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August 4th, 2010 at 11:47 am
@Mike: The government has already interfered in the housing market, see what prices did in the last year and a half. In the US prices leveled off with a massive stimulus package but only after falling significantly from peak prices. In Canada prices increased 10-15%.
It’s worth doing the exercise to understand how much money is required to perpetually prop up the housing market. In Canada, with, say, 3% housing turnover from a stock of 12.5MM households is about 375K transactions. To keep prices at 10% above fundamentals at an average price of $300K requires $11 billion per year of direct stimulus, or 1% of GDP. Not out of the realm of possibility.
But if other areas of the economy need help it’s going to be a tough call propping up an unproductive asset class with no potential for future growth compared to diverting it to other areas that show more potential. I agree the endgame looks like a slow bleed but the system may be over constrained. I think we’re talking the difference between 1% and 2% monthly declines. Either way the direction is down.
August 4th, 2010 at 11:45 am
“Home sales activity in Greater Vancouver was quieter last month…”
Certainly not as “spinmeisterish” as I thought it would be.
Hmm, what’s up?
August 4th, 2010 at 11:34 am
@Mike: You are refuting your own point by using US as an example. The US FED threw trillions of dollars at the economy, and they stimulated nothing except stock market speculation. No jobs, no growth, and real estate prices and loans, residential and commercial, still on the floor bleeding. Deflation of all sorts as far as the eye can see.
Rates are zero. Money is cheap. There’s nothing left. Giving money away is clearly not working. You can’t prop up a bubble indefinitely. You can only postpone with exponentially growing debt. One way or another it will pop. No bubble in history has leveled off, don’t look for a soft landing based on any government action, although they will “do something about it” and then claim it would have been much worse without their intervention.
August 4th, 2010 at 11:34 am
We are currently in the third month of falling average prices and the second month of falling benchmark prices.
The collapse is here and we are still at the beginning.
August 4th, 2010 at 11:33 am
Vancouver West benchmark detached down only $15,000 on the month. That’s a smidge under 1%.
Disappointing.
August 4th, 2010 at 11:27 am
Here is a link to the stats.
August 4th, 2010 at 11:27 am
Here they are…
http://hudsonhometeam.com/_med.....l%2010.pdf
August 4th, 2010 at 11:26 am
http://www.bloomberg.com/video/61991476/
So this guy is says there is a “pool of global buyers, folks like me who are sitting in Chicago” waiting to buy.
Does that mean rich Chinese are buying in North America, and rich North Americans are buying china? I wonder if there is a bizarro Chinese real estate blog where bulls argue about the rich North Americans are buying up everything.
Kind of reminds me of when I see two lumber transport trucks passing each other in opposite directions on the highway.
August 4th, 2010 at 11:25 am
@Mike:
Agree with whom? You may see some window dressing such as a buyer’s tax credit or reduction in PTT, but that’s it. Which will only serve to pull a bit of demand forward as it has elsewhere. The last rabbit was pulled out of the hat with the interest rate drop in late 2008 and there are no more left.
No federal or provincial government is going to take the position that they can keep the housing market from falling because it can’t be done and they know it. If it could be done it would already have been done in the US, Ireland, etc.
In addition, your phrasing “housing market is too big to fail” is wrong. The housing market is failing RIGHT NOW because prices are out of proportion to fundamentals. A bust is not a market failure, but a market success – a return to fundamentals.
August 4th, 2010 at 11:15 am
@crashcow: Whoah those are bullish numbers! No wait. They’re not.
August 4th, 2010 at 11:12 am
“watch the public cry for stimulus…and the government will respond.”
Simulus for what? Average Canadian RE prices will not decline significantly enough for it to be called a “crisis” requiring stimulus.
Only Vancouver will be a bloodbath but that is not a Federal problem. The federal government will not spend taxpayer money for a bunch of idiots in electorally insignificant Vancouver.
August 4th, 2010 at 11:10 am
http://www.theglobeandmail.com.....le1661751/
Where have all the buyers gone?
Long time passing
Where have all the buyers gone?
Long time ago
Where have all the buyers gone?
Gone to foreclosure every one
When will they ever learn?
When will they ever learn?
August 4th, 2010 at 11:10 am
@crashcow:
Finally, the stats are out. Anyone with a link to them yet?
August 4th, 2010 at 10:58 am
July stats package released. Here are the total % benchmark price changes from April to July:
Residential (GVRD)
Greater Vancouver: -3%
DETACHED
Greater Vancouver: -3%
Burnaby: -2%
Coquitlam: -5%
Maple Ridge: -3%
New Westminster: 3%
North Vancouver: -3%
Pitt Meadows: -7%
Port Coquitlam: -7%
Port Moody: -3%
Richmond: -3%
South Delta: -5%
Vancouver East: -3%
Vancouver West: -4%
West Vancouver: -3%
ATTACHED
Greater Vancouver: -2%
Burnaby: 0%
Coquitlam: -5%
Maple Ridge & Pitt Meadows: -2%
North Vancouver: -4%
Port Coquitlam: 0%
Port Moody: -6%
Richmond: 1%
South Delta: -1%
Vancouver East: -8%
Vancouver West: -4%
APARTMENT
Greater Vancouver: -2%
Burnaby: -2%
Coquitlam: 0%
Maple Ridge & Pitt Meadows: -2%
New Westminster: -3%
North Vancouver: -2%
Port Coquitlam: -1%
Port Moody: 0%
Richmond: 0%
South Delta: -2%
Vancouver East: -5%
Vancouver West: -3%
West Vancouver: -12%
August 4th, 2010 at 10:53 am
@ Mike. That’s the banana republic ‘solution’. Printing money and sending cheques to citizens is an even worse distortion of the market that will destroy the economy faster than any housing crash. The piper always gets paid.
If prosperity could be generated by vote no one would need to work. It doesn’t matter how many home owners want it.
August 4th, 2010 at 10:52 am
FRASER VALLEY HOME BUYERS TAKE HOLIDAY IN JULY
The Fraser Valley Real Estate Board (FVREB) processed 1,101 sales on its Multiple
Listing Service (MLS®) in July, a decrease of 47 per cent compared to the 2,089 sales during the same
month last year and down 39 per cent compared to June.
Read more here
August 4th, 2010 at 10:50 am
“watch the public cry for stimulus…and the government will respond.”
Yes, they will respond. With very expensive window dressing. Did you notice how that worked out in the US? Did they throw a lot of money and resources at the problem? Yes. Did they arrest the price decline? No.
Enjoy your pork bellies!
August 4th, 2010 at 10:50 am
@ Anonymous
Hedging and diversification are really 2 different beasts entirely.
Hedging is meant to counter balance the risk of a specific position, and really shouldn’t be of much concern for your average investor.
Diversification, on the other hand, should be of PRIMARY concern for your average investor. With the exception of cash, holding more than 5% of your portfolio in a single asset is just bad investing (hence the popularity of Mutual Funds).
An exception to this rule might be starting your own business, where the luxury of diversification cannot necessarily be afforded. But, if you’re holding an asset strictly for performance (especially a leveraged asset like RE), the 5% rule is generous, if anything. You could probably say 2%.
You have to understand that an educated investor (something every investor should strive to be) will have a general understanding of the risk premium of his/her portfolio. The more risk he/she takes, the more potential for significant returns the portfolio should have. The market is full of investments that trade risk for reward; why would you hold an investment in Van RE when you’ve already admitted to yourself that the potential risk far outweighs the potential reward? You might as well cash out and put the leftover equity on red or black (ie. it’s probably a better risk/reward trade off than your current Van RE investment).
Holding 20 separate companies across 10 different market segments isn’t going to get you rich over night, but it’s also not going to land you in the poor house.
August 4th, 2010 at 10:33 am
@patriotz: I’ve disagreed with you on the past regarding what the government is capable of.
The government controls the supply of money and can therefore considerably influence prices. However, government interference in pricing disrupts markets and impairs long term productivity.
Government intrusion is generally limited to the will of its citizenry. If a government’s policy actions are unpopular, they will not be voted in the next time around. Therefore, governments generally act to satisfy the will of its citizens. They need to get re-elected.
I agree 100% that government will ultimately take the position that the housing market is too big to fail. Households have way too much debt and most of their wealth in housing. Most baby boomers plan to rely on the equity in their homes to finance their retirement.
Read this article re. future Quantitative Easing south of the border:
http://www.creditwritedowns.co.....ystem.html
One example of future simulus is discussed as follows: “The bigger inflation event (QE3?) would use newly created base money for the immediate benefit of debtors. Sending checks to indebted homeowners made out to their creditors would be an example of quantitative easing that would be popular among the masses and economically stimulative. It would allow a new credit bubble to expand and prices of goods, services and assets to increase. We think this form of QE — broad debt socialization – is inevitable.”
Once you see house prices fall 20% nationally and our economy tank as a result, watch the public cry for stimulus…and the government will respond.
Deflation should be embraced. Unfortunately, it won’t. Too many people are too comfortable in jobs only supported by credit expansion.
One thing is for certain – no asset will go up in relation to gold and agricultural commodities over the next decade…
August 4th, 2010 at 10:32 am
@ Pope. Thx for the explanation.
August 4th, 2010 at 10:32 am
Direct link to July stats here.
Why in the hell REBGV doesn’t provide the direct link in their press release or ANYWHERE on their website is beyond me. Makes me feel dirty going to realtor websites looking for the link . . .
August 4th, 2010 at 10:26 am
@chip: No problem. I’m not in favor of automatically deleting posts because of the problem mentioned: they get voted down for opinion.
I vote up comments I disagree with if they are honestly presented. It seems like the ideal scenario would be to have two scores. One for agree/disagree and one for spam/troll/garbage.
We don’t give comment rating to registered users only because the majority of registered users here are of the same opinion: Vancouver real estate is overpriced. Registered users do get double the voting power of unregistered though, because they tend to add more to the discussion and community.
August 4th, 2010 at 10:23 am
@Teddy Bear:
Wow, the city can add 7000 residents just like that?
I though we were running out of land?
August 4th, 2010 at 10:19 am
Home sales activity in Greater Vancouver was quieter last month than most Julys over the past decade, with residential sales, prices, and the number of homes listed for sale trending downward in recent months.
The Real Estate Board of Greater Vancouver (REBGV) reports that the number of residential property sales in Greater Vancouver totalled 2,255 in July 2010. This represents a 45.2 per cent decline from the 4,114 sales in July 2009, the highest selling July ever recorded, and a 24.1 per cent decline compared to June 2010.
http://www.rebgv.org/monthly-r.....ctive-july
August 4th, 2010 at 10:16 am
“If you want to avoid risk completely”
Fortunately, taking risks is not an all or nothing position. At least, some of us understand that.
August 4th, 2010 at 9:48 am
@FlipFlop: “Considering that no single investment should exceed around 5%…”
why?
This is a little too “heuristic” for me. I agree with the bulk of your post, but there are many cases in which this “rule of thumb” breaks down.
People always talk about Hedging and diversification.
If you want to avoid risk completely…then do not invest.
August 4th, 2010 at 9:31 am
@flip_this:
The Soviet Union was too important to fail, but it did.
The US RE market was too important to fail, but it did.
The Irish RE market was too important to fail, but it did.
The Spanish RE market was too important to fail, but it did.
Governments cannot beat economic fundamentals long run.
August 4th, 2010 at 9:22 am
Uh oh. Even the Chinese are getting “skittish”. Here is a recent Bloomberg article.
Aug. 4 (Bloomberg) — China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said.
Banks were instructed to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.
August 4th, 2010 at 9:21 am
I think The Pope is doing us all a great service and we’re here at his sufferance. This is his blog – he can delete anything he’d like, but generally only deletes nonsense and leaves us to react to the rest.
The moderation of blogs is a contentious and long-running internet issue, and there is simply no way for The Pope to make everyone happy. If you don’t feed trolls, they don’t wreck a place – we can each help create the blog we want with our own behaviour.
And thanks to the Pope for creating this space for us all.
August 4th, 2010 at 9:19 am
@The Pope:
That makes sense. There was a discussion a while back to automatically delete posts that reached a certain number of negative votes, and I thought it was being implemented.
I’m glad it’s not. Thanks.
August 4th, 2010 at 9:17 am
@“A-Sharp” Accountant:
I’m not a bull and wasn’t referring just to bullish comments. But I have seen some posts that, while I don’t particularly agree with them, get voted down pretty quickly because they make a point that perhaps five people in a row don’t like.
August 4th, 2010 at 9:05 am
Chip has a point, more tuning would be valuable. Commonly mod points are detracted not for what you say but who you contradict. Moderation for registered users only, and publicly displayed?
Back on topic, a good thread to bust this classic out:
http://img819.imageshack.us/im.....entive.jpg
August 4th, 2010 at 8:56 am
“This time around the government owns such a large portion of the mortgage market, that they might just freeze the mortgage rates.”
They can’t.
August 4th, 2010 at 8:44 am
@superduperbulltime:
Bear did you look at picture of condo? Are you property expert bear? Do you know where Deerfield FL is bear? It’s long drive from Deerfield to Miami bear. Too many waitress in that area already too. The real question you ask when looking at condo ad bear is would 24 year old murse live there? Answer is no to this one.
—————————-
What an argument! LOL When it was sold for $115k in 2005, then it was completely different geographical area, right? And the neighbors – all doctors, lawyers and engineers… absolutely no riffraff
August 4th, 2010 at 8:42 am
I’m with VREAA.
@ McLovin: Ask you friend what proportion of his investment portfolio this property represents.
Considering that no single investment should exceed around 5% (this is an investment property, not a principal residence), I’m guessing he’s a little over weighted.
It’s a tough choice to make, but when you ballpark the odds on potential losses and compare them to the odds on potential gains, it really does seem a little asinine to hold onto it. This is the entire fundamental premise of investing. Risk/Reward. It’s the reason people buy GICs; your money is safe and you get a small return. It’s the reason people buy start ups; your money is heavily at risk, and you might make a killer return.
And, it’s the reason that it’s a bad time to invest in Vancouver RE; your money is heavily at risk, and the likely hood of a big return is very small.
To think that having an asset that comprises over 5% of your portfolio with that sort of risk/reward profile is a good idea, is foolish. To think that having an asset that comprises over 50% of your portfolio with that sort of risk/reward profile is a good idea, is completely asinine.
So, is your friend a fool or an ass?
August 4th, 2010 at 8:39 am
@patriotz:
“The cost of borrowing money is the interest rate. What would double digit interest rates do to house prices? Hint: 1980’s.”
This time around the government owns such a large portion of the mortgage market, that they might just freeze the mortgage rates. Look what is going on in the US: they are talking about automatically refinancing all federally insured mortgages out with a lower interest rate.
The unfortunate truth is with almost 70% of voters being homeowners, the housing market is too important to fail. So the most likely scenario is that money confiscated from savers through inflation will be given to indebted homeowners.
August 4th, 2010 at 8:34 am
@superduperbulltime:
Is that the best that you got?
Deerfield is 1/2 hour north of Fort Lauderdale. That’s not too far unless you’re overleveraged on your mortgage payments and don’t have enough even for public transportation.
Using your argument about the distance from the big city, I guess that’s why Kelowna RE is tanking.
August 4th, 2010 at 8:27 am
@“A-Sharp” Accountant: See two comment up. (Comment #8). Classic group think bear.
August 4th, 2010 at 8:19 am
@chip: We’ve never deleted a comment for being bullish. Rather than restore those 5 comments, I’ll post their contents here so you can decide if it’s unreasonable censorship or just garbage clean up. These were all posted by the same IP between 3:04 and 3:21 am:
Thats the entirety of the deleted comments. Those take up a lot less space like that than they do as the first five comments on the thread. Still unhappy with the deletions? Because we can restore those comments if you’d like.
Generally we leave ‘first post’ type comments to the moderation system, but if the first five comments are a flood of senseless ramblings I see no reason not to remove them, just as we would for LOSE WEIGHT NOW spam comments.
August 4th, 2010 at 8:16 am
So if the Canucks get a new practice rink for $20+million (yikes!) will they play better? Probably not… Why don’t they invest that money in better coaching and management? The reason why I comment on this is because it sort of parallels Vancouver R/E where decisions are made that make no sense and don’t follow any logic, plus no real value is derived from it. The ironic thing is people will pay big bucks to watch the Canucks lose, so it’s a Win for the team anyways!
August 4th, 2010 at 8:16 am
Bear did you look at picture of condo? Are you property expert bear? Do you know where Deerfield FL is bear? It’s long drive from Deerfield to Miami bear. Too many waitress in that area already too. The real question you ask when looking at condo ad bear is would 24 year old murse live there? Answer is no to this one.
August 4th, 2010 at 8:14 am
@Alum:
The cost of borrowing money is the interest rate. What would double digit interest rates do to house prices? Hint: 1980′s.
http://cuer.sauder.ubc.ca/cma/.....couver.pdf
August 4th, 2010 at 8:05 am
Hey guys,
Stop dreaming of price drops. Soon the inflation is going to raise the cost of everything, including housing.
Instead of these rootless arguments look at the condo tracker, which is sharply declining. As of now it is 419. It used to be above 600. That’s more than 33% drop in inventory.
August 4th, 2010 at 7:59 am
Here is a condo on the north (desirable) side of Atlanta that sold for less than $18/ft! Didn’t they have some sort of sporting competition there in the 90′s?
August 4th, 2010 at 7:57 am
@chip:
Really?
Not that I’m for the reckless deleting of comments, but when was the last time you saw an honest bull argument that was in “foreclosure”?
Good Bull arguments don’t get thumbed way up, but they don’t usually make it into the bottom either.
To prove it, I’ll post a reasonable honest bull argument anonymously and lets see if it gets deleted. (not today…but later)
August 4th, 2010 at 7:52 am
It looks like comments are getting deleted if they get voted down too much. Can’t say I’m a fan of this. While many of them are pure dross and deserve to be panned, there have been some decent contrarian arguments that get treated the same way. Delete them and you end up with an echo chamber and that doesn’t make for a very lively comment section.
August 4th, 2010 at 7:38 am
Here is the latest what Vancouver Sun had to say about RE in their business section:
http://www.vancouversun.com/bu.....story.html
The title of the story is: “Canucks eyeing new practice rink in False Creek area”
Well, if that is not RE news, I don’t know what is!
August 4th, 2010 at 6:28 am
Regarding McLovin’s friend’s predicament, from the last thread:
@Confused_among_rich_asians: “how would this decision be considered inferior to selling or losing money (except for opportunity cost)”
——–
Without factoring in the opportunity cost of the 25% downpayment over 10 years, all the math doesn’t mean much. Only ignorant investors will avoid doing the real math, and try to stick with these properties.
Smart investors would take the 100K loss now and move on.
Not doing that would expose them to (a) unexpected downside (assessments; tenants; deflation) and (b) the psychological weight of the chronic losing investment. The latter could cripple their ability to take better opportunities over the next ten years and perhaps for longer.
The clue to how McLovin’s friend should have acted comes in the first line of the anecdote:
“A friend of mine bought at the Waterscapes Skye development in 2008 (pre-construction) hoping to flip the property.”
If the premise for an investment disappears, get out.
The premise here was a quick flip. That failed; Get out; Take the loss; Move on.
One of the very biggest mistakes in investing is to change the premise of the trade after the fact, when the trade goes bad.
What McLovin’s friend has done is tell himself that a day-trade is part of his long-term core portfolio.
That way madness lies.
August 4th, 2010 at 6:20 am
Why on earth would I get 12-15 Florida condos when I can get one super dodgy east side condo for a little more?
August 4th, 2010 at 3:19 am
pretty sad that us little guys are waiting for 1mil westside approval – sorry price is dropping – everything by 30% – hello Dunbar!