Another collection of housing market report by Vancouver
Home Mortgage:
Click on this link to read the full report by Royal Lepage
Real Estate Services.
Unlike the U.S. housing market, the housing sentiment in
Canada is strong and there are no signs of any slowing
down in the demand for housing and price gain across the
country.
Showing posts with label Vancouver new condos. Show all posts
Showing posts with label Vancouver new condos. Show all posts
Tuesday, October 2, 2007
ROYAL LEPAGE HOUSING REPORT
Saturday, September 1, 2007
US Housing Crisis that Greenspan Built
A blog posting by Vancouver Home Mortgage:
It was reported in The Financial Post on Sept 01,2007 in an article "Ultra-low Fed rates stoked housing boom: Taylor"
The bursting of the tech bubble and September 11/2001 terrorist attack on World Trade Center has resulted in Greenspan aggressively cutting interest rates and holding them too low for too long. The asset inflation had resulted in the US housing boom built with too much liquidity and un-regulated mortgage lending. With the collapse of the housing market, US home owners lost billions of dollars in their property asset values all over the US. And, the bottom is not in sight yet!
The recent injection of liquidity by the US and the likely reduction in interest rates will not solve the current problem on US housing deflation. The correction in house prices will take many years to unwind until consumer confidence returns to the market.
The housing problem in the US was explained superbly by the blog posting by Dr. Housing Bubble on the housing and real estate problem in Los Angeles.
The 2001-2006 US housing bubble, built on low interest rates and loose lending regulations is now too big a problem for the US government to solve. The bad mortgage papers created and the financial ramification will take many years to be sorted out. Meanwhile, the US housing recession will likely spill over and result in the contraction of the US economy.
The housing deflation will continue until house prices are once again supported by market fundamentals. The equilibrium is reached when the cost of renting (which currently costs around 50% of owning) is about the same as owning a home and making the monthly mortgage payment. This may take many years for it to happen.
Presently, with dropping house prices, many home owners are having mortgages equal or exceeding their house values. Although a financial crisis may be averted for home owners with option mortgages through the support of the US government, the cycle of declining house prices is already in motion. The US housing recession will affect the general economy as the loss of consumer confidence/dwindling wealth effect will depress consumer spending.
Canada's real estate and housing market will be affected when economic growth in the US is slowing down. There are already signs that the demand for housing is slowing down. The Edmonton market is now facing declining sales and house prices leveling off. Many homes were reported to be sold with large price reductions from the listed prices.
It was reported in The Financial Post on Sept 01,2007 in an article "Ultra-low Fed rates stoked housing boom: Taylor"
The bursting of the tech bubble and September 11/2001 terrorist attack on World Trade Center has resulted in Greenspan aggressively cutting interest rates and holding them too low for too long. The asset inflation had resulted in the US housing boom built with too much liquidity and un-regulated mortgage lending. With the collapse of the housing market, US home owners lost billions of dollars in their property asset values all over the US. And, the bottom is not in sight yet!
The recent injection of liquidity by the US and the likely reduction in interest rates will not solve the current problem on US housing deflation. The correction in house prices will take many years to unwind until consumer confidence returns to the market.
The housing problem in the US was explained superbly by the blog posting by Dr. Housing Bubble on the housing and real estate problem in Los Angeles.
The 2001-2006 US housing bubble, built on low interest rates and loose lending regulations is now too big a problem for the US government to solve. The bad mortgage papers created and the financial ramification will take many years to be sorted out. Meanwhile, the US housing recession will likely spill over and result in the contraction of the US economy.
The housing deflation will continue until house prices are once again supported by market fundamentals. The equilibrium is reached when the cost of renting (which currently costs around 50% of owning) is about the same as owning a home and making the monthly mortgage payment. This may take many years for it to happen.
Presently, with dropping house prices, many home owners are having mortgages equal or exceeding their house values. Although a financial crisis may be averted for home owners with option mortgages through the support of the US government, the cycle of declining house prices is already in motion. The US housing recession will affect the general economy as the loss of consumer confidence/dwindling wealth effect will depress consumer spending.
Canada's real estate and housing market will be affected when economic growth in the US is slowing down. There are already signs that the demand for housing is slowing down. The Edmonton market is now facing declining sales and house prices leveling off. Many homes were reported to be sold with large price reductions from the listed prices.
Thursday, August 2, 2007
Who will be hurt?
In today's Financial Post, Reuters Published: Thursday, August 02, 2007 reported "Canadian, U.S. banks face limited subprime shocks"
NEW YORK -- U.S. and Canadian banks face limited exposure to subprime mortgage losses and future rating downgrades, bond rating company DBRS said on Thursday.
Healthy earnings should insulate financial institutions, DBRS analysts said on a conference call.
"We do not expect wholesale downgrades of banks with exposure to subprime."
Brenda Lum, who covers Canadian banks for DBRS, reiterated remarks made in a report on Wednesday that said Canada's five largest banks also face limited losses from their exposure to U.S. subprime loans.
"There are no credit rating implications for the five largest Canadian banks," Lum said.
But, home owners who bought their homes recently will not be so lucky. The reason being these home owners paid a lot more for their homes than those that bought their homes a few years earlier. Many home owners in the U.S are already facing serious problems with deteriorating house values and higher mortgage payments.
In Canada, we will not be immuned to the price correction when the housing market turn south. It's not unreasonable to expect prices to correct 15% to 20% considering house prices have gone up almost 100% over the past 6 years.
In the hot housing markets in Vancouver, Victoria, Calgary and Edmonton. there are not much up-side potential in house prices continuing to increase without a correction. The down-side risk could be devastating for many home buyers who only bought their homes in the recent months.
It's already in the news that there are likely to be another interest rate hike in September, possibly follow by another one before the end of 2007.
You are welcome to post your comments here.
NEW YORK -- U.S. and Canadian banks face limited exposure to subprime mortgage losses and future rating downgrades, bond rating company DBRS said on Thursday.
Healthy earnings should insulate financial institutions, DBRS analysts said on a conference call.
"We do not expect wholesale downgrades of banks with exposure to subprime."
Brenda Lum, who covers Canadian banks for DBRS, reiterated remarks made in a report on Wednesday that said Canada's five largest banks also face limited losses from their exposure to U.S. subprime loans.
"There are no credit rating implications for the five largest Canadian banks," Lum said.
But, home owners who bought their homes recently will not be so lucky. The reason being these home owners paid a lot more for their homes than those that bought their homes a few years earlier. Many home owners in the U.S are already facing serious problems with deteriorating house values and higher mortgage payments.
In Canada, we will not be immuned to the price correction when the housing market turn south. It's not unreasonable to expect prices to correct 15% to 20% considering house prices have gone up almost 100% over the past 6 years.
In the hot housing markets in Vancouver, Victoria, Calgary and Edmonton. there are not much up-side potential in house prices continuing to increase without a correction. The down-side risk could be devastating for many home buyers who only bought their homes in the recent months.
It's already in the news that there are likely to be another interest rate hike in September, possibly follow by another one before the end of 2007.
You are welcome to post your comments here.
Tuesday, July 31, 2007
Vancouver Real Estate Bubble?
A blog posting by Vancouver Home Mortgage:
In today's Financial Post article
"Longer mortgages ease pain", Garry Marr quoted a report by Derek Holt, assistant chief economist with RBC. There are some issues mentioned on the report that are worth commenting:
"The recent trend to extend mortgage repayment plans to 40 years from 25 years has made consumers less sensitive to interest rate hikes"
"The housing cycle is being extended by new government policy - a reference to the Canadian Government's mortgage insurance rule by reducing the 25% down payment requirement to 20% this year"
The report attributed the changes in "driving up housing prices because consumers can deal with what Mr. Holt calls "down payment shock" by increasing the amortization period.
The above changes are exasperating the housing affordability situation (especially in Western Canadian cities) from bad to worse. While the above lending policy changes help in making home ownership easier, they are fueling demand and higher price gains on all housing units. But, I suspect these are not the main reasons why people are buying.
The real estate frenzy especially for Western Canadian cities like Vancouver, Victoria, Calgary and Edmonton is all consuming. Canadian home owners are happy with the huge price gains in their house values over the past 5 years. Many more people are encouraged to jump in for fear of loosing out as housing reports from real estate experts and economists are predicting another 7% to 8% price gain for the next 2 years?
Another point cited in the RBC report that "the changes in the borrowing practices in Canada have made the Canadian housing market less likely to implode as it has in the United States" is missing the point. It's the lending practices and not the borrowing practices in Canada that save us from facing a similar housing melt-down like the U.S.
The US housing markets are different from Canada in 2 major lending areas:
Firstly, the US sub-prime and "exotic" Variable Option mortgages as reported are as high as 25% of US mortgage origination. In Canada, the sub-prime lending hardly exceed 5% of all mortgages for the past 3 years.
Secondly, mortgage interest payment in the U.S is deductable as an expense, and this encourages more speculative buying and house price escalation in the U.S.
The housing implosion in the U.S. is due to many such option mortgages facing interest rate resets resulting in many home owners not able to afford the new mortgage payments. The housing price collapse in the U.S. is accelerated by tightened lending standards, and difficulties in home refinancing due to house prices worth less than the mortgages owing.
The Canadian housing cycle will take its course and unwind itself to a level when rental return and housing affordability are in balance. There is a disconnect between the average Canadian household income and average housing cost. As it is now, there is a "madness of crowd" mentality that if one is not jumping in to buy a home, or 2 or 3 (for speculation), they will miss the boat.
We, in Canada are faced with the following problems:
1) over-valued house prices - similar to the U.S.
2) major problem with housing affordability - maybe worse than the U.S.
3) over-supply of housing inventory (not apparent now)
4) bullish crowd mentality on real estate - people think we are different from U.S.
5) an economy exporting 80% to the U.S. - danger of economy contraction
6) Canadian loonie approaching parity with US$ - not through productivity gain
What are your thoughts?
In today's Financial Post article
"Longer mortgages ease pain", Garry Marr quoted a report by Derek Holt, assistant chief economist with RBC. There are some issues mentioned on the report that are worth commenting:
"The recent trend to extend mortgage repayment plans to 40 years from 25 years has made consumers less sensitive to interest rate hikes"
"The housing cycle is being extended by new government policy - a reference to the Canadian Government's mortgage insurance rule by reducing the 25% down payment requirement to 20% this year"
The report attributed the changes in "driving up housing prices because consumers can deal with what Mr. Holt calls "down payment shock" by increasing the amortization period.
The above changes are exasperating the housing affordability situation (especially in Western Canadian cities) from bad to worse. While the above lending policy changes help in making home ownership easier, they are fueling demand and higher price gains on all housing units. But, I suspect these are not the main reasons why people are buying.
The real estate frenzy especially for Western Canadian cities like Vancouver, Victoria, Calgary and Edmonton is all consuming. Canadian home owners are happy with the huge price gains in their house values over the past 5 years. Many more people are encouraged to jump in for fear of loosing out as housing reports from real estate experts and economists are predicting another 7% to 8% price gain for the next 2 years?
Another point cited in the RBC report that "the changes in the borrowing practices in Canada have made the Canadian housing market less likely to implode as it has in the United States" is missing the point. It's the lending practices and not the borrowing practices in Canada that save us from facing a similar housing melt-down like the U.S.
The US housing markets are different from Canada in 2 major lending areas:
Firstly, the US sub-prime and "exotic" Variable Option mortgages as reported are as high as 25% of US mortgage origination. In Canada, the sub-prime lending hardly exceed 5% of all mortgages for the past 3 years.
Secondly, mortgage interest payment in the U.S is deductable as an expense, and this encourages more speculative buying and house price escalation in the U.S.
The housing implosion in the U.S. is due to many such option mortgages facing interest rate resets resulting in many home owners not able to afford the new mortgage payments. The housing price collapse in the U.S. is accelerated by tightened lending standards, and difficulties in home refinancing due to house prices worth less than the mortgages owing.
The Canadian housing cycle will take its course and unwind itself to a level when rental return and housing affordability are in balance. There is a disconnect between the average Canadian household income and average housing cost. As it is now, there is a "madness of crowd" mentality that if one is not jumping in to buy a home, or 2 or 3 (for speculation), they will miss the boat.
We, in Canada are faced with the following problems:
1) over-valued house prices - similar to the U.S.
2) major problem with housing affordability - maybe worse than the U.S.
3) over-supply of housing inventory (not apparent now)
4) bullish crowd mentality on real estate - people think we are different from U.S.
5) an economy exporting 80% to the U.S. - danger of economy contraction
6) Canadian loonie approaching parity with US$ - not through productivity gain
What are your thoughts?
Wednesday, July 25, 2007
Vancouver housing bubble: Will it burst or just deflate?
A blog posting by Vancouver Home Mortgage :
With the Bank of Canada raising interest rates and Canadian Banks offering more attractive saving rates to consumers, investors will be tempted to move their real estate investments to safer savings account and GIC investments.
The Bank of Nova Scotia is advertising a 4.85%* on a 24-month GIC. The offer is only available until August 04. There are minimum deposit of $1,000 required and the GIC is non-redeemable.
ICICI Bank offers a more flexible deal, offering 4.5% on C$ deposits and 5.0% on US$ deposits on the bank’s HiSAVE Savings Account. There is no minimum deposit required and interest is calculated the daily balance and paid monthly!
The Canadian housing market is faced with:
* Rising Interest Rates
* Severe affordability problem
* Rising dollar impacting the manufacturing and resource sectors
* Softening in oil and gas prices
* Increasing new and resale home inventory
* Distinct possibility of US recession
These are negative forces that could topple the unrealistic real estate markets in Greater Vancouver, Fraser Valley of BC, Calgary and Edmonton.
What are your thoughts?
With the Bank of Canada raising interest rates and Canadian Banks offering more attractive saving rates to consumers, investors will be tempted to move their real estate investments to safer savings account and GIC investments.
The Bank of Nova Scotia is advertising a 4.85%* on a 24-month GIC. The offer is only available until August 04. There are minimum deposit of $1,000 required and the GIC is non-redeemable.
ICICI Bank offers a more flexible deal, offering 4.5% on C$ deposits and 5.0% on US$ deposits on the bank’s HiSAVE Savings Account. There is no minimum deposit required and interest is calculated the daily balance and paid monthly!
The Canadian housing market is faced with:
* Rising Interest Rates
* Severe affordability problem
* Rising dollar impacting the manufacturing and resource sectors
* Softening in oil and gas prices
* Increasing new and resale home inventory
* Distinct possibility of US recession
These are negative forces that could topple the unrealistic real estate markets in Greater Vancouver, Fraser Valley of BC, Calgary and Edmonton.
What are your thoughts?
Sunday, July 22, 2007
Is there a housing bubble in Vancouver?
A blog posting by Vancouver Home Mortgage:
The U.S. housing market has been on a downward slide for the past 1.5 years. More troubles on sub-prime mortgage problems and foreclosures are being reported every month. Each month, there are more bad news that home builders are slashing prices to unload their inventories. The housing problem in the U.S. as reported by many economists is nowhere near to hitting the bottom yet!
On the contrary, Canada real estate across all the provinces are reported to continue their upward march to new record house prices. House prices are now double what they were 5 years ago!
Are we in Canada so different from the U.S.? Or, is it a matter of time that we will face the same problem with downward spiral in home prices.
If you are looking at buying a condo, townhouse of a detached home, are you buying at the top or near the top of the market?
What's so different in Vancouver that you have to pay twice as much as a similar condo in Toronto? Why home buyers in Vancouver are still chasing the housing market?
What are your thoughts? You are welcome to post your comments here.
The U.S. housing market has been on a downward slide for the past 1.5 years. More troubles on sub-prime mortgage problems and foreclosures are being reported every month. Each month, there are more bad news that home builders are slashing prices to unload their inventories. The housing problem in the U.S. as reported by many economists is nowhere near to hitting the bottom yet!
On the contrary, Canada real estate across all the provinces are reported to continue their upward march to new record house prices. House prices are now double what they were 5 years ago!
Are we in Canada so different from the U.S.? Or, is it a matter of time that we will face the same problem with downward spiral in home prices.
If you are looking at buying a condo, townhouse of a detached home, are you buying at the top or near the top of the market?
What's so different in Vancouver that you have to pay twice as much as a similar condo in Toronto? Why home buyers in Vancouver are still chasing the housing market?
What are your thoughts? You are welcome to post your comments here.
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