Monthly Archives: February 2013

“He had friends who wanted to sell, but who ‘couldn’t afford to sell’. They had withdrawn their properties from the market.”

“I was talking to a young professional who rents in Vancouver. He said he had friends who had purchased in the last few years and, given the soft market, he expressed genuine concern – fear even – for their financial well-being. More interesting, he talked of people he knew who owned RE in Vancouver, who wanted to sell, but who he said “couldn’t afford to sell”. Consequently, they had withdrawn their properties from the market. He seemed to think this made sense, and he didn’t see how the market could possibly drop by enough to put them at risk, or to force them to sell.”
– from ‘westsidefrank’, by e-mail to VREAA, 25 Feb 2013

See: The Myth of the Discretionary Sellersidebar.
– vreaa

Housing Makes Up 20% Of Canadian GDP – “This heavy reliance is not healthy. We basically borrowed our way out of this recession. Now, it’s payback time.”

“If the city is any indication of what’s going on in the country, it’s over-reliant on its housing sector.” – Herbert Crockett, a retired World Health Organization executive who lives in France says of Toronto.

“We basically borrowed our way out of this recession. Now, it’s payback time. We will be in for a period of long, slow growth.” – Benjamin Tal, deputy chief economist at the investment-banking unit of Canadian Imperial Bank of Commerce.

“It did seem a little unusual to have every policy maker in Ottawa hectoring Canadians about their excessive debt levels and yet the economic incentive for the average Canadian was completely slanted to taking on debt and not saving. The realist in me would admit it was the only tool the Bank of Canada had. The reality was, they really could not lift interest rates.” – Douglas Porter, chief economist at Bank of Montreal.

“As an economist working for a Canadian bank, I can’t go into a client meeting and have someone not ask me about housing in Canada. For U.S. investors, they are still a little gun-shy about what happened in the U.S., and I think they worry the same fate will happen to Canada.” – Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC, Royal Bank of Canada’s investment-banking unit, in New York.

Meantime, the share of GDP linked to housing, including construction and renovation, soared to more than 20 percent. A similar U.S. measure peaked at 18 percent in 2005. Canada’s share of construction jobs in total employment was 7.3 percent in January, above the 4.3 percent in the U.S.
“This heavy reliance is not healthy,” CIBC’s Tal says. “I expect to see some softening.”

- excerpts from ‘Canada Losing Debt Halo as Bull Market Housing Peaks With Carney’, Bloomberg, 26 Feb 2013 [hat-tip Nemesis]

As we have been saying here for years.
What percentage of Vancouver’s GDP is linked to housing?
– vreaa

‘CMHC seeking to hide foreclosure information from home buyers’ – “CMHC just told us that pricing will stay strong and now they want to keep information about foreclosure secret. Where there is smoke there is fire.”

“Canada Mortgage and Housing Corp. has been asking realtors for months to keep consumers in the dark about whether the properties it sells are part of a foreclosure, according to a document obtained by The Financial Post.
The move, said to be part of CMHC national policy, upset Quebec realtors who refused to play ball, worried about an ethical breach. …
Some real estate industry insiders wonder whether the Crown corporation is simply being prudent, not letting potential buyers know a property is part of a distressed sell so they can put in a low-ball bid.
Others question whether the Crown corporation is just getting things in order in case home prices collapse and they are forced to sell properties that are backed by government insurance. …
“Look at what is going on right now in financial institutions and everybody is ratcheting up their loan-loss provisions,” said Ben Rabidoux, a Canadian analyst for California-based Hanson Advisors, a market research firm whose clients are institutional investors. “Everybody expects loan losses to rise. I can’t imagine CMHC is in the dark on that. My suspicion is they want to limit any loss on that hits their books.”
By limiting the information on whether a property is part of foreclosure, the Crown corporation would potentially avoid a situation in which a buyer knows it has to sell. In the United States, foreclosed properties have sold at huge discounts.
“CMHC is trying to get the better price,” said Don Lawby, chief executive of Century 21 Canada, who had not heard of the new policy. “You know something is repossessed, you low-ball the offer. You know you are not dealing with a homeowner but an investor.”

– from ‘CMHC seeking to hide foreclosure information from home buyers’, Financial Post, 27 Feb 2013
[hat-tip Reader #4]

“If the price of a house is good or someone is putting a low ball price and the seller is ok with that…I call it the market. CMHC just told us that pricing will stay strong and now they want to keep information about foreclosure secret….When you have smoke…fire is not very far…” – ‘luckyluc’, commenting on the above article at the FP site

Is it within the CMHC mandate to take active measures to hide information from the public?
Aside from that, the need for deception is massively telling – the market is at risk from normal price discovery processes, and the CMHC obviously now sees that.
– vreaa

Realtor Tries To Sell Own Home But Can’t – “Buyers are very skeptical, very hesitant because they think prices may go down.”

Hoda Seraji is experiencing Vancouver’s housing slowdown firsthand. A real estate agent, she took her own family’s two- story house in Canada’s third-largest city off the market after failing to get a single bite for the C$2.39 million home overlooking the Pacific. Cutting the price for the five-bedroom, four-bathroom residence didn’t help.
“Buyers are very skeptical, very hesitant because they think prices may go down,” she says.
Seraji blames fading interest from foreign investors, especially in China. Changes to Canada’s mortgage rules designed to cool the market have accelerated the sales drop, she says.

– from ‘Canada Losing Debt Halo as Bull Market Housing Peaks With Carney’, Bloomberg, 26 Feb 2013 [hat-tip Nemesis]

Agreed, “buyers are hesitant because they anticipate prices are going to drop”.
The problem is not with the buyers, but with prices that are still very, very overinflated.
What was that “C$2.39 million home” selling for just ten years ago? Less than $500K, most likely.
Because of the very large speculative component to price in Vancouver, price drops will not draw in demand, but rather beget further drops.
– vreaa

Failing Westside SFH Flip

old
Before $200K Upgrade

new
After $200K Upgrade

3175 39TH AVE W, Vancouver Westside (Kerrisdale)
3,650 sqft SFH; built 2005; 50×130 lot

Listed 8 Feb 2012 Ask Price $2,799,000
Sold 14 Mar 2012 $2,528,000

Listed 23 Sep 2012 Ask Price $3,080,000
Price Change 13 Nov 2012 As Price $2,980,000
Price Change 25 Feb 2013 Ask Price $2,798,000

Latest promo blurb: “Owner spent over $200k to upgrade outside & inside, with City Permit.”

Of course, in Vancouver, people have only been buying properties for personal use. (/sarcasm).
This reno-flip is on the brink of being underwater, probably already there.
Imagine what’ll happen when buyers collectively realize that houses like this are worth about a million bucks and change, tops.
This is just one example that jumped out. View many other descending ask prices on VancouverPriceDrop. Check that site out if you haven’t yet seen it.
– vreaa

“For almost 20 years, I have had close friends who are realtors. In the past month, I have seen serious changes in behaviour indicative of desperation. Commissions are down 50%, and for those on the fringes, this is pretty much poverty.”

“I’ve been following this market for a long time. Also, for almost 20 years, I have had some close friends who are realtors (and did it in the years when real estate was just something that people needed to live in – – without all the BS hype).
In the past month, I have seen serious changes in behaviour indicative of desperation. There was also a quote that “Everyone in my office has had to take a second job to ensure steady cash flow.”
I don’t think we are here to gloat in the misery of others but with sales numbers like we have now, commissions are down 50% in the past 2 years and for those on the fringes, this is pretty much poverty.
. .
Quick tidbit – – Attached is showing listings declines with some areas even failing to have rising inventory. SFH however is very slow with the high end of the market completely stopped . . . .”
yvr2zrh at VCI 25 Feb 2013 10:36pm

Vancouver Reddit Boards – ‘Paid Shills In Our Midst?’ – “Does anybody else find there are too many real estate/property development posts on the /r/vancouver sub-reddit?”

“Does anybody else find there are too many real estate/property development posts on the /r/vancouver sub-reddit?
Moderators, and fellow /r/vancouver-ites: Can we consider banning/pruning the number of real estate submissions as a new rule? It’s rather frequent that I can come to /r/vancouver and see 4-5 posts on the page that certain individuals have posted.”
pfak at reddit.com 16

From the comment exchanges on that thread:

“I’d say the number of posts are in perfect proportion to the frequency Vancouver real estate comes up in conversation and the local media… “- [nutty buddy]

“The price of real estate in Vancouver is too high. This isn’t controversial, I don’t know why you are suggesting it is, everyone I know down here agrees about this, and some of my buddies overseas, the ones who are familiar with real estate/finance, agree completely.” – [MyFavouriteAxe]

“The fact that it’s subjectively “too high” might not be controversial, but this notion (that almost all of OP’s articles are pushing) that the housing market is about to crash any day now is a complete fabrication, and it’s one we’ve been hearing for at least a decade now.” – [Niyeaux]

“Obviously not everyone agrees the prices are too high, there are people buying houses for those prices, and there are others desperate to join them if the prices drop. Supply and demand my friend.” – [idspispopd]

“In a community as small, as easily accessible, and as geographically centralized as this one, it would be pretty surprising if there wasn’t at last a few paid shills in our midst. I’ve always assumed the aforementioned user /u/derpaderpe (formerly /u/proudbedwetter) is one of them.” – [Niyeaux]

“Paid by whom to sell what?” – [Smallpaul]

“Either the shitty “news” outlets who are peddling these crappy real estate articles, or someone with an interest in making people think the price of real estate in Vancouver is too high. I imagine the list of people who fit the latter description is quite lengthy.” – [Niyeaux]

“Oh, really? Like who exactly?
Agents want people to believe their property is valuable, worth it, and selling well. Developers want to charge as much as possible and make everyone think demand is high. Construction people want as much development as possible. Governments want high assessments so they can charge owners as much tax as possible. Banks want to collect as much interest as they can get on long-term mortgages. Owners want reassurance that their property isn’t losing value…
So, I guess you’re referring to mid to low-income renters and young people who don’t work in a field related to real estate. Yeah, they’ve got a lot of clout. Damn propagandists.”
– [FellSwoop]

“Or, y’know, any prospective investor who is waiting for the market to crash so they can pick properties up for cheap.” – [Niyeaux]

Real Estate infiltrates every discussion about Vancouver, so it certainly won’t surprise any of us here that the subject comes up frequently on the Vancouver reddit boards.
We don’t know whether there actually are any “paid shills” on Vancouver sites (other than the recently publicized OlympicVillage/VancouverIsAwesome ‘arrangement’, of course).
The idea that there are “prospective investor[s] who [are] waiting for the market to crash so they can pick properties up for cheap” is relatively new to the Vancouver RE discussion. It’s an interesting idea to ponder. These ‘vultures’ would have to be people who consider Vancouver RE to currently be appropriately priced, and who are hoping for ‘bargains’ at prices lower than this, such that when the properties recovered what they see as fair price levels, they would profit. We don’t ourselves know any prospective buyers of that stripe; we would certainly be interested to hear about any. All the prospective buyers we know (and there aren’t many of them) see prices as currently being far above fundamental values, and simply have a desire to buy themselves a stable shelter arrangement at a vaguely reasonable price.
– vreaa

High Paid Vancouver Workers Choosing To Live In The U.S. – “The cost of housing is four to five times what they are accustomed to; He did not want to move because he can have his $400,000 mansion in the U.S., versus getting a little home for $1-million in Vancouver; There are other really pretty places out there.”

Eric Murray is chief executive officer of growing clean-tech company Tantalus Systems, based in Burnaby, B.C. Mr. Murray, however, lives in Raleigh, N.C., where he owns a 3,500-square-foot house and puts his three kids through private school.

He is a Canadian, with several family members in Vancouver. But when his career trajectory sent him to Raleigh, he decided to stay put. Mr. Murray is one of a growing number of workers in the Lower Mainland who live in the U.S. You could call them cross-border jobbers.

“My father’s entire family is in Vancouver, so for our relationship, it would be great if I lived there,” he says in a phone interview. “But for me to pick up and move from Raleigh, where I have a fully wooded lot, and a very nice home, and I can send my kids to private school, this sort of stuff – to do that in Vancouver, I just can’t swing it economically. When we looked at this whole thing, we knew we would have to compromise on housing.

“Absolutely, I would live in Vancouver if I could afford it.”

Technology is the third-largest contributor to B.C.’s gross domestic product, says Bill Tam, president of the B.C. Technology Industry Association. He says there is demand for about 4,000 more employees in the industry, and the majority of qualified people come from the U.S.

“Especially in the Vancouver area, technology has been one of the faster growing industries,” he says. “So when companies have had to expand and recruit managers to come here from the U.S., some have relocated to places like Blaine, Wash., close enough to commute on a daily basis. That’s the level of creativity they’ve had to resort to.”

Others, he says, fly in from more distant U.S. locations, like Mr. Murray. Mr. Murray used to fly into Vancouver every other week. These days, he’s flying in every third week.

“When they come across and recognize the cost of housing is four to five times what they are accustomed to, they end up being commuters,” says Mr. Tam.

Sierra Wireless CEO Jason Cohenour, who was travelling and couldn’t be reached for comment, works in Burnaby and lives in the U.S. Tom Ligocki, CEO of Richmond-based Clevest, says he has several employees who live in a golf course community at Semiahmoo Resort, near Blaine. One of his engineers, Jeremy Westbrook, commutes from his home near Blaine to work in Richmond. It takes them about 30 to 40 minutes to make the drive.

“None of the folks in the U.S. want to move to Vancouver,” he says. “The simple example that I heard from one gentleman is that he did not want to move because he can have his $400,000 mansion in the U.S., versus getting a little home for $1-million in Vancouver.” …

“There’s no point in even talking about the Vancouver market. We are just talking to them about directly moving to the Semiahmoo resort,” he says, on the phone from a conference in New Orleans. “If you can’t bring them to Vancouver, that’s the only option we have.

“And they do certainly make very good wages,” he adds. “These are high-end experts that we are hiring.

“But all these folks are used to living in a house. They are used to American comforts, and they are well paid, and they can afford to have a nice luxury home wherever in the U.S.”

“I get into this discussion all the time with guys. Vancouver is great. The mountains and ocean are super. I get that. I would love to live there. I have a lot of family there. But I don’t see how the economics would work for a young person trying to do both of those things, unless they had a similar opportunity in another really pretty place.

“And I have been in a bunch of different countries and there are other really pretty places out there.”

- from ‘Some Vancouver workers have been priced right out of the country’, Kerry Gold, Globe and Mail, 22 Feb 2013 [hat-tip Aldus Huxtable]

Smart business people know: Vancouver RE is woefully overpriced.
– vreaa

“Where in the world would you pay $888,000 to live in this beauty?”

v988743_1

242 E 48th Ave, East Vancouver
2619 sqft
[really? -ed] Old-timer SFH, 33×140 lot
For Sale: Ask price $888,000

MLS®: V988743. Blurb: ‘Amazing property including legal basement suite. Some updating to electrical, and plumbing. Over 2600 sq ft of living space. Some hardwood floors, wood burning fireplace, newer deck, garage, 9 bedrooms [surely not! -ed.], 5 baths on 3 levels. ***close to all amenities and all levels of school including Langara College. All these on a great southern exposed, oversized lot. Well Priced,ASSESSED VALUE $865K.GREAT INVESTMENT WITH REVENUE POTENTIAL****NEEDS A LITTLE TLC’

Hat-tip to ‘Pretzels…thirsty’ for popping this example up in a recent thread and who added: “I think there should be an open web survey for this.
“Where in the world would you pay $888,000 to live in this beauty?”

This entire house looks like a bad basement.
One can only imagine the threat to one’s morale if you ended up an occupant of one of those 9 bedrooms.
– vreaa

Realtor Stories – “A close friend of our family has been a Westside realtor for nearly 20 years. A few weeks ago, he suddenly asked if we knew anyone who might be interested in his $2 million listing. Never before has he done this.”

“A close friend of our family has been a Westside realtor for nearly 20 years. A few weeks ago, while talking about a completely unrelated matter, he suddenly asked if we knew anyone who might be interested in his $2 million listing. Never before in 20 years has he tried to drum up business from us. We know a total of zero people with a spare $2 million, so this was completely ridiculous and seemed rather telling.”
Sheesh at VREAA 19 Feb 2013 11:16am

“A friend of mine 3 years ago quit a well paying full-time job to dabble in RE. When the slowdown started about a year ago, she was lucky to get her old job back.”
Real Estate Tsunami at VREAA 19 Feb 2013 9:25am

“My land-lady who is a very good friend of [a Vancouver realtor] tells me that there are no buyers coming – she says market is very bad… very obvious to anyone who actually uses their brain… but quite an admission from someone who has been a part of this giant scam.”
vancouverbubbleman at VREAA 14 Feb 2013 3:30pm

South China Morning Post Headlines MAC Marketing Deceit – “Bogus Buyers”; “Scam”; “Teetering Market”; “Steadily Falling Prices”.

scmp
Supposed homebuyers Chris and Amanda Lee were exposed as employees of MAC Marketing Solutions in Vancouver [image and caption accompanying the SCMP article]

“A senior executive at a Vancouver marketing firm was forced to resign after employees of the company were caught posing as the daughters of rich Chinese property buyers in interviews with TV reporters.
The deception was intended to create the impression that Chinese buyers were still queuing up to buy into Vancouver’s teetering real estate market, which has long been fuelled by money from China and is now rated as the second least-affordable city in the world, behind Hong Kong, according to the Demographia consultancy.”

“The scandal erupted after a series of news reports this month, sourced to MAC Marketing, suggested that an influx of Chinese buyers would give the Vancouver property market a boost over the Lunar New Year period. That would have been in contrast to statistics from the local real estate board showing that prices have been steadily falling in Vancouver for the past eight months.”

“TV news crews at an open house for the new Maddox apartments in downtown Vancouver on February 9 were introduced to two buyers supposedly from China to support the notion of a Lunar New Year boost, who identified themselves as sisters Chris and Amanda Lee. In an interview with CTV, Chris Lee said: “I’m from China, and that is my sister, Amanda. So, we are looking for a place together.”
She told the reporter their parents were visiting Vancouver for Lunar New Year and were bankrolling the sisters’ purchase of an apartment. “So, if we like this place, we have to tell them and they make the decision. Yes, really, Chinese people like to buy at this time [Lunar New Year].”
A similar story was carried by CBC, featuring Chinese house hunters Chris and Amanda Lee.
Two days earlier, a story predicting a Lunar New Year boost in property sales was carried by The Vancouver Sun newspaper, quoting McNeill.
However, an anonymous local real estate blogger known as the Rainforest Whisperer last week questioned whether the sisters were authentic Chinese buyers, after another internet posting showed that an “Amanda Lee” worked for MAC on the Maddox project.”

“MAC was eventually forced to admit that both the “Lee sisters” were its employees, and that they weren’t even sisters. MAC hasn’t revealed the true identity of “Chris Lee”.
“We regret we did not do a better job at ensuring full transparency with those interviewed and apologise for any misunderstanding this may have caused,” MAC said last week.
McNeill told the newspaper : “I don’t know if it was an overzealous employee or if this happened in a formalised way.”
In announcing the resignation on Wednesday, McNeill refused to reveal the identity of the executive who quit.
“McNeill owes an explanation to the media [whom MAC duped], to the broader real estate community [whose reputation MAC has irrevocably damaged], and to the general public [the ultimate targets of this fraud],” the Rainforest Whisperer wrote.”

“The average price of a detached house in the core district of Vancouver West topped out at C$2.25 million (HK$17.13 million) last May. It has since fallen by more than 11 per cent.”

– from ‘Bogus buyers exposed in scam to boost property market in Vancouver’, South China Morning Post, 22 Feb 2013 [hat tip to numerous readers who alerted us to this via comments or e-mails]

The SCMP article carries some big messages, regardless of veracity:
1. The Vancouver RE market is falling.
2. Sellers are desperate enough to attempt subterfuge.
3. Buyer beware (moreso than usual).
This fiasco is turning out to be a spectacular back-fire for MAC Marketing and will quite probably have deleterious effects on the entire Vancouver RE industry.
Ongoing kudos to Whisperer for detecting the blatant deceit.
Regular readers know that we have always maintained that off-shore buyers of Vancouver RE, along with the vast majority of local buyers, have been buying on the premise of ever rising prices.
Now news is getting out that prices are falling.
And the knowledge of the seller desperation implied by this marketing deceit could have a more profound negative effect on buyer sentiment than any of us had initially guessed.
Do you see why we maintain that falling prices will beget falling prices?
– vreaa

Original story covered here:
CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!
VREAA 13 Feb 2013

Crazy Rubs Off – “At that time, strangely, I recognized this was expensive, but did not consider it absurd. My expectations had been subconsciously adjusted to account for the fantastic/abnormal circumstances.”

“Just started reading your blog, after a brief foray into the 1-bedroom condo market.
I’m 28, a professional, and earn a high 5 figure salary. I moved to the city 3 years ago.
My anecdote is viewing condos on Fraser, considerably south of broadway in a new building. The building is nice but the street and surrounding area looks awful, particularly at night. Grimy, damp, rundown. Nondescript small business with algae growing on vinyl awnings. Saw a series of small single bedrooms (350k) and one slightly larger single bedroom (375k). At that time, strangely, I recognized this was expensive, but not absurd. My expectations had been subconsciously adjusted to account for otherwise fantastic/ abnormal circumstances. Crazy rubs off.
I started reading more and I havn’t looked at ‘property’ since. I don’t intend to buy in this city at anywhere close to current asking price. I’ll move before I do. That’s not said in a righteous or defensive way, its just true. Two weeks after the viewing I was contacted by the real estate agent with an adjusted price list. 350k was reduced to ~340k, 375k was reduced to 350k.”

– Poorprofessional, via e-mail to VREAA, 21 Feb 2013

I have no doubt that we have all been ‘conditioned’ by the absurd prices.
Even the most ardent and insightful bear has been desensitized to the actual meaning of the large figures.
How long does it take a Canadian to save $400K?
– vreaa

“Just came back from Miami. Quite shocked when I saw ok-looking houses go for $150K-$300K. I used to be the kind of guy who would not stop talking about BPOE, but my mindset has definitely changed recently.”

“Just came back from Miami, Florida, I was quite shocked when I saw ok-looking houses in Coral Gables that resembled what you see Commercial Dr to go for $150K-$300K. It’s 30 C degrees in February, city is not as nearly congested as Vancovuer is (hello North Shore), and in all honesty, there were much less signs of homelessness and poverty that you’ll see in your average lower mainland neighbourhood. … I used to be the kind of guy who would not stop talking about BPOE, but my mindset has definitely changed recently…”
Knight at VREAA 22 Feb 2013 9:02am

Thanks, Knight, for the story. If you like, tell us more about the mindset change.
Why should it change now? First time in Miami? Traveling changed your perspective? Economic comparisons?
Or something changing for you here in Vancouver? Has the stalling market influenced you?
– vreaa

Home Inspector Oversight – “It’s been a nightmare, like I wish I’d never set foot in this house. I just wanted a place to live.”

rotten

“Buyers like Lindsay Denton, a 39-year-old single mother, are finding out the hard way they have little recourse if they believe a home inspector misses an obvious, visible defect. Complaints to the inspectors’ association might cost an inspector the loss of his or her license for a week, but financial settlements are only awarded through the courts.
Denton was battling breast cancer when she bought a $750,000 home in East Vancouver after an inspector’s report found no structural defects.
“It’s been a nightmare, like I wish I’d never set foot in this house. I just wanted a place to live,” Denton said.
“It doesn’t mean anything that they have a license or that they have errors and omissions insurance.”
Denton has filed a lawsuit against inspector Christopher Stockdale, who used to be the president of the Canadian Association of Home and Property Inspectors of B.C.
In her notice of civil claim, she alleges Stockdale failed to follow the standard practices of his association.
Denton claims he missed the fact that her home was structurally unsound, with extensive water damage, a hole in the roof, asbestos in the air ducts, and visibly rotten sill plates and posts.
She also claims Stockdale examined her one-storey roof with binoculars instead of climbing up with a ladder and failed to carry a tool to prod any potentially rotten wood.
Denton said she discovered some rot in the structure after the tenants in her basement suite moved out.
“I went downstairs to paint and I touched the wall and it was wet and soft and the wood on top of the foundation was rotten,” she said. “It was crumbling away.”
The crumbling wood Denton refers to is the sill plate, which sits underneath the posts that hold up the structure. She said the inspector should have seen rotten posts next to the furnace he inspected.
Inspections ‘do not constitute a guarantee’
In her claim, Denton says Stockdale of Home Sweet Home Inspections returned to her house, looked at the problems and offered to refund her the $565 inspection fee.
She claims she told Stockdale he also should have seen rot on the side of her house.
“I’ve borrowed $40,000 and I’ve spent more, and I’m looking for another $100,000 to fix my suite because it’s been 18 months without being rented.”
Denton says she’s struggling to make her mortgage payments and is waiting for another inspector’s report to assess the defects allegedly missed in her home, a report which will go before a judge in her civil case.


It’s almost impossible for homeowners to get compensation if something is missed during a home inspection, despite new regulations introduced by the B.C. government in 2009 requiring all home inspectors to be licenced and insured.”
– from ‘Buyers left with big bills when home inspectors miss defects’, CBC News, 21 Feb 2013[hat-tip 4SliceofCheese]

During a speculative mania, construction and inspection standards drop, as the abnormal pace of price gains paper over shoddy work. People are forgiving of all sorts of deficits as long as they know they are accumulating equity at a rapid pace. When the tide goes out, they look for people to blame. Ironically, that often leads to standards being tightened at the very time when such measures are least needed.
As an aside: If you “just want a place to live”, why buy a house where you need to rent out your basement to make the mortgage payments?
– vreaa

New High – “Inventory is now at the highest point it has been in the last 8 years for this time of year.”

RE Inventory Chart130221

“Inventory is now at the highest point it has been in the last 8 years for this time of year.”
– chart and observation care of b5baxter at vancouverpeak.com 21 Feb 2013, created with numbers from PaulB.

West Side Property Example – Resold Feb 2013 At 9% Below 2011 Sale Price

“Just though I would pass along this info as I had the history of the
property at 2662 W KING EDWARD AV because I was watching it:

Sold May 2002 – $495,700 (5 days on market, $27K over ask)
Sold Nov 2009 – $1,230,000 (2 days on market, $41K over ask)
Sold May 2011 – $1,810,000 (25 days on market, $8K under ask)

Oct 2011
New Listing – $2,100,000

July 23, 2012
Price Reduced! – $1,999,000

Listing expired

September 19, 2012
New Listing – $1,830,000

Listing expired

February 18, 2013
New Listing – $1,830,000

Sold Feb 2013 – $1,650,000 (17 months on market, $450K under ask)”

- Many thanks to ‘NSR’ who sent this along by e-mail to VREAA 21 Feb 2013

If this was a flip, and there is a high chance of that given that it was bought in May 2011 and put back on the market in Oct 2011, then the loss is $160K plus transfer/commission costs plus carrying costs.
– vreaa

“Sitting at YVR waiting for my flight to Calgary tonight. Had a pleasant ride with a taxi to the Nanaimo airport with a driver who has sold real estate in the Nanaimo/Parksville area for 29 years. This is the 3rd downturn in his career and the first time he has had to find another income stream. “

“Sitting at YVR waiting for my flight to Calgary tonight. Had a pleasant ride with a taxi to the Nanaimo airport with a driver who tells me that he has sold real estate in the Nanaimo/Parksville area for 29 years.
He is driving cab to supplement his income. Says he had plans to retire and bought a house 5 years ago on one of the islands. Ready to retire and move in and he ends up with his granddaughter on his doorstep 4 years ago. She is now 14 with no sign of leaving until she graduates. Gotta take care of family, he says, but I miss my island property which he gets to once a month without his wife who hasn’t quite accepted their present personal financial state.
He says this is the 3rd downturn in his career and the first time he has had to find another income stream. Says he’s not sure when this slide will end….. here’s my card he says, just in case you decide to buy anytime in the future.”

Anonymous at whispersfromtheedgeoftherainforest.blogspot.ca at 2:34am [hat-tip Whisperer]

RE Mentions In Popular Culture – Realtor Wins Canucks 50/50 Draw – “The last quarter of real estate was the toughest in 24 years, there were periods where we spent more than we made.”

“Phil Moore was in the stands on October 9, 2008, and when Candice, joined by Roberto Luongo and Alex Burrows, presented the Bourdon family with Luc’s jersey, he came up with a plan.
When – not if – but when I win the Canucks For Kids Fund 50/50, I’ll give back.
“I just knew I was going to win sooner or later,” said Moore, a real estate agent and Canucks season ticket holder. “I visualized it over and over again, winning and handing out this big cheque.
“If you’re in the shootout and you’re skating down the ice, you have to visualize your move and visualize scoring. If you visualize something over and over again, it just happens.”
And, wouldn’t you know it, it happened.”

“The last quarter of real estate was the toughest in 24 years, there were periods where we spent more than we made,” explained Moore. “The majority of the winnings will go to pay bills, but it was a unanimous decision within the family that we didn’t want a vacation or anything, we’d rather give a chunk back to help out as much as possible.”
– from ‘Giver’s gain’, canucks.nhl.com, Derek Jory, 19 Feb 2013 [hat-tip rob]

Nice of him to give some back.
Interesting word from the trenches regarding market conditions.
Also, noteworthy for the magical thinking, something common to a good percentage of market participants.
– vreaa

Large Abandoned Richmond SFH Construction Site For Sale – “Assessed value is $2,300,000. Asking $1,888,888 for quick sale.”

photo-21

“Ad posted in Richmond News Feb 15.
10111 Sidaway Road, Richmond
4 Acre Estate Property, located in area of multi million dollar mansions and is adjacent to Mylora Golf Course.
The property was under construction in 2011 but construction was stopped.
House plans currently include a permit to build a 16,000 square foot house, but buyer can change the plans and build on the Engineer approved foundation that is on site.
Value of foundation is in excess of $300,000 and the assessed value of the property is $2,300,000.
Asking firm price of $1,888,888 for quick sale.
Call 604-abc-defgh.”

– posted by ‘Real Estate Tsunami’ at VREAA 18 Feb 2013 7:41pm

Filed under ‘Misallocation of Resources'; the central tragedy of a speculative mania.
– vreaa

Peter Ladner – “While sphincters are tightening in some parts of town over a softening in the real estate market, a lot of people are praying for prices to come down. Housing prices are around 10 times median income. Five times is “severely unaffordable”.”

“While sphincters are tightening in some parts of town over a softening in the real estate market, a lot of people are praying for prices to come down.
They are not impressed that we consistently place in the top three in the world’s unaffordable housing race. They include young wannabe homeowners, of course, but also private and public employers desperate to attract out-of-town skilled workers and senior executives or to retain valuable workers who insist on owning their own homes. Because our housing prices are around 10 times median income (with five times being “severely unaffordable”), the potential newcomers stay away and the valuable workers move away.
Businesses suffer. Families suffer. The city suffers. Homeowner debt piles up to ridiculous heights. The Bank of Canada has the jitters.”

– from ‘Fiscal reality continues to elude Vancouver real estate market’, Peter Ladner, Business In Vancouver, 12 Feb 2013

Everything Peter Ladner says here is true.
A large part of the answer to Vancouver’s dilemma is for housing prices to return to about 5 times local incomes, and that will not occur via a real increase in incomes. It’ll resolve with a 50%-plus drop in RE prices, precisely the kind of outcome to the speculative mania that we are anticipating.
– vreaa

“Canadians shouldn’t count on home prices to be their main source of wealth gains. Real wealth is built through innovation, and hard work. Not through some magical asset inflation.”

“The correction underway in Canadian house prices is likely to persist for another two years, warns Bank of Canada Governor Mark Carney.
“We’ve seen the adjustment in the housing market. We think there’s a bit more to come over the next couple of years,” Mr. Carney told CTV’s Question Period in an interview broadcast Sunday.
Mr. Carney said rapidly rising prices experienced in Canada over the past decade are “certainly not normal” and Canadians shouldn’t count on home prices to be their main source of wealth gains.
“Real wealth is built through innovation, and it’s gained through hard work,” Mr. Carney explained in an interview taped before this weekend’s G20 finance ministers and central bankers meeting in Moscow. “It’s not through some magical asset inflation.” …
Ottawa has tightened mortgage rules several times since 2008 to cool the market. But interest rates still remain at rock-bottom levels, as do borrowing costs.
Mr. Carney said the pace of debt accumulation has slowed to about 3 per cent a year from 10 per cent.”

– from ‘More adjustment to come in home prices: Carney’, G&M, 17 Feb 2013

“We’ve previously felt tied to Vancouver because of my six-figure salary, but lately we decided that we might just move anyway. Given the cheaper housing elsewhere, it might pay to take a pay cut.”

“It’s nice to see prices finally dropping, but at this point my wife and I don’t give a rats. We’ve decided to keep renting and stay mobile regardless of further drops.
We’ve previously felt tied to Vancouver because of my six-figure salary, but lately we decided that we might just move anyway. Given the cheaper housing elsewhere, it might pay to take a pay cut and live somewhere where it doesn’t rain most of the time. It won’t happen for a year or two until we get all our ducks in order, but we’re no longer committed to living in a sub-arctic rainforest. Life’s short, money isn’t everything, and there’s better places to live.”

betamax at greaterfool.ca 16 Feb 2013 5:43am

‘Vancouver Is Awesome’ “Community-Based Social-Venture” Blog Actually A Stealth Paid Promoter Of Olympic Village

vancouver2010olympics
Above from a 12 Feb 2013 post on the ‘Vancouver Is Awesome’ site

“Marketers of the in-receivership Olympic Village are paying the editor of well-known local culture webzine VancouverIsAwesome.com to blog about the joys of life in the village – but it does not say on the website that he is being paid to do so.
Rennie Marketing Systems awarded the deal after receiving a single pitch from VancouverIsAwesome.com editor Bob Kronbauer, who says feels like he won a contest to be paid to flog the Village in False Creek – much like the public contests held by Vancouver International Airport and Tourism Richmond to find paid bloggers to promote them.
“I was visiting the Village a lot as a resident of Mount Pleasant before we moved in and fell in love with it and wanted to share the stories of all the positive things that make it great,” Kronbauer said.
“Beyond the budget and all this stuff I really have no idea about as an average citizen, (I wanted) to sort of expose stories about what it’s like to actually live there.”
Kronbauer lives in a market rental unit at the $1.1 billion complex, marketed by Rennie Marketing Systems, but declined to disclose his rental rate. He began a $2,475 per-month, six-month contract in May 2012 that was renewed in November. The year-long gig is worth a total $29,700.
“Beyond this, beyond my contract to promote the Village, we’ll be staying there in our suite because we love it so much, that was the intention to move there,” Kronbauer said.”

– from ‘Life in the Village pays off for local webzine editor’, Bob Mackin, Business in Vancouver, 14 Feb 2013

Elsewhere in the same BIV edition, Glen Korstrom suggests this is part of a broader trend of media manipulation by the real estate industry:
“Such tactics seem to be part of a trend of real-estate marketers manipulating media perception to sell condos.
Business in Vancouver has learned that VancouverIsAwesome.com editor Bob Kronbauer is being paid by the in-receivership Village on False Creek, formerly the Olympic Village, to promote life in the village – even though nowhere on his website does it make it clear that he is being paid to do so.”

“Vancouver Is Awesome, and we are dedicated to everything that makes it that way.
A community-based social venture sharing positive stories of arts, culture, lifestyle, and everything awesome about Vancouver. No bad news.
If you want to read ugly, bad news about this beautiful city of ours, you’re going to have to look to traditional media and other blogs; V.I.A. promotes everything that makes our city awesome, from old to new and everything inbetween. We’re like the human interest piece on the news… only different.”

vancouverisawesome.com

We’ve previously tried reading the V.I.A. blog, but each time we break out in a terrible rash and can’t continue.
Advertising is irritating enough when it’s clearly advertising; when it’s in a stealth ‘product-placement’ form, far more so. And the ‘trend’ of media manipulation by the Vancouver RE industry is something that has been going on for years, it’s only coming to light now because the current state of the market makes people ‘ripe’ for the realization.
For the record, we ourselves aren’t paid anything, by anybody, for anything we archive, post, or say on this blog; it’s a labour of love and morbid fascination. We actually pay a small fee to wordpress each year to keep ads off the blog.
When news is “bad”, we call it “bad”; when something is “ugly”, we call it “ugly”; and that’s precisely how the RE market here looks to us right now – ugly.
A grand spectacle is playing out in our town, and we’re keeping notes.
– vreaa

If you are interested in developing your own ideas about the truth of the Vancouver RE market, and whether it is ugly or otherwise, read as broadly as you can about the market. If you don’t already do so, make sure you also consider the opinions expressed in posts and discussion on the following sites:
Vancouver Condo Info
Whispers From The Village On The Edge Of The Rain Forest
Vancouver Price Drop
Vancouver RE And Then Some
Housing Analysis
The Economic Analyst
and, of course,
Vancouver Real Estate Anecdote Archive

Bring On The Soft Landing Predictions

babad“It looks, at this point, like it’s a soft landing. … The IMF said that Canadian homes are overpriced by 10%. … BMO Nesbitt Burns says that in each case after mortgage tightening it took about 7 months for the market to adjust. We’re now seven months in from Mr Flaherty’s latest move. Given 5 yr fixed mortgages below 3%, BMO says we shouldn’t be shocked if we find a floor here.”
Michael Babad, journalist, Globe and Mail video commentary ‘Don’t be ‘shocked’ if home prices find floor again: BMO’, 15 Feb 2013

“We’ve seen the adjustment in the housing market. We think there’s a bit more to come over the next couple of years.”Mark Carney, Governor of the BOC, quoted in G&M, 17 Feb 2013

“In a report last week, the International Monetary Fund estimated that Canadian home prices are overvalued by an average of 10 per cent and predicted an “adjustment” over the next five years.”
from ‘More adjustment to come in home prices: Carney’, G&M, 17 Feb 2013

“The January reading suggests that the housing market may be stabilizing after the cool-down witnessed since tighter mortgage rules took effect in July 2012, writes TD’s Derek Burleton. According to the bank’s research, the impact of new mortgage insurance rules tends to wear out after six to nine months. Burleton expects this to be the case for the latest round of tightening as well, especially since a relatively healthy labour market and interest rates at historic lows should encourage home-buying.”
– from ‘Is the housing cool-down already over?’, Macleans, 15 Feb 2013


This commentator acknowledges uncertainty:

berman
“Whether house prices fell a little in January, or a lot, sort of misses the point… the bigger issue here is how far this market will fall, and how long.”David Berman, journalist, Globe and Mail video commentary ‘What’s ahead for the housing market?’, 17 Feb 2013

Regular readers know to anticipate cries of “it’s only a flesh wound” and premature ‘bottom calls’ from many quarters all the way through the coming price deflation.
After a run up of 200% to 300%, a 10% pullback is noise; a rounding error.
There is absolutely no way that the speculative mania in Vancouver housing will resolve itself with such a minor price pullback.
– vreaa

“My friends who are westside realtors are cutting spending budgets and dipping into savings now to keep things going.”

“My conversations with friends who are westside realtors over the past few months (I know a few – hey everyone wanted to be a RE agent for a while, it seems) [reveal that things] are not good (for them). Telling me they are cutting spending budgets and dipping into savings now to keep things going.”
Girlbear at VCI 11 Feb 2013 2:51pm

Spot The Speculators #99 – ‘Canada Don’t Let Your Retirees Grow Up To Be Real Estate Cowboys’ – Alberta Couple Late 50’s; Net-worth $196K; RE Holdings $1,850K

“Alberta couple, Edward, 58, and Sue, 56, earn gross income of $247,200 per year from working in two great jobs — his in transportation management, hers in health care. Yet they are almost broke.
The problem is they are shelling out $47,514 per year just in interest charges on liabilities that amount to 6.7 times their annual pre-tax income. Their assets add up to $1.85-million, leaving them with a net worth of only $150,000 as the end of their careers comes into view.
The problem will get worse if not fixed, because they are not making a dent in the principal they owe. When interest rates rise, their debts will become ever more costly to carry. Unless they act, they will not be able to retire as planned. They may not even be able to avoid eventual insolvency. “Should we be selling off investments, some at a loss?” Edward asks. “We are working hard to keep our heads above water, but we feel that it is a losing battle. Our goal is to quit when I am 64. Question is: Can we do it with our heads above water?”
The numbers don’t look good: Their debt is about nine times their equity and their investment income is negative.”

– from ‘High-income couple has to deal with some real estate headaches’, Andrew Allentuck, Financial Post, 11 Feb 2013 [hat-tip kansai]

Breakdown of their assets and debt:

Assets (market value where applicable):
House: $950K
BC ‘income-generating’ property #1: $540K
BC ‘income-generating’ property #2: $240K
Arizona Condo: $120K
Total assets: $1.85M

Debt
House mortgage: $758K
BC property #1 mortgage: $446K
BC property #2 mortgage: $329K
Business Loan: $75K
CC Debt: $32.7K
Car loan: $13.2K
Total debt: $1.654M

Net-worth: $196K
RE holdings: $1,850K
Ratio of net-worth to RE: 1:9.4

By sensible estimates, one should hold no more than (90 minus your age)% of your net-worth in RE.
By that measure, this couple should have 33% or less of their net-worth in properties; the actual number for them is 944% (yes, not a typo – nine hundred and forty four percent).
If RE blinks, these guys are underwater. In fact, given the current market, they very likely are already underwater in that they’d probably have to drop prices by at least 10% to liquidate their holdings.
If prices drop by 30% or 40% or 50%, or even more, their retirement plans will be completely destroyed.
This is a more extreme example, but the fact remains that a very substantial percentage of Canadian ‘boomers’ are overdependent on the health of the RE market for their future financial health. And, like the couple in this example, they will likely be advised, or forced to the conclusion, that they have to lighten up their RE holdings.
– vreaa

Update – Westside Old Favourite Sells For Same Price As In Feb 2011

Here’s an update on a Westside SFH we’ve featured here before:

4411 W 11th; 4,696 sqft SFH; 63×121 lot (7,623 sqft; 0.175 acres)
(Old Timer; Backs onto alleyway behind 10th Avenue stores.)
Listed 9 Oct 2010 $2,980,000
Price change 6 Dec 2010 $2,890,000
Sold 15 Feb 2011 $2,830,000

Listed August 2012 with $3,180,000 ask price
Remained on market for rest of 2012, unsold

Relisted 24 Jan 2013 with $2,998,00 ask price
Sold 24 Jan 2013 $2,850,000

Anybody care to calculate carrying and transaction costs over the last 2 years?
We can’t verify this, but we are told that nobody has lived there over this period.
Will this property now be utilized as a residence, knocked down for a new build, or is it being purchased to sell again later at a hoped-for higher price?
– vreaa


This house was first featured at VREAA 6 Dec 2010 when we noted that, at an “Ask Price of $2,890,000″, “10% downpayment ($289K); 4% rate; 25yr amortization” would result in “Monthly mortgage payments: $13,681.79″
In a later post, 5 Jan 2010, we cited it as the kind of house that would sell for less than $1M in the coming trough.
This house was also featured representing our fair city in ‘Unashamed House Porn: Seattle Vs Vancouver’, VREAA, 11 Aug 2011.

No Bad Hair Jokes, Please – “A high-rise hotel and condo project on Vancouver’s West Georgia Street is being rebranded as the city’s first Trump tower.”

trump tower vancouver +
Sorry; impossible to resist…

“A high-rise hotel and condo project on Vancouver’s West Georgia Street is being rebranded as the city’s first Trump tower, CBC News has learned.
Developer Holborn Group is relaunching its Arthur Erickson inspired twisting tower under the Trump brand with condos priced around $1,600 a square foot.
When the project was originally launched before the global economic meltdown, the 60-storey tower, which will twist 45 degrees as it rises, was to feature a high-end Ritz-Carlton hotel on the lower floors.
Another 123 luxury condos were planned for the upper floors, priced between $2.5 million and $10 million, with the penthouse priced at $28 million.
But when the recession hit in 2008 the luxury market collapsed. The project was halted and early buyers were refunded their money.
The project was restarted in April 2012, with 290 condo units aimed at a lower price point, at the location on the 1100-block of West Georgia.”

– from ‘Trump Tower brand coming to Vancouver project’, CBC News, 15 Feb 2013 [hat-tip Nemesis]

trump tower in vancouverTop rated comments on the CBC site:

“When overdevelopment has hit the point where the likes of Trump are drawn to town to bless us with their “brand”, you know we’re heading into the trash bin. It used to be such a classy city.” – JimBev [547 thumbs up; 27 thumbs down]

“How embarrassing.” – Michael.Wolf [492 thumbs up; 18 thumbs down]

“So according to this article, we are told that the Toronto development was a smashing success (sub-heading “Toronto success moving west”, article says “Trump International Hotel and Tower has put its stamp on that city”) and there is no reason why it won’t be just as successful here in Vancouver.
Yet, in the December 26, 2012 issue of the Financial Post, an article appeared titled “Trump Tower woes signal Toronto’s condo market ‘on thin ice’.”
One investor feels he’s been ripped off and sold something that was misrepresented. “We bought into the Trump name and what we were being told was a hot real estate market in Toronto for this kind of project,” [the man] said in an interview. “It turns out that the hotel had nothing to do with him and that it isn’t a good investment after all.”
Things are clearly not what they seem and the CBC should correct THIS article immediately. A little Googling would have gone a long way, instead you chose to be lazy and, clearly, parrot what the developer is telling you. Shame.”
– Fox in a Hole [368 thumbs up; 8 thumbs down]

We’ll add the Trump Branding as another candidate for the Vancouver RE market’s ‘Jump The Shark’ moment. – vreaa

“J.J. Miller and his brother William made their fortunes in real estate, and built giant houses in East Vancouver in 1908. They then lost everything in the crash of 1913.”

mansions09re1

“It’s a natural that the conversion of big old mansions into multiple-unit housing can boost density and protect our heritage in the process.
As one of Vancouver’s developers found out the hard way, one of the biggest sticking points is if the neighbourhood will allow it.
Developer James Evans and architect Timothy Ankenman, who are old friends, are also responsible for two recent conversions: one in the hotbed of community activism, Commercial Drive, and the other in the polar opposite prestigious hood that is Kerrisdale.
Anybody who’s lived around Commercial knows the Jeffs Residence at 1240 Salsbury Dr. It’s a hulking three-and-a-half-storey, 1907 house that’s provided rental housing to the area since the 1920s. It was built as both residence and doctor’s office for Dr. Thomas Jeffs and his wife Minnie and their kids. The popular doctor, also a city council alderman and police commissioner, moved out of the house shortly before he died in 1923. It may be considered an old working-class neighbourhood now, but in the early part of the 20th century the Commercial Drive area was a rich person’s enclave, and the Jeffs Residence was surrounded by many other Queen Anne Revival grand houses with turrets, pitched pyramid roofs and hipped dormers.
Mr. Evans lives about a block away, so he’d walk by the house all the time and think about restoring it. One day, he contacted the owner.
“We put together a deal and went through a rather painful approvals process, ended up buying the site, and here we are today,” says Mr. Evans, standing on the job site.
The painful process he is referring to is community reaction against the loss of rental stock.
“It’s a pretty reactionary neighbourhood with anything that smells like development, so here I am, getting launched in the middle of the thing,” he says, sounding dismayed at the memory. “A lot of people in the neighbourhood know who I am, and so I was walking around the neighbourhood with a bull’s-eye on my back over the course of the year I went through it.
“Loss of rental continues to be a sensitive issue,” he adds. “And I looked into trying to use this as rental and I figured the only way I could do it was to spend $1-million on the site, which would have bumped everybody’s rents by about 30 per cent, and that’s not affordable housing anymore.”
Instead, he and Mr. Ankenman went through the process of getting the house added to the heritage registry in exchange for density and other variances. The result is a seven-unit house comprised of mostly two-bedroom units, except for the top unit, which will be one bedroom, with an amazing view from the turret. The price starts at $400,000 for a 750-square-foot condo, and Mr. Evans says he’s already pre-sold three of the units. It’s about two months away from completion.”

I ask him if he would do the Jeffs Residence project over again, having gone through a year under the hot spotlight of contention. He pauses.
“This one is unique,” he finally says. “There’s only one of these in Vancouver. And I’ll be able to walk past this thing in 10 years and it will look great and continue to look great, and I will get some personal satisfaction out of that.
“Will I make any money out of it? I don’t know yet. Time will tell.”

– from ‘Vancouver developers of heritage properties convert homes and hearts’, Kerry Gold, Globe and Mail, 10 Feb 2013

Thanks for the link to the above article goes to regular reader and commenter Aldus Huxtable, who adds:
“I used to live right by this development and have watched it for some time.
It’s a fun story we can watch play out over the next few years.
Down the block is J. J. Miller’s Kurrajong, a heritage house [photo below].
It’s also really important to read the heritage waymarker [see below].
J.J. Miller and his brother William made their fortunes in real estate, and built this giant house on Salsbury in 1908. They then lost everything in the crash of 1913.”

800px-J.J._Miller's_Kurrajong

OLYMPUS DIGITAL CAMERA

Brent Toderian, Former COV Director Of Planning – “The competition between external demand and local demand is one of the reasons that barring a collapse and a crash, we are going to remain a very expensive city to own in.”

Question (woman at microphone): “I would like to hear your comments on limiting foreign ownership as it addresses local affordability.”
Brent Toderian [Brent Toderian, former Director of City Planning, COV]: “Great question.”
Other male panelist: “I call that the elephant in the room.”
Toderian: “I’m really glad you brought it up because I had it on my list. That is the elephant crushing the table. It’s not under it, it’s not on top of it. It’s something the Mayor’s Task Force on Housing Affordability dropped the ball on. The competition between external demand and local demand — that’s the nicest way I can put it — is one of the reasons that barring a collapse and a crash, we are going to remain a very expensive city to own in.”
– from exchange at a keynote panel discussion on “Living Affordably in Greater Vancouver” at BUILDEX (convention on designing, building and managing real estate), Vancouver Convention Centre, 13-14 Feb 2013. Quoted in comment by ‘urbanizta’ at their own blog ‘CityHallWatch’, 15 Feb 2013 at 12:01am

To say “barring a collapse and a crash, we are going to remain a very expensive city to own in” is a tautology; it’s like saying “if prices don’t go down, they will stay up”. In other words, to say this is to say nothing at all.
That aside, this exchange, and the article above the comment, does demonstrate how people are continuing to wrestle with the issue of ‘foreign ownership’ and how it may effect the Vancouver market. The discussion is hobbled by a number of things: lack of actual data, lack of political will to gather pertinent data, the mixing-up of local and foreign buyers, and a lack of understanding of what constitutes speculation. We anticipate that this issue will continue to be ineffectively churned over in many similar discussions while prices begin to collapse. Once the price collapse is convincingly underway, we won’t hear much about ‘foreign ownership’ for quite some time. Firstly, because foreign buyers, like local speculators, will disappear in a falling market; they are momentum players and hate any asset falling in price. Secondly, many locals will be dearly wishing for buyers – any buyer – to rescue them from their real estate holdings. Once prices have ground down into a trough (likely over years); once speculation has been wrung out of the market and the dust settles; – then there will likely be a meaningful place for civic discussion about the wisdom of regulation of foreign ownership.
Currently, the far, far larger ‘elephant in the room’ is a speculative mania that has yet to unwind.
– vreaa

“A friend of mine was looking to move up but he was not able to find a buyer.”

“Just came back from a Chinese New Year vacation in Vancouver. From folks I talked to, Vancouver’s market has been falling quick. My cousin’s house near Boundary Road was assessed at 1.1x million last year. Last month he received a reassessment from the city and it is now valued at 850k. A friend of mine was looking to move up but he was not able to find a buyer. The seller of the house my friend was looking to buy also delisted his property because he couldn’t find a buyer.”
Reader 66 at greaterfool.ca 16 Feb 2013 12:06am

CRTC Chairman Likens Cell-Phone Company Profiteering To Banks Promoting Excessive Mortgage Debt – “It reminds me a lot of when the banks are trying to get people to over-pay for housing, above what their salaries determine.”

crtc-web

“Mr. Jean-Pierre Blais [Chairman of the Canadian Radio-television and Telecommunications Commission] also questioned whether Telus was fully apprising consumers of their eligibility for a discounted rate: “Do you push that? It is fine to say it is on the website. Are you actually encouraging people to keep their devices? … Why do I get the feeling that that’s not what you want customers to do, to actually go out and maybe invest and keep the device? It reminds me a lot of when the car salesman wanted everybody to be on long-term leasing or banks right now that are trying to get people to over pay for housing above what their salaries should be – and therefore all kinds of regulators have to come in to control that market so that people don’t buy above their means.”
– image and text from ‘CRTC grills Telus on pricing’, The Globe and Mail, 12 Feb 2013 [hat-tip CM]

Housing and related concepts have become go-to metaphors; yet more clear evidence of the speculative mania. Also noteworthy in that it appears to have become common knowledge that shady stuff goes on in mortgage financing and that borrowers are overextended.
Not quite completely an example of a ‘pop culture’ reference, but filed under our ‘RE References In Popular Culture‘ category nonetheless.
– vreaa

CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!

Village Whisperer, over at ‘Whispers from the Village on the Edge of the Rainforest’ has unearthed a remarkable story of RE-marketing shenanigans.

Lee sisters
Sisters Amanda (left) and Chris Lee (right) are scouting for condos before their parents visit from China to help them buy one. (CTV photo)

“The CTV-TV story [CTV 9 Feb 2013] featured two sisters who were looking to buy a condo at the Maddox condo development in downtown Vancouver: Chris and Amanda Lee.
Curiously MAC Marketing Solutions has an Administrative Assistant named Amanda Lee who not only works for MAC Marketing Solutions – but her current background says she’s attached to the Maddox Downtown condo development profiled in the CTV-TV story. ..
It wasn’t just CTV-BC that ran coverage of the MAC photo op. So did CBC-TV.”

– Whisperer, 13 Feb 2013

MAC Marketing Solutions, once caught out in this subterfuge, on Wednesday [13 Feb 2013] published an apology for the ‘misunderstanding’, in the form of a facebook page comment:

MAC semi-admission
– facebook screencapture, posted by Whisperer, 13 Feb 2013

Whisperer has followed up with a review of the entire incident:
‘MAC Marketing admits they mislead CBC-TV, BC-CTV and all their viewers/customers’
Whispers from the Village on the Edge of the Rainforest, 14 Feb 2013

Clearly this represents far more than a ‘misunderstanding’, but the exposure of this deceit will barely cause a ripple. We have, sadly, come to expect ridiculously poor standards from local media regarding the coverage of the local RE market.
Well done, ‘Whisperer’, many thanks for the uncovering.
The episode is very reminiscent of similar deceit that we ourselves spotted in April 2012, where a ‘sales representative’ selling condos for Cam Good’s ‘The Key’ was presented by Global TV news as a ‘White Rock Investor’ and apparently interested buyer.
– vreaa

UPDATE 14 Feb 2013:

“MAC president Cam McNeill later confirmed that both women filmed in the segment are in fact MAC employees – and aren’t even sisters.
“I don’t have a full explanation of how things went down, I deeply regret for the fact that it didn’t make it more clear to you that the two women in the story were MAC employees,” McNeill told CTV News.”

CTV News, 14 Feb 2013

Of course, as the two women in the story are MAC employees, and aren’t even sisters, the story itself doesn’t even exist!
– vreaa

UPDATE 15 Feb 2013:

The story of the deceit has now been covered by various ‘media outlets':

‘Vancouver real-estate firm admits faking investor for TV news’
Sam Cooper, The Province, 14 Feb 2013

‘Real estate marketing firm apologizes after employees posed as apartment shoppers from China’
Tracy Sherlock, The Vancouver Sun, 15 Feb 2013

‘MAC Marketing Solutions Exposed For Fake Vancouver Real Estate Investors’
The Huffington Post B.C., 14 Feb 2013

‘Real estate firm apologizes after employees pose as buyers in news stories’
Andrea Woo, The Globe and Mail, 14 Feb 2013
excerpt:
“This is the latest in a number of questionable marketing tactics to be exposed within Metro Vancouver’s real estate community. During a media blitz announcing the Groupon-style sale of units at a Surrey condo development last year, one woman identified to a television news crew as an eager local investor was in fact a sales manager for Key Marketing, the company behind the scheme.
That same company has also taken groups of Chinese buyers on helicopter tours of Metro Vancouver properties, and at least one of those trips was believed to be misleading. Garth Turner, a business journalist and former politician, reported the Chinese buyers on a Feburary, 2011, trip – on which several media outlets were invited – were in fact local real-estate agents and brokers and the trip was meant to promote a new condo development. Cam Good, president of The Key, which includes Key Marketing, was a partner at MAC Marketing Solutions from 2004 to 2009, according to his LinkedIn page.
According to 2011 data by the Landcor Data Corporation, 75 per cent of those who purchased Metro Vancouver condos as investment properties are from Metro Vancouver. About 3 per cent are from the U.S. and 2 per cent are from other countries.
The Real Estate Council of B.C will be investigating the matter.”

‘Condo marketing company admits it duped media’
CTV British Columbia, 14 Feb 2013
excerpt:
“We’re trying to understand how this happened right now, and so I’m just trying my best to be open with you and just say that I’m very sorry that it happened,” said MAC president Cam McNeill.
McNeill maintained that the theme of the story – that Lower Mainland condo sites saw a spike in Chinese buyers around Lunar New Year – was completely true.
“I think that the ladies probably fit the profile of the story,” he said. “At the moment I don’t know whose idea that was; I don’t even know if they took it upon themselves to make that up.”

fake buyers
– image from CTV News

‘Real estate marketer admits to deceiving Vancouver reporters’
CBC News, 14 Feb 2013
excerpt from News clip:
“The owner of a Vancouver real estate marketing company admits his employees misled media over the weekend, including the CBC. … MACs owner admitted the story was entirely false. Two MAC Marketing workers presented themselves as sisters from China in Vancouver looking to buy a condo over the Lunar New Year.” …
“Some say that irreparable damage has been done to the real estate marketing industry, that future claims of sold out success stories will be viewed with scepticism.”

click to enlarge
– Annotated image linked by Canadian Watchdog at greaterfool.ca 14 Feb 2013 10:32pm

Living In Van-Couver – “There’s no way they can afford a mortgage in Vancouver. I know one emergency first-responder who lived in his van to save enough money to afford a downpayment.”

DCIM100GOPRO
Mathew Arthur, a Vancouver-based designer, checks email in his converted 1987 Dodge Ram Prospector.

“Mathew Arthur ditched a renovated laneway house he shared with his two brothers to live in a cheap 45-sq. foot 1987 Dodge Ram Prospector for the next year. He’s part of the growing “van dweller” community in Vancouver, where sky-high housing costs have forced many to get creative.
The contemporary nomadic community describes itself as an “island of misfits, a family, a tribe” on a popular Yahoo! forum. Some have embraced mobile living out of necessity, while others like Arthur are doing it to challenge themselves.
“I had a good design job, but in no way found engagement in my life,” Arthur told The Huffington Post B.C.
The 30-year-old wanted to challenge his notion of comfort by engineering a personalized living space that would test his creativity.
“I iterated through ideas about living in a tent, a shipping container or a commercial space with no household amenities until I arrived at the idea of living in a van,” said Arthur in a blog he’s keeping to document his year-long nomadic venture.
In early December, Arthur bought a $500 used van off Craigslist from a farmer in the B.C. Interior. With the help of his family, the vehicle was gutted, cleaned of mice feces and rebuilt with $400 worth of furniture, wiring and insulation.
In the small space, the van has four main areas: the kitchen and sink, work space, storage and bed. Without a personal toilet or shower, he has a daily excuse to go to yoga for exercise and to use the studio’s facilities.
The difference has shown in his savings: his monthly rent has reduced from $850 to a $200 parking fee plus $50 for hydro.
The tiny living space has forced Arthur to be mindful of his use of resources; he’s producing less garbage by preparing simple, fresh foods, and is using less water and electricity overall.
“The one thing that I took for granted was the freedom to move room to room,” said Arthur of living in a house. However, the shift from a 700-sq. foot house to a van parked in an East Vancouver alley has its quirks.
More people go through the alleyway than he anticipated. He’s befriended a middle-aged woman named Edie who periodically strolls through collecting bottles from the neighbourhood’s recycle bins. The occasional drunk lovers’ midnight fight is also easily audible through the van’s walls.”

– from ‘Mobile Living: Vancouver Van Dwellers’ Nomadic Lives’, Zi-Ann Lum, Huffington Post BC, 27 Jan 2013. All photos Mathew Arthur.

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“They’re a merry band of vagabonds, living in their vehicles not so much because they can’t afford rent or a mortgage — though that’s part of it — but to cast off the chains of mainstream consumer living.
They’re van-dwellers and RV gypsies, free as birds and believing that your possessions in the end wind up possessing you.
“I had all of this stuff,” said 30-year-old Shawn Linley, sitting in his Econoline RV in North Vancouver. “Stuff, stuff, stuff, so much stuff.
“I don’t want a gas-powered weed-eater any more. I don’t want a huge flatscreen TV. I don’t need ’em.
“I’m never going to live in an apartment again or buy another house.”
Linley, like many vehicle-dwellers in B.C., is a journeyman tradesman. There are no official numbers of how many people live in their vehicles in Metro Vancouver, but it’s probably more than people think.
There are little mobile squatters’ camps all over the Lower Mainland — beside treed North Shore creeks, in industrial zones, beside East Van and Burnaby parks and SkyTrain stations, and along the beaches of Kitsilano and Point Grey
It is a sub-culture that is by definition discreet and shadowy, moving every so often to avoid drawing attention.
“Basically, they’re untraceable, people who are good at flying under the radar,” said Judy Graves, advocate for the homeless with the City of Vancouver.
For the most part they have jobs, she said, at least seasonally.
“And some people just do not believe in paying rent, and there’s no way they can afford a mortgage in Vancouver,” Graves said. “In fact, I know one emergency first-responder in Vancouver who lived in his van to save enough money to afford a downpayment.”

– from Living in a vehicle confers freedom from ‘stuff’, Gordon McIntyre, The Province, 11 Feb 2013 [hat-tip Aldus Huxtable]

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“Many people believe that equity and house prices will be dragged down by Baby Boomers as they reduce purchases and sell holdings during their retirement years. But this forecast’s predictive power could disappoint.”

“Many people believe that equity and house prices will be dragged down by Baby Boomers as they reduce purchases and sell holdings during their retirement years. But this forecast is based on just one of the many factors that impact equity and house prices, so its predictive power could disappoint. Indeed, the track record of previous demographic-based predictions suggests such an outcome is likely. A great deal of scholarly research has established the significance of the other factors.”
– from ‘Don’t blame Boomers if housing goes bust’, Larry MacDonald, Globe and Mail, 25 Jan 2013

Retiring boomers will likely weigh heavily on Vancouver RE.
Wannabe retirees are overdependent on their RE holdings for their retirement.
– vreaa

In a related vein:

“Canada’s financial regulator has “serious concern” about the viability of a rising number of private pension plans, a sign that plans are struggling to meet obligations at a time of low interest rates and weak investment returns.The Office of the Superintendent of Financial Institutions supervises roughly 1,400 private pension plans covering more than 637,000 employees in federally regulated businesses such as banking, airlines and telecom. When pension plans give rise to “serious concern,” generally because of their financial condition, OSFI places them on a watch list to be actively monitored.”
Regulator puts more private pension plans on watch list, Tara Perkins, The Globe and Mail, 7 Jan 2013.

Reader Opinion On Construction Trades – “It takes a 2-year trade diploma, a 1 year co-op, and a 4 year apprenticeship to become a fully licensed plumber. This skews the supply and demand curve and allows older workers to bid up their wages.”

DonDWest, a 31 year old Canadian, left this opinion post regarding construction standards as a comment at VREAA 9 Feb 2013. Headlined here as food for thought and fodder for debate:

“Shoddy and overpriced construction/engineering is a big problem in Canada, but I have a different take on what’s the cause. Not to sound like a Republican, but I believe corrupt unions have played a large part. I’ve experienced this first hand from a “young” person trying to enter the trades and then realizing the traditional route to getting in the trades is now economically infeasible at my age (31 years old).

Speaking of leaks, for example, it takes a 2-year trade diploma, a 1 year co-op, and a 4 year apprenticeship in my province just to become a fully licensed plumber. That’s the equivalent of a PhD equivalent level education in terms of time spent. No offense to the plumber, but you’re just a plumber, it shouldn’t take over 7 years to get licensed.
I don’t know about you, but starting a plumbing career at age 40, considering these are physical jobs where the retirement age is much sooner, doesn’t seem economically feasible. I laugh at people who tell guys now entering their late 20′s to early 30′s to “just get a trade” if you’re having difficulty breaking out of the low wage service sector mould.

What the unions have done is significantly convince the government to raise the barriers of entry into the trades for our young. This skews the supply and demand curve and allows older workers (who are mostly baby boomers) to bid up their wages. Ironically, this doesn’t result in better quality work, as there’s less competition coming from the young pressurizing the older workers to back up their wages. The older workers know their jobs are secure and this reflects in their work that’s poorly completed at a snail’s pace.

Oddly enough, due to the incidents of shoddy construction that result from this corruption, this is used by the unions as further leverage that the government needs to increase the levels of qualification in order to enter the trades. The unions created the problem, and their solution is to further reinforce the problem by upgrading credentials on the young, because perpetuating the problem is profitable for the unions and their workers. If the government just took a look at the average age of a construction worker and engineer today – they could easily see that the problem isn’t newbies coming on the scene messing things up.

I’ve come to the conclusion that if a young person wants to enter the trades, he is better off taking the small business route right away. He could start small by restoring old houses in rural Canada for example. I doubt it will take him 7 years just to figure it out, and he won’t be in so much debt due to education requirements, nor will he have to spend years upon years listening to condescending baby boomers that will only serve to hurt his confidence.”

Whatever measures are being taken to ensure sound construction standards in the lower mainland, they don’t appear to be working very well. Witness the tarps, even on buildings constructed after the leaky-condo scandals.
Obviously there have to be some basic standards to which the trades adhere. Over and above that, it is ironically likely that fewer restrictions to entry, and more competition (along with greater consumer expectations, and greater accountability for work quality), may well result in a better quality of construction than we are currently having to tolerate.
– vreaa

“I’m a Canadian living in L.A. and to me the bubble as been clearly visible for many years. I’m fascinated by the ‘cultural’ aspects of the Canadian bubble.”

“I’m a Canadian living in L.A. and to me the bubble as been clearly visible for many years. Now, my interest has evolved, and I’m more fascinated by the ‘cultural’ aspects of the Canadian bubble. Like real estate people being invited as ‘guests’ on the evening news. To my eye, that alone screams overvaluation and speculative mania. Believe me, in a couple of years, that’s the kind of details that will go in the “what were we thinking” category.
I flew to Montreal recently and *everyone* there has something to say about real estate. I wasn’t the one who it brought up. They talk about how this condo sold for X amount, how holding on to a (bubbly) property is the best investment known to man. Greed permeates every one of theses judgments, but greed is never acknowledged. It’s just ‘common sense’.”

Nick at VREAA 9 Feb 2013 11:37am

“Rentals are being phased out in our condo building because they are just too hard to manage and they bring down the value of the units.”

“Rentals are being phased out in our condo building because they are just too hard to manage and they bring down the value of the units.”
– comment by Kensington, 27 Jan 2013 4:00pm below ‘2012 a record year for Vancouver rental housing’, CBC News 27 Jan 2013

It’s still all about ‘value’ (read: price growth), and not about ‘income’.
The changes contemplated by this strata usually occur in red-hot price growth phases.
During weakness, when prices are descending, the potential for rental income becomes more important in the calculation of fundamental value, and in making a property attractive to buyers (thus offering more support to prices).
This strata appears to be late to the party.
– vreaa

Newsflash For Residents Of Vancouver – “Gravity Exists; You Are All Mortal”

EUqjbpINzkCzFjz-556x313-noPad

Petitioned The City of Vancouver
The City of Vancouver: Stop a funeral home from moving into 450 W 2nd Ave!

Petition by
Concerned Citizen
Canada

Property owners in the neighbourhood are concerned that property values will be negatively affected and that the City of Vancouver failed to consider this before approving a change of use for the commercial property in question.

To:
The City of Vancouver, Board of Variance
Stop a funeral home from moving into 450 W 2nd Avenue!
Sincerely,
[Your name]“

- posted at change.org approximately 6 Feb 2013 [hat-tip Aldus Huxtable]

Comments below the petition thread:

“Will negatively impact my property value” – Beth McNeil

“I am a resident of the adjacent condo building and I am concerned about the changes this funeral home will bring to our neighbourhood.” – Samantha Cuncliffe

“I am concerned about the impact the funeral home will have on the neighbourhood.” – Concerned Citizen

“impact of a funeral home on the neighbourhood, sales, and also the risk of health impacts caused by the funeral home.” – Laura MacCormack

“the parking!!. we have the police station right by us already. they already took up all the parking and parking anywhere they want . also the bike line just add in few months ago. there is already no parking for the owner and the visitor and for the business… that will effect our property value. so is that mean we allow to pay less tax.??…we pay tax for our community. we want to enjoy it. the funeral is right by the main traffic road. when they have a event. i cant imagine the impact for the location. they are on the route for Sunrun. and couple of the running event. is going be a nightmare.” – janet wong

“There is no reason to put a funeral home in such a thriving neighborhood. No one benefits from this, not even the funeral home because it’s a terrible location for one…no parking, police station operations that will likely disrupt any funeral services going on, frustrated neighbors who will not support them, etc etc.” – Emily Ng

Yes, we are all mortal.
And, while we’re dismantling ridiculous fantasies..
..our real estate is in a massive speculative bubble.
– vreaa

‘Martin From Richmond’ Update – “Prices are down more than 15%. Another thing worth considering is that 2013 is the Year of the Snake for those of Chinese ancestry.”

“Prices have dropped more than 15 per cent in one popular neighbourhood in Richmond.
Almost a year ago, a 2800 square foot, five bedroom three bath house sold in the Garden City area for $952,000, a bit above asking price in what was described as a cash sale that followed a bidding war between two interest parties.
Within the last week, another house, a 2400 square foot, three bath house on a similar-sized lot sold in the same neighbourhood for $805,000, below the asking price of $838,900 and even below assessed value.
In both cases, the homes didn’t need any work, and were move-in ready, updated, and well-designed.
The $147,000 drop in price works out to be a 15.4 per cent price drop in the area.
And I think it’s an indication that at least one home owner seriously considered “cashing out”, and ultimately did, and that others might do the same, if the real estate industry continues to grind to a halt.
Another thing worth considering is that 2013 is the Year of the Snake for those of Chinese ancestry.
A renowned Richmond fortune teller and feng shui expert predicts that the Year of the Snake will see profit margins slip, and said business will slow down
Whether you believe in Chinese astrology is not the point; considering the influence of foreign and mostly Chinese buyers on the price spikes since late in 2010, it’s whether this significant subset of deep-pocketed people believe it.
The fortune teller said 2013 will see a significant slow down, and said people will be more careful in spending their money.
As with my earlier “self fulfilling prophecy” comment, if Chinese investors really do believe that 2013 will be a slow year, that could influence their decisions, and in fact, result in a slow down. It all depends on if enough people are drinking the Kool-Aid.
But the fortune teller also noted that the “wealthy Chinese” are unlikely to liquidate their assets by taking low-ball offers, and will decide to rather sit on their properties, awaiting better times.
So, recent sales activity (according to the Greater Vancouver Real Estate Board, January 2013 sales were the second lowest for that month since 2002) combined with the Chinese New Year, could further trigger prices to slide.
Something worth considering for those who are mullling over the possibility of re-entering the world of home ownership.”

– Martin from Richmond, via e-mail to VREAA, 6 Feb 2013

We don’t believe in astrology any more than we believe in leprechauns, but we do ‘believe’ in the fact that others believe in such things, and that those beliefs can influence herd behaviour.
A speculative mania is itself based on false beliefs.
– vreaa

“I live in the new Wesbrook village on UBC campus and finally stopped by the Wesbrook Welcome Center. I wonder how long they will keep up this rate of construction?”

NTRcsdX

“I live in the new Wesbrook village on UBC campus and finally stopped by the Wesbrook Welcome Center. They have a map of all current and planned development, (captured here with my) camera phone. The grey ones have been approved but haven’t been started, apparently they should all be completed in 10-15 years. That’s a rate of .67 – 1 highrises and 2 – 3 lowrises a year. Since I moved in 6 months ago none of the show rooms or open houses have closed. I wonder how long they will keep up this rate of construction?”
LazyCanadian at VCI 8 Feb 2013 12:24pm, image posted here.

“UBC has gotten totally out of control. I graduated there a couple years ago, and it was getting a little ridiculous with the amount of construction, but now it’s even worse. When I visited for the first time in 2005, it was beautiful and was one of the reasons I wanted to go there.
The whole campus is under construction now, and they’ve cut down massive parts on the endowment lands (a.k.a. woods) to build million dollar houses and condos (which is just what the generally poor students need).
Most of the open green spaces are now huge condo towers. You can barely walk across campus anymore, with all the detours. Some people recently hung up a bunch of signs. [see below]
Back in 2007 they permanently cancelled the annual big party students have on the last day of classes, because the people in their million dollar homes on campus didn’t like the students drunkenly walking through to the stadium. Apparently the realtors didn’t tell them that they lived on a campus…
Nothing against UBC, I loved the school when I went there, but now when I visit campus, I feel bad for the current students.”

Andrew at VCI 8 Feb 2013 2:38pm

Guerilla signs protesting construction on UBC campus, images from blog post ‘Anonymous snarker channels construction anger into guerilla memes’, Ubyssey Social Club, 12 Oct 2012. Archived here for the chronological record:

constructionsign2

constructionsign3

constructionsign4

‘Drop From Peak Chart’ and Recent Market Action – Paint Dries Faster In Vancouver!

click to enlarge

A ‘Drop From Peak Chart’ constructed and posted by ‘an observer’ at their invaluable blog, ‘Vancouver Price Drop’ [8 Feb 2013]. [click to enlarge]

This elegant chart shows how SFH (single family home) prices in various major markets in the US descended from their peaks.
Superimposed on this is our own BC Lower Mainland SFH price drop. At eight months into the LML descent, we are outstripping the rate of price drop experienced by all US markets, save Miami.
It may feel like prices aren’t budging, or that they are dropping very slowly, but this is not the case.
– vreaa

In a related vein, these very useful market updates and commentary from yvr2zrh (zrh2yvr) at VCI 8 Feb 2013 11:15am & 9 Feb 2013 3:00am; and at VREAA 9 Feb 2013 1:23pm

Market Overview:
“A couple of views 1 week into the month.
1.) Every person who did not sell in Van West last year seems to be hitting the list button this week. We are on pace for close to 500 new listings in one month of Van West – – this is by far a record.
2.) Detached listings are up more than attached and sales are down more than attached. We are on pace for 10+ MOI on detached for Feb – – yeah – Mr. Muir – sellers don’t have to sell eh??
3.) Sorry to be a broken record but – – Richmond – Dead. Forecasting close to 1,000 listings at month end already and 18 MOI. Must be fun . .
4.) Van East attached – pretty balanced – still. Projecting 5 MOI this month which is still up from 4 last year.
5.) Biggest loser? West Vancouver. Forecasting 18 MOI this year for Feb compared to 6 last year. North Van at 6 compared to 2.5 last year. North Van is one of the true middle class (low offshore spec) areas left. 2.6 MOI last year was still very very tight – – at 6 – it’s not bad but really slow for spring. Generally North Van just suffers from low amounts of spec sales so generally not very high inventory.
6.) Burnaby? I’m not joking but last year it was MOI of 3 in Feb and this year we are looking at 12. Oh well – – sorry if you’re trying to sell in Burnaby.
7.) Finally- Van West – – Should end up with 9.5 MOI. Last year, when we thought things were pretty soft already – it was 4.5 (a high amount for Feb). . .
If we end Feb with less than 1700 sales – the HPI will be flat to only modestly down (a big achivement for Feb). . .
Using REBGV numbers – I currently forecast over 15K for Feb inventory. Compares with 14K last year. Note that this excludes bare land and multi-unit properties.
As a trend – – Feb is worse than Jan on a seasonally adj basis.
However- as you all know – – people just don’t have to sell – – and – – as we all know – – People never have to buy.”

Comparisons With 2009:
We all know the market is bad, regardless of any realtorspeak that has made the press in the past week. We also mostly know that the worst period in Vancouver real estate was from September 2008 through about March 2009. Those months were the lowest sales since 2000 and some of them (such as Nov/Dec 2008) are unlikely to be reached again in the future. However, right now we are again at an inflection point. On a market wide basis, February 2013 is shaping up to be the 2nd worst Feb in recent years. However, as you look at the pockets – it is clear that there are some where performance is much worse.
So – Comparing Feb 2013 with Feb 2009, here are some general thoughts based on the current trend.
1.) Sales are higher in 2013 and should be about 10% over Feb 2009. This is a massive deterioration from last month as Jan 2013 was 75% over Jan 2009. This is the effect of a market that is weakening now compared to a market in 2009 that was strengthening.
2.) Listings are much higher than 2009. 2009 was low but in 2013, we are 1.5 StdDev above the average from 2002-2011. So – given that the board is saying people won’t list – I think it is a wish more than a fact. (they are trying to re-create the 2009 market by removing listings – which actually happened then as people were in a state of shock – this is not happening now – people have lost a lot of money and they do not want to lose more . . . so they list).
3.) We are on track for worst sell to list in any February in recent history.
4.) Some markets are worse. Van West Detached forecasting worst Feb in history with lowest sales and highest listings. Don’t know if anyone has access to Van West Detached listings for past 15 years but did we ever have over 400 listings in a month?
5.) Richmond Detached – heading for worst Feb ever. . . .
6.) Even Vancouver West Condos – Volumes looking to be below 2009 with higher listings. (We are not however seeing record listings in Condos – they are high but we would need 20-30% more listing volume here to show panic – – – )
7.) Van East detached – Not seeing the same panic in listing volume as Van West. Sales are down however. Lower inventory and lower listing rate will keep MOI here a bit lower (i.e. 8 instead of 12)
8.) Richmond Condos? Panic !!!! Sell now or forever eat Dim Sum and live in the Mandarin Residences!!!! Not sure why you would ever buy a condo there until 30-40% price decreases occur.
9.) West Van – – Sales volume quite similar to 2009, slow – – but listing volume is way up. I would say it is Panic there in a West Van sort of way. Think about it – West Van has 10,000 detached homes. At the current selling rate, the turnover in the real estate stock would take 30 years. Seems a little long – the average time in a house is likely not that long . . !!! Good luck to them all.
10.) North Van Detached – Modestly better than 2009.
11.) Burnaby – Sales rate is similar but listing rate up 42%.
February is barely a week old. However – it is already certain to be the worst Sale to List ratio ever and have an inventory increase not seen in any other February.

Move-Up Market Freezes:
“It is amazing. Friday had 1 sold and 25 new lists for Van West detached. Almost all stats continue to point to problems. We are getting seasonal increases in average. Not sure why really as the median is going down but average seems to be sneaking up – likely because of a few $10M properties selling on low sales. In any case – – One thing that just has to be hurting this market is the continued flat-down prices on condos. I just have to look at all the young people that I worked with in Vancouver in 5 years that had bought condos since 2007. So many of them are now at that stage in life where they should be looking to get to the next step. However, they have no equity from investment gains and transaction costs will eat most of their savings equity. They make decent income but pay $1800-$2000 per month to live in a 650 sq ft 1 bedroom. That really sucks – – One of my friends is really nice, super smart, motivated and a good worker. Can’t seem to get a better job and wants to move to a house in North Van (Must be the Persian connection.). However, . . . he’s stuck in a Rennie Special . . . . . . after 5 years of slaving the mortgage payments, the person that made the most money was Rennie himself – – ;. . . .
Anyhow . . . I’m looking forward to March as for sure it will be below 2009 . . . . . one month earlier than last year.”

Further commentary on Vancouver price weakness in a recent post by Ben Rabidoux at The Economic Analyst [Real estate sales in Vancouver, Victoria crumble in January; Rot is worse than headlines indicate 5 Feb 2013]. Excerpt:
“January sales-to-new listings ratio.. was the second weakest in well over a decade (next only to January 2009 when people were still not sure if the financial system would survive) and a months of inventory reading that is the second highest in well over a decade. I’ve only compiled detailed data for Vancouver back to 2000, but I suspect that, outside of 2009, you’d have to go back to the early 90s to find numbers this weak. In short, January was a brutal month in Vancouver.

On 28 Nov 2012 Ben gave a presentation in Vancouver on Canadian Housing that was discussed in a thread here 29 Nov 2012. The full presentation is up on youtube, for those who haven’t yet seen it:

‘Canadian Real Estate: What happens next?’, Ben Rabidoux, Vancouver, 28 Nov 2012

“Over 6k of the announced 16K job losses in BC were due to real estate development slowdown in the Lower Mainland.”

“Labour Minister Pat Bell was on CBC radio earlier today. He said that over 6k of the announced 16K job losses in BC were due to real estate development slowdown in the Lower Mainland.”
Patiently Waiting at VCI 8 Feb 2013 3:37pm

It does seem that things are slowing down on various fronts.
These are the kinds of self-perpetuating downward-spiral/vicious-cycle factors that will cause lower prices to beget lower prices still.
Our recollection is that we have roughly 7%-8% of the work-force directly involved in RE construction, whereas more normal levels are 3%-4%.
– vreaa

“These things are obvious when viewed from the outside.”

“Had a nice talk with a doctor department head tonight. He moved here from Chicago where he’s still paying the mortgage on an underwater property. He looks at the prices here and he can see that it doesn’t add up. He was wondering when the tipping point would come for Vancouver. In any case, he has no intention of buying here for now. These things are obvious when viewed from the outside.”
N at VCI February 8th, 2013 at 12:18 am

When a group is trapped in the jaws of an asset bubble, the vast majority of participants don’t have the capacity to ‘view’ it ‘from the outside’.
With perspective, the speculative mania can be seen very clearly for what it is.
– vreaa

Globe & Mail BC Promotion Labels Vancouver Condos ‘Unaffordable’

globeandmail

“This offer card from Globe & Mail for BC subscribers, was in our mailbox last week. Love that the generic Vancouver condo photo has the word ‘unaffordable’ on it. Obviously not so much advertising revenue from that sector for G&M lately ;-) Fun times!”
– JM, by e-mail to vreaa, 5 Feb 2013 [Thanks JM. -vreaa]

RE Mentions In Popular Culture – Canada’s Largest Model Railway Out; Condos In – “This is kinda depressing, and I don’t even like trains.”

see my train a leavin'
See my train a leavin’

“Canada’s largest model railway is facing the daunting task of tearing apart its massive layout and years of rebuilding in a new location. A planned condo development is driving the Model Railway Club of Toronto from the basement area it has called home for nearly 70 years.”
Globe and Mail, 6 Feb 2013 [hat-tip 4SlicesofCheese, who added "This is kinda depressing, and I don’t even like trains."]

There’s gotta be a blues lyric in here somewhere…
– vreaa

Spot The Speculators #98 – “Robert has been tapping his savings for years to support his biggest investment, a rental property that bleeds more than $1,000 a month over the rents it produces.”

“Registered retirement savings plans are the lifejackets for the retirement of a British Columbia couple we’ll call Robert and Jill. At 55, he is a maintenance supervisor for a small town. Jill, 48, is a self-employed management consultant.
“We need to get more money for our retirement and we have to make up for the savings that Robert lost through bad investments,” Jill says.
“We have to rebuild our investments, specifically our RRSPs, if we are going to be able to retire comfortably.”
Their RRSPs have a balance of $355,000 heavily allocated to growth stocks and mutual funds.”

“Robert and Jill have been short of cash and have abandoned RRSP contributions in the wake of a divorce that cost Robert $100,000 on top of a six-figure loss on a business.”

“Unfortunately, Robert has been tapping his savings for years to support his biggest investment, a rental property that bleeds more than $1,000 a month over the rents it produces.
If the property were sold for its $650,000 estimated value, it would leave $200,000 after paying off the $414,366 selling costs. That would pay off $30,000 in other debts and leave $170,000 to put in RRSPs. In 10 years at retirement, that would have grown to as much as $290,500 and could then add $16,000 a year to retirement income.”


Assets:
Residence $550K
Rental property $650K
RRSPs $356K
cash $10K
3 cars $35K

Liabilities:
Mortgages $414K
LOC + CC $30K

Networth:
$1.12M

- from ‘Family Finance: RRSPs to the rescue’, Andrew Allentuck, 6 Feb 2013 [hat-tip space889]

Clearly only hanging onto rental property for presumed future price gains. Ergo, speculators.
Percentage of net-worth in RE: 100%
Percentage of net-worth that should be in RE at age 55: 35% or less
Percentage of BC boomers in similar position: [your guess here]%
Implied price downside when couples like this started selling: [your guess here]%

- vreaa

Usual Suspects – “Nothing To See Here” – “When they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”

“January’s numbers are not a surprise. Some buyers may be sitting on the sideline waiting for a deflationary spiral to develop. When that doesn’t develop, when they realize they’re not going to see significant declines in pricing, they’ll get on with their lives and move on with purchasing decisions.”
– Cameron Muir, chief economist for the B.C. Real Estate Association.

“January’s numbers suggest that there is a possibility the decline in sales should well flatten out.”
– Tsur Somerville, director of the centre for urban economics and real estate in the Sauder School of Business at the University of B.C.

“When a home seller isn’t receiving the kind of offers they want, there comes a point when they decide to either lower the price or remove the home from the market. Right now, it seems many home sellers are opting for the latter.”
– Eugen Klein, president of the Real Estate Board of Greater Vancouver

Above quotes from ‘Lower Mainland home sales continue downward trend’, Derrick Penner, Vancouver Sun, 5 Feb 2013

The tune doesn’t change, despite the substantial change in the backbeat.
Perhaps this is the first time that Muir has used the term ‘deflationary spiral’.
And, we’ll say it again: it’d be nice to see Sommerville at least sketch out a few alternative scenarios for the benefit of Vancouver citizens. The lack of critical analysis of this market from local academics remains one of our bubble’s most remarkable features.
– vreaa

Financial Times – “The lack of buyers is sobering evidence that Canada’s housing boom, which began in 2000 and bounced back to life after the financial crisis of 2008-09, is now over.”

“The lack of buyers is sobering evidence that Canada’s housing boom, which began in 2000 and bounced back to life after the financial crisis of 2008-09, is now over.
Nervousness about the outlook for house prices, and the effect on the economy if they slump, is casting a pall over the last few months in office of Mark Carney, the Bank of Canada governor who will take over at the Bank of England on July 1.
Mr Carney, who will appear to face questions before the British parliament for the first time on Thursday, was courted by UK Prime Minister David Cameron’s government partly on the strength of Canada’s relatively strong performance compared with other large economies. Just as he is leaving, the shine is coming off that record.
Worries about Canada’s house prices and rising consumer debt prompted Moody’s, the rating agency, to cut the credit ratings of six of the largest Canadian banks last month.

Mr Carney deserves neither all the credit for Canada’s successes nor all the blame for its failures. The economy has been driven by forces beyond his control, particularly events in the US, and he has shared economic management with ministers and government agencies. The biggest changes in the housing market last year were the government’s moves to cut back the availability of mortgage insurance provided by the Canada Mortgage and Housing Corporation, a state-owned company.
Nevertheless, it was the decisions by the Bank of Canada under Mr Carney’s leadership to cut interest rates during the crisis and hold them down subsequently that enabled a surge in household debt and house prices. While American consumers were running down their debts, Canadians were adding to theirs, so that by the end of last year household debt was 165 per cent of income, in the same territory as the peak in the US at the start of the crisis.
House prices, meanwhile, rose 23 per cent in the three years to April 2012.”

– from ‘Canada housing cloud cast over Carney’, Financial Times, 6 Feb 2013

Yes, Canada’s housing boom is over.
The Financial Times makes the same observations about Mark Carney’s tenure that we discussed here (VREAA 26 Nov 2012) when his move to the Bank of England was first announced.
– vreaa

‘Crib Crawl’ – Failed RE Venture Developing Into A Television Series – “As a way to shift slow-moving inventory it was a flop.”

“Desperate times demand desperate measures. When Jordan and Russ Macnab, estate agent brothers in Vancouver, Canada, had a glamorous single-bedroom apartment, priced at over C$600,000, that was stubbornly refusing to sell, they decided on a marketing innovation: the “crib crawl”.
They rented a limo bus, stocked it with drinks and snacks, and took a party of possible buyers on an evening tour to see the apartment in question and about half a dozen others, in a mobile viewing party.
The experiment was not a complete failure: the Macnabs attracted a lot of interest, and are developing a television series based on their idea. They are planning their second crib crawl next month.
As a way to shift slow-moving inventory, however, it was a flop. Not one of the apartments they showed found a buyer. Vancouver, which until last year had Canada’s strongest growth in house prices, is now its weakest region. The number of homes sold in the greater Vancouver area dropped by 23 per cent last year.
“It’s a bit of a stalemate at the moment,” says Jordan Macnab. “Buyers are waiting for it to crash, and sellers don’t want to give it up.”

– from ‘Canada housing cloud cast over Carney’, Financial Times, 6 Feb 2013