Great White North’s Housing Boom Is Grinding To A Finish
The Toronto Sun reports from Canada. “The cost of carrying a home hit highs not seen since 1990 — when a real estate bubble burst — the price pressure will ease as our hot real estate market cools off, house price gains shrink and mortgage rates drop. Still, no one’s talking crash, 1989-style. Real estate has been on a roll for the past decade, enjoying record growth, which is why affordability is getting further and further out of reach.”
“The latest housing affordability numbers by RBC Economics show that affordability in the final quarter of 2007 deteriorated everywhere in this country, except Alberta, where a cooling off of a feverish market is already under way.”
“In Toronto, where the market is now showing signs of a slowdown, it took 53% of pre-tax income to carry the cost of a standard two-storey home, priced at $476,000. That’s $3,089 a month to pay the mortgage, utilities and property taxes.”
“Vancouver, meanwhile, it still the most expensive place to own a home, with a detached bungalow eating up a whopping 74% of pre-tax income in the final quarter of 2007 — much higher than the 63.1% Toronto’s market cost in 1989, when the bubble burst.”
“Calgary took 42% of pre-tax income, Montreal 37% and Ottawa 32%.”
The Gazette. “Housing affordability fell across the country in 2007, to end the year at its lowest level since 1990, said the report’s author, Derek Holt, assistant chief economist at Royal Bank of Canada.”
“‘Back then, soaring interest rates and a recession sparked much of the trouble,’ he said. ‘Today, a long upward trend in house prices, driven by sounder macroeconomic fundamentals, like job growth, is primarily responsible for the deterioration in affordability.’”
“A series of winter storms brought record or near-record snowfall levels to Toronto and other major markets in Central and Eastern Canada, prompting many potential buyers to stay indoors. The number of listings on CREA’s multiple listings service dipped by 2.8 percent, to 50,405 units, but was still the third-highest on record.”
“Average home prices climbed 5.3 percent year-over-year to C$327,477, the smallest such jump since November 2004.”
From The Star. “While prices have not slipped in Ontario, economists are worried that the housing market in this province could follow the lead of the beleaguered U.S. market. By the end of 2007, the annual pace of income growth was the slowest among provinces, which was one of the factors that led to the deterioration in affordability, the bank report said.”
“‘The province may well be teetering on the brink of recession and by a number of measures is nowhere near as resilient as first thought,’ Holt wrote.”
“The Canadian Real Estate Association said sales activity will fall short of last year’s record with new listings to increase, a more balanced market and smaller price gains throughout Canada.”
“‘With the further slide in February, Canadian home sales are now firmly below year-ago levels,’ BMO Nesbitt Burns deputy chief economist Doug Porter said yesterday. ‘This is another sign the Great White North’s housing boom is grinding to a finish.’”
The Calgary Herald. “RBC said affordability in Alberta appears to have peaked about midway through last year. Healthy income gains (five per cent year-over-year in the final quarter of 2007) and declining house prices led to overall affordability improvements for new homeowners trying to ‘tap into the overvalued Alberta market.’”
“‘This marks the first time in over three years that the market has witnessed a broad-based affordability improvement across all home segments,’ said the RBC report. ‘This also marks the start of what we fear could become a trend. All of the key housing measures are in contraction mode right now including house prices, housing starts and resale activity.’”
“The sales-to-new listings ratio has swung dramatically from deep seller’s territory into a more balanced state and has remained in steady balance for the last six months. The report said the price of the benchmark two-storey home is still 63 per cent higher than two years ago, ‘and one quarter does not make a trend,’ but the year-over-year pace of price gains has gone from about 50 per cent a year ago to 11 per cent today.”
“A report released Friday by the Canadian Real Estate Association said February MLS residential sales in Calgary dropped by 35.4 per cent compared with a year ago to 2,162 units while the average sale price increased by 5.5 per cent to $415,017. New listings for the month were 5,182, an increase of 38.9 per cent from February 2007.”
“The RBC report is a continuation of a trend Calgary has been seeing since last summer with price moderations, said Todd Hirsch, senior economist at ATB Financial.”
“‘A lot of it is because of much more inventory coming onto the market. There’s more supply,’ he said. ‘The more supply is largely driven by when those housing prices get driven up people might want to throw their house on the market just to see what they might be able to get.’”
“Hirsch said demand has also softened for housing because fewer people are moving here. ‘Also, I think there’s a lot of people who aren’t in the market just because they’re so priced out of the market so they’re not even looking or they’re not even out there checking out prices.’”
“During the fourth quarter of 2007, condo prices grew nationally by 11.5 per cent during the same period, fuelled by a whopping 58 per cent hike in Saskatchewan.”
“‘I think Saskatchewan, in a lot of ways, is becoming the new Alberta,’ Holt said.”
“‘We knew that 50 per cent, year-over-year price increases weren’t sustainable,’ Holt said of the Alberta housing market. During 2007, the hot Alberta housing market went through a correction. The question remains: how far will the pendulum swing the other way on housing prices.”
“‘We’re putting Alberta on watch,’ RBC economist Jimmy Jean said. ‘The question is whether it will correct itself more severely in the following quarters. It’s really an area of concern.’”
The Vancouver Sun. “Covering the cost of a standard, 1,500-square-foot two-storey Metro Vancouver house worth $648,592 would take 79.2 per cent of the region’s median pre-tax household income, according to RBC.”
“The catch is that no family making a median income — about $59,000 for Vancouver — would qualify for a mortgage on that house. At that income, even most condos in Metro are out of reach.”
“‘Affordability did continue to deteriorate in the final quarter of 2007,’ RBC economist Amy Goldbloom said.”
“Goldbloom added that RBC’s forecast is for incomes to grow ‘at a fairly healthy pace, but still lagging the pace of house-price gains, which is always concerning. You do need these fundamentals to keep up.’”
From CBC.ca. “Matt Ramsey and his partner Euphemia Redden said they paid more than $300,000 for a 1,000-square-foot condominium in suburban North Vancouver. ‘The only way we could have done it is with help from my dad to pay off my students loans, which we are so grateful for,’ said Redden.”
“‘But if that hadn’t happened we would still be renting,’ she said.”
“Once upon a time, Garth Turner told a Toronto real estate industry luncheon that the local property-buying frenzy and soaring prices were doomed. Arguing that average families could no longer afford average house prices, he declared a correction inevitable, if not at hand.”
“It was 1987, and for his bluntness, the then-business editor of the Toronto Sun was pelted with buns. Twenty-one years later, Turner is predicting another crash.”
“But try to find a respected Canadian economist who buys into Turner’s pessimism. People at the University of Toronto’s economics department, the Ivey School of Business at the University of Western Ontario and University of British Columbia’s Centre for Urban Economics and Real Estate couldn’t find one for us.”
“‘I think you will have a very tough time finding any economists who agree with Turner on this,’ says Tsur Somerville of UBC.”
“Turner cites recent reports that personal debt levels in Canada are at record highs and savings rates at record lows, leaving many short on options should hard times hit.”
“His scenario gets scarier, if you fear that manufacturing jobs are in danger due to the strong Canadian dollar and the likelihood the U.S. will slip into recession.”
“He claims that suburban trophy houses in some areas of the GTA are lingering on the market and falling in value. He says the collapse will be widespread and long-lasting, in part because boomers will flood the market with houses to finance their retirements – especially since so few employees outside the public sector have much in the way of pension prospects.”
“‘An anti-real estate mood has swept America. Within months it will be here,’ he declares.”
The Globe an Mail. “‘You’d have to be an idiot to buy right now in Vancouver,’ is the conclusion Mitchell Purdy, 25, has come to after nine fruitless months of condo searching with his girlfriend.”
“Mr. Purdy had been looking for a two-bedroom condo in a fairly central location. Of the 70 resale units he considered, all were priced well above $400,000. The two units they bid on ended up with multiple offers which vaulted their sale prices up by around $40,000 apiece.”
“‘I’ve pulled out of the market in the past six to nine months for obvious reasons…,’ Mr. Purdy said. ‘It was stressful, aggravating and very frustrating.’”
“Unwilling to move to the suburbs or to squeeze into a shoebox studio apartment, the couple has decided to keep renting and store away a nest egg until the time is right to buy. ‘I’ll wait to see if prices really cool down,’ Mr. Purdy said.”
“‘In Vancouver … you know it is not the typical man or woman on the street that is buying a house,’ said Holt, co-author of the report.”
“Frustrated and anxious, Claire Munroe and Josh Alter, both 27, have been left waiting for answers after the builder they bought their Vancouver condo from two years ago walked away from the project last week.”
“Citing soaring labour and construction costs, The Eden Group of Companies has placed the condo project into receivership.”
“Ms. Munroe and Mr. Alter, who only learned of their predicament through a reporter, are now part of a group of pre-sale buyers anxious to hear the fate of the 81-unit Sophia building on Vancouver’s East Side.”
“‘First we were in shock, then frustrated we had been left in the dark, and now we’re just in limbo,’ said Ms. Munroe, who bought a 676-square-foot, one-bedroom condo for $336,900 with her boyfriend in March 2006.”
“The couple have been left wondering whether they’ll have to pay more for their unit or be handed back their deposit and have to start all over again. ‘This is our first place together, we were shopping for things and excited — and that’s abruptly come to a finish,’ she said.”
“Ms. Munroe and Mr. Alter are also second-guessing the research they did ahead of the purchase, and wondering whether there’s a lesson to be learned in their misfortune for others clamouring to buy in the city’s overheated condo market.”
“Buyers at the Sophia will probably face a top-up payment to see the building, which is 85 per cent finished, through to completion, says Peter Simpson, chief executive of the Greater Vancouver Home Builders’ Association. A rough estimate that it will cost an additional $2-million would mean almost $25,000 more per buyer, not taking into account the different size of their units.”
“If this happens, Ms. Munroe and Mr. Alter will have to pony up the extra cost, an unbudgeted-for expense they say they’re willing to pay to get their condo.”
“‘Apparently [developer] Bill Eden has said he felt we were lucky people — that we can still make a profit because the market has gone up. We don’t feel very lucky,’ Ms. Munroe says.”
‘But try to find a respected Canadian economist who buys into Turner’s pessimism. People at the University of Toronto’s economics department, the Ivey School of Business at the University of Western Ontario and University of British Columbia’s Centre for Urban Economics and Real Estate couldn’t find one for us.’
‘I think you will have a very tough time finding any economists who agree with Turner on this,’ says Tsur Somerville of UBC.’
And excellent indication of a mania, IMO. Also at the bottom of that article:
‘Greater Fool is an easy-to-read economics book and, if you have a significant chunk of your worth tied to real estate, you should make yourself familiar with what he has to say. But you should also study a broad range of views and always consider the source.’
‘Even though I’m no economist, several Star readers have asked recently if I expect a downturn. I’ve replied that some level of correction wouldn’t surprise me. And after reading Turner’s book, am I in a rush to sell my house so I can rent and wait to pounce on post-meltdown deals? At the risk of proving myself the greater fool, I’d have to say not bloody likely.’
I’m no economist either. I’m too fond of having independent judgment. But think of the career options that would be open to me if I would only foreswear it! I could write for the Star, for instance, or teach economics at a leading Canadian university.
Somehow I scrolled right past this post and only just saw it…very exciting, like finding a $20 in your old jeans.
Thank-you for doing a post on us lumberjacks & polar bears.
In downtown Vancouver (where I live) you can rent a 2BR 2BATH for $2200 a month. On mls.ca that very same condo is worth 586,000 which when you include tax/condo fees/etc the monthly mortgage payment comes out to about $4400/month
You can rent the EXACT SAME PROPERTY for half what you would pay to purchase it. This couldn’t be MORE indicative of bubble mentality.
I have popcorn. And a great big smile.
Another affirmative here. I rent a 2 BR, 2 Bath sub-penthouse with a massive balcony. My rent is $2400 a month, and you’d have to put close to $700K down to buy this place. Not bloody likely with rent being so affordable.
I wonder if liberal movie stars fleeing the US are to Canada what rich foreigners are to the USA?
‘West Vancouver realtor Cal Lindberg says a growing number of his clients have been inquiring about buying vacation homes in the sunny U.S. south. We’re hearing it every day on the news that prices are just dropping like a rock, said Lindberg, president-elect of the Canadian Real Estate Association.’
‘Under normal circumstances, there would be about 3,000 real estate listings in Palm Springs, Calif., he said. But with the U.S. housing crisis deepening by the day, there are about 9,000 houses and condominiums up for sale. ‘That just tells you that prices are going to continue to drop because when you have that amount of choice, it’s going to put a lot of downward pressure on prices.’
‘Mark Dziedzic founded a real estate firm called Arizona for Canadians, which helps Canucks find homes in that sunny, warm state. ‘It’s a little bit of a perfect storm for Canadians right now because you’ve got the dollar at par and you have somewhat of a housing crisis with the subprime mortgage debacle. It’s a time we haven’t seen in 30-plus years. It really has created a buzz,’ he said, noting that about half of home buyers in Arizona are Canadian. He said Canadians are able to negotiate with banks to get some good bargains - sometimes paying 50 or 60 cents on the dollar for their homes.’
‘When they compare it to the value of property up in Canada to what they can get in states, many times they’re very shocked.’
And how rich are they?
‘The national net worth of Canada reached $5.5 trillion at the end of the fourth quarter of 2007, Statistics Canada reported Friday. The sum is the equivalent of $165,400 per Canadian.’
‘National wealth — the sum of produced assets plus land — slowed to a growth rate of 1.3 percent, the report said. Housing cooled in the fourth quarter, the report said, but residential real estate still accounted for more than half the gain in the national net wealth.’
Equity locuses from Canada! They are going to get “owned” as their house values begin to crash in Canada and catching a falling knife in the USA is going to compound problems. Looks like two more foreclosures.
I remember when Floridians and Clownifornians were using their equity to snap up properties in other, cheaper states, inflating prices in those states. As prices drop in FL, CA, they are overdue to drop in other states. I am patiently waiting for price drops in GA, TN, Carolinas, VA, even Pittsburgh! Ill be enjoying my affordable house in Oil City meanwhile.
HELLOCs are not very common in Canada, I am not sure if this has changed signaficantly recently.
In Canada the banks are still in control (run-of-the-mill lenders and exotic loans are not as common), traditional practices like 20% down and 1/3 income qualification are still the norm a few years ago.
I think only the wealthy Canadians are coming down to buy RE.
HELOC’s might not be “popular” in Canada but as an employee for one of the larger banks in Canada, I can assure you there are quite a few of them.
I’ve also seen plenty of outlandish construction mortgages for peoples’ “dream homes” for ridiculous sums of money. Vancouver’s RE market is absolute insanity.
My father purchased my childhood home for about 76,000 in 1982. It is now worth in excess of 700,000 as assesed by the city. Probably a market worth of ~650,000 currently. I’m not sure if I even know what kind of a percentage increase that is nominally.
I keep begging him to sell it and rent a place. He won’t listen. So much for my inheritance. Heh.
Garth Turner is also a Member of Parliament (federal). He has a bit of a reputation for hyperbole and pessimism, but you can’t fault his understanding of the situation in Canada. People are house poor and in negative savings. Property values in some centers are nuts. The average Canadian is being told by the M.S.M that it’s different here. Sounds eerily familiar.
Turner was elected as a Conservative but got into trouble with the Conservative PM (Stephen Harper) and was kicked out of the caucus for speaking his mind too much. Harper is sort of like Dick Cheney with hair. He moved over to the Liberals who are just as sleazy as the Conservatives but are more willing to tolerate differences of opinion.
Unlike in the US, where someone like Ron Paul can go against the party line, MP’s are expected to support the caucus position and can be kicked out if they don’t follow it.
Canada does not have GSE’s like the US. Instead it has something called CMHC which is a direct business operation of the federal government and thus is explicitly backed up by the taxpayer. If you imagine FHA being as big as Fannie, you’ll get the picture.
CMHC’s standards have become looser since the Conservatives were elected two years ago and they are now into absurdities like providing 100% financing of speculative purchases.
Like their role models south of the border, the Conservatives are actually less fiscally responsible today than their rivals, the Liberals.
I don’t know why you turned this into a political debate with some patent falsehoods, but allow me to clarify some of your points:
1. Garth Turner, while quite correct about the housing market, is a hypocrite because he criticized Liberal MP David Emerson for crossing over to the Conservatives and demanded a by-election to reconfirm Emerson’s party crossing, yet he himself crossed over to the Liberals.
2. Garth Turner was kicked out of the PC caucus because he disclosed confidential caucus matters on his blog. Glossing over this as “speaking his mind” is simply rationalizing what he did.
3. Stephen Harper is NOTHING like Dick Cheney. He never presented false evidence to go to war for his own personal financial benefit, period, and was slandered by the Liberal party who Harper is now suing. Contrast this with former Liberal Prime Minister Paul Martin who owned a large shipping company and reflagged most of his ships outside of Canada in a show of Canadian “patriotism”.
4. The Liberals are far more sleazy than the Conservatives. The Liberal “Red Book” back in 1993 promised that the GST would be repealed, yet the Liberals failed to repeal it while the Conservatives actually reduced the federal sales tax from 7% to 5% since coming to power. Oh yeah, there’s that little matter of the theft of $200 Million from Canadian taxpayers by the Liberal party under Chretien and Martin that has yet to be repaid who supposedly had no idea (which makes them at least criminally negligent if not willful).
5. The CMHC repealed the price ceiling limitations for small down payments in September 2003 while the Liberal party was still in power! This is hardly a Conservative invention.
The only thing I can really fault the current ruling governments of most countries is not factoring housing prices into inflation. Had that happened, central banks should have raised interest rates significantly to cool off frantic buying and house flipping. Problem is, I don’t hear any political parties calling for this.
Next time you want to take so many political swipes, at least know what the hell you’re talking about.
Lighten up. No one in America knows what your talking about. Bottom line,( boy that cliche is getting old ), our politics are manageable because we are in a minority situation. The crowd in Ottawa are just as stupid as the crowds elsewhere, say the western world, but of course,( it’s different here ). Couldn’t resist the repeat cliche.
Jumper is an excellent example of how Harper supporters in Canada go ballistic when anyone knocks their hero, just like Dubya’s supporters used to before he became a liability to his own party.
Well I’ll just say one thing that the Americans will understand perfectly well: in 2003, when the Liberals were still in power, Harper rabidly advocated that Canada join into the Iraq war. The LIberals at least had the good sense to keep Canada out of that debacle.
You lied and exaggerated repeatedly in your original post. You glossed over my replies in your follow-up post.
The biggest laugh, of course, is calling me ballistic yet characterizing Harper as rabid. Harper did want to commit troops on the basis of enforcing previous UN resolutions, but eased off that position in a letter to the Washington Times when the evidence became clear and never screamed his position out in the House the way Stephane “do you think it’s easy to make priorities?!?” Dion did. That’s not an example of rabid behaviour. If the Liberals really wanted to make a non-war difference in Iraq, they would’ve actively protested against all of the countries selling Iraq weapons leading up to the war in violation of UN resolutions. It was hardly insight because neither position knew what was going to ultimately happen.
In any event, I’m more than happy to shoot down your foolishness.
I’m kindof in shock that someone in the world thinks that the Liberal Party of Canada is somehow “more tolerant” of differing views.
That’s utter comedy. Check the voting records of Liberal MP’s. They have been lockstep with their pary leadership ever since Jean Chretien.
Someone here is a political hack…
Canadians have drank deeply from the RE koolaid fountain… It’s not like we haven’t been warned… I heard an interview yesterday that 50% of all new mortgages in Greater Vancouver are 40 Year amortization… Yikes!
The bust in the US started in 2005 although many refused to recognize it. In the last year or so the media went from denial to calling it a bubble that burst. Canada was not just warned, they were shown concrete evidence of how this game worked from the benefit of hindsight, and yet greed still overcame reason.
Tim: Canada was not just warned, they were shown concrete evidence
we absolutely were
yet it’s still not too late
most of the horses are still in the barn!
You don’t understand how far along in the game we are, the horses are long gone and they ain’t coming back.
“And yet greed still overcame reason” that is so true.
Young, uneducated, new buyers roped in by sleazy realestate agents who cause people to wildly overbid. Oh Well……At least I was smart enough to wait.
If you think Canada is some how immune to a housing crash you’re terrible ignorant. It has nothing to do with employment, population, demand, economy, and what not. There is only one thing that determines the cost of housing and that’s the affordability index. Simple put…..Canadians can not and will not be able to afford current house values and the bubble will definitely burst. It happens all over the World and it will happen here. If you bought a house in Canada in the last 5 years….you will soon have a mortgage worth twice the value of your home. Denial will not change that. For most it is to late, for some who were smart enough to not buy during a boom will have hundreds of cheap homes to choose from soon. Maybe I’ll buy 2….HaHa
I have a question that I’ve been trying to find an answer for. First, the premise: I you pull up any amortization calculator, it’s immediately obvious that amortizing a loan over 40 years will mean that you’ll pay much, much more over the life of the loan than if you were to have amortized that same loan (with the same interest rate) over 25 years.
As an example: a $250,000 loan amortized over 25 years at 6.5% interest means that you will end up paying $506,405.37 over the life of the loan.
Amortizing that same loan over 40 years amounts to paying a total of $702,548.17, almost 200,000 grand more.
Since this doesn’t take into account net present value–given that the payments you’ll be making in years 26-40 will be much lower in real terms than payments made in the first couple of decades, how can I calculate what level of inflation would make it worthwhile to go for the 40 year loan instead of the 25 and save (and invest) the monthly difference between the two monthly payments (about $220/monthly)?
You cannot assume ahead of time that your investment returns will exceed the interest rate on the mortgage. If you are from Canada, this is even more so because the payments are not deductible.
Pay down the mortgage as quickly as possible. Oh and if you’re from BC, Alberta or Toronto, wait for the prices to crash before you buy.
Vancouver really needs to take a beating. I have no idea how people can afford homes there, there are few jobs and fewer high paying jobs, maybe most of the houses have been supported by wealthy Hkers and Americans south of the border.
100% financing must be popular there, while not so common in Toronto.
Wait until when and if the Peak Oil bubble deflates. That is when a stake will be driven through the heart of the Great White North bubble.
Peak oil is legitimate, we really *are* running out of oil and fossil fuels. We are *not* running out of land in 90% of America. They are *not* making any more oil(for the next million years) and alternate energy is too little, too late to meet current energy demands.
The only part of Canada experiencing RE price declines so far is Alberta, where the oil is. The RE bubble in Canada has nothing to do with oil, any more than the bubble in the US.
Well, in Alberta it was the oil industry that drove the housing prices up 50% a year. I have a relative in one of these towns where drilling operations simply pour people into the town, needless to say RE skyrocketed.
Of course the housing prices will dip when the housing construction comes up to meet the demand, there are in fact too much land and too few people in Canada.
Know of one family fortune made in Ontario over past decades following the contrarian advice of Turner.
“He writes that a reckoning is imminent because we’ve been as greedy as Americans.”
Glad to see we’re still exporting something.
Up in Calgary I would say we are definitely in the early stages of the “denial” phase. Kind of like Florida circa late-2005. Everyone trying to sell a home knows the “market is slow right now”, but their realtor assures them that it is only a temporary lull, before the market magically springs back. Sellers are unwilling to drop prices, but sales volumes have fallen off a cliff. We are in the “stand-off” stage.
Thanks Ben and all contributors for this blog, because watching the bubble burst in slow motion just seems like deja vu to me, having read all about it on this blog. I can wait till next year, when the “acceptance” starts. We are still probably 12 months away.
Canada is a couple years behind America. Those who have a brain can follow the America example and price their Canada house to sell and laugh all the way to the bank.
Sadly my cousin bought a $400k 1500sf house in Toronto this winter. He put down $200k. That money will be history and he probably will be underwater when prices bottom out at around $80/foot.
“In Toronto, where the market is now showing signs of a slowdown, it took 53% of pre-tax income to carry the cost of a standard two-storey home, priced at $476,000. That’s $3,089 a month to pay the mortgage, utilities and property taxes.”
“Vancouver, meanwhile, it still the most expensive place to own a home, with a detached bungalow eating up a whopping 74% of pre-tax income in the final quarter of 2007 — much higher than the 63.1% Toronto’s market cost in 1989, when the bubble burst.”
Canada is going to fall hard. After seeing what happened in the US, psychology should change lightning fast in Canada.
Alberta is already falling, despite the highest oil prices in history. Nobody thought about all the empty prairie surrounding the cities. BC is going to get clobbered. BC’s number one industry, forestry, is now on life support, and the economy is being driven today by RE, construction for the 2010 Winter Olympics, and tourism. Really the place is just Florida with mountains and snow.
But not all of Canada. In the east, where over 2/3 of Canadians live, only Toronto is significantly overpriced. The French-speaking areas have not seen a bubble, because they do not have a cultural preference for owning over renting and will not pay more to own than to rent. This is quite ironic, since English-speaking Canadians have always considered their French-speaking compatriots to be a bit impulsive and irrational.
Forestry is not BC’s #1 industry. Building condos is. Lumber might be our biggest long run sustainable industry, but condo building is bigger by far. Oh, this is going to be fun . . .
Excellent insights into our francophone compatriots, Yogurt. You’re right about the cultural preference for renting vs owning. There are huge swaths of Montreal that are rental housing–those low rise buildings with weird stairs to enter the upper floors. Historically, there were those who argued that the French quebecers who were renters were enslaving themselves to their anglo landlords; that it was all part of the colonial oppression. It looks like the French will have the last laugh!
I did notice Nova Scota wasn’t that overpriced. There were decent starter houses for under $100k on that island. The weather is quite good with mild summers and winters thanks to the north atlantic’s moderating effects.
Do the French rent if it’s cheaper than owning? Do they ignore lax lending standards knowing what will happen when rates go up?
Toronto *does* have rent control and one can rent the entire basement for $600 to $1000 a month. Much cheaper than buying a house for $400k to over $600k. I did think about renting for 6 months in Toronto but it’s far, far, far cheaper to just buy a house in NW Pennsylvania and ill be close enough to Toronto anyway.
“on that island. The weather is quite good with mild summers and winters thanks to the north atlantic’s moderating effects.”
Nova Scotia isn’t an island, perhaps your thinking of just Cape Breton. The winters are hell along the eastern coast of Canada. Snow puncuated by blizzards. And summers are “mild” because they rarely get an entire week of sunshine.
I was once out after sundown along the Cape Breton coast on a warm summer day, and the temperature dropped like a stone after the sun went down. I was a long way from anywhere, wearing a T-shirt, and when the cold, damp fog came rolling in I became increasingly concerned that I was going to get hypothermia before I could get back to shelter. It was nuts.
Nova Scotia isn’t an island, except for Cape Breton, which is Canada’s Appalachia.
There are no houses under 100K in Halifax, which is the only city in NS with any decent jobs. That said, prices are pretty reasonable, but so are plenty of cities in the Midwest of similar size (300k).
“a detached bungalow eating up a whopping 74% of pre-tax income in the final quarter of 2007 ”
…so in after-tax income we’re talking 100% or so… But it’s sustainable.
I love Canada! I’ve been down with O.P.P. for a long time now.
http://members.fortunecity.com/copcarsite/tahoe707.jpg
Link is busted.
Linking isn’t allowed on fortunecity. Go to http://www.imageshack.us and upload.
Funny thing about Canadians, I’m seeing a TON of them down here in Arizona coming in to buy cars. From what I understand prices of new/used vehicles in Canada is significantly higher then here in the US. What makes this interesting to me is most of them are paying “cash” pulled out of a house (second mortgage, equity line of credit). We haven’t seen a local try and buy a car like this in at least a year now (used to make up a large percentage of our business for 3-4 years or so).
Considering how much of them we are seeing THIS far south I wouldn’t be surprised if Canadians are making up a majority share of new/used car sales in border cities. Anyone up north able to confirm this?
On an unrelated sidenote, I decided to take a couple days off this past week and “get away from it all”. I needed a break from hearing everyone at work talking about how horrible our economy and real estate was and worrying about paying their bills (things are hard in the car business right now). So I got to this nice remote campsite 50 miles from anything, and spent my night listening to the next camp over complaining about the economy and real estate and how horrible everything was. I took my raft up to some hot springs nearby and listened to hippies, HIPPIES talking about the real estate bust. On my way back to Phoenix I took a detour to see some Indian ruins (Tuzigoot) and I almost laughed when the PARK RANGERS were standing on the path talking about the stupidity of home prices in COTTONWOOD ARIZONA (and how nobody could afford them/nobody was buying them/they were so much more affordable a few years ago).
I don’t know how things changed guys and gals. One minute my opinions on things (and info gleaned from this blog) were “ridiculous” to anyone I shared them with. They denied, they told me I needed to buy now or be priced out forever. They bought STUPIDLY overpriced homes. Fast forward 6 months and it feels like the whole world has opened their eyes.
Back to work I guess, good luck out there everyone.
Ncinerate
I guess we’re not ‘equity locusts’. How about ’snow flies’?
We already call em “Snow Birds”.
They migrate through every winter from the northern states/canada. Actually a huge economic boon for quite a few dingy little towns here in AZ.
Tuzigoot - they knew how to build ‘em back then. High on a hill, great views, stone that’s a heat-sink in winter and stays cooler in summer - the Anasazi knew how to build shelter, for sure. Wonder if they had any bubbles back then (shells, Macaw feathers, pigeon-blood agate…)?
Definitely a nice place. Maybe a housing bubble is why they all mysteriously moved away in the 1400’s. Nobody could afford to live there (ha).
They aren’t making any more hilltop you know, buy now or be priced out forever!
Ncinerate
If enough people left a location, house prices would crash due to supply exceeding demand by far. Florida lost only 5% of it’s population, yet this was enough to drop prices down to 2/3 of peak levels. The other states which the Floridians moved to are still holding steady in price, but I expect prices in those states to crash as people move back to FL or yet other states.
Heh. I’ve heard real estate talk in odd places too. For two years in a row, during a long-distance bicycle event I participate in here in Florida, I ended up spending a hilly part of the ride in front of the same guys talking about housing. I also was in a restaurant in 2005 in Montevideo, Uruguay, and overheard the only American I had seen for days discussing real estate “investing.” I was tempted to go over to his table and tell him to shut the *#@% up, but then again, on the flight over from Buenos Aires, I had seen ads in the PLUNA in-flight magazine for Miami condos, so I gave him a break.
Ncinerate, the reason Canadians are buying cars in Arizona is because most of the dealers in the border states refuse to sell to Canadians. They’ll lose their license if they do.
With the dollar at par, or even a little over, it’s much cheaper to buy in the States: our retailers are used to charging more and refuse to stop. I think there’s a 30% difference in the price of a new car. I know that prices for furniture and clothes are easily double up here.
It’s annoying, to put it mildly.
” I took my raft up to some hot springs nearby and listened to hippies, HIPPIES talking about the real estate bust.”
I am going to giggle about this for days.
Hi Ben and old friends,
I’m not blogging anymore, but I can tell you that Vancouver is the last North American holdout in the bubble. Things are *still* moving up here. It’s amazing. Gross rental yields on downtown condos are between 2 and 3%. The average price of a SFH is getting close to 1 million. Condos are going for between $700 and $1000/sf. Yet, local incomes are not that high - about $60K per family. Also, we don’t have a mortgage interest deduction.
How is this being sustained? a) belief by locals that this is ‘the best place on earth’ and ‘everyone wants to move here’ (sound familiar?) b) Belief that the Olympics will yield a never ending economic boom. c) 40 year amortizations d) government provided mortgage insurer (CMHC) provides insurance for 0-down mortgages. e) Canadian banks haven’t tightened credit yet. f) big interest in Vancouver real estate from Asian buyers (although they are unlikely the marginal buyer, since they are just looking for a pied a terre).
There are more units under construction now than any other time in the history of Vancouver. Affordability is at an all time low. In-migration is still positive, but lower than historical norms.
But for now, the party is still going! It’s like we are at a keg party and we haven’t noticed that it is 3am and everyone else has gone home. We are the last holdout of drunken frat boys gathered around the old keg. I don’t know if the frat boys will pass out first or the keg will run dry first, but either way it’s going to make for a doozy of a hangover.
Best regards to all the HBB’ers out there. I was one of the original posters on the original site (see here
In fact, if Ben remembers, I’m the one who gave him the ‘gmail’ invitation!
If you cruise those original archives you can see me, Rich Toscano, CR, and lots of others who went on to great fame. (Well, I didn’t go onto great fame, but the others did . . .). It is a lot of fun to cruise those old archives; I recommend it.
Best wishes to all, and keep your eyes on Vancouver — when it busts it will be spectacular.
For those who want more blogging goodness from Vancouver, check out these recommended sites:
1. For number crunching, see Mohican.
2. For good conversations and a humourous take, see the Pope.
3. For great daily numbers, see PaulB.
4. For a Realtor’s perspective, see Robby C. Note that Robby’s site is called ‘the Best Real Estate Anywhere.’ This is typical Vancouver attitude.
These guys have done a great job in filling in the slack when I stopped blogging a year ago.
Did condos really go from $300/foot to $800/foot in the last 4 years? I remember seeing 700 square foot condos with low $200s asking prices. 1 bed plus den, 1 bath and kitchen. Rent was around $1200 a month back then. Now im seeing nice 1/1 condos renting for $1500-1800 a month, how much would those cost to buy? $500k?
“Did condos really go from $300/foot to $800/foot in the last 4 years? ”
Yes. Cruise here to see.
The biggest problem with canucks is they are delusional. They think they are in some way morally superior and more intelligent/ careful than the US. They think that no-doc loans, inflated incomes, fraud etc do not happen in canada. They believe that the commodities bubble is based on supply and demand, not speculation. They belive that building nuclear plants by 2017-2020 will still be a commercially viable way of extracting oil from the oil sands.
Let me give you some reality based observations-
1] The canadian bubble is in many ways worser than than the US bubble. Remember California (if not florida) has been able to create well paying jobs and new industries at rates that canada as country has never created- ever.
2] Words such as Innovation, meritocracy are not found in any “real canuck” dictionary.
3] Most of the economy of BC, the maritimes is supported by service jobs. The praries provinces are mostly natural resource jobs. BC used to have a lot of them not any more. Ontario has a significant amount of US owned manufacturing jobs.
4] More than 80% of canadian trade is with the US and another 10% is to conutries making stuff for the US. Yet they thought they could decouple from the US.
5] Banks here offer loans (especially since 2001) just as freely as in the US. Fraud and income manipulation are just as common here as anywhere in the US- just not spoken about as openly.
6] The percentage of baby boomers combined with the race based discrimination against newer professional immigrants is going to ensure that the tax system implodes here much more quickly the US SS sysytem. If newer immigrants do not get well paying jobs they do not pay much tax. It is distinctly possible that the govt here may not be able to meet any obligations in say 10 years from now.
7] However canucks are prone to magical thinking and believe it will be all right because they are white and think they are smart and everyone loves them- kinda like people on cocaine+ ecstasy. Most canadians who came to canada pre 1940 (”real canucks”) were not required in their home countries (UK, France etc).
8] If the US starts building coal-to-oil plants and nuclear reactors on a large scale, canadian oil sand projects are screwed. THE US may go down that path to a] increase domestic employment -potentially millions of stable middle class jobs b] keep the price of oil affordable -so people do not riot c] Anything above 35-50 USD/ barrell for more than 5 years makes CTL a economically viable possibility.
For the amount of money spent in Iraq (officially) till now, the US could have created CTL plants to make 6 million barrells of oil per day creating about 200 k new stable middle class jobs and over 500k jobs in constructing these plants.
PS- Nuclear waste can be reprocessed and reused - France, Japan, India do that routinely. The future expansion of Indias nuclear program is largely based on processing waste from U235/ U238/ thorium breeder reactors and using it to fuel Pu 239/ U233 reactors. It is a bit more expensive than plain uranium reactors but there you end up using the fuel much more effieciently (like a 100 fold better). The US gave up the idea because of proliferation concerns during the carter administration - his single worst legacy IMHO.
Who cares: Most canadians who came to canada pre 1940 (”real canucks”) were not required in their home countries (UK, France etc).
Most Americans who came to the US pre 1940 (”real Americans”) were not required in their home countries (UK, France etc).
To: who cares anyway - As a Canadian, you are spot on mate. You know Canadians better than most Canadians. We are completely delusional and think that because we are not the bit, mean old U.S. that we are somehow superior and immune. Many Canadians (mostly left wingers) tend to trash the States, even though our economy relies heavily on the States, they have a mental block about this. It’s pathetic. Canada (Esp left wing Canadians) have an irrational, knee-jerk bias against the States. It’s hypocritical and sad. Without the US we wouldn’t have a pot to piss in, but these people can’t admit it to themselves. Just my take, from a Canadian who loves the States, warts and all.
“The biggest problem with canucks is they are delusional. They think they are in some way morally superior and more intelligent/ careful than the US.”
Can’t disagree with any of that. The level of delusion up here about Canada vs US differences is very surprising.
“The biggest problem with canucks is they are delusional. They think they are in some way morally superior and more intelligent/ careful than the US.”
Every time I think of the BC license plates driving through the US and bordering provinces with the motto “the best place on earth” I am so embarassed.
Sorry.
“From CBC.ca. “Matt Ramsey and his partner Euphemia Redden said they paid more than $300,000 for a 1,000-square-foot condominium in suburban North Vancouver. ‘The only way we could have done it is with help from my dad to pay off my students loans, which we are so grateful for,’ said Redden.”
“‘But if that hadn’t happened we would still be renting,’ she said.””
I feel sorry for their dad. Incidentally, my dad offered to help me “afford” a house in the acreage, FL. At that time, a half decent starter house was $300k with nicer houses in excess of $350k. Today, it’s $200k with nicer houses at $240k. I say at the bottom, we will see starter houses for under $100k with nicer houses around $150k.
The average additional cost for Sophia buyers is now estimated to be much higher than $25,000.
http://tinyurl.com/2r6t3k
“According to the report by the receiver, The Bowra Group, which was filed in the B.C. Supreme Court on March 11, it will cost $9.2 million to complete construction, if and when work on the building resumes.
… the buyers will have to come up with an average of $84,600 more than they originally paid to keep their homes, the report recommends.”
I also heard there are concerns about the building exterior and the insurer is considering backing out (which they can do now that its in receivership). Another future leaky condo.
I wonder how many of the buyers wise-up and use this opportunity to walk away with their deposits.
Also, some truly foolish people bought Sophia assignments (from the original speculators) with cash and can’t get back their “lift” (often over $100,000). Up until now, all these stories haven’t involved people taking actual loses, as they only missed out on appreciation. This is the first case of morons getting a real JT treatment and I bet it will cause a chill for Vancouver pre-sales.
Also, there are two other larger Vancouver condo projects now in receivership. Our market hasn’t even crashed and fools are already losing money.
Change is in the air in Vancouver. As mentioned above by VHB I track daily, weekly and monthly Vancouver stats on my website. I also have detailed inventory charts that are updated monthly and reach back over 3 years. http://www.northshoreproperties.ca
Inventory is growing very rapidly. Last month we were up 9% compared to the last year. Now we are up 17% over 07 for the REBGV and climbing. In North and West Vancouver where I live we are up 40% from 07 :0
Will sales catch up? This is very interesting to watch.
If inventory is already piling up faster than buyers, this means the market has peaked. Prices will start falling in the next few months, gonna be fun
Finally, a Vancouver-area RE agent who is willing to look at hard data instead of parotting the same inanities over and over… I call it the MOI argument for Perpetual RE Appreciation in Vancouver… Mountains, Oceans and Immigrants…
The best Canadian ‘bubble blog’ is Alberta Bubble.
Calgary and Edmonton are the areas most prone to a boom and bust cycle in Canada: I’d not be worried about a bubble in, say, Halifax or Ottawa or even Toronto — but Calgary is insane.
Okay, I buggered up the link…
Alberta Bubble
One thing not mentioned by my fellow Vancouverites is that our province’s second-biggest industry is marijuana (no exaggeration). Vancouver is also known as a world center for the following: money laundering, fraud, smuggling and as a haven for money stolen by government officials in China.
All true, and all a good explanation for why the Vancouver market is so out of synch with the rest of North America. The unfortunate element to this of course is that the underground economy is largely recession-proof and, most likely, bubble-proof.
Yeah sure, and did BC become the marijuana capital of the world in the last 6 years? And please explain why BC RE prices increased in lockstep with US bubble prices, granted with a one or two year lag? Have another toke chip.