Falling like leaves (link-o-rama)

moneyplant.jpgYeah, I know. August is far too early to be using an autumnal metaphor, but housing market cycles don’t run on a regular schedule like the seasons do.  You already know that our local real estate boom has withered on the vine, but did you know markets are slowing across the country?  I guess the big question now is how bad will our housing hangover be?

Anyone looking to sell in the next couple of years has to be hoping we don’t follow the US cycle, where one third of all new owners owe more than their house is worth and a quarter of homes sold in the last year were sold at a loss.  Of course thats on a national level, cities like Stockton California are in much worse shape with prices dropping 38% in one year.

Will demand return to the lower mainland real estate market or will we see modern day ghost towns in the burbs?

If you don’t believe in all this doom n’ gloom perhaps its time to buck the trend and invest in real estate.  Money is still cheap and sometimes big risks bring big rewards.  You could try Spain where prices are predicted to drop 20 to 30% over the next four years, or the UK where there’s lots of listings to choose from.  Some see bright spots in the New Zealand housing market if you want to go a bit further afield. They’re only talking about drops in the 10% range.

Feeling brave?

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89 Responses to “Falling like leaves (link-o-rama)”

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  1. 1
    Johnny33 Says:
    “If you don’t believe in all this doom n’ gloom perhaps its time to buck the trend and invest in real estate. You could try Spain where prices are predicted to drop 20 to 30% over the next four years, or the UK where there’s lots of listings to choose from. Some see bright spots in the New Zealand housing market if you want to go a bit further afield. They’re only talking about drops in the 10% range.”

    None of those countries are hosting the Olympics in 2010!! Don’t you know that everyone wants to live here, and the people who don’t know about Vancouver will see it during the Olympics and say, “WOW!!! That’s the best place on earth!” Buy before the Olympics of be priced out forever!!!11!!!1!!

    Current score: 0
  2. 2
    Bob Says:
    August 2009 prices on condos in Vancouver will drop by 25%.

    Current score: 0
  3. 3
    Mold City Says:
    Shh! You’ll scare the buyer. If ignorance got us into this mess why can’t it get us out of it?

    The #1 threat to america: bears

    Current score: 0
  4. 4
    Drachen Says:
    From the Stockton article.

    “Stockton’s median home value was put at $216,100″

    So at the peak the median home value was $350,000 (at peak). The median household wage in Stockton is $46,919, a ratio of 1.32:1 (V:S) compared to Vancouver’s median wage (ignoring the dollar shift, I’ll compare Real Estate dollars directly too which makes the accounts balance). Yet here the median home value is 620k which means that the home price ratio (comparing Stockton’s peak to our peak) was 1.77:1 (again V:S).

    Or to put it another way, our real estate was 32% more overpriced than theirs was at it’s peak (1.77/1.32).

    Current score: 0
  5. 5
    Limey Says:
    “Some see bright spots in the New Zealand housing market if you want to go a bit further afield. They’re only talking about drops in the 10% range”

    I’m not sure we’re going to get off that lightly - there is a chronic amount of personal debt over here, and since the stock crash in the late 80’s, the vast majority of people’s investment is in RE.

    NZ is a very small economic ship that could get battered by the storm. As soon as spring rolls around this year, I think our place will go on the market - it will kill me to get rid of it, but if we decide to leave the country in the next 5 years I’m afraid that we’ll get hammered.

    Current score: 0
  6. 6
    bdk Says:
    You guys have forgotten.

    Vancouver de coupled from the global economy. Isn’t that right Dosh? It’s different here.

    Current score: 0
  7. 7
    gah Says:
    “None of those countries are hosting the Olympics in 2010!!

    Uuuh, London has the olymipcs in 2012, and Barcelona just had their olympics a few years ago (and therefore their real estate should be experiencing that buyer boom any time now…)

    Bud I do agree, both the UK and Spain are nowhere near as cultured as Vancouver is. We are simply on a completely different level than them.

    Current score: 0
  8. 8
    exx Says:
    I heard a new one while having a discussion with a few coworkers yesterday: “The Olympics are going to pull us out of this downward cycle”. Funny - just recently the saying was “Prices will keep going up until the Olympics”. Whatever helps you sleep at night…

    Current score: 0
  9. 9
    kambool Says:
    prices are expected to go up this year only by a single digit.

    the double digit gains are over.

    this is a good time to buy investment properties, since the rents can only go up. (sorry)

    Current score: 0
  10. 10
    Aleks Says:
    The Olympics will fix our economy the same way they fixed Greece’s.

    But if you want to make a quick buck, invest in Beijing real estate. People are over there discovering it right now so the price is bound to shoot up more every day!

    Current score: 0
  11. 11
    jesse Says:
    “our real estate was 32% more overpriced than theirs was at it’s peak”

    I’ll bet Vancouver has always been overpriced (as measured by price-income ratio) compared to Stockton. Whatever the reason, cities like Vancouver have perpetually high price-income ratios. I think this was discussed before but it’s interesting that rents in Vancouver are not higher if “everyone wants to live here”.

    Current score: 0
  12. 12
    jesse Says:
    “this is a good time to buy investment properties, since the rents can only go up.”

    You are implying that prices “can only go up” as well. If they can’t, it’s way better to wait unless rent increases significantly very quickly.

    Current score: 0
  13. 13
    Anonymous Says:
    Have you seen any nifty marketing techniques lately to get rid off old teardowns or test tube stacks?
    Just for a chuckle.. or should I count how much my non RE investment have yielded so far.. sigh..too much work, I lost count.
    Yep, I am one of those pain in the ass rich but tightwad investors. Was shaking my head all along this bubble. They all thought it was a winning 6/49 for everybody??? LOL

    Current score: 0
  14. 14
    VancouverBanker Says:
    Funny, I was just in a meeting this morning with a senior executive: “There is NO WAY Vancouver housing is overpriced by 35%.” This is the same guy who a year and a half ago said prices will keep rising 5% per year, then changed to his tune to prices will level off, and now he says prices will drop 5-10% maximum. I had to keep myself from scoffing out loud!

    Current score: 0
  15. 15
    blueskies Says:
    if a person is anticipating rental increases should they move into buying immediately or wait until the actual rent increases show up before deciding to buy……?

    Current score: 0
  16. 16
    patriotz Says:
    “Some see bright spots in the New Zealand housing market if you want to go a bit further afield. They’re only talking about drops in the 10% range”

    “They” weren’t expecting any price drops at all in NZ two years ago, or in the US, Spain, Ireland, etc., so why should anyone pay any attention to what “they” are predicting now?

    Current score: 0
  17. 17
    mk-kids Says:
    Kambool says “this is a good time to buy investment properties, since the rents can only go up. (sorry)”

    It’s funny because I was looking at craigslist rentals & thinking there seemed to be more moderatelt priced ones. Then I saw this:

    http://vancouver.en.craigslist.....97386.html

    Current score: 0
  18. 18
    pricedoutfornow Says:
    The doom and gloom is all around us now. My landlord was over today, again talking about selling. Said they’ve “lost” 30-40k on the value of this place since they moved out in February. Said she wishes they’d sold earlier this year but….”we had no warning whatsoever that the market was going to go down like it has!”

    sigh…I guess that’s what happens when you rely on the MSM for your “news”. Most people apparently don’t read blogs like this one. I had to refrain from saying “I could have told you!”

    Current score: 0
  19. 19
    patriotz Says:
    this is a good time to buy investment properties, since the rents can only go up.

    Rents went up from 1981 to 1984 too but house prices certainly didn’t.

    The issue is not whether nominal rents are going up, but whether there is any credible scenario where rents rise enough to justify current prices (cash flow equivalence). There isn’t.

    Current score: 0
  20. 20
    that guy Says:
    mk-kids:

    too funny. one of those units is in my building. my unit is similar to the one in the ad, but my rent is about half the “reduced” asking price.

    ssshh … don’t tell my landlord.

    Current score: 0
  21. 21
    patriotz Says:
    I have an important personal message for Roger Corbett: “Don’t mistake a drunken credit binge of epic proportions for strong economic fundamentals. If you do, in a couple of years you will look as foolish as Bernanake does now.”

    Mish is talking about Oz, but it is equally relevant to BC.

    http://globaleconomicanalysis......ed-by.html

    Current score: 0
  22. 22
    Bluesman Says:
    Ok, so continuing from the last thread, according to these sites:

    1) Canadian debt over past four years
    http://tinyurl.com/6bojoz

    2)Canadian GDP over past eight years
    http://tinyurl.com/6opw78

    it appears that our good friend Harper
    http://tinyurl.com/9nc6r

    has put us into approximately 30% more debt (military spending anyone?) after all that belt tightening we had been through.

    So, my question is this: if the economy is getting worse, and if the country is going into more and more debt and it is the citizenry that are going to be the ones paying the debt down in the future, is it better to buy or rent one’s primary residence as compared to say, a situation in which the country is climbing its way out of debt as in the several years preceding 2006?

    Current score: 0
  23. 23
    Re-diculous Says:
    The Psychology of boom bust cycles- posted by Squidly on Greater Fool.

    http://www.youtube.com/watch?v.....re=related

    Current score: 0
  24. 24
    Michael Randallbard Says:
    Beijing house prices fall 20% in December

    Property

    11 January 2008

    The average residential real estate prices in Beijing dropped 20% in December 2007, according to China Real Estate Index System, a domest real estate market databank. The average house price in December was US$1,668 per square meter, 19.67% lower than the average price of US$2,077 per sqm seen in November, CCTV reported (in Chinese). Residential prices and transaction volume decreased as a series of regulatory policies aimed at cooling speculative activity in the capital’s property market, including tightened rules for residents buying second homes, went into effect. Beijing residents’ willingness to buy property went down by 7% in the fourth quarter, according to a quarterly survey conducted by the People’s Bank of China.

    Current score: 0
  25. 25
    Kambool Says:
    increasing rents is based on the cap that government has imposed on rent increases (~3% yr)

    condos have increased in price way more than this.

    Current score: 0
  26. 26
    John Says:
    I noticed someone was trying to make fun of my optimism. Buying real estate and talking about it on blogs is serious business. I buy and sell real estate, SUVs and boats as investments. It’s going very very well lately. There has never been a better time to buy in this or any other market in the world. I’m looking at a nice condo in Miami next week and I’m going to go check into some of those beautiful homes in Detroit next month.

    Current score: 0
  27. 27
    bdk Says:
    From Greater Fool

    But, hopefully, most families will be able to stay where they are, weather the storm and carry on. It’s instructive to realize, however, that anyone who bought a house in 1989 in the Toronto area (the top of the last cycle), had to wait for 13 long years just to break even. And this downturn will certainly be more severe than that one.

    Current score: 0
  28. 28
    Drachen Says:
    Jesse

    “I’ll bet Vancouver has always been overpriced (as measured by price-income ratio) compared to Stockton.”

    I think you’d lose that bet, in the mid ’80s the median home price to median income ratio was about 2:1 in Vancouver.

    I couldn’t find the Vancouver median family income back into the ’80s but in 1990 it was $60,254 while in 1985 a median home cost around 120k

    Current score: 0
  29. 29
    bdk Says:
    Hey Jesse,
    In the late 1990’s a westside house could be bought for $500,000. and it wasn’t a “down and out” group of people buying for that price.
    Which leads this anonymous blogger to wonder “if a Doctor could barely afford a $500k SFH Westside house how are these random warehouse workers ,with brain injuries, paying the same amount for a 1 bedroom on the fringe of the Downtown Eastside (TV Towers)? and not just buying one, buying two in the hopes of selling to a rich asian”

    No one wants a cheap house in Edmonton:

    http://www.canada.com/vancouve.....a42ea5fa85

    Current score: 0
  30. 30
    patriotz Says:
    I think you’d lose that bet, in the mid ’80s the median home price to median income ratio was about 2:1 in Vancouver.

    Way off, the median house was about 160K back then and no way was the median household earning 80K, they are only earning 60K now.

    More like 4:1 I would say which is the historical multiple for Vancouver, we really have had a higher multiple historically.

    http://cuer.sauder.ubc.ca/cma/.....couver.pdf

    increasing rents is based on the cap that government has imposed on rent increases (~3% yr)

    Wrong, rents have actually been lagging this cap and note that it only applies to sitting tenants and that rent for new tenants is uncontrolled.

    http://cuer.sauder.ubc.ca/cma/.....couver.pdf

    The reason why rents have been increasing so slowly is simply that supply has been outpacing demand due to high RE prices and low population growth - the same factors which are going to lead to a bust in RE prices.

    Current score: 0
  31. 31
    Asun Says:
    Is buying this property catching a falling knife?

    Will we see similar pricing in Vancouver, say the W condos maybe?

    Current score: 0
  32. 32
    jesse Says:
    “increasing rents is based on the cap that government has imposed on rent increases (~3% yr)”

    Fail. Sauder nominal rent data. Never let the facts get in the way… blah blah blah.

    Current score: 0
  33. 33
    patriotz Says:
    Will we see similar pricing in Vancouver, say the W condos maybe?

    Nope, even the worst crapholes in the DTES are rentable and we will see the W condos fall to 100x monthly rent or so.

    Current score: 0
  34. 34
    bdk Says:
    “Nope, even the worst crapholes in the DTES are rentable and we will see the W condos fall to 100x monthly rent or so.”

    So units at the W will be worth about $90,000 with parking?

    Current score: 0
  35. 35
    jesse Says:
    “The reason why rents have been increasing so slowly is simply that supply has been outpacing demand due to high RE prices and low population growth”

    The reason even beyond that is that investors have been willing to accept low rents because their total return due to capital appreciation is adequate.

    Current score: 0
  36. 36
    Drachen Says:
    Patriotz

    “Way off, the median house was about 160K back then and no way was the median household earning 80K, they are only earning 60K now.”

    Your 160k figure, if you look at the bottom of the graph you are using for reference is for detached housing. Including condos brings the median closer to 120k. As I said I couldn’t find a record of median household income for 1985, but considering that it was just over 60k in 1990 and it’s just over 62k now (18 years later) I feel it’s a pretty safe assumption that it was probably just a little under 60k in 1985.

    “More like 4:1 I would say which is the historical multiple for Vancouver, we really have had a higher multiple historically.”

    You’re saying that between 1985 and 1990 wages doubled in Vancouver? I don’t understand how you get that number even with the (inaccurate) numbers you provided.

    Current score: 0
  37. 37
    arbitrage Says:
    I’ve lost track of all the links to various statistics (eg median family income).
    Pope it would be helpful if you added popular data links to the sidebar on the main page. Please?

    Anyway, this:
    http://www40.statcan.ca/l01/cst01/famil107a.htm
    Seems to say that med family income in vancouver in 2002 was 53k. Not sure if i’m looking at the right tables. Would appreciate a link repost of the data being discussed.
    Man, we’re poor.

    Current score: 0
  38. 38
    jesse Says:
    “I think you’d lose that bet, in the mid ’80s the median home price to median income ratio was about 2:1 in Vancouver.”

    I’ll still take the bet. The reason is because the price-income ratio in BC (and Vancouver) has typically been higher than other parts of Canada link. Stockton is landlocked and no reason at all to pay a premium to live there.

    Here is a report on median income, in 2000 dollars (see p 19 of 89). I assume you are using real dollars?

    Current score: 0
  39. 39
    VanTOVan Says:
    Looks like the Sask. RE industry called in a few favours to get this crap refutation of the Merril Lynch report printed:
    http://tinyurl.com/stphoenix

    My favourite gem:
    However, he also disputes the 50 per cent overvaluation number, and points out Merrill Lynch is an investment firm that does not sell real estate.

    That’s right–you can only trust someone who’s selling you something.

    Current score: 0
  40. 40
    arbitrage Says:
    oh shoot - right real dollars nominal dollars and stuff :(
    I didn’t look in detail at the link i posted.
    Jesse, Thanks for the link.

    Current score: 0
  41. 41
    Bubble Lad Says:
    There’s a place down on Kit’s point that has a For Sale sign AND a For Rent sign on the front lawn - so you get to move in, pay through the nose (if I know rents in that area) - have strangers walk through your home every five minutes as they try to sell it, then when they sell it you stand a good chance of the new owner telling you to hit the road. Talk about greed AND stupidity.

    Current score: 0
  42. 42
    Aleks Says:
    Here is a report on median income, in 2000 dollars (see p 19 of 89). I assume you are using real dollars?

    Real dollars don’t matter when you’re calculating a ratio, you just have to use the same measure. If you use nominal dollars for wages you have to use nominal dollars for prices and it all works out. Of course, you need data from the same year. Comparing 1985 prices to 1990 wages will give you a skewed result.

    Kind of depressing that since 1980, the median family income in Vancouver has gone down $100.

    Current score: 0
  43. 43
    jesse Says:
    “If you use nominal dollars for wages you have to use nominal dollars for prices and it all works out.”

    Agreed. I was just checking the #s being cited weren’t getting mixed up.

    Current score: 0
  44. 44
    Rob A. Says:
    I think that right now is a great time to buy, especially in downtown Vancouver. People will always pay a premium to be close to the action. An action premium.

    Current score: 0
  45. 45
    blueskies Says:
    People will always pay a premium to be close to the action. An action premium.

    unit in our YT bldg just sold
    listed $399K
    reduced $370K
    sold at $349K
    73 DOM

    500 sq/ft w park/stor 1 bed

    Current score: 0
  46. 46
    John Says:
    Exactly right Rob!!! Now that GM and Ford are cutting truck and SUV production you’ll also see stiff competition for those used trucks and SUVs. That’s why I’ve been buying them. Supply and demand just like in Real Estate. Everyone wants to buy a condo in Vancouver.

    Current score: 0
  47. 47
    Patiently Waiting Says:
    “Kind of depressing that since 1980, the median family income in Vancouver has gone down $100.”

    Wait until the housing boom ends :(

    I know young people with university educations who can’t find decent work (non-call centre) paying more than about $12/hr. Many, many, many people in this city make less than $10/hr. Its simply shocking how little some people live on while surviving in some an expensive place.

    Current score: 0
  48. 48
    jesse Says:
    “An action premium.”

    Hey, I like action! A premium to live right beside Toyota Place (err… I mean GM Place) so I can watch as the Escalades with tinted windows splash water on me as they go into the underground stadium parking. Not THAT’S action, baby.

    Current score: 0
  49. 49
    Drachen Says:
    Arbitrage

    Here is the median wage, 1990 and 2000. (it’s a popup so you have to click on the “Census families median income…”)

    Jesse

    It’s irrelevant whether you’re using nominal or real dollars as long as you’re internally consistent (for these purposes the results will be identical). In this case it’s nominal dollars to nominal dollars.

    Current score: 0
  50. 50
    Rob A. Says:
    “Exactly right Rob!!! Now that GM and Ford are cutting truck and SUV production you’ll also see stiff competition for those used trucks and SUVs. That’s why I’ve been buying them. Supply and demand just like in Real Estate. Everyone wants to buy a condo in Vancouver.”

    What exactly is the point you are TRYING to make? lol…

    Current score: 0
  51. 51
    Drachen Says:
    Rob A.

    “People will always pay a premium to be close to the action.”

    Then why isn’t Hastings and Main the highest priced neighbourhood in Canada?

    Current score: 0
  52. 52
    Rob A. Says:
    “jesse Says:
    Hey, I like action! A premium to live right beside Toyota Place (err… I mean GM Place) so I can watch as the Escalades with tinted windows splash water on me as they go into the underground stadium parking. Not THAT’S action, baby.”

    jesse, it’s too bad that you have been priced out to the point of only being able to afford a carboard box in a parking lot, but really that is your own fault so don’t get bitter towards me, ROFL :D

    Current score: 0
  53. 53
    Rob A. Says:
    Yaletown sexiest place in Canada

    Vancouver neighbourhood top choice among speed-dating clients: survey
    John Colebourn, Canwest News Service
    Published: Thursday, July 31, 2008
    VANCOUVER — Vancouver’s trendy Yaletown is the sexiest place to live in Canada, according to FastLife.ca, a speed-dating company.

    http://www.canada.com/ch/chekn.....cc7a8b92d8

    Current score: 0
  54. 54
    macchiato Says:
    News from Ireland, prices dropping for over a year now and this is the latest:

    http://tinyurl.com/ireland-minus-40

    Current score: 0
  55. 55
    jesse Says:
    “In this case it’s nominal dollars to nominal dollars.”

    Drachen, just to be clear, the link you posted to Arbitrage cites 1990 median incomes in constant 2000 dollars.

    Current score: 0
  56. 56
    jesse Says:
    “but really that is your own fault so don’t get bitter towards me,”

    Oh you were serious? I thought you were making a joke. My mistake and sorry you took issue.

    Current score: 0
  57. 57
    bdk Says:
    So Rob a and John are different personas?

    You’re both right, get out there and buy an Expedition and a studio at spectrum as soon as you can.
    How can you go wrong? The market is clearly going up forever and it makes sense that Downtown Vancouver is more expensive than New York. There is simply no action in New York compared to Vancouver

    Current score: 0
  58. 58
    bdk Says:
    and rob a
    You claimed you were relocated to the Toronto Starbucks what happened there?

    Current score: 0
  59. 59
    Mold City Says:
    Hey Rob A, Are you still in Vancouver? I’m curious if you made a good profit on the sale of your condo.. It’s been months since you put it on the market, surely in the hot downtown core its sold at a premium by now right?

    Are you planning on being in Toronto by the fall? That’s the best time of year there IMHO.

    Current score: 0
  60. 60
    scullboy Says:
    Mold,

    Believe it or not Spring and Fall are now the best times to be in Toronto. Toronto’s stinkin’ hot (and I do mean stinkin’) in summer and brutally cold in winter.

    Oh the other hand they know they aren’t the best place on earth…

    Current score: 0

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