Maclean’s 23 Feb 2011 article highlights BCs vulnerable personal debt situation.
Excerpts:
‘Canada’s Worst Spenders’
British Columbia has been Canada’s real estate debt champion since at least 1999
There’s been plenty of speculation that Vancouver’s hot housing market is in bubble territory, and as interest rates rise, that view is going to be put to the test. A new Toronto-Dominion Bank report says that one in 10 British Columbia households could find themselves scrambling to pay their bills if the Bank of Canada ups rates, as TD predicts it will—up to three per cent by the end of 2012.
The province has been Canada’s real estate debt champion since at least 1999, and it is the only one where the average savings rate is negative, according to TD.
Vancouver in particular seems to most resemble the housing run-up seen in the U.S. Two weeks ago, Robert Shiller, an economist at Yale University who correctly forecast the U.S. housing bust and helped develop the influential Standard and Poor’s Case-Shiller real estate index, likened the B.C. capital to San Francisco, one of the areas worst hit by the slump in the States.
It’s worth pointing out that many of the desirable areas of San Francisco did not drop very much.
Palo Alto dropped $1.36m to $1.2m (12%):
http://www.zillow.com/local-info/CA-Palo-Alto-home-value/r_26374/
Mountain View dropped $794k to $697k (13%):
http://www.zillow.com/local-info/CA-Mountain-View-home-value/r_32999/
Redwood City dropped $830 to $690 (17%):
http://www.zillow.com/local-info/CA-Redwood-City-home-value/r_20128/
The city of San Francisco itself dropped $800k -> $670k (17%):
http://www.zillow.com/local-info/CA-San-Francisco-home-value/r_20330/
San Jose dropped $693k -> $500k (28%):
http://www.zillow.com/local-info/CA-San-Jose-home-value/r_33839/
Most people won’t know what hit them until the are laying flat on their back. Why? Because when people see something go up so quickly, defying all logic, defying what is happening in other areas, they get mesmerized and lose all reasoning capabilities. Greed sets in and they are vulnerable to manipulation at that point. They will believe just about anything. And since almost everything they are told by the RE industry is a lie, the housing market will have one last surge upward, making the resulting fall that is to come to happen much more quickly than it would otherwise. Also, because there is a surge, Vancouver’s housing market is going to fall further than it would have if it wasn’t sooooooo manipulated by the local RE Industry. So all this is doing is making the correction into a crash.
San Francisco, “one of the areas worst hit by the slump in the States” also has a large Chinese community. Perhaps somebody should tell them that they are supposed to be pushing real estate prices higher, not lower.
Has San Francisco’s bubble burst? I was there last fall and prices didn’t seem cheap at all. Very comparable to Vancouver’s crazy prices. Looked up a townhouse that I saw a for sale sign for, and it was about a million bucks. A quick glance at Zillow seems to show that houses are still pretty pricey…but maybe they were less before? Hm.
Still expensive, but 20% down from the peak and trending down.
http://www.zillow.com/local-info/CA-San-Francisco-home-value/r_20330/
There’s a big difference between San Fran and Vancouver… San Francisco has real head office jobs. Charles Schwab, Nokia USA, Levi Strauss, etc… which can support higher real estate prices… I’d be curious to see what their average family income is vs. Vancouver.
….and San Francisco’s rents are double that of Vancouvers.
Bingo.
Wrong – having lived there and rented in both cities I can say for certain that San Francisco’s rents are equivalent to Vancouver’s; real estate is less expensive and salaries are 50% higher; and taxes lower. Plus what you get for a million bucks in San Francisco IS world class.
The RE Industry thinks it is protecting itself, but all it’s doing is ensuring a crash instead of a correction. No more soft landing now. Many of them will have to seek other employment.
Considering that Shiller thought Vancouver was bubbly years ago, San Fran is not actually one of the American cities hit hardest by the slump, and Vancouver is not BC’s capital, I wonder about the context for this quote.
It seems a good deal less precise than I would normally expect from Shiller… who may not know that Vancouver’s not the capital of BC (fair enough, I think), but would know the American markets and know that the west was late in, late out, & still falling. Vegas: hard hit. San Fran? Meh. But the west isn’t done yet.
Absinthe
I went to the Maclean’s article and searched for the word capital. It is not in the article. I’m not sure where the above quote came from. It’s very similar to the article. It could be an earlier version edited for errors I suppose.
Bailing/Absinthe -> we like readers who read closely, thanks.
The current version at the site link has had the ‘capital’ error edited out.
The original version cached at Google, shows it in its original form, with the ‘capital’ in place.
Link:
http://webcache.googleusercontent.com/search?q=cache:eJ_R5sBCYk0J:www2.macleans.ca/2011/02/23/canadas-worst-spenders/+http://www2.macleans.ca/2011/02/23/canadas-worst-spenders/&cd=1&hl=en&ct=clnk&source=www.google.com