With record listings, year over year sales down and prices in some localized markets flat or slightly down, there still seems to be plenty of people who still think real estate prices only go in one direction - up.
CMHC is still bullish on the Vancouver market calling for an overall 8% increase in 2008 and another 5% for 2009. CMHC is hanging its hat on job and population growth despite their speculation that the decline we are seeing is in part, a result of events in the US real estate market causing fear and investors wanting to ring the register and take their profits. They also noted that resales, a measure of investors flipping houses, is also down.
Final thoughts: First, to all those flippers who have taken your profits and are sitting on the sidelines planning your next investment, well done.
To those who are still in the game looking for another 10%, remember this saying: the bulls make money, the bears make money but pigs just get slaughtered.
The predicted 8% an 5% increase for 2008 and 2009 respectively is a possibility however it may also be very optimistic.
Lets not forget following:
Vancouver is the most expensive city in Canada taking 67% of your income to buy the average house.
Mortgage rates haven't fully followed the current rate cuts by the Bank of Canada.
Sub-prime mortgages they say is a small portion of mortgages in Canada but what about zero down and 40 year amortizations. I am certain with the affordability factor the way it has been over the last couple of years there are a behemoth of first-time homeowners with these mortgages. Not to mention, until this credit crisis hit, the lending intuitions in Canada were also like the US and giving away cash.
How about the "real" inflation we are getting hit with, you know the inflation that includes the basic necessities like fuel, food and housing costs.
Finally, I believe this this massive run up in real estate value and record sales in Vancouver is the result of the ability for just about anyone with a heart beat to get a mortgaged over the last 5 +/- years. In other words, the buyers of tomorrow are already strapped with a massive mortgage.
So we are different than the US and we don't have the sub-prime problem but that doesn't mean we won't have a meltdown - Canadian style.
Thursday, May 8, 2008
Vancouver prices continue to rise
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3 comments:
I really agree that zero down and 40 years amortization could be a problem soon. The point is that we cannot see it now. Sub-primes derivates were also rated with high marks by Moody’s, Standards or Fitch.(and they you usually know what they are speaking about) I am dealing with real estate in Toronto. Many of my customers think that zero downs or 40 years amortization is safe but I think it is just a great marketing of brokers and banks and the real risk is hidden.
perhaps the vancouver real estate market is a direct reflection of the world as a whole at present...turmoil. certainly nothing goes up forever, i have been a vancouver realtor since 1981 and ridden more than one rollercoaster, so i view the present market as a normal and healthy one...albeit expensive. personally, i think it would be good to see it level off for a year or two but none of the economists are predicting that. apparently we have lots of jobs and large net migration into the province and 2010 on the horizon. david baxter of urban land predicted in 2000 that BC's population would increase by another one million people before 2025 and that the infrastructure can handle it. people go where the jobs are...the canadian economy is tilting west...and some people with jobs buy houses
magggie: If you have a link to the ULI article could you please post the link so readers can review it? You are right on your points but my question is what do you think the job market will look like after 2010? I see most of the construction and construction related jobs decreasing. I think that if employment stays relatively low for the long term there will still need to be a substantial increase in the average income to catch up with real estate prices at these levels.
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