Parable of Treeland
In the late 1700s, Europeans first discovered a largely unpopulated area with a temperate climate (although annoyingly rainy) and rich in resources of lumber, copper, gold, zinc, coal, petroleum, natural gas and fish. Reflecting that forests covered more than half its area, they named the broader area “Treeland” and it’s major city “Racoover.”
In the mid-1800’s, news broke out that there was gold on the banks of the Fraser River and over 25,000 prospectors swarmed in, hungry for instant wealth. Several towns instantly sprang up. To help maintain law and order, the government incorporated the colony of Treeland. But within a few short years, the frenzy of the gold rush fizzled out.
When Racoover officially became a city, it had 1,000 people. The first mayor was Realtor® McLean. One summer day, a brush fire got away and burnt the city to the ground in less than 30 minutes. McLean, knowing the value of real estate, got rebuilding going in a matter of days.
With its rich resources, Treeland was rapidly developing into a great province. The economy was based primarily on forestry, nicknamed “green gold”, and accounted for over one-third of export earnings. Mining and fishing were also major contributors to the GDP. These export earnings were used to build infrastructure using very little debt. New public facilities included the CP railway line, Granville Bridge, electric streetcars and the first skyscraper. The world’s largest indoor ice rink was built for the Racoover Millionaires, the city’s first hockey team. Beaver Place Stadium inflated up and became the world’s largest air-supported bubble.
Treeland had very little debt and banks prudently provided secured, low leverage, tight amortization, fixed-rate loans on sound homes and vehicles to be used by industrious citizens who lived within their means. There was no speculation flipping in highly leveraged investments.
But even a province as sound as Treeland could come to ruin if it failed to address the dangers that can be caused by the ordinary accidents of life. These dangers were significant when Treeland’s forestry industry got hit with multiple problems. First started the rampant forest fires and pine beetle epidemic, spreading over 15 million hectares. Then came rising energy prices and exchange rate with Eagleland, Treeland’s main trading partner. Times suddenly changed and forestry jobs started disappearing fast. Tens of thousands of jobs vaporized and it became hard to keep track of the mill closures.
In Sep 2001, Eagleland suffered a tragic foreign attack. In response, Chairman Greyspan sought to stimulate the economy and ordered banks to give away gambling chips at low interest rates. Treeland quickly followed suit with this plan. As their affluence and leisure time grew, Treeland’s citizens more and more whiled away their time in the excitement of casino gambling. With the low interest rates, low down payments, long amortizations, gambling chips insured through CHMC, and an obscene amount of chips created thanks to fractional reserve banking, the banks flooded the economy with chips and made all gamblers steadily and increasingly rich.
The winnings of the casinos eventually amounted to 40% of Treeland’s GDP, while 10% of the gambling profits were paid to persons employed by the casinos (many of whom were needed elsewhere in more productive jobs). So much time was spent at casinos that it amounted to an average of several hours daily for every citizen of Treeland. To satisfy the gambler’s addiction and to create new gamblers, the HGTV television network was formed. Social gatherings were alive with feverish, eye-popping discussion about how much winnings were made that week in the casinos. Many of the gamblers started placing bets with a new product called presale assignments, similar to the reckless leveraged futures contracts used in Eagleland.
In 2004, Racoover was selected to host the biggest circus in the world. This fuelled the casinos even more. Soon, there were three-day line-ups just to get into the casinos. Some visited three casinos per night while sending their spouses to a different three. Some speculated that even foreigners were participating in Treeland’s roulette wheels. The gamblers all religiously chanted the three tenets of gambling: “Everyone wants to gamble here,” “Casino winnings always go up,” and “Treeland is the best place on earth.”
A few unspoiled souls, the Savers, regarded this situation as disgraceful. After all, they reasoned, it was just common sense for lenders and citizens to avoid gambling addicts. They cried desperately for the madness to end. Their reasoning was echoed by international reports which showed the world how irrational Treeland’s behaviour had become.
Then in late 2008, all of Eagleland’s gamblers suddenly went bankrupt within weeks and caused a viscous downward spiral that permeated around the world. No one could foresee (so the media said) that Eagleland’s economy was a house of cards that eventually bust, severing Treeland’s exports and economic engine. The Savers, who had been patiently waiting for the madness to end, finally got their break. The stats showed a plunge in casino visitors and the Savers celebrated wildly each time another 10 casino halls became empty. But after a few short months of healing, the governments slammed interest rates to the floor. Gambling activity roared back but the resource industry dwindled and unemployment still remained at record highs. The winnings of the casinos eventually accounted for every single penny of real GDP. How was Treeland supposed to adjust to this brutal new reality?
The circus came to Racoover the following year but the circus folk, puzzled by the madness of the locals, did not participate in the casinos as the gamblers had hoped. The exorbitantly priced Circus Village that was built for the circus clowns could not be sold and went into receivership.
Then the Good Father sounded the alarm bells that Treeland’s gambling chips exceeded those in Eagleland, which was now on life support. He strongly urged Treeland’s citizens to stop their casino gambling and began reinstating shorter amortizations and higher interest rates. He knew this change was sure to induce vomiting and hallucinations in the addicts and suggested that citizens cheerfully embrace their fate. And sure enough, the casino owners and employees (“pimps”), who strongly believed in the beneficence of hyper-gambling, were hostile to change. They petitioned to the Good Father to make gambling easier. However, the pimps’ efforts failed and gambling restrictions became tighter.
By 2010, the gamblers stopped making profits no matter how hard they tried cranking the slot machines. Even some players of the Racoover Millionaires (now renamed Canucks) got caught in the casino mess and suffered heavy losses. By 2013, roughly half the gamblers went bankrupt. The remainder were wiped out by 2017. Much counterproductive governmental action was taken, and the land’s credit was reduced to tatters. Treeland is now under new management and has been renamed: Brokeland.
Submitted by: Crashcow
Reference & inspiration: Basically, It’s Over
February 1st, 2011 at 3:58 am
#84 Troll Says:"But any doomer bear on this blog will swear up and down that flat prices are not possible. "
No need, Teranet doesn't support the flat prices BS.
February 1st, 2011 at 12:05 am
@Joshua:
How does that qualify as a bull mantra? Do you even know what the definition of a bull is? Please go back to lurking.
February 1st, 2011 at 12:03 am
@Joshua:
Exactly Einstein, you're a sharp one aren't you? But any doomer bear on this blog will swear up and down that flat prices are not possible. Yet here we are.
January 31st, 2011 at 3:00 pm
So this is the new bull mantra – "prices are flat!" LOL…
Hey dummies, flat prices means price erosion vs. inflation.
January 31st, 2011 at 2:56 pm
@Troll:
"prices aren't supposed to be flat"
…and the REA's aren't supposed to control the media.
January 31st, 2011 at 2:42 pm
That was the idea, but he is still waiting for it to happen.
January 31st, 2011 at 2:26 pm
@Bear BS:
no women will ever want to be with your…
You didn't have to buy a house to get laid. You should just rent a hooker for a few hours and save a tons of money dumbass.
January 31st, 2011 at 2:10 pm
@Bear BS:
I guess this is what it looks like when self esteem hits rock bottom.
Better buy more real estate you might feel better about your self.
January 31st, 2011 at 1:44 pm
Talking about grasping at straws bears.
Sales of almost 1800 is just below the median of 1925 for the past 8 years. This is hardly a resounding bearish month. Seems pretty flat to me (or anybody analyzing the data)
And troll is right – prices have been flat for almost a year. Remember, prices can only go up or down, never sideways in bubbles according to all the bear experts here.
I guess its time to cue the crash of 2012 not 2011, because if January is anything to go by, its going to be another year of flat prices.
Oh well bears, I guess 2011 will be another year of justifying your poor decisions of the past years, and extolling the virtues of renting over homeownership.
After several years of proclaiming the end is near, living in hovels, and avoiding your renter status at dinner parties, you all must be single by now and enjoying your parent's company. After so many years of RE gains, no women will ever want to be with your, and those of you with wives are going to be losing them as they don't want to raise kids in rented homes.
January 31st, 2011 at 1:40 pm
@Supraboy: @Troll: @Vanrod:
What's wrong boys another zero commission month?
PS
Troll I have a well paying job for you. Bring the ass wipe.
January 31st, 2011 at 1:38 pm
@Vanrod: "while I agree with your sediments"
Sediments come from an eroded brain.
January 31st, 2011 at 1:20 pm
@Supraboy: while I agree with your sediments homophobic slurs should not be part of our discourse
January 31st, 2011 at 1:15 pm
Another flat month.
Do none of the buyers and sellers in Vancouver understand how 'bubbles' are supposed to work? Prices aren't supposed to be flat for almost a year, what's going on bears? Maybe the theory needs some work.
January 31st, 2011 at 1:10 pm
@Vanrod: the median sales since 2002 is 1925/month. We are definitely below that. With tons of inventory coming online. Keep trying.
January 31st, 2011 at 1:05 pm
@Supraboy:
Actually you fucking moron, prices are lower.
Inventory and MOI are high for January and sales are lower than average.
January 31st, 2011 at 1:00 pm
One year after the olympics, property prices are higher. Go argue with that, fools!
January 31st, 2011 at 12:59 pm
So funny to see you faggots still in denial. Stupid bears, give it up.
January 31st, 2011 at 12:45 pm
@Vanrod: "above average sales for the month on January"
…and lots of inventory! I shall make a bold and daring prediction: sales will be consecutively higher in February, March, and April, with MOI perpetually falling into "buyer's market" territory during these months as well.
Does this mean we're entering a bull market? For those who are lucky enough to sell… yes it is!!! For those who can't…
January 31st, 2011 at 11:39 am
@VHB: Look at that, above average sales for the month on January. Never would have imagined that half way through the month
January 31st, 2011 at 11:26 am
#58 oneangryslav2 Says: Your claim that “almost 75% [of B.C.'s population lives] in cities of 50K or more is entirely consistent with Say What’s claim that half of B.C.’s communities have populations fewer than 5000 souls. Think about it."
I realize that. Did I write otherwise? The "#48 Say What?" post was implying something about BC's population distribution. Think about it.
January 31st, 2011 at 11:04 am
January 2011 month-end projections
Days elapsed so far 20
Days remaining 0
Average Sales this month 94
Average Listings this month 241
Projected sell/list 38.9%
SALES
Projected month end total 1740 +/- 0
95% Conf Interval lower bound 1740
95% Conf Interval upper bound 1740
NEW LISTINGS
Projected month end total 4547 +/- 0
95% Conf Interval lower bound 4547
95% Conf Interval upper bound 4547
MONTHS OF INVENTORY
Inventory as of January 28, 2011 11255
MoI at this sales pace 6.47
January 31st, 2011 at 11:02 am
@Anonymouse: You need CMHC insurance approved by Mar 18, no 90 day extension.
January 31st, 2011 at 11:01 am
In the late 1700's, what is now BC was largely de-populated, due to those dirty European diseases.
Same thing happened in most of the Americas, Europeans arrived to find empty towns and infrastructure and farms. Only a few orphans left, and they were easy to ship to reeducation centers.
January 31st, 2011 at 10:37 am
The re pumpers are going to get nasty, the end is so near,so near they can smell it.
I can feel the despiration.
January 31st, 2011 at 10:34 am
@Dave:
Why did my throwing star change shape and colour? This new one looks like a doily.
January 31st, 2011 at 10:33 am
@paulb:
This market is looking more balanced than Cirque du Soleil.
50% sale to list is dead centre balanced.
January 31st, 2011 at 10:30 am
@Anonymous:
Today? More like everyday. Contrary information or opinions are scary for some.
January 31st, 2011 at 10:17 am
@Anonymouse: Just like with last year's changes, you have to sign the purchase contract and file the paperwork before the changeover date.
January 31st, 2011 at 10:15 am
@fixie guy:
Your claim that "almost 75% [of B.C.'s population lives] in cities of 50K or more is entirely consistent with Say What's claim that half of B.C.'s communities have populations fewer than 5000 souls. Think about it. Indeed, given that population distributions generally follow power laws, one would expect that most communities would be relatively small in population size.
January 31st, 2011 at 10:04 am
@EXTREMELY BROKE VANCOUVER HOME OWNER:
http://www.canadianmortgagetrends.com/canadian_mo…
Yup, I see now :
Q. How are pre-approvals affected?
A: The act of getting a pre-approval before March 17 does not guarantee you'll be approved for a 35-year amortization. That's because insured pre-approvals that turn live after March 17 will be subject to the new amortization limit of 30 years. “Turn live” refers to the time when a borrower has signed a binding purchase agreement and submitted a full bona fide mortgage application with a specific closing date.
January 31st, 2011 at 9:55 am
@Anonymouse:
>>>Isn’t getting pre-approved before that date good enough to allow you to buy under the old rules for 90/120 days?<<<
No.
January 31st, 2011 at 9:32 am
wow, lot of posts being censored today. what the matter? cannot take comments both sides eh.
January 31st, 2011 at 9:24 am
New Listings 273
Price Changes 69
Sold Listings 136
11255
January 31st, 2011 at 9:18 am
#48 Say What? Says: "People forget that BC is not Vancouver, and that the majority of our population lives outside of the lower mainland…"
Comfortably more than half BC's population resided in the Lower Mainland in the 2006 Census, almost 75% in cities of ~50K or more. I doubt the last five years of immigration changed that.
http://en.wikipedia.org/wiki/British_Columbia#Cit…
I agree on the city's internal segregation though, certainly compared to Toronto.
January 31st, 2011 at 9:11 am
Isn’t getting pre-approved before that date good enough to allow you to buy under the old rules for 90/120 days?
*********
Exactly – bears will be waiting again for another 6 months for any hints of their eternal crash….
Lol – its just like the waiting that took place after the April mortgage rules…..of course we had some nice months after that now didn't we bears
January 31st, 2011 at 9:02 am
@Best place on meth:
"I think everyone and their dog has said there will likely be a spike in sales up until March 18."
Isn't getting pre-approved before that date good enough to allow you to buy under the old rules for 90/120 days?