“I analyze real estate for a living. Prices stopped making sense to me over 5 years ago. Imagine how it feels for me to have been telling people “bad idea” in 2005/2006 given what the market has done since then.”

Like this poster, we probably would have shorted Vancouver RE some time ago, if that was readily possible. Lucky for all the bears, it wasn’t.  -vreaa

AACI at vancouvercondo.info 30 Apr 2010 4:32 pm –

“I am one of the rare people for whom a sharp market correction will be a double edged sword. I have had a liquid financial position for several years, waiting for prices to make some type of sense to me. On the other hand, I have no delusions and know for certain that the irrational market such as exists currently in Vancouver and surrounding areas has positively impacted on my personal income. I am man enough to say that if Vancouver real estate was a financial instrument I could have bet against, I would be absolutely busted out, bankrupt and finished by now. Prices stopped making sense to me over 5 years ago. I analyze real estate for a living.. imagine how it feels for me to have been telling people “bad idea” in 2005/2006 given what the market has done since then.

Perception becomes reality and the current perception still has an irrationally positive outlook. So although I believe that prices must eventually trend lower so that some semblance of a logical relationship between rents and incomes is re-established, I would not be surprised if it took longer than what many are predicting. What will really be interesting is when the popular consensus shifts from the current paper gain induced euphoric mania nurtured by every real estate pimp to a more realistic perspective. Something along the lines of “holy fuck I owe the bank 650k and the house across the street just sold for 500k”. That is when I will be throwing my parties…. because I am sick like that. Listings are great but foreclosures, insolvency, and the complete financial ruination of “investors” are what will have me partying like there is no tomorrow.”

“Last night “it” happened to me. Out at dinner with several sensible, professional, well-paid collegues. Conversation drifted to RE and house prices…”

bhtbg at vancouvercondo.info 29 Apr 2010 10:26 am –

“Last night “it” happened to me. Out at dinner with several sensible professional well-paid collegues. Conversation eventually drifted to RE and house prices. Some owners beaming with delight that their east van property was worth 1mil, others sheepishly lamenting that they could never afford to enter the market at today’s prices. Me saying it will crash hard, don’t worry. Then word-for-word the arguments in earnest 1. It’s different here, 2. They’re not making any more land, 3. everyone want’s to come here 4. it will never go down. I wouldna’ believed it if I had not heard it.”

“Today I saw someone had posted a home made poster on a telephone pole on Denman street that loudly proclaimed that the real-estate bubble was going to pop in Vancouver.”

nonymouse at vancouvercondo.info 29 Apr 2010 10:24 am –

“Today I saw someone had posted a home made poster on a telephone pole on Denman street that loudly proclaimed that the real-estate bubble was going to pop in Vancouver. It gave a few reasons why like growing inventory and a few others. Didn’t pay too much attention being a bit behind getting to work already.”

“I knew one guy who sold his place and told me he made $24,000 on it. I asked him how much he paid in interest alone. He didn’t want to talk about it. I made him sit down and calculate it and it turned out what he thought was a $24,000 gain was a $16,000 net loss.”

Vansanity at vancouvercondo.info 29 Apr 2010 9:56 am –

“I know many never calculate actual profit/loss when figuring out if they made a profit on flipping their home, it’s easier for them not to. I knew one guy who sold his place and told me he made $24,000 on it. I asked him how much he paid in interest alone, just interest. He didn’t want to talk about it. I made him sit down and calculate it and it turned out what he thought was a $24,000 gain was a $16,000 net loss, ignoring insurance, property taxes etc.. just on interest (carrying costs). As an investment… he didn’t do so well.”

“It is not just the Chinese doing the speculative buying, I know of Whites, Indians, Filipinos, Koreans and other races doing the same thing. Flipping houses using borrowed money and living a materialistic life with fancy cars, bags etc.”

We agree with this poster’s sentiments; the bubble has not been inflated by any particular ethnic group. Members of each and every Vancouver population group have been participating. Everybody’s hustling for a buck and a dime: It’s human nature that does it, not any particular cultural effect. We also agree that “it is just a question of how soon and how fast” this all ends. It’s a pity that the city is losing another sensible soul. -vreaa

LY at vancouvercondo.info 29 Apr 2010 10:59 am –

“I understand the frustration of some bears seeing housing prices go up due to massive speculative buying by Chinese. But it is not just the Chinese doing that. I know of whites, Indians, filipinos, Koreans and other races doing the same thing, flipping houses using borrowed money and living a materialistic life with fancy cars, bags etc. Anyway, their flipping days are numbered especially here in Vancouver. It is just a question of how soon and how fast.
As for me, I am moving to Toronto for good this year where I can buy an almost new detached/semi-detached house in Markham or Richmond Hill for the price of a small 1200 sq ft townhouse in Burnaby or Richmond. No reason to stay in overpriced Vancouver.”

Profile of a Recent First Time Buyer – “About a month ago I became a first time homebuyer in Vancouver. I have been living here for about 15 years, and seeing prices triple, or quadruple in some instances, and I just thought “Wow, I need to get on this wealth train”.

This anecdote is extracted from a telephone interview between CBC Cross Country Checkup host Rex Murphy, and a caller from Vancouver named Steve Zimbalatti, 25 Apr 2010, during a program on debt called ‘Living Beyong Our Means’. The segment occurs at the start of the second hour of the show. The whole segment is transcribed here. Thanks to AnonymousAA at vancouvercondo.info 25 Apr 2010 3:17 pm for first alerting us to this story. –

“About a month ago I became a first time homebuyer in Vancouver. I had been a renter and I had money in the bank and quite a bit of freedom actually. It was very liberating the way I was living and a lot of my friends, I think, were perhaps envious of the fact that I wasn’t tied down by debt. I sort of got into that situation by learning my lessons the hard way. As a student in college I got one of those credit cards that you are allowed to sign up for in the foyer and I thought “Wow, this is great. I’m a grown up now, I can take on some debt.” But I just couldn’t manage it. I maxed it out almost right away. I couldn’t really manage the debt, and it gave me a poor credit rating. I did not pay the bills on time and I just thought “Well this is enough of this, I am never taking on debt again”.

So, from that point forward, I was just living pay cheque to pay cheque, able to squirrel a little bit away every time and build up a little nest egg but I was thinking, here in Vancouver, I am watching all this wealth go by in this housing market. I have been living here for about 15 years now and just seeing prices triple or quadruple in some instances, in that time, and I just thought “Wow, I need to get on this wealth train”. So my partner and I decided that it was time to buy and, you know, if we are going to be here in Vancouver, working here in Vancouver, we might as well own something.

So, we bought last month [March 2010]. We just thought it was an astronomical amount of money that we are paying for this little box in a building in the sky and we just thought “Wow, this is crazy because, we’re grown up, we watched our parents pay $12,000, maybe $20,000, for a house and all of a sudden we are paying $350,000 for a tiny box in the sky. And to get anything in the City of Vancouver at that price, you have to compromise. You might not be able to live in the part of town that you want to live in. But we are very, very happy, actually, with what we’ve got, and we think it was, you know, a spot where we can make a good home.

[Rex Murphy: So do you feel now any less free than you did before?]
Absolutely. We find it very confining. You know, we never used to sort of care about the goings on in government or the world of finance or anything now we’re watching the news every day to see what going to happen to the interest rate, or “do we lock in now?”. You know, we got almost free money in a way. When we tell people that we’re got a mortgage rate of 1.95% interest, my parents’ jaws drop. They used to pay 18% or 20% to service their mortgage, and now it is just like its unbelievable to them. You know I think wealth in a lot of ways these days has been transferred sort of to real estate and it seems to be, you know, by design if you ask me. If you look at say wealth, and where most of the money was 25-30 years ago, most of it was in the stock and bond market. Now for Canadian wealth it is in real estate.

Regarding our debt situation, it is not a worry in the sense that we don’t have it under control but we do find it, you know, I don’t want to say “crushing” because, like I say we are quite happy where we are but we do find it is less liberating, we might not be able to take the vacations we want which was great in the past. Yeah it is just, you know, it is a whole new ball of wax.”

“I’ve been monitoring Fort Langley over the past six years. It’s been relatively stable listings-wise until last week. The listings have skyrocketed, and in the last few days the hot sheets are showing a huge increase in the number of price reductions.”

Canayjun at greaterfool.ca 28 Apr 2010 3:37 pm –

“I’ve been monitoring a small area called Fort Langley in BC over the past six years, as a local realtor there sends me the hot sheets and the weekly stats. It’s been relatively stable listings wise until last week. The listings have skyrocketed, and in the last few days the hot sheets are showing a huge increase in the number of price reductions. But, the price reductions are really small, a drop of $10,000 on a $600,000 house doesn’t really excite anyone does it? It does mean though that the real estate agents are now seeing the writing on the wall. It seems price reductions on existing listings are the norm.”

We Moved From Vancouver To Edmonton

From the comments section of an online article in the Vancouver Sun, 27 Apr 2010, ‘Yes, there’s a housing bubble in Canada — but only in three cities’, by Edmonton Journal business columnist Gary Lamphier –

anonymous 27 Apr 2010 9:42 am – “We left Vancouver after we got married, and moved to Edmonton. We now own our own house with a big yard for our dogs to play in. We would never have been able to do that in Vancouver. Coming to Edmonton was the best move we ever made.”

anonymous 10:25 am – “I also moved from Vancouver to Edmonton – much less rain, much more sun, less traffic, and much more affordable which all equals a great standard of living.”

anonymous 11:01 am – “We moved from Vancouver to Edmonton also to enjoy the lifestyle (it may be cold but at least it’s not raining) as well as affordability, good jobs, and future for our children.”

anonymous 1:30 pm – “Both my wife and I have looked into moving to the west coast, where we used to live. We’re both professionals in the medical/heath field, and have a number of offers for positions. However, we would both take notable pay cuts, on top of the cost of housing there. We will happily remain in Alberta as long as this makes sense and enjoy our disposable income!”

“He told me a week ago that he had made an offer on a condo. This morning he told me that he backed out after hearing from others that the market is getting flooded with listings and could crash.”

sluggo at vancouvercondo.info 28 Apr 2010 12:56 pm –

“I met a nice east european chap who’s doing some painting next door, who told me a week ago that he had made an offer on a condo. He was a bit surprised when I told him he should have lots of selection with all the new listings. He told me this morning that he backed out after hearing from others that the market is getting flooded with listings and could crash. At first the realtor told him “no problem” as there was a lineup of backup offers, but is now seriously starting to hassle him about binding contracts and deposits, regardless of subjects.”

“We foresee a marked weakening in housing” – Mark Carney, Governor of the Bank of Canada

This is as likely as close as any central banker will coming to actually saying that housing will crash. -vreaa

Bank of Canada Governor Mark Carney, as quoted in the G&M 27 Apr 2010 –

“We see a marked weakening in housing over the course of our projection (into 2012), starting from the second quarter of this year and over the balance.”

“My brother, who is a postman, tells me that condos on his Coal Harbour route are 70% unoccupied.”

averagejoe at vancouvercondo.info 27 Apr 2010 – “My brother, who is a postman, had told me that condos in his Coal Harbour route are about 70% unoccupied. This is from talking with the building managers. I am sure a lot of these will be on the market once prices starts to drop.”

China’s RE Trading Volume Collapses – “Recent mortgage restrictions may be having an effect after all.”

China’s RE and stock markets have some direct effects on Vancouver RE in that a small number of local sales are to wealthy foreign investors from China. More important, however, is the psychological link between the two markets. Many Vancouver locals believe that our market is buoyed by China, and thus speculate on local property based on that premise. For the latter reason, this story is particularly important. It comes at the same time as ballooning inventory in Vancouver, and mortgage debt that is growing more expensive by the week. More on the Vancouver-China relationship HERE. -vreaa

From businessinsider.com 27 Apr 2010 –

“China’s property transaction volume collapsed last week. Property trading volume went down 64 percent last week from a week earlier in Shenzhen, down 45 percent in Beijing, down 38 percent in Shanghai, and down 2 percent in Guangzhou. In China’s 35 main cities where housing market data was monitored by the newspaper [China Daily], 21 saw their trading volume go down last week, with the figure in Hangzhou going down 73 percent.

China’s recent mortgage restrictions may be having an effect after all. Obviously this is just a week’s worth of data, but if this weekly data turns into a longer-term trend, one has to imagine it could be bad news for prices.”

The Great Vancouver Real Estate Roller Coaster

vancouvercondo.info is currently the best online forum for sensible discussion regarding the Vancouver RE bubble. VCI host The Pope has now published an elegant video that allows one to experience the ups and downs (yes, downs!) of the Vancouver RE market, 1975 – 2010. Buckle up! –

Connect HERE to comments and discussion of this video.

“CBC’s cross country check up were talking about debt and some guy called up who said he just bought a “box in the sky” in Vancouver for $350k. He conceded that yes, it’s expensive, yes, his lifestyle is different now (no more vacations) and no, he doesn’t get to live in the neighborhood he wanted, but hey, now they OWN!”

AnonymousAA at vancouvercondo.info 25 Apr 2010 3:17 pm –

“I just heard a bit of CBC’s cross country check up. They were talking about debt and some guy called up who said he just bought a “box in the sky” (his words) in Vancouver for $350k. And he conceded that yes, it’s expensive, yes, his lifestyle is different now (no more vacations) and no, he doesn’t get to live in the neighborhood he wanted, but hey, now they OWN! And they can now join in on what he called the “wealth creation train of real estate” in Vancouver. Oh ya, and his interest rate is 1.95%. I think, WHAT wealth creation train, you just took on (probably) $300k of debt, you moron (excuse my nasty tone), you don’t even get to live where you want, and you’ve just committed yourself to staying at home and eating Kraft dinner for the next 35 years. And when rates go up?? God, I am SO sick of this RE market. It’s just a bloody place to live, not a goshdarn money tree!”

“I went to an open house today, it was quiet. The agent explained that the house belongs to another real estate agent who bought it in 2007, renovated everything for herself, but is forced to sell now because of “family reasons.”

painted turtle at vancouvercondo.info 24 Apr 2010 6:18 pm –

“I went to an open house today, it was quiet. The agent explained that the house belongs to another real estate agent who bought it in 2007, renovated everything for herself, but is forced to sell now because of “family reasons.”

“I was talking to my lawyer buddy and he tells me real estate agents are unloading their own properties.”

Unfooler at vancouvercondo.info 24 Apr 2010 7:44 pm –

“I was talking to my lawyer buddy and he tells me real estate agents are unloading their own properties. Also foreclosures in Whistler are becoming more and more common.”

Deeply Desperate Kelowna Developers – “In an attempt to remove absolutely any reason why someone wouldn’t buy their new condo now, we’ve made it possible to overcome any challenge, we have the ability to take deep discount prices way below market value, carry finance, rent to own, zero down, whatever it takes.”

Note: The concept of “deep discount prices way below market value” is a paradox, as the price thereby received is itself market value. -vreaa

Vitger at greaterfool.ca 24 Apr 2010 12:19 am forwarded this e-mail they had received from a Kelowna realtor –

“Joel and I have been working on this concept for some time and just signed the documents. My assistant just told me that we’re about to hit the air waves hard with a ton of news about the upcoming Anything’s Possible Sale, happening this Sunday. In an attempt to remove absolutely any reason why someone wouldn’t buy their new condo now, we’ve made it possible to overcome any challenge, we have the ability to take trades deeply discount prices way below market value, carry finance, rent to own, zero down what ever it takes to put 11 happy new owners into award winning Martin lofts this Sunday. It’s absolutely worth taking a half hour to see if this will work for you or anyone you know. No sale like this has ever taken place in Kelowna. We are selling the units out and moving on, developers orders!

I know this is short notice, but I felt that it was very important to contact you before our advertising hits the airways Saturday, that’s tomorrow throughout the day.

I’m giving you 24 hours notice to book a 15 minute call with me where I’ll happily tell you about the opportunities that are going up for grabs this weekend. My hunch is, something will really jump out at you and you’ll want to secure the opportunity right away. that’s only possible if you call me.

My number is simple and I’m pretty friendly over the phone, so give me a call. Why am I doing this? Because Sunday I will have no time to take calls. My time slots are already filling up quickly. To act out of integrity and because you’re a part of my buyers group, I wanted to give you the very best opportunity possible.

My goal in the 15 minutes will be to support you in solving your challenge, by creating the perfect solution for you. Anything is possible! (no pun intended).
Here are some of the typical challenges I hear:
1) Are you short a down payment?
2) Do you have a home to sell first?
3) Are you looking to rent to own?
4)Are you waiting for a killer deal?

The developer working with us on this project is only doing this for one reason. They want to move on to the next project and they have made it clear to me that everything is possible this weekend. This opportunity is going out to more than 500 people, so please secure your conversation time with me the moment you get this email. My number is again is 250-

Make it a great day!”

P.S. I’ve only got 11 suites remaining and 30 consultation spots. Of the more than 500 people interested in this offer. You do the numbers! Talk soon.”

“If things ever return to normal in Vancouver, maybe I’ll move back. Until then, count me as one of the many professionals who left the West Coast for greener pastures…”

Vancouver Ex-Pat writes via e-mail to VREAA 21 Apr 2010 –

“I’m born and raised in Vancouver. Grew up in the lower mainland and went to UBC. I was a big booster of my City. I was one of those folks who would tell anyone who asked, and even those who didn’t, how great Vancouver was.  Real estate and the free money was never part of my thinking back then in the 80’s or 90’s, I just knew I loved the town. I also knew I hated eastern Canada, the eastern media, and really hated Toronto. Typical Vancouver stuff….
Then I came to see no future for myself in the area. Salaries were low, industry was stagnant, and houses were expensive. An “average” middle class life with a detached house seemed like a pipe dream back then. Now? Fantasy… That equation didn’t work for me, so I left.
I moved to Toronto. I completed an MBA, found work at a bank and make some good coin.
You know what? Vancouver isn’t that great after all… All those years watching Tony Parsons brainwashed me to think how great my hometown was… Well, its not.. I moved here with that chip on my shoulder. Funny thing is, people here in Toronto actually like Vancouver. People here think BC is a great place. They like the Island, love the Okanagan etc… I was shocked to see how my hatred of all things eastern wasn’t matched by a hatred for all things western. Locals here in TO would ask me why Vancouverites hated Toronto. I couldn’t really answer. I very quickly came to realize how brainwashed I was. Living here, I now realize that Vancouver isn’t really all what it’s cracked up to be. Sure I miss my family, friends, the Canucks, Douglas Fir.  Other cities have even more to offer their citizens. TO has an amazing theatre scene. Tons of festivals and cultural events. Imagine, the police don’t tell the citizens to stay home on New Years… And Sports? Pretty sweet… I have Blue Jays season tickets for $100. How is kool is that? I have season tickets to the Buffalo Bills for $450. Awesome. There are real things to do here, and I mean things that don’t include gore-tex. Real activities, not just the mythical ski, sail and golf on the same day crap we get fed from kindergarden onwards. But, Toronto is a fantastic city. Not only is the city alive with people and culture, but the standard of living is much higher. The salaries are better, and RE is lower. That’s an equation I can live with. Other cities in the area… Chicago? Awesome. Montreal? Fun. Ottawa? Great. Who knew there was a whole world outside of the “Greatest place on earth”?
If things ever return to normal in Vancouver, maybe I’ll move back. Until then, count me as one of the many professionals who left the West Coast for greener pastures…”

“My father is now in an old folks’ home, and, due to some poor choices, there is still mortgage owed on his property. My idea is to build the biggest house possible with 3 suites possibly 4 with the laneway house. The only issue is we don’t have that much money to build at the moment.”

Points that arise from this anecdote: Retirees have mortgages too. A good number of Vancouverites have a lot more than their entire net worth tied up in RE. Amateurs are still attracted to the idea of developing or landlording. -vreaa

instigator at RE Talks 22 Apr 2010 10:08 am –

“Nanaimo & E 4th. To build or Sell: Predicament. Well my father is now in an old folks’ home, and, due to some poor choices, there is still mortgage owed on his property. My sister is currently paying the monthly payments. The house is very old, over 70 yrs, and could be called a character home but we all know character home designs are usually out of date with modern living and just not as efficient. Pretty much the house is not in the best shape either. My mother who is divorced from my father wants her (us) to sell the house then take the money and buy a townhouse or apt. in burnaby near metro for sister. I own 2 but not in Vancouver.
My idea is to build the biggest house possible with 3 suites possibly 4 with the laneway house. The only issue is we don’t have that much money to build at the moment unless I liquidate one of my other properties.. or unless I can get a LOC on the one property I don’t have a LOC on. I figure I can build a brand new but nothing fancy or luxurious home. No granite no special tiles or hardwood. Just basic stuff.
What do you think is a good selling price for a new home in this area? I’ve heard of new homes selling for over a million just because they are new in Vancouver. My reasoning is that for a bit of work in construction the profit would be way more than just selling the house as is. Anyone have any advice?”

Vancouver Westside Shed Price Update

Readers will remember this image, featured here 8 Apr 2010:

4274 13th Ave W; Point Grey; 1,614 sqft home; 50×122 lot; V821029

Asking price: $1.698 Million

UPDATE: Sold, 14 Apr 2010, $1.840 Million

Setting aside all jokes regarding the structure, this can be used as a watermark for 50′ lot prices on the Westside at this point in the bubble. -vreaa

Condo Seller Panic – “A guy on my hockey team, a realtor in the Burnaby area, says that he has numerous clients who are anxiously awaiting the Jewel building to finish completing so they can take possession and quickly put it on the market.”

Vancouver renter at vancouvercondo.info 23 Apr 2010 4:45 pm –

“Wheels are starting to fall off. A building I am interested in has a unit already reducing their price by almost $60,000! asking $750k now at $679k, a huge 2 bedroom + den + storage, over 1100 square feet brand new unit. MLS # V815989 for anyone curious. And this is DOWNTOWN vancouver!! who said we are immune?”

Joyco 4:59 pm responds –

“The Robson TV Towers! I wish the best of luck in getting this at the right price. If they are already discounting it by 60k, you can get more – but might as well wait now and let the panic on the other side set in. It’s a crazy time – there’s bound to be people out there who think 60k off would be a great deal since they’ve become used to these prices…forgetting the important fact that it’s overpriced to begin with. Instead of overspending by 200k, you’d only be overspending by 100k – wait it out my friend, we’ll party together. The TV towers are a prime example of new buildings speculator trying to dig themselves out. There are many new developments being completed this year – wait till the flood of listings from each building come out of people wanting to exit. Those buildings currently in construction? The speculators are sweating hard hoping they will get completed asap. Woodwards is another. Now that it’s complete, just look at how many speculators are trying to dump it. The Mark and Beasely will have the same fate once they are complete. A guy on my hockey team, a realtor in the Burnaby area, says that he has numerous clients who are anxiously awaiting the Jewel building to finish completing so they can take possession and quickly put it on the market. It won’t be done until June, so you can imagine their panic – prices stabilizing if not dropping, Jewel 2 tower will be released soon (more competition and likley more competitive pricing) and the overall condo situation.”

David Rosenberg – “Every penny of economic activity, in real terms since this recovery began, has occurred thanks to the housing sector.”

Dave’s comments are addressed to the whole of Canada. In Vancouver, this effect is even more exaggerated. What will sustain economic activity here when the bubble bursts? -vreaa

From ‘Coffee with Dave’ by economist David Rosenberg at Gluskin Sheff, 23 Apr 2010 –

“Based on our statistical work, around half of the 7% annualized growth rate in nominal GDP from the recession trough has been due to the combined direct and indirect benefits from the housing boom. And, when we apply the price deflators to the various sectors of GDP, we actually find that every penny of economic activity, in real terms since this recovery began, has occurred thanks to the housing sector. In other words, if not for housing real GDP would have stagnated since Q2 2009 instead of rebounding at a 3% annualized pace.
Now that we have ascertained the root cause of this economic revival, it pays to assess what the driving factors were behind this real estate surge. No doubt the Bank of Canada’s move exactly a year ago to cut the policy rate to a mere 25 basis points was a huge factor — not to mention the pledge to keep the rate low through mid-2010. And, knowing the expiry date, a tremendous amount of housing activity was brought forward as a result.

The aggressive move to ease CMHC guidelines was equally stimulative. For a good while, Canadians could secure a microscopic interest rate with a 40-year amortization mortgage with practically no money down. What a great deal! The government announced some tighter rules a few months ago, but like the Bank of Canada’s pledge, the new CMHC guidelines did not begin until now, so again activity was pulled forward. This impact of “borrowing activity from the future” will likely be accentuated by Ontario’s and B.C.’s move to harmonize their sales taxes with the federal government this July.
So the housing market in Canada, the goose that laid the golden egg for the broader economy, is now going to be operating without the crutch of massive government support. It will be fascinating to see how this all plays out, especially since so much housing demand has already been filled by all the frenetic activity over the course of the past year. With all of the real growth in the economy since last summer being derived from the residential real estate market, it’s legitimate to ask: who exactly will be picking up the baton?”

“I currently rent a condo in Coal Harbour. I’m retired and had a good career and got lucky more than a few times. I have a net worth in the 8 digits. I can afford to buy a house in Vancouver now, but why would I? I was taught that I should buy things that are cheap and sell them when they are high.”

Jeff at macleans.ca 21 Apr 2010 –

“I currently rent a condo in Coal Harbour. I’m retired and had a good career and got lucky more than a few times. I can afford to buy a house in Vancouver now, but why would I? I was taught to not throw good money after bad and that I should buy things that are cheap and sell them when they are high. That’s the main reason I was able to retire now at a young age. I have a net worth in the 8 digits which is not relevant here other than the fact that I don’t have to deal with a mortgage when I eventually choose to buy and therefore interest rates take a backseat to the actual price of a home for myself. I understand that most people have to deal with interest rates and mortgages but buying an asset that is overvalued rarely, if ever, makes financial sense. Prices have gotten higher than I could have ever imagined especially when related to incomes. People who have bought recently have extended themselves substantially if they haven’t overextended themselves. Interest rates are increasing and therefore so are costs to service debts. With Canadians (Vancouver residents included – it’s not different here) having record amounts of debt it’s a foregone conclusion that those severely extended and overextended individuals will face serious obstacles in this rising rate future. I believe that house prices have to come back in line with reality. I urge people to have a look at the fundamentals and also look into the past.

What makes people think that housing will continue to rise (even after you account for a ‘correction’) in the next year or two? House prices have taken 7-9 years to recoup values after declining from the peak of the market twice in less than the last 3 decades. What makes people think it’s “different this time” especially given the economic circumstances we are experiencing today with rising interest rates and record amounts of debt? There are only so many people who are willing to commit themselves to the “greater fools theory.”

Personally, I suspect that the overall affordability of houses in Vancouver will be much better in the near future than they are presently.”

Vancouver in Free Verse – “Downtown living, la la la…”

Most of us cannot explain things in rhyme, but ‘Anonymous’ can and has. Very nice. From Anonymous at vancouvercondo.info 22 Apr 2010 11:37 am. The author deserves to be named. -vreaa

“Downtown lifestyle, la la la…

Let’s wake up in a shoebox and check out the fabulous view.
Oh, I see all my neighbours.
I guess they can see me, too.

Time to go to work, gotta pay off my huge mortgage.
Oh I forgot I am mostly paying the interest.
Who cares at least I am a owner baby, not some poor souls who rent.
Grande skinny latte no foam, please.
Look at me, I am walking with a giant paper cup with a corporate logo on my way to my tiny cubicle.
Trying not to spill on my nylon pants.
Isn’t that cool?

At a watercooler, yack about my fabulous condo and nearby restaurants
Just don’t ask me how often I go, cuz I can’t really afford it

Break time, let’s go to a “café” and have a fabulous cappuccino in a paper cup

Time to go home
How lucky am I to be in downtown. The whole world is here.
Hang out with my cool friends to do cool things.
Look at all the numbers on my iPhone.

Ring ring
What do you wanna do? I dunno.
How about you? I dunno it’s raining…
Why don’t we go for dinner? (My kitchen is too small anyway)
Earls, Cactus club, Milestones, Moxies?
How cool are we!

Come home and got my mails.
Bills, bills, bills.
Another 10 days till the payday.
Just pay the minimum. Should be ok.
My condo is going up and up, nothing to worry about.

Time for bed.
I hear my next door neighbours.
They must be gettin’ busy.
Wish these walls weren’t so paper thin.
But it’s ok, I am a condo owner.

Downtown living, la la la…”

“They said they were so happy they timed it just right, and they were so lucky to have found this place in the last minute, as they would no longer qualify for the mortgage as of this week. The place was a run down shack, with a dingy looking basement suite, they bought for $750,000.”

White Payer at vancouvercondo.info 22 Apr 2010 9:52 am –

“I saw a news bit on CBC couple of days ago (Monday [19 Apr 2010], when the new rules started) and they were showing a young couple in Vancouver (she was pregnant with their first child) who just made it getting “into the market” before the new mortgage kicked in. They said they were so happy they timed it just right, and they were so lucky to have found this place in the last minute, as they would no longer qualify for the mortgage as of this week. The place was a run down shack, with a dingy looking basement suite, they bought for $750,000. These people were genuinely happy and excited. They think they managed to “beat the system” or something.”

“For a 2bed/den in Yaletown you get yourself a castle out here and 30 minutes to downtown. There are lots of better places to live than Vancouver.”

Kanata squirrel 20 Apr 2010 10:08 pm –

“I was in Vancouver – actually made cash in real-estate and left in 2008 (pre-crash) because it was time to move from the crack street to a nice city – like Ottawa where schools are great and jobs are better than Vancouver. After a couple of years in lofty Kanata Lakes [Ottawa], I’m ready to jump down (or up) a few notches and, for a lot less, get myself 20-50 acres of land so my wife can have the organic farm while I keep working in IT. Now, this will cost less than a Yaletown 1 bedroom/den apartment – but a lot bigger and nicer in the end. For a 2bed/den in Yaletown you get yourself a castle out here and 30 minutes to downtown. There are lots of better places to live than Vancouver.”

“They are all shocked by how crazy people get about real estate in Vancouver. They simply don’t understand why one would get all worked up about something that you just live in. You don’t realize how ridiculous the whole game is until you leave.”

westcoastfella at RE Talks 22 Apr 2010 8:21 am –

“I now live in Toronto, although I do travel for work and get back to Vancouver every few months. One of the things that struck me when I moved to TO was the general lack of interest in all things real estate, compared to Vancouver. When you go out with friends, the topic of conversation never goes to RE unless someone is renovating, or in the process of actually moving. No one talks about the trend of the RE market, or what the moving 3 month average is for this area or that, or what the effect of a 50 basis point rise in rates will be to the average homeowner, etc. Quite simply, no one cares – most of my friends in TO own, a few rent. Those with mortgages all comfortably afford them, those that rent are happy renting and do so for their own reasons. And we all move on with our lives. A few of my friends know of this site [RE Talks] – I have passed the occasional quote to illuminate them on the manic mindset that exists for Vancouver real estate – and they are all shocked by how crazy people get about real estate in Vancouver. They simply don’t understand why one would get all worked up about something that you just live in. Then, when they realize how much homes are here and how far people were going into debt to get homes, they are shocked again, but at least understand why people are so passionate. When you’re that far in debt, it can can mess with you. I’ll say this for Vancouver real estate – you don’t realize how ridiculous the whole game is until you leave.”

‘Distribution’ – When Smart Money Sells To Dumb Money Near A Market Top

These investors are getting out before a dislocation in prices downwards. They are both smart and lucky. The FTBs are “stressed to the max” as they are caught up in the psychological nightmare of a cult-like buying frenzy. They will end up underwater on their purchases, with negative net worth. -vreaa

Strataman at vancouvercondo.info 22 Apr 2010 8:32 am –

“I mentioned before [15 Mar 2010] about 14 properties I USED to manage. Well, we exceeded 50% sales in two weeks, there are 6 units left. The investors who are selling are pricing just below the last sale price of similar units. They have room to move and aren’t in the least bit worried. The buyers 100% are FTB’s. Every one of them looks stressed to the max!  I am arranging for the tenants to leave (none of them want to buy the units they are in and most have the money to meet 20% down payment status). None of the tenants are upset, actually, me included, most are stunned that somebody would actually pay the price they (the investors) are selling for, and that is telling because if you have several years (all are long term tenants) renting a place and you have the funds to buy it but you are not the least bit interested….well that says it all doesn’t it!”

“I came home today to a stupid orange sold sign and my heart broke. This hasn’t ended. When a dual engineer couple cannot afford decent accommodation in a city.. we do what all smart, mobile, young people do… we will relocate.”

Let’s hope that we are entering a period where “smart, mobile young people” will no longer be chased away by Vancouver RE prices. -vreaa

CoB at greaterfool.ca 20 Apr 2010 8:49 pm –

“Today is the day my spirit has officially been broken. I had been keeping an eye on a condo in our building that was grossly overpriced (even for Vansanity’s prices). On Sunday it went off MLS after being on the market for 2-3 months. I was sure it would be relisted at a reduced price soon because the realtor’s sign was still in the front (with ANOTHER sign for ANOTHER overpriced unit). But alas, I came home today to a stupid orange sold sign and my heart broke. This hasn’t ended. When a dual engineer couple cannot afford decent accommodation in a city.. we do what all smart, mobile, young people do… we will relocate.”

Price Drops Already? – “2 bedroom unit a nicer condo building just off of Lonsdale just sold for 550k. The kicker, it sold for 580k exactly 2 years ago.”

paulb at vancouvercondo.info 22 Apr 2010 7:11am –

“2 bedroom unit a nicer condo building just off of Lonsdale just sold for 550k. The kicker, it sold for 580k exactly 2 years ago.”

“The stock market has pretty much been a 2000 ft deep hole in the ground for me. That is why I like long term passive real estate investment, it is something I can better understand.”

Towards the end of a bull market, players can be lulled into the belief that an asset class is risk free. -vreaa

Lady Luck at RE Talks 21 Apr 2010 1:41 pm –

“The stock market has pretty much been a 5000 ft deep hole in the ground for me Well maybe a 2000 ft deep hole. That is why I like long term passive real estate investment, it is something I can better understand.”

“The whole theory of renting being better is flawed. If I can’t just live my life because I am waiting for a crash so I can buy in order to have a dog or family, then I am more trapped than the people that spend everything on a mortgage.”

The bubble ends up inconveniencing almost everybody, some on the way up, others on the way down. -vreaa

Peepers at vancouvercondo.info 21 Apr 2010 9:01 pm –

“Yes, rents are coming down, but it has been tough, VERY tough for people to find places to live in Vancouver. Sensible friends of mine bought because it was cheaper than renting (long term, not a good idea). I agree with so many of the posts on here [vancouvercondo.info], but I feel like on this issue, there are so many people out of touch. Just because something is listed on craigslist doesn’t make it real. Go out and actively look for something decent to live in. It wasn’t pretty, and if you throw a pet or a baby in the mix, you are hooped. I have been told here before that “well of course you are going to get dinged for having a dog”. Uh, what? So then the whole theory of renting being better is flawed. If I can’t just live my life because I am waiting for a crash so I can buy in order to have a dog or family, then I am more trapped than the people that spend everything on a mortgage. Dunno, that’s just my thoughts. I tapped out on all of it and went coop though.”

Absinthe at vancouvercondo.info 21 Apr 2010 9:49 pm –

“I’ve got a friend who’s been moved along twice in this bubble due to the home being sold/reno’ed; I’ve been moved once; and my mom has been moved once and had to give up her cat to find a new place she could afford. And each time, there’s been a lot more work to find a place than when I first came and found apartments with a walk ’round the neighbourhood I wanted to live in.”

“My husband and I, who make over $200K, still can’t afford to buy a house in the neighbourhood where we rent a lovely house for $3000/month. I look at basic little houses with a sad yearning for the stability.”

Garth Turner’s post ‘Homeless’ at greaterfool.ca 20 Apr 2010 contains this anecdote from Joan, who is clearly from Vancouver’s Westside –

“I regularly say I’ll never regret staying home with our kids for the last 4 years, but look at what happened to real estate in that time!   Now, my husband and I, who make over $200,000/year still can’t afford to buy a house in the neighbourhood where we rent a lovely house for $3000/month.  Our kids are well entrenched in the schools, so changing neighbourhoods would be a shame. There’s not a day that goes by that I wonder if we should be diving in like the rest of ‘em.  I regularly wonder who these people are who are buying up $1,000,000 tear downs.  Maybe we should be taking out a 35 year loan and paying more than we can afford monthly.  I look at basic little houses with a sad yearning for the stability of owning a house…knowing we can keep our kids in the school they’re in…not needing to pack up and move yet again…. But, I just can’t believe it’s sustainable.”

Bubble Market Phraseology – Too much inventory is “confusing for buyers”.

One would imagine that buyers are capable of making up their own minds, and that they would benefit from as much inventory as possible. -vreaa

maggie chandler, Vancouver realtor, at yattermatters.com 19 Apr 2010 5:33 pm –

“If sellers are not sharply priced, their agent should discuss their motivation to sell and suggest an alternative to pricing realistically – cancel the listing. That would reduce the inventory and be less confusing for the buyers.”

Comparison with the 1980 Bubble – “The people I knew in 1981 were buying for $125,000 to $150,000, with 15-25% down, & were making a lot more than $16K. They were not carrying near the other debt that people I know now carry, like credit cards, car payments and LOC.”

metalhead at RE Talks 15 Apr 2010 1:14 pm –

“The ’81 people I knew were buying with 15-25% down and trying to pay off a $125,000 to $150,000 mortgage. That’s a big difference from people buying with 5% down now and trying to pay off a $500,000+ mortgage.  I also know most people buying a sub $200,000 home in 81/82 were making a lot more than 16K. The ’81 people I knew were also not carrying near the other debt that people I know now carry, like credit cards, car payments and LOC.”

“An apartment I’ve been following has just sold. Obviously over prized and over priced by the owner, who is a realtor, but it’s not that big a discount to sell for only 140K off your fantasy price, is it?”

vomitingdog at robchipman.net 17 Apr 2010 3:59 pm –

“An apartment I’ve been following has just sold. Upscale, very nice, originally listed for 1.1M, no sale in 2007 or 2008 when it came down a bit, maybe 1.049M, came back up last year for 999K, no sale, went off, came back on again, no sale, came back on now just sold for 960K. So, 2.5 years to sell. Obviously over prized and over priced by the owner, who is a realtor, but it’s not that big a discount to sell for only 140K off your fantasy price, is it?”

“A friend of mine is trying to rent out a nice loft on Seymour Street. One year ago people were fighting over one another to rent it. Now, with a slightly below market rent, she is getting a handful of people who are all looking at multiple units and will get back to her.”

McLovin at robchipman.net 18 Apr 2010 7:21 am –

“A friend of mine is trying to rent out a nice loft on Seymour St (10 yrs old) and one year ago people were fighting over one another to rent it. Now with a (slightly below market rent) she is getting a handful of people who are all looking at multiple units and will get back to her. No doubt she will rent it but the quality of renter has gone down and it may sit for a few weeks waiting for the right person. The days of annual rent increases are over.”

“My Korean grocer was telling me today he is looking to buy a condo in Coquitlam, but his relatives and friends are telling him to hold off right now as prices are headed south.”

girlbear at vancouvercondo.info 20 Apr 2010 4:09 pm –

“My Korean grocer was telling me today he is looking to buy a condo in Coquitlam. BUT he said his relatives and friends (who are mostly landed immigrant Koreans) are telling him to hold off right now as prices are headed south. He is not sure as he really prefers the idea of owning vs renting.”

“I’m noticing psychology change, I’m watching it happen! This week, picking my son up from school, two different parents on two different days started discussions about the insanity of house prices.”

Absinthe at vancouvercondo.info 20 Apr 2010 9:21 am –

“You know, with Crackshack or Mansion making major headlines all OVER, April 19th changes, the average price actually getting to $1M, all the “is it a bubble?” talk in the media, or even more creepy, “WE’RE NOT IN A BUBBLE I’M GOING TO SAY THIS A WHOLE LOT AND VERY LOUDLY”, and with interest rates creeping up — well, I’m *noticing* psychology change. I’m watching it happen! This week, picking my son up from school, two different parents on two different days started discussions about the insanity of house prices.”

Jeremy Grantham – “If they do not go back to the old trend line price multiple of family income, which is what should drive house prices, it will be the first time in history that such a bubble has not broken.”

Jeremy Grantham is a highly knowledgeable investor who started one of the world’s first index funds in the early 1970s. He is Chairman of the Board of Grantham Mayo Van Otterloo, a Boston based asset management firm that manages more than US $107 billion. He has built much of his investing reputation over his long career by correctly identifying speculative market “bubbles” as they were happening and steering clients’ assets clear of impending crashes. Grantham avoided investing in Japanese equities and real estate in the late eighties, as well as technology stocks during the internet bubble in the late nineties. [Above extracted from Wikipedia].

This excerpted from a Financial Times interview 19 Apr 2010 –

“Bubbles are important for the country because there is nothing more dangerous and damaging to an economy than a great asset bubble that breaks. … We looked back as far as we could, [of the 34 bubbles we found over the years], 32 have moved all the way back down to the trend line that existed prior to the bubble forming. There were no exceptions. The two that are outstanding, the UK and Australian housing bubbles, form a unique and interesting subset caused by, I believe, floating rate mortgages. The mortgages came down so fast that they protected the bubble, and now we have to see what happens when interest rates rise. But if they do not, in both cases, go back to the old trend line multiple of family income, which is what should drive house prices, it will be the first time in history that such a bubble has not broken. This is not something that I would want to bet on if I was thinking of buying a house right now.”

[BTW: Canadian housing is in precisely the same boat as that of the UK and Australia. Vancouver’s ‘[price] multiple of family income’ is higher than any city in either of those countries. -vreaa]

“At the big 5 bank where I work we’re using the new 5 year posted rule on ALL applications, CMHC AND conventional. Also prequals have to requalify unless there is a signed offer prior to Apr 19th. I am at our western approval center and all I hear right now is crickets.”

reknab at vancouvercondo.info 19 Apr 2010 2:55 pm & 2:58 pm – “At my big 5 bank we’re using the new 5 year posted rule on ALL applications, cmhc AND conventional. Also prequals have to requalify unless there is a signed offer prior to Apr 19th [2010]. I am at our western approval center and all I hear right now is crickets compared to years past except for one year and I’ve been here since 2004.”

Realtor Notes – “The market is tipping; Fewer buyers prepared to pay asking price; Sellers unrealistic about change; Some see a 10%–30% drop in prices in the months ahead”

From Vancouver Realtor Larry Yatkowsky’s post at yattermatters.com 18 Apr 2010 –

“Every so often a number of associates [realtors] meet up for a coffee session. The coffee conversation is stimulating as it covers a wide range of topics real estate related, from tech talk and legal issues, to market manifestations and of course the required amount of gossip. Discerning the coffee stained scribbles from my crumpled napkin here are some snippets of which some are founded in reality and some on rambling rumor.

* phone calls slowing or have stopped
* the market is tipping
* change to a buyer’s market
* still multiples but only on the best of the best product
* fewer buyers prepared to pay asking price
* limited last minute buying due to rate increase
* rate increase versus lower selling price = same dollars out of pocket
* sellers unrealistic about change
* scanning versus faxing – best practice
* last minute sellers
* don’t get competition bureau as it’s been that way for years
* some agents refuse over priced listings
* some see a 10% – 30% drop in prices in the months ahead
* hopes for less frenzy, more realism”

Busy Realtors – “I had about 40 people through our 2 bed condo listing in Burnaby. Most with Realtors so they appear serious. My wife had about 50 people through our east side TH.”

thinktom at RE Talks 17 Apr 2010 11:10 pm –

“I had about 40 people through our 2 bed condo listing in Burnaby. Most with Realtors so they appear serious. My wife had about 50 people through our east side TH. A friend of mine with Lofts Vancouver was working on two seperate offers tonight.  Fraser Valley might be dead but there is still life in the legs of the Van/Burnaby market right now.”

silverman at RE Talks 18 Apr 2010 00:46 am –

“I had an open house in New West couple weeks ago … 35 people on Saturday, 45 on Sunday… sold $20K over asking.”

“Last Friday, she revealed her latest plan. She and her husband were going to “flip” a property to come up with the downpayment for a house. She didn’t mention how she was going to come up with the downpayment for the flip.”

The RE market has run away so far and so fast that the only way that citizens can conceive of making enough money to jump on board is by jumping on board. Yes, that is circular thinking, but there you have it. It really is the only game in town, isn’t it? -vreaa

This from Peter Pan, via e-mail to VREAA, 18 Apr 2010 3:09 pm –

“An early 30s administrator in our downtown Vancouver office asked us if it was a good idea to buy a house with no money down.  She pulls in 35-40K maximum and her husband is underemployed slinging coffee.  We said “Generally no, because of the risk in involved”. I added that rates were going up and she could be easily left with negative equity.  Last Friday, she revealed her latest plan as she scanned the maps on the MLS website.  She and her husband were going to “flip” a property to come up with the downpayment for a house.  After all, she has a cousin who is a carpenter.  She didn’t mention how she was going to come up with the downpayment for the flip.”

“I should put my condo for sale right now!” I asked her why, since she bought the condo 20 years ago, she is happy there, and intended to spend the rest of her life there. Her answer was: “Can you imagine the money I might lose?”

When prices start dropping, many who have been anticipating a future based on the imagined gains in the value of their primary residences, will be moved to sell. -vreaa

painted turtle at vancouvercondo.info 17 Apr 2010 5:35 pm –

“Yesterday, a colleague of mine was sitting in my office and said :”Prices is Vancouver will always go up.” She is in her 50’s and owns a condo. I asked her to sit down and look at a few charts. The interesting part is that in 10 min I could see her going through the 5 stages of grief: 1-Denial, 2-Anger, 3-Bargaining, 4-Depression, 5-Acceptance. She finally said, with panic in her voice: “I should put my condo for sale right now! And move into my cousin’s basement for a while.” I asked her why, since she bought the condo 20 years ago, she is happy there, and intends to spend the rest of her life there. Her answer was: “Can you imagine the money I might lose?”
I then thought of Patiotz, and how you do not own any money until you have sold an asset.”

UPDATE: In response to requests at vancouvercondo.info, painted turtle described the exchange in detail, at 7:04 pm –

“1) I said : “Are you sure prices are going up?” and I showed yattermatters last charts for Cambie and Main. She was frowning.
2) She shouted: “It is different here” so I told her that people in Miami and California all had good arguments to say it was different there too.
2.1) Then she mentioned “the best city on Earth” and I told her that rankings are for expats, not for people looking for a job and needing to buy a home.
3) Then I showed the graph on Paulb’s site. She opened big eyes and whispered “there is a problem.”
I mentioned how much our household makes (she said “that’s way above average”) and I said that with two kids, I was thinking of buying a 3 BDR place. Then I went on the MLS and showed her what we could get for 3 times our yearly income… nothing!
4) She said: “But all rich Asians want to invest here.”
so I told her that if I were a rich Asian, I would rather buy 3 houses likely to go up in California than one house likely to go down in rainy Vancouver. She said:”Yes, I would too.”
5) I showed how much I spend in rent for an excellent neighbourhood and how much interest I would pay on interests only for the same place, and she said: “Sure, there is no point for people like you to buy.” Then she said “but real estate is a great way to invest.” I answered: “Of course, if you buy at the bottom and sell at the top. I have done it a few times in the past and elsewhere, but I would not do it in Vancouver in 2010.”
6) She was starting to give way. So I showed the comparison of house price/income in several countries, and showed that at 9.6, Vancouver is the most expansive city of all. She said:”Wow! More than London? More than New York?” I think that is the point where she started acceptance.
7) Then I showed the Agent Will’s inventory graph and reminded her of what happened in 2008. She said with a sad look: “so, it is going to be like 1980 then… I knew so many people who went under then.”

The funny point is that when she started thinking of selling, she also said she should take the money and settle down in… a cheap and warm part of the US.”

Vancouver Not Realizing Full ‘Real-Estatic’ Potential – “I asked her about the rising listings. She said Vancouver is a real estate city and is under supplied with realtors. They can’t write the offers fast enough. She said money is huge and if you can warm a seat, you can make six figures.”

[breathless] I have an idea, why don’t we ALL become realtors, then sales would be ten times as high, prices would be 85% higher, and we could all accumulate and sell condos to each other and retire rich! …//… When people are even saying that anybody who can “warm a seat, can make six figures” there is absolutely no doubt as to where we are in the market cycle. -vreaa

Greenhorn at RE Talks 15 Apr 2010 8:16 pm –

“I ran into an old neighbor who is a realtor and asked for a market update. She is an ex-neighbor because she recently moved into a newer and bigger house. She is working 18/7 and earning money like a Wall Street Investment Banker. It is absolutely crazy. Buyers are in full panic mode to beat the HST, rising rates and new mortgage rules. I asked her about the rising listings. She had a very good answer. One I have never thought of before. Vancouver is a real estate city and is under supplied with realtors. Basically, listings are piling up because realtors can’t write the offers fast enough. Realtors are the bottle neck as they get bogged down with paper work and deal administration. She said if they had twice the number of realtors in this city, sales would be twice as high, listing inventory would be cut in half and prices would be 10-15% higher. Her comments were that the money is huge and if you can warm a seat, you can make six figures as she drove off in her new Mercedes. Apparently, we have a shortage of real estate sales people.”

“My co-worker just bought a place last week. FTB, 645sqft, $430K. I told her it looked like a nice cozy place, but I felt a sick feeling in my stomach. I mean what else could I say? She seemed so excited.”

For anybody who still thinks that it’s unfair to suggest that the recent Latvian vignette will play out here in Vancouver, take a look at the following story.  -vreaa

kansai_92 at RE Talks 17 Apr 2010 9:28 am –

“The April deadline has really planted some seeds in the minds of the FTBs. My co-worker just bought a place last week. $430s for 645sf condo near Cambie Village. It was only last month that she told me they had just started looking. Even when I was buying my car, I took about 3 months to finally decide. She admitted they rushed to beat the rule changes and pending rate hikes. I told her it looked like a nice cozy place, but I felt a sick feeling in my stomach. I mean what else could I say? She seemed so excited.” … added at 11:17 am – “They are pretty good savers but little financial knowledge. Don’t understand mortgage rates, resets, affordability, compounding interest etc. I imagine 20% dp. Been renting for years.”

“While I KNOW this house is extremely expensive and likely at the top of the market, we bought it. Wish us luck, we may need it!”

This bubble has inconvenienced many, and here is an example of an individual who, despite (perhaps because of?) sound insight into the market, made the decision to not let the bubble inconvenience them any longer. Essentially they are saying that they are wealthy enough (inheritance ‘backstop’) to be able to take the risk of their new house dropping greatly in market value.  That risk is, by their calculations, less significant than the inconvenience of not moving into their current ideal accommodation.  -vreaa

The Greatest Fool? at robchipman.net 15 Apr 2010 1:02 pm –

“My wife and I currently own a very nice high end condo and are at a stage of life where condo life isn’t necessarily appealing anymore.  So, we locked in a stupid low rate and “kept our eyes out” for a place.  Well, within a month, we found a great house in a great area (our prime target area), and while I KNOW this place is extremely expensive and likely at the top of the market, we bought it.

Why would someone, like me, do this, when my instincts tell me that we’re at the top of the market, with the lowest interest rates on record, affordability a major issue, and nowhere to go but down?

Frankly, because of what I mentioned – we are at the stage of life where we don’t want to live in condo anymore.  I’ve looked at house rental listings, and none were as nice as this place.  Plus, my extensive (believe me, extensive) economic analysis showed me that for every 1% rise in interest rates (which has already occurred), at this approximate price point, we would require a an approximate 10% reduction in the market in order to have the same payment (remember, we are long in the market with our current place, so the market decline hurts us on the sell side too).    I think a 1.7% rate rise (not unreasonable, at all) to ~ 5.4% would mean we’d have to see a 20% market reduction.

My dad passed away last year, my mom’s in a big house by herself on the island – she’s making noises about downsizing etc. or even moving.  So, she’s offered to “advance” us some of my inheritance (only child) to help out.  That helped us make this difficult decision as well, as we have a bit of a backstop there.

At the end of the day, we can afford the payments on this place, although, it will be a bit of an adjustment for us.  We have some economic backstop.  I think the market could easily correct up to 20%, but maybe not by much more than that.  To not buy now, we would have to bank on a 20% or greater drop in the market.

I am somewhat bearish on the market, but not in the same way as a lot of people here are.  I do think that a 20%-30% correction is a very real possibility (or even a probability), but I also think that anything greater than this, on a long-term protacted basis, is unlikely.  There is something that none of us have been able to figure out or quantify that keeps the market buoyant.   I personally think it’s a combination of foreign ownership and generational wealth transfer (baby boomers are relatively affluent and like to help their kids – akin to my situation).  I also think that the bottom fell out, you’ll see other governmental “stimuli” (such as playing with bank rates) to readjust the markets.

So – anyway – that’s what we decided to go, for good or for bad.  I’ve considered the impact that an interest rate of 9% would have in 5 years time, in which case, we’ll likely be selling.  But the way I see it, I’ll cross that bridge when I come to it.  There are lots of other variables at play, that are difficult or impossible to predict – general economic conditions, personal job situation, a further “inheritance”, higher inflation or hyperinflation, a catastrophic illness such as cancer, a global nuclear winter if some quack dictator does something unpredictable, etc.  So, we’ll roll with the punches.

I hope you all take this as it’s intended to be posted – not as a “you are all wrong” sort of thing – more of an explanation from someone who, quite frankly, agrees with you, but given the time and place that we are in, decided that we’d still buy in this market.  Am I greater (greatest) fool?  A number of you will say yes.  But, at least I’m an informed “fool”.

Wish us luck, we may need it!”

and at 1:40 pm –

“Maybe I achieve full bonus at my work each of the next 5 years and reduce the mortgage significantly during that time.  Maybe my options net me $500K.  Maybe I get promoted at work into a significant raise.  All of these scenarios are just as likely as an interest rate rise to 9%.  If so, no, we won’t be selling, and we’ll continue to be extremely happy in the house.  Also, it’s my principal residence, not an investment – if I’m under water, I don’t really care as long as I can still afford the payments.

One thing I think “us” bears (remember I am a bear) forget is that if rates rise significantly, the economy is going to be humming.  Majorly humming.  In which case, I can guarantee that my profession will afford me a much higher income, esp. with 5 years more experience.”

“He readily admits they will be just scraping by in order to make the mortgage payments, with a mortgage-helper suite in the basement. The suite is currently unfinished, and they exhausted all of their savings on the down payment.”

oneangryslav2 at vancouvercondo.info 16 Apr 2010 1:49 pm –

“I can afford to buy very much, thank you. I have chosen not to because renting provides much better value for my money. And it’s not even close.

I have two colleagues–let’s call them Mr. Bull and Mr. Bear.

Mr. Bear has about $200,000 that he could put toward a down payment on a house in Vancouver. He has chosen not to because he also understands economic fundamentals.

Mr. Bull, on the other hand, about two months ago was able to come up with a 5% down payment on an admittedly nice place in east Vancouver. He readily admits that he and his wife will be just scraping by in order to make the mortgage payments, with a mortgage-helper suite in the basement. The suite is currently unfinished, and they exhausted all of their savings on the down payment. They are recent arrivals from the United States–Washington, DC area–and had hoped to fund the completion\renovation of the basement suite via the differential in the exchange rate between the US and Canadian dollar as the funds. Big mistake; the loonie and the greenback are now at par. So, they’re now scrambling to get a second mortgage. They take possession on May 1st.

But I guess they’re now home owners, and Mr. Bear and I–who are lowly renters–are just losers. I can afford to wait until prices make sense. If they don’t, then I’ll never purchase real estate in Vancouver. Big deal.”

“My brother, a PhD geneticist, says there are many top researchers who would love to live in Vancouver but don’t because of (1.) lack of jobs and (2.) high priced RE.”

Not much of a name… at vancouvercondo.info 16 Apr 2010 10:59 am –

“My brother is a PhD in genetics and has said to me many times that there are many top researchers who would love to live here [in Vancouver] but don’t based on two factors:
1. No jobs for them (many of them are in Toronto or the US)
2. High priced RE
So…they can work and make more money elsewhere, and buy cheaper RE.”