Salt Spring: 2 to 6 years of inventory – “You may own a million dollar property, you just can’t sell it in a reasonable time, unless you discount the property heavily.”

“Salt Spring: 3 house sales in the last 30 days and 221 properties listed for sale. That’s 6 YEARS of inventory! Of course that is ridiculous, evened out over the last year its more like 2 years of inventory. But the point is the same. You may own a million dollar property on Salt Spring, – you just can’t sell it in a reasonable time, unless you discount the property heavily.”
– JustJack at HouseHuntVictoria, as cited by chip at VCI, 25 July 2011 9:17pm

Westside New Build Calamity – “The house is for sale for $2.7M at the moment.”

rmac at VREAA 21 July 2011 4:01pm – “The house next door to ours (on West 21st) was constructed by casual labourers that were trucked in daily from Surrey – not much English between them but they did anything required, including discovering an old oil tank and disguising it in a pile of debris to be hauled off. After the house was finished but before curtains were up we glanced in the front window from the sidewalk and noticed a veritable waterfall cascading out of the ceiling fixture. We called the real estate agent listed on the sign out front and hours later someone came to look at it. The never used plumbing in the bathroom had exploded. The water was cleaned up and the plumbing fixed but the wiring, light fixtures, hard wood floors were just left to dry out. Shortly after that the three stairs leading to the front porch came separated at the porch because no rebar had been used to tie in the stairs. That little faux pas was tiled over. The house is for sale for $2.7M at the moment.”

In a red-hot speculative ‘seller’s market’, construction standards disintegrate. Buyers get even less than what they would for lower prices in a more normal market. The ‘high-end’ has not escaped this effect. – vreaa

“I’m Peeved” [‘Vancouver RE-Verse’; Found Poem]

I’m peeved

I confess I am really angry that I have to
leave the city I was born and raised in
(where my parents and grandparents grew up)
because I can no longer afford to live here.

Why is it that we are working
more and more
but can afford
less and less.

– from Georgia Straight, 18 Jul 2011, ‘Confessions’ section
[also made the print edition this week; hat-tip to AR]

A post in the very, very occasional ‘Vancouver RE-Verse’ [Found Poems] series.
Poems are completely unedited but for layout.
Prior example here.

Victoria – “But this is my goal. A house by 55.” – “Renting’s the only sane option. But I know from his conversation with me, that ain’t gonna happen.”

Garth Turner at greaterfool.ca 17 Jul 2011 relays this story from Jake in Victoria –
“I just turned 50. I married in 96 and then started thinking about purchasing a house. Should have bought something but had no cash, no down payment, and job wasn’t that good. But then things picked up. Starting saving, had 2 kids, moved to a small rental house.
But in 2001 prices started spiralling out of control, and even though my income and savings increased, I am still chasing the market up. I could rent a much better and bigger house than I could ever buy, so did just that. But I am running out of time.
So if I wait until 2013 or 2015 to buy in, and I could as I have now saved, I will be 54 by then and ready to retire. And every rent payment is going right out the door, I don’t even want to think how much I have spent on rent in the last 15 years, I could have bought 3 houses.
I work for Government, and my pension from BC Pension Corp starts at 55. I have 31,000 in an RESP, and 90,000 in RRSP money, of which 50,000 was destined for the HBP. 5,000 in a TFSA.
Am I screwed as far as owning a 4 BDR House in Victoria? Is it time to throw in the towel on my dream, rent til the kids are gone, and then buy a 76 Winnebago and live off the land?”
“I am not whining about my position in life, I thank God for what I have, I know I am in a better position than some that have shared their stories on the blog,” he said, “but this is my goal. A house by 55.”

GT added this sensible analysis: “Following up, I found his two kids are 11 and 13, his wife doesn’t work, the family income is seventy grand, he’s desperate to retire at 55 and his pension will be $2,800 a month gross. So here is the situation – devoid of emotion.
The average SFH in that city is $630,000. His down payment will max out at $80,000 (with the HBP and cashing in his TFSA plus the rest of his RSPs). That’s 12% down, which means (with closing costs) a mortgage of $562,600. Of course, he can’t risk going variable since rates have nowhere to go but up, so a 4% fiver amortized over 30 years would cost $2,734 a month, and then escalate. With property tax and insurance, that climbs to $3,134.
His pension income, after tax (at 20.6%), would be $2,416 a month. So, carrying the house would take 129% of his income. No food. No gas. No cable TV or new clothes. No car. And only $31,000 in RESPs to help his two kids through a collective eight years of university.
See what I mean? Home ownership’s a dream denied by his own financial reality.
The only hope might be to move to rural New Brunswick, buy a place for $139,000, shoulder a mortgage in retirement, and have zero savings. Or, Jake could rent for 50% of his after-tax pension income, still have money to live, plus $95,000 invested.
If financial security and quality of life are the goal, renting’s the only sane option. But I know from his conversation with me, that ain’t gonna happen.”

“I work long hours to be able to pay for a house. I drive long distances to get to and from work. I barely do anything in my expensive house other than sleep and go back to work each day.”

“A caller on the Bill Good show this morning [29 July 2011, as recalled by E.G. at VREAA] was saying something to the effect of his being not sure why he bothers living in the Lower Mainland anymore:
Caller (Paraphrased): “I work long hours to be able to pay for a house. I drive long distances to get to and from work. I barely do anything in my expensive house other than sleep and go back to work each day. And on top of that (speaking about the upcoming additional gas tax) every time I turn around I’m being taxed for something else.”
Mr. Good: “I think that you’re speaking for thousands of people right now.”

When the speculative bubble deflates, as all bubbles inevitably do, these “thousands of people” will be in an even worse situation, as their “expensive homes” will be significantly less expensive, but they won’t be in a position to benefit from that. Their mortgages, workload, commutes, and taxes will all be just as onerous as before. And because our economy is so overdependent on RE, some will have the added burden of their employment and/or income being in jeopardy.
Can we imagine how demoralizing all that is going to be?
The misallocation of resources caused by speculative manias is deeply detrimental to a society, in so many different ways.
– vreaa

Ottawa – “She then tells us the owners have already bought another place, unconditionally, and that they MUST sell.”

Bottoms_Up at greaterfool.ca 17 Jul 2011 9:33pm –
“Prestigious area north of Ottawa. Show up at the end of the open house.
Agent tells us that we’re only the second group through the house (and that the first group was ‘really interested’ but they have just leased a place — I said, ‘they can always break the lease’, and she just looked at me confused).
She then tells us the owners have already bought a place, unconditionally, and that they MUST sell (isn’t this a conflict of interest/breach of trust?!).”

“I can’t tell you how many people have informed me of their imagined real estate profits in the past few years, but I can tell you that not a single one of them has actually sold anything and taken those profits.”

“I can’t tell you how many people have informed me of their imagined real estate profits in the past few years, but I can tell you none, and I mean not a single one of them has actually sold anything and taken those profits… but they’ve sure as hell spent them thanks to 2nd mortgages.
The whole “best investment you’ll ever make!” sales pitch falls apart when owners realize they’ll have to either move to a smaller home, distant suburb or back into a rental.”
– ‘nobody you know’ on VREAA 24 Jul 2011 11:33pm

Speculative holders. – vreaa

“Friends of ours just sold their home in West Vancouver for $1.55M. The new owners took possession and within a week it was back on the market for $1.7M”

“Friends of ours just sold their home in West Vancouver for $1.55M. The new owners took possession and within a week it was back on the market for $1.7M. Seems the new owners haven’t sold their old property in Ambleside yet, so now are trying to sell any of the two properties. Just can’t feel any sympathy for anyone who does not put a clause in their purchase deal “subject to sale of property”. This just smacks of over optimism in a frothy market.” – DM at VREAA 17 July 9:47am

“A client of mine had an offer to take a teaching job at the Emily Carr art school and turned it down after seeing the housing prices.”

“A client of mine had an offer to take a teaching job at the Emily Carr art school and turned it down after seeing the housing prices.” – daloo22 at reddit.com 15 July 2011

Spot The Speculator #49 – “A 48 year old Vancouver tradesman and homeowner I recently met said to me that even though his little shack is now worth $1M, it would not be long before it goes to $3M, or higher.”

chris at greaterfool.ca 11 July 2011 2:25am –
“A Vancouver homeowner I recently met, a nice 48 year old tradesman, said to me that even though his little shack is now worth 1 million or so, it would not be long before it goes to 3 million, or higher, as time goes by.
I looked at him in utter disbelief when he said [that] this is the most beautiful city in the world, where you can ski one moment and boat 30 minutes later in the Pacific Ocean. That is pretty much how everyone thinks here; [they believe] that the whole world wants to move here, and therefore prices are only beginning to rise, and will do so forever.”

Yes, there is such an animal as a ‘speculative holder’. Handed a time-sensitive winning lottery ticket, they decide to wait for two more before cashing them in. – vreaa

“I was at a birthday party on the weekend and had the bad luck of getting stuck sitting next to a realtor for most of the evening.”

‘YLTN @ Work’ at vancouvercondo.info 18 July 2011 12:37pm –
“I was at a birthday party on the weekend and had the bad luck of getting stuck sitting next to a realtor for most of the evening. This one has been in the biz for 3 years after leaving a career in the film industry and actually agreed with me that she thinks it is time to sell and rent and is actively trying to sell her burnaby condo. What really shocked me though was her description of some of the West side homes she has been to and what she has seen:
The first one was a 3.8M place for sale and when she went to look at it, the guy that came to the door barely spoke a word of english, had food stains on his clothes, slippers and pajamas (in the middle of the day). She said the guy looked like a backwoods asian peasant and was living in the place with almost no furnishings. She went on to say that she has been to a number of places where they have furnished the multi-million dollar places with a few scant pieces of garden furniture.
Her belief is that the owners are offshore and have hired poor peasants to essentially squat in the place to make sure it is lived in to prevent burglaries and to forward mail that comes there to claim it as a primary residence. They have given the “squatter” a minimal amount of cash to buy furniture which is why garden furniture is the usual choice – cheap and easy to carry with no car! Any one else heard of this?”

No, we hadn’t quite heard of this exactly, although we know of new build westside homes which sell and then essentially sit empty (or with what appears to be a single person living in one room). We wouldn’t quite describe the occupants as ‘squatters’ or ‘backwoods peasants’, but the main idea may be essentially the same. – vreaa

Vancouver Sun – “The prevailing wisdom that Vancouver has a housing bubble should perhaps be reconsidered.” [Huh?]

“Housing bubble fears over-inflated”
“Savvy shoppers can still do relatively well in Vancouver by searching for the right unit in the right location”
“..the situation facing homebuyers seems somewhat less dire than at first glance. … Those seeking shelter, both physically and from high prices, can still find relatively affordable units and decent bargaining conditions if they are careful, knowledgeable, flexible and ready to shop around.”
“…the prevailing wisdom that Vancouver has a housing bubble should perhaps be reconsidered. Certainly normal metrics, like the ratio of average price to income, are extraordinarily high and could well be in danger territory. But, existence of more affordable geographic pockets in the Lower Mainland where buyers’ conditions prevail, and softness among apartment and townhouse dwellings, suggest that some markets are much less inflated.”
– excerpts from article by Robin Weibe, Vancouver Sun, 26 July 2011, here noted for the chronological record.

So suddenly the ‘prevailing wisdom’ is that ‘Vancouver has a housing bubble’?
Huh? We must have missed the transition in the prevailing consensus from ‘no-bubble’ to ‘bubble’ there somewhere.
In fact, we’re absolutely sure that the prevailing opinion of market participants remains: “It’s different here; fundamentals are irrelevant; outside money will continue to buoy us up; we are impervious to any significant price drops”. How do we know this? Well, if even 10% of participants actually knew we were in a bubble, and understood what that actually meant, we’d have already had a rush to the exits, and we haven’t had anything like that, have we?
So, there may have been a little bit more public superficial bubble-talk, but the vast, vast majority of participants don’t really see this as a bubble.
Ironically, there will only be a consensus that Vancouver had a price bubble at the very bottom of the market, years hence (which will then be the very best time to buy RE). Only then will all speculative excesses have been wrung out of the market.
Regardless, Robin Weibe’s article shows that the local MSM, despite an occasional good critical article recently, by and large is still asleep at the wheel. There are no pockets of good value in the LML. Far from it; housing is 2-3 times overpriced in all areas. When the tide goes out, all boats will fall. – vreaa

“I gasped and said it is scary, what happens when the prices drop? She was very upset with me, and said prices never drop, they only go up, these people are building equity.”

eva at greaterfool.ca 11 July 2011 1:52am –
“I sat next to a realtor at friends bbq in Kitsilano, Vancouver ealier this evening…she was saying she must leave early as she had to show a condo…she specialized in condos on the westside. I said, “oh you must be a little down since the market has slowed down”…She turned with an insulted look in her face, and proceeded to tell me sales are booming once again! I asked what type of people are buying in this insane market! She said young up and coming couples, average mortgage payments of $6k a month is most common…I nearly choked on my food. I said they could rent the condos of under $3k a month, why pay double to purchase. She replied, “but why pay the landlords mortgage when they can afford their own”…makes lots of sense to me…pay double to own. I gasped…and said it is scary, what happens when the prices drop…she was very upset with me, and said prices never drop…they only go up…these people are building equity. I smiled and said, yea…I remember 1982…we lost our equity along with many other people, took many years to come back. Although, I must admit I have been a little skeptical lately that maybe we have all been wrong…but after speaking with her now believe more than ever “this cannot end well”. “

RBC – “The longer the BOC delays raising interest rates, the more marginal borrowers will enter the market and be walloped when rates rise, and the further home prices will go above their equilibrium levels, only to tumble later.”

“The very source of Canada’s relative success during the worst of the credit crunch — a banking sector that kept on lending and households that kept on buying — could yet spell its undoing if newly enlarged household debt loads prove too onerous to bear.”
“There is a popular misconception that the Bank of Canada cannot afford to raise interest rates because this would prove too damaging for mortgage holders. The opposite is in fact true. The reality is that the Bank of Canada cannot afford to delay raising interest rates, for precisely the same reason. The longer the bank delays, the more marginal borrowers will enter the market and be walloped when rates rise, and the further home prices will go above their equilibrium levels, only to tumble later.”
Once the Bank of Canada raises its key lending rate from the current “astonishingly cheap” one per cent, rising costs of servicing mortgage and other debts will sap consumer spending. Housing prices will fall as lower-tier buyers are forced out of the market by diminished affordability.
– from the Financial Post 26 Jul 2011, quoting Eric Lascelles, chief economist for RBC Global Asset Management.

Completely correct, but also very old news. Many who are bearish Vancouver RE have for years been alarmed by exactly these concerns. – vreaa

Richmond, Handwritten Sign – “FOR SALE, lovely home, ZERO DOWN”

“FOR SALE, lovely home, ZERO DOWN”
“recorded message, 604- etc”

This snapshot sent to VREAA by e-mail from Roko, 21 July 2011 with the following note; thanks, Roko:
“I’m a long time lurker on VREAA. I saw this interesting sign this morning on Cambie and Shell in Richmond. The small print says ‘lovely home’ and ‘recorded message’… I haven’t bothered to call the number, but there’s gotta be an anecdote in there somewhere…”

“I convinced my brother – a doctor in Vancouver – to NOT upgrade his accommodations. I said, don’t you think the fact that you – a doctor – is afraid of getting priced out means that something is very wrong?”

Anotherlowlyrenter at greaterfool.ca 17 Jul 2011 11:17pm–
“I convinced my brother – a doctor in Vancouver – to NOT upgrade his accommodations. He owns a 2 bedroom condo and had been considering buying a house. Not that he can afford it. Homes are too pricey even for doctors. I said, don’t you think you have enough $$$ exposure? He said, but what if I get priced out? I said, don’t you think the fact that you – a doctor – is afraid of getting priced out means that something is very wrong with this picture. Besides, who is going to price you out? Incomes in Vancouver are well less than incomes in Toronto, yet prices are 3 times as high. He sez, but what about the Asians – they’re coming aren’t they? I said, well they have been coming. But what if they stop coming? Or maybe they sell too, once the bubble starts to deflate. Asian “investors” are pretty good at riding a trend up – and they’re good at selling on the way down. Besides, if Vancouver becomes a place that doctors can’t afford to live, then maybe you better ask yourself if this is the kind of city you want to live in . . .”

“Here’s a couple of attempted flips in Metrotown to watch…”

Crash at vancouvercondo.info July 15th, 2011 at 4:04 pm–
“Here’s a couple of attempted flips in Metrotown to watch:

MLS#: V893467
7005 Gray Avenue
Assessed: $780,000
Sold: Mar 2010 $805,000
Listed: Jul 2011 $1,340,000 (after some renos. maybe $40-50K worth)
Note: This was listed in May 2011 for around $1.1 Mil and didn’t sell, so now re-listed even higher!

MLS#: V899271
7162 Gray Avennue
Assessed: $739,900
Sold: Apr 2010 $790,000
Listed: Jul 2011 $1,398,000 (after some renos. maybe $40-50K worth)

Both of these houses are 1960′s era bungalows and were bought just over one year ago, prettied up with renos and re-listed just after the one year mark to avoid the capital gains.
These people must be watching old reruns of Flip-This-House.

Also:
7188 Gray Avenue
Assessed: $697,500
Sold: Oct 2010 $757,500
House has now been demolished and a new spec. house is being built. This next door to 7162 Gray Avenue.

Lots of builder and speculator activity in the Metrotown area south of Imperial Street. I have noticed a sales slowdown in the area recently, with a noticeable increase of listings.”

Victoria – “How long you been building I asked? 12 years he replied. You’re about to get the rest of your lesson, I said.”

Dan in Victoria at greaterfool.ca 10 Jul 2011 at 10:47 pm –
“Things are definitely starting to turn [in Victoria], there is no doubt about it.
Went to a few open houses today, talked to a few sellers, oh yeah lots of interest, things are good….blah blah blah.
I think you are over priced I said to one fellow.
Got the down the nose look, well if you can’t afford it…
Had a good chuckle.
How long you been building I asked?
12 years he replied.
You’re about to get the rest of your lesson I said.”

Many in the market have no experience of significant price downdrafts and genuinely assume prices will continue to rise indefinitely. These guys clearly don’t do much reading. – vreaa

Spot The Speculators #48 – “Lots of locals buy houses around me, and they all say foreigners are making houses unaffordable. They do not see the irony in this.”

alx at vancouvercondo.info 15 July 2011 1:28pm –
“Got a friend who’s getting married. She and her soon-to-be husband were renting in east Van before and they talked about how rent was reasonable and houses were too costly to buy. But now that they are getting married, suddenly “buying a house” is a given.
He said he prefers a house over a condo because for the extra he pays, he can get a tenant that helps with 1/3 of the mortgage. He hopes the interest rate doesn’t go up too soon. He wants to buy in east Van.
It’s sad and telling of the times and city we live in. No one questions why we should already count on being a landlord by buying a house.
Why should interest rates stay low for a long time?
Why should crappy houses cost $1 million?
Why did this crappy house cost less than half that, just a decade ago?
No, they are not rich. They are not foreigners. Seriously, lots of (local) people buy houses around me, and they all say foreigners are making houses unaffordable. They do not see the irony in this. I did not even try to persuade them to do research. I am mentally exhausted from trying to deter people from taking on a pile of debt on an asset sitting on top of a cliff.”

Another example of a seemingly innocuous ‘family’ primary residence purchase that is based on the expectation of ever continuing supranormal price gains. With forced landlordism to boot. – vreaa

Two Possible Class-action Lawsuits Against Local RE Investment Expert – “The road to hell is paved with good intentions.”

From ‘Real estate specialist denies he withheld information from investors’, David Baines, Vancouver Sun 22 July 2011. Excerpts –

Selfstyled real-estate expert Ozzie Jurock and two associates have been named in a proposed class-action lawsuit by investors in a condo development in Williams Lake.
Brian Stachniak of Delta, who bought one of the 76 units in the Crestwood Estates development, alleges that Jurock and his associates, David Barnes and Ralph Case, failed to report major repair work that needed to be done, misrepresented the value of the units and failed to upgrade the units as promised.
Stachniak is asking B.C. Supreme Court to certify the lawsuit as a class action, which would permit him to pursue it on behalf of everybody who purchased units.
…
This is the second proposed class action filed against Jurock and his associates in the last 16 months.
In March 2010, Gregory Bosworth of Bowen Island made similar allegations with respect to his purchase of a unit in the Roosevelt Apartments in Prince Rupert.
A hearing to certify that lawsuit as a class action was held in May and a decision is pending.
…
Jurock – who is the public face of this business – uses his folksy charm and extensive real estate knowledge to generate publicity in mainstream media outlets.
Until 2008, he wrote a weekly column in The Vancouver Sun. Radio and television business commentator Michael Campbell has also heavily promoted him. Campbell regularly features him as a guest on his Money Talks program on CKNW radio and at his annual World Outlook Financial Conference.
On his conference website, Campbell describes Jurock as “one of Canada’s leading business motivators” and says he routinely attracts audiences of more than 700 people. “There is only one reason,” he asserts. “Ozzie Jurock delivers more than he promises.”
These sorts of endorsements provide Jurock with name recognition, credibility and the platform he needs to attract people to his Real Estate Action Weekend.
This is a weekend seminar billed as “two days of inspiration and insight from Ozzie Jurock.” Topics include how to build and maintain a rental portfolio, and how to buy an apartment building with no money down. Cost is $797.
Taking the two-day course entitles you to join the Real Estate Monthly Action Group. These monthly meetings include guest speakers and reports on market activity. They also provide the opportunity for members to pitch their own real estate deals, and – not incidentally – the opportunity for Jurock and his associates to pitch their deals.
It costs another $300 to join this group, plus $177 per month for a minimum of 12 months, but Jurock provides deep discounts for people who make an upfront commitment to buy the whole package.
The bottom line is that he ends up with a monthly audience that includes relatively unsophisticated but very attentive people who are heavily motivated to invest in real estate.
And what better real-estate deal for a student to invest in than the teacher’s deal, especially if the teacher is offering it at what he claims is below appraised value?
As a further inducement, Jurock offers a $500 referral fee to every member who convinces a friend or family member to invest in one of his deals.
He also peppers members with sophomoric sayings designed to spur them into action. Some examples are “life is in the doing,” “the road to hell is paved with good intentions,” and “it’s never too late [to] attract that great passive income we all need for a self-actualized life.”
I personally do not like this sort of hype, which is exactly what it is. It appears to me that Jurock’s overall marketing strategy appeals to financially unsophisticated people who have limited funds to invest and know little or nothing about real estate investing, but want desperately to get into the real estate market.
One of his answers has been for these people to buy apartments and condos in remote communities such as Williams Lake, Prince Rupert, Prince George and Merritt, and place them in rental pools to generate so-called “passive income.”
But of course, such resource-oriented locations are often subject to wrenching economic downturns, and these markets don’t enjoy the same sort of boost from immigration as the Lower Mainland does. Also, unforeseen expenses (such as leaky condos) can turn the most conservative cash flow projections into wishful thinking.
…/end of excerpts

These kinds of cases almost exclusively occur in falling markets. In soaring markets, even bad investments are bailed out by price rises. Expect there to be similar cases in the LML once the market here turns. How many here ‘invested’ in RE under ‘guidance’? – vreaa

PostCardsFromTheBlastRadius #12 – “Quality, Quality, Quality!” Or “WhenDreamsGoBust…”

Has it been three years… or just two? Hmmm… I’ve rather lost count. Regardless, this abandoned forest ‘o rebar is surprisingly situated within ‘spitting distance’ of Penticton’s OhSoTony Yacht&TennisClub! (yes, they have those in the HillyBillyRiviera, too)… Apparently, the CourtOrderedSale didn’t quite work out. Never mind, DearReaders! – let’s go ‘walkies’, shall we!??

Now, look carefully and you’ll notice rebar sprouting from this lot, too – albeit they’re more like asparagus tips than the RealSteel … This partially developed/vacant lot was originally purposed for a companion dwelling to the structure visible in the background… Hmm. I wonder what it’s called – I must confess, I’m rather partial to that whole SouthWest/Pueblo thang…

Ah! They called it TheArizona!… Now that was prescient. Best of all, it isn’t just an ordinary old case of “NowSelling” – they’ve gone one better and declared it, “NowPreselling!”. I wish them luck. But here’s the thing – when Developers are compelled to go the “ComFree” route… you KNOW times are hard.

Yikes!… That is SO the biggest WeatherWane I have ever seen. I know, DearReaders – you mistook that erection for a crane on an active site. Truth be told, it hasn’t functioned as a crane in at least two years. But it does accurately indicate wind direction and I am reliably informed that it is sufficiently conspicuous to the “OnFinal” NetJetJockeys BarrellRolling in on the ApproachPath to CYYF’S RunWay16 to serve as such…
At least it’s useful.
Still, I wonder what this one was called… Let’s peek!

‘Ashley’s Dream’. One almost yearns to know… who was Ashley?… The Developer’s daughter?… Their MainSqueeze??? Their MaMa? Their Commercial Loans Officer?
Or was “Ashley’sDream” merely the febrile ‘hookline’ of a Down&Out CondoHype CopyWriter struggling to make good on his tab at “TheDecoy”.
We’ll probably never know.
But you’ve got to love that tagline…
“Quality, Quality, Quality”!
Alas, sometimes: dreams -> nightmares.

———————-
Photos and commentary for the ‘BlastRadius’ series by ‘Nemesis’.
[Images Ⓒ​2011 ‘Nemesis’ – All Rights Reserved]

“I’ve been a renter and an owner. Without doubt, from a financial and quality of life point of view, ownership is the correct choice for most people in the long term.”

From comment at the Globe and Mail by Geo Centric 3 Jul 2011 10:11am –
“I’ve been a renter and an owner. Without doubt, from a financial and quality of life point of view, ownership is the correct choice for most people in the long term. How many people, who have been homeowners for 20 years or more, have you heard say “that was mistake – I should have rented”?
We have 60-year old friends that have been renters for 40 years. They have no equity in a home and will be paying ever-increasing rent with nothing to show for the rest of their lives. I have been mortgage free for 10 years and the value of the house has increased by $450K over the 19 years I lived here. If I sold it, I would get my $250K purchase price returned as well [the price appreciation] for a total of $700K – tax free. That’s a tax efficient average annual return of 5.2%.
But wait, there’s more, as Billy Mays would have said. I also get a tax-free dividend each month from my house – the value of what it would cost me to rent it, which is currently about $2,800. Remember, rent is paid with taxed dollars, so to pay your $1,200 apartment rent you might have to earn $1,500 to $2,000 gross, depending on income and tax situation.”

A question for newbies and relative newbies: What is the most important factor that ‘Geo Centric’ is leaving out of their calculations? – vreaa

Vancouver Island – “Prices are dropping, so why should I buy? I’m not even remotely interested.”

Van Isle Renter at greaterfool.ca 10 Jul 2011 10:17pm –
“I live on the Island. Moved here two years ago. No interest in buying a house. Renting and loving it! Prices are dropping, so why should I buy? Until I see a major re-trenchment in prices (30%+) I’m not even remotely interested. I was a homeowner for 20+ years. Glad to be rid of it.
Spend my time golfing and sipping cappuccino’s while the landlord worries about the property taxes, the hot water tank and the roof. And I’m OK with that.”

When prices are falling, prospective buyers feel no urgency to buy, and sit comfortably on their hands. – vreaa

“I grew up in Vancouver and left in my late twenties looking for better career opportunities and have spent the last 10 years in Los Angeles. Vancouver has a massive inferiority complex.”

WS at vancouvercondo.info 6 July 2011 9:21am –
“I grew up in Vancouver and left in my late twenties looking for better career opportunities and have spent the last 10 years in Los Angeles.
I am not sure what one considers “world class” or if it is even definable. Regardless, Vancouver does not resonate on the minds of people in Southern California (or the US for that matter) any more than other far off NW cities like Portland or Seattle. You’d think Vancouver would be more prominent with the entertainment industry focus or self proclaimed “Hollywood North” moniker. Interestingly that is a term I have never heard used outside of Canada. Although, admittedly I am not in the entertainment industry.
In my view, Vancouver is a pretty city in a remote, backwater area of the world with a large port that ships out natural resources to the rest of the world. World class scenery for sure, with horrendously crappy weather and not really important on the world stage outside of being a conduit to Canada’s great natural resource assets.
When I tell people in the States I am from Vancouver about 66% give me blank stares not knowing what to say and the other 33% say “Oh what a pretty city!” then I proceed to ask them if they visited in July, August or the first two weeks of September.
Lately though – Sadly many people asked me about the riots. but that only lasted a week or two.
Vancouver (and Canada) has a massive inferiority complex.”

“Three friends are planning on moving away due to the disproportionate cost of living:income ratio. One is going to Calgary and the other two are going to UK and Australia.”

Vansanity at vancouvercondo.info 19 Jul 2011 3:40pm –
“This week I’ve had the conversation with 3 friends that are planning on moving away due to the disproportionate ratio between the cost of living:income.
One is going to Calgary and the other two are going to UK and Australia (Australia has its own housing bubble to deal with but it sounds like the incomes are higher in their field).”

“We’re facing an exodus” – “Young families will say ‘Let’s sell what we have here, get a better mortgage and make more money somewhere else.’”

Nizam Ibrahim lives in Vancouver but commutes to Calgary, where he rents a two-bedroom apartment in a nice part of town. Despite added monthly expenses of more than $3,000, he still averages $15 an hour more than any job he could get in Vancouver.
“It’s a bit tiring, but to enjoy any kind of lifestyle in Vancouver it’s a compromise I need to make,” said the IBM IT consultant. “I’ve saved more in the last two years working in Alberta and traveling back and forth than I ever did working in Vancouver.”
Recruitment experts predict with its high living costs, skyrocketing real estate and grossly inadequate salaries, more Vancouverites will flee to where salaries are higher and commensurate with their skills and inflation.
“We’re facing an exodus,” said Feras Elkhalil of the WPCG recruitment firm. “We don’t want a brain drain out of Vancouver. We don’t want to lose talented people. If you want good talent, you need to pay for it.”
He added Toronto salaries are at least 15 per cent higher, and 20 per cent greater in Calgary and Edmonton where taxes and real estate prices are lower.
“Employers are not keeping up,” he warned. “I fear they’re turning a blind eye, saying it doesn’t apply to them and we’ll have people frustrated at the cost of living and (foreign investment) driving up costs of real estate. Young families will say ‘let’s sell what we have here, get a better mortgage and make more money somewhere else.’”
– From ‘BC facing a brain drain‘, Erica Bulman, 24 Hours, 17 Jul 2011 [hat-tip to Brent]

The math for Ibrahim is remarkable. It appears that, given the pay differential and his cited extra expenses, he only profits from the commute if he works more than 200 hours per month. Perhaps there are also career advantages.
That aside, the main point of the piece is sound: That income:RE_price ratio in Vancouver is forcing some people away. – vreaa

“I sold my condo in Surrey and moved into a rental townhouse in Burnaby. My sister explained to me that I didn’t understand the importance of leaving real estate for my children.”

MBA at VREAA 5 July 2011 7:30am –
“I sold my condo in Surrey and moved into a rental townhouse in Burnaby. My sister to me explained that I didn’t understand the importance of leaving real estate for my children. I didn’t find that argument compelling. I was planning to have kids while she already had kids and a house in the Fraser Valley. I was moving specifically because I wanted to be a better parent. If housing prices continued to rise, I was never going to be able to move “up” out of a condo anyway, a decidedly unfriendly place to raise children. But more importantly, I was spending 2 hours a day in traffic commuting over the bridge AND my wife needed to work full time to feed the mortgage and strata fees. I decided that my children would be better served having me home for those two hours a day than they would be from this etherial real estate winfall when I die in 60 years. That’s without addressing the inconvenient logic that I pay less in rent now than the interest portion of my mortgage + strata fees + property taxes + levy to fix the roof I was paying in the other place. I am now able to put 10% of my paycheque plus all of my wife’s part time pay directly into savings. I think my kids will be ok because they will have a father they get to see and a mother that can afford to stay home with them full time. I still don’t have kids, but I’m pretty sure when they are adults they will approve of the choices I’ve made on their behalf.”

“It seems to me that people in Van don’t have a strong appreciation for the amount of wealth that is actually coming across the ocean. I could only dream of the wealth that I have seen and it honestly churns my stomach.”

people observer at vancouvercondo.info 19 Jul 2011 8:34pm –
“It seems to me that people in Van don’t have a strong appreciation for the amount of wealth that is actually coming across the ocean currently and in past years. We can really only look at anecdotes here since it is not observed through income.
I am heavily exposed to the current wave of asian immigrants – i could only dream of the wealth that I have seen and it honestly churns my stomach. Simple examples of new immigrants whom, on first glance I would never have known had that kind of wealth. The current wealth is much greater, and deeper than that from Hong Kong and Taiwan.
1. family of three, wealth generated offshore (which is why there are semi-annual trips and wire transfers): two condos paid cash, looking for another house now –
2. renter family I knew (new immigrants), thought they were lower – mid income, purchased house, cash for $900K, father is a a helicopter parent. family background in Asia – super rich. Wife has clearly said, she dresses down in Canada to not be noticed, in Asia everything is top tier Chanel, Gucci, etc. family drives a typical car here.
3. Couple in building, seemed like a blue collar worker. Turns out they were recent immigrants from China that go back for business reasons a couple times a year. Turns out they bought 3 units in the building for cash, renting out two living in one.
4. Girl I went to school with- realized she was wealthy, didn’t know how much – just bought a maserati (daddy’s money) – still owns a place in Van but generally travels the world
This just scratches the surface. It makes me sick, but this is real wealth and it is here. Some try to hide it, others do not. when you look out on the street, and you see the Pradas, LVs, Chanels etc on girls in their mid teens and 20s, the maseratis, ferraris, mercedes slks driven by kids – remember that is real money, and those are purchased – not leased. It is play money for a lot of them, and it makes me sick and tired, but it is real.”

Following on this and another recent anecdote: Envy is not a sin, folks, it’s a normal human emotion; one of the emotions that makes the world go ’round. If your dog dies, you experience loss and grief; if your friend sells his inherited house for a $1.8M tax-free profit, you experience envy. Don’t be ashamed about this, it just happens. If you then calculate that, given your income, and your disposable income, and your savings, and current interest rates, it would take you ‘x’ years to accumulate $1.8M after tax, where ‘x’ years is greater your working lifetime,… well, then, who wouldn’t experience envy?
This will all go on until the bubbles implode. Then a whole different mix of equally powerful emotions will be at play. – vreaa

Vancouver Island House – Sold for $320K 3yrs ago; then $50K updates; Now asking price $325K, down from $349K; No offers after 6 months.

Brian at greaterfool.ca 2 July 2011 9:11pm –
“A house I bought 10 years ago for 140K and sold for 320K here on Vancouver Island is for sale again.
This is after 50 thousand or so of updates, asking price 325 down from 349 and no offers after 6 months.
This compares to the two days it took me to sell it 3 years ago.
The times are a changing and some of us are going to clean up.”

“I’m seeing a lot of tear down/rebuild/flip in Kitsilano, always a common sight. But lately I’ve noticed a drastic decrease in the quality of the crews.”

Hovering at greaterfool.ca 2 July 2011 8:10pm –
“I’m seeing a lot of tear down/rebuild/flip in Kitsilano (Vancouver). Nothing new there.. always a pretty common sight.
But lately I’ve noticed a clear increase in volume and drastic decrease in the quality of the tear down / rebuild crews.
Where once it was rented fences, strewn with advertising for Builder X and Plumber Y. Now it seems it’s Bob and his cousin (and their friend who has a pickup truck). No scaffolding because 2×4′s and a prayer will do.
Who would be dumb enough to buy a house built by these maroons?”

Real Estate Appraiser – “The problem: no bids. The market is cold.”

real_professional at vancouvercondo.info 19 Jul 2011 1:16pm –
“A real estate appraiser in Abbotsford told me that the banks have been strong arming them to “inflate appraisal values” in order to “make the numbers work”. He mentioned that RBC is the worst of the bunch.
He was saying that other than West Van, the Westside and other HAM areas the market is cold. He also went on to say that in Abbotsford if you bought a condo post 2007 you have pretty much lost money now.
He pointed to the following example: A condo which went for $220k a year ago was foreclosed by the bank, that same condo was then sold by the bank for $120k. It was put back on the market a “little while” ago at $175k and is now has the ask dropped to $150k…. The problem, no bids.
He also mentioned that he has gone to appraise some properties and will see, as an example, a 1.5MM+ property (remember this is abbotsford) with a hummer parked outside. But the owners are trying to secure a $40k loan.”

And this related info from gordholio at vancouvercondo.info 19 Jul 2011 5:00pm –
“I’m still on the realtor hot sheets for Abbotsford because we were toying with the idea of low-balling an offer out there before we got smarter and opted to rent again. And I can tell you this: Maybe 25% of the homes we’ve looked at in the past YEAR have sold. Nice places on the east side, up the mountain, that are *still* listed after being on the market for months – many, many months. More than that though are the price reductions. They’re everywhere. I get a fresh new batch every day.
It’s dying out there, just like it died in Chilliwack before that, the Okanagan before that, etc.
And to that I say: GOOD! DIE, DIE, DIE! Bring your death a little closer to greater Vancouver. It’s tentacles are already in Langley and Surrey. I can sense it. Now BRING IT ON!”
[‘gordholio’ is Gord Goble, Vancouver writer, and author of ‘In Vancouver, renting is a better option than buying‘, Vancouver Sun, 26 April 2011.]

Westside SFH – Bought 2007 $700K; Sold 2011 $2.6M – “Everybody on the street says I’m a frigging idiot.. “Why would you sell now? It’s going to four mil.” ”

Garth Turner at greaterfool.ca 17 Jul 2011 –
“Talked this weekend to a westside Van guy who bought a $700,000 house four years ago and just sold it for $2.6 million. “Everybody on the street says I’m a frigging idiot,” he told me. “Why would you sell now?, they ask, cuz it’s going to four mil.”

Comment on above story by Ravishing rick 18 Jul 2011 1:45am –
“The insanity of it all… $700k turned into $2.6m… With the $2m in the tank he can make an inflation indexed annual income of say 120k.
It is disgusting, and I say that out of pure jealousy! Unfortunately, stories like this only make fools run to the party… Even though the party is over!”

“I told him that prices were too crazy, and I wasn’t about to spend 7 large on a POS. He says “but just think how much it will be worth in 10 years, probably double or triple”.

Krazy Kanuk at vancouvercondo.info June 29th, 2011 at 12:38 pm–
“Speaking to more and more of my friends, I think this bubble is closer to popping. The prevailing mindset (especially here in Van) is that property always goes up. It amazes me, my friends aren’t dumb but the things they believe….
I have a buddy here from France. He’s looking to get his permanent residence. He’s a video game programmer, I suspect makes decent but not fantastic money. He asks me “so have you started looking to buy a place?”. I told him that prices were too crazy, and I wasn’t about to spend 7 large on a POS. He says “but just think how much it will be worth in 10 years, probably double or triple”. So let me get this straight. All I have to do to retire in 10 years is buy a million $ house here. Wait 10 years, sell for $3 million and pocket the $2M as profit. Brilliant! What could go wrong?
Back in Houston I have another friend who “gets it”. He just bought another house. $85K foreclosure, looks only a few years old. Decent part of town. 3 bedrooms 2 bathrooms. Expects to rent it out for $1275 a month. When I tell people here about that, they say “yeah, that’s Houston! Who wants to live there?”. I’ll tell you who. All the Californians who were priced out of Real Estate. Anyhow, I’d take the Texas economy any day over almost anything we have in Canada.”

Joanna Pachter, Canadian Business – “This is not yet another story about the real estate bubble. It’s a story about why more of us don’t rent.”

“This is not yet another story about the real estate bubble. It’s a story about why more of us don’t rent. The belief that we’re not responsible adults until we own our home, whether or not we can afford it, has distorted and stigmatized the cheaper and safer alternative: renting. And we’re literally paying the price.” – Joanna Pachter, in the her article in ‘Canadian Business’, an excellent discussion of renting in Canada, circa 2011 [‘Rental Complex’, Joanna Pachter, Canadian Business, 14 July 2011].
We encourage all to read the entire article.

Excerpts:

[Personal anecdote] Over the past decade, Barry Bradey, a health and finance entrepreneur, owned three houses in the affluent Toronto suburb of Oakville, and watched each soar in value. But after a divorce and a business failure, he needed cash on hand. So last fall Bradey (who asked that we use a pseudonym) did some back-of-a-napkin math. The 3,500-square-foot house he wanted would cost about $850,000. Even with $400,000 down, the mortgage would cost him roughly $3,000 a month. Add property tax and maintenance and “that’s $5,000 a month before you turn on the lights.” Utilities, insurance and various amenities would be another grand. He also figured the downpayment came at an opportunity cost of about 6%, equivalent to another $2,000 or so a month. He bounced these numbers off a local realtor friend; she thought the carrying cost should be closer to $12,000. Nevertheless, she insisted the house was worth the money because it was “an investment.”
Bradey didn’t buy that. To rent that same house would cost him—all in, and worry-free—about $3,500 a month. A 53-year-old father of two with a startup venture underway, Bradey did the financially prudent thing. He now rents a large townhouse in the same neighbourhood for $2,200 a month. “With a house, its market value might go up or down, but it would cost me $8,000 to live there,” he says. “My logic is, renting gives me flexibility. I won’t have to pay 5% [commission] if I want to leave.”
—

Over the past decade, as the value of the average Canadian home doubled, and tripled in some areas, rents remained stable or even declined. As a result, it now costs more than twice as much to own that average home as it does to rent it.
—

—

With widespread warnings that we’re approaching the peak of the housing boom, with Canadians more indebted than ever, largely due to their outsize home investments, and with cities like Toronto boasting some of the lowest rents among major world centres, why aren’t more of us re-examining the math? The reasons are cultural and emotional, backed by ill-conceived public policy. This Canadian Dream is an expensive delusion. There’s never been a better time to rent.
—

[Personal anecdote] Your lifestyle suffers, your worries mount—and yet, no matter how much data you throw at people, there’s an ingrained belief that being a homeowner signifies maturity and that renting connotes instability and transience. Moshe Milevsky, a finance professor at Schulich and one of Canada’s best-known home-ownership skeptics, has long argued that for young people with limited means and unrealized career potential, stowing most of their wealth in a single illiquid asset is foolhardy. Today, he thinks just about anyone would be better off renting. “I really wish I could sell my house and rent. Immediately!” he says. “The market is so overvalued. I’d sell to the biggest sucker. But my wife and kids would kill me.” That’s because, for most of us, financial considerations are only part of the equation. “The decision to purchase a house goes well beyond the practical,” says Milevsky. “It’s part of people’s identity.”
—

While the average price of a Vancouver home is now more than 11 times the average family’s income, the rental market has stayed earthbound. But VREAA notes that the bubble has raised the “social cost” of renting. “[It’s] become broadly socially synonymous with being relatively impoverished and disenfranchised,” he wrote in a post that drew passionate debate. [‘The Stigma Of Renting In Vancouver’ 25 May 2010 -ed.] One respondent noted that people are renting luxury units in new buildings they can barely afford to give the illusion they own. Another said that even though renting saves him and his wife $4,000 per month, in social terms, “we’ve never felt poorer.”
Vancouver may be extreme, but the stigma is just as real elsewhere. Bradey, the new convert to renting in Oakville, knows that his friends, who are largely well-to-do and own their homes, see his move as a regression. “Even in my own mind, I probably downgraded [my social status] from an A+ to a B+,” he says. Still, he believes that, were most people who may pity him now forced to go without income for three months, they’d be in trouble.
—

In the glow of our pride of ownership, we tend to forget that owning your residence is hardly the global norm. Quebec, where home ownership rates have been rising, remains a renting-friendly society, at least in the urban centres, and Montrealers who move to Toronto are often shocked by the pressure they feel to buy. In Switzerland, Sweden and other parts of Europe, particularly where rental markets are highly regulated, the majority rents. In fact, Germany, Europe’s economic engine, has the European Union’s highest proportion of renters, according London-based property research firm RICS. In Berlin, 90% of residents rent; in Hamburg, the share is 80%. And renters aren’t the lower-income contingent: professionals who spend half their earnings on rent are not uncommon. While Germans do want to own, they don’t feel pressed to buy when they can’t afford to, the way Americans, Canadians and Britons do. The difference can be traced to real estate market trajectories: Over the past decade, while housing bubbles percolated through much of Europe and in North America, home values rose less than 3% in Germany. Renting has no stigma because Germans don’t think of home ownership as an investment opportunity of a lifetime.
—

No one argues that owning a home is, in principle, a bad idea. But today, in this market, renting is a better one. After 12 years of rising real estate, a renter goes against a powerful cultural tide. But even if the housing bubble continues to inflate for months or years to come, it’s high time to recalculate the ownership premium we are willing to pay.
—/ end of excerpts

It is also noteworthy that Pachter’s article is given cover prominence with a strongly worded: ‘Home ownership is a losing bet: Why renting is suddenly making a comeback‘.
And the association of ‘Home ownership is a losing bet‘ with the ‘Suckered‘ headline story can’t be a coincidence, surely …

City Councillor – “The main source of profitability in the real estate market is capital appreciation rather than income.”

“The main source of profitability in the real estate market is the line not shown in your pro forma, which is capital appreciation rather than income. This kind of performance is not untypical of real estate companies who embarked on a buy-and-hold strategy.” – North Vancouver City Councillor Guy Heywood, commenting on a rental apartment developers request to waive city fees to save the project [‘Rental developer asks city for $500K in fee help’, North Shore News, 15 July 2011] (hat tip VCI)

Local governments are endorsing a new norm where developers are expected to build rental properties that are not cash-flow profitable, but rather on the premise that strong price appreciation will continue unabated?
Yet another example of ‘new paradigm’ thinking common during speculative manias. – vreaa

Spot The Speculators #47 – $1.6M Tax-Free Profit In 36 Months – “The mere act of overpaying for a house three years ago might have been the smartest financial decision we had ever made.”

Frank O’Hara’s ‘China’s Real Estate Spree in Vancouver’ [1 Jul 2011 edition of BC Business] is a ‘must-read’. This personal anecdote excerpted –

“The note, one of those yellow stickies from 3M, was stuck on the door of our west side Vancouver home late one Tuesday night in March. My wife, Cynthia, found it early Wednesday morning while letting our dog out and called to me upstairs: “Baby, you’ve got to come down here.”
In clear, studied script it read, “I would like to buy your house. I am not a realtor. Please call me.” It listed a local phone number and was signed “David” in block lettering. We looked at each other, both resisting the urge to cackle with glee and dance around the room with our winning lottery ticket. Barely resisting.
Like just about every other homeowner, non-homeowner or potential homeowner in the Lower Mainland, I was aware that property values had soared in recent years. I also knew that this was largely due to overseas buyers – and that “overseas buyers” was a euphemism for several strata of mainland Chinese buyers, some of whom are visiting the region on property-buying trips, some of whom live here already (or have family who do) and some who, so sure are they of the wisdom of investing in Vancouver, buy sight unseen from China. …

Until David’s Post-it note showed up, the figures and stories were just … cocktail-party fare that seemed largely divorced from our day-to-day lives. In theory, people who had purchased their homes long ago were now presented with the opportunity to make exponential gains over their initial purchase price. We were in a less rarefied group since we had bought our house only three years ago: a large lot in what we euphemistically called South Kerrisdale, an area realtors call South West Marine that’s frequently called Marpole by our friends. We had paid what had seemed an ungodly sum: $1,875,000, which was, everybody told us, “definitely” the peak of the market. But now, three years later, the stories circulating around town telling of impossible windfalls made our “peak of the market” purchase look as if we’d merely hit the base camp of Mount Everest. And the sudden presence of a suitor opened our eyes to the reality that the mere act of overpaying for a house three years ago might have been the smartest financial decision we had ever made.
 …

It took almost a day for Cynthia to call David back, a period in which we simultaneously imagined spending our impossible gains and then chastised ourselves for such greedy thoughts. One terrible idea then came into our minds: “David doesn’t actually sound like a Chinese name,” Cynthia mused. The implications of such a thought were dire, especially given that, due to his neat handwriting, he clearly wasn’t a doctor either. Even the most reckless North American buyer would be loath to pony up the sort of money we were angling for. We needed someone with a briefcase full of cash if we were to become the next Greek Church House.
But as soon as David picked up the phone, such concerns were assuaged. He spoke in competent but halting English and explained that he was looking for a house for his parents. While driving around town, he discovered our block and thought he’d skip the realtor fees by coming to us directly. He asked if he could return sometime over the next week to see the house, with parents in tow. We cleared our calendar. …

Cynthia mentioned our idea of selling to Mabel, our tough-as-nails next-door neighbour, who was part of the mid-’90s Hong Kong exodus (she has the peach-coloured box to prove it). Mabel often brings potato salad to our house as a gift and once a year at Christmas takes my wife and daughters out for an extravagant Chinese lunch and tells us the state of things, such as, “The former owner of your house was stupid to plant bamboo in your backyard. I told him so. If it disrupts my pipes, I’ll have to sue you.”
Mabel’s response to our thought of selling was equally measured: “You’re crazy.” In 15 years she had yet to develop a touch for the Canadian art of diplomacy. “The Chinese who are coming now are paying with cash – no mortgages. There will never be a downturn because they will never sell at a loss because they don’t have to. They’d rather just give their house to their kids than sell for a loss.” Her message was clear: anyone expecting a major market correction didn’t understand the psychology of the average Chinese purchaser, for whom concepts such as a change in interest rates were of no concern.
Mabel had us second-guessing ourselves. Were we like a mid-’80s Seattle couple selling our Microsoft shares because they had made such nice gains already? …

David and his parents arrived separately, a week after the note had appeared, to tour the house. His parents showed up first in a black Mercedes S600, a $190,000 bank vault on wheels that throughout the world announces, “I’m rich and powerful, and now that that’s out of the way, let’s get down to business.” The father had dark glasses and a stripe of distinguished grey at the temples, and didn’t give his name upon shaking hands; the mother, Maggie, was more gregarious and, as she was taking English lessons, anxious to practice speaking like a local. David, who turned out to be all of 18, arrived a few minutes later in an electric orange $355,000 Lamborghini Murcielago.
The cars alone were a good sign. They marked David and his parents as belonging to the truly wealthy class of Chinese buyers. …

Cynthia led David and his family on the tour as I tagged along. The parents spoke little or no English, so David helped translate such phrases as “steam room with rain-shower fixture” and “programmable Nuheat floor.” (We decided we didn’t want to tax him too much, so we avoided making him translate knob-and-tube wiring.) The parents politely nodded at Cynthia’s detailed chronicling of every upgrade, no matter how small. Halfway through the tour of our cavernous basement, the father muttered something. “My father is very afraid of this space,” deadpanned David. “He would very much like to return upstairs.” In truth, I think we knew that the house tour was a flight of fancy. All the things we had spent $1.85 million on would soon be rubble, replaced most likely by a nondescript house of no discernible era or architectural style.
We moved upstairs to our living room to discuss business. Contrary to the stereotype of tough, straightforward Chinese negotiators, we actually ambled around the question of the house and a selling price for a good half-hour, a long time with most strangers and an eternity when major language barriers exist. Even a month later, I’m at a loss to recall what we talked about. I do recall the line that broke the ice: “The house down the street sells for $1.8 million,” the father instructed David to tell us. It had been an opening salvo but one I was unprepared for.
He was presumably referring to a house a few blocks away in deplorable condition on a small lot. Worse, that price was not only less than we paid but $750,000 below our woefully out-of-date assessed value from the city. The discrepancies were so great that had I been sitting with anyone else my stock response would have been, “What does that have to do with the price of tea in China?” It quickly became apparent we were at cross purposes, but I couldn’t muster any animus. We were the ones who had equated Chinese with irrational spending. They continued to express serious interest in the property, but although we continued to chat for a few minutes I knew our untethered dreams would not be granted by these particular visitors.
 …

Ideally, this would have been a self-contained parable, a caution to greed, prejudgment and a score of other vices. A three-by-three-inch sticky note had turned us into speculators – and now a four-by-four-foot sign rises out of our newly reseeded lawn. The asking price? $3.5 million – twice what we paid just 36 months prior.
The open house is next Saturday.”

Very smart to be selling.
We’d ourselves, however, attribute the resultant $1.6M windfall to exceptional good fortune rather than ‘the smartest financial decision (they) ever made’.
Frank and Cynthia bought in 2008, after the speculative mania was very clearly established (they admit they ‘overpaid’), and they could very well have lost much or all of their RE equity at any point during the 36 month holding period.
If somebody goes to Vegas, puts $1.6M on Black, gets lucky and doubles their money, is it correct to say that the action was “the smartest financial decision they ever made”? – vreaa

“At Christmas my four full-time employees were shocked to see I still live in a very small town-house with two children. My wife keeps bugging me to move, but if we had a big mortgage it would put me under too much stress.”

Ali at vancouvercondo.info 8 July 2011 9:10am –
“I came to Canada 16 years ago. We emigrated from the Middle East. The process was very long and difficult. We had to have every document translated, and go thorough a couple of interviews. The officer asked us about exactly where our money (which was small) came from, what languages we spoke- he was impressed my wife was fluent in French, asked why we wanted to come to Canada
When we got the visa, we felt like winning a lottery, we were so happy. It took me a long time to get going here, I took any jobs and worked for up-dating my technical skills and English. Finally I got a good job and after a few years I started my own small tech company. It is over ten years now. I have four full-time employees- 2 Canadian (many generations), 1 Serbian man, and 1 Chinese lady and a few contract people too. I am proud that I am helping give four families good incomes, and that we do 80% of our work here, but 60% of business is from outside Canada. Also I am very grateful to Canada for this opportunity.
What has this [to do] with real estate? A lot. I still live in a very small town-house with two children. My employees were shocked at Christmas to see how small and my wife keeps bugging me to move. But I tell her, some months I have to borrow from line of credit to make the pay-roll, if we had a big mortgage too it would put me under too much stress.
This has been a big trouble at home and every time it looks like the market comes down a bit, something pushes it up. The government does some tricks or they let in a lot of people with money (without asking any questions) and we lose the chance to move up.
My employees too have the same problem.”

The speculative mania in housing has punished hardworking, prudent citizens. – vreaa

Boomers Intend To Save, But Don’t Follow Through

Harris/Decima, in a poll conducted for CIBC, interviewed more than 854 Canadians aged 45-64 by phone between May 26 and June 5, 2011 regarding savings patterns this year. [canoe.ca 12 Jul 2011]:
“..nearly one-third of respondents aged 45 to 64 felt they were doing a poor job building their savings so far this year, including 17% who rated their progress as “very poor.” In all, less than half of baby boomers surveyed said they are making good progress in 2011.”

It’d be interesting to know what percentage of those who are not saving are failing to do so because they’re convinced that somehow the value of their home will see them through retirement. – vreaa

“What I don’t get is that my friend pays less for rent in Vancouver than I do in Calgary. I don’t know if Vancouver landlords are just more understanding and generous or if the market isn’t that tight for renters.”

“What I don’t get is that my friend pays less for rent in Vancouver than I do in Calgary (And I also paid less when I lived there) for something relatively similar. Most of these houses look like those that have basement suites. Even if you bought before the boom (2002-ish), the house is still around 500-600k. But now that it’s worth 800k, the property taxes should be enormous, add in the costlier utilities and sewage/garbage/recycling fees and I don’t know if Vancouver landlords are just more understanding and generous or if the market isn’t that tight for renters.” – relationship_tom at reddit.com 15 July 2011

“It’s most certainly a renters market. I live in Van and renting is so much more affordable it’s insane. My dad just bought an apartment in Arizona for 80k and is renting it for $900 a month. A similar place here would be 500k but only rent for $1800.” – jsbell_69 15 July 2011

[Comments above from a discussion thread regarding Vancouver Sun article, ’20 ‘average’ homes in Vancouver priced around $810,000′]

“I listed my home 3 weeks ago. We now reduced 20K as more listings have come out lower than ours. Have I missed the boat? The Realtor says keep lowering the price.”

Joe h at greaterfool.ca 23 Jun 2011 11:38am –
“I listed my home 3 weeks ago. We have had 2 showings.
Have I missed the boat? We just reduced 20K as now more listings have come out lower than ours. We purchased a home but on request of the Realtor did not put clause of selling our home. Can we get out of this deal? We are getting very worried now. I contacted my lawyer who is looking into this.
All the Realtor says is keep lowering the price.”

They own two homes in a falling market (somewhere in Canada, post doesn’t specify where).
We agree with the realtor, keep lowering the price.
Coming soon to a town near you. – vreaa

“Right now I am betting about 85% of my life’s savings in small town Canadian real estate. I am buying nice houses in quiet small Canadian towns for the rental income.”

Ben Rabidoux, of the Economic Analyst, has a fine post headlined at zerohedge.com 24 Jun 2011, ‘What’s Really Driving House Prices In Canada? The Must-See Graph Of The Day…’.
Here’s ‘Diogenes’ in the comments section, 24 Jun 2011 19:55 and 19:45–
“I don’t know why house prices are still climbing. I figured the US crisis would spill over into Canada so I sold all my rental properties between 2008 and 2010. I was wrong, now I am buying other properties at higher prices. Right now I am betting about 85% of my life’s savings in small town Canadian real estate, the balance being in physical gold and silver. I am buying nice houses in quiet small Canadian towns for the rental income. If they go up that’s nice but I can hold on quite comfortably and live on the rental income. If they come out with some kind of draconian rent control due to runaway inflation I can sell them at a profit. So no, I am not afraid of a Canadian real estate collapse. I expect prices to continue rising as long as governments pursue inflationary policies. If they ever decide to go for the balanced budget, higher taxes and higher interest rate policies I expect the market to dip then stay flat for a while. That is what typically happens in Canada. Yes we have boom and bust cycles but not to the extent of the US.
Examples of my purchases, in small towns in the neighborhood of Belleville Ontario.
Latest purchases, a 1400 sq ft bungalow on 2 1/2 acre lot on the Moira River, 265ft water frontage, $85,000 plus another $50,000 in fix up costs.
2500 sq ft solid brick Victorian 2 story 4 bed 2 bath house in a small town, $124,000.
1000 sq ft raised bungalow, circa 1987, 3 bed one bath, quiet neighborhood $140,000
All bought since last fall, rents $1000 to $1250 per month.
I leave it to you if these are “bubble” prices.”

As we all know, these returns are far, far better than any in Vancouver.
The prices seem very reasonable to us, partly because prices here in Vancouver have become so very unreasonable.
In the coming crash, some small towns in parts of Canada may suffer less of a price drop than in the bubble centres, but we’d still expect RE to underperform across the country. And are those rents possibly vulnerable to economic climate?
It’d be interesting to know if ‘Diogenes’ is using any leverage, in which case, considerably more than 100% of their net-worth is in RE. – vreaa

“We had a computer fire in our Arbutus basement a while back and, even though there were six emergency vehicles out front, not one of the other residents on the block came over to see if we were okay.”

rmac at VREAA 1 July 2011 8:23am –
“I grew up in Kitsilano (when it was pretty well all immigrants and working class) and moved into the Arbutus neighbourhood in the 80′s. Every house has at least one suite, many have three and a couple of the big $3M Chinese style mansions on my block are operated as B & Bs for mainland Chinese tourists. We had a computer fire in our basement a while back and, even though there were six emergency vehicles out front, not one of the other residents on the block came over to see if we were okay. The locals don’t even talk or appear to acknowledge each other – it is a very odd feeling to think that one is isolated in ones own neighbourhood. I don’t feel that the new immigrants are here to stay – they appear to be riding the wave of home flipping and moving on. The houses are poorly maintained and hardly furnished – just walking around the neighbourhood it’s apparent that lawns are only being mowed occasionally and basic home repairs are not done (yes, even on the new houses). It gives the area a weird feeling of impermanence and I really can’t predict how it will all play out.”

“Lately I find myself overwhelmed by stories of young(ish) professionals who are leaving the city – often in their thirties, driven by the desire to purchase a home that is affordable for them and their families.”

“I have been asking myself what would make Vancouver a better place to live, work and play?  Lately I find myself overwhelmed by stories of young(ish) professionals who are leaving the city – often in their thirties, driven by the desire to purchase a home that is affordable for them and their families. They are grantmakers, green building specialists, filmmakers, and socially progressive bankers. All smart, caring folks, emerging in their respective fields.  All are assets to Vancouver.  
Mostly they love the city but can’t afford to live here, even working at good jobs and earning good incomes. Sadly, the lowest rung on the home ownership ladder is too big a step. Or with children, the lowest rung (typically the one bedroom apartment) is not workable.  I wonder, is this cohort the ‘lost generation’ – talented, skilled, thoughtful people that are bidding adieu to the city, and taking with them their energy, skills and unique potential contributions.”
– Heather Tremain, ‘What would make Vancouver a better place to live?’, The Vancouver Observer, 8 July 2011

In the rest of the post, Heather Tremain, discusses affordable or ‘attainable’ housing. The most important factor in understanding Vancouver’s RE predicament is not recognized: The speculative mania in RE prices. This is a giant bubble, folks. To ignore that makes the task of trying to ‘solve’ the problems of affordable housing completely meaningless.
A collapse in RE prices will change the landscape profoundly. The process won’t be painless, but in the end, it’ll be better for the city. – vreaa

Opinion And Anecdote – “We have a disenfranchised class in Vancouver from a real estate perspective. My children had to move away to own their own homes.”

Excerpted from a letter by ‘ Trevor Gibbs, Vancouver‘ published in the National Post, 21 Jul 2011 –
“My children had to move away from Vancouver to own their own homes. Meanwhile, financial institutions push mortgages like crazy. At the same time, planeloads of investors from Mainland China are buying downtown Vancouver properties that regular Canadians can’t afford. So we have a disenfranchised class in Vancouver from a real estate perspective.
Children of immigrant families are doing better in school than their peers, and as a result they are first in line for university professional degree classes. So we also may have a disenfranchised education class who may never get to university.
This could be the reason why many of the people watching the hockey game felt little hope for the future. As long as the Canucks were winning, they could still feel good about themselves. When their team lost, their one emotional crutch collapsed, and they vented their frustration, urged on by a core group of criminals in their midst.
That basic disenfranchisement is still there, and will come out again. Someone should study the effect of foreign investment in residential real estate, and how it is a threat to a cohesive and equitable society. Last week’s riot may be a clue that something more is at work behind the scenes than just hockey frustration.”

“Only one UBC employee can afford to own a westside home.”

Unagi Don kindly posted this observation/analysis at VREAA 12 July 2011–

“Only one UBC employee can afford to own a westside home.”

#1) The income levels required to own a westside home: $496k.
http://www.yattermatters.com/2011/07/vancouver-home-buyers-adopt-slogan/

#2) The largest employer in Vancouver (which happens to be on the west side): UBC
http://www.lib.uwo.ca/programs/companyinformationcanada/canadaslargestemployersbycity2007.html

#3) The number of UBC employees earning more than $496k: 1
Prof. Donald Wehrung in Sauder School of business earns $510k.
Stephen Toope, the university president, earns only $483k.
http://www.vancouversun.com/business/public-sector-salaries/advanced.html

For the sake of comparison, the public universities in the US located in the most expensive housing areas are probably UCLA and UCSD. (I’m excluding Manhattan as single family detached homes simply do not exist there.)

At UCLA, there are roughly 100 employees with salaries over $400k:
http://www.sacbee.com/statepay/?name=&agency=UC+LOS+ANGELES&salarylevel=400000
And the average home price in Westwood (the upscale area where UCLA is) is around $650k:
http://www.zillow.com/local-info/CA-Los-Angeles/Westwood/r_118920/

It goes without saying that UCLA is not the largest employer in LA.

At UCSD, there are roughly 70 employees with salaries over $400k:
http://www.sacbee.com/statepay/?name=&agency=UC+SAN+DIEGO&salarylevel=400000
And the average home price in La Jolla (the upscale area where UCSD is) is around $1m:
http://www.zillow.com/local-info/CA-San-Diego/La-Jolla-home-value/r_46087/

UCSD is the fourth largest employer in the San Diego area.
http://www.alliant.edu/wps/wcm/connect/resources/file/eb9ce84c34a1a77/San_Diego_Major_Employers.pdf?MOD=AJPERES

Indecision – “My husband and I are putting our townhouse up for sale within the next month, in hopes to buy a larger house that will accommodate us. Or perhaps to rent.”

Kimberley, in an e-mail to Garth Turner at greaterfool.ca 7 Jun 2011 – “My husband and I (with two small children) are putting our home (Vancouver townhouse) up for sale within the next month, in hopes to buy a larger house that will accommodate us. And we would like to stay in the same area. GASP! No more holidays for us. I feel like we should still sell right now, but perhaps cram ourselves into an apartment and rent for a few months, until the bubble has burst! Yes it would be extremely challenging, having to pack and move twice, store everything, not knowing where we would be moving and when we would be moving (children’s schooling etc). But seriously, sounds like it would make sense economically. When exactly is the bubble going to burst?”

“I just bought a house which I am waiting for permits to be torn down. It will take 6-8weeks for the permit, so I will rent it out for $500 per week.”

From craigslist.ca Date: 2011-06-16, 2:37PM PDT-
“I just bought a house which i am waiting for permits to be torn down. It will take 6-8weeks for the permit, so I will rent it out for $500 per week.
The house was a rental property. I am renting it as is and will not repair anything in the house, as i am taking it down. There are 2 kitchens and 2 bathrooms in the house. it has 6 bedrooms. 38th ave at ontario.”

“I’m sure it’s quite embarrassing to banks because in a way, it reflects a failure of their lending systems.”

From cbc.ca 7 July 2011 10:36am –
“Vancouver police have charged two men — including a former real estate agent — with more than a dozen counts of mortgage fraud totalling more than $2 million.
One-time realtor Sunny Kular and a co-accused allegedly defrauded a series of banks between 2003 and 2005.
“This was a larger than normal file with respect to the total number of individual mortgages,” said police spokesman Const. Lindsey Houghton.
“In the end, Crown laid 14 separate charges,” said Houghton, who noted the investigation took five years to complete.
“Five years is a very long time for any investigation and financial crime investigations are often some of the most complex investigations because they require forensic audits,” he said.
Banks tend to under-report mortgage fraud, said lawyer Ron Usher, who has studied the problem.
“I’m sure it’s quite embarrassing to banks because in a way, it reflects a failure of their lending systems,” Usher said.
The bottom line is that customers pay, he said.
“That cost then is passed on to every home buyer.”

“I admit I had a lump in my throat, thinking that one day soon this lot would meet a typical Vancouver fate: the bulldozer, followed by a “water feature”, fake brick and faux stone.”

The Fourth Horseman at francesbula.com 23 Jun 2011 3:26pm –
“I often find myself walking down and around our beautiful and unique “country” area of the city, known as Southlands. Did it last night, in fact.
The area was, and still is, bucolic, for the most part. Yet, my beloved “Flats”, is changing, fast.
I walked past an “old timer” home down there, one that I knew from my childhood, near where when my parents used to take me pony riding. We’ve all seen them. A modest little two story stucco home, maybe 60 or 70 years old, with architectural touches that qualify it as a Vancouver ‘character’ home for all who love that sort of thing.
Located on a corner lot that is maybe 50′ long but quite narrow, the house takes up perhaps 1/3 of the lot. What distinguishes this house from others nearby that are far “grander”, is the incredible home garden. It has been tended by the same woman, who has lived in that house for at least 30 years.
When I rounded the corner, on my walk down last night, that vast garden was in full, glorious early summer bloom. It was fairly vibrating with plant life, wafting in the gentle breeze. A serious rose garden that is second to none in this city amongst private homes, and long, long, long borders and bed of delphinium, pinks, campanula, and foxglove amongst the flora. A veggie patch rounds out the glorious site.
I stood out in front , on a perfect summer evening, looking at all this sight, and listening to the perfect sound of near silence. I admit I had a lump in my throat, thinking that one day, this lot, so obviously lovingly, stubbornly and meticulously tended by that old lady in the sun hat, would, in all likelihood and in the not-too-distant-future, meet a typical Vancouver fate: the bulldozer, followed by a “water feature”, fake brick and faux stone.”

All cities move on; develop; ‘progress’. Movement is necessary. Change is inevitable and very often for the better.
During a speculative mania, however, large profits are to be made through rapid and ill-conceived development. This alters behaviour, and people change methods, goals, standards. The resultant ‘progress’ is often no advance at all. – vreaa

Author David Mitchell Imagines ‘Vancouver’

While on a flight from London for his first visit to Vancouver in October 2010, novelist David Mitchell records a description of what he imagines the city to be, “to pro­tect my imag­i­nary Vancouver against real­ity” [Geist, #80].

Excerpts:

“I find a park bench in my imag­i­nary Vancouver, and see a dad throw­ing a base­ball to his son, and my heart vibrates to minor chords.” …

“I think of Douglas Coupland, William Gibson and Wayson Choy, and I think, What a place, and am filled with an intense desire to be twenty-seven again, and buy a house here, and see if I can make fewer mis­takes a sec­ond time around.”

Mitchell has not, to our knowledge, published a record of his impressions of the Vancouver that he actually found here. And it’s not clear whether, in the above excerpt, he is fantasizing about buying his Vancouver house when he actually was 27 (back in 1996), or whether he would like to be 27 now, and be buying a house at current prices. 😉

[By the way, we recommend David Mitchell’s books; he’s a truly great writer, with a fine imagination.]