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!
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September 25th, 2008 at 10:31 pm
#1 Sapporo Ichiban!
September 25th, 2008 at 10:56 pm
Pope, one suggestion. IMO, if you are going to have the ability to rank a post up, you need the ability to rank a post down…
September 26th, 2008 at 12:30 am
Just In…Marc Faber recommends the govt buys one million homes and BURNS THEM DOWN
http://www.cnbc.com/id/1584023.....amp;play=1
September 26th, 2008 at 6:49 am
What I don’t understand is how anyone can possibly say that the Canadian housing market is in trouble. This is CANADA. We have the most conservative banks in the universe and free healthcare like Cuba. We don’t even embargo Cuba in fact. Anyway Canada has a super force field around it and a lack of land that helps keep the housing market healthy.
September 26th, 2008 at 7:15 am
What I don’t understand is how anyone can possibly say that the Canadian housing market is in trouble.
…cause there are no buyers…only sellers
what part of this don’t you understand?
September 26th, 2008 at 8:00 am
Don’t worry about John oziijjiizo, he is spouting sarcasm – and doing it pretty well I might add…
“Sarcasm is stating the opposite of an intended meaning especially in order to sneeringly, slyly, jest or mock a person, situation or thing. It is strongly associated with irony, with some definitions classifying it as a type of verbal irony intended to insult or wound. Sarcasm can also be used in a humorous or jesting way depending on the intent of the person speaking.” (from Wikipedia)
September 26th, 2008 at 8:02 am
I was watching one MLS – V703410 for 4 month…an now it’s gone. How can I find out the reason why or the price it went for? This condo for on the market for 4 month.
September 26th, 2008 at 8:35 am
Dan, any realtor can give you info on selling price. If you’re not currently working with one, a few of the blogging realtors have offered to give this info to people who call or email, you could try asking Paul:
http://www.nvcondos.ca
September 26th, 2008 at 8:42 am
http://news.bbc.co.uk/2/hi/business/7637491.stm
September 26th, 2008 at 9:38 am
Reductimat: I agree, It is frustrating not being able to give thumbs down to certain comments. That’s the next step, unfortunately I’m not a coder and I’ve got other demands on my time so hacking through this stuff takes a while. I have raised the score limit for comment highlights to 15 and toned down the highlight.
Michael: Great, they could employ the homeless to burn those houses down.
September 26th, 2008 at 9:43 am
Dan Says:
September 26th, 2008 at 8:02 am
I was watching one MLS – V703410 for 4 month…an now it’s gone. How can I find out the reason why or the price it went for? This condo for on the market for 4 month.
The listing was terminated after 157 DOM. Originally asking 599.9k, reduced to 550k at time of termination.
September 26th, 2008 at 9:51 am
Incidentally, Tsur Sommerville (sp?) was the guest speaker at a luncheon that I attended yesterday.
He is not nearly the idiot that people on this board make him out to be and readily acknowledges the limitations of his pricing model. Specifically, the assumptions relating to the representative dwelling, representative rents and expected price appreciation are obviously subject to considerable variance.
I had a few questions on the model but, not surprisingly, there there was no question and answer period (with the room being full of appraisers, I don’t blame him).
September 26th, 2008 at 10:10 am
“I had a few questions on the model but, not surprisingly, there there was no question and answer period”
My brief conversations with him have been cordial. I disagree with some of his assumptions; it’s my view that he ignores fundamental valuations in favour of a more complex population and income growth model to justify higher prices in the future. Time will tell whether that was a mistake.
Ultimately, using nominal growth rates in the past as an indication of future price growth is flawed due to today’s lower inflation environment — a significant portion of the real price growth in the past generation has been due to disinflation. This fact is effectively ignored in his models.
September 26th, 2008 at 10:12 am
After Washington Mutual’s collapse yesterday, short sellers and Hedge Funds seem to be after Wachovia and National City:
http://biz.yahoo.com/rb/080926.....ksbiz.html
September 26th, 2008 at 10:18 am
You know what I’ve come to realise and I’m sure some of you might be coming around too is that the bears are the idiots here. You people lived within your means, saved, scrimped and generally acted responsibly through this whole thing. Meanwhile every nail gun repairman in town is blowing money like it grows on trees. When this thing collapses those people will be getting huge bailouts from the government and you’ll be paying for it. Who’s the smart one? Being a bear is the dumbest move in history.
September 26th, 2008 at 10:20 am
“He [Tsur] is not nearly the idiot that people on this board make him out to be”
I don’t think he’s an idiot. I think he’s getting rich off of selling himself out. If he believed in everything he published I’d think he’s an idiot but I’m sure his papers begin with, “What new angle can I use to help my best buddy Bob prop up the real estate market for another year.”
I’m sure he and Rennie will retire somewhere sunny in a couple of years and live like kings. That’s not dumb, it’s just unethical.
September 26th, 2008 at 10:29 am
FYI, after Washington Mutual’s collapse, short sellers and hedge funds are going after Wachovia and National City now.
September 26th, 2008 at 10:30 am
Here is the link about Wachovia and National City troubles:
http://www.reuters.com/article.....LY20080926
September 26th, 2008 at 11:03 am
James said, “Being a bear is the dumbest move in history.”
Nope, I think you’re wrong there.
Suddenly, the cash I have saved in the bank while being a bear on Vancouver real estate is able to buy all kinds of assets that are being sold at fire sale prices. For instance, today I could buy Petro Canada at $36/share whereas a few months back it was $61/share. At today’s price it trades at an 8 P/E and has a 2% dividend yield.
I’m not going to buy Petro Canada though (at least not yet) cuz there’s plenty more carnage yet to come. And, the real carnage that I am waiting for is the train wreck that will be the Vancouver housing market. It’s happening as I write… listings continue to climb and there are more and more reasons everyday for people to want to sell. The newest reason is retirees who are watching their mutual funds evaporate… and who will now want to sell their homes to use the gains that they have made in their homes to fuel their retirement somewhere else where the cost of living is lower.
That’s one of the beautiful things about capital these days… it is free to move where it wants. Vancouver real estate is over-priced relative to a growing list of investments… Petro Canada is one of them but there are thousands more.
September 26th, 2008 at 11:32 am
There goes Thums/Krish/monkeys theory that wages had tripled and would triple again:
Wages lag behind inflation: StatsCan
Eric Beauchesne, Canwest News Service
Published: Friday, September 26, 2008
OTTAWA – Workers’ wages have fallen nearly a full percentage point behind the increase in the cost of living over the past year, according to the latest employment and earnings report from Statistics Canada Friday, which underscores the combined impact of the slump in economic growth amidst rising inflation.
September 26th, 2008 at 11:34 am
“He is not nearly the idiot that people on this board make him out to be and readily acknowledges the limitations of his pricing model. Specifically, the assumptions relating to the representative dwelling, representative rents and expected price appreciation are obviously subject to considerable variance.”
I was thinking about Tsur’s pricing model the other day. His methodology (assuming the current high price is the norm) has been roundly criticized on the bear blogs, but really he was just missing the next step.
Instead of assuming that current prices are reasonable, and publishing that his model suggests an $85K overvaluation, what he should have done was to use that result, and plugged it back in, and use his model as an iterative machine. After all, his model clearly told him that current prices are unreasonable!
On the first iteration, it says houses a $85K overvalued. Second iteration, using “HousePrice-85K” as the current value, might give a $40K overvaluation. Third iteration, using “HousePrice-85K-40K” as the current value, might give a $20K overvaluation. Fourth iteration, using “HousePrice-85K-40K-20K” might give a $10K overvaluation.
So at the fourth iteration, his model might suggest that houses are 85+40+20+10= $155K overvaluation.
…But just try explaining an iterative calculation to a newspaper reporter for eventual explanation to the public in a too-short, light-on-details newspaper article…
Note that I still disagree with the use of Craigslist rents, assumption of recent house price inflation continuing on into the future…
(Jesse, your comments?)
September 26th, 2008 at 12:47 pm
-TSX down 450 today..perhaps even 500 by closing of today.
-Mortgage rates up .35% TD Canada Trust was first, followed by BMO and Laurentian – thanks to the credit crunch fall-out from US.
-MORE Down south trouble…Washington Mutual cooked yesterday.
Whats next?
September 26th, 2008 at 1:59 pm
My apartment search continues (and continues to irritate). I honestly doubt the whole 1% vacancy statement as there are tonnes of apartments out there, the only problem is that the owners are too greedy and will not drop prices resulting in vacant suites. What I will say is that we have a lack of affordable market priced rental housing…
I personally like one poster on craigslist (search apt rent for this phone number: 604-684-2472 ) It looks good, big place, low price… 25 years old and nasty. Anyway, they coldn’t rent it in August for $1850 so they bumped the price to $1950 in September, WTF???
Or another one we (tried to) looked at was listed at $2150. My partner took time off work to look at it and the prompton agent took her to another unit for $2300 that was smaller? Again, WTF??? After I called the agent to thank her for wasting our time she mentioned that the owner of the unit for $2150 is going to put in laminate flooring so wants $2400 now. I simply laughed and said good luck trying to finance your crappy fake wood floor with a renter…
Lastly, a certain rental agency that I lowballed still refused to lower the price but has added some pretty good incentives to give me the price I want to pay without actually dropping the price. Seems the rental agencies are playing the same game as developers, lowering prices to get cash flow without lowering prices to confirm the decline to the market.
September 26th, 2008 at 2:43 pm
So, Boomerang, you’re saying you’re smarter than all the landlords out there because you don’t want to pay the asking rent? What part of the marketplace don’t you get?
It sounds like you’re wasting the agent’s time. You are a pretender. Living in a rathole. Refusing to accept that goods and services cost what they do.
September 26th, 2008 at 3:00 pm
“Or another one we (tried to) looked at was listed at $2150. My partner took time off work to look at it and the prompton agent took her to another unit for $2300 that was smaller? Again, WTF??? After I called the agent to thank her for wasting our time she mentioned that the owner of the unit for $2150 is going to put in laminate flooring so wants $2400 now. I simply laughed and said good luck trying to finance your crappy fake wood floor with a renter…”
We looked at a place last year and Prompton pulled the same thing. Advertised for one price, then when we looked at the place, they told us the carpets were going to be replaced and the landlord was now going to ask an extra $200 p/month!
On a related note, I was contacted by CBC radio One to do an interview with them on our search for affordable housing. I’m a rather private person though so I don’t really want to put my story out there via an interview – I wrote out the highlights and told them they could use that. Maybe they should talk to you YLTN Boomerang…
September 26th, 2008 at 3:05 pm
“You are a pretender. Living in a rathole. Refusing to accept that goods and services cost what they do.”
It’s only worth what someone will pay, if it’s been vacant for a month in a tight rental market then it’s overpriced and the landlord will learn the hard way that the market dictates the price. You are an angry little man islander
September 26th, 2008 at 3:26 pm
the prices are falling? or the prices are falling!!!!
September 26th, 2008 at 3:29 pm
With property management firms like Prompton, it’s all about extracting top dollar. They’re into securing above-market rents. The applicant’s history is irrelevant so long as they agree to pay. It’s rather silly game and if it actually lands a tenant, it’s typically a short-termer with a greater likelihood of trashing the place or skipping out on the last month’s rent. Owners seem content to let good applicants slip away simply to make an extra $150/month. Meanwhile, it takes three or four months to land someone because the rent is priced too high, so the increased rent actually results in a greater loss. It’s silly but that’s Vancouver.
Vancouver’s low vacancy rate is a bit of a misnomer. For anyone looking to overpay, there’s a huge market. Interested in a downtown one-bedroom for $1400/month? You can move in this minute.
September 26th, 2008 at 3:37 pm
What I will say is that we have a lack of affordable market priced rental housing…
‘Affordable’ and ‘market’ don’t necessarily go hand in hand. The market rate defines what the market considers to be affordable, not an individual looking in the market.
I hear the same thing from being looking to buy condos. The people who complain all want to live in Yaletown. They don’t even want to consider looking at affordable places just outside of downtown (e.g. Burnaby). In the meantime, the market passes them by and they will never buy in at levels they could have in the past.
I hear the same thing on these blogs. Everybody uses Yaletown or Coal Harbour to justify why they believe the market to be so out of whack. Nobody ever looks at the affordability of a unit in Burnaby or Richmond to make their case. There is a reason for that, which is that affordable condos still exist in the city.
September 26th, 2008 at 3:54 pm
islander
Let me guess:
Nobody has rented your 580sqft apt that you bought for an investment. To try and appeal to a different part of the market, you went to Ikea and outfitted the place to now offer a “Luxury Furnished Executive Apartment”. You probably have even less people looking and are refusing to drop your rent and go cash flow negative and are pissed off when people like me offer less than what you ask.
The sad thing you are missing is that the buyer ultimately sets the price. The seller can ask any price they want but will only make the sale when the buyer accepts the price.
In a market of Vancouver’s size, the average renter should be a price taker however when prices are so outrageous that most renters just cannot afford to live, they will offer what they can, eventually making the price.
Grace just completed with average rents of $3000/month for one bedrooms. Shangri-la is also almost done and too will try and ask a premium but I am looking at the 1 bedroom market for ~2K/month and you can find some pretty nice places at this price with a handfull of renters looking. When I started looking at 1 bdr for $2300/month, I found that there were very few, if any, people looking. At $2500/month, I have been the only one and the landlords won’t leave me alone even after I tell them I am not interested at that price… what’s going to happen with these $3000/month places?
I know for a fact that Grace started pre-selling 7 years ago so the landlords here can afford to take a much lower rent without going cashflow negative so I’ll probably start throwing in offers for $2000/month at those guys until one of them finally accepts some $ is better than no $.
Oh, BTW, islander, I am not living in a rathole, I used to live in a nice 2000+ sqft waterfront townhouse in Yaletown that I will probably buy again at half the price I paid along with a half dozen of those 580 sqft shoebox’s for pennies on the dollar when prices go back to normal and I can rent them to the government to solve the homeless problem!
September 26th, 2008 at 3:57 pm
I find it’s slightly cheaper to rent in Yaletown than it is in Burnaby. At least as a single person. Reason being that Yaletown has a good supply of studios and small one-bedrooms, whereas Burnaby is all about the large one-bedroom and two-bedroom units. The rental price per square foot may be more affordable in Burnaby but you end up having to rent a bigger place.
On another note, the Lower Mainland seems to have a quality threshold when it comes to renting. If you think about downtown, the divide between a West End dump with stained carpet and a new Yaletown one-bedroom with amenities and laminate floors can be as little as $150/month.
September 26th, 2008 at 4:02 pm
It’s pretty simple bears. The vancouver condo market is the best there is. The stock market is crashing due to bears and their negativity. The housing market is the last sure thing there is. That’s why I’m still buying.
September 26th, 2008 at 4:14 pm
John
A crashing stock market is a great place to make money with short ETF’s. They’re highly liquid too. When the US bailout looked like a go, I threw $$ into a double bull market ETF and then when they faltered, I shorted the same ETF. If you don’t want big swings and high risk, it is pretty easy to hedge too!
Housing is too high a risk for me in these tumultuous times; your life savings is leveraged and illiquid. As a renter, if I’m in my $2K/month lease and rents come down $200/month on average, i’ll ask the landlord for a rent reduction or break the lease, loose the deposit and find myself a nicer place for less cash. Movings a pain, but after doing it so many times, I have very little junk and can do it for under $400. If rents go up, what do I care, I’m in a lease and rental raises are regulated and will likely be lower than inflation!
September 26th, 2008 at 4:42 pm
“is methodology (assuming the current high price is the norm) has been roundly criticized on the bear blogs, but really he was just missing the next step.”
The two main flaws in his methodology, IMO, are using past appreciation in a disinflationary environment as a gauge for future price hikes and assuming that current (arbitrary) prices are justified.
m- I think you’re right that he could use an iterative method to determine prices for certain types of properties however the problem is that the capital land ratio (i.e. “densification premium”) will increase so perpetually decreasing cost of capital is indeed justified. Since the CLR is not known we have two unknown variables (CLR and fundamental price) and so one must assume one of them (Somerville chose the price).
I think Somerville needs to take another big step back and figure out how fast land could densify — it must be less than the population growth since there is still unused land to be built on. Using expected wage inflation and these upper limits on CLR, the long-term growth should be lower than about 2%+1.5%=3.5%.
Freako made another observation that building costs do not scale with densification — building a condo costs more than building a detached house — so the CLR must take this capital cost into account. Therefore densification premium is likely going to be less than, say, 1% (or 1.5X inflation!). In a desirable area I would assume land appreciation to be no more than 3% going forward; other areas there is likely no densification premium to speak of.
September 26th, 2008 at 4:58 pm
Dave: affordable places just outside of downtown (e.g. Burnaby). In the meantime, the market passes them by and they will never buy in at levels they could have in the past.
LOL. Burnaby is as overpriced as anywhere else, and people can already buy in at last year’s prices. Next year, it’ll be ‘06 prices, then ‘05…..
Keep whistling past the graveyard.
September 26th, 2008 at 5:15 pm
Re:Rent being $150 cheaper for stained carpet west end apartment.
This is so true and yet I had an argument with a building owner about this recently, he insisted that rent control was messing up his resale value. I tried explaining that $1180 was a fantastic amount of rent to collect for a no laundry 625 sq ft unit with a basic dishwasher, electric stove etc.
I tried explained that for $1350 one could live in a new building with better appliances, a pool, restricted floor access, concierge, gym, SECURE parking,insuite laundry and free gas fireplace and free gas stove.
He just kept shaking his head and saying it was all because of rent control.
I repeated that the strata titled units were a better indicator of what the units were worth and he cut me off and said I didn’t realize how much his building cost to maintain and how even though he paid way less than it’d cost today his return was low and he’d be taxed if he sold it.
Since I knew I wasn’t going to win I told him I own an REIT that has a 6.4% yield and I don’t have to do anything, he wanted to go another round about rent control and the government eliminating the capital gains clause where he could upgrade to a bigger apartment every few years and not pay capital gains if it was reinvested (I guess early 1980’s) but I managed to wriggle out of it and politely end the discussion. He can keep his building and be miserable and any potential tenant that wants can find a much nicer newer building and shell out a little bit more.
September 26th, 2008 at 8:06 pm
i purchased my condo for 150k (1100+sft ph) in 1999, in Mississauga. Original owner paid 250K.
This is a falling knife and too many bulls will try to catch it. It is just fun to watch the bulls. I can understand them. I was there. Experience matters in understanding asset classes. The good news is that RE Bulls will get the experience in this downturn.
they will keep saying it is different time. no it is not.
September 26th, 2008 at 8:51 pm
(ok. i don’t know if my last message was posted but here i go again. ok. i’m really random. call me stupid if you want. cuz i know you guys like to just bash here)
did we not think there was also a crash in 2006?
http://vancouvercondo.info/200.....ology.html
and someone said:
“Anonymous Says:
August 30th, 2006 at 6:28 pm
In the long run, we’re all dead.
Prices will drop in the short run. If you have the choice of buying now or buying in two years, you’re almost certainly going to be better off buying in two years.”
WELL, TAH DAH…it’s 2 years later… but is it really a good time to buy?? i don’t think so. or maybe it is. WHAT IF this is another false alarm? WHAT IF all the hidden rich people from asia decided to come buy more properties?
omg. when i was reading all of your posts, i was really starting to believe that the vancouver housing crash is here until i found that post froom exactly 2 years ago.. you guys had a similar discussion!! what’s different now is.. i guess everything has gotten even MORE expensive since then.
September 26th, 2008 at 8:56 pm
“The U.S. government has now put its balance sheet at risk, which now means it is at the mercy of foreign creditors,” Das said. “… They have $9.5 trillion in debt. Roughly about a third of that is owned by foreigners.”
Average Canadians may feel removed from the crisis, but Das warns they are not immune. As Canadian banks deal with ongoing financial fallout, consumers can expect to pick up at least some of that tab.
http://www.thestar.com/Business/article/503974
September 26th, 2008 at 9:15 pm
Eren, it is different this time. We have an international financial crisis.
September 26th, 2008 at 9:29 pm
Re: Das
Those consumers who use credit will pick up much more of the tab.
I wonder if banks will try to screw savers somehow. I had a special deal on a savings account for a few months, but suddenly the bonus interest ended quite a while before it was supposed to. I talked to the bank and it is corrected, but I can imagine others may miss an “error” like this.
September 26th, 2008 at 9:46 pm
i suspect that, this john guy is my friends parrot :
http://www.theglobeandmail.com.....ent2558370
he he he.
September 26th, 2008 at 10:40 pm
yeah erin! you like nuts? govern-mint has printing press but no land making machine! for real estate pop visit miss-a-saga! yeah! knife coming to ing direct account!
September 26th, 2008 at 10:53 pm
M-, I iterated the formula and numbers from the Sauder study and found convergence at $602,124 with 5.4% capital appreciation (-20%). An appreciation of 3.5% puts the value at — get this — $306,508.
I can’t believe those numbers and rightly so. The structure depreciation expected is way too high in the initial study — 1.07% per year on $754500 (mostly land) is very high. Using a more realistic figure of $250K/60 = $4166 per year we arrive at $407K: a 46% drop from peak. The other issue is the mortgage rate is 7.37% which is a bit high but not completely unrealistic.
It gets even weirder. Using the more realistic depreciation number along with 5.4% C.A. yields a fundamental value at $800K.
I’ll believe my own numbers (
) but it looks like detached housing is in for drops of 40% or more (in real terms). The only question left in my mind is how fast will this play out and whether mortgage rates stay steady.
September 26th, 2008 at 10:55 pm
browntown:
re is dead for a while. it is in denial stage.
it is a-go for stocks now. i closed my put options. i am %50 in stocks, dia+spy+qqqq+oil+gold.
everybody is bearish, blood in the streets, these are clear buy signals to me. i wished to see a little more panic, though. that’s why it is %50. another panic selling and i am %100 in stocks. i don’t believe putting money in ing, icici is a good investment. the market is about to finish the bottoming process. in short, i think investing money in stock market is a better bet than real estate.
September 26th, 2008 at 11:03 pm
yeah Erin! your’ right when everyone is scared to buy, bottom is in! raising tide raises all boats eventuallt! reflation nation! yeah
September 27th, 2008 at 12:02 am
Browntown=Ignore the Troll
http://vancouvercondo.info/for.....3&t=48
September 27th, 2008 at 12:06 am
Eren, John is a joker but it’s not clear if browntown/krish/satv/informer/thumsup and whatever other names he/she calls itself is a pure troll,a joker acting like a retarded person, a retarded person or a combination of all three.
If you go to the forum under “The City of Vancouver” and then read the Krisssh post it proves he’s just out to bring the forum away from the topic (that real estate is obviously going to drop for a long time) with silly gibberish.
September 27th, 2008 at 12:12 am
Here is the Forum post, so you don’t have to look for it:
”
For some reason there’s one poster here who gets LOTS and LOTS of attention, consistently taking the comments off topic. Some of you seem to take this joker seriously even though he/she is OBVIOUSLY just trolling for responses. So in an effort to keep the comments more on topic I propose the following:
1) Only reply if you feel his/her posts make sense and need a rebuttal, and only then if you’re going to address the topic. Replies that simply say ‘you’re an idiot’ are obvious and just add to the noise.
2) Don’t get sucked in by the fake ESL grammar, its too inconsistent and phony – it’s only there to try to draw out racists.
3) Post evidence of obvious trolling here and then link to this post instead of repeating the same stuff in the blog comments.
I enjoy reading the comments on this blog for information and opinions, but not for trolling and flame wars. If you need any proof that ‘Krrish’ is toying with you here’s a comment he posted on the majority avoid buying story:
Quote:
The “EMILE’S”problem is not a place or income their problem was they were disconnected from their parents for that they have to spend atleast$1600 per month to baby sit their kids
I don’t know if you have a same problem the best thing in this case is if people can find likewise friends they can fix their schdule or buy a decent home and accommodate a single elder or find a decent looking homeless person.
Do you really believe anyone would honestly suggest ‘a decent looking homeless person’ as a childcare solution? Get real.”
September 27th, 2008 at 12:39 am
hey bdk! Erin, last night (katherine) and alexcanuck all same person! ha ha. call it bdk shuffle! yeah! summers back for weekend! maybe 1010 howe come back too!
September 27th, 2008 at 9:17 am
Re high rents. When people like Boomerang walk away from a condo they think is overpriced in rent, then we call this a conscious consumer decision…”is this worth it given …”
Conscious consumer decisions are good as they keep the markets sane, no? Unfortunately it seems there are too few people here thinking this way or maybe they are simply not capable of making conscious decisions when consuming.
September 27th, 2008 at 9:20 am
You can probably tell if you’re lacking the ability to make of conscious consumer decisions if your answer is yes to either of the below:
“is it really worth paying 7$ 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 9:26 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 9:39 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 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 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 10:08 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 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 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 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 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 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 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 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 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 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 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 6:44 pm
The hunt begins to punish the culprits
Retribution and regulation are coming for bankers
http://business.timesonline.co.....837252.ece
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 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 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 7:22 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 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 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 11:40 pm
Help out a new condo owner
http://vancouver.en.craigslist.....82620.html
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 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 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 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 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 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 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 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 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 6:16 pm
“Everyone was willing to accept lower offers.”
How low? I assume not 40% lower.
September 28th, 2008 at 6:34 pm
The agent hinted that 10% was a sure deal
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 $747k
http://tinyurl.com/4gtvur
September 28th, 2008 at 7:19 pm
From Panamericana at Fishy’s site:
http://www.lewrockwell.com/orig9/quinn9.html
September 28th, 2008 at 7:32 pm
Hi Everyone, just more of a general question for all;
Now that the US is cratering, any thoughts of when it will filter up here in terms of RE? 1-3 years?
Also what about rents coming down due to the slowdown/inventory/etc?
I’ve recently noticed people renting places offering cash bonuses to rent apartments downtown..just wondering if this is the beginning of a trend. on the other hand i went to look at a place today..1350$ for 421 sq feet..in a crappy building.
happy sunday to all.
September 28th, 2008 at 7:52 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 8:58 pm
Growth does NOT equal prosperity
http://www.chrismartenson.com/growth_vs_prosperity
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 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 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 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 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 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 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.