Phoenix
I’ve mentioned in the past that the detachment from fundamentals in this market led us to explore other markets for investment opportunities. Its been a long journey and a steep learning curve.
Tax laws, immigration laws and financing challenges made simple purchases difficult, with the result that my brother has worked hard at creating a corporate investment vehicle to purchase multiple properties in depressed markets that he feels are rentable. Like me, he has spent many years collecting rents here in Vancouver, so he doesn’t come to this without experience. The plan is that eventually the company will go public, raise even more money and purchase more properties.
He’s look at various markets in the Western US, especially Phoenix and Las Vegas. My experience with Greg Swann’s blog prompted me to put them together. This is the result: its the first property purchased, and gives you an idea of what sort of real estate can be bought. When you go to the page and click the “Before” and “After” links on the sidebar don’t forget that clicking “Up one level” will take you back. The three pages are examples of the engenu software that Greg wrote, and I’d appreciate your thoughts on it. His idea is that photography is the language of real estate and engenu is an easy way to display lots of images.
210 comments
Nice pics…and a litle paint and a few appliances and even the wife would like it. For Vancouver (and Toronto, maybe) buyers, prices look like theft. With a rising $CAD, boomers retiring, and subdued US prices in the sunbelt, maybe a little boom is in the cards…
Very true, Ceejay.
For anyone on the verge of retirement, with Vancouver property and a hankering for Florida or Arizona, the stars aren’t going align much better.
GuyCaballero (or is that BuyCaballero?)…. According to FISERV/CNN, your timing couldn’t be better…
…National home prices are forecast to shrink another 11%. Miami, Las Vegas and Phoenix will record steep declines, but a few cities will actually post gains….
http://tinyurl.com/yha6avd
Question for the forum: ING direct is now offering a 5yr variable at prime + 0. So 2.25%. Six months ago it was prime +0.5 or prime +0.8.
My question is, for a normal economy what would be the typical discount advertised by a bank like ING direct for a regular joe blow FTB? My understanding is that it is usually prime minus X? But what is X.
pearl
I am not sure about ING, but plenty of other borrowers offer prime -10%. I think ING would match this.
-10%, Asalvari? If you mean 10% of whatever prime is, be more clear. If not, proofread!
Hi Rob,
Can you provide some metrics on this property purchase? ie walk us through the cap rate calculation? Pretty photos are nice and all – but all I care about is the numbers!
If the return looks attractive you may have some potential investors here on the blog (as I for one am growing weary of waiting for the metrics for an investment property here in the GVRD to make sense).
More data please.
My question is: what is the typical discount from prime, say 2-5 years ago? During the credit crunch it changed sharply, and I am wondering if things are moving back to normal.
Rob,
Howz his experiences in Phoenix? Is he getting renters? Is it hard? Rents stabilized? Going down? Do tell more.
So, lemme get this, you guys are pooling your money to pick up “undervalued” property to hold for the long term? Is that right? And you want to set up a website to bring more money to the pool? Tell more. You’re being coy.
Your 2nd link above: this is the result… that links back to Greg Swan’s page? Isn’t that the property you and your brother bought? Mucho confused. Clear up, please. Always want to hear more about new businesses, especially ones that take us out of dreary over-priced Vancouver.
Pearl:
Be sure you’re comparing correctly. “Prime” can mean different things. The banks “prime” rate is NOT the BOC’s prime, and is not always identical at different banks.
As for WHAT a typical discount is, and how it changes, I’ll leave that to someone who knows better. Just keep in mind that there is an awful lot of marketing and fine print to wade through before you can truly compare. There a whole teams of lawyers and marketers writing that stuff. You’d think it should be simple, but no. And don’t forget fees. A slightly higher rate without ongoing “fees” may be a better deal.
C1 credit union (helmut’s) new forecast – pretty unbelievable.
http://tinyurl.com/yh8ogyl
Warren B/V-Dog:
First link goes to Greg Swann’s site. Second link goes to a page Greg created for the property my brother’s group purchased. There are two things going on there.
First, Greg has a little software program called “engenu” that allows you to quickly create a real estate webpage. Essentially its some PHP, CSS and html template files that allows him to bang out lots of pages quickly. The benefit is that he creates a long tail on the internet and the property gets a unique address specific website. There are things I like about it and things I don’t like. Right now I’m working with Tom to try to do the same thing on a Wordpress platform. Greg prefers engenu. I’m curious what you guys think of his website for Virginia.
The second thing is the investment itself. $65k + $9000 in upgrades. Apparently it should rent for $750. Those are some good metrics, on the surface at least. If you get a good tenant, even if prices continue to fall, you’re set up to hold through bad times. The challenge is financing, and that’s what they’re working on right now. I’m not really involved, and can’t give too many specifics, but my brother started last year by trying to buy a place on his own as an individual. The day before offer writing mortgage rules changed, excluding non-residents, no matter how qualified. Since then he’s been moving toward a publicly trade company, with the idea that they’ll buy, rent, then mortgage the properties. Public offering hasn’t come about yet.
In a lot of ways its easier to buy the places and hold them corporately (you can have a US subsidiary, as I understand it, and bypass many negaitve non-resident tax implications, for example) but at the same time its time consuming to set up the corporate structure properly with all the required disclosures, etc. That’s been the largest challenge.
Bottom line, numbers do look good, as that market is essentially the polar opposite of ours. There are negatives there, clearly, but you won’t find cheap real estate in sunny, robust economies. If you want to buy cheap you need to endure some warts (which isn’t to say you need to kiss a lot of frogs -the idea is that frog to prince ratio will be fairly close to 1:1)
Rob,
Thanks. Interesting.
Beans,
Unbelievable, as in you doubt him. Or unbelievable as in yayhoo! we’re back on track?
In all my reading of the US blogs, with lots of checking out the MSM articles linked to, I’m seeing more and more references to banks and other entities involved in mortgages deliberately NOT foreclosing, or not following through in order to A) keep inventory off the market to help hold up prices an B) (more worrying) avoid recognizing losses. Extend and pretend! As long as a true recovery does come this might work, even though it is illegal, but if the RE market and the real economy doesn’t get back all the lost ground and continue with permagrowth those tactics are going to lead to immense losses, far worse than by accepting the medicine now.
Scary stuff, it means all the bailout money and the much larger backstops will have been pissed away with nothing to show for it.
I mean this is way beyond 3 std. deviations from most forecasts.
Beans:
Well, he has to earn his pay somehow…
It’s quite amusing to see so many people killing themselves to try and get rentals to gain wealth. Never been my cup of tea but still amusing to watch it happen.
As for Phoenix…well…what can I say. I have a colleague who may be sent there for a while and the depression seen clearly on his face says it all.
Warren B (7) wrote
>> Can you provide some metrics on this property purchase? ie walk us
>> through the cap rate calculation?
Yeah Rob, how about it?
Run us through a house in Phoenix. Or, this nice multiplex in Burnaby?
V772948
7769 – 7771 DAVIES ST
At what price point would you recommend to robertscreek or Jeff that they “buy?”
WBWUCR’t'13?
GuyCaballero/Phoenix… “His idea is that photography is the language of real estate”…
Indubitably, but while we’re on the subject of visuals…. what’s wrong with this picture?…
(NYT) …Mr. Obama was the headliner for a lavish Democratic Party fund-raising dinner at the Mandarin Oriental Hotel Tuesday night for about 200 big donors, with each donor (allowed to bring a date) paying the legal maximum of $30,400. …
http://tinyurl.com/ykem2sy
(ABC)… According to a new measure by the National Academy of Science 1 in 6 Americans are now in poverty. They put the overall number at 47.4 million Americans. That is 7 million more than the Census Bureau’s calculation. According to the Associated Press the Census number “does not factor in rising medical care, transportation, child care or geographical variations in living costs.”
http://tinyurl.com/yzqk8vg
By THE CANADIAN PRESS, cp.org, Updated: October 20, 2009 11:30 AM
Ottawa, provinces to go $90 billion into the red this year: report
OTTAWA – A new report says Canada’s federal and provincial governments will spend their way into a $90-billion national deficit this year, and it could reach as much as $100 billion.
The Toronto-Dominion Bank says only Saskatchewan will be able to avoid going into the red during the current fiscal year without dipping into rainy day funds.
Ottawa’s deficit will hit $56 billion, as the federal finance department recently reported.
The bank report says the accumulated government debt amounts to about six per cent of the country’s gross domestic product, a large sum given that all governments were reporting surpluses only a little more than a year ago.
But the recession has taken an axe to government revenues, and stimulus spending at all levels is adding to the red ink.
The bank notes that Canada is in a better fiscal position than most developed countries, and is better off that it was in the early 1990s when deficits hit about nine per cent of GDP.
Still, the bank says it won’t be easy for Ottawa to meet its target of balancing the budget in 2015-16. In fact, the bank says it will likely be impossible unless it raises taxes, something it has vowed not to do.
We remain 16 listings shy of the recent multi-month high for listings.
Will we establish a new multi-month high tomorrow? Only time will tell.
In the meantime – there is a lot of inventory out there for buyers to pick over.
Perhaps tomorrow there will be a multi-month high of listings to choose from.
Supply up. Demand?
i agree with GT.
And also, it appears the market here has topped and is in the process of rolling over – listings rising, sales falling, and not as much smackdown talk of multiple offers. Rob and his gut are dead on the mark muchochos. You fail to heed Rob’s gut at your own peril.
Except for RS and Denial Dave - I hope they load up on RE at current prices…hmm, not fair, RS said he would not buy now if he was renting…fair enough, and good counterpoints has he raised.
OK RS, what do you make of the increasing listings and declining sales (Rob, am I finally right about declining sales, are they slowing?).
G’night all.
WBWYCR,
Check out the Van Sun online. Should make for an interesting year.
B.C. home prices could hit new highs in 2010
Houses in my defined search parameters (price, size, area) are now lowering prices a tad, not much, but enough to make me HOPE.
Dave, perhaps you can buy before we roll over completely, we need a greatest fool, you’ll do.
WBWYCR, too bad you didn’t take my first offer of prices making news highs anytime within the next year. It looks like I would be collecting on that bet this year. Oh well, I can wait till August.
As I recall it, Dave had an offer in hand that HE rejected.
“At this point 60% of Canadian workers have no corporate pensions, and almost half have no retirement savings, either. Of the half that do have RRSPs and whatnot, the average amount saved is enough to live on for less than two years.”
And what little net worth they have is in their house, all too many still with a mortgage. That’s gotta be a bullish sign.
19 Whybuywhenucanrent? Tue, Oct 20, 2009 | 3:55 pm
I already own two properties and am not looking to buy-perhaps ask Rob at what point I should sell one.Judging by the credit union report about 15% increase before hitting peak territory-what do you think Anon-sales look set to be strong.
Anonymous 24:
“… listings rising, sales falling…”
Not last week. Inventory actually fell and sell/lists rose.
Anonymous 23:
Don’t I feel stupid responding to cribbed Garthnotes? Cu it out or I’ll stop letting anyone post anonymously.
HP:
He’s a man of the people, for the people. End of story.
Whybuy:
I don’t have all the numbers for the Phoenix house (taxes, HOA fees, etc). Can’t do it. Is Davies even close to being a buy? If rent multiplier is over 175 its not worth going further, imho.
Noz:
Its a tried and true method that’s made many many millionaires. I’ve seen it happen time and again over the last two decades. I also find it amusing, and enjoy doing it myself. At its root its buy cheap, sell dear. Capitalism and all that. I’m not surprised you sneer at it – I’m sure you feel its a scam controlled by the elites (read: Gnomes of Zurich).
AC:
Banks have been holding inventory off the market for months now, at least. I’m not sure if its mainstream, but realtors in the US were bitching about it a long time ago. Extend and pretend, as you say. May work. Like whistling past the graveyard. For Phoenix to work the key is a paying tenant. It’s that simple.
HP3…not a big deal. With a 65K purchase in the home of the Sun Devils tm your 11 % loss is a toaster, a microwave and a good flatscreen. Eminently affordable for those on a Public Service tm indexed pension.
28 Alexcanuck Tue, Oct 20, 2009 | 8:34 pm
“At this point 60% of Canadian workers have no corporate pensions, and almost half have no retirement savings, either. Of the half that do have RRSPs and whatnot, the average amount saved is enough to live on for less than two years.”
But aren’t half of Canadian workers more than 25 years from retiring?That should give them time to pay off the mortgage
Anonymous 23 – You should give credit to Garth instead of copying his words like they’re your own!
RS
Lots of listings to choose from – higher than in many months. Wonder is sales will likewise rise month-over-month.
Let the chips fall as they must.
robertscreek (29) wrote
>> … and am not looking to buy …
Righto.
Did you see my response to your query on last week’s thread?
WBWUCR’t'13?
WoW (34) wrote
>> Let the chips fall as they must.
WoW — did you see my “buy” recommendation for you in last night’s thread? ( http://robchipman.net/blog/sunday-night-update-2 — posts 27,28,29 & 31)
3115 Waterloo. MLS V792717 Great place. Snatch it up, make it your palace and retreat, and you’re good to go.
Luv ‘n Kisses,
WRWUCBT?
35 Whybuywhenucanrent? Tue, Oct 20, 2009 | 9:09 pm
S’pose you buy a nice Yaletown condo for $450K. Your monthly cost of ownership is about $4K, right? (Interest, Tax, Insurance, Repairs, Association Fees?) And you can rent it out for $2000/mo. (that’s $1900/mo with a 5% vacancy rate)
Here’s one for sale at $450,000, 9th floor, rents for $2000/mo. At “Pacific Place Landmark”
http://vancouver.en.craigslist.ca/van/reb/1428447563.html
And to confirm the rental value, here’s another suite in the same building listed at $2200/mo. 22nd floor, with sunroom (definitely a better product)
http://vancouver.en.craigslist.ca/van/apa/1422891657.html
So as owner you pay $4K/mo, and take in $1900/mo. Not pretty. To have price appreciation cover your loss, you’d need to go up $25K each year. That’s a little 5.5% annual appreciation.
And that’s to break even. When you sell you’ll pay mortgage closeout fees, Realtor fees, possible 2 months rent returned to tenants, possible month or two of vacancy, etc.
Call me a skeptic, but I don’t think we can expect 5.5% annual appreciation in perpetuity. Plus you’re locking up $10K of your own cash in the place every year (above and beyond the $25K you’re throwing away outright).
If we just get, say, 4.5%, then you’re losing $5K/yr. Compounded. If we get, say, -4.5%/yr for a couple years, then you’re losing $55K/yr. Compounded. (Though we can’t sustain loses like that long-term, of course, it would level out and head back up at some point. Like it’s doing in Japan).
Your thoughts, your numbers?”
That is the post you refer to I guess.Your choice of property and your numbers seem a little skewed-with a floating rate at 2.50%interest is about a thousand a month-are taxes and strata fees really $3000 a month?Or take a 3.99% five year mortgage-interest only(can’t count principal as expense)amounts to maybe $1500 a month-where do you get the other 2500 from?As I said I am not buying because I already own,but I am not selling either-if I owned no real estate I probably would buy-but a cash flow break even rental property(yes you can find them-at least here in Gibsons)A recent study claims Gibsons is actually cheaper to buy than rent
Oh and 5% vacancy-why inflate your numbers by 500%,vacancy is closer to 1% in Vancouver.With number magic like that everything can be shaped to your purpose.Also given 3% average appreciation for decades and adding inflation easily brings you to 5.5% annual appreciation—hmm maybe I should leverage into one more house
k
35 Whybuywhenucanrent? Tue, Oct 20, 2009 | 9:09 pm
After looking at the listing you linked I am even more puzzled by your numbers
Tax about $150monthly and strata fees $264 So where do the other $2100 monthly expenses come from?Awaiting your reply
RC:
I take it that is one of the things you “know” without bothering to factcheck?
In the real world…
“The number of boomers who cite reducing debt as their most pressing financial concern soared from 31 percent to 62 percent over the past six months, according to an online survey conducted by Ipsos Reid for Royal Bank of Canada.”
Boomers, that is. http://tinyurl.com/yhwhahq
Do a bit of research before you come out with those bland truthinesses. I know it feels good, but it is not true.
Many, many people are carrying debt into retirement these days. 1/3 have debt averaging 35 000, one in seven have over $100 000! Yet another sign that just maybe credit bubbles can happen and bad things come of it. They have positive net worth frequently, but it is all in their home.
Now, I know there are also many people who use debt wisely and responsibly, and you are probably one of them and will be just fine. However, that puts you in a minority. There is an ungodly amount of debt out there that should never have been issued or accepted.
39 Alexcanuck
So six months ago only half as many worried about debt-sounds like the media wave of negative news had a dramatic effect.But what does this mean in relation to what I said?Median workers age is around the early forties-that means many have twenty five years to save,many have even more-they may well worry about debt but that’s a good thing and means nothing in terms of the numbers I mention.Why don’t you come up with some ” truthinesses” to counter my argument-so aren’t half of Canadian workers 25 or more years from retirement?And isn’t half the population below average IQ?Evidence for this abounds everywhere…
The Canadian workforce is also aging. The average age of Canadian workers rose from 37.1 years in 1991 to an average age of 39 years in 2001. …Statistics Canada
You could really learn to google these things yourself
The vast majority of seniors in Canada are financially secure. While most seniors live on modest incomes, few live on low incomes. Elderly families also have the highest net worth of any type of family unit (the latter consists of families of two or more persons and unattached individuals). Net worth or wealth means the difference between the value of total assets and total debts.
Net worth of seniors
Income is a valid indicator of a senior’s ability to sustain a given standard of living; however, income alone does not provide a full picture of the financial situations of seniors. Net worth is also an important indicator of well-being. The median net worth of elderly families is $443,600 (2005). Their high net worth is likely because many elderly families live in their own mortgage-free homes and the value of their accumulated pension wealth is higher,14 enabling them to use more of their income to ensure a good standard of living.
Statistics Canada
Seems a little research does educate–I hope
RC:
I take it that is one of the things you “know” without bothering to factcheck?
And yes AC I did know the approximate numbers without checking first-the curse of being well up on common knowledge,don’t you know!
AC You realize that article is based on an online survey of some 518 boomers back in April–nothing but the finest in statistics,those on-line surveys in the midst of financial crisis-or maybe delve a little deeper next time foor real numbers
I am agreed with the above persons.
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Hey Helmut. Pass the glue over…I’ll take a sniff too
US houses are set to tumble further in some areas may be better to wait for investment.
LA, Orlando, Vegas, etc. all to drop much further. Some potential winners though.
http://money.cnn.com/2009/10/20/real_estate/home_price_forecast/index.htm?postversion=2009102003
Don’t forget in post 36 he also needs to pay taxes on the rental income and capital gains on a sale if it is an income only property? I think that is right.
ROB:
Tried and true? What you fail to mention is the number of people who fail at it. The side of the coin is almost never talked about or represented.
No I don’t think it’s controlled by elites…I just think it’s a waste of time IMHO. It’s one of those over-glorified get rich schemes that people feel compelled they must try. Most scams always have low budget “late night” ads for their stuff…is it any surprise buying RE cheap on the dollar has its own?
That’s why it’s amusing to watch.
47 Anonymous Wed, Oct 21, 2009 | 5:04 a
No taxes on rentals unless there is profit-same with capital gain,if you pay it means there was profit
re: #36
I realize that the listing says the place is rented out at $2000 / month, but I find that quite high. For 865 sf in that building? At that rent, you’d be able to get 1000 sf on Marinaside/Roundhouse neighbourhood. (tougher right now mind you, alot of rentals are looking for Olympic sized rents). But last fall/spring, I think $2 / sf on Marinaside was doable.
Most likely have to account for higher vacancy with that rent.
Also, the buildings a little old, so as an owner, you’d have to be aware of the possibility of special assessments coming down the pipe. On a building that size, window repairs could be costly. see Governors Tower.
Personally, I wouldn’t touch that building, at any price. But I’m really paranoid the potential for water problems.
Rob, I agree that getting a good tenant is key to the deal. To that end, there’s two pitfalls that one would need to avoid given the current housing situation in some areas of the states:
1. Avoid far-flung recently build suburbs. Many have been ghetto-ized due to huge numbers of foreclosures and may not have a feeling of security (squatters, looters). Also, renters will prefer areas closer to commercial and work opportunities. They may also rely on transit more. Bubble buyers bought in distant new developments due to affordability. Renters have flexibility on their side and don’t feel the pressure of being “priced out” to drive them to the same locations.
2. As opportunities to pick up cheap RE increase, there might be a glut of rental properties on the market and getting a good renter will become quite hard.
That said, I think picking up good opportunities now before a recognized bottom is a good idea for future rental prospects.
CeeJay/30… I couldn’t agree more, at those prices the down-side is negligible – perhaps I was unintentionally vague re: my link in #3; my thinking being more along the lines of, by the time the Caballeros get their venture up and running properties will be even cheaper and the pool of potential renters that much larger… If I were a Caballero though, my acquisition strategy would focus on the neighbourhoods nearest the USAF base and the Uni (assuming there are any properties at his price point near them)…
Meanwhile back in SOCAL – according to the following Fortune/CNN piece, 3000 Californians are bailing on the sunshine state every week…
http://tinyurl.com/ykml5jw
Noz:
” The side of the coin is almost never talked about or represented.”
Considering I constantly advise wise purchases made on the basis of sound metrics its pretty clear you’re bringing your complaint to the wrong place.
“It’s one of those over-glorified get rich schemes that people feel compelled they must try. Most scams always have low budget “late night” ads for their stuff…is it any surprise buying RE cheap on the dollar has its own?”
Are you for real? We aren’t talking about a scam. We’re not talking about easy purchases using other people’s money.
Buying revenue real estate with good metrics in a depressed market as I’ve described is far from a get rich scheme. Its a protect yourself against the downside, try to lock in some conservative returns, and then get rich slowly. There are no late night commercials for it, ever, and the process I’m describing in this post is heavily regulated and requires a lot of disclosure.
“I just think it’s a waste of time IMHO. ”
Again, I beg you to answer, are you for real? Buying revenue generating real estate on the basis of good metrics is a waste of time? You say this in the face of indisputably fantastically marvellous returns for those who did exactly that in past years. If you ignore today (because we can’t see the future) when was the last time you could buy Phoenix or Vancouver real estate at a rent mulitplier of less than 100? What returns accrued?
Everyone’s entitled to an opinion, of course, and, as the saying goes, everyone’s got an opinion. That you find investors making profits amusing speaks volumes about your ability to to distinguish between the objective and subjective.
One more point:
3. Pick a city with solid employment prospects. I know nothing about Phoenix and Las Vegas regarding that aspect. The future may be interesting (in the same connotation as the curse “May you live in interesting times”) and I don’t believe the recession is truely over for the common Joe.
C-Note:
Agreed. Acquiring a stable, employed tenant is, as always, critical to the equation.
It’s not a complaint ROB…not everything is a complaint. Don’t take it so personally. Chill.
There are plenty of ways to become wealthy. Real estate is a gamble. You put in numbers and hope for the best. Just because you sit down and calculate based on metrics doesn’t guarantee anything.
As I said, I wonder how may have tried such things and how many are actually successful…anecdotal evidence on your part doesn’t speak volumes about anything.
I can equally state examples of people who suffered miserably and lost everything due to real estate investments and rentals..even when they went into it with headlong profit initially.
Maybe there aren’t late night commercials in your country but in the US, there are.
Have you ever been to Phoenix by the way? Just curious.
Regarding engen: Is Greg looking at marketing it / making it available to others? If so, turning it into a Wordpress plugin might be a good idea as would making it skinable. As a minor technical issue, clicking either the Prev or Next button should reset the automatic slideshow timer or turn it off completely otherwise you might see an image for a fraction of a second before the automatic advance.
tic toc tic toc tic toc tic toc……..
Should the Fed raise interest rates?
http://tinyurl.com/yzzfam4
…….POP!!
Noz:
You say I fail to mention the downside and you characterize my subject matter as a scam. Both those charges are inaccurate and now you’re quibbling that I called your comment a complaint. Why not admit that I’m not scamming anyone and I mention the downsides on a regular basis, and then point out that your comment (not complaint) is misdirected?
” wonder how may have tried such things and how many are actually successful…anecdotal evidence on your part doesn’t speak volumes about anything.”
Again, are you for real? The success of it is self evident. My anecdotal evidence can be documented easily – I have hundreds of clients going back decades. Its not anecdotal. Names, addresses and dates are available, and much of the information is public record.
“I can equally state examples of people who suffered miserably and lost everything due to real estate investments and rentals..even when they went into it with headlong profit initially”.
Share the nuts and bolts details of that with me. You may be a smart guy in your chosen field, but I’ll absolutely undress you on this if you provide real details and match my metrics.
I haven’t been to Phoenix. As I clearly stated, this is a project my brother has been working on, and he’s been doing lots of due diligence. He’s been there multiple times and done his homework. What’s your point? People live in Phoenix. You may not like it, but some people do. Let’s face it – get the right property at the right price and you can pretty much rent it anywhere, as has been proven time and again. Under all is land, and for every piece of it there is a user, and a user for every piece, whether its a Manhattan penthouse or a grazing lease in the West Chilcotin. Pricing is the only issue.
C-Note:
He does give it away to others, doesn’t seem to be looking for a profit centre, but isn’t looking for WP compatibility. He’s a full on Mac geek (no disrespect intended) who likes owning the technology completely. The engenu vs. WP discussion is a natural one and has come up before.
Phoenix is a dump. The only really nice area is in Scottsdale.
#36, “So as owner you pay $4K/mo, and take in $1900/mo.”
An ever-increasing proportion of that $4K each month goes towards equity, which is money you hopefully get back when you sell. Why do people never factor this in and just look at absolute monthly payments? Isn’t that a form of the nonsense argument that the “debt consolidation” companies advertising on TV use to catch suckers wanting to “reduce their debt”?
Can’t say I’ve done the calculations for your figures, but using my own situation which isn’t too far off I was looking at about 50% of my monthly mortgage payments going towards interest, initially. So that “$4K a month” becomes approximately $2K in interest to the bank, $2K towards your equity, and $1900/month income. That looks very close to coming out even to me, even from day one. After 2-3 years of payments your interest/payment ratio decreases, and you’re net-positive. Oh, and after 25 years you’ve got an asset worth (hopefully) >$425K.
“The plan is that eventually the company will go public, raise even more money and purchase more properties.”
Rob: please please please, make sure you write to me and advise me on the IPO, you got a real winner of an idea- can’t go wrong. Hope you take an advantage, and get in a big way from the ground floor.
On another note:
Looks as the Americans have done it again. They were smart enough to pop the housing bubble and will soon be on the road to recovery.
Australians, English, and Canadians- not so smart will have to learn the lesson the hard way.
Chili Con Carne
ROB:
You’ll undress me huh? The though is disturbing. I doubt it though.
I’m not sure what you are rambling on and on about. Show me data that shows the ratio of successful to failed rental attempts and then you can talk.
My point is…and as usual you take it personally…that rental property ownership is hyped up and over-rated. Hundreds of examples you give a drop in th bucket to the millions who try. Let’s get real.
Rob, is your brother a comedian, or ……….?
BTW do you intend to invest if it goes public?
Chili Con Carne
Sorry, got the numbers a bit wrong, was including insurance, maintenance, etc, where I shouldn’t have been. The basic thrust of the argument still stands, though – simple monthly payment comparisons only tell half the story.
Interesting article on the National Post regarding CMHC.
http://tinyurl.com/yfket9w
It starts by saying: “Ottawa has been creating a housing bubble in Canada with taxpayer money which is why residential real estate prices rise in defiance of high unemployment and recession.”
FTBuyer, what kind of downpayment/amortization has 50% going to equity to start? I think the whole point of “amortization” is that you pay most of the interest up-front.
Noz:
Either learn to read or stop changing the subject. Buying revenue property with good metrics is not the same as buying rental property with no regard to metrics. You’ve made two innaccurate charges and now you’re trying to muddy the waters further.
You claim that you can “… equally state examples of people who suffered miserably and lost everything due to real estate investments and rentals..even when they went into it with headlong profit initially” – please provide me some examples and lets look at the metrics and see if they’re the same.
“My point is…and as usual you take it personally…that rental property ownership is hyped up and over-rated. ”
I take it personally when you characterize careful buying on metrics subject to observing stringent laws as a scam that doesn’t take into account the potential downsides. Of course I take it personally – you’re misrepresenting what I say and then criticising it. When asked to back your statements up with fact you typically change the subject a few times and then reliably submerge. Let’s face it: all I’m doing now is making you pull the “Dive, dive, dive” alarm. You aren’t going to provide real particulars, because its self evident that anyone who bought real estate in the last two decades at smart metrics has made lots of money. That’s a simple by product of a market that rises so high it loses touch with fundamentals. You can’t have it any other way (although you’re unlikely to admit that).
Anyway, if you doubt that I’ll take your arguments apart with ease, by all means, fly at ‘er and make a few.
Chili:
I already invested. Because I know him and have done business with him before hand I was able to do that before they met the next level of legal requirements. When the time comes I’ll supply you with the website address.
Is he a comedian? Some used to think so, but after bringing in a very difficult Costa Rican property deal that literally took a decade+ of work many changed their tunes. After watching him work this for almost 18 months and overcoming many challenges, most find it pleasing, if not comical.
There are other guys doing the same thing, btw, and you can find them on the web.
FTBuyer (60, 64)
Correct that a bit more goes to pay the principle each month.
And, in theory, rent goes up 2% or so per year (this assumes you maintain the property to the same standard year after year — often not the case with rentals).
But I’ve found that the price of insurance and tax seems increases, and these increases on the “red” side of the ledger wipe out the increase in principle payoff and rental increase on the “black” side.
Just my experience, no numbers. (But, look at the last 10 yrs of property taxes in Van, and the price of insurance, and that’s a pretty hefty hit to the budget).
WBWUCR’t'13?
Rob: where will you be listing?
What is the estimated Market Cap?
Chili Con Carne
OK, so what about the pictures…looks like any other pic software for real estate.
where’s the metrics, where’s a smart graphical display of properties, market etc
who cares about pics
68, I’m assuming rent goes up by 2% each year due to inflation? If that’s the case, then all other things being equal, so does the value of your equity for the exact same reason? Presumably if the market takes a tumble, then so will rents. And on the flip side, if taxes were to triple overnight then eventually rents would reflect that. Both ownership and rental seem roughly subject to the same market forces ultimately, but probably on offset timescales.
In any case, I just wish people would stop including in the “cost of ownership” the money that goes towards your equity and eventually ends up back in your pocket. It’s a monthly outgoing, certainly, but it’s definitely not a “cost” in the traditional sense.
>> I just wish people would stop including in the “cost of ownership” the money that goes towards your equity and eventually ends up back in your pocket.
You need to figure it in somehow. There’s an opportunity cost to having that $ tied up in equity. If you’re borrowing $ overall in life, then the opportunity cost is the interest rate of your highest-cost debt. If you have $5K in credit card debt at 19%, then the cost of shoving $780/mo into paying off the principle is 19%. If you have cash in the bank that’s earning 2%, then the cost is 2%.
And in return, if you have $50K paid off vs. $25K, then if the property appreciated $50K then you’d have a 100% return on investment, rather than a 200% return on investment. (Or if it dropped $25K you’d have a 50% loss instead of 100% loss).
I was landlording it with zero cash in the bank for a while, it got me thinking about the ramifications of shoving $1K/mo down into paying off the mortgages… It definitely has an impact (unless you have mountains of cash sitting around doing nothing).
WBWUCR’t'13?
- – WoW – - MLS V792717 – -
robertscreek –
to compare renting to owning, we need to know
* purchase price
* closing costs
* down payment
* interest rate
* insurance costs
* property tax (non-owner occupied)
* maintenance costs
* condo association costs
* property management costs
* estimation of major building repair fees per decade
* monthly rental rate
* vacancy rate
* estimated length of time of residency/investment
* selling costs
* cost of capital — opportunity cost of having $ tied up as down payment and principle payoff
* estimated changes in
- rental rate
- insurance costs
- property tax costs
- home value appreciation/depreciation
So, admittedly, I didn’t find all these, and just made assumptions about others. But it’s what we need to have before deciding to buy or rent for a primary residence, and whether to invest in Real Estate as income properties.
I think we did pretty good at estimating the costs of those Gibsons properties on Aug 10th — you knew enough about that market to get the numbers pretty tight. http://robchipman.net/blog/weekly-stats-13/comment-page-1 (post 7 and onward)
But neither of us know enough about the downtown condo scene.
WBWUCR’t'13?
66 50% to Equity?
I am in the last year of a six year variable-right now 600 out of $900 payment is going to principal-it’s because payment was set for a 4-5%Rate while interest is only 1.875% now .Sweet ,huh-it’s all those bear savings at 0 % helping to pay off my house.
68 Whybuywhenucanrent?
Rent tends to track inflation,at least.Last years increase was 4%,double your number-that is the government limited increase.When tenants changed the actual percentage was much higher.
71 FTBuyer
Agree about the principal payment-but as for rent dropping when housing drops not as much.In my experience rents stay up because usually when the market drops there is unemployment or high interest,so most tenants aren’t in the sweet spot to buy then.
72 Whybuywhenucanrent?
True to a point,but wouldn’t you have to subtract the interest you are saving on the mortgage as you pay it down?For example at 4% you would be ahead 2% versus savings,or only down 15 for the credit card.Either way if you pay down debt you have to add that to your final outcome-it’s just a question of having the money now or later.
73 Whybuywhenucanrent?
True the downtown is not my turf-but you threw those numbers out there so I thought you knew the place
ROB:
I’m not changing the subject…you just don’t answer questions like usual.
As I said, you shouldn’t take it personally because I’m not talking about YOU. But you seem to think the world revolves around you so there’s not much I can do about that.
Regardless…it’d be nice to see what ratio of successful to unsuccessful rental owners…I think that would be enlightening.
I’ve been to Phoenix. Nice scenery. Cool light rail. I’m glad I was there last January and not last June, though.
CEEJAY:
It’s hotter than hell over there. If you like green things, forget it…well unless you like cacti.
Well Well Well
I am in SHOCK folks.
Why?
You ask – are you serious?
Well, let me explain.
Why, that is.
That I am in shock.
I mean SHOCK.
To be more precise.
Well here it is.
Just below.
NEW MULTI-MONTH HIGH IN TOTAL LISTINGS.
Most inventory available for desperate buyers in month – plenty to choose from.
My children, this is the end-game. Be very very careful, for the inflection point…is past. The final chapter was written long ago. Only the narrative speaks.
i mean, to correct the above, most inventory in monthS
Several months…most inventory in muli-months for desperate buyers to multibid over…
RS, enjoy, more listings to choose from – this is bullish, right?
The US needs to attract trillions of new dollars to support its new debt, and that means interest rates will have to rise. The stock market has turned into a born-again casino, and that needs to be addressed. The housing market in Canada needs to be deflated, lest it pop as the US one did. The Canadian dollar needs to fall (and the Euro, and the yen), and that will only happen when the greenback rises.
The inevitable conclusion is that when Ben Bernanke thinks the moment is right, he’ll drop the bomb. If he doesn’t, he becomes Alan Greenspan – the central banker who went before him and allowed cheap money to inflate a housing bubble that destroyed large swaths of the middle class, and the global economy.
Trust me. S’coming.
veritable explosion of listings in my target market.
RS, how do you explain the record increase in listings? Is it due to the heat of the market? Or what?
Come on gumba, what iz it?
New multi-month listings record
something to celebrate.
this is undisputable = there is more supply on the market than in many many months.
Sales – new multi-month highs? or NOT?!
why are we at a multi-month high in listings? bull market?
I dunno.
You tell me – WHY?
RS, why are listings exploding higher? Is this because prices will only go up?
RS, are listings climbing because 70% of YOUR payment is going to principal?
Or what?
Gumba, answer us, you chachi – why are listings at a multi-month HIGH?????????????????????????????????????????????????????????????????????????????????????????????????????????????????
Rob good GUT.
Listings are climbing, at a new multi-month high.
Bullish? I did not think so. Your gut has a great track record. Stay off the ab roller, I like your Gut calls.
You were right – market is cracking before our very eyes.
RS must be a blind dingbat. Cause listings are at a NEW multiMonth HIGH.
Yes, more listings than in MONTHS for desperate buyers to chase…
that said, where are the buyers – on vacation, spending their mulla from recent flips on hookers and coke? I dunno, but they are in short supply.
RS, your an idiot – just wanted to let you know, you gumba.
RS
Focus on this
Simple question
Just this
Simple question
Now, focus.
Think.
WHY
Yes, WHY
Why?
Are listings at a new multi-month high?
Come on gumba, you must know. You know everything. Prices rising for years ahead and all of that. Yet supply at new multi month HIGH.
but WHY.
Huh – say again = WHY?:???????
Prices in my target area are crumbling………down I’d say 15% in the past few weeks.
83 StatisticalHoundDog
Yes Supremely bullish-it means vendors are certain of achieving their high prices before starting the second wave-move up buyers cash rich from selling to first timers-driving the next leg up.Also try to stay in proportion-i.e.listings to sales ratio–how is M.O.I.?
In Kerrisdale prices look to have softened by about half of that level, but new listings are now the norm not the exception.
Yes, the marke appears to be softening.
I will look to buy soon.
WoW!
RS, great retort to new high in multi-month listings count.
Yes, you are right, it must be bullish. Yes, must be sign of next upleg. Of course, rise in listings is bullish.
MOI – my bet is we see an increase in MOI, you dufus.
Hope you are not ugly too. That would be sad.
Anon-I like your burst of creativity-those are some nice handles you came up with-I must have hit a nerve center accidentally:) Or did a troll get trolled?
RS, you evade. You duck and you dodge.
HOW COME listings are screaming upward to a new multi-month HIGH?
Supply, that is. Not demand.
BS, of course!:)
RS, I strive to impress, thank you.
But that begs the question – why are sellers bum rushing the market again? I mean, why sell when its hot, assuming its yet to get hotter, as you portray?
They must be the big dummies, eh!
And MOI higher, buyers in short supply – probably waiting for higher prices and fewer listings, I imagine? What gives?
Anon if you try to calm down I promise to try and behave-though you make it too easy.
Listings for all you buyers – come, your product awaits. No shortage here, its all you can eat.
RS, its not me you should worry yourself over. Its all those rentals on Craigslist that don’t get rented month after month that you should consider.
And all the sellers that are so silly in bum rushing the market while it is hot, what is the hurry, why drive SUPPLY to a new multi-month HIGH? Don’t they read the playbook?
“HOW COME listings are screaming upward to a new multi-month HIGH?”
ummmm?
could it be there is a shortage of buyers?
is it possible the pent up demand has been satiated?
one ponders the imponderable……..
Anon I guess you were right-according to todays number there are already 31 listings more than 5 days ago-out of 13450-obviously markets will collapse-and the rains are coming to wash all the speculators away
haha RS, you regale me with your simplicity.
Let me tell you what is….NEW HIGH in listings over the past several MONTHS.
NOT buyers crushing supply over…but as BS indicates….buyer demand sated…
ever try to get your u know what to rise when your sated – no matter how tempting, it just does not get going…
Welcome toe the inflection point – Viagra not withstanding.
RS, dummies like you are always late to learn, don’t take it so personally.
104 blueskies Wed, Oct 21, 2009 | 8:09 pm
Are you still watching the Gibsons market?Ihavent noticed a pick up in listings but haven’t really looked for a while-but rental demand seems stronger than past winters,perhaps because tens of seasonal rentals are gone now that the Squamish Band are developing their waterfront here
it’s all downhill from here!
you heard it here first……
RS, as buyers survey their target markets, they will surmise that there is MORE to choose from…I’m sure that will panic them into buying faster and multioutbidding their competition to WIN
As sellers survey their target market they will surmise that there is MORE to choose from…I’m sure that will panic them to RAISING prices and holding out for MORE MONEY, as the multibidders chase after them.
Or…NOT.
rs:
toying with an offer at the moment
also have a friend that has made a couple of
lowball offers…. no bites …yet.
RS, native indians are notorious for great market timing – or did you not know this?????
BS, ya, you nailed it…..the lower than past peak recent peak has peaked…let’s see REBGV spin October….and note that spin will be really tough next year as yoy comparisons for sales volume will look….
HORRIFIC.
Worst than Horrific, they will be Robertscreek HORRIFIC>….
106 Anonymous Wed, Oct 21, 2009 | 8:15 pm
Can’t say I have encountered your problem but then some of us naturally see things pointing up while people like you may tend to see things being down
RS, your flacid comments annoy but do not penetrate.
Why are listings at a new MULTI MONTH high?
Why?
I’m a simple lady – just tell me WHY listings are SURGING????
110 blueskies Wed, Oct 21, 2009 | 8:21 pm
Ah well the gods willing we might be neighbours-let me know how it shapes up
113 Anonymous Wed, Oct 21, 2009 | 8:24 pm
A turgid response is called for-higher prices
yes, of course RS, more listings = higher prices
Yes, I understand, the koolaid tastes great.
As BS said, I think this recent peak, which is BELOW the last peak, has peaked. The market turns down. Rob’s GUT has spoken.
Go back to sleep, disappear, come up with a new handle.
should listings breach fourteen thousand
game
set
match
we tumble.
didn’t low rates drive Japan property prices higher?
i thought low rates cured every ill……
yes, RS, higher listings indicatd a more bullish market.
i understand your flacid argument, its a numbnuts approach that speaks volumes. More FOR SALE signs equals higher demand – got it.
“should listings breach fourteen thousand”
it’s over when the fat lady sings……
well the fat lady is on stage singing her tits off…. it’s over
proverbial tipping point!
yes RS, you struck a nerve.
The supply and demand nerve that is.
Let the fundamental games begin.
BS, I tend to agree…I think we need to see 500-700 MORE listings to fully proof this out, but yes…this could be the proverbial tipping point, we could have a very very very ugly lead in to the Olympics. Imagine even higher listings in advance of the games….visitors will be overwhelmed by all of the For Sale signs littering the streets…..even to my amatuer eyes, there are a lot of them…in fact, we have more For Sale signs than we’ve seen in months and months and MONTHs…a new recent high in FACT.
oh great poster of a thousand names!
yes the euphoria is contagious!
mygutsez: you can never own beer
only rent if for a half hour……
122 BS for President Wed, Oct 21, 2009 | 8:38 pm
The bullish side of that is all the jobs making signs-and sold stickers
122 BS for President Wed, Oct 21, 2009 | 8:38 pm
Don’t worry more listings will happen-because of higher prices
higher prices will choke the market
buyers will balk at excessive demands
sales will drop….
Holy xxxx, someone needs a higher dosage. And Robertscreek needs a thicker skin and less bombastic bluster, not too mention an introductory statistics course. Hint… The median is often a lot more significant than the average. (Nine people in a bar, complaining about how the paycheck only lasts 13 days… In walks Bill Gates…
Interesting times, oh yes. What ever happened to the “great moderation”? You know, they’ve figured how to fix the business cycle and avoid recessions and so on.
“Interesting times, oh yes. ”
yea well when the catholics want to merge with the anglicans ya gotta figure…. yep end times…..
127 Alexcanuck Wed, Oct 21, 2009 | 8:55 pm
So you have some new numbers to wrap up our previous discussion?Median workers’ age ?
As for thicker skin,don’t worry I don’t even notice the little pricks…
There is nothing special about 14k listings. The market is still strong. An extra 500 listings is just a rounding error. In any case, we won’t be hitting 14k until next year. Most likely we will be in the 12’s by this time next month.
“Most likely we will be in the 12’s by this time next month.”
Then, the question is: What are the sales volumes by this time next month? It will certainly drop, due to seasonality.
Jimmy, I expect we will see the normal seasonal trends resume themselves (unlike last year’s anomaly), which would mean a drop in both sales and listings. Sales will probably fall off more quickly than listings. I don’t think we will see much price adjustment as that seems to carry a momentum of its own. Price increases will probably start to flatten off towards the end of the year and maybe dip early next year. By spring, I expect another good market with strong sales, which will propel prices to new highs.
OK.
Robertscreek takes first prize for comment #130… i would have change the word “the” to “you” however for more of a zinger!
Anonywow takes gold in the category of extreme excitement under 14K (thanks, i enjoyed that) and creates a new record in new handle creation after a bottle of wine
But dave has just thrown cold water on the whole damned thing by reminding us that listings completely die by the end of the year so we’re going to have to wait until those drat Olympics come and go.
Dave 133,
“Sales will probably fall off more quickly than listings”
Wouldn’t this mean that inventory will increase?
“By spring, I expect another good market with strong sales, which will propel prices to new highs.”
Dave, based on the past 5 or 6 years, I can’t argue with that. However, with each passing year, I’m thinking this trend is gotta end, but we’ll soon find out.
Jimmy, no it doesn’t mean listings will go up. They will still fall as they do each winter. I am just saying that the rate at which listings fall will be lower than the rate that sales fall. In other words, ‘months of inventory’ will go up. But maybe that is what you meant by inventory.
Dave,
Based on your statement “Sales will probably fall off more quickly than listings”, this mean total inventory will increase from where it is today.
eg. Start with 10,000
It’ll be higher than 10,000 in a month from now.
Active blog tonight, how about a little more content to match all that energy, WoW and robertscreek? Go pull up some numbers, pull up some MLS stats, get data on the SLC RE market from 2000 – 2005 for fun.
I haven’t been following the total listings, but looking at Paul/Gavin’s stats, it looks like listings are level to falling this time of year.
http://www.nvcondos.ca/listings?pathway=127&pageId=33
And with THE OLYMPICS just around the corner, if there’s no flood of listings now to get out before post-OLYMPIC malaise, we’re not going to see one. Unless we get some interesting global trouble, I see this market sailing on for another six mos to year or so. Then it will be anybody’s guess as to where things go. But at some point there won’t be enough $ in the BC economy, or certainly some subsets of it to service all that debt, and unless incomes shoot up in $s, home prices will go down.
(Unless, of course, the Canadian gov’t starts giving buyers $ for free to buy houses, then they won’t go down as much…)
WBWUCR’t'13?
Here’s a constructive topic for ya’all — what happened to Paul’s blog?
He was the Realtor of the Year in the Georgia Strait not too long ago, right? I’d think that blog with the easy-to-find charts and stats would have been worth enough to its new owner to maintain it.
I just went there for the first time in a while. I had to hunt to find the stats, and the charts hadn’t been updated since Paul shipped out.
http://www.nvcondos.ca/listings?pathway=127&pageId=33
It looks just like any other Realtor’s web page — there’s nothing on there that says “this is THE site for GVRD Real Estate stats. We manufacture the stats here every night, and people come from far and wide to the oracle of NVcondo.ca to read the tea leaves…”
Thoughts?
WBWYCR’t'13?
robertscreek — a couple things
You wrote
Post 74
>> because payment was set for a 4-5%Rate while interest is only 1.875%
>> now .Sweet ,huh
Sweet, yes, no question there. Congrats to you. I’m also pleased with the choices I’ve made over the last 10 years regarding properties.
That doesn’t, however, mean that someone in the same position I was in 10 years ago would automatically do well doing the same things I did.
Post 75
>> 73 Whybuywhenucanrent?
>> True the downtown is not my turf-but you threw those numbers out
>> there so I thought you knew the place
I do a post like this every 3 months or so, usually the numbers come out of the woodwork. I guess there’s nobody in tune with the market this time around. (romeo, romeo, where art thou romeo?)
WBWUCR’t'13?
And back to Gavin/Paul’s stat site — I imagine Paul got a fair bit of business by being seen as sharp, fair, informed and a modest sort of guy. So it baffles me that Gavin makes no effort to convey his role as a regional expert on his page.
I’m glad he’s keeping up the numbers, though.
Thoughts, anyone?
WBWUCR’t'13?
WBWYCR, I doubt Paul got much, if any, business from his webpage. His take was that real estate was too expensive and that it wasn’t a good time to buy. Whilst that is an honest opinion, it hardly drives sales. And further, most of the visitors to his site were quite bearish on the the market and were not in a position to buy. If the market had corrected more than it did and if prices had stayed low, then I think he would have been rewarded.
I can’t fault Gavin. He’s got a business to run first and as you say, he still kindly provides numbers.
Jimmy,
Let’s say we have 15,000 listings now and 5,000 sales. That would be an MOI of 3. Let’s say in two months we have 12,000 listings and 3,000 sales. That would be an MOI of 4 because sales fell more quickly than listings.
Does that clarify my prediction?
Good Morning, All… this morning’s MSM ‘harvest’ (and one not so MSM) yields the following timely (from GuyCaballero’s perspective) pieces…
(CalcRisk) – Apartment Rents “Plunge” in the West…
http://tinyurl.com/yhwnhvv
(CNN/MONEY) – What housing bust? During the past three years, home prices grew in the beer-guzzling heartland and fell in the wine-sipping coastal states…
http://tinyurl.com/yz67o6q
(WSJ) – Waiting for the Next McMansion to Drop… Apartment rents may face further downward pressure as investors buy foreclosed single-family homes and turn them into rental units, says Ryan Severino, an economist at Reis, who notes that there is little data on the number of houses being converted into rental properties….
http://tinyurl.com/yfo7gwp
Further to Domus/65, here’s another article on the CMHC bubble: http://thetyee.ca/Opinion/2009/10/22/BubbleWillBurst/
OK, it’s only the Tyee, but this story has spent the week rattling around a couple of news outlets and blogs with varying credibility. It’s interesting to see that it has legs.
dave@143
“Whilst that is an honest opinion, it hardly drives sales.”
It speaks volumes about your opinion posted on this and other sites.
” it hardly drives sales”
freudian slip?
THE hidden agenda??
its a simple game
one of supply
and
demand
supply is increasing (let’s see what happens with the rest of the week)
demand – buying appears to be slowing – i await the month end data for confirmation on this (jury is out)
MOI is rising, and if it keeps going up, sellers will have smaller ballz and buyers bigger
just the way the law of the jungle works
did you hear all of the intense questions being put before mark carney this morning on the housing bubble? the fed’s will want this wrestled to the ground soon….and there were lots of questions about the level of canadian personal debts….it was a bit of an intense dialogue, looks like the press smells blood….any comments?
Robertscreek:
Why do you think total listings keep climbing?
BS for President/ (WoW?)
Any link for that Mark Carney comment?
asalvari (148) / BS (149), I am not a realtor nor do I market RE.
If you were buying a car and the salesman said it was too expensive, would you end up buying it? The reality of our world is that honesty doesn’t always drive sales. I commend Paul for being straight with his clients / potential clients, but I doubt he got much action from his loyal readers.
dave@153
What drives you ? I mean what is that you want to find on this site, where you frequently post data and your opinion ? Why you do that? What is that you receive back from this site ?
I know certainly that I will be gone the day I buy. I will come back to check the action when its time to sell or upgrade. But I cant really figure your continuous contributions here.
dave@153
car salesman would show me different car that make more sense to buy, or will ask me to wait for the new promotions coming next month that would lower the price.
Yes, it is possible. (or find better example)
Paul was chosen the best Realtor for reason – he certainly had enough clients to vote him up there. I would say that the site he used to maintain is part of his success.
Listings in the Valley are exploding (that is higher listings RS), very evident. Lots of pre-sales will come back on market too. Perhaps Olympic visitors will come out to the Valley and buy it all up?
My realtor sister-in-law sold 16 properties since February – but none in the past month – she say’s it is cooling off, that is her opinion (say’s its just the winter and poor weather………).
dave (144) wrote
>> WBWYCR, I doubt Paul got much, if any, business from his webpage.
>> His take was that real estate was too expensive and that it wasn’t a
>> good time to buy. Whilst that is an honest opinion, it hardly drives
>> sales.
Um, 50% of all parties in a RE transaction are *sellers.*
I’m sure there are plenty of people around who are holding onto property because of capital appreciation potential, but are ready to sell when the tea leaves make the call. Assuming Paul did a good job of marketing properties for sale, I’d imagine he got plenty of business. (Unless potential buyers like to scour a Selling Agent’s blog for his personal opinions on the market. As long as the Selling Agent doesn’t wear it on his sleeve I doubt many buyers are savvy enough to be talked out of the deal by written comments made by the Sellers Agent.)
dave (153) wrote
>> If you were buying a car and the salesman said it was too expensive,
>> would you end up buying it?
I suspect Paul’s marketing was more toward people who *owned* used cars and were deciding whether or not to put them on the market…
>> The reality of our world is that honesty doesn’t always drive sales.
I couldn’t agree more. That’s why I’d like to see a bit more mandatory disclosure from the RE industry.
WBWUCR’t'13?
No one gets much sales action from online blog readers! That’s a secret most marketers wont tell you!
AC,
Here’s Carney’s tepid statement:
http://www.theglobeandmail.com/report-on-business/central-bank-monitors-housing-rise/article1334321/
Next up quantitative easing. Won’t that keep mortgage rates down, if anything?
He says, ” We remind people that borrowing is for the period you are going to borrow, not just for the moment you take out the loan.”
Gee thanks Mark. I thought borrowing was so I could afford this 1.2M home?
Ontario deficit/economy much worse than previously predicted…guess they will have to go to the bond market and borrow more..remember what happened to rates in the 80’s when governments crowded out the private sector in the debt market – remember that?
Two more for Sale Signs in my daily commute, no new orange sold stickers lately….but June-Sept was hot, and for bears it was not…but gravity eventually takes hold, it appears to have started to do just that, despite RS and Denial Dave’s consernations….
VD 160 –
The last two paragraphs of the article are pretty tell-tale in that the BoC sees an issue with the current housing bubble. People are in way over their head based on all time low interest rates. It seems to me an admission that rates will be rising (and soon) and many people are going to be hurt. Why else study how many people are going to be affected?
In this city, many people purchased on what they are paying today without any regard to what the actual cost of their purchase is. The only thing looked at is the monthly payment. It’s all about today, why worry about tomorrow when rates go up? My property will be worth way more in 5 years so I can just sell…no worries. Oh well, times are different and that may not necessarily be the case for many.
Unfortunately, as a taxpayer, I think I’ll be part of the solution.
VD/159,
You know this, o’course — but don’t underestimate how deliberate the BoC is with their guidance. In his day job (when he’s not tut-tutting the real estate market), a poorly worded sentence has serious consequences in the markets.
Carney speaks softly and carries a big stick.
Personally, I am tired of all the mixed signal language from the BOC, and this is coming from someone that works in governments relations and writes/understands “bureaucratise.” Raise them now, later, in 2025 – its become quite boring thinking of when they will rise…like watching paint dry…
With all the Olympic hype and hidden cost information arising and civil rights infringement going on, I have decided to leave Vancouver in February.
I am going to join the Olympic bandwagon and try to rent my place out of a couple of thousand to pay for my trip : ) That’s what the Olypmics is about, no?
I am heading off to the Philippines for business, and then off to Vietnam and Cambodia for vacation for a couple of weeks.
This place is getting me down
The girlfriend and I just booked to Machu Picchu for two weeks
Hopefully the strength of the market starts to erode by the time I get back
Breaking News
Moody’s place BMO debt on review
Moody’s says it may downgrade bank’s debt due to weaknesses in its U.S. operations
Tara Perkins
Credit rating agency Moody’s Investors Service has placed Bank of Montreal’s debt rating on review for a downgrade.
there is increasing MSM focus on CMHC and boc policies…me thinks they are starting to feel some pressure…
MIA good luck renting your place out (sincerely), I bet a lot of folk are thinking the same thing….
Thanks Anon.
The beauty is that if I rent it, its all gravy – it makes no difference to me financially. I don’t think you can say the same of all those new “landlords” that bought with the intent of having the Olympics pay their mortgage…
dude on BNN this morning predicting the Cdn$ hits 1.20-1.30 vs the USD by Spring – what do you think? Sounds crazy to me….
SOMEONE BUY MY HOUSE, IT HAS BEEN LISTED FOR SIX MONTHS AND NOT SOLD WHY NOT?????? WHERE HAVE ALL THE BUYERS GONE?
6 months and no action = price too high
This isn’t directed at you, MIA, but I wonder how many Olympics landlords will be paying the appropriate tax on their rental income…
MIA…. BonVoyage!!! & beware the Typhoons!…
” detachment from fundamentals “ Rob, respectfully, because its your blog,your assessment of the fundamentals is wrong. Obviously, because people are still buying and paying world class prices for YVR real estate.
The real fundamentals are as follows: this market is driven by the wealthy and the now freed pent up demand of those that sat on the sidelines for the last 5 or 6 years. Quoting average incomes to calculate affordability is futile, because average income erarners are not now, nor will they ever be, buyers. It has always been thus.
UPsurper, whaaa???? huh?
HOwz da coolaid?
Gimze me a Braksz, de MaKit id dun liqe diner
http://www.housepricecrash.co.uk/graphs-bubble-lifecycle.php
Some interesting YOY stats on the US economy. Note the number of underwater mortgages has increased 66% YOY.
Unemployment
November ‘08: 6.6%
October ‘09: 9.8% (up 50%)
GDP
November ‘08: $14.3 trillion
2nd quarter ‘09: $14.1 trillion (down .25%)
Housing starts
November ‘08: 655,000
October ‘09: 590,000 (down 10%)
Food stamps participants
November ‘08: 31.1 million
July ‘09: 35.9 million (up 15%)
Home mortgages underwater
November ‘08: 15 million
October ‘09: 25 million (up 66%)
Deficit
November ‘08: $450 billion
October ‘09: $1.5 trillion (up 300%)
If listings drops to the 12′ s it would have to be from listings being pulled, listings always drop this time of year…
usurper:
Average income isn’t a fundamental. Never was.
The only reason the BOC is even contemplating a housing bubble is because it’s happening in Ontario. If it ceases there and continues here, we’re on our own:
http://www.chpc.biz/
you guys just don’t give up ! still banging on about the market and hoping prices will go down ! this is becoming savagely boring and kinda sad.
to those who haven’t bought in the last 7 years, just what exactly have you been doing ? did you pick up a newspaper in the last 7 years.
didn’t you realise that NOT buying, based on your assumptions that the market will correct, is just another form of speculating?
rob, you’ve done a great job on this blog but the amount of market panhandlers who are begging for the market to change is depressing.
r…j 177
thanks for the chart at http://www.housepricecrash.co.uk/graphs-bubble-lifecycle.php
now put that side-by-side with Teranet’s Vancouver chart http://www.housepriceindex.ca/Default.aspx
and it looks like we’re somewhere around ”Return to Normal” … which really means fasten your seatbelts sports fans!
Anonymous 182 … “didn’t you realise that NOT buying, based on your assumptions that the market will correct, is just another form of speculating?”
How so?
If I buy an asset (any asset), my capital is at risk and to a certain degree I’m speculating. If I short an asset, same thing. If I don’t participate at all, I have nothing to gain and nothing to lose … ergo, no speculation. House prices can go up, down or sideways and it doesn’t affect me or my net worth in the slightest.
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Anon/182,
Extract your monitor from your fundament and read once in a while. Quoth Rob: “the detachment from fundamentals in this market led us to explore other markets for investment opportunities.” So I guess he’s a savagely boring, kinda sad market panhandler, too.
Seven years ago I was in no position to buy. Since then, I have lived in three other provinces and another country. None of these things would have been possible if I hadn’t been busy busy “speculating” (read: enjoying) all that time.
Your argument is, bluntly, bunk. I don’t invest in the junior mining stocks. Does that mean I’m speculating there, too, since I’m not buying? I don’t think so.
Turkey:
Not to overstate the obvious, but if you had bought 7 years ago you would have been getting downtown $1200/month condos for the $150k range, you would have more than doubled your money based on purchase price, and probably made a 500% return once leverage was factored in, all without having to struggle (aside from the DP). There’s a great argument for keeping your powder dry and picking your spots (don’t tell Noz that – he’ll start foaming at the mouth again
)
You’re right, but that’s not the point I was trying to make. For me to take out a mortgage, even on a $150k condo, would have been (a) financially unlikely 7 years ago, since those were starving student days, and (b) a big mistake, since I’ve since been able to starve more glamorously in a number of other climates. No foam required.
Have you guys seen this? it is pure insanity!
http://tinyurl.com/yz2pgtt
The Metro Vancouver Housing Corporation is losing many of its moderate-income tenants to the housing market.
With variable mortgage rates going as low as 2.25 percent, plus incentives being offered by sellers, families are buying homes and moving out of affordable rental properties operated by the public housing body, according to a report by regional housing manager Don Littleford.
Isn’t this a colossal bubble?
The more I read about the backing of the feds to the CMHC, the more I realize the rules have changed, the more I realize that being financial prudent was and is the wrong move.
This recession and housing bubble has taught me that individuals that engage in “risky” practices will be bailed out “somehow” either by the banks (e.g. mortgage relief) or by joe taxpayer through the CMHC.
It is exactly this type of moral hazard which makes more and more “play by the rules” Canadians lose faith in their government, which creates a greater degree of alienation, and eventually a compromised normative order.
I told our director of finance that if individuals who lived beyond their means and threw caution to the wind via excesses debt loads did not get “penalized” during this recession, then all I learned is that I need to take out as much free money as possible and speculate in every sector where bubbles can form.
I will be the eternal optimist from this point forward, knowing that there will never be any repercussions…aaahhh….you have to love this country
pbtr 189: Why don’t you send this comment to: (1) BoC Governor Mark Carney, (2) Minister Responsible for CMHC Diane Finley, and (3) your MP and ask for their blessing to be financially irresponsible? Love to hear what they have to say …
Play By The Rules 189 … “individuals that engage in “risky” practices will be bailed out “somehow” either by the banks (e.g. mortgage relief) or by joe taxpayer through the CMHC.”
Not true. CMHC provides mortgage insurance so if someone gets into trouble their mortgage will be covered … and for that, the borrower pays the insurance premium.
CMHC insurance protects the banks who lent the money, NOT the borrower. If the borrower goes belly-up, the house will be foreclosed, put up for sale and the proceeds used to pay off the mortgage first. If that’s insufficient then (and only then) CMHC will get involved to cover the difference to the BANK. And who’s completely last in the foodchain? The borrower! (as it should be). They (correctly) stand to lose it all.
You may mixing up US mortgages and Canadian. In legal terms, we have what’s called “normal recourse” mortgages which means you can’t walk away … and if you do, you still owe the money. In some states, they have what’s called non-recourse loans, which means technically you could walk into your bank, throw the keys on the counter and legally walk away. I’ve heard the term “jingle mail” for envelopes containing house keys.
Bottom line: Canadian mortgage laws put the borrower firmly on the hook … sans bailout. I think you may be reading too many US articles and thinking it’s the same up here. It ain’t.
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Watch out for next year’s property tax bills
This sounds good if you say it fast, but in reality it’s smoke and mirrors. Property tax in any given year is a zero-sum game. Municipalities decide how much money they want, then divide by the total tax base to figure out the tax rate. If one property owner saves money by getting a lower assessment, then others pay more — it’s as simple as that.
And that is what happened.
For some of us — for example, most condo owners in Vancouver — our 2007 assessment was just a few percentage points lower than the 2008. For higher-end homes and many businesses, the difference was a little a greater, although still not huge. But for a few business properties — mainly the high-end office towers — the savings were very large.
Of course almost everyone chose the 2007 figure, because it was almost always lower. But most of us didn’t save any money. When our municipalities added up the total value of assessed property, the figure was quite a bit lower than it would have been if they’d used the 2008 assessments. So the tax rate worked out to be quite a bit higher — and the total amount of money they extracted from our pockets and purses remained exactly what it would have been if the government had left well enough
http://tinyurl.com/yf9pel3
191 con’t
and further, if someone did default on their mortgage:
1) they couldn’t possibly have made any money doing so, and
2) they wouldn’t be able to get another loan for a very, very long time. the banks would treat them as a former bankruptcy and wouldn’t touch ‘em.
Basically it’s a really, really dumb thing to do and your handle (PBTR) is the right thing to do.
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191 ex-Banker Fri, Oct 23, 2009 | 12:30 pm
Good point and one of the reasons defaults here are 0.50%versus 10% there.Still there is an implicit Government guarantee that if you are reasonably prudent and somewhwere in the middle of the herd you won’t get taken out by the recession wolves-once defaults hit a certain level interest rates etc will adjust to save the bulk of owners.
BS 192 … “and the total amount of money they extracted from our pockets and purses remained exactly what it would have been if the government had left well enough [alone]”
So let me see if I’ve got this straight. Some civil servants (presumably paid by our tax dollars) spent a lot of time and energy deciding how to re-jig the system so they could extract the same amount of money from us.
What a shining example of our tax dollars at work.
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Ex-banker: what is the insurance premium paid to CMHC? If you look at the money these sub-prime borrowers are saving on interest (mortage service cost of ownership) the insurance premium is peanuts. These guys SHOULD NOT be able to borrow those amounts at those interest rates (some below 3% !).
This is a hand-out from taxpayers to home buyers with little or no credit. The government should be held accountable for its actions, especially at election time!
196 domus Fri, Oct 23, 2009 | 12:45 pm
But indirectly they help 65% of the voters-homeowners,so the odds of change are low,regardless of how you vote
Homeownership rate in Vancouver is below 50%. If you add absentees and investors, probably even below that.
196
Exactly! Because of a taxpayer supported agency, they received discounted rates that allow those that would have been unable to participate in the real estate market to participate.
It is also interesting to note emerging stories of perverse differences in rates and allowable mortgages, where those that have less than 20% down and have CHMC insurance receive greater mortgages and better rates than those that are financially prudent and put more down. If this is the case, then the system is even more geared toward those that take unnecessary risks.
197 – Just as the current rules were altered in 2007 to give more fuel to the market (0 down/40 year) , they can be changed as well to help deflate the market. We did see the elimination of the zero down, 40 year mortgages by the same government that implemented them, and there was zero public outcry. If CMCH was to change the rules on minimum down payments, it would not affect current homeowners, and only potential homeowners, who lack political clout.
And careful when assuming that just because there is a 65% homeownership in Canada, that that somehow translates into power to alter situations that may adversely affect them. You might as well say that interests rates will never go up because the “government will not allow it” because it will hurt too many people. Of course, we know that it is the bond markets and international capital which determines interest rates, not the government.
domus 196 … “This is a hand-out from taxpayers to home buyers with little or no credit.”
domus, the taxpayers don’t pay a cent into CMHC … they never have … it’s entirely funded by the premiums high-ratio borrowers pay.
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PBTR 199 … “If CMHC was to change the rules on minimum down payments, it would not affect current homeowners”
Oh, you must mean OTHER than immediately devaluing their homes because a whole slew of potential buyers just disappeared. Yup, you’re absolutely right then. Other than devaluing their homes it wouldn’t have any impact on current home owners at all.
Ex-banker: “domus, the taxpayers don’t pay a cent into CMHC … they never have … it’s entirely funded by the premiums high-ratio borrowers pay.”
Yes, at the moment, you may correct. The premiums would be hardly enough to cover default rates of even 3% the outstanding insured debt. Tax paers would be on the hook for it.
If the private market was to provide that kind of insurance, the risk premiums paid by borrowers would be much, much larger.
201
Oh, I am sorry, I forgot that the changed rules with the elimination of the zero down/40 year amortization to the current 5% down/35 year amorization has devalued Canadian’s homes and eliminated a whole slew of potential buyers…..
yup, I guess the market has been tanking and prices plummeting for current homeowners with that change in a minimum down payment rule….you are absolutely right that those current homeowners have been adversely affected…darn prices increases
Touche 203!
Bear fights are so much more interesting than bull fights.
ROB:
Spare us the voodoo math and your metrics that you drivel on and on about.
No matter how you want to paint it, it’s a big risk and gamble at that. Bring it on with your examples and claim of you’ll own me in figuring stuff like that out. I’d like to see just how math…besides arithmetic…you actually know.
Your turn to foam a bit more now:)
Noz:
You claimed that I “ …fail to mention is the number of people who fail at it. The side of the coin is almost never talked about or represented” .
That’s inaccurate. I don’t fail to mention that. I recommend buying on strict metrics precissely because doing otherwise can be disasterous. Note that you haven’t asked aquestion here, but simply made an innacurate statement.
You go further and say “…I just think it’s a waste of time IMHO. It’s one of those over-glorified get rich schemes that people feel compelled they must try. Most scams always have low budget “late night” ads for their stuff…is it any surprise buying RE cheap on the dollar has its own?”
You’re probably describing something you’ve seen, but you’re not describing anything that I’m talking about. You’re equating it to me and using the word scam, but again, you’re being innacurate. I’m not selling anyone anything. I’m simply showing people what some investors are doing. Again, you’re not asking a question. You’re just making innacurate statements and trying to change the subject into something you want to argue about.
I did ask you a question, of course, but I’ll repeat it: was it a waste of time for investors to buy real estate pre-boom on good metrics? If the boom hadn’t happened and they simply bought property with 25% down that carried itself and appreciated, say, 3% per year, and threw off some tax benefits, would that have been, how do you say, “amusing” enough for you? And given that the boom did happen, and that people saw it coming and witnessed it happening, can you really say they were just lucky?
I asked you a second question as well. When you said that you could “…state examples of people who suffered miserably and lost everything due to real estate investments and rentals..even when they went into it with headlong profit initially” I asked you to provide some examples. I’m still waiting.
Around that time you asked if I’d been to Phoenix. I answered you promptly.
You then write:
“I’m not changing the subject…you just don’t answer questions like usual.
As I said, you shouldn’t take it personally because I’m not talking about YOU. ”
You asked one question. I answered it. If you have any others, spit them out. You say you’re not talking about me, and that you’re not changing the subject. You can’t have it both ways. You’re either talking about my post and buying cheap property on metrics, or you’re not. If you are, then you’re talking about me. If you’re not, then you’re changing the subject.
“No matter how you want to paint it, it’s a big risk and gamble at that.”
Really? How about buying an apartment in Vancouver for $64,000 that rents for $550? What do you think the IRR is on that? Do you think the interest expense and depreciation are worthwhile? Is mortgage paydown on that a gamble or pretty much locked in? Those three things, mortgage paydown, interest expense and depreciation, are those the things you consider “voodoo”?
How about a downtown Vancouver condo for $150,000 that rents for $1250? (How many of those can we point to, I wonder? I guess anyone of the hundreds completed in Vancouver in 2000-2003, no? Anecdotal enough for you?)
What about a Maple Ridge 3 bedroom two story house bought in the 90s for $170k? Renting for $1300 at the time with a suite, but of course rents climbed. Again, those had predictable mortgage paydowns, interest expense and depreciation costs, but most attractive was the neg cash flow (if it could be arranged, because in those days it was tough to lose cashflow on property) so there was a fourth predictable tax benefit of deferrring tax on income to capital gains tax.
In short, how can you complain that real estate is too expensive while not admitting that its been a great investment? How can you argue that its a risky gamble, like any other, when so many of its variables can be nailed down?
rob:
good rant!
didn’t read all of it but it “flowed”
ROB:
Stop ranting and just put up some numbers as to how many are actually successful at doing what you think is wildly successful…..it’s quite simple. You haven’t answered that yet and I doubt you will.
As I’ve said before, you’re ridiculously verbose….perhaps because behind all that talk there’s not much there.
Can you get those numbers or not?
In short, how can you complain that real estate is too expensive while not admitting that its been a great investment? How can you argue that its a risky gamble, like any other, when so many of its variables can be nailed down?
To answer that nonsense, just because something is cheap doesn’t mean it’s a good investment…where on earth do you get that from?
Nailed down the variables? LOL….It’s ridiculously ironic you state that when the renter is the biggest and least controllable variable in rental properties.
And plus….your examples…can you get any more vague than giving a property price and a rental monthly price? Big deal….how many vacancies do you have? What are the expenses with these properties? How does the return change based on occupancy percentage? What’s the GRM based on occupancy? How long will it take to make back the price of the property at your desired NOI?
Do you factor in the headaches associated with rental properties and the hassles with dealing with renters…or is that magically reduced to zero in you metrics calculator?
Noz:
I average 12 vacancies per month.
I collect somewhere north of 1/4 million in rent per month.
I deal with the headaches of renting as a business.
I pay the monthly expenses.
Nobody ever said some people buy real estate unwisely and suffer as a result.
I said buy real estate wisely. You called that a scam and said I forgot to mention the downsides. That’s inaccurate.
[...] Phoenix Investments by Rob Chipman January 19th, 2010 No Comments [...]