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?

So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!

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jesse
Member
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… Read more »
procrustes
Guest
procrustes

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

specialfx3000
Member
specialfx3000

@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.

registered
Member
registered
@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… Read more »
Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

when’s the crash going to happen? next year? year after that?

trackback

[…] – jesse (YVRHousingAnalyst) at VCI 17 Aug 2012 […]

Patiently Waiting
Member
Patiently Waiting

@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 😛

Vote Down The Facts
Guest
Vote Down The Facts

@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.

Ben
Guest
Ben

@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?

N
Guest
N

@Patiently Waiting:

That not just a Vancouver thing, it’s a city thing.

Conrad
Guest
Conrad

@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.

patriotz
Member
@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… Read more »
patriotz
Member

@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.

UnagiDon
Guest
UnagiDon

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

bcj
Guest
bcj

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/

Vote Down The Facts
Guest
Vote Down The Facts

@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.

Anonymous
Guest
Anonymous

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?

Conrad
Guest
Conrad

“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.

boogeybear
Guest
boogeybear

The principle payment is not income – it’s repayment of a debt.

registered
Member
registered

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.

Anonymous
Guest
Anonymous

@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.

rp1
Guest
rp1

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.

Trader Joe
Guest
Trader Joe

@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.

jesse
Member

@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.

patriotz
Member

@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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