Friday Free-for-all!

It’s that time of the week again! Let’s wrap up the work week with our regular news round-up and open topic discussion thread.  Here are a few links to kick off the chat:

-Inventory inches up
-Canada’s housing crash begins
-BC slowdown signals wider slump
-No Cam, thats not what happened
-Mommy, can I borrow the car?
-Vancouvers economic well-being
-No more land, lots more condos
-Tiny little boxes
-25% drop in Vancouver?
-Come back to BC!
-Why rent?
-

 

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

255 Responses to “Friday Free-for-all!”

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    Just watched the CBC report from Thursday PM. Very disappointed that they did not touch on the fundamental (no pun) issue – ownership costs versus rents. Prices in Vancouver for all forms of housing in all districts are massively out of proportion to actual economic value. This shows that the RE prices in Vancouver have nothing to do with the amenities which the program touts, which of course are equally available to renters.

    Garth should have brought this up (perhaps he did and was edited out), but everything that he said was spot on. The best being that there is a limit to consumer indebtedness – which is the straw that is going to break the back of this camel.

    Well-loved. Like or Dislike: Thumb up 69 Thumb down 1

    Keeping An Eye On The Pimps Says:
    2

    “So I ran that thesis past Robert Shiller, of Yale University, probably the foremost authority on real estate in America. He co-founded the Case-Shiller Home Price Index and predicted the American collapse in 2005, a year before it happened.

    “I worry,” he told me, “that what is happening in Canada is kind of a slow-motion version of what happened in the U.S.””

    http://www.cbc.ca/news/world/story/2012/09/20/f-rfa-macdonald-housing-prices.html

    Not me,I ‘m not worried at all,nothing wrong with prices reverting back to where they should be.

    Well-loved. Like or Dislike: Thumb up 60 Thumb down 1

    @Keeping An Eye On The Pimps:
    2005:

    The bubble is building in “glamour cities and glamour vacation areas” in the United States and Canada. Ominously, Prof. Shiller says that “Vancouver is the most bubbly city in the world.” He says that city has a history of volatile housing prices but he doesn’t see the same level of bubbliness in the rest of the country’s housing market.

    Seven years later, Vancouver has confirmed Shiller’s characterisation and the rest of the Canada has a bubble as big as the US had then.

    Well-loved. Like or Dislike: Thumb up 50 Thumb down 0

    pricedoutfornow Says:
    4

    A friend of mine just made an offer on a place for $238k (subject to financing). Curious to see if she’ll get approved for the mortgage since her income is about $33k per year. She’s buying it with about $40k down, actually buying it with her significant other, but just wants her name on the title so “next time we buy we can use his first time home buyer credit”. (Oh ya, and he has no documented income anyway). She was approved for $150k mortgage under the old rules (30 years), not sure why she’s thinking she’ll magically get approved for more under the new rules.

    Well-loved. Like or Dislike: Thumb up 36 Thumb down 0

    The National Story last night was horrible.

    A realtor lying about the listing price for his home, it was never listed at $1.57M, in fact it is currently listed at $1.373M! Nice fact checking CBC.

    And a real estate marketing specialist claiming when a condo comes up for rent in the ‘borough’ of Yaletown, that 40 people will line up to rent it. Ignoring the fact that a statement like that doesn’t even pass the smell test, that kind of supply/demand mismatch would put a huge upward pressure on rents. And we know that rents are going essentially nowhere.

    Very disappointing effort from the CBC. Would have much preferred to have had the group from the roundtable discussion from the previous night to actually go through some of the numbers and metrics for the Vancouver market.

    Well-loved. Like or Dislike: Thumb up 60 Thumb down 3

    real_professional Says:
    6

    @ patriotz,

    The editing in TV news is brutal I’ve seen 30 minute interviews turned into a 10 second sound bite.

    Sadly, If one wants in-depth understanding one can’t go to the TV news. I had my fingers crossed for the CBC segment too – but I was disappointed.

    The worst part was that loser that compares Vancouver to Manhattan. Also that guy selling the house that says, “Get off the sidelines, take some risk, get into the game”… ha ha, He should have said, “Get into the game PLEASE, I have to get rid of this house – take some risk off of me”

    He made me smile

    Well-loved. Like or Dislike: Thumb up 69 Thumb down 0

    @Troll: “The National Story last night was horrible”

    I thought the Neil McDonald piece was decent. Agree that what they clipped from Garth Turner was overall correct, but they should have given both “sides” a rebuttal.

    Hot debate. What do you think? Thumb up 16 Thumb down 1

    @real_professional:

    Yes, the piece sucked. They asked a guy selling something if it was a good idea for people to buy it and treated his answer like a credible data point, they let the lie about the forty people lining up stand, and used only shots of beaches and cafes in the sunshine, without any shots of Kingsgate mall in the rain.

    That said, they got on the TV and said “bubble” and “crash.” And that will be enough to change the tone of the conversation and make people think about whether we might be at the top.

    A few months back, when I told my landlady, as I often have in the past, that I think prices will fall, she said, “Why would they?” That’s the attitude that has propped up prices: the failure to even consider price drops. Once that bedrock belief is brought into question, nature will be free to take its course.

    Well-loved. Like or Dislike: Thumb up 42 Thumb down 3

    Just heard that Vanilla Ice is doing a reality TV show about flipping real estate in the US.

    Hot debate. What do you think? Thumb up 12 Thumb down 1

    Best place on meth Says:
    10

    @real_professional:

    Phil Chan did the best Tom Vu impression I’ve seen in a long time.

    Come on, get in the game!

    Well-loved. Like or Dislike: Thumb up 35 Thumb down 6

    One thing missing

    From the CBC show and all other talks regarding Vancouver’s housing price, no one mentioned that foreign money played a big role here.

    I think in Vancouver in the last few years most of 3 millions + houses are bought by money from overseas. This made the “average price” go through the roof and it has little to do with local economy, unemployment and mortgage rate etc.

    Yes, too many condo built, and I am expecting a 30% drop by next spring.

    “40 people line up to rent” is a lie.

    Well-loved. Like or Dislike: Thumb up 32 Thumb down 3

    New article out: How Canada resembles a slow-motion replay of the American crash

    “I watched America’s nightmare unfold, and it appears pretty evident to me that a sequel of some sort is coming to Canada.”

    “Nosebleed levels of debt”

    “People are investing in real estate that is tough for their budgets because they think it will make them rich. When prices stop increasing, people back off, and the bubble then collapses.”

    “It was not the financial crisis that burst the American housing bubble. Rather, when the groupthink that caused the bubble turned, the market collapsed”

    Well-loved. Like or Dislike: Thumb up 36 Thumb down 0

    Mick Murphy Says:
    13

    http://www.youtube.com/watch?v=qe61HVGIwUo

    TD scamming home buyers on home insurance

    Like or Dislike: Thumb up 3 Thumb down 0

    @Troll: the ‘borough’ of Yaletown

    That’s a simple misunderstanding, he was referring to a burrow in Yaletown. You know, a small dark box in the sky suitable for housing rabbits.

    Well-loved. Like or Dislike: Thumb up 50 Thumb down 0

    In the CBC interview Philip Chan lied about the current price and the current drop. The reporter also said that the original price was including tax but that’s also false unless he has a habit of listing new homes with HST included and not mentioning that huge point in the description. I happen to have all of the old descriptions for this unit and HST being included was never mentioned. This is the description back in May:

    “Brand new front unit with south facing yard. Feels like a half duplex. Great spacious floor plan with 1,721 SqFt living area, 3 bedrooms, 2.5 bathrooms, and a heated garage with 1 underground parking and a unique turn table parking feature! This home, built by a German builder features quality luxury finishes and excellent craftsmanship & woodwork throughout, such as high coffered ceiling, Wainscot panelling in living room, and rich hardwood wide plank flooring. A gourmet dream kitchen features double thick granite slab countertops and stainless steel Viking appliances. Strata Plan shows 1,629 SqFt. Under 2-5-10 Warranty, easy to show. Must see to appreciate!”

    Looks like he lost 1 square foot in the strata plan and the kitchen has been relegated to “Gourmet Kitchen” down from “Gourmet Dream Kitchen”

    Well-loved. Like or Dislike: Thumb up 31 Thumb down 0

    gordholio Says:
    16

    You guys all bring up great points about The National piece last night. BPOM, I too immediately thought Tom Vu when that no-brain sleazeball started yapping about “getting in the game.” Seriously, who can watch that particular bit without thinking the guy’s total pond scum?

    And who knows how heavily Garth was edited. I do know it was essentially two RE industry slime vs one Garth. Though I’ve been disappointed in the past when Garth seems to tone down his fire for TV spots. Maybe he’s just concerned that if he’s TOO Garth, too *real*, he’ll be edited even more than he already, undoubtedly is.

    One thing is certain: Increasingly as this crash unfolds, bulls are being forced to do what bulls do best – spew bullshit. Sewerville, Muir, Tom Vu, Rennie – they’re all just straight up lying these days. “40 people lined up to rent it?” You, sir, are a bloodsucker.

    Well-loved. Like or Dislike: Thumb up 46 Thumb down 5

    A Nation of "Amway" House Ponzi Morons Says:
    17

    “Slow Motion USA”

    Real estate prices are still high in Canada for the same reason Amway is still profitable and running video ads on CBC’s online properties…

    The existence of CBC Amway ads really pisses me off because it shows how gullible and slow Canadians really are in street smarts. Amway is dead and gone in every other jurisdiction, but here in Canada there’s a significant population of shit for brains people who think it’s a brand new and undiscovered way to make money!

    Canada is a haven and incubator for all manner of obvious ponzi schemes besides real estate:

    http://www.pyramidschemealert.org/PSAMain/news/BusinessInMotion.Scam.html

    Hot debate. What do you think? Thumb up 17 Thumb down 0

    Hello Friends, I am glad you enjoyed Mr. Chan’s quotes from TV, he was an excellent student of mine! Today only, I present to you, 10 of my all time favorite quotes. Now, get off your butt you loser and start making money!

    1.“There’s an old American saying. It’s called, ‘Get off your butt and do it!’”
    2.“Today I could relax and enjoy life around my mansion. Watch the waterfall in the front, the waterfall in the back…the waterfall inside the house. I get tired of hearing the water running.”
    3.“Don’t listen to your friends. They’re losers!”
    4.“If you’re not willing to spend three free hours to learn from a self-made millionaire to maximize your opportunity, you deserve to be broke!”
    5.“I hope you enjoy seeing my waterfall as much as I do. I built this water fountain right in front of my estate so I feel good about it. I feel successful every time I come home.”
    6.“At first I got lots of discouragement from friends and strangers who are losers…I had to keep telling these people every time, ‘You are losers! Get out of my way!’”
    7.“A lot of people will tell you, ‘Don’t come to the seminar. It’s a get-rich-quick plan.’ Well, tell them it is a get-rich-quick plan because life is too short to get rich slow.”
    8.“Today I’m going to show you how to drive a sports car. First, you need a lot of money!”
    9.“Do you think these girls like me? No! They like my money.”
    10.“Years ago, when I was a busboy at the country club I used to work at, one night I got all the guts in this world. I walked over to this nice old man, I give him some water and I say, ‘Sir, I’m giving you some water. Would you please tell me how to be rich like you, sir?’ And lucky for me, the old man say, ‘Well, stay after work and I show you how.’ I condense that old man’s secret into just three little words…three little words that helped me overcome all the obstacles in my life.’”

    Well-loved. Like or Dislike: Thumb up 30 Thumb down 0

    Best place on meth Says:
    19

    Look at all these current and future condo projects that Mac Marketing is involved with, spanning the many boroughs of Vancouver.

    http://www.macmarketingsolutions.com/projects/

    More like 40 specuvestors lined up for every 1 prospective tenant.

    Well-loved. Like or Dislike: Thumb up 25 Thumb down 0

    Garth was edited. I do know it was essentially two RE industry slime vs one Garth. Though I’ve been disappointed in the past when Garth seems to tone down his fire for TV spots. Maybe he’s just concerned that if he’s TOO Garth, too *real*, he’ll be edited even more than he already, undoubtedly is.

    Many people do not know that Garth is a fee for service investment advisor with Raymond James. The blog is not done out of the goodness of his heart. It is to sell books and get new clients. If he comes off as a crazy it might turn people off right or wrong.

    Hot debate. What do you think? Thumb up 22 Thumb down 3

    http://www.turnertomenson.ca/

    Like or Dislike: Thumb up 5 Thumb down 0

    To describe Yaletown as a “borough” of Vancouver is wrong at 2 levels. First, it is wrong to imply that Vancouver is equivalent to New Yor, given the huge differences in population, economic prowess, global political significance.

    Second, the realtor is showing he does not understand what boroughs are in New York. Boroughs are not the same thing as neighbourhoods. Boroughs are much larger than a single neighbourhood. The realtor does not understand the geographic concept of scale. Boroughs are essentially at the same scale of cities, containing several neighbourhoods within them. There are 5 boroughs in New York City: Manhattan, Bronx, Brookly, Queens, Staten Island. Each one of these boroughs could be their own city in their own right. Each one of these boroughs contains several neighbourhoods within them. Flushing and Astoria are two of the many neighbourhoods in the borough of Queens. Bedford-Stuyvesant and Flatbush are two of the dozens of neighbourhoods in the borough of Brooklyn. Greenwich Village, SoHo, and Harlem are 3 of the many neighbourhoods in the borough of Manhattan.

    So even if Vancouver was on par with New York City, it still wouldn’t make sense to describle Yaletown as a borough. It’s the wrong spatial scale. Yaletown is at the neighbourhood scale. Assuming Vancouver and New York were in the same league, Yaletown might be comparable to the New York neighbourhood of SoHo, but not the entire borough of Manhattan!!! In terms of spatial scales, entire municipalities (combined) in Metro Vancouver would be at the same scale as New York boroughs. So the City of Vancouver might be comparable to the borough of Manhattan. North Vancouver/North Shore might be the Bronx. Burnaby/New West might be Queens. Surrey might be working class Brooklyn. Since it’s on an island, Richmond might be Staten Island.

    Well-loved. Like or Dislike: Thumb up 42 Thumb down 3

    Proud and extremely rich Chinese home owners Says:
    23

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 0 Thumb down 23

    @Anonymous: Re: borough discussion, you lost Cam at “hello”.

    Like or Dislike: Thumb up 6 Thumb down 1

    @Anonymous: Gentlemen, let’s not quibble about terminology. I think we all can agree that in the galaxy of Vancouver the country of Yaletown is a terrific investment.

    I myself am looking to purchase a 2nd hand presale option on a luxurious 350 square foot burrow there and am looking forward to the many renters that wish to pay a portion of my bills. An acquaintance of mine owns partial share in junior 1 bedroom and when he listed it on craigslist (complete with luxurious Ikea furnishings) he had 4 people lining up to rent it.

    Respectable people who work in the farming and chemistry industry. These gentlemen had facial tattoos and were very curious about security, ventilation and power supply in the suite. Clearly dream tenants who will take good care of the property and pay a rent that will cover up to ONE THIRD of my friends monthly expenses for the unit.

    Yessir, there is no investment quite like this. Get into the game!

    Well-loved. Like or Dislike: Thumb up 64 Thumb down 4

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 4 Thumb down 18

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 3 Thumb down 18

    Supposed to be sunny today… Maybe this will help brighten things up: North Van listing V949678)- 4785 Capilano Rd. Was $1.15M, then $1.025M, now $888K (lucky 8s!). Assessed at $969K.

    Well-loved. Like or Dislike: Thumb up 33 Thumb down 0

    Re-diculous Says:
    29

    @ Best Place on Meth

    Phil Chan did the best Tom Vu impression I’ve seen in a long time.

    Come on, get in the game!

    ….I think its more akin to “Pump and Dump”……The spirit of the good old Vancouver Stock Exchange lives on in Real Estate.

    Hot debate. What do you think? Thumb up 9 Thumb down 4

    Also saw the segment last night.
    Having followed Garth for sometime i have found him to be earnest in his mandate.
    Sure he is a financial advisor but he doesnt force feed it.

    On the other hand Neil could care less about the average consumer and made it very clear.
    How is the average person going to be able to afford a home and rent it out and cover his costs plus live somewhere?

    The RE cartel turned that piece into a pump A dump, i’m curious what they cut out from Garths dialogue.

    Also the back ground for Garth a forest of construction cranes, why not forsale signs, some of the 19+ thousand?

    Or the if you don’t play you can’t win vibe.
    Sounds like the same writers for LOTTO.
    The play within your means doesn’t apply here.

    Hot debate. What do you think? Thumb up 18 Thumb down 4

    wakeupcall Says:
    31

    Anybody got Philip Chan’s address, email, phone or fax numbers?

    Would just like to remind him that it’s shameful to be dishonest.

    Hot debate. What do you think? Thumb up 14 Thumb down 7

    Patiently Waiting Says:
    32

    The crackdown on fake Canadians who abuse our system and drive up real estate prices is continuing.

    More measures, like exit tracking, will be used to detect family bread-winners who leave their families in Canada while they work in low-tax countries. Even before such measures are introduced, hopefully it will put a chill on “astronaut Dads” and make them change their ways themselves.

    http://www.ipolitics.ca/2012/09/17/permanent-residents-who-live-abroad-could-lose-status-kenney/

    However, Kenney acknowledged it is more difficult to pinpoint another type of case, where a family obtains permanent resident status then the wife and children live in Canada but the husband largely lives and works in their home country.

    “Right now the rule is that to maintain your permanent residency you have to live here for two out of five years,” Kenney explained. “But we are aware of massive fraud in that area.”

    One way the government is planning to crack down on permanent residents misrepresenting the amount of time they have spent in Canada is by introducing an exit information system, said Kenney.

    Currently Canada records when someone enters the country but it does not record when someone exits. One exception is a pilot project in which Canada and the U.S. exchange entry data, which results in each country having exit data as well.

    “This would massively improve our ability to police our borders, to remove people who are illegally in Canada, because we’ll know that they are here, and to police residency fraud. In the future, under the exit information system, when permanent residents are leaving the country they will have to swipe their PR card on the way out and then of course on the way back in so we will know electronically exactly how many days they spent in Canada.”

    Well-loved. Like or Dislike: Thumb up 36 Thumb down 2

    Patiently Waiting Says:
    33

    This is a guide for legal professionals who work with “astronaut” Dads and their families.

    There is way too much stuff in this link to quote. Just read the whole thing:

    http://immigratetocanada.blogspot.ca/2012/08/red-china-immigration-blues.html

    “In several Greater Vancouver municipalities (but nowhere else in B.C.) they are, by a very large margin, the principal consumers of all kinds of luxury goods and services. In residential real estate, for example, it is estimated that over 80% of the $2 million homes sold on Vancouver’s West Side in the last 2 years were bought by Mainland Chinese immigrants. One prominent West Side jewellery store owner told the writer that, during the same period, over 90% of his sales (in terms of value) were to buyers from China.”

    Well-loved. Like or Dislike: Thumb up 30 Thumb down 1

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 1 Thumb down 14

    @Anonymous

    Philip Chan’s dishonest cuz he’s trying to peddle his property like those penny stock brokers in Vancouver trying to offload their crap to anyone they can con.

    He’s trying flip a property before the market goes bad, he knows it. Lowered price by 400K but keeps telling people to buy.

    Obviously his actions don’t match his words.

    Well-loved. Like or Dislike: Thumb up 34 Thumb down 3

    @ Patiently waiting

    Fascinating, thanks. The conclusion is cleverly understated:

    “Unclear about their legal rights and obligations as Canadian immigrants, tax residents, and homeowners, and with no experience passing wealth from generation to generation, their failure to plan or even identify the issues will increasingly generate interesting legal work for tax, trust, estate, family, immigration and real estate law practitioners.”

    Translation:

    “When these guys croak, we’re going to make a shitload of cash.”

    Hot debate. What do you think? Thumb up 12 Thumb down 0

    OK. How has this Vancouver = Manhattan argument gone on so long? Is it the old “Well they are not making any more land” bullshit? Well lets look at that.

    Area: Manhattan = 60sqkm, Vancouver = 115sqkm

    Population: Manhattan = 1.6 million, Vancouver = 0.6 million

    So Manhattan has nearly three times the number of people in roughly half the space. And lets not even get into the average incomes….

    The next person to claim that Vancouver = Manhattan is getting a wedgie.

    In fact, does anyone know which US city Vancouver ACTUALLY resembles based on population density? It would be interesting to see what the average prices are there.

    Also, I love the fact that McNeill had to tell us that his “Swiss Bank Account” joke was funny.

    Well-loved. Like or Dislike: Thumb up 40 Thumb down 2

    oneangryslav2 Says:
    38

    @Patiently Waiting:

    In the future, under the exit information system, when permanent residents are leaving the country they will have to swipe their PR card on the way out and then of course on the way back in so we will know electronically exactly how many days they spent in Canada.”

    Why this is not SOP already is mystifying! It’s obvious that this system needs not be in place for citizens, since residency requirements do not apply. But when there are specific requirements (at least 2 out of 5 years) that determine whether residency status is being met, then it would seem a no-brainer for the government to have the empirical means to determine whether the condition is being met.

    Well-loved. Like or Dislike: Thumb up 22 Thumb down 0

    Ravishing Rick Says:
    39

    Cut the Music!

    To all you overweight, risk averse sweat hogs, shut it, and let me show you how a real man gets off the sidelines and into the game!

    Last night on CBC, I had my PVR ready because I thought at any minute Phil Chan was going to breakout into an awkward rendition of Ricky Martin’s “She Bangs, She Bangs”

    …. by PVR I mean my Beta Max.

    Hit the music, William Hung style!

    Hot debate. What do you think? Thumb up 14 Thumb down 8

    We were so absorbed by the National piece on Vancouver yesterday that we missed this GM article.

    The title couldn’t be clearer:

    Housing market will crash: research firm

    Get ready for a Canadian housing crash.

    That’s the forecast from the folks at research firm Capital Economics, who say the collapse in house prices will feed into economic weakness and cause the Bank of Canada to back track on its insistence that the next move in domestic interest rates will be up.

    “Home sales have slumped in recent months, not just in response to the tightening of mortgage lending standards. We fear this adjustment is only just starting and anticipate that the resulting excess supply of homes for sale will eventually drive home prices down by as much as 25 per cent,” the firm says in a note to clients.

    If this gloomy forecast comes to pass, many Canadians will experience the pain of being underwater borrowers, just like in the U.S., where many home owners owe more on their mortgages than their residences are worth.

    Citing Canada Mortgage and House Corp. figures, Capital Economics, one in 10 owners has less than 10 per cent home equity, so a decline of a quarter in home prices would put a substantial number of people underwater.

    A huge drop in housing prices will have ripple effects throughout the economy, and be a major depressant on growth. Capital Economics points out that residential investment currently equals 7.3 per cent of GDP, compared to its long term average of 5.8 per cent.

    “There is a good chance that share will drop below its average, making it a significant drag on overall GDP growth in both 2013 and 2014,” the firm says.

    Domestic housing will compound any slowdown in growth caused by reduced global demand for Canadian commodity exports.

    That’s why the firm says the Bank of Canada’s recent statement of a tightening bias for monetary policy will be revoked, and that government bond yields are likely to fall.

    “The bias policy makers have towards tightening policy looks, in our view, to be increasingly untenable,” it says.

    Is there any remaining doubt that the tide has turned? Soon we’ll discover who was swimming naked…

    Well-loved. Like or Dislike: Thumb up 49 Thumb down 1

    @wakeupcall: Here you go, keep it clean:
    http://www.philipchan.net/OpenHouse.php/Details/373#viewdetail

    Like or Dislike: Thumb up 2 Thumb down 1

    @Simple:

    “In fact, does anyone know which US city Vancouver ACTUALLY resembles based on population density?”

    Vancouve Census Metropitan Area has a population of 2.3 million.

    Here are some USA Metropolitan Statistical Areas with similar populations to Vancouver CMA:

    Denver, CO: 2.6 million
    Pittsburgh, PA: 2.4 million
    Portland, OR: 2.2 million
    San Antonio, TX: 2.1 million
    Sacramento, CA: 2.1 million
    Orlando, FL: 2.1 million
    Cincinnati, OH: 2.1 million
    Cleveland, OH: 2.1 million
    Kansas City, MO-KS: 2.0 million

    Source: http://en.wikipedia.org/wiki/List_of_United_States_metropolitan_statistical_areas

    Granted, this is total population of metropolitan regions. This is not population density, which is what you asked for. To get population density, we have to divide these numbers by the land area of the metropolitan regions, which is too much work for me right now. But it is still valid to compare total populations of metro regions in North America.

    Rather than New York, this shows Vancouver is more comparable to Pittsburgh, Portland, Sacramento, or Cincinnati. These are third or fourth-tier US cities. New York doesn’t compare at all because New York is a first tier global city.

    Well-loved. Like or Dislike: Thumb up 29 Thumb down 1

    ArthurFonzarelli Says:
    43

    I thought the Vancouver-specific component of the series was horribly researched and presented as well. In the interests of impartiality, they should take two individuals from opposing camps who have little or no vested interest in the market… not one with little vested interest (Garth) and then several directly downstream from benefits of an inflated market. Seriously, getting their perspective is like asking the guy selling you buck-a-slice his opinion on wheat futures.

    I thought the following component on the overall Canadian market, particularly bringing in Shiller, was much better.

    It also made me think that those on this forum who constantly deride Garth are missing the point. You can disagree with his style or his perspective on REITs or his motivations or whatever, but the fact of the matter is that he has done more to bring attention to the Canadian housing bubble than anyone else in this country and he should be commended on this forum, not vilified for being overly bullish on commodities or REITs or whatever. My two cents.

    Well-loved. Like or Dislike: Thumb up 51 Thumb down 0

    Ravishing Rick Says:
    44

    I’m convinced: Phil Chan = William Hung

    They are the same person!
    http://www.youtube.com/watch?v=1TS5tvbYJsc

    Hit the music!

    Hot debate. What do you think? Thumb up 11 Thumb down 3

    Finally had a chance to watch the CBC feed from last night. What’s Amazing is that from outside Vancouver, Cam M. and the Chinese guy both look delusional – - – Vancouver is nice – but it is nothing more than a tier 4 city when it comes to business and a city that is supported by debt and foreign investment. Without both of those – it has no hope of sustaining its prices. The level of the floor – nobody knows.

    Off to Munich in the morning – - That place is having a “World Class Party” that starts tomorrow. A bit like the PNE really . . . well – maybe not…..

    Well-loved. Like or Dislike: Thumb up 46 Thumb down 5

    I listened to The Peak FM in a morning and in the news section they were talking about Garth Turner prediciting 30% price decline in Vancouver in the next couple of months. Right after that they played “Loser” by Beck.

    I’m not quite sure if it was the reference to Garth or people who bought a house in Vancouver during last several years =)

    Well-loved. Like or Dislike: Thumb up 39 Thumb down 2

    Just got an email from the Cambie+7 sales team:

    “Construction Start Purchase Incentive

    To celebrate the commencement of construction at Cambie+7, the developer has offered a $10,000 Purchase Incentive for the FIRST 5 HOMES sold on the last weekend of September (Sept. 29 and 30).

    Don’t miss out on this great opportunity. Come to our presentation centre to preview today so you can be one of the Lucky 5!

    Super Investor Package

    Our Best Value Highest Return Collection are perfect for investors. Priced in the $600′s / SF, buyers save $60,000 to $100,000 over comparable developments. To make this even more enticing, we are offering a Super Investor Package* which includes:

    - Guaranteed rental income
    - No rental management fee”

    I thought there was a long lineup for the presale opening? Did those people line up for the free food or smth?

    Well-loved. Like or Dislike: Thumb up 24 Thumb down 4

    pricedoutfornow Says:
    48

    Been spending the day trying to talk my friend out of buying a place. She admitted to me “Ya, if we buy this place we are pretty much going to be broke”-her mortgage will be about $600 every two weeks and she only makes about $800 every two weeks-though her significant other (of questionable employment) says he will pay his share. I told her not to underestimate the cost of homeownership, it’s going to be pricey considering heating costs (it’s a house), home insurance, property taxes etc etc. AND interest rates are going up soon(ish)! Not sure why they are so desperate to buy at this point, I told her prices are likely going down soon (no, she’s not buying in the lower mainland, but I honestly don’t see any potential for increases ANYWHERE in the province!). They are planning on putting 5% down on their offered price of $238k. When I asked how she was going to get the financing, she said she’s going to get a relative to co-sign for her.
    Why do I have a bad feeling about this?

    Well-loved. Like or Dislike: Thumb up 33 Thumb down 5

    Best place on meth Says:
    49

    @gokou3:

    Oooh, 1.5% off – I’m so there.

    They should have made it the Lucky 8.

    Hot debate. What do you think? Thumb up 10 Thumb down 3

    Another anecdote from today.

    Had lunch with an old friend, who is a fairly successful IT entrepreneur. Was living in “million dollar” east side house. However, now his brother-in-law has decided he wants to bail from Vancouver to live in Whistler, my friend had to sell his house because the brother-in-law had lent him a few hundred grand to “get into the market.” Now the brother-in-law needs his money back.

    And, of course, my friend’s house is not selling. Meanwhile, the B-I-L has already bought in Whistler but his house in Vancouver not selling either.

    There must be thousands of these stories out there, where families have to try and unwind goofy inter-familial home-loan schemes. And no one ever imagined things could turn south.

    Well-loved. Like or Dislike: Thumb up 48 Thumb down 2

    @HAM Solo: Yep, this happening at a time when a “majority” of owners are so rich that they have no need to sell. Too bad, a few here and there decide otherwise and screw up the prices for the rest.

    Hot debate. What do you think? Thumb up 11 Thumb down 1

    Anonymous Says:
    52

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 9 Thumb down 18

    Anonymous Says:
    53

    @HAM Solo: “There must be thousands of these stories out there, where families have to try and unwind goofy inter-familial home-loan schemes.”

    Maybe a few. But I very much doubt that there are “thousands of these stories out there.” I suspect most inter-familial home-loan schemes are from settled parents to their children, and in most cases they don’t expect or need the money back as urgently as the brother-in-law in your story.

    Hot debate. What do you think? Thumb up 6 Thumb down 11

    Best place on meth Says:
    54

    Looks like a sub 50 sales day so far, we’ll see how the last 3 hours go.

    The thought of having 40 renters lined up should get people fired up to buy again next week.

    Well-loved. Like or Dislike: Thumb up 42 Thumb down 2

    @Anonymous:
    ” I suspect most inter-familial home-loan schemes are from settled parents to their children, and in most cases they don’t expect or need the money back as urgently as the brother-in-law in your story.”

    Having a HELOC called due to declining equity is pretty urgent.

    Hot debate. What do you think? Thumb up 18 Thumb down 4

    @YVR2ZRH: “nothing more than a tier 4 city”

    I think you mean “Β+” http://en.wikipedia.org/wiki/Global_city

    Like or Dislike: Thumb up 7 Thumb down 1

    Broken Clock Says:
    57

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 5 Thumb down 16

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 2 Thumb down 16

    Anonymous Says:
    59

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 4 Thumb down 13

    Anonymous Says:
    60

    Does anyone have a break down of what the correction predictions are currently (please add to the list)
    (Vancouver only)

    http://www.chpc.biz/2/post/2012/08/plunge-o-meter-back-up.html

    Brian Ripley: 47% correction
    Pacifica Partners: 40% correction
    Garth: now 30% correction?
    I remember in some places (surrey) he said 40% in one post – but he used to say 10%.
    Tsur UBC: 0%

    That would be a great news article if someone news reporter interviewed: agencies, institutions, economists, and researchers and came up with a prediction

    Well-loved. Like or Dislike: Thumb up 28 Thumb down 1

    If Philip Chan is so confident about Vancouver real estate, why doesn’t he just pull the listing and wait for prices to increase? Prices always go up, right?

    Sounds like he’s trying to “get out of the game” by selling out his precious “Swiss Bank Account” of international real estate.

    Well-loved. Like or Dislike: Thumb up 34 Thumb down 1

    Anonymous Says:
    62

    @Dog: …..Vancouver is the most densely built city after manhattan. …

    Ahh, so what you’re saying is that people from Vancouver are more dense! Hard to argue with that.

    Hot debate. What do you think? Thumb up 11 Thumb down 1

    @DOG and his density claims…

    ever been to Hong Kong son? Beijing? You have no fk-ing idea.

    Hot debate. What do you think? Thumb up 11 Thumb down 1

    @Anonymous:
    CMHC: “Average price is expected to climb 2.6% by 2013, both in Vancouver and across BC.”
    http://www.vancouversun.com/business/housing+market+stable+with+modest+growth+2013+CMHC/7090419/story.html

    Well-loved. Like or Dislike: Thumb up 21 Thumb down 0

    Sidelines Says:
    65

    @Dog: I don’t see Vancouver on this list of the top World cities by population density: http://en.wikipedia.org/wiki/List_of_cities_proper_by_population_density No Vancouver “burroughs” come up on this other list either: http://en.wikipedia.org/wiki/List_of_the_most_densely_populated_country_subdivisions

    Like or Dislike: Thumb up 9 Thumb down 0

    Sidelines Says:
    66

    Admin (or anyone else): any idea why html codes I put in (e.x. for paragraphs) come up fine in preview mode, but don’t show up after submitting?

    Like or Dislike: Thumb up 3 Thumb down 2

    Anonymous Says:
    67

    @Anonymous: My prediction is for an upward correction of approximately 75%, to catch up with Manhattan. The two are pretty much the same, so I see no reason for Vancouver to be so cheap.

    http://money.cnn.com/2011/10/04/real_estate/Manhattan_home_prices/index.htm

    Hot debate. What do you think? Thumb up 13 Thumb down 2

    @Anonymous:

    Just because the loans go from parents to kids, doesn’t exclude trouble. For example, many parents plan to sell and downsize when they retire. If that is not possible, they will be without retirement money and may want to call in loans.

    Parents in this city have been making big loans to their kids and other relatives because they are rich. But house prices go down they won’t be rich anymore, especially if they’ve been using their HELOCs to supplement their income or even to finance those loans.

    Well-loved. Like or Dislike: Thumb up 21 Thumb down 1

    ArthurFonzarelli Says:
    69

    …Vancouver is the most densely built city after Manhattan…”

    I don’t believe that Vancouver is the second most densely populated city after Manhattan. In fact that doesn’t even make sense. First, Manhattan isn’t a city – it’s a part of a city (New York). Second, Vancouver isn’t densely populated, downtown Vancouver is a densely populated urban CBD. If you include the entire land mass from Marine and Boundary to Coal Harbour our population density is 5,039 ppl/km2. Converting to miles-squared that would be 13,045 ppl, which would put Vancouver in 44th place for densities among American cities, just below Manorhaven and just above Mount Rainier.

    I noticed this on the CBC segment last night too – whenever they talked about Vancouver being this cramped metropolis they only showed images of downtown – which is probably about 10% of the city’s landmass.

    Well-loved. Like or Dislike: Thumb up 31 Thumb down 2

    Anonymous Says:
    70

    @N: True, but to expect thousands of these stories anytime in the near future is pure hyperbole. Keep in mind that many of these parents who have been giving big loans to their kids bought their homes in the 70ies and 80ies and no longer have mortgages. It is unlikely that the banks are suddenly going to start calling in all these HELOCs. Just sayin.

    Hot debate. What do you think? Thumb up 8 Thumb down 2

    @VMD: “CMHC: “Average price is expected to climb 2.6% by 2013, both in Vancouver and across BC.””

    “Now I can sleep like a baby at night”, says distressed & underwater homeowner who bought last year.

    Hot debate. What do you think? Thumb up 17 Thumb down 3

    When a realtor says Vancouver is like New York, he means the price of real estate. And he is right about that! (For now )

    Vancouver is only considered populated among Canadian cities. Saying Vancouver is populated like New York is like saying Vancouver is warm like Dubai

    Hot debate. What do you think? Thumb up 20 Thumb down 2

    Patiently Waiting Says:
    73

    @N: “Just because the loans go from parents to kids, doesn’t exclude trouble. For example, many parents plan to sell and downsize when they retire. If that is not possible, they will be without retirement money and may want to call in loans.”

    Trouble will happen when a parent needs the money for health care, or moving into a nursing home. People can’t even imagine the costs.

    Hot debate. What do you think? Thumb up 13 Thumb down 1

    We should be mindful that potential first-time buyers who cannot/will not buy (due to the poor economy/job market/debt level/mortgage tightening, etc), don’t automatically enter the rental pool.

    Young people are increasingly choosing to stay/return to nest. Of my acquaintances aged 25-33 in Vancouver (sample size >30), approx 75% still live with parents (or house-sit for parents, who are in Asia).
    Also, family-formation is being more and more delayed.

    This trend does not bode well for specuvestors and house-rich boomers who are eager to pass on their hot potatoes.

    Well-loved. Like or Dislike: Thumb up 42 Thumb down 15

    Best place on meth Says:
    75

    Vancouver ranks #123 in population density.

    http://www.citymayors.com/statistics/largest-cities-density-125.html

    #1 in density of it’s inhabitants.

    Well-loved. Like or Dislike: Thumb up 43 Thumb down 6

    I wouldn’t say Vancouver inhabitants is dense. The economists and the real estates salesman are full of hot air, while there’s essentially nothing inside the skulls of people who is jumping into real estates now.

    Hot debate. What do you think? Thumb up 8 Thumb down 4

    Vancouver correction will be 33.8 % only another 20% to go

    Hot debate. What do you think? Thumb up 6 Thumb down 4

    Yellow Helicopter Says:
    78

    Preview just played for CTV news at 5 – headline is Van RE market – and about some are calling for a 40% crash!
    The message is now finally getting mainstream.

    Well-loved. Like or Dislike: Thumb up 45 Thumb down 1

    BMO interest special 1 day only 2.99. chop chop.

    Like or Dislike: Thumb up 3 Thumb down 0

    @Yellow Helicopter: Executive Summary. Garth says get ready for a cataclysmic drop of 30-40%. Tsur says no way, he’s been saying this for 5 years and it’s ‘bunk’. Serious Helmut agrees, market needs outside push to collapse. People on the street can’t agree what’s going to happen.

    Like or Dislike: Thumb up 8 Thumb down 1

    ScubaSteve Says:
    81

    What’s going on with this blog? Admins? I’ve noticed a lot of good comments being “hidden”. For instance, #74 (VMD’s post). I have unhidden this and can’t for the life of me figure out why it’s voted down 4-13. We should NOT be hiding comments simply because we do not agree with them (if that is the case). It seems as though comments are being hidden too easily. All the “true” troll posts end up with a 10 point differential or more. Can we make it so it requires 10+ differential for a post to be hidden? Or modify it somehow?

    Hot debate. What do you think? Thumb up 20 Thumb down 5

    Really, 40 renters lined up? Why not just raise the price until there is only 1 lined up?

    Well-loved. Like or Dislike: Thumb up 52 Thumb down 0

    New Listings 198
    Price Changes 141
    Sold Listings 74
    TI:19310

    http://www.paulboenisch.com

    Well-loved. Like or Dislike: Thumb up 150 Thumb down 2

    ScubaSteve Says:
    84

    Updated sales trend chart:

    http://i45.tinypic.com/no7akp.gif

    Hot debate. What do you think? Thumb up 7 Thumb down 3

    oneangryslav2 Says:
    85

    @paulb: Inventory flatlining, unfortunately. Is 20K an unattainable goal?

    Like or Dislike: Thumb up 3 Thumb down 3

    ScubaSteve Says:
    86

    @oneangryslav2:

    Just my opinion, but no. Seems like 20k is now out of reach unfortunately. We may come very close in mid-October, but unlikely. It doesn’t matter though. Sales are so low that listings are not important.

    Case and point: We are likely to have less than 1,500 sales this month which will be the lowest sales for a September month since Bill Clinton was the president of the united states. OUCH!

    Well-loved. Like or Dislike: Thumb up 34 Thumb down 2

    market stats Says:
    87

    Did the 74 sales include yesterday, or was yesterday reported elsewhere

    Like or Dislike: Thumb up 2 Thumb down 4

    SunBlaster Says:
    88

    I had an unexpected call from long time friend that i havent talked with for in a long time. He was asking if i could help him in selling his car, i wondered why he wanted to sell he replied that his wifes parents pre aproved them for a mortgage recently thru a realtor friend who only charges $5k for the pre aproval and other helper services. And now they boght a $240k townhouse and moving in next month and he was afraid that him and his wife dont mkae enough to pay for 2 cars and mortgage. So he was considering selling one car or find a second job. I was speechless there are just so many things wrong with this story that it left me speechless, he is really nice guy and a good long time friend, and i could tell he was emotionally concerned at this point. All I offered was to help him move and a bit of encouragment that its nice to have your own place :o( i dint really know what else to say.

    Well-loved. Like or Dislike: Thumb up 47 Thumb down 1

    Garth gonna be on CTV news in a few minutes

    Like or Dislike: Thumb up 4 Thumb down 0

    @ScubaSteve:
    I must apologize for forgetting that the link was already part of the Friday free for all compilation. Rightfully voted down. (Was going to comment on another Vancouver sun story on how “Vancouver special” is now “chic”, got sidetracked to this story instead.)

    Like or Dislike: Thumb up 7 Thumb down 2

    Total days	19
    Days elapsed so far	14
    Weekends / holidays	7
    Days missing	0
    Days remaining	5
    7 Calendar Day Moving Average: Sales	85
    7 Calendar Day Moving Average: Listings	246
    SALES	
    Sales so far	1129
    Projection for rest of month (using 7day MA)	425
    Projected month end total	1554
    NEW LISTINGS	
    Listings so far	4033
    Projection for rest of month (using 7day MA)	1228
    Projected month end total	5261
    Sell-list so far	28.0%
    Projected month-end sell-list	29.5%
    MONTHS OF INVENTORY	
    Inventory as of September 21, 2012	19310
    Current MoI at this sales pace	12.43
    

    Well-loved. Like or Dislike: Thumb up 57 Thumb down 1

    ScubaSteve Says:
    92

    @VMD:

    Ah I see. Well it went from 4-13 to 18-14 in a few minutes. That’s pretty impressive. This blog rocks, as usual.

    Hot debate. What do you think? Thumb up 8 Thumb down 3

    Van RE fall down go boom…. Tsur and Helmet just polish each others helmets. Gonna fall 33.8% u heard it here folks soon your
    1 mill house to be 666666k. Bybyebibuy inequity

    Hot debate. What do you think? Thumb up 12 Thumb down 7

    Just saw Tsur Somerville on CTV slagging Garth Turner…

    Here’s his real title:

    Associate Professor
    Real Estate Foundation Professorship in Real Estate Finance Director, UBC Centre for Urban Economics and Real Estate

    How many times can you cram “REAL ESTATE” in a title?

    I wish commentators like him would have to wear a NASCAR-style jacket showing his sponsors – RE/Max, Concord Pacific, Polygon, Concert Properties, Royal Lepage.

    Well-loved. Like or Dislike: Thumb up 68 Thumb down 1

    Anonymous Says:
    95

    @WOWSERS: “Garth gonna be on CTV news in a few minutes”

    Garth is now saying 30% to 40% correction within 1 to 3 years. He is getting a little more bearish.

    Nice to see CTV pump this one over and over again at the commercial break “real estate to correct 30% to 40%…” then putting the story on at the end of the news cast.

    My favorite part Tsur saying Garth has been calling for a 30% to 40% correction for 3 years now and sure he may be right at some point. FFS Tsur even if it takes 5 years for Garth to be right about the 30% to 40% correction he is still right and it means owning real estate makes no sense you dumb ass!

    Well-loved. Like or Dislike: Thumb up 43 Thumb down 2

    Pretty hilarious post from Garth tonight. We have to recognize that his writing style is really good (that’s a compliment coming from a guy who has been very critical of him for some of his positions…).

    Lots of desperate people in Vancouver, more than we think… The mail he got from “Jason” is a pure gem. What does the guy has against donkeys???

    I’ve been asked to write an update of the article I wrote for LEAP back in April. Since my (I should say our) predictions were accurate, they want to know what’s going to happen to RE and to the overall Canadian economy in 2013…

    It won’t be pretty, that’s for sure. The message that Canada’s RE market is the next domino to fall is spreading worldwide now!

    Well-loved. Like or Dislike: Thumb up 32 Thumb down 3

    fixie guy Says:
    97

    95 Anonymous Says: “Garth is now saying 30% to 40% correction within 1 to 3 years. He is getting a little more bearish.”

    Not weeks ago he was calling that crazy talk. I think Garth knows Vancouver is going to lose >50% if it loses a dime but needs to temper his forecasts to retain the appearance of leading the pack instead of being out in the woods. He has clients to consider.

    Hot debate. What do you think? Thumb up 20 Thumb down 1

    Description of the video on the CTV news website:

    “Prices in Vancouver’s housing market are predicted to drop as much as 40 per cent, but local economists say they aren’t buying it.”

    Not buying it eh? Yeah, I hear there is a lot of that going around.

    Well-loved. Like or Dislike: Thumb up 50 Thumb down 2

    pricedoutfornow Says:
    99

    Update on the friend I spent the day trying to talk out of buying a house for $238k, with 5% down, on a 33k/year salary. Must be something working in the system these days, she didn’t get the financing required for the house (big surprise). They said she needs a cosigner to get that amount of mortgage. The relative she hit up said “No go”. And the CMHC owned house they bid on? Got an offer higher than asking, so they lost the bid.
    Another greater fool averted.

    Well-loved. Like or Dislike: Thumb up 39 Thumb down 1

    HAM Solo Says:
    101

    Would be interesting if all this press coverage extends the period of high listings longer into the fall than might otherwise be the case. Not sure whether October generally gets many 200+ listing days, but if ever there was going to be a year this is going to happen, I’d suspect 2012 is your candidate.

    Like or Dislike: Thumb up 7 Thumb down 0

    @VMD: This was true in the Statscan release this week: big % adult children under 30 live with parents. Makes labour mobility that more difficult.

    I did some quick math on a friend’s parents’ place in eastvan: 3y old house on front-back strata, 2 downstairs suites, each rented $900/mo. Upstairs 4br/2.5ba, figure it rents for $3000? Total 3000+1800=4800 gross. Allocate 20% for maintenance/repair/cca that’s $3840/mo. At 150 price-monthly rent that’s $576k. Assessed at $900k, not much more density to be wrought there. That would put a real drop of around 36% to get 150 price-rent, and I think 3k for the upper is generous in that area.

    Well-loved. Like or Dislike: Thumb up 24 Thumb down 2

    dire straits Says:
    103

    jesse
    “At 150 price-monthly rent”

    is there some guide for price/rent numbers? do you have any study/paper on that? and price to income as well
    thnx

    Like or Dislike: Thumb up 2 Thumb down 1

    van landlord Says:
    104

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 4 Thumb down 30

    kabloona kabloona Says:
    105

    Yeah, Tsur was hilarious as usual in the CTV piece and basically launched an ad hominem attack on Garth’s prediction of 30-40% correction in Vancouver. Also, the Tsur-meister says it’s bunk that prices will correct without some sort of an external shock, instead the market “has to be pushed”…..

    So I guess Tsur is saying Robert Shiller is full of crap….

    Nice.

    Also I noticed all the bullish-sounding street interviews in the CTV news item were from older boomer types. One young guy said he hoped a correction would happen so he could afford to buy a place. Probably some sorta commie, better kick him outta the city….

    Well-loved. Like or Dislike: Thumb up 45 Thumb down 2

    @dire straits: An estimate of historical cap rates puts them in the 6-10% range. A rough calculation is Rent-Expenses=NOI, Caprate=NOI/Price. From that you can estimate price-rent ratio. $3840 NOI and 6% cap is 768k BTW, which would be a 15% drop from current assessed value. So if you think prices aren’t 70% overvalued and only 20% overvalued you need to convince yourself a 6-7% cap rate is sustainable. Maybe someone can comment further.

    Hot debate. What do you think? Thumb up 11 Thumb down 1

    oneangryslav2 Says:
    107

    @dire straits: No paper/study needed. Just think about what kind of rental income one would need in order to be enticed into owning real estate. As some on this blog have suggested, an 8% “cap rate” is generally considered acceptable (at prevailing interest rates). Now work backwards from there: in order to get that yield, your annual rental income should be slightly more than 1/12 the purchase price (100/8=12.5). Thus, each month you must get 1/12 of this rental income. Finally, this mean a price/rent ratio of 12.5*12=150.

    Hot debate. What do you think? Thumb up 14 Thumb down 1

    market stats Says:
    108

    I will be voted out shortly, but did anyone else notice that @paulb’s realtor partner drifted away to another team? I assume a sign of the realtor revenue thinning and resulting effects.

    Well-loved. Like or Dislike: Thumb up 25 Thumb down 3

    @oneangryslav2: My calculations were using net rent, usually gross is used, so the 150 number I used is 120 price-grossmonthlyrent which is 8% caprate at 20% expenses, if I did the math right.

    Like or Dislike: Thumb up 8 Thumb down 1

    Anonymous Says:
    110

    @kabloona: “Also, the Tsur-meister says it’s bunk that prices will correct without some sort of an external shock”

    Yes and when real estate tanks the jobs will disappear, bank earnings will plummet, peoples credit will dry up, consumers will stop spending and the economy will tank. Then guys like Tsur will blame the real estate bust on the economy tanking instead of the other way around. They have their CYA plan ready to go. They are going to need it very soon.

    Well-loved. Like or Dislike: Thumb up 22 Thumb down 1

    Neighbors Says:
    111

    http://www.theprovince.com/business/smoking+renters+Vancouver+Olympic+Village+fear+they+could/7273939/story.html. This story should help OV sales out this weekend….. Maybe after another 30% price drop! Lol

    Like or Dislike: Thumb up 8 Thumb down 1

    Anonymous Says:
    112

    Interesting thing is, the us housing collapse caused the Great financial crisis… not the other way around

    Bubbles collapse for “no reason” all the time, except for extreme valuation and shifts in sentiment… Perhaps all this talk of bubbles is just getting to Tsur.
    I also like the fact that most people don’t think that it is possible to have a deep correction…. a necessary feature of bubbles popping

    Well-loved. Like or Dislike: Thumb up 26 Thumb down 1

    Dan in Calgary Says:
    113

    @Anonymous 112, “Bubbles collapse for “no reason” all the time, except for extreme valuation and shifts in sentiment… Perhaps all this talk of bubbles is just getting to Tsur.”

    I haven’t heard the phrase “irrational exuberance” for a while. It’s such a useful and appropriate adjective-noun pair.

    Hot debate. What do you think? Thumb up 11 Thumb down 0

    Dan in Calgary Says:
    114

    @Anonymous 112, “@Anonymous 112, “Bubbles collapse for “no reason” all the time”

    I came across a Wikipedia entry for Extraordinary Popular Delusions and the Madness of Crowds. Perhaps some here are familiar with the book, which was published in 1841. If I find time, I’ll have to track it down and read it. What a wonderful phrase to describe current folly!

    Hot debate. What do you think? Thumb up 14 Thumb down 1

    @oneangryslav2:
    ” As some on this blog have suggested, an 8% “cap rate” is generally considered acceptable”

    You are using gross rental yield in your example, not cap rate. Cap rate is net rental yield. Otherwise your numbers are correct. Assuming expenses of 2%, a price/rent of 150 is a cap rate of 6%.

    Like or Dislike: Thumb up 8 Thumb down 1

    @Anonymous:
    Bubbles collapse because a given asset can only return its net earnings to all its owners in aggregate. It’s simple arithmetic.

    Hot debate. What do you think? Thumb up 15 Thumb down 4

    #114 @Dan in Calgary: “Extraordinary Popular Delusions and the Madness of Crowds.”

    Picked it up in 2009. Quite interesting. The South Seas Bubble and the Mississippi Company really have few parallels in history. The ghost cities of modern China come close, but at least those are assets with *some* intrinsic value.

    Hot debate. What do you think? Thumb up 10 Thumb down 0

    Jiggitty Jank either someone has poor taste or a poor stager

    Jank

    http://www.realtor.ca/propertyDetails.aspx?propertyId=12413977&PidKey=1321800435

    Hot debate. What do you think? Thumb up 6 Thumb down 5

    #106 @jesse: “An estimate of historical cap rates puts them in the 6-10% range.”

    Beware the value trap. The economy has become so dependent on real estate that an average yield may offer little margin of safety against capital losses. I really wonder what the hell is going to happen when this egg is laid.

    Like or Dislike: Thumb up 8 Thumb down 0

    Solo District… just got an email about a big woo hoo about a 2nd release

    1st 30 buyers save 5-10K

    and

    To celebrate this achievement and our New Release, we will be having cash prize draws for our visitors throughout Saturday, and snacks and refreshments will be provided.

    Really makes one wonder about the snacks and cash prizes, just a low profile way to get freeloaders to come by and make things look busy.

    Starts at noon! lol

    Hot debate. What do you think? Thumb up 13 Thumb down 1

    Anonymous Says:
    121

    A crooked real estate developer with a checkered past:

    http://www.vancouversun.com/business/Baines+Green+property+developers+charged+with+multiple+offences/7282478/story.html

    “Acting on complaints, FICOM conducted an investigation and found Knight had committed multiple breaches:

    He had provided real estate services without being registered under the Real Estate Services Act.
    He had marketed the units without preparing and filing a disclosure statement with the B.C. Superintendent of Real Estate.
    He had received money from at least two people to secure an interest in a unit, but did not deposit those funds in a trust account, contrary to the Real Estate Development Marketing Act.”

    The article is kind of hard hitting on the media too:

    “I think that it’s clear real estate investors should look beneath these pleasing green exteriors and sunny media reports and do their own due diligence before they invest.

    Hot debate. What do you think? Thumb up 10 Thumb down 0

    “I wish commentators like him would have to wear a NASCAR-style jacket showing his sponsors – RE/Max, Concord Pacific, Polygon, Concert Properties, Royal Lepage.”

    best line ever…

    Well-loved. Like or Dislike: Thumb up 33 Thumb down 2

    Best place on meth Says:
    123

    @jesse:

    ” I think 3k for the upper is generous in that area.”

    What area is this?

    I think the $900 for a 1 BR basement in east van might be a bit generous as well.

    http://vancouver.en.craigslist.ca/search/apa/van?query=&srchType=A&minAsk=700&maxAsk=800&bedrooms=1

    Like or Dislike: Thumb up 9 Thumb down 0

    dire straits Says:
    124

    @jesse, @oneangryslav2, @patriotz

    thanks a lot, I got price/rent now.

    Like or Dislike: Thumb up 4 Thumb down 0

    space needler Says:
    125

    @Best place on meth: Both suites are 2br and currently rented to good tenants at $900/mo including utilities. Upper is likely too high, a cl search is more like $2400 no utils. This is Victoria 49th area.

    Like or Dislike: Thumb up 3 Thumb down 0

    Best place on meth Says:
    126

    @space needler:

    Thanks, that makes more sense.

    When I can find an entire house, 4bed 3bath at Douglas Park for $2600 without the nuisance of basement dwellers then $3000 for Victoria/49th doesn’t compute.

    Also, a semi-decent 4br upper in a slightly better east side location can be found for $1850.

    http://vancouver.en.craigslist.ca/van/apa/3268143549.html

    Hot debate. What do you think? Thumb up 11 Thumb down 1

    Re: Extraordinary Popular Delusions and the Madness of Crowds.

    What an enlightening book. Full of jaw-dropping anecdotes that really make you realize we’ve been there before, again and again. I particularly liked the chapter on John Law, and the institution of paper money in France. Also, the South Sea bubble, which seems to me to have a number of parallels with the dot-com bubble: A new “frontier”, and irrational expectations for growth and easy profits. Apparently Sir Issac Newton himself got caught up in that tone — goes to show you even those who supposedly know better sometimes lose perspective when they see their neighbors get rich.
    Also chapters on witchcraft, magnetizers, etc. Not so much economics here, but a wonderful read. Highly recommended.

    Hot debate. What do you think? Thumb up 18 Thumb down 0

    Groundhog Says:
    128

    Re: Extraordinary Popular Delusions and the Madness of Crowds.

    I’ve known about this book for about 10 years and I actually thought I read it a long time ago. After checking my library today I realize I was mixing it up with Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger though, also a very good book to read. I believe it covers many of same past bubbles in a similar way.

    I’ll have to finally pick this one up now that I realize I never did in fact read it!

    Like or Dislike: Thumb up 6 Thumb down 0

    fixie guy Says:
    129

    126 Best place on meth Says: “Also, a semi-decent 4br upper in a slightly better east side location can be found for $1850.”

    Putting the predicted price drop closer to 60% than 35%, which makes far more sense in the big picture perspective of the last decade’s changes in home price and median household income.

    Hot debate. What do you think? Thumb up 14 Thumb down 1

    @Anonymous: “Yes and when real estate tanks the jobs will disappear, bank earnings will plummet, peoples credit will dry up, consumers will stop spending and the economy will tank. Then guys like Tsur will blame the real estate bust on the economy tanking instead of the other way around.”

    He would never blame real estate – he will speak of all the incredible buying opportunities on the way down and then after the fact he’ll proclaim that unemployment, credit issues, lack of consumer spending and economy tanking was the only reason real estate prices dropped hoping that people were too depressed to remember which came first

    Hot debate. What do you think? Thumb up 12 Thumb down 0

    Deliverator Says:
    131

    Oh, yeah. This is totally normal.
    http://www.cbc.ca/news/interactives/before-after/toronto-condos/index.html

    Like or Dislike: Thumb up 2 Thumb down 0

    fixie guy Says:
    132

    116 patriotz Says: “Bubbles collapse because a given asset can only return its net earnings to all its owners in aggregate.”

    Bubbles eventually collapse due to net earnings, but that alone explains little about their timing or creation. Equivalent rental earnings haven’t justified a Vancouver SFH for, what, a decade or two now? In the case of most Canadian real estate, negative net earnings were massively offset by capital gains, the latter driven by the huge upswing in demand, itself generated by the massive increase in qualified buyers caused by changes to federal mortgage policies. Once those changes are revoked, as they recently were, net earnings become again the primary reason to buy. Being negative, the market immediately dies.

    Hot debate. What do you think? Thumb up 15 Thumb down 1

    @Best place on meth: “Also, a semi-decent 4br upper in a slightly better east side location can be found for $1850″

    I don’t see much equivalent to a 3y old place for $1850. $3K, as I mentioned is “generous”. A quick look at craigslist, here’s one datum for “new” 4br: http://vancouver.en.craigslist.ca/van/apa/3190487819.html
    $2400 / 4br – 2000ft² – Brand New 4 Bed 2 Bath

    That puts total at 2400+1800=4400, at 120 is 528K. I’m not seeing -60%.

    Hot debate. What do you think? Thumb up 6 Thumb down 5

    Best place on meth Says:
    134

    @jesse:

    You put more value on “new” than I do, and I suppose many others would as well judging by the market.

    When I look at new builds I generally see poor construction with cheap materials and an ugly cookie-cutter design.

    I’ll take old and well maintained every time.

    Hot debate. What do you think? Thumb up 20 Thumb down 5

    Painted turtle Says:
    135

    4451 walden
    July asking 769,900
    Sold now 569,900

    I would buy it for 400,000 max…

    Well-loved. Like or Dislike: Thumb up 39 Thumb down 1

    @Painted turtle:
    Assessed for $749,200. Ouch.

    Well-loved. Like or Dislike: Thumb up 25 Thumb down 1

    Booradley Says:
    137

    Hidden due to low comment rating. Click here to see.

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    fixie guy Says:
    138

    133 jesse Says: “I’m not seeing -60%.”

    A very optimistic estimate of the rental value of one friend’s home doesn’t seem to me a valid foundation for a market prediction. That’s not typical east Van rental revenue, skewing the home prices just a wee bit:

    http://vancouver.en.craigslist.ca/search/apa?query=house&srchType=A&minAsk=4600&maxAsk=5000&bedrooms=

    Like or Dislike: Thumb up 5 Thumb down 3

    Anonymous Says:
    139

    Why do people keep writing posts about white people having bed bugs? Last time I checked bed bugs don’t care what race you are.

    Hot debate. What do you think? Thumb up 4 Thumb down 10

    Chem Guy Says:
    140

    Woohoo, we’re moving! We just rented a place starting next month, two blocks from our current rental (we like the area) for $2400. The place is 12 years old, gas oven (I like to cook), 3bath, 2bdrm 1400sqft with a 300sqft roof deck downtown. The realtor who rented it to us said it is her parents and they “collect” homes and have no plans on selling but don’t want it empty. Last time the place sold it went for $1M so thanks for subsiding me! Her parents got the place as a repossession on a bad loan so no mortgage. WBWYCR!

    Hot debate. What do you think? Thumb up 16 Thumb down 5

    van landlord Says:
    141

    Hidden due to low comment rating. Click here to see.

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    Anonymous Says:
    142

    On CBC news right now: Amanda Lang tells baby boomers to sell now and praises the CMHC.

    Hot debate. What do you think? Thumb up 17 Thumb down 1

    Anonymous Says:
    143

    $2400 a month rent and people think they are getting a deal!

    Hot debate. What do you think? Thumb up 5 Thumb down 8

    @Anonymous: Let me know when you can buy that million dollar place for $2400 a month.

    $40 dollars is a bad deal for a pound of apples but a good deal for a pound of gold.

    Hot debate. What do you think? Thumb up 13 Thumb down 2

    Chem Guy Says:
    145

    @Anonymous: I agree, it is horrendous that this is what you have to pay but unfortunately you don’t get much in the core for $2400. Pretty much any normal city and this would cover a mortgage on a mansion.

    Like or Dislike: Thumb up 4 Thumb down 1

    @ Painted turtle Says:

    Nuts that they paid close to $600K for that crap. I probably wouldn’t buy it for $400K.

    Here’s a link to google cache for those looking.
    http://webcache.googleusercontent.com/search?q=cache:http://www.zoocasa.com/en/real_estate/1824929-4451-WALDEN-ST-Vancouver-British

    Hot debate. What do you think? Thumb up 10 Thumb down 0

    my friend..

    “my friend is going to re-list her condo again, what a terrible time to have to try and sell something, but she has to, she pre-bought into a new building that’s going to be ready in a few months”

    this is someone that had their apartment listed for about 7 months and took it off the market in June without one offer having been made on it!

    I ask…

    “is she going to put it on at a reduced price?”

    my neighbour..

    “she’s not sure yet, she doesn’t really want to”

    hence the problem…………………………

    Well-loved. Like or Dislike: Thumb up 25 Thumb down 2

    Yellow Helicopter Says:
    148

    Thanks S!

    Like or Dislike: Thumb up 3 Thumb down 2

    Sorry, if this is a little ‘yesterday’, but I watch Tsur video on CTV. Is it just me, or does he seem really perturbed? He didn’tseem like an academic at all. He cam across asw someone who has a lot of time, energy, and money tied up in something and is very frustrated by anyone who has an opposing viewpoint.

    How can anyone confuse cause/effect of the biggest financial crisis since the great depression, and still call themselves an intellectual, let alone an economist? It was prices detached from underlying fundamentals and their inevitable declines that caused the crisis…no external event required.

    Well-loved. Like or Dislike: Thumb up 36 Thumb down 1

    Bo Xilai Says:
    150

    I stand corrected regarding the Centre for Urban Economics and Real Estate at UBC. Tsur Somerville’s sponsors are the following:

    Grosvenor
    Henderson Development (Canada) Ltd.
    NAIOP – Commercial Real Estate Development Association

    I’m going to have to modify the NASCAR-style jacket for Tsur…

    BTW, check how UBC spells “sponsors” on the following URL… Good thing we taxpayers subsidize this great “educashunal enstitooshun”…

    http://cuer.sauder.ubc.ca/sponsers.html

    Hot debate. What do you think? Thumb up 20 Thumb down 3

    #149 @Oilman: “He cam across asw someone who has a lot of time, energy, and money tied up in something and is very frustrated by anyone who has an opposing viewpoint.”

    That sounds like a bad academic :)

    Like or Dislike: Thumb up 7 Thumb down 1

    pricedoutfornow Says:
    152

    What do you guys think:

    Rent: ($2000 per month)
    http://vancouver.en.craigslist.ca/van/apa/3288366650.html

    Or buy: ($749k, 10% down, 3.5%, 25 year mortgage = $3374 plus strata $249(?) prop tax $150/month(?)= getting close to $4k per month
    http://search.suttonwestcoast.com/listings/info/p-3223-perrot-mews-V966221

    Of course you may have issues with the landlord trying to sell, but even in a unit that isn’t for sale, I doubt the rent would be more than $2k per month.

    Rent…or buy? That is the question…

    Well-loved. Like or Dislike: Thumb up 29 Thumb down 3

    Went on the Vancouver special annual show of featured homes today, out of the 5 featured 3 were for sale little did I know I would have circumvented the 30$ admission and just went to their open house! Also one of them has been on market since spring and has had 2 price reductions…..4596 Windsor street that is was by far the black sheep.. poor worksmanship and the place was disgustingly dirty. Dear seller call me when the price comes down to 650k

    Hot debate. What do you think? Thumb up 18 Thumb down 0

    @pricedoutfornow: Good find.

    Like or Dislike: Thumb up 4 Thumb down 2

    The lazy local media gets its colorful 10 second sound bite from Tsur. The media are satisfied since they get an “academic” viewpoint, while Tsur gets to keep his real estate sponsors happy. He can also put on his CV that he is “regularly consulted by local media”.

    However, as far as intellectual rigor, academic honesty in real estate economics is concerned
    Tsur Somerville couldn’t carry Robert Shiller’s jockstrap. History will truly separate the boys from the men.

    Well-loved. Like or Dislike: Thumb up 44 Thumb down 2

    Vote Down The Facts Says:
    156

    Hidden due to low comment rating. Click here to see.

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    Best place on meth Says:
    157

    @Vote Down The Facts:

    You don’t pay off any principle when prices are falling.

    Hot debate. What do you think? Thumb up 17 Thumb down 5

    @Vote Down The Facts: Repeating this line over and over doesn’t make it any less wrong.

    Hot debate. What do you think? Thumb up 17 Thumb down 4

    Anonymous Says:
    159

    Hidden due to low comment rating. Click here to see.

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    Vote Down The Facts Says:
    160

    Hidden due to low comment rating. Click here to see.

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    Vote Down The Facts Says:
    161

    @Best place on meth: “You don’t pay off any principle when prices are falling.”

    I think you’re confusing principal with equity. But I agree with the point I think you were trying to make.

    Hot debate. What do you think? Thumb up 11 Thumb down 6

    @wowsers

    That place was bought for around $630,000 probably a year or 2 ago and renovated for a flip.

    http://bit.ly/UpvCJN

    Hot debate. What do you think? Thumb up 12 Thumb down 0

    @Vote Down The Facts: For the nth time, learn this:

    The downpayment and principal payments have opportunity costs. If you were going to say “principal component of mortgage payment” is “your” money”, then please factor in the opportunity costs of such money. The opp cost varies from person and person, but it can’t be less than the guaranteed interest rate which is 2% if you know where to find it. Someone with investing knowledge would probably uses a higher rate, but that’s not the point of this discussion.

    Hot debate. What do you think? Thumb up 13 Thumb down 3

    Oh gawd, someone I know keeps posting a facebook link to a father and son realtor team; must be tough times as they are now offering 2 $100 Ike’s gift cards per month to anyone that “likes” their page. House salesmen getting’ desperate.

    Hot debate. What do you think? Thumb up 17 Thumb down 2

    Vote Down The Facts Says:
    165

    Hidden due to low comment rating. Click here to see.

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    Anonymous Says:
    166

    Hidden due to low comment rating. Click here to see.

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    ScubaSteve Says:
    167

    Tsur Somerville has become the ultimate douchebag. I wonder how much he got paid by the real estate developers to puke out the garbage coming out of his mouth? He didn’t even address Garth Turner in his answer. In 2 years, Garth Turner will be a genius, and Tsur Somerville will be the town idiot.

    Well-loved. Like or Dislike: Thumb up 47 Thumb down 0

    patriotz patriotz Says:
    168

    @Anonymous:
    “The thing to remember about opportunity cost is that it is an after tax number ”

    Depends where the principal payments (DP or principal part of monthly) are coming from. If they were sitting in a savings account beforehand, yes. If from RRSP home buyer’s plan or TFSA, no. If at the expense of future RRSP or TFSA contributions, no. If at the expense of carrying a credit card or car loan balance, a VERY big no.

    So which scenario typifies today’s buyer, do you think?

    You are also not including insurance, maintenance, and depreciation in your costs.

    Hot debate. What do you think? Thumb up 13 Thumb down 1

    @Vote Down The Facts: “The renter has nothing after 25 years yet still needs a place to live, the buyer has a fully paid off residence.”

    LOL U serious? The renter has saved the principal payments — the ones you refuse to include in your calc — and invested the difference in something earning 4% real return (or whatever) and has pocketed the difference.

    And Anonymous 166, using 2% for opcost is some serious clown finance analysis, bro, even for Vancouverites. Risk-free is 2%, you are not including risk anywhere in that, including liquidity risk (like, the stuff going down right now), duration risk, and cash flow impairment risk in the form of either income impairment (job loss, illness, divorce) or “unexpected” maintenance expenses, both that befall a few though perhaps not the majority. I can line up 20 competent owners against a wall and all but guarantee 1 or 2 of them will experience some sort of “unexpected” hardship over the next 10 years, never mind the ones who are far from competent in managing their finances. Opcost is way higher than 2%.

    You guys are hilarious. I’m no finance guy but come off it. That’s just plain asshattery — dare I say tomfoolery — and my bar for that distinction is mighty high around these here parts.

    Well-loved. Like or Dislike: Thumb up 37 Thumb down 2

    pricedoutfornow Says:
    170

    @Anonymous:

    I wouldn’t call an ad for a $2000 place to rent on craigslist a “scam”-it’s not exactly cheap, is it? This is East Van, not the westside for goodness sakes! There are whole houses which rent for about that in East Van. Now, if the ad were for $800, then ya, I’d be expecting an email back from Father whoever in Africa, but I’m sure this is legit. It shows you how out of whack selling prices are with rents, when whoever buys this property would be paying nearly double what the rent value is. I know this area-I’ve seen similar properties advertised for around the same price-the only time I saw one cheaper (a 4 bed townhouse advertised for $1500) was when it was for “fixed lease of one year”-and even then the guy seemed to have a hard time renting it out, it kept popping up on craiglist. And I guess they’ve had no luck selling this unit, people are probably starting to clue in that since prices aren’t going up anymore, there’s no point in paying a premium to own. Rent and save the difference.

    Like or Dislike: Thumb up 8 Thumb down 1

    When the government introduced 20% DP if not primary residence.? Was ever purchase with no DP allowed in canada for primary residance and if yes when was that practice stopped? I lost track of these changes. Thanx

    Like or Dislike: Thumb up 2 Thumb down 0

    [...] Once that bedrock belief is brought into question, nature will be free to take its course.” – N at VCI 21 Sep 2012 8:55am Share: This entry was posted in 01. He Said, She Said, 10. Demoralized Renters? and tagged [...]

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    Anonymous Says:
    173

    Hidden due to low comment rating. Click here to see.

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    Schmanonymous Says:
    174

    @Anonymous: You’re making fun of more nuanced economic analysis of a significant investment? That’s pretty sad. Just because you made the choice to invest in the single biggest asset in most peoples lives without thought or simple math, does not mean other people do the same. If you’re trying to highlight the stupidity of the average homebuyer in Vancouver, then, ‘Well Done’.

    Hot debate. What do you think? Thumb up 19 Thumb down 0

    Vote Down The Facts Says:
    175

    Hidden due to low comment rating. Click here to see.

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    Deliverator Says:
    176

    @jesse: This was true in the Statscan release this week: big % adult children under 30 live with parents. Makes labour mobility that more difficult.

    Why in the world would you think it makes labour mobility more difficult? These young adults have no leases, no mortgages, in short, nothing to stop them from picking up and moving across the city, the province or the country to find a job. If anything, it’s good for labour mobility.

    Now, if you’re saying that having a lot of the sort of people that won’t get out from under their mom’s skirts and make a lives for themselves doesn’t bode well for the future… on that point, I fully get you.

    Hot debate. What do you think? Thumb up 11 Thumb down 1

    Anonymous Says:
    177

    @Schmanonymous: i got that, all renters are smart!

    Like or Dislike: Thumb up 0 Thumb down 5

    there are some reasonably priced rentals on Craigslist, but there are also some CRAZY expensive prices on apartments on the West Side.

    Obviously the owners have to try and get these prices to help cover all their payments. What worries me is if these landlords are going to set some kind of precedent with their pricing?

    If enough landlords start researching what others are asking and “up” their prices, are us renters going to be hooped?

    Like or Dislike: Thumb up 6 Thumb down 2

    @Vote Down The Facts: “Are you getting it yet?”

    $749K… how does one get $2K mortgage payments out of that without a significant DP? I’m not “getting it”.

    Like or Dislike: Thumb up 8 Thumb down 1

    Vote Down The Facts Says:
    180

    @jesse:

    You’re thinking that I’m talking about a specific property mentioned earlier on. I’m not. I’m trying to establish where the equality of outcome actually occurs, and it’s clearly not when rent=mortgage. Therefore a buyer can spend a little more than rent, for an equivalent property, and still come out ahead of the renter.

    So it’s not as simple as summing mortgage+tax+maintenance and seeing if it’s equal to, less than, or greater than rent. Because that’s not where the balancing point is.

    Like or Dislike: Thumb up 3 Thumb down 6

    @vangrl: If enough landlords start researching what others are asking and “up” their prices, are us renters going to be hooped?

    Not at all. This is a simple point, but one that most amateur landlords dont get: rents are supported by the local economy. They represent what people are willing and able to spend to live here.

    People don’t take on mortgages to pay rent so it doesn’t matter if the CMHC is pumping money into mortgages or interest rates are dropping. If mortgage rates drop by a couple percent all of a sudden the top price you can pay for a house goes up, not so for rent.

    People have a hard limit to what they can pay for rent. If all landlords doubled their asking price we’d have a lot of vacant units and a lot of people either moving away or homeless.

    Well-loved. Like or Dislike: Thumb up 27 Thumb down 0

    @vangrl:

    If enough landlords start researching what others are asking and “up” their prices, are us renters going to be hooped?

    This has been happening on Craigslist for years now. There’s a froth of listings that re-appear, day after day, with asking prices likely tied to mortgage payments and not what the rental market will bear. When new rental stock enters the pool, the new landlords consult the asking rents on Craigslist, and set their initial asking rent to match.

    This phenomenon is one of the reasons I think publicly listed rents will decrease as the bust proceeds. Our obsession with housing as a lifestyle (not a roof) leaks over into rents because we’ve permitted it to. As soon as people start thinking critically about housing prices, the same effect should slop over into Craigslist-land.

    Hot debate. What do you think? Thumb up 13 Thumb down 0

    @Vote Down The Facts:

    Dear VDTF,
    The difference would not be zero. The omitted are: property tax, insurance, strata fees (could be optional), and maintenance (or special assessments).
    Don’t forget that most rental companies cover heating and hot water. I, for example, have heating, hydro, cable and internet – all paid by landlord for my rented SFH.
    Let’s put the transaction cost (for buying and selling you place) aside for now.

    Please punch the numbers again and enlighten the crowd here how exactly the buyer is ahead and share the calculations.

    Hot debate. What do you think? Thumb up 12 Thumb down 1

    @Vote Down The Facts: Therefore a buyer can spend a little more than rent, for an equivalent property, and still come out ahead of the renter.

    But in your hypothetical scenario where rent exactly equals mortgage payment the owner IS paying more since they have to pay tax, maintenance, strata, etc.

    Example: I rented a condo for $900 / mo. The costs to owner beyond mortgage include $300 strata fee and a special assessment for building envelope repairs of $50,000. I moved before work started because I didn’t want to live in a construction zone, but I wouldn’t be surprised if the laundry or dishwasher need to be replaced in the next year or so. The renter isn’t going to pay for that.

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    Vote Down The Facts Says:
    185

    Hidden due to low comment rating. Click here to see.

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    @Vote Down The Facts: Include tax, strata, etc, it works out the same. If they’re all equal to rent, the buyer comes out ahead.

    Hahahahah! Yes, if the cost of everything that goes into your home each month is equal to rent then the buyer comes out ahead. If they house is given to the buyer for free and the walls are filled with civil war gold the buyer comes out even more ahead!

    Hot debate. What do you think? Thumb up 12 Thumb down 2

    @Vote Down The Facts:
    If the expenses of the owner (all of them) are equal to rent he comes out the same as the renter.

    Principal payments are an investment, not an expense.

    Hot debate. What do you think? Thumb up 11 Thumb down 0

    Groundhog Says:
    188

    Include depreciation in these costs. Houses are a depreciating asset and in constant need of capital to upkeep/maintain their condition.

    Also, houses aren’t much of an investment. From 1890 to 2000 in the US and Norway real house prices did not budge, aside from a few booms and busts. I am certain the same could be said for Canada if the data were available.

    Hot debate. What do you think? Thumb up 9 Thumb down 1

    hope you guys are right, i’d hate to see these new “greater fool landlords” start dictating what rents should be in the downtown core.

    Like or Dislike: Thumb up 2 Thumb down 0

    @vangrl: My Dad used to tell me that the most costly room to the hotel was the empty one. This works the same way with rentals, the person losing the most money is the one without a tenant.

    Doesn’t mean you won’t here talk of everyone ‘standing together’ and keeping their ask rents high in the hope of forcing someone to pay it. Check the stockhouse bullboards and you’ll see this attempted with every small-mid cap stock. You’ll also see a lot of familiar sayings like ‘you haven’t lost til you sell’ and ‘I’m in it for the long run’.

    Hot debate. What do you think? Thumb up 14 Thumb down 0

    patriotz patriotz Says:
    191

    @Groundhog:
    “Also, houses aren’t much of an investment. From 1890 to 2000 in the US and Norway real house prices did not budge, aside from a few booms and busts.”

    Well then oil wells must be a terrible investment, since their price always goes down to zero.

    Hot debate. What do you think? Thumb up 7 Thumb down 5

    Patiently Waiting Says:
    192

    @vangrl: Have you watched the movie Pacific Heights? Noob landlords who don’t bow to market rents end up with shady tenants like the Carter Hayes character (played by Michael Keaton).

    “Not long after, Hayes visits to view the remaining vacant unit and immediately expresses a desire to move in. Hayes drives an expensive Porsche and carries large amounts of cash on his person, but is reluctant to undergo a credit check. He convinces Drake to waive the credit check in exchange for a list of personal references and an upfront payment of the first six months’ rent, to be paid by wire transfer.

    Before any of this money is paid, however, Hayes arrives unannounced one morning and shuts himself into the apartment. As days pass, Drake and Patty grow increasingly impatient when Hayes’ wire transfer fails to materialize. From inside the apartment, sounds of loud hammering and drilling are heard at all hours of the day and night, however the door is seldom answered. When Drake finally makes an attempt to enter Hayes’ apartment, he finds that the locks have been changed. Drake attempts to put an end to the constant noise and drive out Hayes by cutting the electricity and heat to the apartment, but Hayes summons the police, who side with Hayes and warn Drake that his actions are unlawful.”

    http://en.wikipedia.org/wiki/Pacific_Heights_%28film%29

    Like or Dislike: Thumb up 5 Thumb down 0

    happy renter Says:
    193

    Hidden due to low comment rating. Click here to see.

    Poorly-rated. Like or Dislike: Thumb up 0 Thumb down 8

    Groundhog Says:
    194

    Yes, the value of an oil well would go to zero once all the oil is extracted… Im not sure i get your point. Is this in reference to my house as a depreciating asset comment?

    Like or Dislike: Thumb up 4 Thumb down 0

    YLTNboomerang Says:
    195

    Underwater alert: V972200

    This overpriced badboy last sold on June 19, 2008 for $1,470,000. I hope this guys goal was to launder money as after failing to recoup original investment by listing at $1,490,000 this one just recently dropped the price again to $1,249,900. Of course, at $781/sqft, this is still over current out of whack market prices so the only way I see this one moving today is to drop the price below $1M and take a half million haircut!

    Hot debate. What do you think? Thumb up 14 Thumb down 0

    UnagiDon Says:
    196

    @jesse: For those of you more knowledgeable about RE finance than I, let me ask about how appreciation factors in to the opportunity cost of capital. One of Shiller’s theses is that one should expect real estate to appreciate (nominally) at the rate of inflation. (Ignoring maintenance costs, etc.) Let’s call that rate 2%.

    So, if one assumes that the renter is getting only 2% return (in a savings account) on the principal payments that he is saving, whereas the owner is getting 2% return (Shiller’s appreciation rate) at 5-to-1 or 10-to-1 leverage, then isn’t the buyer coming out ahead? (Ignoring taxes, maintenance costs, etc.)

    Of course, buying at the top of a bubble, one is unlikely achieve that long-term 2% return for a long, long time.

    Like or Dislike: Thumb up 3 Thumb down 0

    @Vote Down The Facts: “Therefore a buyer can spend a little more than rent, for an equivalent property, and still come out ahead of the renter.”

    Not to put too fine a point on it, but thinking like that is precisely why the US got into trouble. Renting is normally more expensive than owning because landlords take on risk and require a positive return after all revenues and expenses, risk adjusted, are accounted for. An owner takes on these risks too and retains the earnings that would have gone to a landlord (investor). Which is fine but nowhere near the case now. Further the longer-term risks of property investment are higher than simple buy-vs-rent calculations I’ve seen. There are high severity and low probability risks that don’t make it into a spreadsheet or fit nicely in those online calculators but are real and deserve a tangible risk spread. None of those are accounted for in the cursory analysis on this blog, except by the folks who are stating — gasp — an 8% or higher cap rate might not be such a bad move after all. Most REITs have figured this out, but then they have investors like pension funds who care about and account for these things.

    What you are in effect stating is that an investor needs to compete with an owner-occupier who pays the premium you suggest they can reasonably and rationally pay. I’m not seeing how this works out for the investor except if they are betting on capital appreciation. This is not sustainable and most investors I’ve talked to in the US now understand this as canon, Vancouver and Canada seem to be temporarily stuck on the holodeck, we’ll just have to wait for data.

    Like or Dislike: Thumb up 3 Thumb down 1

    Check out this sweetie..

    http://www.vuppie.com/Properties.php/Details/40

    was once listed for 12,800,000 so about 50% off

    looks like they have to sell…

    http://www.taxwiki.ca/Saeed+Korki+v+Her+Majesty+The+Queen,+2010+TCC+384+(TCC)

    Tsk Tsk pay you taxes dude!

    Like or Dislike: Thumb up 3 Thumb down 0

    Anyone know how the 2nd release at the Solo Disctrict went yesterday?

    Like or Dislike: Thumb up 1 Thumb down 0

    @UnagiDon: Don’t know much about it but capital appreciation is more the dependent variable, the only reason property has value is because it generates revenue from future rents. If rents are appreciating at inflation (or a bit above or below inflation), the asset will generally appreciate at the rate the rents the property generates are appreciating. So if rents are going up at 2% per year, the net present value of the asset will also go up at 2% per year.

    If the asset’s in a bubble, one of the critical mistakes is extrapolating at-inflation gains from current price levels without asking what gives property its value in the first place. This was the mistake made Stateside, and one that a first-year commerce student could have uncovered in 5 minutes on a homework assignment.

    Like or Dislike: Thumb up 5 Thumb down 0

    Anonymous Says:
    201

    @UnagiDon:

    You’ve hit on one factor which people are consistently missing that is inflation. In a balanced market (Rental Cost = Ownership Cost) buying is an obvious choice provided you plan to stay put for 5+ years. People who rent for 10+ years lose in all but the most crazy over priced markets.

    The decision to buy or rent is more complex than just some MLS listing says X and I can rent the same or similar for Y. You need to actually do math and account for all the costs then take into account how long you plan to stay in the area and arrive at a decision.

    Other costs that need to be taken into account that I haven’t seen mentioned sufficiently are:
    Transaction Costs = Heavily favor Renting. Any analysis that ignores transaction costs isn’t worth reading as they are huge.

    Inflation = Heavily favor buying. As above any analysis that ignores inflation isn’t worth reading.

    Maintenance Costs = Favor Renting but not as much as some seem to think. Also depend a lot on the type of home and age of home you buy.

    Moving Costs = Depending on your lifestyle these can really favor buying or not matter at all. Single guy or Family with 3 kids makes all the difference in the world. The last time I moved was a multiweek nightmare that cost thousands. Doing that every year or two as a renter would be tough.

    Damage Deposit = I’ve never gotten a full damage deposit back nor have I ever met someone in Vancouver that did. It is a very real cost if you move frequently.

    Insurance = This one is often missed or misunderstood it actually favors owning pretty strongly. The last time I rented I was paying 4x more to insure the contents of my home then I now pay to insure the contents plus the structure. Renters are viewed as much more likely to make a claim and pay through the nose because of it. Again if you are young and own not much of value you can skip it as a renter. And of course this is a much smaller cost then the first 2 which pretty much make the decision because they are so huge.

    Like or Dislike: Thumb up 3 Thumb down 1

    @vangrl:
    “If enough landlords start researching what others are asking and “up” their prices, are us renters going to be hooped?”

    As others have said, landlords can only charge what renters can afford to pay. Despite MSM insistence otherwise, Vancouver is *not* anything like New York, San Fran, etc, where very high rents are made possible by very high salaries. The bottom line is that average salaries in Vancouver are not very high.

    Vangrl, I think you are confusing property sale asking prices with rental prices. Yes, Vancouver properties have been able to see huge price increases, but that is because buyers most often borrow to buy a home, and as prices have risen buyers have just found ways (and govt help, and banks’ stupidity) to borrow more than usual.

    However, people don’t take out big loans to pay rent. What they can afford month-to-month is what they can afford, period.

    If we see rental prices in Vancouver skyrocket, it will be because average salaries are doing the same.

    Hot debate. What do you think? Thumb up 17 Thumb down 0

    Anonymous Says:
    203

    @jesse

    Capital Appreciation and Inflation are different things. Capital Appreciation is when the asset gains value. Inflation is when the dollar loses value. In the current market Capital Appreciation in Vancouver real estate is highly unlikely but Inflation is absolutely certain. Current inflation is running ~1.3% but it will probably average over 2% in the next decade.

    What this means is if you buy a million dollar home in Vancouver today and see zero Capital Appreciation for the next decade you can still expect to sell it for 1.22 million dollars due to that decline in the value of the dollar. The real question is if we will see significant negative Capital Appreciation that is where the owners will get hit.

    Like or Dislike: Thumb up 2 Thumb down 1

    @Anonymous: “People who rent for 10+ years lose in all but the most crazy over priced markets.”

    This cursory analysis ignores long-tail risks. It isn’t hard to figure out that if it’s cheaper to rent than own it isn’t sustainable and that capital is better invested elsewhere. That doesn’t mean that 95% (or whatever) of owners won’t come out ahead in “all but the most crazy” markets, but you ignore the ones who just quite don’t make it for various reasons. In aggregate the renter is better off except when it’s obviously cheaper to own than rent.

    Like or Dislike: Thumb up 5 Thumb down 1

    Anonymouse Says:
    205

    @patriotz: “Principal payments are an investment, not an expense.”

    Yet I get voted down for basically saying the same thing.

    Like or Dislike: Thumb up 4 Thumb down 5

    @Anonymous: Capital Appreciation is when the asset gains value. Inflation is when the dollar loses value.”

    WTF? Rent inflation is when rents increase, that’s pretty much all that matters when looking at where prices are going to head in the long run. I don’t have to look too far afield to see prices are not some independent factor, they are grounded by earnings, same as any other investment.

    Like or Dislike: Thumb up 3 Thumb down 2

    Saw this “court ordered sale”, as the owner cannot make the mortgage payment. The realtor said he is working for the bank, the price is down $60,000 compared to a few months ago. Still asking $1,320,000 (2400 ft2):

    http://search.suttonwestcoast.com/listing/p-6022-chancellor-mews–vancouver-V971686

    The realtor said the market has been slow.

    Hot debate. What do you think? Thumb up 16 Thumb down 0

    patriotz patriotz Says:
    208

    @Anonymous:
    “Inflation = Heavily favor buying”

    No it doesn’t, because inflation is incorporated into interest rates. Just ask anyone who was in the market in the 80′s. The house price appreciation of the subsequent decades was enabled by the dramatic decline in inflation up to the present time.

    Similarly, anyone who thinks that they can buy at today’s prices and come out ahead due to increasing inflation is seriously off base.

    Hot debate. What do you think? Thumb up 11 Thumb down 0

    patriotz patriotz Says:
    209

    @patriotz:
    I would say that whoever came up with that asking price is a bit slow too, as the property is assessed for $1,259,000.

    Like or Dislike: Thumb up 3 Thumb down 1

    Anonymous Says:
    210

    @patriotz

    “Inflation = Heavily favor buying”

    More correctly inflation works for debtors. If you buy with cash it is neutral. As an example if I buy today and borrow a million at a locked in 3% interest rate and inflation averages about 2% for the next 5 years my actual cost to borrow the money is ~$850/month. This is no where near the number that many on this blog who don’t understand the difference between cash flow and net income assume in their calculations.

    You are correct that inflation higher then 2-3% will cause the BOC to raise rates which place downward pressure on prices. Of course in order to get higher inflation you need economic growth which would act to support prices. The counter example being the late 70′s stagflation in the US but that was influenced by a lot of other factors.

    Like or Dislike: Thumb up 1 Thumb down 0

    patriotz patriotz Says:
    211

    @Anonymous:
    That’s assuming that your ability to repay the loan, i.e. your salary, will track inflation, which is a pretty tall assumption these days.

    Like or Dislike: Thumb up 5 Thumb down 1

    Anonymous Says:
    212

    @jesse

    WTF?

    If you don’t understand the difference between Capital Appreciation and Inflation you aren’t going to get very far. I’d suggest you make an effort to understand the terms and what they mean for an economic model because over the longer term the difference really does matter.

    To make it clear imagine you invest $1000 dollars then go to sleep for 100 years. You wake up to discover to your amazement that you have a portfolio worth 1 trillion dollars. If after learning that you also learn that bus fair is now 1 million dollars have you experienced Capital Appreciation or Inflation?

    The answer is you’ve experienced a lot of Inflation and very negative Capital Appreciation. The difference means everything to how much stuff you can actually buy.

    Like or Dislike: Thumb up 1 Thumb down 6

    Anonymous Says:
    213

    @jesse
    Correcting a typo.

    To make it clear imagine you invest $1000 dollars then go to sleep for 100 years. You wake up to discover to your amazement that you have a portfolio worth 1 trillion dollars. If after learning that you also learn that bus fair is now 100 million dollars have you experienced Capital Appreciation or Inflation?

    The answer is you’ve experienced a lot of Inflation and very negative Capital Appreciation. The difference means everything to how much stuff you can actually buy.

    Like or Dislike: Thumb up 4 Thumb down 3

    Anonymous Says:
    214

    @patriotz

    That’s assuming that your ability to repay the loan, i.e. your salary, will track inflation, which is a pretty tall assumption these days.

    If you could afford the payment on the loan in year 0 you can afford it in year 5 if you have the same salary. Loan payments don’t go up with inflation but rent does. That is the fundamentalism reason that inflation favors debtors.

    Hot debate. What do you think? Thumb up 5 Thumb down 8

    @Anon 214

    Loan payment does go up with inflation though, it’s called interest rates. So unless you can get a full 25-40 year interest rate on your loan, it’s going to fluctuate if not on a daily basis, then every 5 years.

    The first thing any government does when inflation picks back up is raise interest rates. Bond markets will have to follow suit.

    So, if you could afford the payment in year 0, you may not be able to afford it year 5 on the same salary. If you were stretched to the limit at year 0, and interest rates went up 2%. You might be dropping bricks in year 5.

    Like or Dislike: Thumb up 6 Thumb down 2

    Hey, "Anonymous" Lame-ass Straw Man. Stop Posting Your Specious Argument Says:
    216

    @Anonymous: Hey, Fucktard Dumbass:

    Homes are not capital except for rents they might produce. Homes represent no other productive capacity to the economy except shelter for workers. If you want capital, buy a factory, or shares in a profitable firm somewhere.

    I have to believe you are the same idiot pushing the buying argument with that shoddy interest vs rent spreadsheet that ignores maintenance costs, adverse price fluctuation risk, locked investment opportunity cost, etc etc… Ya, sure. Don’t worry, just sign there and write the bank a big cheque and be happy. You’re a fucking moron!

    BTW, you never answered on how to scam back that hefty downpayment that is surely lost when this house ponzi toilet gets flushed and the “dream investment” is worth less than what is owed the bank.

    Sell now or be priced IN forever, douchebag.

    Hot debate. What do you think? Thumb up 11 Thumb down 4

    @Anonymous: My point was that asset prices generally track earnings growth, for houses that is rents minus expenses, which track CPI inflation closely. (CPI has real rents declining in the past 15 years, however)

    Like or Dislike: Thumb up 3 Thumb down 1

    I’ll agree with you that inflation favors debtors but only because it’s the savers that are getting punished.

    Parked money loses value, forcing people to invest. Pressure to invest will always have some portion malinvested: see the chinese property boom, the global commodities boom, dutch disease.

    Like or Dislike: Thumb up 6 Thumb down 0

    Anonymous Says:
    219

    @Hey, “Anonymous” Lame-ass Straw Man. Stop Posting Your Specious Argument

    Not one “Anonymous” post in the recent posts has advocated buying. If you are too dumb to read a post and understand the point it is making there is seriously no helping you. I’m trying to increase the rigor in the discussion here so you don’t sound like an idiot but clearly that is more then you can handle.

    A few facts for you. If you disagree with any of these you’re retarded. They are beyond dispute but for some reason a portion of the people posting here can’t grasp them.
    - A home is a Capital Asset subject to price fluctuation
    - Inflation is a massive factor in any financial analysis
    - Transaction costs are a huge factor in real estate
    - Capital Appreciation and Inflation are totally different things

    Posting an analysis ignoring these facts is just dumb.

    Hot debate. What do you think? Thumb up 7 Thumb down 6

    @T:

    Loan payment does go up with inflation though, it’s called interest rates.

    True enough, but interest rates going from 2% to 4% to 6% will not have nearly as much impact as 2% rent increases compounded over 25 years.

    Hot debate. What do you think? Thumb up 3 Thumb down 10

    @Anonymous: “I’ve never gotten a full damage deposit back nor have I ever met someone in Vancouver that did.”

    Whoa! Are you kidding? In my last 6 moves only one tried to get out of returning damage deposit. They refinished the hardwood floors before we moved in and they were marked up and scratched after a couple of years. We took the to arbitration and got a ruling that it was normal wear and tear so the couldn’t withhold the damage deposit. Other than that ive never have anyone even suggest keeping part of the damage deposit.

    Are you and the people you meet running grow ops? How can you not be getting damage deposits back?

    Hot debate. What do you think? Thumb up 16 Thumb down 0

    @Troll: “but interest rates going from 2% to 4% to 6% will not have nearly as much impact as 2% rent increases compounded over 25 years”

    Because once a renter always a renter? Ownership rates are near historical highs. If rates go to 6% from 2% maybe Joe Q SaverRenter might consider investing some of his savings into property without external financing. Unless a 400bps increase in financing rates isn’t going to send prices into the toilet!

    Like or Dislike: Thumb up 7 Thumb down 1

    @Troll: Rates going from 2 to 6 percent is a big move and would likely drive prices down as people can afford less.

    Renters can move pretty easily if rent goes up, buyers can sell for gain in a rising market or a loss in a falling market.

    And who do you know that has rent going up by 2% every year? The only place I saw a rent increase in was after 5 years and it went up by about 3%. That’s a lot less than 2% compounded every year.

    Like or Dislike: Thumb up 6 Thumb down 2

    @Badmath:

    And who do you know that has rent going up by 2% every year?

    http://cuer.sauder.ubc.ca/cma/data/ResidentialRealEstate/RentIndex/pctgrowth-vancouver.pdf

    Like or Dislike: Thumb up 3 Thumb down 3

    Compounding Rates. Really? Says:
    225

    @Troll: …” interest rates going from 2% to 4% to 6% will not have nearly as much impact as 2% rent increases”…

    rate years price
    0.02 25 1.64
    0.04 10 1.48
    0.06 10 1.79

    Like or Dislike: Thumb up 0 Thumb down 2

    Groundhog Says:
    226

    @Anonymous: “I’ve never gotten a full damage deposit back nor have I ever met someone in Vancouver that did.”

    @Badmath

    I agree, I’ve moved from 3 rental apartments in the last 6 years and have received 100% back each time.

    There have been minor nicks and scratches and each one, but they were from normal wear and tear.

    Hot debate. What do you think? Thumb up 9 Thumb down 1

    @Anonymous:

    Capital Appreciation and Inflation are different things. Capital Appreciation is when the asset gains value. Inflation is when the dollar loses value.

    They may be different things, but it doesn’t matter, because no one’s going to separate them out. Maybe you want to start a campaign for the CRA will let me inflation adjust my average buy price when selling investments, so I can ignore this inflation that is not capital appreciation.

    If an asset gains value due to inflation factors (eg wages up), then that’s capital appreciation supported by income fundamentals.

    Like or Dislike: Thumb up 5 Thumb down 0

    @jesse:

    If rates go to 6% from 2% maybe Joe Q SaverRenter might consider investing some of his savings into property without external financing.

    Truth. I’m not making the case for buying at or near the top of a cycle, only pointing out that compounded annual inflation can be far more insidious than appears at first glance.

    Like or Dislike: Thumb up 2 Thumb down 1

    @Compounding Rates. Really?:

    rate years price
    0.02 25 1.64
    0.04 10 1.48
    0.06 10 1.79

    Thanks for the non-sensical chart.

    Like or Dislike: Thumb up 7 Thumb down 2

    @Troll: “only pointing out that compounded annual inflation can be far more insidious than appears at first glance”

    Luckily most people are receiving income increases roughly in-line with CPI inflation, though it should be little surprise real wage growth is under pressure. That’s what real interest rates would suggest is likely to occur (to me anyways).

    If future inflation were forecast to increase from 2% to 3% but real rates remain negative it’s an interesting exercise what would happen. Say income and rent growth increase from 2% to 3% and fully-discounted mortgage rates go from 3% to 4%.

    Or CPI growth stays at 2%, wage inflation increases from 2% to 3% with real rates increasing 100bps, and fully-discounted rates go from 3% to 4%.

    Mortgage rate changes are instantaneous; wage growth, as my Japanese friend says, “takes time”.

    Like or Dislike: Thumb up 5 Thumb down 1

    Compounding Rates. Really? Says:
    231

    @Troll: Nonsensical chart.

    Could you explain your original statement then? I was mystified by the statement that 25 years at 2% trumps anything from central bank or bond market. I just used 10 years at 4% and 10 years at 6% to see what you would have at the end assuming you started with 1.00.

    rate years price
    0.02 25 1.64
    0.04 10 1.48
    0.06 10 1.79

    Did you have a different number of years in mind for higher rates. I can see your point if maybe rates go higher for say 5 years and then go back down to nothing.

    My point is the rate is the exponential factor, not the years. Here’s another “nonsensical” chart. 25 years at 4% assuming you start with 1.00:

    rate years price
    0.04 25 2.67

    Rates are powerful. Central banks that keep honest books know that inflation is no match for rates. Rates are so powerful that nobody even tries inflating something central banks measure for inflation.

    Like or Dislike: Thumb up 3 Thumb down 1

    Patiently Waiting Says:
    232

    @Anonymous: First of all, the one rental disadvantage I agree with you is moving costs. Although this can be reduced by seeking out landlords who want long-term tenants.

    Maintenance costs almost always favor renters. I’m not sure how the type of home can change this. Any home owner should be putting aside money for future repairs, and this is something renters don’t worry about. I agree owners in new buildings have few maintenance costs, but they may experience great headaches in getting the developer to live up to its obligations. Landlord are forced to fix many things in a timely manner according to tenancy laws.

    No landlord can claim a damage deposit without proper opening and closing inspections. If you move into a place and the landlord doesn’t bother with an inspection, you know you will win no matter what. You may have to go through a few hoops in the legal process before the landlord realizes they are ignorant of the law. On the upside, if a landlord doesn’t pay the damage deposit on time (15 days after tenancy ends), they have to pay you double back. Landlords who mess around with damage deposits are costly to the legal system, so they are penalized accordingly.

    The only reason you won’t get a damage deposit back is if you actually did damage the place (and the landlord knows what they’re doing), or you are too weak and ignorant to stand up for your rights.

    I find your insurance arguement hard to believe. Has anyone else here experienced the same thing?

    Like or Dislike: Thumb up 3 Thumb down 0

    @Devore

    Maybe you want to start a campaign for the CRA will let me inflation adjust my average buy price when selling investments

    What you describe would be a fairer system but it will never happen sadly as it would amount to a tax cut. The counter point would be you would have to pay income tax on the income earned by inflation grinding down your mortgage. Actually a really interesting thought but it will never happen.

    Like or Dislike: Thumb up 1 Thumb down 1

    @Compounding Rates. Really?:

    I was mystified by the statement that 25 years at 2% trumps anything from central bank or bond market.

    Well, that’s not exactly what I said is it.

    I think you’re looking at it incorrectly, remember that in terms of interest rates we’re talking about step functions, not compound interest.

    Look at these two examples, $2000 rent increasing by 2% every year vs. $2000 a month mortgage (say $470K at 2%) increasing to 4% in year 5 and 6% in year 20, ie a tripling of rates. The total paid is actually more for the rental case. Of course you can pick a different rate scenario and come up with a different result, but the point is that it’s not always obvious that an interest rate that triples over 25 years may have less effect than something that is increasing at a measly 2% a year.

    disclaimer: The preceding example is not meant as a recommendation to buy Van RE.

    Like or Dislike: Thumb up 5 Thumb down 2

    Compounding Rates. Really? Says:
    235

    @Troll: Compound return vs. step rates.

    Show your work.

    What I know is this: Principal plus service payments on the mortgage can otherwise be freely be allocated/reallocated to future high yield investments which would offset higher future rent. Does your analysis subtract from rent the earning power of the unavoidable sunk costs of the house?

    Every time I see one of these arguments against rent in this environment it all comes back to sunk costs. If you can find an iron clad legal way to get “your” money out of the house when the shit hits the fan I am SO INTERESTED! I say “your” in quotes because it isn’t really yours after you sign the mortgage papers.

    There are some interesting illegal ways to get “your” money back though:

    (1) Buy property by copper content and then rip out all the copper before skipping town.

    (2) Engage in capital formation activities in the “chemistry and farming” industries either directly or indirectly. Indirectly is easier as you can claim you didn’t know that renting to those colorful persons having the various interesting body art and firearm collections seemed harmless enough.

    (3) Buy property under a false identity, run up debts against the remaining collateral in the property and then skip town with the cash. (Can be combined with #1 for increased profit).

    I am sure there are many other illegal ways of getting the collateral money out so it can be profitably invested after the fact. I am looking for legal ways.

    Like or Dislike: Thumb up 4 Thumb down 2

    @Troll 234

    I’ll bite. So with compounding rates as per your example: The rent will be at (1.02)^20=149% or $2980 a month in year 20.

    I’m just using a pure interest calculation as I’m too lazy to look for the amortization formula and to keep comparing apples to apples (rent from landlord vs rent from bank). So let’s 470000 * .02 /12 = $783 a month paid to interest in year one. In year 20, assuming no principal is paid, 470000 * .06 / 12 = $2350 a month to interest. So that’s an increase of 300%.

    Now this is just going off on pure interest alone. We’re not calculating property taxes, maintenance, and all those other ownership goodies.

    Like or Dislike: Thumb up 3 Thumb down 1

    @T: I’m not sure where this went so off track, but I was orginally responding to your comment that “loan payment goes up with with inflation, it’s called interest rates”. Which is not exactly correct, since loan payment will likely only go up with increasing inflation. But regardless, the point I was trying to make was that talking about inflation rates and interest rates are two different animals and a doubling of rates from 2% to 4% for a loan payment may be less impactful than a steady 2% inflation of rents. It’s somewhat subtle and not immediately intuitive or obvious. Of course your point is valid that you should always do a few rent/buy analysis including all the costs to determine which is favourable.

    Like or Dislike: Thumb up 3 Thumb down 1

    @oh oh:

    Guy is optimist, only 25%, right…

    Like or Dislike: Thumb up 3 Thumb down 0

    @Troll 237

    Gotcha. It makes sense now that I follow your post trail.

    Like or Dislike: Thumb up 1 Thumb down 1

    patriotz patriotz Says:
    241

    @Troll:
    ” The total paid is actually more for the rental case…”

    You are not taking present value, so your argument is meaningless.

    Like or Dislike: Thumb up 5 Thumb down 2

    patriotz patriotz Says:
    242

    Majority of Canadians remain ‘blasé’ about debt loads: survey

    The poll by Harris/Decima asked respondents how confident they were about being able to raise $2,000 within a month if an unexpected need arose.

    While 55 per cent said they were extremely or very confident they could raise the cash, 92 per cent said they’d consider borrowing to come up with some of the cash.

    Does that mean that just 8% of Canadian households have $2,000 in the bank?

    “It’s frightening to see that Canadians have become totally blasé about debt – it’s becoming their new ‘normal’ and they’re numb to this dangerous trend,” says Douglas Hoyes, a bankruptcy trustee with Hoyes, Michalos & Associates Inc.

    “For many, the use of debt to not only pay for big ticket items like cars, but also to cover day-to-day living expenses, has become commonplace.”

    Hot debate. What do you think? Thumb up 12 Thumb down 0

    Anonymous Says:
    243

    @patriotz:

    Contrast that article about high Canadian debt loads, with this article that appeared the The Province yesterday:

    http://www.theprovince.com/jobs/story.html?id=7286196

    The Province website is being annoying right now so all I can get from the article online right now is this line: “A survey by the Canadian Payroll Association found that more Canadians are putting money aside in case of a financial emergency.”

    The way these survey results are being spun in the media seems to suggest that Canada is a country of savers. It seems like a media effort to push back against all the news we’ve been hearing about record debt levels in Canada.

    Like or Dislike: Thumb up 4 Thumb down 0

    Anonymous Says:
    244

    The Province headline that says “more Canadians are putting money aside in case of emergency” is quite misleading when you read the details of the Canadian Payroll Association survey from another source:

    http://www.newswire.ca/en/story/1031331/cpa-survey-finds-fewer-canadians-living-pay-cheque-to-pay-cheque-employees-saving-more-but-many-still-far-from-their-retirement-goals

    “Responses from 3,500 employees across Canada found that fewer are now living pay cheque to pay cheque. Although 47% are still reporting that they would be in financial difficulty if their pay was delayed by even a week, it is still a significant improvement over the 57% last year who were just making ends meet.”

    47% can’t handle even a one week delay in pay and this is being spun as a sign of economic health because it’s down from 57% last year!!!

    “Two out of every five Canadian employees are spending at, or in excess of, their net pay”

    Sounds like a real country of savers to me!!!

    The article gives further stats on the difficulty Canadians are having with saving for retirement:

    “73% of employees say they have saved less than a quarter of what they wish to accumulate.”

    “41% say they’ll now have to work longer – five more years on average – than they planned in 2007″

    With these disappointing statistics coming out of the survey, it is just so disingenous that the headline in The Province is talking about how Canadians are saving more. It seems like the media is desperate to tell a good story about the financial health of Canadians.

    Hot debate. What do you think? Thumb up 10 Thumb down 0

    news junky Says:
    245

    Our local governments are under severe financial stress:

    “Spending has gone up for local governments over the past 10 years but predominantly because the province and federal governments are asking more of local governments through policies or regulations,” Moore said. “It affects everything from core utilities to police services.”

    The convention comes on the heels of a business taxation report that suggests provincial and federal government decisions have had negative financial implications for local government.

    Dikes in B.C. has traditionally been a provincial responsibility but, over the past few years, the province has downloaded this to municipalities, with no additional funding. New standards to deal with sea-level rise and storm surge, as well as seismic stability, are expected to substantially increase the costs.”

    I did not know that the BC govt had shifted financial responsibility for dikes to the municipalities. It seems to me like another case of the BC Liberals trying to balance their books by shifting costs to local government.

    Like or Dislike: Thumb up 5 Thumb down 0

    news junky Says:
    246

    Forgot to post link to article about Union of BC Municipalities I just posted about

    http://www.vancouversun.com/news/mayors+address+taxpayer+fatigue+municipalities+feel+financial/7287337/story.html

    Like or Dislike: Thumb up 1 Thumb down 0

    news junky Says:
    247

    “Delegates’ resolutions include using development cost charges to fund projects such as recreation centres, fire halls and flood mitigation.”

    It seems that local governments are becoming increasingly dependent on Development Cost Charges. It seems like a bad way to pay for essential services like fire halls. How are we going to pay for these things after all the real estate development stops/slows because of a real estate crash??? Are city councils going to approve real estate development projects that are bad for the community simply because city finances are addicted to Development Cost Charges just to keep the fire halls functioning???

    http://www.vancouversun.com/news/mayors+address+taxpayer+fatigue+municipalities+feel+financial/7287337/story.html

    Like or Dislike: Thumb up 6 Thumb down 0

    dire straits Says:
    248

    I am listening to a friend about US RE crash and he is blaming it on high rates in 2006.
    Conventional, 15-yr. 6.13%
    Conventional, 30-yr. 6.47%

    What should be good counter argument?
    thanx

    Like or Dislike: Thumb up 1 Thumb down 0

    patriotz patriotz Says:
    249

    @dire straits:
    “What should be good counter argument?”

    Did prices crash in the past when rates were that high (or higher)? No.

    The rates in 2006 weren’t historically unusual. The prices were.

    Like or Dislike: Thumb up 8 Thumb down 0

    dire straits Says:
    250

    thanx patriotz
    yes, true. i have found rates that were higher in 90;s
    http://www.infoplease.com/ipa/A0908373.html (scroll down at bottom)

    Like or Dislike: Thumb up 1 Thumb down 0

    @news junky: Yes.

    Like or Dislike: Thumb up 0 Thumb down 1

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