Transcription and stills from ‘White-hot housing market’, The National, CBC News, 21 Jan 2011. [Hat-tip 'ams' at VREAA and 'kabloona' via e-mail; thanks. Our own comments follow.] -
“If you live in the Vancouver area, it seems like location is no problem at all. The housing market there is hotter than anywhere else. Even a million dollars might not get you the home of your dreams. Even in a city famous for eye-popping house prices, what happened on this corner this month is remarkable.”
The lofty asking price: $1,088,000.
“We had over two hundred people at the open house, there was a line up down the stairs, on the walk-way, and onto the sidewalk. And we had thirty offers come in on the property. And the final sale price was $1,611,000.”
And it didn’t stop there.
“After the neighbour across the street found out about the price, she phoned me up and asked me to list her home”
Incredibly the woman had only owned the house for a few weeks. She paid $1,047,000 on November 2nd. She relisted and sold it on January 17th, for $1,350,000. That’s a $300,000 flip in two and a half months, and that’s without making any improvements to the home.”
With the average house price here already topping one million, it again begs the question “Can prices keep defying gravity?”
“What’s likely going to happen is that, over the next several years, interest rates will go up, there will be some point where they go up relatively rapidly, and once that happens we’ll see in reality how sustainable these housing prices are.” (David Macdonald, Canadian Centre for Policy Alternatives)
Besides an incredible backdrop, Vancouver has something else that keeps prices high, a lot of wealthy buyers from mainland China.
“They are willing to spend a lot of money, they have a lot of money, and especially in the luxury market.” – Gregory Carros (Sotheby’s International Realty)
It all adds up to a frothy start to the 2011 selling season.
— end of transcription —
1. Knockdown for $1.6M; 49% over ask; 200 people on the sidewalk; $300K profit on a 3 month flip; wanting to get in “bad”: anybody need any more evidence this is a mania?
2. $300K in 3 months: High-profile news of great speculative profits is bad, bad news for our society. It distracts everyone from more productive activities, and it’ll demoralize prudent workers and savers. (How long does it take the average family to accumulate $300K savings?). It draws more into the speculative game, and puts even more pressure on prices. (Until, of course, it stops, and reverses.)
3. Throwing in a bit about demand from mainland China seems to be required fashion in these reports; like a crazy leap to try to explain the unexplainable with a hand-wave. The vast majority of sales are to locals; stories of wealthy foreigners cannot support this market indefinitely.
4. To give the CBC their due, they do use the word “frothy” and do ask the question “When is it going to stop?”. The most sensible phrase in the whole piece was “we’ll see in reality how sustainable these housing prices are” [David Macdonald]. We like the language, using the word “reality”, implying, of course that we have prices that are based on “fantasy”. We’d really like CBC to follow up with a piece on the implications to Vancouver if these prices are not based in “reality”.
5. The last two stills are not a visual ‘typo’. The realtor smiled for a really long time after saying that he hopes this never ends. As usual, a small minority of the population, those with vested interests, are happy with the insanity that this RE market has brought to Vancouver.
6. Style comment: Printing the price in massive font over the building in these reports is a bubble development. The implication is that the numbers are far more important than the buildings.
7. “Wanting to get in ‘bad’.” You can feel the exquisite, squirming urgency of the wannabe buyers. Like addicts, groupies, followers.
8. We fully anticipate that lots comparable to the one that sold for $1.61M in this article, will sell for well below $500K during the coming bear market. That’s more than 70% off the recent sales price. If you think that sounds crazy, yes, at this point, maybe it does… It’s the inverse of how crazy the move to the upside has been. That’s how bubbles implode.