“I have spent the last week in Phoenix and what an incredible eye opening time it has been.”

“I have spent the last week in Phoenix and what an incredible eye opening time it has been. Single family detached one story home built approx 2004, 3 bedroom, 2 bathrooms, nice area (Gilbert, AZ) approx 45-55 minute commute during rush hour to any point in Phoenix… $140,000.
Upon talking to many people and explaining what is going on in Vancouver the resounded response has been “every bubble bursts”… Luckily I’ve had the company of couples of varying ages from their mid 30s to late 60s, what an eye opener. Also was given a nice tour of Phoenix by a farmer who still owns his 20 acres that his Grandfather bought and has seen the entire area change and develop over time. I wonder if there will be an equivalent person in Vancouver to do the same in a few years…is this bubble’s skin so thick it is a balloon? I suppose when a balloon bursts the sound is much louder.”
– Aldus Huxtable, via e-mail to vreaa, 14 Dec 2011

And while we’re talking about the USA, these charts from Seattle Bubble blog, 14 Dec 2011 and 15 Dec 2011. Thanks to jesse for the links:

20 responses to ““I have spent the last week in Phoenix and what an incredible eye opening time it has been.”

  1. An interesting mea culpa from US economist David Altig on missing the warning signs of the GFC. Even today, though, he claims the evidence was not as clear as it was ex post.

    Obviously Altig didn’t read CalculatedRisk.

    Having experienced a number of surreal business venture environments, it’s not surprising in the least Vancouver is so obtuse. The drive to have conviction in one’s enterprise is necessary for success.

    Don’t blame Vancouver, it is trying, real hard, to succeed in rather difficult economic circumstances that make it challenging to undertake anything but real estate investment..

    • …”Having experienced a number of surreal business venture environments…” – Jesse

      It was a long time ago, Jesse – but several of us involved in a modest start-up were ‘rather surprised’ to discover one of our co-founders was an active (if scrupulously surreptitious) adherent of Dr. Frankenfurter’s fashion sensibilities…

      http://tinyurl.com/7wzp3a9

      David Lynch himself couldn’t have cast a more interesting office Xmas party that year… I often wonder what happened to ‘ol DocFurtiveFranker; the romantic in me likes to think he bought a controlling interest in Fredericks of Hollywood (after their 2001/Chapter11)…

  2. jesse -> “The drive to have conviction in one’s enterprise is necessary for success.”

    Humans are hard-wired to be irrationally optimistic, because that encourages them to irrationally strive & compete. That pattern of behaviour has evolutionary benefits for the species, but not necessarily for the majority of individuals. Rational striving makes far more sense for individuals.

    If 100 entrepreneurs have irrational conviction in their ideas, only one may succeed (by virtue of brilliance and hard-work and luck), but 99 will fail. The society benefits from the fruits of the successful venture, but 99% of the entrepreneurs end up bearing the burden of their failed efforts.

    Hard-wired irrational optimism is a major factor that drives speculative manias. Why else would hoards of intelligent people be able to kid themselves “it’s different here” despite mountains of evidence to the contrary?

    Despite the drawbacks of the hard-wiring for individuals, we still benefit greatly from folks (especially young bright folks) who ignore the math and irrationally optimistically strive for ridiculous goals (like limiting global warming, or cold fusion, or, even more preposterous goals, such as affordable housing in Vancouver). 😉

    • real estate track record of success is much better than 99% failure rate in Vancouver; much closer to 100% than 0.
      I do smell what you’re cooking with this post though…risk not, reward not, and the failure rate for those that do not take the risk is 100%

      • Not ‘cooking’ anything.
        It’s a simple fact that humans are hard-wired to be overly optimistic. It’s evolutionarily beneficial.

    • For those who have experienced a failed startup, each week it’s like watching a perpetual photocopy of reality, all in the name of perseverance and “stick-to-it-edness”, aided by a bolus of hope.

      How many homeowners have awoken covered in sweat at 4am and realised, as clear as day, they are beyond any hope of recouping their investments. That’s a sobering moment, and, perhaps in a fit of irony, is more often than not elicited in a dream-like state.

  3. 2 quick thoughts.

    definitely a need for more duplex supply – yes even in upscale parts. gta and mtl both have a lot more of this, for example. there are a lot of aging folks and it is an ideal arrangement for kids to live beside their parents in separated spaces – especially for the large asian pop.

    this bubble is good illustration why it is dangerous to put public policy in charge of economic allocation – and also why activist public policy won’t solve the bubble. once you’ve got too many on the wrong side of the trade, it becomes impossible to address by popular measures. public institutions have no idea how to cut when it is needed. individual citizens in full possession of their own savings would have ended the vanRE bubble long ago. to be fair a lot of private businesses can’t voluntarily cut and reallocate either. but those ones just run out of revenue, are eliminated, and no more spent on that. i’ve been reading garth’s blog. great personality that’s doing a lot but it is clear he doesn’t get it on this. public policy should not be actively responsible for growth and getting everyone a job. that is a task it is fundamentally ill-equipped to perform. it should only ensure that basic rights are not being violated.

    govt rarely shrinks voluntarily. it typically keeps growing until it can’t. (eg. see eurozone today, japan and usa tomorrow, btw china has been shrinking state influence slowly since about 40 yrs) this is the big danger for canada despite all of its natural advantages: too many people believe this works.

  4. Visit Phoenix in the summer, then we’ll talk. Vancouver is over priced for sure ,but its worth a multiple of Phoenix, especially for those that are blessed with Canadian Citizenship. all I am saying is Phoenix is not a good comp. Seattle however is a good comp.

    • Yes, I shall. It’s over one hundred degrees and the cheap housing is all set up with air conditioning, that and cars are much cheaper, all have AC and a thorough lack of rust that our overpriced used vehicle market is doused in. Sounds absolutely horrible doesn’t it.

      • i’m going to get me a mint 85 4runner

      • Be sure to take some bottled water with ya, Derp… 😉

        The following is from Texas… but the writing is on the wall (or is that the well?) for the rest of the Sunbelt..

        [TheStatesman] – Growth of large private water companies brings higher water rates, little recourse for consumers

        “PFLUGERVILLE — When Robert White opened his water bill last month, his jaw dropped: $250 for a month’s worth of water and sewer service. The 63-year-old construction contractor, who shares a three-bedroom home with his wife in the bucolic Springbrook Centre subdivision, said he likes to keep his lawn green and expects hefty water bills. “I just don’t want to be hijacked,” he said.

        White’s water service is provided by a private utility owned by California-based SouthWest Water Co. LLC. Just across the four-lane Pflugerville Parkway, where White’s neighbors in the Springbrook Glen subdivision — a nearly identical grid of neatly arranged brick-faced homes — get their water from Pflugerville, rates are on average about 60 percent less.

        And White’s bill for water service may nearly double soon, if SouthWest Water gets the latest rate increase it has requested. “I have never felt so helpless,” he said.”….

        http://tinyurl.com/7qgbr2f

  5. “Seattle however is a good comp.”

    And there are a lot of houses in Seattle that have dropped 50%. I know several people in this situation. Luckily, most had paid all, or the majority, of the mortgage down.

    Drops are not inevitable. But housing drops are a risk. Some people are more exposed to that risk then others.

    Instead of “Bear Aware” Canadians need a “Large Mortgage Beware” campaign.

  6. I would agree that although it can be eye-opening looking anywhere outside Vancouver, Seattle is a better comp than Phoenix. Phoenix literally sprawled out the last 15 years and is not land locked like Vancouver. Seattle has similar geographic features.

  7. Pingback: “Bolus Of Hope” ['Vancouver RE-Verse'; Found Poem] | Vancouver Real Estate Anecdote Archive

  8. Yes it is different there, there’s no jobs to go along with the over priced housing. Compare to Seattle – Seattle has head offices of Microsoft, Amazon, Costco, Starbucks, and Boeing. Those are just the large ones off the top of my head.

  9. Seattle also houses the head offices for huge corporations like Weyhauser, Provident Health, Nordstrom, Paccar, Getty Images, Holland America cruise ships, Alaska Airlines, Eddie Bauer, Expedia, REI, Nintendo America, and T-Mobile USA.

  10. So what you are saying is that Seattle isn’t a good comp for Vancouver at all.

  11. Neither Phoenix nor Seattle is a good comp. Phoenix is just a mass of suburban sprawl with no limit to how much land is available. Seattle is also a huge sprawl and there is not the desire to live in the city proper like there is in Vancouver. Seattle is just another middle American city.

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