Canada house price crash a certainty

Happy day after the new mortgage rules come into effect!

Even before these rules were announced we saw a ‘softening’ in the Vancouver real estate market.

Prices have drifted down as of late and sales are at an all-time-low and inventory keeps growing.

..Yet there are still those that believe ‘it’s different here’.

We saw housing bubbles grow all around the world and pop one by one, but we went through the same steps of pumping up cheap credit to build the house of cards higher.

Check out this post on Alphahunt about Why a Crash in Canadian House Prices is Certain.

What’s amplified our current RE cycle is that credit was steadily made cheaper & easier throughout the boom period – and especially when the RE market suffered in 2008. After finally waking up and seeing the monster they helped create, the Gov’t is making lending rules stricter. Lending practices should not have been made so loose to begin with. And their meddling in 2008 only delayed the inevitable bust.

Today, we’re still at extreme unaffordability and there is no such thing as a ‘soft landing’ or ‘small correction’ for Vancouver RE. Any asset that has seen a price rise of at least two standard deviations above long-term valuation ratios has always mean reverted. If the Vancouver RE market did not return to the normal multiple of income and rent, it will be the first time in history. You can’t binge drink and avoid the hangover. Timing the start of the hangover is always challenging, but what we know with high probability is that there will be a hangover.

 

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Village Whisperer
Member
Village Whisperer

Is a crash certain?… of course.

Is the timeline certain?… absolutely not.

We watch and observe… and take care not to let hope cloud observation.

patriotz
Member

Canada’s housing market at ‘tipping point’

“We have had three years of solid house price appreciation in almost all regions of the country,” (Royal LePage) chief executive officer Phil Soper said in the report.

“Confidence in Canada’s real estate market is sound, but home prices cannot growth faster than salaries and the underlying economy indefinitely,” he added.

Someone from a RE brokerage talking sense? That’s downright scary.

xyz
Guest
xyz

Flip job just down the street from where I used to live:

Purchased March 2012 for $688,000
http://winfieldyan.ca/mylistings.html/details-23084454

Reno’d for a couple months (200K my ass) and back on the market for $899,000
http://eddieyan.ca/mylistings.html/details-25690634

*same a$$hole realtor that walks in your house and into bedrooms with closed doors containing teenage girls without your permission*

This should be interesting.. wonder how long this guys list of suckers is…

Greatest Fool
Guest
Greatest Fool

“You can’t binge drink and avoid the hangover.”

What do you mean? I have been binge drinking since midnight. I still don’t have a hang over!

Teddybear
Member
Teddybear

Oh joy! This one at http://alturl.com/7oz4e (V950552) was listed some two months ago for 479k, and look at it now: 399k!!!

🙂

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

@patriotz: “Someone from a RE brokerage talking sense? That’s downright scary.”

Did you ever consider that these people just report what the data is telling them? When the market is bullish they report that. When it’s bearish, they report that. Such an approach is reasonable and rational and stands in stark contrast to what others do.

Piklishi
Guest
Piklishi

@scared bull bull
Actually no they don’t report the data as you say. Now is the only time they started doing it because they are scared. They also need publicity so people maybe start trusting them and buy RE.
If they had a choice they will never addmit it but right now they are stuck and it might take years to recover from the crash. Time will tell.

market stats
Guest
market stats

CBC news report last night on the Clevland RE market. They are tearing down foreclosures to reduce supply and consolidate neighborhoods to support the market for the $25-75k houses that remain.

crabman
Guest

@Teddybear: “was listed some two months ago for 479k, and look at it now: 399k!!!”

17% down, 25% to go! Below $300k, that place starts to make sense.

Rightsizer
Guest
Rightsizer

@Bull! Bull! Bull!: Did you ever consider that these people just report what the data is telling them?

So is the problem that prices grew unsustainably or that they are currently too high? How can you have one without the other?

yvr2zrh
Member

#9 – Original List was $499,000. Assessed at $433,000.
Bought in 1990 for $192,000 so they are going to make a gain. Like many with these unrealized gains, they will cut prices now quickly to get a sale. This is just like boomer houses – big unrealized gain and will drop price a lot in order to move it. This will sell pretty quick now but I would go in with a bid of $350,000.

VHB
Member
VHB

@ZRH2YVR: Bought in 1990 for $192K. If it sells in 2012 for $350K, that is actually a very poor rate of return after inflation, realtor cost, maintenance fees, any assessments on building over last 22 years, etc.

Bank of Canada says that inflation has been 56.74% over this period:
http://www.bankofcanada.ca/rates/related/inflation-calculator/
.

That means the original $192 is only about $300 in today’s dollars. So, he made 16.66% (50/350) over a 22 year period; less than 1% per year in inflation adjusted terms. And that’s gross–what about selling costs, maintanance etc.

Vancouver Real Estate–not really a good investment…

VHB
Member
VHB

@VHB: whoops, I meant 50/300 not 50/350. the percentage gain was right though 16.66% over 22 years. Hell you can beat that with a frickin ING account.

patriotz
Member

@VHB:
Like another poster you are neglecting rental value. I would say, given both the runup in prices and the big drop in interest rates around and after 2001, he would come out quite a lot ahead of renting if he sold today even for $300K.

As would anyone else who bought before the beginning of the bubble and sells today. There is still plenty of time to sell and make a very good return for such people – but very few of them will take the opportunity. And the guy selling the condo will miss the boat too, if he is simply putting his money into another property.

Troll
Guest
Troll

@VHB: Don’t look only at capital gains, but also the ‘yield’ from not having to pay rent. Isn’t that that the true value of RE? Any capital gains are a bonus.

TPFKAA
Guest
TPFKAA

@patriotz:
“Someone from a RE brokerage talking sense? That’s downright scary.”

He has realised that there is no saving this Hindenburg of a real estate market, and that further pumping will only make him look incompetent, unethical, or a greedy turd… so he is trying to build credibility for his post-crash career. I would expect to see a lot more of this kind of move from various talking heads who will have “seen it all along.”

Vote Down The Facts
Guest
Vote Down The Facts

@VHB: “that is actually a very poor rate of return”

Also need to take into account mortgage interest, property taxes, strata fees, and any rental income earned (or equivalent, if it was the owners principal residence), etc.

Former listings in that building (e.g. V826150) said it recently had a new roof and pipes, too – those don’t usually come cheap.

Navin R. Johnson
Guest
Navin R. Johnson

@Bull! Bull! Bull!:

Bull-ka-shi-t-ski

Bear
Guest
Bear

VHB:
To beat that, u need to invest so that it covers both inflation and the 16.66%.
Can’t just take out the inflation portion and claim that it glows only 16.66%…

VHB
Member
VHB

@Bear: Yeah true, but if you can’t beat 16.66% over 22 years after inflation then you just suck. Your chequing account interest would likely do that.

And yes, you should account for imputed rent less interest, condo fees, assessments, prop taxes, etc. I’m not actually new at this, guys 🙂

Freako/Patriotz: he didn’t buy ‘before the bubble’. He bought in 1990 near the peak of the last boom. I am pretty sure he could have got that place for less in 1999 than he paid in 1990.

Alls I’s sayin is that getting $350 for a place you paid 192 for 22 years ago is really not a great rate of return.

Navin R. Johnson
Guest
Navin R. Johnson

I’d think now would be another great time for a realtor. Scare thousands of people, using the current data, into listing, sell to more intellectual bottom feeders and keep cashing in on the easy money…

registered
Member
registered

8 market stats Says: “….on the Clevland RE market. They are tearing down foreclosures….”

Detroit is doing likewise, the mayor pushing to shut down services in large parts of a city built for double the current population. I think Cleveland was also pursuing legal action against developers who overbuilt neighborhoods now abandoned and costing taxpayers a mint in upkeep.

patriotz
Member

@Navin R. Johnson:
The problem is that falling prices scare even more people from buying. It’s a fact that sales volumes are low all the way to the bottom of bear markets. They don’t pick up until people start to think the bottom is in.

Navin R. Johnson
Guest
Navin R. Johnson

@patriotz:

Yes, but people do buy, as they are now…someone’s collecting the commission..

Bear
Guest
Bear

VHB:
That’s my point. You can’t beat that with an ING account :p

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