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February 9th, 2010 at 5:56 pm
true that. but nepotism and cronyism are cousins, so to speak
February 9th, 2010 at 5:45 pm
@logic:
That’s cronyism not nepotism, unless there are some family ties we don’t know about.
February 9th, 2010 at 5:27 pm
also, Arnold is one of Gordo’s buddies. This is BC, land of nepotism, after all.
February 9th, 2010 at 5:09 pm
Using the multiple of 9.3 even for condos is rather functional. I’m sure there are many FTB out there purchasing $375k condos with $40k a year salaries.
February 9th, 2010 at 4:49 pm
@Boombust:
Well either because The Terminator was a pioneer in the use of steroids or because his father belonged to the party that invented the Olympic Torch, I guess.
What better credentials could you ask for.
February 9th, 2010 at 4:46 pm
Dave has no sales again today. The Demographia survey is for metropolitan areas, and “Median Multiple” (median house price divided by gross annual median household income).
February 9th, 2010 at 4:45 pm
40. Dave if 9.3 ratio is meaningless. What is the ratio for condos only. And using your logic we should adjust down the income to show who is buying. But even if we don’t what is the best case ratio for income/price. Something tells me its still not even close to 3.
February 9th, 2010 at 4:42 pm
Gag me. NOW I have heard the “The Terminater” himself is going to carrying the torch?
Can someone explain WHY?
I mean, c’mon! As if we’d be on California’s radar screen if THEY were hosting the games. Not even close.
February 9th, 2010 at 4:41 pm
@Dave:
Dave, dumps in Surrey are selling for over half a million. THERE ARE STILL PLENTY OF AFFORDABLE OPTIONS across Canada, just not the Lower Mainland.
February 9th, 2010 at 4:40 pm
@Dave:
Nor does the average person in the Bay Area buy a SFH in San Francisco.
As I recall price/income in the Bay Area peaked around 10:1 and has since declined to about 5.5:1, i.e. prices are down about 45%. And that bust is not over.
How come Dave?
February 9th, 2010 at 4:22 pm
@crabman:
The 9.3 ratio is meaningless. The average person in the GVRD does not purchase a SFH in Vancouver. Vancouver homes are in the upper 90% percentile of real estate in the Lower Mainland and perhaps even 95th. If you want to read into these ratios, then you should also adjust the income for people who buy those homes. Of course when you do that, the ratios are nowhere near 9.
There are still plenty of affordable options in the Lower Mainland.
February 9th, 2010 at 4:16 pm
@crabman:
That’s also using an income of $100k per year. Scale that back to the median family income of about $65k a year and see what that yields…unaffordability.
February 9th, 2010 at 4:01 pm
@Purp:
Actually (at least for a condo) you get a 4x ratio at 6.1% for people with car payments. With no other debt, you still hit the 4x limit at 8.9%.
For example, an income of $100k buying a $400k condo with 10% down and $500/mo in taxes and condo fees:
Anyone still think our current 9.3 ratio is sustainable? Dave? Browntown? SATV???
February 9th, 2010 at 3:31 pm
@ Patriotz 33 : “…I am using the 1950’s as an example for interest rates because I don’t think rates are likely to go back to where they were in the 70’s or 80’s, because people are so indebted now they wouldn’t be able to buy anything (i.e. it would result in general deflation)….” — Agreed, so if rates don’t return to that level, then what will change to reign in the amount of cheap money sloshing around fueling the bubble? Are you anticipating that CMHC rules change and risk is offloaded back to the banks, who will likely tighten mortgage lending standards? And since that requires prudent responsible action by the gov’t, against their natural tendency to stay in power, isn’t that wishing for unicorns too?
February 9th, 2010 at 3:10 pm
@taylor192:
“Now who wants to get back to predicting whether a collapse will occur, and when?”
Not whether, that is a given. As for when, as I said a few days ago we’re peaking right now, within a couple of months things are going to start to slide and within six months there will be an undeniably downwards trend. A year from now specuvestors will be peeing in their pants.
@Purp:
Purp, I don’t think it matters whether we want a crash to happen or not. It’s going to happen so get yourself in the best position possible to see yourself through it. If you’re prepared these economic storms will have a minimal impact on you and your family and may even bring some very positive changes. The people who will be hurt the most are the small business owners in Vancouver and the people who have stretched themselves too thin on Real Estate.
As for me I can safely say that my wife’s job will not be impacted and mine is pretty safe too so we’ll be laughing all the way to the bank.
February 9th, 2010 at 2:58 pm
@Eyes of the World:
Hahaha..I love checking in here and seeing the same old “arguments” being rehashed over and over and over again…
Vancouver is the best place on earth and the Olympics will show that to the world. People will walk around, notice the beauty and buy here.
Most people are room temperature, and there are a lot of them with tons of money. A lot of them are coming to the games (who else can afford them?). Not all of them are rational investors, as the supposed bubble has shown. If you think that many of them wont buy here because of the price you are out to lunch…
Not everyone is a rational investor like all the bear renters here..
——–
Hahaha. Be my guest. Fill your boots.
February 9th, 2010 at 2:48 pm
@taylor192:
The historical price/income for Vancouver, like California, has been 4/1. People really have been willing to pay more to live here – but just 33% more, not over 100% more.
And the collapse is not a matter of “if” but “when” and “how fast”.
February 9th, 2010 at 2:36 pm
@Purp:
Price/income was at the same level as the 1950′s as recently as the mid-1980′s. We have been in two bubbles, with a slight correction, since then. It’s that simple.
Do note that real prices were a lot higher in the 80′s than in the 50′s, because real household incomes were higher (higher real wages and many more two income families). But it was the same price/income.
I am using the 1950′s as an example for interest rates because I don’t think rates are likely to go back to where they were in the 70′s or 80′s, because people are so indebted now they wouldn’t be able to buy anything (i.e. it would result in general deflation).
http://cuer.sauder.ubc.ca/cma/.....couver.pdf
February 9th, 2010 at 2:30 pm
LOL @ Purp and patriotz arguing silly semantics
Who cares if its 3x or 4x, right now Vancouver is 9x and that’s silly by any standard.
Purp, you’re technically correct. Rates have been dropping since the 80s, higher TDS/GDS and longer amortizations seem here to stay. Thus the magical price/income ratio of 3/1 has changed… or has it?
patriotz makes a good point that other countries with bubbles that overshot the price/income ratio have seen a return to a 3/1 price/income ratio.
Housing is ruled on emotion right now, not fundamentals. A collapse in housing may see a 3/1 price/income ratio again – if a collapse occurs.
Now who wants to get back to predicting whether a collapse will occur, and when?
February 9th, 2010 at 1:58 pm
@Patriotz 26 : Thanks for the link, interesting stuff. But I’m not sure why you are disregarding the past 30 years of data, instead basing affordability on what the price/income ratio was in the 1950s. I would put that in the unicorn camp.
February 9th, 2010 at 1:51 pm
@Patriotz 27 : Read my quoted statement again and see if you can’t find the answer. Hint, it’s not unicorns.
@Logic : Agreed.
February 9th, 2010 at 1:48 pm
“you don’t want the other one to happen”
————–
Err, I do. Don’t assume we are all in your pseudo-altruistic camp. I want exactly what is best for me and my financial health, and that scenario would be.
February 9th, 2010 at 1:47 pm
“I think price/rent is a much better metric because it directly ties the price to a monthly payment.”
-0——————
And by this measure too we are in a massive bubble.
February 9th, 2010 at 1:44 pm
@Purp:
They didn’t want it to happen in the US, Ireland, Spain, etc, either.
So why did it?
February 9th, 2010 at 1:42 pm
@Purp:
I already corrected you once, I’ll correct you again. I was talking about the interest rate level we had in the 1950′s. Straw man much?
And what was that? Right around 6%. How much of a shock would that give to recent homedebtors?
http://www.bankofcanada.ca/pdf.....page58.pdf
February 9th, 2010 at 1:40 pm
@Aleks — you kind of made my point. Wishing for a 4x price/income ratio is like either wishing for unicorns or economic scorched earth. One isn’t going to happen and you don’t want the other one to happen.
February 9th, 2010 at 1:32 pm
@Patriotz : I don’t know what the rates were in the ’50s, I wasn’t alive yet, maybe you can tell me?
Look, the point is, a given ‘affordable’ price/income ratio is only relevant in a static lending environment (ie rates that are steady). If someone says a 4x ratio represents a normal market, they are also implying that 5-year interest rates are in the 10-12% range. If the rates change, then the price/income also changes, which means it’s not a particularly useful metric. I think price/rent is a much better metric because it directly ties the price to a monthly payment.
I understand your point about longer amortizations, but I think it’s fair to say that as amortizations increase the price/income ratio will also be rising. If they are held steady I guess eventually enough future demand will be borrowed putting a downward pressure on prices. And of course if they are decreasing there is a definite downward trend.
February 9th, 2010 at 1:28 pm
@Eyes of the World:
“Not everyone is a rational investor like all the bear renters here..”
Well that’s what we’ve been saying for the past five years!
A bubble market cannot develop if everyone behaves in a rational manner. But it cannot be sustained indefinitely either so it will crash. The only pertinent question is when.
Your own argument promotes the bubble hypothesis you know?
February 9th, 2010 at 1:17 pm
16: “Not everyone is a rational investor like all the bear renters here.”
———————————
In Soviet Russia, Investment Rationalizes You!
(coming soon to an Olympic town near you)
February 9th, 2010 at 12:53 pm
@patriotz:
Excuse me, “longer amortizations cannot result in higher prices long run”.
February 9th, 2010 at 12:51 pm
@Purp:
What do you mean “we”, white man? I explicitly gave the 1950′s as a time of stable house prices and interest rates. What do you think the rates were then?
BTW longer amortizations cannot result in lower prices long run, because they borrow demand from the future with interest. They also greatly increase the risk from rising interest rates.
February 9th, 2010 at 12:25 pm
@Purp:
Interest rates doubling from 3.5% to 7% would have exactly the same effect on people’s ability to pay as when they went from 5% to 10% or 9% to 18%. Plus, a lot of people are so maxed out that even just a 1% rise would sink them.
Sure, 1% doesn’t sound like much but as a fraction of the current interest rate it would mean about a 30% increase in the interest portion of mortgage payments. Whether rates will ever go to 10% is immaterial because all those people currently paying below 5% will be screwed long before then. The abnormally low rate amplifies everything.
February 9th, 2010 at 12:10 pm
Vancouver is Interzone. Exterminate all rational thought.
February 9th, 2010 at 12:06 pm
@Starving Artist:
Regarding the sharp uptick in housing starts in January it may just be the unseasonably warm weather we’ve been having this year. Often housing starts follow weather patterns rather than ‘calendar’ seasons.
February 9th, 2010 at 11:58 am
Hahaha..I love checking in here and seeing the same old “arguments” being rehashed over and over and over again…
Vancouver is the best place on earth and the Olympics will show that to the world. People will walk around, notice the beauty and buy here.
Most people are room temperature, and there are a lot of them with tons of money. A lot of them are coming to the games (who else can afford them?). Not all of them are rational investors, as the supposed bubble has shown. If you think that many of them wont buy here because of the price you are out to lunch…
Not everyone is a rational investor like all the bear renters here..
February 9th, 2010 at 11:47 am
@NMOFAN — Agreed, higher rates in any form will cause hurt. My point is only that if we are using a price/income ratio of 3-4 as ‘normal’, then we are really waiting for interest rates to return to 10%+ and amortizations to max out at 25 years. I just don’t see that happening anytime soon (if it did it would absolutely bring the world economy to it’s knees). In the medium term, I wonder if we will return to something in between, say 6-8% and 30 year ams. This will correspond to a different price/income ratio, say around 7-8. People who are waiting for homes to return to 3x income may as well rent for the rest of their lives.
February 9th, 2010 at 11:26 am
@Purp:
It doesn’t matter if rates don’t go as high as 10%. When you have rates that are in the range of 2-4%, going up to, let’s say 6%, will hurt many many people.
If people are stretching in terms of affordability now, every incremental rate increase will only be that much more painful.
February 9th, 2010 at 11:18 am
@Patriotz — I guess the question is what is ‘normal’ for rates? No doubt that rates have nowhere to go but up, but is it realistic that 5 year mortgages will go back to 10%+ anytime soon?
February 9th, 2010 at 11:12 am
bubble verbatim article from globe and mail
http://www.theglobeandmail.com.....le1460944/
February 9th, 2010 at 11:10 am
Nice press from the US. If Americans are finally taking notice of Canada, there MUST be a problem.
It’s tax time, and as an accountant I see a lot of financial information. I really don’t like what I’m seeing. Excuse me, but people who earn $40k per year really shouldn’t have $700k in debt (and that’s just the mortgages!) And it’s not just one or two clients, it’s quite a few. They’ve taken out these mortgages to buy principal residences, and then added a couple of rental properties for good measure.
Ever get that sick, worried feeling in your stomach? Yes, this would be one of those times.
February 9th, 2010 at 10:58 am
More bubble talk on the G&M this morning:
http://www.theglobeandmail.com.....le1461256/
I am hearing echos of 2008.
February 9th, 2010 at 10:45 am
“What are we, chopped liver?” – a lost cause.
February 9th, 2010 at 10:23 am
@Purp:
You seem to be assuming that today’s low interest rates are permanent. What I am saying is that if price/income and price/rent deviate significantly from their sustainable values seen during times of moderate interest rates (the 50′s for example), they have to come back down. Because interest rates will inevitably return to normal as well.
February 9th, 2010 at 10:04 am
@Patriotz “…it’s very easy to see from price/rent and price/income whether price is out of line with earnings…” — Doesn’t it really come down to a monthly payment? In that sense price/rent should be a good indicator since rent can’t mortgaged it represents what the market is willing to bear for housing. But I don’t really get the price/income ratio, since this ratio is closely correlated with interest rates and amortization lengths. When rates were 10%+, the ratio sat at 3-4. It has been trending upwards for the past 25 years as rates have been decreasing, for much longer than a bubble existed. So I don’t think it’s really a good metric, or at best it’s an indirect measure of affordability.
February 9th, 2010 at 8:27 am
Really though, all the recent MSM attention to our market…
I feel like a Noxema Girl. I knew I was beautiful all along.
February 9th, 2010 at 8:03 am
Good thing those rich foreigners don’t read the Globe and Mail’s ROB.
February 9th, 2010 at 7:13 am
TOTALLY off topic…but I almost gagged when Michael J Fox’x name came up as a possible person to light the Olympic torch.
WTF? What has he ever done for this country? He’s not even Canadian anymore.
As far as Tsur Somerville, he reminds me a lot of Michael Levy.
Sticks up his finger to see which way the wind blows.
Me? I salute them both with the middle one.
February 9th, 2010 at 4:30 am
http://www.theglobeandmail.com.....le1460610/
With respect to RE bubbles, that is complete nonsense. Because the earnings of RE (rental value) and ability to pay (wages) are so predictable, it’s very easy to see from price/rent and price/income whether price is out of line with earnings. These numbers cannot deviate from historical norms in the long run. This has been demonstrated by many well known experts like Robert Shiller. Anyone willing to take an objective look at the numbers in 2005 could see that the US market was headed for a bust.
Instead of “most housing watchers”, why not pay attention to those who got it right about the US, etc. Because all of them say there is a bubble in major markets in Canada.
Somerville is saying that if prices simply don’t go up further, everything will be OK? He deserves to be on the cover of Mad Magazine.
Once again, no mention of price/rent or price/income for any Canadian market in this article.
February 9th, 2010 at 2:58 am
It’s going to be interesting to see what happens when completions catch up to the starts line – that’s a lot of construction jobs that aren’t likely to come back any time soon.
http://housing-analysis.blogsp.....yment.html
Although I’m not sure how that jives with this:
VANCOUVER, BRITISH COLUMBIA–(Marketwire – Feb. 8, 2010) – According to Canada Mortgage and Housing Corporation (CMHC), 917 new housing units broke ground in the Vancouver Census Metropolitan Area (CMA) in January, 50 per cent higher than the same month a year ago.
I’d be inclined to believe the former, but that’s just my bias showing. The construction industry has grown by 110,000 workers according to BC Stats, from 2000 to 2008 and falling since then. That represents almost 5% of the BC workforce in 2008 numbers. If all those are boom jobs…..? 15% unemployment a possibility?
http://www.bcstats.gov.bc.ca/d.....icsann.pdf
February 9th, 2010 at 1:17 am
The even better article is the G&M article concerning the Competition Bureau’s decision to attack the MLS monopoly.
This poor industry: Attacked by foreign journalists and bloggers and now domestic bankers and bureaucrats. Pile on the HST, no more “the Olympics are coming” and buyers of the future used up months ago. Ouch!