“It was a chance conversation with a seasoned realtor that tipped me off to the whole bubble back in 2004.”

“It was a chance conversation with a seasoned realtor that tipped me off to the whole bubble back in 2004. When I met my wife she had just purchased a condo in Surrey for $135k. We moved into it and met a tough-as-nails older woman who had been a realtor for 30 years and lived in the building. She shared the history of the building with us. Units had originally sold for $170k but a leaky condo adventure had dropped the value down to $70k, many lost their homes but those that were left were holding out for the prices to return to $170k. I asked her how long that would take. She pondered it, referred back to her 30 years of experience and said. “Probably 10 years.”

Almost exactly one year later in mid 2005 she came to us to tell us she could get $160k for our unit if we wanted to sell and move to a larger unit. We took her up on it and bought a larger unit in the same building. We got an over ask offer of $164k and bought a bigger unit for $170k. A year later and I was now working in Burnaby, a crappy commute. The condo needed a new roof and we had an assessment of $5000 that we had to take HELOC to pay for. We got a call to check out a place in a co-op in Burnaby near my work. It was perfect for the family we wanted to start. When we returned from checking out the co-op there was a flyer under our door. Our friendly realtor had just sold a comparable unit to ours for $240k.

Our families told us we were nuts to sell and rent. I smelled a rat, this experienced realtor had predicted 10 years to appreciate from $135k to $170k. And two years later the value had skyrocketed to $240k. My sister explained that I didn’t understand because I didn’t have kids yet how important it was for us to have real estate holdings to leave them. I decided that when I did have kids, they would be better served having me home for the two hours I would have been commuting then having a condo in Surrey 50 years from now. We pulled the trigger, the realtor actually sold the place to the same people who had bought our previous unit and we are now renters in Burnaby.

I knew nothing about real estate when I met my wife, she had bought into the market with an inheritence and had a bit of trouble walking away from ownership. But strata drama had shown her that she didn’t really own much of anything, she couldn’t rent her place out, she couldn’t decorate the way she wanted, she could have the pets she wanted, it was really a lot like living in a co-op. Except your crazy neighbours are toying with a massive chunk of your equity when they make silly rules. (They tried to make the building a 55+ while we lived there).

But ultimately it was that chance conversation with the realtor when she genuinely predicted a slow, steady increase in value that paced with inflation that tipped me off to the anomaly that was this price increase. I watched it shoot up and I was not prepared to sit back and watch it drop back down, taking my windfall with it. My wife is glad we made the move too, now she tries in vain to explain to her friends and family that they are headed for financial ruin if they continue their real estate delusions. But we all know how that goes.”

- lexlimo at VREAA 27 Feb 2013 9:42am

Thanks for your story, and for all your other comments on the blog, lexlimo.
- vreaa

Bears Care, Too

“…the schadenfreuden stories on Vancouver Real Estate Anecdote Archive. Always good for a bitter laugh.” – Bill Lee at francesbula.com 26 Nov 2012

“I never did give anybody hell. I just told the truth and they thought it was hell.” – Harry S. Truman

All the very best for the festive season to all readers, and wishing you all a fine, peaceful 2013.
Regular readers know that we foresee challenging times ahead for the Vancouver RE market. This opinion is not a wish, it is simply the result of an analysis of all the available evidence. And it is most definitely not to be confused with a desire for bad things to befall anyone in our community.
The speculative mania in housing (2003-2012) has been detrimental to Vancouver. It has misallocated human and financial capital, and distorted the economy of the city. It has inconvenienced many, and, unfortunately, in the end, it will have financially and psychologically hobbled a good number of citizens. This outcome is inevitable. Again, please don’t confuse this observation with a wish, it is simply part and parcel of a spec mania: a messy resolution has been ‘baked in’ since prices hit the afterburners in the mid 2000′s. When asset prices are artificially inflated by a chain of ever increasing debt-financed transactions, there will always be a large group left ‘holding the bag’ when it all runs out of oxygen.
There is, unfortunately, no other way things can resolve, and nothing that can be done to significantly ameliorate the bubble’s consequences. It is too late for that. The problem was letting it develop in the first place; and not allowing it to unwind earlier.
Anybody who is wishing for soft-landings, or hoping that some form of kindness will somehow allow for a resolution that involves no damage, needs to answer this question: Who do I expect to do the buying that will let everybody down gently? Who do I expect to step in now, borrow (or ‘donate’) large sums of money, and agree to purchase properties that are still woefully above their fundamental values? (and thus exposing themselves to very large losses ahead). Who do you suggest should be the sacrificial lambs?
Those wishing for fantasy bullish, Pollyanna-ish outcomes may be well-meaning, but they are simply ignorant of bubble market dynamics. You can’t simply call the game off and hope that everybody wins; it doesn’t work like that after years of ever-increasing over-extension.
All that said and done, we hope that readers fare as well as possible. All citizens, owners or not, will feel some of the economic effects of a RE downturn. Non-owners will suffer less direct personal impact, and there are a good number of owners who will survive the RE bear market with just a scratch or two. We are most concerned about modest net-worth households who have almost all of their savings in their homes; often with leverage. We know it is a painful fact that they can’t all get out ‘whole’, but we fear for them nonetheless. Particularly vulnerable are those close to retirement who are relying on the value of their homes for a comfortable future.
We hope that Vancouver can find a way to make the transition from overvalued market to a fairly, and sustainably, valued market with as little damage, and as peaceably, as possible. In fact, for us, the ‘peace’ bit is paramount. Economic stress puts groups at risk of highly-charged fractures, and we sincerely hope that as a large and diverse group we’ll be able to avoid scapegoating, in-fighting, and division.
So, to emphasize: Bears care, too. They may come across as grumpy and (per force) contrarian, but they care as much for family, friends, neighbours, and fellow citizens as anybody else. Sure, the occasional bearish commenter will express the opinion that they will gain pleasure from the losses of speculators, but this is far from the commonest position. The very few Vancouverites who have seen this speculative mania for what it is most commonly express genuine concerns about the potential consequences for themselves, their families, and their fellow citizens.
- vreaa

“I conceive that the great part of the miseries of mankind are brought upon them by false estimates they have made of the value of things.” – Benjamin Franklin

“I think you’ll need another sidebar category to capture the mounting “why do you hate families/wish misery on others?” accusations that are going to come in increasing numbers. Long time bulls – and new visitors to this site – may trot that one out more and more, accusing you and posters here of schadenfreude, hating home “owners”, etc. Even if it doesn’t happen here, mind-bending statements in this vein will increasingly pop up elsewhere and be worth collecting. May I humbly suggest a sidebar icon with a picture of Helen Lovejoy and the words “won’t someone PLEASE think of the children?!?” to link to the post you ultimately create addressing this topic?
Past even-handedness will matter little to desperate people who will misinterpret many sentiments expressed here. The archive will be useful to a subset of these people who are willing to be taught the historical mechanics driving this bubble.”
- paraphrasing of Royce McCutcheon at VREAA 17 Sep 2012 8:50am [We'll call such a sidebar 'Bears Care, Too' -ed.]

Bears Invade Burnaby – “Drop your prices and we’ll play nice.”

Bear admiring a gorgeous, south-facing 42 x 122 foot lot in Burnaby

Thinks: “This formwork stinks.. the hell if I’d fork over $120K to this ‘landscaper’.”

“The Burnaby RCMP is warning the public and morning commuters about a bear sighting.
Officers say shortly before 8 a.m., a big black bear was spotted lumbering down Rosser Avenue at Willingdon Avenue.
Police have not had any reports of aggression or interaction between the bear and people.”
- from Vancouver Sun 13 Sep 2012 [hat-tip epte]

Bears aren’t violent so long as you don’t get in their way, and let them take what they want.
- vreaa

“I went for lunch today and I wasn’t scorned by my friends for being a bear. I can’t find anyone to argue with anymore. The harsh reality of a very long move down is sinking in.”

“I went for lunch today and I wasn’t scorned by my friends for being a bear.
The fun is over. I can’t find anyone to argue with anymore. The harsh reality of a very long move down is sinking in. I am sensing big time panic among a lot of people out there.
Truthfully I thought it was going to be fun but I think it is just going to be sad.”
- McLovin at VCI 30 Jun 2012 9:46pm

Yes, it is going to be a largely sad affair.
And definitely less fascinating than the mania itself.
- vreaa

A Vancouver RE Bear Unashamedly Anticipates Schadenfreude – “I do want this correction to happen. I don’t give a rat’s ass about the families who will lose their houses, or the investors that will lose their rental properties, or the carpenter who will lose his window framing job.”

“I’ve been renting for a while, I have no debt, bunch of money saved and invested in a pretty diversified portfolio, and I’m extremely happy with my current job. Could’ve bought, like many others did… I mean rented from the bank, but I didn’t. For some reason, as opposed to the grand majority, I’m still scared shitless of debt, I hate owing money, and just couldn’t wrap my head around the idea of being tied to a loan for 20+ years. It’s kinda hard to explain to the average Joe why Lucy the hair dresser lives in a 750K McMansion, while Mike Hunt the engineer “hasn’t been able” to do it. I do want this correction to happen. I don’t give a rat’s ass about the families who will lose their houses, or the investors that will lose their rental properties, or the carpenter who will lose his window framing job. Many relatives and close friends have done the 5/35 or 5/30 deal. They’re responsible adults who signed the dotted line and now have to live up with the consequences. Yes I’ll be affected too… but you know what… I don’t care. Higher taxes, zombie economy, unemployment, doom & gloom, financial crisis, ..whatever. At least I won’t have an underwater mortgage. Man that’s one scary thought. I’m ready. I got my shorts for when the tide recedes. Schadenfreude.”
- Mike Hunt at VREAA 6 Jun 2012 1:08am

Bear Exhausted By Tenacious Bullishness – “Over the long term real estate never goes down besides there is so much money coming over here.”

“Talking to a colleague. Her and her brother were looking at places in my neighborhood last night. He sold his place in the sticks and is now looking to move closer to the city. I asked her why doesn’t he just rent, “he feels that interest rates are going to rise and he wants to lock in a low rate.” Wouldn’t it better to sock away the money and wait for rates to rise, values to decrease and then buy, I asked. “Over the long term real estate never goes down besides there is so much money coming over here.”
The rent for my one bedroom is $1,550 and similar apartments are listed for $490k. meaning it would cost me almost $3,000 a month to own a comparable apt. — based on 5% down with a 5-year fixed at 4% with a 25 year amort.
I am so very, very tired of being wrong about Vancouver’s RE market. It appears that there is just no shortage of people who truly believe that we are running out land, that real estate always goes up and that everyone wants live here.”
- Manna from heaven, at VCI, 1 Jun 2012 11:19am

“What do you mean you were wrong? Average price is down 12% YOY. It sounds like you were right.
Bears have been wrong so long they can’t recognize when they are right!”
- WFT? at VCI 1 Jun 2012 12:15pm

“Several bears I know that were sitting on the sidelines have finally thrown in the towel and bought in the past couple of months.”

“Several bears I know that were sitting on the sidelines have finally thrown in the towel and bought in the past couple of months. Perhaps a contrarian indicator that a top is near?”
- Troll at vancouvercondo.info, 31 Aug 2011 11:25am

If we’d kept a list of the succession of contrarian bells that have rung for this market over the years, it’d be might long…
But, yeah, bears capitulating is always noteworthy.
Poor schmucks, they should have come to the meetings.
- vreaa

Indecision – “My husband and I are putting our townhouse up for sale within the next month, in hopes to buy a larger house that will accommodate us. Or perhaps to rent.”

Kimberley, in an e-mail to Garth Turner at greaterfool.ca 7 Jun 2011 – “My husband and I (with two small children) are putting our home (Vancouver townhouse) up for sale within the next month, in hopes to buy a larger house that will accommodate us. And we would like to stay in the same area. GASP! No more holidays for us. I feel like we should still sell right now, but perhaps cram ourselves into an apartment and rent for a few months, until the bubble has burst! Yes it would be extremely challenging, having to pack and move twice, store everything, not knowing where we would be moving and when we would be moving (children’s schooling etc). But seriously, sounds like it would make sense economically. When exactly is the bubble going to burst?”

Bubble Bear Bloggers Buy… in Seattle and New Jersey

“Tim, the seattlebubble.com blogger, bought this house [3601 Wetmore Ave, Everett, WA; 1,620sqft SFH on 6,098sqft lot] for $225K. [Seattle Bubble blog, 27 May 2011]. He expressed concern that the act of buying would be seen as “moral weakness” and “picked to pieces” by readers. He summed up rationale as “buy vs. rent was in favor of buying for the location & type of homes we wanted to live in”.
At less than $150/sqft, it seems fine to us. -ed.
—

HOMEOWNERS James A. Bednar and his wife, Jayne, are in the throes of renovating their first home, in Wayne. Mr. Bednar, a blogger, has been a longtime public skeptic of the real estate market.

BIG news in the virtual neighborhood: “Grim” bought a house. [from nytimes.com 12 May 2011]
For the last six years, James A. Bednar — or “Grim,” as he is known in the blogosphere — has served as a passionate advocate of cool wariness about New Jersey real estate. Through his posts on njrereport.com, Mr. Bednar convened a community of skeptics, scoffers and scavengers for “true value” during times of spiraling prices — first up, then down.
Most regulars on the blog appear to have remained renters through at least one full housing market cycle, depending on how one measures the cycling. As did Mr. Bednar.
But on the morning of April 29, as Grim, he abruptly posted the announcement that he and his wife, Jayne, were closing on a three-bedroom ranch in Wayne. “Has J. B. lost his mind?” asked Grim about himself.
There were 217 quick responses. “Now I’ve heard everything,” read one. Others asked whether Mr. Bednar would disband the blog, for which he is unpaid (definitely not, he said), and whether prices had now hit bottom (he did not answer that). But most expressed warm, if teasing, congratulations.
“I’m sure with your knowledge of the market you are getting a real good deal,” read a post from “Mikeinwaiting.” “As far as bottoms go, well, you take your chances.”
Mr. Bednar, who says he usually blogs in the wee hours, has had a full-time job as a software technician since graduating from college during the dot-com boom of the early 2000s. He withheld the gritty details of his purchase from the blog. But in an interview, he readily gave them up, saying that since he was in the habit of exposing price information about other peoples’ houses, it would be hypocritical to do otherwise: purchase price $435,000, list price $479,000 — meaning that the Bednars negotiated a 9 percent discount.
—-
As we’ve said before, US RE is a fair buy at present. There is likely still more downside, but, looking at these purchases prices, even another fairly big leg down wouldn’t completely destroy these folks.
Vancouver, snap-shot from the future, sometime later this decade? -ed.

Global News Switch – ‘Real Estate Bubble?’ Story Becomes ‘Steady Climb’ Story

Global BC TV, 12 Apr 2011, Noon news -

Randene Neill: “Vancouver’s real estate market continues to lead the country in terms of price. the latest survey by Royal Le page shows detached homes in vancouver sold for nearly three times the national average but as Tanya Beja reports some analysts are suggesting that these prices can’t be sustained for much longer.”

Announcer: “It takes just over a million dollars to put a ‘sold’ sign on the average Vancouver home. It’s a little less if you’re buying east of Main Street, and 50% more on the westside. Those figure released today by Royal LePage, showing that prices of homes rose 10% in the first quarter of this year, compared to last.”

Chris Simmons, Royal LePage Realtor: “The vast majority of buyers on the westside and Richmond buying single family homes are from mainland China.”

Announcer: “Royal LePage says strong demand from overseas and low interest rates helped push the price of Vancouver homes three times above the national average.
It’s cause for concern say analysts, who warn buyers are taking on too much debt:”


AJ Sull, Pacifica Partners: “[inaudible]..income concerns, especially here in BC. The debt to income ratios are quite lopsided. We’ve exceded the US averages at the peak of the US bubble. So, that to us is not very comforting.”

Announcer: “The average Canadian household debt reached a record $100K last year, more than one and a half times the average income. Experts warn with rising interest rates, Canadians will no longer be able to service their debts and their mortgages. They say a correction in housing prices is inevitable.”

Sull: “We do think about a 25% price decline would start to balance incomes and housing prices off, quite well.”

Announcer: “AJ Sull says with a federal election looming, it’s time for politicians to weigh in on real estate prices. But unless there’s a drop in demand for Vancouver housing, some realtors say they don’t see prices going anywhere but up.”

Realtor: “We have people who want to live in Vancouver, people from Toronto want to live here, people from China want to live here, people from Iran wish to live here, people from all over the world want to live in Vancouver. So it’s a place where there’s an awful lot of demand.”
—

Okay, so that was the Noon news on Global, 12 Apr 2011.
Noteworthy for having the words ‘Real Estate Bubble?’ heading the piece, for mention of the word ‘bubble’, and for having an analyst on camera suggesting that 25% price drops are possible, perhaps even desirable, in the Vancouver market. (A concept familiar to bear blog readers. FWIIW, we would tease AJ Sull that he is being overly optimistic. If he’d suggested a 50% price drop, however, he’d likely not have gotten air-time, so “hats-off”, it’s a start).
The realtor, of course, gives the perennial “demand, demand, demand” argument for never ending price increases. -vreaa

The message is softened somewhat on Global between the Global Noon and 6pm news slots [hat-tip to Brian via Garth at greaterfool.ca for alerting us all to this]. Here is the later version, also verbatim, for the archive record:

Global BC TV, 12 Apr 2011, 6pm news [archived by Greenhorn here]-

Announcer: “And even as you ponder how much cheaper your car insurance could be, the price of real estate just keeps going up. According to the latest industry report, a typical home in Vancouver sold for nearly three times the national average in the first quarter of this year, and three things appear to be at work here: low interest rates, a limited supply of houses, and increased pressure from foreign buyers.”

Announcer2: “Putting down roots in Vancouver is getting more expensive, especially if you’re shopping for property in some of the cities most desirable neighbourhoods.”

Simmons, Royal LePage Realtor: “You know you’re probably looking close to two million dollars for an average sale price of a SFH on the westside of Vancouver, and maybe not quite so high in West Vancouver”

Announcer2: “A new survey by Royal LePage shows that vancouver housing prices are now three times the national average, with condos going fro a half a million dollars and bungalows about double that. It’s an increase of almost 10% from the first quarter of last year. according to realtors, it’s fuelled mainly by low interest rates, and demand from abroad.”

Realtor: “There is a large demand for properties in Vancouver and Richmond amongst the Chinese population, and they’re looking to immigrate.”

Announcer2: “While the focus on Chinese buyers has prompted some to push for restrictions on foreign ownership, some analysts say the bigger concern is whether Canadians are taking on too much debt, without having the income to match rising prices.”

AJ Sull: “Canadians had a little bit of complacency, saying that in Canada we don’t incur debt like Americans do..well, we’ve started to trade places with the Americans.. the Americans are paying down debt at a fairly rapid clip, and Canadians have yet to face that and bite the bullet on that.”

Announcer2: “Historically housing prices are three and a half times Canadian’s income levels, they’re now almost six times higher [sic], the average family has a debt of almost $100K, and, unless wages keep up, AJ Sull says, the real estate bubble could soon burst.”

Sull: “… concern is that, as interest rates go up, and they will eventually, will people be able to service that mortgage and the credit card debt that’s been piled on.. and that will have an impact on the economy over time, because people’s ability to spend is going to be more and more constrained.”

Announcer2: “Sull says a market correction of between 12 and 25% could be in Vancouver’s future. For potential buyers, it could just be a matter of being patient.”
—-

Between Noon and 6pm, the segments ‘Real Estate Bubble?’ headline has become ‘Steady Climb’, and AJ Sull’s self-stated “25%” becomes voice over “12 to 25%” mentioned by the announcer. The realtor drones on about foreign demand in both segments, using different words but saying the same thing.
Global have, however, in the second segment, introduced the idea of ‘patient buyers’, which we’ll give them credit for. That can’t be something the RE industry wants to see. Buyers becoming VERY patient will be part of the coming crash. -vreaa

Most Bearish Globe and Mail Article Yet – ‘Signs point to a severe housing correction in Canada ‘

From ‘Signs point to a severe housing correction in Canada’, by George Athanassakos, G&M, 10 Apr 2011 -
“I believe that Canada’s high house prices in relation to incomes, combined with record household debt levels and overinvestment in residential construction, will cause a severe correction in the real estate market. …
Home prices are simply way out of line, especially when viewed in relation to household income. The ratio of house prices to income has historically averaged about 3.5 in Canada. It now stands at about 5.5. It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period – so it follows that house prices will have to decline. …
The current consensus is that Canada’s real estate market has achieved a “soft” landing and that prices will flat line but not decline substantially over the next several years. I disagree. The housing market in Canada is already in bubble territory. Average house prices have doubled in the last 10 years, while rents have risen by only about 30 per cent. The ratio of house prices to rent is now higher in Canada than in any other developed country. …
Canada is past the point of no return. What has propped up the housing market in Canada and delayed the correction is artificial demand from Asian investors. While it is not clear when this demand will dry up, it eventually will. Once it does, watch out.”

Bearish Buyers: Capitulation, Of Sorts – “Yeah, if there was ever a clearer signal of the top of the market. I’m also the guy who enters the shortest cashier line-up at the grocery store but still manages to exit after everyone in the longer ones.”

Bear capitulation occurs when a long term RE bear gives in and buys.
Yelling “That’s it, I’ve had enough, this market is absolutely crazy, I resign myself to renting for life!” doesn’t count. Also, leaving Vancouver may seem like capitulation but it isn’t. The bear has to give in and buy. One of the laws of bubblology states that the bubble is over when the very last bear that is going to buy throws themselves on the frenzied pyre of the market and is consumed in the flames. When that happens, we can get on with the crash, already.
Here are two (rare) anecdotes of bear capitulation, but they are both ‘qualified’ capitulations, and we thus don’t present them as evidence of a top. Our brief comment follows at the end of this post.
We don’t see very many stories of bear capitulation: if you know any, please send them along. – vreaa

Lost Soul gave an account of their purchase on two threads at RE Talks, 8 Mar 2011 and 25 Mar 2011. Excerpts from Lost Soul’s comments:
“This loooooong time bear likely will be an owner soon (accepted offer).
Please don’t categorize me as a bull. I’m buying with the expectation that we will take a financial hit for it.
We didn’t all of a sudden grow horns and start snorting. But something did grow and popped out after nine months and we needed more space. It’s not all about money.
Could we have just found a bigger rental? — I suppose, but we just wanted a place to settle into and be able to do what we wanted with it without worrying about what the landlord would think.
Do we think this is a wise *financial* decision? — not a chance — this is pure consumption in our view. If by some bizarre happenstance the value of our place goes up 50% in the next year, we will not all of a sudden start crowing about how we were so brilliant to buy.
What if the market gets halved? — Bring it on! The loss on this purchase of course will be unpleasant but it also means that the next place we buy will have dropped twice as much in absolute dollars so net we’d still be ahead (if not by so much as not purchasing at all now). And ‘No’, the loss on the current place would not wipe out our dp for the next one — contrary to the beliefs of some here, bears are not necessarily on welfare living in their parents’ basement.
(Still) My advice to others: *We* are fortunate to have the savings and income to pull this off. If *you* are purchasing a place you’re not happy to live in for the next 35 years and buying it means Kraft Dinners, you might as well wait and pray for a crash — the “buy small and climb the property ladder” approach isn’t going to work.”
[In response to a comment "Lost Soul Buying..."] “Yeah, if there was ever a clearer signal of the top of the market. I’m also the guy who enters the shortest cashier line-up at the grocery store but still manages to exit after everyone in the longer ones.”

And a related story from enki at RE Talks 26 Mar 2011 8:47pm – “I totally sympathize; I am a longstanding bear (and still am), and finally bought a townhome in Abby in August [2010]. I didn’t want to buy, but I was tired of waiting, and wanted some stability. Living across the street from some very good mountain biking didn’t hurt either. I bought the cheapest thing I could tolerate, and resigned myself to losing some equity while keeping my wife.”

These stories don’t really qualify as complete capitulation, as the protagonists remain mentally bearish, and actually anticipate a drop in prices. In complete capitulation the bear overextends themselves as much as other current buyers, and emerges from the experience as a born-again bull.
The anecdotes above are perhaps best seen as stories of ‘partial capitulation’. They are of interest, because, for a prospective buyer, the ‘partial buy’ and ‘renting’ are both compromises, but with different inconveniences.
For the record, we don’t think ‘partial buying’ is a good idea. Moving up during a crash may be more challenging than one expects. – vreaa

[Update: An exchange on 29 Mar 2011 between posters at RE Talks turns ugly, and Lost Soul confirms they paid cash for the above deal. Screen caps here and here.]

Hoocoodanode?

A preparatory post. This archive post will be updated, below, with a list of future quotes from industry spokesmen, media commentators, realtors, blog commenters, citizens, etc, claiming that the implosion of the Vancouver RE bubble couldn’t possibly have been predicted. We’re setting it up here, before the fact, as that’ll add to the irony. As VHB (Vancouver Housing Blogger) recently suggested at VCI (vancouvercondo.info), special points for the first reader to spot such a quote. Extra points if the quotee is already on record as being an active bubble-denier.
This post will be linkable from the sidebar, and will be updated with quotes as they start pouring in. (No, we have no idea when, just that they will.)

——
Hoocoodanode? Quotes:

1. [pending]

“How will I ever be able to afford that tear down crack shack on the West Side when I’m competing against overleveraged idiots?”

Manna from heaven at vancouvercondo.info February 9th, 2011 at 9:26 am- [After referencing BC's 160% debt to disposable income ratio:] “How will I ever be able to afford that tear down crack shack on the West Side when I’m competing against overleveraged idiots? Now, before some cheerleader chimes in and says that I should lower my sights, I’d like to add that I’m an accredited investor (more than $1 million in liquid assets) and routinely make in excess of $200,000 a year. Please don’t think that I’ve shared that information for the purposes of bragging. My financial situation and my inability to purchase a dump clearly illustrates the absolute absurdity of this market and anyone who wishes to defend it.
Tempted to buy some waterfront on the coast and say the hell with it! I could fish, harvest clams, mussels and oysters, and forage for berries. Doesn’t sound too bad.”

Summary Snapshot – Heady Prices; Breathless Reportage; Disregard For Debt; Bull Exuberance

An average number of sales for January 2011, as monitored at VCI by VHB. [Jan 2011 sales 1876, sell/list 38.9%, MOI 6.0; Mean for 2001-2010 1732, sell/list 45.2%]

A prominent spike in average detached home price as per above REBGV chart. The detached home average price was $1,144,537. This spike may at least partly be attributable to a statistical anomaly, skewed by a few high end sales. Regardless, that’s the average, and the chart looks vicious.

In pockets of Vancouver, a fair number of over ask sales; Westside, Richmond, and Eastside, too.

Global BC runs a breathless piece on spiking prices, bidding wars, and over ask sales; with the obligatory mention of “increased Asian investment”.  [3 Feb 2011, archived by fellow archivist Greenhorn HERE.]

The Vancouver Sun runs an article ‘How much has the value of your Metro Vancouver home increased in five years?‘ [4 Feb 2011].

In a G&M article [3 Feb 2011] Benjamin Tal, CIBC ‘specialist on household credit’, argues that we’re all richer than we think, and that the 148% debt to disposable income ratio is nothing to worry about. An unwise position, in our humble opinion, and one that is likely to haunt Tal in the fiasco that will follow.

Sentiment? Not easy to distill.
In social situations there is much talk of and from those profiting (on paper) from the bubble. We have heard at least one story of people taking profits by selling investment properties (good for them).
On the blogs, some bears are definitely gobsmacked and demoralized by examples of outrageous prices achieved by sellers. Some are considering leaving town, as evidenced by the recent string of ‘disillusioned’ stories. Other bears are still showing fighting spirit and continue to point to the glaring facts of this bubble. “Just how long can this go on?”, they ask.
At RE Talks, a perennially bullish site, the bulls are even more boisterously euphoric, and any bear that ventures there is soon made to feel like a FOX reporter in Tahrir Square. Only those with the very toughest pelts remain.

This is all as good a sign of a top as any, but, then, we’ve said that before more times than we care to remember.

-vreaa

Disillusion Row, Numbers 1-12

All of the following  anecdotes are from a single recent thread at vancouvercondo.info. They are archived here as a record of some of the sentiment being expressed at this juncture. Our housing bubble is at the very least profoundly distracting. Worse, it is scaring away human capital and putting our local economy at risk of implosion. -vreaa

1. JordanClark January 24th, 2011 at 3:56 am-
“This market is insane, the longer it goes on the worse off everyone here will be in the long run. The prices just flat out don’t make sense, there is no justification and people need to realize huge debt comes with real risks. People who got in at the right time might be better off but they do so to the detriment of the younger generations, who will be relied on to pick up the economic torch some day. What will happen when they aren’t there or still up to their eye balls in debt? We’ve been waiting for years and have pretty much given up on greater Vancouver. The market here will collapse some day, but that whole process will probably take many more years, people here are extremely stubborn about the eternal value of real estate and will take nothing before reducing prices. My kids start school this year, we need to be in a home with a yard, and stability. The condo life sucks. Luckily I’m a dual citizen so I’m in the process of sponsoring my wife and moving down to Washington State. I wish this was an easier option for more Canadians/Vancouverites because I think it would offer great relief to so many other families. We’ll buy a nice 3-4 year old house, 4-5 bedrooms, 2500+ sqft, nice 8000+ sqft yard, on a nice cul-de-sac within a few blocks of school for maybe $300k. From saving all these years we can put 50-75% down, pay it off in 10-15 years while still making significant retirement contributions. I’ll be able to retire in my 40s. Adios Vancouver.”

2. Vancouverite January 24th, 2011 at 7:03 am-
“Count me among those who have had enough. I was born and raised in Vancouver. I am at the very top of my very high earning profession here, like my husband. We own a SFH on the west side (it is respectable by Vancouver standards but pretty modest by the standards of any other city) and we are almost mortgage-free. While we would like to buy a bigger house since our kids are getting older, we won’t. This bubble is certain to burst sooner or later and we work way too hard to throw our money away competing with buyers who are up to their ears in temporarily cheap debt. We know how long it takes to save $100K. Although our extended families are here, we are actually giving serious thought to moving elsewhere in Canada or even to another country. We could sell our house today and buy a nicer house in a nicer neighborhood mortgage-free, with lots of cash left over for savings. There would be some initial sacrifice professionally, but we’d probably earn more in the long run. Even if we didn’t, we don’t really care if it means a better life for our kids. Which brings me to my biggest concern, Vancouver’s future. There is almost no significant business left here that is not connected to real estate in some way. Why would you bother trying to make a better widget when you could make more money more easily by developing, constructing, or marketing $1m townhouses? Even if you wanted to make a better widget, why would you do it in Vancouver, where it is difficult to attract professional talent because of the exorbitant cost of living? When this real estate bubble collapses, and it will, I think it is going to be disastrous for this city, which has put all its eggs and then some into one basket, and for its people, many of whom depend upon rising home equity for their spending and have forgotten what actual work and business looks like. I think I might like my family to be somewhere else.”

3. LY January 24th, 2011 at 7:12 am -
“I rented for 5 years in Richmond waiting for house prices to correct. Everytime its about to go down, the gov’t will intervene. As long as mortgage terms in Canada are lax and rich immigrant’s money continue to flow in, I don’t see any sizable correction in housing prices especially in bubbly vancouver. I gave up on Vancouver, move to Toronto and bought a house. Adios Vancouver too.”

4. pricedoutfornow January 24th, 2011 at 9:04 am -
“How has RE affected me? Well, for one, I have a whole pile of cash that could potentially be used for a healthy downpayment, if prices were what they were in 2001. If I were to drop that on a downpayment today, it wouldn’t get me very far. Plus the cost of carrying the mortgage would make my living costs go up by over $1000 a month (more when interest rates rise!). For another thing, every family gathering with my SO ends with questions from the inlaws as to why I haven’t bought yet, why am I throwing money away on rent. No matter how often I explain I’m actually SAVING money, they just harp on about how “Real estate always goes up.” Talk about zombies. I do wish I had a dog though, which would be a million times easier if I had a house with a yard. I can’t wait for this bubble to pop.”

5. Vansanity January 24th, 2011 at 9:09 am-
“My inlaws saw that piece on CBC and they called up in a panic, “oh my God prices are going up again, what are you waiting for?” I told them, hey, if you want to buy us a place for $1M I won’t stop you. In other words, put your money where your mouth is, cuz I have, that’s why it’s in the bank.
My wife and I ideally would like to have a place in East Van or Burnaby but we refuse to live “house poor” as some of our friends and family do. I haven’t convinced my wife to move away, but the longer this goes we might eventually take off and move to sunnier pastures. You know the saying the grass is always greener, well when it comes to real estate and money and Vancouver to the rest of the world, it might be true.”

6. VancouverFiveOh January 24th, 2011 at 11:32 am-
“I have been bearish since 2006. I’m a logic and math type and that has served me well in my profession but perhaps not so much when it comes to housing. I could have flipped a bunch of west side homes by now, right?
Count me among those who are seriously considering leaving Vancouver. I was born and raised here but am tired of this city and it’s “best place on earth” attitude. I’m also tired of the rain. Today sucks.”

7. Dan in Calgary January 24th, 2011 at 11:45 am-
“I was born in Vancouver, left and moved back in 1975. I spent more than 30 years of my adult life in Vancouver, leaving for Calgary in 2007. Vancouver’s rain was an irritation to be tolerated as long as the city had charm, class and a friendly, laid-back kind of atmosphere, with a small enough population that one could actually enjoy what Vancouver offers. But that all changed, particularly beginning when the Olympic hype started. Then the rain became intolerable. Today Vancouver is mere hype.”

8. /dev/null January 24th, 2011 at 11:56 am-
[In response to "Let’s poll how many would have said: I wish I bought a property a few years ago."]
“I almost did but I’m glad I waited. Instead we both moved to part-time work – me to finish my degree and my wife to spend more time with our kids. With a mortgage we couldn’t/wouldn’t have done that. Now we can actually afford a house instead of that condo we were looking at, despite the run-up in prices. So we chose to invest in increasing my employment income (and raising our kids) versus real estate. So far I’m happy with the decision. Don’t assume that bears are just sitting around with their life on hold because they haven’t yet purchased a home.”

9. exWestEnder January 24th, 2011 at 1:46 pm-
“We moved to Paris (France) to see if it could possibly hold a candle to The Best Place on Earth. My partner got a transfer to the Paris office in Sept 2008. We moved in November, and man, we were we ever grateful that, as renters, we did NOT have to sell in that particular RE market. So now we’re enjoying all those French clichés: 7 weeks vacation, job security, cheap wine, amazing food, and a city where Lotsa Stuff Happens. … If our wanderlust fizzles and the Van property market ever returns to earth, we can come back knowing we already have a generous down payment….if we want to buy. On the other hand, when I remember the rain I might opt for putting it towards a farmhouse in the south of France instead….”

10. Patiently Waiting January 24th, 2011 at 1:59 pm-
“I have almost a million reasons to cheer for high real estate prices. They are the dollars my parents house is “worth”. I will inherit the house which my parents own outright. But I remain a bear because I hate what’s happening to this city culturally, feel sad for families who are struggling because of this, regret what this is doing to the economy (and my chances of getting decent work), want to see every real estate agent and mortgage broker humbled in a serious way, and logically know this can’t go on.”

11. painted turtle January 24th, 2011 at 3:05 pm-
“The real estate mania had a great positive influence on our lives. When we moved to Vancouver in 2005, as a 35 year old professional couple with 2 kids, we did not question our future: 1) Find good/secure jobs 2)Buy a house with a yard and be in debt for ever. This was supposed to be the way to happiness. Well… by the time we both had a full time job, house prices were too high. So we looked for a great rental solution (took some time). Now the kids are old enough they do not really need a yard anymore. We realized that since we are renting, we are making more money than needed. We could both put a break on our workloads and spend more time on hobbies we first thought would have to wait for retirement age. We can take care of our health, spend time with our teenage kids, take extended vacations, live a slow life. We also save money, and can look for ethical investments rather than being obsessed with ROI. We are now exploring exciting career moves/education we could have never thought of before. Somehow, it feels like being in my mid 20′s. By the time house prices will go down, our kids will be grown up, and the need for a house will have vanished. Anyway, mobility/freedom is our lifestyle, and I am happy we did not give up on that. So I would like to thank everybody who bought a house in the last six years for preventing us from entering a system we do not believe in, especially since we were about to be lured into making a wrong step. People who confuse wealth for happiness might no understand us, but fortunately, not everybody must have the same philosophy of life.”

12. YLTNboomerang January 24th, 2011 at 6:57 pm-
“I’m born and raised Vancouver and have had the opportunity to live for a few years in Germany/Belgium/Switzerland/US. I’ve been back for about 6 years now and have been a renter since selling in 2007. Does the irrationality make me want to give up and buy? NO WAY! I learned my lesson once already during the dot.com boom when I thought “maybe things are different now and the old style valuations no longer hold?”. Well, the result of that thinking lost me a fair amount on the market. I see the market today (more than ever) as a bubble and thus will never buy here until things come back in line with fundamentals. We’re happy renting and likely will do so when we move to Calgary in two years due to a planned advancement. I’ll keep an eye on Vancouver real estate and who knows, I could maybe even buy a place for retirement in the future if prices normalize.”

—
…and one bystander:

1. Best place on meth January 24th, 2011 at 11:06 am-
“I have no intention of ever buying real estate in Vancouver. I am however enjoying watching this one-industry city commit greed induced suicide. This Ponzi scheme is mere entertainment from my viewpoint.”

“As frustrating as it may be” on the Wrong Side of the Bubble, the Bearish Position Remains Right

blammo at VREAA yesterday [24 Jan 2011] taunted the Vancouver RE bear ‘Choir’ for having been wrong for so long -
“I often wonder if more people have been hurt by bear blogs (selling too soon/not buying), than will benefit from them due to future market corrections.”

This is a familiar and expected criticism. We acknowledged to blammo that it has indeed felt silly being wrong for so long, but pointed out that this is simply what happens in bubbles. Bears look silly until they suddenly look right. It is easy to point out that anybody could have made a fortune flipping condos or westside lots, but we know that all markets are made up with an almost infinite number of coulda-shoulda-woulda situations, in retrospect.

Despite being wrong for this long, our outlook remains the same. And, no, this is not out of stubbornness, or out of insanity, but quite simply because there is no information out there that causes us to change our view. The vast chasm between Vancouver RE pricing and fundamentals remains astonishing. In fact, we see even more downside for the market as it goes from very overextended to uber-overextended. Fifty percent price drops become even more likely.

David Rosenberg, by coincidence, has some relevant comments in his ‘Breakfast with Dave’ missive today [25 Jan 2010]. He is, of course, talking about the currently overextended stock market, but the principles are very similar:
“As frustrating as it may be to have been focused on risk-adjusted returns as opposed to gross nominal returns, to have been managing the downside risks and preserving capital rather than chase a mostly speculative run, it is more advantageous to be positioned tactically to take advantage of any corrections or price dislocations that occur over the near- or intermediate-term that are part and parcel of all markets, especially ones that have over-run the inherent fundamentals.”

There you have it. That is why sensible managers of their own funds have not bought into the Vancouver RE market for the last 3, 5 or even 7 years. They have seen how much our RE market has ‘over-run the inherent fundamentals’, and have decided not to participate in a ‘speculative run’ with a significant portion of their own net worth. This is not to be confused with risk aversion. All good investors and speculators have to take risk. But the ones who do well through their investing lifetimes are the ones who take calculated risks, when the odds are on their side. Pointing out that people have made money in Vancouver RE in the last 5 years is like pointing out that a cowboy walked up to a roulette table, put all of his money on a number, and his number came up. And then another cowboy did the same thing, and another. Does this change the way one approaches roulette? Do you line up with the cowboys? No. Sensible people avoid roulette altogether as, over the long term, you can be assured of losing.
Yes, it is ‘frustrating’ for bears as the RE run continues, but memories of this frustration will pale into insignificance when compared with the relentless and ongoing pain of being on the wrong side of the bubble collapse. That collapse has the potential to wipe out many, and to severely impede the financial health of even more for decades. Not to mention the broader adverse effects on our society, that we will all be forced to sustain.
Until the price drops commence, we’ll admit we look foolish. But we fully expect that to be a temporary position.
-vreaa

“The day I embraced the fact that I would be in the Lower Mainland for at least the next several years – and I realized that I was completely fine with the idea that I might rent that whole time – was a GREAT one.”

Royce McCutcheon [at VREAA 20 Jan 2011 11:44am] has some wise advice for those caught on the wrong side of the bubble – “Make a choice NOW. Don’t hedge. Don’t wait till the end of this year. Ask yourself: how much sleep have I lost over this issue? How many fights have I had with my partner? How much stress have I carried with me because of this? How much WORSE will my obsession with this issue be as I consider the implications of having an expanded family?
The day I embraced the fact that I would be in the Lower Mainland for at least the next several years – and I realized that I was completely fine with the idea that I might rent that whole time – was a GREAT one. It removed some seriously pointless baggage. Life can’t be lived waiting for things to happen – and while I truly believe things here are going to correct soon, I can’t tell for certain if we’ll see it start this Spring or a few years out – or if I’m flat out wrong. Do you want to worry about how this issue is going to affect your life for that long? A terrible thought.
So do the pro/con calculations with your partner TODAY, ruminate, and make a CHOICE. Choose to stay for a longer time line (like several years) or choose to move soon and start building your new life ASAP. You don’t have to carve it in stone, but at least put it on the wall with some fairly permanent ink. The funny thing is that there’s a decent chance you’ll be happier either way.
Make a call together and then stick with it.
And as a post-script: nothing says you can’t stay engaged on this issue from an intellectual standpoint. I’ve actually found it to be much more interesting once I stopped considering it so much vis-à-vis my own life.”

“I can tell she gets tense when I trot out the usual arguments about why it’s STILL a bad time to buy.”

tincup at VREAA 18 Jan 2011 7:43pm – “Much like all the people in the US who vowed they would move to Canada if Bush were elected for a second term, we have not followed through with our plan to move away from Vancouver if things didn’t start correcting by fall 2010. We simply renewed our plan…”if things haven’t turned around by fall 2011.” The difference now though is that due to a growing family we simply can’t stay in our current (cheap) place beyond that, and the S.O. is very anti-renting now due to the eccentricity of our current landlord. I can tell she gets tense when I trot out the usual arguments about why it’s STILL a bad time to buy. It’ll be an eventful 2011 for me, that’s for sure. If/when we buy, it won’t be at the bottom but hopefully it’ll be down enough that I won’t feel like all that patience was wasted. Vancouver really is different in the sense that it is taking forever for this correction to get going.”

Chin up; you are not alone. It’s bloody difficult to live through these times on the wrong side of the bubble. The market is a massive distraction, and it hinders regular folks who are simply trying to get on with their lives. It wastes time and misallocates resources. It causes people to leave or avoid living in our city. Affordable (not necessarily cheap, no one is expecting that) housing (to rent, and, yes, to own) is far, far better for a society. Economically, socially, psychologically. It’s going to take a while to resolve, but it will normalize. The more people that are scared off, the worse the comeuppance. Let’s hope sanity returns soon. -vreaa

UPDATE: tincup at VREAA 20 Jan 2010 1:37pm – “Just to mix things up even more though, yesterday I found out that my very solid, stable job is being relocated. Exactly where is uncertain at this point, but the options (not decided by me) range from pretty nice mountain town to god-aweful northern hole. If they decide on the latter, I’ll be looking for a new job. 2011 will be an interesting and stressful year.
Sure glad I don’t own right now…”

“If somehow this market is special, and ignores fundamentals, and keeps going up, in two years my family and I are outta here!”

YLTNboomerang at vancouvercondo.info January 11th, 2011 at 9:44 am -
“If somehow this market is special, and ignores fundamentals, and keeps going up, in two years my family and I are outta here! I’ve been courted a few times to move to Calgary for significantly higher wages but held off due to extended family being here in Vancouver. Looking into it further, I can get flight passes from AC for $320 per round trip which means: $320 x 3 x 26 = $24,960 gets the three of us back to Vancouver every other weekend and let me say, the raise for moving to Cowtown is much more than $25K!”
and January 11th, 2011 at 1:43 pm-
“My moving to Calgary wouldn’t be acceptance that the market will continue up, it would be a “sick of waiting, move on with life” move. The Vancouver market will crash, hopefully soon as it has gone on too long however if there is some bizarre move that delays the eventual crash beyond the next 2 years I’ll go somewhere else to wait. Furthermore, if there is such a massive crash that the CHMC goes down with it and becomes a burden on the taxpayer…well…I’ll just give up on this country as a whole and move overseas or down south – somewhere that has already been through their re-pricing and is back to recovery.”

2010-2019 Prediction – 2011 Update – “The Vancouver RE Bubble is like a large festering carbuncle on a dinner guest’s nose – so clearly present yet publicly unmentionable.”

We posted ‘Prediction For The Coming Decade: A Real Estate Bear Market Will Be Vancouver’s Defining Social And Economic Event’ about a year ago [27 Dec 2009], so time for a minor update.

Vancouver RE 2010 played out without any really big surprises. Mortgage tightening started, as expected, but the initial step was less restrictive than we’d anticipated, and credit remained freely available. Household debt pushed to record high extremes. As a consequence, the market was stronger from summer to fall 2010 than we’d guessed it’d be, even though seasonal sales were still tepid when compared with the last decade. The RE market was also likely supported by ongoing strong general stock market and commodities rallies (both of which are looking exceedingly long in the tooth, see below).

We still stand by the prediction items in the Dec 2009 post, and see no need to make any changes at this point. Local RE remains outrageously overvalued by all fundamental measures, and we anticipate that the inevitable coming RE bear market will have profound effects on our community.

The Vancouver RE Bubble is like a large festering carbuncle on a dinner guest’s nose – so clearly present yet publicly unmentionable. We sit and watch the machinations of the bubble in progress, in awe of how that which will seem so obvious to all in retrospect, is in the present essentially ignored.  As the market extends more and more, the bulls grow more and more complacent, and the bears grow quieter, and quieter, and some lie down and capitulate (and none can blame them for that exhaustion). These are all increasing signs that the market will turn, not that the bull will go on forever.

So, anything to add? Well, as an aside, we’ve been interested in developments in non-RE markets. We think there is a high risk of a very significant and broad pullback in risk assets over the next 12-24 months, and that would definitely speed the inevitable coming price drops in local RE. Such a deflationary wave would involve the general stock markets, the loonie, oil, other commodities, gold, silver, China, other emerging markets, Chinese RE. The US dollar will likely rally, surprising all the naysayers. Since we posted about this on 25 Oct 2010 [Contrarian Bet - The US Dollar Is About To Rally], the USD index has rallied from 77.1 to 80.2, or +4.0%, which is in the right direction and a modest start. [We admit that the USD is down in loonies through that same period, with the loonie moving from 98.03c to 100.3c. We see this strength as temporary, with fair value now probably in the low 90's.]
Some of the observations on which we base our opinions include the following:
- The vast majority of analysts predict general stock market gains through 2011; in numerous stock market analyst surveys (Barron’s, etc), a full 100% of the individuals interviewed have been bullish
- Sentiment is heady: Yesterday, analyst Laszlo Birinyi published a report predicting that the S&P500 would rally another 124% from here by Sept 2013. (This after a 86% rally off the Mar 2009 lows. Dow 30,000 anybody?)
- Bull:Bear ratios are back to the highs of summer 2008
- Complacency is back to extremes (VIX back into the teens; currently 17.0)
- Insider selling is high; markets have recently pushed higher on decreasing volume; distribution pattern
- Mar 2009 to present was a powerful bear market rally; yields and P/Es did not reach bear market bottom range; the bottom for the bear market that started in 2000 is not yet ‘in’
- Baltic Dry Index is dropping (leading indicator for global economic activity)
- China is trying to put on the brakes to manage its RE bubble
- There are growing voices against Quantitative Easing in the US; limitless printing is not a given
- Precious metals stocks have been underperforming the underlying metals themselves
- Precious metals sentiment is high and widespread; even the real estate blogs are inundated with commenters certain that gold, silver, SLW, etc, etc, can only go up (because, after all, look at all the dollar printing!). Heck, even ‘Johnny Horton’ at RE Talks is touting the PMs. The precious metals are a very volatile market and, the majority of times we’ve seen this kind of confidence over the last ten years, the new/momentum money has been caught off-sides by multi-month corrections. [In the longer term we anticipate ongoing gold strength and further fiat weakness, and a likely gold bull market blow-off peak towards the end of the decade, but only after a substantial pullback in gold in the short and intermediate term.]

So, we foresee another deflationary wave starting hereabouts. This will likely not look exactly like 2008 (that would be too easy), but will probably be a slower process. If this does occur, interest rates will not increase.

But, let’s be clear, this is all an aside, discussion of the general markets is not the core focus of this blog. What happens in those markets may influence the shape of the coming Vancouver RE bear market, but not the fact of the RE bear market. Our RE market is so extremely overextended that we anticipate it collapsing under its own weight at some point, regardless of activity in other markets. Interest rates don’t need to rise for that to happen, nor do general stock markets need to plunge. A simple plateau in prices, increase in inventory, and a small percentage of speculators getting cold-feet would do it. Local properties are selling at 2 or 3 times their fundamental value. We expect homes like the one below on Vancouver’s Westside to sell for less than one million dollars before this is all over. That would represent, in this specific case, a drop of over 65% from it’s current asking price of $2.89M, and would still make it generously priced, actually overpriced, by global standards. Yes, folks, still expensive at a third of the price!

TPFKAA – “Like many people I have been trying to save with my wife for the past four years, with the end goal of buying a house”

Just three or four short days ago ‘anonymous’, the poster now known as ‘The Poster Formerly Known As Anonymous’ (‘TPFKAA’), started treating us to anecdotes in the VREAA comment sections. We’ve already headlined one of their composite anecdotes [Spot The Speculators #22; 23 Dec 2010], and will headline others in the near future. And there will be even more to follow, we hope.
Here’s TPFKAA’s own story, edited and compiled from various posts, 22 to 24 Dec 2010, at VREAA:

“I have been a blog reader for the past few weeks – it has been eye-opening. I have since been collecting my own anecdotes. I have “vectored” in to this site to share my experiences, as limited as they are. I felt it my duty to share with others as they have generously shared – I owe a debt of enlightenment to the many who bothered to post real stories from their lives, in keeping with the spirit of this forum. I (have gone) a little evangelical on the postings volume, I must admit, and for this I apologise. I had a lot of anecdotes built up over the past month that I felt would be of interest. [No need for apologies, the anecdotes are appreciated. -ed.]

Like many people I have been trying to save with my wife for the past four years, with the end goal of buying a house – (we actually wanted a small condo or townhome but have her father living with us, and with two kids, there are very few that have enough bedrooms. One thing I don’t understand is why virtually no one builds four bedroom apartments or townhomes – they are surely more economical than SFHs?) We were despairing of ever being able to afford anything large enough. I was looking as far out as Mission (we work in Vancouver, rent in Burnaby). One day I just got sick of every minute of every day thinking about how I could spend less and save up fast enough to get in to the market, and did a little search on Google for “average Vancouver house price” to see what information I could uncover to get a glimpse at future house prices. I came across Vancouver Condo info’s rollercoaster, saw the charts, and in rapid succession hit VREAA and Garth Turner’s blog. Read every Froogle Scott episode (loved the writing and the detail) – and months of archived blogs and anecdotes. The wife says I am obsessed.
I think it’s fair to say my world shifted on its axis. Since then, I have been asking subtle questions of anyone I encounter (it’s surprisingly easy in Vancouver, in 2010, to ask highly personal questions like how much did you spend on your house! amazing…) and my findings astonished me. The one question that had been puzzling me was the HAM or Hot Asian Money hypothesis, that had all my family members believing prices will NEVER come down in Van. So I got my realtor landlord into a discussion and worked my way to asking how these investors get the money. He volunteered all of the above. I should mention that together with his brother, he also manages 19 properties for investor clients, taking care of renting them out, maintenance etc. (his brother does the legwork, gets a small rent based commission, and together they share the commission from the eventual sale of these investor properties.) All these investor clients are living in Van, and own one or more investment properties in addition to primary residence. Most of them bought in around ten years ago, however, so they truly are long term investors.

I will keep asking around for more information. As far as I see it, there are two possible outcomes to this real estate conundrum:
1) Chinese and other foreign investors keep coming with enough cash and overseas income to buy up all Westside and work their way east with tear-down and rebuilds, with no need of local jobs. Local wage earners unlucky enough to be left behind in the property market rent or leave. That would include us. A skeleton crew of baristas, mechanics, retail staff, Ferrari and Lamborghini salespeople and check out clerks live in rent assisted social housing islands in a sea of uber wealthy, world’s-elite-with-a-penchant-for-temperate rainforest-climate-owned mansions. What happens to the local economy next I am not smart enough to figure out.
OR:
2) Many of the overseas investors are overleveraged in a speculatory bubble, both in their home markets (esp. China) and here. Rising interest rates and falling prices sap their will to buy higher. Depending on events in China, prices either decline calamitously or grind down slowly as per Garth Turner until they rest somewhere slightly above where fundamentals would put them, so about 4.2 price to income ratio (Vancouver seems to always have been above fundamentals. (grow op income perhaps?)
People continue to buy in preference to renting because of the homeowner premium. (as a six year renter since I arrived in this god-forsaken city I am prepared to pay slightly over to not have to deal with the landlords here – words cannot describe how cheap they are and how much it annoys me to have to spend money and time on making repairs because they never show up and I worry that they will raise rent every time I make them fulfill their legal obligations and actually spend the money on repairing dripping taps, leaks, broken stairs, etc.)

So that’s my take. I will keep collecting information to help the blogosphere decide where this will end.

As a new-ish Vancouverite who has lived in Italy, Spain, UK, Finland, Japan, even Albania albeit briefly, and traveled in 28 more countries, I want to tell something to all of you: read my lips very carefully:
THIS – IS – NOT – THE – BEST – PLACE – ON – EARTH.
It’s just like every other place, ok in some respects, sucky in others, great in a few. Get your heads out of your asses. It’s almost embarrassing telling people from other parts of Canada where I live, as I inevitably get tarred with the same brush of arrogance.

In my case, housing in Vancouver wasn’t affordable 4 years ago, and it isn’t affordable now. If it were affordable I’d be mortgaged to the hilt just like everyone else, nervously biting my bull hooves hoping that all these have-nots posting away into the night are wrong. I didn’t try to outsmart the market. I came within 10,000 more saved dollars of pathetic little downpayment to springing for a 1950s bungalow on an easement in Surrey backing onto railway land that if BC rail decided it needed, would cut the corner of the house off. Well, the 10,000 wasn’t as big an obstacle as the wife’s reluctance towards the place.”

“I just wanted to share a conversation I had with a good friend of mine as he announced he was going to buy a place.”

El Magnifico at VREAA 25 Dec 2010 12:24pm -
“I just wanted to share a conversation I had with a good friend of mine as he announced he was going to buy a place. It really highlights well what is called “the emotional factor” when it comes to buying real estate. Hopefully this conversation will be useful to some other people…

Me:
Hi (…),
I hope you’re doing well. I was also apt hunting recently, until I learned more about the real estate market in Vancouver… I’ve decided to hold off for for a couple of years and see what will happen.
I read a lot of articles, blog, etc… You may want to hear what these people have to say about the Real Estate market in Vancouver. Here are some of the most useful links I found:
– http://vreaa.wordpress.com/
– http://www.greaterfool.ca/
– http://canadabubble.com/
– http://financialinsights.wordpress.com/
Good luck!

My friend:
Hi (…),
Hope all is well with you too!
Thanks a lot for the information. I surely won’t dare to disagree that the risk of a potential real state crisis has increased due to the low interest rates, easy credit, and consequent increasing household debts, etc.
However, since I arrived in Canada some people have been expecting a real state crash in Vancouver for different reasons: 2008 financial crisis, the olympic games; etc.
On the other hand, some other people think that real state prices in vancouver will never drop significantly, due to the shortage of available land…
Meanwhile, I now realize that I have spent over $75,000 to pay for my rent in the last 3.5 years… and I will never see this money again, that’s for sure…
I mean, I totally see your point, and actually nobody can be sure if a mortage will or will not be a good deal at this time…
I really don’t know who is right or wrong… and so I guess I will keep looking around and I think I will probably buy a place if I see a good opportunity on a place that I like. Besides, it’s probably better to buy now, when interest rates are low, than the opposite…
Anyway, we should keep discussing about that… I think it can helpful to the both of us in trying to make lucid decisions.
Thanks again and let’s try to get togetehr for a beer or coffee sometime soon.
I take this opportunity to wish you, (…) and your baby a very Merry Christmas and Happy New Year!!
Talk soon,

Me:
Hey (…),
Good to hear everything is well for you! (…).
Somehow, I’m glad I didn’t buy any real estate as I would have been such in trouble to sell it off (the market is dead right now, -35%ish for saleq compared to last year…).
I’m glad you are aware of the potential risk for a real estate crash. The intent of my first email was simply to make you aware in case you were not. As we say in french “un homme averti en vaut deux” which means something like “one knowledgeable man is worth two men”.
If I can only give you a few advices to you in making the biggest investment of your life (unless your business becomes so successful that you can afford all these millionaires’ toys), there would be as follow:
– be always careful of what real estate agent and their board say. Trusting them regarding real estate analysis is like trusting your drug dealer when he says heroin is good for you! They have a vested interest in keeping the market going up…
– when you compare renting vs. owning, make sure that you take into account all the costs of ownership. As a renter, you don’t have to pay for property taxes ($1,500 a year), strata fees ($400 to $500 a month in the nicer buildings in downtown) and the maintenance costs (so many people bought condos in leaky buildings and had to pay 50 to 70K in rainproofing… that really hurts!). All in all, ownership costs are really expensive too.
– Don’t forget that when buying a place, you’ll have to pay 7% of commission fee to your real estate agent. On a $450,000 property, this is $31,500 (not far from half what you paid in rent in 3.5 years in Canada!), money that you will never see again too.
– remember that if you don’t have 20% of down payment, you’ll be required to pay for the CHMC insurance, which will be a significant additional burden to your mortgage payments.
Coming back to the argument of buying when interests are low, it is actually a bad idea, and it’s counter intuitive. Let me explain you. When people buy a house, they look at what they can afford and usually bought the biggest house/condo they can afford (property cost + interest cost). This is ok in countries like US or France, where mortgage interest rate is setup for the entire duration of the mortgage. In Canada, however, mortgage rates are reset every 5 years. I let you imagine what happened when a family that has bought to the maximum of their ability, at emergency low interest rates, see their mortgage payment doubling because their mortgage rate has been reset much higher 5 years later… This is what, in my opinion, will create a real estate crash throughout Canada. When the Bank of Canada will increase the prime rate, people will see their mortgage payment increase and won’t be able to face it, and therefore be forced to sell…
On the other hand, if you buy a place at a time where interest rate are high, the cost of your mortgage payment are likely to be lower when your mortgage rate is reset after 5 years. Today, it is the opposite. Interest rate can only go up, and therefore mortgage payment will go up significantly for most of the people.
Regarding the argument of available land in Vancouver, I don’t really buy this argument. There were so many special places in the US (Florida, California, Nevada, etc.) that, despite great features/qualities, have lost more than half of their values that I don’t think this argument is very solid. What I see is that prices in downtown Vancouver are now similar to prices in Manhattan and double the prices in Seattle. There is no rationale reason for that…
The last thing that I wanted to share with you is what I discovered when looking at mortgage payments. Initially, the first few years, your mortgage payments are split as follow: 80%ish to interest and only 20%ish to your principal. That something I didn’t know and found totally unfair and outrageous. Somehow, the first few years of your mortgage, you more renting the place to the bank than owning it…
Anyway, it’s a very long email. I wanted to share with you my thoughts and discoveries regarding RE. I was in the same seat as you and I didn’t buy, and now I’m leaving, I’m so glad I didn’t.
(…)
I hope this email will be useful to you. I’ll organize a small farewell gathering before I leave (…).
Cheers buddy !

Him:
Hi (…),
Excellent reasoning, thank you so much for taking the time to share, I really appreciate it!
(…)
I did become aware of the issues you mentioned above when I first thought of buying a property here in Vancouver, in early 2009. I agree with you in most of them (and that’s why I gave up the idea of owning a real estate property in Vancouver, back in 2009).
In some other aspects I think slightly differently from you, more specifically regarding the interest rates and ownership costs (but I won’t get into details here, because I don’t want to make this a boring discussion to you, as I’m sure you have more important things to think about(…).
(…) I’m now also considering some aspects of ownership that are less of financial relevance (but not less important) and more of personal nature, and therefore difficult to be quantified, because their effect and value can significantly vary from person to person.
All in all, I’m still inclined to jump into the owners side, if the right opportunity comes.
Well, thanks a lot again (…). I really appreciate your analysis – definitely very useful.
Hopefully I will see you soon then!
Cheers,
….”

“Here Is My Bear Household Profile…”

‘WFT?’ at vancouvercondo.info December 15th, 2010 at 10:43 am-
Here is my Bear household Profile:
Cash invested in low risk assets: $1,200,000
Annual income from investments: $60,000
My annual income as a lawyer: $165,000
Wife’s annual income as a doctor: $150,000
Rent: $1800/mo (2 bedroom south false creek)
Do I have money to buy a house? Yes.
Am I stupid enough to do it? No.
With my investment income alone, I can live in a mansion in Shaugnessy.
http://vancouver.en.craigslist.ca/van/apa/2114309230.html

$5000 / 4br – Ideal Shaughnessy House For Rent -
Ideal Shaughnessy location, quiet neighborhood. 80′x150′ lot with a beautiful 4,044 sf character home. 4 large upstairs bedrooms with walk-in closet in each. New kitchen and large deck off the kitchen. New carpet in basement. Local access street. Only one block away from prestigious private schools.

Why would I buy that house for 3.5-4 million and have it eat up my invested savings, and spend all my take home salary on mortgage payments every month?
In other words, if I can live in that house using my $1,200,000 in savings, why would I spend those savings AND borrow a few million more to live in the same house?
Please, bulls, give me one good reason why I should buy that house?

Don Coxe: “I see a price bubble.” … Nicole Foss: “Me too, a very big one. I could see real estate falling 90%.”

For the chronological record, a bearish commentary (Coxe) and an ultra-bearish prediction (Foss) made the blogosphere news today:

“Canada continues to experience a real estate bubble” – Don Coxe, Coxe Advisors, Chicago [In 'Basic Points', 15 Dec 2010, distributed by BMO Capital Markets]

“We are in a massive bubble and there will be an enormous comeuppance. Canadians are tremendously in debt.” … “I could see real estate falling 90%” – Nicole Foss, of the Agri-Energy Producers’ Association of Ontario, and author of The Automatic Earth blog, on Max Keiser’s Keiser Report (E105), Dec 2010

[We think 90%-off is too bearish. But the direction is correct, as is the concern that there are big challenges ahead. FTR, our estimates are 50-66% off for Vancouver. -vreaa]

“In Vancouver there is no economic engine driving the local economy other than Real Estate. An economist at one of the local business schools said it’s like watching a game of Kerplunk.”

‘Fool me once…’ at greaterfool.ca 20 Dec 2010 1:10am – “I have spent all of my 50 years here in Vancouver. … This was a beautiful spot to grow up and raise a family. Was being the operative word. There is no economic engine driving the local economy other than anything related to Real Estate. This includes construction as well. Most of the local activity is supported by this sector. An economist at one of the local business schools said it’s like watching a game of Kerplunk, all the balls are still in play, but there’s only one stick left to hold them up. The stick is going to come out at some point of the game.”

Learning From Isaac Newton – “I know quite a few people who sold at peak just before the 2008 correction. Their plan was to buy back in at lower prices. They are all now waiting and losing pace to the market every month.”

eyesthebye at RE Talks 18 Dec 2010 12:24pm – “I know quite a few people who sold at peak just before the 2008 correction. Their plan was to buy back in at lower prices. Guess what? One is still living with her folks, another can now only afford a townhouse, and a couple more are renting, waiting and losing pace to the market every month. If I ever decided to sell it’ll be because I have an accepted offer on another house. Check how many “smart” waiters/renters there are on this site [RE Talks]. Waiting to buy real estate is the dumbest strategy… better to buy real estate and wait.”

Learning from Isaac Newton’s experience:
Okay, these players could listen to their friend ‘eyesthebye’, and plunge back into the bubble market ASAP (buying even less for even more; exposing themselves to the market, again). Alternatively, they could stick with the conviction that led them to sell in 2008 (that Vancouver RE was ridiculously overpriced and due for a big correction) and stay out of the market.  If they take the latter course they will,  in our opinion, ultimately prevail, and then some. In the coming crash prices will likely drop far, far below those of the 2008 peak.
During the South Sea Bubble, Isaac Newton, perhaps the brightest guy on the planet at the time, made a lot of money selling into the first half of the run-up. Then, enticed by the promise of further gains (and, who knows, perhaps because of the taunts of the early-1700s likes of ‘eyesthebye’) he stepped back in, just in time for the final peak ‘n plunge. He lost 20 thousand pounds, at a time when ‘a middle class family could live very comfortably on 200 pounds a year’. If he’d simply stayed out of the market and waited, he’d have been one of the  very few people who made money out of the bubble. -vreaa

“The maxim that credit was not wealth unless it rested on a wealth-producing asset had been ignored”. – John Carswell, historian, ‘The South Sea Bubble’, (1993)
“Snap; ditto.” – Vancouver RE 2010

Local Realtor’s Bullish Predictions – “Sorry, but you’re wasting your time with these charts. They mean nothing. There are only three factors: Supply of Buyers, Buyer’s access to funds, Supply of Sellers.”

Local realtor Will Wertheim laid out a bullish case for Vancouver RE in his comments [3 Dec 2010 10:18am] on our recent post presenting a technical analysis of the Vancouver RE price chart [Five Charts: Predicting Future Vancouver Housing Prices, 11 Sep 2010]. Will’s argument is headlined here, for the record, and our own comments on his predictions follow.

“Sorry, but you’re wasting your time with these charts. They mean nothing. There are only three factors (two related):
– Supply of Buyers, and
– Buyer’s access to funds
– Supply of Sellers

Like it or not you have to agree that there is a large enough pool of buyers out there right now and that will not likely dissipate over the next two years (as your hopeful charts try to say). Many of these buyers are not of local means. As long as these buyers have access to cheap money (be it offshore or through low interest rates) they will buy. The price balance and pressure is due to the small availability of homes for sale. As long as many homeowners are living in their homes and not listing them, supply will remain tight.

What happened in 2008 was an incredible event of such mind boggling reach. From media and those “in the know” a global crisis of confidence occurred. I knew (but did not realize its magnitude) of it coming about a year before it did from some higher-up bank VPs (no, I will not disclose who said what to me but they were a client who did not go forward on a deal and then proceeded to lose quite a bit of their investment equity, at least on paper). It stretched out into every sector of the consumer’s mind and retailers/sellers struggled to move any sort of product. What a great time to buy it was (in hindsight).

Now, what would have happened if that bubble didn’t burst? If there was no 2008 crisis? And where would we be today if the 2009 recovery didn’t happen? Doesn’t matter.

Fact: We don’t have enough land in the areas people most want to live for the type of homes most people want (westside detached).
Fact: We don’t have a high turnover of homes coming onto the market and likely won’t for a very long time.
Fact: Vancouver is desirable for a great many people, particularly those from outside Vancouver. I see that every day and hear it from tourists and foreign buyers.
Fact: Interest rates are low and general consensus is that they are unlikely to rise much over the next year or two. Beyond that, unknown.
Fact: Yes, unaffordability for locals is obscene. You’re talking average prices but as you know, that average house is pretty darn poor. While the average may be $1m for REBGV, on the West side it is $1.6m. The result is that locals will continue to migrate East where it is *cough* “affordable” while only those of generous means will be buying up the West maintaining that high average.

My bet: somewhere between 4 and 5. Not as low as 4 and not as high as 5. Unless another crisis of confidence spurs a massive dump of listings and a disappearance of money.”

—-
Our comment:
We welcome Will’s opinion and will take the opportunity to discuss it.
He sees as highly probable a mix of scenarios 4 and 5; scenarios that, in our original post, we weigh as having just 15% and 3% probabilities of playing out, respectively. So we differ substantially from him in our outlook on the markets.

Will’s position really comes down to a ‘demand-will-continue-to-overwhelm-supply’ argument:

1. Demand will remain high
- “(the) pool of buyers out there … will not likely dissipate over the next two years”
- “Vancouver is desirable for a great many people, particularly those from outside Vancouver.”
- “locals will continue to migrate East , … while only those of generous means will be buying up the West maintaining that high average.”

2. Supply will remain low
- “We don’t have enough land in the areas people most want to live for the type of homes most people want (westside detached).”
- “We don’t have a high turnover of homes coming onto the market and likely won’t for a very long time.”

3. Money will remain cheap and available
- “Interest rates are low and general consensus is that they are unlikely to rise much over the next year or two.”

Will is essentially saying “Things that have been happening will continue to happen, so price rises that have been happening will continue to happen.”

Will offers us caveats, but simultaneously downplays them:
- “As long as these buyers have access to cheap money (be it offshore or through low interest rates) they will buy.”
- “As long as many homeowners are living in their homes and not listing them, supply will remain tight.”
- “Unless another crisis of confidence spurs a massive dump of listings and a disappearance of money.”
He mentions these caveats in passing, but when it comes to factoring them into the final probability outcome, he appears to ignore the possibility (probability?) of any of these things coming to pass.

This is the difference between the bulls and bears at present.
The bulls say that things have gone well so far, despite the ‘crisis’ (the ‘Great Recession’), and thus, things are expected to continue to go well.
Bears say that, somehow we may have missed the bullets thus far, but there are so many potential downside risks, we’re expecting at least some of them will come to pass. And it’ll only take one or two of them to start a price avalanche. Bears give weight to factors other than ‘supply’ and ‘demand’, such as historically extreme fundamental measures, as indicating that a severe price correction is highly probable. Record high price:income and price:rent ratios; record high ownership rates; record low interest rates (now guaranteed to rise); record high household debt levels.

What Will doesn’t seem to get is that, rather than ‘meaning nothing’, analysis of charts takes into account the past behaviour of buyers and sellers. That’s the point. As we said at the beginning of the five-charts article: “Only a lunatic makes real estate sell or buy decisions based solely on charts, but, conversely, only a fool would say that past price action is irrelevant.”
-vreaa

Animation – “It was a hectic weekend. We finally bought a house.”

‘P’ sent us this video of an imagined dialogue by e-mail 11 Dec 2010 -

Greg Weldon, Market Analyst, interviewed on CKNW – “Vancouver is among the most overpriced real estate markets in the world. You guys are totally tied into this.”

Michael Campbell interviewed investor and market analyst Greg Weldon, of Weldon Financial, on CKNW Money Talks radio show 4 Dec 2010 [9am show], at 9.15am [hat-tip to Renting at vancouvercondo.info 4 Dec 2010 1:18pm]. Extract -
After discussing the global debt bubble, and the sovereign debt crisis, Weldon notes that “timing the failure becomes so difficult”. He discusses the “push for austerity” that is “not [only] happening in Europe”. He then says the following:
“Even when you mention Canada, by some metrics, the math is… Vancouver is among the most, you know, overpriced real estate markets that there is in the world, so, you know, it does hit home, you know, it’s a city that I love, I love visiting, it’s great, we’ve had a lot of fun there, but the reality and the math is, you guys are totally tied into this…”

Opinion – “Vancouver bears better realize that there has been, and continues to be, a demographic and cultural shift. If you don’t want to buy into this new normative order, time to leave.”

“The New Normative Order” sounds a little Orwellian, but we’ll give this poster their due. In Vancouver, sales are in the bottom 30%-ile when compared with the last 10 years. The spring should be revealing, yes, but, until then, bears such as us have to admit that the fall market is showing more resilience than we’d anticipated. Prices are rather flat, but sales have bounced more than we’d have guessed since the summer. Is this noise? We’re not sure.
The chart above is adapted from those at agentwill.com (thanks Will). It deals with sales by week in the area that realtor Will follows, but it is pretty representative of what’s gone on in Vancouver as a whole.
Here follows a laying-out of the current ‘stick-it-to-the-bears’ case. It’s yet more of the ‘overwhelming-(Asian)-demand’ argument for Vancouver RE.
We archive it here to show that, at this point, it is still being yelled from various roof-tops. -vreaa

‘Flip Flop Vancouver’ at greaterfool.ca 1 Dec 2010 4:44am (! -ed.) -

“In Vancouver, aka crash ground zero, we have had over 100 percent list sell days for the past month, and its only November. We are back to multiple offers and over ask sales. Spring is going to be on fire.
The market has come back with a resurgence, and we are on track for a sales month that will be similar to the rest of the Novembers during the bull years.
Wow, Vancouver bears have been wrong for so long it must really hurt.
As for the Asian factor, yes, everyone with two eyes and half a brain can see that the offshore investment factor is real.
When 78% of the over 2 million dollar homes are being sold to asians, it is pretty clear that they are supporting the market (and yes, that is a real number, albeit from remax).
Gee, its hardly a surprise as Vancouver prices have gone pretty much up since the mid 80s, which correlates nicely with the beginning, and continuation, of the asian influx into Vancouver.
As long as offshore asian money, and asian immigrants come to Vancouver, prices are not going down.
While the rest of the bears patiently rent, and squirrel away the meagre difference between renting and buying, asians in Vancouver are easily amassing their down payments.

Keep in mind that renting is HUGELY stigmatized within the asian community. Asian children stay at home, with no costs, until they are married. Asian children DO NOT rent, preferring not to waste their money on rent, all the while amassing their down payments. It is not rocket science – even when earning average pay, the stay at home potential first time asian buyer can get a much bigger down payment much faster then those renting.
Also, extended family immigrants all pool their resources to buy real estate with the asian community. Four individuals working average jobs can pay off a home much faster than a high income couple. They are more prone to buy investment properties with little down payments as well.

Sorry bears, but the norms, values and traditions of the soon to be dominant group in Vancouver trump those of the soon to be minority group in Vancouver. This demographic does not share in the traditional idea of going out on one’s own, renting a crappy apartment, deferring gratification, and struggling to amass a down payment. Instead, it is much smarter to live at home, not have any bills, and amass a massive DP that allows you to pay off your mortgage faster, and leverage your equity quicker for another property.
But hey, its not like I am pontificating the effect of asian buyers in a local market 3000 miles away from the action. Lol.

Vancouver bears better realize that there has been, and continues to be, a demographic and cultural shift. If you don’t want to buy into this new normative order, time to leave.”

“Once you get your mind around the fact you may never buy here it feels really liberating.”

McLovin at vancouvercondo.info 14 Nov 2010 10.01am - “I was having a frank conversation with my wife and I told her that we may never own again in Vancouver. This is not to say that we won’t take the savings and put that into investment properties in other places where the numbers make sense. Prices would have to drop 50% here for us to consider buying here and who knows if that is going to happen? Truthfully, I really don’t care, I am living my life and loving it. That being said, once you get your mind around the fact you may never buy here it feels really liberating.
In my opinion the stigma around renting in YVR has started to abate. I no longer get strange looks when I tell people I rent in fact a few say that’s a good idea. This has not been the case for the last four years.”

“I am thick-skinned enough to deal with the social pariah status of being a mere renter. A lot of people here believe that responsible adulthood includes home ownership, so if you don’t own, you somehow don’t make the cut.”

A discussion regarding buying versus renting at vancouvercondo.info this week included interesting anecdotes and opinion, and we have archived many comments below. The stigma attached to renting persists. It’ll only change after prices plummet and enough people have been burnt to make renting look respectable and even wise again. See the ‘Renters’ sidebar for past discussion and links. -vreaa

Anonymous November 11th, 2010 at 11:25 am-
“I started looking in 2007 and in the area I want to buy, prices haven’t moved much at all (not Vancouver or Richmond). Since 2007 I’ve saved over $150k. As long as price growth doesn’t outpace my rate of savings I’m doing well. If I had bought in 2007 it would have been with 5% down, as I was fresh out of school, so imo I’m better off having waited. I’m going to buy something soon, were just waiting for the exact house we want to hit the market; probably by spring. It’s tempting however to keep renting because if keep my current pace of savings, I’d have about $800K cash in 10 years, and there is no way I’d have $800k in equity after 10 years if I buy. My wife however, sees more value in family memories than a fat bank account and I agree.” and later adds “My situation probably isn’t very common. Yes we live cheap. I drive a $2,500 car; we don’t travel or eat out. We save about $4k per month on average, less currently but more when my wife is at work, so at 3% that works out to about $800K in 10yrs. We rent a home that our family owns so this helps a lot because our rent is very low, enough to cover taxes/services and maintenance. My mother in law lives 2 blocks away so she looks after the kids while we are at work, which is a huge savings.” [Arguably favourable situation, but 'renting a home that my family owns' makes this a non-representative example. -ed.]

Ted November 11th, 2010 at 11:33 am-
“Here is my story: Bought in Calgary in early 2005, sold for an almost 100% gain 18 months later. Moved to Vancouver and held on to our now large down payment and rented. Passed up 1000 square foot units for around 500K which now go for about 650K.
Gave up and bought in early 2009 and now contracted to sell 100K higher (-35K of renos – low net but free accommodation at least!)
I don’t think I should buy right now but don’t have the conviction all of the bears seem to have. Who knew the interest rates would drop to nothing? Who knew amortizations would be extended? Who knew qualifying would become so easy? Who knew Canadians would lever themselves up to the levels they have? Could something else come out of left field to keep this game going? TD’s new mortgages? Maybe… There is no way investment real estate makes any sense right now but if you’re looking at a primary residence I’m not so sure.”

patriotz November 11th, 2010 at 1:29 pm-
“I do not aspire to own in Vancouver again as I have no plans to live in the city long term. Elsewhere in BC perhaps, and as we know the bust is already well under way outside the Lower Mainland. If I did want to buy I would wait for price/rent of about 150x, that would be the figure for a house with suite income, a house without a suite would be higher as the potential suite income would have to be factored into the price. Any higher than that and you are throwing away money. I’ve found that having my name on a deed does not make life more enjoyable. I also think that Canada’s support for retirees will be stressed in the future and I think throwing away money at a stage in your life where you don’t have a great deal of time to earn it back is not very smart. I’d rather keep my money in the stocks and bonds where I can get a reliable 6% yield. As far as condos go, they have so many downsides that I can’t understand why anyone would pay more than 100x rent. If you rent one you do have the risk of having to move but so what – they’re all the same anyway.”

Lilypad November 11th, 2010 at 1:31 pm -
“Prices would have to fall at least 50-70% for me to buy a house or condo in Vancouver. It is just too easy to rent a luxury condo for half the price of a mortgage, strata fees, taxes and other maintenance costs, even at these low mortgage rates. Plus I don’t need to deal with the costs and anticipation of building leaks, irritating strata councils and disrespectful neighbours. If I have any problems I just pick up and move. To me this lifestyle represents FREEDOM. I can always move with my nest egg to a nice place that is 1/7th the price of Vancouver if I ever feel the need to own a house and take on the headaches and added expenses associated with it.”

Absinthe November 11th, 2010 at 1:47 pm -
“I’ve had, since 2005, a bigger place at a lower price in a better location than I could have had buying, with money left over for RRSP and RESP. I am more diversified than I would be if I owned my primary residence. I have more room, which with two small kids, is no small thing. I have a yard, which with two small kids, is no small thing. And, I don’t have to lose a second of sleep worrying I don’t have enough set aside for the roof, or the furnace, or whatever else might go. Seriously: I became a bear because owning would require an unholy amount of “lifestyle” and location sacrifice for the excitement of property taxes and strata meetings (because I wouldn’t have been able to afford a SFH) and there was simply no way it was worth it. I live in a bigger house a lot closer to work than those of my group that own.
If housing rises forever, then they’ll be house rich and I’ll have investments and be more liquid and live closer to work and deal with less stress. I will buy, if and when the lifestyle sacrifice required isn’t so heinous as to make my every day a sweet hell of 3 hour commutes (and the car/gas payments that go with), or conversely, 4 people in 750 square feet with no room for projects, etc.”

metalhead November 11th, 2010 at 1:48 pm -
“I have a paid for house in Abbotsford and I’m 50 years old with a decent bit of cash put away. I’m looking at rec. property in the Okanagan area. Some specific deals are getting close for me. In general though I think the area has a ways to drop and it’s really just starting. We’ll see how it looks in Feb. or March? I should be able to buy something outright or maybe tap a small amount of HELOC to take care of the balance. I won’t need a mortgage.”

Renting November 11th, 2010 at 1:57 pm -
“At what price point would I actually buy? When it is cheaper than renting when all costs are factored in. I think we need about a 50% reduction to make buying cheaper than renting if interest rates stay low. Is 60% to 70% realistic? Yes, you are caught in a bubble which clouds your vision. Look at the examples posted in this thread for Prime NYC at 80% off and Kelowna water front at 50% off. This is just the start of the decline in both places. A million dollar home in Vancouver is a piece of shit. At 60% to 70% off it will still be a POS and will still be priced higher than buying a POS anywhere else in the world. It would have to drop 85% to be priced at levels we see in Phoenix for example. So yes 60% to 70% is not just realistic but probable. 300k to 400K for a POS house in the less desirable part of Vancouver would still be expensive IMO but that is 60% to 70% off!”

cgh November 11th, 2010 at 1:01 pm -
“My rent is $820 per month and I’ll gross around $120,000 this year (hard to say exactly yet, as I’m a contractor). If my girlfriend and I end up moving in together, I’ll save even more.
I have other friends in the same position. Unlike them though, I am not even thinking of buying anytime soon – why bother? The value just isn’t there, and I am thick-skinned enough to deal with the social pariah status of being a mere renter.”

paul November 11th, 2010 at 3:20 pm -
“I’ve never experienced any negativity about renting yet I read about it all the time on forums like this. I think this is an Internet thing as in real life it would be very surprising to have someone criticise you to your face for choosing not to buy a house. I mean, your living arrangements are hardly likely to come up in conversation with someone you hardly know and why would the people you do know care whether or not you own your own home?”

cgh November 11th, 2010 at 3:53 pm -
“Actually, I find living arrangements come up [in conversation] all the time. At dinners with friends, some of whom are acquaintances (particularly their spouses), talk often turns to real estate, what’s going on with whose house, etc., and when I eventually reveal I’m renting, it’s assumed by some (not all) that there’s “something wrong” in my life. Those were the words used by a very good friend’s spouse not long ago, in fact. She has basically classified me as someone who “needs to get their life together”.
I bought a vehicle over the summer, and the financial person at the dealership took my cheque (I paid cash) and said, “Bet that’s the biggest cheque you’ve written in a while – well, except for the down-payment on your house!” I said I’d never made a down-payment before, and it went from there.
Maybe it’s just our social circles, I don’t know. I think that once you’re 35+, a lot of people here believe that responsible adulthood includes home ownership, so if you don’t own, you somehow don’t make the cut.”

rp1 November 11th, 2010 at 5:57 pm -
[Regarding whether one experiences “negativity about renting".] “Try being 30 with a young family. If you haven’t got a million in cash or a million in debt (either way, as that’s what gets you a SFH) then you’re the worst parent ever.”

Anonymous November 11th, 2010 at 6:35 pm -
“My wife mentioned to another mom at our kid’s preschool that we rent a house nearby and the other mother responded like my wife had cancer, with a tone of pity.”

McLovin November 11th, 2010 at 6:47 pm -
“It feels different out there. I am meeting a lot of people who think the market is overpriced. Recently I met a person who sold his house made a huge amount and said “I won the lottery.. I am taking my money and renting maybe for the rest of my life.” This was refreshing to hear. I know the sales and prices don’t really back this up but it appears to me that the winds are changing.”

jesse November 11th, 2010 at 8:28 pm -
“Overpaying will, in net, leave someone with less capital in the future. For whatever reason some people’s personal situations warrant them being willing to pay a premium for certain products at certain times. From a strict value investment point of view investing in property any time in the past decade — even at a small discount vis a vis the market trough in 2008-09 — was not a wise move. But in many specific situations it’s not always about maximizing future capital.”

Renting November 11th, 2010 at 9:34 pm -
“Although I have seen people offer good intentioned advice to renters I have never seen someone get any type of pity or disrespect. If someone was to show my wife that disrespect I would simply give her some advice on how to reply. For example: Oh do you own? When did you buy? Oh geese right at the peak of the bubble. You must be worried? No. Well then your husband must have a really good high paying job. Oh that is all he does, so sorry to hear that. We will keep our fingers crossed for you that things work out. I mean I am sure what happened in the US will not happen here with the price collapse. And if interest rates do go up as everyone predicts you can get always get a second job on weekends. I can watch the kids for you. I don’t have to work.”

NO – LYMPICS November 12th, 2010 at 10:53 am-
“A friend of mine lives near the 41st and Oak. For about 16 years he rented a nice 50 year old rancher from a Chinese landlord. The Landlord has now given him notice…wants to sell for approx. $1 million but no takers. Was paying about $1400 month.”

Opinion – “Pools Of Morons And Herds Of Idiots”

Derek at vancouvercondo.info November 11th, 2010 at 10:11 pm -
“The thing with Vancouver is that you can never underestimate the pool of morons who will ante up and buy a house. It just seems that there is always another idiot who is looking to get in the game. I dunno when this will run out. It will, but it could take a lot longer than [bears] hope for.”

Devore at vancouvercondo.info November 12th, 2010 at 1:22 am -
“The money is not in running with the herd. The money is in raising your head up, and looking at the big picture to see where the momentum’s going, then getting there first. The herd is right, until it isn’t. Everyone’s an investment genius during the boom, until the boom ends. Then they’re running off the cliff with the rest of the genius herd.”

[We agree with both Derek and Devore. -vreaa]

Chris Davies, REIN Member – “Guys like Don and I don’t care if prices go up or down, or sideways. You can make money with real estate in any economy.”

The recent VREAA post on Don Campbell’s interview at BNN [28 Oct 2010] resulted in a response from REIN member and blogger Chris Davies: ‘Bubble Blogging = Masturbation’ at chrisdavies.ca, 3 Nov 2010.  Read more about Chris here. In his post Chris says some fairly rude things about Garth Turner, denigrates what he calls “bubble blogging”, and then addresses the VREAA post thus -
“Which is why when I read a truly rediculous [sic -ed.] post from VREAA which took the time to transcribe one of Don Cambell’s spots on BNN, I was inspired to write this post.
Just how bored do you have to be to sit and transcribe a BNN interview? Really?
And is Don such a threat to you, Vancouver and investors across the country that you need to try and dismantle his points?
It’s easy to make a list of  ’15 fallacies and misconceptions’ with no support, and no concrete advice.
Here’s the point for the bubble bloggers out there, those who write just for the ego boost of an inbox full of comments or seeing a traffic spike.
Guys like Don and I don’t care if prices go up or down, or sideways. What we’re looking for is how can we use it to make money, and improve our families quality of life, plan for our own retirement or help others. You can make money with real estate in any economy, and many of us have done it in the past and will continue to do it in the future. My family has been managing buildings for Don and investors like him since the early 1980′s.
If there’s a bubble blogger out there who would like to see how it works, give me a call. If you’re just wanking to the tune of ‘the sky is falling’, just stay home.”

—-

Open reply to Chris:

[Intro: Readers to insert own masturbation joke here: Examples: "Why so tough on masturbation, Chris? Bad experiences?", or, perhaps use "..sex with someone I love", etc, etc.]

1. VREAA documents beliefs and actions relevant to the Vancouver RE market. That’s the whole point of VREAA. It’s a chronology of actions and opinions. REIN’s position is noteworthy at this point in the bubble. As is yours, Chris, regarding price action being irrelevant.
We don’t archive and address Don Campbell’s points because they are “a threat to (us)” but rather because they contain common misconceptions currently held by lots of people in Vancouver.
And we “dismantle” his arguments because, well, they’re dead wrong, and may even be dangerous to some. (Like you, we like to “help others“.)
We take the trouble to have the interview transcribed because videos on the web can simply disappear, and, as archivists, we’d like to save details of different opinions for posterity. [No giggling, Chris. 'Posterity' means 'all future generations', not 'butt']. We guess it’s disturbing for RE pumpers to see their flaccid non-arguments transcribed in black and white.

2. You state “It’s easy to make a list of  ’15 fallacies and misconceptions’ with no support, and no concrete advice.“
If you were a regular reader of VREAA, you’d see many sound arguments supporting these conclusions. We are in a large RE bubble. Fundamentals don’t support current values. (We particularly disagree with Don Campbell’s statement “You can not analyze a housing market by looking at the housing numbers, you can only analyze the future of the housing market looking at the economic fundamentals, which is jobs and in-migration.“)
If we were asked, our concrete advice would be for individuals to consider not buying RE in the Vancouver market, and, to a lesser extent, we’d give the same advice for the whole Canadian market.
We note that you have not attempted to supply evidence against even ONE of the ’15 fallacies and misconceptions’ we found in the Don Campbell interview. (“I’m a good guy just trying to make an honest living” doesn’t qualify as an argument). Perhaps you’d like to try?

3. You state “You can make money with real estate in any economy.“
Please clarify: When you say “make money with real estate” do you mean buying real estate or managing real estate? You state “My family has been managing buildings for Don and investors like him since the early 1980′s.”
Okay, great, you make money in property management. I have absolutely no problem with that whatsoever. Property managers will likely continue to make money in any market, agreed. Property always needs managing. But let’s not confuse making money from property management with making money from investing or speculating in RE.
Remember, people are reading your blog, and watching Don Campbell on BNN, trying to make their own decisions about whether to buy real estate, often whether to buy a personal residence. We wouldn’t want them to be confused in that decision by comments about how it’s always a good time to be a property manager.
So, to the point, Chris: Are you currently buying properties?

4. Regarding price direction, you state: “Guys like Don and I don’t care if prices go up or down, or sideways …“
We believe it is very dangerous to make light of possible price drops, and that, for many Canadians, RE will prove to be a spectacularly bad investment going forward. Future returns are very dependent on entry-price points, and from that perspective it doesn’t get much worse than it is right now.
Besides, note that Don’s interview doesn’t even acknowledge the possibility of significant price drops. The whole interview treats the risk of any price pullbacks, even 10%, as remote. Don states that even the most overvalued markets are simply going to “plateau” or “be flat”. We disagree strongly.

We’ll keep your “I don’t care if prices go up or down” opinion on record. In fact, we’ll add it to the ‘Bull Hubris’ sidebar along with its confident cousins.

Ben Rabidoux, Financial Insights – “I rent my current home” – Check Out; Bookmark

Ben Rabidoux, on his blog ‘Financial Insights’, has been spoiling us all recently with lots of excellent commentary on the economy and the real estate markets.
I may be preaching to the choir (or the already converted?) when I suggest you bookmark Ben and check out his site regularly.

Here is part of Ben’s own story [financialinsights.ca 31 Oct 2010], reposted here as an archived anecdote, with his permission:
“I rent my current home. I live in a fully updated and renovated 4 bedroom, 3 bathroom home with all the trimmings (granite countertops, slate and hardwood floors, etc.). We live on 5 beautifully manicured acres backing onto a wooded area with trails through it. I pay about half of what the home could rent for on the market. We are in a very secure 2 year lease with a written agreement by the owner not to sell the home for the duration of rental period. Needless to say, I don’t buy the argument that renting a home is somehow a compromise on stability or living standards. Not at all.
I’ve often said that I do feel that home ownership is an integral part of long term financial security. I’m not against owning a home at all. However, the argument that renters are ‘throwing their money away on rent’ is bunk. It holds only the slightest element of truth when price to rental ratios are at or near their long-term averages. Today they are an astonishing 2.5 standard deviations above their long-term norms, an extremely rare statistical occurence.”

It’s wise to be cautious when you come across somebody on the internet who sees things pretty much the way you do yourself… there’s a danger that you simply confirm your own delusions. The web has been criticized for possibly having that effect on outsider groups and conspiracy theorists.
Having said that, when you’ve looked at the data yourself, drawn your own conclusions, and consequently feel isolated in what seems like a mainstream of madness, to then find other individuals who have drawn similar conclusions is to be shown that there may be some sanity in your thinking.
vreaa has been party to more than one prior situation like this one, where the passage of time proves a small minority opinion to have been overwhelmingly correct in the face of mainstream ignorance.
We have little doubt that the bearish position on Vancouver RE will prove to have been correct.
As Ben says, he is NOT wrong stating that Vancouver RE will return to values supported by economic fundamentals, well below current price levels.
Timing? It’ll happen when it happens. -vreaa

Undead Market – “I have a creepy feeling things are heating up again.”

This by e-mail to VREAA from MarKoz 20 Oct 2010 - “A co-worker has a house in Coquitlam which she listed for sale in the spring. It lingered for sale without an offer for 3 months. She just re-listed and it sold in a week and a half. I have a creepy feeling things are heating up again. Open houses and “sold” signs all over Kerrisdale as I drove through on the weekend. I live in the Main area and am surrounded by holes in the ground where older houses (which were listed at $750K+) were demolished to make way for new builds.”

“My wife and I are starting to think about buying a house, although nothing too serious until we see the correction is underway.”

[note that this anecdote is posted here one month after it was up at VCI -ed.]

mflat at vancouvercondo.info 27 Sep 2010 4:48pm – “My wife and I are starting to think about buying a house, although nothing too serious until we see the correction is underway. With that in mind, we’ve started looking more at the real estate market to see what’s out there and watch the pricing trends. We did two things this weekend that I wanted to share:
1. Went to the Vancouver Heritage Foundation’s self-guided Vancouver Specials tour. For $25 they give you a map of 4 renovated Vancouver Specials (all on the east side this year) to see what’s possible with these eye sores. As shown, the boxy Special is great for a modern renovation with it’s straight, boxy lines, and simple load-bearing design. Something to think about for when the market tanks and one wants to do a lot of reno to make a house their own.
What surprised us about the tour was the demographic of people we saw/encountered. They were largely over 40-years-old, and many much older. Perhaps those who are looking for their last flip into a house they can reno and be proud of? Something that might get into Wallpaper magazine as they enter their final creative years as a self-published author/poet? Anyway, just odd to see so many older people interested in this sort of thing, and not the young condo flippers that you’d see at every Realtor conference.
2. Took a long walk from downtown to Main & 25th to check out some houses. First up was V840359, listed at $720K. This is a Vancouver Special built on one of the worst bogs in the city. Take a walk down 18th sometime, and have a laugh at all the tilted foundations where neighboring roofs are almost touching due to the house angle. The house listed was like a horror slum on the inside. The worst part of it was the room angles, with sloping floors, and walls/ceilings that felt trapezoidal due to the sunken foundation. No thanks.
Next up was V851300, listed at $790K. A tiny house on a small lot marketed as a better option than a townhouse or condo. Well, maybe at these prices.
Observation is that prices are softening, but not yet to the extent where anything makes sense.”

Vancouverite View Of New York City Apartments

‘Bob’ sent the following note and images to VREAA by e-mail, 14 Oct 2010 - “I’m a Vancouverite who recently had a chance to spend time in New York City. The five boroughs have a total population of 8.4 million and a population density of 10,630/km². The New York metropolitan area has a population of 19 million and an approximately gross metropolitan product of $1.13 trillion (2005). By comparison, our entire nation, the whole of Canada, has a GDP of about $1.3 trillion (2009).

While walking about the city, my wife and I found ourselves looking at photos posted in an upscale realtor window (housing ‘porn’, as some people call it), advertising Upper East-side apartments and condos. Desensitized to high prices by the Vancouver real estate market, we were pretty surprised to see the kind of thing you can get in Manhattan for your buck.

For instance, to give some examples that come up after an internet search (in these cases all by Sotheby’s) – this 1 BR in a very prime area, ‘close to Fifth Avenue, located on New York’s Museum Mile next to Central Park’,  ask $950K:

Or this 900 squ.ft 1BR, 10.5ft ceilings, at 45 East 66th Street, (on Madison Ave, one block from Central park), ask $895K:

Or this smaller 1BR at 345 East 77th Street, ask $399K:

Later, looking to get an early dinner, we asked a respectable looking fellow for restaurant advice.  Me: “Excuse me, do you know this neighbourhood?”, He: “I should do, I’m a realtor.” After he gave us advice regarding where to eat (good advice, it turned out), we asked him about the market. He told us about apartments nearby in the Upper Eastside that were selling in the $600K range. (Looking around the web, for instance at these recent Corcoran sales, it seems properties below $1Million are selling in the $500-$900/squ.ft range, with lots in the $625-$700/squ.ft price range). Perhaps your readers with more experience of the Vancouver condo market can offer opinions on how these prices compare with ours. They seemed like good value by Vancouver standards to me. [Recent sales from prior link saved for the archives here. - ed.] On top of this, it looks like the US property market is about to take yet another step down.

I’m not going to try to list all the appeals of NYC. Anybody who hasn’t seen the place should visit. It is indisputably one of the greatest cities in the world. On this note, I stumbled across two things that led me to consider Vancouver, and BC, and our much discussed ‘Greatest Place On Earth’ theme -

The first was from an ad for a iPhone app that allows you to identify activities of interest around you in NYC. I was struck by the modesty of the claim -

The second was a painting by artist David Shrigley, seen at the Anton Kern Gallery in Chelsea, NYC. For the record, I love Vancouver, and love living here, but seeing this painting in NYC did make me chuckle. A teasing contrast to ‘Greatest Place On Earth’ and ‘Everything Is Going To Be Alright’ -

“I explained to her that I’m happy renting and she reminded me that renting is throwing away money when it could be put towards a mortgage.”

specialfx3000 at vancouvercondo.info 12 Oct 2010 8.19 am – “Over the Turkey weekend, a relative asked me again if I’m still in the market. She reminds me that the rich Asians are taking their wealth out of China and will continue to pump up the Vancouver prices. She said their dirty money needs to be invested in our safe-haven country. I explained to her that I’m happy renting and she reminded me that renting is throwing away money when it could be put towards a mortgage. I told her sales are drying up and she said it’s just the season. I told her local income cannot support the prices and she says that don’t matter. She of course bragged about how much her house is worth now. Thank goodness my baby started crying so I politely ended the conversation.”

“I am off with my family to Italy for 2 1/2 weeks, this wonderful little trip made possible by my landlord.”

McLovin at vancouvercondo.info 7 Sep 2010 6:23 pm – “I am off with my family to Italy for 2 1/2 weeks, one week in a villa in Umbria and one week in a villa on the Amalfi coast. This wonderful little trip (I hope we will remember for a lifetime) has been made possible by my landlord. We rent a wonderful 3br condo in Yaletown for 31% of the cost of owning it. The money I am “throwing away” on rent has made this trip possible.”

“A friend-of-a-friend liquidated everything this August. Sold his house in Kits and investment condo because he believes we’re in for “another recession or worse”.”

Pete at vancouvercondo.info 30 Aug 2010 8:12 am – “I talked briefly with a friend-of-a-friend who has just liquidated everything this august. Sold his house in kits and investment condo because he believes we’re in for “another recession or worse”. He’s now sitting on 1.9 mil in cash and planning on renting and waiting out the market for a few years. He either has the best timing ever or he’s going to be dissapointed when he’s priced out of that east van fixer-upper in a few years.”

“Vancouver is in our blood. That doesn’t mean we’re incapable of seeing the insanity of pricing our real estate way ABOVE places like Hawaii, NY, etc. The hype is reprehensible. We see the HUGE amount of misallocated effort and money wrapped up in this market, and the hurt that’s coming down the road.”

The “if you complain so much about this place, why don’t you leave?” cries have reached another wave of high intensity on local RE blogs. The couple in this eloquent anecdote demonstrate how it is not inconsistent to both love Vancouver and, at the same time, harbour misgivings about the obscenely overvalued RE market & its deleterious effects on our society. -vreaa

Royce McCutcheon at vancouvercondo.info 20 Aug 2010 12:13 pm -
“My wife and I – both in health research – have decided to have a crack at setting up here because we felt it was somewhat worth taking a professional hit in order to 1) have closeness to people we care about and 2) to stay in Canada and, especially, in an area where we grew up. We’re here because we are Lower Mainlanders. I don’t mean that in the sense that we’re straight out of a leaky-shoebox-lovin’ condo ad, stacking fresh-cut flowers in the front basket of our mint Vespa scooter. I mean it in the sense that we are actually OF this place. For better or worse, this place will always be HOME. I learned how to ride a bike when I lived in family housing at UBC, I grew up listening to Robson & Larscheid call Canucks games, I’ve enjoyed everything from Expo 86 to the celebration of the recent hockey gold, and my heroes are people like Terry Fox and Doug Coupland. My wife has similar bona fides. We’ve spent time in dozens of countries between us and we return here because it is in our blood.
But even with us personally loving it here, we reserve the right to mock the “best place on earth” tag. Just because WE are acclimated to the craggy beaches, hefty rainfall, and lack of cultural and industrial infrastructure, doesn’t mean we’re incapable of seeing the insanity of pricing our real estate way ABOVE places like Hawaii, NY, etc. We know that outsiders who don’t have Vancouver in their blood are unlikely to feel like we do, so we think the hype is reprehensible. And even though we personally are not in the real estate market, we can’t simply ignore real estate in the Lower Mainland. Why? Because it’s clear that this incredibly delusional and out-of-whack market has the ability to impact the majority of people in this region (not just those who invested directly in real estate)! THAT is why we express anger and frustration and why we deride this place. The vitriol you’re witnessing towards Vancouver – and Lower Mainland real estate in particular – is a symptom of the Cassandra complex that’s developed in people in this city who can think rationally. We see the HUGE amount of misallocated effort and money wrapped up in this market and we see the hurt that’s coming down the road, yet we’re pretty much powerless to affect the situation. Some of us may personally benefit from a massive correction and are gleeful, sure. (There’s a very decent chance that my wife and I will benefit hugely in the time ahead – and even if a correction takes a long time, we love where we rent.) But if things get bad enough, many might also have to leave (for us, research funding has already started to be cut BEFORE a massive correction has occurred). And we take no pleasure in seeing people we care about – or the city we love – struggling to move forward.
So, regarding why we stay here even after ‘grass is greener’ comments, it comes down to simple personal math: [(Being ‘of’ the Lower Mainland) – (Poorer work circumstances)] > [Better working circumstances somewhere else]. Some days the equation flips. Once that happens enough times, we’re gone. Till then, most negative comments are just blowing off steam in an obviously frustrating situation.”

Krugman – “Canada’s housing bubble has yet to burst.”

Nobel winning economist Paul Krugman addressed the Canadian Bar Association in Niagara Falls, Ontario, 15 Aug 2010. As reported in, G&M 16 Aug 2010. - “Canada cannot be complacent in the face of disturbingly bleak global conditions, because Canadians spend too much relative to their household incomes and the country’s housing bubble has yet to burst.”

The Importance of Buying at Vaguely the Right Time

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

Misinformed Citizens – “She mentioned now is a good time to buy, read it in a paper, heard it on the news. I said now is exactly the wrong time to buy. Many people that don’t keep up with blogs or follow stats closely haven’t really got it yet.”

When BC is in crash mode and the majority are saying “nobody knew this could happen here”, the stories on the blogs will stand as a record that a small minority had seen the bubble for what it was all along. -vreaa

metalhead at vancouvercondo.info 5 Aug 2010 5:21 am – “Spoke with the neighbour’s wife on the street. She knows I have talked about buying another property in the past. She mentioned now is a good time to buy, read it in a paper, heard it on the news. I said now is exactly the wrong time to buy. Prices are still very near peak and the downturn is only just starting. She seemed surprised. Many people that don’t keep up with blogs or follow stats closely haven’t really got it yet.”

Cabbie Talks Real Estate

GB at vancouvercondo.info 30 July 2010 8:32 pm -

“Last night came home by cab from YVR. Had to endure cabbie telling me all about how “real estate only goes up”. Only in Vancouver this conversation would occur in a cab! LOL. I was too tired to reply with much more than “no it doesn’t”. Of course he thought I was an idiot. And of course he is a cabbie and I work in finance. What is the saying?…when cabbies start talking the asset….then get the hell out of that asset! Reminded me of the tech bubble days when shoe salesmen were telling me how they were making it big…”

“The realtor called me back earlier this year to tell me I “missed the boat” in 2008, but that it was still a great time to buy despite prices being higher…”

exx at vancouvercondo.info 30 Jul 2010 at 9:38 am -

“I’ve been waiting for one of these Port Moody highrises (Sahalee) to reduce under $300K. Finally happened, #1709 651 Nootka reduced from $338K to $299K. #609 is still asking $329K… good luck! These 2 bed 2 bath 750sqft condos are literally shoeboxes with no closets. Anyway, thought I’d post that because in summer ‘08 I viewed #809, listed for $349K, and jokingly told the Realtor I might consider $250. She called me back and said I could have it for $300K – I passed. She actually called me back earlier this year to tell me I “missed the boat” back then, but it was still a great time to buy despite prices being higher…

Also both my friends in Coquitlam have let their listings expire after 4 months and 0 offers. One of them has decided to try selling in the fall or next year when the market “picks up”, the others own a house and are refinancing to fix it up and then either try again or just not sell at all.”

Market Savvy Prospective Buyer Patiently Watches a Bubble Peak and Begin to Implode – “I’ve sat on my hands and waited for the market to come to me.”

‘Taipan’ is an Australian commercial real estate developer who is looking to buy a recreation property in a ski resort in BC. Here is part of his story, one of a market savvy prospective buyer patiently watching a bubble form a peak and then begin to implode. -vreaa

Taipan at RE Talks 24 Jul 2010 10:53 pm -

“I’m looking to buy a ski chalet in the interior of BC. In 2008, I started looking seriously. It took me only a week or two to shake my head and say that Canadian prices were nuts. It’s like that saying that “If you drop a frog into a pot of boiling water, it will immediately leap out. However if you add a frog to a cold pot of boiling water, and heat it, it will die before it realizes how much trouble it is in.” People, including bank managers, real estate agents etc., looked at me as if I had two heads when I told them they were in trouble, and the market was a bubble. So I’ve sat on my hands and waited for the market to come to me. But I’ve never stopped watching that market and watching the emotion of the vendors. And that is best represented by the drop in asking prices and the sale prices. Every week or two I sit down and go through all the listings, price changes, sales, etc. and keep it in a database. (Eg get yourself informed – and don’t rely on others to feed you what they want to tell you.)

What I’ve seen is three kinds of actions:

In the first group, a vendor will place the property on the market and it will sit and sit and sit. There is no variation in price and after around 300-500 days it is just taken off the market. Most likely that vendor still wants to sell, and harbours the belief that some how, some time in the future, the market boom will return and they will get paid their asking price. (Well it could be a very long time!)

The second group, who must sell. You will see prices dropping and dropping and dropping. Like these examples below. Just remember this is a ski resort and all of these properties are pretty well within eye distance of each other.

House 3127 sq feet, 4 bed, family room, flat
reduced from 865000 to 799900 11october2008
reduced from 799900 to 744900 5/4/09
reduced from 744900 to 699900 on 10/04/2010
reduced from 699900 to 649900 on 31/05/2010
Time on market 708 days – been with 2 agencies remains unsold.

Townhouse 1555 sq feet. 3 bedrooms
reduce from 639000 to 629000 1/3/09
reduced from 629000 to 598000 30/09/09
reduced to 589000 30/12/09
reduced to 559000 15/3/2010
reduced to 539,000 on 10/04/2010
reduced from 539000 to 529000 on 24/07/2010
Time on market 571 days Unsold

House 2802 sq feet 4 bedrooms
originally listed at $1,590,000
changed agencies and relisted at $1,425,000
reduced to $1,200,000 15/3/2010
Sold for $1,050,000 after 523 days on the market.

Townhouse 1461 sq ft 2 bedrooms
reduced 22/02/09 from 529000 to 499900
reduced 499000 to 479000 27/07/09
reduced from 479000 to 449000 15/3/2010
reduced to 429000 on 21/5/2010
Sold June 2010 for $409,000 after 540 days on the market.

The third group. People who have bought places during the boom and now facing the harsh reality of taking a bath, when they want to sell. For instance a house bought in Sept 2007 for $1,225,000 has this week been relisted at $999,900. No multiple offers, just a steady increase in the amount of stock, properties sitting and not selling, while others are sold at dramatically reduced prices. Those that have met the market have sold on average in 210 days.

Welcome to how bubbles deflate! And the bulls can’t understand how patience can be so rewarding.”

Conflicting Views On Vancouver RE Risk

A Vancouver RE bull and a Vancouver realtor discuss the issue of timing a sale:

eyesthebye at RE Talks 23 Jul 2010 9:54 am – “Since real estate mostly goes up, and is almost always close to peak, it’s not risky at all whatever time you sell. The only risk when selling is not getting back in fast enough and letting the market and your affordability get away on you.”

ckung at RE Talks 24 Jul 2010 8:04 am – “Given that I personally believe that this market is at a start of a long awaited correction, I would suggest re-listing it but with an aggressive price strategy (i.e. significantly lower than the competing properties). If, for whatever reason, my clients feel that delisting it “for now” is the better way to go then I would warn them that there a real possibility that the market may have dropped even more once they want to list again. It is a risky proposition to delist and wait for a better time to do so because there may not be a better time to do so.”

[We agree with the realtor, 'ckung'. The bull's confidence is breathtaking. - vreaa]