Depreciation fantasy
May 15 2011 - Vancouver house prices have fallen for the 35th continuous month as the fallout from the global credit crisis continues to hit the metro area hard. In April the benchmark price for a single family detached home dropped an additional 9% bringing the year over year losses to 74%. The benchmark price for a detached home now stands at $47,034.
While prices have dropped dramatically across the entire spectrum of housing no market has been hit hard as downtown condos, where prices have dropped to zero and many speculators have simply walked away from their debt never to be heard from again. Supply continues to increase as some condo towers started during the building boom are completed, but many others have been abandoned by bankrupt developers in a state of partial completion.
The sad state of the downtown core can be blamed on a confluence of factors: the credit crisis, the exodus of jobs and population, multiple bank collapses, oversupply and the discovery of the unique health hazards caused by granite and stainless steel. The elimination of the CMHC and the requirement for 70% down payments certainly isn’t helping the local market.
While many speculators have been financially destroyed by this market, not everyone is unhappy with the collapse. Local teacher Sandy Ursus just bought three homes in Vancouvers southlands neighborhood and is quite happy with the purchase.
“The minute I saw this house I fell in love. We’ve been saving for years, but when this and the neighboring homes came on the market for a combined price under $200k I knew it was time to take my money out of the bank and buy” Ursus explains sipping champagne on her sunny deck. “Since we had the two neighboring homes torn down it’s almost like living in the country here. Its funny thinking that just a few years ago people were fighting to pay more than the next guy for a house in Vancouver while these days the seller will throw in a new car and a years worth of gas just to get you to buy.”
Is she concerned about predictions of further depreciation and economic woe?
“Not at all, this is a place to live, a place to raise a family, not an investment. We’re debt free and maxing out our RSPs so the price of the house is really not a concern for me.”
Local economist Rusty Summervile disagrees “She should really get rid of that house as soon as possible. History has shown that real estate is a massive wealth destroyer. The most sensible course of action is to rent and save as much as you possibly can, let someone else shoulder the depreciation.”
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May 15th, 2008 at 7:14 am
Can we start some sort of bet on which one of the predictions will be closer to reality?
I am going with “Depreciation Fantasy”.
Best regards,
cash in 2016!
Ari
May 15th, 2008 at 7:18 am
good point! cutting edge design indeed…
May 15th, 2008 at 7:47 am
May 15th, 2008 at 8:05 am
May 15th, 2008 at 8:18 am
May 15th, 2008 at 9:16 am
What is this outrageous concept? What sort of lunacy would make someone think such a thing? Rx: Rennie.
May 15th, 2008 at 9:41 am
http://www.youtube.com/watch?v=A2_Hmt-MKLA
May 15th, 2008 at 9:43 am
in the case of depreciation fantasy Micheal Randalbard would be able to park his car in downtown for free but he might have to bring his own coffee from Richmond then he can walk around on world famous shoping promenade Robson and beautiful marina side but there won’t be anybody to see and hear that micheal is dj made of gold.
May 15th, 2008 at 9:52 am
Richmond has world famous shopping too, everyone I met in Hong Kong knew where Richmond is and you know every asian in the world is rich and is itching to move to Richmond.
Maybe you can take the bus there and see for yourself.
What are you doing stalking another man on here?
May 15th, 2008 at 10:35 am
A place to live is an investment, because a having a place to live has a cash value.
Not to criticize the author however, the character is using “investment” in the popular meaning of “something which is guaranteed to increase in price”, rather than the one economists and business people (and even Marxists) use, an asset that returns income to the owner.
May 15th, 2008 at 10:35 am
Wow. What’s this talk about a correction? Now there’s one coming, but it won’t be major? I thought there was no end in sight for yoy price appreciation?
My favorite part of the article, “5 main reasons why it’s different this time [that a major correction won't occur]”
1. Home prices in Canada are not overvalued. COUGH… CHOKE…
2. There’s little evidence of widespread speculation. COUGH… CHOKE…
3. Canada’s housing market is not overbuilt. COUGH… CHOKE…
4. Households are not over-leveraged, noting that mortgage carrying costs as a share of disposable income are historically low. COUGH… CHOKE…
5. Overall mortgage quality is still sound, as Canadian lending standards are tighter than those in the U.S. COUGH… CHOKE…
It’s like they put together a list of some of the bear arguments and printed the exact opposite.
May 15th, 2008 at 10:43 am
Canaccord alleges that Scotia Capital, the group’s investment-banking and capital-markets unit, received materially relevant information last July on the risk associated with the third-party paper’s U.S. subprime exposure, which it didn’t pass on to Canaccord.
http://www.nationalpost.com/ne.....?id=353629
May 15th, 2008 at 10:44 am
Yeah 75-85% of buyers planning to sell before selling isn’t speculating at all!
May 15th, 2008 at 10:48 am
always been like that:
2 kinds of RE markets:
rising market bullish
balanced market bullisht
nothing else can exist on Planet Krissssh
May 15th, 2008 at 10:49 am
May 15th, 2008 at 10:55 am
May 15th, 2008 at 11:08 am
As for me, I enjoy humor and satire. If you don’t why do you read it?
May 15th, 2008 at 11:21 am
Gotta love our nation there is nothing below balance but six percent above even at balance,no rain no sun for bears just few beers to forget the crash then back to work!
ASAP
May 15th, 2008 at 11:25 am
May 15th, 2008 at 11:26 am
May 15th, 2008 at 11:32 am
I am learning quickly, I just have a few more concepts to grasp before I can fully comprehend the part where negative cash flow and negative equity is a good thing.
If only the dogs at Rob’s blog could help me out.
May 15th, 2008 at 11:32 am
http://tinyurl.com/6cngjs
Rennie, shut up and stick to your knitting…condo marketing. You are no authority on creating affordable housing.
May 15th, 2008 at 11:37 am
Au contraire, Rennie has cooked up an affordable housing strategy that makes the NDP look like pikers.
Just wait.
May 15th, 2008 at 11:51 am
May 15th, 2008 at 11:51 am
Just wait.
i can see craigslist ads from upside down speculators….”MUST RENT”…..please
May 15th, 2008 at 12:01 pm
May 15th, 2008 at 12:21 pm
Here’s an article from the Washington Post in 2005 (about Ben Bernanke in the U.S.) that sounds eerily familiar to what we’re hearing now:
Bernanke: There’s No Housing Bubble to Go Bust
Fed Nominee Has Said ‘Cooling’ Won’t Hurt
By Nell Henderson
Washington Post Staff Writer
Thursday, October 27, 2005; Page D01
Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.
U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households.
http://www.washingtonpost.com/.....02255.html
But we’re different from the rest of the world, right?!
May 15th, 2008 at 12:21 pm
If he’s not joking he’ll be in for quite a shock when his Mum puts her primary residence up for sale in July.
NYC, if you’re so sure the market isn’t in the process of tanking call any realtor in the book and ask what you could get for your place and how fast it’ll sell.
If it’s downtown then you have 8,000 other units available and another 10,000 new ones which will either be for sale or for rent in the next year, a lot of the speculators will not be able to obtain a mortgage so they’ll be people willing to assign a brand new unit for the original selling price plus 50% of their original 10% deposit.
This is exactly what happened in San Diego and the realtors were saying the same things as the bubble was bursting there too.
The only reason you’re mad is because you’re scared, don’t lash out and call me an assclown. It’s not my fault you just made the biggest purchase of your life without doing any research.
Read yesterdays New York Times, there is an article about the Miami Condo Vultures who won’t touch units that were previously $750,000 for $200,000 now.
May 15th, 2008 at 12:31 pm
May 15th, 2008 at 4:00 pm
Oh and I don’t know about the others, but I love my rental life…. awesome refinished REAL wood floors (no crappy laminate), the windows are getting washed this aft, GREAT view on a very quiet little street near the park, close to the beach. I’m downtown close to all the cafe’s! And I’m only paying $1320.
Someone else takes care of everything, the garden ouside’s gorgeous and if I need to move for a new job… no worries. What’s not to love?
May 15th, 2008 at 5:38 pm
May 15th, 2008 at 6:47 pm
25 year vets saying - vancouver westside SFH most listings they’ve ever seen and being run off there feet for appraisals
People not buying until they sell … build while you own your old residence has stopped
Great spec building property - now showings!
It’s never different
relax, be patient and enjoy
May 15th, 2008 at 8:23 pm
People don’t like being warned of upcoming crashes. John Kenneth Galbraith wrote about this phenomenon.
…leading on as it does to wonder at the increase in values and wealth, to the rush to participate that drives up prices, and to the eventual crash and its sullen and painful aftermath. There is protection only in a clear perception of the characteristics common to these flights into what must conservatively be described as mass insanity. Only then is the investor warned and saved.
There are, however, few matters on which such a warning is less welcomed. In the short run, it will be said to be an attack, motivated by either deficient understanding or uncontrolled envy, on the wonderful process of enrichment. More durably, it will be thought to demonstrate a lack of faith in the inherent wisdom of the market itself.
May 15th, 2008 at 10:04 pm
Hey, wasn’t this VHB’s ‘favorite’ project?
Woodward’s redevelopment project came very close to collapsing.
A major redevelopment project envisioned to help revitalize Vancouver’s Downtown Eastside almost fell through before construction even began last year, CBC News has learned.
And it took only $49M to grease the wheels:)
http://tinyurl.com/3z3kry
May 15th, 2008 at 10:18 pm
“I said to (Housing Minister) Rich Coleman, ‘If we lose Woodward’s, you can stick a fork in the Downtown Eastside forever, because no developer is going to take a chance of going in there,” Rennie said.
After numerous discussions, Rennie said the province announced a $49.3-million contribution towards SFU’s new art school in November of last year.
——–
Excuse me, who the hell elected Bob Rennie to anything?
This is sick.
May 15th, 2008 at 10:19 pm
May 15th, 2008 at 10:49 pm
May 15th, 2008 at 11:16 pm
Jun, if that’s what you want, then STFU.
May 16th, 2008 at 6:15 am
Yes, we need to be sent to a re-education camp, where we can learn obvious “truths” such as:
Nepal is truly better off under the generals rather than that terrorist radical the Dal Lama.
The smell in the misty air and the taste in the taste in the murky water is healthy.
If you can
steal and loot the villagers property or childrendeservedly earn enough to come to Canada then the property market just won’t crash.May 16th, 2008 at 6:53 am
I’m not sure what assumptions are so unreasonable. If you seriously want educated opinions why real estate in Vancouver is likely to crash, we can answer a lot of questions you may have. If you are just upset that this will happen and want to vent, we can’t help you.
May 16th, 2008 at 8:41 am
Thats a contradiction. A correction is a drop in price and isn’t this a market? Would you consider a realtors view more educated? Rob Chipman is on record as expecting a ‘correction’ of up to 20%. How many thousands of dollars does that represent off the average house in Vancouver?
May 16th, 2008 at 9:20 am
This is yet another one of those “Canada is not like the US” myths. Lets look at some numbers from the 2001 and 2006 censuses:
2001:
Population - 30,007,094
Housing Units - 12,548,588
Population/Units - 2.39
2006:
Population - 31,612,897
Housing Units - 13,576,855
Housing Units Required - 13,227,154 (Population/2.39)
Overbuilt - 349,701
The population of Canada has been growing at about 321k/year. This means we need an additional 134k housing units/year. (2.39 people/unit) But we’ve been building over 200k/year for several years.
In 2007 there were 228,343 housing starts, and in 2008 there should be about 214,650. If there is a need for 134k/year, it means 174k were/will be added to the excess supply in 2007 and 2008.
Adding this 174k to the 2006 total of 349k brings the total to 523k, or almost 4 years worth of overbuilding!
May 16th, 2008 at 11:07 pm
Not a fantasy. Granite contains small amounts of radiation. According to Wikipedia it’s about 10 to 20 ppm.
May 16th, 2008 at 11:09 pm
May 18th, 2008 at 7:48 pm
The reasons are here:
1. Vancouver is open up straight to Asia. China and India people in this century will be making the big big money. However, people who live in Vancouver locally will continue to wonder why they have so much money. Well, they will have more and more money!! and they are not afraid of buying!!
2. Commodity price all over the world. “Everything” is going to cost more in this age. “Everything”, but money (currency). Drastically, the cost of building the same building will cost much higher. You have China having crisis with the earth quake. They are going to buy extra extra resource with whatever it costs. It will beat up the commodity price even more.
US dollar weakness. The weakness is going to drive up the commodity even further.
3. The resource in Canada. Canada, itself, has a very low population, big land and lots of nature resources. Canada has a huge potential, and a lot of people in the world knows that. What do you think just the people in India and China are going to think?
I have pointed out a few things that I hope you are going to really think about clearly. Be open minded, the globe is a lot bigger and changing a lot faster now. Don’t trap yourself and being stubborn. Do what you can still and be wise.