Yearly Archives: 2010

Economist Who Doesn’t Get Out Much: “We don’t have a housing bubble. We don’t have a speculative mindset. We don’t hear people saying “It’s different this time”.

From ‘Housing: Bubble or not?’, The Globe and Mail, 13 Apr 2010, 6:09 am. Rob Carrick interviews Will Dunning,  an ‘Independent Housing Industry Consultant’, and ‘Chief Economist for the Canadian Association of Accredited Mortgage Professionals’ (‘a group representing mortgage brokers’) –

RC: “How did we get to a point where people are worried about a bubble in house prices?”

.

Dunning: “There are certain characteristics that you see in a bubble, you see rapid growth of asset values, and you also have rapid growth of debt associated with those assets. But there are some other characteristics that are very important that we don’t have.”

.

Dunning: “We don’t have a really speculative mindset.. You know, we don’t hear people saying “It’s different this time”, that’s the classic manifestation of a bubble… and we don’t see risky lending, we still see careful lending.” … “We have very prudent behaviour… in a hot market.”

.

RC: “So it sounds to me that you’re saying: “(a). We don’t have a housing bubble in Canada, and (b). Even if we were to get more bubbly in the housing market you still don’t think it’s that big a problem.”

Dunning: “Right”

“In that moment, the money didn’t matter. Only the condo mattered. Now, all the money I have, goes towards paying the loan. I live for the loan.”

Elize Robinson gazes around her condo with a sad smile on her face, wondering what might have been. As the sun streams in through the large skylights in the sloping roof, it is easy to see why she fell in love with the unit. But things did not work out the way she planned. She bought the condo for $380,000 in Mar 2010 with the aid of a huge bank loan. She realizes now that she made a mistake in buying at the top of the market.

“I lost my common sense in that period,” she says. “I was not thinking about the money. It was really a lot of money, I now understand, but in that moment, the money didn’t matter. Only the condo mattered.” It soon became apparent that she was going to struggle with the loan repayments. So instead of moving into her dream condo herself, she rented it out.

At the same time, Vancouver’s housing market collapsed in spectacular fashion. Prices have fallen by more than 45% in just under three years, well and truly bursting the bubble. Now Elize’s apartment is worth less than half of what she bought it for and the rent she receives does not even cover half of the loan repayments.

She blames herself, but is also angry at the banks who made credit so easily available. “They had analysts and economists in their staff. They should more carefully analyze the situation and the people to whom they are giving the loans.”

British Columbia law does not allow Elize to walk away from the loan. Now out of work and expecting her first child, she is worried about the future.

“All the money I have got goes towards paying the loan. I live for the loan,” she says. “Even the social benefits I get I have to give away to pay the loan.” Elize’s is a familiar story, echoed around the country.

Bob Dubonsky, assistant professor at the Sauder school of business, says that Vancouver’s property market was more over-inflated than those elsewhere. “The bubble was so huge. There was so much money pouring in,” he explains. “People borrowed a lot of money to buy a lot of real estate – – 2007-2010 were crazy years.”

Whether or not another boom follows this bust, one thing is for sure. Many people like Elize Robinson fear they will be living with the consequences of the “crazy years” of 2007-2010 for years to come.

The above anecdote from Vancouver’s future was produced by barely tweaking the article ‘Living with Latvia’s burst bubble’, by Shanaz Musafer, BBC News, 12 Apr 2010. One tweak: Latvia’s market fell 60% in 3 years, we anticipate Vancouver’s bust will initially be less severe. For those who don’t believe it will happen here, note that the first halves of such future anecdotes are already being written in Vancouver. -vreaa

[UPDATE 27 Jul 2012: The photo originally illustrating this post has been removed, at the e-mail request of the lady in the photo. – ed.]

Vancouver RE Becomes A Game, Literally – “Crack Shack or Mansion?”

When Vancouver RE becomes a subject of ridicule, can a top be far away? At crackshackormansion.com, pictures speak far louder than words. -vreaa

UPDATE: The authors of this fabulous website were later revealed to be teacher Petr Pospisil and his girlfriend Ola Rogula, a lab tech at the University of B.C., “frustrated when the price of an average detached home in Vancouver rose to over $1 million” [Vancouver Sun, 16 Apr 2010]. Thank you, Petr and Ola.

UPDATE – “Now I realize why I can’t take this CMHC Economist seriously…”

https://i0.wp.com/renwl.org/wp-content/uploads/2010/03/dan_aykroyd_thumb.gif

“I’m a senior accountant for KPMG currently working for Re/Max, so here’s something from “inside the circle”: The government leg propping up the market is soon to be removed.”

Jeremys at vancouvercondo.info 12 Apr 2010 10:59 am

“I’m a senior accountant for KPMG working currently for Re/Max so here’s something from “inside the circle”. In the past year, I’ve been very, very tempted to purchase a property (a second purchase for primary residence, and turning my first home into a rental property). It’s hard not to [be tempted], with Re/Max offices busy like you wouldn’t believe and all the hype and hysteria surrounding the market. It’s anxiety at its best – and you just don’t want to be left behind. I’m sure many others were/are in the same position. Half a year ago, many of my close ties within management personnel of the company honestly didn’t know what advice to give me. Needless to say, it’s a unprecedented situation:

Housing market heads down, government intervenes with low rates to boost economy. In their intention for a slight boost, they shot it out of this world and it snowballed. Many of those who were saving for the market to correct itself further found themselves immediately back in the market. Those who had no business being in the market in the first place now found, due to the rates, they could get in. Then with all the frenzy, fear and panic starts to set in. On the business side, how could the government not expect anything more – every bank, broker, agent, etc. was pushing for sales mostly based on “get it before it’s too late”. Any why not?: much larger commissions, easy buyers who were trigger happy, a new crop of buyers who without interest rates had no business being there in the first place. Now even the government has realized the monster it created – besides the coincidental HST, they’re trying to put the brakes on (DAMAGE CONTROL) by tightening lending practices and increasing rates.

So back to half a year ago – no one could tell me an answer, they’d never seen a situation like this. Fast forward to the last couple of months. The mood is much different. Just as busy, yes, but those close to me can firmly tell me to stay on the sidelines for now – the feeling is it’s a mad rush to the exits. It’s often referenced to the Cash for Clunkers effect – immediate boosts and results were outstanding, but once it was over it was more over than anyone could have imagined. They simply took buyers from the near future and made them buyers today.

I was almost a bull in the market now turned bear. I could’ve caved in half a year ago since no one had sound advice. At this point in time, however, it’s hard to ignore the “read between the lines” advice from all my colleagues within the company. All agents have told me the majority of those coming in to buy these days are those who are firmly on the “get it before mortgage rates rises/HST” train. With this being on the start to the typically selling season, already the crop of worried buyers is on its last leg.

The government leg propping up the market is soon to be removed. If you were waiting for a correction, half of the “competition” during a downturn is already gone. Take what you will from all this, but when real estate agents on the floor level can sense something, you can figure out the rest.”

Interviewer: “The average price of a bungalow in Vancouver is $1M … doesn’t that look a little bubblish?”; CMHC Economist: “We haven’t been able to find any evidence yet of housing prices being out of line with fundamentals in any of the markets in Canada.”

Preserved for posterity. -vreaa

Bob Dugan, Chief Economist, CMHC, at bnn.ca 12 Apr 2010 8:15 am

“Healthy activity in the new home market.”

[Interviewer: “It was an eyebrow raiser to see that the average price of a bungalow in Vancouver is near $1M … doesn’t that look a little bubblish?”]

“Well we’ve certainly looked at the question of a bubble and we haven’t been able to find any evidence yet of housing prices being out of line with fundamentals in any of the markets in Canada.”

“Price growth has been fairly modest overall… in a longer term context”.

[Interviewer: “So, generally speaking, a positive report!”]

“We still haven’t rented out the suite. ‘For Rent’ signs keep popping up all over our Westside neighbourhood. I wonder if there are enough renters to go around?”

bill at greaterfool.ca 11 Apr 2010 12:57 pm

“We still haven’t rented the first floor bachelor suite. We have the odd nibble and sometimes make an appointment but they have all been no shows. ‘For Rent’ signs keep popping up all over our neighbourhood [Broadway and Arbutus in Vancouver]. Not to mention ‘For Sale’ signs as well. I would think that there is some pressure from the owners of condos here. I wonder if there are enough renters to go around? I expect the competition for renters is going to get much more intense. I reckon there will be a rent reduction at some point. I cant see senior management allowing us to go another month without a tenant.”

British Columbians Selling & Moving To The US – “It was just too good of an opportunity to turn down.”

For many owners, home prices have reached such high levels that cashing out becomes a life-changing proposition. Some act on this; many don’t. Of those who don’t sell now, a good number will try to do so once prices start dropping. It is particularly painful to see what was once a ‘home run’ becoming a ‘single’, and then, perhaps even a ‘strike-out’. These sellers will add to supply as the market falls. -vreaa

CTV News BC ‘Canadians heading south for real estate deals’ ctvbc.ca 9 Apr 2010 7:57 pm

“As the value of the loonie hovers near par, a growing number of Canadian’s are taking advantage of real estate deals south of the border”

.

“The Cruikshanks are packing up their Surrey home, and getting ready to move.” … “Craig Cruikshank will keep his job in Vancouver, but his new home won’t be in BC.”

.

[‘Southern Comfort’ packing box. Nice touch. -ed.]

.

“It was just too good of an opportunity to turn down.” [Craig Cruikshank]

.

“They bought this place in Birch Bay for $274,000.”… “You’d have to go past Hope to compare a home price to that.” [Craig Cruikshank] “Especially by the beach” [Ms. Cruikshank].

.

“This new 1,300 sqft home in Blaine is listed for $225,000…”

.

“…for that price you couldn’t even buy this 30 year old mobile home in Abbotsford..

.

“…or two bedroom condo in Surrey.

.

“I’m very proud to be a Canadian… I love this country.. I’m very resentful of the fact that I can’t afford to live here.”  [Craig Cruikshank. Craig’s wife is a US citizen.]

“I have listed my paid-off home in Burnaby after 25 years residence. I expect it to be sold this weekend for a great deal more money than it is really worth.”

Mister Obvious at greaterfool.ca 10 Apr 2010 11:33 am

“I have listed my paid-off home in Burnaby after 25 years residence. I expect it to be sold this weekend for a great deal more money than it is really worth. I feel just fine about that. However, I’m really not making the move for that reason. I have long been planning to move on anyway and this seems as good a time as any. However, I will not be buying immediately. I will be investing my tax-free principal residence money elsewhere while things shake out. I know I have to expose this money to some level of risk in order to garner a return that beats inflation and then some.”

“Greater Vancouver has simply gone whacko. I have a friend who moved here from Victoria well over thirty years ago. She absolutely fell in love with the Vancouver city of the late seventies and never wanted to leave. Today she is completely disillusioned with the current state of affairs and generally detests the place. It’s very sad, really. She now longs for Victoria, and bubbly though it also is, it’s a far more genteel environment these days.”

Observations and Opinion of a West Coast Woman – “The result is that many of the people born and raised here are now leaving Vancouver since affordable housing for families is quickly disappearing.”

This poster expresses opinions that are representative of those held by a significant subgroup of Westcoasters. It’s hard to know exactly what percentage of the market is being driven by the kinds of sales she describes. -vreaa

West Coast Woman at greaterfool.ca 9 Apr 2010 10:28 pm

“Just today I heard the “money expert” for CKNW Radio in Vancouver (Michael Levy) state that Vancouver’s “red hot market” will NOT be affected by the upcoming increases in interest rates. He has also continually stated that Vancouver does NOT have a housing bubble. I just shake my head every time I hear him say these things. The 1950’s houses in my ordinary middle class neighbourhood now sell for $1.8 to $2.1 Million. In 2002-2003, they were selling for $500 – $600,000. For the most part, it’s developers buying the older homes, ripping them down and replacing them with 4000 – 5000 sq. ft. monster homes: Asking price $3.3 – $4.0 Million. These new houses are completely unaffordable for almost everyone who actually works here, so they are usually bought by Chinese immigrants (or is it “visitors”) who park their wives and children here while they work where they can make money and pay no taxes – in China. Meanwhile, we pay through our taxes for their children’s free Canadian education and medical – only so that they can all pack up and leave once the children have finished school, since the children find they can make much more money there than here. The net result is that many of the people born and raised here are now leaving Vancouver since affordable housing for families is quickly disappearing. And since every piece of land is now so “valuable” it has to be used for developer-driven expensive miniature condo housing (instead of parks, public spaces or commercial space), many businesses are also leaving the City. How anyone can look at what is happening in Vancouver and claim it isn’t in a housing bubble and that this “red hot market” is not driven by low interest rates is beyond me.”

“We are planning to list our home shortly and have been interviewing Realtors. The first mentioned that he has told all his clients to hold off buying as he is expecting an imminent correction.”

VanMike at greaterfool.ca 9 Apr 2010 12:16 pm

“I think the tide has definitely turned in Vancouver. We are planning to list our home shortly and have been interviewing Realtors and have gotten some candid views on the market. Realtor #1 mentioned that he has told all his clients to hold off buying as he is expecting an imminent correction. Realtor #2 did not sound surprised when we said we were planning to rent a bigger place for a few years and re-evaluate the market then. He mentioned that over 50% of his sellers are doing the exact same thing. And this is one of the top sellers in Vancouver.”

“A couple of years ago I started going to open houses with my wife. Quickly, I found myself getting angry that we were even discussing shoeboxes that were going for $600 per sqft. I started looking for information online.”

It has been exceptionally difficult, socially and psychologically, to be a prospective buyer who is bearish on Vancouver RE prices these last 5-8 years. The internet arguably fuels bubbles, but it also enables independent thinkers to feel less isolated. This poster describes how Vancouver Condo Info and other blogs have given him the fortitude and information necessary to “make reasoned decisions about home (not) buying”. -vreaa

RoyceMcCutcheon at vancouvercondo.info 9 Apr 2010 11:32 am

“A couple of years ago I started going to open houses with my wife. We just thought we’d try to learn about what such a big purchase would involve. I could see the hype, but I didn’t feel too compelled to push against it. Quickly though, I found myself getting angry. Angry that we were even discussing shoeboxes that were going for $600 per sqft, etc., I started looking for information online. I was hoping to hear at least some voices that made me feel like I wasn’t some crazy curmudgeon that was missing the point about RE here in Vancouver. This site was one of the places I eventually uncovered and I’ve been happily lurking ever since (with close to zero understanding of RE, investing, etc. going in, there wasn’t much point in adding my voice). I figured I’d take this opportunity to thank thoughtful posters on this site who have given me wonderful points and counter-points to use while discussing why I don’t want to buy in this town any time soon. It helped my wife and I crystallize what we wanted to do about housing: we elected not to buy and have instead rented a spacious place that’s about 10 minutes walking from work. We’ve also socked away thousands each month, meaning we can buy IF IT MAKES SENSE TO DO SO later on. Maybe we’re now facing RE-mageddon (am I the first to use that?), maybe not yet. Either way, to the bears (and, yes, some of the bulls): thanks for giving me some tools to help make reasoned decisions about home (not) buying. Cheers.”

“The landlord has listed both of his million dollar investment houses for sale. At least one was bought with 0% down. He’s hoping to sell before the April 19th deadline.”

BCite at vancouvercondo.info 10:04 am

“I have family who rent a house. Apparently this landlord has listed both of his investment houses for sale. He’s hoping to sell before the April 19th deadline. At least one of these million dollar investment properties was bought with 0% down. My family tells me he believes this is now the top of the market.”

“I own 4 properties in total…PR, 2 side by side duplexes, and now a legal 4-plex. Would I buy more? Sure if I had the $$.”

A Vancouver Island landlord shares with us the extent of their RE holdings. -vreaa

islandlandlord at RE Talks 9 Apr 2010 2:24 pm

“I was considering pulling out the equity in the first 1/2 duplex I bought years ago and buy a purpose built multi-plex. I managed to find an updated purpose built 4 plex, so I decided to just sell the 1/2 duplex. All within the last 6 or so months. Now all of my units are in close proximity to each other which makes life easier for me. I own 4 properties in total…PR, 2 side by side duplexes, and now a legal 4 plex. Would I buy more? Sure if I had the $$ (PS: equity is not money, and I’m not willing to pull out unless I have to). Also, I would suggest to any buyer out there, you have be doing a lot of leg work when you’re looking for a deal. You need to get the property BEFORE it hits mls or icx; almost all solid revenue properties are sold by word of mouth, realtor to realtor etc. By the time the average joe gets to it, via mls, its all been picked over.”

CBC TV News – $1M Milestone – “What we’re seeing now, is people are moving typically in three- or four-hundred thousand dollar chunks up the property ladder.”

From CBC News, 7 Apr 2010

“For the first time, the average price of a Vancouver home has topped $1 Million.”

.

“It’s got a dream home price-tag, but this old-timer is definitely not the home you’d dream of. The asking price … Just over One Million Dollars.”

.

“That’s what we’re seeing now, is people are moving typically in three- or four-hundred thousand dollar chunks up the property ladder, over time.”

.

“Most of my clients are very wealthy.. they are new immigrants in the investor category.. so they are buying multi-million house on westside of Vancouver.”

.

Larry Yatkowsky says he doesn’t believe anyone who predicts it’s got to end soon with a double-digit crash. “It’s not going to go there.. I have no reason to believe it would drop anywhere near that.” Higher interest rates may cool things off a bit, but he says don’t expect too much of a fall back from that million dollar milestone.

“There was a family renting up the street from me a couple of years ago, both mom and dad were engineers and very well paid. They moved to Ottawa because they could buy a house and have a decent standard of living there.”

oldtimer at VREAA 8 Apr 2010

“There was a family renting up the street from me a couple of years ago, both mom and dad were engineers and very well paid. After child number two they moved to Ottawa because they could buy a house and have a decent standard of living there – something unattainable here unless you are willing to give up something be it privacy by being forced to have a basement suite or just having to work your ass off to pay the bills.”

“The Shed Is Fine, Now Where’s The House?”

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

Asking price: $1.7 Million

“Built in 1981 this 1,600 square foot home can easily accommodate a small family.”

[Okay, okay, we know – “it’s selling for land value”, etc. But then why not advertise as ‘lot value’, and spare the photos? Perhaps to show us that it’s a particularly easy knock-down? -vreaa]

Karl Denninger’s Opinion – “I’m willing to bet that in Vancouver homes are overvalued by a factor of five – or more. I can’t tell you when it will blow up, but I can tell you with absolute certainty that it will.”

Readers who follow the financial markets will likely know of Karl Denninger’s widely read blog ‘The Market Ticker’. Denninger today [8 Apr 2010] saw fit to step up and make comments about Canada’s housing boom, and his prediction is even more severe than anything we Vancouver bears foresee. -vreaa

“The latest median household income I can find for Canada is closer to $53,000 – or about half of what it should be [to support these housing prices].  That is, homes in Canada – on the whole – are selling for double reasonable “fair values.” I’m willing to bet that in Vancouver they’re overvalued by a factor of five – or more. I can’t tell you when it will blow up, but I can tell you with absolute certainty that it will.”

“Dream House” Urgency; Overextended Buyers; Grow-op Jeopardy; Unaffordable Renos; Price:Rent Ratio 400:1 – All in a Single Anecdote

We are in agreement with oldtimer at VREAA 8 Apr 2010 9:22 am

“Sometimes people are willing to ruin their lives on a whim. Case in point, a couple who were determined to buy their “dream house” before they were forty. They purchased the house next door to mine in Arbutus [Vancouver Westside] for $834,000 three and a half years ago [2006]. It was superficially updated but, as I told them, it had been a massive grow-op, plumbing removed, vents put in weird places, wiring screwed with. They checked with the police who verified the grow-op status but bought the place anyways. After spending over $100,000 to remediate (and that didn’t include a new kitchen) they finally went bust and the house was sold last summer for about $950,000. The new owner tried for three months to rent the place out and didn’t succeed until December (rent – $2,500). This is what I consider to be a sign of the insanity of Vancouver’s real estate market.”


“In my circle of friends I’m witnessing an exodus, as they abandon Vancouver. Computer programmers, arts and culture consultants, teachers, video game designers, lawyers: they’ve all found the city, and prospect of trying to build a life here, untenable.”

The following two anecdotes, one concerning an individual and one a social circle, are extracted from an article by Max Fawcett [at maxfawcett.wordpress.com, 8 Apr 2010]. Readers will be aware that we share Fawcett’s concerns regarding individuals leaving or avoiding Vancouver because of our RE Bubble. “Exodus”; “This is a dangerous trend”; “Vancouver’s future is in real jeopardy”. -vreaa

” ‘Jimmy’ is a 30 year-old corporate lawyer with a very good job who earns close to $100,000 and lives in a three bedroom apartment off Commercial Drive with his long-time girlfriend, with whom he’s expecting his first child in a few months. He still has some debts to pay off from school, but once those are cleared away he’d like to be able to buy a home in the near future. The problem is, he explained to me, that he’d have to save for ten years just to be able to afford the mortgage payments on a place of similar quality to the one he currently rents. Yes, he conceded, he could plunk down a small down payment and go eyeballs deep into debt, but if the market ever corrected downwards he might have to spend twenty just to dig himself out of that hole.”

“In my immediate circle of friends I’m in the process of witnessing an exodus, as they abandon Vancouver and the hope of the building a life here and head east in search of a new one. In almost every case, the reason for their departure is the inhospitability – hostility, even – that Vancouver manifests towards anyone trying to build a decent middle class life without a trust fund on which to draw. These people aren’t struggling artists or layabouts, either, but a diverse group of aspiring professionals whose only wish is to find a meaningful job that can provide for a decent lifestyle – one, in other words, that doesn’t include three roommates and Kraft Dinner for supper four times a week. They are computer programmers, arts and culture consultants, teachers, video game designers, and lawyers, and they’ve all found the city and prospect of trying to build a life here untenable.”


“A couple with two children had moved from the coast and built their dream home. They bit off more than they could chew; They lost the property to the bank.”

Chris at greaterfool.ca 8 Apr 2010 10:07 am

“I built log houses and provided engineering services for these houses over the last ten years in the vicinity of Kamloops, British Columbia. A couple of days ago I was phoned by the new owner of one of these buildings outside of 100 Mile House. He was tracking down paperwork related to purchasing the house. He had just bought the property in a bank sale. In other words the original owner lost the property to the bank. The original owners (a couple with two children) had moved from the coast and built their dream home. The house is large, has very high end finishing details and was expensive. This house was going to be the house they retired in and left as a legacy to their kids. It sounds like they bit off more than they could chew; spent more on their dream home than they expected and took on too much debt to finish it. Anecdotally, the new owner told me that a lot of the houses he looked at in the area involved bank sales. We’ve had a building boom in our area due to people retiring (and cashing out) from places like Vancouver. I wonder just how widespread this problem is.”

Developer + Donation = Contract “There’s absolutely no connection between the donation we chose to give to the B.C. Liberal Party and any business opportunity or any business interest I have, period.”

This is a specific example of a broader issue that concerns us — In times of asset bubbles, developers gain financial and political influence such that they direct our society to misallocate resources. The example is more disconcerting than most because it involves a ‘donation’ that can easily be construed to be little more than a ‘bribe’. It’s good to see that our local MSM, usually too compliant with insider forces, are taking involved parties to task in this case. We at VREAA are, however,  more concerned about the less obvious, more insidious influence that vested interests have over city and provincial policy during bubble times. If our society had a healthy economy, would we be building a casino at BC Place at all? -vreaa

https://i0.wp.com/www.sgtalking.com/images/gambling.jpg

Excerpts from ‘Donor who gave Liberal’s $50,000 got casino contract two months later’, by Jonathan Fowlie, 8 Apr 2010

T. Richard Turner, the Liberal insider who pushed for a retractable roof on BC Place, donated $50,000 to the B.C. Liberal Party two months before his company was named as the preferred bidder for a mega hotel and casino project next to the stadium.

Turner is the government-appointed chair of the Insurance Corp. of B.C. and a former chair of the B.C. Lottery Corp.

The donation was made while PavCo — the Crown corporation that operates BC Place — was collecting bids for the development of lands next to the stadium.

Turner is a director of Paragon Canada Holdings ULC — a Canadian entity of Paragon Development Ltd., the company selected to build a $450-million casino and hotel project next to BC Place — and a director of Edgewater Casino ULC.

On Wednesday, Turner said the donation was meant to support the Liberal party in the election, and had no connection to the PavCo bid process.

“There’s absolutely no connection between the donation we chose to give to the B.C. Liberal Party and any business opportunity or any business interest I have, period.” … “That just does not happen,” Turner said

Opinion – “Anyone that can look a young family in the eyes and sell them a tear down shack for half a million dollars while knowing full well that emergency rates are coming to a screeching halt in a few short weeks has a special place in hell waiting for them.”

veej at greaterfool.ca 7 Apr 2010 10:14 am

“Anyone that can look a young family in the eyes and sell them a tear down shack for half a million dollars while knowing full well that emergency rates are coming to a screeching halt in a few short weeks has a special place in hell waiting for them.”

“I used to rent a house that sold in 2007. The new owner was going to renovate and move in, but that turned out to be too expensive so they’ve been trying to rent it out ever since. It’s been vacant more months than it hasn’t, which may have something to do with them doubling the rent.”

Kraisin at vancouvercondo.info 6 Apr 2010 12:05 pm

“I used to rent a house that sold in 2007. The new owner was going to renovate and move in, but that turned out to be too expensive so they’ve been trying to rent it out ever since with tenants moving in and out. It’s been vacant more months than it hasn’t over the last three years, which may have something to do with them doubling the rent. I guess they haven’t figured out yet that it’s better to have a good tenant paying market rent and staying long term than people moving in and out and monthlong streaks of vacancy with squatters moving in and breaking windows. Amateur landlords and irresponsible owners wreck neighborhoods.”

“My wife and I saved over 20% of pretax income for years, preparing to start a family. We could never put down more than 10-20%. SFH prices went up by more than we made year after year.”

Our government is two-faced when it calls for ‘prudence’, as it has long been punishing those demonstrating that virtue. This poster’s exasperation is shared by many. The idea of him, as a careful saver, at any point in future being asked to bail-out those who have caused this predicament with their imprudence, is outrageous; a moral crime. -vreaa

rp at VREAA, 5 Apr 2010 at 10:40 pm, in response to the prior post by painted turtle –

“This has been going on a lot longer than 10 years. A majority of households own property, so being frozen out is particularly acute. If you’ve been saving money and waiting to buy with minimal risk, it’s like they have ripped the ladder up. In my case my wife and I saved over 20% of pretax income for years, preparing to start a family. We could never put down more than 10-20%. SFH prices went up by more than we made year after year. We now have enough savings to live for 5 years with no income at all, yet it is loose change in the property market. Never going to buy. The central bank now sees fit to erode our savings by setting interest rates below the rate of inflation. Get some guy who can barely service his debt to buy another plasma TV. Good times! Your only hope to beat inflation is by paying fees to the financial industrial complex – another ponzi scheme with non-stop BS. “Invest now” at P/E=22! They can stuff it. I will not soon forget this. It is very clear that this country has nothing to offer me. It has gone completely beyond stupid. They’re now stealing from me to prop it up, so don’t expect any help later! We’re 30 years old and scaling back. We’re going to work less, pay nothing in taxes, and spend more time with family. If costs go up we’ll cut back. If opportunities appear we’ll move. I have no idea who is going to pay for all these retirees. It won’t be me. The problem is there’s no incentive to work more. Nobody is going to triple my income, and extreme risk is a no-no for families, so we’re out of the game. Meanwhile the important things in life could easily pass us by. I realized years ago that my most valuable commodity was time, and with kids my life is now moving at warp speed. I can never do enough. It’s time to knuckle down, and take care of priorities.”

“For ten years I felt it was amoral that people would make more money speculating on houses than working hard.”

We strongly share this poster’s concerns about the social effects of a housing bubble, in particular, the way in which easy money perverts the work ethos. -vreaa

http://mildcolonialboy.files.wordpress.com/2008/10/800px-the_way_to_grow_poor_the_way_to_grow_rich_-_currier__ives_1875.jpg

painted turtle at vancouvercondo.info 5 Apr 2010 10:37 am [Thanks to VHB for the link to the illustration] –

“I would be excited by a real estate burst in Vancouver. Why? I am not excited to see people lose their money or their homes, I feel sad for them. I am not sure I would buy a home if prices crashed even 40% (for several reasons). I am excited because for ten years I felt it was amoral that people would make more money speculating on houses than working hard. Speculators were making home prices more and more unaffordable, meaning working people had to go deeper and deeper into debt. The impact of this moral shift could be felt everywhere. Students did not value education any more, overextended families were going through traumatic experiences, people were losing sleep over buying a home, the streets were full of people who could not resist taking equity our of their home to buy expensive cars, investment was becoming a central topic at parties, etc. Gambling had replaced sweat and intelligence. I felt like I was living in a giant casino. The resentment against speculators was mounting, and I have heard it turned into very racist views. This whole mess was wearing down the human capital of this city. When one goes for one’s citizenship ceremony, one is reminded that what makes a valuable citizen of Canada is not owning a $1 million house, but volunteering for your community. Where has that spirit gone lately? Believing in economic fundamentals is not the same as a sense of entitlement. It is just a belief that there is nothing new under the Sun, that economics go through cycles and will always do so. There is also nothing new under the Sun went it comes to greed or herd mentality. Usury was forbidden by religions at times in the past… maybe there is a reason why.”

“I had dinner with a friend on the weekend who has bought a new condo in Coquitlam for $320k as if he just bought a bag of chips from the local IGA.”

Anonymous at vancouvercondo.info 5 Apr 2010 10:36 am

“Had dinner with a friend on the weekend who has just decided to jump into the market. He just bought a new condo in Coquitlam for 320k as if he just bought a bag of chips from the local IGA. While we were discussing his new purchase I asked him if the upcoming interest rate hikes played any part in his decision to buy. His answer? “Umm…. no I can’t say it did….” – there we have the long-term thinking of the average buyer these days. I could only sit there politely smiling but thinking that he just doesn’t know what he has set himself up for in the future.”

“On both occasions these homeowners have replied that they think there will be more than a 20% drop. Bizarrely though, one of them is currently looking to sell and move up.”

Ann Ong at vancouvercondo.info 5 Apr 2010 10:19 am

“In the last couple of weeks I’ve talked to two different Vancouver homeowners who asked me when we are going to buy a place of our own in Vancouver. My starting position in these conversations is “We don’t want to buy in a bidding frenzy so we are waiting for things to calm down a bit”. If this doesn’t generate a major argument I punt a “And there could be a drop of, oh, .. 20%” across the bows. There has been a definite change in response compared to previous conversations with others. On both occasions these homeowners have replied that they think there will be more than a 20% drop. Bizarrely though, one of these homeowners is currently looking to sell and move up. Go figure!”

Observations Suggest High Inventory In New Developments

Supersogs at vancovercondo.info 5 Apr 2010 8:26 am

“Going around to various open houses and pre-sales, it’s the RE agents’ last and greatest pull: “Now is a great time before rates go even higher”. Can’t tell you how many times I’ve heard that, trying to sell people on panic and fear. Once this group of panicking buyers takes “advantage” of low rates, there will be no more government help through easy lending practices and interest to keep this train moving.

Over the last couple of months, here’s what I and numerous others are noticing while doing the rounds in metro Vancouver:

1) Outside of Van/Burnaby/Richmond (Coquitlam, Surrey, etc), the discounts are coming! Half a year ago people would be snatching this up. Now, every development you look at seems to be offering “incentives”. For example, Rennie’s “Best value ever” in the Grand Central condos in Coquitlam – condo prices have dropped anywhere from 30-70k for the units, they haven’t been able to sell in Tower 1 – and this is before Tower 2 is even up! So many projects in that area sitting at only 60-70% sold only with other towers coming up. Notice how many “free mortgage payments for 2-3 years” incentives there are? You don’t think the developers know something?

2) Another example – In Burnaby, had this been half a year ago all new condos would’ve been sold out in a matter of weeks. Luma had the advantage of coming out early and are close to selling out with about 10 units left. Perspectives and Affinity towers which opened later, arguably much better than Luma, are both sitting at 65-75% for the last couple of weeks after a hot start. Half a year ago this never would’ve happened. Now they are sending out desperate emails saying to hurry in before the selection is gone. I don’t ever remember receiving emails to hurry in for other presales in the past year – they were gone. This is especially troubling for Affinity who has a phase 2 tower that is about to be released soon.

3) In East Van Downtown, the revival of the area is starting but not really going as fast as expected. If the market starts going down, do you think any developer will continue to try and continue fixing the area? Down the road, surely, yes, but it’ll stay put for the next coming while. Just take a look at the excess inventory – Rennie’s much overhyped Woodward’s with so much inventory, Smart Gastown, Ginger, V6A, etc. also with not much inventory moving there. Check out the 4 spectrum towers – 35 units for sale and 60 rentals available.

4) No one can remember the last time there has been so much rental inventory. It’s obvious it’s from the Olympics, but the effects are coming. Craigslist, for example,  ‘1 bedroom in Yaletown for under $1800’ and see what you get. Even if half of them or more are duplicate listings, the number of vacancies is absurd. Owners who took “advantage” of the Olympic renters now face the same dilemma. Those who can’t weather the storm of a empty unit or can’t afford to rent it out for a much lower rate will soon flood the market trying to get out.”

“Just about every realtor I know has one or two condos.” … “I have now heard 3 stories in the past week of investors who have had to list properties because they cannot find a renter in their price range.”

junius at greaterfool.ca 4 Apr 2010 9:42 pm

“There is a huge amount of investment property in Vancouver. Just about every realtor I know has one or two condos. Obviously these properties are supported by rental income. What is not known is just how many of these units are in the market and what the overall prices sensitivity is for the owners. In other words, how many will have to sell if rents drop or carrying costs increase 5 or 10%? How many can afford to hold for any period longer than a few months?

Right now I can say – based on some personal conversations over the past week – the number of price sensitive investors could be very high. I have now heard 3 stories in the past week of investors who have had to list properties because they cannot find a renter in their price range. All 3 have had a vacant apartment now for more than 30 days and no one yet for April so they are faced with the dilemma of dropping their rent price or selling. All 3 said they cannot keep the mortgage payments up for long OR drop the rent because the rent supports nearly their entire mortgage payment. Two properties rent in the $2K range and one in the $4K range.”

Vancouver Buyers #3 – “A 30% drop in prices would wipe out their equity gains of the past decade.”

Here’s the third anecdote about couples using realized RE gains to leverage themselves into more expensive properties. These stories reveal the importance of  ‘move-uppers’ in the $1M market, and also tell of a group of buyers who look like they’ve profited from the boom but are actually in a precarious position. -vreaa

junius at VREAA, 5 Apr 2010, in response to Vancouver Buyers #2 –

“I agree that this is a pretty typical West side story. I know a couple in West Van that bought last fall and the numbers are similar [move uppers; new purchase $800K-$900K; income 80K each -ed.]. A 30% drop in prices would wipe out their equity gains of the past decade.”

Vancouver Buyers #2 – “This couple’s equity gain is someone else’s reduced savings.”

jesse at vancouvercondo.info 4 Apr 2010 2:20 pm

“I know a couple almost exactly like that in ulsterman’s story, with about the same incomes [$80K each], but they are buying an SFH in the centre part of Vancouver for about $900K. Both bought condos a few years ago before they married. They sold one in ‘07 and are selling the other this year, using the proceeds to purchase an SFH at 6X their gross annual income (assuming they rent the basement). Their purchase is by no means “crazy” — since they have made significant money on their condos and interest rates are low, they can comfortably afford the higher price. This couple’s equity gain is someone else’s reduced savings. Chances are this will become abundantly clear in the years ahead.”

jesse UPDATED this anecdote at VREAA 9 Apr 2010

“The couple who were going to buy $900K property in Vancouver reneged on subjects and decided not to buy. I think it was a case of cold feet; luckily it didn’t turn into remorse! They said the property was owned by a local who lives on the west side. It is completely furnished (either from before or for staging) but, according to neighbours, hasn’t been lived in for years. I have seen 1 or 2 such properties in my travels, where owners are either abroad or are simply sitting on an empty property without bothering to rent it out.”

Vancouver Buyers #1 – “My friend is buying a house in Van Heights for $750,000. He met a girl with $200k equity in a Yaletown condo and they both make $80k-ish.”

In response to our recent question about Westside buyers, ulsterman at vancouvercondo.info 4 Apr 2010 11:23 am kindly supplies this anecdote –

“My friend is buying a house in Van Heights for $750,000. Met a girl with $200k equity in a Yaletown condo and they both make $80k-ish. We used to chat about absurd real estate prices and “things have to crash.” Then he met the equally well paid partner with equity and things changed. I drove past his soon-to-be place and phoned to congratulate him on the “investment”. There’s no point in talking to him about market peaks, P/E multiples, etc, because although he was once a bear, he says while him, me and others bears were calling tops for 5 years, his wife-to-be was making the tens of thousands in equity that have enabled them to move into a house. What can I say? “No, this time I’m right”?

I think that they have the income to weather a significant rise in rates, so whether I’m right or not (this time), they will be able to ride out any falls. If I’m wrong (again), then they will continue to build the kind of equity that I will need a 649 ticket to replicate.”

patriotz 1:04 pm adds a pertinent comment

“[Whether they are] selling that condo is something which you didn’t mention. If they are just borrowing against it, they are setting themselves up to crash and burn. If she really is selling it, they will probably muddle through, although I think they have a lot of KD ahead of them.”

further: [ulsterman confirmed that they had indeed sold the condo and “pocketed 200K tax free”; ‘best place on meth’ then noted that they haven’t actually pocketed it, but rather that they were “just throwing it into an asset even more overpriced than the one they’re selling.”]

“I just spent a weekend consoling my better half because I didn’t want to buy a foreclosed monster home on Musqueam land.”

ulsterman at vancouvercondo.info 3 Apr 2010 8:27 am

“I just spent a weekend consoling my better half because I didn’t want to buy a foreclosed monster home on Musqueam land. Her best friend lives 2 minutes from the house and they are also on Musqueam land, hence the sudden desire to relocate – plus she hates renting.
The house was 268k and sold for 238k – abandoned.
I never actually visited the property. Lease about 12k and taxes 9k according to realtor site. It was 5700sqft with swimming pool etc. The lease, tax & mortgage was about $2600, same as I pay in rent. This was my partner’s argument – it’s the same as rent etc etc and we would have our “own place”, “build equity” etc etc.
Repair-wise it would have been a Froogle Scott on steriods -she has a father and step-father who are handymen so she had visions of them “doing the work for us.”
Obviously I dodged this bullet, but what do people think about the concept of buying on lease land if as my partner says, “we will never be able to afford our own house to live in otherwise and ALL my friends now own (please add in much wailing and gnashing of teeth that we are poor renters!).”

“I manage a strata building. Most people have not a clue to what they are getting into when they buy into a strata property.”

CondoConundrum at vancouvercondo.info 3 Apr 2010 6:05 am

“I manage a strata building myself and most people have not a clue to what they are getting into when they buy into a strata property. Hint: glitter and shine goes a long way regardless of the quality.”

and at 9:53 am

“A new owner approached me the other day. He mentioned that he would like some info on how he could use the neighbouring building’s (not affiliated with ours) pool and amenities room since our building does not have one. I replied I was not aware of any existing agreement with them. He answered…
(drum roll please) “Well the Real estate agent told me I could use it any time and that was a major part of his decision making.” My shadow buckled over laughing. I had to tell him that this was not true and if he went over there the manager was likely to throw him off the property. Incidentally he refused to pay the strata fees for a few months.He promptly payed up after a lien was placed on his ‘airspace’.”

“Being chewed out by my family: I missed the boat; I should buy a dump here quickly before it’s too late.”

other ted at vancouvercondo.info 2 Apr 2010 4:44 pm

“Back in Vancouver. All I hear is how Vancouver real estate is the greatest investment ever. It never goes down. I missed the boat and will continue to miss the boat as it will continue to go up. Being chewed out like this from my family, and the rain, is starting to make me irrationally exhuberant. I should buy a dump here quickly before it’s too late. Even though I could buy a little piece of paradise elsewhere for less, I must truly be missing out.”

Really, Really Bad News Reporting Meets Nebulous Financial Advice; Chaos Ensues.

Do Vancouverites have low expectations of themselves and others regarding financial literacy? -vreaa

This article was posted on the news1130.com website 2 Apr 2010 1:34 am. Reproduced here verbatim and in its entirety:

Take advantage of latest price increases

Expert says there are ways to save and make more money

Andrea Macpherson Apr 02, 2010 01:34:06 AM

VANCOUVER (NEWS1130) – The cost of living in B.C. went up Thursday with increases on ferry rates, TransLink Fare Saver passes and a hike on your BC Hydro bill. Financial Advisor Richard Knowles says there are some easy ways to save money and be a smart consumer. “Buy fares and to do purchases in bulk you travel BC ferries as an example on a regular basis, buy large booklets of fare in advance, just buy it in bulk because you get discounts for that.”

Knowles says when the cost of living goes up after awhile salaries usually go up as well. Knowles adds it’s a good time to save where you can and to take a look at any investments. “Another thing to do would be to invest with things that grow with the economy things like bank stocks or different types of equity investments might be growing up with the economy.”

Knowles also suggests diversifying your portfolio and invest in thinks [sic] that take advantage of inflation.

“I grew up in Dunbar. I want to, one day, live in or around Dunbar. We have a total family income of about $275k. We could slap down a down payment of $500k. Yet to buy a decent house in Dunbar it would mean borrowing well over $1million. Who are the people who are doing this?”

Other Mike at yattermatters.com 1 Apr 2010 7:30 am

“Dunbar boggles my mind. I grew up in Dunbar. I love Dunbar. I want to like, one day, live in or around Dunbar. We are a 2 income family with total family income of about $275k. We could slap down a down payment of about $400k ($500k if we really had to) without getting near the RRSP’s. Yet to buy a decent house in the old neighbourhood it would mean borrowing well over $1million. Who are these people (aside from the Asian story) who are doing this? Are they really borrowing $1mil?”

Like ‘Other Mike’, we at VREAA are curious about the personal and financial details of people buying >$1.5M homes on the Westside.  Anecdotes that shed any light on this question would be greatly appreciated. Disguise details as necessary without losing the core of the story. -vreaa

White Rock Realtor Owns Three Properties – “Maybe I’ll just take some of the risk out and not gamble as much with that one.”

Many realtors own one or more speculative properties in addition to their personal residences. That worked fine for many on the way up, but, with falling prices ahead, this sub-group of speculators is very likely to go through a period of distress. They face the ‘double-whammy’ of concurrent dropping asset values and falling income. -vreaa

Anecdote extracted from Vancouver Sun article on mortgage rate rises, 3 Apr 3:10 am

“Mike Graham, a White Rock realtor, owns two rental properties that have variable mortgages, but opted to lock in a five-year fixed rate when he bought his own home in White Rock last summer. “The market was changing, everybody was talking about the interest rates going up,” said Graham. “I just thought for a principal residence, maybe I’ll just take some of the risk out and not gamble as much with that one.”

March 2010 – Vancouver Detached Home Average Price Hits $1,000,000

Is that it? The top, we mean. There’d certainly be a nice symmetry to it. And it’s a number that will be really easy to remember for future conversations. -vreaa

[Note: This post regards AVERAGE price. The benchmark (closer to median) price for a Greater Vancouver detached house is about $800,796 (Feb 2010).]

The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise – Part 6: Renovation Nervosa

“His clothes are dirty, but his hands are clean.” Sweat pays you more than the dollars saved. You spend hours of your own time and effort, but what you get back is a sense of actually being part of your home. Doing imbues meaning. In this episode, our protagonist takes us on a tour of his home’s innards, and of the challenges facing those who try to do renos themselves, or even with the help of subcontractors. For those of us who enjoy sitting back in comfort and vicariously having the sense of being a good person doing sincere and honest work, could there be a better read than this on a rainy Easter weekend? Here’s a real treat from Froogle Scott. -vreaa

Part 6: Renovation Nervosa

Bleen
I don’t always walk the blocks of our Vancouver neighbourhood purely in the spirit of unscientific inquiry, as I do in February of 2010, when I count all the renovations and new houses. In our first years in the neighbourhood, as it starts to transform, I often feel not exactly envy, but anxiety that other people are getting on with things and we aren’t. When our second set of tenants moves out at the end of July 2006, the time has come to start doing something.
.When we bought the house it was our intention to fix it up. A 1940s workers’ bungalow, stuccoed-over and given an amateurish renovation in the late 1970s, and 1980s, by the time we move in, everything is worn, tired, and like the vinyl peel-and-stick tiles on the kitchen floor, and the cheap, dark-stained kitchen cupboards and cabinets, not that inspiring even when new. The original wood windows were removed and replaced with those nasty, single-pane aluminum windows that were all the rage in the 1970s, when heating a house, because oil and gas were relatively cheap, just meant cranking up the thermostat. The wood windows were repurposed, cannibalized and installed above horizontal sheets of plywood as a way of boxing in a small back deck. The resulting structure, stuck on the back of the house and clearly visible from a side street, resembles a funky, second-storey, homemade greenhouse.
….The deck is painted white, chocolate brown, and ‘bleen’. My wife and her sisters, as girls in the 1970s, came up with the name ‘bleen’ to describe a particularly noxious colour that pervades East Vancouver at the time, and can still be found if you cruise back alleys in 2010. A kind of unnatural green that suggests turquoise without actually being turquoise — not unlike the colour of public swimming pools, or the Crest mint toothpaste of the era. Bleen is a portmanteau word — blue plus green — but somehow bleen evokes and connotes so much more. Spleen, bleach, blech (for those of you who used to read MAD Magazine), chlorine, clean, it sounds like something that if drunk would cause violent vomiting. Bleen is more a state of mind than a colour. It stands in for ‘crap’. I painted my deck/house/fence this crappy colour because I’m not rich, because life is crap, because I’ll never be able to afford anything other than third-rate crap, so I’m going to revel in my crapdom, and force you to swallow it as well as you walk down the street past my house. Perhaps bleen is like East Vancouver’s visual equivalent of fado, a type of Portuguese folk music, which a friend, who’s traveled quite a bit in Portugal, explains is a kind of Portuguese blues. I’m Portuguese, so this is my fate.
….Strangely, in a certain light, a number of Vancouver’s new glass condo towers look bleen.
….I’m a little uncertain now what my original goals were for the renovation. I have a somewhat queasy sense that they were probably a lot more modest, and definitely a lot less expensive, than what they ended up being. To begin with, I thought I was going to do large portions of the work myself (utter madness, I now realize). I’m reasonably good with my hands, and in my early 20s I worked on two house-building crews, so I understand framing and how houses are put together. I’ve done lots of painting, and some carpentry, and drywalling, and roofing, and a fair bit of demolition. So I was all set, right? What I didn’t have is much of a plan (translation: no plan). Without consulting with my wife, I rip out the skanky wall-to-wall carpeting in the rental suite the day the tenants move out, and reveal a rotten patch in the subfloor. This act is akin to pulling the thread.
….My wife’s goal is clearer. She grew up a dozen blocks away, near Trout Lake, in an early Vancouver Special built in the 1960s, painted entirely bleen. Riding the #7 bus up and down Nanaimo Street and imagining the house she might one day live in, she used to look down the small slope into our current neighbourhood and think that her future house could be anywhere but on those dreary and depressing blocks. Cast back by fate and the realities of the Vancouver real estate market to those very blocks, for my wife, the renovation is simply about getting rid of the bleen.
.

Bleen deck
.
Pulling the thread
Shiplap — 1×8 boards — nailed to long 2×4 sleepers that lie flat on the concrete slab is what forms the subfloor in the rental suite. In the living room, it’s this subfloor that has rotted in a roughly circular patch about a foot across, allowing me to easily break away rotten bits of wood and place my hand flat against the cool concrete beneath. Everything is dry now, but obviously significant amounts of moisture have been trapped in this area at some point, allowing the rot to occur. A few feet inside the door to the suite is another soft spot beneath the vinyl tiles. I peel away the putty coloured vinyl baseboard in the living room and reveal black dots of mould. When we bought, the home inspector got some elevated moisture readings, and here’s the physical evidence that his readings were accurate. So now we have a decision to make. We can ignore the telltale signs of moisture intrusion — on balance, they aren’t that drastic — patch the subfloor where necessary, and get on with an overhaul of the suite. Or, based on the web research I do, we can address the moisture problem in a more fundamental way, probably by installing new drain tile around the perimeter of the house.
….Outside, I dig a hole a couple of feet deep and confirm that the house does have existing drain tile — old style, orangey-brown clay pipe laid in short sections, with small gaps between sections to allow ground water to seep in. By shining a flashlight into a gap I can see a silt buildup inside the pipe, the weakness of this old design. Over time the pipe clogs up, and ground water no longer flows down the pipe and away from the house. Instead, depending on how much natural drainage a lot may have — our lot is perfectly flat — the water sits in the soil surrounding the house and seeps into the foundation, because concrete is porous. When heavy rains saturate the soil, moisture migrates through the concrete foundation walls and the concrete floor slab. If a basement is unfinished, this moisture evaporates from the bare concrete interior surfaces. But if a subfloor, or carpet, or tiles, or drywall, or paneling have been installed over these surfaces, the moisture becomes trapped, providing ideal conditions for mould and rot. If you live in Nevada or Arizona, this process may not be an issue, but in Vancouver, a city built on the site of a cleared rainforest, it’s a significant concern. Modern drain tile minimizes the infiltration of the surrounding soil, and the risk of clogging, by using joined lengths of perforated PVC pipe, with the perforations — a series of round holes — oriented down, and the pipe laid in a gravel bed.

Clay drain tile, once manufactured nearby in Port Haney
.

….In 1987, the City of Vancouver changed its building code to prohibit the common past practice of connecting the downspouts from roof gutters to the drain tile system. The problem with this approach is that during a heavy downpour roof water can overwhelm the drain tile and reverse the normal flow, forcing water out the perforations and into the surrounding soil, making the saturation worse, and potentially causing moisture problems for neighbouring properties, or even flooding. Changes to the residential built environment can disrupt old patterns of drainage. Infill houses are often bigger than the houses they replace, with greater roof area to collect water. New houses may be closer together, maximizing their square footage by swelling up to fill the lot. And increasingly, broad walkways, patios, decks, large garages, and parking pads are covering a greater percentage of the typical residential lot, making more of the land impermeable. As the built environment becomes denser, rainwater has fewer options for soaking into the ground, and must be more actively managed. As one way of addressing this increasing need to manage drainage, new construction now requires a two-pipe system: drain tile for foundation drainage, and solid pipe for roof drainage, both pipes emptying into a sump, which then feeds the city’s storm sewer.
.
Renovation 101
This is all stuff I learn from my research. Over the next three years, as the renovation costs mount, and my faith in some of the people we hire evaporates, my early mornings will increasingly be spent scouring the Internet for information and guidance. Research, often last minute and panicky, aimed at making the most appropriate choice among an oppressive number of options, or aimed at spending money as wisely as possible, or in the case of bad hires, aimed at preventing the next rip-off or screw-up. Going into the renovation, I may have known a lot more about construction than the average person, but as I find out, there is a hell of a lot I don’t know, and trying to backfill that knowledge on the fly is at times acutely stressful.
.
Drainage Blitzkrieg
I tell my wife that installing a new suite over a damp basement slab and foundation walls makes no sense. Mould will breed. Expensive new finishings will progressively rot. She agrees and we get quotes from drainage contractors. One guy smells of stale booze, and doesn’t get back to us for three weeks. Another offers to make the GST magically disappear — probably along with his company if there are any problems with the installation down the road. The contractor we end up hiring is at first reluctant even to price the job. He says that giving quotes in East Van is usually a waste of his time because people on the East Side don’t want to pay his prices. And they don’t want to pay for a permit. He won’t do any work without a permit. I assure him that we want everything done properly. Interestingly, his price isn’t that much higher than the no-GST boy — although neither quote is cheap. We opt for a two-pipe system, even though the building code exempts replacement drain tile systems from the two-pipe requirement. Once the trenches are dug, putting in a second pipe doesn’t cost that much more.
….The drainage crew comes in with a jackhammer, diamond saw, and wheelbarrows and removes the old concrete walkways around the house in preparation for digging. The next day the contractor brings in his mini excavator, which can just squeeze down the four-foot side yard between the house and the fence, and digs the necessary trenches around the house, digging out the old drain tile in the process. He also digs a deep trench through the front yard toward the sidewalk to uncover the sewer pipe and tells us they’ll replace the original cast iron pipe with a new ABS one “so we don’t have to come back in a year and dig up your yard again.” The contractor has already surmised that the cast iron toilet drains and main DWV stack (drain-waste-vent stack) inside the house will be on the renovation hit list, and eventually having new pipe all the way from the roof to the street is preferable to connecting new to old.
….We arrive home from work to find our house surrounded by trenches, berms, and piles of earth. Our lot looks like a World War One battlefield, although the onslaught feels more like a World War Two Blitzkrieg. The crew has forewarned us, and we’ve relocated most of the shrubs and plants from the front of the house to the back yard. The place is a mess, but it’s all over in about a week: gravel beds, pipes, sump installed, trenches backfilled and tamped. We’re left with a mangled front lawn, denuded topsoil, and no walkways, but a well-drained property.
(Drainage: $10,700)
.
Finding contractors
Hiring contractors is proving difficult. Finding a drainage contractor wasn’t easy, and none of the concrete outfits we phone is interested in installing new walkways. One guy tells me that if I can build the forms myself he’ll place and finish the concrete, but otherwise forget it, he just can’t justify taking the time away from his bigger jobs. Olympic and associated infrastructure projects, concrete condo towers, and high levels of new housing starts are putting big demands on the local concrete industry. We eventually find an old-time Italian contractor who rolls up in his dilapidated pickup and tells us he can do the job.
(Concrete walkways: $2,000)
.
….The contractor who does our drainage job goes from feeling East Van is a waste of time to telling me that our job led directly to three others in the vicinity — people living in the neighbourhood who saw our project ongoing and approached him, begged him in a couple of cases, to look at the drainage situation with their properties. Whether it’s the changing demographics of the neighbourhood, or boom-related desperation, apparently getting his price on the East Side is now less of an issue.
….We’re well satisfied with the first step in the reno, although writing the cheque is a bit painful. When record rainfalls deluge Vancouver two months later in November, and a violent windstorm fells thousands of huge trees in Stanley Park a month after that, we feel we’ve dodged a bullet. A woman I work with tries desperately to hire someone to redo her property’s drainage so she can sell the house in the aftermath of a marital breakdown. I give her the name of the contractor who did our job, but like everyone else she phones, he takes days to call back. When he does finally return her repeated calls it’s only to confirm he’s insanely busy and can’t possibly do her job.
.
Lead and asbestos
My reading and research is causing me increasing worry about lead and asbestos. Most renovation web sites and books warn do-it-yourselfers against merrily ripping into walls and ceilings and old woodwork with demolition tools, especially in older houses. The danger is that you disturb old building materials and contaminate your home with lead dust from old paint, or worse, asbestos from any number of old building materials.
….Until the 1960s, it was common for paint to contain large amounts of lead, and it wasn’t until 1976 that the Canadian federal government limited the amount of lead allowed in interior paint to 0.5% by weight.
….Asbestos was originally thought of as a wonder material because of its heat- and sound-resistive properties, and structural strength. Until the early 1980s, it was used in thousands of building materials including floor tiles and tile adhesive, pipe insulation and duct tape, house siding, roofing felt and shingles, acoustical ceiling tiles, ceiling texture, and drywall mud. Perhaps most notoriously, until the mid to late 1980s asbestos-containing vermiculite pellets under the brand name Zonolite were used for attic insulation. The vermiculite came from Libby, Montana, but was processed in plants all over North America, including one right here in Vancouver on Industrial Avenue. Reading down a very long list of building materials that once contained asbestos, I conclude that with the right combination of timing and bad luck, one’s whole house could be made of asbestos.
….I contact a company that does hazardous materials testing and in January of 2007 a technician takes a variety of samples from all over the house — the white, plaster-like duct tape sealing the joints between sections of heating duct, drywall mud from the walls in the rental suite, floor tiles, ceiling texture, exterior stucco, and three colours of old paint, including the glossy, chocolate brown interior doors upstairs, and the linen closet shelves, which are bleen. The results aren’t terrible. Only the duct tape and the drywall mud contain asbestos. The duct tape is 60 to 80% asbestos, but that isn’t a surprise. More of a problem is the drywall mud, which contains up to 10% asbestos, because it’s spread throughout the entire suite. Undisturbed behind paint, it’s not an issue. But we want to tear out the walls. As for the old paint, the brown has a 3.49% lead content, and the bleen 8.26% — crappy and toxic — however both are upstairs and not part of the first phase of the renovation.
….The situation with the drywall mud puts an end to my weekend warrior aspirations regarding demolition of the old suite. A disappointment, but, safety first. We start looking for an asbestos abatement company that can do the demolition using the approved procedures.
(Hazmat testing: $1,100)
.
Learning the hard way
2007 is the year I go from thinking we can manage the renovation ourselves, and do a significant amount of the work ourselves, to accepting that we need help. My wife recognizes this reality much sooner than I do. However, I’ve never met a brick wall that I didn’t enjoy bashing my head against.
….In March, I arrange for what City Hall calls “a special inspection”. We want to make the unauthorized suite legal, and according to the city’s Secondary Suite Program the first step is to invite in a phalanx of inspectors — building, electrical, and plumbing — for a look. They itemize all the things that are required to make the suite legal, and the results are packaged up in a letter sent to the homeowner by the city.
(Special inspection: $132)
.
….When we get our letter it lists 41 code violations, 30 of which are electrical. The entire suite is on perhaps two electrical circuits, which may have been adequate for an unfinished basement in the 1940s in which no one lived, but is woefully inadequate for a self-contained, two-bedroom living unit with multiple appliances. When the tenants are still with us, the electrical outlet they use for a space heater in winter, and the outlet my wife uses upstairs for a blow dryer, are on the same circuit, as are half our lights upstairs — but no lights downstairs. Not surprisingly, this circuit frequently trips, knocking out our lights, and a couple of clocks that will once again flash 12:00 and have to be reset. Because there are no longer internal stairs connecting the two levels of the house, I have the peculiar joy, about once a week, of stepping out into the dark and the freezing early morning cold in my housecoat and rubber boots, feeling my way down the frosty and slippery back stairs, and fumbling in the dark with the key to the outer door of the lower level, so I can stare groggily at the unlabeled breakers on the electrical panel, trying to figure out which one has tripped — because they don’t give much of a clue from their appearance. Nothing other than the heater is affected downstairs, so the tenants have no inkling of this oft-repeated little ritual. I vow once again to label all the breakers, and once again, when the weekend rolls around with various other house-related tasks, I forget. I climb the back stairs cursing the Portuguese brothers who put in the suite, wondering if fado is also extending its tentacles around me, my affection for the East Van do-it-yourself ethos wearing progressively thinner.
.
No going back
According to our special inspection letter, even if we change our minds about legalizing the suite, or about even having a suite, most of the items in violation must still be rectified because “they do not comply with the minimum safety standards prescribed under the applicable By-laws and Regulations.” So there’s no going back. The City now has us on their books.
….I’m not one of those people who automatically adopt an adversarial or crafty stance toward city inspectors. Building codes have developed over a period of many years based on often-unfortunate community experience. I want to make use of the inspectors’ knowledge. That said, when I look at the long list of requirements in the letter, and contemplate the dollar cost associated with each one, I understand why many homeowners with rental suites want to remain off the books. According to a City of Vancouver report, of an estimated 25,000 secondary suites in the city, only 20% are legal. It’s about money. If the homeowners were to spend the often thousands of dollars required to legalize their suites, they’d lose a significant portion of their mortgage-helping potential. We’re going legal because it makes sense as part of a more general, large-scale renovation — although this may be revisionist thinking on my part. Building a new basement suite would include rewiring it to modern standards, which would wipe out all 30 electrical code violations in the process. We’re also going legal because I am who I am (more on this later).
….One of the city’s requirements is that we deal with the ceiling height issue. We need to provide a minimum headroom of 6’6” over 80% of the suite area and all exit routes. Like many houses of its era, our house has floor joists that run from the outer walls to a central beam supported by posts. In the basement, the underside of this beam is only 6’2” from the floor. Even though I don’t actually need to, I automatically duck my head whenever I walk under the beam. I have quite a bit of back and forth with the building inspector about this beam. The nightmare scenario sketched out by the inspector is that a tall tenant is woken up by fire in the middle of the night, attempts to run out of the suite but smacks into the beam and is knocked out, and dies in a fire that would otherwise be survivable. Promising that we’ll only rent our suite to short people doesn’t get us very far. The solution is to create a section of “flush beam” by cutting the beam where it crosses an exit point, by cutting back the joist ends in the same area, by moving the beam up into the joist space, and by attaching the joists to the side of the beam with U-shaped steel connectors called joist hangers. The inspector suggests we may want to consult a structural engineer.

Central beam in gutted suite causing low headroom in front of doorway

The men in white suits
In April, the men in white suits arrive — not for me, although I suspect my wife is already starting to question the sanity of our undertaking. The white suits are the hooded disposable coveralls the crew from the environmental contracting company wear, along with full-face respirators. The crew seal up the entire ground floor, and install a large fan to create negative pressure by blowing air from the suite out an open window. The open window is fitted with a large sausage made of poly to catch dust and air-borne particles, with a small hole on top to allow relatively clean air to escape. We rent space heaters for upstairs because we can’t use the furnace during the demolition.
(Space heater rental: $145)
.
….
The crew spends a week gutting the suite — the kitchen cabinets and sink, the bathroom fixtures and full-length, funhouse mirrors, the bars on the windows, the garish, crime-scene carpet in the bedrooms, the junky woodwork, the wall and ceiling drywall, the fiberglass batt insulation in the outer walls, much of it black with mould at the bottom where moisture has collected, and all the heating ducts. This final item prompts some discussion. Once the ducts are gone we won’t have any heat. Although the joints are wrapped in asbestos-laden duct tape, the tape is fairly inert and doesn’t pose a huge hazard if not damaged or disturbed. The ducts could be removed at a later date without much risk. We’ve already selected a heating contractor to replace the 50-year-old furnace, a new duct system is part of the work, and the weather’s quite mild — summer is on the way — so I give the go-ahead to remove the ducts.
….Once the gutting is complete and the suite is down to bare studs, the crew vacuums every crevice with an industrial-quality HEPA vacuum. A few items remain: the laundry facilities, the disconnected furnace, the hot water tank, the tenant fridge, and the subfloor and interior stud walls, which I plan to take apart myself so I can stockpile and reuse the wood. The demolition also reveals a nasty surprise. Where the concrete front stairs join the house, the exterior wall sheathing is heavily rotted. I can shine a flashlight right through gaps in the rotten wall to the space under the stairs. The space is full of black, rotted wood falling to the damp earth floor — the entombed formwork from when the concrete stairs were poured — and dozens of white spider egg sacs.
….With the back and forth of the demolition over, we get the front yard, still a mess from the drainage work, leveled and reconditioned with new topsoil, and re-sodded.
(Demolition: $7,800)
(Landscaping: $1,700)
.

Rotted exterior wall sheathing where house meets space under concrete front stairs
.
TK
“TK” is Tony Kwan, who becomes the structural engineer of record for our project. When he arrives at the house for the first meeting, I’m in the suite and he sees me through the curtainless living room window. He’s accompanied by a young woman. I watch as he marches up the walkway, around the side of the house, and in the door at the rear. He gives a nod and a grunt and starts looking around. No handshake or introduction. He spends about a minute strutting back and forth like a little Napoleon, staring up into the joists, looking at the support beam and posts, occasionally saying Mmnnn. I’m uncertain what role the young woman is performing. My wife comes down from upstairs and I introduce her to TK. I explain to TK the issue with the central support beam and the headroom and he tells me we should replace the posts and beam with a weight-bearing wall, with a flush beam over exit points. The weight-bearing wall will require a concrete footing be poured the entire length of the house, which will necessitate removing a three-foot-wide strip of the concrete basement slab and digging a trench down to the hardpan — the solid material a couple of feet below the surface soil. I mention that I have my doubts about the condition of the subfloor, and the quality of the old basement slab. With a dismissive wave of his arm TK says, “Take it all out.”
….“Take out the entire slab?” I ask.
….“That’s what I say. These old slabs are no good. If this is my house, I would take it all out.”
….TK tells us that if we want him to do the job we need to give him a $500 deposit. My wife reports later that when I go upstairs to write the cheque, TK immediately switches from directives about the house to questions of a personal nature. “Do we have any children?” “No.” “Why not? You should have a family.” We assume that because my wife is Chinese-Canadian, TK feels at liberty to make pronouncements about such matters. He quickly figures out that my wife doesn’t speak Chinese, at which point he and his assistant wander a few feet away and begin a hushed conversation in Chinese, interspersed with giggles, as they look around the gutted basement.
….TK is not our first choice. A friend of ours is a builder, who at the time is working on a million-dollar renovation in West Vancouver. He gives us the name of the structural engineer on that project, someone he highly recommends. I phone this engineer and explain the connection. He’s apologetic when telling me that he’s currently working seven days a week, as are most structural engineers in Vancouver at the moment, and he simply can’t take on any more work. He gives me the name of a former classmate who he’d recommend. I phone the classmate. Same story — way too busy to consider more work. I ask the classmate if he has a recommendation. He pauses for a moment, and then suggests I could try TK. Thinking back, there may be some hesitancy there that I miss because I’m feeling pressure — trying to manage the renovation from my work place, yet again running into brick walls trying to find and hire people during a frenzied real estate and construction boom, the clock ticking on a house with no heat.
….After one or two more disagreeable interactions with TK, my wife and I, by unspoken agreement, begin referring to him solely by his initials.
(Structural engineering deposit: $500)
.
Do-it-yourselfers hit a wall
Over the spring and summer my fantasy of managing the renovation and doing a significant amount of the work ourselves persists. TK delivers the engineering drawings, which aren’t much more than the new suite layout I gave him, with some added technical specs for the weight-bearing wall and the footing, and his Professional Engineer seal. I’d asked for seismic upgrading information, because with everything open on the lower level of the house we have the opportunity to improve the earthquake resistance of the structure. One thing we discover once the drywall and insulation are gone is that there are no anchor bolts connecting the house frame to the foundation walls. The only thing holding the house on the foundation is gravity. Even a moderate earthquake could cause the house to vibrate off the foundation. The drawings do include some seismic information, but based on my close reading in the interim of Residential Guide to Earthquake Resistance, the information seems inadequate. However, time’s passing and the drawings are what I need to get the required development and building permits from the city — which I do get in June, but not before being initially rebuffed.
(Structural engineering drawings: $1,600)
.
….Our proposed new layout includes moving and altering the size of two windows on one side of the house. A stern gatekeeper at City Hall’s Development Services informs me that this alteration is prohibited in houses with side yards of four feet or less, because windows provide a pathway for fire to spread to adjacent houses, so there’s no point even submitting the plans. Existing windows are grandfathered — even massive windows in front of sawdust-burning furnaces, I speculate — but altering a window constitutes a new window governed by the current building code. The only way we’d be allowed to make the alteration we’re proposing is if we also install sprinklers throughout the house, a retrofit that typically costs about $25,000, the gatekeeper tells me.
….We’re forced to junk the beautiful layout we sweated over, and do a quick revision that involves some design compromises we aren’t overly happy with.
(Development and building permits: $922)
.
….Drawings and permits in place, I persevere over the summer months with what now feels like an official plan — or at least more of a plan than initially existed. I disassemble all the interior stud walls and neatly stack the lumber, orangey-brown Douglas fir, some of it free of knots. I remove the pink bathtub. I take apart the raised bathroom floor, constructed of 2x8s, and yank out the flexible bathtub drain pipe that snakes in the space beneath. I put on a half-mask respirator, goggles, and gloves, check my intestinal fortitude, and spend a day cleaning out all the rotten wood and spider eggs from the space beneath the stairs.
….Next is the subfloor. I use a flat shovel to pry up the sheets of 1/4-inch plywood the floor tiles are attached to, before going to work on the shiplap and 2×4 sleepers beneath. The pace really slows down here. The sleepers are spaced about a foot apart, and at every point where the shiplap crosses a sleeper it’s attached with two nails. Hundreds of connection points across the entire subfloor. The shiplap is springy when I try to lever it up between sleepers, and it tends to splinter at the first nail when I shove the pry bar directly into the connection point between shiplap and sleeper. I eventually give up on this method and begin using a circular saw to buzz through the shiplap at the mid point between two sleepers, walking the saw from one end of the house to the other. I can then stomp the short sections of shiplap, or come down on them with a long, straight wrecking bar, and they seesaw up on the underlying sleeper and pop loose. At this point, at my wife’s urging, I bring in a friend to help — the one who told me about fado. Together, we make short work of the subfloor, pile the cut-up shiplap on the patio outside, toss the long 2×4 sleepers to one side of the basement floor, and then relax with beers in the sunshine, feeling pretty good about ourselves. But it’s August 12th. Isn’t there some fable about the ant and the grasshopper and oncoming winter?
….I turn my attention to the now-exposed concrete slab. There’s also a brick chimney to consider, in the center of the house, running from the slab to the roof. After weeks of persistent phone calls, we’ve just signed a contract with a concrete contractor to do the central footing work, and perhaps install a new slab depending on what we decide, and paid a deposit, but we’re on a waiting list. The contractor isn’t that interested in doing the concrete demolition and excavation for the footing. He’d rather use his crew on the more skilled work of building forms, and placing and finishing concrete. I decide to tackle the demolition and excavation myself. I begin by installing two rows of jack posts to take the load off the central beam. Excavating the trench for the footing will require digging around the base of the posts supporting the beam, and likely destabilizing them. The beam and posts will be coming out, but I’m not prepared to handle that job myself. I order a large roll-off container, which a truck drops in front of the house, and rent a Hilti demolition hammer, a big fan, and an extra wheelbarrow. This time I need less urging from my wife to call upon my friend, and I’m also paying him because the work will be heavy and take a significant amount of time.
(Concrete deposit: $2,850)
(Roll-off container: $990)
(Tool rental: $180)
.
….Along the way, I’ve been taking samples of newly uncovered materials to the hazardous materials lab, and nothing in these new samples is of concern, although concrete demolition does produce silica dust, which is hazardous to the lungs if you don’t wear a respirator. But finally here’s something I can bash the hell out of without turning the house into a toxic waste dump. I make a couple of test passes with a sledgehammer and the concrete breaks easily enough — it’s only 2-1/2 inches thick, poured directly on top of brown soil — but it breaks into small chunks and shrapnel rather than nice pieces you can just lift into a wheelbarrow.
(Additional hazmat testing: $297)
.
….
My friend arrives on a Saturday morning early in September and we put on our protective gear and go to work. The plan is to break the concrete in a three-foot-wide strip the length of the slab, wheelbarrow the debris to the container, and then excavate as much of the brown soil as required to get to the hard ground. I’ve dug a test hole, and the hardpan is about two feet down.
….We work all weekend. Breaking the concrete is very slow going. The problem is that the pointed chisel on the demolition hammer tends to poke through the concrete rather than break it along a line. We soon figure out that we have to work an edge, and break away the concrete a little at a time. I now realize we probably had the wrong shape of chisel. Rather than a point, a flat, wide shape would probably have been more effective. Oh well — next time. If there ever is a next time. By the end of the day we’re wiped, but we have the concrete broken.

My friend with the demolition hammer
.
….
Sunday is just grunt labour. First loading heavy shovelfuls of concrete debris into the wheelbarrows and walking it out to the container, and then digging, digging, digging. Load after load of the damp brown soil. Finally we start seeing the yellowy-grey hardpan. We leave a safe amount of soil beneath the post footings, and the larger concrete pad supporting the chimney. We don’t get the entire trench excavated by the end of the weekend, but we’re about 85% done. Near the end of the day, my friend makes a worrisome discovery at one end of the trench where it meets the concrete foundation wall. The foundation wall extends only 18 inches below the surface of the soil, it stops 6 inches short of the hardpan, and it has no footing — a horizontal portion of concrete — beneath it. Just an 8-inch-wide concrete wall that ends. From a structural standpoint, this is not good news.
….As we’re packing up for the day my friend says, “You’ve got yourself a big project here.” We both laugh, sort of. He’s already suggested hiring the handyman he and his partner have used for several jobs. And during a break in our work he tells me about a recent basement slab demolition he heard about in the neighbourhood. Apparently the owner hired a contractor who used a remote-controlled micro excavator to do the work — a demolition robot. The entire slab was out in a few hours.
….I’m starting to feel I need serious help — interpret that as you see fit.

Concrete broken for central trench
.
Tarpits
Drainage problems, electrical problems, plumbing problems — the upstairs shower slows to a trickle if the washing machine is running — ceiling height and other building code requirements, asbestos and lead issues, foundation issues, rot, mould, seismic concerns, competing with all the other equity-swollen homeowners during a boom for contractors and construction industry professionals — these are the tarpits we aren’t aware of as first-time buyers taking an anxious 10-minute twirl around a 60-year-old house during a real estate boom, one of the few places we can afford in our target area that doesn’t look like total crap. Typically, these problems affect the things hidden from view, the various systems we rely upon to make a house function as a house, systems that are only vaguely understood, or not understood at all, by the average person. These are the unsexy but expensive things far removed from dreamy notions of granite countertops, stainless steel appliances, hardwood floors, and tasteful colour schemes that coordinate walls, window coverings, and upholstery. They’re the guts of a house, the organs, rather than the skin. And when they go wrong, the whole organism can go wrong. Most first time buyers really don’t understand the implications of those fateful words, uttered so blithely: we can fix it up.

Episode 6 total: $32,572. Includes a number of smaller, miscellaneous expenses not listed individually in the episode – mostly tools, small amounts of materials, and safety supplies.

Next episode
Part 7: “Renovation Nervosa Continued”
Animal show. Hellhole. No heat. Nightmare contractor. Bleeding money. And so on.
.

Financial details

From 2004 onward, all mortgage and LOC balances are as of 31 December of the year in question.
.
2003
Asking Price: $355,000
Sale Price: $355,000
Down payment: $88,750 (25%, ergo, no CMHC insurance, representing thousands of dollars of additional cost)
Mortgage (at purchase, Sep 2003): $266,250
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2003 Property Assessment (estimate of market value on July 1, 2002): $260,600
2004 Property Assessment (estimate of market value on July 1, 2003): $330,500
Equity based on assessment: $64,250
.
2004
Mortgage principal: $247,330
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2005 Property Assessment (estimate of market value on July 1, 2004): $420,000
Equity based on assessment: $172,670
.
2005
Mortgage principal: $201,829
Terms: 3 year fixed at 4.00%, 18 year amortization, bi-weekly payments
2006 Property Assessment (estimate of market value on July 1, 2005): $461,000
Equity based on assessment: $259,171
.
2006
Mortgage principal: $191,884
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $4,291
HELOC interest rate: variable, at Prime.
2007 Property Assessment (estimate of market value on July 1, 2006): $570,000
Equity based on assessment: $373,825
.
2007
Mortgage principal: $183,063
Terms: 5 year variable at Prime minus .75%, 25 year amortization, bi-weekly payments
HELOC balance: $49,410
HELOC interest rate: variable, at Prime.
2008 Property Assessment (estimate of market value on July 1, 2007): $639,000
Equity based on assessment: $406,527

Fear and Ignorance in Vancouver – 34yr Old FTB Overpays For Condo; Inadvertently Becomes A Landlord – “It’s a learning process that’s so scary. No one can ever tell you what it’s going to be like. At least I’m in the market and I’m learning.”

Fear and ignorance can only drive a market for a finite amount of time. Over the next 5 years there will be a whole lotta learnin’ going on. -vreaa

This anecdote extracted from a Canadian Press story, ‘Homebuyers’ pain, mortgage brokers’ gain as tighter rules come into place’, by Derek Scott, 2 Apr 2010

“Buyer Leslie Urquhart said buying her first home was a horrifying ordeal. Urquhart, 34, began her six-month home shopping odyssey with one goal – to get into the market. But she quickly realized that was easier said than done. Increasing budgets, pressure from her realtor to commit to a place and finding a mortgage made her wonder what she had got herself into. Urquhart’s realtor urged her to use a broker, saying a broker could find a better interest rate than her bank. The broker did find a cheaper rate, but it was still too high for her to manage. Urquart was left somewhat cold by the experience with her broker. She said she was left in the uncomfortable position of putting her trust in someone she had only spoken with over the phone. “I never met with him, it was very impersonal,” she said. Although she eventually found a condo for $60,000 more than her original budget, she advised other first-timers to do their homework and prepare themselves for changes. “It’s a learning process that’s so scary,” she said. “No one can ever tell you what it’s going to be like.” In the end, Urquhart accomplished her goal of getting into the housing market, but she won’t be living in her new place as she had hoped. Instead, she will become a landlord, renting the place out while living in a basement suite at her parent’s house where rent is cheap. “At least I’m in the market and I’m learning,” she said.”

Federal Cabinet Minister Buys Ottawa House – 0% Downpayment; Price:Income 4:1

For Vancouver readers, perhaps the most remarkable aspect of this story is not that a Cabinet Minister is capable of hilarious indiscretions, or somehow has access to a 0%-down mortgage, but that a 2,800 sqft SFH in a “ritzy area” of our nation’s capital can sell for a mere $880K! Now THAT’S newsworthy. -vreaa

This extracted from the Ottawa Citizen, 2 Apr 2010, 10:32 am

Canada's Minister of State for Status of Women Helena Guergis speaks during Question Period in the House of Commons on Parliament Hill in Ottawa April 1, 2010.

Embattled Status of Women Minister Helena Guergis may have one potential reason to resist calls for her resignation – a large mortgage on a new Ottawa home she recently purchased.

[2,800 sqft two storey home; Rockcliffe; Sale price $880K; Mortgage $880K]

The transaction was financed through a Bank of Nova Scotia branch in Edmonton, where Guergis’s husband, former Conservative MP Rahim Jaffer, held a seat until the last federal election. It is unclear if Guergis bought the house with no money down, or whether the bank rolled an additional line of credit or other loan onto the mortgage to bring it up to the full purchase price of the house.

Most home-buyers make a down-payment of 5 per cent or more of the purchase price of home to qualify for a government-insured mortgage, but there is nothing to stop a bank from lending the full amount of the property.

As a minister of state, Guergis earns $56,637 on top of her MP salary of $157,731.

CIBC – “The gap between real estate gains and income growth is widening, suggesting stagnating or falling real estate markets in coming years.”

Those pesky fundamentals. -vreaa

A CIBC report on the Canadian consumer, as reported in Financial Post, 31 Mar 2010. Excerpts –

“Consumer fundamentals are at their weakest point in 15 years and do not match up with recent rebounds in sentiment.”

“The recent surge in spending is not backed up by rising consumer fundamentals,” Benjamin Tal, economist with CIBC, said in the report. “The ‘V-shaped’ recovery in consumer confidence we have seen throughout the second half of 2009, has actually coincided with a drop in the ability of households to spend.”

“To a certain extent debt is replacing income as a major driver of consumer purchases,” he said. “Given the vulnerable starting point of the consumer, the Bank of Canada will soon find that even a moderate monetary squeeze will be sufficient to drive a material deceleration in consumer spending.”


“Despite the rebound in stock valuations and the recent surge in home prices, over the past two years Canadians have seen their liabilities rising twice as fast as their assets.”

“The gap between real estate gains and income growth is widening, suggesting stagnating or falling real estate markets in coming years, and household debt is rising faster than assets.”

Vancouver Couple – $1.2M house; $700K mortgage; Husband laid off last month; Wife “unsure if her job is going to be there next month.”

Vancouver RE bulls ask why any homeowner would think of selling in a falling market. In this couple’s case, we can think of (1,200,000 minus 700,000) reasons. -vreaa

Ronaldo at greaterfool.ca 1 Apr 2010 11:45 am

“I know of one couple in Vancouver who bought a couple years ago and are sitting on a S700,000 mortgage, They are saying that their realtor is telling them that they can get $1.2 million for the house, which is an old 1920’s style, needing a complete renovation. I suggested that they sell and rent and wait a year. She says they are afraid to, as they would not be able to qualify to buy again, as husband got laid off and doing part time work, and herself unsure if her job is going to be there next month.”

Realtor Turf War – “Warning! Don’t use a part-time agent.”

Usually we expect to see this kind of in-fighting over commissions in a descending market, when customers and sales are drying up. Perhaps these guys are a leading indicator. -vreaa

The real-estate industry is no longer only battling with the Competition Bureau. It is now fighting amongst itself, with one of the country’s largest firms starting a campaign against part-time agents.

From ‘Re/Max starts campaign against part-time agents’, by Garry Marr, Financial Post, 30 Mar 2010“Michael Polzler, head of Re/Max Ontario-Atlantic Canada, launched a new offensive this week with an advertising blitz in the greater Toronto area that says: “Warning! Don’t use a part-time agent.” The campaign follows a letter Mr. Polzler paid to have printed in The Real Estate Magazine, an industry publication. In the letter, he declares it’s time to “take back the industry” and calls for the creation of new requirements for agents such as increased education, a one-year apprenticeship program and a referral program that would allow inactive realtors to transfer clientele to full-time professionals for a fee. “I don’t believe part-time agents can do the job,” he said in an interview.”

“I’ve been in Miami since 2003. It was obnoxious to listen to all the RE talk. Now I get the same thing from my Vancouver-based family.”

Josh at VREAA 31 Mar 2010 6:40 pm

“I’ve been in Miami since 2003. It was obnoxious to listen to all the RE talk. Now I get the same thing from my Vancouver-based family.”

“An investor who bought into a rent to own home placed their own tenant in the building until they came up with the financing. They wanted to complete in October but now they HAVE TO complete before April 19th or will not qualify.”

joycer at vancouvercondo.info 30 Mar 2010 8:00 am

“I know personally of an investor who bought into a rent to own home and placed their own tenant in the building until they could come up with the financing. They wanted to complete in October [2010] but now say they HAVE TO complete before April 19th or will not qualify. So it’s no surprise to me that sales are doing well (but still not containing listings), the question is how much future demand is being robbed.”

An Ex-Pat Comes Home – “I’ve been frustrated talking to friends and family in Canada about housing because I honestly feel like I’ve traveled backwards 5 years in time, to when reasonable discussion was impossible in California, and house prices were only going up-up-up.”

CalgaryLurker at greaterfool.ca 27 Mar 2010 7:55 pm

“I want to share my experiences as a former expat coming back home. I lived in San Francisco/Bay Area for most of the last 11 years and recently chose to move back to Canada for family.  Since being back, I’ve been somewhat frustrated talking to friends and family about housing because I honestly feel like I’ve traveled backwards 5 years in time, to when reasonable discussion was impossible in California, and house prices were only going up-up-up.
I think what frustrates me the most though is knowing what it was like to live through the years after that peak, and the possibility of reliving them yet AGAIN here in Canada. The truth is I very much would like to own a home, I just am unwilling to sell my financial future to do it, which is what the last decade has asked of home ownership.
I am in my late 30s and have never owned a home, but instead chosen to rent. Financially I am certainly capable of buying, and came close on several occasions, but for various reasons ultimately decided it didn’t make sense for me. Our culture’s recent obsession that views homes as investments is an aberration in my view, and over the years I have chosen to put my money to work elsewhere. I suppose I developed this thinking during the 80s as I watched my father tried to sell our family homes during recessions in Alberta, usually at a loss. It certainly coloured his thinking.
After I moved to San Francisco in my late 20s, I watched the dot com bubble inflate and pop, lived through power brownouts, 911, antiwar protests, two terms of Bush, and saw the California real estate bubble inflate and pop, and the budget crisis that followed. What stayed with me is that nothing moves in a straight line for very long. It’s never different this time. People will always move en masse to find the next good thing (or avoid the next terrible thing) whether looking for a job or an investment. It has made somewhat cautious when dealing with my money and big social events like bubbles. Animal spirits be damned!
I do understand what the ride up feels like. It is exciting and it feels GOOD. I had to line up with 30-40 people just to see an apartment to rent, and usually had to overbid! In my industry, everyone was trying to figure out how to get an investment property or three. HELOCs were providing family trips to Hawaii and brand new cars. Every lunchroom conversation was about home reno projects. Etc..etc.. I chose not to buy back then even though a dozen of my friends and co-workers did because the numbers just seemed silly to me (perhaps being the son of an CPA something rubbed off). In retrospect I am very glad I didn’t cave to the pressure I was feeling at the time (though I went to open houses and talked to realtors, so it was close). Today many of my friends in California are underwater on their homes but making payments, some have lost their vacation and rental properties, and some are under threat of foreclosure. Many have had to scale back their lives. One even used to live in Stockton, the ground zero for the central valley collapse, where entire streets were gutted before he moved to Seattle. He lost about 200k of equity and considers himself lucky.
And these are not poor or dumb people by most standards. All of them work in software making 6 figure combined incomes, but they ‘caught the bug’ and started to believe the narrative. It is infectious. And, as you know from Garth’s site, the mortgages that have been issued over the past few years are stretched for perfection. If prices drop more than a few percent, or rates go up a little, or a few bad apples default, it starts a cascade. And although San Francisco proper was more shielded than further out communities from the declines, they eventually felt it too. This in the city that was’ jewel of the west coast’, and where ‘they are making no more land’, like so many arguments I hear now about Vancouver.
So, I recognise now I will likely have to rent until 2014-15 before the crash has played itself out here. Hopefully it will go quicker since the government has relatively fewer schemes left in its pocket to keep the prices high. I will be moving to Vancouver shortly (for business) and it is astonishing to me that prices are now HIGHER than San Francisco’s were, even at its peak. And I used to tell Americans friends about the sensibility of Canadians….
One side effect of the crash in California I noticed was the exodus of people. Either because they were broke, or lost their jobs, or didn’t like what was happening to the social programs, etc. Many people I know are now in Austin, Portland, and Seattle, cities which didn’t crash as mightily, but where housing is cheaper to begin with. (Actually look up the luxury 6000 sqft places with huge lot that you can get in Texas for the price of a Calgary condo. And that is simply what they cost, not crash pricing. Reminds you what housing SHOULD be.) These cities economies where buffered by the influx of people and I think are doing relatively better. The same might happen to Calgary and Edmonton when Vancouver starts to dip, but then again the American cities I mentioned have more diverse economies than in Alberta. If oil isnt high, the entire western provinces start to look like all of California.”

“There are jobs in Vancouver, but not what they use to be. I use to make 60K a year, but most jobs require a lot more for 45K a year now. Jobs are just lower pay in general.”

Sam at greaterfool.ca 31 Mar 2010 11:19 am

“There are jobs in Vancouver but not what they use to be. I use to make 60K a year, but most jobs require a lot more for 45K a year now. This is what it seems like to me. Jobs are just lower pay in general.”