On a side note, the US is in real trouble. Prices are still low even though they can get 30 year fixed mortgages at historically low rates.

Correction: Prices in the US are still high. Apart from the real disaster areas like some Florida markets, prices in the US still exceed historical multiples of rents and incomes. Particularly places like Seattle and NYC that were slow to start the bust.

Prices in the US has been inflated for so many years that people have lost perspective on what fair pricing really is. In most markets, that's 3x median income. That goes for here, too, although historically Vancouver has been 4x income.

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It was a good discussion and I tend to agree with you; markets are interconnected and complexity spills over especially when you are looking at projections of yeild going into the future.

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http://www.thomaspalley.com/docs/articles/macro_p…

However, republicans/austrian economics would argue it would rain fire and puppies if this went through so I don't think this would ever pass.

Note the chartalist taxes drive money concept should be thought of broadly. Example: food is a life tax that must be serviced.

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In regards to what to target, Rona is good, as well any furniture companies would be decimated once household formation drops off. Alternately taking some form of a long/short spread using options against SP500/TSX in terms of USD would be safer but may not pay off the same way.

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The seawalls are lined with businesses and restaurants where people can enjoy making commerce.The seawalls are dark and empty here, good places to get mugged, raped or step in vomit and dog shit, they've designed them as unusable dead zones for 'jogging'. Hey….douchebag planners, not everyone wants to run, bushwalk or cycle on their time off. Some people want an upmarket lifestyle that does not include the grouse grind. I hardly think that giving the homosexuals a discreet place to have public sex should have been the focus of the Vancouver planners.

For a place thats so 'international' none of the businesses have head offices here. Singapore is packed with open lively markets, above and below ground for every type of weather. Food can be had in and out without restriction. Vancouvers planning dept has ruined a Singapore like location and permanently consigned it (Vancshithole) into the toilet bowl. Vancouvers population has become a parasite within itself, selling real estate and pot to one another, there is no commercial hub. When the real estate money gets cut off, the entire place will wither and die.

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…..

Your logic makes sense but your premise is faulty.

..

This was just a question. If many defaults/foreclosures happen, such as in the USA, who loses the money, mortgages are insured, will the bank lose money, insurance company who insured it or the government who bought up loans to get banks lending? I'm not suggesting the government will bail anyone out, they already have. Who stands to lose the most if people walk away from mortgages?

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For very specific types of properties, with very well understood maintenance costs and tenant prospects, we can estimate very well expected monthly NOI. Gordon C is right that certain types of property cannot be properly valued by simply looking at GRM. But for a Yaletown condo with a very well understood set of inputs (i.e. rent coming in; ongoing taxes, maintenance, general administration, and some planned renovations some years hence going out) I think there is a very tight relationship between yield (however it's defined) and GRM.

Appraising isn't a 5 week course at the community college. It's complicated and high stakes. But there must be some admission that for some of the simplest real estate assets around, namely residential condos or apartments, the calculation should be simple, at least as a first pass estimate of investment value. If a condo/apartment price doesn't even come close to this first-pass estimate it's unlikely any more detailed calculations will markedly improve matters.

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I hope you don’t mind me going back to last week, but here is a challenge from Gordon C:

“Jessie and VHB, I have laid out my arguments.

Okay show me. Show me how you can estimate a yield from a GRM.”

Not estimate–calculate. Here it is:

GRM = price/(rent/month).

Multiple denominator by one, expressed as (12months/1year) gives us price/(annual rent).

Invert this to get (annual rent)/price. That is the definition of yield.

So, to go from GRM to yield, you just divide by 12 and invert.

An example: GRM is 200. 200/12 = 16/667. 1/16.667=6%. Done.

To conclude, there is a direct mathematical relationship between GRM and annual yield. They both take the same inputs (rent and price) and express the same thing in different ways.

I don't know if the dust has settled yet, but going back to the original argument:

GRM is by definition Price divided by Gross Rent (Gross Rent Multiplier).

Any useful definition of Yield is definitely much more than just gross rent divided by price.

As you conceded, there are more particular types of yield, but in the most basic form you have the "Current Yield" that you referenced (I think in real estate that would equate to the cap rate). But to calculate current yield you still have to account for operating costs so it would be net income divided by price … which you can't compute from GRM alone.

You can argue semantics and say that gross rent divided by price is "a yield rate, not The Yield Rate", but it wouldn't be useful, and I don't think it was the original intent of question.

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That's the thing that always strikes me when I get back to Vancouver twice a year. Where is the business activity? Why are all the new buildings residential rather than office?

Singapore and HK have bubbly real estate prices but new (and full) office buildings are everywhere. When I hit my local coffee shop I'm just as likely to sit next to an informal meeting of the board for a satellite company discussing million dollar deals (yesterday morning) as I am to a guy and his financial advisor, gas workers from the Natuna field, a banker's wife just back from viewing a $20,000 a month rental or some guys from an Indian med tech company having an ad hoc powwow about new markets in China.

It's buzzy and I love it.

When I'm having a coffee in Vancouver, it seems there's the guy from Remax, a mortgage broker, several students probably in their fifth year of study before becoming baristas and some flashy 20 somethings pulling up in their Beemers and $5000 cash in their wallets.

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http://globaleconomicanalysis.blogspot.com/2010/0…

Vancouver Home Sales Drop 30 Percent , Calgary 42 Percent – First Comes Volume, Then Comes Price; Canada Housing Peak is Finally In

This pattern is quite similar to how things cascaded in the US once the top was in.

"Housing Collapse Cascade Pattern"

•Volume drops precipitously

•Prices soften a bit

•Inventory levels rise slowly

•High-end home prices remain relatively steady for a brief while longer

•The real estate industry tries to convince everyone it's "business as usual" and homes are affordable because rates are low

•Bubble denial kicks in with media articles everywhere touting the "fundamentals"

•Stubborn sellers hold out for last year's prices as volume continues to shrink

•Inventory levels reach new highs

•Builders start offering huge incentives to clear inventory

•Some sellers finally realize (too late) what is happening

•Price declines hit the high-end

•Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc

•Gimmicks do not work

•Price declines escalate sharply at all price levels

•The Central Bank issues statements that housing is fundamentally sound

•Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt

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