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June 13th, 2009 at 8:58 am
Risk = reward. The price paid for a conservative approach over the past 10 years has been incredible.
June 13th, 2009 at 8:54 am
Interesting… when a company avoids debt and accumulates cash it’s looked upon negatively because they are not utilizing their capital effectively. The bears on here think accumulating large amounts of cash and no debt is the correct thing to do. It’s a safe thing to do but perhaps not the most effective.
June 13th, 2009 at 7:06 am
#46 Alot of my friends are dual income with a suite to make the payments, if they have bought a home recently (last 3 years or so. Some of them got really stressed when the whole stock market/Real Estate thing happened. They couldn’t even stand to watch the news. If one of them loses a job I’m not sure how they’ll make it. I’m pretty sure they have everything into the house. Some of them are having a rough time of it already as they work in construction, but so far parents are helping them out. It is amazing how long people can survive for before they getting really desperate. EI, Parents help them, max. credit cards, and then a period of plain just not paying the bills. Some just go bankrupt rather than sell their house. It all takes time and all this has just started here.
Alot of ppl my age though bought before things went crazy and talk about how thankful they are cause they wouldn’t be able to afford these prices. Just the young’uns or people new to the area or those of us a little late to settle down and be ready to buy, who are really feeling the affordability.
Honestly I can see why some would jump in now. I mean if you’d been waiting years already for the market to give you a break and you just want that house. Your kids aren’t getting any younger, your wife is pressur’in you and you think losing your job couldn’t happen to you. Impatience sets in. Interest rates are low and prices down a bit. The monthly payments work. You plan to live in this house for years and you say to yourself even if prices go down in the short term they “always go up” in the long term.
Some of us young’uns don’t have the fear we should of not having enough money to pay our bills. Most of us really have never gone without. Think about it, a whole generation of kiddos have never lived through a bad reccesion or were really little at the time. There is a real sense of entitlement among young people.
http://www.reuters.com/article.....UD20090612
“A survey for Australia’s St George Bank found almost two-thirds of Generation Y-ers — people born from the mid 1980s to early 1990s — are expecting their parents to help them out with their rent, their wedding and when buying a home.”
June 13th, 2009 at 4:39 am
46, because people are retarded sheep.
June 13th, 2009 at 12:19 am
/dev/null:
ok, i understand the whole buy at higher interest rate/lower principal thing and how high interest rates should drive house prices down due to increased mortgage payments. my question is, if that is the case, why did people buy in 2008, 2007 and so on, when prices were rediculous and interest rates were not 3.xx%. the monthly carrying costs on those places should be quite high back then. they all can’t have bought simply because they thought prices were gonna keep increasing right?
maybe the norm now is to have dual income to support a home, and the typical home is a townhouse/condo depending on where u live, so younger people are “used” to these prices and do not think it’s overpriced?
June 12th, 2009 at 10:42 pm
Problem with “HotSpots” (Century 21 “Research” all over papers today)
Area A Price Index 4/08=100 3/09=80 4/09=100
Area B Price Index 4/08=100 3/09=85 4/09=94
Price increases 4/08 to 3/09 and 3/09 to 4/09 and yoy
A -20% +25% 0%
B -15% +10% -6%
Total market has fallen from avg of 100 to 97 ie -3%
BUT look at the hotspots from march to april, wow. We were wrong after all.
I’m off now to go and buy as much house as I can possibly ‘afford’ before I’m priced out….again.
June 12th, 2009 at 10:10 pm
ted are you seriously considering buying now. If you were going to capitulate you should have done that a few years ago. I understand your frustration but why buy just rent. Even if real estate doesn’t drop it still doesn’t make sense to pay more to own than rent.
June 12th, 2009 at 9:50 pm
PorkyFlu:
You don’t really have a firm grasp on the notion of value, do you? Cash flow!=value.
June 12th, 2009 at 9:42 pm
DaMann:
Anybody watch Gran Torino?
This post reminded me of the scene with Clint Eastwood complaining about his $10 haircut.
June 12th, 2009 at 9:32 pm
Bears, we’ve been “fighting the tape” since the VHB days. In that time we’ve missed out on huge amounts of appreciation which would make the recent drop look tiny. ie. up 200k instead of 260k. Real estate is a religion in BC, the boomers are just starting to retire and rates are outrageously low. I’m buying! Capitulation? Yes… If you keep making the same prediction for long enough it will probably come true but your timing will be wrong.
June 12th, 2009 at 9:22 pm
justspiffy, have you considered co-op housing? That’s where I’d be if I had kids.
June 12th, 2009 at 8:49 pm
“what if the American economy starts turning around…”
A BIG ship like that takes a long time to go in any direction. Rest assured, this piddly economy of ours is a mere tugboat. Even when the US does turn around, it will take a long time for the wake to reach our boat.
We’re always the last in and the last out. Take it from me.
June 12th, 2009 at 8:43 pm
Does anyone have a prediction on what the outcome of Rennie’s newest project pre-sale which starts tomorrow and will be finished Fall 2011. I know presale is a bad word and should be very interesting to see what comes of it. Drove by and didn’t see any greater fools with the sleeping bags even though the weather is great for camping…
June 12th, 2009 at 7:41 pm
afc:
Sorry, typo. The rate increase should be over 2% rightaway.
June 12th, 2009 at 7:09 pm
Anonymous:
I am lender and have first hand knowledge regarding speculators holding out. Most of them have VRM 0.75% to 0.90% below Prime. So currently their mortgage rate is between 1.35 to 1.50%. How many of them lock up into 5 year term when the rate was 3.5%? Very few. It is very hard for a person to lock up with a 1.15% rate increase rightaway especially they are thinking short term to sell. I have none of my clients lock up. So if the Prime goes up next year by big numbers, you will see lots of blood.
June 12th, 2009 at 7:08 pm
(( NB: I still am bearish, but this spring’s rebound was a bit of a surprise to me. ))
June 12th, 2009 at 7:08 pm
Yep, Vansanity, I hear ya. I started thinking, meh, what if the American economy starts turning around and we just never clue IN, we sail along on a bubble of delusion? What if we end up with one of those painful bleeding for 20 years “soft landing”? How would it be possible?
June 12th, 2009 at 7:04 pm
I made may mind up that I won’t do anything until after the 2010 games, it could be the wrong move but time will tell. In the meantime I certainly am amazed that Icarus continues to fly so close to the sun.
June 12th, 2009 at 6:45 pm
Sounds like most of you bitter renters have an income problem. Solve that and you can buy too. I really don’t understand why you guys can’t see this most basic thing.
June 12th, 2009 at 6:42 pm
I was just going through some listings and came across this description for a new condo beside Coquitlam Center Mall. Asking price: $469,000
Assessment Value is $517,000. Such a good investment opportunity.Easily rent it out $1600/mth.
Nearly $500/mo for maintenance and tax. Even if you put down 20% ($94,000) a 25 year mortgage at 3% results in nearly $2300/mo w/ maint+tax.
How is this “such a good investment opportunity” when rented out at $1600/mth??!!
June 12th, 2009 at 6:36 pm
We’ve a kiddo on the way and that just gets you thinking real fast about what’s important to you. Hubby and I were talking last night…We think that fundamentals point to more affordable real estate in BC’s future but if it doesn’t happen in the next couple years, I think we’re outta B.C. We’d like to stay close to extended family but as parents you want to provide a nice life for your children. BC’s cost of living makes that tricky. It’s not too bad as a single person or young couple but add in kids and renting an apt or basement suite isn’t really appealing anymore. I’ve had a mortgage debt before and hated it! I would hate what today’s housing debt would mean for my family. I mean we almost have enough to pay in full for a place in Ottawa! Hmmm let me see, good health care, decent jobs, decent crime rate, same average pay as here and houses are reasonable! I can deal with cold winters and hot summers. The savings in housing = alot of trips to visit B.C. with its mild weather, pretty parks and great mountain skiing. I’d prolly just go to Hawaii with the kids instead though.
June 12th, 2009 at 6:06 pm
I’m also disheartened by the recent rise in prices. But if things don’t start to move, I may move to a more upscale rental in a year or so.
June 12th, 2009 at 5:26 pm
“Crash already! I do agree with you guys on spring 2010. I’m just not as sure as I once was.”
Bears capitulating, as sure sign of a bubble almost ready to pop.
Keep the faith my friend , there is no other way this thing can end.
If a weak economy doesn’t pop it, a strong economy will.
Either way , it’s just a matter of time.
June 12th, 2009 at 4:54 pm
Vansanity:
Could’t agree with you more, I could have posted this myself. I don’t know what the hell to think anymore.
June 12th, 2009 at 4:53 pm
Yalie: “Prices always spike in spring – ALWAYS
Yup. It happened in US cities in 2005, 2006, 2007, 2008, and again this year. Vancouver is no different. Prices are too high compared to rents and incomes. It’s so obvious where we go from here.
June 12th, 2009 at 4:29 pm
The rental rate for downtown condo in San Diego and Vancouver, seem to be slightly over $2/ft.
But compare the selling price for these two comparable units:
Vancouver $350k
San Diego $150k
Both units are in newer buildings downtown, and the San Deigo unit is slightly larger.
June 12th, 2009 at 3:59 pm
Anonymous: I’m not expert but hey it’s Friday and I’m tired of working. I think the argument goes something like this: Imagine there are 25 exactly identical houses on a block – people paid $500,000 for each one. Some guy needs to sell (moving out of town) and the best price he can get is $350,000. What are each of the other houses now worth?
And the reason he only got an offer for $350,000 is that affordability is based on the monthly payment people can afford, so same max monthly payment and a higher interest rate means lower principle.
Or something.
June 12th, 2009 at 3:54 pm
“I was wrong when I thought the inventory would spike again this year. I think I’m weakening.”
“I do agree with oneangryslav that Spring 2010 will be a time of reckoning.”
No it won’t, and neither will Spring ’11, or Spring ’12 or Spring ’13.
Really, I don’t know why so many people are having a conniption about the recent price spike. Prices always spike in spring – ALWAYS. When the spring is over, inventories will rise once again and prices will continue their inevitable plunge. Then there will be another “spike” next spring, followed by yet another price plunge in ’11, etc.
Anyone who can’t see this coming, especially anyone who’s been following this blog, deserves what they get if they’re foolish enough to buy now.
June 12th, 2009 at 3:53 pm
VanBanker:
oneangryslav:
Thanks to you both. I can relate to the thoughts on short selling and expensive dinners!
I’m not about to cave in. I just don’t have the same conviction I once had.
What prompted this was that: I had a friend approach me recently because someone they knew were about to buy and he was trying to have me to convince them… [that's confusing, I've been drinking on a patio all afternoon so I apoloigize, and I'm about to go back, I know, life sucks!]…. not to buy. I ended up telling them to do their own research because I maybe wrong. I acted like a disclaimer.
If I’m being true to myself. I honestly don’t know anymore. I know what the fundamentals are telling me. I know what the trends say of spring. But I don’t know that right. It’s a truly disturbing yet humbling position to look at myself from. I don’t like it.
Crash already! I do agree with you guys on spring 2010. I’m just not as sure as I once was.
June 12th, 2009 at 3:46 pm
mold city,
yes i understand low rates only delay the evitable. What I am trying to say is in the short run, eg next 1-4 years, how can people be predicting a huge drop given this case? would it make more sense that if RE is to totally tank, it’ll tank in 5 years? (Ok im assuming most people would have locked in at the 5 year 3.xx rates)
I am ready to buy a house now. I think its ridiculous how much housees costs, but with the spring bounce I am getting less and less pessimistic about RE in the short run. I dont want to wait another 5 years. I dont mind paying more then renting for having my own place, but the premium is absurd right now.
June 12th, 2009 at 2:32 pm
Anonymous: Temporary low rates only push the problem further down the road. How long can you lock into a 3.xx% rate for? a couple years? What happens then if you’re just scraping by and you need to renew at a higher rate? you sell right?
What happens if a bunch of people are in the same situation and have to sell at the same time?
At least in the US they lock into these low rates for the entire 25 year mortgage term.. In Canada it seems like a 10 year lock is about as long as you can get.
June 12th, 2009 at 2:01 pm
riff raff:
Only 90 minute boat ride from greatest city on the planet? Dunno, but when you factor all things in, I think Victoria is more overpriced than Vancouver, and that’s saying a lot. The whole entire BC RE market makes me ill.
My brother bought a house in cloverdale for $500,000. Brand new house with virtually no lot at all. But hey, the GST was thrown in so good deal! Don’t even get me started on the idiocy out there, even my own family.
June 12th, 2009 at 1:35 pm
On a sideline: I am moving to Victoria, but noticed that rents are quite high there, even dungeons. Housing is expensive too.
Question: What is the reason for rents and real estate to be so high in Victoria?
June 12th, 2009 at 1:31 pm
Vancouver won’t come back down to earth until the flippers go bankrupt and people stop playing games. It would help if people waiting on the sidelines would shed their mass delusion about the need to live here.
Right now, nice starter homes in southern California are as low as $70,000 and FALLING. With the money you’d save over a lifetime of being debt-free, you could afford a great standard of living. Vancouver might be nice, but you can’t tell me it’s ten times nicer.
I suggest the impatient take a good look elsewhere, because opportunities abound. Personally I would like to live in Vancouver because of family, but I’m not going to wait forever when I can easily afford a nice home virtually anywhere else.
June 12th, 2009 at 1:23 pm
Jameson House?
At those prices, the units better be ORGASMIC!
Properties that have higher rent yields are going to have sticky prices on the way down.
I’m talking about houses with mortgage helpers, duplexes, cheap apartments located in convenient locations, etc.
Detached properties in East Van are particularly sticky because high concentration of certain ethnic groups (Asian, South Asian, Indian) living there tend to be pretty conservative in their borrowing and will not be in a hurry to sell. They can make the numbers work by having extended family living with them and so forth.
The top end needs to fall out first since all the short term investors will get shaken out. They can’t make the numbers work and carry the units.
Then the price compression happens as everything trickles down.
June 12th, 2009 at 1:19 pm
if the rates are up much higher, how would that force lower prices if the # of inventory is the same?
What im saying is, suppose most of those people that bought at peak/near peak etc. dont have to sell simply because they were able to lock in at the low 3.xx rates. In this case, they would probably be able to afford the monthy mortgage, so why would rates jumping in 2010 matter to them? It would only affect those that truly have to sell, and those that truly have to buy. In that case, if those that truely have to sell is not a lot, wouldnt prices stablize becuase they will be bought by those that truely need to buy (or think they do anyways)?
June 12th, 2009 at 12:47 pm
Spectrum: “Looking at most US cities that have had their RE prices fall of a cliff, it seems to be from summer until November when prices fall. And during that time they have fallen pretty hard.”
They also had higher MOI going into the summer. Vancouver MOI is reasonably low right now. Unless listings really take off in the summer and fall I think prices won’t drop more than 5-10% this year.
2012…
June 12th, 2009 at 12:27 pm
“Vansanity Says:
June 12th, 2009 at 10:18 am
I wonder sometimes… I’ve seen this market defy all logic, all fundamentals, all reason in the past… could it do it again? Is it doing it again? ”
Don’t worry, it’s tough going against the herd, and scary sometimes. Remember, the end of every bubble is when the last bear capitulates and buys in. Don’t be that bear!
I trade short on the stock market quite often and every time there is always a point where I’m underwater and start to doubt myself, but every time I hold on I always make out like a bandit in the end. It’s only when I close too early that I regret it later.
June 12th, 2009 at 11:57 am
“Richmond is lower mainlands hottest market” Great! And then we find out that the latest real-estate advertising scam is to find any “chunk” of land that may have appreciated in value over the last year and tout that as the direction in which the market is heading. Oh and simply ignore the bigger picture, which depicts a precipitous downturn in housing.
What’s next…? “The hottest market: Down only 15%! Buy now!”
June 12th, 2009 at 11:34 am
Looking at most US cities that have had their RE prices fall of a cliff, it seems to be from summer until November when prices fall. And during that time they have fallen pretty hard. What we’ve been seeing so far this spring it a slight uptick, which is also helped by extremely low interest rates. Once the uptick is gone and interest rates start to rise, even the mighty Vancouver RE market will fall.
I do agree with oneangryslav that Spring 2010 will be a time of reckoning. Interest rates will be far higher, the world economy will know that there will be no fast recovery and all the speculators in Vancouver will be dumping.
June 12th, 2009 at 10:48 am
Vansanity: Vansanity, hang in there. This thing is far from being over.
Watching the Vancouver RE market is like staring at disbelief as a baseball literally hangs in mid-air, insouciantly defying the laws of gravity. Alas, we’re not special here, and if you look at recent comparative charts of North American cities, you’ll notice that even after this spring’s slight uptick in prices, from their peak, Vancouver prices have fallen faster and quicker than every single city in N. America save Miami. My informed opinion is that Spring 2010 will finally be the time of reckoning.
On the other hand, if prices don’t fall, then I’ll be a happy renter all my life. Every time I get a slight itch to buy, I just remind myself of how much more I’d have to be shelling out to the bank, insurance company, strata board, etc., if I “owned” my place rather than just rented it. Then I go out and have an expensive dinner
June 12th, 2009 at 10:18 am
I wonder sometimes… I’ve seen this market defy all logic, all fundamentals, all reason in the past… could it do it again? Is it doing it again?
I was wrong when I thought the inventory would spike again this year.
I think I’m weakening. Hearing all your comments helps, but my level of conviction that I once had regarding this market has changed. I think I completely underestimated the amount of pent-up demand and demand in general that was created through looser lending practices.
Anyway, despite all that I’m still priced out and not willing to buy something that is, by all measures, unaffordable to me.
We’ll see what happens, I guess.
June 12th, 2009 at 9:44 am
The problem with green shoots is that if you eat them before they bloom you’re left with nothing but dirt.
June 12th, 2009 at 9:43 am
I noticed on the latest tout sheet put out by Century 21 that the stats they are quoting are from April which coincides with the BOC coordinated dump on intrest rates. So , typical recession behaviour sees sheeple diving into the lowest end pf the market on purely monthly payment driven principle. This is not the sign of a healthy market. The latest stats have already shown a marked decrease in activity going into June. Why aren’t they using the current market to balance the news? Duh, I wonder why? Intrest rates have risen sharply and are now on an agressive upswing. Oh Oh.
http://www.vancouversun.com/Bu.....story.html
June 12th, 2009 at 9:25 am
The problem with green shoots is that you can’t live on them.
June 12th, 2009 at 8:59 am
Great post in general (Pope I assume ?)
I love my friday free for all
By the by, I’m seeing more houses for sale in Kitsilano. I know of 2 or 3 “sold” places from last year that have had their curtains drawn and the grass unmowed since the “sale”.
Yesterday there were gardeners mowing, installing flowers and thouse cheap walkway solar light posts. I’m thinking these houses are going to appear on MLS again (at the original sale price that didn’t work last year).
Rising mortgage rates, green shoots, bring it on.
June 12th, 2009 at 8:07 am
mino3: Is there even a market for this crap anymore, even at cheaper prices?
I’m guessing not, since the whole court case was to see whether presales buyers would be allowed out of their contracts based on the delays. Those buyers got screwed by this court decision (well arguably they were screwed the day they signed the contract).
http://www.theglobeandmail.com.....le1170003/
June 12th, 2009 at 6:08 am
I stand corrected on the pricing. It was actually around $1000/sqft. I could only find a small pamphlet with 3 prices:
890 sqft $879000 (organic)
815 sqft $899000
1930 sqft $2725000
They marketed “organic” suites, which basically means fewer walls and a more ’rounded’ shape. Who wants to pay more for less privacy and curved walls which are a pain to fit furniture around?
Is there even a market for this crap anymore, even at cheaper prices?
June 12th, 2009 at 5:53 am
Jameson House is a joke. They came late to the party and tried to push the envelope (I still have a pamphlet from spring 2008 advertising $800/sqft), and now they see small signs of life in the market and want to jump back in?
Good luck selling high end, pretentious luxury in a recession.
June 12th, 2009 at 5:41 am
“Real estate is not a religion”
The first page was relevant, but the second page went on a big tangent about immigrants? Weird.