Monthly Archives: November 2010

Olympian Marketing Task – “I’ve set a target of selling 100 units by June. Everything is now on the table. It has become a do-right or die effort.”

‘Marketing specialist’ Bob Rennie’s quotes extracted from the Vancouver Sun 29 Nov 2010 -
“It has become a do-right or die effort. The village has only one last opportunity to be successfully marketed if it is to escape its vexing image as a troubled neighbourhood.”
“The word ‘Olympic’ is a really, really expensive word. It is wrought with controversy. It can be seen as a weakness. But it can also be seen as a strength.”
“When someone gets into a taxi at the airport and says “take me to the Olympic village” everyone knows where that is. It’s not the same when someone says the name of a residential building downtown.”
“That’s the strength in this project. It is the only Olympic village. But we have to get this one right.”
“We will begin to market about 150 units in two to three waterfront buildings. Half of the condos, which average 1,000 square feet, will be under$1 million, and the other 50 per cent will be over $1 million. I’ve set a target of selling 100 units by June. It will take upwards of three years to sell all of the 473 remaining units in the village.”
“Everything is now on the table. These will be price-competitive to what is out on the market.”


Addendum:
Regarding the structure in the image above, from Wikipedia:
“The Temple of Olympian Zeus (Greek: Ναὸς τοῦ Ὀλυμπίου Διός, Naos tou Olympiou Dios), also known as the Olympieion, is a colossal ruined temple in the centre of the Greek capital Athens that was dedicated to Zeus, king of the Olympian gods. Construction began in the 6th century BC during the rule of the Athenian tyrants, who envisaged building the greatest temple in the ancient world, but it was not completed until the reign of the Roman Emperor Hadrian in the 2nd century AD some 638 years after the project had begun. During the Roman periods it was renowned as the largest temple in Greece and housed one of the largest cult statues in the ancient world.
The temple’s glory was short-lived, as it fell into disuse after being pillaged in a barbarian invasion in the 3rd century AD. It was probably never repaired and was reduced to ruins thereafter. In the centuries after the fall of the Roman Empire, the temple was extensively quarried for building materials to supply building projects elsewhere in the city. Despite this, substantial remains remain visible today and it continues to be a major tourist attraction.”

Los Angeles Compared With Dunbar

Hat-tip to ‘metalhead’ [at RE Talks 29 Nov 2010 8:56am] for pointing out the Bel Air, LA property above, for sale for $2.45M.
“4,200 square feet, 4 bedrooms, 5 bathrooms. Office and staff quarters. Spacious back yard has a heated, free form black bottomed swimming pool, attached spa, barbecue areas, circular sunken fire pit and a large lawn area.”

This is just one of many such examples we could take from LA.
As ‘metal’ suggests, let’s compare this to what you’d get in Dunbar [Westside Vancouver] in a similar price range. Keep in mind that the LA market likely hasn’t yet bottomed.

$2.26M; 3419 W 23rd; 2,838 sqft; 33×122 lot; MLS V857830.

$2.388M; 3688 W 35th; 3,895 sqft; 50×130 lot; MLS V820562

$2.50M; 3356 W 27th; 3,021 sqft; 33×131 lot; MLS V849344

$2.60M; 3930 W 38th; 3,349 sqft; 62×166 lot; MLS V856281.


Afterthought:
For the aesthetes in our readership, we thought we’d add this bonus ‘butt-view’ of the $2.388 Million property.
Where do we sign?
What are we thinking?



“I have a friend who has a super luxurious place and advertises it as a furnished short term rental continuously while he lives in it. He can’t afford his 5K per month mortgage payments. He will be forced to sell in the next 6 months. He is basically broke.”

Renting at vancouvercondo.info November 27th, 2010 at 4:50 pm- “A lot of high priced rentals are furnished short term rentals. They are competing with hotels. I have a friend who has a super luxurious place and advertises it through an agency continuously while he lives in it. There are several people in the same building doing this. His place has only been rented for two months of the past year. When it rents he goes on vacation or stays with someone else. He does this to make ends meet because he can’t afford his 5K per month mortgage payments. I figure he will be forced to sell in the next 6 months as he hasn’t had anyone rent it since summer and I know he is basically broke.”

Planned Boomer Sales – In One Extended Family, 5 of 7 Homes Will Be Sold

‘t’ at vancouvercondo.info November 28th, 2010 at 6:07 am- “With regards to boomers selling to either leave the market or downsize…
My parents intend to leave us the house, so they will not be selling…and neither will we because the house simply has too much sentimental value for my sibs and I.
Out of 5 sets of Aunts/Uncles, the eldest has recently sold their home to free up retirement funds. I suspect that 2 other sets will be selling for the same reason in the next 10-15 years.
For the Grandparents, the West-side homes will likely end up being sold because no one in the inheriting group can afford to buy out the other members, and I doubt any of us will be content to leave our share in.”

[Update: One uncle does not own. So, of 7 homes, 5 will be sold. -ed.]

Opinion – “I just came back from California after taking a month off. Long story short, I think Vancouver is priced alright in the scheme of things.”

FuturePorscheOwner at RE Talks Nov 27, 2010 1:33 pm“I just came back from California after taking a month off, went to L.A, San Fran, San Jose, San Diego and got to see most of the smaller towns along the way. After talking with a lot of the locals,realtors and such, it became apparent that the market there is still pretty high. This sort of makes me conclude that maybe our prices aren’t that high, there isn’t a city in Canada similar to Vancouver, which has
-Beautiful women/beaches
-Good bar/club scene
-Decent weather all year round
-Clean in comparison to most of the cities I have been to in Canada (regina, toronto, calgary)
-Excellent transportation infrastructure (as compared to BART)

Vancouver is basically is a mix of the Bay Cities:
-Hollywood North (LA)
-Hippie Ville (Berkeley)
-San Jose (Companies like Microsoft, SAP come into mind)
-Pretty big GAY, DINK population (San Fran)
-Amazing beaches (Montrey)

Long story short, I think Vancouver is priced alright in the scheme of things, even going to some of the Uni towns like Berkeley, and Sunnyvale it seems like the prices here are pretty reasonable.”

“A friend was telling me about how corrupt rich Chinese are buying up everything in Canada. Businesses, real estate, it doesn’t matter, they just want somewhere to park their ill-gotten cash. Buying businesses without even looking at the books, they just don’t care! They have so much money, they just buy everything!” (/sarcasm)

Sour Grapes at vancouvercondo.info November 26th, 2010 at 10:59 pm“A friend was telling me about how corrupt rich Chinese are buying up everything in Canada. Businesses, real estate, it doesn’t matter, they just want somewhere to park their ill-gotten cash. Buying businesses without even looking at the books, they just don’t care! They have so much money, they just buy everything! Vancouver is a fantastic city and they’re just starting to hear about it (in November 2010) because of the Olympics. His realtor friends keep telling him how rich Chinese are buying everything in sight, there’s no end to the sales.
So why don’t they buy up the Olympic Village? Oh, he says, they only buy land. Condos don’t matter to them. The prestige is in buying land.
So why are condos going up like crazy in China? Oh, he says, the rich buy the land, and everyone else buys the condos.
So where is everyone else getting the money to buy the overpriced condos? Before he could answer, he had to go lie down because he suddenly had another one of his migraines.
I guess making shit up causes headaches. I can understand that.”

“I worked for one of the most sought-after private schools on the Westside, and have gotten to know a lot of these families. Here’s a snapshot of the kinds of reasons they sell.”

Simpatico at vancouvercondo.info November 25th, 2010 at 9:25 pm“There are lots of reasons that Asian families, just like other families, sell their homes. I worked for one of the most sought-after private schools on the westside, and have gotten to know a lot of these families. Here’s a snapshot of the kinds of reasons they sell (which reminds us not to stereotype people too easily):

Sold house because Taiwanese father called wife and kids back to Taiwan so wife could return to work in family business during economic downturn in Taiwan. Family needed cash from sale.

Family divorce: Father in China divorced wife (had a second family) and he sold home. Wife moved with kids from this marriage into a rental with instruction from husband to “get a job” — no more support for her, only for the kids. (She was young and naive and failed to get a property agreement before she agreed to move to Canada.)

Mainland Chinese couple folded Richmond-based vitamin business that failed and sold their one and only rental home (kept the personal residence).

Hong Kong couple moved to Shanghai so father could return to principal site of law firm and earn more than at satellite office in Van. Once kids entered university couple decided the would only rent a place on westside to return at holidays when kids are out of university.

Word on the street among many of these Asian families last year was “sell” because Van market was at peak and market would go down for several years. Use capital to buy multiple US properties instead because that market is way down already and they could make a bigger return quicker by speculating. (Of course, they didn’t foresee the banks screwing up the chain of title in the MERS/securitization mess.)”

“I’ve looked for work in BC for the last 2.5 years and as far as engineering and design goes…it’s DEAD. I don’t know how people in BC make ends meet.”

Subhuman at vancouvercondo.info November 25th, 2010 at 2:30 pm – [Commenting on the Globe and Mail article saying Vancouver has "economy that boasts a lot of froth, and not much substance."] – ” ‘Froth’ is right….I’ve looked for work in BC for the last 2.5 years and as far as engineering and design goes…it’s DEAD. I don’t know how people in BC make ends meet.”

“I know someone who had gone five months with only one low ball offer on a million dollar place in a nice area of Victoria. They switched to an Asian realtor based out of Van and had an Asian buyer with cash sign a deal within a week or two.”

coastal at vancouvercondo.info November 25th, 2010 at 1:19 pm- “I know someone who had gone five months with only one low ball offer on a million dollar place in a nice area of Victoria. They switched to an Asian realtor based out of Van and had an Asian buyer with cash sign a deal within a week or two. Wife and kids are moving in, dad staying in China to work. Not saying it’s the norm by any means but it does happen but only in high end neighborhoods.”

Vancouver and US City Compared – “I have my feet in both an undervalued market and an overvalued market at the same time, and the difference is night and day.”

Bothsidesnow at vancouvercondo.info November 26th, 2010 at 5:22 pm- “We are renting two accommodations right now- a house in the American midwest and a condo in downtown Vancouver (long story). Both are necessary, but we don’t plan on taking possession for the long term on either (through rental or owning). The GDP of the US city is twice that of Vancouver. It is a much, much wealthier city. The cost of renting the house is about 25 percent more than buying. Similar houses would go for over a million in Vancouver. The cost of renting the condo in Vancouver is about 50 percent less than buying it. I have my feet in both an undervalued market and an overvalued market at the same time, and the difference is night and day.”

[Using the fundamental measure of the price:rent ratio, this would mean that the Vancouver property is 2.5 times overvalued, when compared with the US property. And the US property has very likely not yet bottomed in price for this RE cycle. -vreaa]

Very Distressed Selling On Vancouver Island

Bear Mountain‘ ‘within minutes of Victoria’s downtown core’ is on sale at 60% off the initial pie-in-the-sky ‘List Prices’.
Ask prices on penthouses have dropped from $1000/sqft to $400/sqft.
['Overpriced at less than half the price'?]
Who knows for what prices these units will eventually exchange hands?

“I had the opportunity to meet a new Canadian ‘business investor’ from China; Young wife manages 3 properties; 15-17 rooms; Short term rentals.”

chopsticks at vancouvercondo.info November 25th, 2010 at 12:10 pm“I had the opportunity to meet a new Canadian ‘business investor’ from China and he left his young wife alone with limited english to manage 3 properties. All mansions, where they each have apprx. 15-17 rooms as short-long term rentals. Heck, they even put coin operated washers and dryers in the main hallway and some slot machines in the ‘communal kitchen’ area. The folks who introduced me mentioned that the house the owners live in (which btw previously had an inside pool but was filled-in to accommodate another rental room) paid their house cash and the other two ‘mini-hotels’ were mortgaged but with a % down payment as per regulation for investment properties.”

Westside Realtor Spouse Opinion – “Most of those houses are not coming back on the market for at least a generation so effectively the pool of homes is being reduced.”

XXX at vancouvercondo.info November 25th, 2010 at 11:31 am- “My wife is a successful West Side realtor and she concurs with Manyee on stats [80% of buyers of >$2M homes are 'Asian'. -ed.]. Marginal buyer [? - ed.] is Asian from Oak street west to UBC. Most of those houses are not coming back on the market for at least a generation so effectively the pool of homes is being reduced. Schools (especially private) are the big driver followed closely by “status” of living in best/most expensive neighbourhoods (what ever that means!?!). While I think this is ridiculous it is what it is for now and has to be supportive of the market. Add lower rates and bullish commodity prices and I wouldn’t bet against house prices until one of these factors change.”

“Most people I know who bought a single family home here in Vancouver did it in early 2009. They are dual income professionals born in Canada. The one couple I know buying this year paid 150K more.”

eyesthebye at RE Talks 25 Nov 2010 10:24am – [commenting on the Globe and Mail article on Chinese buyers of RE in Vancouver] “Sobering article if you’re a bear looking for a price drop. Most people I know who bought a single family home here in Vancouver did it in 2009 (spring and summer). They are dual income professionals born in Canada. I only know of 1 such couple who bought a SFH this year (August) and they paid some 150K more than if they had done it last year. Same kind of transition happened in Banff with foreign buyers and tourism. I know many wealthy caucasian families who’d been there for generations that decided to pack up and move their vacation homes to Kananaskas. So bears…off to Abbotsford?” [This poster has elsewhere described how they themselves bought a SFH in east Vancouver in early 2009. -ed.]

“I was talking to a friend of mine on the weekend regarding the bounce in housing prices from the financial-crisis lows. He said the usual: “Vancouver is different”

real_professional at vancouverdondo.info November 24th, 2010 at 11:24 am- “I was talking to a friend of mine on the weekend in regard to the bounce in housing prices from the financial-crisis lows and he said the usual, “Vancouver is different” … Really?? then why did Winnipeg bounce too? It has nothing to do with Vancouver – it has everything to do with off balance sheet guarantees that the Canadian government has made vis a vis the CMHC, and low interest rates.”

“I’m finishing some courses, and my wife and I are moving out East. No matter what happens, this is going to be a miserable city for everyone in the next few years.”

Patiently Waiting at vancouvercondo.info November 24th, 2010 at 12:10 pm- “No matter what happens, this is going to be a miserable city for everyone in the next few years. I’m finishing some courses, and my wife and I are moving out East somewhere. I’ll leave my hometown to the scumbags who ruined it, and watch their painful agony from a safe distance.”

Frenzied Spike In Canadian Media Articles About Asian Immigration

‘Too Asian’? – Macleans, 10 Nov 2010
A lengthy article on patterns of admission to Canadian Universities.
Controversial enough to be the cause of public meetings at UBC.

Is Vancouver in a real estate bubble? – Globe and Mail, 24 Nov 2010
Despite the name, this article deals entirely with the effects of Chinese immigrants on the Vancouver RE market and economy.
We will extract the anecdotes elsewhere.
There is a discussion of this article at financialinsights.

Also, last month, the Globe and Mail ran a series of 6 articles on immigration and Multiculturalism that garnered much web discussion.

Are these articles simply documenting the various effects of immigration on Canadian society?
If so, those issues are longstanding; the effects are gradual, and ongoing; so why all this concurrent media attention?
Students of the effects of markets on social phenomena will ask: “Why now?”
Have the emerging markets peaked?
Has the USD bottomed?
Are we about to face a second large deflationary wave?
-vreaa

“But my parents said they paid their mortgage off faster and rates were as high as 11%.” … “They were paying the equivalent of you paying $6500/month. Problem is, you are paying $2300, and you save nothing.”

rf [likely a financial advisor] at VREAA 24 Nov 2010 8.08am“When I advise a 40 year old couple that, if they take a 35 year mortgage, that just making the regular payments means they will have a mortgage until they are 75. Half of the time their eyes just glass over and they mumble that they still want to retire before 60.
“But my parents said they paid theirs’ off faster and rates were as high as 11%.” Sure, but rates went from 11% down to 4%, and the amortization was 25 years at most. They were paying the equivalent of you paying $6500/month. Problem is, you are paying $2300 and you save nothing. And how does an accelerated payment strategy work if rates go from 4% to 7%?”

Flaherty – “No Sign Of Housing Bubble”

Again, why is it that we have a parade of people coming out and denying what they say doesn’t exist? Wethinks they doth protest too much.

“The evidence is not there that Canada has a housing bubble. In fact, the evidence with respect to affordability of mortgages in Canada is solid and we have a stable market”Finance Minister Jim Flaherty, to the House of Commons finance committee, 23 Nov 2010
.
This statement will be archived in the ‘What Bubble?’ sidebar page. Be sure to regularly check that archive, which, along with the ‘Bull Hubris’ quote collection, should make interesting reading in years to come.

CBC CPP Discussion – Panelist: “By the time somebody retires, they should have no debt”; Moderator: “But how realistic is that?”

From today’s panel discussion on CBC Radio’s The Current, regarding Canadian Pension Plan reform [23 Nov 2010] -
Panelist: “By the time somebody retires, they should have no debt”.
Moderator: “But how realistic is that?”

35% Of SFHs Have Secondary Suites

From THE ROLE OF SECONDARY SUITES: RENTAL HOUSING STRATEGY – STUDY 4, City of Vancouver, Dec 2009 p17 -
“Based on BC Assessment data, there are at least 24,000 single-family houses with a secondary suite in the City’s single-family zoned areas. Overall, the proportion of properties with suites is around 35%, but this ranges from 18% for the west-side local areas to 46% for local areas on the east-side. The number of suites is more difficult to estimate, but there are probably on the order of 1-2,000 other single-family zoned properties with two or more suites. Including those buildings brings the minimum estimate of properties with suites to 25,000.”

The Agnostic Realtor – “You can’t argue that Vancouver RE is overpriced [because the market is unknowable.]”

Mike Stewart, Vancouver realtor, posted this video 17 Nov 2010
His argument can be summarized:
You can’t argue that Vancouver RE is overpriced because:
a. you can’t compare Vancouver with any other place; all places are unique. “Compared to where?”
b. you can’t compare today with any other time; all times are unique.
“Compared to when?”

“The RE market is dynamic; it’s always changing; it’s always moving.”
“If you feel the market is overpriced, you should act accordingly; If you feel the market is underpriced, you should act accordingly. My job is to help you buy or sell property based on what YOU think the market is doing.”


We believe that Mr Stewart is very wise to take an agnostic position regarding the market. Realtors are wise to present themselves as not knowing whether the market is going up or down.
HOWEVER, realtors should be market agnostics because they are SALESMEN,
NOT because of  presumptions that the market direction is UNKNOWABLE.

There are many valid ways of estimating whether a market deviates from fair value. At present, by numerous measures, Vancouver RE is outrageously overpriced. You can use history, you can use comparable cities, and you can use fundamental measures to come to this conclusion.

Mr Stewart thinks he’s being neutral, but he’s actually taking a stand by saying that the markets are unknowable.

If Mr Stewart REALLY wants to be a good salesman, he’d decline from making ANY comments about the markets, including even saying that markets are unknowable.
After all, what does he know about predicting market direction OR claiming it can’t be done? He’s self admittedly a salesman, not a market analyst.

He should consider remaking the video in a shorter version, simply saying: “My job is to help you buy or sell property based on what YOU think the market is doing.”
That’d be refreshing. We’d be more favourably disposed to hiring him if he made a statement like that.

-vreaa

‘Retail’ by Brian Ulrich

From ‘Retail’, a series of photos by Brian Ulrich -
[UPDATE - At the kind request of the photographer, the images have been reposted uncropped. We urge you all to follow the link to see the whole series. -ed.]

How’s The Local Economy? – “Things are not looking good in my industry”

oneangryslav2 at vancouvercondo.info November 20th, 2010 at 4:34 am:
“Things are not looking good in my industry [which is] dependent almost exclusively on public largesse. Moreover, a rather comprehensive sampling of friends and family would suggest that the picture is no less bleak in many other areas of the economy.”

How does the economy look from your vantage point?
What are you hearing?

“Short of real estate prices rising substantially, it’s probably going to be a tough road ahead.”

GlobalBC TV clip [19 Nov 2010] on prospective taxpayer losses from the Olympic Village [archived at youtube by GreenhornRET]. Final statement -
“Short of real estate prices rising substantially, it’s probably going to be a tough road ahead.. for the City, and for taxpayers.”

This doesn’t just apply to the Olympic Village, but to our entire RE market, and to our economy. We’ve become completely dependent on an ongoing RE boom. -vreaa

The End Of The Implausible Happy-Ending Scenario – “Real estate prices would rise 40 per cent quickly, condo prices would increase, and cost overruns would be covered.”

From an article in The Province [19 Nov 2010] on the implications of the developer for the Olympic Village going into receivership.
After laying out the likely money losing outcomes, the article ends with these flippant statements:
“There is a fourth scenario, however implausible, with a happy ending.
Real estate prices would rise 40 per cent quickly, condo prices would increase and cost overruns would be covered.
“Everyone would go away happy,” said [UBC real estate professor] Tsur Somerville.

(sarcasm/) Why is this so implausible? (/sarcasm)
Hasn’t our entire economy, for the last 10 years, been completely dependent on just such an implausible ongoing RE-price-rise bailout?
Where would we be without the 100%, 200%, 200+% RE price rises?
What will happen to Vancouver if/when RE prices don’t “rise x% quickly”.
We guess we’ll find out.
- vreaa

“The consumption practices of the average 40-60 year old are alarming. $500k-$1M in RE; 3-4 newer vehicles; less than $100,000 in savings; debt $300,000+; income $120K-$200K. Buying anything that catches their fancy.”


.
mohican, a financial planner, in the comment section of his own very fine blog, housinganalysis, 11 Nov 2010 1:52pm“[Debt taken by consumers based on rising housing prices] is very concerning for the future of our society. The consumption practices of the average 40 – 60 year old are alarming. They just can’t seem to stop spending money and expect that the good earning years will continue forever with no regard for – emergencies, family issues, job loss, retirement, or really anything beyond immediate gratification.
I meet many of these people and they typically have $500,000-$1,000,000 in real estate, 3-4 newer vehicles including boat/RV/quads/etc, less than $100,000 in savings (RSP/TFSA/etc) and typically owe $300,000+ on a combination of a mortgage and HELOC. They make huge debt servicing payments each year since they typically make a healthy combined income of between $120,000 – $200,000 but everytime something catches their fancy – they go right ahead – whether it’s a new Harley, fancy vacation, or ‘lending’ their kids money to buy a house.
These personal financial practices are unsustainable and will likely result in these folks getting a very rude shock one day.”

400% Price Rise In 10 Years – “You have to take a deep breath and realize that the world you thought you knew is not as it appears. You must understand and accept that there is untold wealth that exists within our city. A paltry $2.5 mil is chump change. What we are experiencing now is only a beginning.”

Larry Yatkowsky, at his blog yattermatters.com, recently posted [In Ten Years, 13 Nov 2010] the remarkable (yet commonplace for Vancouver) story of a Dunbar house [3929 West 31st Street] that has been reno’ed once, rebuilt once, and sold 4 times in the last ten years. The 2010 price is fivefold the 2000 price; a 400% increase. The tale is noteworthy, as are the comments that follow. Try and spot the infinitely varied ways in which people are able to say “It’s Different This Time”.
We have reposted excerpts here, for the archives. Thanks go to Larry for the data. -


August 2000
3BR. 2,496 sqft. 50×130 lot. Same owner for prior 35 years.
Ask Price $539,000
Sale Price $548,000 (2d on market)
.
.


December 2000
After some renos (“granite counters, shaker maple cabs, black appls, halogens, Kohler, alabaster.”)
2,538 sqft.
Ask Price $699,000
Sale Price $695,000 (3d on market)
.
.


September 2006
“Totally upgraded 4 years ago [6years?]. New kitchen and bathrooms.”
4BR. 2,575 sqft.
Ask Price $1,289,000
Sale Price $1,275,000 (7d on market)
.
.


October 2010
Re-built in 2008.
New 2nd floor. 3,437 sqft. 50×130 lot.
Ask Price $2,495,000
Sale Price $2,468,000 (28d on market)
.
.
From the comments and discussion that followed:

“People in this city have become nuts. Completely nuts. The pain will be deep and prolonged for everybody. For the same price you can buy an apartment building in Seattle with 40 apartments with a cap rate of 8%, that is $200,000 year income.” – ‘french’

“Would this even be possible if interest rates were higher?” – ‘BBcoq’

“I’m sorry guys you have to take a deep breath and realize that the world you thought you knew is not as it appears.” – Larry Yatkowsky

“How could anyone buying this place at $2.47M expect this kind of appreciation to continue? Is this place going to sell for $5million EVER?” – ‘stats don’t lie’

“Buyers are bringing wealth to their purchase, not just incomes. The only pain experienced is from [for?] non-land owners. Don’t bet it won’t be worth 5M one day – and sooner than you think. One thing is certain, the future holds higher prices not lower.” – ‘L8erdude’

“As Larry says there are lot of people in this town making serious money.” – fish10

“This is insane. People are in for a huge disappointment. Trying to rationally justify such a purchase is a waste of time as there is no rationality involved.” – ‘french’

“I bet all the bears will say that all the buyers that bought that specific home the last 10 year have been nuts. Has there really been a good time to buy for you bears? NO! Keep complaining…10 years and counting.” – Sam

“It is an absurd assumption to impose limited horizons/perspective on others in light of the fact that the baseline for home prices in Vancouver has shifted. The market has done so with complete disregard for those who cannot afford these price levels. There is nothing new about this – it applies to any market. … You must understand and accept that there is untold wealth that exists within our city. So much so, that a paltry (to them) $2.5 mil is chump change. From my perspective, what we are experiencing now is only a beginning.” – Larry Yatkowsky

“Geez, you flip flop like a politician depending on the “market” winds. And you mince your words and imply in your statements even more than a bloody politician.When prices were going down, you were a believer that the market was going down and some correction was coming. When things were soft, it was a flat market. And now after a month of strong list sell ratios, we are off to the moon again!” – ‘Realist’

“I report on what’s happening or what might, could, would, should, maybe or really is happening. That it’s up, down or sideways is of no consequence to me other than to provide some experienced insight to those peoples who are trying to make a financial decision when buying or selling their home.” – Larry Yatkowsky

We’ll let ‘Jumbo’ have the last word:
“It is what it is and until it isn’t, it is.” – ‘Jumbo’

Terry Chen, Actor and RE Speculator – “I have flipped about three properties in the last ten years. I have another large loft space in downtown Vancouver. The goal for me now is to sit on the property I have for as long as I can and not sell.”

Terry Chen is a 35 year old actor with an impressive acting resume, not least of all for having a role in Cameron Crowe’s wonderful ‘Almost Famous’. Less impressive, he bases his future investment strategies on (1) having made money ‘flipping’ in a RE bull-come-bubble market, & (2) avoiding the stock-market after getting burned playing tips from friends. He also has a sense that renting means ‘impermanence’ and that owning means ‘not paying someone else’s mortgage’. Don’t quit your day job, Terry! – vreaa
[hat-tip to Ben at financialinsights.com]

Anecdote extracted from an interview at moneyville.ca [15 Nov 2010], by Emily Mathieu. -

“I moved around quite a bit when I was a kid growing up. My dad was a travelling salesman, I guess is the easiest way to put it. By the time I finished high school in Calgary I had attended about six or seven different schools from grade school all the way up. My father came to this country about 40 years ago with $100 in his pocket and was able to take care of his family and buy a few different properties while we moved. There was always a sense of impermanency. It never seemed like there was a base in terms of a home . . . which I guess later affected my need or my desire to buy property early on.

My first large purchase was a car when I was 19. I was able to afford that through an insurance claim because of a car accident, which was no fault of my own. But then I started working in nightclubs in Alberta when I was 17. I lied about my age to get my first bartending job. During that experience I met somebody who told me, very early on, when I was 18 or 19, not to pay anybody else’s mortgage.

That was the best financial advice I ever received. For some reason that advice stuck with me. The benefit in renting is you have flexibility, but in the long run if you are going to be paying rent you may as well be paying your own mortgage. I was fortunate enough to make some big chunks of money early-on, in my 20s. I bought my first property in Vancouver at the age of 25. It was a smart move and I definitely don’t take any credit for it. But thanks to advice of some good friends I was fortunate to get into the market at an early age.

I have purchased and flipped about three properties in about the last ten years. At this point I have another large loft space in downtown Vancouver. I think the idea or goal for me now is to sit on the property I have for as long as I can and not sell.

I have learned about the stockmarket the hard way. There have been certain times where I got a lead from a friend or source and tried to investigate it. Obviously the stock market, like real estate, is a gamble. I have lost tens of thousands in the stock market . . . I am less and less inclined to throw my money at (the market) these days.

Regarding retirement, I am relying on a lot of my property investments to help me out in the future as well. I would rather live in the moment and the present as much as I can and worry about those things as they come down the line later.”

“Are you tired of paying someone else’s mortgage? No money to buy a place of your own? We have the solution, a $0 down mortgage. Almost anyone can own their own home.”

Alex Kotai (pictured), ‘President and Senior Mortgage Advisor’ of YMS (Your Mortgage Source) is still offering Zero-down mortgages locally. As per their blurb:
$0 Down Mortgages on Owner Occupied Properties
Are you tired of paying someone else’s mortgage? You don’t want to deal with landlords any more however, you have no money to buy a place of your own. We have the solution for you in the form of a $0 down mortgage. This means that almost anyone can own their own home. We have lenders who will finance 95% of the purchase price and give you 5% cash back for your down payment so you can own your own home. Also, you have the option to have your 5% down payment gifted from family or borrowed in the form of a loan.

[Hat-tip to metalhead at VCI for the link.]

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

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

Home Ownership Cult Lures All, Despite Evidence – “You’re renting?” she said, lowering her voice as though uttering a swear word.”

Hat-tip to paul at vancouvercondo.info for pointing out an excellent article  ‘Are we better off renting?‘ in The Observer 14 Nov 2010. Read the whole article, it’s not only relevant to the UK. The irrational cult of homeownership has resulted in a misallocation of energies in many societies.
Excerpts -

“The woman’s expression was one of mystification and mild disgust. “You’re renting?” she said, lowering her voice as though uttering a swear word. A few hours before, I had met this woman at a friend’s birthday party. We had fallen into a polite sort of chit-chat and when she asked where I lived, I told her that my boyfriend and I had just moved into a new house. We were renting, I explained – taking a step off the property ladder to see what would happen to the housing market before committing to anything more long term.”

67% of households in the UK are owner-occupied, down slightly from the all-time high of 71% in 2003. By 2020, that figure is forecast to slip even lower to just over 60%.

In 2008, the proportion of households privately renting had jumped to 14% from a low of just 8% in the late 1980s. The estate agent Savills predicts that this figure will rise to 20% over the next decade. And yet renting still carries with it a whiff of social stigma.

The figures that we have for pre-1900 housing tenure show that well over 90% of people rented. That means even quite wealthy people, who could have afforded to buy houses, didn’t. It wasn’t as closely associated with social status as it is now.

In 2007, 67% of German households were renter-occupied. You can still buy a house in Germany for the same price, in real terms, as you could in the 1970s. Only a third of Swiss households are owner-occupied.

Countries with high rates of home ownership (such as Spain, where 89% of households are privately owned) seemed also to have high rates of unemployment.

A study by the [UK] Centre for Housing Policy in 2003 found half of those living in poverty were home-owners.

Countries with a higher proportion of renters also have a higher GDP: Switzerland has a GDP of £46,719 per capita, compared to the UK’s £27,915.

“Almost everyone I spoke to for this article had spent a considerable amount of their time examining the issues and had emerged with serious misgivings about buying houses. And yet, of course, they all admitted to owning their own home.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Opinion – “Pools Of Morons And Herds Of Idiots”

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

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

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

Abbotsford – “From old sales price to new asking price there is a 25% drop. Right here in the best place on earth.”

“A-Sharp” Accountant at vancouvercondo.info November 11th, 2010 at 8:46 am-
“I just got a flyer in the mail for ‘Yale Crossing’ in Abbotsford. There are over 30 units left in a fairly small building. The flyer says that all units must be sold by the end of the year.
These units were initially priced at about $290k + GST in spring 2008. THey sat until later that year and some sold for $265+GST.
Now they are asking $210 including Net HST
From old sales price to new asking price there is a 25% drop. Right here in the best place on earth.
I’m certainly curious to see what “must sell this year” means… If it is true, then I will certainly put in an offer on Dec 29th for 100k or something.
Another anecdotal point of reference: These [Okanagan, Westside Road] places originally sold for $850 in 2006, went up to about 1 mill in 2008, and now are foreclosing and asking in the 400′s.”
.

4215 Westside Road # 9
Kelowna, BC, V1Z 3W8, MLS 100115093
Ask price $459,000
1042 sqft, on ‘under one acre’
Realtor blurb: “Foreclosure. Reduced with $20,000! [? -ed.] Blow out price for this rustic style 2 bed & den waterfront cottage. Cottages sold for $849,000 in 2006! It features 3 levels, granite counters, incredible lakeviews, little private beach, patio.”

“These were supposed to be the ‘greenest Games ever’. What a joke.”

We seem to be world leaders in the area of self deception. -vreaa

Buses For Games Not Green, by Bob Mackin, 24h News Vancouver, 10 Nov 2010 [excerpts] – “More than 1,000 buses from around North America used at the 2010 Winter Olympics and Paralympics were driven a combined 5.1 million kilometres to and from Vancouver. British Columbia Passenger Transportation Branch temporary licence records obtained by 24 hours via Freedom of Information show that VANOC charter bus contractor Gameday Management Group of Orlando, Fla., formed a mostly diesel, mostly American fleet to shuttle athletes, sponsors, dignitaries, media, workers and spectators in February and March.
Numerous companies still owed their final payments await the results of this week’s mediation between VANOC and Gameday, which claims it’s owed $10 million. Taxpayers bailed out VANOC for at least $80 million and could be on the hook for more.
Using the list of companies and their addresses, 24 hours measured the round-trip distances using Google Maps and found the 1,112 buses went 5,106,618.2 km, or a total of 127 trips around the equator.
The documents do not show how far the buses went while in the city during the Games.
“These were supposed to be the ‘greenest Games ever’,” said Olympic critic and Five Ring Circus author Chris Shaw. “What a joke.”

Talking With Americans – “I realized just how insane Vancouver prices sound.”

“O would some power the gift to give us to see ourselves as others see us.”
………………………………………….- Robert Burns, ‘To a Louse’

pricedoutfornow at vancouvercondo.info 10 Nov 2010 12.00pm“I was just talking with an American about house prices in Vancouver. She thinks it’s absolutely ludicrous how much we are paying for houses. As I talked to her about all the people I know who have bought houses for $800k, $900k, or a couple condos for $500k, each I realized just how insane it sounds. Meanwhile she’s considering buying a condo in Miami for $100k. On South Beach, walking distance from everything including the beach. She couldn’t believe what I was telling her. She’s lived for awhile in NYC and doesn’t think much of Vancouver, except that it rains a lot and is kind of small. When I step back and listened to what I was telling her, it DOES seem ridiculous. $800k for a falling-down house in our podunk little town? Give me a break!”

Addition:
An Upper-Westside Manhattan condo that had been offered for >$2M, sold for $229K [New York Post, 10 Nov 2010] (88% off!)

Ian Watt, Realtor & Mathematician – “If you’ve ever been to Winnipeg, you realize that Vancouver is ten times better. Our average price should be 2.5 million dollars for an average house in Vancouver.”


.
Ian Watt, a Vancouver condo realtor, seems like a genuinely good chap. His energy is infectious, and his self-posted videos are so often entertaining.
In a recent video [29 Oct 2010, fully transcribed below], however, he demonstrates questionable judgment (“Vancouver is ‘ten times’ better than Winnipeg”) and laughably outrageous logic (“…therefore Vancouver prices should be ’10 times’ those of Winnipeg”).
Ian also seems to have lost grasp of just how much Vancouver RE prices have risen (“I don’t think that they are going to drop 30% back to prices of 15, 20 years ago”). A 30% price drop won’t even take us back to 2005, let alone 1995 or 1990 (which would require drops of  about 60% and 80% respectively).
So many people seem to think that our market couldn’t possibly drop more than 10%. -vreaa
[Thanks to 'westsidefrank' for the transcription]
.


.
Hi, Good afternoon, It ‘s Ian Watt in downtown Vancouver. I had an email yesterday from a prospective client that says my husband and I have been looking for a home in Vancouver for a while but the prices are so inflated and Vancouver is so overhyped, do you ever think that the prices are going to go down to a reasonable level?
.

.
Well, I don’t know what the prices are going to do. My personal feeling and it’s just a feeling, is that we are going to stay at this level for awhile unless the interest rates or the mortgage rates shoot up… I don’t think the prices are going to change too much, maybe 5%, maybe 10%, if the mortgage rates go up. Who knows? Who knows? But the reality is that if the mortgage rates go up you’re going to pay more in the end anyways.
.

.
But the way I look at it is that Vancouver in not overhyped because, if you look at the average sale price of a house in Winnipeg, say $250,000 (it could have changed a little bit here or there since I checked last), but if you’ve ever been to Winnipeg, you realize that Vancouver is ten times better. Our average price should be 2.5 million dollars for an average house in Vancouver but it’s not, it’s about a million dollars for an average house in Vancouver. So I think mathematically speaking, yes, Vancouver prices are pretty accurate or even undervalued compared to Winnipeg.
.

.
But, in reality prices are expensive in Vancouver. It’s a very sought after area, BC stands for ‘Bring Cash’ so make sure if you are going to move to Vancouver be prepared for a million dollar price tag on your typical house.
.

.
I don’t know where the prices are going. I don’t think they are going to shoot up at all in the next 4 years. I could be wrong. I’ve been wrong before, but I don’t think that they are going to drop 30% back to prices of 15, 20 years ago. I just don’t see it happening. They seem to be holding their own price levels right now, maybe we will see a little bit of a correction… maybe 5%, but it is not going to change and impact your buy ability, that’s for sure.
.

.
My name is Ian Watt, and if you have any questions you can always e-mail me at IanWatt at ianwatt.ca. Thank you very much and have a great day!

Landlord’s Dilemma – Condo & House, or Two Condos?

There are risks here. There are mortgages on both properties. The carrying cost of the furnished condo is $2400, and the $2700 rent looks vulnerable (30% vacancy rate after Jan 2011 will put it chronically cash flow negative). The house has a headline rent:price ratio of 1:265, and, by the landlord’s own admission, is a ‘moneypit’. We can think of a third alternative here that is not being considered…  -vreaa

xslandlord at RE Talks 3 Nov 2010 10.48am lays out their position and chews over a decision – “I bought a downtown condo (for $500k with all the expense included) few months ago so far everything works out nicely (fully furnished and getting $2700 per month until end of Jan.2011). I also have a rental house in east Van that is worth $750-800k by now with monthly rental income of $2850. My question is since my $500k condo can generate similar income with less market value, is it a good idea to sell the rental house and re-invest to another condo or other opportunities? I understand there is capital gain involved, my wife has lots of RRSP room available so we could minimize the tax payout. On the other hand, this east Van house has always been fully rented to long term tenants, they are just so good.”
And later adds:
“The condo is only 868 sft, and it is practically 100% financed, and with the low interest rate I am getting positive cash flow. The east van house was bought 6 yrs ago and re-mortgaged (to finance the condo purchase) and still produce positive cash flow. I don’t need to sell anything but just have a doubt of untapped potential of this capital appreciation.”
And still later, in response to advice to “make sure you allow for a 30% vacancy allowance for furnished rentals”:
“Yes this will be a big concern when the current lease ended. I don’t have much experience on furnished rental. In addition to the usual Craigslist rental posting, I may have to utilize some leasing agents to find tenant, thus will for sure eat up at least 10% income. Based on my mortgage rate my break-even point is $2400 per month (fully furnished, hydro, cable/internet/telephone included).”
And, in a series of posts thereafter, xslandlord adds the following info:
“Recently the old drain tile got plugged and the the whole basement suite got flooded. I spent more than $4000 on the repair and new laminate flooring. Last month I also replaced new garage door (supposed to be a $150 quick fix but at the end replaced the whole door). 3 years ago I replaced new roof… My point is the house has been money pit.”
“The strength of the house:
1) It is located on 5800 block of Prince Albert, easy comute to everywhere;
2) Directly facing a huge park, even basement bedrooms have park view;
3) Lot is 42′ wide and there is potential to build a lane-way house;
4) Basement suite is “legal suite” approved by city, and all mechanical condition is very good.
The weakness:
1) House is only 2300 sft. So a typical small house on big lot situation;
2) Main floor has only two bedrooms thus make it less appeal for family upgrade from condo;
3) Being an old house, there is alway more maintenance.
If/when Vancouver have real estate correction/crash, I think this house would be slow to sell, but on the other hand, because of such low rent, it will be always easier to rent out too. I am really 50-50 [regarding the decision] now.”
“There are LOTS of condos in downtown, but the whole downtown is almost built up already, also there would be much more broader buyers/renters group for downtown condos: first timers, empty nesters, offshore buyers, secondary resident buyers, ESL student renters, short term vacationeer, temp foreign workers, etc. East van will always be a homogenous market as local wage earner’s home. If economy is bad, people just put off upgrade from condo to house.”
Regarding interest rates on mortgages “both places have fixed rate (below 4%) for another 4 years. I think vacancy rate and rent fluctuation might be bigger factors [than interest rate fluctuation].”

Canadians Carry $1 Trillion Mortgage Debt

The Canadian Association of Accredited Mortgage Professionals released a web poll survey (n = 2005) that was discussed in The Vancouver Sun [8 Nov 2010] and The Globe and Mail [8 Nov 2010]. Here follow some data points:

There is $1.01 trillion in outstanding mortgage debt in the country as of the end of August, up 7.6 per cent when compared to last year.

Over the past 15 years, the volume of outstanding mortgages has increased by 194 per cent. [It has thus tripled. This works out, by co-incidence, at 7.45% per annum, compounded, for 15 years. Far greater than  the inflation rate.  -ed.]

The average mortgage holder has home equity (the value of their home minus their owed mortgage debt) of $146,000, or 50% of the value of their home. [We would love to see figures and distribution for what percentage of net worth is tied up in RE. -ed.]

People who have arranged a mortgage in the last year had attained an average rate of 4.23 per cent a year on five-year, fixed mortgages.

22% of mortgages in Canada have amortization periods of more than 25 years.
42% of home owners who have taken out a new mortgage on a newly purchased home or condominium, in the past year, have amortization periods of more than 25 years.

18% of mortgage holders took equity out of their homes, almost half of them citing a need for “debt consolidation or repayment.” [="spending". -ed.]
The average amount borrowed against home equity was $46,000.
There are 5.65 million mortgage holders in Canada, thus the borrowing is estimated at $41-billion, about the same as last year.
About $15-billion was taken out for renovations, $6-billion for education and other spending, $7.5-billion for investments and $4-billion for other purposes.

84% of those with mortgages could withstand paying an extra $300 or more on their monthly payments. [Thus, 16% will not be able to withstand $300 more per month. - ed.]
At $1,056 per month on top of current costs, the average respondent would “be concerned with [their] ability to make [their] payments.” [Thus, 50% could not withstand paying $1,056 more per month. -ed.]

“There is a sizable minority, about 350,000 out of 5.65 million, or about 6 per cent, who would be challenged by rate rises of less than 1 per cent, and a further 225,000 (5 per cent) have thresholds in the range of 1.00 per cent to 1.49 per cent. However, most of these have fixed-rate mortgages: by the time their mortgages are due for renewal, time will have increased their financial capacity and reduced the amount of mortgage debt being financed. There are about 100,000 borrowers who are susceptible to short-term moves of interest rates, which is a quite small share (less than 2 per cent) of the 5.65 million mortgage holders in Canada.” [Thus 11% will be unable to tolerate rate increases of 1.5% by the time they renew. -ed.]

[Note: The above self-estimations likely have an optimistic bias, as most people, by their hopeful nature, underestimate the risk of getting into dire financial circumstances. Thus we could read "at least 16%..." etc. -ed.]

What Is The Total Value Of Residential RE In Canada?

Leith van Onselen presents an analysis of total housing value relative to GDP for current and prior bubbles in Japan, HK, USA, Australia, NZ and UK [seekingalpha.com 3 Nov 2010]. He expresses hope to be able to include Canadian figures. I can’t recall if I’ve ever seen an estimation of the total value of residential RE here. What are the figures for Canada? Help him out if you can, anybody. (And share with us here).

UPDATE: I have just discovered that Leith has already discovered the Canadian numbers: Total Value of Residential RE/GDP = 1.8 (National number). He hypothesizes that this relatively low number is the result of the concentration of housing overvaluation to four centres (Vancouver, Victoria, Montreal and Toronto) with “relatively affordable housing elsewhere”. He has analysed the Canadian market at his blog ‘The Unconventional Economist’ earlier this year [6 Sep 2010].
So, now, anybody know the ‘Total Value of Residential RE/GDP’ for BC?

“I got a bit nosy yesterday and checked the online land registration office for about 10 properties of friends, acquaintances and relatives.”

Debtisslavery at greaterfool.ca 6 Nov 2010 12.40pm“I got a bit nosy yesterday and checked the land registration office online for my province. One can find out if there is a mortgage on any property, for a small fee.
So I checked out about 10 properties of friends, acquaintances and relatives.
I couldn’t believe what I saw. Between the start of the housing boom and now, people have gone hog wild. People who you would not believe could do it, in fact, did it.
And no, I don’t believe these people had tax purposes and investment strategies in mind. Consumption is what they had in mind.
75 year-olds have taken a $70,000 mortgage on their modest semi-detached; 40-something high flying government employees mortgaged $400,000 for a house paid $350,000; a boomer mortgaged $150,000 on a townhouse she bought for $75,000 15 years ago; pre-boomers took a $125,000 mortgage on their modest detached house; a 60-something law professional signed for a half-million $ loan; a career-oriented, no-nonsense individual has now a $175,000 mortgage on a home bought for $160,000 with a $122,000 mortgage 5 years ago; a 40 something couple refinanced 3 times and could barely recoup anything if they had to sell now.
Real estate is the fastest way to impoverishment for a lot of people. Had these people sold their houses, took their equity and burned it, they would have been ahead. Tough times are coming. There is going to be carnage in real estate.”

“I’m just some hardworking schmuck in my 40s who wants to have my own place one day, yet doesn’t want to pay for an overinflated property, either.”

canali at greaterfool.ca 5 Nov 2010 10.02pm“I live in gorgeous Vancouver…but you get economists and other RE analysts saying that our higher prices are also driven by things that can’t be cyclical whims of the marketplace: our land is limited to the west by ocean, to the north by mtns to the south by the US border) and then you go east to the Fraser Valley.
So it’s only natural (they say) that with great climate, lovely geography and limited developmental land that such rates can be sustained….sure they may go for a dip here and there, but overall the trend is upwards.
Another factor to consider is with the number of immigrants (many with cash) who wish to come here in the lower BC mainland (among highest growth area of anywhere in Canada I’ve been reading).
I’m not a realtor,  just some hardworking schmuck in my 40s who wants to have my own place one day (instead of renting forever and not building up equity) yet doesn’t want to pay for an overinflated property either and be mortgaged to the teeth like so many others.”

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

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

—-

Open reply to Chris:

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

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

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

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

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

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

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

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

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

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

Bungalow On Acid – Can you start a revolution with 7 cans of paint?

We’ve always felt that the teal and cream of our downtown core could do with a bit of jazzing up… (anybody here ever been to Spain?)
Anyway, we are grateful to the owners of 1192 Lillooet Street (MLS V855710) for single-handedly trying to brighten up the entire city.
[and thanks to instigator at RE Talks for letting us know.] -vreaa

“A Macdonald Realty analysis of Chinese buying trends shows that 78% of homes in Vancouver valued over $2 million were bought by this demographic.”

Wow. 78% is a lot. More than we’d have guessed.  -vreaa

From MacDonald Realty November Market Update, November 2010 -
“Macdonald Realty president & CEO Lynn Hsu showed a Macdonald Realty analysis of Chinese buying trends which showed that 78% of homes in Vancouver valued over $2 million were bought by this demographic. This trend is expected to continue as there is a 10-year backlog of investor category Chinese immigrants waiting to come to Canada, the vast majority of which are planning on settling in Vancouver. Sellers of these properties tend to pocket the appreciation in their homes and move to other asset classes in the city or to other municipalities in the province, which results in an upward push in prices.”

A ‘Lot’ Of Realtors Agree: No Price Drops Ahead

From MacDonald Realty November Market Update, November 2010 -
“The Macdonald Realty 2010 Real Estate Conference was held on October 19th at the new Vancouver Convention Centre. Over 300 residential agents, commercial brokers, and property managers attended this event which featured … prominent guests and speakers.
The highlight of the event was a discussion between a host of prominent economists and industry leaders.
BMO deputy chief economist Douglas Porter led the discussion with an overview of the Canadian economy and global forces that could affect the economic recovery following the great recession. He concluded that while there was a chance of a double dip in the global economy, it’s much more likely that the current recovery would stick, albeit the pace of growth will be slow.
UBC real estate professor Tsur Sommerville gave a presentation on the BC real estate market and stated that the recent resurgence in prices meant that future gains would be slower than in previous years. That said, he also saw no sign of a pullback in prices and predicted slow, but steady price growth for the foreseeable future.
Bosa Development VP Eric Martin agreed that prices were unlikely to fall, stating that the US and Canadian housing markets are markedly different for one reason: bank lending practices.”

“This guy is no dummy – He fully understands that his decision not to sell is based on emotions regarding his unwillingness to realize the loss.”

We suspect that ‘stealth inventory’ is building. Prospective sellers are waiting in the wings… for various reasons… and precisely when and how and in what number they descend on the market will shape the action over the next year. Here’s the story of a seller who suspects his own hope is irrational. -vreaa

real_professional at vancouvercondo.info November 1st, 2010 at 5:14 pm“On Friday I met a good friend of mine for a pint. Just to let you know, he is a home owner, really smart, and he and his wife have great jobs.
Approximately three years ago they purchased a condo in a nice area of the lower-mainland. He purchased it for approximately $340k and attempted to first sell it on his own (sans realtor) and reduced the price by approximately 20k as he attempted to attract buyers.
He threw in the towel and hired a realtor who didn’t do much better. Moreover the realtor, walked the price down by another 20k without a sale. Now let me be clear, I have been to his condo and it is nice, the only reason they are moving is because they need more space – no defects in his place what-so-ever.
Well it turns out that the realtor finally said that despite his inability to move it – it could move for around 270k (a 20% reduction from their purchase price). But instead of enduring another $30k of price cuts he decided to take it off the market and rent it out while he lives on rent elsewhere.
As I said earlier this guy is no dummy – he fully understands that his decision not to sell is based on emotions regarding his unwillingness to realize the loss – yet, he clearly doesn’t see any upside in the Vancouver market.
I feel sorry for him, but he is young and well paid so he should be fine. The other idiots with the $500k mortgage, the lower wages, and the inflated egos won’t be able to endure the cash burn.”

Open Houses On UBC Campus – “It seemed clear that none of these dwellings were intended for faculty/staff/students who, by the way, do not make enough money to afford them.”


‘UBC home seeker’ at vancouvercondo.ca  November 2nd, 2010 at 8:24 pm“I recently went to a few open houses on UBC campus. The dwellings were staged Asian style. The Realtor was also Asian style. It seemed clear that none of these dwellings were intended for faculty/staff/students who, by the way, do not make enough money to afford them.”

The University is developing a ‘city’ at the end of the Westside peninsula. The promotional material on their website, www.ubcproperties.com, is at odds with ‘UBC home seeker’s assessment of the affordability of properties there. -
“By establishing broad land use objectives, policies and other criteria, the Official Community Plan (OCP) provides a guide for approximately nine million square feet of non-institutional development.”
“Half of all households at UBC will be ‘work/study’ – meaning that at least one member of the household works or studies at UBC, thus reducing the number of vehicles coming to the campus.”
“The residential neighbourhoods emerging on campus will be a source of affordable housing for UBC’s faculty, staff and students.”