“I heard today from a co-worker that he just sold his Burnaby condo and is thrilled to have come out ahead. He bought in 2007 and was pretty much stretched to the limit to make the payments. He had an unexpected expense in 2008 (I didn’t ask what) and couldn’t afford it. By then the market was dropping and he didn’t want to sell at a loss, so he threw a renter in there and moved back in with his parents. He was lucky enough to have the market then rise and he made a small profit after all fees, and is now renting happily having learned a valuable lesson.”
nico101 – “I have a house near Commercial Drive which is losing it’s tenants for the upper 2 floors on Dec 1st. I still have the basement suite tenants though. Given the timing I’m considering the whole Olympic rental thing.”
Agitprop – “My sister has had her place with a jaw dropping view in West Van, listed for a month or two….nada. The market is WAY oversupplied.”
From the experience of realtor Mike Stewart (and contrary to the opinion of many), very few buyers are overextending themselves. This from RE Talks 21 Nov 2009 10:14 pm-
“The people I am working with are not at the limit, I would say 70%+ are low ratio and most of these people are working with a lot of equity. I don’t come across people very often who are limiting what they do from a lifestyle perspective so they can have more Real Estate. People tell me they want to have money/time to do the things they value and they buy property they can comfortably afford. The people I work with see the low rates as a way to pay off their mortgages quicker or keep payments lower than they normally would be and don’t use it as a means to buy something they couldn’t afford. These people tend to be very cautious with property transactions and how they finance these transactions. This caution could be seen in how rare foreclosures were in my market during the economic crisis. This prudence and caution was the reason for this.”
A frenzied market can put participants through hell. Chris Kowalchuk is simultaneously experiencing regret about not buying earlier, desire to buy now, and caution that the ‘current market is a bubble that is about to burst’. This personal story extracted from the aforementioned G&M article ‘In Vancouver, house prices on a tear’, by Kerry Gold, 19 Nov 2009 6:03 pm -
“With mortgage rates low, and predictions that they’ll go up some time next year, buyers are too often panicking to buy that house, says Chris Kowalchuk, a first-time buyer who lost out on an offer on Tuesday. He bid $700,000 on a two-bedroom east side house listed at $680,000, without conditions. There were at least seven other bids. “Things are overpriced right now, I think, for what they are worth,” he says. “People are thinking they’ve got to get in while the interest rates are low.” Mr. Kowalchuk, a geologist who recently married, is willing to wait until the interest rates start climbing so that the competition will fall away. He believes the current market is a bubble that has to burst. “I’m looking for a house that I can stay in for at least five years, so I’m willing to overpay a little bit to get the right house.” Like a lot of people, Mr. Kowalchuk now wishes he’d been in a position to buy in the fall and winter of 2008, when many people worried that the market hadn’t yet hit bottom and chose to wait and see what would happen in 2009. By spring, buyers realized that the lower prices and low interest rates made houses affordable again, and the market reacted accordingly. “My dad was telling us to buy, buy, buy, when everything was depressed,” he says. “But we didn’t have time, with the wedding. We put it off until we ran out of time.” But first-time buyer Mr. Kowalchuk refuses to get caught up in the [current] hype. He is willing to wait until the bidding wars subside, even if it means paying a higher mortgage rate. “We’re going to keep looking, but we don’t want to panic and jump into something just because everybody else is doing that. If it’s totally a sellers’ market, people will just out-bid each other. People think they have to buy, no matter what. I’m thinking by April the long-term rates are probably going to start going up. I’m thinking everybody will panic and stay out of the market.”
In parts of Vancouver, such as the Vancouver Eastside, the market has reached fever pitch. This article in the Globe and Mail by Kerry Gold, 19 Nov 2009 6:03 pm, has so many important anecdotal points regarding sentiment and market activity that vreaa has archived large swatches in this post, and highlighted two stories from it in the posts above.
“In the last three months, a heritage house at 274 E. 20th Ave. was listed for $959,000 and sold for $320,000 above asking, after eight days on the market. A heritage fixer-upper at 265 E. 24th was listed for $749,000 and sold for $1,033,000 within a mere 13 days. A month later, another house nearby at 214 E. 24th, was listed for $749,000 and sold for $950,000 within six days. A typical Vancouver Special at 4554 Walden St. was listed for $730,000 and sold eight days later for $958,000. All those houses were in the trendy Main Street area.”
“It’s very topical,” says realtor Rod MacKay. “Other places [in the country] are strong, but nobody’s seen anything like this. What’s really surprising is nobody anticipated the six-month dry spell being as slow as it was, and prices coming up as much. No one anticipated it bouncing back so far and so quickly.”
“At the beginning of this spring’s buying frenzy, buyers were offering $100,000 above asking in some cases. But by September and October, there were buyers – no doubt tired of being repeatedly out-bid – who are making offers so far above the asking price they couldn’t lose. In the case of the house at 265 E. 24th, it went for $284,000 above asking. “That takes a lot of stones to do that,” says the selling agent Darryl Sjerven. “There were 18 offers on that house. So you go in there, write an offer, and there are 17 other offers and you don’t know what any of them are. They could all be just $10,000 over asking. To go and write $284,000 over takes a lot of guts.”
To describe the bidding mentality these last few months, Mr. Sjerven uses the analogy of a “hang loose” hand gesture – with the three middle fingers curled under and pinkie and thumb sticking out.“Say you get five offers on a house, and suppose the house is listed at $750,000. The guy with the pinkie does not get it, he doesn’t know what’s going on,” says Mr. Sjerven. “Even though there are four other offers, he’ll offer you $700,000 subject to sale of his home and if he gets financing and everything. Then you get the typical pack in the middle, they’ll go around $785,000, or something like that. There’ll be a cluster of those people. Then there’s the thumb. It sticks right over the side and says, ‘this is my house. I want this house.’ He’s far enough ahead that it doesn’t get into further bidding or anything like that. And he buys that house.”
A few months ago, it seemed like the only houses being sold in bidding wars were the “hot properties,” the ones with three bedrooms up, new granite counter tops, and a gleaming in-law suite downstairs. More recently, the bidding wars have been over houses that aren’t so hot, such as that Vancouver Special that went for above asking.“The house wasn’t renovated or anything,” says selling agent Kenny Wong. “It was 37 years old. It had the original “shagadelic” carpets. It was on a 33-by-110 lot. It wasn’t even a standard lot. “I had a hard time selling a Vancouver Special in the winter – a lot of people made low-ball offers,” he adds. “Now they are going over asking.”
Although overall prices aren’t quite at pre-correction levels, for buyers it has felt like the spring of 2008 again.
As to where the market will be in early 2010, the current frenzy appears to be abating and realtors like Mr. Sjerven expect the lull to last over the winter and through to the end of the Olympics. Not many people like to list or buy homes around the holiday season, and few are going to want to sell around the time of the Games, when it could be hard to get around. That five-month lull will create “pent-up demand” that will trigger another frenzy, says Mr. Sjerven. “Once you clear the Olympics out of the way and we’re into April, it will be a race to those listings. Spring is going to rock.”
Money is free and you don’t even need a downpayment. The only thing good about this is that it is almost impossible to make monetary policy any looser without some kind of obscene give away program that’d likely stir objections. This from casual observer at greaterfool.ca on 21 Nov 2009 at 4:40 pm -
“If you go into one of the big five banks, and take their posted rate on a mortgage, they will GIVE you the 5% down payment. CMHC is happy because the 5% DP has been paid, the bank is happy because they get a higher rate on the mortgage, and the buyers are happy because THEY DIDN’T HAVE TO COME UP WITH A DOWN PAYMENT. And it’s all legal and above board. CMHC just charges a premium for a “NON-STANDARD Down Payment”. Now if that’s not a zero down mortgage, I don’t know what is. I know people that have done this within the last couple of months, but none of the media seems to want to bring attention to this.”
As markets reach extremes, more and more people become aware of the resultant disparities. Even though most of us prefer to stay put, the benefits of making a move start crossing thresholds that cause some people to take action. This from Peter Pan at greaterfool.ca on 21 Nov 2009 at 1:41 am -
“I’m looking to get the hell out of Vancouver and move to the US… Why should I stay here and pay exorbitant RE prices when I can move to Oregon, make more money with my qualifications, enjoy a better climate, pay less taxes and buy a beautiful home for 500K?”
“I live in Van, and it rains often. This last 12 mths has been a dry exception, not the rule. I don’t mind the rain and prefer it to snow, but I don’t know why locals here pretend that it doesn’t rain often and get defensive when others point it out. Does the blind jingoistic patriotism really run that deep? Are we Vancouverites becoming as unthinkingly defensive of our little backwater as inbred hillbillies? It’s like the Emperor’s New Clothes and no one wants to admit the obvious: it’s Raincouver on the Wet Coast; just admit it and get over it already.”
“I live in Vancouver. My wife, young daughter and I are quite content to rent a place for $1,450 a month that would easily list for $700,000 (and probably go into a bidding war to sell for more). Our landlord arranges for the lawn to be cut, landscaping taken care of, and immediately takes care of any repairs. Got to admit, he’s great…kinda makes me feel like I’ve got it too easy. We’ve got a couple hundred thousand sitting on the sidelines in safer investments earning a little interest (aside from our RRSPs which are very diversely invested, life insurance and no debt). I’m a 40 year old investment advisor with a contrarian and value based philosophy. As I tell my older clients when recommending laddered GICs as part of their portfolio, it’s not just paying 3.35%, you’re getting 103.35% as you know you’ll get your money back. Can’t say that about many investments these days – especially real estate. Heck, the cap rate’s got to be close to that but the risk is huge (oh wait, I forgot real estate only goes up!! – Hasn’t anybody looked at a graph of real estate in Vancouver for the last 40 years?) Luckily for me most of my clients are much older and have no debt. Bad for them is that their kids (in their 50s) can’t say the same, and of course it gets downright worrisome when grandkids (who are in their 20s and 30s) situations are brought up. Meanwhile the plan for my family is that we’ll keep socking away into our RRSPs, keep building our down payment and in a few years when the @#!$ is really hitting the fan, pick up a pretty nice place and pay it off in less than 10 years. (Hopefully the banks won’t have a problem accepting a 30-40% down payment then! lol).”
At this point in the real estate cycle, to be luring individuals who are “worrying about living paycheck to paycheck” into RE ‘investment’ could be seen to be imprudent. Listeners to Vancouver Radio station ‘CKWX News 1130′ this week (16-20 Nov 2009) were exposed to this 60 second ad about once an hour. The meaty bits are italicized -
“Hey, would you like to kick yourself? That’s what you would be doing if you ignore this opportunity. Today’s real estate market could be at rock bottom, and when markets hit bottom, the winners are buying. Come to a free learn to be rich workshop and discover how to join the winners based on the teachings of Robert Kiyosaki, best selling author of ‘Rich Dad, Poor Dad’, the number #1 book on personal finance. Rich Dad’s learn-to-be-rich workshop is free and happening in the Vancouver area today through Friday. This totally free workshop will introduce you to tools and strategies that could create extra cash flow and free you from worrying about living paycheck to paycheck.Don’t kick yourself next year saying “Why didn’t I invest when I had the chance?” This is your chance. Register now online at richdad*******.com or call 800-399-****. Get a free gift for attending. Registration is free. Call now 800-399-****.”
Risk is being abnormally underpriced in the Canadian mortgage market. Despite the Bank of Canada’s call for prudence, there remains an apparent open invitation for buyers to overextend themselves. This from German Guy at robchipman.net 19 Nov 2009 at 12:44 pm
“I hear a lot of talk about how CHMC is the Canadian version of American sub-prime so, since I don’t have much to do in this never ending rainy place, I decided to go and apply for a mortgage to find out what is it all about.
I asked for a 5 /35 year fixed rate with minimum 5% down payment and 5/35 with 300k down as well as a VMR and wanted to know how much money I would qualify for. Here are the figures I gave the banker (the figures are imaginary and have no relation to my real revenue):
Gross annual income: 95k, estimated purchase price 800k
Expenses estimated by banker: Monthly heating costs $67; annual taxes $2500, loan/credit card monthly: $360
In the case of 5/35 with 40k down he qualified me for loan of $538,842, with $2,404 monthly payment and 4.20% interest rate. In the case of 5/35 with 300k down he qualified me for a loan of $798,842 with $2,534 monthly payment and 4.20% interest rates.
I asked to get a lower interest rate in the second case where I put a bigger down payment since the bank was not taking as much risk as with the first one.
Answer: We take more risk when you put a bigger down payment because your loan does not have to be insured by CMHC, so if anything your interest rate could be higher because the bank is taking more risk. We are not in the business of foreclosing homes and selling to get paid, we prefer when you have a CHMC insurance as our risk is much lower than when you have a pig [that's 'big' -ed.] down payment above 20% of purchase price.
I asked for a VMR then, he quoted me a 2.25% interest rate for 35 years and qualified for $665,000 loan with 5% down payment.
I asked could put a bigger down payment ?
Answer: No. We will not give you a VMR loan if it is not CHMC insured!
I pointed out the absurdity of the situation in his reasoning, with taxpayer taking all the risk and the banks making risk free profit. All he said was don’t try to fight the government.”
“I had an interesting discussion with a well heeled Asian real estate investor (tens of millions invested) a few months back. His belief was that as an investor, there were better opportunities in the U.S. real estate market over the long term. His views on Vancouver was that a correction would eventually occur and could be partly triggered by the exodus of large scale Asian investors to American markets that have retrenched and now offer better prospects for longer term returns than Canada. While Vancouver has a large Asian population, many large scale Asian investors have bought properties throughout the country over the last ten to twenty years. Rebalancing their portfolio is largely a business rather than an emotional decision.”
“The tiny slice of market (Upper Lonsdale) that I follow is right now critically short of properties under $900,000, but glutted with properties over $1 mil. 60% of the listed homes are over $1 mil when maybe 6% of the sales since Sept 1 [2009] have been over $1 mil. Right now you could buy a crack house for $800,000 or spend 25% more for something really nice. And all the buyers are opting for the crack house?? This is not a balanced market and I can’t believe there are many who are spending their own money in it.”
“I’ve heard some anecdotal info that homes in the $800-900K range in the Main street corridor have also been selling with multiple offers, while more expensive properties close by on the West side are sitting longer.”
“[I am seeing a similar effect] in Dunbar, Point Grey and Kitsilano. The most prolific selling realtors are moving from Dunbar and PG to Kitsilano townhomes.”
“I am not a renter, I am a west side homeowner. I sold my investment home in late 2005 and am waiting to buy a rental property when fundamentals make sense. Investors aren’t buying into the hype, at least smart investors.”
Are current buyers following the recent BOC guidance to be ‘prudent’? This admission from Vancouver Realtor MikeStewartRealtor at RE Talks 18 Nov 2009 10:21 pm, in response to a poster’s question about ‘best 5 year and variable rates’ currently available -
“The best variable I’ve seen is prime -0.1%. Haven’t really been paying attention to fixed rates with variables so low. I’d use a mortgage broker. Talk to a few to see who can get you exactly what you want.”
“Please let us in on the secret. How is it that people can afford million dollar homes? I still don’t get it. I’m single and have a salary that is in the high five-figures, which puts me up in the top 20% of households in Vancouver, yet I can’t afford to purchase a SFH in East Vancouver.”
As home prices inflate to stratospheric levels, the utility of the sale price of many homes would cause a percentage of owners to ‘cash in’ – sell, move/rent, and live comfortably on the proceeds. (As one owner planning on selling and leaving Vancouver told vreaa, “I’ll never have to work another winter”.) The flip side of this is that many potential buyers are now sitting on their hands, as they are aware of the utility of the money that they save by doing so. This position is expressed here by Krazy Kanuck at greaterfool.ca 17 Nov 2009 11:05 pm, who has the added advantage of “living temporarily” in Vancouver, which probably gives him useful perspective. -
“I’m living temporarily in Vancouver (the epicenter of delusion), and I can’t wrap my head around the fact that if someone gave me $1 million, I could either: 1) buy a house here…and not a great one, only a good one, OR 2) buy $1 million worth of dividend stock funds, rent the house, put food on the table, and probably run a car. (I’m assuming a 3.6% yield…or $3k a month….for doing NOTHING!!) And my friends call me Krazy.”
Being a renter is no picnic. There is always the risk of having a property sold from under you, and having to endure the consequent inconvenience of a forced move. The following two stories are likely the consequences of smart landlords taking profits by selling.
Now, however, an increasing proportion of landlords are latecomer amateur speculators holding properties for price increase rather than for steady cash flow. Renters who are also prospective buyers may at some point face the bizarre situation of seeing long awaited RE price drops at the same time as being asked to vacate properties that their speculator landlords are hastily liquidating. But we’re not there yet.
Here are two back-to-back stories from vancouvercondo.info of boom market volatility displacing stable renters -
“My landlord (a realtor, btw) is selling the house expecting the prices to go down in 2010. I was thinking of buying at the end of next year, but since Bank of Canada kept the party running with crazy low rates I will have to wait a little longer. So I looked at craigslist and there are plenty of places to rent in my range ($1000 p.m.) right now, not like two years ago. I was playing with the idea of buying a place right now, but I’m not going to do it, I’d rather have a 200K mortgage at 7% than a 400K one at 3.5%. I can put a lot of money down, but it doesn’t make any sense right now.”
“After a lifetime of stable renting, my family and I went through some serious bubble related instability with our rental last year. Now we’re paying just slightly more for more bedrooms and a yard, so it’s turned out for now- but I must admit for the first time getting grumpy about this bubble. The insanity in the housing market is making rental feel insecure, and I’m having trouble feeling settled. That, I don’t like. But I realized there’s your self perpetuating mechanism: newbie specuvesting landlord runs all over his business obligations, makes the renter feel insecure, the renter jumps into a terrifyingly risky but looks-easier-to-live-in purchase situation.”
“My dreams of buying cheap real estate are over. I don’t need to own, and current buyers are far crazier than I would have *ever* expected. We just witnessed a worldwide financial crisis – the biggest in 80 years – and they are lining up to mortgage their lives away for a dream. Casting themselves onto the rocks is more like how I see it, because I don’t see how this could possibly be over. I save enough money to provide decent financial security for my family and will continue to do so. I’m 30 years old. It would feel good to settle down, but instead I’m going to remain flexible about where I live and what job I take.”
The real estate boom has shut out some prudent citizens who would, under more normal circumstances, be homeowners. Some feel despair, others great inconvenience. Some gain solace from local and national real estate blogs, in the following case, from Garth Turner’s greaterfool.ca. This post by ‘Mom Society’ at greaterfool.ca 16 Nov 2009 10:33 pm appears to be an update and elaboration from the same poster whose earlier thoughts are archived at VREAA 7 Nov 2009 -
“We desperately want to buy a place with a yard as we have an 18 months old son and he needs a place to play. Although our annual income is around $15,000 more than average, we still find we can not afford anything with a yard, even in Surrey. It is annoying to see almost all our friends have moved to their new houses recently. Our hearts sink every time we hear mainstream media telling us next year housing price will continue to go up. Actually we don’t care if your [Garth Turner's] prediction would be accurate, no one has crystal ball. At least your blog gives us hope in this raining winter, give us a hope to allow us still dream we may have a home with yard in the future. Thank you. If we are belonging to middle class or working class, I feel [we are not alone in] our sadness.”
“I was sitting in the Starbucks on the corner of Denman and Davie this morning, doing a bit of work and listening to a group of 4 construction tradesmen at the table behind me talking about all the layoffs in the places they work, and stating that they were beginning to get “freaked out” by the prospect of losing their jobs while trying to pay their mortgages. They were most worried by the fact that it’s not just the new hires being let go, but also people with “seniority”. I felt sorry for them, as they genuinely sounded worried, and seemed like nice enough guys.”
Gloria, at robchipman.net, on 16 Nov 2009, 9:27 am, discovers that Vancouver RE price to rent ratios make no sense. The unit that she describes has a price:rent ratio of 390, and that’s before any talk of maintenance fees (which would put the ratio well above 400). These ratios would imply that, from a historical perspective, the sales price is over twice what it should be.
“Luxurious ‘O2′ on Davie / Denman St. has several units for sale, and one of them (2bdr/2bthr, 975 sq.ft) is both for sale and for rent. The sale price is 975k, and the rent is $2500 per month. I just don’t get it… why the rent is so low, or why the sale price is so high?”
“Sold my condo in Vancouver. Didn’t get what I wanted but did make a profit so this is good. I’m with Garth [Turner] in that the worst is yet to come and I’m in cash.”
“I was at the Daiso $2 shop to buy toilet brushes and brooms. And I overhead a conversation. A guy just bought a house with a mortgage and was checking with his friends if the bank would lend him another $6K for CHMC insurance.”
“Attended 4 open houses on the wet side this weekend. Very little traffic. I attribute this to the weather and seasonality, and the realtors indicated that the [sellers] are in no rush and will wait until they get enough of a bid before they sell. Market seems strong but traffic is light, from what I’ve seen.”
M- : “I’m wondering who’s left to buy– in my group of friends and acquaintances, my observations on who has bought are:
-2006-2008: non-bearish friends and acquaintances who could really (or in two cases couldn’t) afford it, bought.
-2009: bearish friends and acquaintances bought (all of them).
Yep, in my circle of friends and acquaintances, all of my bearish friends (with the means to buy) have bought. There are two exceptions: myself, and a couple who just returned from overseas. Aside from them, the only other renters work low-wage jobs, or are recent graduates.”
mohican: “I have observed the same thing within my circle as well. Including myself, most bearish friends have purchased already. They largely took advantage of the winter 2008 price dip and negotiated hard to get a decent deal. Many are still bearish – including me – but just wanted a little lifestyle certainty and were willing to pay for it. I don’t know where the future buyers will come from – overseas? The ownership rate is at an all time high right now as per statscan.”
david: “When bears capitulate isn’t that the sign of a market peak?”
“My rent was $975 a month for a crappy, 35 year old one bedroom that didn’t have insuite laundry or anything, and where the landlord would knock twice then enter my suite without advance notice for non-emergencies, once even while I was on the toilet. Now, my mortgage is the same for a 12 year old one bedroom with laundry, fireplace, dishwasher. This includes maintenance fee. And I can have a pet. And no landlord can come in because he feels like it. Yes, the interest rates will rise, but my salary will also increase. If I’m laid off, or my mortgage skyrockets, I’ll work my ass off to keep it all together. I am confident in my ability to make it work. Downpayment? Some people work two jobs and weekends for years and years and years to save up for one; others inherit it when a loved one passes away; others borrow money interest-free from family, and others have it handed to them by well-to-do parents who would rather their kids have a condo than live in a dump run by a slumlord. Do you blame them? It’s not really anyone’s business where a downpayment comes from. It’s not a crime to have a downpayment.”
“Even though he had never purchased real estate before, Alym Abdulla could sense that the market was heating up as he began looking at downtown condos last spring. The 24-year-old pharmacist started seeing suites in late March, and before long he realized that some of the units were receiving multiple offers from prospective buyers.
“I must have looked at close to 50 places,” Abdulla told the Georgia Straight in a recent interview in his living room. “I put in offers on two other places that didn’t go through because the market started to pick up.”
He said he was getting discouraged and was ready to quit when his real-estate agent, Stu Bell, recommended that he check out a home in a Bosa-developed building near the corner of Hornby and Smithe streets. When Abdulla entered the suite in the middle of May, he was immediately impressed by the layout, which featured two full bedrooms, each with an en suite bathroom, on either side of the living room. “The thing that really sold me on this place was the balcony,” he said. “It’s quite large. It makes you feel like you’re not trapped in your little shoebox downtown.”
Abdulla ended up paying the $508,000 list price. He said he bought then because he wanted to take advantage of the low interest rates. With a smile, he acknowledged that some of his friends look at him differently now that he’s a homeowner: “One of my friends who I used to live with in university, he’s like, ‘I feel since you bought your place, you’ve matured. You’ve completely changed in the way that you are. Before, we used to live the student lifestyle. Now, you’re always cleaning your place. You have plants. You look after them. You’ve even got a cat now. It’s like you’re an adult.’ ”
“The average inspector is only there for three hours or less. I’m of the view, and I don’t represent the majority, by far, that a good inspection is a full day.”
“I have been in the building construction and service industry as an electrician for over 30 years and I have found that most [home inspectors] in this so-called regulated agency have no construction experience at all. I have done a number of home inspections and found many serious issues. I warn all my clients when offering to purchase a home with a finished basement, [or any] evidence [that] the house has had some structural changes made to it, [that] if the sellers cannot produce building permits, electrical permits, plumbing permits along with contractors names phone numbers and business licences and insurance certificates, that [means that] $50,000.00 to $100,000.00 dollars minimum must be negotiated off the price of that home no matter how pretty it looks. And that is before I even look at it. Why? What I have seen going on in the renovation and home construction industry in electrical work, carpentry, and plumbing is disgusting beyond words. Is the system broken? Pretty much, in my opinion, because, really, if some building inspector has not swung a hammer for at least 5 years, or been connected to the construction business as an electrician or plumber, he really has only read a book, and that is not what constitutes a ‘qualified person’ in construction, no matter how many degrees or letters one may have behind [one's] name. There is a structure of regulatory municipal and provincial agencies is in place but bureaucrats seem to chew up resources that would otherwise put people out in the field. “Buyer beware” is all I can say for now, until these agencies are set up to actually work.”
There are many stories about couples at odds regarding RE decisions, but only a few clearly described on Vancouver blogs. These two anecdotes come from greaterfool.ca and it is unclear thus far whether they originate from Vancouver or other parts of the country. Regardless, they do represent some of the social conflict being experienced in Vancouver.
“In the past few months we’ve seen just about all of our non-owning friends jump into the market and buy their first home. This is driving my wife crazy.. to the point where we’re in marriage counselling because she wants to buy and I don’t. With her, it’s the emotional attachment to pride of ownership. With me, it’s not buying so that we don’t devastate our future enjoyment of life. I can’t seem to negotiate with her on this. Is there any middle ground you can think of? I’ve suggested splitting the difference and buying half a house, but that doesn’t make any sense to either of us. Do you have any suggestions for me?”
“I know exactly what you are talking about. I am in the same situation as you. Counselling and the whole bit. I have managed to delay the purchase pressure for a year by agreeing to rent a similar place to what we would buy in the area we want to live for one year. After the year is up who knows but it gives me a year to come up with a new plan. Good luck.”
Vancouver Realtor Tom Everitt Seals the Deal. Also starring uncanny thinktom look-alike, Richard Kind (super-geek ‘Cousin Andy’ in ‘Curb Your Enthusiasm’).
A Vancouverite becomes aware of the fact that they’ve been unduly influenced by the herd, and decides they’re better off elsewhere. This striking story from Rust at vancouvercondo.info 10th Nov 2009 at 8:56 am -
“I’ve been doing more travel for work, and the thing that always surprised me is how nice other cities are. Even though I don’t believe it logically, it seems like the ‘best place on earth’-hype has actually gotten to me subconsciously. I find myself almost surprised when I notice things that are far more appealing about other cities with lower cost of living. It’s been an eye opener. Right now family and work keeps me here, but prices would have to drop DRAMATICALLY for me to even consider buying here. It’s become clear to me lately that I’m just not interested in living in Vancouver long term.”
Home owners have experienced paper and emotional gains from rising RE prices, and the construction industry has obviously experienced a period of boom. What is less obvious is that, for many, real estate prices have made Vancouver a less attractive city in which to live and work. Business have left Vancouver, or avoided it in the first place. Recent job cuts have people talking about this effect -
“Let’s face it Kodak Canada is what is left of Creo. The [major] job cuts were in 2002 and 2003. There is almost nothing left there now. I don’t think I know anyone left working there, maybe a few. It won’t make a difference. The real story is how many jobs in hi-tech did this real estate boom kill? How many startups never bothered? How many real jobs vanished or were never created? The damage is done. Seriously, crash or no crash I can’t see myself moving back to Vancouver.”
“I took a high-tech management program from SFU back in the late 80’s when it looked like Vancouver had a real future in high tech. Our focus companies were Glenayre and Creo. For a metro to be a growth centre for high tech, it must be attractive to professional families. Vancouver was in the 80’s and 90’s and that’s the major reason why capital and workers were attracted here for the many startups. Make the metro unattractive, and you kill high tech. Housing in Seattle is a good deal cheaper than in Vancouver, and it is and has always been a major high tech hub – why on earth would anyone locate here instead of there, except to employ a few peons who couldn’t get H1B’s? Inside Canada look at Ottawa, or Waterloo, which are even cheaper. If housing gets down to and stays at 80’s real prices, high tech may get going again, but it looks like we’ve slipped back 20 years or more.”
“Looking after a bank repo at King’s Landing. Bankruptcy for two swinging 20 year olds and two aged Mainland Chinese folks (the parents who funded them)! The old folks are dumping their other two condo’s cause they co-signed! All heading back to China it seems. 500K loss after mortgage was paid off.”
“We dare not dream to buy a home in Vancouver, actually we can not afford anything with a yard for a kid to play in, in Surrey, or Maple Ridge, although I worked for several years as a full time programmer. We feel shame to be poor and working poor.”
“On Halloween we got less than 25% of the historical number of children at our door Trick or Treating. Was it H1N1, the economy, or just a change in attitude towards candy, who knows? But the Olympics (as a symbolic Halloween) are likely to experience the same low numbers for the same reasons: fear of the pandemic, not enough money to pay for the trip, or just a pervasive rancor over the spending on junk, rather than on economic meat and potatoes.”
househunting: “I am house hunting right now and it is not looking good. I am probably going to rent until more listing show up in the spring. Is it worth it to get my license to purchase my my home? What is the process and what is the cost? … I don’t have much faith in realtors, and would rather pay myself the commission.”
Lost Soul: “You do realize that having a Realtor is not a pre-requisite to buying a place, don’t you?”
househunting: “It is in my case. Got a realtor in the family that kinda have to use. Rather get my own license and do it myself.”
islandlandlord: “If he/she can’t do the job then I’d cut him loose and find someone who can. Maybe things are different in your family, but I wouldn’t hesitate to drop him.”
househunting: “I wish it were that easy. When it is your spouses immediate family it’s a little hard. Any info on how long it takes to get a license?”
Multiple Offer: “Since there is a realtor in the family, why not offer to split the commission with him/her and save the trouble?”
househunting: “Thanks for the response. It has nothing to do with the commission. If I could use another realtor I would. I just don’t want to have to deal with my current realtor (MIL [my mother-in-law]) and the only way is to be my own realtor without opening up a can of worms. I have many friends that are realtors that I could use, but that would cause a lot problems.”
“I really don’t get this silliness. My wife says “I don’t care what anyone says, there is no recession in Vancouver”. All she comments about is the wealthy cars, and stupid prices of RE. I keep trying to tell her that Vancouver is a city living on credit and home equity loans, the music will stop soon. She doesn’t buy it anymore. She IS starting to believe it’s different here. Shit, so am I!!!??!?!? EVERYTHING is defying all logic and reason. Sure, I know people are buying places based on variable rates of 2% but even at that, I still can’t fathom how ( or why) people are buying and getting $700k mortgages on $100k household incomes. Man I can’t wait for rates to go up!”
“Went by Maple on 84 in Surrey last weekend…. Someone mentioned that they were considering the D plan, which was the most expensive. The realtor said that would hold the most value and appreciate the fastest with the market. When the parent of that person (first time buyer…) said it would also fall the fastest if the market came down again, the realtor quickly corrected them, and said “Oh, no, the market is not going to go down, these units will be worth more by the time they are finished”. If they are so confident, why the low prices?”
“I just finished my [Mortgage Broker] course a few days ago. Three weeks of my life I will never get back. … There is only one official mortgage broker course, [in order] to become licensed, offered through UBC. It is very similar to the Real Estate course that Sauder offers. The requirements to write the exam, and the course itself, was beyond easy. This means the mortgage industry is not concerned about saturation, which makes me wonder what duty they serve to the existing mortgage broker community (the answer is inherent). … The course was useless, boring and easy. You need a 65 and I managed to get 98. Seriously, it’s a joke. … I am not going to do anything special with the course for a while. Once my house is finished and I’ve settled a few issues with some investments I’m going to start a business plan so that in 2 years I can run my own brokerage. We’ll see what happens.”
“I think the new-agish health industry is big (in Vancouver), my sister used to be a yoga teacher there, but after being away for a few years, was unable to get back into it because of saturation in the market. Her income from waitressing has gone down too. Her partner seems to be doing well in therapy/personal growth work, but they sure can’t afford a house! And these are 2 people with university degrees. I guess the beauty and climate make it worthwhile.”
“I’m recently married in Vancouver, income around $85k and wife is looking for work, 29 years old with about $55k in RRSPs ($25k in a money market fund ready to use as a first time homebuyer), $25k in stock, and $65k in cash. No debt, paid for car, and renting for approximately $1200/month with the intent to buy as soon as fundamentals make sense.
… All of my friends have purchased in the past 5 years, many at 5/35, and while I’m happy to rent for as long as necessary (maybe look at a bigger place?) it would be nice to put some of the cash to use. I just feel like I’m spinning my wheels saving every month when the market goes up more than I can save. I’ve been able to keep the new wife satisfied with a honeymoon in Asia, new furniture, and the ability to stay at home while she looks for work. Once she finds something though I know her nesting instinct will kick in…”
This from Jim -
“I’m in a similar situation, 10 years older and have been waiting for over seven years, but property here seems to hold its value. … Even if rates go to 6 percent and the asset value goes down 10-15 % people will likely hang on. I don’t see how the market will correct substantially, except maybe for all of the cheap, small and poorly built condos.”
From Cyrus -
“I am in almost the exact same situation as Canucks Fan (except with about half as much saved). As the days go by, I become more and more comfortable with the idea of renting for the long term. It has been almost two years sans mortgage and with that, reduced stress. As a 26 year old, I believe my generation has grown up with the idea that the place you live in is also an investment. This idea will perhaps come back to bight some in the not so distant future.”
From taylor192 -
“I live in Kits and rent a 2bdrm for $1900. Its valued at ~$550K, which at 35/5 is $2300. Then add $300 condo fee and $300 in tax. I’m saving $1000 or 30% renting. If I was paying the mortgage I’d only be paying down the mortgage $600.”
“I bought several condos in a highrise building in North Burnaby 10 years ago, some were sold but I added more. The market price of 2br was 125k 10 years ago, rent was $780/m; today the price is 260k, rent is $1300/m.”
“There was that big buzz about people renting out their homes and making a killing on it,” said Vancouver resident Tanya Peters. Peters and Tyler Jones planned to get married in Costa Rica during the Games. Their vision was to rent out their house to Olympic visitors to help pay for the wedding. But so far, they have no takers, and now regret not hopping on the gravy train earlier. “I know several people who rented out and did make a lot of money but they rented out a year ago,” Peters said. It appears the Olympic rental market has slowed to a crawl. Jones and Peters have had their home listed on various websites since July. They have dropped their price to $3,000 for two weeks from $5,000.”
“Nick Burzese and his fiancée Di Pham recently realized the North American dream – they bought a house of their own. And the couple’s new home is not just anywhere. It’s in Vancouver, one of the country’s priciest markets. Having rented for years, the couple, who both work in the mortgage business, thought they’d never be able to afford a house in the city. They were doomed, they felt, to live in a distant suburb. As they house-hunted, they saw to their disappointment that the recession hadn’t dampened the market much. “Everywhere we went, there were so many people there,” says Mr. Burzese, 36, a broker at MPRO Mortgage Architects. Eventually, they came across an old 11/2-storey “character” home on a leafy street of detached houses near the Pacific National Exhibition grounds, on the city’s east side. “We immediately fell in love with it,” Mr. Burzese says. “It’s really an area that’s starting to transform.” Ms. Pham, 28, and Mr. Burzese put $57,000 down on the $570,000 house early this year. The couple says they’re comfortable with the debt. They make good money and are installing a basement apartment as a “mortgage helper.” But they might not have been able to get into the market were it not for the intervention of the Bank of Canada and the federal government – in the form of a continued low interest rates and federal policies aimed at maintaining the flow of lending and spending. The interest rate on their mortgage? Just 1.5 per cent.”
“Over 3 out of 4 open houses we’ve gone to in the past year have been vacant properties — I remember up until 2006 or so, the majority were occupied. Read into that what you will.”
“I was at an open house last week. The realtor said:
“If you are thinking about making an offer on one of these homes, wait a while. Nothing is selling and I keep telling the developer to drop the prices. If nobody buys in the next few weeks, I think I will be able to convince the developer to drop the prices dramatically!!”
I give him an “A” for full disclosure and an “F” for fiduciary duty. (unless this was a pre-planned spiel).”
Okay, this may not be ENTIRELY relevant to Vancouver RE, but anybody who has been following the market will know how important the idea of the 2010 Winter Olympics have become regarding market sentiment and discussion. So perhaps you’ll forgive this somewhat extraordinary post. It does, however, deal with an issue that is of interest to archivists, namely the writing of ‘history’ via before-the-fact press releases. Ron Judd’s ‘Olympic Insider’ column at The Seattle Times, dated October 30, 2009 at 10:45 AM, reveals that VANOC distributed a lengthy press on the evening of October 29, 2009, that contained more detail than one would expect regarding an event that hadn’t yet happened. It was clearly set up for lazy newspeople to paste and cut and quote verbatim.
Here are some of the things VANOC predicted would happen the day after -
“A ceremonial party of First Nations chiefs paddled across the waters of Victoria’s Inner Harbour this morning towards the public welcoming ceremony cradling the flame from the dramatic jutting bow of a traditional canoe.”
“On shore, onlookers waved Canadian flags as they lined the harbourfront and sweeping green lawns of the British Columbia Parliament Buildings craning for their first look at the flame.” [I like the 'craning' bit - ed.]
“What a magical moment,” said John Furlong, VANOC’s Chief Executive Officer.”
“The Canadian prime minister and British Columbia Premier Gordon Campbell were among the dignitaries on hand for the flame’s arrival celebrated with a 50-member honour guard and a flyby of four CF-18 jets from the 409 Tactical Fighter Squadron streaking overhead in a classic box formation. The same jets soared overhead at approximately 10:40 am as VANOC revealed the identity of XXX as the first torchbearer to carry the flame in the Vancouver 2010 Olympic Torch Relay, presented by Coca-Cola and RBC and supported by the Government of Canada. As the audience cheered, he/she ran through the crowd proudly carrying the curved metre-long winter white torch, officially starting the 106-day relay’s 45,000-kilometre journey across Canada.”
It all makes it tempting to ask VANOC how we’ll all feel next year. And if they’ll please reveal what they know of where the RE market is heading.
“Even though he had never purchased real estate before, Alym Abdulla could sense that the market was heating up as he began looking at downtown condos last spring. The 24-year-old pharmacist started seeing suites in late March, and before long he realized that some of the units were receiving multiple offers from prospective buyers. 
(unless this was a pre-planned spiel).”
