“He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”

“Just spoke to someone in the neighbourhood, real estate came up and it came out he’s invested in real estate over the last 15 years, buying dumps and fixing them up and flipping them. Has done this multiple times I was thinking oh no, this is going to end badly, then he told me he’s now retired and I thought even worse… Then continued to say he’s sold all his properties except his current which is currently for sale and explained that the market’s currently in crash mode, worst that he’s ever seen. He talked about 2008 and thought we were in for something far worst this time. Talked about previous declines he’s seen and thought this is going to be worst. Doesn’t follow any of these blogs. He’s getting close to selling now for about a 40K loss, and thinks he’s close to sealing the deal, but I got the impression he’d be happy taking even more of a loss just to get out.
He’s moving away from the lower mainland and buying farmland to retire on. Mentioned there are a couple others a few streets away that bought/reno’d/now trying to sell, thinks they’re already listed at breakeven and that they need to come down quite a bit more before selling. …
This was in South Surrey, I should add. Was a guy that seemed to have had some very good days in his life and has seen some very tough times…. Sounded like he was in the midst of a tough time job wise in his life in the late 90′s and is a pretty good handyman and kind of fell into the real estate thing, rode it up, and jumped off when he realized he had gained enough money to live out his life without worrying any further about money.
I was taken aback by this guy… Good for him.”

groundhog at VREAA 1 April 2013 at 4:10pm and 4:39pm

41 responses to ““He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”

  1. This guy must be a multi-millionaire now. He defiantly wasn’t listening to the doomsayers in 2005.

    • Your point being…?…

      Yes, speculative manias can run on longer than anybody thinks.
      That doesn’t mean (1) that it isn’t a spec mania or (2) that people who saw it as a spec mania in 2005 were wrong or (3) that it isn’t going to end the way all spec mains do: with a price collapse.

      • His point probably being had someone in 2005 bought with 25% down and now 8 years into a 25 year mortgage at some of the lowest rates ever seen, even if prices come down by 50% now it wouldn’t matter.

      • Yes, but my point of asking “Your point being…?” is that, in every single speculative mania, the easiest thing for rookies to say (and a ubiquitous rookie lament) is “If I had bought at point ‘x’, I’d now have ‘y’, etc etc etc”.
        This is an absolutely useless activity at any point.

      • @BLM i think the point was if he had sold in 2005 he wouldn’t be a multi-millionaire.

      • His point probably being had someone in 2005 bought with 25% down and now 8 years into a 25 year mortgage at some of the lowest rates ever seen, even if prices come down by 50% now it wouldn’t matter.

        Not true. :roll:

      • Vreaa – True it is a useless exercise. And it is an exercise that is not limited to rookies. Nor is it limited to speculative manias. In fact, the same individual would be counting his blessings and the gains if the markets went down from the point when he/she was planning to buy but didn’t.

        But nevertheless, useless either way.

        One wonders if the said subject (of this blog post) will not sulk if prices go higher or be smug with glee if prices fall after he moves out of the lower mainland.

      • “One wonders if the said subject (of this blog post) will not sulk if prices go higher or be smug with glee if prices fall after he moves out of the lower mainland.”

        He probably would respond at least a bit like that… It’s human nature to do so.

      • Well, to be fair, if you simply blindly followed the signals from the Federal government you would have made lots of money.

        In 2000 they wanted you to buy houses. In 2008/09 they wanted you to leverage up even more.

        In 2012 they told you they were going to bring prices down.

        It’s not that hard. They control the monetary base and credit supply. If you ignore what they say it kind of shows you know zero about finance and probably shouldn’t be commenting. Keep collecting the anecdotes, but avoid the commentary because you’re just showing your ignorance.

      • In 2005, cap rates were about 8%, unemployment was low, immigration was high, vacancies were low and interest rates were moderate. How does this equal a spec mania?

        Next time local econ fundies reach these conditions you would do well to buy.

      • blammo -> Please give us some examples showing cap rates of 8% in Vancouver in 2005.

      • I could lie and say that I meant retail cap rates but I won’t (because I didn’t), I double-checked my source for that stat (8%) and it was unreliable:

        http://www.biv.com/article/20120423/BIV0111/304239946/-1/BIV/vancouver-real-estate-cap-rates-hitting-record-lows

        However, even at 5+% cap rates (more likely), Vancouver was still a fundamental buy in 2005:

        http://www.vancouvermarket.ca/2012/07/13/cap-rate-compression-how-much-longer-can-it-last/

    • I know a guy who went to the Casino and made lots of money. I wish I had gone with him because it must be a good investment.

      • Or if I had poured my downpayment for my house (at the time 300K) in 2010 into the market when it was at its lows, my initial DP would’ve been over 600K now, instead because I bought RE in Vancouver, my equity hasn’t changed all that much.

  2. How can it be the “worst he’s ever seen” when prices are still far above what they were when he entered it 15 years ago? Sure prices aren’t going up, but they’re still way above what they should be.

    • “Worst he’s ever seen” likely refers to rate of change rather than absolute levels.

      • Yes he was referring to the rate of change and lack of liquidity, ability to sell. This was in White Rock. He talked about previous downturns in the early 90’s and 80’s. he used to work in the banking industry in some management capacity. I don’t know what happened to him, had his wits about him but a very “anti-corporate, anti-capitalist” attitude. He may be a multimillionaire but doesn’t look like it whatsoever. Very frugal, only buys with cash except his primary residence where he puts a minimum of 20% down. I didn’t get the impression he was a multimillionaire, but has a significant amount of savings that is more then adequate to retire on given the lifestyle he wants to live.

  3. Sounds like someone justifying in his mind for a decision that’s been made already.

    He’s decided to leave the lower mainland for farm land and to let go of the place that made him his fortune, he hangs on to the thought that terrible things are to come. Would his view be more sanguine if he were not to leave?

    People do this all the time to reason their selling of a stock.

    • Yeah, and sometimes, some of them are right.

    • “…the place that made him his fortune”

      You say this casually, as if amateurs flipping RE is an unsurprising route to riches. Nothing could be further from the truth.

      As for the self-rationalization, I wonder if you’ve done the same, BLM? You’ve said before that Vancouver “beckons” you to return — how much of that explains your relative bullishness?

      • “…the place that made him his fortune”
        This is a simple appeal to emotion. It’s ungrateful to leave “the place that made him his fortune” (even if it’s a casino)

      • El Ninja – I didn’t mean it in that context. Fact of the matter is he did make his fortune in Vancouver buying dumps and fixing them up for a profit. Whether that is flipping or value adding is a different matter.

        For the record I have not done the same. I’d like to return for lifestyle reasons and not for some attachment to past financial gains. In fact, it may shock you to hear I would probably rent for some time before I would buy if I were to return now, given my situation.

  4. I can only go by personal experience. I have been fortunate to have bought and sold at good times. I sold my house last March in Lions Bay and recently my realtor told me that today it has devalued by 160k. I have tracked the market there and it is going down. The market is correcting or dumping in many parts of BC. The RE Board has feverishly been putting out fires and publishing strategic data. It’s just like the US was before things got bad. There is much riding on our housing industry and billions of dollars being generated through taxes, construction, banking. The tentacles are long and will not let go of their death grip without a fight. Same as in the US.

  5. I have been an avid reader of this blog for a few years. I came to the lower mainland in early 2012 with the idea of building a “forever” house. I believed that housing prices were too high and with the help of this blog I was given all the data I needed to prove this to myself. Thank you!

    Now here is the twist. In the area that I am interested, the cost to buy land and build a house is about 20% higher than the cost to buy a used home. I understand that the land costs will go down in a crash, but the costs to build are stickier.

    The lots I am interested in would have to decline by over 50% and the cost to build would have to decline by 20% to make the decision to build a go. I believe these drops are possible, but for me it is the basis for justifying the value of a used home. From my perspective, in my little backwater of the GVRD used home prices are starting to make sense.

    Does the cost to build a new home provide a fundamental backstop to used home prices? Recognizing that in the heart of the crash there will be some great opportunities as the market over-corrects.

    • “Does the cost to build a new home provide a fundamental backstop to used home prices?”

      No it doesn’t.
      If all other RE spec manias are anything to go by, when prices collapse, used homes will sell at less than “replacement cost” (cost of land + new build).
      Yes, it doesn’t make sense, but spec manias specialize in “not making sense”, both at tops and in troughs, one way and then the other.

      • One of the basic economic rules (surprisingly missed by many) is that sale price is not determined by cost.

      • True Bubble and Vreaa. Which is why a perfectly good house built in the 60’s or 70’s in small town Sask can sell for 10 or 15 thousand dollars whereas a replacement building is 150k minimum. Of course, it really hurts when that 150k house drops by half and defies the logic of all those who claim there is floor under prices based on build costs.

      • Ralph Cramdown

        About 10 years ago, a cousin bought a place in Saskatchewan for $5k, in town with full municipal hookups, in the place later made famous as where the guy who was trading his way up from one red paperclip finally traded for a house.

        My cousin’s traded up since, of course. I recall his main complaint being that it was a LONG drive to the nearest Canadian Tire.

    • Costs to build are not sticky. The construction industry has just started to contract, and there will be 2nd order effects on the price of land too because their industry is outsized (along with finance).

      The bubble has gone longer and higher than anyone thought. Wait and see the effects, and only catch falling knives with money you can afford to lose.

    • Real Estate Tsunami

      Young,
      Which area in the Lower Mainland are you talking about?

    • Cost to build will fall during a crash because you’ll have lots of builders chasing very little work. They’ll work at a discount, at least during the worst couple of years. Unfortunately, coming out of a bubble, you will also have a bunch of poorly skilled “builders” who shouldn’t have been doing it in the first place. So you have to make sure you go with someone reputable.

      As vreaa, prices will fall so low that used homes will be cheap compared to new construction. And builders will stop building because the price they can get will not justify the cost of building, as bubbly alludes to.

  6. Who retires on farmland? That’s obscene. Young people need to own farms (not condos) so that food is produced.

    • I happen to know quite a few people who have retired from their “day jobs”, but have managed to maintain productive farms well into their 80’s. With help from family, livestock and some crops can be maintained well into one’s later years.

      Perhaps that’s what this individual is talking about. Sitting around on one’s ass in retirement doesn’t appeal to everyone.

  7. The funny thing is, in the US, there are many places where it is much cheaper to buy than it is to rent. Yet, people still choose to rent. Why? Less carrying costs, don’t have to be responsible for maintenance, insurance, etc.

    • Real Estate Tsunami

      Also, the wounds from the housing crash have yet to heal.
      One of the reason why some many Europeans are renting, is the massive physical destruction of RE in WW2 that stil hounds them.

    • Agree… still a massive psychological effect of the US RE bubble.
      And I don’t think the US is out of the woods yet regarding RE. They are far closer to healing than we are, of course.

  8. The personal anecdote that I am trying to contribute is:
    Despite high real estate prices the cost of a used house is MORE attractive than building a new house. Neither is actually attractive, but it is indicative that the whole industry is broken.

  9. pffft! … ted was wondering if bc bud best on earth … http://tinyurl.com/cqwjts5

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s