The CBC has an article looking at the situation for middle-class home shoppers in Vancouver BC. They’ve noticed that incomes have dropped since the 70s while prices have risen.
So if you’re middle class in Vancouver you’re either priced out forever or something is going to change.
From that article:
Lawyer Nathan Hume and health researcher Angie Chan live with their two young children in a rented two-bedroom apartment in Vancouver.
With two good jobs, they had hoped home ownership in the city would be within their reach. But sky-high prices in Vancouver have left them without any options.
“We have a number of friends who are in the same situation as us — highly educated, they’ve got good jobs, they have young kids, and they’ve all left the city,” said Chan.
Hume says it is likely they could get a mortgage to buy something, but they don’t think that’s smart, when it would mean foregoing savings for retirement and their childrens’ education.
Any readers here have friends who have moved away from Vancouver simply do to house price dynamics? Any of you considering a move away based purely on the cost of housing?
The Vancouver real estate bubble is getting attention from outside Canada again. This time Mish is in Business Insider comparing current prices in massively overpriced Vancouver to what the same price gets you in post-bubble Ireland. The difference is rather large.
There are some pretty nice houses you can get in Vancouver for only $890k! Two of them are even potentially liveable and one has even had some upgrades.
The post-celtic-tiger property is pretty decent as well, and a fair sized discount from the original asking price of $6 million.
Now clearly what happened in countries like Ireland was that people who should not have been were extended credit. Lots of credit. And since property prices were rising they were viewed as ‘can’t lose’, until they lost.
Have we made credit too easy in Canada, or are we more sensible than that?
UPDATE: reader Anonymouse pointed out that Mish comparing a hotel to a single family home is not a fair comparison. In response Many Franks posted this link about home prices in Donegal from last September:
The average price of a new home in Donegal is estimated at €179,000, representing a drop of 43pc from peak values. New three- and four-bedroom semi-detached houses are cheaper than in most other parts of the country, with averages estimated at €128,800 and €155,000 respectively.
Second-hand homes are estimated to average €165,800, down 3pc from last April and a drop of 41pc from peak values. The cheapest second-hand apartments in the country can be found in Donegal, with the average price of a one-bedroom apartment estimated at €50,000, and €57,500 for a two-bedroom apartment.
City by city data for US markets is just out showing how much prices fell in the year and how far they’ve come down since the market top. Here’s what last year looked like in some major US markets:
South of the border: city -by-city breakdown of latest Case-shiller data
Las Vegas: Prices down 8.8%, and 61% below peak.
Los Angeles: Prices down 5.2%, and 41% below peak.
Miami: Prices down 3.8%, and 51% below peak.
New York: Prices down 2.9%, and 24% below peak.
Phoenix: Prices down 1.2%, and 55% below peak.
Portland: Prices down 4%, and 29% below peak.
San Francisco: Prices down 5.4%, and 41% below peak.
Seattle: Prices down 5.6%, and 32% below peak.
Remember, it’s not a bubble, it’s a balloon. Balloons don’t pop, they deflate. Slowly over the course of many years.
Hat tip to VMD for the link.
It seems that everywhere around the world that house prices lept up quickly there was always someone predicting a ‘plateau’. The idea that even if the market is overpriced the correction won’t come in the form of a crash, but instead property prices will stay flat and wait for income and rents to catch up. This prediction is of course being applied to the Canadian real estate market as well:
Matthieu Arseneau, a senior economist with the National Bank, likes mortgage payments as the best yardstick. That’s because the evidence tells him that the rise of interest rates from today’s bargain-basement levels will be moderate. Based on this, he thinks it’s silly to foresee a housing crash, since monthly payments won’t get into distress territory even by the time rates peak in about three years.
That’s why Arseneau dismisses apocalyptic talk about a housing crash in Canada. As a cautious analyst, he doesn’t rule out any scenario absolutely, but Arseneau said Monday that this one is awfully unlikely: “I think there will be no collapse unless there’s a worldwide recession and credit crisis.”
Of course these comments regard the Canadian real estate market, not the Vancouver market specifically. Can anyone name any real estate markets that have reached Vancouver levels and then gone flat?
Full article at the Ottawa Citizen.