Why you shouldn’t demand lower prices

I’ve been reading this site for a while and I see a lot of people that are hoping for lower house prices in Vancouver without fully thinking out the repercussions.

Its human nature to be greedy and want ‘something for nothing’ but we should draw a line at actively wishing ill on others so that we may benefit.

A drop in property prices would cause a lot of harm across the lower mainland, affecting not only home owners but a whole economy of construction workers, real estate agents, lawyers, lenders and architects.

Instead of selfishly wishing prices would drop, you should try to realize the benefits of home ownership:

1) A tangible solid investment that can help you retire
2) Homeowners have a lower crime rate creating safer neighborhoods
3) Pride of ownership creates more civic responsibility

Here’s a useful editorial in the Telegraph on how home ownership benefits everyone:
http://www.telegraph.co.uk/comment/3644666/Everyone-benefits-from-home-ownership.html

They make a very strong argument for why governments should come to the aid of homeowners who have suffered from a house price drop or interest rate increase and are unable to pay their bills.

But there is something more fundamental about the housing market that should inform policy. Housing markets are different from lots of other markets in that actions by individuals affect not only the actors, but neighbourhoods and even society as a whole.
Allow your personal appearance to deteriorate, and you pay the price in lost job opportunities and a reduction in the number of people willing to be seen with you. The cost is yours. Allow your house to deteriorate, and your neighbours pay the price. Innocent bystanders get hurt when things go wrong in the housing markets.
First, the value of all homes declines as the neighbourhood becomes dotted with vacant houses and takes on a less attractive appearance. Second, society pays a price.

IF you are someone who is hoping for a real estate decline I urge you to read the full article and rethink your position.

Even if you think you would be unaffected you should remember that a decline in house prices effects the whole economy:
http://www.vancouversun.com/business/Home+price+drop+could+mean+less+spending/6773895/story.html

And it doesn’t take too much of a drop to put buyers in a position where they owe more than a house is worth. With a normal 5% down a 15% drop like that predicted by TD would be a disaster.

Using the Real Estate Board of Greater Vancouver’s benchmark price – the price of a typical home – for all residential properties in Metro Vancouver of $625,000, and the minimum down payment of five per cent, a homeowner would need $43,850 including property transfer tax and legal fees to close the deal. The total mortgage amount would be $593,750 plus $17,515 for the high-ratio fee. If the market value dropped 15 per cent over three years, the value would be $531,250, while the outstanding mortgage after three years would be $574,805.64.

A decline in house and condo prices affects real people who care for the neighborhoods they live in, is it fair to wish them bad luck simply because you feel prices are too high?

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patriotz
Member

@Tim B:
“Although I think Vancouver needs affordable housing, I agree that we should be careful what we wish for.”

Sorry to break this to you, but what we wish for has nothing to do with what happens. What the bears have been wishing for is that prices never got too high in the first place, in which case nobody would have to worry about them going down.

What you have to be careful about is what you do. Like buying a house or condo for an absurd price. So if you want to lecture someone, try it out on the people who’ve done that.

watson
Guest
watson

@Tim B: If people are stupid enough to walk into that much debt given all the uncertainty in the world today they truly deserve what is coming to them. Anyone who bid up the price of a property is just as much to blame as the bank that lent them the money.

Tim B
Guest
Tim B

Although I think Vancouver needs affordable housing, I agree that we should be careful what we wish for. A radical price drop beyond a 10-15% “correction” would spell financial disaster for many people, probably more than it would help.

You cannot just walk away from a mortgage debt. It will haunt you till it is paid off or you are dead ( the “mort” part ).

I am more concerned for the people who would suffer financial ruin than I am for the whiners who can’t afford the Kits bungalow walking distance to the beach for their first home purchase.

asiaman
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asiaman

GVR although I disagree with your opinions I do agree with you on the foreclosure thingy

GVR
Guest
GVR

And, may I add, the “Foreclosure” stamp on dissenting comments is incredibly juvenile.

asiaman
Guest
asiaman

I lost 180 grand last year selling my house,(overseas) problem is its not only the price drop but the fees, paying the salesman, the incredible amount of time it takes to pack up and leave etc. etc. I wouldnt wish that on anyone, my nieve and un thought out deciion to buy will haunt me for years, although its getting better I still think about it every day. However I agree with most of the commenters here that inflated prices are far more toxic than corrections. I have walked the walk have scars to prove it, and I still agree with these guys, all you naysayers give the bears a break,they are some of the few honest guys around, and honesty is one of our most precious commodities these days. Also the whole line of bullshit (i must admit I… Read more »

GVR
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GVR

Having browsed through a few posts and a bunch of comments, I don’t think I have ever seen so much bitterness and pent up anger on any blog or website before. I guess that comes from being so completely wrong about Vancouver real estate for so many years. The glee over the jitters in the market these days is just pathetic.

TNT
Guest
TNT

If you are upset at anyone look at the greedy little fear mongering banks? They are the ones that control the housing environment they give and then they take and take and take…. The fall of the American market was caused by the banks. The fall of the European market, banks, and the fall of the Canadian market,banks. Bankers are generally not a stupid bunch this is a methodical orchestrated calculated financial rape of the citizens and its concequences. I just sold a beautiful house that i really liked and put a ton of sweat into because i am sick of being enslaved by the banks.I am now renting a brand new house, that a Chinese buyer took off the market for a good price. Wait untill the intrest rates go up…who wins? The insured Banks win, this will not… Read more »

patriotz
Member

@rp1:
“WSJ: Lower prices do nothing for affordability:”

Complete bullshit. Of course lower prices at a given interest rate – not to mention lower rates – make anything more affordable.

The authors of the “study” conclude that zero-down, neg-am, etc. mortgages make housing more affordable. They don’t – they just move the payment burden farther into the future. Which is exactly why there was a surge in prices followed by a crash.

If housing had been more affordable when prices were higher there wouldn’t have been a crash at all. How obvious can you get?

Lemon
Guest
Lemon

With landlords demanding $45-$65/ft on Broadway, $65/ft on $80/ft W4th, over $200 for robson. I could see why vacancies are increasing. The cycle goes: 1. Tenants and Landlords in balance. 2. Low interst rates and LOC availability incrase the tenant pool. 3. Landlords increase rent due to increased demand. High turn over doesn’t matter as long as there are higher rents overall. 4. LoCs and Debters maxed out, tenant pool decreases. 5. Prices sticky, landlords aren’t worried, low interest envirnment, no pressure. Almost every entrepeneur I’ve spoken to has funded their ventures with a HELOC. It’s almost impossible to come up with a business plan and get bank loan. Concerning Futureshop, that business is overpriced and a rip off. Their “price guarantee” couldn’t match anyone because everything they sold has a unique model number. The odd time that they do… Read more »

Just looking...
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Just looking...

Agree with the many who have debunked this post by pointing out its many flaws, especially the point out that there are losers either way but that astronomical prices create a perpetual class of losers. I’d add a further comment to this flawed logic: “2) Homeowners have a lower crime rate creating safer neighborhoods” Higher incomes correlate to higher education levels and lower crime. Homeowners = those who can afford to own and choose to do so. Renters = those who can afford to own and choose not to + those who cannot afford to own. Those elements of society who are most likely to contribute to reported crime (those with mental health issues, addicts, etc.) are only found in the renter category. It’s not only a correlation vs causation issue, it’s a stat that has a huge sample bias:… Read more »

SunBlaster
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SunBlaster

Was talking to a friend, he said his girlfriend is going to her grandparents anti retirement-home party, I am like WTF is that? So he explains that her grandparents live in West Van and there are plans to build a retirement home in the area, so they are gathering all the neighbors to agree against this retirement home because it’s going to lower their property values.

R U SRS?!?

yvr2zrh
Member

Just back from the big going away party for Dean M. from UBC. OK – So I welcome lower prices more than anybody. The mis-allocation of investment and human capital resources which results from this two-class society is astounding. However, I have a comment regarding realtor commissions and their livelihood. We all talk about how a decline in the price will affect realtors. That is really a crock of S–T. Nowa a decline in prices affects the amount of commission that a realtor receives. However, as we go through the next 6-24 months, it is transaction volume that is important. Realtors should not care about price so much as just getting the deal done as fast as possible at the market price. If the market is falling – – just get the product moved at the lower price. Realtors make… Read more »

leesh0222
Member
leesh0222

Declining housing price does not necessarily decrease the number of homeowners, since the number of houses stay the same.

Phil
Guest
Phil

I personally want to see all the HAM get decimated.. Screw them. They have ruined the city I was born and raised in. Priced out all of the people of all races who have a vested interest here. I want them to lose their shirt. Fuck them.

And to all the self righteous non-HAM, I couldnt care less. They threw a dart and lucked out. It’s time they came back to earth and had to earn their wealth.

Dan in Calgary
Guest
Dan in Calgary

“A decline in house and condo prices affects real people who care for the neighborhoods they live in, is it fair to wish them bad luck simply because you feel prices are too high?” 1. Yes a decline affects (a certain group of) “real people”. 2. But high prices also affect “real people”, just a different group. 3. Thus, scratch the “real people” argument. 3. It truly is not fair to “wish them bad luck”. 4. But I don’t “wish them bad luck”. 5. I care as much about “them” as they care about me. No more, no less. 6. I simply want prices to go down. 7. Thus, scratch the “not fair to wish bad luck” argument. A “survival of the fittest” argument would be better. As a culture, a society, a community, or ___(name of social grouping)____, we… Read more »

VHB
Member
VHB

@VHB: sorry — last post is June numbers over last 10 years.

VHB
Member
VHB
year	sell	list	sell/list
2002	2689	3850	69.8%
2003	3525	4301	82.0%
2004	3501	5594	62.6%
2005	4333	4742	91.4%
2006	3951	5460	72.4%
2007	4244	5533	76.7%
2008	2425	6546	37.0%
2009	4259	5372	79.3%
2010	2972	5544	53.6%
2011	3262	5793	56.3%
Mean	3516	5274	66.7%
median	3513	5496.5	72.4%
VHB
Member
VHB

Jun-2012
Total days 21
Days elapsed so far 10
Weekends / holidays 4
Days missing 0
Days remaining 11
7 Calendar Day Moving Average: Sales 119
7 Calendar Day Moving Average: Listings 266
SALES
Sales so far 1226
Projection for rest of month (using 7day MA) 1307
Projected month end total 2533
NEW LISTINGS
Listings so far 2797
Projection for rest of month (using 7day MA) 2928
Projected month end total 5725
Sell-list so far 43.8%
Projected month-end sell-list 44.2%
MONTHS OF INVENTORY
Inventory as of June 13, 2012 19194
Current MoI at this sales pace 7.58

CMHC hater
Guest
CMHC hater

@Best place on meth: BPOM, if there was a prize for best posts, you will win it hands down. I mean hands down. I come here to read your posts buddy. I wish I knew you personally.

Devore
Member
Devore

@Makaya:

More than 20 vacancy signs as Vancouver’s Robson Street undergoes ‘transition’

Aww, didn’t Dave just finish telling us how commercial landlords are different, and they’ll sit on an empty unit for YEARS if need be waiting for that one “special” long term customer willing to pay their outrageous asking rents? I guess we’ll find out how long they’ll wait.

Anonymous
Guest
Anonymous

@Canadian_in_Cabo:

Listings have plateaued.

VIVA FORT MAC
Guest
VIVA FORT MAC

A decline in Vancouver is inevitable and most welcomed. The article is right that it will destroy the local and domestic economy. ie construction jobs, realtors etc… But that’s the price you pay when you enter those professions. Go times and Bad times. If you’re unemployed due to the bubble burst. Just simply move to a place where the economy is flourishing with jobs… IE Fort Mac or somewhere in northern BC/AB and get a “REAL” job. But seeing the vancouverite psyche, “Why would i move to Butt-F#%$ NO WHERE”. So suit yourself and wallow in self pity as the bubble bursts. LOL.

rp1
Guest
rp1
Navin R. Johnson
Guest
Navin R. Johnson

@Canadian_in_Cabo:

Of course they’re slowing. Time of the year. Wait until fall when the listings shoot right through the roof!!!!