tag:blogger.com,1999:blog-31427364.post4099252146482483377..comments2024-03-26T03:52:23.395-07:00Comments on Housing Analysis: Personal Finance Scenariosmohicanhttp://www.blogger.com/profile/06094213357140749289noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-31427364.post-42099485379332967332008-02-24T17:21:00.000-08:002008-02-24T17:21:00.000-08:00"Provided the payment history is satisfactory, mor...<I>"Provided the payment history is satisfactory, mortgage renewal is easily facilitated since the borrower does not have to requalify."</I><BR/><BR/>Maybe I'm missing the point of MI. Who does it protect? The way I understand it, if my property is foreclosed on the MI pays the lender off but the MI hounds still come after me for the difference.jessehttps://www.blogger.com/profile/02155122147972263497noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-23419407463561740312008-02-23T16:44:00.000-08:002008-02-23T16:44:00.000-08:00I worded it incorrectly though I should have said ...<I>I worded it incorrectly though I should have said "risen to" rather than "risen by" 375% ie. prices are 3.75x the inflation adjusted 1977 price.</I><BR/><BR/>3.75*277,000 = 1,040,000. I agree that there will definitely be a 30% drop!JMKhttps://www.blogger.com/profile/14740454447994074321noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-40194242720864544832008-02-23T14:18:00.000-08:002008-02-23T14:18:00.000-08:00"One of the reason things remained relatively flat..."One of the reason things remained relatively flat from the 40s to the 70s was the growth of the suburbs in most metro areas"<BR/><BR/>Then how do you explain the flat curve from the 1700s to the 2000s? Not highway building I hope.<BR/><BR/>"As soon as a home is subdivided, torn down for condos, or even substantially improved, it is removed from his database."<BR/><BR/>As it should be. If the LAND had increased in value then a house built 100 years ago would be worth more BECAUSE it can be torn down and turned into a duplex or whatever, developers would bid it up if it was undervalued.<BR/><BR/>"For all the growing metros in the US or Canada I guarantee that they have outperformed inflation for a long time."<BR/><BR/>Considering we're in the middle of an enormous bubble right now your statement is meaningless because nobody could ever agree when to measure from or to. If you bought in 1982 for instance you did NOT outperform inflation until a couple of years ago.<BR/><BR/>My opinions are based on hundreds of years of observation of real estate and other bubbles. What are your opinions based on?Mark Fengerhttps://www.blogger.com/profile/01922616270777907779noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-45775475096324774392008-02-23T14:03:00.000-08:002008-02-23T14:03:00.000-08:00I did my own inflation adjusting.Median detached h...I did my own inflation adjusting.<BR/><BR/>Median detached home price in 1977, 80k, plug it into the BOC inflation calculator, and it's 277k in current dollars.<BR/><BR/>I worded it incorrectly though I should have said "risen to" rather than "risen by" 375% ie. prices are 3.75x the inflation adjusted 1977 price.<BR/><BR/>I don't know where the people who made your graph got their inflation data but mine comes from the Bank of Canada.Mark Fengerhttps://www.blogger.com/profile/01922616270777907779noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-1599777004942351682008-02-23T13:07:00.000-08:002008-02-23T13:07:00.000-08:00I think your math is a little off, or this chart ...I think your math is a little off, or <A HREF="http://bp1.blogger.com/_rt16FZ_z1N8/R5enx7pB06I/AAAAAAAAAzQ/RNmj3p20Xck/s1600-h/GV+Real+HPI.JPG" REL="nofollow"> this chart</A> is wrong. It shows a 180% inflation-adjusted increase from 1975 to the end of 2007.<BR/><BR/>We've been over why this is rational and likely to be sustained for the long term in this blog before. The problem with Shiller's analysis is that it excludes most of the effects of densification. As soon as a home is subdivided, torn down for condos, or even substantially improved, it is removed from his database. A far more telling measure, in my opinion, would be the total value of all land over a fixed metropolitan area over time. For all the growing metros in the US or Canada I guarantee that they have outperformed inflation for a long time. <BR/><BR/>I think you have to be very careful with long-term trends, real or nominal. One of the reason things remained relatively flat from the 40s to the 70s was the growth of the suburbs in most metro areas, facilitated by US interstates and, to a lesser extent, Canadian highway building. The physical expansion of cities has slowed down since then because people can only drive so many hours each day. <BR/><BR/>Whether you think these long-scale trends will continue or not will inform your decision on whether housing in Vancouver will continue to outpace inflation (on a 10-y time scale). In my opinion, your faith in a return to the zero real-growth trend is misplaced.JMKhttps://www.blogger.com/profile/14740454447994074321noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-63063192637257314962008-02-23T10:34:00.000-08:002008-02-23T10:34:00.000-08:00I just felt like doing some math. Inflation adjus...I just felt like doing some math. Inflation adjusted prices have risen 375% since the '70s in Vancouver. So it is in theory possible that even my dire predictions are not extreme enough. There is precedent.<BR/><BR/>Think about it, where else have prices risen that much in RE and retained most of the gains? It is possible that with the myth of the ever appreciating house well and truly busted that prices will return to THAT historic norm.Mark Fengerhttps://www.blogger.com/profile/01922616270777907779noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-86626193755304223732008-02-23T10:22:00.000-08:002008-02-23T10:22:00.000-08:00If anyone's wondering what patriotz and I are talk...If anyone's wondering what patriotz and I are talking about <A HREF="http://randolfe.typepad.com/randolfe/images/housing_projection.jpg" REL="nofollow">Here</A> is the graph. Note this is a graph of the United States and only applies to Vancouver in a general way, our runup has been much larger and we never returned to the green "market trend" line after the 1980s.Mark Fengerhttps://www.blogger.com/profile/01922616270777907779noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-24455711313038902632008-02-23T10:15:00.000-08:002008-02-23T10:15:00.000-08:00JMK:Yes, 300%, I am counting from approximately 19...<B>JMK:</B><BR/><BR/>Yes, 300%, I am counting from approximately 1987, that is the point where our RE left the historic curve. the "bubble" of the '90s was, IMO actually a feature of the current bubble (most big bubbles have this feature).<BR/><BR/>The graph you link to is terrible for these purposes because it's not adjusted for inflation.<BR/><BR/><B>Patriotz:</B><BR/><BR/>Actually it wasn't a "runup" really or a "response to improving fundimentals". I'd say it was more of a return to normal fundamentals which had been thrown out of whack by the Depression and WW2, if you draw a line from pre-depression to post depression prices it's flat with a big chasm between.Mark Fengerhttps://www.blogger.com/profile/01922616270777907779noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-50443338077672519752008-02-23T09:21:00.000-08:002008-02-23T09:21:00.000-08:00I thought CMHC insurance was rolled into the mortg...I thought CMHC insurance was rolled into the mortgage and added to the balance not paid out of pocket. So if you put 0 down you owe ~103.5% on day one?BearClawhttps://www.blogger.com/profile/15714953167582532109noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-62097617677843911102008-02-22T23:15:00.000-08:002008-02-22T23:15:00.000-08:00300% more or less300%? Wow, when are you counting ...<I>300% more or less</I><BR/><BR/>300%? Wow, when are you counting from? 1985? <BR/><BR/>Vancouver has gone up slightly more than 100% since 1997. <BR/><BR/><I>I absolutely dare you to find any historical bubble with the kind of build up we've had (300% more or less) that has fallen only 30%.</I><BR/><BR/>There is a chart from this very blog that will provide you with an example: <A HREF="http://bp0.blogger.com/_rt16FZ_z1N8/R5ejorpB01I/AAAAAAAAAyo/j2wCfUkaOEI/s1600-h/rebgv+price+graph.bmp" REL="nofollow">Vancouver from 1985 to 1998</A>. Went up 300% (more or less), only dropped about 15% (more or less).JMKhttps://www.blogger.com/profile/14740454447994074321noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-49268456158780767182008-02-22T22:39:00.000-08:002008-02-22T22:39:00.000-08:00I absolutely dare you to find any historical bubbl...<I>I absolutely dare you to find any historical bubble with the kind of build up we've had (300% more or less) that has fallen only 30%.</I><BR/><BR/>The only runup of that size without a subsequent crash was from the end of the Depression to the post-WWII years but that was no bubble, rather a response to improving fundamentals.<BR/><BR/>Now think about it. The world became a completely different place from 1938 to 1946. Now just what has changed from 2000 to 2008 in fundamental economic terms, other than most people being a lot more in debt?patriotzhttps://www.blogger.com/profile/11154064267408955762noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-78858980314315247492008-02-22T20:11:00.000-08:002008-02-22T20:11:00.000-08:00Mohican and others: I apologize about the factual ...Mohican and others: I apologize about the factual error on mortgage insurance; my memory wasn't right.M-https://www.blogger.com/profile/11157896639592232047noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-71934927013239991332008-02-22T16:54:00.000-08:002008-02-22T16:54:00.000-08:00"Home prices decline 30% over 5 years"What about t..."Home prices decline 30% over 5 years"<BR/><BR/>What about the most realistic scenario?<BR/><BR/>"Home prices fall 65% over 5 years"<BR/><BR/>30% would be completely unprecedented. Never before has a bubble with such a run-up as we've had fallen so little. NEVER. I absolutely dare you to find any historical bubble with the kind of build up we've had (300% more or less) that has fallen only 30%.Mark Fengerhttps://www.blogger.com/profile/01922616270777907779noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-11126254594662437392008-02-22T14:19:00.000-08:002008-02-22T14:19:00.000-08:00dave, fun and mental - I checked and you are corre...dave, fun and mental - I checked and you are correct that the "Insurance coverage is for the entire amortization period of the loan and is transferable between Approved Lenders. Provided the payment history is satisfactory, mortgage renewal is easily facilitated since the borrower does not have to requalify."<BR/><BR/>That is directly from the CMHC website. Refinancing can cause further insurance premiums to be due. Sorry for the error.mohicanhttps://www.blogger.com/profile/06094213357140749289noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-81026507207584685622008-02-22T14:07:00.000-08:002008-02-22T14:07:00.000-08:00fun and mental - I don't work for a bank per se (I...fun and mental - I don't work for a bank per se (I work for a bank brokerage) and I don't work with mortgages at all. I am only going by what I read on CMHC's website. Apologies if I have misunderstood what happens at mortgage renewal. Perhaps someone more in the know than me can comment here.<BR/><BR/>I'm still not sure about this because many times a mortgage will be renewed at another institution. If what your saying is true then in scenario 2 the mortgage company is willing to lend 95%+ of the mortgage value without any insurance at all. That seems like a boneheaded business move. If the CMHC premium is only payable at first purchase then there must be some provision for further premiums if the lender changes or in a refinance situation.mohicanhttps://www.blogger.com/profile/06094213357140749289noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-256922159766185412008-02-22T13:54:00.000-08:002008-02-22T13:54:00.000-08:00mohican,are you serious?are you trying to tell us ...mohican,<BR/><BR/>are you serious?<BR/><BR/>are you trying to tell us that you work for a bank and yet don't understand how the cmhc and it's premiums work?<BR/><BR/>insurance premiums are not payable again on renewal.<BR/><BR/>they are one time premiums unless you make a material change to the mortgage. ie you increase it down the road. even then the chances are you will only pay a new premium on the amount you increase.fun and mentalhttps://www.blogger.com/profile/12990878400482662541noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-41660942585530300092008-02-22T12:21:00.000-08:002008-02-22T12:21:00.000-08:00fencesitter: Yorkson is in the Willoughby area and...fencesitter: Yorkson is in the Willoughby area and Bedford Landing is in the Fort Langley area so Dave's numbers exclude these two extremely large developments. <BR/><BR/>The overbuilding in Langley/Surrey is insane - only to be appreciated with a drive through the area. To see what I'm talking about drive from Fort Langley through Bedford Landing, turn left on 216 to 88 Ave, turn left on 208 to 66th, turn right at 203 to 72nd, turn left to 188, turn left at 68th to 194, turn right on 64 to 168, turn left from 168 to 24 ave, turn right onto king george hwy through Whalley. Leave town, disgusted as you have just seen well over 10,000 housing units under construction.mohicanhttps://www.blogger.com/profile/06094213357140749289noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-25513568807935985962008-02-22T12:13:00.000-08:002008-02-22T12:13:00.000-08:00Dave, how many of those are in the Yorkston or Bed...Dave, how many of those are in the Yorkston or Bedford Landing developments?<BR/><BR/>Yorkston would make an interesting case study with the number of completed units sitting vacant, while even more houses continue to be built in the same development.Fencesitterhttps://www.blogger.com/profile/00412903923931502556noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-57342314328626225532008-02-22T11:54:00.000-08:002008-02-22T11:54:00.000-08:00I saw Cam Muir give a presentation Wednesday where...I saw Cam Muir give a presentation Wednesday where e forecasts RE in GVRD to go up 7-9% in 2008.<BR/><BR/>Tsur Sommerville was there as well. Tsur noted that he had concerns over 40% of the condo's downtown being investor owned and that this was unprecedented in terms of what this could mean for the market (he did not sound positive for this specific segment), and generally, he had the Vancouver market as overvalued.<BR/><BR/>Cam dodged the question, when asked, that given his positive forecast whether he would personally buy a Condo in the GVRD. From that I assume his answer would be no.NumbersGuyhttps://www.blogger.com/profile/15870370762311284052noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-59771678254987943372008-02-22T11:14:00.000-08:002008-02-22T11:14:00.000-08:00mohican....are you sure about the CMHC insurance a...mohican....are you sure about the CMHC insurance as when I bought in 1995 it was a one time deal?<BR/> on another note, I follow the Walnut grove area of Langley as that is where we want to move to.<BR/>Feb 22/07 71 detached houses<BR/>Feb 22/08 98 detached houses<BR/>the highest I have seen is 103 on May 24/07. 98 in feb seems to be a large increase.<BR/> DaveDavehttps://www.blogger.com/profile/16707394522540952017noreply@blogger.comtag:blogger.com,1999:blog-31427364.post-73038412101315358762008-02-22T10:47:00.000-08:002008-02-22T10:47:00.000-08:00Hat tip to M- and Patriotz for bringing this up in...Hat tip to M- and Patriotz for bringing this up in an earlier post's comment section.mohicanhttps://www.blogger.com/profile/06094213357140749289noreply@blogger.com