“Remember that Vancouver house that went for $2.55M ($655,000 over asking) in a 25-person bidding war last April [2011]? Well, the house is back on the market a mere six months later for an asking price of $3.5m, or an annualized 78%. (This house originally went for $531,000 in 1996.)”
- Paul Kedrosky, Infectious Greed, 28 Oct 2011
US commentators have a perspective on these things that is sorely lacking locally. – vreaa
“Greed is good” – Gordon Gekko
“Infectious Greed” is greed shared. Extra good!
Oh yeah that’s right vreaa. This is a case I’ve seen often, it takes someone from outside the Kool Aid drinker circle to make something so obvious obvious. Witness Credit One sanguine reports on Vancouver’s housing market and compare them to the national and international reports that scratch their heads in wonderment at how high Vancouver’s prices have risen from stratospheric to orbital.
From some time spent on the front lines during the .com bubble I have to agree with a previous commenter that during that time — the late-’90s — it was very hard to not be swept up in the whole thing, the money was flowing so quickly it seemed like it was can’t-lose. People were intently focused on getting products out to eagerly waiting customers, it seemed like what the nerds had been preaching since the ’80s was finally coming to pass. It was hubris crossed with large amounts of capital pure and simple; oh yeah, and with no good collective business case.
In Vancouver today I see the same mindset, people believing that what they “knew” a decade or more ago is now finally coming to pass: a new order is finally here and Vancouver is finally on the map. Heck I don’t know the future but it smells eerily familiar… not least looking at those “outsiders” who are taking a step back and asked, “So… who are your customers, exactly?”
“The original story says the house was at 2466 West 14th Street in Vancouver, but the new listing says 2468 West 14th St”
Hmmm… wondering who they want to sell to!
And from the comment section:
“So this was not a raw flip. I was actually impressed by how they had further contemporized an already modern house design. They had obviously spent a chunk of money. (…) With respect to the market the realtor made a reasonable case for it being priced properly.”
So the flipper may have spent $100K+ on renovation on what seemed to be a proper house and is now asking $1m more than he paid for. And this person says this is priced reasonably. My Grade 4 math tells me something is not right here…
I’m wondering if this is the realtor or the flipper himself that wrote that comment.
Well let’s keep track and see if this thing sells! I wonder who the realtor is. I used to live in that area and there are a couple realtors that seem to be able to sell some very over priced house (IMHO) no problem and over asking to boot! What’s even more amazing? They aren’t Chinese realtors and they aren’t even specifically marketing to Chinese buyers!
In the US one form of fraud in the late stages of the bubble was the “straw buyer” fraud. You have someone bid artificially high to establish a BS valuation, then try to flip it now that it is “worth” that much.
In other cases, a fraudster would buy a home for $500k let’s say, turn around and sell it to a fake buyer for $700k. That buyer never makes a payment and walks away from the house. The fraudster takes the $200k profit, pays the fake buyer some cut. Often there was a crooked appraisers involved.
All kinds of fun “excess” comes to light when the bubble pops.
actually didn’t they already do that in Alberta?
A bit off topic but I think I’ve figured out the investor’s dictum that forms the core philosophy of the buyers of Vancouver Real Estate, including, but not limited to HAM:
“The more it costs, the more I make.”
“The more it costs, the more I make.”
Surreal logic but there’s your “wealth effect” in a nutshell. I remember a sense of awe I felt as a child holding a $10,000 watch in my hands then wrapping it around my wrist, never mind I couldn’t afford it. It made me feel wealthy just wearing it. No doubt such base emotions carry over into adulthood.
I think the Excel price chart for this SFH should be closer to an exponential curve to better demonstrate the bubble that it is since exponential price increases are the smoking gun for the eventual price crash. Just like every other asset price bubble in history. I’m always amazed how many people inherently realize that exponential increases are unsustainable but choose to ignore charts that show this character in favour of a shorter term charts to make themselves feel more at ease that price gains will continue.
The chart looks like some kind of ‘best fit’.
Add a reasonable 4th price data point and voila! an exponential curve.