Category Archives: 06. Held my Nose and Leapt

Stories about people buying out of ‘priced-out forever’ fears, spousal cajoling, or other pressures.

BC Premier: “I think the market’s good, it’s a buyers market. I want to make sure I get in before prices start to rise.”

“In Kelowna on Thursday, Clark said she has already been on the Internet looking for a home but would also like to hear from anyone in real estate about a home that requires low maintenance.
“I have a cat, but I won’t be bringing her. So no pets, no smoking and low maintenance,” she said.
The premier told reporters at her victory party on Wednesday night that she didn’t want to be “presumptuous” and start looking for a house while she was campaigning, but she’s getting serious now.
“I think the market’s good, it’s a buyers market. And you know the riding is really getting stoked again, so I want to make sure I get in before prices start to rise.”
– from The Times Colonist, 11 July 2013 [hat-tip kabloona]

Announcement:
With this brief (but sweet) post, we’ll be taking another break from our (admittedly very skeletal) posting habits of the past six weeks. We’ll be on hiatus for at the very least the rest of the summer. Refer to VCI and Whispers for ongoing Vancouver RE discussion. We hope to be back in full at some point. Enjoy the fine weather, and keep well, all. – vreaa
(PS: Nothing has changed regarding our overall bearish outlook on the Vancouver RE market.)

Vancouver Sun Profiles A First Time Buyer – “I just wanted to build equity and not pay rent.”

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“Myles Wilcott, a single, 31-year-old general manager at Canadian Linen & Uniform Service, is among those who have met new financial requirements in order to buy a condo. He paid $412,000 for 705-square feet two-level loft in a 16-year old building in the Gastown district of Vancouver.

Wilcott had been looking at condos throughout the winter, waiting to find what he was looking for at a price he could afford.

By this spring, he had almost enough in his registered retirement savings plan to meet the minimum down payment set by the federal government. He had sufficient income to cover the monthly payments, even though new federal regulations meant he would be paying hundreds of dollars more each month than he would have been required to pay before the rule changes.

He was not concerned about reports of record high prices and talk of a possible crash in the real estate market. “A lot of people talk about getting into the market to make a quick buck,“ Wilcott said. “I just wanted to build equity and not pay rent.” …

Mr. Wilcott, who graduated from Simon Fraser University in business and human resources, said in an interview he had thought about buying a home a few years ago but did not qualify for a mortgage that was big enough to buy what he wanted.

He turned his attention to improving his credit rating, pursuing his career and putting aside some savings. “I was able to climb the ladder enough to the point where I qualified for a [25-year] mortgage.”

Mr. Wilcott started the home-buying process in December. The first step was to arrange for pre-approval for a mortgage. He had an agent to help him search in earnest for what he wanted – a loft-style condo in the downtown area. He looked at 12 different condos before finding what he was looking for.

He put down the minimum five per cent, which was about what he had saved in his tax-free registered retirement savings plan. A federal program called the homebuyers plan allows purchasers to use their RRSP as long as the money is paid back within 15 years.

His mortgage payments of $1,900 will be considerably higher than the rent of $1,200 he was paying before he bought the condo.

However it was his outstanding debts — not the monthly payments — that almost tripped up his mortgage application. Arrangements were finally confirmed at an acceptable rate with Vancity Savings Credit Union.

The whole process was a bit more stressful than he anticipated. The most difficult aspect of the purchase was evaluating the conflicting points of view he received on home buying. “I got too many people involved … there was such a wide array of opinions — buy now, don’t buy now; wait five years, don’t wait; don’t go into that neighbourhood, go over there.”

But once he met the qualifications and found what he wanted, he was ready to close the deal.”

- image and text from ‘First-time homebuyers adjust to federal changes; For those who can afford it, home ownership still a viable option’, Robert Matas, Vancouver Sun, 15 March 2013 [hat-tip OH YAH]

“$700 per month more outlay for accomodation plus condo fees, taxes, legals, move etcetera, etcetera (you all know the drill) and no mention that all his savings were wiped out during the purchase. Live and learn. Got to get on that ladder even if it only leads to a periscope.”
Farmer, commenting on the above story, at VREAA 16 Mar 2013 3:22am

Agreed, we don’t think Myles really did the math on this.
He says “I just wanted to build equity and not pay rent”.
Even if he’s not fully conscious of it, he’s speculating on future RE price strength.
We’d bet the math shows that he wouldn’t “build equity” without that.
– vreaa

Vancouver Secretary’s Urgency To Buy Condo At 7.7x Annual Pre-Tax Income – “I’m worried about keeping pace. I’m worried that no matter how long I keep saving, the prices will keep climbing and I’m never going to be able to catch up.”

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[photo Rafal Gerszak, The Globe and Mail]

“Alice Soo is developing a case of spring fever for real estate.
In 2011, five years after graduating from university, she made a final payment to erase $25,000 in student loans. At the same time, she has been a disciplined saver, with $30,000 now socked away. Ms. Soo, a clinical secretary at Vancouver General Hospital, is eager to use it for a down payment on a condominium in the suburb of Burnaby, and soon.
Why the urgency? Condo prices in Greater Vancouver have slipped 3 per cent over the past year, but Ms. Soo believes the softness in the market won’t last. “I’m worried about keeping pace. I’m worried that no matter how long I keep saving, the prices will keep climbing and I’m never going to be able to catch up. That is my main concern.”
Such is the psychology of the first-time buyer in Vancouver, the country’s most expensive property market. Prices here have soared 24 per cent since the summer of 2009, according to the Teranet-National Bank house price index, and the price of a typical detached home is still about $900,000. But prices have cooled and sales activity is way down – there were nearly 30 per cent fewer transactions this February than a year earlier – so Ms. Soo’s concern about missing out may be unwarranted….
“For every first-time buyer, there’s an owner who`s looking to sell and trade up, and for every upgrade, there`s a retiree looking to cash out. The “trickle-up” effect can make the difference between hot and cold in the market.
This year, the big question is: Will the first-timers come back?”
For Ms. Soo, who is now renting the basement of her sister’s home, the first choice is to buy a Burnaby condo priced at roughly $300,000, preferably close to a SkyTrain rapid transit station. Given her modest annual pretax salary of $39,000, Ms. Soo is excited by the prospect of moving into her own place by the time she turns 30 this summer. But price remains the sticking point for buying a condo this spring. She and her agent, Eddy Shan of Homeland Realty, are finding that sellers aren’t budging much from their asking prices.”

– this anecdote from ‘Will nervous first-time buyers make this spring housing market bloom?’, Tara Perkins and Brent Jang, Globe and Mail, 9 Mar 2013 [hat-tip OH YAH]

We agree that this FTB’s “concern about missing out may be unwarranted”. She is still living in the not too distant past, and continues to suffer from the “buy now or be priced out forever” fever. It’d be interesting to know more about her knowledge of current market conditions, and to understand her sources of information.
The current market action is precisely what one would expect through a topping process: sales declining, prices sticky but beginning to give, buyers waiting and watching. Sales volumes always lead prices.
And there will always be some buyers, at any point in the descent, thinking they have “bought the dip”.
The most vulnerable owners in the coming downturn will be the over-leveraged, the latecomers, and the retirees with far too much RE for their life-stage. If Ms. Soo buys, she’d be both over-leveraged and a latecomer.
– vreaa

————————-

Some further excerpts of interest from the same article:

“Will McKitka, a real estate agent with Macdonald Realty, said the spotlight has turned on the slump in property sales in February, but prices haven’t collapsed. “People use the B-word, in terms of a housing bubble. Vancouver isn’t in one,” Mr. McKitka said. Monthly sales volumes are being crimped by stalemates over pricing, he noted.
Two of his clients watched negotiations fall apart last month, even though the asking and offering prices were tantalizingly close. “Not close enough,” he said. But Mr. McKitka insists that buying into the Vancouver area’s cooled-off housing market makes sense. Gone are the days of huge jumps in home values, but for those able to save for a down payment in 2013, it will be a better financial decision to own than rent, he argues.”

“It still seems that the much greater risk is that sales weaken further, not that they surprise to the high side,” BMO Nesbitt Burns economist Douglas Porter said in a research note this week.
Prices remain stubbornly high in most urban markets. Fitch, a ratings agency, said this week that prices nationally are about 20 per cent too high. Such headlines add to the fear among first-time buyers that, even if they can afford to get into the market, now might not be the time.”

“Large marketing campaigns and incentives on the part of mortgage lenders are likely to play a significant role in driving the market this spring. “People buy payments, they don’t buy house prices,” says Toronto-based mortgage planner Calum Ross. “There is a huge psychological impact of five-year mortgage rates dropping below three per cent.” Mr. Ross adds that he’s now seeing “massive” amounts of marketing by mortgage lenders.”

“Phil Soper, CEO of real estate agency Royal LePage, said the slowdown is a good thing, because the market was too hot, but he thinks that the changes that Mr. Flaherty made in July went too far. “It pushed things for young people, for first-time buyers, to a place it didn’t need to be,” he said.
Now, he says, the impact of the change has largely been felt. “Young people have had eight months to either save up a larger down payment or look farther afield for a home,” he says. “As long as the cost of mortgage financing remains very low, we’re going to attract financially stable young people, first-time buyers, into the housing market. The desire to own one’s home hasn’t changed one bit.”

Will McKitka’s comment added to the ‘What Bubble?’ sidebar collection of bubble denier quotes.
We agree with Doug Porter’s observation that “surprises” are more likely to be to the downside.
– vreaa

Author Of ‘Real Estate Investing for Canadians for Dummies’ “jumped into the market 3 years ago with a 2 BR apartment in Mount Pleasant”; Reports Ownership Cheaper Than Renting; Leaves Out Math

“This columnist jumped into the property market three years ago with a two-bedroom apartment in Mount Pleasant. The mortgage payments at the time were on a par with where rent was heading, so the move made sense. Despite increases in strata fees and property taxes since, the move continues to make sense – perhaps more sense than ever.
Tallying mortgage interest, property taxes, strata fees and assessments, as well as home insurance paid in each of the past four years versus rent and home insurance paid in 2008 (the last full year in which rent was paid) shows that home ownership has steadily cut household expenses. Preliminary figures for 2012 indicate savings on housing costs of more than 20% versus 2008.
Poor affordability tends to give first-time buyers in Vancouver fewer options than those in other cities, but the pay-off – for those who can manage it – is significant.
So long as mortgage costs remain in check, the payoff seems set to continue, but low interest rates and increases in rental costs have so far put accounts in this buyer’s favour.
(The exit strategy and ultimate return on investment is a significant risk factor, of course, but we’ll leave that matter for another column.)”

– from ‘Rental market tight despite rise in Vancouver vacancies; apartment sales projected to hit record-breaking pace’, Peter Mitham, Business In Vancouver, 8 Jan 2013 (“Peter Mitham has written about British Columbia real estate since 1998 for Business in Vancouver and many regional, national and international publications. He is co-author of “Real Estate Investing for Canadians for Dummies”)
[hat-tip Sarbaz]

Priceless stuff. And that’s a major problem — no ‘price’ – no numbers, no math.
We’d love to see the details. The claim seems to be a stretch.
Just for a start, is this a comparable 2BR to the prior rental?

Also, interesting to note that an author of a RE investment text:
1. “jumped into” the property market, and
2. talks of the ‘return on investment’ – for his home!
– vreaa

Buy The Dip! – “Our families have been pressuring us to buy a place as the prices are coming down.”

“We got married 1.5 years ago. My husband doesn’t believe in buying a place, so currently, we are renting in downtown Vancouver. We have combined saving of $150,000 plus some assets in gold. We have a combined household income of $115,000. Initially, our goal was to save one of our salaries but realistically it hasn’t happened yet. We plan to start a family soon and will need a bigger place. Our families have been pressuring us to buy a place as the prices are coming down. Since both of us work in downtown Vancouver, we don’t want to move to suburbs like Surrey where houses are cheaper but has longer commute. Do you think prices in North Vancouver will come down in the near future?”
Jasmine, as relayed by Garth Turner, greaterfool.ca, 8 Jan 2013

There will be a subgroup of buyers who jump in at 10%-15% off, thinking we’ll have a re-run of the 2009 ‘dip and bounce’. They will be as severely punished for their purchase as any other buyers in the last 5 years.
Notice, too, that these advisors/buyers are very early ‘premature-bottom callers’.
– vreaa

REW’s ‘House Hunter Chronicles’ – “I had wanted my dream house right away. I wanted to skip the steps. But now I’m thinking short-term house and long-term house.”

A serialized story called ‘House Hunter Chronicles’ was posted through the summer at the website REW.ca. Here it is, for the record:

“Follow local house hunters as they experience the highs and lows of buying a home in the intense Vancouver real estate market. Elaine L. is the first to share her search with us. We’ll check in with her every couple of weeks to see how it’s going.”

Elaine L
Family size: Two — a single woman and her mom
Currently: Own a condo
Budget: $800,000 – $ 1.1 million
Neighbourhoods Collingwood, Fraserview, Renfrew, Renfrew Heights, Killarney
Looking for 2000 – 2500 sq. ft. newer detached house with rental suite down, move-in condition

1. Meet Elaine L. (June 16, 2012)

Elaine L. is only in her twenties, but she’s already a veteran in the Vancouver real estate game. She and her mom, Patty, sold the first condo they lived in back in 2004. They rented for a while, thinking Vancouver house prices would go down, but when that didn’t happen they bought their current condo in 2008.

Since then their condo has appreciated by $40,000, and its 880 square feet are starting to feel a bit cramped for the two of them and their dog. When one friend bought a rental property and another bought a house, Elaine was inspired to start house hunting again.

So she’s contacted the same Realtor they worked with before and asked her financial advisor what kind of price she can afford, and the house hunting is on! She hasn’t put her current home on the market yet, and there’s no deadline for buying, but she’s started doing a lot of online research and visiting open houses.

Elaine and Patty would like to stay in southeast Vancouver, where they are now. Finding the right neighbourhood involves researching crime and average income statistics and using Google Maps Live View to check out the look and feel.

Her ideal house is at least 2000 square feet with a mortgage helper in the basement, living area on the main floor and bedrooms upstairs. Elaine says that it’s mostly older houses that offer that layout, and they tend to be out of her price range. But more affordable Vancouver specials, both the classic ones and the newer versions, have suites on the main floor and living and sleeping areas up, all on the same floor.

Chinese traditions also play a part in her search for a good house; for instance, if you need to go down a couple of stairs to get to a house, it’s off the list.

Is she looking for a fixer-upper? Definitely not. “I can build IKEA furniture — that’s about it.”

Elaine credits her friends with keeping her on course. “My emotions get the best of me sometimes,” she says. “I look at a house and I don’t really like it, but I talk myself into it, and then I have to get my friends to talk me out of it.”

2. Elaine Loves and Lists (June 22, 2012)

Follow local house hunters as they experience the highs and lows of buying a home in the intense Vancouver real estate market. Elaine L. is the first to share her search with us. We’ll check in with her every couple of weeks to see how it’s going.

It was a bit like falling in love. The house ticked all of Elaine’s boxes: 2300 square feet, 3 bedrooms on the top floor with the kitchen and living area downstairs, and a 2 bedroom rental suite on the same floor that would cover $900 of the mortgage. It was built just last year, so it’s like new but without the HST. Her mom, Patty, liked it too.

Perfect.

But alas, her love was unrequited. When her Realtor inquired about putting in an offer subject to the sale of the condo the seller said, Don’t bother. “No one wants to sell to you if they have to wait for you,” Elaine says.

That’s why every day last week Elaine and her mom were hard at work — lugging a heavy elliptical trainer down to the storage locker, taking boxes of bric a brac over to a sister’s garage and removing all traces of Elaine’s Hello Kitty collection. They’re staging their condo, and by next week they hope to be able to get their Realtor in to take pictures and put the condo up for sale.

“I don’t want to go through that again,” says Elaine about having her subject-to-sale offer rejected. “We have some places where we can stay for a few months if we don’t find anything. And when we sell we’ll try to set a really late possession date.”

Meanwhile, “It’s a great feeling to be tidy. We’ve decluttered and depersonalized it to get an open, contemporary look. We had the floors redone with a dark laminate and it really opened up the space. We’ve cleaned all the walls. The place looks fantastic.

“A friend warned me not to fall in love with it and decide not to sell. But I want to live in a house.”

The house she fell in love with — actually a half-duplex — has been sold. But the good thing is that there are lots of similar places in the same neighbourhood, so Elaine’s optimistic that something with the same appealing layout will come up… after she’s sold the condo.

“It’s around $900,000, and at first I thought it was expensive for a half-duplex, but it feels just like a detached house. The two halves barely share a wall. Only the rental suites connect. I haven’t seen anything like it in Vancouver.”

Though Elaine was looking to buy a house in Vancouver, this place is in Burnaby, which hadn’t been on Elaine’s radar until a friend alerted her to the listing. It turns out, it’s just across the Burnaby border, only two minutes from where she is now, so she’d still be close to friends and family.

Of course, that’s if all this works out.

The upheaval is stressful. Elaine says “I’m always worrying. What if we sell this and don’t have another place to live? What if the market crashes and my house ends up not being worth what I paid for it?

“But then I remind myself that I’m not biting off more than I can chew. I’ll be living comfortably, even if the market crashes. I always plan for the worst case scenario, so I’m planning everything as if the suite isn’t rented. We’ll be okay.”

3: Keep it Clean (July 18, 2012)

Now comes the hard part: living in a home that has to be clean, shiny and spare at all times.

“Having to clean up after myself all the time is making me want to get it over with,” says House Hunter Elaine L. “I want someone to buy it so I can leave”

The condo she and her mom share has now been on the market since the beginning of July. After hauling out everything that wasn’t nailed down, and getting new flooring installed, she’s thrilled at how great the place looks. But it has to be kept that way.

“I gave my dog a haircut!”
The dog was the worst culprit in the keep-it-clean campaign. Elaine’s mom, Patty, had been spending part of every day vacuuming up the dog hairs that showed up particularly well against the dark wood of the floors — one of the new selling features of the condo.

A canine cropping took care of that problem. Now it’s a matter of always putting things away, dusting and doing the dishes.

All that upkeep is worth it. Their Realtor says that it shows really well, and he’s had favourable comments from people viewing it. Considering there are three other condos for sale in the same building, that’s hugely important. Elaine and Patty indulged in a little spying, going to the open house at one of the other condos to check out the competition, and they’re satisfied that their efforts have given them the upper hand.

The other side of feng shui
They’ve even had some serious interest. A mom and daughter came to look at the condo twice, but they rejected it because the mom said that the ensuite bathroom door facing the bed was bad feng shui. Elaine and Patty are Chinese too, and they have a few criteria based on feng shui principles. But not that one.

“The bed can be moved.” says Elaine. “We’ve lived here for four years and haven’t had bad luck!”

As her Realtor — and every Realtor the world over — says: It’s just a matter of finding the right person.” There are three showings coming up; three chances to find that right person. And with all those prospective buyers coming through her home, Elaine’s decided not to spend the week constantly keeping everything spotless. She’s going to Vegas instead. She’s got a phone with a US number, so anything that needs to be handled can be handled from there.

Let’s hope Elaine and Patty’s luck holds.

4: Elaine’s Las Vegas Luck (July 27, 2012)

Last time we talked to House Hunter Elaine L., she was off to Vegas with a group of friends. She was fed up with having to keep her condo spotless and ready to show at a moment’s notice, so she figured she couldn’t make a mess if she wasn’t there. Problem solved.

So there’s Elaine enjoying a delicious lunch in Sin City when her phone rings. It’s her Realtor. He’s got an offer. Can she look at it now?

They talk a bit and work out a counter offer and the Realtor sends it off. Lunch is interrupted several more times as offers and counter-offers fly back and forth. Finally, when Elaine is in the back of a cab on the way to an outlet mall, the Realtor calls with the final offer. He scans it to her phone and Elaine signs it, gets it witnessed, returns and continues to the mall… with considerably more to spend than she had when she set out.

Jackpot!

Digital transactions like this are more and more common with the advent of wi-fi, tablets and smartphones. So far there’s never been a problem. Digital signatures are informally accepted as valid, although the real estate industry has not yet had occasion to test them in court. The Realtor also took the contract to Elaine’s co-owner — her mom, Patty — for an ink-on-paper signature.

The condo was on the market for exactly two weeks before the offer, with one open house and 10 private viewings. The buyers saw it in one of the private viewings. The time on market is bang-on for Elaine’s Collingwood neighbourhood. Since May, the majority of comparable condos there have sold within 18 days.

Elaine says the condo had numerous advantages that helped it sell so quickly. First was all the work she and Patty put into it.

“We took so much time to clean it up perfectly,” she says. “We got rid of every trace of our everyday life. It was completely staged. I don’t think other people go to that extreme. We saw other places, and they weren’t as perfect as ours.”

It was also listed in the mid-400,000s — a price that appealed to people getting into the market. Elaine says she’s seen more expensive condos sit ounsold. “A friend of mine has a sub-penthouse that’s selling for $150,000 more than mine, and she’s had it on the market for a year now.”

On top of that, the location is perfect: it’s right by the SkyTrain and close to an elementary school.

The couple who bought have two young daughters. At 880 square feet, the condo will be a tight fit, but in the Vancouver market, condos have replaced fixer-upper detached houses as the first rung on the property ladder for first-time buyers and new Canadians.

The buyers’ bank sent an appraiser, the home inspector did a report and the subjects were removed a little over three weeks after listing. The completion date is August 23. That’s too soon to find a house and move in, so Elaine and Patty are staying with Elaine’s sister for a bit.

“It’s nice not to have a set date for leaving. We can look around until we find the right place. But it’s a motivation as well. We don’t want to impose on my sister for too long.”

Elaine’s excited and a little apprehensive now that the deed is done. “It’s kinda scary. I don’t know where I’m going to live, and I’m going to be taking on a big mortgage. Plus, I’m worried that the market might go down and I will have paid more than the house can sell for,” she says.

But, “Mom believes that in the Vancouver market things won’t go down that much unless something big happens.” So even if the market starts to dive, that’s not going to keep them from looking… or buying

The search is on in earnest now.

5: Know the Market (August 16, 2012)

“I had wanted my dream house right away. I wanted to skip the steps. But now I’m thinking short-term house and long-term house.”

Elaine L. is finding the search to buy a house in Vancouver more frustrating than she had expected, now that she’s in serious search mode. She and her mom, Patty, are camped out at her sister’s place, and they don’t want to be an imposition for too long. On top of that, Elaine was recently promoted at work so her days are super busy. Her evenings are almost entirely occupied with searching online for new listings and going out on viewings or drive-bys.

She’s no longer thinking about a duplex. “It doesn’t feel like the responsible thing to do. I think it’s better to buy a whole piece of land because that’s where the money is, that’s where the resale value is. It just seems more secure.”

But even though she can buy a house up to $1.1 million, she’s finding it tough to find her dream home in Canada’s priciest real estate market.

There was one perfect house made even better by the fact that it was priced in the $840s. She found the listing as soon as it was posted and jumped on it, but despite her quick action, the house was sold before she got to it.

Then there was new Vancouver special that looked more like a heritage house. Not only did it have a unique look, it had the layout she’s after. But by the time she found it, the owners had taken it off the market.

The capper was the three-storey house with an above-grade basement suite downstairs. It was quite new and priced at $799,000. It looked like a steal… until she found out it was a former grow-op.

Lesson learned.

If it sounds too good to be true, it is, and for Elaine that includes any house priced under $800,000. With all the research she does, she knows house prices in her chosen neighbourhoods inside out, and she’s learned to distrust any listing with a price that seems too low for the area.

So the dream house is just going to have to stay in the future. “For now we’re going to look for one with lots of rental income and save up for the one we ultimately want,” she says.

The decision has lightened her load at a highly stressful time. It’s broadened the range of acceptable houses. She can look at the new Vancouver specials that she used to reject because they always had a rental suite on the main floor, and she wanted the main floor and upstairs for herself.

Now that first-floor rental suite is a desirable feature. The income from that will help her get to her ultimate goal, to buy a house in Vancouver that’s exactly what she wants.

[As of 6 Oct 2012, no apparent further updates. -ed]

The final chapter sounds like a dangerous recipe: a rationale for overpaying for a property that is very suboptimal for the owner (a house with the (necessary) rental suite on the main floor!). If Elaine takes the plunge, she could be regretting the decision for a decade or two. – vreaa

“Now he’s gone and bought a place! Is the Anglo-American ownership obsession that strong that even when you know you shouldn’t be buying you do anyway?”

“My old boss recently got transferred to Toronto and has been providing a steady stream of Facebook updates regarding the RE market there – how he can’t believe he’s moving there at the peak of the bubble, how he’ll need to rob a bank, etc, and now he’s gone and bought a place! Is the Anglo-American ownership obsession that strong that even when you know you shouldn’t be buying you do anyway?”
CanuckDownUnder at VCI 6 Jul 2012 7:21pm

Yes, the ownership obsession is that strong.
Also, people have poor understanding of how they will behave under different circumstances.
Those who ‘know’ they’ll not buy end up buying; those who are certain they’ll “sit pat through the downturn” end up coming to market at 30%-off.
– vreaa

Naïve Buyer Logic – “We probably wouldn’t have been able to afford to mortgage a house, or at least not the house we wanted, if we hadn’t jumped on it.”

“Bruce and Denise Perrett, of Port Coquitlam, B.C., got married last year and wanted to buy a house, but they weren’t in a rush.
That all changed when the couple heard Ottawa was tightening mortgage rules.
For the Perretts, locking into a 30-year term as opposed to 25 years meant an extra $300 a month that could go to strata fees or property taxes.
They sprang into action and called their mortgage broker.
“She was right on it, she got us the approval and the next day we were rolling,” said Denise Perrett. “Then we found out we had to have an accepted offer by [July 9] and then we panicked and called our realtor.” …
The Perretts spent 48 hours looking at homes and put an offer that was accepted last week on a property in Maple Ridge that has everything they want.
The best part is that they qualify for a 30-year mortgage.
“We probably wouldn’t have been able to afford to mortgage a house, or at least not the house we wanted, if we hadn’t jumped on it,” Bruce Perrett said.”

– from ‘Home buyers scramble before mortgage rules change’, CBC News, 7 Jul 2012 [hat-tip specialfx3000 at VCI, and jesse]

1. When market rules tighten, you won’t be able to afford ‘x’.
Why stop thinking at that point? ->
2. Others like you won’t be able to afford ‘x’, either.
Therefore ->
3. Prices will have to drop to ‘x-y’.
– vreaa

“Is your daughter still renting? Why doesn’t she jump in?”

(Conversation overheard today at the gym. Two boomers.)
Man: Is your daughter still renting?
Woman: Don’t tell me… It gives me anxiety. Who is renting those days?
Man: I do not know. Every one I know owns. Why doesn’t she jump in?
Woman (looking at the far away horizon with empty eyes): She is waiting for things to change…
Man: What ?!?!?!
Woman: This is what she says….
Man: Do you really think things could change? This is Vancouver.
Woman: No…uhhghgh… maybe, who knows?
jumpin in at VCI 4 may 9:26pm

Raising Kids In The DTES – “We own an affordable home in downtown Vancouver, and I don’t think we could have pulled that off if we hadn’t been willing to take a chance on a dodgy neighbourhood. The next wave of real estate refugees will be moving even closer to ground zero.”


A woman smokes crack in Vancouver’s Downtown East Side
[The image illustrating this story in the National Post]

“For the past six years, our family has lived just around the corner from the worst stretch of Vancouver’s notorious East Hastings Street, near dismal Pigeon Park. Curiously, we chose to move here while my wife was expecting, about nine years ago. We had found a condo that we could actually afford, so we purchased a unit pre-construction, gambling that the neighbourhood would improve significantly by the time our building was completed. It didn’t. We moved in anyway, hopeful that change was just around the corner. It wasn’t, although the area would improve, eventually. But first, we would spend a few years raising our children in what could generously be described as a disturbing new community.

Housing prices being what they are in Vancouver, I expect that more families will consider taking a chance on “improving” neighbourhoods, as we did. And they will find, as we did, that addicts don’t make the best neighbours. While every user’s personal story is surely tragic, it remains a fact that addiction does terrible things to people. Junkies steal, they prostitute themselves, they leave needles and feces in the streets. The Downtown Eastside may be home to my city’s least fortunate, but it is also, in many cases, home to my city’s least sanitary, least responsible, and least polite. Anybody who thinks drugs are glamorous should spend some time around here.

[Series of stories of DTES encounters at this point. Read the whole article]

So why did we stay here? I suppose it helped, as middle class parents moving into a decidedly un-middle class neighbourhood, that our hopes were not high in the first place. … we were able to ride out the rough patches because we always knew that our time here was optional: either the area would improve or we would leave. Many will never have that choice.

Recently, parts of the neighbourhood have improved, and significantly. A couple of years back, the completion of several residential towers quite rapidly turned our formerly desolate block into an up-and-coming district, complete with overpriced French bulldogs. There are now coffee shops and grocery stores and dry cleaners and pizza places where, not long ago, there was nothing. For years, we were the only fools braving the local playground, dodging the winos and crack heads, checking beneath the monkey bars for needles and broken glass. Today, there are always kids around, there’s a beautiful new daycare just across the street, and funding has just been announced for an elementary school. Heck, these days, even the walk to Gastown isn’t quite as scary.

It took a while, but we bet on gentrification, and – knock on wood – it’s happening. Of course, when a toddler is taken hostage at a daycare, as happened about a year ago just a few blocks away, you do have reservations. And, to be sure, if anything serious had ever happened to a family member – or if my kids paid more attention to their surroundings – I might be telling a completely different story. But, with hindsight, this was a good move for us: we own an affordable home in downtown Vancouver, and I don’t think we could have pulled that off if we hadn’t been willing to take a chance on a dodgy neighbourhood. So, if any parents out there are considering a similar choice, it can be done, but you will need to stay alert, avoid the clearly problematic individuals and situations, and hope that your kids won’t be exposed to anything too extreme. And good luck, because the next wave of real estate refugees will be moving even closer to ground zero.”

- excerpts from ‘Mike Comrie: Raising kids amid the hookers, junkies and drunks of Vancouver’s worst neighbourhood’, National Post, 20 Apr 2012
[hat-tip Aldus Huxtable]

You Go, Girl! – “She was ready to start climbing the property ladder and he wasn’t. She hopes women have the courage to leap confidently into homeownership. Work within the budget (she laughs).”

“I have a single friend sitting on the fence between buying and renting. She’s financially ready to make the leap into homeownership, but hesitant about doing it solo in case she meets someone soon.
Waiting for Mr. Right can derail a number of women’s homeownership plans, according to Sandra Rinomato, a realtor and owner of a full-service brokerage in Toronto.
“I can’t tell you how many times a client asks what she’ll do if Mr. Right comes along, and I always say if he does, then okay, you can keep the investment in your portfolio and rent it, he can move in, or you sell it and take the equity,” she says. She speaks from personal experience, having at one point purchased property on her own while in a serious relationship. She was ready to start climbing the property ladder and he wasn’t.

More and more single women are entering the market, making up roughly one in four new buyers, according to Ms. Rinomato, who is currently hosting the new HGTV series, Buy Herself, focused on helping singles navigate the world of real estate.

“If I could pull a rabbit out of a hat I would, but we work within the budget,” laughs Ms. Rinomato. Searching outside your financial scope can derail the process, or financially stretch you further than you should be if you fall in love with something a few rungs out of your reach on the property ladder.
Aside from down payment, monthly mortgage costs, and emergency funds for the unexpected, it’s your responsibility to have a grasp on the countless other costs associated with buying your first place, like inspection, legal, and appraisal fees.

Ms. Rinomato says it’s not unusual for solo buyers to have unrealistic requirements. … A strong team in your corner is also essential for a first-time buyer, and an understanding of the steps of buying, and how to will help you make the right investment decision. … She hopes her new TV series inspires women to at least ask if this is the right time to buy and not to hold back because they’re scared, or don’t think it’s an option, or think Mr. Right is around the corner. More importantly, she hopes women have the courage to leap confidently into homeownership if the time and the investment is right.

‘Finding the right home, with or without Mr. Right’, Angela Self, G&M, 20 Apr 2012 Angela Self is “one of the founders of the Smart Cookies money group and writes a weekly column on managing debt and saving money at the Globe and Mail”.
[hat-tip theragingranter]

Careful feminist analysis of the article would be appreciated; any takers?
“A strong team in your corner is essential for a first-time buyer”: let’s guess… a realtor and a mortgage broker, right?
– vreaa

From the comment section of the G&M article:

“Is anyone else amused by the fact that a show enticing single women to buy into the very peak of the condo bubble, and thus committing financial suicide, is being marketed as “female empowerment”? I’m thinking it’s time to short Lululemon stock. … In a few years HGTV can do a follow-up program called “Sell Herself”. That’s what many of these women will be doing in order to hang onto their negative equity condos.” – Alistair McLaughlin

Spot The Speculator #67 – “It’s a home, it’s an investment — a bit of both.”


Melissa Yan, Yaletown condo purchaser, RE marketer.

“Melissa Yan wondered why she had to wait until she got married to buy a home.
She decided she didn’t. So the 28-year-old, who works in marketing for Magnum Projects, opted to jump into Vancouver’s hot housing market at Christmas in 2010.
She picked up a 600-square-foot, one-bedroom apartment in Vancouver’s trendy Yaletown district in a design that would fit her needs and a price tag that would allow her to enter the market and establish equity so that one day she could get an even bigger house.
“I have always known I had wanted to own, so I made it a priority for myself to put aside money for the past five years,” says Ms. Yan, who was living with family as she saved. “It’s a home, it’s an investment — a bit of both.”
Ms. Yan, who says her work in real estate convinced her she needed to buy, is one of a growing number of 20-somethings who are no longer waiting until they get married to purchase a home for the first time. She is part of a trend that adds an extra stage to the housing market.
Traditionally, people bought their first property upon marriage, looked for a move-up when their families got larger, scaled down as the kids moved out and then were off to the retirement home.
But the new reality is that more first-time buyers fit Ms. Yan’s profile.
A TD Canada Trust survey this spring found 45% of first-time homebuyers were going it on their own rather than with a co-purchaser.
“I would say a lot of my friends are doing this,” says Ms. Yan. “People are getting married later in life, too. Weddings are so expensive. I figured I would invest in an asset for now. I know it’s not my final home.”
– from ‘Mingles’ moving housing markets, Financial Post, 19 Nov 2011 [The above is the later, 21 Nov version, of the article. See below for explanation.]

Well, it turns out that Melissa’s Marketing work is actually directly related to RE marketing… From her public LinkedIn profile:
“Manage strategic real estate project marketing programs for clients. Responsible for marketing strategy, public relations, forecasting, budgeting, lead generation, event planning, media buying and negotiations. Initiate and manage strategy and direction with graphic and interior designers for marketing collateral, sales centers and show suites.”
I don’t know of we should be outraged, disgusted, sarcastic or amused by such an article… I just want to point out that FP just loss all its little remaining credibility it had in my mind for not disclosing such “details”.

– from Makaya at VREAA 20 Nov 2011 [who cited 604serf at VCI 20 Nov 2011 ("Really, “interview” someone who works in Condo Marketing about how they’re buying a condo…and not disclose that? Seriously??") for picking this up]

Note: The original article, posted 19 Nov 2011, read “She decided she didn’t. So the 28-year-old, who works in marketing, opted to jump into Vancouver’s hot housing market at Christmas in 2010.”
The ‘for Magnum Projects’ was added in a later edit, seemingly in response to observations such as those by 604serf and Makaya above. – ed.

Update: 604serf, in the comments section below, confirms that they did indeed e-mail the editor of the FP with their observations and that the article was changed as a result. Here is the response they got from the FP managing editor:
“Regarding your note about the story on single people buying more condos, We have confirmed that you are correct and the person used in the story works in condo marketing. If we had known this it would have been disclosed, and that change has been made in the online story.
Thank you for your continued readership and attention.
Cheers,
Grant”

Greenhorn (the Vancouver RE video archivist) forwarded this comprehensive ‘before’ and ‘after’ account, for the record:

Original article started like this:
[quote]Melissa Yan wondered why she had to wait until she got married to buy a home.
She decided she didn’t. So the 28-year-old, who works in marketing, opted to jump into Vancouver’s hot housing market at Christmas in 2010.
[/quote]

Was changed to this:
[quote]Melissa Yan wondered why she had to wait until she got married to buy a home.
She decided she didn’t. So the 28-year-old, who works in marketing for Magnum Projects, opted to jump into Vancouver’s hot housing market at Christmas in 2010.
[/quote]

And this 5th paragraph was changed from:
[quote]Ms. Yan is one of a growing number of 20-somethings who are no longer waiting until they get married to purchase a home for the first time. She is part of a trend that adds an extra stage to the housing market.[/quote]

to:
[quote]Ms. Yan, who says her work in real estate convinced her she needed to buy, is one of a growing number of 20-somethings who are no longer waiting until they get married to purchase a home for the first time. She is part of a trend that adds an extra stage to the housing market.[/quote]

Screen capture of original 19 Nov 2011 article here.

Other choice quotes from the FP article:

“They want to jump on the equity train right away and build equity.”
– Peter Simpson, chief executive of the Greater Vancouver Home Builder’s Association

“People are getting married later, so there is a need to buy a condo sooner. People go to school later; the whole life cycle has changed.”
– Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada.
[Orwell? No, more like Kafka. -ed.]

“They’re not getting married, so they should get on with their financial lives. A home is a great asset. From a financial planning perspective well down the line, these people who bought a home and built up equity in their home from a young age will have an asset that will give them the confidence to retire.”
– Scott Plaskett, a certified financial planner in Toronto
[Worked great for the last 30 years, what could possibly go wrong? -ed.]

“I am 36, an IT consultant, and my wife, 34, is a teacher. Combined we make 140k/yr. We live in Cloverdale. You have to make sacrifices in life. It’s not unusual to have to make these tradeoffs in a large city.”

“I am 36 and an IT consultant and my wife is 34 and a teacher. Combined we make 140k/yr. We bring home roughly 7k/mo and our mortgage payment is $1200/mo. We live in Cloverdale.
Instead of buying up more and more house for myself, I put $1500/mo into my RRSP’s and another $200/mo in my kids’ RESP’s.
And if it wasn’t for the daycare costs (to the tune of $1200/mo), we’d be doing even better. I have no car payments btw either as both my cars are currently paid off as is my motorcycle.
You have to make sacrifices in life – live in an East Van condo or live in Langley. You can get a nice place in Langley for under 500k. But you’ll spend a lot of time commuting.
It’s not unusual to have to make those tradeoffs in a large city.”

– rainman_104 at reddit.com discussion of ‘Going Going Gone’, 13 Oct 2011

It’s common in Vancouver that, when owners are advising prospective buyers, they talk of ‘sacrifice’.
But there are different kinds of ‘sacrifice': the ‘sacrifice’ that comes with austerity and prudence, which is admirable, and the ‘sacrifice’ of accepting very poor value, which is foolishness.
– vreaa

Spot The Speculators #64 – “I was thinking before we bought that it might be difficult, it might be a big challenge, but when we got the home we found things were okay.”


Kamal and Raman Khangura have a new home in Abbotsford — and the mortgage to go with it.

“Young homeowners Raman and Kamal­preet Khangura say disciplined saving is the best way to banish financial fear.
The Abbotsford couple have so far kept their heads above the debt that threatens to drown many young British Columbians. The Khanguras keep an iron grip on their spending and salt away every dollar they can.
In February, the couple — without help from family — bought a $527,000-home in Abbotsford, paying $27,000 down. They have a $2,000-a-month mortgage payment.
That’s a lot of debt. And Raman, 26, admits to having had some passing worries before buying the house.
He reassured himself by going over the details of the financial plan he and Kamalpreet, 27, had prepared.
“I was thinking before we bought that it might be difficult, it might be a big challenge but when we got the home we found things were okay,” he says.
“We’re careful with our money.”
The Khanguras have no other debts and are determined to keep it that way. Credit cards are paid off each month. Their line of credit will only be tapped in the direst of emergencies.
The $1,000 a month they get in rent from a basement tenant is tucked into RRSPs. Mortgage payments come strictly out of their salaries.
Kamalpreet works as a certified dental assistant. To boost their income, Raman works two jobs — a full-time position managing a trucking repair company and a part-time bookkeeping job.”

– article and image from ‘Young British Columbians struggle the hardest with debt’, Paul Luke, The Province, 29 Oct 2011

20-somethings. 2011. $27K down, $500K mortgage. “Careful with money”. (eyeroll)
Repeat: 20-somethings; modest income; $527K purchase.
This is not “care”, this is not prudence, this is gambling.
For people who “salt away every dollar”, it’s going to be torture for them to watch a torrent of downward prices leech away all of their savings and then some; perhaps up to five times their savings. – vreaa

(BTW, what are the likely mortgage variables that get you $500K for $2K per month? Are they on variable rate?)

When Price Cuts Aren’t Price Cuts – Yaletown Condos at $650/sqft


928 RICHARDS ST. NO. 1906, YALETOWN, VANCOUVER
11 yr old highrise; 750 sqft; maintenance $321/month
ASKING PRICE $499,900
SELLING PRICE $491,000
PREVIOUS SELLING PRICES $445,000 (2008); $242,000 (2002); $185,681 (2000)
TAXES $1,954 (2010)
DAYS ON THE MARKET 14
The Action: When this two-bedroom-plus-den corner suite at the Savoy was listed earlier this year, there was a surplus of properties that lingered on the market as buyers took their time to make a selection and negotiate on price. About a dozen buyers promptly viewed this condominium and one eventually made a proposal just shy of the asking price to seal the deal.
The Agent’s Take: “The average price per square foot for units in that building over the last year was $652, so we were a bit concerned that given the … market conditions for condos, we might have to go below this average. However … [this] sold higher than the average price per square footage, [so] clearly location and quality of building is still key, and of course, pricing sharply ensures the condos don’t sit on the market too long and become stale.”

– above ran as ‘Oversupply cuts price for Yaletown condo’, by Syndia Yu, G&M, 3 Oct 2011

Archived here for the longer term record.
This sold for over average price per sqft, so there was no ‘cut price’ involved.
The $9K off ask (2%) is a rounding error, not a price cut.
Keep the long view perspective: condos like these will sell for $200K-$250K in the trough. That’s a price cut.
– vreaa

It’s Official: No Longer “Best Place On Earth” – “Best Place on Earth” was a “broader brand” used only in B.C. “to help motivate British Columbians.”

In April 2007, VANOC CEO John Furlong (left) and then Premier Gordon Campbell unveiled licence plate naming B.C. ‘The Best Place on Earth.’

“BC No Longer Calls Self ‘Best Place on Earth’.
The boast is vanishing from official branding. Where did it go, and why?

The “Best Place on Earth” and the sunshine-and-mountains logo (is it setting or rising?), was launched in 2005 and registered with Industry Canada’s Canadian Intellectual Property Office the following year. It appeared on ICBC’s Vancouver 2010 Winter Olympics licence plates in 2007, replacing the traditional “Beautiful” above a photograph of Mount Garibaldi and the VANOC inukshuk logo.
But something funny happened on the way to the biggest show on Earth. When Campbell put on his salesman-in-chief hat and attended the Beijing Olympics in 2008, he called British Columbia “Canada’s Pacific Gateway” instead of the “Best Place on Earth.” With a pinch of sarcasm, I asked him, why? If B.C. is really the best place anywhere, why not tell the world?
First the world has to find B.C. on the map, he said.
Jobs, Tourism and Innovation minister Pat Bell offered few hints about the slogan’s fate when he was grilled by NDP critic Spencer Chandra Herbert in a May 5 budget estimates debate.
“Yes, I am proud of the province and I think it’s the best place on earth, but it was probably not the best way to attract people from other parts of the world who think their little section of the world was the best place on earth,” Chandra Herbert said to Bell. “I’m just wondering: is ‘best place on earth’ shelved for now, and we’re now not going to see that anymore, and we’ll see ‘Super, natural B.C.’ in its place?
Bell answered that “Best Place on Earth” was a “broader brand” used only in B.C. “to help motivate British Columbians.”

Since Premier Christy Clark’s March swearing-in, the bold advertising slogan of the Gordon Campbell era has slowly and quietly disappeared from government websites and letterhead. You can still find it if you look, but blink and it could be gone.
How could a province with a misery-filled neighbourhood like the Downtown Eastside and a nation-leading child poverty rate ever call itself best-on-Earth in the first place? How did the politicians and bureaucrats decide to deep-six the slogan?
The decision, I am told, was not even of the “back-of-the-napkin” variety, because no scrap of paper was used to record it.

– Bob Mackin, TheTyee.ca, 4 Oct 2011
[hat-tip Nemesis]

So, now we understand. We have always been puzzled by the claim, this explains all.
The slogan was not an actual claim that BC was the “Best Place on Earth”, it was used “only in B.C., to help motivate British Columbians.”
So, citizens of BC, how does it feel to have been treated all these years like children; like the second to last team in the local Under-7 hockey league?
The real problem is that many folks lapped it up. And, relevant to us here, it helped push them to reach for that much more debt, so they could overextend even further to buy that much more unaffordable ‘BPOE’ real estate.
“C’mon, you can do it, you can do it… Bid another $75K beyond your means! You can do it! Stretch, stretch…!”
– vreaa


UPDATE: More on this story from Doug Ward, Vanc Sun, 7 Oct 2011
“My initial reaction is ‘hurray,'” said Peter Williams, director of Simon Fraser University’s Centre for Tourism Policy and Research, about the slogan’s demise.
“It was presumptuous. If it was meant to endear people to us, it probably wasn’t going to do that given that a lot of other people live in other parts of the world that are pretty nice. And probably quite competitive to B.C. in many senses.”

[Off with his head! -ed.]
Government communications director Greer said the slogan was aimed at British Columbians and not for a global market. “It was more of in-province pride thing.”
[See: appropriate for 6 year olds, above. -ed.]
“Canada Starts Here” is also the brand used in the marketing of Clark’s new jobs strategy.
[Actually, wouldn't it be just as accurate to say "Canada Ends Here" ? -ed.]
B.C.’s tourism brand continues to be the venerable “Super Natural British Columbia.”
SFU’s Williams said the “Super Natural British Columbia” brand has gone through “many reincarnations but it’s held up pretty well and I thought this ‘Best Place On Earth’ was creating some confusion in the marketplace that we didn’t really need.”

[Whereas "Super Natural British Columbia" was a big hit with visiting goblins, gremlins, elves and apparitions. -ed.]

Guerrilla Advertising On reddit? – “Just moved here, and have been renting a place for 4 months. My wife and kids (3 boys) are now coming to live here with me. I need to buy a home.”

“Just moved here, and have been renting a place for 4 months. My wife and kids (3 boys) are now coming to live here with me. I need to buy a home. I have a $800,000-$900,000 budget. I work in downtown. What are some good, safe, and clean neighborhoods I could live in? A place where my dollar will go far and my kids could grow up.
Any good neighborhood in the GVRD would be good.
Please tell me what neighborhoods you would recommend,
Thanks”

– thread at reddit.com ‘Need to Buy a Home in Vancouver’ started by ‘MiamiToIbiza’, 3 Oct 2011. [hat-tip matt at VREAA]

A discussion ensues, with bubble/no-bubble exchanges.
Through the discussion ‘MiamiToIbiza’ elaborates as follows:
“Coming up with a $1,000,000, is really difficult. I’m Only 32 years old, and banks consider me a risk at for a million, but I have approval for $750,000 loan. I plan on putting $150,000 in my self, I can’t afford to put in $250,000.”
“Looking for 2-3 bedroom +2-3 bath, at least 3000sqf home.”
“I may have my parents come and live with me.”
“I don’t think I’ll be buying in the proper City of Vancouver area.”
“I don’t think were in a bubble, we are very stable. Vancouver is Port City, a gateway city for people and goods.”
“I’ve been looking at Fraser heights, It seems really nice, I’m putting an offer on this home: http://www.cotala.com/1648 . THANKS FOR THE HELP VANCOUVER”


Gee, this guy went from asking an initial very open exploratory question about which area of the city to consider living in, to putting in an offer on a specific home, all in the space of 24 hours??
If we were in any way cynical, it’d occur to us that this reddit post just may have been a bit of guerilla advertising by a realtor or seller. But, no, Vancouver RE gets people to do crazy things, right?
The only three other posts on reddit from ‘MiamiToIbiza’, all in the last 24 hours, criticize teachers, Alberta and Winnipeg.
And another post thread started by ‘MiamiToIbiza’, also on 3 Oct 2011,   just hours after the first, reads:

“I bought a home
Got a home in Fraser Heights, everything is now getting finalized.
HOUSE: http://www.cotala.com/1648
It was slightly hire
[sic] then [sic] my budget but I’m happy. (Parents put in some money, THANK YOU MOM AND DAD)
Let me know what you think of the home”
.

Yep, we’d say it’s fair to conclude that this is guerilla advertising.
(Anyone who knows otherwise, please let us know).
The market is deteriorating.
Are Vancouver sellers and realtors becoming desperate?
Oh, and what does the BCREA have to say about this kind of advertising?
– vreaa

Point Grey Standard Benchmark – 4444 15th Ave W; $2.7M Ask



4444 W 15th Ave, Vancouver (Point Grey)
2,401sqft SFH, built 2001, 33ft x 123ft lot
Ask price: $2,698,000

Noted here for:
1. Benchmark price of standard size newer build, on standard lot
2. Ballsy use of 4444 street number

Any readers with prior sales history? – ed.

Borrowed From Dad To Buy Teeny $510K Yaletown Condo; LOC For Closing Costs; Condo Fees “Too High”; $131K Other Debt; Lexus/Toys/Maui – “This guy is in way over his head.”

“I have a friend who has been driving me insane about how he just thought Yaletown is just the greatest place. He was looking at a teeny condo, so small that I could touch the walls with outstretched arms. It was $510K. He borrowed money from Dad… and then he realized he didn’t have the money for closing costs. He put it on his line of credit! Now he tells me, three weeks in, that he is concerned the $356 a month condo fees are too high. This guy must make high dough, but he is in way over his head.
He was kind of nervous at lunch today about the above. Then he dropped the bomb on me. He still has student loans of $61K and his credit card debt on five cards is nearly $70K.
After I gathered my thoughts, I was still speechless.
This gent seems to think everything will be fine.
I paid for lunch, of course.
How many poor schnooks are in this kind of jackpot?
He has a leased Lexus, and all the toys and great clothes and goes to Maui on the credit card every year.”

– ‘Bill Gable’ at greaterfool.ca 15 Sep 2011 12:59am
[hat-tip to 'Bailin' in BC', who notified us by e-mail]

How many in same boat?
When pullback comes, condos crash.
Move-upper-wannabes cease-up.
Whole market crashes.
– v.

Complex Pressures On ‘A Simple Man’ – “My rant about the Asian mentality toward housing. My getting married and having children is, to my parents, the sum total of my goal for existence. I can’t move out of Vancouver even if I want to.”

“I immigrated from Vietnam 14 years ago. We had about the same culture and mentality as Chinese people. My parents are both teachers, and teachers in Vietnam get paid peanuts. That is an issue that angers me, but I will not dwell on that. I just want to tell my perspective as well.

We came to Canada with practically no savings. My mother forbid me to sell the house in Vietnam to get some seed money. She would have a relative of ours stay there instead, because in her mentality, once a family (and by this I mean an extended bloodline of 20-30 people) acquires one or more houses, relinquishing it is unthinkable.

My parents have been working a full time job and a part time job for most of their time here, clocking in 60-70 hours a week average. Meanwhile I have been going through university, maintaining A to A+ grades and getting scholarships, while working 25 hours a week part time. I also work full time + part time (60-70 hours week) whenever not in school. I am not saying this out of arrogance. I burn away my health and lifespan to maintain this sort of productivity, and trust me, I am not happy living like this. And we also skimp our spending and lifestyle to completely unimaginable levels. I will spare you the details. But the alienation from my parents, family, and community in general is a worse alternative.

Our family did this so that we could buy a house in Vancouver as soon as we could so that I can get married. It sounds absurd to you but my getting married and having children is, to my parents, the sum total of my goal for existence. To understand how much weigh my parents place on marriage, children, and house, I will tell you the anecdote that I once sat through a 6-hour long lecture about the need for me to buy a house and court more girls the night before the final round interview for a 6-figure job (needless to say I did not get the job). [My friend] Julian [Lee] is quite civil in his post about this [VREAA, 7 Sept 2011], but his parents are also significantly more easy-going than mine, and so he had not felt the pressure to buy a house as keenly as I do. And yet, my parents are still a long way from the true “Asian fanatical parents” out there.

Neither Julian nor myself belong to the “rich and probably questionable Asian” group, by the way. Both of our families are honest, upper-middle class at best, and just very hard working.

I managed to buy a house in the end of 2005 and rent out half of the house. I have been comfortably paying down the mortgage for the last few years, but the story didn’t end here…

Recently, I told my parents that if I sell this place and buy in Surrey or Port Coquitlam, I would be able to get a much better house and yet pay off all the debts, and actually still have a bit of money to spare. I got a week-long lecture about how the location is far from the city center, dangerous (because it is far from the city center), etc. etc. I will spare you the details because it all doesn’t make much sense to me either. I know that my parents were just frightened with the prospect of giving up a house because it is, in the community and to my aunt’s family who also live in Vancouver, a lost of status.

I also told my parents that I would like to get a job in the US and live there. My parents then gave me another earful on how I am irresponsible and leave my old parents alone to deal with the renters in half of my house.

There you go, my rant about the Asian mentality toward housing. Perhaps a generation later, this mentality may fade. But right now, I can’t move out of Vancouver even if I want to. Julian and I had talked for a long time about the subject of Vancouver RE, and I suspect that he is as stuck in Vancouver as I am.”

(Afterthought: My parents bought their first house in Vietnam the same way, through ridiculous amount of hard work and sacrifice of lifestyle. They did this because, tada, my dad needed to prove to his own family that he could buy a house before marrying my mom.
To me, that attitude is nihilistic and, eh (let’s not insult my parents here) wisdom-challenged, but it is the attitude of a people, a society, immovable regardless of my wish.)

- ‘a simple man’, at VREAA, 9 Sep 2011, 1:18pm

Your’re obviously not that ‘simple’ a man. Many thanks for a story well told.
We trust that your satisfaction with life will increase, and that you’ll be able to eventually enjoy the results of your labours.
We suspect many readers have had experiences with parental ethics that allow us to empathize with you.
We hope that the extreme infatuation with home ownership that you describe in some individuals cools and moderates in the years to come. We’d venture that it is not good for a society to have such beliefs driving housing ownership costs to irrational levels. (Yes, we’re aware that this is a judgment call.)
We suspect these apparently firmly held beliefs will be significantly challenged when prices drop. Nobody, regardless of cultural background, likes assets that lose value. So, just how ‘immovable’ are those beliefs?
What has happened elsewhere in the world to individuals with this housing ethos, when markets have gone through crashes?
Any Vietnamese Dubliners or Chinese Las Vegans out there to share their experiences?
– vreaa

Canucks Hockey Player Expresses RE Market Hope – “We finally bought in the Vancouver market and hope it keeps going up”

Now that he has the security of a five-year, $23-million with a no-trade clause, Bieksa said he felt confident enough to buy a house here last month.
“We finally bought in the Vancouver market and hope it keeps going up,” said Kevin Bieksa [Vancouver Canucks defenceman].

The Province, 7 Sept 2011 [hat-tip Vansanity at vancouvercondo.info]

“I’m not a money guy. I know about money, I understand its value, but it’s not my main priority. I think everybody takes less to play here. It’s such a great organization that you want to be here. So if you want to be here, you have to take less, that’s just the culture.”
– Kevin Bieksa [The Province, 28 Jun 2011] (when agreeing to his new contract).

“I am a first generation immigrant here to Vancouver. I bought my place last year. I expect a correction of 10% over 3 years. People always ask me: why do the immigrants come here?”

Julian Lee at VREAA 29 Aug 2011 1:56am & 7 Sep 2011 12:08am -
“I am a first generation immigrant here to Vancouver. I came about 20 years ago with my parents from Asia. This is a beautiful city and I am proud to say that I am now a Canadian and have completely integrated into the culture. I have a particular perspective on the Vancouver real estate bubble as I am very familiar with both cultures. Here are my 2 cents:

1. Are there rich asians who are buying houses? Yes, there are a lot of it. But they are not the majority of real estate purchasers. They make up purchases in some of the most expensive areas. But it doesn’t justify that all areas should go up by the same percentage. For example, if you go to an open house on some of the Westside neighbourhoods, you’ll be amazed by their purchasing power. It’s incredible, beyond anything that we have seen here, completely consistent with other stories. The street is loitered with expensive cars. You can also take a look at the parking lot of some west side schools, their kids roll in far fancier cars than their teachers. But, if you are to go to an open house say in the commercial area, these guys are nowhere to be found. So it’s not true that they are the single most important factor in driving up house prices in every area, but they do certainly make a difference in some areas. I think across the entire lower mainland they don’t make up the majority as they almost never touch anything in Surrey (except South Surrey White Rock) or Langley. For now they mostly operate in Vancouver, Burnaby, Richmond (until the Tsunami, notice how Richmond’s price stopped flat at the same time as the earthquake), and West Van. As for the 5% foreign buyer stat that have been bandied about here, I would be very curious to ask who is classified as a foreign buyer? Is an immigrant a foreign buyer? Is it simply a non-canadian citizen or a non-canadian resident? That does make a difference because a lot of these rich asians park their wife and kids here. So their family is technically canadian residents, are they still considered a foreign buyer at that point? The final thing is, almost all of them will buy. They will not rent, every investor immigrant that lands here from Asia will buy a property of some sorts. They really don’t care about how high the price is, we have not reached a level that would make them feel that we are expensive compared to a place like Beijing.

2. About this bubble. Is there a bubble? I would say there probably is. But it is not as big as one may imagine. Here is why. All the statistics that have been gathered have been compared to western stats. Meaning that all rent to own ratios, average cost to income ratios, etc, are all using historical statistics in the Vancouver / Canadian markets. But that’s not necessarily correct. Because the demographics of Vancouver is shifting. When you look at any given city’s ratios, you need to take a look at their demographics. So for example, if your city is 20% chinese, I would use Beijing’s ratios multiplied by 0.2. If the city is 10% Indian, then use Mumbai’s ratios multiplied by 0.1, etc. Basically, I would take into account the cultural differences of these ratios. Taipei’s rent to own ratio is a lot worse than Vancouver’s, to the tune of double or triple as bad. This is just an example, do I expect that Taipei or Beijing will ever correct to Western levels? Not a chance. It’s just the way that different cultures value real estate. I would be curious what that ratio would look like once the cultural differences have been considered. I would imagine that we would still be higher than the number, but it wouldn’t be as astoundingly high as it currently is. So while I feel a correction is in order, I would be shocked if Vancouver housing crashed.

3. People always ask me this, why do the immigrants come here? I am a Canadian Citizen who immigrated from Asia when I was young. I have to say, it’s the best thing that has ever happened to me. To understand the core immigration issue, one must examine what is important to rich asian people. Believe it or not this all starts with the one child policy in China. As a result of this policy, Asian families, who normally are very children focused, have become even more so. For anyone who has ever received an education in China, he/she would know that it is worse than hell to go through the highschool final examination (the so called gao kao). Basically, you prepare night and day since the age of 15 till you graduate when you will take a national university entrance exam which will determine your fate for the rest of your life. Like it or not, whether you are rich or poor it does not matter. Everyone needs to go through this. No matter how rich you are, places in the best Universities in China cannot be bought with money, no matter how much. Anyways, no parent wants their kids to go through this. So they must find a way to get them abroad.

Now you ask, there are a ton of places with good education systems, why here? Well, when you only have one child, you really don’t want anything to go wrong with this kid. The only other person that you trust with this child is your wife. So the wife must also immigrate with the child. However, unlike the child who can probably integrate into any community easily, the wife can’t. I am not even 30 and I have to say it is hard for me to drop into somewhere say Germany and integrate easily into the community. Try learning another language when you are 40 and you’ll find out in a hurry that it is not that easy. So you need a huge chinese community where the wife can pretty much not learn english, or know very little of it, to get around. Sound familiar now?

Now, it may sound absolutely absurd to us, but everytime I travel to the states for business or pleasure my relatives get worried. Why? Because there is this nice misconception that the US is dangerous amongst chinese circles. Why? Cause they have guns. Now, remember, the kid is the most important part of the family, do you really want to send him to somewhere where anyone can carry a gun? Not likely.

This really narrows the places down to a few in the world. You are looking at Vancouver, Toronto, Melbourne, Sydney, Singapore. At this point, you have to look at yourself, now imagine that most of your time is spent in the bustling chinese cities where air pollution is a huge problem, where the only thing green you see if likely the little patch of grass the government decided to put there to show the foreigners, where all you see is skyscrapers, etc. You only have about 3 weeks vacation each year, do you really want to go to Toronto? I have not heard one investor immigrant who have ever said they prefer toronto to vancouver. Vancouver is as beautiful as any city in Asia. And here is the kicker, we are a relatively new city, we bring an air of invigoration to some of these people who simply see a better lifestyle here.

Now, you are down to Vancouver and the two Australian cities. Well, unfortunately for us, the Aussies seems to be perceived as more racist than us nice Canadians. At least in some chinese circles. And, asian people aren’t adventurous like their Western counterparts, they tend to want to stick to a tried and true formula. So, as the first wave of rich asians have landed here and shown that their families will settle nicely in this City without much issues. More will follow. They do NOT take the path less traveled, they like the one that has been stepped on by thousands of people.

Finally, one last thing to consider. It is very difficult to get money out of china. If you are very rich, you need to have an excuse to get your money out. Well, guess what, thanks to our abundance of resources, these guys have a nice excuse to get their money out. They can say that they are coming here to buy resources. Much easier sell to the government.

So there you have it, if you look at all these factors, you quickly realize why it is that they don’t go to Miami, or Phoenix, or Portland, hell, or even Seattle, but they come here.

That said, to cool off the bullish camp. A few thousand immigrants does not make up the whole market, so you will still get the swings, but they will come and snap up anything they can get their hands on if we do go down significantly. Because they know that in this is perhaps one of the rarest places on Earth that fits everything they and their peers are looking for. The ones who are here are buying because they know more are coming. There is a three year waiting queue in Beijing for applications. The scariest part is there have not been any significant efforts to market Vancouver abroad. This is all done by word of mouth.

So there are my 2 cents, I wish everyone good luck in this market. I am not convinced that the market will go up forever as I am intelligent enough to know that no market acts that way. I expect a correction of about 10% over the period of say 3 years. Then it might still go up a bit after that. But I think it’s unrealistic to expect ridiculous returns that we have seen. I bought my place last year, but I had to search very very hard to find the best possible deal in the market in order to hedge myself against a correction. I am actually really glad that there is this forum as it is good to hear a contrarian view over the normal “yeah it only goes up comments”.”


Thanks for sharing your story and your thoughts, Julian.
Your argument that Vancouver is an attractive city for Asian families is persuasive in a broad fashion, but hard to actually quantify. It is a form of the ‘Limitless Demand Argument For Ongoing Market Strength’. It amounts to ‘Vancouver is attractive to Asians’ + ‘There are lots of rich Asians’ = ‘Ongoing price strength in Vancouver ad infinitum’. We have always had the position that there is a chance of this playing out, but that that chance is low (less than 5%).
Many aspects of human behaviour are similar across different cultures, and if you’re a regular reader here you’ll know we expect all market participants to respond in a similar fashion to a pullback in what is an overextended speculative market driven largely by very cheap financing. Markets behave under the same principles in Beijing, Mumbai, Taipei, Europe, and North America; we expect human responses to a failing Vancouver RE market to be similar across cultures. Namely, many buyers will sit on their hands, some sellers will come to market as prospects of ongoing steady gains fade. People almost everywhere have recently learnt that when assets start falling, they can fall a lot. We think they’ll realize that about Vancouver RE in good time.
Asian buyers may well have been attracted to Vancouver, and see it as a safe-haven, for the very reason that prices seem bullet-proof. We expect Vancouver RE to be a lot less attractive to ALL players on the way down.
In the relatively brief 2008-2009 dip, all Vancouver buyers, of all nationalities, disappeared, and only came back when money was handed out for free. There will be no such springboard under the market when it next weakens.
If your way of thinking is true, then we would expect to see an increase in Asian buying in the event of any future price drops. Personally, we don’t see that happening, and expect the opposite.

We’d classify your prediction of no more than a 10% pullback over 3 years as a prediction of ongoing price strength; after a run-up of hundreds of percent, such a ‘correction’ would be nothing more than ‘noise’.
We’ll see how our various predictions play out in the coming years. It probably won’t be long before we get a chance to see how market participants respond to an initial price pullback.
Thanks again for your posts, please continue to contribute here, and all the best with your endeavours.
– vreaa

“Several bears I know that were sitting on the sidelines have finally thrown in the towel and bought in the past couple of months.”

“Several bears I know that were sitting on the sidelines have finally thrown in the towel and bought in the past couple of months. Perhaps a contrarian indicator that a top is near?”
Troll at vancouvercondo.info, 31 Aug 2011 11:25am

If we’d kept a list of the succession of contrarian bells that have rung for this market over the years, it’d be might long…
But, yeah, bears capitulating is always noteworthy.
Poor schmucks, they should have come to the meetings.
– vreaa

“As soon as prices dip, I will upgrade immediately. And almost all my peers have the same plan.”

“There are many young people in Van who have saved up large sums of cash for down payments [for properties] they still have yet to afford. When properly values drop to a certain value, they will fill the void. I’m not saying that we will be able to buy a $600K house (I can’t), but most of us now are beginning to seriously look into starter homes (1 bedroom/den condos). I spent $400K on a 1 bed/den (I’m in my 20’s still), but as soon as prices dip, I will upgrade immediately. And almost all my peers have the same plan.”
Vinny17, Globe & Mail, 3 Aug 2011, 3:12pm

Doesn’t add up.
Can’t afford a 600K home; buys a $400K 1bed/den. Then, when prices drop, expects to be in a position to “upgrade immediately”?
Surely, with price drop, all equity in $400K property will disappear (if not, why can’t he afford a 600K home now?).
In a crash, almost all move-up-wannabes are frozen in their current properties, with substantially reduced equity in those properties.
Many believe that prices can’t drop substantially because pent-up demand will step in at small pullbacks, such as 10%-off.
We disagree, we believe that demand will drop with falling prices.
– vreaa

Unnamed Eastern City – A Fine Way To Buy A House

This article on what sensible home buying should be like from ‘House Hunt Victoria’, 12 May 2011 reproduced here with kind permission of ‘HHV’.
No line ups in the rain?… No competing offers from a half a dozen other parties in the driveway?… No cellphone bids from foreign lands?… No 400K over-ask bid?… No shouting?… ‘Conditions’? [what are those? -ed.]…
The respect for the human aspect of the transaction stands out. ‘HHV’ and Froogle Scott share similarities in the way they appreciate homes as  personal artefacts.
[Note: We continue to believe that housing in Canada is an overheated speculative market, more so in Vancouver than anywhere else.]

—-

Buying: the search and the offer

“We’ve been at it for four long years. This search was very easy. We used a poor facsimile of VREB’s Matrix or PCS system and the MLS® website to find the houses we wanted to view. Our REALTOR® scheduled appointments. We gave her a list of 30 houses we wanted to see, 15 each day for two days. After the first day, we asked her to add 5 houses she thought we should see based on our reaction to what we’d already seen.

Day one was very fast. We’d planned to be at it for around 7-8 hours. We were done in four. Let’s just say we get to “no” very quickly. Mrs HHV came up with some handy acronyms for our listings sheets:

* NWIH = No way in hell
* NATP = Not at this price
* WAO = Worth an offer

At the end of day one we had two WAOs on our list. We repeated the process again the next day, in almost as little time. We found the home we bought around mid-day. We looked at half a dozen more afterwards. By the end of our two-days of looking we had 5 WAOs on our list and one house we thought we really wanted.

We spent the rest of that day doing what we always do when we have a big decision to make. We compared the status quo to the anticipated outcome of the action taken. Action won out. We decided to schedule a second showing and, if it showed as well the second time, make an offer. It showed better the second time.

Here’s an interesting side note: both times we viewed the home, the owners were present. Normally agents advise against this. The mobility of the owners was an issue, so they chose to stay home. We were very glad they were present. They made themselves scarce and weren’t an issue for us. But they were a big part of the gut feel we got while inspecting their home. They were the original owners and their pride showed.

When we went to make the offer our agent showed us what had sold in the neighbourhood over the previous six months. Like many neighbourhoods in Canada, prices were on the downswing. The asking price was below the assessed value, only marginally so. The home had only been on the market a few days. Our agent suggested a price. We suggested another.

The negotiation would have been very simple if the listing agent hadn’t been trying to take the day off. We had a few conditions on the offer: appraisal, inspection, financing and a change to the possession date. Our offered price was 2.6% below the asking price. We felt it was strong. Did it need to be? Given what we knew about the owners I’d say yes, it did. Given what we knew about the market conditions, I’d forgive you for telling me we paid too much.

So why did we choose to present a strong offer? Simple: the product and the people.

The house is immaculate and gives us the perfect opportunity to make it our own at our own pace. It needs nothing to make it livable today, but its old enough to make updating it worthwhile over the next 5 to 10 years. The layout is flexible. We’re a small footprint family right now, but we may not always be. The house meets both those needs.

The lot size was above average for the neighbourhood. But the home built on it was about 90% the size of many of the other houses in the neighbourhood. The price reflected the home size, but not the lot size when we reviewed comparables. We value land. We like houses, but don’t value a big house the way many people who choose to buy big homes on small lots seem to.

This house had one thing I always look for in a home: copper. If you’ve been in a new build in the last 5-7 years you’ll often see an abundance of what’s known in the plumbing world as PEX. We don’t like it and don’t trust the long term viability of it. I’d say 60% of the homes we viewed were plumbed with PEX versus copper. That was enough for us to rule them out, “good bones” and all that. All the major upkeep work had already been done: roof, siding, furnace, hot water heater etc.

This home was well-loved. Enough so that I wanted to know how it was well-loved. That was worth something to us: not leaving a distaste in the process of selling the home for the current owners. We wanted inside knowledge and were willing to pay for it.

Our agent suggested an offer price $5,000 lower than what we suggested.

The owner of the home had already decided his final price. It was $5,000 higher than our offer. When that came back we countered a matched price, but asked for some things around the property we knew the current owner didn’t want to move (another reason why we were thankful they’d been around for the viewings and we’d had a chance to ask them a few questions). We certainly didn’t get $5,000 worth of items, but we did them a service (they don’t have to try to sell the lawnmower, yard tools, gas BBQ, spare fridge etc) and we saved a bit of time/money not having to go out and try to buy all this stuff anyway.

When I attended the home inspection 5 days after having the accepted offer in place, the inspector confirmed our gut feel had been right. No home inspection will ever be “perfect,” but the total “fixes” necessary to this house are priced out under $500. Even better, the owners of the home showed me everything I had wanted to know about the house: how the sprinkler system works, how to maintain the water system, how to shut down the gas and water supplies, how to run the A/C/heatpump unit etc. We exchanged numbers and they’ll be a good knowledge source in the future should anything surprise us.

Much of the time we discuss properties here at HHV, we focus on the financial side of things. We have to in Victoria because the prices dictate us to be excessively prudent to prevent ourselves from getting overwhelmed by the emotional side of buying a home and ending up in a potentially financially ruinous situation. Buying a home is emotional though, you can see that in some of my description above. It’s been a positive experience for us thus far. We’re not in the house yet and we know there will likely be a few initial “moments” when we are, but we’re thankful that the price we paid allowed us to embrace the emotional side of the home buying experience — there’s value in that too.”

Spot The Speculators #40 – “My friends and relatives who bought within the last two years at these unbelievable prices honestly believe that there are thousands of Chinese investors lined up to get into Vancouver. They wanted to get in before being priced out forever.”

Garth Turner at greaterfool.ca 3 Jun 2011 eloquently summarizes concerns about the risks that foreign speculative players bring to a market (including the risk of the bottom falling out if/when they desert).
This anecdote from the comment section of that article, chris 3 Jun 2011 9:29pm:
“I live in Vancouver and my friends and relatives who have bought recently (within the last two years) at these unbelievable prices honestly believe that there are thousands of Chinese investors lined up to get into Canada and especially Vancouver (and maybe they are right), so they wanted to get in before being priced out forever. My sister-in-law keeps asking me when I am going to buy because her house has appreciated 30% in the last year. She lives in an area now targeted by mainland Chinese investors. My “bearish” comments fall on deaf ears. My friends show me MLS listings of houses in their neighbourhoods that are now listed at hundreds of thousands more than they paid a year or two ago. It’s seriously delusional here. It’s hard for me to argue with their logic since they have been right for years and I have been wrong for as many. I don’t see Vancouver prices slowing down until the property bubble pops in China…”

Note that this is not an anecdote about foreign buyers. It is the story of breathless local buyers overextending themselves to buy at ‘unbelievable’ prices on the premise that prices will continue to rise. For every one foreign buyer, there are how many local buyers harbouring this belief? – vreaa

Westside Couple Do An ‘Isaac Newton’ – “This afternoon we are putting in an offer on a 1979 boxy Vancouver Special in the same neighbourhood as where we sold. I can’t believe we are doing this, never did I think I would get caught in this frenzy of bidding wars. I’m scared and confused about our decision.”

Anna’s story as told by Garth Turner at greaterfool.ca 20 Apr 2011 -
“Two years ago Anna and her husband decided to sell their house on the west side of Vancouver. “At the time it seemed like a good idea,” she says, “because interest rates were forecast to rise and we were seeing a housing recovery here after the global recession. Our goal was sell high and buy low, anticipating a decline in the market.” The five-year-old house went for $1.2 million. They were ecstatic. That was $1.1 million more than they had the day before. But joy has turned into gut-wrenching, debilitating stress.
The same house today sells for $1.4 million. Meanwhile Anna, her husband and 15-month-old daughter have been living in a 500 square foot suite for $1,100 a month – with $1.2 million sitting in cash in the bank. Idling. Coiled. Waiting to pounce. In their minds only one asset class exists – a house.
“We are getting very claustrophobic. My husband is getting anxious and wants to re-enter the housing market.  I want to wait.  However I am also very scared because it seems the market keeps rising.  There seems to be no end in sight for increased prices.”
The ‘buy now, or buy never’ fear has etched their minds and strained their lives. The clear logic they felt before – sell high, buy low – has been replaced with an icy, pervasive terror that real estate will rise forever, and a confused couple with only $1.2 million in cash will be locked eternally in a basement suite. Deprived. Wanting.
Yesterday Anna wrote: “This afternoon we are putting in an offer on a 1979 boxy Vancouver Special listed for $1,328,000, in the same neighbourhood as where we sold. We already have the inspection lined up before the offers are presented.  I can’t believe we are doing this, never did I think I would get caught in this frenzy of bidding wars.  I’m scared and confused about our decision.  Not able to sleep, so here I am writing my thoughts to you.  I’m really confused what to do. And how long will we have to wait before the market comes down.  Any ideas?   We are already at a loss of $200,000,000 and can’t afford any bigger loss. Anna.”

Isaac Newton held shares early in the South Sea Company Bubble. In April 1720, seeing and understanding the nature of the bubble, he sold his £7,000 holding of shares. The bubble continued to inflate. Newton couldn’t resist, he bought back in, heavily. The bubble collapsed. When all was said and done, he had lost £20,000.
Anna and her husband made a wise decision two years ago. They are about to reverse that. They are buying out of fear of being ‘priced out forever’. They are, also, speculating on ongoing rising prices, even though most would not label their buying ‘speculative’.  -vreaa

“We’re stretching it on the cost, we can do it, we can do it, but we’re gonna have to cut pretty much all the frivolous spending. I just don’t know how anyone can make money on a house these days.”

This from ‘anonymous’, via e-mail to VREAA, 16 Apr 2011 -“On the bus-ride  home today,  just listened to a mid-late 30s office type guy talking to some ladies about how he and his s/o put an offer in on a Coquitlam condo last night. “We’re stretching it on the cost”, he says, “we’ve looked at the budget”, “we can do it, we can do it,” he boasts, “but we’re gonna have to cut pretty much all the frivolous spending” …(Okay, so interest rates not on the radar, or did he factor this in ?). Then the conversation continues, “I just don’t know how anyone can make money on a house these days, ..” Then goes on to list every tax, fee, and expense he can think of…HST, etc.”

[Note to 30's guy: The house is for living in, not making money on. -ed.]

Bearish Buyers: Capitulation, Of Sorts – “Yeah, if there was ever a clearer signal of the top of the market. I’m also the guy who enters the shortest cashier line-up at the grocery store but still manages to exit after everyone in the longer ones.”

Bear capitulation occurs when a long term RE bear gives in and buys.
Yelling “That’s it, I’ve had enough, this market is absolutely crazy, I resign myself to renting for life!” doesn’t count. Also, leaving Vancouver may seem like capitulation but it isn’t. The bear has to give in and buy. One of the laws of bubblology states that the bubble is over when the very last bear that is going to buy throws themselves on the frenzied pyre of the market and is consumed in the flames. When that happens, we can get on with the crash, already.
Here are two (rare) anecdotes of bear capitulation, but they are both ‘qualified’ capitulations, and we thus don’t present them as evidence of a top. Our brief comment follows at the end of this post.
We don’t see very many stories of bear capitulation: if you know any, please send them along. – vreaa

Lost Soul gave an account of their purchase on two threads at RE Talks, 8 Mar 2011 and 25 Mar 2011. Excerpts from Lost Soul’s comments:
“This loooooong time bear likely will be an owner soon (accepted offer).
Please don’t categorize me as a bull. I’m buying with the expectation that we will take a financial hit for it.
We didn’t all of a sudden grow horns and start snorting. But something did grow and popped out after nine months and we needed more space. It’s not all about money. :wink:
Could we have just found a bigger rental? — I suppose, but we just wanted a place to settle into and be able to do what we wanted with it without worrying about what the landlord would think.
Do we think this is a wise *financial* decision? — not a chance — this is pure consumption in our view. If by some bizarre happenstance the value of our place goes up 50% in the next year, we will not all of a sudden start crowing about how we were so brilliant to buy.
What if the market gets halved? — Bring it on! The loss on this purchase of course will be unpleasant but it also means that the next place we buy will have dropped twice as much in absolute dollars so net we’d still be ahead (if not by so much as not purchasing at all now). And ‘No’, the loss on the current place would not wipe out our dp for the next one — contrary to the beliefs of some here, bears are not necessarily on welfare living in their parents’ basement.
(Still) My advice to others: *We* are fortunate to have the savings and income to pull this off. If *you* are purchasing a place you’re not happy to live in for the next 35 years and buying it means Kraft Dinners, you might as well wait and pray for a crash — the “buy small and climb the property ladder” approach isn’t going to work.”

[In response to a comment "Lost Soul Buying..."] “Yeah, if there was ever a clearer signal of the top of the market. I’m also the guy who enters the shortest cashier line-up at the grocery store but still manages to exit after everyone in the longer ones.”

And a related story from enki at RE Talks 26 Mar 2011 8:47pm“I totally sympathize; I am a longstanding bear (and still am), and finally bought a townhome in Abby in August [2010]. I didn’t want to buy, but I was tired of waiting, and wanted some stability. Living across the street from some very good mountain biking didn’t hurt either. I bought the cheapest thing I could tolerate, and resigned myself to losing some equity while keeping my wife.”

These stories don’t really qualify as complete capitulation, as the protagonists remain mentally bearish, and actually anticipate a drop in prices. In complete capitulation the bear overextends themselves as much as other current buyers, and emerges from the experience as a born-again bull.
The anecdotes above are perhaps best seen as stories of ‘partial capitulation’. They are of interest, because, for a prospective buyer, the ‘partial buy’ and ‘renting’ are both compromises, but with different inconveniences.
For the record, we don’t think ‘partial buying’ is a good idea. Moving up during a crash may be more challenging than one expects. – vreaa

[Update: An exchange on 29 Mar 2011 between posters at RE Talks turns ugly, and Lost Soul confirms they paid cash for the above deal. Screen caps here and here.]

Update on West-side House – Sold For $2.83M

4411 W 11th; 4,696 sqft; 63×121 lot
Listed 9 Oct 2010 $2,980,000;
Price change 6 Dec 2010 $2,890,000
Headlined here 6 Dec 2010
Sold 15 Feb 2011 $2,830,000

We stand by our estimate/guesstimate predictions that properties like this will sell for less than $1M in the coming RE bear market. -vreaa

Anybody At Global BC TV Still Consider Themselves A ‘Journalist’? – Another RE Infomercial Run As ‘News’

Global BC TV ran another shameless real estate infomercial as news, arguably even more blatantly obvious RE touting than the very recent ‘Helicopter Cam’ [9 Feb 2011] and ‘Burnaby Line-Up’ [16 Feb 2011] incidents.
‘Village on False Creek’s First Buyer’, [4 Mar 2011], is a breathless account of a 27 year old moving into a 700sqft ground-floor Olympic Village condo. The attention to realtor-type detail in the piece is enough to make even the most bald-faced  salesman blush: the buyer is a ‘happy homeowner’, the site is better than others in the city, a non-view is a ‘view’, the non-view is safe from further obstructing buildings, the condo is ‘bright’, the small spaces are ‘spacious’, prices have been ‘slashed’, just look at each & every one of the shiny appliances, the high ceilings, etc, etc.
The piece offers some wonderful laughs for the discerning viewer, but don’t let that distract you. This perversion of programming, with selling masquerading as ‘news’, is serious stuff. We archive it here in all its mundane and agonizing glory, for the record.
Anybody at Global still consider themselves a ‘journalist’? – vreaa

Announcer: “When condo king Bob Rennie remarketed the village recently and lowered the prices, nearly half of the available units sold out. [Hahaha: 'Half the units sold out' = oxymoron. -ed.Today, the first of those new buyers moved in.”

[Image removed at Christy Zettl's request, 28 Feb 2013]

[Image removed at Christy Zettl's request, 28 Feb 2013]

John L. Daly, Reporter: “She’s a happy home-owner… a 27 year old homeopath who’s now unpacking at her brand new condo at ‘The Village at False Creek’, formerly the ‘Olympic Village’. She’s the first to buy in and move in after the prices were slashed.”

[Image removed at Christy Zettl's request, 28 Feb 2013]

Christy Zettl, Olympic Village Condo Owner: “I am ‘number one’, yes, big day today.”

[Image removed at Christy Zettl's request, 28 Feb 2013]

Christy Zettl: “For what you are paying and then the type of accommodation that they have, it’s probably the best in the city. Uhm… we looked at a lot of places in the West-end, on Denman, on Beach, and, you know, for what you were getting for the space, for the location, there’s not even comparable.” [We'll just have to guess what is meant here because, taken literally, it makes no sense. -ed.]

[Image removed at Christy Zettl's request, 28 Feb 2013]

Christy Zettl: “I like the high ceilings, and the big windows, and you can see through the water through/out the door [sic]“

[Image removed at Christy Zettl's request, 28 Feb 2013]

John Daly: “She has a view through the Community Centre to the water. [Not making this up, folks. -ed.] The good news is there is virtually no chance that anyone can build a new building in front of her, here on False Creek.” [One building is enough, already. -ed.]

[Brief bridging section inserted here on building in another area of downtown that will obscure neighbours' views.]

John Daly: “…not an issue for Christy, whose bright condo in the Kayak Building sits right on the street across from the Community Centre. She says she’s not allowed to say what she paid for it, but…:”
Christy Zettl: “It was reduced probably about 30% from the original price.. so if it went for full price there’s no way I would have been able to afford to move here (smiles).”

[Image removed at Christy Zettl's request, 28 Feb 2013]

John Daly: “The 700sqft unit has one bedroom,…


“a utility room,…

“a modern washer drier combo,…

“a relatively spacious wash-and-bath-room [sic],…

“And built in fridge,..

[Image removed at Christy Zettl's request, 28 Feb 2013]

“microwave,…

“and convection oven,…

“topped with a gas range.”

[Here there is a demonstration of the impressive gas-range lighting capacity]:

Reporter John Daly, (who perhaps used to consider himself a journalist but by now must be feeling like this guy)…

…continues: “As well as possibly one hot part of Olympic history:”

[Image removed at Christy Zettl's request, 28 Feb 2013]

Christy Zettl: “It’s unconfirmed, but apparently Sidney Crosby might have been staying in this apartment, so… I just found out about a minute ago… that’s quite exciting!… (laughs)…”

[Image removed at Christy Zettl's request, 28 Feb 2013]

John Daly: “After looking all over town, Christy’s family is very pleased to see her settle down in what was once the ‘Olympic Village’… now, ‘The Village at False Creek’.” [In case you missed the new brand name when we mentioned it a minute ago. -ed]

Young Siblings Buy UBC Condo; With Help From Petroleum Engineer Dad


“Siblings Bayan, 21, and Roya, 18, Bennett grew up in Qatar, Thailand, Venezuela, and Canada. The nomads have alighted at UBC to continue their post-secondary education—Bayan, his third year of biomedical engineering; Roya, her second year of an arts degree. Uninterested in cramped (mono-sex) student residences, they opted for a condo in the campus’s new village.
The Bennetts looked at 10 other places around town, including a spot kitty-corner to the fraternity houses, before settling on an 856-square-foot condo in the Pacific Spirit development. 5928 Birney Avenue; $655,000.
[$765 per sqft; land is leased]
They liked the water feature out front and generous patio in the back. With financial assistance from their father, a petroleum engineer, the siblings moved in at the end of July. With classes in full swing, Bayan and Roya haven’t had time to decorate the two-bedroom, two-bath unit. “It’s still kind of a mess.”
– from ‘UBC’s South Campus: A residential neighborhood is springing up in the heart of the UBC campus’, 1 Oct 2010, Vancouver Magazine

Panicked Urge To Buy (continued) – “She’s worried that if she does not buy now, she will be priced-out forever.”

Enlightened at VREAA 25 Feb 2011 1:56pm“We were thinking of upgrading when we sold our house a month ago. Then we were enlightened and we have decided to rent for now.
My friend has a townhouse and she’s worried that her townhouse has reached it’s max and if she does not buy [a SFH] now, she will be priced-out forever. She still wants to buy because of this logic but she can’t b/c all $800K+ houses out there are like crap!”

$695K (35%) Over Ask Dunbar Tear-Down; 52×130 For $2,683,000

calguy asked today at VREAA: “Can someone confirm a sale recently, last week in Dunbar. A bungalow at 4035 west 28th was listed at 1.9 million and sold for 2.6!!! I thought I saw it somewhere but can’t remember where. It was listed as a building lot. A shame as it looked like a nice home for a reno. I remember when these homes were 1 million and we thought that was expensive then!”

4035 28th Ave W
3,057 sqft house; 52×130 lot; MLS V869100
Listed 10 Feb 2011: Ask price $1,988,000
Sold 19 Feb 2011: Sale price $2,683,000
$695k [35%] over ask.

Near private schools. Fairly solid house, by Vancouver standards, but clearly bought as a tear-down. It was advertised as “An excellent holding property or build your dream home.” It’s hard to imagine anybody sinking $2.7M into RE so they could live in this modest house. More likely they will spend another $1M on top of that to rebuild. So, we could use this sales price as rough lot value for this area. And, arguably, as another example of misallocation of resources (a perfectly usable home is destroyed).
As frequent readers know, we often cite the possibility of 50% off in the crash. Here we’ll make an exception and say that we wouldn’t be at all surprised if lots this size change hands for a lot less than $1M in Dunbar in future years. That’d be a drop of more than 63%.
It would be interesting to know if this house was purchased by a SFH developer or end-user. Anybody know more? -vreaa

“It doesn’t matter how intelligent, educated, or mathematically inclined someone is: when it comes to real estate, it’s like they’ve suddenly taken crazy pills.”

Yalie at vancouvercondo.info February 21st, 2011 at 5:28 pm“I don’t know why, but for some reason it doesn’t matter how intelligent, educated, or mathematically inclined someone is: when it comes to real estate, it’s like they’ve suddenly taken crazy pills. Case in point – I was having lunch with a friend who’s an extremely successful (and highly paid) corporate lawyer, who’s looking to buy a house soon. This is one of the smartest guys I know, and he deals exclusively with corporate finance and securities law.
He mentioned that he’s in a rush to find a place soon, because “interest rates are likely going up and that’s going to increase monthly payments”. I mentioned that higher interest rates would mean lower prices, but he countered with “sure, but that still means the monthly payment will be the same either way”. So he figures it’s still better to buy now.
So one of the most intelligent, financially-savvy guys I know can’t figure out that it’s better to pay a lower price with higher rates than a higher price with lower rates, given the same monthly. And this guy deals with billion-dollar securities all day long.
There really is no reasoning with people over real estate. I have had similar conversations with several other people, and it never seems to make a difference. When someone has made up their mind to buy a house, all they want to hear is reasons why they should do it.”

“Even at the corporate level, locals have a desire to ‘overpay’ for RE assets and make strange choices when it comes to parting with cash for RE.”

Mango at financialinsights February 20, 2011 at 1:44 am- “Lululemon just paid $65M for a building in Kits. That is 25% of the cash they have on their balance sheet. That [building] would have cost them less than $3 million a year to rent. They have massive growth in earnings per share (EPS), so common sense [should have told them to rather use the money to invest further in their business].  Instead, they bought the building? So even at the corporate level, locals have a desire to “overpay” for RE assets and make strange choices when it comes to parting with cash for RE.”

“It’s very frustrating. We’re willing to pay but we can’t find anything.”

From ‘Tight market sparks bidding wars in hot neighbourhoods‘,  Vancouver Sun 12 Feb 2011“Miri Malkin and Gabi Kabazo, the parents of three children under 4, are living in a Yaletown condo while they look for a house in Vancouver in the $800,000 to $1-million range. The couple are pre-approved and plan a 40- or 50-per-cent down payment. They’ve been looking since May, but have yet to put in a bid because all the houses they’ve looked at are either fixer-uppers or don’t have enough space for their family. They would prefer to live in Vancouver rather than move to the suburbs.
“It’s very frustrating,” Malkin said. “We’re willing to pay but we can’t find anything.”
The couple, who moved to Vancouver from Israel in 2004, were looking in 2008 but didn’t buy because they thought prices might come down. One Arbutus townhouse they looked at was priced in the $700,000 range and is now listed for more than $1 million.”

“News of bidding wars in an overheating Vancouver market comes on the heels of a TD Economics report that identifies B.C. residents as most vulnerable to interest rate hikes, a housing correction or an economic downturn. The province’s average household debt-to-income ratio of 160 per cent is the highest in the country and matches levels reached in the U.S. just before the financial crisis and housing bust.”

[It probably goes without saying that, if we were in this couple's position, we'd sit tight in the current rental or, perhaps better still, rent a SFH in one of our target areas. That way, when prices collapse, we'll know even more about where we want to eventually buy. ... The Sun perhaps deserves some kudos for at the very least printing a few words of reservation (citing the TD warnings). It continued the article, however, with old stalwart Tsur Sommerville again assuring us that a crash is impossible in Vancouver, and, whatever the outcome, "It’s just sort of what variant of expensive we’re looking at.” -vreaa]

“My real estate agent is VERY pushy. He told me: you are NOT buying a dwelling, you are getting hold on an INVESTMENT for 5 years, until you can find the next SUCKER to sell it to, at an inflated price.”

painted turtle at vancouvercondo.info February 2nd, 2011 at 6:34 pm-
“My friend Stan sat down today, with an anxiety attack: he is about to buy a 1 bdrm condo (pre-sale) for $350 000. He is single and close to retirement, so he is balancing if he will be able to pay the mortgage in 10 years. I tried to put the numbers down with him. He said: “My real estate agent is very different from you. He is VERY pushy. He told me: you are NOT buying a dwelling, you are getting hold on an INVESTMENT for 5 years, until you can find the next SUCKER to sell it to, at an inflated price.” So I asked Stan: “What does that make YOU? The previous sucker?” That anecdote is telling me a lot about the spirit in this city.”

Extra! Extra! Read All About It! – Pablum From ‘The Vancouver Sun’ Lulls Locals

What motivates ‘The Vancouver Sun’ to print an article like: ‘Real estate market calm expected to follow hectic 2010 in Metro Vancouver; Home sales forecast to increase modestly across B.C. as prices stabilize‘, 27 Jan 2011?
It contains no ‘news’ or analysis whatsoever. It consists of hopeful statements regarding price direction from a family who have recently purchased a home, and reassurances of stable markets and price increases from BCREA, CMHC, UBC’s Land Economics department, and a realtor. There is no mention whatsoever of any downside risk.
The only conceivable purpose of this article appears to be to lull current owners and potential buyers into believing that the Vancouver real estate market is stable, cosy, and benign. It’s an advertisment dressed up as a newspaper article. -vreaa
[hat-tip to Mr. Poppinfresh at VREAA for pointing out the importance of non-articles such as this one.]

“Carrie and Mike McDougall — with their daughter Kylie, 3, and son Colton, 4 — moved to British Columbia from Alberta recently and bought a new house in Maple Ridge. They were comfortable with the price they paid and are expecting prices will go up in the next year, as are experts across Metro Vancouver.”
“Hopefully, it was a good time to purchase,” McDougall said in an interview.

Other excerpts:

“There will be a much more gradual increase in consumer demand and less volatility. There will be more stable market conditions this year.” – Cameron Muir, chief economist for the B.C. Real Estate Association

“We’re calling for a three-percent price increase in 2011.”- Robyn Adamache, senior market analyst for Metro Vancouver with Canada Mortgage and Housing Corp.

“[I'm] seeing an uptick in buyers who believe interest rates are heading north. [I] believe there will be a modest increase in both pricing and demand this year.” – Ron Antalek, a realtor with ReMax Ridge Meadows Realty.

Tsur Somerville, director of the centre for urban economics and real estate at the University of B.C.’s Sauder School of Business, said he doesn’t like forecasting the future, but nevertheless believes that 2011’s real estate picture will be largely determined by the speed of the recovery and the Bank of Canada’s action on interest rates.

White-Hot Sentiment – “People want to get in. They want to get in bad”

Transcription and stills from ‘White-hot housing market’, The National, CBC News, 21 Jan 2011. [Hat-tip 'ams' at VREAA and 'kabloona' via e-mail; thanks. Our own comments follow.] -


“If you live in the Vancouver area, it seems like location is no problem at all. The housing market there is hotter than anywhere else. Even a million dollars might not get you the home of your dreams. Even in a city famous for eye-popping house prices, what happened on this corner this month is remarkable.”


“This is the condition it was in.”
It began when agent Nick Calogeros listed this dilapidated home  next to a park in a good neighbourhood.


The lofty asking price: $1,088,000.
“We had over two hundred people at the open house, there was a line up down the stairs, on the walk-way, and onto the sidewalk. And we had thirty offers come in on the property.  And the final sale price was $1,611,000.”


That’s a whopping $533,000 over asking [49% over ask], a new record in this neighbourhood, and for a house that will very likely be knocked down.

And it didn’t stop there.
“After the neighbour across the street found out about the price, she phoned me up and asked me to list her home”



Incredibly the woman had only owned the house for a few weeks. She paid $1,047,000 on November 2nd. She relisted and sold it on January 17th, for $1,350,000. That’s a $300,000 flip in two and a half months, and that’s without making any improvements to the home.”


Calogeros – “The supply is very low, interest rates are still low, and people want to get in.”
Interviewer – “They want to get in bad”
Calogeros – “They want to get in bad… to the market… they do.”

With the average house price here already topping one million, it again begs the question “Can prices keep defying gravity?”


“What’s likely going to happen is that, over the next several years, interest rates will go up, there will be some point where they go up relatively rapidly, and once that happens we’ll see in reality how sustainable these housing prices are.”  (David Macdonald, Canadian Centre for Policy Alternatives)

Besides an incredible backdrop, Vancouver has something else that keeps prices high, a lot of wealthy buyers from mainland China.

“They are willing to spend a lot of money, they have a lot of money, and especially in the luxury market.” – Gregory Carros (Sotheby’s International Realty)

It all adds up to a frothy start to the 2011 selling season.


Interviewer – “When is it going to stop?”
Calogeros – “Hopefully never.”
Spoken like an agent on commission who has just made a killing.

— end of transcription —

Our thoughts:

1. Knockdown for $1.6M; 49% over ask; 200 people on the sidewalk; $300K profit on a 3 month flip; wanting to get in “bad”: anybody need any more evidence this is a mania?

2. $300K in 3 months: High-profile news of great speculative profits is bad, bad news for our society. It distracts everyone from more productive activities, and it’ll demoralize prudent workers and savers. (How long does it take the average family to accumulate $300K savings?). It draws more into the speculative game, and puts even more pressure on prices. (Until, of course, it stops, and reverses.)

3. Throwing in a bit about demand from mainland China seems to be required fashion in these reports; like a crazy leap to try to explain the unexplainable with a hand-wave. The vast majority of sales are to locals; stories of wealthy foreigners cannot support this market indefinitely.

4. To give the CBC their due, they do use the word “frothy” and do ask the question “When is it going to stop?”. The most sensible phrase in the whole piece was “we’ll see in reality how sustainable these housing prices are” [David Macdonald]. We like the language, using the word “reality”, implying, of course that we have prices that are based on “fantasy”. We’d really like CBC to follow up with a piece on the implications to Vancouver if these prices are not based in “reality”.

5. The last two stills are not a visual ‘typo’. The realtor smiled for a really long time after saying that he hopes this never ends. As usual, a small minority of the population, those with vested interests, are happy with the insanity that this RE market has brought to Vancouver.

6. Style comment: Printing the price in massive font over the building in these reports is a bubble development. The implication is that the numbers are far more important than the buildings.

7. “Wanting to get in ‘bad’.” You can feel the exquisite, squirming urgency of the wannabe buyers. Like addicts, groupies,  followers.

8. We fully anticipate that lots comparable to the one that sold for $1.61M in this article, will sell for well below $500K during the coming bear market. That’s more than 70% off the recent sales price. If you think that sounds crazy, yes, at this point, maybe it does… It’s the inverse of how crazy the move to the upside has been. That’s how bubbles implode.

-vreaa

“I can tell she gets tense when I trot out the usual arguments about why it’s STILL a bad time to buy.”

tincup at VREAA 18 Jan 2011 7:43pm“Much like all the people in the US who vowed they would move to Canada if Bush were elected for a second term, we have not followed through with our plan to move away from Vancouver if things didn’t start correcting by fall 2010. We simply renewed our plan…”if things haven’t turned around by fall 2011.” The difference now though is that due to a growing family we simply can’t stay in our current (cheap) place beyond that, and the S.O. is very anti-renting now due to the eccentricity of our current landlord. I can tell she gets tense when I trot out the usual arguments about why it’s STILL a bad time to buy. It’ll be an eventful 2011 for me, that’s for sure. If/when we buy, it won’t be at the bottom but hopefully it’ll be down enough that I won’t feel like all that patience was wasted. Vancouver really is different in the sense that it is taking forever for this correction to get going.”

Chin up; you are not alone. It’s bloody difficult to live through these times on the wrong side of the bubble. The market is a massive distraction, and it hinders regular folks who are simply trying to get on with their lives. It wastes time and misallocates resources. It causes people to leave or avoid living in our city. Affordable (not necessarily cheap, no one is expecting that) housing (to rent, and, yes, to own) is far, far better for a society. Economically, socially, psychologically. It’s going to take a while to resolve, but it will normalize. The more people that are scared off, the worse the comeuppance. Let’s hope sanity returns soon. -vreaa

UPDATE: tincup at VREAA 20 Jan 2010 1:37pm“Just to mix things up even more though, yesterday I found out that my very solid, stable job is being relocated. Exactly where is uncertain at this point, but the options (not decided by me) range from pretty nice mountain town to god-aweful northern hole. If they decide on the latter, I’ll be looking for a new job. 2011 will be an interesting and stressful year.
Sure glad I don’t own right now…”

“Lotsa regrets on my end….. a lot of properties I’ve wanted to buy in the lower mainland over the past 7 years but didn’t “

RiskArb at RE Talks 10 Jan 2011 9:16am -
“Lotsa regrets on my end….. a lot of properties I’ve wanted to buy in the lower mainland over the past 7 years but didn’t:
– parking lot on granville street before the big redevelopment
– West side lot on SW Marine with views
– Pre-sale condos in coal harbour
– First phase of Harbour Green
– Didn’t buy into Hong Kong real estate during SARS (bought in Vancouver instead) and later in 2008
– Didn’t buy into several Singapore and Indonesian projects I liked in 2007/2008…. again, cash constrained and I didn’t want to over-leverage
– Never flipped a property ever. Instead of buying and holding (I always put down 35%), I could have been more ballsy and flipped condos or put down less equity.

The reasons:
– Couldn’t scrounge up enough $$ for the parking lot on granville b/c most of my savings was stuck in an illiquid stock holding that didn’t end up making me any $$$
– My partner on the west side lot (was a small builder) bailed on me. His wife was nagging him and he gave in.
– Pre-sale condos. I bought some…. but should have done more and bought a penthouse instead of the smaller units
– First phase of Harbour Green…. this was so underpriced versus Rennie product….. should have plunked down but again, my holdings in stocks/PE at the time were locked-in and couldn’t come up with the $$$

Having said that, I’ve done better than most so i”ll count my blessings.
I’m no rocket scientist, but I usually call it right and the major f*ck ups have been when I listen to other people.”

“I just wanted to share a conversation I had with a good friend of mine as he announced he was going to buy a place.”

El Magnifico at VREAA 25 Dec 2010 12:24pm -
“I just wanted to share a conversation I had with a good friend of mine as he announced he was going to buy a place. It really highlights well what is called “the emotional factor” when it comes to buying real estate. Hopefully this conversation will be useful to some other people…

Me:
Hi (…),
I hope you’re doing well. I was also apt hunting recently, until I learned more about the real estate market in Vancouver… I’ve decided to hold off for for a couple of years and see what will happen.
I read a lot of articles, blog, etc… You may want to hear what these people have to say about the Real Estate market in Vancouver. Here are some of the most useful links I found:
http://vreaa.wordpress.com/
http://www.greaterfool.ca/
http://canadabubble.com/
http://financialinsights.wordpress.com/
Good luck!

My friend:
Hi (…),
Hope all is well with you too!
Thanks a lot for the information. I surely won’t dare to disagree that the risk of a potential real state crisis has increased due to the low interest rates, easy credit, and consequent increasing household debts, etc.
However, since I arrived in Canada some people have been expecting a real state crash in Vancouver for different reasons: 2008 financial crisis, the olympic games; etc.
On the other hand, some other people think that real state prices in vancouver will never drop significantly, due to the shortage of available land…
Meanwhile, I now realize that I have spent over $75,000 to pay for my rent in the last 3.5 years… and I will never see this money again, that’s for sure…
I mean, I totally see your point, and actually nobody can be sure if a mortage will or will not be a good deal at this time…
I really don’t know who is right or wrong… and so I guess I will keep looking around and I think I will probably buy a place if I see a good opportunity on a place that I like. Besides, it’s probably better to buy now, when interest rates are low, than the opposite…
Anyway, we should keep discussing about that… I think it can helpful to the both of us in trying to make lucid decisions.
Thanks again and let’s try to get togetehr for a beer or coffee sometime soon.
I take this opportunity to wish you, (…) and your baby a very Merry Christmas and Happy New Year!!
Talk soon,

Me:
Hey (…),
Good to hear everything is well for you! (…).
Somehow, I’m glad I didn’t buy any real estate as I would have been such in trouble to sell it off (the market is dead right now, -35%ish for saleq compared to last year…).
I’m glad you are aware of the potential risk for a real estate crash. The intent of my first email was simply to make you aware in case you were not. As we say in french “un homme averti en vaut deux” which means something like “one knowledgeable man is worth two men”.
If I can only give you a few advices to you in making the biggest investment of your life (unless your business becomes so successful that you can afford all these millionaires’ toys), there would be as follow:
– be always careful of what real estate agent and their board say. Trusting them regarding real estate analysis is like trusting your drug dealer when he says heroin is good for you! They have a vested interest in keeping the market going up…
– when you compare renting vs. owning, make sure that you take into account all the costs of ownership. As a renter, you don’t have to pay for property taxes ($1,500 a year), strata fees ($400 to $500 a month in the nicer buildings in downtown) and the maintenance costs (so many people bought condos in leaky buildings and had to pay 50 to 70K in rainproofing… that really hurts!). All in all, ownership costs are really expensive too.
– Don’t forget that when buying a place, you’ll have to pay 7% of commission fee to your real estate agent. On a $450,000 property, this is $31,500 (not far from half what you paid in rent in 3.5 years in Canada!), money that you will never see again too.
– remember that if you don’t have 20% of down payment, you’ll be required to pay for the CHMC insurance, which will be a significant additional burden to your mortgage payments.
Coming back to the argument of buying when interests are low, it is actually a bad idea, and it’s counter intuitive. Let me explain you. When people buy a house, they look at what they can afford and usually bought the biggest house/condo they can afford (property cost + interest cost). This is ok in countries like US or France, where mortgage interest rate is setup for the entire duration of the mortgage. In Canada, however, mortgage rates are reset every 5 years. I let you imagine what happened when a family that has bought to the maximum of their ability, at emergency low interest rates, see their mortgage payment doubling because their mortgage rate has been reset much higher 5 years later… This is what, in my opinion, will create a real estate crash throughout Canada. When the Bank of Canada will increase the prime rate, people will see their mortgage payment increase and won’t be able to face it, and therefore be forced to sell…
On the other hand, if you buy a place at a time where interest rate are high, the cost of your mortgage payment are likely to be lower when your mortgage rate is reset after 5 years. Today, it is the opposite. Interest rate can only go up, and therefore mortgage payment will go up significantly for most of the people.
Regarding the argument of available land in Vancouver, I don’t really buy this argument. There were so many special places in the US (Florida, California, Nevada, etc.) that, despite great features/qualities, have lost more than half of their values that I don’t think this argument is very solid. What I see is that prices in downtown Vancouver are now similar to prices in Manhattan and double the prices in Seattle. There is no rationale reason for that…
The last thing that I wanted to share with you is what I discovered when looking at mortgage payments. Initially, the first few years, your mortgage payments are split as follow: 80%ish to interest and only 20%ish to your principal. That something I didn’t know and found totally unfair and outrageous. Somehow, the first few years of your mortgage, you more renting the place to the bank than owning it…
Anyway, it’s a very long email. I wanted to share with you my thoughts and discoveries regarding RE. I was in the same seat as you and I didn’t buy, and now I’m leaving, I’m so glad I didn’t.
(…)
I hope this email will be useful to you. I’ll organize a small farewell gathering before I leave (…).
Cheers buddy !

Him:
Hi (…),
Excellent reasoning, thank you so much for taking the time to share, I really appreciate it!
(…)
I did become aware of the issues you mentioned above when I first thought of buying a property here in Vancouver, in early 2009. I agree with you in most of them (and that’s why I gave up the idea of owning a real estate property in Vancouver, back in 2009).
In some other aspects I think slightly differently from you, more specifically regarding the interest rates and ownership costs (but I won’t get into details here, because I don’t want to make this a boring discussion to you, as I’m sure you have more important things to think about(…).
(…) I’m now also considering some aspects of ownership that are less of financial relevance (but not less important) and more of personal nature, and therefore difficult to be quantified, because their effect and value can significantly vary from person to person.
All in all, I’m still inclined to jump into the owners side, if the right opportunity comes.
Well, thanks a lot again (…). I really appreciate your analysis – definitely very useful.
Hopefully I will see you soon then!
Cheers,
….”

Buy Or Rent In Fort Nelson? – Reader Request For Opinion

t at VREAA 11 December 2010 at 3:48 am
“I am very bearish on Vancouver real estate…I am moving to Fort Nelson in the new year. I have been looking at Vancouver RE for so long that the prices in Fort Nelson appear reasonable to me. I have looked at the cost to rent vs. cost to own…$1100/month to rent, $800/month to own…and I am considering buying a place up there. Your thoughts?”
& t again on 13 December 2010 at 10:01 pm
“I am going to buy in Fort Nelson in the next month. I am a bear, and I am relocating for work. The cost to buy up there is roughly 300k for a nice family home. It would cost more to rent than it does to pay a mortgage. I do think that the prices are still high up there, but the local economy does support those prices because there are lots of high paying jobs. If any of you know anything about the RE up there please let me know. We meet with a local RE agent next week.”

vreaa thoughts:
t – Thanks for the note, and for caring enough to solicit our opinion.
We suspect there will be numerous readers who can give you food for thought regarding this decision; we’ll start with a few thoughts of our own:

You’d likely be taking the following into account:
Various nuts-and-bolts questions about the math (Is the cost of owning REALLY $800 per month? What about transfer costs, taxes, maintenance, etc? etc.).
Your age. Your income. Your degree of job security.
Whether you intend to live in Fort Nelson long term.
If you purchase, would you be buying the kind of residence that you’d like to live in long term?
What is your ‘ownership premium’? (How important is it for you to feel you ‘own’ your house?)
Would the prospect of future higher interest rates alter your decision? (BOC Governor Carney warned us yesterday that rates WILL rise)
Would the prospect of a future distressed economy in Fort Nelson alter your decision? (How secure are all those ‘high paying jobs’?)

We note that you went from “considering buying a place” to “I am going to buy” in just two days. Obviously you are planning your move, and we respect that you have a need to decide one way or the other. But, does the decision to buy merit the urgency that you currently appear to feel?
Perhaps you are confusing two separate decisions:
..(a) where are we going to live when we get to Fort Nelson?, and
..(b) should we rent or buy our accommodation?
These are indeed two separate decisions, but currently they may feel like one. Perhaps you should try to separate them.
Is the prospect of going up and renting for a while too burdensome?
What do you have to lose if you went up, rented for 6 months, and then made your decision?
The benefit, even if you did end up buying, would be that you may get a better idea of the property type and site that would work for you.

All of the above are important considerations, and readers will likely be able to add more.
For us at VREAA, however, the most crucial considerations are the following:
We are bearish on RE. (You, ‘t’, are bearish, too.)
We anticipate a pullback in RE prices in Vancouver in future, a pullback that will also effect all of BC (and, to a lesser extent, all of Canada). We think prices could drop 50%, perhaps more.
We could be wrong (we have been for some years now).
We weigh the probability of ongoing steady price increases as low to very low (5-10% chance of ongoing price strength). We think the chances of an outright crash are far higher than that.
So, if we were trying to make the decision you’re weighing, we’d be asking ourselves the following:
“If I were to purchase, how much would a substantial decrease in housing prices in Fort Nelson effect my overall future financial trajectory?”
The answer to this question would be closely related to income level and net-worth.
If you purchased, what percentage of your entire net-worth would be made up by the purchase price of the property? 20%? 50%? 100%? 500%? 1,000%? – [the 1,000% example is the case where you put 10% down and have no other savings.]
For some individuals, to purchase a property that then drops from 300K to 150K market value, and stays there (in real terms) for 10 years, would not be of much consequence. For them, it may not be worth the hassle of renting to avoid that risk.
For others, the 150K paper loss may be completely devastating; it may result in a financial blow that takes decades from which to recover (and essentially changes their entire life’s financial trajectory for the worse).
Some people can afford to lose 150K, others can’t.
(In Vancouver, the same rent vs buy decision are heightened by the fact that in many cases that statement becomes “Some people can afford to lose $1.5M, others can’t.”)

Needless to say you have to do your ‘own due diligence’ on this.
(Oh, and by the way, I don’t think any of us doubt what the Fort Nelson realtor will advise. You’d best be clear in your own mind about your intentions BEFORE you meet with the local RE agent next week.)

Animation – “It was a hectic weekend. We finally bought a house.”

‘P’ sent us this video of an imagined dialogue by e-mail 11 Dec 2010 -

Westside – Price Drop To $2,890,000; With “Great Mortgage Helpers in Basement”

4411 W 11th; 4,696 sqft; 63×121 lot
Listed 9 Oct 2010 $2,980,000;
Price change 6 Dec 2010 $2,890,000
“4 bdrms up, great mortgage helpers in basement. Must see to be appreciated.”

10% downpayment ($289K); 4% rate; 25yr amortization
Monthly mortgage payments: $13,681.79

[Those 'mortgage helpers' could come in handy. Magical elves, one hopes. The whole concept of paying $3M for the privilege of running a rooming house in one's basement escapes me.  -ed.]

What are we thinking? – Frank Lloyd Wright Californian Home on 80 Acres compared with more expensive Dunbar Box on 0.15 Acres


.
UnagiDon, in the comments section of our recent post comparing LA and Dunbar houses, points to an article in the NYTimes [2.Dec.2010] featuring the Frank Lloyd-Wright designed ‘Fawcett House’ in Los Banos, California: 3,800 sqft; 6 bedrooms; 80 acre lot. Asking price $2M. Impressive photos here.
The Dunbar box, photo reposted, sold for $2.4M.
With the Frank Lloyd Wright house, you get 536 times the land that you get with the Dunbar house. (6,500 sqft vs 3,484,800 sqft).
Yeah, sure: far from Starbucks, higher taxes, less sunshine of liquid type, but, still…

People of Vancouver: What are we thinking? -vreaa

Recent Dunbar sale: $2.4M:


Los Angeles Compared With Dunbar

Hat-tip to ‘metalhead’ [at RE Talks 29 Nov 2010 8:56am] for pointing out the Bel Air, LA property above, for sale for $2.45M.
“4,200 square feet, 4 bedrooms, 5 bathrooms. Office and staff quarters. Spacious back yard has a heated, free form black bottomed swimming pool, attached spa, barbecue areas, circular sunken fire pit and a large lawn area.”

This is just one of many such examples we could take from LA.
As ‘metal’ suggests, let’s compare this to what you’d get in Dunbar [Westside Vancouver] in a similar price range. Keep in mind that the LA market likely hasn’t yet bottomed.

$2.26M; 3419 W 23rd; 2,838 sqft; 33×122 lot; MLS V857830.

$2.388M; 3688 W 35th; 3,895 sqft; 50×130 lot; MLS V820562

$2.50M; 3356 W 27th; 3,021 sqft; 33×131 lot; MLS V849344

$2.60M; 3930 W 38th; 3,349 sqft; 62×166 lot; MLS V856281.


Afterthought:
For the aesthetes in our readership, we thought we’d add this bonus ‘butt-view’ of the $2.388 Million property.
Where do we sign?
What are we thinking?



“Most people I know who bought a single family home here in Vancouver did it in early 2009. They are dual income professionals born in Canada. The one couple I know buying this year paid 150K more.”

eyesthebye at RE Talks 25 Nov 2010 10:24am – [commenting on the Globe and Mail article on Chinese buyers of RE in Vancouver] “Sobering article if you’re a bear looking for a price drop. Most people I know who bought a single family home here in Vancouver did it in 2009 (spring and summer). They are dual income professionals born in Canada. I only know of 1 such couple who bought a SFH this year (August) and they paid some 150K more than if they had done it last year. Same kind of transition happened in Banff with foreign buyers and tourism. I know many wealthy caucasian families who’d been there for generations that decided to pack up and move their vacation homes to Kananaskas. So bears…off to Abbotsford?” [This poster has elsewhere described how they themselves bought a SFH in east Vancouver in early 2009. -ed.]

400% Price Rise In 10 Years – “You have to take a deep breath and realize that the world you thought you knew is not as it appears. You must understand and accept that there is untold wealth that exists within our city. A paltry $2.5 mil is chump change. What we are experiencing now is only a beginning.”

Larry Yatkowsky, at his blog yattermatters.com, recently posted [In Ten Years, 13 Nov 2010] the remarkable (yet commonplace for Vancouver) story of a Dunbar house [3929 West 31st Street] that has been reno’ed once, rebuilt once, and sold 4 times in the last ten years. The 2010 price is fivefold the 2000 price; a 400% increase. The tale is noteworthy, as are the comments that follow. Try and spot the infinitely varied ways in which people are able to say “It’s Different This Time”.
We have reposted excerpts here, for the archives. Thanks go to Larry for the data. -


August 2000
3BR. 2,496 sqft. 50×130 lot. Same owner for prior 35 years.
Ask Price $539,000
Sale Price $548,000 (2d on market)
.
.


December 2000
After some renos (“granite counters, shaker maple cabs, black appls, halogens, Kohler, alabaster.”)
2,538 sqft.
Ask Price $699,000
Sale Price $695,000 (3d on market)
.
.


September 2006
“Totally upgraded 4 years ago [6years?]. New kitchen and bathrooms.”
4BR. 2,575 sqft.
Ask Price $1,289,000
Sale Price $1,275,000 (7d on market)
.
.


October 2010
Re-built in 2008.
New 2nd floor. 3,437 sqft. 50×130 lot.
Ask Price $2,495,000
Sale Price $2,468,000 (28d on market)
.
.
From the comments and discussion that followed:

“People in this city have become nuts. Completely nuts. The pain will be deep and prolonged for everybody. For the same price you can buy an apartment building in Seattle with 40 apartments with a cap rate of 8%, that is $200,000 year income.” – ‘french’

“Would this even be possible if interest rates were higher?” – ‘BBcoq’

“I’m sorry guys you have to take a deep breath and realize that the world you thought you knew is not as it appears.” – Larry Yatkowsky

“How could anyone buying this place at $2.47M expect this kind of appreciation to continue? Is this place going to sell for $5million EVER?” – ‘stats don’t lie’

“Buyers are bringing wealth to their purchase, not just incomes. The only pain experienced is from [for?] non-land owners. Don’t bet it won’t be worth 5M one day – and sooner than you think. One thing is certain, the future holds higher prices not lower.” – ‘L8erdude’

“As Larry says there are lot of people in this town making serious money.” – fish10

“This is insane. People are in for a huge disappointment. Trying to rationally justify such a purchase is a waste of time as there is no rationality involved.” – ‘french’

“I bet all the bears will say that all the buyers that bought that specific home the last 10 year have been nuts. Has there really been a good time to buy for you bears? NO! Keep complaining…10 years and counting.” – Sam

“It is an absurd assumption to impose limited horizons/perspective on others in light of the fact that the baseline for home prices in Vancouver has shifted. The market has done so with complete disregard for those who cannot afford these price levels. There is nothing new about this – it applies to any market. … You must understand and accept that there is untold wealth that exists within our city. So much so, that a paltry (to them) $2.5 mil is chump change. From my perspective, what we are experiencing now is only a beginning.” – Larry Yatkowsky

“Geez, you flip flop like a politician depending on the “market” winds. And you mince your words and imply in your statements even more than a bloody politician.When prices were going down, you were a believer that the market was going down and some correction was coming. When things were soft, it was a flat market. And now after a month of strong list sell ratios, we are off to the moon again!” – ‘Realist’

“I report on what’s happening or what might, could, would, should, maybe or really is happening. That it’s up, down or sideways is of no consequence to me other than to provide some experienced insight to those peoples who are trying to make a financial decision when buying or selling their home.” – Larry Yatkowsky

We’ll let ‘Jumbo’ have the last word:
“It is what it is and until it isn’t, it is.” – ‘Jumbo’