Holiday Free-for-all!
It’s that special time of year again, have you been naughty or nice? Either way you’ve earned some holiday time and we hope you’re enjoying (or soon to be enjoying) that time. Go ahead, grab a strong drink, we won’t judge.
Here’s our regular end of the week news round up and economic open topic discussion thread for the Christmas weekend. Whether you’re freaked out deep in debt, or jealous of the trappings of those who are, we hope you have a relaxing weekend.
And if you have to occasionally sneak away from the family and argue with a stranger on the internet, we’ll be here for you. Here are a few recent links to kick off the chat:
- Could a US style collapse happen here?
- IMF says Canada on course, but risks ‘elevated’
- BC immigration ‘surged’ by 10% last summer
- Canada’s housing market among the best
- Stock market ‘best since 1928′
- is saving money bad for Canada’s economy?
- sell the condo, move east and retire early
- should you give your 5 year old cash for Christmas?
- Got a grand? Get a house.
So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!
December 28th, 2010 at 8:45 am
@vanhattan
You could be leaving just when things are about to get fun…
BTW @ 200K a year you should be able to save a crazy amount of
money and still rent….something doesn't sound right….
December 28th, 2010 at 5:18 am
Hi Guys,
I have been reading these real estate blogs here in Vancouver and have never found the advice to be useful as most of the comments ignore the reality on the ground bears and bulls alike.
Here is my situation. I moved here in 2005. I could not find a 'decent' place to rent that would accept a very well behaved dog so we decided to buy a condo of a whopping 889 square feet. We hated the condo and paid more than 3x what our gorgeous home with 22 foot ceilings, 1/2 acre treed lot with more than 3x the square footage cost. (sold our 3,000 sf home for 330K, bought our 889 sf condo in Van for 377K). The purchase and shock of living in this shit hole almost cost me my marriage. F*ck, even the dog hated the place. So we sold 15 months later for 488K). Never saw an uneducated unemployed dog make a 100K+ in one year but that is what our dear Buster did as we would not have purchased except for him. Purchased another condo, this one a more reasonable 1050sf brand new condo with great views, great neighborhood. Still nowhere as nice as our old 'home' but at least manageable. Purchased for 700K. The latest comps put our place at 900K+.
Ok so here is our situation. Have a huge desire to get back into a real house again. Have been searching for over a year now. Have been looking at complete sheet boxes going for over 1.5 million that before I moved here I would NEVER have even considered even looking at much less buying and LIVING in. This is what we found one recent weekend: Falling down complete sheet boxes with more than 30+ people showing up in the first 10 minutes of an advertised open house. I am NOT racist in the least bit but have to say that 80% of the lookers were of Asian decent. Guess what???? The damn place sold for 100K over asking at 1.6M the very SAME day!!!!!!!!!
I got so depressed I went home almost in tears. My new path forward?? Here it is: Put the place on the market this spring for 200K under current valuations per a comparable sale one month ago. This is still 100K more than what we paid for it but being 200K below the most recent comp should sell in a weekend. Guess what. I am getting the F#%k out of here. We should be able to easily get out of here with 250K more in our pocket than when we arrived. I figured if we had rented the same places vs. buy we would have paid about $150K over the same period. So we will walk away from the best city on earth living essentially rent free with 100K to spare. What are we going to do next? Move back to the USA to the most expensive housing market in the country and still be able to buy a real house with actual quality and real architecture for 50% less than what sheet holes cost here. This metro area also actually has jobs that pay on average 3x what they pay here.
Bottom line: even though I have been very lucky with this real estate market in Vancouver, I can't believe what places are still selling for. My opinion is that prices will continue to go up as long as the Asians keep moving here en mass buying any sheet hole for above asking price. My estimate is that China still has a couple of years left of their bubble before it bursts so Vancouver will probably still go up and up and up for another couple of years.
I am out of here. I want to stay, but simply cannot afford it. I am not bragging but I make 5x the average wage of the average resident and can't for the life of me figure out how anyone makes it in this town.
So am I a bear? Am I a bull? Neither. Just a very discouraged Vancouver resident who simply cannot believe the prices of the crappy 2nd world real estate here. I simply cannot afford to live here and I make more than 200K/year!!!!!!!!! My quality of life is worse than when I made 65K/year before I moved here! Really folks. This city is insane. I am getting out. I have loved Canada and loved Vancouver, except for the housing situation. I will always have fond memories of the place and will leave being a Canadian citizen but have reluctantly thrown in the towel. I would much prefer to live in Canada than in the US as our values are much more Canadian but I also want a better quality of life.
So perhaps we will return but only if the real estate prices return to earth. From where I sit this is still a far way off.
Humbly, a soon to be former Vancouverite.
December 27th, 2010 at 9:38 am
In the late 70s and very early 80s didn't the market increase more than double then corrected 40%
So it can lower 40% but that was a very fast jump up and faster correction a blip I think it was over a 2 or three year period. Once it corrected it started climbing immediately
Check out the charts it did not take long to recover
Do you know what the interest rates were like then?
Inflation then
What are you investing then while awaiting the RE correction?
Too bad I cannot buy a Put option on my house if I could I would but houses are not stock.
So I will HOLD and ride out this Potential correction.
When the US real estate market first corrected a lot house went up for sale then when they didn't sell owners took them off the market
December 27th, 2010 at 8:38 am
Tell that to people in Vegas, Phoenix or Miami. Some areas are down more than 50%. The US correction is far from over. It still has a few years to play out and will go down more.
December 27th, 2010 at 8:29 am
@penguin:
Are people in the US and Japan different? Were people in the 80s in Vancouver different? Is this emotional attachement that all real estate owners have a new thing that only applies in Vancouver today? Would the same thing not have prevented every other real estate crash? Everyone does not have to sell. We only need a small percentage to sell and the house of cards collapses. Maybe you are not one of the small percentage, but your property value will be effected the same.
Most rentals are maintained just fine, however I would rather live in a rental and have the landlord not fix things than own a house and not be able to afford to fix things. At least with a rental you can move with little cost or just fix the stuff and still be out ahead.
You missed the 1980s correction of nearly 50%.
December 27th, 2010 at 7:57 am
I agree housing is over valued in the YVR area it appears we disagree on the amount of correction possible
So for me to make an argument its required that I need to have footnotes – LOL
But for your argument its trust me in the future YVR RE will be cheaper than rent Good luck with that
When I first bought in the late eighties my monthly cost were much higher than the rent I was paying. Ditto for my parents in the early 1960s ditto for my cousins in the 1970s and early 1980s
It was cheaper to buy than rent during the late 1990s then the market corrected up perhaps a overcorrection but that remains to be seen
Tell me another time when you could buy cheaper than rent?
Again I ask you bears that have greater cognitive than us in the herd what do you think we should invest in?
December 27th, 2010 at 7:33 am
113 penguin Says: "I did say you could create a positive cash flow on YVR real estate during the 1990s but that is not the norm for the last 50 years.
Ah, all of between 5 or 10 years of 50, again without any more proof than 'I said', ignoring the first and second half of that decade were very different markets, and without expanding on how one small micro-economy breaks with the rest of the world and subsidizes renters for nearly half a century. Next time just use the short form: trust me.
December 27th, 2010 at 7:27 am
Morgan Stanley economist Gerard Minack said in a report earlier this year that Australia’s market is overvalued by at least 40 per cent.
“There’s a word for a financial asset that is overvalued by 40 per cent, so let’s use it: housing is a bubble. Buying an asset that’s overpriced never ends well.”
http://www.theglobeandmail.com/report-on-business…
December 27th, 2010 at 7:20 am
Best place on meth Says:
December 27th, 2010 at 1:59 pm
@penguin:
Why would you compare a city of 2 million to a country of 300 million?
My answer – it appears all you bears do so that was my point LOL
December 27th, 2010 at 6:23 am
From family conversations over the Holidays, I felt less isolated as a bear this year. Long-time owners are wondering whether they should cash-out before its too late. In my little universe, sentiment seems to be changhing.
December 27th, 2010 at 6:07 am
Sentiment has changed. I have talked to people who bought during the 2008 downturn who believed in the infallability of Vancouver real estate who are now selling. They are worried that they might not get an offer. I told them just lower the price and they will there are still fools out there. Sentiment is changing fast, this might start correcting faster than people think.
December 27th, 2010 at 5:59 am
@penguin:
Why would you compare a city of 2 million to a country of 300 million?
December 27th, 2010 at 5:50 am
I did say you could create a positive cash flow on YVR real estate during the 1990s but that is not the norm for the last 50 years Of course if you could buy Real estate for cash perhaps then you could create positive cash flow.
Ill clarify it has not been the norm in YVR RE to create positive cash flow on a mortgaged property
Even if you compare YVR to the USA: in the USA it has corrected 30% not 50%
Just stating the way it is now but if the greater than 50% correction occurs in YVR I stand corrected
What do you bears think we should do for investment- Hold Cash? Stock Market? Gold?
Tulips?
December 27th, 2010 at 5:28 am
"A 30% correction is the best you can hope for (or fear of) this is just my opinion as unlike some of you I dot the crystal ball that foresees the futue."
No penguin, it has nothing to do with crystal balls, and wishful thinking, or black magic.
We bears don't operate with the same apparatus as you fools.
Remember in the USA your ilk turned to the St Joseph figurines to get sales?
December 27th, 2010 at 5:27 am
#110 penguin Says:"For the last 50 years it has been rare to buy Vancouver real estate and create positive cash flow."
Prove it. Owners have been subsidizing renters at a loss for 50 years across flat, declining and appreciating markets?
December 27th, 2010 at 4:52 am
For the last 50 years it has been rare to buy Vancouver real estate and create positive cash flow.
The last time was the mid to late 1990s when the market corrected close to 30% in some areas especially the condo market.
The current increase of YVR RE prices happened after that bear market
Established people with equity are not going to panic sell your argument falls short when you do not consider the emotional attachment with a home
You are correct owning a home requires a higher labor factor but that is what creates this emotional bond
Even the simple act of painting a room gives the true feeling of ownership building a deck or creating a play area for your children satisfies a basic human need.
If it was all about dollars more of my neighbors would be selling NOW even us HERD can use a calculator and figure we can increase our monthly income by selling and just rent (or move out of the lower mainland altogether) but we choose to HOLD and live in a home that we have direct control on maintenance.
I am established and plan on living here another 20 years I think I can ride the potential correction and be financially OK
I wouldn't want to live in a rental unit where the landlord cannot afford the simple repairs and maintenance required because of their negative cash flow.
A 30% correction is the best you can hope for (or fear of) this is just my opinion as unlike some of you I dot the crystal ball that foresees the futue.
I base my opinion of the historical correction in YVR RE
December 27th, 2010 at 4:39 am
http://tinyurl.com/greatlandlordstory
would a realtor go to this length?
methinks not……..
December 27th, 2010 at 4:33 am
@scoop:
Very nice, I'm not sure if "crashflow" was a Freudian slip on the realtor's part but with 9 bedrooms it has undeniable flophouse potential.
December 27th, 2010 at 3:26 am
@penguin: "at what point would you buy Vancouver Real Estate"
Bear Patrol buys 50% off or pockets difference. True bear not care either way if this never occurs.
December 27th, 2010 at 3:13 am
#90 penguin: Awesome, another exposition that explains why Vancouver prices wont drop that completely ignores any explanation of why they rose. CMHC, federal emergency rates, speculation; bah humbug. This is Vancouver dammit, not a regular city. Carry on.
December 27th, 2010 at 1:23 am
@penguin:
>>>I give vancouver RE a HOLD recommendation just ride out the coming bumps and pay down your mortgage<<<
I take that to mean DO NOT BUY and I'll second that.
I'll buy when prices have fallen precisely 48.6%.
December 27th, 2010 at 1:18 am
Penguin:
I know it doesn't bother you because you have a small penis, but a lot of guys say your mother's vagina is always dry these days.
December 27th, 2010 at 1:05 am
@penguin:
It does not matter what past movement was but what will it be? There will always be sales in any neighborhood regardless of peoples equity. The fact people have equity will allow them to sell at reduced prices, where someone without equity cannot sell. Your neighborhood with all that equity may be the hardest hit as a percentage drop.
All you need is the same amount of sellers but fewer buyers. There will be fewer buyers because once the direction is down people hold off buying. That applies to all neighborhoods.
True it would mean things are bad all around economically, but the renter will be in much better shape. They can easily reduce their housing expenses where an owner can't.
What is happening in the US? For some they lose their house, for some they buy a house for less, for most things don't change much. Although, obviously the less exposure you had to housing the better. It is like saying why buy car insurance. You get in a car accident then what? Then you are better off than you would be without the insurance.
Yes you are in agreement with most of the herd. The herd almost never gets it right long term. What happens to the must sells? You get transfered in your job, your relative dies and the estate must be split, you lose your job and can't get another, you retire to a old age home? Any reason why the people in Japan, the US and here in Vancouver still decided to sell when prices dropped 10% plus in every other real estate correction or crash?
Historically real estate always corrects when inflated above the fundamental value. That is all that matters.
For me the place I am renting now would have to drop 50% to make it a break even at todays interest rates. If interest rates rise then it will have to drop more. I will buy when it is CHEAPER than renting. Ownership should not be at a premium, it should be at a discount. That includes your neighborhood.
Thanks for the recommendation but as history shows the herd normally gets it wrong. I doubt it will be different this time.
December 27th, 2010 at 12:23 am
At what point would you buy this instant crashflow investment?
December 26th, 2010 at 10:41 pm
@penguin:
For me, it's not as simple as waiting until some magic number is hit and then stepping in.
First and foremost, even though Vancouver is my hometown (my family mostly lives here as well), there is always the possibility of taking a job in another province/country. As for the mathematics of buying a home, it will depend upon a combination of price drop, relative rents, interest rate levels (which would affect the opportunity cost), tax levels (i.e., if the GofC were ever to introduce a mortgage-interest deduction on income taxes, that would certainly factor into the equation). So, it's not nearly as clear-cut as you picture it to be.
I do know one thing, however. Being a renter has made me once again appreciate the risk- and labour-free nature of not owning.