FFFA! Price! Decline! How low?

Hey! You made it to the end of another work week!

Now it’s time for us to do our regular end of the week news roundup and open topic discussion thread for the weekend.

Here are a few recent links to kick off the chat:

-How low will house prices go?
-Banks see slowing mortgage growth
-Vancouver prices soften
-13k party time!
-Bad time to be a realtor?
-Pricing property in a falling market
-Majority want to invest but cant afford to
-Goodbye Waldorf
-Sales sunnier outside Vancouver
-A relaxing 80 minute drive
-Gov loses student loan info

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

116 Responses to “FFFA! Price! Decline! How low?”

- ♦ ↓ ↓ ↓ Click here to leap to comment form ↓ ↓ ↓ ♦ -

    So I wondered… Am I the only person who finds it more convenient to use open houses to check out different condo buildings and layouts in an area I’m thinking of renting in than actually troubling property managers/tenants?

    Sometimes I even get given snacks!

    (I’m a buyer, possibly, if SFH prices fall ballpark 50-60% in the next few years. Otherwise I’ll just move to Seattle.)

    Well-loved. Like or Dislike: Thumb up 66 Thumb down 3

    real_professional Says:
    2

    Hello realtor, my old friend
    I’ve come to talk with you again
    Because listings softly creeping
    Reduced home values while I was sleeping
    And the retirement that was planted in their brain
    Still remains
    Without the sound of buying

    In open houses I walked alone
    Narrow driveways of faux cobblestone
    This listing even claims the street lamp
    Toronto, Vancouver? One’s cold, one’s damp
    When my eyes were stabbed by the flash of a reduced sign
    That split the neighbour’s spine
    And touched the sound of crashing

    From a yellow helicopter I then saw
    Thirteen thousand listings maybe more
    People looking without buying
    People giving but no taking
    People writing songs that CREA never shared
    No one dared
    Disturb the sound of popping

    “Greater Fools,” said I, “you do not know
    Listings like a cancer grows
    See my charts that I might teach you
    Lessons from Florida may they reach you”
    But my words like home prices fell
    And echoed in the House of Commons

    And Carney fled and people prayed
    To the leverage gods that they made
    And the Bond Market flashed out its warning
    In the words those higher rates were forming
    And the sign said “The Legacy of Flaherty is best written on leaky condo walls
    And bathroom stalls
    And whispered in the aftermath of a correction

    Well-loved. Like or Dislike: Thumb up 130 Thumb down 6

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

    Poorly-rated. Like or Dislike: Thumb up 4 Thumb down 31

    It turns out the maple leaf on the new plastic $20-bill is not a Canadian maple leaf. It is a leaf from a Norwegian Maple, which is considered to be an invasive species in Canada.

    http://www.cbc.ca/news/canada/ottawa/story/2013/01/17/ottawa-foreign-maple-leaf-irks-botanists.html

    Hot debate. What do you think? Thumb up 19 Thumb down 6

    Many Franks Says:
    5

    Some ugly stats on Canadian consumer behavior:

    As of last September, Canadian households were in debt to the tune of $474 billion. That equates to one and a half year’s net income per household.

    In British Columbia, the average household consumer debt was $38,837 (the highest in Canada). Remember that this does not include mortgage debt. We have car loans, personal loans, lines of credit, and credit cards.

    Although most of us are managing to stay out of serious trouble, we are not doing all that well overall. About half of us with credit card debt either always or often fail to pay off the full balance owed each month. That is what turns a “credit card” into a “debt card.”

    A 2012 poll found that one person in every 20 felt they would never be able to fully pay off their credit card debt. About a tenth of us can only make the minimum payment each month.

    I can’t wait for December’s numbers to hit the press.

    Well-loved. Like or Dislike: Thumb up 44 Thumb down 1

    Left already living in San Diego Says:
    6

    23 degrees and sunny here in San Diego.
    Are you still enjoying golfing, sailing and skiing on the best place on earth, all at the same day?

    Well-loved. Like or Dislike: Thumb up 32 Thumb down 5

    gordholio Says:
    7

    #2, real_professional: Awesome, just awesome.

    Well-loved. Like or Dislike: Thumb up 30 Thumb down 2

    YLTNboomerang Says:
    8

    Can anyone explain to me why REIT’s are doing so well if we are in a bubble? I’m the biggest bear around and I get that many of them are solid because they are focused on commercial RE but I’m hearing more and more about them focusing on residential properties. I get that there are still cashflow positive properties in the middle of Canada but as more cash flows into these organizations eventually they are going to have to buy where the inventory is (TO, VC, etc.) and where there is no way they can be +ve.

    Even if these guys are positive, if we have a RE crash, do they have to mark their assets to market?

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

    Troll Feeder Says:
    9

    Real Professional, that was amazing. Can you archive that on vancouverpeak? If you don’t I will. Any musicians reading this that want to perform that? I’d love to hear it.

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

    real_professional,

    Nicely done!

    Someone did a similar one for stock brokers:
    http://www.youtube.com/watch?v=0ufxcMqsZpM

    “Hello Wall Street my old friend
    I’ve come to beg for business again
    Monthly payments slowly creeping
    Just sold a car I thought I was keeping”

    Like or Dislike: Thumb up 7 Thumb down 1

    Groundhog Says:
    11

    @YLTNboomerang

    Investors seeking yield in a ZIRP environment

    Like or Dislike: Thumb up 7 Thumb down 1

    Short'em High Says:
    12

    YLTNboomerang Says:
    January 18th, 2013 at 9:18 am

    … if we have a RE crash, do they have to mark their assets to market?

    No, but the market will mark and certainly overshoot on the price of their debt instruments, equity shares, and credit default derivatives…

    What RE flipper bulls fail to realize about their trading in physicals is that there is no possibility of creating a hedge or protective trailing stop order. Flippers are going to lose all their gains and more. With REITs at least there is a 50/50 chance of getting out without losing your shirt. You can also work out for yourself if cummulative distributions will cover your worst case loss. On the other hand, as the inevitable crisis looms, it may be more profitable to be short after each distribution rather than long on the record date.

    Like or Dislike: Thumb up 4 Thumb down 1

    Patiently Waiting Says:
    13

    Reading the complaints in this Craigslist post would make you think of some rat-infest 70s building off a bad part of Commercial Drive:

    http://vancouver.en.craigslist.ca/bnc/hou/3524540722.html

    Well, its actually about a Burnaby condo building completed only last year.

    Building today’s slum today.

    Affinity by Bosa.

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

    patriotz patriotz Says:
    14

    “Even if these guys are positive, if we have a RE crash, do they have to mark their assets to market?”

    They mark their assets to market on the balance sheet every year, but that doesn’t affect their earnings. REIT’s buy properties for income not speculation.

    As Groundhog said that real problem with REIT’s is that the people who buy the units (i.e. the stocks) are paying too much for them. There is nothing the management can do about that.

    Like or Dislike: Thumb up 8 Thumb down 0

    @YLTNboomerang

    2 things will influence how much profit a (correctly operated) REIT makes: interest on its debt and rent revenue. Obviously, if interest rates rise too much, REITs will suffer, but some of them got into really long term mortgages at low rates, so they do have their bets somewhat edged on that front.

    The rent revenues can fluctuate, and this is mostly how you find out which REIT is better managed. Vacancy rate can kill profits pretty fast, but then again, many commercial or office buildings are leased for many, many years. Most companies don’t want to move all their workers every now and then, so 10+ years lease are common. Since there is quite a high built-in cost for office or commercial tenants to move, the owner can raise rents without too much risk of losing its tenants. Unless the tenant goes bankrupt, they often stay in the same place.

    Residential REITs more or less act like a more rational version of your average RE investor. Except they can’t just sell everything when markets become overvalued, cause then they would just stop to exist as a REIT. They stop adding to their inventory though if management knows wtf they’re doing.

    Also, keep in mind that stock prices are normally just a reflection of future earnings, so if a bad management team is replaced by a good one and operations improve, the stock price can go up even in times are bad for the industry. Kinda like a big pharma can do really good if R&D does well even if medicare tries to curb spending for the industry as a whole.

    Like or Dislike: Thumb up 9 Thumb down 0

    @ Real Professional:

    That’s some seriously funny shit!!! (And funnily serious too).

    Well done.

    Hot debate. What do you think? Thumb up 9 Thumb down 2

    Left already living in San Diego Says:
    January 18th, 2013 at 8:24 am

    23 degrees and sunny here in San Diego.
    Are you still enjoying golfing, sailing and skiing on the best place on earth, all at the same day?

    ===========

    Say hello to Kalluk, Tatqiq and Chinook for me, OK?

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

    Re: #13

    “Unit 7 0 6 is an illegal factory, also managed by A D V E N T . Mr. Stompy upstairs owns a 247 factory. He does his laundry after 11pm, sleeps at 3am EVERY night and wakes up at 4am.. constant noise and stomping!”

    Sounds like a brothel?

    Hot debate. What do you think? Thumb up 11 Thumb down 2

    Anonymous Says:
    19

    …What a douche! I’ll bet his calculator is still in the package..

    Ya, but not because he couldn’t use it. It’s because he couldn’t figure out how to open the package.

    Like or Dislike: Thumb up 2 Thumb down 3

    trash crash alert Says:
    20

    Looks like we are on the BUST cycle:

    Billionaire investor George Soros has been an active promoter of the relevance of reflexivity to economics first propounding it publicly in his 1987 book.[1] He regards his insights into market behaviour from applying the principle as a major factor in the success of his financial career.

    Reflexivity is discordant with equilibrium theory, which stipulates that markets move towards equilibrium and that non-equilibrium fluctuations are merely random noise that will soon be corrected. In equilibrium theory, prices in the long run at equilibrium reflect the underlying fundamentals, which are unaffected by prices. Reflexivity asserts that prices do in fact influence the fundamentals and that these newly-influenced set of fundamentals then proceed to change expectations, thus influencing prices; the process continues in a self-reinforcing pattern. Because the pattern is self-reinforcing, markets tend towards disequilibrium. Sooner or later they reach a point where the sentiment is reversed and negative expectations become self-reinforcing in the downward direction, thereby explaining the familiar pattern of boom and bust cycles [2] An example Soros cites is the procyclical nature of lending, that is, the willingness of banks to ease lending standards for real estate loans when prices are rising, then raising standards when real estate prices are falling, reinforcing the boom and bust cycle.

    Hot debate. What do you think? Thumb up 9 Thumb down 3

    Groundhog Says:
    21

    @trash crash alert

    Alchemy of Finance?

    Like or Dislike: Thumb up 2 Thumb down 1

    Short'em High Says:
    22

    Attn: REIT pickers, finance accounting believers, and high ratio book experts.

    How does one pick a REIT that won’t gap down one day by 50% and never come back? Is there an unstated assumption here or is this forum simply a hangout for a different sort of irrational believer?

    One thing that surprises me (maybe I shouldn’t be surprised), is when RE stock advice is posted on this forum, nobody ever mentions a stop loss exit price/percent. What we do see are endless remarks about accounting practice, management genius/stupidy and so on.

    It is remarkable that some who consider physical RE risky because of the likely and sudden price gap (crash), think little of the same problem in RE stocks. Armchair platitudes on “future earnings” will not reduce the damage to your account if the share price suddenly tanks – fairly or unfairly.

    FYI Home Capital Group, HCG.TO still hovering above $60:

    http://ca.finance.yahoo.com/echarts?s=HCG.TO#symbol=hcg.to;range=3m

    If it runs to $70 before finally collapsing into a smoking ruin, one would have to endure a $15 loss per share to hold the short from when it was first identified as a short target at roughly $55 – a 27% adverse fluctuation capital.

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

    Bull! Bull! Bull! Says:
    23

    @real_professional that’s genius.

    if that song was submitted to a crowd sourcing site i would help fund it with some of my vast real estate profits.

    i want to see that sung on youtube by a professional musician someday.

    Hot debate. What do you think? Thumb up 10 Thumb down 14

    Anonymous Says:
    24

    …which is considered to be an invasive species in Canada….

    Though you were referring to Realtors for a minute.

    Hot debate. What do you think? Thumb up 9 Thumb down 3

    US policymakers didn’t foresee their “US-style” housing crash. Will our counterparts do any better?

    http://finance.yahoo.com/news/fed-missed-warning-signs-2007-183654997.html

    Like or Dislike: Thumb up 6 Thumb down 1

    Anonymous Says:
    26

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

    Poorly-rated. Like or Dislike: Thumb up 2 Thumb down 12

    Anonymous Says:
    27

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

    Poorly-rated. Like or Dislike: Thumb up 1 Thumb down 13

    Anonymous Says:
    28

    Woo hoo, Vancouverites. It’s time for Dine Out Vancouver again. Go out and spend more money after maxing out your credit cards last month.

    Seriously, I don’t get why we get excited about $38 menus (or $28 for that matter). Let’s say each orders ONE glass of wine ($7-8), with taxes and tipping, it’s close to $120 for two.

    Not much of a good deal, is it…

    We are such a bunch of suckers…

    Well-loved. Like or Dislike: Thumb up 32 Thumb down 9

    “It is remarkable that some who consider physical RE risky because of the likely and sudden price gap (crash), think little of the same problem in RE stocks. ”

    I think this was more or less aimed at me.

    I don’t consider physical RE risky because of the sudden and likely price gap (crash). I think it’s a sure loss because it doesn’t turn a profit and won’t for the lifetime of the building (if bought at current Vancouver prices). Some REITs are turning a profit as we speak. See the difference here? Profit. Earnings. Making money, not burning it.

    Real estate prices can go up or down, but if you have a building with 25 years lease and 25 years mortgage and you know your operating costs for the next 25 years, you can calculate the profit you’re gonna make for the next 25 years, regardless of RE prices. It’s roughly the same calculation for physical RE, except right now in Vancouver the rent doesn’t even cover the interest on the mortgage you need to afford physical RE, so it’s kinda easy to figure out that profits will be <0 for the foreseable future.

    Are REITs risk-free investment? Not by a mile. But their risk-adjusted rewards are mor or less the same as other stocks on the TSE, while physical RE (in Vancouver) are pretty much the penny stocks of the TSX-V.

    Like or Dislike: Thumb up 6 Thumb down 2

    Having followed local Chinese RE forums for a couple years, I’m surprised by the lack of bullish pumping in 2013. There is Zero talk on Chinese New Year “HAM” buyers so far this year, which is quite unusual. Even the perma-bulls are either staying silent or saying “it’ll get better next year.”. None of them are publicly predicting a spring turnaround of Van RE market.

    Guess we can file this under “qualitative observation”

    I’m betting on subdued CNY sales this year, where “HAM” will be more focused on selling than buying. We’ll find out in less than a month.

    Well-loved. Like or Dislike: Thumb up 54 Thumb down 2

    HAM Solo Says:
    31

    @ patriotz

    REITS, in theory could have to write down assets, based on their accountant’s view, but point taken, a distribution cut would probably send them tumbling well before they actually wrote down their office towers and commercial properties.

    IMHO, REITs will lag the housing downturn and so may not be fertile ground for shorting for some time. Before REITs go down, you need the problems in housing to spread to the broader economy and even then there will be a lag between a weaker rental market for office and commercial space and moves by the REITs to reduce their distributions. In the US, the sector held up surprisingly well for a long time before getting hit for a 60% decline.

    The one REIT sector I might look to short soon would be the retirement home group like Amica, Chartwell. They lose 20% of tenants per year through, for want of a better euphemism, attrition. Replacing them depends on whether the family can sell grandma’s house and also on how much they get for it. As the retirement REITs tend to run on fairly slim margins, a slowdown in intake can be deadly.

    Imagine if you are trying to plan moving a parent out of their Vancouver home right now. Either you’re going to significantly reduce the amount of money you thought you had to take care of mother, or you’re going to be stuck unable to sell the house.

    Like or Dislike: Thumb up 8 Thumb down 0

    Sub-550k Richmond SFHs showing up on MLS
    11407 Kingcome ave
    Asking 548,800
    Assess 666,600

    11251 Kingsbridge Dr
    Asking 549,800
    Assess 637,300

    Well-loved. Like or Dislike: Thumb up 50 Thumb down 1

    I dug a bit deeper to get more information about the number of dwellings in Vancouver. The 2011 government census data indicates the following:

    Vancouver population: 603 502
    Apartments Over 5 Stories: 70 270
    Apartments Under 5 Stories: 87 430
    Total Apartments: 157 700

    What we know:
    1) BC Hydro account usage data from 2006 and 2007 was used to classify condominium units as “empty” if their electricity usage levels were below a threshold of 75 kilowatts (Kw) of electricity per month or 100 Kw per month. When the use threshold is 100 Kw per month, the estimate of empty units is 8.5% of units. Under 75 Kw per month the estimate of empty units is 5.5%. To put that in perspective a 17 cu inch refrigerator/freezer uses 120 to 160 Kwh per month.

    2) There were 5336 attached dwellings listed for sale at the end of December 2012 according to Larry’s website.

    3) The B.C. Assessment Roll Data for 2009 shows that 35.2% of the apartment condominium stock was investor-owned and 64.8% was owner-occupied. The Cityscape Consulting report prepared for the City of Vancouver shows that by sub area the ratio of investor owned vs. owner occupied units is as follows:

    Investor Owned/Owner Occupied
    Downtown: 48%/52%
    W. End: 40%/60%
    Fairview Kits: 27%/73%
    W. Side: 18%/82%
    E. Side: 19%/81%
    Mt. Pleasant NE: 23%/77%
    Van. Total: 35%/65%

    Doing some Rough Math we get the following:
    1) There are between 8674 and 13 405 unoccupied condos in Vancouver (5.5% * 157700) and (8.5% * 157700).

    2) 3.4% of the total attached units (5336/157700) were listed for sale at the end of December, 2012.

    3) YVR2ZRH found 31% of units are listed tagged as vacant (4% of units were double tagged so the number might not be completely accurate). Assuming 31% of units listed are vacant, 1654 of the 5336 units listed on the MLS would be classified as vacant. The listed vacant units represents only 12% to 19% of the 8674 to 13 405 unoccupied condos in Vancouver as indicated by the B.C. Hydro accounts data.

    Ben Rabidoux has shown that per household formation, Canada has actually out built household formation over the past 10 years. If you look at average attached prices, they have fallen to similar levels seen in early 2010.

    It’s conjecture, but perhaps as a portion of investors/flippers finds their mortgages underwater, they pull their listings hoping for the market to recover. If that were the case, it would be logical to see the greatest number of listings pulled downtown where investors tend to own a higher percentage of the total number of units.

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

    Re #32

    “Sub-550k Richmond SFHs showing up on MLS
    11407 Kingcome ave
    Asking 548,800
    Assess 666,600

    11251 Kingsbridge Dr
    Asking 549,800
    Assess 637,300″

    Two properties 80m from each other. Can’t help but think they are owned by same HAM “investor” now in distress.

    Well-loved. Like or Dislike: Thumb up 22 Thumb down 2

    Good Garth post today about Kelowna

    http://www.greaterfool.ca

    Like or Dislike: Thumb up 6 Thumb down 3

    This may have been posted a few days ago but worth the read. Reality has clearly set in.

    http://www.theglobeandmail.com/news/national/due-to-a-steep-sales-drop-vancouvers-home-prices-have-softened/article7398676/

    Like or Dislike: Thumb up 4 Thumb down 1

    patriotz patriotz Says:
    37

    “I don’t consider physical RE risky because of the sudden and likely price gap (crash). I think it’s a sure loss”

    Exactly right. Investment risk means difficulty in evaluating fundamental value – i.e. in figuring out an appropriate price to pay relative to estimated earnings.

    RE in Vancouver is not any more risky than it ever was, just a lot more overpriced.

    Hot debate. What do you think? Thumb up 16 Thumb down 2

    New Listings 215
    Price Changes 58
    Sold Listings 54
    TI:13289

    http://www.paulboenisch.com

    Well-loved. Like or Dislike: Thumb up 114 Thumb down 0

    UBC in Crisis Mode Says:
    39

    These two ladies, mentioned in the Globe and Mail article “West-side Vancouver sellers holding out for deep-pocketed buyers”, made millions (if not tens of millions) from Chinese buyers.

    http://www.theglobeandmail.com/news/british-columbia/west-side-vancouver-sellers-holding-out-for-deep-pocketed-buyers/article7381772/

    It does not matter much if their clients are holding up or not, they are not staving, which cannot be said for other realtors (11,000?).

    http://sydneydeng.mlslink.mlxchange.com/?Page=3602957

    Like or Dislike: Thumb up 7 Thumb down 1

    14K Party by the end of the month!

    Can anyone provide the Jan month end inventory for since 2008?

    Can someone also provide the peak listings inventory and the month in the last several years? Did we ever get over 20,000?

    Like or Dislike: Thumb up 5 Thumb down 2

    Ralph Cramdown Says:
    41

    “How does one pick a REIT that won’t gap down one day by 50% and never come back?”

    I’ve got a better idea. Pick 100 different dividend payers that PROBABLY won’t blow up. When one of them does, say “c’est la vie,” while continuing to invest the excess profits from the remainder into more payers.

    Hot debate. What do you think? Thumb up 9 Thumb down 3

    Bag it and tag it Says:
    42

    30 VMD
    I agree about your prediction for HAM and CNY. I think the HAM boom last few years was fueled by the corrupt getting out of China before regime change. Now I think most HAM will want to wait at least a year or two to get a feel for the new regime before trying to flee….and when they do, I’m sure they’ll go somewhere with stable RE and not Van.

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

    Here are the sale stats so far in Jan:

    Year Sales YoY%
    2013 713  -14%
    2012 816  -23%
    2011 1054 -

    If we don’t count the first day of January from both ’13 (possibly aberrant # due to spill-over from Dec 31, when no sale was recorded on MLS) and ’12, then we actually have 617 vs 771 = -20% YoY sales decline.

    Last January sales picked up around Jan 19. Avg daily sales Jan 1-18 was 60/day, while Jan 19-31 was 100/day. We can expect an uptick in sales starting Monday, but I doubt we’re going to average 100 sales/day for the rest of the month.

    Well-loved. Like or Dislike: Thumb up 33 Thumb down 1

    Groundhog Says:
    44

    @Mclovin,

    Heres last year:

    paulb. Says:
    January 31st, 2012 at 10:41 am
    New Listings 278

    Price Changes 88

    Sold Listings 112

    TI:13442

    AND:

    paulb. Says:
    February 1st, 2012 at 11:11 am
    Whoa…

    New Listings 305

    Price Changes 74

    Sold Listings 38

    TI: 13368

    Just picked these up from the comments sections and took a quick read through them…..Everyone thought these #’s were pretty horrible last year, this years #’s are shaping up to be a bit lower.

    Hot debate. What do you think? Thumb up 19 Thumb down 1

    Groundhog Says:
    45

    Also, hardly any month-end expirations last year.

    Like or Dislike: Thumb up 0 Thumb down 1

    YLTNboomerang Says:
    46

    Thanks for all the info on REiTs, my thought process for inquiring was thinking about potential short options in the future. I made the decision last year only to invest in industries I am directly involved in as I’ll likely see trends before joe investor. I don’t invest in tech stocks, random high dividend yield co’s, ETF’s or Garth’s preferred (though I have bought a tonne of the debt my employer has issued). I am obsessed with RE and bubble watching so figure with my new 2012 strategy I really need to proffers the best way to profit from the impending crash. I need some extra sugar to go with my “told ya so’s” to family and perma-bull friends and colleagues.

    Like or Dislike: Thumb up 4 Thumb down 2

    YLTNboomerang Says:
    47

    Can anyone recommend any good advisors who have a strategy to profit on the downside? I don’t have the time and sense to effectively manage a net short position on Canadian RE (and don’t feel comfortable playing on the short side with more than 10k). I’m fine with fee based and am prepared to invest about 100K into a well developed short strategy.

    Like or Dislike: Thumb up 6 Thumb down 3

    real_professional Says:
    48

    @YLTN Boomberang: THIS IS NOT ADVICE JUST THOUGHTS:

    honestly – lots of people claim that they know how to short the Canadian consumer. One recent anti real estate advisor was suggesting shorting banks. In my opinion it is way too early – difficult to isolate the real estate exposure – and if you look at XFN.TO, it wouldn’t have been the best strategy, quite the opposite.

    What everyone has to remember is that the Canadian consumer is actually not very Canadian at all. A Canadian gets into his/her Honda (HMC), drives to Safeway (SWY), buys a latte at Starbucks (SBUX), and then buys some Kellogg’s (K) cereal. Now, they may talk on their iphone (AAPL) and use Rogers as a carrier (RCI/B.TO). Ding ding ding – finally a Canadian company.

    But you have to ask yourself is if what is Canadian consumer exposure demand also elastic to justify a short. Tim Horton’s (THI.TO)is low end products that one would argue would hold up relatively well in a recession, Rogers, Telus, BCE, could get squeezed on ARPU but in general wireless have already faced increased competition and in addition, are now considered by many a staple product.

    And then there is perception: The Bay, a company that is very Canadiana, they actually get close to 1/3 of their revenue from US consumers through their Lord and Taylor stores. Most people shorting blindly don’t know that.

    Then we have an international brand like Lululemon – Well not so international, they get 40% of their revenue from Canadian stores.

    The point is do your homework, people claiming shorting are more wishful than truthful. Simulated returns are as valuable as a Chinese takeout menu, and historical returns can’t always be repeated especially on something like a non-regular occurrence like this real estate market.

    Shorting Canadian consumers may be better done by going long American consumers (and their currency), not “shorting” at all on an absolute basis, but more on a relative basis.

    ————-

    I am not self promoting as the person I am going to tell you to contact is, not me, but someone that I think will be a good person to have a conversation with. It is who I discuss strategies with. He is a good and friendly resource to talk to and isn’t pushy. He isn’t a shorting expert nor would he claim to be but can provide insight and an interesting conversation – perhaps lead you in the right direction.

    AJ Sull, Pacifica Partners
    CFA, MBA, CMT
    aj@pacificapartners.com
    604.576.8908

    Hot debate. What do you think? Thumb up 15 Thumb down 7

    Total days	21
    Days elapsed so far	13
    Weekends / holidays	5
    Days missing	0
    Days remaining	8
    7 Day Moving Average: Sales	56
    7 Day Moving Average: Listings	249
    SALES	
    Sales so far	713
    Projection for rest of month (using 7day MA)	451
    Projected month end total	1164
    NEW LISTINGS	
    Listings so far	3010
    Projection for rest of month (using 7day MA)	1990
    Projected month end total	5000
    Sell-list so far	23.7%
    Projected month-end sell-list	23.3%
    MONTHS OF INVENTORY	
    Inventory as of Jan 18, 2013	13289
    MoI at this sales pace	11.41
    

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

    January to April aggregated

    year sell  list ratio
    2006 12243 18030 68%
    2007 11634 19270 60%
    2008 10710 22616 47%
    2009 7407  16529 45%
    2010 10850 24405 44%
    2011 12221 23138 53%
    2012 9816  23207 42%
    

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

    January to April aggregated

    year sell  list ratio
    2006 12243 18030 68%
    2007 11634 19270 60%
    2008 10710 22616 47%
    2009 7407  16529 45%
    2010 10850 24405 44%
    2011 12221 23138 53%
    2012 9816  23207 42%
    

    Like or Dislike: Thumb up 4 Thumb down 2

    real_professional Says:
    52

    And Jesse, we are running closer to 25% so far?

    I wouldn’t be surprised if we are around 33% by April.

    Like or Dislike: Thumb up 5 Thumb down 3

    Groundhog Says:
    53

    @ Jesse

    FYI

    http://www.zerohedge.com/news/2013-01-18/detonating-japanese-debt-time-bomb-kyle-bass

    New Kyle Bass interview, Japan got brought up a few weeks ago and we went back and forth a couple of times….He’s looking at an 18-24 month timeline for “debt timebomb” to go off.

    Like or Dislike: Thumb up 4 Thumb down 2

    real_professional, perhaps, though seasonality would forecast sell-newlist to increase in February and into the spring. An average 33% sell-newlist over that period would be horrendous.

    One interesting year is 2010. That year saw sell-newlist comparable to 2012, with sales slightly more robust, but the second half of the year saw sales rebound significantly.

    In 2010 I remember thinking how similar to 2008 it was looking in its sales pattern. That all changed in about May, which was the start of a massive bull run in Van West, Richmond, and some other areas, that lasted about a year or so (a bit less for Richmond that was going well until about March 2011).

    I bring this up because we have seen years in the past that have exhibited burgeoning weakness that were “false starts”. There are two factors for consideration in 2013 in the “not as bearish as 2012″ camp:
    1) Pop growth into Vancouver in 2012 was slightly higher than in 2011.
    2) Asian economies — most notably China — have seen a rebound in investment spending in the past 3-4 months and that could lead to some additional income generation that makes its way to Canada.

    Don’t get me wrong, though, there are plenty of things to the downside in 2013, including increasing dwelling completions and fully-implemented OSFI mortgage underwriting guidelines. Those two factors will be more bearish than 2012. Add in what I call “amateur landlord fatigue” and 2013 could be “the” year. Like sands through the hourglass… :)

    Hot debate. What do you think? Thumb up 16 Thumb down 2

    604 Receding Gains Says:
    55

    Anyone have stats separating highrise condo from low rise condo? Are both being beaten up the same way? I suspect downtown highrise is being crushed more than the other segments….

    Like or Dislike: Thumb up 3 Thumb down 2

    Romeo Jordan Says:
    56

    Like I said, we WILL see 300+ listings day before the month is out.

    The inventory increase will become (unusually) noticeable to the great unwashed in a couple of months.

    That sinking feeling they are beginning to feel will be confirmed.

    Nothing like the smell of fear in the morning.

    Hot debate. What do you think? Thumb up 14 Thumb down 15

    Girlbear Says:
    57

    http://online.wsj.com/article/SB10001424127887323596204578241712854783062.html

    These people have the money to buy, but would rather rent…

    Like or Dislike: Thumb up 7 Thumb down 1

    YLTNboomerang Says:
    58

    real_professional:

    Thanks for the contact. My strategy to date has been long on USD by investing in US equities and USD. It is annoying though as I’m very blue chip US and have to pay the foreign tax on dividends verses the 50% tax for domestic dividends.

    It’s the whole “short this, short that” mentality that makes this one of the few circumstances where I want to consult with and pay a proffessional (not your vanilla advisor that just preaches the mutual fund du jour as recommended from above or the one that pays him the highest comish). RE goes down, CDN equities will likely go down too as our economy is too dependent today; I want something beyond Canada is going to suck, go US then come back in the future. I want Canada is going to suck so I’ll manage m own US portfolio and hopefully profit off a domestic investment that is profitable inversely to CDN RE….maybe I should find a TSX short ETF, ugh!

    Like or Dislike: Thumb up 3 Thumb down 2

    One to watch… 3071 West King Edward ave, this lot sold 1yr ago for approx 1.41 correct me if i’m wrong, a yr later and a new shoddy home is just listed for 2.488.000, me thinks they may realize 2mill and profit be nill, they got a LOT o competition in this price range-area

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

    Quick comment regarding rental rates.
    As you all know, I left town. Lived in the same amazing apartment for 5 years while dear Landlord subsidized our housing costs to the tune of $200,000 cumulative over 5 years. After 5 years of no rent increase, you would think that on leaving they would be ready to raise it !!!!

    Wrong – - – -

    Rent is down 8.5% on a nominal basis, 20% on inflation adjusted bases and if you are taking out strata/taxes, rent is down even more!!!

    I would so love to go back to it – but now at that price point there is serious inventory and competition so the landlord is being aggressive to get the vacancy time as low as possible.

    Did we throw money away on rent? No !! We lived it up, had a great place, and saved $200,000 compared to the cost of owning.

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

    Patiently Waiting Says:
    61

    Yet again, a school district budget crisis due at least partially to declining enrollment. Coquitlam is wondering what happened to over 300 projected students (1% of total enrollment).

    http://www.theprovince.com/news/Declining+numbers+force+Coquitlam+school+district+into/7841789/story.html

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

    macafee is cool Says:
    62

    @YLTNboomerang Says
    why do you think TSX will go down when 80% are resources on TSX and you assume that US will be long along with Asia?

    Like or Dislike: Thumb up 3 Thumb down 0

    @ Patiently Waiting # 61

    It’s puzzling to me why school enrollment is declining in both Coquitlam and Surrey. Similar to Coquitlam, the Surrey School Board was expecting an increase in enrolment this year, but instead they’ve experienced a decline.

    http://www.globaltvbc.com/surrey+school+board+surprised+by+drop+in+enrollment/6442737243/story.html

    With the high cost of housing in the City of Vancouver, I would think more families with school-aged children would be moving to suburbs like Coquitlam and Surrey. Those are two of our largest suburbs that have experienced significant growth in recent years so a decline in school enrollment is shocking. Could it be that young families are moving out of Metro Vancouver altogether?

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

    Keeping An Eye On The Pimps Says:
    64

    Foreclosure Avalanche Warning

    The pimps pull numbers out of their anuses and call it a forecast, now they are pulling psychotic ideas out of their anuses.

    Their psychotic ideas go like this… “If sellers can’t get the price they want, they simply pull the listing off the market”

    Yeah, ok, Cameron, how come the listings are swelling?

    Since January 2, my neighbourhood has had at least 2 open houses on every block, yes some even on week days.

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

    Patiently Waiting Says:
    65

    “Could it be that young families are moving out of Metro Vancouver altogether?”

    Also, some aren’t moving here in the first place. Especially immigrants, who are being encouraged to move to the Prairies in a number of ways. For instance, I suspect immigration settlement services (taxpayer-funded) are being reduced in Vancouver/Toronto and increased in places like Saskatoon.

    BTW I’ve been looking at rental apartments as we will move in a few months. I talked to a rental manager for a very large rental complex who noted an unusual number of vacancies (she showed us a few empty units). She was surprised as usually the rental market picks up when real estate slows down.

    Hot debate. What do you think? Thumb up 14 Thumb down 3

    Anonymous Says:
    66

    “It’s puzzling to me why school enrollment is declining in both Coquitlam and Surrey.”

    There is a pretty simple explanation. Declining population. Less people coming, more people leaving. There is no other explanation. With all the houses and condos in the pipeline this is just another nail in the coffin of lower mainland real estate. This crash could be a lot faster and more severe than most bears predict.

    Hot debate. What do you think? Thumb up 14 Thumb down 3

    RealityCheck Says:
    67

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

    Poorly-rated. Like or Dislike: Thumb up 1 Thumb down 18

    RealityCheck Says:
    68

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

    Poorly-rated. Like or Dislike: Thumb up 3 Thumb down 12

    Anonymous Says:
    69

    RC: “Like I said a few days ago, give your kids any advantage you can…they will need it in the future. Like a “Paid off house at age 30″”

    When you give your kids the house when they hit age 30 where are you going to live? If you have kids at age 25 you will only be 55 when your kids are age 30 and you will still need a place to live for another 30 plus years. Or do your kids live with you until they are 65? There could be 2 more generations in your family needing a house by that time. I hope you have a big house.

    Hot debate. What do you think? Thumb up 10 Thumb down 2

    Anonymous Says:
    70

    RC: “Private school enrollment is at a record high!”

    In Surrey LOL!

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

    Anonymous Says:
    71

    RC: “I’ve got a lot of useful things to sell you.”

    We know. Now get back to the open house so you can try to make that sale.

    Hot debate. What do you think? Thumb up 16 Thumb down 4

    Anonymous Says:
    72

    RealtyCheck: “WOW. Posters here seriously think Metro Vancouver’s population is dropping??? ”

    Getting scared?

    It has got to suck when not only are your only assets gone no bid and in free fall but you also have zero income. Ouch! Those soup kitchen lines are going to be long.

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

    Worst time in 31 years to buy RE Says:
    73

    YLTNboomerang #8
    Regarding REITs:

    I doubt if there’s a bigger bear than me when it comes to individual residential properties in the vancouver area. But I’m also a keen investor in REITs and will continue to be as REITs are a totally differnt beast than single condos or houses.

    Based on a 2012 REIT review by CIBC, the categories for the 27 biggest REITs in Canada include shopping centres, office, industrial, diverse retail, retirement homes, hotels, and residential…
    residential means apartments.
    The residential (apartment) sector was 15% of the total of $46 billion. OF that 15%, BEI.UN and CAR.UN are by far the biggest 2 with minimal holdings in Vancouver.

    The market for apartment blocks has nothing in common with the market for individual condos. Construction of new apartment towers has virtually dried up in Vancouver over the last 15 years…they’re all condo towers. Almost all of the buildings acquired by REITs are existing properties with several hundred units where anything less than $50 mil would not buy very much. The fact that they can borrow at a substantially lower rate than the general bublic does not hurt either.

    Apartment blocks burhased by REITs are long term commitments that are not affected very much by economic cycles. If anything, they may even benefit from condo and house owners who are selling and intending to rent.

    Like or Dislike: Thumb up 6 Thumb down 1

    #6
    “23 degrees and sunny here in San Diego.
    Are you still enjoying golfing, sailing and skiing on the best place on earth, all at the same day?”

    I heard this before, but that is ridiculous, you will spend most of the time in traffic congestion, even on weekends. So the main activity really is sitting in a car.. unless you have a “yellow helicopter”

    Hot debate. What do you think? Thumb up 17 Thumb down 8

    patriotz patriotz Says:
    75

    “But I’m also a keen investor in REITs and will continue to be as REITs are a totally differnt beast than single condos or houses.”

    BEI.UN Yield 2.953
    CAR.UN Yield 4.194

    The REIT’s would never buy properties with yields that low, so why would you buy a REIT with yields that low?

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

    Been working on my 2013 predictions for both VCI contest and the other forums. Sorting out a list of factors that will negatively impact Van RE. While working on the demographics section I remembered reading about Canada’s “population dependency ratio” a few weeks ago, so I went ahead to do more research:

    1. good read: BoC’s article last April “Aging Gracefully: Canada’s Inevitable Demographic Shift”
    2. Graph: Canada and US age dependency ratios: the boom that was, now becomes the headwind (by pacifica partners)

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

    (…continued)
    3. “The most depressing slide ever” [Real house price vs Inverse of Population dependency ratio] by Citi’s Matt King
    http://www.businessinsider.com/matt-kings-most-depressing-slide-ever-2012-12

    Like or Dislike: Thumb up 7 Thumb down 1

    Worst time in 31 years to buy RE Says:
    78

    patriotz #75

    “why would you buy a REIT with yields that low?”

    Because I bought them about three and a half years ago along with several others when CAR.UN was less than half today’s value and BEI.UN less than a third of today’s value.

    You still holding PGF?

    Like or Dislike: Thumb up 6 Thumb down 3

    Following up on what others have pointed out in this and other threads…
    I have some knowledge of the rental market (esp. in Victoria), and while it is not an epidemic it is obvious that for many months vacancies have been lingering that a couple of years ago would have been snapped up quickly and been competed for.

    What is going on? Can this really be explained by population decline (and in Victoria too?). And/or are there fewer foreign students coming over? And/or are there more young people returning/staying to live with their parents?

    When prices were going up and home sales volumes were high a couple of years ago, rental vacancies were tightest. Now, with home sales low and prices headed down, rental vacancies are high. That is the opposite of what would have been my first assumption (ie: people not buying should mean more pressure on rental market)

    What’s up here?

    Hot debate. What do you think? Thumb up 15 Thumb down 2

    Waiting to exhale Says:
    80

    My contribution to the demographic debate:

    My occupation requires me to deal directly with new immigrants coming to Canada. I do not have precise statisitics but my work unit has noticed a few trends when it comes to immigration.

    The amount of new immigrants from China overall is trending downwards. For the ones that are coming you find less families settling in the Lower Mainland. I have noticed an increase of families settling in other major Canadian cities like Montreal and Toronto. These families are relatively small usually having a set or parents and one kid.

    The most interesting trend is Filipino immigrants. Nowadays they rarely settle in BC. They usually end up in the Prairies. My own rough estimate would be less than 10% actually settle in BC. I find the Filipino immigrants the most interesting in terms of demographics because they are now the number one immigrant source country for Canada and they usually come in big families. A family with more than three kids are quite common.

    Many of the new immigrants from East Asia (Hong Kong, Taiwan, South Korea)of the 1990′s who settled in the Lower Mainland have since gone back to their native countries for better economic opportunities. I think the numbers are even higher for their kids who would be in their thirties now which is prime child rearing age. As we all know many of these new immigrants settled in differnt geographical pockets and that is why I believe there has been less children enroling in schools than estimated. I believe this trend will continue with families repatriating to their original countries and the next domino to fall will be Chinese immigrants.

    Well-loved. Like or Dislike: Thumb up 44 Thumb down 1

    Romeo Jordan Says:
    81

    Folks in the know are starting to talk about a complete meltdown this spring.

    Could we actually CRASH brutally hard and fast (40% decline), vs. a protracted slump?

    Well-loved. Like or Dislike: Thumb up 33 Thumb down 10

    Romeo Jordan Says:
    82

    Drove by 4 OPEN HOUSES on the West Side….Kerrisdale area….ALL Chinese Realtors (ie. Ben Chang, and his silver 3-series with the Open House sign and arrow on the roof)…..all had signs saying “Please take your shoes off at the door”….all had ZERO traffic…me thinks that January will be a slow month, perhaps Feb as well…

    You have it on record that I’m predicting a 300+ listings day for this month. A 400+ listings day for next month. And a 500+ listings day this year.

    This is the year that For Sale signs EXPLODE onto a lawn near you, and Open Houses are full of….crickets….

    Like or Dislike: Thumb up 0 Thumb down 0

    Hot debate. What do you think? Thumb up 12 Thumb down 3

    Few anectodes from today’s trip to Surrey:

    -prices on brand new townhouses are (and I quote the sales personnel) “not set in stone. Not anymore” Also “there’s room to move there” as well as “the days of pre-sales are gone”.Offers are welcome – low ball offers are expected.

    -I was told that it costs the developer an average of $1,000 a month to keep each completed unsold unit in the development. Ouch! So private sellers can supposedly just hold off and take their places off the market “for now” – developers… not so much.

    -majority of units that I saw today are now priced ~5% below the original prices that were announced last fall. Plus, like I said “there’s room to move”

    Good times are coming to those who wait. The carnage will be severe.

    Well-loved. Like or Dislike: Thumb up 52 Thumb down 1

    pricedoutfornow Says:
    85

    @Crikey

    re-rental market vacancies

    I was wondering this myself, as I keep seeing the same prime units being listed on craigslist over and over again, some for MONTHS!-one which is nearly an exact replica to our unit, and when we applied to rent this unit 3 years ago there were about a dozen people interested in renting it as well (we lucked out). I was wondering if it isnt one reason why we are seeing sales volumes down as well-everyone who could have bought in the boom, did buy. So that young family starting out who would have ordinarily rented for a few years before buying a place, skipped the renting (or shortened it considerably when they qualified for a gigantic mortgage at great rates), and thus, this gives you more rental supply. We are still renting and my spouse often comments that we are the only ones in our circle of friends and acquaintances who rent-everyone else bought (we are the losers, basically, and SO does find it embarrassing). Thus it is only logical that there are more rentals on the market, vacant for months and months, just given how many people have bought and now, no longer need to rent.
    I think it is a great time to be a renter!

    Hot debate. What do you think? Thumb up 18 Thumb down 1

    @Crikey

    One possibility is that there are now less intentionally vacant places. If people don’t expect to be able to sell fast, they may look for tenants. If people are in fact taking their homes off the sales market, as some people claim, then they are probably putting them on the rental market. If this is true, it will be a very long time before the impact wears off, and it will set the rent fundamentals for sales prices even lower than they already are, so it would be a factor in a lower bottom for sales prices.

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

    No Noise Says:
    87

    @Crikey, Pricedoutfornow, N

    Victoria, like Vancouver is over built and prices are past peak, sales are at a standstill, desperate sellers have given up trying and are renting out instead, hence low sales listings. Pricedoutfornow u may b right that buyers have already bought in recent years so there are fewer buyers now – it all adds up to lower rents due to lower sales and ultimately lower home prices. Problems will continue with reduced govt tax revenue, job losses, and further price deflation. Its a worldwide (western world) phenomenon due to 30 years asset bubble deflation due to globalization, deregulation, cheap money, fall of communism (people can go west), opening of China (cheap labour to make crap for the west), etc etc etc

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

    No Noise, FWIW I did some analysis over at mohican’s blog on BC cities’ population growth and comparing it to under construction. Victoria has seen its population growth drop markedly since 2008 and its housing construction market has remained depressed ever since.

    http://housing-analysis.blogspot.ca/2013/01/under-construction-and-population-growth.html

    Victoria’s population growth through the last half of the last decade was around 3500/year. From mid-2011 to mid-2012 it was about 1500. The pressures on housing in that market are increasing in my view.

    On the other side of the water, in Vancouver, population growth increased year-on-year from mid-2011 to mid-2012. Still below its peak in mid-2010 but it is not dropping at the same rate as did other major CMAs in BC. Despite the malaise in most of BC for construction, Vancouver has fared somewhat better and its relatively robust population growth is likely part of the answer.

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

    @Crikey

    I recall the vacancy rate going to ~10% in many US cities too (back in ’09). One of the common explanations was people ‘doubling up’. I would imagine our average persons-per-household is now jumping too from its recent historic lows.

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

    Van RE list to sell ratio same as Canucks score 7-3, RE also as popular as the NHL, gonna be a rough tough year if your looking to sell

    Like or Dislike: Thumb up 4 Thumb down 2

    @jesse
    Great graphs!

    @Danny
    Interesting – I wish I had paid more attention to US rentals while I watched the US bubble burst.

    @NoNoise
    The saddest part is that when our local economy suffers due to the bubble burst, the cuts will probably come at a cost to those that had nothing to do with the mess and can least afford cuts. At least that is what happened in Australia a few years back in a similar scenario.

    @N
    Makes sense. Anecdotally I have recently noticed several examples of property management companies reducing rental prices on advertised apartment units, and also being open to minor haggling or rental price, which I had never seen in the previous ten years.

    @pricedoutfornow
    That makes sense too.
    I hope your wife is coming around to your way of thinking now, willing to wait out the current obvious downturn. Perhaps even eating crow and a thank-you hug from her are in order? :)

    @Waiting to exhale
    Fascinating immigration trend observations. I myself have seen many immigrant-family friends get on a plane out of Canada the minute they graduate from university here
    (many are off to the U.S., which is where they wanted to be all along but were too cheap or didn’t previously have the right credentials for; others have gone back overseas as per their family’s original plans, without even bothering to look for jobs here)

    Like or Dislike: Thumb up 9 Thumb down 0

    patriotz patriotz Says:
    92

    “why would you buy a REIT with yields that low?”

    Because I bought them about three and a half years ago along with several others when CAR.UN was less than half today’s value and BEI.UN less than a third of today’s value.

    I asked why would you buy them with today’s yields. Given that you bought them years ago, why are you holding them with such low yields? Where’s the upside going to come from?

    You still holding PGF?

    Yes, current price is below my cost base but I’m not going to sell now when I’m getting a 10% yield.

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

    Old School Says:
    93

    @Waiting to exhale #80

    Excellent point on the rising Filipino influence on local immigration numbers.

    YVR is a key point of entry and it may have a distorting impact on the immigration stats. The bulls cling to those stats, hoping new residents will support the current Vancouver market, even at current prices.

    But as you more or less infer, just because someone lands here doesn’t mean they are going to rush to the next open house on Dunbar. Particularly when renting is so much cheaper for those who decide to stay, but actually have to work for a living.

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

    Old School Says:
    94

    @patriotz #75

    Indeed. From the Broadwalk REIT Q3 MDA:

    “Although Boardwalk has not acquired any new apartment units during 2012, we continue to be active in the bidding process; however, Boardwalk has not been able to conclude that acquiring these assets at the offered selling prices would be in the best interest of the Trust on a risk-adjusted basis.”

    Document available at http://www.sedar.com

    REIT unit prices and their business models have benefited from BoC negative real rates. When that trend goes into reverse, we’ll see what happens.

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

    Here’s another accolade for Vancouver that the real estate pumpers can use. In addition to being the best place on earth where you can ski, golf, and sail all on the same day, Vancouver is now regarded as “the crown jewel of the Pacific Northwest” when it comes to kinky sex. From the Vancouver Sun:

    “A good starting place for anyone aspiring to check out Vancouver’s very active alt-sex scene, or just to spice things up, would be Doig’s Thursday night seminar: Your Guide to Erotic Vancouver…

    The scene has grown so much over the past two decades, with regular events run by MVK, that Doig says Vancouver is known as “the jewel of the Pacific Northwest” for sexual adventurers.

    It’s not something that’s been exploited by Tourism Vancouver yet, but if the Taboo show continues to have its annual around-the-block lineups, who knows?”

    http://www.vancouversun.com/entertainment/Taboo+show+walk+kinky+side+with+video/7829469/story.html

    Like or Dislike: Thumb up 9 Thumb down 0

    Worst time in 31 years to buy RE Says:
    96

    patriotz #91

    “I asked you why you would buy them with today’s yield”

    I never suggested or even hinted that anyone should buy them in the first place. I merely pointed out that they were the biggest 2 residential REITs. However, having heard you grumble about REITs for years (not unlike your political views), The only reason I responded was because I sort of expected you to jump in here off topic.

    That said, I love your comments when you stick to RE.
    Sorry if I ruffled your feathers.

    Like or Dislike: Thumb up 4 Thumb down 2

    Compared to January 20, 2012 this is where we stand using one week averages for listings, sales and price changes:

    Inventory up 4%
    New Listings down 18%
    Price Changes up 18%
    Sell/List down 15%!
    Sales down 30%!!
    MOI up 49%!!!

    And let’s not forget that last January was pretty awful compared to historical averages.

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

    Wakeup call Says:
    98

    Like I’ve been suspecting, Low Sales is turning out to be the big story this year. I think that is much more important than new listings right now. A flood of listings will come just as soon as sellers stop dreaming.

    Well-loved. Like or Dislike: Thumb up 26 Thumb down 2

    “And let’s not forget that last January was pretty awful compared to historical averages”

    That is correct however January is not a strong indicator for the rest of the year. Two examples are 2009 and 2010, as I mentioned. That stated, recent weakness is arguably a necessary condition for a worsening picture in 2013.

    I just don’t like seeing bears disappointed like I did in ’09 and ’10!

    Hot debate. What do you think? Thumb up 12 Thumb down 3

    Bag it and tag it Says:
    100

    Patriotz #91
    If you bought PGF above the current price and the current dividend is 6.5% (according to bloomberg), how is the yield 10%?

    Like or Dislike: Thumb up 3 Thumb down 1

    Short'em High Says:
    101

    Worst time in 31 years to buy RE Says:
    January 20th, 2013 at 8:29 am

    …grumble about REITs for years… jump in here off topic….

    What about RE(IT)s isn’t relevant to RE? R and E are the first two words!

    Also, any credible commentary most certainly should include what to do with the capital that is not being allocated to overpriced RE – at least until prices come into line with rents one way or another.

    Some comments involve moving to jurisdictions where RE is priced inexpensively with respect to rents. Fair enough. Yet, for those who have no plans to move, there is still the problem of what to do with all the cash – including earning a return that pays the rent.

    Investing hard cash (or borrower obligation against real cash) into physical RE where the market is dominated by free spending penniless morons with government backed loans and a willingness to go bankrupt is not an option.

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

    Pink Helicopter Says:
    102

    BCREA sales and inventory stats are out for the month of December 2012. Here are your Months of Inventory (MOI) calculations.

    BC Northern
    Inventory: 1876
    Sales: 154
    MOI: 12.2

    Chilliwack
    Inventory: 1237
    Sales: 106
    MOI: 11.7

    Fraser Valley
    Inventory: 5834
    Sales: 602
    MOI: 9.7

    Greater Vancouver
    Inventory: 13902
    Sales: 1171
    MOI: 11.9

    Kamloops
    Inventory: 1632
    Sales: 80
    MOI: 20.4

    Kootenay
    Inventory: 2349
    Sales: 91
    MOI: 25.8

    Okanagan Mainline
    Inventory: 4603
    Sales: 230
    MOI: 20.0

    Powell River
    Inventory: 184
    Sales: 10
    MOI: 18.4

    South Okanagan
    Inventory: 1404
    Sales: 45
    MOI: 31.2

    Northern Lights
    Inventory: 196
    Sales: 7
    MOI: 28.0

    Vancouver Island
    Inventory: 4367
    Sales: 257
    MOI: 17.0

    Victoria
    Inventory: 3055
    Sales: 258
    MOI: 11.8

    Provincial Totals
    Inventory: 40639
    Sales: 3011
    MOI: 13.5

    Outside Vancouver
    Inventory: 26737
    Sales: 1840
    MOI: 14.5

    I now have data going back 2 full years. Here’s an interesting fact: this past month just witnessed 2-year MOI highs for 8 of BC’s 12 sales regions:

    BC Northern (12.2)
    Kamloops (20.4)
    Okanagan Mainline (20.0)
    Powell River (18.4)
    South Okanagan (31.2)
    Northern Lights (28.0)
    Vancouver Island (17.0)
    Victoria (11.8)

    At 11.9, Vancouver just barely missed the 2-year high of 12.7 set in September ’12. In addition, the provincial overall MOI of 13.5 is also a 2-year high. Further note that the province-wide raise in MOI is almost entirely due to a fall in sales (down 26% from December 2011), as total provincial inventory was nearly unchanged YoY.

    So where have all the buyers gone? Perhaps refueling their yellow helicopters or tending to their hydroponic tomatoes, waiting for a spring thaw to jump back into the market? As always, time will tell!

    Well-loved. Like or Dislike: Thumb up 50 Thumb down 1

    Anonymous Says:
    103

    I think Patriotz is invested in Pengrowth traded on the TSX and indeed has a yield close to 10% but has a payout ratio around 150% also high yields like this give me pause on putting my cash in this stock

    Patriotz can have risky investments such as PGF just as others can invest in Vancouver RE if like them he can afford the capital losses as the results of these investment decisions

    But best of luck

    Like or Dislike: Thumb up 7 Thumb down 2

    Anonymous Says:
    104

    “Patriotz can have risky investments such as PGF just as others can invest in Vancouver RE if like them he can afford the capital losses”

    Both may be risky but one you have to drop a $million on and there is a poor yield, no liquidity, high transaction costs and no potential for earnings growth.

    Hot debate. What do you think? Thumb up 14 Thumb down 2

    Romeo Jordan Says:
    105

    We need two things, in the short term, to drive prices lower.

    A large/quick increase in For Sale signs birthing onto a lawn near you.

    More negative MSM spin.

    Fingers crossed.

    Hot debate. What do you think? Thumb up 11 Thumb down 5

    UBC in Crisis Mode Says:
    106

    Better chance in other cities?

    Just found this in e-mail:

    Are you looking for the great return of real estate without the stress of management?

    SAGE III is a turnkey condo investment with professional management and 10% return from guaranteed rental income. The project is in a high demand location next to the new $100 Million Wilfred Laurier Business School Complex in Waterloo, Ontario.

    Special VIP Sale gives you the chance to:

    – BE THE VERY FIRST TO BUY AT THE LOWEST PRICES

    – 100% LEASE GAURANTEE

    – 35% + RETURN ON INVESTMENT IN THE FIRST YEAR

    – FREE PROPERTY MANAGEMENT

    – COMPLETE FURNITURE & APPLIANCE PACKAGE INCLUDED

    – LUXURY FINISHES, APPLIANCES & DÉCOR

    – WATERLOO IS ONE OF THE FASTEST GROWING COMMUNITIES

    Like or Dislike: Thumb up 7 Thumb down 2

    Old School Says:
    107

    @ wakeup call #97

    Agreed that low sales is the big story. Generally, the more illiquid a market becomes, the lower the price a buyer is willing to pay in order to compensate for the extra risk.

    There will be some initial stickiness from sellers, but in this type of tug-of-war it is usually the patient buyer that wins.

    Perhaps Vancouver RE is different but, I doubt it.

    Hot debate. What do you think? Thumb up 9 Thumb down 3

    Anonymous Says:
    108

    @UBC in Crisis Mode Says:

    SAGE III is a turnkey condo investment…

    Right off the top, they spelled “turkey” wrong. (No offense, @Turkey.)

    Hot debate. What do you think? Thumb up 9 Thumb down 2

    UBC in Crisis Mode Says:
    109

    A new “sold” sign on Van West:

    Driving along the Marine Drive yesterday and noticed a “sold” sign.

    http://www.realtylink.org/prop_search/Detail.cfm?MLS=V984285&REBoards=All&From=MLS

    It used to be $3,180,000 and re-listed recently for $2,980,000 by Julia Lau.

    Like or Dislike: Thumb up 7 Thumb down 0

    patriotz patriotz Says:
    110

    “Patriotz can have risky investments such as PGF”

    Why not as long as I limit my exposure – which happens to be about 3.5% of my net worth outside my RRSP.

    As opposed to homedebtors whose residences represented 2000% at time of purchase, and some of whom have passed through infinity and come back on the negative side.

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

    PinkHelicopter: “where have all the buyers gone”

    Based on my quick analysis,
    1) Pop growth outside of Vancouver is very low. The growth that is occurring, as of about a year ago, was concentrated in Vancouver.
    2) International immigration has dropped in the past few years.
    3) People are leaving BC, predominately for Alberta.

    Fewer sales because population growth is ebbing, especially outside YVR. Add in credit tightening and some lethargy in the resource sector and that’s what we used to call a “combo attack” in Street Fighter 2.

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

    Anonymous Says:
    112

    House near me where an old Greek couple lived sold over a year ago for a couple million to a developer. They transformed it into a 3 suite main house and coach house. About eight months ago they came up for sale, averaging a little over a million ask on each.

    This weekend I was out for a walk and I saw that all four are now for rent with the same real-estate company that was trying to sell them before.

    Yikes! I’m thinking that developer bet the farm on current market softness being only temporary.

    Obviously even the professionals are delirious.

    Well-loved. Like or Dislike: Thumb up 20 Thumb down 0

    HAM Solo Says:
    113

    @ Pink Helicopter

    A top-to-bottom, province-wide bear market in real estate. No other way to put it.

    At this point, it does not make economic sense to develop a residential property anywhere in this province. Watch for the construction trades job numbers to plummet as projects complete. A BC recession is here.

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

    “A BC recession is here”

    Now that’s an interesting call! Vancouver-area construction activity is the last holdout province-wide. If you believe that recessions are front-loaded with a fall in residential construction activity, 2013 will be interesting to watch. It looks like Vancouver-area housing starts peaked about 4 months ago.

    Another stat I track is Vancouver City permits. I’ll update my numbers and put them up on mohican’s blog in the next couple of days.

    Like or Dislike: Thumb up 5 Thumb down 0

    What the heck. Here you go, to November 2012.

    http://housing-analysis.blogspot.ca/2013/01/city-of-vancouver-permit-update-for.html

    If you are thinking there is going to be a recession in 2013, at least insofar as building permits in the City of Vancouver are concerned, it looks as if there will be a fair amount of building activity in 2013.

    Like or Dislike: Thumb up 4 Thumb down 0

    @Anonymous

    “House near me where an old Greek couple lived sold over a year ago for a couple million to a developer. They transformed it into a 3 suite main house and coach house.”

    Is it on West 11th? If so, I have been wondering about that place! If only for the odd brown-on-top, black-on-the-bottom paint job. Also I was walking by one day and overheard a contractor flipping out about some sort of quality problem (couldn’t walk slow enough to hear the whole conversation).

    Like or Dislike: Thumb up 0 Thumb down 0

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