Is there an echo in here?
Jonathon sent in a link to this great ‘blast from the past’ interview with developer Sam Zell about whether there was a real estate bubble in Miami. He makes some very compelling arguments about why there is no real estate bubble, and some of them sound remarkably familiar somehow.
Q But U.S. home prices are up about 40% in three years. How can this not be a bubble?
A Econ 1001: Prices have gone up because the demand has been much greater than the supply. The country is producing all it can in terms of supply, but what you see is more demand. Over the next 10 years we’re going to add a million new household, much of that’s due to immigration.
Econ 1001 is very advanced, so you may not understand that. Here’s something you will understand:
Q How bad could it get?
A Worst-case scenario? A flat housing market. Look, all I can tell you is we’re the largest owner of apartments in the U.S. and among the largest converters of apartments to condos. If there was a danger of a bubble, would we be in this business? I’ve never been accused of being a Pollyanna, I’m the Gravedancer. Americans don’t understand that we have the cheapest housing in the world. London and Tokyo are more expensive than New York. Why do you think everyone is going to South Florida from Europe? It’s because prices here are cheap compared with there.
Understand? South Florida is cheaper than other places, and everyone wants to live there. Ergo, there is no housing bubble in Miami condos. All of those arguments just happen to be applicable to Vancouver BC as well.
Here’s the ‘flat market’ in Miami since that argument was made, but always remember: ‘it’s different here’.
July 16th, 2010 at 10:59 am
@patriotz: Such are things when you're talking inflation/deflation. You really have to define your terms.
Neither here nor there.
I'm just surprised that people, RE bears of all, would settle for negative real return to 'save" their money, so they can leverage themselves 3-5x annual income to buy a house, which they see as an investment, presumably a safe one, but look at ACTUALLY investing their savings as gambling.
Boggles the mind.
July 16th, 2010 at 10:39 am
@Grant, specialfx3000 is correct… I did e-mail the lady and told her the market was trying to tell her something about the price she wanted for her back alley special. "Rant" is a little of a strong word, though… She responded back and I quoted some of her reply…
July 16th, 2010 at 8:24 am
@Devore:
I agree that's not contradictory, in fact the latter is likely to lead to the former when you have stagnant wages.
But that's not what you said.
July 16th, 2010 at 8:20 am
@patriotz:
Asset deflation and price inflation. That's not contradictory. I meant what I said. It's now more important than ever to ensure your savings and your retirement are beating real inflation of things you need: food, energy, transportation, healthcare, taxes, user fees.
The no-effort, couch-potato method of investing in a GIC guarantees losses as far as the eye can see.
July 16th, 2010 at 7:25 am
@grant:
In a previous thread, it was mentioned that someone contacted her (Peter Pan?) ranting about the unit and her response included the quote, indicating lots of demand.
That was weeks ago and apparently the listing is still there.
July 16th, 2010 at 2:55 am
Peter Pan, your quote does not actually appear anywhere in the craigslist ad… where are you getting it from?
July 16th, 2010 at 12:15 am
Crazy Laneway Lady is still posting on Craigslist for her $1650 Rat Box Back Alley Special, despite "countless responses and viewings we have had, as well as the applications we already have in hand well BEFORE the application deadline we have set."
Here's her e-mail just in case you'd like to share your enthusiasm for her "special rental"…
hous-gjhcm-1844338819@craigslist.org
July 15th, 2010 at 11:43 pm
25 US cities where life is good, incomes are high and houses (median) are well under $100K since the correction has rationalized prices.
http://money.cnn.com/galleries/2010/moneymag/1007…
I read another article recently that said that Miami is booming…………for renters. RE is Toxic in the US, that is keeping prices real and the pimps in their place.
July 15th, 2010 at 10:51 pm
Hat's off VHB – that canequity site is gold, GOLD! I tellsya. Thank you.
July 15th, 2010 at 10:24 pm
Victoria isn't sliding down slowly like we are–they are truly crashing. Sell lists<40%. Sales down 50% from last year.
Check out this 19% haircut. Maybe the asking price was crazy high (I know nothing of this prop) but still.
"Here is a sale that came through today in saanich west.
330 hector rd. (decent house on 5 acres)
Assessed at $904K
Orig. ask $895K
reduced to $789K
SOLD $725K"
July 15th, 2010 at 10:05 pm
Hey, has anyone ever seen this site before?
Major score! Lotsa new data there on mortgages.
Pope–this is your post for tomorrow–show everyone this site and let them play with it!!!
What do you make of this picture?
I think the July 2010 is so superlow because the month is only half done. It says on there that data up to July 14th are included.
What's the y-axis there? Does the graph plot the % of total mortgage apps over this time period that occurred in a given month? That is, say there were 1000 apps between 2002 and now and 15 of them happened this month, would it show '1.5%'?
That is how I interpret it–there are 9 years of data or so times 12 months, so on average each month would have 1% of the apps. That's pretty much the average I see on that graph.
ANYWAY. For July 2010, say you double it to account for the fact it's only a half month. Still WAY WAY down. And check out June!! That must be the HST effect, I guess. See Alberta here. No spike in June.
Toronto is not having a good july either . .
July 15th, 2010 at 9:10 pm
More RE news in the MSM.
http://www.youtube.com/watch?v=o4q8VNXX3Js
I'm patient enough to wait this out – not to try to time it mind you (not waiting for "bottom"). I have metrics in mind and when I can get them lined up, take the plunge I will.
July 15th, 2010 at 8:53 pm
@Poor Bear Camps:
Over a nine-month period during 2008, the benchmark price in Vancouver fell by 15%, for an annualized gain of 20%. Were that rate of decline to continue for three years, the result would be a 48.8% [1-(1-.20)^3] drop in prices, wiping out 7+ years of gains.
Hell, if it falls at 10% per year, it would take just over 6 years for prices to fall 50%.