Thursday 31 October 2013

A few points re: when will the expiring rate-holds show up on RE Board's Sales stats

- The sales strength since summer was predicted back in June by some, so the recent sales strength supports the prediction.
- Fixed rates moved up from early/mid June until August. With rate-hold being 60-120 days, potential buyers were allowed up to 4 months since July/August to take the leap.
- The source of my daily stats come from REBGV server. However, it's known that it takes at least 2 weeks (and possibly over one month) for a “sale” to be entered into the REBGV system.
- Therefore, REBGV sales stats may have a lag of 2 to 4+ weeks vs actual “real-time” events. I still think a significant slow-down in sales will occur once most of the pre-approved mortgages expire. When this weakness shows up on REBGV sales stats is up for speculation (but should be soon)
- Even BoC and several major banks’ economists have in the last 1-3 months warned about the summer/fall RE rebound being “temporary”.
- But of course certain banks like BMO were quick to cheer “crash averted”
- As an aside, it’s worth noting that some smaller/cheap mortgage lenders have been refusing to lend toward condo purchases (wonder why ;) )

Thursday 24 October 2013

Daily Read: Falling rates, BoC’s stand put housing spotlight on Flaherty

Falling rates, BoC’s stand put housing spotlight on Flaherty
The Globe and Mail - Published 

Kelowna mansion auctioned off, comes with free Lambo

From one of my contacts:

This luxurious Kelowna mansion was auctioned off today (see Auction Site Here)

Built: 2008
Listing Price (2008): $5,900,000
Listing Price (2013): $4,350,000 (May/13)
Assessed Value (2013):$3,780,000
Auction Date: Oct 24, 2013
Winning Bid: $3,500,000
Winning bidder got “house, a free Lamborghini, $250k of furniture, and $200k of beautiful art as part of the deal!”

 I don’t know what the purchase price was back in 08 (if it was sold then), but this was the listing back in 2008, the year it was built.
It was called “San Marc Tuscany Villa” and was “previously owned as a second residence“.
If the original owner paid anything close to the original asking price of $5.9M back in 2008 for this vacation home, he’s short $2.4M, a lambo, and “$450k worth of furniture & art.”

Wednesday 23 October 2013

G&M: Bank of Canada warns of risk of housing ‘correction’

The Bank of Canada is warning about the risk of a housing “correction” given the latest strength of the market.
While it believes Canadians are cutting back on their thirst for borrowing, and that all will be fine in the end, it nonetheless cites the risk of a bubble and the fallout on the broader economy.
“The elevated level of household debt and stretched valuations in some segments of the housing market remain an important downside risk to the Canadian economy,” the central bank said today.
“The continued slowing in household credit growth and the rise in mortgage interest rates point to a gradual unwinding of household imbalances,” it added in its monetary policy report.
“However, recent data suggest some risk of renewed momentum in the housing market. This would provide a temporary boost to economic activity, but could exacerbate existing imbalances and therefore increase the probability of a correction later on.”

 - The "demand brought forward" caused by low rate-holds from June/July (expiring between late September and late November) was very likely the cause of the "renewed momentum".

- Despite the dropping Canada 5Y bond yield since the (temporary resolution of) US debt limit/government shut-down fiasco and today's cut-back of Canadian economic forecast, the current 5Y CDN Bond Yield is still 1.73%, while back in April the yield was at 1.18%.

- We will likely see further lowering of fixed mortgage rates (currently at 3.79%-3.89%), but we likely won't see the 5Y Fixed rate go back to April's historically low 2.69%-2.79%

- I will not be surprised to see Flaherty/OSFI dish out more mortgage tightening rules if RE's momentum persists prior to the Spring market.

- Though I still expect noticeable (worse than seasonal) softening of Vancouver RE (vs summer/13) for the remainder of this year.

Bank of Canada cuts economic outlook, drops rate hike signal

G&M: Bank of Canada cuts economic outlook, drops rate hike signal

"The bank is cutting its forecast for both the Canadian and U.S. economies – not just for this year, but for 2014 and 2015 as well.
The bank pointed to an economic environment that is now “less favourable for Canada” – most notably, the painfully slow recovery from recession in the United States, Canada’s main trading partner."
"...however, the Bank must also take into consideration the risk of exacerbating already-elevated household imbalances. "

"BoC says they don't concern themselves with specific housing markets, but there could be structural reasons for some "unusually strong" markets" - @BenRabidoux

My take:
- As expected, Canadian economy continues to show slack

- BoC dropping rate hike signal, whilst mentioning "risk of exacerbating already-elevated household imbalances", may "nudge" Flaherty/OSFI toward further mortgage rule tightening, now that prime rate's not going up any time soon.

- As I've mentioned before (either in this blog or in other forums), more than half of my investments are in US currency, exchanged when CAD/USD was above par.  I agree with @BenRabidoux that "BoC will LAG the Fed in next rate cycle" (ie US will hike their rates earlier than Canada), which is negative for CAD.  I intend to purchase more USD down the road whenever exchange rate gets favorable.

- CAD/USD just took a tumble after BoC cuts econ outlook, from 97.3 yesterday down to now 96.3. If CAD/USD continues its decline (which I think it gradually will), the big loser will be holders of illiquid, over-valued CAD assets.

- RE bubbles will still “deflate” despite being in a persistent low-rate environment. For those who plan to buy in the next couple years, a good scenario would be having had a RE price correction & CAD/USD correction (provided you have liquid USD investments), while interest rate remains low (yes you can have the cake and eat it too).

Friday 11 October 2013

Are we seeing demand for Vancouver RE beginning to run out of steam?

It had been discussed that the daily MLS stats (see my twitter feed @greaterfoolvan) represent sales that actually occurred >2 weeks ago, just that they're officially entered into MLS system now.

As was discussed last month,
"Back in June, RBC raised its 5Y Special Fixed Rate from 3.09% to 3.19% on June 10, then 3.39% on June 24.
With Fixed Rate on the upswing since early/mid June, the 90-day low-rate holds are starting to expire about [mid-September].  The 120-day low-rate holds will expire by [mid October]".

This week's weakened sales potentially reflect the early phase of "demand tapering" starting in late September.  The rate of month-over-month sales decline (vs previous years' trends) for the next couple months will be interesting to watch. (I'm predicting a sales drop-off worse than avg seasonal trends)

Tuesday 8 October 2013

Daily Reads

1. Toronto real estate: Condo buyers ‘scrambling' to close deals

Mortgage brokers have seen a surge in people who bought pre-construction condos a few years ago and are now “scrambling” to get financing to close deals.

2. Rumor: CRA cracking down on non-reporting of rental income? (Source: commenter on
" recently been instructing mortgage lenders to report to them all individuals who have rental properties on their mortgage application and who have not reported them on their tax returns. In other words if you are holding a mortgage for a rental property but have never declared or paid tax on your rental property income, you can possibly expect an audit and allot of explaining to do."

Tuesday 1 October 2013

Back in action

Been out of country on vacation.
Google even suspended my account and also this blog due to "suspicious sign-in's" by my mobile devices in other countries, good on google I suppose!

Expect September official REBGV data to be released tomorrow.

Sales remained strong relative to last year, however still below 10 year average.

As I've said before, the 120-day rate-holds start expiring by late Sept/first half of October.
Watch those sales drop (worse than seasonal trend)!