Vancouver's Real Estate Market

[Hehe]

Originally Posted by StylinRed

thats not principle that's 'face' his ego was bruised, when the owner said no, and then he was just being petty when he refused the final discounted offer from the seller/agent

It's only that way if you look at face value. But what I referred was the fact that some stay focused on certain principles they rely heavily on (in this case, $/sqft)

And in this particular case, the seller actually lost a compelling offer. The very property was sold about two month later for the same offer my friend made according to the realtor.

As far as my friend purchase goes, I think from a home perspective, the original home was better as the layout had less wasted spaces. But as RE investors, the house my friend bought made more sense as it's larger (both house and lot) and less expensive per square. So, there's no right or wrong answer, just depends on how you see it.

[learn2manual]

15-25% increase in 2016 home assessments...wtf

Some homeowners in Metro Vancouver to see a significant increase in home value - BC | Globalnews.ca

[iEatClams]

Originally Posted by learn2manual

15-25% increase in 2016 home assessments...wtf

Some homeowners in Metro Vancouver to see a significant increase in home value - BC | Globalnews.ca

not suprising. I expected more. my neighbourhood was gone up like 30% from last year. In east van, last year tear downs were going for 850K, same type of homes are now selling for 1.1 Million.

homes around metrotown are crazy. 60 year old shack listed for 1.2 million, sold for 1.3 million. last year those homes were going for 1 milliion. that's like a 30% return.

really wished I bought any type of detached home last year (affording it is another issue). but hindsight is 20/20.

[Tapioca]

The old rule of thumb about mortgage affordability was 3-3.5 times your income.

Unless you've been in the market a long time and have substantial equity, owning a detached or semi-detached in Vancouver or the near-burbs doesn't seem possible under the old rule. What is the new rule of thumb on mortgage affordability now? 5 times? 6 times one's income?

The numbers being thrown around are eye-watering now. Even if your average professional couple makes 200K/year (e.g. nurse and senior manager at a Big-4 or lawyer) with maybe 200-300K in equity from a condo or semi-detached, it's hard to imagine that they're the ones being able to compete for a detached in Burnaby.

[Adorkami]

When I was looking to get pre approved for a mortgage they dont want you to spend more than 40% of your gross income on mortgage payments. 35 year amortization rates are still available so you can still borrow lots of money but will pay lots of interest (400k at 1500/month for 35 years).

[Tapioca]

Originally Posted by Adorkami

When I was looking to get pre approved for a mortgage they dont want you to spend more than 40% of your gross income on mortgage payments. 35 year amortization rates are still available so you can still borrow lots of money but will pay lots of interest (400k at 1500/month for 35 years).

So, a family making 150K gross (which is not much of a stretch if both earners are mid to senior professionals) is able to qualify for mortgage payments of $5000/month? Wow...

Guess RRSPs, a rainy day fund, TSFAs, and RESPs are thrown out the window? Or perhaps people are investing in those things on home equity? Smith Maneuver?

[Special K]

Can't be gross income. Net will be 30-40% less.

[SumAznGuy]

According to RBC's web page, no debts and combined income of $150K a year, they can easily borrow $700K @ 2% interest.
That is roughly $2965 per month for mortgage payments over 30 years.

[Mr.C]

Originally Posted by SumAznGuy

According to RBC's web page, no debts and combined income of $150K a year, they can easily borrow $700K @ 2% interest.
That is roughly $2965 per month for mortgage payments over 30 years.

You can rent a way better house for 3k than you can buy for 700k.

[Jmac]

Originally Posted by Adorkami

When I was looking to get pre approved for a mortgage they dont want you to spend more than 40% of your gross income on mortgage payments. 35 year amortization rates are still available so you can still borrow lots of money but will pay lots of interest (400k at 1500/month for 35 years).

RBC's site states a minimum down payment of 20% for ammortization in excess of 25 years.

I doubt many $75k/year earners have $70k sitting in their bank accounts.

[4444]

Originally Posted by Tapioca

The old rule of thumb about mortgage affordability was 3-3.5 times your income.

Unless you've been in the market a long time and have substantial equity, owning a detached or semi-detached in Vancouver or the near-burbs doesn't seem possible under the old rule. What is the new rule of thumb on mortgage affordability now? 5 times? 6 times one's income?

The numbers being thrown around are eye-watering now. Even if your average professional couple makes 200K/year (e.g. nurse and senior manager at a Big-4 or lawyer) with maybe 200-300K in equity from a condo or semi-detached, it's hard to imagine that they're the ones being able to compete for a detached in Burnaby.

whilst I agree 100% in what you're saying, one correction: Snr Managers, on average, at big-4 in Vancouver don't make 200K p.a. - many/most will make the low 100's.

5x income on a place is scary, beyond that is ridiculous. not sure why people are so obsessed with worrying about buying a house, we'll all be dead at some point so enjoy the day, enjoy life, enjoy your money.

who gives a fuck about keeping up with the highly indebted, financially stressed Joneses (sadly, 95% of people in the Western world)

[4444]

Originally Posted by SumAznGuy

According to RBC's web page, no debts and combined income of $150K a year, they can easily borrow $700K @ 2% interest.
That is roughly $2965 per month for mortgage payments over 30 years.

4.67x income, i bet they could go to the bank and get pre-approved for way more than that!

[lowside67]

There is quite a bit of misinformation on this page about how banks qualify people for mortgages. The two ratios that are measured are GDS ("gross debt service") and TDS ("total debt service")

GDS = housing costs only, specifically: mortgage, utilities, property taxes, and 50% of strata fees if applicable.

TDS = GDS + any other payments such as car, student loans, etc.

If you are going to require CHMC insurance...(<25% down payment or poor credit rating)
1) Maximum purchase price of property is $1-million
2) Maximum amortization is 25 years
3) GDS = maximum 32% of gross income
4) TDS = maximum 40% of gross income
Based on these numbers, a couple earning $150k/year could qualify for monthly housing costs of $4,000. An $800,000 mortgage = $3,391 per month at 2.0% / 25 years. Even assuming no strata fees, it's unlikely that they could qualify for much more when you add in property taxes and utilities.

If you are do not require CHMC insurance...
The rules for CHMC above are rigid and cannot be changed. If you are not requiring insurance, the banks have some flexibility but will typically start with GDS in the 32% range and TDS in the 40% range. For some high value clients or those with strong credit scores without other liabilities, they may bump GDS to 40% so if you have no other debt, you can use the full 40% to qualify.

Based on getting the full 40%, a couple earning $150k/year could qualify for monthly housing costs of $5,000. A $1,100,000 mortgage = $4,066 per month at 2.0% / 30 years. This should easily be doable for a well qualified buyer, especially if the down payment is a bit higher than 25%.

Mark (BMO Employee)

[lowside67]

Originally Posted by Tapioca

The numbers being thrown around are eye-watering now. Even if your average professional couple makes 200K/year (e.g. nurse and senior manager at a Big-4 or lawyer) with maybe 200-300K in equity from a condo or semi-detached, it's hard to imagine that they're the ones being able to compete for a detached in Burnaby.

Originally Posted by 4444

whilst I agree 100% in what you're saying, one correction: Snr Managers, on average, at big-4 in Vancouver don't make 200K p.a. - many/most will make the low 100's.

I think he was saying the couple's income would be $200K/year which makes sense as the nurse can probably earn $70K so that's only $130K for the senior manager at KPMG.

Mark

[4444]

Originally Posted by lowside67

I think he was saying the couple's income would be $200K/year which makes sense as the nurse can probably earn $70K so that's only $130K for the senior manager at KPMG.

Mark

good catch!

[Hondaracer]

Originally Posted by Mr.C

You can rent a way better house for 3k than you can buy for 700k.

Yea, but you're not getting that 50-80k return on investment per year by renting

[flagella]

Lol @ senior manager in big 4 making $200k.

[Adorkami]

Maybe a banker can answer this for me. Is there anyway to take in to account future income when applying for a mortgage? I currently live in an apartment and if I'm able to keep it the rent would create a slight profit (people beside me pay 500/month above my mortgage/strata). Other than being approved for a mortgage I don't see the gain on selling my apartment if I still have enough cash to put a down payment on a house

[Mr.C]

Originally Posted by Hondaracer

Yea, but you're not getting that 50-80k return on investment per year by renting

You're making the dangerous assumption that prices will continue to rise like they have.

[flagella]

Originally Posted by Adorkami

Maybe a banker can answer this for me. Is there anyway to take in to account future income when applying for a mortgage? I currently live in an apartment and if I'm able to keep it the rent would create a slight profit (people beside me pay 500/month above my mortgage/strata). Other than being approved for a mortgage I don't see the gain on selling my apartment if I still have enough cash to put a down payment on a house

How much profit are you going to generate by selling your apartment now? Discounting your future cash flow isn't hard. Determining the discount factor is a bit more tricky and I don't know enough about real estate (particularly rental market) enough to know what risk premium is required in addition to risk free rate.

Essentially you are comparing how much you would make now versus present value of your discounted future cash flows (obviously you will need a term).

Generally though, if you don't have any better ideas what to invest in with the sum of $ you will receive if you were to sell your apartment, just keep renting.

[Hondaracer]

Originally Posted by Mr.C

You're making the dangerous assumption that prices will continue to rise like they have.

history would say it's safer to assume growth rather than decline imo.

Especially if you're buying relatively desirable places in Burnaby/Vancouver, imo the market is there for you to make money on a home regardless of the situation. a "correction" isnt going to mean that all of a sudden these incredibly sought after homes all of a sudden become unsellable. People will -always- want to live in these areas, and pay a premium for them

[noclue]

Yeah but like 2009-2010 when it's hard to get a mortgage, desirable areas will fall too.

[4444]

Originally Posted by Hondaracer

history would say it's safer to assume growth rather than decline imo.

Especially if you're buying relatively desirable places in Burnaby/Vancouver, imo the market is there for you to make money on a home regardless of the situation. a "correction" isnt going to mean that all of a sudden these incredibly sought after homes all of a sudden become unsellable. People will -always- want to live in these areas, and pay a premium for them

that is an INCREDIBLY dangerous way of thinking.

whether they are desirable or not, in general if the whole market goes up or down, said desirable places, whilst maintaining a value gap, will go up and down. Things like mortgage availability / ease of obtaining debt play a huge role in this as well as hundreds of other factors.

Just saying that you can never just buy regardless of looking at relative values and taking into account many factors.

[Hehe]

Originally Posted by Hondaracer

history would say it's safer to assume growth rather than decline imo.

Especially if you're buying relatively desirable places in Burnaby/Vancouver, imo the market is there for you to make money on a home regardless of the situation. a "correction" isnt going to mean that all of a sudden these incredibly sought after homes all of a sudden become unsellable. People will -always- want to live in these areas, and pay a premium for them

Do you have any relatives who bought in the peak on the late 80s? I'm sure they don't agree with that, at least not when they realized they lost a a huge amount of equity during the 90s.

During the 90s, real estate purchases were done mostly on necessity; the natural requirement to have a shelter. However, they didn't buy RE with the assumption that it would grow, but rather, it made sense purchasing vs. buying given their financial situation.

If you can afford a place in this market, by all mean go ahead as long as it doesn't alter your long term financial goal too much and you simply see the mortgage payment as cost of shelter.

However, if you are thinking housing as your major investment/component in your portfolio, I'd suggest to think again. Historically speaking, RE has grown at the same/similar rate of inflation. Many that I know buy house because it forces them to save and they don't invest in much else but a regular RRSP or similar retirement scheme. I find that ridiculous... but their long term plan is much simpler, so I can't argue.

As far as investment goes, cashflow is still the most important aspect, or at least that's what I learned from my parents. So whenever I'm borrowing for an investment, all that matter is the cashflow that such investment brings me after debt service. So I know I would be enjoying an even better cashflow once the loan has been paid. To put it into perspective, my parents were once about 11M in debt. ... but their cashflow brought down the debt so fast that 12yrs later, they are debt free and making more in a month than what I make in a year.

But cashflow in the current GVR market?

[!LittleDragon]

Recent history sure... recent history also says stock markets triple in 6 years. At least stocks and funds still pay you when they're down in the dumps.