Monthly Archives: October 2009

Anecdotes From The Future – VANOC Knows How You’ll Feel Tomorrow

Okay, this may not be ENTIRELY relevant to Vancouver RE, but anybody who has been following the market will know how important the idea of the 2010 Winter Olympics have become regarding market sentiment and discussion. So perhaps you’ll forgive this somewhat extraordinary post. It does, however, deal with an issue that is of interest to archivists, namely the writing of ‘history’ via before-the-fact press releases. Ron Judd’s ‘Olympic Insider’ column at The Seattle Times, dated October 30, 2009 at 10:45 AM, reveals that VANOC distributed a lengthy press on the evening of October 29, 2009, that contained more detail than one would expect regarding an event that hadn’t yet happened. It was clearly set up for lazy newspeople to paste and cut and quote verbatim.

Here are some of the things VANOC predicted would happen the day after -

“A ceremonial party of First Nations chiefs paddled across the waters of Victoria’s Inner Harbour this morning towards the public welcoming ceremony cradling the flame from the dramatic jutting bow of a traditional canoe.”

“On shore, onlookers waved Canadian flags as they lined the harbourfront and sweeping green lawns of the British Columbia Parliament Buildings craning for their first look at the flame.” [I like the 'craning' bit - ed.]

“What a magical moment,” said John Furlong, VANOC’s Chief Executive Officer.”

“The Canadian prime minister and British Columbia Premier Gordon Campbell were among the dignitaries on hand for the flame’s arrival celebrated with a 50-member honour guard and a flyby of four CF-18 jets from the 409 Tactical Fighter Squadron streaking overhead in a classic box formation. The same jets soared overhead at approximately 10:40 am as VANOC revealed the identity of XXX as the first torchbearer to carry the flame in the Vancouver 2010 Olympic Torch Relay, presented by Coca-Cola and RBC and supported by the Government of Canada. As the audience cheered, he/she ran through the crowd proudly carrying the curved metre-long winter white torch, officially starting the 106-day relay’s 45,000-kilometre journey across Canada.”

It all makes it tempting to ask VANOC how we’ll all feel next year. And if they’ll please reveal what they know of where the RE market is heading.

“Leaving Vancouver was one the best things I ever did. I do not miss any of the things people believe to be so essential as to require living in the most expensive real estate in the country.”

This advice was directed at the prior ‘sardine family’ poster, but it’s applicable in a broader sense too, so it is posted separately. Here’s Kurt at greaterfool.ca on 29th October at 11:37 pm -

“I don’t know how portable your job(s} are, but leaving Vancouver was one the best things I ever did. Think carefully, and if you do, make damn sure you’ve got a job waiting for you, but you really should consider going elsewhere. I do not miss any of the things people believe to be so essential as to require living in the most expensive real estate in the country.”

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

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

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

“The market is hot all around… There are homes in the North Burnaby area with standard 33 ft lots selling for over a million dollars! “

This from DAB at RE Talks on Thu Oct 29, 2009 2:44pm -

“There are homes in the North Burnaby area with standard 33 ft lots selling for over a million dollars! And this is not just one home but several. The market is hot all around, even homes in the 700-850k range are selling within 2 weeks.”

“Who can afford to buy a nondescript house in the $1,000,000 plus range in Vancouver or the Okanagan? – And why would they?”

This from Roches Moutanee in the Comments section of a Globe & Mail ROB article dealing with the ‘great’ rural BC recreational property ‘bust’, Oct 30, 2009 -

“I now live in Ontario but grew up in BC and will soon move back for the last phase of my career and to be with family and friends. … This summer I was visiting my old neighbourhood in Richmond and went to an open house. It was 25 years old and in need of updating – a minimum of $100k. They were asking $1,130,000 (with a straight face). I live in a neighbourhood in the GTA where people have serious jobs – VP’s of major corporations. The homes are in the $500k – $700k range. Who can afford [to buy] a (nondescript) house in the $1,000,000 plus range in Vancouver or the Okanagan? – and why would they? The residential real estate industry in BC, and in particular Vancouver and the Okanagan, are simply ponzi schemes. Everyone is washing each other’s laundry and counting on people with surplus equity to move there and pay big money for homes. If people can’t sell their house in Toronto, Winnipeg, or Edmonton, etc. and purchase a house in the Okanagan for the same cost, or less, then where are the people going to come from? – and don’t count on international money, as even that has limits. My colleagues in BC say that the market is different this time around. I disagree, and can’t wait for the big correction which will take place some time next year and will persist for 4-5 years.”

“One of her customers owns 45 condo units that will house journalists covering the Games”

And after the Olympics, who will these condos house? This passing snippet of an anecdote from an article in the Georgia Straight, October 29, 2009, by Carlito Pablo , regarding a laundry service in downtown Vancouver that fears business will suffer from the Olympics -

“One of her customers owns 45 condo units that will house journalists covering the Games.”

Bidding War Lost – “So let your home slip away for a couple of grand?… Ditch the pride and roll up your sleeves.”

This dialogue regarding a prospective buyer making an offer on RE Talks, starting Wed Oct 28, 2009 at 6:10 pm -

househunting: “[The] market is pretty hot. We are in the market and made an offer and there are 3 others that the sellers are considering. The realtor asked if we wanted to up our offer, but our original offer was already over asking so we declined. Our offer expires tomorrow night.”

eyesthebye: “At the time we bought we were asked to “move up” our offer. It only cost us an additional 5K and a larger deposit. Why don’t you just
ask the seller what it will take to secure the property? Have them sign back the conditions to you after you say yes to the counter. Easy. If you like the property don’t let it get away for a stinking 5K – or relatively minor condition”

househunting: “The sellers no longer live here. We asked the realtor for info and all he said was there were multiple offers (4 total) and [asked] if we were willing to up our offer. We declined. Our offer was pretty strong as we went 2K above asking, [with a] closing date that works for the sellers as it is currently tenanted, and the only condition being a home inspection. We are pre-approved are not willing to pay more for this property.”

eyesthebye: “So let [y]our home slip away for a couple of grand? So glad I don’t function in ego mode. Do yourself a favour and ask what the sellers would like from you, it might only cost you an extra few thousand. You obviously like the property – ditch the pride and roll up your sleeves.”

househunting: “It has absolutely nothing to do with pride. The way it looks to me is that we have the best offer on the table. I am not getting into a bidding war. I can go up $3,000 only to have the realtor ask the other party to go higher and then – guess what ? – it comes back to me to go higher. It is a nice house, has a lot we are looking for, but not everything. Again the realtor said he couldn’t say anything [other than ask whether we were] willing to up our offer.”

eyesthebye: “I wouldn’t play that game either. If the seller isn’t willing to sign back to you in writing what they want then walk away. And if your realtor “can’t say” what the owner wants I’d look for a new realtor.”

househunting: “Well this is where I think we made a mistake. We made a strong offer on Tuesday morning but gave the sellers until Thursday at 8pm to either accept, counter, or reject. In hindsight I should have given them 24 hrs to respond. I am sure we will get something in writing but the sellers are waiting for last possible moment to do this. That way if they are able to get more offers on the table it gives them more options. It’s not my realtor that won’t say what the sellers want, it is the seller’s realtor. He won’t even return calls back to my realtor. We’ll wait till tonight and see what happens. I have another house in mind but can’t make an offer until I hear back from the realtor about our original offer.”

househunting (next day): “We heard back from the realtor, the sellers went with another offer, which is subject to financing, and wanted to know if we wanted to be in the position of a back up offer. We declined as we do not want to be in that position. The search goes on………..”

“All of us are first time home buyers so I guess we’re the ones who are driving the market.”

Who has been buying? This from noreason at RE Talks on Thu Oct 29, 2009 8:35 am -

“I’m an accountant but have moved into the finance side of things. I’ve been following the [message boards] since about May [2009] when deciding whether to jump into the RE market or not. I can give some feedback on the 400-550k market range, ie high end condos or houses out in the valley. I know personally 4 couples who have purchased + me and my spouse. We’re all in our late 20′s and all have combined gross incomes over 100k. All of us are first time home buyers so I guess we’re the ones who are driving the market. I can’t speak for them, but the reason why we bought was because interest rates are at a historical low and prices dropped a little. But the most important was we just felt we needed to get on with our lives in a new place. Renting before just didn’t feel right, we couldn’t make improvements to the place without feeling that you were wasting money. I have no doubt that interest rates will rise in the near future and we plan to use the max monthly overpayments and get that principal down in the next 5 years.”

“It is so engrained in our minds that owning is the way to go that people try to do it at all costs… Most people have the idea that renting is a waste of money, without doing any math.”

This from davers as a comment in a thread on VREAA 28 Oct 2009 at 2:39 pm -

“I simply don’t understand all these people killing themselves to buy a home. I think it is just so engrained in our minds that owning is the way to go that people will try to do it at all costs. I was talking to a coworker yesterday and he was trying to figure out when he was going to move out of his parents house. He figured he would have all his debts paid off (student loans) and enough for a downpayment by the time he was 25. “But then you live at home until you are 25, why don’t you just rent and save money once you have your debts paid off?” I asked. “But renting is just a waste of money, I would rather just own from the get go” he answered. I quickly explained the rent I pay is less than what my landlord pays in property taxes, strata fees and mortgage interest, which are all ‘a waste of money’ as well. If I was to purchase my current place with 10% down and a 25 year mortgage, interest would be 1050, strata 250 and property taxes 125. (total 1425). Yet my rent is only 1200. That doesnt even take into account special assessments and the depreciation of the building. After this explaination of how I was actually saving 225 a month he began to reconsider his way of thinking. I got the feeling from this conversation that most people probably have the idea that renting is always a waste of money without doing any math. This is probably because save for the last 4-5 years and the blip in the early 80s, this calculation would show that the numbers are pretty close. People just haven’t realized how much this calculation has changed in the past few years.”

People Making Money From RE – “Hooray for Real Estate!” & “I sold all three of my downtown investment properties over the past three months.”

This story came to VREAA as an e-mail from pianoexcellence, a poster on the RE Talks BC discussion board -

“I cashed out of my PR and my Squamish condo. I sold the Squamish condo in May 2008 and my PR in June 2009. I made a lot of money and am thankful for the role that RE has played in my life as I am only 28. I threw all my gains on the Squamish condo at the TSX in Jan 2009 and have made a killing (after momentarily crapping my pants during the crash in Feb). I am waiting to put the rest of my equity from my PR into div stocks but am looking for a suitable entry point. Until then, it sits in GIC’s. There…ho0ray real estate!!!”

And this from MultipleOffer, also at RE Talks, on Wed Oct 28, 2009 11:01 am -

“I have ["sold high" and made a huge return on (my) investment]… this market was too good not to sell into, particularly after coming through such troubling times. I sold all three of my downtown investment properties over the past three months. I am holding onto one small older rental unit that breaks even with a good 5-year rate on it. Whether this was the right move or not for the market remains to be seen, but it was the right move for me and my family. We no longer have a mortgage on our PR which we can live quite comfortably in for many years to come. I am saving for a future downpayment, but waiting for a buyer’s market before re-entry.” And later added – “Unlike [pianoexcellence] I held onto my principal residence and an investment property, so I still have some exposure to the market, which is good if it goes up, and not a bother at all if the market falls. Rental cashflows and PR is paid off, with $ in the bank to pay off the rental property mortgage if I ever needed to. A crash would just be seen as a buying opportunity for me.”

First-Time Amateur Landlord Speculators: “Did I tell you they get home stay students in their house?”

People are not just borrowing and betting to play the RE game in Vancouver… they are also extending themselves personally by taking on tenants in their basements, or even within in their own homes. All the gory details (in fact more than we need) about being an amateur landlord in Vancouver, circa 2009, from Greenhorn at RE Talks Tue Oct 27, 2009 9:33 am -

“I know several first time home buyers under the age of 30 who are also first time landlords. Buying an investment property is the only way they can afford to buy a house in Vancouver. Perverse isn’t it? The plan involves getting a 5% down mortgage on their house which is borrowed from the Bank of Mom and Dad or the Bank of Grandma. They also borrow the down payment for the investment property from the same place. Once the investment property doubles in value in 5 years, they pay off the parents/grand parents and pay down the mortgage on the house that they really can’t afford. Did I tell you they get home stay students in their house? Several people I know are renting out bedrooms to two or more students at $750 per student. That’s an extra $1,500 per month so they can pay the mortgage they can’t afford. So they have international students and their friends coming and going all night. They wake up early to make breakfast and lunches like slaves. Did I tell you some of these students have poor hygiene and stink? Did I tell you jewelery has gone missing? Did I tell you some students forget to flush the toilet everyday so there is a nice present waiting to be seen every morning? Did I tell you about the lack of tenant screening on the investment property because they ask an above market rent and only get the riff raft? The bounced cheques. The late cheques. It is causing lots of stress.”…”What is scary is the parents/grand parents had to mortgage their homes to lend junior the money. Vancouver has made a whole industry/economy out of high priced real estate and entitlement.”

kansai_92 adds, at 11:01 am -

“This is the same as what I’m seeing amongst people I know. On paper it looks fine, but the one HUGE assumption is rising prices. If prices fall or even if they are FLAT, the strategy unravels.”

We all know lots of people who have recently bought: Indicative of a Market Top?

This exchange on RE Talks, Tue Oct 27, 2009, 7:46 am and 8:22 am -

eyesthebye: “I look around my office full of dual income professionals and [I've] lost count of the number of people who’ve bought homes the past 6 months.”

dot com refugee: “I do agree with you on this one, in that friends and associates in my 30something age group have virtually all bought their own homes and many have a rental property. Even the few in my circle in their 20s have bought. I’m about the only person I know that rents.”

VREAA can add that he personally knows of the following recent activity: (a) a longstanding Vancouver RE bear who bought two properties, (b) a prior RE bear who went from renting to buying a house, and (c) a family that went from owning two properties to now owning three.

Does this activity represent steady ongoing demand, and thus a healthy market? Or is this activity demand ‘borrowed from the future’ as the result of low interest rates (plus some bear capitulation)? If so, it would suggest an overheated market and perhaps a market top.

Fantasy Anecdote: “Mr Carney, I’d like to take the opportunity to thank you for improving housing affordability for us regular Canadians…”

This fantasy anecdote from vreaa himself:

Somehow, I come to be sitting in the very front row of the October 22, 2009 press conference held by Bank of Canada Governor, Mark Carney. The members of the press have had chances to ask their questions, there is a sense that we’re about to wrap, and then for some reason I find my hand raised, and Carney generously gestures for me to speak…
“Who…me?.. hey great!.. Mr Carney, thank you for allowing my question. I’d like to take the opportunity to thank you for improving housing affordability for us regular Canadians –I’m a construction worker who earns $70K a year, and I’ve finally taken the plunge and bought a $650K Vancouver town-home. My bank, my realtor, my mortgage broker, and all my friends & family encouraged me to buy.. Heck, my family have been on my back to buy for quite awhile, and my friends, who all own a few properties each,  told me to stop being such a renter-loser… And all these folks have reassured me that I can afford it because the monthly carrying costs seem so reasonable, and it’s obviously a good investment… Heck, if the last 8 years are anything to go by, it’ll be a GREAT investment, right? So… as you said, we’re all being prudent… Here’s my question… well, it’s more a request, really… Some buddies and I are thinking of getting in on some investment condos… If possible, could you hold off on raising rates past next June? … Please… it’ll help us out a lot…”

“People should manage their affairs prudently in anticipation that at some point rates will return to a more normal level.”

These comments of hope and caution were made by Bank of Canada Governor Mark Carney on Thursday Oct 22, 2009, after the release of the October Monetary Report [transcribed from video of the press conference] -

“Our view is that people should manage their affairs prudently in anticipation that at some point rates will return to a more normal level. Obviously rates are exceptionally low… they’re exceptionally low for a purpose… and we’ve given pretty clear guidance on how long we expect they will have to remain at these levels [June 2010] in order to achieve inflation targets. But people should manage their affairs for… you know… a longer horizon… and most Canadians will certainly do that.”

[And in response to a question concerning whether there is a 'risk of people buying houses they can't afford'] “We do look at this… we have some concerns… Obviously consumer borrowing cannot grow faster than the economy forever.”

Addendum: This comment on Mr Carney’s comments from Stewart Hall, an economist at HSBC Securities Canada, quoted by Paul Viera, Financial Post, Oct 22, 2009 - “The Bank of Canada [seems] to have removed themselves from the dynamic of cheap money … and instead fallen back on the view that, at best, we are simply seeing pent-up demand and at worst … that lenders and borrowers will self regulate and act in a prudent way.”…“The heart wants what the heart wants and many a purchase, houses included, prove emotional rather than prudent.”

Rates So Low Renters Forgoing Subsidized Housing To Buy

When low income individuals are forgoing subsidized rentals to buy, how far can a market be from a top? These excerpts from an article that ran in the Georgia Straight 22 Oct 2009, by Carlito Pablo -

The Metro Vancouver Housing Corporation [mandated to supply affordable rental to families with low to moderate income] is losing many of its moderate-income tenants to the housing market. With variable mortgage rates going as low as 2.25 percent, plus incentives being offered by sellers, families are buying homes and moving out of affordable rental properties operated by the public housing body, according to a report by regional housing manager Don Littleford. The housing body has seen two consecutive quarters of increasing vacancy in its properties. “With the efforts of the Bank of Canada and the chartered banks to create economic activity, they’re offering very low-cost money on everything.” — “the next several rental quarters are expected to be challenging until mortgage and consumer-borrowing interest rates return to more normal levels”.

Early Boomers “starting to get the downsizing itch.”

When will the boomers downsize? Perhaps that’s already starting. This from /dev/null at vancouvercondo.info October 22nd, 2009 at 12:43 pm -

“[My] parents/in-laws are the early boomers and they and all their friends are starting to get the downsizing itch. Father-in-law shoveled a LOT of snow last winter, which is hard on anyone’s back, and they hate asking the kids to check on the house if they want to go somewhere warm for Jan/Feb. Too many stairs, too many unused rooms yada yada. They sold in August [2009] and decided to rent for now (imagine how happy I am). Many of their friends are making noises of doing the same. It’s a huge demographic group. What do you think might happen if even a small fraction of them decide “let’s just put the house on the market and see who bites”? “

Buying & Selling Condo Nets More Than 14 Years Of Income From Work

When it’s easier to make money buying and selling a single condo than it is to earn it by working for 14 years, you’d imagine that would have major effects on how members of society direct their efforts and resources. And vreaa would argue that almost all of those changes will ultimately prove to have been bad for the city and for the community. Here’s Ultraman at greaterfool.ca Oct 22, 2009 at 12:01 am -

“Well put me down for righteous. I too sold my condo, completion Dec. 1 and I’m still not 100% sure that the RE market won’t crash so hard and fast that the buyers wouldn’t go through with it. So fingers crossed. The short of it, we bought early 2003 in trendy Yaletown of Vancouver. Net profit after all fees $240k. I haven’t made $240k after taxes in the 14 years I lived in Vancouver. We bought a 5 acres piece of land in southern Quebec ($65k) and eventually we’ll move and build a house there. We sold now because, like many I think that this unreal RE market will crash hard and when I’m ready to move I want to be able to give a month’s notice and not have to worry about how many years it will take for the value of my condo to recover. Anyway, one thing about money and profit, you have to take it when it passes.”

“I am forever outpriced, and have decided to rent for the rest of [my] life.”

This statement of exhaustion, resignation, and some determination, from abbydabby at RE Talks on Thursday Oct 22, roo9 7:03 am -

“I am forever outpriced. — Well bulls, You were right. I was wrong. I am now a renter and even though both my wife and I work, we are not willing to spend all the money we make on a decent (as in non-luxury) home. So we [have] decided to rent for the rest of our lives so that we can afford to go out occasionally and travel once a year. But congratulations to you! I guess the new reality is that average income families can really only afford dumps or rent something decent. No middle ground. Good buy RE market.”

_______
UPDATE: It’s interesting to note the psychological pressure applied to abbydabby after those comments, by posters who are bullish the market (all comments from the same site and thread) –

adamcory on Thu Oct 22, 2009 11:05 am — “Maybe its your way of life that keeps you from owning something you desire…”

(BCAccountant on Thu Oct 22, 2009 11:11 am responds for, and in support of, abbydabby — “It definitely my way of life that keeps me from buying…. I follow the personal rule to live within my means”.)

unicas on Thu Oct 22, 2009 11:31 am mocks this prudence — “Because you add anything to the penny. But you may have missed the big picture. Have you ever heard any accountant joke?” [Presumably the ones implying accountants are people who know 'the price of everything but the value of nothing'.]

eyesthebye on Thu Oct 22, 2009 8:43 am suggests abbydabby buys anyway, but that they must decrease their expectations — “What about a townhouse or half duplex? Or even a large condo? There will be some buying opportunities for those mentioned in the next 6-8 months.” — “Don’t give up yet.”

Greenhorn on Thu Oct 22, 2009 3:59 pm is a little more forceful — “You have a piss poor attitude that prevents you from achieving your goals. The fact that you have resigned yourself to renting for the rest of your life is pathetic. You probably spend everything you make on a nice car lease, plasma TV, ipod, PS3, etc. and have huge credit card bills. There are lots of affordable places to buy in Metro Vancouver. What about Surrey, Langley or Cloverdale. Stop feeling sorry for yourself and get off of your welfare ass and do something.” [and later adds] “Sorry for the tough love, but you have a bad attitude which will get you absolutely no where in life.”

Specuvestors consider bailing: “He is re-evaluating his investment.”

Bears have long voiced the idea that a plunge in Vancouver RE prices will be greased by bailing amateur landlord/speculators. But few thought this effect could start cutting in at interest rates this low. Prime rate at TD has been 2.25% since April 2009.

This from SD92129 at vancouvercondo.info Oct 20th, 2009 at 10:37 am -

“TD’s recent increase on my co-workers variable (to prime +1%) has halved his +ve cashflow. He is re-evaluating his investment. He is 1% from being cashflow neutral, renter is leaving at the end of the month, he is considering sell, re-rent, hold out for 5 months or so to cash in on the olympics and para-olympics (dont flame me, not my words, I quietly laughed when I heard that also).”

“My neighbours have put their place up for sale in a flurry of panic that the market is going to crash.”

On the other hand, it’s not just the disenfranchised bears who are fearful of ever-rising prices, some owners are becoming fearful of the opposite, a crash, and are taking steps to cash out. It seems everybody is fearful in their own way….perhaps it’s the time of the year.

This from Hovering at vancouvercondo.info on Oct 20th, 2009 at 10:08 am -

“My neighbours have put their place up for sale in a flurry of panic that the market is going to crash. My landlord (who bought last year at peak) is also desperately trying to sell the place out from under me (so to speak).”

“I’m watching the market irrationally move further and further beyond my means.”

Market wisdom is that the bull market is over when the very last of the bears that are destined to capitulate do so (and buy). VREAA personally knows of two long term bears who have recently bought. The Vancouver RE message boards are rife with bears expressing their exhaustion and demoralization. Perhaps we are somewhere near a top. This bear lament from Ulsterman at vancouvercondo.info on October 19th, 2009 at 7:06 pm -

“All the rational arguments in the world won’t help the fact that the irrational bulls have become quite wealthy while I’ve sat back and read bear blogs. I think the market is insane and makes no sense. When I see family income @ 60k I wonder who is buying all the houses around me. [My income is] double that and I feel like everything is out of my league. Meanwhile, I’m watching the market irrationally move further and further beyond my means. Funny thing is, though, I don’t really feel like I’m getting rich from renting either. The house I rent (Burnaby) costs 2400/month to rent and I figure it would cost 4200/month inc. taxes to buy (at the CCS 5 year rate of 3.85 – which i’m certain will rise soon). However, I don’t automatically save 1800/month because to be honest I couldn’t afford to pay 4200/month in the first place without eating Kraft dinner throughout my “good years”. Could I pay 4200? Right now yes – just. But what happens when another kid comes along? Mortgage rates rise? 4200 on one income is a frighteningly LARGE payment. Very little margin for error. I’m just worried that this market will keep on chuggin’ or drop a measly 10-15% again and I’ll still be waaaaaay out of the market.”

“Life is too short to live in a city where people are obsessed with real estate to the point it drips in to every conversation.”

And individuals continue to consider leaving Vancouver to seek out saner RE climes. This from Hibernating at robchipman.net on Oct 14, 2009 at 9:54 am -

“I will check back in 1 year to see if there is a downward trend in real estate in Vancouver. If not, I am taking my pile of savings from renting in this overpriced city and buying something outright in another part of Canada. Life is too short to live in a city where people are obsessed with real estate to the point it drips in to every conversation. Sorry, but no other city I have ever been to or lived in is this focussed on RE to the point that there are no longer any intelligent conversations about civic affairs, national politics, global affairs, etc. When people only have one thing to talk about, it shows me that the society is both neurotic and immature.”

And Hibernating later adds:

“Purchasing your home back then [1990] meant buying a home first and foremost, and then maybe as a long term investment.  Flip that rationale around, where the investment properties of RE are the primary motivator, and having a home is secondary, and presto, the role of RE changes in social conversations.  Just like people will always ask how is the market doing, people now ask, how is your house doing.
Just had a meeting the other day with a chap that moved from Montreal, where he had a 2 year old 3500 square foot house for less than 350.  Once we started talking, he commented how everyone talks about RE here, especially at social functions.  I told him he is not alone in thinking that, as in the past several months, I have met with people from Europe, the US, and other parts of Canada, who travel here for business or now live here, who have all said the same thing.  Just passing on my “anecdotal” experience….”

“Now everyone is buying because they’re afraid they’ll be priced out.”

This regarding “fear-based demand” from betamax at vancouvercondo.info on October 18th, 2009 at 4:19 pm -

“A very successful realtor I just talked to said: “Last year, everyone was afraid to buy. Now everyone is buying because they’re afraid they’ll be priced out.” Further conversation revealed that most buyers thought they’d be priced out later primarily because of rising rates, though none of them seemed to consider that they’d have to pay those rates at some point anyway. When fear is running the market then you know a correction is still nigh. Yes, it’s been a long time coming, longer than most of us thought or would like, but I think that when the market finally corrects it will not be a Japan-like decline but a rapid fall when expectations of constantly rising prices aren’t met and the bottom falls out of this fear-based demand.”

“When the market crashed he had 34 assignments on the go.”

This anecdote about a flipped-out condo flipper from whisperer, the blogger at ‘whispersfromtheedgeoftherainforest.blogspot.com’, posted 16 Oct 2009 at 12:15 am. If this can happen when the market pulls back just 15% (winter 2008-2009), one would imagine that there will be even more spectacular blow-ups if and when it drops again. -

“Back in 2002, my friend ‘Bill’ (not his real name), and another colleague (‘Steve’), had invited me to join them in a
‘can’t miss’ venture. Yaletown was just starting it’s transformation and under construction was a new condo development at the corner of Seymour and Davie. Known as Tower 1, the Brava development was about to become available for pre-sale. Offered at a ‘bargain’ $306 per square foot, Bill and Steve were planning on snapping up four of the two bedroom condos (two each). At 880 square feet, each two bedroom unit was selling for about $270,000. Now, I didn’t have $540,000 to spare and neither did they. But that didn’t deter Bill. “All you need is $20,000,”“$10,000 per unit as a down payment.” The objective wasn’t to actually complete the purchase. The plan was to sign an agreement to purchase (an ‘assignment’) and then in six or eight months, sell the assignment for a profit. It was my first introduction to condo flipping. Bill was a very convincing. He had done this before and was ecstatic about the possibilities. Recognizing the early stages of a real estate bubble blowing up before our very eyes, Bill could see the easy money… and he made a convincing argument. “Just get one,” he urged, “and get your feet wet.” It was the lure of easy money… but I passed. Was it a mistake? Bill and Steve sold their four assignments for over $360,000 per unit just 8 months later. After fees, they each netted over $120,000 each for their efforts. Not a bad return for their $20,000 investment over eight months. Bill came back to me with another project the next year, this one in Tinseltown. Your humble scribe declined on that one as well. It was an attractive gamble, I said, but what happens if the market collapses? Bill would have nothing of it. It was a “license to print money”. After that, we lost touch.”

“As we know, the real estate market exploded upward for the next few years. Hundreds of others followed Bill’s idea and condo developments sold out everywhere within hours of opening their pre-sales centre. Long lineups were the norm and each new development sold out faster than the last; each one an ‘event’ profiled on the local evening news.”

“And then the real estate market crashed. [15% price drop to early 2009 trough. -ed.] My friend Bill? With each passing year, he took his profits and leveraged more and more pre-sale purchases. Things were so good, he quit his job and turned to real estate flipping full time. When the market crashed he had 34 assignments on the go. Worse, Revenue Canada began tracking down assignment sales and he was audited… apparently the government expected that these profits should be declared as income at some point. In July, Bill declared personal bankruptcy. After a messy divorce, he’s currently trying to rebuild his life.”

“…the Bank of Canada allowing people instant gratification…”

Some prospective buyers on the sidelines are demoralized by the recent market action and are starting to look at the systemic factors that have led to the RE bubble: here’s rog at Garth Turner’s greaterfool.ca on Oct 17, 2009 at 12:16am -

“Boy, are housing prices in Vancouver making me depressed. I have saved close to 70 grand and a dumpy 60 year old house here is 600 thousand and up. Savers are not rewarded, with the Bank of Canada just allowing people instant gratification, and the rates don’t look like going up anytime soon. My money makes almost no interest…”

“What type of mortgages are most new buyers taking?”

This in the trenches report on risk taking from Anonymous at vancouvercondo.info October 16th, 2009 at 4:36 pm -

“I spoke with my banker at Vancity in Richmond today. I asked “What type of mortgages are most new buyers taking?” She said without a doubt it was at least 95% “variable with the 5 year term” I said “quite risky”. She says no, because they can lock into a 5 year fixed at any time. This rate of course being double what they are paying now. Most current buyers only qualify @ the current 2.25% rate. If rates go up, I think all these current buyers will be broke.”

“Wow, landlords are getting desperate!”: Market Rents are Down

There are many anecdotes on various boards about rents dropping and renters being in the driver’s seat.. most of the time. Here are two anecdotes,  one of which involves the ‘renter’s dis-ease’…(eviction):

YLTNBoomerang at vancouvercondo.info Oct 15th, 2009 at 8:49 am -

“Wow, landlords are getting desperate! Last year when I looked at places it was a competition to rent, this year I am getting pestered by the landlords of every place I see with offers of “special deals” and rent reductions for signing a longer lease. We looked at one place that was very nice but very small and custom; we told them it was just not big enough as the built-ins would prevent us from using all our furniture (didn’t mention to them that it was over-priced). I got an email follow-up this morning from the landlord/owner offering not only a $200 rent reduction but actually offering to remove the built-ins so we could fit our stuff. Imagine that, they pay for custom millwork to increase the value then rip it out to make room for renters.”

Crash at vancouvercondo.info Oct 15th, 2009 at 9:42 am -

“My wife and I just recently got an eviction notice as our landlord wants to demolish the house and build a duplex in place. Too bad as it’s a nice house in Metrotown with the upstairs rented to us, and two lower suites, so it’s a good revenue generator. But anyways, lots to choose from rental wise (and we have 2 cats) and we’ve had potential landlords pester us for business. We found another upper suite in the same area for $75 less per month and negotiated a new dishwasher and kitchen counters and faucets be installed. They are also not asking us for a pet deposit. I also came across a full house (in nice condition) and the rent was originally $1800 but then lowered to $1650. So there’s lots for rent and languishing and rents are definitely dropping.”

Foreign Sellers, Local Buyers?

Part of Vancouver RE mythology has been the idea that prices have been elevated beyond the restrictions of local incomes by local owners selling to wealthy foreigners. Simon posted this relevant observation (edited) on VREAA -  “I’ve given up trying to figure out this town…” thread, 3 October 2009 at 9:23 am -

“I am in real estate and I can tell you for certain that most of the recent sales have been to ‘natural born Canadians’…”
“Most are moving up due to lower rates and ironically many of the sellers are overseas investors cashing out after years of owning. If you had access to the realtors MLS info you would see that. Are they over-extending themselves? – maybe some are, but they are still buying.”

“…the sick fact that people are USED to making $425k offers on 500 sq ft condos with no view…”

This from Jim as quoted by Garth Turner on his blog greaterfool.ca October 4th, 2009 -

I’m 27 years old, no debt and I have managed to save and budget well. I’m lucky to be living with a family member. I’ve been wanting to leave the nest for years now but right when I finally had the means (out of school and working full time) the real estate in Vancouver went insane! To be honest, in Vancouver right now everyone I talk to seems to think that since it’s “booming” again that it will never go down. My buddy just listed his condo (500 sq ft) at $399,000 he had 20 offers and it sold for $425,000. I told him I was happy for him, but that it’s just not sustainable….his response to me was “Vancouver has changed man, you have no idea how much money is in this city, plus we have the mountains, ocean, olympics and rich Asians…real estate can never go down! You missed the boat dude”. Any predictions for if and when Vancouver specifically will ever stop? I refuse to believe Vancouver won’t correct harshly soon…..but with locals all thinking that the world will move here after the olympics, that if they don’t buy now they’ll be “priced out forever,” and the sick fact that people are USED to making $425k offers on 500 sq ft condos with no view and a curved wall in the living room even I am starting to worry that my waiting is just going to screw me in the end. Meanwhile I just keep saving and saving and getting further and further behind, that 3.85% 300k mortgage is looking pretty good right now.”

The Pressures from Family and Relatives: “Why Not Buy?”

The details of an intra-family debate regarding Vancouver RE is laid out by real scenario at vancouvercondo.info on October 5th, 2009 at 5:07 pm -

My girlfriend and I are in our mid to late 20’s living at home mainly cause we don’t want to buy anything in this market. Combine income of 110k/year. Recently her mom is insisting that she buys something.

Her reasons:
1. start building equity
2. with our incomes and help with the downpayment, we can get a nice townhouse 400-450k range (burnaby, coq area) and be comfortable even when rates do go up.
3. if you decide you need something more, you can always rent it out and buy again. Even though the rent may not cover the mortgage, at least most of it is going towards something you own.
4. rent is like throwing your money away.

My counter argument:
1. Although we can technically afford a place like that, I look at value more than affordability.
2. prices are so far from fundamentals and avg incomes, its just not sustainable. Would bother me if 450k can buy me a house instead!
3. paying interest is also throwing money away
4. I can rent and live in a neighborhood I actually like and still save up for an even bigger downpayment.
5. vancouver is due for a crash. the gov’t keeps making provisions to keep that from happening.
6. we have lowered our standards so much in the past 10 years, why the sudden change? I think it’s hype and psychological, both of which can be turned in an instant

I’m thinking a majority of people my age just do what our parents say. Think about it, 2 sets of baby boomer parents, both paid off their mortgages, kids out of university and now left with excess cash. Why not buy if affordability is not in question? Not to mention the pressures from family and relatives. We’re both canadian born chinese if people are wondering. RE is like religion. Each side is blowing smoke and not making sense according to the other party. If it wasn’t for this blog [vancouvercondo.info -ed.], there would only be one party. There’s now talk of her mom buying, and we rent from her. At the end of the day, it’s one more blind sale to boast. You’d be surprised how many ppl out there read the Sun and Province for RE advice, think renting is garbage, believe the olympics (now HST) is driving RE prices, and that RE goes up forever.”

“I’ve given up trying to figure out this town…”

Judging by current blog discussions, there are a good number of non-owners exhausted and demoralized by Vancouver RE price action. This from scullboy at vancouvercondo.info Oct 2nd, 2009 at 11:29am -

“I’ve given up trying to figure out this town…. I’m giving it a couple more months, then I’m packing it in for somewhere else. I’ve spoken to a lot of people between 35 – 45 who are saying the same thing….. “Yeah it’s pretty but I’ll never be able to afford more then a 2 bedroom apartment I’ll have to share with a roommate.”   My own roommate is preparing to leave. He’s in construction. He runs fiber optic cable through new buildings. He was saying the whole construction industry is set to dry up completely after the Olympics.   It’s sad but to be totally blunt, I don’t think natural born Canadians can move to Vancouver and compete. Guys like Supraboy [another poster] can because they live with Mummy and Daddy but that’s hardly competing, it’s just extending adolescence indefinitely. ……I’d say the city will collapse in on itself when all those 35-45 years olds migrate somewhere else, but after three years I can’t figure out how Vancouver ever functioned as a city. There aren’t a lot of head offices. It’s expensive to start a business here. Except for construction and tourism, there just aren’t many industries to support the population.”