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.

5 responses to “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.”

  1. Don Campbell isn’t too hot on downtown Vancouver condos right now. If nothing else that is something with which I can agree.

    Don and Chris are cleverly shifting debate towards the act of investment in specific markets and away from asset prices in others. I don’t necessarily have the problem with the statement that “[y]ou can make money with real estate in any economy.” I’d like Don or Chris to come out and state under what conditions it would take for them to invest in Downtown Vancouver real estate again. Perhaps that might help find some common ground amongst those who seemingly have little in common.

    • Perhaps. However, Don has clearly stated that he expects Vancouver prices “will have a tendency to be flat”. He is not anticipating a drop.

    • Hi Jesse,

      I’m not a fan of downtown apartment condos, simply because I don’t think they’re as well positioned as other types of real estate. Personally, I love 3 or 4 bedroom townhouses right now. They’re easy to rent, make great homes for first time buyers when things are up and they’re accessible/familiar units when prices are more affordable. So to answer part 1 of your questions, I wouldn’t invest in downtown condos, unless there’s a mass societal change in how we use our living space.

      Rather than trying to justify the ‘right time’ to buy a certain unit in a certain city, I look for places that are going to perform well, since managing at a distance isn’t necessarily that hard. Alberta’s particularly well positioned, and honestly, I don’t think Vancouver will come down or plateau for long enough to make sense as a buy and hold investment. I guess to give you an indicator that’ll answer your question, I’d need to see housing affordability indicators (and RBC’s are good ones) move back to closer to where they are in Edmonton.

  2. First, thanks for taking the time to respond. VREAA shows more willingness for honest engagement and dialogue than a lot of other similar blogs. If one of your authors is ever in Edmonton I’d take you to a REIN meeting for free and cheerfully show you some of the data I use to make my own decisions.

    I get what you’re saying about recording some of the shows for posterity, and the focus on Vancouver is possibly complicating a wider conversation about the value of bubble blogging by itself. My issue is that without concrete advice on how to move forwards, blogs like yours can come across as all fear, all the time. If you want to help people, as opposed to just trying to prevent harm, then what about some success stories? Positive tips?

    For your list, I guess we’ll agree to disagree about housing market analysis. Most of the housing market numbers are short term lagging economic indicators, and when you’re planning to invest for 5+ years, you need longer term evidence. One thing I thing you’re wrong about is the relevancy of national housing numbers (listings, average price) to a local market for the purposes of investment. National numbers have no impact on the value of a single home, or a community. They’re also not really impacted by single municipality numbers, outside of the GTA, and perhaps Vancouver. There’s nothing in the appraisal techniques which take national housing trends into account. I think the closest national numbers get is indirect influence via consumer sentiment.

    To clarify, by making money with real estate, I mean the purchase, holding and sale of real estate. I mentioned property management because it gives me a unique window into the performance of investment properties owned by a huge variety of investors since 1973. There have been those who have taken losses, or have made mistakes, bought badly or even committed fraud.

    But to get to the point, I am buying properties. I’ve bought two this year, and entered a joint venture partnership on a third. One is my principal residence, and one an investment property which actually worked as a flip (we released the keys the day before you wrote this post). I’d like to buy more, but I just came back from several months overseas in 2009, and at the moment I’m switching jobs. I’m working with a mortgage broker to get things ready for my next property. It’s a great time to buy long term real estate investments in Edmonton (and Calgary) for three local reasons: great cash flow, in part thanks to motivated vendors; people are more willing to accept creative offers and seller financing; transportation improvements are in the middle of construction, which when completed significantly impact property values. Edmonton’s ring road is about 5 minutes from my house, and when it’s done in 2011 I expect neighbourhood values to improve (that’s not why I bought in that area though).

    I think that Vancouver and Toronto are possibly overpriced today, but I also believe that the economy will lift quickly and significantly enough to meet those prices before broad price drops occur. I also think that real estate investments should be a dispassionate decision based on numbers, and from that perspective you can’t compare a TO or Van property to a well performing property in Alberta, and thus shouldn’t be buying there. Also, long term real estate investments are long term so they can bridge the gap of a price drop. You might be right bout it ending up being a bad investment for the many canadians who bought a pre-build condo in Toronto, or a $1.2 million single family home in Vancouver thinking it’s an investment. For people who buy carefully and follow a proven system like REIN’s, the risks are significantly less than many other asset classes.

    The worst case scenario in a real estate investment is that in 20 years the tenant has paid off the mortgage and you’re free and clear. The worst case with a stock is that the company goes bankrupt and you’re left with an expensive paper airplane.

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