“The sales in the $725K-$800K range caused cries of disbelief and anger from my close family who bought a house down the street for almost $1M, in June.”

“Sellers in Burnaby North, like many markets, are busy chasing the market down, with very few getting out in front of the declines. I’m fortunate to have access to MLS, and I’m seeing many listings that were priced >$1M as late as August now well in to the $800k range.”

v972997_1
“This one, V972997, a foreclosure, is particulary extreme: original list $1.8M in Dec 2011, now listed at a fire sale price of 900k.”

“A couple of decent houses (V967123, V981232) in Brentwood Park area just sold for <725k. V967123 was originally listed for 988k in May! The sales caused cries of disbelief and anger from my close family who recently bought a house down the street for almost $1M in June. Their lot/house is nicer but still, you can see the doubt creeping in, even as they vociferously defend their investment.Things are changing in that market, and fast.”

- CashedOut At VCI December 3rd, 2012 at 7:47 pm .

59 responses to ““The sales in the $725K-$800K range caused cries of disbelief and anger from my close family who bought a house down the street for almost $1M, in June.”

  1. Vociferousness leads to the dark side.

  2. Maybe the neighbors can keep adding additions and renovate to maintain their million dollar valuation as the market crashes.

  3. “The sales caused cries of disbelief and anger from my close family who recently bought a house down the street for almost $1M in June.”

    Proof that they weren’t simply buying at a reasonable price for personal use, right?
    [We could have classified this anecdote in the "Spot The Speculators" category.]

    • Dunno, maybe they bought with different intentions, greed does funny things to internal value structures.

      • True. And viciously distorted/fluctuating prices will distract/anger even the most even-tempered owner. Part of the detrimental effect of the bubble.

        At the same time I’d argue that anybody overextending in order to buy Vancouver RE in June 2012 was doing so based on the premise that prices would remain strong (and, as you know, I’d call such buyers speculators).

    • Investment on the way up, just a home on the way down.

      • And the difference between the two?… two to three times the underlying value.

      • The quantum duality of home ownership. It is, and will always be, both a home and investment, but only one depending on when needed to validate an argument.

      • The Poster Formerly Known As Anonymous

        Hahaha! So true! My in-laws kill and resurrect the cat at whim. Their entire justification for buying, at the time, was that they believed prices would go up, and they would sell in exactly five years, realize the gains, and upgrade. The last time home prices were mentioned in conversation (a third party brought it up) my brother-in-law said “I don’t care, I don’t look at the media reports because I don’t want to know. It makes no difference to me now whether they go up or down; it’s for living in.” “Unless you need to sell” I said, not reminding him that that was the plan. “Unless we need to sell, yes” he said in a sheepish voice.

      • Cyril Tourneur

        If you aren’t renting it out or running a business from it, I don’t understand how a house is ever anything other than a consumer durable.

      • Cyril Tourneur

        “The whole stock of mere dwelling-houses too, subsisting at any one time in the country, make a part of this first portion. The stock that is laid out in a house, if it is to be the dwelling-house of the proprietor, ceases from that moment to serve in the function of a capital, or to afford any revenue to its owner. A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, makes a part of his expence, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing,*3 the tenant must always pay the rent out of some other revenue which he derives either from labour, or stock, or land. Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it. Clothes, and household furniture, in the same manner, sometimes yield a revenue, and thereby serve in the function of a capital to particular persons. In countries where masquerades are common, it is a trade to let out masquerade dresses for a night. Upholsterers frequently let furniture by the month or by the year. Undertakers let the furniture of funerals by the day and by the week. Many people let furnished houses, and get a rent, not only for the use of the house, but for that of the furniture. The revenue, however, which is derived from such things must always be ultimately drawn from some other source of revenue. Of all parts of the stock, either of an individual, or of a society, reserved for immediate consumption, what is laid out in houses is most slowly consumed. A stock of clothes may last several years: a stock of furniture half a century or a century: but a stock of houses, well built and properly taken care of, may last many centuries. Though the period of their total consumption, however, is more distant, they are still as really a stock reserved for immediate consumption as either clothes or household furniture.” – Adam Smith

        http://econlib.org/library/Smith/smWN6.html#B.II,%20Ch.1,%20Of%20the%20Division%20of%20Stock

      • Couldn’t that Smith guy have simply stated “imputed rent”?

      • Real Estate Tsunami

        ” but a stock of houses, properly build and taken care of, can last for centuries”. Adam Smith.
        Not here in Ditchmond. LOL

    • It’s proof they are stretching to buy something that is way too expensive for them. They should have told themselves no. If it goes up 10% per year it can go down 10% per year, possibly for a couple of years! Volatility cuts both ways.

    • Or another way to look at it. If the government, media, and society in general gleefully create a market where 100k doesn’t mean anything, you should be prepared to lose at least 100k to market inefficiency. 100k is a rounding error in Greater Vancouver. 500k is a rounding error on the west side. If that’s a lot of money to you, you should be out.

      • Real Estate Tsunami

        100k a rounding error?
        I hope you’re not a accountant.lol

      • Truth is, there are people I know operating on these higher-valued properties looking to make rather “middle-class” returns off their investments. The carry is huge but the margins are razor thin. We are seeing these people’s trades in anecdotal last-sale to ask comparisons.

        Scary.

      • Ralph Cramdown

        I marvel at the thin margins, too. Land transfer tax, agent commissions, possible points and insurance on the financing, all calculated on the gross property price. And in a speculation-mad city, when you acquire the property, your first question ought to be “what did everyone else know that I didn’t?”

  4. Speaking of the BurnabyHillBillies’ “cries of disbelief and anger”… President Xi Jinping’s “8 NewRules” would appear to be a source of comparable consternation to China’s governing elites… Your ThursdayZen, DearReaders…

    “No empty rhetoric and rigmarole!”

    “Extravagant measures are strictly forbidden!”

    “Making empty talk is harmful to the nation!”

    “No more hollow slogans!”

    [WaPo] – China’s Xi Jinping to party officials: Simplify

    http://wapo.st/Uo9NLV

    [NoteToEd: Canadian RE Boards and practitioners might well consider adopting President Xi Jinping's NewRules as a pre-emptive BubbleImplosion consumer palliative.]

  5. pffft! … @v … now why can’t you be more entertaining like this … http://tinyurl.com/b8yqfhf
    ps. ^ret ich bin ein wankowertimhortonsebiter (r jonsson mitkaffee?)

  6. Buy now or be priced out forever.

  7. I’ve noticed the first “sold” signs in many months on some townhouses in my neighbourhood in North Burnaby. Only 3 out of the dozens that have been up for a good 6 months, but it makes me wonder how low those people decided to go to cash in.

  8. Over at RET, Mike Stewart is getting what he deserves. What a liar!!

    http://realestatetalks.com/viewtopic.php?f=8&t=128392&p=315586#p315567

  9. Somewhat related. I found a small flyer in my mailbox last night from a local realtor. For all those interested in “insider information” a la zillow, this realtor is promising to give you the keys to the kingdom, access to REBGV data at http://www.secretmountpleasantststs.ca, at least for the Mount Pleasant neighbourhood.

  10. Real Estate Tsunami

    Funny, no one is talking about a Buyer’s Market anymore.
    I think it should now be called “Sellers are retreating and retrenching Market”.

  11. I know this 900k Mediterranean-style home. Any construction activity stopped way before Dec 2011. It must be inspected thoroughly before somebody decides to finish it. Also, it has a veeeery custom floorplan. I believe the price is close to the lot value (the place is good btw).

  12. From the Financial Post::

    The Bank of Canada sounded an alarm about Toronto’s condominium market Thursday in its Financial System Review, warning that a correction here could bring on a shock that would spiral through the whole economy.

    Condo market driven by easy credit and faulty math: analyst

    Condo buyers are ‘exuding hope over experience’ and ending up with ‘an astonishingly low return’ on their investment. Read this analyst’s view
    .
    The bank said Canadian households, weighed down by record personal debt, are vulnerable to two shocks: A big drop in housing prices and sharp decline in the job market.

    And it singles out the condo market as a potential catalyst.

    • Exactly what I have been warning about for over two years. The potential exists for some very trying times ahead although it is by no means guaranteed. This had been on the Federal radar for sometime as well. More specifically, the risk posed by a Toronto bubble was the impetus behind the regulatory changes we have seen. It is one thing to have a mania in Vancouver but quite another when it materializes in the countries financial center and puts the whole economy at risk. It had to be stopped

    • A link to that article.for anyone who did not see it yet. It is one of the more candid assessments of the real risks we face brought on by a combination of low rates, high personal indebtedness and a synchronized slowing in the global economy.

      Bank Of Canada Warning:
      http://business.financialpost.com/2012/12/06/bank-of-canada-warns-own-low-rate-policy-poses-risk-to-economy-2/

  13. pricedoutfornow

    One thing that’s been on my mind lately is how people can afford to pay for these million dollar homes? I mean, even if they put down $200k (say, from equity in a prior condo), so the mortgage is $800,000 at 3% over 25 years, the monthly payment is pretty close to $4000/month. And I know people who have done this (though in the past it was 30-35-40 year amortizations)! But I wonder wonder how they can make that $4000/month mortgage payment. Basement rental I guess? Foreign exchange students? Just how on earth has Vancouver ended up with a place where people pay such huge amounts every month towards a mortgage? You could easily rent that house for $2200/month, why are they so keen to buy it for $4000/month plus maintenance, property taxes etc? People in Vancouver don’t make THAT much money, do they? It seems to me that if you’re buying a house for close to a million bucks, your annual household income should be more than $200k/year. Are there enough of these families around to maintain the market given those numbers? And what about when interest rates go up? I somehow have an inkling though that people AREN’T keeping their heads above water, and a lot of debt is being rolled into the mortgage upon renewal or drawn from the HELOC to make ends meet. Anyone have any ideas on where the money comes from (and don’t tell me China, I’ve heard enough of that, I’m talking about the family I know who bought a house for more than $700k and their family income is no more than $140k/year). It just doesn’t add up without the budget looking all red, month after month.

    • Maybe they’re putting up more equity than you think?

      And remember, at 3%, you can rent $800,000 for $2,000/month — the rest is that forced saving thing.

      • It is only $2000/month if you have an infinite year mortgage, ie only paying interest. A loan of $800,000 requires payments of $3800/month with a 25 year mortgage that has zero fees and insurance.

        The average person in Vancouver is saving less than nothing. The savings rate is negative. Down payments from gains from selling condos are getting a lot smaller as prices continue to go down.

      • Ralph Cramdown

        Nothing you’re saying is wrong, but these houses continue to change hands and, unless they’re all-cash deals, somebody is financing the buyers. Since it’s doubtful that they’re paying hard money (i.e. “asset based lending” to use the current vernacular) interest rates, the lender thinks they’re a good risk. Take your pick: They’ve got more equity than you think or more income than you think.

      • Real Estate Tsunami

        Ralph,
        Or they are richer than they think.

    • If it plays out like the US, then many of them can’t actually afford it. There are many seemingly “prosperous” households around you that are actually falling apart, living off credit, deep underwater. Seem to be living the dream now, but it is coming to an end.

      • Real Estate Tsunami

        Hear it all the time from the house-rich cash-poor parents on my kid’s sports teams. Have to work longer hours. No more vacations in Hawaii.
        Don’t have money to fix the fence. Gotta stop the extra hockey practices, can’t afford it anymore etc.

    • I know a brother and sister purchased a home together in richmond and they rented out every single room and bsmt to make payments

  14. Pingback: Real Estate: Losing Value/Buying at the Peak |

  15. Jumping Jehosophat, who “designed” that home? Maybe a blind Mediterranean meth-head?!

  16. So, I’m in Calgary with the boss from Houston this week, while waiting in a lobby I ask “Is our CDN HQ going to stay in Calgary?”. I’m thinking of moving to US HQ in Houston so had to ask. Based on our limited exposure to oil and gas and the high salaries to attract tallest in AB his answer was simply “no”. Where? He asked if I like TO…”no”. Why not Vancouver I asked; “cost of living” was the answer; Calgarians won’t move. I showed him crackshackormansion and a couple charts showing recent market movement on the tablet and the response was “keep me posted”.

    I might bring a corporate HQ to Vancouver yet, too bad it means I’ll just end up moving twice.

    • That’s funny, because Vancouverites are continually telling me that everyone is just itching to leave a “shithole” like Calgary (or any place but Montreal which is the Canadian slice of Europe) and move to Vancouver. Anyone who is content to stay in Calgary is either really a true redneck, stupid, or uncultured.

      • When you actually live in Vancouver, as I have for about 10 cumulative years of my life, you know that the hype is just … hype.

        It’s nice. On sunny days, really nice. It has a lot going for it. But I’ve also lived in one city in southern Germany, two cities in California, Edmonton, Calgary, and two cities in the interior of BC and, frankly, they all have pros and cons.

        Vancouver is nice. But really no nicer than any of the others (except, perhaps, Edmonton in January).

        Vancouverites do like to sip the Kool-Ade, though, as it helps them to mentally justify why they put up with the financial and commute-time strain.

  17. Fast? Not fast enough. I live in Coquitlam and I can’t believe that houses here are still selling …

  18. Seeing a lot of condo listings where a unit comes up for sale and doesn’t sell.
    Then another unit with the same floor plan in the same building but higher floor gets listed a few months later and the price is tens of thousands lower.
    Must suck for the first seller!

  19. Housing prices are stagnant in all areas. In this instance, those houses were basically 20 25% lower than the “market value” but a lot of yet-to-be-built towers were still sold out within hours of first opening day?! such as Cambie 7, Station Square…. it doesn’t make sense

    • Assigments?

    • Real Estate Tsunami

      Sold out according to the RE hypers.
      Don’t believe everything you read.
      The MC2 was supposed to have sold 80% on the first weekend of showings. Got a flyer yesterday. No more mention of that.
      Many of the Canada Line Skytrain cars are covered with advertising for MC2.
      My advise, don’t buy holes in the ground.

  20. “Notyetmoldy ”
    That’s funny, because Vancouverites are continually telling me that everyone is just itching to leave a “shithole” like Calgary (or any place but Anyone who is content to stay in Calgary is either really a true redneck, stupid, or uncultured.

    Sorry ‘Notyetmoldy”, but we are none of the above – how about former proud Vancouverites who are educated, cultured and want to put our degrees and post degrees to work and not be working in retail or service in Vancouver because of no jobs. Also being able to afford a nice house without going bankrupt. You just exemplify a typical Vancouver attitude from someone who has probably not travelled east of the Rockies. BPOE!!

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