“The only people that think of Vancouver homes as lottery tickets ready to be cashed in seem to be the ones that don’t own them, or the ones that merely flip them. To the majority of owners, they’re just homes.” [We disagree]

“In 2000 I got married, and my wife and I decided it was time to get something more than our apartment. We were making just under 100K combined back then, and bought what we could afford. In retrospect, very good timing, but I didn’t time the market in any way.
Truthfully, I don’t care. I like my home, I like where it is, it suits me and my lifestyle – so yes, I guess you could say I’m attached to it. I’m 40 years old, so I’ll probably be here another 10 or 15 years until I stop working, and worry about the next phase of life then – maybe its here, maybe its not. While I don’t believe that housing will keep going up like it has – I’m pretty bearish on Vancouver real estate – I don’t think it will go lower than what I paid for it either. I don’t really care until its time to sell it.
The only people that think of Vancouver homes as “lottery tickets ready to be cashed in” seem to be the ones that don’t own them, or the ones that merely flip them. To the majority of owners, they’re just “homes”.”

nuxfan at vancouvercondo.info 23 Aug 2011 7:18pm

We respectfully disagree with ‘nuxfan’.
One result of the speculative mania in Vancouver RE is that it has been absolutely impossible to ignore. For most owners, homes are now more than “just homes”… they are, consciously or unconsciously, also considered stores of wealth; they are partly financial instruments. To suggest that owners are oblivious to this, or that their psychology and behaviour is unaffected by an awareness of the ‘value’ of their property, is either naive or disingenuous.
‘nuxfan’, himself, for instance, plans to “stop working” at 50 to 55 years of age. Does the projected market value of his house factor into that expectation? We can’t be sure, obviously, but we’d wager it does.
Note that this doesn’t mean that we’re arguing that all owners should sell.. just that any owner who claims “not to care” is deceiving themselves, or others, or is so wealthy that the value of their home only constitutes a small percentage of their overall net-worth. And in Vancouver that last group is very small.
– vreaa

38 responses to ““The only people that think of Vancouver homes as lottery tickets ready to be cashed in seem to be the ones that don’t own them, or the ones that merely flip them. To the majority of owners, they’re just homes.” [We disagree]

  1. suggest to anyone in Vancouver that prices are likely to go down, and the reaction is very often emotional, even defensive, it’s almost like a personal attack

  2. off topic for the vancouver market but interesting stories about debt and people

    http://money.cnn.com/galleries/2011/pf/1108/gallery.extreme_debt/index.html

  3. Robertson jams with a monk http://vancouvercondo.info/2011/08/rbc-bmo-and-the-tiny-rate-ratchets.html/comment-page-1/#comment-131415

    “The converse is that {Vancouver} becomes a very desirable city. People come here from all over the world for the beauty and for the sense of community… That creates challenges for my kids and the next generation to live here. It’s not affordable to live own here now.”

    There, fixed it for you.

  4. “The only people that think of Vancouver homes as “lottery tickets ready to be cashed in” seem to be the ones that don’t own them, or the ones that merely flip them. To the majority of owners, they’re just “homes”.”

    evidence of the truth of this statement…with detached homes at record high prices we should see inventory at all time high. If owners were looking to cash out at the best opportunity wouldn’t there be more homes on the market? People own their homes to live in and raise their families.
    This ongoing campaign to paint homeowners as greedy house flippers is perhaps the most erroneous assessment of this market I’ve ever hear

  5. My agent says I’m losing out because homes in the Renfrew area of east Vancouver are selling like ‘hot cakes’. I decided to drive around and look and it appears my realtor is right. There are sold signs everywhere in the Renfrew area. BUT wait after some research I found out where these homes were all being sold to. They ended up on this one realtor’s website:

    http://www.julianaho.com/ActiveListings.php/1

    This asian realtor bought “20″ of them with her partner and are building to suit potential buyers. I couldn’t believe my eyes I had to scroll back and forth on the 3 pages of listings and count twice to make sure I was not double counting.

    I guess if no one else is buying the realtors may as well buy their own product. The scary thought is this is ONE realtor. How many realtors are there in BC?

    • I wonder which bank let those realtors the money to buy the 20 properties?

      • ‘Bank!?’

        Surely you jest, Patrick…

        I’d wager a CASE!… yes, a case of the ‘Nagans finest that if there is any ‘financing’ involved – it goes down to a numbered offshore entity. I even hear there’s a new solicitor practicing in Ontario who can help with that sort of thing.

      • sorry, AMS – I meant to say, “AMS”

      • I think any one of the banks will lend you the money just because it’s real estate… and as everyone already knows real estate only goes up….yawn. I have 2 additional thoughts. One is how can a realtor remain ethical and think in the benefit of their client if he/she has “20” building lots to DUMP?—you’d think there might be a conflict of interest. Secondly, buying up every lot in sight creates a monoply and anyone who desires to live in that area pretty much ends up buying from that one realtor. Is there a law against that?. I know when Walmart wants to be a supercenter to sell anything every local small merchant within the 15KM blast zone is yelling bloody murder at city hall.

    • I used to work for the RE industry 4 years ago and met some of these “investor”-realtors. They were all using “creative” financing:
      1) buy a home with 5% down
      2) take out a home euqity loan against the home
      3) Take the loan money and GO TO 1

      This way, some claimed to have bought a third or half of all condos in some buildings. It works awesomely as long as the prices go up.

      • It amazing to me how much money banks will give you for real estate vs. how little you can get for starting a business or buying a business.

      • “amazing to me how much money banks will give you for real estate”

        It’s not surprising because businesses have inherently more risk for the lender. Giving a loan for real estate is close to a can’t lose venture for the banks, either through low LTV ratios or mortgage insurance. Businesses the only recourse is liquidating tangible assets at a discount (often a hefty discount).

        If it’s investor money fronting these purchases with large downpayments and the banks lending the difference, it’s hard to get too upset with anybody. The investors might lose their shirts (boo hoo) but the banks’ loans are superior and close to fully backed. Egregious… yes I suppose… but from a loan quality point of view there isn’t much out of order.

        If they are financing through CMHC loans, that’s a different story but my bet is they have financial backers.

      • A can’t lose venture. Yeah… Just look at Europe or the US. All those real estate loans worked out awesomely.
        On the other hand, the savers, producers and other stupid suckers always pay the bill once these schemes blow up.

        Itsallgood.

      • “All those real estate loans worked out awesomely”

        Nope and they won’t be awesome in Canada either. I just think it will be Canadians, not banks, who are going to take this one over the barrel, and I’m not just talking about CMHC.

      • Yes, that’s what I said: “savers, producers and other stupid suckers always pay the bill”

      • “savers, producers and other stupid suckers always pay the bill”

        Homeowners and to a much lesser extent taxpayers will foot the bill. Savers, relatively speaking, will be further ahead. I doubt banks will require significant bailouts but that’s JMHO. Canada will have pain but who takes it will be different from the US.

        Say prices drop nationally by 20%. Banks will recover close to 100% on their low-ratio loans and will file government-backed MI claims on the high-ratio ones. The only question is how fast they can dispose of defaulted assets.

      • Savers have been paying the bill for many years by now, because of gov’s/CB’s inflationary policies / stimulus / artificially low inerest rates. These things are directly related. Not sure why you keep avoiding this obvious fact.

        Producers are and will be paying for this whole stupidity, because they are the biggest taxpayers. Producers are also being discouraged by the real estate idiocy. It’s better to speculate than to do something productive. We will all pay for that.

        Homeowners – yeah some will pay a part of their personal bill. And they should. However, if there is a signicant decline in prices, homeowners who end up significantly underwater will NOT pay, except for maybe metaphorically. If a debt is too big to be paid, it simply won’t be paid. No matter what the law says. The debts will have to be written off at some point – in our current system that is the same as letting the taxpayers (through bailouts) and savers (through monetary printing coming after that) pay for the whole mess.

      • jesse, please explain: If real estate crashes – how is a realtor “homeowner” going to pay the bill after he buys 20 properties, but only really paid a 5% downpayment on the first one? Where is his skin in the game? How is the average “investor” who owns 5 or 6 properties with negative cash-flow going to pay once the house of cards falls apart?
        Oh yeah, it will be covered by “government-backed MI claims” – you must be joking!

        🙄 🙄 🙄

      • “Savers have been paying the bill for many years by now”

        I guess it depends on what they’re saving in. If my money’s in the bank, it’s likely being leant out to a homeowner. I understand the interconnectedness of the situation but the question, perhaps, is what to do with one’s capital. Everyone will pay but some more than others. Honest question, what is the best course of action for my capital going forward?

        ” If real estate crashes – how is a realtor “homeowner” going to pay the bill after he buys 20 properties, but only really paid a 5% downpayment on the first one?”

        Is that the situation here? This developer is buying multiple properties and somehow financing development; I think they have more external capital than just 5% on a single property. If it is the case that the developer is financing all these purchases through CMHC then yes the government will be on the hook for the shortfall but I doubt this is the case here.

        ” if there is a signicant decline in prices, homeowners who end up significantly underwater will NOT pay”

        The question is how many homeowners will be significantly underwater. Country-wide I don’t think it will be that many, at least compared to the US. That means that homeowners are going to take more on the chin than lenders. Household indebtedness is a concern, definitely.

      • “I guess it depends on what they’re saving in. If my money’s in the bank, it’s likely being leant out to a homeowner.”
        You are kidding right?

        “Is that the situation here? This developer is buying multiple properties and somehow financing development; I think they have more external capital than just 5% on a single property.”
        I don’t know whether the case mentioned by Patrick is like this. But I do know that these cases exist and are not that rare in Vancouver – I worked for the RE industry and stayed in contact with many people in the industry after I left.

      • “You are kidding right?”

        What do you think banks do with deposits? I’m under no illusions that bank savings are in large part being leant out as mortgages.

        “But I do know that these cases exist and are not that rare in Vancouver”

        Well that may be so but for a developer that is unlikely the case. Banks generally require larger capital when financing construction loans, or do you know different?

    • I believe there are 6000 realtors in Vancouver.

    • “What do you think banks do with deposits? I’m under no illusions that bank savings are in large part being leant out as mortgages.”
      That is not how it works. In real world, banks lend money out first and then look for deposits. And that is only if there is a reserve requirement – but in Canada there is not. There are only capital requirements and those allow the bank to be “creative”.

      “Well that may be so but for a developer that is unlikely the case. Banks generally require larger capital when financing construction loans, or do you know different?”
      When did I wrote anything about construction loans? Not me, nor Patrick.

  6. wow, interesting Patrick. I guess prices can only go so low before realtors snap them up at wholesale – and it looks like that time is now. The plot thickens.

  7. @Patrick

    Somebody gonna get a hurt real bad… financially

  8. “amazing to me how much money banks will give you for real estate”

    well, not so amazing when you realize the banks don’t have any skin in the game.

  9. Ok, this is bad and mean but I’m seriously wishing for a world of permanent financial hurt for this Juliana Ho realtor and partner. They are liking raking in millions in profits flipping houses while people who actually produce stuff and make society a better place gets what? $70K if they are lucky. It might be right by capitalist terms but I just don’t feel it’s right for long term and society.

    • This perverse system has NOTHING to do with capitalism. The only reason why banks are willing to lend these speculators so much money is because they know that they will be bailed out eventually.

      Privatize profits and socialize losses is NOT capitalism.

  10. nobody you know

    There’s got to be more to this story. If nuxfan believes he’ll lose hundreds of thousands of dollars in a crash, doesn’t care and still plans on retiring in 10 years (at age 50!) then he’s making a helluva lot more than $100k or in line for a nice inheritance. Not that there’s anything wrong with that.

    • I am nuxfan – of course there is more to the story.

      We ARE making a helluva lot more than we were in 2000, and with no kids or debt, we’re saving around 100K per year into RRSP/TFSA/non-registered investments/cash. Our dividend-heavy-but-well-balanced investment portfolio is already worth 1M, so at our current savings rate (even with little or no appreciation), we’ll have more than enough to retire on in 10 or 15 years time. I could actually stop working now, if I only wanted to subsist, the income from that portfolio would cover our barest living expenses. My home as an asset has never been a factor in my ability to retire.

      I already stated that while I think Vancouver housing is going to go down, I do not think it will completely collapse, and I certainly don’t think the value of my home will fall below what I bought it for – even a 50% drop from current value means I still make a ~50% gain on my home when/if the time comes to sell it. Still a great return on an asset that continues to provide utility for me – a place to live for far less than having to rent the same – that I never expected to rise beyond inflation in the first place.

      • nuxfan -> Thanks for the important clarification.
        Your ability to save $100K per year makes all the difference.
        That fact renders the possibility of a 50% crash in housing far less important for you than for the average Vancouver homeowner, who does not have/will not have $2M+ invested outside of their primary residence at age 50.

      • CanuckDownUnder

        Vancouver’s new motto – Only for DINKS.

      • nobody you know

        Self made millionaire at 40, debt free and banking $100k a year ? That is awesome. There’s a lot to be said for living below your means and saving for retirement by building a diversified portfolio. We’re not rich by any means, but we pay ourselves first and real estate will be purchased when it can be done without deferring retirement.

  11. Nuckdownunder
    DINKS?
    I don’t see it. In fact, knock on some doors and see if a family has or does live in detached homes here. The vast majority of houses were or are used for families.

  12. noplacelikehome

    Someone mentioned to me that the Harper government wants to/is in the process of/ changing the law, to make those who default on mortgages serve jail terms. (1) is this true, and if it is, (2) will this even affect off shore owners – or only Canadians? (I guess they have to fill the new jails they are building with someone.)

  13. that is so true that to majority of homeowners, it’s just a home. pity that this blogger disagree to that and the sentiment of anti-homeownership. just because you cannot afford it, does not mean everyone else cannot either.
    and who are the “we” that the blogger mentioned here? your own family? on behalf of all the posters here? or the entire vancouverites?

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