He’s got nothing good to say about the Canadian real estate market.

According to Dave it’s a bit early to claim there will be a ‘soft landing‘.

Finance Minister Jim Flaherty has acted four times in the past five years to make mortgage-lending rules more restrictive amid concern that the Vancouver and Toronto markets were overheating. Flaherty has said he welcomes a slowdown of condominium construction in the two cities and has warned consumers, who have a record debt-to-disposable-income ratio of 165 percent, not to become overextended.

Madani, a former senior economist at the Bank of Canada, was the only person surveyed by Bloomberg News during the past two years who consistently predicted the central bank wouldn’t raise borrowing costs. Madani previously forecast home prices in the country would fall by 25 percent in the next few years.

Read the full article over at Bloomberg.

Some of them are a bit too ham-fisted with their approach and get called out for generating obviously fake stories with fake buyers or fake houses.

But there’s one guy who really knows what he’s doing.

Bob Rennie isn’t referred to as the ‘condo king’ for nothing, he knows just the right way to keep the media interested.  Here’s how Mac put it:

Here is the depressingly effective PR strategy Rennie has used for years to effectively make the newspapers (and TV news) his free ad agency.

1. Start with a hook that splits the audience: either one hopes for it or is dying to refute: Boomers will finance the real estate market.

2. State a belief supported by your “insight” as an expert and mix with some facts. Leave it to the reporter NOT to know how to ask hard questions:

Boomers own their homes outright.

Feds have a hard time understanding our market.

Vancouver RE buyers are not entirely dependent on only their incomes to buy their homes, he noted. Just 4.9 per cent of Metro Vancouver residents make more than$100,000 [≈ Small rural house (2011)] a year, while 65 per cent earn less than$55,000 [≈ Median US household income (2009)] a year.

3. Plug your other projects: scaled down VAG and [fill in the blank] condo development

4. Recap with an example that is a tautology: someone sold in Shaughnessy for a bit less, therefore they will be buying their kids houses and financing the real estate market

5. Don’t address the other side of that argument (probably because the journalist can’t figure it out)…as in ‘What if the Shaughnessy seller had plans for the higher sold price and now feels “poorer” because they sold for less and gives less to their kids? Is there any trickle down effect on prices from that? And what if we do’t use Shaughnessy–the most $$$ neibhbourhood– as an example but use another neighbourhood instead where the price drops may be more significant and the family net worth, and negative wealth-effect might be less and maybe even they have more kids to “support” into their late adulthood?

6. Bring up an obvious example of something that has nothing to do with the main point you’re trying to prove to re-inforce your “expertness”: people like dens. They like them as extra bedrooms. (This was also true for every generation of grannies and grandpas). But my God! It’s true! So if you are right about dens, then you must be right about the Boomers, and the VAG, and RE being supported by these den-loving boomers who will take less rooms but want more room. (???)

7. Side your argument with the masses: “They won’t pay for crazy green initiatives or crazy lofts.” Same effect as no. 6 above. Gosh! You are right. Utilitarian condo for the kids. Luxury for the parents! And TA DA! You have proved the hook! Boomers will finance the RE market! And I don’t need to ask how, if the market has already declined, this will effect their net worth because I know they will use dens and prefer to visit Grouse Mountain over wanting to visit a proper Art Gallery that makes the Rennie Gallery look small.

Thank you Rennie, and thank you Vancouver media!

It’s time for us to do our regular end of the week news round up and open topic discussion thread for the weekend, here are a few links to kick off the chat:

-Better to rent or buy?
-Boomers will finance the market
-Challenges for Richmond sellers
-Will extradite criminals for cash
-Hike rates now
-Imaginary money
-CAAMP shows concern
-

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

One thing that helps drive profit is CMHC mortgage insurance.

Wouldn’t it be great to make an investment where you got the profit and somebody else took over the risk?

The unfortunate side effect of this economic boosting is the the spectre of taxpayer liability for housing bubble fallout.

But what if the banks bailed out the CMHC after being bailed out by the CMHC?

Sounds a bit like a perpetual motion machine but that’s what BMO analyst John Reucassel is suggesting could happen if the CMHC went bust:

“It appears to us that the CMHC is reasonably well capitalized and positioned to meet the challenges from a housing slowdown.  However, investors may be concerned that, in a severe downturn, Canadian banks may either a) need to recapitalize the CMHC; or b) absorb some of the losses.”

Read the full article over at the Financial Post.

They revisit Vancouver Real Estate agent Keith Roy’s very public decision to sell his house last year and say prices have dropped 3.9% in Vancouver, 5.6% in West Van.

They also talk about lending practices in Canada and recent efforts to return CMHC amortization terms to their historical norm.

Some of the loopholes people use to avoid the mortgage restrictions are quite extraordinary. For example, although the government requires buyers to purchase private mortgage insurance on mortgages with 100 percent loan-to-value ratios, eHow says this can be avoided just by getting two mortgages, each for 50 percent of the home value.

Canadians are also allowed to borrow against pensions and life insurance policies to fund their down payments. Even credit cards can be used to fund down payments. So it’s very possible that the total housing debt is actually much higher than the official mortgage debt numbers.

If this sort of thing is being openly discussed even after the government has launched its efforts to curb lending excess, just imagine what kind of shenanigans were going on before the crackdown. The quality of the mortgages made in 2011 and 2012 may turn out to be much worse than is commonly suspected.

Read the full article here.

So is the Canadian market falling apart at this point?  Vancouver has certainly fallen over the last year and this is starting to have an effect on developers as well – the Alba has been put on hold due to a ‘challenging real estate market‘.

There’s a troubling move towards more debt later in life.  Many Canadians are now going through their 50s with an increasing debt load rather than using that time to pay off debt.

But between 50 to 59 is usually the time when a person is trying to reduce debt and prepare for the golden years, says Douglas Hoyes, a trustee with the Ontario-based bankruptcy and consumer proposal services firm.

“We found, nope, in fact it’s the opposite. It keeps building and building,” says Hoyes, referring to debt loads.

The surprising thing is that the majority of these bankruptcies aren’t occurring due to unemployment:

A common stereotype is that the average bankrupt person is unemployed, but the study shows that 81 per cent of insolvent debtors were employed at the time of filing. The average take-home pay for Joe Debtor was $2,366 per month on a net basis, while the average household income was $3,058.

Read the full article here.

And we’re having tech difficulties.

We’ll flesh this thread out later.

Carry on!

Troll shared these numbers in the previous thread:

Here’s some facts for the navel gazers to vote down:

Apr 1-15: 115 sales/day
Apr 16-30: 127 sales/day
May 1-8: 137 sales/day

Sales are strengthening during a time that they usually begin to fall off. MOI is also falling. Like it or not bears, this market is beginning to show some signs of strength. Not so simple to just dismiss as a bull trap.

Then frank pointed out we’re still pretty high on the inventory front:

Here’s VMD‘s interpretation of the trend:

Been on vacay in remote areas without internet..
to further Troll #103′s stats:

So far in May: 137/d vs 133 (2012) vs 160 (2011)
Apr 16-30: 127 (2013) vs 140 (2012) vs 159 (2011)
Apr 01-15: 115 (2013) vs 154 (2012) vs 147 (2011)

Look at May vs Apr sales in last few years:
2012: 2853 2011: 3377 2010: 3156 2009: 3524

The statement that “Sales are strengthening during a time that they usually begin to fall off” is incorrect. Sales almost always fall off in June (except 2009), not May.

and here’s Trolls response to that:

I don’t like using monthly numbers because they are skewed by the number of business days, one or two extra days can skew the numbers. I think a better measure is sales/day. For example you show increasing sales for 2012 from April to May, but if you break it down by sales per day, you get the following:

Apr. 1-15: 154 sales/day
Apr. 16-30: 144 sales/day
May 1-8: 133 sales/day

Falling just as I said.

So what do you think? Are we seeing enough of a trend reversal yet to say the market is strengthening or is it a normal spring bump on a long hill down?

First off, we heard you on some of the issues browsing this site on an ipad. It was unusable, but now should be much better. We fixed a bug that would not let you vote or view hidden comments on mobile devices. One thing still missing are time stamps and comment numbers, but we’ll go with ‘functional’ for now.

And speaking of hidden comments, it would appear that some people are personally offended by the community voting system in place here. For those of you new to the site, here’s how it works: instead of active moderation each comment can be voted up or down, one vote per reader. Highly rated comments are highlighted and comments with a total negative vote below -8 are hidden. Those comments can be unhidden to read and then voted back up if you want.

When the brilliant Vancouver Real Estate Anecdote Archive went on hiatus someone was unhappy with their recommendation of this site and has been posting this comment around:

I am strongly opposed to the recommendation by Vreaa to move to VCI (Vancouver Condo Info) to post commentary as it is just a hack site of sheep speaking to the same tune as one another and offering little in the way of genuine creative commentary on the Vancouver Real Estate situation. I will admit I have posted there once or twice but I really don’t consider it a useful or intelligent venue for discussion as its focus is popularity centric and voting counts for more than honest dialogue. The conclusion I have come to after only a few brief visits is that you must fall in line with your peers for validity or be cast out and down-voted into oblivion. That is self defeating in my opinion and does not represent true democracy (unless mobs of one-dimensional sheep are considered to be democratic all of a sudden) and it does nothing to foster genuine debtates or discussion. VCI gets my veto. Two very big THUMBS DOWN for that site. I encourage readers to move on to “The Greater Fool” or other open discussion forums that welcome more varied opinion and have a host with an actual personality.

On this site that comment currently has 20 up votes and 15 down votes. I don’t know about you, but I find that a bit ironic

So we obviously can’t please everyone, but our goal is to please the majority of the visitors to this site.

With that in mind (and the recent spate of crap-flooding trolls) it’s poll time!

Any other thoughts on this site, compliments or complaints? Leave ‘em in the comment section below!

Canadian Housing: Bursting bubble or gentle landing?

Here’s one chunk of that article with a few asides that always seem to be missed:

Lewandowski believes Canada will not suffer a U.S.-style housing crash simply because policymakers had the benefit of watching it happen next door.

“What we experienced here in the U.S. with housing markets and regulators goes directly to the attitude and changes the minister of finance has made in Canada. A regulator who is being proactive is taking Step One in making sure the housing market doesn’t find itself in a bubble,” Lewandowski said.

So often it seems that ‘bubble’ is used as if it refers to the collapse in prices. It doesn’t. The ‘bubble’ is the inflation of prices beyond reason. By the time the collapse comes the damage is already baked in, falling prices are a correction of the problem, not the problem itself.

Both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have been on the march against a housing bubble for years, aware how low rates and loose lending standards in the United States ignited a boom and bust there.

Well, Carney and Flaherty have definitely been ‘warning’ of consumer debt levels for a while, but government policies like following the US into 40 year zero down mortgages didn’t help to prevent a housing bubble.

The central bank has held rates low since the global financial crisis because growth remains tepid and global woes weigh on Canada’s export market, and Canadians can find a five-year mortgage rate below 3%.

Meanwhile in the states you can lock in to a 30 year mortgage for 3.35%. In fact, while house prices in the US were correcting, interest rates were falling as well.

But the government’s gradual tightening of rules for borrowers — a firm admission that the market was hotter than anyone was comfortable with — has taken some steam out of the market, and economists, like Carney, seem to believe a soft landing may be at hand.

“We’re encouraged by the fact the level of housing starts has come down to slightly below demographic demand, as we see right now, there’s still more adjustments to go,” he said in testimony to Parliament last week. “We’re encouraged by the evolution of house prices in a number of markets. We’re on the path to a balanced evolution of the household sector and we all have to continue to be vigilant.”

Ok, we’ll continue to be vigilant then.