Well, this was predictable.
Days ago I reprinted a Craigslist ad offering to pay people to line up outside the sales office of a new condo development in Burnaby. “We need people to hold spots and line up for a new condo project located in Burnaby (Kingsway/Willingdon Ave),” it said. “Line up may start as early as weds/thurs night. Grand opening is Saturday February 19, 2011. Warm beverages and washrooms will be provided by the developer. Shifts are determined on how long you would like to stay. (preferably 8 hours+) Get paid cash quickly for sitting in a line up!”
This, of course, is reprehensible. False advertising, meant to misled people and create an untruthful situation. Until, of course, illusion becomes reality. That apparently happened last night when a TV crew from Global showed up, and footage hit the air of anxious buyers ready to mob the latest dream building. By Saturday morning this charade may actually have created demand in Canada’s most delusional market.
Jen works nearby. This is her report:
“When I went to work Tuesday morning I noticed a bunch of people at the empty lot and wondered what was up. Through the morning, the crowd/lineup grew. At noon, I noticed the porta-potty in a parking lot behind an adjacent building. An hour later it was gone (I kinda wonder if we should call the employment standards people – after all, I think it was in the job offer). The line grew by 50% from what was there at 9:30, so at 2:45 when I left, the lineup stretched beyond the length of the adjacent building. By 4, they were erecting tents (like very nice party tents – fully enclosed) for the people in the lineup exposed to the rain. When I went back to work at 8 there were flood lights for the people now in the tents. And alas, when I left at 10, the floodlights were extinguished, but several police cruisers were in attendance :)
“A co-worker went out and spoke to the people in the lineup at lunch. When asked what they were in the lineup for, the first two people in line didn’t know. A little further down the line, someone said they were waiting to buy a condo. When asked if one of them were going to buy a condo, the guy said no, but his friend beside him was going to buy one. Asked if they were getting paid to stand in line….answer…no! Upon leaving the project with a loud comment from my co-worker “hope you guys are getting paid well for this”, the answer from one “not bad, not bad”.
“I’m horrified and can’t believe that we live in such a society. But from 15 floors across the road, it’s very entertaining! And…there is the possibility of snow on Thursday night or Friday! I think I might try to sell coffee at an inflated price.”
Okay, same Bat Channel, different Bat City. In Toronto another blog dog reports on a mortgage just handed to his friend by one of the country’s Big Five chartered banks. You know the ones – the global leaders in responsible lending, guardians of an impeccable financial system that would never, ever allow the kind of deadbeat McMansions-for-Oakies loans that lead to the seminal collapse of the US housing market.
“My colleague just got a loan approved for $400,000 from one of the top 5 banks. He has s 5 % downpayment (around 20,000). He’s not even on a company payroll but on a contract. No real job prior to joining our company. Wife is in a retail job of $12 an hour. Above all: will complete 2 years in the country in Sep 2011. What the lending standards the bank has followed here I fail to understand.”
No steady job. No employment security. Minimal downpayment. Uncertain credit history. And yet rubber stamped for 95% financing. At teaser rates destined to reset far higher. How, exactly, is this different from the sub-prime mentality which facilitated the demise of real estate to the south?
Well, one difference is that in the States these days they’re far more conservative than we crazed beavs.
While Ottawa endorses and supports home purchases with just 5% down, the Obama administration is calling for minimum downpayments to be 10% before qualifying for mortgage insurance.
But that hardly matters. In nine of the biggest American cities the average down on a house is now 22% – a number which has doubled in the last three years. This is also three times the average downpayment in Canada right now, which CMHC estimates is running at just 7%.
And who’s driving this trend towards more prudent lending standards? Here’s how the Wall Street Journal put it:
“The move to force home buyers to lay out more cash is driven mostly by banks, who have found that larger down payments discourage delinquencies by increasing the buyers’ exposure to loss and reducing the impact of declining prices. Many home buyers placed little, if anything, down during the boom.”
It’s also interesting to note while buyers here can get 100% financing, and purchase houses with zero money – thanks to those cash-back mortgages at some of our big, conservative, prudent banks – this is impossible in the US. The only exceptions are for military veterans or rural residents, where government programs allow for no equity. In Canada you just need to be a bank customer, and fog a mirror.
The point of this post, therefore, is to be fooled not by illusion.
The condomaniacs you see lining up, desperate to grab an imaginary unit in an unbuilt building, may be as phoney as the developer’s moral compass. The buyers of houses selling for near half a million may be two paycheques from oblivion. And the bankers in towers of granite and gold may give us our own Madoff moment.