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:
RSS 2.0 comments feed. Both comments and pings are currently closed.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.
April 21st, 2008 at 10:02 am
The REIC is like a little kid believing that if he closes his eyes then the monster in his closet can’t see him and won’t get him. Good luck with that, there’s a massive monster in Vancouver’s closet, it’s real and it’s going to hurt a lot of people.
April 21st, 2008 at 10:30 am
Yes, the local market won’t crash for another year. So let’s just all calmly walk to our real estate brokers right now, and put our houses on the market for good measure….
April 21st, 2008 at 10:52 am
This article makes no sense- first it says according to IMF Canada is undervalued, then it says Metro Vancouver is different than the rest of Canada. So it would be logical to assume that Metro Vancouver is, in fact, overvalued according to IMF?
April 21st, 2008 at 11:53 am
The train of logic is off the tracks. There is no mention of the runup of prices in Vancouver or poor affordability. Platitudes like “running out of land” and “not as vulnerable to a recession” are all symptoms of the author’s confirmation bias and are arguably blatantly untrue.
“then it says Metro Vancouver is different than the rest of Canada”
Actually that was never said. I think, based upon subsequent paragraphs, the author meant exactly the opposite — that Vancouver is MORE immune to a housing downturn than the rest of Canada.
[tinfoil hat] It almost looks like some lobbyist from the RE industry told the Sun to run a piece contradicting Porter’s analysis. It had to be editorial because they couldn’t find any of their regular “experts” with the stones to risk calling out Porter as wrong. [/tinfoil hat]
April 21st, 2008 at 12:00 pm
.
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“So let’s just all calmly walk to our real estate brokers right now, and put our houses on the market”
If you want to beat the rush, ya might wanna run like hell. April inventory is at a 9 year high. NINE FRIGGIN YEARS.
Will there be blood?….Rivers of it! and sooner than you think.
April 21st, 2008 at 12:35 pm
“So let’s just all calmly walk to our real estate brokers right now”
I love the law of unintended consequences. I don’t think that was the author’s intent but it was so poorly written it could certainly lead to a rush for the exits.
April 21st, 2008 at 12:47 pm
This is really an unbelievable editorial.
Let’s just itemize all the delusional concepts that have been debunked:
1) X City is “special”.
2) “Everyone” wants to live here.
3) Wealthy immigrants will protect us from a housing correction.
4) They’re not making any more land.
5) Vancouver is a world-class city.
What a pile of crap. San Francisco is a world-class city. Miami is a world-class city. NYC is a world-class city. Los Angeles is a world class city. Every single one of those “world-class” cities has seen an ongoing correction.
Every single mindless real estate analyst forgets the single most important aspect of real estate:
Can people pay for it?
In Vancouver the answer is no. We are over-building. People are getting every bit as greedy and delusional as our friends across the border.
The correction is coming. If you can’t see that, your reasoning capabilities must be seriously questioned.
April 21st, 2008 at 12:56 pm
So listings are at a 9yr high, how far did prices drop that year? 20%-30%-50%? Enlighted me.
A 9yr high is something no doubt…But, (remember total inventory is also much higher now then 9yrs ago) It’s not like inventory has never been this high, yet people are still claiming this will lead to unheard of price drops. Are we just picking the stats we want?
April 21st, 2008 at 1:01 pm
Nine years ago the market was still hooped.
There had been no unprecedented run up in prices but there had been a really awesome asian flu and it was followed up by the leaky condo crisis, which would have been classified as a natural disaster had it happened in one day.
It seems to me TD Bank lost money in 2000 because they had so many people walk away from their mortgages.
April 21st, 2008 at 1:23 pm
Notice no one mentions the number of housing-related jobs created over the last 5 years and how that’ll play out in a housing crash…. This article’s really just an attempt to stop the ball from rolling off the cliff.
April 21st, 2008 at 1:43 pm
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Anti-Pesto,
For your information, that inventory runup 9 years ago was followed by an 8% price drop…according to my chart anyway. Anybody with more accurate info?
And as bdk pointed out, that was not preceded by the most insane bubble of our lifetime.
April 21st, 2008 at 1:50 pm
nevermind those jobs playing out in a housing crash, what’s going to happen to all of them when the condo/olympic boom is over? Or will we continue building condo’s at an incredible pace even PAST the olympics? Even though we’ve “run out of land(tm)”.
April 21st, 2008 at 1:56 pm
See 8% is a beleivable number, as would be 12% or even 15%. 50% is not as some people are predicting.
I don’t think we’re in the most insane bubble of our lifetimes, anyone see the price of oil, how about gold, the tech stocks had a bigger bubble as well (although we know how that ended). Fact is a correction is due, and I’ll buy the arguements for it, I don’t buy the arguements for a crash though. Convince me.
April 21st, 2008 at 2:24 pm
Anti-Pesto
Why is 8-15 believable but 50% is not? Do YOU have some sort of statistic to back that up or is it a “feeling” you have.
I am sick and tired of morons with “feelings” about the market who haven’t done any research walking around cocksure and arrogant like they invented the mortgage or something.
There’s this wonderful tool called the Internet. Perhaps you’ve heard of it. Use it. Report back here after you’ve educated yourself and I’ll be happy to share some of my data. Better yet you don’t even need to go anywhere, you can just read through the posts on THIS BLOG and learn what you need to know. Stop being a lazy bastard, get off your ass and learn something before shooting your mouth (fingers?) off.
April 21st, 2008 at 2:29 pm
The running out of land theory is true though. We can argue it but it doesn’t change the fact. We can increase density to build more units yes and we are, but the land we are building it on is ever increasing in price. The only option we have is to build more units on each lot to bring down the unit cost of the land.
April 21st, 2008 at 2:33 pm
Did they have a land-making machine in Miami? If not, why didn’t that stop the on-going crash there?
April 21st, 2008 at 2:35 pm
Drachen why so grumpy?
April 21st, 2008 at 2:37 pm
“build more units on each lot to bring down the unit cost of the land.”
Funny I didn’t see any discounts on the Shangri La because of their efficient usage of land. Hmm maybe there was ANOTHER reason why their prices were so high huh?
All I’m asking is that you THINK about these things for a second or two Pesto, that’s all.
April 21st, 2008 at 2:38 pm
*l* my feelings have done pretty well for themselves financially, hope yours have been this good.
Reading stats about the past is a sure fire way to predict the future?
I hope no one is basing their investments soley on this blog or others like it, otherwise we’d all be buying gold and it would be at $5000/ounce and homes would be worthless
April 21st, 2008 at 2:39 pm
Umm I didn’t say the costs of the units must be cheaper, I said the land costs per unit are reduced. It’s called math.
April 21st, 2008 at 2:42 pm
I’ll buy the arguements for it, I don’t buy the arguements for a crash though. Convince me.
No, you convince me that prices won’t crash…
April 21st, 2008 at 2:43 pm
“Reading stats about the past is a sure fire way to predict the future?”
Do you THINK that people like Warren Buffet invest based on empirical evidence or on instinct? Doing “pretty well” for yourself on gut feelings only means that you’ve been lucky. I know people who did “pretty well” in Vegas, it doesn’t mean that theirs was a wise investment strategy.
Also, I don’t think you understand how to extrapolate past market performance into future trends. What does $5000/ounce gold have to do with anything?
April 21st, 2008 at 2:45 pm
“No, you convince me that prices won’t crash…”
Exactly TD, we have a solid rational argument based on reams of empirical evidence and at least 3 proven ways of interpreting the data.
He has “feelings” and yet he’s asking US to prove ourselves to him!
April 21st, 2008 at 2:45 pm
Actually Granville Island is a man-made island, it was built in 1917. But maybe they won’t make any MORE land and everyone will decide that this is the only city in the world so all the other land outside of it doesn’t really count.
April 21st, 2008 at 2:53 pm
USA population density: 31 per sq Km
~overbuilt, currently crashing
Canada population density: 3.3 per sq Km
~we’re running out of laaaand!
April 21st, 2008 at 2:57 pm
don’t worry about it antipesto, some people cant handle a dissenting opinion. They want to be right so the get louder and louder thinking that will change reality.
April 21st, 2008 at 2:58 pm
I’d like Anti-Pesto to answer Drachen’s question – “Why is 8-15 believable but 50% is not?” Some markets in California have dropped 25% and are just getting started. Some dropped 5% in a month – an annualized rate of 60%.
I’ve never heard a good explanation for what changed in the last five years that justified a doubling of price?
April 21st, 2008 at 3:00 pm
You guys are funny today.
I thought the Gold hitting $5,000 an ounce was a reference to the unnamed hysterical spammer/rice king from Richmond?
Speaking of Richmond a really good example of the land argument is near no.4 and Alberta, I believe it’s called Mandalay Bay?, seven years ago it was 15 run down rented dwellings and now there are hundreds of units, a new school, a park and need I mention it’s crawling with rich immigrants who simply cannot own enough of the units (at any price) and are constantly on the phone calling their rich friends telling them that Richmond has cafe’s and to hurry up and get here because it’s so world class!
Of course the one exception to all these buyers is an elitist Starbucks barista named Rob A. who’s Mummy re mortgaged her house in order to get a down payment on his studio and he thinks he’s pretty sweet too, but other than him it’s all elite rich immigrants who want to be near the cafe’s.
Where else will you get free internet AND a cup of coffee? Duh! Hurry up and invest every cent in these units because if you don’t you’ll be forced to rent them for a fraction of the carrying cost and if you don’t own then you simply cannot be a world class coffee drinker at the cafe!!!
April 21st, 2008 at 3:01 pm
Building Granville Island, the new convention centre, or filling in a chuck of Victoria Habour in HK was surely enough to reduce land prices.
Heres a fact for you, most people buy everything on feelings, they could have all the facts in front of them but the final decision comes down to does it feel right. If it doesn’t then no purchase is made.
That’s what people looking at only stats fail to see sometimes, last year the US economy was still doing alright, it wasn’t the unemployment or high interest rates that brought the housing market to it’s knees, it was a change in consumer confidence. People stopped beleiving in housing and that was the end. It’s the same reason it went up to begin with.
April 21st, 2008 at 3:02 pm
In BC, the landmaking machine is a chainsaw. Still lots of dumpy vacant lots in Surrey and the valley that aren’t crown forest or part of the ALR. You can even see them from skytrain. Take a drive along Marine way in Burnaby, and there’s available land. New shopping mall even. There still real dumpy SFH lots within 2 blocks of Patterson Skytrain station that could easily be bought out for new density condos. Look at the old brewery lot by Royal Columbian Hospital. Huge hunk of land that still sits empty and probably will until the next RE boom.
If you wanna talk “no more land, too many people”, look at Japan. Aren’t they still recovering from a RE crash they had years ago. And now there’s a Global RE crash?
April 21st, 2008 at 3:08 pm
I can handle dissenting opinions Dosh. The problem I have is with uninformed opinions which are misrepresented as things of great value. I can give 25 cents to any bum on the street and ask for an opinion on the future of Vancouver real estate.
What bugs me is that you and Pesto simply seem incapable of recognizing how stupid and pointless it is for you to attempt any sort of debate with no debating points other than your “feelings”. It renders you immune to intelligent discourse and makes you look like a fool.
April 21st, 2008 at 3:13 pm
The reason I beleive a 50% correction isn’t in the cards is because the market (people) won’t allow it, if prices were to get down 30% somehow, the amount of new buyers entering the market would stop the bleeding really fast, their are examples of certain cities in the US that have dropped more, sure, but there are countless more where the bleeding has stopped at a certain level as buyers see a reason to get back in.
Vancouver has been the most expensive city in Canada for years for no logical reason. Is anyone suggesting we will be passed by Toronto because the salaries are higher there and they could afford to pay more?
April 21st, 2008 at 3:15 pm
some people cant handle a dissenting opinion. They want to be right so the get louder and louder thinking that will change reality.
Funny Dosh, this describes you to a tee. If you can provide a quantitative analysis to support your bullishness, you will be much better received in this forum.
April 21st, 2008 at 3:17 pm
“most people buy everything on feelings, they could have all the facts in front of them but the final decision comes down to does it feel right. If it doesn’t then no purchase is made.”
So what you’re arguing is (without any supporting evidence I might add) that the majority of Vancouverites feel the same as you? Or that your feelings alone are enough to support the market? Do the banks have a say in this because they seem to “feel” that they should tighten lending standards? Are you also saying that $1,000,000 for a crappy house “feels” equally as good as $400,000 for that same house?
Oh and by the way “most people buy everything on feelings” is an opinion not a fact. But I’ll give it to you that if you stretch the semantics in your favour you’re probably right (however that still doesn’t make it a fact, facts are PROVEN things, not hypotheses and until you go out and interview at least a fair percentage of “most” people it is merely conjecture on your part).
April 21st, 2008 at 3:19 pm
there are countless more where the bleeding has stopped at a certain level as buyers see a reason to get back in.
Link please! Where is this happening?
April 21st, 2008 at 3:20 pm
Am I trying to sell anyone anything? If you don’t agree with my “feelings” then that’s great, we’re not a couple so my feelings shouldn’t affect you.
I’m not asking for financial advice from a blog, don’t worry about me. I just feel sorry from people that might be reading these blogs and making desicions based on what they’ve read on them.
April 21st, 2008 at 3:20 pm
Drachen you say my only debating point is based on my ‘feelings’, but that’s not true. I don’t need to base anything on feelings, just look at a chart of house prices, where have they gone? Up. Thats not a feeling, thats just reality.
April 21st, 2008 at 3:23 pm
I don’t know about 50%, but a big drop is coming. There seems to be more evidence than ever that things are finally turning.
Anecdotally, I’ve talked to multiple people recently who still want to buy. I try for about 30 seconds to explain a few basic facts, but then I walk away and go bang my head against the wall somewhere.
April 21st, 2008 at 3:24 pm
I think antpesto needs a visual aid… Look up the real estate roller coaster and take a ride. How can real estate possibly go up when it has it the top… Sayings like “What goes up Must come down” remember that one. This is common sense… Our number one trading partner going in to recession this will have an impact…
April 21st, 2008 at 3:24 pm
Anti-Pesto,
Please tell me which buyers will backstop our market when it slides? You suggest that you are following the goings on in the US market, are you not aware that the banks have tightened lending? Many banks now require at least 10% down and some will not lend on condos. So who in this market (except a small number of bears) will have 10% down and the will to buy into a falling market?
Link for claims made above:
http://thehousingbubbleblog.com/index.html
April 21st, 2008 at 3:29 pm
Am I trying to sell anyone anything? If you don’t agree with my “feelings” then that’s great, we’re not a couple so my feelings shouldn’t affect you.
I’m not asking for financial advice from a blog, don’t worry about me. I just feel sorry from people that might be reading these blogs and making desicions based on what they’ve read on them.
So they should make a decision based on their feelings, or yours? Why are you posting here? No one here is worried about you, don’t sweat it.
BTW fools like this will be the ones crying for bailouts and whining that they were blindsided by the market.
April 21st, 2008 at 3:32 pm
Dosh
“just look at a chart of house prices, where have they gone? Up. Thats not a feeling, thats just reality.”
Dosh dosh dosh… Please tell me you’re not that stupid. If I throw a rock up in the air really hard, one second after I threw it it’s still rising and I pause time and turn to you and say, “Will the rock continue going up, or will it come back down?” By extrapolation I presume your response would be, “It will go up forever.”
Can you really be saying that? So if we went back in time two years your opinion would be that the US housing markets would continue upwards forever. Go back even further and you’d be of the opinion that Tech stocks would go up forever.
Pick anything that’s risen abnormally high without a fundamental shift in the basic economics of that commodity and it did not continue rising forever. It fell again. Time and again, sunrise, sunset, sunrise sunset. But you’re saying that THIS time, THIS time it’s different. Yet you offer no explanation WHY it should be different this time.
April 21st, 2008 at 3:32 pm
Dosh you’re right,
I believe you need 100 people for an accurate sample, actually it’s not a belief it was first year Statistics.
So let’s find 100 people and survey them.
That way we can prove everyone thinks the same way as we do.
If you aren’t into finding people willing to do a survey let’s find some proof here to show all these clowns armed with their statistics and historical data that our feelings are better.
Where are you going to buy your next investment?
I’m really hoping to find an investment property that will break even, do you know of any buildings downtown where I can rent out the property for the mortgage? Obviously everyone wants to live downtown so I can charge any amount of rent right? It’s where the action is right?
So which buildings should I look at? Spectrum? 33 Pender? Ginger? I want to invest where the action is!
April 21st, 2008 at 3:36 pm
This proves the market can only increase!
“When a particular asset class delivers outstanding
returns over an extended period, investors
become convinced that there are solid fundamental
reasons for the trend. Theories are
developed to justify participation and disregard
valuation considerations. In the early ’70s, the
“Nifty Fifty” stocks like Polaroid and Xerox were
going to make money forever. At the beginning
of the decade, the Internet was going to render
traditional industries irrelevant. Today, growth
in China and India is expected to translate into
a permanent shortage of commodities.”
See, prices are going up! I told you!
April 21st, 2008 at 3:42 pm
Invest in something you beleive will go up, not something someone tells you must because of past performances.
Again I’m not suggesting anyone buy real estate as none of my posts have said that. I’m just saying don’t buy the BS that gets posted on these blogs. Most bears are hibernating waiting for prices to go down before buying that will limit any downturn. There are others that claim they will buy if prices drop 20% but in fact they won’t they will still be scared and think what if it goes down some more. My “feelings” are alot of the people here fall into the second category.
April 21st, 2008 at 4:03 pm
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LOL….Dosh to the rescue of A-P
Talk about dumb and dumber, with comments like:
“Just look at a chart of house prices, where have they gone?”
Hard to believe that one glance at that insane chart would not have the oppoosite effect on anyone with a lick of common sense….especially with inventory at a 9 year peak.
April 21st, 2008 at 4:11 pm
“The reason I beleive a 50% correction isn’t in the cards is because the market (people) won’t allow it, if prices were to get down 30% somehow, the amount of new buyers entering the market would stop the bleeding really fast,”
“There are others that claim they will buy if prices drop 20% but in fact they won’t they will still be scared and think what if it goes down some more.”
Do these two views not cause some sort of cognitive dissonance.
April 21st, 2008 at 4:27 pm
I think even amongst us bears, belief in a 50% price correction is a radical opinion.
Sure hope it does. I’ll have bought a condo already once prices are down 20%, but I’d probably be able to buy a house as well if they were down 50%
April 21st, 2008 at 4:40 pm
“What’s the difference between a middle class house and a prison cell?
One is a 10×10 room where you sit and ponder your poor decisions while staring blankly at the floor and decide to get religion to help you out of your bondage and the other one is for criminals.”
Not Mssing It on HBB
http://thehousingbubbleblog.com/?p=4421
Replace “middle class house” with “Vancouver condo”.
April 21st, 2008 at 4:48 pm
i’m not relying on a certain set percentage drop to figure when to buy a place – i’m going to buy when it isnt cheaper to rent the same place.
If rents for some reason went up to $5000/month – than i would recalculate what a proper price for a condo/house would be. If i cant afford to pay $5000/month – than i am forced to move.
If rents drop to $500/month, than i use that to calculate a proper price. Not some arbitrary percentage drop.
Of course there’s a bunch of soft factors like “pride of ownership”, the associated stability (or conversely, the ball and chain of a mortgage), etc… – but these things can only shift the basic value so much.
April 21st, 2008 at 4:57 pm
in my case, i’m willing to pay a bit more for “pride of ownership” etc… long term i see value in owning the place you live in – sorry, that’s from the gut.
I’m not willing to pay a 50% premium on rent however (i dont have the real numbers in front of me, just pulling them out of my ass).
April 21st, 2008 at 4:58 pm
I have a brother who truly believes and has for 10 years(maybe more) that prices will return to 1985. When you could have bought a house in the valley for $60,000. That kind of thinking is more about dreaming than reality.
But this is ridiculous overinflated and thus will have to return to earth. I truly would bank on about 30% overall and in some areas like DT 40-45%. The shills have been pumping this market for too long and is bound to burst. People with cash know it and they are in my opinion of the highest intellect. Watch and see..
April 21st, 2008 at 5:00 pm
Comment by Anti-Pesto
2008-04-21 15:13:14
The reason I beleive a 50% correction isn’t in the cards is because the market (people) won’t allow it, if prices were to get down 30% somehow, the amount of new buyers entering the market would stop the bleeding really fast, their are examples of certain cities in the US that have dropped more, sure, but there are countless more where the bleeding has stopped at a certain level as buyers see a reason to get back in.
Vancouver has been the most expensive city in Canada for years for no logical reason. Is anyone suggesting we will be passed by Toronto because the salaries are higher there and they could afford to pay more?
The US is still dropping, none of their markets have bottomed.
Sure, there’ll be some buyers on the way down but not enough to slow the descent (simple supply demand at that point).
Yes, why shouldn’t Toronto pass Vancouver as our prices drop? It’s another world class city, and property prices logically will be determined by the income of locals (the consumers of RE).
April 21st, 2008 at 5:00 pm
Behind the scenes, price/rent is what I use to get my 20% estimate. At 50%, most places I’ve looked at buying would be radically cash-flow positive, probably returning 10%/year before price appreciation.
I’m only really in the market for a condo near Downtown though, so I admit that is the only area I’m basing my calculations on.
April 21st, 2008 at 5:08 pm
I’m glad there are some reasonable bears here, as the unreasonable ones seem to have shooed away most of the bulls (both the reasonable bull as well as the unreasonable ones) This place would be better with a more balanced discussion.
Lets try a new topic, last year when interest rates were beginning to raise some people called for the end of the boom and the bust was upon us. In hindsight that didn’t play out, would those who argued that point now argue that with interest rates dropping it must push up prices? If we are talking strictly numbers then it would make sense but I have a feeling those people would still be bearish.
April 21st, 2008 at 5:13 pm
So we agree that by logic Toronto should be more expensive then Vancouver. Yet it isn’t, hasn’t been in decades, and probably won’t be anytime soon. Why is that?
Is someone going to tell me to use the internet? All that ever tells me is to buy gold.
April 21st, 2008 at 5:26 pm
I don’t agree that prices are determined by the income of locals.
If tomorrow half of the homes in Vancouver disappeared and were never allowed to be rebuilt, the prices of the remaining homes would go up as those who really wanted to and could afford to would pay more of their income for housing, and the rest of us would get roommates. It is a function of supply and demand and what people are willing to give up to have a home/room/etc. more than it is a function of income.
Now while Vancouver has plenty of land to build houses on, we’ve made a lot of decisions to prevent this land from being used and this housing from being created. This history goes back long before the current environmental movement or housing bubble. In my opinion, the biggest is that we simply lack the highways to bring distant areas into the commutable Vancouver sphere.
Now this is in many ways a good thing, it is one of the things that make Vancouver unique. But because of this (and other) choices, we need to accept that those of us who earn less than $200k or so a year are never going to comfortably own a single family home. That’s life.
None of this would be a problem for most of us if enough condos/townhomes were being built, but that isn’t happening either because of old-fashioned NIMBYism and government policy that is simultaneously pushing for greater density while also charging developers extra money when they try to build extra density.
So, in my opinion, we are always going to be an expensive real estate city because we have chosen to limit the supply of real estate. This will be just as true after the impending price crash as it is now.
Sorry for the long post.
April 21st, 2008 at 5:30 pm
Careful, you’ll get attacked by those that state there is an oversupply.
April 21st, 2008 at 5:36 pm
Well, at current prices I think there is an oversupply, but I also think that we will always be an expensive city compared to Toronto. I don’t expect our affordability ratios to ever be as low as theirs.
April 21st, 2008 at 6:21 pm
Anti Pesto
“Lets try a new topic, last year when interest rates were beginning to raise some people called for the end of the boom and the bust was upon us.”
I don’t actually recall that many people saying that a rise in interest rates would be the end. It was mentioned but most of the more educated users here pointed to past boom bust cycles which had little (if any) correlation with interest rates.
“So we agree that by logic Toronto should be more expensive then Vancouver. Yet it isn’t, hasn’t been in decades, and probably won’t be anytime soon.”
Source this, don’t make crap up. IF it’s true provide a source for your data, otherwise you’re just pulling it out of your rectum.
April 21st, 2008 at 6:38 pm
What part is crap? The part that Toronto hasn’t been more expensive then Vancouver for decades or that it isn’t now?
I think it’s pretty obvious I don’t have a source that shows Toronto will remain cheaper then Vancouver for all points into the future.
April 21st, 2008 at 6:43 pm
Anti-Pesto, you made the comment, “I hope no one is basing their investments soley on this blog or others like it”.
If it weren’t for the likes of Calculated Risk and the Big Picture, I would have missed on all the Puts and short sales I had on home builders and the financials.
So while the cognoscenti pass around and sign the thank-you card we have for you, please take my heart-felt thanks for taking time out of your profitable, busy schedule to come and save the unwashed masses.
April 21st, 2008 at 7:26 pm
Anti-Pesto,
You are somewhat correct that people buy on feeling. But the feeling now is that the market is crashing. I feel and everyone feels that real estate is a bad investment right now. I feel that the market will drop 65% to 70%. Never mind 50%.
April 21st, 2008 at 7:35 pm
“inventory at a 9 year peak.”
those numbers are for canada not for vancouver,in vancouver we have usual inventory that did not even crossed the last year peak as yet.
Anti Pesto,
Thanks for taking the time out your views are outstanding preety much fit on the scenes,please don’t mind what DRACHEN got to say he is very depressed personality he was almost gone last year as WG2C recomend last year he don’t need a pills, he is looking for direct stroke,his desire change like four weathers in a day some time 30% some time 50% some time 70% than back to 40% if there is any quick method to collect those comments I can post them here.so basically he is not agree with the less numbers than his desire.
Drachen,
you should feel happy about pesto’s recomendation about 10-15% if it was me,i would say ZERO because there is NO CRASH IN VANCOUVER.
USA is not crashing all the way there are 152 markets those are up and further going up it’s depend on the place you live in.
This article actually found stuff used by us on the blogs same as vancouver magazine so they like it the just want to repeat our way.
City is special.
Everyone wants to live here.
Wealthy immigrants will protect us from a housing correction.
They’re not making any more land.
Vancouver is a world-class city.
It’s different here.
the best place on earth
April 21st, 2008 at 7:39 pm
Well 70% drop is the boldest prediction I’ve seen to date.
I’m now officially a bull since I believe prices will only drop by 20%!
April 21st, 2008 at 7:53 pm
I feel that the market will drop 65% to 70%. Never mind 50%.
anti-pesto, dosh et al:
asset values including RE could fall 100% to
ZERO value if you can’t sell, something is only valued by what someone is willing to pay for it ……
April 21st, 2008 at 8:05 pm
why did you prefer to drop only upto 50%,65%,70 percent?
did you forget to say 100 percent?
April 21st, 2008 at 8:16 pm
Prices can drop by more than 100% if people are willing to pay you to take the place.
April 21st, 2008 at 8:18 pm
people are willing to pay you to take the place.
good point!
when you can pick up property for tax owing that is exactly what you are doing…..
April 21st, 2008 at 8:18 pm
punface,
why don’t we find one and fit all the bears in that,wanna do it?
April 21st, 2008 at 8:26 pm
haha I’m a bear dammit I’m a bear! I think we will see price decreases for the next few years, starting as we speak! I think this fall the Vancouver Sun will eventually have to put a big headline saying HOUSING PRICES CRASHING. I think it will be a decade or more before real prices reach what they are today.
I just don’t think prices will drop by 50%, no offence to my more ardent bear comrades.
April 21st, 2008 at 8:27 pm
krssh2.3:
checkout some inner city areas of Newark NJ and Detroit ….. buy a SFH for $800.00
April 21st, 2008 at 8:28 pm
I just don’t think prices will drop by 50%, no offence to my more ardent bear comrades.
all baby bulls are sooo cute at that age
April 21st, 2008 at 8:34 pm
And the looters will take your stuff worth $100,000 so the base start from there, its worth $100,000 to stay in Vancouver even if I am a homeless person.
April 21st, 2008 at 8:38 pm
its worth $100,000 to stay in Vancouver even if I am a homeless person.
severe disconnect in the logic k
a shopping cart is for free as you will
soon find out!
April 21st, 2008 at 8:48 pm
Building Granville Island, the new convention centre, or filling in a chuck of Victoria Habour in HK was surely enough to reduce land prices.
Thanks for bringing up Hong Kong. It saw a 50% bust in the late 90′s, in spite of a shortage of land that makes Vancouver look like Edmonton.
Manhatten had a huge RE bust in the 70′s. London also saw a bust around the same time.
Even if there is not one square inch of land left, prices will still go down – a lot – if not justified by fundamentals.
April 21st, 2008 at 9:06 pm
oh man, this fill in any name thing for comments can get pretty confusing – i (arbitrage @ 16:48) am not the same arbitrage @ 19:26 – though i would like a 65-75% drop (to make my future mortgage smaller or non-existant), it might be good to actually bring numbers and calculations to the table when making such bold statements.
April 21st, 2008 at 9:43 pm
sitting out after sell and sitting out but not buying despite supportive income does not creat fundamental crisis, in that case there are lots of people around to take care of the market only some properties can change hands and the market is up.
only silly people would like to sell their option in this type of environment.
April 21st, 2008 at 9:47 pm
Type of market where bats are sitting on every single branch of the tree looking for option.
April 21st, 2008 at 10:15 pm
You’re right, I’m going to buy a few more condos tomorrow!
Best Place on Earth!
Can you help me find a place downtown?
This is an investment so I need a place that I can buy which I can rent out for the full mortgage or at the best a $50 loss. Everyone wants to live downtown! I can charge unlimited rent right?
Do decent looking homeless people usually pay their rent on time? I’m hoping to find a few!
April 21st, 2008 at 10:27 pm
BDK,
Yes I can help you find a place you want downtown? ok buy any place would you like to rent it?why? do you hold multiple properties?just buy a place and live in it that’s for you.
Oh only 75 k in pocket and scared?then why are you looking for property over value why don’t you change your target area go to surrey or east vancouver oh sorry you don’t like east side maybe? then shut up you will never be able to buy property unless you get entery point do you understand entery point?
April 21st, 2008 at 10:39 pm
hmm… for a cash flow positive investment (or when buy is cheaper than rent), assuming no appreciation, and no down payment (or assuming we’ve found a much better and safer investment than real estate – like ABCP haha), or we only want to talk about the cost of shelter… just looking at one downtown condo example:
Cheapest condo on spectrumcondos.ca
$329,000 (dinky 510 sqft, 19th floor studio)
5 yr fixed (we like to play it safe), 25 yr amort, 5.59%, monthly payment (ingdirect) – the payment is $1988!
Going rent is say… $1200 (I wouldnt pay that, but lets just say 1 bdrms in better locations for $1400 are are some kinda benchmark) – using the same terms for mortgage, and to get a similar monthly payment the place would have to go for $200000.
About a 40% drop in asking price is required. Alright, lots of assumptions and simplifications, but haven’t seen a calculation on here for awhile. Pick away at it if you want. I think the calculation for fair price over at the financial planning blog gives us a similar number.
April 21st, 2008 at 10:53 pm
I don’t know where prices will head next year. I do know, however, that there was a household designer furniture store advertisement served up together with the web version of the editorial.
April 21st, 2008 at 11:26 pm
I am sick and tired of morons with “feelings” about the market who haven’t done any research walking around cocksure and arrogant like they invented the mortgage or something.
There’s this wonderful tool called the Internet. Perhaps you’ve heard of it. Use it. Report back here after you’ve educated yourself and I’ll be happy to share some of my data. Better yet you don’t even need to go anywhere, you can just read through the posts on THIS BLOG and learn what you need to know. Stop being a lazy bastard, get off your ass and learn something before shooting your mouth (fingers?) off.
Are you for real??? Get a hobby man.
April 22nd, 2008 at 1:07 am
Going rent is say… $1200 (I wouldnt pay that, but lets just say 1 bdrms in better locations for $1400 are are some kinda benchmark) – using the same terms for mortgage, and to get a similar monthly payment the place would have to go for $200000.
No condo, except something like a condo townhouse that has appreciable land value, is worth more than 100x rent. They have next to no land value, and a host of unpredictable expenses beyond the owner’s control. The property will eventually become worthless or require large capital infusions, which amounts to the same thing. Condo prices dropped to this level – or even lower – in the previous busts and I see no reason why this can’t happen again.
So it’s really worth around 120K, which is a 60% drop from the current asking price. That’s assuming rents hold up which is another big if given the current rate of building and the coming recession.
April 22nd, 2008 at 6:36 am
One thing to say. We should not make fun of poor english skills here. Poor math, no knowledge of history, lack of critical thinking, lack of research, lack of credible sources for their “facts”, mindlessly parroting slogans, etc are all fair game. Plenty of targets there.
“World class city”? “The best place on earth”? If you live for camping, hiking and other outdoor activities this is pretty good place. You don’t need a city involved for that part, 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………Vancouver isn’t! It’s an overgrown small town. No notable architecture, public spaces and events are pathetic, restaurants (with a few exceptions) are very ordinary. Don’t get me wrong, it’s far from the worst place on earth, but NOT world class. I’ve been to world class cities. If I wasn’t so outdoorsy I don’t think I’d be here.
April 22nd, 2008 at 7:31 am
Great comment. We have survived more drops so we will survive also this one. You can read many articles like this one in newspapers now. I think that effect is exactly opposite. If they say “don’t panic” and after some not really trustworthy arguments it just boosts people to panic. I am working as a Toronto realtor and I am following my experiences it is exactly like this.
April 22nd, 2008 at 7:33 am
I’ll buy a house when I see Krissh2 hanging from the debtors gallows.
April 22nd, 2008 at 7:34 am
Re: multiples – well, a 100x rent valuation would make buying a lot easier. But isn’t that quite a bit lower than historical? Going on the price to rent ratio chart from financial planning – it looks more like 16-20x Annual(?) rent. Though, it only shows from 1992.
Anyone want to help me with some further questions:
- What is the design/expected life of a high rise condo building? Wouldnt we use this as a multiple? (plus various other factors like discount for holding something that’s slowly falling apart, but is still on a small chunk of land that is appreciating)
- Is there value left after the building collapses? Do all the owners have to agree on what to do with the land?
- Does the 500 sqft owner get as big a say as the 1500 sqft penthouse owner?
April 22nd, 2008 at 7:49 am
no body can answer your mislenious question that does not exist dummer why don’t you post this on refered dead site,one thing is for sure a financial planner can not help you to buy house they are mostly agent for various banks to invest in gic or bonds.
April 22nd, 2008 at 7:59 am
- Is there value left after the building collapses? Do all the owners have to agree on what to do with the land?
There’s a few condo developments in Florida where buyers are being forced to sell their condos for market value (around 40% less than they paid) as the majority owner of the building wants to revert to rental units. Not sure how the laws work in BC but if some vulture fund comes in after a crash and buys the majority of the units in your building could they force the minority owners to sell in order to revert to rentals? Strataman, Freako?
April 22nd, 2008 at 8:11 am
I enjoy the increased bullish sentiment on this site.
It means that some visitors (even with some bullish tendencies) are being inquisitive and it’s a definite shift in the psychology.
The wheels are slowly starting to turn backwards.
On Rob’s site I pointed to Satv/Krrrsh’s vocalness and his anxious desperation is being felt across all blogs.
Also, the media is turning more bearish by the day except for the advertorials grasping at straws looking for the last suckers.
It’s interesting and amusing to see how all this shift is unfolding exactly as in the US so it’s no surprise that many of the delusional bulls will hang on till the end.
Noname
April 22nd, 2008 at 8:25 am
Arbitrage
Yep, believe it or not people, in a NORMAL market condos actually fall in price every year. It’s like a used car, the land value is essentially nothing and the building gets older and less desirable. Anyone calculating the value/rent of a condo should take that into consideration.
I am not sure what would happen if the building collapsed, I imagine the place would be insured and each owner would be paid the amount of their last assessment. The insurance company would then own the land.
In your last case if the building were to be torn down I believe each owner would have to sell their place to the developer, so each would negotiate their own price.
April 22nd, 2008 at 8:27 am
re: increased bullish sentiment – perhaps the Pope can help us with this – based on ip stats and stuff – has there been a spike in new visitors? I would think the van mag article would have driven some traffic this way.
I’m actually kinda curious about the corporation ip background – who’s visiting from 9-5? The bankers? The accountants? The engineers? The realtors? The university?
A much more balanced (balanced in the sense of number of bears and bulls seems to be the realestatetalks forum). Mostly still bears here. I’m a lurker bear.
April 22nd, 2008 at 8:38 am
Andrea,No Name
you did not read his response to your post he want to assist 33 million people with different occopations.
April 22nd, 2008 at 8:40 am
“- Does the 500 sqft owner get as big a say as the 1500 sqft penthouse owner?”
I think your condo unit means that you have a percentage or a ratio of shared ownership of the common area and then the title to whatever percentage your unit counts for towards the entire building and there is also a percentage of ownership at demolition in the paperwork that you get when you hold the title. It’s also used to calculate your strata fees. Just like the penthouse unit pays more in strata fees. So if the building was sold for it’s land value only the penthouse would get more.
But if the penthouse was sold as one unit new, then it would just be one vote at the strata council meetings whereas if you owned two units that’d been converted into one you’ll see a unit with 4 parking stalls, two strata lot numbers, double the parking passes etc.
In order to demolish the building they’d need a big majority in a vote and umpteen engineers reports stating the building was useless.
Good luck getting a strata to agree on anything though, except maybe to unlawfully ban something.
I’m surprised a strata hasn’t tried to put weight restrictions on occupants yet!
April 22nd, 2008 at 8:45 am
Re: Artibrage’s 40% drop calculations.
Wouldn’t it be worse? The rent of $1200 includes major costs (strata fee and taxes, say $300) that are not included on the mortgage side of equation. Take that into account and the equivalent monthly payment ($900) to the mortgage gets you something closer to $146,000. That’s a 56% drop.
Am I so wrong?
April 22nd, 2008 at 8:45 am
Anti Pesto
“So we agree that by logic Toronto should be more expensive then Vancouver. Yet it isn’t, hasn’t been in decades, and probably won’t be anytime soon. Why is that?”
I had a moment to look it up. You’re wrong.
I was pretty certain your statement was hokey, I was living in Ontario in the early ’90s and I knew a guy living in Toronto so I had some idea of the market. Turns out Toronto was nearly twice as expensive as Vancouver in 1989 (just to pick one data point).
http://tinyurl.com/623vg6
Toronto Graph
http://tinyurl.com/6mtl5d
Vancouver Graph
(by the way I hate how you can’t post links here without the message getting held for approval)
April 22nd, 2008 at 9:00 am
Regarding arbitrages question about visitor stats: traffic is growing, but no big spike in visitors. Most visitors are of course coming from the big ISP’s, telus, shaw, rogers, novus, etc.
The fifth highest number of visitors are coming from UBC and then we get a lot from the banks, TSE, Cannacord, law firms, VGH, the BC government and corporations (EA, Radical, eBay, Kodak, etc)
April 22nd, 2008 at 9:04 am
Drachen, if you limit links to one per post it should go through the spam filter. I know it’s frustrating, but believe me if the filter wasn’t there the comment section would be unreadable.
April 22nd, 2008 at 9:13 am
“if the filter wasn’t there the comment section would be unreadable.”
*cough*randallbard*cough*
Got it.
April 22nd, 2008 at 9:37 am
For those of you who are new here or just observing and wonder what to think:
Anti Pesto and Dosh are agents. The very fact that they are working so hard here shows several things.
1) They have lots of time on their hands.
2) Business is drying up. They are hoping to reverse some of the psychology which is rapidly turning against them.
3) Despite common belief agents do not have very good knowledge of the industry* (evidenced by AP’s misunderstanding of the price relationship of RE in Vancouver and Toronto over the past decades and their complete inability to provide any factual evidence to back up their claims.)
Do not trust Real Estate agents. They are not there to help you, they are there to earn a commission!*
* My apologies to the few good agents out there (yes there are some (their number does not include Dosh and AP)) who both know the market and care about their clients.
April 22nd, 2008 at 9:47 am
There are some good agents out there – I’d point out Paul Boenisch who not only openly shares information of the market, he puts in the extra work of making daily statistics on REBGV listings and sales available on his website:
http://nvcondos.ca/
April 22nd, 2008 at 9:50 am
drachen,
you just need to compare the land size,weather condition and employeement rates- toronto vs vancouver the outcome is very easy to digest,open your mind,it’s all good when you are in vancouver.
April 22nd, 2008 at 9:54 am
Krrish:
Are you saying you have a mathematical formula? I’d love to hear it!
Otherwise, comparing a bunch of oddball statistics is pretty meaningless (quite like yourself).
April 22nd, 2008 at 10:02 am
krissh2 pretty much everyone on this board already lives in Vancouver, what are you trying to sell?
April 22nd, 2008 at 10:12 am
Please read this before replying to Krrish:
http://vancouvercondo.info/for.....c.php?t=48
April 22nd, 2008 at 10:23 am
He’s trying to convince himself that owning a crappy unit in an average location downtown is worth paying double what it should because in his own little unskilled labourers brain it’s more important to hold a mortgage than it is to have any other assets and he thinks it will continue to go up.
He’s looking for positive reinforcement and he thinks he’s making sense.
Is Dosh really a realtor? he seems far too stupid to have passed the multiple choice realtor exam.
Once again:
During the technology mania, valuation considerations
were dismissed due to fear of missing out.
(Is this real estate mania any different you ask?)
When a particular asset class delivers outstanding
returns over an extended period, investors
become convinced that there are solid fundamental
reasons for the trend. Theories are
developed to justify participation and disregard
valuation considerations (like unsubstantiated claims that immigrants will move here in droves). In the early ’70s, the
“Nifty Fifty” stocks like Polaroid and Xerox were
going to make money forever. At the beginning
of the decade, the Internet was going to render
traditional industries irrelevant (“do you think the internet is going away?!”. Today, growth
in China and India is expected to translate into
a permanent shortage of commodities.
Tech Boom “I’ll be retired at 30, buy tech stock now or miss out!”
Real Estate Boom “I’m a naive moron who works in a warehouse, buy real estate today and you can be like me!”
April 22nd, 2008 at 10:23 am
Yeah digi statistic canada reports indicate that “vancouver took over any other province in migration not toronto”isn’t it a rule of thumb to discribe what city deserve to stand out of crowd?
I recomend please do not mess with krrish2 he is very dangerous player just back off.
Digi your post is incomplete actually if you look in the link you had krrish is giving rant to emile and loggers that they have no merci for rich,poor,homeless,students and for pets that’s mean because of driving forces there is no help there is always some one sitting on the top and always some one sitting on the bottom.
you can not accommodate homeless and elders so rich people can not accommodate you that simplly means throw your money and watch the show no money go home.
no merci et all
April 22nd, 2008 at 10:28 am
“The fifth highest number of visitors are coming from UBC and then we get a lot from the banks, TSE, Cannacord, law firms, VGH, the BC government and corporations (EA, Radical, eBay, Kodak, etc”
Wow, I wish I had “reading real estate blogs” in MY job description. ;>)
April 22nd, 2008 at 10:29 am
oh no:
http://www.news1130.com/news/t.....0709_10484
April 22nd, 2008 at 10:37 am
Personally, I could see a price drop of between 30% (back to price/income ratio of 2001) and 50% (back to price/income ratio of approx 1985). The reason I can’t decide between those two is the data doesn’t go back long enough to decide which is closer to a historical average.
April 22nd, 2008 at 10:44 am
The News 1130 story conveniently ignores the drop in sales. Even in a crashing market, there are a few fools ready to jump in at whatever costs. Personally, I know a few potential First Home Buyers who have given up in the last few months.
Vancouver Banker, I think it will be somewhere between 30% and 50%. Once local prices are down 30%, I’ll start lowballing like crazy.
April 22nd, 2008 at 10:47 am
VB, do you have a link that would suggest a 30% drop is back to 2001 levels? I would say that is closer to 50%, because that was around when I bought.
April 22nd, 2008 at 11:14 am
Warren
He’s way off. In 2003 the average detached was around 375k, adjusted for inflation that’s 435k today. In reality detached is in the 900s now (I don’t have the stat handy, if I’m wrong please correct me). So even using only the 2001 start point for measuring we’re due over 50%.
If you use 1985 (which I believe is more likely the correct point) it was 125k (again detached) adjusted for inflation that’s 226k. Which would mean a potential for a 75% correction but historically in North America from the 1900s onwards there has been a 5-10% price appreciation every 20 years or so, so if you add that in we’re looking at about a 65% correction if 1985 is the year we left the “normal” curve.
If he is a banker I like the way he thinks but his math is surprisingly far off for someone dealing with numbers all day.
April 22nd, 2008 at 11:15 am
krrish2,
You idiot, where do they have more people? Toronto or Vancouver????
I rest my case!!!!!!
April 22nd, 2008 at 11:21 am
Thanks Drachen that makes more sense. Personally I’d be thrilled with 50%… as long as interest rates aren’t 10% and I have a job.
April 22nd, 2008 at 11:22 am
Re: multiples – well, a 100x rent valuation would make buying a lot easier. But isn’t that quite a bit lower than historical? Going on the price to rent ratio chart from financial planning – it looks more like 16-20x Annual(?) rent. Though, it only shows from 1992.
Mohican’s chart is for SFH. Yes, the multiples from 1992 forward have been above the historical norm.
Price/rent for SFH got down to 100 in the mid-80′s. That was about rent equivalence at the interest rate prevailing at that time. The annual multiple of 16 in 2001 was also quite close to rent equivalance. Remember interest rates were a lot lower then. There is no guarantee that interest rates will remain at the current low levels.
The multiple for condos should be a good deal lower than for SFH due to reasons discussed above. Maybe someone can give some data on how low they got for some properties in 2001.
April 22nd, 2008 at 11:25 am
Here’s a counter to the News1130 article:
U.S. Housing slump may exceed Depression: Shiller
http://tinyurl.com/62wq4a
….oh, my mistake….its different here
April 22nd, 2008 at 11:47 am
No matter how obvious this gets, they all keep on eyeing a revival. Hope springs as eternal as stupidity.
U.S. Home Sales Plunge 19.3%, Prices down 7.7%
The sky isn’t falling but home prices are, and the plunge in the value of U.S. homes combined with tighter mortgage-lending standards is making Americans even more reticent about buying.
On Tuesday, the National Association of Realtors reported a worse than expected 2.0% drop in sales of existing single-family homes and condominiums in March to a seasonally adjusted annual rate of 4.93 million units compared to February. Compared to a year ago, sales were off 19.3%. The median price of a home sold last month dropped to $200,700, a decline of 7.7% from the median price a year ago.
Joseph A. LaVorgna, chief economist at Standard & Poor’s said in a note to investors Tuesday that falling home prices aren’t such a bad thing, “On one hand they are causing negative wealth effects and forcing some new mortgages underwater; but on the other hand, this is a necessary, albeit unpleasant, prescription for restimulating housing demand,” he said. Sales were expected to drop 1.6% to a seasonally adjusted annual rate of 4.95 million units, down from 5.03 million in February, according to the consensus forecast of Wall Street economists surveyed by Thomson Financial.
Lawrence Yun, the chief economist of the National Association of Realtors, said that a tightening of lending practices was stymieing some home shoppers, counterbalancing relatively low mortgage rates. “At the same time, many buyers continue to bide their time with a large number of homes to choose from, while other potential buyers remain on the sidelines.”
February homes sales were down nearly 24% from a year earlier. Sales of existing homes fell nearly 13.0% in 2007 to 5.65 million, the biggest decline in 25 years. The median sales price for single-family homes and condominiums dropped 8.2% in February from a year ago, settling at $195,900. The median price for single-family homes was down 8.7% from a year ago, the biggest decline in four decades.
April 22nd, 2008 at 12:10 pm
“In 2003 the average detached was around 375k”
Typo, that should read 2001 of course.
April 22nd, 2008 at 12:17 pm
“Tech Boom “I’ll be retired at 30, buy tech stock now or miss out!””
My own personal memory of the end of the tech boom was hearing one Computer Science prof airily declaring to another, some time in very late 1999, that he “simply would not accept” any investment returns under twenty percent.
I’m sure his Nortel returns were spectacular a few months later.
Nothing like this at all though, I’m sure
April 22nd, 2008 at 12:35 pm
ok, seems the 40% drop calc is pretty conservative than. i do hate going out on limbs.
someonetoeatcheesewith:
i agree that using $1200 without subtracting tax, maint, etc… is quite the approximation – it was done more to ease the calculation and avoid going into the details.
Just wanted to show that >20% drop is easily possible. If a 20% drop was all that was required to go back to normal, some of us would have bought in 2005 (guesstimating here).
patriotz – thanks for clearing that up – i’m glad Mohican’s data is for SFH – i dont really want to pay $200k for 510sqft.
April 22nd, 2008 at 1:39 pm
Sorry Digi, I’m with the program now!
April 22nd, 2008 at 2:31 pm
Interesting that part of the editoral’s rationale is “Metro Vancouver’s limited supply of land and high demand for housing, fueled largely by immigrants’ desire to live here, sounds like a recipe for a stable if not robust residential real estate market.” Yet, according to Human Resources Canada, newly arrived immigrant family income is only on average 76% of native born Canadians . Also, an assessment from the BC government suggests that in this province, recent immigrants don’t find as high paying jobs as native born Canadians. Good thing affordability is not a problem.
April 22nd, 2008 at 3:20 pm
Wow, I’m amazed with the responses these days. I’ve been checking into this post for 6 months now and can tell you it has changed a lot.
The way people put forward their arguments in a constructive way is such a delight. Bringing forth easy to understand stats for new people will make it easier for people to understand Vancouver is overvalued and a price correction is surely due to come.
I do feel sorry for any body who buys a condo or a house right now because they have bought at the peak of the market. If some of those people discovered this forum I sure they would have changed their minds. Pity how greed can cloud ones judgment.
April 22nd, 2008 at 3:47 pm
“Pity how greed can cloud ones judgment.”
Fear is worse.
April 22nd, 2008 at 4:10 pm
speaking of collapse
http://tinyurl.com/3htuna
interesting read
April 22nd, 2008 at 4:13 pm
Drachen: Are you sure your graph for Toronto prices is just for Single-Family Homes? And are you sure both are adjusted for inflation?
Looking at the Sauder data, Vancouver has been more expensive than Toronto since at least the mid-70s. Significantly so.
April 22nd, 2008 at 4:38 pm
.
.
.
QUESTION FOR POPE, or for anyone else who would liket to respond:
Noticed a few comments on Chipmans site about the activity increase on these blogs coinciding with the recent inventory spike.
No surprise there, but what really blew me away was RCs claim that “page load volume is about the same as always” and he had not noticed any increase of comments.
Is this remotely possible or is he stooping to new lows?
So, out of curiosity, I wonder if POPE has any stats for volume on his blog….or has anyone else noticed a volume increase?
April 22nd, 2008 at 5:48 pm
I’ve been lurking on these blogs since sometime in 2005. What I notice is how much angrier everyone is now. There have always been trolls who have engendered hostile responses but the average poster just seems a lot more agitated these days.
April 22nd, 2008 at 5:58 pm
“but the average poster just seems a lot more agitated these days.” so is the average neighbour, lady I know who bought an Elan unit to flip is some pissed off, says the realitor sits on her ass and does nothing! Asked her (I’ve known her for three years)if she changed realitors she said NO but she is going to; because HER realitor seems to think places sell by themselves. Had to bite my tongue and not say “well actually places USE to sell BY THEMSELVES the realitor was decoration not skill. (Apologies to Paul your not that kind). Lots of anger out there and the down turn is not even off the start line!
April 22nd, 2008 at 6:30 pm
franko,
three hundred comments 267 from wow!15 from jeff and rest from newcomer.
April 22nd, 2008 at 6:45 pm
“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?
April 22nd, 2008 at 6:57 pm
“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?
April 22nd, 2008 at 7:28 pm
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.
April 22nd, 2008 at 7:46 pm
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.
April 22nd, 2008 at 9:12 pm
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 job at all.
welfare,medical,food,shelter,library,ambulance,doctor,hospitals.
Show me any world class city where people have type of access except uk.
those service above makes place to be called best place on earth.
Going to usa,australia does not makes you feel the diffrence,have you ever been to calcutta,south africa,have you ever been or heard about pakistan.
Have you ever seen womens being raped infront of public?
have you ever have to write your test tommorow and your neighbourer is playing loud music all day all night.
have you ever hold on to your book because their is no light in your community or locality?
did you ever carry 50 pound of watercan on your head and walking 10 kilometer to get home?
April 22nd, 2008 at 10:59 pm
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
April 22nd, 2008 at 11:37 pm
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 best place on Earth”.
Also, for the best place on earth, why are the lineups to the US always so damn busy but coming into Canada…they’re dead?
Anyway, back to Un-REality Vancouver style! It just seems so silly to me, now more than before, seeing the prices and the hype! Haha! I seriously can’t wait until people wake up from the bubble they’re live in, not to mention the RE bubble they’ve all created.
April 22nd, 2008 at 11:39 pm
^ should read “living in” Moo..moo, moo (My bad)
April 22nd, 2008 at 11:53 pm
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 economic sense, then we should not tell people to sacrifice healthcare and other essential needs to make the ideologues happy. It’s time to force some honesty into the discussion of housing policy – renting sometimes make sense.
Thanks for that, good read! What’s with your quote from the comment thread? Just looking for some bullishness?
April 22nd, 2008 at 11:54 pm
Mulligan on the bold, k, I’ve done enough!
April 23rd, 2008 at 1:13 am
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.
April 23rd, 2008 at 7:46 am
“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/down.....rville.pdf
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 for housing data in the past.
So, IF the data is accurate then why is PRICE so different between Van and TO but rents are almost identical? Same study, I presume the same definitions were used for both graphs yet our housing is nearly twice as expensive to buy but under 5% more expensive to rent. Note also, Calgary is more expensive than Toronto to buy now too but the rents are actually about 20% less.
April 23rd, 2008 at 7:56 am
“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.
April 23rd, 2008 at 8:11 am
“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.
April 23rd, 2008 at 8:15 am
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?
April 23rd, 2008 at 8:33 am
“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.
April 23rd, 2008 at 10:07 am
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 that R/E is very likely going to have a 50% crash in price.
I just filed my tax return. I make pretty good money. Well into the six figures and I could only save $10K per year. If you buy a place for $600K and the market corrects by 20%, that’s $120K. That’s 12 years of my savings. Oh wait, $10K was based on rent. If I assumed I had a mortgage, that would be 40 years of saving. Losing 40 years of savings in one pop is pretty risky to me.
April 23rd, 2008 at 10:38 am
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.....03815/1001
Just when you think you’d seen the apex of greed in the land of plenty….
April 23rd, 2008 at 10:50 am
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?
April 24th, 2008 at 2:26 pm
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.
April 24th, 2008 at 3:12 pm
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
April 24th, 2008 at 3:23 pm
http://vancouvercondo.info/for.....c.php?t=48
April 24th, 2008 at 8:31 pm
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/k.....rtxflr.htm
April 24th, 2008 at 11:32 pm
“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 own one unit. You get one vote per unit.
Generally land values increase over time while building values decrease. This applies to condos, townhouses and single family homes. Some of those houses sitting on million dollar lots on the West Side are worth less than $10,000. However, in last year’s assessment the building values went up in some cases. I’d guess it has something to do with higher construction costs.
April 28th, 2008 at 11:49 am
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!