“I’m a mortgage broker and I just don’t get it. When will the madness end? Recently a girl was telling me about her purchase of a flip, for $800K, plans to put $400K into it, and sell it for $1.6M. When I asked her what contingency plans she had if the market went sour she looked at me like I was speaking a foreign language.”

“It’s unfortunate but everywhere I look I still see and hear of people looking for homes to renovate and flip. I’m a mortgage broker and I’ve spoken to other realtors, mortgage brokers and so called “real estate investors” who all still believe that now is a great time to buy a teardown and rebuild OR renovate.
I just don’t get it. When will the madness end? Listings are up but the market just isn’t getting the message.
I was at a bar recently (blarney stone) where a girl was telling me about her recent purchase of a flip. She purchased for $800,000, plans to put $400,000 into it and flip it for a cool $1.6 million. When I asked her what contingency plans she had if the market went sour she looked at me like I was speaking a foreign language.”

Anonymous at whispersfromtheedgeoftherainforest 12 Apr 2012
[hat-tip Makaya]

48 responses to ““I’m a mortgage broker and I just don’t get it. When will the madness end? Recently a girl was telling me about her purchase of a flip, for $800K, plans to put $400K into it, and sell it for $1.6M. When I asked her what contingency plans she had if the market went sour she looked at me like I was speaking a foreign language.”

  1. It ends, usually with someone barfing or starting a fight. It is Vancouver after all.

  2. Curious if you also asked her who financed this?

  3. Ralph Cramdown

    At the beginning of the cycle, people who talk about such schemes are considered nuts. At the end of the cycle, same deal. Different people, though, and a different kind of nuts.

  4. Found poem, made easier, for my untrained eye, by no wanting of reversing
    http://vancouvercondo.info/2012/04/friday-free-for-all-200.html/page-1#comment-151334

  5. My brother in law just bought a brand-new single family home in Fuchu, Tokyo where is 30km away from downtown Shibuya. And yes, it is a DETACHED house. Guess how much it costed him? Less than $400,000CAD. Compared to super overvalued housing in Vancouver, a detached and brandnew house built with concrete and bricks for 400k in Tokyo, one of the top three most populated financial and ecomoical city in the world makes sense. Whoever is driving the market up to this point or helping in anyway so most young people can’t afford a proper home should suffer big time financially when the market explodes.

    • Vancouver is the new Tokyo?
      Japan is a closed society and does not permit immigration – the major source of our house appreciation.
      Besides, 30km from Vancouver gets you to Cloverdale. You can buy a brand new 2700sq/ft home with coach house for around 500k. I doubt your Tokyo example is anywhere close to this size.

      • F1, I have to call you out yet again on your immigration argument. I’ve provided official statistics showing, a). That growth rates in immigration have been falling for decades, and b). That Vancouver’s population has grown at less than 1% annually over the past 10 years. Where was the massive appreciation in earlier decades in which immigration and population growth rates were higher? Please don’t answer with “supersaturation”…

      • 4SlicesofCheese

        Skytrain is the new bullettrain.
        Fuchu is the new Cloverdale.

      • And Vancouver a new world financial capital… what a joke! F1, you’re embarrassing yourself.

      • Tokyo has a hell of a lot more sprawl than the Vancouver area. I’m sure Fuchu is a lot more urban than Cloverdale.

      • I will go with “Capital of Financial follies” for ten points.

      • “Name a bubbly oil tanker port just north of the Skagit tulip fields”

      • Immigration policy was exactly the same back when just the palace grounds in Toyko were worth all of Manhattan (or whatever insanity measure was going around at the time).

        ZIRP sunk Japan.

      • Exxon Valdez?

        Speaking of which, that notorious ship has just been bought by a company in India and is slated to be broken up into the usual bits for recycling.
        http://www.goskagit.com/news/local_news/article_6f3bb561-9caf-5226-b231-e57890b228fd.html

        If you are sitting around with a little time to kill, you have got to check out this video produced by Al Jazeera on the ship-breaking business. Totally amazing what they are doing there and the clips are eye-opening. It is part of a series called “Working Man’s Death” that looks at hard labour conditions in the Third World.

        Working Man’s Death – Brothers by Al Jazeera — 22 minutes
        http://www.aljazeera.com/programmes/workingmansdeath/2012/01/201211013514810663.html

        Actually, the whole series is brilliant.

      • Vancouver is definiely NOT the new Tokyo. Japanese make/design many of world’s finest goods, cars, electronics… I can’t really think what people in Vancouver make/ design that is world famous. 30km from Vancouver also gets you to Coquitlam and Port Moody, where a 40 year-old plywood built dump is 700k. That brand new detached house in Tokyo consists of 5 bedrooms, 1 kitchen, 1 living room, small yard enough for a bbq grill and sun tanning chair, and a front spot for parking up to 3 cars (maybe 3 Fit’s or 2 camry’s). I happened to see a few of those houses in Cloverdale, where is surrounded by miles and miles of farm lands.

      • Sorry F1, we deal with hard facts here, not deluded homeowner anecdotes of invading Chinese. Show me the Vancouver immigration numbers. Oh, we already have them, they suck.

        Vancouver is a tiny provincial backwater town, by any international metric. 30km in Tokyo (or any actual world-class city) is spitting distance, especially with the transit options available.

      • # of mainland Chinese immigrants has doubled since the late 90’s and now stands at about 9K/year. Reached as high as 13K in 2005.
        You can continue with the immigrant denials if you wish, but all the mainland Chinese coming to Vancouver and buying real estate is not insignificant.
        Also noted, US immigration is up nearly 2x from 2004-2010 compared to 1997-2003
        See “immigrant landings” chart
        http://www.metrovancouver.org/about/statistics/Pages/KeyFacts.aspx

    • Brick houses don’t blow down. Good choice.

      • Ralph Cramdown

        But stick built is generally a better choice in earthquake zones (said the big bad wolf, talking his book…)

      • I was rather impressed with the poor man’s earthquake proof in Central America. 8 steel rods through every column of concrete block and roofs made of corrugated glass fiber. Light weight, light transmissive and after the earthquake you just re-sparge the outside walls to hide the cracks.

      • Straw huts have appeal in earthquake zones. Not good for highrise construction but they let the air in (you really notice the nice change if you have stinky feet)

    • Pretty easy commute as far as Tokyo goes. I remember having to take several trains to get out to Hachioji (going through Fuchu) for work some mornings which took over well over an hour. Can’t beat Japan’s trains for reliable and relatively stress-free commuting.

  6. It would certainly end if real interest rates ceased to be negative. These schemes have been massively subsidized. The interest paid on one million dollars is a little under 30k per year. The subsidy from negative real rates has been as high as 20k per year or 2%, and if the cost of living is used instead of the CPI the subsidy has dwarfed any amount paid for several years.

    You can’t blame people for speculating when your economic system subsidizes it and burns the fuck out of anyone not doing it. We faced a crisis caused by moral hazard and too much debt, and we addressed it by adding more moral hazard and more debt. Why stop now?

    Next up could be -5% on savings accounts and 150% mortgage loans. That would undoubtedly stave off recession for a few more years. It’s very hard to care anymore about what they do.

  7. buy for $800k, sell for $1,600k… anonymous whispers…

  8. not sure where you get your info from El Ninja. We are steady at approx 40K immigrants per year and mostly to lower mainland.
    BC Stats show:
    http://www.bcstats.gov.bc.ca/StatisticsBySubject/Demography/Mobility.aspx

    2001 – 38,483
    2002 – 34,058
    2003 – 35,233
    2004 – 37,028
    2005 – 44,771
    2006 – 42,084
    2007 – 38,963
    2008 – 43,994
    2009 – 41,441
    2010 – 44,176

    so where have we lost immigrants? Please show your stats again with your source.
    Also, I don’t consider adding 100,000 additional Vancouverites every 15 years insignificant (1% annual incrase). This is the growth rate for this city.

    • I don’t consider adding 100,000 additional Vancouverites every 15 years insignificant (1% annual incrase)

      Tokyo adds a Vancouver every 10 years

      http://www.city-data.com/world-cities/Tokyo.html

      Metropolitan Area
      Population: 28,025,000
      Description: comprised of the four prefectures of the Kanto region: Tokyo, Kanagawa, Saitama, and Chiba
      World population rank1: 1
      Percentage of national population2: 22.2%
      Average yearly growth rate: 0.8%

      • ah yes, so Vancouver actually is the new Tokyo. thanks for clearing that up

      • btw,
        2011 saw Tokyo condos down 7.2% and detached up 2.4%.
        You’re looking at Vancouver’s 2012 trend

      • So Tokyo @ 28 million people hasn’t hit its saturation point but Vancouver at 2 millions people did?? Also a house in Cloverdale @ $500K Canadian is 25% higher than the $400K Japan house example with poor construction quality and shorter useful life. So I think price is at best on an even footing and probably lower/better value going to the Japan house. Also, what’s your transportation option in Cloverdale? How about culture and all those other city life factors in Cloverdale?

    • You forgot 2011: 34,787

      Peter Griffin: …yeah…

    • My source F1? Statistics Canada.

      btw, the source you provided shows net international immigration to Vancouver of 27,845 in 2010/11. Same as the late 90s.

      Note also that the percentage of immigrants as a percentage of Vancouver’s population was lower in 2006 than in 2001:

      http://www12.statcan.ca/census-recensement/2006/as-sa/97-557/table/t3-eng.cfm

      • “percentage of immigrants as a percentage of Vancouver’s population was lower in 2006 than in 2001”

        I think the 2011 census will show an uptick again. This is “percentage of recent immigrants”, the 2001 census tracked immigration from 1996 to mid-2001, while the 2006 census tracked immigration from 2001 to mid-2006. The 2006 to mid-2011 will be higher than reported in the 2006 census, but not by a whole lot.

        It’s good to distinguish between “immigrants” and “landed immigrants” or “recent immigrants”. An immigrant is only an immigrant for a time instant, then becomes something else: she or he does not remain an immigrant after immigrating.

      • Agreed, Jesse. Although the same table shows that “recent” immigrants as a percentage of total population was also higher in 2006 than in 2001.

      • the #’s I gave you above from BC stats are net migration.
        2010 is 44,176 – not sure how you can’t see this.
        Stats show these numbers consistently between 34 and 44K for many years now.
        So your statement as quoted below is completely false. In fact, BC international immigration was a mere 12K for each of 1985 and 1986 – then since 1991 we’ve been on a tear.

        “That growth rates in immigration have been falling for decades”

    • You crack me up, F1. 100,000 new Vancouverites per year? Try 6,000.

      http://vancouver.ca/commsvcs/planning/stats/poptrends/index.htm

      • learning disability El Ninja?

        This is my quote:
        “Also, I don’t consider adding 100,000 additional Vancouverites every 15 years insignificant (1% annual incrase). This is the growth rate for this city”

      • Personal insults don’t help your case, F1.

        The number of immigrants arriving to BC each year is unchanged relative to 1993. Some “tear”.

        The massive runup in RE prices is due to a speculative mania fueled by debt, misinformation, and greed.

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