A Realtor’s Review – “And there is the problem. This Olympic Village, Millennium Water, whatever you want to call it, is completely unaffordable.”

This excerpted from an article by local realtor Will Wertheim at agentwill.com 17 May 2010 2:51 pm –

“Today I attended a Realtor review of the Millennium Water development.” … “Mr. Bob Rennie, the King of All Condos, spoke to the crowd. Those who expected a rousing and uplifting speech would be shocked by what he said. It was far more somber, realistic, and tempered with hope rather than wishes.” …  “After the speech we went in groups of twenty to visit the showhomes. … You have a group of realtors, people who sell for a living, people who know their product, and the reactions you get from them will pretty much determine the results. We started in the lowest priced home which was $595k for just about 600 square feet. No view. Reaction? Astonishment at the price. We moved on to another and another. Prices being bandied about were up to 1.X million. Reaction? Astonishment at the gall. We moved into a 2.1m unit and at over $1400/sq.ft. the reaction became muted. It was an impressive suite. We get into the Erickson designed buildings and the prices were $2.Xm and just under $4m, I think. The reaction was much more appreciative. The suites were large and well designed. The views were fantastic and the prices were reflective of the quality and the location. And there is the problem. This Olympic Village, Millennium Water, whatever you want to call it, is completely unaffordable.”

[Note that Will Wertheim finds this development overpriced in terms of the current market, which many of us believe is itself already very, very overpriced. -vreaa]

Whistler – “He told me everything is for sale and pointed out a listing in the the Four Seasons that is a court ordered sale for 250k. These places traded between 450-500k at the peak.”

XXX at vancouvercondo.info 18 May 2010 8:13 am – “I talked to the local Whistler realtor I deal with. He told me everything is for sale and pointed out a listing in the the Four Seasons that is a court ordered sale for 250k. These places traded between 450-500k at the peak. There are at least 10 for sale but I only know of one that is court ordered – for now.”

David Rosenberg on ‘The Giant Canadian Housing Sud’

Kudos to the few who are speaking out. Note his reference to fundamentals like price:rent and price:income. -vreaa

From David Rosenberg, Gluskin Sheff, 17 May 2010 daily letter –

“NO HOUSING BUBBLE, EH?
Well, that is the message out of Ottawa.
Don’t buy into that. It was Ottawa’s policies, namely allowing near 100% LTV mortgages insured by the CMHC and 40-year mortgages that triggered the bubble to begin with. (Okay — we’ll call it something else: a giant sud). Home prices have surged to record levels relative to incomes or rents so call it whatever you like.
The just-released existing home sales report showed that resale home sales fell 2.6% MoM in April (on a seasonally-adjusted basis) and are down three of the past four months. On a year-over-year basis sales are up 20% partly due to easy comps but this will slow dramatically in the months ahead. Average prices are running at about 12% YoY, slowing from the 20%+ rates seen a few months ago.
New listings continue to rise – up 0.9% MoM and up nearly 30% from year-ago levels. The inventory of unsold homes moved up to 5.3 months (on a seasonally-adjusted basis) to the highest level in almost a year. This higher inventory build is consistent with what we are seeing in the new housing market, where housing starts having been running above household formation rates for about 7 months in a row. All of a sudden, the inventory landscape is beginning to change and we would expect prices to follow suit. Just in time for the Bank of Canada’s rate-hiking cycle too. If you’re a renter, start licking your chops — this is about to become a buyer’s market (hey — CMHC didn’t boost its reserves against default for no reason).”

“A couple in their 50s bought a house in Shaughnessy in 2005 for $2,000,000. It is now listed for $6,800,000.”

The first couple will clear >$4M (tax free) for holding a house for 5 years. This is very likely more than they could save through conventional means through an entire lifetime of hard work, saving, and investing. Such circumstances, where property prices rise at rates that dwarf income and savings, are simply unsustainable. -vreaa

VRENGD at vancouvercondo.info 14 May 2010 12:38 pm – “Two sellers that I know personally: One is a couple in their 50s who bought a house in Shaughnessy in 2005 for $2,000,000. It is now listed for $6,800,000 – based upon the list price for similar houses in the area. Another is a couple in their 30’s who bought a small bungalow on Ontario street in 2004 for $450,000. Wanting to list for $1,200,000. This is a 200% increase in five years. It is a similar story for many properties in Vancouver. Prices have risen 200% in five years.”

Field Report From ‘Millennium Water’ – “Vancouver’s Ground Zero For Irrational Exuberance” – “So why, in your opinion, does this place come at a $700,000 premium?”

crashcow at vancouvercondo.info 15 May 2010 6:13 pm –

“With the weather so nice today, I decided to checkout my first open house in a long time to get a feel for what’s happening in the trenches. And not just any open house, and entire open village. Little did I know how much of a treat it would end up being. On the way to Millenium Water, I passed by an abnormal quantity of For Sale signs. I kept asking myself how Rennie is going to pull off a 474 condo sale when inventory is exploding and sales are faltering. But soon after I walked into the gates of the Olympic Village, I knew I had stepped into a dream world of magic.

If Vancouver ever had a ground zero for Irrational Exuberance, Millennium Water is it. And if Bob Rennie is ever the King of anything, it’s hype. The man has carefully orchestrated a circus of clowns, bands, tents, treasure hunts and euphoria. When bands are cheering on lined up speculators and the King himself is handing everyone cookies, what is being witnessed is the last “hurrah” of a heavily inflated market. I lined up to view a condo and couldn’t help but overhearing what the herd was chanting. One of my favourites was, “I don’t know if I like this area, but I love the wave pattern on the wall.”

I followed the crowd into a staged 1 bed, 2-den condo at slightly over 1,000 sq. feet. I overheard some lady asking an agent the price and he replied with a straight face: “One-point-three-million.” The lady’s jaw dropped, she shook her head, and moved on. I couldn’t contain myself and had to keep the conversation going.

– Me: “The miracles of record low interest rates. So that’s roughly $1,200 per sq. ft?”
– Agent: “Yes, but I’m also selling units down the street for $500 per sq. ft”
– Me: “So why, in your opinion, does this place come at a $700,000 premium?”
– Agent: “It’s an opportunity to be a part of this famous community and the proximity to the water.”
– Me: “Not only are you asking for an outrageous premium, you’re doing it at a time when there are over 18,000 units on the market, CHMC rules are tightening and mortgage rates are climbing.”
– Agent: “You should then really consider the units we have listed down the street.”

So I followed the yellow brick road down the street and into another Rennie building called “The Maynard’s Block.” And sure enough, studios were priced at half a million. Buy now, or be priced out forever. “

“Five friends with properties on the market since April; No offers; Realtor’s phones quiet for past 2-3 weeks; Low-balling; Sharks smelling blood in the water.”

anonymous at vancouversun.com 15 May 2010 10:31 am – “I have 5 friends with properties on the market since April. All of them thought that they were investing in an “unsinkable” asset: a house or a condo. You never lose in real estate, right? Only problem is none of these people have gotten offers yet, they’ve held multiple open houses, their properties are well maintained and priced correctly for the market they’re in. Yet, nothing.  The realtors that are honest will tell you that in the past 2-3 weeks, the phones suddenly went quiet. There is still some limited interest in some better-than-average deals, but even there the buyers are REALLY low-balling, because like sharks smelling the blood in the water, they know some people are getting really scared of what will happen after the summer. They are trying to get out of the market as fast as they can, and honestly, I don’t blame them.”

“My friend was looking at $2million newer condos this week and was surprised to see many of these homes sitting empty; no one has ever lived in them. Several of the buildings have only 20% occupancy.”

anonymous at vancouversun.com 15 May 2010 12:50 pm – “My friend was looking at 2million plus newer condos this week and was so surprised to see many of these homes just sitting empty and no one has ever lived in them. As a matter of fact, several of the buildings have only 20% occupancy. One area is Coal Harbour and also parts of Yaletown.”

“I travel to Hong Kong a fair bit and whenever there is a corruption case in the news I almost reflexively look for a Vancouver real estate angle.”

Impossible to know how much these buyers have contributed to the bubble. All the stories confirm is that at least a few RE sales over the years have been related to ill gotten gains. -vreaa

chip at vancouvercondo.info 13 May 2010 11:41 pm – “I travel to Hong Kong a fair bit and whenever there is a corruption case in the news I almost reflexively look for a Vancouver real estate angle. These are some I remember from the last few years:

1) Corrupt cop: “A covert police study obtained by The Asian Pacific Post shows that Hon and his family had bought at least 11 residential and commercial properties and established a dozen companies in Vancouver, including a restaurant on Robson Street.” [6 Feb 2008]

2) Corrupt banker: “Gao Shan has been alleged by China for embezzling $150m from a Bank of China’s small branch in Heilongjiang, where he was the branch manager. Apart from Gao, China believes his accomplice Li Dongzhe (李東哲) also lives in Vancouver. A national arrest warrant was issued against Gao in 2005. However, there was no “Red Notice” issued by the Interpol against Gao.” [11 Apr 2007]

3) More corrupt bankers: “Two Chinese nationals with connections to B.C. are on trial in Nevada this week, accused of bilking the Bank of China of $400 million and blowing it on everything from lavish Las Vegas gambling trips to houses in Richmond. … But U.S. prosecutors allege the trio also stashed some of their ill-gotten gains in Metro Vancouver real estate, specifically three $1-million homes on Udy Road and Mang Road in Richmond.”

A Journalist Leaves Vancouver – Max Fawcett’s Goodbye

Just last month we featured local journalist Max Fawcett’s anecdote about friends leaving Vancouver. Max has now announced that he has himself left Vancouver, for Edmonton, and that RE prices are the major reason for his move.  Some confident locals will argue that these desertions are meaningless, that Vancouver will be no less attractive a city without these folks, that there is an endless supply of talent and wealth hankering to get in here, so why should we worry?

We personally have a very different take on this, and believe that this almost invisible loss of human capital is one of the most important ways in which the Vancouver RE bubble has hobbled our city. People who would under normal circumstances be playing various active roles in our communities are chased away by preposterous RE prices.

RE has taken centre stage in our social, cultural and economic life, and that is a place that it doesn’t deserve. We look forward to a time when homes in Vancouver are again seen as places to live, rather than investments or speculative vehicles. And we particularly look forward to a time when it is again possible for people like Max and his friends to make Vancouver home. -vreaa

Read Max’s whole article at MaxFawcett.com 13 May 2010. Excerpts below.

“Having been born and (mostly) raised in Vancouver, I’m not ignorant to its charms. But it long ago became obvious to me that the average citizen who lives there pays a high price for those pleasures, one that’s only gone up in recent years.”

“I lay most of the blame for this state of affairs on the overheated real-state market. When the average couple – one without trust funds, inheritances, or seven-figure jobs – can’t afford to buy the average home, there’s a price to be paid. In the short-term, that price will be paid (in a cruel irony) by those very same average couples, who will leverage themselves into knots to get into the market.”

“Those average couples will start to look elsewhere, to the Edmontons, the Saskatoons, and the Halifaxes of the country, places where middle class people – teachers, journalists, nurses, and tradespeople, for example – can afford to live middle class lives. They’ll move to places where they can afford to save money, to have children, and to plan for the future, rather than remaining on the economic hamster wheel of places like Vancouver and Toronto, where wages remain stagnant while prices shoot ever higher.”

“My pay has probably risen 5% a year for the last decade but I can’t keep up with this market, and according to the NYT I’m “upper middle class”. Where is all of the fu%&king money coming from?”

It’s borrowed money. Prices will reconcile with incomes. -vreaa

ceejay at robchipman.net 14 May 2010 4:49 am – “My pay has probably risen 5% a year for the last decade but I can’t keep up with this market, and according to the NYT I’m “upper middle class”…using Orwellian classification, more like upper-upper middle class….but not in this place. And I am not alone. Or am I , and is it that people value RE possession so much they are readilly willing to impoverish their everyday lives? Where is all of the fu%&king money coming from? We need some kind of ethnographic analysis of buyers to figure this out but that kind of data is simply not being gathered. Statscan, where are you when we need you?”

Local Speculators – “My partner came home last night and was envious that a coworker has recently purchased yet another house. I know several people who are playing this monopoly game, buying several houses as rentals. Some of them make $55k per year and yet have $650k in outstanding mortgages.”

Forget foreign speculators, the real gamblers driving this market absolutely bananas have been the seemingly-innocuous, common-or-garden local buyers who, in addition to their personal residences, have purchased one or more ‘investment’ properties. We have described them as one of the Major Players, ‘Local Investors; Households That Own Two or More Properties’. They are a particularly important group of owners because we anticipate that many will sell their RE investments when the premise for holding them, namely rising prices, disappears. Thus they will sell into price drops, potentially adding to a price cascade. It has been impossible to calculate their exact number, but anecdotes like the following three suggest they make up a significant subgroup. -vreaa

anonymousAA at vancouvercondo.info 12 May 8:44 am – “Here’s something I’ve been considering lately, after my partner came home last night and was envious that a coworker has recently purchased yet another house. A “good deal” $750k instead of the list price of $800k or so. This is his oh, 6th house purchase? He’s been playing monopoly, buying more and more houses for the past 20 years or so, so I guess that’s how he finances these rentals (lots of equity-well, the older ones). Another co-worker has also done the same thing, 3 rentals in the last 18 months (though one hasn’t worked out and is sitting vacant at a cost of $2000/month!). I also personally know several people who are playing this monopoly game, buying several houses as rentals. Some people I know make $55k per year and yet have $650k in outstanding mortgages. This must be common, anyone else know people in this situation? And meanwhile my partner moans that we don’t even have one house, let alone six!
How can this end well, when rates go up? Sure, you have a few hundred bucks left over at the end of the month from the rental after paying your VRM, but what about when rates are 5.25%? You can only raise the rent so much.”

space889 at vancouvercondo.info 12 may 2010 9:25 am – “I know someone who joined [an RE investment group] in 2008 and within 18 months bought like 3 condos along with $700K+ mortgage, at least 1 condo was in Edmonton, too. Since I don’t know him that well, I didn’t really want to ask him how his investments are doing. He was very excited and trying to get a lot of people involved and start creating wealth together! The good thing about him is that he works for the government with 5 years+ seniority so he’s fairly safe from being laid-off and he gets a guaranteed pension that I think is protected from creditors. Still you have to admit these people’s bravery (regardless of whether you think it’s stupid or not) on taking on so much debt and not being worried about it. That’s guts, man….I wouldn’t be able to sleep well at night if I owed $700K+ and personally liable for it. Ah well, I guess sometimes to make the big money, ignorance of risks helps”.

Rent385 at vancouvercondo.info 12 May 2010 9:44 am – “I also know a few people that have accumulated multiple properties for rental purposes (over the last decade or so). Many of them are not selling right now. They are aware that the market will mellow and interest rates will rise, but somehow, they are going to be fine. One of them (who makes ~$100K) has purchased 3 bungalows, one with a suite, all in the tri-cities area. Even with his income, he must be carrying 600k+ in mortgages. I can’t see him renting the units for >$3500 (total for all three). Is he going to make money? I guess he’s hoping that over the long term RE prices will continue to go up (perhaps with some inflation to help out). If he can keep his mortgages under control (and if there is some inflation) then he’ll probably come out on top.”

Junius added this comment 10:08 am – “I believe this is much more widespread than people in Vancouver commonly acknowledge. When the bloom comes off the market it is these investors looking to exit that will bring prices down fast.” [We agree -ed.]

UPDATE: Additional relevant anecdote:

ibought3 at vancouvercondo.info 13 May 2010 11:49 am – “I know a number of friends that bought in the last two months. Two of them earn very average salaries probably around 40-60k, and they have purchased to become landlords. Several are just first time home buyers.”

“Where are these sales coming from? My friend in Coquitlam put his condo up for sale 30 days ago and has only had 3 viewings despite it being the best $/sqft of the 15 other listings available in his complex. His price is being reduced today to make it stand out even more.”

exx at vancouvercondo.info 11 May 2010 3:29 pm – “Where are these sales coming from? My friend in Coquitlam put his condo up for sale exactly 30 days ago today and has only had 3 viewings despite it being by far the best $/sqft of the 15 other listings available in his complex. His price is being reduced today to make it stand out even more. He’s very frustrated by the lack of viewings and the huge # of listings he has to compete with.”

“Our property is one of those recent sales. Sold 6.5% over ask. FTB’s or 2ndTB’s looking at current low rates and monthly payments still seem to see value here.”

Purp1 at vancouvercondo.info 11 May 2010 3:43 pm – “Our property is one of those recent sales. On the market for one week. 60+ groups at open house, 4 offers, best was 6.5% over ask. Lots of interest in Vancouver for ’starter’ homes priced well which have a mortgage helper. FTB’s or 2ndTB’s looking at current low rates and monthly payments still seem to see value here.”

“He purchased a unit presale, but it was built differently than shown in the plans at the time of purchase. He hoped by protesting that the developer would do the right thing; annul the contract and refund his deposit.”

Bob Arctor 10 May 2010 4:29 pm –

“I was riding by the former Olympic village this afternoon, when someone protesting in front of the Millennium Water presentation center caught my eye. He purchased a unit presale, but it was built differently than shown in the plans at the time of purchase. He said he was unable to afford the legal fees to fight the many lawyers Millennium has working for them. He hoped by protesting Millennium would do the right thing; annul the contract and refund his deposit. I suggested going to the media for more attention but he wants to wait a couple weeks before it reaches that point. He let me take some photos of him and his signs.”

Observations During Commutes – “I was on the bus in Port Moody this morning and saw something I hadn’t seen since the peak of ‘08 – so many for sale signs in a low-rise condo that the bottom ones are laying on the sidewalk, and not a single sold sticker.”

Vansanity at vancouvercondo.info 11 May 2010 7:42 pm –“I was driving home from UBC today along 12th Ave. One the west side, nothing but vacancy signs, hit the east side, and the for sale signs are everywhere. Crazy stuff! You should all take a drive out there and check it out, beautiful outside this week.”

exx at vancouvercondo.info 11 May 2010 8:55 am – “I was on the bus in Port Moody this morning and saw something I hadn’t seen since the peak of ‘08 – so many for sale signs in a low-rise condo that the bottom ones are laying on the sidewalk, and not a single sold sticker. I’m not sure a term was coined for those, but they’re back.”

“I’m getting rid of my pie in the sky, I can’t handle owning in this market.”

rofina at RE Talks 10 May 2010 10:28 pm –

“Any recommendations for a sellers agent for Burnaby North? I’m getting rid of my pie in the sky, I can’t handle owning in this market. I sleep better invested in the stock market, rather then being a homeowner in Vancouver, to me thats a sign that I shouldn’t own right now.”

Only 7% of Canadians See Risk Of Housing Price Drops

That figure is very low, and speaks of dangerous complacency. Contrast this with the (clearly minority) opinion of Mark Carney, Governor of Canada, who recently stated that he expects “marked weakness” in Canadian housing for the next 6 quarters. The bull:bear ratio for the Canadian RE market is thus 7 to 1. Last week, Wednesday 5 May 2010, when the US stock market peaked, the ratio for that market was at a historically extreme 3.5 to 1.  Sure, RE is not stocks, but,… you get the idea. -vreaa

Excerpts from ‘Rising mortgage rates, rising trouble’, by Tavia Grant, The Globe and Mail, 10 May 2010 –

“Canadians across the country believe house prices will rise further. Almost one half of those surveyed, or 49 per cent, expect prices to rise and 44 per cent expect them to remain stable.”

“Almost half a million more mortgage holders would be in trouble if their rates hit 5.25 per cent, a national survey showed Monday.”

“The survey suggested buying activity is slowing. While Canadians are “positive” about the housing market, just 3.4 per cent say they are very likely to buy – “suggesting activity may slow during the remainder of this year.”

“A very large majority of Canadian mortgage borrowers have acted prudently within a challenging housing market,” the report concluded.

[Based on “a biannual report by the Canadian Association of Accredited Mortgage Professionals”,  “compiled from an online survey of 3,000 Canadians, almost 1,800 of whom were home owners with mortgages. The survey was conducted by public-opinion firm Maritz for CAAMP, during April.”]

Liar Loans In Vancouver – “Two people close to me are self employed, and ended up with mortgages more than 10 times their actual income. Stated was 3 times actual. Both were CMHC backed.”

junius at greaterfool.ca 10 May 2010 9:00 am – [commenting on reports of mortgage fraud in Vancouver] “Even if they were not outright fraud, there were a number of tricks being used to push incomes up and increase access to debt. I saw this clearly with 2 people close to me are self employed who ended up with mortgages more than 10x their actual income (stated was 3 times actual). Both were CMHC backed as well.”

.
bubbly at VREAA 10 May 2010 9:25 am – “In 2006, a friend talked to a broker at a downtown bank about a loan. Without any hesitation, the broker offered him to “increase” his income by about 50% so that he would qualify. “Nobody will ask”, he said.”

“Both announced their intentions to move out of Vancouver in the next year” – “This city doesn’t want people like us anymore. So I’m listening and leaving.”

Absinthe at vancouvercondo.info 10 May 2010 12:37 pm –

“This weekend, I had friends over for drinks and both announced their intentions to move out of Vancouver in the next year. Both are born and bred in Vancouver, but have recently spent time in Ontario. They’ve realized that life does exist East of the Rockies. One of these friends is in the artistic class – working and being paid in her creative profession, but not rolling in cash. Work tends towards feast and famine. The other friend is currently on mat leave, her husband has been recently laid off. My artistic friend said this: “This city doesn’t want people like us anymore. So I’m listening and leaving.” She also is shocked at how lovely the architecture is “even for us impoverished folks” when you venture East”

Vancouver RE Metaphor – Obvious, Yes, But Too Cute To Ignore

“A real estate agent has told me that, thanks to unscrupulous mortgage brokers, falsifying documents in mortgage applications has become rampant in Vancouver.”

If this has indeed been happening, it’d be yet another mechanism by which higher prices begat higher prices, and another reason that, once this lumbering beast of a market turns, it could fall harder than any of us expect. -vreaa

From an article by Steffan Ileman, examiner.com 8 May 2010 5:31 pm –

“A real estate agent that wishes to remain anonymous has told me that, thanks to unscrupulous mortgage brokers, falsifying documents in mortgage applications has become rampant in Vancouver. The agent says this is how some local and foreign buyers that want to get in on Vancouver’s real estate boom extend their buying power. The same assets, for instance, could be recycled and used by a number of different parties to support  mortgage applications, and it’s especially easy to forge documentation from foreign sources. With HST and rising interest rates it will be more expensive than ever to own or maintain property in British Columbia, and the question is if low income home owners can trigger a bust in BC’s mortgage bubble.”

“A friend of ours bought a condo in Richmond despite our advice. Their closing date is end of May and their mortgage was pre-approved prior to April 19 deadline. There are still people rushing to buy with their pre-approved mortgages, happy that they beat the deadline.”

LY at vancouvercondo.info 9 May 2010 2:50 pm –

“A friend of ours bought a condo in Richmond despite our advice. Their closing date is end of May and their mortgage was pre-approved prior to April 19 deadline. So I don’t expect sales to drop downhill [immediately] after April 19. There are still people rushing to buy with their pre-approved mortgage happy that they beat the deadline. With sales/listing ratio trending down, I expect sales to taper off by June when this last pool of buyers run out.”

“The big money isn’t out of the market yet. I was interested in a property at about 5-10% less than list. Sold in a day, slightly above list. I believe it was a cash offer and purely for income.”

No mention was made by this poster as to whether this is a cash-flow positive property. If so, it would be a rarity. -vreaa

beans at robchipman.net 9 May 2010 7:13 pm –

“The big money isn’t out of the market yet. I was interested in a property at about 5-10% less than list. Sold in a day, slightly above list. I believe it was a cash offer and purely for income.”

“She asked me to guess the price. I said “$1.3million, but I think I can get it for $850k in the crash”. The realtor told us it was listed for $2.9million”

WoW at robchipman.net 7 May 2010 5:33 am –

“I went for a drive today (putting my little guy to sleep after dinner out….he’s only 3 and has no clue about the housing bubble, it’s weird how even people who live with me could care less) and I saw a fair chunk of ‘For Sale’ signs in my westside driveabout…not that many sold’s…  my kid’s grandma was with me on the drive around… she called (against my will) the realtor for a listing we saw on 45th and Columbia…..she asked me (before she called) to guess the price…I said $1.3million, but I think I can get it for $850k in the crash..the realtor told us it was listed for $2,900,000…I kid you not…I said that I would rather pay $12,000 a month to rent than to buy at that price…I imagine rent for that place would run $5,000 – tops. So do the math. In the end, prices will reflect fundamentals. That house is worth 1/3rd of asking. Eventually (I think its gradually happening) buyers/sellers will clue in.”

Fundamentals – “What Chart Is This?”

We often discuss fundamentals like price:rent and price:income. This chart reflects a ‘fundamental’ that is of central importance in understanding the Vancouver RE market.

Anybody care to guess?

[x-axis years; y-axis percent. I’ll post the source later.]

UPDATE and answer:

The chart shows Canada’s Household Debt to GDP Ratio.

It’s clear where the housing bubble came from.
Debt Increasing At An Unsustainable Rate.

It’d be fascinating to see the equivalent chart for BC alone.

[The chart is taken from a recent David Rosenberg commentary. ]

“A world-class city? Please.”

That’s Shanghai that is being discussed, not Vancouver. It seems dozens of the world’s very impressive second tier cities have the same identity angst, comparing themselves with NYC, London, Paris and Tokyo. More proof that humans are in essence identical, wherever you go. From an article in China Daily, by Chen Weihua, 4 May 2010.

“I explain to them that we are planning on buying when the price drops about forty percent…They laugh at me…“That will never happen”, they say. I say “When my parents bought their place the listing price was 225K and their offer of 100K was accepted.”

This from ‘T’ via e-mail to VREAA 16 Apr 2010 –

“I was a work today and realestate came up. The guys, all nearing retirement, were on my back to buy a piece of property. It always goes up you know. Their properties have appreciated like crazy. There is nothing but money to be made….I say that my husband and I can’t afford a house because, with our $120,000 income, we only qualify for $300,000 mortgage…they can’t believe that…they know that we are well paid compared to most people. They say that we should live off of one of our incomes and bank the second till we have a good enough down payment to get in…I explain to them that even if I banked 36k a year, in ten years I would only have 360k (neglecting interest) of course…they say that can’t be right…no, no I must be wrong…people are buying they say…I try to explain to them that we are planning on buying when the price drops about forty percent…they laugh at me…that will never happen they say….I say “when my parents bought their place the listing price was 225k and their offer which was accepted was 100k” ….they say that it was the eighties and that is never going to happen again…

I stopped arguing at that point…old dogs, you know…but it made me think…my parents renovated their house….one day they were driving around and they happenned upon a construction site where a condo tower was being built…on the site was a twelve person hot tub with a hole in the bottom. My dad asked the foreman what had happened to it. The foreman said that a carpenter working on the site had dropped his hammer off the top floor and it had fallen into the hot tub punching a hole in the bottom. They had ordered a new one for the building, but hadn’t gotten rid of this one yet. My dad said he would give the guy 500 bucks for it and take it off his hands…The foreman said no way…said it cost 5k brand new and that my dad’s offer was an insult…my dad thanked the guy for his time and left…six months later…my dad drove by the site and the hot tub was still sitting there…he found the foreman and said “I’ll give you 500 bucks for it”… the foreman, knowing it was the only offer in town, took it.

It doesn’t matter what you are selling…could be a hot tub with a hole in the bottom….could be a crack shack in Vancouver….It is only ever worth what the buyer is willing to pay for it.”

Discussion Regarding ‘VREAA Removes A Post’ – “Shall we compare the societal damage done by someone with a few stickers in his pocket to the societal damage done by a massive housing bubble?”

Many thanks to all for the thought provoking discussion regarding ‘VREAA Removes A Post’ (4 May 2010), both in comments posted here, and elsewhere.  [Comments from some other sites are archived, here.] Instead of responding to all the various ideas in a piecemeal fashion, I thought I’d respond in this post.

Perhaps the most important topic raised is the issue of freedom of speech, and journalistic freedoms. Many commenters were dismayed by my decision to take down the post, and I can understand their responses:

“Please don’t cave in to realtor pressure, you are simply reporting a story” -Mark

“Giving in to bullies is not really a good way to go about reporting on issues.” -Snowrunner

“Take Down ?!? Its part of the history!” -asalvari

“Pretty ridiculous that you caved in to the realtor’s demands.” -Adrian

Many encouraged me to put the post back up, but I have decided not to do that.
Let me emphasize that in principal I agree with the argument that there is nothing illegal about the post, and that it was by and large simply reporting. I documented activity that had occurred in the community that was reflective of sentiment regarding the Vancouver RE market. That is something that I have done in many other posts at this site. In fact, a central focus of this blog is documenting stories that reflect the personal and social effects of the RE bubble, and the fact that some individuals had felt moved by the market circumstances to post posters and stick stickers certainly is noteworthy from that perspective.

If I was an anonymous reader of this blog, I’d quite likely also have tried to encourage the blogger not to be intimidated and to take a stand on this issue.
However, a good number of commenters saw that this was a more complex matter for me, the blogger. I greatly appreciated the supportive comments that showed a somewhat nuanced understanding of how it would feel from the blogger’s perspective. Not by co-incidence, some of that support came from individuals who themselves have experience of blogging:

“Cut VREAA some slack. I suspect he doesn’t have the time or $ to take a big legal stand.” -VHB

“I applaud your wise decision to move on and post another day.” -Larry

Refusing to remove the post may have provoked an actual legal proceeding. Recall that I received two e-mails from the realtor that made direct threats of legal action. The second e-mail had come even after I’d clarified that I was not responsible for the stickers in any way. I will add here that the realtor works as an agent for a fairly large realty company. It is highly likely that, if their company decided to back them in this action, they would have automatic access to legal resources, whereas I do not.
As various commenters pointed out, if the realtor did proceed with this action, even if they had no grounds at all (as I believe is the case), it would potentially have cost me my time and my money.
It would be, at the very least, a nuisance, and, at worst, would take up my personal resources. I really don’t think the case would have gone very far, but it could still have proven to be a significant interference.

“Be careful” – freedom

“Tread lightly on the legal stuff.” -Larry

With all that in mind, I did the risk/benefit analysis, and decided to remove the post.

“If vreaa chooses to not put the pics up again I completely understand: a nuisance suit is still a nuisance suit! Who has time for the hassle?” -Absinthe

Another consideration that contributed to my decision was the risk of being scapegoated. Recall that I’d had absolutely nothing to do with the poster or sticker campaign itself. But if the realtor was angry enough about something, and had nothing better to do, they may have pursued the action anyway, if only to blow off steam. Again, this would have all come out in the wash, but I didn’t want to be a by-stander drawn into a brawl that I had no part in.

Now, if I was a public figure in the Vancouver RE market, or if I was someone who made my living from journalism, or if this was a blog where the central focus was freedom of speech, I would possibly have responded differently.

“Contact BC civil liberties association and get a quote or two for the press.” -Rocker Guy

“I’d throw this story to some local guerrilla political messaging blogs and let them take it from here.” -jesse

As it is, I decided to respect the realtor’s request, and decided not to go head-to-head with them about something that I ultimately just didn’t see as worthwhile taking a big stand over.

Many commenters appealed to me to release the name of the realtor who sent the e-mails, or the e-mails themselves.

“One case of Molson’s finest delivered free to anybody who can come up with that reators name.” -joeblow

“I think someone threatening to take legal action against you should be named. Again, it’s newsworthy and readers of the site would want to know.” -midbach

I haven’t seen fit to do that, even though I suspect it would be within my legal rights to do so. I made that decision simply because I don’t want to be a party to escalating any form of uncivil discourse or action. I know that the vast majority of readers would not act on that revealed information in any untoward way but, this is the internet, and I wouldn’t want to take the chance. Witness this comment exchange:

“You absolutely have to give us the realtors name, and there would be nothing illegal about that. This CREEP would wish he’d never been born.” -sluggo

“What, are you going to put stickers all over his signs?” -Dave

In this regard I should re-iterate that none of the realtors whose signs were imaged on the web, nor any well known realtor bloggers, were the source of the e-mails.
I would also re-iterate that I do not condone any actions that involve breaking the law.
Bears can express themselves and, more important, this RE market will do what it’s going to do, without anyone breaking the law.

“Don’t descend to their level. The best revenge is making sure the facts and real information gets out there.” -Plummet

“House prices are not going to change as the result of a grassroots movement. Leave it to the Invisible Hand [of the market]” -Newcomer

Many of the comments were thought provoking.
More than one commenter noted that, in complaining about coverage of these incidents in the community, the realtor had actually drawn more attention to the message on the poster, and stickers, and I think that is a remarkable point:

“Great example of the http://en.wikipedia.org/wiki/Streisand_effect” -Wiki

Another commenter suggested that the realtor should have politely asked to have the images taken down prior to threatening legal action and, I agree completely, that form of discussion would have been far preferable.

“I am unimpressed with anybody who brings lawyers into the picture when simply politely pointing out one’s concerns with an image could accomplish the same effect. I would certainly avoid hiring a party who is so quick to jump to their lawyers.” -VultureBoy

Commenters suggested that this whole affair was itself a noteworthy ‘data point’ in the Vancouver RE bubble. Perhaps, like the simultaneous deflating of the roof of BC Place, this will mark the final top.

“If you want a measure of what the sentiment and a big part of the narrative around real-estate in this town it’s kind of all condensed into this one little event.” -nonymouse

“The fact that a realtor would threaten to sue over posting pictures of “bubble” stickers on realtor signs is the surest smoking gun you need that even the realtors know this market is done.” -Rent-o-rama

Of particular interest, I believe, were the points made by commenters regarding the relative intrusiveness of the stickers on the realtors’ signs compared with the impact of aspects of the RE bubble itself:

“Gimme a break, realtors are the ones that vandalize our hoods in the first place by putting their for sale ad signs up all over the place.” -gork

“So it is unacceptable to put a tiny sticker on a FOR SALE sign, but it is perfectly ethical to sell an overpriced home to an overextended family…” -painted turtle

“Shall we compare the societal damage done by someone with a few stickers in his pocket to the societal damage done by a massive housing bubble? If the first is an ounce, the second is an ocean.” -VHB

A special form of comment and a considerable amount of derision came from local realtor Rob Chipman, at his own blog, in the form of a post ‘Guerilla Education’ (robchipman.net, 6 May 2010).
I should explicitly state that Rob was not the realtor who e-mailed me the threats, and he has even seen fit to reproduce the images at his site. Rob takes me to task for both the content of my original post, and for my decision to take it down.
Firstly, with regard to post content, Rob says that I was wrong to label this action “a guerrilla education campaign” and to have said that “there are still members of the public, trapped in disinformation bubbles, for whom this will be news”. He claims: “We live in the information age. You can get all this information on your phone, right now.” For the record, the image of the poster on the lamppost shows that it included statements such as “Vancouver has been rated the most unaffordable city in the English speaking world” and “Interest rates are expected to rise, causing some mortgage payments to increase by 60% to 100%”. Well, yes Rob, you may be able to get that information from your phone, right now, if you know where to look. I would argue that a good number of Vancouverites, dependent on local media for their information, are not aware of these facts. They don’t look for them on their phones because they’re not even aware that there are important RE market issues being debated. It’s certainly not something that is easily learnt from local papers, local TV, or from the copies of ‘Real Estate Weekly’ that are delivered to our doors (uninvited) 50 times a year or more.
Secondly, Rob believes I should “stand up and preserve our freedom of speech, not fold like a cheap tent and cry foul”. Well, I’d refer him to my discussion above, and ask him to try to see this situation from my perspective. I suspect that ‘freedom of speech’ includes the freedom to decline from speaking when one has good reason.

The purpose of VREAA is to document the personal and societal impacts of the Vancouver RE Boom and Bust. It has always done this through civil discourse, as any regular readers know. The Vancouver RE cycle will wax and wane in its own sweet time, and that is going to play out regardless of these kinds of skirmishes.

“time to move on” -jesse

Thanks again for all the discussion. I’m going to continue to post anecdotes, with occasional commentary. If you have any stories from the Bubble-trenches, please send them along.
-vreaa

Fuel From Flippers: 2009 Aug $511K + Renos = 2010 May $799K Ask

2720 Adanac Street, Vancouver East, BC. Renfrew area. 1929. 1,655sqft, basement suite, 33×110 lot. (Price history: 2005 Oct, Sold for $411,000)

.

2009 Aug: Sold for $511,000

.

2010 May: Renovated, For Sale, Asking Price $799,000

Much can be discussed around this example. For us, perhaps the most important piece of information is that one of the buyers pushing up prices in Aug 2009 was a flipper looking to make a quick couple of hundred thousand dollars. -vreaa

Home Hunting on Planet Earth

From Saving Penny, a series of basic finance educational videos at yourmoney.ca, that Rob Carrick of the G&M alerted his readers to today. Check out ‘Episode 8: Doug and Penny talk about buying a house and moving in together.’ Excerpts:

“I really want Doug and me to move in together! It’s all I’ve been thinking about lately! It would be so nice!”

“You should aim for a place that is two to five times your annual salary, less if you’ve got loads of debt.”

“All home expenses, mortgage, insurance, tax, and all the bills, shouldn’t be more than 35% of your after tax income. I wonder what percentage we’re paying now by renting?!”

—

Okay, so this is all very yuppie-idealized, but the point is, do the math for anywhere west of the Rockies, and you’ll see that, using these figures, nobody should be buying anything. -vreaa

“Irrational personal consumption choice”: “He and his wife work seven days a week but can’t afford asthma medication for their son because they bought a house.”

VRENGD at vancouvercondo.info 4 may 2010 7:37 am –

“My sister is a doctor. Yesterday she had a patient who said that he and his wife work seven days a week and can’t afford asthma medication for their son because they bought a house. They buy enough medicine to treat half of the son’s asthma attacks and go to emergency the other half of the time. There are two things to note from this anecdote. First, this person and likely many others make extraordinarily stupid decisions. Why doesn’t this family rent for 1/3 the monthly cost and buy medicine for their son (and take him on a nice vacation every year). Second, the family’s stupid decision to own a house is being subsidized by the taxpayer through the family’s increased use of the healthcare system.

People are sacrificing everything to own. Many homeowners will not be able to deal with illness. They will not be able to deal with legal problems. After mortgage payments, they have nothing left. What do they do? The show up at emergency and ask us to bail them out. They show up at legal aid, say that can’t afford a lawyer and are being denied access to justice, and ask us to pay for their legal advice. What else are home debtors sacrificing? What else are taxpayers doing to subsidize their irrational personal consumption choice?”

“With the amazing rates you REALLY should take advantage of, the renter will be paying your mortgage!”

Cash flow positive properties are a thing of the very distant past in Vancouver. Prices will drop to a point where rental yield again makes sense. -vreaa

BTscene at vancouvercondo.info 3 May 2010 12:24 pm –

“I love the pitch of RE agents at the DT open houses I attended for fun last weekend. Their investment purposes bit is quite entertaining:

“Perfect for investment!”

“Condos in this area are renting for $2,000.00+!”
(I’ve done the research. They’re listed at $1,800 but really with all the vacancies they’re going at $1,500.)

“At $2,000 – With the amazing rates you REALLY should take advantage of, the renter will be paying your mortgage!”
(In this magical building, are there no strata fees and property taxes?)

“Don’t worry about the vacancies, it’s just post Olympics. Even if rent is discounted, it’ll only be for the short run – it’s downtown Vancouver, everybody wants to be here, just weather the storm!”
(I’m sure those who bought at prices a few years ago can afford to weather the storm. Anyone who’s buying at today’s prices – you really think so now?)

“I’d suggest you make a offer ASAP, the seller is really motivated because _____________. There are 10 other viewings today and we’ll be looking at offers tonight. Just between you and me, the seller at this point (what, knowing there are 15 other for sales in the building?) is willing to take 10% off the asking”
(10% off the asking sounds like a great deal to a fool jaded by today’s prices.. 10% off asking is still 20% over what it’s worth.)”

“The market has remained solvent longer than I can remain publicly bearish. I’m now in the closet – been wrong so long that I make only neutral comments when the inevitable real estate conversation turns to “but we are different here”.”

ulsterman at vancouvercondo.info 4 May 2010 8:15 am –

“The market has remained solvent longer than I can remain publicly bearish. I’m now in the closet – been wrong so long that I make only neutral comments when the inevitable real estate conversation turns to “but we are different here”.”

My worry is this. In the Ireland, 1 in 5 houses are empty. Entire housing developments have become ghost towns. The Irish economy is on the edge of bankruptcy and Ireland is one of europe’s economic PIIGS. HOWEVER, after 2-3 years of this calamity, prices are down maybe a 1/3. My concern is that Ireland is on the edge of the abyss and yet their prices aren’t off 70% (Vegas -style). How many empty houses and condo’s do we have in Vancouver? Is our economy staring into the abyss? Could we really only be looking at a 20-25% price drop?”

“We rented, and I learned (again) that rental houses require less of my energy than the house we “owned” and which had taken over my life.”

Dan in Calgary at vancouvercondo.info 4 May 2010 7:40 am –

“After we sold in Cloverdale (at a loss) and moved to Vancouver, we didn’t have the money to buy a new house because of the price differential. We had a sick child who required constant care from a live-in caregiver (whom we paid generously, btw). So we couldn’t afford to buy. Oh well, life’s just like that. We rented, and I learned (again) that rental houses require less of my energy than the house we “owned” and which had taken over my life.”

“My wife’s friend is a new homeowner (last year and a half). They rent the basement, have a newborn, they both work. She says she cries every night because she is so petrified they’re going to lose the house.”

buffates at vancouvercondo.info 4 May 2010 6:13 am –

“My wife’s friend is a new homeowner (last year and a half). They rent the basement, have a newborn, they both work (grandma looks after the kid). She says that she privately cries every night alone because she is so petrified they’re going to lose the house. If that’s the case with these two then how many Vancouverites are out there a half a paycheque away from tanking?”

VREAA Removes A Post

VREAA yesterday took the unusual step of removing a prior post and, in the interest of the integrity of the archived record, we thought that we’d share with readers the circumstances that led to that decision.

Recently, unknown individuals stuck posters and stickers up around downtown Vancouver that were obviously designed to warn citizens of a ‘housing bubble’. A reader at vancouvercondo.info reported these to the blogging community (29 Apr 2010). Readers know that at VREAA we are interested in stories that reflect significant activity and sentiment in the Vancouver RE market. We certainly felt that this apparent guerilla campaign was newsworthy, and, in the interest of archiving these images, we posted a note at vancouvercondo.info saying that we’d be interested in any images of this campaign. In response we received two snapshots by e-mail (one of a poster on a lamppost, another of a sticker on a realtor sign).

We posted those two images in a post here at VREAA entitled ‘Bears Take It To The Streets – “Vancouver Housing Bubble Ready To Pop!” Signs In Downtown Core’ (30 Apr 2010). In the comment section of that post, a commenter linked a 3rd image, a snapshot at ‘flickr’, and we added that to the post. A further two relevant images were found on Mike Shedlock’s (‘Mish’s’) very well know financial blog, ‘Global Economic Trend Analysis’. Also in the comment section of our post, on 2 May 2010, a commenter with the handle ‘Vigilante’ posted ‘tinypic.com’ links to what appeared to be the original images for the poster and sticker that had been used in the campaign.

Yesterday, 3 May 2010, vreaa received an e-mail from a local realtor who had initially assumed that the campaign originated from this site (VREAA) and threated legal action for “defacing company property”. In response, we immediately removed the links to the images from ‘Vigilante’s comment. In an e-mail to the realtor, we clarified that VREAA was not the source of these images nor of this campaign. In a second e-mail, the realtor claimed that “[in] displaying such vandalism on your site you are a party to promoting such activities” and requested that we “stop posting this kind of promotion of unlawful acts”. They again threatened legal action. In response to the second e-mail we took our original 30 Apr 2010 post down all together. No images related to this story are any longer available from this site.

At VREAA, we do NOT condone or encourage any actions that are unlawful, nor have we ever intended to do so. We archive stories from the Vancouver RE market, at times with commentary. Since February 2008 we have posted over 500 such anecdotes. Our readers know that we believe that the housing market is very overextended and likely to suffer a large correction. Numerous commentators are now in agreement in this regard. Even Mark Carney, the Governor of the Bank of Canada, foresees a “marked weakening in housing”. Nobody has to break the law for this to all play out in that fashion.

-vreaa (vancouver real estate anecdote archivist)

See also:
Discussion Regarding ‘VREAA Removes A Post’ – “Shall we compare the societal damage done by someone with a few stickers in his pocket to the societal damage done by a massive housing bubble?”
VREAA 6 May 2010

“EVERY friend/colleague I met in the last two weeks talked to me about Vancouver Real Estate. It has become a VERY touchy subject… It feels like we are at a crossroads…”

It is human to tend to talk one’s book. -vreaa [To talk one’s book is to speak favourably or unfavourably about an instrument depending on whether one is long or short of it. – Reuters Financial Glossary]

painted turtle at vancouvercondo.info 2 may 2010 9:38 pm –

“EVERY friend/colleague I met in the last two weeks talked to me about Vancouver Real Estate:
1) If they rent, they want to forecast if it will fall by 20% or 50%
2) If they own and are flexible, they want to sell
3) If they own and are not flexible (i.e. families with kids and jobs), they try to convince themselves that all is for the best in la la land (market currently going through the roof, the rich Asian theories backed by pseudo academic studies, the crystal meth factories theories, the rich Asian mafia gangsters theories, etc)
4) If they are buying, they want to bury their head in the sand.
It has become a VERY touchy subject… It feels like we are at a crossroads…”

“Prices here have become ridiculous. My family rent a two bedroom house that is supposedly worth $900,000 for $1000 per month. Even if we could qualify for a mortgage of that size, why would we even consider buying?”

[Clarification: In actual fact this poster rents the top half of a $900K property for $1025pm; the basement rents for $750pm. That’s still a price:rent ratio of 1:520, and still preposterous. -vreaa ]

Joel at creditwritedowns.com 25 Apr 2010 –

“Living in Vancouver for the past four years, I have had the luck (misfortune?) of watching this bubble develop. Prices here have become ridiculous. My family rent a two bedroom house that is supposedly worth $900,000 for $1000 per month. Even if we could qualify for a mortgage of that size, why would we even consider buying?”

Free Money Still On Offer – “Free mortgage payments for up to 2 years; no money down mortgages; cash back mortgages; self employed mortgages.”

alexcanuck at Housing Analysis 2 May 2010 8:29 am , in response to a discussion where some were claiming that there were no ‘sub-prime’ lending standards in Canada –

You want predatory teaser rates?
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You want 0% down?
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Bear Distress – “Over the last 3 years it has been tough to express a bearish point of view. Heck, I’m a bear and I have to admit, my belief in a crash is built on faith. At this point the elastic band is so far past what I thought possible, how can I guarantee it can’t stretch even farther?”

We sympathize. -vreaa

inglishmagor at Mish’s (Mike Shedlock’s) Global Economic Trend Analysis comment section 2 May 2010 11:11 am –

“It pains me how much longer this bubble in BC has lasted. I do have an idea why it has though. The average person does not look at fundamentals or future outlooks. They look at the other average people around them.

In BC the average person has seen the downturn in the US. The bears around have been telling them we are in a mess up here as well and it should have tumbled down starting in 2007. The average person has heard 3 years of bears telling them the game is over, while it has marched on. The truth is that the game did end on its own in 2008 when things started to topple. At that time the government stepped in and lower interest rates to try and stimulate industry in the East of Canada. A side bar to that was historically low interest rates for people to keep buying real estate in BC. Again for the average person they did not look at the underlying government intervention, they saw 100% proof that Canada really is different.

Over the last 3 years holding a bearish point of view has been tough to express. Events start to go one way, then the playing field shifts with government intervention. There is a chance of a crash, but there is also a chance of an initial 15% hit followed by 10 years of stagnation with inflation slowly eating housing prices. This again makes the bears argument seem grey to young couples wanting to own a home and have seem 10 years of constant price increases.

Heck, I’m a bear and I have to admit, my belief in a crash is built on faith. I believe things can deviate from fundamentals for only so long. At this point the elastic band is so far past what I thought possible, how can I guarantee it can’t stretch even farther?”

“I personally know several people who have purchased not just one, but two or three properties in the last 12 months. I’ve been waiting a long time, renting, waiting while fools rushed in.”

sallysmith at Mish’s (Mike Shedlock’s) Global Economic Trend Analysis comment section 2 May 2010 11:02 am –

“I’ve been watching this bubble inflate for about 5 years now. It began to deflate in 2008, however was rescued when the Bank of Canada dropped interest rates to .25%. Now, they have no choice but to raise them, given the so-called “recovery” in our economy. However, this “recovery” has been mostly based on people running out and buying houses. I personally know several people who have purchased not just one, but two or three properties in the last 12 months. All at low-interest rate mortgages. They are in for a real shock when rates go up starting June 1st (variable rates, controlled by the BOC-banks have already raised their 5 year mortgage rates-we in Canada can only lock in for 5 years(less often 10) or take a variable floating rate) . This feels like it will be a disaster. I can’t see any other way out of it. But I’ve been waiting a long time, renting, waiting while fools rushed in.”

“Our Absolute Bottom Line” in Squamish – “We just received an offer on our house of $510k, $30k under our asking price and $10k under our absolute bottom line. We bought it in 2003 for $270k.”

The bubble has rendered these participants seemingly blasé about the meaning of >$400K tax free profit. Also, take note of the concept of “our absolute bottom line” that appears unrelated to anything to do with the market, and rather to be about arbitrary personal needs or wishes. -vreaa

[UPDATE 2 May 2010 late evening – please see clarifying comments from Bailing in BC in the comments section and my comment in response. Also, I have subsequently altered my preamble to read ‘seemingly blasé’ -vreaa]

This from Bailing in BC at greaterfool.ca 30 Apr 2010 –

“We just received an offer on our house of $510k, $30k under our asking price and $10k under our absolute bottom line.  If we really wanted to sell the house we would take it but we are questioning our resolve to actually sell. The house is in Squamish.  We bought it in 2003 for $270k and of course the place skyrocketed.  At the high point of the market we could probably have got $580-600k for it but prices went down and Squamish has not bounced back completely.  We don’t imagine that it will for many years.  We only have $80k left on the mortgage, because we sold a rental property in Summer 2008 and paid down the mortgage. I strongly feel that housing market will go down considerably.  The house is old and is due for quite a bit of maintenance but is comfortable and we could see ourselves living here for a long time.  The house also has a suite that we rent for $900 per month and herein lies our problem.  If we sell the property we would probably be looking at spending $1600 per month on a rental, we would also be losing $900 per month in income.  If we sell after Realtor commission we will be left with $413,000.  I have no background in investing outside of real estate, and frankly I’m afraid of the money.  I don’t feel confident that we will be able to get enough of a return to replace what we are losing and I’m afraid of losing more money by mismanaging it. The plan of course was to cash in on the bubble and buy back in when the price drops but now that the moment of truth arrives, we have cold feet.”

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We Moved From Vancouver To Edmonton

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

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

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

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

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