“My wife and I earn nearly 4 times the median household income in Vancouver. We can’t afford to buy a decent home for our family. This thing either starts crashing or we are out of here.”

Cognizant at greaterfool.ca 9 Mar 2011 12:33am [hat-tip to Nick] – “My wife and I earn nearly 4 times the median household income in Vancouver. We can’t afford to buy a decent home for our family. This thing either starts crashing or we are out of here. I can’t live with the rage I feel towards all of the greedy realtors and house porn addicts who don’t see that the crazy RE prices here are DESTRUCTIVE and dangerous. I am so crazy mad at all of this. …
Everyone is so blinded and irrational about this that it is pretty lonely being a RE bear these days.”

Destructive and dangerous. Agreed. – vreaa

44 responses to ““My wife and I earn nearly 4 times the median household income in Vancouver. We can’t afford to buy a decent home for our family. This thing either starts crashing or we are out of here.”

  1. I still don’t get the anger. If you make 4x the family income and claim you cannot afford a “decent” home pardon me if I file this under the categories of “bear hubris” and “entitlement”.

    • jesse-> I would, respectfully, disagree.
      Of course these people are able to afford to rent a habitable, utilitarian home somewhere in the city. What appears to be angering them is how the accommodations available to them are of low quality when compared to what people with their rank of income can afford in other North American cities.
      And, for those who put a reasonable to high premium on owning rather than renting (read: school districts, stability), the city is preposterously “indecent”.
      So, no, the anger expressed in this kind of anecdote recently is, in my opinion, quite understandable, and not indicative of hubris or entitlement.
      They are important stories because they reflect sentiment that is driving people away from the city (and causing others to avoid coming here in the first place).

      • But vreaa, I think what you’re describing *is* entitlement. There is no social contract, implied or otherwise that stipulates that anyone should be able to afford X house while earning Y household income. I’m not even sure it’s bad economics to let the Vancouver market run wild. This is free market capitalism and globalisation and if anyone doesn’t like it, they should seriously consider 1) adjusting their expectations for a life in vancouver 2) adjust their career goals 3) migrate to a more affordable city. Lots of HAM did just that. They worked hard to get where they are and they’re exercising their right to live how they want according to the income they earn. If native Vancouverites weren’t so parochial they might notice that the world has changed quite a bit and the flow of capital isn’t necessarily defined as transferring from the Cambie branch of the VanCity credit union to the Coquitlam branch.

        I’ve lived half my life in Vancouver and I’ve recently moved home after spending several years living in London UK. I was born in Canada and I am thankful to my parents for having the forsight to move here. Canada is the third country that my parents have migrated to, out of a desire to secure their future as well as mine. While I am thankful for having grown up with socialised medicine, high quality elementary, secondary and post secondary education, and a relatively welcoming atmosphere to immigrants of all ethnicities and religions, I haven’t taken any of it for granted. As it has happened numerous times throughout history, I am fully aware and prepared to react if the attitiude of Canadians change towards minorities (and before any of you say it won’t ever happen in Canada, I draw your attention to the treatment of english speaking immigrants in Quebec from the 70s to now, the calculus of real estate bears in rationalising poorly formulated solutions to rebalancing the economy, the change in attitudes toward immigration policy as a reaction to the great recession in Canada). If you thinking expensive houses are unfair, wait until your family loses all of its capital because of apartheid social policy.

        Many naturalised Canadians and native born Canadians with immigrant parents still remember the pain and suffering inflicted by social upheaval when complacency and entitlement lull us to sleep. Those who are constantly whining that life is unfair because they can’t afford to buy a nice house should take some time to evaluate what is and should be most important in their lives. For god’s sake, just move. There are much better jobs and cheaper real estate to be found in other cities in the west, such as Seattle and Calgary.

      • So, matt, you are arguing that RE in Vancouver is fairly priced?

        Your argument is essentially, “it is what it is”, “take it or leave it”.
        Respectfully, I disagree. That argument is a form of economic relativism that is intellectually bankrupt.
        Next you’ll be saying “you can’t spot a bubble when you’re in one”.
        Well, you can.

      • Another thing, matt: We’re particularly interested in what you mean by “the calculus of real estate bears in rationalising poorly formulated solutions to rebalancing the economy”. Please elaborate.

        [Most Vancouver RE bears are AGAINST social engineering. Take CMHC, for example.]

      • @matt my tax money is guaranteeing all the speculation that has driven the real estate market, so i have a right to have expectations about how my tax money is used in public policy that affects my daily life. It is not about entitlement, it about the social contract for Canada “Peace and Good Government”

        Regarding your comments about globalization. The free flow of capital and goods across borders, without the free flow of people across borders, is a recipe for disaster, because it enables a small group of money managers to move money around without any accounting for the social costs and other externalities caused by the movement of money. They are able to hold societies hostage.

        I am all for globalization so long as we have free flow of money, people and goods, not just money and goods. And most importantly private profits and private losses not private profits and socialized losses like we have now.

        I honestly feel that the globalization is creating not just transnational corporations but transnational individuals who think that they are entitled to free shit from the society they live in or else they will move their money and selfs from the society that they are in to some other society.

        This reminds me of a book I read about 12 years ago called “The Sovereign Individual” by James Dale Davidson and William Rees-Mogg it was very depressing read because I had seen what happens when productive smart people starting acting like they are sovriegens they start believing that what they do is their business only and does not have an impact on the society they live, this is the dangerous thinking that leads to two tier society, where no one is really happy including the first tier of resource owners and wealthy people.

      • Yes, I’d argue that housing is fairly priced. The proof is that there are people willing to pay it. On the other hand, I would never consider participating in this market because I don’t have the capital to shoulder the risk should the market choose a new trajectory in the near future. I also don’t want to tie my financial well-being to Vancouver (there isn’t much going on here except weed and tourism. I don’t think it’s politically viable to start a natural gas industry here). If I could buy a home with sufficietnt utility at a price that is reasonable to me, then I would but I don’t see that happening in the near future.

        As I’ve mentioned before in past comments on this board, my problem with this market is that I don’t think it’s right that the Canadian tax payer is shouldering the risk from speculators. To be clear, I don’t think every market participant is a speculator and some people really can afford the prices that we’re seeing. No one is being coerced into paying prices they can’t afford and we should all stop this irrational thinking.

      • “They worked hard to get where they are and they’re exercising their right to live how they want according to the income they earn”….

        So are the Cage Dwellers of Hong Kong, Matt.

        One city. Two worlds. Sound familiar?

        http://tinyurl.com/ydjq4vb

      • matt: “Yes, I’d argue that housing is fairly priced. The proof is that there are people willing to pay it.”

        matt, we’re actually pretty much on the same page for most things, so I don’t want to make too big a deal out of this. But you must realize that by making the statement above, you are declaring yourself a complete nihilist about market analysis. If that is the case, so be it. But don’t expect the rest of us to agree. Markets are very very inefficient, and if you don’t believe that, you’ve been living in a cave for the last decade, at least.
        Those inefficiencies can be taken advantage of by astute participants.

        Our analysis leads us to conclude that Vancouver RE is currently overpriced, grossly so, perhaps by a factor of 2 or 3 or even 4. The wise are lightening up and avoiding buying (you happen to be doing this for other reasons, it seems).
        The only people who should be buying in Vancouver at present are those whose net worth is large enough to leave them insignificantly affected by a housing crash of over 50%.

      • vreaa, what is the remedy? Real estate price controls? More subsidies? I would suggest otc financial instruments to short the Vancouver market but that would be absurd.

        Would you march out onto the floor of the Chicago Mercantile Exchange and declare that $110/barrel oil is indicative of unfair pricing by intellectually bankrupt traders?

      • matt: “what is the remedy? Real estate price controls? More subsidies?”

        No, the remedy is a free market.
        As it is we have subsidies for speculators (CMHC), moral hazard, politicians with an interest in shoring up the RE markets, vested interests applying pressure on government at every level to keep lending standards inappropriately loose, etc.
        So, fewer controls, fewer subsidies, let the RE market itself discover true market values.

      • vreaa, while I agree with the outcome of your market analysis, I’m not sure you or anyone (myself included) else has enough information to comprehensively describe what is happening in the Vancouver housing market. I’ve stopped trying to sound intelligent with market analysis when pleading with my friends not to risk their long term financial well being by buying homes which I consider to be overpriced. The fact is, I’ve been consistently wrong about the Vancouver market since 2006. Even the great recession which struck in 2008 has proven unable to disturb the resilience of the market. And it’s not just me that’s wrong, VHB and mohican, two other blog posters whom I also respect (you included) have also been wrong. Your analysis, however comprehensive it may be is missing some other significant element that can’t describe what is happening here.

        Yes I am a nihilist when it comes to market analysis. Did you follow any of the bullshit that was being written by economists, “insiders”, central bank governors and Jim Cramer leading up to the collapse and bailout of Bear Stearns and the subsequent destruction of Lehman Brothers?

        Don’t let your arrogance get ahead of you. Paulson and Co, you are not.

      • Nemesis, that is awful. But I’m confused, are you equivocating cage homes with bedbug infested apartments on the West End of Vancouver? Or illegal basement suites in Point Grey?

      • matt: “I’ve stopped trying to sound intelligent with market analysis when pleading with my friends not to risk their long term financial well being by buying homes which I consider to be overpriced. The fact is, I’ve been consistently wrong about the Vancouver market since 2006.” … “Your analysis, however comprehensive it may be is missing some other significant element that can’t describe what is happening here.”


        This ALWAYS happens to bears in bubbles:
        1. It goes on longer than most expect.
        2. (a) They start thinking “Maybe it IS different this time” (= matt: “missing some other significant element that can’t describe what is happening here.”)
        2. (b) They start doubting their analysis. (This is a necessary development: when the last bear who is going to capitulate does so, the bubble is over).

        PS: We certainly don’t feel arrogant about this; we have been humbled again and again by the strength of this speculative mania. We’ve been wrong longer than you have. We also feel silly about having been wrong for this long. BUT that does not mean “it’s different this time”.

      • ams, what do you think is preventing the free flow of individuals? Where do you see this happening?

      • “how the accommodations available to them are of low quality”

        I think you hit on it, this person is comparing what is affordable to his peers, not only those in the city who bought years ago or are encumbering large debt obligations to to so, but those in other cities who don’t face high prices. There is some underlying equivalency going on equating income to what lifestyle one should be afforded.

        I think bubbles are painful and damaging, however life isn’t always meted out fairly across time periods and generations. This poor fellow can rent with his head held high and come out the better financially. Or is renting a stigma in his circle?

      • matt answering your question about the free flow people. Consider the relationship between Canada and the USA we have free trade agreement and free flow of capital between the two countries, and we have a tax treaty, and recently the Federal government made it even easier for USA based Venture Capital firms to invest in Canada by simplifying the taxing of the profits.

        Go try crossing the USA border, and tell the border agent you were going in for a couple of days of consulting in the USA you will be told that you have to have a work VISA to do that, no one tells a bunch of money that you need a VISA to move the money between countries. Or maybe you want to do get a job in the UK or anywehere in the EU in fact try staying for more than 90 days in the EU or any of the Schengen treaty countries and you will have to go through a very long process, you can’t just fly into another country, apply for a job and participate in that society, but hey money can with no questions asked.

        I am originally from what people in the west would call a third world country in a very tough neighborhood of the world and I can tell without the Canadian passport I have now no one would let me into their country without a visa, or some very long and involved process to let me into their country, yet money can move from the country I am originally from to all other countries freely, in fact it has a very thriving banking sector.

        It is reasonably easy for a person from rich country to visit another rich country maybe even move across countries, but it is not as easy as moving from Toronto to Vancouver but for money borders mean nothing money can move between countries the way you and I can go from Toronto to Vancouver.

    • I feel pretty much the same as this couple, sure I can rent and pay $1570 a month in rent for something that would cost me $2200 a month to own, in a normal market with sound fundamentals I should have be able to buy a place twice better than what I rent and pay less $1570. The more I learn about the role of government policy in this insane RE market and more pissed off I get because the government is using my tax money to guarantee all this speculations, totally sick. I have taken a lot of risk to launch a business for the past six years I have worked my butt off my business is profitable and I have sent tons of tax money (business, and personal income taxes) to the government a lot more than an average employee and all that tax money I sent is going to get used for some stupid bailout of the Canadian Housing market. So my own tax money is being used to screw me out of living in a better place, all the contributions I have made to the real economy don’t count it’s all about speculation a game I am not interested in playing. The only benefit I got out of this whole thing is a pretty self education on economics, and finance.

    • @matt you say “To be clear, I don’t think every market participant is a speculator and some people really can afford the prices that we’re seeing. No one is being coerced into paying prices they can’t afford and we should all stop this irrational thinking.”

      Well I disagree because real estate prices are set locally the most recent sales on the same streets sets expectations on the way up and the way down.

      When banks pre-qualify people for huge mortgages far more than is prudent prices go up plain and simple. Most people don’t understand compound interest, amortization tables, and can’t calculate the numbers because our education systems turns kids of math in elementary school. So you argument about people being able to afford what they are buying is not true because these people buying are delegating to the banks to tell them what they can afford, they will soon discover that they made big mistakes.

      • I agree with you AMS. There should be consequences for this sort of predatory lending and I think it’s unconscionable that the CMHC may be enabling this behaviour.

        But I still think there is a significant percentage of buyers for whom this is not a problem.

    • this is the most ridiculous comment I’ve read in a while.
      median income for Vancouver is 56K – 4 times is 224K. Even if this couple only put 5% down and went with a 25 yr mortgage they can afford a 1,255,000 home. Unless they’re trying to squeeze themselves into an exclusive west side neighbourhood I don’t see what the problem is.

      • There’s “afford” and there’s afford.
        Perhaps in buying a $1.225M home they’d be putting 2 or three times their net worth into RE, at the peak of a speculative bubble, and, when the crash comes, they won’t only be wiped out but be in the hole by hundreds of thousands of dollars. Perhaps thats the risk that this sensible couple are saying they can’t afford to take.

  2. What stuns me is how people are NOT angry about paying a fortune for poorly built, poorly designed shoe boxes.

  3. “No, the remedy is a free market.”

    BINGO! Remove the crutch of government guarantees and let new home owners pay the true risk premium demanded by banks, and we’ll see very quickly what the true intrinsic value of real estate is.

  4. matt: “Yes I am a nihilist when it comes to market analysis. Did you follow any of the bullshit that was being written by economists, “insiders”, central bank governors and Jim Cramer leading up to the collapse and bailout of Bear Stearns and the subsequent destruction of Lehman Brothers?”


    Yes, we did. Also followed analysts who have done fine through all of this (as have we).
    In our experience, most market nihilists are intelligent people who have tried to make money in the markets and have failed; sometimes by chance, sometimes by poor technique. They then rationalize that markets must be efficient, thus you can’t expect to outperform, thus you might as well give up.

    PS: Tradable Hypothesis: For this cycle, the loonie has topped, the USD has bottomed, the Nasdaq/emerging markets have topped, commodities are in for a downdraft.

  5. I find it very annoying when some idiot suggests that what we have here is “free market capitalism”. Matt, are you a troll? Since when is an environment with artificially low interest rates and guaranteed bailouts for reckless lending a free market?

    Free Market is the solution. Unfortunately, we don’t have it here.

    And yes, the bear anger IS justified. The current environment is artificial where certain groups are significantly disadvantaged because of political decisions on the top. These decisions are part of the slow and prolonged suicide of the West. Speculation and freeloading are rewarded; Productivity is punished.
    The good news is that productive people are leaving the city. The joke is on you, real estate bullshitters.

    • bubbly -> matt is definitely not a troll, he is sincere in his arguments, IMHO.
      In fact, we sympathize with him regarding his exhaustion – he’s seen the bubble for what it is for more than 4 years, but it has been relentless; it has defied logic and worn down sane individuals.
      Many of us have experienced versions of what he’s going through.
      [which doesn’t mean we aren’t at times angry, too!]

  6. OK, I get the exhaustion. But I am tired and “exhausted” too because people keep telling me “this is free market, get used to it” and I always try to explain to them that NO, this is not a free market and give them clear reasons why. Sometimes I feel like I am talking to a wall…

    • Well then spend more time here and converse with people who agree with you 😉

      FWIW my friends are mostly aware prices are unaffordable and unsustainable. Of course most of them either rent or bought when prices were much lower. I guess I just don’t roll in the right circles…

  7. @jesse you said “I think bubbles are painful and damaging, however life isn’t always meted out fairly across time periods and generations.”

    I agree with your sentiment that life has a chance element to it, things like natural disasters, getting cancer, or other bad life events are upsetting and possibly truly random. However, when something is man made and intentional its hard to just say suck it up life is not fair.

    • “However, when something is man made and intentional its hard to just say suck it up life is not fair.”

      War isn’t fair either and it’s man-made, just as an example. As do you, I see the perversity of the situation and how many people are going to pay a heavy price for excess risk taking. But at some point screaming from the rooftops, while in cohort with others may prove useful, must be measured with getting on with life. If that means moving so be it.

      The overarching perversity I see is how all of one’s friends can make risky financial investments and the majority of them will think it’s acceptable because, even if/when prices crash significantly, the majority of them will not be forced into severe hardship. That is, the magnitude of the financial harm is severe but the probability of it occurring is low. In total I don’t think people see those dangers because they aren’t everyday occurrences. But in total these risks have real financial implications but are not shared equally and unaccounted for except by those with a bigger picture view, or simply those with enough assets to see it off their bottom lines. This obliviousness was the same frustrations my parents faced with their neighbours and peers who had higher spending and debts throughout their lives. In the end most came out fine, with reasonable retirement savings and had lived a more comfortable life (and arguably a better one based on their spending). But not all were so lucky. Does that mean that their profligacy was rewarded? I’d argue in sum it was not. Point is, I don’t think even after the pain of a crash has been meted you will see most people wake up. The person who is the subject of the anecdote will have to deal with this in perpetuity. Nassim Taleb put it well in his book “Fooled by Randomness”, (to paraphrase) I am content knowing that the expected outcome of my life, ex ante, exceeds that of my rich neighbour.

  8. Matt, when you allow that they’re paying > CDN12/ft.SqPCM…. the ‘affluent’ CageDwellers of HongKong have clearly realized a level of prosperity exceeding even the wildest dreams of either the PointGreyTroglodytes and/or WestEndBedBuggers… (did I just say that?)…

    More seriously, Matt – it’s really about atomization, particularization and stratification – all of which are socially corrosive/toxic/anomic…

  9. Permit me, if you will, an analagous illustration of lively local interest…

    Let’s call it ‘Casino Capitalism’… (albeit, ‘Nemesis’ wholeheartedly agrees with the wag who once opined, “Comparing capital markets to Casinos is patently unfair – Casinos have rules.”)…

    [CBC] – Casino Will Not Be ‘Forced’ On Vancouver

    …”The B.C. government welcomed the Paragon Gaming Inc. proposal with open arms last year. The tourism minister of the day, Kevin Krueger, said the sprawling entertainment centre would bring a whole new vibrancy to downtown Vancouver.”…

    http://tinyurl.com/6276a76

    As regards, ‘a whole new vibrancy’…

    [Reuters] – Special Report: The Macau Connection

    …”A Reuters investigation in collaboration with the Investigative Reporting Program at U.C. Berkeley has learned that casino executives, U.S. diplomats and the Chinese government share the concerns raised by Jacobs about Macau’s booming junkets industry, which they describe as rife with organized crime. An extensive review of court records, interviews with high-level federal officials, and State Department cables obtained by WikiLeaks and released to Reuters through a third party, reveal widespread corruption in a region that resembles a Chinese version of the early years of Las Vegas…”

    http://tinyurl.com/4lxv767

  10. And as for the ‘early years of Vegas’… Here’s how those panglossian dreams have actually played out….

    [BloomBerg] – Sahara Hotel Casino, Oldest on Las Vegas Strip, to Close May 16

    “The Sahara Hotel & Casino, the oldest remaining Las Vegas Strip resort, will close May 16 after owners SBE Entertainment Group and Stockbridge Real Estate Funds postponed its redevelopment amid a record citywide slump.”

    http://tinyurl.com/4dmrdl8

  11. I can afford to buy a house without a mortgage and I’m not touching the RE market in Canada. It may be time to look at moving to a different country entirely.

  12. @vreaa
    how are real estate markets inefficient? I think they might be the most efficient markets in the world. They separate the wheat from the chaff – they guarantee entry only to those that are “efficient” with their lives, education and subsequent income

    • Rusty -> “They separate the wheat from the chaff – they guarantee entry only to those that are “efficient” with their lives, education and subsequent income”

      Are you serious, or are you trolling?
      Firstly, you don’t appear to be aware of what the term “efficient market” refers to.
      Secondly, if we ignore that and address the argument that you appear to be making, consider:
      Exhibit A: The USA
      Exhibit B: Ireland
      etc

    • What has the personal life of a market participant got to do with market efficiency?

  13. “Yes, I’d argue that housing is fairly priced. The proof is that there are people willing to pay it.”
    -matt

    It’s hilarious how matt seems to think that markets (even real estate!) are efficient. Real estate, almost by definition, can NOT be efficient, because transaction costs are very high, there are major taxes involved, and relevant information is not easy to find. Transaction volumes are also very low, which is unlike an efficient market.

    You sound like one of my old finance professors stubbornly sticking to the efficient market hypothesis argument despite the overwhelming evidence that there are many psychological factors that create market inefficiencies, ie, hypes and bubbles. You probably won’t admit it, but many of your arguments are simply illogical. I can understand why you may not choose to believe so, though, but I know that it is difficult for humans to accept they are wrong if they have been arguing a point for so long.

    I am not an investment advisor, but I think you should login to your brokerage account and buy some OpenTable (NASDAQ:OPEN). It’s trading at almost 200x earnings with an arguably mediocre business, but hey it’s fairly priced because someone is willing to pay up that much for it.

    I agree with most that housing is overvalued, and cannot be rationally (keyword: rationally) justified at these prices other than the hope (read: dream) that some greater fools will keep buying real estate at further higher prices.

    Solution: Rent. Most people renting out their houses now are barely getting any yield, and intelligent people can take advantage of these morons by living inexpensively. Unlike housing prices, rentals have more to do with fundamentals, so even if this housing bubble lasts for another 5 years, you still get live relatively cheaply for that time.

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