Is there a housing bubble right now in Victoria?

[gumgum]

Even if we see a drop of 10-15% in some regions - like some bodies are predicting - I generally I don't this as a bad thing at all. Sure there are some mostly short-term drawbacks to this. But overall, as with most corrections, it would be a good thing for the economy.
I am somewhat hopeful for a correction of this magnitude, because in a miniscule way, it would level the playing field. When the middle class can't afford a home, there is definately a problem that needs to be addressed.

[JohnN]

$110M to house homeless: report

Coalition sets goal of housing 1,500 in Greater Victoria by 2018

Bill Cleverley
Times Colonist
March 18, 2012

It will cost about $110 million in capital over the next seven years to build enough housing to end homelessness in the Greater Victoria area, says a report to be released this week by the Coalition to End Homelessness.

Operating those units will cost another $13.7 million a year, according to the coalition's procurement action plan.

Victoria Mayor Dean Fortin, co-chairman of the coalition, says the plan is doable. "As a community, which includes the senior levels of government, if we put $10 million to $15 million a year into housing, that's not a large amount of money when you think of the federal, provincial and local communities."

The coalition's action plan sets a goal of housing 1,500 people by 2018 - the same goal it hoped in 2009 to meet by 2014. The target incorporates about 500 units already brought on stream since 2008.

Key features of the procurement plan include:

- Creating 719 units of supported housing through new construction and renovating and repurposing existing buildings - estimated to cost $109.9 million. Almost 45 per cent (315 units) are forecast as being created through an approach that would see annual competitive calls by B.C. Housing to private developers to design and build the units.

Once completed, the units would be turned over to non-profit groups to operate. The balance of the new construction and acquisitions would be provided through faith-based groups and the non-market sector.

READ MORE:
http://www2.canada.com/victoriatimescolonist/news/story.html?id=6d36cb36-83c3-4f6d-89e5-a3fcc3d64d4a

[pherthyl]

Originally Posted by LJ

They did say "across the country".

Well the headline must be right. Nevermind we have actual local data that says the opposite. Must be wrong... Silly stats.

[pherthyl]

Originally Posted by LJ

Every voice that is happy is wrong, every voice that is doom and gloom is right, I guess.

I still don't see how decreasing housing prices are bad.

I would hazard a guess that most people on VV would probably benefit from decreasing housing prices, even some of the ones arguing against it in this thread.

If you are a first time buyer, decreasing housing prices are good because you can get in without taking on as much debt.
If you own, but are ever planning on buying a better place, you win from decreasing housing prices as well, because an X% decrease will affect the more expensive place more in terms of dollars. So your $500k place loses $50k, but that $800k place you want to buy loses $80k, so on average the move up buyer will be ahead.

The only people who don't win are the ones that are in their last house, and are planning on selling it to finance their retirement. If you're planning on living in it until you die it doesn't matter. It's really only the downsizers that get hit (and investors of course).

[skeptic]

Originally Posted by pherthyl

I still don't see how decreasing housing prices are bad.

I would hazard a guess that most people on VV would probably benefit from decreasing housing prices, even some of the ones arguing against it in this thread.

If you are a first time buyer, decreasing housing prices are good because you can get in without taking on as much debt.
If you own, but are ever planning on buying a better place, you win from decreasing housing prices as well, because an X% decrease will affect the more expensive place more in terms of dollars. So your $500k place loses $50k, but that $800k place you want to buy loses $80k, so on average the move up buyer will be ahead.

The only people who don't win are the ones that are in their last house, and are planning on selling it to finance their retirement. If you're planning on living in it until you die it doesn't matter. It's really only the downsizers that get hit (and investors of course).

This assumes the real estate market is homogeneous. But it is not, and what you've said here is mostly nonsense.

[pherthyl]

Originally Posted by skeptic

This assumes the real estate market is homogeneous. But it is not, and what you've said here is mostly nonsense.

The evidence from Case shiller index in Seattle is that the magnitude of decline amongst the price tiers (top third, middle third, lower third), is pretty close.

Edit: A closer looks at most cities in the US would indicate that volatility is greatest in the lowest tier, and least in the highest tier.
So it's possible that move up buyers might not be ahead after all, depending on what price points they're moving between. Here's the data: http://www.standardandpoors.com/indi...=1245214512860

Don't worry though Skeptic, even in Victoria your house doesn't qualify as entry level.

[skeptic]

I mean homogeneous by neighborhood. If my house drops 20% and I want to move to North Saanich the houses there haven't necessarily dropped by the same amount if at all.

[pherthyl]

Originally Posted by skeptic

I mean homogeneous by neighborhood. If my house drops 20% and I want to move to North Saanich the houses there haven't necessarily dropped by the same amount if at all.

Usually the outlying areas drop more than the core, so I think in that particular case you have a good chance of being better off. But yeah, every neighbourhood will have a somewhat different trajectory, no matter what direction the market goes.

[true blue oak]

More news that things are changing. Mortgage lenders about to get their fingers slapped and told to use common sense. Draft Guidelines.

[Mike K.]

What I find incredibly disappointing is while we use statistics served up by economists to buffer our own points of view and often refer to banks as harbingers of bad news / messengers of good news, it's those institutions, the investment banks and general banks, who stand to benefit from our fortune and misfortune.

I think it is shameful for the banks to be preaching bubble after years of preaching all systems go. Banks are in the real-estate business, they are the ones making the money -- realtors skim profit from transactions but it pales in comparison to what banks make off of mortgages. Unfortunately for us, the consumer, whether or not the bank is making money on interest from mortgages or selling off foreclosed properties, they're still making money. And if they're losing money, the government steps in to bail them out with our money.

In the end you and I are the ones who are paying the price regardless of which end of the fence we end up arguing on. To the banks and the lenders, it doesn't really matter.

[true blue oak]

Originally Posted by Mike K.

In the end you and I are the ones who are paying the price regardless of which end of the fence we end up arguing on. To the banks and the lenders, it doesn't really matter.

Totally agree in that the banks are really the winners in all of this. Think hard before you sign the papers, because you have to give them the right to put you in financial servitude for 25-30 years.

[pseudotsuga]

^or 35-40 till recently!!

[pherthyl]

Originally Posted by Mike K.

And if they're losing money, the government steps in to bail them out with our money.

In the end you and I are the ones who are paying the price regardless of which end of the fence we end up arguing on. To the banks and the lenders, it doesn't really matter.

Yup. The banks send out warnings about debt levels, while at the same time offloading as much of their mortgage portfolio as possible to the taxpayer. To the point where CMHC had to cut down on the bulk insurance from banks because they were hitting their ceiling.

Can't really blame them. And since I own their shares I'm happy they're covering their asses.

[MarkoJ]

• Video Link

[dasmo]

Ok, now when you look compare us to Van where a bulldozer shack on Cambie sells for 3 times the assessed value at 3 million dollars, kinda makes our bubble not seem so bubbly huh?

[Mike K.]

Apparently a condo proposal in Richmond also along the Canada Line recently sold out and had some 11,000 signed up for pre-sale info. That's insane.

[selector]

Well good for those home owners getting a cool 3 mil.
Be funny if the new owners had the land expropriated for fair market value.

[pherthyl]

Originally Posted by dasmo

Ok, now when you look compare us to Van where a bulldozer shack on Cambie sells for 3 times the assessed value at 3 million dollars, kinda makes our bubble not seem so bubbly huh?

Vancouver is bubbly no doubt, but it's also an international city with ten times our population, and a big target for immigration. Not exactly directly comparable.

[pherthyl]

Originally Posted by Mike K.

Apparently a condo proposal in Richmond also along the Canada Line recently sold out and had some 11,000 signed up for pre-sale info. That's insane.

I can see the appeal of that though. Living right by rapid transit is a big deal. If we ever get our light rail to Langford that place is going to get a lot more appealing.

[pherthyl]

New article in the Financial Post.

I think this is an important quote:

The CMHC, which recently confirmed it is cutting back on the mortgages it insures as it edges closer to the $600-billion cap imposed by the federal government, is “very vulnerable,” Gagnon cautioned.

“We call it an insurance company but it is much different than that because nothing in its portfolio is of high quality. It’s all ‘low-quality’ borrowers.”

But it is taxpayers who will be on the hook if the housing market collapses.

[skeptic]

Originally Posted by pherthyl

New article in the Financial Post.

I think this is an important quote:

Prof. Gagnon gets an F for not doing his homework.

• 72% of CMHC-insured mortgages are low-ratio (80% LTV or less)
• Only 9% of CMHC-insured borrowers have less than 10% equity
• Average equity in CMHC-insured homes is 45%
• Average amortization period at initiation for CMHC-insured mortgages: 24.6 years (It’s 24.1 years for properties with 5+ units)
• Average insured loan amount for 1-4 unit properties: $158,894
• About 45% of CMHC’s high-ratio and rental business is comprised of rural areas, smaller markets or multi-unit properties (like rental housing, nursing and retirement homes), which are partly or fully unserved by private insurers.
• Average credit score of insured borrowers: 723 (77% of insureds have a score over 700)

http://www.canadianmortgagetrends.co...lled-back.html

Based on these stats, CMHC doesn't look like the ticking time bomb the housing doomers are making it out to be and Prof. Gagnon looks like a complete idiot.

[true blue oak]

... housing doomers are making it out to be and Prof. Gagnon looks like a complete idiot.

Why are we housing doomers? I seek either:

1.) House prices to come down considerably or
2.) Wages to go up considerably, or
3.) A combination of 1 & 2

So that historical wage to purchase ratios are once again realized.

I am not a doomer at all - I am looking for quality of life for many, not financial servitude for decades.

I would say that the people that want house prices to stay at their inflated prices are the ones that have the negative view.

[skeptic]

Originally Posted by true blue oak

... housing doomers are making it out to be and Prof. Gagnon looks like a complete idiot.

Why are we housing doomers? I seek either:

1.) House prices to come down considerably or
2.) Wages to go up considerably, or
3.) A combination of 1 & 2

So that historical wage to purchase ratios are once again realized.

Good job trying to divert attention away from the point of my post. All you have done is demonstrate that you are fervently hoping for some kind of miraculous restructuring of the economy in your favour. Good luck with that.

[true blue oak]

Originally Posted by skeptic

Good job trying to divert attention away from the point of my post. All you have done is demonstrate that you are fervently hoping for some kind of miraculous restructuring of the economy in your favour. Good luck with that.

Not arguing your stats - I am sure they are accurate. Just arguing that to wish for a healthy housing market is not a "doomer".

[true blue oak]

Vancouver correction now predicted - Global report.