On Tuesday we brought you Richmond realtor James Wong's musings that "sales are expected to continue to languish due to the lack of buying interest."
Fellow Richmond realtor Alphabet Arnie Shuchat follows that bleak news up with the following market analysis:
Primarily in Richmond, most people who bought in the last 3 years are technically under water. What I mean is that they are for sure going to be unable to sell their property for more than they purchased it; they are definitely likely to have a selling price net of commissions yield proceeds of disposition less than the amount owing on their mortgage.
I say this because in our previously expensive real estate market, buyers were throwing everything they could at the down payment and they would be lucky for a house purchase to be able to do so with a conventional mortgage at 20% down. The market being down some 25-30% depending upon neighbourhood, means that they are 40% through their 5 year fixed mortgages and in the event they were at term today, the discussion at the bank would most likely revolve around them coming up with sufficient equity in the form of a new 20% equity payment to finance a conventional loan, or CMHC insurance for a non-conventional one. Both scenarios are grim and place yet another purchase of the next house phase in jeopardy.
So we have all niches of home ownership who got in over the last 3 years looking at negative equity and all of the chilling effects on spending, renovating, moving up etc... that go with that. It is the inverse of the wealth effect that happens when asset prices move up and people feel good.
Shuchat's analysis is a shocking bit of news for anyone who believed the bunk that the real estate always goes up.
This is the very scenario that started the dominos falling in the United States, a condition the real estate industry here has always insisted simply cannot happen in Canada.
Say it isn't so.
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Interesting analysis by a realtor. I wonder why this rarely reported by local media. No wonder Vancouver Sun is in trouble, as it is not serving the public, but the ones who paid for the ads.
ReplyDeleteYou are spot ON! That's what you get for selling editorial. Good riddance.
Delete"..Both scenarios are grim and place yet another purchase of the next house phase in jeopardy."
ReplyDeleteThis is really tragic. People will actually live in the house they bought.
Owen Bigland says it's always a good time to buy real estate! what a clown.
ReplyDeleteI do believe that when mortgages come due for renewal, if it is simply rolled over with the same financial institution, there is no need for an appraisal or the headache of refinancing. So even if the prices do drop, as long as they keep making the mortgage payments at low interest rates all is still well...for awhile.
ReplyDeleteNew OSFI rules have changed that.
DeleteI just renewed a mortgage Saturday (2.99 for 5 years)- no appraisal, no re-finance process,just a single signature. There's been no change in that regard.
DeleteYes, but was that Saturday mortgage in a 20-25% negative equity situation ?
DeleteI think what we have to worry more about is the slew of boomers selling at once. Has anyone noticed that the single family homes in Richmond have had a significant drop in prices, yet the boomer downgrades, ie luxury townhouses and apartments have not? Chart please.
ReplyDeleteWhat to watch for the when you mortgage comes to term, and you're under water: even if you avoid a balloon payment by staying with your current lender, you'll probably end up paying a premium in interest. Your lender will know if you can't stump the cash to change lenders, and they'll sign you to an interest rate that they'll choose for you, based on the risk you represent to them, like prime plus two, three, or four percent(!) catching home-owers between rocks and hard places.
ReplyDeleteWouldn't that be like owing money to the Mob? You keep paying your debt but because of the high interest, the debt never goes away and they will own you for life? Dear god I hope the lender won't sell me for sexual favors or fit me for cement shoes.
DeleteI check Arnie's blog weekly and he's quite open for RE guy...let's not forget he's RE guy so his voice says ...."BUY, best time to by is now" at the end .
ReplyDeleteIt's here folks - US RE of 2008 and it's only now in 2013 when US RE is rebunding.A lot of folks in Canada will have to try to sell in next 2-3 years as they may not qulify to re-mortgage when the term is up,or have they will be forced to top-up the shortage in equity.
US RE started tanking in latter half of 2005. 2008 was when the repercussions hit the financial world.
DeleteWhy should we believe this realtor when we so casually deride others of his ilk?
ReplyDeleteIf we take this as a sliver of truth and all other realtor-speak as bunk, surely we're guilty of the same crime as realtors: cherry-picking bits of data here and there to support our Weltanschauung.
Just playing Advocatus Diaboli here, as a bear.
hahahahahahahahahahahahahaha hahahahahahahahahahahahahahhaaahahahahahahah
ReplyDeleteaaahahahahahahahaha suckers
HuffPo says Bets against Banks/Real estate in Canada rising:
ReplyDeletehttp://www.huffingtonpost.ca/2013/04/29/bets-against-canadian-banks-dollar_n_3179845.html?utm_hp_ref=canada