Comments on: GVRD: 24% speculative?

By: patriotz

patriotz — Sun, 05 Aug 2007 13:53:00 +0000

IMHO the '81 crash was due largely to the leaky condo crisisWell sorry to let you down, but the leaky condo crisis - in the public eye anyway - began in the late 1980's, and the new NDP government appointed Dave Barrett to investigate it, perhaps in part to try to embarrass a certain Vancouver mayor of the late 1980's who had a new job.Even the current RE bulls admit the '81 crash was about affordability (it's not so bad now by their calculations).

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By: freako

freako — Thu, 02 Aug 2007 10:41:00 +0000

One odd thing though. Most of the stats I've seen show condos have increased more than SFH in the last few years.And that is a f*cked up market for you. Condos are depreciating assets. I can not say for sure that an east side SFH is overpriced, because I cannot possibly know Vancouver's future population growth. But for downtown condos, there is no frigging way that the present value of future income streams comes close to todays prices (is we make the assumption that inflation will continue to outpace rents).

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By: van-realestate-crash

van-realestate-crash — Thu, 02 Aug 2007 07:22:00 +0000

Patiently Waiting said... One odd thing though. Most of the stats I've seen show condos have increased more than SFH in the last few years. How true, perhaps SFH has appreciated so much because we ran out of land 20years ago, and now condos are appreciating so rapidly because we are running out of sky.Or perhaps, it's just a bubble.

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By: Damir

Damir — Wed, 01 Aug 2007 22:30:00 +0000

…world population is rising steadily, and at an accelerated rate for the last 50 years…Global population growth rate has not only stalled over the past 40 years, it has been cut nearly in half. http://www.census.gov/ipc/www/img/worldgr.gif

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By: Patiently Waiting

Patiently Waiting — Wed, 01 Aug 2007 21:43:00 +0000

One odd thing though. Most of the stats I've seen show condos have increased more than SFH in the last few years.

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By: markx

markx — Wed, 01 Aug 2007 18:05:00 +0000

jmk: SFHs becoming unaffordable compared to median is generally a result of increasing population. In the current run-up, population growth has been fairly small, compared to late 90's and early 2000's. I wouldn't want to assume the same trend of population growth for the next 20 years as the past 20 years. Vancouver is already a major metropolitan area, with very high cost of living.

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By: freako

freako — Wed, 01 Aug 2007 16:38:00 +0000

I don't have the numbers, but my guess would be that Vancouver's fraction of households in SFH's has gone down dramatically over the last 30 years.Good point. Priced in density potential skews SFH comparisons. I have posted pictures in the past of the West End a century ago, and it was nothing but houses. Those few SFH that remain have impossible affordability, and would likely not be owned by an owner/occupier.In any case, SFH affordability is poor even if we widen the area to the entire GV.

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By: tulip-Mania2

tulip-Mania2 — Wed, 01 Aug 2007 16:33:00 +0000

JMK:"consider what the affordability would be on an SFH in Manhattan."Are there any similarities Vancouver/Manhattan?I do see many differences, in size, population, incomes, economic base, but not many similarities.

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By: JMK

JMK — Wed, 01 Aug 2007 16:01:00 +0000

and why isn't relative affordability relevant? If Vancouver SFH numbers go from 55 to 60 to 72%, does that not indicate that there is less appreciation headroom?Hi Freako, I think the affordability measures are relevant. However, there is no good reason for it to be constant.If 2/3 of Vancouver's housing market is non-SFH right now, and that increases to 3/4 non-SFH in the future, then I'd expect the SFHs to get apportioned to the highest bidder. The price of an SFH goes up compared to the median income as more of the population moves into non-SFH housing.I don't have the numbers, but my guess would be that Vancouver's fraction of households in SFH's has gone down dramatically over the last 30 years. As an extreme example, consider what the affordability would be on an SFH in Manhattan. I'm not trying to argue that this trend drives short-term housing run-ups, but I don't think expecting SFH affordability to drop to pre-2000 levels is a fool-proof strategy.

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By: freako

freako — Wed, 01 Aug 2007 15:12:00 +0000

If the market prices are entirely random as purpoted by you and many other pundits,Whoah, slow down. To borrow a quote from Chipman, you are seeing what is not there. EMH is a framework for analyzing market, not a dogma with unrealistic assumptions. As mentioned, I don't think RE at the moment is even weak form efficient. Once more, so that there is no misunderstanding,I don't think RE at the moment is even weak form efficient. FYI, the EMH framework allows for three levels of efficiencies, weak, semi-strong and strong. It does NOT have an opinion about what is out there, it just provides a framework for evaluating efficiency.I did not conclude non-random walk by "trends" alone. Didn't say you did. I truly don't believe that this blog is an appropriate place to play out this debate.Sounds great, but I am still not sure what is being debated.If active decisions are made in an "efficient market" and a random market setting, prices do not trend. As I explained, it is possible for a market to "trend" while being efficient. For example, imagine a company that has a high chance of a steady earnings, but a small chance of a random unpredictable catastrophe. As time goes along with the catastrophe occuring, prices climb steadily. When the calamity occurs, the price collapses. This is efficient, yet appears trendlike.Further, if each trade is discreet and entirely unrelated and merely "appear to" trend but entirely random, they do not show a significant statistical correlation to each other. I don't know what you mean by trade, but in the example I gave above, the company could gain a decent real return (as compensation for the risk) annually. Say 12% give or take. This surely looks like a "trend".

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