I can’t speak to all the specifics of the Canadian housing market, as I don’t know everything about their version of Fannie/Freddie but I do know they have this crazy idea that people need to document their income (outlandish and an affront to ‘financial innovation’) and for the most part require 5% down. There does seem to be a far more emphasis on adjustable rate mortgages, much like Australia versus the U.S. which is more of a fixed rate environment in general.
All that said, parts of this story remind me of one of the two stories that woke me up to what was happening in many parts of Cramerica (we never had a housing boom in Michigan so I had nothing first hand to rely on). As I wrote in [Jan 14, 2009: WSJ - Would You Pay $103K for this Fixer Upper?]
So when was your “I see the light moment” regarding real estate? 2007? 2008? Maybe even 2006 if you were lucky. As I’ve written in the past [Aug 13: Option ARMs- Who Thought Up these Time Bombs?], my moments started happening in mid 2005 (I’m usually early on these things) as I read about Zareh Tahmassebian in a Fortune article [May 30, 2005 - Fortune: Riding the Boom]. I was aghast at the tale of an early 20s mortgage broker in Las Vegas, making $100s of thousands a year churning out mortgages, driving fast cars WHILE flipping 8-9 houses he owned. I have to tell you, I was 10 years older than him and felt like the biggest slacker in the world after reading about his exploits. But I could see this was nonsense… and it would blow up “someday”. If you have never read the article, it truly is an awe inspiring tale and I suggest you follow the link and take some time out to review (a reader has since emailed me that a google search revealed Zareh has fallen on hard times – easy come, easy go I suppose)
So are we seeing a repeat in Vancouver? Hard to say – I assume Vancouver is a lot like San Franscico where there is a limited area to build, along with a large amount of Asian money coming in that will keep prices elevated well over the national average. But I sense the ghost of Zareh Tahmassebian none the less as I hear about “contracts” being flipped like they were in the good ole days in the U.S…
Posted by: TraderMark
Date: June 30, 2010