“Over 7 years we have paid approx $250K in payments and took a whopping $80K off the principle. I knew at the outset how the math works but to actually be reminded of it really made this whole process hit home.”

“I ran by the bank to get my closing costs for cleaning up the mortgage. The payout is 415ish with the 5k penalty. So over 7 years we have paid approx $250K in payments and took a whopping $80K off the principle. LOL.. Now to be honest I did know how it works and I knew at the outset how the math works but to actually be reminded of it really made this whole process hit home.”
– Sean in Vancouver, as quoted by Garth Turner, at greaterfool.ca, 28 Oct 2011

“Canada’s recent economic performance has benefited greatly from a booming housing market, which has driven house prices, residential investment and construction employment to elevated levels. We see little hope of it rising much further.”

Excerpts from ‘Canada’s house of cards?’, BNN.ca, 28 Oct 2011 –
“Homeowner’s continue to hear a chorus of admonishments from the Department of Finance, the Bank of Canada and OSFI that these low interest rates will not be around forever,” Bank of America Merrill Lynch economist Sheryl King said in a recent note to clients. “However, we think the stronger signal households are receiving is from policy rates, which have held steady at 1.0 percent for 13-months now.”
King says roughly two out of three mortgages underwritten this year have been for a variable rate term, compared to a typical 25 to 30 percent share. …
“Over the past decade or more, rolling a variable rate mortgage from month-to-month has consistently been less expensive than a fixed mortgage rate. In essence, a generation of homeowners has experienced nothing but declining rates and lower monthly interest payments,” she says.
“This expectation will be hard to change. … The U.S. homeowner was lured down a very similar path by the Federal Reserve at the turn of the century.” …
“Canada’s recent economic performance has benefited greatly from a booming housing market, which has driven house prices, residential investment and construction employment to elevated levels, from which we see little hope of it rising much further. There is the strong likelihood of a housing market correction at some point in the not-too-distant future, which we believe would involve an outright decline in housing investment.”

Agree on all counts. -ed.

“She moved back to her parents’ house earlier this year, and has paid off everything she owed. She expects to have enough saved to make a down payment on her own home in about 18 months.”

“J.Y. Fores-Pimentel, a single parent in Richmond with two children, says society encourages people to think they can spend more than they earn — and gives them credit cards that make it easy to tumble into unmanageable debt.
Fores-Pimentel, 31, became caught in the debt trap but freed herself by curtailing spending and cutting up her credit cards. She moved back with her kids to her parents’ house earlier this year and has paid off everything she owed.
By living frugally, Fores Pimentel expects to have enough saved to make a down payment on her own home in about 18 months.
“You have to change your lifestyle and it’s really difficult,” she says. “But there is such a sense of freedom in being debt-free.”
– from Average British Columbians unprepared for ‘tsunami of debt-related problems’, Paul Luke, The Province, 29 Oct 2011

Can’t. Make. This. Stuff. Up.
Somebody with a net-worth of zero, sees path to fiscal responsibility via leveraging up meagre savings 20:1 and ‘purchasing’ (promising to pay-back over lifetime) a property, almost definitely a condo, for hundreds of thousands of dollars.
We’re living within a cult; the majority are brainwashed.
– vreaa

High Up On The Roof

“My brother, who has zero experience in construction, answered a craigslist ad for a roofer position at a large roofing company. They offered it to him after a brief interview, 15 bucks an hour. He started work and was ‘trained’ by a crack addicted employee. The crack head, actually asked to borrow money from him for supplies, which turned out to be a lie for drugs – he obliged and offered up $200 – which he never saw again. My brother confronted his boss after the crack head went awol for a week. The boss had the keys to his apartment (the crack head was staying at an apartment of his) and offered him to go in and take whatever he wanted ! My brother quit shortly after.
If this is the quality of the people who are in the industry now, I can only wonder the quality of the output… crazy.”
– Loon at VREAA 30 Oct 2011 8:46pm

“When I was younger I did roofing for an outfit in Alberta and they had strict standards:
– sneak off to a local pub at lunch for a quick beer if you’re going to drink on the job. Or a one beer limit on the roof, but pound it so the customer doesn’t see
– smoke weed in the company truck but never ever on the roof. That would be unprofessional
– if it goes up nose I don’t want to know about it, but you’d better share
– if you’re working on the road don’t bring hookers back to the motel room you’re sharing with your fellow roofer. That’s what parking lots are for.
– be nice to the new guy. He just got out of prison, and oh by the way – can he stay with you for a while until he gets on his feet?
– all fights are to be done on the ground away from the kettle. And don’t throw hot tar at your enemy/co-worker no matter how much you want to kill him
Good times!”
– nobody you know at VREAA 30 Oct 2011 9:29pm

Concerned citizens hear these stories all the time, but they’ve gotta be exaggerations, right?
– vreaa

“I remain convinced that the naysayers will be wrong again. Each time – after climbing a wall of worry – we muddle through with the result that hard assets will be even higher five to 10 years later.”

Excerpts from an article in the Vancouver Sun, 28 Oct 2011, by Ozzie Jurock, publisher of the Jurock Real Estate Insider. The Sun comment section was closed for this piece.
“In 1960, … your home sold for an average price of $13,105. Yes! By 1970 we reached $24,000, by 1980 we clocked in at $100,000, by 1990 $230,000 and by 2000 $296,000. In the last 11 years we rocketed from there to where we now are at $1.1 million (average used home sale price between Lions Bay and Mission).
…
We have had massive inflation in housing prices, driven by excess, cheap easily available money and today we are doing more – much more – of the same.
…
Real estate remains cyclical. I have told my subscribers to expect a downturn in the Interior and Vancouver Island over a year ago and a slowdown in Vancouver, too. But, I remain convinced that the naysayers will be wrong again. Yes, the numbers are bigger, the zeros larger and yet each time – after climbing a wall of worry – we muddle through with the result that hard assets will be even higher five to 10 years later.
…
House hunting is a little like duck hunting. When duck hunting one has to lead the duck. You have to shoot ahead to allow for the distance the duck is going to fly while your shotgun pellets are getting to him.
If you don’t you’ll always be shooting where the duck was, not where the duck is. Same thing with the real estate market. It is always changing. You have to know what’s happening with the aspects involved in your potential purchase and the management of your existing property portfolio.”

Agree regarding the importance of doing your best to anticipate the market.
Does the “management of your existing property portfolio” ever involve selling? – vreaa

“I open the door an the end of the hallway. Surprise! It’s a fully occupied suite. The owner made no mention of this. How about that for a surprise after you’ve signed the lease? The owner’s sister lives in the basement!”

“Ready for a chilling Halloween rental tale? What if you moved into a house without knowing there were other people living there?
It almost happened to me today. I check out this rather promising listing at 1107 Yorston Court:
$2300 / 3br – Beautiful North Burnaby Home
Date: 2011-10-16, 2:23PM PDT; craigslist.ca; PostingID: 2653098354
It’s old, but has a large lawn and a huge deck. I’m poking around in the basement, and I open the door an the end of the hallway. Surprise! It’s a fully occupied suite. As you can see, the listing makes no mention of a downstairs suite or shared accommodation. Neither did the owner as he was showing me the place. How about that for a surprise after you’ve signed the lease? The owner’s sister lives in the basement! What if I hadn’t opened the door?”
– Vulture Fun at vancouvercondo.info 29 Oct 2011 6:50pm

Spot The Speculator #63 – “I run the numbers in my head: This guy is paying $8K mortgage for this?! He paid $1.6 million for a house I would not buy for $400K !?”

“I decided last week to look for a rental home.. and it turns out to feel like a study of Vancouver real estate behaviours. This is actually great fun.
So today I go visit a 4 bdrm home in Point Grey. Smells like a sponge, feels like a sponge. Asking: $3300. I run the numbers in my head: this guy is paying $8000 mortgage for this?!?!? He paid $1.6 million for a house I would not buy for 400K !?!??! Maybe he paid cash… Well, what a poor return on investment, even less than inflation. Not to mention the $5000 taxes.
Obviously this was an amateur landlord. The paint was peeling off the window in large chunks, and he expected me to bring in my kids? The appliances were from the 80s. For God’s sake, if you rent for $3200, you could buy a brush and some paint. The basement showed signs of freshly scrubbed mold. The door between the master bdrm and the attic looked like an outhouse door. All skylight windows had missing handles. The attic was filled with moldy dusty insulation from the 70s. I even felt sorry for the owner.
So the HAM-guy says: Do you like it?
Me: Too humid, sorry
Him: You know, I own 3 other empty homes and I am looking for tenants, including a 5 brdm in Dunbar.
Well, the vacancy rate is 2%. So either he has 20 rental homes, or he only has 3 houses and recently realized he is loosing money on them, so he should better rent them. Who knows?
I left, feeling I was leaving a completely surreal place… “Insanity” is a euphemism.”
– ‘jumping in’ at vancouvercondo.info October 28th, 2011 at 6:54 pm

“I Married A Renter” [Visual Anecdote]

The Many Dangers of Low-for-Long Interest Rates

1. It encourages households to take on potentially excessive debt
2. It risks inflating a housing bubble
3. It discourages saving
4. It encourages inappropriate risk taking
5. It threatens the health of pension plans
6. It poses a risk to inflation
Ultimately, an extended period of negative real interest rates is a heavy punishment for savers and a juicy reward for debtors. Can there be any doubt that the end result will be a household sector that is overburdened by debt and undersupported by savings?
– from ‘focus’, BMO capital markets weekly ‘financial digest’, article by D Porter and B. Reitzes, 28 oct 2011 (pdf)

A bit late to be warning of this now.
We’ve already had ‘low-for-long interest rates’ for years now, and 1-5 have already come to pass.
– vreaa

Spot The Speculator #62 – “You have to make a decision – bling or buy. We saved a 20% deposit, and now own our first place. Bling or buy baby.”

“We lived for 5 years in a 450 square feet bachelor, with a bathroom across the hall, paying $725 a month rent, and did not buy any new consumer items. We purchased only thrift store furniture and bought cheap cars (old run down VWs) and mostly consignment clothes. No bling. You have to make a decision – bling or buy. We saved a 20% deposit, and now own our first place. Bling or buy baby.”
– ‘Bling or Buy’ at VREAA, 27 Oct 2011 12:40pm

Speculative mania = Bonfire
‘Bling or Buy’ = Twig
– vreaa

China’s Property Crash – Effects on Vancouver?

“Recent buyers are outraged as the value of their investments fall, sometimes by more than 25%.”
“They worked hard to earn money to buy property, but not long after they bought it, it crashed this much.”
“UBS are predicting the property market will suffer a hard landing in the next few years.”
– from ‘Shanghai Property Crash’, 27 Oct 2011 .

Greenhorn writes, by e-mail:
“This means Vancouver real estate prices will rise, right?
Condo prices in Shanghai are crashing. If you watch this video, you will see that condo prices in Shanghai are falling from $260/sq.ft. to $190/sq.ft. A lot cheaper than Vancouver!
Why are condo prices so low in Shanghai? Because China is a poor country with a per capita GDP of less than $8,000. But Canada’s GDP is only $40,000 and condos in Vancouver sell for over $1,000/sq.ft. so may be this ratio of per capita GDP/condo prices per sq.ft. is about right.
People tell me that if real estate prices crash in China, there will be a flood of money to Vancouver as our real estate market is an excellent store of value. I find this hard to fathom. If your real estate in Shanghai at $190/sq.ft. is crashing, do you then go buy in a market such as Vancouver that is 5 times as expensive? If Vancouver real estate at $1,000/sq.ft. crashes, do you then go buy in Monaco at $5,000/sq.ft.
Sure my examples are extreme, but you get the point I am trying to make.
When China real estate prices are up, Vancouver prices rise because the wealthy Chinese want to diversify their holdings.
When China real estate prices are down, Vancouver prices rise because the wealthy Chinese want to diversify their holdings.
Do prices ever fall in Vancouver?”

Despite our apparently bullet-proof market, we have a hunch that this will have a negative effect on Vancouver RE:
(1. deleveraging in China)
+
(2. psychological effects of plunging Chinese RE on Vancouver local buyers)
will be greater than
(3. tiny amount of safe-haven money running wishfully to only RE on globe still ‘retaining value’)
Add to this Euro-bloc rolling-crisis, and we think that the next leg down in everything is going to be a doozie. Look out, here comes 2012.
– vreaa

Cambie Corridor Speculation – “People are overpaying for land”

Six months after Vancouver City Council approved a plan to transform the Cambie Street corridor, homes in the area have nearly tripled in value and some residents fear development will ruin the neighbourhood. Ten homes on Cambie Street near 41st Avenue recently sold for $3.4 million each, nearly three times their assessed value.
City planner Brent Toderian says the city is trying to cool down land speculation in the neighbourhood. Toderian says the city has been meeting with developers and realtors to discuss land transactions after getting wind of some very high deals negotiated in the months after the Cambie corridor plan was approved.
He says the final prices didn’t appear to have factored in community amenity contributions the city negotiates with developers in order to pay for infrastructure and services associated with increased density
“People were overpaying for land — thus we sent messages out into the marketplace to say you’re going to have to adhere to the expectation of the plan if you wish to succeed in development.”
– from CBC 27 Oct 2011 [hat-tip ‘subterranian’]

“I’m a govt worker, my boyfriend is a journeyman plumber, we don’t have kids, how are we supposed to save up a 10% down payment for a mortgage?”

“I’m a govt worker, my boyfriend is a journeyman plumber, we don’t have kids at the moment, I’d say we live “comfortably paycheque to paycheque”, but how are we supposed to save up a 10% down payment for a mortgage?
We have had no issues paying our landlord’s mortgage – $1250 for a 2 bedroom condo in Poco, so clearly we are willing and able to afford our own mortgage, but we are just unable to save up for the gouging cost of a down payment. Are we supposed to borrow from the bank of Mom and Dad? Buy in with our siblings? What is happening to our independence?”
– Mrs.PacMan, comment, Vancouver Sun, 18 Oct 2011 3:53pm

“I have no desire to move back to grey wet days.”

“I left Vancouver about 15 years ago after growing up & being educated there. Vancouver is THE most beautiful city in the world – when it’s sunny. Unfortunately, those days are few. I don’t want to put down my hometown but wake up people – those real estate prices are just stupid. Created more by poor government policy than anything. Greed combined with short term thinking to make present careers look good. It’s good to see that people are waking up and realizing it’s just not worth it. Being house poor in a rainy city with a bogus transit system. Most livable city – my derriere! The good news is that there are great alternatives in terms of where to live. In the short term there’s adjustment but I have no desire to move back to grey wet days. The thought of living in Vancouver actually depresses me. If you live in Vancouver, seek God: it’s possible to be salt and light in the darkest of places. Your only other option is to wallow in a dark, damp, grey, downward spiral of negativity and depression while you wait for the next sunny day.”
– honest weights at greaterfool.ca 18 Oct 2011 9:37pm

Whooaaaaa!
It’s not that bad.
Dress right; go for a walk in the rain; get stuff done.
File under: Sentiment, extreme; Minority belief.
– vreaa

“We’ll move to Bellingham in the spring, where house markets are far lower. We’ll live without health care, in a country at war, with the biggest debt in history, BUT, we will be able to afford having a family.”

“My wife who’s from the states and I got married a year ago, our dream was keep living in Squamish or Vancouver where she could keep working as a nurse. We realized that we won’t ever be able to buy a house and even rent it outrageously expensive. Starting a family would be impossible if we still want to have time to play outside. So we’ve decided to move to Bellingham in the spring, where house market are way, way lower but we’ll still live in a beautiful place, without health care, in a country at war, with the biggest debt in history. BUT, we will be able to afford having a family. Thanks for squeezing the middle class out of Canada, Canada.”
– ‘Phil from Squamish’, comment, Vancouver Sun, 18 Oct 2011 10:21am

“In the late 60s and early 70s my parents and their siblings all moved from Vancouver to South of the Fraser to have families. This has never been an affordable place to raise a family.”

“My parents were both born and raised in Vancouver as were their siblings. In the late 60s and early 70s they all moved from Vancouver to South of the Fraser to have families. This was not because they wanted to leave Vancouver but because they couldn’t afford to stay and buy a place. Vancouver has never been an affordable place to raise a family.”
– The Point at vancouvercondo.info 19 Oct 2011 4:49pm

When Price Cuts Aren’t Price Cuts – Yaletown Condos at $650/sqft

928 RICHARDS ST. NO. 1906, YALETOWN, VANCOUVER
11 yr old highrise; 750 sqft; maintenance $321/month
ASKING PRICE $499,900
SELLING PRICE $491,000
PREVIOUS SELLING PRICES $445,000 (2008); $242,000 (2002); $185,681 (2000)
TAXES $1,954 (2010)
DAYS ON THE MARKET 14
The Action: When this two-bedroom-plus-den corner suite at the Savoy was listed earlier this year, there was a surplus of properties that lingered on the market as buyers took their time to make a selection and negotiate on price. About a dozen buyers promptly viewed this condominium and one eventually made a proposal just shy of the asking price to seal the deal.
The Agent’s Take: “The average price per square foot for units in that building over the last year was $652, so we were a bit concerned that given the … market conditions for condos, we might have to go below this average. However … [this] sold higher than the average price per square footage, [so] clearly location and quality of building is still key, and of course, pricing sharply ensures the condos don’t sit on the market too long and become stale.”
– above ran as ‘Oversupply cuts price for Yaletown condo’, by Syndia Yu, G&M, 3 Oct 2011

Archived here for the longer term record.
This sold for over average price per sqft, so there was no ‘cut price’ involved.
The $9K off ask (2%) is a rounding error, not a price cut.
Keep the long view perspective: condos like these will sell for $200K-$250K in the trough. That’s a price cut.
– vreaa

“The grandparents/parents/aunts warn that renting they will get ripped off, and home prices will keep appreciating; if they don’t buy back in immediately, they will be poor forever.”

“A Chinese family I know just sold their east van plot to a developer who is buying up the whole block. The extended family have lived under the same roof for 20 years, so the whole house was mostly paid up. They bus everywhere, haven’t owned a car… About a month ago they netted 1.2 Million clear from the sale. They have until January to move out.
Their 13 year old son has been BEGGING them to rent for a while, to buy a car, take a holiday, and enjoy not feeling poor for a change. The grandparents/parents/aunts say that 1) renting, you will get ripped off and 2) the home prices will keep appreciating; if they don’t buy back in immediately, they will be poor forever.
They are currently in negotiations for a $1.4 Million East Van house; they will mortgage the 200,000 difference. Poor kid. He is a smart young man. He says that it is impossible that prices will not go down significantly at some point in the near future, because they have gone up to such ridiculous levels.
Just thought this gives an idea about how people can afford the current prices, and how so many homes continue to sell.”
– TPFKAA at VREAA 24 Oct 2011 9:55pm

So, the $1.4M market is dependent on the $1.2M market.
“..and so on infinitum.”
House of cards.
– vreaa

Comments already made on the thread:

“Game theory says it’s almost impossible for this family to end up renting.
Door #1: By continuing to own, if prices go down, the worst that can happen is their peers lose the same as they, if prices go up everyone’s a winner.
Door #2: By renting they either lose if prices go up, or win while everyone else loses. Further it’s unlikely they will find somewhere desirable to rent given the family size.
This family will choose Door #1 every time to align with their peer group, and will likely ride the bubble all the way down for the same reasons.”
– jesse 24 Oct 2011 10:58pm
[Well put. And, BTW, mutual fund managers underperform the markets by choosing Door #1 every time. -vreaa]

“who is this kid? Manny from modern family?”
– matt 24 Oct 2011 10:19pm

“If these rates of appreciation continue your school age children will not earn enough money in their lifetimes in any job to ever buy real estate and you’ll want them to move out at some point. Buy condos for all your unborn descendants!”
– rp1 25 Oct 2011 12:04pm

City Of Vancouver – Enough New Homes; Business-Unfriendly; ‘Green’?

City of Vancouver, 1998 to 2010:
Net increase of new residents: 83,267
Net increase of homes: 50,973
Net increase of new businesses: 46 (0.09%)
Business:Residential tax rate ratio: 4.5:1 (cf 3:1, or less, rest of Canada)
Net increase in cars: 64,329
– from article ‘Business growth in Vancouver stalls while suburbs flourish’, by Don Cayo, Vancouver Sun, 24 Oct 2011

Are these figures correct?
If so:
1. 1.7 new people to each new home (cf 2.1 average household).
2. Unattractive to business endeavours.
3. ‘Green’? [eyeroll]
– vreaa

Tyee and his Wife – “One thing that has changed in the past year is our perspective: we no longer believe a crash is inevitable, or that it would make any real difference to us.”

“My wife and I rent a basement suite in Vancouver, and occasionally we shake our heads that we’re pushing 40 and living in a space that barely notches above student housing. For a long while we’d been looking down our noses at people shelling out what seemed to be exorbitant prices for tiny, well-marketed properties. We waited, a bit haughtily, for the oft-predicted crash to bring prices back down to our level. While waiting in this particular basement for the past three years, we’ve paid $40,000 to our landlord.
As basements go, ours is fine, no mould-spore filter required. But it’s hard not to feel churlish when the subject of real estate comes up. At parties, we sip from the house cocktail shared by many young (and not-so-young) middle-class renters in Vancouver: two parts seething resentment, one part liberal guilt. To protest too much about our situation seems bourgeois, given we eat organic vegetables, drink good wine, and go on vacation every few months. We blunt our bitterness by counting our blessings, which are many—and it’s hard to stir a revolt on a full stomach and a glass of Merlot.
One thing that has changed in the past year is our perspective: we no longer believe a crash is inevitable, or that it would make any real difference to us. Like one of those Re/Max balloons, prices have risen so far out of our reach that even if they deflated significantly we still couldn’t get on board. Yet on our incomes, as a childless couple, we have a choice. Unlike James and Tina, we just might be able to purchase a property that suits our needs. Or we could leave.”
– anecdote from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

When the last prospective buyer with a bearish perspective capitulates, the speculative mania is over.
At least that’s pretty much how the market dictum goes. And we acknowledge we’ve been saying that for years now.
We empathize entirely with Tyee’s position.
But, this really is a speculative mania.
They never, ever end with permanently high plateaus.
Prices will revert to means determined by fundamentals, and that’s a long way below today’s prices.
– vreaa

Policies On Housing #1 – NSV (‘Neighbourhoods for a Sustainable Vancouver’)

[see ‘Policies On Housing’ – The Positions Of Local Entities On The Challenges Facing Vancouver Housing‘ for an introduction/rationale for this series]
—
NSV (‘Neighbourhoods for a Sustainable Vancouver’)
From their website, nsvancouver.ca:
“Neighbourhoods for a Sustainable Vancouver (NSV) is an organization made up of individual electors from neighbourhoods across Vancouver, of which many individuals are also part of neighbourhood groups whose views help to inform NSV Principles and Policies. NSV is endorsing candidates on the ballot in the upcoming 2011 civic election.
NSV is offering an alternative to Vision Vancouver and the NPA who are both effectively the same on city planning and development issues since they are heavily funded by the development industry. Regulators of land use policy, such as Vancouver’s City Council, should not be funded by those they regulate. Excessive amounts of money should not be raised or required for local elections.
NSV supports sustainable development in a scale, pace and form that protects heritage buildings, affordable rental housing and neighbourhood character, implemented through genuine grassroots neighbourhood-based planning processes. Affordable and social housing should also be a priority and designed to perform well within the scale and character of each neighbourhood. We want our city to be ecologically, socially, and financially sustainable.”
—

Here is ‘jesse’ on NSV’s policy on housing [Many thanks, jesse. -ed.]:
“The platform is rather detailed. It can be found here, [and archived here].
I’ll highlight a few policies that stood out to me, of which I have concerns:

“Ensure that planning and development are rooted in neighbourhood-based processes that have established community support and enhance public trust. Such processes should be genuine cooperative efforts between the City and the local community and should demonstrate substantial local support for any outcome”
This statement recurs in other policies throughout their document. Here NSV is talking about existing neighbourhood groups being more actively involved in the planning process, to the point they are given a near veto over land use planning. The issue here is that many city-wide initiatives and burdens could be nixed if such a policy is enacted. Imagine trying to get approval for treatment centres, halfway houses, or other subsidized housing in certain neighbourhoods, or even provide “medium income” housing throughout the city, from east to west. Further, density increases have been slow to materialize in certain west side neighbourhoods despite, based on price signals, a large number of people desiring to live there.

“Strive to end homelessness and poverty, and to address housing affordability more generally.”
A more general approach to housing affordability is good but it’s unclear what this means. Is “affordability” regarding ownership or just renting?

“Estimate future capacity needs based on existing population and realistic transparent projections, with raw data available to the public for ready independent review.”
Sounds good. Projections, though, can become self-fulfilling.

“Minimize rezonings that would divert development from rapid transit serving centres and high growth areas such as the Downtown District”
Uh yeah. Why rezone areas that don’t have transit? I disagree; the concept is to increase transit corridors to react to density increases, not the other way round. JMHO.

“Do not increase zoning capacity beyond what is required to realistically meet anticipated growth, so that development is directed where it should be implemented in the greatest public interest. (If the whole city is upzoned, then profitability rather than transit access may determine development, with increased orientation to automobile transportation.)”
This is a bit confusing; the “greatest public interest” is a weasel phrase. More on that below.

“Reduce/avoid regulatory disincentives to renovation of existing older character buildings to encourage adaptive reuse, which retains the affordability and embodied energy of existing buildings”
Noble, but it’s hard to see how this will align with planned density increases. Density looks to increase in specific areas, and produce larger disparity over time with this policy. Not that this is good or bad, but the conclusions seem obvious to me.

“Engage the public and other levels of government to explore and enact policies to constrain inflation of residential property values due to flipping, money laundering, and excessive foreign investment.”
This will be seen as noble, and populist, but I think vreaa and I agree this is missing the point, that there is a chronic land price bubble that extends beyond flipping, illegal activities, and foreign investors. While policies like these, if ham-fisted enough, may divert some “hot money” away, it misses the broader point, that land prices are woefully disconnected from underlying fundamentals and it’s mostly locals who are supporting valuations. [Agreed. – vreaa]

—
jesse adds:
“I was going to do a technical breakdown of NSV platforms but its policy is detailed enough, people can peruse it for themselves. Instead I thought I’d get on the virtual soapbox and highlight some concerns I have with their platform. I do think it’s good that it is a detailed policy. I’ve concentrated on the specific policies with which I have biggest issue. Other policies of NSV may or may not be good ideas but I support them being debated openly and on that front they seem to be adding to debate, and steering towards discussing broad housing policy as an election issue. I hope other parties and candidates can issue rebuttals to NSV’s policies or state that they agree with them.

Vancouver has a choice to make regarding increasing its density. One way is to concentrate density into areas whose existing residents are more willing to accept these increases — or cannot manage a careful, politically astute, time-heavy, media-savvy, and vocal campaign — but I also know that some neighbourhoods are much less organized than others and planning land use for the overall city “public good” produces entrenched interests that make living close to work more and more difficult as time goes on. Indeed if we look at Vancouver’s history, in certain neighbourhoods like the West End, Kits, Fairview, and more recently Mt. Pleasant, Cambie, and Main St. south of False Creek, we can see density slowly encroaching via a formal rezoning basis. This will start “creeping” outwards with more and more pressure over time.

Other neighbourhoods, mostly on the east side, have increased density through zoning for basement suites, and more recently the allowance of lane way housing city-wide. These efforts have increased dwelling capacity formally, and informally houses are adding suites more than the City wants to admit in terms of enforcement. (It has acknowledged illegal suites’ existence in working reports.) You know that I think that the City practice of “turning a blind eye” to illegal basement suites is a disingenuous way of increasing density in neighbourhoods. These suites have started to pop up on the west side too, though their instigation is more noticeable and prone to neighbours issuing complaints. It is my view this is not a good way of increasing density, producing a bifurcation of neighbourhood incomes and rendering ownership near impossible. By disallowing full-ownership density increases, it may actually increase, not decrease, speculative activity in low-density areas.

So density is coming, adding neighbourhood associations into the mix will make this process more difficult and, based on previous experience, forces density into areas where the populace doesn’t really want to be. Again, look at price signals: a great many people want to live, but are unwilling to buy, on the west side.

The City, as a whole, has the ability to decide whether protecting existing neighbourhood character by keeping density low is in the “public interest” of the city overall. I think keeping low density is going to cause more strains going forward, and increasing into medium-density similar to European or other cosmopolitan locales, as Kits/Fairview/etc. have already embarked on, is only a matter of time. At this point, given stratospheric land values, might as well hit the relief valve sooner rather than later. This is within the bounds of what the city is allowed to do and likely exactly at odds with NSV’s proposals. Increasing density in a sustainable way across the city won’t be popular, sure, but people working in, say, UBC who need to commute for close to an hour or more every working day, would likely welcome such density increases closer to their places of work. Density increases can be had by thoughtful rezonings either into multiplex or row housing (I dismiss this is not possible) of larger lots. Creative architecture can allow proper blending into neighbourhoods.

While I support more comprehensive concentration on housing policy beyond the serious problems in affordability for low-income families, which what NSV’s platform is attempting to do, I do not support the concept that Vancouver can maintain its “character”; rather it can only delay it and this will cause longer-term stresses for affordability, livability, and environmental sustainability of an extremely desirable chunk of rock. Perhaps other contributors can argue the other side, as to why certain NSV policy proposals are a good thing to pursue.”
—

‘Policies On Housing’ – The Positions Of Local Entities On The Challenges Facing Vancouver Housing

Posts in the series, thus far:

#1 – NSV (‘Neighbourhoods for a Sustainable Vancouver’)
[Not a response, but jesse’s discussion/critique of the publicized NSV position]

#2 – Joe Carangi, NPA Candidate for Vancouver City Council

#3a – Sandy Garossino, Independent Candidate for Vancouver City Council
[Excerpts from interview with ‘The Mainlander’]
#3b – Sandy Garossino, Independent Candidate for City Council
[Response to our questions]

#4 – Tim Louis, COPE City Council Candidate

#5 – Ellen Woodsworth, Cope City Council Candidate

[#6 – “Mayoral candidates Gregor Robertson and Suzanne Anton each said they would not put limits on foreign investment.”]

#7 – Non-Responders; Delinquents; Hall Of Shame

—Dear Candidate:
_Invitation to publicize your position on housing policy._
The ‘Vancouver Real Estate Anecdote Archive’ (VREAA) is a local blog that focuses on the personal stories of Vancouver citizens meeting the challenges of housing during a real estate price boom.
We are currently running a series of posts called ‘Policies On Housing’ in which we feature the positions of local political groups/entities who may end up shaping future policy.
We would like to invite you to lay out your policy in that regard, around the following questions:
1. What do you see as the main housing challenges facing Vancouver?
2. What measures do you propose to address those challenges?
3. What is your policy on housing densification?
4. Would you support policies that would lead to a drop in real estate
values?
5. What is your own family’s housing situation?
Your answers to these questions will be headlined as a separate post, and discussion will ensue.
This is an opportunity for you to have your position on this central issue publicized and debated.
Please send your reply to: vreaa@hotmail.com
Sincerely
‘jesse’ (frequent contributor at VREAA) &
‘vreaa’ (vancouver real estate anecdote archivist)
—

Regular readers know that we at VREAA have been pretty much agnostic when it comes to the finer points of political policy: Our focus here has rather been on the massive market forces that the speculative mania has applied. We have argued that differences in the approaches of different groups to ‘affordable’ housing in Vancouver pale into relative insignificance when it comes to the effect of the bubble, and that, when the bubble implodes, an approach to a sustainable and sensible housing policy will face challenges different from those now apparent. Debating details of policy, we’ve argued, is like debating precisely where to position the proverbial deck-chairs on the Titanic. So, we’ve argued, let the bubble play out, then respond to the terrain that remains.
We respect the fact, however, that many (most?) disagree with that position, and we acknowledge that some regular posters on these pages may have a valid point when they argue that policy is important, now. So, out of respect to that position, we will headline the housing policies of major local political groups/’players’, and discussion thereof, over an ongoing series of posts, ‘Policies On Housing’. We have invited candidates to voice their opinions by open invitation and via the e-mail above.
All of these posts will be linked in the 24. Policies On Housing sidebar category, and via the sidebar graphic, too, linking to this post.
Please, do not misinterpret any of these posts as endorsements of positions. Our aim here is to record positions, and to encourage discussion.
– vreaa
—

“He said every house he tried to put an offer on was bought by developers with no conditions.”

“A month or two ago, a guy at work described his experience looking for an old starter house in Coquitlam. I think he was looking around the Coquitlam/Burnaby boundary. He said every house he tried to put an offer on was bought by developers with no conditions. He was not considered by the sellers because it was easier to sell to the developers, so he gave up looking.”
– Summer at vancouvercondo.info October 22nd, 2011 at 9:09 am

“In ‘Burquitlam’, whole blocks of old houses are being leveled for townhouses.”
– Patiently Waiting at vancouvercondo.info October 22nd, 2011 at 9:26am

Leif and Heidi – “The longer I’m here, the more I’m convinced this market is unstoppable. If this was any other regional city, prices would adjust. It’s not really Canada anymore.”

“Leif, 31, is an intern architect, and Heidi, 32, a full-time student at Emily Carr. Former Winnipeggers, they had already owned homes in Saskatoon and Winnipeg when they arrived in Vancouver in 2009, bringing with them $75,000 in equity. Despite their modest income, they were optimistic that their good fortune in the real-estate market on the Prairies would set them up for a decent fixer-upper in Vancouver. They quickly realized their income and savings would only buy them a one-bedroom condo—if that.
“Coming here was a slap in the face,” says Leif. “We thought we were lucky getting that down payment together, but it’s pennies here.” Recently he spotted a new one-bedroom in Kitsilano for $300,000; to prove a point, he went on MLS and found a home in Winnipeg for the same price: an old-stock character house with four bedrooms and two baths on three floors. It was 2,400 square feet; the Kits condo was 400. “The longer I’m out here, the more I’m convinced this market is unstoppable. If this was any other regional city, prices would adjust. But that’s not how it is here,” he says. “I don’t want to sound like we’re feeling sorry for ourselves, because we could happily move back. But we realized that Vancouver is not a regional market. Real-estate-wise, it’s not really Canada anymore.”
– anecdote from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

A bubble, by definition, appears ‘unstoppable’ to almost everybody in its sphere of influence. – vreaa

Alex and Erin – “What frustrates us is that there’s no way to grow wealth or security while living in this city, making what we make—which anywhere else would be considered a really good living.”

“Alex and Erin are doubtful about their future. Smart, practical, and into the city’s culture of dining, outdoors, and high-tech, they’re the Everycouple of Gen F’s 20-somethings. They rent a 500-square-foot apartment in Hastings-Sunrise and love living in Vancouver—even if it means having a living room not much larger than a snooker table. Alex, 28, is a young chef who moved here from Medicine Hat in 2005. After completing culinary school in January, he was hired at the new Hawksworth restaurant in the Rosewood Hotel Georgia. Erin, who grew up in North Vancouver, is 26 and until recently was a pr manager at 1-800-GOT-JUNK. A Twitter lover, she broadcasts their gourmet experiments to the world in 140-character bites. They’ve chosen careers that tie them to Vancouver, or a city of this size, and necessity aside they enjoy the city’s vibe.
They’re not optimistic about putting down roots. As a cook in an upscale restaurant, Alex can count on earning around $29,000 a year. Erin makes more with freelance copywriting and PR, but not much. “Together we make about $70,000, which sounds like a healthy combined income at our age,” Erin says, “and we’re not destitute. What frustrates us is that there’s no way to look at growing wealth or security while living in this city, making what we make—which anywhere else would be considered a really good living.” They’d like to buy a condo in five years or so, but that’s a stretch. “It would have to be in Port Moody or something, which means you’re commuting. Even if we lived on macaroni and cheese for three years, we couldn’t make it work here.”
Erin has over $40,000 in student debt from her UBC years and her Kwantlen diploma, and while pr was a consciously practical choice, getting ahead is tough. “The pr departments are small to begin with, unlike in Toronto,” she says. “So there are piles of people coming in at junior levels who can’t move up because people aren’t moving out of senior positions—the director has been there for five or 10 years and will be for at least another 10.”
– anecdote from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

Four Out Of Four RE Industry Insiders Agree: “There is no bubble in Vancouver” – “[Moderator] Podmore wore a ‘no bubble’ button to the debate”

“Ward McAllister, president of Ledingham McAllister Properties, and fellow panelists Eugene Klein, president-elect of the Real Estate Board of Greater Vancouver, and real estate consultant Richard Wozny, of Site Economics Ltd. were at the board of trade to debate whether or not Vancouver real estate is in the midst of a bubble. They all agreed it is not. …
“Buyers, especially the under-25 mark, are sitting on the sidelines,” said Klein. …
The HST effect was the only real damper on Metro Vancouver real estate, which the three panelists and moderator David Podmore, CEO of Concert Properties Ltd., all said (was) not a bubble. Podmore wore a button to the conference with the slash symbol for “no” imprinted over the word bubble.
“I am very optimistic about where we are heading,” he said, noting that his company largely pulled out of Metro Vancouver Real Estate in 2007, but went back in 2009.
He cited two reasons for the region’s strong real estate market: immigration and the fact that real estate is being viewed as a hedge against the uncertainty that has hit global finance.
Klein said international interest in Vancouver is attracting foreign buyers. He said buyers are coming here to live, with only three per cent characterized as foreign investors. He said supply is now out-stripping demand, but it has no affected prices. Prices have increases dramatically in some area over the last 12 months; in Richmond by $200,000, in West Vancouver by $275,000 and Vancouver’s West Side by $400,000.
“Demand for high-end properties have helped drive our demand for most of the year,” he said.
Wozny said Metro Vancouver’s real estate prices are “very high by any measure.”
“It must be something political or social because it certainly has nothing to do with economics.” he said.
He forecast low interest rates for the foreseeable future, which will translate into continuing sales.
“There is no bubble in Vancouver,” he said.
McAllister had advice for prospective homeowners in their 20s who are questioning whether they should wait for prices to come down. Don’t wait, he said; borrow from mom and dad.
And he warned against selling hoping to get back into the market later.
“Affordability is one of the main concerns in this market and I think will continue to be over the rest of my life.”
– from ‘New housing sales stall over transition out of HST’, Gordon Hamilton, Vancouver Sun, 21 Oct 2011
[hat-tip Patiently Waiting at vancouvercondo.info]

Well now, ain’t that.. cosy?
Quite the ‘debate’.
Metaphors almost fail us… kinda like getting Palmer, Nicholas, Woods and Player to debate the subject “Golf, the Best Game?”; or four vultures to debate the merits of carrion.
Thoughts:
1. Interesting terminology, “the under-25 ‘mark’ “. (Ever seen ‘The Sting’?)
2. They are seeking buyers at the margins: persuading those in their 20’s to borrow downpayments.
3. Their analysis is arguably even more nebulous than the usual “limitless demand” position: Even though prices are very high and not supported by “economics”, low interest rates and “something political or social” will “translate into continuing sales”. “Immigration and the fact that real estate is being viewed as a hedge against the uncertainty that has hit global finance” will continue to buoy the market. This really is little more than wishful thinking. Consider what may happen to this market if just a 15% drop in prices (and a 10% drop in the loonie) lead investors to question its “safe haven” status.
4. “Affordability is one of the main concerns in this market and I think will continue to be over the rest of my life.” – Classic bubble quote. Whenever people start expressing opinions that markets will never change, take note.
5. With reference to our discussion earlier regarding the media and the RE industry, witness the Sun running this as ‘news’.
– vreaa

Tyee Bridge – “Two quick chippy points”

Tyee Bridge is the author of the recent much appreciated ‘Going Going Gone’ [Vancouver Magazine, 1 Nov 2011], an article dealing with the challenging effects of the Vancouver housing market, and our economy, on a generation of industrious young people. The article was much discussed here (12 Oct 2011), and was also followed by a CBC interview (19 Oct 2011). Tyee posted a comment containing discussion and a question in an older thread last evening, so we thought we’d headline it here, with our reply, for sake of ongoing discussion.
—
Tyee Bridge, at VREAA 21 Oct 2011 9:28pm–

“Hi, Tyee of the article here, with thanks to Jesse and VREAA for their input on the piece early on. If you’re interested, go to the link HERE [CBC, 19 Oct 2011] for a response to the CBC interview and my response in return (assuming the moderator lets it thru)– relates to the premise of the effect of Chinese capital.

Two quick chippy points:

1) I know this is not Jesse or VREEA’s position, but I often hear a sort of default assumption that media and journalists are unwitting (or witting) dupes for the real estate industry– cheerleading for the market to stay ludicrously inflated, or something, an uncritically regurgitating PR as part of the corporate media conspiracy. I’d suggest that this characterization is off the mark, certain Sun columnists excepted. I for one would selfishly love to see the market take a nosedive, if it didn’t kick the heck out of all those I know who do own homes. I do think it will correct, perhaps seriously, esp if something hammers the Chinese economy. But as mentioned, I don’t know that it matters, which brings me to the next pt.

2) I read somewhere on this blog– can’t find it at the moment– that I was wrong in my my assertion that a 40% market crash would not put median-income earners in reach of a 3-bdrm home in Vancouver. By my rather ham-handed calculations, a household income of $68K (the family median here) would get you a mortgage of about $300K. That means you would need to have 3-bdrm homes that go for $500K to make them affordable to median-income earners in a 40% crash. Am I wrong here? When I looked on MLS this week there were exactly 19 three-bdrm homes of any description (condo/townhome/detached) in all of Vancouver and North Vancouver going for less than $500K. Unless I’m missing something, that’s only 19 of 150,000 owner households, which seems negligible.”

—-
Tyee, thanks for your article; as you will have seen it was much appreciated here.
And thanks for the comment. Regarding the points you raise:

1) As you point out, most of us here know that Vancouver journalists aren’t all members of some kind of RE cabal or “corporate media conspiracy”. But you have to acknowledge that, as a group, they haven’t accounted well for themselves when reporting on RE in this town over the better part of the last decade. Sure, there may be a few journalists, like yourself, who do not have direct self-interest in ongoing supernatural Vancouver RE market strength, but they compose a very small minority, and that has been reflected in how the market has been covered. If you look back through the last 5-8 years of media coverage, it is very clear that the vast majority of all published and aired stories promoted and championed the market; only very recently have there been any significant numbers of articles questioning the sustainability of the boom, or critical of its effects.
There may also exist some local journalists who own property but have been able to overcome self-interest and see the mania for what it is. But they, again, are in a (even smaller) minority.
Here’s a mental-exercise ‘poll’ – Make a list of ALL the journalists/producers/newswriters/editors you know who have a voice in the local media. Ask yourself whether each of them owns real estate in the city. For each of them, what percentage of their net-worth is tied up in the RE market? For many (most, perhaps?) the answer will be over 100%. (We’d love to hear your ballpark estimate results.)
Apart from the fact that bubbles are hard to identify from the inside, those who have vested interests in them continuing are particularly bad at spotting them. This could be happening consciously or unconsciously, so this is not to say that all of the bubble-pumpers have necessarily been ‘bad’; many have simply been herd-followers, or vacuous cheer-leaders. Regardless of the exact motivations, the market has for years been covered in a very biased fashion.

2) Yes, at 40% off, this city will still be woefully overpriced.
You may have seen from our prior posts that we now fully expect a 50%-66% price drop (peak to eventual trough; real prices).
At that level fundamentals will kick in, certain properties will be persuasive to cash-flow seeking investors, that’ll put a floor under the drops (but, as with the implosion of most manias, we may well overshoot).
Like raises in interest rates, an economic implosion in China will speed a crash in Vancouver RE, but neither are necessary for this mania to end. All that needs to happen is for prices to stall and then fall, a process that may have already commenced. In the current economic environment, a small price drop could be the spark to the tinder.
You may also have seen our posts where we discuss the massive amount of ‘covert’ speculation in the market. We suspect that very few players can imagine the effects of that evaporating.
Simple price drops may bring some prices into an affordable range for some citizens, as you are calculating. The vanilla math still looks fairly bleak, as you point out, but a speculative mania aftermath has some weird consequences, and many of the variables won’t respond in a linear or predictable fashion.
If prices drop 30%, we’d imagine effects would include:
– complete absence of new speculative buying (= far fewer buyers)
– very few move-up buyers (almost all wannabe-move-uppers will be stuck with low or negative equity in condos and townhomes)
– tighter lending practices (= fewer buyers)
– attempt to lock-in-your-profit selling; perhaps even panic selling (from off-shore investors, local speculators, boomers in retirement, pure flippers; = more supply)
– slump in the economy; lower wages (= fewer buyers; = more sellers)
– disgust with RE (= markets correcting to even lower than the means and fundamentals would suggest; overshoot).
– rents may drop, with falling wages & lost jobs (= drop in income yields; fundamental ‘floor’ prices drop lower)
– other factors
* Overall, there are many factors that will feed off each other once price drops have clearly commenced. The ‘virtuous’ cycle of the boom will become the ‘vicious’ cycle of the bust. If you can imagine 30%-off, all the factors would be in play to take us to 55%-off.

So, that figure of ’19 out of 150,000′, for $500K, may change very substantially.
In the trough, there may well end up being something like one to two hundred 3BR homes selling for $200K-$250K at any one time. But there won’t be many buyers around to take advantage. And, ironically, at the precise point when true speculators should be stepping in, they’ll mostly be gun shy, because most are momentum and not value investors. And people who expect off-shore money to surge in and scoop up all sales at 10%-off or 20%-off will be surprised to find these guys sitting on their hands at 30%-off and 40%-off (because why buy something that’s losing value, right?). In fact, we wouldn’t be surprised if off-shore investors, rather than stepping in to buy, actually become sellers, dumping assets that are dropping in value. A falling loonie will at that point make the RE price fall look even worse from their perspective. Suddenly Vancouver, rather than appearing to be some kind of charmed safe-haven, will look exactly like hundreds of other cities around the world with falling RE prices.

There will be very substantial consequences of the crash, many are impossible to predict. When it has all shaken itself out, and everybody has dusted themselves off, only then will it make sense to discuss a sustainable housing strategy for the region. In current discussions, the biggest ‘player’ (by far) is being left completely out of the equation. Whether you’re talking about DTES subsidized accommodations, or young couples looking for affordable first time buys, or UBC staff/faculty housing plans, the whole terrain will look different at ‘half-off’. There will still be challenges, but they’ll be different, and, we suspect, more addressable.

We hope you, Tyee, stick around to see it all play out, and we hope that all goes well for you and your wife with future endeavours (real estate and otherwise). Please continue to share your thoughts.

– vreaa

James and Tina – “Today, any starter home in the Lower Mainland is far out of our financial reach. We didn’t ever think that we’d be 35 years old having never lived above ground level.”

“James and Tina live in Point Grey, in a two-bedroom basement suite in a Vancouver Special. Tina, 34, a former music teacher, is now a stay-at-home mom. James, 35, teaches music and directs the 260-student Dr. Annie B. Jamieson Elementary School string orchestra. He also gives private cello lessons to bring in extra cash. Their twin boys were born last May, and their challenge as a new family of five is how to afford not groceries but space. The search for a larger home has not gone well. Real estate, they say, has been “a continual source of depression” for seven years. “We feel fortunate to be healthy, have three wonderful children, and have jobs that are mostly satisfying and interesting,” James says. But they’re tired of living below ground. “Our dehumidifier and industrial mould-spore-removing air filter are playing too large a role in our lives.”
On their combined income—at around $80,000, it’s well above the regional family median of $68,000—they’re still knocking their heads against the subfloor of the real-estate boom. While in their 20s, they saved for a down payment and made offers on six houses in Vancouver and Burnaby. Despite bidding over the asking price almost every time, says James, they always lost out. “Today, any starter home in the Lower Mainland is far out of our financial reach. We didn’t ever think that we’d be 35 years old having never lived above ground level.” They love Vancouver, and want to stay close to their families and their roots. But, like many middle-income earners here—web designers and police officers, young architects and teachers—they find themselves rehashing halfhearted talks of packing everything into a moving van. “Maybe we’ll head to Victoria,” says James, “somewhere we can realize our dream of living above ground.”
Tina and James are part of what, real-estate-wise, might be called Vancouver’s Generation Fucked. As the city becomes a global “lifestyle destination,” tens of thousands of middle-class households are getting a hard lesson in diminished expectations. Unless the members of Gen F want to raise their children in a one-bedroom condo, their salaries will qualify them to be no more than permanent renters in Vancouver.”
– anecdote and image from ‘Going, Going, Gone’, by Tyee Bridge, Vancouver Magazine, 1 Nov 2011

“My friend says that Canada’s property has been way undervalued for so long and that all of these huge increases are just us ‘catching-up’ in the world-class property realm where we belong. I have given up on the idea of ever buying a place in Vancouver.”

“But what if it really IS different here? I have given up on the idea of ever buying a place in Vancouver. Properties just keep going up and up with no sign of stopping. My friend says that Canada’s property has been way undervalued for so long and that all of these huge increases are just us ‘catching-up’ and being up in the world-class property realm where we belong. I hear those kinds of comments all the time in Vancouver. sigh.”
– Kimberley at greaterfool.ca 30 Sep 2011 1:59am

“Lately, I am sensing a shift in opinion among friends and family where more and more are complaining about the high prices of RE and whether it’s a good thing or not for the city and families.”

“Lately, I am sensing a shift in opinion among friends and family where more and more are complaining about the high prices of RE and whether it’s a good thing or not for the city and families, especially among the Xers and Yers who are mostly being priced out completely. I think the recent stories on Global TV just reflect that change in sentiment.”
– ‘Troll’ at vancouvercondo.info 12 oct 2011 11:37am [as previously discussed, this ‘Troll’ isn’t actually much of a troll]

“I’m a single person who makes a pretty good salary but housing costs and all of the taxes keep me at home. I’m just trying to keep my head above water so that I don’t have to sell my condo.”

“I’m a single person who makes a pretty good salary but again, housing costs and all of the taxes that I keep getting hammered with keep me at home. I pay my bills, have too much debt after being unemployed for a little while and I’m just trying to keep my head above water so that I don’t have to sell my condo. I really wish the governments would wake up to the fact that we can’t afford to pay anymore taxes!”
– Kittybay, comment in Vancouver Sun 18 Oct 2011 9:03am

“The house was recently listed for $25,000 below what we offered for it in 2009. And it is just sitting there, doing nothing after two months.”

“We put an cash offer (no mortgage) on a house in mid-2009, for $50,000 below asking price. It was rejected. A year later the house had not sold and was listed for the exact price we offered in mid-2009. A year after that, it still didn’t sell. It was recently listed for $25,000 below what we offered. So, this is a $75,000 price reduction in two years. And the house is just sitting there, doing nothing after two months. Listings are the highest they’ve been in 10 years, sales are at the lowest they’ve been for ten years. Price reductions are happening, even though you may find some houses going for more than asking (not many). It’s a recipe for a major housing correction. And…no…Asian buyers are not going to ride in on a white horse and save us. This is the end game.”
– comment at Canada Bubble blog (comment section), passed on by Makaya at VREAA 15 Oct 2011 9:35pm

“I said he made money because he was part of an irrational rising market not because of house-flipping super-powers. They looked at me with shock, they expected the story to pump me up with real estate lust.”

“I met with friends that were going on and on about an uncle that kept buying and flipping houses last year.
They said, “He made 50k on that one, then bought that and flipped it for 80k, then bought that and flipped it for 70k,…”.
I said, “He would have been better off buying one property and doing one sale and increasing his holding period, he made money because he was part of an irrational rising market not because of house flipping super powers. I said transaction costs would have killed him.
They looked at me with shock, because they were expecting the story to pump me up with real estate lust.
Needless to say, they bought a place last year and are renovating it with the intention of flipping it. In addition, Their neighbour is elderly and they want to now convince him to sell his place to them. They said they want the neighbour to sell to them and then just rent it back to the elderly neighbour…. I hope stupidity is rewarded accordingly.”
– Anonymous at vancouvercondo.info October 16th, 2011 at 7:52 am

“He’s a lawyer. She’s a manager. His mom’s a doctor. Just the kind of people who could live anywhere, and do it well. But not Vancouver. This is how a bubble can eat a city.”

“He’s a lawyer. She’s a manager. His mom’s a doctor. The family has breeding and expectations, not to mention wealth and upward mobility. Just the kind of people who could live anywhere, and do it well. Make the locals inadequate. But not Vancouver.
Some months ago he was offered a job at a prestigious BC law firm with the usual perqs, Big cheques. Moving costs. Status office. West Georgia ain’t Bay Street, but there was the appeal of a city which fashions itself green, progressive, sporty and insufferably self-centred. Besides, you can drive the Carrera all year. Sweet.
But it took just one weekend of house-hunting on the west side, in West Van, even North Van and down to White Rock to send the ambitious thirtysomethings fleeing back to godless Toronto. “They are,” he told me, “nuts. What possible benefit is there changing jobs and doubling my salary when I have to pay triple for a lesser house?” Left unsaid: If I’m going to move to a regional city with no subway and no prestige at least I expect to live better, not worse.
This is how a bubble can eat a city.”
– anecdote relayed by Garth Turner at greaterfool.ca 18 Oct 2011

“My husband and I make a combined income of around $150k. We bought a house on the North Shore after a relative died, with a $300k down payment from the sale of our last house.”

“My husband and I make a combined income of around $150k. We bought a house on the North Shore after a relative died (fixer upper, below market value, no realtors involved, no property transfer tax), with a $300k down payment from the sale of our last house. And we still had a hard price ceiling of $640k, which meant about a $2k monthly mortgage. If it hadn’t been a family property that I knew inside and out and planned on keeping for many many years to come, we likely would not have bought in this city again.”
– RESKeptic at VREAA 14 Oct 2011 10:38am

“Our building is one of the best in Kitsilano: concrete, well maintained, no leaks, tennis court, outdoor pool, gym. Units usually sell very quickly but not now.”

“I am 58, she is 50, debt free, both working, conservative and diversified investments. Our humble 1 bdrm condo was purchased for 149k in Dec./96 and paid off years ago. Anyway, things are definitely slowing down here. Our building is one of the best in Kitsilano: concrete, well maintained, no leaks, tennis court, outdoor pool, gym. Units usually sell very quickly but not now. A one bedroom has been on the market for a month. Original asking price was 400k, now lowered to 359K and still no takers. Yet, the skyline is full of cranes as new condo buildings continue to be built on a massive scale. Who is going to buy them? In fact, as has been pointed out, prospective buyers (younger people) are up and leaving the city.”
– anecdote relayed by Garth Turner at greaterfool.ca 18 Oct 2011

“I’m not interested in working my butt off to pay a mortgage that we really can’t afford and then totally lose out on enjoying our children and giving them the benefits of having me at home.”

“Christina King and her husband Ian have a 22-month-old son and a two-month-old daughter. They recently decided to give up the idea of ever owning property because they are not willing to sacrifice time with their children to make the kind of money a B.C. mortgage demands.
“I’m not interested in working my butt off to pay a mortgage that we really can’t afford and then totally lose out on enjoying our children and giving them the benefits of having me at home,” she said.
King, 34, teaches yoga, but works around her husband’s schedule so one of them is always home with the children. The family rents a house in Metchosin, a bucolic community west of Victoria, from Ian’s parents. But Ian will soon be moving into a position as a farm manager in the same community, and a house on the farm will be part of his compensation.
“We’ve chosen a lifestyle over making a ton of money,” King said. “We’ve chosen that lifestyle because it’s something that we love to do, it goes with our values. It keeps us happy and not stressed, which I think makes us better parents.
“We’re still able to do what we love, but we’re not going to have to pay a mortgage for the rest of our lives.”
Sacrificing family time to pay for housing and child care is a decision young parents should not have to make, said Paul Kershaw of the University of B.C.’s Human Early Learning Partnership.”
– anecdote excerpted from ‘Incomes, house prices leave young B.C. families worse off than anywhere in Canada’, by Tara Carman, Vancouver Sun, 18 Oct 2011
[hat-tip 4SlicesofCheese]

CBC Radio – Tyee Bridge Interviewed By Stephen Quinn

On The Coast | Young Adults Leaving Vancouver.
– CBC, 19 Oct 2011 (8 min radio interview)

Must listen, all.
Thanks for the link, jesse.
– vreaa

“Financial planner Ted Rechtshaffen has a client with a net worth of $2-million who owns seven condos. If you are of the view that real estate only goes up, highly leveraged is a smart thing.”

“Condominiums in Toronto have appreciated at an average rate of 7% to 8% over the past 15 years. Condominiums also have the added attraction of requiring minimum cash up front until they are registered. It can take three years to build a condominium, so you can get away with putting as little as 20% down before you have to come up with the full amount.
The math is simple. You put $73,500 down on that condo and hope the value of the $367,500 condo jumps to $450,000 in three years, based on a 7% increase. That’s an $82,500 return and, even if you take out $20,000 for transaction costs, you are left with $62,500 profit, or an 85% return on your money in three years.
It’s attractive to many. Financial planner Ted Rechtshaffen has a client with a net worth of $2-million who owns seven condominiums.
“It is a strategy that has worked,” he says, adding the model could come tumbling down if interest rates rise. “If you strip it all down, it’s a highly leveraged strategy. If you are of the view that real estate only goes up, highly leveraged is a smart thing.”
– from ‘Into the arms of housing’, Garry Marr, Financial Post, 18 Oct 2011
[hat-tip SR]

From that same article:
“This real estate boom is over. It’s not crazy to invest now, but it’s not the best way to utilize cash.”
– Benjamin Tal, deputy chief economist at CIBC World Markets

Spot The Speculator #61b – “A few weeks ago I overheard a young guy at my gym saying prices can’t stay this “low” forever, you better jump in, and how this place in Richmond he was looking at was “only” 1.5 million dollars.”

“A few weeks ago I overheard a couple young guys at my gym (maybe age 25) saying prices can’t stay this “low” forever, you better jump in, and how this place in Richmond he was looking at was “only” 1.5 million dollars. I thought 1.5 million dollars was a lot of money for a 25-year-old, but not anymore I guess with the Bank of Canada’s free money interest rate policy.”
– Basement Suite PhD at VREAA 16 Oct 2011 2:58pm

“Condos Kill” – Occupy Vancouver Banner

– ‘Occupy Vancouver’ banner at corner of Georgia and Howe.
[photo care of ‘ams’, via e-mail 19 Oct 2011]

Spot The Speculator #61a – “We have friends who recently bought a place because “they didn’t want to waste money on rent”. They put 7% down, and a month later bought a car. Now on a tight budget.”

“We have friends who recently bought a place because “they didn’t want to waste money on rent” Even after we told them the pros and cons of renting. They put 7% down, and a month later bought a car.
Dad has decent paying job, mom is stay at home mom, similar household income as my wife, who does not work at the moment, and I.
Originally our friend’s wife told my wife their monthly budget for food was 1200 a month. Which we thought was tight for a family of 3. Turns out we misunderstood, 1200 a month includes utilities, cell phone bills, internet (no cable), and who knows what else.
This was a shocker to us. Sure you can do it, but to have such a tight budget and the majority of money going to your mortgage is it really worth it? What if the dad loses his job?
Sure, some can say if you have our mentality you will never own anything. But before, even if you lost your job, you would probably have a safety net of savings. But with today’s prices, most new families are maxed when they buy in, and have no ability to save anything. All the eggs in one basket.”
– 4SlicesOfCheese VREAA 16 Oct 2011 10:18am

Spot The Speculator #60 – “Our combined salary is at the average for the province, yet we were able to buy a condo in Vancouver. How?? It’s because we made SMART financial decisions.”

“As a married father of a 2.5 year old, my wife and I have worked hard to get to where we are. Our combined salary is at the average for the province, yet we were able to buy a condo in Vancouver. How?? It’s because we made SMART financial decisions. We don’t have fancy phones, clothes, cars, or even an extravagant lifestyle. In fact, my wife stays home most of the time with our daughter because it didn’t make sense for her to work just to send our daughter to daycare. Most people my age (31) live outside of their means. These articles never touch on the lifestyles of those who proclaim that they can’t afford housing. Was any research done to look into the expenses of those who can’t afford homes? How many of them have smart phones with their outrageous plans, designer clothes, or even decide to buy ultra-expensive organic foods? People need to step back and re-assess their own finances instead of complaining how things are unaffordable to them.”
– geeperscreepers, comment in the Vancouver Sun, 18 Oct 2011 11:07am

It is true that many display mindless consumerism.
Having said that, keep the big picture in mind. Is personal austerity that sensible if one is using it purely as a tool to service mortgage debt during a massive speculative mania?
Who exactly is being the more mindlessly consumer: the renter with the ‘smart phone’, or the very careful budgeter paying thousands each month to ‘own’ a condo?
Prudent citizens watch their spending at every level. But if you make wise decisions about the hundreds-of-thousands of dollars, the decisions about the tens of dollars become less important.
This family is speculating on increasing RE prices. If you don’t believe that, ask them what their plan is if prices were to fall and keep falling. Chances are it’s simply unimaginable to them. They think they are SMART, but they are gambling.
– vreaa

BC The Hardest Province To Raise A Family – “Mortgage payments on their New Westminster townhouse, daycare costs, transportation, groceries and servicing student loans suck all the income out of the household as fast as they are able to earn it.”

“Heather Hansen and her husband are left with almost no spending money after they pay their regular bills.
Mortgage payments on their New Westminster townhouse, daycare costs for their two-year-old son, transportation, groceries and servicing student loans suck all the income out of the household as fast as Hansen, a health care social worker, and her husband, an apprentice welder, are able to earn it.
The family is not eligible for any kind of income assistance because their salaries are too high.
“But we continue to [accrue] debt because we actually don’t make enough money to live,” Hansen, 31, said. “At present, we are barely able to maintain any form of personal or social life because we can barely afford our groceries.”
Hansen’s experience is not unique. In fact, a new study indicates it is the norm for couples with young children in B.C., whose standard of living has deteriorated more than that of their counterparts in any other part of Canada over the last 35 years.
Hansen and her husband would not have been able to afford their townhouse without the help of their parents. The previous generation did not necessarily have it any easier, but they were able to find jobs without as much formal education, Hansen said.
“I find that a large number of my peers, anyhow, are entering the workforce after incurring a large amount of debt and are then trying to buy a home with very little equity.”
– anecdote excerpted from ‘Incomes, house prices leave young B.C. families worse off than anywhere in Canada’, by Tara Carman, Vancouver Sun, 18 Oct 2011
[hat-tip 4SlicesofCheese]

The article included the following analysis:
“Since 1976, household incomes for couples aged 25 to 34 in B.C. have dropped by six per cent after adjusting for inflation, said the study by Paul Kershaw of the University of B.C.’s Human Early Learning Partnership.
B.C. is the only province in Canada to report a drop in average income for this age group, the study found.
At the same time, housing prices have skyrocketed across Canada, and nowhere more so than in B.C. Real estate prices have risen 149 per cent in this province since 1976, when housing costs accounted for less than three times the average household income for young couples. Today, it is seven times as much.
The bottom line?
“B.C. is now the hardest province in which to raise a family,” study author Kershaw said in an interview. “And that’s because we’re the only jurisdiction in the country where household income for young couples has actually fallen behind where it was a generation ago.”
This reality is setting the stage for “a silent generational crisis occurring in homes across Canada,” he said.
“While the generation raising young kids are squeezed for time at home and squeezed for money after housing and squeezed for services like health care, for the generation about to retire, it’s become far easier,” he said. And because they are the demographic that tends to vote in higher numbers, policy priorities typically reflect their interests, Kershaw said, citing the focus on funding health care to treat end-of-life diseases as an example.
Baby boomers are also leaving behind a national public debt that has nearly tripled over their adult lives as well as an environmental debt in the form of per capita carbon dioxide emissions they have made little effort to reduce, Kershaw said. At the same time, they are cashing in on the skyrocketing housing prices as their children struggle to scrape together a down payment, he added.”

Brad Lamb Is Not Worried – “We are the number one condo market for new development on the planet. This talk of bubble is ridiculous.”

Announcer: “Remember that so called real estate bubble that’s been predicted to burst for what seems like forever? (laughs)… well it certainly didn’t happen last month… Canadian home sales rose almost 3% in Sept and 11% from the same month last year.”
—
Brad Lamb: “We are the number one condo market for new development on the planet.”
Announcer: “Brad Lamb is a RE broker and developer who has “been selling Toronto property for two decades, he says 2011 could be a record breaker.”
Brad Lamb: “I’m building over 2000 condos across Canada at present, and I’d say that 50% of those are under 520sqft.”
—
Announcer: “Yet there are worries that developers may be building too many condos in Toronto.”
Will Dunning, economist: “… we don’t know how they’ll be absorbed in the market place.”
Announcer: “Brad Lamb, who builds them, is not worried.”
Lamb: “This talk of bubble is ridiculous. But, we’re going to have recessions, we have them every 15 or 10 or 8 years, and when it happens, people are going to put their hands in their pockets and not buy real estate.”
-CBC Radio, “World at 6”, 17 Oct 2011

Spot The Speculator #59 – Fishy Anecdote or Common Plaice? – “Co-worker who makes $70k has just been approved for a $650k mortgage.”

“Co-worker who makes approx. $70k has just been approved for a $650k mortgage.
Just another example of how our banks are so much more prudent and conservative than their American counterparts.”
– ‘Manna from heaven’ at vancouvercondo.info 17 Oct 2011 9:25am

This useful discussion followed from posters at VCI:
jesse – “$650K at 2% is $2400/month or $29K/year. Add in other DSR costs and we’re up to about $35K. That’s 50% GDSR. Likely he’s either got supplemental income from relatives or other, and/or he’s committed to renting out a basement suite or rooms to flatmates/students. I don’t see how even a bank is going to qualify someone under the scenario you state.”
Troll – “Don’t forget he has to qualify under the 5-year rate, which would bring the number up to $36K/year. Something smells fishy about this anecdote.”
jesse – “Says who? For CMHC-qualified loans I agree. But how about low-ratio loans? You’re richer than you think.”
Anonymouse – “$650K mortgage, or $650K purchase price? There’s potentially a big difference.”
kansai92 – “Basement suite… or multiple basement suites. Maybe he’s going to live in the basement suite and rent out upstairs.”
Troll – “Fair enough…but then his income isn’t $70K anymore.”
patriotz – “Probably less. Hint: income = revenue – expenses.”
jesse – “…costs of ownership are often higher than budgeted, assuming this person even made a budget. It could be lender was using 80% offset instead of 50% add-to-income, so it’s a valid comment.”

Spot The Speculator #58 – “One sushi cook who makes 50K a year somehow got 850K mortgage for 2 properties and is renting out both. Cash flow negative. Been trying to flip both for past 6 months with no offers.”

“One sushi cook who makes 50K a year somehow got 850K mortgage for 2 properties and is renting out both. First is house 700K with 500K mortgage upstairs rent $1500, downstairs $900. Second property is 500sq/ft apartment downtown 450K with 350K mortgage rented for $1200. Been trying to flip both for past 6 months with no offers. He says rent is covering mortgages, strata but he covers property tax and insurace. I can’t begin to tell you how badly I want this thing to explode in the faces of these idiots!”
– Patrick at VREAA 16 Oct 2011 2:01pm

Spot The Speculator #57 – Medical professional chooses to rent – “On the contrary, MY SECRETARY, who I employ, has already bought two condos in the last year; is more than $800K in debt, and insists on giving me real estate advice.”

“I am a medical professional and do quite well financially and can afford a large mortgage in Vancouver.
I RENT a house because it makes no sense whatsoever to spend a million dollars to buy an old dilapidated house. I will give it another year or so, otherwise off I go to some place that actually makes sense.
It might make sense to take on so much debt if the value is sure to go up by 15-20 percent over the next two years, but not in this town and not with these fundamentals.
On the contrary, MY SECRETARY, who I employ, has already bought two condos in the last year and is more than $ 800K in debt, and insists on giving me real estate advice. …
I moved to BC 2 years ago (after having lived in NYC, Dallas and Toronto in the last 15 years ) for compelling family reasons, and the Vancouver RE reminds me of the Pied Piper’s story.
I rent a house and use portion of it for my office. People do not realize it but it is far more cheaper and far more comfortable than owning property in Vancouver.
People get this false sense of security and “affluence” but do not realize the property value would have to go up at least 10 percent each year for them to break even versus renting. (This includes the cost of renting money from the bank, property taxes, agents fee (if selling) and cost of maintaining the property).”
– Get real at VREAA 16 Oct 2011 12:36pm and 7:00pm

Spot The Speculators #56 – “The hairdresser I went to the other day was telling me he and his partner have been approved for up to a $1 million in new mortgage financing, assuming they can sell the existing suburban home they bought last year.”

“The hairdresser I went to the other day was telling me he and his partner have been approved for up to a $1 million in new mortgage financing, assuming they can sell the existing suburban home they bought last year, tarted up and are now attempting to flip for a big profit. I don’t mean to imply that theses jobs are marginal, just that incomes in those types of jobs are variable and extremely market sensitive. If the economy does take a hit, servers and others in personal care-type service industries will be hit hard. My daughter, the perennial student, is a part-time server in a trendy downtown watering hole and says tips have plummeted in the last two years. She maintains that people that can’t afford to go out are still going out but not tipping as much or at all. She and her fellow servers also complain about the prevalence of groups of people that go out and expect to sit and watch a sporting event without buying drinks or food – usually one person will buy something to try to maintain a table but everyone else orders little or no menu items. The manager of the bar now routinely politely evicts those “squatters” but it is a problem.
The banks seem ready to approve large mortgages for people that used to be considered marginally employed (back in the day when I worked for a bank).”
– Observer at VREAA 15 Oct 2011 11:45am

Spot The Speculator #55 – “At my workplace the lot-boy who washes customers cars for $10/hr. told me how how to invest in real estate. His 1st condo equity was extracted to buy his 2nd condo and that equity was extracted to buy the 3rd.

“At my workplace the lot-boy who washes customers cars for $10/hr. told me how how to invest in real estate. His 1st condo equity was extracted to buy his 2nd condo and that equity was extracted to buy the 3rd and final one. He says Royal Bank was willing to give him the money since all of them are rented out. We don’t have sub-prime like the USA but this looks like a dangerous house of cards that I think is not just isolated to this one individual. I read somewhere that a famous stock investor said once a shoe-shiner was giving him stock tips he knew that was the time to get out of the stock market. I was getting that feeling when the lot-boy was giving me tips on how to buy real estate since I’m just a lowly renter.”
– Pat at VREAA 15 Oct 2011 11:47am