Falling like leaves (link-o-rama)
Yeah, 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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August 12th, 2008 at 2:23 pm
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!!
August 12th, 2008 at 2:25 pm
August 12th, 2008 at 2:31 pm
The #1 threat to america: bears
August 12th, 2008 at 2:31 pm
“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).
August 12th, 2008 at 3:17 pm
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.
August 12th, 2008 at 3:30 pm
Vancouver de coupled from the global economy. Isn’t that right Dosh? It’s different here.
August 12th, 2008 at 3:39 pm
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.
August 12th, 2008 at 3:43 pm
August 12th, 2008 at 3:59 pm
the double digit gains are over.
this is a good time to buy investment properties, since the rents can only go up. (sorry)
August 12th, 2008 at 4:02 pm
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!
August 12th, 2008 at 4:04 pm
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”.
August 12th, 2008 at 4:09 pm
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.
August 12th, 2008 at 4:49 pm
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
August 12th, 2008 at 5:19 pm
August 12th, 2008 at 5:28 pm
August 12th, 2008 at 5:35 pm
“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?
August 12th, 2008 at 5:52 pm
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
August 12th, 2008 at 6:08 pm
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!”
August 12th, 2008 at 6:11 pm
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.
August 12th, 2008 at 6:12 pm
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.
August 12th, 2008 at 6:55 pm
Mish is talking about Oz, but it is equally relevant to BC.
http://globaleconomicanalysis......ed-by.html
August 12th, 2008 at 7:50 pm
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?
August 12th, 2008 at 8:33 pm
http://www.youtube.com/watch?v.....re=related
August 12th, 2008 at 9:59 pm
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.
August 13th, 2008 at 12:41 am
condos have increased in price way more than this.
August 13th, 2008 at 8:25 am
August 13th, 2008 at 8:46 am
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.
August 13th, 2008 at 9:02 am
“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
August 13th, 2008 at 9:07 am
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
August 13th, 2008 at 9:32 am
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.
August 13th, 2008 at 9:42 am
Will we see similar pricing in Vancouver, say the W condos maybe?
August 13th, 2008 at 9:51 am
Fail. Sauder nominal rent data. Never let the facts get in the way… blah blah blah.
August 13th, 2008 at 10:09 am
Nope, even the worst crapholes in the DTES are rentable and we will see the W condos fall to 100x monthly rent or so.
August 13th, 2008 at 10:27 am
So units at the W will be worth about $90,000 with parking?
August 13th, 2008 at 10:58 am
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.
August 13th, 2008 at 11:15 am
“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.
August 13th, 2008 at 11:29 am
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.
August 13th, 2008 at 11:36 am
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?
August 13th, 2008 at 11:51 am
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.
August 13th, 2008 at 11:54 am
I didn’t look in detail at the link i posted.
Jesse, Thanks for the link.
August 13th, 2008 at 12:03 pm
August 13th, 2008 at 12:19 pm
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.
August 13th, 2008 at 12:35 pm
Agreed. I was just checking the #s being cited weren’t getting mixed up.
August 13th, 2008 at 12:41 pm
August 13th, 2008 at 12:49 pm
unit in our YT bldg just sold
listed $399K
reduced $370K
sold at $349K
73 DOM
500 sq/ft w park/stor 1 bed
August 13th, 2008 at 12:54 pm
August 13th, 2008 at 12:57 pm
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.
August 13th, 2008 at 1:05 pm
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.
August 13th, 2008 at 1:14 pm
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.
August 13th, 2008 at 1:19 pm
What exactly is the point you are TRYING to make? lol…
August 13th, 2008 at 1:20 pm
“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?
August 13th, 2008 at 1:25 pm
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
August 13th, 2008 at 1:28 pm
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
August 13th, 2008 at 1:35 pm
http://tinyurl.com/ireland-minus-40
August 13th, 2008 at 1:48 pm
Drachen, just to be clear, the link you posted to Arbitrage cites 1990 median incomes in constant 2000 dollars.
August 13th, 2008 at 1:51 pm
Oh you were serious? I thought you were making a joke. My mistake and sorry you took issue.
August 13th, 2008 at 1:53 pm
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
August 13th, 2008 at 1:55 pm
You claimed you were relocated to the Toronto Starbucks what happened there?
August 13th, 2008 at 3:00 pm
Are you planning on being in Toronto by the fall? That’s the best time of year there IMHO.
August 13th, 2008 at 3:37 pm
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…