Conference Board sees perfect stability
The Conference Board of Canada is predicting perfect stability in the local real estate market for the year ahead. They see the Metro Vancouver real estate market as currently hot, but not overheating and predict that it ‘likely won’t overheat as 2010 progresses’.
While Metro Vancouver home sales in December tracked a pace that was nearly three times higher than sales last January, board senior economist Robin Wiebe said new listings also rose keeping the overall market in balance.
“Though [the market] is closing on the top of the balanced range, buyers are provided with a reasonable choice as the go out searching for homes,” Wiebe said in an interview.
However, Wiebe added that “it wouldn’t take much to tip [the market] over into seller’s territory.”
That is one factor that has the Conference Board putting Metro Vancouver on the list of cities it expects will see property prices rise between five and just under seven per cent along with Victoria, the Fraser Valley, Calgary, Regina, Ottawa and Halifax.
Edmonton, Saskatoon and Montreal are among the cities that the Conference Board expects will see price increases over seven per cent, with Winnipeg Toronto and Hamilton among cities that should see price increases between three and five per cent.
The Conference Board is estimating that no Canadian cities will see price decreases in 2010.
The full article can be read in the Vancouver Sun.
January 26th, 2010 at 6:18 am 1
In other words, prices are going to keep going up because they are still going up.
No mention of course of price/income or price/rent.
Utterly pathetic. But not surprising. Look at this article by the Conference Board on the US bust. They correctly indicate that the price declines south of the border are tapering off, but can't see the real reason – prices are now approaching historical multiples of incomes and rents. Talk about not getting it. These people have had years to take a look at what US economists who correctly predicted the bust had been saying.
http://www.conferenceboard.ca/Economics/hot_eco_t…
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January 26th, 2010 at 7:26 am 2
These people are idiots. I can't count the number of times they have been WRONG.
"The Conference Board". What a laugh.
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January 26th, 2010 at 8:38 am 3
"The Conference Board is estimating that no Canadian cities will see price decreases in 2010."
Oh well then. Hey everybody, it's perfectly safe to go pull the trigger on that massive 30 year debt at historically low introductory interest rates, the Conference Board says so!
You have to respect all the critical analysis the Sun did in this piece though. Take this gem for instance:
""
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January 26th, 2010 at 9:20 am 4
What IS a Conference Board?
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January 26th, 2010 at 9:45 am 5
Over the past 4 years I've been reading the comments on the bear blogs criticizing the various "talking heads" from the vested interests. Sadly I've noticed they've been consistently right for four years while my fellow bears and I have been consistently wrong. I hope 2010 is really the year we bears get it right!
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January 26th, 2010 at 9:59 am 6
What IS a Conference Board?
It's a bunch of people rationalizing a pre-determined conclusion.
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January 26th, 2010 at 10:07 am 7
It is also speaking out against the obvious, a ridiculous dollar policy keeping buisness from investing in productivity gains and the insane taxes.The Liberal governments 7% solution is still a very nasty concept in CDN fiscal poicy. Ever wonder why there isn't a single global industry based in Canada? Ever wonder why there is no manufacturing? The Libs thought that they could keep the CDN pop dumbed down by a) importing mass numbers of people who didn't know better and b) keeping the people here underemployed, in low wage jobs while strangling them with high taxes.
http://www.financialpost.com/news-sectors/economy…
http://www.financialpost.com/news-sectors/economy…
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January 26th, 2010 at 10:09 am 8
This report is just taking a snapshot of the current environment and predicting short-term price gains. So if money is burning a hole in your pocket, and you just HAVE to buy something (like 1st Time Home Buyer), it would be better to buy now than wait a few months.
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January 26th, 2010 at 10:18 am 9
What else can they do to sustain it? Theses price increases I mean…
Do they have any more rabbits in their tophats?
Soon the elusive 50% drop will result in prices that are still out of whack with fundamentals… in other words, even if it all collapses Vancouver will still be unaffordable by all standards.
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January 26th, 2010 at 10:38 am 10
@BoB:
What do you mean the bulls have been right? Someone buying a property 4 years ago has paid considerably more out of pocket than someone renting the same property, haven't they? That means the bears are ahead, not the bulls.
Bulls are right only if buying a property is cheaper in the long run (present discounted basis) than renting.
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January 26th, 2010 at 10:49 am 11
@mino3:
You mean they have an ideological agenda? Well that's just shocking.
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January 26th, 2010 at 11:14 am 12
Following up on yesterday's topic:
I have a credit score of 730. This qualifies me for:
- unlimited GDS (>680)
- 46% TDS (>720)
Since I have zero debt, I can carry all my debt (unlimited GDS) as my mortgage. 46% of my income allows me to carry a $780K mortgage for 35yrs at 4%, which is 8.7x my income.
Using that logic, 9.3x doesn't seem so bad does it?
LOL
When I bought my house in 2004:
- GDS was 32%
- TDS was 40%
Using my same salary as today, that would have allowed me to carry a mortgage of $410K for 25yrs at 5%, which is 4.5x my income.
Unfortunately in 2004 I was making less and had a car payment; so I could only borrow $220K, which at the time was 3.3x my income.
So from 2004 to 2009 I have gone from being able to afford 3.3x my income to 8.7x – the system is broken, that's absurd.
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January 26th, 2010 at 11:30 am 13
What do you mean the bulls have been right? Someone buying a property 4 years ago has paid considerably more out of pocket than someone renting the same property, haven’t they? That means the bears are ahead, not the bulls.
The bears are trying to time the market by not buying right? The person that bought 4 years ago can cash out, rent and be far ahead of the chump who rented the whole time. Can't deny that's how it's turned out. (I was one of those chumps)
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January 26th, 2010 at 11:49 am 14
“Though [the market] is closing on the top of the balanced range, buyers are provided with a reasonable choice as the go out searching for homes,” Wiebe said in an interview.
Oh my God! I cannot stop laughing! These guys are comic geniuses! And the best part is they say it with a straight face!
I love you, Vancouver! I LOVE YOU!!!
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January 26th, 2010 at 11:53 am 15
@patriotz 11
I would tend to disagree. If a bull buys in 2004 and sells today for a 100% gain, he was right. All in all he made money after everything, while the bear renter paid his rent every month.
That being said, he has to sell and end up with more money than he would have had if he rented all those years. A bull who bought 8 months ago is not any more right than the bear that has been renting for the past 5 years.
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January 26th, 2010 at 11:55 am 16
LOL, hah ahhahahahaha.
im sorry, it was one of those uncontrollable laughs that blurted out. (now i need to wipe this coffee off my monitor).
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January 26th, 2010 at 12:00 pm 17
The fact is that the bulls are financially ahead if they bought before 2008, or if they bought one year ago. Saying that renters are ahead because they save $500 or $1000/month more than the bulls is a delusion. The bulls have much higher gains from property appreciation.
Of course, the bulls have to to realize those gains by selling their properties. Not everyone has balls for that and some will eventually go to the slaughterhouse. But until then, the bulls are ahead.
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January 26th, 2010 at 12:02 pm 18
13
You are absolutely right BOB.
We all thought we were smarter than the "greaterfools" that ran out to buy in a supposed "bubble." Four years later and the majority of those greaterfools have received paper equity gains that the average bear will never see in his lifetime, and if they were to cash out or have cashed out, have earned once in a lifetime gains.
The funny thing is that a bunch of uneducated blue collar people and immigrants who were told that RE was the best investment have done the right thing, and have reaped the rewards. The educated ones that have conducted market analyses and adhere to perceived "common sense" have been left renting for years, and will like continue to rent for many many many years to come as this thing slowly deflates.
I personally know over a dozen uneducated dolts that can now survive on their measly 45k salaries because their homes have doubled, and even with a correction, will still be far ahead of the bears. Some have made hundreds of thousands, which would take a lifetime for savers to make by saving and investing that "renter's premium." They have more equity and cash than those earning close to six figures and will come out far ahead of the prudent savers and market timers.
Sorry, but it is time to call a spade a spade…
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January 26th, 2010 at 12:16 pm 19
I'm not saying now is the time to buy, but I have have to question the logic of the bears and try to determine if there's a bit more time to make some money! I think it's going to run out of steam soon, but that's what I thought 4 years ago. Maybe the bears capitulating is a good sign!
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January 26th, 2010 at 12:20 pm 20
The beauty of leverage investing is that a person with a small cash in the game can make a lot of money. RE is basically a leveraged investment until you pay off your mortgage. (5%-20% cash + 80-95% leverage) But the downswing is a real bitch.
Exhibit A:
http://www.nytimes.com/2007/09/16/business/worldb…
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January 26th, 2010 at 12:26 pm 21
@BoB:
Wrong. The bears are not trying to time the market. They are not trying to predict market tops or bottoms. They are not buying now because today's prices are not good value. They will buy when the market price is good value. That's not market timing. That's value investing.
"Can" and "if" don't count in investing. What matters is what you do. If you haven't sold, all that matters is your carrying costs versus rental value. The market price can crater at any time. And note that you can't turn on your PC and sell your house in seconds like you can sell stocks.
"Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."
-Warren Buffett
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January 26th, 2010 at 12:27 pm 22
@Continuous Burn: Well…..in the last 7 years the wife and I have saved $265K (counting accumulated compound interest and tax returns) and we're renters……..saving the difference, and then some.
Does that me a spade or a plow ?
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January 26th, 2010 at 12:29 pm 23
Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
-Warren Buffett
This has worked well for Buffett lately huh?
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January 26th, 2010 at 12:41 pm 24
19
I am not saying this is a time to buy either.
I am just saying the argument that the bears are ahead of the bulls is pure garbage. If you want to talk about delusional bull arguments, you need to identify this as a delusional bear argument.
You cannot compare saving an extra 5 or 10 thousand per year for several years to appreciation AND built equity amount to several hundreds of thousands. And if you throw in continued renting for another 5 years while this bubble deflates, bears will be even farther behind.
They may have a home they that they put down 50% in 2015 and no other investments, but bulls will have completely paid off homes (even if it corrects 50%) plus cash to invest.
And quite frankly, even if people have negative equity, over the long term their mortgage payment vs rental payment will make them come out ahead.
Bears who have been on the sideline for years have missed out on once in a lifetime gains that have turned your average hairdresser and subway sandwich artist into wealthy individuals – individuals that have amassed an amount of money that they could never obtain through other avenues such as saving or investing (and don't give me potential ROI on investing as only 8% of Canadians invest in the stock market while 70% own RE).
It is time to admit the truth – this "bubble" has lasted longer, and generated more paper wealth than anyone here could have imagined. Given the track record here, it could last several more years, and this blog will still be calling for an imminent crash and slamming the "greaterfools."
While sitting on the sidelines may have been beneficial in the US bubble that saw a four year rise and now four year decline in prices, Vancouver has seen an 8 year increase and most likely an 8 year decline. If that happens, that means most bears will have been on the sidelines for a decade and a half, renting, and waiting while even the most ignorant RE owning bull will still be ahead….
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January 26th, 2010 at 12:47 pm 25
Carioca Canuck
Net income savings vs saving the difference between owning and renting are two different things. I think bears focus on net savings in their life overall to help justify their position.
I am willing to bet that the two of you have not EACH saved 18k per year for seven years SOLELY from the difference between renting and owning….especially since you admitted throwing in your tax refund…
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January 26th, 2010 at 12:47 pm 26
"Bears who have been on the sideline for years have missed out on once in a lifetime gains that have turned your average hairdresser and subway sandwich artist into wealthy individuals – individuals that have amassed an amount of money that they could never obtain through other avenues such as saving or investing."
I'll agree that there has been an unprecedented once in a lifetime gain and I missed it completely. I sold and relocated at exactly the wrong time and wasn't in a position to buy until things were getting questionable in my mind.
After watching a once in a lifetime event would it be prudent to think it would happen again?
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January 26th, 2010 at 12:49 pm 27
24
Agree completely!
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January 26th, 2010 at 12:50 pm 28
Off topic question – 5 years from now, what are the interest rates likely to be?
The BOC meets twice a year and the banks usually follow. Looking at the worst scenario if they raise rates 1/4 point each time that would mean variable mortgage rates will end up being somewhere around 4 and 1/4. for the 5 year term. does this make sense or am I talking out of my ass???
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January 26th, 2010 at 12:53 pm 29
@28 : "Off topic question – 5 years from now, what are the interest rates likely to be?" — higher.
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January 26th, 2010 at 12:54 pm 30
Concerning all the bulls/bears BS:
When you buy you have to pay:
- 1-2% land transfer tax
- lawyer fees
- 0-2% CMHC fee
When you sell you have to pay:
- <1% mortgage break free (if you're not buying)
- lawyer fees
- 5-6% commission
On average, you're paying 8% costs to buy/sell that property.
Gains today since:
2007: 15% (gains were falling off in 2007)
2008: 0% (we're back to the peak)
2009: 19% (up from the fall)
If you bought in those years and had to sell, your gains today are (after buying/selling costs):
2007: 7%
2008: -8%
2009: 11%
Thus if you bought in 2007, lets say a $450K condo with $50K down, you've made $31.5K. Yet int those 3 years, did you save $31.5K renting? That's ~$900/mn you have to save renting vs owning, and about how much I save renting my 2bdrm condo in Kits vs owning.
If you've been a bear and renting since 2006-2007, you're probably doing just as fine as the bulls that bought, and have less risk about the future.
If you're a bull that bought before 2006, you've done well, congrats for timing the market and taking advantage. Bears, you've missed out for whatever reason. Keep saving, take advantage when the bubble pops.
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January 26th, 2010 at 12:55 pm 31
two years ago people were bragging over the price of crude oil and further claimed that it would hit $500 bbl, most of those people clinged to their beliefs and subsequently became financially wiped out when oil fell rapidly to $31 bbl, keep in mind that the recent gains would never have occurred without the unprecedented actions of the BOC and the willingness of the CMHC to insure a gargantuan amount of mortgages backed by you and me, this can all change very rapidly
so you had better hold off on your chest pounding for a few months yet
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January 26th, 2010 at 12:58 pm 32
so many bull retards on today
RE agents having a slow day today?
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January 26th, 2010 at 1:02 pm 33
@Carioca Canuck: in the last 7 years the wife and I have saved $265K
It makes you someone who is missing the point. Someone who make the income you clearly do and has the dicipline to save (or pay down a mortgage) would have a lot more than 265K if they had bought 7 years ago.
Even rubes making 45k a year who bought 7 years ago are sitting on paper gains that are the equivelant of or better than what you've managed. If you have a hard time accepting this as fact you need to examine why. You may not like it, it may not be fair but at least some of those rubes are going to sell in the next couple of months and pocket a tax free lotto win.
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January 26th, 2010 at 1:02 pm 34
"so you had better hold off on your chest pounding for a few months yet"
Just insert "for a few more years" in that line since posters here have been saying an equivalent of that statement for 6 years…"next year, you wait and see, prices are going get creamed"
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January 26th, 2010 at 1:05 pm 35
@BoB:
What strategy would have worked better? The Lehman Brothers kind of strategy?
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January 26th, 2010 at 1:08 pm 36
33
Exactly! The reality bites, but lets not stick our heads in the sand. People missed out on a once in a lifetime windfall. I doubt it will ever happen again, at least not for another 20 years.
By that time, most of the bears will be too invested in life to risk selling at the top and renting in order to cash out. The key is to figure out where the next bubble will be from all those rubes cashing out.
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January 26th, 2010 at 1:15 pm 37
on feruary 28 the olympics will end
on march 03 the new federal budget will be announced where its strongly rumoured that the feds will require a minimum 10% down on all insurable mortgages
that $90,000 nut might be tough to come up
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January 26th, 2010 at 1:17 pm 38
In a few posts the bear arguments have been completely decimated. It seems fellow bears have undermined their own arguments. It looks like all those "stupid" bulls have been right for 8 years, and it looks like even when prices go down, early bulls will still be ahead of all those patient renting bears.
Ouch…that has got to be a hard less to swallow…to know that you have been so wrong for so many years despite the passionate and logical arguments to the contrary. To know that you will be renting for many more years, waiting for the inevitable crash or deflation. And to know that a bunch of uneducated realtors, immigrants, and landscapers outsmarted the bears despite not having the "intelligence" to know that the market was in a bubble.
Oh well, life is not fair..
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January 26th, 2010 at 1:20 pm 39
http://www.cbc.ca/olympics/story/2010/01/26/spo-w…
It begins… Once this is over, both BC and the Olympics will have significantly more tarnished reputations.
The only question is whether a person like Capitulate will be a scammer or scamee.
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January 26th, 2010 at 1:25 pm 40
@Capitulate:
The people who are missing out on a once in a lifetime windfall are the people who own now and aren't selling.
Just wait and see.
I bought in the mid-80's BTW. That's a buy side windfall, i.e. it makes you money without having to sell. And that's what it's going to take to get me to buy again.
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January 26th, 2010 at 1:26 pm 41
"However, Wiebe added that “it wouldn’t take much to tip [the market] over into seller’s territory.”"
He doesn't even understand the difference between a buyer's market and a seller's market.
"seller's market – A market which has more buyers than sellers. High prices result from this excess of demand over supply."
"buyer's market – A market which has more sellers than buyers. Low prices result from this excess of supply over demand." – both from investorwords.com
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January 26th, 2010 at 1:28 pm 42
In other news all leading indicators point towards a crash even more strongly than in 2008.
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January 26th, 2010 at 1:29 pm 43
"To lurk among the BubbleBloggers and their seething commentariat is to acquire an education in a slice of America invisible from this side of the sewer gratings. Notwithstanding the idiotic economic analysis, which is really no worse than the static-market fallacies paraded as profundities in the pages of the Arizona Republic, these sites — and not just HousingPanic — are infested with a cult-like fever to inflict suffering — at second hand, to be sure — on people who are in fact guilty of nothing except failing to have drunk the BubbleBlogger KoolAde."
"The BubbleBloggers will someday bawl balefully in private, but they will never, ever admit that they have been very publicly very foolish. You will know and I will know and in the secret chambers of their hearts they will know they were wrong all along. But as long as you don’t hold your breath waiting for that contrite admission of error, you should be fine."
The above was authored by Greg Swann in 2006, the disgraced phoenix realtor that once bragged that "Phoenix was different" and would boast further that Phoenix would never crash, he would react badly, almost violently at any mention of a housing bubble
did i mention that he lost his house to foreclosure 12 months ago
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January 26th, 2010 at 1:31 pm 44
@Capitulate
Lets no confused "stupid" bulls with "lucky" bulls. In 2002 few predicted a real estate run, so those "early" bulls are just "lucky" bulls.
By 2004, if the bears hadn't hopped on the bull bandwagon, I agree, they were stupid and missed out on gains.
Yet by 2006 the market was overheated, and bulls/bears are sitting about even since.
I doubt many of the bears on Canadian real estate blogs were bears for the entire last 8 years. I was once a bull, I bought in 2004, and changed to a bear in 2008 and have recently put my house up for sale.
Those "lucky" bulls and the bandwagon bulls are encouraged to do the same, sell their house and walk away with gains. Their luck has run out the last 2 years.
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January 26th, 2010 at 1:35 pm 45
37
Yes, yes, the endless host of arguments that will undermine the strength of the market.
Lets see, income to price ratios should collapse the market especially since they are now 1:9.3….. but they have been out of whack since 1989, and here we are 2 decades later and they are still out of whack…they have not been your much touted 1:3 for over two decades
Rising new builds will flood the market, putting downward pressure on prices……the 2008 credit crunch shut down a lot of projects and solved that potential catalyst
The elimination of 0 down/40 year amortizations will be the nail in the coffin…that came and went without anyone noticing its effect….
The "great recession" with a doubling in unemployment will teach people that RE is risky and that you cannot pay for your house when you are unemployed…yet prices surged during the supposed worst recession ever, despite all those darned unemployed people
The Olympics will be over and then the real carnage will start….but Sauder came out and showed the event has no impact on the RE market…
Nine million baby boomers start turning 65 this year and will flood the market as they downsize…this same generation was supposed to take early retirement ten years ago when it was good and open up tons of new positions for the next generation….that did not pan out and having babyboomers downsize from a lifestyle they cherish will not happen either…
Interest rates will rise and crush those overextended buyers….been saying that one since 2008, with no increase on the horizon until 2010 is almost over, and even then it might go up a percentage or two
Ho-hum, it must be tiring reciting the same thing year after year and constantly being wrong because of ever changing government policy and external events you cannot control.
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January 26th, 2010 at 1:41 pm 46
#44
I thought you lived in the US? Are you referring to your US home that you bought in 2004 and are not listing in 2010? If so, I feel sorry for you
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January 26th, 2010 at 1:47 pm 47
42
Oh no, you mean listings are following their season trend and increasing after the holidays? You mean they are increasing from anemic levels (5500k in Dec) to the same levels seen throughout the boom period (8500-12000k)?
Oh, watch out now, because your prediction is extrapolated from three weeks of data and must be significant…
Lol…no wonder all the bears missed the boat….
Go back to your tutorial sessional boy…
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January 26th, 2010 at 1:50 pm 48
I love the predictions of cooling to more "normal" rates of appreciation. Only 7%. So in 10 years that $1 million house in Van is going to be $2 million. I really feel that there are going to be a lot of disappointed people in the near future.
An Anectote:
I was in our coffee room at work today, and had a discussion with co-workers about what it would take to retire. I threw out the figure of $1 million. I figure $1 million in dividend stocks should generate $2500 to $3000 a month almost forever.
Everyone from the junior engineers to the secretary said No Way! That's WAY too little. One of the junior engineers (looks to be in his early thirties) came up with "somewhere between $4 and $5 million, because you need to buy a house for about 1.5, a couple of new cars, some nice things, go on some nice vacations, eat out once in the while, then _ALL_ you have left in the bank is 2 mil or so". So this guy thinks he is going to save/invest an average of $100K a year for the next 40 years or so! I didn't ask, but I bet a big part of his anticipated returns are his house.
I really think that the whole lot of us from the boomers, Gen X (myself), and Gen Y are dreaming. How can everyone save (without saving of course….that's too hard) multi-millions of dollars? I really thing all of us need a reset of our expectations.
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January 26th, 2010 at 2:10 pm 49
@Krazy Kanuk: I figure $1 million in dividend stocks should generate $2500 to $3000 a month almost forever.
You can live on $2500 to $3000 almost forever. I adjust your expectations up if I were you.
That said the question "how much to retire" is meaningless unless you take into account the age of the person asking it. A 70 year will do just fine on 1 million although I'd hesitate before telling a 65 year that that is sufficient. It very well may be but it depends on lifestyle. A 30 year old had better aim for 5 or 6 million. Inflation is a very nasty thing taken over 30+ years.
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January 26th, 2010 at 2:10 pm 50
@Lurking
You must have me confused with someone else. I own a home in Ottawa, currently rent in Vancouver after moving here in 2008.
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January 26th, 2010 at 2:13 pm 51
Must have been SD90210…sorry
I comment you for trying to cash out at the top, but a top in Ottawa is like 1.5 years of appreciation gains in Vancouver…it is a nice stable little town…no windfall for you, but at least you might be ahead of the renters
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January 26th, 2010 at 2:14 pm 52
"commend" instead of "comment"
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January 26th, 2010 at 2:17 pm 53
@Lurking: So have you thought about what you will do with the money. I ask because I find myself in a similar situation but if I do cash out I'm not sure where to put the proceeds.
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January 26th, 2010 at 2:22 pm 54
53
stuff it under your mattress like all the other bears
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January 26th, 2010 at 2:26 pm 55
Lol – when every bear argument is easily dismissed in post 45 people just vote this capitulate guy down – way to refute him
I guess the only thing bears have going for their arguments is time – as in, the crash is just around the corner
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January 26th, 2010 at 2:26 pm 56
@g:
The retirement issue is a good thing to raise. I think people are going to live and work longer in the future than they did on the past. I think that much is obvious. I wonder what the impact of this will be on real estate? My guess is that it will cause an overall rise in values because people are willing to finance over a longer period, or are willing to spend more time working their way up through the market (e.g. condo-> townhouse -> SFH). In the past, it might have taken 25 years to purchase and own a SFH outright. In the current market, it probably takes 35 to 40 years start (condo) to finish (SFH) to achieve this.
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January 26th, 2010 at 2:27 pm 57
@Capitulate:
Wow, what a lot of straw men and fallacies. First off most of those arguments were never seriously proposed here. Secondly just because a market has held on to ridiculous levels of price for longer than most people expected does not mean it will hold on forever.
In 1637 one tulip bulb sold at an equivalent of about a hundred thousand dollars today. It took seven years for prices to reach that apex and only two weeks for prices to drop to one per-cent of that peak value (and they continued to drop for years afterwards). If you'd been living in Amsterdam at that time you'd have been pushing bulbs just like everyone else, but seven years of an unsustainable market does not mean it will go on forever.
The collapse is brought on by the LEVEL of prices and what the market can bear psychologically and economically, NOT how long prices are out of whack. Many bubbles in the past have lasted longer than Vancouver Real Estate and many have soared higher. But, the one thing they all have in common is the ending.
But the whole, "It has gone up for a long time so it will continue to go up." argument is completely false anyhow. Without evidence that it will continue to rise it's just wishful thinking and in this case completely mathematically impossible as prices cannot continue indefinitely to outpace money supply.
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January 26th, 2010 at 2:31 pm 58
@Drachen: I think the bears have been routed. You should crawl back to your cave.
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January 26th, 2010 at 2:47 pm 59
Are you kidding? Those arguments were never put forward here? Dear lord, do you read the posts on this blog?
That post was a summation of all of the bear arguments put forward over the years – income to price ratios, inventory, employment, interest rates, post-Olympics.
All of those arguments were touted, "critically" discussed, and put forward as "reasons" why the market will collapse. Now that they have been dismissed, or have failed to materialize, you try to negate their place in the bear world.
Since these "arguments" are no longer valid, your fall back on some wishy washy statement about how the collapse will be "brought on by the LEVEL of prices and what the market can bear psychologically and economically." I see, once tangible reasons like inventory (supply & demand) and price to income ratios are no longer valid you embrace this line of reasoning.
By the way the whole, “It has gone up for a long time so it will continue to go up.” argument is completely false anyhow
_____
By the way, I never said that it will continue to go up. I simply pointed out that bears have been wrong for so many years about a coming collapse that they must be tired of reciting the same old lines (like they accuse the bulls of doing).
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January 26th, 2010 at 2:49 pm 60
@Babybear
Capitulates post #45 does not dismiss anything.
In the past 2 years anyone in real estate has effectively lost money, as prices are back to the peak, yet negative with inflation.
He is right, ratios have not been 3:1 since the 90s, cause interest rates have slowly crept down. Yet ratios have never been 9:1. That an invention of low rates, raised GDS/TDS, and longer amortizations; all of which are destined to change.
He is right that we timed the market wrong, we didn't account for what the government would do. Fortunately now the government is telling us exactly what they are going to do: raise rates, rates downpayments, and lower amortizations. We also know that previous changes heated up the market, so these changes should likewise cool it.
He is right that we were wrong about boomers retiring early. We may be wrong again about boomers retiring at 65. We won't be wrong about boomers being retired at 75. It will happen in the next 10 years.
He is right about the unemployment doubling not impacting real estate, sheeple kept buying. The market has been ruled by emotion not fundamentals for too long. Emotion is a wonderful thing, once the negative emotions start, its going to snowball, and the press hasn't been positive lately.
He is wrong about the Olympics. Vacancies are up and rents are down, when we should be a full city of visitors for the next few months. Not a good sign of things to come.
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January 26th, 2010 at 2:52 pm 61
Drachen
Seriously, you constantly get called out by Dave and now you get called out by Capitulate. Keep to teaching in the ivory tower because you don’t understand the real world.
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January 26th, 2010 at 2:53 pm 62
@Continuous Burn:
Our tax refunds average around $1000-1500 each per year……the rest is the rent/buy differential, and in some months, but not all, a little bit more is saved, just as in some months, we save a little bit less.
Sorta like a homeowner has to pay more when rates go up, or their taxes go up, or the furnace packs it in, or a pipe bursts, or electricity/gas and water increase, there will always be variables. Notice that I didn't say anything goes down ?
Thing is, I don't have a lifetime of debt still hanging over my head, my personal credit convenant on the line, and a 7/3% real estate a commission expense to get at my money……..and it's only going to get better for me.
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January 26th, 2010 at 2:54 pm 63
@Lurking
I'll make ~100K cashing out in Ottawa. Yes that pales when compared to the $200-300K my coworkers are up on similar investments at a similar time in Vancouver, yet it is what it is. I lived in Ottawa then, and took advantage of what was offered to me.
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January 26th, 2010 at 2:57 pm 64
#43
And I guess there was very little mention of that in the media..
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January 26th, 2010 at 3:05 pm 65
63
In order to save that much from a renting vs owning differential, you are either are not comparing apples to applies (eg. renting an apartment comparing your savings as if you were buying a house), or you have been in your current rental for so long that you are being charged less than current market rates.
Sorry, but you must be doing one of these as there is no other way you can collectively save 36k from a simple rent to own differential.
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January 26th, 2010 at 3:07 pm 66
@Convert:
Personal attacks do not make an effective argument. Do you have some actual information to share?
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January 26th, 2010 at 3:07 pm 67
63
surprised you made 100k in the ottawa market – is that actual pure profit or do you still have to account for maintenance, commission and property taxes over the period you owned it..find most buyers never itemize those let alone account for them
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January 26th, 2010 at 3:15 pm 68
No – but your willingness to focus on my simple post versus one that challenged your position says quite a bit and tells me a lot about your credibility
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January 26th, 2010 at 3:21 pm 69
@Capitulate:
Oh fine, point by point it is then.
"Lets see, income to price ratios should collapse the market especially since they are now 1:9.3….. but they have been out of whack since 1989, and here we are 2 decades later and they are still out of whack…they have not been your much touted 1:3 for over two decades"
As I said, just because something has lasted for twenty years does not mean it's going to last forever. This is not an argument it is a fallacy.
"Rising new builds will flood the market, putting downward pressure on prices……the 2008 credit crunch shut down a lot of projects and solved that potential catalyst."
See point 1) you're essentially making the same argument again.
"The elimination of 0 down/40 year amortizations will be the nail in the coffin…that came and went without anyone noticing its effect…."
That was never seriously proposed here to my knowledge and in any case it was more than off-set by reducing rates to .25%
"The “great recession” with a doubling in unemployment will teach people that RE is risky and that you cannot pay for your house when you are unemployed…yet prices surged during the supposed worst recession ever, despite all those darned unemployed people"
The recession hasn't hit hard here because we haven't had our crash yet and see above, the .25% interest rate has insulated the market from the recession.
"The Olympics will be over and then the real carnage will start….but Sauder came out and showed the event has no impact on the RE market…"
Tsur has been wrong on a number of things over the years, simply because, "he predicted it", is not an argument, it is a fallacy.
"Nine million baby boomers start turning 65 this year and will flood the market as they downsize…this same generation was supposed to take early retirement ten years ago when it was good and open up tons of new positions for the next generation….that did not pan out and having babyboomers downsize from a lifestyle they cherish will not happen either…"
This is more of a, "over the next 10 years or so", trend I've never seen anyone here propose that this will be the catalyst for the collapse of real estate although it should have long term effects and it may have a small role to play in the collapse.
"Interest rates will rise and crush those overextended buyers….been saying that one since 2008, with no increase on the horizon until 2010 is almost over, and even then it might go up a percentage or two"
Ok, interest rates haven't risen yet, but obviously they will, we'll see what happens when it happens. Your point is completely meaningless as it tells us nothing about the future.
Does that work for you? Complete load of crap you're shovelling there, I thought that would be obvious enough but apparently I have to spell it out.
The reason why I said none of these 'bear arguments' have been seriously proposed here is this. Each time one of them comes up someone else points out that it's all well and good to talk about boomers or interest rates or whatever but what will eventually kill the market is unsustainable prices. All of these MAY be a factor in reaching that unsustainable level but none of them alone can cause a crash.
Also I'd like to point out how you're trying to misquote me to create another straw man. I didn't say as you misquoted me, "Those arguments were never put forward here", I said, "most of those arguments were never seriously proposed here." and they weren't, if anybody suggested that any of those factors ALONE would crash the market they were soon corrected by other bloggers.
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January 26th, 2010 at 3:33 pm 70
Good to see some spirited discussion with some rational arguments! I agree with many of the points by the bears and bulls. I think we can agree the bears have been wrong for the past 5 years or so. Don't need to rub it in (I'm sensitive…). What we need now is some predictions regarding timelines. One comment mentioned boomers retiring in another 10 years max. Can we then assume a few more years of irrational real estate markets? Or will it all end in the next 6 months?
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January 26th, 2010 at 3:37 pm 71
Capitulate
"To know that you will be renting for many more years, waiting for the inevitable crash or deflation. And to know that a bunch of uneducated realtors, immigrants, and landscapers outsmarted the bears despite not having the “intelligence” to know that the market was in a bubble."
———————————–
I will agree with you on that. I have been waiting to buy a house since 2006, which is when I first felt I had a substantial enough downpayment.
But prices did not make sense. I never heard of a housing bubble before, but I Googled 'housing bubble' and the rest is history.
I guess one difference between you and me, capitulate, is that you do not have the "blinking red light" that I have in the back of my head, which says: "POTENTIAL-FINANCIAL-RUIN DECISION AHEAD".
That light blinks strong enough in my head to make me content in my 3bdr, one washroom, 4 women rental town house.
Why? Because (pay attention here):
The worst case scenario if 'bulls-are-right-arit-is-wrong' is that I don't buy, continue renting and sleeping well at night.
BUT: The worst case scenario if 'arit-is-right-bulls-are-wrong' is that I DO buy, and I go into financial ruin.
Being pretty paranoid, I judge only by worst case scenarios, not best ones.
My guess is that this "blinking red light" has started to suddenly shimmer inside your own head, too late. So you come here to convince us, and indirectly yourself, that everything is going to be alright.
I hope for you that you are right, but if I was you, I would be very, very scared holding a 35 year mortgage in Vancouver today.
If arit is right, he will be buying cash in 2016. No mortgage.
Best regards,
arit
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January 26th, 2010 at 3:42 pm 72
@Drachen:
It doesn't. As I said in the previous thread, what Somerville said is that the Olympics in themselves do not result in bull or bear markets afterward, and he's correct.
But what does have an impact on the RE market is idiots who will use every and any rationalization – including the Olympics – to pay ridiculous prices for properties. A lot of properties are being held empty for Olympics rentals (either hoped-for or actual) and a lot of them are going to be unloaded afterward. This will not be the root cause of the bust – that's inflated prices as always – but it will help touch it off. So will the loss of the games-related jobs.
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January 26th, 2010 at 3:50 pm 73
@Continuous Burn:
Rent was $1,700 in 2007…..$1,600 in 2008 and $1,500 in 2009….projected to hit $1,400 in June when my lease gets renewed according to the res mgr. Purpose built "high end" executive rental bulding owned by a pension fund and managed by a national rental company.
1,100'….2 bedroom…2 bathroom…2 huge walk-in closets…kitchen island…fireplace…track lighting…huge balcony…tile floors…9' floor to ceiling windows…etc…4 year old high rise on a riverside cul-de-sac in one of the toniest areas of inner city Calgary…..similar if not exact condo comps on the street are starting at $500K to $1MM and go up….all with $750+ monthly condo fees to start.
Run the numbers to buy a $500K unit, which will need renos…….I did…..$100K down…..a $400K mortgage fixed at 5% over 25 years…..$2,326 a month…..$750 condo fees…..$250 taxes…..$200 utilities…..$3,526 plus another $875 of lost opportunity cost on the $100K downpayment each month……$4,401 per month….and in 5 years I still owe $354K…..so theoretically I made $46K of equity which I will lose about $30K of if I sell, as I'll have to pay RE fees and give a discount to sell it…….(property is not going up in value here in Calgary, nor will it be due to forthcoming rate increases)….yet I can save another $180K not counting accumulated interest or tax refunds in the same period. So make it $200K if you include that.
I should buy RE because ???? My landlord will let me paint the walls pink, we have great pride of tenancy and a sense of community because we are all high end tenants…you have to have a 30% rental GDSR to move here and 650+ credit plus you can't be the slightest bit sketchy.
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January 26th, 2010 at 3:52 pm 74
@Lurking
Its the final amount I'll walk away with all things considered.
My cost of buying was ~$10K (CMHC fee and lawyer) and my cost of selling will be about $20K (commission, lawyer, repaint). So as long as I clear ~$130K, I'll net ~$100K. Minus the $10K down, I'm up $90K in 6 years. Not bad, yet not Vancouver levels obviously.
- It was a new house, so few minor maintenance issues.
- Land transfer tax was waived when I bought it.
- I don't consider property tax, it would be included in my rent if I want renting, so its an expense either way.
- I don't consider my renos as a cost of ownership. I have about $10K of DIY projects, yet I enjoyed them, and $2K/yr is a decent price for a hobby.
Plus my brother lived with me, and currently rents the house. My monthly cost of ownership was little when I lived there, I have no current carrying costs, and I've rolled the savings into my RRSP.
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January 26th, 2010 at 3:53 pm 75
@patriotzed:
I was quoting Capitulate.
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January 26th, 2010 at 3:57 pm 76
FWIW the bears haven't been wrong.
What we predicted started to happen in 2008 and was well on it's way to crashing "until"…….
-The government had the BOC drop their prime to .25%
-The government increased the CMHC lending limit from $350 BILLION to $600 BILLION
-The GDSR/TDSR limites were raised
-The government told the CMHC to throw credit worthiness out the window and underwrite every piece of paper that came their way
Did any of the RE bulls predict that would happen? No, of course not, nor did the bears……but we were right and what we predicted was happening (to wit, Calgary was down 20% in 9 months) until the government lost their f-in mind and screwed the taxpayer for decades to come.
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January 26th, 2010 at 4:07 pm 77
well, one thing people need to remember. SFH is not really SFH in Vancouver. In my hood, everyone SFH has rental suits. Many have more.
9x Median family income to support a home is not quite correct. The living space in SFH is no better than a shoebox condo.
btw, anyboby works in CRA. I suspect many landords don't report their rental income here. Are CRA looking in the collect taxes on unreport rental income, or capital gains on the rental portion?
It should be very easy to bring in additional tax revenue.
If more than one family filed tax returns on the same address, and with one of these family move in-and-out once in a few years.
Anyone?
anyone know?
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January 26th, 2010 at 4:42 pm 78
@g:
point taken, although I would assume that you could index the $2500 to $3000 by inflation. In the long run, stocks tend to outpace inflation, and dividends tend to increase.
My first point is that $3000 a month is roughly what an average worker makes (give or take), and to even generate this modest amount of income requires saving $1 million. My second point is that this amount of savings is well above what your average person (boomer especially, as they are nearing retirement) has, yet EVERYONE thinks that they need multi-millions of dollars to retire.
There's this huge disconnect between:
#1 what people are saving
#2 expectations on what constitutes a reasonable return (RE wise)
#3 what people require for retirement
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January 26th, 2010 at 5:40 pm 79
@Drachen:
Sorry about that, should have made the quote from Capitulate more clear. I did not include your response because it was not relevant to mine.
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January 26th, 2010 at 5:46 pm 80
@chris:
OK, so let's just look at the other metric – price/rent (and I mean for the whole property, including any secondary suites). That metric is also among the highest on the planet across all individually titled dwelling types.
Got a rationalization for that?
And no I am not talking about multi-unit rentals, in Powell River or anywhere else, so don't bother bringing them up again, bulls.
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January 26th, 2010 at 5:51 pm 81
Wow, Bob Renie sign up to this site today? OR, is it some morn geek running a bunch of vrtual machines?
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January 26th, 2010 at 5:52 pm 82
@g and Krazy Kanuk,
You can write the rate of inflation out of the equation by assuming an annual rate of return on your savings of X% over and above inflation. Then all your calculations are in today's dollars. Granted, though return rates will probably flex with inflation (for fix income investments), you can't really assume this will happen.
KK, I agree with your points of disconnect; particularly regarding a reasonable return. My guess is that most people do their calculations assuming a rate of 6-10% above inflation and they think they are being conservative. Those same people should look at the return they've been getting for the past 5 years (to iron out the recent big down and up in the markets) AND also realize that as they get closer to retirement, they will want to be more conservative with their investment behaviour and their return will be lower accordingly.
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January 26th, 2010 at 5:54 pm 83
@chris:
There are no capital gains on the rental portion as long as it is truly secondary.
I don't know what they are doing about unreported rental income. But it only takes one disgruntled tenant to get you charged with tax evasion, so any landlord not reporting is taking a big risk.
Note also that due to the writeoffs available anyone who bought for more than 2001 prices is likely to be losing money and can claim a deduction. But if CRA catches you not reporting the penalty is on the gross rent, not taxable income.
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January 26th, 2010 at 5:58 pm 84
Fear the Boom Bust
http://www.youtube.com/watch?v=d0nERTFo-Sk
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January 26th, 2010 at 6:14 pm 85
I reported my last landlord for evading taxes on their rental suite income. Not because I had a problem with them personally, I just don't like the idea of people avoiding paying their fair share.
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January 26th, 2010 at 6:51 pm 86
Here's another great Conference Bored prediction from 18 months ago:
"Canada's growth to slump, but no recession: conference board"
http://www.cbc.ca/money/story/2008/10/15/canadaec…
Give these Nostradimwits a big hand on that doozy.
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January 26th, 2010 at 7:10 pm 87
"I don’t know what they are doing about unreported rental income."
Below around $10-15K additional income, the CRA usually can't be bothered. The best way to get "even" with a "mean" landlord is to call the city bylaw department and report violations. These days the cities are scrambling for any money they can get their hands on!
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January 26th, 2010 at 7:12 pm 88
Wow, some nasty comments and surprisingly, not from me
.
I can't speak for anyone else, but I am not particularly mad if some hairdresser or landscaper or whomever made a fortune. When I was a competitive rower I learned the fastest way to lose a race is to focus on the guys in the other boat. Once that happens you aren't focusing on yourself, and you're screwed.
I also don't begrudge the winners of lotteries and casino games. They won against all odds.
The thing is, you always hear about the big winners, and never about the losers. Pretty soon though, we'll be hearing all kinds of sob stories about how people lost everything and "how could we have known what was coming?"
I don't envy the winners, but I don't feel any pity for the losers either so once the tears start rolling they can go cry somewhere else.
The difference between bulls and bears is simple: Each person defines relevant fundamentals, considers the "buy or not" decision and makes his or her choice. I get a kick out of the Drachen/Dave slapfest because each has defined the numbers that matter to him, then proceeds to cut the other to ribbons.
When I sold my loft in Toronto I learned a valuable lesson: Your property is not worth what you believe. It's worth the amount on the cheque the buyer writes the day it's sold. It's as simple as that. People are blinded by the astronomical gains their neighbors have made, and they assume they are next in line. They may be, but then again they may not. The longer the hang on, the higher the chance they're going to get caught.
At this point, there's so much greed and fear present in the market nobody is thinking straight. People aren't making rational decisions and that's going to mean extremely bad times well into the future.
I think the government has been shockingly irresponsible in gaming the so-called "free market". The lowered interest rated to 0. They boosted CMHCs cap. For a while they brought in mortgages with ridiculous terms. Essentially they gamed the system so almost EVERYONE signed up, and now they'll have no choice but to change the rules to keep the game from going totally off the rails.
So much for the "free Market" the Conservatives love to go on about, but at least this is the issue that'll get Harper booted out of office. Take away people's rights, cover up torture, screw up our international reputation and people barely notice.
Hit 'em in the pocketbook though and ooo la la! Out come the pitchforks and torches!
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January 26th, 2010 at 7:42 pm 89
@scullboy:
There is nothing false or fake about monetary policy. Low interest rates are a natural part of our economy. It is what it is.
I agree with you on relevant fundamentals. Every market participant places a value on the home they are buying or selling. That is the natural economic relationship of supply and demand. A difference of valuation does not a greater fool make, one way or the other.
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January 26th, 2010 at 7:50 pm 90
@Dave:
Low interest rates maybe, but the CMHC is completely artificial and the current trend towards throwing a policy at any drooling half-wit capable of signing the mortgage agreement is most certainly an attempt by the government to 'prop up' housing.
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January 26th, 2010 at 8:02 pm 91
@Dave:
Wanna buy a Beanie Baby?
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January 26th, 2010 at 8:30 pm 92
#48 @Krazy Kanuk: "How can everyone save (without saving of course….that’s too hard) multi-millions of dollars?"
Hyperinflation?
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January 26th, 2010 at 8:54 pm 93
@patriotz:
Wanna rent my basement?
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January 26th, 2010 at 9:52 pm 94
http://www.youtube.com/watch?v=_xMz2SnSWS4
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January 26th, 2010 at 10:19 pm 95
@dave:
Ok…. low interest rates are a natural part of our economy…. NOW.
I can easily recall a time when HIGH interest rates were a natural part of our economy. I can also easily foresee a time in the not so distant future (within the next 24 months) when high interest rates will return.
Will you agree that's a natural part of our economy as well?
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January 26th, 2010 at 10:21 pm 96
My god, that was awesome!
It makes me want to go out and bid $200K over asking for an 800K house on Knight St.
Did you see all those 10 foot tall blue/green Na'vi people flying around Stanley Park? If not, try putting on your 3-D glasses.
Geez, I love Pandora. It's the Best Place On……
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January 26th, 2010 at 10:26 pm 97
"There is nothing false or fake about monetary policy. Low interest rates are a natural part of our economy. It is what it is."
This is funny.
There is nothing natural about central banking and monetary policy. It is central planning at its worst. Eliminating central banks (what are they really for anyway?) and letting the market set interest rates would be "natural", but we can't have that now, can we?
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January 26th, 2010 at 10:46 pm 98
@Sofia:You are shocked at stability of real estate,Stop accusing Harper.
If Harper is behind the rise how come Bernanke and Green Span failed?
Now i know why did you leave your pink underwear and sandles on the door step,You are fucked Sofia.You don't know that Real eastate prices develop through Gouge of Economy and from desire to live in the best place on earth. or else USA real estate should have quadruplet first as Nanke lowered down interest rates FIRST. If you ever wanted to accuse someone accuse your Banker friend who advised you not to buy when you actually should have done it.
@The reason why VRENGD: Beautiful video,Beautiful Vancouver,Nice.
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January 26th, 2010 at 11:08 pm 99
@The reason why VRENGD:
http://vimeo.com/8951807
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January 26th, 2010 at 11:33 pm 100
So is it time to buy or not?
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January 26th, 2010 at 11:38 pm 101
These promotional videos have me so confused.
Ok, I'm convinced now, Dubai is the Best Place On Earth.
And their real estate never goes down because wealthy Asians all want to move there.
Ozzie?
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January 27th, 2010 at 12:03 am 102
@Informer 10:
And Real estate prices in Winterpeg develop from what exactly? Saskatoon? Regina? Rest of Canada?
Is it association? Same Federal government as the best place on earth? Help me out here!!
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January 27th, 2010 at 12:05 am 103
informer is a fuckwit
nuff said
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January 27th, 2010 at 4:05 am 104
@Dave:
No thanks, I like the top floor a lot better. But I'm renting you (and other debtors) my capital at over twice the yield.
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January 27th, 2010 at 5:08 am 105
@scullboy:
No it's not. It's also worth what you can rent it out for, if you don't sell it. If you buy a property for less than this value, you make money from it without ever selling it. That also applies if you're living in it, because the rent you don't have to pay is a return to you.
What a concept.
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January 27th, 2010 at 7:37 am 106
@Patriotz:
Geez, man! Ok, your property's resale value is worth the amount on the cheque the buyer writes the day it's sold, Captain Picky.
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January 27th, 2010 at 7:53 am 107
@scullboy:
Right.
I wasn't trying to be "picky", though, the point is that the owner of an asset always has two choices: sell it at the current market price, or hold on to it and receive the earnings. Likewise, a non-owner of an asset who needs to use it has the choice of buying at the current market price or paying the earnings to the owner, i.e. renting it.
Deciding which choice is the right one is the key to successful investing. In anything.
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January 27th, 2010 at 9:15 am 108
87 – Maybe true for your specific case. If its just a family with a basement suite, its actually in their interest to report the suite income because they can file expenses as well. If they aren't reporting it, then they are probably just plain ignorant (not surprising).
I turned my former landlord into CRA. In this case a whole house with two suites was being rented out for over 24K/year. The guy earned a lot of money through various sources but still tried to swindle me out of my damage deposit (there were no opening or closing inspections). I had to threaten to take him the RTO (where I'd get double back) for him to finally cough it up.
For guys like that, I'm sure the CRA has a "where there's smoke, there's fire" rule. Who knows what other rental properties he owns? Or any other little side businesses? Our city is full of sleazy shitheads like this, and they are often worst abusers of tenants.
Anyhow, no harm in picking up phone and letting them know. They'll figure it out from there.
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January 28th, 2010 at 10:05 am 109
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