Real Estate

Vancouver housing bubble?

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Deal Addict
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Dec 14, 2007
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This thread was far more active when prices were climbing.
I'd love to write history... in advance.
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Deal Fanatic
Oct 7, 2007
5841 posts
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atomiton wrote: This thread was far more active when prices were climbing.
I know. Where did everybody go????

Here are some highlights I picked up from the September real estate data:

• There were 5,279 detached, attached and apartment properties NEWLY listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in September 2018

• # of Listings within EACH property type and for ALL property types increased from Aug 2018 to Sep 2018

• the total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 13,084, a 38.2 per cent increase compared to September 2017 (9,466) and a 10.7 per cent increase compared to August 2018 (11,824)

• Sales of detached properties in September 2018 reached 508, a 40.4 per cent decrease from the 852 detached sales recorded in September 2017

• Sales of apartment properties reached 812 in September 2018, a 44 per cent decrease compared to the 1,451 sales in September 2017

• Attached property sales in September 2018 totalled 275, a 46.9 per cent decrease compared to the 518 sales in September 2017

• Sales volumes on the Vancouver west side are down by 50% YOY (in each individual category: condos, townhouse, detached)

Not sure when we will see prices shift but if these trends continue, there should be more than enough homes for everyone to choose from. If I was in the market, I would just sit back, watch the statistics and wait before buying anything. I see some people feeling like they need to get in before rates go up BUT better to lock into a cheaper house at a higher mortgage rate than the other way round. As rates go up, prices will have to come down because the average buyer only has so much income to pay for housing.
Deal Guru
Jan 27, 2006
12078 posts
5230 upvotes
Vancouver, BC
atomiton wrote: This thread was far more active when prices were climbing.
Right now the prices are pretty much flat - yes, there's slight drop according to the actual numbers but nothing to get too excited about.... - at least according to the 'official' numbers.

I'll bet the action will really heat up when the official numbers start showing much larger downward 'adjustments'.
Deal Guru
Jan 27, 2006
12078 posts
5230 upvotes
Vancouver, BC
choclover wrote: I know. Where did everybody go????

Here are some highlights I picked up from the September real estate data:

• There were 5,279 detached, attached and apartment properties NEWLY listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in September 2018

• # of Listings within EACH property type and for ALL property types increased from Aug 2018 to Sep 2018

• the total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 13,084, a 38.2 per cent increase compared to September 2017 (9,466) and a 10.7 per cent increase compared to August 2018 (11,824)

• Sales of detached properties in September 2018 reached 508, a 40.4 per cent decrease from the 852 detached sales recorded in September 2017

• Sales of apartment properties reached 812 in September 2018, a 44 per cent decrease compared to the 1,451 sales in September 2017

• Attached property sales in September 2018 totalled 275, a 46.9 per cent decrease compared to the 518 sales in September 2017

• Sales volumes on the Vancouver west side are down by 50% YOY (in each individual category: condos, townhouse, detached)

Not sure when we will see prices shift but if these trends continue, there should be more than enough homes for everyone to choose from. If I was in the market, I would just sit back, watch the statistics and wait before buying anything. I see some people feeling like they need to get in before rates go up BUT better to lock into a cheaper house at a higher mortgage rate than the other way round. As rates go up, prices will have to come down because the average buyer only has so much income to pay for housing.
I don't think we will see too much of an adjustment from the following selling groups:
1. Actual home-owners who have lived in the property for a decade or more which means that they are in the green by a whole lot. (pun intended)
2. Investors who have owned their property and rented it out to longer term tenets who are covering their mortgages.
3. Land assembly sellers looking for their lottery tickets.

However, these other groups will start feeling it:
1. Buyers at the top of the market especially those who may be underwater according to the next round of assessments.
2. Owners who squeaked through the mortgage qualifications before the stress test and are variable rate with interest rates going up (the US fed is predicting at least another 1% in the prime rate in the next 12 months).
3. Builders who have completed building their house but have not sold it in the past 6 months as the builder's bridge financing to build the house starts moving up in cost due to increasing rates and having to carry such a large amount especially if home prices drop.
Deal Addict
Apr 10, 2011
1352 posts
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Vancouver
'Buyers' market': Metro Vancouver home sales dive 40 per cent compared to this time last year

VANCOUVER — The Greater Vancouver Real Estate Board says home sales across the region in September plunged more than 40 per compared with the same month last year

https://business.financialpost.com/real ... wn-sharply
Deal Addict
Apr 10, 2011
1352 posts
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Vancouver
If someone bought in the past 2 years and their home value drops by more than their down-payment, what happens?

They are technically "under water" aren't they?

So, the financial institution will lose money if that home needed selling.

So, each member of the couple would equally share the remaining outstanding debt if they have to move, lose their job, get a divorce, etc.

Mortgage lenders and 2nd/3rd lenders may start to sweat soon - - especially with interest rates going up - - and a missed/NSF payment or two. In a downward market, they'll be looking at those flagged homeowners more closely.
Banned
Aug 24, 2018
196 posts
119 upvotes
RxMills wrote: If someone bought in the past 2 years and their home value drops by more than their down-payment, what happens?

They are technically "under water" aren't they?

So, the financial institution will lose money if that home needed selling.

So, each member of the couple would equally share the remaining outstanding debt if they have to move, lose their job, get a divorce, etc.

Mortgage lenders and 2nd/3rd lenders may start to sweat soon - - especially with interest rates going up - - and a missed/NSF payment or two. In a downward market, they'll be looking at those flagged homeowners more closely.
To be underwater your current resale price must be less than you paid originally (plus realtors fees).
Deal Addict
Apr 10, 2011
1352 posts
834 upvotes
Vancouver
More interest rate hikes are imminent now which should further cool the market.

Fed said they were holding off hikes because of the lack of a Trade Agreement. That's done. That's another reason why the Cdn$ got a big bump.

To further cool things, several mayoral candidates are proposing $5M+ mansion taxes.
Deal Guru
Jan 27, 2006
12078 posts
5230 upvotes
Vancouver, BC
RxMills wrote: If someone bought in the past 2 years and their home value drops by more than their down-payment, what happens?

They are technically "under water" aren't they?

So, the financial institution will lose money if that home needed selling.

So, each member of the couple would equally share the remaining outstanding debt if they have to move, lose their job, get a divorce, etc.

Mortgage lenders and 2nd/3rd lenders may start to sweat soon - - especially with interest rates going up - - and a missed/NSF payment or two. In a downward market, they'll be looking at those flagged homeowners more closely.
It will be bad for the housing market but not so much for the banks. If you are thinking that it would be an US style destruction of the banking industry (which a lot of US shorts are now betting on), there's a few differences here -

1. In the US, a 'homeowner' can walk away from their house and their obligations by leaving the keys with the lender. Yes, there will probably be a hit on their credit score but little else. In Canada, homeowners can't do that... the banks can and will go after them for the money.
2. The vast majority of 'questionable' situations for the banks have been insured by either a private insurer or CMHC so the banks actually don't have that much skin in the game. The CMHC recently did a stress test of their system and they found that they can survive so there's not much of a chance that the banks won't get paid out.
3. The US had many 'questionable' creative mortgage products which were primarily based on a rising housing market that will NEVER drop. Many of those similar type products never made it to the Canadian market place.
Member
Jul 26, 2015
206 posts
129 upvotes
Vancouver, BC
otismod wrote: To be underwater your current resale price must be less than you paid originally (plus realtors fees).
Being underwater means that the property owner ows the bank more than the current property market value. Therefore walking away from the property makes more sense than keep paying the mortgage.

The “underwater” term has nothing to do with the purchase price or realtor fees.
Jr. Member
Jan 31, 2013
104 posts
98 upvotes
Toronto
craftsman wrote: It will be bad for the housing market but not so much for the banks. If you are thinking that it would be an US style destruction of the banking industry (which a lot of US shorts are now betting on), there's a few differences here -

1. In the US, a 'homeowner' can walk away from their house and their obligations by leaving the keys with the lender.
This is not true.
2. The vast majority of 'questionable' situations for the banks have been insured by either a private insurer or CMHC so the banks actually don't have that much skin in the game.
[Citation needed.]
3. The US had many 'questionable' creative mortgage products which were primarily based on a rising housing market that will NEVER drop. Many of those similar type products never made it to the Canadian market place.
You mean like interest-only mortgages? We call those HELOCs in Canada.
Deal Addict
Dec 4, 2016
1659 posts
749 upvotes
craftsman wrote: It will be bad for the housing market but not so much for the banks. If you are thinking that it would be an US style destruction of the banking industry (which a lot of US shorts are now betting on), there's a few differences here -

1. In the US, a 'homeowner' can walk away from their house and their obligations by leaving the keys with the lender. Yes, there will probably be a hit on their credit score but little else. In Canada, homeowners can't do that... the banks can and will go after them for the money.
Not all U.S. states have "no recourse" mortgages. Some states do allow banks to pursue home owners to the point of bankruptcy. In the U.S. crash, there's no noticeable difference between recourse states and non-recourse states. Most people declare bankruptcy before sending keys back to the bank.
Deal Fanatic
Oct 7, 2007
5841 posts
2213 upvotes
RxMills wrote: More interest rate hikes are imminent now which should further cool the market.

Fed said they were holding off hikes because of the lack of a Trade Agreement. That's done. That's another reason why the Cdn$ got a big bump.

To further cool things, several mayoral candidates are proposing $5M+ mansion taxes.
Don't forget also that several mayoral candidates want to implement a LAND VALUE CAPTURE TAX on the "land lift" in value created by the city-wide mass rezoning to duplexes. I've heard several of the candidates mention this without using the word tax and was wondering if other voters have picked up on it yet. I have a feeling most people are going to be surprised when it happens thinking that no one ever mentioned that before when they did mention it but using language that is subtle and avoided the direct use of the word "tax".
Member
Jan 13, 2016
390 posts
100 upvotes
Vancouver, BC
Here's an article on some of the riskiest types of mortgages in the states

https://www.investopedia.com/articles/m ... -loans.asp

There is definitely more opportunity for US buyers to get in trouble. Has anyone read The Big Short? I plan to read it to understand the mortgage crisis better.
Last edited by Latebuyer on Oct 4th, 2018 10:52 am, edited 1 time in total.
Deal Fanatic
Oct 7, 2007
5841 posts
2213 upvotes
RxMills wrote: More interest rate hikes are imminent now which should further cool the market.

Fed said they were holding off hikes because of the lack of a Trade Agreement. That's done. That's another reason why the Cdn$ got a big bump.

To further cool things, several mayoral candidates are proposing $5M+ mansion taxes.
I have a feeling that if these candidates get elected they will lower the $5M threshold to something far lower like $1M and find an excuse (e.g. house sales are dropping) to collect more taxes from more homeowners.

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