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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.
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.
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
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
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.
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.
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.
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.
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?
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.
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.
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.
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.
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.
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
December 17th, 2008 at 4:22 pm
NO-LYMPICS, fine, i’ll go away. Enjoy the board.
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.
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
December 17th, 2008 at 4:13 pm
NO-LYMPICS, your “#1″ post is silly. GO AWAY.
December 17th, 2008 at 4:12 pm
paul, that’s some decent writing.
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.
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).
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.
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….
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.
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.
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.
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)
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?
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.
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!!
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.
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.
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.
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.
December 17th, 2008 at 12:00 pm
oops
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.
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.
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.
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.
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.
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.
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.
December 17th, 2008 at 11:18 am
http://business.theglobeandmai.....iness/home
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.
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.
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.
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!
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?
December 17th, 2008 at 10:22 am
I’m #1 I tink