Adios to a rainy, chilly May.
Larry has the numbers first as usual. All three categories showed a very small average price increase. The average prices are basically flat or down from May 11. Average detached AND apartment prices are down 4% over that two year period.
I have no doubt that if the real estate board's HPI continues to show the real numbers, they will show a drop for MAY.
Final MOI for May :
Detached: 6.4
Attached: 5
Apartment : 6
Clearly there was a little more strength in May than the preceding few months. The question is whether this will continue or if that is the end of the peak buying season.
Saturday, June 1, 2013
Thursday, May 30, 2013
The pig is being neutered....
IMVHO, we have had 4 major factors feeding into our RE bubble:
1) The lowest interest rates since WW2 leading to a speculative bonanza
2) The actions of the CMHC. The irresponsible doubling of the CMHC lending capacity and allowing lower DP, longer amortizations and allowing insurance coverage for investments, helicopter buyers, and second homes. The mandate of helping Canadians AFFORD a home was expanded to help everyone get a mortgage, regardless of the future ability to pay.
3) Aggressive lending by banks. Not too far off from the actions of their US brethren. Cheap money and tax-payer insurance are the troughs. How can you expect to take a piggy to the trough and expect them not to have a feeding frenzy?? By asking them nicely Like Carney and Flaherty and hoping they will forgo the huge pay running into 8 figures a year, every year, and be responsible?
4) Off-shore buying in certain markets, like Vancouver and Toronto, mainly from Mainland China. But not in other markets like Victoria and the OK which have already dropped a good chunk.
What has changed.
We have had a blip up in interest rates, but I don't read much into this yet. One day rates will explode up, I don't think we are there yet. We will probably meander around the 2.8-3.3% best five year rate for some time.
Off-shore buying waxes and wanes and despite occasional noise about taxing empty homes, or a surtax for non-resident owners, it is not going to happen.
The banks have stuffed just about as much debt down the throats of Canadians as they possible could with their gimmicky low interest mortgages, their ads of people pulling money out of their homes to buy toys or go on exotic holidays, or not-so-subliminal messages of 'How rich they are!'
Left to their own devices they will keep lending until no one can sustain their debt with their anemic income growth, just like they did in the US. But just as all good things come to an end, so do bad, and the growth of consumer debt is slowing of it's own weight.
However we have one big piece on our side to try and re-estbalish sanity. The ultimate pig, which has put nearly $600 Billion of liabilities on the back of tax-payers is finally being reined in.
Not only have the senior management been shaken up, with departures announced every few weeks. Now the CEO says she is leaving:
OTTAWA, Ont. (CP) — Canada Mortgage and Housing Corp. president and CEO Karen Kinsley is stepping down after a quarter century with the provider of mortgage loan insurance.
Canada Mortgage and Housing Corp. (CMHC) is continuing to shrink its business, as the government seeks to reduce its exposure to the housing market.
1) The lowest interest rates since WW2 leading to a speculative bonanza
2) The actions of the CMHC. The irresponsible doubling of the CMHC lending capacity and allowing lower DP, longer amortizations and allowing insurance coverage for investments, helicopter buyers, and second homes. The mandate of helping Canadians AFFORD a home was expanded to help everyone get a mortgage, regardless of the future ability to pay.
3) Aggressive lending by banks. Not too far off from the actions of their US brethren. Cheap money and tax-payer insurance are the troughs. How can you expect to take a piggy to the trough and expect them not to have a feeding frenzy?? By asking them nicely Like Carney and Flaherty and hoping they will forgo the huge pay running into 8 figures a year, every year, and be responsible?
4) Off-shore buying in certain markets, like Vancouver and Toronto, mainly from Mainland China. But not in other markets like Victoria and the OK which have already dropped a good chunk.
What has changed.
We have had a blip up in interest rates, but I don't read much into this yet. One day rates will explode up, I don't think we are there yet. We will probably meander around the 2.8-3.3% best five year rate for some time.
Off-shore buying waxes and wanes and despite occasional noise about taxing empty homes, or a surtax for non-resident owners, it is not going to happen.
The banks have stuffed just about as much debt down the throats of Canadians as they possible could with their gimmicky low interest mortgages, their ads of people pulling money out of their homes to buy toys or go on exotic holidays, or not-so-subliminal messages of 'How rich they are!'
Left to their own devices they will keep lending until no one can sustain their debt with their anemic income growth, just like they did in the US. But just as all good things come to an end, so do bad, and the growth of consumer debt is slowing of it's own weight.
However we have one big piece on our side to try and re-estbalish sanity. The ultimate pig, which has put nearly $600 Billion of liabilities on the back of tax-payers is finally being reined in.
Not only have the senior management been shaken up, with departures announced every few weeks. Now the CEO says she is leaving:
Kinsley announced the move in what she described as her 10th and final message for CMHC’s annual report and at a time that Ottawa has been moving to reduce taxpayer exposure to housing market debt.
“CMHC has been my home away from home for 25 years and I cannot adequately express how proud I am of our achievements,” Kinsley wrote.
........
Well Ms Kinsley, I hope you are right, but it is a little early to write your own 'proud' legacy, when we are all time highs in RE and all times highs in tax-payer insured $$. Lets review this in a year or two and see how great the achievements are. I am willing to write a mea culpa if in two years the CMHC is NOT looking at significant losses and agree with you.
Finally it looks like this pig is finally being yanked away from the trough (but can anyone please tell me why they insure multi-residential and retirement homes? These are investments, why not let the private sector insure them?)
CMHC contracts business on cues from Ottawa
Canada Mortgage and Housing Corp. (CMHC) is continuing to shrink its business, as the government seeks to reduce its exposure to the housing market.
The amount of insurance that the Crown corporation had in force ticked down by $3.5 billion, to $562.6 billion, during the first three months of the year. The figure falls as consumers pay down insured mortgages and rises when CMHC sells new insurance.
CMHC wrote only $8.2 billion worth of insurance during the first quarter, compared to nearly $19 billion in the same period a year ago. The number of units of housing that it insured fell 54 percent, from 114,045 in the first quarter of 2012 to 52,078 in this latest quarter.
The decline comes as the government has forced the Crown corporation to dramatically reduce the amount of bulk, or portfolio, insurance it was selling to banks. Banks can buy bulk insurance to cover large swaths, or portfolios, of mortgages with low loan-to-value ratios (high downpayments) that weren't previously insured.
Mortgage insurance is mandatory when a consumer has a down payment of less than 20 percent, and sales of that core product have also fallen since Finance Minister Jim Flaherty tightened the mortgage insurance rules last July. The changes that he made, which included cutting the maximum length of an insured mortgage to 25 years from 30, were designed to take some steam out of what he feared might have been an overheating housing market. His changes also effectively eliminated the ability of consumers to refinance high loan-to-value mortgages.
CMHC said that insurance volumes to cover new mortgages fell by about 23 percent, while refinance volumes were down by 69 percent. Bulk or portfolio volumes sunk by about 98 percent.
Meanwhile, the volume of insurance that CMHC sells to cover multi-unit residential buildings (including nursing homes, retirement homes and apartments) rose 5 percent.
CMHC wrote only $8.2 billion worth of insurance during the first quarter, compared to nearly $19 billion in the same period a year ago. The number of units of housing that it insured fell 54 percent, from 114,045 in the first quarter of 2012 to 52,078 in this latest quarter.
The decline comes as the government has forced the Crown corporation to dramatically reduce the amount of bulk, or portfolio, insurance it was selling to banks. Banks can buy bulk insurance to cover large swaths, or portfolios, of mortgages with low loan-to-value ratios (high downpayments) that weren't previously insured.
Mortgage insurance is mandatory when a consumer has a down payment of less than 20 percent, and sales of that core product have also fallen since Finance Minister Jim Flaherty tightened the mortgage insurance rules last July. The changes that he made, which included cutting the maximum length of an insured mortgage to 25 years from 30, were designed to take some steam out of what he feared might have been an overheating housing market. His changes also effectively eliminated the ability of consumers to refinance high loan-to-value mortgages.
CMHC said that insurance volumes to cover new mortgages fell by about 23 percent, while refinance volumes were down by 69 percent. Bulk or portfolio volumes sunk by about 98 percent.
Meanwhile, the volume of insurance that CMHC sells to cover multi-unit residential buildings (including nursing homes, retirement homes and apartments) rose 5 percent.
Wednesday, May 29, 2013
Adios Mark Carney...
The last Bank of Canada rate decision of the Carney regime comes out this morning.
Expect no change at all.
The punishment of savers and encouragement of wanton borrowing, aided and abetted by the banks (You are Richer than You think!) has led to this (thanks Ben Rabidoux)
This graph is up to 2011. The divergence has just got larger since then. It sure looks like a large edifice of debt sitting on small and wobbly legs of income.
The problem is that when it starts contracting, it is self-perpetuating. The domestic 'boom' has been built on debt and when the debt hits it's inevitable ceiling and consumers pull back, there will be weakness and job losses and more debt reduction and so on...
This is the legacy of Mr Carney. Not that I am out to demean the guy, he did what he thought was right at the time. 'reduce rates and jaw-bone consumers'.
Unfortunately it didn't work, we are at the edge of the precipice IMO.
I wish him well in the UK , though I am not sure how our situation resolves gently without a huge up-lift in exports.
Expect no change at all.
The punishment of savers and encouragement of wanton borrowing, aided and abetted by the banks (You are Richer than You think!) has led to this (thanks Ben Rabidoux)
This graph is up to 2011. The divergence has just got larger since then. It sure looks like a large edifice of debt sitting on small and wobbly legs of income.
The problem is that when it starts contracting, it is self-perpetuating. The domestic 'boom' has been built on debt and when the debt hits it's inevitable ceiling and consumers pull back, there will be weakness and job losses and more debt reduction and so on...
This is the legacy of Mr Carney. Not that I am out to demean the guy, he did what he thought was right at the time. 'reduce rates and jaw-bone consumers'.
Unfortunately it didn't work, we are at the edge of the precipice IMO.
I wish him well in the UK , though I am not sure how our situation resolves gently without a huge up-lift in exports.
Tuesday, May 28, 2013
Extra work
Not entirely TRUE in all aspects but nevertheless a great quote
The Amount of Money
in your bank
at the time you Died
. . .
is the EXTRA work you did
that wasn't Necessary
Saturday, May 25, 2013
Investing on Foreign Land Conversion
Have you ever been approached by investment opportunity on a piece of land oversea ? It usually goes like this ...
Land is limited, population is growing. So investing on land is a low risk high return opportunity; Especially on an island . . . but why oversea and how its a better investment ?
Land is limited, population is growing. So investing on land is a low risk high return opportunity; Especially on an island . . . but why oversea and how its a better investment ?
- more structure and well organized land & property legislation
With better laws in foreign country, one can be more assured in his land investment is being protected in terms of benefits and interest safe guards compare to your own country which may otherwise affected by cronism or corruption.
- steady and growing population - usually a developed nation
Here the demand is being taken care of. If the people in your country is leaving the country, then there may not be any more demand to your land in future.
- tax free or exemption
Normally a country would love some money coming in from oversea, hence they may offer attractive tax incentive. So investing on land oversea could actually become cheaper than investing land in your own country.
- Land Conversion
To make the return more attractive, land investment is usually tight to conversion. For example, the land was initially for farming purpose. But as population grows, the land is to be converted to residential area. Once converted, the value of the land usually increase drastically. However conversion like this requires expertise planning and professional services.
So should you invest into an opportunity like this ?
Says there is an offer on a piece of land near London where this farmland will be converted into a residential area in the next 5 years. The offer is GBP 13 to GBP 16 per square feet. Assume the buying process is simple and legal where you only need to deal with a local public company approved by your local government. Buying process is as simple as using your credit card and checks writing. Total investment could be as small as 1,000 sq ft.
Will you buy into this offer ? What are that factors that will affect your decisions ?
Thursday, May 23, 2013
Bears in disarray??
One very useful site has gone off the air, another is hardly posting. Both are big losses to the bear community. Reading the posts on the various RE sites left open I see the same thing...'why isn't the crash happening already??'
Even while the crescendo of news and opinions all around the world is getting louder about our RE bubble and the consequences of it's bursting, one good list/day and we feel deflated. Deja Vu all over again. Once again a small drop in the market will be met with buyers and we will be off to another steroid (cheap money) induced high.
However this is how tops are made. If this is really the top, and we will only know in hindsight, they come not with a bang and a fanfare but they slip in almost unnoticed while everyone is waiting for the bell to ring or another leap up-wards. They come in disbelief.
We have a long way to go to get back to sanity.
Lets look at two listings today for an example of where we are. Both of these are court-ordered sales, something I would not wish on anyone. I chose them because I suspect the Realtor must have priced them down aggressively to try and sell them to get the owner off the hook.
Here is one in Burnaby priced at $828K - MLS V989801
Here is another in Richmond priced at $799K V958124
You can decide yourselves what a pre-foreclosure property like these should be priced for. In Vancouver these are regarded as reasonable prices.
This is one of hundreds of foreclosures I found in Las Vegas which sells for less than half the above two.
Friday, May 17, 2013
Throwing your money over-board
It is sad to see how the government is wasting your money.
The party that claimed in the latest election to be the more fiscally conservative one. the one that hopes to balance the budget is the one doing crazy things like this:
1) Paying $2 Million to a Traditional Chinese Medicine doc who apparently saw 400 patients a day! That's one every couple of minutes for 12 hours! (hat tip Vancouver Condo info)
and
2) Paying $6 Million to defend two of it's own fraudsters and then the Chief Justice says the auditor general CANNOT audit the Lawyers bills to see if we have been screwed.
If you feel like you are being managed by a bunch of self-serving incompetent fools in Victoria, you are right.
And people wonder why less than 50% bother to vote. When the choice is a between an idiot and a ditherer - why bother!
Of course the Conservatives claim to be fiscally conservative in Ottawa too. Except their senators keep putting their hands deep into the public purse (though not as much the above fellow) and they have no problem doubling the CMHC liability - adding $300 BILLION to the anchor around our necks..oh and increasing the debt and deficit at the same time.
The party that claimed in the latest election to be the more fiscally conservative one. the one that hopes to balance the budget is the one doing crazy things like this:
1) Paying $2 Million to a Traditional Chinese Medicine doc who apparently saw 400 patients a day! That's one every couple of minutes for 12 hours! (hat tip Vancouver Condo info)
and
2) Paying $6 Million to defend two of it's own fraudsters and then the Chief Justice says the auditor general CANNOT audit the Lawyers bills to see if we have been screwed.
If you feel like you are being managed by a bunch of self-serving incompetent fools in Victoria, you are right.
And people wonder why less than 50% bother to vote. When the choice is a between an idiot and a ditherer - why bother!
Of course the Conservatives claim to be fiscally conservative in Ottawa too. Except their senators keep putting their hands deep into the public purse (though not as much the above fellow) and they have no problem doubling the CMHC liability - adding $300 BILLION to the anchor around our necks..oh and increasing the debt and deficit at the same time.
Subscribe to:
Posts (Atom)