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Friday Free For All!

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332 Comments

It’s Friday and that means open-topic discussion time on VancouverCondo.Info. Here are a few stories I’ve noticed this week:

– Vancouver prices stagnating or dropping?
– Planners want offices downtown
– Council Passes EcoDensity™ ©harter
– Oil makes everything more expensive
– Mortgage rates going up
– Sad outlook for forestry
– Difficult days ahead for Canadian banks
– Canada urged to save for a rainy day
– Bay st. surprised about inflation?
– Still paying more than Americans
– US lenders slash prices to dump foreclosures
– Britain enters nightmare of negative equity

So what are you seeing out there? Post your news, links and thoughts here and have an excellent weekend!

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freako

Also, pick a nominal increase where you will admit you were wrong along with the associated timeline.

Sorry I cannot, because I cannot possibly predict how much longer stupid people will be given money by stupid lenders. I will admit that I am wrong when fundamentals have caught up with prices (without prices going back down). Particularly the price/rent multiple.

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freako

Pick a nominal decrease and pick a timeline. Also, pick a nominal increase where you will admit you were wrong along with the associated timeline. No I can't. Sure I have predictions related to timelines, but I would never place any certainties on them. But I am very confident that real prices will drop to those levels. And if I am right, do we need timelines? No. We have all the information needed to make a decision. An investor would be better off waiting as long as it takes as well. If you want my guess for a time line, sure. Since the collapse has already started, I am no longer taking random guesses at it like I have in the past. It is still just a guess, but I have some confidence in it. 1. We have already peaked… Read more »

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holgs

PS. I should have reviewed my grammar in that last post. Living in Sweden will do that to ones English.

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holgs

Sorry to join in the gang up. Dave, I see what you did here: I will further add that a correction of greater than 10% will only occur due to an external factor (e.g. higher interest rates > 1.5%, higher unemployment ~ + 2%, or a recession) You know that a correction will cause much greater than 1.5% higher unemployment, right? If the estimate of 1/6th of new jobs in construction is true, then what of the remaining percentage is – mortgage brokering – real estate sales – furniture sales – electritical – harley dealers I personally know a bunch of people my age (~30 years) that are in construction or real estate. Probably a good 20-30%, of my camping buddies are in to that field. And all of them own at least one home. My prediction is this, one… Read more »

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Dave

However long it takes? You can do better than that.

Pick a nominal decrease and pick a timeline. Also, pick a nominal increase where you will admit you were wrong along with the associated timeline.

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freako

For what it's worth, my prediction is real prices back to 2003 levels (however long it takes). That would be rougly a 45% drop in nominal terms if prices peaked today and fell rapidly.

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freako

Ummm no. A Ferrari is not a home.

Of course lenders don’t give out free money. Of course inflation influences the Prime Rate.

None of this affects anything that I have stated.

,/b>

No, a Ferrari is not a home, but that doesn't matter because the logic you attempt to apply is the same.

I can't afford the Ferrari today, but maybe I will with tomorrows income. Thus, as long as I borrow to buy item x, I can afford it.

So, if it breaks 15%, I will have been wrong.

I will talk to you then. Probably 12 to 18 months away, but one never knows.

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Dave

Freako, put me down for 12 to 18 months of gains. In other words, if there is a correction, then I predict values will drop from 10 to 15% (nominally). So, if it breaks 15%, I will have been wrong.

I will further add that a correction of greater than 10% will only occur due to an external factor (e.g. higher interest rates > 1.5%, higher unemployment ~ + 2%, or a recession)

As far as the upside, if prices appreciate more than 10% to 15% in the next two years, then I will have been wrong.

And what is your number on both on the upside and downside?

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Dave

Holy Macro. By that logic, I should go out and buy a freaking Ferrari on credit because I am paying back the loan with inflated dollars. Did you skim the part earlier where I poopoo’s this line of thinking? LENDERS ARE NOT IN THE BUSINESS OF GIVING AWAY MONEY. THEY TAKE INFLATION INTO ACCOUNT WHEN LENDING YOU MONEY. THINK ABOUT IT.

Ummm no. A Ferrari is not a home.

Of course lenders don't give out free money. Of course inflation influences the Prime Rate.

None of this affects anything that I have stated.

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freako

I’m not saying it can’t be done, but I think it is better to stick to the history of our own market.

Holy Macro #2. Your "think" is to reality as lipstick is to a pig. This is worse than debating global warming/religion/etc etc. Pointless. Dave, at what level of peak to trough depreciation will you concede that you were wrong in your interpretation of the situation? Can we nail you down to a number? Because that is the only way this debate will end. Would 20% be enough?

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freako

The point I made earlier was that a mortgage remains in constant dollars. All that means is that if you took out a $100k mortgage, it will not increase over time with inflation. Rather, it will drop as you pay off the principle. Holy Macro. By that logic, I should go out and buy a freaking Ferrari on credit because I am paying back the loan with inflated dollars. Did you skim the part earlier where I poopoo's this line of thinking? LENDERS ARE NOT IN THE BUSINESS OF GIVING AWAY MONEY. THEY TAKE INFLATION INTO ACCOUNT WHEN LENDING YOU MONEY. THINK ABOUT IT. The data shown by CUBC (taken from stats Canada) shows that income growth is at around 6% per year right now. I have to look at it again (and I will), but I think it refers… Read more »

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freako

In the meantime, measuring the volume of ‘flipping’ is the next best thing to use.

No, no, and no.

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Dave

Drachen -Nearly all of his historic arguments are based on the Vancouver graph where he makes extremely broad assumptions based on two data curves. I make no apologies for using Vancouver data to predict the future of the Vancouver market. Saying prices will follow other markets (e.g. Miami) presupposes the same mechanisms and demographics are in play. If you want to make parallels with another market, then you need to provide a lot more information than just saying the appreciation curves were similar. Some questions that would need to be resolved would include: 1. demographic of buyers (e.g. percent out of town); 2. level of speculation; 3. level of subprime mortgages; 4. economic fundamentals (employment / unemployment); 5. population changes; 6. available land supply (is it constrained or easy to build down the coast?); 7. affordability, etc….. I'm not saying… Read more »

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Dave

Richard – For the denser readers here (me mostly), what does the “in real dollars per year” part mean, anyway? Say i’m making $100 this year. my increase is 3% next year, so i understand i’m going to be making $103 next year. Which bits are “real” and “nominal”? sorry to be asking such a simple question, but i get lost sometimes… I do know however, that this year my increase was only 2%, next year it’s going to be 3%, and the year after it’s going to be 2%. sigh… My bad. When I wrote that I got real and nominal mixed up accidently. The point I made earlier was that a mortgage remains in constant dollars. All that means is that if you took out a $100k mortgage, it will not increase over time with inflation. Rather, it… Read more »

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Dave

Got a better speculation metric, aside from… 'everybody knows'… 'it's obvious to anybody'… ' everybody I know who bought…'?

I readily admitted previously that this metric did not capture pre-sales and assignments. I also know that a large percentage of pre-sales in the downtown condo market is quite high (depending on the development). But, these transactions are not recorded as sales anywhere and so nobody has the actual data. Do you? Didn't think so.

In the meantime, measuring the volume of 'flipping' is the next best thing to use. By this metric, speculation is low.

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Anti-Pesto

Great to see the constant attack against anyone that doesn't support the bear view. Don't recally any of Daves posts being vicious or personal. Glad to see I'm not missing much by not visiting as often. Continue on.

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jesse

"To bad Dave bought recently."

Dave's motives are irrelevant if we are debating data and logic, not "belief". It's worth everyone considering their own confirmation bias. We see what we want to see and it's hard to debate against anyone with selective blindness.

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/dev/null

Gotta love peer review, eh Dave?

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Drachen

Dave

Also, as if it wasn't obvious. The "flipping" statistic you quote to support your speculation argument is incredibly weak. In the '80s short term condo flipping was done primarily through actual purchases, now the main vehicle for short term flippers is the assignment which is not recorded in your stats. Almost everyone who buys for the purposes of speculation is holding on for longer than in the '80s and renting the property out. In other words the statistic you're quoting was created to intentionally mislead people.

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Drachen

Freako "I still presume that you are debating in good faith" He is not debating in good faith. He claims to have taken many Economics classes yet he keeps trying to drag nominal dollars into the equation. He cites dubious numbers and ignores numbers that would detract from his argument. He compares Vancouver to Seattle, Portland and New York even though their markets have gone through nothing like what ours has in the way of appreciation instead of comparing us to places like Miami which has had a very similar appreciation curve. Nearly all of his historic arguments are based on the Vancouver graph where he makes extremely broad assumptions based on two data curves. None of that is arguing in good faith and I think he knows it. His talking points are simply too close to verbatim of the… Read more »

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Brittanny Spears

To bad Dave bought recently.

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freako

Dave, the numbers you quoted were from the CUBC presentation.

Yup, I concur that Dave has leaned heaviliy on CUBC for material. He also quoted the misleading resale percentage as a proxy for speculation.

I can't speak for Pastrick's other forecasting, but on RE I think he is out to lunch. Sure us bears were premature, and his had direction right to date, but he will miss the boat very very badly the coming bust. Anybody with their eyes open can see it coming. Yet an economist that represents multiple financial institutions sees only what he wants to see.

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jesse

"If we assume income growth of 5 to 6% in nominal dollars (based on the last few years) things will be roughly 25 to 30% more affordable (assuming constant interest rates)." Dave, the numbers you quoted were from the CUBC presentation. It does not compute with what Statscan has published as wage growth from 2001 through 2006, about 1-2% annual gains on average. I don't know where CUBC gets its numbers but only people receiving continuous promotions or in cyclical industries can hope to receive 5-6% per year wage gains with 2% CPI inflation. This is borne out when you look at the negotiated union and public sector worker wage increases: about 3% per year at the very most. You will probably find that many of the people receiving 5-6% wage gains are in industries like construction and real estate.… Read more »

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patriotz

Whoever sits in the mayor's chair is irrelevant to the RE market. One need only look at the current bubble which started with a COPE mayor (Larry Campbell, now a Liberal senator), and has continued with an NPA mayor (Sullivan).

The "soft" left in Vancouver (Vision/former COPE light) is just as pro-development as the NPA. They are just supported by different contingents of the construction industry (unions versus companies).

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freako

I don’t know why we all keep discussing the nominal versus real pay issue. You mortgage stays in nominal dollars while you pay goes up in real dollars. The FACT is that pay is going up about 6% in real dollars per year. The people lending you money aren't morons. They price in expected inflation. You seem to think that some free lunch occurs when you pay a mortgage with inflated dollars. There is no such thing. You pay for expected inflation. Sometimes you get lucky in that inflation deviates from expectations in your favour, sometimes the opposite. No net freebie. So we basically agree. I will add however, that I believe there will be a permanent affordability shift because I believe real estate to now have less risk than existed in the past (yes that is controversial and yes… Read more »

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