Interest Rate Reset Risk

[Greenhorn]

Anecdotal evidence I have from a small sample in that rich money is buying downtown Vancouver and the West side. Iranians, Mainland Chinese, Koreans and few buyers from the Middle East. Pretty interesting.

“Rich [foreign] money is buying downtown Vancouver and the West side.”

Greenhorn - I took the liberty of archiving part of your post, I trust that is okay.

The role foreign buyers play is important in attempting to understand this market. Do you have any more info about these sales that you could possibly share with us?
How small a sample? (It has got to be at least 4 sales you're talking about!) How many properties does this involve? Any idea how the new owners intend to use the properties? (leave empty for own occasional use or rent out?).

VREAA, my stats cone from realtor friends who are quite honest about the answers they give me regarding who is buying downtown and the westside. I also have friends who live in these areas who track every sale in their neighborhood and who know who their new neighbors are. Most purchasers are living in their properties and some are renting them out. It is by no means scientific, but there are underlying trends and patterns that are becoming noticeable. If you discount or ignore the rich foreign purchaser, you will never reconcile how prices in Vancouver can be so high, with record job losses and a weak economy. Of course the Vancouver local with a job can compete with rich foreigners in bidding up prices and getting caught up in the fervor, because interest rates are at record lows and credit is easy. Everyone in Vancouver is rich now because they are either wealthy foreigners or can qualify for huge bank loans. Which group is dominating the market? The rich foreigner or the heavily financed local yokel? I have no idea, but am hoping it is the former so that our real estate market stays orderly. If it is the latter, we are in for a world of pain. It sounds like their are a lot of foreigners with cash that are buying.

[vreaa]

Everyone in Vancouver is rich now because they are either wealthy foreigners or can qualify for huge bank loans.

Greenhorn, thanks for the additional info.
I've updated the post accordingly -
“Rich [foreign] money is buying downtown Vancouver and the West side.”

[grantness]

Grantness & Austin - Paying off the mortgage on my primary residence asap, no matter what rates are doing is what my plan is.

Except when you're "pushing out amortization" ... in a maneuvre somehow related to interest rates & inflation.

hey, i can totally understand where you're coming from. Realtors are highly motivated to get people to "buy high, sell low"

[metalhead]

http://ca.news.finance.yahoo.com/s/2711 ... -2015.html

So Dodge says the CB will keep rates low so the Guv can raise taxes?
Great. Those who live conservatively and try and save money get shafted while those who get in debt are protected by "accomadative" rates.
Keep those pumps going!
When it all comes crashing down it's going to be pretty spectacular.

Dodge says rates can stay low through 2015
Fri Nov 27, 4:37 PM
Email Story IM Story Printable View
OTTAWA (Reuters) - The Bank of Canada could keep its benchmark interest rate accommodative through 2015 to offset fiscal restraint by the government, which must hike taxes to balance its budget, former central bank chief David Dodge said on Friday.

In point-form notes for a speech he was delivering at a business forum in Lake Louise, Alberta, Dodge backed the plan by his successor, Governor Mark Carney, to hold interest rates at near zero until mid-2010 but said the bank could back away from "unconventional initiatives".

With a credible fiscal plan, the overnight target rate, now at the lower limit at 0.25 percent, could "remain accommodative through 2015," he said.

The rate could rise to 2 percent in 2010-11 but stay below neutral for the rest of the period, he said, to compensate for the "fiscal drag and continuing (small) output gap," Dodge wrote in his notes.

snip...............

[MikeStewartRealtor]

hey, i can totally understand where you're coming from. Realtors are highly motivated to get people to "buy high, sell low"

The Realtors you're working with have told you this?

[grantness]

The Realtors you're working with have told you this?

Not in those words, of course not. They typically say "that offer sounds too low" (when i'm the buyer) or "you risk offending them with a counteroffer" (when i'm the seller). Of course when i hear them on the phone (when they're double-ending the deal) the message is the opposite: they're telling the client how attractive the offer they just got was.

It's not just me... on HGTV there's countless shows where realtors try to get sellers to lower their prices, and buyers to accept the higher prices.

But back to the topic... i usually ignore anyone (financial advisor, realtor, shoe-shiner) telling me "you should buy as little of something as possible when it's cheap, and then as soon as it's expensive, stock up!"

[MikeStewartRealtor]

Hi Grantness,

If they said those things, why are you still working with these people?

[eyesthebye]

Grantness & Austin - Paying off the mortgage on my primary residence asap, no matter what rates are doing is what my plan is.

Except when you're "pushing out amortization" ... in a maneuvre somehow related to interest rates & inflation.

hey, i can totally understand where you're coming from. Realtors are highly motivated to get people to "buy high, sell low"

no grantness...realtors are motivated to get people to buy high, sell higher. Low prices cut their commissions

[gse36]

Grantness & Austin - Paying off the mortgage on my primary residence asap, no matter what rates are doing is what my plan is.

Except when you're "pushing out amortization" ... in a maneuvre somehow related to interest rates & inflation.

hey, i can totally understand where you're coming from. Realtors are highly motivated to get people to "buy high, sell low"

no grantness...realtors are motivated to get people to buy high, sell higher. Low prices cut their commissions

no. grantness is correct.

low prices cut commissions, but low prices are guaranteed sales.

why waste 3x the time & effort trying to sell a $800k place for $900k. thats $13k vs $14k commission.

$13k for guaranteed sale. probably one open house, closed in a month.
$14k for a 50% sale (50% chance its overpriced and never sells and another realtor takes the listing). EV is 50% of $14k = $7k, plus it will take 3 months if any to sell.

EV $13k 100% certainty in 1 month
vs 50% chance making $14k, and 50% chance making $0k... in 3 months.

You do the math....

[Lost Soul]

You do the math....

Whack!

[pianoexcellence]

a few years ago, I once had a "union mentality" guy complaining, among other things, that it was the realtors driving prices up so they could make higher commissions.


I remember thinking..."I guarantee they would rather have volume than price", it was low interest rates and public demand that sprung from rising momentum and neighborly BBQ talk that was driving prices.

-P-

[eyesthebye]

"gse36"

no. grantness is correct.

low prices cut commissions, but low prices are guaranteed sales.

why waste 3x the time & effort trying to sell a $800k place for $900k. thats $13k vs $14k commission.

$13k for guaranteed sale. probably one open house, closed in a month.
$14k for a 50% sale (50% chance its overpriced and never sells and another realtor takes the listing). EV is 50% of $14k = $7k, plus it will take 3 months if any to sell.

EV $13k 100% certainty in 1 month
vs 50% chance making $14k, and 50% chance making $0k... in 3 months.

You do the math....

have you got your head up your arse? Prices were 20% lower this time last year - yet sales up 275% now. Your theory about lower prices making real estate easier to sell is falling on deaf ears. In fact, every time real estate starts moving up people buy more, and every time it moves down people stop buying. Forget theory...check reality

Whack!

[Lost Soul]

have you got your head up your arse? Prices were 20% lower this time last year - yet sales up 275% now. Your theory about lower prices making real estate easier to sell is falling on deaf ears. In fact, every time real estate starts moving up people buy more, and every time it moves down people stop buying. Forget theory...check reality

Whack!

It dawns on me that you don't even know what is being discussed but why doesn't that surprise me? -- grantness & gse36 are not talking about general price levels but about buyer's & seller's agents behaviour with respect to a specific property that is up for sale.

Thwack!

[MikeStewartRealtor]

No Sorry LH

I was asking Grantness why he would take the advice and work with the people that gave him the advice he quoted...

My job is to help people buy and sell real estate. Contrary to what some assert on this forum, we don't control the market or prices. The market dictates our activities.

Have any of you heard of the "Working with a Realtor" brochure? If you have bought real estate in BC over the last few years and had an Agency Relationship with a Realtor, you will have signed one.

Cast your eyes to section 2

The Agency Relationship http://www.bcrea.bc.ca/buyers/why_use.htm

REALTORS® work within a legal relationship called agency. The agency relationship exists between you, the principal, and your brokerage, the company under which the individual representing you is licensed. The essence of the agency relationship is that the brokerage has the authority to represent the principal in dealings with others.

Brokerages and their licensees are legally obligated to protect and promote the interests of their principals as they would their own. Specifically, the brokerage has the following duties.

1. Undivided loyalty. The brokerage must protect the principal's negotiating position at all times, and disclose all known facts which may affect or influence the principal's decision.
2. To obey all lawful instructions of the principal.
3. An obligation to keep the confidences of the principal.
4. To exercise reasonable care and skill in performing all assigned duties.
5. To account for all money and property placed in a brokerage's hands while acting for the principal.

You can expect competent service from your brokerage, knowing that the company is bound by ethics and the law to be honest and thorough in representing a property listed for sale or lease. Both buyer/tenant and seller/landlord can be represented by their own brokerages in a single transaction.

We do as we are told when we are in the Agency Relationship. We don't tell the clients what to do. We give our advice and if the client wants to take it, great. If not we do as we are told....

[Austin]

Come on Mike, you're not seriously going to quote that stuff like it's gospel, are you?

"Undivided loyalty" .. what about double ending? Are you going to say that realtors don't try to do that?

If you want to say something nice about Realtors, you can say this .. Realtors try to convince both the buyer and the seller to pay market price.

Why? Because that's where deals get done and that's when they get paid.

There are a few Realtors out there who do specialize in low balling, though, but they focus on atypical situations (diamonds in the rough) that most buyers aren't interested in.