August 4, 2018

You Can’t Always Say, ‘It Will Be Worth More’

A report from the Georgia Straight in Canada. “Local real-estate agents are finding it much tougher to generate income through commissions. That’s because July’s residential sales fell to their lowest level in that month since 2000 in the Real Estate Board of Greater Vancouver’s territory. It extends from Whistler to the Lower Mainland. There were 2,070 residential property sales in the REBGV last month, down 30.1 percent from the same month in 2017. Sales last month were off 14.6 percent from June. West Side of Vancouver detached homes saw biggest price drop in any category and location over the last year. They’re down 8.4 percent, compared to an 8.3 percent drop for detached homes in West Vancouver over the same period.”

The Tri-City News. “Just like the ground, real estate sales in the Tri-Cities are drying up this summer. According to statistics released by the Greater Vancouver Real Estate Board, in May, June and July the Coquitlam house market saw the number of sales drop 49.3% from 363 in the summer of ’17 to 184 this year, townhouse sales go down 44% (166 to 93) and condos 40.8% (419 to 248). In Port Moody, house sales decreased 43.5% (69 to 39), condos 41.4% (128-75) and townhouses 34.2% (73 to 48).”

“The last three months of PoCo house sales were down 40.4% (178 to 106) compared to the same three months in 2017. The last month was particularly precipitous in PoCo with it going from 47 sales in June to 22 in July, a drop of 53.2%. Three-month townhouse sales dipped 40.5% from 11 to 66 and condos 29.3% (174 to 123).”

The Vancouver Sun. “Following the bombshell report detailing how Vancouver-area casinos became hubs of international money laundering, the second phase of B.C.’s battle against dirty money is expected to target real estate. And while the real estate sector largely drives B.C.’s economy, many members of the industry appear to have significant work to do on this front. According to data obtained by Postmedia News, Canada’s financial intelligence watchdog found ’significant’ and ‘very significant’ deficiencies in the anti-money laundering controls at 88 per cent of real estate entities they examined in B.C. over the last two years.”

“Money laundering has been a hot topic in B.C., especially this summer. In late June, former RCMP deputy commissioner Peter German delivered his damning report into how Lower Mainland casinos operated for years, he said, as ‘laundromats for the proceeds of organized crime.’ The following week, B.C. Attorney General David Eby said the next phase of German’s work will focus on monetary transactions linked to the housing market. German, The Canadian Press reported, ‘predicts the second phase will be a ‘larger beast to tackle,’ because he says real estate drives the economy in B.C., while gaming has had less of an overall impact.”

“A large beast indeed. Real estate is vital to the economy of Vancouver and B.C. The real estate and construction industries combine to represent more than a quarter of British Columbia’s gross domestic product, according to Statistics Canada, representing a bigger portion of B.C.’s economy than the oil and gas sector accounts for in Alberta.”

From Next Shark. “A theatrical poster of ‘Crazy Rich Asians’ in Vancouver, Canada was vandalized with racist comments ahead of the movie’s opening this month. Twitter user @jojocake found the poster installed in a bus shelter in an ‘affluent neighborhood.’ ‘A bus shelter with this poster in an affluent neighbourhood in Vancouver was vandalized with racist comments. Extremely upsetting.’”

“Lead actress Constance Wu had the words ’stupid chinx’ written on her face and ‘money laundering thiefs’ on her arm.”

“However, @jojocake believes that the offensive act may actually directed at Vancouver’s housing problem. ‘This doesn’t justify the act in any way, but I think the vandals’ motives have less to do with the movie and more with the Vancouver housing crisis and foreign investors. But they should be turning to the government for better regulation, certainly not an entire race of people.’”

From CTV News Vancouver. “A Langley, B.C. condominium complex was supposed to be home for dozens of pre-sale buyers, but instead, the development is sitting empty. Last year, the project went into court-ordered receivership, meaning a court-appointed individual was given responsibility over the property which serves as collateral for a loan. In court reports, the receiver for Murrayville said they’d found some of the units were pre-sold more than once – and as many as four times in some cases.”

“Future homebuyers considering a pre-sale property might be surprised to find out what’s in the fine print. They’re drawn in by glitzy showrooms that allow them to choose their unit and finishes, and many sign contracts without really understanding them. ‘People don’t read the last 10-15 pages. They just look at the first page, the price, how many parking spaces I get, is there GST on it? And that’s it,’ said real estate lawyer Kenneth Pazder.”

“If they did read the whole contract, they’d learn many things they thought were guaranteed – such as what floor the unit is on, the view, square footage and finishes – can actually be changed by the developer. For example, Pazder said, the kitchen might be in a different location, or the unit might be facing a different way. ‘But why people haven’t complained is because in the last 10 years or so, by the time your condo has closed, it’s gone up by $50,000 to $100,000, so I’m buying it anyway, regardless of what’s going on,’ he said. ‘But you can’t bank on that. You can’t always say, ‘It will be worth more by the time I close.’ So that’s another risk.’”

The Leader Post. “Another piece of Regina’s Economic Report Card showed a 17.8-per-cent drop in housing starts in the first half of this year compared to 2017. ‘I think the housing market is over built, but it’s not a structural problem,’ said David Froh, vice-president of Economic Development Regina (EDR), an arm of the City of Regina. ‘We’ve seen in our community a significant build-up in the housing and condo market, and with current absorption rates, it’s going to take a while to catch up.’”

“He said this is positive for homebuyers because it makes homes more affordable, but it might take longer to sell, and demand for construction services will be lower. Gord Archibald, CEO of the Association of Regina Realtors, said housing demand has been down, resulting in less building. ‘I think the builders are simply reacting to what they’re seeing take place in the marketplace. There’s less demand out there than what there had been, so they’re pulling back on the supply side,’ he said.”

“Right now, supply numbers are high. The listing service used by Regina Realtors has had around 1,700 listings on it the past couple of months, said Archibald. Comparatively, there was an average of around 500 listings five years ago. Home prices have dropped 6.1 per cent over the past 12 months alone, and sales have declined in the past couple of years too, he said. ‘There’s a direct correlation between economic growth, job growth and population growth, because all of those contribute to demand for housing, and of course those factors have been down in recent years,’ he said.”

The St. Albert Gazette. “Home-buyers looking for a new place to live are in luck. The market is currently drowning with more than 10,000 homes up for sale across the Edmonton metro area, which hasn’t happened since 2008. Darcy Torhjelm, chair of the Realtors Association of Edmonton, said the state of the economy is a key factor in current market conditions. ‘There’s a lot of questions out there in regards to the economy. What’s going to happen, we keep getting all these news flashes about tariffs and new problems. There needs to be a confidence in the economy.’”

“According to the latest report released by the association, in July the number of homes on the market increased by 12.62 per cent year over year, with 10,094 currently up for sale. It’s also taking longer for homes to be sold. Last month, the average house sat on the market for an average of 57 days before being snatched up. In response, homeowners have been slashing prices in order to get a sale. ‘There’s a lot of choice for buyers, which is good. A lot of buyers are still looking in the lower price categories, which I think is why you could be seeing more of the average price dropping,’ he explained.”

“Regardless of what’s happening in St. Albert, overall the market remains over-saturated across the region. To combat this, sellers need to make sure their houses are up to par before putting it on the market, Torhjelm said. When it comes to the future of the market, he doubts change will happen any time soon. Instead, sellers should consider whether right now is truly the time to put their home up for sale.”

“‘Sellers have really got to evaluate why they’re selling. If they’re just selling and they don’t have a plan moving forward, then that could be problematic,’ he stressed. ‘Right now, you’re not going to get your top dollar and it’s harder to find a buyer right now. Unless you really desperately have to sell, I think right now is the time to not be in that position.’”

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Comment by Ben Jones
2018-08-04 07:50:17

‘the receiver for Murrayville said they’d found some of the units were pre-sold more than once – and as many as four times in some cases’


Comment by Mortgage Watch
2018-08-04 07:50:35

Tahoe City CA Housing Prices Crater 5% YOY As Mortgage Fraud Grips California

Comment by Ben Jones
2018-08-04 07:54:29

‘Did You Fib On Your Mortgage Application? There May Be Trouble Ahead. Canada Mortgage and Housing Corp. wants better income checks to prevent mortgage fraud.’

‘With house prices rising sharply in some Canadian cities, the pressure on homebuyers to get into the market has grown intense. We are a homeowner society, after all, and for many people, a house or condo is the ultimate status symbol.’

‘But with housing moving out of affordability range in Toronto, Vancouver and nearby cities, some buyers are taking dubious shortcuts.’

‘A 2017 survey from credit rating agency Equifax found 13 per cent of Canadians say it’s OK to tell a little lie on your mortgage application. Fully 16 per cent believed mortgage fraud is a “victimless crime.” (Just to be clear: Lying on a mortgage application is, in fact, a crime.)’

‘And plenty of people are acting on this ethos. Equifax found a 52-per-cent spike in what they term “suspicious mortgages” between 2013 and 2016. The vast majority of the increase happened in the provinces with the priciest markets — Ontario, with two-thirds of all suspicious mortgages, and British Columbia, with 12 per cent.’

‘If something happens to slow the economy and many households stop paying mortgages, banks will suffer losses and will cut back on lending. That will reduce the amount of money available with which to buy homes, and the whole thing collapses like a house of cards (see: U.S. housing bubble, circa 2008).’

‘Well, now the CMHC wants to do something about it. According to documents obtained by Reuters, the federal housing agency has asked the CRA to take a “more direct and formal role” in verifying incomes.’

‘For years in Canada, we patted ourselves on the back for avoiding the U.S.’s housing bust of the last decade. We reminded ourselves constantly that our lending is more responsible than U.S. lending.’

‘But in the wake of the U.S. housing bust, lenders there pulled back and tightened their standards. In Canada, in the intervening years, we’ve done the opposite. Subprime loans — the riskiest kind — have seen an explosion on this side of the border.’

‘No wonder the Bank for International Settlements has repeatedly named our country as a top candidate for a banking crisis. No wonder CMHC wants tighter verification of incomes on mortgages.’

‘If this overpriced housing market comes crashing down one day because too many borrowers couldn’t make their payments, mortgage fraud will prove to be far from a victimless crime. We will all feel that pain.’

Comment by b
2018-08-04 09:00:28

In the late 80’s in the Toronto area there was a scam with bank accounts. A relative would provide money 40-60 days in advance of updating or getting a mortgage - this would then show up in the bank statement (but without the transaction) that was used to verify savings.

This worked for many years until the early 90’s recession - where banks and CMHC got caught with their pants down.

Looks like something else has been happening in the last few years

Comment by Tik Tok
2018-08-04 07:57:32

I’ve been reading about the imminent crash of Vancouver’s real estate market for 20 or more years. One of these days it will happen, I guess. Much like China’s economy, which is always on the verge of imploding.

Comment by Ben Jones
2018-08-04 08:08:07

You do know it got sawed off by double digits in 2016? Some of these neighborhoods got whacked by 20-30% in a matter of months. What got whacked the most? Detached shacks, which the REIC told us was bullet proof.

I guess the arrival of trolls was inevitable. But that doesn’t mean we have to listen to your uniformed bullshit.

Comment by George
2018-08-07 21:17:09

Speaking of bullshit. Where in Vancouver have detached house prices dropped 30%? I’m constantly in and out of the market and haven’t seen this. Maybe 10-15% in the high end luxury market. That’s to be expected when you have a mindless government that wants to destroy it’s citizens equity.

Comment by Albuquerquedan
2018-08-04 08:55:49

Much like China’s economy, which is always on the verge of imploding.

If you having been reading this blog for any significant amount of time, you know I have not been in the China is on the verge of imminent imploding camp. Due to the fact that China was growing rapidly Australia avoided a recession for decades and Vancouver, Canada avoided a housing crash. But Trump policies are game changes, and Ben has been right to point out the correction in Vancouver. It was self inflicted to begin with due to the tax on foreign buying. However that just shifted Chinese buying to other Canadian cities. If China slows, it will impact all of Canada. China’s economy is like riding a bike the difficulty is at the slow speeds, if Trump sanctions slow the economy too much the already accumulated debt becomes very difficult to service. We are seeing the signs already. So Tic Toc the clock is ticking and the bomb could blow up any time.

Comment by Ben Jones
2018-08-04 09:19:28

August 3, 2018

“Seattle has been arguably one of the hottest housing markets in America, with home prices rising annually by double digits fueled by scorching demand. There is, however, one outside force that is starting to throw cold water on all that heat: new weakness from once-intense Chinese buyers. Stephen Saunders is a managing broker with Coldwell Banker Seattle and works with Chinese investors in the Seattle market. ‘It’s drying up,’ he said. ‘I just don’t see the same kind of volume. The downtown Seattle condo market has come to a grinding halt, and that’s where Chinese buyers were.’”

Comment by Albuquerquedan
2018-08-05 05:53:07

The U.S. is no longer supporting Chinese defense companies, MAGA:

Comment by Ben Jones
2018-08-04 07:57:37

‘Canadian real estate buying power is taking a real hit. Bank of Canada (BoC) April numbers show, new borrowers paid the highest mortgage rates in years. Fast rising rates mean people are shaving off serious amounts of borrowing room.’

‘Uninsured mortgage borrowers are paying much higher mortgage rates. The average volume-weighted mortgage rate paid was 3.4% in April. This represents an increase of 63 bps from last year, shaving off ~6.3% of buying power. That million dollar mortgage you were planning on borrowing last year, is more like a $940,000 one this year. This is the highest rate people have been locking in over the past 5 years of data we could obtain.’

‘Insured borrowers leave smaller down payments, so they pay slightly higher rates. The average volume-weighted mortgage rate was 3.54% in April. This represents an increase of 67bps from last year, shaving off ~6.7% of buying power. Once again, this is also a highest rate we’ve seen in the past 5 years of data.’

‘The days of the ever expanding pool of credit may be coming to an end. Canadian real estate buyers were coming off of record low rates, so the minor hike may come as a shock. Up to 2017, if you waited a few months, your credit expanded. No rise in income needed, declining rates gave you more borrowing room. Now that the opposite is happening, home prices rising may be a little stickier.’

Comment by Mr. Banker
2018-08-04 08:10:56

“Up to 2017, if you waited a few months, your credit expanded.”

A miracle!

“No rise in income needed, declining rates gave you more borrowing room.”

A miracle that allows you borrow your way into prosperity.

“Now that the opposite is happening, home prices rising may be a little stickier.”


Comment by Ben Jones
2018-08-04 08:00:45

‘After several years of torrid job growth and a steadily falling unemployment rate, B.C.’s labour market looks to have cooled off. In particular, job creation has come to a shuddering halt so far in 2018. A downshift in the demand for labour in some sectors of the B.C. economy is also part of the story. The unfolding slump in the housing sector has implications for the labour market. One aspect of this is the modest decline in home building that is now occurring.’

‘But the bigger impact is being felt via the sharp downturn in real estate transactions. Fewer existing-home sales mean less need for the services of real estate agents, property appraisers, home inspectors, real estate lawyers and mortgage finance experts. Indeed, Statistics Canada’s figures show a sizable drop in the number of people working in B.C.’s large finance and real estate sector.’

‘Lower levels of real estate activity also have a knock-on effect on some segments of retail (e.g., businesses purveying home furnishings, carpeting and flooring). The pace of retail spending growth has visibly slowed in recent months, while the number of people working in retail has declined since the beginning of the year. As the province’s formerly booming housing market loses steam, there might also be a forthcoming drop in renovation spending as well as further weakness in some parts of the retail space.’

Comment by b
2018-08-04 09:49:21

A while back i read (at least in the US) that 20% of realtors made something link 75% of the sales. There was an entire % that usually each year did not make a single sale (i guess they were part time or for family only)

what about landscapers, handymen, decorators/painters? Does they business also reduce — or does it increase because people are staying in their houses

Comment by Mr. Banker
2018-08-04 10:43:33

“A while back i read (at least in the US) that 20% of realtors made something link 75% of the sales.”

If the commissions are the same no matter what realtor one chooses then why not choose a realtor with a proven track record? What incentive is there to choose a low performer?

The experienced realtors get rich while the inexperienced realtors get …

… they get to watch.

Comment by Ol'Bubba
2018-08-04 13:38:39

I read a study recently that stated 50% of production is done by the square root of the number of people involved in the production, and this was across many industries.

Extrapolating, if you have a 9 agent office then 3 of those agents would do half the volume and the other 6 would do the other half.

In a 16 agent office, 4 agents would produce half the volume and 12 agents would eke out the other half.

No doubt there’s a lot of turnover in the less productive ranks.

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Comment by Mr. Banker
2018-08-04 15:46:27

“Price’s Law and Who’s Doing the Work”

“Price’s Law
The square root of the number of people in a domain do 50% of the work.

“This means that in a company of 10 employees, 3 of them do 1/2 the work. The remaining 50% of the work is done by the other 7 people.

“This scales too.

“When there are 100 employees, 10 of them do 1/2 the work. The other 90% are doing the other half of the work.

“As your company grows, incompetence grows exponentially and competence grows linearly.

“Price’s Law specifically applies to creative work. Meaning the creation of something “new” like new products, ideas, software, music compositions, basketball shots made, artwork, etc.

“The “Price” in Price’s Law is Derek J. de Solla Price.”

Go to the link and you will be rewarded with a video explanation presented by Jordan Peterson.

Comment by Ben Jones
2018-08-04 08:03:17

‘At 53, an engineer realizes he has a lot of unprofitable real estate and not much else for retirement’

‘Two rental properties pay $3,700 per month before expenses, but bleed money after deductions for interest, taxes and other costs’

“My rentals, which are most of my capital, have generated a lot of capital appreciation for me, yet they lose money every month. What should I do to make my retirement work?” Jack asks.’

Comment by Ben Jones
2018-08-04 08:23:26

That this is even in the press is amazing. You can see it in the apartment biz too. Huge complexes with a cap rate of 3 or 4 or 5%. Cap rates are before financing costs. Very few apartment buyers use all cash. And you can get 3% on a US bond now.

Why would I give Jack one penny to ‘bleed money’ every month? They do this crap in Australia too.

Comment by OneAgainstMany
2018-08-04 09:49:57

There is a Federal credit union (United States Senate Credit Union) that is offering 3.53% 5-year share certificates (credit union equivalent of CDs). These are insured by the NCUA, the credit union equivalent of FDIC. This is risk-free money. Inflation running at 2%-2.9%, but it might fall if gas doesn’t keep pushing it up.

Another development in my area: there is a large billboard that went up that has the 30-year fixed rate mortgage. It’s out there for all to see, similar to what one might see for gas prices. It was 4.64 last week and it was 4.49 last night. I wonder what this does for psychology when the Fed hikes rates next time and the rate is pushing 5%?

Comment by Taxpayers
2018-08-04 12:04:00

5 is a winner!

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Comment by b
2018-08-04 09:59:22

But Jack got luck and has (in theory) appreciation. He should hope that he can sell before a prolonged downturn.

Also property taxes and strat fees (what canucks call condo or HOA fees) will keep going up at least 1-2% above inflation

Comment by Ben Jones
2018-08-04 10:34:43

‘Jack got luck’

I don’t know why people look at it this way. He’ll get some money if someone else gets stuck. But the overall effect will be the same. Multiply that by several millions and you get fooked, which is what Canada is.

Comment by Mafia Blocks
2018-08-04 15:57:09

Jacks last name is Burns.

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Comment by Taxpayers
2018-08-04 11:31:50

Canadian banks,stocks still elevated
Por que ?
Their oil is mostly from tar sands,so not all that profitable

Comment by OneAgainstMany
2018-08-04 13:34:22

Empty Promises, Empty Offices

How Tianjin, once China’s fastest-growing region, became its slowest

The Economist
August 2nd, 2018

“The problem is that the city’s planners got far ahead of themselves. They built a big new financial district, which they billed as China’s Manhattan, in the Binhai district, on the city’s far-east side. Nearly 70% of offices there are vacant, according to Jones Lang LaSalle, a property-services firm. That flatters the reality. One whole floor of the New Finance Building, a glistening complex, has been converted into “escape rooms” for adventure games. “The buildings are great,” Zhang Junkai, a port worker who lives nearby, says with a wry smile. “It’s just that we don’t have enough people in them.””

“Tianjin’s woes are an extreme version of China’s. Over the past decade cities have rushed to expand. Yang Weimin, a senior official, revealed this year that, based on electricity usage, China’s housing vacancy rate is higher than Japan’s, which stands at 13%. In downtown Tianjin that is almost palpable. Colonial buildings, dating to the 19th century, have been beautifully restored. Yet they are eerily quiet. “All the units have been sold, but few people have moved in,” says a guard at the Tai’an Avenue luxury complex.”

Comment by Mr. Banker
2018-08-04 16:36:56

A related article …

China’s eerie ghost cities a ’symptom’ of the country’s economic troubles and housing bubble - ABC News (Australian Broadcasting Corporation)

Comment by Ben Jones
2018-08-04 15:14:38

Interest Rates SKYROCKET In Canada As Housing Bubble Worsens! - What This Means

World Alternative Media
Published on Jul 18, 2018

Seems the central bank is popping the bubble. There’s a poster around here that needs to eat some crow.

Comment by Mortgage Watch
2018-08-04 16:15:53

Arlington, VA Housing Prices Crater 9% YOY Barbecuing NoVA/DC Homeowners

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