Too Many Buildings And Not Enough People
The Calgary Herald reports from Canada. “The average Calgary homeowner is expecting a 47 per cent return on investment on their property, according to a new poll released by BMO. The report said 33 per cent of Calgary homeowners believe their property has doubled in value from the time of purchase. At the national level, the BMO poll said the average homeowner in Canada expects a 62 per cent return on investment on their property. Canadian homeowners believe they could sell their current home for an average of $369,968 – an increase of $141,686.”
“‘A home is one of the rare investments that you can enjoy and use, while potentially watching it increase in value over time,’ said Laura Parsons, mortgage expert with BMO Bank of Montreal. ‘We’re seeing investors coming into Calgary that have cash.’”
The Financial Post. “The housing boom has not only resulted in record real estate prices, it has spawned an unprecedented number of realtors. The number of people selling real estate reached 108,706 during the first quarter of the year, according to the Canadian Real Estate Association. To put it another way, that’s one realtor for every 245 Canadians over the age of 19. We have almost as many people selling houses as making them.”
“Much of it is an influx of speculative careers from would-be real estate agents who see a quick buck to be made because they know someone selling their house. ‘You’ve got some nice person making $30,000 or $40,000 as a receptionist. This is the American dream. You do two deals and you make $50,000,’ says Lawrence Dale, a long-time thorn in the side of both CREA and TREB having sued both.”
Mortgage Broker News. “Developers appear to be a little less eager to scoop up land in the Toronto area to build condos on, reports The Globe and Mail. The price that developers paid for land to build condos on softened by 4 per cent in the first three months of this year. If that keeps up, it would be good news for those economists and market watchers who believe that too many condos are going up in the country’s most populous city.”
“The news follows a Conference Board of Canada report that predicted a soft condo landing. ‘We see a soft landing even in areas of higher risk, like Toronto. Granted, there are many condominium units under construction in Toronto, but not all will be completed at once, and the rental market, for which many are headed, is tight,’ the report stated.”
The Ottawa Citizen. “The number of new homes under construction fell drastically in April as builders reacted to plummeting demand for condominium units. According to Canada Mortgage and Housing Corp., homebuilders began construction on 253 new residential units in April, down 50.9 per cent from the 515 they began building during the same month in 2013. Almost all of that drop can be attributed to reduced condominium construction.”
“‘I can tell you that 85 per cent to 90 per cent of the apartments are condomiums,’ said Sandra Pérez-Torres, senior market analyst with CMHC. ‘We have had so many apartment starts in the last two years. The market is just cooling down now. We’re seeing so few starts that it’s just cooling the whole market.’”
Winnipeg Free Press. “New-home construction activity declined for the fourth straight month in the Winnipeg area in March. Canada Mortgage and Housing Corporation said homebuilders began work on 521 new single- and multi-family units last month in the Winnipeg Census Metropolitan Area, which includes Winnipeg and 10 neighbouring municipalities. That was a drop of 6.1 per cent from the 555 starts recorded in April of last year, and followed declines of 19 per cent in January, 10.7 per cent in February and 65.5 per cent in March.”
“April’s decline was concentrated on the single-family side of the market, where starts were down 30.5 per cent to 189 units from 272 a year earlier. ‘While builders picked up production in April following a slow first quarter, softening demand due to lower employment and net migration should keep housing starts below 2013 levels moving forward,’ said Dianne Himbeault, CMHC’s senior market analyst for Winnipeg. Himbeault said last month that home-construction activity was expected to be lower this year because of a build-up of unsold houses from 2013.”
The Global News. “The Canada Mortgage and Housing Corporation released new numbers Thursday that paint a bleak picture of the construction season in the province, especially Moncton, where new construction is down 64 per cent. ‘Last year we had a lot of construction in the rental market, this year we haven’t seen that,’ said Claude Gautreau from CMHC. ‘The vacancy rate in New Brunswick is a lot higher than it’s been, say, in the last 10 to 15 years.’”
“He says construction of large multi-unit buildings has stalled and new-home construction is also down. In Moncton, Gautreau believes the market is over-saturated. There are too many buildings and not enough people. ‘If you look at the younger age groups we can see that employment is trending down a little bit and so if you have young people having a hard time finding employment they may be prompted to look outside the province,’ Gautreau said.”
The South China Morning Post. “In March 2014, just a few weeks after the Canadian government announced it was shutting down the Immigrant Investor Programme, average house prices in greater Vancouver suffered their biggest month-on-month fall on record, plunging more than 11 per cent. This came amid a three-year period of price volatility so severe that it has never been matched in the history of the city’s real estate market.”
“Wait, let me try that again. In March 2014, just a few weeks after the Canadian government announced it was shutting down the Immigrant Investor Programme, the Home Price Index (HPI) for greater Vancouver continued to rise to near-record levels, amid what real estate board chief Ray Harris called ’steady and stable market conditions.’”
“Which of the preceding paragraphs is accurate? Both of them. And therein lies a problem for anyone trying to get a handle on Vancouver’s property market, and whether the cancellation of the Chinese-dominated Immigrant Investor Programme is a game-changer or of utter irrelevance.”
“Since early 2011, average house prices have changed direction by a factor of 10 per cent or more five times. Such volatility had never happened before, and the swings are getting wilder. Yet not a single report on the March stats highlighted this fact. During the 2008-2009 global financial crisis, 10 per cent swings occurred twice. Before that, you have to go back to 1996.”
“Although the federal government announced in February that the IIP would indeed be cancelled, this decision only goes into effect in June, when the federal budget is passed. That is when more than 60,000 rich would-be immigrants will be informed that their bids to move to Canada have been scrapped. About 40,000 of these applicants, representing 12,000-15,000 households, had hoped to move to Vancouver. How many of these had already bought homes in the city? And how many will be seeking to sell, when their dreams of living in Vancouver are officially dashed?”
The Vancouver Sun. “Charles Hou is a retired social studies teacher who has lived in Dunbar for 48 years. He has a bone to pick. ‘On my block, there are three empty million-dollar houses,’ writes Hou. ‘The house behind mine sits empty for 90 per cent of the year. This is having a devastating effect on my neighbourhood. People no longer are doing upgrades on their houses because they know they will be torn down if sold.’”
“Are Vancouverites dangerously over-extending themselves, with colossal mortgages and modest downpayments? Is there a housing bubble? How big a market share do foreigners reflect? How many Vancouver homes sit empty? Benjamin Tal, the Toronto-based senior economist at the Canadian Imperial Bank of Commerce, did everyone a favour last week by highlighting the absence of such clear data in a report he wrote, entitled Flying Blind.”
“‘The gap between the importance of the real estate market to the economy,’ Tal wrote, ‘and the lack of publicly available information on it is mind boggling.’”
“The average Calgary homeowner is expecting a 47 per cent return on investment on their property, according to a new poll released by BMO. The report said 33 per cent of Calgary homeowners believe their property has doubled in value from the time of purchase. At the national level, the BMO poll said the average homeowner in Canada expects a 62 per cent return on investment on their property. Canadian homeowners believe they could sell their current home for an average of $369,968 – an increase of $141,686.”
Bahahahahahahahahahahahahahahahahahahahahaha
The Great American Machine Lives! And it lives in Canada!
Dollars without borders!
Bahahahahahahahahahahahahahahahahaahahahaha
People are just as smart in Canada as they are here!
Bahahahahahahahahahahahahahahahahahahahahaha
“The Great American Machine” should read as “The Great American DREAM Machine”.
Keep them dreaming and you’ll keep them spending. And schmucks who have no money to spend will end up coming to me.
This farce is now in full swing.
China is imploding and its three little bitches — Canada, Australia & Brazil are going down next.
What about Russia?
“The housing boom has not only resulted in record real estate prices, it has spawned an unprecedented number of realtors.
“We have almost as many people selling houses as making them.”
Bahahahahahahahahahaha
And after these house sellers spend lots of their time and their energy and their money wooing their marks and selling the marks on the merits of The Great American Dream they then bring their marks to me for the signing of some dotted lines.
The realtors get a cut, I get a cut, PLUS I get many years of monthly payments sent to me.
The marks work, the realtors work, and as for me? I get to sit back and collect - for YEARS I get to sit back and collect.
Bahahahhahahahahahahaha
Truly and sincerely, you cannot lose with the stuff I use.
‘You’ve seen a few stories here on News1130 about the challenges of condo living in Vancouver. While thin walls, floors and ceilings make for thin patience, it is possible to coexist in close quarters harmoniously according to an expert on etiquette.’
“Most people moving into that situation would expect that there would be a little bit of friction but I think we also take for granted that common sense is common practice,” says Lew Bayer, president of Civility Experts Worldwide.’
“When people know that there’s a baby next door, we’d want to turn the radio down by 10:00; we’d hope that we’d treat others the way we’d want to be treated. When you live in close quarters, there is some stress and people tend to want to get even, but what comes around goes around, unfortunately,” she tells News1130.’
“Be mindful of your space, be mindful of people’s privacy. We call it social dandruff, this notion that your business becomes everybody’s business whether they show some interest or not. Maybe it’s keeping your windows open so that everybody can see you run a round naked and hear all your arguments with your spouse. We’d expect that people would be mindful that not everyone wants to know all of our business,” says Bayer.’
“Don’t make the assumption that people are being obnoxious or rude always on purpose just to get under your skin. Our research shows that while some of that does happen, the majority of the time people are really not aware how their actions are being recieved. If somebody explains to them kindly enough the first time, sometimes that’s enough to make a difference.”
‘If it doesn’t, that’s when it is time to take your complaints to your strata council or landlord.’
“Don’t make the assumption that people are being obnoxious or rude always on purpose just to get under your skin.”
Lol. This guys needs to get out more often.
Some people LIVE so as to get under your skin. And if they happen to live next door to you then you are screwed.
(Although it can be quite amusing if they live down the street a bit. This happens to be the case on the street where I live.)
There are forty houses on my street and forty families live in these houses.
Thirty-nine of these families are normal and one of these families is crazy. That means 2.5 percent of the families that live on my street are crazy, which fits with statistics in general.
If you are a next door neighbor of this crazy family then you will be driven nuts. But if you live down the street a bit then you will be entertained. Also, you will grow to be educated a bit on just how intensely and insanely crazy some people can behave.
It really comes down to luck.
Not if you bought the house and are “building equity”.
Then you are out of luck. Good luck with the cray-crays.
As my brother used to say, “Never attribute to malice that which can adequately be explained by stupidity…”
‘The average Calgary homeowner is expecting a 47 per cent return on investment on their property, according to a new poll…At the national level, the BMO poll said the average homeowner in Canada expects a 62 per cent return on investment on their property’
You know something is screwy when corporations are taking polls like this.
“you know something is screwy”
And some conclusions can be made too.
Nonsense, a 47 percent return is a lock.
A lock on the house after it gets repossessed?
Oh, I see, you meant a lock on your bonus. That it is but that’s in the past, no?
For you, sure.
I think you might be missing the satirical bent of our friend here, my good buddy.
There is a reason that all through human history dating way back, dictators have always executed satirists.
Just trying to get in on the fun.
I agree. Love the posts. Wish I had thought of it first.
Darn.
47 percent? Over what period of time? Real or nominal? What are the holding costs? Without more information that number is meaningless. My house (outside of DC) would most likely sell for close to double what I paid for it, back in 1999. I might have been able to get nearly triple if I’d sold at peak. Of course the people who bought at peak have suffered considerable losses.
“A home is one of the rare investments that you can enjoy and use, while potentially watching it increase in value over time,” said Laura Parsons, mortgage expert with BMO Bank of Montreal. That’s actually not nearly as stupid as the statement about housing as an investment that we USUALLY hear from the RE world. It is an investment which has returns “in kind” rather than cash dividends. Instead of a dividend, you get housing. And it keeps granting those dividends after the mortgage is paid off. So over a long enough time, a house is not a bad investment so long as you didn’t pay too much or get a crazy-insane exploding suicide mortgage. But the REAL (inflation adjusted) capital gain is usually quite modest, especially when you account for maintenance and taxes.
If you can find a buyer.
“watching it increase in value over time,” said Laura Parsons…
Laura lives in a mania. An old house is not worth more than a new house. People who believe this also believe relentless credit expansion is normal. Waging a lifelong war of mowing, trimming, weeding, painting, roofing, power washing, repairing and upgrading isn’t profitable, no matter how much you enjoy it.
The profits you imagine are Ponzi profits. Take them or lose them.
But sometimes, because of population growth and/or a gentrifying neighborhood, the land that it is built on becomes more valuable over time.
Yes. Like Buffalo, Detroit, Cinncinnati, Columbus, Syracuse and Rochester.
Those would be the “other times.” When you account for maintenance costs and changing tastes, the house itself almost always depreciates in real terms. But of course the advantage of the 30 yr FRM is that the principle and interest portion is fixed, while in a normal market, equivalent rants would slowly go up over the course of the loan. With normal inflation, after 15 years or so your monthly costs would be less than if you were still paying rent, if you didn’t overpay in the first place.
The math does not work. Overpay for something by several hundred percent, pay entrance costs, pay taxes that will consume the value entirely over that time, double your cost again by using long term borrowed money, all to stay ahead of inflation?
I fear to ask what you would do to stay ahead of deflation, once that smacks you on the side of the head!
“With normal inflation…”
You are living in a mania Jim. A generation of theft is all you know.
“Buying a house is never a good idea” is just as silly an idea as “Buying a house is always a good idea.” Since the returns of an investment in housing are HOUSING, one of the critical measurements of whether the price you’re paying makes any sense is the ratio between purchase price and rent. Of course the vast majority of people can’t afford to pay cash for a house. You can either rent housing or you can rent the money to buy it. This means that interest rates affect the price/earning ratio that purchase makes sens for. The amount of time that one anticipates living in the housing also affects the price that it makes sense to pay. Only during crazy bubbles like the last one did it pay to buy a house and sell within a few years. OTOH, since once the mortgage is paid you’re only paying maintenance and taxes, there is in theory SOME period of time where purchase could pay off compared to renting no matter what the price you pay, although at the bubble peak, I suspect that period of time was more than a lifetime. And of course significant price declines meant that people who bought at peak would have been in much better shape waiting until after the crash and buying. The old “rule of thumb,” at pre-bubble price/rent ratios and interest rates was that if you weren’t going to live somewhere for six years you should rent.
In a normal market, there is little in the way of real gains in real estate prices. During the bubble there were unsupportable gains and during the bust there were huge losses of principle. Appreciation is NOT normally significant enough to make the purchase of RE a good idea. The fact that appreciation was out of control and flipping was becoming a “thing,” was one of the things that made me wonder whether we were in a bubble back in 2003. But the 30 year FRM can do much to limit the inflation of one’s housing costs.
For me, after 10 years, my mortgage was LESS every month than equivalent rent. Of course now that my mortgage is paid off, my cost of housing is MUCH lower. Yes, there was an opportunity cost, but I would need to have something like twice the purchase cost of my house in savings to generate those kind of returns. Certainly in my neighborhood, prices still seem high to me, they’re about double what I paid and median incomes certainly haven’t doubled since 1999. But interest rates are lower so the payments might be similar.
Fixt it for you.
“Buying a house is never a good idea at grossly inflated asking prices which we’re currently experiencing.”
‘New data released Thursday by Canada Mortgage and Housing Corp. shows that housing starts in the Calgary census metropolitan area have soared this year. The CMHC reported that in April total starts in the region of 1,592 in April were up by 49.2 per cent from last year. The single-detached market has seen a hike of 15.6 per cent to 630 units while the multi-family sector is up 84.3 per cent to 962 units.’
‘On a year-to-date basis, total starts in the Calgary CMA have risen by 64 per cent to 5,857. That consists of a 135.4 per cent hike in the multi-family sector to 3,767 units and a 6.0 per cent jump in the single-detached market to 2,090 units.’
‘Connor McDonald, economist with TD Economics, said the six-month moving average across Canada is essentially unchanged from the previous month at 183,515 units. “April’s recovery beat even the most optimistic expectations, with multi-unit starts outperforming the increase implied by building permit data, and more than offsetting the March decline,” he said.’
“Despite April’s sharp rebound, we continue to expect a gradual slowdown of momentum in the Canadian housing sector. Elevated new home inventory levels, and a large number of projects under construction, are likely to be two important culprits that contribute to pulling down the pace in housing starts from their current level, to a pace more in line with demographically driven levels of about 170,000-180,000.”
‘Canada unexpectedly lost 28,900 net jobs in April, delivering the biggest one-month employment blow to the economy this year. The Statistics Canada data said the employment numbers dropped in seven of the 10 provinces, including Quebec, New Brunswick, Newfoundland and Labrador and Prince Edward Island. Quebec saw the biggest plunge, losing 32,000 jobs.’
‘Derek Burleton, deputy chief economist for TD Economics, said in a statement, said the “employment pendulum continues to swing violently.’’
“The extent of the weakness in job creation in recent months has been surprising given the reasonably positive readings flowing from employer surveys and signs of continued moderate growth in the economy,” he said. “While there had been hope that this puzzle would have been solved today with a strong employment reading, we continue to be left waiting.”
The numbers would have been much, much worse if all those newly hired realtors hadn’t picked up some of the slack. Whew. Dodged another bullet, thanks to them.
Canada loses 28,000 jobs and unemployment remains the same. They do their statistic just like our own Department of Truth. More and more people just don’t look for a job supposedly!
http://www.thestar.com/business/economy/2014/05/09/statscan_to_release_jobs_numbers_today_amid_controversy.html
Redwood City, CA Housing Prices Crumble 7% YoY As Inventory Grows
http://www.zillow.com/local-info/CA-Redwood-City-home-value/r_20128/#metric=mt%3D19%26dt%3D1%26tp%3D4%26rt%3D8%26r%3D20128%26el%3D0
Walnut Creek, CA Housing Prices Crater 18% YoY As Demand Turns South
http://www.zillow.com/local-info/CA-Walnut-Creek-home-value/r_34637/#metric=mt%3D18%26dt%3D1%26tp%3D4%26rt%3D8%26r%3D34637%252C118802%26el%3D0
San Francisco/Daly City Rental Rates Plunge 20% YoY As Housing Demand Craters
http://www.zillow.com/local-info/CA-Daly-City-home-value/r_31163/#metric=mt%3D46%26dt%3D1%26tp%3D5%26rt%3D8%26r%3D31163%26el%3D0
San Leandro, CA Housing Demand Collapses 22% YoY; Housing Inventory Balloons
http://www.zillow.com/local-info/CA-San-Leandro-home-value/r_13698/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D8%26r%3D13698%26el%3D0
Riverside, CA Housing Demand Craters 16% YoY As Inventory Balloons 88%; Rental Rates Plunge 9%
http://www.zillow.com/local-info/CA-Riverside-home-value/r_47401/#metric=mt%3D30%26dt%3D1%26tp%3D6%26rt%3D8%26r%3D47401%26el%3D0
“Although the federal government announced in February that the IIP would indeed be cancelled, this decision only goes into effect in June, when the federal budget is passed. That is when more than 60,000 rich would-be immigrants will be informed that their bids to move to Canada have been scrapped. About 40,000 of these applicants, representing 12,000-15,000 households, had hoped to move to Vancouver. How many of these had already bought homes in the city? And how many will be seeking to sell, when their dreams of living in Vancouver are officially dashed?”
That’s racis’
2% is too much to pay for borrowed money.
http://www.cbc.ca/news/business/investors-group-unveils-3-year-mortgage-at-1-99-1.2641367