Friday Free-for-all!
Well it’s back to school time and the air is getting a chill to it. What’s happening in our local housing market and economies around the world?
-Drop in home sales causes economic problems
-Economic problems cause drop in home sales
-House sales in Vancouver ‘went off a cliff‘
-August ‘08: slowest month for real estate since 1998
-Yaletown Sofa closes outlets, seeks new line of credit
-Buyers see hope in Lower Mainland real estate crash
-Victoria prices slide, listings at 12 year high
-Bank of Canada holds interest rates steady
-TSX slides on oil price drops and economic fears
-Whistler shipping-container home plan collapses
-is the Florida market nearing bottom?
So what are you seeing out there? Post your news, links and anecdotes here and have a great weekend!
note: any conversation on Vancouver, 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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September 8th, 2008 at 11:25 pm
Bearette & Arit, I will certainly host a bear bible here. I’m working on a portal page which would be a good start but unfortunately there’s this think called ‘work’ thats keeping me from getting that done. A wiki is one option, its just a question of whether it would be usefull and used.
September 8th, 2008 at 6:25 pm
Nice move arit. Great idea. I will go and procure myself a google account to log in. Would Van Condo like to host such a Bear Bible? What say you VC?
September 8th, 2008 at 7:58 am
#224,
You can’t rent your investment and you can not borrow risk to invest in stock market but in real estate you can buy millions of dollar mortgage because some or whole part of borrowed money justify by number of people living in side,sorry your girl gone wild but as a owner she is smart buyer it could be possible that you were trying to convince her to invest in stock market.
#224 if you find another girl make sure you don’t repeat your mistake.
September 7th, 2008 at 11:11 pm
Those bob cats better not move into my house.
September 7th, 2008 at 10:56 pm
This blog is EXACTLY like a stock message board. There are pumpers, and there are bashers, but the most logical post i’ve read was the one that talked about P/E ratios of real estate. Which should be the ONLY way you talk about RE if it’s an investment.
If you can’t rent your place out for at least what the mortgage is worth, then you are buying completely based on speculation and not real value. Warren Buffet never invested in something he didn’t understand, and I don’t understand the value of a property if you can’t rent it out for MORE than what the mortgage is worth!
I am sooooo glad my ex bought a place with her fiance last year three months after we broke up. She’s LONG on the housing market, but the last 4 years have been strictly a momentum play. Fundamentals are returning to properly valuate homes! Ha ha!
Her life savings are probably wiped out already in the depreciation of the value of the house.
People say they don’t play in the stock market. Buy a house and that is exactly what you are doing. It’s a low risk stock, but you are essentially buying on margin. Stop talking about buys or sells, it’s more bid and ask these days. Values of real estate, charted will look like what happened to Etrade in December 2006 (look up the chart)
Buy it with every last bit of monthly income you have and you’d better pray that it just goes up and up and up.
Me, my net worth has increased 40k since she left me.
God bless God! He works in mysterious ways. I’m starting to understand.
September 7th, 2008 at 8:48 pm
A few posters talked about cost of construction affecting real estate prices in the coming years. I believe, and someone please correct me if I’m wrong, that right now it costs around $120-$150 per square foot to build a condo with above-average finishing in Vancouver (this doesn’t include cost of land.) This weekend I saw some ads for condo projects in Langley and Abbotsford advertising 1br units for around $150k. I think these projects more accurately reflect the cost to build. This may be the direction the market is headed in for few years, i.e. developers start marketing more affordable condos that even the “average working joe” can afford.
September 7th, 2008 at 6:49 pm
I don’t expect an interview on the Bill Good show however were I ever to be invited as a high-priced expert, I would say that sales are falling off a cliff because prices are too freaking high, and sales will continue to fall off a cliff until prices are freaking reasonable.
September 7th, 2008 at 6:10 pm
>>>>>>>>>>>>>>>>>>>>>>> Problem: >>>>>>>>>>>>>>>>>>>>>
Sales have fallen off the cliff:
Let’s do a diagnostic:
Interest rates:
Real rates are still at record lows, possibly below zero
Can’t be interest rates-check
Unemployment:
Some good paying jobs are disappearing, but still unemployment is low
Can’t be unemployment-check
Best place on earth:
I still hear this, nothing changed there-check
Land scarcity:
Well you know what they say: “ Vancouver is hemmed by mountains , ocean, and the USA”
no change there-check
The Olympics:
There coming in 2010, no change there-check
Grow ops
No change-check
Rich Jet set all want to live here
I still hear this, no change-check
Oh well I can’t figure it out, perhaps a highly trained professional on the Bill Good Show might be able to explain it.
September 7th, 2008 at 5:55 pm
BEARETTE BEARETTE BEARETTE
Hey, I am a taker! Your idea is right-on. We have already started to scatter info here and there. We talked building materials and insulation, leaks, condos. But we did not save the information anywhere.
Bearette,
Please see if you can open this link
http://docs.google.com/Doc?id=dkz3q3b_20dk779w9h
If it works for you, and you approve of it, we could all store our information there, in the
“Vancouver Bear Bible 2008″. That way we can have a central knowledgebase to benefit from.
care to try it out?
Let me know if you cannot access it.
Thanks in advance,
arit
September 7th, 2008 at 5:19 pm
Thanks Strataman! So one can remove the superfluous kitchen and just leave the hookups buried in the wall? (Properly finished and blocked, of course!) Are interior walls ever removed completely to give one big room? Two single bedroom units to become one double size living room with kitchen expanded and two “stock” bedrooms. One would need the correct mirror image units to begin with, natch. Any known published or online resource for this idea?
September 7th, 2008 at 4:44 pm
alexcanuck “Would it be feasible to combine two adjacent shoebox units in a strata building into one livable place?” Yes that is possible and done quite often. I have worked with 5 such combination’s. Generally the strata’s will allow total inside remodeling as long as you stay away from various utility risers within the units, such as gas,sewer water and fire systems.If you want to relocate your access points to utilities such as that you will be required to submit engineered plans, which have to include a study of the complete building system. One set of units did that and they paid well over $40,000 for engineered drawings and performance guarantees accepted by the strata. They also had to deposit $50,000 with the strata for 10 years the assumption being if a building system fails the problem will be assumed to be the renovators until proven otherwise and the exploratory work would be the owners cost. Usually they will insist that outwardly in the hallways it remains identical. You will not be able to remove a door to the hallways or change their appearance. The door may be sealed off and finished inside but must remain the same on the hallway side. They will not allow relocation or changing of windows,siding, or balconies, as that is building envelope.
September 7th, 2008 at 3:48 pm
What I find so incredulous about our local economists is their apparent aversion to examining the most basic of economic principles; supply and demand.
Why haven’t they ever commented on an all time record number of units under construction, combined with an significant supply of un-rented completed units, against a long-standing anemic rate of population growth? How could they possibly assume that the supply of first time buyers would never dry up when all of them know that the affordability envelope had long since been pushed beyond the breaking point. The degree to which speculation has fueled this boom would be no surprise to them, nor would the fact that prices became totally detached from achievable rents some years ago. Why then, when virtually all of them were predicting a significantly lower level of appreciation, could they not project waning investor enthusiasm and a coincidental move to divest on the part of the more highly leveraged speculators?
Moving beyond the simple supply versus demand syndrome, are they that out of touch that they really believe that Sub-prime and ALT-A mortgages were the cause of the US meltdown rather than the most well publicized effect? Where are the economists in this part of the world who can tell it like it really is a la Chris Thornburg: “prices are dropping because they got too freaking high”?
This stuff isn’t complicated, but breaking it down to its most basic levels appears to be beyond the comfort level of our local economic pontificators. I suppose you can’t blame them for not wanting to start a stampede to the exits. I have little sympathy for them now, however, given their complicity in fueling the fires in the first place.
September 7th, 2008 at 3:09 pm
His rearview mirror is basically an admission that he f’ed up and he’s looking for reasons why.
That is a very very weak admission. A reader who didn’t know better gets the impression that he called it right.
Here is a cross post of my recent RE Talks post on this very article:
We have tried to dissect Pastrick’s model in the past. I have always been of the opinion that he does little if any proper fundamental analysis (ie. price to rent etc), but rather tries to correlate/extrapolate a number factors to future price movements. He may well think that these factors are “fundamentals” but they really aren’t in the direct sense. Clearly he has zoomed in on recent economic condition and prevailing interest rates as key determinants of future RE prices. The problem is that he sees these conditions as absolutes that can drive near double digit price growth PERPETUALLY. In other words, as long as rates stay low and the economy is strong, prices will go up 10%+ a year. Yeah right.
This is a very foolish way of looking at things, but is the typical mindset of a statistical modeler (as opposed to a financial analyst). There is simply no effort made at UNDERSTANDING the actual MECHANISMS that drives RE prices, but rather a shotgun approach of simply correlating a plethora of data points and thinking that this will tell the future. It probably does, until it doesn’t. If there is one factor HE SHOULD HAVE TRIED TO CORRELATE, it should have been that high price/rent multiples generally means that RE will underperform (and vice versa). Essentially a case of not seeing the forest for the trees.
It is pretty clear that he is myopic about the “low rates, strong economy means higher prices” mindset. In March, he said: “Lower mortgage rates, a tight labour market, high income growth and rising in-migration all point to continued high sales volumes and price rises, according the CUCBC’s chief economist Helmut Pastrick.” No mention of affordability, price/rent etc. And now that his forecast has been completely invalidated he says: “Pastrick says it’s a different type of real estate downturn from what’s been seen before. Past triggers – like dramatic spikes in mortgage interest rates or high unemployment – aren’t present now.”. He pretty well admits that his entire model is based on these two factors. No wonder he is surprised. I think he should audit a financial analysis course or two. Perhaps Tsur could sit in as well, working in Henry Angus building and all.
Apparently his “model” has been expanded upon, because now affordability factors in: “Instead he attributes the drop to prices that had risen too high – beyond the affordability levels for first-time buyers “. That was the case in March as well (when prices were higher), so why would he think that prices could pile another whopping 17%? Clearly he was OBLIVIOUS to affordability concerns a paltry six months ago.
And in the past few years, we criticized the fact that his B.C. economic forecasts ignored U.S. housing melt down. First, he called for U.S. soft landing. Then he neglected to factor in economic consequence, of the OBVIOUSLY under way bubble collapse. Apperentaly, his “model” is now hip to some of these events: “coupled with consumer angst about everything from high oil prices to the U.S. economy and the real estate market meltdown there.
Overall, there is absolutely NOTHING forward looking about his analysis. Pure extrapolation of past condiditons. Zero connection of dots. Carl Gomez on the other hand …
September 7th, 2008 at 3:06 pm
Rent before you commit to buying. You can test a building or a neighbourhood. For stratas, you probably will get some more insight into who owns and what problems they face. Personally, I doubt I’ll ever buy a condo.
I will buy a piece of land, even if it just has an old shack on it. When the market crashes, building or renovating will be a lot cheaper.
September 7th, 2008 at 2:49 pm
Listen to Bearette. (206) Some good thoughts there. Possible future topics? To start it off:
Would it be feasible to combine two adjacent shoebox units in a strata building into one livable place? Or would that simply not fly under strata law?
For either investment or residence purposes, what makes for a good building? Some buildings will become hellholes, leaky and moldy, filled with drug labs, flophouses, “escorts” and crackheads. Absentee, cash-strapped owners resolutely voting down any attempts to change matters. Any decent people fleeing and being replaced by more lowlifes. Others will be great, with families, good maintenance, courtesy and blockwatches . It will take years before it is obvious which is which. What are the clues, and are any buildings clearly set on a path already?
Any advantage to buying an entire floor for investment? Strikes me you may be able to attract a better tenant if they perceive a security and livability advantage from knowing any current/future neighbour will be subject to the same criteria as they were. (One advantage to being a renter is that when confronted with the neighbour from hell it is MUCH easier to toss in the towel and move.) Real estate is often a good investment, and in the few years following a monumental crash can be a great one. We are sitting on a wad of cash, and need appropriate vehicles for it.
September 7th, 2008 at 1:50 pm
.i do not regard realtors as professionals only they do.
is it not a vocation ?
real estate boards do not provide a public service they service only themselves and there paying members.
care to dispute that ?
its the one rotten apple that makes them all look bad.
the boisterous and nauseating ones and the ones that spin spin spin.
the ones that claim more affordable homes will hurt the economy where as in Calgary’s place unaffordable homes are strangling the economy as no one can afford to live here
no doubt Vancouver will end up the same way.
do you know that realtors and spec buyers make up less than 1% of any given cities population
September 7th, 2008 at 1:45 pm
Matt,
“I’ve wondered the same thing on this blog and received an equivalent amount of emnity in responses.”
I’ve never seen anyone be rude to you. I have seen some very thoughtful and earnest replies to your comments (ie from jesse). Your own comment in this thread is deliberatlet provoking, so you’re hardly reaching across the fence yourself. I tend to assume touchy people are overleveraged and panicked, but maybe your just naturally rude?
“Lately though it seems that the posts have gotten less arrogant from the bears as I think a few of them are beginning to clue in to the reality that economics does not discriminate by a buyer’s personal buying strategy. ”
You have an amazing capacity to completely miss the point. The primary thing Vancouver Housing Blog/Financial Planning & Personal Responsibility/Vancouver Condo Info (the 3 main “bear” sites locally) have stressed is that the sun doesn’t shine forever and when the rain comes you had better be prepared. In boomtimes, leverage is your friend. In recessions it can destroy you and deplete your wealth. Therefore, the advice has been: do not overleverage, instead save for the rainy day. To say that everyone is in the same boat in case of an economic downturn is ridiculous. Mohican from Financial Planning & Personal Responsibility is the perfect example. He recently bought when a deal that met his criteria came along. He got a substantial reduction in price from his neighbours who bought a couple of years. Will he be in the same boat as his neighbours during a downturn? Not if he has less leverage working against him.
Troubled recessionary time are when millionaires are both made and bankrupted. They are, in fact, NOT a time when everyone has the same economic outcome, even if they are an *unpleasant* time for all.
I know some people who bought more house than they could afford within the last 12 months and others who have borrowed an enormous amount against the sudden increase in “equity” of their property. These people will not be in the same position as people who have been conservative with the amount of leverage they have taken on, people who bought 7 years ago, people without debt and, especially, people with substantial savings. For the record, I am saddened that some people will be hurt, especially friends and family.
September 7th, 2008 at 1:32 pm
#176 islander you have it backwards..its your dislike of anyone who dose not believe in your delusions that real estate always goes up.. you simply do not like posters that post bearish comments or opinions regarding real estate and any time your opinions are opposed you feel like you have been personally attacked..
try posting a pro canuck comment on a flames blog the day of a big game and see what you get thrown back at you
in other words know where you are
September 7th, 2008 at 1:15 pm
bearette — good points. These guys are standing on the deck of the Titanic and quibbling about how fast its sinking and if their fellow passengers are ‘nice’ enough. The “hater” post below, for example, hypocritically reeks of fear, loathing and flopsweat, and such types are better ignored.
I don’t have ready answers to your questions, but I’ll start thinking along those lines and doing some research, particularly as I expect to buy within 3 years.
September 7th, 2008 at 1:04 pm
Patiently – LOL. Great article and pic, thanks.
September 7th, 2008 at 12:56 pm
Yes, like Beramax says, it is well and truly over. I think it’s funny we’re still arguing about how over it is. There is no point. The bulls will fight it right up until their foreclosures. Lets ignore them, they are now utterly irrelevant.
It would be truly interesting, I think, and more educational, if us long-standing 2005, VHB-era bears started talking amongst ourselves about how best to take advantage of just how over it is. I think that would be way more constructive. And useful. Let’s just shut out the noise of bulls-in-denial and focus our energies on strategizing amongst ourselves — sharing advice and tips about how we are going to carve up the Vancouver real estate market carcass between us and to our best advantage.
Topics like how to low, low, ow-ball. How to buy without a realtor. How to spot the trough. What to look for in a home to make sure its built to last, not built by a boom-era crack-smoking teenager with a hammer. Which areas will fall least during a prolonged downturn after the initial 2008-2010 drop. Investment properties: a good investment at 50 per cent off 2008 prices? Etc.
Any takers?
September 7th, 2008 at 12:54 pm
Bobcats squat in foreclosed Cali house.
http://www.latimes.com/news/lo.....6826.story
September 7th, 2008 at 12:42 pm
Fish has East Van MOI at 72 weeks.
http://fishre.blogspot.com/
Up until now, East Van has been strengthened by buyers who were priced out of West Side/North Shore. It had been a strong area, and now its the weakest. This is BIG.
September 7th, 2008 at 12:41 pm
Who cares, it’s over. Get it? Time to start looking for a new job. Tim Hortons and Walmart are always hiring.
September 7th, 2008 at 12:38 pm
Betamax,
you did not produce any relevent point other than that your sister is realtor same as paul who published fake numbers.
September 7th, 2008 at 12:14 pm
Message to bulls who have now become hypocritical moralists and apologists:
You were wrong, wrong, wrong, and you’re not nearly half as smart as you thought you were.
Hope you have some savings, because you’re going to need them. Buh-bye.
September 7th, 2008 at 11:28 am
“We all live in the moment here. When things are good, you don’t think that things could get bad.”
September 7th, 2008 at 11:17 am
Dosh Says:
July 1st, 2008 at 6:59 pm
I don’t think we need to make a really big deal about this – listings are up and sales are down, but so what? Markets change all the time. Even IF we were to track the US market it’s been more than two year for the US markets to fall where they are today and thats not been that far. Do you really want to wait for more than two years to buy when there are so many good option on the market right now? Even IF prices were to fall you’d probably pay more on rent while you wait than you’d lose in a correction.