Monthly Archives: November 2012

Baloney Budgets – “I understand you’re trying to make Vancouver look like a place people would want to live. Every one of these case studies is misleading, and you are doing people a disservice by offering them as accurate.”

“Every one of these case studies is misleading, and you are doing people a disservice by offering them as accurate. I understand you’re trying to make Vancouver look like a place people would want to live (and therefore make money off assisting them with their relocation), but please exercise some ethical restraint. 1) There is nowhere in Kits Allison can buy a month’s worth of groceries for $170, unless she’s living off of plain oatmeal and carrots. Shopping at IGA, Safeway or Choices could easily run a person $100 per week, not including much protein, and she can forget the occasional bottle of wine. 2) Gerald is spending almost 50% too much on his apartment. Back before people thought of housing as a place to sleep instead of one more status symbol, the lender rule was no more than 28% of your gross salary should go towards housing. His $36k/year is $3000/month; 28% of that is $840, so his $1225 rent is $385 too high. An actual financial planner would tell you the same thing. But since he can’t rent a studio in Coal Harbour (or maybe anywhere in Vancouver) for $840, he’d be stuck in a basement suite in Dunbar or Kits. Do any of your prospective clients know how much of the city lives in someone else’s basement? Also, what about paying off his student loans, or did he luck into rich parents? 3) You have not factored in the impact of interest rates returning to their long-term norm of about 7% (never mind the rate reset they’ll face in a few years, courtesy of the bank). What does that do to Mara and Jeff’s mortgage amount? Also, where are these people eating out so cheaply? A nice dinner plus wine four times per month at the listed total means their final bill with tip is $60 every week. Please show me a restaurant where a couple can get a “nice dinner” including a bottle of good wine for $52 including tax; I’d like to go there. Do they have any existing debt to service? 4) Same interest rate problem as Mara and Jeff. Misleading people as to the actual costs of living in this city helps no one but yourselves.”
– Dan, commenting below an article at 2vancouver.com titled ‘Vancouver Money and Budgets: A few case studies’ [23 Nov 2012], that sketches out proposed budgets for people in Vancouver in 4 different situations. As Dan points out, the budgets have elements of fantasy about them. [hat-tip to VCI; posted here for the record.]

It’s expensive to live in this city, largely because of costs associated with accommodation. This is very, very bad for Vancouver: It forces young people away, and diverts resources from other areas of the economy. We’d bet that relocation companies like ‘2vancouver.com’ have some relevant stories they could tell. – vreaa

“I personally know 5 people that have overextended themselves buying multiple houses and condos, planning to sell in the future. None of them have gotten out yet and I know for a fact they are underwater on some of these and hoping to sell in the spring.”

“I personally know 5 people that have overextended themselves with multiple houses and condos that they only bought to sell in the future. These are not realtors or people that have any investmeny knowledge in general, they are people that have owned for a long time and took advantage of the mania of the last 6 years to leverage up to the max on as many propertiea as they could. None of them have gotten out yet and I know for a fact they are underwater on some of these and hoping to sell in the spring.”
Groundhog at VCI 29 Nov 2012 3:05pm

Of all the ‘springs’ that we’ve been watching over the years, this one is perhaps shaping up to be the most eagerly anticipated.
There appear to be a lot of owners intending to list and sell in the spring. And bears are wondering where the buyers are going to come from.
– vreaa

“A relative of mine was at University, then left in second year, to become a realtor in North Van for the last two years. As of September, he’s returned to classes.”

“A relative of mine was at University, then left in second year to become a realtor in North Van for about the last two years.
As of September, he’s returned to classes. Before then, for several months, the number of facebook updates about multiple bidding wars, a balanced market, or open houses dwindled to zero.
To keep peace in the family, I specifically haven’t mentioned any of my heretical views on the Canadian housing market or asked why an English degree suddenly looked better than being a realtor in the “Best Place on Earth.”

UBCghettodweller at VREAA 29 Nov 2012 7:48am

The tides; the seasons; breathing in and out.
Trends tend to return to means.
– vreaa

Overheard At Ben Rabidoux’s Presentation On Canadian Housing – “He asked “When do you think the crash will occur?” Ben, of course, said “Right now, sell now.” Shockingly, the guy next to me said “Hey man, that’s my landlord in Yaletown, he’s got 5 properties down there. I can’t believe it. He’s so screwed.”

As had previously been announced here, Ben Rabidoux gave a presentation on Canadian Housing in Vancouver 28 Nov 2012, and it was very well received by the audience of 650. We hope that Ben posts some form of the talk at his site. At VCI, people are relaying summaries of the talk, and sharing their experience of the evening. There were also some interesting anecdotal observations:

“Looking carefully, you also see a lot of “shooters” from the downtown finance scene. I was one row away from one of my friends on the “street” who went there independently, as did I. A few rows ahead was a guy who runs one of the largest investment funds in Vancouver. My read, the leaders in the big money crowd are starting to take the bubble talk seriously.” – HAM Solo

“Going into the seminar, I thought Ben would provide a more soft-moderate outlook to the bubble resolution, probably in line with bank analysts/economists, but he’s all-out hardcore bear armed with numbers, graphs, and a complete frank discussion about what’s out there and what will happen. He explains some stuff we discussed a million time here as well as some new stuff that we haven’t thought about before that will affect the market going forward. I was about 60:40 on soft landing vs crash before and now I’m leaning 90% towards crash.” – RaggedyRenter

“Lots of insider interest; one fellow introduced himself to David LePoidevin after the talk as a local construction insider looking to hedge downside risk by investing in a short-on-RE vehicle David offers.” … “Long story short, Ben is probably responsible for another dozen Boomer mansions hitting the market in January, priced to get out before Armageddon.” – Many Franks

“The people behind me kept asking each other questions about what CMHC was and it was clear neither of them had any clue.” – BLISTERINGAGENT

“The couple behind me decided that it might be a good time to sell their Shuswap Lake property.” – Bailing in BC

“The highlight for me was during the Q&A when a guy got the microphone, he was all dressed in a white pimp suit and asked “When do you think the crash will occur?”, Ben of course said “Right now, sell now.” Shockingly, the guy next to me who looked white said “Hey man, that’s my landlord in Yaletown, he’s got 5 properties down there, I can’t believe it, he’s so screwed.” It was awesome.” – Ray


UPDATE:

Presentation now up on youtube:
‘Canadian Real Estate: What happens next?’, Ben Rabidoux, Vancouver, 28 Nov 2012

“When I was in their office last week, I overheard the conversation of a realtor saying his friends have bought homes to flip and they are all stuck with them now. He said the market has fallen so fast, it’s so different from the actual stats.”

“He [a local realtor] says the market is good and he is busy. That’s not what I’m hearing from my realtor friends up at Macdonald realty. In fact when I was in the office last week, I overheard the conversation of a realtor saying his friends have bought homes to flip and they are all stuck with them now. He said the market has fallen so fast, it’s so different from the actual stats. So, by the time you see the HPI move downwards, the market has actual moved much more.”HAM at RE Talks 28 Nov 2012 10:57pm

A Big ‘Thank-You’ To The Insanity Of The Vancouver RE Market – “I sold my loft in a seedy part of Gastown that I bought for $168K in 2005 for $520K in 2011. Paid $220K for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free, with $200K in the bank, at 26.”

“I recently moved to Halifax from Vancouver for grad school and its amazing how much more enjoyable life is when your debt free. I sold my loft in a seedy part of gastown that I bought for 168k in 2005 for 520k in 2011. Paid 220k for a nice 600sqft 1bdrm in downtown Halifax, and now I’m debt free at 26. I’ve got 200k in cash in the bank too, how many 26 year olds can say that?! and I have all of this thanks to the insanity that is the vancouver real estate market! I feel for these people though, our generation really got the shaft when it comes to the economy and real estate. I’ve got plenty of friends who did everything they were supposed to do to succeed in life and are working temp jobs to pay off 100k in grad school debts. If I didn’t have supportive parents I don’t know where I’d be right now.”
jj at VREAA 27 Nov 2012 9:22am

Well done, jj. You were fortunate with the timing (because 2008 could just as easily have taken you back to pre-2005 prices), but that is now not material.
jj saw that $520K cash was of far, far higher value than a “loft in a seedy part of Gastown”. Anybody who cashes out in the vague vicinity of a top, by virtue of luck or skill, will do fine.
The point is that the person who overextended to allow jj to cash out, and all the thousands of other Vancouver buyers over the last 3, 4, 5 years who have done the same, are left holding the other side of the deal: A property that is worth far, far less than the future earnings that they have promised to pay to buy it.
– vreaa

“If I had bought when I was 20, I would likely be mortgage free right now. In 10 years, I’ll likely be glad I bought in 2011, as opposed to waiting an additional 5 years.”

“The sooner you buy, the sooner you’ll be mortgage free, and then the sooner you can retire/diversify your time with minimal monthly fixed costs. If I had bought when I was 20, I would likely be mortgage free right now. In 10 years, I’ll likely be glad I bought when I did (last year [2011]), as opposed to waiting an additional 5 years.”
gobigorgohome at RETalks 27 Nov 2012 12:54pm

Appropriate handle.
Timing can be a bitchallenging.*

People who bought near the top in 1981-1982 waited 25 years (yes, twenty-five, not a typo) to break-even in real dollar terms.
– vreaa

[* see what he did there? if only you were all as polite. -ed.]