“My mistake was to not realize the intensity of their belief in the cult of real estate, and that any appeal to reason would be met with vitriol, as with any other cult.”

“Here’s another, less-discussed perspective on this RE madness: the sickening feeling of watching those you love commit slow financial suicide by buying yet more RE, right at the peak, and the fractures created when we try to warn them.

A week ago a family member called to say that they have just bought a house near us. Great, except that (1) they are buying the new place at the probable peak of the market, (2) they are keeping the old house “because (they) think it will be worth more later” (it’s only gone up about 8% total in the last 5 years, less than the rate of inflation), (3) they also (I think) “own” two rental places which have dropped about 10% in value in the last 3 years and a non-revenue property (which is just straight expense), and (4) they have young children. Good thing they have well-paid, secure government jobs.

For otherwise intelligent, financially savvy people to simply assume that real estate always goes up or at least not down much, nor for very long, (and they’re 40, so as far as they know, it does always go up) and not even cross-check their assumptions simply stuns me. I’ve been trying for the last 18 months to get them to reduce their risk, given that we’ve got to be close to the market peak and the chance of a significant move downward is probably far higher than that of even a 5-10% move upward. So, at risk of making them even madder at me, I sent them another massive email detailing all the reasons RE is extremely risky now. Of course, they desperately need real estate to continue upwards, so they wrote back a mean, rude personal attack email, cc’d to the entire wider family.

It’s so futile. In the end when they lose their shirts in the big collapse, they sure won’t thank me for the warning they ignored nor even acknowledge that they got a warning! Sigh. At least since they cc’d the entire family, they are the ones who will end up looking foolish, although they are attempting to make me look foolish now. It’s too bad that it will be some years before we’re all proven right about the upcoming crash severity and length. (and, they will probably quietly struggle along financially for many years afterward without any of us being the wiser).

I was awake most of last night stewing about this, and in tears due to the very mean things that were publicly said to me. Unfortunately all of the family will now be mad at me for causing what will probably be a semi-permanent rift. The only way forward that I can see is if & when they are proven wrong in the coming years and are in a bad financial situation, they might admit I was right. But, I doubt this will happen, it will be too painful for them. Guess I just should have kept my mouth shut for all the good it has done, leaving me feeling like the unwanted evangelist in the room (albeit with a better supported belief) 🙂

My mistake was to not realize the intensity of their belief in the cult of real estate, and that any appeal to reason would be met with vitriol, as with any other cult. “

– ‘JCH’, via e-mail to vreaa,21 Mar 2012

102 responses to ““My mistake was to not realize the intensity of their belief in the cult of real estate, and that any appeal to reason would be met with vitriol, as with any other cult.”

  1. Another chilling anecdote of the futility of cheap money. I have a former addict in my family too, and the reactions to confrontation are equally as unpleasant.

    I wish I could express some silver lining to this but alas I cannot.

  2. I have been guilty of the same email, they also bought anyway, but the personal reaction wasn’t as bad. I think you can rest assured that you were acting on love even if it didn’t and doesn’t feel that way. Family relationships don’t move in straight lines, but, unlike most other relationships, play out over extremely long timeframes.

  3. Joe_Blown_Away_By_High_Housing_Costs

    Real estate booster article in the Vancouver Sun today. Some choice quotes:

    “The Canadian housing market is off to a strong start this year, with gains in sales and prices in most major markets”

    “Given the current economic climate, the strength of the country’s housing market clearly reflects the value Canadians place on home ownership”

    “One driving factor has been the overall performance of the market over the past decade. Existing homeowners have realized substantial equity gains, especially in recent years, and many are taking advantage of the combination of historically low interest rates and equity to upgrade.”

    “Vancouver-area sales were down 16 per cent in the early part of the year, joining Winnipeg and Kitcherner-Wateloo, Ont., as the only spots where sales were down from one year earlier, Re/Max said. Still, Vancouver had the highest average sales price of any market, at $786,695, up 0.1 per cent from last year.”


  4. When family were slow selling before buying a second house during the crash in the u.s. but before the crash was fully recognized I just snapped and said, “Drop the price 15k a week until it sells. Or you are crazy.” I didn’t say anything else. They were fortunately well above water still at this point. 50k above or so. The house sold 10 days later and she remembered I’d kicked her in the tush to get moving and was very happy.

    Another friend’s new boyfriend was pressuring her to buy in France where things are really crazy, and our freaking out at the concept sure got her attention. But after all the graphs we made and prepared and discussion about crossover points of total accumulated assets, it turned out there was just one key that was convincing.

    Piling on with argument isn’t effective you have to find that little lever to pry with that gets them to rethink assumptions. In this case it was pointing out that her landlord was subsidizing her. She tried to argue that her landlord had no mortgage and her rent was pure profit, but we pointed out that given prices, the landlord would be far better off selling and investing in other areas. Not only would that make the landlord’s holding diverse, it would result in more income for her. Hence still a subsidy.

    The friend didn’t care about the enormous downside risk. That’s the part which is tough to grasp. She really liked the idea of getting subsidized. Go figure.

    Don’t make long arguments. Find the little lever that makes them rethink.

    And here I am making a long argument. Aye!

    • LOL at your friend and her subsidy.

      For most people theres no point arguing, you need to find the string attached to that voice of doubt in thier head, and give it a tiny tug. Its the voice of “maybe it could go bad” than the voice of “this will/this is bad” that most people will listen to, cause its more emotion than ration. Alot of times thats better then presenting charts and statistics.

    • @AG. This is very great advice. mom’s deprogramming is proceeding well though her resistance was both surprising and considerable. My little thread was to point out it’s all just an explosion of mortgage credit – mom don’t do debt load.
      @(f1, reality check, renx10). how is someone else’s family any of YOUR business? got another one for you. you know what i love about these guys? they hit the notes so pure. when you hit on the truth, it’s pure like that. it just rings free and won’t go away. just a bunch of guys jamming in the park. i’d love to hear more but i can’t find them to buy anywhere. that’s because they’re not trying to sell anything.

      note the time and place, btw. and nice jamming with the rest of you.

    • So true AG. I had a similar experience. Was talking to an elderly neighbor about the disaster that is coming for housing. She was talking out loud and waffling back and forth with the expected comments. “Well where would I live” she asked? “I wouldn’t have a yard anymore of a place for my garden”.

      Tough to argue with that so I just gave it to her straight. I said, you are in your eighties and will be fine whatever you do now. The choice is yours. The only people who are really going to get hurt are your kids who will lose most of their inheritance if prices fall.

      The house is up for sale.

      • These pretzels are making me thirsty

        You are good at convincing people. Have you considered starting your own blog? 🙂

  5. Joe_Blown_Away_By_High_Housing_Costs

    Wow! I sympathize with this person. It’s an example of how the real estate bubble tears apart families.

    I don’t even try to warn people in my family about the real estate bubble. Whenever I post a link to a RE bubble story on facebook, I make sure all my homeowning family members are blocked from seeing it.

    I don’t want to be the bearer of bad news for them and they most likely wouldn’t believe me. They’ve been so propagandized they all truly believe RE is going up in price forever. I can’t be the one to ‘burst their bubble’, pardon the pun. It would just lead to conflict, as in this example headlined on VREAA right now.

    • “an example of how the real estate bubble tears apart families.”

      You know what else “tears apart families”? Packs of wild dogs.

      But seriously there will be more than a few desperate calls from homeowners to family members for cash advances when the HELOC drip runs dry. Seen it, stresses families for decades. On the bright side (I did find a silver lining!) I surmise this part of the family won’t come a-knocking to “JCH” for a bailout should TSHTF.

    • Yeah, I too would like to be able to share my concerns about Canadian RE more broadly, but I’m nervous it will sour friendships

  6. I tend to find these assumptions are even stronger with the Under 35 crowd. Having never seen an RE downturn they are unable to fathom that there is risk. Funny thing is you tell that same group your investing 80% of your net worth in one company and they will have a million answers why it doesnt make sense…

    • I spoke to a guy in my office recently about interest rates… He looked at me like I had two heads when I told him I had paid 11% on student loans from the early 1990s… He assured me that such double-digit rates reappearing in his lifetime is IMPOSSIBLE.

  7. JCH

    You detailed your side without providing information on the % of equity in your relatives holdings. It sounds like they’re doing well.
    You’d should keep your nose out of their financial affairs.
    You sound like a “busy body”

    • Royce McCutcheon

      In my experience, when it comes to real life unsolicited financial/real estate advice I’ve seen to individuals making choices in the Lower Mainland, I almost never hear others counsel AGAINST real estate here. In any given month however, it is a given that I will hear people contemplating entering the market being (repeatedly) told things like “stop paying someone else’s mortgage”, “housing only goes up here in the long run”, “Asians!”, etc. Have also routinely seen the same points made to young people contentedly renting and not even close to established in their earnings.

      It makes me think of the Public Enemy album title, “It takes a nation of millions to hold us back”. Huge societal forces are vested in real estate values moving only one direction.

      No doubt you make a point of referring to people making these kinds of arguments as busybodies as well.

      • hahaha

        formula1 should answer “Touché!” (but he won’t).

      • Basement Suite

        Damn Royce, thanks for the idea, been looking to spice up the gym MP3 player, now I’m digging out the old school! PE this, PE that, fists in the air, proud to be black… 😀

    • F1, there’s a financial bus careening down the hill looking for a runaway lane. It won’t be productivity, and it won’t be real estate. It won’t even be inflated goods because the consumer has no cash and there’s enough inventory to undercut the other guy. The ones who drank the koolaid sucked their equity thinking it was a dividend. Ask yourself who makes cash when no one is borrowing? Boring old utilities.

      So, if you saw a relative hooked on real estate crack, wouldn’t you try to intervene? This is so inevitable, F1, you must be taking a cut from VREAA for your invaluable comic relief. Want I should tell you what the wife says about China? She just got back. Canada is dreaming. Why do you think Christy Clark is pumping our wares like flea market flogger? She knows the productivity and wage base won’t support the tax that will be required. You can’t sell debt for a profit anymore. Big fat interest rate increase by year end. How I do know? Cause I’m a saver and I demand it—or I will yank the cash.

  8. reality check

    I think you should mind your own business. I know you were acting out of your perceived concern but I think you learned the meaning of the saying “No good deed goes unpunished”. Also what if real estate doesn’t suffer a huge drop. Yes it will correct because it always does but a small correction over the long-term will mean nothing.

  9. Thank you Dr. formula1… You should get your own TV show on the ‘O’ Channel. I hear they just canned Rosie O’Donnel, so there is a space open

  10. I also have refrained from talking RE. It’s amazing how slogans have substituted thinking and are repeated over and over. Most people will get it when it’s too late to do anything.

  11. Personally I think you will get blamed even more when housing prices go down and they suffer financial distress, which they will given that they now have 5 properties now!!! 2 rental condo, 2 houses (new and old), 1 non-rental property. Unless they both make $120K+ per year, that would be pretty hard to carry.

    When they are at the end of their ropes, and if they remembered your warning, it’s more likely they will blame you because if it weren’t for you, none of these would have happened to them!

    Best to write back saying something like “I care and love you very much. Buying a house is a big financial decision and long term committment, potentially life changing. I just want to help you by presenting you with some facts and arguments you might not be aware of so you will have the complete picture and facts for your decision. Playing devil’s advocate if you will. I’m sorry if you took it the wrong way and hurt your feelings as your reply have certainly hurt mine. I hope we can move on past this.”

    After this, whenever the topic of housing or finances come up, regardless of what they say, good or bad, and just go along with “hmm..yeah…ok…if that’s what you think is the right thing to do…”. ie. meaningless agreements…dont’ bother argue or try to convince them with any opposing views anymore! Save yourself the grief!

  12. Hello JCH, Im sure you are a very nice person and mean well, especially when it comes to your family.
    Where in the world does your family you are talking about in this “anecdote” live , Haney ? Because where in the world in the Lower Mainland did a home only go up 8% in 5 years, it sounds like they won the negative lottery.
    Real estate is not “a cult”, it usually is the foundation of wealth in equity for most Canadians over the years.
    I love this site and am pretty pessimistic myself, but warning people about a bubble just around the corner is really sticking your neck out. The signs for Vancouver are just not there. The burbs, I dont really know so much.
    Recently , the place next to me came up for sale, I tired to get my brother or friends to come and look at it. The listing got 6 offers the first Sunday, they sold the joint for 10% over the listing price. If someone came and just got it at the list price before the open house, Im sure they would be happy right now.
    As for someone in this thread who said sales are down 16% in Vancouver, really really ??? I dont believe it, but who cares if sales are down 100000000%. the prices are still going up.

    • “The signs for Vancouver are just not there.”

      In what way Renx10? Do you mean there are no signs of a bubble? I’d really like to see the data you have to support that because, hanging around bear blogs, I tend to only see bearish data…

      • here’s a good article on defining a bubble market. The article comments on Vancouver as a warning for bubble as well as Toronto condo market. Cook does not comment on Vancouver supply vs demand + wealth when looking at detached home prices. We know that condo is starter home, but how much wealth goes into the detached purchase? We simply don’t know the details of these transactions we believe can’t possibly be affordable. Cook does acknowledge Vancouver land scarcity, thus contradicting his bubble warning for the region.

        “Over the long haul, the main driver of real-estate prices is household formation: the number of people you need to provide shelter for. If you have very strong population growth you can generally support stronger real-estate gains. If you have slowing population growth, you would expect some moderation in demand for real estate.”

        “Then there are geographical factors. Land scarcity—such as in Vancouver and Toronto, for example—drives up the value of real estate”.


      • one of the comments from above posted article:

        The real estate market needs to see this as a alien species invasion as in our environment.
        “Foreigners with harder work and spending ethics and much more money are taking over the real estate market.
        As most environmentalist know, alien species invasions don’t end in a bubble burst but rather an explosive take-over
        of the environment. In other words, it does not go away as most hopeful home buyer are waiting for”

      • Superficially attractive, but “alien species takeover” may be an invalid metaphor.
        Alien species do best when they find nutrients in their new environment that sustain and encourage their growth… when it comes to foreigners moving to Vancouver, they are dependent on umbilical cords from elsewhere to sustain them (they certainly don’t find their funds here)… a far more vulnerable set-up.

      • circa 1989, Tokyo, Japan – “Real estate prices in Japan reflect the underlying scarcity of land in the country: in Ginza, it’s impossible to stack $US 1000 bills high enough to pay for the value of land underneath.” We all know how this debt story has played out so far.

      • Vancouver is the new Tokyo?

      • Pretty damn close formula,…….. pretty damn close.

        Vancouver is the next Tokyo (really depends on what happens in China).

  13. Basement Suite

    “It’s too bad that it will be some years before we’re all proven right about the upcoming crash severity and length.”

    Too bad indeed. I think it could be a very time before it happens to the extent it needs to, you might change “years” to “decades”. Even then it may never correct to the massive extent I want to see. Things have gotten so out of hand here that even a 50% correction would leave houses very overpriced in this city, and not too many people expect 50% or anything close. There will be a correction but I see another 2008 dip, possibly just a little bigger, nowhere near what is needed to make me willing to buy. Money is just too cheap. Until mortgage rates go up substantially (which could honestly be decades), it is just too easy for Canadians to make their payments on overpriced RE. So, most will, and only the “prudent” among us stay out. By the time I retire, I expect we will have finally had a return to normal interest rates and sustained our massive correction, and I will be glad my retirement wasn’t tied up in an east van POS. Investments (like RE) to me are very long term, for retirement, what happens over the next 25 or 30 years matters to me. But I will not be right for a long time, I suspect.

  14. JHC, if I were you I would send a “apology” letter stating you may have “over-reacted”, but only cause your worried, as you’ve heard rumours of bubble talk, news about foreclosures and mortgage rule changes etc….. Plant the seed of doubt, because when the bubble pops they’re gonna dislike you even more, because they’re gonna think people like you “caused” the bust with all the doom talk.

    They may just see you as a giant nag or that person that wants to keep them from “succeeding.” Sad (and annoying) but thats how people like that think. If you don’t verify thier truths, they just see you as “mean.”

  15. I’ve been pondering the ‘cult’ recently too. It amazes me how certain people our about their RE purchases. In contrast with Randy I find that boomers are most likely to hold strong beliefs. I can’t think of any other asset that invokes such devotion from adherents – they have no room for doubt and no time for doubters.

    I guess I can understand why realtors like F1 & Reality Check would feel the need to preach the faith – their livelihood depends on finding and keeping coverts. What I don’t understand is why otherwise sensible intelligent people buy the hype. There is a guy at work is one of the smartest people I know, a world expert in his field, very open to new ideas and concepts yet when it comes to RE he is SURE it is always a good time to buy. Originally we were talking about Victoria which he said could never go down because of all the retiree’s. His certainty made me rethink my own assessment but I just couldn’t find any data that supports the fundamental cost of owning being twice that of renting. So I rent and sit on my downpayment…I think I will be an owner again in the future but not until sanity returns. And if it doesn’t return I’ll leave and move somewhere where I can buy a house mortgage-free. I’ll miss the view but not the scary look in people’s eyes if you dare to suggest house prices won’t continue to rise forever.

    • Bally,

      How much money have you been able to save for a downpayment with your Mcdonald’s job? Really, what kind of job can you expect with such atrocious spelling, rambling and incoherent text?

      • formula1 -> Quit the pathetic ad hominem.
        Bally says they have a downpayment, we’ll take that at face value.
        And how far is your own job from a ‘Macdonald’s job’, really?
        And, criticizing spelling: The second last refuge of the scoundrel.

      • vreaa,

        treat the harsh harshly and the gentle gently. Basically old testament virtues.

      • If we used those old-testament principles in our editing process, we’d have banned you some time ago. And you know it.
        So, simply keep it civil.

      • “So, simply keep it civil”

        from both sides, right vreaa? I see biased much officiating here.

      • “with your Mcdonald’s job”

        Definite offside. That said, Bally calling formula1 a “realtor” is even more insulting.

      • Royce McCutcheon

        @F1: be sure to post that last comment again using one of your other handles to really reinforce your point. Thanks.

      • f1 -> “I see biased much officiating here.”

        The invitation to submit bullish anecdotes, as always, remains open.
        Funny enough, we come across so few, and don’t get sent any, either.
        Also, we make absolutely no apologies for our bearish position; like JCH, we feel obliged to call it the way we see it. It’s a duck, folks!

    • I am not a realtor I can assure you of that

  16. My MIL is a major Vancouver RE groupie. I remember her trying to put pressure on me to by a tiny condo 5 years ago so that we could get onto the property ladder. Alas, we will be priced out. At that time I told her I could not take up on such a commitment while working a dead end Job and will be returning to school for the next 4 years. She thought I was not being fiscally responsible and taking care of my family responsibilities. Gave her all the calculations (rent vs buy, potential earning after school, e.t.c) but she chose to ignore numbers and insist that I was missing the last train.

    I then told her that people have always bought houses since the beginning of urbanization and will continue to do so. When my time to buy comes I will make that purchase. Also, remember telling her that if, by the time I finish school, someone in my profession can not buy a house in Vancouver then something is wrong with Vancouver – and not me. I had to, in certain terms, tell her that, as long as I am able to provide for my family (without ever asking her for a penny) then I am being very responsible. She then never uttered RE talk to me again. Guess she wrote me off as one major loser. Anyway, I have never looked at life as some popularity contest and will do what maximizes my family’s welfare.

    However, she recently raised RE issue with my wife last week when she learned I had left Vancouver and the family would be following this summer. My wife even told her about the SF homes she was checking out on MLS and the higher salaries in Alberta, when she was pressed to explain why we are leaving GPOE. Despite my wife’s explanation, MIL still insisted that we should at least own a place in Vancouver even though we will be based in Alberta. She insisted on us renting in AB and using those AB salary windfalls to finance a place in GPOE. Her reason being that we will get better property appreciation in Vancouver than anywhere else in Canada. My wife then raised that concern about buying at the peak of a market and MIL’s defense shield was raised pronto. She insisted that Vancity real estate will never collapse.

    Normally, I never do things to impress people but for just this one time I will make my MIL eat her own words. Once I get that SW Calgary McMansion this summer we will invite MIL to come see our new place. Will pick her up at YYC in the brand new Mercedes. BTW, I am not buying the house and the car to impress MIL. The house fits my lifestyle and financial status. The Mercedes is my pat on the back for all those years of being a broke student and a reflection of where I am headed in corporate Canada. The only showy part of this equation is the invitation to see what one can accomplish when they do not have a 700k mortgage around their neck, coupled with miserable Vancouver salaries. She needs to learn that there is life outside Vancouver. Hopefully that will shut her up for good.

    • Right out of school and already have a McMansion and a a Mercedes. I’m sorry things just sounds like a made up anecdote.

      • “Right out of school and already have a McMansion and a a Mercedes.”

        Welcome to the world of negative down-payment mortgages, courtesy of BoC and the US Fed.

      • Basement Suite

        “Welcome to the world of negative down-payment mortgages, courtesy of BoC and the US Fed.”

        Well put.


      If your intention is to “show up” your Mother-in-law just make sure you invite her for a visit in July or August, not Nov-May.

      • IamOuttaHere

        Does not make much of difference since the benz will have the 4matic or if I settle for the A4 I will be getting the quattro. Even if she is unable to appreciate my landscaping she will sure appreciate the 3 car garage and the Wolf range. It would kill her to learn that she is going back her rain forest $700k 1800sqf box with Future Shop frigidaire appliances and tenants in the basement.

      • Yeah, all those +12C days in Feb this year in Calgary were really “unimpressive”! Suckers.

    • Maybe you should considering renting that mansion, just in case things in Calgary get bumpy in the furture. On a side note, i’ve seen the a McMasion in the new parts of Calgary, Holy Crap!!!! They’re f**king impressive!!!!

    • be right, not righteous.

  17. formula1 (above) -> “The article comments on Vancouver as a warning for bubble as well as Toronto condo market. Cook does not comment on Vancouver supply vs demand + wealth when looking at detached home prices. We know that condo is starter home, but how much wealth goes into the detached purchase?”

    You constantly seem to forget that price:income ratios have ALWAYS been calculated, historically, when detached properties are more expensive than condos and town homes.
    So, at anytime in history, you could point to the price:income ratio, and point to desirable detached homes and say “Yes, but people who buy the detached homes have higher incomes, or bring wealth from elsewhere, or are cashing in lesser properties using the equity and moving up”. That has ALWAYS been the case.
    So, we find it comical the way that you perpetually use that logic to try to negate the outrageously inflated Vancouver price:income ratio (10.6!!!! Stratosphere!!! 66%-off before it is vaguely reasonable!!!).

    • You really should just be looking at the price-income ratio as to what it takes to buy a starter condo in a distant suburb. First time buyers cannot nor should they be able to afford a sfh in the city proper. There are many many affordable condos in the valley and in the outer edges of greater vancouver

      • “You really should” understand the concept of ‘normal distribution’ (in fact, all kinds of distribution) and how the price:income ratio is always relevant as a reflection of the relative under or overvaluation of an entire market.
        The “yes-buts” that you and f1 come up with about price:income are as comical as somebody saying: “The average height of a male human is 5 feet 9 inches”, and you guys retorting: “Yeah, but it is very important that you realize that some guys are taller than that.”

      • “The average height of a male human is 5 feet 9 inches”, and you guys retorting: “Yeah, but it is very important that you realize that some guys are taller than that.”

        ha ha, so glad you used this analogy vreaa. My mother used to ask me to fetch her a wooden spoon with which to paddle my backside…you’ve just handed me the wooden spoon.
        By stating that price must match avg income is to say that all male human must be 5 feet 9 inches. Yet you acknowledge that this is not true. So to with incomes. Ample evidence in sale data to show that there are plenty of incomes/wealth to support these detached prices.

      • 4SlicesofCheese

        Ample evidence in sale data to show that there are plenty of other peoples money available to be borrowed to support these detached prices.


      • formula1 -> You really simply don’t comprehend the argument; you are showing your ignorance of ratios and distribution.
        Nobody, anywhere is “stating that price must match avg income”.
        Not sure how much effort one wants to put into trying to explain this to you any further.

  18. Seriously, never worth it beyond a couple of sentences. I’ve had a similar discussion with a close relative regarding vacation property.

    I was told that “it’s an investment.”

    Also (scoffing tone), “What do you invest in, mutual funds?”

    My reply, “yup, and bonds, and a few stocks. Liquidity!”

    Their response, “Pffffft.”

    And now their place is a money hole and “for sale” signs are as common as mushrooms.

    Their funeral.

    But… no need to rub it in. Nor to go at them with emails. If they can’t figure it out from one simple conversation… whatever.

  19. I think that when it comes to family and friends, you are best off sharing some resources but offering no advice.

    In 2008, I fervently advised some friends to sell their house and rent. Well, the market recovered and their place zoomed up in value. Luckily, they didn’t take my advice–they stayed put and just sold a few weeks ago for much more than the would have got a few years ago.

    If they had listened to me, I might have lost a very dear friendship.

    Say a few sentences about diversifying and share some web links. But unless they specifically ask you for advice, it’s really none of your business.

    • Yes, there is risk in offering advice.
      There is also risk in almost every other aspect of human relationships.
      Even to have a simple conversation is to be, in one sense of the word, ‘aggressive’, for, when you speak, you are asking the other to remain silent.
      If you fear causing injury with any form of intrusion, your only option is being a hermit.

      • Well, there are some areas in which you owe your friend a bop on the head (they’re drinking too much, not taking care of themselves, being a jerk, etc.), and if you lose the friendship over it, at least you know you did what you know is in the best interest of your friend.

        But although logic and history tell us this bubble is fixing to pop, none of us has a crystal ball. I will tell family and friends my opinion and offer resources if they express interest, but that’s it. I don’t think that’s risk-averse; it’s an acknowledgement that I don’t know everything and a willingness to let my loved ones learn from their own actions, should I happen to be right about the bubble.

      • “Yes, there is risk in offering advice”.

        You started this site as a neutral observer; more from a reporter stance. You’ve now become a full blown blown counsellor complete with blow horn and hardhat with red siren on the top. Perhaps this is a result of prices getting further and further from your predictions (?).
        Just taking stock of your metamorphosis vreaa. Nothing personal intended.

      • formula1 ->
        Yes, you are correct, for the first two years this site attempted to be a pure repository of anecdotes (even though I was already a bear).
        End of 2009 that all changed when I published my ‘predictions’ post and started a bearish commentary.
        If my commentary is any more ‘shrill’ over the past 2+ years, it is not because of my predictions not yet coming to pass, but rather because the speculative mania is that much more extreme, and more obvious, and more dangerous, and deserves even more to be labeled as such.
        The bubble has gotten more extreme: we’re pretty much the same bear.

      • because the speculative mania is that much more extreme, and more obvious, and more dangerous, and deserves even more to be labeled as such

        same old same old. This market has been the same for over a decade now. The only thing that’s changed is the way you perceive it.
        You either buy the supply & demand argument or you don’t vreaa. Is there more land to develop detached homes? Are people moving to Vancouver by the 10s of thousands per year? Neither answer supports your view on where prices are heading.

      • formula1 -> Again we’ll have to agree to disagree.
        The truth will out, give it time.

    • Sounds like theirs was an emotional purchase. Touchy.
      My brother bought and wanted to know pros, cons, worst case scenario. Engineer. But it was 2005 and I was nagging him to buy. In an long range bull market, if they sell they lose nothing, maybe some minor cost. But if they buy at peak, they could lose a lot. I don’t think advising someone to sell harms them in any way if they can buy laterally. Traders put in stops to collect their thoughts all the time with bigger margins than a house.

  20. You have to tailor to the argument to the individual.

    A guy I used to work with was a total chick-magnet playboy. I said “that is so responsible of you to settle down and be a homeowner.” The enthusiasm dropped off his face.

  21. well one thing is sure. it’s either really different or really dumbass. there is no other possibility. bears can point to other markets and claim to be sober, risk-averse and responsible. bulls will go on to become ultimate mavericks or ultimate schmucks.

  22. “reality check | 22 March 2012 at 11:07 am | Reply

    Right out of school and already have a McMansion and a a Mercedes. I’m sorry things just sounds like a made up anecdote.”

    If you go through my anecdote or other previous posts you will learn that I am a mature student who went back to school after starting a family and having worked for a number of years. So, I am different from the penniless 22 year old grad. Also, due to my past work experience and maturity, I am able to negotiate a higher starting salary than someone with a degree and zero experience.

    During my working days I took advantage of my employer’s RRSP match. So did my wife. Each time our work RRSPs hit a certain threshold we would transfer the balance into self directed RRSPs, which I managed aggressively. We are doing pretty well in the RRSP department and too bad there is a dollar limit to how much you can withdraw as a new home buyer. As the spouse of a student with zero income, my wife used to get like $5000 tax refunds since I transferred some tuition credits to her. We did not squander these refunds.

    While I worked we lived a very modest lifestyle and could live just on my salary. We did not have condo fees or property taxes or interest payments. My wife’s salary was more or less for saving. We clip coupons and go to no frills on their $1 days e.t.c.

    All the child tax benefits checks go straight to the kids RESP accounts. With the matches we get from the government the kids college fund is not that shabby. All this happened while we lived in a $950/month 2 bedroom rental.

    So, I am not exactly starting from scratch here in Alberta. I have no problem paying a $40,000 down payment. As for the Mercedes, I would never purchase a luxury car when they can be leased for so little. I can get into an entry level luxury car (C-Class/A4/3Series) for just $500/month. So the lifestyle I am aiming at is not that unrealistic given my income, education, financial savvy, and the cost of Alberta real estate. In fact, such a lifestyle is a norm in a lot of North American cities. It is only that if you live in that poorhouse between Langley and the pacific ocean you will think that it is normal for a household with a $100k income to be suffering. In places like Dallas and Atlanta such incomes can get you into exclusive gated communities right by a golf course. Even with Alberta prices I still feel very shortchanged. Maybe after a year or two working in AB it will not be such a bad idea to go for a NAFTA TN visa.

    • Iamouttahere,

      Better buy a big car and big house for your life in Alberta – you’re going to be spending a lot of time in each.

      • IamOuttaHere

        For the first time I agree with you.

        Yes, I will be spending lots of time in that home and enjoy it to bits since I do not have to work a second job to pay a mortgage. Since my basement will not be rented out I can surely do a lot of stuff in that man cave. Homedepot here I come with those weekend projects.

        As for the car, who would complain about spending time in a luxury car with nifty creature comforts. Better than spending time in a civic or corolla – cars very popular in Vancity since folks have blown 2 thirds of their paychecks on mortgages payments.

    • Basement Suite

      ” It is only that if you live in that poorhouse between Langley and the pacific ocean you will think that it is normal for a household with a $100k income to be suffering. In places like Dallas and Atlanta such incomes can get you into exclusive gated communities right by a golf course.”

      I don’t golf anymore, but damn, maybe you’re on to something.

  23. This story reminds me of an ex-colleague in the late 90s. He owned at least half a dozen revenue properties, all SFHs, in addition to his principal house. His pay then was somewhere between 70k-80k. It was extremely harrowing working in the same team, as he dashed to RTO to lodge complaints against his tenants, banks to renew his various mortgages, his rental properties to fix stuff, courts to fight to keep the deposits or to evict tenants and other never-ending personal chores. Every so often, he asked for loans from lunch money to a couple hundred to a few thousand.

  24. UBC video report on their study and options

    • “When I moved to Vancouver 36 years ago, I blanched at the cost of housing. Buying a home inside the city was impossible”.

      “And then as now, Vancouver’s real estate was unaffordable. Nothing in that regard has changed.

      What has changed are expectations. There are those who feel that the lack of cheap housing in Vancouver is an abomination. They feel that the convenience of a short commute or the proximity to a really good Ethiopian restaurant should be the natural order of things”.

      “There’s nothing that this task force can do to make Vancouver as inexpensive as Toronto or Edmonton. But I do believe it will mean changes in the processing of building permits, and in the wording of zoning bylaws that ultimately will lead to increased competition and more affordable housing choices.”

      Read more: http://www.vancouversun.com/business/McMartin+Affordable+housing+Vancouver+bother/6339607/story.html#ixzz1ptivE3DY

  25. “IAmouttaHere” – That’s okay – just chalk up another ex-Vancouverite in Calgary. This trend happened in the early 90’s and it’s happening again. Most of the negative press of comments are probably people just jealous because you will actually earn a decent salary for your years education and be able to have a nice house, unlike in Vancouver. Although I will have to disagree with you…, way more nicer cars in Vancouver – too many people using easy credit. And as far as not visiting Nov – May, sorry but this winter has been mostly sunny, many days between 7-10 degrees.

    To the story above, it still seems that there should have been or will be a bubble but Vancouver continues to steam along. 33′ houses/lots on the west side are creeping towards 2 million whereas only a year or two ago they were just over 1 million. Go back 7-8 years and those 33′ homes were around 400-500K. Is part of the RE:craze more of a generational entitlement period?

    • Another Calgary transplant here.

      From the lower mainland to Calgary, I’d chose the weather in Calgary. Even leaving aside this winter, which has been exceptionally dry, sunny and warm. And this comes on the heels of an exceptionally warm summer (swimming in the river every day after work from August to mid-Septemeber) and fall (the one time that fall colours out west outdid those in Quebec). No flowers out (though first daffodil shoots poking up), though.

      Which leaves aside the main point: having left BC in 2009, my salary is now just about double, but I work 2/3 the hours. Which leaves more time for climbing, skiing, biking, swimming and watching the trainwreck unfold. Contrary to commonly received wisdom, I also find that folks are pretty down to earth and far less wound up about outward trappings of material success. I miss the flowers and granite (limestone is scary stuff, believe), but not much else. Certainly not the “West Boast” attitude.

      Cheap money is cheap everywhere, though, and house prices here are still pretty harsh. I hesitate to spend too much time looking at Vancouver prices though, as they tend to distort reality and good sense. I struggle with the question of whether 500K is the new normal for a nicely restored old house walkable to downtown — it would be an easier question where the house is 2 million, and you make half as much, believe.

  26. Thank you, everyone, for your mostly helpful comments. A couple of points: the 5 properties discussed are mostly in the Fraser Valley, with the non-revenue one being farther out. (If you want to know where most properties are, you can probably figure it out by perusing my source, the FVREB Dec 2011 stats online).

    Good thought about finding the one key point, but I have been unable to find one so have tried the scattershot approach: put all points of risk on the table and hope they seize on the one most important to themselves. Hasn’t worked.

    I thought it was obvious that I am worried about my family members because I am certain that they have less equity than possible price drops would cover. (Say, average 20-30% equity in each property, e.g. 100% equity in the oldest cheapest property and 20% in the newest most expensive property which was an order of magnitude more costly). I am in agreement with VREAA that future price drops could easily exceed 40%. From reading many sources, and calculating P:R and P:I for my own neighbourhood, the numbers support this as well.

    I’m in Walnut Grove, Langley. Using December 2011 Langley average detached price of $565,154 and WG’s average household income of $88,000, that is a P:I of 6.4. (to use the February 2012 numbers or to use a WG average price (not reported by the FVREB), this P:I would be even worse) For the P:R, we rent for $1800/mo or $21,600 per year. This house would sell for around $500,000 or more, giving a P:R of 23+. Both of these suggest a drop of 40-50%.

    Good try, “IamOuttaHere”. Think you have covered all the bases. I too have experienced life outside Vancouver (lived in Dallas, LA, UK, Australia and Malta, for 9 years total; also have traveled extensively to most continents and visited many truly world-class cities). Vancouver is most definitely not the BPOE, no matter how much RE groupies wish it. Maybe one day when Vancouver RE prices have normalized, you will be able to pack up and come home, paying cash for a reasonably-priced home. Best of luck to you.

    We would consider leaving again but won’t, as we have kids now and this is where the (aging) grandparents and all other relatives are.

    Part of the cult of RE in boomers and older is that they truly have seen it go up greatly in their lifetimes (in large part due to demographics I think). This is especially true for my parents, as at 75 they are 10 years older than the oldest boomers and having bought significant RE in their 20s before there was a lot of competition, they were well positioned to take profits in their mid-30s to mid-50s when the boomer demand crested. But, they think they were merely brilliant investors 🙂

    Oh and F1, before you continue criticizing others for “atrocious” spelling, you need to buy a dictionary and look up how “busy body” is actually spelled. Your ignorance is glaringly obvious when you make juvenile errors such as this.

    • Langley has a very bright future. Close enough to the city, space, lots of young families, new amenities going in daily, affordable, etc.
      Obviously you should not be dispensing advice.

    • I think they’ve noticed for a while now, but the wheels turning the political policy sausagemaker move slow and with significant force. Don’t touch!

  27. Pingback: Unasked for advice…. | Red Cedar

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