Monthly Archives: December 2010

Jay Bryan, Montreal Gazette – “Homes are resistant to big drops in value. … It’s hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two.”

Excerpts from ‘No solid basis for scary speculation’ by Jay Bryan, Montreal Gazette, 30 Dec 2010 -
“One of the biggest business stories of 2010 was one that never happened: the disastrous Canadian housing bubble and crash that never came to pass.
Of course, we know this now. Canada’s hot housing market has settled down without any serious slump in either prices or sales. It’s hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two.” …
“The roots of bubble hysteria are understandable. After the terrible experience of the U.S., it made sense that many would be hypersensitive to any evidence that something equally disastrous could happen here. What’s not so understandable was that journalists working for some of the best newspapers in North America would give credence to such a hare-brained idea without finding any evidence that it was actually happening.” …
“As investors become more or less optimistic, the price of an asset -stocks, commodities or real estate -constantly moves up and down. Sometimes it’s too high and ripe for a fall -but that’s not a bubble. And unlike stocks or commodities, homes are an asset that’s resistant to big drops in value. Many owners are perfectly willing to wait if they don’t get a satisfactory price.”

It’s worth taking a look at the entire article.
Our comments:
Complacency comes before a fall.
Labeling concerns about a bubble in the Canadian RE market as “hare-brained” and “hysteria” are examples of bull hubris.
A home is by no means “an asset that’s resistant to big drops in value”.
How can anyone seriously write that while witnessing so many examples of housing prices plummeting around the globe?
It reminds one of the ‘scientist’ centuries ago writing that nothing heavier than air would ever be able to fly (while birds settled on his windowsill).
And folks, when “It’s hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two” – Run for the hills! This kind of market complacency always, always, predicts coming volatility. The evidence is overwhelming that the moves will be to the downside.
-vreaa

[Some of Jay Bryan's passages from this article will also be archived in the 'What Bubble?' and 'Bull Hubris' sidebars.]

[Update 2 Jan 2011: For an excellent and comprehensive dissection of the Jay Bryan article, see 'Who’s the ‘hare-brained’ one? More hot air from perma-bull Jay Bryan' by Ben at financialinsights.com.]

“I grew up in this town and am old enough to remember when False Creek still had pulp mills surrounding it… Vancouver just gets uglier and more soul-less with every passing year”

interested at VREAA 30 Dec 2010 4:49pm“I grew up in this town and am old enough to remember when False Creek still had pulp mills surrounding it and working class people raised 4 kids in their East Side AND West Side bungalows. I’ve always hated the hubris of “the best place on earth” and see it as yet another bid to bragging rights for ex-pat Ontarians and Albertans. I’ve also lived in San Francisco, Oakland, Berkeley, Montreal, Toronto, London England and Glasgow and can decidedly attest that Vancouver is not the best place on earth. It may not even be the Best Place in Canada. In fact, Vancouver just gets uglier and more soul-less with every passing year, given the relentless tear-down culture here.”

Can’t Sell? Increase The Price By $200K!


3719 W 11th Ave, Point Grey; V853201
2,198 sqft house on 30 x 122 ft lot; Built 1996
Listed 29 Sep 2010; Ask price $1,498,000
Price change 29 Dec 2010; Ask price now $1,698,000
No sale in 3 months, price increased by 13.3%

Up is the new down, people.
What’s going on here?
Trying to attract buyers who demand to pay more? (Not a joke: There seems to be cachet to paying more for less on the westside. Bragging rights?).
Or some kind of weird financing fudging? (We’ve previously seen other properties relisted higher just prior to a sale: Is the financing source possibly more comfortable if the buyer buys at list rather than higher than list?)
The property would still be overvalued at a half of the original price.
Soulless boxes like this one will sell for 650K or less after the crash.
Standard lots will return to 500K and below.
-vreaa

A Vancouver Bull Sells An Investment Condo In Singapore- “I could probably hold out for another 10-20% easily over a year (still very cash flow positive at this price)….. but decided to take it.”

RiskArb at RE Talks 28 Nov 2010 8:03am“Realtor from Singapore woke me up this morning to present an offer from a mainland Chinese buyer for my condo.
If I sell, it would be the highest price so far obtained in the development. And mainland money is new to this part of town (East Coast SIngapore) as they’ve typically only played in the ultra high-end (Orchard Road and Marina Bay).
At the same time, I read in the Globe and Mail ROB an article about Vancouver real-estate and how the majority of purchases on the westside are from mainlanders. … The trend should have slapped you in the face by now.”

Update one month later:
RiskArb at RE Talks 27 Dec 2010 10:30pm“Update. I turned down the above offer……..and last week I got another offer that’s 3% higher. Malaysian Chinese buyer. I could probably hold out for another 10-20% easily over a year (still very cash flow positive at this price)….. but decided to take it.”

“My new path forward?? Here it is: Sell. Move back to the USA to the most expensive housing market in the country and still be able to buy a real house with actual quality and real architecture for 50% less than what sheet holes cost here.”

If this anecdote doesn’t make you sit up and think, nothing will. The Vancouver RE market is perversely distorted, and this is profoundly unhealthy for our society.  – vreaa

vanhattan at vancouvercondo.info December 28th, 2010 at 4:41 pm- “Here is my situation. I moved here in 2005. I could not find a ‘decent’ place to rent that would accept a very well behaved dog so we decided to buy a condo of a whopping 889 square feet. We hated the condo and paid more than 3x what our gorgeous home with 22 foot ceilings, 1/2 acre treed lot with more than 3x the square footage cost. (sold our 3,000 sf home for 330K, bought our 889 sf condo in Van for 377K). The purchase and shock of living in this shit hole almost cost me my marriage. F*ck, even the dog hated the place. So we sold 15 months later for 488K. Never saw an uneducated unemployed dog make a 100K+ in one year but that is what our dear Buster did as we would not have purchased except for him. Purchased another condo, this one a more reasonable 1050sf brand new condo with great views, great neighborhood. Still nowhere as nice as our old ‘home’ but at least manageable. Purchased for 700K. The latest comps put our place at 900K+.

Ok so here is our situation. Have a huge desire to get back into a real house again. Have been searching for over a year now. Have been looking at complete sheet boxes going for over 1.5 million that before I moved here I would NEVER have even considered even looking at much less buying and LIVING in. This is what we found one recent weekend: Falling down complete sheet boxes with more than 30+ people showing up in the first 10 minutes of an advertised open house. I am NOT racist in the least bit but have to say that 80% of the lookers were of Asian decent. Guess what???? The damn place sold for 100K over asking at 1.6M the very SAME day!!!!!!!!!

I got so depressed I went home almost in tears. My new path forward?? Here it is: Put the place on the market this spring for 200K under current valuations per a comparable sale one month ago. This is still 100K more than what we paid for it but being 200K below the most recent comp should sell in a weekend. Guess what. I am getting the F#%k out of here. We should be able to easily get out of here with 250K more in our pocket than when we arrived. I figured if we had rented the same places vs. buy we would have paid about $150K over the same period. So we will walk away from the best city on earth living essentially rent free with 100K to spare. What are we going to do next? Move back to the USA to the most expensive housing market in the country and still be able to buy a real house with actual quality and real architecture for 50% less than what sheet holes cost here. This metro area also actually has jobs that pay on average 3x what they pay here.

Bottom line: even though I have been very lucky with this real estate market in Vancouver, I can’t believe what places are still selling for. My opinion is that prices will continue to go up as long as the Asians keep moving here en mass buying any sheet hole for above asking price. My estimate is that China still has a couple of years left of their bubble before it bursts so Vancouver will probably still go up and up and up for another couple of years.

I am out of here. I want to stay, but simply cannot afford it. I am not bragging but I make 5x the average wage of the average resident and can’t for the life of me figure out how anyone makes it in this town.

So am I a bear? Am I a bull? Neither. Just a very discouraged Vancouver resident who simply cannot believe the prices of the crappy 2nd world real estate here. I simply cannot afford to live here and I make more than 200K/year!!!!!!!!! My quality of life is worse than when I made 65K/year before I moved here! Really folks. This city is insane. I am getting out. I have loved Canada and loved Vancouver, except for the housing situation. I will always have fond memories of the place and will leave being a Canadian citizen but have reluctantly thrown in the towel. I would much prefer to live in Canada than in the US as our values are much more Canadian but I also want a better quality of life.

So perhaps we will return but only if the real estate prices return to earth. From where I sit this is still a far way off.

Humbly, a soon to be former Vancouverite.”

Renter Poll – “Where do you rent, how many bedrooms, and how much do you pay?”

Reader ‘ams’ proposed [VREAA 28 Dec 2010 8:12pm] that we headline this question, for the sake of data points and possible discussion. If you’re a renter and would like to participate, please add your info in the comments section.

“Where do you rent, how many bedrooms and how much do you pay?”:

ams‘ own response, to get things rolling -
“Mount Pleasant, 2 Bedroom Condo, hardwood floor, in suite brand new washer, dryer, fridge, stove, and dishwasher. $1570 per month not including utilities.”

[Rough estimate of 'square footage' may be as useful as 'bedrooms'. -ed.]

TPFKAA on Ambivalent Recent Buyers

anonymous (now known as TPFKAA) at VREAA 22 Dec 2010 at 9.35pm -
“A family friend bought a 2 bedroom, maybe 700 sf condo during the late 08- early 09 correction for around 350000. He rents out the second bedroom to a tenant. I asked him if it was working out ok in such a tight space… a pained expression flitted across his face: “yeah it is a little tight… but it works out okay.”
uh huh. Comfortable.”

“An acquaintance with a townhouse, decent sized, good for two kids, bought long ago told me she dreaded her family friends coming over for dinner. Recently the friends bought a house for 850000 in N van, with help from parents’ downpayment. Since then, each time they visit the wife keeps on telling my friend that “you should get a bigger place. you really need more space.” They shopped for months before they found the place, and it is in dire need of renovation and decoration. My friend says it is really grotty. But they seem so pleased with themselves. To me it sounds more like they need others to affirm they see the emperor’s clothing, because their nagging subconscious sees the scam they have fallen victim to.”