Friday free-for-all!
The world is going through some interesting times: a hangover from the boom of loose credit, house prices dropping in many cities, inflationary pressures and skyrocketing energy prices. This is our open-topic weekend post to discuss anything related to economics and real estate on the global and local level. Here are a few stories I’ve noticed this week:
- June 2008: Vancouver house prices drop slightly.
- Real estate inventory continues to grow
- Screen Actors Guild strike threat looms.
- Kevin Falcon cares about your convenience
- Victoria: love the weather, not the street people
- Americans move to Canada (less than vice-versa)
- Canadians work more for less
- Canadians no longer spending like ‘drunken sailors‘
- Loonie predicted to drop
- Canada from a Hawaiian perspective
- Will gas prices kill the suburbs?
So what are you seeing out there? Post your news, links and anecdotes here and have an excellent weekend!
note: any conversation on real estate or economics is allowed, please keep it civilized. when posting articles please only quote pertinent points and link to the original instead of pasting the entire article here. Pasting a link will automatically create a clickable hot-link. Thanks!
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cashisking Says:
July 3rd, 2008 at 9:20 pm
Watch channel 9 news (CTV?) tonight at 11 …
I know of at least 4 west side realtors who each have just put their homes and at least 1 additional investment property up for sale in the past 7 days … I’m sure it’s a coincidence … also know of two people who bought earlier this year before the sold their original residence – both places are up for sale b/c they can’t sell even at the price they bought 4 months ago.
Anecdotal, but still …
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random person Says:
July 3rd, 2008 at 9:42 pm
supply has gone up, demand is low. but prices are not dropping yet…
how long will it hold? and how much will it drop (if it does)? any predictions?
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paulb Says:
July 3rd, 2008 at 10:06 pm
But prices are dropping. The benchmarks dropped in all categories this month.
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Matt Says:
July 3rd, 2008 at 10:34 pm
The bear fantasies of 20% declines are unlikely to happen without significant job losses. Sure, real estate prices will be low but that’s because no one will be able to afford to buy anything, just like now. Those of us lucky to have well paying jobs during a recession will likely be those who are currently able to buy houses now at a reasonable debt load. It’s stunning how much armchair economics are expounded on this blog yet no one thinks it applies to them.
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VHB Says:
July 3rd, 2008 at 10:36 pm
“are unlikely to happen without significant job losses. ”
You forgot the part where you tell us why we are immune to significant job losses. Not that I agree with your premise, but it would be nice at least if you told us why your premise holds.
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Gadwin Says:
July 3rd, 2008 at 10:37 pm
Dave, Satv, and Matt, it’s OVER. Detached SFH benchmark price DROPPED by $5,596 last month according to the REBGV:
http://agentwill.com/statistic.....tatistics/
The market cannot be saved. It can only go DOWN for the next two to three years.
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VHB Says:
July 3rd, 2008 at 10:38 pm
“It’s stunning how much armchair economics are expounded on this blog yet no one thinks it applies to them.”
Some of us have spent some time (some would say too much time!) getting ready for what is coming. Now you tell us that we aren’t ready for what is coming? Believe me, we’re ready. We’ve been ready for a l o n g time.
Why on earth would you think it is the *bears* who would arrive at the bust without their pants on?
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Thums up2 Says:
July 3rd, 2008 at 10:49 pm
Specially North Vancouver taking the toll in all three category right?and west vancouver2 but appartment prices took huge jump in west vancouver 711.268 up 10.7% from last month 635.900.East Vancouver almost remain the same in appartments.
Detached got big hit in west van,north van and burnaby.
Attached got hit in eastvan and vanwest.
Over all appartment performance remain same some cheer up moment rob a’s area rocking upward prove that downtown is the place for action”the best place to be”.
Interesting point:Actually average prices are up by $904,167 in june over 887,503 in may.I know it’s difficult to translate housing prices there are lots of way to look at them but area realtor can assit us better.
Finally rbc found out there is no housing crash in vancouver in decades to come.no crash,in the housing market-Royal Bank optimistic about economy
http://www.cbc.ca/money/story/.....eport.html
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patriotz Says:
July 3rd, 2008 at 11:11 pm
The bear fantasies of 20% declines are unlikely to happen without significant job losses.
Well San Diego, LA, Phoenix, Miami, etc. are all down over 20% to date and where have the significant job losses come from?
Real estate.
Cough.
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Gadwin Says:
July 3rd, 2008 at 11:32 pm
Go look at the latest REBGV stats:
http://agentwill.com/statistic.....tatistics/
Benchmark prices are DOWN for ALL CATEGORIES. DOWN DOWN DOWN!
RECORD INVENTORY, DEPRESSED SALES, and PRICES DOWN DOWN DOWN. Specuvestors, it’s time to sell your second property before you lose even more money as the market tanks. Get out while you can.
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Londonernow Says:
July 4th, 2008 at 4:56 am
Three more houses likely to be added to lower mainland inventory soon:
http://www.canada.com/vancouve.....c48cd17237
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Warren Says:
July 4th, 2008 at 5:38 am
VHB,
I think Matt has a point with respect to job losses. I’m not sure what you do but like most people out there I have a real job with the real prospect of a layoff. I certainly wouldn’t be the first to go, and I’m looking forward to cheaper RE prices. But if you’re not nervous about an overall recession, you’re naive, or living off a trust fund.
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The Van Man Says:
July 4th, 2008 at 6:10 am
Matt,
I think you’ve been brainwashed by realtors, who seemed content to pump real estate even in the midst of a possible downturn. A real estate friend of mine told me that unless you have real estate appreciating a gross of 10% or more (that’s before deducting interest charges, carrying costs and so forth) and in past few years after 2002, it was the case. It’s not now and most realtors are talking about a 3.5% YOY increase which they say is still a good investment for RE.
What an oxymoron, when in fact a 3.5% YOY is NOT a good investment, because you are already loosing money on interest alone (unless you can show me a way to qualify for a 1% mortgage) and if you signed on a 40 AMS, then yeah, you have a LONG WAY to go to loosing your money. Tell me Matt, do you love loosing your money YOY? Apparently, there are hordes of people who are content in loosing their money for 8 straight years while hoping for a Nasdaq rebound.
No one really knows how deep the correction will be, but we know that based on the Landcor website that the rise of the Housing Price Index mirrored those homes in the States, especially the boom states of California, Florida, etc..
And no, having well paying jobs is no guarantee for a sustained house prices either. We need not look far and long to Japan, where they had make work projects, a good economy (wonder where they have money to develop Nintendo Wii, Sony Playtstation 3, Canon 1dsMk III (an $8000 DSLR camera) and the list goes on and on. If you did happen to visit Japan during the housing bust, you wouldn’t even notice that home prices were deflating to their 23 year lows unless somebody told you so. Nope, there were jobs alright. The problem is with the confidence in the asset itself and credit availability to buy them. Human psyche is unpredictable. One day, you get overconfidence and then all of the sudden, pure pessimism pours in undermining confidence. You can examine many US corporations with very low PEs these days. These companies produce and deliver food and medicine to us. We have to buy them, some people more so than others and yet their stock prices are depressed. Why??
What’s supporting our current housing boom is basically credit. Buying a home with cash is possible to some, but we all know that it’s pretty pretty rare. The immigrants argument suggest that they buy these homes with cash, but looking at the rich immigrants stats suggest otherwise. And with the inflationary pressures we are facing now with 20 to 30% increase in some food items, as opposed to our CPI’s 2.2%, sooner of later central bankers are going to fight it with higher rates. European countries, Australia and even China are raising rates. Traditionally as rates increases, home prices will drop.
And don’t forget that as rates increase and so will the monthly mortgage payments for home owners as they renew.
Matt, you also mentioned well paying jobs. I have no doubts that there are well paying jobs in Vancouver, but traditionally the pay rates are lower than competing US states and our eastern provinces. The only well paying jobs these days that I know of are in the construction or its related businesses. They are well paying because, they pay more than the minimum wage and you don’t need a lot of education to boot with higher pay either.
But I also happen to know someone who had been in this construction and home reno business for more than 20 years and during the last few downturns, they had shed jobs and so did their peers.
So where do we go from here.
House prices will either drop like what we see in the states, or plateau for a few years until economic fundamentals catches up with prices.
We know that in order for fundamentals to catch up, wages have to go up significantly. But the trend these days is for a muted salary increase in the private sector, whereas you are much luckier if you happen to work for a public sector with a strong union. But, by exactly how many? Definitely not a lot and besides, many of these people may have already homes or homes already paid off. They may own a secondary, but by asking them to buy 2 or 10 more additional houses during the downturn to justify even higher prices is like asking them to become little Bernankes. Even Bernanke himself has a limit of how many ABCPs he can buy as he himself is running pretty low in his reserve. Once these measures are exhausted, what do you think will keep house prices rising again?
I just don’t see wages climb at the same rate as houses over the last 6 years did, but if it does, I’m not complaining. Which means, we have more spending money! But if BC is the only province in Canada or even in the world with 100% wage increases, BC companies will quickly become uncompetitive, which means MORE job losses.
So wages, while increasing, will increase gradually based on fundamentals. Which means, home prices must fall back to fundamentals. We bears only expect to see the natural equilibrium restored and that we are nice. Restoring back to price fundamentals is a reasonable expectation, but I hope it doesn’t act like Nasdaq where 8 straight years of down will make any bullish investor a bear, or like Japan house prices going all the way down.
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Mr. Simpleton Says:
July 4th, 2008 at 7:00 am
To me it’s simple:
The market becomes normal if a two income family with average salaries can afford to own a modest home, should they choose so OR ownership of said home costs same or less then renting it (like in: isn’t it cheaper to buy stuff then to rent it???).
This is my benchmark.
Do you think it’s unreasonable?
Because if it is then either our social/political/economic system is seriously flawed and/or has departed too far from what it was meant to be or perhaps it is because it is different here and no rules apply? I don’t think so.
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Anonymous Says:
July 4th, 2008 at 7:03 am
Comment #1 “I know of at least 4 west side realtors who each have just put their homes and at least 1 additional investment property up for sale in the past 7 days”
This is scary!!! How bad is it when 4 of the them “in the know” are listing their places?
I went to an open house recently and the listing agent has called a few times to see the place again and to put in an offer!!! I’ll better wait a bit!!!
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James Says:
July 4th, 2008 at 7:21 am
Why are you giving your contact info to a realtot?
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Spincycle Says:
July 4th, 2008 at 7:29 am
But if you’re not nervous about an overall recession, you’re naive, or living off a trust fund.
..or prepared. Are you living month to month or have a heavy debt load? Do you have no savings? Getting laid off would be a drag, but I’ve got enough saved up to live for a couple of years without income.
But lets be realistic, if Vancouver were plunged into a situation where there was no work I’d simply move to where there was work.
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VHB Says:
July 4th, 2008 at 7:37 am
Warren, thanks for your concern for me. I’ll be fine, thanks. I am not naive. I am just prepared.
Some bulls think that ‘everyone’ will be screwed because they assume ‘everyone’ is as unprepared for a downturn as they are. (Not accusing Warren of this.)
Again, we have been teased for 3 years about being ready for a downturn ‘too early’. Well, now that a downturn has arrived, don’t suddenly assert that bears are going to be sucked down with the overleveraged homedebtors. The boom created some winners and losers. The bust will do likewise, but shoes will be on other feet.
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pricedoutfornow Says:
July 4th, 2008 at 7:51 am
Mr. Simpleton-The market becomes normal if a two income family with average salaries can afford to own a modest home, should they choose so OR ownership of said home costs same or less then renting it.
AGREED! We’ve all been waiting for a downturn, not because we’re looking for some dramatic bloodbath but because we expect to be able to afford something that is so basic-a place to live. And if you’re a young and educated with cash in the bank, there should be no reason why we can’t attain that goal. This hasn’t been possible for the past few years. When you think of it, a house should just be a house, a place to live and raise a family, and maybe 30 years down the road, provide you with a bit of change to help with retirement (maybe). Not an “investment” which will make you a millionaire quickly. Well, soon enough we should be back to fundamentals and people won’t be so excited about real estate.
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Warren Says:
July 4th, 2008 at 7:55 am
I just wanted to bring up the fact that a recession is hardly something to be excited about, and house price declines are only a small part of it.
I have multiple income sources and a decent savings pile. I could live quite a while if I lost my job, but I’d rather keep making/saving money and retire early.
I’m sure lots of bears could survive without jobs for months, but that takes them right out of the market for a house even at bargain prices. That is all.
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bdk Says:
July 4th, 2008 at 8:10 am
The greedy speculators with modest incomes who’ve leverqaged themselves to their eyeballs will be the main losers here.
The simpleton warehouse worker who should have stuck with one studio but went and bought two will lose $6,000 in “value” and pay $2,000 to subsidize the occupant for deacades to come and might be able to avoid bankruptcy by working two or three jobs.
I have no sympathy for these greedy folks. I worked in real estate for years and years and despite what you hear about rich people buying real estate it was actually a lot of average families from the suburbs and single hairdressers who live downtown who were mortgaging and re mortgaging their principal residence to play a flipping game that they didn’t understand while arrogantly dismissing any intelligenct advice, these are the same people who won’t even buy balanced mutual funds because they consider them too risky.
It’s unfortunate that there is no risk tolerance assesment done before they sign away their life savings, it’s hard to have any sympathy when you see the fools talking about their “feelings” and what they “think” on this blog before going to their jobs in the warehouse, delivering pizza or in Rob a’s case working at starbucks.
Hey Rob are you one of the starbucks employees getting axed? Don’t worry there are a lot of cafe’s downtown, everyone knows this.
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snark Says:
July 4th, 2008 at 8:46 am
Warren, a recession doesn’t mean EVERYONE loses their job – even a depression doesn’t mean that. Business continues during a downturn, there just isn’t as much low-hanging fruit.
If we ever got to the point where everyone with a bearish opinion of the local market lost their job the big problem wouldn’t be that they wouldn’t be able to buy a house – no one would be able to sell a house or make payments, the entire system would collapse and thats not going to happen. All thats going to happen is that people who’ve gotten overly used to living on cheap credit, or think house prices will go up forever and is the only investment you need are going to find things a lot tougher.
Of course if you work in real estate or construction related sectors you might find things getting a lot tighter in the coming years, but its not like you don’t have a chance to start diversifying your skillset while times are still good.
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VancouverBanker Says:
July 4th, 2008 at 8:59 am
Finally it begins! I’m sitting on a nice down payment and I plan on buying a house on the west side for my gf and I to start having a family. We’ve been waiting to buy since we came back to Vancouver in late 2005, and suffered through millions of comments from idiots who told us prices would never drop, so I look forward to buying something when we bottom in late 2009 or 2010.
And purchasing it from an ex-bear who over-leveraged themself would be icing on the cake! I have zero sympathy for anyone who bought in the last few years, period.
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Anonymous Says:
July 4th, 2008 at 9:07 am
Matt,
What are you talking about? What 20% drop. 50% to 60% drop? Get real dude.
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jesse Says:
July 4th, 2008 at 9:17 am
“I’m sure lots of bears could survive without jobs for months, but that takes them right out of the market for a house even at bargain prices. That is all.”
Ah, but the stakes are higher for some than others. Bitter renter can survive without a job without going bankrupt. Harry Homeowner will not be so lucky.
There’s no turning back now. No way out. See you on the other side.
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freako Says:
July 4th, 2008 at 9:20 am
Some bulls think that ‘everyone’ will be screwed because they assume ‘everyone’ is as unprepared for a downturn as they are. (Not accusing Warren of this.)
That is one of the interesting things about this bubble. Historically, owners have acted in a more fiscally responsible manner than renters. But get the cause and the effect right. They are owners BECAUSE they are fiscally responsible. They are not fiscally responsible because they are owners.
Now it has reversed. Of recent buyers, I am convinced that they are overrepresented by fiscally irresponsible individuals, and vice versa.
Turning the world upside down may lead to some weird situations going forward. Will a block full of renters snub their noses at the trashy owners who just moved in?
If anyone was in doubt, I was being cheeky in the last sentence.
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snark Says:
July 4th, 2008 at 9:25 am
Matt, you say price declines won’t happen without significant job loss. As far as I know we’ve got a booming job market right now, so can you explain why benchmark prices dropped by $5,500 in June? I mean, I know thats barely anything, most people spend that on cigarettes and coffee, but still, when was the last time the Vancouver benchmark price dropped in June and why is it doing it now?
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freako Says:
July 4th, 2008 at 9:28 am
I just wanted to bring up the fact that a recession is hardly something to be excited about, and house price declines are only a small part of it.
Come on Warren. Nobody is exciting about people losing their jobs. However, they feel that the sooner our economy (and spending) adjusts to fundamental reality.
Did I wish for the Nasdaq bubble to end? Hell yes, because I KNEW that it was based on hot air. Would we be doing anybody any favours by letting it go on? No. Did I wish that the valuations were true and we had indeed had achieved a paradigm shift that would bestow prosperity on our entire society. Yes. But I know that it was not to be. It is the exact same with the RE bubble. I wish for the INEVITABLE correction to come and go, because that is what is best for all in the end. False prosperity is worse than no prosperity at all. Don’t confuse realism with pessimism.
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freako Says:
July 4th, 2008 at 9:30 am
I mean, I know thats barely anything, most people spend that on cigarettes and coffee,
Actually, it is ALL of the median PRE-TAX income. Add in interest, taxes, and what have you, and a May buyer had a sh*tty month (whether he knows it or not). Of course, and buyer pre April is still sitting on gains.
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Patiently Waiting Says:
July 4th, 2008 at 9:38 am
Is there any reason why a bank would reduce a HELC by $100K, other than fear of falling prices?
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Thums up2 Says:
July 4th, 2008 at 10:03 am
Bdk,
you priced out bear there is no discount for you,i have no sympathy either for these sitting out folks because there was an oppertunity to get in at the same time when other people got in now keep on sitting on the fences.Any body getting older than 35 year just forget about buying ever in your rest of life enjoy your life on rent now.
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blueskies Says:
July 4th, 2008 at 10:05 am
Is there any reason why a bank would reduce a HELC by $100K, other than fear of falling prices?
tightened credit availability:
banks are finding it harder and more expensive to get money and are very careful who gets access to it…..
debt deflation!
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chip Says:
July 4th, 2008 at 10:19 am
Real estate markets can get clobbered without job losses. In the US, unemployment only rose after the market started to crash. Anyone who doesn’t know this should be kept away from sharp objects let alone significant financial decisions.
But as far as jobs do affect real estate, Vancouver is in a unique position with some 85% of new jobs created in BC over the last several years occurring in construction. When the building stops, the job losses will be severe. Very severe.
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/dev/null Says:
July 4th, 2008 at 10:29 am
Freako said: “Historically, owners have acted in a more fiscally responsible manner than renters. But get the cause and the effect right. They are owners BECAUSE they are fiscally responsible. They are not fiscally responsible because they are owners.”
Amen.
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bdk Says:
July 4th, 2008 at 10:31 am
Thums, if I was over 35 and have parents who own millions of dollars worth of commercial and residential real estate and we both know the market is going down, why would one buy right now? I don’t want to lose $200,000 or $300,000 dollars and pay $2,000 more per month for decades to come.
Why do you think I’m renting again? My situation could be different from yuors. I’m suggesting average people DO NOT get over leveraged on real estate in Vancouver because you’ll lose ALL YOUR MONEY. It’s too late for you bevcause you’re an idiot and nothing gets into your brain. This is most likely because you are inadvertantly huffing paint industrial solvents at work. There is just no way anyone could be born as stupid as you.
you should write
“I think i try to be smart and now I go to work at warehouse and all my money goes to mortgage and I eat kraft dinner for dinner for decades to come while rpice go down and no immigration and boomers sell the houses theys own and no buyers and now I am a bum, but buy now because bargain and i am dumb and think good idea it is, market go up”
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Bob Says:
July 4th, 2008 at 10:35 am
Here’s some anecdotals from Abbotsford:
In Abbotsford I’ve heard from two different sources that there’s a delveloper of a housing development that just dropped the prices on his new houses 70-80K to $499,000.
A realtor was telling me that apparently listing prices are remaining pretty much unchanged, but deals are being made with price drops of as much as 13% as sellers are slowly coming to realise how difficult it is to sell right now.
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GM Says:
July 4th, 2008 at 10:48 am
Wow! Matt’s been given a hard time, and I get it, given his snide tone in his original post. I’m a long-time bear and reader of these blogs (since VHB early days), and I have every intention of buying when there is a SIGNIFICANT drop in price, and I think I’ll be well prepared to do so. That said, Matt has a good point that has often concerned me: it is highly likely that there will be significant economic fallout that accompanies falling house prices in BC, and some of us (like it or not!) are going to get slammed just as house prices become affordable. Clearly, BC has not been slammed by economic mayhem YET, but it is looming on the horizon all around the globe. I have friends who have longed to buy and have been putting up with insensitive BULL comments for years. These friends have been frugal and wonderful savers, but I am truly concerned about them being able to buy a house once prices meet with reason because they are self employed and provide a product that will not be popular in an environment where consumers are financially strapped. There is so much more than a housing boom / bust cycle going on here, and as much as I am cheering the recent drop in sales and run-up in inventory, we need to admit that there will be many people (even responsible bears)who will be hurt by global economic crisis.
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snark Says:
July 4th, 2008 at 10:56 am
GM, fair point but just like booms turn to bust there’s always a point when the bust turns around and the economy starts to recover. That could be 2 years away it could be 15, but even if things get real bad they won’t stay that way forever.
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VHB Says:
July 4th, 2008 at 11:05 am
GM: you’re right that many people–including bears–will feel some pain. Matt did invite us to apply his claim to ourselves when he said, “no one thinks it applies to them.” So, I took my own particular case to tell him he is wrong. But I accept your general point that some bears will be hurt too.
HOWEVER, given that there will be some pain, I would much much much rather be a debt free renter than a leveraged up homedebtor.
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Patiently Waiting Says:
July 4th, 2008 at 11:18 am
If there is 10% unemployment in a recession, there is 90% employment. I know some people drop out of the labour force, but you get the gist?
If we had a recession with double-digit unemployment at the same time as a housing collapse, we will once again see $80K condos in East Van and $200K SFH in New West. Even with a much reduced income, many of us will be in a much better position to buy.
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Drachen Says:
July 4th, 2008 at 11:27 am
“some of us (like it or not!) are going to get slammed just as house prices become affordable.”
Well, on the bright side of the equation at least we won’t get the double whammy of losing a job and having a huge mortgage. I’m not worried though, I’m self employed and my income is not dependant on the local economy to a great degree and my wife has tenure.
“Even with a much reduced income, many of us will be in a much better position to buy.”
I agree 100%, if one member of a couple loses their job and has to take a lower paying job you still have say 75% of the household income. With real estate below 50% of what it costs now it’s a no brainer that it’s easier to buy in a slump. There’s also the added bonus that the person who had to take the lower paying job will get a good position after the economy recovers which means making mortgage payments will be easy.
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jesse Says:
July 4th, 2008 at 11:28 am
“Did I wish that the valuations were true and we had indeed had achieved a paradigm shift that would bestow prosperity on our entire society. Yes. But I know that it was not to be.”
The difference being that some of the investment during the tech boom did go to productive uses. With housing there are just more houses, unless you consider stainless steel appliances an innovation.
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jesse Says:
July 4th, 2008 at 11:40 am
“Is there any reason why a bank would reduce a HELC by $100K, other than fear of falling prices?”
Also increased risk of default, directly through a specific applicant’s job being unstable, (or nonexistent) or generally poor economic outlooks causing a lender’s overall risk to increase. Even with home equity as collateral the bank still needs to make money off the interest or what’s the point.
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Mr. Simpleton Says:
July 4th, 2008 at 11:43 am
Recession? High Interest Rates? $2/l gas? Double-digit unemployment?
I say – Bring It On!
I’m ready.
Let’s see who’s left standing after the dust settles.
I come from a place where people were giving away generations worth of heirlooms/wealth/savings/jewelry etc. for a loaf of stale bread at some point in history.
The only people afraid of the market correcting to normal state are the ones who will be left with nothing but their “RE Investments” and a mounting, no longer manageable debt. Unless they can figure out a way to eat granite and stainless steel they better be soiling their pants now as there is nothing they can do soon but moan and bitch and scream for help and mercy.
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Burden of Proof Says:
July 4th, 2008 at 11:58 am
Warren Buffet said: “it is not until the tride recedes that you can see who has been swimming naked”.
With the RE market busting and recession clerly visible on the horizon, the bill for a decade long credit bubble is comming due and you’ll be surprised how many of your friends and neighbours were swimming naked.
If you were a bear over the last few years, you likely have hundreds of thousands in savings to buy distressed assets. If you are an over extended bull, you are SOL.
Times like this are just transfers of wealth from people without cash to people with cash.
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Aleks Says:
July 4th, 2008 at 12:18 pm
“Historically, owners have acted in a more fiscally responsible manner than renters. But get the cause and the effect right. They are owners BECAUSE they are fiscally responsible. They are not fiscally responsible because they are owners.”
I blame the reduced down payment requirements. A minimum 25% down payment is a pretty good test of fiscal responsibility. Not only does it give the lender some buffer before the equity turns negative, it also weeds out people who don’t know how to save. Giving out loans for hundreds of thousands of dollars to people who can’t even save up tens of thousands is a recipe for default.
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James Says:
July 4th, 2008 at 12:22 pm
Ok I don’t have hundreds of thousands saved but I have a tiny mortgage (by today’s standards less than 200k), a new fuel efficient car that is payed for and several months salary in the bank along with RRSPs and some equities outside of RRSP. What can I do now to get ready? Am I screwed?
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franko Says:
July 4th, 2008 at 12:28 pm
Hi Bob, and thanks for the anecdotals from Abbotsford.
As an ex-spec builder who keeps in touch with the gang that’s still active, let me assure you that the same thing is happening in Coquitlam and on the North shore. During the last coffee break with a bunch of builder buddies, I learned that most of these guys are not proceeding with new projects and are letting recently acquired permits expire. Unlike developers of large multi-unit projects, that could take a couple of years from commitment to completion, small-time house builders sometimes have the advantage of bailing out at the first sign of trouble.
Although most of these guys with unsold new houses are scared $hitless as not even price drops are generating much interest, one of the guys FINALLY had the subjects removed from a recent sale that enabled him to escape with only a small loss…or so he claims. Anyway, this guy was so happy, you’d have thought he just won the lotto. Needless to say, he sprung for the coffee and doughnuts.
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arit Says:
July 4th, 2008 at 12:56 pm
VHB said: “Some of us have spent some time (some would say too much time!) getting ready for what is coming. Now you tell us that we aren’t ready for what is coming? Believe me, we’re ready. We’ve been ready for a l o n g time.”
++1 VHB
When the going gets tough, the tough get going. I am with Simpleton. I want to see high interest rates, high fuel prices, credit bust! Blood on the street. The faster the better.
This will separate the wheat from the shaff.
After the dust settles, those left standing can meet here for a beer in the blogosphere.
By then we will need new blog titles:
“Vancouver post bubble”
“Vancouver un-real bargains”
“Vancouver bear advice”
“Vancouver apartment info”
“Financial advising and I told you so….”
“Vancouver Housing Blog – the resurrection”
Best regards,
arit
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freako Says:
July 4th, 2008 at 12:56 pm
That said, Matt has a good point that has often concerned me: it is highly likely that there will be significant economic fallout that accompanies falling house prices in BC, and some of us (like it or not!) are going to get slammed just as house prices become affordable.
Prices are high even for a very very strong economy. If our economy falters badly (ie. severe recession), housing will drop EVEN more. In other words, affordability WILL IMPROVE no matter what happens to our economy.
I presume that if somebody lost their job, they will be unable to buy. However, odds are that they will be employed long long before prices have gone up any significant amount.
The other worry is access to credit. I can’t see CMHC stop giving insurance any time soon, so any responsible renter who squirreled away his “equity” (rental savings), will be in a position to make a decent downpayment.
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freako Says:
July 4th, 2008 at 1:04 pm
The difference being that some of the investment during the tech boom did go to productive uses.
Yes, just like sh*t is a meal to flies, there is SOME value in everything. However, on the net worst excesses of the Nasdaq bubble fell into to the misallocation of resources domain.
With housing there are just more houses, unless you consider stainless steel appliances an innovation.
Well there are net benefits to those who stayed out because housing will be cheaper (renting and owning), but I agree otherwise.
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freako Says:
July 4th, 2008 at 1:07 pm
I blame the reduced down payment requirements.
I am in total agreement. Skin in the game is key. As I have stated before, if CHMC worked with a formula that required larger downpayments when price/rent multiple exceeds some threshold, this situation would never have gotten this bad. And ironically, it would have actually FULFILLED their mandate of improving affordability for those potential owners who have been prudent enough to squirrel away a down payment.
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freako Says:
July 4th, 2008 at 1:14 pm
OT Oh, I have floated this idea before, but it is topical with the carbon tax.
I suggest that the tax should be made revenue neutral by applying the tax towards basic auto insurance instead of income tax reductions.
It could cover a fair portion of basic insurance (perhaps all for a small older car). Insurance that was charged by size of car, miles driven and manner of driving is more efficient AND fair. Including insurance in gas pricing solves all these AND discourages EXCESSIVE auto use.
A few problems of course, such as out of province “smuggling” but overall I think it would be a positive.
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dingus Says:
July 4th, 2008 at 1:19 pm
“I blame the reduced down payment requirements.
I am in total agreement.”
And this goes to the whole “there is no subprime in Canada so all is good” meme. B*llsh*t, though to be Clintonesque, it depends what your definition of subprime is. At it’s broadest, it means lending to borrowers who until recently wouldn’t have qualified, and who are at risk of either default or of having to sell short in order to relieve financial pressure. I think 40 yr ams and 5% down fall into this category. How many 22 year olds have bought air space parcels with long term, high dollar mortgages with minimal dps? My guess from water cooler talk with the junior ‘business analysts’ fresh out of Cap College at my work is tons and tons. How many of these folks use HELOCs and credit cards to finance living expenses? Probably lots.
The problem is not limted to negative amortization loans. It is too much leverage to buy overpriced assets by those that should not be in a position to do so, and how that ultimately shakes out. If the economy, job market and housing prices stay relentlessly positive, and interest rates stay low, all is good. Obviously all of these conditions cannot persist indefinitely.
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Who Knows... Says:
July 4th, 2008 at 1:22 pm
Freako…
I totally agree with your #52 post… the CMHC was out to lunch or had other motives during this boom. They ran things extremely irresponsibly. Your suggestion would have helped people like me who were saving as hard as they could for a down payment as opposed to jumping in with a bigger mortgage (which I could have done.. at a risk)
however, I disagree with your post #53. The point of the carbon tax is to get people to pollute less (drive less). If the tax revenue was applied to car insurance, it might be revenue neutral, but it would be giving the money directly back to polluters. By giving EVERYONE money back on income tax and letting them decide how to spend it is better for the environment and more fair for all as it doesn’t benefit drivers only. I know I can’t wait for my income tax breaks… it’ll make my bike ride to work that much sweeter.
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freako Says:
July 4th, 2008 at 1:24 pm
it depends what your definition of subprime is.
It is common sense that we have shaky lending. How else could we have THE most expensive RE in North America with incomes below that of Windsor, Ontario? Only fools would be assuaged by semantic manipulation of reality.
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dingus Says:
July 4th, 2008 at 1:25 pm
AS long as we’re on the same wavelength, I’ve also thought that car insurance should be based on km driven — a simple odo check by the broker isn’t a huge deal. I believe some insurers in the states have this. A tax on that component? Why not.
Also, perhaps more options in terms of temporary insurance would be nice. You could own a full time commuter car and a weekend SUV for hwy trips. Or a 12 pack of single day insurance etc. Once you insure a vehicle full time, it tends to get used.
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jesse Says:
July 4th, 2008 at 1:38 pm
“The other worry is access to credit.”
CMHC reversing DP requirements would be a devastating shock. The only way for them to do it without excess carnage is to raise requirements 1-2% per year to bring it back. I can’t see how CMHC WON’T be required to change if they are haemorraghing money. The question to me is how they go about regaining fiscal autonomy.
Even with CMHC banks will not lend to anyone with a pulse. They make money off charging interest and if payments stop they need to eat the spread. If CMHC defaults become more common I am sure banks (and I believe CMHC too) will scrutinise borrowers that much more carefully.
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Raincouver Says:
July 4th, 2008 at 3:33 pm
*A buyer’s market in Vancouver still no bargain*
http://tinyurl.com/6gd9ly
According to The Real Estate Board of Greater Vancouver, Canada’s most expensive market is in “a buyer’s phase,” but the cost of an average detached home is still $305,878 higher than the national average.
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Aleks Says:
July 4th, 2008 at 3:37 pm
I think part of the problem is referring to it as “the subprime mortgage crisis” in the US. The problem was loose lending standards due to the securitization of the debt which encouraged mortgage originators to sell as many loans as possible without having to keep any cash on hand to back them. Subprime was the first segment to fall, but the problem is not even remotely isolated to subprime. Alt-A is already crumbling and there are a lot of so-called “prime” loans that are going to go into default.
And on top of that, existing homeowners took out HELOCs or refinanced as their home’s assessed value increased, driving their debt ratio up. Even the old adage that the majority of owners bought before the bubble and will be fine after the crash may prove dramatically wrong. Watch the debt counselling shows, there are people who refinanced multiple times in the last five years on top of running up credit card bills and now can’t refinance. Meaning, one assumes, that even though they bought before the bubble, they don’t have any equity left in the house to borrow against.
If the problem really was limited to subprime, then a case could be made for Canada being different. However, the problem is loose lending practices, and we have that in spades. Ever seen the posters for Coast Capital that say “We’ll approve just about anyone”?
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Drachen Says:
July 4th, 2008 at 3:46 pm
Freako
“Including insurance in gas pricing solves all these AND discourages EXCESSIVE auto use.”
You’re missing one obvious problem. What about the family or individual who decide to trade in a car for a bike or public transit? They should get no benefit for that?
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Rob A. Says:
July 4th, 2008 at 4:23 pm
I think that a soft landing in the housing market will be good for downtown. There are a lot of construction workers hanging around in my favorite cafes taking up space. It will be good when they are gone, they don’t dress very well IMO.
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Anonymous Says:
July 4th, 2008 at 4:38 pm
Rob A.
Why should you care….you’re moving to Toronto….remember?
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beatstreet Says:
July 4th, 2008 at 5:17 pm
This is still a sellers market…because if you can sell you should! If you can buy, you should hang tough.
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scc Says:
July 4th, 2008 at 5:37 pm
re:carbon tax
The issue I have is that these taxes pretty much go into general revenue. These taxes should be going into improving our transport infrastructure and technology (and for environmental protection in the case of the new carbon portion). If you want people to drive less, alternatives need to be funded. How about letting people write their bicycles off if they don’t have a car insured for to/from work and all transit fares? Sounds sane to me if they’re already letting you write off political contributions.
re:CMHC
As a crown corp selling insurance backed by taxpayers offering zero down and 40yr product poured gas on the hot housing market. If their mandate was to facilitate sustainable and affordable housing, they have failed.
Externally, it appears that they just following what the other MBS and insurers market participants were doing. If they didn’t play ball, they would have no market (as they should have). I liken this to the telecom companies during the bubble conducting untraditional/risky business in an effort to keep pace with Worldcom only to find out worldcom’s results were a sham.
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rob a Says:
July 4th, 2008 at 5:52 pm
Don’t worry guys my job at the cafe is safe LOL LOL
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patriotz Says:
July 4th, 2008 at 6:17 pm
Vancouver is in a unique position with some 85% of new jobs created in BC over the last several years occurring in construction.
Not that unique, Piggington has pointed out a similar situation for San Diego and I’m sure the same applies to Phoenix, etc.
http://www.voiceofsandiego.org.....ection.txt
But 85% of new jobs in BC is half again as much as San Diego, which means that BC is probably headed for an even bigger bust.
And as for the root cause of the US bust, Chris Thornberg has (true to form) pointed it out – the prices were just too damned high relative to rents and incomes. That’s all there is too it. Everything else is just details.
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Alistair Cookie Says:
July 4th, 2008 at 6:33 pm
@James Ok I don’t have hundreds of thousands saved but I have a tiny mortgage (by today’s standards less than 200k), a new fuel efficient car that is payed for and several months salary in the bank along with RRSPs and some equities outside of RRSP. What can I do now to get ready? Am I screwed?
What do you think?
Most who bought in the last few years are in a totally different ballpark than you. They bear their fair share of the blame for prices going through the roof.
The biggest culprit of course is Alan Greenspan who will be vilified in future history books.
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Alistair Cookie Says:
July 4th, 2008 at 6:38 pm
@VancouverBanker We’ve been waiting to buy since we came back to Vancouver in late 2005, and suffered through millions of comments from idiots who told us prices would never drop, so I look forward to buying something when we bottom in late 2009 or 2010.
Those same idiots will be telling you you should not be buying too!
The thing is, this downturn will not be a U-shaped recession, it will be an L-shaped one. Expect prices to not bottom out until 2012 at the earliest.
Of course that does not mean buying in 2010 is a bad move if the price/property is right, but once prices bottom, it will be a long, long time before there is any movement up.
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Alistair Cookie Says:
July 4th, 2008 at 6:49 pm
@Mr. Simpleton
I will find it very hard if not impossible to show compassion towards anyone who fell into the trap of buying in Vancouver the last few years (people upgrading aside… kind of) and goes negative home equity or loses their home. Everyone makes their own bed, this includes silly family members whom I warned.
I may actually in some cases ask them how they didn’t see this coming while shaking my head at them. I may even blame them in some part for my not being inclined to buy in the early 2000’s because they were a part of driving up the cost of home ownership.
As far as job loses goes, it will be very sad and no I do not wish this on anyone. Losing a good paying job is different than losing an overpriced, unfordable home. The sad part is everyone here will know someone affected by the coming job losses.
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freako Says:
July 4th, 2008 at 7:04 pm
If the tax revenue was applied to car insurance, it might be revenue neutral, but it would be giving the money directly back to polluters. By giving EVERYONE money back on income tax and
True. Why not do both? They are not mutually exclusive.
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bdk Says:
July 4th, 2008 at 7:07 pm
Sorry I almost let the troll drag the real topic off post:
The Market has crashed, 50% drop overall and 70% at TV Towers
Satv/krissh/informer/browntown/thumsup=
http://vancouvercondo.info/for.....3&t=48
Back to the real topic, the market is finished and anyone who thinks otherwise has a surprise coming. Read the links trolls, it’s indisputable.
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freako Says:
July 4th, 2008 at 7:08 pm
Externally, it appears that they just following what the other MBS and insurers market participants were doing. If they didn’t play ball, they would have no market (as they should have). I liken this to the telecom companies during the bubble conducting untraditional/risky business in an effort to keep pace with Worldcom only to find out worldcom’s results were a sham.
Well if the private sector is doing your job for you, get the f*ck out of dodge and let them do it.
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Toto Says:
July 4th, 2008 at 9:48 pm
It’s really funny how people in this forum are so keen of prices going down, Get Real folks, thanks mainly to your liberal immigration rules and the beauty of Vancouver people will keep coming and guess what, prices will not go down for years to come. Soft landing is what will happen.
This city has created a real dual society of have’s and have nots. The rest of Canada, may be a different story, not Vancouver.
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patriotz Says:
July 4th, 2008 at 9:53 pm
Yet another person who simply does not understand asset valuation.
House prices like stock prices must, repeat must, be supported by earnings.
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freako Says:
July 4th, 2008 at 10:02 pm
Translation of Patriotz take on Totroll’s post:
Why do these liberal rules and physical beauty only affect prices, but not rents?
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stagnate Says:
July 4th, 2008 at 10:43 pm
interesting article in the west ender today about rental rates in vancouver, essentially rents have now doubled since 2000. provincial rent controls have saved some, with others left with percentage increases comparable or higher than ownership values. i would say rents and market values have both hit the affordability ceiling at this point and could not go higher irrespective of demand. those that could afford to buy have, and will continue to do so (with some exceptions of course, ha ha).
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freako Says:
July 4th, 2008 at 10:57 pm
interesting article in the west ender today about rental rates in vancouver, essentially rents have now doubled since 2000.
I really doubt that apples for apples market rents have doubled.
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Anonymous Says:
July 4th, 2008 at 11:26 pm
essentially rents have now doubled since 2000.
Begging rents on craigslist or actual rent people are paying? Statscan figures don’t agree from what I’ve seen and reality doesn’t either. I’ve moved 3 times since 2000, each time further west and though I’m paying twice the rent I have more than twice the space / view / amenities / etc – in fact no one I know has seen their rent double for equal space in that time. At most It seems to be around 20% increase which is in line with inflation. With the way prices have moved rent should have gotten MUCH more expensive.
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Anonymous Says:
July 4th, 2008 at 11:28 pm
I agree with SCC on the carbon tax issue – if the goal is to get people out of their cars its time we improve transit and alternatives. Why not make transit free? This city has an embarrasingly bad transit system and lack of bike lanes. Most other cities I’ve been to in North America and Europe best us on both those fronts.
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Anonymous Says:
July 4th, 2008 at 11:30 pm
Soft landing is what will happen.
Hmm.. that sounds familiar, where have I heard that before?
.. Oh yeah! They said that in EVERY OTHER CRASHING MARKET! Thats where I’ve heard it before!
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patriotz Says:
July 4th, 2008 at 11:38 pm
essentially rents have now doubled since 2000
You mean places like $1300 / 2br – Bedroom Suite for Rent (Kits) would have rented for $650/month in 2000?
I don’t think so.
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betamax Says:
July 5th, 2008 at 12:06 am
This city has created a real dual society of have’s and have nots.
That’s what Robert Toll said about the US before housing crashed and his company’s stock crashed more.
Keep dreaming.
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Matt Says:
July 5th, 2008 at 12:13 am
I think you are all unfairly painting me as a bull. I have no aspiration to promote real estate market participation in Vancouver. I have great disdain for posters such as Thums Up, Krrrish, dosh (who are all probably the same person anyway) and all the other assholes who are deliberately posting nonsense for the purposes of their own (perceived) financial gain.
With respect to VHB’s question about employment, there’s a couple reasons why I think home owners are unlikely to sell in a bear market without job losses. First, homes are an extremely emotional purchase. For some people it symbolises an important stage of their lives where they can lay down roots and start a family, much as their parents and grandparents did. For others, it is a symbol of material status and a significant reason that led to their decision to purchase real estate included impressing their friends.
I consider these two extremes the dichotomy of the market psychology of Vancouver. (Indeed, there are speculators however many of these people live outside the country and make their money in real economies.) In both cases, the impetus for buying real estate was irrational therefore it seems to me that it would be unlikely that an irrational home owner would be keeping an eye on the market, planning for the long term benefit of his financial well-being.
Indeed I believe it is the case that these people have no intention of selling simply because it would mean an end to their idyllic lots in life. Negative equity is meaningless to them. They bought homes they could barely afford, knowing full well they could barely afford them.
So what is left that could crow-bar are naive Vancouverites from their homes? It certainly isn’t good financial sense. That leaves us with money, or rather the lack of it. Besides death, terminal illness or divorce, unemployment is probably one the most cataclysmic family malaise. None of the preceding three events are affected directly by the performance of the economy. A sudden loss of income/unemployment obliges one to take a long gaze into the abyss. At this point, the home owner must decide whether to keep living in a dream or take appropriate measures to escape financial ruin.
A few job losses here or there are unlikely to cause a precipitous decline. I think it would take something dramatic, such as an Asian recession to bring Vancouver’s real estate market down to a 50% decline. I do hope I’m wrong.
Another reason why I don’t think that we’re likely to see large declines in housing prices is that banks simply don’t want to deal with foreclosures and will do everything in their power to keep the mortgager paying for their now worthless home. It costs them too much money to take away a house from someone who’s just lost their dream. The property is likely to end up vandalized requiring costly cleaning fees or even renovation. There is also an additional cost to the bank to hire an agent to sell the home, in a market trough of sales.
The point which I keep trying to get across to the bears on this blog is that a massive decline in real estate prices hurts all of us. It’s an indicator that some economic event is taking place that will make all of our lives harder. The market is relaying information to you that something is drastically wrong.
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Matt Says:
July 5th, 2008 at 12:16 am
Comment #23, VancouverBanker,
Are you sure that your schadenfreude isn’t premature?
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patriotz Says:
July 5th, 2008 at 1:10 am
there’s a couple reasons why I think home owners are unlikely to sell in a bear market without job losses.
They haven’t been selling in the US (or Alberta) either. So how come prices crashed?
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patriotz Says:
July 5th, 2008 at 1:13 am
Hint: market prices are determined by those who are buying and selling, not those who aren’t.
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Matt Says:
July 5th, 2008 at 2:20 am
patriotz, I believe there is evidence to support my claims. The job loss statistics are starting to mount in the US.
http://www.baltimoresun.com/bu.....3839.story
“More job losses are coming through the remainder of the year. The economy has lost just over 400,000 jobs since the start of the year and will lose another 400,000 by year’s end,” said Mark Zandi, chief economist for forecaster Moody’s Economy.com. “Behind this pessimism are the broad-based job declines across most industries and regions of the country.”
http://www.economist.com/marke.....d=11543614
The surge in the oil price followed figures showing that America’s unemployment rate had risen from 5.0% in April to 5.5% in May, the biggest monthly rise for 22 years.
http://www.ft.com/cms/s/0/c8bb.....07658.html
The US lost jobs in June for the sixth month in a row and jobless numbers remained elevated, signalling an continuing deterioration in the labour market and helping to push back thoughts of an increase in interest rates.
“The net number is grim,” said Ian Shepherdson, an economist at High Frequency Economics, adding there was “worse to come”.
I have no idea what’s happening in Alberta. Thanks for the hint by the way.
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Anonymous Says:
July 5th, 2008 at 5:59 am
Mtt says: “The market is relaying information to you that something is drastically wrong.”
Yes, this is true. It’s relaying the same message when prices become completely detached from economic fundamentals, which is exactly what the bears have been saying all along: “Something is drastically wrong with home prices in Vancouver”
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alexcanuck Says:
July 5th, 2008 at 7:43 am
Pesky statistics are raining on Liberals’ economic parade
http://tinyurl.com/652f9t
From Vaughn Palmer in Thursday’s Sun. Not exactly new news, but well told and in MSM on how thin and lonely our “Booming Economy” actually is.
Resource and goods-producing industries down. Exports in decline. Private sector investment stagnant. So what accounts for the good news on the economic front?
Provincial growth is mainly a result of the boom in residential construction, the thriving service sector and government spending, according to BC Stats.
Matt especially may want to read this. If he doesn’t want to be unfairly painted as a bull he should know how and why an economic downturn could possibly take place here. Take out construction and HELOC supported frivolous consumption and we are in a serious recession.
I hate booms. Booms are terrible for the real and longterm economy. It’s just like those wild house parties that happen when the parents go away. Spend years building a nice place, well stocked wine cellar, respect from your neighbors, beautiful yard, etc. Go away for one weekend and the place is trashed, windows smashed, fine french wine flavoured vomit on the carpet, stereo stolen, tv smashed, etc. In the case of BC you can add that the savings account looted to pay for the party.
The liberals boast of the budgetary surplus all the time, it’s just accounting smoke and mirrors. Total taxpayer supported debt is the figure that matters, it includes such things as crown corp. debt, P3’s future payments (to be fair, add fees you’ll be paying directly to those P3’s). Using that figure, total taxpayer supported debt, the Liberals have been spending your money like drunken sailors, all the way spending more of your taxes to proclaim their fiscal responsibility. And sending me a hundred dollars of my own money (add shipping and handling) as a bribe! Also selling off assets and spending the capital. You’re not supposed to sell assets to support consumption during good times. Fiscally responsible, my ass!
Yes, it feels good to whip out the Visa card and throw a party, but just wait for the bill and hangover to arrive.
I don’t think the NDP are much better, BTW. I throw my vote away on the Greens, they are the only ones who would plan based on what is best for the grandchildren, not the next election. At least until they take power!
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alexcanuck Says:
July 5th, 2008 at 7:53 am
My links to support my Liberal “Fiscal responsibility” rant. I don’t make this stuff up, or get it from press releases and advertisements.
http://tinyurl.com/5tysmd
The Tyee from 2004
http://tinyurl.com/5efe5d
The Vancouver Sun from February this year
They haven’t changed their spots much.
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Spincycle Says:
July 5th, 2008 at 8:12 am
but Matt, the job losses in the US are starting to mount well after the peak of the housing market – prices simply got too high and started to correct when future demand dried up. A house price decline can simply indicate that prices where too high. If people have been relying on overpriced homes for extra debt based spending and recalibrating their view of economic reality based on bubble prices THATS when the fallout becomes a problem.
I suspect in this regard Vancouver is not that different from the US bubble cities. It’s a matter of semantics, but it seems reasonable to say the unsustainable price rise is as much to blame as the inevitable price decline.
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Thums up2 Says:
July 5th, 2008 at 8:13 am
Hey Matt you drunken head rat,
B.C. Economy countinue to grow above the current level because Goods and Services are interdependent so most of you domestic idiots can not harm our economy you fucked up idiot the pace you guys are experience- is already at the bottom for this decades,
If you did not lose your job already most likely you will never lose it again for decades to come,Any body who feel the fear of job loss can buy a job loss insurance got it?
btw i knew you are a bear but your own counterparts attacked you to burn your ass you dum head i suppose to correct them but #84 tells me you deserve that shh you got from every one else.
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Warren Says:
July 5th, 2008 at 8:21 am
alexcanuck,
I’m no liberal defender, but that article says debt is up 8.2% in 7 years. That’s less than inflation. Our income taxes have decreased dramatically since the liberals came in to power. I’m pretty sure budgets have been balanced for the last few years. I’d like to see some debt repayment myself.
As usual, the Tyee has a pretty slanted take on the issues.
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stagnate Says:
July 5th, 2008 at 8:24 am
a big part of the rent doubling is due to the rental stock changing (ie new investor owned condos). more upscale rental stock creating sizeable increases in median rents. probably accounts for half the doubling, i would think a generic one bedroom rental apartment in mount pleasant 8 years ago would have rented at 650, now would probably go at about 950. the west ender did not get very technical in their assertions.
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alexcanuck Says:
July 5th, 2008 at 8:51 am
Warren: Read more carefully.
The Tyee is from 2004, the second link is this year. I chose one older, one newer, one left wing, one right wing. I really try to get a balanced view from multiple and diverse sources. Far too easy to stay in a comfortable bubble, only listening to those voices who reinforce your views. One ends up either like krish or bullish Dave (Hillary) like that.
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freako Says:
July 5th, 2008 at 9:14 am
Why not make transit free?
As right wing as I am, I agree with that. Build it out and subsidize the hell out of it. People who take transit instead of driving confer external benefits on society. In doing so they incur costs of their own (inconvenience, increased commuting time). The LEAST we could do is to remove their monetary commuting expenses to token amounts. If we include externalities, public transit commuters are the ones subsidizing drivers.
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bdk Says:
July 5th, 2008 at 9:58 am
Stagnate, you are correct.
You can still rent a studio on Barclay for $740 downtown right now. The units with 7 appliances,pool,concierge, U/G parking, insuite laundry.
in 2001 the same 615 sq ft one bedroom rented for $1100 and are now $1300, the unit is 7 years older. The tenants who moved in 7 years ago are paying approximately $1320 with the legal increases.
The newer units haven’t increased too much but the older buildings with no amenities or security have.
If you google Hollyburn Properties they have taken a lot of flack for kicking out tenants and “renovating” and then jacking the rents up for old buildings as high as the newer buildings.
A 2 bedroom in Sunset Plaza, on Beach and Bute, was $2000 8 years ago and you’d be paying $2250 if you were to rent it today. Why someone would pay that when they could go to Parkwest 2 for $2300 and have new appliances, laundry, security, pool, gym etc. who knows.
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bdk Says:
July 5th, 2008 at 10:00 am
http://www.canada.com/vancouve.....mp;k=74813
There are stories going back for years about these people.
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blueskies Says:
July 5th, 2008 at 10:08 am
editorial from the Van Sun:
http://tinyurl.com/6op77t
the next six months:
sphincter tightening adventures in CDN markets
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freako Says:
July 5th, 2008 at 10:11 am
Matt, I don’t think anyone doubts that the VAST majority of owners will manage to keep their homes. What you don’t grasp is that prices are set at the margin. If demand is sufficiently low, prices can collapse even without widespread foreclosures.
The point which I keep trying to get across to the bears on this blog is that a massive decline in real estate prices hurts all of us. It’s an indicator that some economic event is taking place that will make all of our lives harder. The market is relaying information to you that something is drastically wrong.
Don’t confuse the messager with the message. Do you know what is wrong? The stinking real estate bubble. That market relayed that message the moment prices ran away from rent. Taking away something that wasn’t rightfully yours may be unpopular, but it is the right thing. Those who porspered because of a direct or indirect consequence of the housing bubble will have to pay the piper. That is just the way it is.
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dingus Says:
July 5th, 2008 at 10:51 am
freako:
Agree wholeheartedly with your post #97. I spend about 3 bucks on gas getting to work and back. The transit fare is $6.50, involves 2 buses, 10 minutes of walking and an extra half hour – 45 minutes of time each way. I’d have to be some sort of eco-martyr to take transit. The car is already insured, I don’t pay insurance based on use (I would save a few pennies in insurance for not using it as a commuter car, but get real), so there’s no disincentive to drive.
The problem with making transit free is that you get stories in the media about the “subsidy” taxpayers pay for transit, given that fares don’t cover the full costs of ridership. Yet no-one talks of “subsidies” for drivers, who pay ZERO (in direct costs) for roads. It’s similar to housing reporting. The core readership owns houses, pays taxes and drives, and that sort of reporting meets with a receptive audience.
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pricedoutfornow Says:
July 5th, 2008 at 10:59 am
It’s true, prices are not set by those who aren’t selling, but by those who are. Guess how much your house/condo will be worth if a couple desperate sellers in your neighbourhood cut the price by a fair bit? You got it, it drags the whole area down. Good luck trying to get $400k for that condo when some speculator had to drop the price to $200k. It all falls down…
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Patiently Waiting Says:
July 5th, 2008 at 11:06 am
I favor some reductions in transit fares (up to 50%) alongside significantly improved service. Suddenly removing (or mostly removing) transit fares will cause a huge stress on our underfunded transit system.
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patriotz Says:
July 5th, 2008 at 11:07 am
The point which I keep trying to get across to the bears on this blog is that a massive decline in real estate prices hurts all of us.
Baloney. It hurts nobody except speculators and the RE industry.
If you own a house indefinitely, the value of that house to you is its fundamental value based on equivalent rent, not the market price, whatever it may be from time to time.
The current RE bubble in BC is causing a massive warping of the BC economy toward excess RE investment, damage to non-RE businesses, and excessive consumer spending and indebtedness.
The problems we are seeing now in the US are due to the bubble, not to its end, just as drug withdrawl symptoms are due to the addiction, not going without drugs.
The sooner this idiocy ends, the better, and thankfully it seems clear that the end is now underway.
Oh and one more thing – your tone seems to indicate that the bears can somehow stave off the collapse by changing their tune. Are we supposed to run out and buy just to keep this circus going?
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Patiently Waiting Says:
July 5th, 2008 at 11:17 am
This story from Tsawwassen shows how how entitled homemoaners worried about property values can keep the media’s attention by creating false issues tugging at our heart-strings:
http://tinyurl.com/6kl4a5
Just like the fools who are mortgaging themselves to foreclosure, these people are responsible for their circumstances. If they were worried about power-lines hurting their children, they wouldn’t have bought there in the first place. According to the story, they also rejected underground lines in the past.
Get used to this manipulation; you’ll see more of it.
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Alistair Cookie Says:
July 5th, 2008 at 11:34 am
@Matt The point which I keep trying to get across to the bears on this blog is that a massive decline in real estate prices hurts all of us.
This would only be a true statement when affordability levels are realistic, unlike they are now.
The inverse in Vancouver’s case is true; a massive increase in real estate prices hurts us all. This has led to:
- massive credit bubble
- massive consumption bubble
- soon to be massive foreclosures
- etc
A stable price market instead of a bubble would have made just as many people happy.
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Alistair Cookie Says:
July 5th, 2008 at 11:47 am
About the transit/carbon tax issue:
Years ago I was also faced with a bus commute that was longer, more costly and generally more inconvenient than driving my car to work. Now luckily, I get to ride my bike in.
I feel that the entirety of the carbon tax, should be applied to transit infrastructure and reducing the cost of taking public transit. Further, I also feel that transit should be free for the BC public (tourists and non-residents should pay). In other words, yes, subsidize the cr&p out of it.
One further point I’d like to make is that a vehicle consumes the most fuel during acceleration, and it pollutes the most while idling (newer and hybrid cars aside). That said, all roadway infrastructure improvements should be designed around eliminating as many red lights as possible. This will reduce both fuel consumption and pollution, and have the added benefit of reducing commuting times.
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scooter Says:
July 5th, 2008 at 1:30 pm
If this government really cared about our carbon footprint/reducing pollution/saving the environment it wouldn’t be spending OUR money on twinning the portmann bridge. The increases in transit fares are another sign on how hypocritical those idiots are… We have so much traffic congestion, the transit system is pathetic and all their doing is trying to make you buy some fluorescent, mercury filled light bulbs or super-expensive hybrids (which btw are not as eco-friendly as everyone wants us to believe)… like that’s gonna make a difference.
We are lied to every second of every hour of every day, and we believe it, bunch of suckers we all are…
I bought a 50cc direct injected sooter last fall that gives me a minimum of 85mpg, has almost no emissions, uses 5 liters of gas a week to get me to and back from work everyday.
My car is now parked and only used sporadically on weekends and I got ABSOLUTELY NO INCENTIVE, NO REBATE and NO DISCOUNT whatsoever for doing as much for the environment as I possibly could.
Bunch of bullshit, that’s what it is.
We all know gas taxes are supporting this fu**ing government and looks to me like the more Hammers on the road the merrier.
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scooter Says:
July 5th, 2008 at 1:36 pm
I meant Hummers…
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VancouverGuy Says:
July 5th, 2008 at 1:58 pm
“The liberals boast of the budgetary surplus all the time, it’s just accounting smoke and mirrors. Total taxpayer supported debt is the figure that matters, it includes such things as crown corp. debt, P3’s future payments (to be fair, add fees you’ll be paying directly to those P3’s). Using that figure, total taxpayer supported debt, the Liberals have been spending your money like drunken sailors, all the way spending more of your taxes to proclaim their fiscal responsibility. And sending me a hundred dollars of my own money (add shipping and handling) as a bribe! Also selling off assets and spending the capital. You’re not supposed to sell assets to support consumption during good times. Fiscally responsible, my ass!”
Total taxpayer supported debt is NOT the key figure. The debt of a crown corporation is not the government’s debt. Why? Because it is supported by your fees, not your taxes. If we had private utilities, you would not count the debt of the utility as taxpayer supported debt. A crown corp is the same thing.
Debt is not a bad thing if it is being used for capital investment rather than current consumption. The whole point of going to accrual accounting instead of cash accounting is so that the budget is NOT smoke and mirrors. It is so that you can see how much is being spent on current services, including capital charges and depreciation on assets. If a government is able to make capital investment, still run a budgetary surplus based on accrual accounting, and lower taxes at the same time then that is fantastic, regardless of increases in debt. Why? Because that means the increases in debt were to pay for capital investment, not to pay for current consumption. So long as it was a good investment, which can be questionable, then it works.
Our economic performance is a different story, but don’t hammer people for running a budgetary surplus and increasing debt if it’s to build the hospitals and highways we need for the future.
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scooter Says:
July 5th, 2008 at 2:08 pm
VancouverGuy said:
“Our economic performance is a different story, but don’t hammer people for running a budgetary surplus and increasing debt if it’s to build the hospitals and highways we need for the future”.
I believe that more highways is the last thing we need.
113 X Spec-Builders Feel The Heat - When Escaping With “A Small Loss” Is The Same As Having “Won The Lotto”. « Vancouver Real Estate Anecdote Archive Says:
July 5th, 2008 at 2:08 pm
[...] July 2008 · No Comments Spec builders have become aware of the slowing market. This from Bob at Vancouver Condo Info July 4th, 2008 at 10:35am [...]
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VancouverGuy Says:
July 5th, 2008 at 2:26 pm
Maybe I should have said bridges then. We need larger bridges to reduce congestion.
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blueskies Says:
July 5th, 2008 at 3:25 pm
I believe that more highways is the last thing we need.
add to that list the airport infrastructure expansion …
in an expensive energy future
will Disneyland be a goto destination?
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alexcanuck Says:
July 5th, 2008 at 5:02 pm
We need larger bridges to reduce congestion.
Or less SUV’s carrying one person.
And expensive fuel and better transit will accomplish that just fine. Southern California has the best freeway system in the world, the longest commute and the worst traffic.(Worst traffic in US/Canada, too many other factors in say, Bangkok, to fairly compare.) You CAN”T build your way out of congestion, just doesn’t work.
And as far as taxpayer supported debt, it is still money I have to pay over the next 40 years. I don’t see the distinction, either way it’s out of my pocket with no choice in the matter. Tolls on a new or even existing bridge is different, I do have a choice of where I live and where I work, and the more expensive the unsustainable choice is the better. Fuel prices and WORKABLE transit alone will do it more simply, though. The sprawling suburbs are going the way of the dinosaur, like it or not. Look to European cities for our future.
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patriotz Says:
July 5th, 2008 at 7:23 pm
The debt of a crown corporation is not the government’s debt. Why? Because it is supported by your fees, not your taxes.
That is true only if the cc is a viable business entity earning competitive return on investment. BC Hydro, for example. ICBC is another although in this case it has no debt.
Otherwise taxpayers have to make up the shortfall in the form of subsidies to the cc. BC Transit being a prime example, White elephant owner BC Pavilion Corp (BC place stadium, convention centre) being another.
As has already been pointed out, future obligations to P3’s are another form of debt, e.g the Canada line. BTW local taxpayers, not the P3 operator or BC government, are on the hook if its ridership fails short of expectations. Watch that property tax bill.
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betamax Says:
July 5th, 2008 at 9:37 pm
It’s stunning how much armchair economics are expounded on this blog yet no one thinks it applies to them.
A conclusion jumped to on scant evidence. Most bears are prepared, and it’s a topic done to death long ago and so doesn’t get rehashed much — till someone like you comes along and thinks he’s the first to think of it.
Personally, my job is recession-proof, though my wife’s isn’t. No worries, we’ve already saved a huge downpayment over the last few years, and we’ll buy what we can afford to make payments on my income alone, which is not inconsiderable.
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VancouverGuy Says:
July 5th, 2008 at 11:12 pm
“Or less SUV’s carrying one person.
And expensive fuel and better transit will accomplish that just fine. Southern California has the best freeway system in the world, the longest commute and the worst traffic.(Worst traffic in US/Canada, too many other factors in say, Bangkok, to fairly compare.) You CAN”T build your way out of congestion, just doesn’t work.”
I think it’s fair to build when facing congestion is the construction is supported by tolls. If the expansion is supported by a toll, as in fully supported without government financing, then the project should go forward. For untolled projects people do a whole ton of studies, etc… and who knows what the right answer is. But if you are fully supporting a project through a toll, then the project is viable just based on user demand.
People choose to commute to work and live far away. Maybe they do so because of high real estate prices in the city, but it’s their way of saving money. There is no reason to punish them MORE because they already have to move far away from where they work. Maybe the European way is the way of the future. But we should let the market decide. Build viable projects that are self-supporting, and then let things evolve from there.
I’m all for increasing transit. I think transit is great. And I don’t need a car, because I live and work downtown. Not only do I not need a car, I don’t own a car.
“And as far as taxpayer supported debt, it is still money I have to pay over the next 40 years. I don’t see the distinction, either way it’s out of my pocket with no choice in the matter.”
Not for something like BC Hydro, or BCTC, or the other crown-corps that are self sustaining, like BC Ferries… I agree with the comment that crown-corps that are not self sustaining should not fall in the same category.
BC Transit, from what I can see, is not self-supporting. Translink is not self-sustaining (ie transit fares are not sufficient to support ops), but that’s because a lot of transit would not be in place without subsidization… subsidization that a lot of people encourage in order to reduce traffic.
And yeah, P3s that are not user-supported are a liability for the public, although technically not debt. Should be treated pretty much the same way though for accounting purposes.
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Matt Says:
July 5th, 2008 at 11:46 pm
#101, Freako,
Not for one second am I saying that a decline in prices won’t happen. I’m not trying to dispel the fact that there is a real estate bubble either. In my view the problem is that many people who are wishing for large declines in prices don’t know what they’re wishing for and if we were to experience a relatively sudden drop of say, 35% in a year, that’s the economy’s way of telling us we’re all in a world of pain, above and beyond the corrective action of a deflating bubble. In any case, I think you might get your wish as there are whisperings in the financial press about global stagflation.
It’s disturbing to read so many comments from people who wish financial ruin on their fellow citizens. It seems as though many of you are so upset that you can’t afford a home, someone deserves to pay a price. This logic is appalling.
I suppose I shouldn’t be surprised at how catty Vancouverites are. Consider that the Economist Intelligence Unit consistently rates Vancouver one of the best places to live in the world yet the blight of the Downtown Eastside has been permitted to fester for the last 30 years. Never mind that no one noticed the disappearances of several streetwalkers for over a decade. These people probably deserve this pathetic existence, don’t they? As long as they aren’t blocking the magnificent view of the mountains from one of downtown Vancouver’s much lauded cafes or restaurants, who cares?
As an aside, I find it interesting that whenever a Vancouverite tries to describe what makes Vancouver a world class city, he always mentions the cafes and the restaurants. Whereas if you were to ask someone what makes San Francisco, NYC, London or Tokyo a world class city, the answer is likely to include a description of its economic well being, or its primary means of economic growth.
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patriotz Says:
July 5th, 2008 at 11:51 pm
It’s stunning how much armchair economics are expounded on this blog yet no one thinks it applies to them.
You’ve got it completely ass-backwards. It’s the bulls who think economic principles – most notably the fundamental law of investing, that an investment is only worth the value of the income that it brings in – don’t apply to them.
But people living in a fantasy world always think it’s the realists who are nutty. Do a little searching on the web and take at look at the attacks on Shiller, Krugman etc in 2005 when they said the US RE bubble was going to burst.
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Patiently Waiting Says:
July 6th, 2008 at 2:42 am
What people wish here has no affect on the market. I’m not sure what you’re point is, Matt. Early in the American bubble burst, homoaners and realwhores turned on potential buyers, saying all kinds of nasty things about them. It appears the same thing is happening here now. This to shall pass.
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VHB Says:
July 6th, 2008 at 5:18 am
Matt. Thanks for the explanation. Bears are like Robert Pickton. Nice.
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The Van Man Says:
July 6th, 2008 at 6:32 am
To answer Matt’s last response.
There is a difference between a house and a home. Women call a home, whereas the men a house. The reason has to do with pre-historic human instincts and that is, women’s nesting instincts come into play when making decisions about the family home. The emotional part comes from the female side of the household and can disrupt the sane logically deduction formed by their men (which means selling the house at the top of its price) can be vetoed or torpedoed by their spouses.
Another but mostly neglected part of the human psyche has to do with 3 motivating factors.
A human being will only do something when one of the 3 factors are present. Pain, fear and ambition. When you are suffering from extreme pain in your lungs or throat, what do you do? You do something by going to the doctor or seeing a pharmacist. You just never think about it because it comes naturally. House prices went up so high because most of them have the “ambition” to become rich or “fear” of being priced out.
Do you think they act upon using the intellectual side of their brain? No. Because we are only humans.
Bears and bulls are the same species. I am a bull on the major corporations with low PEs and a bear on current RE and I do this because, I think rationally with the available data. The available data also suggests that unless your house is appreciating 10% gross YOY, you are loosing money as an investment vehicle. Yes, if this is your family home, then it’s ok to loose money. Raising kids is expensive — we’ve been there and we lost a lot of money, but remember the return is greater than the sum of that monetary loss. This is how we try to rationalize a bad situation good.
During this 8 year boom, most people were driven by their ambition to try to become the next Donald Trump and their “fear” of the stock market no thanks to the last dot.com bubble. Where do they put the money that they withdrawn from their brokerage account? Into the real estate market, because loosing money is twice as painful as making money. Only to loose it again. This cycle repeats. We’ve seen it during the late 70s, 80s and 90s.
Yes, we’ve the heard the saying “This time is different”, but every time it turned out to be same old same old. This time is no different.. What’s going to be different is how fast will prices fall.
Unlike the stock market, real estate is a slow to move because it’s such an expensive asset to sell. You need good financing from a bank that’s willing to lend you. And while prices are high now, it is high because it is the asking price. When it is sold, it is the market price or the price the market is willing to bear at the moment. But it’s a vicious cycle. As soon as 1 home is sold in the neighborhood, the next home will be subjected by that market price, not the asking price. But home owners will be stubborn. They all believe that one guy who sold simply cracked. They all believe they are tougher emotionally. But as time dragged on, they see the news that other parts of the town are all selling lower. Then the human emotion side of “fear” sets in. Prices tumble like dominos in the states not because of foreclosures. The “fear” that they would be priced out of the market that drove the housing boom is replaced by the same “fear” that would drive them to become impossible debt slaves.
Human emotions are with us and they dictate what we do. Most wise investor attach no emotion to their investments at all. One friend of ours who is very good at investing in real estate and he had this to say. Buying an investment property is like a one night stand — Wham bam thank you ma’am! Don’t stay around for the carnage. It usually isn’t pretty.
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alexcanuck Says:
July 6th, 2008 at 6:38 am
It’s disturbing to read so many comments from people who wish financial ruin on their fellow citizens.
Once again: We (I hope I can speak for most bears here) don’t “wish” financial ruin to happen. We simply believe it IS going to, and have made sure it won’t happen to us. Does a specuvestor “wish” financial ruin on those priced out forever by not buying after prices have only doubled, on their way to infinity? And if we choose to buy a nice home at something close to fundamental value, by waiting, is that a flaw?
No, the people who “wish financial ruin on their fellow citizens” are those using slick marketing campaigns to urge young people to sign up for 40 years of crushing debt to “buy” a shoebox. All so the developer, realtor, mortgage broker or banker can get paid, they know full well what a boom is, and won’t get caught by it’s inevitable collapse.
The bank that holds the risky mortgage may see it’s share price hammered, but that’s only YOUR pension fund that takes the hit. The clever individuals who engineered the boom will be fine.
Very simple how booms develop, really. Just follow the money. Last one in the pool is
a rotten eggfinancially ruined.Yes, this logic is appalling, but not the way you (don’t) think.
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Noname Says:
July 6th, 2008 at 6:44 am
Matt,
As mentioned by many bears previously to me, it is actually the bulls who have no sympathy towards their fellow beings. It is the bulls who expect their fellow citizens to accept living in substandard conditions (600sq condo) out in Coquitlam or Surrey and expect them to raise a family while maintaining a two income household. Where is the sympathy there?
Why is it that an average family working their butt off should settle for such reduction in the quality of life by buying today vs. a family living comfortably just because they were lucky to buy a few years ago?
How can you not have sympathy for that? How can you not have sympathy for people not being able to afford to have a decent family just because they cannot afford to live here anymore? How can you not have sympathy for those who are forced to uproot their family and forced to move to other parts of the country just to make ends meat? How can you not have sympathy for the hard working savers who have been fiscally responsible being screwed over by some bubble seeing that their savings are virtually worthless?
Sympathy is a two way street. Bulls had no sympathy for bears over the last few years. It’s only natural that bears would have no sympathy for the same bulls that showed no sympathy when bears expressed their concerns.
Btw, personally, you know what pisses me off? That I have been extremely hard working, financially responsible, high income earner with relatively a lot of savings and yet in Vancouver I can’t help but feel poor. Why is it that society no longer rewards hard workers but it rewards gamblers? How can individual members be motivated to work and contribute to society if the lesson learned is that you can work hard but you can only get ahead by getting lucky?
On another note, Vancouver is no where near being world class. The surrounding nature is quite scenic but the city itself is a giant bore. Again, personally, not a day goes by that I don’t think of leaving this place. You might ask why I don’t leave and the answer has NOTHING to do with Vancouver. It has to do with personal relationships. Again, how can you not have sympathy for people that have to decide between choosing personal relationships or their quality of life? Where is sympathy from the bulls?
As far as I can see, it is the bulls who are the ignorant selfish greedy members of society who are unwilling to work hard and contribute so I have no reason to feel sorry for them.
Noname
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Anonymous Says:
July 6th, 2008 at 7:16 am
No, the people who “wish financial ruin on their fellow citizens” are those using slick marketing campaigns to urge young people to sign up for 40 years of crushing debt to “buy” a shoebox.
Yes, those are the people you should point your finger at. As for “armchair economists”, the finger should be pointed at spin doctors like David Lereah, who surely has egg on his face now but he doesn’t care because he quity to join the other side.
We should also point the finger (to a lesser degree) at the media who gives these severely biased industry “economists” so much airtime. When the topic of cigarrettes and cancer come up, imagine what it would look like if big tobacco health “experts” were quoted uncritically in the MSM without opposing viewpoints. Then imagine a FULL PAGE cigarette ad on the opposing page.
Finally, CMHC MUST be blamed for sheer incompetence. Holy sh*t are they out to lunch for:
a) Letting this happen in the first place.
b) Parading their ludicrously bullish “economist” in front of the media.
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bdk Says:
July 6th, 2008 at 9:39 am
Garths at it again
http://www.cbc.ca/canada/story.....baird.html
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fish10 Says:
July 6th, 2008 at 9:41 am
Freako I quoted you in my latest post:
http://fishre.blogspot.com/
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Burden of Proof Says:
July 6th, 2008 at 12:00 pm
“It’s disturbing to read so many comments from people who wish financial ruin on their fellow citizens.”
If capitalism, competition, the aquisition of wealth and free markets scare you, then I suggest you stay in bed and suck your thumb.
The bulls loved it during the boom and now they are scared to death by the looming bust. This is capitalism, the survival of the fittest, where the strong eat the weak. It is the system we designed for ourselves. Don’t be disturbed by it.
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Alistair Cookie Says:
July 6th, 2008 at 1:15 pm
@Matt It’s disturbing to read so many comments from people who wish financial ruin on their fellow citizens.
Very few are wishing this on anyone, despite having to sustain comments such as:
- you’re crazy not to buy now
- you’re an idiot to think you’ll lose money
- you’re throwing your money away on rent
- etc
My comments earlier were simply those with an ‘I told you so’ nature, mixed with a little blame on those whom I know could not afford to buy, yet helped create the bubble. There is no wishing anything on anyone there. If your child does not study for an exam are you wishing that he fails… no! But IF he does you can then say ‘I told you so’ and then proceed to blame him for the higher cost of education…
No, I have mixed feelings as some of my family members did buy in the last few years, so upgraded at lesser expense, and then others like myself did not buy as (speaking for myself) I did not see value for my dollar; rent was the better option.
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Alistair Cookie Says:
July 6th, 2008 at 1:21 pm
That’s ’some upgraded at lesser expense’.
And further, I have saved enough to sustain several years of recession/depression while others have spent everything.
Did anyone not read ‘The Ant and the Grasshopper’ as a child?
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Alistair Cookie Says:
July 6th, 2008 at 1:37 pm
@AlexCanuck No, the people who “wish financial ruin on their fellow citizens” are those using slick marketing campaigns to urge young people to sign up for 40 years of crushing debt to “buy” a shoebox. All so the developer, realtor, mortgage broker or banker can get paid, they know full well what a boom is, and won’t get caught by it’s inevitable collapse.
There it is! Well said. I would extend that further up to the top of that food-chain. It is the banksters, and their attempted power grab through the Federal Reserve and the other central banks who are wishing the financial ruin.
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betamax Says:
July 6th, 2008 at 1:38 pm
‘Ant and the Grasshopper’ — good analogy, I was thinking of it when walking the dog earlier today.
It’s not surprising that observers feel some moral outrage at the stupidly unsustainable behaviour of the grasshopper, nor is it surprising that they take some satisfaction at seeing him get his well-deserved comeuppance.
You’d have to be a saint to feel otherwise. And I’m no saint.
135 X Hold Off Buying That New Home | Discovering The Secrets Of Vancouver Says:
July 6th, 2008 at 4:05 pm
[...] Vancouver Condo Free For All [...]
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DoDo1975 Says:
July 6th, 2008 at 5:53 pm
Noname,
Amen. But remember, many of the bulls (at least that troll the boards) don’t care about society or families. They want to make more money for themselves. If thats happening then its good.
If it makes 60% rich and 40% poor, it must be good.
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browntown Says:
July 6th, 2008 at 6:21 pm
yeah, mr market says “reports of my death have been grately exagerated”! 5yr mortgage down this week to 5.19! rocket fuel for next leg up! you can thank browntown for cash advise later!
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blueskies Says:
July 6th, 2008 at 7:38 pm
brownstreak:
reports of my death have been grately exagerated
where are the buyers?
why are sales down?
big leg up on inventory!
who’s on first?
repeat after me…”spell check”
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browntown Says:
July 6th, 2008 at 7:52 pm
hey bluenuts! repeat after me… call rbc mortgage broker before to late! secure mortgage ok before inventory swallowed up! inventory surge on its last legs! big fall cleanup coming!
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alexcanuck Says:
July 6th, 2008 at 8:12 pm
Hey, look at that! brownstreak took Blueskies advice and learned to use spellcheck.
Now repeat after me…”Calculator”. Also “history book”.
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blueskies Says:
July 6th, 2008 at 8:15 pm
big fall cleanup coming!
indeed!
brownstain clean up aisle four!
inventory has multiple legs
like centipede……
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exx Says:
July 6th, 2008 at 8:26 pm
btw Thums up…
So I actually went to the Coquitlam tower (Heffley) today and asked 2 realtors how much a parking stall goes for. $7-10K. So while I did make the mistake of overlooking the additional parking stall in the example I gave, your assumption that a stall in Coquitlam would be half the price of a “$40-50K downtown stall” is way off. I guess we both don’t know ‘a heck’ about the market.
I went to a few other open houses in Port Moody & Coquitlam today, some in the same buildings that I looked at last month. The prices just keep tumbling down. The best one being a unit we looked at last month going for $379,800. Today? $345,900 (10% haircut). The realtor’s reason for the big drop? The ‘local’ investor is nervous about the market. I asked her if she thought he’d consider an offer 10% below the asking price (~$310,000) and her response, as expected, was “Yes, make an offer, he’s VERY motivated.” I don’t blame him, nearly 20% of the units are for sale.
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Jim Says:
July 6th, 2008 at 8:39 pm
A few reasons BC’s bubble burst will be bigger than most:
- Olympics venue construction complete as of spring ’08 (2+ billion of investment completed)
- Housing speculation rampant in BC in the past three years
- Widespread psychology of “things will continue to go up until well after the games”
- American speculators begin cashing out to cover their losses south of border
- Listings in the lower mainland triple in 2008 as speculators/investors try to sell
- With multi-billions in mortgage defaults at stake, Canada’s banks release weekly reports pleading Canada is separate from the US (‘Canada will withstand US meltdown’, ‘Canada does not have a subprime crisis’)
- Canada’s versions of subprime mortgages are 0% down, no income verification with 40 year amortizations (40 year mortgages merely inflated and prolonged the bursting of the bubble)
- Most Canadians are now heading south for recreational and/or winter homes rather than west to BC (with their at par loonies they are presently able to purchase new resort homes for a third of what they would pay in the Okanagan, Lower Mainland or Victoria)
- Forestry and tourism start to feel America’s economic pain
- Construction, one of the pillars of BC’s recent boom, dwindles as developers stall projects
- Possibility of NDP regaining power in the upcoming BC election erodes business confidence
- Interest (mortgage) rates begin rising in late ‘08 eroding affordability
- Housing affordability surpasses 70% of average incomes in many areas of the lower mainland
- Migration patterns intensify as oil-powered Alberta/Saskatchewan entice workers from across Canada with exorbitant salaries and low costs of living/tax environments
- Prices of energy (carbon taxes) strain potential buyers just as banks begin tightening their lending practices
- The ripple effect’s first wave of significant home foreclosures and price declines commence in Vancouver autumn ’08
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punface Says:
July 6th, 2008 at 8:48 pm
From the latest entry on Garth Turner’s blog: “In Vancouver, despite the hype of the 2010 Olympics, the situation is even more dire. Sales have crumbed by 43% in a year, and the number of people trying to bail has grown steadily, with listings up 18%.”
Aren’t listings up way more than 18%?
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browntown Says:
July 6th, 2008 at 8:57 pm
hey nutslappers! good try with history canucknut but remember history show realestate go up! check 1978 to 2008, only canucks stay same level! calculate your rent going out of bank account! ha ha ha hey jim try calculating land left for houses, too bad to many people scrample for garage! hey exx, smart move shop for condo!
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Brittanny Says:
July 6th, 2008 at 9:03 pm
Bear who sold in Dec, 2007 – I knew it was going to get bad, but I did not think it would get this bad so fast. Wow, what a meltdown!
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Thums up2 Says:
July 6th, 2008 at 9:03 pm
Exx,
What did i say imagine parking lot in coco at half price”IMAGINE”
Now work on your recomendation 2 parkings =$14,000 distance between third floor to twelfth floor $1,500*9=$13,500 so floor 3rd and 12th will cost same in same direction that’s why both units cost $389,000 in downtown difference between floors cost atleast $4,000 then there are lots of view in downtown while view in coco could be free but directions still cost little bit extra every where.Imagine 15k in east side almost $500k in west side for all e,w,s,n facing.
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Thums up2 Says:
July 6th, 2008 at 9:12 pm
Brittanny,
Are you trying to say “WOW” melt down while waiting for crash?
opppsss you did it again Brittanny?
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exx Says:
July 6th, 2008 at 9:13 pm
Sorry I’m not very good at imagining what things should cost. Don’t you feel much better knowing instead? Did it explicitly say anywhere that there are 2 ‘additional’ stalls, or are you using your imagination again?
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M- Says:
July 6th, 2008 at 9:13 pm
Punface: new listings was up 18%. Total inventory was up 50-some percent, though the REBGV report doesn’t make it easy to find this number.
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Thums up2 Says:
July 6th, 2008 at 10:01 pm
“Did it explicitly say anywhere that there are 2 ‘additional’ stalls, or are you using your imagination again?”
Exx,
here we got description of property if you don’t believe this then go check out your own posted link again- good?
Unit #301
Type: Apartment
Description: Coquitlam’s tallest building, brand new 2 bedrooms, den & 2 baths + 2 parking. The best layout in the building, 965 sq ft + 73 sq ft balcony. Close to Coquitlam Town Centre, restaurants, public library & recreation centre.
Exx i shoudn’t be complaining if you had left your post
question marked but you were throwing your post with confidence so you deserve that rant you have got to mislead the thread and posters but today you are doing little better so hey? IT’S OKEY!!!
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Joe Stalin Says:
July 6th, 2008 at 10:08 pm
When this house market crashes the provincial and federal governments will bail everyone out. You will all pay fot the foolishness do not be fooled.
As for the carbon tax and transit etc you have all missed the real show yet to come. Cap and trade is on it’s way and will shutdown what’s left of industry in BC.
So let’s sum it up. We’ve got a crashing housing industry, a forestry industry that’s on death’s door, a huge bailout on it’s way and a provincial government hell bent on shutting down all industry in the name of a slide show by a failed politician. Should be fun.
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Matt Says:
July 6th, 2008 at 11:21 pm
#123, VHB,
Loosen up the drawstring on your lululemon pants. I think bears on this blog are driven by the same greed as the bulls. The main reason Vancouver has been maligned with a real estate bubble is that Vancouverites are ignorant, materialistic and ostentatious. These attributes afflict both bulls and bears.
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betamax Says:
July 6th, 2008 at 11:46 pm
The main reason Vancouver has been maligned with a real estate bubble is that Vancouverites are ignorant, materialistic and ostentatious. These attributes afflict both bulls and bears.
You comprehend neither bubbles nor bears. In fact, your posts here invariably communicate little more than the limits of your own comprehension. It’s like watching a man bounce off a trampoline and bash his head against the ceiling, over and over again.
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Patiently Waiting Says:
July 7th, 2008 at 12:00 am
ignorant? Yes, because our location has made this city insular. People here rather dull-witted and unaware of the rest of the world (despite all the immigration).
materialistic? Sure, but no more than anywhere else.
ostentatious? Actually, not really. People here dress more casually than other places, there are a lot less pimped-out SUVs clogging the highways than other places in North America, and Vancouver houses are nothing special (pun intended). Except for a few downtown yuppies, nope, no way, and much less than other places.
Up until a few months ago, 95% of everyone I knew was a bull. Soon 95% will be bears. Same people, different times.
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patriotz Says:
July 7th, 2008 at 3:28 am
I think bears on this blog are driven by the same greed as the bulls.
Since when is refusing to buy a house, or anything else, for a ridiculous price being greedy?
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Rob A. Says:
July 7th, 2008 at 5:19 am
Awwwww…. Matt weeps for Vancouverites, how sweet. LMAO.
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Thums up2 Says:
July 7th, 2008 at 6:24 am
Rob A,
Matt has long way to go because he has just sold his house then he has become desperate to re-enter quickly as he can so he has chose his suitable plate form called cry but after january 2009 he will change his plate form from cry to screaming.
Did you notice on 5k disscount they had start talking about recession,inflation,stagflation,and job loss but those are the least form on ending stages so you can see loser begin with final spin which already ended in march 2008 you can say lmao again!!!
Between INFORMERSOURCE1.said our blogger poster SOPHIA is pregnent by almost 2.5 months while informer source 2 said she is planing to settle up back home in ns.
SOPHIA?
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ReductiMat Says:
July 7th, 2008 at 7:38 am
Matt, what geographical region gets to claim you as its paragon of enlightenment?
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oxymoron Says:
July 7th, 2008 at 8:55 am
Matt Says: “I think bears on this blog …”
Example of an oxymoron: the phrase “Matt thinks”.
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Drachen Says:
July 7th, 2008 at 10:00 am
Why do you bring “oxy” into it?
Matt has nothing of value to add. His only topic of conversation is how much smarter he is than everyone else around him. In my experience people who need to brag about their mental prowess to that degree are very insecure about their intelligence. Usually they’re insecure with good reason.
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alexcanuck Says:
July 7th, 2008 at 10:17 am
Usually they’re insecure with good reason
Often they can be recognized by the rusty Camaro (if Asian, make that rusty Civic with 3″ chrome tailpipe) that they tend to tailgate you in.
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Re-diculous Says:
July 7th, 2008 at 11:25 am
For all those in denial…this is for you
B.C. Records Biggest Drop in Consumer Confidence
http://www.canada.com/vancouve.....17d09ac2ec
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Vansanity Says:
July 7th, 2008 at 11:36 am
Nice post Re-diculous.
A lot of news on the recession this morning. CNN had a piece on recession proofing your assets ie. savings account.
Building permits in Canada up 1.1%. Housing permits dropped, commercial gained and made up for the housing short-coming.
Consumer confidence at all time low.
BC Housing starting to fall: “Price declines in Vancouver and the Fraser Valley look to continue in the near term,” according to Credit Union Central B.C.’s latest weekly economic briefing. “The long-awaited and much-anticipated price cycle peak probably occurred in February.”
TSX continues to fall today. Dollar is down on oil retreat.
BOC set the tone for higher interest rates. Likely they won’t raise them next week but they are worried about inflation and it’s only a matter of time until the rates start climbing.
It’s going to be the “Perfect Storm”. Batten down the hatches and hold on tight!
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Scratchy Says:
July 7th, 2008 at 11:57 am
“Building permits in Canada up 1.1%. Housing permits dropped, commercial gained and made up for the housing short-coming. ”
Once again *exactly* tracking what happened in the US market.
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freako Says:
July 7th, 2008 at 1:36 pm
according to Credit Union Central B.C.’s latest weekly economic briefing. “The long-awaited and much-anticipated price cycle peak probably occurred in February.”
I love how guys like Pastrick go from perpetual appreciation machine to “long anticipated price cycle peak” without admitting that he was wrong.
Lereah did it too. Gave us bogus sunshine reports and then reported that prices dropped just as he had anticipated.
Rob Chipman now claims that he has anticipated a 20-40% drop. All he has ever said are cliches such as “buy when the numbers work” and the “cure for high prices is high prices”. Now that the sh*t storm has finally arrived, he retroactively repositions himself. What a joke.
Asshat Gary Watts from the States finally admitted that he was wrong, but blamed it entirely on Wall Street shenanigans.
It is really twisted how all the usual suspects try to reposition themselves to not only escape culpability, but to paint themselves as prophets. Sick I tell you.
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Michael Randallbard Says:
July 7th, 2008 at 10:33 pm
Australian housing braces for further pain