“Prices are certainly negotiable at the moment.”

logic at vancouvercondo.info 30 Oct 2010 3.07pm- “Just had friends drop c.620k on a 2 bedroom place near Commercial (still overpriced imho, but hell, they can afford it). Originally listed at 699 a few weeks earlier. Prices are certainly negotiable at the moment.”

High Water Mark – $2.4M for 2462sqft on 33ft in Dunbar

Dunbar, Vancouver Westside: 4036 West 19th
Type: 4-bedroom, 5-bathroom detached
Size: 2,462 sq. ft.  Frontage: 33ft
B.C. Assessment, July 2010: $1.508 million
Listed for: $2.388 million
Sold for: $2.39 million
Sold on: June 17
Days on market: 9 [after relist? info anybody? -ed.]
[Featured in Vancouver Sun, 26 Aug 2010, 69 days after the sale]

Archived here for the historical record.
If you’re reading this in the distant future, you’ll know whether we, the bearish minority, were wrong to see this as completely crazy. -vreaa, 1 Sep 2010

The Importance of Buying at Vaguely the Right Time

When somebody next claims to you that RE, or any investment, always goes up “in the long run”, or by “x% p.a. over any 20 year period”, and that you should therefore simply buy & hold, show them this diagram. It’s from Carl Richards, at a NYTimes investment blog 10 Aug 2010. One implication is that the time that you buy can make massive differences in your actual dollar returns. – vreaa

“The pressure to buy was absolutely immense. He caved and paid current prices because the alternative of constant harassment would have driven him insane.”

jesse1 on RETalks 6 Aug 2010 8:41pm – “A member of my extended family bought recently because he and his wife are expecting their first child. The pressure to buy, for various reasons, was absolutely immense. I looked in awe at the way he was treated by his immediate family. He caved and paid current prices because the alternative of constant harassing would have driven him insane.”

Westside Detached Sale Example: 13.5% off original asking price

3540 40th Ave West, Dunbar
V835842, 2,889 sqft house built 1931; 66 x 101 lot
Listed 7 Jun 2010, $1.549M; Reduced 12 Jun 2010, $1.449M
Sold 6 Jul 2010, $1.34M (13.5% off original ask)

[Still overpriced. Houses like this one will sell for substantially less than $800K at the ultimate trough. -ed.]

“THAT’s Not A Reduced Price, THIS Is A Reduced Price…”

$9,000 off a $430,000 asking price is NOT a reduction, it’s a rounding error. The 2% is barely statistically significant, the buyer is effectively paying ask. The article cited below makes out it’s a big deal, and turns out to be a puff-piece trying to keep buyer interest buoyant. As listings rise and sales stall or drop, buyers will find out that ‘low-ball’ offers start at 20%, 25%, 30% below asking price. BC MOI is 9.3 months and climbing. If you absolutely have to buy, wield a big stick. – vreaa

This anecdote from an article by Derrick Penner, Vancouver Sun, 15 July 2010 -

“When Maple Ridge’s Monika Novosadova went house hunting this spring, she faced an embarrassment of options looking at 28 homes before coming putting an offer down on a three-bedroom single family home at the end of June. And it was a shrewd offer since, like much of British Columbia in June, she faced a buyer’s market with rising inventories and declining sales putting home-hunters more in control.

“I felt I had cards in my hand because it was a buyer’s market,” Novosadova said in an interview. “And I felt fairly confident the price could be negotiated down.” So the single mother wound up getting the house, in a “perfect family neighbourhood” for $421,000, not the $429,900 it listed for. Now she’s excitedly looking forward to moving into the home with her 10-year-old daughter in September, and her realtor Ron Antalek said Novosadova’s experience is typical of what other buyers are facing. “There’s not the necessity of multiple offers and competing bids,” Antalek said. “People are able to shop. They have time to compare.”

From the same article:

Across B.C. in June, realtors recorded 7,722 sales, down 22.5 per cent from the same month in 2009. Active listings in inventory, climbed almost 21 per cent to hit 59,232 units in June, which equalled a 9.3-month supply based on the pace of sales. [9.3, where have we seen that number before? Oh, yeah, it's also Vancouver's price:income ratio. - ed.]

“I have a friend who just bought. She got tired of looking, and got it below asking price, so she “just jumped in”.

manx at vancouvercondo.info 28 May 2010 6:00pm – “I have a friend who just told me she bought in tv towers. She got tired of looking, and got it below asking price, so she “just jumped in”. Didn’t get any details but I’m guessing around $650/sqft.”

“A professional couple looking at a $1.8M house on the West-side of Vancouver were told by the realtor that it was a “nice starter home.”

This via e-mail to VREAA – “A professional couple looking at a $1.8M house on the West-side of Vancouver were told by the realtor that it was a “nice starter home.”

Profile of a Recent First Time Buyer – “About a month ago I became a first time homebuyer in Vancouver. I have been living here for about 15 years, and seeing prices triple, or quadruple in some instances, and I just thought “Wow, I need to get on this wealth train”.

This anecdote is extracted from a telephone interview between CBC Cross Country Checkup host Rex Murphy, and a caller from Vancouver named Steve Zimbalatti, 25 Apr 2010, during a program on debt called ‘Living Beyong Our Means’. The segment occurs at the start of the second hour of the show. The whole segment is transcribed here. Thanks to AnonymousAA at vancouvercondo.info 25 Apr 2010 3:17 pm for first alerting us to this story. -

“About a month ago I became a first time homebuyer in Vancouver. I had been a renter and I had money in the bank and quite a bit of freedom actually. It was very liberating the way I was living and a lot of my friends, I think, were perhaps envious of the fact that I wasn’t tied down by debt. I sort of got into that situation by learning my lessons the hard way. As a student in college I got one of those credit cards that you are allowed to sign up for in the foyer and I thought “Wow, this is great. I’m a grown up now, I can take on some debt.” But I just couldn’t manage it. I maxed it out almost right away. I couldn’t really manage the debt, and it gave me a poor credit rating. I did not pay the bills on time and I just thought “Well this is enough of this, I am never taking on debt again”.

So, from that point forward, I was just living pay cheque to pay cheque, able to squirrel a little bit away every time and build up a little nest egg but I was thinking, here in Vancouver, I am watching all this wealth go by in this housing market. I have been living here for about 15 years now and just seeing prices triple or quadruple in some instances, in that time, and I just thought “Wow, I need to get on this wealth train”. So my partner and I decided that it was time to buy and, you know, if we are going to be here in Vancouver, working here in Vancouver, we might as well own something.

So, we bought last month [March 2010]. We just thought it was an astronomical amount of money that we are paying for this little box in a building in the sky and we just thought “Wow, this is crazy because, we’re grown up, we watched our parents pay $12,000, maybe $20,000, for a house and all of a sudden we are paying $350,000 for a tiny box in the sky. And to get anything in the City of Vancouver at that price, you have to compromise. You might not be able to live in the part of town that you want to live in. But we are very, very happy, actually, with what we’ve got, and we think it was, you know, a spot where we can make a good home.

[Rex Murphy: So do you feel now any less free than you did before?]
Absolutely. We find it very confining. You know, we never used to sort of care about the goings on in government or the world of finance or anything now we’re watching the news every day to see what going to happen to the interest rate, or “do we lock in now?”. You know, we got almost free money in a way. When we tell people that we’re got a mortgage rate of 1.95% interest, my parents’ jaws drop. They used to pay 18% or 20% to service their mortgage, and now it is just like its unbelievable to them. You know I think wealth in a lot of ways these days has been transferred sort of to real estate and it seems to be, you know, by design if you ask me. If you look at say wealth, and where most of the money was 25-30 years ago, most of it was in the stock and bond market. Now for Canadian wealth it is in real estate.

Regarding our debt situation, it is not a worry in the sense that we don’t have it under control but we do find it, you know, I don’t want to say “crushing” because, like I say we are quite happy where we are but we do find it is less liberating, we might not be able to take the vacations we want which was great in the past. Yeah it is just, you know, it is a whole new ball of wax.”

“CBC’s cross country check up were talking about debt and some guy called up who said he just bought a “box in the sky” in Vancouver for $350k. He conceded that yes, it’s expensive, yes, his lifestyle is different now (no more vacations) and no, he doesn’t get to live in the neighborhood he wanted, but hey, now they OWN!”

AnonymousAA at vancouvercondo.info 25 Apr 2010 3:17 pm -

“I just heard a bit of CBC’s cross country check up. They were talking about debt and some guy called up who said he just bought a “box in the sky” (his words) in Vancouver for $350k. And he conceded that yes, it’s expensive, yes, his lifestyle is different now (no more vacations) and no, he doesn’t get to live in the neighborhood he wanted, but hey, now they OWN! And they can now join in on what he called the “wealth creation train of real estate” in Vancouver. Oh ya, and his interest rate is 1.95%. I think, WHAT wealth creation train, you just took on (probably) $300k of debt, you moron (excuse my nasty tone), you don’t even get to live where you want, and you’ve just committed yourself to staying at home and eating Kraft dinner for the next 35 years. And when rates go up?? God, I am SO sick of this RE market. It’s just a bloody place to live, not a goshdarn money tree!”

Vancouver Westside Shed Price Update

Readers will remember this image, featured here 8 Apr 2010:

4274 13th Ave W; Point Grey; 1,614 sqft home; 50×122 lot; V821029

Asking price: $1.698 Million

UPDATE: Sold, 14 Apr 2010, $1.840 Million

Setting aside all jokes regarding the structure, this can be used as a watermark for 50′ lot prices on the Westside at this point in the bubble. -vreaa

“They said they were so happy they timed it just right, and they were so lucky to have found this place in the last minute, as they would no longer qualify for the mortgage as of this week. The place was a run down shack, with a dingy looking basement suite, they bought for $750,000.”

White Payer at vancouvercondo.info 22 Apr 2010 9:52 am -

“I saw a news bit on CBC couple of days ago (Monday [19 Apr 2010], when the new rules started) and they were showing a young couple in Vancouver (she was pregnant with their first child) who just made it getting “into the market” before the new mortgage kicked in. They said they were so happy they timed it just right, and they were so lucky to have found this place in the last minute, as they would no longer qualify for the mortgage as of this week. The place was a run down shack, with a dingy looking basement suite, they bought for $750,000. These people were genuinely happy and excited. They think they managed to “beat the system” or something.”

Busy Realtors – “I had about 40 people through our 2 bed condo listing in Burnaby. Most with Realtors so they appear serious. My wife had about 50 people through our east side TH.”

thinktom at RE Talks 17 Apr 2010 11:10 pm -

“I had about 40 people through our 2 bed condo listing in Burnaby. Most with Realtors so they appear serious. My wife had about 50 people through our east side TH. A friend of mine with Lofts Vancouver was working on two seperate offers tonight.  Fraser Valley might be dead but there is still life in the legs of the Van/Burnaby market right now.”

silverman at RE Talks 18 Apr 2010 00:46 am -

“I had an open house in New West couple weeks ago … 35 people on Saturday, 45 on Sunday… sold $20K over asking.”

“My co-worker just bought a place last week. FTB, 645sqft, $430K. I told her it looked like a nice cozy place, but I felt a sick feeling in my stomach. I mean what else could I say? She seemed so excited.”

For anybody who still thinks that it’s unfair to suggest that the recent Latvian vignette will play out here in Vancouver, take a look at the following story.  -vreaa

kansai_92 at RE Talks 17 Apr 2010 9:28 am -

“The April deadline has really planted some seeds in the minds of the FTBs. My co-worker just bought a place last week. $430s for 645sf condo near Cambie Village. It was only last month that she told me they had just started looking. Even when I was buying my car, I took about 3 months to finally decide. She admitted they rushed to beat the rule changes and pending rate hikes. I told her it looked like a nice cozy place, but I felt a sick feeling in my stomach. I mean what else could I say? She seemed so excited.” … added at 11:17 am – “They are pretty good savers but little financial knowledge. Don’t understand mortgage rates, resets, affordability, compounding interest etc. I imagine 20% dp. Been renting for years.”

“While I KNOW this house is extremely expensive and likely at the top of the market, we bought it. Wish us luck, we may need it!”

This bubble has inconvenienced many, and here is an example of an individual who, despite (perhaps because of?) sound insight into the market, made the decision to not let the bubble inconvenience them any longer. Essentially they are saying that they are wealthy enough (inheritance ‘backstop’) to be able to take the risk of their new house dropping greatly in market value.  That risk is, by their calculations, less significant than the inconvenience of not moving into their current ideal accommodation.  -vreaa

The Greatest Fool? at robchipman.net 15 Apr 2010 1:02 pm -

“My wife and I currently own a very nice high end condo and are at a stage of life where condo life isn’t necessarily appealing anymore.  So, we locked in a stupid low rate and “kept our eyes out” for a place.  Well, within a month, we found a great house in a great area (our prime target area), and while I KNOW this place is extremely expensive and likely at the top of the market, we bought it.

Why would someone, like me, do this, when my instincts tell me that we’re at the top of the market, with the lowest interest rates on record, affordability a major issue, and nowhere to go but down?

Frankly, because of what I mentioned – we are at the stage of life where we don’t want to live in condo anymore.  I’ve looked at house rental listings, and none were as nice as this place.  Plus, my extensive (believe me, extensive) economic analysis showed me that for every 1% rise in interest rates (which has already occurred), at this approximate price point, we would require a an approximate 10% reduction in the market in order to have the same payment (remember, we are long in the market with our current place, so the market decline hurts us on the sell side too).    I think a 1.7% rate rise (not unreasonable, at all) to ~ 5.4% would mean we’d have to see a 20% market reduction.

My dad passed away last year, my mom’s in a big house by herself on the island – she’s making noises about downsizing etc. or even moving.  So, she’s offered to “advance” us some of my inheritance (only child) to help out.  That helped us make this difficult decision as well, as we have a bit of a backstop there.

At the end of the day, we can afford the payments on this place, although, it will be a bit of an adjustment for us.  We have some economic backstop.  I think the market could easily correct up to 20%, but maybe not by much more than that.  To not buy now, we would have to bank on a 20% or greater drop in the market.

I am somewhat bearish on the market, but not in the same way as a lot of people here are.  I do think that a 20%-30% correction is a very real possibility (or even a probability), but I also think that anything greater than this, on a long-term protacted basis, is unlikely.  There is something that none of us have been able to figure out or quantify that keeps the market buoyant.   I personally think it’s a combination of foreign ownership and generational wealth transfer (baby boomers are relatively affluent and like to help their kids – akin to my situation).  I also think that the bottom fell out, you’ll see other governmental “stimuli” (such as playing with bank rates) to readjust the markets.

So - anyway – that’s what we decided to go, for good or for bad.  I’ve considered the impact that an interest rate of 9% would have in 5 years time, in which case, we’ll likely be selling.  But the way I see it, I’ll cross that bridge when I come to it.  There are lots of other variables at play, that are difficult or impossible to predict – general economic conditions, personal job situation, a further “inheritance”, higher inflation or hyperinflation, a catastrophic illness such as cancer, a global nuclear winter if some quack dictator does something unpredictable, etc.  So, we’ll roll with the punches.

I hope you all take this as it’s intended to be posted – not as a “you are all wrong” sort of thing – more of an explanation from someone who, quite frankly, agrees with you, but given the time and place that we are in, decided that we’d still buy in this market.  Am I greater (greatest) fool?  A number of you will say yes.  But, at least I’m an informed “fool”.

Wish us luck, we may need it!”

and at 1:40 pm -

“Maybe I achieve full bonus at my work each of the next 5 years and reduce the mortgage significantly during that time.  Maybe my options net me $500K.  Maybe I get promoted at work into a significant raise.  All of these scenarios are just as likely as an interest rate rise to 9%.  If so, no, we won’t be selling, and we’ll continue to be extremely happy in the house.  Also, it’s my principal residence, not an investment – if I’m under water, I don’t really care as long as I can still afford the payments.

One thing I think “us” bears (remember I am a bear) forget is that if rates rise significantly, the economy is going to be humming.  Majorly humming.  In which case, I can guarantee that my profession will afford me a much higher income, esp. with 5 years more experience.”

Buyer Panic – “It was pandemonium! A friend of my mother’s listed her small 3 bedroom rancher in Richmond last Thursday for $799K. The open house was Sunday, people lined up to get in. There were 12 offers and it went for $910K. One guy even offered the agent $25K “extra” in her pocket if she’d sell to him.”

McLovin at robchipman.net 12 Apr 2010 4:33 pm -

“Can someone say the market is stupid hot? If you ever need a speculative blow off top example here it is:
This story is absolutely true (no, I do not have the MLS number). It was a friend of my mother’s house. She listed it in Richmond Thursday for $799K for a 3 bedroom rancher (small).
The open house was Sunday they had people lined up to get in. There were 12 offers and it went for $910K. One guy even offered the agent $25K “extra” in her pocket if she’d sell to him. It was pandemonium there!
I must admit, even as a long term investor in real estate, I am stunned by this. This is going to end even worse than I thought. I wonder how the person who “won” the bidding war is going to feel in a year? Do people believe this sort of behaviour is normal? I can’t wait for the days like in the late 80’s where I was the only person who had made an offer since it was put on the market 103 days ago.”

Realtors Report Being Busy – “My sister is a realtor in one of the burbs, she’s working 16/7. Everyone’s desperate to get into something before everything changes. What’s unusual for her is the percentage of deals lately which seem complete but then fail.”

Listings are soaring; Realtors on the street say that they are busy. The lending rules tighten next Monday, 19th April. -vreaa

MikeStewartRealtor at RE Talks 7 Apr 2010 7:17 am – “In the areas I work, I saw a big surge in supply right after the Olympics, but starting from about 10 days ago we’ve seen a normal Spring market kick off and demand is surging.” and 8 Apr 2010 7:09 am – “Worked till 10 last night is was so busy.”

Greenhorn at RE Talks 13 Apr 2010 8:53 pm – “Realtors and mortgage brokers I have talked to say the same thing you are saying. It is insane!!!! Buyers are in full panic mode. Good time to be a realtor. Actually, it is always a good time to be a realtor in Vancouver!”

webfeet at RE Talks 14 Apr 2010 1:26 am -“Inventory is around 15,600 [for GVRD]. I’d call that pretty bearish. It seems like realtors are much busier listing than selling these days.”

betamax at RE Talks 14 Apr 2010 12:12 pm – “My sister is a realtor in one of the burbs, she’s working 16/7. Everyone’s desperate to get into something before everything changes. What’s unusual for her is the percentage of deals lately which seem complete but then fail. Might just be a statistical cluster, but some of these desperate buyers are simply stretching too far and can’t get the financing they thought they could. Which means that some of the people who just barely qualify could be in financial trouble in short order, no matter what else happens. Interesting times.” and 15 Apr 2010 9:10 am – “My sister mentioned being shocked by how many buyers she’s encountered who said they were getting in now to beat the HST….and many were looking at pre-owned RE. The idiots didn’t even understand that HST only applied to new sales; she had to explain it to them.”

CBC TV News – $1M Milestone – “What we’re seeing now, is people are moving typically in three- or four-hundred thousand dollar chunks up the property ladder.”

From CBC News, 7 Apr 2010 -

“For the first time, the average price of a Vancouver home has topped $1 Million.”

.

“It’s got a dream home price-tag, but this old-timer is definitely not the home you’d dream of. The asking price … Just over One Million Dollars.”

.

“That’s what we’re seeing now, is people are moving typically in three- or four-hundred thousand dollar chunks up the property ladder, over time.”

.

“Most of my clients are very wealthy.. they are new immigrants in the investor category.. so they are buying multi-million house on westside of Vancouver.”

.

Larry Yatkowsky says he doesn’t believe anyone who predicts it’s got to end soon with a double-digit crash. “It’s not going to go there.. I have no reason to believe it would drop anywhere near that.” Higher interest rates may cool things off a bit, but he says don’t expect too much of a fall back from that million dollar milestone.

“I had dinner with a friend on the weekend who has bought a new condo in Coquitlam for $320k as if he just bought a bag of chips from the local IGA.”

Anonymous at vancouvercondo.info 5 Apr 2010 10:36 am -

“Had dinner with a friend on the weekend who has just decided to jump into the market. He just bought a new condo in Coquitlam for 320k as if he just bought a bag of chips from the local IGA. While we were discussing his new purchase I asked him if the upcoming interest rate hikes played any part in his decision to buy. His answer? “Umm…. no I can’t say it did….” – there we have the long-term thinking of the average buyer these days. I could only sit there politely smiling but thinking that he just doesn’t know what he has set himself up for in the future.”

Vancouver Buyers #1 – “My friend is buying a house in Van Heights for $750,000. He met a girl with $200k equity in a Yaletown condo and they both make $80k-ish.”

In response to our recent question about Westside buyers, ulsterman at vancouvercondo.info 4 Apr 2010 11:23 am kindly supplies this anecdote -

“My friend is buying a house in Van Heights for $750,000. Met a girl with $200k equity in a Yaletown condo and they both make $80k-ish. We used to chat about absurd real estate prices and “things have to crash.” Then he met the equally well paid partner with equity and things changed. I drove past his soon-to-be place and phoned to congratulate him on the “investment”. There’s no point in talking to him about market peaks, P/E multiples, etc, because although he was once a bear, he says while him, me and others bears were calling tops for 5 years, his wife-to-be was making the tens of thousands in equity that have enabled them to move into a house. What can I say? “No, this time I’m right”?

I think that they have the income to weather a significant rise in rates, so whether I’m right or not (this time), they will be able to ride out any falls. If I’m wrong (again), then they will continue to build the kind of equity that I will need a 649 ticket to replicate.”

patriotz 1:04 pm adds a pertinent comment -

“[Whether they are] selling that condo is something which you didn’t mention. If they are just borrowing against it, they are setting themselves up to crash and burn. If she really is selling it, they will probably muddle through, although I think they have a lot of KD ahead of them.”

further: [ulsterman confirmed that they had indeed sold the condo and "pocketed 200K tax free"; 'best place on meth' then noted that they haven't actually pocketed it, but rather that they were "just throwing it into an asset even more overpriced than the one they're selling."]

Homeviewer Discretion Advised – ‘Vancouver Deliverance’ Visual Anecdote

Bubbles distort judgment. What was going through the realtor’s mind when they were capturing, uploading and presenting these photographs? Surely some form of cautious description in the MLS blurb would have sufficed? This house was discussed on various blogs recently, including greaterfool.ca 8 Mar 2010. Fascinatingly, an ex-owner supplied an anecdote, which is archived below the photos. -vreaa

MLS#V809495 3635 Prince Albert Street, Vancouver East, BC
Lot size 3,159 sq.ft   House 1,650 sq.ft
Asking price  $579,900
“Handy man special. Needs TLC. Mainly Land Value.”

Here’s poco at greaterfool.ca 9 Mar 2010 2:58 am - “Believe it or not, I owned this house back in 1973—I can’t stop laughing.–it was a dump back then but from the pics I see they’ve done a few upgrades.
It does bring back a lot of memories from those days. My first wife and I bought it for 28k in Sept 73 from her mother (somewhat as a gift) we split up and I stayed in the house while we tried to sell it.
Finally sold in the fall of 75 for 43k–had a huge moving out party where I met my 2nd wife—-I wrote her phone number in the dust on the siding “shingles” to the left of the front door– whenever we were in that part of town we would drive by and lo and behold the phone number was still there –years later.
Note the dark brown cupboards in the small pantry(?) area– I swear thats the “mac tac” (70s thing) I covered them with.
But thanks once again for that link– I’ve e-mailed it to many–and yes I will be going by it this week.
PS-hope andrew doesn’t see this –he’ll be calling me a fool for not keeping it as a rental.”

Bubble Sentiment Levels – “91 per cent of Canadian homeowners believe a home is a good investment”

A recent study from the Royal Bank Of Canada, 8 Mar 2010, contains information highly suggestive of a market oversaturated with bullish sentiment. Under these sentiment conditions smart players are selling, and markets commonly top.  -vreaa

Excerpts:

Homebuying momentum in Canada continues to gain steam with the portion of Canadians who are very likely to purchase a home in the next two years rising to 10 per cent from seven per cent two years ago, according to the 17th Annual RBC Homeownership Study.

91 per cent of Canadian homeowners believe a home is a good investment, the highest level in 12 years, and one-quarter (26 per cent) expect their home to be their primary source of income when they retire.

Most Canadians (six-in-10) also believe housing prices will rise in 2010, up significantly from 25 per cent in 2009.

Do buyers in a market show “urgency” at a top or a bottom?

Question: Do buyers in a market show “urgency” at a top or a bottom? -vreaa

Excerpts from ‘Canadians fret over mortgage rates, prices’, Globe and Mail, 24 Mar 2010 -

More Canadians are looking to enter the housing market ahead of higher interest rates and home prices that are expected to arrive later this year. [Huh? Wouldn't increased interest rates put downward pressure on prices? Oh, Nevermind. -vreaa]

“There’s definitely a sense of urgency among home buyers,” said Lynne Kilpatrick, senior vice-president of personal banking at BMO.

71 per cent of current and future homeowners think house prices are too high. It also found about 33 per cent of respondents complained they have lost sleep due to the stress of trying to buy a new home.

“We’ve been looking for a house for 3 years and finally found one and bought it, even though some people’s common sense said “now is the time to wait.”

ängstlich at robchipman.net 15 Mar 2010 8:28 am -

“We’ve been looking for a house for 3 years and finally found one and bought it, even though some people’s common sense said “now is the time to wait.” We waited through the mini-’crash’ and didn’t see a single house we wanted to buy. We had very particular wants and the kind of house we wanted just doesn’t show up often. So we bought the one we found, figuring the odds were slim that we would ever see such a thing again before our children went to university. Even when the market was down, the selection completely stunk, at least in terms of what we wanted – old, not reno’d into submission and turned into a replica of every other vancouver reno that looks like a bad preppy furniture catalogue, close to transit, etc.
But we weren’t willing to spend just anything; we refused to get in a bidding war; we refused to pay more than we thought was currently “reasonable”; etc. and the market situation made it possible to do that. We got a price reduction on the house and have a house that was within the range of what we could afford.
My only regret is that we didn’t buy a house 3 years ago that we didn’t want; we could have sold it now at a profit instead of having thrown many 10s of grand away in rent. But at the time we thought: we’ll find a place we like in a few months so all the expense of purchase and resale will not be worth it. We were wrong, but might not have been.”

Vancouverites In ‘The Guardian’ – “It may be expensive to live here; housing is very expensive. It took HARD WORK to buy a house, but we did it. We will continue to make sacrifices so we can live here.” … “I am an immigrant to Canada, and I am lucky enough to live in Vancouver because I bought here before it became a world-class city.”

A somewhat lukewarm review of the Vancouver 2010 Olympic Games in ‘The Guardian’ drew comments from individuals living in Vancouver who, not surprisingly, managed to mention real estate prices:

hhcu at www.guardian.co.uk 1 Mar 2010 6:26 pm – “Vancouver with a mild climate is one of the most desirable cities to live in Canada. Housing prices are the highest in Canada. That is one of the many reasons that we have homeless people. That sounds a bit dismissive, but we also are a city of immigrants, the majority start out working at the basic minimum wage and the majority, if not all, are not homeless. I am an immigrant to Canada, and I am lucky enough to live in Vancouver because I bought here before it became a world-class city. I have lived in and traveled to many so called world-class cities and am always happy to come home to Vancouver, even in the rain which sweetens the air and makes the trees grow, at least a foot a year. The Closing Ceremony was belittled. Who cares! Even the poorest (here often bus drivers “let” some of the destitute gratis on the buses) can take a (wheelchair friendly) 99 bus out to the university forest and see a real working beaver dam, the “organizing committee” being the beavers themselves. No wonder this hardworking little animal is venerated here. Now we have the Para-Olympians to look forward to. As for the bill? It is a heck of a good party.”

ProudCanuck2010 at www.guardian.co.uk 1 Mar 2010 7:15 pm – “I am a proud Canadian, that has also lived abroad in Tokyo, and have travelled to many cities in the world, and I work in tourism/hospitality, and I have experienced racism, challenges with language, and also warm hospitality from my hosts where I visited. So I speak from experience when I say that Vancouver qualifies as a World-Class City. I chose to live in Vancouver for it’s beauty, weather, people, culture, and diversity and have called this home for 15 years after my travels abroad because it what it offers. BC residents are the healthiest in Canada, we get to look at those beautiful mountains, whenever the clouds lift, and we wait patiently and happily for those days, and live in the most liveable city in the world. And in my job, I speak with visitors EVERYDAY of how they fall in love with our city, and our province, and can’t wait to come back. It’s on the list of “Things to do before I die” for many. It may be expensive to live here, and housing, admittedly is very expensive. But we worked hard to buy a house, and it took a few years, but we did it. But it took HARD WORK, and we will continue to make sacrifices so we can live here. We could have moved to a city and found a job where it wasn’t so expensive, but we want to live HERE, and that is the price you pay. I imagine if I chose to live in other “World-Class Cities”, it would not be any different. New York? Tokyo? The same! Viva la Vancouver! It rocks!”

Bear Baiting – “It’s the whole tone the bears take when presented with a good deal. This home couldn’t possibly be priced in my range because, it’s a dump, it has two alleys, it’s close to commercial buildings, yadda yadda yadda.”

Those bullish the market are cajoling cautious prospective owners by claiming that they simply don’t have the fortitude to buy, or that they have over-inflated and unrealistic ideas regarding the quality of housing they deserve. -vreaa

eyesthebye at RE Talks 9 Feb 2010 started a discussion headlined “Great Deal on this SFH in Main area” by referencing the above house (625 E 24th Ave; built 1910; 1490 sqft + 800 sqft unfinished; 33×122 ft lot; asking price $679K) and claiming that it was a “great deal”, that ‘sweat equity’ would add $300K-$400K to its value, and also offering to bet that it will sell for $100K over ask. Debate as to the desirability of this property ensued, regarding construction quality, age of the structure, neighbourhood, proximity to commercial area, and even the property’s Feng Shui. At that point the original poster objected to all the objections by saying: “It’s not just the discussion itself – it’s the whole tone the bears take when presented with a good deal. Like argufying themselves out of the market. This home couldn’t possibly be priced in my range because, it’s a dump, it has two alleys, it’s close to commercial buildings, yadda yadda yadda. If prices were 50% cheaper bears would still talk themselves out of buying somehow” and “This home might be [only] a half great deal to you – but your opinion doesn’t coincide with this market. Most buyers would probably tell you that being able to buy a decent home under assessed value constitues a great deal – at any time.” Poster dot com refugee pointed out that the house seemed “bloody expensive”, to which jimtan replied “Move to Windsor! You’ll love it there!!!”.

Bear Vitriol: “I personally know over a dozen uneducated blue collar people that can now survive on their measly 45k salaries because their homes have doubled, and even with a correction, will still be far ahead of the bears.”

Here’s  Continuous Burn at vancouvercondo.info 26 Jan 2010 12:02 pm -

“We all thought we were smarter than the “greaterfools” that ran out to buy in a supposed “bubble.” Four years later and the majority of those greaterfools have received paper equity gains that the average bear will never see in his lifetime, and if they were to cash out or have cashed out, have earned once in a lifetime gains. The funny thing is that a bunch of uneducated blue collar people and immigrants who were told that RE was the best investment have done the right thing, and have reaped the rewards. The educated ones that have conducted market analyses and adhere to perceived “common sense” have been left renting for years, and will like continue to rent for many many many years to come as this thing slowly deflates. I personally know over a dozen uneducated dolts that can now survive on their measly 45k salaries because their homes have doubled, and even with a correction, will still be far ahead of the bears. Some have made hundreds of thousands, which would take a lifetime for savers to make by saving and investing that “renter’s premium.” They have more equity and cash than those earning close to six figures and will come out far ahead of the prudent savers and market timers.” [Only if they actually cash out, and how many do you know who are doing that? -vreaa]

Kitsilano Sale; $335,000 Over Ask: “The bidding was frantic and the look in the eyes of the buyers at the open house was desperate.”

Panic buying in Vancouver’s Westside. -vreaa

This exchange at RE Talks 19 Jan 2010 -

eyesthebye 10:24 am -“I have a friend that just lost out on a Kits house.
Assessed 1.175M; Asking price 1.475M; Bid 1.65M; Selling price 1.81M.
The bidding was frantic and the look in the eyes of the buyers at the open house was desperate. Total of 6 offers. No subjects. The high bidder was Chinese, as was the buyer for another property in Kits a couple weeks ago; [where there was] also bidding 300K-400K above asking.”

gse36 1:26 pm – “Given the market, 1.488M was quite well priced. 2758 sqft, old house completely redone, so its almost like new. With a suite. A new house like that would go for 2M+, so 1.8M for a rebuilt one, with suite, is about right. Assessed value is 1.1M-1.2M, but of course that is mainly land value — it doesn’t account for the fact the house is very usable.”

Taipan 2:11pm – “Great to hear the desperation entering the market once again. No need to think, just make sure you out bid everybody else. I love these anecdotes. I’d even grab a coffee and hang around watching to see that sort market psychology.”

Overdone Deal On The Westside? $458,000 (2000); $1,330,000 (2010)

The buyers are “ecstatic and excited” over their “drool worthy” lot, AND the sellers “chose a good time to sell”. It seems everybody is happy. Our hunch is that one party has made a mistake. -vreaa

This ‘Done Deal’ from the Globe &Mail 15 Jan 2010 -

3168 West 19th Ave, Vancouver Westside

ASKING PRICE: $1,188,000 SELLING PRICE: $1,330,000

PREVIOUS SELLING PRICE: $458,000 (2000) TAXES: $5,652 (2009)

DAYS ON THE MARKET: 11 LISTING AGENT: Faith Wilson, Re/Max

Agent Faith Wilson calls this 1,960 sq. ft. home on a “drool worthy” lot, “a perfect example of how the market in Vancouver has picked up momentum and confidence.” “This listing sold in 11 days and had 19 offers,” she says. The house has, “fabulous street appeal,” says Ms. Wilson. It has three-bedrooms, two-bathrooms and is situated on a 6,100 sq. ft. lot close to parks, transportation and schools, including well-regarded Carnavon Elementary and Prince of Wales Secondary School. The one-level plus basement home is located on a quiet street and has “manicured lawns and mature landscaping, especially in the big south facing back yard,” she says.  Updates include a new furnace, hot water tank and wiring. “The new owners are ecstatic to be in such a great location and are excited about the opportunity to either add an extension or to design their own home for this beautiful lot,” says Ms. Wilson.  As for the previous owners, “they have loved living here but are ready to move on,” says Ms. Wilson, and they chose a great time to sell.

“We have a savings account we call our “higher interest rates in 2014″ fund. We save about $1500/month into that.”

Without any doubt, the best current forum for Vancouver RE market discussion is vancouvercondo.info, hosted by ‘the pope’. Readers of VREAA know that we owe many of the anecdotes archived here to posters at VCI. In a recent article, ‘Say Goodbye To Free Money’, the pope asked a series of questions aim to assess how people were preparing for future tighter lending. Here’s one response from a relatively well prepared owner. -vreaa

DP at vancouvercondo.info 12 Jan 2010 3:46 pm -

“How are you preparing for higher rates?
We have a 30yr amortization period on our mortgage (which is $500K), but do monthly payments as if it was a 25yr. We also have a savings account we call our “higher interest rates in 2014″ fund. We save about $1500/month into that.

If you hold a mortgage are you locking in or are you counting on the low rates of today continuing for a lot longer?
Locked in.   4.05% until end of term in March 2014. Probably should have opted for the variable rate and locked in when rates started going up and benefit from a year or two of low variable rate. Live and learn.

If you’ve got cash, where are you sticking it?
Extra top-up mortgage payments (about $250/month), savings account (about $1500/month), and investing in index funds (only $200/month). Losing out on investment returns now, but it’s worth it for us. The trade-off is in 2014 when mortgage is due, we have security of having about $450K left on our mortgage, with $90K sitting in cash which we can use to reduce mortgage to deal with higher interest rates.

Do you hold equities in markets that will be negatively affected by higher rates?
Of course.“

“The agent told my cousin she would try to squeeze the people that made the first offer by telling them there was another offer “out there”. The implication was clear, it must have been higher.”

Here’s a story of buyers who probably paid at least $30,000 more for a Yaletown condo than was  necessary to seal the deal. -vreaa

From Cynic at vancouvercondo.info 10 Jan 2010 9:46 pm -

“My cousin recently listed her apartment in Yaletown (Marinaside) for $739,000. She was offered $710,00 the first day and decided to think about it when the agent called with another offer, but only $685,000 this time. The agent told my cousin she would try to squeeze the people that made the first offer by telling them there was another offer “out there”. Of course, agents can’t divulge the offer but the implication was clear, it must have been higher. Long story short, the first buyers offered $740,000 and my cousin had a sale. She stills feel somewhat sleazy about it but, hey, that’s Vancouver.”

“You could stick your finger right into the roof where the ceiling meets the east wall.”

Two mainstream-media pieces on the same day focus on the unclear reliability of home inspectors. Locals have grown accustom to the pitfalls of poor construction, but does the simultaneous occurrence of two such articles from different outlets indicate more widespread buyer caution? -vreaa

‘Can you trust your home inspector?’, a TV program from cbc.ca broadcast 8 Jan 2010, with Erica Johnson & Mike Holmes.

‘Home inspection remains a buyer-beware environment’, a newspaper article by Derrick Penner, Vancouver Sun, 8 Jan 2010.

Darcy Zallen, a civilian employee of the RCMP, holds her inspection report as she stands in her master bedroom,  while contractor Jeff Bain removes rotten wood from the outside walls. Zallen had the home inspected and had no idea that the home needed major repairs. Despite a property inspector’s report that indicated some minor problems and noted a roof needed to be replaced within five years, Zallen faces spending up to an estimated $40,000 to make major repairs before she can move in. She purchased the home for $405,000.
“My main concern was the roof, because it was tar and gravel, but it had this weird metal covering,” she said. Zallen brought in roofing contractors to do maintenance, they told her the roof was beyond repair. And when other contractors started what she thought were cosmetic renovations, they uncovered a wall that was rotting away. “You could stick your finger right into the roof where the ceiling meets the east wall,” Zallen said. (from the Vancouver Sun article).

The Psychological Momentum Bull Argument – “Red is the New Black; Owning has become a Defining Part of One’s Persona in this City; Renting is the Biggest Stigma.”

It is no secret to readers of these pages that vreaa considers the Vancouver RE markets very overvalued and set for a tumble. For the record, we will at times headline opposing and alternative arguments on these pages. We recently had a look at the bullish predictions of Vancouver condo developer James Schouw, which centered around the argument for overwhelming ongoing demand. Here we highlight posts from an individual who argues that despite increasingly unfavourable fundamentals, psychological market momentum will cause people to take on ever increasing amounts of debt, or overextend themselves in whatever way necessary, such that they “do whatever it takes to [own their home] because it has become a defining part of one’s persona in this city, as renting is the biggest stigma”. We agree that RE has attained a remarkable psychological and social pre-eminence in Vancouver through this boom. Such engines are in fact common in bubble markets.  We disagree strongly, however, that such factors can keep price levels divorced from intrinsic value indefinitely. Fundamentals (yes, those “tired old arguments”) will take hold, and will turn a virtuous cycle very vicious. -vreaa.

For the record, this from ‘Vancouver Rocks’, who admits to being someone who works “administering a multi-billion dollar federal infrastructure fund“. They stated their position 4 Jan 2010 3:50 pm & 8:59 pm at greaterfool.ca -

“The strength of the market is domestic based, and has been driven by historically low interest rates (since 2002), a sincere if not brainwashed belief that we are the best place on earth, a certain level of amenities that cater to those that love scenery and the outdoors, and a commitment by a population willing to take on massive debt for bragging rights. Is that delusional? Sure, but that delusion has fueled the longest RE boom in this province (and in Canada’s history as far as I can tell) to the point that it is entrenched.

Affordability has been tapped for many years. This year and next year will be no different. Each year, people are amazed at the ever increasing percentage of income spent on housing, and each year prices continue to go up. Each year, people bring out the same tired old arguments. And yet, here we are with a low paying service sector economy; a province absent of corporate headquarters; a decimated forestry and fishing industry; an embryonic tech sector; anemic immigration at best; a doubled unemployment rate; and a 15% increase in RE prices one year during the “worst” recession.

Income to price ratios mean nothing in this city. This city has not followed the three times income rule since the early 80s. There has been a disjuncture between incomes and home prices for DECADES now. Such a ratio may mean something in Winnipeg, but out here people find a way to pay for their real estate no matter what – through foreign money, renters as mortgage helpers, second jobs, etc.

People in this city will do whatever it takes to keep their place because it has become a defining part of one’s persona in this city, as renting is the biggest stigma in this city.

And because most people are aware of the strength of the market, any minor “correction” will see people flock right back in because they know that prices go up.

I think people believe that people are taking on massive amounts of debt without knowing what they are doing. While some of the generation Ys are doing so because they embrace risk and have never known “bad times,” other older generations that should “know better” take [on the risk of debt] knowingly.

If the big bad “recession” of 2008 taught us anything, it is that being in the red can pay off – “red is the new black” so to speak. The government created a moral hazard with their bailouts, so many homeowners believe deep down that should anything go wrong with real estate the government will bail them out. Real estate has become the defining sector of an economy, an indicator of wealth, and a “right” in the minds of the masses.

Prices have been in a so-called “boom period” for over 8 years now – yes, that is eight years, and this will most likely be the 9th year of significant appreciation. Just a history lesson for all the young’uns – prices may rise, and dip, but in Vancouver they maintain their trajectory ever upwards. To all of you that are waiting for a major crash in Vancouver, you might have to wait another decade. But be sure to keep checking blogs for predictions that a crash will happen “next year,” and be sure to comment on how much your are “saving” every month by renting ($500 here, $1500 there), all the while watching homeowners secure “paper gains” reaching tens of thousands if not more each year.”

“My co-worker bought recently with the full expectation he and his wife are taking a major hit in the near future, but with a second child on the way family outweighed finances.”

Regardless of where we are in the RE cycle, there will always be buyers and sellers motivated primarily by life circumstances. For some this results in serendipitously good timing, for others, bad. -vreaa

This from a poster at RE Talks 22 Dec 2009 -

“A co-worker bought recently with the full expectation he and his wife are taking a major hit in the near future, but with a second child on the way family outweighed finances.”

“Unlike previous years, my reply that I had NOT purchased was NOT greeted with exclamations of “Why not?? You gotta buy sometime! Come on, hurry up and buy!!!”

There’s A Change A-Comin’. Warnings to be prudent bubble up ever closer to the surface. But the Vancouver RE market moves slower than the speed of dark. So slow it can’t get out of its own way. Instead of anticipating the after-effects of the Olympics, it looks like we’ll have to trip right over them before we stall. Never underestimate the foolhardiness of those determined to get rich quick. -vreaa

This from pricedoutfornow at vancouvercondo.info 20 Dec 2009 5:49 pm -

“Some interesting observations from this weekend. Went to a few Christmas parties where RE came up. One co-worker revealed she and her husband recently purchased a house in South East Vancouver ($600k maybe?) They are both around 55 years old. First time home buyers, they’ve rented since arriving in Canada about 15 years ago. Everyone at the table fell silent and one person was bold enough to ask “What are you doing, planning to pass on the debt to your children??”
Another party I was asked not once, but twice, by different people, if I’d purchased the new place where I’m living. However, unlike previous years, my reply of “NO” was not greeted with exclamations of “Why not?? You gotta buy sometime! Come on, hurry up and buy!!!” Both people simply fell silent, and no one who was listening even offered any such advice. Strange indeed. Has the wind changed direction finally?”

“He admits prices are higher than he’d like, but believes he can easily cover the mortgage payments even if interest rates start to rise.”

Buyers who buy based on affordability of monthly carrying costs at historically low rates will get slaughtered. Period. -vreaa

This from Macleans.ca article by Jason Kirby 17 Dec 2009 9:33 am -

“It may be winter, but Vancouver’s love affair with real estate is in full bloom. After a brief pause to mark the recession, the hot topic over lattes is once again square footage and million-dollar views. Which is roughly the price tag Michael Lin kept coming across last week as he and a friend sat in a Granville Street café surfing MLS, the real estate listing website, on his laptop. Lin, a computer programmer in his late 20s, has watched the ups and downs, and then ups again, of Vancouver’s housing market from his rented apartment. Now, with the economy in repair mode and mortgage rates still near record lows, he’s eager to take the plunge into the city’s condo market. He admits prices are higher than he’d like, but believes he can easily cover the mortgage payments even if interest rates start to rise. But when asked whether he will have enough left over at the end of the month to save for retirement, he chuckles. He wasn’t saving much before, either. “This way,” he says, “I’ll be forced to save.”

[Note that "even if interest rates start to rise" comment strongly suggests Lin plans to use a variable rate mortgage. -ed.]

[This passage from the end of the article is relevant to Lin's position: "Whether the housing market slows, or continues to grow at its historical average of around six per cent a year, financial advisers have more immediate concerns: the rush by younger Canadians like Lin to buy high-priced homes while mortgage rates are so low. Daniel Collison, a regional director with Investors Group in Markham, Ont., and an instructor at York University’s Schulich School of Business, says buyers could be setting themselves up for trouble in the near future. “When you see young professionals making $150,000 sitting there with $700,000 mortgages, they’re the ones who are most at risk,” he says. The problem isn’t just that prices are high, but that even a modest increase in interest rates could send their monthly mortgage payments skyrocketing. For instance, someone who took out even a $300,000 mortgage when variable rates were as low as 2.5 per cent could see their monthly payments of $1,345 jump nearly $600 if rates rose to six per cent, and more than $900 if rates returned to eight per cent, where they were earlier this decade. “The shock that’s going to hit some of these people is just astounding,” says Collison.“There’s a lot of artificial optimism about what they can afford to carry.”]

“Seems their bid of 502K may go through after all, as the other party has dropped out. She’s all jiggy with excitement.”

Bubbles keep inflating, until they pop. -vreaa

This from Boombust at greaterfool.ca 14 Dec 2009 11:29 pm -

“Today I spoke with a “twenties-something, soon-to-be-married” woman who is bound and determined to buy a ratty old house on Marmont St. in Coquitlam. It was listed at 488K. Seems their bid of 502K may go through after all, as the other party has dropped out. She’s all jiggy with excitement.”

Toronto – “Our search felt really irrational, at times, in terms of bidding. Just because money was available to people, it seemed that was artificially inflating the price of houses.”

This Toronto anecdote could very well be a story from Vancouver. -vreaa

An article from the National Post by Paul Vieria 10 Dec 2009 quotes Graham Withers, a film and TV editor in Toronto, who with his wife Heather Harding just bought a house. He described nearly a half-dozen failed bids in the prior month in which properties sold for at least 20% over asking price -

“It was kind of disappointing in the beginning because we were careful not to stretch ourselves further than we could handle. Our search felt really irrational, at times, in terms of bidding. Just because money was available to people, it seemed that was artificially inflating the price of houses.”

____

From Benjamin Tal, an economist at CIBC World Markets, earlier in the same article -

“What the Bank of Canada is saying is that there might be too much of a good thing going on. And I think the issue here is to what extent are extremely low interest rates blinding Canadians, and giving them a false sense of confidence to buy a bigger house.”

“We bought a home in Vancouver’s hideous inflated west side in 2005. When the markets starting tanking in October 2008 we stupidly panicked, put the house up for sale and essentially gave it away for about $1,000,000″

Bubbles stir the emotions, and even those who have profited by selling may feel confused. This Vancouverite, who has $600K equity in hand after selling her house in 2008,  expresses regret, sheepishness, dismay, fear, greed, depression and resentment – all in one paragraph. This anecdote is also noteworthy in that it shows that supply does indeed come into the market as prices drop and owners begin to sell out of  fear. How many Vancouver properties will enter the market when prices next descend?  -vreaa

This from the body of Garth Turner’s latest post at greaterfool.ca, 4 Dec 2009, quoting am e-mail from Vancouverite ‘Elaine’ -

“I ended up making a huge mistake and frankly, feel like a pretty great fool. We bought a home in Vancouver’s hideous inflated west side in 2005. We had a  $375,000 mortgage on a nice home we had reno’d. I thought the mortgage was huge (in hindsight I see it wasn’t!). When the markets starting tanking in October 2008 we stupidly panicked, put the house up for sale and essentially gave it away for about $1,000,000, and then rented a home for a hideous monthly fee and intended to buy again when values “stabilized”. Well to our dismay, the average house price one year later in the same area is $1,400,000. Needless to say we have been unceremoniously turfed out of the Vancouver housing market due to our unfounded fear about a housing crash that never happened. I am not challenging you [Garth Turner], I know in time this market cannot sustain itself, but in the meantime we have to live somewhere in Vancouver and with a 70% increase in house value in 10 years, and a steady stream of  strong Asian cashflows, it seems a correction will never come.  I don’t want to lose out on equity, and our lease is up, and what the heck do we do next?  We are in our mid-forties, our combined income is about $150,000 p.a., and we have about $600,000 to put down. Luckily no debt otherwise. The thought of going to a cramped condo after living in a nice home is depressing, not to mention the  resentment over the mountain of equity we lost.”

“I did regret buying my condo at such a high price for a few months, until recently I spoke with some new neighbors with a similar floor plan, the price they bought it at is more ridiculous than mine.”

In a bubble, buyers buy out of fear of missing out, even despite their own common sense warning them that prices are, as this buyer states, ‘ridiculous’. This from G Lady at vancouvercondo.info 1 Dec 2009 12:58 am -

“Now [the market] is going back up again…quite aggressively. I personally know a handful of people (professionals in their late 20’s planning to have a family) with enough down available to buy for their own use instead of for investment/speculation like before. I think the current market is actually more solid than the market from a couple of years back because of this difference. Vancouverites are just not giving up on buying. Different groups of buyers keep showing up to keep the market from dying. First the speculators now the young professionals. When I bought my condo, I thought it was at the market peak. I did regret buying it at such a high price for a few months until recently I spoke with some new neighbors with a similar floor plan, the price they bought it at is just more ridiculous than mine. In other similar units, the rent ($1500/month) is enough to cover the entire mortgage payment AND strata fees. I’m glad that for the $1500/month that I’m paying, I’m owning this place instead of using that as rent.”

“I have bought and sold property both in Vancouver and Hong Kong over the past decade.”

Only a minority of Vancouver participants have any first-hand experience of RE markets taking a substantial fall. This from Cassandra at greaterfool.ca 23 Nov 2009 6:15 pm -

“I have bought and sold property both in Vancouver and Hong Kong over the past decade. Hong Kong real estate speculation is not a sport for the faint of heart. When it moves, it moves like a greyhound on steroids, both going up and down. The run-up in Vancouver RE reminds me of HK before the 1997/98 bust, which was breathtaking in its rapid decline, and left millions in negative equity. … Back in more sedate Canada in 2007 some friends of mine asked my opinion on whether they should buy a four-bedroom 1960’s house in Burnaby for $749,000. I brought out my chart and showed them the last ten-year real estate run-up compared to the historical averages, pointed to the top [and] said to them, “Would you want to buy here?” They would, apparently. Where some see danger, others only see the missed opportunity, all those years where they could have made more money. And we’d better jump in before it’s too late. These were university educated people in their forties. Go figure. Strap in your seatbelts, Vancouver first-time-buyers, your tummy’s going to be somewhere above you when the silent whistle blows…”

The Globe and Mail – “In Vancouver, House Prices On A Tear”

In parts of Vancouver, such as the Vancouver Eastside, the market has reached fever pitch.  This article in the Globe and Mail by Kerry Gold, 19 Nov 2009 6:03 pm, has so many important anecdotal points regarding sentiment and market activity that vreaa has archived large swatches in this post, and highlighted two stories from it in the posts above.

“In the last three months, a heritage house at 274 E. 20th Ave. was listed for $959,000 and sold for $320,000 above asking, after eight days on the market. A heritage fixer-upper at 265 E. 24th was listed for $749,000 and sold for $1,033,000 within a mere 13 days. A month later, another house nearby at 214 E. 24th, was listed for $749,000 and sold for $950,000 within six days. A typical Vancouver Special at 4554 Walden St. was listed for $730,000 and sold eight days later for $958,000. All those houses were in the trendy Main Street area.”

“It’s very topical,” says realtor Rod MacKay. “Other places [in the country] are strong, but nobody’s seen anything like this. What’s really surprising is nobody anticipated the six-month dry spell being as slow as it was, and prices coming up as much. No one anticipated it bouncing back so far and so quickly.”

“At the beginning of this spring’s buying frenzy, buyers were offering $100,000 above asking in some cases. But by September and October, there were buyers – no doubt tired of being repeatedly out-bid – who are making offers so far above the asking price they couldn’t lose. In the case of the house at 265 E. 24th, it went for $284,000 above asking. “That takes a lot of stones to do that,” says the selling agent Darryl Sjerven. “There were 18 offers on that house. So you go in there, write an offer, and there are 17 other offers and you don’t know what any of them are. They could all be just $10,000 over asking. To go and write $284,000 over takes a lot of guts.”

To describe the bidding mentality these last few months, Mr. Sjerven uses the analogy of a “hang loose” hand gesture – with the three middle fingers curled under and pinkie and thumb sticking out.“Say you get five offers on a house, and suppose the house is listed at $750,000. The guy with the pinkie does not get it, he doesn’t know what’s going on,” says Mr. Sjerven. “Even though there are four other offers, he’ll offer you $700,000 subject to sale of his home and if he gets financing and everything. Then you get the typical pack in the middle, they’ll go around $785,000, or something like that. There’ll be a cluster of those people. Then there’s the thumb. It sticks right over the side and says, ‘this is my house. I want this house.’ He’s far enough ahead that it doesn’t get into further bidding or anything like that. And he buys that house.”

A few months ago, it seemed like the only houses being sold in bidding wars were the “hot properties,” the ones with three bedrooms up, new granite counter tops, and a gleaming in-law suite downstairs. More recently, the bidding wars have been over houses that aren’t so hot, such as that Vancouver Special that went for above asking.“The house wasn’t renovated or anything,” says selling agent Kenny Wong. “It was 37 years old. It had the original “shagadelic” carpets. It was on a 33-by-110 lot. It wasn’t even a standard lot. “I had a hard time selling a Vancouver Special in the winter – a lot of people made low-ball offers,” he adds. “Now they are going over asking.”

Although overall prices aren’t quite at pre-correction levels, for buyers it has felt like the spring of 2008 again.

As to where the market will be in early 2010, the current frenzy appears to be abating and realtors like Mr. Sjerven expect the lull to last over the winter and through to the end of the Olympics. Not many people like to list or buy homes around the holiday season, and few are going to want to sell around the time of the Games, when it could be hard to get around. That five-month lull will create “pent-up demand” that will trigger another frenzy, says Mr. Sjerven. “Once you clear the Olympics out of the way and we’re into April, it will be a race to those listings. Spring is going to rock.”

“I’m wondering who’s left… all of my bearish friends with the means to buy have bought.”

This exchange regarding personal knowledge of former bears buying, at mohican’s Housing Analysis blog 9 Nov 2009, starting 11:34 am -

M- :  “I’m wondering who’s left to buy– in my group of friends and acquaintances, my observations on who has bought are:
-2006-2008: non-bearish friends and acquaintances who could really (or in two cases couldn’t) afford it, bought.
-2009: bearish friends and acquaintances bought (all of them).
Yep, in my circle of friends and acquaintances, all of my bearish friends (with the means to buy) have bought. There are two exceptions: myself, and a couple who just returned from overseas. Aside from them, the only other renters work low-wage jobs, or are recent graduates.”

mohican: “I have observed the same thing within my circle as well. Including myself, most bearish friends have purchased already. They largely took advantage of the winter 2008 price dip and negotiated hard to get a decent deal. Many are still bearish – including me – but just wanted a little lifestyle certainty and were willing to pay for it.  I don’t know where the future buyers will come from – overseas? The ownership rate is at an all time high right now as per statscan.”

david: “When bears capitulate isn’t that the sign of a market peak?”

“Yes, the interest rates will rise, but my salary will also increase. If I’m laid off, or my mortgage skyrockets, I’ll work my ass off to keep it all together.”

Vancouver RE currently demonstrates historically record high price-to-rent ratios. Despite this, very, very low interest rates continue to make buying look attractive, especially if one only considers monthly payments. This illustrative example from Beth (2009 Nov 13, 20:27) in the comments section of the 12 Nov 2009 ‘Vancouver RE market bounces back’ article in the Georgia Straight, by Charlie Smith -

“My rent was $975 a month for a crappy, 35 year old one bedroom that didn’t have insuite laundry or anything, and where the landlord would knock twice then enter my suite without advance notice for non-emergencies, once even while I was on the toilet. Now, my mortgage is the same for a 12 year old one bedroom with laundry, fireplace, dishwasher. This includes maintenance fee. And I can have a pet. And no landlord can come in because he feels like it. Yes, the interest rates will rise, but my salary will also increase. If I’m laid off, or my mortgage skyrockets, I’ll work my ass off to keep it all together. I am confident in my ability to make it work. Downpayment? Some people work two jobs and weekends for years and years and years to save up for one; others inherit it when a loved one passes away; others borrow money interest-free from family, and others have it handed to them by well-to-do parents who would rather their kids have a condo than live in a dump run by a slumlord. Do you blame them? It’s not really anyone’s business where a downpayment comes from. It’s not a crime to have a downpayment.”

Personal Growth Through Real Estate Purchase – “His friends look at him differently now that he’s a homeowner”…”You have plants. You look after them. It’s like you’re an adult.”

A 24 year old pharmacist buys a downtown condo for $508K, and reaps the admiration of his friends. This from the Georgia Straight cover story ‘Vancouver real-estate market bounces back’, by Charlie Smith, Nov 12, 2009 -

“Even though he had never purchased real estate before, Alym Abdulla could sense that the market was heating up as he began looking at downtown condos last spring. The 24-year-old pharmacist started seeing suites in late March, and before long he realized that some of the units were receiving multiple offers from prospective buyers.

“I must have looked at close to 50 places,” Abdulla told the Georgia Straight in a recent interview in his living room. “I put in offers on two other places that didn’t go through because the market started to pick up.”

He said he was getting discouraged and was ready to quit when his real-estate agent, Stu Bell, recommended that he check out a home in a Bosa-developed building near the corner of Hornby and Smithe streets. When Abdulla entered the suite in the middle of May, he was immediately impressed by the layout, which featured two full bedrooms, each with an en suite bathroom, on either side of the living room. “The thing that really sold me on this place was the balcony,” he said. “It’s quite large. It makes you feel like you’re not trapped in your little shoebox downtown.”

Abdulla ended up paying the $508,000 list price. He said he bought then because he wanted to take advantage of the low interest rates. With a smile, he acknowledged that some of his friends look at him differently now that he’s a homeowner: “One of my friends who I used to live with in university, he’s like, ‘I feel since you bought your place, you’ve matured. You’ve completely changed in the way that you are. Before, we used to live the student lifestyle. Now, you’re always cleaning your place. You have plants. You look after them. You’ve even got a cat now. It’s like you’re an adult.’ ”

“The interest rate on their mortgage? Just 1.5 per cent.”

This from ‘Easy credit, soaring prices raise new housing fears’ by Tara Perkins, Kevin Carmichael and David Ebner, Globe and Mail Update, Friday, Oct. 30, 2009 7:52pm -

“Nick Burzese and his fiancée Di Pham recently realized the North American dream – they bought a house of their own. And the couple’s new home is not just anywhere. It’s in Vancouver, one of the country’s priciest markets. Having rented for years, the couple, who both work in the mortgage business, thought they’d never be able to afford a house in the city. They were doomed, they felt, to live in a distant suburb. As they house-hunted, they saw to their disappointment that the recession hadn’t dampened the market much. “Everywhere we went, there were so many people there,” says Mr. Burzese, 36, a broker at MPRO Mortgage Architects. Eventually, they came across an old 11/2-storey “character” home on a leafy street of detached houses near the Pacific National Exhibition grounds, on the city’s east side. “We immediately fell in love with it,” Mr. Burzese says. “It’s really an area that’s starting to transform.” Ms. Pham, 28, and Mr. Burzese put $57,000 down on the $570,000 house early this year. The couple says they’re comfortable with the debt. They make good money and are installing a basement apartment as a “mortgage helper.” But they might not have been able to get into the market were it not for the intervention of the Bank of Canada and the federal government – in the form of a continued low interest rates and federal policies aimed at maintaining the flow of lending and spending. The interest rate on their mortgage? Just 1.5 per cent.”