a lot, but so is every other house, so if you don't actually want to leave Vancouver, there is zero point.

You could actually cash out at the peak of the bubble then rent for a while then get again in the market.

Scroll down and look at the graph...
http://www.zillow.com/miami-beach-fl/home-values/

Surely with hindsight you'll agree with me the correct thing to do was to sell during the Sunbelt bubble (in November of 2006, ideally) and rent for a few years (maybe even moving to a cheaper corner of the metropolitan area) before buying something again in 2010-2011.

[ssiguy]

Mayor Moonbeam just did an interview with Walrus to explain why Vancouver is so expensive.

He say's that foreign money is a definite factor but there far more too it. He said it is happening in all high-tech cities of the world like London, NYC, SF and, of course Vancouver. In case you missed that he placed Vancouver's economic prowess alongside London, NYC, and SF.

He then said that it was also people wanting to move to the city due to our culture riches which he said included our craft breweries and our "food stands were world renowned" and we had some car-free days on our streets and the Pride festival. I've heard a lot of excuses for high real estate in the city but people wanting to buy pricey Vancouver real estate in part because of our world class food stands and beer truly is a first. You couldn't make this stuff up.

This is an example of how the City and Province will do or say absolutely ANYTHING to deflect pressure away from them doing anything about the housing crisis in the city/Metro. The Ponzi scheme has to continue or the city's economy would be devastated and all the negative current consequences {including forcing the young people out of the region} will have to be tolerated as it's simply too late.

I've heard a basic explanation of how you can tell the difference between a recreational drug user and an addict and it exemplifies Vancouver's real estate frenzy perfectly..........

" Recreational drug use is something you do to feel good while with an addict it is something they do to stop from feeling bad."

[GreaterMontréal]

Originally Posted by ssiguy

Mayor Moonbeam just did an interview with Walrus to explain why Vancouver is so expensive.

He say's that foreign money is a definite factor but there far more too it. He said it is happening in all high-tech cities of the world like London, NYC, SF and, of course Vancouver. In case you missed that he placed Vancouver's economic prowess alongside London, NYC, and SF.

He then said that it was also people wanting to move to the city due to our culture riches which he said included our craft breweries and our "food stands were world renowned" and we had some car-free days on our streets and the Pride festival. I've heard a lot of excuses for high real estate in the city but people wanting to buy pricey Vancouver real estate in part because of our world class food stands and beer truly is a first. You couldn't make this stuff up.

This is an example of how the City and Province will do or say absolutely ANYTHING to deflect pressure away from them doing anything about the housing crisis in the city/Metro. The Ponzi scheme has to continue or the city's economy would be devastated and all the negative current consequences {including forcing the young people out of the region} will have to be tolerated as it's simply too late.

I've heard a basic explanation of how you can tell the difference between a recreational drug user and an addict and it exemplifies Vancouver's real estate frenzy perfectly..........

" Recreational drug use is something you do to feel good while with an addict it is something they do to stop from feeling bad."

Quebec has passed BC in Venture Capital in 2015, and in Private Equity in 2014. Let see if the trend continues. I don't think being a high-tech city = high real estate $.

[Pinion]

Originally Posted by someone123

They may be the last generation to almost universally want a house. A lot of younger people today don't; they want affordable housing but they're not lusting after the neighbourhoods of 1980.

People in their 20s think this but I don't think the majority of millennials will be much different than boomers when it comes to wanting quiet SFHs when they get older. I'm 36 and went from never wanting a SFH to never wanting another condo.

Of course I won't move east of Coquitlam to get one either so that's why a lot of us will be condo lifers.

[whatnext]

Originally Posted by casper

Personally I find it disturbing that the information used as a basis for the first article is in the public domain.

Someone buys a house in BC they have to list their occupation on the land registry papers. We should stop that. When I purchased my property my realtor basically said, I need to put something down on the offer, I usually just do "business person" since what business is it of the sell what your actual occupation is.

From a journalism perspective we have a news paper that:
- Decided to write a story about "Tian Yu Zhou" buying a home.
- The new owner has no interest in talking to the Vancouver Sun.
- The lawyer is not going to talk to the press about a client out of respect for client privacy.
- The realtor is not going to talk to the press.

End result is the NDP critic David Eby is being interview and answer question on if Tian Zhou has the money to but the property, can afford the mortgage payments.

The fact the previous owner donated money to the Liberal party also appears to be an issue. Most property sales the seller and buyer never talk to each other of meet. That is what the realtors do. If I buy property I have no idea what political party the seller supports.

I have to ask the question, why is the Vancouver sun writing this new article about "Tian Yu"? Why pull a random home-owner and write an article about them buying a house, especially if they appear interested in talking to your paper.

Gee, maybe because there aren't any students from Ireland or <insert any other country> here.

Your attitude isn't helpful, it's because this ridiculous sense of political correctness we are in the situation we are in now. And unfortunately because of dissemblers like yourself we grow closer to seeing some sort of Trumplike backlash building.

[ssiguy]

You are right that a high-tech sector doesn't necessarily mean high real estate but that's the whole point............the politicians will do or say absolutely anything to try to explain away the housing crisis to excuse their inaction.

It's far too late for Vancouver but I find it upsetting that Victoria has chosen the same path of welcoming money launderers and wholesale destruction of perfectly liveable homes.

Vancouver has never shown any interest in historical preservation but Victoria always has which is what gives it it's charm. There is still time for Victoria to put a moratorium on housing destruction so the city won't be left with empty monster homes but I don't think they will. They have learnt that the money is just too easy just like their big sister.

[casper]

Originally Posted by whatnext

Gee, maybe because there aren't any students from Ireland or <insert any other country> here.

Your attitude isn't helpful, it's because this ridiculous sense of political correctness we are in the situation we are in now. And unfortunately because of dissemblers like yourself we grow closer to seeing some sort of Trumplike backlash building.

If you want a non-Asian example. When I lived in Saskatoon this was pretty common scenario:
- Farm family in rural Saskatchewan hits the point where kids are in the age demographic to go to university. They buy a condo in Saskatoon for the kids to go university. When done they sell it off. With 5% down-payments and low interest it is cheaper than renting for 6-7 years.

My objection is to poor journalism.

The reporter knows nothing about the person who is at the centre of this article other than what he/she obtained from property registration documents.

The MLA being interview knows even less. The Liberals and NDP will always play politics and try to score points on each other. That is the nature of our system. It is when you drag private citizens into this that I get worried.

What exactly has this new homeowner done to deserve this attention?

More and more this look like McCarthyism.