“People think they have to buy, no matter what. We don’t want to panic and jump into something just because everybody else is doing that.”

A frenzied market can put participants through hell. Chris Kowalchuk is simultaneously experiencing regret about not buying earlier, desire to buy now, and caution that the ‘current market is a bubble that is about to burst’. This personal story extracted from the aforementioned G&M article ‘In Vancouver, house prices on a tear’, by Kerry Gold, 19 Nov 2009 6:03 pm -

“With mortgage rates low, and predictions that they’ll go up some time next year, buyers are too often panicking to buy that house, says Chris Kowalchuk, a first-time buyer who lost out on an offer on Tuesday. He bid $700,000 on a two-bedroom east side house listed at $680,000, without conditions. There were at least seven other bids. “Things are overpriced right now, I think, for what they are worth,” he says. “People are thinking they’ve got to get in while the interest rates are low.” Mr. Kowalchuk, a geologist who recently married, is willing to wait until the interest rates start climbing so that the competition will fall away. He believes the current market is a bubble that has to burst. “I’m looking for a house that I can stay in for at least five years, so I’m willing to overpay a little bit to get the right house.” Like a lot of people, Mr. Kowalchuk now wishes he’d been in a position to buy in the fall and winter of 2008, when many people worried that the market hadn’t yet hit bottom and chose to wait and see what would happen in 2009. By spring, buyers realized that the lower prices and low interest rates made houses affordable again, and the market reacted accordingly. “My dad was telling us to buy, buy, buy, when everything was depressed,” he says. “But we didn’t have time, with the wedding. We put it off until we ran out of time.” But first-time buyer Mr. Kowalchuk refuses to get caught up in the [current] hype. He is willing to wait until the bidding wars subside, even if it means paying a higher mortgage rate. “We’re going to keep looking, but we don’t want to panic and jump into something just because everybody else is doing that. If it’s totally a sellers’ market, people will just out-bid each other. People think they have to buy, no matter what. I’m thinking by April the long-term rates are probably going to start going up. I’m thinking everybody will panic and stay out of the market.”

“My wife, young daughter and I are quite content to rent a place for $1,450 a month that would easily list for $700,000 (and probably go into a bidding war to sell for more).”

This from Contrarian in Vancouver, on greaterfool.ca, 20 Nov 2009 11:54 am -

“I live in Vancouver. My wife, young daughter and I are quite content to rent a place for $1,450 a month that would easily list for $700,000 (and probably go into a bidding war to sell for more). Our landlord arranges for the lawn to be cut, landscaping taken care of, and immediately takes care of any repairs. Got to admit, he’s great…kinda makes me feel like I’ve got it too easy. We’ve got a couple hundred thousand sitting on the sidelines in safer investments earning a little interest (aside from our RRSPs which are very diversely invested, life insurance and no debt).  I’m a 40 year old investment advisor with a contrarian and value based philosophy. As I tell my older clients when recommending laddered GICs as part of their portfolio, it’s not just paying 3.35%, you’re getting 103.35% as you know you’ll get your money back. Can’t say that about many investments these days – especially real estate. Heck, the cap rate’s got to be close to that but the risk is huge (oh wait, I forgot real estate only goes up!! – Hasn’t anybody looked at a graph of real estate in Vancouver for the last 40 years?) Luckily for me most of my clients are much older and have no debt. Bad for them is that their kids (in their 50s) can’t say the same, and of course it gets downright worrisome when grandkids (who are in their 20s and 30s) situations are brought up.  Meanwhile the plan for my family is that we’ll keep socking away into our RRSPs, keep building our down payment and in a few years when the @#!$ is really hitting the fan, pick up a pretty nice place and pay it off in less than 10 years. (Hopefully the banks won’t have a problem accepting a 30-40% down payment then! lol).”

“I sold my investment home in late 2005 and am waiting to buy a rental property when fundamentals make sense.”

This from Disbelief at robchipman.net 18 Nov 2009 6:57 pm -

“I am not a renter, I am a west side homeowner. I sold my investment home in late 2005 and am waiting to buy a rental property when fundamentals make sense. Investors aren’t buying into the hype, at least smart investors.”

“I’m single and have a salary that is in the high five-figures, which puts me up in the top 20% of households in Vancouver, yet I can’t afford to purchase a SFH in East Vancouver.”

This from oneangryslav2 at vancouvercondo.info 18 Nov 2009 11:42 am -

“Please let us in on the secret. How is it that people can afford million dollar homes? I still don’t get it. I’m single and have a salary that is in the high five-figures, which puts me up in the top 20% of households in Vancouver, yet I can’t afford to purchase a SFH in East Vancouver.”

Krazy Kanuck & his Vancouver RE Kalkulations

As home prices inflate to stratospheric levels, the utility of the sale price of many homes would cause a percentage of owners to ‘cash in’ – sell, move/rent, and live comfortably on the proceeds. (As one owner planning on selling and leaving Vancouver told vreaa, “I’ll never have to work another winter”.) The flip side of this is that many potential buyers are now sitting on their hands, as they are aware of the utility of the money that they save by doing so. This position is expressed here by Krazy Kanuck at greaterfool.ca 17 Nov 2009 11:05 pm, who has the added advantage of “living temporarily” in Vancouver, which probably gives him useful perspective. -

“I’m living temporarily in Vancouver (the epicenter of delusion), and I can’t wrap my head around the fact that if someone gave me $1 million, I could either: 1) buy a house here…and not a great one, only a good one, OR 2) buy $1 million worth of dividend stock funds, rent the house, put food on the table, and probably run a car. (I’m assuming a 3.6% yield…or $3k a month….for doing NOTHING!!) And my friends call me Krazy.”

“My dreams of buying cheap real estate are over. I don’t need to own, and current buyers are far crazier than I would have *ever* expected.”

This from rp at vancouvercondo.info 17th Nov 2009 10:31 am -

“My dreams of buying cheap real estate are over. I don’t need to own, and current buyers are far crazier than I would have *ever* expected. We just witnessed a worldwide financial crisis – the biggest in 80 years – and they are lining up to mortgage their lives away for a dream. Casting themselves onto the rocks is more like how I see it, because I don’t see how this could possibly be over. I save enough money to provide decent financial security for my family and will continue to do so. I’m 30 years old. It would feel good to settle down, but instead I’m going to remain flexible about where I live and what job I take.”

“I just don’t get it… why the rent is so low, or why the sale price is so high?”

Gloria, at robchipman.net, on 16 Nov 2009, 9:27 am, discovers that Vancouver RE price to rent ratios make no sense. The unit that she describes has a price:rent ratio of 390, and that’s before any talk of maintenance fees (which would put the ratio well above 400).  These ratios would imply that, from a historical perspective, the sales price is over twice what it should be.

“Luxurious ‘O2′ on Davie / Denman St. has several units for sale, and one of them (2bdr/2bthr, 975 sq.ft)  is both for sale and for rent. The sale price is 975k, and the rent is $2500 per month.  I just don’t get it… why the rent is so low, or why the sale price is so high?”

“The sellers are in no rush and will wait until they get enough of a bid before they sell. Market seems strong but traffic is light, from what I’ve seen.”

This from WestsideBuyer on robchipman.net 15 Nov 2009 4:46 pm -

“Attended 4 open houses on the wet side this weekend. Very little traffic. I attribute this to the weather and seasonality, and the realtors indicated that the [sellers] are in no rush and will wait until they get enough of a bid before they sell. Market seems strong but traffic is light, from what I’ve seen.”

“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?”

“In the past few months we’ve seen just about all of our non-owning friends jump into the market and buy. This is driving my wife crazy.. we’re in marriage counselling”

There are many stories about couples at odds regarding RE decisions, but only a few clearly described on Vancouver blogs. These two anecdotes come from greaterfool.ca and it is unclear thus far whether they originate from Vancouver or other parts of the country. Regardless, they do represent some of the social conflict being experienced in Vancouver.

This from Typhoon at greaterfool.ca on 11 Nov 2009 at 11:28 pm -

“In the past few months we’ve seen just about all of our non-owning friends jump into the market and buy their first home. This is driving my wife crazy.. to the point where we’re in marriage counselling because she wants to buy and I don’t. With her, it’s the emotional attachment to pride of ownership. With me, it’s not buying so that we don’t devastate our future enjoyment of life. I can’t seem to negotiate with her on this. Is there any middle ground you can think of? I’ve suggested splitting the difference and buying half a house, but that doesn’t make any sense to either of us. Do you have any suggestions for me?”

Here’s Stessed at greaterfool.ca 11 Nov 2009 at 12:43 pm -

“I know exactly what you are talking about. I am in the same situation as you. Counselling and the whole bit. I have managed to delay the purchase pressure for a year by agreeing to rent a similar place to what we would buy in the area we want to live for one year. After the year is up who knows but it gives me a year to come up with a new plan. Good luck.”

Young, Patient, and Renting

These anecdotes from greaterfool.ca post of Nov 3rd 2009, and the ensuing comments -

This from Canucks Fan -

“I’m recently married in Vancouver, income around $85k and wife is looking for work, 29 years old with about $55k in RRSPs ($25k in a money market fund ready to use as a first time homebuyer), $25k in stock, and $65k in cash. No debt, paid for car, and renting for approximately $1200/month with the intent to buy as soon as fundamentals make sense.
… All of my friends have purchased in the past 5 years, many at 5/35, and while I’m happy to rent for as long as necessary (maybe look at a bigger place?) it would be nice to put some of the cash to use. I just feel like I’m spinning my wheels saving every month when the market goes up more than I can save. I’ve been able to keep the new wife satisfied with a honeymoon in Asia, new furniture, and the ability to stay at home while she looks for work. Once she finds something though I know her nesting instinct will kick in…”

This from Jim -

“I’m in a similar situation, 10 years older and have been waiting for over seven years, but property here seems to hold its value. … Even if rates go to 6 percent and the asset value goes down 10-15 % people will likely hang on. I don’t see how the market will correct substantially, except maybe for all of the cheap, small and poorly built condos.”

From Cyrus -

“I am in almost the exact same situation as Canucks Fan (except with about half as much saved). As the days go by, I become more and more comfortable with the idea of renting for the long term. It has been almost two years sans mortgage and with that, reduced stress. As a 26 year old, I believe my generation has grown up with the idea that the place you live in is also an investment. This idea will perhaps come back to bight some in the not so distant future.”

From taylor192 -

“I live in Kits and rent a 2bdrm for $1900. Its valued at ~$550K, which at 35/5 is $2300. Then add $300 condo fee and $300 in tax. I’m saving $1000 or 30% renting. If I was paying the mortgage I’d only be paying down the mortgage $600.”

“We are holding our breath and keeping our happy little family of three in a 1 bedroom 560sqft condo in Kits”

This from ‘family of sardines in Vancouver’ quoted on Garth Turner’s greaterfool.ca blog, October 29th, 2009 -

“We are holding our breath and keeping our happy little family of three in a 1 bedroom 560sqft condo in Kits (that crazy Realtors have priced at $400,000) and waiting for the day when the cash we’ve saved up will be worth something a wee bit larger. While the Realtors keep telling us to fear the rising interest rates, the math doesn’t work – how do you justify bidding up an already overpriced home by another $200,000? I’ll keep working on the down payment, take a raise in interest rates, forget the bidding war increase, and possibly have a more reasonable price instead – thank you very much!”