Hoax/Joke – ‘The Office of the Superintendent of Financial Institutions Canada Follows The Twitter Accounts Of Bearish Bloggers And Not Those Of RE Industry-Insider Commentators’

[UPDATE 6am, 25 Nov 2012: I fell for this hoax completely. Somebody set up a fake OSFI Twitter account and only referenced the bears (with a few gvt organizations as diabolically good cover). I popped up a post pointing this out, triumphantly. What can I say? I'm not going to take down the original post, which appears below. Excellent joke, got me entirely. You wag, whoever you are. (I can now return to worrying that the OSFI is not listening to the canaries).- vreaa (Thanks to Whisperer and LJ for pointing out the hoax).]
————

Original Post:

“The Office of the Superintendent of Financial Institutions Canada (OSFI) is the primary regulator and supervisor of federally regulated deposit-taking institutions, insurance companies, and federally regulated private pension plans.” – from OSFI website. For a summary of the OSFI’s mandate, see ‘OSFI, Our Mandate’.

The OSFI has set up a Twitter account. Below find a screen capture showing the Twitter accounts that they themselves, the OSFI, follow (as of 25 Nov 2012). Of the 9 accounts they are following, 5 are Government of Canada organizations (BOC, CRA, StasCan, Immigration, CEAP). The other 4 accounts are all bloggers who are bearish the housing market! Two are from identified individuals (Ben Rabidoux and Garth Turner), the other two are anonymous sources (Canadian Watchdog, and Vancouver’s own YVR Housing Analyst). The Twitter accounts of industry analysts and vested interests are screamingly obvious in their absence. We find this remarkably clear vindication of the work done by these bloggers, which is often (and conveniently) dismissed out of hand by industry-related commentators. And we’re pleased that the OSFI is listening to ‘the canaries’.
[Thanks to 'Canadian Watchdog' for bringing this to our attention, 25 Nov 2012]

“My good friend’s girlfriend broke up with him recently, because he didn’t want to “settle down” (buy a house).”

“My good friend’s girlfriend broke up with him recently, because he didn’t want to “settle down” (=buy a house). My friend has been waiting for a crash since 2008. We like to talk about bulls having various problems including marital stress because of excessive debt, etc. But the bubble is clearly straining relationships on both sides.”
- bubbly at VREAA 23 Nov 2012 3:33pm

The misallocation of resources that occur as part of a massive speculative mania in housing include interpersonal conflicts and the associated misspent energies around buy/rent disagreements and debt spending. Sure, couples have ample disagreements around housing during more typical times, but in the grip of a speculative mania they are that much more powerful and that much more destructive.
- vreaa

We Need More Evidence – “Pooling data sets from BC Hydro, the 2011 census, the Provincial Home Owner Grant and BC Assessment, along with whatever numbers the region’s real estate associations are willing to make public, would create one giant playground for local analysts.”

“When questions about foreign ownership came up at the City’s housing affordability meetings earlier this year, task force members realized the issue was large enough to warrant a separate report. A working group of business and architecture academics was assembled to learn more. Its volunteer members met several times over the course of three months to explore the issue and recently penned a five-page summary of their findings.
The result is underwhelming if you were hoping for closure on the matter, but here’s the takeaway: we still don’t know how foreign investment impacts local real estate, but we have researchers in the city who have developed methodologies to study and interpret the data needed to clarify the situation.
Their conclusion put another way: if the City really wants to understand foreign ownership, it needs to pay researchers and quit relying on the generosity of volunteers.
“At the end of the day, we still have no real idea what the impacts are and if they are good or bad and what that actually means to the city,” says Erick Villagomez, adjunct professor at UBC’s School of Architecture and Landscape Architecture and chair of the academic working group behind the report. “We need more evidence.”
The City is hesitant to pledge more money in order to clarify the issue of foreign ownership, at least until it’s sure further study would improve Vancouver’s affordable housing stock in a concrete way.” ..
“Villagomez wants researchers to crunch more numbers to strengthen understanding of the matter. He points to data available from BC Hydro, the 2011 census, the Provincial Home Owner Grant and BC Assessment. He says pooling those data sets along with whatever numbers the region’s real estate associations are willing to make public would create one giant playground for local analysts. The only trouble is finding a pot of money to buy whatever data sets aren’t free and another pot to pay researchers to analyze them.”
- ‘To Solve Housing Foreign Ownership Puzzle, Someone Must Pay’, Luke Brocki, The Tyee, 19 Nov 2012
[hat-tip 'poster with infinite number of handles']

Evidence is good. There is easily accessible information out there that could shed an immense amount of light on the RE market. ‘Play’ in the ‘playground’ of data could be very revealing. We’re all for that.
Foreign ownership is one thing; at least as important is utilization.
BC Hydro data likely already reveals how many units in the city are vacant or under-utilized. Interesting, eh?
Perhaps city council is hesitant to uncover information that threatens the strength of the market.
- vreaa

Three Vancouvers? – “A recent report paints a picture of a city riven with inequality and the growing geographic segmentation of its classes.”

“The 21st century is shaping up to be the century of the city. But global cities are not only becoming increasingly-important economic forces of the world economy. They are also becoming increasingly divided and segmented. …
A new report, by David Ley and Nicholas Lynch of the Cities Centre, takes a detailed look at Vancouver’s growing class divides and geographic segmentation. Vancouver is a very different city than Toronto. It is a city of tremendous natural assets and physical beauty, noted for its mild climate, perched on the Pacific coast. It is widely thought of as an affluent city, with some of the highest housing prices in North America. It has attracted a huge influx of immigrants, especially from the Pacific Rim. It is a frequent winner of “livable cities” titles, as the study notes. This city is sometimes referred to as “Dream City” or “Lotus-Land.”
But their recent report, “Divisions and Disparities in Lotus-Land: Socio-Spatial Income Polarization in Greater Vancouver, 1970-2005,” paints a Vancouver riven with inequality and the growing geographic segmentation of its classes. …
City #1 is affluent Vancouver, made up of neighborhoods where average individual incomes grew by more than 15 percent of the metro average between 1970 and 2005, comprises roughly 30 percent of the region’s census tracts and covers three distinct areas: the central core, the North Shore suburbs, and scattered areas with high-priced condos and houses close in proximity to valued amenities, such as waterfronts, views, and green spaces.
City #2 is middle class Vancouver, with income changes of plus or minus 15 percent of the metro average. It includes nearly half (47 percent) of the region’s census tracts.
And City #3 is disadvantaged Vancouver, areas where incomes fell by more than 15 percent of the metro average between 1970 and 2005. These areas account for some 22 percent of the region’s census tracts; and as the authors note, they “are relatively concentrated in the southern and eastern neighborhoods of Vancouver and extending out to the southern and eastern suburbs.”
While City #1 consists overwhelmingly of native-born Canadians and is more than three-quarters white, City #3 has an immigrant majority and is 61 percent minority. It has the highest population densities too, as well as the lowest gross incomes, and despite its lower property values, a lower share of homeowners. More of its residents are employed in working class and service occupations than in either City #1 or #2. …
The study concludes:
As a result, the dominantly middle-income City of 1971 is now divided three ways: one-third lower income, one-third higher income, and one-third middle-income. The middle-income city of the 1970s has become the polarized city of the 2000s. …
Even the city widely recognized as the world’s “most livable” cannot escape the growing class polarization of our increasingly spiky and divided world.”
- excerpts and image from ‘The Growing Urban Class Divide, Vancouver Edition’, Richard Florida, The Atlantic Cities, 14 Nov 2012 [hat-tip Aldus Huxtable]

Poster in Dunbar – “LOST… my faith in City Hall. The Mayor has handed over our communities to private developers.”

“LOST… my faith in City Hall.
The Mayor has handed over our communities to private developers.
Tell City Hall that you oppose 6+ storey high-rises on Dunbar.
3-4 storey apartments on every arterial street.”

- poster seen on Dunbar streets, Nov 2012

Spot The Speculators #89 – “Rent our charming turn of century East Vancouver home. The basement has shared laundry and a suite where we, your prospective landlords, reside.”

Visualize the basement

“$2400 / 3br – 1400ft² – Lovely quiet home in great neighborhood Available December 1st (Mount Pleasant / Cedar Cottage)
Date: 2012-11-11, 1:44PM PST
Our charming turn of century East Vancouver home is for rent.
Newly (as in will be finished in a week!) renovated kitchen with white shaker cabinets, dove grey quartz countertops, breakfast peninsula, mini office / computer area, dishwasher.
Hardwood floors throughout most of the house, living / dining rooms with big picture windows.
Three bedrooms upstairs: master bedroom with two large closets (one walk-in with a window for natural light), two smaller bedrooms with one closet each and big windows looking out to back yard.
One bathroom with soaker tub and skylight.
Back deck for bbqing and entertaining, big nicely kept back yard.
Front porch ready for your rocking chair.
Basement has shared laundry (and a suite where we, your prospective landlords, reside).
One year lease.”
- craigslist ad, 11 Nov 2012 [hat-tip Chem guy at VCI]

You can imagine the ‘math’.
Upside: “In 25 years, our tenants will have paid off our mortgage!”
Downside: “We live in a smallish, dampish, darkish box, with people stomping on our heads.”
…
Another example of Vancouver homeowners as speculators: decisions to buy/hold property based almost solely on expected future price strength.
When these homes were first designed and built, was there ever any intention for people to be living in the basements?
- vreaa

“BC has the most heavily indebted population in the country. The average BC citizen has $37,879 in consumer (nonmortgage) debt. That’s 40 per cent higher than the national average.”

“Dave Malicki discovered his dark side as he plunged into a hellhole of debt.
The good friend, loving father and respected lawyer showed a flair for denial, counter-attack and wilful ignorance.
Many people thrashing in debt try to consolidate their loans. Malicki de-consolidated.
He divided his borrowing. He borrowed from his mom so he could fly to see his daughters in England, from his girlfriend to cover his rent, from a lawyer friend to cover his law society fee.
“I was in such a state of denial that when my girlfriend or family member would bring it up, I would turn on them and say that they didn’t have any faith in me,” he says. “It was a horrible, horrible thing.”
It grew worse. He fell behind in child support payments and feared he might not be able to borrow money to fly to see his children.
When his debts swelled to $85,000, his girlfriend and his accountant convinced him to get help. Ashamed and guilty, one eye twitching with anxiety, he dragged himself into a bankruptcy trustee.
A few hours later, he had filed for bankruptcy. A euphoria washed over him that has yet to completely fade, seven years later.
“I was walking on air,” he says. “I had tears of joy and relief.”
…
“A growing number of B.C. residents are running this emotional gauntlet. Beset by stagnant incomes and rising prices, B.C. posted a 42 per cent increase in people going bust over the past four years – far higher than the 11-per-cent national increase.
It’s little wonder insolvencies are surging: B.C. has the most heavily indebted population in the country. The average B.C. consumer has $37,879 in consumer (nonmortgage) debt. That’s 40 per cent higher than the national average.”
…
“Malicki, 46, is a beacon of hope for those who fear they will never rehabilitate themselves and emerge from the darkness of debt to a better life. He closely tracks all his costs. A renter and house-sitter, he has cut his spending to the point he only works in law halftime.
The rest of the time he works with children, and does paid and unpaid work outdoors. Next month, he flies to Tanzania for three months to help build a secondary school with a Vancouver-based charity.
“While I’m gone the child-support cheques will be sent out and all my obligations will be met,” he says.
Malicki offers three bits of guidance to people in a financial jam. The first is to talk to an expert – and do it now.
“Write down what you spend. By becoming aware of where your money goes your spending habits will change.”
His third piece of advice is reserved exclusively for people whose self-esteem has taken a hit – which is to say, almost every debtor out there.
“Forgive yourself once a day. Maybe twice.”
- from ‘The people’s debt: B.C. has the most heavily indebted population in the country — and the number is growing’, Paul Luke, The Province, 4 Nov 2012

“Vancouver is a lonely place for financially responsible people.”

“There are some of us who still view life realistically but Vancouver is a lonely place for financially responsible people.

My partner and I are alike when it comes to finances. Our friends have been buying houses, condos, cars, boats, and all the toys in the world on incomes we know are similar or smaller than ours. Often we get lessons on how easy it is, “just put $10000 down and you’ll have $700 payments, its so cheap these days.” That would be a fine statement if we were talking about housing, unfortunately many of our peers talk in such a way of car payments. I get nightmares imagining what it must feel like to spend $1000 +gas on a car with my income. Dreadful thought, but I know first hand of people who do this without a second thought.

With housing its no different. We purchased a condo in 09, at a small monthly discount to renting. Our mortgage is just barely 2 times our annual income. We feel the need to get rid of this debt as soon as possible. Yet, we have friends who have bought both houses and condos in the past year valued 4 times that of our condo! These people earn the same money!

I would venture to say people are so conditioned to debt these days, they feel naked not having obscene monthly payments. When a car if finally close to paid off, they trade in for the newest model with biggest possible payment, or newest cruiser, or newest Bowrider.

The irony of it all? It makes us feel poor! We look at our friends, over extended, loaded on debt, enjoying all the spoils of life. The appearance of the wealthy elite.

Us? No consumer debt, used cars, and a big savings accounts, even bigger investment accounts.

This is partly why Vancouver is such a hard place to live, if not for us both being grounded and reminding ourselves that by 40 we will have enough cash-flow to retire or work part time, we would likely go insane and cave to the temptations. Its hard not to feel vindictive, and wish financial reckoning upon the indebted masses who get to enjoy the spoils without the work.”

- Burt at VREAA 25 Oct 2012 8:39 am

Burt has our sympathy; it isn’t easy running against one’s herd, or even just sitting out while the herd is running.
The one note of surprise in the post regards Burt’s early retirement. It would be interesting to see his retire-at-40 math, given current interest rates and investment environment.
- vreaa

“About a third of Baby Boomers plan to sell their home to fund their retirement. They shouldn’t be relying on their homes. Even if prices don’t plunge, big increases in property values are a thing of the past.”

“About a third of Baby Boomers plan to sell their home to fund their retirement, according to a study that questions whether buyers will dry up as that massive segment of the population downsizes.
Bank of Montreal is warning Boomers not to count on that nest egg, while other observers suggest that even if prices don’t plunge, big increases in property values are a thing of the past.
“They shouldn’t be relying on their homes because there are risks,” says Marlena Pospiech, a retirement strategist at the BMO Retirement Institute.
The bank suggests the following risky scenario: As Canada’s population ages, more Boomers will be retiring and selling their homes, putting downward pressure on prices.”
- from ‘Boomers warned using home sale to fund retirement could backfire’, Garry Marr, Financial Post, 31 Oct 2012

Gee, now where have we been hearing this warning, for, umm, the past 4 or 5 years?
As we said on an earlier post today: “Opinions previously held only by lunatic bears-on-blogs are being expressed mainstream.”
Note how the possibility of price “plunges” are now also entering the mainstream discussion.
- vreaa

“Pegeen and Michael have invested heavily in the B.C. real estate market, which poses some risks if prices fall. They have about 64% of their wealth in real estate [actually, 81%]. As a benchmark, pension funds tend to target 10% to 15%.”

“I see no problem having 81% of my wealth in real estate…”

“Midlife reflection led Michael and Pegeen to feel their lives would be fuller if they adopted two children, so they have set the process in motion. Their plan is to adopt siblings between the ages of 5 and 10 years.
The couple can afford the new additions to their family. Over the years, they have built a consultancy that pays them well even though they have plenty of time off to travel. They spend about a quarter of each working year out of the country.
“We hope this won’t change once we have kids,” Michael writes in an e-mail. When the children join them, they will have to move from their two-bedroom Vancouver condominium to a three-bedroom home. High prices in the city mean they will likely have to rent, Michael writes.
With no company pensions, they have to provide for their own retirement. They are well-fixed to do so now, but they know having children will change things. They have an investment adviser “but don’t really have a plan,” he adds.
Their major assets are a portfolio of stocks and B.C. real estate – their condo, a vacation property and a half interest in a rental property in a smaller city.
Their goals including scaling back to working half-time so they can spend more time with the children, continuing to travel abroad on business, maintaining their current lifestyle while still providing for the new additions to their family, and “retiring early at 60 with few worries and the kids’ education taken care of.” Neither one has life or disability insurance and they wonder whether they should buy some.”

“We asked Eric Davis, a financial planner, investment adviser and vice-president of TD Waterhouse Canada Inc. in Kamloops, B.C., to look at Michael and Pegeen’s situation.
“Life is pulling this family in many directions,” Mr. Davis says. … They need to give some serious thought to setting their priorities. …
If they sold their existing real estate, they would have enough money to buy a three-bedroom house in Vancouver if they chose to, Mr. Davis says. Because of the nature of their business, which takes them out of the country part of the time, “they could consider buying a cheaper property outside the expensive Vancouver market but [that is] still accessible to airports.”
Mind you, Pegeen and Michael have invested heavily in the B.C. real estate market, which poses some risks if prices fall. They also carry substantial debt in the form of a $390,000 line of credit.
“From an asset allocation standpoint, they have about 64 per cent of their wealth in real estate,” Mr. Davis says. “As a benchmark, pension funds tend to target 10 per cent to 15 per cent.” …

Monthly net income: $10,000 (variable)
Assets: Non-registered portfolio $380,000; RRSPs $80,000; TFSAs $40,000; U.S. IRAs (individual retirement accounts) $160,000; condo $600,000; vacation property $500,000; share of rental property $75,000. Total: $1,835,000
Monthly disbursements: Housing expenses $630; transportation $200; groceries $800; clothing $100; line of credit $1,000; charitable $100; vacation and travel $500; personal discretionary (drinks, dining, entertainment, pet expenses, sports, hobbies, subscriptions) $1,410; dentists, drugstore $150; telecom, TV $185; RRSPs $815; TFSAs $410. Total: $6,300 cct
Liabilities: Investment line of credit $390,000

- from Mid-life couple need to set their financial priorities, The Globe and Mail, 26 Oct 2012
—

This ‘Financial Facelift’ is noteworthy in that it is the first that I can recall where any advisor has explicitly mentioned the possibility of Vancouver RE dropping in price.
Relatively minor point: We disagree with the math – Their net-worth is actually $1.445M (subtract their liabilities), of which $1.175M (or 81.3%, not 64%) is in RE.
That aside, look at the advice: They are in ‘midlife’ (40s?) and it is suggested that they are being unwise having ’64%’ of their wealth in RE; the wisdom of a far lower figure is implied.
Think about it: what percentage of Vancouver homeowners in their forties have less than 64% of their net-worth in RE? Many (most?) have a far greater percentage in RE simply by virtue of the cost of their homes. We don’t know the exact numbers, of course (we’d love to know them) but we suspect it’s a very substantial portion.
As a group, Vancouverites are woefully overdependent on RE for their future financial health, “which poses some risks if prices fall”.
- vreaa

Arguments With Myself – “The perception of offshore money pouring into the area to acquire properties without foreigners even visiting them has been overstated.”

“The perception of offshore money pouring into the area to acquire properties without foreigners even visiting them has been overstated, said Cameron Muir, chief economist at the B.C. Real Estate Association.” – from ‘UniverCity condo project feels market chill’, G&M, 23 Oct 2012

Gee. And where would people have gotten that impression?:

“There are high-net-worth Asian purchasers buying as investments, as second homes, or for satellite families.” – Cameron Muir, chief economist for the British Columbia Real Estate Association, Businessweek, 24 Jun 2010

–
Off-shore buyers have had a small but significant direct effect on prices, and a very, very large indirect effect as a story that has fuelled locals in their speculative buying. We’ve consistently believed that.
- vreaa

Cost To Rent A Luxury Two Bedroom Unfurnished Apartment In Desirable High Income Cities, And In Vancouver

- from ‘Sticker shock: Cost of living varies widely’, Mercer, 9 July 2012 [hat-tip clive]

Vancouver rents are pretty much in line with incomes; RE prices aren’t, yet.
- vreaa

“The Accountant was advising people to retire without any debt. The Radio Host says in an incredulous tone “But is that REALLY possible???”

“This was the topic on this morning’s financial tips spot on CBC radio. A CA was advising people to reconsider if they are liquidating their RRSPs in order to fund a bad real estate investment (or something like that, was half-listening for part of it). One thing that caught my attention, the CA was advising people to retire without any debt. The radio host says in an incredulous tone “But is that REALLY possible???” WTF? I for one, don’t understand how someone who is in their 50 or 60s, bought their house in the 1970s or 80 for at least 50% less than what prices are today, can have an enormous amount of debt going into retirement. But I guess people have been taking money out of their houses in the form of HELOCs so it shouldn’t be so surprising. But it really shouldn’t be this way. People are counting on their houses being worth so much when they retire, but maybe they shouldn’t.”
- pricedoutfornow at VCI October 23rd, 2012 at 10:03 am

A significant number of Vancouverites close to retirement are overly in debt and overdependent on the market value of their homes for their future financial health.
A significant number of radio show hosts, and other commentators, are unable to imagine how this could be any different.
- vreaa

“A lawyer, a public company financier, a real estate marketer, a cop, and a real estate agent walk into a diner…”

“I went out for lunch with a few old university friends yesterday. One was a lawyer, one a public company financier, one a real estate marketer, one a cop, and of course, one of whom was a Real estate agent.
Needless to say, the conversation ultimately led to the fact that we all hate our jobs! When it came to the police officer’s turn to gripe, he expressed that after 10 years on the force he was finding his work becoming particularly mundane. In fact he had taken to framing houses on the weekend with a carpenter friend of his in return for free help with a renovation he was doing at his own residence. He said he really enjoyed the labor/results aspect of the work versus what he deals with at his 9-5. But when he began saying that this framer buddy of his and he wanted to build a few houses out in Port Moody and sell them I damn near pulled out his pepper spray and gave myself a good spritzing.
I did my best to casually offer a warning of dabbling in the dark arts of amateur development… but hell, what’s the worst that could happen?”
-nom nom no at VREAA 19 Oct 2012 7:53am

We’d submit that a major reason that so many in mid-career find their jobs ‘mundane’ is the era of bubbles. In typical times, one develops a profession or a trade, strives to do it well, and is rewarded by society for one’s work.
Since the 90′s, we have heard so many stories of those speculating on tech stocks, housing, and sector-whatever, making ‘x’ times their annual income in ‘y’ months, that the fabric that holds together part of the reason for working unravels.
Why should I continue to be a perfectly competent dentist when society will reward me better for flipping condos or trading stocks in my pjs?
This distraction is part of the misallocation of resources that occurs in times of speculative mania/s.
We need police officers to be good police officers, and dentists to be good dentists; not to be taking off to build and flip houses.
- vreaa

“The political strategist and lobbyist behind Gordon Campbell and Christy Clark’s rise to the premiership has slashed the price of his Shaughnessy mansion by $1.082 million.”

“British Columbia’s man of political intrigue is reaping the rewards at the racetrack, but not so much in the luxury housing market.
Patrick Kinsella was the leading co-owner at Hastings Racecourse for the 2012 meet that ended Sunday. The political strategist and lobbyist behind Gordon Campbell and Christy Clark’s rise to the premiership has slashed the price of his Shaughnessy mansion by $1.082 million.
The 100-year-old, four-storey, 6,441 square-foot house at 3839 Selkirk was listed in July 2011 by Rennie and Associates Realty for $7.28 million. There were no takers. Kinsella and his wife Brenda switched agents to Macdonald Realty BGW, which is now asking $6.198 million. The price has fallen 14.8 per cent since July 2011.
Kinsella is not alone. Real Estate Board of Greater Vancouver figures show there were 32.5 per cent fewer sales in September 2012 than a year earlier. The Vancouver West benchmark price fell 6.5 per cent to $2.09 million. It was the worst September in a decade.
University of B.C. associate professor Tsur Somerville said west side, West Vancouver and Richmond properties are under pressure. Immigrants and investors who were snapping up properties in 2010 and 2011 have “moved from getting a unit at any price to — if they are buying — buying for the best price they can,” he said.
“In any downturn, luxury homes tend to be more cyclical than starter homes. In the slowing market the luxury homes tend to get hit harder,” Somerville said.”
- from ‘Mansion Market Slide Hits Kinsella, Powerbroker to Campbell, Clark’, The Tyee, 15 Oct 2012 [hat-tip Terminalcitygirl; many thanks]

Sorry, now I’m confused…
Are Westside homes resistant to any downturn, or are they expected to “get hit harder”?
For the record, for new readers, we are on record as having asserted that, in the end, all property types and all property areas will get hit by about the same devastating percentage loss, peak to trough.
- vreaa

“I want my tenants to have some hope in the future so they can be motivated enough to get out of bed every morning to go to work to pay my mortgages.”

“I absolutely love the situation we are in right now. It is so damn hard to qualify for a mortgage, forcing the perpetual renters to be forever priced out in a big city like 416 or Vancouver. At the same time, people with existing mortgages can enjoy this low interest rate for a long time. By the time rates normalize, the tenants would have paid off their properties.
I wish you luck being liquid. I would rather pay the bank 2.15% to use your money (for which you probably get 1.05%) and invest it in providing shelter for you so i can take your rent check every month and build equity for myself.
I always tell my tenants that i think real estate will definitely crash by at least 90% when i stop by to pick up my rent check. I even refer them to this blog. After all, i want them to have some hope in the future so they can be motivated enough to get out of bed every morning to go to work to pay my mortgages. It’s going to be a nasty CRASH, renters, a nasty CRASH.”
- Bryan at VREAA 15 Oct 2012 3:01pm

What’s the most remarkable thing about any market?
It’s that, regardless of conditions, for every trade there is both a seller and a buyer, each convinced that the other is doing the wrong thing.
- vreaa

What’s Another $15,000 On The Visa? Nothing! – “Friends of mine just bought a Burnaby condo. They told me that they have nothing left over at the end of each month.”

“Friends of mine just bought a Burnaby condo. The realtor told them what a great deal they were getting, then pointed to the comparable unit in the same building listed 50k higher, and expressed his frustration with the owner (also his client): “see – their place has been listed for a year but they will never sell, because they refuse to lower their asking price. You can’t work with them. They will stay unsold for years.” He then said that he liked working with the seller of the unit my friends bought, because she could be talked down to a price that would sell.” …
“As for my friends who bought… I shed a tear for them. They just moved from a $900 co-op unit into a $440k mortgage at 1800/month plus 300 strata fees. They told me that now, there is nothing left over at the end of the month…. holidays will be camping trips to kelowna. And, the husband, who was heavily persuaded to buy by the wife, said that he couldn’t believe how much all the house stuff cost: $1,000 to paint the unit; $500 to have screens put in, some mirrors changed, bathroom stuff… it’s all money, money money, he said. And then saddest of all – he said that “I used to hate debt – I would do whatever it took to not spend on credit cards I couldn’t pay back right away. Now, I am $440,000 in debt. So what is another $15,000 on the Visa? It’s nothing. I just put whatever on the credit card now.”
- TPFKAA at VCI 28 Sep 2012 at 10:41 pm and 10:49 pm

“You will buy this unit, and four others like it…”

– image from ‘Vancouver Housing Bubble Doesn’t Scare Chinese Investors’, Huffington Post BC, 4 Oct 2012

Headlined for the nature of the image, and the quality of the emotion portrayed. 
Infatuated. Besotted. Entranced. Lustful.
When price drops establish themselves, these feelings change to disillusionment; guaranteed.
- vreaa

“Sure, But She Has A House To Die For…”

“The Chamber’s Guest House Bed and Breakfast in North Sydney, N.S., where a Fred and Millie Weeks stayed, is shown on Monday, October 1, 2012. Media reports in Nova Scotia say a 77-year-old woman arrested in connection with the suspected attempted murder of her husband in Cape Breton is a woman who became infamously known as the “Internet Black Widow.” The reports say the woman arrested is Melissa Ann Friedrich, also known as Millie Weeks. …
Weeks had been convicted of manslaughter in the death of her husband, Gordon Stewart, in the 1990s in Nova Scotia. She also received a five-year prison sentence for theft and forgery in 2005 involving a man she met online. Two of the men she dated in Florida had fallen ill and one of them died, but no criminal charges were laid, according to the Halifax Chronicle Herald newspaper.”
- image and text from ‘Internet Black Widow’ arrested, G&M, 1 Oct 2012

For the gorgeous character house above, many Vancouver men would take their chances.
- 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

RE Bought And Sold – “I concluded that the taxpayer had numerous foreign assets that were not previously disclosed.”

- 3275 Campion Rd, Victoria, BC
9,300 sqft SFH on 8.4 acres; ask price $6.7M (down from $15M).

“The Appellant resides at 3275 Campion Road in Saanichton, Vancouver Island, British Columbia.”
…
“When the Appellant filed his Canadian income tax returns for the 2002 and 2003 taxation years, he reported the following income:
2002 Net Rental Income $20,000; Net Income $19,100
2003 Net Rental Income $20,000; Net Income $22,312″ …
“After completing the Net Worth Analysis and reviewing the Notices of Objection, officials of the CRA concluded that the Appellant earned and failed to report the following income:
2002 $287,340
2003 $177,380
(Note: Pension income of $2400 was also included for each year.)”
…
“Q. Okay, and in particular what did you gather from this new information? What did it tell you?
A. That there was some accounts and assets held outside of Canada that I had not previously been aware of.
Q. So with respect to the assets then, what did that screen from the bank indicate?
A. That the UBS account value was [$] 2,097,000. There was also an account in Germany that had a value estimated at [$] 200,000. And there were blue-chip stock holdings in Iran worth [$] 800,000.
Q. And I notice also it indicates there was a Banker’s Acceptance worth [$] 200,000, is that right?
A. Yes it does.”
…
“It should also be noted that the Appellant sold a home located at Beech Drive in Victoria for $4,500,000 (original purchase price was $1,075,000 and significant improvements were added). The Appellant’s home at 3275 Campion Road is currently for sale. The original asking price of the Campion Road property was $15,000,000. The current asking price is $13,500,000.”
…
“Based on the comments as outlined above, I believe that the gross negligence penalties imposed by the Minister should be upheld.
Before concluding, I wish to quote from United States Supreme Court Justice Oliver Wendell Holmes. Justice Holmes said:
“Taxes are the price we pay for civilized society”.
I believe that this comment by Justice Holmes applies in this situation.”
…
- from ‘Saeed Korki v Her Majesty The Queen’, Tax Court of Canada, Docket 2008-74(IT)G, 2010
[hat-tip to 'oh oh' at VCI 23 Sep 2012 3:06pm for alerting us to this case. - ed.]

Ah, Look At All The Lonely People – “With Vancouver’s sky-high housing prices, problems around affordability are creating resentment. There are a lot of people that just don’t feel welcome here.”

Vancouver may seem like a paradise, but behind the polite smiles, there’s evidence of loneliness, deep resentment and racial tension among some citizens.
Armed with these findings from two years of research by the Vancouver Foundation, Vision Vancouver Coun. Andrea Reimer is proposing to create an Engaged City Mayor’s Task Force. The 16-member force would devise plans to foster better relationships between citizens, and encourage broader participation in local government.
After surveying 3,841 people from more than 80 ethnic groups this year, the Vancouver Foundation found that one-third find it difficult to make friends in the city, and a quarter are lonely.
Many of the lonely people tend to be those living in high-density housing, and young adults who aren’t yet embedded in careers, Reimer said.
“There are a lot of people that just don’t feel welcome here,” she said.
With Vancouver’s sky-high housing prices, problems around affordability are creating resentment.
Over 60 per cent of residents aged 25 to 34 see Vancouver as “a resort for the wealthy,” with “too much foreign ownership,” according to the survey.
Frustration around housing is leading many to incorrectly place the blame on foreign owners from Asia, according to Reimer.
“There is a strong tension around race,” Reimer said. “We have to get ahead of that.”
Reimer said the task force would be composed of 16 volunteers from diverse backgrounds — half renters and half owners would be one division — and a likely focus of planning would involve encouraging neighbourhoods to get more involved in tapping into existing infrastructure budgets. The idea is to create public spaces “more aligned with what the community wants.”
- from ‘Lonely city: Vancouverites isolated, resentful; city council seeks answers’, The Province, 25 Sep 2012 [hat-tip joe_blown_away_by_high_housing_costs and others]

Unexpected Call From Long Time Friend – “They bought a $240k townhouse and are moving in next month, and he is afraid that they don’t make enough to pay for 2 cars and a mortgage.”

“I had an unexpected call from long time friend that i havent talked with for in a long time. He was asking if i could help him in selling his car, i wondered why he wanted to sell he replied that his wife’s parents pre approved them for a mortgage recently thru a realtor friend who only charges $5k for the pre approval and other helper services. And now they bought a $240k townhouse and moving in next month and he was afraid that him and his wife don’t make enough to pay for 2 cars and mortgage. So he was considering selling one car or find a second job. I was speechless. There are just so many things wrong with this story that it left me speechless, he is really nice guy and a good long time friend, and i could tell he was emotionally concerned at this point. All I offered was to help him move and a bit of encouragment that its nice to have your own place (i didn’t really know what else to say).”
- SunBlaster at VCI 21 Sep 2012 6:22pm

“Trying to sell a $3M house in suburbia by targeting cheapskates looking for free food! I get freshly baked cookies to appeal to walk-bys but actually advertising a free catered event?”

“2893 AURORA RD, Capilano Highlands, North Vancouver (V971457, 5414sqft SFH, Ask price $2,988,000) is the most expensive property currently listed in the Delbrook area of North Vancouver. I’ve been tracking this area for 4 years now and have seen the general trend of decent (but overpriced) places getting snapped up at around 800K, knocked down, and 4500sqft monsters built in their place and listed for $2M plus. Its almost like the spec builders have shifted from Van West to Delbrook. These houses are nice but builder designed boringness that will be albatrosses once a return to normal prices, but I digress.
The main reason for the post is the open house comment for next week:
“More than an open house this will be a FEAST. Profeesionally catered, by one the city’s finest, you are sure to appreciate the home and the food. Bring your appetite!”
So, you are trying to sell a $3M house in suburbia by targeting cheapskates looking for free food!!! I get freshly baked cookies to appeal to walk-bys but actually advertising a free catered event???”
- yltnboomerang at VREAA 15 Sep 2012 12:16pm

Another Greater Fool Averted – “She was trying to buy a house for $238k, with 5% down, on a 33k/year salary. There must be something working in the system these days, she didn’t get the financing required.”

“Update on the friend I spent the day trying to talk out of buying a house for $238k, with 5% down, on a 33k/year salary. Must be something working in the system these days, she didn’t get the financing required for the house (big surprise). They said she needs a cosigner to get that amount of mortgage. The relative she hit up said “No go”. And the CMHC owned house they bid on? Got an offer higher than asking, so they lost the bid. Another greater fool averted.”
- pricedoutfornow at VCI 21 Sep 2012 8:53pm

Some people will not be allowed onboard, even though they had the full intention to buy.
This will turn out to have been in their favour, fortune triumphing over judgement.
- vreaa

“Every time the conversation has gone to real estate in the past, the verdict has always been that Vancouver will never go down. Now, all of a sudden, these same people are saying that the bubble is “finally” bursting.”

“I’ve been running with the same fairly large group for a year now. Every time the conversation has gone to real estate, the verdict has always been that Vancouver will never go down. Now, all of a sudden, these same people are saying that the bubble is “finally” bursting, and the group members are teaching each other new terms like, “under water.” It’s amazing how fast it goes.”
- N at VCI 18 Sep 2012 at 9:13pm

In years to come, these same people will also tell themselves that (1) they ‘knew’ all along that it was a bubble and (2) they didn’t act because, who could have known it was a bubble? (backed by the related falsehood “You can’t identify a bubble while it is happening”, care of Greenspan and others.)
Yes, we know that’s a complete contradiction, and makes no sense, but, humans are like that.
- vreaa

Your House Is A Big Fridge – “Do you plan to sell your fridge in 20 years and retire on it? No, it’s a fridge, you store things in there.”

“Over at York University’s Schulich School of Business, finance prof Moshe Milevsky also believes that too much is sometimes made of owning a home.
“The way I look at it is, I tell people your house is a big fridge,” Milevsky says. “Are you romantically attached to your fridge? Do you plan to sell your fridge in 20 years and retire on it? No, it’s a fridge, you store things in there.
“It’s a place to live. We need it. You enjoy the benefits of it, backyard and so on, but it has to be done in perspective.” Milevsky feels there has been a serious rethink now, especially in light of the U.S. housing crash six years ago, over whether home ownership makes sense for a mobile workforce that has to deal with fluctuating property values.
“If you’re in your 20s or 30s, not sure what you’re going to be doing for a living, and your job is relatively risky, the last thing you want to do is pile on risk,” Milevsky suggests.
“But if you’re a 42-year-old teacher, have two kids, and your husband has a secure job for some government agency and you know you’ll be here for next 25 years, OK, maybe home ownership makes sense because your personal balance sheet is a lot safer, it’s a lot more secure.
“It has to be viewed as a portfolio transaction.”
- from ‘Should we stop encouraging home ownership?’, Mark Gollum, CBC News, 24 Sep 2012

From the comment section of the same article:
“Well, there is no way I’m ever going to take or listen to the advice of someone who equates home ownership with fridge ownership. My fridge is like a car: it wears out and I replace it. I make enhancements to my home, I better it, and its value rises. We are in a very sad state if the “experts” are advising that home ownership is not a good investment. The issue isn’t owning a home, it’s making sure you purchase a home that is affordable to you. Why these ongoing attempts to destroy the middle class?”
- keeper100, ibid
—

We agree completely with Moshe Milevsky’s comparison.
In coming years, Canadians (and especially Vancouverites) will learn to treat their homes more like fridges, and less like financial instruments.
- vreaa
—

The entire CBC article is worth the read. Some very sensible comments, as always, from Ben Rabidoux (“We’re asking taxpayers to basically take on the risk to allow people to jump into ownership with the risk being held by somebody else. And I’m not sure that’s sound policy.”)
Also, the poll on the same page is of interest. It currently shows 40% saying “home ownership is an important part of Canadian life”, vs 39% saying “home ownership is not a right. Renting is a fine alternative.”

“Free Car With House In Richmond.”

- image submitted with comment from ‘derp’, VREAA, 23 Sep 2012 11:12pm, who noted: “Free car with house in Richmond”.

16-Year-Old High School Kid Offers RE Advice – “There’s a lot of money to be made in Vancouver. Just buy a house, rent it out, and in a few years you can buy another one, or maybe a condo. It’s a great investment. You should definitely look into it.”

“I was in Vancouver last year and we went hiking near Deep Cove (lovely area). During our hike, we met two 16 yr old kids from Van who were hiking on the same trail. We hiked together for over an hour, just chatting. We ended up giving them a ride all the way back to Van because they didn’t have a car, or a drivers licence, they were going to take 2 or 3 buses to get back. Anyway, in the car the most talkative and assured of the two told us : “There’s a lot of money to be made in Vancouver. Just buy a house, rent it out, and in a few years you can buy another one, or maybe a condo. It’s a great investment. You should definitely look into it.” The kid was great but I couldn’t help seeing this as a perfect “shoeshine boy” moment. When a high school kid is giving you unprompted investing advice, just do the exact opposite and you’ll do just fine.”
- Nick at VREAA 20 Sep 2012 12:20pm

Agreed, a shoeshine-boy moment.
In fact, this is the most extreme such example we’ve heard from our bubble.
(Who is there left to recommend housing? Toddlers? Pets?)
- vreaa

This comment followed Nick’s:
“This is pretty much how most under-25 born and raised in Vancouverites seem to think. Conceptually, they can’t ever imagine leaving Vancouver (best place on earth syndrome) but they also recognize it’s far too expensive a city to live in, especially if you’re starting out in life (even with rich boomer parents to subsidize a real estate purchase.) They have to buy in to the real estate bull mindset otherwise prospects are very depressing.”
- Cranston Snord at VREAA 20 Sep 2012 3:39pm

CBC’s The National – ‘Vancouver Housing: Bubble or Bust?’

CBC’s The National last evening [20 Sep 2012] featured a segment entitled ‘Vancouver Housing: Bubble or Bust?’. We’ll be transcribing and headlining one or two sub-stories from that piece. Until then, readers may want to view the whole thing at the CBC site:

—
UPDATE 22 Sep 2012: Care of ‘AP’, we now have a transcription of the whole piece and append it here [Thanks A.P.! -ed]:

PETER MANSBRIDGE: Welcome back. We’re heading to Vancouver now, home of the highest real estate prices in the country. And that’s our focus this evening, assessing the market there, what’s happening to it and what it means for the rest of Canada.

Would you be willing to pay more than $2 million for a home or say 1.4 million? Those are the average prices in one of this city’s trendier places, the West Side and Kitsilano. And believe it or not, that’s something of a bargain. The recent trend for prices across the Vancouver region is down. That doesn’t mean you’ll soon be able to pick up a gorgeous home for the price of a garden shed, but after years of buyers being at the mercy of forces beyond their control, the forces are with them. Not only are the houses going for less, they’re sitting for sale longer. Even bidding wars are becoming a memory.

Some say it’s the beginning of a correction, while some say it’s beginning of a crash. Our Chris Brown takes a look at what’s hitting home in Vancouver.

CHRIS BROWN: On a nice, sunny day the premium you pay to live in Vancouver seems to be worth every penny. It’s got the beach, the views, the trendy hangout spots and homebuyers have been prepared to plunk down a fortune to own a piece of it. Year after year after year prices in this city shattered once unthinkable ceilings. Until now.

GARTH TURNER: I see risk more than anything. I see a market that’s gotten beyond itself. The prices bear no real relation to the economics economics behind the market, so it’s only a matter of time and depth of how much destruction there’s going to be.

CAMERON McNEILL: Whenever the market goes near the top part of the cycle we always do hear pessimistic economists talking about bubble, et cetera. But the reality is that the fundamentals that are driving the market below the surface are just too strong for any sort of bubble circumstance to happen.

CHRIS BROWN: Whether Vancouver’s market has finally reached the tipping point after years of incredible gains has become the debate in living rooms and boardrooms across the city. The numbers provide ammunition for both sides.

At first glance Philip Chan’s property in in popular Kitsilano would seem to support those who believe the crash is upon us. It’s a very nicely finished 1,700 square foot newly built unit in a triplex. Back in March it came on the market for $1.79 million, including sales tax. It’s now 1.57 million. That’s an almost 12 percent price drop.

PHILIP CHAN: I think the market actually during the last six months has adjusted downwards. I think everybody know about that. And it went up too fast and it’s just taking a little bit of an adjustment.

CHRIS BROWN: Describing a $200,000 price drop as an adjustment is just the kind of thing those who believe the market is unsustainable seize on. They argue it tries to sugar coat the ugly reality that prices are tanking. Chan, who built this home is a realtor who’s also trying to sell it, doesn’t believe that.

PHILIP CHAN: Unit like this, I think you can find no more than 10 on the market at this moment. How much can it drop?

CHRIS BROWN: A lot more, argues Garth Turner. From his perch in Toronto the former MP writes a blog on real estate and has a big following in this city.

GARTH TURNER: People in Vancouver have to spend on average up to 70, 80, 90 percent in order to afford the average home. That is out of whack with every place else pretty much in the world. Beyond this façade of high prices is a great big steaming pile of debt and there’s a limit to how much debt people can get into. I think actually we’re at that limit.

CHRIS BROWN: Condo marketing specialist Cameron O’Neill argues Turner’s affordability statistics are misleading. He says they’re skewed by high prices for detached homes in a city where there’s no more room to build any. Many more people, he says, choose to buy condos or townhomes.

CAMERON McNEILL: We are in a, in fact, like a mini Manhattan and people want to live in this dense population.

CHRIS BROWN: There’s been a culture shift in Vancouver, he says. Living in smaller spaces is seen as okay. For many people, including families, getting along with less space is expected, even desirable.

CAMERON McNEILL: In Yaletown, one of the boroughs within downtown Vancouver over my shoulder here, just 10 years ago you wouldn’t see a baby carriage. Today they have six or seven daycare with waiting list and they’re happy to have the coffee shop as their living room, they’re happy to have the park as their backyard and they’re happy to have the seawall as their playground.

CHRIS BROWN: It’s true that Vancouver’s average detached home price are staggering. Even with this dip average house prices in the city proper average over a million dollars and in the more expensive western part of the city they’re twice that much. But townhomes are cheaper and condos even more so. In other words, it’s only in certain parts of the city for certain types of housing the prices really went berserk. Those who believe the fundamentals here are sound argue are there are lots of housing options. But Garth Turner believes the gap between wages and prices remains too great.

GARTH TURNER: No market is sustainable when the average consumer can’t afford the product. In downtown Toronto, where you’ve got very expensive real estate, it’s at a multiple of about eight times what the average income is to buy the average home, which most people can’t afford. The U.S. collapsed at 4.6. Well, you know what? In Vancouver right now we’re 11.5.

CAMERON McNEILL: The fact of the matter is in Vancouver you can today buy a condominium, you can rent it out and you will have 40 people lining up to try to rent that condominium. They’ll be paying a very, very high and a fair rent. If you have that much desire for people to — to live in a condominium, you know, I think that the market’s got no problem sustaining itself.

CHRIS BROWN: At his Kitsilano property owner and realtor Philip Chan is sounding confident the market won’t slip much further from the 10 or 12 percent it already has.

PHILIP CHAN: Nobody can predict the future, so if you see that the market is healthy enough and you can afford to do it, do it. You can either sit by the ballpark and you watch the game or you can go down and play the game. You might get hurt or you might win.

GARTH TURNER: We see people, particularly in Vancouver, with 80, 90, 95, a hundred percent of their net worth in one asset at one address on one street in one neighbourhood. To me that defines risk.

CAMERON McNEILL: I always say Vancouver is the Swiss bank account of international real estate. It’s a — it’s a funny little quote that I say because sophisticated people, whether they live in Vancouver or they’re international, they — they recognize Vancouver as a safe, long-term place to park some money when it comes to real estate.

CHRIS BROWN: In the months to come that assertion will be tested. Are we looking at a bubble that’s bursting or a boom that’s just had a little hiccup?

(BROADCAST CONCLUDED)

“Forget All This Silly Talk; Cuddle Up; Do The Sensible Frugal Thing; Buy A House; Become A Millionaire”

“The basic necessity of life is having a roof over your head, you own it to live in it for the long term and keep it, forget about all this investment cr_ap and appreciation business. My mom has a grade 4 education and bought a house back in 1980 in the middle of downtown Toronto for 50,000 dollars. It’s worth close to 700,000 dollars now. She had no clue houses could appreciate, in fact, she has no idea what appreciation was. Heck, she has no idea what a stock is and how to buy it. We rented out all 7 rooms to pay off the mortgage in 5 years time. What do you know, we still live here and my mom, who made only minimum wage all her life is a millionaire!!! She stopped working at age 49! All she does is watch tv and go out to restaurants. Simple frugal life.
Ignorance is bliss!!
Don’t buy and sell, buy and sell, you’ll only be losing money from all the cost. If you like your house and the location is great, you keep it for the long term. At an average rate of 2 percent compounded annually, you’ll eventually be a multi-millionaire.”
- Motown Philly at National Post 14 Sep 2012

The making-a-million-bucks part of the equation is completely dependent on where in the cycle you buy.
- vreaa

Armstrong Cheese II – “Looks like they’re a wee bit late to the party.”

Above photo from Gord Goble [via e-mail, 15 Sep 2012], who writes: “Not the best photo (totally against the sun, taken from a long distance while in my car), but I found the subject pretty interesting nonetheless. Armstrong Cheese = Vancouver real estate. Looks like they’re a wee bit late to the party.
I like the other elements too – the guy walking away disgusted and another billboard that’s also all about fantasy.
Anywho, thought you’d like it. Taken at the Highway 99 – 8th Ave interchange near the border.”

[Thanks Gord, nice shot. We particularly like the fantasy and disgust components. A companion piece to subterranian's photo near Lion's Gate Bridge, 14 Sep 2012. Looks like these guys have the North and the South covered. - vreaa]

Cheese Houses Billboard Ad – “More Desirable Than Vancouver Real Estate”

- image from ‘subterranian’ via e-mail 14 Sep 2012, who writes: “Thought I’d send this along… It’s been running for days on the electronic billboard at the north end of the Lions Gate Bridge. HAM and cheese?” [Many, many thanks, subterranian; an image from our bubble that we are very pleased to archive.]

No mold comments, please.
Seriously, folks… any doubt we’re living in the distorted universe of an RE mania?
- vreaa

Okanagan Airline Pilot Near Retirement – Assets: RE ‘Worth’ $2 Million; RRSP $100K

“Housing grows more turgid each passing week. I tried explaining that yesterday to the airline pilot living deep in the folds and creases of the Okanagan Valley, where he has a $2 million waterfront property and just $100,000 in RRSPs as he nears retirement. “This is not a happy asset allocation,” I said, as he told me how much he was worth. “Try selling the house for six months and see.”
An illiquid house is worth nothing. Just bills.”
- from Garth Turner at greaterfool.ca 11 Sep 2012

Robert Shiller – “People get excited about housing. They get excited about Vancouver. You’ve got to get it straight. Just because Vancouver is a nice place to live, doesn’t mean that prices are going to go up there forever.”

“It’s looking like the bubble is still alive in Canada.” …

“It looks like Vancouver is San Francisco lagged some three years… San Francisco is a bubble city, it’s one of the main boom cities in the US… Californians are known for that, they’re emotional people (laughs)… But they’re no different in Vancouver.. in fact it’s worse in Vancouver… I have Vancouver doubling, even correcting for inflation, in 22 years.. that’s bigger than San Francisco. So it makes you wonder.. where is Vancouver going now? I’ll tell you one thing, I’m not investing in Vancouver real estate (laughs), not me!” …

[Interviewer: Is the issue the prices, or is the issue the affordability?]
“I’d say the issue was sociology. Economists are getting back to that very belatedly. It’s about how culture changes and how people get excited about housing. They get excited about Vancouver, it’s a beautiful city, by the way… it’s a nice place to live. But you’ve got to get it straight: Just because it’s a nice place to live, doesn’t mean that prices are just going to go up there forever…. when they get sufficiently high, people are going to say: You know, I’m not going to do it… and that’s when it breaks.” …

“Glamour cities are more bubble prone than run of the mill cities… if you have celebrities living there.. if people go there on vacation tours… that’s where the psychology brings on bubbles.” …

“I’m not giving you a strong forecast… I don’t know what these cities could do… they could keep going up. I really don’t know.”

- excerpts from interview with Robert Shiller, BNN, 6 Sep 2012 [hat-tip G]

Gord Goble – A Glimpse Of Our Future?

These photos from Gord Goble, following up on ‘South Surrey Building Blitzkrieg; Thoughts and Images’, March 2012. Gord writes: “I took a little time late this afternoon to grab some more pics of the crazed (and horrid) construction going on in my insane little neighbourhood (and the telling signs of a real estate bubble pop). Pretty eerie. A glimpse of the future.”
Sombre images. Many thanks, Gord.

—

“I am a boomer, I see the problems that high housing prices are causing for the younger generation. I have two children; one challenged with a large mortgage, another priced out of the Vancouver market.”

“Yesterday while visiting friends and family, I started to talk about the price of Real Estate and how I see it affecting the younger generation.
Let me first say, I am of the boomer generation, I see the problems that high prices for housing is causing the younger generation. After all, I have two children of my own and see the problems that they are dealing with. One family challenged with a large mortgage, another one of my children priced out of the Vancouver market.
Now back to the conversation, I stated that the prices were out of reach for the normal working family and a family member made the argument that it was all relevant. He claims that prices of houses for his parents were cheaper than he bought and when he bought his first home he was making $300 a month.
True, he was making that money back in 1966, but in that same time period my father was making $70 a week and bought five acres and a two bedroom home for $9800. If we round that up to $300 it would have taken my father less than three years of work to purchase that home.
Two years ago, I looked at the same property, it now was selling for over $800,000. My son is in the $40,000 dollar range, like most people that is an average wage, it would take him 20 years of work to purchase the same property.
Wages have not kept up to inflation, let alone the cost of housing. This is going to cause the housing market to stagnate and if the young generation are lucky, prices will fall. There is some sign of that happening now in Vancouver.”
- from ‘House Prices and Young Folk’, by ‘RA’ (a ‘Retired British Columbian’) at their blog ‘Voice of the Wet Coast, 28 Aug 2012

“Vancouver RE talk I overheard at a BBQ on the weekend.”

“THINGS I OVERHEAD AT A BBQ OVER THE WEEKEND
-we finally sold the townhouse, we lost a lot of money
-prices are starting to soften
-wait to buy
-condos are down 15-20% already
and my personal fav
-all the people that didn’t go to university after high school became realtors and made a lot of money.” … “For once I did not bring up the topic at all, I just sat back and observed.”
- 4SlicesofCheese at VREAA 28 Aug 2012 8:30am

“Things I overheard at my BBQ:
- we sold our loft for full ask after one showing
- we just bought a house in Burnaby, ended up at asking price. The house was expensive, but we really like it and the location, so it was worth it to us.
- we thought about waiting to buy, prices might go lower, but they’re at a point right now where we can finally afford what we want so we’re looking.
Sounds like a different BBQ…”
- nuxfan at VREAA 28 Aug 2012 9:56am

REbelle, REbelle… – “My 17 year old niece told me a bunch of her friends were thinking about going in together to buy a place and instead of renting when they graduate high school.”

“My 17 year old niece told me a bunch of her friends were thinking about going in together to buy a place and living there instead of renting when they graduate high school…
They are all smart so I’m sure they will eventually have good careers but currently they all have part time / summer mall jobs.
I told her it was the worst idea ever on so many levels and thankfully she agreed. Still, it shows you how brainwashed we’ve become.”
- an observer at VREAA 30 Aug 2012 8:51am

“I was on the bus recently and overheard a few young girls talking about buying a place when they go to university next year. The usual “rent is just throwing money away” and “I’ll sell it in a few years and make some cash” we’re part of the conversation. Yowza. 18 with a mortgage, a student loan, and a credit card… Sounds like a recipe for disaster.”
- Terminalcitygirl at VREAA 30 Aug 2012 10:47am

“One of my deadbeat buddies from high school, who never held down a job or followed through on any type of ambition, just bought a place in Surrey, with 5% down.”

“So one of my deadbeat buddies from high school (never held down a job or followed through on any type of ambition) just bought a place in Surrey. With 5% down. He actually bought it in April and I only found out last week when I passed through town.
So that means we’re at a market top. It was official the day he closed.”
- RiskArb at RE Talks 29 Aug 2012 7:23am

Vancouver Restaurants: Crunch The Numbers – “Both establishments were located in downtown Vancouver, where rent prices feast on restaurant profits. MacKay was paying $40,000 in monthly rent for the two locations.”

Two high-profile restaurants run by celebrity chef Dale MacKay served their last suppers last Saturday and closed the doors for good. … MacKay opened Ensemble Tap, a casual restaurant, soon after opening Ensemble. Both were located in downtown Vancouver, where rent prices feast on restaurant profits. He was paying $40,000 in monthly rent for the two locations. “You crunch the numbers, you do your best to forecast and try to attain that,” he said.
“Ensemble did very, very well right off the bat. It was a success. We had good feedback but I went in a little under-capitalized into Tap,” said MacKay. “It’s a big space. It’s not Gastown or the East End. The rents are very, very high.”
- from ‘Top chef Canada, Dale MacKay closes his restaurants’, Mia Stainsbury, Vancouver Sun, 27 Aug 2012 [hat-tip 4SlicesofCheese]

Off The Market – “The ‘For Sale’ sign has disappeared from the lawn. My wife figures they got too close to the baby’s birth to be able to deal with a move.”

“Just a quick update on the couple I know in Burnaby who are expecting a third child and trying to sell to move up to a bigger place. I drive by their $820k ‘starter home’ every morning on my way to work. After a series of weekend open houses every weekend for about a month, the ‘for sale’ sign has disappeared from the lawn. My wife figures they got too close to the baby’s birth to be able to deal with a move. I think the sign might show up again once the realtor brother figures the buyers are back for the fall run. I’m hoping they decided to just stay put as their plan was to sell and buy a bigger place for over a million. Selling and renting was never in the cards.”
- lexlimo at VREAA 22 Aug 2012 12:21am

1. Move-uppers may seem to have done well, but their increased exposure puts them at increased risk in a downturn.
2. Sometimes, by chance, market conditions prevent people from making even bigger mistakes. This couple will likely look back and ‘thank’ their child for “saving” them from the move-up.
- vreaa

Garth Turner in Vancouver – “By the time things trough the average price will likely be 40% lower, with a return to 2005 levels. The impact will be substantial. Maybe life-altering.”

“Last night in Vancouver I told people the correction now decimating homeowners’ equity is real, and just starting. The 15% price correction and 30% collapse in sales foreshadows what is yet to come. By the time things trough the average price will likely be forty per cent lower, with a return to 2005 levels. The impact on people who bought in the 28-month delusional period between late-2009 and last March, when I told you what was coming, will be substantial. Maybe life-altering.”
- Garth Turner, well-known blogger and housing bear (greaterfool.ca).
The crowd at Garth’s presentation was larger than at his last appearance here, a fact that likely reflects changing Vancouver RE sentiment. See here for Garth’s own account of the event.
If any readers were present, please share your perspectives on the meeting.

This from ‘Poorboy’ in the comment section at greaterfool [21 Aug 2012]:
“My favourite part of the event: the self-professed financial advisor in the audience who didn’t get where the downward pressure on prices would come from since he wouldn’t sell his million dollar home for 300,000 less.”

Vancouver’s Remarkable Price:Rent Fundamentals – “About to sign a lease, at a 420 price:rent ratio, on 1 year new house built by Asian owner, 1800+ sf, pulled off MLS recently due to no buyer.”

“About to sign lease on 1 year new house built by Asian owner, 1800+ sf, pulled off MLS recently due to no buyer. Now about to be rented to yours truly at ~35 years Price-to-Rent ratio after talking down rent by $100/m. [Thus 420 monthlyrent:price ratio. -ed.]Landlord still has a couple houses near completion. Who knows what happens to the tenant if the landlord goes bankrupt?”…
“I’m moving from a 1Br+den 670 sq ft condo at 283 months (23.6 years) rent, to (the aforementioned) 3Br newer house at 415 months (34.6 years) rent. Definitely makes more financial sense to rent than buy. Viewed a 3Br 1000sq ft newer condo few days ago at 305 months (25.4 years) rent, but passed (interesting to note that property manager is a realtor, guess managing client’s property might be what’s keeping them busy these days!)
- VMD at VCI 17 Aug 2012 10:00pm and 18 Aug 2012 11:22am

An example of a ‘speculative hold’. The owner believes prices will rise in future and is holding the property not for rental yield, but for assumed future price increases.
We are of the opinion that a good percentage of this kind of inventory will be put on the market at significantly lower prices, as it becomes clear that a downward trajectory for prices is establishing itself.
And, yes, this will be disruptive to tenants. The rental market is less stable through a speculative mania in housing, and the unwinding thereof.
- vreaa

Other current sky-high Price:Rent ratio anecdotes from the same VCI thread:

“I am living in Richmond with an (assessed value) : (rent) ratio of about 285.
Strata fees and property taxes not included, why buy now?”
- Anonymous 18 Aug 2012 10:04am

“I’m renting a house in SE Burnaby. Price to rent is somewhere between 350-370 on the conservative side. My best friend is the landlord and I’ve urged him to consider selling. But he will have nothing to do with it. Already has over $1.5mil RE exposure with little other savings. Oh yeah, still looking to buy another investment property because “RE does so much better than the stock market”. Just can’t save people from themselves.”
- How much?? 18 Aug 2012 10:27am

“Here is a unit that has been listed on CL for months (available now) for $2650 per month. The same units are listed for sale at $839K to $879K. So even if they get their asking rent the PR is 316 plus.”
- Anonymous 18 Aug 2012 12:36pm

“Beat you all. 4br house on Ontario. 2012 sale $1.35M. Monthly rent $2850, 2 yr lease. Price/rent 474. I love living here but wouldn’t buy at half the price.”
“Our landlord purchased the property earlier this year as an “investment”. I really can’t understand their business model. The house is an original, nicely-maintained bungalow. New paint, new dishwasher etc.
It’s not a quick flip (we have a 2-year lease) and it’s not a tear down and rebuild, which might make sense. The landlord is shelling out $3k or whatever per month to hold the property. They seem to be invested for the long term.
Of course the potential downside for us is a forced move if the house is sold. We figured that by the end of our lease the house will likely be underwater so that the landlord would not be in a position to sell. We will see how that goes.
I should add the landlord couple are very nice people and I don’t wish them any financial hardship.”
- No Money Down 18 Aug 2012 12:37pm and 19 Aug 2012 10:10am

“I have a whole house (unlike many, home owners, I have no tenants in the basement to worry about) on a nice street off The Drive, assessed at a little over 410 months’ rent.”
- N 18 Aug 2012 1:56pm

“I’m in a 3 bedroom house (we have the place to ourselves), 5 year lease for $1600/mo. House is worth $750,000 based on comps for a ratio of 468.”
- Vulture Fun 18 Aug 2012 11:34pm

“I pay $850 a month for a condo in Surrey. Same unit 2 floors up sold for $253,000 in late 2011. So a ratio of 297:1. You guys are insane with your 400′s ratios.”
- ScubaSteve 19 Aug 2012 12:39am

“I am the winner. I pay 4,400 for a 3,800 ft 6 bedroom (or is it 7?) house in west side.
Assessed close to $3.0 million. For now this is a 660 multiplier.
At the higher price points, it gets more and more un-economic to own and rent these houses out.”
- Van Coffee 19 Aug 2012 8:48am

“I’m at 489 but if I take off the huge strata fees that my landlord pays I go to 696. Strata and ppty tax eat up exactly 50% of my rent cheque. Not a lot left to pay the mortgage and occasional special assessment.
BTW…for all you haters who think we renters are basement dwellers who are broke, I’m writing this poolside in Osoyooss. Thanks landlord!”
- McLovin 19 Aug 2012 11:01am

“For the record – we are in a $1.5M Condo. Strata and taxes are over 1,000 per month and the rent is 3,500 gross (2,500 net of landlord costs). This give you 600.
Property value is no more than the day we moved in.
This represents a $200,000 plus savings and building of equity by renting (we built equity by renting – – – sounds strange).”
- ZRH2YVR 19 Aug 2012 4:52pm

Low Retirement Savings + High Homeownership = RE Sales

53% of Canadians plan to keep working ‘after retirement’.
A further 29% ‘said they were not sure if they would work after retirement’.
Almost half of today’s 50-59 year olds have less than $100,000 saved for retirement.
“The retirement landscape is shifting as baby boomers reach traditional retirement age with a smaller nest egg than they expected to have.” – Christina Kramer, executive vice-president, retail distribution and channel strategy at CIBC.
- from a national online survey (n=805; 5-8 July 2012), conducted last month for CIBC by Leger Marketing. As reported in Globe and Mail 20 Aug 2012, and numerous other news outlets.
—

Bank of Nova Scotia economist Adrienne Warren says that when the latest census figures come out next month she expects us to be in the elite company — depending on your view — of countries with more than 70% of households owning their own homes. Based on the 2006 census, we were at 68.4%. … Interestingly enough, the United States is believed to have cracked that 70% threshold before the bottom fell out of its housing market. … “The government is saying you should not be a homeowner if you cannot afford it,” said Benjamin Tal, deputy chief economist at CIBC World Markets Inc.
- from ‘Home ownership in Canada reaching new heights’, Financial Post, 17 Aug 2012
—

A large number of underfunded homeowner boomers will be heading for retirement with their only substantial asset falling in value. This will add to supply and plunge RE prices further.
- vreaa

Vancouver RE Invades A Citizen’s Dreams – “…and then I woke up!”

“Home.. is where I want to be. But I guess I’m already there”
- ‘This Must Be The Place (Naive Melody)’, Talking Heads, 1983

“I just woke from a nightmare. In it, I had a speckerfriend (a real person), come over yelling at me if I want to help make 12 million bucks. I said how? He replied building a mansion in Whistler. I face palmed and said haven’t you seen vancouverpricedrop? He’d never heard of it, I told him he would be lucky to get 8 mill in this market. A desperate look came over him, I asked how much to break even? He said 3 million, I told him I would think about it …and then I woke up !”
- Loon at VCI 15 Aug 2012 7:34am

“We’re staying in Vancouver because we’ve got 3 sets of grandparents for the kids nearby, and neither my husband or I has much interest in BC outside of Vancouver proper. But my subconscious has something else to say: twice this past week, I’ve dreamed of the relief of packing up and moving to Toronto or Montreal.”
- Absinthe at VREAA 15 Feb 2011 12:39pm

Misallocation of resources.
We’d be better off dreaming about flying and exploring jungles and sex and surfing and traveling and all sorts of other stuff.
As we all already know, RE has invaded our collective psyche.
It’s part of living through a massive spec mania in housing.
Any other home/RE dream*/nightmare* stories out there?
(*The kind that happen while you’re asleep).
- vreaa

Canadians Planning On Selling Homes To Fund Retirement

“Peter and Mary are in their mid-50s and earn two incomes. They are wondering whether they can retire at 60.
It helps that their three children have grown up. The two oldest are “off the payroll” and the youngest is expected to become self-supporting after he completes university in three years.
Their retirement dreams aren’t extravagant. The couple plan to sell their house and live six months of the year in their condo (where the youngest child is now living rent-free until university is finished).”
- from Financial Facelift, Globe and Mail, 10 Aug 2012

“In Alberta, a couple we’ll call Lars, 57, and Phyllis, 56, waited until their late thirties to have children. Not long after, Lars lost his job with a multinational company, forcing him to retrain for a new profession. Phyllis had an illness that curtailed her career and made her a stay-at-home mom doing part-time work. But they adapted.
Today, one child is in university and one is about to start. The couple has six figures of debt and no capacity to save after paying all their bills out of $7,450 in monthly combined take-home income.
With no more than eight years to go to Lars’ planned retirement at 65, they wonder how can they finish paying the university bills and retire with financial security. …
They plan to boost retirement income by taking advantage of high real estate prices in Alberta. They want to sell their $450,000 house and move to the Maritimes, where, they think, they can buy a similar house for $225,000. The difference would add to their retirement capital.”
- from Family Finance, Financial Post, 10 Aug 2012

Many Canadians are planning to sell their homes to help fund their retirement needs.
There appears to be a significantly sized group of them intending to do this at much the same time.
The majority will be disappointed by falling, in some cases plummeting, home prices.
- vreaa

“Now they want to sell and buy a bigger place closer to her job. They will be down tens of thousands.”

“Know of a couple purchased 1 one bedroom in Vancouver for $430s.
This was back in 2010 and they were just getting married at the time.
I know the wife and told her I didn’t think it was a good idea since they didn’t even have a downpayment.
They were so worried about “buy now or be priced out forever”, went to his family for a loan for the 20%.
Fast forward to this week. Couple now has a 1yr old and the place is feeling too cramped. On top of that her job situation is changing and she needs to work in Burnaby.
Now they want to sell and buy a bigger place closer to her job.
They will list the unit for $419K to start.
They’ll be lucky to get $400 and minus the transaction costs, will be down tens of thousands.”
- kansai92 at VCI 9 Aug 2012 12:08pm

“I just heard of someone who bought a house in East Van with 7 other people! Dude, you’re signing up for a mortgage with roommates? Yeah that ought to work out, good luck with that!”

“I don’t live in Vancouver, but I read ‘vancouvercondo.info’ for the same reason I read the US bubble blogs. The insanity is entertaining. I just heard of someone who bought a house in east van with 7 other people! Dude, you’re signing up for a mortgage with roommates? Yeah that ought to work out, good luck with that!”
- Nex at VCI 6 Aug 2012 2:24pm

“I agree. I think it’s crazy that roommates would purchase property together. I’ve had lots of roommates in my day and it never seems to work out. I can’t imagine being stuck to a roommate for 25 years for a mortgage!
Vancity Credit Union actually has a mortgage product specifically designed for roommates. It’s called the “mortgage mixer”. From the Vancouver Sun:
“Vancity also has a “mixer mortgage” where roommates can go together to buy a home they wouldn’t be able to buy otherwise. ‘It also works well for parents and children, because the parents can own part of the home as an investment, while it helps the child get into the market,’ McKinley said. “It definitely helps people get into the market younger.’”
- Joe_Blown_Away_By_High_Housing_Costs at VCI 6 Aug 2012, in part quoting from Vancouver Sun 19 Apr 2012

“It was more fun as a contrarian fighting a uphill battle in early 2011″; “I don’t even talk about housing anymore with the friends that have bought”; “Where have all the Bulls gone?”

“I don’t even talk about housing anymore with some friends. These are the friends that have bought 800k to 1 million dollar homes and are in their early thirties. Being close friends, it is disconcerting how badly they will be hurt when this bubble falls apart. So I don’t talk about it. Tried to warn them though.”
- 900kCrackHouse at VCI 1 Aug 2012 10:45am

“For me, it’s boring to the point where I don’t feel very motivated to post. As I said a few days ago, it was more fun as a contrarian fighting a uphill battle in early 2011. Now even the bulls are adapting their stance to “we all know it’s falling, but I guarantee it won’t fall too much for too long, sellers should wait it out” (Their stance used to be “UPUPUP to the Moon!” lol)
I used to get a good share of jeers and typical bullish trash talk, but since a few months ago the resistance almost completely stopped.
It’s not that fun for a bloodthirsty warrior to walk onto the battlefield finding most of the enemies already deserted or defected.”
- VMD at VCI 1 Aug 2012 11:11am

“It all seems so easy. We are no longer fighting a rear guard action in Dunkirk we are 200 miles from Berlin with no Germans in sight.
Where have all the Bulls gone? I guess they are finally realizing that we can be wrong for a very long time but we only need to be right once.”
- McLovin at VCI 1 Aug 2012 9:06pm
—

We’ve also noticed the sudden silence of the bulls.
It can only mean that they are experiencing various aspects of the slowing.
- vreaa