Crackshack or Mansion? The Answers.

A week ago we had a community driven interview of Petr and Ola, creators of the instant classic Vancouver Real Estate quiz “Crackshack or Mansion?”.  You asked your questions and voted up the comments you wanted to hear answers to.  Well we’ve sent the highest rated questions on to Petr and Ola and here are their answers:

How long have they lived in Vancouver?
PETR: I have lived here since 2002 and Ola has lived here since she was about 10 years old.

Do they rent or own? (wouldn’t want to presume even the obvious!)
PETR: haha. We rent.
OLA: …one of these “special” 1950’s bungalows.

If they rent, have they been tempted to buy?
PETR: Ola had considered buying a place with her friend in about 2007. I thought the bubble was pretty much at its peak back then and strongly encouraged her to wait. A lot of her friends were getting into the housing market (or thinking about it) and I think the mob mentality almost got the best of her. It didn’t take long to convince it’s a crazy idea (to buy with a friend, and at these prices).
OLA: I shudder when I think about it now. Even if prices kept going up and interest rates stayed low, it’s insane to tie yourself down with other people like that.

Have they considered leaving Vancouver because of RE prices?
PETR: Even though we are convinced this is a bubble that will have a severe correction, the prices will probably still be too high for us. I wouldn’t pay 200,000 for most of those million dollar mansions. The city is nice but it has a lot of competition for the pretty city of the month award. The bubble will pop everywhere so the interior of BC will look pretty good.
OLA: I must admit, owning my dream home has been a fantasy since I was 8. However, my dreams are extensive and require many acres and handcrafted woodwork. It would be a trophy for career success. It would be a frivolous indulgence when I have excess cash flow. Enslaving myself to a peach-coloured 80’s built condo isn’t really a replacement for that.

What is the effect of the RE market on their own social circle? Are friends overextending to buy RE?
PETR: We both know several people that have bought recently. We don’t know their financial situation but based on their careers it’s a safe assumption that they are severely overextended. I hope it works out for them but it likely won’t unless they sell and swallow all the closing costs.

Are they experiencing pressure to buy from family/friends/colleagues?
PETR: Not at all. Most people have no clue of anything outside of the nighly news. They understand their knowledge limitations so they don’t try to convince anyone.
OLA: My step dad tried to pressure me into buying in 2003. But I was a university student on loans then and it couldn’t happen. Hindsight being 20/20, it could have worked out well if I sold at the peak… but it’s hard to gauge the peak. Since the driving force is credit, and the credit pushers do whatever they want, whenever they want, it’s impossible to see the end of the gravy train far in advance. Pete & I were convinced it was the end a few years ago, but then the credit spigots were cranked even farther.

Are any friends leaving for more reasonably priced pastures?
PETR: nope 🙂
OLA: I know some people who bought further east in the Lower Mainland. Save a hundred thousand, take 2 hours of commuting off your life each day. The bubble is the worst here, but it’s Canada wide so there’s not much one can do within the country.

Hi Petr and Ola, thanks for making such an entertaining site, I’d like to know how much exposure this got outside of Vancouver. Do you get many visitors from other countries?
PETR: We don’t know where our hits come from but I suspect most of them are Canadian. We have done interviews on many networks (all but one in Canada). We did a long interview with Al Jazeera English which was very cool. They took us to the houses on the game and interviewed us from the front doors. From what I understand they are doing a very extensive story on the Vancouver real estate market. They asked Garth Turner for an interview but he was unavailable.
OLA: Judging by the forum hits we get, we’re biggest in Vancouver, big in Canada, and also make a splash in other bubble cities. The appreciation seems greatest from people who are out-priced.

Do you have mls number for the mansion in the game since many people are interested in buying after seeing picture.
PETR: Hahahaha. I’m sure the interest is huge. They are easy to find on mls.ca if you put in the price range. There are a few that have been removed and at least one with a reduced price.

I’d like to know if they’ve gotten any hate mail from Crack Dealers who are pissed that they’ve exposed their sham: the selling of a temporary “high” followed by a lifetime of debt, to the unsuspecting masses looking for escapism. Also, please ask the same question again replacing “Crack Dealers” with “Realtors”.
PETR: Hehe, I like the question. No crack dealer complaints, they’re used to being made fun of. I think realtors will soon be pacing up and down east Hastings at 2am asking if you want to buy a house. Maybe the two could work together. You are much more likely to borrow 1 million if you’re high.
OLA: No hate mail to our virtual “face”, but we’ve heard multiple accounts of them rolling their eyes whenever the game is mentioned.

You’ve done a lot of interviews now. Have any of the interviewers tried to justify the prices or is everyone just as shocked as we think they’d be?

Did the dynamic duo have any reservations about doing the project under their real names and has there been any negative or positive feedback of “going public” with the view that real estate in Vancouver is ridiculous.

(answering both at once)

PETR: Most of the interviewers really loved the site. I think a lot of them are renters and related to it just as much as everyone else. I was very cautious at first because I know how much Vancouverites defend their bubbles. I was expecting a lot of backlash when the site started blowing up. I am a teacher in one of the areas that is highlighted in the game and was expecting angry parents and bad press but none of that happened. I have only had one negative comment. One lady was mad that we accused her of having lived in a crackhouse (she got 15 out of 16).

We were misquoted a couple of times by interviewers (probably homeowners). They represented us as being angry, distraught, pranksters. I am anything but distraught; I don’t owe anyone a million dollars.
OLA: one article talked about our site, then quoted some “expert” as saying that well, we’ve learned one of life’s hard lessons: real estate prices are tied to land values. Another “expert” chimed in that Vancouver prices are high because the city allowed too much dense development. If that’s not dredging the bottom of the justification barrel, I don’t know what is! (ED: you mean this gem?)

I believe Crackshack or Mansion, fresh in people’s minds, is helping to burst the bubble psychology and that it will prove a big part of the psychological wave down – where rate adjustments and changes to underwriting kick the financial legs out from under the bubble.

My question is, did you point out the “Emperor’s New Clothes” intentionally to help with that, or was it that you’d reached a point where you just couldn’t be silent about insanity any longer? We know you as readers of Garth’s, and savvy on the fundamentals but your timing and execution also seems perfect, and I am curious as to your thoughts on that!

OLA: Haha, I’ve been calling it the “Emperor’s New Clothes” in all the interviews, but sadly nobody has quoted me for it. I’m glad someone else sees the parallel! We’re totally that little girl in the story, and I think that’s why it resonates well.
PETR: I don’t want to overstate the impact of the game but I do think it will make a difference. Friends of mine bought a couple of months ago and after the game came out they were openly discussing regretting the purchase (when they were celebrating the week before). The timing was pretty much perfect but that was an accident. This bubble is old news to a lot of people that care to do a bit of research, but most people respond best to a silly game with pictures 😉

At first I felt guilty about posting peoples houses and probably making it harder for them to sell (Ola was wise enough not to have that guilt). I look at it differently now. The bubble was a terrible thing on the way up and will be devastating on the way down. If the combination of all of us can help pop it earlier, we are doing a community service. It’s probably too late though, the bubble is too big and the damage will be severe.
OLA: The worse the damage, the cheaper the scraps 🙂

Sort by:   newest | oldest | most voted
chip
Guest
chip

Sometimes I think it should be Crackshack And a Mansion, because the some $7 billion a year generated in the basements of crackshacks and other homes throughout the Lower Mainland is surely paying for a fair number of those mansions.

Kite towards moon
Guest
Kite towards moon

Stock market is good indication to make sure Vancouverboom2 run smooth,It's kind of tune up before listing goes blur with heart touching sales and rock solid prices.

vreaa
Member

Thanks Petr, & Ola; and thanks for the interview, Pope; great idea.

Interesting that 'Al Jazeera English' actually took them to the houses and interviewed them there. Sounds like that "very extensive story" should be worth watching.

Plummet
Guest
Plummet

@chip: I don't recall any part of the popular definition of a "mansion" to include "has part of the mortgage covered by renters in the basement".

realpaul
Guest
realpaul

Debt is piled on top of debt. ECB buys one trillion euros of its own paper. As is the case here and in the US it only puts off the inevitable for a short period of time. Kind of like getting drunk the night before you go to jail or thinking the Canucks are a good team based on one game.

Can you imagine what this is going to do to the value of international paper money? Straight into the crapper. Look for a continued devaluation of your purchasing power as the governments are stupid enough to think they will inflate all this paper away. Case in point:

http://www.investors.com/NewsAndAnalysis/Article….

vreaa
Member

"A real estate agent that wishes to remain anonymous has told me that, thanks to unscrupulous mortgage brokers, falsifying documents in mortgage applications has become rampant in Vancouver. The agent says this is how some local and foreign buyers that want to get in on Vancouver’s real estate boom extend their buying power. The same assets, for instance, could be recycled and used by a number of different parties to support mortgage applications, and it’s especially easy to forge documentation from foreign sources. With HST and rising interest rates it will be more expensive than ever to own or maintain property in British Columbia, and the question is if low income home owners can trigger a bust in BC’s mortgage bubble."

From an article by Steffan Ileman, examiner.com 8 May:
http://www.examiner.com/x-36530-Vancouver-Governm

Archived as an anecdote:
http://wp.me/pcq1o-Rh

boomingVancouver
Guest
boomingVancouver

Stock market rally big time on trillion dollar grecian money orgy. How does this affect vancouver condo market? Everything go up in market including bond price so mortgage rate come crashing hard like ukranian luge racer. Once rate go down condo go up. This is the start of third boom in Vancouver.

Best place on meth
Member
Best place on meth

CDN 5 year bond rapidly heading back up again.

http://www.bloomberg.com/apps/quote?ticker=GCAN5Y

~The cure for higher prices is higher interest rates~

Nero
Guest
Nero

@Best place on meth:

Doesn't matter what central banks do any more.

Mortgage rates everywhere have nowhere to go but up. The collapse of US Real Estate has made banks and lenders very risk averse.

There is absolutely no way that bank lending rates will decline in the short term.

The only way they will decline is if they continue to rise first, and then decline again in a new recession in 2-3 years.

Nero
Guest
Nero

@vreaa:

This should be the big news today, but even the MSM will sweep this under the rug…

But this is exactly the kind of stuff that will blow-up in the media when RE prices collapse, and the fallout will be a far more regulated and tighter compliance mandate on the CAAMP, which currently has no more credibility than the CREA.

Mortgage brokers should have a fiduciary duty to advise cleints on debt management and financial planning. Instead they just lend to anyone who qualifies, and just make up shit for the other borrowers.

nonymouse
Guest
nonymouse

Just to resurrect a dead horse for a moment. The sign that I took a picture of with a bubble pricing sticker now has a bright red "sold" on top while the bubble sticker remains.

VRENGD
Guest
VRENGD

"Mortgage brokers should have a fiduciary duty to advise cleints on debt management and financial planning. Instead they just lend to anyone who qualifies, and just make up shit for the other borrowers."

They don't have the education of the brain power to do this.

Buyer beware.

Lenders who have been vicitmized by broker fraud and buyers who willfully participated should sue the brokers and the buyers. They should also be charged with criminal fraud.

More legislation is not the answer. Law suits and financial consequences for the perpetrators are the best deterrant.

Not much of a name..
Guest
Not much of a name..

http://www.theglobeandmail.com/report-on-business

Wow…I wonder what the numbers look like for this slice of heaven. I'm sure that they would be disproportionately higher for Vancouver.

snatchamoto
Member
snatchamoto

"OLA: I must admit, owning my dream home has been a fantasy since I was 8. However, my dreams are extensive and require many acres and handcrafted woodwork. It would be a trophy for career success. It would be a frivolous indulgence when I have excess cash flow. Enslaving myself to a peach-coloured 80’s built condo isn’t really a replacement for that."

THIS.

vreaa
Member

@nonymouse: "The sign that I took a picture of with a bubble pricing sticker now has a bright red “sold” on top while the bubble sticker remains."

Thanks for the update.

Surreal.

Perhaps 'certified anything pricing' increases sales?

The realtor took the trouble to post the Sold sign without removing the sticker?

Anoymous
Guest
Anoymous

"Even though we are convinced this is a bubble that will have a severe correction, the prices will probably still be too high for us. I wouldn’t pay 200,000 for most of those million dollar mansions."

So $200,000 is still to much for a house in Vancouver? Makes you wonder why these bitter renters bother to live here at all? And from their own comments they've midjudged the market at least twice already.

Drachen
Member

@vreaa:

I just hope the CMHC will do a proper investigation of each and every house that goes under for the next few years. The banks and the mortgage brokers should be on the hook for the billions of fraudulent failed mortgages, not the taxpayer.

No Insight
Guest
No Insight

Let's see… Ola was strongly urged to buy in 2003 but didn't. Oops. Petr wouldn't buy a home for even $200k today? WTF?

These guys aren't just bitter and astonished renters… they're living in regret and have ventured into fantasy.

But, boy, I bet they love the attention that reinforces their beliefs. Now, this will get voted down because it questions one of your uber-bears. And, no, I am not saying prices will keep going up. I think prices will drop substantially. I am just saying that these two really aren't all that.

ibought3
Guest
ibought3

@No Insight:

Regardless if they are "all that".. you gotta admit the crackshack game was brilliant and it went mainstream. Like they said, the regular joe on the streets understands pictures, and games.

Neptune
Guest
Neptune

@No Insight:

Ola had considered buying a place with her friend in about 2007. I thought the bubble was pretty much at its peak back then and strongly encouraged her to wait.

Where did you get 2003 from?

Gordon C.
Guest
Gordon C.
Houses today are sold like used cars. Its the monthly payment that is important for people. So while someone would not pay $200,000 for a home in Vancouver. Would they pay a mortgage payment of $800 a month for a 3 bedroom rancher? How about $1,800 a month? $2,800? If you just sold your condominium and could put $200,000 down on a house and are still willing to pay $1,800 per month. How much house can you buy? The amount someone is willing to pay in a mortgage payment is not going to change much. What will change is what they have as a down payment and the interest rate. As prices decline, so will the size of the down payment decline, then add in rising interest rates, lack of consumer confidence, and a smaller pool of prospective purchasers for… Read more »
Purp1
Guest
Purp1
Interesting comments. Ola "…My step dad tried to pressure me into buying in 2003. But I was a university student on loans then and it couldn’t happen. Hindsight being 20/20, it could have worked out well if I sold at the peak… but it’s hard to gauge the peak…" — Actually it WOULD have worked out well if you had sold ANYTIME in the past few years, without trying to gauge the peak. Petr "…Even though we are convinced this is a bubble that will have a severe correction, the prices will probably still be too high for us. I wouldn’t pay 200,000 for most of those million dollar mansions. The city is nice but it has a lot of competition for the pretty city of the month award…" — Huh? Is he seriously thinking that an 80+% drop is… Read more »
Devore
Member
Devore
@vreaa I find Al Jazeera to be a fairly robust media outlet. They go in depth into stories western media do not touch or do not bother with. They remind me a little of the original independent CNN, where they would actually spend money to send a person on-location, instead of reprinting press releases and throwing soft-balls at interviewees that they specialize in now. They of course have their own bias, as do all media. Different sides of the same coin. @No Insight Interest rates have no where to head but up. This level of pricing is only sustainable while rates are low. Each 1% rate increase cuts purchasing power by 10%, combine with already high income-price valuations, the drop will be much larger. As the cheap pre-approved buyers run out in the next few weeks, prices will start sliding.… Read more »
Anonymous
Guest
Anonymous

@Gordon C.:

Houses today are sold like used cars. Its the monthly payment that is important for people.

Actually, I agree with the sentiment of this quote, but it's now even worse than you suggest. I had been meaning to post on this phenomenon but had forgotten to do so. Thanks for reminding me.

Over the last couple of weeks, I been hearing a radio commercial put out by some car dealership. The catch is that they are now eschewing the "only $XXX a month" phrasing and going with "$XXX dollars "every two weeks".

boomingVancouver
Guest
boomingVancouver

If you bear can't pay more than 200k for house you will never own in Vancouver. That ok since you happy renting forever and pay my mortgage. You happy, me happy. I like my maguerita on the rocks not with the crush ice when you get a chance.