Why I am a real estate bear. Are you one too?

Preface: I had already written my post when I began a discussion with a co-worker of mine late in the afternoon. We began to talk about real estate prices (on Bowen Island, where she has family) and it was obvious that she had no clue about anything to do with real estate. That, however, didn’t stop her from affirming with the utmost certainty, that “we’re in a lull, and by the spring prices will start back on their inexorable climb.” Just then a co-worker jumped in claiming that he was going to wait until after the Olympics (about 2 years) to buy. When I told both of them that I expect a bottom in real estate prices (real prices, if not nominal) around 2014/2015, they looked at me like I was nuts.

I just smiled knowing that this is exactly what my friends/acquaintances in the US were thinking about 3 or 4 years ago. They no longer think I’m nuts and one or more of them e-mails or calls every couple of days to get my opinion on the real estate market. Well, here’s my original post below:

A native Vancouverite, I had lived abroad (in 4 different countries) for 13 years before returning to Vancouver this summer.

I have never personally owned real estate, but growing up in this city I was a casual observer of the manner in which my family’s (and friends’ and neighbours’) fortunes were party to the vicissitudes of the Vancouver real estate market. I saw my parents purchase a home on East 19th ave and Clarke Drive for $33K in 1973, tear it down in 1989, build a new home there and sell it for abou $500,000 (in about 1990), which my parents used to buy a building lot (right near the top of the market). There they built another home, the cost of which took the remainder of the profit from the sale of the earlier home, even though labour costs were mostly free (our labour, not counting opportunity costs). Then I left Vancouver and have watched at a distance as prices reached truly astronomical levels in this city.

As I stated earlier, I don’t own any real estate, but I began my long journey into trying to understand what was going on in the world of real estate in about 2003, which is about the time I started to seriously consider buying a home in the northeastern US (which is where I was living at the time). I thought that I could buy a 2-3 bedroom house, rent out a couple of the bedrooms and have my roommates help pay my mortgage. But when I started pricing things out, I realized that it just didn’t make sense financially.

My gut (and my analytical nature) were telling me that something was wrong. What’s more, I had moved to the US from Europe (where I lived for about 4 years) and just could not believe the amount of new cars on the road; something just didn’t add up and I couldn’t understand how I, who was making about the median wage for the area in which I was living, couldn’t even come close to comfortably purchasing a home, while families (not individuals, but families) whose gross net income could not have been much higher than mine at the time, were out purchasing four-bedroom McMansions so that they could park their two cars–one of which was obligatorily an SUV–in the driveway. That’s when I had to find out what the hell was going on…which led me to various “bear” sites on the Internet. I then realized that I wasn’t the only one who thought like I did…

That’s when I found the one-word answer to the dilemma: Debt. In fact, it was insane, “you’ve never seen anything like it” levels of debt that individuals/families were taking on without seemingly the littlest regard for a strategy of how they were going to ever pay it back. Everyone (and his two-year-old son and pet cat Wheezer) was going into debt at a rate that I just knew was not sustainable. So, I’ve been a housing bear since about 2003…

That doesn’t mean that I’m a natural “bear”, but I’ve been aware of the unprecedented amount of debt that is weighing down the balance sheets of families, companies and governments worldwide and which still have to be resolved in some manner before anything like a sustainable recovery is in the works. I think this will take years, rather than months…

What about you, what are the specifics of your own personal “awakening” with respect to the real estate market in Vancouver (or any other city)? Did you know that the realtor mantra “real estate only ever goes up” was b.s., or did they have you fooled for a while? When/why did you begin to think that most Vancouverites were nuts and deluded about the value of our real estate?

-The Dude

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135 Responses to “Why I am a real estate bear. Are you one too?”

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1 X NO -LYMPICS Says:
December 17th, 2008 at 10:22 am

I’m #1 I tink

Current score: -53
2 X Drachen Says:
December 17th, 2008 at 10:23 am

[re-post from last thread]

Dave

“Most people who buy SFH in GV are not first time home buyers.”

And those people don’t impact the market significantly. Sell 1 home to buy another and the net market impact is essentially 0. For the market to keep going upwards it needs to feed on new buyers and home ownership is at record levels.

But enough of you changing the subject and avoiding my question.

You’ve admitted your system of market prediction is broken over the long run. You’ve said your system works fine for the last 50 years but will fail over the next 100.

At what point between now and 100 years from now does your system fail?

What makes you believe the system is still working now if you know it will fail eventually?

Your system of market prediction is 0 for 4 right now in predicting recent trends, that, coupled with the fact that you know it will not work forever doesn’t tell you that maybe now is the time it fails? Really?

You’ve said in the past that you don’t purposely dodge questions yet twice you’ve avoided this one (in spite of your name being in bold at the top). How about an answer Dave?

Current score: -9
3 X Drachen Says:
December 17th, 2008 at 10:43 am

In response to this blog post (sorry for hijacking the thread Dude but I really want Dave to stop dodging the question).

I lived in Vancouver for some time as a bachelor with no interest in buying. Went to Europe, got married and stayed for a year (we met here but she’s from over there). We came back and in 2005 we started looking at real estate. After the third open house I was just not getting it. I figured two professionals earning good salaries should be able to afford something they could raise a family in. At the time I said to my wife, “I think it must be a bubble, this is ridiculous, these prices make no sense.”

When I got home I did a quick internet search for “Vancouver house prices bubble” and of course quickly found VHB. I’ve learned a lot from him and Freako and many others here as well as doing a bunch of reading on the side and I think I can firmly say that my original intuition was correct.

My prediction for the future:

- Prices will bottom out in 2011-2012 (plan to buy in mid-late 2011 if you want the best bargain)

- Prices will hit about 40% of peak (50-70% off of peak).

- There may be a flattening or even an upwards bump this spring, (don’t be alarmed) this is normal, we’ve seen it in most cities where the bubble has burst. Prices will begin falling seriously again by the end of summer.

- Dave will not acknowledge that he’s been completely wrong this whole time. Instead he’ll just fade away and pretend that he was right all along, it was just the recession or something similar that skewed reality away from his predictions.

- VHB will move back to Vancouver in 5-10 years when he gets sick of the weather wherever he is now.

- Pope will receive the Pulitzer prize.

- Michael Randallbard will be hospitalized in excruciating pain when he finally realizes that you can neither eat, nor live in gold.

Merry Christmas to all and to all a good crash!

Current score: 69
4 X Macronomics Says:
December 17th, 2008 at 10:49 am

My experience in real estate is as such.
Have purchased a primary residence in 2003 but sold in Dec 2007.
Own “revenue” properties in Alberta w/ partners.
I say “revenue” because all properties purchased with 20% down and rents are covering all expenses and then some.

These are truths that I hold regarding RE.
And I will continue to hold these truths until proven wrong.

1. RE is cyclical
2. Rents are paid with today’s income whereas prices can be based on tomorrow’s expectations
3. While prices can swing up and down, they will always come back to levels justified by fundamentals.
4. Pre-sales can be a form of sub-prime since the buyer doesn’t have to qualify for a mortgage in order to control a piece of property
5. RE prices rise even with no change to fundamentals due to inflation and money invested to maintain RE
6. Significant and prolonged drop in sales volume will result in price drops as well as rent decreases no matter what.
7. Never trust vacancy and rent numbers from CHMC.

Current score: 50
5 X Potato Hat Says:
December 17th, 2008 at 10:51 am

Yeah, I’ve seen the dead cat bounce in a couple other bubble cities in the states, but I don’t see it happening here. We’re still rocking 20+ months of inventory here. And all the psychology has turned against the buyers – I don’t see them showing up en masse this spring.

Current score: 26
6 X Anonymous Says:
December 17th, 2008 at 11:04 am

Why does anyone care what Dave thinks? He’s not a realtor, he’s not buying, he’s never been right and he’s incapable of comprehending the basics of economics.

Let’s collectivelly ignore his ignorant trolling and discuss topics that haven’t been beaten to death.

Current score: 29
7 X observer Says:
December 17th, 2008 at 11:18 am

http://business.theglobeandmai.....iness/home

Current score: 2
8 X Bubble Lad Says:
December 17th, 2008 at 11:24 am

I moved here four years ago, and within a few weeks had been hammered on by a close relative to buy Buy BUY! (with all the usual threadbare reasons detailed in post after post by clueless “Daves” on this blog.

The level of fantasy was staggering. I consider myself truly lucky to have had front row seats to one of the true mass delusions of the last hundred years, right up with with Tulipmania and and South Sea Bubble.

At first it really got under my skin, considering that developers have single handedly turned Vancouver from a great little “city” into an unlivable mess who’s greatest ambition seems to be turning all the lower mainland into Yaletown.

But after I thought about it, what choice is there for BC’ers? It has always been a boom & bust economy, and EVERY boom, people believe that “this time will be different”. Everyone tells each other they’re going to DO something with all that easy money, establish a “real” economy, but no one ever does. The get rich quick mind set is part of the genetic code of BC’ers – right back to fishing, logging, mining – make a ton of cash quick, then blow it. But now, with all the resources gone (or converted to mechanized models employing minimal people), the only thing left here is real estate/tourism.

So here we are again: sledding down into the latest bust that was never supposed to happen, because “this time is going to be different”. The only question is, is it the last boom this province will see for decades? Because once real estate goes the way of mining, fishing, logging, there’s nothing left to get rich quick on.

Pretty grim.

Current score: 44
9 X miser mouse Says:
December 17th, 2008 at 11:25 am

Dude: Yeay, Squeak!
Well, that is what I have been saying too.
I, actually work for my money, put up with stupid stuff, but I earn my money and pay taxes on every penny, no bonuses or treats or candy parents.
I also am religiously frugal and know that money do not grow on trees. Everything I buy is 2nd hand, marked down meats, dabble in vegetarian zone, cook from scratch, bike and drive miserly(not miserably)dont drink/smoke, etc.

I was wondering if I was missing out on something, what I was doing wrong. So I asked people left and right if they have received any raises or know anybody that did. Answer was “no”. So, like you, if went on line trying to find answers since the media did not mention anything except buy buy. And I found this site, before that the Vancouver housing market blog – i was depressed when it shut down, who was going to tell it as it is? What is life without some truth?
So, yes debt was the answer. And I as a working person and frugalist preaching ” live below your means” I felt I have fallen down on a different planet. I didnt get it, and still dont. Dont you have to pay back what you loan + interest?? Dont you have to give it back one day?? Dont you?? Really, honestly??
I dont get it. I just dont get it.

Current score: 32
10 X NO -LYMPICS Says:
December 17th, 2008 at 11:28 am

On the reminiscing front:

PART 1 (of 2)

I guess my 1st economic epiphany came with the economic whack job OPEC did in the early 1970’s,and oil prices quadrupled.. That created a lot of global turmoil and zeitgiest-ical bumper stickers such as ” LAST one to leave “X” please turn out the lights “. However, years later, I came across an old magazine investigative article (circa 1970’s) which stated that over the past 100 years, there had been over 20 such oil “shortages”, which subtley indicated a bit of a backroom fix was in by the major players.

In the late 1970’s and early 1980’s came a mega RE boom,(MURBS came on board as well)… I vividly recall news features on TV about SFH increasing $1000 per week and same mad RE frenzy as we saw until recently.

An In -law dove into the RE market , buying a condo near SFU and renting it and asked me to help them move some appliances. The in -law was engaged to be married but still felt obligated to buy THEN under the old RE mantra to “buy ASAP or be left behind ” . I still recall their tenant saying to us that night “Did you hear John Lennon got shot ?”.

At the same time, our family had an investment property, and a person had bought an adjoining one of similar size. This property doubled in price then W-H-A-M….the 20 % interest rates kicked in and the person had to sell. The new buyer bought it at 50 % of the peak price.

The economy was brutal…I know a university grad (B.Comm 1981 )whose first job was delivering phone books.
Also:My grandparents had a major renovation done on their house…and their own son was totally qualified to do the work. However, one bidder was so low that their own son said there was no way he could even come close to matching that low bid…..that’s how desperate things were and people so hungry for work.

Then the EXPO 86 “new economic hope(?) “.

At the time, I met a builder who had purchased a property near 49th and Granville for the princely sum of $250,000. The came the post Expo 86 wave of Asian wealth which was mind boggling at the time. Another builder I knew stated “you make your profit the day you buy the lot”, meaning your hope is that you have timed the market right when you start the project and that the lot value rises as you build…one builder confided they had made $400,000 on the property value in the time it took to build. Within year or 2, Vancouver area properties had tripled and quadrupled.

When Vander Zalm sold the Expo lands to Li Kai Shing…that fiscal blessing by Li Kai Shing of Vancouver effectively sent a message to other investors to buy into the area.

I do recall a strange slump in the late 1980’s early 1990’s, something had happened in Asia, but then it re-loaded again till mid 1990’s then it went flat, about the time Hong Kong ceded back to Mainland China . Conclusion was that the scared offshore money was here,… not much left or forthcoming to keep that post Expo 86 bubble going.

Funny enough..the coincidence of the Bre X and “Dot.Com” etc, Stock market boom in the mid 1990’s nicely timed take up the slack of the mid 1990’s RE collapse/flatline.

It was about this time my suspicions rose about the merits of what I myself had observed and experienced since the 1970’s.

Part II upcoming.

Current score: 14
11 X Anonymous Says:
December 17th, 2008 at 11:40 am

Dave do not respond to Drachen let him troll while buyers are in the market to take advantage of current market scenario,DUDE congrats on your first ever post but rant is due later.

Current score: -30
12 X paul Says:
December 17th, 2008 at 11:48 am

SoCal was also thought to be bulletproof and untouchable. Look what happens when a dreamer wakes up. So many similarities to the BS we were fed in Vancouver.

http://www.mercurynews.com/bus.....i_11248874

On the subject of debt. Did anyone else notice when advertisements for sales campaigns stopped including the prices of anything (such as cars and real estate) and started to exclusivley refer to the amount of the monthly payment.

Automobile prices (as well as real estate), especially high end vehicle prices also skyrocketed when intrest rates were manipulated artificially low by the Federal Government. People began taking on huge amounts of consumer debt as if they would ‘lease everything’ instead of ever owning anything because the payments were low. Condos were sold as X dollars per month, unwary buyers forgot that the real price was what they would have to pay back to the bank over the ever increasing amortization period, not the ‘affordibility’ of the monthly nut. What mass stupidity it all was.

We used to talk about paying a 25 year mortgage off early , like in 15 years, not extending the amortization out to 40 years and some real estate touts were slathering at the prospect of 50 year mortgages before the government balked at such a luducrous proposal. But , that would have got the payments down wouldn’t it and then the developers could have jacked up the prices even more to suck up any excess disposable income.

The current debt service for accomadation in BC is 71% of pretax income. Don’t you people have to eat anymore. What are the kids taking to school in their lunchboxes. Or are you all scamming the low income applications and getting the kids fed for free. Shame on the east side professionals that are sucking away as parasites do on the school budgets because they can’t take responsibility for the feeding of their own children before paying for the residence you knew you couldn’t afford in the first place.

The low intrest rates created a mass delusion fueled by avarice and greed. The auto companies and real estate developers jacked up prices as high and as fast as they possibly could basing all financing on low intrest rates. This phenomena caused our society to completly forget about VALUE.

In todays market here in Vancouver and virtually worldwide there is no sustainable support for the current illusionary values that have been cooked into the market by the artificial intrest rate regime that dictated the huge inflation in prices, prices, not values.

Prices of all these over inflated items will have to come down far further down than the statistical norm would indicate prima facie because the run up in prices itself was an aberation and itself statistically insignifigant and illusionary.

The average BC family has a joint annual income of $71,000, this allows for a pretax debt service ratio of 33% or $1952 p/m. This is roughly supportive of a mortgage ( latin for death grip) under $400,000.00. This implies that the average price of a SFH in Vancouver must fall an additional 40% to align itself with the market.

I think the new credit regime forced on us by the crisis is a godsend (forgive the term as I am not religious)and the necessary legislation will begin to harden these numbers. Debt on disposable income is currently at 120%. Will the last one to leave the current real estate market please turn out the lights.

Current score: 43
13 X Raincouver Says:
December 17th, 2008 at 11:53 am

.
I had my lightbulb moment in Sept 2005. Something didn’t feel right about the housing scene. Luckily, I found Ben Jones’ blog and then VHB right after that.

And I realized at that time the banks would go begging to the taxpayer to compensate them for their “losses”. It was a complete set-up.

Ever since, it’s been like watching a grade B horror flick with really bad actors and a really bad plot and an even worse ending.

Current score: 15
14 X miser mouse Says:
December 17th, 2008 at 11:54 am

Dude: Yeay, Squeak!
Well, that is what I have been saying too.
I, actually work for my money, put up with stupid stuff, but I earn my money and pay taxes on every penny, no bonuses or treats or candy parents.
I also am religiously frugal and know that money do not grow on trees. Everything I buy is 2nd hand, marked down meats, buy day old bread, dabble in vegetarian zone, cook from scratch, bike and drive miserly(not miserably)dont drink/smoke, etc.

I was wondering if I was missing out on something, what I was doing wrong. So I asked people left and right if they had received any raises or know anybody that did. Answer was “no”. So, like you, I went on line trying to find answers since the media did not mention anything except buy buy. And I found this site, before that the Vancouver housing market blog – I was sad when it shut down, who was going to tell it as it is? What is life without some truth?
So, debt was the answer. And I as a working person and frugalist preaching ” live below your means” felt I had fallen down on a different planet. I didnt get it, and still dont. Dont you have to pay back what you loan + interest?? Dont you have to give it back one day?? Dont you?? Really, honestly??
I dont get it. I just dont get it.

Current score: 4
15 X mouse..mistake.. Says:
December 17th, 2008 at 12:00 pm

oops

Current score: 5
16 X Macronomics Says:
December 17th, 2008 at 12:07 pm

Exactly, the key is debt.
My co-worker kept asking how people can afford $1M houses.
Simple, if everyone decided to move up the property ladder and the banks facilitated, anything is possible.
Remember, RE is leveraged traditionally at 75% LTV.
Someone owning a home purchased for $300,000 suddenly finds their house worth $500,000.
They decide to move up to a $700,000 home, they only need to put down another $50,000.
The bank puts up the rest.
If everyone does this, all RE prices go up in a leveraged manner.
But all the gains are on paper. Not like everyone could exit and realize their gains.

Current score: 21
17 X Anonymous Says:
December 17th, 2008 at 12:22 pm

i saw a minivan with a url on it. i think it said http://www.vancouverhousingblog.com, but i am not sure. i looked it (or something close to it) and saw the old VHB site. i’m glad i did, actually.

Current score: 1
18 X Anonymous Says:
December 17th, 2008 at 12:25 pm

the tsx has crashed. literally. i wonder if there is a conspiracy at work here. i mean, the us fed hasn’t got any bullets left, opec is cutting back, and the tsx just keels over and dies. it’s the weirdest thing. they need to fire their entire IT department.

Current score: 2
19 X NO -LYMPICS Says:
December 17th, 2008 at 12:52 pm

Part II

Re Real Estate Things were really flat in the late 1990’s. I recall the head City planner at the time in Richmond had stated no Hi Rises were on the books…and it took about 2 years for Hi Rises to work their way from start to finish. There was also an entire area with a new OCP, one developer had started a project, massive pre-load sand pile,…then stopped. Word got out they went bankrupt.

Cressey developments had a major stake in that area, and in early 2000’s started a “phased” low rise ie 2-3 story condo project. If not mistaken, at the time this was the first major condo development in Richmond for years.
Sales were slow, (and not helped by the protests of Leaky Condo buyers from a Cressey development in South Vancouver).
Then the market started to pick up. However, the clientele seemed to be mostly Asian, much like the last boom the Post Expo 86 boom.

In the last few years, land prices went nuts…doubling and tripling. It appeared that the explanation was that Hong Kong was “business as usual”, but that much of the business had gone into Mainland China, and created another generation of wealthy people ie ” Cadillac Communist” . As their economy grew, they simply followed the trail blazed by the Hong Kong expatriates and parked a lot of money hear in BC Real Estate.

The joker in the deck was everything has a limit , and begets the question ” How many of these Rich investors ARE there in reality ? ”

However, it made me recall a time in the 1990’s I was driving around a Hi Rise area,…it was dark out, and I looked up and was amazed at how many condos did NOT have one single light on.
One also noticed this phenomenon in other RE holding ie McMansions, etc.

I was also noting this same “Lights out” phenomenon in the mid to late 2000’s.

About the same time I had read about the Dutch Tulip mania in the 1600’s.

Then, in driving around the Greater Vancouver area over the past several months, I noticed a pace of development that was absolutely UNprecedented…. it was bizarre and surreal. On the one hand, one may have thought that all these developers must be sophisticated and smart,many have been in business for years, they MUST know their market, and more importantly, the “traditionally conservative” lending institutions wouldn’t lend to developers (and purchasers) unless there was a market, right?.

However, when lending practices bordered on the bizarre,costs of borrowing were cheap, and tales of people using their credit cards to place down payments on 2-3 condos, one became to be a bit concerned re the so-called market forces . In fact, there were warnings sign way back…of projects being cancelled in boom times…yet other still moving forward. Regardless, “something” was lurking behind the scenes.

In trying to make sense of this, it appeared that the Gov’ts had primed the pump,…that when one Boom came and went, another was primed to replace it as well. I read an article recently re: a US financial expert who stated exactly that…when the 1990’s “Dot . Com bomb” went off the US Gov’t reloaded for a RE Boom, and in doing so tossed out all the old Rules and Regulations. Unfortunately the rest of the world seemed to drink the same Kool Aid.

In hindsight, this may have been speculation going back to day one, and nothing remotely attached to basic supply and demand. By the time more normal market forces kick in that create a benchmark pricing based on actual and non speculative supply and demand, there may be such collateral carnage that a net deficit results,whereby benchmark prices are much lower than they would have been otherwise.

THUS…..This RE collapse was all a “No -Brainer” inevitable, but the fact that the ” Powers -that- be” allowed something to happen that should never have been allowed to happen is quite disgusting. Unfortunately, another example of failed leadership covering and catering to vested interests and the resultant collateral damage of these inmates taking over both the fiscal and regulatory asylums.

Current score: 9
20 X gadwin Says:
December 17th, 2008 at 1:19 pm

Only die hard specuvestors who have multiple properties and are facing bankruptcy aren’t bears now. They still think the “rich asians” will save them

Unfortunately, the detached benchmark is dropping $30K a month, or $1K a day – so much for the rich asians!!

Move over Phoenix, because Vancouver is about to take the lead as the biggest real estate meltdown in North America!!

Current score: 17
21 X VHB Says:
December 17th, 2008 at 1:21 pm

I moved back to Vancouver late in 2004, after a few years living here and there.

My plan was to get into a SFH in about 5 years. I knew there were two ways to do it.

1) rent, save, and buy the SFH as a FTB.
2) buy a condo, then trade up to the SFH.

I chose option (1). I don’t regret it.

What led me to make that choice? I don’t claim any special powers of prognostication. I have no idea what asset class will boom next. But here is what I did have going for me:

a) Knowledge of financial history. Everything I heard ‘justifying’ Van RE resonated with explanations for bubbles past. It’s different this time.

b) Awareness of the world outside Vancouver. i) knew that this same thing was going on elsewhere ii) knew that, while nice, Van is not the best place on earth.

c) I can do math.

Current score: 56
22 X kuroame Says:
December 17th, 2008 at 1:37 pm

I was in Japan during the bursting of the bubble economy. When the run-up started getting crazy here I brought up Japanese bubble as comparison and most people got a glazed look in their eyes and said crazy things like “yeah, ok it may be over-valued but I don’t want to pay someone else’s mortgage” or “you don’t understand, it’s not just an investment, it’s a home”. Then I knew we’re doomed, it was just of question of how long the insanity would run.They should have been committed to a mental hospital – Seriously – I think the criteria is potential to cause harm to self or others?

Current score: 15
23 X holgs Says:
December 17th, 2008 at 2:11 pm

Here is my history:

Never owned real estate… So the term “JBR” fits me.

In the last 13 years high school, I have lived in Victoria, Sacramento, Santa Clara, Victoria, Mountain View, Victoria, Linköping Sweden, back in Victoria, and now in Göteborg, Sweden. That is my #1 excuse for not buying. I still participate in this blog from Sweden because Victoria, B.C. is my home away from home, and this blog has the most interesting posters on it

As other bears here know, being around the world tends to open your eyes to the differences with other cultures and the relative pros and cons of your home town and adoptive towns. It also prevents you from ever putting any one city on a pedestal.

My parents’ bad experiences with RE were a generous source for my cautiousness about housing… They lost their shirts once in the 1981 Vancouver crash and then did it again in the 1989 crash. Thanks guys!

Like VHB and others, I can’t take credit for reaching my conclusions. I have been figuring out the fundamentals since 2005, when I discovered the HBB, VHB, and patrick.net. Blogs convinced me that there was a global credit bubble of unprecedented proportions, and since that time I have engaged in my share of beer-fueled “disagreements” about where real estate was headed all over the world, including on my brother’s stag this past summer! Lame, I know… but I recently heard back from my “target” who admitted that I was right… 1 for 100! yeah baby!

Online, I’ve been called a permabear, a basement renter, a mom’s basement dweller, a bitter renter, you name it… But most of the time it’s by people who grew up in the area and bought into the hype.

British Columbia: The Best Place on Earth (for arrogant license plates)

Current score: 18
24 X dilettante Says:
December 17th, 2008 at 2:44 pm

Grew up in Toronto, did undergrad in Halifax, moved here to take another degree in the late 90’s. Prior to that I had travelled extensively — U.S., Mexico and central america, Asia (China, India, Pakistan, Nepal, Thailand) both travelling and teaching ESL.

Anyway, once in Vanc, I obviously couldn’t afford to buy RE, as I was in school for the next 3 years and change. Once out of school never felt settled enough in a job/career to take on the mortgage payments, my rental was actually very nice and very cheap, and, let’s face it, coming from T.O. and Halifax, I didn’t “get” the RE cult here anyway. Some people rent, some people buy. If you want to buy, buy. There’s always houses, right? Right?

Anyway, as I got more settled in career, along comes wifey with kid #1 then kid # 2, and then we’re one income for several years. Now its the mid 2000’s (03,04,05 ish). Prices astronomical. Income less so. Panicked by spiralling prices, we tried to find something to buy by stretching on 1 salary. Everything was awful, and twice the price of the rental. Nothing made sense. Googled “Vancouver + housing + bubble” sometime in 05, where people made some sense, and have been addicted to VHB and this and the other blogs ever since.

I’ve had similar experiences to others here. General pity, mockery and scorn from colleagues, which doesn’t exactly enamour you to the place, does it. Friendships have been strained, slights logged, grievances held. This bubble (and I’ve been convinced its a bubble since 05) has been truly awful for the culture of this town. It’s a very sad thing, actually, made worse by the cheerleading from the media.

Anyway. Now wifey and I make very good money, have a substantial downpayment, but are on the sidelines until well after the Olympics (feh). We can wait, and are looking forward to buying the place we want without insane pressure at a sane (ish) price. The past six months have been a godsend.

Current score: 28
25 X VHB Says:
December 17th, 2008 at 2:54 pm

“The past six months have been a godsend.”

As scullboy said recently, it’s like being Noah building the ark. Your neighbours make fun of you. Right now we’re Noah after about a week of rain straight. The neighbours are looking at each other furtively wondering if that Noah kook might possibly have been right. Noah’s in no rush; just buffing up his big ole’ ark. Hanging out. No need to deploy his capital yet. He knows what’s going to happen and he’s chill.

Current score: 42
26 X I told you so Says:
December 17th, 2008 at 3:00 pm

I agree with a lot of the bloggers, international experiences give you a better perspective of the economic environment. I have lived in different countries throughout North and South America. I have also traveled extensively through Europe and Asia. Not just resort traveling but actual immersion with different comunities.
I moved back in to Vancouver in 2006 after 15 years of living abroad. The first thing that cought my attention was that Real Estate was the main topic of conversation in parties or any sort or social reunion. When I found out about the average income in the city and the mortgage payments that people were paying, it was a clear signal for me that this was a bubble.

For me it was just a matter of common sense, why would you become a bank’s slave for 35 or 40 years to own a less than 1000 sqf apartment, or a 40 – 70 year old house which in most cases you would share with a mortgage helper.

After my masters was done I was planning to find a job somewhere else and leave the city. But after the latest current events, I think I will stick around.

Also I would like to make a statement that many locals might disagree with me. Vancouver is a really nice city with a special charm to it, but by no means is the best city in the world. Not even top 10. I believe that many vancouverites have been brainwashed with that slogan and need to get out and see the world.

Current score: 41
27 X Greg Says:
December 17th, 2008 at 3:05 pm

I thought something was seriously out of whack when BC prices kept leaping every spring from 2002 onwards. Found Patrick.net, watched the bulls trample all over the logical economic arguments until things in California suddenly went down the drain. The bulls disappeared.

Observed the slow motion trainwreck that was iamfacingforeclosure.com and Casey Serin. Found some local blogs like Chipman’s and Victoria’s Truth. Started up my own bear blog in 2006 to counter the MSM bias in local RE reporting in Victoria. Can’t say I called the downturn, people smarter than me signaled what was happening. I like to think at least I documented some of the insanity.

Looking to be a first time buyer – I’ve been holding off since the start of 2007 on buying. I continue to watch my target areas with my target prices and criteria. Hoping for a swift ‘82 style price crash, but patient about that, too.

Had to listen to family tell me prices just won’t go down, you’re in the minority and your ideas are not panning out. Why do you keep waiting?

Now the point of view has come full circle, and I don’t get bugged about that anymore.

Good luck to all, and to all a cheap house….

Current score: 17
28 X paul Says:
December 17th, 2008 at 3:24 pm

#22 Kuroame. There still plenty of bad loans on the books of Japanese banks. It is a surreal economy of denial , maybe just something to do with Japanese culture and the horror of admitting you’re wrong and losing face, maybe? Honestly , it’s charming. And, Japanese girls are soooo cute.

Currently there are many apartments which are still valued ( loan value) at a million dollars (equivalent) advertised for rent in the $500 p/m range. This puts the multiple at 2000 to 1. Of course it sounds insane, but thats Japan.

My point is, many apartments which sold at more than a million dollars twenty plus years ago have continued to lose money over that time and now rent out as very old stock, allmost having completed their economic life creating a fully depreciated asset for the owner who lost every penny of his million bucks….forever. Could the Japanese market be a look at our future?

Will the recovery period of this crisis render Vancouver downtown condos near worthless? They won’t be new when the crisis is over. New designs will be much more desirable and affordable when the developers begin building again. Will the buildings be trashed and occupied by crack heads and Surrey rats and drug dealers living on the desperatly cheap rents. Will Yaletown revert to the ghetto it was before this all started? The only people who can live in 500 sq. ft coffins are the homeless anyway.

This recession will most likely double the homeless population before it’s over. The Downtown East Side will sprawl out like a dead greasy carcass over the debt trapped pseudo-yuppies in their crack infested playground that fluttered once breifly one summer and whose innocence died in infancy like a whore who turned out too early and looks much worse than her age.

Who do you think your neighbours are going to be in the WoodWards complex in 2015 ? Not Bob Rennie and his boy toy thats for sure. I’m not sure I would buy one of those Yaletown coffins if you offered it to me for the legal dollar it would take to transfer posession. I’ve been a landlord to scumbags before and believe me it’s no treat.

Current score: 31
29 X observer Says:
December 17th, 2008 at 3:33 pm

If you allow people the freedom to speculate on RE when prices go up (by buying), you can be sure that they will also speculate on RE when prices drop (by not buying).

Current score: 7
30 X kuroame Says:
December 17th, 2008 at 3:50 pm

I told you so; “Vancouver is a really nice city with a special charm to it, but by no means is the best city in the world..”

I agree, if by “city” you mean provincial backwater with great snowboarding and by “special charm” you mean a new strain of something they’re growing out in surrey.

Current score: 2
31 X Tony Danza Says:
December 17th, 2008 at 4:12 pm

paul, that’s some decent writing.

Current score: 4
32 X Anon Says:
December 17th, 2008 at 4:13 pm

NO-LYMPICS, your “#1″ post is silly. GO AWAY.

Current score: 8
33 X NO -LYMPICS Says:
December 17th, 2008 at 4:19 pm

Post # 32

Geez Anon

a) You’re just jealous
b) What? It took you this long to see it ?
c) Yeah? same to you !
z) Seasons Greetings

Current score: -16
34 X Anon Says:
December 17th, 2008 at 4:21 pm

In addition to the obvious RE price problem that this post refers to, I believe there are two other important problems as well in Vancouver:

1. rents are unreasonably high relative to incomes
2. city quality is deteriorating especially in downtown. More people, more garbage, more traffic, no parking and same underdeveloped infrastructure.

Many say that “buying is too expensive, you have to rent”. I don’t think rent is the only option, moving away from Vancouver seems to be a valid option to be considered.

Current score: 6
35 X Anon Says:
December 17th, 2008 at 4:22 pm

NO-LYMPICS, fine, i’ll go away. Enjoy the board.

Current score: -3
36 X I am a bear because I can read and add Says:
December 17th, 2008 at 4:33 pm

” Understandably – other than in “basket cases” such as Vancouver – Canada is adjusting normally.”

http://www.scoop.co.nz/stories/BU0812/S00311.htm

Current score: 0
37 X NO -LYMPICS Says:
December 17th, 2008 at 4:53 pm

Post # 28 by Paul

Awesome analogy re: Future of Yaletown, etc.

QUOTE:
” The Downtown East Side will sprawl out like a dead greasy carcass over the debt trapped pseudo-yuppies in their crack infested playground that fluttered once breifly one summer and whose innocence died in infancy like a whore who turned out too early and looks much worse than her age”

Reminds me of “Escape from New York”
Kurt Russell as Snake Plissken

Given History tends to repeats itself, it is not a stretch to postulate that the economic model you discussed re Japan’s RE collapse will not be repeated here, even moreso as we speak.

Japan was at least a fairly homogonous society, more predictable, versus the outright global RE pimping we did here in BC.

I recall via news items that many Hong Kong expatriates were realizing RE appreciations of 30 % per annum , and many had 1000 sq. ft apartments they sold for prices approaching $1 Million and were amazed at how big a house plus yard they could buy here in BC.

Regardless, good riddance to the excessive speculation and the specuvestors, it was long overdue for a day of reckoning , the Asian RE economic model came over here like a virus … sayanora and arrivaderci.

Current score: 1
38 X Dave S. Says:
December 17th, 2008 at 5:33 pm

“I have never personally owned real estate”.

Well, that says it all. Next thread please.

How would you know the satisfaction of paying your mortgage and owning property then? Simply, you don’t. You like to think you can comment about it, but truthfully you can’t.

Real estate values will go up and down until the day we die, but you will never know the satisfaction of owning property.

You are neither a bear nor a bull.

Dave S.

Current score: -41
39 X Bubble Lad Says:
December 17th, 2008 at 5:35 pm

Post 28/37 – excellent point – I’m amazed by the people who have an opinion on the neighborhood who have never even walked around the block that Woodwards – but they’re sure the area will “turn around” (translation: get “Starbuck-ized”).

Last Sunday I walked around Woodwards taking pictures.

First off – it sticks out like a sore thumb. From almost every area of Gastown it looms up like some science fiction dystopia city.

I took a panorama of the entire south side of Hastings across from the development (if I could post it somewhere I’d show it to you: abandoned buildings, busted windows, human feces, abandoned drug gear on the sidewalk, overpowering stench of urine. It has to be one of the worst blocks in the entire DTES – and it’s RIGHT ACROSS THE STREET FROM YOUR “MILLION DOLLAR” CONDO!

Honestly, don’t get me started.

Current score: 19
40 X The_Dude Says:
December 17th, 2008 at 6:13 pm

I’ve been reading the replies and I agree that having travelled and lived in other countries gives one a keener sense of just how much of a premium one should be willing to pay to live in Vancouver. Like others have noted, there are some very nice things about the city, but there are dozens of cities that I would live in (and have) just as easily as Vancouver. Just as an example, I lived in a charming city in the southern US that is less than half the size of Vancouver but has about 10 times as much to do on a given night.

Dave, this is just silly:
“Well, that says it all. Next thread please.

How would you know the satisfaction of paying your mortgage and owning property then? Simply, you don’t. You like to think you can comment about it, but truthfully you can’t.

Real estate values will go up and down until the day we die, but you will never know the satisfaction of owning property.

You are neither a bear nor a bull.
Dave S.”

Ah, the emotional ploy; I’ll just bet those home owners who put no money down and are paying off a depreciating asset over 40 years sure feel some level of satisfaction. As I mentioned in my post, I am willing to pay a bit of a premium for the satisfaction of “owning” my own home (versus renting) but the premium that a home seller wants me to pay today for that privilege is too high. But I (unlike the underwater home “owner”) have time on my side.

In addition, as compared to today’s overburdened home owner, I get a hell of a lot of satisfaction every time something goes wrong in my apartment (which happens rarely, but it does) and my landlord is just a phone call away. On Sunday, in fact, the hot water stopped working. While my landlord came over to fix the water tank for me (paid soeone else to have it fixed is more like it) I went down to my local watering hole, watched some football and talked to some interesting people.

Current score: 17
41 X observer Says:
December 17th, 2008 at 6:40 pm

There’s nothing wrong with buying right now at current prices. The amount you overpay will go to supporting the ailing financial sector for the next 35 years and hence in a sense you will be contributing to the recovery of our economy.

Current score: 1
42 X skif Says:
December 17th, 2008 at 6:47 pm

Long time reader, first time typer!
After turning 30 and deciding it was time to ditch the room mates, and started shopping around for a one-bedroom apartment in 2002. I almost bought a place in South Granville for $130k, but was outbid by another buyer. I simply couldn’t afford more, so it was easy to stop looking as prices only climbed. Eventually I found VHB (he should get some kind of award). Since then I have gotten married, and had heard the usual arguements from my wife about why we should be desperate to buy. Several times I would explain that renting is not throwing money away when buying a liveable place would cost twice as much or more and it would simply be like renting from the bank. Thanks to VHB and others, I learned a great deal about fundamentals like rent parity, debt service ratio, and affordability. Instead of buying we put the difference between rent and a mortgage away and now have a sizeable downpayment waiting to buy a place we like in the next few years.

There is one interesting opinion a friend made to me a few years ago as prices were climbing. I was wondering how anybody could afford to buy, and he pointed out that many people were using family money (i.e. parents) and that the boomer generation is one of the first generations to not have their earning years interrupted by a world war or other major calamity. Also, families are smaller so there is more wealth that is starting to be passed down. When I look at my peers this certainly bears out, as almost all who have bought in the past few years have done so with parental help. Anyone else think that may have had a significant influence in the run-up?

Current score: 14
43 X vancouverboom2 Says:
December 17th, 2008 at 6:48 pm

The Dude,

Answer to your posted question is very simple that you chosed to become a bear,Your story is your personal circumastance that you were out of town for 13 year but what about people back here?.What about All of your friends and family are they bear(tenents)as well?.What was wrong in having bought somewhere in 13 year?.2003, which is about the time you started to seriously consider buying a home in the northeastern US but why are you trying to mix usa here why don’t you keep hold on vancouver?.What was wrong if you have bought in 2003 here even at peak of 2008 your monthly payment should be lower what you would have pay in 2003.Being bear or bull is a choise,ability to handel your debt easily if you are a bear why don’t you relex on rent what are you trying to impliment here?.Do you want prices to come down at the level where you can afford to buy?.What if prices goes up after that and you are in urgent need to sell your home what would you do?.What prices would you like to list your home?.

Do you know what?.There is no demand no conclusion in your post,your post is just a personal story your personal circumastance it has nothing to add in the market.Regarding your concern about Vancouver as “best place on earth” it has nothing to do with housing prices best place on earth is based on merits like quality of life that’s why Vancouver is priceless.

Current score: -30
44 X asalvari Says:
December 17th, 2008 at 6:50 pm

Dave, you are really in trouble if you think like that. I can only laugh at your “How would you know the satisfaction of paying your mortgage and owning property then?”.

You want me to see mortgage slavery as privilege, right ? Are you NUTS?!?

And buy the way, owned a condo, sold it recently, off peak a bit (quite a bit) but I am still positive overall. I have nicely aligned the money on a chair, put my hands on it and I am sitting tight now.

Yes Dave, that is what I think about owning property in Vancouver.

And buy the way, I am sick of your hijacking all of the blogs in 200KM Vancouver proximity – state your belief and be done with it – for god sake, go out and see the carnage done to the people mislead by same idea you are pushing around. I wonder if you could sleep afterward. And no, I am not talking about the speculators/investors.

Current score: 3
45 X anonymous Says:
December 17th, 2008 at 7:07 pm

virtually anyone with a variable mortgage and ten percent down is in positive cash flow. Renting is a waste of money, look at any long term renter. The majority of posters here need a calculator and an amortization table.

Current score: -25
46 X alexcanuck Says:
December 17th, 2008 at 7:17 pm

As promised… Tony Gioventu of CHOA (Condominium Home Owners Association) as heard on the Christie Clark Show, CKNW. Start about halfway through hour two. This link
should be hour 2 only, just go halfway through. Immediately after some relationship fluff.
Well worth a listen. All about the precarious financial state of both the strata and owners.

Current score: 0
47 X bdk Says:
December 17th, 2008 at 7:22 pm

anon and vancouverboom you guys are right now get out there and buy so we can have an intelligent conversation

Current score: 3
48 X Patiently Waiting Says:
December 17th, 2008 at 7:46 pm

“When I look at my peers this certainly bears out, as almost all who have bought in the past few years have done so with parental help. Anyone else think that may have had a significant influence in the run-up?”

Yes, and many family fortunes will evaporate as the bubble pops. The South Sea Bubble, and all bubbles since, are famous for that.

Down-payments not only disappear but the kids now come back home after being foreclosed on (if the parents still have a home). This will be a multi-generational tragedy.

alexcanuck, listening to stuff like that makes me want to be a permanent renter. When the building you live in falls apart, find a new victim, err sucker, err landlord

Current score: 8
49 X timm Says:
December 17th, 2008 at 8:03 pm

Dave S:

“How would you know the satisfaction of paying your mortgage and owning property then? Simply, you don’t.”

While you are paying a mortgage you don’t have the satisfaccion of owning property anyway, that won’t happen until you actually pay off your debt.

Current score: 7
50 X anonymous Says:
December 17th, 2008 at 8:16 pm

Timm, buy an amortization table. Even if buying at the top of a boom negative cash flow only last a few years.

Current score: -15
51 X Anonymous Says:
December 17th, 2008 at 8:32 pm

“so we can have an intelligent conversation”
what a non bableee fish,hey my mortgage helper please countinue as rental slave.

Asalvary,

You are not sure about your decision that’s why you are so disappointed and pretending to having fun i also know the reason behind your disappointment that is low interest rates if you were still in your unit your monthly payment would have lowered but you are renting a place and paying more increased rents than your mortgage,

your post prove that you are a greedy seller who is waiting to get in at low but commision was greater than any drop disappointed again.

Current score: -14
52 X timm Says:
December 17th, 2008 at 8:49 pm

anonymous 50 Says:
“Timm, buy an amortization table. Even if buying at the top of a boom negative cash flow only last a few years”

And that will give me the satisfaccion of owning property Dave S was refering to?
should I buy now or I’ll be unsatisfied forever?

Current score: 2
53 X anonynona Says:
December 17th, 2008 at 8:53 pm

Mortgage payments: $3,845.53 monthly
Mortgage balance: $595,435.44

Number of payments: 60
Total payment: $230,731.80 5yr
Total interest: $151,167.24 4.790%

Number of payments: 300
Total payment: $1,153,659.00
Total interest: $478,659.00

*nobody need to buy an Amortization chart you can simply go online http://www.canequity.com/mortgage-calculator/

Current score: 1
54 X skif Says:
December 17th, 2008 at 9:01 pm

There’s a nice little “rent vs buy” calculator at http://www.interiorsavings.com

For my situation, even with a 3% mortgage rate AND property appreciating 3%/yr I’d have to live in the place for 18 years until buying was the better option. I guess I have cheap rent!

Current score: 2
55 X Keeping an Eye on the Pimps Says:
December 17th, 2008 at 9:01 pm

you have to give credit where credit is due, and it looks like boom2, Dave Krrish is right, there is a second leg up, just around the corner, and we better run out and buy quickly Or be priced out for ever.

Let’s face it fellow bears, The Rennie Machine was right.
The Best place on earth, the golden decade and we didn’t jump in shame, what a shame.

Current score: 0
56 X asalvari Says:
December 17th, 2008 at 9:03 pm

#51

No man, I am not greedy – had to sell to move closer to normal schools.

regarding the rent/own ratio, I was paying less then the rent – could have paid it completely in couple of years.

regarding the fun – no , I did not have any fun in selling it, and I am quite disappointed that you think I would have fun at other people troubles – but, you know, it speaks volumes about you and your personality.

Anyways, if you think I should buy, let me know the mls of your property, i will give it a try after the dust settles down.

Current score: 1
57 X Keepin an Eye on the pinmps Says:
December 17th, 2008 at 9:13 pm

Satv, Rob, Dave, Boom2, the following link is for you.

BC economy set to exceed 5%gdp, in 2009 as rich immigrants intend to Vancouver their home- 1 bdr leaky condo in Vancouver to reach 1 million dollar mark

Hurry, Hurry, Hurry, pick up an investment property,now is the best time-just before the Olympics

Current score: 0
58 X Patiently Waiting Says:
December 17th, 2008 at 9:18 pm

My story:

In 2001, I started working at a bank in Halifax. 9/11 hit and all of a sudden we had the lowest interest rates in a generation and my employer got on our case to SELL SELL SELL mortgages and all forms of credit. Thankfully, I was raised by parents with solid values when came to things like money, so I always had a healthy skepticism towards the bank and its predatory practices (I refused to force credit cards on university students, no matter how much the banksters insisted).

In 2003, while still working at the bank and having been fully immersed in bubble propaganda, I received a modest inheritance. For the first time, my wife and I considered home ownership. We found a pretty 1930s house on an overgrown lot with an apartment on the top floor. With my inheritance, I avoided CHMC fees and the apartment paid the majority of our mortgage payment. It was cheaper than renting.

Not longer after buying, I became a bubble-head. Neighbours told us we were smart to buy because values were skyrocketing (this was Halifax). The bank, the headlines, the conversations. It was sinking in. Then our credit card limit started shooting up. Even though I wasn’t going nuts, the available credit made me feel rich. I was also constantly doing this or that around the house and yard…it was becoming my life (blech).

In 2005, I had used a bit of credit and was considering adding $15K of CC debt to my mortgage (along with remaining student debt). I mentioned it to my Mom and she told me what’s what. I did the refinance, requested a lower limit, and put away my card.

I felt bad about refinancing. Not only that, but I began doubting the economy. I quit my bank job and found lower paying but more ethical work. I started reading many different blogs about peak oil, politics, and finally the housing bubble. By Xmas, I was reading The Housing Bubble Blog.

In 2006, we decided to move to Vancouver (my home town). I looked at Vancouver house prices on the internet and was amazed, then quickly discovered Vancouver Housing Blog. I needed the voices of reason (thanks to all of you).

We put our Halifax house on the market, reduced it quickly when it sat for a month, sold it, and pocketed our bubble bux. It was a modest amount by Vancouver standards but bubble bux nonetheless. I was also happy not to be a landlord anymore. Even with credit checks, tenants are hit and miss.

We’ve done the home ownership thing and it was……..meh. And we actually had a cute, well-built house. Certainly not worth going broke over, like you’d have to in Vancouver. My wife even told me recently that she couldn’t care less if we owned again. So much for that female nesting instinct.

Maybe we’ll own again, but we’re happy renters for now with our bubble bux in the bank.

Current score: 25
59 X browntown Says:
December 17th, 2008 at 9:22 pm

oh yeah nutdudes! browntown like econ slowdown, mortgage rate drop puts more payment for bank paydown! rbc can sweat but more cash moneys in pockets for party in pants! yeah!

Current score: -12
60 X arit Says:
December 17th, 2008 at 9:33 pm

“How would you know the satisfaction of paying your mortgage and owning property then?”.

That’s a good one. A really good one. Paying 70% of your salary over 25-40 years for large quantities of wood shavings bond together by glue made in China and the land it sits on in the best case. In a complex or condo you get only the wood shavings.

Dave, here I open myself: I _also_ never owned property. Feel free to mention my mother and her basement. These days must be very stressful for you both financially and emotionally, you can take it out on me if it helps.

Some of us here are not after ’satisfaction’ as you call it, also known as “The pride of home ownership”. Some look at the dry numbers, and if they don’t make sense, no soup for you.

****************

And now the arit story:

Regarding “Best Place on Earth”.

Our case is different than most of you. Once we decided we want to leave Israel, we could pretty much chose where to go. Being a software/mechanical engineer (sorry modesty, relevant) makes it quite easy to immigrate anywhere.

The US was out of the question, as we do not really identify ourselves with the American values (that’s an entire topic by itself, so we’ll leave it there).

The choice was down to Spain, Australia and Canada, and we chose Canada (again, why?, different topic altogether).

Then the city. Which one? Down to Toronto, Vancouver and Calgary, all three have software development. We both have been in Toronto in the past, but not Calgary nor Vancouver. We saw the pictures of Vancouver, and loved it. So for us, it was, effectively, the “Best Place on Earth”.

After being here six years now, I do see the advantages: beautiful scenery, peaceful, quiet, a nice place to raise the family. And the disadvantages of this city: Not enough roads and highways, no major companies that produce stuff, very lousy drivers (here in Richmond, where we do all our weekday drives)… and of course, house prices. So I cannot promise I will stay here forever. For now it’s OK.

Becoming a Bear********************************

When we landed, we wanted to buy a house, but we calculated we could afford only 180K and still have enough money for food and a frugal life. That ammmount, in 2003, could somehow buy you some wood shavings but not the land under it. So we rented, and saw the insanity begin. Each month we could affor a bit more house, but the house kept running away, climbing faster than my Excel sheets allowed.

In 2005 we started to smell something is funny. We have a family income above average, but everybody around us lives in nices houses, drives new cars, and we rent (1000 a month, 3bdr townhouse) and drive an older car. How can it be?

We are immigrants, surely something we don’t understand. Here in Canada things work differently. Everybody made it except us.
What’s the secret?

So I asked my co-worker, Canadian born here, what’s the deal, and he answered: “If you are not leveraged, you do not exist”. Believe me: I didn’t even understand his answer.

So everybody is in debt.

Then I found Patrick.net, (by Googling “Housing Bubble”, I thought I coined the term!!!) and all the usual suspects.

So…

We came up with the “arit 10 year plan” which started in January 2006 and was supposed to end in 2016 with us buying a house in cash.
But now, I am not so sure I _ever_ want the “”"satisfaction”"” of owning a house. I am re-evaluating our plan with the newly gained knowledge FROM YOU GUYS! THANK YOU, I aquired here in the past 3 years.
I am thinking more like putting all the money somewhere safe and renting forever. Flexibility is very good, especially in tough economic times.

Well, sorry if I have bored you with the arit story, but I think maybe the immigrant perspective deserves some exposure too.

Best regards

arit

Current score: 37
61 X Price Reduced/ For Sale by Owner Says:
December 17th, 2008 at 9:39 pm

browntown/Rob/krissh/satv is correct, with low interest rates; make life much easier because now homedebtors, have enough spare change to take bus instead of walk to extra part time job.

Current score: 0
62 X anonymous Says:
December 17th, 2008 at 9:41 pm

Arit, you’re too cheap. Consider that at some point a lot more immigrants and inflation will come, you will need credit/leverage to protect yourself. You’re almost talking like a child in regards to your finances.

Current score: -23
63 X Downtown Vancouver Real Estate Video Blog Says:
December 17th, 2008 at 9:42 pm

I am not a bear.

I am a bull and I think prices are going to fall for a while, they will come back up. When prices will bottom or come back is difficult to say.

This is not the End of Days.

We are not having a Real Estate Armageddon.

People move to Vancouver because its a better place to live than about 90% of Canada and the rest of the world.

People will keep coming and they have to live somewhere…

Current score: -20
64 X arit Says:
December 17th, 2008 at 9:52 pm

anon

“You will need credit/leverage to protect yourself.”

Excuse me, I honestly don’t understand what you are saying. The credit is there, I am just not using it. I hope you do not mean that the debt protects you?

“You’re almost talking like a child in regards to your finances. ”

Maybe you are right, you know? I worked for ACCPAC (you must know Simply Accounting, it’s sold in COSTCO LOL). And I absolutely disliked programming for the financial domain. It was like I was allergic to it. Finances and me don’t go well together. I quit there. But I am good with Excel, and I am cheap, so I know exactly where every penny goes.

So enlighten me: Why do I want to go into debt?

Regards

arit

Current score: 13
65 X anonymous Says:
December 17th, 2008 at 10:01 pm

Arit, i’m not sure what it’s like in Isreal, i know it is a difficult place. In Canada though there is a lot of opportunity for smart people. You can do better than watching your nickels and having a bit of a nest egg. Expand your goals.

Current score: -18
66 X arit Says:
December 17th, 2008 at 10:20 pm

anon

“You can do better than watching your nickels and having a bit of a nest egg. Expand your goals. ”

My friend, I cannot imagine anything better than living a quiet peaceful life where I am not in “alert” mode 24/7 with a sig sauer always, always, hurting my right butt cheek. 15 years made a nice impression (literally).

Regards,

arit

Current score: 10
67 X anonymous Says:
December 17th, 2008 at 10:29 pm

Fair enough Arit, but the economic landscape is unstable enough to warrant any “ten year plan” childs play. Ten month plans at a maximum.

Current score: -10
68 X geffr Says:
December 17th, 2008 at 10:48 pm

One thing I never really understood. Nice cars in front of really crappy houses in east vancouver……

Current score: 4
69 X MickeyFinn Says:
December 17th, 2008 at 10:59 pm

“No soup for you…”

Arit, you’re too funny.

Current score: 6
70 X condohype Says:
December 17th, 2008 at 11:24 pm

I grew up in a small, isolated, hopeless resource community. Getting out and starting a life for myself was a priority. I’ve always been a person who values independence and control over my destiny. I moved to Vancouver as soon as I finished high school. I took out loans and studied. When I finished my degree, I went straight to work to pay off the debt. From there, I worked on building up savings. Only then did I start thinking about real estate. Should I buy or should I rent?

Well, I did what I always do when it comes to financial decisions: I looked at the numbers. The numbers sucked and I stayed away. The year was 2006. It was an easy choice. Sure, there was an irritating social aspect — all those conversations with friends and colleagues telling me I was throwing money away in rent, that real estate only goes up, etc. — but it didn’t change my thinking. The numbers didn’t work.

By 2007, with prices still rising, I started to get really concerned about what was happening to Vancouver. With every condo ad, I saw the city one step closer to doom. It seemed so tragic and yet so hilarious. To think it was all coming down to granite countertops and stainless steel sinks! Buy now or never get your chance to wake-up to a “wood-like” floor!

I looked around the web and found sites like this one. Here, I learned I wasn’t alone in my suspicion. I decided to write my own blog, and I focused on condo marketing because it seemed like the ultimate symbol of where it all went wrong. Really, what better to describe Vancouver in the last seven years than the condo ad?

The rest, as they say, is history.

Current score: 47
71 X MickeyFinn Says:
December 17th, 2008 at 11:33 pm

I evolved into a real estate bear about four years ago… and then into a constantly ranting real estate bear about two years ago… and then into a gloating gleeful real estate bear about four months ago.

My background is in business. Mostly in corporate finance and general management with publicly listed companies. And I’ve done a stint as vp & treasurer of a major Canadian real estate development and ownership company. I have a BA (economics) and an MBA in finance and I am a member of the Canadian institute of chartered accountants. As such, I couldn’t reconcile the trajectory of Vancouver real estate prices with Vancouver incomes, population growth etc. In other words, the numbers just didn’t make sense to me.

I was willing to accept that real estate prices could outpace what would be justified based on average Vancouver incomes and rental rates… and I was willing to accept that such an imbalance could persist for an extended period of time… but I couldn’t ignore the insane pace of new development and the massive build-up of condos, too many of which were being purchased by speculators.

My prediction…

I predict that the overbuilding story is not over. There is still an enormous number of condominiums slated for completion this year and next… thousands of those units will come onto the market and add to the existing inventory overhang… and the only way the Vancouver real estate market will arrive at a new equilibrium is for prices to fall… a lot. In my opinion, prices will eventually fall to a level which will equal about a 50% decline from the peak that we saw last February.

On the other hand, I see the bottom arriving sooner that some of the other posters on this board. In my opinion, the bottom of the market will arrive around the first half of 2010.

Current score: 25
72 X Western Separatist Says:
December 18th, 2008 at 12:01 am

Arit, inflation will wipe out your cash long before it buys you a house.

Current score: -15
73 X betamax Says:
December 18th, 2008 at 1:32 am

“the satisfaction of paying your mortgage and owning property”

A salesman’s line if I ever heard one. I used to own, and “the satisfaction” is over-rated, especially when appreciation isn’t going through the roof.

I sold because of divorce, and I basically gave my ex-wife everything because I made a lot more money than she did. I moved in with a friend, and I bought a motorbike and toured across Canada and the US. I spent a lot of money doing it, and it was worth every penny.

By the time I met my wife and was ready to buy again, it was ‘04 and prices seemed ridiculous. I saw all the supply in the pipeline and knew a correction was inevitable. When we moved in together in ‘05, prices were even more insane and I knew it was a bubble like 1981 all over again (now I think it’s worse): double-digit appreciation and everybody walking around spending money like they’re rich when stats showed that they weren’t.

I googled “housing bubble” and found like-minded critical thinkers online…and I’m still here today, enjoying the much-delayed yet finally here correction. Popcorn’s ready!

Current score: 10
74 X betamax Says:
December 18th, 2008 at 1:35 am

inflation will wipe out your cash long before it buys you a house

Too bad we’re experiencing deflation instead. Cash is king.

Current score: 17
75 X Via Says:
December 18th, 2008 at 1:40 am

I’m not someone who is averse to buying. But I’m not going to just do it to have a piece of land. Before moving to Canada we earned a great salary in another country, in a large, important city. I liked to live near the downtown core. There were nightclubs, bars and eateries open 24/7 all around me. That’s the kind of lifestyle I wanted. We rented a great two-bedroom apartment at a really affordable price. I could have bought a place but the district where I lived was mainly an entertainment one, so there weren’t any condos for sale. There were condos a few minutes away but I wanted to live there. Hey, I was a block from the subway and have never owned a car in my life.

I moved to another country and then made my way to Canada. I rented an apartment in the West End. I have children and a husband but we still like to live near the downtown areas, don’t own a car and keep many of the habits we had when we were single so I did not want to buy a big house in the burbs and a SUV. When we started looking around the city we realized the places in our price range were not large enough. We would have to move to Surrey to have a house, and even that was expensive.

I did some math and realized we would have to live very cheaply to afford a place. I mean not going out, having to pinch pennies, never getting to go out for drinks, etc.

Why would I move to Surrey? Why did I come all the way to Canada live so cheaply? So I said to hell with it and we rent a two bedroom.

You only get one life and I am not going to live my life making 99 cent maccaroni to eat every day just so I can have a tiny condo. Some people might say, what are you going to do when you grow old? You won’t have a house then! My aunt has two wonderful houses back in my birth country. She also never went abroad, has not taken a vacation in 6 years, and her idea of a fancy meal is going out for Chinese once every five months. But she has two beautiful houses. She says than in a few years, when she is 65, she will sell them and live like a rich woman.

And I say, so what? What use will it be to have all that many at 65? Can it buy back the youth and fun she lost?

Me, I’m enjoying life. One day, if we find something that we life in our price range, we’ll buy. If not, I will not sweat it too much.

Current score: 32
76 X The_Dude Says:
December 18th, 2008 at 2:06 am

Hi Arit:

Great story and welcome to Canada; your 10-year plan (I guess it about 8 years now) sounds like a keeper. I’ve told friends and family that if I ever buy a house in Vancouver it will most likely be about 2014-2015.

Current score: 6
77 X Anonymous Says:
December 18th, 2008 at 5:30 am

I; like many of you here thought the prices could not possibly be sustained and supported, so I went online looking for some kind of information to support what was just a susspicion – does any one else see this? Thankfully I found VHB (thanks!) and Ben Jone’s site in the US. It was wonderful to read from a whole group of people who also see it. Most of our friends, and some family were hugely into denial -spending like crazy. Now they seem to look a bit defeated…. Sad.

Current score: 3
78 X anonymous Says:
December 18th, 2008 at 6:44 am

Drove around Richmond yesterday. Interesting that 70% of the people i saw weren’t here twenty years ago. The number of housing lots in Richmond is about the same though. Supply and demand, no wonder they have to build so many condos. Suprising that financial accountants with mba’s sometimes can’t even figure it out.

Current score: -18
79 X observer Says:
December 18th, 2008 at 8:00 am

The issue of inflation has been raised many times because of the increase in monetary supply. The way I see it, the printing of money through easy credit happened long ago and we’ve already had our inflation – first inflation in tech stocks, then real estate, then resource commodities. There’s no asset or resource left to inflate anymore that hasn’t been tainted, except cash.

Current score: 10
80 X arit Says:
December 18th, 2008 at 8:19 am

“Western Separatist Says:
Arit, inflation will wipe out your cash long before it buys you a house.”

Well, I never said I keep my powder in cash. Actually I am doing something riskier, and thus do not recommend it to anyone else: I am betting all our downpayment money on the assumption that people will be old and sick. All in one stock. I am buying, buying, buying. All the time. Even now. Do not try this at home.

It’s what we call in the army “Medal or Jail” situation. No in-between.

Regards

arit

Current score: 8
81 X Van-zee Says:
December 18th, 2008 at 8:47 am

I became a bear in 05 and thought that 02-04 prices were too steep of a run up. The internet provided plenty of well reasoned cases for a global credit problems and made the US seemed like a mess. Locally VHB was a place where that I found the best local information and opinions.

A few couple of 06 points stand out to me. B Rennie’s interview with “if the blogger is right….” quote was and this article in Harpers http://www.itulip.com/forums/showthread.php?t=966 was another. By summer 06 I was 100% willing to sit this hand out.

It’s not that I think real estate is always bad I’ve owned and made money it just simply hasn’t made sense for me here and now.

I’ve become a bear because of the nature of most of the bullish arguments have seemed to be empty.

Current score: 6
82 X kuroame Says:
December 18th, 2008 at 9:57 am

#28 PAUL;

Good points, this city had a lot of potential in terms of urban planning but we used almost every available lot downtown to build nearly unlivable units. I think the real long-term damage was in what we built during the bubble, not the price appreciation.

Current score: 1
83 X ellery Says:
December 18th, 2008 at 9:58 am

I found VHB because I had just rented an office across the street from Woodwards and wanted to know why they were having a ground-breaking ceremony. I googled “woodwards + development” (I was worried about future construction noise) and landed on VHB. When I looked through the site, many questions I had had about why prices were going up so quickly were on there, and many things clicked into place that day. I read Irrational Exuberance and clicked through many sites (including the mental Housing Panic) and finally settled on HBB, Calculated Risk and VHB.

The thing that tipped me off, even before I knew the expression “bubble”, was hearing the same cliches (rich asians, no more land, throwing money away, priced out forever). On the blogs I found that these same cliches were from cities all over north america. This convinced me that is was all emotional. Well, that, and the level of angry denial I encountered when I (honestly, very innoccently) excitedly relayed some of “Irrational Exuberance” findings to my friends. I would understand if they rolled their eyes for quoting strangers on the internet, but Robert Shiller isn’t exactly a 9/11 conspiracist.

My sister yelled at me “there’s no bubble, everyone says there’s a bubble but there isn’t” and a friend who was moaning that she would never be able to buy also yelled at me for telling her not to worry, she would be able to buy someday (she later bought exactly the month of the peak, and got her wish – she is still excited to have slipped into one of the last 5%, 40 year mortgages). The yelling and sheer strength of emotional response backed up with no reason (olympics, etc.) is what sealed it for me.

I have found the whole thing a bit depressing on a social level. My friends are smart, educated, amazing, and still many of them got caught up, and I also can’t believe how many feel comfortable telling me how rich they were getting while I was throwing money away. I now know one friend is avoiding me for fear I will say “I told you so”, while others have begun telling me how they knew all along it was going to crash Seriously, though, this whole thing has strained a lot of personal relationships, through jealousy and frustration. That may sound like it’s not much, but it is one of the sadder elements. It’s hurt the city for sure and made me want to leave, though family and friends means I probably won’t.

Current score: 30
84 X ellery Says:
December 18th, 2008 at 10:01 am

ps. arit you are right. your investment strategy is terrible, and I am worried for you. hedge a little, man.

Current score: 3
85 X NO -LYMPICS Says:
December 18th, 2008 at 10:01 am

A couple of days ago I was driving around Richmond near # 3 RD. and Westminster Highway.

Saw a crew putting the nails in the coffin…err ” putting the finishing touches ” onto a nearly completed Hi – Rise project at Saba and # 3 RD.

What I couldn’t believe was a company commencing the START of a Hi – Rise foundation nearby at # 3 RD. and Westminster Hwy.
The site is not prime, the only “benefit” is RAV err “Crime Train” outside the front door. The project is shoe-horned into a commercial area.

If you include
(i)projects just nearing completion,
(ii) some 1/2 finished and
(iii)the newly started ones…there must be approx. (15) Hi -Rise projects within a block of this site about to throw even more condo inventory onto a dead RE market.

Either they don’t watch the news…or they must know something we don’t.

Current score: 3
86 X arit Says:
December 18th, 2008 at 10:22 am

ellery

“hedge a little, man”

Sorry, I wouldn’t know what that is. Please elaborate. Speak slowly as if you were addressing a retarded kid.

Thanx

arit

Current score: 2
87 X NO -LYMPICS Says:
December 18th, 2008 at 10:43 am

Post # 83

Not to worry, it is simply a reflection of human nature and ones level of education expertise, etc. is irrelevant.

Look at Mr. Madoff and the $50 Billio Ponzi scheme.
One person was quoted as claiming they thought Madoff was a brilliant man, but (drum roll )he now knows Madoff is a brilliant man for having pulled this stunt for so long. Madoff’s clients themselves were Millionaires and Billionaires. Maybe its a “faith” compounded by larceny,an internal greed gene overrides due – diligence and more importantly basic common sense.

Like asking what goes really into a hot- dog the participants don’t really want to know what makes up the truth, they simply hold their nose and focus on the end result.

Much like the Pine Beetle epidemic, which in hindsight if one understands the dynamics, was long overdue, an RE crash was also long overdue.

Back in early 1980’s the boom reached a point that the interest rates reached 20 + %. RE market then crashed. The demand for $$$ upped the cost of borrowing ie the demand for money. In my view this is the way to go, it most certainly weeded out the speculation. Yes some got burned, even those that bought a place simply to live in, but it stopped a lot more collateral damage by frustrating others from making the plunge into what was clearly becoming treacherous uncharted waters .

However, in this latest go around, the exact opposite happened,… as things got heated they made it cheaper to borrow $$$. WTF ? This was the equivalent of the InSite clinic…step right up and get more “credit crack”?
You then attract and create more credit junkies???, no matter how smart and sophisticated one “may” be. What is also amazing is how integrated the ripple effects are, creating a domino effect globally and in many non RE sectors.

I recall the saying the prophet is the most disliked in his own country (or moreso amongst their own peers and acquaintances). Been there and done that on certain issues. You’ll find they were mostly fair- weather friends, you’ll recall Jack Nicholson’s famous line “YOU CAN’T HANDLE THE TRUTH !!! “…but maybe in the future avoid in depth conversations on “business – related” matters.

In the end…the old bromide of “Real Estate never goes down!!!” ..it is a safe sound secure investment…may end up on the shelf next to one’s Bre-X stock and BCRIC shares.

Current score: 1
88 X observer Says:
December 18th, 2008 at 11:23 am

Seems to me that they are trying to make it cheaper to borrow, hence the ZIRP, but it isn’t working because deflation is emerging, making the real interest rate high. It’s almost as if the invisible hand of the market has decided enough is enough and is counteracting any measures to make it cheaper to borrow.

Current score: 3
89 X Anonymous Says:
December 18th, 2008 at 11:51 am

hey browntown what is your story?
are you a bull that hangs out on bear blogs for a reason?

http://business.theglobeandmai.....iness/home

Current score: 1
90 X paul Says:
December 18th, 2008 at 12:08 pm

Mickey Finn #71, have you got a reason for picking 2010 for you call on a rebound? Just curious. Theres a tremendous issue with credit and inventory which I think will be exacerbated at the end of the 2010 Olympics. Job loss , inventory overhang etc. I agree there will be a rebound but my research has it out a bit further. My work suggests 2013-15. I am an investor with some background in economics and analysis, frankly I am neither a bull or a bear. In my business I deal with things as they are and not how I’d like them to be.

And Kuroame, don’t believe that crap about all the land being used up and gone. Vancouvers downtown can be walked across in twenty slow minutes. There is plenty of room for expansion. A new neighbourhood will spring up somewhere else and be marketed as hip and blah blah blah, thousands of idiots will be sucked in because they want to belong and the precess will begin all over again. I wrote a paper a long time ago I called “Building tomorrows ghettos today”, think about it. How many times over the past many decades have I heard that “there is a shortage of land” and they are still building. It’s a load of crap. There are entire areas of the city which are far beyond the economic life of the buildings.

There will be huge urban renewal projects in the future. I can think of several areas which need gutting right now. But heres what going to happen, the government which controls the stock through by-law and planning will pre sell land to a huge developer making sure that the average guy gets no chance to buy and suddenly there will be a need to flush out the poor and get to it.

Kuroame, price appreciation/depreciation is not a problem at all unless you’re one of the ‘new condo owners’ whose ‘inflato bucks’ are disapearing before their very eyes. If you’re not one of those whose ‘bubble wrap homeless shelter of the future’ owners whose bank account is making an ugly popping sound then value obviously is not an issue.

But, if you are one of those happy holders of a 5% down 40 year mortgage who is currently underwater and will be breathing through a snorkel for up to ten or fifteen years when you maybe ‘break even’ ( and for Christ’s sake don’t factor in opportunty cost or inflation) then no, it’s best not to think about value and simply get mad at the city every time you see a new building going up which is competition for yours and putting price pressure on the existing stock because it’s newer and has a new paradigm of functionalities.

OMG, thats an ugly picture isn’t it, being old and poor and having your face pushed into the muck by a new set of tatooed money grubbers crawling out of their grandma’s basement who don’t have the decency to wait until you’ve cashed out.

No-lympics #85, you should check out the RCMP stats for ‘the crime bubble’ which is slated to occur anound the crime train stations in Richmond. Apparently crack heads have a very short attention span and cannot function outside of a 1387 meter bubble. Everything within that 1387 meter bubble is slated to become a war zone. Crime rates are EXPECTED to increase thousands of percent virtually immediatley. Man you don’t want to buying in THAT bubble. Too bad for the citizens of Richmond that the RCMP only tabled that report after the city council had voted in the Sky Train line. Very suspicious to me.

Current score: 3
91 X The Pope Says:
December 18th, 2008 at 12:15 pm

I made it a week without posting, but no one seems interested in doing the Friday Free-for-all, so I’ll put it together and post it tonight as usual. Do you guys want me to carry on with the end of the week news round-up posts? You can answer by just voting this comment up.

Thank you everyone who’s contributed posts, we have a good discussion starter from CZ for monday morning.

Current score: 90
92 X kuroame Says:
December 18th, 2008 at 1:08 pm

PAUL ; “And Kuroame, don’t believe that crap about all the land being used up and gone”

Yeah, sorry i wasn’t very clear. I was just trying to say that from a urban planning perspective we committed a lot of prime land to crapping unlivable buildings, not that we’ve “ran out of space”

Current score: 1
93 X NO -LYMPICS Says:
December 18th, 2008 at 1:31 pm

Paul
re: Post # 90

“Crime train”
Yes, one early epiphany was hearing a VPD cop being interviewd and his crime stats corroborate yours…60 % of the Property Crimes occur within 500 meters of a SkyTrain line.

If you want to a good pre – view….go to North Surrey Rec Center …. it is part of a transit hub for buses and SkyTrain, an “attempt” at Hi Rises…a University campuses etc. but it shows how an Urban Planners and Councils “urban renewal vision” can turn into a nightmare with all the dubious parties hanging out and open drug -dealing, etc.

Richmond RAV line runs through mostly light industrial/commercial areas …intentionally, so as to create a new City Center OCP via planned conversion (via less resistance from NIMBY’s) to Hi -Rise residential.

However, Hi – Rise are spotted all around the RAV line like an alien space ship / sore thumb and then the Re crash.
The commercial/ light industrial areas will remain there for now ( though some fear the High taxes based on new Highest and Best use assessments may force many businesses out) with the RAV line ” crime train “…one can envision a lot of drug dealing and prostitution in these areas after hours …much like Vancouver had.

BTW: During the civic elections, The Local Richmond papers had maps indicating where the Council candidates lived…most of the incumbents lived in nice SFH neighbourhoods far removed from this future hell hole / City Center ghetto. Richmond Council shares the same double digit IQ as evidence by the dim bulb above their heads, they seem to think Richmond is immune from what has historically happened elsewhere, all things being equal.

Current score: 0
94 X cashisking Says:
December 18th, 2008 at 1:33 pm

Leaving my rented place in the city to go to my seasonal rental at Whistler. Looking forward to the new fireplace installed by my landlord … cost him about – would you look at that – almost the same amount I’m renting for.
He’ll probably make a killing during/after the Olympics so it’s an excellent investment.
On that … I went to an open house in Whistler last week … RE agent said he couldn’t tell if market was cratering b/c absolutely nothing is selling … LOL

Current score: 7
95 X paul Says:
December 18th, 2008 at 2:08 pm

#94, Cashisking, thats freakin’ hilariuos.

“RE agent said he couldn’t tell if market was cratering b/c absolutely nothing is selling … LOL”

I can only say ” How do these guys stay in buisness at all being that stupid.” This recession could be so deep by 2010 that the only people who show up at Whistler are the free riding reporters and government parasites.

Current score: 3
96 X Lily pad Says:
December 18th, 2008 at 2:18 pm

Paul: It may only be the athletes that show up! I heard a reporter say that the Whistler accomodations are out of reach for reporters and very few will be sent.

Current score: 2
97 X Domus Says:
December 18th, 2008 at 2:25 pm

I am a housing bear, although I remain a natural resources bull (even in these times of heavy discounts).

Reason’s I am a housing bear:
1) demographics: population is just not growing as fast to support double digit growths in RE; maybe a point above inflation is more like it;
2) median income: self-evident point. Vancouver has relatively low median income (even compared to other parts of Canada) and prices were not sustainable.
3) over-supply: huge amount of supply coming online in the next 24 months. it will take years to work through it.
4) observations of people around me: I know people earning less than half of what I earn who, apparently, could afford to buy centrally located apartments, on debt. Conversations with other people always led me to believe that the only argument for the bull market in RE was: prices never go down, you never lose money. Just crazy.

By the way, I am still an RE bear: I don’t think this will be a quick correction. It will take YEARS for demand to catch up again with supply. In the meanwhile, no rush to buy anything: just sit tight and invest your money intelligently. You will thank me in one year, when prices will be down by another 25% (at least) in nominal terms.

Enjoy renting and see your future home dropping in price! DON’T BUY NOW! THERE ARE STILL A LOT OF LOSSES TO BE MADE IF YOU BUY NOW!

Current score: 14
98 X vancouverboom2 Says:
December 18th, 2008 at 2:56 pm

Keepin an Eye on the pinmps,

Please tell you friends about pent up demand and no supply ahead please also teach them to post numbers when they talk about future supply tell them do not shot their arrow in dark don’t even feel shy and also tell them one more thing that a developer need to buy land worth $ 20 million then financing for the cost to develope please tell them that one need guts to develope land.

by the way your link has nothing to offer any change in economy forecast this is something had been discused already.

Current score: -13
99 X paul Says:
December 18th, 2008 at 2:57 pm

I’ll thank you now Domus #96. i believe in instant gratification.

Kurome #92 You’re right on when you describe those concrete shoeboxes as unlivable. I love the design that doesn’t allow two persons to pass in a hallway and the ones with no bedroom walls or windows. Thats real long term livability all right. You sleep behind a curtain (slider)in the hall. Wasn’t it a hoot how the designers left the doors off even the bathrooms in order to try to give the illusion of space. I thought Murphy Beds for a master bedroom were a nice touch.

Building Tomorrows Ghettos Today. I coined that term when I inspected the first plaster condo project in vancouver ( The Galleria on West 8th), it was obviously a disaster waiting to happen. The downtown condo mess is the same issue. Crap won’t evolve into a paradise, unless you LIKE living in shit that is.
The Permits and Planning people should be ashamed of themselves.

Current score: 4
100 X paul Says:
December 18th, 2008 at 3:03 pm

Vancouverboom2. Hows the weather up there?

Current score: 1
101 X VanSun Says:
December 18th, 2008 at 3:05 pm

Top level people believe that Vancouver is the best place on earth, and they have the numbers to back them.

http://www.canada.com/vancouversun/pdf/salgov1.pdf
http://www.canada.com/vancouversun/pdf/salgov2.pdf
http://www.canada.com/vancouversun/pdf/salgov3.pdf
http://www.canada.com/vancouversun/pdf/salgov4.pdf
http://www.canada.com/vancouversun/pdf/salgov5.pdf
http://www.canada.com/vancouversun/pdf/salgov6.pdf

Current score: 0
102 X VanSun Says:
December 18th, 2008 at 3:08 pm

http://www.canada.com/vancouversun/pdf/salgov1.pdf

Current score: 1
103 X Lily pad Says:
December 18th, 2008 at 3:19 pm

Look at what I found out about Peter Wall of Wall Financial Corp. (e.g., Wall One, Playhouse Development behind Olympic Village).

“Wall’s friend Bob Rennie, who has worked extensively with him, described the Wall formula as “Great location, smaller suites. Put in a Sub-Zero fridge and a Wolf range with red knobs, and they’ll line up to buy it”.[38] In May 2008, Wall Corporation bought a building at 1212 Howe Street in downtown Vancouver. In charge of the building’s sales and marketing campaign, Rennie claimed that it “played right into Peter Wall’s model of ‘take a prime location and undersize the suites a bit’ “.[39]”

http://en.wikipedia.org/wiki/Peter_Wall

Current score: 0
104 X NO -LYMPICS Says:
December 18th, 2008 at 3:25 pm

Post #99

“The Permits and Planning people should be ashamed of themselves” .

Agreed.
Their “flavour du jour” zeitgiest has long term consequences. Terms like LEEDS and Green Roofs litter their nomenclature oooooo ahhhh

500 Sq.Ft shoeboxes are the new ” SRO’s “?

Their ramping -up of new OCPs etc.was unprecedented .
It gave the illusion of demand.
Richmond planners and the City Center Area Plan had visions of 50 years into the future and planned accordingly…WTF !?!

Most OCP’s are 5 – year plans which allow for much needed flexibility.

Was that ACTUALLY a long term vision, or a sop to the Big Developers to flood the market ASAP and cash -in ? .
Now they are in gridlock ..the “stool/turd ” of any/all future development is stuck half way in the ol’ intestine, maybe for years.

In many cases, your Local Gov’t CAO and Head of Planning are the gods in any given City, the elected officials are simply the rubber stamp ” puppets” .

Current score: 1
105 X NO -LYMPICS Says:
December 18th, 2008 at 3:33 pm

Hmmm

At Wal Mart…..There is now a run on Sub Zero fridges and Red Knobbed Wolf ranges by parties with free ads on CraigsList trying to sell their condo assignments .

PS Wal Mart greeters now giving out rain – checks.

Current score: 1
106 X Price Reduced/ For Sale by Owner Says:
December 18th, 2008 at 3:39 pm

Boom2 Rob,

Rich International immigrants
Rich Albertans
No deficit government
Solid Financials
Low supply
High demand
Multiple bids
Resource Rich
Booming Economy
The Olympics
We won’t be affected by the US
There is no overhang on supply, it will all be absorbed
Prices will continue to increase at least till the 2010
Prices will really spike once the international investors visit Vancouver in 2010
It’s different this time

It all fell apart, told you it wasn’t different this time

Current score: 7
107 X Domus Says:
December 18th, 2008 at 3:40 pm

Paul #99: “The Permits and Planning people should be ashamed of themselves.”

True. We should elect intelligent planners, not sadists who will allow buildings where it is impossible to store even a bag of rice.

Downtown apartments are not ecodensity, they are sadodensity.

Some people made loads of money in the last boom: nobody will take that away from them. The crappy housing stock (small, leaky, you name it) is there to stay for decades. Politicians are partly responsible and will have to pay for this somehow.

Those condos are like glass fishbowls….a one way ticket to diagnosed depression….

Current score: 8
108 X observer Says:
December 18th, 2008 at 4:05 pm

Hmmm, 1000 units available for rent downtown now on craigslist.
It sounds like there is a lot of pent up demand for rentals…

ext>> Found: 1000 Displaying: 1 – 1000
[ 1 | 2 | 3 | 4 | 5 | 6 | 7 ]

Current score: 3
109 X vancouverboom2 Says:
December 18th, 2008 at 4:08 pm

born i was in kazakstan and here i came and now it is to buy i did for much more money than should paid i did so blog i do and tell people buy now or pay less later is why nutslaps too smart so i tell them to buy and make sense i do not no one thinks me smart but i keep everyday saying and telling that market good even though market bad and now i loooose all my money and share bed with brother and sister and in decades to come i won’t be so poor and own condo i will that will be same price for decades to come no reason to listen to me nutslaps no sense i make yeah yeah and the price does down decades to come nutslaps yeah land making machines everywhere too much land not enough people in small canada not enough people want to move here and make not enought moneys to buys the wisemans condo from my and that is why buy now and burn money for decades yeah

Current score: -12
110 X vancouverboom2 Says:
December 18th, 2008 at 4:10 pm

also in six months more than five thousands units come and tv towers is best one but no buyers and already 20,000 sellers pent up demand is for buyers where are buyers?

Current score: -4
111 X nisei Says:
December 18th, 2008 at 4:13 pm

Our awakening:
In 2005 my wife and I was considering buying an investment property, so in order to educate ourselves, I did an online search and found RET. On RET, I was intrigued by VHB’s posts and I soon found my way to Van Housing Blog. What I learned from VHB (and verified for myself) not only put the kibosh on purchasing an investment property but it ultimately lead us to the decision to sell our primary residence early 2007. I admit it was a gamble at the time because the market was still robust, but aside from what I thought were unsustainable prices, we weren’t too happy with our location and the condition of our home. So instead of going into further debt by doing an addition/renovation or moving up the property ladder, we decided to sell and rent. As renters we enjoy a stress free life. As a bonus we have also reduced our consumption costs (cheap rent, shorter commute, and buy less stuff we don’t need due to lack of storage). We hope to get back into the market when home prices are more inline with traditional metrics and maybe pick-up an investment condo as well

Current score: 15
112 X blueskies Says:
December 18th, 2008 at 4:36 pm

and now i loooose all my money and share bed with brother and sister

therein lies your dilemma …..

if your sister is turning tricks
and the charge is too low you can’t up
for that by doing greater volume even if it is family members…..

Current score: -2
113 X ellery Says:
December 18th, 2008 at 4:49 pm

arit

“hedge a little, man”

sorry, I wrote my post quite quickly and re-reading it, it sounds a bit rude!

anyway, what I meant is “hedge your bets”. Hedge, verb: ” to prevent complete loss of a bet by betting an additional amount or amounts against the original bet.”

In other words, putting all your savings in one stock, any stock, even the best stock ever that Warren Buffett personally fed-exed you a guarantee on is completely bananas. I would never put more than 25% of my savings in any one sector, let alone any one investment. Just a thought.

Current score: 3
114 X vancouverboom2 Says:
December 18th, 2008 at 4:50 pm

Sale by owner,

Those facts are still available you can see lowest rental vacancy rates in vancouver 0.5% where is the supply that some of your friends are talking about?.Even if there is anything exist as we go those unit need to cover up flood of 30,000 people every year so supply has soaked compared to demand and future developer will only step in if their margin of profit is guaranteed that’s why it is very difficult for bears to walk farther away from the next trap either you buy to encourage developer to make more or you pay higher prices for available resale inventory but lots of sellers already pulled off their units off the market.

Paul,

Beautiful weather as long we are in vancouver and i am expecting a flood from Ontario and Quebec could break into vancouver to take a shelter under our solid economy and fill more application to full fill supply for the required labour force.I also feel like some richi rich can also enter here to buy because there is no question remain among canadian or world about vancouver,Vancouver is rock solid and heart touching forever.

Just one tipping point will start a new race my weather forcasting tools spotlight that tipping point close to march,I have also successfuly traced a small magnitude two week ago that was helpful to shake the bucket of confidence based on my weather forecast April stats would be very interesting to watch main while scientists are inspecting all the gears.

VB2

Current score: -12
115 X Price Reduce, Must sell Says:
December 18th, 2008 at 5:29 pm

Sorry, more bad news for Vancouverboom2

More bad news for speculators Government to build 200,000 homes to stimulate the economy and create jobs

This doesn’t look good for the those who are overextended and need the revenue from the mortgage helper suite, and it sure doesn’t look good for specuvestors who bought in the last few years.

Current score: 0
116 X Anonymous Says:
December 18th, 2008 at 5:38 pm

404 Not Found

Current score: 0
117 X alexcanuck Says:
December 18th, 2008 at 5:41 pm

Arit:
I second ellery. All eggs in one basket bit. A few points to ponder.
Outsourcing of care. Many procedures can be done overseas for much less, AKA medical tourism. China, for one, has no recognition of patent law and intellectual property rights and can copy most anything for less. Shoddy quality, but that doesn’t dissuade people who either can’t afford the real thing or don’t realize the difference. And if you’re thinking care homes, that also can be done elsewhere, and patients can enjoy a better climate to boot!

Some potential patients won’t be able to pay for terribly expensive stuff if they lost everything in the great crash of 08/09 and had to start over. Less realistic profitable demand than some projections. Our (excellent) public health system can’t possibly supply everything for everyone forever.

Lots of over-enthusiastic hype and outright scams in the field. (as in all areas)

Certainly some winners there, and a reasonable amount could be allocated, but all? Do more research, think it through, and then ignore me, ellery and the “experts”, make up your own mind and accept the consequences.

Current score: 1
118 X I told you so Says:
December 18th, 2008 at 5:45 pm

Vancouverboom2

I am just tired of the argument about immigration offsetting the huge supply under construction.

Firstable, go sit at an immigration Canada office and tell me if the mayority of people you see there look like they have the means to buy a $400k apartment off the bat. Most of the immigrants that come in to Vancouver dont have savings nor land high profile jobs that would allow them to buy property under current market conditions. The typical immigrant with a bachelors degree that just arrived to Canada wont get hired for more 50k. Now imaging what those without a degree make.

Besides, go step in to a bank and try to get a mortgage loan with no previous credit history and just holding your Permanent Resident card. They wont even give you a credit card with a $1,000 line.

Now, I tell you all this from personal experience. So unless you get 30,000 of rich immigrants coming to Vancouver each year or the property value declines 50%, the condo towers will remain empty.

Current score: 5
119 X arit Says:
December 18th, 2008 at 5:47 pm

ellery,

Thanks for the explanation about hedging. Now I understand. It is a very different approach from mine. I’ll think about it. I need to balance “hedging’ versus “medal or jail”.

My line of thought is this:
What is the worst case scenario, and can I afford it?

The worst case scenario is that I lose all the money which I am not using right now, and I find myself in 2016 in the same situation that I am today. Today I am happy. No debt.
Of course I also have RESP and RRSP which are not invested in the abovementioned risk.

Regards

arit

Current score: 2
120 X arit Says:
December 18th, 2008 at 5:49 pm

alexcanuck,

Thanks for the advice. As I told ellery, I will give this serious consideration.

Regards

arit

Current score: 1
121 X vancouverboom2 Says:
December 18th, 2008 at 6:19 pm

Told you so,

you are right in second paragraph- majority of immigrant does not buy right away they like to buy within three year of their residency but what all these new flood do to previous residence? They help those previous residence push them forward to buy,some of investor through migration and immigration buy right away based on landcore data those were some of 5% in 2007.there are words in market that most of buyers are from within city within city means immigrant,migrants,and extended family members(extended family means local anytime)within three years of their residency.

Current score: -5
122 X Lily pad Says:
December 18th, 2008 at 6:31 pm

Pope: Is this ad on your site just a coincidence or is it deliberate? (not that there’s anything wrong with that).

http://www.gaybeardating.com/?.....aff_cp=IMG

Current score: 0
123 X Paul Says:
December 18th, 2008 at 6:38 pm

I think it’s gonna be hard to pinpoint the bottom of this market because there are some many other macro-economic factors involved right now. The recession that started last year in the U.S. shows no signs of turning around. In fact, there is a greater risk now that it will become self-feeding and evolve into a prolonged recession or depression as consumers and business continue to cut back spending. The bottom can happen anywhere from 2010-2018. I believe we are lagging the U.S. by atleast a year, so we should see a bottom in the hardest hit areas such as LA, Miami, and Las Vegas first.

Current score: 1
124 X New Guy Says:
December 18th, 2008 at 6:43 pm

Vancouverboom2 thank you so much for the information regarding immigrants.
If you could send me an email at
vancondotalk@gmail.com
I’d love to get more information from you.
It’s great to see at least one sane person left in Vancouver, the best place on earth!!!!

Current score: -3
125 X other ted Says:
December 18th, 2008 at 7:04 pm

This is a great thread I really love reading everyone’s story. I haven’t posted much but I will give my story too.

I started off as a perma bear I guess but not of real estate but of Vancouver. I grew up here went to school for most of my education and worked here for most of my life. I was an engineer and I grew disalussioned that I could afford a middle class lifestyle with what was considered decent work.

For me I had enough in the early part of the decade. I decided I needed a new career or a new location. For the first few years I was all over Canada and away from home and I heard of the rising real estate prices everytime I phoned home. I know real estate was cyclical and expected an increase as prices seemed to bottom out and there was a new found confidence in the city due to a new government and the belief that the olympics would bring prosperity. I did not buy the hype but I new that people would act accordingly and drive up prices. But I expected modest growth.

I don’t know how I would of saw things if I was in Vancouver when prices took off. Maybe I would have been overcome with fear and bought in. But being away it gave me perspective and I knew it was nuts and something was not right. At first I thougth it was just Vancouver. Of course travelling on and off for the middle part of the decade I met people from all over the world who bragged about their countries real estate. Then I realized it was something not just locally driving this.

Regardless I made up my mind I couldn’t live in Vancouver anymore. I said to myself its a big world why do I have to define succes by how everyone else defines it”as owning Vancouver real estate” I figured I could advance my career and have a better standard of living my moving. I believed that everyone else was a coward in my profession and they allowed themselves to get treated like crap by not moving. I did more for my profession by quitting and leaving Vancouver than almost any other engineer I believed.

Anyways I moved to Calgary where oil was taking off. Being a skeptic I believed in high oil prices but didn’t quite believe all the hype I first encountered when I came to Calgary. Then I saw real estate was becoming as insane in Calgary as it was in Vancouver. Before I moved to Calgary 3 years ago I discovered VHB and once I was there this site and the calgary contrarian which is now defunct. (alberta bubble took over)

About 3 years ago everything became clear reading the great posters on this site like (freako, the pope, vhb, and later poster like patriotz etc. )(I know i rarely post and its mostly to argue about things i disagree about but I agree with 99% of what goes on here)

Its funny when I moved to Calgary people would get downright angry with me when I didn’t believe houses should be as high as they were in Calgary and didn’t buy into peak oil as why oil went so high(apparently people forgot about iraq). Anyways I was accused of being negative. I always felt positive in my belief I would buy at a discount to 2006 prices.

I am glad I found this site because not only did it reinforce my belief but it gave me knowledge to understand what is going on and predict how this will all end and what to do. I believe in cash for the time being and I will buy when the prices are right.

I keep on thinking it will be vancouver. But my mind keeps on telling me even if prices go back to 2002 levels why should I. It was 2002 when I decided I had no future in Vancouver because of career issues not just property prices. I felt prices were too high back then with relation to income. But then again I am no longer an engineer. I am now a comodity trader if I could find work in Vancouver which is doubtfull it would pay better. Anyways I have saved more money in the last three years than I had up to that point in my life. I will most likely be able to buy in cash when this all explodes or get away with a small mortgage.

Current score: 6
126 X other ted Says:
December 18th, 2008 at 7:05 pm

i am bad i should have proof read what i said. first paragraph disillusioned with not…

Current score: 0
127 X paul Says:
December 18th, 2008 at 8:24 pm

Vanboom2 109-10, your pretense of being a new-English speaker/immigrant from ‘Kazahkstan’ is getting a bit old, don’t you think? Why you want to insult immigrants by pretending an ignoramus POV is rather bizarre. Are you someones alter ego perhaps.

Current score: 0
128 X paul Says:
December 18th, 2008 at 8:28 pm

A new Paul has hijacked my name #123 is not my post.

Current score: 0
129 X realpaul Says:
December 18th, 2008 at 8:29 pm

from now on I’ll camm myself ‘realpaul’. Thanks paul.

Current score: -1
130 X realpaul Says:
December 18th, 2008 at 8:30 pm

from now on I’ll call myself ‘realpaul’. Thanks paul.

Current score: -1
131 X realpaul Says:
December 18th, 2008 at 8:38 pm

California average now only $32,000 away from a full 50% reduction. If it’s true that when the US gets a sniffle Canada gets a cold then this is what we could be looking at soon.

http://www.doctorhousingbubble.....to-285000/

Current score: 3
132 X Anonymous Says:
December 18th, 2008 at 8:44 pm

109,10 is a troll who call himself former btk and currently bdk.

Current score: 0
133 X Mike Stewart Says:
December 19th, 2008 at 8:31 am

Well Well now!

All the real estate bears are proved wrong again!!

Benjamin Tal says Vancouver and the West will fare better than the rest of the country!

No Real Estate Armageddon!

Oil is at all time lows, the CONSERVATIVES want to spent $30 billion to get Canada moving again…

You bears need to tell me how this situation is going to turn into the end of days you all predict?!

Current score: -7
134 X ellery Says:
December 19th, 2008 at 10:06 am

Oh, no Mike, you’ve ruined my day. And CIBC has such a fantastic record, too.

http://business.theglobeandmai.....iness/home

Globe & Mail: “Bank Most Likely to Walk into a Sharp Object”

Current score: 2
135 X IC4 Says:
January 7th, 2009 at 6:53 am

I am bear bear bear and a little bit bull. Let me explain.
Was born and grew up in Vancouver. Remember the 81/82 horror clearly. Waited a few years after that and bought my first house in Richmond. Happy homeowner! Proud too. Then came an economic downturn in early 90’s and we moved to Australia, bought another house there. Sold the Richmond house at profit. Have stayed long enough in Australia to watch our house go into negative equity for 10 YEARS. Then a miracle—prosperity returned to the Lucky Country. New cars, trips abroad, full renovations being done up and down the streets. My neighbour across the road spent $100K, the one next door $200K! Everyone was reno crazy.

But the beautiful thing was this: now I could entertain thoughts of moving back to The Best Place on Earth. If my house was finally worth some good money, then we could return in triumph!

So a trip to BC was in order. First stop, Victoria, home of my family. Signed up for real estate listing emailed daily. Tromped around looking at ordinary homes. It was June/July 2007. I didn’t know then what I know now. But I had a rude awakening and the reality of the insanity struck my mind like a bash from a 2×4—we will never be able to afford a house in this place. Maybe ever. Ohhh such despair. Return to the other Best Place on Earth, Australia, to lick my wounds. What was I thinking? Vancouver has obviously moved on while I’ve been away for 17 years. They don’t know about my pitiful plans to return to my native land and what’s more if I haven’t got the money to buy then I must be really dumb. That’s a subject for another time.

June 2008, return to the Island, talk to the REALTOR who now lets me know there is a “correction” occurring, and now is a good time to buy. Better than last year. Oh? Well guess what? My house in Australia is worth A LOT less now than last year, but never mind that, the exchange rate is murderation.

It was in trying to make sense of the local market that I began googling for no-bullshit real estate talkers. Thank god I found some straight shooters. What I’ve read has put my mind to rest. I have TIME. There is no rush to buy. (my family in BC thinks I’ve already missed the boat to come back here, get a job, and a nice home. This makes me depressed but my back is against the wall at this end of the world).

Since that moment of despair in Victoria 18 months ago (not knowing RE was at its peak) I’ve been watching the RE drop down and down. That has been enormously satisfying. As some others who have long been around Vancouver can vouch for, this is the part of the cycle we live for. So satisfying. It does hurt to think I might not be able to afford to move back. I’m not so young anymore and don’t have the luxury of decades to bounce back financially. So houses must fall by an awful lot, from my vantage, because I really love BC and want to come back, if only for the last few years of my life.

Current score: 0

patriotz: http://www.theglobeandmail.com /report-on-business/the-making -of-a-housing-bubble/article14 60610/ Bubbles...
patriotz: @arit: ” Keeping foreclosures off the market by the banks” Is a method used by US banks to prevent prices...
Starving Artist: It’s going to be interesting to see what happens when completions catch up to the starts line...
Starving Artist: Methinks the bulls doth protest too much.
chico: The even better article is the G&M article concerning the Competition Bureau’s decision to attack...

Score: 138, San Franciscan in Vancouver, Banker Bubble-talk Bundle: I can’t help but just laugh my guts out about what is happening in this…

Score: 120, The Pope, Friday Free For All!: Larry, thanks for sharing the info and remaining calm in the face of…

Score: 111, VHB, Are we there yet?: Should I buy a pencil for $1,500? 1) I could afford to pay that. 2) I…

Score: 110, squirrell, Putting off the Ritz: I think the reason why many want to own their own home is so they can have…

Score: 105, rp, Sales boom sparks bubble fear: It just isn’t funny anymore. It’s like if everyone started…

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Why I am a real estate bear. Are you one too?

135 Responses to “Why I am a real estate bear. Are you one too?”

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