Friday Free-for-all!
It’s that time of the week again! This is when we do our regular end of the week news round-up and open topic discussion thread for the weekend. Here are a few stories to kick off the chat:
-Vancouver home resales plummet
-Young families fleeing BC
-CMHC forecasts moderate slowdown
-Canadian prices falling steadily
-Canadians invade Costco
-Home inspectors regulated
-US market recovering?
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So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!
August 17th, 2012 at 4:06 am 1
Re the inventory peak discussion last night, most years since 2005 have seen September inventory at least as high as Octobers but not by much. This year looks to be on balance a hybrid 2008-2010 scenario: inventory is off its highs but still elevated, sales are lackluster, and prices are starting to drop, but nothing as of yet that as yet looks as acute as 2008. So what can be expected for the rest of this year and next for sales and inventory?
We can first compare to 2008. 2008 saw Vancouver get hit by a freight train, most likely in part because lending was becoming difficult, with higher mortgage rates than today’s, but early 2009 saw such a dramatic decrease in price-payment ratios there was an immediate response to housing activity, in part buoyed by robust population growth. Both these shots in the arm are for the most part no longer present.
Nonetheless we are still in a mode where low interest rates are allowing some households to reduce their payments as their pre-2009 financing terms expire, and this tailwind will be mostly spent in a year or so (and as of now it’s mostly spent already). Rents are increasing and have been on the tight side in the past 2 years or so.
A slowdown in China’s investment spending has likely led to less capital flows being invested in Canadian real estate this year compared to 2009-2011. And this is not only because of so-called “HAM” but also indirectly through a recent boom in hard commodity prices that has subsided somewhat this year — look at how BC-headquartered resource company equities have been doing since 2009.
The Chinese central government has already approved a significant stimulus spend to come into place in Q4 of this year. That will lead to additional economic activity but this is unlikely to have the same impact as previous stimulus efforts as much of the spend will go into servicing existing outstanding nonperforming loans. I would expect some uptick in capital flows into Canada in 2013 but nothing like was seen in the past couple of years and will likely be short-lived.
Mortgage rate spreads have increased for a variety of reasons since 2011, which has partially offset falling interest rates seen earlier this year. Going forward we can expect further crimps on lending through increased spreads and increased loan rejections for Vancouver-area mortgages.
Population growth has continued to slow, in part due to unemployment still being elevated. This looks to be a cyclical trend that is highly dependent upon residential construction activity. It is the nature of BC’s economy that construction boom leads to population growth but as completions mount, population growth subsides, as it is doing now. This cycle looks to be on roughly a 10 year period and it looks 2012 and 2013 lie in a downdraft.
Units under construction are elevated relative to population growth and still appear to be increasing. As completions mount later on this year and into 2013 this will provide an additional headwind for the housing market.
Are there factors that could produce a renewed bout of strength? Well some navel gazing is in order — I for one did not anticipate the veracity of the stimulus from governments and how strongly they affected house prices. I am, now, trying to keep an open mind as to what could come to the rescue this time round, though any insight into what this might plausibly be would be greatly appreciated. A markedly improved US economy in 2013 would be a positive for Canada as a whole.
Aside any additional strength from factors not considered above, I see continued elevated inventory and lower sales continuing through the rest of 2012 and likely through 2013: we need only look at the early part of this century to see the effects of lower population growth. I think the months of inventory levels will be enough to put a downwards pressure on prices as measured on a year-over-year basis. This will not mean that prices are monotonically going to fall — seasonality sees prices buoyed in the spring for a variety of reasons — but any bouts of strength are likely to be muted before renewing their descent in the second half of the year. How much? I’ll say -5% by the end of 2012 and a further -10% by the end of 2013. And that is only a guess based on what I can see based on the factors above. If factors I considered above combine in some way to exacerbate effects, or if some real sh!t starts going down in, say, Asia, things could get worse.
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August 17th, 2012 at 8:02 am 2
The Vancouver foundation says that if you hate HAM then you are a lonely basement dweller in this report.
http://www.vancouverfoundation.ca/documents/Van-Fdn-Consequences-of-loneliness.pdf
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August 17th, 2012 at 8:28 am 3
@procrustes:
That’s one F’d up survey. Who da hell did they survey?
-People who live here and do not speak English simply do not try hard enough to be part of the community.
-There is too much foreign ownership of real estate here.
-Vancouver is becoming a resort town for the wealthy.
Well, I agree with all three statements but I don’t feel lonely. Do you?
Vote up if you agree but don’t feel lonely.
Vote down if you agree and feel lonely.
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August 17th, 2012 at 8:35 am 4
@1 jesse: “If factors I considered above combine in some way to exacerbate effects, or if some real sh!t starts going down in, say, Asia, things could get worse.”
2008 tanked without them, solely on the force of lost liquidity. The market exploded in 2006, solely on federal policies inflating liquidity, and pulled back from the abyss in 2008 solely due to emergency near-zero interest rates. Sauder data shows nothing special, for example, about 2008 regarding population growth.
This is true not just of Vancouver but of Canada, a strong indicator these additional factors are marginal effects. While it’s interesting to consider the potential negatives it comes with an unintended argument for the opposite; that Vancouver’s prices were, divorced from the rest of the country, originally driven and effectively justified by Asian money, population growth, construction cycles, etc.., or true fundamentals instead of federal stimulus. That’s very unlikely.
The federal coffer is dry. As we’ve seen, the international financial community knows and has begun downgrading our banks. The banks are freaking about high personal debt levels. The hat has no more rabbits, the choices now are between sh!t and fiscal Seppuku.
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August 17th, 2012 at 8:52 am 5
when’s the crash going to happen? next year? year after that?
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August 17th, 2012 at 9:00 am 6
[...] – jesse (YVRHousingAnalyst) at VCI 17 Aug 2012 [...]
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August 17th, 2012 at 9:41 am 7
@specialfx3000: I was a busy local deli, and a really nice guy from Quebec was talking to the people around him in a friendly, non-threatening way. Just commenting on the food there. The mostly white people were acting like a bunch of zombies. When I responded to him in kind, he seemed happy to finally get a response from somebody…anybody.
You might not feel lonely until you attempt to talk to a Vancouverite in a public place
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August 17th, 2012 at 9:56 am 8
@fixie guy: “The market exploded in 2006, solely on federal policies inflating liquidity, and pulled back from the abyss in 2008 solely due to emergency near-zero interest rates. Sauder data shows nothing special, for example, about 2008 regarding population growth.”
You’re ignoring market sentiment, which I think is as important as any other driving mechanism. Many bought houses because they had an expectation that they’d increase in value more than any other asset. Government policy enabled this to some extent.
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August 17th, 2012 at 10:02 am 9
@procrustes: Weird questions. Did they happen to ask any non-english speaking residents if they felt lonely in a city where english was the primary language?
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August 17th, 2012 at 10:15 am 10
@Patiently Waiting:
That not just a Vancouver thing, it’s a city thing.
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August 17th, 2012 at 10:16 am 11
@jesse:
Fair enough analysis. But if prices are down 15% by the start of 2014..that would mean the true bears who made the case for renting due to overvaluation in 2005 would really have to admit they were dead wrong.
For the person who ignored that advice, would have a full 9 years of mortgage principle paid plus appreciation that was better than inflation.
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August 17th, 2012 at 10:20 am 12
@Vote Down The Facts:
“You’re ignoring market sentiment, which I think is as important as any other driving mechanism.”
He’s not ignoring it, just assuming with justification that it was positive.
Prices did not start falling in Vancouver 2008 because people started getting negative on RE, but because there simply weren’t enough buyers at current prices and interest rates.
Buying remained more expensive than renting all through the 2008/9 downturn. That’s prima facie evidence of positive market sentiment. People will not buy at a higher cost then renting if they don’t expect higher prices.
Market sentiment on RE is always a lagging indicator of price declines. Polls in the US showed that most people remained positive on RE until well into 2007, over a year after prices started falling.
Market sentiment is important in causing markets to overshoot at the bottom – as we have seen in some US markets – but it’s not the cause of prices starting to fall.
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August 17th, 2012 at 10:24 am 13
@Conrad:
” But if prices are down 15% by the start of 2014..that would mean the true bears who made the case for renting due to overvaluation in 2005 would really have to admit they were dead wrong.”
No it doesn’t, because the person who bought in 2005 will have paid more in expenses than the person who has rented since that time.
If at any time in the future, someone who has been renting since 2005 can buy and come out ahead of someone who bought in 2005, the bears will be proven right.
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August 17th, 2012 at 10:31 am 14
Off-topic: Canadian of Convenience (indeed, Vancouverite of Convenience) makes the front page of NY Times
http://www.nytimes.com/2012/08/19/opinion/sunday/home-is-where-the-green-card-is.html
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August 17th, 2012 at 10:36 am 15
Classic Vancouverism:
“You spend $1-million on a house, you don’t want it to smell like fish,” East Vancouver resident Lenore Newman told Postmedia News this week.
http://news.nationalpost.com/2012/08/16/can-vancouvers-anti-stink-bylaw-pass-the-smell-test/
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August 17th, 2012 at 10:54 am 16
@patriotz: “Prices did not start falling in Vancouver 2008 because people started getting negative on RE, but because there simply weren’t enough buyers at current prices and interest rates.”
You’re an expert at the strawman. I never said that prices started falling due to negative sentiment. But I’m sure it played a part once they’d *started* falling, as I’m sure it will over the coming months and years. Emotion alone doesn’t necessarily cause any changes in market direction, but it sure can amplify them once such trends begin to emerge.
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August 17th, 2012 at 11:04 am 17
Found keys.
I just found a set of keys at David Lam park. The FOB is round and made of blue, transparent plastic. Any ideas which building?
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August 17th, 2012 at 11:05 am 18
“No it doesn’t, because the person who bought in 2005 will have paid more in expenses than the person who has rented since that time.”
Yeah but they are making forced principle payments every month. Which is way more than the difference in expenses. For the financially uneducated (lets be honest is like 70% of the population) that is huge.
A real world person would be much better off.
Your academically inspired person that you distort to fit your argument would be better off renting..I guess. But lets face hes a loser.
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August 17th, 2012 at 11:45 am 19
The principle payment is not income – it’s repayment of a debt.
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August 17th, 2012 at 11:47 am 20
16 Vote Down The Facts Says: “Emotion alone doesn’t necessarily cause any changes in market direction, but it sure can amplify them once such trends begin to emerge.”
I would take further and suggest bubbles are impossible without emotion and sentiment. While necessary though, alone they’re insufficient to sustain markets. It takes sentiment plus opportunity. The latter is the normally missing component that the federal government supplied for a decade to the tune of hundreds of billions.
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August 17th, 2012 at 11:50 am 21
@patriotz: have you bought in ottawa yet, or you are priced out in ottawa as well. oh wait,you cant borrow any money cuz you are still unemployed.
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August 17th, 2012 at 11:53 am 22
The Economist now says we are 77% overvalued relative to rents, and 32% relative to income:
http://i.imgur.com/GBTEy.png
Canadian price-to-rent:
http://i.imgur.com/yzNCM.png
Prices in real terms:
http://i.imgur.com/oKUua.png
The last two graphs suggest that Canadian house prices simply don’t revert to the mean. I put the difference down to government policy. We have our economic model, and that includes rising house prices. The government enforces this through policy and they have done so again. It is a form of middle class welfare.
Anyone looking for a fair break now is out of luck in this country. There may be a good deal (relatively speaking) in 10 years or so. You will only find real opportunities in countries that embrace free markets. The decline in living standards for younger Canadians is baked in.
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August 17th, 2012 at 12:06 pm 23
@bcj: ““You spend $1-million on a house, you don’t want it to smell like fish,” East Vancouver resident Lenore Newman told Postmedia News this week”
This person is an idiot. In Vancouver $1,000,000 gets you your pick of some of the shittiest houses in the most unpleasant neighbourhoods in North America. This is Vancouver, what did she expect for $1,000,000? Value? For that, go elsewhere.
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August 17th, 2012 at 12:28 pm 24
@fixie guy: Agree with your comments. In the medium, absent of any credit changes, the other factors of pop growth, capital flows, construction, etc. will matter and, from my analysis, are pointing prices to the downside relative to past recent years. I cannot state with high certainty the magnitude of these effects, only that they are unlikely to be positive. IMO a slowdown in population growth is going to have a direct impact in the next couple of years and will be significant.
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August 17th, 2012 at 12:29 pm 25
@Vote Down The Facts:
” I never said that prices started falling due to negative sentiment.”
But you’re the guy who brought up sentiment regarding rising and falling prices. So don’t accuse anyone of bringing up a strawman if you didn’t make it clear just what role you thought sentiment played.
“But I’m sure it played a part once they’d *started* falling”
I disagree, and the evidence for that is, as I’ve already said, the quick turnaround of the market when interest rates dropped, while buying was still more expensive than renting. People had remained positive about buying RE – and they bought as soon as the lower interest rates enabled them to.
And again as I’ve already said, you want evidence of negative sentiment, it’s in US markets where people won’t buy when it’s cheaper than renting.
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August 17th, 2012 at 12:39 pm 26
@fixie guy:
“I would take further and suggest bubbles are impossible without emotion and sentiment.”
You don’t have to suggest it, by definition a bubble exists when people pay prices not justified by earnings in expectation of rising prices.
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August 17th, 2012 at 12:40 pm 27
@patriotz: “People will not buy at a higher cost then renting if they don’t expect higher prices.”
I had thought that, and I agree this is true in the long run, but how many Joe Howmuchamonths are looking at monthly outlays without doing any semblance of risk analysis of their purchase? That’s a huge point here: buying has, on a cursory, incomplete, and unadjusted-for-risk basis IS cheaper than renting. It’s incorrect but provides evidence enough for some to buy. In the longer term, as the realities and true costs of property management become apparent, it will be shown that owning at current prices is more expensive than renting when all costs are considered. Frankly, scant few, even many smaller-time investors I’ve talked to, do the analysis as would an American investor post-bubble.
That’s part of what Conrad is talking about and I respectfully disagree with him. Current prices are the only saviour of past purchases post-2005 and if prices do drop 15% or whatever I would be surprised if, aggregating all cases to account for risk, and fully accounting for costs (which I doubt many save third-party property managers actually do), owners of today are ahead. It does of course require some basic semblance of investing the difference in a prudent way, but, not to put too fine a point on it, who gives a f*ck if some dude can’t get it together: if the poor fellow can’t save beforehand it’s statistically unlikely his tenure of ownership will prove any better.
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August 17th, 2012 at 12:45 pm 28
China Said to Order Action by Banks as Developer Loans Sour:
http://www.businessweek.com/news/2012-08-16/china-said-to-order-action-by-banks-as-developer-loans-sour
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August 17th, 2012 at 12:54 pm 29
Residential Activity in the Second Quarter of 2012
Number of Sales – 8,132
Year/Year (%) – -18.8 (from 10,018 )
Number of New Listings – 19,085
Average Price ($) – 724,319
Year/Year (%) – -11.5 (from 818,721 )
(Developments in 2012)
This really made my day!
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August 17th, 2012 at 1:08 pm 30
@LS from article
“Since the European markets seem to be in a state of flux, it’s prudent to expect more uncertainty from the European economy for the rest of 2012″
Funny, I hear a lot about how the Euro crisis is one of the factors weighing on the local RE market. I suspect that, if any, this has a net positive effect on RE here as uncertainty in Europe leads to increased demand for “safe-haven” Canadian Government Bonds forcing down yields and subsequently 5-yr fixed mortgage rates.
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August 17th, 2012 at 1:15 pm 31
@ Trader Joe
“This person is an idiot. In Vancouver $1,000,000 gets you your pick of some of the shittiest houses in the most unpleasant neighbourhoods in North America. This is Vancouver, what did she expect for $1,000,000? Value? For that, go elsewhere.”
It cracks me up to no end when someone gets on the news and whines about how rough they’ve got it using some ridiculous self-serving, ass-backward logic.
I remember this one old Rube from Richmond a couple years back that sold his teardown for $900K and then had the audacity to get on the news and bitch about it once similar properties started selling for even more, claiming he’d been hoodwinked. Nevermind he sold for more than he ever would have dreamed he’d be able to, for a price that he certainly wouldn’t get today.
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August 17th, 2012 at 1:45 pm 32
Michael Pettis on some irrelevant country’s future economic growth: http://www.mpettis.com/2012/08/17/1685/
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August 17th, 2012 at 2:14 pm 33
@rp1: “You will only find real opportunities in countries that embrace free markets”
What contries are those? Somalia?
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August 17th, 2012 at 2:15 pm 34
“Somalia is a pure free market”:BBC
http://news.bbc.co.uk/2/hi/4017147.stm
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August 17th, 2012 at 2:23 pm 35
Since this is an open topic discussion, I have a question that is only slightly related to the euro crisis: Does anybody know if this is a good time to visit Greece? Are prices for accommodation down? I’m looking for a place to spend a few months this winter and I’ve never been there.
I did go around Europe in 2007 and found prices for hotel and flights very low especially in the south. Portugal 4 star for 26 euro a night and flights from Madrid to Faro for 19 euro.
I’d be interested in anyones opinion if now is a good time to take the Canadian dollar to the south of the eurozone to escape the coming rainy season.
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August 17th, 2012 at 2:40 pm 36
@bcj:
The person interviewed does not own property in East Vancouver. She posted a comment to the original Province story in which she claimed she rented because she felt that properties in Vancouver were overpriced.
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August 17th, 2012 at 2:48 pm 37
@patriotz: “But you’re the guy who brought up sentiment regarding rising and falling prices. So don’t accuse anyone of bringing up a strawman if you didn’t make it clear just what role you thought sentiment played”
I think you need to look up the definition of ‘strawman’.
“And again as I’ve already said, you want evidence of negative sentiment, it’s in US markets where people won’t buy when it’s cheaper than renting.”
I’d suggest that many people don’t even know whether buying or renting is cheaper. All they know is that RE is “bad”. The fact that the majority hold this position is often a clear indicator that it’s a good time to buy.
It’s like when a Starbucks barista tells you it’s a good time to buy in Vancouver – most likely the exact opposite is true.
Either way I think you underestimate the role emotion plays in the market, probably because you’re one of the minority who actually takes the time to educate themselves on the market fundamentals instead of relying on what investment advice your brother-in-law gives you or whatever.
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August 17th, 2012 at 3:08 pm 38
@oneangryslav2
“The person interviewed does not own property in East Vancouver. She posted a comment to the original Province story in which she claimed she rented because she felt that properties in Vancouver were overpriced.”
Shame on me for taking the MSM report at face value. Nicely done Province & NP.
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August 17th, 2012 at 3:09 pm 39
New Listings 155
Back On Market Listings 10
Price Changes 108
Sold Listings 59
AS OF 3:09PM
ALL LOWER MAINLAND
A 6.8M SALE TODAY
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August 17th, 2012 at 3:12 pm 40
@bcj:
“The person interviewed does not own property in East Vancouver. She posted a comment to the original Province story in which she claimed she rented because she felt that properties in Vancouver were overpriced.”
I apologize to this woman for calling her an idiot. If she rents and thinks that houses in the area are overpriced, she is clearly not an idiot and is smart.
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August 17th, 2012 at 3:17 pm 41
@bcj: Here’s the excerpt from the article:
Here’s her comment:
Read more: http://www.theprovince.com/Fishy+odour+east+Vancouver+caused+breakdown+rendering+plant/7090484/story.html#ixzz23qOjTtEp
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August 17th, 2012 at 3:29 pm 42
I’ll buy when this place is $219,000
http://vancouver.en.craigslist.ca/van/reb/3164761518.html
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August 17th, 2012 at 3:40 pm 43
@Vote Down The Facts: As much as I disagreed with you often times, I agree with you on this one that asset prices are heavily driven by emotion. Most people do not have the ability or knowledge to distinguish between price and value. Therefore, they base their decision on what they read in the MSM and hear from their friends and family. That explains business cycles, buy-high-sell-low, and all the other irrational behaviors.
For example, just look at facebook shares! Has anything fundamental changed with FB that warrants a 50% reduction in valuation since their IPO? I would say the social network is equally good (or suck) as three months ago.
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August 17th, 2012 at 3:43 pm 44
@Anonymous:
I wouldn’t buy this place at any price. Ok, maybe $50k.
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August 17th, 2012 at 3:46 pm 45
@oneangryslav2: The thing though is, the people who paid $1M for the homes in that area are the ones that move in AFTER the plant began operations. If they don’t do their research, then that’s too bad. And yes, by research I mean spending more time learning about the neighbourhood than trying to figure out which smartphone to buy next.
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August 17th, 2012 at 4:37 pm 46
When renting is an appetizing option
Add in property taxes and other house-related expenses, and becoming a homeowner presents itself as an expensive proposition. Because they are paying much less in rent – $1,850 a month – “with the inflated house prices, renting may be the best option for the time being,” Mr. Henein says. “Waiting three to five years to buy will put them comfortably over the 25-per-cent [down payment] and still have them mortgage-free before the age of 60.”
http://www.theglobeandmail.com/globe-investor/personal-finance/when-renting-is-an-appetizing-option/article4487130/?cmpid=rss1
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August 17th, 2012 at 5:36 pm 47
@Trader Joe:
“What contries are those? Somalia?”
In what way is Somalia a free market? There are no private property rights, trade is not free and all business transactions are affected by the fact that it is consistently rsnked the most corrupt country in the world (in other words it’s disparate local goats steal the wealth produced by individuals).
It’s markets are among the least free in the world. Somalia proves the opposite of what you think.
Africa in general is the least economically free region in the world and as a result the poorest. Though it wasn’t always like this. When it’s markets were more open up to the first half of the last century, Egypt and Kenya were wealthier than Korea and China. But as they nationalised their economies and Asian countries freed theirs, things changed,
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August 17th, 2012 at 5:39 pm 48
@Chip:
‘Goats.’
Meant govts but iPad has other ideas.
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August 17th, 2012 at 5:45 pm 49
Renters will never be able to beat someone who bought pre 2005.
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August 17th, 2012 at 5:55 pm 50
I’d like to see 72 sales tonight.
Keep the drive alive.
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August 17th, 2012 at 6:10 pm 51
New Listings 169
Price Changes 86
Sold Listings 59
TI:18848
FYI Richmond looks hot compared with W Van
This week in W Van…
New Listings 36
Price Changes 21
Sold Listings 6
TI:717
http://www.paulboenisch.com
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August 17th, 2012 at 6:35 pm 52
@paulb:
Thanks Paul. You are an asset here.
1) Only 59 sales? The concludes a pretty rough week for the market. It started off with a bang and ended with a whimper. This is turning out exactly like July – a stronger first half than the second half.
2) Those West Van numbers are unbelievable. Only 6 sales in a week, with 717 listings? At that pace, West Vancouver has an MOI of 27.16. If sales do not pick up in West Van, it will drive the REBGV average prices way down, since these are often higher end sales.
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August 17th, 2012 at 6:52 pm 53
ScubaSteve – did you make any point?
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August 17th, 2012 at 7:02 pm 54
@Just sayin:
Do you have something constructive to add?
Thanks Paulb
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August 17th, 2012 at 7:06 pm 55
Bhahaha ha ah aha hahhah
A lot of used house salesmen will be cancelling their summer vacations to knock on doors and cold call.
The top is in its all downhill from here. There will be steep drops and slow ones and a few bear traps to suck people in but at the end of the day no matter how long it takes it will be -40% top to bottom.
(And we will will still be expensive by US standards)
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August 17th, 2012 at 7:21 pm 56
What’s with the maintenance charges at these Whistler condos? You can get a quarter share in a condo for about $70,000 but the condo fees are $400. I’m assuming that must be $400 each, so $1600 in total for a one bedroom unit….that’s insane? Or is the total maintenance costs $400 split between 4?
http://www.yattermatters.com/homes-for-sale/?area=Whistler&community=Any&type=Residential%2BAttached&bedrooms=Any&bathrooms=Any&minprice=0&maxprice=20000000&nonce=7f750d1937&search=true&submit_x=123&submit_y=14&submit=Find+Your+Home&listpage=2&prop=V920454
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August 17th, 2012 at 7:26 pm 57
@Bull! Bull! Bull!:
A financial advisor who advises waiting to buy AND put 25% down on a place?? That’s crazy talk! Wow, things have really changed in the market sentiment haven’t they?
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August 17th, 2012 at 7:28 pm 58
McLovin – “-40% top to bottom”
Do you see the following:
- downtown 2-bedroom condos at $350,000
- downtown 1-bedroom condos at $225,000
- $400 per foot avg.
What will get us there?
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August 17th, 2012 at 7:30 pm 59
@vangrl:
My guess is $400 total, split between 4…based on other units I’ve seen.
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August 17th, 2012 at 7:39 pm 60
@Just sayinMcLovin – “-40% top to bottom”
You asked:
Do you see the following:
- downtown 2-bedroom condos at $350,000
- downtown 1-bedroom condos at $225,000
- $400 per foot avg.
What will get us there?
I ask what got us where we are?
Tick Tock Tick Tock
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August 17th, 2012 at 7:58 pm 61
@bcj:
http://www.ufv.ca/geography/People/Faculty_and_Staff/Lenore_Newman_s_Home_Page.htm
Gentrification at work. Educated snooty people expect places they live in to be nice, just because they live there.
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August 17th, 2012 at 8:14 pm 62
@Just sayin:
“What will get us there?”
Lack of buyers.
Duh!
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August 17th, 2012 at 8:15 pm 63
People who pay for something, even if it is an outrageous amount, should expect nothing more than what they paid for. If you pay a million bucks to live in a shithole, newsflash, it’s still a shithole.
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August 17th, 2012 at 8:20 pm 64
McLovin – “-40% top to bottom”
Do you see the following:
- downtown 2-bedroom condos at $350,000
- downtown 1-bedroom condos at $225,000
- $400 per foot avg.
What will get us there?
I absolutely see that. Why would any sane person think that $400 sq ft is cheap? Or $225K for a 1 bd rm? Its comments like this that make me realize how crazy people in Vancouver really are. $225K for a 1 bd rm is EXPENSIVE.
To answer the other part of your question. What will get us there?
Record high home ownership
Record high personal debt
Record high price to rent
Record high price to incomes
Record low returns on rentals
Sluggish economy
Virtually zero wage growth
Eventually higher interest rates
Seriously a 40% decline is easily in the cards yet people look at you like you have 3 heads if you dare mention such a thing. I am not saying it will happen tomorrow but the sled is already on the track and its along way down. Once people figure out the prices are going down each quarter and not up the idea to buy now will be replaced by buy later.
That said, I am quite sure I wasted 6 mins of my life writing this because the true believers who have no knowledge of history will ignore this anyway.
Real Estate always goes up, just ask anyone who bought in 1952 for 3 years wages for a Westside house.
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August 17th, 2012 at 8:47 pm 65
@ScubaSteve: did any of you donate to paulb? the guy didnt sell any home and yet give you the information for free with hope to earn commission from you. so far, no commission is expected.
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August 17th, 2012 at 8:49 pm 66
@McLovin: you soon forgot the pain of moving already? i remember you were crying the in cyberworld when you were looking for rental.
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August 17th, 2012 at 8:49 pm 67
German Chancellor Angela Merkel praised Canada for not living on borrowed money.
http://www.bluecanada.ca/index.php?/topic/63824-german-chancellor-angela-merkel-praised-canada-for-not-living-on-borrowed-money/
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August 17th, 2012 at 8:51 pm 68
@Devore: unfortunate for you, so-called shitholes that many stupid bears mouth-water to lick on!
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August 17th, 2012 at 8:58 pm 69
#65, assumptions, assumptions… I am buying in the next year, come collapse or no collapse, and I have already contacted Paul. So his hard work will actually pay dividends if it is simply on my purchase alone.
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August 17th, 2012 at 9:29 pm 70
The real housewives of van just made fun of apartment renters! perhaps anonymous is a real housewife!!!
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August 17th, 2012 at 9:37 pm 71
@george: “Canada is an example of how one can emerge from the crisis in a robust way,” Merkel said.
Honey you ain’t seen nothin’ yet.
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August 17th, 2012 at 9:44 pm 72
@McLovin: you soon forgot the pain of moving already? i remember you were crying the in cyberworld when you were looking for rental
YOu must have me confused with someone else. I have been renting the same place for 6 yrs. My rent has not gone up once which means it has gone down by about 15%. I am renting an amazing 3 br for 31% of the cost of owning it. I have gotten new floors, had it painted twice and dodged the special assessment.
Good quality renters that treat a place with respect are hard to find and quite coveted.
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August 17th, 2012 at 10:00 pm 73
About to sign lease on 1 year new house built by asian owner, 1800+ sf,
pulled off MLS recently due to no buyer.
now about to be rented to yours truly at ~35 years Price-to-Rent ratio after talking down rent by $100/m.
Landlord still has a couple houses near completion.
Who knows what happens to the tenant if the landlord goes bankrupt?
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August 17th, 2012 at 10:10 pm 74
@VMD: “Who knows what happens to the tenant if the landlord goes bankrupt?”
You’re well protected because of the lease. BK does not break it.
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August 17th, 2012 at 10:49 pm 75
projected end of month sales now under 1800. MoI inching in on 11-handle. Nice inventory pick up today–daily fluctuation or have we exhausted the ‘delist and wait til next year’ phenomenon?
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August 17th, 2012 at 10:54 pm 76
To come in under 2008′s 1568 sales for August, we’d need to have sales < 59.9 per day for the rest of the month. That's pretty tough to do, but who knows.
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August 17th, 2012 at 11:09 pm 77
Still thinking we might get a day of 30 sales this month
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August 18th, 2012 at 1:18 am 78
Projected sales of 1745 now… how bad can this market get? Doesn’t even matter at this point if we don’t surpass August 2008.. what dismal numbers compared to last year. This market is in serious trouble. The general public is only getting a very small piece of the puzzle from the MSM media. We have the luxury here of knowing 2-3 months ahead of what the general public knows. By mid-October it is going to be pure chaos in Vancouver. I predict a total meltdown, with tons of listings and huge price drops. We could be down 30% in price by the end of the year…
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August 18th, 2012 at 1:40 am 79
“We have the luxury here of knowing 2-3 months ahead of what the general public knows.”
Assuming you’re correct, what use is that, besides perhaps winning a bar bet?
Give us a crystal ball 2-3 *years* into the future, and that will start to get into a useful time frame for real estate investing.
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August 18th, 2012 at 3:27 am 80
@Vote Down The Facts:
“Either way I think you underestimate the role emotion plays in the market”
Really? After I’ve been saying for years that people buying in Vancouver are irrational idiots?
You’re a real piece of work.
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August 18th, 2012 at 3:45 am 81
@jesse:
“You’re well protected because of the lease. BK does not break it.”
Nor does it break a month-to-month tenancy. But of course a new owner may terminate a month-to-month for personal use with proper notice, as with an ordinary sale.
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August 18th, 2012 at 4:14 am 82
@Chip:
Somalia isn’t what I would call a free market either, but why don’t you answer the question and tell us what country does have one?
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August 18th, 2012 at 5:17 am 83
Rent or Buy? With Rents on the Rise, New Yorkers Do the Math
Buying because it’s cheaper! What a concept!
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August 18th, 2012 at 6:00 am 84
24 jesse Says: “In the medium, absent of any credit changes, the other factors of pop growth, capital flows, construction, etc. will matter …”
Only if it’s assumed the most recent credit policy changes are fully priced into the market. Far from it. Housing markets are slow to react, inelastic and only starting to feel the impact. China’s economic outlook – as it translates to offshore home sales – will prove nearly invisible when credit tightening really takes hold.
It’s also a bit of false reasoning based on the premise offshore buyers enter the market because they want to live here, the old BPoE argument. If as is more likely it’s to profit from the unprecedented appreciation of the last decade, they’ll flee independent of any other foreign economic outlook when that artificially stimulated performance advantage disappears. We’re already hearing about capital moves to the US.
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August 18th, 2012 at 7:48 am 85
@Just sayin:
If you think those prices are low, check out this building in downtown San Diego:
- downtown 2-bedroom condos at $235,000
- downtown 1-bedroom condos at $159,000
- $287 per foot avg.
http://www.sdlookup.com/Community-8-Acqua_Vista
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August 18th, 2012 at 7:56 am 86
@crabman:
Can’t compare a depress city to a jubilant city like Vancouver where the weather is mild and heaven like.
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August 18th, 2012 at 8:21 am 87
@fixie guy: Spot on
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August 18th, 2012 at 8:51 am 88
Joan Riegel, a 69-year-old educator, started looking to buy earlier this year, when the rent on her 1,000-square-foot Upper West Side rental climbed past $5,000 a month
This is another way that Vancouverites are delusional. They compare Vancouver prices to that of Tokyo, Paris and New York and while our prices are often less than those places our rents are much less. In this example a 1,000 sq. ft place is $5,000 a month. What would that be in Vancouver $2,200?
The price to rent in Vancouver is completely out of whack with the long term fundamentals of the market. So again for the used house salesmen here: prices similar to NYC but rents 40% of NYC = Either rents here have to go up 50% or prices down 40%.
I think we all know which one it is.
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August 18th, 2012 at 9:34 am 89
@McLovin:
Your comment is spot on!
Of course, for rents to go that high in Vancouver, the city would need much, much higher salaries. Everybody knows that places like New York have much higher salaries than Vancouver, in part to compensate for that higher cost of renting/living.
But with BC’s small businesses flailing their arms in panic at even the *thought* of raising the minimum wage, it is clear we are not going in the direction of New York salaries.
So, Vancouver has:
- much lower salaries than New York (protected by small businesses that can’t afford to pay more)
- much lower rents than New York (protected by strict BC tenancy laws that put a cap on rent rises)
- property prices that dictate either rents must go up or prices must go down
It doesn’t take a rocket surgeon to figure out what will happen.
Why don’t Used House Salesmen and Vancouver’s mainstream media ever spell these obvious points out?
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August 18th, 2012 at 9:44 am 90
@fixie guy: “Only if it’s assumed the most recent credit policy changes are fully priced into the market. Far from it. “
Events relating to dwelling formation and oversupply will exacerbate any additional credit tightening. I’m not claiming any of these factors are independent.
It looks likely credit will be tightened further, with or without government intervention. It doesn’t hurt matters that dwelling formation is lower and that units under construction is concurrently increasing.
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August 18th, 2012 at 9:45 am 91
@patriotz:
“Buying because it’s cheaper! What a concept!”
I think it makes sense that in a calm, settled market in an average place (lacking any government incentives to help people buy) it should be break-even (or, sometimes cheaper) to buy than to rent, if for only the facts that renting allows the luxury of incredible mobility, carries no maintenance fees (nor associated headaches), depreciation, taxes and other fees, etc, etc.
This is especially true for condos, where you are not really buying any “permanent” plot of land that will always hold value, but instead buying a box in the sky that will depreciate in value over time and always require more money.
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August 18th, 2012 at 9:45 am 92
@McLovin: So what is a typical price-rent in Vancouver? For newish downtown it looks to be over 200; is that what you (and others) are seeing?
A good friend of mine was tracking Spectrum as a bellweather since the units are for the most part similar. Something easy to track to get an on-the-ground measure of same-unit price-rent ratios.
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August 18th, 2012 at 9:53 am 93
@patriotz: so the irrational idots own real estates. and the “rational smart ass” moved around because this smart ass could not survive in any city? where did your head get pulled out off?
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August 18th, 2012 at 10:04 am 94
I am living in Richmond with an (assessed value) : (rent) ratio of about 285.
Strata fees and property taxes not included, why buy now?
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August 18th, 2012 at 10:27 am 95
I’m renting a house in SE Burnaby. Price to rent is somewhere between 350-370 on the conservative side. My best friend is thE land lord and I’ve urged him to consider selling. But he will have nothing to do with it. Already has over $1.5mil RE exposure with little other savings. Oh yeah, still looking to buy another investment property because “RE does so much better than the stock market”. Just can’t save people from themselves.
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August 18th, 2012 at 10:42 am 96
why are stupid bear trying to be captain america and save the world while paying rent?
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August 18th, 2012 at 11:01 am 97
@crabman: Was that the same condo development that hired ‘fake neighbors’ to lounge around on display in their underwear across from the display suite during the height of their housing bubble?
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August 18th, 2012 at 11:22 am 98
@How much??:
I’m moving from a 1Br+den 670 sq ft condo at 283 months (23.6 years) rent,
to a 3Br newer house at 415 months (34.6 years) rent.
definitely makes more financial sense to rent than buy.
viewed a 3Br 1000sq ft newer condo few days ago at 305 months (25.4 years) rent, but passed (interesting to note that property manager is a realtor, guess managing client’s property might be what’s keeping them busy these days!)
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August 18th, 2012 at 11:43 am 99
@Crikey: “- much lower rents than New York (protected by strict BC tenancy laws that put a cap on rent rises)”
I appreciate your message, but this particular point is not correct.
New York and Vancouver both have rent controls. But in Vancouver the rent controls are not what is limiting rent increases. The increases are currently being limited by people’s willingness to pay.
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August 18th, 2012 at 12:17 pm 100
@UnagiDon: yes, rent that people willing to pay. no wonder, landlords are happy to collect $800 for a east van 350 sf one bedroom suite from the very willing people.
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August 18th, 2012 at 12:36 pm 101
@jesse: “So what is a typical price-rent in Vancouver? For newish downtown it looks to be over 200; is that what you (and others) are seeing?”
If you are getting 200 then the place is either being used as a meth lab or a brothel. No normal tenant would pay that. Here is a unit that has been listed on CL for months (available now) for $2650 per month. The same units are listed for sale at $839K to $879K. So even if they get their asking rent the PR is 316 plus.
http://vancouver.en.craigslist.ca/van/apa/3130947251.html
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August 18th, 2012 at 12:37 pm 102
@VMD:
Beat you all. 4br house on Ontario. 2012 sale $1.35M. Monthly rent $2850, 2 yr lease. Price/rent 474.
I love living here but wouldn’t buy at half the price.
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August 18th, 2012 at 12:46 pm 103
Finally, a “financial facelift” article where both the advice and its recipients are sane.
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August 18th, 2012 at 1:49 pm 104
@McLovin:
That’s absolutely right. I was in San Francisco this month and taking note of the high prices there, but when I went on Craig’s list and looked at the rents, those prices made much more sense. And that brings us back to the reason for the low rents here, which is that Vancouver is a place with very few high paying jobs.
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August 18th, 2012 at 1:56 pm 105
I have a whole house (unlike many, home owners, I have no tenants in the basement to worry about) on a nice street off The Drive, assessed at a little over 410 month’s rent.
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August 18th, 2012 at 3:03 pm 106
Looking forward to NOT hearing the oft-repeated phrase, “He’s done rather well”, spoken in a west-side accent and referring only to the effect of the RE market on (soon-to-be-fleeting) paper wealth.
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August 18th, 2012 at 5:12 pm 107
@Dan in Calgary: it’s ok to be jealous. normal human behaviour.
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August 18th, 2012 at 5:13 pm 108
@Dan in Calgary: Probably won’t hear it too much, you live in Calgary.
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August 18th, 2012 at 5:15 pm 109
@UnagiDon:
“New York and Vancouver both have rent controls.”
Yup, they sure do – I didn’t imply that New York didn’t.
But seeing as how Vancouver has much lower rents, all other rules being equal it would take many years (if it was at all possible) for long-term renters in Vancouver to be paying the same as average rental costs in New York.
And yes, willingness to pay is also a factor. Multiple factors, definitely.
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August 18th, 2012 at 5:44 pm 110
@Crikey:
For practical purposes, in terms of the actual active market, which is to say, apartments where someone entering the market could rent, NYC does not have rent control.
http://en.wikipedia.org/wiki/Rent_control_in_New_York
and
http://en.wikipedia.org/wiki/Rent_control_in_New_York#Rental_unit_distribution
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August 18th, 2012 at 6:59 pm 111
Here are the idiots again comparing shithole Wetcouver with NY.
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August 18th, 2012 at 7:48 pm 112
@Crikey: There is no rent control for new tenants, which means people charge as much as they possibly can. It turns out that is a lot less than you can charge in NY. Wonder why that would be?
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August 18th, 2012 at 9:47 pm 113
@Crikey: As mentioned BC rent control rules are not the same as New York’s. Rent growth in BC and Vancouver has, over the past 20 years, lagged the control limit. The only times rent control seems to have mattered are when lazy landlords suddenly find the urge to increase their incomes after years of neglect, or when new owners who payed high prices need to evict tenants who had seen their rents fall below market by previous owners’ prerogatives. But blaming rent control for those situs is akin to me blaming the stupidity of a posted speed limit for a speeding ticket.
This year the cap is over 4%.
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August 18th, 2012 at 10:01 pm 114
@jesse:
“or when new owners who payed high prices need to evict tenants who had seen their rents fall below market by previous owners’ prerogatives”
Jesse & UHS et al.,
Thanks for the clarifications.
Even though new renters can be charged “anything”, I do think it is important to emphasize the other side of the rules — existing renters have caps on price increases. Yes, these rules may be the same as New York, etc…but if you are an investor thinking of buying rental units in either New York or Vancouver, which looks better to you?
1)rental units costing $XXX thousand dollars, which come with long-term tenants paying $5000 a month (New York, San Fran, etc), but where you can only increase that rent by a few percent every year, or
2)rental units costing $XXX thousand dollars, which come with long-term tenants paying $1200 a month (Vancouver), but where you can only increase that rent by a few percent every year?
I know that for a investor this doesn’t apply to every tenant, but there are enough very long term tenants out there that I would think this is a consideration for investors.
In other words, if you are a rental property investor and are convinced that Vancouver rent prices are going to rise to meet up with purchase prices… well, you have one more thing working against you, which will make a difference over the years (unless you find a cheap excuse to kick out long-term tenants, which is a rare enough occurrence that to usually makes the news)
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August 18th, 2012 at 10:34 pm 115
@Crikey: “I know that for a investor this doesn’t apply to every tenant, but there are enough very long term tenants out there that I would think this is a consideration for investors”
If you mean that for all the properties for sale in Vancouver, there are some that have a potential cap on future revenue, agreed. All the more reason to demand a discount on the properties with such impairments — nothing a lower price can’t fix. For those who are planning on occupying upon sale it’s a non-issue. (And look at how the home ownership rate has increased in the last decade…)
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August 18th, 2012 at 10:40 pm 116
@Crikey: “unless you find a cheap excuse to kick out long-term tenant”
The usual excuse I’ve seen is to claim occupancy of a close relative. Few tenants have the desire to hold landlords to this through the RTA and end up moving on. “Cheap” in this case is a month’s rent. The cases that make the news are usually larger-scale investors who can’t use the relative excuse because of the number of units involved.
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August 18th, 2012 at 11:34 pm 117
@No Money Down: I just checked my ratio, and you are the winner. I’m in a 3 bedroom house (we have the place to ourselves), 5 year lease for $1600/mo. House is worth $750,000 based on comps for a ratio of 468.
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August 19th, 2012 at 12:39 am 118
I pay $850 a month for a condo in Surrey. Same unit 2 floors up sold for $253,000 in late 2011. So a ratio of 297:1. You guys are insane with your 400′s ratios.
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August 19th, 2012 at 12:41 am 119
Now I’m all jealous… need to find myself a “400′er” to rent…
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August 19th, 2012 at 12:53 am 120
Realtors in China are getting frustrated…
http://www.liveleak.com/view?i=216_1345348995
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August 19th, 2012 at 3:38 am 121
@jesse:
For all but a few rental properties (likely all multi-unit) in Vancouver, tenant turnover is high enough – every 2 or 3 years on average I think – to render sitting tenant rent controls virtually moot, whether or not the allowable annual increase is in line with the market.
Remember the average turnover for all households is about 7 years, and 70% of those are owner-occupiers.
Also in NYC the scope of rent controls is much less than what many people think, they only apply to a fraction of the multi-unit rental stock. Note the story which I posted, in which the renter was motivated to buy because she was hit with a big rent increase.
As well in San Francisco the scope of rent controls is less than in Vancouver – they only apply to sitting tenants but even then there are exceptions.
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August 19th, 2012 at 8:48 am 122
I am the winner.
I pay 4,400 for a 3,000 ft 6 bedroom (or is it 7?) house in west side.
Assessed close to $3.0 million.
For now this is a 660 multiplier.
At the higher price points, it gets more and more un-economic to own and rent these houses out.
\
VC
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August 19th, 2012 at 8:48 am 123
Oops.
I meant to say 3,800 ft house. not 3,000.
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August 19th, 2012 at 8:53 am 124
Hat tip to koozdra at HHV, this will bring back memories for those who followed the US bust:
http://www.timescolonist.com/business/Colwood+developer+offers+kind+mortgage/7111142/story.html
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August 19th, 2012 at 9:20 am 125
@patriotz: Interesting but with CMHC out of the picture (presuming the banks can’t get the insurance after the fact on their own either) I think very few people will be qualified by the banks for one of those mortgages.
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August 19th, 2012 at 10:10 am 126
@Vulture Fun:
Our landlord purchased the property earlier this year as an “investment”. I really can’t understand their business model. The house is an original, nicely-maintained bungalow. New paint, new dishwasher etc.
It’s not a quick flip (we have a 2-year lease) and it’s not a tear down and rebuild, which might make sense. The landlord is shelling out $3k or whatever per month to hold the property. They seem to be invested for the long term.
Of course the potential downside for us is a forced move if the house is sold. We figured that by the end of our lease the house will likely be underwater so that the landlord would not be in a position to sell. We will see how that goes.
I should add the landlord couple are very nice people and I don’t wish them any financial hardship.
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August 19th, 2012 at 10:11 am 127
@Van Coffee:
I’m not worthy.
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August 19th, 2012 at 10:33 am 128
There were further announcements this week about tighter language requirements for immigrants. Its not lost on TPTB how Vancouver and Toronto are economically weakening compared to rest of the country in measures like income and employment.
http://blogs.wsj.com/canadarealtime/2012/08/13/immigrant-underemployment-is-costly-for-canada-cibc-says/
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August 19th, 2012 at 11:01 am 129
Im at 489 but if I take off the huge strata fees That my landlord my pay I go to 696. I know if I owned it I would pay them but it’s still fun to calculate. Strata and ppty tax eat up exactly 50% of my rent cheque.
Not a lot left to pay the mortgage and occasional special assessment.
BTW…for all you haters who think we renters are basement dwellers who are broke, I’m writing this poolside in Osoyooss. Thanks landlord!
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August 19th, 2012 at 11:02 am 130
hahaha, it’s amusing that they are now comparing how much rent they pay. i guess, comparing your manhood is on the table for next week.
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August 19th, 2012 at 11:23 am 131
@McLovin, “BTW…for all you haters who think we renters are basement dwellers who are broke, I’m writing this poolside in Osoyooss. Thanks landlord!”
We know it, and soon others will too, viz, renters are the new elite = the financially savvy, mobile and unburdened intelligentsia of the 21st century.
(Definition of intelligentsia: intellectuals who form an artistic, social, or political vanguard or elite.
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August 19th, 2012 at 11:32 am 132
@No Money Down: Maybe they don’t understand their own “business model”. I always thought an investment was supposed to generate cash, but when you hear about landlords talk about only losing about two or three hundred on a rental every month, it makes you wonder.
Maybe you should consider extending your lease. As I said, I’m in a five year. At first I was horrified about losing flexibility. After all, that’s one of the celebrated advantages of renting. Now I realize I’ve just bought an option to stay. When it comes to breaking a lease, the law in BC seems to favour the renter. Landlords can only come after you for actual losses (the number of months the place is empty if you bail). No tricks allowed either: they must attempt to lease at a price that is in line with the rent you were paying. At most you’d be stuck with paying the landlord two months extra rent. In my case that would be $3200, a penalty I would gladly pay if the value of the house was dropping $8000 every month.
I don’t like breaking promises, but if an acceptable house comes up for 250 – 350k while I’m in the middle of my lease, I’m outta here. Any RTA experts here see any problems with that?
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August 19th, 2012 at 12:11 pm 133
#124 @patriotz: My Nigerian friend will take 50.
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August 19th, 2012 at 1:48 pm 134
hahaha, now they claim they are the elite of the 21st century. i almost peed in my underwear. got to run to the bush.
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August 19th, 2012 at 2:24 pm 135
what is the rent to price ratio supposed to be? is it 200?
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August 19th, 2012 at 2:27 pm 136
I’ve been holding back my situation because I don’t know if it counted.
Signed a 2 year lease with one of houses bought around Cambie, scheduled to be demolished for future high rise construction. Property was bought for 3.3 million, house in great shape, renting whole house for $2,150.
Where do i claim my prize?
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August 19th, 2012 at 2:53 pm 137
@Anonymous:
200 is on the verge of bubble territory.
Historical norm is around 150. That gives a net rental yield of around 6%.
Vancouver got down to 100 in the mid-1980′s. Before you say that can only happen with high interest rates, a number of US markets are close to that today.
Those figures are for a house, condos should be a good deal lower due to lack of land value and lack of owner control. Around 100. REIT’s want a net rental yield of around 8% which is a price/rent of around 120.
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August 19th, 2012 at 2:59 pm 138
thanks Patriotz
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August 19th, 2012 at 3:55 pm 139
Where major asset classes stand in this low interest rate environment:
Stock dividend yield (S&500)
Current: 1.93%
Historic Avg: 4.45%
Bond yields (10-yr US Treasury)
Current: 1.81%
Historic Avg: 4.54%
RE rental yield (Vancouver)
Current: ~3%
Historic Avg: ~6%
Our crazy RE prices are partly due to a rational response to low rates and partly due to irrational exuberance.
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August 19th, 2012 at 3:58 pm 140
patriotz,
Your rental yields don’t match your price/rent ratios. Is that because you’re taking into account other costs? 8% yield = price/rent of 150.
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August 19th, 2012 at 4:00 pm 141
@Simon:
” Is that because you’re taking into account other costs? ”
That’s what “net” means. I’m assuming expenses of about 2% exclusive of financing costs.
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August 19th, 2012 at 4:03 pm 142
@crashcow:
“Our crazy RE prices are partly due to a rational response to low rates and partly due to irrational exuberance.”
A rational response to low rates would mean owning is no more expensive than renting at current prices and rates. Everything above that is irrational.
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August 19th, 2012 at 4:04 pm 143
Patriotz,
Ok, makes sense thanks.
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August 19th, 2012 at 4:14 pm 144
“A rational response to low rates would mean owning is no more expensive than renting at current prices and rates. Everything above that is irrational.”
Stupid bears cannot see beyond dollars and cents. when you take your wife our for dinner, do you compare homemade meal and restaurant value. and to make rational decision, you take your wife back home for instant noodles.
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August 19th, 2012 at 4:52 pm 145
For the record – we are in a $1.5M Condo. Strata and taxes are over 1,000 per month and the rent is 3,500 gross (2,500 net of landlord costs). This give you 600.
Property value is no more than the day we moved in . . . . This was a $200,000 plus savings and building of equity by renting (we built equity by renting – - – sounds strange).
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August 19th, 2012 at 5:11 pm 146
you dont have the mean or gutt to buy, that’s why you rent. and while you rent, you save what you have left from your paycheck after all the expenses. it’s a no brainer and nothing to sing about.
by what you were saying, it’s like I didnt buy facebook at $39 a piece, and it was $19 this week, so I saved myself $19 a piece for a zillion shares. can i bank the difference? duh!
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August 19th, 2012 at 5:17 pm 147
What is the consensus: 150 times rent is fair price?
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August 19th, 2012 at 5:36 pm 148
I think the gold medal goes to Anon on the price:rent (Cambie is nutz). Please invite everyone here at VCI to a demolition party when the lease expires – there is nothing like mixing hi-balls and sledgehammers to get a bit or RE frustration out.
Where is canuck down under? Long time no update ….
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August 19th, 2012 at 6:05 pm 149
patriotz –
Even Phoenix is now around 150 times for condos.
Why do say only 100 times rent on condos?
Do you see downtown Van 1-bedroom condos selling at $150,000?
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August 19th, 2012 at 6:06 pm 150
Some news from the
OlympicVillage…Olympic village rebranding pays off, but debts remain
So to summarize, things are going great but the city is losing money and the project may be put into bankruptcy… What a joke! At least, Bob Rennie must be happy with the lion’s share of the 11 million bucks in marketing budget. [puke]
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August 19th, 2012 at 6:25 pm 151
@Just sayin:
Here is a SFH in Phoenix with price/rent just over 100:
http://www.zillow.com/homedetails/3316-E-Harvard-St-Phoenix-AZ-85008/7540957_zpid/
I have given the reasons why condos should have a low multiple. One, no land value, your investment is fully depreciable. Two, you have no control over major decisions affecting the value of your property such as maintenance and rental policies.
I have no idea if DT condos are going to sell for $150K. That’s simply what I think they are worth.
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August 19th, 2012 at 6:33 pm 152
patriotz – let’s be fair.. no one is going to buy a winter property right now under $200k in Phoenix, the house you found is low end. You either don’t know Phoenix or you are finding the cheapest home possible. I know you will argue that it doesn’t matter for this calculation. But find a decent home in a decent area around $200k and you will see the number is up around 150.
Interesting to know someone here thinks dt Vancouver 1-bedrooms are worth $150k. I’d like to see prices that low so that people could afford to live here comfortably. But unfortunately I can’t see less than 150 times and therefore $225k. Still considerably less than $399,900.
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August 19th, 2012 at 6:35 pm 153
@Just sayin:
Yes let’s be fair. What I claimed was that in some US markets there are SFH with price/rent near 100 and I just proved it.
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August 19th, 2012 at 6:36 pm 154
patriotz – Thomas and 32nd is a bad neighbourhood.
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August 19th, 2012 at 6:37 pm 155
@Just sayin:
So what?
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August 19th, 2012 at 6:37 pm 156
patriotz – you are picking a house in the Detroit of Phoenix.
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August 19th, 2012 at 6:45 pm 157
@Vulture Fun:
Vulture, what you are missing is… if you broke your lease because house prices had dropped 50%, then rent prices would have also dropped 50%. So your landlord would lease out the place for market rent (50% less than your lease) and you’d be on the hook for losses for the remainder of the lease of the difference market rent versus your agreed rent.
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August 19th, 2012 at 6:47 pm 158
ScubaSteve – Rents usually stay constant even when home prices drop.
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August 19th, 2012 at 7:19 pm 159
@patriotz: That Times-Colonist link is unbelieve, thanks for posting.
“We’ve created a whole new kind of mortgage,” Gant said. Homebuyers will need 10 per cent of the purchasing price, but League Financial will then loan them an additional 10 to 25 per cent
My favorite line:
“Relying solely on debt is old fashioned and just plain dangerous.”
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August 19th, 2012 at 8:35 pm 160
Off topic…
BC’s biggest asset is its natural beauty. Let’s protect it against the silly Enbridge project… Here is an awesome video answering Enbridge misleading animation of the northern gateway pipeline.
http://vimeo.com/47788521
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August 19th, 2012 at 8:41 pm 161
@Makaya:
What a ridiculous claim. What’s made the place more busy recently is the opening of stroes/bars/restaurants, not any freakin’ “rebranding”! Did Bob Rennie write this piece himself?!?
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August 19th, 2012 at 8:42 pm 162
@Just sayin: Okay, I’ll play. What’s the “Detroit of Vancouver”, and what is the price/rent ratio there?
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August 19th, 2012 at 9:12 pm 163
@oneangryslav2:
This is the Detroit of Vancouver and the price to rent is about 400.
http://www.realtor.ca/propertyDetails.aspx?propertyId=11550333&PidKey=-1319769606
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August 19th, 2012 at 9:20 pm 164
@Makaya
That project, will probably be providing one of BC’s real industries once real-estate tanks. Diversifying our oil sales will be beneficial to everyone that is Canadian. Look what happened to our softwood industry when we only sold to our neighbors down south.
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August 19th, 2012 at 9:55 pm 165
@Just sayin: 156. An investor doesn’t care what the neighborhood is like, just that someone is willing to pay the rent…and apparently that’s the going rent ffor such a house in that hood.
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August 19th, 2012 at 10:09 pm 166
@anon: “Where do i claim my prize?”
Alas there is no prize. Using SFH as a gauge for price-rent is not entirely correct; I would use condos as a baseline gauge, and your comment exemplifies why
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August 19th, 2012 at 10:17 pm 167
@ScubaSteve: That’s an interesting point which I had not considered. I’d love to hear from anyone else who could confirm or deny this. I do think that rents will not drop in lockstep with price drops. I’m sure you’ve seen the chart comparing the two, with prices taking off like a rocket, and rents just trundling along with inflation. As discussed earlier, rents are based on income not credit.
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August 19th, 2012 at 10:22 pm 168
@ScubaSteve: If you’re correct, I’d be on the hook for $38,400, assuming I broke the lease tomorrow with 4 years remaining. So, worst case scenario, I’m losing about the same as landlord would in 4 months. Sounds like I’m still coming out ahead.
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August 19th, 2012 at 10:23 pm 169
I like all these 300, 400+ price-rent ratios but they seem to be for either higher end “luxury” properties or quite the opposite: lower-end crackshacks slated for re-development.
Price-rent is not a good gauge for underutilized properties like, say, a westside bungalow itching to be torn down and turned into one of… them. If you want a gauge of the magnitude by which prices are inflated and slated to drop, look at price-rent of non-luxury condos, or of lower-density properties away from the city core. Just trying to look at this objectively — and don’t get me wrong, there looks to be significant over-valuation — but it helps to get some numbers as a baseline now, and compare to the types of price-rent ratios that put in bottoms in parts of the US as to when to gauge the “bottom”.
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August 19th, 2012 at 10:50 pm 170
@Makaya:
‘BC’s biggest asset is its natural beauty.’
I like the outdoors a lot but you can’t eat beauty. Take away the industries that use nature rather than observe it and BC would be one of the poorest places on the planet.
Canada is a highly trade dependent country and energy contributes one third of our export revenues. If a rational cost-benefit analysis shows the pipeline isn’t worth it, fine. But odds are this debate will be won by the side with the most meaningless yet hysterical rhetoric.
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August 19th, 2012 at 11:11 pm 171
SFHs on Anderson Creek in Maple Ridge — the very fringes of suburban development in the Lower Mainland — are listed for over 600k. That seems insanely overpriced to me considering how far out from anything these new suburbs are. I would expect a big discount in price if I had to commute that far — even 100k seems high to me.
http://coldwellbankermapleridge.com/officelistings.html/details-8104742
Interesting read on the growing pains of new greenfield suburbs:
http://www.mapleridgenews.com/news/142553515.html
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August 19th, 2012 at 11:23 pm 172
Ok so there might be a 100 times rent dumpy area of Phoenix that an example has been found. I’m also sure that in Detroit we can find some 2 times rent houses. I therefore can’t wait for Yaletown to be 100 times rent as patriotz believes it’s “worth”.
Any other estimates on how much Yaletown is going to? I want it as cheap as possible
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August 19th, 2012 at 11:33 pm 173
patriotz – you could have this place in a good neighbourhood of Phoenix for about 250 times rent.
http://www.zillow.com/homedetails/7167-E-Rancho-Vista-Dr-UNIT-4010-Scottsdale-AZ-85251/82821373_zpid/
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August 19th, 2012 at 11:35 pm 174
@Vulture Fun:
I think rents will drop because more rental inventory will be available due to vendors unable to sell.
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August 19th, 2012 at 11:38 pm 175
Sorry to have to say this, but, yaletown must be one of the world’s largest dog toilets.
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August 19th, 2012 at 11:45 pm 176
“I think rents will drop because more rental inventory will be available due to vendors unable to sell.”
What’s the current use of the property?
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August 19th, 2012 at 11:48 pm 177
Muff Diver Mike – that was directed at you. Isn’t the current use rental? or if not, aren’t the current owners just occupying another residence? Isn’t it a zero sum game?
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August 19th, 2012 at 11:58 pm 178
“What’s the current use of the property?”
Being flipped!
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August 20th, 2012 at 12:08 am 179
“A successful rebranding of the Olympic Village has turned it from a virtual ghost town into a bustling new neighbourhood”
The rebranding was meaningless. Dropping prices by 35% from what they were asking might have helped sell them though. They could have done that for virtually free and saved Rennies rebranding fees (paid for the second time).
They are paying Rennie more than standard MLS fees for selling a 700 unit condo project. Normally sales and marketing for a condo project would be far less based on scale. And this one is huge at 700 units. Only a government run project could come up with so many expenses.
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August 20th, 2012 at 12:18 am 180
@Muff Diver Mike: Maybe, but IIRC there was a time during the crash in the US when rents went up because suddenly there was a wave of people who realized the advantages. It seems reasonable to expect the same here. I think landlords who offer decent places will be rewarded while all the slumlords burn. There’s going to be a big shift in what’s considered acceptable. 400 sq ft is fine for a dog, but no human outside of a jail cell should have to deal with that. I’m starting to feel a little superior being a renter…and lucky as hell.
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August 20th, 2012 at 6:30 am 181
[...] oneangryslav2 [at VCI 17 Aug 2012 3:17pm] points out, the Post story is a little misleading. Lenore Newman is both an East Van resident and [...]
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August 20th, 2012 at 9:30 am 182
@Just sayin: $470/sqft, last sold in 2007 for about $611K. Indeed when a market in net tanks, not everyone bears the burden evenly. Something for Vancouver, in net, to keep in mind.
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August 20th, 2012 at 10:53 am 183
jesse – I agree. I can see Westside houses down at $500k, while downtown 2-bedrooms maintain $500k.
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August 20th, 2012 at 9:12 pm 184
[...] “About to sign lease on 1 year new house built by Asian owner, 1800+ sf, pulled off MLS recently due to no buyer. Now about to be rented to yours truly at ~35 years Price-to-Rent ratio after talking down rent by $100/m. [Thus 420 monthlyrent:price ratio. -ed.]Landlord still has a couple houses near completion. Who knows what happens to the tenant if the landlord goes bankrupt?”… “I’m moving from a 1Br+den 670 sq ft condo at 283 months (23.6 years) rent, to (the aforementioned) 3Br newer house at 415 months (34.6 years) rent. Definitely makes more financial sense to rent than buy. Viewed a 3Br 1000sq ft newer condo few days ago at 305 months (25.4 years) rent, but passed (interesting to note that property manager is a realtor, guess managing client’s property might be what’s keeping them busy these days!) – VMD at VCI 17 Aug 2012 10:00pm and 18 Aug 2012 11:22am [...]
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