“My best guess: this property is now an ‘investment hold’ and will be built ‘when prices recover’. Good luck on that!”

“The dominos start to fall: SFR Project on indefinite hold in Van West!
This is a property I have been watching for some time: 4988 Chancellor Boulevard in University, Vancouver West. A 7,700 square foot lot with an old house in an exclusive area of mostly older homes, with a few new builds. Sold under MLS V951758 in June 2012 for about $2,600,000 listing was at $2,688,000; by June 2012, properties in Van West were already coming under some price pressure. After it was sold, a sign appeared on the site, advertising a new 4,500 square foot modern architectural home to be ‘built in 2013′ with completion by 2014, priced at $5,188,000 under V989612 still active, but listing now says ‘completion in 18-24 months’. However, after about 6 weeks the sign disappeared and from June 2012 through last week the house was vacant and there were no signs of construction. Then last week April 10, several large U-Haul trucks arrived and a pickup toting a boat. Now, there is furniture in the house, a new ‘beware of dog’ sign on the front and from the shoes outside the front door, it appears it has been rented to a family plates on vehicles are BC. Normally, a family doesn’t move lock, stock and barrel into a house on a month-to-month tenancy, so I’m guessing they have a longer lease, but I cannot find a rental listing. The developer of the new house, Natural Balance Premium Home Builders, does not list this house on its website and the purported architect, Frits de Vries’, website does not mention this project.
My best guess: this property is now an ‘investment hold’ and will be built ‘when the prices recover.’Good luck on that!”
- RFM at VCI, April 15th, 2013 at 7:37am

Man Loses $745,000 Vancouver Condo Deposit

“A man who put down and then lost a $745,000 condo deposit when he failed to complete the sale can’t get his money back, says a B.C. Court of Appeal ruling.
Afrasiab Amiri agreed in 2005 to pay a 25 per cent deposit of $745,325 for a $2.9-million condo in the Erickson development, located on the oceanfront on False Creek, before construction was completed.
The condo sale was valued at more than $3 million after the developer agreed to install limestone floors, which increased the price by $71,300.
The balance of the purchase price was to be paid on closing, but the purchaser did not secure financing to complete the deal by the contract deadline.
The seller refused further extensions, and relying on the terms of the contract retained the purchaser’s deposit.
Amiri filed legal action, claiming the seller was in breach of the contract. He sought the return of his deposit, contending the contractual terms calling for its forfeiture were invalid.
The trial judge rejected Amiri’s claim, and on Tuesday three judges of the B.C. Court of Appeal upheld the lower court’s ruling.”
- from ‘Man loses $745,000 deposit after $3-million Vancouver condo deal fails: court’, Canadian Press, 9 Apr 2013

It’d be interesting to know why “the purchaser did not secure financing to complete the deal by the contract deadline”.
Was it for reasons specific to the individuals economic situation, or was it because the market value of the property had plunged and no lender would consider making the loan?
- vreaa

Graphic – Degrees of Housing Overvaluation in Canada

- forwarded to vreaa via e-mail by ‘B’, 13 Apr 2013; original source of graphic as yet unknown to us.

The Rare Individual With A Negative Ownership Premium

“I love moving. The longest I’ve ever lived in one apartment is 3 years. I usually move every year or two. Sometimes I move after only a few months. Some of my moves have been because I was renovicted by the landlord. Sometimes I move because the landlord never does repairs and I am sick of taking him to the RTB. But even if there are no problems with the apartment, I’ll start thinking about moving after one year. After two years in the same apartment, I start getting really antsy to move. Real estate bubble aside, I could never buy real estate because I could never commit to live somewhere long term. I don’t really understand how people do it? Don’t they get bored with their homes after a few years? Don’t they get tired of looking at the same view every day for years on end?”
- perma-renter at VCI January 22nd, 2013 at 4:31 pm

Advice Regarding Renting In Vancouver, Please – “Unfortunately, the Vancouver rental stock is absolutely atrocious. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income.”

“..reading this blog I’m glad to see there are many others like me who eschew real estate and prefer to rent. My wife and I are in that camp. We moved from TO to Vancouver about a year ago, so our perceptions of the Vancouver rental market are pretty uninformed. Currently, we are looking to upgrade our rental from a small 1-bedroom, downtown apartment to something larger (a detached or 2+den apartment >1,000 sf) and within good distance of rapid transit (or at least what qualifies as transit in the rainforest). Unfortunately, the Vancouver rental stock is absolutely atrocious (at least compared to what I was used to in Toronto). Just browsing Craigslist or Kijiji becomes depressing – a large number of “garden” (re: basement) suites, or just places in serious need of some TLC. It just seems like every landlord is looking for someone to pay 100% of their mortgage on a crappy place through rental income (so much for their faith in real estate appreciation, eh?). Another challenge for us is finding a place that will except our small dog – our own doing, but she’s part of our family. Love to hear how others are fairing in their rental hunt.
Where do you guys look to find good rentals in the city? Do you use an agent? Any blogs you can recommend for people like us to share our thoughts on the rental market?”
- rent_vancouver at VREAA 11 April 2013 11:01pm and on

“I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island. Compare to Vancouver. It simply doesn’t compute.”

“I just visited Manhattan for a week, and happened to snap some real estate ads on both the Upper West and Upper East sides of the island (both very affluent areas). Compare these prices for these apartments, located in the heart of the one of the world’s most important metropolises with all the employment opportunities that go along with it…. to how far one’s money goes in Burnaby, Downtown, etc. It simply doesn’t compute.”
- from ‘L’, via e-mail to VREAA, 8 Apr 2013

Ben Rabidoux In Vancouver Next Week

Ben Rabidoux has asked me to let readers know that he’ll be in Vancouver next week, giving a talk on housing and the economy. It takes place Thursday April 18th, 4-5pm. More info here.

Those readers you who don’t know Ben will find his analysis thorough and thought provoking. We have featured his opinions here on numerous occasions.
His website is ‘The Economic Analyst’. Take a look at his latest article ‘Canadian housing and economic trends: The good, the bad, and the ugly’ [9 Apr 2013]. Excerpt:
“Things have gone from bad to worse in Vancouver, where sales remain very weak (March sales were almost 20% below an already-weak 2012 level) and existing MLS inventory remains elevated. To add insult to injury, the backlog of unsold new homes is growing, units under construction remain high, and the strong population growth needed to absorb all this inventory is nowhere to be found. It’s going to be another rough year for Vancouver, but on the bright side, we can expect the y/y comparisons to get more favourable throughout the year. Vancouver sales fell off a cliff in late 2012. It’s quite unlikely we’ll be seeing 20-30% y/y sales declines come late summer given how depressed sales were last year. So you can bet the real estate board will be waiting anxiously to put their always-positive spin on that.”
—

“The mortgage company told me they were calling in my 40-year, 0-down mortgage. I have paid nearly sixty thousand dollars towards it, but, nearly five years in, I have yet to touch the principal.”

“There are few other words out there that carry the sense of shame and failure that “bankruptcy” and “foreclosure” do. They are words about having commitments that you couldn’t meet; they are words about loss.

They also carry judgment, don’t they? As though if you go bankrupt it must be because you went to a five-star resort with your lover, spent money you didn’t have on extravagant things. And foreclosure? Well, that’s just the little matter of losing your family home. Of sitting down in the living room and pulling your children close and saying, “We’re going to move, my loves, because Mama can’t pay the mortgage anymore.” Bow your head in shame.

So you can imagine how shredded I was about a month ago, when those words blew into my life, when the house of cards I had so carefully constructed over the last eight years came crashing down. I had constructed it after my marriage split up, when as a single mother-of-two, with a high school education and no work experience, I moved back to Canada, tried to find a job, found one, then bought a little home, and then got laid off, and started university full-time. All the while, I was eyeing nervously the fiasco of my finances and hoping like hell we were going to make it to solid ground. You can imagine that when the house of cards finally collapsed, I was devastated.

And I was shocked. Because in my mind, we had just made it to that solid ground. I got through university, I got a wonderful job. But then the tidal wave I’d been running from for the last eight years crashed over me still.

I had had a sense it might. It was the accumulation of all that time out of work, all that time in school, all those months in which I bought the groceries and school supplies on credit cards, all those late payments.

Seven times in the preceding two years I had approached the bank that held the lion’s share of my credit card debt and asked them to reduce the interest from 20 percent to something more manageable, something more like 10. I explained that I had been laid off, that I was now not only a single mom but a full-time student, living on student loans. I explained that I was trying my best to pay it off but I couldn’t even make a dent in it with interest that high. Seven times they turned me down. The last time I met with a bank officer, she told me to make all my payments on time for a year and then come back and she’d consider it. I shuffled off, head bowed.

And then the mortgage company told me they were calling the mortgage – a forty-year-mortgage with no money down, made back in the day when you could still do that. I have paid nearly sixty thousand dollars towards that mortgage. Nearly five years in, I have yet to touch the principal. Get a new lender, they told me or come up with the pay-out amount, the same amount of money I borrowed initially. Impossible. I cried.

For a week I walked around numb, as though everything I had been fighting for, so hard for so long, had just collapsed. Vanished. As though I had lost my children their home. I couldn’t believe, I told my boss, sobbing, that after all that effort, everything had all fallen apart in the end. I told her I had always been afraid I was going to die alone and be eaten by dogs and here I was – losing the house. I can’t believe, I said, I can’t believe it ended this way.
My boss held up her hand. “Hold on,” she said.”The dogs haven’t gotten you yet.”

And with that I entered into a long period of stillness, and when I emerged I went to a credit counseling place, where they took one look at all my debts and my non-existent assets and went straight to suggesting I declare bankruptcy. And then I went to a bankruptcy trustee who suggested exactly the same thing. He reviewed what that would mean for me.

“I have been paying a thousand dollars a month in credit card debt,” I said, “for more years than I can count, and I haven’t even made a dent in what I owe, never mind that I’ve paid the debt some four times over. And you’re telling me that I can pay less than that, a lot less than that, for 21 months – and then this is over?” He nodded. “Do you just make people happy all day long?” I sniffled through the tears. He said, “If it feels this good to you, you know it’s the right thing to do.”

I keep thinking I should have done this two years ago. But I kept going, kept borrowing, kept paying, kept trying, month after month. And I kept doing that for two reasons. For one, it’s the right thing to do, isn’t it? You borrow money, you pay it back. For two, there was shame. To admit defeat would be to admit failure, would be to announce to myself and the world that I couldn’t cut it.

Now I feel like, hey. I accumulated that debt to take care of my family, and I am grateful for it. And I paid that credit card debt four times over. The bank is NOT getting ripped off here. They’ve done just fine by me. And my house? We loved our little house, it has been just lovely for us. And now it will be just lovely for some other family who needs a home. We’ll find another little house, or an apartment, and we will make it fine for us, too.

Eight years ago, I grabbed my kids and carried them through a whirlwind of challenge and uncertainty. I got us to solid ground. The tidal wave may have crashed over us, but all it did was wash away the wreckage of the past. We are on terra firma. And we are free.”

- from ‘Going Bankrupt’, by Kyla Hanington, The Sunday Edition, CBC Radio, 7 Apr 2013 [hat-tip 4SlicesOfCheese]

‘Vancouver City Hall: Housing Report Card 2012′; Plus Revised Version

The following ‘Vancouver City Hall: Housing Report Card 2012′ appears at VanCityBuzz 8 April 2013.
The cheekily truthpacked revised version below that is from a source that is as yet unknown to us (but was passed on via e-mail by ‘B’, 9 Apr 2013).

“My folks find themselves at 65 still owing half the value of their home and recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it.”

“My folks have owned in South Surrey since the mid-70′s, mostly in just two locations, but in their empty nest years yo-yoed between downsizing and re-upsizing to various condos, townhouses, duplexes, etc. trying to ‘find the right fit’, and all of a sudden they find themselves at 65 still owing half the value of their home + recreation property to the bank. After almost 30 years of ownership in the BPOE and a number of boom markets, they have very little to show for it and dad will keep working until the debt is paid before considering retirement. Now they are talking of selling and renting, which I have encouraged them to do, but they would feel ashamed in their peer group to ‘stoop’ to that.”
- Dazza at VREAA 6 April 2013 11:05 am

“Rent for $2,200 a month or buy and have a mortgage of $4,310 per month. Why would anyone buy?”

7541 Kerr Street, East Vancouver (Fraserview)
2518 sqft SFH on 45×110 lot

“We considered renting this SFH a few months ago. It stayed on the market for a few months, looks like the landlord never got any tenants (rent went from $2500 to $2200) and today when I walked by – - it’s for sale for $999,999! Gee… tough choice, rent for $2200 a month or… buy and have a mortgage of $4,310 per month (based on 3.09%, 25 year, 100k down). Why would anyone buy?
Thanks, I think we will remain renters until prices come back down to earth. Or never buy in Vancouver.”
- pricedoutfornow at VCI 5 Apr 2013 7:38pm
—

Think of this situation like this:
This landlord can’t find anybody who will pay $2,200 per month to actually use the house as a home, but they are hoping to find somebody who is prepared to pay over $4,310 per month to make use of the house as a financial instrument, by using it to bet on increasing prices.
The house’s fundamental value is that which one could calculate based on a yield of less than $2,200 per month. The speculative market has been valuing it at substantially higher than that. As the speculative mania unwinds prices will fall to reflect fundamental values.
- vreaa

“They were talking about two couples they knew who had recently bought a lot and planned to each build a house on it and live as neighbours.”

“I was in a Starbucks in Kits today listening to two very Vancouver ladies talking RE. They were talking about two couples they knew who had recently bought a lot and planned to each build a house on it and live as neighbours. These ladies were concerned because one of the couples were heavy pot smokers. They wondered how the other couple would feel having clouds of dope smoke wafting in through the open windows on warm summer evenings. I just looked at my wife, who had been listening intently as well and whispered TWEB (This Will End Badly).”
- lexlimo at VREAA 4 April 2013 7:17 pm

Greater Vancouver Home Builders’ Association Annual First-Time Buyer Seminar Attendance Plummets

“The Greater Vancouver Home Builders’ Association presented its 19th annual free seminar for first-time homebuyers in Surrey on March 19. This event is the largest of its kind in North America, drawing aspiring homeowners from virtually all Metro Vancouver municipalities – and beyond.
Attendance over the years has averaged 800. One year, registrations were cut off three weeks before the event, as 900 eager people had already signed up. Last year, attendance dipped to a tad under 600.
This year, despite significant promotion and a top-notch panel of speakers, about 500 prospective first-time buyers registered. Moreover, an audience head count revealed less than 300 attendees.
Mind you, I believe a number of external factors contributed to the attendance drop – March break, heavy rain, traffic and a Canucks game. Also, it appears the wealth of information available at folks’ fingertips kept some of the registrants at home that night.”
- from ‘A world of advice’, Peter Simpson, The Vancouver Sun, 6 Apr 2013

Thanks to RG, who sent the above link to VREAA by e-mail, and who adds:
“The interesting bit is Mr. Simpson’s rationalization that the marked drop in attendance may be attributable to, “March break, heavy rain, traffic and a Canucks game” …
Seriously? … “rain” and “traffic” resulted in far less than half of the typical numbers of potential first-timers from seeking critical purchasing information? Wow.”

Mom and Pop Get It Wrong In All Markets, Time And Again

“Villa and White felt “sucker punched” when stocks collapsed in 2008, he reports. The crash “wiped out half their savings.” They sold out of stocks, put their money in the bank, and “swore off stocks,” presumably forever.
Last month, as the Standard & Poor’s 500 index surged to new highs, they hired a new financial adviser and plunged into the stock market again.
The problem with Villa and White isn’t that they are unusual but that they are absolutely the typical American investor. Both of them are doctors, meaning they are presumably intelligent and educated. And yet they insist on investing like absolute fools.” …
“They buy high, sell low, and the ending is predictable.” …
“Share prices fall because there are more sellers than buyers. They rise because of the reverse. So mom and pop investors like the Villa-Whites rush to dump their stocks because they see the market plummeting, oblivious to the fact that the only reason it’s falling is because people like them are rushing to dump their stocks.”
- from ‘Mom and pop: The world’s worst investors’, WSJ Marketwatch, 4 Apr 2013

And so it is with all markets.
Regular folks (in the case of RE, the vast, vast majority of market participants) fell in love with Vancouver RE when prices started running up, became more and more adoring as they ran up more, and were most infatuated at the frothy peak (at the very time they should have been most wary). It is this crescendo of infatuation that drives speculative manias to their ridiculous heights.
As prices fall folks will become less enamoured, then discouraged, then disgusted by local RE, and when the most people are the most disgusted, it’ll be a sensible time to buy.
It’s not rocket-science, but it is emotionally very, very difficult to be a contrarian, and to take a position that is the opposite of that of the crowd.
- vreaa

The average British Columbian homeowner is not going to pay off their mortgage by the time they retire.

“The average Canadian homeowner doesn’t think they’ll be mortgage-free until they’re 57 — two years longer than what they expected last year, a survey by CIBC suggests.
The survey also found that half of those surveyed said other debt, from credit cards to lines of credit, have increased and impeded their ability to pay off their mortgage more quickly. …
The report released Friday also found those in British Columbia expected to be the oldest at 59 when they have paid off their mortgage, followed by those in Manitoba and Saskatchewan at 58. …
Colette Delaney, executive vice-president of mortgage, lending, insurance and deposit products at CIBC, said that the longer someone has to hold a mortgage may mean the less savings they have for retirement.
“Being mortgage free sooner can help accelerate retirement savings, but carrying a mortgage into your late 50s can have the opposite effect and make it more challenging to reach your long term savings goals,” said Delaney.
- from ‘Canadian homeowners don’t think they’ll be mortgage-free until they’re 57′, Canadian Press, 5 Apr 2013

Let’s simply face it that the average British Columbian homeowner is not going to pay off their mortgage by the time they retire.
In a closely related sense, locals are overdependent on their RE holdings for their retirement funding, and are at high risk of their retirement plans being severely hobbled by coming RE price weakness.
- vreaa

“He’s sold all his properties except his current one, which is now for sale. He explained that the market’s currently in crash mode, worst that he’s ever seen.”

“Just spoke to someone in the neighbourhood, real estate came up and it came out he’s invested in real estate over the last 15 years, buying dumps and fixing them up and flipping them. Has done this multiple times I was thinking oh no, this is going to end badly, then he told me he’s now retired and I thought even worse… Then continued to say he’s sold all his properties except his current which is currently for sale and explained that the market’s currently in crash mode, worst that he’s ever seen. He talked about 2008 and thought we were in for something far worst this time. Talked about previous declines he’s seen and thought this is going to be worst. Doesn’t follow any of these blogs. He’s getting close to selling now for about a 40K loss, and thinks he’s close to sealing the deal, but I got the impression he’d be happy taking even more of a loss just to get out.
He’s moving away from the lower mainland and buying farmland to retire on. Mentioned there are a couple others a few streets away that bought/reno’d/now trying to sell, thinks they’re already listed at breakeven and that they need to come down quite a bit more before selling. …
This was in South Surrey, I should add. Was a guy that seemed to have had some very good days in his life and has seen some very tough times…. Sounded like he was in the midst of a tough time job wise in his life in the late 90′s and is a pretty good handyman and kind of fell into the real estate thing, rode it up, and jumped off when he realized he had gained enough money to live out his life without worrying any further about money.
I was taken aback by this guy… Good for him.”
- groundhog at VREAA 1 April 2013 at 4:10pm and 4:39pm

“One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized after debt paid off $185K.”

“One of my old high school buddies finally got her mother to sell the family home in Kitsilano – sold for over $1M, monies realized $185,000. Home equity loans and “helping” out the kids does take a toll.”
- ex-kitsie at VREAA 30 Mar 2013 3:17pm

Even longstanding owners are speculating on future price strength.
- vreaa

“I know someone who just declared bankruptcy because her condo was assessed at $150k and she bought it presale north of $250k in 2005 or 2006.”

“I know someone in BC who just declared bankruptcy because her condo was assessed at $150k and she bought it north of $250k in 2005 or 2006 (presale). Tried to rent it out for the past few years but the rents kept drifting lower and lower, and the tenants stayed shorter and shorter terms (I think they moved on to better places, this is a city in BC where rents are down significantly since there was a boom-the boom is long over). She was losing more than $10,000 a year and just couldn’t get ahead. Time to hand the keys back to the bank and start over.
I hear stories like this all the time. A friend’s dad in the same city bought a house during the boom “everyone wants to live here!”. Now his mortgage is $2500/month (blue collar worker) and he tries to rent out the basement suite for $1000 a month (no takers-though it worked during the boom). The house is worth about 30% less than what he paid for it (maybe less, not a lot of sales these days).
All we have to do is look north a bit to see these stories.
Quiet suffering. These stories don’t seem to make the news but they do exist.”
- pricedoutfornow at VREAA 1 April 2013 7:55 pm

Sturdy, With Views – “Calling Froogle Scott!… Is Dr. Scott ‘In The House’?” [Not In This One, Certainly]

Poster ‘DNAspark99′, [on the forum bcsportsbikes, 22 Mar 2013 and onwards; hat-tip RE Lurker] has posted images of a ‘building’ that is under construction, with this commentary: “So, my landlord has taken it upon himself to build a ‘toolshed’. For a roto-tiller. At least, that’s the entirety of what he told us – there are, however, some inherent communication issues. (He’s Korean, and not yet well versed in English (though certainly much better than my Korean)). There’s one door so far, and a lawnmower will not even fit through it. (I don’t think he knows that yet though)
So, this is the ‘project’ thus far. For one, the ground it’s being built is mushy moist marshland – your feet sink with every step. Which is always ideal for a good foundation – or complete lack thereof.
It may not be immediately obvious, but I don’t think this man has a background in construction.
It appears he owns a hammer and saw, perhaps a measuring tape, perhaps not. Certainly nothing like a square, straightedge, or level.
I guestimate that he has seen no more than 3 episodes of various home improvement shows, and maybe at best he’s driven by a construction site atleast once in his life. After all, “How hard could it be?”

And now, in time-lapse video:

More:

A second time-lapse video [posted 2 Apr 2013], worth the watch for casual efficiency, for the horse, for the stuff falling off the roof, and for the paint-job:

“She said the market was dead in Victoria and that it would remain so for a very long time. I asked how she knew. Her answer was fascinating and should scare the pants off the real estate crowd.”

“Yesterday two old friends, J & M, from Victoria, mid 50′s, both very bright and mid level bureaucrats at separate provincial government departments came to visit us in the Comox Valley. At one point the topic moved to real estate. I began to say that the market was dead here when J interjected that it is the same in Victoria and that it would remain so for a very long time. I was surprised by her response and asked how she knew this because I know that neither of them reads any of the real estate bear blogs. Their answer was fascinating and should scare the pants off the real estate crowd.

First, both live in Townhouses and J is the head of her strata council (46 units). She said that last year about 7 units sold. This year one of the most desireable units was listed and got no inquiries at all. It was pulled. In addition one of the vendors of a unit last year did want to buy back in but could only do so with a 0/40 mortgage, which is of course no longer available. She had no idea what he had done with the equity from the sale.

Second both pointed out that their incomes have remained largely static for years but that housing prices and strata fees (not to mention special assessments) have increased relentlessly to the point where they felt prices are ridiculous relative to income. J was of the opinion that the townhouse unit in which she lives has about $60K of material in it and yet these units were until recently selling for $300k plus. She felt that the spread between material cost and selling price was indefensible. J also pointed out that despite being mortgage free her strata fees and hydro per month were in excess of $500, the better part of a mortgage payment not that long ago.

Third J said that the price of real estate would be down basically forever because our generation had had few children, overall. As a result who was going to buy our houses when we depart for the great hereafter?

Fourth both believe that the potential sales price of their own units have decreased substantially in the past year and will probably continue to decrease but they intend to stay put. They do not see any point, for example, in selling and then renting despite knowing that prices are inflated vis a vis rent.

Fifth both pointed out that they work at very large institutions and that they, of course, interact with many of their fellow employees. One of the constant topics is real estate and these days the virtual impossibility of finding buyers for the units that their fellow employees have for sale. They report that the view of the majority of their fellow employees is similar to their own – real estate is dead.

Finally, and very ironically, at least for most of us at this site, both get most of their news from CBC and CTV. Their overall impression of reports on both channels was that the real estate market is collapsing.”

- Ford Prefect at VREAA 31 Mar 2013 8:46am

Kits Notes – “I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen in the 5 years I’ve lived here that is priced below $700K.”

James writes [via e-mail to VREAA, 12 and 14 Mar 2013]:
“A couple of properties that I’ve been watching in my neighborhood with interest...

Unit #1 2482 W 8th Ave; 1132sqft; Ask $699K
Granted this is a garden suite (but a nice one at that), I’m pretty sure that this is the first 3+ bedroom property of any type that I’ve seen since I’ve lived here (5 years) priced below the 700K mark in Kits. MLS blurb states: “NO HST & PRICED $146K BELOW ASSESSED VALUE!”
History:
Nov 2012 list price: $810K
Dec – price reduced: $799K
Today’s price: $699K -> -14% in 4 months! ouch!”

“Two other units in the same heritage-tear-down-and-subdivide Kits special..

Unit #2 2488 W 8th Ave; 1331 sqft; Ask $899K
This one is great because it’s a 2 bedroom and yet priced at a full $200K above the one above…but still “PRICED $106K BELOW ASSESSED VALUE & NO HST!”
Previous list price: $950K -> I wasn’t able to find a date on this…
Current list: $899K
Price Reduction: -5.4% in 4 months. Though I bet any money that the $950K price was an interim price drop given the obvious desperation on the other units.”

“Third still listed on one site but not Realtor.ca which means that some poor sucker paid too much money or they are in the process of relisting it:

Unit #3 2486 W 8th Ave; 1197sqft; Ask $950K
3 bedrooms but $250K more than the “garden suite”. “PRICED $79K BELOW ASSESSED VALUE & NO HST!”
La piece de resistance as they say.
Previous list price November: $1,050,000 (!)
Dec price reduction: $998,000
End of Feb price reduction: $950K
-9.5% haircut on a property that the city has deemed to be worth $1,030,000.
If it did sell, I would bet money it was NOT at $950K and therefore was probably -10% below assessed value at the time of sale. I’m sure all the other people on that street that are trying to sell , and there are a number of them, are not thrilled with this…”

“So, total $110K + $100K + $50K = $260K of assumed profit vaporized in 4 MONTHS.
Further, I managed to stumble across cached web pages with original purchase price of the property that was sold in May 2008 and subsequently torn down and replaced with the 3 “heritage style” Kits units above.
The original house looks like it was sold back in 2008 for $1.388M. Here it was then:

“I’m certainly not well versed in what it would cost to tear down to the foundations and then some, rebuild, subdivide and then flip a ~4K sq ft home like this, but an educated guess would be somewhere around ~$2-2.3M total for the 3 units once it’s all said and done including costs to sell each unit.
For the original list prices that WOULD have worked out to ~$500K profit. I didn’t consider cost of carrying the original mortgage since I’m not sure how these things work for developers, but 5 years of interest would be significant on a $1M+ mortgage.
Current list prices that profit drops to ~$200K.
And that’s with an assumed 1 out of 3 units sold and the nicest unit at that. No wonder they are getting desperate.”
—

Thanks to James for the above info and thoughts.
Anybody else got ideas on the math on a development such as this? -vreaa

“A beautiful Belfast home, in the equivalent of 1st Shaughnessy, bought at their RE peak in 2007 for £3.5 million, has now sold for £800K, almost 80%-off. The market didn’t suffer any significant economic shocks. Rates & unemployment didn’t skyrocket. They didn’t build more land. Sentiment just changed and the prices fell and fell.”

“My old high school pal works at a Belfast, Northern Ireland newspaper – The News Letter – I believe it is the world’s oldest, continuously published paper. Unlike Vancouver journalists he regularly wrote “this is a bubble” articles during the incredible real estate boom that Belfast endured. It was at LEAST as extreme as the 2000-2012 Vancouver bubble period. Their bubble burst in 2007 and real estate has been a taboo topic at middle-class dinner parties ever since. I must say, my return visits have been much more enjoyable since people there stopped crowing about their real estate winnings.

Anyway, his latest of many articles highlights the plight of the owner of a beautiful home bought at the peak in 2007 for £3.5m. The area is the equivalent of 1st Shaughnessy. It has just sold for £800,000, or [almost] 80%-off. I must stress that 80% is not indicative of the average market which ONLY fell about 55% from peak.

Why this is relevant is that the Northern Ireland market didn’t suffer any significant economic shocks. Rates didn’t skyrocket, neither did unemployment, there is a huge percentage of people there who have safe government jobs with pensions. They didn’t build more land; and for those who don’t know the geography, Belfast is surrounded by the Irish Sea and an agriculture land reserve where there isn’t sea.

Sentiment just changed and the prices fell and fell. I will also add that my friend was considered a kook when he quoted the rare economist who called for a massive price correction. People just couldn’t conceive of such an outcome.

If you’re interested in the article it’s available here.”

- Ulsterman at VCI 29 Mar 2013 9:38pm
—

A story for Vancouver RE market observers that requires no commentary.
- vreaa

“Two family members of hers are trapped, underwater, in condos on the East Side.”

“My new business partner & I were talking about office space and got to talking about the cost of RE, as always seems to happen in this city. I don’t like to bring it up having been contrary for so long, but it does come up anyway, and I get a pained look on my face. Anyway, happily, we had a shared moment of agreement about renting. My partner hasn’t done extensive reading in RE, having decided it was “a ponzi scheme”, but had a simple story that she felt proved her out. Two family members of hers are trapped, underwater, in condos on the East Side. One is looking at assessment or maybe maintenance increase? and wishes to move because work situation has changed and he’s commuting to Surrey. The other has too little room for a growing family and is thinking of moving out, renting space, and putting their condo up for rent … “if they can get enough to cover the mortgage”. We both pulled a face at that. Seems unlikely.”
- Absinthe at VREAA 27 March 2013 7:59 pm

“Interprovincial migration is not saying good things about BC’s economy.”

- the above table via e-mail from ‘JJ’, 27 Mar 2013. Thank you, JJ.
JJ adds: “Did you need another reason to be bearish on Vancouver real estate? I’m guessing not but here you go anyway. Interprovincial migration is not saying good things about BC’s economy – looks like net international immigration ticked up slightly in 2012 (+1000 or so vs. 2011) but this was more than offset by departures to other provinces.
Q4 was worse than the year as a whole and suggested an annualized rate of negative ~13,500 or something along those lines.”

These figures reflect (1) paucity of good employment opportunities and (2) high cost of living (especially, of housing). Ask any migrant.
- vreaa

Vancouver RE: Not As Expensive Provided You Don’t Think – “It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.”

The following excerpts from ‘Vancouver: Not as Expensive as You Think’, Jim Sutherland, Vancouver Magazine, 1 April 2013 [no joke -ed.]:

“The real estate market is soft, and it’s going to get softer. In the last year, average prices have dropped five percent or so, and they’ll sink some more, guaranteed. Less certainly, the market will…not plunge American-style but rather drift, sometimes downward, sometimes sideways, and perhaps not for very long.” …

“… the Cassandras have gained the upper hand lately, and looking at some of the numbers it’s easy to see why. Sales running at only two-thirds the normal pace. Lots of dwelling completions due this year. Historical norms that are way out of whack. The unreasonable chunk of average income that buying a house here requires. Rents that stack up well against buying. Then again, there also exist other, less ominous numbers, some of which will be revealed here for the first time.” [What cheek. MOI has been well know in local RE discussion for years, thanks to the work of jesse (YVRHousing) and others. - ed.]…
The mystic metric is called months of inventory, which is the number of homes for sale divided by a given month’s sales. When the MOI is neutral-around six or seven-average prices change little. Below six, prices rise. And an MOI in double digits results in lower prices. The formula works so reliably, it’s bizarre. … Long before prices respond, anyone willing to make a simple calculation will know.” …

“Of course, the mild price drops currently predicted by MOI look nothing like the armageddon forecast by those who believe we’re in a real estate bubble. Why not a U.S.-style meltdown here? The reasons are many (shortage of land, solid financial institutions, impressive livability, fiscal health, low mortgage rates…) even if far from categorical. A major safeguard is the provincial economy.” …
How can this be the case when so many sectors are in trouble? Film production, gaming, life sciences-so much for the halo industries that were going to make us a post-industrial poster child. But at the same time, a lot of industries are thriving. … (goes on to list lumber, mining, pipelines)…
TEDtalks, HootSuite, Plenty of Fish, and Lululemon sure sound like storytime selections at the daycare centre but actually mint money while helping to define the 21st century. Fortunes can be fickle out there on the cutting technical-entertainment-design edge, as a prior generation of civic champions like Angiotech, Electronic Arts, and Ballard Power Systems proves. Still, it’s an indication that at least some cultural creatives can afford to live here. So the local economy is almost certainly going to be just fine, which will help keep the real estate market from crashing, regardless of all those micro-metrics.” …

“The monster that threatens to swamp us is declining immigration-and in Vancouver that’s the worst thing that could happen to property markets.” …

“But why, one might reasonably ask, are immigrants to Vancouver so fixated on buying real estate? Isn’t it foolish to dive into such a pricey market? Reasons have to do with everything from cultural predilections to the perceived riskiness of other investments; from the apparent solidity and performance of our property market to the essential nature of being adrift in a foreign land. But beyond all that, the fundamental explanation is straightforward: especially to immigrants from Asia, real estate in Vancouver doesn’t seem expensive at all. In fact, it’s pretty cheap.” …

“One [analysis], by the Serbia-based crowd-sourced website Numbeo.com, comes up with house-to-income ratios very similar to Demographia’s but analyzes 362 of the world’s largest cities in more than 100 countries. On Numbeo, Vancouver sits not second or even 25th, but as the 125th least affordable city in the world. Our price-to-income ratio is about one-third that of Chinese cities such as Beijing, Shanghai, and Shenzhen and comparable to or cheaper than most other places where Chinese emigrants might reasonably expect to land. Potboiler settings like Moscow, London, Paris, and Tokyo are up to twice as expensive, while secondary but still global cities such as Sydney, Melbourne, Amsterdam, Stockholm, and Barcelona-the kind that join us on livability surveys-are tightly bunched around us in terms of affordability as well. Comparable American spots like Seattle, San Francisco, and San Diego are a little to a lot more affordable, but prices in the U.S. recently experienced a catastrophic plunge and are now bouncing back strongly, even as ours soften. It’s clear that our perception of affordability has been coloured by living on a continent where housing is unusually inexpensive.” [...and why shouldn't our housing be inexpensive? -ed.] …

“None of this means that housing affordability isn’t a problem in Vancouver. We know that mortgage payments are taking up too much of our income, that young people discouraged by the high cost of entry are leaving town, and that the situation isn’t sustainable. We also know that prices are currently falling and that the MOI the formula says they will drop some more. But unless we lose status as a global magnet or immigration is otherwise reined in, a real estate environment akin to that of other Canadian cities or currently depressed American ones is not a realizable dream.”
—

See below for one reader’s impressions of the article.
Personally, we won’t attempt a comprehensive analysis at this moment.
The author deserves credit for listing evidence that Vancouver RE is overextended and some of the negative effects of high RE prices. At the same time he also throws in many of the mythical reasons for ongoing relentless support.
One critique I would offer is that there is a strong possibility that the BC economy has only seemed relatively resilient because of the RE spec mania (and all its knock-on ‘positive’ multiplier effects), and thus using apparent BC economy resilience as a reason for ongoing future RE strength is a circular argument. We still believe that our economy will suffer badly when our RE inevitably reverts to mean.
Another thing: why shouldn’t our RE be as inexpensive as places such as the US?
- vreaa
—

Regular reader ‘space889′, alerted us all to the above article with the following [edited] comment at VREAA 23 March 2013 at 10:19 pm:

“OMG!! You have to profile this!!! I just flip through April 2013 issue of Vancouver Magzine’s cover story about Vancouver RE. It is simply unbelievable the extent to which they try to convince people that Vancouver RE is still cheap by global standards. Two things stuck out for me -

“The first is a map of Vancouver, Burnaby and North Shores redraw with new neighborhood names like – Hanoi for most of Burnaby, Macau & Kew Gardens for UBC, Downtown Abby for Cambie from Broadway to 41st, and then North & South Yorkshire from 41st to Marine Drive, Queenstown and Gaslamp Quarter for North Van, and Brighton, Monte Carlo, Chamonix Mount Blanc for West Vancouver. Unbelievable!!”

“The second is they tried to dispel the myth that Demography Survey tries to peddle that Vancouver is expensive by world standards. They gave these reasons why you shouldn’t trust that survey. One the survey only included 7 countries and excluded most of the world including Asia, Africa and South America. Second the backers of the survey is an ultra conservative right wing think tank that opposes any idea to moderate car use. As a counter example, they used data from a Serbia-based crowd-source website that shows on a price to income ratio, Vancouver is cheap, cheap, cheap, especially compared against world class cities.”

“Further, in a comparison they claimed to show that a desirable house in 7 cities with higher price to income ratios – Phnom Penh, Rome, St. Peterburgs, Tel Aviv, London, Mexico City, and Melbroune – all require you to spend “the same for less square footage, less lawn but more history”. However their comparison really got my blood pressure up… They do not compare apples to apples… The ‘desirable house’ in Vancouver they picked is a 4 bed 2 bath house near King Ed Canada Line station and they describe it as TEARDOWN! Let’s just let it sink in for a minute. An example of a desirable home in Vancouver is a teardown on a busy main artery road!!” …

—-

Here are the definitely-not-apples-to-apples vanmag comparisons that got space889′s blood-pressure up:

“Around the World in Seven (sic) Homes
What does a desirable (but you know, not outrageous) house look like in cities with higher price-to-income ratios? In many cases, you’re spending the same for less square footage, a lot less lawn, and a lot more history.” [P:I ratios cited appear to be median city home price to median city income, not related to the specific properties. -ed.]

More Undisclosed RE Industry Insiders Publicized As Clients – “In 1995, Allan and Karin Hoegg were mortgage-free. But no more. Today their Vancouver home is a valuable source of income as they plan for full retirement.”

Allan and Karin Hoegg are pictured in their home in Vancouver, British Columbia on March 8, 2013 [image F.Post]

“In 1995, Allan and Karin Hoegg were mortgage-free. But no more: today their Vancouver home is a valuable source of income as they plan for full retirement.
Allan Hoegg says when their son and daughter-in-law wanted to buy a house, they took out a variable-rate mortgage so they could help them out. “We wanted to take advantage of the stability of the current rates.” To cover the mortgage payments, they rent out a suite in the home to students.
The couple also established a home line of credit that allows them to free up cash for investment purposes when they need it. “It gives you maximum flexibility and you can pay it any time you want without penalty,” he says. “It’s dead easy.”
Like many people planning their retirement, there’s a sentimental side to keeping their home, he says. But there are just as many practical reasons. In the Hoeggs’ case, selling to downsize would mean substantial commissions and moving costs. “Besides, real estate is a very good investment in Vancouver,” he says. “The longer we can stay here, the greater the possibility of no-tax capital gains.”

“For the most part, people want to stay in their homes, says Rob Regan-Pollock, senior mortgage consultant with Invis – Team Rob Regan-Pollock mortgage brokers in Vancouver. “The fact is they’re sitting on a big nest egg. So when they get near to retirement, they start asking how they can use that equity to help them in their retirement.”
There are plenty of options to consider, from applying for a line of credit or reverse mortgage to renting out your property to finance your monthly costs at another residence.
A line of credit is the most flexible option, Regan-Pollock says. “If for some reason you can’t meet your monthly expenses, a line of credit on your home can be a very good buffer. The interest rates are low — typically prime or prime plus one per cent, depending on the institution and your qualifications. It’s also quite sustainable, since your home will often appreciate in value more than the amount of debt being drawn down against it.”

- from ‘Home is where the retirement money is’, Denise Deveau, Financial Post, 13 Mar 2013

Comments from ‘Bo Xilai’ below the FP article, 27 Mar 2013:
“Denise, why didn’t you mention Allan Hoegg works for Invis – Team Rob Regan-Pollock mortgage brokers. Of course he’s going to use his house as an ATM… he’s just eating his own cooking. And at the same time you’re interviewing Rob Regan-Pollock as an “expert” in your piece. http://www.teamrrp.com/team/
More fake real estate stories using employees as plants.” …
“They used an employee of the “expert” interviewed without disclosure and, I would argue, in a deceitful manner to promote a strategy beneficial to the “expert’s” reputation and business interests.”

Allan Hoegg (top left) part of Team Rob Regan-Pollock mortgage brokers [image teamrrp.com]

[thanks to 'C', for sending news of the article and 'Bo Xilai's comments to vreaa via e-mail, 27 Mar 2013]
—

This article is interesting..
1. for the undisclosed insider publicized as client
2. for the journalist’s ineptitude or, alternatively, collaboration
3. for the retirees’ dependence on RE holdings for retirement funds
4. for the fact that such borrowings were used to purchase more RE
5. for the need for tenants in their ex-SFH to cover mortgage payments
6. for the assumption that Vancouver RE is “a very good investment”
7. for the assumption that prices will continue to rise.
- vreaa

For those readers unfamiliar with the recent high profile case of industry insiders masquerading as condo buyers, please see:
CTV TV News Featured ‘Condo Buyers’ Actually Marketers Of Very Same Condos!, VREAA 13 Mar 2013

UPDATE:
This article also headlined and discussed by Whisperer here:
‘Another media scandal from the real estate industry? News article appears to be contrived shill piece from PR company.’, 28 Mar 2013

Rumor that some OV units will be reduced by 20%.

“I’ve just had a re-freshing chat with that realtor who’s selling an investor-held unit in the Olympic Village. He told me that Rennie has applied to the City to have certain, hand-picked units at the OV reduced by 20%. This guy is very straightforward and has insight into how investor bulk buying works.”
- Posted by mac to Whispers from the Edge of the Rainforest at March 24, 2013 at 6:31 PM [hat-tip Whisperer]

Downside Weights On The Vancouver RE Market – “One of the older guys (over 60) mention to the guy beside him that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house.”

“Every Friday I play hockey with a bunch of guys who are over 55. I’m a goalie, so even though I’m not 55, they let me play – I guess it’s hard to find 55 year old guys whose knees are willing to bounce up and down off the ice for an hour and half.”
“Anyways, I overheard a conversation in the dressing room last Friday. One of the older guys (over 60) mention to the guy beside him (over 70) that he and his wife were thinking about selling their family home, and renting, in order to get some of the money that was locked up in the house. The over-70 guy nodded in approval. The over-60 guy asked if he had heard of anyone doing this before, as they couldn’t see any other way to continue to fund their retirement.”
“The over-70 guy nodded, and said “Yup, we did it a couple of years ago. We’ve been renting now for two years – we had to do it, because we couldn’t afford the property taxes each year anymore”.
- anecdote from ‘Ross’, relayed by Garth Turner at greaterfool.ca 27 Mar 2013

“Boomer retirement supply” will be just one of the factors weighing on the Canadian RE market in these coming years.
In Vancouver, there will be many other downside weights. We anticipate that the largest will be the loss of speculative buying (all buying based on the idea that prices go up will stop). Another downside weight will be the knock on effects of a shrinking RE sector (loss of jobs; loss of related economic activity; people leaving). Yet another will be the disappearance of the ‘move-upper’ market (as condo prices contract, almost all wannabe move-uppers will be stuck.. they will not provide support for townhome or SFH prices). Another downside weight will be cash flow negative properties coming to market that have only been held because prices have remained strong enough (we’d expect this to include some of the empty condos we recently heard about). Collapsing RE markets in China will have a modest direct downside effect, but also a larger indirect downside effect through the psychological impact on local speculators.
This list is not comprehensive, I’m sure readers can think of other mutually-perpetuating downside mechanisms. When a speculative mania cycle turns from ‘virtuous’ to ‘vicious’, the multiplier effects reverse.
Boomer supply will be just one of the many downside weights. Many who are reliant on paper RE wealth for their retirement fiscal health will come to market; as prices drop, some will do so with urgency.
- vreaa

“My buddy was looking to upgrade to a house in the Coquitlam area. With 200k extra for a home, that’s half of lifetime saving between him and his wife.”

“My buddy was looking to upgrade to a house in the Coquitlam area. Currently they own a apartment. Not sure if they even have than 10% down payment for a “used” single family home. The other day we were chatting and he mentioned how he wants to upgrade to all new appliances and do a bunch of renos when he buys a place. He said that I bought a house without a mortgage so I could upgrade all the fancy appliances at my place. Here is my thought: my place is in Surrey, which is 500k, for a single house. He wants to buy a house for 700k. His household income is not more than mine. If he is not overextending himself, he could easily do the upgrades. With 200k extra for a home, that’s half of lifetime saving between him and his wife. I guess no more trips and fancy toys.”
- from klin1022 at VREAA 18 Mar 2013 9:41am

Remember the good ol’ days when people used to think about an amount of money in terms of how long it would take to earn or save it?
- vreaa

“I was walking in the Fraser neighborhood yesterday, I noticed that the population, on average, seem to be composed of workers. I belong to the top 5 percent in terms of income. Nevertheless, I cannot afford any of the houses for sale in that neighbourhood.”

“As I was walking in the Fraser neighborhood yesterday, I noticed that the population, on average, seem to be composed of workers, and may be some middle class family, but I bet the average household income is below the province average. I was dressed in MEC [Mountain Equipment Co-op], I guess one could tell I did not belong to that neighborhood, and some people were giving us the strange look. Now, I belong to the top 5 percent in terms of income. Nevertheless, I cannot afford any of the houses for sale in that neighbourhood. Clear sign we are in a bubble? Are people renting the basement, the attic and taking two homestays? Are they packing 10 people per dwelling? Or are these neighbourhoods gentrifying overnight? I also noticed a huge disconnect between the new macmansions being built and the school next door. I do not mean to be disrespectful to those schools, I was myself brought up partly in an inner city and partly in a rural area where I was surrounded by very nice people. But PC aside, after talking with local educators, I do not wish to send my kids to most Fraser schools. So who are those mcmansions being built for?
- from Anonymous at VCI March 25th, 2013 at 8:30 am

“Vancouver is an urban resort whose value mostly resides in its real estate and not much else.”

“Many of these people are filthy rich and treat Vancouver as the gorgeous playground that it primarily is. These are global cosmocrats who make their money in the real business centres of the world – Hong Kong, London, New York – and then drop in here as a respite from the hurly-burly of their hectic lives. Some bought condos for their kids to stay in while they attended school here. In some cases, those children have moved on but the apartment remains.
In most cases, these wealthy purchasers are buying high-end units with golden views of the city, posh pied-à-terres that are out of reach for most of us. And they pay the requisite taxes to the city to maintain them. To which I say: What is the problem?”
—
“Are we going to start telling people that if you’re buying a condo in Vancouver you have to make sure you, or someone else, lives in it year-round? Are we going to say you can’t buy a condo as an investment property and sit on it for as long as you want before selling it for a profit?”
—
“I also find it amusing that we get so up in arms about “foreigners” buying up our real estate but think nothing of the thousands of Canadians who have poured into the United States in recent years to take advantage of the housing mess down there. Does anyone doubt that many of those same Canadians are buying those condos as investments in the hopes they’ll cash in once the market returns to normal? “
—
“You can’t say: “Oh, it’s different because we aren’t driving up real estate values in Phoenix or Palm Springs the way investors are apparently doing in Vancouver.” You either believe in a free market system or you don’t.”
—
“Whether we like to admit it or not, Vancouver is an urban resort whose value mostly resides in its real estate and not much else. And when that’s the case, you’re going to encounter the types of situations that we see now, with some buying condos as expensive business-class lounges and others purchasing them as an investment decision.
And I’m not sure there’s much you can do about it or would want to.”
—
- from ‘The ‘great unoccupied condo scandal’? Get over it’, Gary Mason, ‘The Globe and Mail’, 22 Mar 2013
—

A few ‘random’ thoughts; any reader suggestions of a comprehensive critique of the article will be appreciated:
1. How is it that local judgments of Vancouver have gone from the embarrassingly over-reaching (“Best Place On Earth”), to the other, nihilistic, extreme (“Value mostly resides in its real estate and not much else”), without touching on the intervening reality (a provincial city with a fair amount going for it).
—
2. There is the implication that we should accept that RE is primarily a financial instrument, rather than shelter. People buying and selling RE, always, it seems, at a profit: Foreigners sitting on Vanc RE and selling for a profit; Canadians buying US RE with plans to “cash in”.
—
3. Contains a common “you can’t handle the truth”-type taunt about free markets. But who is this aimed at? Who in Canada is currently taking a strong position that there really should be a completely ‘free-market’ in shelter? When did Canada last have a free market in RE? The Vancouver RE market is already far from a free market. It is a market where lending risk has been mispriced, partly by ‘emergency’ low interest rates (where no need for RE price support has ever existed), partly by tax-payer backstopping of lenders (through the CMHC), and partly by loose mortgage lending guidelines (political expediency). Yes, speculative manias occur in free markets, but they would be far more self-limiting if people and institutions were all forced to play with their own money rather than perversely cheap debt. If Vancouver RE was genuinely a free market, it probably wouldn’t have gotten to its 2008 heights in the first place (let alone its 2011 highs), and, if it had, it certainly wouldn’t have been ‘bailed out’ at the very moment when it least needed it.
—
4. The article displays the kind of hyperbole that we expect in the vicinity of bubble tops, when everything can be interpreted to be so frothy and paradigm-shifting that it’s overwhelming to some observers. It’ll be interesting to see how all these dilemmas and debates settle down after some healthy price-to-fundamental-value reconciliation.
Vancouver will still have housing and city planning challenges, but they’ll look very different once the massive speculative demand disappears.
- vreaa

“Rogers Communications is expanding into RE; aiming to relaunch website; providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.”

“Rogers Communications is expanding into the real estate business.
The mobile and cable giant has applied to become a licensed real estate brokerage right across Canada and is aiming to relaunch its five-year-old website Zoocasa.com in May as a unique, one-stop-shopping site for homebuyers.
It’s aimed at going far beyond U.S.-based property listing services such as Zillow and Trulia which have revolutionized house hunting south of the border by providing critical data that can help potential buyers assess the value of a property from the comfort of their home computer.
… The rebuilt Zoocasa site will have “the most complete list of property information that can be provided to consumers, including neighbourhood and related information,” said real estate maverick Lawrence Dale who quietly folded his Realtysellers private sales online listings site a few months ago and started working with Rogers as Group Head, Real Estate Business.”
- from ‘Rogers to step into the real estate business’, thestar.com, 25 Mar 2013

We welcome any moves that result in availability of data regarding for-sale properties.
A Zillow-like system in Canada would represent a great improvement.
- vreaa

I’m only 50 and I can just about retire if I want to, all because of a single simple decision – “When prices rebounded to their former highs, then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I sold my place.”

“Fortune does not always smile upon you twice but that is exactly what happened to me. I was not an investor when I bought my west side home in 1998. In 2009, like homeowners all over I watched my home value plummet and my paper wealth evaporate before my eyes. Because of my job situation, and other investments turned sour, I was in a pretty bad spot and considered selling my house, for fear of being completely wiped out. Fortunately, I did not sell and when prices in my neighborhood rebounded to their former highs and then rocketed another 30% higher to what I considered to be totally unsustainable levels, I decided that only a fool would pass up a second opportunity to harvest such a massive non-taxable capital gain, and in 2011 I listed and sold my place at what in hindsight was pretty much the top of the market for my area. I suffered a little during the following year, anxious that maybe I had made a huge mistake, but now two years later I can comfortably say it was the smartest decision I could have possibly made, and I can’t even begin to describe the feeling of calmness I have these days, as I watch from the sidelines as Vancouver’s RE market crumbles.
I may or may not buy back into my old hood in the future, but if I do it won’t be before prices have dropped at least 40% or more. I’ve even come to think of my action as my own personal way to “short” the Vancouver RE market. And if prices don’t revert to the mean no big deal as there are plenty of other BPOE’s to be discovered elsewhere in this big world. In the meantime I’m renting (wife and kids transitioned just fine), and sitting on a pile of cash until the time is right.
In short, my life is changed forever. Thanks to the unfortunate souls that bought my place; I’ve got big time cash in the bank and zero debt. I have extra money to invest (mostly just cash for now), money to help my kids through university (started), money to travel (done), money to take time off (done), and even money to buy a summer cabin on a lake to take the “edge” off renting (done). If all goes according to plan I should have enough to buy back something comparable to my old house in my old neighborhood, in about 24-30 months according to my best guess. If anybody can identify the downside in this scenario I’d love to hear it.
For the record I’m a regular guy that earns a slightly above average salary. While other homeowners were taking out LOC’s or spending all their monthly earnings in order to enjoy life to the max, I would apply my surplus savings at the end of each month to aggressively pay down my house mortgage and invest in equities. Life was still quite bearable and I didn’t really need all that extra stuff anyhow.
I’m only 50 and I could just about retire if I wanted to now, all because of a single simple decision. I used to think I was a bit of an oddball because I lived below my means. Now it turns out I’m a fucking genius compared to my neighbors. I’m pretty sure only a few will end up as lucky as I have.”
- ‘Good to be out’ at VREAA 24 Mar 2013 12:54am

1. Congratulations to ‘Good to be out’ for having the good sense to see the mania for what it is, and for having the capacity to act on that realization by selling.
2. Anybody who sells in even the very vague vicinity of the top will end up having done fine.
3. It is not normal, nor good for a society, that an individual should be able to retire at 50 simply via the act of selling his home.
- vreaa

The Vacant Lot of Versailles, Richmond.

- from ‘E’ via e-mail to VREAA 22 Mar 2013. Thanks to ‘E’, who also wrote:
“My husband snapped this pic at 16500 Westminster Hwy, Richmond, on his ride home from work yesterday. He dubbed it The Vacant Lot of Versailles. If you squint and tilt your head just the right way, you can almost see it.“

“I don’t think that most people think things are going to crash, just that there is going to be a slight correction, but it was amazing to me how sentiment has changed, and the fact Vancouver RE is too high was just understood.”

“Investors Group (I know, I know,) came to my office for a lunchtime seminar a few days ago. (Talking TFSAs, how to reduce your taxes, etc,). Anyway, it was open to everyone, and there was over a hundred people there. Without giving away too much about where I work, there are a few administration types, and then mostly people with professional designations or MBAs / PhD’s.
The presenter mentioned Vancouver’s Real Estate Bubble a few times, and said that everyone was talking about ‘how we are in a bubble.’ I scanned the audience each time, looking for shock or surprise, but everyone had a look of acceptance, like yes, of course we are overpriced. I don’t think that most people think things are going to crash, just that there is going to be a slight correction, but it was amazing to me how sentiment has changed, and the fact Vancouver RE is too high was just understood.”
- Yellow Helicopter at VCI, 15 Mar 2013 9:48am

“The ‘investor’ who purchased our house put it up for sale two months later, in January 1981, but the bubble had burst.”

“Ah, Vancouver. How quickly we forget. We moved to Vancouver from overseas in July 1979, bought our house within ten days the market was heating up – a fixer upper on the westside, Pt. Grey for $105,000. Totally renovated new heating, plumbing, electrical, some cosmetics for $25,000. By July of 1980 the market was on fire, prices were increasing weekly. There were no bidding wars I think it was illegal at the time, but mortgage rates were in the area of 20-21%. We decided to get out, and tried to sell the house by ourselves: first week of August listed for $235,000, no bites. Second week advertised for $245,000, some phone calls, one showing. Realized sheeple would only believe agents’ pricing. Got an agent who evaluated/listed it at $265,000. The house sold in 6 weeks for $254,000. Here comes the good part: we gave a first VTB [Vendor Take Back] non-transferable mortgage for $180,000 at 18% for one year, moved to Windsor and bought a bigger, newer, renovated house in the best neighbourhood for $125,000. It gets better: The “investor” who purchased our house put it up for sale two months later January, 1981, but the bubble had burst. He sold it just before his mortgage was due for $180,000. In one year, he lost $74,000 of his down payment plus the $26,000+ he paid us in mortgage payments, plus taxes, closing costs, agent fees for selling the property. Not counting, I’m sure, what it cost him in nerves. He who does not know history is doomed to repeat its mistakes.”
- diva at greaterfool.ca 15 Mar 2013 9:58 pm

And, to round the story out, that same property probably hit recovery in real terms over about 20 years (by about 2001 it probably would have been selling for about $500K, which is $254K in 1981 dollars, inflation adjusted).
And by 2011 the same property was ‘worth’ $1.7M, given the action of our 2001-2011 spec mania. It is now, Mar 2013, likely worth 10% or more below that (sans rebuilds etc.)
After the current bubble bursts, it’ll be interesting to see if real prices recover within 20 to 25 years (that’s what it took on average last time round).
It’ll be particularly intriguing if, in the coming trough, houses like the one described return to their inflation-adjusted 1980 peaks (in other words, about 66%-off). That’d be really cute, and something that’d get the TA guys into a tizzy (it’d look cool on the charts).
66%-off is the very high end of our guesstimate for the trough; we suspect 50%-off is more likely.
- vreaa

For A City To Have That Kind Of Vacancy, It’s Like Cancer – “Downtown, the vacant unit rate is so high that it’s as though there were 35 towers at 20 storeys apiece – all empty.”

UBC planner Andrew Yan’s research raises questions about whether the city is turning into a high-end resort or a haven for offshore investment. [image from Globe and Mail]

“Nearly a quarter of condos in Vancouver are empty or occupied by non-residents in some dense areas of downtown, a signal that investors play a significant role in the city’s housing market.
And the city overall has a much higher rate of empty apartments and houses than other Canadian cities, with a rate closer to places like New York and San Francisco at the height of their mortgage crisis in 2010.

Downtown, the rate is so high that it’s as though there were 35 towers at 20 storeys apiece – empty.

That’s the latest discovery that adjunct UBC planning professor Andrew Yan made when he analyzed 2011 census numbers to try to add more information to the contentious debate over whether Vancouver is turning into a high-end resort or offshore investors’ holding tank.

He revealed those numbers Wednesday night, as a capacity crowd turned out to listen to speakers on a panel at SFU Woodward’s talk about “foreign investment in Vancouver real estate.”

In all, the city of Vancouver appears to have about 7,500 more vacant housing units than what would be expected in most other Canadian cities. For Metro Vancouver, there are around 15,000 to 20,000 more.

That sign of high vacancies and non-resident-owned units, which contradict some other studies and assurances that Vancouver is not being flooded with investors, should give the city pause, analysts say.

“What kind of community are you living in if there are that many empty? For a city to have that kind of vacancy, it’s like cancer,” said Richard Wozny, a real estate consultant, during an interview Wednesday. “It distorts density and it’s delaying the impact. It raises the question ‘Are we over-building?’”

Mr. Yan, who specified that it’s not possible to know exactly why so many apartments were empty, said data indicate Vancouver is creating neighbourhoods that appear to be very dense, but actually don’t have an active full-time population.

That gives a skewed picture of, for example, the amount of commercial activity they can support.

In Coal Harbour, where up to one in four condos is empty in the tower-dominated waterfront neighbourhood between Stanley Park and the downtown convention centre, the scattered shops in the area often struggle to stay in business. By contrast, the West End, which has a low rate of empty residential units, is bounded by three streets – Davie, Denman, and Robson – that are packed with busy small shops and restaurants.

Mr. Yan said that the high numbers of empty apartments don’t prove there’s a problem with foreign investors, but they do indicate that Vancouver has a large proportion of general investor buyers, be they offshore or Canadian.

Housing analyst Tsur Somerville, director of UBC’s Centre for Urban Economics and Real Estate, said the data he has seen also indicate that Vancouver built more housing in the 2006-2011 period than the number of new households that were added to the city’s ranks.

That means investors. There’s nothing wrong with that, as long as those units are occupied, said Mr. Somerville, also on the panel.

“The problem is vacant units since that’s demand for real estate without housing people.”

Mr. Yan’s analysis entailed isolating the census data on dwellings that showed up as either “unoccupied” or occupied “by a foreign resident and/or by temporarily present persons” on Census Day 2011, which was May 10.

“These units could be non-resident occupied because their occupants were just away for the Census Day, between rental tenants, or moving in a just-opened building, but there is also a chance that they are someone’s pied-à-terre, vacation home or empty investment holding,” observed Mr. Yan.

In the city of Vancouver, the rate of those kinds of dwellings stood at 7.7 per cent overall, with some parts of the downtown as high as 23 per cent. In the city of Toronto, the rate was 5.4 per cent; in Calgary, 5 per cent.

If Vancouver’s “non-resident” category had the same rate as Calgary’s, it would have had only about 16,500 empty units on Census Day – the level to be expected in a regular city, where some part of the housing stock is always going to be empty for one reason or another. Instead, more than 22,000 units showed up in that category. An analysis for the whole Lower Mainland shows that it has between 15,000 and 20,000 more empty units, proportionally, than the Calgary or Toronto metropolitan regions.”

- from ‘Vancouver’s vacancies point to investors, not residents’, Frances Bula, Globe and Mail, 20 Mar 2013 [hat-tip Nemesis]
—

Thanks to Andrew Yan for the research and to Frances Bula for the article. Usually we quote brief snippets from articles, here it is all succinct and interesting enough that we’ve quoted it in its entirety.
The phenomenon described represents an important sub-type of RE speculation in Vancouver.
The most crucial form of speculation driving our spec mania has been regular folks over-stretching to buy their primary residences. That represented the vast majority of transactions in the RE markets, and served as the most important engine to drive prices skywards.
A more obvious sub-group is the flipper, who buys to resell within a year or two, with or without renos.
This article deals with yet another sub-group, the speculators who buy and hold properties (in this case condos but also applies to SFHs) as, essentially, gambling chips. They are betting they can sell at almost any time later, and win. Up until recently, preternatural price gains have made this a profitable method. Not so anymore. We believe that a weak market and falling prices will cause much of this ‘shadow inventory’ to come to market in coming years, with dire implications for prices. This is part of the reason that price drops will beget price drops.
By the way, note how Yan says that he can’t be sure who is holding these units. My own bet is that far and away the biggest holders will prove to be local gamblers. That distinction is not, however, of any particular importance when it comes to predicting outcome. All of this is more evidence of the Vancouver RE market representing a speculative mania, and the outcome is inevitably going to be a collapse in prices.. that’s how manias everywhere always end.
This work is also pertinent to discussions regarding population growth and densification: “Vancouver built more housing in the 2006-2011 period than new households.” Perhaps Vancouver is significantly less constrained than many fear.
- vreaa

“What’s the worst that can happen? You can’t pay your mortgage, so sell your house! No fear.”

Hannah Sung, Globe&Mail: “According to the numbers Canadian’s are carrying more debt than ever; which seems like a worrisome place to be. So I decided to ask people: ‘What is your biggest financial fear?’.”

Man1: “That’d be my mortgage. Actually, I just lost my job, about a month ago. Believe me I’m really happy about it; I can go back to school. I really don’t want the fear to come in front of me. What’s the worst that can happen? You can’t pay your mortgage, so sell your home! No fear.”
—

Hannah Sung: “‘What is your biggest financial fear?’.”

Woman: “The stereotyped idea of graduating and living in your parent’s basement.”
—

Hannah Sung: “What is the best way to manage the stress of being in debt?”

Man2: [looking concerned] “Try to think positive. I just had a job interview.”

- from ‘The fears that grip Canadians as debts rise, housing prices fall and incomes stall’, Globe and Mail video, 9 Mar 2013

Spot The Speculators #100 – Couple In 20′s Desire Light Workload, Early Retirement And Free Money From Their RE ‘Investments’; Current RE:Networth 10:1

“In B.C. a couple we’ll call Max and Portia, 28 and 27, are trying to plan their financial future. They bring home a total of $6,880 a month from their high-tech jobs, but Portia wants to take sabbaticals to travel more and Max wants to try out a new career. They also want substantial investment income — $1,000 a month by their mid-30s. All that, plus early retirement well before 65.
What is standing in their way is not just the problem of earning enough money to do all that, but more than half a million dollars of debt
They have already made big career switches, Max from running a theatrical company for four years, Portia from several years in pharmacy management. Their jobs, their incomes and their present high rate of savings can build a solid retirement, though not necessarily an early one.
…
So far, Max and Portia have made a big bet on real estate. A $265,000 rental condo is their largest investment. It has a $228,775 mortgage with 26 years left on its amortization. Without capital repayment on the 25-year mortgage, interest alone is $410 a month. Condo fees and taxes add $277 for total carrying costs of $687. It generates $1,050 rent, so their total return is $363 a month or $4,356 a year. That’s a 12% return on their equity — not bad, but vulnerable to rising interest rates. If they have to roll over their 3.0% mortgage at 4.0%, which is still historically cheap, they will lose their margin of profit. No one doubts that interest rates will rise and a 1% jump is easily in the cards…
Rather than take all the risks that go with being landlords — such as vacancy, tenant damage, and the inevitable rise in interest rates — they could sell, harvest their about $23,000 of equity after 5% selling costs, and use the cash to pay off most of a $27,000 student loan outstanding at 4.5%. If they choose not to use the cash to pay off the loan, then, at $500 a month, it will be repaid in five years. Their home mortgage would still have 24½ years to run. …
If they choose jobs for fun … their ability to have a secure retirement will be at risk
Their reality at present is that debts are almost 90% of their assets. To support a $1,000 monthly investment income, they would have to have $400,000 capital generating a 3% return after inflation. They can’t do that in seven years with their present incomes and the need to pay down debt. Moreover, if Max changes jobs or Portia takes lots of time off for travel, sacrificing income and perhaps career advancement, their financial outlook would dim.
“It is not possible in any reasonable scenario, especially if they impair their incomes with sabbaticals or risky job switches,” Derek Moran [a financial advisor from Kelowna] says.

Summary of finances:

Income:
$6.9K per month

Assets: $606.7K Total
Home condo $298K
Rental condo: $265K
RRSPs: $23.7K
TFSA: $8.9K
Stock options: $4.5K
Cash: $6.6K

Liabilities: $544.4K Total
Home condo mortgage: $284.6K
Rental condo mortgage: $228.8K
Loans: $31K

- from ‘Is this couple’s financial vision an impossible dream?’, Andrew Allentuck, Financial Post, 8 Mar 2013 [hat-tip MC]
—

Networth: $62.3K
Percentage of Networth in RE: 973%
[For those readers who have semantic objections to their position being expressed in that fashion, think of the '973%' as an elegant way of saying that their net-worth is leveraged to RE prices by 9.73 to 1.]
So, if their RE holdings drop in market value by a touch over 10%, they lose their entire net-worth. In fact, we can say with close to certainty that, given current market conditions, their actual current net-worth is very likely less than zero, as they’d be unlikely to clear 90% of the quoted amounts on their properties if they tried to sell.
This couple represents self-delusion run amok.
They clearly see RE as a path to a light work-load and early retirement. Free money, in effect.
How many Vancouverites have built positions in RE based on similar fantasies?
Note how the sensible financial advisor (from Kelowna, and thus, we’d assume, no stranger to collapsing RE markets) advises them to sell their RE ‘investment’.
What will the effect on our markets be when all those speculators in a similar position try to get out of money losing RE, over the same few years?
—
This couple’s position is also particularly noteworthy in that it represents the local speculative activity that has been the major engine of our perverse bubble. Most would still argue that their actions are innocent; that they are simply trying to get ahead in current challenging economic circumstances. We’d argue that they are being greedy; and ask what the hell they were thinking buying a second, poor-cash-flow property with a household balance sheet like that. It is purchases such as these, people over-stretching to buy primary residences and/or ‘investment’ properties in the hope of future abnormally large price gains, that have relentlessly pushed up prices and formed the bedrock of the problems now facing Vancouver RE: A bubble based on cheap borrowing and over-leverage.
—
Speculative manias represent ephemeral fantasies, and they all, ultimately, have to be reconciled with reality.
—
- vreaa

“So, if you want some Vancouver real estate should you buy now even if you pay a little more and get a little less than you had hoped? Probably. And should you sell your Vancouver real estate in the hope of buying it back later for less? Definitely, not.”

“Will the Vancouver housing market crash? Should I be waiting for a major drop in prices before buying a home in Vancouver? Should I sell my Vancouver home, rent for a while and then be able to buy an equivalent home for a lot less money? The answer to all of them is a resounding NO.” …
“Housing prices did crash in the 1980’s but a major difference is that at that time many homes had been bought by speculators on very small margins and interest rates soared well into double digit levels.
Now, very few homes are held on spec and any anticipated increase in interest rates is expected to be very modest. Mortgage rates may even go down. Canadian banks make a significant share of their profits from mortgage lending and it is a low risk part of their business since their prudent lending standards reduce the chance of default. Also, many mortgages are guaranteed by the Canadian Mortgage and Housing Corporation (CMHC).” …
“The cost of housing in Vancouver is not likely to change dramatically for the foreseeable future. It may soften a bit or it may even rise a bit.” …
“Prices are about 3 per cent lower than they were six months or a year ago, but are 4 per cent higher than they were three years ago. Prices for detached homes have been the softest, while apartments and townhouses have seen much less change, reflecting the trend to condos as a more affordable form of housing.” …
“There are two groups which would benefit from declining home prices. First are people in the Vancouver area who do not own real estate and whose income level does not enable them to afford the size and location of home to which they aspire. Many have adjusted by seeking a smaller home and/or one in a less costly neighbourhood. But some cannot afford even that.
A second group are the retirement age baby boomers across Canada who hope to spend their golden years in this small corner of Canada where you don’t have to shovel snow. They are frustrated because a home anywhere else in Canada buys much less home in and around Vancouver. They are also one of the main reasons why a housing crash will not occur. Any drop in prices will lead to retirees entering the Vancouver housing market, putting a floor under prices.
Those in the international community do not seem to mind our house price levels. When looked at in a global context, home prices in Vancouver are not unreasonable. Ask anyone from London or Hong Kong. And people from around the world see not only good value in our real estate, but also an open society, a pleasant climate and a stable political environment.
Finally, the majority of people in greater Vancouver already own real estate, benefit from current housing values and would be hurt by a crash or any serious drop. They do not want to see the value of their biggest asset decline. Home equity often forms a large part of retirement savings and people count on it in their financial planning.” …
“So, if you want some Vancouver real estate should you buy now even if you pay a little more and get a little less than you had hoped? Probably. And should you sell your Vancouver real estate in the hope of buying it back later for less? Definitely, not.”
- from ‘Little chance of correction in Vancouver real estate market’, Roslyn Kunin (‘Troy Media BC’s Business columnist; consulting economist’), Troy Media, 18 Mar 2013 [hat-tip ATP, who added, perceptively "same old, same old".]

If it really was a case of paying “a little more” and getting “a little less”, few would be discussing the matter. We fully expect that people will “pay a little more and get a little less” in the Vancouver RE market. Fact is they are paying a lot more and getting a lot less.
This “same old, same old” column archived here for the record. It will eventually be noteworthy that in March 2013 some people were still making ‘limitless demand’ arguments for ongoing endless price strength in the Vancouver RE market.
And it is remarkable that an economist would not give any thought to economic fundamentals in their discussion, and wouldn’t consider indicators such as price:rent or price:income ratios in their analysis.
- vreaa

2013 West Vancouver Sale At 2007 Prices

“Interesting data point out of West Vancouver. 4820 Headland Dr. sold last month [January 2013] for $1.17M. It sold in July 2007 for $1.2M. Poor location, corner of a 3-way stop, either way, they’ve done ‘well’ to have lost money over the past 5.5 yrs in Van RE. A few more of these coming I reckon….”
- NoBid at VCI February 26th, 2013 at 6:00 pm

“We live next door to a large new house that replaced a beautiful one in excellent condition. It has been empty since its construction about 2 years ago. The owners live in another house nearby.”

“We live next door to a large new house that replaced a beautiful one in excellent condition.
This new house, contrary to the bylaw, does not meet the requirement that the bulk and size of new developement is similiar to existing developement. Nor is it as required, compatible with the existing amenity and design of developement. City Planning approved this contrary to the neighborhood objections.
It has been empty since its construction about 2 years ago.
The owners live in another house nearby.
In this block there are now 3 houses that have been empty for several years.”
- B. Mcloughlin, commenting 2:58 PM on March 8, 2013 below the Globe and Mail article Kerrisdale preservationists lament a tide of bulldozers.

Misallocation of resources.
Speculation.
- vreaa

“Mere mortals could not afford housing in Vancouver even back in 2004.”

“Moved from Montreal to Vancouver, stayed six years, (got-the-hell-out-cause- I-didn’t-like-it), moved out to Ottawa. In each city I had a job waiting at 90K range.

Mere mortals could not afford housing in Vancouver even back in 2004. House was fully paid off in Montreal, even with that equity we realized we were going to have the largest mortgage ever. With wife and three kids, living in a condo was not considered, so we moved a little east of the city – Pitt Meadows, commuted into Vancouver for work. Wife gradually found self employment – accounting – in small businesses locally. Loved the views, hiking with kids in the mountains, crossing to Victoria by ferry.

Shocked by real estate prices. Stunned by the cost of everything else. Couldn’t believe that salaries in general here were Lower than Toronto, Ottawa and Montreal. Where in Vancouver would someone bring up a couple of kids on 60k? Where did the 35k salaries live? Was not impressed by the theatre and music scene. Good Chinese food, and Indian food, but otherwise, Vancouver does not hold a candle to Toronto/Montreal/Ottawa. Only place that made real bagels seemed to be Granville Island. Drove down Hastings Street one day. Remarkably like NYC of the seventies, down and dangerous.

Was slightly depressed by weeks and weeks of cloudy days. Missed the changing of the seasons. I love a sunny cold winter day, so bright with the sun reflecting snow. Came to realize that there were no advancement opportunities in my industry. (Like most other Vancouver industries, only a branch office in town.) A survey of some neighbours’ professions: Two teachers, one small business owner, four retired.
Realized that there would be nothing for my kids to do once they hit teenage years in Pitt Meadows. Take a 1.5 hour bus ride to see a band downtown? If would be a pain for them to go to either UBC or SFU.
And where would they live as adults? Love my kids, but after a degree, you’re out. Didn’t see a future for them here.

Moved to Ottawa. Housing is aprox 1/3 the Vancouver cost. We live 20 minutes drive from downtown and Parliament buildings – in traffic. Oldest attends Carleton U, also about 20 minutes away, by bus. High school is 4 minute walk for other two. We lucked out at Canterbury High.
Unknown to us when we moved here, it’s the city’s premier arts school. Incredibly motivated kids apply to attend Canterbury from all of eastern Ontario. We happened to move into its catchment area.
Ottawa has Carleton U and Ottawa U. Montreal (1.5 hour drive.) has Mcgill and Concordia U, if the kids want to adventure out to another city and/or immerse themselves in french language.
Ottawa has virtually no reports of grow-op busts, unlike west coast.
Ottawa has NAC, and host of other theatres, many museums, byward market. Rideau canal has pleasure boating in summer, and becomes world’s longest skating rink in winter. Hiking and cycling, cross country sking in Gatineau park is great. Montreal is 1.5 hours drive with major Jazz/music fest. Many of those acts come to Ottawa the week before or after.

Kids still facebook old buddies from the Pitt. Several bored buddies are serious dopers, dropped out, etc. We’ll go back to Vancouver to visit, but never to live.”

- Dadeedumer at VREAA 9 Mar 2013 11:57am

Thanks for sharing your story, Dadeedumer.
We bemoan the fact that RE prices have driven many from Vancouver.
And we agree that, by 2004, prices were already overextended beyond those supported by fundamentals.
- vreaa

“I explained that if the present rate of price appreciation continued that same house would be worth $92 million in 2051. He astounded me by responding, yes of course. That’s why he was buying a second house.”

“My idiot neighbour.
In his mind “real estate ALWAYS goes up”. When I tried to explain to him that Vancouver was in an unsustainable bubble situation and he said I was crazy. The example I used was a westside special that I know was purchased in 1969 for $38,900 and sold in 2010 for $1.89mm.
I explained that if the present rate of price appreciation continued that same house or 50×120 piece of dirt would be worth $91,800,000 (that is Ninety One Million Eight Hundred Thousand dollars) in 2051 and asked him if he thought that would be the case.
He astounded me by not even blinking and responding, yes of course. That’s why he was buying a second house. At that point I made the decision to leave Canada.”
- Bob at greaterfool.ca 12 Mar 2013 9:25pm

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Vancouver RE Crash On Track

Expected weakness continues, sales remain low. Things are playing out as we’d anticipate. Very significant price drops to come (all in all, 50% to 66%, peak to trough). :

SALES ARE WEAK:
“The flicker of optimism that sparked in Canada’s housing market when January sales outpaced December’s has died out, erased by a notable drop in February.
Last month’s declines were significant enough to prompt the Canadian Real Estate Association (CREA) to cut its sales outlook for 2013 on Friday for the third time since last summer. …
“Vancouver remains the clear weak spot, with sales down a seasonally adjusted 9.8 per cent in February and 29.2 per cent in the past year,” Bank of Montreal economist Robert Kavcic wrote in a research note.But some feel that much of Vancouver’s weakness has played out.” [hahaha -ed.]
- from ‘Clouds gather over Canadian housing market’, Globe and Mail, 15 Mar 2013

SO ARE PRICES:
“The average MLS residential price in BC was $514,134 … down 8.1 per cent from a year ago.” – BCREA news release 14 Mar 2013

INVENTORY/LISTINGS ARE HIGH:
“I’m seeing big increases in New West, North Van, Burnaby SFH listings. Historical highs for this time of year. VW has stalled out; VE puttering along. Condos downtown nothing special on the inventory side. I don’t know what all that means except that our little crashlet is *not* a “Van has too many condos; it’s just condos; houses are safe from all this” thing. It is in fact inventory growth and sales declines are mostly a SFH thing, from what I see.” [price declines will effect all sub-sectors of the market. -ed.]
- VHB at VCI 15 Mar 2013 12:22pm

chart care of b5baxter at vancouverpeak.com

HOUSEHOLD DEBT CONTINUES TO GROW:
“The ratio of Canadian household debt to disposable income rose to another record last quarter, calling into question Bank of Canada Governor Mark Carney’s assertion that families are listening to his warnings about the risks of borrowing too much.
Credit-market debt such as mortgages rose to 165.0 percent of disposable income, compared with 164.7 percent in the prior three-month period, Statistics Canada said today in Ottawa.
In his previous two policy statements, Carney weakened language about the need to raise the central bank’s 1 percent policy interest rate, partly on evidence a housing boom was slowing and consumer debt burdens are stabilizing. Finance Minister Jim Flaherty tightened mortgage rules in July on concern some regional housing markets were overheating.
National net worth rose 1 percent to C$6.87 trillion ($6.73 trillion) in the fourth quarter, Statistics Canada said. On a per capita basis the increase was to C$195,900 from C$194,300.” [Watch the per capita net-worth plunge with RE prices over coming years. -ed]
- from ‘Canadian Household Debt-to-Income Ratio Rises to Record 165%’, Bloomberg, 15 Mar 2013

MEDIA STILL PUMPING:
“Global TV just ran two RE spots (within an hour of each other) on this morning’s news featuring Joannah Connolly, editor of the highly acclaimed BIV and holder of a BA in Eng Lit.
In segment one, she commented on the 0.1% rise in the Cdn new HPI (for Jan) and implied the housing market had “reversed a downtrend”. She also mentioned the Cdn$ and how “it rose five cents” yesterday. How sad. Colorful, animated bar graphs (a la CNBC) were used in the presentation to drive home the point that home prices are still way higher than they were in 2009. The year 2012 was conveniently omitted from graph #1 so as to mislead the public into believing the upward trajectory is still intact. graph #2 was equally laughable with price chg’s in Vanc, Vic, Wpg and Cda average all appearing to be gains with upward pointing bars.
In segment two, she talked about how hot the commercial RE was, that land was in limited supply and that investors were “snapping up anything and everything”.
- from bullwhip29 at VCI 15 Mar 2013 9:55am

..AND MASSAGING:
BTW, they changed the headline of the Tara Perkins article in the Globe from this…
“Real estate market outlook cools as home sales plunge”
To this…
“Clouds gather over Canadian housing market”
There….that’s better.”
- from kabloona at VCI 15 Mar 2013 11:01pm

REALTORS STILL PUTTING ON BRAVE FACES:
“BC home sales continued at a modest pace in February,” said Cameron Muir, BCREA Chief Economist. “Despite improved affordability, many potential buyers and sellers remain in a holding pattern. With pent up demand now becoming latent in the market, it’s not a matter of if, but when home sales rise above their current pace.”
- BCREA news release 14 Mar 2013
—

Former PM Kim Campbell Sues Vancouver Condo Developer For Market Weakness

Former prime minister Kim Campbell is suing the redevelopers of the Hotel Georgia in downtown Vancouver, alleging her condo wasn’t ready on time, and now she wants her money back.
In her statement of civil claim filed in B.C. Supreme Court Campbell says she paid a $368,000 deposit on a condo in the new residential high-rise at the Hotel Georgia in 2007.
Former prime minister Kim Campbell is suing the developers of the Hotel Georgia in Vancouver. (AP )
Her lawyer Bryan Baynham says the pre-sale agreement with Georgia Properties Partnership was that that the condo would be finished December 2011.
“The project wasn’t finished on time. They were more than a year late and not surprisingly the people don’t want to complete and they want their deposit back.”
- from ‘Former PM Kim Campbell sues Vancouver condo developer’, CBC, 15 Mar 2013

EVERYBODY speculates on Vancouver RE, it seems.
If prices were up, these claims wouldn’t be occurring.
- vreaa

“I have continuing conversations with a friend who spent just under 1 million for an East Van home…”

“I have continuing conversations with a friend who spent just under 1 million for an East Van home.
6 months ago he thought prices would never come down for detached homes in Vancouver.
3 months ago he admitted that West side home had come down but not on the east side. After all, the west side was overvalued compared to the east.
This month he talked about re-financing their mortgage so they could take on more debt and do more renovations on their home.
sigh.”
- b5baxter at VREAA 12 Mar 2013 10:28am

Ongoing Hope For Soft Landings – “Growth should actually gain momentum this year rather than crashing as it did the U.S.”

“Some observers became panicky about a serious collapse in the market, perhaps because they believed that Canada was just like the U.S. had been in 2006.
But what we’ve seen in the ensuing months says that this interpretation was entirely wrong. Housing really is somewhat overpriced and it will indeed be the weakest part of Canada’s economy this year, notes economist Arlene Kish at IHS Global Insight, a big economics consulting firm, but it “will not be following in the footsteps of the U.S. housing downturn.”
Instead, it will be more of a typical cyclical downturn, with housing investment — including new construction, renovations and all sorts of related spending — dropping by a significant, but hardly catastrophic, 1.7 per cent. With others sectors of our economy picking up a little steam, growth should actually gain momentum this year rather than crashing as it did the U.S.”
- from ‘Canadian housing market finds its feet’, Jay Bryan, The Montreal Gazette, 15 Mar 2013
[hat-tip to 'Ryan' who told us about this story via e-mail]

Added to the ‘Premature Calls Of A Bottom‘ sidebar collection.
- vreaa

“Over the years, we refinanced our home a few times to pay off our debts. Now we’re selling our home as we can’t keep up with mortgage payments. In this market, we’re not sure if we’ll break even.”

Q: “Over the years, we refinanced our home a few times to pay off our credit cards and other debts, but we never actually got ahead. Now we’re faced with selling our home as we’re having a hard time keeping up with our first and second mortgage payments. With the market the way it is, we’re not sure if we’ll break even. What can we do?”

A: “… With over a decade of extremely low mortgage rates and fast-rising home values, many homeowners refinanced their mortgages to access the equity in their homes. Unfortunately, this can work against you if you aren’t living within your means.”

- from ‘Evaluate all options before selling your house’, Scott Hannah, The Province, 11 Mar 2013 [hat-tip Alexcanuck]

Savings rates in BC have been negative for years.
The average BC consumer debt is a remarkable $38,837, the highest in the country (up 6.2% in the last year!).
Whether by means of low downpayment or large HELOC, a significant percentage of owners are woefully over leveraged to the RE market.
All of this information represents downside risk for the RE market.
- vreaa