Vancouver Sun: at least a year till ‘collapse’

The Vancouver Sun ran an editorial this weekend about the ‘firm foundation’ of the local real estate market.  The gist of the piece is that people should not panic over last weeks declaration that the Canadian housing boom is ‘officially over‘.

Compare Canada’s situation with the horror show south of the border and beyond. American homeowners from Blaine to Maine have witnessed the value of their property go down almost as quickly as it went up. The median price of a single-family resale home fell 8.7 per cent in February from a year earlier, the most in four decades of record keeping, according to the Chicago-based National Association of Realtors. Some cities, including Miami and Las Vegas, have reported declines approaching 20 per cent, which is widely expected to be the U.S. national average price drop in 2009.

Let’s not compare too closely to the American market though, because if we did we might worry about the recent increase in listings.  In the US prices continued to increase as listings grew, unfortunately as soon as the trend changed and appreciation stopped people were less interested in buying and the bottom fell out of the market.

I do appreciate the assertion that the ‘firm foundation of the local market lets it weather boom-bust cycles’.  What else is the local market supposed to do, disappear?  We’ve weathered many boom-bust cycles and we’ll weather many more, the only problem is that ‘firm foundation’ can turn out to be a lot further down than some people expect.  We survived 50% drops in the early eighties and lesser drops in the nineties but that doesn’t mean that buying at those peaks was a great investment.

I guess the point of the editorial is this: Don’t panic, because the local market won’t crash for at least a year:

The bad news, according to the IMF, is that real house price movements tend to lag cyclical peaks and troughs — generally by one or two quarters, but in Canada’s case as many as six quarters. In other words, the collapse here may be a year to 18 months away. According to the Canadian Real Estate Association, sales dropped 13 per cent in the first quarter of 2008 from a year earlier and the ratio of new listings to sales stands at a nine-year high.

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awum
awum
12 years ago

Oh you flat market theorists, you make me laugh! You say you expect that the market can continue on a "soft landing" course after 7 years of record gains, at a time when we have reached historic lows of affordability. So, you expect that the market can count on a continuous supply of new buyers ready to commit 50% and more of their net salary to purchase teeny tiny homes on 40-year mortgages, when no-one expects them to see an real price appreciation for the next few years. You actually expect them to kiss goodbye thousands monthly on interest with no expectation of gain to make up the gap between renting and owning costs — even when CNN reminds them on a daily basis the kind of risk they are taking.

Really, you guys. You're so nutty!

sheeplessinvancouver
sheeplessinvancouver
12 years ago

"What is the design/expected life of a high rise condo building?" That depends on the quality of construction. There are high rises in the West End that have been there since the '60s and buildings in European cities that have lasted for centuries. "Is there value left after the building collapses?" Yes. Each strata unit has a share in the common property which includes the land. There's something called an entitlement upon destruction that outlines what share each strata lot owns. "Do all the owners have to agree on what to do with the land?" A decision like this would require a 3/4 vote of those present (in person or by proxy) at the meeting where the vote was held. "Does the 500 sqft owner get as big a say as the 1500 sqft penthouse owner?" Yes, assuming they each… Read more »

beatstreet
beatstreet
12 years ago

Average tax filer income has jumped quite a bit in Vancouver over the last 5 years. In 1999 it was $30,830 while in 2003 (latest stats) it was $47,358 according to CRA. That surprised me and likely accounts for a good deal of the real estate jump. However, time will tell if that kind of income increase can continue. Income can fall too………. …in 1993 it was $37,130 and 5 years later was $29,664. Hmm….Boom and Bust?

See: http://www.gvrd.bc.ca/growth/keyfacts/avincpertxf

TIME
TIME
12 years ago

but how can you make 50 working at same job-the case discribe housing market prices justify as rate of pay has been tripled so the market turn around tripled now…….

"for the market to drop @50%to 100% rates of pay must get back from $50.00 to $13.00 per hour and from $25.00 to $7.45 per hour"-TIME

Anonymous
Anonymous
12 years ago

if friend start his carrier at 7.45 and making 25 now. it means nothing. Everybody make far less money in the beginning of their carrier.

Krrish2
Krrish2
12 years ago

Anonymous

2008-04-23 10:07:55

A friend start working @7.45 per an hour in 1995 he is now making $25.00 per an hour almost tripled.

A friend start working @$13 per hour in 2001 is making now $50.00 per an hours more than tripled.

People who have paid off their mortgage since 2001 or further but still making highest rates of pay are owning multiple properties.

Population difference is huge between 2001 and 2008.

Hello?Hello??Hello???

Are you still there?

gonebabygone
gonebabygone
12 years ago

Off topic but relevant…

Think speculation on housing is dangerous and unethical for the greater good? How about speculation on food?

http://www.washingtontimes.com/apps/pbcs.dll/arti

Just when you think you'd seen the apex of greed in the land of plenty….

Anonymous
Anonymous
12 years ago

Anti-Pesto, And all other weak bears. Please don't simply see it as 50% or 60% crash. You will just get lost in your own feelings, thinking that 50% drop is a large number and it won't happen. Even I ask myself, 50% is a large drop, could this happen. YES, it will happen. To understand that a 50% correction is very likely and is going happen, just think about it in terms of going back to 2001 prices. How much were salaries and wages then, how much is it now? What was interest rate then, what is it now? It's as simple as that. Was there a fundamental change from 2001 till now. Why weren't average homes $700K back then, what makes you think it will sustain now. If you understand that there is not much difference, you will realize… Read more »

Anonymous
Anonymous
12 years ago

"What’s with your quote from the comment thread? "

At first I just thought it was really odd that the person made the statement that it's cheaper to purchase because of low vacancy rate. Now I realize that they must be living in Bizarro Vancouver or Vancouver Washington.

read on
read on
12 years ago

Comment by Drachen

2008-04-23 07:56:41

“Tsur has been a very unreliable source for housing data in the past.”

That was actually unfair to say, as far as I know he’s never released false or misleading data. My problem is with his interpretation of the data which has been severely lacking in credibility.

****

That's why the man gets paid 200k plus from the public purse, eh?

Anonymous
Anonymous
12 years ago

"for the best place on earth, why are the lineups to the US always so damn busy but coming into Canada…they’re dead?"

Maybe as being CANADIAN and VANCOUVERITES you can manage they can't,I have heard they are in downturn so thanks for your vocation and shoping there that was really helpful.

Drachen
Drachen
12 years ago

"Tsur has been a very unreliable source for housing data in the past."

That was actually unfair to say, as far as I know he's never released false or misleading data. My problem is with his interpretation of the data which has been severely lacking in credibility.

Drachen
Drachen
12 years ago

"Drachen: Are you sure your graph for Toronto prices is just for Single-Family Homes? And are you sure both are adjusted for inflation?" AFAIK the TO prices are for housing average (which actually makes my point stronger) and neither is inflation adjusted. Even the Sauder graph shows TO ahead in the 80s (though not by as much as the graphs I found, however the Sauder data is all from the same source so let's assume it's more accurate). Also, note the NEXT graph on the Sauder paper http://cuer.sauder.ubc.ca/download/research/discu… which shows Vancouver and Toronto RENTS only a fractional distance from each other. As for reliability of the data, I feel I have to point out that Tsur Somerville is the paper's first author. Not that I'm saying he'd outright lie about the numbers but Tsur has been a very unreliable source… Read more »

patriotz
patriotz
12 years ago

I was reading a piece from the guardian on homeownership ideology and in the comments section

Note the comments from the housing ideologues. Like all ideologues, they do not belive in rational analysis, only ideology. To them, if someone does not agree with their ideology – "home ownership is always a good thing" – it means they must believe in the opposing ideology – "home ownership is always a bad thing",

They simply cannot understand that ownership of a house, like any investment or consumer durable, may or may not make sense based on yield on investment and contingencies of the prospective owner.

Vansanity
Vansanity
12 years ago

Mulligan on the bold, k, I've done enough!

Vansanity
Vansanity
12 years ago

Jadeeast, From the actual article you posted, not a comment made by someone who read it, it reads: "For low and moderate income families who are struggling to make ends meet, and pay for necessities like healthcare and childcare, how are we helping them by having them pay 80-125% more than necessary for their housing costs? Oh yeah, but they will accumulate equity in their home. Right, the housing bubble will keep inflating indefinitely. Maybe the ideologues of homeownership thought that housing prices would just keep rising forever, but this was an unbelievably stupid thing to believe… In the interest of promoting better housing policy in the future it is important to have a public acknowledgement of the follies of homeownership ideology. We don't have a bottomless pit of money to satisfy their perverse ideology. If homeownership does not make… Read more »

Vansanity
Vansanity
12 years ago

^ should read "living in" Moo..moo, moo (My bad)

Vansanity
Vansanity
12 years ago

Nothing puts things into perspective better than getting away. Just got back from Vegas. I saw evidence of their crash. Talking to the locals, it seems most are still reeling from the shock of it. Those of you who've gone down fairly recently would have seen the new Casino/Condo/Resort Hotel MGM is building on the strip, HUGE! Anyway, a cabbie was telling me that many people who bought their presale condo's ended up not being able to pay. Deposits of $30,000 given to the developers per unit. The building construction is still going up, should be done next year but it seems like they can't sell the units fast enough. It felt good to talk to people who didn't know where Vancouver was. People who don't care about the Winter Olympics. People that have no clue that we're in: "The… Read more »

Jadeeast
Jadeeast
12 years ago

I was reading a piece from the guardian on homeownership ideology and in the comments section I came across this.

"In Vancouver, where I now live, the value is in the land and not the property per se, and demand is so high in Vancouver proper that prices remain high but stable. It's still cheaper to buy an equivalent property, as there is less than 1% rental vacancy in this city."

I think the term used in this cases is "not even wrong".

The article is here http://tinyurl.com/4l8636

krrish2
krrish2
12 years ago

You idiot, where do they have more people? Toronto or Vancouver???? I rest my case!!!!!! Land size dum head land size,average prices you idiot average price,weather you idiot weather,migration towards vancouver you idiot not towards toronto,jobs you idiot unemployeement rates. I still hold my case!!!!!!! Tony thanks to be with me together you can do it i can show you the way. About being in vancouver that's what we need to realize where we are?.important. "but when I’m out I don’t see many others. Other than that aspect, if you have actually been to a world class city";- Alexcanuck. Alexcanuck going out door or staying in door have nothing to do with best place or world class,lets say you have high paying jobs you can take a world tour every year or when ever but imagine if you don't have… Read more »

-A-
-A-
12 years ago

I heard that many of the construction workers are encouraged to "invest" in the project they work on, just like the dot.com start ups encouraged employee investments.

If this is so, what a disaster waiting to unfold as they won't be able to unload the units, just as their jobs end.

Some will end up unemployes and with 2 mortgages, some will have to take part time jobs and subsidize the negative cash flow.

Construction workers dreams dashed of becoming Donald Trumps, the would be tycoons will have settle for the Palm Sisters rather than Tom Vu’s bikini clad babes.

mohican
12 years ago

Regarding web traffic. I have noticed a near 50% increase in traffic to http://langley-financial-planning.blogspot.com/ over the past 4 months. I'm getting a lot more search engine traffic and more unique visitors for a broader variety of domains.

Anonymous
Anonymous
12 years ago

"Comment by Anti-Pesto

2008-04-21 13:56:24

See 8% is a beleivable number, as would be 12% or even 15%. 50% is not as some people are predicting."

Anti,

I certainly don't want to buy a $1 Million shack today and have it go down 15% = $150,000.

How many people do you know who would not care about losing $150,000?

-A-
-A-
12 years ago

"Is this remotely possible or is he stooping to new lows?"

Franko could you ask the spin manster how he voted?

Does he think the market has turned?