“A new year means new resolutions, and we should start fresh when talking about Vancouver real estate.”
“Happy 2012! In keeping with the spirit of the brand new year, I say we resolve to look at our dynamic real estate market in a fresh way. Let’s proverbially “sweep out the old” and make room in our news for market stories from a fresh perspective.
First, we should agree not to discuss things that don’t exist. There are three things I don’t want to hear about anymore in the real estate world for 2012, so let’s clear the air and get off on the right foot here.”
“What bubble? If I never have to hear one word again this year, it would be “bubble.” One of the most compelling aspects of the bubble is there is no way to predict it.
In each historic case of bubble markets (characterized by rapid price increases and a sudden pricing collapse), it is the unpredictability in forecasting that is the common thread. While economists and pundits have claimed affordability indices are the true measurement of anticipating a housing bubble, there is no historical data to support it.
All of the market bubbles in Japan, the U.S. and Australia, had their own underlying economic and political drivers. Our country’s lending policies are conservative and are coupled with record-low interest rates. B.C. is known for exceptional regional livability, low unemployment and excellence in education.
Let’s face it – if there is a bubble correction, most single-family homeowners won’t be affected. In any market, few “win” on both ends of the deal. Buy low/sell low and buy high/sell high would be the norm for most. Let’s agree to disagree until we can discuss it in hindsight.”
– excerpted from ‘Let’s Change our Vancouver Real Estate Vocabulary’, by realtor Leah Bach, BC Business magazine, 6 Jan 2012 [The other two things to agree to not mention are 'Real Estate Fees' and 'Foreign Investment'.]
Adults know that this is complete hogwash. Of course you can identify bubbles when they exist; they exist when asset prices run up far beyond fundamental value as determined by future income stream, fueled by speculative buyers using cheap financing to chase rising prices in a momentum fashion. As happened with tech stocks in the 90’s, US & many other RE markets housing through the ‘naughts’, and as has so very obviously happened with Vancouver RE 2003-present. These are all classic asset bubbles.
Another reliable identifying factor seems to be that there will always be self-interested commentators, in the middle of the bubble, claiming that bubbles can’t be identified: Greenspan, Bernanke, Leareah; Vancouver/Canadian RE bubble ignorer/apologists (Bach, Wiebe, Podmore, Sommerville, Flaherty, Muir, Yu, Guateri, Geller, Bryan, Pastrick, Dupuis, Campbell (Don), Goldberg, Marchildon, Lovett-Reid, Klump, Regan-Pollock, Dunning, Dugan, Jenkins, Ash, Kinch, Good, etc, etc).
So, the routine seems to be to stick your fingers in your ears, ignore the data, dismiss the “naysayers”, and then, after the implosion, to pontificate as to how impossible it was to see all this coming. If your eight year old kid behaved like this, you’d call him on it.
Bubbles can be identified before they implode. Shiller, Baker, Prechter, Shiff, innumerable online bloggers, all saw the US RE bubble for what it was. Keene has written extensively about the Australian RE bubble. Rosenberg, Baker, Shiller, Krugman, Shedlock, Coxe, Jarislowsky, ‘The Economist’, Rabidoux, Turner, innumerable bloggers have all clearly stated that they see our national Canadian RE bubble, and many have pointed out that Vancouver is an extreme example of such a speculative mania.
If it walks, talks, smells, looks, behaves, and, heck, has the complete genetic structure of a duck, call it what it is – it’s a duck.
Those who argue that this is not a speculative mania, particularly if they do so from a self-serving position of influence, should be taken to task on their opinion.