End of the Canadian RE bull market
ReadytoPop posted a link to this Financial Post article that portrays what it looks like when a real estate bet turns bad:
Erica and Jeff Manger never thought the price of their house could drop.
The Alberta couple bought a condominium in the Rockies resort town of Canmore three years ago and when they decided to move in 2008 to Sylvan Lake in Alberta, where they could afford a detached home, they kept the condo as an investment.
“It never occurred to us that we wouldn’t be able to sell for what we paid,” says Ms. Manger. “People were making $100,000 [on paper] a year on their condos.”
Now they’d be lucky to get the $315,000 they paid for their condo, even though it may have fetched $345,000 in 2008 when they were thinking about selling it to help pay for their new home. Instead, they’re getting $1,100 a month in rent for an investment that costs them $1,800 a month to carry and isn’t going up in value.
It gets worse. They have to sell the house in Sylvan Lake because Jeff, who is a helicopter pilot, is looking for a better location for work. They paid $375,000 for the house and fixed it up. Not even counting Jeff’s labour, the couple spent another $30,000 on supplies.
“We tried to sell it and put it up for $409,000. We lowered it to $385,000 when we hired a realtor, but that didn’t work,” says Ms. Manger.
Read the full article over at the Financial Post
August 8th, 2010 at 7:38 pm 1
For those not familiar with Alberta, 2007 was the very top of the market in that province. A year later they brought another property in a one horse town (pop. 11K) for more than what houses were selling for in Calgary a few years previously. And this when the husband has a job which he knows may require him to move.
These two are the poster children for the Alberta bust. Another episode from Ben Jones' HBB, recast for the Canadian market.
Like or Dislike:
0 
0
August 8th, 2010 at 9:09 pm 2
I know it sounds trite but the child in this story had no say in this particular mess. Just like many of us who have friends and family who drank the koolaid and all we could do was watch.
We're all speculators now.
Like or Dislike:
0 
0
August 8th, 2010 at 9:43 pm 3
uh oh bull. market bout to crash like rich asian in bentley with fake license. time to slash price of all 6 condo in yaletown before more profit lost. you want to buy? i selling 3 my husband selling 3.
Like or Dislike:
0 
0
August 8th, 2010 at 10:02 pm 4
“What is going to be the new norm is the $64,000 question and it’s still a very real debate,” says Doug Porter, deputy chief economist with the Bank of Montreal. “Did the market wildly overshoot or was it really just responding to the steep decline in interest rates?”
Read more: http://www.financialpost.com/news/Getting+real+Bu…
Doug Porter is deputy chief economist with the Bank of Montreal.
And I'm just going to quote him again:
“Did the market wildly overshoot or was it really just responding to the steep decline in interest rates?”
Yes, Doug, in USA, they call it subprime, in Canada, your bank and others call it "innovative financing".
Like or Dislike:
0 
0
August 8th, 2010 at 10:49 pm 5
@Keeping an Eye on The Pimps:
False dichotomy. The market overshot because of the steep decline in interest rates. Those low rates are not sustainable, except in a context of general deflation.
This guy should know better.
Like or Dislike:
0 
0
August 8th, 2010 at 11:31 pm 6
Bulls and Bears class has been created by wall street to make fools out of poor investors,however,when it comes to housing market,The market must connect to honest human being,necessity,and land structure.So let the national or international newspaper join the goons institution by pumping their culture into world of honest human being,They will loose their bussiness and income just by attacking the Vancouver real estate,Virtually poised to never goes down like wall street in 15 seconds.
Uruguay 2
Brazil 1
Argentina 0
Like or Dislike:
0 
0
August 9th, 2010 at 12:10 am 7
“People were making $100,000 [on paper] a year on their condos.”
That's what this story is really all about. Greed. Although this story certain has a sad element, it has its origins in greed. For a reality check, compare the staged photo, showing the sad family, with this famous, non-staged, photo from the Great Depression.
Like or Dislike:
0 
0
August 9th, 2010 at 12:39 am 8
Those owners need to take a chill pill. Real estate always goes up.
They should count themselves lucky for being home owners and RE investors with all the status and privilege that brings. They are better than the loser renters that post on this blog. Don't they realize that?
Now is a great time to buy. Everyone knows that. That is why they will sell their RE no problem.
Like or Dislike:
0 
0
August 9th, 2010 at 12:43 am 9
Bear problem is market is like cancer tumour. You take it out and it looks like it gone forever every bear dance around like life is saved and then radiologist call gp with bad news. It spread like wildfire again bear. When will diagnosis for Vancouver happen? Not sure but it will be start of Vancouver boom 4.
Like or Dislike:
0 
0
August 9th, 2010 at 12:45 am 10
"that costs them $1,800 a month to carry"
Wanna bet that the 1800 is only their mortgage, and doesn't include insurance and property taxes, let alone allowances for vacancies or special assessments.
Like or Dislike:
0 
0
August 9th, 2010 at 12:45 am 11
My brother is a chemical engineer in Edmonton. He is a very realistic, rational guy. He thinks Edmonton is NUTS.
He bought a new spec home in 2002 for 212k Proceeded to sell it (by owner in a bidding war) for 447k in 2007. He then bought a new home (pretty nice one too) for 570k. That is where he still lives.
We had a drink together on my deck a couple of days ago. He told me that every day he thinks of selling and renting…but just can't because of the lifestyle change involved (he has two kids). I agreed, mentioning that budgeting for a family unit is more like allocating resources in an NFPO than it is all about the bottom line. He believes that his place is actually "worth" 350k, down from the current FMV of around 490k. He never envisioned his place being worth 600k. He never spent as though it were.
To him, it is worth choking on the depreciation because he REALLY LOVES the place. Fair's fair. I like going on 5 vacations a year…because I really love it. To each their own.
The significance of this…is that for everyone who bought at current prices and subscribing to the "eyesthebye" sticky price theory (that is…nobody will ever sell for a loss {complete crap}), there is another person like my brother who would have no problem or hseitation to lower the price to 460k to get a sale…because he actually bought way back in the day and is rolling in the "monopoly money".
It almost seems counter-intuitive…the person who does not have to sell may actually be the one to lower the price since a loss is so far out of the question that it is irrelevant.
Like or Dislike:
0 
0
August 9th, 2010 at 1:00 am 12
@“A-sharp” Accountant: Actually your comment is kind of bullish isn't it? I mean most bears here assume (wrongly) that every homeowner out there is stretched to the max and are complete idiots. The opposite is true of course. Most people don't have huge mortgages and bought well before the boom ever happened. So you've got this huge group of people who could care less really about the price but also who don't need to sell and don't want to.
The outliers who are stretched and those who need to sell will push prices down but if your bear collapse story relies on a huge massive group of dumb ass owners with no money scraping by then you'd better rewrite it.
Like or Dislike:
0 
0
August 9th, 2010 at 1:03 am 13
@Keeping an Eye on The Pimps:
GReenspan and Bush were calling it "innovative mortgage products" too, praising lenders for their creativity and asking them to step it up a notch.
Like or Dislike:
0 
0
August 9th, 2010 at 1:10 am 14
@youdungoofed:
First straw bear post of the thread.
Do you really think that we assume that someone who bought a house a generation or more ago and has it paid off is a "complete idiot"? Completely the contrary – they did everything right.
We assume that anyone who has bought since 2007 (when the problems in the US became apparent) or refinanced based on current prices is a complete idiot. And that a good proportion of those will be stretched to the max fairly soon.
And that's all it takes to tank the market.
Like or Dislike:
0 
0
August 9th, 2010 at 1:11 am 15
"The outliers who are stretched and those who need to sell will push prices down…"
Well. That settles that.
Like or Dislike:
0 
0
August 9th, 2010 at 1:11 am 16
@youdungoofed: "most bears here assume (wrongly) that every homeowner " Need anyone read further? If the 3 or 4 percent of homeowners who sell every year become 6 percent, the market crashes horribly. We don't need "every." A horrible quick crash needs only 3 or 4% more. And I haven't ever even forecasted a 'horrible quick crash' either.
Like or Dislike:
0 
0
August 9th, 2010 at 1:13 am 17
A real life story: I know a guy (at that time he was an FTB) who took home equity loan to repay credit cards and renovate his apartment. When he bought the condo in 2006 he paid 250 k for it. A year later the bank was very generous with the equity loan, and quite frankly I do not understand how he got that much – I think it was a bit over 300k. Anyways, now he is trying to sell, and the price is ridiculous- $100k over the BC assessment!
http://tiny.cc/l8pp5
I feel sorry for him, in a way: the strata council is totally incompetent, they spend money like there is no tomorrow therefore strata fees are through the roof, they never really look for the best deal when finding contractors, they hide documents from other owners and lie to cover up god knows what and that is probably the reason why property managers do not stay long with them. I find it funny how his realturd describes "proactive" strata, since he too lived in the building, was on the council, sold his condo and left the building at the speed of light.
Like or Dislike:
0 
0
August 9th, 2010 at 1:25 am 18
"If the 3 or 4 percent of homeowners who sell every year…"
The "Pareto Principle" in action.
Like or Dislike:
0 
0
August 9th, 2010 at 1:38 am 19
@Teddybear:
I saw the pictures of the renovated condo. With all the money spent, that was the best he could come up with?
Horrible decor and colour choices. I can't see it having much appeal to the general public.
Like or Dislike:
0 
0
August 9th, 2010 at 1:39 am 20
Oh boy bears, one more month and still no crash, this make hard to enjoy summer. Only thing burning up is BC Forest. There is no spectacular crash pending bear with current environment. Let's wait for asteroid or 10% rates. 5 year down to 2.4% bears, bad news.
SSB in Paris to see finish of TDF and thinks Van RE bears like fans waiting for riders. Lots of build up and excitement and long waiting and then a quick whoosh of rider and then over and time to go home. Just like waiting for crash bear, reality will disappoint.
Vancouver is great city, we have no dog poop on sidewalk and sushi is cheap. Everybody except bear blog posters are busy make money and business and growing city while in France everyone sit around, drink cafe and eat baguette all day. All 'world class' cities are part of past bears, just like failed predictions. Time to look to future Marty, because where we going, we don't need roads.
Like or Dislike:
0 
0
August 9th, 2010 at 1:54 am 21
The Vancouever house price rollercoaster is in the boingboing submitterator:
http://boingboing.net/submit/2010/08/vancouver-ho…
With enough votes it could make it to the front page.
Like or Dislike:
0 
0
August 9th, 2010 at 1:59 am 22
What do new listings and sales look like for August so far? MOI?
Like or Dislike:
0 
0
August 9th, 2010 at 2:03 am 23
The interesting thing to me will be listening to the vested interests as the market declines. Their spin will be fascinating.
Like or Dislike:
0 
0
August 9th, 2010 at 2:18 am 24
@Anonymous: The living room looks like a circus stage or something. You sure this is a "guy"?
Like or Dislike:
0 
0
August 9th, 2010 at 2:19 am 25
"Wanna bet that the 1800 is only their mortgage"
Wanna bet that the 1800 includes both principal and interest so, strictly speaking, is not a "carrying cost"?
Like or Dislike:
0 
0
August 9th, 2010 at 2:25 am 26
Over $300/month strata fees for zero amenities, and shared laundry? Where do I sign up?
Like or Dislike:
0 
0
August 9th, 2010 at 2:34 am 27
Just had lunch with a bunch of friends over the weekend. Two of them will sell even if the market crashes. In fact, they prefer the market to crash.
1) Upsizing. Their kids are getting older and want more room. They are more than willing to sell even if the market crashes. If thier condo sells for less, so will the house they want to buy.
2) Downsizing. They are no longer planning to have kids. The couple is selling their house to buy two condos. Again, the price makes no difference.
Like or Dislike:
0 
0
August 9th, 2010 at 2:34 am 28
Bear attack on RET update #3.
Bear continue to attack RET try to get Horton blog to die like cancer patient in BC waiting line. As usual bear fail and go home cry like loser. It's ok bear just think you haven't wasted opportunity cost on silly real estate purchase.
Like or Dislike:
0 
0
August 9th, 2010 at 2:35 am 29
@Jonathon:
http://agentwill.com/weekly-stats/
Like or Dislike:
0 
0
August 9th, 2010 at 2:38 am 30
This really must be the end of the market. I am starting to hear sad stories of real estate investment gone wrong in my circle. I visited an old friend on the weekend, things seemed unusually tense in her household. Later on, after her husband and their flock of children had gone, she tearfully confessed to me that her husband, with her express objections, had gone a few years ago and signed up to buy two of those Olympic condos, with a buddy of his. Guess what…now they are on the market and NOT SELLING and now the first mortgage payment is coming due. Her husband's share is $2600 a month and she's wondering where the hell they will get the money (they are a single-income household). She's frantically searching for a job, and seething in anger at her husband. She said she told him NOT to buy in, but I guess he got greedy,since they had flipped a condo a few years ago and made $25k. I was absolutely stunned at her revelation because they had always been the epitome of financial stability-this is a couple who, with a whole flock of children, had paid off their mortgage on their principal residence in less than 15 years. Now it looks like they could lose a lot (and retirement is supposed to be 10 years away). I'm shocked at how investing in real estate seems to have become an addiction in our society and once there are no gains, people you don't expect could end up being financially devastated.
Like or Dislike:
0 
0
August 9th, 2010 at 2:39 am 31
Laneway housing concept is as much a low brow position as bicycle lanes. The dillitant planning and stop gap measures are as idiotic as tearing down the viaducts and planned 'street parties'..the local government has zero vision and no concept of urban discourse. Vancouver was designed as strip mall surrounded by a mish mash of residential plots laid out over periods of boom and bust population events, hence there are huge tracts of ugly and mostly delapitated housing stretching for mile after useless mile around the downtown extending six blocks from the epicenter. I would suggest tearing out areas like Shaugnessy, Kitsalano, east to Commercial Drive and the PNE, the entire area bewteen Main and Knight from Marine to the Waterfront and redeveloping an urban strategy. Otherwise the city will continue to resemble a dogs breakfast of ugly shacks.
http://www.vancouversun.com/business/Laneway+hous…
Like or Dislike:
0 
0
August 9th, 2010 at 2:49 am 32
Wonder if our favorite laneway ad on craigslist got rented out? I cannot seem to find it anymore.
Like or Dislike:
0 
0
August 9th, 2010 at 2:53 am 33
@Anoymous:
After 3 years, how much of the payment on a 30+ year amortization is principal? I rather doubt they went for a shorter amort. It might well be 40, in which case it would be about 10%.
Like or Dislike:
0 
0
August 9th, 2010 at 2:53 am 34
Laneway houses take off.
http://fotservis.typepad.com/photos/mother_india_…
Like or Dislike:
0 
0
August 9th, 2010 at 3:01 am 35
@4slicesofcheese: #32
LOL Yes, I rented it for the total of 400 from October to May to keep my sour cabbage and potato.
Like or Dislike:
0 
0
August 9th, 2010 at 3:04 am 36
"I rather doubt they went for a shorter amort."
What makes you think that?
Like or Dislike:
0 
0
August 9th, 2010 at 3:06 am 37
@pricedoutfornow:
Well if their house is mortgage free then they can refinance to make those payment, problem is they may be making those payments for a loooong time. I can't believe he would go out and buy 2 presales without his wife's consent. That can spell divorce.
In the end, it's that crap that has caused this whole mess and drove prices up. That's what I was arguing with a friend the other day that it wasn't true demand for housing in this city. He was saying that it's so many people moving here that needed houses the caused the demand. In fact it was idiots like this buying them like poker chips and nothing more.
Like or Dislike:
0 
0
August 9th, 2010 at 3:19 am 38
I wondered where this MLS listing disappeared to….transformed now to a rental.
http://vancouver.en.craigslist.ca/van/apa/1886877…
For those who recall, this was one of the "side by side" comp condos. This one listed at $594k (mls listing disappeared yesterday) and the one next door listed at $539k and sold for $540k. Also, it was pointed out that the $540k SOLD condo was purchased quite a while ago for a low price, while this one was purchased more recently for a price not far from where they tried to sell it now.
So I guess it is true. If you can't sell it for what "you believe" it is worth, you try to rent it instead to "wait out the market".
Note to potential sellers: Your first loss is always your best loss.
Like or Dislike:
0 
0
August 9th, 2010 at 3:23 am 39
@pricedoutfornow:
As the demand for real estate continues to deteriorate, the demand for divorce lawyers will continue to increase.
Like or Dislike:
0 
0
August 9th, 2010 at 3:29 am 40
Further to last post…asking $2000/month rent for a condo that they had listed at $594,000.
Quick mortgage calculation using TD site and assuming 5% down and 5 year closed rate.
"For a 25 year mortgage for $564,300.00 at the rate of 5.59%, your Monthly payment is $3,474.06"
Of course there is also upkeep, prop taxes,and HOA fee – let's be conservative and say $400/month for all.
SO I can pay $2000/mnth to live in something it would cost me $3900/mnth to own. Not to mention my $30k down payment not in my pocket anymore. To make that work I gotta factor in some HUGE capital appreciation…HHHHMMMMMM. Decisions decisions.
Like or Dislike:
0 
0
August 9th, 2010 at 3:29 am 41
Bears, why you expect people to listen to you on anonymous blog, when you can't even convince your friends that you have cranteeny with on deck that they make bad RE decision. Seem like every bear has 'real life story' of someone who in deep Paris dog poop because can't make ends meet. You need new friends bears. 99% of population not in this situation. Either that or take course on influencing people so they will listen to Armageddon tales and sell all their RE and live in moldy basement.
Like or Dislike:
0 
0
August 9th, 2010 at 3:30 am 42
@Girlbear: I don't understand how it didn't sell for over half-a-million (!) dollars. I mean it's got laminate flooring, is right on Arbutus Street and is on the third floor (oops, I mean "penthouse"). I can't believe that the $2000 in Ikea furnishings didn't compel someone to buy.
Like or Dislike:
0 
0
August 9th, 2010 at 3:35 am 43
The Mother of all Bubbles is China, dwarfing anything we've seen here.
http://theburningplatform.com/blog/2010/08/08/the…
Continue to shop Wallmart, they really need your money.
Like or Dislike:
0 
0
August 9th, 2010 at 3:38 am 44
@Girlbear:
WHOOPS. My bad.
I put "5's" where "4's" should have been. Condo was asking $494k, and the neigbour sold for $440k.
SO recalc, assuming 5% down:
For a 25 year mortgage for $469,000.00 at the rate of 5.59%, your Monthly payment is $2,887.35
Still not a win to BUY it. $2000/mnth rent vs $3300/mnth all in to own.
Like or Dislike:
0 
0
August 9th, 2010 at 3:41 am 45
Fundamentally corrupt union pension plans on the chopping block. The precedent is long overdue.
http://globaleconomicanalysis.blogspot.com/2010/0…
Like or Dislike:
0 
0
August 9th, 2010 at 3:42 am 46
@Girlbear:
Don't forget that keeping the condo and bleeding every month when their mortgage payment/taxes/strata etc. are due still allows them to brag at cocktail parties about being a real estate investor. Have you seen the way people druel at you if you say the words "investment property"?
Like or Dislike:
0 
0
August 9th, 2010 at 3:43 am 47
@Boombust: You don't understand Pareto Principle, this is not it.
Like or Dislike:
0 
0
August 9th, 2010 at 3:48 am 48
@4slicesofcheese:
I think it got run over by a Smithrite truck.
Like or Dislike:
0 
0
August 9th, 2010 at 3:55 am 49
@Best place on meth:
Check this out.
http://www.reuters.com/article/idUSTRE5572PK20090…
Like or Dislike:
0 
0
August 9th, 2010 at 4:03 am 50
@Girlbear:
“For a 25 year mortgage for $564,300.00 at the rate of 5.59%, your Monthly payment is $3,474.06″
Anybody who gets a 5yr closed today at 5.59% is a fool. There are many places still doing them for 3.99%.
Like or Dislike:
0 
0
August 9th, 2010 at 4:14 am 51
@Girlbear: Math is hard. Why not use variable rate of 2.1% and 35 year am. Then payment is only $1575/month. Or just keep using numbers that fit your world view. Or maybe just stick to uber-bear analysis of price to income and price to rent. Probably better. And no operating of heavy machinery please, especially after a nice glass of Bordeaux.
Like or Dislike:
0 
0
August 9th, 2010 at 4:16 am 52
@Anoymous: "Anybody who gets a 5yr closed today at 5.59% is a fool. "
Anybody who buys today at ANY mortgage rate is a fool!!
Like or Dislike:
0 
0
August 9th, 2010 at 4:33 am 53
"@Boombust: You don’t understand Pareto Principle, this is not it.
I do, indeed.
The ratio is 20:80 and…
20% of 20 = 4 and 20% 0f 80 = 64
Therefore, only FOUR % of sellers are required to begin a price slide when those 4% decide to sell.
Like or Dislike:
0 
0
August 9th, 2010 at 4:35 am 54
"20% 0f 80 = 64"
er. should read…20% of 80 = 16
Like or Dislike:
0 
0
August 9th, 2010 at 4:43 am 55
Sylvan Lake in 2007 was nothing more than a Rig Pig Resort, and is praying for higher natural gas prices.
I am from Sylvan and moved to Chilliwack in 2007. There will be lot be many more of these stories in the near future, I have cousins, friends and many acquaintances in the 25-29 age group that felt and/or were led to believe that prices only increase and 2007-2008 was a great time to buy.
Moved to Chwk in the summer 0f 2007 and would not ever consider a move back to Central AB.
Like or Dislike:
0 
0
August 9th, 2010 at 4:45 am 56
@Boombust: No, you indeed do not.
80-20 rule say that 20% of activities produce 80% of results. Example, 20% of RE agents produce 80% of sales. You can change to 90-10 or 85-15, it is not hard and fast rule, just for picture only.
But your example not fit. Why? Because people who do not sell or buy are not part of same population, they are not the 'other 80%'. All people who buy/sell take part in setting the market, not only 20%. Unless you mean to say that 20% of the 3-4% that are selling will cause prices to move? But I do not think that is what you meant. Math is hard, especially with all the distractions of best place on earth, culture, bikers and male nurses.
Like or Dislike:
0 
0
August 9th, 2010 at 4:47 am 57
“20% 0f 80 = 64
er. should read…20% of 80 = 16"
Oops. Wrong again…80% of EIGHTY = 64
So, 4:64
In other words only 4% of "the vital few" are enough to set a new chain of events in motion.
Like or Dislike:
0 
0
August 9th, 2010 at 4:48 am 58
"Math is hard"
Can be.
Like or Dislike:
0 
0
August 9th, 2010 at 4:54 am 59
@Boombust: 100% of all of your calculation make no sense.
Like or Dislike:
0 
0
August 9th, 2010 at 5:00 am 60
Wow major media must really be hurting for news stories about real estate these days. While it's obvious that the Canadian housing market is currently stagnant and in decline, why is it "big news" that a couple who bought property in a "resort town" in Alberta can't seem to make any money on their property?
How about we focus on Greater Vancouver (hence the name of the blog), a major city with over 2.5 million people living in it. I'd like to hear RE stories about LOCALS making, or losing money on properties.
Like or Dislike:
0 
0
August 9th, 2010 at 5:00 am 61
"100% of all of your calculation make no sense…"
You need a crash course in Dianetics.
Like or Dislike:
0 
0
August 9th, 2010 at 5:10 am 62
Here's an idea – for those who think a 60-70% crash is likely, could somebody take a typical $350K 1 bedroom condo which might rent today for $1300-1500 and tell us what it should rent for post-crash in order to give the landlord the lowest acceptable rate of return?
Like or Dislike:
0 
0
August 9th, 2010 at 5:16 am 63
@SuperSmartBull: Math is hard. Why not use variable rate of 2.1% and 35 year am. Then payment is only $1575/month.
So we should buy a long term investment based on record-low short term mortgage rates? Math really is hard, isn't it?
Like or Dislike:
0 
0
August 9th, 2010 at 5:25 am 64
@BumsUp2: Oh silly bear, you cannot read whole post to understand point, maybe small font is hard to read from group think vote down. Please ask other bear when to buy. Hint, it is not pick arbitrary interest rate and am term.
Like TDF, bears life flash before eyes and they miss next leg up. Again.
Like or Dislike:
0 
0
August 9th, 2010 at 5:40 am 65
Anyone care to conjecture how this crash will unfold? What the main catalysts will be? What timescale we're looking at?
Like or Dislike:
0 
0
August 9th, 2010 at 5:55 am 66
I'm still getting laughs from the Talking Heads that equate 'deflation' to a downturn in real estate 'values' as being the death knell for the economy. For one thing the bubble in real estate 'prices' has nothing to do with the general economy. Real Estate has been a product of pure speculation and the current asking prices have nothing….zero….nada to do with 'value'. Therefore if RE prices fall it is not deflationary for the economy…it will just be a normailizing of the speculative nature of the artificial bubble that was created by the governments intervention in the market.
RE prices were blown way out of proportion to the general economy..to the extent that they had to create financial products to accomadate the rampant speculation. What is unfortunate is the government backstopped the speculation with public money ( CMHC) and instead of the speculators getting washed out as they should during a bubble the taxpayer is now on the hook for a problem the banks would have eased out of on their own had the government zero rate policy and CMHC backstop not interfered with the banks own risk analysis.
I read an article over the weekend which stated that BC GDP is now 6 tp 9% dope. The rationale of the srticle was that BC government officials are shit scared of the legalization potential in California because it would blow a hole in the local economies and unemployment would skyrocket as it is said that up to 250 thousand people are employed in the dope business here in BC. Is this why our government is so soft on this crime and that all action towards cleaning out the grow ops runs into legislative roadblocks?
Like or Dislike:
0 
0
August 9th, 2010 at 5:56 am 67
@anonymous(GStrader): Bumpy start, then long slide down ala Japans "lost decade". Probably looking at 20-30% down over the next two years, then a sluggish up and and down slide for almost a decade, that's my guess.
And my prediction is that the media will report the slide that started in May as being caused by an event that is yet to happen as of august 2010: this could be a drop in the US stock market, a rising Canadian dollar, higher interest rates, etc. The one thing the drop won't be blamed on is prices that are too high.
Like or Dislike:
0 
0
August 9th, 2010 at 6:42 am 68
@realpaul:
Are you suggesting that those who operate grow-ops appear on official employment figures?
Like or Dislike:
0 
0
August 9th, 2010 at 7:06 am 69
@Anoymous:
Your question is posed backward. There is no reasonable prospect of higher real rents (indeed even nominal rents are falling), so you should be asking how much the condo should sell for to match the rent.
The answer is about $150K.
Like or Dislike:
0 
0
August 9th, 2010 at 7:08 am 70
@Girlbear: Dug out the numbers Anon found from a while ago regarding the rental apartment (PH2)now on craigslist asking $2k/mnth. Yup couldn't get anywhere near ask so they decided to rent. Given their purchase price in 2007, I doubt that $2000/mnth will make them any money. I also doubt they will get $2k/mnth for that place. IMO.
"87 Anonymous Says:
July 7th, 2010 at 4:38 pm
@Girlbear:
BC Assessment 2010 value
PH3: $455,000
PH2: $397,000
Asking price
PH3: $439,000
PH2: $494,900
Purchase price
PH3: $280,000 in 2003
PH2: $477,500 in 2007
Take away the realtor commission and the owners of PH2 are probably already looking at a loss.
Like or Dislike:
0 
0
August 9th, 2010 at 7:09 am 71
@ pricedoutfornow August 9th, 2010 at 10:38 am
Some comments regarding your post…
If your friend's hubby bought a "few years ago", he is probably in the chips big time on those 2 units. Of course, that could change very quickly.
If your friend's hubby managed to pay off his mortgage in full over 15 yrs while she stayed at home with the "flock of children", he must be doing more than ok salary wise. Second question… if they are 10 yrs to retirement, I am presuming they are in their mid to late 50's. If so, the flock of kids argument doesn't hold any water.
Those $5200/mo mortgage payments imply property values of well in excess of $1M (for both) and would require sizeable DP and income to qualify, but you are suggesting they are in the poor house and are unable to handle this now.
If their home is indeed paid off in full, they should have been able to save a whack of cash every month as they are the "epitome of financial stability" according to you. They would also have access to hundreds of thousands of $ via a HELOC if times really got tough.
I'm sure your friend is aware that renting the units out is an option. The inflated price aside, the location is fantastic, close to d/t, transit, shops etc and wouldn't be hard to rent out if the price is reasonable enough. Once the rent is factored in, the monthly cash outlay isn't that big a deal, at the least for the short term and the interest payments can be deducted.
* If your friend is that worried about making one mortgage payment, something else is wrong, something that she hasn't disclosed to you (or her husband hasn't disclosed to her). Or maybe this whole story was just made up?
Like or Dislike:
0 
0
August 9th, 2010 at 7:37 am 72
@ realpaul August 9th, 2010 at 1:55 pm
"Real Estate has been a product of pure speculation and the current asking prices have nothing….zero….nada to do with ‘value’." – absolutely, correct.
"Therefore if RE prices fall it is not deflationary for the economy" – I don't agree with you on this, however. A RE crash in Vanc would be catastrophic. Practically everyone I know has all their net worth tied up in RE. Any significant change to this would most definitely affect how they spend in the future. The recent financial crisis and resulting steep discounting we saw with many of the retailers is a classic example. To this date, people are not willing to pay full retail for anything and it will be quite some time before that appetite comes back.
Like or Dislike:
0 
0
August 9th, 2010 at 7:53 am 73
@Anoymous: #62
If the 1 BR condo priced today at $350K falls 70%, and it very well could, that would leave the price at $105K.
Rent should be 1% of that, or $1050 a month as condos should cost 100 months rental.
Like or Dislike:
0 
0
August 9th, 2010 at 7:54 am 74
@bullwhip29:
You're talking as though a crash might not happen. This fake economy simply cannot continue indefinitely.
RE crashes are the inevitable outcome of RE bubbles. And every time someone buys RE at an inflated price they are throwing away future purchasing power – no matter how long the decline takes or when it starts. But the faster the bust goes and the sooner it starts, the fewer people will buy at an inflated price.
The crash of the early 80's wasn't "catastrophic" at all. It was necessary to get skilled workers and real investment into the city to build a real economy. Just like the upcoming crash.
Like or Dislike:
0 
0
August 9th, 2010 at 7:58 am 75
@patriotz:
"Your question is posed backward."
And deliberately so. If prices fall 50-70% then market competition should drive rents down also, especially so for condos which are currently borderline as investment vehicles. I'm asking, quite simply, what a market crash might do to rents.
e.g. $350K condo having crashed to $150K
$150K with 15K down @ 5%/25yr, plus $300/month strata fees, and $100/month property tax (no principal residence discount)
What would a reasonable rent be on such a property? One which gives the landlord a nice return, but nothing outrageous?
My question might be posed backwards, but that doesn't mean it has no answer.
Like or Dislike:
0 
0
August 9th, 2010 at 8:00 am 76
@Best place on meth:
"If the 1 BR condo priced today at $350K falls 70%, and it very well could, that would leave the price at $105K.
Rent should be 1% of that, or $1050 a month as condos should cost 100 months rental."
And how much yield would that give the landlord?
Like or Dislike:
0 
0
August 9th, 2010 at 8:02 am 77
@Girlbear:
Nobody does a 25 year mortgage anymore.
try running the numbers for a 35 and at a variable rate. haha!
Like or Dislike:
0 
0
August 9th, 2010 at 8:05 am 78
How about this for an assessment. I am not a bull and think you should time buying real estate but is owning a condo in Vancouver that far of renting:
Condo in Vancouver Own Rent
350,000 with 300,000 mortgage 1,400 to 1,500 Rent
4.20% over 5 years/25 year amort
payments 1,600 + 250 Strata
= 150 taxes =2,011.00 subtract
principal porttion of payment
$580.00
equivalent rent 1,420
So Interest rates need to go up or jobs down to have a significant effect on the real estate prices
Like or Dislike:
0 
0
August 9th, 2010 at 8:06 am 79
#68 A….It would be interesting if all 250,000 in the ghost economy of growops suddenly showed up on the welfare stats…since they can't collect EI.
#72 BW. Its not catastrophic if it means that the fundamental economics of the market reassert themselves. Just because theres a lot of people reliant on one part of a false economy ( the pot grows are a good ex) should we spend tax dollars propping them up? What if it was heroin or kiddie porn?
In every bubble that has burst throughout history, the people involved learned hard lessons and tended not to repreat them…that in itself is not a bad thing.
So, a lot of people lose 'equity'…..what I am saying is 'so what?' ….it didn't exist in the first place. We might as well say " OK lets set the floor price at a million"….that would quickly make a million worth nothing. Nope….capitalism may suck…but its a hell of a lot better than the alternative….lets step back and let the chips fall where they may.
Like or Dislike:
0 
0
August 9th, 2010 at 8:08 am 80
@Anoymous:
That's wrong. Rents do not depend on the market price of the dwellings. They depend only on number of dwellings (supply) and number of households (demand) in the rental market.
It happens that rents are declining in many US markets that are also experiencing a price bust, but that's because too much supply was built. Rents continued to increase during the Vancouver bust of the early 80's and the Toronto bust of the early 90's.
Like or Dislike:
0 
0
August 9th, 2010 at 8:17 am 81
Larry, a poster at http://www.agentwill.com (see weekly stats) is taking on bets that Vancouver real estate prices will not fall by greater than 10%.
I think that anyone that wants a piece of that action should go and take up the challenge, should they feel that it is worth trying.
Like or Dislike:
0 
0
August 9th, 2010 at 8:18 am 82
@ patriotz August 9th, 2010 at 3:54 pm
Let me clarfiy…
A RE crash in Vanc will be catastrophic this time around. Things were pretty ugly (maybe not catastrophic) in the early 80's – ie. two years of rapidly declining prices followed by another decade of zero returns. The current bubble is one of epic proportions that has caused a wealth effect never seen before. Unfortunately for many, owing a million dollar home doesn't mean you're a millionaire (although many feel and act like they are…well, at least for now). What it really means is that you OWE your bank a lot of money, perhaps more than you payback in a lifetime. That's what differentiates this bubble from others in the past and why we're in for a much harder landing this time around. Thanks for the feedback.
Like or Dislike:
0 
0
August 9th, 2010 at 8:20 am 83
Bullwhip – since you feel that way, are you going to wager a bet with Larry on it?
Like or Dislike:
0 
0
August 9th, 2010 at 8:21 am 84
How about you Boombust? Think you can beat Larry?
Like or Dislike:
0 
0
August 9th, 2010 at 8:23 am 85
@ realpaul August 9th, 2010 at 4:06 pm
"In every bubble that has burst throughout history, the people involved learned hard lessons and tended not to repreat them…"
It is only human nature to repeat the same stupid mistakes over and over again. In 15 or 20 years (or sooner), we'll be right back at it once our memories start to fail us.
Like or Dislike:
0 
0
August 9th, 2010 at 8:27 am 86
“100% of all of your calculation make no sense…”
You need a crash course in Dianetics.
Current score: -9"
But, it's "The Modern Science of Mental Health", according to L. Ron Hubbard.
Surely, Supersmartbull (and Realpaul) could benefit…
Get rid o' dem bad engrams.
Like or Dislike:
0 
0
August 9th, 2010 at 8:28 am 87
@ bumncream August 9th, 2010 at 4:20 pm
Hmmm…interesting. I think he's getting in way over his head given that prices in some parts of Vanc have already dropped by more than 10%.
Like or Dislike:
0 
0
August 9th, 2010 at 8:29 am 88
"How about you Boombust? Think you can beat Larry?"
That Larry. It's his "reactive mind" acting up again.
He too, may benefit from a Scientologist "auditing". He he.
Like or Dislike:
0 
0
August 9th, 2010 at 8:32 am 89
@realpaul: May I know officially nominate you for leadership of the National Front (Disco).
Like or Dislike:
0 
0
August 9th, 2010 at 8:33 am 90
@Thomas: "So Interest rates need to go up or jobs down to have a significant effect on the real estate prices"
Actually, all it takes is few buyers and a lot of sellers. Believe it or not, significant prices changes can happen even when employment is improving and interest rates are remaining low. Like right now.
Like or Dislike:
0 
0
August 9th, 2010 at 8:36 am 91
@patriotz:
"Rents do not depend on the market price of the dwellings."
So in a post-crash scenario the market permits landlords to rake it in, so to speak? How can rents be independent of the market price? What happened to fundamentals?
Like or Dislike:
0 
0
August 9th, 2010 at 8:37 am 92
"National Front"
Now remember, the National Front is a Fascist Front, as they used to say.
Although it WAS during the disco era, I'm not sure what you mean…
Like or Dislike:
0 
0
August 9th, 2010 at 8:42 am 93
@Anoymous:
The fundamentals the rental market are the supply of dwellings for rent, and the demand for rentals from households. Neither of which have anything to do with what they sell for.
Like or Dislike:
0 
0
August 9th, 2010 at 8:46 am 94
@Anoymous:
Speculation on appreciation?
Like or Dislike:
0 
0
August 9th, 2010 at 8:53 am 95
@pricedoutfornow: well at least they are mortgage free on their principle residence. Imagine if they still had a mortgage on their house, that would probably be the end of them. It's not as bad as it could have been.
Like or Dislike:
0 
0
August 9th, 2010 at 8:54 am 96
Rents will go down because there is already too much supply, a lot of which is not really on the market as clueless speculators let it sit empty and make their money on appreciation. Rents will also go down due to lower demand, as high-paying construction jobs disappear and households consolidate or people leave town to find work.
Like or Dislike:
0 
0
August 9th, 2010 at 9:01 am 97
@Boombust: "Pareto…"
All this talk about second-guessing the intents of sellers and buyers is overly confusing and a sidebar. Vancouver is a relatively diverse and large city. The reasons and urgency with which people buy and sell vary significantly but what has been amazing to me is how consistent the percentage of "desperate" buyers and sellers has held.
How do we know this? There is a very high negative correlation between price changes and months of inventory. Whatever the motivations and level of desperation of sellers, we know that (say) 20% of them are d-e-s-p-e-r-a-t-e. This was true 2 years ago when interest rates were higher and is proving true today.
Prices are close to as high as they were last fall when affordability was the same and employment was WORSE. Where are all the buyers now?
Like or Dislike:
0 
0
August 9th, 2010 at 9:03 am 98
@Aleks: "Rents will go down"
I'm bearish as most people reading here, but examples of parts of the US, with similar construction employment as % of population, show rents roughly increase with CPI, even when prices crater.
Like or Dislike:
0 
0
August 9th, 2010 at 9:04 am 99
Larry is pretty confident that he's the best investor in Canada and that Van RE prices won't go down any greater than 10%. Dude's got a chip on his shoulder, but what if he's right?
Like or Dislike:
0 
0
August 9th, 2010 at 9:07 am 100
@bumncream:
Why do bulls and RE agents want to gamble and bet? I don't want a RE agent who likes to bet and gamble? Has he not seen what just happened in the US?
Like or Dislike:
0 
0
August 9th, 2010 at 9:11 am 101
Hi Jonathon,
Its not the realtor, its a blogger with a grandiose sense of self.
That said, he's willing to put up or shut up so I have to give him some credit, he's putting his money where his mouth is.
Not sure if any of the bear's have the moxie to bet him, we'll see. Should be interesting to watch unfold.
Like or Dislike:
0 
0
August 9th, 2010 at 9:13 am 102
@ Patriotz: "So in a post-crash scenario the market permits landlords to rake it in, so to speak? How can rents be independent of the market price? What happened to fundamentals?"
Yes, rents are a lot more correlated to median salary than they are correlated to median prices. Also, carrying costs are determined by prices AND interest rates, so that an increase in interest rates my negate any effect of a decline in price (for instance borrowing 500K for 30 years at 4% is the same as borrowing 450K for 30 years at 5%).
Like or Dislike:
0 
0
August 9th, 2010 at 9:17 am 103
New Listings 229
Price Changes 132
Sold Listings 163
Like or Dislike:
0 
0
August 9th, 2010 at 9:22 am 104
@patriotz:
"The fundamentals the rental market are the supply of dwellings for rent, and the demand for rentals from households. Neither of which have anything to do with what they sell for."
Why are you deliberately avoiding answering the question?
Imagine I'm an investor in 2012, I spy a condo for $120K which was previously $350K in 2010. I can get a 5% 5yr fixed mortgage, and don't want to amortize longer than 25yrs. I'm prepared to put 10% down. How much rent would I have to charge in order to make it worth my while?
Like or Dislike:
0 
0
August 9th, 2010 at 9:23 am 105
@paulb.: So much for the HST theory! Load 'em up, I say. That many fewer buyers to compete with after prices crater.
Like or Dislike:
0 
0
August 9th, 2010 at 9:26 am 106
@Anoymous: Are you including maintenance, transaction fees and HA fess in your hypothetical 2012 purchase?
Like or Dislike:
0 
0
August 9th, 2010 at 9:26 am 107
@Anoymous: "How much rent would I have to charge in order to make it worth my while?"
You don't get to choose your rent. You have to take what the market will bear.
You're surprised that rents don't depend on market prices? What in the hell do you think has been going on the last 7 years as prices have doubled; tripled and rents have barely moved?
Renters don't care a whit what your mortgage is. They will pay what the market for rentals is asking.
Like or Dislike:
0 
0
August 9th, 2010 at 9:27 am 108
@Plummet:
I agree with your scenario. The US is looking like it is unfolding "Japan style" as well. Looking for the equity markets to trade sideways for the next while (i.e 3-5 years).
Like or Dislike:
0 
0
August 9th, 2010 at 9:28 am 109
@Boombust: It's a song, by Morrissey
Like or Dislike:
0 
0
August 9th, 2010 at 9:29 am 110
August Projections for month totals
Days elapsed so far 5
Days remaining 16
Average Sales this month 120
Average Listings this month 224
Projected Sales 2512
Projected New Listings 4704
Projected sell/list 53.4%
Like or Dislike:
0 
0
August 9th, 2010 at 9:30 am 111
@bumncream:
over what period of time? what are his conditions? sooner or later the market will correct. right now RE is a ridiculously bad investment and in high risk to go down. who cares if it's tomorrow or 10 years from now. good luck guessing when the peak is with your life savings…
Like or Dislike:
0 
0
August 9th, 2010 at 9:49 am 112
"You don’t get to choose your rent."
No, but once somebody has calculated the amount of rent necessary to make a modest income you can see whether or not the market will bear it. Presumably somebody buying a condo at a 70% discount in 2 years time would be able to undercut just about any other rental apartment out there whilst still generating revenue, therefore setting a new market price.
None of us know what supply/demand will be like in the rental market in 2 years time, but IF it should always be cheaper to buy than to rent (leaving room for landlords to generate revenue) it should be a pretty simple question to answer by taking one of the existing spreadsheets some here have and running the equations "backwards".
Like or Dislike:
0 
0
August 9th, 2010 at 10:29 am 113
VHB, how would that compare to last August? thanks as always.
Jonathon – Larry is open to bet parameters. No bear is willing to take the challenge. Go to http://www.agentwill.com and see what his offer is, I'm shocked that no bear will step up. I don't have the mulla, but not all of us bears can be hard up….I hope.
Like or Dislike:
0 
0
August 9th, 2010 at 10:34 am 114
@Jonathon percival the second:
Aren't you suppose to be shopping for the left over condo listings?
While those in need of their own shelters are buying out there before the tide of skyrocketing prices hit you hard.
Why don't you keep your promise?
Do you want another John to come forward after September 2010?
Like or Dislike:
0 
0
August 9th, 2010 at 10:35 am 115
#86 B, it may be within the realm of human nature to produce a continous crop of suckers by way of peoples memories being relatively short and youth being notoriously short sighted, death defying and ignorant of the simple facts of life. But what I said was that the people who actually got burned in the calamities of the past tend not to repeat their personal experiances. Thats what the new generation of entitled suckers is there for.
You have to wonder what goes through young couples heads when they sign a 35 year mortgage for 500 sq ft 'flex space' ( no walls-no bedrooms- no doors) catbox in Yaletown with no concern about what happens after the condom breaks. Thats called 'the ignorance of youth'.
Historically, its the young who fall victim to the biggest scams….as they have fallen for the greatest scam of the past 300 years. This decade long RE swindle will be remebered in history as one of the greatest financial toilets of all time.
Like or Dislike:
0 
0
August 9th, 2010 at 10:43 am 116
@Jonathon:
I don't think he's bluffing, his entire livelihood is based on RE and prices going up. He's probably living like RE will always be high and is likely leveraged himself. If prices drop 10% he's probably screwed and won't have any money anyway so he's got nothing to lose…
I sold in April and it's great renting in Vancouver right now. I have no need to gamble or no need to buy anything if prices never go down.
Just look at history and fundamentals and they will. I don't need to gamble with RE agents, they've already caused enough damage getting greater fools to gamble with each-other. I imagine he really believes that it will never drop 10%, if it does his world will crumble either way…
Like or Dislike:
0 
0
August 9th, 2010 at 12:08 pm 117
"Whatever the motivations and level of desperation of sellers, we know that (say) 20% of them are d-e-s-p-e-r-a-t-e. This was true 2 years ago when interest rates were higher and is proving true today."
Exactly. The Pareto Principle in action…20% of the vital few affcting the other 80%.
I don't think it ever changes.
Now, we are going the OTHER way, (down market) that's all.
Like or Dislike:
0 
0
August 9th, 2010 at 12:11 pm 118
@Thomas:
A condo that costs $350k
in downtown vancouver would rent for $1020 with parking.
It'd be a 420 sq ft studio.
check crosbypm website and you'll see the carlyle at 1060 alberni asking $1250 for a big one bedroom that would cost more than $350k
Or compare studios at the Lions
Or Savoy, Pinnacle, Genesis, 1188 Howe, 1010 howe, 1333 homer any of the units that cost $350k will rent for $1100 max with parking, now deduct strata, new washer and dryer, carpets, management fees, special assesments, special levies when the elevator breaks or sprinklers go off, increasing strata insurance costs, increasing strata deductibles,
Check online the asking price for rents is dropping and a single or a couple (not shared by 4 people) are easily able to negotiate
Like or Dislike:
0 
0
August 9th, 2010 at 12:37 pm 119
Speaking of tumbling rents, $888/mo will get you this chic Yaletown studio:
http://vancouver.en.craigslist.ca/van/apa/1889765…
How could any lucky-number-loving Asian renter possibly pass this up?
Like or Dislike:
0 
0
August 9th, 2010 at 12:43 pm 120
@Anonymous:
"A condo that costs $350k in downtown vancouver would rent for $1020 with parking. It’d be a 420 sq ft studio."
What are you on? One of the buildings you cited, 1188 Howe, has listings right now for units substantially bigger than 420sqft for about $350K
Like or Dislike:
0 
0
August 9th, 2010 at 1:32 pm 121
In some ways the large amount of foreclosed properties in the US has actually softened the landing of the US housing market (yes it could have been worse and will get worse).
When comparing what happened to the US rental prices I suspect we will see something different here. Since will not see the foreclosures like the US as owners here cannot just walk away without compete bankruptcy owners will hold properties longer as there is no easy way out.
With the banks owning so many houses in the US they have somewhat limited the stock for sale by keeping properties off the market until they sell some of their units. They also keep the empty units out of the rental stock as banks generally do rent properties. Since people here cannot just walk away and leave the property for the bank to deal with (as in many US states) we will see a much less orderly sale with individual owners in control of the stock. Individual owners will rent the units out and or try to sell ASAP. There will be no holding back of inventory.
Like or Dislike:
0 
0
August 9th, 2010 at 1:36 pm 122
Rents are based on the incomes. People will generally only rent what they can afford since there is no promise of future riches by renting (the reason buyers buy more than they can afford).
If someone does over extent themselves renting (or loses income) they can easily adjust by moving to a lower rent unit. People will move in together, live with parents, or move further out of town before paying more rent than they can afford. If the economy tanks (and it will when housing crashes) many renters will downsize or consolidate.
I also suspect some of the over extended owners will move in with mom and dad and rent their current principle residence out to try to prevent bankruptcy once interest rates increase. They may also rent out basements not currently rented, rent rooms or move into their cars if desperate enough. Of course if you move into your car you still get to keep bragging rights of home ownership.
All this adds to increased rental stock and can soften prices. In any case unless they can keep the bubble going forever (which they can't) housing will get cheaper both renting and buying as more supply comes online due to consolidation. Especially at the higher end of the market.
Like or Dislike:
0 
0
August 9th, 2010 at 1:43 pm 123
Correction:
"They also keep the empty units out of the rental stock as banks generally do NOT rent properties."
Like or Dislike:
0 
0
August 9th, 2010 at 1:50 pm 124
anoymous says: Imagine I’m an investor in 2012, I spy a condo for $120K which was previously $350K in 2010. I can get a 5% 5yr fixed mortgage, and don’t want to amortize longer than 25yrs. I’m prepared to put 10% down. How much rent would I have to charge in order to make it worth my while?
won't happen without a massive increase in real interest rates. even a 20% dip puts vancouver real estate too attractive relative to gold, bonds and other investments. investment money tends to be fluid towards yield. these are fundamentals you're not going to read here from hard core bears. don't forget you have to look objectively at supply and demand for housing. think 2009. in u.s. markets with big declines there has been excess supply and inelastic demand.
Like or Dislike:
0 
0
August 9th, 2010 at 1:58 pm 125
"I’m prepared to put 10% down. How much rent would I have to charge in order to make it worth my while?"
You need 20% down now to buy a rental property.
To answer the question you should be able to cover your mortgage payments and ALL expenses with the rent based on a 25 year mortgage. That is if it is a good building which are few and far between in Vancouver. Most are, have been or will be leakers and ultimately torn down.
Like or Dislike:
0 
0
August 9th, 2010 at 1:58 pm 126
@VHB: Ouch: those are higher sales than I expected.
Like or Dislike:
0 
0
August 9th, 2010 at 2:02 pm 127
"You need 20% down now to buy a rental property.
To answer the question you should be able to cover your mortgage payments and ALL expenses with the rent based on a 25 year mortgage."
OK, so 20%. But just covering my payments and expenses isn't really an attractive investment proposition. Where's the profit? I'm hoping at least somebody can actually do the numbers and let me know what I'd need to charge to cover my payments/expenses AND turn a modest profit on a downtown condo which crashes from $350K to $120K
People are falling over themselves to do the math in other cases – what makes this one so unattractive?
Like or Dislike:
0 
0
August 9th, 2010 at 2:04 pm 128
"won’t happen without a massive increase in real interest rates. even a 20% dip puts vancouver real estate too attractive relative to gold, bonds and other investments."
There will be some dumb money flow in, just not enough to prop things up. People still bought Nortel stock and Japanese real estate on the way down – but down they went.
Like or Dislike:
0 
0
August 9th, 2010 at 2:04 pm 129
VHB are you an owner or renter?
Did you not close your blog down because you bought a place?
Like or Dislike:
0 
0
August 9th, 2010 at 2:07 pm 130
"OK, so 20%. But just covering my payments and expenses isn’t really an attractive investment proposition."
Yes it is because after 25 years it is paid off and generating income. It doesn't matter if the value goes up or down in this case.
Like or Dislike:
0 
0
August 9th, 2010 at 2:07 pm 131
@Renting: "All this adds to increased rental stock and can soften prices."
You make good points in those comments. I don't see an outright collapse in rents based on experiences south of the border. As people start consolidating, the real problems will start showing up when landlords start renting to lower quality tenants. Ultimately they only make money when a property is occupied and the selection of available tenants degrades with oversupply of housing. I see rents keeping apace with incomes (perhaps slightly lagging for the points you mention), but the net yields to landlords goes down regardless as the financial burden of sub-standard tenants starts creeping in.
On another note, the foreclosure process in BC isn't exactly fast. Who knows what banks would do if foreclosures increased significantly. The number of REOs in the US is mind-boggling and will be a drag on their economy for years. I don't think that level will be experienced in Canada only because the amount of overbuilding was not as severe.
Like or Dislike:
0 
0
August 9th, 2010 at 2:16 pm 132
"somebody can actually do the numbers and let me know what I’d need to charge to cover my payments/expenses"
No one cares what you need to charge it is what the market will pay. Get it?
Just for fun I will help you. A condo today for $350 K may net rent of $800 per month if nothing goes wrong in the building (say a new building). If the place crashed you will likely still net $800 per month maybe a little less due to the place is no longer new and the economy is softer due to the crash. So lets say it is now $700 per month that may make your mortgage payment with 20% down. No monthly profit until is is paid off. You will need a bigger crash to get a monthly profit.
Like or Dislike:
0 
0
August 9th, 2010 at 2:20 pm 133
"I see rents keeping apace with incomes"
I agree, but when RE crashes incomes will also decline in the GVRD.
Like or Dislike:
0 
0
August 9th, 2010 at 2:25 pm 134
renting says: There will be some dumb money flow in, just not enough to prop things up. People still bought Nortel stock and Japanese real estate on the way down – but down they went.
have you ever done research on the yields of nortel or japanese real estate? you've only read bear blogs?
Like or Dislike:
0 
0
August 9th, 2010 at 2:32 pm 135
@bullwhip29:
I can assure you this story is not made up (at least not by me). And I believe her story, the tension in that household can't be faked. I wish it weren't true, believe me! This is someone I truly care about. Anyway here are a few more details so maybe it'll make more sense:
-her husband works in a blue-collar job, union, so yes, they are in their late 40s and he's less than 10 years away from retirement with teen/preteen children (he expected to retire at 55). I don't know his salary, but he's not in management, so I'm assuming it's about 60k. A few years ago I told my friend I was making $50k and that seemed to impress her, so I'm sure he's not making much more in his job. They are not wealthy by far-no vacations, EVER, no fancy cars in this household. But they've never had any significant debt.
-he and his buddy initially put down I dunno, 50k on these condos, and then he maxed out his line of credit (90k) and his buddy did the same ($40k) to get the mortgages. wife tells me that they had a "hell of a time" getting the mortgage.
-their principal residence is assessed at well over $1million, I'm sure. they purchased for $350k about 15 years ago (or so)
-she tells me the mortgages are about $1 million, or about $500k per condo
-rent? sure, but she knows the rent isn't going to cover the mortgage, not between the two guys (I doubt studios rent for more than $2500/month do they?)
The $2500/month mortgage payment on the condo probably represents a good chunk of the husband's income (which is the reason why the wife is freaking out). With a bunch of kids to feed, how can they even survive? Though they don't have a mortgage on their own house, there are day to day expenses to cover. My advice to her…cut the price and SELL, I don't see this market recovering any time soon.
Like or Dislike:
0 
0
August 9th, 2010 at 2:33 pm 136
@Renting: "but when RE crashes incomes will also decline in the GVRD"
Total income will decline. Construction and real estate incomes will definitely decline. I'm not convinced those with jobs in many other areas will see significant income drops, especially those closely tied to the public sector and in export-focused jobs.
I'm very focused on residential sales. Low sales is a precursor to fewer housing starts and lower construction employment. Recessions affect us all, some significantly more than others. Vancouver is probably the best market in BC right now, and that's not saying too much. I think there is significant nascent weakness in BC's economy.
All that said, those who remember the early 1980s remember what a "real" recession looks like. The pain in housing in 2008-2009 didn't have time to spread to the rest of the economy. I'm not convinced 2011-2013 will be able to pull off the same trick.
Like or Dislike:
0 
0
August 9th, 2010 at 2:46 pm 137
@pricedoutfornow:
Are you talking about the rent for one studio or for both? You could maybe (maybe!) get about $1250/month for a brand-new, nice studio in a good location.
Like or Dislike:
0 
0
August 9th, 2010 at 2:48 pm 138
"have you ever done research on the yields of nortel or japanese real estate?"
Yes yields on both were poor kind of like Vancouver real estate is now. That is why prices crashed.
The yields on Vancouver real estate will also be poor after a 20% decline (and with a reset to normal interest rates they will be worse than today).
When an asset is falling the yield needs to be pretty high to attract funds and financing.
Like or Dislike:
0 
0
August 9th, 2010 at 2:51 pm 139
@Anonymous: Haha 300 square feet! I would hardly call that "living" downtown.
Like or Dislike:
0 
0
August 9th, 2010 at 2:52 pm 140
renting says: Yes yields on both were poor kind of like Vancouver real estate is now. That is why prices crashed
so far you haven't told us anything that we haven't seen here before. i'll give you a homework assignment. compare nortel and japanese real estate yields with other investment vehicles at the times of their peak. you can do the same with vancouver now. come back in a week and let us know what you found.
Like or Dislike:
0 
0
August 9th, 2010 at 2:56 pm 141
"Construction and real estate incomes will definitely decline."
Many of those jobs will decline to zero income. Some will leave BC, some will move back home with mom, some will get a room mate. All of the above means more rental stock. Yes housing starts decline but that takes a while to effect the market. Most things started today will be finished. I don't see a crash but softening to some extent. I know in downtown a lot of real estate and construction related workers are renting nice places. Rents will rebound with the economy and as the lack of starts catches up.
Like or Dislike:
0 
0
August 9th, 2010 at 3:00 pm 142
@Renting: small point: yields don't directly take into account financing costs. Yield is typically defined as rent/price.
Like or Dislike:
0 
0
August 9th, 2010 at 3:01 pm 143
@Anonymous:
Okay, let's do the math: Purchase for 120K (net costs/fees), with 20% down, which means that you'll have to finance 96K. Assume a 5% 5-year fixed mortgage, amortized over 30 years. This means the mortgage payment will be about $500/month. Add about $300/month for strata fees, about $100/month for taxes/insurance, and you'd need to charge at least (I haven't included any special assessments, maintenance, repairs, labour, etc.) $900/month to break even on a cash-flow basis.
If you rent the place out for $1000/month, the yield would be about 1.25%. (Once again, this is assuming no repairs, not a cent spent on maintenance, apartment is rented every single month, etc.) If you rent the place for %1100/month, your yield is 2.5%. To get a yield of about 5%, you'd need to rent the place out for more than $1300/month.
P.S. I'm sure that the math is correct, but I'm tired and may have messed something up; I don't have the energy to verify.
Like or Dislike:
0 
0
August 9th, 2010 at 3:02 pm 144
"compare nortel and japanese real estate yields with other investment vehicles at the times of their peak. you can do the same with vancouver now. come back in a week and let us know what you found."
Let compare now:
Nortel – no yield
Japanese real estate at peak – negative yield
Vancouver real estate – negative yield
Nortel looks the best based on yield. Too bad you can't buy it anymore.
Like or Dislike:
0 
0
August 9th, 2010 at 3:09 pm 145
renting says: Vancouver real estate – negative yield
go back to school, if you keep posting here the credibility of this blog will plummet.
Like or Dislike:
0 
0
August 9th, 2010 at 3:13 pm 146
"small point: yields don’t directly take into account financing costs. Yield is typically defined as rent/price."
Fair enough, but you can never consider real estate yield without considering financing cost since almost all real estate is financed to some extent when purchased. 100% Cash buyers are few and far between especially for investment purposes.
Like or Dislike:
0 
0
August 9th, 2010 at 3:14 pm 147
@stagnate: You are starting to sound like jimtan. I know that must hurt you but I call them as I see them.
Like or Dislike:
0 
0
August 9th, 2010 at 3:21 pm 148
"go back to school, if you keep posting here the credibility of this blog will plummet."
Thanks Stagnate. Allowing me to read your posts has been enough of an education for me. A great lesson on the psychology of people who "catch a falling knife" and the greater fool theory.
Sorry to inform you Nortel is no longer available. Maybe you can still get some Japanese real estate at peak?
Like or Dislike:
0 
0
August 9th, 2010 at 3:25 pm 149
@McLovin: Some speculated about that. Some also speculated that my silence was bought by the REIC or Bob Rennie. Some speculated that I am a millionaire dilettante.
But I never said those things myself.
Like or Dislike:
0 
0
August 9th, 2010 at 3:26 pm 150
jesse says: You are starting to sound like jimtan. I know that must hurt you but I call them as I see them.
i don't read real estate talks much, but i think jimtan is more bullish than i am. for a number of years now i've been mildly bearish on local real estate. i can't think of anything negative to say about jimtan though so am indifferent to your comparison.
Like or Dislike:
0 
0
August 9th, 2010 at 3:26 pm 151
@ Stagnate: Could you please tell us how the "yields" on Nortel and Japanese real estate are related to our particular situations? You might be on to something, but without you explaining your argument it is hard to understand where you are going with this. (P.S. The yields on some of the best stocks are often very low, sometimes even zero).
Like or Dislike:
0 
0
August 9th, 2010 at 3:39 pm 152
gstrader says: Could you please tell us how the “yields” on Nortel and Japanese real estate are related to our particular situations?
well, it's a factor to consider. as an example, local real estate in 1982 was yielding 1-3%, but you could walk into a bank and get a 90 day gic for 18%. bond and stock yields were high at the time also. unless massive deflation sends the money supply into a vortex capital has to sit somewhere. it's a factor for consideration, no other implication.
Like or Dislike:
0 
0
August 9th, 2010 at 3:42 pm 153
Great news…as we speak a shipload of Tamil Tigers has anchored off the coast of Vancouver Island….the navy is rushing in to escort them to Comox. This bunch will surely scoop up a few condos as they glide through customs and immigration with their 'welcome ' cheques.
I have to wonder how these desperate refugees charter disposable ships and fuel for the voyage…is it possible the Canadian Tamils group, funded by the Canadian taxpayer is secretly funding the exodus of terrorists to Canada???
Did anone tell them that the Tamil homeland is barely thirty miles from Sri Lanka in a country called India????? Why do they come to Canada????? Would it be for the free ride they've been promised by the tax payer subsidized mooches who have already snuck in on the coat tails of the bleeding hearts.
It was such a proud moment to see our federal Liberal Mp's dining with the terrorists and their fundraisers in Toronto while the federal Libs were supporting the war in Sri Lanka. The federal Libs seemed to think nothing of harbouring these terrorists in Canada safe from justice elsewhere. The Tamil Tigers were murdering their own people if they didn't send their children to fight, they extorted funds at gunpoint from Toronto residents who'd fled the reign of terror.
And now we're inviting the same scum to come and live with us….I hope the nasty's end up on Bob Raes street. Vote Liberal….Fuck Canada says Bob.
Like or Dislike:
0 
0
August 9th, 2010 at 4:06 pm 154
@ Stagnate: "unless massive deflation sends the money supply into a vortex capital has to sit somewhere."
I completely agree this is a major issue. There are few place for the average investor to park their money. Banks give 1%, the equities markets are flatlining, durable goods are getting cheaper etc. On the other hand, if the US situation has taught us anything, is that there are "perfect storms" that make all this irrelevant. It hasn't happened here yet, but some of the issues are starting to rear their head. I'll tell you what I think needs to happen for a real (i.e. more than 10-15% correction) crash to occur.
1. The Canadian dollar needs to weaken. Why? Because the strong dollar has made consumers richer by making cars, TVs, gasoline etc effectively cheaper. If the dollar weakens to say .80 US, we will see 3-4% less disposable income for the average Canadian.
2. Unemployment rate cannot decrease. Doesn't need to increase anymore than it is though.
3. Bond yields must increase. This has the effect you described above, as well as affecting bank interest rates (not to be confused with BoC intraday rates).
4. The US economy needs to get healthier. This again will have the effect you described (dollars will be pumped into the US rather than the Canadian "safe-haven") but will also attract skilled labour (and hence high earning population) away from Vancouver again.
5. Credit requirements need to be tightened some more. This is already happening, but there's still too much lending going on for there to be any serious crash. The pool of potential buyers is still far greater than in the past.
Many of these are intertwined (like 1 and 4, or 3 and 5) but I think it's a fair picture of what to look out for. Comments?
Like or Dislike:
0 
0
August 9th, 2010 at 4:16 pm 155
@pricedoutfornow:
$500k for a studio? That's darwin at work for ya. The fixtures better be solid gold for that money, I don't wanna see any chrome.
I've taken to cycling by the olympic village recently, it sure is eye opening to see it first hand. The place is deserted, and that's an understatement. A ghost town. No one around except for looky loos and the black shirted security standing around bored.
Looking in the windows, where the shades aren't down anyways, very very few units have any furniture, or show any signs of occupancy.
That's gonna be a long, slow spectacle there.
Like or Dislike:
0 
0
August 9th, 2010 at 4:23 pm 156
@stagnate: You are a very rude individual. If you have a point to make, make it, no need to play smart ass.
If you're trying to compare Canada of today to Japan of the 80s, you're delusional. They're nothing alike. In the 80s Japan was an exporting industrial power house, and Japanese savings rate was exceptionally high, and always has been, and they have a hard working, industrious culture.
Any of this the case in Canada? What does Canada produce and export? Raw lumber?
Like or Dislike:
0 
0
August 9th, 2010 at 4:32 pm 157
@Devore:
Sometimes my running route will pass through the village. It's got allot stacked against it. The rush to build was too fast to build an organic community. The buildings are placed in an odd way and it's isolated from everything else. Time will tell but it sure feels like a ghost town right now.
Like or Dislike:
0 
0
August 9th, 2010 at 5:01 pm 158
Bullwhip,
I totally agree. That said, he seem’s open to the challenge and to putting funds into escrow with a lawyer.
Interesting. But, does not look like any bears are willing to actually put up any $ and challenge him.
Oh well…
Like or Dislike:
0 
0
August 9th, 2010 at 8:02 pm 159
@Devore:
Canada extends east of the Rockies, you know. I know that's a hard concept to grasp in the "Best Place on Earth", but give it a try.
Like or Dislike:
0 
0
August 9th, 2010 at 10:20 pm 160
It's OVER.
Global housing rebound loses steam
And they still can't talk about the real reason why prices are falling – they are simply too high.
Like or Dislike:
0 
0
August 9th, 2010 at 10:39 pm 161
Canada sees ‘dramatic’ housing slowdown, global report says
http://www.financialpost.com/news/Canada+sees+dra…
“The recent slowdown has been most dramatic in Canada,”
Like or Dislike:
0 
0
August 9th, 2010 at 11:47 pm 162
@stagnate: My comparison is no to jimtan's bullishness, it's to his patronizing attitude. Just explain to us how and why Japan and Nortel are the same or different than Van RE and be done with it. Don't try to troll away a decent set of comments. It obviously isn't working. You don't have any authority to pass judgement from what I've read.
Like or Dislike:
0 
0
August 9th, 2010 at 11:59 pm 163
Uh oh bears, ship of Tamil RE tourists arriving as we speak to snap up OV condos. Luckily they're waterfront so the ship will dock right in front. Once other countries hear how easy it is to send ship to buy in BPOE(tm) then bears will become extinct. And hockey season not even start yet. With Canucks upgrade blueline housing will be very very very strong this fall as Leaf fans dump TO condos and move west. Bears always looking at reasons market should fall, look up friends. Let's say RE agents will not have time to climb Grouse Grind 14 times because phone will be ringing off hook.
Like or Dislike:
0 
0
August 10th, 2010 at 12:08 am 164
@ Nonymouse
Do you run through it? It's last stop on my ride before taking the leg to south Van and for the life of me I can't understand why anyone would want to live there. The entire area is a sunless concrete pad, interior condos – by far the bulk – face same across narrow streets that will amplify noise like horns once the area gets inhabitants; it's the most depressing development I've seen. Future wages in perpetuity should be sequestered from the municipal jackasses who foisted this on Vancouver.
Like or Dislike:
0 
0
August 10th, 2010 at 12:10 am 165
@ pricedoutfornow August 9th, 2010 at 10:32 pm
Didn't mean to accuse you of making up your story, but it sounded kind of hokey to me…perhaps I am just ignorant? Anyhow, then you say:
"he and his buddy initially put down I dunno, 50k on these condos, and then he maxed out his line of credit (90k) and his buddy did the same ($40k) to get the mortgages. wife tells me that they had a “hell of a time” getting the mortgage."
- you mean, HE told his wife after the fact that HE had a hell of time getting the mortgage. She apparently didn't know this was going on, right? She also didn't notice that $50k was missing out of the bank acct and a $90k balance was racked up on the LOC? Well, alrighty then…
Generally speaking, I'd be inclined to follow your direction and cut the cord too. Without really knowing all the details (current market price, price paid, comparable listings etc…) it's tough to say anything more. Logic would suggest that letting the units go at insane liquidation prices may be a bad move, however, if they can still squeak out a small profit or come close to breakeven then perhaps doing so would wipe out the balance on the LOC, top up the bank acct somewhat and most importantly, alleviate the stress. If they are hugely underwater on these units, they'll have to pony up more dough if they want to sell, which could be problematic. The rental income will not cover all costs involved, but it will most definitely make a big dent into that $2500 payment. If taxes, maintenance, insurance are not incl in this figure, then their situation is a little more difficult. What else is there to say? Two spouses not communicating with one another who have chomped off way more than they can swallow. I bet there are thousands of other families in the very same situation (or worse) and most figure out a way to deal with their issues.
Like or Dislike:
0 
0
August 10th, 2010 at 12:29 am 166
@fixie guy:
You voted for it, you got it.
http://www.nytimes.com/2010/01/31/sports/olympics…
Like or Dislike:
0 
0
August 10th, 2010 at 12:41 am 167
@oneangryslav2:
You are calculating the yield based on the debt of $96,000 instead of the actual cost to they buyer.
In the above scenario your initial outlay would only be $24000 down, so if your rent was $100 more than costs then the yield would actually be 5% (1200/year divided by 24,000). If the rent was $1300 (i.e. $400 positive cash flow) then your yield would be 20%.
There would also be the value of the property after 30 years (which would be paid off in the above scenario.
But remember that whenever you account for the cost of the mortgage then you are essentially investing with leverage so your gains (or losses) are magnified.
Like or Dislike:
0 
0
August 10th, 2010 at 12:44 am 168
@Anonymous:
Anonymous said:
How could anyone do that for you if we don't know your expenses or what you consider an acceptable profit? The math is simple, just do it yourself:
rent = payments + expenses + "modest" monthly profit
As someone mentioned, if your rent is covering mortgage payments and expenses then you're doing fairly well because you are gaining equity in the property. Just try to account for future maintenance and big one time expenses (like special assessments, renos, etc.) and average those out over time.
If you're trying to value the property to see if it's a good deal then some investors would consider cap rate for a quick estimate (the value of the property compared to the net operating income). For a 120k property to achieve a cap rate of 6% it requires net operating income of $600 per month (120,000 * 6% / 12). So you would need a rent of $600 + all your expenses (strata, maintenance, etc. but not counting mortgage).
Cap rate is just a high level view – probably best for qualifying properties, and then a more in depth analysis would be required. Cap rate might give you a basic idea if a condo provides good value, but it doesn't account for:
Financing costs
Changes in future rent
Vacany rates
Capital expenses (major repairs)
Improvement costs (renos)
Commissions (renting and/or selling)
Appreciation (or depreciation) of the property
Like or Dislike:
0 
0
August 10th, 2010 at 12:47 am 169
“Not one taxpayer has paid one dollar for the Olympic village,” he said. “And they never will.”
Didn't Mayor Drapeau say that the Montreal Olympics would never have a deficit just as a man could not have a baby?
Uh oh.
Like or Dislike:
0 
0
August 10th, 2010 at 12:52 am 170
@fatjay:
That's not yield, that's return on equity.
Gross yield = rent/price.
Net yield (cap rate) = (rent – property expenses)/price.
The yield on a asset has nothing to do with how you pay for it.
Like or Dislike:
0 
0
August 10th, 2010 at 12:57 am 171
"Buy and Bail"…
http://www.bloomberg.com/news/2010-08-10/-buy-and…
Like or Dislike:
0 
0
August 10th, 2010 at 1:09 am 172
@Girlbear:
In other words, upper-middle class white people. Not you-know-who.
Like or Dislike:
0 
0
August 10th, 2010 at 1:14 am 173
@fatjay: "Cap rate might give you a basic idea if a condo provides good value, but it doesn’t account for…"
Cap rate can and does account for maintenance, capital funding, and vacancies. It does not account for rental and capital appreciation however those are inferred based upon what an "acceptable" cap rate is.
I agree there's a lot more to research beyond cap rate and if such a simple calculation doesn't make financial sense it's time to run away. Any efforts to "make the numbers work" with lower cap rate is a fool's game.
Like or Dislike:
0 
0
August 10th, 2010 at 1:21 am 174
@Anoymous: Presumably somebody buying a condo at a 70% discount in 2 years time would be able to undercut just about any other rental apartment out there whilst still generating revenue
that's silly. Presumably an investor wants the most they can get, not to "undercut" other investors. Rents don't fluctuate wildly like prices because you don't leverage to rent and there's no rental speculation.
Falling prices just mean you get back to decent cashflow instead of losses for investors. It means the return of investment which will be needed to fill in the vacuum left by collapsed speculators.
Like or Dislike:
0 
0
August 10th, 2010 at 1:37 am 175
I did a walk through the Olympic village display suites a few weeks ago. I agree 100% that is a ghost town and the buildings are too close due to them all being low to mid rises. No privacy at all and it has a feel of a low income housing project (I wonder why). All the Concord Pacific developments across the creek are much better planned communities. No comparison IMO. And it will likely take 15 years to get the surrounding areas of the village finished so there is really nothing close by to make this area attractive.
Now the good part the pricing. I only got the price on one unit. I was about 980 ft, small balcony, view over looking the street, long skinny floor plan which was a poor use of space IMO with limited windows. The asking price was 1.2 Million plus HST. I wish them luck, but unless buyers do not look at any other area, or do not care about value for the $, I just could not see anyone even considering the place for this price – even if you think Vancouver real estate is fair value. Anyone who has bought at these prices will lose most of their money without a crash.
At some point they will have to cut prices and the shxt will hit the fan as the City finally will have to accept the massive losses. My guess this will not happen until after the next election. And of course it will be blamed on the unforeseen ___________ (fill in the blank) which no economist could see coming.
Like or Dislike:
0 
0
August 10th, 2010 at 1:50 am 176
Nice to see another of my ideas get into the mainstream conciousness. Sloppy fat civil servants, overpaid to an outrageous degree skewing the RE market with careless purchases due to their surety of sloppy fat pensions. People need something to talk about…why not interfere with the propaganda by introducing these juicy unspoken factoids into the mainstream eh?
http://communities.canada.com/VANCOUVERSUN/blogs/…
Like or Dislike:
0 
0
August 10th, 2010 at 2:01 am 177
I call bullshit on the 'seasonally adjusted' housing numbers just issued by the government. These figures are made up based on historical 'expectations' they have nothing to do with reality. 100% of the time these 'seasonal numbers' are adjusted down when its found that actual permit numbers are worse than anticipated. If they are saying 'this' number…you can guarantee that it is much lower when the real numbers are published two months from now. The government uses these bogus stats to manage the message because in Canada information is kept as a closely guarded political weapon and is not public as it is in most other democracies.
Did anyone notice how the sudden jobs numbers release in the US last week led to an even more egregious number released from Canada withinn hours of the American so as to keep a lid on the C dollar? So goes the extent of truth availability in Canada
http://ca.reuters.com/article/domesticNews/idCATR…
Like or Dislike:
0 
0
August 10th, 2010 at 2:14 am 178
@ Renting August 10th, 2010 at 9:37 am
Although I agree with you 100%, I firmly believe that the key players involved in the OV will NOT liquidate these units until absolutely every other option is explored first…and that includes giving them away if necessary (ie. via lotteries and such) or just simply taking them off the market (very quietly) and using them as subsidized rental units for "friends and family". Total BS no doubt, but too many ppl involved trying to save face.
Remember these articles from a few weeks back (which everyone should have read already)? Note the difference in # units available/presold as reported by the authors of these two articles.
http://www.cbc.ca/canada/british-columbia/story/2…
http://www.bloomberg.com/news/2010-06-25/vancouve…
I guess the only thing worse than this would be if these units were somehow totally deficient and required major taxpayer funded upgrades. Think Montreal's Big Owe…
Like or Dislike:
0 
0
August 10th, 2010 at 3:35 am 179
@fatjay: Yes, you're right. Thanks for the correction.
Like or Dislike:
0 
0
August 10th, 2010 at 4:17 am 180
@Plack:
"that’s silly. Presumably an investor wants the most they can get, not to “undercut” other investors. Rents don’t fluctuate wildly like prices because you don’t leverage to rent and there’s no rental speculation."
They want to get the most they can, of course, but if their product represents better value than their competitors then they'll have an easier "sell". Which, for a landlord, might hopefully translate into fewer periods of vacancy, or increased competition between tenants allowing the landlord to select those who they feel would be most responsible rather than being forced financially to take the first person who registers interest.
Surely one would expect rents to plummet roughly in line with prices after a crash, as competition between landlords (especially those who bought pre- and post-crash) erodes the amount of income they're permitted to make by the market. I say roughly in line because their are fixed monthly costs that obviously won't change no matter how great a deal an investor manages to scoop up a post-crash condo for.
Am I alone in thinking that rents HAVE to fall after prices?
Like or Dislike:
0 
0
August 10th, 2010 at 4:19 am 181
@fatjay:
"How could anyone do that for you if we don’t know your expenses or what you consider an acceptable profit?"
It's hypothetical. Feel free to make up any numbers for unknowns that you think are reasonable.
Like or Dislike:
0 
0
August 10th, 2010 at 4:27 am 182
@Anoymous:
Yes.
Rents continued to rise during the 80's bust in Vancouver and the 90's bust in Toronto. Those are the facts. Now go back and fix your theory.
Like or Dislike:
0 
0
August 10th, 2010 at 3:02 pm 183
more vacant rentals hitting mls today.
watch for "new carpet" or "new hardwood"in the listing an/or "quick possession possible" in the listings.
and another building had an elevator break this week, another had sprinklers go off unannounced.
Like or Dislike:
0 
0
August 10th, 2010 at 5:19 pm 184
@ patriotz: It's possible for rents to decline in Vancouver, but I agree the cause won't be the decline in real estate prices. For example, rents in NYC declined in 2008 much more than RE prices did. This again had to do with the decline in incomes due to the financial and legal sector meltdown. The same may happen in Vancouver. The run-up to the Olympics provided a lot of decent-paying jobs that aren't here anymore. Just a thought.
Like or Dislike:
0 
0