Monthly Archives: July 2010

oneangryslav’s Sister’s Sale Update

oneangryslav2 at 30 Jul 2010 10:36 am

“As I’ve written before, my sister listed her home in Coquitlam about 6 weeks ago. She’s had about ten or so showings and three Sunday open houses, but no offer yet. She has noticed listings in the same neighbourhood expiring and not being re-listed, which is good for her as there is less competition.

Oh, and the realtor suggests that the lack of an offer thus far due to a combination of the price being too high (which it probably is, by about $25,000) and the great weather. “Nobody wants to buy a house when the weather is good!” Except aren’t the highest sales volumes seen during the summer?”

‘Landtricks’ Accusations – “I worked for a large developer until recently. Even I wasn’t aware of all the tricks, because only the owners of the largest development companies know of them.”

A series of accusations that developers in Vancouver and the lower mainland manipulate land transactions to their own advantage has been posted anonymously, and undated, on a website ‘’ under the heading ‘Metro Vancouver Land Cartel’. For the record, we archive part of it below, with specifics edited out. We found out about the post after ‘tabin’ linked it at RE Talks [30 Jul 2010, 4:43 pm]. The author claims to be somebody who “worked for a large developer until recently”, and quotes from an e-mail sent to him/her by “a colleague and friend”, so this is 2 or 3 degrees of separation stuff. We have no way of verifying whether there is any truth to these accusations, but we’ll be following with interest any public dialogue that results.
In every bubble, insiders and vested interests make hay during the boom period, and we’d expect the Vancouver RE bubble to be no different. We have previously noted the unholy triad of  ‘uncritical media’, ‘vested interests’ and ‘government compliance’ that definitely helped fuel our bubble. “Everybody’s hustling for a buck and a dime”, after all.
Vested interests and insiders making as much money as possible during boom times, is not, however, the same as possible price-fixing and other nefarious practices, so we’ll have to see if there ever emerges any actual evidence of this. It sounds to us like the kind of issue that could becomes a focus of attention in a serious downturn, when a significant number of people holding over-leveraged RE cans will be looking for scapegoats.
Speaking of downturns, we’d not expect this issue to make any difference to the inevitability of a bubble implosion. Even if there was a ‘cartel’ attempting to continually manipulate prices upwards, the size of the market, and the forces that come into play when a bubble runs out of oxygen, will completely overwhelm their attempts. If anything, upward manipulation of prices during the boom will simply ensure that the bubble is that much greater, and that the subsequent fall will be that much greater, too. -vreaa

This from [undated; first seen 30 Jul 2010]

“I received a very interesting and informative email from a colleague and friend of mine. I thought it important enough that it should be shared with all the people who might be affected by this. I worked for a large developer until recently and was sent this email and even I wasn’t aware of all the tricks because only the owners of the largest development companies know them.
The author refers to the suburban situation. I can attest it holds across Metro Vancouver and the tricks may vary to suit the different conditions in the various municipalities.

The email is as follows:

I know quite a few people have an idea or suspicion about the collusion in price fixing (like the oil companies do with gas prices) that goes on with  the main established developers … but not the details of how its carried out – even I only know some of it because its clever and kept secret.  This is also carried out elsewhere in the Lower Mainland and parts of BC but I don’t think to the extent and success it has been in Surrey/Langley. In Richmond it has not really been successful in the city centre because too many Asian developers jumped in.  Also it doesn’t work with smaller projects as the smaller developers can do them so its not possible to control those.
It all really started in 1991 when Surrey had its “Suburban Lands Review” identifying all the new future NCP [Neighbourhood Concept Plan -ed.] development areas. That is when the big developers … got together and divided all the areas up for joint ventures and options and staked their claims to purchase land so as not to compete with each other as there was such a surplus of land all at once available for future development.  This was a smart move (though it was illegal) as there was enough of a pie for everyone.  They also sold the idea to the City of Surrey that NCPs should be self funded so that this way the large developers could control development and shut out the smaller and midsized developers – who would be left with the scraps and had no control over the timing of development.
Now with the number of new NCP areas that are developable at any one time much more limited in Surrey and Langley (currently only South Newton, Grandview Heights and Yorkson are), they have to compete within the same NCPs.  So what they do is divide up the NCP parcel by parcel so each of them get their share of the major parcels and this way they do not compete with each other.  …
If any one of the cartel members purchases a parcel, they then get first dibs on any adjoining parcel (unless it is already “assigned”).  Some developers get first dibs on property on certain types of roads.  Its all mapped out in detail.  This is why landowners rarely get competing bids from cartel members and prices are suppressed but the savings are never passed on to home buyers and simply goes to extra large “bonus” profits.

Some of the specific tricks are:
– Lesser members get the less desirable sites allocated to them and are expected to pay less for their land in order to maximally suppress land values to benefit the cartel (the more established ones reap the greatest benefit out of this).  So unknowing to them, the lesser ones do the “dirty work” and are used to sacrifice for the greater benefit of the others in the cartel.
– Up and coming developers are often told of the benefits and are tricked to join (but don’t really get the benefits) the cartel but often later leave it when they realize its not to their benefit and they are being used and controlled (but some still get suckered in to stay as they feel important in that they belong in the company of these bigger developers and they feel they have “arrived”).  What a few smart developers have done in the past is just play along and still steal whatever land they want once they learn of the exact competition for whatever land they want and then end up being out of the cartel.
– The cartel uses its own realtors – each developer has its own agent for each area.  This way listing agents (and buying agents) have no control and the developers control buying and selling. That is why they don’t even respond to listing agents trying to sell their clients development properties. For realtors, there is no point in contacting any of these developers as they already know which parcels are “theirs”.
– For new NCPs they purposely have the engineering consulting firm (with whom they are very friendly and give a lot of business to) leave property that is serviceable just outside the boundary of a new NCP and later purchase it from the owner cheap and get the NCP boundary moved so it is “in” and serviceable.
-The cartel’s new trick is in new NCP areas to force consolidation of parcels (put in servicing and planning constraints) so they only can do development because they are big enough to purchase multiple properties and overcome these hurdles.  This way they also get the land cheaper. They also get the planners to run future roads in funny ways and not shared along property lines to further do this (force consolidation of parcels for development to be feasible).
– They buy up the parcels which can hold up development (like where key future road access and servicing points are) so as to control development.
– To suppress pricing of land further, cartel members do not buy optioned land from speculators even if it is a good deal and only if they really have to. This keeps speculators out and cartel members artificially control prices downwards.
– They collude and fix selling prices of their housing units also so as not to compete with each other and get the maximum selling price possible.
– They encourage all their members to spend the least they have to on exterior finishing so as to keep the standard low and not raise expectations of consumers.  Yet they still sell their housing units for “full” price.  This is done to maximize profits for the long term.
– Even when making 10 million profit on a 5 million dollar project investment (of their own money), they will fight city planners for every inch for even small concessions.  This is because they are so damn cheap and greedy and also they do not want to set precedents for the municipality to make it easier to change policies that will later effect their profits, especially in leaner times.
– There wouldn’t be a problem with this land price fixing if say they were going to take a fixed 20% profit on the product and if the land were cheap, the selling price was reduced to keep the same 20% profit.  Instead, even if they get the land for free, they sell for the maximum price they can get and maximum profit. I have seen this when they get the land for “dirt cheap”, they never give a break to the home buyer.  Of course they do not have 100% control over the land values as supply and demand, scarcity, migration, the economy and other factors largely control this but they still have a large enough influence with their monopolistic collusion tactics which are in fact illegal.
– The biggest mistake this cartel made is that they were short-sighted and cheap and not really very smart in not buying up all the developable land parcels they could in order to control development permanently and block all future competition.  They foolishly thought (and still do to an extent) that they can buy the land they need when it suits them at their price. They underestimated other smaller developers (like the Indo community ones) who then came in and got a big enough chunk of the development pie and have become much bigger and will be more dominant in the future and have taken a lot of the cartels market share.  Smart business people would have seen this potential problem and bought up the land for their future development dominance. In fact any smart developers can just go out there and snap up as much development land as possible and then they will be the main builders in the years to come as they would control much of what can be developed and just laugh all the way to the bank and the rest would be left on the sidelines as there is only very limited developable land and without it you are no longer a player.  It is easy to do this but to tell you the truth, these guys aren’t too bright and are just a bunch of circus monkeys ordered around by the ring masters (the big developers who run the cartel for their benefit).
– They give themselves awards they just divvy up among the cartel members which are a farce and are simply a marketing tool and a way of getting new developers to join them.  They also function as a way to keep cartel members obedient to the cartel – if members don’t follow the rules, they don’t get any candy (awards).

– The cartel’s developers has really strong political influence at every municipality they are active in but the real control is in ownership of the land and they failed to realize this simple and obvious fact and missing this important fact, allowed a lot of smaller developers to become bigger thereby “stealing” the cartel developer land and the smaller developers made a lot of money and therefore are now real future competition for the cartel developers. As a result of this threat, the cartel developers are trying even more corrupt tactics at the municipalities.  The worst municipality for this is the City of Surrey (which is surprising since it is so large and not some small town where it is easy to buy off a few people and control it).  They especially buy off or influence city staff.  … The corruption and influence is still there and in a way its worse because the cartel is losing its control and is getting more desperate and has been done to a greater extent including a new (since about last year) special greater focus more to the implementation (application and servicing) stages.  In actual fact, Surrey needs a full-time or part-time engineer and a planner to act as auditors or ombudsman to oversee all decisions and respond to any complaints who are independent and do not know staff.  It really is that bad in Surrey.

All I am going to tell about myself is that I have been developing in the Surrey Langley area for over 25 years and have done very well financially and have recently retired from it and have let the next generation carry on with it and thats why I have not given my name here.  I just wanted to give back by letting people know so that the illegal racket will end sooner rather than later and I did my part in exposing it so I can clear my conscience as I benefited from it because I was able to buy land cheaper and sell my housing for greater prices and profits due to the price fixing and non-competing of the cartel.”

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

exx at 30 Jul 2010 at 9:38 am

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

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

“I’ve just sold my American Home of 19 years, and will rent for the next year or so until we move to BC.”

Contrarians would currently be selling Canada and buying the US. Here’s somebody who is almost doing the reverse (not exactly the reverse, because they’re waiting before they buy BC). – vreaa

Fiendish Thingy at 24 Jul 2010 1:18 am

“I’ve just sold my American Home of 19 years (in Santa Cruz, CA , the 2nd least affordable community in the U.S. – 7.5 times avg. income IIRC), and will rent for the next year or so until we move to BC. We are sick of the corruption of both major parties, and look forward to living in a country where most of our tax dollars aren’t gobbled up by illegal wars (including torture and wiretaps), bank bailouts, and corporate welfare. We know Canada isn’t a Utopia, but it will be Heaven compared to the insanity going on the past 10 years.

We are already landed immigrants, and are just waiting for our daughter to graduate college, and for us to find jobs (in the health professions) before moving and becoming renters in the lower mainland.

In the meantime, our over $300k USD from the sale of our home will remain liquid and available for the day when Canadian RE becomes more reasonably priced. In a few years, we hope to pay cash for a home, and have no mortgage. We are completely debt-free and loving it!

As for those who hope to buy American, there are definitely good deals out there, but more may be on the way. There is a huge backlog of foreclosures, and isn’t there a huge wave of Alt-A (you pick payment/interest only) mortgages about to reset in late 2010? I don’t think we’ve seen the bottom in the U.S. yet…”

Point Grey SFH Inventory

MLS SFH Inventory, West Point Grey, on the 28th July for each of these years:

2006 – 27
2007 – 34 (est.)
2008 – 77
2009 – 39
2010 – 78

Realtor Tempts Buyers With Cash Back Incentives

From craigslist 27 Jul 2010 5:47PM

“ATTN: BUYERS! RECEIVE $1000 IF YOU BUY WITH ME…. (Lower Mainland)”

Okanagan – 2005 Prices; Selling Strategy In A Falling Market

thirdlittlepig at RE Talks 26 Jul 2010 5:55 am and 6:33 am

“I happened to be looking at some properties that I made notes on here in the Okanagan about 18 months ago. Nice house, not lavish, a country mile from mine, 6 bedrooms, 5 baths, 5 acres, quiet semi-rural area, but close to town, built 1980, was listed for $849K 18 months ago. Asking $599k now. I’d say that’s at least close to 2005 prices. There are a lot of others that haven’t sold over that time, delisted, then relisted. In fact the local paper recently had an article where the RE agent was suggesting that because the market had slowed people who really wanted a good price for their place should delist and try again some other time. This in a market which is obviously not going up and could easily slide for the next few years or who knows how long. I don’t get the logic on that, because in the case of this home this approach would have just delayed the inevitable price drop and probably made it worse. If they had priced aggressively in the first place they might have sold sometime in the last 18 months because places were moving albeit slowly. Last year a three acre place in this area and $599 price range sold (asking originally $660k), slightly better view but not outstanding over the lake. Anyhow my point is, if people are selling, shouldn’t the RE advice be to face reality, price aggressively, take your money and run?”… “If sellers are pricing too high because they haven’t realized yet what has happened to the market they are less motivated and aren’t going to sell anyway, so the realtors have to run around showing their place or beating the bushes for buyers, but there is no point until they sharpen up their price. If the seller won’t do that , they think the realtor just isn’t trying or somehow there’s a buyer there somewhere. Life was just do much easier for realtors when buyers thought they were going to get priced out and spent less time looking for and deciding on a house than they do a big screen tv. And sellers were so much happier thinking they had a $849k home that probably would sell than a $599k home that still isn’t selling. I am just really curious where these prices would actually be if sellers priced to sell and not to have their place sit there listed for 18 months.”

Spot The Speculator #7 – “The RE buzz is still alive in my circle of friends.”

anonymous at 26 Jul 2010 9:57 am

“I was talking to a couple of friends on the weekend. The RE buzz is still alive in my circle:
-one (first time buyer) looking to buy a SFH in east van, is being “helped” by his parents to exceed the 20% DP threshold so that 80% of rental income could be used to qualify
-another is selling his “newish” custom built home to buy a subdividable lot, plans on building 2 homes, 1 to live in the other to sell (story from the friend above)
-one couple (move-up buyers) are planning on buying a house in Surrey with 2 mortgage helpers (carriage house and basement suite), with the combined rental income they figure the outstanding mortgage will be $300/month (didn’t get financing details)

As long as there’s cheap money at play, people seem to be fearless about loading up on debt.”

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

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

Taipan at RE Talks 24 Jul 2010 10:53 pm

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

What I’ve seen is three kinds of actions:

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

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

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

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

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

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

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

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

Conflicting Views On Vancouver RE Risk

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

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

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

[We agree with the realtor, ‘ckung’. The bull’s confidence is breathtaking. – vreaa]

“I wonder just how bad things are when realtors start cold calling by knocking on my door during dinner to tell me about what’s going on in our West Vancouver neighbourhood.”

DM at VREAA 24 July 2010 8:09 pm

“I wonder just how bad things are when realtors start cold calling by knocking on my door during dinner to tell me about what’s going on the neighbourhood (West Vancouver). Her face lit up when we said we said were renters. Almost felt a bit sad for her….didn’t have the heart to tell her we sold all our real estate in 2008 and don’t plan on buying again for quite some time.”

Developer ‘Affordability’ Spreadsheet – “To think that they’re now encouraging secretaries and coffee baristas to take out loans for $175,000 blows my mind!”

A reader who borrowed 2.3 times annual income to buy in Kitchener, Ontario, in 2006, marvels at how locals here in BC are being tempted by developers to borrow 5.8 times income in 2010. As the banker in the anecdote earlier this week said, “the banks have leveraged up the Canadian citizenry to unsustainable levels.” -vreaa

This from Angela by e-mail to VREAA 20 July 2010 –

“In 2006 I bought a 2bedroom/1bathroom 800 sqft condo in Kitchener, Ontario.  My income was approximately $45,000 at the time.  My bank manager, who I had a good long-standing relationship with, approved me for $103,000 at 4.4%, fixed rate. [2.28 x income -ed.] She said, “Spend whatever you want on a place, but that’s the biggest mortgage we’re going to give you.”  And that mortgage was HUGE to me. The payments were about $350 every two weeks, plus condo fees of $190.

Now I have found something that adds to your argument that Vancouver prices are unaffordable and buyers are headed for a world of hurt. ‘Madison Crossing’ is a development planned in Langley. Here is an extract from an ‘affordability spreadsheet’ found at the developer’s website:

Note that an income of only $30,000 a year is required for a mortgage of $175,000. [5.83 x income -ed.] And that out of a $9,000 “down payment” you only end up with about $3,000 in equity, meaning that really that $9,000 is going towards closing costs and HST.  The scariest part is the calculations is based on a 2% variable rate.
They advertise in the Langley local newspaper each week.  I ripped out a copy to show to my grandkids in 40 years. To think that they’re now encouraging secretaries and coffee baristas to take out loans for $175,000 blows my mind!”

Spot The Speculator #6 – “I plan to live there, renovate everything I can, then sell in a year. I have a close friend who has been doing this for a living.”

604newb at RE Talks 21 Jul 2010 4:59pm8:23pm

“I’m looking to make my first home purchase. The maximum monthly payment i can handle is about $1,000, so i am looking at apartments in the range of 200,000 – 250,000. I plan to live there, renovate everything i can, then sell in a year. I’m looking to live in vancouver, west side, but would consider richmond or burnaby also. Any tips on this kind of investment? If any of you people have mls listings as examples of good investments that would also be appreciated.” … “I have a close friend who has been doing this for a living. As for the market, yes its possible that it may drop, but that’s a risk it is worth taking i think.”

Local Businesses Hurting? – “I spoke to the owner of one of the remaining shops recently and asked his opinion about the situation. He told me the business right now is at it’s lowest EVER.”

Vancouver Sun, 20 July 2010“Some downtown Vancouver parking lots are offering specials on parking rates as they’ve seen traffic fall eight to 10 per cent since last year.”

Anonymous at 20 Jul 2010 1:18 pm“At the end of this month, 2 (TWO!) of the local Suzuki motorcycle dealers are closing their doors. One of these places was in business for many, many years (Modern Motorcycling), the other was in business for just a couple, but is a part of an empire (Jim Pattison Suzuki). I spoke to the owner of one of the remaining shops recently and asked his opinion about the situation. He told me the business right now is at it’s lowest EVER. He’s been doing this for couple of decades now and the state of motorcycle industry in BC is in disastrous shape. People have no money to buy and the banks won’t help either.”

Bubble Lad at 20 Jul 2010 1:37 pm“Restaurants are getting hammered too. Spoke with a local merchant with friends who have restaurants, and most of their business has been halved in the last six months to a year. Have also noticed a strange “value menu” trend popping up at a few of the places I frequent (if like “fuel” on 4th, they haven’t already drastically reduced the entire overall concept).”

Vancouver Bank Employee – “The senior executive explained that the banks have leveraged up the Canadian citizenry to unsustainable levels.”

Here a banker gives precisely the same warning that a small minority (us included) have been sounding for some time — Canadian citizens are dangerously overly indebted. The unwinding of this debt, as implied by the banker’s intent, will lead to a deflationary wave, where consumers have far less money at hand. The Canadian asset class most vulnerable to such a change is real estate, and Vancouver’s RE is the most vulnerable in the country. – vreaa

Rob, a Vancouver bank employee, wrote an e-mail to Garth Turner that was discussed at [19 July 2010]. Here’s the extracted anecdote –

“I am a certified financial planner working for an excellent Canadian bank in Vancouver. Although the mantra by branch managers to the Account Managers and bank staff is still (to quote what I heard from one of them) “park your morals at the door”, what is important is that there is acknowledgment at the top of the house that things will begin to change. I had a meeting yesterday with a senior executive out of Toronto who said some staggering things that I thought I would NEVER hear from anyone in the top echelons of the banking industry.  He explained that executives have been meeting together and advising the board of directors that what the bank has been doing for the last 5 years to generate profits cannot continue.  He explained that the banks have leveraged up the canadian citizenry to unsustainable levels. He said that going forward (here is the best part) we have a MORAL obligation to provide the right advice to Canadians regarding their spending habits, budgeting, retirement, investing and borrowing desires.  I was shocked!  This was the first time I had heard a Banker expose the truths of what is going on in Canada right now and take ownership of the fact they have been dangling the carrot and enticing the population into perpetual debt.”

BOC Raises Rates By 0.25% – “Housing activity is declining markedly from high levels, consistent with the Bank’s view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010.”

Okay, we agree, but now what? ‘Policy stimulus’ has sucked forward demand from the future. In the Vancouver RE market, this has been happening steadily for the better part of a decade. The super-cheap money of the last two years simply fueled the final frenzied blow-off in the process. We now have less demand, high inventory, rising rates, and prices still in the stratosphere, gasping for oxygen. This can only result in ongoing price drops. We seem to have peaked in May [2010]. – vreaa

From the 20 Jul 2010

“The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent.”

“Housing activity is declining markedly from high levels, consistent with the Bank’s view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010.”

Westside Detached Sale Example: 13.5% off original asking price

3540 40th Ave West, Dunbar
V835842, 2,889 sqft house built 1931; 66 x 101 lot
Listed 7 Jun 2010, $1.549M; Reduced 12 Jun 2010, $1.449M
Sold 6 Jul 2010, $1.34M (13.5% off original ask)

[Still overpriced. Houses like this one will sell for substantially less than $800K at the ultimate trough. -ed.]

“THAT’s Not A Reduced Price, THIS Is A Reduced Price…”

$9,000 off a $430,000 asking price is NOT a reduction, it’s a rounding error. The 2% is barely statistically significant, the buyer is effectively paying ask. The article cited below makes out it’s a big deal, and turns out to be a puff-piece trying to keep buyer interest buoyant. As listings rise and sales stall or drop, buyers will find out that ‘low-ball’ offers start at 20%, 25%, 30% below asking price. BC MOI is 9.3 months and climbing. If you absolutely have to buy, wield a big stick. – vreaa

This anecdote from an article by Derrick Penner, Vancouver Sun, 15 July 2010

“When Maple Ridge’s Monika Novosadova went house hunting this spring, she faced an embarrassment of options looking at 28 homes before coming putting an offer down on a three-bedroom single family home at the end of June. And it was a shrewd offer since, like much of British Columbia in June, she faced a buyer’s market with rising inventories and declining sales putting home-hunters more in control.

“I felt I had cards in my hand because it was a buyer’s market,” Novosadova said in an interview. “And I felt fairly confident the price could be negotiated down.” So the single mother wound up getting the house, in a “perfect family neighbourhood” for $421,000, not the $429,900 it listed for. Now she’s excitedly looking forward to moving into the home with her 10-year-old daughter in September, and her realtor Ron Antalek said Novosadova’s experience is typical of what other buyers are facing. “There’s not the necessity of multiple offers and competing bids,” Antalek said. “People are able to shop. They have time to compare.”

From the same article:

Across B.C. in June, realtors recorded 7,722 sales, down 22.5 per cent from the same month in 2009. Active listings in inventory, climbed almost 21 per cent to hit 59,232 units in June, which equalled a 9.3-month supply based on the pace of sales. [9.3, where have we seen that number before? Oh, yeah, it’s also Vancouver’s price:income ratio. – ed.]

Bank Teller Peddles Mortgages – “You should buy now – interest rates are so low!”

Rediculous at 15 Jul 2010 2:08 pm [also headline linked by the Pope at 16 Jul 2010] –

“I was in CIBC today trying to get some money transferred. While the service rep was waiting on the phone to speak to a rep at the bank where I want the funds sent, she took the opportunity to throw in a little hustle.

Her: Make sure you come see me if you need anything – I do it all – banking, mortgages, insurance, investments, everything!
Me: Ok. (with a smirk)
Her: Do you have a Mortgage?
Me: No.
Her: Do you plan to buy a house?
Me: Not for a while, at least a couple years.
Her: You should buy now – interest rates are so low!
Me: Prices are rediculous and a 5 year term on a 35 year amortization would expose me when interest rates go back up. In 5 years, I could be paying 10%!
Her: You know a house is one of the best investments you can buy – values just keep going up!
Me: Since 1890 housing has returned 0.5% after inflation. A diversified stock portfolio has returned 7% after inflation. Housing has been a good investment in Vancouver for the last 10 years, but you can’t really even call it that as since at least 2004, there has been no fundamental indication that there would be reasonable security of principle and a reasonable expectation of return that reflects the risk involved in holding the real estate.
Her:…. starts talking on the phone. Couldn’t tell whether she had gotten through or was just trying to hide behind her phone.

Once she got off the phone, she tried to offer me a higher limit on my LOC, which is secured by nothing. I have 50k in available credit from CIBC with no collateral. I don’t use any of it.

The Banks are still serving up the Koolaid in Costco sized batches and money, for all intents and purposes, is still basically free in Canada. Absolutely boggles my mind. This cannot and will not end well.”

“Darby and Jill have their home, their cottage and two rental properties all in the same region. Their children also live in the area, raising the couple’s exposure to a single real estate market even further because of the mortgages they hold. They are in the real estate market up to their ears.”

Across the country, people close to retirement are overinvested in real estate. [In Ontario, there is also an unhealthy infatuation with small, grubby ‘Group of Seven’ prints. Haven’t these guys heard of Jack Shadbolt? Ten times the square footage, five times the colour range, at a third of the price. Not everything in BC is overpriced.] – vreaa

From ‘Getting a handle on spending’ by Dianne Maley, Globe & Mail, 2 Jul 2010

“Jill and Darby, both 62, are looking forward to easing into retirement. She has her own business and he has just quit his job to work as a consultant. Together, they earn a tidy sum, netting $10,000 a month. But their spending is high, too. And they are in the real estate market up to their ears. They have a cottage on Georgian Bay worth about $700,000 with two lines of credit on it, one for a down payment on a couple of rental properties and the other to lend money to their children, who are making regular payments. They have a home in Barrie, Ont., valued at $300,000 with a $135,000 mortgage, and the two rental properties that just cover their costs and in which they have virtually no equity after the cost of selling them is taken into account. They plan to sell the income properties one day and divide the anticipated profit with their son and daughter. As well, they hold $200,000 mortgages for each of their two children, who each pay them $1,200 a month. Their plan is to retire on about $80,000 a year, far less than the $100,000-plus they are spending now. The $100,000 doesn’t include the $2,000 a month credit card payment. Darby and Jill have more than $1-million in savings and investments, including the mortgage loans to their children.”

RE related assets and liabilities include:
Assets: Cottage $700,000; family home $300,000; two rental properties $380,000. Total: $1,380,000

Asset or liability?: Mortgages to children (money lent to children to buy RE) $400,000.
Liabilities: Line of credit on cottage (down payment rental properties) $90,000; Line of credit on cottage (loan to children) $75,000; mortgages on rental properties $265,000; mortgage on family home $135,000. Total: $565,000.

See the original article for full analysis, and advice to the couple from a financial planner, which includes the following:
“They have too many eggs in one basket. People need to watch their real estate diversification with regard to location. Darby and Jill have their home, their cottage and two rental properties all in the same region. Their children also live in the area, raising the couple’s exposure to a single real estate market even further because of the mortgages they hold. They have 72 per cent of their net assets in real estate in the Barrie/Georgian Bay area – almost $1.8-million. They may want to reconsider their risk profile and their ability to absorb a rise in interest rates in deciding whether holding the two rental properties matches their short- and long-term goals. “

[Translation: “Sell!” -vreaa]

In Debt In West Van – “Quite a few are in deep doo-doo financially. Bought way too expensive homes while interest rates are low. Would not consider living anywhere else. No way they can sustain their lifestyle, but could not bear to lose face amongst the neighbours. They are surviving for now, but barely.”

edinacloud at VREAA 14 July 2010 10:29 am

“We rented in West Vancouver for a year, although it wasn’t our plan to move there originally. We found a small place for a good deal, and it offered us much needed peace and quiet for a while. We never felt like we belonged there but that was OK, we were just passing through.

Our experience was that those we met who had lived in the area for decades (read age 70+) were nice folks, not at all pretentious, happy to have their mortgages paid off. Friendly and welcoming. Others we encountered were arrogant snobs, no surprise there. You’d take your life into your hands when you drive anywhere, as they are way too important to slow down and obey the rules of the road. God forbid if you should be seen out wearing anything other than Lululemon and carrying a Louis Vuitton handbag.

An acquaintance renting in West Vancouver for the last couple of years has a kid at a local school. They have made friends with some of the other kids’ parents and shared some of their observations with us. Apparently the signs are there that quite a few are in deep doo-doo financially. Bought way too expensive homes while interest rates are low. Would not consider living anywhere else. No way they can sustain their lifestyle, but could not bear to lose face amongst the neighbours. Empty fridges, hardly any furniture, scrabbling to get into get-rich-quick schemes just to pay the mortgage. Trying to sell as much of their stuff on Craigslist and eBay as possible. They are surviving for now, but barely. If interest rates go up they will be totally screwed.

Since about February this year, we noticed many homes in the area go on the market and languish there. Sometimes those signs would disappear completely after a while, did not see many ‘sold’ signs. Some weekends there was a sign on pretty much every block, pointing to an open house nearby. Plenty of retail units in high traffic areas were empty too, some for months on end. Building plots going unsold, both residential and commercial. Most of the new houses that we saw for sale were absolutely huge, ugly monsters – at least 4000sq ft and up, some on tiny lots.

Residential rentals are languishing on the market for longer too. It seems that people are no longer prepared to be gouged and are looking for better deals elsewhere.

I can’t help wondering if many bought in West Vancouver as an investment in the run-up to the Olympics, thinking they would make lots of easy money by renting their places for huge amounts to visitors for those few weeks. Then when it was all over, they rushed to offload their over-priced properties.

The job market here sucks for higher earners. It’s a dangerous mix. Only the strong will survive there; the others will have to try and sell and move somewhere cheaper. It won’t be pretty.”

“We have been living in West Vancouver for the last 2 years. It is a very strange place indeed. Locals seem unfriendly, transient, and in debt.”

DM at VREAA 15 July 2010 9:56pm

“We have been living in West Vancouver for the last 2 years. It is a very strange place indeed. We have found it to be a very unfriendly place – on the surface people seem pleasant enough but it’s almost impossible to get beyond general pleasantaries. Knocking on the neighbours doors to introduce ourselves was met with a complete lack of interest. The driving is nerve racking and not necessarily caused by the elderly. Any close calls in the car has been caused by some youngish self absorbed individual on the phone. We have been disappointed in the massive turnover of property in the surrounding neighbourhoods – house after house is listed or sold. After living overseas for a long time, we wanted to move to a community where neighbours knew each other and friendships were formed. It’s become apparent that Ambleside, Sentinel Hill, Dunderave is very transient. And lastly, with respect to the debt that people must be carrying here? I think it’s all got to be an illusion.”

Rent or Buy? – “We pay $1,850 a month to rent a house in North Van, where a so-so home costs $700,000. Forties, two kids, $125,000 saved, no real estate, no debt. We’ve just got notice of a rent increase, to $2,500. Dilemma.”

This anecdote from Chuck headlined by Garth Turner at 14 July 2010

“We pay $1,850 a month to rent a house in North Van, where a so-so home costs $700,000. Forties, two kids, $125,000 saved, no real estate, no debt. We’ve just got notice of a rent increase, to $2,500. Dilemma. This increase of $650 will seriously affect our ability to save. To complicate things further, $2,500 is still on the low end of rents for houses on the North Shore so moving to another house would not save anything.  We would have to move to an apartment, basement suite or townhouse or a lower rent which is not preferred with our kids being 12 and 10 and needing some yard space.  We work on the North Shore so moving to another part of the city doesn’t make sense as it would only increase transportation costs. So we are thinking about buying. Using a factor of 5.48 (equivalent for a 4.39% fixed mortgage) we could carry almost $500,000 for the equivalent of the rent.  We understand that there would be taxes and maintenance that would increase this monthly cost. But warnings loom large when we think about purchasing. So we feel a bit at a crossroads – just live with the new rent and lose the savings while we wait for some correction in the real estate market, or go ahead and see if we can force something down with lowball offers now to get something for similar monthly costs?”

[We agree with Garth’s conclusions that this couple should continue to rent. – vreaa]

“I have often wondered how many of the locals are genuinely well-off and how many are just indebted to their eyeballs.”

Agreed. Debt is invisible. And knowing the actual numbers would be fascinating. As it is, the best we can do is patiently wait, and see what happens when the tide goes out. -vreaa

Jon B at 11 July 2010 11:28 pm

“Cruising the streets of Ambleside and Dundarave in West Van I have often wondered how many of the locals are genuinely well-off and how many are just indebted to their eyeballs. It would be very interesting if one could identify the true ratio.”

82 per cent of Manitobans who have a residential mortgage said it would be a “problem” for their household if mortgage rates were to increase by 1.5 per cent.

What are the equivalent numbers for Vancouver?

This from ‘Manitobans vulnerable to mortgage rate increase, poll finds’, 7 Jul 2010

“An alarming number of Manitoba homeowners would be in hot water if they were hit with a sudden increase in monthly mortgage payments, according to the results of a new poll. A Winnipeg Free Press/Jory Capital poll of 1,000 Manitobans conducted by Probe Research found that 82 per cent of the respondents who have a residential mortgage said it would be a “problem” for their household if mortgage rates were to increase by 1.5 per cent. That’s the size of increase many economists were forecasting earlier this year when it looked like the global economy was rebounding from last year’s recession.”

“My best friend is a realtor in Vancouver. He said for the last 2-4 weeks he has had almost ZERO calls for his listings. READ: No demand.”

Canadian Keynote Speaker at 12 Jul 2010 12:46 pm

“My best friend is a realtor in Vancouver. He said for the last 2-4 weeks he has had almost ZERO calls for his listings. READ no demand. He said the other realtors in the office said the same thing – very, very, very quiet for historically a busy time of year in this area of Canada.”

“Friend with million dollar house for sale in prime neighborhood, can’t figger out why no one is calling. They are actually going to get their phone-line checked, I’m serious. Price reduction? Are you kidding? This place is different!”

If your house doesn’t sell, it’s because your phone isn’t working. Anything but the imagined gains being too high. -vreaa

wetcoaster at 11 July 2010 10:11 pm

“Friend with million dollar house [for sale] in prime west coast neighborhood, can’t figger out why no one is calling. They are actually going to get their phone line checked, I’m serious. Price reduction ? are you kidding ? this place is different. I stay so far out of this picture, lol.”

First Time Buyer – “It’s so scary, you just never feel like you know you can do it.”

‘Getting in’ is actually the easier part. Being in, while prices drop, is going to be the tough part. -vreaa

From ‘Getting into a tough market’, 21 May 2010

“For most of her life, 56-year-old Royal City resident Jackie Olds thought owning a home was nothing more than a pipe dream. The market in the Lower Mainland was spinning out of control. There was no way she could ever afford to own, she couldn’t pay for those tricky, hidden costs. Or, so she thought.

“During my last experience trying to rent a place it was just a nightmare,” she said. “Everything was overpriced and filthy. I went to this one apartment and lifted up the bread board and it was covered in bugs. I left in tears.”

Once the tears dried up, Olds decided to sit down and take a long look at her budget and see if she could manage the daunting jump into home ownership. “It’s so scary, you just never feel like you know you can do it,” laughed Olds, now the owner of a condo in New Westminster’s Brow of the Hill neighbourhood. “But, if you do your homework and you don’t rush in, it’s amazing.”

“It’s Only A Flesh Wound” – Vested Interests and Market Participants Make Light Of Market Weakness

Sales have dropped, prices are falling. Early in a bear market, players are so conditioned by years of bullish action that they ignore evidence of a turn, and show optimism in the face of sales and price weakness. This is described as the bearish “Slope of Hope”. It contrasts with the “Wall of Worry” that a bull market climbs. Expect to see realtors, industry insiders, and others with vested interests, all downplaying price drops over the next 2-3 years. They will be reassuring themselves, and others, that all is ‘a-okay’. There will be calls of “Buying the dip”, “Bargain hunting”, “Buyers’ markets”, “Bottoms”, etc., etc.
Here follow early examples. There’ll be lots more like this. We’ll collect them here, with a sidebar link. Please e-mail us with any such quotes you come across. (Later in the bear market these voices will grow silent, and, later still, when we reach the eventual trough,  they’ll be at their most pessimistic.) -vreaa

“We’ve noticed a dip in the demand for downtown condos, but it’s a slight correction rather than a downturn.” – Andrew Carros, a real estate agent with Sotheby’s International Realty Canada’s Vancouver office, in the New York Times, 6 July 2010 [What’s the difference between a ‘slight correction’ and the beginning of a severe ‘downturn’? -ed.]

[On sales drops, and possible price drops] “This is probably more of a ‘one-off’ rather than something we have to be concerned about for the rest of the year into next year.” – Andrew Pyle, ScotiaMcLeod Wealth Advisor, CBC News 6 Jul 2010 [ @ 1:36min]

“We will see both prices and unit sales decline towards the end of the year. … This should not be interpreted as a severe correction but rather a natural reaction to the market having peaked quite early this year.” – Phil Soper, president and chief executive of Royal LePage Real Estate Services, Vancouver Sun, 7 July 2010

“The up and downs do come in life, but, generally, it will go up.” – Harpreet Bajwa, local RE flipper, CBC news, 6 July 2010

“Buying activity is likely to increase again in the fall. Inventory levels sit at about 9.3 months of supply based on the current pace of sales, the highest they’ve been since March of 2009, but they are at or near the peak as to where they’re going to go.” – Cameron Muir, Chief Economist, B.C. Real Estate Association, Vancouver Sun, 15 July 2010

“We should see a summer slowdown that is typical of any summer market. Prices should see a mild correction of 2-3%.” But Kinch warns consumers not to misinterpret this as a bubble that has burst. – Peter Kinch, mortgage broker,, 19 Jul 2010

“My expectation is for a gradual improvement in sales over the next 18 months rather than the roller coaster of activity we’ve seen over the past two years.” – Cameron Muir, Chief Economist, B.C. Real Estate Association, Vancouver Sun, 30 July 2010

“Sales activity is expected to pick up again next year as we return to a more balanced market over the coming months.” – Randi Masters, Victoria Real Estate Board President [in a VREB release 3 Aug 2010 that reports a 43.5% drop in July sales, YOY.]

[REBGV reports that a total of 2,255 homes were sold in the Greater Vancouver region in July 2010, a 45.2 per cent drop from the 4,114 homes sales in July 2009. – 5 Aug 2010]

“We had a relatively active beginning to the year and things are sort of normalizing now.” – Robyn Adamache, market analyst, Canada Mortgage and Housing Corporation, 5 Aug 2010.

“I penned this editorial to calm fears that the real estate market in Vancouver was collapsing.” … “The gyrations of real estate values and mortgage rates shouldn’t keep us up at night. A house is not a stock, to be sold when earnings disappoint or a sector falls out of favour.” … “Relax, fire up the barbecue and enjoy the rest of the summer.” – Harvey Enchin, Vancouver Sun editorial, 9 Aug 2010

“We’ll see firmer market conditions in many markets by the time we reach the fall” – Cameron Muir, Chief Economist, B.C. Real Estate Association, Vancouver Sun 12 Aug 2010

“Even if the economy collapses, house prices don’t tank. You get some drop, but it’s typically modest because there’s a growing population and there just isn’t a lot of land.” – Jock Finlayson, B.C. Business Council, Vancouver Sun 21 Aug 2010

“That opportunity to buy at a discount is quickly disappearing.”‘eyesthebye’, bullish market commentator, RE Talks 29 Aug 2010

“Housing starts, sales of resale homes and average home prices are all expected to rise next year [2011] as BC shakes off the recessionary blues, according to the BC Real Estate Association” [sales by 5.3%, starts by 17%, prices by 1.6%] – Real Estate Weekly, 3 Sep 2010

“In terms of any kind of impending doom for the consumer in the marketplace, that certainly isn’t in the cards right now. Household financial conditions are relatively strong today.” – Cameron Muir, Chief Economist, B.C. Real Estate Association, Business Today, 1 Sep 2010

“It’s a great time to buy a home. If ever there was a time to buy, it is now.” – Martin Nel, a senior BMO official, Financial Post, 1 Sept 2010

“The risk of a 1990’s-style housing market correction are minimal.” – David Onyett-Jeffries, RBC economist, Financial Post, 9 Sep 2010

“If you’ve ever wondered what a soft landing in housing looks like, this may well be it.” – Pascal Gauthier, senior economist, Toronto-Dominion Bank, Vancouver Sun, 15 Nov 2010

“The market may slow down in the next few months, but don’t expect to see any significant price declines.”silverman (local realtor) at RE Talks, 21 Mar 2011 10:50pm

“There’s yet more indication investors are finally getting the break they need to beef up their portfolios, with the B.C. Realtor association confirming a near-8 per cent dip in the value of properties sold during the first month of the year.”‘Cooling market offers investors a ‘in’, Canadian Real Estate Magazine, 15 Feb 2012

“The pace of home sales slowed during the first half of the year. However, the downturn is likely to be temporary as population growth, persistently low mortgage rates and encouraging employment figures suggest a stronger second half of 2012.”Cameron Muir, BCREA Chief Economist, BCREA news release, 12 July 2012

“I met a realtor today at an open house. He was totally convinced that this was a quite summer lull and that there would be a feeding frenzy come September. He also mentioned that other realtors were very worried that this is the end of the good times, but not him.”
Loon at VCI 4 Aug 2012 6:47pm

“Some potential homebuyers in Vancouver are taking a breather over the summer months”
Cameron Muir, BCREA Chief Economist, 14 Aug 2012

“There is a bubble… What we see now is probably, at worst, a soft landing.”
Rick Waugh, Bank of Nova Scotia CEO, Globe and Mail, 18 Sep 2012

“I think the market actually during the last six months has adjusted downwards. I think everybody know about that. And it went up too fast and it’s just taking a little bit of an adjustment.”
Philip Chan, Vancouver Realtor, on ‘Vancouver Housing: Bubble or Bust?’, The National, 20 Sep 2012

“This is just a brief pause before the Mainlanders return again. Clearly the high end of the market has not been impacted.”
CBM at yattermatters 1 Oct 2012 9:26pm

“This is not, in my view, the beginning of a major correction, or recession, or decline in housing prices of 15% or 25% as some predict.”
Helmut Pastrick, chief economist for Central Credit Union 1, the central financial facility and trade association for the B.C. and Ontario credit union systems, on CTV 2 or 3 Nov 2012 (‘Deflating Vancouver Real Estate Bubble’)

“This isn’t a sharp correction, this isn’t a U.S.-style correction, it’s just simply an unwinding of the excess valuation that was created by artificially low interest rates for a long period of time.” Craig Alexander, chief economist at Toronto-Dominion Bank, Financial Post, 9 Nov 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. 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

“I’m cautiously optimistic. In terms of changes to mortgage rules, they came in 3 to 4 months ago, we’re feeling the effect now, in the past after mortgage changes, you get about 3 to 6 months where things soften up, then things begin to pick up. So, you know, I’m cautiously optimistic.”
Mike Stewart, local realtor, self posted youtube video, 20 Nov 2012

Spot The Speculator #5 – Woodward’s – “Perhaps over 50% of the residents are renters, not owners. On our floor only two out of the ten apartments own their homes.”

Clearly a large percentage of the buyers in this project, as in other downtown condo projects, bought units not for personal use, but as speculative investments under the assumption that prices would continue to rise. -vreaa

Margaritar comments [4 Jul 2010] on Brian Hutchinson’s articles on the Woodwards project 3 July 2010

“I’ve been following the Woodwards articles and am quite pleased with them, but as a resident of the Woodward’s W43 building, I think much of the ‘heart of the matter’ has been left out.

The continuous remarks about the residents of this building being “monied”? Not quite accurate considering perhaps over 50% of the residents are renters, not owners. Talking to the people in my building, you will see tons of different opinions, as the demographic of this building is so different. Some people view it as a trailer park, some as a university res, some as a place for their families.

Much of the drinking and carrying on on the top floor has been from young punks and their friends. Hence, I haven’t used the hot tub once. I go up their for the gym and the view (the bbq up there has never worked). The sight of drunk girls and guys wearing no clothing and sitting in a hot tub with them? Kinda grosses me out.

On our quiet floor we have mixed demographics – I have the only child on the floor, there are a couple of older couples, a couple of dogs, a couple of singles, another young couple, and then there are the roommates. The young guy roommates are the only ones who have defaced property on our floor, for no reason other than that they were drunk, even telling me twice that he was the one who wrote swear words on the wall. Awesome. On our floor only two out of the ten apartments own their homes.

I’m not saying I’m against renters, I am a renter and I treat the place as my own – but not everyone does. And the fact that continuously you write about the people who live here as spoiled and rich is kind of an insult as many people in this building have to work hard to make a buck just to pay their rent, and can’t even enjoy the facilities as they are being taken over by young kids getting drunk and throwing parties all the time. Hence the signage. (the signage is also due to the fact that we have a security guard who’s not really around most of the time for whatever reason).”

thinktom (local realtor) at RETalks 7 Jul 2010 3:39pm – “TON of listings in Woodwards right now. Yikes.”

Spot The Speculator #4 – “I can sleep at night okay” (laughter) “That’s a good thing. He’s invested in two other houses.”

Excerpts from CBC news, 6 July 2010

Harpreet Bajwa: “We bought it approximately for 580”

$580,000 for this house in  South Vancouver. Harpreet Bajwa bought it 11 weeks ago, did some renovations, and now he’s flipping it. This weekend his real estate agent is listing it for $729,000, hoping for a bidding war.

It worked for him before when he flipped this place 6 months ago.

When this house first went on the market back in December [2009] there were 50 families through in the first and only open house. There were five multiple offers. That was then. Last month sales in Vancouver plummeted 30% compared to a year ago.

Harpreet Bajwa remains optimistic.
Mr. Bajwa: “The up and downs do come in life, but, generally, it will go up.”
Interviewer: “You can sleep at night okay?”
Mr. Bajwa: “I can sleep at night okay” (laughter).
That’s a good thing. He’s invested in two other houses.

“I got sucked in to an argument on RE. God, I’m so sick of even talking about it. This new homeowner was telling me that it never goes down, it’s never a bad time to buy etc…etc… He sounded like he was reading from a script.”

Vansanity at 6 Jul 2010 7:10 am

“I got sucked in to an argument on RE. God, I’m so sick of even talking about it. This dude was telling me that it never goes down, it’s never a bad time to buy etc…etc… He sounded like he was reading from a script. I’m not even making up the fact he said “everyone wants to live here”. There were more too. When I talked about interest rates and how they affect prices he said I was thinking too far ahead… WTF??? Unbelievable. It was okay to think 5 years down the road as long as I’m also factoring that prices will be higher, much higher, but not okay to think 5 years ahead about where interest rates are. It was mind boggling. Here’s what I discovered upon some reflection. This dude, a new homeowner, wanted me to buy a place so badly it was a bit disturbing. If I’m wasting my money renting, why does it concern him? It’s my money. The only reason I can think of is that he’s insecure about his new purchase.”

Opinion from Mike Shedlock – “I am now confident the peak in Canadian housing insanity is finally in.”

This from one of the highest traffic economics blogs in North America. We agree. -vreaa

‘Mish’ (Mike Shedlock) at his blog, 6 Jul 2010

“First comes volume, then comes price; Canadian housing peak is finally in.

Housing Collapse Cascade Pattern

  • Volume drops precipitously
  • Prices soften a bit
  • Inventory levels rise slowly
  • High-end home prices remain relatively steady for a brief while longer
  • The real estate industry tries to convince everyone it’s “business as usual” and homes are affordable because rates are low
  • Bubble denial kicks in with media articles everywhere touting the “fundamentals”
  • Stubborn sellers hold out for last year’s prices as volume continues to shrink
  • Inventory levels reach new highs
  • Builders start offering huge incentives to clear inventory
  • Some sellers finally realize (too late) what is happening
  • Price declines hit the high-end
  • Increasingly desperate sellers get creative with incentives, offering new cars, below market interest rates, trips, etc
  • Gimmicks do not work
  • Price declines escalate sharply at all price levels
  • The Central Bank issues statements that housing is fundamentally sound
  • Prices collapse, inventory skyrockets, and builders holding inventory go bankrupt

Some of those may happen simultaneously or in a different order, but the whole mess starts with a huge plunge in volume.

I am now confident the peak in Canadian housing insanity is finally in.”

A Different Kind of ‘Bidding War’ – “Us sellers are sucking each other’s prices down in a bidding war of our own…a race to sell before the buyers go elsewhere.”

Jane, from Vancouver, as quoted by Garth Turner at 5 Jul 2010

“I did as you and the realtor suggested…reduced my price.  In order to be at the lowest price of all comparable condos in my neighborhood, I went from 498K to 439K.  That is matching the lowest of the condos, and beating all others.  Us sellers are sucking each other’s prices down in bidding war of our own…a race to sell before the buyers go elsewhere or wait any longer.  It’s just money, right?  How long is it going to take to make that back in those preferreds?!!!  The price was dropped this morning and presto – there were 4 requests for showings today.  Maybe we’ll get lucky and have a bidding war and recoup a few thousand that we dropped.  Maybe we’ll get lucky and simply be able to sell before having to drop the price any more.”

Contrarian Realtor – “Vancouver has the highest prices in North America… nowhere to go but down!”

Unusual! Refreshing! This opinion archived here out of rarity, considering the source. Clearly a sellers’ agent. – vreaa

Jenn Kwok, Vancouver realtor, at RETalks, 5 Jul 2010 1:00 pm

“Vancouver has the highest prices in North America, 9 times average annual income — no where to go but down!”

Shadow Inventory – “I have two friends selling right now. They wanted to sell to cash out at the top. Guess what, no offers. Instead of dropping prices, they are both taking the properties off the market. Their theory? The Vancouver market is never slow for long.”

Properties that don’t sell and are taken off the market are ‘shadow inventory’. They will return  when price declines become established. -vreaa

SethM (aka Greenhorn) at RETalks 4 Jul 2010 11:47 pm

“I have two friends selling right now. These properties have more than doubled in value and their mortgages are very low. They wanted to sell to cash out at the top. Guess what, no offers, though the traffic at the open houses was fairly good. Instead of dropping prices, they are both taking the properties off the market. What a waste of time for the realtors. Their theory? The Vancouver market is never slow for long and can bounce back very quickly. Therefore, why throw money away with a price reduction?
This is an interesting strategy. 2 years ago, Bob Rennie advised vendors to take properties off the market if they didn’t have to sell and the market came back with a vengeance.”

Renting Is Wise And Prudent, But It Can Be Demoralizing – “Moving with young kids is not my idea of fun. Neither is trying to find a decent 3-4 br family-friendly rental house in Vancouver. There’s a lot of crap out there.”

The fundamentals are skewed profoundly in favour of renters. But ownership has the advantage of stability, and, thus, despite the financial disadvantages, still lures many. Patience and inconvenience will be rewarded. -vreaa

BCite at 4 July 2010 1:14 pm“I’m so discouraged with renting at the moment and I certainly don’t want to buy right now. I do wish this bust would hurry up and happen already. Can anyone else out there identify?”

scoop at 4 July 2010 4:02 pm“I can identify. Recently received notice requiring us to vacate our current rental home. For a single person, moving from one generic one br condo to another may be no big deal. But moving with young kids is not my idea of fun. Neither is trying to find a decent 3-4 br family-friendly rental house in Vancouver. There’s just a lot of crap out there. Sometimes I wonder, should we just bite the bullet and buy a place, even though the prices make me sick? I’m definitely on the fence at times.”

Exchange In A Woodward’s Elevator – “I can’t wait to move back to Yaletown.” … “I don’t think anybody is really happy here.”

From ‘The Woodward’s Project’ series, by Brian Hutchinson, National Post, 3 July 2010

In an elevator, a few hours after an inconvenient power failure:
“I can’t wait to move back to Yaletown,” said one man.
“I don’t think anybody is really happy here,” said another.
“You guys complain too much,” said a woman. “What did you expect, the Shangri-La?”

We’ve Behaved Like PIIGS, Too

Canada’s banks have somehow achieved a reputation that is not merited by performance.  Jonathan Tonge [‘Canada versus the PIIGS -Who’s more indebted?’,, 20 May 2010], was early to described this. Murray Dobbin also summarized the argument [‘The Canadian ‘good banks’ myth, 24 May 2010]. We archive links here as a reminder for those looking back on this chronology that there was mainstream complacency at this point regarding Canada’s financial position.

“[There is a myth being perpetuated] that Canada did not have to bail out its banks. Wrong. We are, according to the IMF, actually the third worst of the G7 countries, behind the U.S. and Britain, in terms of financial stabilization costs.” [Murray Dobbin]

“One open house had one visitor, and the second two visitors. House ask price is $760k. The agent is going to re-list it as a starter home to try to draw more interest.”

900KCrackHouse at 29 Jun 2010 8:53 am

“We know people who recently listed their house in the North Van – Deep Cove area. They’ve had two open houses. One open house had one visitor, and the second two visitors. House value is $760k. The realestate agent is going to re-list it as a starter home to try to draw more interest. What kind of person buys a $760k property for their first home anyways?”

“He’s a CA who moved here from Winnipeg about 5 years ago, and just loves the city. He’s one of the few people that agree RE here is due for a crash.”

Krazy Kanuck at 29 Jun 2010 12:47 pm

“I went out with a friend I haven’t seen for years. He moved from Winnipeg here about 5 years ago, and just loves the city. He’s one of the few people that agree Real estate here is due for a crash. He and his girlfriend are renting a really nice 2 br condo with den, right in coal harbour for $2k a month. Condo fees are $600 a month. Anyhow, he is a CA but is striking it out on his own with a few partners. They have their own web based start up company. One thing he said really struck me. He said “you know….because of my partner and I, we have 5 people drawing paychecks. We haven’t paid ourselves for 1 year so far, but it feels great to have created 5 jobs. The thing that sucks though is that there are no government incentives for entrepeneurs”. So there’s plenty of incentives to go buy a house (cheap easy money), but very little to encourage economic growth.”

Spot The Speculator #3 – “Their fortune is held up by the present real estate market. It is a thin thread on which to hang their financial lives.”

This anecdote extracted from ‘West coast couple stakes it all on property’, by Andrew Allentuck, Financial Post, 19 Jun 2010

“Reggie, 57, and Barbara, 41, are British Columbia entrepreneurs who have parlayed real estate investments and a few small businesses into a net monthly income of $8,640 from a combination of consulting fees and rent from a dozen investment properties. They have $3.8-million in properties financed with $1.4-million in mortgages and lines of credit. That makes their equity in the properties $2.4-million. They get an average $17,280 per year cash return, which is less than 1% of their equity. Their monthly mortgage payments add to their growing equity in the properties. As well, the properties carry $1.2-million of unrealized gains. But real estate makes up 94% of their net worth. The remainder is a $50,000 business investment, $121,000 in RRSPs, $5,000 in a TFSA and $9,000 in an RESP. They have no employment pensions”

Partially retired, they are raising a school-age child. The couple is facing the reality, however, that they cannot continue to be high-energy business people forever. Barbara, a real estate broker, wants to spend more time with her child. Reggie wants to shift to investments that are less time-consuming than managing real estate. They ask, “Do we have enough money for retirement? We have been big risk-takers for a long time, but we know that we have to change our investment strategy as we move forward.”

Okay, this is about as difficult as spotting a barn at 10 feet, but it does make for a nice anecdote in the series. A couple of Westcoast speculators are up to their eye-balls in RE. Twelve properties. Yes, TWELVE properties. And note the leverage. (There is an error in the article. Real estate doesn’t make up 94% of their net worth, but rather 147%. [Assets: $2.4M + $185K = $2.585M; RE holdings = $3.8M]). If RE prices drop 33%, they’ll lose 50% of their net worth; if prices drop an unthinkable 66%, they’d be a completely wiped out. Nobody can deny that they’ve done well accumulating wealth through the bubble. But they are now being wisely advised to lighten up (see below). Their case remind us of a few points:
Local Speculators Inflated Our Bubble. Note that these are local speculators, the major driving force for the bubble. When you have locals accumulating 12 properties apiece, who needs foreign buyers to fuel the frenzy? How many other households are there in the LML owning 4, 5, 6 and more properties?
Speculators Will Add To Supply. How many properties is this couple now going to sell? Three? Four? To whom? This is ‘speculator supply’. Some speculators will only decide to lighten up once prices start to fall in earnest.
Retirees Are Overdependent On RE. Note this couple’s complete dependence on RE for their retirement.
Yields Are Ridiculously Low, And Don’t Come Close To Supporting Prices. Despite this couple’s relatively low mortgage:price ratio, the yield on their properties is still <1% !!

Things Have Looked Great On Paper. These guys have done very well simply by pyramiding their RE holdings. This works well in a bull-market/bubble, where the wind is at your back, but turns nasty as the market turns. The realization of their paper gains now becomes dependent on buyers stepping in at these elevated prices. It’s a pyramid scheme, and this is the point where the scheme becomes precarious. We run out of the next concentric circle of buyers.  A small percentage of current owner-speculators will be able to cash out near a top, but the vast majority will not. -vreaa

[The pyramid metaphor has been used in a few ways here: firstly, ‘pyramiding’ is a method of investing where one buys more and more of the same asset as the market moves in the direction you desire; secondly, to describe a ponzi or pyramid scheme, and, lastly, the inverted pyramid of the image symbolizes the precariousness of this couple’s situation. -ed.]

Portfolio manager and financial planner Adrian Mastracci, head of KCM Wealth Management Inc. in Vancouver, made the following prudent observations in the article:
If interest rates were to rise from 2.0% to 3.5%, the variable rate mortgages, which now cost them $9,659 to service, would cost them $16,903 per month, effectively wiping out their $17,148 monthly rental income.
A real estate bust might result in the couple having properties worth less than their loans.
Their fortune is held up by the present real estate market. It is a thin thread on which to hang their financial lives.
Reducing leverage is essential if the couple wants a secure retirement.
[He recommended that they sell some of their RE, and we’d agree. -ed.]

The Market Has Changed – “Apparently deals are falling apart over $5k differences between buyers’ bid and sellers’ asking price. Also, many buyers making offers are subsequently unable to get the financing.”

betamax at 29 Jun 2010 1:00 pm

“Just talked with a Vancouver realtor who’s been making multiple six-figures for years. Apparently deals are falling apart over $5k differences between buyers’ bid and sellers’ asking price — unheard of previously, when buyers would just pony up the extra, and very frustrating to said realtor. Also, many buyers making offers are subsequently unable to get the financing afterward. Such problems previously occurred very rarely but are suddenly common almost overnight.”