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June 14th, 2008 at 6:37 am
Dave “You mortgage amount drops over the term you make payments… dummy. It doesn’t increase with inflation.” I have experience inflation in the 80’s first hand. The mortgage payment will go up because the interest rates will go up. I have seen and experienced where all the payment made over a five year term are wiped out due to the timing of the renewal and you owe more at mortgage renewal then you did when you started. The only way you can beat that scenario is to have a very large down payment well in excess of 25%.
June 14th, 2008 at 6:30 am
Dave “FACT… rental vacancy is at historic lows.” Dave I work full time in the condo industry. CMHC calculates rentals based on the criteria that if ONE owner has THREE rental units it is counted as rental property. If three owners each have ONE rental property it is NOT counted as a rental property. The MAJORITY of Condo rentals are of the latter type. There is a glut of Condo’s for rent if you are in the $1400 and above rental territory. So you are quoting a statistical fact not a REAL fact.
June 14th, 2008 at 4:44 am
I think that I’ve found the reason that Dave isn’t concerned about the magnitude of the impending housing collapse in Vancouver.
If you look at the slide 52 which he refers to in an earlier post (#92), you’ll notice that Cameron Muir somehow neglected to include the magnitude of the price change in the first few years of his graph of “Vancouver MLS Average Price” (page 52). The graph begins in 1980, yet the percentage change in price is not shown before 1983.
I’m sure that this is just an oversight by Cameron, and not an attempt to intentionally deceive.
Dave also state in the same post, “You mortgage amount drops over the term you make payments… dummy. It doesn’t increase with inflation.”
The amount that you owe the bank should drop over the term that you make payments, but your monthly mortgage payment can increase dramatically when interest rates rise (which usually happens if the BOC decides to fight inflation). I’ve seen interest rates over 21% in Vancouver, imagine what that would do to your monthly payment if they were to get that high again.
June 14th, 2008 at 3:34 am
Regarding that Global report, the woman says that the local real estate market is slowing cooling down. WTF? I thought is was cooling off at RE light speed, or is it just me?
June 14th, 2008 at 3:33 am
Dave is presenting his argument probably better than most here, I just don’t agree with many of his forward looking extrapolations of some fundamentals and some under estimations. Virtuous is going vicious and it’s a positive feedback loop. The global foreclosure report is one of the first real signs of this, not to mention a couple months ago, it was said half of the new jobs yoy were in construction … when that unravels it should be ugly.
June 14th, 2008 at 1:41 am
I really don’t think the majority of immigrants know that BC is “The Best Place on Earth.”
Half of all immigrants to Canada settle in Toronto. Some also settle elsewhere in Ontario, so for immigrants to Canada, Ontario is clearly “the best place on earth”.
June 14th, 2008 at 12:24 am
Well Dave, I’m still struggling with this. I think I’ m glad I didn’t buy at the 1981-ish peak because I would lose money for the next 20 years. Actually, that’s when I sold my house in Coquitlam and pocketed 40% profit after 1.5 years of ownership. But the people who bought it got screwed because their house lost 35% of its value within a year and took 20 years to come back.
Anyway, I don’t think I should buy at the current peak. But I’ve been sitting it out since 2002 (really, it’s true). So I’ve been sitting it out for 6 years, which exceeds your 18-month rule.
So tell me honestly Dave, give me your best advice. Should I buy now? Also, just so I can see what kind of thinker you are, what advice did you give your friends regarding Nortel?
June 14th, 2008 at 12:18 am
Regarding Dave and his “dont-sit-out-for-more-than-18-months” notion, when did people who bought at the 1981-ish peak break even? Wasn’t it about 20 years or more later?
June 13th, 2008 at 11:50 pm
“FACT… 35,000 people are coming to BC each year. FACT… rental vacancy is at historic lows. FACT… 35,000 housing starts per year isn’t much higher than the norm.. FACT… The GVRD will grow from about 2.2 million people today to 2.9 million people in 2020. Sounds like demand to me.”
Yeah, but can they afford to stay here?
“Although forestry is down, the BC economy is very strong and our future looks great.”
Which part of the economy is booming, exactly? Construction isn’t going to last forever. Tourism is down. Mining and resources is up, but are there any mines in Vancouver? I know there’s a great big hole in the middle of Cambie but i understand it’s for the Canada Line, not the Canada Mine. “Oh yeah! Let’s migrate to Vancouver and get a job at the world class coffee shop and enjoy the mountains and the ocean.” Oh that’s right, i forgot about the drug trade and the criminal activity.
“Alberta isn’t the first choice to live for new immigrants and Canadian’s from other provinces.”
Neither is Vancouver.
“Alberta is flat and has no limit on land. In contrast, only 4% of BC is privately owned and we are surrounded by the ocean, rivers and mountains.”
I really don’t think the majority of immigrants know that BC is “The Best Place on Earth.” You only get indoctrinated into that after you’ve been here for a while and have heard it from the locals. All the mountains and oceans in the world aren’t going to help you get child care, food on the table, clothes on your back, and a roof over your head. You know, things that families actually need. Screw the mountains and oceans.
June 13th, 2008 at 11:47 pm
“Ignore the Jackass” Post #136. Yes & Thank-you. Thums up just pulls shit out of his ass that is not backed up by anything. He is a brainless, illiterate little dickhead that needs an ESL course or deportation papers.
June 13th, 2008 at 11:31 pm
moldcity: as the landscape changes there is opportunity as follows- buy from a desperate seller (there will be a lot more of them than in recent past) and then turn around and sell to a buyer who hasn’t considered that the landscape has changed. yes, time spent on the blogs can lead to money in your pocket courtesy of the uneducated. cash flow investment? nah, would look elsewhere. wait for 60% drop? like dave says could be a wide deep hole with nothing but a shovel.
June 13th, 2008 at 11:08 pm
Dave, the shit hitting the fan in the United States was not because of sub-prime loans. If your primary source of information on this topic is USA Today, or the nightly news, I can see why you think this.
If you did follow it closely, you’d be shocked to see how closely our situation mimics that of say California.
For some fantastic analysis on all that is going on there, I suggest you read some of the ubernerd posts here.
June 13th, 2008 at 11:01 pm
WOW! Thanks for the link to the Global news piece on the vancouver housing market guys, I missed the broadcast but it was great to be able to watch that online. It looks like the market has really turned and the psychology is changing as we speak. This spring has been BRUTAL for trends, with all the places for sale and the drop off of buyers.
For anyone saying ‘the bears were wrong’ blah blah blah.. lets just deal with the present. Does anyone here truly believe that it makes sense to buy in Vancouver RIGHT NOW!?!
…Dave?
…Stagnate?
June 13th, 2008 at 10:46 pm
What was the external driver of the late 90’s bear market in Vancouver, a time of very strong economic growth in the US?
The NDP.
OK, got it. Housing busts only happen in BC when there’s an NDP government.
Guess I’ll go out and buy now.
June 13th, 2008 at 10:36 pm
Bah. Just when the discussion was getting interesting. PLEASE thums up2, if you can’t put together a coherent sentence or use real numbers just knock it off and step away from the keyboard.
in 2007 BC recieved 38,893 immigrants, a 7.6% decrease from 2006. Stop lying and back up your bullshit numbers.
June 13th, 2008 at 10:18 pm
Dave,
How exactly is the 12-18 month number relevant? It’s like saying Vancouver Canucks defeated San Jose sharks eight out of ten times when the game was played on a tuesday. Cool … but so what?
June 13th, 2008 at 10:07 pm
“35,000 people are coming to BC each year. FACT… 35,000 housing starts per year isn’t much higher than the norm.”
In 2007,60,000 people moved to bc.
June 13th, 2008 at 9:58 pm
“I predict about 6-8 years from now.”
Brittanny,
You did not get the point of inflation in the favour of purchaser that similar favour is a great punch for tenents in other wards if you are locked into mortgage for your said 8 year your rent will be 25%-35% up- one who is paying average rate of 1050 rent-will be paying 4800 till the mortgage term of 25 year come to an end you damn it.
About your question of global news, I can thrash their news in one second but you know that media deliver news for all sector of socaity so i will leave my response blank for media.
Dave thanks and special HI-5-keep up the good work.
June 13th, 2008 at 9:52 pm
Well, actually it is much higher than the norm, and it also amounts to about 2 new housing units for each new household.
You are ignoring replacement numbers. I have no idea what those are.
I think it is around 33,000 for 2008. The average in the last 20 years is probably around 28,000. I wouldn’t call that ‘much higher’.
Er no, that’s a prediction, not a fact. It’s also way out of whack with the current historically low growth rate of 1% annually.
Fair enough. How about ’strong likelihood’?
June 13th, 2008 at 9:42 pm
Since the market top last year, prices in Calgary and Edmonton have dropped over 10%, from a price/income much lower than Vancouver, at a time of rapidly increasing oil prices. Why?
The run-up in the prior two years in Alberta was huge. It hasn’t given up a year of gain yet.
Alberta isn’t the first choice to live for new immigrants and Canadian’s from other provinces. Alberta is flat and has no limit on land. In contrast, only 4% of BC is privately owned and we are surrounded by the ocean, rivers and mountains. Valuations (price / income) will never get as high as BC.
June 13th, 2008 at 9:40 pm
brittany: indeed you’ve got some game, you’ll do ok no matter what happens.
dave: i see some weakness in the market now, with tangible results coming. i agree with you though, i don’t think real estate will be cheap again in the sense some others posting here are hoping for.
June 13th, 2008 at 9:39 pm
35,000 people are coming to BC each year. FACT… 35,000 housing starts per year isn’t much higher than the norm.
Well, actually it is much higher than the norm, and it also amounts to about 2 new housing units for each new household.
FACT… The GVRD will grow from about 2.2 million people today to 2.9 million people in 2020.
Er no, that’s a prediction, not a fact. It’s also way out of whack with the current historically low growth rate of 1% annually.
June 13th, 2008 at 9:37 pm
What was the external driver of the current US bust? The Spanish bust? The Irish bust? The UK bust which is just getting rolling?”
I don’t follow the US market that closely, but IMO… The US bust is really a story of LA, Vegas, Phoenix and Florida. Other markets that are similar to Vancouver (e.g. Portland, Seattle and perhaps NY) haven’t had big issues. The problem is twofold: 1. Large volume of subprime loans (much higher than Van); and, 2. Higher mortgage renewal rates for those loans causing foreclosures. On top of that, the ’sun cities’ were overbuilt based on in-migration for vacation homes. This is not the case for Vancouver.
The Spanish bust is analogous to Florida in that outside buyers were driving the market.
No idea about Ireland or UK.
Prices fell 20% from the market peak in BC in 1981 to the onset of the recession in 1982. How come?
They fell more than that (30 to 40%). How come?
- The prior two years to 1981 saw values almost double
- Large speculation (speculation #s are much lower currently
- double digit unemployment
- double digit interest rates
- major recession
What was the external driver of the late 90’s bear market in Vancouver, a time of very strong economic growth in the US?
The NDP.
June 13th, 2008 at 9:33 pm
calgary, edmonton, saskatoon – demand/supply is too elastic in these prairie hoods, even today someone would be better off investing in vancouver than the above.
June 13th, 2008 at 9:29 pm
Yes, some bears have been wrong for the last 4 or 5 years. Not me. I sold in Dec. 2007.I will buy back when interest rates peaks and start moving down again. I predict about 6-8 years from now.
Get out of the way, or your going to get hit by the truck.
June 13th, 2008 at 9:28 pm
I agree stagnate. I think the only question is when the peak will occur. My point is that it could happen this year or in another few years. If the later, then sitting on the sidelines will have been a bad call. Even if you buy near the peak and prices correct 5%, within a year, you will probably still be ahead given that you gained equity and haven’t been paying rent (I could do the math but won’t bother) .
If you haven’t bought yet and have a good down-payment, then it isn’t worth worrying about buying at the peak. If you can afford it and plan to own for a long time, then you will be just fine. We’ll get back to the peak in 7 years (nominal).
June 13th, 2008 at 9:26 pm
What I am saying is that IF a drop does occur, it will likely be relatively shallow (i.e. giving up less than 10%)
Since the market top last year, prices in Calgary and Edmonton have dropped over 10%, from a price/income much lower than Vancouver, at a time of rapidly increasing oil prices.
Why?
June 13th, 2008 at 9:23 pm
Prior corrections have been externally driven
What was the external driver of the current US bust? The Spanish bust? The Irish bust? The UK bust which is just getting rolling?
Prices fell 20% from the market peak in BC in 1981 to the onset of the recession in 1982. How come?
What was the external driver of the late 90’s bear market in Vancouver, a time of very strong economic growth in the US?
I have been in the market since 2001 and plan to be so for the rest of my life. Corrections in price don’t really affect me.
Corrections in price don’t affect you when you buy at a market bottom, which is exactly why I intend to buy at the next market bottom. And no, they are not hard to identify.
June 13th, 2008 at 9:21 pm
Noname, I never said a drop wouldn’t occur. I am basically predicting a flat market for a number of years going forward. What I am saying is that IF a drop does occur, it will likely be relatively shallow (i.e. giving up less than 10%). I have about 40% equity in my home and another 15% in liquid assets. I don’t fear losing my equity.
I don’t really have anything to gain or lose here. In contrast, many of the perma-bears are unwilling to admit that they have been wrong all these years and that values will never drop to the levels when they started calling for a crash.
June 13th, 2008 at 9:16 pm
boys calm down, dave got under your skin. he’s telling you something you don’t want to hear, because maybe he’ll be right. assessing demand and supply for vancouver real estate is not quite as simple as just looking at an inventory chart. and assuming everyone but the bears is tapped out has been a losing ticket in the past. given the constraints on the supply side a 20 to 1 rent to own ratio on your generic inland condo is not that bubbly. 5-10% correction then stagnation in the market. you heard it hear first.
June 13th, 2008 at 9:15 pm
Dave,
#1 – BC econmony is strong because of construction. This is fading very fast.
#2 Price corrections can give up alot more than 12-18 months of gains, Eg. Britain yesterday: Purchased in 2005 for 215k pounds, sold at auction for 79k pounds. You would be amazed at how much and how quickly a market can turn. My family and myself hvae been involved in the Real Estate game since the ’60’s.If fear turns to panic, it can get real ugly real fast. I am talking about 90 days fast. Mark my words, you will see. Sell now at under market prices and you will thank me for a lifetime of losses. Think about your kids, not yourself.
June 13th, 2008 at 9:15 pm
Dave,
You actually do indeed care about what the market does. In fact, I would bet that you are pretty damn scared about a possible drop. If you weren’t, you wouldn’t be posting on this site trying so desperately to try to convince others that no drop can occur.
You posts reek of fear. Nothing personal, just an observation…
Noname
June 13th, 2008 at 9:13 pm
Drachen, why do I have to keep repeating myself? It is better to use nominal costs because that is what your mortgage is priced at. I don’t care about inflation adjusted values.
I am the one backing up my points with real data. On what information are you basing your correction on? So far, I haven’t seen any real data. So far, all my points have been backed up (e.g. depth of corrections).
I fully believe in supply and demand. Last months MOI numbers suggest a balanced market with little price change. If MOI gets up to 9 months, then I will predict a 10% price correction, but no more.
FACT… 35,000 people are coming to BC each year. FACT… rental vacancy is at historic lows. FACT… 35,000 housing starts per year isn’t much higher than the norm.. FACT… The GVRD will grow from about 2.2 million people today to 2.9 million people in 2020. Sounds like demand to me.
June 13th, 2008 at 9:06 pm
Subprime loans are not an issue here.
In Canada subprime is spelled ABCP.
http://canadianpress.google.co.....j30O_yebKA
June 13th, 2008 at 9:00 pm
Brit, I don’t disagree with your assertion regarding fear and greed driving markets. That doesn’t support your case or refute any of my points.
The main points are:
1. Prior corrections have been externally driven. Although forestry is down, the BC economy is very strong and our future looks great.
2. Price corrections have only given up 12 to 18 months of gains. I have been in the market since 2001 and plan to be so for the rest of my life. Corrections in price don’t really affect me. If anything a price drop might allow me to consider real estate as an investment.
June 13th, 2008 at 8:59 pm
“No houses prices don’t go down because they are ‘too high’. They typically go down due to external factors such as an economic downturn or higher interest rates.”
There is not much correlation between GDP growth and house prices except in areas where construction jobs make a large part of the workforce. Like, say, Vancouver. House prices must follow incomes or eventually nobody could afford to buy property any more except with rising amounts of debt. Right now prices do not in aggregate support the underlying incomes, ESPECIALLY when debt levels are unusually high. Like, say, Vancouver.
June 13th, 2008 at 8:59 pm
Dave needs to learn about supply and demand not a difficult lesson to learn… Dave sounds a lot like Cameron Muir. Lots of supply demand down something has to give. Even with 0 down and 40 year mortgages. Idiots like you were beaking off in California and Florida not long ago. We follow the US we always have and we for a long time will. Sorry Dave (Cam)
June 13th, 2008 at 8:56 pm
Dave
“And when have home values fallen 50% in BC?”
When have they tripled? (inflation adjusted)
If you purchased at the peak in the ’80s it took over 20 years and the current bubble to regain your losses.
Your logic is as demented as most bulls. If you throw a rock upwards 10 feet it falls 10 feet (the bubble of the ’80s) but if you throw it up 30 feet in the air your hypothesis is it will only fall about 5?
Well as others have said, why are you wasting your time here? Your fingers should be too sore from signing all those mortgages to be able to type here if you’re that confident.
“Subprime loans are not an issue here.”
They’re not the issue in the states either, or hadn’t you noticed that all the media outlets are talking about the problem spreading to ‘prime’ mortgages.
The problem is not the mortgages, not directly anyhow, the problem is unsustainable prices. Vancouver’s prices are clearly unsustainable, ergo they will fall. As I’ve said before there are 3 methods tried and true to measure overinflated real estate markets, all 3 of them peg our market at around 250-300% over sustainable values. Your wishful thinking will be like cobwebs breaking an elephant’s fall.
If you have something more useful than, “Nuh uh.” to add to the conversation let’s hear it, otherwise without any kind of evidence or research to back up your claims you’re just spewing hot air (or pixels).
June 13th, 2008 at 8:53 pm
Dave is clearly an idiot troll Re shill. Bull in sheeps clothing. Clearly the market is very unpredictable but what is likely is a correction. Whether Dave likes it or not it will happen and a lot more than 10%.
June 13th, 2008 at 8:51 pm
Beatstreet, what percent of mortgages are 40 year in Vancouver? 1%? 2%? It’s small and it isn’t the driving force in this market. Subprime loans are not an issue here.
In any market it is the marginal buyer that sets the last price. And, in this market I would argue most of the marginal buyers have been using 40 year mortgages. So, the absolute number really doesn’t matter if my assumption is right.
June 13th, 2008 at 8:51 pm
Dave, Are you saying that you don’t care about profit/loss?
Because if your are, you are not human. The general population is driven by fear and greed. This is a primal instinct. It is greed that drove the market up and it is panic that will drive it down. It does not matter where you are,China or Canada. You have to think with your head, not your heart.
PS. Big night out tommorrow, so I am just chilling on the blogoshere.
June 13th, 2008 at 8:47 pm
GDP fell 7% after 1982. Enough said.
June 13th, 2008 at 8:43 pm
Mortgage rates were higher at the market peak in 1981 than the market bottom in late 1983. Repeat, the market fell as mortgage rates were falling.
Exactly.
June 13th, 2008 at 8:43 pm
Yes, I believe prices will be higher 12 to 18 months from now. I think we will have a couple 5% years and perhaps a small drop after that. Overall, mostly flat.
No houses prices don’t go down because they are ‘too high’. They typically go down due to external factors such as an economic downturn or higher interest rates.
Beatstreet, what percent of mortgages are 40 year in Vancouver? 1%? 2%? It’s small and it isn’t the driving force in this market. Subprime loans are not an issue here.
June 13th, 2008 at 8:40 pm
And when have home values fallen 50% in BC?
Are you suggesting interest rates of 14% within 5 years?
Mortgage rates were higher at the market peak in 1981 than the market bottom in late 1983. Repeat, the market fell as mortgage rates were falling.
Many US markets are alredy down up to 30% from the peak in 2006, with minimal increase in interest rates.
If prices do not make sense relative to rents and incomes, they have to come down.
June 13th, 2008 at 8:34 pm
In the case of Vancouver real estate, my review of the data has shown that the market usually only takes back 12 to 18 months of gain.
Well my take is that usually the market is not inflated by 40 year mortgages, US subprime lenders setting up shop in Vancouver (who have since left) and once-in-a generation low interest rates that are gone for good (unless a depression hits or something).
Therefore, the past is no guarantee of future results.
June 13th, 2008 at 8:32 pm
However, going forward… sitting on the sidelines for an extended period (again 12 to 18 months) will likely cost you
Are you saying that 12 to 18 months from now prices are likely to be higher?
House price declines are not a random phenomenom. House prices go down because they are too high.
The issue is not what % of the time house prices go up or down. The issue is what house prices are reasonable. Reasonable house prices are those where ownership costs are comparable to renting, and prices are a reasonable multiple of incomes. Prices will eventually adjust to this level. Always.
June 13th, 2008 at 8:30 pm
And when have home values fallen 50% in BC?
Are you suggesting interest rates of 14% within 5 years?
Neither of those scenarios is likely. What is more likely is that at some point in the next few years we have a 10% correction and interest will be +/- 2 to 3% of where they are today.
June 13th, 2008 at 8:29 pm
Brittanny, that’s a doomsday senario, it’s easy for bears to think that way but its friday night-get out there and get crazy!
June 13th, 2008 at 8:26 pm
Dave, Timing IS everything. How will you feel when the current value of your home is half of what it is now and at the end of your mortgage term the interest is double what it is now? You will get forclosed on and loose everything. just like alot of Americans are experiencing now.