Friday, March 23, 2012

Frankly disgusted...

The circus between the banks and Flaherty which I have been reading about is totally nauseating.

Here we have CEOs paid many millions a year saying...regulate us!

Like a obese glutton unable to control his appetite. Some on th blogosphere even have an excuse for the banks. They have to be easy or lose business. That is the same bs that chuck prince at Citi said before the US collapse. 'while the music plays we have to keep dancing'

BS !! - the result was huge tax-payer bail-outs. Not all banks did this. Not New York Bank of Mellon. This is the junkie's excuse. Would we excuse a barman from giving more and more drinks to a drunk until he died!

Of course not. Why can't the stupid banks self-regulate???

Then there is Flaherty who wants to shun responsibility too. It's not my market- he says!

Duh.... It is bozo. What about the CMHC.?

No CMHC, no bubble.

Nobody wants to take responsibility for what is going to happen, not the over-paid debt pushers, nor the windbag politician.

E are in a bind.

Sunday, March 18, 2012

Checking in from my holiday

I see increasing calls for Christy Clark to ´do something´about our housing bubble.

Cristy is in a tough spot....If she tries to put the breaks on Re she will dealing with a huge bubble and help middle class families who are priced right out.

However she will also upset current owners, the housing lobby (developers and Realtors) and also take away a major economic driver ( short-lived and speculative yes, but that never stopped a politician)

In fact there is very little she can do. She has no control over the CMHC or the Bank of Canada rate or lax bank lending and if she speaks against Chinese off-shore ownership she risks alienating China and risking their investment in other areas, and I can assure you- that would lead to a major recession in BC. Tough bind.

The TD bank is the latest bank begging to be regulated more.

This is turning out to be a weak spring for sales. Sales haven´t blossomed and are on track to be amongst the lowest in the last decade.

HOWEVER listings haven´t exploded either which removes the housing crash scenario. This is perfect. As I have said if we had a quick correction the Federal Government would lose it´s resolve and their would be no changes.

Excuse any errors or mistakes ( and I cannot make the font bigger). I am paying $$ for the internet connection.

Monday, March 12, 2012

What could be done...

There was an interesting piece on the CBC radio this afternoon about a Tyee reporter, who looked at what was available for the $340K he could afford as a FTB. He was renting a 1500 sq foot house in East Van and was looking at getting onto the property ladder. Basically a noisy 1 bed shoe-box near the International Village or heading out deep into commuter land.

He interviewed ex-councillor Peter Ladner, who said something he probably wish he hadn't. He claimed that the young leaving was a terrible thing for a city.."who is going to serve me my coffee at Starbucks?", he ended with. Now I cannot be too hard on Peter, at least he has been outspoken about the affordability problem, however unfortunate this last statement of his was.

The reporter (?name) ended by saying that many of his friends had left Vancouver, because they could not afford a reasonable home in this city and he was considering doing the same.

This is what seems to escape the foolish politicians, bank CEOs and Carney...all this CMHC bs, the zero rates, the gimmicky low rate mortgages are just making it even more unlikely that first time buyers can get onto the property ladder.

Think about it - the $10K tax rebate and the super-low mortgage deals from TD and BoM will only drive prices higher! Builders, sellers, speculators will just hold or up their prices.

If the idiots just left the market alone for five minutes, the lack of affordability would remove demand and prices would fall. They would fall a lot (10-15%) very quickly. That's 30-40-50K. But no, they keep thinking they have to DO Something, the result is they drag in a little more demand from the vulnerable and the over-stretched to delay any correction.

Mr Flaherty, and Carney, Multimillionaire bank CEOs and Ms Clark - the problem is NOT that rates are too high, or tax breaks are needed. The issue is that the prices are TOO HIGH.

The answer is not a quick fix or a ten second sound bite.

Until there is some dis-incentive to speculation whether local or off-shore the mania will continue and the quality of life for those living in this region will deteriorate.

No where is speculation currently encouraged as much as Canada.

1) The CMHC insures investment property loans. WHY?

2) We have a tax structure that allows the windfall gains of RE to be taken tax-free after one year of ownership. WHY? One year is too short a time period. I know many folks who buy, fix and flip in one year. If they claim it as their principle residence their gains are 100% tax free. I don't begrudge them the gains. They took a risk and deserve it, but why tax-free? If a businessperson starts a company, employs people, takes a huge risk and sells it after a year, their gains are NOT tax-free.

3) We allow unfettered access to our housing stock to anyone with money, regardless of their residential status and with no concern about source of funds.

4) Yes we do need more ALR thrown into the high density pot and yes we do need higher density on some plush areas where the NIMBYS live.

5) Empty homes pay premium taxes. Doesn't sound like capitalism. Well the most free-wheeling capitalist country in the world is Singapore and they regulate their housing supply and access like no-one else. So whether you are a dentist from Winnipeg, with a condo for future retirement or a Government Mandarin from Beijing buying a West Van palace, you will have to pay more if we find it is left empty.

Why? because if you chose to leave it are taking housing away from the cop who you will expect to risk their life checking your empty house when the alarm goes off or the fireman who will have to do the same to put out an electrical fire.

Who could do all the above. Not just one, but all of the people listed. It would take the Federal Government to take over the CMHC, it would need the Province and cities to deal with ALR and density and over-rule some very wealthy interest groups.

It would take the City with Provincial backing to change the taxation rules.

It would take bank CEO's to be responsible and put concern for the future above their bonuses.

And then maybe we can keep the young in this city to serve coffee and produce plays and then some!

Friday, March 9, 2012

My Open letter to Mr Flaherty

The Honorable Jim Flaherty
Minister of Finance

March 9th 2012

Dear Minister

I am writing to you as a concerned citizen worried about the effect a housing slow-down will have on the financial well-being of the CMHC and of our country.

As you are no doubt aware the CMHC has now reached the level of leverage attained by Fannie Mae and Freddie Mac in the US prior to the US housing collapse.

The CMHC is supposed to make home ownership more accessible to Canadians, however by its actions it is having the opposite effect.

1) Insuring investment property purchases surely takes homes out of the housing stock.

2) Rates are at all time lows, banks are falling over themselves to lend at very low rates and prices are at all time highs. To provide insurance at such a time to vulnerable borrowers is setting these borrowers up for disaster should there be the slightest change from the current ideal circumstances and exposing us all to excessive risk.

The result is that the CMHC has, in my opinion, been a significant factor in the recent huge and unsustainable rise in home prices across Canada and decline in affordability.

This rise in house prices gives the impression of wealth, and certainly increases the net worth of current owners. However new entrants into the market and those who 'move up' are left struggling with such huge burdens of debt that there is little money left over for discretionary spending and no capacity to deal with set-backs in employment or income.

Would it not be sadly ironic, that having watched the debacle in the US from front row seats, we nevertheless march onwards and repeat their same mistakes.

I am sure Canadians would not look kindly on the legacy of a Finance Minister who allowed this to happen unfettered. The CMHC seems to have taken on a life of its own and has moved into areas that increase their size and importance but are well away from their stated mandate.

May I offer some suggestions, at this late hour to mitigate the risk we are all now exposed to:

1) Do no allow the CMHC to increase its lending ceiling. We are already at $540 Billion, that is higher per capita than Freddie Mac and Fannie Mae were to the US tax-payer.

2) The CMHC should get out of insuring investment property. That is more risky and is reducing the stock available for other owner-occupiers.

In fact the CMHC should have its horns clipped significantly. As mentioned, insuring vulnerable lenders at all time low rates and all time high prices is doing no one any favours. I would encourage you to continue on your path of tightening lending requirements.

Privatizing the CMHC would be the ideal solution to allowing the market-place to properly evaluate risk and reduce the burden on the tax-payer.

3) The Board of the CMHC needs to revamped. I have reprinted the names and occupations of the Board members taken from the CMHC site, below:

Dino Chiesa
Toronto, Ontario
Chair of the Board of Directors, CMHC
Principal, Chiesa Group

Karen Kinsley
Ottawa, Ontario
President and Chief Executive Officer

James A. Millar
National Capital Region
The Sussex Circle

Brian Johnston
Toronto, Ontario
Monarch Corporation

André G. Plourde
Montréal, Quebec
President, Groupe immobilier de Montréal Inc.

Sophie Joncas
St-Hubert, Quebec
Chartered Accountant

E. Anne MacDonald
Pictou, Nova Scotia

Michael Gendron
Edmonton, Alberta
Chief Financial Officer
Mancap Group

Rennie Pieterman
London, Ontario
Partner, Practical Plumbing Co. Ltd.

Where are the academics, the high level actuarial talent watching out for the tax-payers' interests, where are the impartial voices whose livelihoods are not tied to housing? Does this board seem to you reasonable for overseeing many Billions of tax-payer exposure? The IMF doesn't seem to think so.

Clearly you have concerns about rising household debt and the high price of housing, as you have voiced caution many times publicly. However talk alone is not enough, we need action.

We need to rein in one of the largest enablers of this debt explosion, the CMHC, and reduce the liability that we will all face once there is a correction in housing.

Canadian banks have already shown with their ultra-low rates, cash back mortgages and stated income loans that despite their rhetoric and reputation they are following the same pattern as the US banks prior to their housing collapse, let us at least try and mitigate some of this by removing the CMHC's gasoline from the fire as much as possible.

Thursday, March 8, 2012

Bank of Canada

No change. Stronger economy...blah blah blah... risks remain...blah blah change from 1%..blah blah blah BUT ONCE again:

For Canada, Carney said the No. 1 risk continues to be household debt, which currently stands at a record 153 per cent of disposable annual income.

Here is Carney's dilemma. He has rates low to try and stimulate business spending and give businesses a break on their borrowing. However the consumer is doing all the borrowing and despite all the jaw-boning from him and Flaherty the banks are still the big pushers of debt. Witness the BMO shenanigans.

Lower rates can give borrowers a break and leave them more money for food and clothing or they can let them borrow more than they should. Will the BMO mortgage officers tell their clients to calm down and not over-leverage with the low rates and be sensible..what do you think?

Of course we will have all the other banks getting on the band-wagon. Remember those huge pay-packets have to be earned ($11 Million for the CEO of TD Bank).

This shows us that the banks are not responsible. Who lent this record amount to Canadian consumers..they did! Yes the Government is the enabler with low rates and the CMHC but the banks have been using aggressive US-style money back, lair loans, teaser rates to get people into huge amounts of debt and pumped up this RE and debt bubble.

We have a big reckoning to come. And I would say to bears that this too is good. Yes it may draw some more feeble minded into buying too much house for their wallet but it will prove to Flaherty and Carney that if they care about the future of this country at all, they have to rein the banks in big time.

Had the banks been more responsible they may have been more reluctant to cross them (think plum future jobs at risk). Now they have no choice.

Friday, March 2, 2012

Here's the meat....

From the GVREB news Release

The MLS® HPI benchmark price for all residential properties in Greater Vancouver currently sits at $670,900, up 6 per cent compared to February 2011 and an increase of 0.9 per cent compared to January 2012. The benchmark price for all residential properties in the Lower Mainland is $601,300, an increase of 5.5 per cent compared to February 2011.

Sales of detached properties on the MLS® in February 2012 reached 1,101, a decline of 21.5 per cent from the 1,402 detached sales recorded in February 2011, and a 12 per cent increase from the 983 units sold in February 2010. The benchmark price for detached properties increased 10.5 per cent from February 2011 to $1,042,900.

Sales of apartment properties reached 1,020 in February 2012, a decline of 15.4 per cent compared to the 1,206 sales in February 2011, and a decrease of 5 per cent compared to the 1,074 sales in February 2010. The benchmark price of an apartment property increased 2.8 per cent from February 2011 to $373,300.

Townhome property sales in February 2012 totalled 424, a decline of 13.3 per cent compared to the 489 sales in February 2011, and a 1.9 per cent increase from the 416 townhome properties sold in February 2010. The benchmark price of a townhome unit increased 0.7 per cent between February 2011 and 2012 to $472,800.


SURREY, BC – The Fraser Valley Real Estate Board’s Multiple Listing Service® (MLS®) recorded 1,269 sales in February, an increase of 59 per cent compared to January and a 1 per cent decrease compared to the 1,279 sales during February of last year.

In terms of new listings, the Board received 2,846 in February, an increase of 3 per cent compared to January and a 6 per cent decrease compared to the 3,038 listings received last February, taking the total number of active listings to 9,037, an increase of 4 per cent compared to those available in February 2011.

As Board President Scott Olson explains, a seasonal increase in sales is typical for February; however this increase was not as robust as in years past. February’s sales finished at 4 per cent fewer than the 10‐year average for that month.

“Although our market has picked up, it’s still favouring buyers. In terms of our clients, we’re seeing more caution and deliberation when house hunting.

“This could mean using a home inspection as part of negotiations, or asking for extras to be thrown in, or the client walking away if terms are not met. The other side is that selection at certain price points is limited depending on location, so if the buyer finds the right home, they act, which is keeping prices stable.”

The MLS® HPI benchmark price of a ‘typical’ detached home in Fraser Valley in February was, $569,200, an increase of 8.3 per cent compared to $525,400 last year. The benchmark price of Fraser Valley townhouses increased by 2.0 per cent in one year, going from $305,700 in February 2011 to $311,900 in February 2012, while the benchmark price of apartments increased by 0.6 per cent going from $200,200 in February of last year to $201,500 in February 2012.

Olson adds, “We anticipate the new HST transition rules will generate more buying activity of new homes over the coming months and will have a spill‐over effect on the resale market. The majority of new homes in the Fraser Valley fall under the new $850,000 HST rebate threshold and first‐time buyers will be taking advantage of the refundable tax credit bonus of up to $10,000 available until March 31, 2013.

“These changes will improve accessibility in the Fraser Valley, a region already recognized for its affordability.”

Thursday, March 1, 2012

words fail me............almost

New high for the average price

Actually this is not unexpected. Inventory is the highest since the 2009 crash. The MOI is over 6 and much higher in the outskirts, with condos leading the pack, sales are down a lot compared with last year- yet HAM buying has been hot and heavy in the pricey the average is up!

In fact we have had several huge sales, and not just to the Lululemon founder, but to some very rich locals and HAM, which has skewed things considerable.

Now we will have to wait for the HPI, though of course we know that the REB has fiddled with this so that this is not as reliable as it was.

Actually this result is not as bad as it would seem:

1) Higher prices will bolster the very little back-bone the Feds have to deal with their own excesses.

2) In all bubbles the periphery starts to defalte first- OK, Sunshine Coast, Fraser Valley and then we get to the centre. That's what happened in the US.

If this is the case, we would expect weakness to emerge from the FV numbers and our numbers to be weaker from here onwards.