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June 27th, 2008 at 1:43 pm
nvan: been there, done that. I had a friend who recently (two months ago) said they bought a place, newly completed, and it was their first day looking on the market. I just cringed. The deed was done. I bit my tongue so hard, she said the realtor told her there were other bidders and she had to move fast. Riiiiiiiiiight. Enjoy negative equity.
The simplest math I’ve given people is this. Home today worth $600,000 I rent at $1,000 per month. 2 years from now Home drops by $100,000 to $500,000. In that 2 year time I spend $24,000 in rent. Net savings of $76,000 on principal…hmmm.. yea, renting is such a waste of money. Idiots. I have no more sympathy for people who can’t think for themselves.
I leave you all with this: “Most people would die sooner than think; in fact, they do.”
June 27th, 2008 at 1:30 pm
Confused: Yes, basic Economics dictates supply > demand = lower prices or vice versa demand > supply = higher prices. However, real estate as in most markets has its variables. Have to look at: the cost to borrow (interest rates); employment; income; debt loads; location etc… to name a few. One of the biggest variables that plays a key role is the motivation/emotion of the seller. Sellers are stubborn, no one wants to sell at a loss. If a seller can afford to hang on to a property in the hope it will sell for more later…they will do just that. Remember Robert Shiller talking about prices. He says that prices fall when the psychological tug-of-war between enthusiasts and doubters is won by the doubters. That’s happening as we speak, but its not something that will happen overnight. I think next year, if interest rates rise and the bank keeps increasing the cost of borrowing, it will be that last motivating factor for people to sell. All we’re seeing this year is the profit margins on pre-sales narrow to the point of it not making any sense or cents to bother with it as an investment. The tides turning.
That being said, take what I and anyone else say with a grain of salt and complete your own research and come to your own conclusions.
Pope, never given you a proper shout out for the site, I love it. It’s my favorite of all the RE blogs. Keep up the great posts, TGIF!
June 27th, 2008 at 1:19 pm
“and sold now”
BTW, sales are down around 30%. How do you expect to sell “now”????
June 27th, 2008 at 1:17 pm
P.S. I anwered “no” because I wouldn’t make profit in today’s collapsing market.
June 27th, 2008 at 1:16 pm
My answer to Me2′s question is 4ys ago, “yes”; 3yrs ago “yes” 2 years ago “no” last year “no”.
Now, you answer my question with a straight “yes” or “no”. I dare you.
June 27th, 2008 at 1:06 pm
Would you have made money if you bought 5yrs ago and sold now? How about 4yrs ago? 3yrs ago?, 2yrs ago? last year? just use a yes/no answer otherwise you’re a bear salesman blah blah blah.
June 27th, 2008 at 12:53 pm
Ah poor Krissh…now that this whole boom is over I’m kinda gonna miss that crazy, rambling, totally incoherent, insulting and abusive mystery man. Maybe a memorial blog is in order? A “Greatest Hits” sort of thing.
June 27th, 2008 at 12:43 pm
Is it just me or does dave typed a lot and say nothing?
DAVE: Answer this question with a one word answer (yes or no): Does increasing suppy and decreasing demand lead to lower prices in real estate?
If you spew any gibberish other than the one word “yes” or “no” answer we know you are a BS snake oil salesman. If you ignore the question, we know you are full of crap. Answer the question. I dare you.
June 27th, 2008 at 12:36 pm
I was wrong, last time I said I had a video of Krrish at work it was actually someone else.
THIS is the real thing!
http://www.videosift.com/video.....se-Failure
June 27th, 2008 at 12:33 pm
…so at 5% a year, eight years from now that 365k north Burnaby condo will be worth 540k, right? Right? And at the end of the mortgage the condo will be worth, with its 5% gains a year (right Dave?) … 2.7 million dollars!
Whoopee!
June 27th, 2008 at 12:30 pm
Building equity! It’ll take 5 1/2 years of payments to pay off CMHC fees alone! Then add PTT, and it’s what, 8 years of payments to even start ‘building equity’!
Of course condos will gain 5% a year forever (right Dave?) so, there’s your equity.
June 27th, 2008 at 12:21 pm
Sadly it happened today at lunch. One of the guys at the office whispered that his girlfriend and him were going to buy a place on a 40year 5% down in North Burnaby. Since he knows my views he started in on… “but renting is throwing away your money. At least this way we’ll be farther ahead in equity when we move somewhere bigger in a year or two…” I almost tried to explain the math to him but all I could get out was good luck. 26 years old $60000 between on a $365000 condo. There’s still a few more people willing to take a shot even at the top.
June 27th, 2008 at 12:08 pm
“supply going up with demand going down means lower prices. I mean, you learn that on the first day of university.”
Well it’s taught anyhow. Dave is living proof that you don’t necessarily learn it.
Dave
“Blah blah blah MOI blah blah…”
Umm Dave, MOI is a method to measure supply and demand… So you’ve essentially said, “Well no, it doesn’t just depend on supply and demand, it also depends on supply and demand!”
“To the end of May, the MOI for Greater Vancouver was approximately 6″
I plug in the numbers and get over a 9, what numbers are you using? Sales for may = 1758. Units on the market at the end of may = 17,000 or so.
By the end of this month we should see an 11 or so, so by your methods prices should start falling any day.
But honestly that’s a terrible method, sales fluctuate too much at different times of the year, even in the boom times of 2006 and 2007 the winter months were hitting double digit MOIs but prices didn’t fall then.
“Inventory and sales typically peak at this time of year and drop over the Fall.”
I like how you constantly ignore the fact that this is obviously not a typical year for either inventory or sales. Typically boats don’t sink so there shouldn’t have been any worries on the Titanic after it hit the iceberg right?
“I predict that the ratio will get a little bit worse into the Fall (~7 MOI) which may cause a slight easing of prices.”
As always your predictions come without any information to back them up, just like everything else you put out there. Did the Ouija board tell you that one or have you graduated to Tarot cards yet?
June 27th, 2008 at 11:52 am
Note also the article does not mention a certain West Coast province or any of its cities.
Elephant in the living room? What elephant?
June 27th, 2008 at 11:44 am
Maybe I don’t get it. If inventory keeps rising quickly to a HUGE 20,000 like it is doing now, does that not mean that people are not buying houses?
People continue to buy real estate in all markets, both up and down. Houses are still selling, just not at the rate they were in the last couple years which broke all time records. The drop in sales isn’t really surprising to anybody and most predicted in would happen this year.
I thought that when people don’t buy houses, the price of houses goes down.
But some people here think the price will keep going up. What gives?
Some people say prices will stagnate. That would make sense if inventory also stagnated. But if you took economics 101 you know that supply going up with demand going down means lower prices. I mean, you learn that on the first day of university.
The price of houses depends on many other factors as well. Assuming constant economic factors (e.g. interest rates, stable economy, employement, etc…), then the best way to predict the price appreciation (or depreciation) of real estate is to look at the ratio of total listings to sales. This ratio is better known as Months of Inventory (MOI).
In a tight market (~3 MOI), prices go up, in a balanced market (~6 MOI), prices remain stable and in a buyers market (~9 MOI), prices go down.
To the end of May, the MOI for Greater Vancouver was approximately 6, which is a balanced market. Assuming the ratio remains the same (i.e. ~6 MOI), then prices will likely remain stagnant.
Going forward, prices will be dictated by overall inventory and overall sales. Inventory and sales typically peak at this time of year and drop over the Fall. But once again, the important factor is the ratio. I predict that the ratio will get a little bit worse into the Fall (~7 MOI) which may cause a slight easing of prices.
June 27th, 2008 at 11:26 am
“There are a litany of reasons why the Canadian market is different,” Mr. Porter said.
Yes, but there also a litany reasons why the Canadian market is NOT different. Low interest rates fuelled a real estate boom not justified by fundamentals like income, it doesn’t matter that we didn’t have a subprime market like the US. Fact is, prices are just too high and can’t be supported by our incomes. Therefore prices have to come down. Simple. And as soon as prices start to stagnate, people will stop buying as there’s no reason to rush into the market. Worse yet, the masses are starting to get the idea that houses are overpriced, so no one’s going to buy until we see a substantial decline to affordable levels.
Confused-Exactly!!! I still don’t get those articles that point out high inventory, then say things like “but don’t worry, we stil project a 5% increase in prices this year” Sure, maybe THIS year as only the high-priced houses get sold, but what about next year when the prices have to come down as people NEED to sell?
June 27th, 2008 at 11:18 am
“We are definitely seeing a shift in the marketplace, although it’s certainly not a time for panic,” said Victoria Real Estate Board president Tony Joe.
Uh huh. You wouldn’t be trying to unload a few properties, would you Tony?
Remember: don’t panic, but if you’re going to panic, be the first.
June 27th, 2008 at 11:14 am
“I own twelve and I keep them empty and in pristine shape ready for the chinese investor.”
Yeah well I have 1200 condos. chinese investor will pick mine over yours for sure since mine are in double super crazy mint pristine shape. So there.
June 27th, 2008 at 10:56 am
“But if you took economics 101 you know that supply going up with demand going down means lower prices. I mean, you learn that on the first day of university”
Agreed, but the trolsl here (it calls itself Krissh/Satv/Thumsup/Informer?browntown) it thinsk calculators are useless and economics is fake. He’s said all this stuff if you check the archives. He is eitehr kidding or just an idiot and it thinks increasing supply, lower sales, negative equity and negative cash flow are good things. Just ask it it posts the same incoherent jibberish everyday. See “The Krissh Post” in the forum section for a warning on this clown, whom the Vancovuer Sun called an idiot!
June 27th, 2008 at 10:53 am
Even units taht are priced below historical market value are languishing on the market unsold. Showings are still taking place but no actual Sales.
For the simpler folks here (Krissh/Satv/Matt/Dave/Thumsup?warehouseworker1234) this means sell for whatever you can get today or lose hundreds of thousands of dollars in equity and thousands every month on “vacant pristine” or tenanted units.
June 27th, 2008 at 10:51 am
Maybe I don’t get it. If inventory keeps rising quickly to a HUGE 20,000 like it is doing now, does that not mean that people are not buying houses?
I thought that when people don’t buy houses, the price of houses goes down.
But some people here think the price will keep going up. What gives?
Some people say prices will stagnate. That would make sense if inventory also stagnated. But if you took economics 101 you know that supply going up with demand going down means lower prices. I mean, you learn that on the first day of university.
June 27th, 2008 at 10:44 am
one more bust article from the vancouversun
June 27th, 2008 at 10:37 am
Wow…..I’m really surprised just how quickly the MSM is jumping on the bear-bus, ….its starting to get crowded, but hey, welcome to all
June 27th, 2008 at 10:25 am
from the article:
“It’s a bit unnerving to see how Canadian performance is beginning to look like that of the U.S. two years down the line,”
June 27th, 2008 at 10:19 am
Yeah, but you get bonus points for tinyurl’ing
June 27th, 2008 at 10:08 am
bah! beat me to the punch.
June 27th, 2008 at 10:07 am
check this out in the globe:
Housing drop looming in Canada?
“After months of holding fast to the view that Canada will not follow the U.S. into a housing decline, one economist is now raising the spectre of an overall drop in prices north of the border.”
http://tinyurl.com/4383vb
June 27th, 2008 at 10:05 am
Wowieee…here’s a headline for you
Housing drop looming in Canada?
http://www.globeinvestor.com/s.....7/GIStory/
Happy Canada Day!
June 27th, 2008 at 9:44 am
I’m sorry – I thought James was joking – when I read comments by people still trying to buoy up real estate they just seem like comedy now. “We’re through the looking glass here, people!” I give up.
June 27th, 2008 at 9:19 am
10James Says:
June 27th, 2008 at 6:59 am
I think it’s now clear that the Vancouver real estate market is headed for another round of steady apreciation….I own twelve and I keep them empty and in pristine shape ready for the chinese investor.
James,
Good luck with you 12 properties. Let us know how things are going in a few months.
June 27th, 2008 at 8:51 am
Ah yes, Robson street, the ‘Rodeo drive’ of ‘Hollywood north’ where you can get everything your heart desires: ‘New York style’ pizza, ‘Tokyo style’ sushi, ‘Dublin style’ pubs, ‘LA Style’ salons, ‘Paris style’ cafes.. and ‘Vancouver style’ street artists.
No other city in the world has artists on the street that will draw a beautiful charcoal portrait of you while you wait. I mean I assume this to be true, I’ve never been to another city. Why would I need to with all this culture here?
June 27th, 2008 at 8:44 am
No but I am going to NYC in July.
June 27th, 2008 at 8:41 am
any exposure is good exposure.
Vacationing in Chernobyl?
June 27th, 2008 at 8:33 am
“Sino-Canada high school describes Vancouver as the “city of heaven” with beaches, lakes, forests and a mild climate that make it the first choice for holidays and immigration. “
Here we got back to the above saying actually who ever come to visit downtown looks like they don’t like to go back that’s why now Vancouver is fueled by external dollars and high net worth individuals,During Expo 86.Population of downtown 40,000-We are now at a population of over 85,000.Population projections at 120,000 by 2020.Some people think we are not even world famous while robson street has it’s own slogan runing from decades called
“World famous shopping promenade worlds best Robson street”
June 27th, 2008 at 8:23 am
Add a protracted recession and the unions, both public and private sector, are going to get squat for some time, just like in the 80’s.
Precisely. In fact govt. employees took a pay cut in the early 80′s because the alternative was significant layoffs.
June 27th, 2008 at 8:19 am
Matt:
“Manufacturing unions may be much weaker but it certainly isn’t the case with government unions which exist as a stealth social welfare system for people unable to find work in the private sector.”
Huh? Put together a sentence that makes sense, please – or fine tune your thought. A public sector union is a “social welfare system?”
June 27th, 2008 at 7:52 am
Regarding the feet, remember any exposure is good exposure. I’m not trying to be bullish or sarcastic, its just the truth.
And it’s better than going toe-to-toe against other cities for “world class” status!
June 27th, 2008 at 7:44 am
Regarding the feet, remember any exposure is good exposure. I’m not trying to be bullish or sarcastic, its just the truth.
June 27th, 2008 at 7:43 am
Compounding Olympic project costs, higher food and petroleum prices, expect these unions to demand further wage increases that will result in the financial phenomenon explained by Ms. Croft
Demanding and getting are two different things. Remember public sector unions have less bargaining power than their private sector counterparts, because when they go on strike it improves their employer’s financial position – the tax revenues keep coming in but the wages stop going out.
Add a protracted recession and the unions, both public and private sector, are going to get squat for some time, just like in the 80′s.
Oh yes and that’s bearish for BC RE.
June 27th, 2008 at 7:06 am
…or detached feet washing up on the shore?
My coffee was close to being one with the monitor. Very funny stuff.
June 27th, 2008 at 6:59 am
I think it’s now clear that the Vancouver real estate market is headed for another round of steady apreciation. As stagflation takes hold people will flock in to buy real estate in the best place on earth in order to protect their money. Remember that in BC 1/3 of workers are unionized and about 20% are in public sector unions. The big goverment unions start striking in 2011. Buy and hold condos in Yaletown. It’s the gold of the west. I own twelve and I keep them empty and in pristine shape ready for the chinese investor.
June 27th, 2008 at 6:31 am
Dave, I love how you quote promotional material as if it’s a neutral observers opinion!
June 27th, 2008 at 6:27 am
I wonder.. when people around the world think of BC are they more likely to associate it with thoughts of the winter games or detached feet washing up on the shore?
June 27th, 2008 at 6:11 am
I guess they are making more land:
“A B.C.-certified high school in China is creating a “Vancouver” resort on a lake near Shanghai, complete with its own Coal Harbour, Robson Street and Royal Yacht Club.”
http://www.canada.com/vancouve.....b402ebb296
“Sino-Canada high school describes Vancouver as the “city of heaven” with beaches, lakes, forests and a mild climate that make it the first choice for holidays and immigration. ”
June 27th, 2008 at 6:10 am
On the news, California median just fell 35% yoy. I think Freako commented on the slow fall of median in the US a year ago, and predicted ugly numbers once the sales mix go the other way. I guess now is the time. Overall, I expect indexed prices in US to hold steady on a nominal basis from now on, as inflation work the price back to where it started and then a bit lower.
June 27th, 2008 at 5:35 am
Matt,
I wouldn’t be too worried about city unions, they don’t represent too many people in the big picture. Does anybody know when the teachers and various health care workers have their contracts expire? Both of them have an ax to grind with Gordo and friends, and it could get ugly next time.
Although if the joe taxpayer is feeling the brunt of the recession, these groups won’t get a lot of public sympathy.
June 27th, 2008 at 1:05 am
However, Patricia Croft, chief economist for Phillips Hager & North Investment Management Ltd. in Vancouver, sees key differences between the economies of the 1970s and today.
“First, central bank policies are different this time. They plan to resist inflation. Second, in the 1970s, workers, who had appreciably stronger unions than today, were able to pass through their costs of living in the form of wage increases. That set off a wage and price spiral. This time it’s different, central banks will fight inflation and accept some stagnation. And the unions now have much less power.”
The collective bargaining agreements of Metro Vancouver city union all expire around 2010-2012. Compounding Olympic project costs, higher food and petroleum prices, expect these unions to demand further wage increases that will result in the financial phenomenon explained by Ms. Croft.
Manufacturing unions may be much weaker but it certainly isn’t the case with government unions which exist as a stealth social welfare system for people unable to find work in the private sector.
June 27th, 2008 at 12:15 am
from the G&M article on stagflation:
“Invest in real estate. Though hard to sell in fractions and often lumpy in returns, it has been a good store of value over cycles of as much as 40 years, Mr. Gampel says.”
Idea for children’s book:
‘Mr. Gampel Encounters a Giant House-Lump’
(hedges have to be sensibly priced to start with).
June 26th, 2008 at 11:54 pm
Re: Vancouver Sun editorial
My understanding is condo owner-occupiers want to discourage investors mainly because they have different interests regarding the upkeep of the buildings. I have no phobia against renters (being one myself) but if I had to buy in condo it would be in one that was only for owner-occupiers.
June 26th, 2008 at 11:02 pm
We’re about to hit 20K inventory for the REBGV, courtesy of PaulB’s numbers. On top of that, sales will be down roughly 35% to 40% compared to June, 2007.
I’m sorry bulls, but this market will be in a freefall soon. Seriously, get out while you can!