Vancouver Real Estate Anecdote Archive

Still Ignorant After All These Years – “During our lunch my friend told me that he was going to quit his job to become a realtor. He seemed surprised by my comments about the market, and said that he hadn’t heard any of this before, and wouldn’t even begin to know where to look for that kind of information.”

vreaa — Sat, 28 Jan 2012 00:00:36 +0000

“Recently had lunch with a friend of mine. During our lunch he told me that he was going to quit his job to become a realtor. Was quite surprised as he was just promoted and is doing very well. I launched into the usually bear arguments: debt-to-income, easy lending standards (CMHC), risk of further restrictions regarding mortgages, housing starts and that most economists are waving red flags regarding Canada’s RE market.
He seemed surprised by my comments and said that he hadn’t heard any of this before and wouldn’t even begin to know where to look for that kind of information. We’ve talked about RE before and as I pointed out to him that I’m still wrong but have been right about every other housing bust I called, from the U.S. to Ireland to Spain — Australia’s right around the corner, and that at some point I’ll be right about Canada’s as well.
In any event, I didn’t dissuade him. He is a great salesman and will undoubtedly have success regardless of getting in at the top of the market, taking on tonnes of listings and having to deal with future sellers that will refuse to lower prices because their house is worth more. I wished him luck and told him to make sure that he had plenty of cash set aside to grow his business.”
- Manna from heaven at vancouvercondo.info 25 Jan 2012 11:09am

Boy, this is late to the party.
Like arriving at 6.30am, after the cops have broken it up.
Mental note to self: 1. Never underestimate the ignorance of some folks, and, consequently, 2. Never (again) try to estimate how long a speculative mania can perpetuate itself.
Yeah, sure, perhaps it’s we bears who’ve been ‘ignorant’. But the game isn’t over yet.
- vreaa

Vancouver RE Blogosphere Watch – Poster Publishes His Annual ‘The Wengzhou Money Is Coming’ Post

vreaa — Fri, 27 Jan 2012 21:30:43 +0000

2012
“Wenzhou money is now in Vancouver. An article from Vancouver’s chinese media talked about groups of businessmen from Wenzhou are in Vancouver now and purpose of their trip is to buy properties. One agent by the name of Zhang Wei Bin of Sutton picked up 4 parties at the airport alone on Monday, the first day of the year of dragon. Starting on Tuesday, they have started to look at ocean view properties in West Van, most in $5 million range, including one at 2400 Halston Crt, which those businessmen consider very cheap, comparable properties cost 3 times more in China.
Most of you may never have heard the city. It is the birth place of current day capitalism in China and it is estimated the residents of the city have amassed over $90 billion investable capital, people from Wen Zhou are known as fierce business competitors, and fearless properties buyers. Wen Zhou housewives formed buying teams and go from city to city to buy big chunk of new development projects and sell later for profit.”
- unicas at RE Talks 26 Jan 2012 8:44pm
—
2011
“The Wenzhou ladies may be coming. Wenzhou people are feared in China both as fierce business competitors and real estate buyers. 30 years ago, they were among the first Chinese who set up private business shops. They calculated profit by fraction of a penny. For the past decade they have been known as bigshot condo buyers. They form teams of RE buyers, go from city to city in China, and bring up prices whereever they go. And for the first time ever, they are allowed to invest directly overseas. So the suit case for cash will not be needed anymore. And “I buy 3, husband buy 3 thing may not be evening news material anymore. The money they are allowed to invest oveaseas may not initially sent out of the country in the name of RE investment, eventually most of the money will find their way in some kind of real properties.”
- unicas at RE Talks 23 Jan 2011 10:05am
—

Well, they certainly have more inventory to choose from this year.
Any news on how Wenzhou Chinese stock market and RE investments have done over the last 12 months?
What do these guys do when they’re holding assets in falling markets?
- vreaa

Maclean’s – “Yes, we’re in a bubble, and it will probably pop soon. The signs of a bubble are unequivocal.”

vreaa — Fri, 27 Jan 2012 16:14:12 +0000

“Are we literally living in a bubble? And when it bursts, will it get as ugly as it did south of the border? Here’s where the most recent speculation is pointing:
Yes, we’re in a bubble, and it will probably pop soon.
The signs of a bubble are unequivocal. At 13 years and counting, Canada’s current housing boom is one of the longest-lasting in the world, the Bank of Nova Scotia noted in a recent report. The real price of Canadian homes has increased by 85 per cent on average since 1998. Prices stagnated in 2008, at the height of the financial crisis, but they were back on the rise again as soon as 2009, when they grew by nearly 20 per cent, according to the Canadian Real Estate Association.
Meanwhile, Canadian household debt set a new record last year. On average, the debt burden of Canadian families stands at 153 per cent of their disposable income, according to Statistics Canada. That’s almost as much debt as American households had at the peak of their bubble.”
…
“The scary part is that, by most accounts, 2012 is going to be the year when housing prices start heading south. The housing market is already showing signs of weakness. Despite a rebound in December, housing starts fell in the last quarter of 2011. And in some smaller markets on the west coast, condo prices have already declined 15 per cent, according to Merrill Lynch. The bank predicts that prices nationwide will slip by five per cent this year in the best-case scenario. A spike in unemployment could trigger a 10 per cent price drop.”
…
“No, it won’t be “housemageddon.”
The good news is that, in all likelihood, our bubble won’t go KABOOM! Instead, we seem to be in for a painful but not devastating pop. That’s because only certain parts of Canada are in a bubble. Overcrowded markets in B.C. and Ontario may be close to busting, but many other areas of the country remain very affordable. The very same survey that ranked Vancouver most-unaffordable-city after Hong Kong rates Canada the third most affordable country, after the U.S. and Ireland.” …
“Most likely, then, the Canadian market will let the air out gradually. As inelegant as that sounds, it’s good news.”
- excerpts from ‘What happens when Canada’s housing bubble pops?’, Erica Alini, 26 Jan 2012 [hat-tip Potato]

Well, hard to get more mainstream, or more definite, than that.
All of the signs of a speculative mania were very definitely present by 2006-2007, but the MSM were silent about it then.
Now, 5 years and tens-of-thousands of overextended buyers later, it is even more glaringly obvious that the bubble is present, so the media ‘warns’ of this. What do they expect the record high number of homeowners to do about this now?
The MSM are rear-view commentators, and their articles have little predictive capacity. Like all other mainstream commentary recently, this Maclean’s piece is overly optimistic in its price-drop predictions.
—
Note ‘Maclean’s’ is calling for a soft landing. All those predicting a slow gradual reconciliation of prices and the fundamentals (which are currently far, far below prices) have to answer one big question:
Who do they imagine these buyers will be, who will step in and buy, in an orderly fashion, all the way down?
Who will, essentially, step in and bail out current owners, with promises to pay banks a stream of money for the rest of their lives, at these still very elevated prices?
And, while they’re pondering that, ask them for historic examples of speculative manias that have resolved with a soft landing. (There aren’t any.)
- vreaa

“The two top tech companies could not find anyone to fill the position. The number one reason given by the numerous Canadian & US-based candidates for withdrawing was the cost of living in Vancouver.”

vreaa — Fri, 27 Jan 2012 15:00:44 +0000

“Heard two interesting Vancouver anecdotes recently. Two top tech companies (one bio, one IT) were recruiting for certain specialist legal skill sets. Given that very few people meet the criteria the jobs were advertised across North America. Both companies were offering very attractive salaries and both were prepared to pay for relocation etc.
In both cases, despite interviewing numerous Canadian & US-based candidates, the companies could not find anyone to fill the position. The number one reason given by candidates for withdrawing…the cost of living in Vancouver was just too high.”
- Bally at VREAA 26 Jan 2012 6:16pm

Anybody not troubled by stories such as this really doesn’t care about the future of this city. – vreaa

Slew Of Mainstream Press Articles About Canadian RE

vreaa — Fri, 27 Jan 2012 04:42:16 +0000

‘Housing a ‘balloon’ not a bubble: economist’
BNN.ca 11 Jan 2012
“Sal Guatieri, Senior Economist at BMO Capital Markets, tells BNN that housing is not in a bubble, but rather a “balloon.”
“In a balloon the air can seep out slowly, it doesn’t necessarily need to burst unless something comes along to prick the balloon,” he says. “That something could of course be a recession or a loss of incomes or job…or a big spike in interest rates that worsens affordability, but we don’t see that happening.”…
Guatieri says that while home valuations are “excessively high” in Vancouver and “somewhat high” in the Greater Toronto are, he doesn’t expect a major implosion in home prices.
“We think Canada’s housing market will fizzle out rather than flame out,” he says. “It will indeed soften, there’s no doubt it will because household debts are relatively high — there’s only so much more rapid mortgage growth that can be sustained in Canada’s housing market and economy.”
CIBC chief executive officer Gerry McCaughey told bankers at a gathering that the housing sector may have peaked and will begin to soften.
RBC CEO Gordon Nixon and Bank of Montreal CEO Bill Downe also expressed concern about housing prices, saying the next few years could see a pullback.
Many economists say the condo market is particularly vulnerable if there is a pullback in home prices, but Bank of America Merrill Lynch Canada economist Sheryl King says predicting an isolated fall in home prices is risky.
“I don’t think that anybody would want to say with the lessons that we learned with the United States that you can isolate a particular sector or a particular part of the market and say everybody else is going to be protected,” she says. “There’s a lot of exuberance in this market right now, there are increasing signs of speculation…this is a market that is red hot and you have to be a little cautious right now,” she adds.

‘More gains in home prices expected’
Vancouver Sun, 12 Jan 2012
Canada’s housing market will continue to be strong this year, with rising property values expected in all major markets, real estate brokerage firm Royal LePage said Thursday.
The company’s forecast called for prices across to country to rise 2.8 per cent by the end of 2012, after stronger gains last year. …
“Widespread calls for a major real estate correction in 2012 simply can’t be justified,” Royal LePage CEO Phil Soper said in a statement. “The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace.”
The Canada Mortgage and Housing Corp. has forecast the average price of a listed homes for resale to be $363,900 this year, up 1.2 per cent from 2011. The Canadian Real Estate Association predicted that the average price would be relatively flat at $362,700. Both forecasts were made in November.
Royal LePage said even pricey housing markets in Vancouver and Toronto — where standard two-storey homes averaged $1.1 million and $629,188, respectively, in the last quarter — will see continued price appreciation in 2012.

Bill Good Show, CKNW Radio
calguy via e-mail to vreaa, 12 Jan 2012
“Just listened to Cameron Muir [chief economist of the B.C. Real Estate Association] on the ‘Bill Good [radio] show’. He says the market will be flat …except for the premium pockets.
Interesting he says the influx from China is a big factor, especially in areas like Dunbar etc, and West Vancouver. He says they are bringing lots of cash but
also taking loans out. He basically admitted that young people have to look at a condo in order to buy a place.”

‘Mark Carney’s low-for-long rates yielding more houses than machines’
Vancouver Sun/Bloomberg, 18 Jan 2012
Bank of Canada Governor Mark Carney’s 1 per cent interest rate has fostered the opposite of what he has said the country needs to be competitive — record borrowing by consumers, while companies pare debt ratios to the lowest in decades. …
“For the bank to be exhorting businesses to go out there and spend at a time when the bank itself admits the global environment is quite uncertain, I think it’s being a bit disingenuous,” said Mark Chandler, head of fixed-income strategy at Royal Bank’s Capital Markets unit in Toronto.

‘Chinese cash buyers may be about to spice up choice neighbourhood real estate market’
The Province, 19 Jan 2012
Will the story of 2012 in real estate-mad Vancouver be a “not very sexy” period of moderation, or another surge of cash-in-hand transactions in the “micromarkets” favoured by Chinese investors?
For answers we interviewed Cameron Muir, chief economist of the B.C. Real Estate Association, and Julia Lau, Chinese real estate specialist at Sotheby’s International Realty Canada.

‘Year of Dragon heats B.C. real estate market’
CBC, 25 Jan 2012
“Real estate agents in and around Vancouver are expecting big things this week, thanks to the Lunar New Year, which is typically a great time for sales.
Real estate agent Malcolm Hasman showed four Chinese families through a $7.8 million mansion in West Vancouver on Tuesday. The home has panoramic views, two kitchens and even a heated driveway.”

UBC Prof. Duanduan Li says the Year of the Dragon is auspicious for big changes, including big purchases. (CBC)

‘Household borrowing surge driven by most indebted’
CBC, 26 Jan 2012
“The debt-to-gross income ratio of those most indebted families is 160 per cent. The proportion of the most indebted families is greater in British Columbia, Alberta and Ontario where housing is the most expensive.”

‘Pending housing bubble spells trouble for Canada, experts say’
Financial Post, 26 Jan 2012
“Patti Croft, recently retired from being chief economist for RBC Global Asset Management, cited the risk of a housing bubble as among Canada’s biggest issues. Part of the problem, she said, is exceptionally low mortgage rates, due to the Bank of Canada’s low interest rate of one per cent — a level intended to support the economy. “Historically, after a long period of low interest rates, what lies ahead is some kind of speculative excess,” she said.

[hat-tips to Makaya, calguy, E.G., others for pointing out these articles. -ed.]

The above only a small sample of the large wave of RE related articles in national and local MSM over the last few weeks. – vreaa

Limitless Demand Argument Still Being Voiced – “Over the next decade Van RE will prove to be an excellent investment.”

vreaa — Thu, 26 Jan 2012 15:30:08 +0000

“I am looking at buying in Vancouver and torn between the obvious paranoia of some people who think the Van RE market is in a bubble and will crash and my belief that Vancouver will always be a safe place to park you money, as long as it is quality. Let me explain – buying a condo which has no direct interest in the underlying land is always a risk, if it has no unique features, (like to die for view) or in an area where where future new buildings will sprout up like daisies on a warm spring day, these are not good investments and over the long run will depreciate. Buying your typical 3BR home in the valley or suburbs with an hour commute, again not a good investment. I believe real estate which has a land component, duplex or Single Family house within 30-45 minutes of the CBD, in a good area will hold it’s value and although we may be in a market where increases are minimal, over the next decade Van RE will prove to be an excellent investment. The reason I believe this are 1) Having traveled all over Canada, given a choice Vancouver is the place to live. 2) China and the Asian Pacific view Vancouver as a safe place to purchase in order to diversify overall investments position, regardless of current market prices this will continue, soon the rich Indians (from India) will be coming. 3) ALR, US Border, Mountains all limit the supply of land in the lower mainland, combine this with my buy RE with a land component close to the CBD and you have a winning formula, providing of course you can afford it.
I have a lot of sympathy for working Vancouverites looking to get into the market, people who grew up in Vancouver and want to stay and raise their families, yet can not afford the market and see their dream of providing for their family like their parents did fade.Hey it’s not fair but it does not change the situation. If you are one of these angry people who desperately want the market to crash or use screwed logic to justify renting and your pessimism, I suggest you consider moving. If I was young and unable to get into the Vancouver RE market, I would move to a place like Saskatchewan where real estate is cheap, the economy is strong and prospects are good, sure the winters crap but it doesn’t rain. Having left BC 20 years ago, I would never be in the situation I am now, able to come back and buy quality real estate, looking through global glasses and liking what I see.”
- Sam Waterman at VREAA, 25 Jan 2012 8:16pm

Sam, it doesn’t seem like you’re really “torn” at all.
If what you say is genuinely what you believe, you’re clearly going to go ahead and buy a Vancouver SFH.
Please keep in touch, and we’ll see how that has worked out for you in coming years.
—
We humbly disagree with Sam, being one of the “paranoid” few who believe Vancouver is in a bubble.
We predict that all sectors of the market will implode, SFHs as much as any other.
Remember, SFHs have been bid up through the mania, with people using the very exclusivity that Sam cites to justify that much more stratospheric pricing. SFHs are, by degree, as overpriced as condos or townhouses or any other sub-sector you care to name. In the same way, no geographical areas are bullet-proof.
We archive this post, along with others in a similar vein, under ‘The Limitless Demand Argument For Ongoing Market Strength’ sidebar category. These kinds of arguments are very common during speculative manias.
- vreaa

More Sellers Than Buyers? – “Would your buyer’s who backed away reconsider their decision? The other three offers that were declared Sunday evening have decided not to go forward.”

vreaa — Thu, 26 Jan 2012 14:00:31 +0000

“It was Sunday in the early evening when the call was made to the listing agent:
Buyer’s Realtor® – “We’d like to make an offer!”
Seller’s Realtor® – “Ok that’s great but, I need to tell you that three others who visited the weekend open house have also declared their intent to make an offer as well,” said the listing agent.
Buyer’s Realtor® – “Oh – well then, I will inform the buyers I’m representing to advise them that you expect multiple offers – I’ll get back to you with their decision.”
Later Sunday Evening:
Buyer’s Realtor® – “The buyers I’m representing have decided that they do not want to participate in a multiple offer situation.” “Thanks for your time and good luck with your multiples.”
Monday Morning:
Seller’s Realtor® phones. “Would your buyer’s reconsider their decision?”
Buyer’s Realtor® – “Why?”
Seller’s Realtor® somewhat embarrassed – “the other three offers that were declared Sunday evening have decided not to go forward.”
- Local Realtor Larry Yatkowsky recounts a story he heard over coffee with his Realtor buddy, at yattermatters.com 23 Jan 2012.

Inventory is rising rapidly this year, and has yet to be met by convincing sales.
This next month or two could be where the bust declares itself.
Remember, it’s not about buyers vs sellers; it’s about sellers vs sellers.
- vreaa

Maple Ridge – Renter Comes Out Ahead Of Buyer/Seller Over 5 Years

vreaa — Thu, 26 Jan 2012 02:58:23 +0000

“We are all renters. That’s what I said to the nice bank lady when she gawked at my account balance. I explained, five years ago my buddy teamed with an investor to make the down payment and bought a house in Maple Ridge @ $335,000. The payment was $2000/m and he had a mortgage helper for $500/m. Since, he has reno’d the deck for $10000 and payed five years of tax totaling $10000. He also bought a water heater and paint for $1000. At the time, he bugged me to buy, but I rented and banked the difference between our two payments. I paid $700/m. and banked $800/m
Five years later, he wants out and intends to rent again. He can get $400,000 for the property. Principal owed is 310,000. The gross profit is $90,000
Deduct, 3% agent fee going in and out.
Deduct the interest portion of mortgage payments he covered
Deduct operating expense and property tax
Deduct 50% of the mortgage helper as taxable income
Pay back the downie investor principal plus 5%.
Gross profit on the house experiment $90,000
less expenses
balance =
$29,000 for five years rent isn’t too shabby, I told him, however expenses ate up any additional savings. And if he does not buy another place in a year, deduct tax on the capital gains for this year. An accountant might dispute my calculations but I think it’s pretty close. I did not include credit card interest, though my friend has been cash poor throughout the experiment.
In the same five year time period, I banked $48,000 rather than pay mortgage interest, with no fear of capital gains tax and no operating expenses, which I also banked. I may not be a millionaire, but I am happy with my lifestyle and enjoy west coast amenities without worry.
I wanted to share this experience, because I have been reading the VREAA blog and comments rent-free for some time and felt the need to pony up. Thanks.”
- sage at VREAA 24 Jan 2012 5:01pm

Froogle Scott – “Some interesting comments from our banker this morning. They’re wondering what might happen if prices go down 20 or 30 percent.”

vreaa — Wed, 25 Jan 2012 14:00:18 +0000

“Some interesting comments from our banker this morning. My wife and I were in the bank switching our variable rate mortgage to one of the low fixed rate mortgages the banks began offering last week. (The switch is a bit of a gamble, but not one with a lot of downside risk.) Our banker said that because we have a good credit rating, we could also apply to have our HELOC credit limit raised and we’d be approved. But as of two weeks ago, customers with a ‘C’ rating, if they want a raised limit, must have their house reappraised, at their expense, and also provide a proof-of-income letter from their employer. I asked if this was because the bank was getting worried about house prices. Our banker said, “Yes. They’re wondering what might happen if prices go down 20 or 30 percent.” She then went on to say that my wife and I are among the few clients who have been significantly paying down the principal on their mortgage. A number of her clients have been “bumping up,” and she feels some of them could be caught if the market drops.”
“Interesting on several levels. The bank quietly enacting some defensive measures. Clients with good credit and steadily shrinking mortgage balances — i.e., ‘safer’ — invited to increase their credit limit. 20 or 30 percent – her numbers, the ones that I assume are circulating in the bank at the moment. Plenty of people still increasing their debt, fiddling while elsewhere Rome burns, assuming the flames will never reach them, or not even aware there’s a fire. As for credit rating, apparently all it takes to get on the bank’s shit list is a couple of missed credit card payments.”
- from Froogle Scott, via e-mail to vreaa, 24 Jan 2012

Interesting. Many thanks for the story, Froogle.
If prices do fall 30%, what’s to stop them falling 50%?
Do we expect there to be buyers stepping in at 30%-off levels given what such a fall is likely to do to wages, the economy, lending criteria, and sentiment? We will have lost all momentum buyers, of course. And would we expect value buyers to step in when prices, albeit lower, would still be significantly overvalued by fundamental measures?
—
PS: All Froogle Scott fans will be pleased to hear that he is, in his characteristic painstakingly thorough fashion, putting together an analysis of the actual cost of home ownership. He plans to share this with us soon. We eagerly await it.
- vreaa

Excessively Indulgent Expensive Fast Food And Its Relationship To Asset Bubbles

vreaa — Wed, 25 Jan 2012 07:08:06 +0000

“A small storefront on Vancouver’s Granville Street is the home of a rare gourmet treat — the $100 hot dog.
And it could soon be in a small storefront near you.
Dougie Dog is owned and operated by Dougie Luv, who is as ambitious as some of his menu items are exotic.
“We want to expand across the country, we want to share the love,” said Luv. “Why should Vancouver be the only place with the greatest hot dog in the world?”
So, what’s with the $100 doggie, Dougie?
Luv explains that this is no ballpark tube steak. It contains Bratwurst, Kobe beef, truffle oil, a dribble of $2,000 cognac and some Atlantic lobster.”
- from ‘$100 hot dog on Vancouver menu’. CBC, 24 Jan 2012

Reminiscent of:
“In what might now be forever known as the “War of the Burger Prices”, the Wall Street Burger Shoppe has just raised the price of their burger to $175, to ensure their place as New York’s most expensive burger. And no, you’re not seeing things. The (burger) is sparkly and gold because their burger is topped with gold leaves. According to Reuters:
The burger, created by chef and co-owner Kevin O’Connell, seeks to justify its price with a Kobe beef patty, lots of black truffles, seared foie gras, aged Gruyere cheese, wild mushrooms and flecks of gold leaf on a brioche bun.”
- ‘America’s most expensive burgers’, Huffington Post, 28 May 2008, shortly before Wall Street imploded.

File under: Socionomics.
We’re sure that industrious readers could find us examples of similar flavour excesses from 1999 and 1929. – vreaa