Was that it? ‘The Top’? [Possibly] – “They are not as excited, they’re taking a wait and see approach. They’ll put an offer in, and the offer may not be close to the asking price, and then the owner might give them a counter offer, and then the buyer is gone.”

So, was that ‘The Top’? Perhaps it was.

TECHNICAL ANALYSIS:
The average price of a detached home in Greater Vancouver has dropped $115K from a top of $1.22M in May-June 2011. That’s a drop of 10%.
From a technical perspective, however, the price is still in a steep uptrend (light red line), which will be violated if prices drop below about $1.10M next month. Below that there is support (light blue lines) at $1.0M, $935K, and at (as long-time readers know, a level we see as crucial) about $740K.
Price drops will not be in a straight line, and we would not be surprised to see short-lived bounces upwards off any of the support levels. That is perhaps most likely to occur at the $740K support level, before that support then gives way to the downside perhaps 6-18 months later.
We expect a number of factors to add momentum when prices start to fall in earnest. Each violated level of support will bring more sellers to market.
[Chart from the REBGV. For caveats regarding use of technical analysis and average prices, and for prior TA at VREAA, see 11 Sep 2010]

INVENTORY INCREASING; SALES STAGNANT; MOI RISING
“September was a month that recorded the third lowest number of sales in the last 10 years and in combination it had the third highest volume of listings in 17 years.” – Larry Yatkowsky, Realtor, 4 Oct 2011
Months of Inventory for Greater Vancouver roughly 6.6
Over 800 SFHs for sale on the westside.
Prices in October appear, thus far, to be flat compared with September.

NEW BUILD SFH SALES ON WESTSIDE: ZERO
In September, there were 0 (zero) new build SFH sales on the west-side. This is the first time that this has happened in any month over the 17 years of available records. The HST ‘uncertainty’ was immediately blamed.

FOREIGN BUYERS ‘LEVEL OFF’
[Wouldn't that more accurately be 'DROP OFF'? -ed.]
Reporter: “Realtor Lorne Goldman says that he’s recently seen a 30% decrease in sales on Vancouver’s westside. Off-shore buyers from mainland China appear to be leveling off”.
Goldman: “You’re not seeing as many, and the ones that are coming in, are, you know, not as excited, they’re taking a wait and see approach, … they’ll put an offer in, and the offer may not be close to the asking price, and then the owner might give them a counter offer, and then the buyer is gone.” – ‘Buyer’s Market’, Global TV, 4 Oct 2011
[With the drop in average prices, and with simultaneous loonie weakness (down 10% in 6 weeks), these homes would actually look 15%-20% cheaper to foreign buyers. So, why hasn't demand increased, as bulls always claimed it would? Why aren't buyers stepping in to snap up bargains and 'deals'?
It is way too early to tell, but regular readers know that, unlike the bulls, we fully expect demand to drop with falling prices, as demand based on the premise of rising prices will disappear. Buying based on price-momentum will stop. - vreaa]

‘BUYERS’ MARKET’: A MISNOMER [so far]
“Prices are still high, but listings have increased and sales have decreased, turning the Greater Vancouver area into a buyers’ market!” – ‘Buyers’ Market’, Global TV, 4 Oct 2011

Chart shows impressive year over year price changes.
[We have a semantic problem: A 'buyers market' should not simply be defined in terms of sales:listings ratios. That term leads to confusion: If sales are slow and inventory rises, but prices are still 2-3 times fundamental values, describing that as a 'buyer's market' is just a sales gimmick. Sure, sellers start sweating, but buyers are not yet being offered good value. A true 'buyers market' only emerges when prices fall to a range of good value, as determined by underlying fundamentals, or lower. Of course, higher MOIs do translate into downward pressure on prices, eventually. We are possibly starting that process now in Vancouver-ed.]

SALES COMPOSITION CHANGING?
“What’s selling? A bottom end market with only 25% of the Downtown Vancouver [condo] sales over $500,000 and a mere 8% over $1M. August listings and and sales were flat, compared to July. Inventory climbed to 7.2 months. Up from 3.7 in March.” – Maggie Chandler, realtor, ‘Downtown RE Update’, 3 Oct 2011
[This effect may exaggerate 'average' price drops, so caution needs to be used in interpreting average prices, as always. - ed.]

EVEN MORE CONVOLUTED BULLISH REALTOR ARGUMENTS
“We saw a sizeable number of investor class immigrants who came here a little more than 5 years ago, got their contribution, or their investment to Canada back… and many of them are using that money to…uh.. putting that into the real estate market.” – Cameron Muir, BCREA Economist, Global TV, 4 Oct 2011 (1:30 on)

SENTIMENT CHANGING?
“We are here on the front line in Vancouver. It’s amazing the attitude shift in people within the last 2 months or so. People are openly talking about the market here being in a bubble. People I know who were total RE pumpers are starting to look scared. This is going to be epic.” – Drew at greaterfool.ca 4 Oct 2011 11:54pm
“I was sitting and doing my work minding my own business and started hearing my coworkers discuss real estate, and they were literally mad about what’s going on. Amazing, the tides really are turning.” – 4SlicesofCheese at vancouvercondo.info October 5th, 2011 at 1:06 pm

FLAHERTY STILL IN DENIAL (publicly, anyway)
Asked at a news conference in New York (5 Oct 2011) what it would take for Canada to act again to cool the market, Finance Minister Jim Flaherty said: “It will take clear evidence of a bubble in the housing market in Canada, which we have not seen.” – Reuters, 5 Oct 2011

So, a top, yeah, perhaps.

Getting The ‘Financial Intervention’ From The Family RE Cult – “There’s a real blind spot when it comes to understanding the true cost of owning vs. renting. It’s impossible to have a rational, informed discussion when the people you’re talking to have their own set of imaginary facts.”

“I was recently ambushed by my family and endured what can only be described as a financial intervention. I got the “cheaper than rent!” lecture, followed by “get on with your life” and “it’s part of growing up”.

I am the lone holdout among my siblings, all of whom recently purchased “cheaper than rent” strata units in the suburbs that cost far more than their old rental units in town. Their mortgages alone cost more than they used to pay in rent. And of course this does not include strata fees, insurance, property tax, repairs, maintenance and any potential future increase in mortgage payments if interest rates go up in the next 3 decades.

When I pointed this out I got a blank stare followed by “but we don’t want you renting forever”. There’s a real blind spot when it comes to understanding the true cost of owning vs. renting. It’s impossible to have a rational, informed discussion when the people you’re talking to have their own set of imaginary facts. Like when they told me that “real estate doesn’t go down in price”, which is demonstrably false. When I mentioned that it had in fact gone down many times in the past and we happened to be witnessing the greatest global real estate correction in living memory I was met with more blank stares. They were clearly embarrassed for me that I had such an odd set of beliefs and eventually just gave up and talked amongst themselves about their futures flips and dream houses they would build with their imagined profits.

It should be noted that all of them purchased in the last 18 months, and none of them have sold or profited. Two of them arrived in cars gifted by my parents, as they can’t afford a car now. The fact that they can’t afford basic transportation now that their “cheaper than rent” condos are draining their bank accounts is lost on my parents who rewarded them for “getting on with their lives”. Two of them also spent most of the last year without functioning kitchen appliances and could not cook and/or store perishable food items to feed their families because again, the “cheaper than rent” condo cost so much they couldn’t even afford a $100 craigslist special. And again, they were bailed out when Santa Claus delivered shiny new appliances. I guess that’s also “part of growing up”.

I never myself bring up the subject of real estate around them, but it is THE topic when we’re all in the same room together. It didn’t used to be this way. And most of the people in the room have worked or did work for a financial services company so they should be able to do the basic math and realize their error.

I’m not against owning, and I don’t believe that real estate needs to be cheaper than rent to be worth buying. Sometimes when you pay more you get more. And I understand that they’re building equity so long as the prices stay high and they do the required repairs and maintenance to at least keep the place worth what they paid for it. The problem right now is that the home equity being built up is more than cancelled out by the drastically higher costs of owning. They’re betting on indefinite price increases because in reality they can’t afford these places and will need to sell sooner rather than later. They’re all talking about selling even though they only bought in 2009. And they all imagine they’ll buy something bigger and better with their profits.

As for my parents, I don’t know what they’re thinking. This is an emotional issue for them and they feel like realty savants because their modest home is worth more than they paid for it in the 80s. They’re financially bailing out their kids who borrowed house-sized mortgages for their starter condos, and pressuring their other kid to do the same. I don’t get it.

- ‘nobody you know’ at VREAA, 9 October 2011 at 11:46 am

A wonderful account; many thanks ‘nobody you know’.
It takes an immense amount of personal fortitude to keep your head when all about you are losing theirs.
You eloquently describe what other Vancouver housing bears have experienced in various forms of social interactions.
You also describe the inherent speculation in all purchases (“They’re betting on indefinite price increases”).
- vreaa

Calls For ‘Activism’ Regarding State Of Vancouver RE Markets – What Action, Exactly?

A number of thoughtful readers have made suggestions, increasingly so in recent months, that we all somehow attempt to “do something” regarding the state of Vancouver’s housing market.
‘mjw’s personal anecdote [7 Oct 2011] about two UBC professors leaving for Alberta as a consequence of housing prices, concludes with “I think that some sort of activism is needed to highlight and make people aware of the game that is being played out.”
Recent suggestions by ‘Vesta’, ‘jesse’, ‘Gord’, and others, were discussed in a thread headed ‘Consequences, Intended and Otherwise‘[14 Sep 2011].
Today at VREAA, Vesta again calls for some kind of action, and talks of “a small group starting to coalesce”, of “someone in this city very involved in politics and very concerned with what is happening”, and again asks people to “write/phone City Council, MLAs, etc”.

Initial thoughts:

Thanks, Vesta.
We think you know that we are pretty much on the same page as you in hoping that the housing distress can be resolved. We would very much like to see Vancouverites being able to get on with productive activities that are not hobbled by excessively draining RE costs. Housing costs are at the very least a distraction, sometimes a disaster.
We do believe that getting the word out, educating, is the very best form of activism.
But, other than describing what we see, what is the desired ‘message’? On this we are unclear.
Our concerns are that a great deal of coming distress is ‘baked into the cake’… There is no way we could hope to ‘educate and extricate’ the City of Vancouver from this mania without a great deal of pain.
We can educate those who will listen such that they try to get out early, but only a very small minority would ‘escape’. And, realize that every ‘escapee’ would have to sell to someone who then takes the subsequent fall… so there would be no resultant net gain for the group.
Understanding the nature of speculative manias, we see no way forward but for a flushing-out of all speculation from the system. This will result in a price crash of 50%-66%, and general (temporary) mayhem for the economy and the society. Many will be devastated by that outcome. As we wrote some time ago, a real estate bear market will be Vancouver’s defining social and economic event for this decade.
There simply is no way of landing this bubble ‘softly’… there never is. Never.

Having said that, what is the very best overall outcome we could hope for?
How do well meaning citizens who understand what is going on direct the ‘action’ of any proposed ‘activism’?

We are very, very strongly opposed to any actions that would further ‘socialize’ the risk of being in the housing market. We would see such action as bordering on criminal. Such mispricing of risk has been an important cause of our bubble in the first place. We are strongly opposed to ‘bail-outs’ of any kind. In fact, we believe that the government should back even further away from back-stopping speculation, by tightening CMHC-backed lending. Buyers and lenders have to take full risk for their actions. So, please, no suggestions that public money be used to attempt to bankroll a soft landing in any way: such action would further punish the prudent (and, by the way, would be doomed to fail before it even started).
But, this may not be very helpful: we’re telling you what we don’t want.
What do those calling for ‘action’ suggest we call for?
- vreaa

Such Stupidity Should Not Be Rewarded – “I have a relative that said that she and her husband would ‘buy their dream house’ when their east Vancouver shack, for which they paid $750K, “doubles or triples in value over the next few years”.”

“I have a relative that said that she and her husband would ‘buy their dream house’ when their east Vancouver shack, for which they paid $750K, “doubles or triples in value over the next few years”. She’s a high school teacher; he works in sales.
Such stupidity should not be rewarded.”
- VancouverContrarian at greaterfool.ca 4 Oct 2011 at 10:03 pm

Vancouver and Phoenix Compared – Our Speculative Mania Is Twice The Size; ‘LAS VANCAS’ Revisited

“I think Phoenix and Vancouver can’t really be compared.” – comment by ‘Homeslice’, VREAA, 2 Oct 2011

PHOENIX
2001 – 110 [Case Shiller Index; from SFH data]
2006 – 228 [peak, May 2006]; run up 108%
2011 – 100 [July 2011: 99.8]

VANCOUVER
2001 – $385K [ave detached home price, REBGV data]
2011 – $1,223K [peak, May 2011]; run up 218%
2016 – ?

‘Homeslice’ is correct, it is unfair to compare Vancouver with markets like Phoenix or Las Vegas – Our speculative mania is far WORSE than anything that happened in Phoenix or Vegas, the price run up has been TWICE as great here as it was there. – vreaa
—
‘LAS VANCAS’: Click Chart to see large version:

REBGV average nominal price chart 1977-2011, for detached, attached and apartments, overlaid with a semi-opaque insert of this Las Vegas house price chart, for the purpose of absolute price comparisons 1987-2009 (scales are the same; but there is no correction for currency exchange fluctuation).
The Vegas chart was overlaid such that the y axes were identical in absolute dollars (such that the curves could be compared/contrasted: there was no attempt to fit the curves).
The whole exercise (imperfect, because of the lack of currency fluctuation effect) was to show how small the Vegas bubble was, in absolute terms, compared to ours.
- from ‘Vegas Versus Vancouver, 1987-Present’, VREAA, 11 Mar 2011

Request To Readers From ‘Global TV’ – “I’m doing a story next week comparing renting vs. buying in today’s market, and would like to talk to anyone who may have sold their property in the past year or so in order to rent instead.”

Tanya Beja, of Global TV, would like to hear from readers who have sold their Vancouver homes and now rent:
“I work with Global TV, and I am a regular follower of your blog. I’m doing a story next week comparing renting vs. buying in today’s market, and am wondering if you know of anyone, or have contact info for anyone, who may have sold their property in the past year or so in order to rent instead? This is part of a week-long series examining the high-cost of living in BC.
Thanks so much,
Tanya Beja
Global TV”
tanya.beja@globalnews.ca
—
The irony of this request was not lost on us, given our past criticism of Global’s poor and industry-serving coverage of our housing bubble. For a moment we considered waggishly suggesting that Tanya talk to Gord Goble, who meets the description of recent-owner-come-renter but is also someone who has actively taken Global to task for their faux-news-reporting on local RE issues.
We responded saying we could post a request to readers, adding “You guys may follow VREAA but, boy, your reports sure don’t reflect that. How about a Global piece on how the relative “high-cost of living in BC” is almost entirely attributable to a speculative mania in housing? That really is the case, and history will prove that viewpoint correct.”
Tanya responded: “My goal with this series is to get a snapshot of what’s happening to first-time buyers. I’m not intending to forecast the future, but at least with the renting story I do hope to challenge the idea that buying real estate in yvr is always a ‘smart investment’.”
So, in that spirit, let’s try to help her out, and see if Global can in any way redeem themselves before judgment day. (Melodrama intentional.)
- vreaa

“Intuition and Instinct” Reassures North Vancouver ‘Residential Designer’ – “We’ll be able to weather whatever market storms come our way.”

“I’ve intuitively felt that our housing values in Vancouver, specifically here on the North Shore, are not artificially inflated but rather reflect desirability of the locale and the limited supply of buildable land that our topography permits. Our communities on the North Shore are delineated by a perimeter of mountains and ocean that creates one of the most beautiful locales on earth while preventing outward growth. The fact that we’re only minutes from a thriving, world-class metropolis suggests to me more than ever the adage “location, location, location.”
There are those who argue that the trap door will eventually drop but I suspect it won’t be anything so dramatic. My instinct tells me that we’ll be able to weather whatever market storms come our way.”
- Kevin Vallely, a ‘residential designer in North Vancouver’, North Shore News, 28 Sep 2011
[hat-tip vancouvercondo.info]

When it comes to markets, “intuition and instinct” send the very opposite messages to which one needs to pay heed, more often than not. – vreaa

BCREA – The Bubble Hasn’t Burst So It Doesn’t Exist

“Well I guess the first question is, is there a real estate bubble at all? … We had a financial crisis, the largest we’ve seen since the Great Depression, we had an ensuing global recession, and if that isn’t a trigger or tipping point, for any kind of inflated market to see a major correction, I don’t know what is.”
- Cameron Muir, Economist, BC Real Estate Association
(from ‘Is Vancouver’s housing bubble about to burst?’, CTV 27 Sept 2011)

The argument is that the bubble hasn’t yet imploded so it doesn’t exist.
- vreaa

Ex-Seller Pent Up Demand? – “I sold in Van West about 6 months ago, I’ll buy back in if prices go down about 30-35%.”

“I sold in Van West about 6 months ago, I’ll buy back in if prices go down about 30-35%, that’s the percentage that would make sense to maybe jump back in, and only if the rates are still relatively low. If it doesn’t go down that much then I’ll just keep renting…kind of enjoying renting actually”
- vangrl at vancouvercondo.info 20 Sep 2011 4:03pm

“My wife wants to buy NOW! because she thinks we are throwing away money renting. Its a battle! She also hates moving as do I. The problem is there is a lot of people who have sold, and are sitting on a lot of money. We all sold at different times.”
- mattymatt123 vancouvercondo.info 20 Sep 2011 12:57pm

–
How many Vancouverites have sold their primary residences and are now renting; waiting on the sidelines, hoping to buy at lower prices?
Will that ‘pent up demand’ ensure that any price pullbacks are shallow, as many are predicting?
How will these prospective buyers respond when prices do indeed start dropping?
(Our opinion is that this is a relatively small pool of buyers, and that, even if they do step in and buy, the effect will not be enough to overcome the massive downward momentum in prices that will occur when our very broad-based speculative bubble implodes).
- vreaa

Astrologer On Vancouver RE – “In the long run, Vancouver’s real estate will trend upward. The city’s realty sign is ruled by the Moon, which stood in benevolent Taurus, and in the city’s money house, on April 6, 1886 when it was incorporated.”

“Vancouver’s home prices have climbed by more than 25 % over the last two years, and are now, it seems, second only to New York City’s. I often receive emails asking about the situation. The TD Bank has forecast that Vancouver’s house prices will decline by 25 % over the next two years. Here’s my best guess:
In the long run, Vancouver’s real estate will trend upward. The city’s realty sign is ruled by the Moon, which stood in benevolent Taurus, and in the city’s money house, on April 6, 1886 when it was incorporated. (Always remember my forecast for 2023, though.)
In the medium range – to 2016 – foreign countries will continue to feed this city’s real estate – waves of Chinese have been buying here since the 1980’s, and the most recent wave should last to 2016.
However, even though this wave will defy the TD forecast, it will not have a smooth road upward. At present, a complicated change is occurring: while the true value of Vancouver’s homes will probably rise over the next 18 months, the actual sales prices enter a much less reliable outlook over this same short period.
One of two scenarios should play out: One, there might be a “nova effect” – a bubble in prices now into early 2013, but somewhere along the way the bubble will burst. I’d expect a peak to be reached around July 2012, then it stalls, and the decline begins. Around August/September 2012 foreign purchases of Vancouver’s real estate will dry up, perhaps due to bad luck in their home countries. About January 2013, the local government will take an action that hurts either the B.C. economy, or real estate directly. Two, all of the above events will occur except for the nova, or bubble. In this scenario, the decline has already begun, quietly and slowly, very recently, and will continue quietly and slowly through late 2016. In any case, I would wait until at least 2013 to buy Vancouver. I could be wrong.”
- Tim Stephens, Astrologer, ‘Astral Reflections’, late September 2011 (for week of Oct 2-8, 2011)
[hat-tip terminalcitygirl at VREAA]

As good a prediction as any.
The perfusion of RE into every realm of pop culture.
- vreaa

Provincial Government Policies Will Not Save Vancouver From A Housing Crash – “We’re caught up in a very challenging global economic situation. We are in for a rough time and the provincial government can’t fix that.”

“Our province is a place of relative calm and stability, but we are surrounded in almost every corner of the world by economic turmoil” – BC Premier Christy Clark [The Vancouver Sun, 23 Sep 2011], unveiling a plan she hopes will make BC “one of the country’s fastest-growing economies by 2015″.

“We’re caught up in a very challenging global economic situation. We are in for a rough time and the provincial government can’t fix that.” - Jock Finlayson, economist for the Business Council of B.C., G&M, 18 Sep 2011

The world is experiencing deflationary effects that are the result of forces related to the deleveraging of excessive debt. BC has thus far largely remained blissfully removed, by virtue of having kept the speculative mania in RE going, by ongoing debt-fueled consumption, and by importing money. We can’t see how local RE related activity can insulate us for much longer. BC will, unfortunately, be swept up in the wave. This will occur regardless of local policy; the forces are simply too great for relatively minor ‘in house’ adjustments to alter the course of much larger external forces. This decade, a Real Estate bear market will be Vancouver’s defining social and economic event. – vreaa

Vancouver RE’s “Reality Distortion Field” – “She conceded that I might have a point, but last time I spoke to her she was back to predicting only a modest drop in local prices.”

“I work with someone from Ireland. She argued with me about how real estate isn’t inflated in Burnaby. Her particular story has something to do with the houses in her neighbourhood not being priced for first time home buyers because she moved up into it. So others will have to sell to move up into it. She misses the fact that she’s describing a pyramid scheme. But after a trip to Ireland recently she was less sure of herself. She conceded that I might have a point after all. She saw homes skyrocket into the the 700-800 Euro range only to drop right back down to the 200-300 Euro range. Last time I spoke to her she was back to predicting a modest, 10-20% drop in local prices and then years of flat. I guess it doesn’t take long for the reality distortion field to kick back in once you get within the media bubble of BC.”
- lexlimo at VREAA 20 Sep 2011 8:08am

It is difficult to not be swept along by group-think. – vreaa

“Depending on what you’re looking for, Vancouver is actually a great city to live in. If you can’t be happy here, forget it and go live somewhere else where you can find your happiness…”

“Depending on what you’re looking for, Vancouver is actually a great city to live in. I don’t come from a 3rd world country, but from western europe. I’m not an aging baby boomer either, I’m 34! I’ve lived in London and Paris for years, so I know what’s living in a world class city is like. I also did my MBA at UBC (that’s the reason why I came here in the first place) and decided to get a job and live here (as did a lot of my fellow classmates). Depending on your chosen field, you can have a decent career here. For sure the opportunities might be more limited, of course you may have to compromise a bit on salary, but would I trade my life today to go back to London or Paris? Hell no! In fact, most of my work involved projects located anywhere in Canada and the US. I could be located pretty much everywhere I want, and I chose to be here.
Is everything perfect in Vancouver? Of course not. I wish so much I could afford a house here, which I can’t despite my 6 figure salary (that’s the reason why I’m on this blog!). But I’m renting a nice condo in a great location in downtown, the same way I was renting in London and Paris. I don’t have any problem with it and I’m patiently waiting (and saving) for prices to come down and be reasonable again, as they certainly will… If they don’t? well, I’ll be sitting on a pile of cash…
Vancouver is not for everyone, and there is no reason to be angry about it. I have a happy life here, and I know lots of people do too. If you can’t be happy here, forget it and go live somewhere else where you can find your happiness…”
—
“I agree this is not a city for everyone and a lot of my friends in Paris or London would have a miserable life living here. But Vancouver works great for me and this is where I want to raise my kid…”
—
“This city/province has a lot to offer, but not everyone enjoys nature and all the activities that come with it. If you prefer museums, a developed music scene and other cultural activities, you will have a pretty miserable life here.”
—
“When I went camping to Garibaldi Lake last month, there were all kinds of people, very young “party” folks, older mature ladies (early 60′s) and parents with young children (I brought my 7 month old baby up there and I was not alone, to my biggest surprised! Talking about family responsibilities…).
I agree with you there are a lot more important things in life than outdoor activities. It’s all about putting your priorities in order. I love great food and I have yet to find a good yet affordable restaurant in Vancouver. I’m still amazed at the costs of fruits and vegetables here, and don’t get me started about the price of cheese here. I would also love to have more music festivals in Vancouver during the summer season.
The same way some people go and spend spring break in Florida or Mexico to get sunny and warm weather, it’s possible to travel from Vancouver to satisfy your cultural (and other) cravings you can’t satisfy in Vancouver… Portland, SF or even NY are not that far away.”

- Makaya at VREAA, 20 Sep 2011 at 12:44pm, 2:25pm, 2:37pm& 4:49pm.

Olympic Village Update – A Waggish Resident Expresses Their Frustration

- Seen posted in one of the Olympic Village buildings. Photo from ‘zerodown’, via e-mail to VREAA, 6 Sep 2011.

A City Obsessed – “I can’t remember the last time I went out with friends and real estate didn’t come up. Don’t we have anything else to talk about?”

“I was at the grocery store and ran into someone I hadn’t seen in several years. We caught up for about 90 seconds about work and kids and what neighbourhood she was living in and then (totally unsolicited) the person started going into defense mode why she was renting. I told her that I was also renting and that I thought it was going to be the correct solution in the medium term. What struck me was how quickly the emotions as well as the topic of home ownership came up in the conversation. Real estate is top of mind for everyone in this town ALL the time, whether you’re a bull or a bear.”
- buffates at vancouvercondo.info 1 Sept 2011 6:46am

“We are obsessed, as a city. I can’t remember the last time I went out with friends and real estate didn’t come up in some way, in the conversation. Odd, isn’t it? Don’t we have anything else to talk about?”
- pricedoutfornow at vancouvercondo.info 1 Sept 2011 7:15am

“I ran into an ex-colleague while out biking. After greetings, without skipping a beat, he went into a 2 minute run-down of his housing moves and deals over the last five years, culminating in proudly telling me exactly what his westside house was now worth. He literally became breathless during the last bit.”
- westsidefrank, via e-mail to VREAA, 30 Aug 2011

“When I remember my previous life, in European cities: the topic was never ever mentioned, or just a brief sentence like: “I just bought a HOME.”
- painted turtle at vancouvercondo.info 1 Sept 2011 7:23am

Talking With Friends About Real Estate

“I have stopped trying to convince people in Vancouver that real estate is overvalued. What’s the point? It’s not worth my effort. I find it’s much more satisfying to agree with them-they have no idea I’m being sarcastic. When they say things like “Real estate only goes up” and “Vancouver is the best place on earth!” I smile and nod.
I’ve found that the “real estate always goes up” argument is dying in other places of the province. People on my old street in Kelowna saw their property values go from around $500k in 2008 to now $350k-they are no longer cheering so much for real estate there. Others have condos that are underwater and are having problems finding tenants. I do believe this will happen here too, it’s only a matter of time before people realize that real estate values are no longer soaring and it’s harder and harder to find justification to buy.”
- pricedoutfornow at vancouvercondo.info 26 Aug 2011 9:07am

“I was talking to a colleague about my views of Vancouver’s impending crash but had to stop as I didn’t realize that her husband is in construction and a crash would really hurt their income. It was the look of total fear on her face when I listed the facts that made me stop and ask why she looked so dour.
It is a weird feeling nowadays when I talk doom and gloom wrt real estate as I feel that it is starting to get through and my facts make people uncomfortable. When this happens I try and think something that will make the person feel better such as “well you bought years ago, you’ll be ok”. I just wish that all those caught up in the rush to the top had taken the same tact when berating me about throwing my money away on rent and how stupid I was to sell.”
- YLTN@Work at vancouvercondo.info 26 Aug 2011 9:29am

“Last evening, I was in a real estate conversation with my wife’s family and I should win an Academy Award for my acting skills. (Lot’s of nodding and smiling)”
- specialfx3000 at vancouvercondo.info 9:39am

Rumour – “Vancouver Westside homes are being bought, left vacant, then flipped at higher prices after one home in same area is bloated after a STAGED price bidding war.”

“I thought I’d share an interesting comment from a realtor friend of mine. Vancouver westside homes are being bought, left vacant, then flipped at higher prices after one home in same area is bloated after a STAGED price bidding war. Most disturbing is local buyers still wanting to get in at these prices because they are afraid they will be “Priced out Forever”. Sadly when this ends the locals with be holding the bag of mortgage debt.”
- Patrick at VREAA 23 Aug 2011 5:31pm

Thus far, this is just a rumour.
Any corroborating stories will be posted.
- vreaa

Mayor Robertson – “People come here with money and they want to be part of this. That creates challenges for my kids and the next generation to live here. It’s not affordable to live here now.”

“There are many hopeful environmental stories in the city of Vancouver. In the past 15 years, residents’ use of cars and carbon emissions have both gone down dramatically, by roughly one per cent every year – even while the population has expanded to 570,000 people and the economy continues to grow. This is a very unusual trend in the world’s cities now. A city that is committed, and that sets aside the perceived inevitability of calamity, can be a stronger community. We can change our ways of getting around and looking after each other. I think there’s a lot of hope in that for generations to come.
The converse is that Vancouver becomes a very desirable city. People come here from all over the world for the beauty and for the sense of community… That creates challenges for my kids and the next generation to live here. It’s not affordable to live here now. People come here with money and they want to be part of this. And that makes it difficult. So it’s creating other challenges for us.”
- mayor Gregor Robertson, Vancouver Sun, 23 Aug 2011, from a conversation with David Suzuki, Thich Nhat Hanh, and Jim Hoggan

The mayor is deducing that Vancouver RE prices are high because his “green” policies are perceived as successful. We believe that he is sincere in his logic, but also that he is simply wrong. Housing prices have ballooned to “unaffordable” levels in Vancouver because we are in a very large debt-driven speculative mania, not because we have any particular desirability as an environmentally friendly city.
Many of the apparent problems of unaffordable housing will be ‘solved’ by a simple market crash. Of course there will be all sorts of bad effects for the community from such a crash, but that is now unavoidable. You may say that such an outlook is an example of a “perceived inevitability of calamity”, but this outlook is not pessimistic, it is simply realistic. Ask any student of speculative manias. It’s already woven into the fabric of the market; it’s a completely natural consequence of the speculative mania. – vreaa

“The only people that think of Vancouver homes as lottery tickets ready to be cashed in seem to be the ones that don’t own them, or the ones that merely flip them. To the majority of owners, they’re just homes.” [We disagree]

“In 2000 I got married, and my wife and I decided it was time to get something more than our apartment. We were making just under 100K combined back then, and bought what we could afford. In retrospect, very good timing, but I didn’t time the market in any way.
Truthfully, I don’t care. I like my home, I like where it is, it suits me and my lifestyle – so yes, I guess you could say I’m attached to it. I’m 40 years old, so I’ll probably be here another 10 or 15 years until I stop working, and worry about the next phase of life then – maybe its here, maybe its not. While I don’t believe that housing will keep going up like it has – I’m pretty bearish on Vancouver real estate – I don’t think it will go lower than what I paid for it either. I don’t really care until its time to sell it.
The only people that think of Vancouver homes as “lottery tickets ready to be cashed in” seem to be the ones that don’t own them, or the ones that merely flip them. To the majority of owners, they’re just “homes”.”
- nuxfan at vancouvercondo.info 23 Aug 2011 7:18pm

We respectfully disagree with ‘nuxfan’.
One result of the speculative mania in Vancouver RE is that it has been absolutely impossible to ignore. For most owners, homes are now more than “just homes”… they are, consciously or unconsciously, also considered stores of wealth; they are partly financial instruments. To suggest that owners are oblivious to this, or that their psychology and behaviour is unaffected by an awareness of the ‘value’ of their property, is either naive or disingenuous.
‘nuxfan’, himself, for instance, plans to “stop working” at 50 to 55 years of age. Does the projected market value of his house factor into that expectation? We can’t be sure, obviously, but we’d wager it does.
Note that this doesn’t mean that we’re arguing that all owners should sell.. just that any owner who claims “not to care” is deceiving themselves, or others, or is so wealthy that the value of their home only constitutes a small percentage of their overall net-worth. And in Vancouver that last group is very small.
- vreaa

“Dull”, “Steady”, and “Flat” Canadian RE Markets? [Highly Unlikely]

“The realization that the Bank of Canada will not be raising interest rates in the coming months is working to remove any sense of urgency to front-load activity. At this point we do not see any catalyst that will change the current trend in any dramatic way.” – Benjamin Tal, Deputy Chief Economist, CIBC World markets, Reuters, 16 Aug 2011.
Tal also said the Canadian real estate market will be comparatively “dull” going forward [in interview on CBC Radio, 16 Aug 2011, 3:35pm.]

“We will probably have a couple of years of steady prices” – Victoria Real Estate Board president Dennis Fimrite, ‘Victoria housing tilts toward buyers’, Times Colonist, 3 Aug 2011

“CREA expects sales to fall less than one per cent in 2012 while prices will flatten next year.” – ‘Home sales to rise this year, says CREA’, Kim Covert, Financial Post, 16 August 2011

A speculative mania never ends with a flat, boring market; not even in Canada.
We suspect “Dull”, “Steady”, and “Flat” are hopeful terms being used by vested interest insiders who are seeing the first signs of coming weakness. – vreaa

“You people who live in Vancouver have taken on that same air of superiority that you once criticized Torontonians for.”

“You people who live in Vancouver have taken on that same air of superiority that you once criticized Torontonians for.
Believe it or not, there is life – and good life – outside of Vancouver.
I know. I was born and raised there, but I choose to live elsewhere.”
- Michele K., Globe & Mail, 3 Aug 2011 2:46pm

“If word on the street has value then ‘summer siesta’ is something I’m hearing”

“If word on the street has value then ‘summer siesta’ is something I’m hearing”
- Larry Yatowsky, local realtor, 3 Aug 2011, in response to an observation that “pricy stuff sits and sits”.

Many are waiting for more definite signs that the Vancouver market may be slowing.
Just about every other market in BC has very definitely turned.
(All without the need for interest rate increases, we note.)
REBGV stats (care of Larry) show average price of detached Vancouver ‘SFH’ dropping from all time high in May of $1,223,421, to $1,133,357 in July. This is, of course, only a raw average, and is thus of limited value. Nonetheless, it’s what a turn would look like.
- vreaa

“I can’t tell you how many people have informed me of their imagined real estate profits in the past few years, but I can tell you that not a single one of them has actually sold anything and taken those profits.”

“I can’t tell you how many people have informed me of their imagined real estate profits in the past few years, but I can tell you none, and I mean not a single one of them has actually sold anything and taken those profits… but they’ve sure as hell spent them thanks to 2nd mortgages.
The whole “best investment you’ll ever make!” sales pitch falls apart when owners realize they’ll have to either move to a smaller home, distant suburb or back into a rental.”
- ‘nobody you know’ on VREAA 24 Jul 2011 11:33pm

Speculative holders. – vreaa

Vancouver Sun – “The prevailing wisdom that Vancouver has a housing bubble should perhaps be reconsidered.” [Huh?]

“Housing bubble fears over-inflated”
“Savvy shoppers can still do relatively well in Vancouver by searching for the right unit in the right location”
“..the situation facing homebuyers seems somewhat less dire than at first glance. … Those seeking shelter, both physically and from high prices, can still find relatively affordable units and decent bargaining conditions if they are careful, knowledgeable, flexible and ready to shop around.”
“…the prevailing wisdom that Vancouver has a housing bubble should perhaps be reconsidered. Certainly normal metrics, like the ratio of average price to income, are extraordinarily high and could well be in danger territory. But, existence of more affordable geographic pockets in the Lower Mainland where buyers’ conditions prevail, and softness among apartment and townhouse dwellings, suggest that some markets are much less inflated.”
- excerpts from article by Robin Weibe, Vancouver Sun, 26 July 2011, here noted for the chronological record.

So suddenly the ‘prevailing wisdom’ is that ‘Vancouver has a housing bubble’?
Huh? We must have missed the transition in the prevailing consensus from ‘no-bubble’ to ‘bubble’ there somewhere.
In fact, we’re absolutely sure that the prevailing opinion of market participants remains: “It’s different here; fundamentals are irrelevant; outside money will continue to buoy us up; we are impervious to any significant price drops”. How do we know this? Well, if even 10% of participants actually knew we were in a bubble, and understood what that actually meant, we’d have already had a rush to the exits, and we haven’t had anything like that, have we?
So, there may have been a little bit more public superficial bubble-talk, but the vast, vast majority of participants don’t really see this as a bubble.
Ironically, there will only be a consensus that Vancouver had a price bubble at the very bottom of the market, years hence (which will then be the very best time to buy RE). Only then will all speculative excesses have been wrung out of the market.
Regardless, Robin Weibe’s article shows that the local MSM, despite an occasional good critical article recently, by and large is still asleep at the wheel. There are no pockets of good value in the LML. Far from it; housing is 2-3 times overpriced in all areas. When the tide goes out, all boats will fall. – vreaa

“I gasped and said it is scary, what happens when the prices drop? She was very upset with me, and said prices never drop, they only go up, these people are building equity.”

eva at greaterfool.ca 11 July 2011 1:52am -
“I sat next to a realtor at friends bbq in Kitsilano, Vancouver ealier this evening…she was saying she must leave early as she had to show a condo…she specialized in condos on the westside. I said, “oh you must be a little down since the market has slowed down”…She turned with an insulted look in her face, and proceeded to tell me sales are booming once again! I asked what type of people are buying in this insane market! She said young up and coming couples, average mortgage payments of $6k a month is most common…I nearly choked on my food. I said they could rent the condos of under $3k a month, why pay double to purchase. She replied, “but why pay the landlords mortgage when they can afford their own”…makes lots of sense to me…pay double to own. I gasped…and said it is scary, what happens when the prices drop…she was very upset with me, and said prices never drop…they only go up…these people are building equity. I smiled and said, yea…I remember 1982…we lost our equity along with many other people, took many years to come back. Although, I must admit I have been a little skeptical lately that maybe we have all been wrong…but after speaking with her now believe more than ever “this cannot end well”. “

“I convinced my brother – a doctor in Vancouver – to NOT upgrade his accommodations. I said, don’t you think the fact that you – a doctor – is afraid of getting priced out means that something is very wrong?”

Anotherlowlyrenter at greaterfool.ca 17 Jul 2011 11:17pm-
“I convinced my brother – a doctor in Vancouver – to NOT upgrade his accommodations. He owns a 2 bedroom condo and had been considering buying a house. Not that he can afford it. Homes are too pricey even for doctors. I said, don’t you think you have enough $$$ exposure? He said, but what if I get priced out? I said, don’t you think the fact that you – a doctor – is afraid of getting priced out means that something is very wrong with this picture. Besides, who is going to price you out? Incomes in Vancouver are well less than incomes in Toronto, yet prices are 3 times as high. He sez, but what about the Asians – they’re coming aren’t they? I said, well they have been coming. But what if they stop coming? Or maybe they sell too, once the bubble starts to deflate. Asian “investors” are pretty good at riding a trend up – and they’re good at selling on the way down. Besides, if Vancouver becomes a place that doctors can’t afford to live, then maybe you better ask yourself if this is the kind of city you want to live in . . .”

Victoria – “How long you been building I asked? 12 years he replied. You’re about to get the rest of your lesson, I said.”

Dan in Victoria at greaterfool.ca 10 Jul 2011 at 10:47 pm -
“Things are definitely starting to turn [in Victoria], there is no doubt about it.
Went to a few open houses today, talked to a few sellers, oh yeah lots of interest, things are good….blah blah blah.
I think you are over priced I said to one fellow.
Got the down the nose look, well if you can’t afford it…
Had a good chuckle.
How long you been building I asked?
12 years he replied.
You’re about to get the rest of your lesson I said.”

Many in the market have no experience of significant price downdrafts and genuinely assume prices will continue to rise indefinitely. These guys clearly don’t do much reading. – vreaa

“I sold my condo in Surrey and moved into a rental townhouse in Burnaby. My sister explained to me that I didn’t understand the importance of leaving real estate for my children.”

MBA at VREAA 5 July 2011 7:30am -
“I sold my condo in Surrey and moved into a rental townhouse in Burnaby. My sister to me explained that I didn’t understand the importance of leaving real estate for my children. I didn’t find that argument compelling. I was planning to have kids while she already had kids and a house in the Fraser Valley. I was moving specifically because I wanted to be a better parent. If housing prices continued to rise, I was never going to be able to move “up” out of a condo anyway, a decidedly unfriendly place to raise children. But more importantly, I was spending 2 hours a day in traffic commuting over the bridge AND my wife needed to work full time to feed the mortgage and strata fees. I decided that my children would be better served having me home for those two hours a day than they would be from this etherial real estate winfall when I die in 60 years. That’s without addressing the inconvenient logic that I pay less in rent now than the interest portion of my mortgage + strata fees + property taxes + levy to fix the roof I was paying in the other place. I am now able to put 10% of my paycheque plus all of my wife’s part time pay directly into savings. I think my kids will be ok because they will have a father they get to see and a mother that can afford to stay home with them full time. I still don’t have kids, but I’m pretty sure when they are adults they will approve of the choices I’ve made on their behalf.”

Westside SFH – Bought 2007 $700K; Sold 2011 $2.6M – “Everybody on the street says I’m a frigging idiot.. “Why would you sell now? It’s going to four mil.” ”

Garth Turner at greaterfool.ca 17 Jul 2011 -
“Talked this weekend to a westside Van guy who bought a $700,000 house four years ago and just sold it for $2.6 million. “Everybody on the street says I’m a frigging idiot,” he told me. “Why would you sell now?, they ask, cuz it’s going to four mil.”

Comment on above story by Ravishing rick 18 Jul 2011 1:45am -
“The insanity of it all… $700k turned into $2.6m… With the $2m in the tank he can make an inflation indexed annual income of say 120k.
It is disgusting, and I say that out of pure jealousy! Unfortunately, stories like this only make fools run to the party… Even though the party is over!”

“I told him that prices were too crazy, and I wasn’t about to spend 7 large on a POS. He says “but just think how much it will be worth in 10 years, probably double or triple”.

Krazy Kanuk at vancouvercondo.info June 29th, 2011 at 12:38 pm-
“Speaking to more and more of my friends, I think this bubble is closer to popping. The prevailing mindset (especially here in Van) is that property always goes up. It amazes me, my friends aren’t dumb but the things they believe….
I have a buddy here from France. He’s looking to get his permanent residence. He’s a video game programmer, I suspect makes decent but not fantastic money. He asks me “so have you started looking to buy a place?”. I told him that prices were too crazy, and I wasn’t about to spend 7 large on a POS. He says “but just think how much it will be worth in 10 years, probably double or triple”. So let me get this straight. All I have to do to retire in 10 years is buy a million $ house here. Wait 10 years, sell for $3 million and pocket the $2M as profit. Brilliant! What could go wrong?
Back in Houston I have another friend who “gets it”. He just bought another house. $85K foreclosure, looks only a few years old. Decent part of town. 3 bedrooms 2 bathrooms. Expects to rent it out for $1275 a month. When I tell people here about that, they say “yeah, that’s Houston! Who wants to live there?”. I’ll tell you who. All the Californians who were priced out of Real Estate. Anyhow, I’d take the Texas economy any day over almost anything we have in Canada.”

Author David Mitchell Imagines ‘Vancouver’

While on a flight from London for his first visit to Vancouver in October 2010, novelist David Mitchell records a description of what he imagines the city to be, “to pro­tect my imag­i­nary Vancouver against real­ity” [Geist, #80].

Excerpts:

“I find a park bench in my imag­i­nary Vancouver, and see a dad throw­ing a base­ball to his son, and my heart vibrates to minor chords.” …

“I think of Douglas Coupland, William Gibson and Wayson Choy, and I think, What a place, and am filled with an intense desire to be twenty-seven again, and buy a house here, and see if I can make fewer mis­takes a sec­ond time around.”

Mitchell has not, to our knowledge, published a record of his impressions of the Vancouver that he actually found here. And it’s not clear whether, in the above excerpt, he is fantasizing about buying his Vancouver house when he actually was 27 (back in 1996), or whether he would like to be 27 now, and be buying a house at current prices.

[By the way, we recommend David Mitchell's books; he's a truly great writer, with a fine imagination.]

“The janitor recommended that she get her daughter working as soon as possible doing “anything” so she can buy real estate as soon as possible since “that’s the only way she’s going to get rich.”

granite countertop at VREAA 5 July 2011 at 10:21 am -
“A friend of mine, she’s an American, works in Richmond, was talking to the janitor at her workplace. He is ethnically Chinese but doesn’t have much accent, so he’s probably been here for decades.
She mentioned that she had a teenaged daughter. He recommended that she get her daughter working as soon as possible doing “anything” so she can buy real estate as soon as possible since “that’s the only way she’s going to get rich.” My friend’s replied that the area was in a bubble, but the janitor assured her that an endless flow of Chinese money would keep the market going up. My friend had made a bit of money owning a house before moving to Canada, but then she’s watched her home country’s market tank, doesn’t have trouble imagining the local market tanking.
Three things weren’t clear:
What exactly was a teenager supposed to do to make enough to afford any sort of down payment? There’s one profession a teenage girl could make enough money in, but I’ll assume the janitor was just real estate crazed and not disgusting in other ways, and that he wasn’t suggesting she get into that.
Why did he suggest the daughter get into real estate? When I asked her, she jokingly said “Oh, maybe he figures I’m too old, it’s too late for me.” I pointed out to my friend that he probably assumed she already owned.
Are there teenagers being pushed by their parents into actually trying to do this?”

“What does New York have that British Columbia does not?” [Let me count the ways...]

tdma800 at RE Talks 9 Jun 2011 7:59pm – “If you don’t want to see live theatre, and don’t like to work in the financial industry, what does New York have that British Columbia does not?”

Wow, where do you start?
Reminiscent of “What have the Romans done for us?”….
We thought we’d pop this up as a free educational service to tdma800 and others who have never left the 604 area code.
Readers thoughts?

[Why exactly is this relevant to a discussion of Vancouver RE? Well, next time you get into a bidding war for a Yaletown Condo, remember that one (all?) of your competitors may be thinking "After all, what does New York have that Vancouver does not?" as he pumps that bid 33% over ask.]

We’ll start us off below by listing some fairly standard stuff about NYC itself; we’re sure to be missing lots. (That’s something else about NYC, even its fans have only scratched the surface…)
In no particular order:
1. MoMA
2. Strand Books
3. The Cloisters
4. The Chrysler Building
5. The Village Vanguard (and how many dozen other jazz clubs?)
6. The Met
7. The American Museum of Natural History
8. Washington Square
9. Staten Island Ferry
10. The NYC Marathon
11. Positive Cash Flow Residential Real-Estate (made that up; much closer, anyway -ed.)
12. The Macy’s Thanksgiving Day Parade
13. The Yankees, The Mets
14. Madison Square Gardens
15. Central Park
16. Chelsea (20 streets of private art galleries)
17. Carnegie Hall
18. The Subway
19. The Lincoln Centre
20. Times Square
21. Actual Newspapers
22. The Whitney
23. Actual Industry (deserves own list)
24. 48 Million tourists per annum
25. The US Tennis Open
26. The Knicks
27. $1.3 Trillion GDP (NYC metro alone)
28. The Guggenheim
29. The Fifth Avenue Mile
30. The Chelsea Hotel
31. The Frick
32. A setting for lots of books
33. Fashion
34. The High Line
35. Eraserhead, recent midnight show
36. Chocolate exports of $250M p.a.
37. Food manufacturing $5B p.a.
38. Bowery Ballroom
39. Joe’s Pub
40. Public Transit Nostalgia
41. The Zoo
42…. etc etc etc etc
[please post own examples: 'Debate'?; 'Diverse opinions'?; ??]

[PS: We LOVE Vancouver, it's a very fine city, that's why we live here, but it simply ain't NYC.]

Opinion – “Providing for your child’s future means making sacrifices and perhaps taking on risk and debts you would not have imagined yourself doing.”

rusty at VREAA 2 July 2011 at 2:15pm -
“What’s your long range plan? Not owning means you have no assets to pass to your children. This is what it’s all about my friend; passing your wealth to your children. Yours will need to leave town and provide for their own future because you’re still pissing your money away on rent and toys. Providing for your child’s future means making sacrifices and perhaps taking on risk and debts you would not have imagined yourself doing. There’s no textbook or UBC course for this – just use common sense…if you’re not passing wealth to your children and others are for theirs, how much of a disadvantage will your kids be at? Take a look around you – those parents that are passing wealth off to their kids today are helping them buy Vancouver homes. And the parents that aren’t? Those kids are moving out of town, or renting or raising their kids in condos. You have the benefit of insight a generation before this happens to your kids.”

Whether you agree with rusty or not, you have to acknowledge that this way of thinking is part of what is driving buying in Vancouver. It is one facet of ’buy-now-or-be-priced-out-forever’ thinking. Over the last ten years, those who don’t own have not been able to expand their net-worth as rapidly or as easily as their owning peers. It thus seems to many that the only road to wealth and security, for oneself and one’s family, is by owning real estate. It drives new buyers to overextend and overbid, to go into that much more debt than is prudent.
There are no safety brakes: the Governor of the Bank of Canada may occasionally make speeches imploring people to be prudent, but how many hear him, let alone listen? The majority only hear their extended family egging them on to buy, and their bank managers assuring them they are eligible for larger mortgages than they’d themselves imagined.
Built into this line of thought is the premise that prices will continue steadily upwards.
Almost needless to say, we find this line of argument fallacious. It is the kind of thinking that prevails when risk takers have been disproportionately rewarded for more than a decade. It prevails until it stops, and when it does stop, when prices plunge and the great Vancouver RE Debt Deleveraging begins, we’ll see who has actually provided for their future. -vreaa

The US Dollar – Who You Gonna Listen To? ‘Some Anonymous Blogger’, Or Lindsay Lohan?

“Have you guys seen food and gas prices lately? U.S. $ will soon be worthless if the Fed keeps printing money!”
- Lindsay Lohan tweet 27 Jun 2011

Need any more evidence that the USD will rally? -ed.

“The house prices, the sense of the city as a place where the main economic base is the city itself as a spectacle…”

Local civic-life commentator Frances Bula on her blog 22 Jun 2011 -
“I have a feeling that many people who once thought Vancouver was a good place to live are beginning to see it as a good place to visit only — stay a week, visit the sites, and then head back to home. The house prices, the sense of the city as a place where the main economic base is the city itself as a spectacle: those give the sense to some that it’s not really a city to live in any more.
I don’t feel that way myself. I’ve lived in the city proper for more than half my adult life. It feels workable to me, a place with neighborhoods and a sense of civic life. But are those of us who feel that way dying out?”

Poll: Vancouverites Overwhelmingly Agree Vancouver ‘Nicest City’ In Canada – “95 per cent of those living there convinced there’s nowhere better in Canada.”

Excerpts from‘Vancouver ranked ‘nicest’ city in Canada’, Vancouver Sun 28 Jun 2011 [hat-tip 'calguy'] -
“[A] survey of more than 1,500 Canadians, commissioned by the Montreal-based Association for Canadian Studies and carried out during the week of June 21, presented respondents with a list of nine major cities from coast to coast and asked them to name their first and second choice for “nicest city in Canada.” …
Twenty-five per cent of all Canadians picked Vancouver as No. 1. Quebec City drew the second most votes as Canada’s nicest city, with 20 per cent of respondents nationally. …
The overall results, noted association executive director Jack Jedwab, partly reflect the fact that Vancouver residents themselves overwhelmingly named their own city the nicest — with 94.7 per cent of those living there convinced there’s nowhere better in Canada.”
“…such “hometown patriotism,” while evident to some degree among residents from each of the cities offered as choices, was strongest in Vancouver.”
“63 per cent of B.C. residents in general chose Vancouver.”
—
This comment below the article from an individual representative of the 94.7%, full-patch cult member ‘len2′ 28 Jun 2011 2:34pm – “excuse me, I don’t need polls to tell me what a Garden of Eden I live in, of course this is utopia. have you ever seen the moon on the rise standing by prospect point? how about from the cap river looking west, the string of pearls across the Majestic Lions Gate with a full moon in the background or underneath the Lions Gate looking south at the beautiful span, as it disappears into a forest of green. I have had the pleasure of living in this place of breathtaking beauty for over 40 plus years and I am still in AWE and THANKFULNESS when I look around me. nothing compares. I say to all you Vancoverites get out and explore your paradise, don’t just drive around, walk around the sea walls at night, visit the parks through out the lower mainland. to me this will always be heaven on earth. biased, of course I am, who would not be.”
[Note to self: Avoid getting into a bidding war on a Vancouver property with 'len2'. -ed.]
—

Comment:
Yes, it’s another one of those almost innumerable polls/surveys/ratings.
We don’t have access to the methodology or raw data; the actual poll results themselves doesn’t appear to yet be publicly available. The poll was “conducted last week via web panel by the firm Leger Marketing”. A “web-panel” is a group of people who have previously agreed to participate in such polls. ’1500 Canadians’ were each presented with a list of 9 cities (Vancouver, Quebec City, Ottawa, Montreal, Toronto, Halifax, Calgary, Edmonton and Winnipeg) and asked to rank them by ‘niceness’. There also appears to have been an ‘Other’ choice.
It looks like almost all Vancouverites polled voted Vancouver #1, and that is “partly reflect[ed]” in the “overall result”. We take this to mean that the pollster is pointing out that part of the reason that Vancouver did so well is that it got all of its home-town votes. Perhaps Vancouverites actually are more invested in their city than most?
Anybody with access to the actual poll publication, please share it with us. It’d be interesting to know more about the methodology, if only for curiosity sake, and we’d like to see the actual numbers.
And, by the way, what is the rationale for funding such a study? – vreaa

Game Day – Carney On The Road In Vancouver – “The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear.”

15 Jun 2011, 8am: Big Day! No, not this evening’s Stanley Cup Game 7 on home ice, but BOC Governor Mark Carney, on the road, speaking here in Vancouver. We don’t know what he’s going to say, yet, but we expect it to be pertinent to our speculative mania in housing and the nosebleed debt levels BC-ites are carrying. He’ll be subtle, but he’ll warn us nonetheless. Nail-biting stuff.

UPDATE; excerpts from the speech:

“Some markets are already severely unaffordable even at current rates.”

“Given such developments, one cannot totally discount the possibility that some pockets of the Canadian housing market are taking on characteristics of financial asset markets, where expectations can dominate underlying forces of supply and demand. The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear – greed among speculators and investors – and fear among households that getting a foot on the property ladder is a now-or-never proposition.”

Entire speech here: (pdf)

“I find it surprising that even I am feeling bearish, despite being a homeowner. Are any of you former bulls feeling the same way?”

hazuchan at RE Talks 6 Jun 2011 7:30pm – “I find it surprising that even I am feeling bearish, despite being a homeowner. Are any of you former bulls (like me) feeling the same way?”

Why should owning real estate effect whether you foresee ongoing RE market strength or future weakness? [rhetorical question].
It is obviously human nature to ‘talk one’s book’… so much so that when our analysis runs against our actual position it feels odd. It’s the first step in changing a belief, and later, acting on the new belief to change a position.
There has been so much information accumulating out there that suggests ‘bubble’. Information that has been getting increasing airtime from different quarters, MSM included.  More and more players – former bulls/complacent owners/potential buyers/potential sellers – are filtering and filing this information.
This is quite probably why ‘hazuchan’, a local RE owner who appears to read quite widely, is experiencing this ‘feeling’.
The ‘pumps’ are being ‘primed’; preparing for action.- vreaa

Spot The Speculators #42 – “In my neighborhood, the people who are buying the overpriced homes sold their smaller overpriced home and took on a new mortgage. They are not speculators.” [Yes, they are.]

Glenys 7 Jun 2011 in the comment section ‘Vancouver home prices poised for correction, could fall 21 per cent: report’, The Canadian Press, 7 Jun 2011 -
“For the last decade or so these reports by “experts” continually say Vancouver’s housing market is overpriced and the bubble will burst and prices will fall. Still waiting for it to happen – small adjustments that last less than a year don’t count. Still people from somewhere able to buy and keep the market high, regardless of world economy or interest rates.
In my neighborhood, the people who are buying the overpriced homes sold their smaller overpriced home and took on a new mortgage. And they were originally able to buy the smaller overpriced home because they sold their overpriced condo or even smaller home. They are willing to take on the debt because they like living here and want to live here. Not because they are speculators or investors.”

Anybody attaining more RE exposure, in an ‘overpriced’ market, based on an underlying belief that price growth will remain strong, is a speculator. This is true regardless of whether they know it or not, and regardless of whether they are selling one property to move up to another. If they are borrowing money in order to make the move up, they are using leverage in their speculation.
This is a fine example of the thinking behind the unseen, unidentified, unconscious speculation that has been a major driver to our market since at least 2003. – vreaa

“A buddy of mine moved back to Alberta; one of the key reasons he gave was that housing was too expensive here – this was in 1998!!! Now he regrets leaving here.”

rusty at VREAA 4 Jun 2011 1:55pm – “A buddy of mine and his wife moved here in 1994. He’s in sales and wife is a nurse. When they decided to start a family they moved back to Alberta to be close to family. One of the key reasons my friend gave was that housing was too expensive here – this was in 1998!!! Now he regrets leaving here and states that he can’t wait for his kids to reach adulthood so he can move back (divorced now and can’t move here due to custody). The funny part about this is, if they’d bought a home here in 1998 they’d be set for life. I’m sure that 10 years from now we’ll hear stories about folks who left Vancouver in 2011 and pine desperately for this city.”

A few thoughts:
1. Housing was arguably almost fully priced in 1998 (Canadian prices plus west-coast weather premium), so your friend’s observation was not that far off base.
2. Regardless, his reason to move was multifactorial: it seems it was mostly “to be close to family”, right? He would have moved regardless of the housing market.
3. The fact that buying a home, anywhere, should “set” anybody up “for life” should set off alarm bells. It should be immediately apparent that this is not a sustainable dynamic decade after decade. It is the result of a brief freakish boom, and is not about to be repeated.
4. You should advise your friend to leave ‘coulda-shoulda-woulda’ out of this… anybody can look at any market and have the same thoughts. Check out a chart of silver, or Nortel, or the TSX: Anybody can, in retrospect see where they ‘coulda’ bought or ‘shoulda’ sold. Your friend needs to decide the best action for himself now.
5. Also, there’s a possibility that your buddy is at risk of getting wires crossed: Are there other things that went well in Vancouver but poorly in Alberta that have nothing whatsoever to do with geography? For instance, he was in a relationship in Vancouver and is now divorced. As a counter-example, I have friends (a couple with three kids) who sold their SFH in the early 2000′s and also moved to the prairies. They now observe that they ‘could’ve’ gotten much more for the house if they were to have sold it now, but this is just a passing observation because they’re happy where they are and have no plans to return.
6. Regarding your prediction that “we’ll hear stories about folks who left Vancouver in 2011 and pine desperately for this city.” … well we’ll simply have to wait and see if that turns out to be the case. As we mentioned in (3) above, we’d be very surprised if the next ten years look anything like the last.
- vreaa

UBC Hospice Approved

‘Residents of this high-scale apartment building at 2688 West Mall UBC, like Janet Fan, here in Vancouver, B.C. on January 12, 2011, are outraged that a proposed hospice would be built next door to their building. The building is 80% Chinese extraction and there are major cultural implications with living next door to people that are dying.’ – from The Province, 3 Jun 2011

Noted here, for the record. We applaud UBC for this move, it took some courage. It was admirable for them to be able to separate issues of inter-cultural respect from those of personal expedience. We also applaud ‘The Province’ for using a photo that converts the mundane into something that is aesthetically pleasing. – vreaa

WSJ – ‘Chinese Fuel Vancouver Home Boom’

Excerpts from the ‘Chinese Fuel Vancouver Home Boom’, by Monica Gutschi, WSJ 1 June 2011 -
“A fresh wave of Chinese buyers, coupled with Canada’s already frothy home prices, has vaulted Vancouver into the ranks of the world’s most unaffordable real-estate markets.
Bungalows—small, detached, single-story homes, some in need of significant repair—can command prices well above a million Canadian dollars (US$1.02 million.) One local website, crackhouseormansion.com, invites visitors to guess whether homes pictured on the site are property sold for more than C$1 million or are alleged crack houses.” …
“Sales of homes worth more than C$2 million soared by 118% in Vancouver in the first four months of this year, real-estate brokerage RE/MAX reported in May. The average price in the high-end segment now tops C$3 million.” …
“Vancouver real-estate agents say Chinese buyers dominate the high end of the market, fanning demand and prices across the city. The strong demand for high-end homes has helped drive up prices for more modest houses. Some Vancouverites are selling their now richly valued homes and buying more-expensive ones, while new buyers are scrambling to buy before prices rise further, agents say. “It creates this positive vibe, this dynamic to the market that is upbeat,” says Elton Ash, vice president for western Canada at RE/MAX. …
The city always has been more expensive than most in Canada. Its location, sandwiched between the sea and the mountains, constrains the supply of available land. Vancouver also has long been near the top of global surveys in terms of quality of life. The 2010 Winter Olympics helped showcase the city to the world.” …
Some economists are starting to wave warning flags. Royal Bank of Canada says monthly carrying costs—mortgage payments, property taxes and utilities—for a detached bungalow represent 72% of the average Vancouver household income. That is more than double the 32% threshold that Canadian banks use to gauge whether a borrower can handle a loan.
“The prices appear disconnected to the level of activity and the balance of demand and supply,” RBC economist Robert Hogue says.”

—
For the record, the author of this WSJ article had a conversation with vreaa during it’s writing. Obviously the article is of interest, and is important to students of our RE market, because it gives prominence to the ‘Chinese Fuel Vancouver Home Boom’ meme in a respected international publication with wide readership. As a story about the Vancouver RE market, it is, however, lacking. Mention is made of low interest rates, easy borrowing, and “new buyers scrambling”, but, in our opinion, it should have put all the facts together and explicitly concluded that local buyers are responsible for this speculative mania. China is a subplot. It is remarkable that a US based publication, circa 2011, can’t see a housing bubble for what it is. – vreaa

Misallocation Of Human Capital During Speculative Bubbles – “What do you call societies that depart from meritocracy? What tends to happen to them in the long term?”

JRoss at VREAA 29 May 2011 11:50pm, in response to a comment suggesting that a couple who are both academics at UBC looking for accommodation in Vancouver shouldn’t have an attitude of “entitlement and elitism” and should consider “some homes in Renfrew area that require some elbow grease for <700K with revenue suites" -
“I lived on < $900 month from a TA at UBC in Point Grey for several years so I could obtain an advanced degree. My wife did same. Why would I or anybody else do that if there were not the potential (potential, not promise) of some future reward? That is not entitlement. That is a meritocracy.
Question for you my obtuse friend – What do you call societies that depart from meritocracy? What tends to happen to them in the long term? And just exactly who are the 'elistists' in same?
You seriously think that is is entitlement for the dentist who fixes your kid's teeth, or the doctor who treats your wife's cancer, or the lawyer who writes up your real estate contracts, or the CA who does your taxes, or the pharmacist who had the misfortune to graduate 25 years after you, or the professor who teaches all of them, to want some chance at a reward commensurate with their efforts? Seriously, what is wrong with you?
You do realize there are very nice places in the world where people who EARN such qualifications are afforded a better life than an 80 year old house in a marginal neighbourhood with strangers in the basement? Why would anybody who is possessed enough of their faculties to EARN one of the aforementioned careers not question what it has bestowed on them and realize they might be better off elsewhere?
You seem to think that we should all just accept the status quo and sign up for a lifetime of debt that will fund your retirement with wealth that came your way mostly because of the accident of the timing of your birth and you actually have the balls to call ME entitled."

Very, very eloquently put.
A speculative mania in real estate causes misallocation of resources. JRoss highlights how people with skills useful to a society can be forced away because of a profound perversion of normal reward dynamics. People are avoiding Vancouver because of these forces. The detrimental effects on our society are mostly hidden during the boom leg of the bubble, but will almost definitely compound other negative aspects of the inevitable deflation.
Forcing hard-working, talented and useful members of our society to avoid Vancouver is just one aspect of this misallocation of human capital. Other manifestations include (1) young people being drawn into short-term-attractive construction work (rather than studies or more sustainable lines of work), (2) professionals decreasing their hours worked or retiring early (as a result of perceived paper profits in RE), (3) people in useful professions selling their homes and leaving the city (because the capital accumulated in their home has hit life-changing levels), etc. We personally know of individuals in each of these categories, and related personal stories have appeared on these pages. People do unusual things in unusual times, and we’re living through unusual times in Vancouver by virtue of our overly-expensive real estate. – vreaa

Sauder Economist – “It’s not sustainable.”

Excerpted from an article [nsnews.com 25 May 2011] discussing a recent surge in sales and prices of properties on Vancouver’s North-shore:
A report on the Canadian real estate market released last week by RE/MAX pointed to a surge in the sales of luxury homes across the country, with overseas investment being a driving factor in the West. A May 19 report by Landcor Data Corporation, a company that specializes in B.C. real estate statistics, similarly pointed to China as the major force behind the Lower Mainland’s market.
But Tsur Somerville, a professor with UBC’s Centre for Urban Economics and Real Estate, cautioned against drawing such conclusions.
“Who knows?” he said. “It becomes very problematic sorting things out.”
Somerville did concede, however, that it was a plausible explanation.
“There is grounds for it in the sense that mainland China is the largest source of immigrants (to the Lower Mainland) right now,” he said. “Immigrants coming from China are disproportionately in the entrepreneur and investor categories; they’re coming in with wealth.”
Why it might suddenly be happening now, however, was hard to say, he noted. Somerville scoffed at the notion, floated by Landcor in an interview with the North Shore News last month, that it could be attributed to the Olympics, or to Canada’s recent designation as an approved destination by the Chinese government. “I would be very shocked,” said Somerville. “The approval by China affects tourism here; that’s not the same thing.”
One thing is for certain about the flurry of purchases, however, he said: “It’s not sustainable.”
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To the best of our knowledge, this is the first time that Tsur Sommerville has been quoted as saying that anything about the Vancouver RE market is “not sustainable”. – vreaa

Dr. Rusty Jekyll and Mr. Rusty Hyde – Ambivalent Landlords

rusty at VREAA 24 May 2011 at 8:18am -
“3 of my homes have no mortgage. For my renters I choose nice families who need a break on their rent and charge a nominal amount. Maybe this is why our rent to price ratio is out of whack, too many generous landlords.”

rusty at VREAA 7 May 2011 at 7:17pm -
“I’ve never discounted my rent. When a tenant moves I raise rent according to market. I think a stat showing lower rents is a suckers stat since the lower rents are on (likely) shitholes that are tough to rent in any market. A good rental in a good location is always in demand, and always increases.”

[For the information of occasional readers, Rusty is a pharmacist and landlord (but not necessarily in that order) who describes themselves as 'all-in' Vancouver real estate.
In frequent comments here, Rusty often takes others to task for inconsistencies he perceives in their argued positions.
Hey, we understand!... this market is driving everybody batty; the left hand doesn't know what the right hand is intending, right? That's why it's called a 'mania'! - vreaa]

Family Wedding RE Chat – “Despite the American relatives pointing out the ridiculousness of these arguments, there was no convincing the Vancouverites that it’s a bubble.”

pricedoutfornow at vancouvercondo.info May 22nd, 2011 at 7:27 pm -
“Went to a family wedding this weekend. American relatives were attending, and as usual as per social conversations in Vancouver, the topic quickly became real estate. The Vancouverites were jumping up and down, telling my American relatives that “Vancouver is different, it won’t crash here, we have Chinese investors, we have mountains.” Despite the American relatives pointing out the ridiculousness of these arguments, there was no convincing the Vancouverites that it’s a bubble, and it will crash here too, just like it has in their home country. Finally, the Americans realized there was no convincing these delusional, irrational people, finally one just turned away, and remarked under his breath “Well, sure sounds like a bubble to me.”
I think the Americans would know, they’ve seen this hype before (and are now buying properties in Florida for half price). They just shake their heads sadly and sigh “Poor Canadians, they will learn.”

“I had a discussion about Vancouver real estate during a class break. Students started venting about the housing market.”

pessimisticprof at greaterfool.ca 20 May 2011 9:50 pm -
“I had a discussion about Vancouver real estate during a class break and to my surprise a bunch of students started venting about the housing market. It appears it is starting to sink in that they will never be able to afford a house, and they scoffed at the idea of inheriting mom and dad’s McMansion – “That’s all they have for retirement – they will chew it up to fund their own expenses, so no hope of getting the house or help with a downpayment.” One student proudly proclaimed that he had just closed on a condo in Surrey for $300K – 30 year, 5% down. I asked him why he thought the bank would loan a kid like him so much money – he sort of looked confused, muttered “I dunno”, and admitted he had never thought about that. I took the opportunity to explain how CMHC and Ottawa had distorted the housing market by enabling people with no money (like him) to purchase property way beyond their normal capacity, leading to a huge but unsustainable increase in housing prices. When I got to the part about interest rates normalizing I thought he was going to toss his cookies! By the time I was finished his “great investment” was starting to look like a huge ball and chain. I think the rest of the class understood the message.”

Toronto – “A young lady at work told me she was thinking about buying a condo because her money would grow more in real estate than other investments. Well, last week she bought a presale, and so did her parents and her boyfriend.”

Markey at greaterfool.ca 17 may 2011 6:13am – “A young lady at work (30+ Chinese) told me she was thinking about buying a condo because her money would grow more in real estate than other investments. I told her I believed that she would be having a Nortel moment if she bought now and I told her why. Well, last week she did buy and so did her parents and her boyfriend — from floor plans to a new development by the CNE that sold out in hours without ever having been made available to the public. She had only a few minutes to decide on the unit that she plans to flip once it is built, or to have a tenant carry the rent. According to her, foreign investors are buying Canadian real estate because, in this tumultuous world, it is a safe investment. She didn’t want to miss the opportunity. Now, I understand that a 30-year-old has never seen a real estate plunge, but her parents have. Do people really have such short memories?”

“It is so funny to see people’s reactions when you say the market may go down. It is like you have offended them deeply; to their core.”

Tracy, as quoted by Garth, at greaterfool.ca 16 May 2011 – “I was telling someone today that my father sold his condo in North Vancouver. They asked me why he would sell, and I explained that the market had been up for a long time and that most likely it would go down in the future. The individual (from Vancouver) looked at me like I was a nut bar, as if absolutely insane, and told me that the market would never go down here. I stated that Ireland, California, all of these places of had seen a huge market drop. It is so funny to see people’s reactions when you say the market may go down, it is like you have deeply offended them to their core, and they talk as if they are the expert economist, even though they bought their property at the top of market.”