2008 in the rearview mirror
Well 2008 has come to a close, and if you’re counting on Vancouver real estate as a ticket to riches it hasn’t been the best of years. But DO NOT FRET, for I have discovered a simple way for investors to feel a little bit better about the direction house prices took in 2008. Do not look directly at a chart or graph of house prices, instead only view them through a rear view mirror:
There! That’s not quite so bad now is it?
(Yes, we used this same trick when comparing the Vancouver BC / Syndey Australia markets.)
Happy New Year Everyone!
December 31st, 2008 at 11:25 am
#31 I haven't seen any of them for years. I have been working in another industry ( one which is strictly amongst professionals and doesn't require me to work with the public in any way, which I hate) for twenty years. It seems to me that 'Bill' was an East Indian guy.
Manyee Lui was just another dim sun queen, one of thousands it seemed. Braindead and barely pretty with lots of warpaint.
December 31st, 2008 at 7:56 am
RealPaul:
If you don't mind my asking, What actually happened to the BELA boys? Where are they now ?
One of the partners owned a Chinese restaurant,(died years ago)
One or two were engineers
One was a house builder(who had some experience to get the ball rolling)
I remember meeting one of them and he showed me a list of projects. it filled a page. They claimed they were THE biggest SFH builder in Vancouver at the time in the mid to late 1980's, and this occurred in the span of 3-4 years. That is both bizarre and unsustainable.
The last time I saw them they were spec building in old Shaughnessy. Their business model was that it was tough for the average millionaire to go throught the hoops to build in Shaughnessy, so they spec built $10 million plus homes and had Manyee Lui (?) sell them.
I know the original partnership imploded a few years after it started..one left the group … but I saw some minor SFH projects later,but I asume they are gone now. Most builders crash and burn…maybe higher turnover than realtors.
Later on "Bill's Development" came onto the scene….a party who had a landscaping business and then came out of nowhere and was pumping SFH out like no tomorrow, outcompeting BELA… that's how much frontier "Hey I 'm a builder now !!! mentality is out there in boom times.
=========================================
Re Feng Shui.
Well whoever started it…it sure caught on…..even Richmond City Hall called in a Feng Shui advisor to "consult" on the new City Hall design…though doesn't like to admit it. Many builders I knew were scared sh*tless to make sure they were Feng Shui compliant.
December 31st, 2008 at 1:43 am
#27 PS: Broadmoor became 'the eye of the dragon' because it was the first area in Richmond that I had chosen and managed to break open and was able to secure a large number of building lots.
If I'd been selling houses/building projects to anally fixated persons I would have advertised it as 'the a-hole of the universe'. I made the whole thing up ( The Feng Shui thing) to make a quick buck. Two of the boys at Bela were in some of the JV's under a differant name. I didn't know Feng Shui from my left nut back in those days other than I knew the effect it had on my clients. We all agreed to play it up for the sake of the money.
I also made a point of selling my own image by allways showing up in tennis togs and a big gold Mercedes. My 'assistant' at the time was a 19 year old lingerie model , also Chinese. She didn't type worth shit, but when I walked into a social gathering I got noticed, that was what I wanted. That 'big face' I had drove them nuts, because as I said they are lemming like and wildly attracted to the look of success I presented.
I was a fisherman, a good one. I know these fish. They are my fish swimming in my pond. I think I became that cynical when I worked in advertising research as a kid and found out just how crooked the world really is.
December 31st, 2008 at 1:24 am
#27 Bela construction was one of the shells I sold to three families in a JV in 1987. Idiots all. Granny bashers without the wit between them to blow out a candle.
I call these boys " The Dim Sum Queens'. They crashed and burned in lock step with all the other specuvestors ( I love that term) of the time and lost big when the turn came in '92. I went to Fiji. Those were good times.
The pools open, but you're right not be a divin' in.
December 30th, 2008 at 8:58 pm
Nolympics, realpaul,
Thanks for the advice. I appreciate it.
Regards,
arit
December 30th, 2008 at 8:42 pm
# 26
Fascinating reading…thanks !!!
Fills in a lot of blanks…as well as corroborating many other facts (which I concur with).
I do recall all those whacky "Feng Shui" ideas such as laying out a given area like a dragon…and the hot areas were certain dragon body parts. Someone once told me Broadmoor was the "eye" of the dragon re: Richmond being layed out as a dragon ….thus it became hot for no other reason.
I'm sure the Honk Kong threat from Red China was milked for all it was worth…while the rest of us predicted Red China wouldn't dare interefere with the golden goose Honk Kong was at the time.
As you state, it was all scared money…which came over…hence not many so-called "fundamentals" involved. It gave too many a false sense of security, economic or otherwise. Scared money is fickle and foolish, it is bad to consider it, (let alone rely on it) as a never- ending golden goose.
I knew one of THE biggest SF House builders in Vancouver(BELA) …they started out very small on the East Side of Vancouver building small spec houses….then before I knew it they rode the Rich Asian gravy train with investors spec building. They simply lucked out with perfect timing in the mid 1980's ….they ended up spec building in Shaugnessy of all places.
( I did notice that some became smart and avoided purchasing spec homes and all the built – in profit …they saved the dollars by hiring contractors for custom builds )
In the end….It's all promotion and gullible lemmings…nothing has changed. However, after the last lemming takes the plunge is when it gets V-E-R-Y interesting .
December 30th, 2008 at 6:24 pm
#25 I use a list of specific statistics to generate an aquisition strategy. Burkeville is nice enough, true, but it doesn't meet my crtireria re' school stats, transpo, shopping etc. Everything weighed together either spells success or not to me.
Just business analytics not personal at all. If you want to invest in an area the first thing you should think about is your exit strategy. Who is going to buy your home when you finish with it? Theres some merit to the argument " buy the worst house on the best block" within reason of course.
When I first looked at Broadmoor for example I had the #3 transpo line, the Richmond Center shopping easily accesssed , and two schools with some of the best graduation stats in the province. There was no China town in Richmond or any signifigant Chinese population ( to speak of) at that time.
Once we started the ball rolling though with a few succcesful projects the Chinese pop flooded out there. I guess you blame it all on me. I can't take all the credit though. I used the JP Morgan strategy ( that I studied in business school) as a template. I was actually surprised that it worked so well.
I did the Westwood Plateau using the same criteria, before me it was just trees on the side of a mountain.
Not blowing my horn, just telling you that it pays to look at the subtle connections of the entire package. This is also why I disagree so much with those who propose investments in the hinterlands of the Okanogan etc. It just doesn't work for the longer term. We see the reaffirming pattern breaking down in California, Nevada, Yaletown etc. Good lessons in overdevelopment there which will certainly make it into the classroom at some future date.
And sit down, but all that Feng Shui nonsense, we made it all up. It was nothing more than a sales pitch. Once you get people talking by placing information in the right medium it's hard to get them to realise they've been duped. They insist on verifying the thought by insisting they knew it all along. Good advertising by dangerous people.
When developing Lower Shaugnessy, Oakridge, South Granville, Cambie , Oak , Richmond, Coquitlam etc, we used the same cookie cutter BS and it continues to work today. Think about for a minute and then you'll realise that only so many places can be on the back of a dragon. They (the above) all are, how can that be? Self affirmation in a nut shell. We lied.
The new immigrant patterns established by previous groups have been well studied and we in buisness manipulate the needs of these ethnic pops to our own end. The Chinese began to come in 1986 when the PRC announced that it wouldn't renew the lease for HK . The Chinese were as desperate , ignorant and lemming like as all the mass immigrant waves before them. I got to retire at 42 because I new this. The fact that the HK newspapers were sensationalizing the idea that Red Guards would be marching down Nathan Road in Kowloon did a lot to help stoke the fears and we read the papers daily and knew just what to say to ping ponged immigrants from across the pond. We weren't alone in this though, I knew some Aussies who were doing exactly the same thing for the same reasons.
Many car dealers run the same scams today. They know that immigrants like to be instantly comfortable so they rely on the patterns established by those that have come before them. If you wonder why an entire population is driving mini vans one year and hondas the next, look no further than a basic primer on social psycholgy.
I did a double major in Commerce and Psych, I have advanced degrees in Economics. When I got my first suit I was an absolute monster. It's unfortunatly very easy to manipulate people and it's done all the time.
December 30th, 2008 at 4:30 pm
Re: Burkeville
Meant more as an example of less McMansions, once more affordable and neighbourly via less gentrification.Knew people who bought in there CHEAP , given it was not on the radar screen years ago as people assumed it was old and noisy from the aircraft traffic. Not quite true…more noise in other areas.
Sea Island School closed in the late 1970's, but because of the affordability of the area more families moved in and they re-opened the school, all due to the specific demographic changes that the area attracted .
****Historical Footnote:
FYI: Burkeville was once company housing for aircraft assembly workers…BOEING was once located on Sea Island…then moved to Washington State, our loss = their gain. *****
Price wise, Burkeville has unfortunately suffered the same bubble froth as other areas once word got out. Still, a nice area if you can afford it.
December 30th, 2008 at 2:29 pm
PS I meant to say " That is not to say that bubble froth is NOT being wiped off the top of every sub area and it will pay to be attentive to the baseline numbers as this scenario plays out.
Prices of everything in every area are falling!!!!!!
December 30th, 2008 at 2:26 pm
#22 no lympics, the epicenter of any market sub area will be where the best daels will be had as that is the area of highest price volitility. An old maxim is " First and fastest, last and least." The reverse is true in a downturn. The areas which began appreciating first will also depreciate the first and fastest.
It is the micro markets in the fringes of the epicentric proximity map that will more or less stabize within a band of more predictable volitility. That is not to say that bubble froth is being wiped off the top of every sub area and it will pay to be attentive to the baseline numbers as this scenario plays out. It is premature to step into the market at this point.
I wouldn't consider Burkeville as an investment. Broadmoor I know well as I was the first builder to construct anything in that area. When we first began to JV construction projects in Richmond ( I was a young executive designing buisness ventures to sell to new immigrants) it was almost impossible to get anyone to consider it.
You are correct about the McMansions in the area being converted into rooming houses, this trend has been in place for several years. As SFH they are 'functionally obselete'.
December 30th, 2008 at 2:03 pm
Arit:
You want a "FREE" single family house?
Good !
I thought so….
Soon BC Assessment will be sending us our annual property assessments. There is a window (I beleieve in January only ) whereby you can search out comparables or any property on-line..ie punch in addresses and get info that is otherwise avilable on microfiche ONLY for the rest of the year, requiring you to go to City Hall or BC Assessment offices.
If you key in on certain areas, you can get a handle on (i) LOT value and (ii)IMPROVEMENTS . Lot value will be the variable..whereas the improvement value won't vary much ,if at all.
You will find a lot of "older homes" say 40 + years are depreciating down to numbers like $20,000 in the "IMPROVEMENT" value . These would include bungalows , split – levels and 2 – storey homes common in the pre – 1970's era. Many of these are built like brick sh*thouses, unlike a lot of post 1970's crap . The only real "original " problem is the power panels , many only had 60 Amp services. Much of the maintenance for older homes requires a trade on par with " handyman". Forced air heating was the norm, much better and cheaper than Hot Water heating one sees in newer McMansions. Regardless, I've been in many older homes that still had the original owners and are in immaculate shape.
So, if one looks at the property(LOT) value price and anticipate it crashing…then the search would be reduced as the "cheapest" lot that has a "free" house, if you catch my point.
Certain areas of Richmond are overly inflated due to Feng Shui..ie Broadmoor area which was once a working class neighbourhood built in the 1950's and 1960's became a favourite for the Wealthy Asians. In the boom times many houses were demolished to make room for new McMansions and multi family, so BC Assessment often had to reduce the value to " LOT Value" given the purchasers looked at the value in the lot only…so use this to YOUR advantage.
I'd seek out areas whereby the lot value is historically lower,(wether of comparable lot size or $/ sq ft value) and thus far less likley to fall from the peak. One can often see just simply being on the other side of the same road can be a big difference between 2 very similar houses.
However, as realpaul mentioned bungalows(or any so called older house)…have a good look beyond curb appeal. We recently visited some friends who were renting a bungalow…it looked plain Jane…but inside was a renovated kitchen ,rest of the house was in very nice shape with other updates…and lo and behold…a large 400 sq.ft rec/family room added onto the back of the original house as well as a covered back porch, which you would never see from the road.
Time to go treasure hunting, lots of good deals if one ignores the McMansions. Most of them are wasted space with their two storey open entranceways, etc. In fact, I predict (and have said many times ) that areas whereby the majority of housing is McMansions could be bad news areas in the near future…the so-called "wealthy" won't buy them…these older McMansions are already getting close to 25 years old , others will find them requiring too much upkeep and cost for utilities. Future Buyer??? = most likely landlords will buy them and change them into rooming houses, there goes the neighbourhood..
You may wish to check out BurkeVille on Sea Island…many of those parties bought homes built in the 1940's and actually live in them…and renovate them. You do find neighbourhood pockets all over whereby people hang onto older homes, are more family oriented and neighbourly than those cold bunkered "wealthy" McMansion areas.
December 30th, 2008 at 1:00 pm
Realpaul,
Thanks for the heads-up. I'll keep that in mind. The truth is that I do not trust any existing house for the same reasons you mentioned, so it's looking like if we indeed buy, it will be to delete the current house and build our own (yes, bulletproof, mock now yall).
regards
arit
December 30th, 2008 at 11:36 am
#8 Arit. Those older bungalows can be a trip through renovation hell. Upgrading just the basics can easily set you back $100,000 or more. Occasionally you can find one that has been done over. A rare find indeed. One of my old tactics was to bang on the doors of the cherry props myself before they came to market. There are plenty of innovative strats to get an owner to sell without scaring them into the arms of a real estate leach.
It's a process more than an event. The current stats show housing averages off 20% since Oct ( 10% drop in Oct and 10% in Nov with Dec not out yet but it seems repeating), so you are getting closer to your 300K figure. Personally I'd say it's worse but I'll give the douchebags at CREA a bone today and use their info for arguments sake.
I will hazard a guesstimate that the average Richmond SFH ( detached older bungalow ) will be 420K or lower by Feb 09. That represents a 30% adjustment from Sept 08 where prices for this type of unit was topped out in the low 600K area.
The ROI ( ex:300K) at current market rents ( 1500 p/m )would be 5% which is probably closer to fair market value. However conditions may push values lower to -50+%. So, even a 30% drop in prices for SFH is still risky territory for '09.
An entry point that would be cutting edge would be at the ROI on a 30yr bond, current yield 2.75%. This gamblers initiative indicates a 45% price adjustment for SFH in Vancouver of 45% before investors are enticed back into the market. FYI this is what the smart money is looking at. Do the math and coincidently you arrive at $330K. Your guestimate of 300K is very close no? 200K is probably aggresive but possible.
December 30th, 2008 at 11:08 am
RBC article parsed for clarity and direction…..
Good afternoon
Home Prices declined fastest rate on record,
depressed mounting foreclosures
slumping sales Index declined 18 percent
more than forecast dropping 17.4 percent September gauge fallen every month January 2007 Economists forecasted fall by 17.9 percent year earlier decrease prices 33 percent drop Phoenix 32 percent decline Las Vegas.Consumer Confidence much weaker than expected falling to 38 from 44.7
record-low reading
starting to sound like satv
December 30th, 2008 at 10:38 am
Thought you all might enjoy the following comments being distributed by the Royal Bank today (Dec. 30, 2008)….
Good afternoon from the RBC Capital Markets Real Estate Group in Toronto, Montreal, Calgary and New York.
Economic Commentary
Home Prices in 20 major US cities declined at the fastest rate on record, depressed by mounting foreclosures and slumping sales. The S&P/Case-Shiller Index declined 18 percent in the 12 months to October, more than forecast, after dropping 17.4 percent in September. The gauge has fallen every month since January 2007.
Economists had forecasted that the 20-city index would fall by 17.9 percent from a year earlier. The decrease in prices was led by a 33 percent drop in Phoenix and a 32 percent decline in Las Vegas.
The Conference Board measure of US Consumer Confidence came in much weaker than expected in December, falling to 38 from 44.7 in November (originally reported as 44.9). This represented a record-low reading for Household Confidence. Expectations had been for falling gasoline prices to continue supporting a recovery in this measure to 45.5 from the 38.8 recorded in October.
December 30th, 2008 at 9:34 am
Post #16 :
Error
Last paragraph…meant to say " that has migrated NORTH to "
December 30th, 2008 at 9:29 am
Recently drove by the Fraser Wharves in South Richmond.
This is where they unload a lot of foreign- built cars shipped from overseas, then transfer them onto trains for distribution elsewhere .
The nearby railway tracks were covered in snow for the past several days till yesterday….I guess one train of (???) made a pass .
I saw a large "auto carrier" cargo ship "parked" at the docks….can't tell yet if it is unloading .
The current storage lot is quite full of cars …not much movement of current inventory as evidenced by the snow – covered cars .
Just curious if this will be like the US,….manufacturers forced to find space to store unsold inventory, another US phenomenon that has migrated south to " WE ARE DIFFERENT LAND !!!! "…(aka "insulated" Canada).
December 30th, 2008 at 8:52 am
http://business.theglobeandmail.com/servlet/story…
December 30th, 2008 at 8:36 am
REBGV 2009 directive :
Starting in the Spring 2009 RE " buying/selling boom" Season
Real Estate offices must now be located on the ground floor and no RE offices must have a Yaletown /Olympic Village view .
This way when Realtors jump out of windows, less damage/messy, subject to they land on their asses. (However, history has shown landing on their heads may be a break -even game.)
ALSO:
Mentioning Bob Rennie's name , …..they don't make any more land,….. Rich Asians or " BC Real Estate never goes down " subject to 6- month suspension.
PS Many realtors are thanking the REBGV and are considering taking up the offer !
December 30th, 2008 at 8:20 am
If they try to claim they didn’t see this “crash and burn” mess coming, we know we are dealing with certifiable idiots as well as the traditional liars.
Already pretty much in the books. But not really idiots, they know how the game is played. They, and their buddies, have got their millions out safely, and really don't care much about the misery and devastation they leave behind.
December 30th, 2008 at 8:09 am
Post # 5 :
Good link
Well….. to be honest that apocalyptic view must certainly linger in the minds of many of us.
If the Western economies ( if not most economies ) have been shown to be built on a fragile bubble foundation over the last 25 – 30 years, that indicates a restless public and a Gov't also bankrupt of ideas, usually adding up to a volatile mix.
All Gov'ts have done is throw funds at the biggest bubble leakers,(ie AIG, Big 3, etc.) when this will be more like the death by a thousand(Million) cuts when it " tsunami's " the grassroots.
Natural forces will ultimately take over, the "scary" thing is we don't know what many of them are yet. Unless Gov't declares some sort of fiscal amnesty, I don't know what roll or control Gov't has anymore. If they try to claim they didn't see this "crash and burn" mess coming, we know we are dealing with certifiable idiots as well as the traditional liars.
A pox on their governance outhouse !!!
December 30th, 2008 at 12:05 am
Arit, one was "Anon", the other was "Anonymous"…
December 29th, 2008 at 11:49 pm
Uhmmm?…. Is it the same anon?
Chose a nickname guys! it can be Rumpelstiltskin as far as I am concerned, but we cannot maintain a meaningful dialog if anon tells me I am too cheap and anon tells me I am too expensive. Is there an anon saying I am just right?
Regards
arit
December 29th, 2008 at 11:38 pm
Arit, don't. 300k is too much for a house with the kind of construction quality we get here. When you factor in maintenance and other costs it still won't pay off at 300k. Wait for it to go below 200k.
December 29th, 2008 at 11:28 pm
To 3 anon:
You may be right. When a single, used, detached, 3bdr 2bath home hits 300K in Richmond we will consider buying. How's that?
Cheers,
arit
December 29th, 2008 at 11:00 pm
#6 read the comments, more fun
December 29th, 2008 at 10:58 pm
#5: Oh, great. Canada gets all the crappy states.
Why did I just waste 5 minutes on that article anyway? What a load of hooey.
December 29th, 2008 at 10:46 pm
if this is to occur what happens to Vancouver re?
http://online.wsj.com/article/SB12305110070963841…
December 29th, 2008 at 10:25 pm
anonymous:
never say never
though probably not in a next year
December 29th, 2008 at 10:23 pm
Arit, prices will never be cheap enough for you to buy. You're too cheap.
December 29th, 2008 at 9:55 pm
It's been an amazing year for us frustrated-basement-dwellers! As my old mentor Hannibal Lechter used to say "I Love It When a Plan Comes Together".
Let's hope the coming year continues us expected.
Regards,
arit
December 29th, 2008 at 9:50 pm
I like it! Objects in mirror are closer than they appear! Bwahaha
Regards
arit