what will make prices rise again?

Last summer with all the rush to ‘buy now’ and steadily increasing prices in the Vancouver real estate market there was a prediction about house prices in 2010. Essentially someone took the rate that price were going up at that point and extrapolated out at the same rate to hit the prediction of an average house in vancouver going for one million in 2010. I must admit I also got swept up in the excitment with my bold prediction of condo prices reaching an average of THREE MILLION DOLLARS.

Unfortunately for us soothseers prices have actually been flat or dropping month after month since last summer, and its starts to get harder to see how we could ever hit that estimate.

So what are the conditions that could cause prices to shoot up again to hit that 1 mil in 2010 extrapolation? I’ve come up with a few:

1) Oil hits $4,096 per barrel. Flush with cash, the Alberta government buys a house in vancouver for every man, woman, child and house-pet in the province, whether they want it or not.

2) The Canadian government starts printing more money. LOTS more money. A loaf of bread costs $80 bucks and the fifty dollar coin is introduced into circulation.

3) Vancouver incomes double in the next year and more than half of them come with a rock solid 10 year contract and a lifetime supply of free bread.

4) Local real estate marketers develop a ‘mind control ray’ that convinces people they must ‘buy now or be priced out forever’. The ray also convinces banks and lenders to hand out loans that are 15x stated income.

5) Demand from planet Zegnbar skyrockets. The Zegnbarian exchange rate is so favorable that a Zegnbarian toenail clipping is worth about $460,000 CND.

Thats about all I can come up with on this Monday morning. Have I missed any?

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the pope
the pope
13 years ago

Vanphoenix: Summer might be good, but it all depends on how many want to sell and where the demand is. It seems like as a rough rule of thumb is about 2 years from peak to trough, but there are way too many factors to determine when those highs and lows are until you're well past them.We've been up for more than two years in a row, so down for more than two wouldn't be unheard of – Tokyo is still down from their peak after 15 years.Past Vancouver market bottoms have meant that with 25% down your mortgage taxes and maintenance have been less than rent on the equivalent property.There's always the 1/3 of your pretax income for housing costs as a gauge for a 'financially responsible' deal, but it all depends on how much of a premium you… Read more »

VanPhoenix
VanPhoenix
13 years ago

When do all of you estimate/guess would be the time to buy? The downturn is here but when will it bottom? How much will prices have decreased when we hit bottom? Jut curious to see what others think. I think the summer might be a good time to buy. I am itchig to get back into the RE market but not willing to make a financially irresponsible deal.

the pope
the pope
13 years ago

6.) The government will legalize polygamy. A household of 20 middle class wage earners making 50K brings in 1M annually. Using the 3X annual income rule of thumb you get 3 million dollar houses.Ah! Densification. Isn't that the Mayors plan?

RennieRay
RennieRay
13 years ago

Ok guys…I've taken the leap from Annonymous to a real name. I couldn't bare the thought of lurking in the shadows anymore.In light of this joyous occasion, I'm marking this event by dedicating my blog name to one of my real estate heros that holds one of the patents on that ray gun. It's real…I've seen it! Turns brains to mush…very nasty device.I wonder if this ray will be on the market for next christmas…hell I'd line up at Future Shop to pay more on Boxing Day!

Tulip Mania
Tulip Mania
13 years ago

"4) Local real estate marketers develop a 'mind control ray' that convinces people they must 'buy now or be priced out forever'. The ray also convinces banks and lenders to hand out loans that are 15x stated income."Sorry, not much of a chance. You see the contraption was stolen and it ended up at a "Cash Converter" pawn shop.I purchased it and converted it into an "orgasmatron", and I rent it out to cash strapped stressed out people with large mortgages.And by the way Pope, followers are good customers too.

Tulip Mania
Tulip Mania
13 years ago

"6.) The government will legalize polygamy"oh, oh, you mean polygamy is not legal?

C
C
13 years ago

6.) The government will legalize polygamy. A household of 20 middle class wage earners making 50K brings in 1M annually. Using the 3X annual income rule of thumb you get 3 million dollar houses.

vancouvercondo
vancouvercondo
13 years ago

betamax: yeah, but the 'mind control ray' seems to be fading. Why the month after month price drops?vanphoenix: I'd be suprised to see quick price drops, I think more likely it will be a slow ride down. a very quick trip from peak to trough would be about a year, and would probably only happen with a shock to the system (rates up, recession, etc)jesse: agreed. Thats why they need the mind control ray. It's not the majority of owners that have to worry about drops, its the margins who have major unplanned life changes.

Jesse
Jesse
13 years ago

In my experience friends and family influence way more effectively than Realtors. How can you argue when the large majority of homeowners' home equities are way in the black, and probably will be until they sell?

VanPhoenix
VanPhoenix
13 years ago

It doesn't seem like these RE prices are sustainable. Much of it is foreign interest and speculators. At the first sign of trouble they will jump ship. It should send us for a quicker decine but this is only one factor. I've over simplified the issue but there are numerous other variables and I'm sure I don't know all of them. What I do know is that RE is out of whack here and buyers are being strethed way too thin (financially). It amazes me that people continue to buy when they cannot really afford it. I refuse to take part in the non-sense and enjoy watching most prices drop. The drops are not big enough for me to buy…yet. Here's to hoping for a quicker decline!!!

Jim
Jim
13 years ago

Real estae will go up in the future (after some period of decline) for the same reason it always does- the people that get singed or lose in this cycle will either be out of the market,or conveniently lose their memories in 2014,as granite counter tops are replace by the "new" new thing- authentic moon rock counter tops.Or alternatley, the next round of post YVR RE meltdown 1st time buyers, are currently 20ish, and could not give a rat's ass about RE as they are currently busy sowing their wild oats.

betamax
betamax
13 years ago

4) Local real estate marketers develop a 'mind control ray' that convinces people they must 'buy now or be priced out forever'.Apparently, this one has already happened.

the pope
the pope
13 years ago

Good point jesse – you could also stretch the definition of 'food' to lower that cost and get a few surplus army blankets to keep warm in the winter instead of paying expensive utility bills.But as you point out, we're probably not going to see a ground-swell of demand from monks even if prices drop in half. I don't know many people that would choose to live without luxury items, particularly if we define luxury as "anything other than shelter and food".

Jesse
Jesse
13 years ago

More realistically, it could be that people can live with bad affordability at the expense of luxury items. If all you required for happiness was food and shelter (à la Buddhist monk), and were employed, what affordability could you handle? That would give you the absolute maximum, probably less than 3M but probably more than current levels.Unfortunately, the "no material possessions" catch-22 takes the monks out of the market. They could rent I guess.