Vancouver Bubble from the Californian Perspective

A very good analysis form a leading Bubble Blogger in SoCal. The good Doctor began blogging about the US bubble years before the collapse. He has an interesting analysis of Vancouver’s bubble here along with some good comments.

The other CA bubble – Canadian housing bubble ripe for popping. Vancouver real estate increased by 142 percent from 2002 to 2011. Average detached home in Vancouver costs roughly $1 million while the median household makes $67,000 per year.

In the last few years I’ve noticed that many of the cable finance and housing shows highlight families in Canada. Shows that talk about debt or home buyers are usually focused on families in Canada which is rather odd given that we are here in Southern California. Yet the funny thing about these shows is that they rarely identify that they are in Canada although I recognize locations like Vancouver. If one simply tuned into the show it would appear that a bubble was still going on in the states. This is probably the point. After all, the cable shows focused on flipping houses or making quick bucks on real estate started going off the air yet another bubble was still going on up north. Obviously these shows had an audience otherwise they would not be on the air. Now the focus is on the Canadian bubble and American audiences can swim in the nostalgic dreams of the glory days of domestic housing. Yet the shows rarely mention their location as if English-speaking families and cookie-cutter condos and homes are so easily interchangeable that they will fool an audience. Yet one thing the shows fail to acknowledge is that the Canadian housing bubble is even more pronounced than that in the United States.

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MadasHell
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MadasHell

I must thank both this site an paulb for keeping the housing market in perspective. It has been fun reading comments from real estate agents justifying the prices but we all know that all bubble will pop. I have a good feeling it will be this year, even when we have no help from Mr C and F.

WS
Guest
WS
Dabster
Guest
Dabster

@WS:

Responses to the post are hilarious. They are having fun and laughing at us with the reason, yet another expensive soap opera with the sad ending.

crashcow
Member
WS
Guest
WS

@ Boromir

There are some passionate defenses showing up today that "Vancouver is different".

registered
Member
registered

@3 Dabster: My brother lives near the coast north of LA. Last we spoke about the California market he was adamant the collapse is Bush-Obama-Arnold-Bear Sterns's fault and, since the entire country still wants to live in California, a temporary setback. My impression is it's the accepted local view. Got agitated like only family can when I suggested his head was in his sand. A highly technical background didn't stop him classing Case Shiller numbers with dowsing rods for predicting future price movements. Even more bizarre as he's been a long time direct player in the stock market.

How did real estate acquire the hallucinatory power of mushrooms?

NoNo
Guest
NoNo

income figures are meaningless.

west vancouver has 20% childhood poverty rate. richmond has 30%. do you believe those numbers?

there is a lot of black money in the lower mainland.

Makaya
Member
Makaya
@WS: "There are some passionate defenses showing up today that “Vancouver is different”" The confrontation between the Canadian (Vancouver) homeowner and the bubble-burst-experienced Americans is hilarious: Here is the Canadian homeowner view: There is no housing bubble in Canada. You Americans just don’t understand what is happening up here. Vancouver is a world unto itself for 2 reasons: First: They have run out of land in the city. Vancouver is located on a triangle . At the south end is the border. On the east there is salt water. On the north-east are the coast mountains. There is lots of reasonably priced suburban housing east of the mountains if you are willing to make the commute. Second: There are lots and lots of wealthy Chinese who see Canada as a safe place to put their money when they get it… Read more »
Roomy Shopper
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Roomy Shopper

I notice that the recent stock market rally has led also to rising bond yields. Government of Canada 2 year notes now yield 1.03%, up from 0.83% in December and the highest since October. Same increase at the 5 year note.

Take a topping market with all customers buying on leverage…add rising interest rates…add massive and growing inventories…and add relatively stronger returns suddenly appearing in the stock market. Shouldn't that start to pull any investor money out of RE?

patriotz
Member

@NoNo:

"income figures are meaningless."

But rents don't lie.

patriotz
Member

@Roomy Shopper:

"Shouldn’t that start to pull any investor money out of RE?"

"Investors" buying RE are using government guaranteed financing not available for other assets.

It's not a free market so don't expect it to behave like one. Except inevitably in the long term.

vangrl
Member
vangrl

I strongly believe that this is finally the year that Vancouver starts getting back to reality….I'm so excited:)

WS
Guest
WS

@Makaya

I lived 28 years in Vancouver and moved to Orange County in 2002. I experienced it all. It is almost comical until I try to convince my family to get the heck out of Vancouver real estate. In my frustration even made my mom cry about 6 months ago. I still lob some grenades now and then, but have pretty much given up trying to convince anyone from Vancouver.

Makaya
Member
Makaya
@Makaya: And here another exchange between a Vancouverite and a Califorian… Those guys make us look stoopid 🙂 i agree that canada is due for a correction but every location is different. vancouver is much different than other cities in canada. it’s one of the most sought after cities to live in, in the world. especially for the millions of chinese who aspire to move there. the vancouver market doesn’t care about what the average wage is when the chinese are buying non-stop. there are well over a million millionaires in china and that number continues to climb up. unless the chinese market crashes, i do not see the vancouver housing market changing much. another point to remember is that vancouver is a coastal city and there is no more space to build in it. to give you an idea… Read more »
Roomy Shopper
Guest
Roomy Shopper

@patriotz

I guess I'm saying what has changed is the monthly payment equation, which is going higher right now. Therefore the economics for the investor have just got worse by 0.2%. Not a big deal in normal times, but given prices being where they are, this takes a healthy chunk out of his "income" as a rental property owner.

If you throw in the other weakening aspects of the market, if I were a condo "investor" I would be less inclined to hit the offer now than I would be if rates were trending lower.

Anonymous
Guest
Anonymous

"Those guys make us look stoopid "

you are, really. no question on that!

patriotz
Member

@Roomy Shopper:

RE investors have been losing money on an operating basis for pretty much a decade now. What keeps them feeding the alligator is the belief that rising prices will make this loss up and give them a profit on top of it.

What will get the investors to bail is not a small increase in interest rates, but a flattening of prices that convinces them that the game is over and it's time to cash out.

Anonymous
Guest
Anonymous

NoNo, can you please send a link to those numbers (RE child poverty).

I have friends who do not believe me…

trash crash alert
Guest
trash crash alert

Gee, cardboard crash on way.

Market is imploding, rather correcting to its true economic rent valuation similar to Montreal.

Talk about a brisk market. Just saw the fastest land animal today.

A west side Realtor wearing running shoes chasing a chicken down Arbutus street.

YLTNboomerang
Member

@DEFAULT NAME: Here's a link for Child Poverty in WEst Van and Richmond:

http://www.ralphsultanmla.ca/spring-summer-2011/

Ralph Sultan, MLA from West Van wrote a report about it. I contacted him by email about how the source of this stat is from wealthy satellite families leaching off our social system. He wrote back to me stating that he acknowledges this and the reason for his report was more of a "How can such a wealthy riding have high poverty levels". You have to read between the lines a bit but I am pretty much sure he was agreeing with me. The funny thing is that he actually took the time to write the letter by hand with good 'ol pen and paper. My guess is he didn't want a digital record of his comments.

YLTNboomerang
Member
YLTNboomerang
Member

@YLTNboomerang: Oh yea, Ralph's report concludes that West Van has the highest child poverty rate due to the large number of immigrant and single mom with kid families, AKA satellite families

Yahoo
Guest
Yahoo

@YLTNboomerang: Do you still have the letter? Can you scan it and post it?

RippedtoShit
Guest
RippedtoShit

Looks like sales are set to rocket higher.

Frack!

RippedtoShit
Guest
RippedtoShit

the comments on the rise in gov't bond yields, although modest, could be material…if the two year goes to say 1.20% i suspect that mortgage rates will go higher…IF the stock market recovers the bond market could sell off quite a bit, and squeeze rates up say 50bps, and that would hurt things…

i hope we blow through 20,000 listings in the next few months, bring on the 500 listings day….frack!

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