The death of the American Dream
Remember when all you had to do was buy a house and live in it as the price went up? It’s only been a few months of dropping prices here in Vancouver, but in the US it’s getting harder to remember the good old days.
Call it the American dream that died. The slump in U.S. housing, now more than three years old, is the most severe since the Great Depression. A move by the government to revive the market – through a tax credit for first-time home buyers – met with some success earlier this year, but after the credit expired, sales collapsed in July. Now economists fear further declines in home prices, which have already fallen 30 per cent since their peak in 2006.
The days when Americans could count on their homes as the pillar of their financial affairs – a seemingly magical asset, bought with borrowed cash but steadily increasing in value, tapped to fund college tuitions, second homes, and retirement travel – are past. Even if the market eventually recovers, as many expect, the era of the home-as-nest-egg is over for the foreseeable future.
In this brave new world, housing prices don’t always go up, and if they do, the pace is more likely to be in line with inflation. People can find themselves trapped in their homes, unable to sell because their house is worth less than what they owe on their mortgages, a condition now shared by one in four U.S. homeowners.
Read more about the fundamental shift in the US housing market over at the Globe and Mail.
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August 30th, 2010 at 11:15 pm
Is Canada really different? 2 links:
Why Canada’s housing market may be heading for a correction
http://www.theglobeandmail.com.....le1690581/
Is Canada in a housing bubble?
http://www.theglobeandmail.com.....le1690435/
August 30th, 2010 at 11:11 pm
PIIGS squeal
August 30th, 2010 at 9:15 pm
Some red meat for fecalpaul:
http://news.yahoo.com/s/ap/201.....FwcGxlc3dp
August 30th, 2010 at 9:12 pm
@Anonymous: #87
Harper does have balls but they’re in his mouth and belong to someone else.
Looks like it’s open season on realtards and boy are they pissed.
http://www.theglobeandmail.com.....le1574959/
Go propertyguys.com, wipe those douchebags off the face of the earth.
August 30th, 2010 at 8:56 pm
It seems that at least one developer is getting out while the getting is good, however his greed may be getting the better of him.
http://www.realtor.ca/property.....1223998375
Looks like he bought the lot last September for $600k, spent $15K on soft costs, and now wants $830K.
Is this a desperate hail mary at the end of the boom, or a valid business model?
August 30th, 2010 at 8:54 pm
@Best place on meth:
You can golf, sail and water ski on the same day. But more importantly, you can finish work on a Friday and within a few hours be having a drink in Bali or Phuket for the same price that Air Canada charges for a one-way flight from Vancouver to Nanaimo.
August 30th, 2010 at 8:35 pm
@SamanthaD: I’m sure real “ellites” (elites) such as yourself should be able to spell “layers” (lairs) and use proper grammar.
August 30th, 2010 at 8:30 pm
That Guardian article says the D.P. requirement in the UK was increased from 10% to 25%. It would be nice to have the same in Canada. That would definitely kill prices. I remember before the latest mortgage rules were introduced there was quite a bit of speculation in the media as to what the changes would be. The possibility of an increase in the DP requirement from 5% to 10% was met with great consternation by the RE industry as you can imagine. I recall reading the opinion that an increase to 10% would cause a “crash”. 10 percent!! That is how leveraged this market is. I would love for it to go back to 25% but I think we all know Harper government will never do it: a) He has no balls, and b) Harper is all about pandering to homeowner families (everyone else can eff themselves).
August 30th, 2010 at 8:23 pm
The brokerages – including Century 21, Royal LePage and ReMax – will meet Tuesday to try and agree to an alternative listings site that would pool their offerings. The meeting comes a day after Yahoo Canada announced it will offer listings on its main search page using database and real-time search technology from Toronto-based Zoocasa.com.
In related news, Rotary dial telephone makers team up with wagon wheel companies to fight what they are calling “absurd claims of fantasy” that their businesses are in decline due to technological change. President of the new association called REALTOR for short, claims that business is better than ever. Only 0.05% of the world has made a rotary dial telephone call so the future growth is endless!
August 30th, 2010 at 7:39 pm
The brokerages – including Century 21, Royal LePage and ReMax – will meet Tuesday to try and agree to an alternative listings site that would pool their offerings. The meeting comes a day after Yahoo Canada announced it will offer listings on its main search page using database and real-time search technology from Toronto-based Zoocasa.com.
Big-name realtors plot rival listings site
August 30th, 2010 at 7:31 pm
@Boombust:
August Units 1994-2009
1994 = 2159 = 44%
1995 = 2326 = 47%
1996 = 2141 = 48%
1997 = 2096 = 55%
1998 = 1589 = 49%
1999 = 2002 = 59%
2000 = 1805 = 51%
2001 = 2659 = 77%
2002 = 2558 = 73%
2003 = 3413 = 88%
2004 = 2570 = 61%
2005 = 3800 = 82%
2006 = 3092 = 65%
2007 = 3493 = 75%
2008 = 1611 = 35%
2009 = 3496 = 74%
2010 = ???? = ??%
August 30th, 2010 at 7:28 pm
@chip:
All your points regarding Singapore are spot on, BUT, can you go golfing, sailing and skiing there all in the same day?
Because to some of our local mouth breathers that seems to be a critical selling point when trying to pass Vancouver off as the best place on earth.
You know, the kind of stuff the average person cares about.
August 30th, 2010 at 7:06 pm
@oneangryslav2:
Government-free isn’t the same as limited government, which is the practice of the Singapore govt when it comes to the economy. Singapore has the second freest economy in the world. It took me two days to incorporate a new business here, all online. My first year tax rate on income up to S$100,000 is zero in the first three years, and only 8.5% on the remaining amount up to S$300,000.
My personal tax return is one page.
Singapore is constrained politically with limits on the media that you won’t see in Canada. That is partly due to the newness of the country and partly due to the nature of its neighbourhood. Whereas Canada shares the world’s longest undefended border with the world’s biggest economy, Singapore has the sometimes hostile Indonesia and Malaysia and their associated religious tensions. Singaporeans are also a mostly a culturally conservative people so they believe the price they pay for political stability here is preferable to the price that the Thais and Filipinos pay for their young, free-wheeling democracies. When they no longer want to pay that price they will vote the government out because they do have elections.
Personally, I feel freer here. I have never been contacted by the government whereas in Canada the CRA badgers me with demands, many of which were resolved ages ago but they keep losing the paperwork. I have never filed a police report whereas in Canada petty and not so petty crime is always an issue. When I enter Singapore the customs official invariably says Welcome Back to Singapore, Mr XX, whereas in Canada I’m always asked many useless questions about my business, family etc.
And I keep most of what I earn, whereas in Canada half of it is taken and presumably pored down a big gaping hole somewhere near Ottawa.
In sum, Singapore has fewer laws and regulations but very stiff penalties. Operate within those limits and you are very free. Canada has many laws and regulations which, though not overly punitive, together smother one’s liberty to a significant extent.
August 30th, 2010 at 6:53 pm
“One of the employees at the Harrison Hot Springs hotel said she thinks the recession is still on.”
Well, I think she’s got that right. It was never really “off”.
August 30th, 2010 at 5:57 pm
@chip: But isn’t Singapore the antithesis to the government-free libertarian utopia that you and your co-ideologues revere?
August 30th, 2010 at 5:53 pm
@chip:
At least Singapore actually does have a lack of land.
It’s 1/4 the size of greater Vancouver with more than twice as many people – 9 times the density.
August 30th, 2010 at 5:52 pm
“…and they own three properties in Vancouver.”
Maybe it’s that huzbah or his wife we saw on the News.
August 30th, 2010 at 5:52 pm
I was in Harrison last week and it was a ghost town. One of the employees at the Harrison Hot Springs hotel said she thinks the recession is still on.
August 30th, 2010 at 5:51 pm
VHB,
How do your stats compare MoM, and YoY?
August 30th, 2010 at 5:50 pm
And my anecdote of the day, with no meaning attached whatsoever, is that I was at the Canadian embassy getting a passport for my son when a Chinese couple (mainland not Singaporean) asked the admin officer what they need to do to move to Canada because their daughter is studying there and they own three properties in Vancouver.
I really wanted to ask them how they bought three properties outside China despite that $50,000 annual cap on taking funds out of the country. I’m truly curious as to how this works.
August 30th, 2010 at 5:49 pm
Days elapsed so far 20
Days remaining 1
Average Sales this month 105
Average Listings this month 181
Projected Sales 2207
Projected New Listings 3803
Projected sell/list 58.0%
August 30th, 2010 at 5:44 pm
Singapore’s property market continues to go on a tear, helped along by some 30% annualized GDP growth in the first half and a very high immigration rate that has brought in almost 150,000 people a year since 2005 (note, the city-state only has 5 million people and these immigrants are all vetted to a much stricter education and current-income criteria than those in Canada).
But the government doesn’t have a reputation for economic management for nothing. Yesterday, they introduced measures to yet again rein in the property market, and the minister responsible spoke with a clarity that Canadian politicians sorely lack:
“If the current momentum in the market continues, what will likely happen is that a property bubble will form. And when the bubble bursts, and not if, but when the bubble bursts, there will be severe implications for individuals, as well as for the economy on the whole.”
Not if, but when. Not it’s different here because we’re the second wealthiest country in the world, or we had 1 million tourists arrive in the month of July alone or any other exercises in cognitive dissonance that the Singaporeans could trot out if they wanted to.
But when.
August 30th, 2010 at 5:41 pm
New Listings 191
Price Changes 116
Sold Listings 102
August 30th, 2010 at 5:10 pm
@The other Garth:
“I was in Yaletown on Sunday. Ran across a gaggle of asians clustered around open house signs. I have no idea if they were wealthy and just flew in from China. I didn’t really care, as I was spending my Sunday relaxing, doing some recreational woodworking at the Roundhouse, and going for a walk. Life as a renter is pretty difficult.”
Ya, cos no homeowners had a relaxing weekend either. Jeeesh.
August 30th, 2010 at 5:03 pm
Reality is the real estate slump, denial is the fantasy.
“”It’s either feed your kids or pay your mortgage,” says Omayra Delgado, a 33-year-old special education teacher whose Miami house has slumped in value from $160,000 (£103,000) to $60,000. “My home is in foreclosure. I’m trying to keep it.”
http://www.guardian.co.uk/busi.....reclosures
August 30th, 2010 at 4:17 pm
@rp1:
“CBC reports the Mayor of Vancouver pissed his pants.”
He just found out how much it’s going to cost to put in covered, heated bike lanes in time for winter.
August 30th, 2010 at 4:11 pm
@nonREgirl: CBC reports the Mayor of Vancouver pissed his pants. But it wasn’t related to sales of Olympic Village condos, which are non-existent and threatening turn the city into Lehman Brothers. He just does that on a regular basis.
August 30th, 2010 at 4:07 pm
@900kCrackHouse: “Any thoughts on why the median price dropped so much more than the average price?”
A few large numbers pulled the average up. Likewise, when the median is above the mean, a few low numbers are pulling the average down. The median is generally more reliable, but it’s easy to be mislead by one number. It’s best to have the distribution.
August 30th, 2010 at 3:57 pm
I was in Yaletown on Sunday. Ran across a gaggle of asians clustered around open house signs. I have no idea if they were wealthy and just flew in from China. I didn’t really care, as I was spending my Sunday relaxing, doing some recreational woodworking at the Roundhouse, and going for a walk. Life as a renter is pretty difficult.
August 30th, 2010 at 3:51 pm
Realwhores in the UK are blaming ‘a lack of first time buyers’ and ‘ the deposit requirement’ for killing the market. HUH !!!! Does that mean that you can only juice the market with stupid kids and zero down?????? Sounds a lot like the phony ‘pent up demand’ bullshit we heard here in Vancouver.
http://www.telegraph.co.uk/fin.....-hard.html
Now, if we could only figure out a way to jump start that 50 year mortgage program again…..ya, thats the ticket.
August 30th, 2010 at 3:33 pm
@900kCrackHouse: Well, while the median and the mean are both measures of central tendency, they are calculated differently. The mean is the mathematical average, while the median is the “middle” amount.
Example: 5 sales–500K, 500K, 750K (East Van bungalow!), 850K, 2000K.
The mean is 920K, while the median is the “middle” sale, or 750K. You’ll find that the lower the total number of observations, the more (in general) the median and the mean diverge. Sometimes the median will be higher than the mean, other times it will be lower. It all depends on the mix of real estate being sold.
August 30th, 2010 at 3:25 pm
@Anoymous: I’m not convinced. Please do the math, including all associated costs–realtor’s commissions, etc.–and the forgone opportunity cost of a down payment, and compare to renting the whole time.
August 30th, 2010 at 3:23 pm
@Anonymous: Any thoughts on why the median price dropped so much more than the average price?
August 30th, 2010 at 3:20 pm
@Anoymous:
“f you’d bought before 2005 and sold at the previous peak you’d have been able to live an even better life.”
But if you have not sold yet, you are in for a crappy life of deflating house prices while your huge mortgage debt stays the same. What will it be? Bankruptcy or a rent it out and loose money every month?
August 30th, 2010 at 3:18 pm
@Anoymous: #57
Possibly, but timing these things is a complete crap shoot.
Also not having a mortgage to tie me down meant I could leave Vancouver and travel for extended periods of time… a luxury I took well advantage of!
Even if I could have timed the market perfectly, and was more interested with turning a condo into an investment… the type of property I was interested in would have only, at most, given me a 100k “wind fall.” I use quotation marks because these 100K would not include my realtor costs, property tax or interest on the mortgage etc etc etc. By renting, I’ve been able to save about as much (even after my travel expenses).
August 30th, 2010 at 3:15 pm
@realpaul:
But they certainly are trying to dress up that pig! The Herald completely ignored this outright lie spouted by Queen Realturd(TM):
‘Diane Scott, president of the Calgary -Estate Board, said supply and demand is playing a role on current average prices but there’s also the factor of luxury home sales. “Homes sold over $1 million are down in numbers from last year for the same period,” she said. “June to August last year we had 98 sales over $1 million.”‘
Now from this they would have us believe that a fall in luxury home sales are putting downward pressure on the average price. However this ignores the fact that sales are down big across the board, roughly 40% from last year. And when you’re looking at average prices then relative sales matter.
Sales of “luxury” $1 million homes make up a greater proportion of sales in 2010, and are actually putting upward bias on the prices. Mike Fotiou went through the numbers on his blog if anyone’s interested.
August 30th, 2010 at 3:14 pm
@Anoymous:
If you’d bought before 2005 and sold at the previous peak you’d have been able to live an even better life.
I always thought it was a shame I wasn’t born as Forrest Gump – what a life… plus I would have obviously bought stock in a certain fruit company and gotten rich.
Oh well. big mistake there, I guess…
August 30th, 2010 at 3:07 pm
@VanCity Guy:
“No, I never bought, still haven’t… but I was fooled by the spin and until late 2005 I was looking to get in. Now after renting, and being able to live such a good life, I don’t think I will buy for some time now.”
If you’d bought before 2005 and sold at the previous peak you’d have been able to live an even better life.
August 30th, 2010 at 3:01 pm
Unfortunately the recent decrease in 5yr fixed rates will increase sales and stop the price decline for another month or so. Don’t be surprised to see an uptick in sales this week and next.
August 30th, 2010 at 2:56 pm
http://www.calgaryherald.com/b.....l#Comments
Alberta is toast…..
The economy of this province runs on NG exploration and production and when the largest and most respected investment house says we’re done….boys…..RE ain’t coming back any time soon regardless of whatever any local realtor says……..
——————————————–
“Forget about investing in North American natural gas, FirstEnergy Capital Corp. said Monday.
Too much supply and not enough demand has made the resource – once the bread and butter of Alberta government coffers – a sinking ship, according to analyst Martin King.
“With this interim price forecast update we are effectively abandoning hope that any price recovery on the scale that we had been previously forecasting for late 2010 and 2011 will come to pass,” he said in an early morning report.
The Calgary-based analyst slashed his 2011 natural-gas price forecast by a dollar to average $4.75 US per million British thermal units.
King also lowered his 2010 average price to $4.63 US per mmBtu, from $5 US.
North American markets have been flooded with shale gas volumes as producers stepped up drilling activity south of the border. Analysts attribute the fevered pace of activity to drill-to-keep lease requirements, as well as volumes being supported by dwindling hedging contracts inked at higher prices.
Prices in Canada will suffer from a widening spread between New York and Alberta trading hub AECO, with Alberta natural gas averaging $4.24 per thousand cubic feet, from a previous estimate of $5.38 per mcf.
“With a clear lack of any major negative impact on supply and rig counts from the past year of price activity, we are prompting avoidance of the North American natural gas investment space,” King said in a Monday morning research note.
© Copyright (c) The Calgary Herald”
August 30th, 2010 at 2:43 pm
Listen crew, Stu here. Stu doesn’t want to see another basement suite circle jerk here. They’ve been talking about pent up demand running out here for decades. Well, the ethnics keep storming the immigration office son. I think the crusties in Ottawa planned it that way. The ethnics don’t like it there because it’s too cold. I think the KKK is still active once you get past Port Coquitlam. Well, as always the best time to buy was yesterday.
August 30th, 2010 at 2:38 pm
@Boombust:
No, I never bought, still haven’t… but I was fooled by the spin and until late 2005 I was looking to get in. Now after renting, and being able to live such a good life, I don’t think I will buy for some time now.
August 30th, 2010 at 2:32 pm
“I can’t believe I ever fell for it…”
What are your circumstances? Did you actually buy?
Just curious.
August 30th, 2010 at 2:22 pm
Pent up demand…
Remember that term from a few years back? This was the term that explained why all of a sudden everyone wanted to buy a condo in Vancouver and why people were lining up over night or days in advance to do so. I was walking around downtown last week and it finally dawned on me that this line was complete BS and I can’t believe I ever fell for it.
The argument was that there was a tonne of “pent up” demand for housing downtown, but not enough places for sale to meet this demand and that as soon as buildings started to pop up like mushrooms, all of this demand came to the forefront to buy, thus pushing prices up. The epiphany I had was that demand can’t be pent up…it’s either there, or it isn’t. If there was a lot of “pent up” demand back when there were few condos available downtown, it would have caused prices back then to skyrocket (more demand than supply) and that as soon as yaletown/coleharbour was built, this demand should have been satisfied and prices should have relaxed. Obviously we all know now that the exact opposite occurred.
I now realize that the Vancouver boom was more closely tied to the city winning the bid for the Olympics and, more importantly, the cheap credit that was increasingly becoming available. This fed the mania which became the Vancouver bubble. The pent up demand theory is just another example of Realtor BS in action.
It should be fairly obvious to everyone on this blog, and some people out in the city, that this market is cooked. There will be many other attempts by Reators to spin the facts to suit their argument, but don’t be fooled!