Friday Free for All!
Every friday we do a weekly news link round up and have an open topic discussion. Here’s a few stories I’ve noticed this week:
- Man charged for craigslist rent scams
- BC only province to see increase in EI claims
- Robert Zoost the Super-Realtor
- Tips for first-time house sellers
- Bad week for Canada’s banks
- Do recessions cause a birth-dearth?
- UK follows US into housing bust
So what are you seeing out there? Post your news, links, thoughts and anecdotes here and have an excellent weekend!
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May 30th, 2008 at 3:27 am
From a Surrey realtor’s mail-out to “valued clients” :
BUYERS MARKET: Means there are too many homes for sale and not enough buyers.
SELL FIRST: Why?
*It is nice to know what kind of money you can spend on your next home.
*Eliminate the possibility of losing the home you have “purchased”.
*Eliminate some of the stress in dealing with the competition.
——–
What’s with that second bullet point? It seems like the realtor is hinting that many potential sellers are at risk of foreclosure. WOW!!!! True, but WOW!!!
And why is “purchased” in quotes? Who does she think purchased the home? The lender, or the lenders investors?
The realtor also goes on about how you want to buy first in a sellers market (in the same format:
SELLERS MARKET: When there is and a shortage of homes and an abundance of buyers.
BUY FIRST: Why?
*Gives you time to shop and find what you want
*Selling your home, in this kind of market, will be “easy” compared to finding your new property.
———
First of all, she needs a proof reader. Also, both points are confusing.
Very odd mixed messages. No, I’m not a valued client of that realtor, thank goodness.
May 30th, 2008 at 4:13 am
What I’m seeing out there? It’s getting ridiculous and I don’t see anything propping up purchase as well as rental prices other than psychology and anticipation. Amateurs first time home renters on roids is what i’m witnessing. Ads such as “$1900 for a studio in yaletown” is making it tough to locate a reasonable home..
http://vancouver.en.craigslist.....96834.html
in addition, check out msn.ca:
guess who came in 1st?
http://finance.sympatico.msn.c.....-home.aspx
May 30th, 2008 at 5:57 am
What real investors pay for rental income streams in a tight market:
On Vancouver’s east side, for instance, Goodman estimated an average per-unit price of $149,776 so far in 2008 compared with $127,281 during all of last year. In Burnaby, Metro Vancouver’s hottest market in 2007, Goodman added, the average per-unit price is $135,368 so far this year compared with $125,496 during all of 2007.
Sander added that the Lower Mainland extremely low apartment vacancy rates and the rising gap between the cost of home ownership and the cost to rent help support current prices.
http://tinyurl.com/4eolne
May 30th, 2008 at 6:25 am
I’ve been following the West End housing market in detail for a month, and in that time I’ve seen some exciting price decreases.
There’s one development (The Barclay) where the developer booted out renters and redeveloped the low-rise wood frame apartment building. I was in there checking out the work in the non-show suites, and was impressed to see a thin vineer of concrete on top of plywood for flooring. I’m not a engineer, but I don’t think that would make it any quieter for the tennant below!
Anyhow, they had two bedroom walk-ups for $559K for the longest time ($680/sqft). I guess they needed more money to finish the project because yesterday I noticed they went UP in price when all the other properties that haven’t sold in that dollar/sqft range have been LOWERING their prices! Now these places (MLS# V680049, V680061, V680074) are going for $595K ($723/sqft). A few of the smaller ones (MLS# V680045, V680067) they were selling for $552K and are now selling for $595K ($731/sqft).
They must be students of the Rennie School of Marketing, if it doesn’t sell, jack up the price!!
The average price per square foot in the west end (for two bedroom places) has been drifting upwards. At the start of May, it was 595/sqft, and now it’s 599/sqft. However, many places are dropping their prices, some are silly reductions (MLS# V701466) that dropped from $497,000 to $492,000. Others are whoppers (but still over priced!): MLS #V694094 dropped from $499,900, to $429,000! Still hasn’t moved, despite being below the average price per sqft in the west end.
I’ll be interesting to see how some of these places play out over the summer months!
May 30th, 2008 at 6:40 am
Interesting stat from Teds link:
Adamache said that the cost of home ownership has risen two-to-three-times higher than the cost of renting, which pushes up demand for rental housing, although in recent years builders have only put up about 500 units per year of purpose-built rental housing. She added that investor-owned condominiums have provided the bulk of new rental stock.
Across Metro Vancouver, 22 per cent of new condos are turned over as rentals, Adamache said. In downtown Vancouver, that number is closer to 45 per cent.
Interesting because official vacancy stats are based only on large scale rental operation – I believe the cut off is something like 3 units to be included in that count. Any owner renting out 1 or 2 condos as ‘investments’ is not include in the vacancy stats.
It seems like a bunch of the new condo stock is being turned into rentals, but not necessarily included in the official vacancy stats. Doesn’t this mean vacancy rates could rise dramatically, but not be reflected in the stats? I personally work with 3 people who own an extra ‘investment’ condo they rent out at a loss that would not be included in vacancy stats if they were vacant.
May 30th, 2008 at 6:44 am
On Vancouver’s east side, for instance, Goodman estimated an average per-unit price of $149,776 so far in 2008 compared with $127,281 during all of last year.
There you have it. That’s what apartments are really worth. The difference between these prices and condo prices is the fool premium.
May 30th, 2008 at 6:53 am
the future of vancouver’s homeless if re prices skyrocket forever
May 30th, 2008 at 6:55 am
Mold city if you’re right then I think this could get really interesting. How many basement suites have been made in this town? Add in all the condos and you’ve got some serious unaccounted for supply out there.
May 30th, 2008 at 7:07 am
Re-west end.
Last week I saw an ad in the West Ender where a unit had dropped the price $120,000 at least a 20% reduction, the neighbors must be pleased.
As far as the rental market goes the Coast Hotel may be turned into rental units.
Most of the new retail space at the bottom of Davie still is for lease after months and months sitting empty well except a Tim Hortons is going in one spot.
As far as “The Barclay” looks like it should be a North Van housing co-op in the 70s, they just put a little bit of blush on a pig and are trying to sell it as a princess.
May 30th, 2008 at 7:39 am
the “R” word…..
http://tinyurl.com/49ynp6
Canada’s economy contracted in the first quarter of the year…..raising the spectre of a recession in Canada even before one in the US sets in.
May 30th, 2008 at 7:47 am
Mold City,
Are you sure about the way rental stats are calculated? I thought that had been discussed before and it was determined that sauder’s methodology included a cross section of the market.
If it is only those larger rental buildings, the stats are useless.
May 30th, 2008 at 8:01 am
Patiently
“And why is “purchased” in quotes? Who does she think purchased the home? The lender, or the lenders investors?”
I think this is in reference to the second home. If you make a deal on a place without selling yours first you may have to renege so the house wasn’t really purchased, thus the quotes. I actually find it quite refreshing that an RE agent would be so forthcoming with this kind of information.
May 30th, 2008 at 8:36 am
Th majority of 888 Hamilton is rental suites. A lot of furnished corporate apartments too.
May 30th, 2008 at 8:41 am
Warren, I’m not sure about Sauder, but the article refered to CMHC stats. This is from their methodology page:
The survey is conducted on a sample basis in all urban areas with populations of 10,000 and more. The survey targets only privately initiated structures with at least three rental units, which have been on the market for at least three months. The survey collects market rent, available and vacant unit data for all sampled structures. Most RMS data contained in this publication refer to privately initiated apartment structures.
However, I think they have recently started to track individual units. Don’t you have a condo you rent out downtown? Have you or your tenant ever been contacted for a rental survey by CMHC?
May 30th, 2008 at 9:30 am
Drachen, I see what you mean. The poor wording and basic writing errors on that mail-out were confusing. But if its a Buyers market, you can probably buy a new home with the contingency that you sell your old home. Right?
May 30th, 2008 at 9:43 am
Then again I guess the seller of the new home can just back out. I guess she is referring to the emotional side. Not the rational side which would be that there are lots of other homes out there to buy instead. I would never fall in love with real estate.
May 30th, 2008 at 9:48 am
From the Sun article linked by Ted:
“Much like real estate generally, the market for apartment blocks cooled in the first quarter of this year. But with Metro vacancy rates hovering below one per cent, investors still view apartments as a good investment.
2008 Transactions: 24
Total units: 902
Dollar value: $99.9 million
2007 Transactions: 54
Total units: 1,950
Dollar value: $220.3 million”
How the f&%$ do I infer from this that investors view apartments as a good investment? Just because a place is 99.3% rented doesn’t mean it’s a good investment. Well done again, Vancouver Sun!
May 30th, 2008 at 9:55 am
PW – I think the meaning is that you can put a subject on your offer based on the sale of your place, but if you can’t sell the home you live in, or find that its worth a lot less than you originally thought (due to a falling market) then you would ‘lose’ the purchase of the new house because you wouldn’t be able to complete the deal.
Remember many markets are currently seeing multi-thousand dollar drops in value each month. Think of how many places have been for sale for more than three months, even in the supposedly hot market of Vancouver. If last months condo price decline continues its going to get sticky for sellers with all that competition.
If you sell your house first then you know exactly how much you’ve got to put into the next place.
As far as the emotional angle goes, isn’t that the only thing left to sell at these price levels? If you didn’t ‘love’ the place why would you pay these stupid prices?
May 30th, 2008 at 10:02 am
How the f&%$ do I infer from this that investors view apartments as a good investment?\
If they didn’t think apartments were a good investment they wouldn’t be buying.
Rather self-evident really.
May 30th, 2008 at 10:03 am
Sauder’s vacancy rates are based of CANSIM data. CANSIM, in turn, calculates vacancy rates from CMHC which in this particular release is based on “apartment structures of six units and over, privately initiated in metropolitan areas”.
estat.statcan.ca/MIS/Directory/Estat_Table_Directory.pdf
In other words, the vacancy figures cannot be taken at face value.
May 30th, 2008 at 10:05 am
As before, here’s Paul Boenisch’s graph of listings according to REBGV, with an extrapolation of where I expect the data point to be tomorrow. You can see some grid pixels there, ‘cuz I was counting pixels for accuracy. Since each vertical pixel represents 71 listings, I’m pretty sure that unless something radical happens today and tomorrow, this graph should be within about 1 pixel of the actual result. (I took a SWAG of about 100 net new listings for the 30th, and then rounded up)
http://www.flickr.com/photos/umdesch4/2536173681/
May 30th, 2008 at 10:09 am
If they didn’t think apartments were a good investment they wouldn’t be buying.
At more than a 50% drop in transactions, number of units AND dollar value since last year it looks like many of them aren’t buying.
May 30th, 2008 at 10:11 am
Blue Skies – you must be mistaken about a GDP contraction in Canada. Canada is different, how could Canada have a contraction when the US still hasn’t even had one yet. Imagine if it does (actually I think it has but they’re fudging the numbers in the US)
Anyway, even if all of Canada and even the Rest of BC slows down, that won’t touch Vancouver, which is the most different of the differents.
May 30th, 2008 at 10:19 am
“and was impressed to see a thin vineer of concrete on top of plywood for flooring. I’m not a engineer, but I don’t think that would make it any quieter for the tennant below!”
When I worked in construction, a long time ago, I think this was pretty much standard practice to pour a thin layer of concrete on the floors above ground. My guess is this is more of a structural issue. For noise, they would put up 2 3/4 inch sheets of gyproc on the rooves and combining walls with a dampener between the sheets. The dampener was a thin piece of aluminum folded over to create space between the sheets.
May 30th, 2008 at 10:20 am
“As far as the emotional angle goes, isn’t that the only thing left to sell at these price levels? If you didn’t ‘love’ the place why would you pay these stupid prices?”
Yep, a realtor would never suggest it, but the most sensible thing to do in an early buyers market is sell, rent for a while, and then maybe buy when blood has flown through the streets and gone down the drains.
umdesch4,
That graph is on viagra. Lots of happy bears out there.
May 30th, 2008 at 10:38 am
CIBC Deathwatch: $6.7 Billion in losses.
http://www.financialpost.com/story.html?id=550881
My former employer. Couldn’t happen to a nicer bank.
May 30th, 2008 at 10:44 am
A nice graph posted at:
http://www.economist.com/daily.....p;fsrc=nwl
or
http://tiny.cc/clickhere976
America’s house prices are falling even faster than during the Great Depression
May 30th, 2008 at 11:24 am
Patiently
“But if its a Buyers market, you can probably buy a new home with the contingency that you sell your old home. Right?”
Maybe, but there’s been a major shift in the psychology of these things in the past 5 years or so. I think most Vancouverites have forgotten that this kind of stipulation used to be a standard part of home buying. There’s still people who buy without even getting an inspection done (just remember the people with the bats from last year!). I think a lot of the newer RE agents don’t even know how to add that sort of thing into a contract, they’re used to a take it or leave it market.
May 30th, 2008 at 11:27 am
Anonymous
Actually I think it’s a terrible graph because it doesn’t seem to be adjusted for inflation.
May 30th, 2008 at 11:39 am
umdesch4, nice update. That chart looked crazy last month, this month it’s insane.
Paul said he’ll have a new post tonight covering sales and listings on his blog.
May 30th, 2008 at 12:06 pm
Mold City,
I have not been contacted, but strata laws require me to file a “form K” with my property management company. Surely stats could be collected from property management companies and correlated with rents in the newspaper. But hey, who am I to judge, I just want realistic stats.
Even getting some information from Prompton or other companies who handle individual rentals would help.
May 30th, 2008 at 12:07 pm
Nice update on Paul’s graph. Lets see that make the front page of the Sun.
May 30th, 2008 at 12:10 pm
RE West End:
I walk past the Barclay almost every day to and from work. The hideous brown colour makes it look like a giant dog turd. The “50% sold!” sign has been sitting there for as long as I can remember. You couldn’t pay me to live in that building.
Also,
Here’s an interesting vid about Alt-A loans in the States. There are 50% more of them than subprime, 100% greater in value, and are even more screwed up. Lots of good info on just how much money is going to be lost on these. Subprime is the tip of the iceberg.
Mr. Mortgage on Alt-A Crisis
May 30th, 2008 at 12:53 pm
?”If they didn’t think apartments were a good investment they wouldn’t be buying. Rather self-evident really.”
That’s not what the article implied. They said that vacancy rates were low therefore rental apartment was a good investment. I don’t see how that is self-evident.
May 30th, 2008 at 1:14 pm
Hey guys I will be updating my own graph this evening. No need to edit my charts and beat me to the punch.
Thanks
May 30th, 2008 at 1:37 pm
Here’s some more journalistic gold attempting to dispell cause for concern over the recent doubling of the foreclosure rate in the Lower Mainland.
Kinch is a frequent advertiser on 1130.
May 30th, 2008 at 1:47 pm
Why can’t journalists just report numbers? Do they have to add poorly researched/biased opinions too?
May 30th, 2008 at 2:11 pm
I should add:
I’m wondering if the editor/publisher said – “hey, go write a fluff piece supporting Kinch” to the reporter (sorta like a conspiracy to keep the property market / advertising up) or if the reporter got the numbers and thought… hm, i should boost the word count… i think i’ll call Kinch.
May 30th, 2008 at 2:11 pm
That article reads like a press release. It cites only one source, a mortgage “expert”. I’m guessing that means someone whose livelihood relies on selling mortgages.
I love how it’s different here because this jump in the foreclosure rate is a result of stated income, otherwise known as liar loans. Because they didn’t have those in the US.
May 30th, 2008 at 2:19 pm
arbitrage, because then the masses would need to think for themselves. If it’s on paper it must be true! 8% price increases in 2009, they’re coming – the banks and real estate agents said so!
The boom will NOT bust until the bust happens. Canada will NOT go into recession until it’s in recession.
May 30th, 2008 at 2:21 pm
The person who tells the reporters what news to cover is called an assignment editor.
http://en.wikipedia.org/wiki/Assignment_editor
And…if you don’t want to do what they ask, there will be consequences to pay.
May 30th, 2008 at 3:16 pm
Sorry Paul, I’ll stop doing that…I just was in the rare position of having some time to kill at work this morning, and being in the middle of house-hunting-hell right now, I’m obsessively looking at your numbers and charts every day.
May 30th, 2008 at 3:20 pm
From that news1130 story-
While the number may have some people panicking, Kinch says our markets are still strong and people are still gainfully employed in Vancouver and the Lower Mainland.
Uh. Maybe not panicking, but isn’t the point that we SHOULD be concerned about this doubling of foreclosures when the economy is strong? We have a notoriously up and down economy here and there are signs of a global slow down. What happens when the markets aren’t strong?
May 30th, 2008 at 3:23 pm
“Kinch says the biggest change in the mortgage market which may be fueling foreclosures is ‘stated income.’”
Peter, you’re not suggesting we have “liar loans” are you? I don’t believe you.
May 30th, 2008 at 3:25 pm
hey, regarding that foreclosure stuff.
I just let a guy in a suit&tie in our building because he was posting a foreclosure note on a person’s apt door.
i know we aren’t suppose to let people in the building, but hey I’m bear and I’m happy to see the foreclosure man in Vancouver!
He was mentioning in the elevator that I should be happy to see him, because this person probably hasn’t been paying their strata fees either, and now they’ll get her out. He was saying that strata has first title before the 1st mortgage. I didn’t know that.
May 30th, 2008 at 3:30 pm
Why can’t journalists just report numbers? Do they have to add poorly researched/biased opinions too?
No one would read a paper that just printed the numbers, people want to know what they mean without doing their own analysis.
Look at it from the reporters perspective: you can spend a bunch of time doing research and writing up an article, or you can take the press release, move a few words around and then have the afternoon to go outside and enjoy the fine spring weather or do ‘research’ for a story on internet porn.
You will get paid the same either way, but if you did the analysis yourself you may be held accountable for it. If an expert provides you with the analysis, well hey, they ought to know right?
May 30th, 2008 at 3:56 pm
hah – yeah, my post was more of an unreasoned rant than anything.
Going completely off topic – the current model we have for newspapers/tv news doesnt seem to be working very well – as you say Lager (sorta i think) – the financial connection between the reader and reporter is too long. It’s like playing telephone.
The money seems to flow like this:
reader-advertiser-news company-reporter
Each extra layer messes with things.
Are there any fee for news and analysis companies? I think that’s what the bloomberg terminals are/were like?
More ranting: whytf is the weather so prominent on tv news stations?? I guess it’s for people without internet connections.
May 30th, 2008 at 5:14 pm
Media’s motto: “Don’t tick off your advertisers.”
Bottomline …. #1 revenue stream is from advertising. Revenue from other sources is minimal in comparison.
May 30th, 2008 at 5:35 pm
Let me explain how this works. The assignment editor assigns the news story, the reporter can pitch a story idea to the assignment editor, but the assignment editor has the final say what news story the reporter reports, what they want covered in the story, etc.
May 30th, 2008 at 5:43 pm
…which is why we are all here.
Eventually, the majority of our children will be cognizant of the fact that any newspaper that exists solely for paid advertising will have an objective different than one that is stated.
We’ll celebrate ‘global’ blogs like Calculated Risk, The Big Picture and naked capitalism and we’ll have our local blogs like the Popes.
The times are a changin’, although not fast enough in my opinion.
May 30th, 2008 at 5:44 pm
…and further to my post above, a news 1130-like station that JUST reports the facts would be useful for a society that operated like the above.
May 30th, 2008 at 5:53 pm
I am continuing the discussion from the last thread as to how much a square foot units will sell for after the correction. I stated between $100-$200/sqft. Some believe $300-$400′s. I assumed we were taking about downtown/yaletown condos. I was wondering where do most people think condo’s in surrey will settle at. Of Course i think in the short term prices may shoot below this, but I personally wouldn’t pay more than $80/sqft for a condo in surrey. Wondering what most think of this.
May 30th, 2008 at 6:16 pm
They said that vacancy rates were low therefore rental apartment was a good investment.
No, they said “But with Metro vacancy rates hovering below one per cent, investors still view apartments as a good investment.”
That’s a tautology really. If people are buying, it’s because they think apartments are a good investment.
May 30th, 2008 at 6:41 pm
“We’ll celebrate ‘global’ blogs like Calculated Risk, The Big Picture and naked capitalism and we’ll have our local blogs like the Popes.”
More likely blogging will become profitable and therefore corrupted by corporate money.
May 30th, 2008 at 7:08 pm
More likely blogging will become profitable and therefore corrupted by corporate money.
No doubt, money will always try to work its way in, and it will be cyclical like everything else, but I am confident that the trend over time will have more of the collective intelligence of society aware that whenever anyone proffer’s an opinion the first question that will come to mind is, “are they trying to make money off of this”.
And yes, that was one hell of a run-on.
May 30th, 2008 at 9:33 pm
tn: the strength of the surrey condo market has suprised me the last couple of years, but no doubt a lot of supply is in the works and in the past demand can be finicky in surrey. the surrey condo market was in the dumps from about 96-2004. it used to be challenging to get decent tenants in surrey, the demographics may have changed now though. i used to own a couple condos in surrey but sold them in 2003. despite good cash flow there were tenancy issues and strata counsel and property management issues ongoing. the surrey condo market is more interesting than most and will continue to be so. indeed any weakness in the market may be magnified in the surrey condo market.
May 30th, 2008 at 9:44 pm
More likely blogging will become profitable and therefore corrupted by corporate money.
You don’t have to wait for that, for the right sum I’ll start up a blog and advocate for most any argument you want, I have bills to pay.
May 30th, 2008 at 10:00 pm
“More likely blogging will become profitable and therefore corrupted by corporate money.”
I think profitability is in the works for Calculated Risk, but I doubt they could be corrupted.
May 31st, 2008 at 5:47 am
Blogging like any public discussion forum can be made into a money machine. Just look at Intrade, an online foreign gambling site which has a bet going on the probability of a US recession. It’s currently sitting at 35%, where just a few months ago, it was at about 70%. This involves real money from a bunch of European betters.
Wisdom Of The Crowds published a while back and written by James Suroweicki documented that the power of individual insights combined together can produce a far more reliable prediction than a small number of experts in the field. Basically, I like to monitor this blog and Intrade because it gives me a clear idea of what might happen in the future, whether the US is going to have a severe recession (this looks like not to be) or are we going to follow a US style housing recession (this looks like it to be) as from the consensus of the bloggers here. Remember, a collective pool of individuals who may possess a little bit of information helps form
a reliable conclusion which can not be denied.
I’m not surprised that blogs like this will become commercialized only to pay for the operation and maintenance of the site and manpower. It is clearly undeniable that the comments are data that can be used to predict future events, why shouldn’t this information be mined and sold to a curious audience like myself?
May 31st, 2008 at 6:35 am
“Remember, a collective pool of individuals who may possess a little bit of information helps form
a reliable conclusion which can not be denied.”
Isn’t there a danger of “group think”?
May 31st, 2008 at 8:01 am
If you meant some bloggers here may have lemmings syndrome, who tend follow the general consensus, then I don’t think the answer is a yes. Simply because, you will only visit this website with specific intentions. If your intention is to discuss the housing bubble, you will come here. If your intention is to discredit the housing bubble, you will come here too. If, your intention is like myself who likes to see the general consensus of the housing bubble and where the future will trend, then you will come here too. If your intention is to discuss American Idol, you will not likely come here. The blog site was formed with a specific conclusion in mind. The key here is to determine what is the general consensus for this conclusion and of course, it’s looking ever so grim.
Focus groups are commonly used by corporations, American Idol (or any idol series), politics and even in the military.
May 31st, 2008 at 8:15 am
Disappointing results on Paul’s NV numbers site. The second half of May definitely did not live up to the promise of the first half. The line continues upwards but only at approximately the same angle as in April. Still at this rate the market can’t hold out forever.
It was such a clean exponential curve right up to mid May too…
I suppose this is wishful thinking but is there any chance that MLS or local agents are engaging in behaviour that would artificially lower the numbers? Some time back it was put forth that some agents were listing multiple homes under one listing.
May 31st, 2008 at 8:27 am
Drachen,
As much as I’d like to buy tomorrow at a reasonable price, I don’t think a catastrophic collapse is really something I’d like to see.
From Paul’s graphs of the previous 3 years, you can clearly see that something significant is changing in 2008. That should be plenty of reason for prices to soften.
May 31st, 2008 at 9:22 am
Warren “I don’t think a catastrophic collapse is really something I’d like to see.” I don’t want to see this either but I kinda think it is inevitable. We have a self feeding economy the majority of which is based on real estate, when construction workers go (probably a 100,000 plus) we will see people who have no link directly to construction laid off permanently. That will include (suprise suprise) even totally secure government civil service, retail staff, and professionals such as engineers and architects. It pisses me off that a whole communities future goes down the drain for 10 years to repay the profits made by flippers who contribute nothing to society.
May 31st, 2008 at 9:40 am
I don’t think a catastrophic collapse is really something I’d like to see.
As opposed to what? How many more years of people destroying their financial futures on a misguided decision to buy, educated young people leaving because they see no future here, and real businesses leaving the province because they can’t get competent staff, while the RE parasites make even more money?
The 1981-84 collapse was great for the BC economy in the long run. It made the province attractive for educated and talented people and had a lot to do with the growth in high tech and film making among other industries.
Bring it on.
May 31st, 2008 at 10:50 am
Patrioz! I agree but what pisses me off is why we always have to follow this stupid boom bust route. The best thing NOW for the Vancouver economy IS a collapse. Trouble is as you say a lot of young nieve people will be hurt and some of the more professional flipper leeches will get of scot free. I’d love to see those ones face a 110% retroactive capital gains tax for proceeding five years!
May 31st, 2008 at 11:28 am
I feel even more sorry for the old naive people. The youngsters have a lot of time to fix their mistakes. For others, this is it, welcome to a frugal retirement.
May 31st, 2008 at 12:13 pm
Regardless of what’s really going on the buzz about real estate throughout the city seems to have quieted right down.
The display centres downtown are totally dead (go check for yourself I did) . I don’t hear anyone talking about real estate in the elevators or at the Cafes where the action is!
No one’s asked me about real estate at parties the last few weeks….
What’s next?
May 31st, 2008 at 12:15 pm
Warren
“I don’t think a catastrophic collapse is really something I’d like to see.”
Remember Japan. 10 years of depreciating home prices and a gradual bleed of the economy. Better to rip the band-aid off quickly and get it over with I say. I think in the middle to long term a catastrophic collapse is really the best result an educated observer could hope for.
My prediction: Real house prices will be 1/3 of what they are today by the end of 2011.
May 31st, 2008 at 12:15 pm
We’ll celebrate ‘global’ blogs like Calculated Risk, The Big Picture and naked capitalism and we’ll have our local blogs like the Popes.
TBP is advertiser-supported – just like the Vancouver Sun, the NYT, the Globe & Mail, etc etc etc. The more fuel writers like BR and CR can add to the volatility fire, the better their hit rate, the more money they make.
They’re not in this for “truth”, bud, these are full-time jobs for them.
And let’s not forget the most well-funded real estate “bear” of all – Mr. Shiller – who gets a lovely cut of all the futures trades deriving from his nifty little index. It is 100% in his interest to – shall we say – “err” on the side of increasing expectations of volatility.
Ain’t no virgins in this cathouse…
May 31st, 2008 at 12:21 pm
>>>>>>>>>>>>>>>>>>>>>>>>WARINING:>>>>>>>>>>>>>>>>>>>>>>>>>>>
THIS IS NOT FOR MOTIVATIOAL REAL ESTATE SALES SEMINARS
I have just concluded a comprehensive in depth study, using the latest computing equipment, with the assistance of greatest minds on earth. My findings are:
There is a definite correlation between the level of intelligence and the percentage of income one pays for shelter.
The study included research spanning back many hundreds of years, and millions of people, and so based on this research I can claim with great confidence, that in Vancouver, Kelowna, and Victoria, there is a huge representation of low intelligence and paying a huge amount of their income for shelter.
As for other characteristics these fools might have in common, I will drill into the numbers a little deeper and report back to the forum.
Yes some realtor’s feelings were hurt during the research.
May 31st, 2008 at 1:40 pm
Anonymous
A couple of problems.
1) The blogs which you’re referring to are, “mom and pop”, businesses, not multinational corporations raking in millions or billions of dollars a year. As such they are managed by people who are directly in touch with the situation and not executives who push the bottom line at all costs.
2) Shiller is only successful in the short term if he is wrong. It’s in his greater interest to be right and therefore a long term success (see Irrational Exuberance 1st ed.).
3) Unlike many of the contributors here you seem to have a real stake in things, otherwise why would you “err” on the side of increasing expectations of inaccuracy amongst proponents of the bear argument.
4) I think an intelligent person can read Shiller and the relevant blogs and the local papers and come to the conclusion that one is far more reliable than the other. The fact that Shiller et al. base their arguments on fact, history and economic principles rather than wishful thinking might have something to do with it…
May 31st, 2008 at 4:01 pm
Shiller is only successful in the short term if he is wrong,
Shiller is responsible for helping bring to life a brand new category of financial derivatives. “Wrong” for Shiller is not about price direction – it’s about price volatility. The more concern he can pump up regarding real estate prices – in EITHER direction – the more need their is for his derivatives. You do understand the Shiller indices have proprietary (ie, not disclosed) non-deterministic (ie, a person – not math – decides) inputs to the mode….right?
I like the index and have followed Shiller’s work for over two decades. He’s a sharp guy with, from time to time, some real interesting things to say.
But that doesn’t make him a saint or any less human than the rest of us…
May 31st, 2008 at 6:59 pm
Has anyone noticed how much more The Vancouver Sun weighs these days?
Must be all that ink for the RE advertisements.
May 31st, 2008 at 7:27 pm
Has anyone noticed how much more The Vancouver Sun weighs these days?
also noticed there are a lot of cars for sale, and every one has an image attached…sign of the times?
June 1st, 2008 at 6:10 am
Tons of RVs and SUV’s for sale now. Desperate people call for desperate measures.
June 1st, 2008 at 7:42 am
I don’t think a catastrophic collapse is really something I’d like to see.
Why not? It is something I look forward to. Are you being altruistic or motivated by self-interest?
June 1st, 2008 at 9:26 am
It looks like we’re entering the cycle when there’s some decent vulturing to be had, not in real estate yet, but in other stuff. Here’s a craigslist search I do occasionally:
leaving must sell
I was doing a search for ‘moving must sell’ but then I figured I’d narrow it down to people who are ‘leaving’ not just moving within the area.
I was suprised to see the doubling of foreclosures in the lower mainland, seems the market really has hit the affordability wall and is doing the turnaround.
June 1st, 2008 at 10:33 am
Quite right, you don’t get foreclosures in a rising market because the owner has equity and can just sell and get cash.
June 1st, 2008 at 10:49 am
NY Times article which contains a template for low balling sellers:
http://www.nytimes.com/2008/05.....mp;ei=5087
June 1st, 2008 at 11:03 am
Typically during manias, first time buyers get priced out, and the only market players left are specuvestors who end up selling to each other, until the market collapses on its own weight.
However, during this bubble, when the affordability wall was hit, along came more creative financing aided by CMHC (whose top brass should be charged with crimes against the economy), and any remaining future demand was soaked up.
When prices fall, who will be left to buy?
If there is anyone left to buy? Who will be successful at selling to them, the big marketing machine, or the anxiety ridden, specuvestors, who are stuck with negative equity, and negative cash flow?
June 1st, 2008 at 11:17 am
the buyers will keep their heads down. too scared to get into the market despite the pressure from RE types….
“it’s a good time to buy…. please!”
June 1st, 2008 at 11:21 am
Seems to be some distressed leaky condo sellers in New West. One building called Tiffany Shores has apparently just been nailed by a huge assessment.
Seeing lots of “For Sale” signs in car windows these days.
June 1st, 2008 at 11:38 am
Sounds like the name of a porn star to me.
June 1st, 2008 at 1:55 pm
Blueskies
“the buyers will keep their heads down. too scared to get into the market despite the pressure from RE types…”
Why do I have the feeling that there will soon be two types of people haunting the street corners of Vancouver.
The Homeless. “Can you spare a few dollars?”
And the Over-homed. “Buy a Condo for 350k?”
Both looking equally haggard and underfed.
June 1st, 2008 at 6:26 pm
Thank goodness its different here, because according to Bloomberg another British lender has their back against the wall…maybe its time for another nationalization?
http://www.bloomberg.com/apps/.....refer=home
June 1st, 2008 at 7:21 pm
Hello Satv Krissh Krash, this story is just for you.
Btw, I noticed you seem to disappear from Blogville exactly the same times as Rob.
Biggest fall in UK house prices ever recorded:
Why I find this interesting is that UK has a land shortage, at least that’s what the pimps have claimed, has had no major interest rate hikes, and up to now no real economic shocks, unemployment is still very low, yet the bubble is bursting.
http://www.onlykent.com/200805.....-recorded/
June 1st, 2008 at 9:09 pm
Why I find this interesting is that UK has … yet the bubble is bursting.
They don’t have the Olympics in 2010.
June 1st, 2008 at 9:11 pm
My prediction: Real house prices will be 1/3 of what they are today by the end of 2011.
Are you serious?
June 1st, 2008 at 10:52 pm
Why I find this interesting is that UK has … yet the bubble is bursting.
They don’t have the Olympics in 2010.
Was that a joke? They have the olympics in 2012, FYI.
June 1st, 2008 at 10:53 pm
former Vancouverite has no clue
June 1st, 2008 at 10:56 pm
Why I find this interesting is that UK has … yet the bubble is bursting.
They don’t have the Olympics in 2010.
Nope. 2012 isn’t 2010.
June 1st, 2008 at 11:16 pm
It’s funny you guys just hope all day long for the price of real estate price in Vancouver to drop or bubble. Com on, face it. It’s stupid, not going to happen. It’s almost waste of time hoping… I know people are going to argue. But that’s not going to help.
June 1st, 2008 at 11:20 pm
the credit crunch has hit the u.k. quite hard, more similar to u.s. than here. re-assessment of mortgage risk has had a significant impact on r.e. demand. r.e. has tripled in u.k. as opposed to doubling here. believe it or not, the fundamentals here are stronger than the u.k. currently.
olympics-never have a positive or negative effect on a real estate market. non factor.
1/3 by 2011: would need to see the macroeconomic carnage trigger first before that would be a legitimate prediction. infusing personal pyschological issues into a prediction wastes the time of anyone reading this blog.
June 2nd, 2008 at 6:24 am
believe it or not, the fundamentals here are stronger than the u.k. currently.
Wrongo. Vancouver and Kelowna have a higher price/income multiple than almost every market in the UK, including London.
http://www.fcpp.org/images/pub.....008600.jpg
June 2nd, 2008 at 6:54 am
“Was that a joke? They have the olympics in 2012, FYI.”
Prices are up in LONDON=OLYMPICS12
June 2nd, 2008 at 7:26 am
It’s funny you guys just hope all day long for the price of real estate price in Vancouver to drop or bubble.
Actually you’re the one that’s funny jun. No one is hoping for the price of RE to crash, we’re just waiting for it to happen just like everywhere else in the world. jun you need to spin harder, find someone with more brains than you to help you post here, may I suggest SATV?
June 2nd, 2008 at 8:32 am
Former Vancouverite
“My prediction: Real house prices will be 1/3 of what they are today by the end of 2011.
Are you serious?”
Of course I’m serious. If you knew anything about Real Estate you wouldn’t be surprised. There are 3 ways to measure the “healthy market” cost of real estate.
1) Housing costs 3-4x annual income (some people will go up to 5). Median Household income is 62k. Median home price is 558k. So prices are 2.25-3x what they should be.
2) Rent to cost ratio should be between 100 and 150 in a healthy market. In 2007 it was 326 (and rents are likely to come down in a crash here).
3) Look at a graph (preferably one adjusted to inflation) map the curve ignoring any big features. Interpolate the curve into any current big features and that will be approximately where prices should sit. In this case we appear to have left the curve in the late ’80s. Median price in 1987 for detached was 150k. Adjusted for inflation it’s 250k and in the long term the after inflation adjustment is about 10-15% every 20 years so it should be around 287k. In reality it’s over 900k.
So, what’s your method for determining proper real estate pricing that tells you otherwise? Or are you just another one of those people who claims that their “feelings” are more valuable than scientific measurements.
June 2nd, 2008 at 8:42 am
Jun
“Com on, face it. It’s stupid, not going to happen.”
Yeah. Well that’s such a great contribution to the discussion. Would you actually care to provide a REASON why you might be right and we might be wrong or are you going to just let your arguments stand at the intellectual level of a four year old?
June 2nd, 2008 at 9:01 am
In Stockton California houses that sold for $500k two years ago sell today for $200k. Of course Stockton is the foreclosure capital of the US right now, with 3 out of 4 house either in or on the path to foreclosure:
http://www.msnbc.msn.com/id/24883012/
This shows the danger of using up your market boosting tricks during a boom and absorbing future demand leaving little or nothing left to help cushion the bust. Nothing yet has helped stop the carnage in many US markets, not lower interest rates and not government bailouts. In Vancouver we’ve seen the advent of zero down 40 year mortgages and interest only loans, what will be left to keep our market from crashing hard?
June 2nd, 2008 at 9:18 am
RJ
“what will be left to keep our market from crashing hard?”
Nothing, and that is a good thing. Hard crashes are over in a few years, soft crashes just draw out the pain. Let’s have a clean break, 25% bankruptcy rate for Vancouverites and get on with our business once real estate rates have returned to normal. Maybe Vancouver can even start to attract businesses to locate here again and start working on building a real economy rather than one that’s based on a bubble.
June 2nd, 2008 at 10:42 am
So, what’s your method for determining proper real estate pricing that tells you otherwise? Or are you just another one of those people who claims that their “feelings” are more valuable than scientific measurements.
Touchy, touchy, boy. I don’t have anything to tell me otherwise. I was surprised by the magnitude of the drop you anticipated. My question “are you serious” reflected my sincere surprise and was not meant to be sarcastic.
You on the other hand, well I think you need to chill a bit and give people the benefit of the doubt before you automate your “I don’t tolerate fools gladly” phraseology. So step back, take a deep breath, or instead of giving “thumbs up” to most of your posts, I’ll just ignore you.
June 2nd, 2008 at 10:55 am
Former Vancouverite
“or instead of giving “thumbs up” to most of your posts, I’ll just ignore you.”
Oh gosh, not that. Anything but that! Your approval is absolutely critical to my sense of self worth!
And don’t boy me, kid. Especially when you’re pretending that you’re taking the high moral road.
June 2nd, 2008 at 11:55 am
what will be left to keep our market from crashing hard?
Our cafes where the action is at?
June 2nd, 2008 at 12:00 pm
Drachen Says:
2) Rent to cost ratio should be between 100 and 150 in a healthy market. In 2007 it was 326 (and rents are likely to come down in a crash here).
Drachen, I would really appreciate it if you could explain the rent to cost ratio you mentioned. Please provide an example of this 100 to 150 rent to cost ratio.
Excuse me if this seems like a silly thing to not know. I visit this blog daily to learn more and more about real estate, rent, ect…
I am trying to learn more and your insight and other posters insight have provided a wealth of information for me.
Thanks.
June 2nd, 2008 at 12:47 pm
from patriotz’s link, here is the full PDF report from Demographia.
Vancouver saw 9% increase in median price-income ratio from the report a year ago. Victoria’s saw 10.6% increase. Data was from Q3 (September 2007). In the past 6 months the US markets have eroded significantly. It is likely Vancouver is now closer to the top of the list and could soon be in the top 4 if US prices continue to fall fast. Unless Vancouver median price starts falling too.
June 2nd, 2008 at 1:20 pm
“if you could explain the rent to cost ratio you mentioned. Please provide an example of this 100 to 150 rent to cost ratio.”
The ratio compares monthly rent to price. The analogy used is to a bond that produces a return (yield) every month just like a rental property. Example: condo is $200K and rent is $1300 to produce ratio of 150. This means you get 7.8% gross annual return. After expenses this is reduced further to say 6.5% at best. This yield is reasonable as it is a few % above the risk free yield you would get from a treasury bond. In some cases the risks are higher so the ratio could go lower to 100. You need a higher yield to compensate for the risk just as you would demand a higher yield from a junk bond.
For comparison a ratio of 300 is a gross yield of 4%, and a best-case net yield around 3.2%.
Note the 100-150 ratio is for condos. For properties with a chance to subdivide, the ratio would be a bit higher.
With yields low (price to rent ratio high) in Vancouver you are relying on future price gains or rent increases to compensate for the crappy yield.
June 2nd, 2008 at 1:51 pm
Jesse
Thanks for covering that, I’m a little too involved and I sometimes forget that not everyone knows what I’m talking about
Also, an addendum to your clarification.
Condos are a depreciating asset in a normal market, this further drags down the P/E ratio.
For those who don’t believe that condos should depreciate in a normal market here’s a thought exercise:
Imagine a new condo. Now imagine a condo of the same size and general amenities but it’s 50 years old. Which one is worth more?
June 2nd, 2008 at 2:50 pm
Does anybody know how many months of inventory it should take before the bubble should statically burst? Like in Miami or San Diego or Phoenix or etc, how many months of inventory does it take before you get significant price reductions? Somes sites quote, “there are 11.2 months of supply of existing homes on the market”, however if we are only at 18,000 listings locally and we are selling about 3000 a month, shouldn’t that mean we have six months of inventory? Does that mean our bubble won’t burst yet?
June 2nd, 2008 at 3:11 pm
Mike
There are too many factors involved to try to make that sort of a calculation. The speed at which inventory increases will have an effect, the percentage of “motivated” sellers, foreclosures, employment statistics etc…
However I think one can reasonably say that if inventory continues to rise the way it has been since January we should begin to see some price movement by the end of the summer and YOY price drops by next spring.
I think nearly everyone here wants things to go faster even if it’s just their own morbid curiosity to see how it all turns out. The fact is that we’re in for a long downhill ride, if it’s a quick and decisive crash it could be over by the end of 2011 but I doubt it’s possible things could bottom out much earlier.
June 2nd, 2008 at 4:34 pm
“Imagine a new condo. Now imagine a condo of the same size and general amenities but it’s 50 years old. Which one is worth more?”
Yup, basic maintenance alone increases over time. Rent also decreases over time relative to new stock, even with decent upgrades. Maintenance up + rent down = depreciated asset.
“Does anybody know how many months of inventory it should take before the bubble should statically burst?”
The rough crossing point is around 5-6 months of inventory for at least 3 months before you can observe definite negative price movements. Vancouver is diverse enough of a market with no major supply/demand shocks that it should follow this general rule.
June 2nd, 2008 at 7:20 pm
from the “we are different here” category
http://tinyurl.com/6jvufv
the joys of commuting from a bedroom community with
expensive gas…. hello Port Moody et al
June 2nd, 2008 at 7:36 pm
from patriotz’s link, here is the full PDF report from Demographia.
As I have stated many times before, Demographia botches Vancouver numbers. The price is way too low. I checked San Francisco numbers, and the it was dead on. Vancouver is likely at the VERY TOP of the list, and has been for some time.