Vancouver Price Drop Shopping Spree!!
Yep, Vancouver house prices are dropping. The REBGV benchmark price is down about 4 percent since May 2008. I guess that means we only need another few percent to meet ‘equilibrium’ according to this recent Sauder study on overpriced Canadian real estate.
Interestingly enough that Sauder study compares asking rents from Craigslist, so another option to reach ‘equilibrium’ would be just to post a bunch of much higher asking rents on Craigslist. That way we wouldn’t have to deal with the indignity of dropping house prices.
In the meanwhile, potential first time home buyers watch prices drop and hope for affordability.
Got a better idea of what you could buy with that money? Leave a comment below!
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Van-zee Says:
September 8th, 2008 at 11:35 pm
Better than a pet monkey?
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RVW_0824 Says:
September 8th, 2008 at 11:46 pm
Somerville’s (Sauder) study is not even close to reality and his analysis is completely flawed. In their formula used to calculate market equilibrium they incorrectly reduce the Cost of Capital by the Long Run Expected House Price Appreciation (which includes that massive run up period of 2001 to 2008 and assumes that real estate prices will increase in perpetuity by 5.4% per year – which if you do the math is impossible). Just because it has gone up that much, on average, in the last number of years…does not mean it will do it again. There are also a number of other significant flaws in their analysis.
A simple cap-rate analysis would tell you that Vancouver’s real estate market is over valued by 30% to 50% depending on location and type (single family, multi-family, downtown condo, etc.).
Here is the link to his study. http://cuer.sauder.ubc.ca/down.....ercost.pdf
Let’s use the West side of Vancouver as an example as you just can’t look at the Greater Vancouver average. $1.5MM homes there rent for $2,500 to $3,500 and they are in dismal states. Might cover half of interest and other costs – if you’re lucky. I pay $2,200/month for my Coal Harbour apartment. Would have cost me close to $1MM to buy at the peak. I calculate it provides a 2.3% cap rate. The rent I pay does not even cover half the interest expense+property taxes+maintenance fees/capex. To be cash flow neutral – it would have to drop below $500K (still under a 5% cap rate)…and that’s at 6% interest rates….what happens it that goes to 7% or 8%? Rents can only go so high. Short and simple – prices are coming down in a material way.
The Vancouver Sun is a disgrace as a news source when it comes to Vancouver real estate. God forbid they lose all the revenues from the West Coast Homes section and all the other advertising from developers and Bob Rennie and the like.
I have been saying for the last few years that we will look back at this in the same way we did after the tech bubble. That one never made sense to me either. Buy an asset or a stock that is cash flow negative and pays no dividends. The only way to make a return is to find someone foolish enough to pay you more that you paid for it. Problem is that someone is going to be left standing in this game of musical chairs and that time is now. If you divide the purchase price by the annual net rental income – that number comes to a ~40x multiple in Vancouver. How many companies trade at those types of multiples? Only supercharged growth technology or biotech companies with proprietary technologies that are defendable. Real estate is a simple asset….the market can bear a certain amount of rent that grows by 2 to 4% a year. Build a cash flow model…it’s not rocket science.
I predict a 30% to 40% drop by 2012 followed by a period similar to 1992 to 2002…stagnant for a long time.
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Many Franks Says:
September 8th, 2008 at 11:52 pm
Let me say, since nobody has yet — fantastic job on the grafix.
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Gadwin Says:
September 9th, 2008 at 12:28 am
The market is in meltdown mode. All the specuvestors are rushing for the exits now, but the exit is now jammed.
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BBY Says:
September 9th, 2008 at 1:24 am
I predict a 30% to 40% drop by 2012 followed by a period similar to 1992 to 2002…stagnant for a long time.
We’ve gone down over 4% since May at an ever increasing rate. With dire economic global forecasts for the next few years, and the likelyhood of increasing mortgage rates. You think it will take THAT long (until 2012) to reach 40% below peak? I suspect we’ll be there by 2011.
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Patiently Waiting Says:
September 9th, 2008 at 2:00 am
I predict 40% off before 2010…at least. This bubble is uncharted territory, so I suspect even the most dire predictions might underestimate the carnage.
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Keep and eye on the pimps Says:
September 9th, 2008 at 6:48 am
http://www.cbc.ca/canada/briti.....ecast.html
Ok at what point does Pastrick stop embarrassing himself?
Is the man a liar or plain stupid?
Remember this:
“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.”
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VHB Says:
September 9th, 2008 at 7:23 am
“just to post a bunch of much higher asking rents on Craigslist. ”
Pope, you are golden.
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mohican Says:
September 9th, 2008 at 7:34 am
Nice graphic!
BTW Pope – I believe you used the benchmark price for all housing types not just detached homes. The GV Detached Benchmark was $737,985 in August, $753,165 in July, $765,654 in June, $771,250 in May, and $771,321 in April. This gives a total drop of $33,336 which is enough to buy a fully loaded Toyota Camry Hybrid if you like!
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RVW_0824 Says:
September 9th, 2008 at 7:38 am
Agree 100% that the carnage will happen before 2012. The downfall is gaining some great momentum and will only feed on itself. I would not be surprised to see a 50% drop in the condo market. Who is going to buy all of those condo’s in the Olympic Village and the surrounding area? Are you aware that the city of Vancouver has backstopped the Olympic Village project (the Fortis financing) and is on the hook for it if all of the units do not sell? What about all the projects on the go or finishing up in Coal Harbour, on Seymour/Richards, the Woodward’s building and surrounding area, the Hotel Georgia, the Ritz Carleton, Shangra La, etc., etc. The presale market is imploding and if it isn’t already – it will soon be a thing of the past.
Cap rates that are less than a government bond and negative cash flow properties cannot last in the long run…a 40% drop or more will be the only way to get us there. It’s coming to a theater near you and I agree with all of the comments on timing – it could be as early as early 2010 that we see these kind of drops.
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alexcanuck Says:
September 9th, 2008 at 8:03 am
“bet you always wanted a monkey”
New song for the Ladies. “If I lost a million dollars”
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Vansanity Says:
September 9th, 2008 at 8:14 am
I agree, sweet graphics, condohype created it? Looks profesh.
I’m just curious, what do you all do? No need to state specifics, maybe just the industry you’re in. I’m in general insurance.
I ask because many of you, sound very well versed in financials and it would be interesting to know your line of work.
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betamax Says:
September 9th, 2008 at 8:33 am
Awesome graphics, definitely.
As for when we’ll see double-digit price drops, my bet is 2009 and continuing into 2011. It’s going to get bloody.
Much like the TSX, just slower…
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betamax Says:
September 9th, 2008 at 8:38 am
Anecdote o’ the week: 6 mths ago, two co-workers argued that Vancouver prices would never go down (other places sure, but not the greatest place on earth). Now both agree that prices have further to plunge, and one is even going to sell and rent for a couple years.
He bought years ago and could reap a huge profit, though I suspect he’s too late for a quick sale and will chase the market down. But the change in beliefs and attitudes is surprising.
Naturally, they don’t remember that they used to believe otherwise. Funny how that works.
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mflat Says:
September 9th, 2008 at 9:19 am
Very cool graphic. Looks like a real ad done by some fly-by-night agency for advertising in the Courier. Good dose of cheese!
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Vansanity Says:
September 9th, 2008 at 9:27 am
I don’t know where I got condohype from… sorry, props Pope! Nice work.
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The Pope Says:
September 9th, 2008 at 9:33 am
Thanks everyone!
believe you used the benchmark price for all housing types not just detached homes.
Gar! After I’ve done all that work! As you can probably tell, Mohican is the financial professional and I’m the enthusiast who should work on his attention to detail. I guess a minor correction in the wording on the graphic will fix that, perhaps I’ll do one for detached houses next month.
This gives a total drop of $33,336 which is enough to buy a fully loaded Toyota Camry Hybrid if you like!
A more impressive total number to be sure.
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The Pope Says:
September 9th, 2008 at 9:41 am
As a side note, the benchmark price drop from June to July of $8,377 is exactly the amount you’ll need to buy the limited edition publishing of the Knights Templar papers from the Vatican.
I smell a conspiracy!
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freako Says:
September 9th, 2008 at 9:52 am
Brilliant. Encore!
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freako Says:
September 9th, 2008 at 9:58 am
Another stat I like is “months of free rent”. RE blowhards usually talk about not paying your landlord, building “equity”, and I have even heard people calling ownership “free rent”.
There are two sides to that coin. We can state the drop in the number of months of “free rent” that you would have received if you applied the savings of not owning at peak towards renting. If the GV benchmark SFH that costs $734K rents for, say, $2700 to rent, then you’d have something like 16 months free rent already.
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pinocchio123 Says:
September 9th, 2008 at 10:02 am
Guys,
I have a question.
Looking at the stats it is obvious that the selling prices are falling.
When is this going to translate into lower asking prices?
I check the MLS regularly and there are no more sub $400K SFHs listed than there were months ago.
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jesse Says:
September 9th, 2008 at 10:29 am
Funny that anyone buying property at the peak has collateralized it with vapour. I’m pretty sure I can get a loan to buy the monkey that has higher grade collateral than a mortgage, as long as I use the poor little fellow as an organ grinder.
I’m glad to see we can now afford all these things with all the money we, and pretty much everyone else, really never had in the first place.
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jesse Says:
September 9th, 2008 at 10:31 am
“When is this going to translate into lower asking prices?”
I agree with Rob Chipman that it will be either a Tuesday or a Thursday.
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paulb Says:
September 9th, 2008 at 10:33 am
WOW monkeys are bloody expensive. How did you think of that one? LMAO
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betamax Says:
September 9th, 2008 at 10:42 am
When is this going to translate into lower asking prices?
Already has, but substantial drops won’t happen till ‘09 as sellers are now telling themselves current drops are an anomaly which will be corrected next spring. By mid ‘09, when sellers realize that spring sales were a dud and it’s really over, then you’ll see panic prices.
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The Pope Says:
September 9th, 2008 at 10:45 am
Paulb- google searches at specific price points
http://www.tradepoint.ca/Regul.....goryId=600
Haven’t you always wanted a monkey?
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scullboy Says:
September 9th, 2008 at 11:14 am
I thought this blog had a resident monkey mascot…..
Hi, krrish!
On an unrelated note, there are still fools out there. II have a friend who KNOWING the market is falling is STILL planning on taking out a HELOC. “Did you know that’s how everyone does it in Vancouver?” he asked.
I’ve given up trying to explain that losing money on TWO assets is far worse then losing money on just one. Some people just believe everything they hear. There’s a koolaid drinker born every minute, I guess…..
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Burden of Proof Says:
September 9th, 2008 at 11:33 am
The so called “benchmark” is merely a statistical fiction created by the RBGV.
Reality is reflected in the average prices reported by the same organization. The average price of SFH is down 10% or about $100,000 since the peak price in February 2008.
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Lager not Logger Says:
September 9th, 2008 at 11:36 am
“When is this going to translate into lower asking prices?”
When people decide they really want to or need to sell, in the meanwhile the only stuff selling is going for below asking price. We’re only a few months past the peak, you can’t expect people to have given up hope on the market miracle yet. Look at the US, it took at least a year for asking prices to drop significantly, even two years into their bust there were experts saying that it was turning around any moment.. hasn’t panned out so well yet, other than for ‘board-up specialists‘.
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Thums up2 Says:
September 9th, 2008 at 11:37 am
2rvw_0824,
you were trying to compare a house vs appartment do you even know how many levels and bedrooms,bathrooms in one house? Do you even know how many families can fit in appartment or house?do you even know how much rent for appartment vs house?Do you even know that west vancouver is up 7.70% from last month. West Vancouver July 2008 $1,409,522 Aug 2008 $1,512,967 up 7.70%
This is how a house looks like $6800 / 6br – Large 6 Bedroom House Beautiful home ,It’s a 53′x120′ total of 6 bedrooms, 5 bathrooms, and a theater/recreation room. New appliances were installed this year and new landscaping performed in 2007.while smart buyers and fool sellers will be countinue most of shoping spree are availabe in port moddy area only because there was extreme acceleration in prices but anywhere else specially in Vancouver price acceleration was gradually up.
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Drachen Says:
September 9th, 2008 at 11:40 am
Vansanity
“I’m just curious, what do you all do?”
Graphic arts, 3d Animation and Software Development.
You may have seen some of my stuff on TV if you watch a lot of kids shows. Especially on YTV.
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patriotz Says:
September 9th, 2008 at 11:48 am
Reality is reflected in the average prices reported by the same organization.
Wrong. The average is not only affected by sales mix but skewed by price. In California the low end dropped off first, meaning the average lagged the Case-Shiller index (which is not affected by sales mix or price skew) considerably for over a year. Here, it seems the high end has gone dead first, which means the average is falling faster.
The REBGV benchmarks are not perfect but they are the only apples-to-apples indexes we have.
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wolfey Says:
September 9th, 2008 at 11:59 am
hi,
anybody notice the TSX is down 370 points and Dow is down 180. and this is after the GOv’t bailout FAN/FRE potentially costing the taxpayer 200 billion. anybody want to buy an US Dollar?
I wonder how this is going to affect CANADA…Toronto, Calgary, BC?
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Thums up2 Says:
September 9th, 2008 at 12:14 pm
Hi Sophia,
Welcome to the jork of length land where googly take over spin every day.How ever still in love crushed lil’bit on brittania bread.
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bdk Says:
September 9th, 2008 at 12:25 pm
One thing is for sure.
The Market is Going DOWN FOR DECADES TO COME and anyone with half a brain saw this coming years ago.
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YLTNBoomerang Says:
September 9th, 2008 at 1:19 pm
Thanks everyone for the info regarding rents yesterday; might have found a place… On a different note, consensus is that prices are declining yet in monitoring downtown townhouses I’m seeing price increases all of a sudden on stagnant units; setting up for big drops perhaps? (I say + days in some cases as they were listed before I started tracking)
v732147: 179+ days since originally listed, started at 635,000, dropped to 609900 in May, re-listed 594900 in June now re-listed at 638000
v726086: 120 days, listed at 619000 re-listed at 639900 in August
v727488: 179+ days, listed at 899000, dropped to 879000 in March, 859000 in April, 829000 in May, 799000 in June, then re-listed at 869000 in August???
v731538: 119 days, listed at 2998000, dropped to 2798000 in July, re-listed back at 2998000
v730890: 243+ days, listed at 1498000, disappeared for a while and re-listed at 1568000 (maybe this one sold and the flipper is just trying to get their RE fees back)
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pinocchio123 Says:
September 9th, 2008 at 1:20 pm
Just for fun, I took thumsup2’s text from above and did english/chinese traditional/english twice. This is what It came up with:
There hockey welcome to land jork which the length accepts revolves every day. Liked still crushing in brittania bread lil’ Position.
Great fun!
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buff_butler Says:
September 9th, 2008 at 2:05 pm
thums up 2 said
“Do you even know that west vancouver is up 7.70% from last month. West Vancouver July 2008 $1,409,522 Aug 2008 $1,512,967 up 7.70%”
Where can I find these reports?
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G Says:
September 9th, 2008 at 2:19 pm
From Inventory on Rob’s site:
Sept 1-8 REBGV SFH+TH+APT
Gross Sales 172,897,674
Units Listed 1,337
Units Sold 334
Sale Success Ratio 38%
% Sales to Listings 24%
Avg Price/Unit 517,657 (-11%)
Active Listings 19,526 (+60%)
Sept 2007 REBGV SFH+TH+APT
Gross Sales 1,660,872,647
Units Listed 4,990
Units Sold 2,852
Sale Success Ratio 65%
% Sales to Listings 57%
Avg Price/Unit 582,353
Active Listings 12,178
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G Says:
September 9th, 2008 at 2:21 pm
Here is last month’s stat package from Inventory:
August 2008 REBGV SFH+TH+APT
Gross Sales 897,510,715
Units Listed 4,589
Units Sold 1,611
Sale Success Ratio 27%
% Sales to Listings 35%
Avg Price/Unit 557,114
Active Listings 19,067
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Thums up2 Says:
September 9th, 2008 at 2:42 pm
38buff_butler,
you can log onto rebgv.com click on the realty link then click on latest release then click on aug hpi then click on july hpi or click here for august http://www.realtylink.org/hpi/.....YPE=buyers and here for july http://www.realtylink.org/hpi/.....YPE=buyers
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Vansanity Says:
September 9th, 2008 at 2:51 pm
Drachen – thanks for sharing that. See, I would’ve had you pegged as being tied to the banking industry given your knowledge, that’s pretty cool!
wolfey – crazy day huh? Looks like TSX tanked 487pts by the end of the day. Oddly, the greenback has been bullish last couple months. Some analysts were expecting it to remain this way for a couple more quarters.
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willieverown Says:
September 9th, 2008 at 4:32 pm
So what should prospective first time home buyers do?
(especially those with no down payment)
1) Rent (especially if you can find an afforable place)
2) Co-Ops (i.e. a life never owning a property)
3) Try and wait for the market to crash?
4) a crazier idea like rent-to-own
5) or move?
Are there any hope for those people stuck out of the Vancouver realestate market because they were born too late and don’t want to live in the boonies?
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Rocker Guy Says:
September 9th, 2008 at 4:43 pm
Excellent Charlie Rose episode last night, where a bunch of big wigs discuss the Fannie/Freddie bailout:
http://video.google.com/google.....&hl=en
“The falling house prices is really why this had to happen now…” “… mortgage revenues were insufficient to fund these companies.”
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crabman Says:
September 9th, 2008 at 5:24 pm
willieverown,
Rent for now, 99% chance of a big market crash. You should be able to buy something in 3 years or so. (Hopefully less)
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JB Says:
September 9th, 2008 at 5:41 pm
Agree….good job on the graphics….my eyes popped out when I arrived!
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Anonymous Says:
September 9th, 2008 at 5:56 pm
A car you say? Not so outlandish after all…
http://www.faithwilson.com/showProperty.php?p=316
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condohype Says:
September 9th, 2008 at 6:02 pm
Judging from this Craigslist ad, the market’s at equilibrium.
Man, what a gong show. The owner’s asking $3000/month for a one-bedroom at Spectrum.
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Patiently Waiting Says:
September 9th, 2008 at 7:31 pm
willieverown,
1) Yes, just take the time to find the right place and you will be happy while the market crashes.
2) Some love it, some run far far away. As you suggest, its especially for those who aren’t interested in the housing market or need the space to raise a family (lots of other kids in some co-ops). There are no new co-ops and they are often like leaky condos (health issues).
3) Yes.
4) No.
5) I’ve considered this too. Just keep in mind the fewer job prospects in smaller places.
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patriotz Says:
September 9th, 2008 at 7:54 pm
a crazier idea like rent-to-own
Rent-to-own opportunities started mushrooming in the US a couple of years ago and are one of the early signs of an impending RE bust.
It’s quite simple really. You pay an above-market price for a rental, which gives you an option to buy it for an above-market price.
Is that a deal or what? For the owner it is.
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greed Says:
September 9th, 2008 at 7:55 pm
Not specifically real estate related but can someone explain the recent strength in the US dollar.
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browntown Says:
September 9th, 2008 at 8:04 pm
hey nutslaps! yeah drachen, this morning “Oscar” pop out of garbage can to say buy before next leg up! “barney” shoot off rocket! ha ha yeah nutbags remember browntown say best time to buy is when everyone scared to buy! asses frozen at northern rock! ha ha ah
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cashisking Says:
September 9th, 2008 at 9:07 pm
sptsx mkt cap c$1,500 Billion = down 19.8% from its high 3 months ago
tsx venture mkt cap c$52 Billion = down 50% from its high 3 months ago
C$ 326,000,000,000 ….. poof
oil is going to 250 … grain/corn fertilizers never going down rich asians need them … oh and they love gold and our real estate
when is the “its different this time” going to show up … oh yeah Dave real estate will only go down maybe 5%
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stagnate Says:
September 9th, 2008 at 9:28 pm
the u.s. dollar currently is in a counter rally, has been in a down trend for numerous years now. basically, appears deflation is the current flavour of the month. the counter rally’s don’t last, the reasons for the dollar’s downtrend keep worsening. inflationary and deflationary fears will oscillate for the forseeable future, brought on by the fact that u.s. debt levels are actually too big to be serviced by current revenues.
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Anonymous Says:
September 9th, 2008 at 11:09 pm
Anybody buying a home right now must be out of their mind. The real estate is in a free fall.
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condohype Says:
September 10th, 2008 at 12:24 am
Oh man, this is comedy gold. Regina realtors are totally fired up about the UBC housing report. The top guy at the Association of Regina Realtor goes so far as to question Tsur’s intelligence. For real. Seriously, this is too funny. Am I crazy to get such pleasure from this?
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patriotz Says:
September 10th, 2008 at 2:33 am
can someone explain the recent strength in the US dollar.
Cheaper oil
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richmond renter Says:
September 10th, 2008 at 6:59 am
Can someone explain the recent strenghth in the US dollar:
yes, with the government buyout of Freddie and Fannie, there is some renewed consumer confidence. This is all that is required to push the dollar back up a few points. The US gov’t will probably have to print more money as well to counteract the buyout.
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blueskies Says:
September 10th, 2008 at 7:18 am
added the UBC study researchers have no understanding of the local marketplace. “Without any local knowledge, they’re proclaiming our market to be overpriced.”
….. said the UBC study provides a “misleading” picture of the local real estate market.
……..
“You’d think these (UBC) guys would be a little smarter than that,” he added.
finger pointing 101
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jesse Says:
September 10th, 2008 at 8:16 am
“Regina realtors are totally fired up about the UBC housing report.”
The lady doth protest too much, methinks. Somerville is likely closer to the mark with Regina than he is with Vancouver. It sounds like Realtors have confidence the buyers of Regina will prove Somerville wrong in time. They’re probably right, though not in the way they would like.
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randm Says:
September 10th, 2008 at 9:26 am
“I’m perfectly willing to hear (complaints) that we don’t have the weighting right,” Somerville said.
..’and perfectly willing to ignore those complaints’ he continued, pausing from his Craigslist research only long enough to take a large drag off his ’shangri-la’ bong.
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scullboy Says:
September 10th, 2008 at 10:21 am
Vansanity:
“I’m just curious, what do you all do?”
I’m an IT project manager, currently specializing in call center infrastructure.
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umdesch4 Says:
September 10th, 2008 at 10:46 am
In other news, it looks like Washington Mutual, the “biggest U.S. savings and loan”, is about to implode:
Washington Mutual Shares Plunge, Debt Risk Climbs to Record
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jesse Says:
September 10th, 2008 at 11:06 am
Hardly. As you can see I know how to use html tags. The rest is logic and data.
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anne.w. Says:
September 10th, 2008 at 11:28 am
I think I might know what’s happening with the asking prices going up.
Realtor said that places are now selling for about 5% less than asking. So if X is a fair price for a place, you have to list it for X+5% to play in the current game.
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anne.w. Says:
September 10th, 2008 at 11:36 am
The Vancouver real estate market is heading into… Brickor Mortis!
http://www.wordspy.com/words/brickormortis.asp
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BBY Says:
September 10th, 2008 at 12:39 pm
If some realtors are re-listing at higher asking prices, it’s probably a desperate play to influence market psychology. “Better buy now as the market is stabilized and prices as starting to go up again.” Fiddling with the prices is about the only thing a realtor could do. And it’s probably easier to convince a sellar to increase the asking price rather than lower it. Greed is a powerful force concsiously and sub consciously.
It might catch a few stragglers, but the pool of greater fools is drying up, as is credit and money supply for the few remaining. Still I am amazed (and dismayed) when I hear of people buying now. sigh.
BTW Friends of a cousin recently bought a house in Burnaby at $150K less than asking because the (desperate) seller had upgraded and was stuck with 2 mortgages longer than they had expected. Classic.
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jesse Says:
September 10th, 2008 at 1:46 pm
“Friends of a cousin recently bought a house in Burnaby at $150K less than asking”
Yeah my dogwalker’s old roommate’s friend’s brother just bought a place too. Apparently he got a good deal below asking but I didn’t ask by how much.
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Carioca Canuck Says:
September 10th, 2008 at 3:20 pm
Who on earth would name their child “Tsur” ? Genghis Khan maybe…….?
Pope….
Spit my coffe out when I saw your graphic…it’s brilliant !! Stopped laughing enough to type…..gonna wait a while longer….and then buy me a dozen of them thar pricey monkey’s and start up a real estate office.
Licensing should be no problem.
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me Says:
September 10th, 2008 at 4:39 pm
jesse – that kind of sarcasm is not attractive – we can’t all be as smart as you
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Aleks Says:
September 10th, 2008 at 4:43 pm
“Oh man, this is comedy gold. Regina realtors are totally fired up about the UBC housing report. The top guy at the Association of Regina Realtor goes so far as to question Tsur’s intelligence. For real. Seriously, this is too funny. Am I crazy to get such pleasure from this?”
The headline is correct, though, the study was flawed. No way does Regina have a bigger drop, in percentage or actual dollars, than Vancouver. Whether the realtors are right that their market isn’t as inflated as reported, I have no idea. It’s possible that a flawed methodology like the one used could end up with results that are too high in some cases and too low in others.
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bdk Says:
September 10th, 2008 at 5:12 pm
“Oh man, this is comedy gold. Regina realtors are totally fired up about the UBC housing report. The top guy at the Association of Regina Realtor goes so far as to question Tsur’s intelligence. For real. Seriously, this is too funny. Am I crazy to get such pleasure from this?”
How do you know Regina isn’t world class like Vancouver and has de coupled from the rest of the world???
“it is big dumb who buys not now in Regina before next leg up rich asian and city is Regina”
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condohype Says:
September 10th, 2008 at 6:26 pm
The comedy is in the dissing, not whether the report is correct. I’m amused by the public trashing.
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jrochest Says:
September 10th, 2008 at 6:39 pm
Oh, the Regina response is nothing. You guys should have seen the tempest in the Saskatoon media over the Merrill Lynch report, back in August.
It was declared to be OVERWHELMINGLY wrong. Utterly utterly wrong wrong wrong wronger than wrong. By everyone: print, radio, TV.
And those 1700+ properties on the market? That’s just people testing the waters, they don’t really mean to sell.
And the fact that there were only 224 sales in August, a 44% drop from last August and the worst sales for August in a decade? It’s just been a little rainy.
And the fact that housing starts are falling? see above.
And the fact that housing prices are falling? Seasonality!
After all, prices haven’t fallen in Calgary or Edmonton! They’re stablizing! We have such a great economy! Everyone’s moving to Saskatchewan!
Whistlin’ in the dark, walkin’ past the graveyard…
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Michael Randallbard Says:
September 10th, 2008 at 7:20 pm
can someone explain the recent strength in the US dollar.
Maverick McCain” and the Resurrection of the US$
http://www.financialsense.com/.....uesday.htm
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paulb Says:
September 10th, 2008 at 7:29 pm
Where is the 2000 gold Mike?
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alexcanuck Says:
September 10th, 2008 at 7:29 pm
http://tinyurl.com/5f5gqu
“China has joined the United States, Britain, Spain and others on the list of nations suffering a real estate decline” NYT article.
I must say, I’ve read both the NYT and Economist for a long time, and neither really warned of the credit crunch or the property bubble. They would mention the fears, and then get all reassuring and calm. I would get all flustered with my (un)common sense, gut feeling reaction to the ever-increasing debt loads, both consumer and corporate, and they would say not to worry, it’s different this time. Somehow that never sat too well with me. They have both lost a LOT of credibility in my mind.
Last fall I lost a bit thinking the Canadian markets would be hit harder, but it’s all come back and more, I’ve ridden oil down from $142 to now in HOD, with more coming in TSX and financials bear funds as well. I have become a deflationista I guess!
The GVRD RE market is just a sideshow really, the troubles with the economy are a LOT deeper than us. The fall in RE will be spectacular all right, we very much had a local bubble, but on top of a more widespread world-wide credit bubble. Now both are deflating at once. Everything you consume is going up all right, but that’s not inflation, just price increases. Real inflation is more to do with things you OWN, and all that is DEflating as we speak.
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Dosh Says:
September 10th, 2008 at 7:49 pm
#
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Dosh Says:
February 1st, 2008 at 2:27 pm
Well somebodies buying hughz – why does it matter where they come from? Maybe 25% of buyers are Albertans, maybe 50% is European. Who knows how accurate any of those numbers are? The demand is there, thats whats important.
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Dosh Says:
September 10th, 2008 at 7:53 pm
Satv { 05.23.08 at 9:27 pm }
Do we have that mess of subprime here?do we have threat of terrorism here?do we have mass destruction from hurricanes?do we have BUSH here?
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Alm Says:
September 10th, 2008 at 8:00 pm
>>RVW_0824 Says:”Vancouver’s real estate market is over valued by 30% to 50% depending on location and type (single family, multi-family, downtown condo, etc.).
Here is the link to his study. http://cuer.sauder.ubc.ca/download/rese … ercost.pdf”
———————–
Didn’t have a patience to read the whole article. But he does suggest 7-11% price drop for Vancouver market to be in equilibrium with rent.
I understand there are several overlapping trends.
1) Pre-construction and other speculators – those that don’t plan to invest for longer than 2 years. They will panic and trigger the sale-out, but not all of them will – and not in all the districts they represent a majority. People have accumulated a lot of cash lately in realtor’s and development business or upon sale of their Asian or East-European condo (where prices shot up waaay more then in Vancouver in the last 5 years), and they have to park their cash. With relatively low mortgages they can ride out few years of storm on rental income – for many of them rent isn’t their only source of income.
2) People that bought 1-2bdr or townhouse for themselves in the last 2-3 years with 10-20% downpayment outside downtown core. They are paying 3.5-4.5% interest fixed for another 2-3 years, with monthly payments below $1,500 (this includes maintenance, and property taxes after the City Grant are laughable). Why would they sell – and go where – to rent out same 1bdr or 2bdr for $900? Short of a job loss, there is nothing to make them sell in a hurry.
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arit Says:
September 10th, 2008 at 8:02 pm
Carioca Canuck Says:
September 10th, 2008 at 3:20 pm
Who on earth would name their child “Tsur” ? Genghis Khan maybe…….?
Actually it’s a Hebrew name, means “Flintstone”.
Everyday you learn something new.
Regards
arit
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jesse Says:
September 10th, 2008 at 8:24 pm
arit is right. Tsur is short for Tsuriel and it is his middle name. His works stand for what they are, regardless of his name.
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Tsuriel Says:
September 10th, 2008 at 8:47 pm
http://www.hebrewonline.com/he.....NameID=593
Tsuriel mean God is my rock. What the h*** are you talking about? Freddie Flintstone!
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patriotz Says:
September 10th, 2008 at 8:51 pm
I must say, I’ve read both the NYT and Economist for a long time, and neither really warned of the credit crunch or the property bubble.
Wrong on both counts:
Krugman, That Hissing Sound, NYT, August 8, 2005
“Meanwhile, the U.S. economy has become deeply dependent on the housing bubble. The economic recovery since 2001 has been disappointing in many ways, but it wouldn’t have happened at all without soaring spending on residential construction, plus a surge in consumer spending largely based on mortgage refinancing. Did I mention that the personal savings rate has fallen to zero?
Now we’re starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone – not just those who own Zoned Zone real estate – should be worried.”
Economist: In come the waves, Jun 16th 2005
“The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops
NEVER before have real house prices risen so fast, for so long, in so many countries. Property markets have been frothing from America, Britain and Australia to France, Spain and China. Rising property prices helped to prop up the world economy after the stockmarket bubble burst in 2000. What if the housing boom now turns to bust?”
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patriotz Says:
September 10th, 2008 at 8:55 pm
Oh BTW, I don’t believe that there is a “credit crunch” in the US. If credit were really hard to get, interest rates would be higher. not at near-historic lows. I think that’s pretty self-evident.
What has happened is that lending standards have returned to some degree of sanity, which looks like a “crunch” compared to no standards at all.
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arit Says:
September 10th, 2008 at 9:05 pm
Tsuriel,
We were discussing Tsur, not Tsuriel. Tsur means flint, as in flintstone. Tsuriel means “My flint is God”, literally.
The website you mention is slightly wrong, as it says
my rock (צוּר, Tzur)”.
Where it should be flint.
Regards,
arit
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Tsuriel Says:
September 10th, 2008 at 9:19 pm
http://www.merriam-webster.com/dictionary/flint
with all due respect, mr. arit, flint is rock so you are splitting hairs with yourself.
That is why Freddie Flintstone is named Freddie Flintstone, get it? He worked in the quarry!
http://en.wikipedia.org/wiki/The_Flintstones
Well, you learn something new everyday!!! But don’t forget about the God part! It is important to Tsuriel’s name. Of course no God-fearing individual would just name their kid “rock”, or “flint” to you. It has to have a greater meaning.
Oh, by the way, what does Arit mean?
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Anonymous Says:
September 10th, 2008 at 9:20 pm
“BTW Friends of a cousin recently bought a house in Burnaby at $150K less than asking because the (desperate) seller had upgraded and was stuck with 2 mortgages longer than they had expected. Classic.”
2 mortgages? Wow.. some are really expecting that others are going to make them rich.
Being a cheapskate and frugalist to madness, I spotted this bubble 7 years ago. Not from having a degree in economics, but common sense. I questioned as to why people were expecting so much, I questioned why people were willing to pay. I asked around and asked who is making more money, no body did or knew anybody who got raises, only more expenses. I knew it did not add up. The papers were saying one thing, and for each month that went by, the news paper world segregated even further from my world, a real world. Stone soup. And it went on for 7, seven! years!!!! Unbelievable. And here we are.
I dont like bubbles, I dont like fevers. In fever people become delerious, hallucinate and live in a surreal world.
Not healthy. It was a gold rush, and some paid a big price.
Either way, I figured this would have to burst in the seams sooner all later. What goes up must come down. I guess mother nature rules.
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RVW_0824 Says:
September 10th, 2008 at 9:22 pm
Aleks says: “The headline is correct, though, the study was flawed. No way does Regina have a bigger drop, in percentage or actual dollars, than Vancouver. Whether the realtors are right that their market isn’t as inflated as reported, I have no idea. It’s possible that a flawed methodology like the one used could end up with results that are too high in some cases and too low in others.”
The UBC reports discounts each city differently. It takes expenses such as maintenance fees, etc. as a % of the purchase price. Given the historically high nature of these expenses as a % of historical prices – the Vancouver %’s are skewed to the low side and historically cheaper cities are skewed to the high side. So in Vancouver he starts with a low cost of capital % to use as a discount rate. Error #1. He then discounts the % that prices must drop (by reducing the cost of capital by his prediction of how much prices will increase in the future) by to come to equilibrium by assuming in his formula that prices will go up in the future at the same rate they did in the past…which is completely illogical as he includes the period 2001 to 2008 which had increases that were clearly unsustainable in the long run and historically as the price drops are proving – so why would prices grow as they rates in the future (grow a number a 5% on a compounding basis and watch it go to the moon quickly…kind of like prices from 2001 to 2008). Error #2.
You would think a professor at UBC would find the flaws in his analysis…but he’s only an associate professor and the paper looks like it was actually written by one of his grad students and he oversaw it.
Pricing on the margin will drive prices down. What I mean by this is that those that are being crunched by being overstretched (cutting cheques each month to cover negative cash flow at one of more properties where rents don’t even come close to covering the mortgage, bought a number of presales, etc.) or those that are just speculators – when they all run for the door they will drive down prices. Whether others in their buildings or area can hold out for a long period of time or not without reducing prices…pricing always occurs on the margin…ie – your property is worth what your neighbor sold for…not what it used to be worth or what you think its worth.
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Anonymous Says:
September 10th, 2008 at 9:28 pm
Arit:
You’re starting to talk like Rob Chipman!
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alexcanuck Says:
September 10th, 2008 at 9:38 pm
neither really warned
That’s exactly what I mean. Yes, in retrospect you can pull out an article or two that DOES warn, but the overall tone was very complacent. The occasional article that DID ring alarm bells seemed to really stand out for me for me, but I almost put that down to my personal bias. Almost, but not quite, for which I’m relieved, gratified and in a much better financial position than if I wasn’t such a pessimist. “Economic Miracle” and all that just didn’t sit right with me!
Also, your second link is not an Economist article.
BTW, I do respect and value your opinion, Patriotz. Don’t take this as criticism. I am generally in broad agreement with you. Now that I’ve buttered you up a bit…. Do you think natural gas is worth going strongly bullish on? It sure seems oversold to me, I still have quite a bit of uncommitted cash doing almost nothing for me and want to place it. Sure is interesting times out there, huh? Kinda dangerous.
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arit Says:
September 10th, 2008 at 10:01 pm
Anonymous,
Why are you anonymous?
How can we associate what you are saying to anything else you have said or will say? How should I take your comment?
Regards,
arit
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patriotz Says:
September 10th, 2008 at 10:20 pm
Also, your second link is not an Economist article.
I know it’s not. It’s just a citation. The article is pay-per-view at the Economist website. But I downloaded a copy while it was free.
I really don’t know much about natural gas or other commodities. Really all I claim to know is that the net rental yield for RE has to be above the cost of borrowing money in the long run. That’s all you need to know about this bubble.
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Anonymous Says:
September 11th, 2008 at 9:59 am
The Pope,
It sounds like your site is crashed again but not yet the market,comment sections are not opening.
with best regard from enternal “tu2″ magic triple quad hard drive.
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Carioca Canuck Says:
September 11th, 2008 at 5:40 pm
Tsur what…..
That still does not answer my question.
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greed Says:
September 11th, 2008 at 8:58 pm
Thanks Stagnate. So would you hold gold stocks or rather buys a Downtown Vancouver condo?
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greed Says:
September 11th, 2008 at 9:46 pm
Thanks Michael Randallbard. Great article. Took some time to digest.