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Friday Free For All!

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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!

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jesse

"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.

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Dave

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… Read more »

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patriotz

“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.

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buff_butler

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.

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patriotz

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.

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beatstreet

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.

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Patiently Waiting

"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.

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Michael Randallbard

Growth does NOT equal prosperity
http://www.chrismartenson.com/growth_vs_prosperit…

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Bluesman

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.

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Brad

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. 🙂

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Anonymous

From Panamericana at Fishy's site:

http://www.lewrockwell.com/orig9/quinn9.html

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Bluesman

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

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Anonymous

The agent hinted that 10% was a sure deal

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jesse

"Everyone was willing to accept lower offers."

How low? I assume not 40% lower.

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Anonymous

Just went to a couple of open houses. I don't believe how dead the market is. Everyone was willing to accept lower offers.

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lbj

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.

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Drachen

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.

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MickeyFinn

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… Read more »

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jfk

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.

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Strataman

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,… Read more »

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Vansanity

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… Read more »

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MickeyFinn

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.

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jesse

"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.

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Anonymous

Help out a new condo owner

http://vancouver.en.craigslist.ca/cto/858082620.h…

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freako

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.

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