The BC Real Estate Discussion Thread

[sameer666]

1 minute ago, Harvey Spector said:

@sameer666  Great blog!! Very informative and helpful advice for first time buyers thinking of using the program. 

Thanks Harvey!

 

Let me know if there's anything you think I should expand on, or add! I won't be publishing a final version on my website until early next week. 

[kingofsurrey]

Been reading sales dropping in the valley but prices still rising.. Is this accurate ?

[sameer666]

Hey everyone. Finally got around to finishing up the blog I put together that goes over the BC Home Partnership Loan program. See below.

 

Quote

Is the BC Home Partnership Loan really for you?

 

Living in Vancouver, we reside in one of the toughest global real estate markets for millennials to get their foot in the door(literally). With some of the highest housing prices in relation to income in the world, crippling levels of household debt, and a scarcity of supply, it is not getting easier either. Due to pent up discouragement and frustration from the millennial generation, the BC government has decided to put forth a new program to help. Unfortunately, government programs are not a one size fits all solution for everyone, and often consumers unintentionally run into issues with the fine print after the fact. Because of this, I would like to give an objective and detailed analysis of this program. After reading this, one should come away with a better understanding of how this initiative works, and how it could be efficiently applied to their situation. I will tackle this analysis by splitting it up into 4 key sections:

1. How does this program work, and how does one qualify to use it?
2. What should consumers be looking for in the fine print, and other things to consider.
3. How is this program intended to be used?
4. How can one use this program to their benefit, as opposed to their detriment?

If there are further questions beyond what I have covered here, please get in touch!

How does this program work, and how does one qualify to use it?

 

One of the biggest challenges millennials face is saving up the necessary down payment to get a mortgage. Aiming to target this issue, this new initiative will match one’s down payment for up to 5%(capping out at $37,500) of the purchase price of a home. This would be in the form of a second mortgage loan registered on the property purchased. The loan begins as interest and payment free for the first 5 years. After that, interest will begin to accrue and monthly payments will be due. These payments will be due based on an interest rate of the prime rate + 0.5%(currently 3.2%), and amortized over the remaining 20 years of the mortgage. This loan can be repaid partially or in full at any time. BC Housing outlines the following criteria to qualify for this program as below.

To qualify for the BC HOME Partnership loan, anyone who appears on the title of the home must meet the following criteria:

• Be a Canadian citizen or permanent resident that has resided in Canada for at least five years.
• Have lived in British Columbia for at least the full 12 months preceding your application.
• Be a first-time home buyer who has not owned an interest in a principal residence anywhere in the world at any time and has never received a first-time home buyers’ exemption or refund.
• The combined, annual gross household income of all individuals on title must not exceed $150,000.
• The home being purchased must be used as the principal residence of all individuals on title for the five years after purchasing.
• Purchase a home valued at $750,000 or less.
• Be eligible for a high-ratio insured first mortgage for the home

The BC Home Partnership loan is due and payable in full if any of the following occur:

• Default under the first mortgage or the BC HOME Partnership loan
• Change of ownership (including addition of a person to title)
• The home is no longer the home buyer’s principal residence

 

What should consumers be looking for in the fine print, and other things to consider.

 

• This program is only applicable to consumers acquiring an insured mortgages(less than 20% down). For example, if one has a 15% down payment saved up, they cannot use this program to get to a 20% down payment, as that mortgage will no longer be considered an insured mortgage. The consumer must put less than 20% down for this program to work. If one could put 20% down, but wants to take advantage of this program to create liquidity, they should also keep in mind the mortgage insurance premium would be avoided when putting 20% down. At 15% down, this premium would be 1.8% on the entire mortgage amount, or $1,800 on every $100,000 of mortgage acquired.
• The down payment assistance will be legally registered as a 2nd mortgage on a home, giving an interest in the home to BC Housing. As with any mortgage, this mortgage charge cannot be removed until the loan is paid off.
• There are legal costs involved with both registering a mortgage charge on the title of a property, and eventually removing the mortgage charge when the loan is paid off. The cost for both of these has yet to be revealed in detail by BC Housing, but it will be at the consumer’s expense. Typically, legal costs to register an additional mortgage is approximately an extra $100-$200 when purchasing a home. An additional cost of approximately $200-$300 would be applicable to remove the mortgage off title once the loan has been paid off.
• The down payment is considered a “non-traditional down payment” as defined by CMHC. This means if one puts less than 10% as a down payment, they would be paying an additional 0.25% on a CMHC mortgage insurance premium. An easy way to think of this is an extra $250 per every $100,000 of mortgage acquired. This cost will not be paid upfront, but added to the total mortgage amount, and amortized over the life of the mortgage. For example, when insuring a $400,000 loan amount, the insurance premium would be $15,400 for using a non-traditional source of down payment, as opposed to a $14,400 if the entire down payment came from your own funds, a difference of $1000.
• Further to the previous point, only a minority of lenders currently have programs where they accept “non-traditional down payment” sources. Fewer options, means less competition for the business. This could potentially lead to acquiring a mortgage with a marginally higher interest rate, or mortgage terms which are less flexible.
• If there are any changes to the properties title, the loan will become immediately due. This means even if one wanted to add a family member on title, or a spouse down the line, they would be  responsible for immediately paying off the loan in full. This could also apply if someone was to be removed off title. The most common example of this is in the case of a divorce. 
• If one changes the purpose of their home in the first 5 years of the loan, they would be responsible for immediately paying off the loan in full. The most common example of this is switching the properties purpose to an investment property.
• We still need to see how mortgage lenders respond to this new initiative. It is very common for lenders to have a mortgage term on their contracts where they prohibit any form of secondary financing. Due to this, there is a possibility some lenders will not participate in the program. If that occurs, that means there will be fewer options for financing for consumers interested in using this initiative.
• Even though there is to be no interest or payments over the first 5 years, lenders will still want to qualify the liability of having a loan to pay back. Thus, just because one would qualify at 5% down with the down payment coming from their own means, it does not mean they would also qualify for the same mortgage using this program.

 

How is this program intended to be used?

 

As of right now, subject to a consumer’s income and credit, one is able to purchase a home with as low as 5% down. Since qualified consumers who have saved up 5% can technically enter the market already, it is clear this program is targeted towards consumers who have saved less than 5% of a down payment to purchase a home. This definitely creates a home ownership opportunity for a market that was not able to attain it before, but it also encourages larger household debt, and puts consumers in a situation where realistically, they begin with negative equity in their home.

Take the example of buying a home for $300,000. In this case, a consumer would save up $7500 for their portion of the down payment, and the government matches them $7,500 by ways of this initiative. With this specific example of an insured mortgage, a mortgage insurance premium(in this case of $10,972.50) would be added to the original mortgage amount($285,000), meaning the first mortgage would be registered for $295,972.50. In addition to this first mortgage, the consumer would have a second mortgage registered for $7,500 to BC Housing.

Adding the first and second mortgage together, one would find they have acquired $303,472.50 in mortgage debt to purchase a home for $300,000. In this scenario, the consumer essentially has negative equity in their home. This means the size of their mortgage exceeds the value of their property, and is also known as being “underwater”. If the consumer for whatever reason had to sell this home, right from the start they would lose more than they originally invested into the home. This is not even factoring the possibility of depreciation, the costs to hire a realtor to sell the property, potentially paying a penalty to break the mortgage, and legal costs.

For this reason, a consumer should heavily weigh the importance of home ownership against the size of the liability they would be willing to acquire when deciding if using this program is worthwhile for their personal circumstance. They should also be confident and firm in the long term commitment they are making to live in this home. These are the key questions to be asked in regards to using this program with its intended purpose.

How can one use this program to their benefit, as opposed to their detriment?

Although the program is designed for consumers who have not saved up the necessary 5% down payment, anyone who is putting less than 20% down(including the interest free loan portion) can also use this program. If these consumers can carefully navigate through the fine print with discipline, they may find a few scenarios where this program can save them money, or allow them flexibility they did not have before. Here are a few examples of these scenarios:

• Already saved up 5% down? One way to take advantage of this program is using it to put 10% down. When one is able to put 10% down as opposed to 5% down, the mortgage insurance premium drops from 3.6% to 2.4%. Assuming one is able to pay off the government loan before interest starts accruing, this would quantify itself as approximately a reduction of $1200 in the mortgage insurance premium on every $100,000 of mortgage acquired. This could potentially save a consumer a fairly large amount in regards to insurance premiums. For example, when purchasing a $700,000 property, using this initiative to put 10% down instead of 5% would lead to a reduction of $8,820 in mortgage insurance premiums.
• Likewise, If one used this program to increase their down payment from 10% to 15%, the mortgage insurance premium would then decrease from 2.4% to 1.8%. This would quantify itself as a reduction of $600 in the mortgage insurance premium on every $100,000 of mortgage.
• It should be noted that in most cases mortgage insurance premiums are not paid upfront, but instead added to the amount to be mortgaged, and amortized over the life of the mortgage.
• Let us look at a scenario where a consumer has already saved up $30,000 as a 10% down payment on a $300,000 purchase, but also has $15,000 in student loan debt with a current interest rate of 6%. On a payment plan to pay it off in the next 5 years, the consumer is subjected to approximately $2,400 of interest in the course of paying off their student loan. One way to take advantage of this program is for the consumer to pay off the $15,000 in student loan debt, and then have their 5% down payment matched. This way the consumer is still putting 10% down, and as long as they pay back the government loan before interest begins to accrue, they are able to forego paying $2,400 of interest for their student loan.
• Another innovative use, would be for one who has already saved 10% or 15% of the down payment required, but wanted to put an offer on a home which needed a bit of work done. Assuming they are to pay it off before interest accrues and the payments begin, they could use the matching government funds to create liquidity to give themselves a no interest renovation loan for 5 years. If one needed to retain liquidity for other reasons as well, this could also apply with this use.

In conclusion, there is definitely fine print to be wary of when considering using this initiative, and the intended use of the program promotes higher than normal levels of household debt, and in some cases, even to the point of negative equity. Even though the loan is considered “interest free”, there will be legal costs to both register and remove the loan on one’s property, and this would be at the cost of the consumer. One could also be subject to a larger CMHC insurance premium if they are to use the loan to put less than 10% down, opposed to putting less than 10% down all from their own funds. Unable to make any changes to the title of one’s property without the loan becoming fully due could also prove to be a troublesome term of this initiative to many consumers. Nonetheless, if carefully planned and executed, some consumers could potentially find ways to use this plan to their advantage.

 

[Harvey Spector]

18 hours ago, kingofsurrey said:

Been reading sales dropping in the valley but prices still rising.. Is this accurate ?

 

No in Surrey prices of detached homes and condos have fallen to almost their same levels from January this year. As the attached stats from the Real Estate Board show, the median price for a detached home in Surrey is $780k today, in January it was $775k. For condos it is $210k today, in January it was $194,500. 

 

I expect further price drops in all areas in 2017 as sales have continuously dropped by 40% or more each month since August in almost all areas which is a strong indication that prices will follow suit. 

 

Edited December 21, 2016 by Harvey Spector

[Harvey Spector]

National home sales slow in November

Friday, December 16, 2016

 

Canadian home sales fell 5.3 per cent from October to November, according to statistics recently released by the Canadian Real Estate Association (CREA). This represents the largest monthly drop in activity since August 2012.

Activity was down month-over-month in about two-thirds of all local markets, including in Toronto and Vancouver, which are Canada’s most active markets.

“November was the first full month in which the expanded stress-test was in effect for home buyers with less than a twenty percent down payment,” said CREA President Cliff Iverson in a press release. “The government’s newly tightened mortgage regulations have dampened a wide swath of housing markets, including places not targeted directly by the government’s latest regulatory measures. The extent to which they pushed first-time home buyers to the sidelines varies among housing markets. “

“Canadian housing market results for November suggest that Canada’s housing sector is unlikely to be as strong a source for economic growth as compared to before mortgage regulations were recently tightened,” added Gregory Klump, CREA chief economist. “Housing activity generates a lot of spin-off spending, which makes its weakened prospects an additional source of uncertainty as regards the outlooks for Canadian economic and job growth.”

Actual (not seasonally adjusted) sales activity remained 1.6 per cent higher than November 2015 levels, which represents the smallest year-over-year increase since October 2015. Heightened activity in the Greater Toronto Area (GTA) and vicinity were dampened by declines in the Lower Mainland of B.C.

The number of newly listed homes fell 0.4 per cent in November 2016 compared to October. New listings increased from the previous month in nearly half of all local markets, led by the GTA.

The national sales-to-new listings ratio fell to 59.8 per cent in November, down from 62.9 per cent in October, representing a more balanced housing market than in previous months. However, the ratio was over 60 per cent in almost half of all local housing markets in November, most of which are located in British Columbia, in and around the GTA and across Southwestern Ontario.

The Aggregate Composite MLS home price index increased by 14.4 per cent year-over-year in November 2016, down from 14.6 per cent in October. This reflects a slowdown in single family home price appreciation.

Benchmark prices for two-storey single family homes and townhouse units posted gains of 16.3 per cent and 16 per cent, respectively, representing the largest year-over-year gains in November 2016. Meanwhile, the average price for a one-storey single family home increased by 13.7 per cent, while the price of an apartment unit climbed 11.5 per cent.

The actual (not seasonally adjusted) national average price for homes sold in November 2016 increased by 7.3 per cent year-over-year to $489,591. The price continues to be inflated due to the active housing markets of the Grater Vancouver and Greater Toronto Areas, despite Greater Vancouver’s recently diminished sales activity. With the Greater Vancouver and Greater Toronto Areas are removed from the equation, the average price of a home sits at a more reasonable $361,260.

[Harvey Spector]

So the average price of a home in Canada NOT including the Greater Vancouver and Greater Toronto Areas is $361,260 as of November 2016...

[Alflives]

12 minutes ago, Harvey Spector said:

So the average price of a home in Canada NOT including the Greater Vancouver and Greater Toronto Areas is $361,260 as of November 2016...

I heard the Calgary and Edmonton markets are in the toilet.  

[Harvey Spector]

National average home price expected to dip in 2017

Thursday, December 22, 2016

 

Canadian housing market trends have evolved mostly as predicted in the Canadian Real Estate Association (CREA)’s last housing market forecast, published in September. Sales activity in British Columbia is showing signs it will return to more normal levels, and sales in Ontario continue to set new records despite a shortage of supply in the Greater Toronto Area (GTA) and the surrounding region.

Mortgage regulations tightened further after CREA’s previous forecast. It is expected that soon, tightened regulations are expected to reduce the number of first-time buyers that qualify for mortgage financing, especially in more expensive markets where there is a severe shortage of lower-priced homes for sale. Tightened mortgage regulations and lending guidelines are also expected to increase capital costs for lenders, causing modest increases in mortgage interest rates in 2017. The CREA did not include these factors when making its last forecast, and they have resulted in downward revisions to sales and average price predictions for 2017.

Nationally, sales activity is expected to climb 6.2 per cent to 536,700 units by the end of 2016, which is slightly higher than the CREA previously forecasted. Projected annual sales for 2016 would represent a new annual record for national activity, increasing 3.3 per cent from the previous record set in 2007. However, when adjusting for population growth, sales remain below 2007 levels.

British Columbia is expected to post a 10 per cent increase in activity, the largest surge in activity expected among the country’s most populous provinces, due to unprecedented sales strength early in 2016. Ontario’s annual increase is projected to reach nine per cent.

Overall, Prince Edward Island is anticipated to post a 22.4 per cent increase in sales for 2016, the largest annual percentage increase this year. P.E.I. joined the ranks of British Columbia, Manitoba and Ontario as the only four provinces to set new annual sales records in 2016.

Alberta is expected to show an 8.1 per cent decline in sales for 2016, while Saskatchewan’s housing activity is expected to fall by 4.6 per cent. Activity in Newfoundland and Labrador should remain relatively unchanged from 2015 levels.

Meanwhile, sales are forecast to rise in Manitoba (four per cent), Quebec (5.8 per cent), New Brunswick (6.1 per cent) and Nova Scotia (4.9 per cent). In Quebec, New Brunswick and Nova Scotia, sales activity has been slowly gaining momentum, allowing 2016 to mark a multi-year high for annual sales.

Year-over-year average price gains have continued to climb in Ontario due to strong demand and an unprecedented supply shortage. At the same time, average prices in British Columbia have fallen due to a sharp decline in multi-million-dollar single-detached home sales in the Lower Mainland. Because of this, the projected annual average price for Ontario in 2016 has been upwardly revised following the last CREA forecast, while the projected annual average price for British Columbia has been revised downward.

Average prices appear to be stabilizing in Alberta and Saskatchewan, but remain lower than year-ago levels in Newfoundland and Labrador. Average prices in other provinces are either rising slowly or remain level, reflecting a well-balanced supply and demand for housing stock.

The national average price for a home in 2016 is now expected to rise by 10.5 per cent to $489,500, but in British Columbia, the average price is predicted to climb 8.1 per cent, which will be offset by Ontario’s gains of 15.1 per cent. Manitoba, Quebec and New Brunswick are expected to see modest gains under 2.5 per cent, while Alberta, Saskatchewan and Nova Scotia, prices are projected to remain relatively stable. In Prince Edward Island, the average price of a home is set to climb 11.6 per cent due to a very strong price gain recorded in the third quarter. Meanwhile, the CREA believes that in Newfoundland and Labrador, the average price of a home will fall 6.7 per cent.

The CREA predicts that in 2017, there will be 518,900 home sales nationally, a 3.3 per cent decline compared to projected activity this year. Transactions in B.C. and Ontario should remain strong but drop compared to 2016 levels due to falling affordability, an ongoing shortage of affordably-priced listings for single-family homes and tightened mortgage regulations. British Columbia home sales are expected to decline by 12.2 per cent, while Ontario is expected to see a 2.7 per cent drop in sales.

Sales are also predicted to slow in 2017 in Saskatchewan, Nova Scotia, Prince Edward Island and Newfoundland and Labrador. Home sales are expected to climb in Alberta (3.5 per cent), Quebec (1.2 per cent), Manitoba (0.8 per cent) and New Brunswick (1.6 per cent). In Alberta, the moderate increase mostly reflects slow sales activity in the first quarter of 2016, which is not expected to reoccur in 2017.

Notably, the national average price is expected to fall 2.8 per cent to $475,900 next year, with slight gains near or below inflation in Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia, along with small declines in Alberta, Saskatchewan, Prince Edward Island and Newfoundland and Labrador.

Although the average sale price of a home in B.C. is expected to fall by 7.8 per cent in 2017, this is mostly due to an anticipated decline in single family home sales activity at the higher end of the market, particularly in the Lower Mainland.

Meanwhile, a large supply of listings relative to demand is expected to keep price gains in check in other provinces, although sales have begun to deplete inventories in provinces where supply had been higher in recent years.

[Harvey Spector]

1st-time homebuyers say 'no thanks' to B.C. loan

B.C. government announced program to offer interest-free loans of up to $37,500 to 1st-time homebuyers

By Roshini Nair, CBC News Posted: Dec 22, 2016 8:06 AM PT Last Updated: Dec 22, 2016 8:10 AM PT

 

Two first-time homebuyers who qualify for the provincial government's new interest-free loan program say they won't be taking advantage of the loan because they don't want to go into unnecessary debt.

 

On Dec. 15, the B.C. government announced a new program for first-time homebuyers. The program will provide a loan of up to $37,500 with a 25-year mortgage. The loan is interest-free and payment-free for the first five years and can be used towards a home with a purchase price of up to $750,000.

 

Andy Anissimoff, a 37-year-old visual artist who currently rents in Squamish, is eligible for the program but said he doesn't plan on using it because he thinks the real estate market is overheated.

 

Anissimoff started looking for a duplex in 2013, but as the months passed, he saw prices rising at an alarming rate.

 

'We want to still enjoy life and other things but not overextend ourselves'- Eligible first-time homebuyer Lauren Hinnen

"This is officially crazy," he said. "And over the next year I watched [the market] balloon even further … I'm convinced that it's a dangerous time."

 

At this point, he doesn't feel comfortable entering into the market.

 

"In certain parts of this province this loan could be awesome," he said. "But in Vancouver, Victoria and Squamish, I really think they're exposing vulnerable buyers who are going to see this money evaporate in three months."

 

Another eligible first-time buyer, Lauren Hinnen, is in a similar situation.

 

Hinnen, a non-profit worker who lives in Mission with her husband, says she's uneasy about getting a loan to pay down another loan.

"We didn't want to overextend ourselves," she said. "We're both really fiscally responsible and have strived really hard to be consumer debt-free over the years."

 

Hinnen said it has been difficult to find a house, or even a condo or townhouse within her price range.

 

"We're not going to buy an overvalued house," she said. "I'm actually concerned about going into the market with this looming because it is going to raise the amount of people looking for homes under the $750,000 range."

 

At the time of the announcement, B.C. Minister of Housing Rich Coleman said there would be an applicant screening procedure to prevent people from taking on too much debt.

 

For now, however, both Hinnen and Anissimoff plan to take a wait-and-see approach.

 

"We want to still enjoy life and other things but not overextend ourselves," said Hinnen.

Edited December 22, 2016 by Harvey Spector

[Harvey Spector]

Real Estate, Business

Average cost of renting an apartment in major cities across Canada (INFOGRAPHI)

Daily Hive Staff

Dec 19, 2016 2:40 pm10,401

 

Canada’s largest real estate search website, RentSeeker.ca has released a new and updated annual report for 2016.

 

In it, they use an infographic to display the average cost of rent as well as vacancy rates across the country. Info for studio/bachelor apartments, 1-bedrooms, 2-bedrooms, and 3-bedroom apartments is all here.

 

So, not only will you be able to see just how expensive it is to live in certain cities in Canada (Toronto), you’ll also see how impossibly hard it is to find a vacant one even if you have the money to afford it (Vancouver).

 

A few interesting takeaways from the info below:

 

• The average price of a one bedroom apartment in Montreal is just $1 more than in Moncton, NB
• Vancouver’s highest vacancy rate is for a 3-bedroom apartment and is just 1.4%
• Calgary is more expensive than Edmonton in every apartment classification except a 3-bedroom
• Saint John, NB and Saskatoon, SK consistently have the highest vacancy rates across every category
• It is less expensive to rent a 3-bedroom apartment in St. John’s, NL than a studio apartment in either Toronto or Vancouver
• Yellowknife, NT is the most expensive city in Canada to rent any kind of apartment 

Edited December 23, 2016 by Harvey Spector

[Toni Zamboni]

thanks for all the info and insights guys!

keep this thread going, much appreciated!

[Harvey Spector]

B.C. is desperate to keep its housing bubble aloft. It won’t work

 

Canada’s household debt is at record highs and a reckoning is coming. B.C.’s offer to further burden the most vulnerable borrowers will surely backfire

 

The cynics said this would happen.

Not the election of Donald Trump as president of the United States; only nihilists saw that one coming. I’m talking about the prediction that politicians would absorb none of the lessons of the financial crisis. Here in Canada, amnesia is setting in.

 

The initial sign came in the 2015 federal election campaign, when former prime minister Stephen Harper attempted to revive his popularity by promising to allow first-time homebuyers to use more of their tax-sheltered savings for down payments.

 

At the end of October, Finance Minister Bill Morneau declared that he would maintain responsibility for deflating asset-price bubbles, even though it is widely accepted that those types of decisions should be made at a far greater distance from politics than the office of a cabinet minister. And now, British Columbia Premier Christy Clark has defied economic wisdom, announcing on December 15 that her government will offer first-time homebuyers concessional loans of as much as $37,500 to help them enter the country’s most expensive housing market. “There are people in my community today who could afford a condo or a townhouse who just don’t have the downpayment,” Rich Coleman, the province’s housing minister, told Business News Network.

 

In some places, the inability to come up with a down payment means you can’t afford to buy a house, but never mind that. Coleman represents Fort Langley-Aldergrove, a constituency in the Greater Vancouver Area, where the average price of a home is around $1 million. Tens of thousands of words have been been typed this year documenting how normal people can no longer buy a place to live in Canada’s third-largest metropolitan area. The pressure to act must be immense, especially with an election scheduled by law for May 9, 2017. “Owning the place where you live is part of what being a Canadian is all about,” Clark said as she explained her new policy.

 

If all this sounds familiar, it may be because you read about how America lost its mind over real estate on the way to the Great Recession. Democratic and Republican politicians spent years skewing the housing market, all in the name of the “American dream.” Owning the place where you live was what being American was all about. In 1995, Bill Clinton set a goal of raising the homeownership rate to 67.5% from 64%, and chose to get there by cajoling banks into loosening their lending standards. The administration of George W. Bush fetishisized an “ownership society,” which is probably why his administration failed to appreciate the fragility of a system that granted loans to unemployed people who had neither income nor collateral.

 

One of the best books about the financial crisis is Raghuram Rajan’s Fault Lines: How Hidden Fractures Still Threaten the World Economy, published in 2010. One of Rajan’s fractures was household debt. A steady decline in factory jobs, stagnant wages and growing income inequality through the 1990s and into the 2000s showed the middle class was in trouble.

 

America’s leaders should have responded with structural changes, such as reducing the cost of education. Instead, Rajan argues, politicians responded to voters’ desire for material success by designing policies that encouraged Americans to borrow against their futures to live large in the present. It is a an approach that assumed not only steady economic growth, but economic growth that distributes gains widely. That didn’t happen. When the housing bubble burst, there was no safety net. The forces that led to Trump’s successful campaign this year were triggered years ago, by feckless politicians who failed to think clearly about what they were doing.

 

Canada resembles the pre-crisis America that Rajan describes. The homeownership rate is 69%, about where the U.S. rate was when the market crashed in 2007. Total household credit topped $2 trillion for the first time in the third quarter, pushing the ratio of debt to disposable income to a record 167%, according to Statistics Canada. Personal debt is rising faster than household income. The Bank of Canada says the level of household indebtedness has left the country vulnerable to a shock, just as the U.S. was in 2008 when the investment bank Lehman Brothers collapsed. Canada’s banks are solid, but its economy isn’t: gross domestic product will do well to expand 1% in 2016. Even if the worst-case scenario is avoided, all that debt still will weigh on Canada’s near-term fortunes: the household savings rate jumped in the third quarter, suggesting Canadians are becoming less inclined to spend. Perversely, a shift to prudence could become the shock that bursts the bubble. In a speech on November 30 in Vancouver, Evan Siddall, the head of Canada Mortgage and Housing Corp., tutored his audience on “negative demand externalities.” Siddall remarked on Canadians’ “notable history” of making their mortgage payments. “However, this discipline of reducing spending to save a home can still harm our economy,” he said. “Housing market bubbles fuelled by easy credit tend to burst first when people slow their consumption, which undermines economic growth.”

 

British Columbia’s premier said she recognizes that debt is an issue. Still, Clark said that she and her officials don’t think their sop to homeowners will cause additional harm. Here’s a partial list of the economists who disagree: Tsur Somerville and Thomas Davidoff of the University of British Columbia; Andy Yan of Simon Fraser University; and Rob Gillezeau of the University of Victoria. After constraining demand with a tax on international purchases of Vancouver real-estate, Clark’s newest initiative will put upward pressure on prices: Every rational seller in British Columbia just has added $37,500 to his or her asking price. So if Clark succeeds in getting more people into a home, she likely will have done so by saddling them with bigger mortgages than they might have had otherwise. The winners stand to be sellers and real-estate agents, not buyers.

 

There is more to dislike. New research suggests that we voters are poor at seeing what is best for us. We get upset about surging home prices, and then get even more upset when local politicians start talking about loosening constraints on development to increase supply. We cling to romantic notions about home ownership, ignoring the math on what we would be worth if we had used our down payments to buy shares Tesla Motors Inc. in late 2010. We nod in agreement when real-estate brokers warn that mortgage restrictions will hurt the economy, unaware that Canada now spends vastly more on real-estate commissions and transfer costs than it does on research and development.

 

So it is unfair to take holier-than-thou tones when criticizing politicians for carrying out the bad ideas that we foist on them. Still, that same research—by Ernesto Dal Bó of the University of California, Berkeley; Pedro Dal Bó of Brown University; and Erik Eyster of the London School of Economics—suggests that voters can be persuaded that direct benefits, such as concessional home loans, could ultimately hurt them if those benefits end up changing behaviour and destabilizing the economy.

 

British Columbia home prices had begun to fall, in part because of persistent warnings from officials such as Siddall and Bank of Canada Governor Stephen Poloz, and in part because of new regulations and taxes aimed at curbing demand. Voters were starting to get the message that there is more to life than owning an overpriced house. And now Christy Clark has come along and confused matters. Her policy exacerbates the biggest threat to Canada’s economy because the voters of British Columbia probably won’t see it that way.

[Capt.Awesome]

Just sold our townhouse in Pitt Meadows and bought a house here. 

It's nerve racking because it seems like a bigger gamble then ever to purchase a place,  but with the sense of community and ties we were unwilling to go any further east.

 

In 2009 at 24 my gf ( now wife) and I bought a condo in Poco for 213,000.. We sold it for 272,000 in 2011. We bought our townhouse for 335,000 (which was just as freaky then) and just sold for 445,000.

With a purchase price of 665,000 on a humble house we HAVE to put down 20% (133,000) so we now will sit with a mortgage at 532,000.

 

Its honestly crazy to think we carry over a mortgage that size but then again seems reasonable in this market,  we plan on this being our forever home so as long as interest rates don't sky rocket we hope to provide our daughter with the best life possible. 

Edited December 26, 2016 by Capt.Awesome

[sameer666]

22 minutes ago, Capt.Awesome said:

Just sold our townhouse in Pitt Meadows and bought a house here. 

It's nerve racking because it seems like a bigger gamble then ever to purchase a place,  but with the sense of community and ties we were unwilling to go any further east.

 

In 2009 at 24 my gf ( now wife) and I bought a condo in Poco for 213,000.. We sold it for 272,000 in 2011. We bought our townhouse for 335,000 (which was just as freaky then) and just sold for 445,000.

With a purchase price of 665,000 on a humble house we HAVE to put down 20% (133,000) so we now will sit with a mortgage at 532,000.

 

Its honestly crazy to think we carry over a mortgage that size but then again seems reasonable in this market,  we plan on this being our forever home so as long as interest rates don't sky rocket we hope to provide our daughter with the best life possible. 

Glad to hear of your good fortune in the market. Frankly, I think you decided to do your final cash in at a really good time. It's all speculation, but I think the next couple years are going to be a rough ride for the market. 

 

Interests rates are also on the rise, so you got in at a time where they are low. I would take advantage of the low interest rate you got for your current mortgage term, and pay down as much principal you can over it.

 

Congrats on the detached house! For many young people in the lower mainland, you're basically living the dream.

[riffraff]

11 hours ago, Capt.Awesome said:

Just sold our townhouse in Pitt Meadows and bought a house here. 

It's nerve racking because it seems like a bigger gamble then ever to purchase a place,  but with the sense of community and ties we were unwilling to go any further east.

 

In 2009 at 24 my gf ( now wife) and I bought a condo in Poco for 213,000.. We sold it for 272,000 in 2011. We bought our townhouse for 335,000 (which was just as freaky then) and just sold for 445,000.

With a purchase price of 665,000 on a humble house we HAVE to put down 20% (133,000) so we now will sit with a mortgage at 532,000.

 

Its honestly crazy to think we carry over a mortgage that size but then again seems reasonable in this market,  we plan on this being our forever home so as long as interest rates don't sky rocket we hope to provide our daughter with the best life possible. 

 

Nice work!  Congratulations 

[Harvey Spector]

Greater Vancouver Property Values Up Nearly 30%: BC Assessment

Annual roll reveals massive overall price growth in Vancouver and across BC, as well as individual home values – with Chip Wilson's house topping list again

 

Joannah Connolly  REW.ca

January 3, 2017

 

Greater Vancouver property values have increased 29.7 per cent year over year, according to the 2017 BC Assessment roll released January 3, and stand at a total value of $825.2 billion as of July 2016.

The growth rate over the past year is much higher than the 16.96 per cent annual increase cited one year ago, which was itself a huge leap from the 9.5 per cent of the year before. However, as the latest assessments date from July 2016, which was close to the peak of 2016’s hot market, they do not take into account any price declines seen in some areas and property types since the summer.

Most of the value increase was once again seen in detached homes, which rose between 20 and 50 per cent compared with one year previously. Typical 33-foot-lot detached homes on both the West Side and the East Side of Vancouver have increased by 41 per cent year over year.

“The majority of residential home owners within the region can expect a significant increase compared to last year’s assessment,” said assessor Jason Grant in a media statement. “Increases of 30 to 50 per cent will be typical for single-family homes in Vancouver, North and West Vancouver, Burnaby, Tri-Cities, New Westminster and Squamish. Typical strata residential increases thoughout these areas will be in the 15 to 30 per cent range.”

Some of the steepest increases in property values, however, were outside of Greater Vancouver’s most expensive neighbourhoods. Some detached homes in downtown Squamish were cited as rising 47 per cent in value compared with the previous year, and typical single-family homes in both Burnaby’s Buckingham neighbourhood and in North Vancouver’s Lynn Valley were up 46 per cent.

Property values across the Fraser Valley increased even more steeply than those of Greater Vancouver, by nearly 34 per cent to $430.1 billion, from $321.1 billion one year previously.

Despite this, the province’s most expensive individual properties were, as ever, found on Vancouver’s West Side, with Chip Wilson’s home topping the list again.

The detached house at 3085 Point Grey Road in Kitsilano, built for and owned by the Lululemon co-founder, has been valued as BC’s most valuable property for the fourth year in a row, rising to $75.8 million from $63.87 million the previous year. The home has been the most expensive property in BC ever since it was completed five years ago.

Across the whole of BC, property values have risen around 25 per cent, now totalling nearly $1.68 trillion in value. Significant new construction has pushed the total number of residential properties above the two million mark for the first time.

Homeowners can expect to receive their BC Assessment notice in the mail during this week and next week, if they have not already received one of the early notices sent out in December. 

“Those who feel that their property assessment does not reflect market value as of July 1, 2016, or see incorrect information on their notice, should contact BC Assessment as indicated on their notice as soon as possible in January,” said Grant. “If a property owner is still concerned about their assessment after speaking to one of our appraisers, they may submit a Notice of Complaint (Appeal) by January 31 for an independent review.”

To find out the value of your own home and that of other individual properties, go to this BC Assessment page and enter the address. 

[Harvey Spector]

'All hell is going to break loose in Vancouver': Ex-trader's real estate forecast

Sarah MacDonald, Reporter

@CTVSarah

Kendra Mangione, Web Journalist / Digital Content Editor, CTV Vancouver

@kendramangione

Published Friday, December 30, 2016 2:43PM PST

 

A man who made millions as a short seller on Wall Street by betting against the odds has turned his sights from the U.S. economy to Vancouver real estate.

Former trader Marc Cohodes spent decades betting against housing "bubbles" before they burst. Now he has his eye, and his money, on the local housing market, and he has a warning to homeowners and first-time buyers.

"It's going to blow to complete and utter smithereens," Cohodes predicts.

"I think the market probably topped in the spring of '16 and I think all hell is going to break loose in Vancouver in 2017."

Cohodes is so confident in his prediction that he's betting against one of Canada's biggest alternative mortgage lenders, forecasting a housing crash similar to the one south of the border in 2008.

"I witnessed some of the U.S. housing fiasco here, and I said to myself, if I ever see it again, I should speak out louder than I did," he told CTV's Sarah MacDonald.

So this time he's speaking out, and his predictions are drastic.

Cohodes, who is now retired from trading, predicts that all of Metro Vancouver's multimillion-dollar homes will see their value plummet by as much as 50 to 80 per cent.

He noted that recent numbers already suggest a dip of between 15 and 20 per cent in some areas.

A Vancouver-area economist who spoke with CTV earlier this month about a dip in prices for detached homes says buyers and sellers may see another drop, but that Cohodes' dire prediction is unrealistic.

Tom Davidoff – who predicted a dip of 15 per cent when the foreign buyers' tax was introduced in Metro Vancouver in the summer – says homeowners may see their property values fall another 15 in 2017.

"That could absolutely happen," he said.

In a previous interview, the associate professor at UBC's Sauder School of Business said sales have been slow since the tax started, and that prices are ticking down as a result.

"I think we can say the market is facing very significant headwinds. We have the foreign buyers tax hitting an important part of the market. We've got new qualification rules for mortgages coming down for lower-end buyers," he said on Dec. 5.

But he cautioned that the market is hard to predict, especially with interest rates rising south of the border. If Canadian rates follow suit, and some have, it could push prices down even further across the country.

And the B.C. Real Estate Association says factors like the foreign buyers' tax could fuel a drop in demand and sales.

"It hasn't really hit yet, but we expect it to really start taking a bite out of sales in 2017," said BCREA economist Brendan Ogmundson.

He estimates the number of sales to dip 20 per cent, and the average home price to decrease by eight per cent.

The latest numbers released by the Real Estate Board of Greater Vancouver, published Dec. 2, shows that sales in November were down 0.9 per cent compared to the previous month. The data also showed sales this November were 7.6 per cent lower than the 10-year average for that month.

The benchmark price of all residential property types for the month was $908,300, down 1.2 per cent from October, but up 20.5 per cent from November of last year. Numbers for December and year-end totals will likely be released next week.

The forecasted price decreases have some recommending both buyers and sellers be cautious about entering a market that could quickly change.

"There's so much uncertainty over where prices are heading in Vancouver," Davidoff said.

While others suggest first-time buyers hold off on making a purchase entirely.

"Don't buy, don't buy, don't buy!" Cohodes advised.

With a report from CTV Vancouver's Sarah MacDonald

[riffraff]

Interesting.

 

todays mail showed my property up 8%.

[riffraff]

1 hour ago, Harvey Spector said:

'All hell is going to break loose in Vancouver': Ex-trader's real estate forecast

Sarah MacDonald, Reporter

@CTVSarah

Kendra Mangione, Web Journalist / Digital Content Editor, CTV Vancouver

@kendramangione

Published Friday, December 30, 2016 2:43PM PST

 

A man who made millions as a short seller on Wall Street by betting against the odds has turned his sights from the U.S. economy to Vancouver real estate.

Former trader Marc Cohodes spent decades betting against housing "bubbles" before they burst. Now he has his eye, and his money, on the local housing market, and he has a warning to homeowners and first-time buyers.

"It's going to blow to complete and utter smithereens," Cohodes predicts.

"I think the market probably topped in the spring of '16 and I think all hell is going to break loose in Vancouver in 2017."

Cohodes is so confident in his prediction that he's betting against one of Canada's biggest alternative mortgage lenders, forecasting a housing crash similar to the one south of the border in 2008.

"I witnessed some of the U.S. housing fiasco here, and I said to myself, if I ever see it again, I should speak out louder than I did," he told CTV's Sarah MacDonald.

So this time he's speaking out, and his predictions are drastic.

Cohodes, who is now retired from trading, predicts that all of Metro Vancouver's multimillion-dollar homes will see their value plummet by as much as 50 to 80 per cent.

He noted that recent numbers already suggest a dip of between 15 and 20 per cent in some areas.

A Vancouver-area economist who spoke with CTV earlier this month about a dip in prices for detached homes says buyers and sellers may see another drop, but that Cohodes' dire prediction is unrealistic.

Tom Davidoff – who predicted a dip of 15 per cent when the foreign buyers' tax was introduced in Metro Vancouver in the summer – says homeowners may see their property values fall another 15 in 2017.

"That could absolutely happen," he said.

In a previous interview, the associate professor at UBC's Sauder School of Business said sales have been slow since the tax started, and that prices are ticking down as a result.

"I think we can say the market is facing very significant headwinds. We have the foreign buyers tax hitting an important part of the market. We've got new qualification rules for mortgages coming down for lower-end buyers," he said on Dec. 5.

But he cautioned that the market is hard to predict, especially with interest rates rising south of the border. If Canadian rates follow suit, and some have, it could push prices down even further across the country.

And the B.C. Real Estate Association says factors like the foreign buyers' tax could fuel a drop in demand and sales.

"It hasn't really hit yet, but we expect it to really start taking a bite out of sales in 2017," said BCREA economist Brendan Ogmundson.

He estimates the number of sales to dip 20 per cent, and the average home price to decrease by eight per cent.

The latest numbers released by the Real Estate Board of Greater Vancouver, published Dec. 2, shows that sales in November were down 0.9 per cent compared to the previous month. The data also showed sales this November were 7.6 per cent lower than the 10-year average for that month.

The benchmark price of all residential property types for the month was $908,300, down 1.2 per cent from October, but up 20.5 per cent from November of last year. Numbers for December and year-end totals will likely be released next week.

The forecasted price decreases have some recommending both buyers and sellers be cautious about entering a market that could quickly change.

"There's so much uncertainty over where prices are heading in Vancouver," Davidoff said.

While others suggest first-time buyers hold off on making a purchase entirely.

"Don't buy, don't buy, don't buy!" Cohodes advised.

With a report from CTV Vancouver's Sarah MacDonald

 

Link?

[Harvey Spector]

43 minutes ago, riffraff said:

Interesting.

 

todays mail showed my property up 8%.

 

Your BC Assesmemt that you received today is the value of your home as of July 1, 2015.