How to protect your investment.

Police have seized a large cache of 'extra-ordinary' weapons from a condo near the science world skytrain station.

Police evacuated some 40 residents as a precation, after finding a number of firearms and explosive devices. CTV reported police seized a tripod-mounted military-style machine-gun, rifles, explosives, and ammunition.

Oh, come on now - the neighborhood's not THAT rough.

Police reportedly called in military explosives experts to help them assess the weapons. Chapman said there is no indication the man was involved in a gang or terrorist attack.

Neighbour Dave Paauwe said there are a number of rental suites in the condominium building, and grow-ops aren't uncommon.

Articles in the Edmonton Journal and Globe and Mail

House odds go bad in Las Vegas.

Speculators who were looking to make some quick and easy cash by 'flipping' properties are seeing bad times all over the US, but it's particularly bad in Clark County Nevada (Las Vegas) - One in every 30 houses there started the foreclosure process last year.

More than other states hit by the mortgage lending crunch, the high foreclosure rate in Nevada, California and Florida was driven by speculation, said Rick Sharga, vice president of marketing for Realty Trac. “It was a combustible mix of risky loans and risky real estate deals,” he said.

Russ Valone, the chief executive of research firm MarketPointe Realty Advisors, said speculators in San Diego were putting deposits on downtown condo units under construction, assuming they could sell them at a profit when they were finished.

“There were guys out there that were rolling the dice just as if they were going to Las Vegas,” Valone said.

When the market slowed, many buyers forfeited their deposits, or let their properties get repossessed by the banks. As a result, the inventory of unoccupied condo units downtown since early 2005 has soared fivefold, he said.

That article also mentions that predictions of a 1% price decline across the US in the next year has pretty much killed 'flipping for a profit' in these previously frothy markets.

Friday free-for-all

Here it is, your rainy friday free-for-all open topic post.

Whats going on out there?
-City staff moves to protect rentals
-no byline column in the Sun says bad idea
-a critical look at the Liveable Region plan
-What boomer buyers might look for
-US economic growth at 4 year low
-Pacific NW & Texas not seeing the slump

What are you seeing? Post you news, anectdotes, links and what-have-you here!

US slowdown cutting into Canadian exports

Paulb pointed out this article in todays Globe and Mail about the drag that the US Slowdown is putting on Canadian exports. The Bank of Canada says that slower growth in the US is expected to 'suck the heat' out of the Canadian economy which will balance higher inflation here. In its semi-annual outlook the BOC says that they expect inflation to reach 3% by the end of this year.

“With the U.S. slowdown now expected to be somewhat more prolonged, net exports should exert a slightly greater drag on growth in 2007,” the outlook says. “All told, the Canadian economy is expected to expand at a rate slower than potential through 2007, and in line with potential through 2008 and 2009.”

Potential is considered to be about 2.7 per cent growth annually.

Total inflation is expected to return — on its own accord — to the bank's 2 per cent target by mid 2008, the bank said, but will peak at about 2.8 per cent in the fourth quarter of this year.

Core inflation — which excludes food, energy and other volatile items — will remain above 2 per cent for a few months, returning to target by the end of 2007. Although housing prices are no longer a concern to the bank, capacity pressures will keep core inflation high.

I'm always suprised at how specific they get with their predictions - How has their track-record been for previous BOC outlooks?

Muir sees affordability problems leading to balance.

Reductimat just gave me the heads up on this story: The B.C. Real Estate Association is seeing lower home sales and more inventory going into this spring and they predict this trend will go on due to affordability problems cutting into demand from first time buyers.

The Association's Chief Economist Cameron Muir says BC housing starts will likely drop 7% this year and a further 6% in 2008. He says the BC market is starting to return to more balanced conditions, and the demand for housing has dropped a bit.

Muir says that's good news for some home buyer's deep pockets because there's more inventory to choose from, and less sales pressure to put a bid on a home right away.

Theres a bit more detail in this story in the Sun where there's no prediction of lower prices, just less demand and more supply.. clearly they've studied some esoteric economics courses that I'm not familiar with.

Property tax & assesments

I was in an airport in Southern California this morning when I spotted this headline on USA Today and upon my return to town it made me take notice of this article in the Vancouver Province about the recent property tax increase in Vancouver..

Every so often we post a story about property taxes in Vancouver and inevitably someone posts a comment based on the assumption that higher assessment values mean higher property taxes. Of course property taxes in Vancouver aren't like PST or GST and someone always seems to be around to point out that fact - property assessment values in Vancouver only determine your share of the total tax burden compared to your neighbors property. Higher property values don't create a property tax windfall for local governments, in fact - if we can base anything on the US example, by the time government gets around to grabbing more property tax based on inflated property values the boom is already over.

So what's going on here? Is it just that governments move at a pace that's too slow to react to market changes? Are we at the tail end of a boom locally? Are we due to hear complaints about taxes based on "unrealistic property assessments" or will the recent Vancouver property tax increases simply be absorbed painlessly into future appreciation?

friday free for all!

It's Friday so that means we do our open topic thing here at Vancouver Condo info - This is the place to post your links, news, and the things you're noticing in our crazy-go-lucky real estate market.

A few random things:
-Vancouverites more willing to live in condos.
-Is the US housing market a tsunami waiting to hit?
-Frauds adding to foreclosure pain in the US.
-Rennie temporarily loses 'crackberry' connection.
-Can Seattle and Vancouver learn from each other?

What are you seeing? Post it here!

Vancouver wants to raise house property tax

According to this story on News 1130 Vancouver city council would like to double property tax for homeowners from the original four percent increase they recently decided on. This move is an effort to shift some of the tax burden from businesses in the city to homeowners.

Councillor Peter Ladner explained businesses have been paying six times what homeowners pay in property taxes. He said, "We have to catch up because we are hearing very clearly from the business community that our taxes are killing them, and they're killing our neighbourhoods and they're making it impossible for people to keep businesses going in the city."

If this proposal goes through, local businesses would see very little or no increase in their tax bill. Their goal is to bring our current 6-1 ratio closer to the standard 3.5 to 1 ratio of other cities, and what better time to raise taxes then a housing boom?

US homebuilder profit plummets

D.R. Horton "Americas home-builder" saw a bit of a drop in their Q2 profits.. Quite a bit of a drop actually: an 85% drop in profit from last year. That works out to be 16 cents a share, short of analyst expectations of 27 cents a share.

"Market conditions in the homebuilding industry continue to be challenging in most of our markets as inventory levels of both new and existing homes remain high, and further increases in the use of sales incentives continue to put pressure on profit margins," said D.R. Horton Chairman Donald R. Horton.

CIBC: House prices will double in 20 years.

CIBC World Markets says that the average Canadian house price will double in the next 20 years:

Yes, the number of people aged 45 to 54 is expected to drop by 2.5 million by 2026 as the baby boomers age. But this age group accounts for only 12 per cent of the housing demand, it said.

Most home purchases take place when people are younger. CIBC says 68 per cent of all first-time home buying is done by people aged 25 to 44. That group is expected to decline only slightly in the coming two decades.

So only slightly less demand = double prices. They base their prediction on three factors:

-Interest rates are expected to stay low
For twenty years? Wow! That's some crystal ball!

-Immigration is expected to increase
Good thing since its so much lower in BC now than the 90's.

-New mortgage products will make home ownership more accessible.
What great news! You wouldn't happen to offer any of those would you CIBC? You know, like those great 60 year mortgages in Japan?

Update: Cailin points out the obvious spin on this story. If all these positive factors come into play and house prices 'double' in the next twenty years that works out to be about 3.75% a year compounded, or a bit less than a presidents choice savings account, but I guess that doesn't sound quite as impressive huh?

Mom? Can I borrow the car?

There's an article in the Ottawa Citizen about a recent study sponsored by the Bank of Montreal that found a large number of people between the ages of 30-34 living with their parents.

Adult children are returning to their parents' homes in unprecedented numbers, with rosy dreams of saving for their own first homes -- yet few are socking away enough cash for an adequate down payment, according to a recent survey.

"These kids have to get a reality check," says Cid Palacio, vice-president, BMO Bank of Montreal, which commissioned the poll of 1,205 people, conducted by Decima Research in six Canadian cities. Ottawa was not included.

"They have unrealistic ambitions and will be chasing this rainbow of homeownership without a tangible or practical plan on how to get there."

The article goes on to mention that in those 6 cities: Halifax, Montreal, Toronto, Winnipeg, Calgary and Vancouver the 'stay at homes' have an average income of $43k and have been saving about 12% of their pretax income for about 18 months. The average expectation is to have a 25% down payment in just under 4 years.

No way, says Ms. Palacio. "They should be saving twice as much money or realize it will take them eight years, not four."

Those not living at home are saving about 10% of their pretax income. The bank suggests that "with rising house prices" potential buyers should "consider that they won't be able to save 25 per cent of a house price for a down payment". There is no mention of the possibility that prices will stop rising or drop as they have in the past.

Insurance companies don't like green roofs

There's an article in the sun about insurance companies not wanting to insure buildings with rooftop gardens, also known as 'green roofs'.

The plans of dozens of developers poised to put green roofs on their condo buildings -- the Olympic village being the most prominent among them -- are now in limbo after the province's Homeowner Protection Office sent out a letter to all municipalities warning that local insurance companies are mostly unwilling to insure green roofs on multi-unit residential buildings that will be sold as condos.

So are there extra risks posed to building integrity from rooftop gardens? Probably not:

No one who works in the green-roof industry had heard of any other jurisdiction in North America or Europe where insurers were refusing to insure green roofs.

But in B.C., where problems with leaky building envelopes in condo buildings provoked a major crisis among consumers and the construction industry, anything involving water in proximity to residential building walls provokes nervousness.

What a shame to have the leaky condo crisis prevent us from creating rooftop greenspace. Hopefully this is something that developers and insurance companies can work out, particularly since it doesn't seem to be a problem in any other city.

Friday free-for-all

Here's your open topic for friday the 13th!

-Is Vancouver the 3rd best place in the world?
-or is Vancouver the 69th best place in Canada?
-Bank of Canada has problems predicting the future.
-US bubble commentary on Bloomberg

What are you seeing out there? Post your links, anectdotes and news here.

Have at it!

*hat tip to swirlyman and cailin for link suggestions

Buy/Rent Calculator in the New York Times

Here's an excellent Buy/Rent comparison calculator on the New York Times site. It lets you enter rent value / purchase value, interest rate, property taxes and then adjust sliders for house appreciation and rent increases.

What with recent complaints about 'affordability' in the lower mainland I was curious about how some local real estate would compare, so I entered some number for this house I found on craigslist since it listed a selling price and current leased rental income.

With rental income of $1170 and an asking price of $419,800 you get some interesting results by playing with sliders on that calculator. for instance: 25% down payment at 6.25% interest rate - if the house appreciates by 10% a year over 30 years you're better off buying after just one year, but if the house appreciates an average of 5% a year over 30 years you're better off renting.

There are a lot of variable there - if you have some numbers from the local market its worth plugging them in and checking out the results.

Note: Since this is a US site I assume they are taking into account the mortgage tax write off, which we don't have here in Canada.

UPDATE: dingus points out this Canadian buy/rent calculator.

US mortgage mess gets messier.

There's an in depth 4 page report on MSNBC about the US subprime mortgage / housing market problem - There are some astounding statements in that article: One in every 92 US households in foreclosure for 2006, Mortgage fraud reports doubling in the last two years, threats and bribes for appraisers to push up assesments.

This is looking like a bigger and bigger problem for the US, with some comparison being drawn to the savings and loan debacle of the late eighties.

“The (mortgage) industry was trying to create additional home ownership,” said Donohue. “And that’s very nice, and I think that’s a great thing to allow people home ownership. But at what cost? And to what end does that happen? I think what happened is that people — unscrupulous people — took advantage of that and what they did was go out and solicit prospective buyers.”

Real Estate Radio

Some enterprising fellows are now offering to put a short-range radio transmitter in your 'for sale' sign to broadcast a commercial to anyone on the block interested in your house or condo.. Its an interesting idea, but most people don't bother to put a price on their sign, so what (besides music and sound effects) are they going to put in their custom commercial? And would this marketing system have any advantages over the good ol' world wide web?

I'm still cringing from the last Rennie Condo ad I saw in a theatre, I wonder if these audio commercials feature soft jazz and lots of talk about 'lifestyle'.

Are realtor commisions set to drop?

There's an interesting article in The Star about discount brokers in the real estate business and the impact they may have on the cost of buying and selling.

While other industries, such as travel agents and stock brokerages, have gone the discount route, the real estate industry has largely held steadfast.

Realtors have been successful at holding their commissions at a standard 5 per cent in recent years, although that is already down from 6 per cent a decade or more ago.

But in a market where homes are selling in record numbers and at record prices, some consumers are wondering why commissions are still so high in the real estate business.

They also mention the Competition bureaus investigation of the Canadian Real Estate Association:

The Canadian Competition Bureau, meanwhile, is investigating the Canadian Real Estate Association to see if the CREA's guidelines discourage discount brokerage houses from using the Multiple Listing Service, which the association owns.

CREA officials say they are simply protecting their trademark.

I've noticed a lot of discount broker signs on condos recently, I wonder how much of an impact they are having here in Vancouver. As the article points out - in a hot market it may be easy to sell through a discount broker, but what happens when the market slows?

So what do you think- Are discount brokers the way of the future and would you feel comfortable using them to sell a property in a slower market?

Surrey Council restricts Industrial Land Rezoning

The Surrey Council has put a stop to the rezoning of industrial land - it looks like they're having a similar problem to Vancouver: Condo's just don't bring in the taxes like business do:

The city has only 1,300 acres of vacant developable industrial land, a figure which had been dwindling. Surrey put a stop to that Monday afternoon.

“An interim policy to protect the city’s current supply of industrial designated land is considered to be a first step in curtailing any further erosion in Surrey’s employable lands base,” the staff report says.

The latest housing boom hasn’t helped Surrey’s imbalance of taxation, Gill said.

“When you put residential everywhere, you’re not covering your costs of your infrastructure, in terms of your policing, your fire, your city costs,” said Gill, also the chair of the city’s finance committee.

Gill wants to see a plan beyond the industrial lockdown that would include enticements for industries “that would have a very high ratio of employment.”

Real estate games in the Globe and Mail

Digi pointed out this commentary on risks in the Vancouver 'real' estate market from this weekends Globe and Mail. Its an entertaining read as well as some food for thought:

Nature is logical, but people are not. They seem to think that the laws of physics won't apply if they spend enough money. Sometimes this works for a while, but you can hold back the tide or suspend the forces of gravity for only so long, before they boomerang and thwack you in the puss.

When imaginary value meets real water and real mud, all that pretend money washes away. You can build on the supposition that nothing bad will happen, even put your house on a sandbar in the middle of a river, thinking the river won't ever rise, but that's what rivers do, always have done. Why should they spare you and your big-screen TV?

Friday free-for-all

It's Friday! ..and what a Good Friday it is! This is the open topic thread for Friday April 6th. Here's what I've seen in the news recently:

-Young people: buy first, think later.
-Flood of used cars flow into Canada
-Economist Micheal Shedlock commments on Canadian Building Permit Plunge:

When things go bad blame the weather. I suggest this is the beginning of the end of the housing boom in Canada. Canada seems to be about 18 months or so behind the US and has a lot of catching up to do. It will be a painful process especially for recent buyers and trapped sellers, just as it played out in the US.

What are you seeing in the news? Post your links, anectdotes, comments and news stories here!

US housing market as a rollercoaster

Spark posted this link in an earlier thread. If you havent seen this yet its worth watching: the US housing market from 1890 to the present rendered as a rollercoaster ride. You really get a visceral feel from the peaks and dips.


This video was created by the fine folks at speculativebubble.com

.. so who wants to make one of these for the GVRD? I bet the 1980-82 section would be particularly exciting.

February building permits plunge

According to this article in the Globe and Mail, Canadian building permits took an unexpected plunge in February. The 22.4 percent drop was more than triple economist expectations.

“The magnitude of the decline is a function of the uncharacteristically robust level at which builders have been taking out permits,” said Stewart Hall, market strategist at HSBC Securities (Canada), in a note.

“Let's not get carried away in spinning this as Canada's own real-estate implosion.”

Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said that while the construction industry remains healthy, “the hefty retreat does support the view that housing activity will moderate in the year ahead.”

Condo Hype!

I just discovered condohype - It looks like the latest addition to the Vancouver/ condo/ real estate blogs with a focus on condo marketing. Very funny writing with a heavily sarcastic bent and a solid focus - their tagline is 'disown the lifestyle'.

Check it out, they're off to a great start!

..now where's my latte?

New Century files for Bankruptcy.

Well it looks like another sub-prime mortgage lender in the states is down for the count - New Century Financial filed for chapter 11 bankruptcy today and announced that they will fire 3200 employees. The thing that makes this a story to pay attention to is the fact that more than 2 dozen subprime lenders have shut down in recent months, New Century is just one of the latest. According to ml-implode.com 47 lenders have shut down since late 2006.

This could pose additional problems for the US housing market as foreclosed homes are added to the supply side while potential buyers with poor credit ratings are taken out of the demand side of the market.

Livin' la vida poco

There's an article in the National Post titled something grand about going small. Canadians are living in ever-larger houses, except in vancouver where they're living in ever-smaller condos. The example in the article is counselor Gordon Prices' west end apartment that is around 1100 square feet "which makes it about half the size of the average Canadian home."

Vancouverites are used to making do with less. Most have no choice; the city is sandwiched between water and mountains, and real estate here is astronomically priced, the highest in Canada. Traditional single-family homes -- even small bungalows -- cannot be had for less than $500,000, making them unattainable for even moderately high-income earners.

Figures released last week indicate that detached bungalows in Vancouver sell for an average of $758,000; in Toronto, they sell for an average of $387,744.

Other Canadians may wonder how people in Vancouver could possibly cope inside such small homes; Mr. Price's apartment is actually a generous size, by West End standards. And his neighbourhood has one of the highest population densities in North America, with about 20,000 people per square kilometre. That is more than four times the density of Montreal, one of Canada's oldest and most congested cities.

I'm glad they point out that 1100 square feet is actually a large west end apartment - interesting that they don't mention the sub-500 square foot ultra tiny condo's that are going in to many new towers downtown.