But I’m SUPPOSED to be RICH!
I have a question for you. We live in a time of superb economic growth for the western provinces, Vancouver is a beautiful place to live and we’ve got two weeks of winter games coming in just 4 years. Interest rates are very low by historical standards and the CMHC will insure mortgages with absolutely no down payment.
So given all those positives WHY IS MY HOUSE WORTH $29,000 LESS THAN IT WAS A COUPLE OF MONTHS AGO?!?
I mean seriously, prices should be going up shouldn’t they? We’ve got nothing but positive economics here. I’m taking some solace in the fact that its the winter and the market usually slows down around now, but a $29,000 average drop in house prices!?
This has got me worrying about the liquidity of my house-riches. What if I can no longer put up some fresh paint and new laminate and increase value by $50k? What if something were to happen to our economic paradise? What then?! I mean if prices can go down when everything is going great what happens if everything stops going great. What if rates rise, more people move out of the province, or the job market starts to decline?
You people have turned me into a worrier, just BUY SOMETHING ALREADY!
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December 23rd, 2006 at 11:40 am
If prices go DOWN when the economic climate is great, then maybe they will go UP when the economic climate is bad!
December 23rd, 2006 at 12:06 pm
How about increased wages equals more money in your pocket. Instead it seems like society feels they have to spend everything they make.
Inflation is way ahead of wage increases. So this means people are borrowing to buy now. If interest rates go up then wham, no cushion.
December 23rd, 2006 at 12:14 pm
$1576/Month @ 8%
$1788/Month @ 10%
$300,000 over 25 Years =
$1919/Month @ 6%
$2289/Month @8%
$2683/month @10%
This is not including, Tax’s, Utilities, Car Payments, etc. It all adds up to a large monthly payment that will kill those who can just manage at todays, low rates.
Not to forget, at todays prices, you will need about $200,000 down just to have mortgages like that.
There aren’t too many first home buyers, current owners, that have that much equity.
December 23rd, 2006 at 1:00 pm
Noticed that Chipman now classifies his links into:
1. Real estate blogs
2. Bear blogs
Interesting way of doing things. He could have done it a couple of other ways:
1. Industry fluff
2. Real estate blogs
1. Bull blogs
2. Bear blogs
1. Blogs
2. Biased blogs
December 23rd, 2006 at 1:30 pm
affordability.
Just because we’re all working doesn’t mean we can all afford to spend twice as much on housing.
Some of us also factor in the possibility of interest rate hikes over the next ten years.
December 23rd, 2006 at 1:40 pm
Even then you aren’t realizing these gains until you actualy sell the house. Borrowing agianst it means you are paying interest on your own money.
If prices start to drop then there will be a lot of pissed of people.
The realization that they just paid for some “Baby Boomers” retirement.
It is just too risky to buy into this over inflated market right now.
December 23rd, 2006 at 1:53 pm
It is just too risky to buy into this over inflated market right now.
That is just the thing. One reason that prices have gotten so high is that it is felt that it is low risk and high return. Once that mindset changes RE will get it both barrels. The question is how long the Wiley Coyote moment will be. Will probably feel like an eternity.
link
December 23rd, 2006 at 2:54 pm
You may recall that I’d estimated a 2-7 year range for probable peak to trough period.. recently I’m considering the lower end of that range as more likely.
I think we’ll likely play ‘catch up’ to the US as the skids come off.
The start of the plunge, the Wiley Coyote moment, could come as early as this Spring.
December 23rd, 2006 at 3:02 pm
1. Real estate blogs
2. Bear blogs
How old is Rob Chipman ? Was he in diapers in the early 80’s or is he a grizzled old vet ? Experience is crucial at this important juncture in the RE market. I wouldn’t take any advice from someone with less than 25 years in RE bizz whose seen both sides of the coin.
December 23rd, 2006 at 3:07 pm
1.Fantasy blogs
2.Reality blogs
December 23rd, 2006 at 3:14 pm
December 23rd, 2006 at 4:20 pm
How old is Rob Chipman ? Was he in diapers in the early 80’s or is he a grizzled old vet ?
He mentioned that he was young and working construction during the 80’s collapse.
Anyhow, I thought he was a reasonable straight shooter, even when he tried to argue the impossible. But “real estate blogs” and “bear blogs”? I understand the need for separatation as people in the thick of real estate have practical concerns such as optimal renos or how to deal with tenants or where to get a good deal on granite. They don’t want endless debate on bubble or no bubble. But calling them “real estate blogs” and “bear blogs” is assymetric to say the least.
December 23rd, 2006 at 5:37 pm
I think you are correct in pointing it out. And now I feel really bad about some of my comments.
I am new to the blogsphere and had no idea that if you are joking you are supposed to end your post with
December 23rd, 2006 at 6:26 pm
Well you certainly don’t have to read his blog, thats the great thing about freedom. I disagree with you on the term ‘manipulative’ though. I think he’s cagey and is hedging his bets, it may not be entirely forthright, but I don’t think its ‘manipulative’.
December 23rd, 2006 at 7:17 pm
You have to think a little more positive. The downturn was simply due to all the lousy wheather over the past few weeks. i mean who wants to pump all that money into a new home when you can’t see all the new lamenent and gaudy new paint because the power is out. And let’s face it, granite counter tops are really hard to enjoy when there’s a tree obstructing the view.
So just keep reminding yourself that in the spring prices will go through the roof….unless they don’t and then your screwed.
December 23rd, 2006 at 7:34 pm
Anyhow, I thought he was a reasonable straight shooter, even when he tried to argue the impossible.
I’ve noticed your absence on Chipman’s blog lately. His henchman Aaron could really use some freako time :-). He told me I should invite you back when I told him it was lucky you weren’t there. It was something to do with how the Provincial government would raise wages to support the house prices. Very funny actually.
Mostly Chipman has my respect but he does egg people on a bit. It’s often hard to tell home much is egg and how much is what he really thinks.
December 23rd, 2006 at 7:52 pm
Aaron will say the most ridiculous things and apparently believes them, so there’s no point in arguing with him or any other bull at that blog.
I’m not in the business of converting people so I’m happy to let them wallow in their surety of future riches. They’ll find out they’re wrong soon enough.
December 23rd, 2006 at 8:15 pm
December 23rd, 2006 at 9:01 pm
just remember its a freakn house, live in it.
can i cry you a river …or better yet can I borrow a feeling
December 23rd, 2006 at 10:35 pm
December 23rd, 2006 at 10:45 pm
or better yet can I borrow a feeling
eh? I’m not sure how I would lend that to you..
just remember its a freakn house, live in it.
exactly! Its a house to live in, not an investment. Even if the value drops in half its not like that *hurts* you unless you *need* to sell it. Just live in it and don’t worry about it.
I think the Japanese market is starting to get close to its prior peak now, and its been less than 20 years, so if you ignore the interest they paid to the bank they now have an asset that they can sell for close to what they paid for it, and they had all those years of living expenses paid!
It doesn’t matter what the market does, if you can afford to buy the house you want to live in over the long term, it wont bother you if houses get cheaper in the short term.
December 23rd, 2006 at 10:51 pm
As the recent weather has shown its not just prices that can go through the roof, but I’m not sure how that could be classified as a ‘positive’.
In the event of a windstorm knocking a tree through your roof I know which side of the renter/owner division I’m most comfortable with.
December 23rd, 2006 at 11:09 pm
“It doesn’t matter what the market does, if you can afford to buy the house you want to live in over the long term, it wont bother you if houses get cheaper in the short term.”
I plan to run a feature on Sundays. I will be named: Aaron Best’s Bests.
Do you mind if I run the above quote from you as a ” special guest” contribution this Sunday?
December 23rd, 2006 at 11:56 pm
â€Noticed that Chipman now classifies his links intoâ€
We all have our indiscretions, we are humans and make mistakes, you checked out Rob’s blog, there is no shame in curiosity, it’s a sign of intelligence.
December 24th, 2006 at 12:02 am
I am new to the blogsphere and had no idea that if you are joking you are supposed to end your post with
“
I don’t know who is anomymous who, but no the endless debate on bubble or not refers to the rest of us who are not interested in the best price of granite because we are not in the market or about to get out of it. It was not aimed at any one individual, anonymous or not. If railing for or against a bubble was a crime, yours truly would never see daylight again. And I would have company in the dungeons.
December 24th, 2006 at 12:07 am
Debating with Rob is a bit like ramming your head into a brickwall. The wall does crumble eventually, but it is not a particlularly enjoyable experience. It is a bit like debating with somebody who speaks a different language. I am not in the mood for taking a 1001 paces backwards and starting all over with Aaron.
Overall, though, Rob does debate in good faith. Unlike that other extremely manipulative jackass who can’t decide what his handle is.
December 24th, 2006 at 12:30 am
bc_cele:
As the recent weather has shown its not just prices that can go through the roof, but I’m not sure how that could be classified as a ‘positive’.
In the event of a windstorm knocking a tree through your roof I know which side of the renter/owner division I’m most comfortable with.
Doh! I’m going to give myself a 100 lashings with a wet noddle and repeat “sarcasm doesn’t come through on a blog” until I remember it.
On that note…I just got back from Afghanistan, and the first thing I thought when I got there was “..the real estate prices have to be high here..they have mountains..”
December 24th, 2006 at 6:19 am
December 24th, 2006 at 7:05 am
“Plus the whole skiing, sailing, golf is quite a draw. Can’t get that in Tokyo, London, New York, LA, Sydney, Osaka, etc etc.
Actually, where else can you get skiing and sailing 20 minutes apart?”
When a guy who invents macroeconomic theory on the fly resorts to the oldest cliche in Vancouver real estate, the MARKET HAS PEAKED.
Honest now, how many have told out of towners about the 20 minute apart golf ski thing. All of you, right. Now how many have actually golfed and skiid on the same day, never mind the same week?
As for the ski to sail in 20 minutes, yes I see helicopters plucking skiers off the mountain and plopping them down on sail boats all the time. If your name is Richard Branson that is.
December 24th, 2006 at 7:52 am
December 24th, 2006 at 9:55 am
Ask any recent home debtor with 3 jobs, and boarders if they have the time and / or money.
December 24th, 2006 at 10:24 am
“I think the Japanese market is starting to get close to its prior peak now, and its been less than 20 years, so if you ignore the interest they paid to the bank they now have an asset that they can sell for close to what they paid for it, and they had all those years of living expenses paid!”
I occasionally hear similar statements about the Japanese RE market. Unfortunately, they are not true. The Japanese RE market has been in continuous decline since its peak in 1989, and has lost almost 40% of its value over that time.
In addition, ignoring the lost opportunity cost of the mortgage payments on an overpriced asset makes no sense. If ken rented in a similar situation, and invested the difference between his rent and what would have been the mortgage on a similar house, he would be much better off.
Take a look at these links if you don’t believe me:
http://tinyurl.com/woslr
http://tinyurl.com/yf7gys
December 24th, 2006 at 10:58 am
In addition, ignoring the lost opportunity cost of the mortgage payments on an overpriced asset makes no sense.”
Right you are. Another thing to note is that nominal prices have done better than real prices at times, due to general deflation.
In either case, even if Japan were close to nominal breakeven, it would be absurd to use such a fact to justify paying obscene amounts in 1991.
December 24th, 2006 at 11:18 am
December 24th, 2006 at 11:32 am
A house is an investment, and the yield is - surprise - something economists call “shelter”, which means not having to live outside. And likewise it has a return on investment made up of yield and capital gains. The former is dismal right now, which means the latter is likely negative looking forward.
What you’re trying to say is that a house is not a speculative investment, which is purchased in expectation of capital gains over yield.
it wont bother you if houses get cheaper in the short term
My house went down 20% after I bought it, and believe me I was pretty steamed about it. And prices were way, way lower than today.
December 24th, 2006 at 1:48 pm
Thanks for your illustrative example. The idea that people should buy any time because the market will recover *at some point* is ridiculous. It takes me a long time to save even $20k (and it takes longer & costs more to pay off a loan for that amount), so I would certainly notice if that amount or more was wiped out in a downturn. Why people suggest that a hundred-thousand dollar loss is nothing is beyond me. For example:
ken: Even if the value drops in half its not like that *hurts* you unless you *need* to sell it.
And what if you *need* to sell it due to job loss, job transfer, divorce, illness, accident, etc. etc. Then you just eat that 50% loss? It’s no big deal to lose hundreds of thousands of dollars? Get real.
The other myth that these idiots propagate is that “you can’t time the market, so don’t bother trying.” I think this one was originally made up by mutual fund managers, for obvious reasons.
While it may be near impossible to time the *exact* top or bottom of a given market, someone with reasonable powers of discernment who undertakes critical analysis of a market can usually discern if it is likely to rise or fall - and to invest accordingly.
And, after a speculative run up that has pushed the limits of affordability, housing doesn’t look like a good investment right now.
December 24th, 2006 at 2:36 pm
1. Real estate blogs
2. Bear blogs
How old is Rob Chipman ? Was he in diapers in the early 80’s or is he a grizzled old vet ? Experience is crucial at this important juncture in the RE market. I wouldn’t take any advice from someone with less than 25 years in RE bizz whose seen both sides of the coin.
I too noticed that Chipman categorized van.condoinfo., van(un)real, and VHB into “bear” blogs - as if that diminishes the salience of them. Personally, I would rather not have the link. He links to Real Estate Tomato, which is a blog about blogging and yahoo more than a real estate blog, Bloodhound - which has some long ramble about someone named Courtenay, and her eating disorder, and livium’s blog - which is another blog about blogging, but mentions Chipman’s blog.
I guess no one really wants to talk about the reality of the RE market. One can learn a lot more at VHB, or here, in about ten minutes, than a week of reading at Rob’s so-called RE blogs.
If I was Chipman, I’d ask Aaron to start his own blog, and stop cluttering up my own with inanities. It’s rendering it meaningless and trivial.
I have encouraged both of them, but I no longer know why.
Chipman is about 45, and as I know him, is a decent guy, but his sidekick does seem to be in diapers. I gave him a very long leash, and the chance to put forth reasonable arguments, but mostly just ignore him now. He’s got some pretty goofy ideas - like buying in Vegas, and renting out to hotel workers with a clause that he has a room when he wanted it. Huh? But he has an out by not liking the administration.
I was going to be a neuro-surgeon, but I didn’t like the name. I thought that people might think i was neurotic plastic surgeon, or such.
I have now changed Rob’s link to Rob’s Bull Blog - because it is mostly bull over there these days.
December 24th, 2006 at 2:46 pm
http://www.heraldtribune.com/
Just replace Florida with Vancouver about a year from now.
December 24th, 2006 at 2:58 pm
It is Sunday
Aaron’s Best Collected Works:
It’s time for the provincial gov’t to do something about that. If Vancouver is the most expensive province to live in. Wages need to be among the highest as well. I’ve got to believe that will happen. Call me an optimist!
“Stale dating happens when a property sits on the market for what is considered a long period of time.”
I don’t really seehow the wage angle will hold back values?
Then there is the Buying in Vegas little gem.
There is also the post about how he will own RE all over the world.
There are many others but hey, let’s be kind.
It’s Christmas.
December 24th, 2006 at 3:24 pm
What would be say the intrinsic value of a Townhouse located around West 4th and Burrard or even a Condo that’s being built right now at that location?
December 24th, 2006 at 3:26 pm
The worst of the U.S. housing downturn may have passed and the sector should stabilize by the end of next year, three economists who study the nation’s housing sector said Thursday.
link
The three economist: Chief economists from the Builders, Realtors (good old Lereah) and Fannie Mae).
Might as well have discussed crime rates with Ali Baba and the 40 thieves. Why does the MSM pull these stunts? Published as Christmas nears the allegory is obvious, the three wise men. Seems more like the three stooges to me.
And I am not talking about the funny kind.
stooge
–noun
1. an entertainer who feeds lines to the main comedian and usually serves as the butt of his or her jokes.
2. any underling, assistant, or accomplice.
–verb (used without object)
3. to act as a stooge.
December 24th, 2006 at 3:45 pm
It’s funny that when you won some money, you want more. But, it does hurt when you loose money. It never feels good doesn’t it. That’s just part of human nature. Learn to accept it. You win some, you loose some. Same with shopping. You may be a great shopper for most items, but that doesn’t mean that you’re getting all the greatest deals. This is the same with a house.
Buy a house if you plan to plant your roots for a long while and disregard price changes. As long as you can afford the mortgage payments and all the other frictional costs associated with it, then everything else is just noise.
Yes, since the dusk of the investment crash of 1929, people had been predicting the death to real estate and stock market prices — they will pummel back to depression era prices. They’ll even furnish you with all the charts, facts and news cut outs.
The Canadian real estate averages around 3% average compound growth year after year. I read that in the past issue of the Canadian MoneySaver somewhere. That’s certainly nothing to write home about. If past history serves us with any indication, the recent price increases will self correct itself back to the normal average. Which means that in the not so distant future, the eventual price increase will self attenuate back to where you paid dearly for in the peak — broke even. That could be 10 years, 20 years or maybe longer.
Keep in mind that owning a house was never meant to be a good investment. It’s shelter and in this case, your bank is your landlord.
December 24th, 2006 at 4:00 pm
Did I ever tell you the story of when I went to the drycleaners to pick up my drycleaning and discovered one of my buttons was missing?
It’s a very interesting story kinda like your story.
December 24th, 2006 at 4:29 pm
Most Canadians do place a lot of their savings in a home, knowing that it’ll be there to bail them later in life. Some may never see that happen cause they sold it after years of stagnation and enduring negative equity ownership. Just ask anybody who had bought in the peak of the 80s or 90s and see how long did they presevere? Not long enough unfortunately as told by my bank manager.
December 24th, 2006 at 6:04 pm
December 24th, 2006 at 7:37 pm
Start with the VHB site http://van-housing.blogspot.com/
Its inactive for the holidays but lots of neat background info there.
I bet those relatives have a lot to lose in a crash. You may not even know how far they are into this mess as many people keep quiet about the extent of their speculation. I know of a couple of doozies among my family/friends and there are certainly more.
December 24th, 2006 at 8:26 pm
December 24th, 2006 at 8:35 pm
I,you, they,we, means nothing its a question that who can?
All people who never did nor they realy going to if I did I will find some thing for my son and doughter if I am not married I still can to make my future easy going there are always some current facts to reduce prices but market does not allow actualy prices are up and always up if all can afford than who is going to rent Rich and Poor/Owners and tenents lifetime bussiness what you guys are doing is beating heads every days that takes years to develop real estates
December 24th, 2006 at 8:37 pm
It is Sunday Aaron’s Best Collected Works:
There are many others but hey, let’s be kind.
It’s Christmas.
Muir/Anon/whatever the hell you call yourself today, you are a tool. You’ve already been told that you are just a negative person with nothing worth while to add to any discussion. You still haven’t stated any of your theories, or points of view. Instead you lurk in the background stalking me, waiting for a chance to call me names. I think at this point you are upset I put you in your place, and you are trying to get back at me with your pathetic BS. I’ve given you lots of opportunities to leave with your dignity, but your obviously too thick to get the hint. When it comes right down to it you are like a rash. Irritating, and hard to get rid of. Get a life TROLL!!!
December 24th, 2006 at 8:41 pm
Let me guess what happened next. You dropped the $800 suit and the button off at the tailor’s. When you go to pick it up, the button is sewn back on … a $50 polyester suit. And the tailor insists on his $30 fee for sewing it back on.
December 24th, 2006 at 9:06 pm
I think the intrinsic value would be this: take the total monthly rent you would pay for the property, if you can fit your mortgage, condo fees & taxes into that monthly total with 25% down then that sounds about right.
December 24th, 2006 at 9:14 pm
(laughing) Brilliant freako! Thanks for the Christ!mas cheer.
December 24th, 2006 at 10:05 pm
Now I feel even less lonely. I think China is in for some hurt, and with it our resource sector. I have found only one other poster that agrees with me on this (can’t remember who).
December 24th, 2006 at 10:12 pm
Sauder has all the numbers you need, in spreadsheet and charts.
link
Prices peaked in Q1 1981. Nominally surpassed in Q2 1989. In real terms, breakeven was Q1 of this year, (exactly 25 years).
December 24th, 2006 at 10:40 pm
Yes. I was absolutely stunned. It made me think of London during WWII. Everywhere - holes in the ground, bare foundations, half-finished condos which sat there for years. Almost a whole block of SFH near 22nd and Namimo which just sat and deteriorated. Spooky. Forclosures galore.
Decline 45% to bottom in 1983 BTW.
Anyone who denies this crash should apply now for a job in the Bush White House. Dubya needs you.
December 24th, 2006 at 11:10 pm
Doubt it was me, but I’m in agreement. Here’s an interesting article you might like to read from earlier this year (Foreign Policy):
Dark Side of China’s Rise
bc_cele:
What’s the latest from Afghanistan?
December 24th, 2006 at 11:12 pm
I don’t see the market getting to the point where my place will be worth $225 000 again. I see a slight decrease but nothing more. Our market is insane and I’m glad I don’t have to buy.
December 24th, 2006 at 11:17 pm
What I recall more clearly is the 80s recession. Every night, the evening news had depressing stories about young people trying to find work or mass rallies to opposed cutbacks in just about everything. By the time I graduated - with guidance counsellors strongly urging me to go to college or face doom - the worst of it was over, but it still plays in the back of my mind to this day.
I think people my age are a bit more cautious than people 5 or 10 years younger. I think that age group is going to be shocked when they meet their first recession.
December 24th, 2006 at 11:29 pm
Things are normally very quite there this time of year, but they were starting to quicken their pace of attacks when I was there. However, I left just before the latest push (Falcon Summit), and since then I’ve heard that things have calmed down. Last I heard was that our troops moved into their positions with almost no difficulty and have almost 1000 of the Taliban surronded in a very small area.
Everyone at the camp was hoping that we can contain these guys once and for all because it is not a good situation for the locals. There were a number of women killed for the simple fact that they dared to teach children. One woman had to be kept in the compound to keep her from being assassinated. The sooner we can contain them then the sooner the building projecs we are doing can get the country back on its feet.
December 24th, 2006 at 11:29 pm
Probably not me either, though I’m also in agreement. China is building huge overcapacity, and they’re very vulnerable to even a slight downturn. My wife is Chinese and knows of some Chinese who are concerned - but they don’t get quoted in the media.