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March 22nd, 2008 at 5:32 pm
Where is the oversupply of condos d/t? I can beleive there will be an oversupply in the burbs but d/t?
Over the last few years and the next few years we are looking at about 3-4K completions/year in Vancouver. With an average of 1.5 people per condo that’ll house 6K people hmm that’s the same figure Vancouver’s been growing at for a long time. That is also assuming all those condos are occupied which we know they won’t be. So I can’t see this oversupply, it’s not like Vancouver is expanding, all new supply is only condos/townhouses, knocking down old houses for new houses doesn’t increase supply.
March 22nd, 2008 at 4:47 pm
However so much hot money has gone into the commodities that I suspect we are due for a good shake out.
And where did that hot money come from in the first place? If it was created as part of fractional reserve banking system, then it was inflation. If it was diverted from other goods, then not inflation. Again, as per the Austrian view.
Our money supply is inelastic because our Central banks have inflation targets (however they define it) which they are supposed to at least aim for.
I guess you could look at it that way, but the term does not sit well with me. Money may be created or destroyed as part of attempts at regulating the economy, but it is not produced or consumed in the traditional sense. Hence I don’t think the term “inelastic applies”. Taken literally, inelastic supply means that the same amount would be supplied no matter what the price. That obviously isn’t the case.
March 22nd, 2008 at 4:44 pm
“Some use simple price increases…core/ producer/ over-all”
This is not a good measure. It is used as a proxy but, in certain cases, can lead to extraneous results. As a theoretical example, imagine if all prices rise by 5% but consumers scale back spending by 10%.
March 22nd, 2008 at 4:42 pm
How does one define inflation? Some use simple price increases…core/ producer/ over-all… define it as you will.
Or money supply, again define it as you will.
I thought I clarified that with the “call me Austrian but” and “from an Austrian point of view”. It is indeed an unresolvable debate, and I gave one particular point of view (and identified it as such).
March 22nd, 2008 at 4:04 pm
Freako- this is the discussion that is going on forever on Mish’s blog.
How does one define inflation? Some use simple price increases…core/ producer/ over-all… define it as you will.
Or money supply, again define it as you will.
Depending on the definition one can show inflation running at almost double digits or near deflation. I suspect we have both.
Inflation in things that have relatively inelastic supply..oil and wheat..and deflation in other categories such as housing in the US and UK and cars.
I think we agree in that further inflation in the first category will likely lead to more deflation in the second. However so much hot money has gone into the commodities that I suspect we are due for a good shake out.
As to my second statement. Our money supply is inelastic because our Central banks have inflation targets (however they define it) which they are supposed to at least aim for.
March 22nd, 2008 at 3:26 pm
I wonder if I could buy the small piece of land in the middle of pacific & richards and charge realtors a fee for littering my lawn with open house signs… there must be at least 20 of them. I’ve lived in the area for 4 years now and the amount of signs this year is extraordinary.
March 22nd, 2008 at 2:28 pm
Erase this if it was already posted. Below is a link on Van RE (what else?) bearish, Schiller was on ROBtv (or bnn) recently talking about Vancouver, I didn’t know that, anyway, check it out, Happy Easter!
http://www.bclocalnews.com/business/16872171.html
“Don’t feel too ‘bubbly’ about real estate”
March 22nd, 2008 at 1:30 pm
“Can no one make Krrish2 STFU?
Don’t be fooled. I suspect that the shape shifter in question is actually a well-educated and “successful” RE guy who is bored with life and who is somewhat annoyed with the ideas expressed on this and other RE blogs”
I am not so sure how successful he really is. I drive by his place of business on my way to SFU, and it doesn’t exactly exude success. And the bald guy he has working for him looks like somebody who just got out prison.
As for educated…. he seems to parrot superficial knowledge retargeted superficial knowledge from illiterate Surrey housewives calling in the Bill Good Show.
I think his character Kiingi, Krissh and Satv are his attempt at reproducing some character from Mordecai Richler writings but fails miserably and is quite banal really.
March 22nd, 2008 at 12:37 pm
Condo supply growing like crazy
Now this is interesting. It means that builders and lenders also believe it is different here. Maybe the builders think that they can limit their exposure through presales but what about the lenders? Where does the buck stop? My guess is with the tax payer (c/o CMHC) and some unwitting creditors such as Norwegian fishing villages (as happened with U.S. subprime). I doubt that our major banks are stupid enough to leave skin in this game. In any case, the lenders are the achilles heel in this shell game.
March 22nd, 2008 at 12:32 pm
In our current system it is, though in others, such as the Weimer republic printing presses, the money supply was elastic.
Not sure what you mean by “inelastic”. Elastic supply literally means that the amount supplied drops if market prices drop. The “price” of money is the interest rates, and money supply sets interest rates, this statement does not make sense. I presume that you merely mean that the money supply is somewhat fixed, or not. Our money supply is ever expanding (our economy grows), and the BoC has a straight inflation target. If inflation (as measured by CPI) ticks above their threshold (2%?) the shut off the taps for a while.
March 22nd, 2008 at 12:27 pm
That depends if money supply is inelastic. In our current system it is, though in others, such as the Weimer republic printing presses, the money supply was elastic.
I view them as two separate eventualities. Overexpanding money supply (the provervial printing presses) IS inflation. Rising gasoline prices are a possible RESULT of inflation, but not inflation itself. If gasoline prices rises in the absense of excess liquidity IT IS NO inflation, even if CPI ticks up a notch (it does this because the CPI basked is fixed, and cannot account for economy wide changes in the basked).
March 22nd, 2008 at 11:37 am
Can no one make Krrish2 STFU?
Don’t be fooled. I suspect that the shape shifter in question is actually a well-educated and “successful” RE guy who is bored with life and who is somewhat annoyed with the ideas expressed on this and other RE blogs. He’s just “having a little fun” as he would put it, while he degrades the nature and quality of posts on the blog. This in itself suits his purpose because he doesn’t want the blog taken seriously. Some day he will truly be “outed” and he will be embarrassed when that happens, at which time he will proclaim “Oh No! I’m-bare-assed!”
March 22nd, 2008 at 10:47 am
emile
“They were worried that Trichet would not act like Bernake did, so that the hit would be even more painful.”
I think that’s a backwards way of putting it. Bernake’s morphine was just helping the market walk on broken legs for longer, in the end the pain is greater than just letting it break, waiting until it hits bottom and THEN start picking up the pieces. If you’re already overextended in trying to prevent an inevitable crash you have nothing left to start rebuilding with.
The BOC, the Fed and the CMHC are just trying to put the fallout off until after the next election cycle, it’s 99% politics and 1% economics IMO.
March 22nd, 2008 at 10:17 am
Since demand for gasonline is inelastic (people will buy similar amounts at almost any price) there is less money to spend on other goods….Freako
That depends if money supply is inelastic. In our current system it is, though in others, such as the Weimer republic printing presses, the money supply was elastic.
March 22nd, 2008 at 9:45 am
I watch a debate of finance professionals from France.
People start to default on their mortgage because of variable interest rates contracts: when form 3.5% up to 6.2% in 2 years. (Banks increase rates to cover their los in the sub-prime mess).
Mortgage rejection went from 3% to 10% in the past few months (banks not willing to take risks anymore).
They also said that in the UK one mortgage out of 2 is rejected at the moment.
They also said the financial crisis should hit Europe with a lag of 6 to 9 months and that they are ready for the worst. They were worried that Trichet would not act like Bernake did, so that the hit would be even more painful.
They believed the world is many months from the end of the global crisis.
March 22nd, 2008 at 9:32 am
Price of gas has Americans cutting back elsewhere
Of course it would. Call me Austrian, but I have long argued that rising gas prices is not a CAUSE of inflation. Inflation occurs when there is too much money chasing to few goods. In this case there is ONLY a shortage of gasoline (compared to demand). Since demand for gasonline is inelastic (people will buy similar amounts at almost any price) there is less money to spend on other goods. Thus demand and price for non-gasoline items will drop. One price up, another down. Not inflation. Our MEASURE of inflation, CPI uses FIXED baskets and may be impacted by a shift in consumption. Thus CPI has gone up, but inflation has not. At least from an Austrian point of view (which is th correct one IMHO).
March 22nd, 2008 at 8:41 am
Fine…I’ve risen to the bait. Can no one make Krrish2 STFU? He wouldn’t know a “world class city” if it jumped up and bit him on the arse. Initially I thought he was one of those experiments in artificial intelligence that get put on the web, where an attempt is made to pass off a program as a human is made, but now I just think he’s an inarticulate mortgage broker with lots and lots of time on his hands.
I’ve attached a list of amenities required to make the big league of cities.
http://www.thisislondon.co.uk/.....article.do
March 22nd, 2008 at 8:23 am
People situations are always changing and even older people with no mortgages have to die or move to assisted living. Eventually all neighbourhoods are sold and new families with vast mortgages move in. So I don’t think that any area is exempt from a correction. It is getting so crazy that parents are using HELOC’s to allow their children to get into the housing market. Thus putting themselves in jeopardy. This will be very messy spanning all generations… Mom and Pop could lose their homes also. Don’t spend your false equity. It’s just common sense.
March 22nd, 2008 at 7:44 am
Are you so sure that we are “The Best Place On Earth”?
Ofcourse,People like to spend money on future of the city not on Olympics or Fifa,for example few year back there was World Cup in West Indies two month’s long there was nothing up,the spectators left the tournament half way because place and length of tournament was boring.
E2 Since the annocement of 2012 olympics home prices are falling in most cities of UK but VANCOUVER IS UP while Juggernaut across the border has fallen on it’s knee.
In Vancouver you can CATCH all the action of life,we are not just ol but bpe.
March 22nd, 2008 at 7:39 am
If you think that SFH in high-priced neighbourhoods aren’t being bought with toxic financing today, you’re kidding yourself.
The 80-81 boom lasted for a far shorter time than the current bubble, which means a much smaller % of the housing stock carried shaky financing. When the bubble pops all categories are going down. Just like south of the border, and just like previous Vancouver bear markets.
March 22nd, 2008 at 6:07 am
MC_V said:
Prices will drop, but they may not walk like in the US; depends on how much more mommy and daddy are going to pony up to keep up the payments for their kids.
I say.
Well, I don’t think they can. Canadian mortgage bearer is responsible for paying off the mortgage or the difference of it when it gets sold plus transaction costs. This is different from the Americans where they could actually mail back the keys, hence the term “jinglemail”, back to the banks and walk away, although I heard that in some American states, walking away endures similar penalties. Besides, I suspect that if their parents provides the downpayment for the loan, they too may provide some guarantees to the bank. So that is why, your friend’s bank isn’t too worried. The question really is, will these kids simply walk away?
I’ve seen some many people in the work force nowadays that come in to work whenever they like, when they like and when they leave, they sometimes don’t even give a darn of a notice either. If they do, it’s a couple of days and then they vanish like Merlin.
The Carpe Diem’s website actually described the US subprime mortgage as being as very small part of the overall mortgage lending practices. It’s the 40 year AMS that Canadians are signing up for that is troubling me. This I will have to agree with Mr. Turner for once.
If the Vancouver real estate does fall, the overbuilt condo market will go first, because it doesn’t take a lot of condos to bring prices down in the same neighborhood. Good neighborhoods with established home ownership won’t suffer that much as a previous poster had posted. This is because, once the mortgage is paid for, a 50% price drop won’t matter. West Vancouver in the 80s is different from the West Vancouver of today. 25 years had passed and many of these residences had already paid off their mortgage. However, residences in new condos with 40year AMS haven’t! That is the difference! So, expect significant prices drops in areas where there are condo overbuilding.
March 22nd, 2008 at 4:24 am
Imagine it’s 2011. The olympics are over. All the hype and every other person’s justification for high real estate prices has come and gone. We have a ton of empty condos because the foreigners who were renting them have gone home. And they will go home because everyone gets homesick. Everyone misses their own bed. The party’s over. Yeah Vancouver is nice but now I’ve seen it and I want to see something else. I’ve never been to Rio. Where’s the NEXT winter olympics being held. I’m sorry but the world is a pretty big and BEAUTIFUL place. Are you so sure that we are “The Best Place On Earth”?
March 21st, 2008 at 5:37 pm
I hope we don’t end up like Whistler, where locals have to rent and foreigners are the landlords.
If you rent a house to someone who can’t afford to buy it, you are losing money. The reason is simple: the tenant is not covering your costs of ownership. If he were, he could afford to buy it.
Li Ka-Shing probably builds more condos in Vancouver than anyone else. Does he rent them out, or sell them? Why is that you think?
Leaving Vancouver For Different Reasons « Vancouver Real Estate Anecdote Archive Says:
March 21st, 2008 at 3:04 pm
[...] 21 March 2008 · No Comments This from Vansanity on Vancouver Condo Info 2008-03-21 08:11:25 [...]
March 21st, 2008 at 2:11 pm
Travel to Canada hits lowest level since 1972: StatsCan
http://www.cbc.ca/consumer/sto.....ravel.html
March 21st, 2008 at 1:59 pm
This is a paragraph from a montly RBC economics email report i get. I like the part starting at “However most of the increases came from the volatile urban multiples”
Does this mean condos/housing are subject to risk?
Housing starts rose a phenomenal 15.4% in February to an annualized 256,900 units from 222,700 in January. However, most of the increase came from the volatile urban multiples component. Despite the surge in February starts, however, some moderation in activity for all of 2008 is expected from the slightly under 230,000 housing units started in 2007.
March 21st, 2008 at 1:50 pm
Mortgage broker friend said business is best he’s seen pretty much ever. Most people that are buying are first time buyers getting 40 year mortgages but using big down payment gifts from their boomer parents.
We’ll see how this turns out!
My guess, the boomers are throwing their money away by betting on their kids ability to pay. A 30 year old getting a 40 year mortgage is still paying for it at 70!
The one thing going for the banks here is that there is at least some skin in the game. Zero down isn’t a very big part of my friends business. Neither is 5%.
Prices will drop, but they may not walk like in the US; depends on how much more mommy and daddy are going to pony up to keep up the payments for their kids.
March 21st, 2008 at 1:45 pm
“Looks like Infinity in Surrey has completed. Craigslist has 100 posts under apt rentals in this building. That can’t be good.”
Richmond has so many buildings under construction I can’t count them. New West has about 4 or 5 high rises completing soon, UBC, etc, etc. It’s everywhere overbuilding to the extreme for the rich Albertans.
Sorry, but there aren’t really that many rich Albertans, the wealth, like everywhere else is concentrated in a few hands. I’m off to Calgary next month to see my retired in laws, and my friends none of whom are overly wealthy. Like Californians, they are not buying up all the land, and those that do will loose on it soon.
March 21st, 2008 at 12:38 pm
CC:
It just seemed that way to some people I guess. Anecdotal evidence is a nice snapshot of things but it’s really useless for building an argument.
March 21st, 2008 at 12:25 pm
I didt’t say they were investments. In each case they are primary retirement residences.
Don’t confuse me with a RE bull….for I am not.
March 21st, 2008 at 11:53 am
” Comment by SC
2008-03-21 11:33:27
First time buyers disappearing not because they don’t want to live here. They still do (hence demand is there), however they can’t afford to because of prices. So someone else with deeper pockets are buying it up. Seems like an influx of wealth from other sources to push the market higher. I hope we don’t end up like Whistler, where locals have to rent and foreigners are the landlords.”
I guess we better beg, borrow, and steal, just to get in right? And couples should get a second job, buy a 2 bedroom leaky condo in East Vancouver, and rent out the second bedroom as a mortgage helper to 6 or 7 foreign students right?
Are you a realtor? or bad at math?
Do you know it is impossible to get price out of the market indefinitely?
As for Whistler… if the locals accept the conditions they live in, it proves that eventually a high consumption of pot is bad for analytical thinking.
March 21st, 2008 at 11:38 am
I missed this one the first time.
“And if she was a former real estate, shouldn’t she know that the boom was unsustainable??”
Do you think the secretaries at Enron knew what was going on? I can tell you for certain that the technicians at Nortel had no clue (I knew one who’d convinced everyone he knew to invest (except for me)).
Agents are just salespeople. Next time one of those annoying ‘flat rate’ natural gas salesmen comes around ask him if he knows what his company’s stock is worth and where it’s going in two years.
March 21st, 2008 at 11:33 am
First time buyers disappearing not because they don’t want to live here. They still do (hence demand is there), however they can’t afford to because of prices. So someone else with deeper pockets are buying it up. Seems like an influx of wealth from other sources to push the market higher. I hope we don’t end up like Whistler, where locals have to rent and foreigners are the landlords.
March 21st, 2008 at 11:10 am
First-time buyers disappearing but prices are expected to go up?
Lower demand + greater supply = price increases?!
Man, the industry is drunk on hype.
March 21st, 2008 at 11:07 am
“And if she was a former real estate, shouldn’t she know that the boom was unsustainable??”
well, current real estate brokers know re only goes up, up, up….
so ironic, isn’t it?
March 21st, 2008 at 11:00 am
Any comments?
Yeah, if the Albertans are so flush why is RE falling in Alberta?
The Californians were supposed to be propping up RE values in every outpost west of the Rockies. How did that work out?
The whole of southern BC is trolling for Alberta RE money, because its traditional economy (forestry, mining) is practically dead. That’s spreading it way too thin.
March 21st, 2008 at 10:31 am
“I personally know 3 Calgarians who have bought property on Vancouver Island in the last 12 months”
Tell us how their investments turned out in about 12 months from now.
March 21st, 2008 at 9:59 am
FWIW…….I personally know 3 Calgarians who have bought property on Vancouver Island in the last 12 months.
March 21st, 2008 at 9:54 am
A,
10 over 10 man, The work force is busy till 2020 tonz of project in non residential construction.Unemployment rate is to fall 0 around 2010 to onwards then may be another olympics. British Columbia is going to creat 250,000 job from free trade with India and we have lots of job shortage in all other sectors.Raise after raise you can face the elimination challenge, Buy or move with the hammer of inflation or get in with full pocket,Best real estate on earth Vancouver,B.C.bpe.
March 21st, 2008 at 9:19 am
Anon:
Same kind of fallacies that are spread everywhere. One of the first rules of critical thinking is that the burden of proof lies with the person making an existential claim. In this case, “Rich Calgarians are buying up the island.”
If the person making that claim cannot offer any proof then the statement has as much value as, “Unicorns live in Madagascar.”, “George W. Bush is a really smart guy.”, or “Aliens ate my pet cat and replaced her with a clone.”
We get the same kind of argument here in Vancouver but it’s Asians or Americans. It’s just BS sold by the agents as a plausible explanation (if it’s not examined too closely) for the possibility of future gains.
March 21st, 2008 at 8:13 am
Many Victoria RE agents are convinced that the industry here will be propped up by people from Calgary buying up the Island.
I would love to get stats on this.
Also, if it were true who wants to live in a city whereby one is the “poor” local while Victoria is ruled by 50 somethings from Calgary.
Any comments?
March 21st, 2008 at 8:11 am
Friday off…so nice. Too bad I can’t sleep in.
Anyway, had a talk with a friend this morning who’s talking about getting away from Van, he’s a plumbing trade. Talking about Fort McMurray for a bit and then buying in the interior or island.
He knows a developer working on some land around Bear Mountain. He has a proposal for a new sub-division there and if it goes through he’ll build it and retire. I talked to him about being careful buying anything on historic highs, he listened but wasn’t concerned. Says that Bear Mountain has many foreign investors showing interest and he figures if he picks one up he will see some serious gains. His exact words were, I’ll do better than my RRSP’s. I know what you’re all thinking, believe me, I do.
It’s not worth wasting my breath trying to dissuade him, his mind is already made up. The longer this goes the more people will get sucked in. I’m still going to wait it out for two more years, job is going good, but if I don’t see things change post-olympics or sooner, I’ll be packing up and going somewhere else, somewhere affordable and sunnier.
March 21st, 2008 at 8:06 am
I’ve been following the infinity listings on craigslist too, as I watched the building go up (recently moved out of the neighborhood). It’s beyond me why anyone would be willing to pay $1400/month just so they can “be guaranteed a seat on the skytrain!” Pulleaase…plus if no one has noticed, the whole place is still one great big construction site as they put up tower number 2. Thanks, but I don’t like hearing hammering at 7am. Crazy!
Here we go! Soon enough those investors will realize they can’t get the rent to pay the mortgage and dump the condos back on the market. Price declines, anyone?
March 21st, 2008 at 7:58 am
Rob, aka Krrish/Satv;
I just got back from the USA, your counterparts from the NAR are really pumping the idea that boomers should be investing in farm land.
They hype goes something along the bio fuels boom, and anticipated food shortages pitch.
Any plans in the works for you guys getting on board this new scam?
Or do you think the Olympic BS has a little mileage left?
March 21st, 2008 at 7:57 am
Housing Crisis Deepens Across Britain, Europe
“homeowners are worried that house prices might start to fall”
They call that a crisis? I thought the crisis was that houses were unaffordable. Falling prices are the return to normalcy.
March 21st, 2008 at 7:34 am
Headline in today’a Province Money section:
“we’re battling a headwind
The Economy: Canada’s risk of falling into recesion sharpens”
…..so how’s that Decoupling Theory coming along?
March 21st, 2008 at 7:31 am
Saturday’s issue of the Vancouver Sun has an interesting article about investors of Canaccord Capital Inc. It detailed how investors were told by their brokers that these ABCP investments were triple AAA safe! And that they are comparable with GICs and Canada Savings Bond and now having most of them finding out that their life savings are put on ice. They’ve been given an ultimatum. Accept the deal which means the money will be tied into the longer notes or get 60 to 80 cents on the dollar. These folks think that they could veto the bigger boys, so the big institutions would just buy their bonds back. How wishful thinking is that? Don’t forget that these institutional investors represent a pool of ordinary investors who are in the same boat as they are now. This smells like BRE-X all over again I suppose..
My advise to them is simply this. Learn from the BRE-X shareholders and sell for whatever you could get for and just walk away, albeit a tad poorer.
A lady in the report said that, if this doesn’t get resolved soon, she might have to sell her house to get some cash. She used to be a real estate broker too and wouldn’t want to get involved in this mess if she knew it was ABCP.
Oh come on… ABCP offers attractive rates. ABCP invest in among other things mortgages in American housing which prices were going up like a space shuttle. Fundamentals were completely broken. And if she was a former real estate, shouldn’t she know that the boom was unsustainable??
Scary prospects are unfolding..
March 21st, 2008 at 7:30 am
Housing Crisis Deepens Across Britain, Europe
http://www.npr.org/templates/s.....d=88732648
March 21st, 2008 at 3:49 am
Looks like Infinity in Surrey has completed. Craigslist has 100 posts under apt rentals in this building. That can’t be good.
March 20th, 2008 at 10:33 pm
Thanks for the great work. I must say the BBC shanty towns video smacks of a classic BBC April Fools prank. You can’t afford a mortgage payment – OK, i accept that. But how about renting a one bedroom apartment? I don’t believe it’s common-place for someone to go from owner to tent dweller. May happen, but it’s hardly typical of the subprime problem.