3804 W 10TH AV, Point Grey, Vancouver West
MLS V802328
33×122 lot, old timer, $1,300,000.00
“Good investment character home in Point Grey. Peaceful neighborhood for family.” [Actually, on a very busy street, and next to shopping intersection -ed.]
Update: Context care of Google earth:
This from grumpy at greaterfool.ca 30 Jan 2010 at 6:15 pm –
“I just got my property tax assessment. Its up by 21% over last year. This is hell of a way for the governments to engineer another tax grab eh? Don’t tell me that the BOC and Flaherty don’t know exactly what’s going on here. Several ‘New Canadian’ neighbours who are mortgaged to the hilt after of buying at the very top of the market (Vancouver) have asked me to help them appeal the assessments. I suspect that the reason is that they are now facing additional expenditures that they hadn’t calculated into their monthly budgets. Many of these people have no obvious source of income, so where does the money come from? I don’t ask. Nor do a majority speak a word of English, or work. But it is becoming obvious they are not paying cash, and are only ‘in the game’ on spec, with huge mortgages that eat their lunches for them every day, and it’s getting uncomfortable to be so hungry. As an ex-analyst I know how the appraisal process works, and I know I would be wasting my time appealing the assessments. The very people who are crying about the increase in taxes are the same people who had a part in generating the statistics for the appraiser in the first place. I suspect they have only purchased these properties because of the free money offered to people with no credit record and no job, to wait for a big payoff before selling. If I am right the bubble is about to burst based on unaffordable costs of ownership finally becoming a factor for the many who have ‘no skin in the game’.”
4313 W 11TH AV, Point Grey, Vancouver West
MLS V806376
1947 sqft, 33×122 lot, old timer, $1,288,000.00
Many Canadian home owners have borrowed money against the increasing market prices of their homes. These title search examples are from Toronto. We’d expect there to be many such examples in Vancouver. -vreaa
From the Globe and Mail 28 Jan 2010 1:16 pm –
No. 17
Purchased by Dave and Chloe in January, 2004
Paid: $1,284,912
Mortgage: $300,000 (five years, 4.89%)
In 2009, the couple took out a second mortgage for $600,000 (“on demand,” prime plus 7%)
No. 37
Purchased by Rebecca and Domenic in December, 2006
Paid: $1,129,948
Mortgage: $730,000 (five years, 5.25%)
In 2009, the couple took out a second mortgage for $500,000 (“on demand,” prime plus 6%). A third mortgage was secured in November, 2009, for $580,000 (“on demand,” terms unknown)
No.18
Purchased by Geoffrey (all names have been changed) in April, 2004
Paid: $1,440,059
Mortgage: $1,275,000 (five years, 0.24% below prime)
Monthly payment: $6,555.17
In 2005, Geoffrey took out a second mortgage for $4 million (five years, prime plus 5%), secured by 200-plus acres of property north of Toronto.
Imagine that you are an artist illustrating a children’s book. The story involves three magical, animated creatures adventuring around British Columbia in preparation for a big sporting event. You decide to portray some creatures and objects as having human emotions, by giving them smiley faces. The story is set in places of great natural beauty: the seas, the beaches, the forests, the slopes, the campgrounds. The creatures (a ‘sea-bear’, a ‘sasquatch’ and an ‘animal garden spirit’) are rooted in folklore that reveres nature. The year is 2010, the world is preoccupied with the environment. . It would be natural for you to animate the mountains, trees, oceans, islands… right? Well, yes, maybe you would, if all else were equal. If, however, you were living in a society obsessed with its profoundly over-inflated real estate market, you’d be moved to animate the buildings. Yes, the buildings. See below for the animated entity scorecard. Trees 1; Highrise Buildings 27. Subtle point? Perhaps. But a preposterously distorted real estate market does effect a society in innumerable subtle ways. -vreaa
From ‘Miga, Quatchi and/et Sumi’: ‘The Story of the Vancouver 2010 Mascots’ by MEOMI (Vicki Wong and Michael Murphy) –
Entities With Smiley Faces Scorecard:
Seaweed 7
Starfish 1
Octopus 1
Mushrooms 7
Bridges 2
Trees 1
Highrise Buildings 27
Excerpt – “The glass buildings of Vancouver shimmered with light…”
Asset bubbles do most of their damage through the misallocation of resources. Money is directed to projects that would be deemed imprudent, or even useless, in more normal times. Human energies are distracted by the promise of easy riches. Young people who would have studied engineering become stock-brokers, or realtors, or construction workers. People who would normally be focused on their work, their family, their leisure pursuits, become distracted by their neighbour’s or coworker’s sudden, easily-acquired, life-changing wealth. Doctors reduce work hours and flip condos; Architects drywall or trade stocks; Teachers become roofers; Poets, landlords. Productive citizens cash out, retire early, and move away. What effect does all of this distraction have on our city, our society? Froogle Scott generously shares his experience. -vreaa
Property assessments — the new scratch-and-win
In the three years following the purchase of our house in the fall of 2003, its assessed value increases by 72%, or almost a quarter of a million dollars. This windfall changes the way I think and feel about money. Had we bought the house fifteen months earlier, close to the beginning of Vancouver’s real estate boom, the windfall in the first four years of ownership, based on the July 1, 2002 assessed value, would have been a 119% increase, or $310,000. Opening the annual Property Assessment Notice feels like playing a scratch-and-win or pull-tab lottery ticket with which I don’t just win the maximum prize possible — I win a super-secret mega-prize that I didn’t even know existed. Each year I stare at the assessment number for a moment, almost stunned. How can this be? At this point, we’ve done little more than live in the house, collect rent from the basement suite, and make our mortgage payments every two weeks. We did replace the water service, the gutters, and the shingles on the garage roof — a total expenditure of about $5,000.
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Some perspective
To put these assessment numbers in perspective… For years my gross annual income moved up and down in a range between twenty and thirty thousand dollars, depending on whether I was a student and working part time, or working some job full time for awhile. After leaving home, I was a renter for twenty years, almost always with roommates or housemates, to keep costs down. I’m a lifelong public transit user who only sporadically owned cars for short periods of time — the cars always used, and often hand-me-downs from family. I have never purchased a new car. The things I do buy — books, music, clothing, tools, furniture — I often buy used or on sale. Along with my wife, who had a similar low-budget lifestyle throughout her 20s and early 30s, I love grubbing around flea markets, junk stores, used book and music stores, Sally Ann, Value Village, and other thrift stores, and discount or liquidation outlets. I was someone for whom spending five hundred or a thousand dollars was a big, big deal. But I also like quality, and hunt it out, which I’d say makes me frugal, rather than cheap. If you’re cheap, price is the only consideration, and even if you can easily afford to purchase something of better quality, you won’t.
….About ten years ago, at the age of 37, I belatedly started a career. My income, while still relatively modest by professional standards, jumped to a level it had never been at before. However, my frugal ways were now ingrained, and I didn’t alter my spending habits. My job working for a demanding high tech company also kept me very busy and I didn’t have much time or energy left over to consider doing something with the money piling up in my savings account. As the balance steadily increased so did the alarm among the tellers at my bank — the Main and Hastings branch of the Royal on Vancouver’s Downtown Eastside. (At the time, my wife and I were living in a loft apartment on the hazy borderline between Gastown and the Downtown Eastside.) The lineup at that particular branch was often long, and fairly evenly divided between people from Chinatown, which is immediately adjacent, a number of them probably merchants doing business banking, and Downtown Eastside residents, a number of them quite possibly dependent on various forms of social assistance. When the details of my account came up on the screen, I often noticed a strange wave pass across the tellers’ faces. The degree of deference with which I was treated, one that you might not expect based on the clothes I was wearing — not that different from those worn by the Downtown Eastside residents — subtly increased. Invariably, “Mr. Scott” was asked if he’d like to speak with an investment officer. I put them off. I couldn’t be bothered with the hassle at that particular moment. This behaviour was not very smart from a financial standpoint, but by being a micro-consumer for years, long before I had any idea that I might buy a house, I amassed a sizable downpayment without even realizing that was what I was doing.
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A third salary
At the time that we buy the house, my wife and I have a combined annual income of between $120,000 and $130,000 before tax. (Six and a half years later that figure hasn’t changed much.) So when the property assessment drops through the door in early 2005, after our first full calendar year of ownership, and shows an almost $90,000 increase in assessed value, it’s like being handed a third salary, a very good one, tax free, for the year. The local media are bursting with stories about the miraculous real estate gains in Vancouver and surrounding areas, the wondrous boom. There’s no land left. Rich foreigners, and rich retirees from Alberta and Ontario, are flooding in. “House Prices Going Up By $222 A Day!” The Province screams on its front page. Vancouver is the gateway to the Pacific. It’s a paradise, a world-class playground, with no winters, except on the much-hyped ski slopes. In short, Vancouver has it all, it’s perfect, the best place on earth, and who knows how high property values could go?
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A city of real estate junkies
I begin each day with coffee, sitting in front of the computer, combing through the listings on RealtyLink. The web site where I found our house now serves a new purpose. It’s the source of my daily real estate fix, the endless compare and contrast, the micro-calculations, that are entertaining and comforting if you’re on the plus side of the equation. I quickly figure out that assessed value and market value are two very different things. List prices are much higher than the most recent assessed values, and sale prices, after bloodthirsty bidding wars, even more distantly removed. Sale prices often outstrip assessed values by one hundred or two hundred thousand dollars, or more, especially on the West Side, and in other affluent parts of Greater Vancouver.
….One of my favourite games is to find a house similar to ours in the same real estate zone, compare features, and see how much is being asked. After all, using recent sale prices, this is pretty much what professional real estate appraisers do. This house has a fireplace, or a bigger garage, or a new deck. But it doesn’t have a basement suite. (When we bought, our realtor told us that a basement suite immediately adds $30,000 to the price of a house. It’s probably more now, as the necessity of having that mortgage helper increases with the increase in prices.) That house’s lot is bigger/smaller. (Lot size is a crucial component of price, because it dictates the maximum square footage of any house that can be built. And plenty of buyers in Vancouver are thinking of major renovations, or demolishing and rebuilding.) Or the kiss of death — the house is a “deal” because it’s on one of the three drag strips that slice through Grandview: East 1st, East Broadway, or East 12th. I find out that my secret, early morning vice is shared by all sorts of other people. We’re becoming a city of real estate junkies.
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More numbers
House prices take something of breather throughout most of 2004, which is reflected by the 2006 property assessment (covering the period from July 1, 2004 to July 1, 2005). The assessed value of our house goes up by only 10%, or $41,000, which in this rapidly distorting market feels like a disappointment. The increase is still equivalent to a third salary, but a smaller one. Maybe the market is starting to become rational. And really, the party couldn’t go on forever. But at the beginning of 2005 prices start rocketing upward again, as if someone pushed the nitro button. Between late 2005 and early 2006 the line of ascent becomes almost vertical. Like someone sprinting up the Grouse Grind, the steep hiking trail that climbs straight up one of Vancouver’s North Shore mountains, the increase in average house price eats up an additional hundred thousand dollars of value in three months. Renters trying to save a downpayment must feel suicidal, or murderous. When our assessment shows up in early 2007, it reveals a 24% increase and an astounding $109,000 in additional assessed value. Like being handed two salaries.
….These are the numbers for a very average little house in East Vancouver. Double everything for a nice house on the West Side. There are probably plenty of homeowners in Point Grey and Kerrisdale and Dunbar who see a $200,000 jump, or more, on their 2007 assessment. A one-year increase that’s more than the average price in many parts of the country at the time for an entire house. I imagine households across Vancouver in which residents are thrilled because they’re winners — unless, as renters hoping to buy, they’re not winners. News stories marveling at the boom abound, gobbled up by homeowners eager to read about their incredible good fortune. The BC Assessment web site is like a millionaires club, populated with real estate millionaires. According to The Vancouver Sun, there are over 50,000 of them in the province, most of whom will be in Greater Vancouver. At this pace, how long will it be before my wife and I become real estate millionaires? If the value of our house continues to increase at the rate it does during the 2002 to 2006 period (an average of 22% a year), the answer is: three years.
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Dream, dream, dream
Yes, I do understand these are paper gains. We’re fully aware that if we sell our house only to buy again in the Vancouver market we’d be no further ahead. In fact, the cost of selling, and moving, and buying — and the likelihood that we wouldn’t be able to avoid a bidding war the second time around — would put us considerably behind. But the wealth effect has nevertheless exerted its influence, at least on me. My wife is perhaps a little more grounded at this point in time. Neither of us has much of an inclination to try moving up to a better house, although my wife sometimes wistfully wishes we had a view. We don’t really think of our house as a “starter home”. We don’t have kids, and our starter home could very well be our finishing home. My day-to-day behaviour is still relatively frugal, but my dreams are starting to become a little more extravagant.
….I start to talk to my wife about the options, and possibilities, that the increasing equity in the house could represent. At some point in the not-too-distant future (ten years from now?) we could sell the house and cash out, using a third or half of the money to buy a place on one of the Gulf Islands, or on Vancouver Island, or on the Sunshine Coast, maybe as far up as Powell River. We both like Powell River, where, by Vancouver standards, they’re almost giving away houses. The remainder of the money we’d use to significantly beef up our retirement savings. We’d need to keep working for a time, or at least my wife would (the dream gets a bit bumpy at points), so finding a suitable position in her field would be a prerequisite, but periodically positions do come available in communities in these various areas. I could probably telecommute, or, as I half-jokingly suggest (but only half), I could retire early and, you know, write my novel.
….Or we could keep the Vancouver place, rent out the more desirable top half for the market rate, probably $1500 to $1700 a month, and use the basement suite as our Vancouver crash pad, for when we’d had enough of pine cones and sea breezes and needed a dose of the big city’s restaurants, shops, and other enticements. In this scenario we’d get another, smaller mortgage for an out-of-town place, and use the rental income to make some or all of the second mortgage payments.
….Or we could use the house to fund extended travel periods, renting out both halves and using the proceeds to go live in other places for a year at a time. Possibilities, options, flexibility. Ultimately that’s what money means to people. You can call the shots in your own life rather than have them dictated to you on terms you dislike. Money = freedom.
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This house is my retirement plan
Another, more sober line of thinking has us just staying in Vancouver, paying down the mortgage as quickly as possible, and switching from using the basement suite as a mortgage helper to using it as a retirement savings helper. My wife, who has spent her career to date in the public sector, has a pension. Working entirely for small to medium-sized private sector employers, I don’t. No pension, and only a moderate RRSP: $50,000 scattered across four different accounts, which I’ve mostly ignored, other than dumping in $5,000 to one or another of them before the annual contribution deadline. The overall total reduced by the $20,000 that I withdrew under the Home Buyers’ Plan, the maximum allowable at the time.
….At some point after these repeated years of property assessment increases and equity gains, I’m in the shower, where all big thoughts seem to come to many of us (perhaps the steam, and the isolation from the outside world, help release them from our tightly packed brains?). With a certain amount of gravity I think to myself, “This house is my retirement plan.” Although I’ve yet to discover him, über-blogger and personal finances guru Garth Turner, with X-ray vision that penetrates the walls of our house, fixes my cozy, pink, showering self with a withering and somewhat contemptuous gaze. Fool!
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Financial Details
From 2004 onward, all mortgage and LOC balances are as of 31 December of the year in question.
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2003
Asking Price: $355,000
Sale Price: $355,000
Down payment: $88,750 (25%, ergo, no CMHC insurance, representing thousands of dollars of additional cost)
Mortgage (at purchase, Sep 2003): $266,250
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2003 Property Assessment (estimate of market value on July 1, 2002): $260,600
2004 Property Assessment (estimate of market value on July 1, 2003): $330,500
Equity based on assessment: $64,250
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2004
Mortgage principal: $247,330
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2005 Property Assessment (estimate of market value on July 1, 2004): $420,000
Equity based on assessment: $172,670
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2005
Mortgage principal: $201,829
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2006 Property Assessment (estimate of market value on July 1, 2005): $461,000
Equity based on assessment: $259,171
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2006
Mortgage principal: $191,884
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $4,291
HELOC interest rate: variable, at Prime.
2007 Property Assessment (estimate of market value on July 1, 2006): $570,000
Equity based on assessment: $373,825
.Next Episode
“What About Everybody Else? Getting Priced Out Forever”
In the latter half of the 1980s I was a student at the University of British Columbia, augmenting my student loans by working part time as a bartender in one of the student bars. . . . One evening one of the food prep guys — let’s say his name was Mike — told me that he and his mother had just bought a house on the East Side, the traditionally working class part of Vancouver. . . . I remember the price he and his mother paid: $90,000.
Posted in 17. The Froogle Scott Chronicles
Tagged Anecdotes, British Columbia, Bubble, Housing, Real Estate, Vancouver
Here’s Continuous Burn at vancouvercondo.info 26 Jan 2010 12:02 pm –
“We all thought we were smarter than the “greaterfools” that ran out to buy in a supposed “bubble.” Four years later and the majority of those greaterfools have received paper equity gains that the average bear will never see in his lifetime, and if they were to cash out or have cashed out, have earned once in a lifetime gains. The funny thing is that a bunch of uneducated blue collar people and immigrants who were told that RE was the best investment have done the right thing, and have reaped the rewards. The educated ones that have conducted market analyses and adhere to perceived “common sense” have been left renting for years, and will like continue to rent for many many many years to come as this thing slowly deflates. I personally know over a dozen uneducated dolts that can now survive on their measly 45k salaries because their homes have doubled, and even with a correction, will still be far ahead of the bears. Some have made hundreds of thousands, which would take a lifetime for savers to make by saving and investing that “renter’s premium.” They have more equity and cash than those earning close to six figures and will come out far ahead of the prudent savers and market timers.” [Only if they actually cash out, and how many do you know who are doing that? -vreaa]
Increased bullish confidence is traditionally a sign of an overheated market, and rampant overconfidence a sign of an impending top. Vancouver RE, however, has been so hot for so long, and bullish cockiness has reached fever-pitch so frequently, that sentiment has proven to be a poor market timing device. Nevertheless we are interested in market emotion and will continue to collect signs of bear capitulation or bull hubris. A prior VREAA post [7 Jan 2010] listed numerous RE bullish blog quotes. This post will serve as an update and as an ongoing repository. It will be linkable from the sidebar. -vreaa
Steinbock at RE Talks 11 Jan 2010 8:12 pm – “BOC has announced that they will NOT increase the prime rate to control the hot real estate market for the foreseeable future. Yes, really. So:
1-it sux to be a bear.
2-Any bears willing to commit hara-kiri; please sign up now, as I have only one sword available.
3-It sux to be a bear.
4-Make sure to allow extra $ for cleanup if buying bear inhabited dwelling/property as excrement is being produced at an increased rate.
5-Bear rugs available at severe discount due to oversupply.
Your friend, Steinbock”
jimtan at RE Talks 13 Jan 2010 00:29 am – “What is the right strategy for a bull trend? Sensible people learn to buy on dips. What is the wrong strategy? It is foolish to refuse to buy, and to hold out for a ridiculous price. … You guys [bears] are the negative examples. Why spend time on this forum if you’re not willing to learn?”
jimtan at RE Talks 15 Jan 2010 10:01 am – “I’ve done the numbers and the bulls have the upper hand. The more noise I hear from the ideological bears, the better I feel. It’s confirmation that my analysis is right.”… “The bears… don’t do the numbers!”
silverman at RE Talks 14 Jan 2010 1:52 pm – “History tells us that over the long term you can’t lose.”
eyesthebye at RE Talks 23 Jan 2010 10:15 am – “So how many bears are now priced out having sat out 2009 and the 18% increase in prices? Priced out also refers to never being able to “bring oneself” to pay the price now offered.”
Greenhorn at RE Talks 23 Jan 2010 00:01 am – “Fundamentals don’t apply to Vancouver. I am sorry to say (for the Bears) that Vancouver real estate has detached itself from economic reality long ago. It has reached escape velocity to break away from economic gravity. It is a beautiful case study. Really, something that has never, ever been seen before in any other city in the world. The Vancouver real estate market had a brief slow down 2 years ago, but resistance levels [support levels -ed.] kept prices from falling for long. As prices fell, new waves of buyers jumped at the opportunity to buy at prices they could finally afford. Question for the Bears: After how many years of denial do you change your tune? 5 years, 10 year, 20 years of continual appreciation? If you read text books, you will never make money in Vancouver from real estate. Forget about it. Sooner or later you will begin to sound like a heretic. Don’t be that crazy guy in the basement suite.”
Johnny Horton at RE Talks 24 Jan 2010 3:20 pm – “All these landless serfs spouting off about nothing for the past 10 years. Don’t you wish they’d just shut up? We’ve had to listen to them bad mouth anybody or anything to do with real estate for the 10 years. We’ve had to suffer all their stupid graphs, and “good evidence”, etc. We’ve had to endure their insults…boo-hoo-hoo. Is there no end to their bitterness????”
eyesthebye at RE Talks 27 Jan 2010 7:29 am – “Economic conditions are irrelevant – Have you not learned anything in the past year?”
—
UPDATES, ongoing:
Austin at RE Talks 27 Jan 2010 10:10 am – “…as the world gets wealthier quality of life itself becomes a product. It looks like Vancouver is producing it.”
jimtan at RE Talks 29 Jan 2010 11:18 pm – “Affordability studies like this are worth nothing. Its comparing the median income of A-L-L residents to the median price paid ONLY by current buyers. Apples and oranges?”
silverman at RE Talks 5 Feb 2010 12:14 pm – “Look at it this way.
Miami: Future price movement… Down. Therefore, currently it is overvalued
Vancouver: Future price movement… Up. Therefore, currently it is undervalued”
tqn at RE Talks 8 Feb 2010 8:48 pm – [in a thread “Are there better places than Vancouver?”] “It’s the best place one earth, and it’s at the jealousy of the world.” [sic]
Eyes of the World at vancouvercondo.info 9 Feb 2010 11:58 am – “Hahaha..I love checking in here [vancouvercondo.info] and seeing the same old “arguments” being rehashed over and over and over again… Vancouver is the best place on earth and the Olympics will show that to the world. People will walk around, notice the beauty and buy here.”
jiming at VREAA 10 Feb 2010 9:23 pm – [commenting on an accountant’s concerns re overextended mortgagees] “Blah blah blah.. new highs”.
Johnny Horton at RE Talks 10 Feb 2010 10:56 pm & 11 Feb 2010 9:21 pm– [addressing in turn dot com refugee and HomelessinSD, who had both found this house overpriced] “Why are you dissing a house that you can’t even afford to buy? If you diss the house, you actually are dissing yourself.” & “Who are you to talk down about this house? You can’t even afford to buy this house and yet you call it a “shit shack”. What does that make you?”
eyesthebye at RE Talks 14 Feb 2010 9:45 pm – “Rental yields to determine price only matters in commercial [and not residential] real estate – bears somehow adopted it as their explanation of a bubble.”
Johnny Horton at RE Talks 16 Feb 2010 5:12 pm – “Renting eventually equals poverty. You cannot earn enough money to accumulate wealth. The stock market is a big racket. Any investment gains other than your principal residence, is taxed. Your primary residence is tax free other than the costs of services every year. The dollar is eroding, hence you have to earn more to pay an ever increasing rent.”
eyesthebye at RE Talk 24 Feb 2010 8:53 am – “Homeowners have been using HELOC for years to reinvest in real estate and have made piles of cash. Hope you took your thumb out of your ass long enough to understand this.”
Vancouver Rocks at vancouvercondo.info 27 Feb 2010 1:32 pm – “The gods are on our side when it comes to real estate. The Vancouver boom is not over. It is just starting. All it will take is a couple of thousand visitors to buy, and the already low inventory will be eliminated. Sorry bears, but Vancouver will continue to go up and you will continue to be left behind.”
eyesthebye at RE Talks 27 Feb 2010 2:43 pm – [in response to a bearish comment] “Dripping with naivety . If you can’t see that the Vancouver market has changed enormously in the past ten years then you’ve been living under a rock. In another ten years this city might be the most expensive and desirable place to live in the world.”
Alum at vancouvercondo.info 10 Mar 2010 9:34 am – “Go Vancouver RE……Go….!” [a reference to Olympic cheerleading; possibly intended as sarcasm; representative of current bullish sentiment and belief nonetheless]
Anonymous at vancouvercondo.info 11 Mar 2010 3:41 pm – [in response to a renter who enjoys the freedom that comes without a mortgage] “Hey, be sure to enjoy your “freedom” on the streets when you retire, and have no home of your own. Life is not easy, and sometimes it requires commitments like home ownership to get ahead.”
Vancouver Rocks at greaterfool.ca 12 Mar 2010 5:01 pm – “Those that sat out during the run up will NEVER EVER EVER get a chance to buy at pre-boom prices (2002).”
eyesthebye at RE Talks 18 Mar 2010 8:07 am – “As I’ve said many times before – rental yields, growth charts, graphs, pie charts, etc. mean nothing – what matters is demand. And if folks can scatch and claw their way to be able to own a piece of this paradise they will. Too bad for you.”
arpakdel at RE Talks 24 Mar 2010 11:05 am – [This post, intended as intense sarcasm, may, perversely, end up being a literally accurate prediction! -vreaa] “Here is a wild WILD WILD thought… maybe they just bought a home for their growing family to enjoy and build memories in for many years to come in one of the best neighborhoods in one of the greatest cities in the world. But naaaah, that can’t possibly be. They must be greater fool first time buyers buying into the hype that owning a home has intangible value and they must be insanely over extending themselves, and it is only a matter of time that they whole world comes crashing down and they will be sad pathetic home owners that will regret their decision forever and will long for a time machine to turn back time so they could have a second chance to take the advice of renters.”
Johnny Horton at RE Talks 30 Mar 2010 9:56 am & 4:27 pm – “Yes, we all know the story about the kid who kept crying “wolf” when there was none. Then one day there was one and when he cried “wolf”, nobody came. The boy got eaten up. Or how about the story of the broken watch. It’s right two times a day. You Be 
rs are long overdue to be right. Maybe this time? 
” … “[I] can’t get over how fcuking stupid some of you Be rs are. I don’t know which is greater your stupidity or your sourness. Both are pretty sizeable. “
eyesthebye at RE Talks 8 Apr 2010 9:21 am – “I’ve gained 130K in equity in the past year. The true cost of renting is what you don’t gain, not your monthly savings on the net difference from renting vs owning.” & at 9:44 am “I can access my equity anytime I want.” & at 6:33 pm “The “numbers” in Vancouver will never make sense”… “I’d be surprised if any accountant bought a SFH in Vancouver post 2006” & 9 Apr 2010 9:22 am – “Using these numbers (rent:price ratios, median incomes:price, etc.) to justify your purchase will make a lifetime renter out of you.”
Johnny Horton at RE Talks 13 Apr 2010 8:44 am – “We are in a huge bubble. Probably for at least the last 40 or so years. So what? “
Anonymous at robchipman.net 14 Apr 2010 9:30 pm – “renters are at the bottom of lifes foodchain suck it up losers”
silverman at RE Talks 15 Apr 2010 9:19 am – [with sarcasm] “Yup… nobody is smarter than a basement suite dweller waiting for the market to go down 40%.”
eyesthebye at RE Talks 24 Apr 2010 9:15 am – [regarding David Rosenberg being bearish on Canadian RE] “I don’t think he has a grasp on how real estate works here in Vancouver. And I’m talking about detached, not condo or TH. There is not much product in the SFH segment since land is scarce. Vancouver (west side and east) in a very small city in terms of area. The “haves” play “keepaway” with the “have-nots”…that is to say, investors have a large pool of renters and are therefore not obliged to sell when prices begin to turn. Rosenberg lived in the US for many years and has probably never stepped foot in Vancouver.”
JimTan at Housing Analysis 1 May 2010 11:32 pm – “We now know that Canada is not like the States. Canadian and Vancouver RE followed a different trajectory. The bubble enthusiasts were 180 degrees wrong. … The cause for a bubble was missing. Players in Canada (and Vancouver) worked with public information that was adequate. They knew the risks. They did their numbers. Unlike the States, there was lack of panic and momentum. The market was information efficient and RE was correctly priced for the context.“
Jack NoSourGrapes at macleans.ca 26 Apr 2010 – “Look, we are sorry you aren’t able to afford a house in Vancouver. There are people in cities all over the world that can’t afford to own there, so deal with it and move on.”
silverman [a realtor] at RE Talks 10 May 2010 10:21 am – [In response to a bear mentioning 35%-45% price drops] “Sorry, but you have a severe case of wishful thinking. There ain’t gonna be a 35% – 45% drop unless a 30’s depression, or 80’s inflation of 20% causing the doubling or tripling of interest rates, happen. What you will see in the near future, is a flat market in BC with a possible correction of no more than 5%. If a shortage materializes, then we could have some modest gains.”
Rob Chipman [a realtor] at robchipman.net 17 May 2010 3:00 am – “I don’t see big storm clouds on the horizon for this local market. Price growth may stall, or even drop, but no crash.”
silverman at vancouvercondo.info 28 May 2010 12:10 pm – “You will have a hell of a time convincing a seller to accept less than what he paid.”
eyesthebye at RE Talks 12 Aug 2009 6:03 pm as cited by eyesthebye at RE Talks 20 Jun 2010 11:49 am – “One thing is damn sure about price direction. There is now no way there will be a major crash in Vancouver. What is happening with the market now has made a crash impossible. After fence-sitters and market-timers were burned expecting a big bust, got a 15% correction followed by another run up, what do you think the odds are that they’ll miss the boat next time? I’m betting they jump in at less than a 10% reduction due to itchy trigger finger syndrome.”
eyesthebye at RE Talks 20 Jun 2010 8:35 pm – “If simple earning were the only reason why properties are priced where they are you could definitely say the values are out to lunch – yet there’s more at work here in Vancouver, ain’t there? Foreign money, bank of Mom and Dad, wealthy retirees, etc. None of which has anything to do with the annual earnings:price calculation. Sorry bears, no grade school calculation is available for prices in this city.”
Austin at RE Talks 25 Jun 2010 10:21 am – “I think anything across the bridges, viaduct, or past 0 hastings and still on the south shore (ie, downtown) is becoming comparable to Manhattan. In fact, I think it’s pretty reasonable to say, downtown Vancouver is the Manhattan of Canada.”
Tracie McTavish, president of Rennie Marketing Systems, quoted in Businessweek, 24 Jun 2010 – “Real estate is like a sport here.” [An outrageous comment, when you come to think of it. What’s next? Government sponsored food-fights? -ed.]
vanreal at RETalks 17 Jul 2010 6:07 pm – “Without a house you have no leverage to borrow more money if you need it. The banks will only lend significant sums to people with some form of security. Renting will destine you to a life of poverty. It is fine if you are young but you should get into the market asap. I bought in 1990 for 150,000 and my house is now worth over 1,000,000.”
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.”
vanreal at RETalks 1 Aug 2010 9:42 pm – “Everyone keeps talking about how the fundamentals don’t support the 1st time buyer affording anything on an average household income of 60,000 but there are many many properties that the first time buyer can afford in the suburbs. Burnaby, Coquitlam, New West and Richmond all have apartments both 1 and 2 bedroom below 250,000 dollars. That is certainly affordable for an average family. It just cant be a single family house in the city. That ship has sailed.”
eyesthebye at RE Talks 29 Aug 2010 8:46 am & 9:09 am – “I believe that a 6% appreciation/year is entirely likely. Prices will be up 30-40% from today in 2015.”
eyesthebye at RE Talks 2 Nov 2010 9:49 am – “This is [a] common bear miscalculation – that rental prices need to be related to home prices. Calculating the cost of renting compared to owning will make you a renter for the rest of your life.”
Chris Davies, REIN member, ‘Bubble Blogging = Masturbation’ at chrisdavies.ca, 3 Nov 2010 – “Guys like Don [Campbell] and I don’t care if prices go up or down, or sideways.”
Larry Yatkowsky, realtor, as archived at VREAA 16 Nov 2010 – “You have to take a deep breath and realize that the world you thought you knew is not as it appears. You must understand and accept that there is untold wealth that exists within our city. A paltry $2.5 mil is chump change. What we are experiencing now is only a beginning.”
eyesthebye at RE Talks 16 Nov 2010 8:22pm – [On the effects of falling stock and commodity prices on RE] “If anything, investors will give up on the market and pour their money into a proper investment – real estate.”
eyesthebye at RE Talks 6 Dec 2010 11:17am – [Describes own purchase in early 2009 and shows alternative they ‘passed on’ ] “I’ve taken the liberty of posting the listing – mostly because I want to show the bears the kind of prices they’ll never see again when they passed up a golden buying opportunity in early 2009.”
eyesthebye at RE Talks 16 Dec 2010 9:34am – “Chinese investment in Vancouver … will last at least another three years due to the estimated backlog of investor class immigrant applications. This will probably be long enough to send Vancouver real estate to the moon without enough fuel to make it all the way back to earth.”
TheBestPlaceOnEarth at greaterfool.ca 20 Dec 2010 4:21am – “Richmond is on friggin fire folks. Over 50% Asian investors and growing. House after house after house, we’re talking in the 100′s maybe 1000′s being bought bulldozed with a monster home put on top. No joke here Lamborghini’s with the N (New driver) sticker on them. Please come down to Richmond for a site visit you won’t believe it. Make no mistake about it these are cash deals NO MORTGAGE. God I love this place just plain unstoppable. The creme de la crem GOD ITS GREAT. Goin higher too! Love IT.” and more at 4:25am – “If your talking you took 50 grand downpayment on that potential winner house in Richmond and bought a portfolio at a one time [gain] of 13% your looking at 6500 bucks. FOLKS DO THE MATH. Richmond house make you over 12 times the amount. WAKE UP NOW. STOP IT. Grow up and BUY. Do the math.For God’s Sake.”
eyesthebye at RE Talks 24 Dec 2010 8:33am – “I doubt Vancouver real estate will even correct more than 10% at any point in the future.” and 2:54pm – “To call Vancouver real estate a “bubble” is to say that it will one day burst. And to burst you’ll need sellers at much lower prices – I don’t see that happening. Sellers here take their homes off the market rather than discount. Hasn’t history taught you this?”
Exquisite Malevolence – Vancouver RE Bull Uses ‘It’s A Wonderful Life’ Quotes To Torture Bears On Xmas Day at VREAA 26 Dec 2010
“It’s hard to find a reputable analyst who predicts anything other than mild fluctuations in housing over the coming year or two. … Unlike stocks or commodities, homes are an asset that’s resistant to big drops in value.” [In same article concern about a bubble called ‘hysteria’ and ‘hare-brained’.] – Jay Bryan, Montreal Gazette, 30 Dec 2010
“Sellers have spoken loudly many times recently…they WILL NOT give back the equity gained on their homes; they will simply take them off the market.” – eyesthebye at RE Talks, 13 Jan 2011, 12:00pm
“Since I bought my home my “income” has been 40% from my job and 60% from housing appreciation. When I sell this is tax free money. Go ahead and rent forever.” – L8erDude at yattermatters.com February 2nd, 2011 1:18 pm
[Addressing a bear who frequently discusses fundamentals]: “Your analysis and charts can be worshiped every where else on the planet. But Vancouver is your Waterloo. You should have known this by now. Vancouver RE is a totally different game.” – unicas at RE Talks, 20 Feb 2011 5:19pm
[In response to: “I can’t believe the type of money being thrown around on the West side. I don’t even think the most bullish people foresaw these type of sales.”]: “I think the bulls always knew it was possible. We all saw Vancouver as the best place to live in the world and foresaw more and more international money coming here. That said, I admit I’m stunned at the prices. I think the bears analysis was per usual…wrong.” – eyesthebye at RE Talks 28 Feb 2011 2:52pm
“With sales remaining very strong and listings at a mere trickle, I think we’re about to see a 5 month price explosion on SFH like you’ve never seen before in this city.” – eyesthebye at RE Talks 22 Mar 2011 10:40am
“Prices on detached are still too low. Detached is still about half of what it should be.” – eyesthebye at RE Talks 29 Mar 2011 12:40pm
“If you don’t own your place Vancouver is not kind – can’t you tell by the sheer quantity of grumpy bears? For those of us that do, we consider Vancouver to be a paradise.” – eyesthebye at RE Talks 6 Apr 2011 10:51am
“..the circle that I know continue to move on with their lives. They buy detached homes, start having kids, take promotions at their jobs, etc. These are young people in their 30′s who are born and raised Vancouverites, unlike most of the posters here.
Posters here live on the fringes of our society. The people I know are as disconnected with posters here as they are the addicts at Main/Hastings. You people are basically shadows to us.” – Rusty at VREAA 7 Jun 2011 8:24am
“When you start a family you buy a home.” … “If you don’t get the premise it’s because you don’t have children. And if you do have children and you don’t get it then you never should have entered into parenthood.” – rusty at VREAA 1 July 2011 10:16am and 11:46am
“Would you care to make a wager on these predictions?
Any stake you’re comfortable with – as high as you want to go…I think I can cover it lol.”
“I want you to put the cash in my hand – so I can grin at you like a cheshire cat.”
– Rusty, in two posts at VREAA, 26 July 2011, attempting to set up a bet with vreaa regarding future price action. [Rusty doesn’t believe a price crash is possible, or that a Vancouver RE bear could put up a bet that he couldn’t cover.]
vanpro: “Vancouver homes are 3-4 TIMES the price of [comparable] Seattle homes. Median price of all homes in Seattle = US$340k = CDN$327k.”
jimtan: “So, move to Seattle. You’re be doing us a big favour.”
– exchange at RE Talks, 26 Jul 2011
“40,000 new residents in the GVRD each year. Why don’t you tell me if prices will be higher or lower in 5, 10 or 15 years?
Yes, inflation will always win. Haven’t you learned anything yet? People with homes are the ruling class…it’s always been this way (anywhere in the world), expecting it to change is idiotic.” – Rusty, on a roll, at VREAA, 27 July 2011 12:31pm
“Here’s the recipe: gradually add 100K people to Vancouver, bake 15 years, sprinkle with development policy that reduces the # of detached dwellings…serve up a housing cost that doubles each 8-10 years. Go ahead and keep renting for the next 20 years. That’s a recipe that serves up a very sour tasting housing position.” – rusty, at VREAA, 31 July 2011 6:12pm
“Chance of price collapse in property prices = nil.
You might get short and shallow correction like 2008 but that’s it.”
“Won’t ever see [‘a solid 12 months of price declines’] in this city. Best bet maybe two seasons worth.” – rusty, at VREAA, 1 Aug 2011 4:53pm& 5:21pm
[Addressing a renter] “Your savings will never keep up with the pace of property appreciation. Each year you wait is a year further you get from home ownership. Has history taught you nothing? If you’re happy being a lifelong renter or having to move out of Vancouver when you want to buy then continue to rent. Sounds like you’d have a nice lifestyle without owning – but you put your child at a distinct competitive disadvantage to a homewoners child.” – Rusty at VREAA, 5 Aug 2011 10:19am
“Fear of debt is what keeps mosts of these bears from every taking on a mortgage.
The bold own homes, the bashful don’t
No risk = no reward” – eyesthebye, RE Talks, 10 Sep 2011 4:11pm
An emotion related to hubris: Tamara Taggart demonstrating the excitable frisson that many owners of appreciating homes in BC demonstrate for the sport of Real Estate [VREAA, 28 Sep 2011]
“My instinct tells me that we’ll be able to weather whatever market storms come our way.” – Kevin Vallely, a ‘residential designer in North Vancouver’, North Shore News, 28 Sep 2011
“I do not see this trend of rising house prices in Vancouver to end until this in-migration stops .. likely not until 2050.” – Thomas Beyer, President, Prestigious Properties Group”
– RE Talks, 21 Sep 2011 3:22pm [cited at VREAA 24 Sep 2011]
VANHATTAN – ‘BC Homes Magazine’, Aug/Sep 2011 cover
“Do you think anyone cares that you’re priced out while others are still in the game? This is human competition at it’s basic level. Vancouver is for the strong, the fit; this city separates the wheat from the chaff.”
– Hardy at VREAA 8 Oct 2011
“There will be a day when you remember these days as an excellent buying opportunity.”
– formula1 at VREAA 7 Dec 2011 9:10pm
“I don’t think there is any sign anywhere from people on the ground in Canada that foresees the bubble. Economists predicting a collapse in Canada have been wrong for years; my prediction is that they’re going to be permanently wrong.”
– Gerald Soloway, Chairman and Chief Executive Officer, Home Capital, Bloomberg, 20 Apr 2012
“The idea of 40% price drops is farcical.”
– Robert McLister, mortgage broker, Bloomberg, 15 May 2012
“People come to town and say it is a bubble, but what do they know?”
– Bob Rennie, The Province, 24 Aug 2012
“Most homes here are bought by people with wealth. They can afford to hang on and wait for better market conditions, so it makes sense that listings are getting pulled. Conventional house price economic responses are more applicable to cities like Calgary and Edmonton. The rich are not the same as most people, otherwise Vancouver’s prices would never have risen so far above average household incomes in the first place.”
– ThinkRight commenting at Financial Post 4 Dec 2012
Housing prices simply cannot outstrip incomes forever. A reconciliation will occur. -vreaa
This from the Vancouver Sun 25 Jan 2010 –
“Vancouver not only has the least affordable housing of 28 markets measured in Canada, but of 272 metropolitan markets ranked in Ireland, the U.K., New Zealand, Australia, the U.S. and Canada, according to statistics compiled by the Winnipeg-based Frontier Centre for Public Policy. The numbers are calculated by dividing the median (or middle) residential house sale price from the third quarter by median annual gross household income. In Vancouver, for example, a median home price of $540,900 was divided by median household income of $58,200 to create a multiple of 9.3. The group describes as “severely unaffordable” any reading of 5.1 and over. Not only that, it is “unprecedented in modern history,” the group said.”
Posted in 02. Profiting from the Boom, 05. Where do Buyers get the money?, 08. Overextended Buyers, 10. Demoralized Renters?, 12. Effects of Development, 14. Social Effects of the Boom, 15. Misallocation of Resources
Tagged Anecdotes, British Columbia, Bubble, Fundamentals, Housing, Real Estate, Speculators, Vancouver
Now ‘space’ has become a ‘non-essential’. It seems we’ve forgotten that Canada is the second largest nation in the world, and one of the least densely populated. -vreaa
Excerpts from an article in The Vancouver Sun 22 Jan 2010 –
‘Micro-lofts’ to come to Vancouver
“Two Vancouver property firms are expected to formally announce Monday the million-dollar creation of 30 so-called “micro-lofts” in the Downtown Eastside. At approximately 270 sq. ft. — about the size of two municipal parking spaces — the market rental units will be the smallest in the city.
“So many people contact us, not with a specific size they want, or specific amenities, but they tell us where they want to be in the neighbourhood and how much they can pay. So often that amount is just not achievable for anything but a very specialized product like this,” said John Stovell, general manager of Reliance Properties. “By cutting away the non-essentials, that is the only way to get to that price-point in Vancouver,” he said.
—
Comments on living in small spaces by these posters on greaterfool.ca –
rubberduckie 23 Jan 2010 9:10 pm -“I lived in a sub-300sq.ft. bachelor suite for a number of years. Being in a space that small does stuff to your head. I think half of my dreams at night were about discovering extra space behind a door. Maybe it’s living in a small space in Vancouver that makes us lose our minds and pay way too much for slightly larger condos!”
Ronaldo 23 Jan 2010 10:06 pm – “I once lived in a 327 s.f. house for a time and I gotta agree with you that a person definitely can get “spaced out”, a condition that will become very familiar in Vancouver in the years to come. Welcome to Japan in the 90’s.”
—
UPDATE 27 Jan 2010
Housing Advocate at vancouvercondo.info 27 Jan 2010 12:56 pm – “I do not think that people realize that 270 sq feet was previously deemed as non-livable space by provincial guidelines. The minimum space requirements, outlined in discussions on affordable housing strategies, identify a much bigger number. It is funny how concepts of “liveable space” get altered when there are profits to be made.”
This from MikeOnTheMic at greaterfool.ca 23 Jan 2010 1:47 pm –
“As a life-long Vancouverite, I agree that RE prices here are not realistic. When would you all think that we started to exceed realistic prices? In the early 2000’s? Anyways, I’m hoping that we get back to realistic RE pricing at some point over the next few years. Maybe with what’s going on in the markets this past week we will see the start of a return to RE sanity soon.
On the other hand, I am a bit puzzled by the consistently pejorative terms and connotations I often read here [greaterfool.ca] when it comes to describing Vancouver and the implication that RE ownership here is crazy (current unrealistic prices notwithstanding). It was 15C and sunny here yesterday. The cherry blossoms are starting to come out, as they usually do on the West Coast at this time of the year. You can start your day-off driving 20 minutes out of town to go snowboarding all morning and then grab lunch on the way to the beach and windsurf / kitesurf all afternoon.
I have a neighbor who works in Korea full time so that his wife and kids can live here. He visits twice a year for a week at a time. He says that it is a dream for him to have his family live here because his kids’ prospects are so much better. This is not uncommon.
I grew up here and lived through the 1980’s influx of families from SE Asia, many of whom were able to purchase expensive RE. Having travelled to many places in Asia and experiencing first-hand the quality of life in that part of the world, it is no surprise to me that people are still flocking to our shores. As their economies improve, the upwardly mobile should increase in number and many will likely look to follow their emigrated friends and family.
I’ve lived on the East Coast through brutal winters and snow / ice storms through until May-June. A lot of people I knew out there were either dreaming about or planning to move out West at some point.
I’ve had friends visit from Europe who can’t believe the relatively low cost of living here when it comes to basic things like groceries, gas, utilities, etc…
Some posters here have compared Vancouver / Victoria lifestyle / RE / economic issues with those in the SF Bay area – fair enough – but we’ve got free health care and less random crime (OK – crime in Vancouver is a problem, but have you been to Oakland?).
Aside from stupid RE prices right now, I guess one other downside is the earthquake risk here, but if anyone is really worried about that, you could always bury a school bus and use it as an underground bünkerhaus. Not much of a view, but you might get some geothermal heat for free 
Maybe I’m just trying to reassure myself that it’s OK to own a very small piece of paradise here, as I do. I agree that there is a huge need for folks to ponder the emotion that colours these considerations. Thanks to your advice Garth, I’ll try to ensure that my RE risk is not at foolish levels. Maybe I’m just a local guy who loves living here and thinks that the place gets a bit of a raw deal on this blog, all b/c RE is currently over-priced. But hey, don’t you know that it rains all the time in Vancouver? Who would want to live there anyway? Peace.”
Posted in 02. Profiting from the Boom, 14. Social Effects of the Boom
Tagged Anecdotes, British Columbia, Bubble, Bulls, Canada, Foreign buyers, Housing, Life, Rain, Real Estate, Vancouver
Cult-like sentiment. Misallocation of human capital. ‘Junius’ lays it out; we agree. -vreaa
This from junius at greaterfool.ca 23 Jan 2010 10:27 am – “Vancouver is the epicenter of RE insanity in Canada. There is no market like it. I speak to friends who have moved from here to Toronto, Calgary, Ottawa or Montreal – or abroad – and they all say it is like leaving an insane asylum. It is much, much more than the outrageous and inflated prices. The culture in Vancouver is so deeply tied to the notion that RE prices cannot do anything but go up forever you can easily find yourself outcast just for expressing a contrary opinion. It is like expressing an opinion questioning the existence of a God to a group of Christian fundamentalists. I worry most about how deeply a crash would impact the Gen Ys who have both pursued a career in RE and leveraged themselves to the ceiling in debt. I cannot tell you how many bright young people I have met who have left traditional careers – teaching, engineering, law, etc. to pursue the easy riches of a career in RE. Some are agents, some are in marketing, some are in mortgage lending and finance. However in each case they left because a career in RE paid better and appeared to be more solid in the long run. I am sad for this group because many of them have really just started in the last decade when things could not have been better. They will find it nearly impossible to replace the income they enjoyed over the past few years and in many cases will have to in order to keep their investments. A crash will hit them hard in so many ways.”
junius adds some specifics, at 10:35 pm – “My favourite place to watch the insanity of Vancouver prices is on the Prompton Board at the Roundhouse on Davie Street. It has a bevy of current listings for premium apartments in Yaletown. If you are in the areas pass by and take a look – more than a little amusing. What you will see are mostly condos in the 900K to 3 million range. The majority lately are in the 1.1-1.8 range which is what a 2 bedroom in the 1100 sq ft. range lists for. Over the past few month almost all of the movement has been in the under 800K range. I noticed that yesterday only one unit out of about 40 listings had sold. It was a 1 bedroom that was listed at 650,000 that sold for 580,000 – more than 10% off list. Just one listing but it could be a sign of things to come.”
Excerpts from an article in the NYTimes 21 Jan 2010 –
“70 percent of 8 million New York City residents live in rentals. Average rents are down by about 25 percent from the market’s height in early 2008; vacancy is close to 2 percent, compared with just under 1 percent in 2007 and 2006; and the city is still losing jobs. As a result, the new buildings are offering a range of incentives to lure tenants, including one to five months of free rent, free gym memberships, American Express gift cards and even free iPods. Rents have already dropped to the levels they reached in 2000, and the influx of apartments is expected to keep them there.”
“At least 16 new rental buildings are expected to open in Manhattan in coming months, ranging from small buildings to 500-unit high-rises, for a total of more than 3,500 apartments. Brooklyn will get an additional 3,500 new apartments as well, including units in some buildings that opened in late 2009. New studios in the Hudson Yards area [Manhattan] could start at $2,000.”
BC is on the cusp of the Boomer Retirement Years. The number of people turning 65 in any given year is about to almost double. A large number of those boomers are overdependent on RE for retirement funds, and will have to sell. This will result in a significant increase in RE supply and will apply downward pressure to prices. Falling prices may in turn increase the rate of retirees cashing out, as they see their retirement funds (aka market value of home) dwindling. Here is an anecdote from a boomer, reproduced in full because of its crucial relevance to the Vancouver RE market. -vreaa
This from Dianne Maley in the ‘Financial Facelift’ section of the Globe and Mail, 22 Jan 2010 6:06 pm –
Hard choices, changes are called for : Selling her valuable home might be the best option for woman hankering to retire
“At 61, Ruth’s thoughts are turning to the day when she can quit her stressful job with its long hours and spend more time travelling, doing yoga, hiking and taking courses at the university. While she is active and in good health now, Ruth had a health scare last year. “An incident like that makes you think and reflect on what’s really important in life,” she writes in an e-mail.
What’s most important is being able to help her 21-year-old son, who graduates in July, to pursue a career in the theatre.
Ruth’s main asset is her house in the trendy Kitsilano neighbourhood of Vancouver, which she figures is worth $1.35-million. We asked Gina Macdonald, financial planner and portfolio manager at Macdonald, Shymko & Co. Ltd. in Vancouver to look at Ruth’s situation.
What our Expert Says If she continues to work until she’s 65, Ruth’s income will still fall short of her retirement goals if she continues to live in her Kitsilano home. Without paying off her mortgage, Ruth will need $59,000 a year after taxes, the planner estimates. That number would fall to $42,000 if the mortgage is paid off. Ruth’s two indexed pensions will only give her about $696 a month. She will be eligible for full Canada Pension Plan and Old Age Security benefits of $17,414 a year, which will raise her monthly income stream to $2,147, or about $26,000 a year. This does not even cover her housing expenses of $2,632 (mortgage, property taxes, insurance, utilities, telephone, repairs), Ms. Macdonald points out. As well, the interest rate on her 24-year, $230,000 mortgage could rise from the current 5.1-per-cent rate, requiring more than the $1,430 a month she currently pays. With the mortgage, her income shortfall is $2,770 a month, about $33,000 a year. Even without the mortgage, she’d be short about $1,353 a month, about $16,000 a year. The mortgage is clearly an obstacle. If Ruth continues to rent out her basement suite at $933 a month, the shortfall (with the mortgage) would drop to $1,837, about $22,000 a year. One option for Ruth is that she could apply for the B.C. Property Tax Deferral program, saving her another $458 a month and shaving the shortfall to $1,379.
Ms. Macdonald offers several possible solutions for Ruth to make up the shortfall. First, Ruth could withdraw money from her registered savings to generate enough income to stay in her home. She would need to take about $22,000 a year in order to get after-tax income of $16,548. (This, plus her pension income of about $26,000, would raise her income to the desired $42,000). At a 3-per-cent rate of return in her RRSP account, she could do this for up to 13 years before she ran out of money – and the mortgage still would not be paid off in full. At that point Ruth would have to sell her home. Other possible solutions include renting out more space in the house or even moving into the basement apartment until the mortgage is paid off or until she receives a possible inheritance. Alternatively, Ruth could downsize to a house that costs no more than $850,000, which would leave enough money to generate an income stream (with her other income sources) of about $50,000 a year. “The new house could have a basement suite to generate additional cash flow for travel goals and for big ticket replacements such as a new roof or new furnace,” Ms. Macdonald says.
Critical to Ruth’s success is a revamping of her investment portfolio, Ms. Macdonald notes. “A 100-per-cent equity portfolio is inappropriate for a 61-year-old woman nearing retirement with limited resources.” Given the relatively small size of Ruth’s RRSPs, Ms. Macdonald recommends a diversified portfolio of index funds because of their low cost and the diversification they offer. She also suggests a bond or GIC ladder, in which a portion of the fixed-income securities mature each year. Finally, Ruth has the capacity to save about $1,000 a month as long as she continues working, which she can use to replace her 17-year-old car with a new used one, catch up with her $10,000 in unused RRSP room, open a tax-free savings account and make repairs to her house.”
This from Cynic at vancouvercondo.info 22 Jan 2010 11:14 pm –
“Last Sunday I went through an open house in the new Woodwards tower – the suite was a 2-bedroom on the “penthouse” floor (41st floor). Asking price was $960,000 but, according to the realtor, it or its twin, could be rented for $2,000 to $2,500 per month depending on the view. Apparently less that 30% of the building is occupied so pretty well any kind of suite you want in the building is available. The monthly maintenance was over $500 (and slated to rise sharply very soon according to the somewhat desperate salesperson) so anyone buying at that price would have to be brain dead.”
The 2001-2010 Vancouver RE market has affected our city profoundly, and touched many of us in ways that have changed our lives. We started collecting anecdotes here at VREAA out of a fascination for the personal and social effects of the boom. A similar captivation has led a Vancouver homeowner to write of his own experience, and we are very pleased to bring you his serialized account, with its numerous anecdotes. ‘Froogle Scott’ will share his story of buying a house in Vancouver, and the journey that he and his wife have been on since that day in September 2003. In the first episode, we hear the story of the buying itself. Here begins one couple’s multi-faceted experience of this boom. -vreaa
September 2003
My wife and I, first time buyers, purchase a 1940s stucco bungalow in the Grandview area of East Vancouver for the asking price of $355,000. This is about a year and a half into the current eight-year real estate boom/bubble. The lot size is 33 x 117, just slightly smaller than standard. The MLS listing gives the square footage of the house as 1860, which later turns out to be a 20% exaggeration. The house is only about 1550 square feet, split over two levels — the main floor, and a two-bedroom, ground-level rental suite. The rental suite is tenanted — a quiet single mum with stable employment and her teenaged son, who look at us with a certain amount of trepidation when we first tour the house. They needn’t worry. We’re happy to inherit good tenants, and do not increase their rent ($560 a month, plus 40% of the utilities) for the year and a half that they continue to live in the suite.
……. We avoid a bidding war because of the listing agent’s greed. She wants to sell the house to her own clients and pocket both ends of the commission (“double-ending”). So she doesn’t have an open house. And the home owners perhaps aren’t savvy enough to demand that she have one.
.
Feeding frenzy
The very first house we look at, a beautifully maintained 1950s stucco bungalow with a full-height basement suite in the heart of Grandview, the house we still wish we’d been able to buy, is snapped up at the open house. Nine bids, and a sale price of $402,000, about 9% over asking. In hindsight, not a bad deal. But we’re newbies in the RE game, and our buyer’s agent, a personal friend, is unfortunately out of town that day. When we ask the listing agent if we can come back in the morning with our agent for another tour and to potentially put in an offer, he looks at us with amusement. “Sure. But the house will probably already be sold. Why isn’t your agent with you? Your agent should be with you.” The open house is a feeding frenzy. You can hardly navigate the rooms. A weird tension is in the air, people shooting covert glances at one another, as if to say: “Get out. This is my house.” We’re quickly getting the picture.
.
Getting played
On RealtyLink, I find the house we do end up buying. The picture, which highlights a dark smudge beneath one of the front windows, makes the house look crummier than it actually is. Which is probably our first bit of luck. How many people took one look online, and skipped right over it? This time our agent is with us when we show up to tour the house. We see that another couple has already arrived ahead of us. We’d thought we were getting a private showing, but apparently not. The listing agent lets us in, and invites us to look around, but does little more, and then, somewhat unnoticed by us, slips away. A few minutes later my wife spots the listing agent and the other couple whispering together outside, and looking our way.
…….The house is solid enough, but everything about it is a little tired, and out of date. A 1940s East Van workers’ house overlaid with a cheap, do-it-yourself, 1970s facelift. Vinyl peel-and-stick floor tiles. Garish cayenne, and harvest gold, and pink kitchen and bathroom appliances and fixtures. A 50-year-old furnace. The do-it-yourself rental suite is dreary — poorly laid out, with a ceiling height of just under 7 feet. But we tell ourselves: “We can fix it up.” Famous last words.
…….Despite the shortcomings, of all the houses we’ve seen over the past few weeks, this one, with its good location, and comfortably within our budget, makes the most sense. With the memory of the one that got away still fresh, we decide on the spot to put in an offer, subject to a home inspection. But the listing realtor has disappeared. The three of us look all through the house and she’s not there. We finally go out to the street and spot her in the driver’s seat of her car, madly writing, the young couple sitting in the back seat, studiously ignoring us. All the windows up, doors locked.
……. Our realtor strolls over to her window and knocks on it. The listing realtor looks up, startled, as if caught in the act of doing something she shouldn’t be — which, we soon discover, is exactly the case. She hides whatever it is she’s working on, rolls down the window a crack, and screams at our realtor, “You’re trying to look at my offer!” A heated discussion follows between our realtor and the listing realtor while we wait a number of feet away beside our realtor’s car. We don’t really know what’s going on. Our realtor comes back to the car, pissed off. “We’ll have to put in the offer later,” he says.
……. It dawns on us that we’ve been played. The listing realtor purposely double-booked the showing so she could use us as a lever to force her own clients — the young couple — into making an offer. She insists she can’t take our offer at the moment, she’s required elsewhere, and will have to take it “later.” “Later” no doubt means after she’s got the owner to accept her clients’ offer. Yes, this sort of behaviour is against various rules of the real estate profession. But it doesn’t appear to have hurt this realtor. I continue to see her listed among Vancouver’s ‘top sellers’.
.
There are no bargains
We go to see another house. A very nice, and large, stucco bungalow near a leafy park in the South Fraser Street area. I love this house. The rooms are big and open feeling. Everything’s immaculate. And the price is just within our budget — well, with a little stretching. But a large guard dog chained up in the yard next door barks incessantly the whole time we’re there. The barks seem to penetrate every nook and cranny of the house. I notice earplugs on the kitchen counter and think that the owner, a nice fellow and a realtor selling his own house, should have hidden those in a drawer. My wife isn’t keen. In a subtle way, she probes the owner about his reasons for selling. Could the dog be one of the reasons? The owner says no, but his face twitches just slightly. I’m disappointed, although I recognize the wisdom of my wife’s sentiments. There’s a reason this really nice house is a relative bargain, and those telltale foam earplugs are it. Outside my wife and our realtor both agree that the owner was lying about the dog. We leave and go for dinner at a restaurant.
.
My cell phone doesn’t work
Throughout dinner our realtor works his cell phone, calling the listing realtor of the previous house multiple times. She won’t answer. She obviously knows his number and she’s ignoring us. A feeling of resignation sets in. After looking at numerous houses over a number of weeks, and finally deciding to put in an offer, it’s tough to be blocked out like this.
…….Our realtor convinces us that it’s still worth faxing an offer to the listing realtor’s office. The house may already be sold, but he’s seen a number of real estate deals fall apart at the eleventh hour. The fax will be time-stamped, and in the morning he’ll phone the head of the listing realtor’s office to complain about the treatment we received and if the house isn’t already sold, demand our offer be presented to the owner. We go to our realtor’s office and fax in an offer about 9:30 pm. Two thousand dollars over asking, subject to a home inspection, with a 48-hour time limit. Somehow we figure out that the husband of the listing realtor is also a realtor and our realtor finds out his home phone number. He phones it, gets the husband, and explains to him in a fairly forceful way that his wife better phone us. I’m starting to realize that our realtor’s belligerent side, which I had feared might be a liability, is actually an asset. The phone rings a few minutes later. It’s the listing realtor. Magically, her phone is working again. I’m not sure what she’s saying on her end, but our realtor keeps interrupting her, and repeating in a very loud voice: “IS THE HOUSE SOLD?” The conversation eventually ends. Apparently the house is not yet sold, but the listing realtor has told our realtor that, “Your people shouldn’t even bother. My clients have a hundred thousand dollars in their back pocket.”
……. My wife and I go back to the apartment we’re renting. The next morning, our realtor phones the head of the listing realtor’s office to make sure our offer has arrived, and that it will be presented to the owner. Perhaps more importantly, he goes back to the house and knocks on the door, and tells the owner that we’ve put in a cash offer of $357,000.
.
Betrayal
We hear nothing, and two days later our offer expires. We’re bummed out, but we move on. As our realtor says: “Houses are like trains. There’s always another one that comes along.” We start the search again. One of the houses we look at during this period is another stucco bungalow, also listed at $355,000, a somewhat better house than the one we believe we’ve lost, but overshadowed by two larger houses on either side, one of them hideously ugly, and in a less desirable location, sharing a back alley with a busy part of East Broadway. When we’re down in the basement and out of earshot of the owner, the realtor, of the slightly frightening, glamour queen variety, whispers to us, “He’ll take three twenty-five!” The basement is dark, even in the middle of the day, and feels damp, and we’ve both lived in this particular neighbourhood before. We pass.
.
There’s a hole in my pocket, dear Liza, dear Liza
Two weeks later our realtor phones. Are we still interested in the Grandview house? The listing realtor has phoned our realtor (on the explicit instructions of the owner, we later find out) and she’s interested in presenting a renewed offer from us. Apparently the young couple’s financing has fallen through. I guess there must have been a hole in that back pocket.
……. A little more hardened by this point, and wanting just the slightest bit of revenge, we offer asking price, rescinding the extra two grand we had previously offered. The owner accepts.
……. The home inspector gives the house a passing grade, although he tells us that he got an elevated moisture reading in the back corner of the suite kitchen and that we should keep an eye on it.
.
Dumb, but lucky, and getting handed a house on a plate
If the timeline for buying a house had been solely up to me, we would have been quickly priced out of the market for centrally located single family residences. It would have been a centrally located townhouse or condo, or a modest house in the burbs. Only recently back from seven years in Ontario, with a much more sedate real estate market at the time, I was all about careful looking and comparing, taking our time, microscopic home inspections, lists of mandatory and nice-to-have features, researching neighbourhoods, becoming an expert in “the perfect mortgage,” and so on. I wanted a nice, hundred-year-old “character house” with maybe a bit of fixing up required. (Ha! I shudder at the thought now…) Growing up, I’d hated stucco bungalows. My wife, who’s lived in Vancouver all her life and grew up in a Vancouver Special, was a little more in tune with the reality of the RE situation, and gave me enough kicks in the butt to ease up my natural cautiousness and agree to pull the trigger. So I wasn’t smart about timing. I was dumb, but lucky. And by trying to screw us out of the house, the listing realtor actually handed it to us on a plate — in the middle of one of the most incredibly overheated housing markets any of us have ever experienced.
.
Financial Details
Asking Price: $355,000
Sale Price: $355,000
Down payment: $88,750 (25%, ergo, no CMHC insurance, representing thousands of dollars of additional cost)
Mortgage: $266,250
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2003 Property Assessment (estimate of market value on July 1, 2002): $260,600
2004 Property Assessment (estimate of market value on July 1, 2003): $330,500
Equity based on assessment: $64,250
Further episodes of The Froogle Scott Chronicles will be posted at regular intervals over the coming weeks. Comments are welcome below. – Froogle Scott & vreaa
Posted in 17. The Froogle Scott Chronicles
Tagged Anecdotes, British Columbia, Bubble, Housing, Real Estate, Realtors, Vancouver
Yes, these figures do ‘make you think’. What you end up thinking, however, likely depends completely on the position you already hold. Vancouver RE bulls will see these kinds of figures as vindication for bullishness going forward; Vancouver RE bears will point to studies showing that RE prices climb at about the inflation rate over the long term, and conclude that Vancouver RE is overvalued. -vreaa
This from Ulsterman at vancouvercondo.info 19 Jan 2010 8:56 pm –
“I was at Burnaby City Hall today dealing with a secondary suite issue and the lady helping me was viewing the info on the house I rent. It was built in 1954 and valued at $14,000. According to the BOC inflation calculator that’s $113,557 in today’s money. Makes you think. The house was assessed by the city [2009] at $725,000.”
This exchange from ‘Vancouver RE and then some‘ is archived here as representative of opinions, sentiments, and anecdotes that are currently common on Vancouver RE discussion forums. It is a variation of the ‘ceaseless and consistent demand’ argument, and of the argument that “Vancouver is the Swiss Bank account of International Real Estate”. Versions of this position have been highlighted in prior posts, as voiced by James Schouw, ‘Vancouver Rocks’, Bob Rennie, and Maggie Chandler, amongst others. -vreaa
Anonymous at fishyre.blogspot.com 18 Jan 2010 12:09 pm – “The bubble theory has failed as far as Vancouver RE is concerned, we have to admit it. We have reached a permanent high plateau of prices here. RE is still red hot in Vancouver. I talk to builders and they are still going knocking at doors asking owners if they want to sell, so they can tear down and build a new house and sell it for a profit to a rich chinese. What people forget is that we are being overwhelmed by rich chinese influx of immigrants. I dont see RE going down for the foreseeable future. Drive near any school at recess time in Vancouver and see how dominant the asian pattern is, it is proof that hot money is still flowing here.”
fish10 added 19 Jan 2010 3:52 pm – “Yes, it is possible that we have reached a permanent high. Nothing can be discounted. The strength of the market has been something to behold, and there are a lot of rich people in China. If only 1/1000 came here we would be cleaned out.”
As part of a discussion around who lives in the West-side of Vancouver [average SFH now over $1.5M], this from Stan at vancouvercondo.info 19 Jan 2010 4:10 pm and 3:21 pm –
“I live in Kitsilano. I earn around $50,000 a year. Almost all Canadians are Middle Class these days anyhow, but if working class means mechanics, mailmen, construction workers, then all of these people do live in Kits, Dunbar, West End and Pt Grey. So do students, retail workers, waiters…”
“I myself am willing to pay a premium to live in Vancouver, just as I would expect to pay a premium to live in a nice neighbourhood of any city. I can’t afford the current premium, but I still rent here. I love Vancouver and have lived here most of my life but kind of accept I may never be able to buy and might have to wait to inherit. I do think, while Vancouver isn’t perfect, it is a damn fine place to live and if I had money and wanted to live in a peaceful English-speaking country with good services, low crime and a relatively high standard of living, there really aren’t all that many other options. Vancouver isn’t everyone’s cup of tea but it is certainly attractive enough to be a lot of people’s cup of tea – enough to keep prices relatively high (unfortunately).”
Panic buying in Vancouver’s Westside. -vreaa
This exchange at RE Talks 19 Jan 2010 –
eyesthebye 10:24 am –“I have a friend that just lost out on a Kits house.
Assessed 1.175M; Asking price 1.475M; Bid 1.65M; Selling price 1.81M.
The bidding was frantic and the look in the eyes of the buyers at the open house was desperate. Total of 6 offers. No subjects. The high bidder was Chinese, as was the buyer for another property in Kits a couple weeks ago; [where there was] also bidding 300K-400K above asking.”
gse36 1:26 pm – “Given the market, 1.488M was quite well priced. 2758 sqft, old house completely redone, so its almost like new. With a suite. A new house like that would go for 2M+, so 1.8M for a rebuilt one, with suite, is about right. Assessed value is 1.1M-1.2M, but of course that is mainly land value — it doesn’t account for the fact the house is very usable.”
Taipan 2:11pm – “Great to hear the desperation entering the market once again. No need to think, just make sure you out bid everybody else. I love these anecdotes. I’d even grab a coffee and hang around watching to see that sort market psychology.”
This from VRENGD at vancouvercondo.info 19 Jan 2010 1:42 pm –
“Vancouver is an irrational bubble. Just like Ireland, its economy is founded on construction and RE speculation. When that stops, we will have 10% unemployment. I personally have about $1.5M in cash left in the bank after a couple of purchases in California (where rents cover my mortgage payments plus some profit). I’m waiting to buy Vancouver RE in 2011 when the values are 60% lower. The bulls think that international investors will buy Van RE at these levels. Let me tell you something: we are not stupid. By any rational measure (historic price growth, price to rent, price to income) this market is probably the worst RE investment in the entire world. Trust me, there are no international investors buying Van RE right now. It is just a bunch of deluded, frenzied locals.”
Posted in 02. Profiting from the Boom, 07. Avoiding Vancouver
Tagged Anecdotes, Bubble, Foreign buyers, Fundamentals, Housing, Real Estate, Speculators, Vancouver
This from junius at greaterfool.ca 18 Jan 2010 6:07 pm –
“It is really hard to explain to people outside the Greater Vancouver area how emotional [the subject of Real Estate is here]. We have friends that moved to Toronto recently and they say even TO is nothing like Vancouver. I think the reason is really simple. More people here have more riding on increased rises in the market than any other market in Canada. There is nowhere else in Canada where more people have second or third investment properties and rely so heavily on the promise of RE to get them to early retirement.”
Posted in 08. Overextended Buyers, 14. Social Effects of the Boom
Tagged Anecdotes, Bubble, Canada, Housing, Life, Real Estate, Retirement, Speculators, Toronto, Vancouver
This from North Van Dude at greaterfool.ca 18 Jan 2010 5:29 pm –
“In my search for a new home to rent in North Vancouver, I am coming across many properties for rent that are also for sale. In fact most of the ones I looked at are for rent and for sale. Is this unusual? What is almost amusing is the price/rent ratio. I am looking at one house tonight with a p/r ratio of 1:593. No house is less than 1:400.”
Posted in 10. Demoralized Renters?
Tagged Anecdotes, British Columbia, Bubble, Fundamentals, Housing, Rent, Vancouver
We’re at all-time high prices, and some investors are somehow already in trouble. What happens when the variable rate goes up and prices start dropping? -vreaa.
This from Real Estate Watcher at greaterfool.ca 18 Jan 2010 2:00 am –
“I have friends that bought investment property over the past two years. They have rental condos in the Greater Vancouver area. They told me that if they sold the properties now they would be break even on one and take a loss on the other. They said that it is best to wait five years for the market to recover, then the property will regain its value. This is when it gets painful. I don’t have the heart to them that I think the market is on a long slow ride to the bottom and will not be going back to the its inflated price range for a very long time. I think many of us will see friends and family that bought into the real estate hype and will soon have big financial losses.”
What percentage of your net worth is in Vancouver Real Estate? For many buyers since 2000 that figure remains well over 100%. Even those who have owned for a longer period have a majority of their wealth in their home. The future financial health of Vancouverites is too dependent on RE. -vreaa
This from Real Estate Bear at greaterfool.ca 17 Jan 2010 11:22pm –
“I am a financial planner and sold my house November 2008. At first my wife was reluctant to sell but as the market began to tank she agreed that it was the right thing to do. Now that the market has recovered she is questioning our wisdom of having sold. Our son in law is a realtor and thinks we were crazy to have sold and truly believes that prices will continue to go up. I can not even discuss my views with him that real estate will correct without him laughing at me and calling me a fear monger. Many of my clients have way too much house compared to the size of their retirement portfolio and are relying on their real-estate to fund their retirement. Many also have multiple real-estate properties and plan to purchase additional properties with new money instead of investing in their retirement portfolio. When I talk to them about the real estate being in a bubble they look at me in disbelief. I get paid to give advice, and it troubles me when a significant portion of my client’s assets are subject to a severe correction potentially affecting their retirement, they do not take my advice.”
[This could be a Vancouver anecdote, but not necessarily so, so it is tagged as broadly Canadian unless we hear from its author].
Posted in Uncategorized
Tagged Anecdotes, Bubble, Canada, Housing, Life, Real Estate, Relationships, Sentiment
Any cheaper and it really is free money. -vreaa
This from a property investor named thadeus at RE Talks 18 Jan 2010 –
“For the record, I have a number of variable rate mortgages right now at 1.35% … I also have properties with a fixed rate of 5.49% and they still cashflow each month.”
It’s not only the people at the bottom of the food chain who will run into problems with debt. -vreaa
“5662 Chancellor Blvd, Vancouver (UBC) 4192 sqft; 78 x 181 ft lot; Built 1929
For Sale $2,900,000 Foreclosure.“
These excerpts from an e-mail that a financial advisor from either Alberta or BC sent to Garth Turner, as quoted on greaterfool.ca 17 Jan 2010 –
“In my profession I have always fielded questions from anyone I talk to regarding whether or not real estate is a good investment. I think, lately, they are just asking to get affirmation instead of a real answer. Regardless, my recent responses are being universally poorly received. I will be the first to acknowledge that anecdotal evidence isn’t, but I have come to feel from my experience with the Canadian populace that I am fighting a battle [using] common sense and losing. I have yet to see the light at the end of the tunnel. I fear it will come only once the dust settles. And then, as always, only for a time. Amusingly, I have even lost business because of my position on the subject of Canadian real estate. The moment I realized that my view was affecting my career came as a shock to me, so much so that for about three long seconds I considered that maybe it wasn’t in my best interest to tell the truth. Too bad for my pay-cheque that I consider my job to be that of providing impartial and unbiased (as much as humanly possible) investment advice that is in the client’s best interest. I have been bearish about real estate in Canada since my wife and I sold our townhouse in 2007. After three years of moving twice a year and watching our friends buy property literally like it’s going out of style, even my wife is asking the question, “What if we are wrong?”
In response to the above, junius comments 17 Jan 2010 9:42pm – “I know that feeling living here in Vancouver. Being a Real Estate Bear is a very dangerous position to take. It stresses friendships and family in ways few non-moral or political issues do.”
A commentary from 6 months ago, but topical nonetheless. The numbers are unchanged. How long before this discrepancy in fundamentals reconciles? -vreaa
Nicholas Meyer of ‘Downtown Suites’, June 2009 (transcribed excerpt from youtube video) –
[After decribing difficulty renting out high end suites] “The thing that is really interesting is that in Vancouver, these suites are incredible value [for renters]. The suite at Harbour Green is actually worth about 4 million dollars. So if you work it out with the cost of today’s money, with maintenance & taxes, it would be about $22,000 a month to own. So to be able to rent it for $6,000, a brand new suite, that’s an incredible deal. The reality is that in Vancouver there is not enough people to be able to rent these suites out, we are not London or New York, we are just a sort of relatively small city.
Posted in 10. Demoralized Renters?
Tagged Anecdotes, Audio anecdote, British Columbia, Bubble, Fundamentals, Housing, Interest Rates, Real Estate, Rent, Speculators, Vancouver
This exchange at vancouvercondo.info 17 Jan 2010 –
hippo 11:10 am – “A friend’s 16 year new condo building needs repiping done, budgeted at $1 million. The piping system was supposed to last 20-25 years. Each unit has to cough up around $8,000. But they are have trouble hiring contractors.”
crabman 11:34 am – “$8,000 special assessment for a 16 year old building? They got off easy! Where I’m renting, the owners had to come up with $20,000 each to replace the membranes in a 12 year old building. Of course, compared to the Governor’s Tower, my landlord got off easy, too. Those guys had to cough up $120,000 each, for a 13 year old sieve. [They had] to replace the entire building envelope!”
This property owner is breakeven at current prices and speculating on future price increases. In fact, it sounds like his current net worth may be zero. How many are in his position? -vreaa
Here is nico101 at RE Talks 2010 2:05 am –
“I have a house right by Commercial Drive. It’s currently rented and brings in $3850/month which after factoring in mortgage, taxes, repairs, insurance, etc, just barely covers costs, believe it or not. Here’s the thing… My intention was never to be a landlord, it just sort of happened and I’m finding the whole landlord thing to be a serious PITA. I could probably sell now and just break even after realtor fees, mortgage payoff penalty, etc. My gut tells me to wait and let the market grow. In a perfect world I’d love to wait short-term (1yr or so) and then sell at a slight profit to pay off some other debts.”
Posted in 08. Overextended Buyers, 11. Regrets about Investing in RE
Tagged Anecdotes, Bubble, Housing, Real Estate, Rent, Speculators, Vancouver
The buyers are “ecstatic and excited” over their “drool worthy” lot, AND the sellers “chose a good time to sell”. It seems everybody is happy. Our hunch is that one party has made a mistake. -vreaa
This ‘Done Deal’ from the Globe &Mail 15 Jan 2010 –
3168 West 19th Ave, Vancouver Westside
ASKING PRICE: $1,188,000 SELLING PRICE: $1,330,000
PREVIOUS SELLING PRICE: $458,000 (2000) TAXES: $5,652 (2009)
DAYS ON THE MARKET: 11 LISTING AGENT: Faith Wilson, Re/Max
Agent Faith Wilson calls this 1,960 sq. ft. home on a “drool worthy” lot, “a perfect example of how the market in Vancouver has picked up momentum and confidence.” “This listing sold in 11 days and had 19 offers,” she says. The house has, “fabulous street appeal,” says Ms. Wilson. It has three-bedrooms, two-bathrooms and is situated on a 6,100 sq. ft. lot close to parks, transportation and schools, including well-regarded Carnavon Elementary and Prince of Wales Secondary School. The one-level plus basement home is located on a quiet street and has “manicured lawns and mature landscaping, especially in the big south facing back yard,” she says. Updates include a new furnace, hot water tank and wiring. “The new owners are ecstatic to be in such a great location and are excited about the opportunity to either add an extension or to design their own home for this beautiful lot,” says Ms. Wilson. As for the previous owners, “they have loved living here but are ready to move on,” says Ms. Wilson, and they chose a great time to sell.
In the realm of psychological speculation, sure, but a wonderful thought nonetheless. At the very least, worth a chuckle. The exchange below appeared at vancouvercondo.info, after about one week of extremely heavy rain. -vreaa
buffates 15 Jan 2010 8:27 am – “I’m not one to dwell on the weather…but honestly when you have rain like we’ve had over the past week it definitely contributes to the argument that Vancouver is by no means the end all be all. I keep having to remind myself that most of the world seeks, craves and wants live with sun most of the year. I have heard many people joking that they hope their house doesn’t float away. I definitely wouldn’t want to borrow 700K for a crappy house unless it was a tropical paradise. East Van does not qualify as a tropical paradise.”
World Class Soggy 15 Jan 2010 8:55 am – “I wonder if the tendency of Vancouverites to overvalue housing has to do with the shitty winter weather? I also wonder if that’s why we have a problem with construction quality. So much of our construction seems like it was thrown up as quickly as possible to get out of the rain. “Just throw some stucco and a tarp on it, we’ll fix it later.”
—
Addendum: On the subject of rain, this from pricedoutfornow at vancouvercondo.info 15 Jan 2010 7:43 pm – “Due to all this rain, my ceiling is leaking. I told the building manager today at 3pm and she’s arranged for someone to come over tomorrow at 9am to fix it. Was contemplating how if I owned, rather than rented this apartment, I’d be on the hook for paying to fix the leak. Or perhaps would have the headache of arguing it with the strata nazis, since the leak seems to be originating from the roof. None of that for me, I’ll be off to the gym tomorrow while the guy fixes it, and leave it to the landlord to cut him a cheque. Ha! Oh the joy of renting…”
Posted in 14. Social Effects of the Boom
Tagged Anecdotes, Bubble, Construction, Housing, Life, Rain, Real Estate, Vancouver
Much is said of the allure of Vancouver for Asian home buyers. Here a poster quotes Richard Russell, and gets his own wife’s opinion regarding the relative attractiveness of Vancouver & La Jolla, California, from a Chinese perspective. -vreaa
This from space889 at vancouvercondo.info 13 Jan 2010 10:26 am –
“I note more and more Asians here in La Jolla. I’m thinking that in ten years La Jolla will be half Chinese. Consider this — you’re a Chinese multimillionaire (and there are thousands of them). You want to get rid of a lot of the dollars you own. You search the world — the best weather on earth is in San Diego’s La Jolla. La Jolla is situated right on the Pacific Ocean. The US is a free country, nobody goes to jail and is tortured because he announces that Obama is a dud. Home prices in the US are cheap compared with prices in China. La Jolla is a bargain, and probably a good “safe haven” just in case things don’t go right in China. ” – [Richard Russell, DOW Theory Letters, the largest fee based subscription investment newsletter in the world.]
“I showed this to my wife and her reaction was “no I think rich Chinese people will still to Vancouver because Vancouver is way more famous in China than La Jolla”. I think partly this is due to at least 2 popular Chinese TV series based in Vancouver. Also when she moved to Vancouver back in 2000, it was in part because people posted online in China that Vancouver is paradise on Earth – however she absolutely hates the rain and the dark cloud here, really disappointed. She much prefer sunshine. She thinks Hawaii is really paradise on Earth. As well, she said even more important is the fact that virtually all the rich people in China who can buy a $1.5M/$2M+ houses in Canada or US got at least a good portion of their money illegally or at least in an extremely questionable manner. What does that mean? It means that they would prefer Canada over US because they don’t need to worry about being deported back to China with their $$! Yeap that’s right! Her believe that there will be lots of rich Chinese people coming over and buying up expensive real estate is simply because Canada don’t deport criminals with lots of money back to China! So our absolute best advertising for Vancouver and its real estate is not “Best Place on Earth”, ski and golf in the same day, mountain and ocean view, democracy & human rights, etc. Nope. Our best advertising apparently is people like Lai Changxing who don’t get deported and gets to live high on the hog here 
And I have absolutely no comeback for that argument, especially now Canada has the approved tourist destination status which makes coming to Canada easier than before. So yeah come winter Olympics, we might indeed get a flood of rich Chinese people coming over and buying expensive houses and moving prices up even more. However what else these people might bring over, that’s an entirely different question.”
Irrational Optimism is not confined to the RE sector. A survey shows exporter optimism based on little more than the hope that things will improve, a rather circular argument. 80% of these exporters expect the Canadian dollar to strengthen, yet they are optimistic that their business will improve. This flies in the face of logic. But optimism has gotta be good, right? -vreaa
“Canadian exporters have grown dramatically bullish on sales prospects over the next six months -– due more to a belief that conditions can’t get any worse rather than expectations for runaway global economic growth, Export Development Canada said Tuesday in its semi-annual trade confidence index.”
“Sales abroad plunged 20% in 2009 – or six times worse than any annual decline in recent memory. “We are at the bottom of a chasm right now, and the only way you can really look is up,” Peter Hall, chief economist for EDC said. “Exporters were hit between the eyes with something that is very unusual. Obviously every thing is going to look positive after a year like this.”
“The survey, which sought opinions from over 800 businesses, was conducted between late October and early November.”… “The index moved to 77.4 in the fall of 2009, a jump from 68.5 in the previous reading of exporter confidence released last spring. The surge represents the largest rebound in confidence since the Sept. 11, 2001 attacks”
“The upswing in exporter sentiment emerged even though the Canadian dollar traded in the mid-US90¢ range for much of the past few months, and a number of currency watchers believe the loonie will hit parity with its U.S. counterpart some time in 2010. Over 80% of survey respondents believe the dollar will either increase in value or remain at the same level in the near term.”
‘Canada posts surprise trade deficit’, 12 Jan 2010, Financial Post –
“Millan Mulraine, economics strategist at TD Securities, said the strong Canadian dollar will “continuing to wreak havoc on the export-based Canadian economy.”… “We expect net trade to be relatively unsupportive to overall economic activity,” he said.”
We’re worse off but we’re better off. These guys are magicians. -vreaa
[David Wolf, an advisor to Mark Carney, Governor of the Bank of Canada (photo: National Post)]
This priceless juxtaposition of quotes posted by crabman at vancouvercondo.info 11 Jan 2010 1:17 pm
“Now that David Wolf is at the Bank of Canada, he says everything is great?:
“Recent house price increases do not appear to be out of line with the underlying supply-demand fundamentals,” David Wolf, an advisor to the governor, Mark Carney, said in a speech in Edmonton. [11 Jan 2010]
That’s not how he felt in 2008 when he was at Merrill Lynch!:
It may just be a matter of time before the Canadian housing market tanks like the U.S. market did, Merrill Lynch Canada economist David Wolf said, warning that Canadian households are now nearly as overextended as households in the U.S., and even more so than those in Britain, prior to the bursting of the housing market bubbles in those countries. [24 Sept 2008]“
This from taylor192 at vancouvercondo.info 11 Jan 2010 11:53 am–
“My sister and brother left Vancouver about a decade ago after living here for several years. They’ve both settled down in much cheaper cities (Alburquerque and Montreal) and laugh at the suggestion of moving back here. They would never sacrifice their lifestyles to pay the high costs of living in Vancouver, especially now that they have families. Lifestyle is more than beaches and mountains, especially for those with a family and little time to enjoy either.”
Posted in 07. Avoiding Vancouver, 14. Social Effects of the Boom
Tagged Anecdotes, Bubble, Canada, Housing, Life, Real Estate, Relationships, Sentiment, Vancouver
As we’ve said before, Olympic exuberance and Vancouver RE market fantasies are joined at the hip, so we are following the Games with interest. ABC News suggests that the lack of high profile US stars and/or darlings will result in far fewer TV viewers for these Olympics. This is a characteristically US-centric view, but an important point nonetheless, as a large percentage of ad dollars for the Games do come from the US. They point out that ad time is still up for sale, unheard of for an Olympics that takes the stage in exactly one month. -vreaa
Excerpts –
“So guys, it’s an Olympic year (as it is now every couple of years!), the Winter Olympics are kicking off in Vancouver next month. … Contrary to the usual Summer Olympic promotional blitz, [there is] next to no fanfare surrounding these games. There is actually even advertising time still up for grabs, [which] is virtually unheard of. And so we wondered what exactly is going on.”
“There is no doubt that Vancouver is in the shadow of Beijing.”
“On the eve of an Olympics without readily bankable favorites and thus little if any buzz just weeks shy of the opening ceremonies, the Vancouver winter games could fall flat Stateside.”
“NBC says it could lose hundreds of millions of dollars on this year’s Olympiad with companies like Johnson and Johnson, GM, bank of American and Home Depot deciding not to buy ad time.”
Posted in Uncategorized
Vancouver Real Estate Anecdote Archive 