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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.
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.
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.
September 9th, 2008 at 5:56 pm
A car you say? Not so outlandish after all…
http://www.faithwilson.com/showProperty.php?p=316
September 9th, 2008 at 5:41 pm
Agree….good job on the graphics….my eyes popped out when I arrived!
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)
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.”
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?
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.
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
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
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
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?
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!
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)
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.
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.
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?
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.
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.
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.
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‘.
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.
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…..
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?
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.
September 9th, 2008 at 10:33 am
WOW monkeys are bloody expensive. How did you think of that one? LMAO
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.
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.
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.
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.
September 9th, 2008 at 9:52 am
Brilliant. Encore!
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!
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.
September 9th, 2008 at 9:27 am
I don’t know where I got condohype from… sorry, props Pope! Nice work.
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!
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.
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…
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.
September 9th, 2008 at 8:03 am
“bet you always wanted a monkey”
New song for the Ladies. “If I lost a million dollars”
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.
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!
September 9th, 2008 at 7:23 am
“just to post a bunch of much higher asking rents on Craigslist. ”
Pope, you are golden.
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.”
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.
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.
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.
September 8th, 2008 at 11:52 pm
Let me say, since nobody has yet — fantastic job on the grafix.
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.
September 8th, 2008 at 11:35 pm
Better than a pet monkey?