Are we there yet?

Now that the correction has started, the only questions that remain are its depth and when we get there. Or more simply, when does one buy?

There are a lot of different ways of evaluating real estate prices and many of us are aware of the traditional metrics. I won’t repeat this analysis because it has been said before and is readily available. Most results would place fair value anywhere from current levels to another 20 to 30% on the downside (and even more by some).

Another way of evaluating expected prices is technical analysis, which is simply looking at past trends and assuming history will repeat itself. Real estate has appreciated at approximately 5.5% per year over the long term. Using 1983 prices (the bottom of the last crash) as a baseline, this would give an expected bottom of $630k for the average Greater Vancouver SFH. Using a similar approach, fair value was estimated at $730k, not accounting that markets tend to overshoot fair value. Considering this, I think $630k is a reasonable expectation for the bottom (based on technical analysis).

Based on the November 2008 average SFH prices of $750k, I think we have another $120k to go on the downside, or roughly another 15% drop on top of what we had to date. Considering the rate of the correction, it shouldn’t take long for us to get there. It might only take another 6 months.

But with all that said… who cares? Why are so many people consumed with buying at the absolute bottom? I think we are asking ourselves the wrong questions because none of us really know where the market will go (a known unknown). I think the following three questions are more important, partly because they can be answered (known knowns):

1. Can I afford it?

2. Do I like the product and the location?

3. Will I live there for a reasonable period of time (at least 5 years)?

If the answer to all these questions is yes, then it just might be the right time for you to buy.

Dave

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NO -LYMPICS
Guest
NO -LYMPICS

I'm #1 it tink BTW: Season's Greetings

aaaarghhh
Member

Excellent points. If you are to use the standard historical chart posted by Vanboom2 the most likely support line is more likely in between $380,000 and 450,000. As you pointed out correctly, technical analysis is only one way of looking at these things. History does not always repeat itself in exactly the same way. Most mortgage re-sets will peak in 2010 and another wave of crisis will impact the market. Market movements are often-times perception ( Adam Smiths 'invisible hand')and the perception will undoubtedly be negative going forward with lots more bad news in the pipeline.

CREA now stating the obvious in this article
http://www.financialpost.com/story.html?id=107796

Richmond Rich Renter
Guest
Richmond Rich Renter

1. – No (can't afford it yet) – almost 80k short still

2. – Yes (lots of nice houses in my target area)

3. – Yes (I hate moving, so I'd stay for at least 10+ years)

2 out of 3 ain't bad. The first one (affordability is the biggest killer still.

Rado@freemarkets.ca
Guest

This is one of the weakests posts ever. I see that it's tagged with "humor" so maybe I am missing something.

VHB
Member
VHB

Should I buy a pencil for $1,500?

1) I could afford to pay that.

2) I like the product.

3) I will get good use out of it for a long time.

There is something missing. Here is the missing fourth question:

4)Is it good value for money? Answer (for RE or $1500 pencils) is NO!!!!!!!!!

Anonymous
Guest
Anonymous

technical analysis? known unknown? known knowns? geez… i thought you were into real estate. now i can't decide if you are really a stock broker or dick cheney.

betamax
Guest
betamax

Who's Dave, the shill poster we haven't heard from lately because he's busy selling his second-hand crap on ebay to pay next month's mortgage?

Van-zee
Member
Van-zee

I'd like to echo VHBs first point.

Question #1 To me this is one key way that we got into the mess by confusing the cost of servicing a debt with the underlying value of the asset.

vancouverboom2
Guest
vancouverboom2
BOOM2 With low vacancy rates and falling interest rates buyers has jumped to take full advantage one of my friend who send his realtor with offer to seller found out that seller ran out of country seems like having fun with last leg of buyers mareket January expected to open with sellers market otherside one of my friend who did not get respected yield from one of the driver who was driving on full stream when friend chased him till the end that driver respond i love to give yield on normal time but i like to use my right when i am in rush to buy first my friend did not get what the hell he was talking about but it was fun when he realized what other driver mean to say all that falling interest rates and Vancouver… Read more »
Vansanity
Guest
Vansanity

Oh Dave, nice try, just because your voice has gotten louder doesn't make you right… especially with this well educated bunch. Good luck! We've got a long, long way to go before it becomes a good time to buy.

But you know me, put your money where your mouth is. Go buy and good luck to you, you'll need it.

kuroame
Guest
kuroame

Question: So how rich can you get on real estate?

Schiller: From 1890 through 1990, the return on residential real estate was just about zero after inflation.

Anonymous
Guest
Anonymous

Dave, go re arrange the deck chairs on the Titanic some more.

This is the worst topic in vci's history

Drachen
Member

"Another way of evaluating expected prices is technical analysis"

Yes, that's another way of looking at it. Another way is to use Tarot cards and Ouija boards. All three have proven equally reliable.

Or perhaps we could just stick with fundamental analysis, which happens to be the method used by successful investors. Your choice really. Science and proven track record or mumbo jumbo that's called "Voodoo Economics" and worse by the economics community.

Enough already Dave, hasn't this been discredited thouroughally enough for you yet?

VHB
Member
VHB

"Your analogy should have read something like… I could buy a nice pencil for $1.15 at the local shop, but if I drive around on Boxing Day I might get one for $1.00"

Now you have scale weighing against you. I would likely not defer consumption over 15 cents. But if it were $150K, I can do without for a few more months.

umdesch4
Guest
umdesch4

Flagged as humour, but not particularly funny. Dave in #11, you're being at least as disingenuous as VHB you're slamming, with lots of weasel words to boot.

$1.15 vs $1.00 (with "might" and "boxing day", "some other location" etc). You sound way worse than a used car salesman with rhetoric like that.

NO -LYMPICS
Guest
NO -LYMPICS
While a firm believer in the old saying " We must learn from history or be doomed to repeat it" …..I think we should toss out the RE History books over the last 25-30 years. We are getting bombarded with a daily dose of the smell of what is oozing of the cracks of a decades old RE Ponzi Scheme (and perhaps other Ponzi schemes as well). I saw the 60 Minutes feature (which Paul noted in the previous topic), and how another major wave of US foreclosures is ready to pounce based on another brand of goofy mortgages. In the last few weeks, I have only seen ONE single SOLD sign, that's it!!! , period!!!! . Sure, if you have cash(aka "Cash is KING")…and see an RE holding you have to have for W-H-A-T-E-V-E-R reason….based on a fear someone… Read more »
casisking
Guest
casisking
Dave, Dave Dave Dave Dave Please shake your head and repeat several times in a condescending tone. PLEASE everyone do not listen to this fool … I think his first post stated that house prices would only drop 5% then they would be flat … then that was revised to 20%. He also had a bet with another poster about the amount of listings we would see this fall and he was SSSOOO wrong (even when we let him get away with month end expiry's). "Our economy was strong, we don't have a subprime issue in Canada + plus the rest of the kool-aid issues (no land, rich immigrants blah blah blah …)." My wife works in RE … I hope people realise how many houses are coming to the market (new/used) this spring. People actually believe things will be… Read more »
NO -LYMPICS
Guest
NO -LYMPICS

Speaking of History, RE , and the 2010 Olympics REal agenda…

http://www.straight.com/article-93176/developers-

Enjoy with some Chianti and fava beans

other ted
Guest
other ted

Now that people like Dave can start threads we should have voting added to the thread also.

Drachen
Member
Dave "Drachen, you are just showing your ignorance of investment techniques. Technical analysis has not been discredited. Many any investor has gotten rich trading this way. If you can’t look at a market and see trends, then you just aren’t looking." Dave, people get rich winning the lottery, just because some people are successful does not mean that the system has any predictive value. For those who are unclear; "Technical analysis "ignores" the actual nature of the company, market, currency or commodity and is based solely on "the charts," that is to say price and volume information, whereas fundamental analysis does look at the actual facts of the company, market, currency or commodity." -Wikipedia What little evidence there is that Technical Analysis works at all comes only from stock markets and there isn't even the slightest thread of evidence that… Read more »
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