Friday Free For All!
It’s Friday and that means open topic time at VancouverCondo.info. Here are a few stories I’ve noticed this week:
-Long term mortgage rates rise
-Luxury home sales to slow
-Canada: at risk for housing market meltdown
-Scotiabank: no risk for housing market meltdown
-Canada’s central bank braces for US recession
-Flaherty: Serious consequences if US bailout fails
-Washington Mutual: Biggest US bank failure yet
-TD: No worries of a great depression
So what are you seeing out there? Post your news, links and thoughts here and have an excellent 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!
September 29th, 2008 at 9:31 am
"think his formula is a more accurate predictor of real estate prices because it takes investor mindset somewhat into account."
It takes investor mindest FROM THE PAST into account and then infers that past performance is an indication of future performance. Maybe. Maybe not. Note Somerville's past performance data includes a generation of disinflation baked into the appreciation numbers. That period is now pretty much over.
September 29th, 2008 at 9:07 am
Well yes that’s tautological.
Patriotz, of course it is. It humours me to see how some posters can take such strong exception to it.
But it’s true. If you buy something cheaper, then your expectation of price appreciation is clearly higher than if you buy it at a more expensive price. That’s the difficulty in using Tsur’s formula. It’s hard to put a number to an ‘expectation’ because expectations change depending on various factors. I think his formula is a more accurate predictor of real estate prices because it takes investor mindset somewhat into account. In contrast, price to rent ratios only seem to be able to predict pricing maybe 10% of the time, which is market bottoms. That’s great if you want to wait out a bull market and sit on the sidelines for 10 to 15 years, but it isn’t so great for those who want to be in the market.
September 29th, 2008 at 1:12 am
“I think you must also consider that lower prices create an expectation for higher price appreciation in the future.”
Well yes that's tautological. If I expect the benchmark house in GV to be worth 800K in, say, 2020, that's a higher appreciation from a market bust price of, say, 400K in 2012 than the market top of 771K in 2008.
September 29th, 2008 at 12:27 am
I actually have to give dave credit
"I think you must also consider that lower prices create an expectation for higher price appreciation in the future."
Does make sense however only from an investor perspective. The problem with this logic is that the investment numbers currently dont make sense for investment – especially if you rule in the possiblity of a 30%+ plunge. As well pressure from this point of view wont help with just a 10% drop… 30% definitly.
September 28th, 2008 at 11:01 pm
Canada’s Price to Rent ratio is 190
Of course only the price/rent of local markets is relevant. Greater Vancouver runs from the high 200s to as high as 500.
September 28th, 2008 at 9:33 pm
Global Price to Rent: Canada No. 2!
Darn, another silver medal. According to the OECD's June 2008 Outlook, Annex Table 60, Canada's Price to Rent ratio is 190 second only to Spain at 198. But, we are far above the average of 144.
Who came in last…that former real estate hot spot Japan at 69. Hmmmm…..
Unfortunately, there is no link available, but the report can be purchased from the OECD web site if you are really interested.
September 28th, 2008 at 9:04 pm
"The Americans just looked at their wanted list, told him he wasn’t on it and sent him home."
I'm surprised they didn't hire him.
September 28th, 2008 at 8:58 pm
Growth does NOT equal prosperity
http://www.chrismartenson.com/growth_vs_prosperit…
September 28th, 2008 at 7:52 pm
Brad,
Judging from the fact that sales this year will be around half of what they were last year, and the Greater Vancouver listings:population ratio is about 1:78 I would expect a 40% drop within the next 2 years. Could be more, could be less.
As far as rents are concerned, until the speculators start caving rents will be way to high for the salaries in this city.
Good evening to you.
September 28th, 2008 at 7:32 pm
Hi Everyone, just more of a general question for all;
Now that the US is cratering, any thoughts of when it will filter up here in terms of RE? 1-3 years?
Also what about rents coming down due to the slowdown/inventory/etc?
I've recently noticed people renting places offering cash bonuses to rent apartments downtown..just wondering if this is the beginning of a trend. on the other hand i went to look at a place today..1350$ for 421 sq feet..in a crappy building.
happy sunday to all.
September 28th, 2008 at 7:19 pm
From Panamericana at Fishy's site:
http://www.lewrockwell.com/orig9/quinn9.html
September 28th, 2008 at 6:53 pm
Going, going ….
REAL ESTATE AUCTION. Mon Sept 29th, 2008 at 7:00 pm. Seller is very motivated! Bidding starts as low as 20% below city assessment.
Assessed at $747k
http://tinyurl.com/4gtvur
September 28th, 2008 at 6:34 pm
The agent hinted that 10% was a sure deal
September 28th, 2008 at 6:16 pm
"Everyone was willing to accept lower offers."
How low? I assume not 40% lower.
September 28th, 2008 at 6:08 pm
Just went to a couple of open houses. I don't believe how dead the market is. Everyone was willing to accept lower offers.
September 28th, 2008 at 4:27 pm
Good to hear that folks are starting to smell that recession in the air. Let's hope that it will be the next penny to drop in that thick scull of Joe Public cuz it will be the final straw for meltdown city.
September 28th, 2008 at 2:45 pm
Strataman
Several months later he tried to turn himself in because he didn't want to be a fugitive any more. The Americans just looked at their wanted list, told him he wasn't on it and sent him home.
September 28th, 2008 at 2:28 pm
Yeah jfk, I'm in total agreement with you their.
The beautiful thing about fear is that it is contagious. Even people who have a vested interest in maintaining calm in the real estate market get betrayed by their own fear… and they find themselves trying to talk-down exactly what scares them. Witness for example the quote attributed to Ward Mcallister in last weeks Van Sun article where he couldn't help but try to state that local developers are pulling back on new projects and his contention that they can still balance-out the supply of new product… yeah right.
Ask yourself this Ward… why do you need to hold back new projects? Answer: cuz you've already over-built and over-committed to new projects that will be completing over the next couple of years.
The train is picking up speed as it approaches the station.
September 28th, 2008 at 11:54 am
Hey Mickey,
More listings are cool, but Vancouver already ranks among the highest inventory among North American cities. Now that the penny has finally dropped in the thick scull of Joe Public, I think this long overdue correction could be fast and furious….downright scary with the approaching recession.
September 28th, 2008 at 11:42 am
For Dave, thumbsup and brown streak; Just so you know you are going where others have gone before you!
"The moment when Saddam Hussein's faithful minister of information, Mohammad Said Sahhaf, finally accepted that the game was up is revealed today by The Telegraph.
In the dying days of the regime the indefatigable minister, dubbed "Comical Ali", had haunted a radio studio in Baghdad, urging engineers to carry on pumping out Saddam's propaganda.
Even after the statue of Saddam was toppled on April 9, Mr Sahhaf refused to accept that Saddam's era was over. But in the early hours of April 10, with the sound of battle raging ever closer to the studio, in the al-Adhamiyah "district, even Mr Sahhaf headed for the exit.
"Sahhaf slowly removed his black beret," recalls Raibah Hassan, 35, the manager of the Hikmat studio, the last person to have seen Mr Sahhaf in public. "He folded down the epaulettes on his military jacket to hide his rank and then he reached for a red and white kaffiyeh scarf.
"He wrapped it around his head as he told us to keep on re-broadcasting until 3am. He said goodbye, and then disappeared out of the back door."
September 28th, 2008 at 10:26 am
I'm back from 2 glorious weeks of holidays in sunny Cabo! Now I guess I'm a "tanned bitter renter" right? LOL! So glad we're renting, our savings have never been higher.
Anyhoo, looks like I picked a really good time to take off! Not much happening on the global equity and credit markets… LOL!!
One thing that's not being discussed enough for me, but will have a huge impact, is consumer confidence. It is LOW. The "bailout" or "rescue plan" can perhaps deter a seizure of global credit markets. However, from what I'm seeing, the damage has been done in consumer confidence, regardless. It will take a long time to change that.
Also – Someone mentioned short-selling banks like WaMu. Didn't the US suspend short-selling of financial stocks? I thought they did that right after the UK announced the same rule. Doesn't that speak volumes for what's going on out there? LOL! Unbelievable times we're living in.
September 28th, 2008 at 9:06 am
By this time next week we will have the newest numbers from the real estate board. What you will see – and I can pretty much guarantee this – is the highest listings inventory yet this year… which means the highest for many many years.
It is straightforward. Listings continue to rise and properties are not selling. The resolution will come in the form of price reductions. Price reductions will beget fear from real estate owners who either need to sell of who want to sell and they will start to list their units etc…
I predict it will start to spiral down quite rapidly.
Fear is a powerful emotion. People hate to lose their money.
September 28th, 2008 at 7:35 am
"But, if you are to take that approach, I think you must also consider that lower prices create an expectation for higher price appreciation in the future. "
Wow.
Only if you measure appreciation as average to peak. For everyone who sells at the peak after buying at the average there is another that does the opposite. That's how averages work.
It's a fascinating argument. I suggest you email Dr. Somerville and discuss further. Who knows: you may have something.
September 27th, 2008 at 11:40 pm
Help out a new condo owner
http://vancouver.en.craigslist.ca/cto/858082620.h…
September 27th, 2008 at 10:13 pm
I think you must also consider that lower prices create an expectation for higher price appreciation in the future.
No they don't. The price of Nortel halved the other week (for good reason). Does that create an expectation for higher price appreciation in the future? Absolutely not.
If a model suggests that RE is fundamentally overvalued and prices need to drop, it DOES NOT suggest an expectation for higher price appreciation in the future.
September 27th, 2008 at 8:05 pm
richmond renter,
I agree, the realtor didn't sound professional. Racists exist in all ethnic groups. I just like to give everyone the benefit of the doubt
September 27th, 2008 at 7:22 pm
Dave
"Mr. Market, I enjoy being called a moron by semi-literates like yourself"
No you don't, deep down you're really very scared that you're not half as smart as you pretend to be. Honestly, the only way anyone can be wrong as often as you and still believe in their mental superiority on a subject is if they're hopelessly deluded about their own intelligence. All of the smart people I know have doubts, that's part of intelligent behaviour, asking the question "Am I wrong on this?"
The fact that you don't seem to have any doubts ever shows your true nature.
I know you're thinking the response, "Well you don't show doubts either!" The reason is that I've been through it. After two years of asking for a rational reason why we bears could be wrong I've heard exactly zero rational, cogent arguments I think I can safely say that there are no good reasons for believing the current pricing is sustainable or even remotely close to sustainable and many good ones for believing prices must fall between 40 and 70%.
September 27th, 2008 at 7:18 pm
Arit,
Thank you! I thought I was imagining this, being a "prairie girl" and fairly new to the city.
September 27th, 2008 at 7:16 pm
Paitently waiting: Personal information, sure, don't disclose if that's the policy. But when another couple can ask for VERY personal information, numerous questions and get straight answers and I ask ONE simple question if the owners are "downsizing", I get the "It's none of your F&cking business" attitude. Yeah, I was in an awesome mood, just finished a yoga class and had a light and airy smile on my face when I walked in.
When I left, I felt really, really hurt.
September 27th, 2008 at 6:55 pm
richmond renter,
Well I'm not doubting the feeling you had of being dismissed, I can see where maybe your questions may have crossed a fine line. The length of time someone has owned a house may even be available in public records, so that kind of info is fair game.
When I've bought and sold real estate, agents refused to give me more than minimal details about the party, even during the negotiation process.
September 27th, 2008 at 6:44 pm
The hunt begins to punish the culprits
Retribution and regulation are coming for bankers
http://business.timesonline.co.uk/tol/business/in…
September 27th, 2008 at 6:38 pm
Richmond renter,
You are not alone, I am also a Richmond renter, and I also feel sometimes that I get treated quite differently for being caucasian. I prefer not to go into details in a public forum, but let's just say that when I feel I need 'protection', I take with me my Chinese coworker – she handles the situation in Cantonese and I get fair treatment.
Best regards,
arit
September 27th, 2008 at 6:23 pm
I was at an open house this afternoon and got treated like crap from a racist Real Estate agent. She was kind, curious, and answered numerous questions from an asian couple such as the length of time the owners had been in the home, etc. After they left, she turned to me and asked if I had any questions. I asked her one…if the seller was downsizing, transfered..? So I could get a feel for situation. Her response was "Well I guess you'll have to ask them, won't you? I'm not inclined to give out personal information. I looked at her in disbielf, thanked her for her time (sic) and promptly left.
Funny thing is, I have a decent downpayment, lot's of RRSP's and personal assets and could easily afford the place. Trust me, I'm a bank's dream. But she took it upon herself to assume since I wasn't asian I couldn't afford it. I feel sorry for the owners of the house if she's representing them and trying to sell on their behalf! No wonder it's been reduced twice over the past 4 months.
Is there a place where a person can report real estate agents like this? I'm just so wound up right now….
btw, this is not intended as a rant about racism. I just couldn't believe how rude this women was to me!
September 27th, 2008 at 5:55 pm
But Dave, wouldn't high prices create an expectation for price depreciation in the future, or is this a one way street…
September 27th, 2008 at 4:55 pm
Mr. Market, I enjoy being called a moron by semi-literates like yourself because you don't even see the irony, but I do.
September 27th, 2008 at 3:31 pm
"I think you must also consider that lower prices create an expectation for higher price appreciation in the future. ”"
Holly cow! This is one of the most rediculous things I have ever read. Dave has shown himself to be either a moron or a partisan RE bull not intersted in finding the truth (AKA a lier).
September 27th, 2008 at 1:46 pm
"M, your iterative suggestion for Tsur’s formula is a good idea. But, if you are to take that approach, I think you must also consider that lower prices create an expectation for higher price appreciation in the future. "
HAHAHAHAHAHAA
GOOF
September 27th, 2008 at 1:30 pm
Dave
"you must also consider that lower prices create an expectation for higher price appreciation in the future."
Again you're spouting pure speculation as if it's written in stone fact Dave. Stop misrepresenting your meandering wishes as though they were facts.
In the real world when prices go up they create an expectation that they will continue to go up (as has been the highly provable case for the last 20 years!)
When prices go down it creates the reverse expectation. I'd like to hear some examples you can provide that prices going down gives psychology a boost Dave.
September 27th, 2008 at 12:54 pm
Dave, the point of using a formula to determine what the fundamental value of a property ought to be is to take emotion and expectations out of the equation.
When you get the convergent number from the iterative approach, that's the fundamental value based on the assumptions made about price growth, rents, etc. It says nothing about boom-bust behaviour. We all know the market's never going to take a straight-line.
September 27th, 2008 at 12:23 pm
M, your iterative suggestion for Tsur's formula is a good idea. But, if you are to take that approach, I think you must also consider that lower prices create an expectation for higher price appreciation in the future.
September 27th, 2008 at 11:32 am
Hey Gadwin you realize that short-selling is temporarily banned right now, and therefore is not the bogeyman/scapegoat with the market action on the banks?
Lack of balance sheet transparency, counterparty defaults, escalating losses, and fear by depositors and CDS sellers might be more to blame.
September 27th, 2008 at 10:08 am
Mortgage rates are rising, credit is contracting, loans are harder to get, RE is still at near record unaffordability. Prices have a lot further to go down. Merrill Lynch's 35% down forecast is just a minimum.
A RE Agent friend just told my wife that their office has been briefed that prices will decline much futher for at least two more years. She advised my wife not to by for a long time.
September 27th, 2008 at 10:05 am
By the way,
The identical unit one floor up was listed at $975,000. After months with no takers, it is now rented.
September 27th, 2008 at 10:04 am
Rents are not rising. I just rented a 1200 SF two bed, two full bath water front unit right on the sea wall in South False Creek for $1800. I talked the agent down from $2000. At first he refused but after two weeks of no takers he gave it to me at a discount. I'm paying 20% less than the previous tennants (the agent showed me their contract).
September 27th, 2008 at 9:39 am
Jesse: thanks for running the iterative numbers! It's interesting to see how bearish they are even with Tsur's assumption, let alone your other test-runs!
September 27th, 2008 at 9:26 am
I was just talking to a real estate agent in West Van who said that the market is going crazy. It's like a new boat of rich asians has just come in. Everyone's buying condos like there's no tomorrow. There must be worry that if you don't buy now there will be no bank to keep your money in. Buy now or the bank will go under.
September 27th, 2008 at 9:20 am
You can probably tell if you're lacking the ability to make of conscious consumer decisions if your answer is yes to either of the below:
"is it really worth paying 7$ for a coffee just because they give it an Italian name, especially when it's not really as good as the real Italian version of it?"
"is it worth coughing up 180$ for these lululemon pants, when it's public knowledge that they are made in China (for probably 2$ a piece)"
September 27th, 2008 at 9:17 am
Re high rents. When people like Boomerang walk away from a condo they think is overpriced in rent, then we call this a conscious consumer decision…"is this worth it given …"
Conscious consumer decisions are good as they keep the markets sane, no? Unfortunately it seems there are too few people here thinking this way or maybe they are simply not capable of making conscious decisions when consuming.