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Let the seller beware

LORI MCLEOD AND PAUL WALDIE

From Friday's Globe and Mail

Latest comment posted at 10:58 PM EST 25/09/08

Listings surge, sales plunge and prices cool throughout Canada ...Read the full article

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  1. Wally Wally from Canada writes: “If you have bad credit, no down payment and a good job, you can't get a mortgage in Canada any more,” said Alex Haditaghi, chief executive officer of mortgagebrokers.com.,

    Bad credit,no down payment and a good job...shouldn't this be a clue? Maybe, just maybe these people aren't good with their money.
  2. Misery No one from Angus, Canada writes: The bull marker was built on a house of cards. It was bound to fall apart. But the banks mortgage companies and appraisers all fed at the trough and got fat.
  3. B C from Canada writes: Price sharply below recent comparables or endure the consequences. Prices dropping 2 percent a month and accelerating in Vancouver. A mountain of inventory. Construction in progress is unprecedented. Almost no buyers. 800k--a lifetime of savings--for a townhouse? This is madness, as people are now cluing in. That townhouse could be 400k in a few years.
  4. Steve I'm Not an Alberta Redneck from Calgary, Canada writes: In a few years, housing should be affordable, even for the young whiners. It was the same in 1980. I waited and saved. Glad I did. Many were advising me to do otherwise. I heard the same siren calls 2 years ago. An average house was "going to be over $1million" by now. What a crock!
  5. Rollo T from Belgium writes:

    Paul's a little late on his prediction on the housing bubble bursting, about 3 years, but, better late than never.
  6. Some Guy from Canada writes: I bought at a bottom 15 years ago. I fell sympathy for those who bought at a top last year. Hang on if you can. There will be another top in 5 - 10 years.
  7. Roop Misir from Toronto, Canada writes: Like water and other items of commerce, real estate prices will find their own levels (barring intervention, of course).
  8. Dick Garneau from Canada writes: Home buyers are spooked, just like those in the financial markets. They low ball offers, as a hedge against future lower prices.
    Only those caught in the credit crunch, who are forced to sell, will sell at low ball prices.
    Hopefully this is a short term blip, until the U.S.A. gets it's house in order.
  9. indy jones from Canada writes: Let see....$800 000.00 property......Just need 40 000.00 (5 percent) down as a mandatory down payment soon........Stock market is doing fine - who here is pretty confident about what is happening in the market????

    And soon there will be a 35 year limit on mortgages - so let's say a 5 year RBC term at 5.79 percent - this amounts to just $4,192.18 per month and the total interest for that 35 years is just $1,000,712.92.

    This is just plain crazy - think the stock market is gut churning??? -- GET OUT WHILE YOU CAN!!!!!!!!!!!!!!!!!!
  10. Binder Dundat from Toronto, Canada writes: It's going to be an interesting winter for the RE market, with the 40-year amortization/zero-down era ending, a gradual drop in prices taking the enthusiasm out of buyers, potential for ongoing turmoil in world markets, etc.

    Suddenly, half a million bucks for a crumbling townhouse with 1920s wiring, a 1970 furnace, and no garage isn't going to sound very fun.

    It's been so long since RE was anything but bullish that people have forgotten it's cyclical.
  11. J. Kenneth Yurchuk from Toronto, Canada writes: Check out Bill Carrigan at www.gettingtechnical.com. He's got a pretty good analysis of the housing market in TO. Shows a breakout on the down side and predicts a Bear for the next year or two.

    On the plus side he's got some convincing arguments about a pending end of the "bear" in US stocks.

    Carrigan usually is on the money.
  12. Ken Woodwords from Ottawa, Canada writes: Indy Jones: Add taxes, utilities and upkeep, it easily reaches 5K a month, 60K a year after tax money. I always wondered who could afford those houses. They are either double income professionals or plain idiots.
  13. Soon To Be Returning Expat from North Carolina, United States writes: Hey, an article that doesn't try to pass it off as a "stabilized" market, or a "cooling" market, or other terms they try and hide reality behind.
  14. John Connor from Around Town, Canada writes: Wally Wally from Canada writes: “If you have bad credit, no down payment and a good job, you can't get a mortgage in Canada any more,&8221; said Alex Haditaghi, chief executive officer of mortgagebrokers.com.,

    I ask again, just how is that supposed to be a bad thing?
    Having bad credit has consequences, regardless of job status!
    One of them is an inability for a time, to get MORE CREDIT.
    Lenders of last reort need to give their heads a firm shake and get back down to planet Earth for a while.
    They are not part of the solution, they are part of the problem.
  15. Alistair McLaughlin from Canada writes: We'd better do something about this. If this market keeps up, I just may be able to afford my first home in a few years. What an unmitigated disaster that would be.
  16. St. Anselm from Mexico City, Mexico writes:
    If people can't manage to set aside enough income for a down payment, why should anyone believe they'll be able to set aside enough to pay mortgage principal and interest, property taxes, maintenance, utilities, etc.
  17. j wilson from vancouver, Canada writes: Indy Jones, you've pretty much hit the nail on the head. What was once affordable because it was making money (in equity) is now laughably unaffordable because there is no guarantee in most markets that prices will be at mid-2007 levels for years to come.
    nor is there a guarantee that your next mortgage will not price you out of that home.

    There should be a rider tagged to this story about how much the poor dear paid for the condo. if she bought it for 5 and is still trying to sell for 8 (which is very likely) then she might be waiting for a while longer.
  18. j wilson from vancouver, Canada writes: There are no other markets in this country quite like the Vancouver condo market, but if I owned one and was selling, I'd list it today, I'd list it well under the average, and unload it.

    (Unless I bought last summer and had to sell. Then I'd unload it even more cheaply on the way to the bankruptcy trustee.)
  19. Bob Robblee from Innisfail, Canada writes: Since forever, the banks have mortgaged 75% of home value and CMHC has guaranteed the difference up to 95%. The last time I had to have a mortgage, an independent appraiser, not the real estate agent, assessed the property.
    Because of this system, we don't have the stupidity of the US housing market. But, the rapid rise in their values influenced values here and the fall there will be mirroed here, although not nearly as badly.
    When a house is priced far above the costs of land, materials, utilities and labor, it is a sure bet that a major cyclical downturn is going to happen. Just a matter of when.
  20. The Central Screwtinizer from Ottawawa, Canada writes: Its all a question of DEMOGRAPHICS folks...you have Babyboomers currently aged from 43 to 63 years old (Important-a 20 year period)...generally, the Boomers have already been retiring for 8 years since the age of 55 or more (unless of course they did not take care of business or circumstances altered the equation...), generally, so far their children have gone or will be going to college and/or in the process of leaving home...this cycle will go on for 20 years...as time went on the the Boomers had fewer children because median income remained at 1982 levels due to inflation making having children an expensive undertaking. Behind the Boomers there is not enough population, including immigration, to take over their jobs as they retire hence the high demand by companies for workers and its about to get worse because of the peak of the Boomers about to retire... Such is why the job creation numbers are always positive. Mainly they are job replacement figures you are looking at. So who is going to buy all of the large over-priced homes owned by Boomers is a good question should they decide to start selling... The homes that have been taken care of will be the most attractive...let us say...a handiman's dream will be sold for a song and a dance. For Sale signs will remain on lawns for very long periods of time...
  21. Loudan Bellicose from Canada writes: The $hit will hit the fan soon in Canada just like in the US.
    There is a relationship between the earnings of the average man and the price of the average house.
  22. Michael Peters from Vancity, Canada writes: There was a stat that I read only a couple of years back (2006 I think?) that families in Vancouver, on average, spent 75% of their PRE-TAX INCOME on the costs of their abode. 75% !!! Pre-tax income!!! That simply is not sustainable. A lot of Canadians think we don't have a pending mortgage problem here in Canada - we do. It may not be as bad as in the US, but I don't think we should be so smug. The banks have offered some crazy mortgage terms to a lot of people. Oh, you don't have a down payment? No problem! You've got a great credit history, so don't worry about it. You don't make enough money to afford a mortgage amortized over 25 years? No worries! We'll spread it out over 40! That way YOU can be a home owner (it's everyone's right, don't you know?), and WE (the bank) will be able to keep you a slave to your mortgage forever! And don't worry if times get tough for you and you have to sell your property - RE always go up, so nothing to really worry about! The only thing to worry about is not getting into this hot hot hot housing market right away! Artifically low interest rates and these bogus mortgages appear to have made housing more affordable, but in reality, it's served only to fuel RE inflation and build a nice little house of cards.
  23. Kim Morton from Canada writes: Considering that most houses in the lower mainland are listed at about twice their real worth it is not surprising that prices are starting to fall. Lots of speculators will rightly get burned and cry lots. These are the same ones who bragged about the huge profits they were reaping last year. The ones that will be in the biggest problem are those who stupidly borrowed against their paper equity to blow on toys and holidays. Look for good deals on SUVs campers,Harleys and boats.
  24. Peter Simpson from Vancouver, Canada writes: So the Globe still accepts comments from "David Wolf, a Toronto-based economist at Merrill Lynch & Co." Considering how well Merrill Lynch is doing I can see why;-)
  25. Chris Halford from Ottawa, Canada writes: The prices have got a long way to fall in places like Vancouver and major Alberta cities. The prices in those areas have gone crazy, like the American housing market. If ordinary Americans had been able to afford reasonably-priced places, there would never have been such a big market for the sub-prime mortgage scam. I just hope that ordinary people don't get too badly hurt when the prices crash, as they will. If the 80s are anything to go by, when Nelson Skalbania and Peter Pocklington speculated the market into the stratosphere, first in Vancouver and then on their Eastward trek, there will be pain. In the meantime, I can't make myself feel too sorry for somebody who'll "only" get 3/4 mill or 800 grand for her place.
  26. Hairy Wrangellian from Saltspring Island, Canada writes: So you own one of those over-priced houses in Vancouver and decide to sell it now before things get worse - what are you going to do with the money? Put it in the stock market? Keep it in bonds? Cash? Gold? We're in for a pretty bumpy ride for the foreseeable future as energy gets a lot more expensive. If you're not carrying a lot of debt on it, the great thing about real estate, understanding all of its flaws, is that its REAL. Markets go up and down, inflation can erode the value of cash, but having a good chunk of your dough in tangible assets is the ultimate security.
  27. Prairie Duststorm from Edmonton, Canada writes: indy jones from Canada writes: Let see....$800 000.00 property......Just need 40 000.00 (5 percent) down as a mandatory down .. The thing is for the average person whether you rent or buy you need somewhere to live and not many places are for free. So what you can afford is key. Renting you still end up with nothing.
  28. Chris Halford from Ottawa, Canada writes: Hairy Wrangellian from Saltspring Island - You have a good point. Unless you really have to, you're probably better to hang on, given the situation with stocks and the potential of interest rate cuts. I guess I just see the price of those Vancouver condos as being silly and how hard it is on the working Joe there to afford anything to buy. I just wish housing prices were more reasonable there. You must be sitting pretty on Saltspring, I'm jealous!
  29. s c from Canada writes: Put money in real estate. Put money in the markets. Who did better - someone buying real estate at the "high" last year or someone putting their money in the markets? Neither has fared well over the short-term.

    Real estate and investing are both long term investments. Those who bought either five years ago are still doing very well. Those who bough either last year are likely see losses. Don't panic and you should be fine.

    I see housing a needed place to live that I also hope will appreciate over time by at least as much as I am paying in mortgage interest. Don't see being better off by renting and sticking my down payment in the markets instead.
  30. Robert Mackidd from Winnipeg, Canada writes: “If you have bad credit, no down payment and a good job, you can't get a mortgage in Canada any more,”.

    The guy in the article that said this just about summed up all that is bad about going on regarding money today. The simple fact that at one time (not to long ago) you could get a mortgage under these terms shows the pure stupidity or greed (probably both) of the lender and the mortgage agent.

    Look to the USA and ponder the price they are paying today!
  31. Michael Peters from Vancity, Canada writes: Your house should NOT be viewed as an investment. It is a forced savings tool that provides a nice hedge aginst inflation.

    Prairie Duststorm - are you one of those people who think that one NEEDS to own a home because you gotta live somewhere? We were able to rent a nice little 2 bedroom in a great part of Toronto for far less than the interest component we would have paid on a 25 year $500,000. Why buy? Not to mention that with buying, you need to pay property tax and take on all the risks of home ownership. I'm not saying it's not a good move to buy a house, you just need to make sure the math works.
  32. b W from Canada writes: We have a problem in Canada. In the US, the government had to take control of Freddie Mac and Fanny Mae. However, in Canada, the government already controls CMHC. However, their books are not subject to scrutiny.
    One of the reasons the banks are lending under these totally irresponsible terms is because CMHC is insuring these totally irresponsible terms. Don't blame just the lenders and mortgage brokers if the government was willing to insure their success.
    When CMHC announced that they would insure the exotic mortgages, the central bank asked them to reconsider. CMHC refused and we taxpayers will be responsible for the mess.
    My only question, why are we not more concerned about a complete lack of CMHC oversight?
  33. Chris Kempan from Winnipeg, Canada writes: Who couldn't see this coming? There has been a major disconnect between income and housing for years, eventually a correction was bound to happen.

    I blame the lenders, these are the people who lend too much to too many people for vastly over-valued properties.
  34. S Van GOOGLE from Wallis And Futuna Islands writes: Van is Overpriced.. but remember Van also has Less space for good suburbs. So Price v Location is always going to be the case in Van.

    Remember this is cyclical.. peaks v troughs is Econ 101..
  35. Richard Hawrelak from Sarnia, Canada writes: The only folks who can afford an $800,000 mortgage today over 35 years at 5.8% ($4,404/mo. after tax) are DINKS earning a combined salary of $176,000 (bt) where the house payment is 50% of their combined (bt) income. Lots of those around and more coming in from Asia every day.
  36. gordon foster from Canada writes: People were taking out 40-year morgages? Are they nuts?
  37. Ned Chiwalski from Oilgary, Canada writes: As an ex-banker, the people on this post blaming the banks and mtg companies have their heads up their you know where.
    Nobody is holding a gun the the heads of people coming in for high ratio mortgages. It's the greed of the consumers that is driving this.
  38. Trevor Ouellette from Canada writes: $800,000 townhouses in Canada? That doesn't seem a tad goofy to anyone? Man, the Canadian banks are going to get wacked hard next year with all the overpriced mortgages on their books.

    Canadian subprime... get use to hearing that.
  39. Michele K from Ottawa, Canada writes: Kim Morton from Canada wrote: "Considering that most houses in the lower mainland are listed at about twice their real worth it is not surprising that prices are starting to fall."

    Funny that you say that, Kim - it has seemed to be too that prices are almost twice where they should be, at least in Vancouver and Victoria. My siblings all live there and I have to say that being out in Ottawa I'm getting much more bang for my housing buck, not to mention, easy access to a lot of great jobs to support that mortgage.

    Chris Halford, not that there are any guarantees in these things, but we should be grateful we live in Ottawa, home of predictable, stable government jobs and resulting real-estate.

    I had to laught when an ambitious Lebanese immigrant co-worker asked me a couple of years back when he should jump into the Ottawa real-estate market - I told him anytime he had a good down-payment would be just fine, and I would give him exactly the same advice today.

    Sure, most of us aren't living in $1 million homes, but there's a pretty good chance that 5 or 10 or 20 or 50 years from now when we go to sell, we'll have locked in some solid - though perhaps unimpressive - gains.
  40. Michele K from Ottawa, Canada writes: That's 'laugh', not 'laught' - must stop posting while drinking martinis.

    Trevor - $800K townhouses are nothing (in Vancouver and Toronto anyway). On the news last night Brian what's-his-name, that Canadian interior designer I quite like, was giving a tour of a $30 MILLION condo now being built in Toronto, which some are claiming is a bargoon. Me, I can think of a LOT better things to do with $30 million (including feeding a 3rd-world country).
  41. Orest Zarowsky from Toronto, Canada writes: They ain't making more real estate. Which is why prices keep rising. Landfill is not an option anywhere other than coastal areas. And filling in the Great Lakes is not an option.

    The real issue here is the rules and regulations that are in force and applied to lending agencies. And the debacle in the US is a direct result of deregulation and the desire of the neo-cons to turn the clock back to the "good old days" before FDR's New Deal.

    That neither the neo-cons nor the general public have any grasp of reality is the root cause of the problem. The fact is that the sub-prime fiasco is just a more extensive variation on the Savings and Loan debacle during Reagan's second term.

    What do you want to bet that the senior "management" team of all these financial institutions being bailed out by Joe Taxpayer will get those multi-million dollar "performance bonuses" even as the companies they were "leading" and running go belly up? And while the line employees lose their jobs and income.

    Neo-con economics and policy strike again.

    But who benefits from this "plan" and who pays the costs?

    Your tax cuts and deregulation at work.

    But WTF, keep supporting the goombas who give you these fiascoes.

    Vote CPC here, or Republican in the US. Then whine about the consequences.
  42. C. Beresford Tipton from Outside Ottawa, Canada writes: The other problem with the real estate market in most cities, particularly Calgary and places like Newmarket, Barrie, Pickering and Toronto is that new homes come with virtually no land. In Calgary people were paying $800,000 for homes built on 25 foot lots (the standard city lot used to be 50 feet wide and the municipalities saw a way to increase their tax base and began approving "infills". These homes have no real land value. All the small parcel of land is capable of providing is a place to park the poorly constructed home. In suburban GTA new homes are typically built on 32 by 85 foot lots. People that purchase these homes can't grow a garden large enough to put any meaningful amount of food on the table and because of this they don't bother doing any vegetable gardening they have lost, or never developed, a valuable skill. We lived like this for 1 year and hated it and moved back onto an acreage. We have fruit trees, a large vegetable garden, and our kids know how to split wood and grow their own food (and like doing it). Our land has real value - to us anyway.

    I always tell my kids that if things get real bad and we are looking at a depression our land can do what land is supposed to do - provide us with a roof over our head and the ability to grow most of the food we require.
  43. Edrico Alberto from Edmonton, Canada writes: Like Richard Needham, long-time-ago columnist for the G&M used to write; "there's no security like looking out the window and seeing a cow".
  44. nancy ludlow from wasaga beach, Canada writes: Through the powers of the media and internet, sellers and buyers of Real Estate have become more savvy in the last number of years. The huge rise in prices in the major metro areas has created a trend, where, sellers are looking outside the city to more affordable housing. This benefits the future retirees, who, are able to buy equal or better in a rural area and bank a comfortable amount of cash. First home buyers have the advantage of being able to qualify and purchase homes they could never dream of owning in the more urban areas. The trade-off for the commute is well worth the change for positive financial and life-style benefits! My husband and I relocated north of Toronto 30 years ago and have seen the growing steady migration. We have made our living from the sale of real estate for years in this area and see very few people unhappy that they made the move. Nancy Ludlow
  45. Michele K from Ottawa, Canada writes: Nancy, I did not actually have to get to the end of your post to know you were in real estate. Buyers have become more savvy over the past few years? You have got to be joking. You and they are completely out of touch with demographic trends (though in your case, I'm sure that's a business decision), and demographics are reality (and realty, for that matter). There's not a sizable city in this country that does not have mile after mile of former agriculture lands turned into characterless poorly-built, usually super-sized tract housing, far from where most work and want to be, where one has to drive everywhere they go - these areas are going to be the new ghost towns 20 years from now. Where is the market for giant, isolated, falling-apart houses on specks of land going to be as energy prices go up, and family size goes way down?

    I'm not saying many people aren't happy moving out of the large centres, but your basic premise about buyers being smarter than ever is simply not supported by the evidence. Ask someone in Calgary how smart they feel now, 6 months ago having engaged in a bidding war over a cheaply-built tract house (not home - HOUSE; people make a home, not real estate agents). They may have won that battle, but by now they've lost 20% of the 'value' they're going to be paying for over the next 20-25 years.
  46. Marcus L from Calgary, Canada writes: A $800K townhouse in Vancouver is $799K overpriced.
  47. Mar Koz from Vancouver, Canada writes: The posters commenting on "poorly built" homes situated on postage stamp lots have hit the nail on the head. Your home is an investment? It is a deteriorating pile of chipboard and vinyl (in Vancouver anyway) requiring expensive maintenance and the payment of property tax. The lot, small though it may be, is the only thing of lasting value - and with the size of the lots these days you're not getting a much value for your $1,000,000. Of course, if you have a condo (leaky or otherwise) you don't even get the benefit of a postage stamp lot. Real estate is an investment because people believe it is. If enough people believe and are willing to pay you more than you paid then you can make a handsome profit. The same was true of tulips all those years ago in Holland. In Holland, people eventually woke up to the realization that a tulip was just a tulip. Will people here ever realize that a home is just shelter? (Shelter that can be rented for literally half the cost of buying). Maybe, maybe not. Everyone I know in Vancouver believes in real estate the way Sarah Palin believes the world was created in a few days 4,000 years ago. Tough to shake that faith but the current turmoil might just do it.

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