Like stocks, global real estate is also in a bubble spurred by easy credit, but is bursting in different areas at different times, Harry Dent Jr. said. He has been renting a home in Tampa since 2005 as he waits for the battered Florida market to bottom before buying. “The home I have been renting for six years has fallen at least 40 per cent, and I am expecting another 20- or 30-per-cent decline.”
When an asset bubble bursts, prices often return to where the rapid, price runup began, he said. “Look at what your real estate was worth between 1996 and 2000. That is the range it will fall to … I think housing in Vancouver and Victoria could decline 60 or 70 per cent, while Toronto is more like 50 per cent, and Montreal a little less.”
- from ‘Get set for a crash, forecaster says’, Globe and Mail, 10 Jan 2012
Noted here not as an endorsement of Mr Dent as an analyst, but rather to mark the fact that the Globe and Mail has actually put into print predictions of RE price drops this extreme. They’re more extreme than our own modest 50%-66%-off predictions for Vancouver.
- vreaa
Makes sense to me…most unionized gov’t workers got their last pay raise right around 1996…
60-70% would be something. I doubt it will be that severe.
Fundamental support comes in around ballpark 50%-off, lower than that in a higher interest rate environment (where investors would demand even better cap rates than a simple 50% haircut would provide).
High likelihood of overshoot given the size, duration, and depth of saturation of the mania.
Also, ‘fundamental support’ is a dynamic concept, as a crushed economy may put downward pressure on rents (unemployment, stagnant wages, desperate landlords..).
Did you follow the tech boom? How far did you think Nortel would drop when it was at $124?
Obviously Vancouver RE can’t go ‘bankrupt’, but 2/3 off is completely feasible.
For certain condos perhaps. I do think for inner locales that SFH won’t be nearly as severe even with higher mortgage rates. Could be wrong tho.
I think what he is saying is very plausible but he’s also not the most renowned forecaster. Calling for Dow 35000, most famously. Interesting that they trot out a wing nut at this point?
From the G&M:
“Harry Dent oversees the U.S.-listed Dent Tactical exchange-traded fund (DENT-N18.60-0.20-1.06%) but suggests that most investors avoid this go-anywhere ETF. “People would be better off to be safe in cash, or bet on the markets going down,” said the economic forecaster whose firm has run the ETF since late 2009.
The quantitatively driven ETF uses a momentum strategy, but it doesn’t work well in a volatile market environment, he said. The ETF lost 8 per cent last year versus a flat S&P 500, and gained 4 per cent in 2010 versus a nearly 13-per-cent gain for that index.”
As we said, we find the G&M article more interesting for the fact that it puts such predictions into print, and don’t endorse Dent as an analyst.
Kudos to the VREEA host for telling it like it is (or would be) for so many years, in the teeth of so much denial and opposition. Thoreau among others would cheer you for your enlightened independence and fruitful obstinacy.
Until proven correct, hard to differentiate from lunacy, though.
Onward. There is no alternative.
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(well, actually, there are a few very, very low probability alternatives, but the evidence still overwhelmingly supports a coming crash)
good company. jim rogers said the euro would fail 10 yrs ago – have it right there on the inside jacket of my ‘adventure capitalist’ 2003. ron paul’s been saying the same thing about big govt for 30 yrs. mises foretold the fall of soviet russia (and by extension all socialist empires) in the 1920s, as well as the regime irredeemable fiat currency, all based on rigorous economic principles, fully exposed. the only thing he and hayek were wrong about was the timing. they were too optimistic people would recognize things sooner for what they are. when you reach that point of recognition and see the world clearly, it becomes more difficult to understand why others do not. mom is still giving me fits. wrt vanRE, only the timing open for debate, imo.
“Look at what your real estate was worth between 1996 and 2000″.
old paradigm argument.
Did you follow the tech boom? How far did you think Nortel would drop when it was at $124?
unrelated paradigm argument
How so? Markets and market psychology are pretty much the same across assets and instruments. Be it Tulips, stocks or RE.
What makes the effects of RE worse is the fact that it is not liquid and carries higher carrying and transaction costs than other assets.
The condo market may fall ~30% but hard to fathom SFH in Vancouver being similarly impacted (limited supply).
Limited supply because a lot of people want these money making Vancouver Special SFHs. We will reach a point were no one wants to touch them and demand will shrink, resulting in a rising supply.
Formula1 -> “old paradigm argument”; “unrelated paradigm argument”
—
F1 is making a “new paradigm” argument, also known as “It’s different this time”. It almost never is.
Well said.
Also, I keep reading the name as Harvey Dent.
@”Formula 1″Did you follow the tech boom? How far did you think Nortel would drop when it was at $124?
unrelated paradigm argument”
Fredula (Fred + Formula 1 — I understand you’re the same poster?):
The host’s Nortel comparison can also be called an analogy, and (speaking as a writer) I think it’s accurate.
didn’t nortel need to be bailed out?
50% off is a lot in term of percentage. But the drop is tiny, it only reflects price level about 1 year ago for some of the West side and Richmond SFH.
You must be using the new math?
If the average price is currently $1M, a 50% drop means the average price would be $500k. Prices from there would have to rise 200% to recover to current levels. 50% is a catastrophic drop.
And that’s why it’s going to get real weird around here when that much phantom wealth suddenly gets vaporized.
“Fredula (Fred + Formula 1 — I understand you’re the same poster?):”
your assumption is that anyone who is not sour on real estate must be the same person. Brilliant
[Touches anterior side of hand to forehead to complete facepalming gesture]
Yes, because your propensity to post under different handles isn’t well known here.
@Vesta: I believe VREAA confirmed Fred is a different person, however Formula1, Rusty, Eyesthebye, and a couple other names are indeed the same person.
Thanks for the clarification, Royce! I’m so disappointed, because i liked the moniker “Fredula.”
However, we can now use “Rustula” as Formula 1′s combo moniker.
“Pustulent Rustula” or “Pestilent Rustula” would make for some nice consonance if one is feeling particular exasperated with the spread of irritating Formula 1 comments.
On the serious side, I agree with Jesse below that CAC info needs to be made clearer (re: Granville corridor) so redevelopment can occur.
diablo is another handle
so, is that what a writer doing? making name up like vestapricedoutsourgrape? no wonder, one has time to bitch 24/7
you guys are dealing with a god damned pshycopath.
ive never seen a more persistent, stubborn or mentaly deranged troll.
Fredula — I thought the VREAA host and other commenters familiar with Fredula’s comments had identified Fred and Formula 1 as the same commenter. Are you saying you’re not? Or am I mistaken?
Sincerely,
“Brilliant”
fred and formula1 come from different IP addresses. That does not necessarily mean they are different people though it’s likely they are.
There are wonderful examples of concurrent comment threads on certain local real estate forums that prove there’s more than one, er, person in the car.
Fred —
I must say that “Vestapricedoutsourgrape” is not only not witty, it’s completely inaccurate. I wasn’t priced out. I’m now a renter by choice.
Furthermore, it sounds from other commenters here like you yourself can be found “24/7″ making nasty comments on multiple websites, not just the VREAA. Sounds like a case of trying to solve some anxiety to me — I hope not over RE insolvency.
I saw that our old family home in Alberta was listed and calculating the price we sold it for in 1986 and the current price it was just about 2% appreciation per year.
Isn’t that the way it is supposed to work? =)
Looking to see if it sells at that price though.
Vreaa, did you catch this article on the Province regarding speculation on the Granville Corridor?
“Late last year, 10 lots on Cambie Street south of 41st were sold for $3.4 million each. The lots, each with an old house, were sold for triple their assessed value.
Eight lots along busy Granville Street in Vancouver are currently up for sale for a cool $30 million.
The asking prices for the eight lots which are south of 41st Avenue, are over twice their assessed values, with total assessed values being $13.25 million.
Seven lots are being sold for $3.6 million each, while a larger one is going for $4.1 million.
“They are in a row so we expect a developer to pick them all up,” said Karson Tse of Bowmac Realty.
Tse said the properties have been on the market for 95 days, as of Jan. 9, adding that it took him only a few weeks to convince the owners to sell their properties, including two who bought in 2011 and stand to double their money.”
http://www.theprovince.com/news/Speculation+fever+spreads+Granville+Street+real+estate/5976131/story.html
psychic spies from china try to steal your mind’s elation, little girls from sweden dream of silver screen quotations, and if you want these kind of dreams, it’s californication. ciao dudes.
Sigh… silver screen quotations. Je m’en souviens bien.
Psst… for those who, like ‘Nem’, pine for Venice – it’s back. CalifornicationSeason5.
http://tinyurl.com/65hdafq
Again, if these properties are changing hands due to rezoning, the new owners are likely going to be sorely disappointed due to CAC clawbacks. The City needs to seriously step up its efforts to better advertise how CAC works. There is significant dumb money at play and could mean prime locations with redevelopment potential will sit stagnant for a long time. Hardly in the public interest.
Completely correct Jesse. Owners and offshore buyers don’t understand Community Amenity Contributions in Vancouver. It is bizarre since CACs are so costly and so simple. It is another example of the stupidity of the speculators active in the market.
Lots of people believe developers and wealthy speculators/investors are smart. It just aint true. These clowns will be the last to admit the bubble exists. And its gonna cost them.
BTW, “bubble” under-states our local situation. This isn’t a bubble, it is far bigger – a zepplin….the Hindenburg. Where’s my lighter.
This is an old one and it has been covered on one of the blogs. Nice to see the Province article. Original listing had “realtor comments” announcing that the bids would be accepted on October 15 for short acceptance thereafter. With a $30M land cost – nobody will touch this for sure. – We have previously gone through each of these on Greaterfool and did note the 2001 purchase. The lots are huge however at 200 ft depths. There is no chance that it would go for over $20 million so I have little expectation this will succeed in the current slow market.
This guy seems to be an all around doomer, a perma bear. Yes there will be a solid correction in Canada but that doesn’t mean the rest of the world will crumble as well.
BTW anyone making stock market predictions looks stupid to me.
“Like stocks, global real estate is also in a bubble spurred by easy credit”
I’ve been reading about a new bubble in farm land in the US. It’s amazing how there is still so much “hot money” that has to go somewhere/anywhere right now. A constant string of bubbles, it’s just that some, like housing or the stocks, are in really really big markets.
If this money isn’t creating jobs, may as well tax it back into the public purse, and invest in infrastructure, education, and healthcare.
Actually it does create jobs. Rising prices brings more demand from investors, which is satisfied by more supply. This creates lots of jobs in construction, finance, and real estate. Housing is a huge part of the economy now. Maybe you’re thinking of sustainable jobs ?
yes, good middle-class jobs, sustainable at least until the next election!
whatever goes into the public purse must be taken from the private purse. something else goes unfunded. who is better at spending your money? you or your govt?
whatever goes into the public purse must be taken from the private purse. something else goes unfunded. who is better at spending your money? you or your govt?
Sadly, for most people,. the answer is the latter.
30% fall then stagnation. Look to Europe for the example!
The 10% adjustment I’m reading everywhere has already come and gone.
At Dec. 2011 Vancouver SFH’s have dropped 13.5% from their May 2011 peak but there hasn’t been any media coverage of this because it is being brushed off as a seasonal adjustment. Our realtor has stated that several of the properties bought last Chinese new years have been re-listed at higher prices which appears to be fools looking to sell to greater fools. If there isn’t a huge Chinese demand this Jan. 23 like last Chinese new years watch out below as anything can happen. The atmosphere now feels like just before opening bell on trading day.
Lots of activity at Van East open houses. This goose ain’t cooked yet.
I wonder how much affect the recent barrage of negative RE news on MSM is gonna have on the average persons psyche.
Seems like a new negative story everyday, I guess people catch on slowly but even my dad hasn’t brought up buying in awhile now and he used to every time I visited.
A comment on Garth’s blog:
“We had our house appraised (not by realtor) at $619,000. Listed at $597,000. Sold for $497,000 after 6 months. 1/2 acre in Okanagan town, lake view. There were 15 lake view homes for sale at the time (Jan. 2011) and I think most of them are still for sale, following the market down. A dollar in the hand is worth more than a house in a flat market.”
Ouch!
“Renovators Alert! Prime Detached Mimico Opportunity. Renters Alert! Why Rent When You Can Own? **** EXTRAS **** The Seller Will Not Accept Any Offers From Any Individual ThatIs An Employee Of The Toronto Dominion Bank Or Any Of It Subsidiaries/Affiliated Corporations.”
lol!
http://www.realtor.ca/propertyDetails.aspx?propertyId=11439351&PidKey=896376964
reo? is the history available?
http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/reverse-mortgages-hit-record-high/article2297785/
Reverse mortgages hit record high
A bit off topic but I wonder, if the crash occurs and many loose their “home”, will home hardware change their slogan of “Home owners helping home owners”?
ytlnboomerang, they won’t change the slogan, they’ll just change the imagery that goes along with it. Likely they’ll show people serving others in a soup kitchen or something of that nature.
Im really curious what sort of prices buildings like fairmont pacific rim, shangri la and hotel georgia will fetch after the impending crash. I wonder how low they will have to be priced to justify the $2000+ monthly maintenance fees which cant be lowered as they are condo/hotel projects.