Housing Bust 2012

[gsp_]

This is the city where a few weeks ago someone beat out 17 rivals for a non-descript three-bedroom bungalow by paying $1.2-million, $421,800 over the asking price. Bid high or go home. That’s the Toronto way.

That someone turned out to be a college kid bidding her family's overseas money. You can't make this stuff up.

[CROCKD]

Bank regulator proposes heightened scrutiny of mortgage market

OSFI’s guidelines lay out the details that it wants banks to check when considering a mortgage application. They include items such as home heating bills and other variable expenses.

[randomwalker]

Bank regulator proposes heightened scrutiny of mortgage market

OSFI’s guidelines lay out the details that it wants banks to check when considering a mortgage application. They include items such as home heating bills and other variable expenses.

Talk about closing the barn door after the horse has already bolted. It's just too little, too late, the damage is already done. There's nothing to do now but sit back and watch the coming train wreck in slow motion. Next stop, "reversion to the mean."

[dusty2]

Anyone who's been to a new condo sale knows that a high proportion of the people are Oriental like the one who paid $421,000 more. These are wealthy people from overseas looking for a safe place to put their money. When you have millions of dollars in a Western currency, the safest place to put it is a Western country. They know that a Chinese leader could take their money if he felt like or throw him into jail and confiscate his wealth. There's are no laws that are fair in China.

[blackball]

Simple solution is to restrict foreign ownership of residential properties in Canada. Crash and burn!

[Brix]

Years ago there was an eccentric Vancouverite in the habit of pushing an baby carriage filled with salvage through downtown streets and shouting, apparently in explanation, "C'est les Chinois, je vous dis!"

Lately a lot more people (including some of my best friends) have pretty much taken up that cry in connection with soaring housing prices. Are they maybe getting a little too carried away? The Tyee investigates:

A 2010 Landcor report into the Metro Vancouver housing market titled "A Decade of Peak Performance" found foreign ownership of residential real estate in Vancouver was "extensive": 2,545 properties with owners from around North America (2,532 of those from the United States, where the highest valued residential property held by an American was $7.17 million), 977 from Asia (609 of those from Hong Kong, where the highest valued residential property held by a H.K. resident was $6.84 million), 527 from Europe (mainly from the United Kingdom, where the highest valued property held by a U.K. resident was $7.55 million) and 302 scattered across some 90 other countries.

[Bob.G]

I think you are living in the past. The bubble already burst about six years ago. But, with interest rates on mortgages being the lowest they've been in a long time, I expect new home ownership to go up, and the property values of houses in general to trend upward. Though this will not be the case in places that were hit hard by the recession, especially in the "Rust Belt" area of the United States. I bought my home in 2004, and refinanced this past year to get an even lower rate on my mortgage. Bottom line the outlook for the housing market is okay, to good. We just need to keep our economy growing, while adding new jobs.

[randomwalker]

Here's Diane Francis' take on foreign ownership of residential real estate. I don't agree with her any more than I would were she advocating limiting foreign ownership of stocks, bonds, commodities etc. or Canadians owning real estate outside Canada. She touches on other issues such as interest rates, CMHC, down payments etc all of which I thought should have been looked at years ago, but now the horse has bolted and it's too late to close those gates. At this point it's "buyer beware." Most of us know that markets sometimes swing pendulum like from the extremes of under owned to eventually over bought. In the long haul we also know that "The madness of crowds" usually ends in a reversion to the mean, painful for those who bought late, less so for those who got in early or those who just got out.

One other thing that I've just realized of late is that interest rate setters and policy makers have consciously decided to sacrifice those buying houses late in this housing boom/bubble in that they know abnormally low interest rates are adding fuel to an over heated residential real estate market and this is the price that is to be paid in an attempt to stimulate the wider economy. It's a triage of sorts, some home owners will die economically speaking so the broader economy may live.

To tame Toronto’s housing ‘bubble’, ban foreign buying
Diane Francis, The National Post Apr 13, 2012

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised. What is going on here is a deluge of hot money from abroad that is creating an artificial and potentially dangerous real estate bubble. This mania happened in several other countries — where it was shut down — and has spread to Canada. Officials here have been urging restraint but that is not the solution. A ban on foreign buying of residences is the only solution.

http://opinion.financialpost.com/2012/0 ... gn-buying/

[Benchwarmer]

This is a dangerous move, because at a whim governments world-wide can ban foreign purchases of real-estate, stocks, bonds, and trade. We created this problem ourselves, fix it there (such as changing CMHC rules so the insurance only applies to Canadian citizens, and ending the artificially low interest rate policies).

[patriot1]

We created this problem ourselves, fix it there (such as changing CMHC rules so the insurance only applies to Canadian citizens.

I doubt that would stand up to a legal challenge, since permanent residents have essentially the same rights as citizens except of course for those rights which derive directly from citizenship (e.g. voting). But that's not the problem and not the fix anyway.

This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised.

Francis cannot see the forest for the trees. Open-ended government mortgage insurance is in itself a gross manipulation of the housing market. That's the problem, and the fix is to greatly reduce the scope of it - e.g. by imposing strict price caps, requiring larger down payments, limiting it to first time buyers, etc., or simply getting rid of it.

She is also ignoring the fact that foreign (i.e. non-resident) buyers can't get CHMC insurance in the first place.

I don't know whether Francis can't figure this out or she can figure it out but simply wants to arrest the usual suspects. Anyone who's been paying attention to the facts can see that this bubble was deliberately created by the Harper government.

[jaguar]

Why not eliminate the tax exemption on primary residences? Housing shouldn't be favoured over investment in other assets such as businesses that provide jobs and increase national economic output. Removing this tax advantage could reduce demand for housing.

[kcowan]

She is also ignoring the fact that foreign (i.e. non-resident) buyers can't get CHMC insurance in the first place...

I thought she was focusing on foreign students resident here who do qualify for CMHC coverage?

[dusty2]

Probably the best way to lower condo prices, in Toronto, is to do what they're doing now - building as many condos as the buyers want. If you want a low-priced condo, there's plenty in Montreal at $100,000, since they've managed to ruined their housing market. Toronto presently has 180 highrise buildings under contruction, Vancouver only has 16, which might be why they're expensive. Location is what's important, if you want a cheap home, try Flin Flon or the Yukon.

[Shakespeare]

The under-the-radar changes that may soon deflate (or pop) the housing bubble - Econowatch - Macleans.ca

Putting CMHC into OSFI hands may well represent a greater tightening of credit than Flaherty could have done by shortening amortization lengths or increasing down payments. OSFI regulators, in fact, have gone public on several occasions to express concerns about underwriting standards in Canada. Expect significant changes to happen, though likely behind the scenes.

[patriot1]

Putting CMHC into OSFI hands may well represent a greater tightening of credit than Flaherty could have done by shortening amortization lengths or increasing down payments.

"Would have", not "could have".

[CROCKD]

Vancouver ‘vulnerable’ to housing bust, RBC warns

"Much of the Vancouver-area market’s high valuation hangs on the strong and constant flow of wealthy buyers coming from abroad - a phenomenon that is poorly documented," he added in the report

[CROCKD]

Flipping Condos.

Why CRA wants $30,000 HST rebates back

[qwimjim]

haha condo's for 100K in montreal. if you want a nice condo in montreal (~1000 sqft), in anything resembling a desirable neighborhood it's going to cost minimum 300K and that won't get you much. there is a ton of development in montreal, not highrise condos but it's still impressive.. montreal isn't cheap anymore, a semi-detached near downtown will cost anywhere from 1-2 million. new developments with detached homes a 20-30 minute commute from downtown are selling detached homes for 2-4 million, and million dollar townhouses.

[CROCKD]

Are foreign investors driving up Canada’s housing prices?

[CROCKD]

An interesting perspective from the G&M's chief of its European bureau.

A housing crisis of global proportions

[crx00]

http://vancouverpricedrop.wordpress.com/

[CROCKD]

The case for selling and renting in Vancouver.

Ready to be bold? Sell the house and rent

[CROCKD]

How condo boom threatens a ‘ghost city phenomenon’

CMHC estimates that roughly 25 per cent of condominiums in the Greater Toronto Area are sold but sitting vacant -- shades of Miami at the height of its collapsed condo bubble in 2007. Other analysts say the 25 per cent figure may be too low.

“This is the ghost city phenomenon,” Mr. Holt said.

[BRIAN5000]

Talking with a Real Estate agent at poker the other night. He said that in the Lower Mainland anything that is already built isn't selling but presales are still strong.

[AltaRed]

IOW, the speculators (flips) are still at work on the premise there will still be time to make a return on their equity (deposit).