“She tells me that she isn’t worried because the prices cannot drop below what she paid.”

“My sister-in-law bought her place 5 yrs ago, and saw her house price double last year. She tells me that she isn’t worried because the prices cannot drop below what she paid. Only time will tell.”
eagle eyes at greaterfool.ca 2 Feb 2012 1:13am

These are the owners who may well end up being most surprised by the coming deflation.
After sitting on what felt like certain profits for years, they will give them back, and more.
The mania was already well underway by 2006; prices could end up going back as far as those of 2000, 2001.
– vreaa

27 responses to ““She tells me that she isn’t worried because the prices cannot drop below what she paid.”

  1. Have anyone read Garth’s latest post regarding the new MLS stats? Is the MLS trying to hide the true market conditions by not posting med and avg prices? Can anyone give their opinion please?

    Ive realized that Garth has insulted basically everything that the govt does or any change that is made in the RE industry. He’s a great writer, but maybe that’s what gets people’s attention. He has never said anything good about anyone in the RE industry or about Harper, Carney, & Flarehty. Your thoughts guys thanks!!!

    • I believe Garth also says to always use a realtor when you are selling, despite all the crap he heaps on realtors.

      • If you’re trying to dispose of a multifaceted multi-hundreds-of-thousands-of-dollars asset and think you don’t need assistance, I hope you know what you’re doing! 😉

    • Garth can turn a phrase, and he’s also very bitter at the current governing party for tossing him to the curb 5 years ago. He brings up some salient points, and does so with wit and humour. But….. he’s also fond of selling his own version of the truth, and some of his recommendations I just don’t agree with. For example, he thinks those with paid off houses and no plans of selling should borrow up the half the value of their home and invest it. Because “too much of their net worth is tied up in one asset.” Well, that’s true. But the risk side of that is much greater than he would have us believe. I’ve seen him challenged on this and he typically responds with riducule. He is also callous in his dismissal of anyone who is not a financial success, repeatedly referring to anyone with major assets saved up as “losers”. I’m a regular reader and enjoy his posts and particularly his skewering of the RE industry, but I take him with a grain of salt. And I don’t make any decisions based on what he’s recommended that’s for sure.

      • Of course, that should read “….repeated referring to anyone without major assets saved up as “losers”. He’s also fond of calling them ‘failures’. Not just at finance, but at life. Never mind if they endured some hardship or bad luck along the way and still managed to successfully raise a family and put them through school. In Garth’s world, you’ve either built up a giant nest egg by age 60 or you’re an abject failure. He’s completely unyielding and unapologetic on this. And his sycophantic fan base is mostly of the same mindset.

      • Investing is not for everyone. But what I think a retired person with a paid off home should do is, sell now and downgrade or rent. Preserve your net worth.

      • Garth also recommends that, and I agree with that much. Turn that imaginary “home equity” into the real thing. Why risk letting it get away? It’s the biggest tax free windfall most of us would ever see in our lives.

    • Putting aside our feelings about crazy Garth, I too am curious about what people think re: Van guy’s question: “Is the MLS trying to hide the true market conditions by not posting med and avg prices? Can anyone give their opinion please?”
      Despite the fact that someone will probably call me a conspiracy nut/ commie for saying so, my answer is yes. The fact that they will no longer report stats past 2005/2006 IMHO is an obvious tell, especially since we all know the mania started in 2002 and many folks believe it is that range price valuations could/ should revert to in the correction. I think the cartel and their marketing dept know exactly what they are doing – the market is all about confidence and we wouldn’t want pesky stats to jeopardize that now would we?

      • Standard operating procedure for all oligopolistic undertakings, TCG… I’d say more about that… but I’m currently pre-occupied investigating the recent spate of CropCircles on the landholdings of SouthCentralInterior AnarchoSyndicalist Communes [alas, the final refuge of all LapsedRealtors, ExcommunicatedNeoLiberals. OrthodoxEconomists and nascent NeoMalthusians] …

      • Ralph Cramdown

        The RE boards are absolutely trying to obfuscate. TREB has now taken to reporting, just after month end, this month’s gross sales, and comparing it with last year’s, which by now has been adjusted downward due to cancels (deals falling through). Thus they report rising sales even if unit sales are the same as last year. If any one of sales MoM, prices MoM, sales YoY or prices YoY are up, sales are reported as being up. They’ll show 30 years of prices without adjusting for inflation, redefine “Months of Inventory,” a term which has always meant (current active listings) / (sales this month), to now mean (average of active listings for the past 12 months) / (average of sales for the past 12 months). Oops, changing district names and boundaries and not recalculating old price data so people can’t compare historical price data with new? Did it last summer, and have done it before. Allowing agents to revise the supposed list price downward AFTER the sale so their (and the board’s) sale/list price ratio looks healthier? Been doing it for years, and there’s no policy against it. I’m sure there’s more, that’s just the stuff I know about as an outsider.

      • I doubt there is much of an effort to hide data but who knows. The benchmark price is some measure — an opaque measure — so take it for what it’s worth.

        It’s all about the sales, baby!

    • CREB is also dropping their statistical reporting of average, median and the distribution of prices because the HPI methodology is claimed to be a more superior measure of value (because of it’s opaqueness?). I’ve also noticed far less publicly available property information on the city’s tax assessment website – likely as a result of pressure from the RE industry to restrict helpful information freely available to the public.

  2. Renters Revenge

    Tell that to the 30% of US mortgage holders who are currently under water.

    • The terms “REO” and “short sale” are in common parlance in America. In Vancouver “REO” is a theatre and “short sale” is a bungalow.

      It’s surreal to see the difference in attitudes in the American real estate markets compared to the one currently tenanted in Vancouver.

      • Renters Revenge

        The scariest part is that this is playing out exactly how it did in the US – in terms of the initial denials and then gradual acceptance of the bursting bubble. The recent chatter and anecdotes such as this one tells me we are well into the crash phase, with the widespread public acknowledgment about 6-8 months away. It’s already game over, but no one is willing or wants to admit it.

      • Royce McCutcheon

        I thought REO was a Speedwagon?

  3. Tell her to Google “Phoenix housing crash” or similar if she doesn’t think a 50% retraction is possible. There, they’ve had an average 50% retraction, which means some homes are down much more than that.

    • I tried this a few times, really people see little to directly compare to Vancouver, a city with what they see as different economic, political, geographic, demographic, and environmental factors. People will see what they want to see. Really pushing US data in their faces is more of a strategic “I told you so”, nothing much to do with short-term tactics.

  4. Hmm, just had a few emails. TD has jacked its variable interest LOC’s up 3.75% as of April 2nd, 2012. Seems they knew not to put this on the first as some would assume it’s a joke.

  5. dudes, pls stfu and quit being so funny. i really need to work more blog less – not unlike quitting pot.
    (a) it’s not a ledge if you don’t step out
    (b) don’t look down
    (c) if you looked down, don’t worry. some really smart people from the govt are putting up the mother of all safety nets. just chill until it’s finished.

  6. It is the same mantra preached and spread by the masters, and fanatically followed by the grasshoppers.
    Since a year ago, all “business entrepreneurs” under PNP (provincial nominees programs) must live a certain period in their nominating province. Yet they continued to buy multiple houses in Vancouver long before their immigration papers were finalized, either “house prices cannot drop” or easy money is too tempting.
    Recently, a couple of them who failed to convince the CBSA officers of their intention to live in Saskatchewan and Quebec, were denied entry and PR status. They own several houses in Toronto as well as in Vancouver, but NONE in SK or Qc.
    Those who managed to convince the CBSA officers and to have PR status granted, but decide NOT to live in the province that nominated them, believe that CIC have no legal ground to go after them. They know that we have neither the resources nor the will to go after them once they are “in”.

    • Yep, just like Quebec has it’s own immigration program that is widely used by immigration consultants and their clients to get immigrants into Canada and then on to Vancouver without ever residing in Quebec.

  7. Garth Turner has a lot of valid points and he’s interesting to read. BUT he is in the business of selling something, just like realtors, i.e. books, seminars, etc. If there’s a great depression, he’s not going to sell much of anything. So he is biased against the possibility of any type of extreme economic downturn. So he basically believes what he wants to believe. “Invest in preferreds with a balanced portfolio…” He also claimed for the longest time the housing correction would be 10-15 percent and thought anyone who thought 20-30 percent was crazy. Now that many credible sources are saying 20-30 percent or perhaps even 50%, he’s wised up a bit. His logic was if RE dropped 50%, then GDP would drop A LOT, then look out below. And he’s right, GDP would drop a lot, to depression levels. Which is why he believed it wouldn’t happen, because a great depression can’t happen. But it can happen. And it might happen. So he may either have to write a new book OR he may not be able to sell his seminars and current books anymore.

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