“I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”

“Some of you might remember my photo essay from a few weeks ago, re: the non-stop construction insanity in my South Surrey neighbourhood. Well, one of those 200-plus new homes just came on the market. 3000 sq ft and a decent sized yard (one of the few new homes around here that does). But I tells ya, it sure *seemed* like it was slapped together in a month. If it’s like everything else they’re puking up down here, it’ll be looking pretty rough within a year. And don’t get me started on the landscaping. Does “dirt” count as landscaping?

Anywho, the place is just seven or eight doors down from our $1600 rental on Zero Ave. In other words, we both face the US. Thing is, we face a forest. They face low-rent apartments (including the obligatory crappy looking exteriors, broken cars, etc, etc) in a lousy neighbourhood of Blaine. A neighbourhood that won’t be upgraded in any of our lifetimes. They’re also close enough to the Pacific Highway border crossing that they’ll awake to the sound of long-haul semis shuffling around night after night after night.

I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”

Gord, at VREAA, 15 Apr 2012 5:25pm

For backstory, be sure to read:
‘Gord Goble – South Surrey Building Blitzkrieg; Thoughts and Images’
We share Gord’s fascination with the market.
– vreaa

47 responses to ““I figured they’d be asking maybe $800,000 for what’ll likely be a $500,000 house in a post-bubble world. Turns out I was $300,000 under. That’s right: $1.1 million. Mind-blowing. Just mind-blowing.”

  1. I am unfamiliar with Greater Vancouver Area geography. These houses really sit across the street from Blaine, WA?

  2. Ralph Cramdown

    Who’s got the better location for digging a tunnel?

  3. http://www.zillow.com/homedetails/744-A-St-Blaine-WA-98230/2120313486_zpid/

    The answer to VREAA’s question is $119K – well actually that is what they are hoping to get through the foreclosure

  4. That was the home across the street, not a comparable. This is the closest comparable although better location, bigger lot, bigger home and undoubtedly much better built

    http://www.zillow.com/homedetails/287-Boblett-St-Blaine-WA-98230/23662731_zpid/

    Asking $420K but it has been listed for over 2 years

  5. isn’t this Summerfield development? I think these homes are still selling new at less than 800K.
    Here is one. Sure looks like it – but this Summerfield example is 34oosqft
    http://www.realtylink.org/prop_search/Detail.cfm?areatitle=&ARPK=&ComID=&agentid=&MLS=F1204214&rowc=54&rowp=51&BCD=FV&imdp=115&RSPP=5&AIDL=899&SRTB=P_Price&ERTA=False&MNAGE=0&MXAGE=1&MNBT=0&MNBD=0&PTYTID=5&MNPRC=200000&MXPRC=900000&SCTP=RS

    • OK, I figured it out. The lot size is 3 times the size of comparable lots in the development.

      • That makes some more sense, then. Not so “insane” as first made out.

      • F1, this property is not three times the size of comparables, so don’t go around saying it is. Honestly, you *must* be a realtor.

        It’s *nearly* triple the size of the smallish three-bedroom row houses that make up part of this development. They have virtually NO yard. But these are not comparables. When looking at other four- and five-bedroom *non* row houses, it’s approximately double the size. In some cases, not even double.

        Moreover, this cannot be considered a “big” yard. The lot holds the house itself and a medium-sized front and back yard. Virtually no side yards. The front yard is mostly dirt so far and a small driveway, and that’s all it will ever be. The back yard lacks any sort of privacy – surrounded as it is by the numerous “sardine” houses that tower directly behind it. Probably big enough for a badminton court and not much else.

        Funny, the house I owned in the Sunshine Hills area of North Delta, the one I lived in for a dozen years before selling in 2010, was also on an 8500-square-foot lot. Yet it seemed much larger than this one. *Much* larger. With tons more privacy. And a view. Here, you have a view of your neighbour’s kitchens and bedrooms out the back, and a glorious view of low-rent, multi-family Blaine housing out the front.

        Yep, really worth 1.1 million. Gosh golly, sign me up. There’s only 66 other houses for sale in our tiny rectangle of BPOE-istic wonderfullness.

      • Maybe we should all come to your place to watch the Lower Mainland R/E bubble market implode, Gord. Just put on the Joe and we’ll be by for a cuppa. If you have popcorn that would make the day extra special.

        Or I could just bring beer and we can get loaded and have a good laugh!

      • “this property is not three times the size of comparables, so don’t go around saying it is”.

        the lot size is 10,151 sq/ft.
        This is 2.5 times the average Vancouver lot of 4026 sqft.
        The lot size is the reason it’s priced at 1.1M rather than 775K

      • So it’s 2.5 times and not 3 times? And 2.5 times the “average Vancouver” lot size? Come on, that’s weak, even when viewed through my conscientious objective.

  6. BTW, if developer price is 800K for a home in this project there’s absolutely zero chance it’ll ever be 500K.

    • “Absolutely zero”.
      Noted.

      • vreaa,
        you’ve been telling us that buyers are putting down minimum or no downpayment. Buying an 800K home with the 5% you claim means there’s 40K equity in a house at this price. How can seller take less than they own? Remember, we are full recourse mortgage.
        Your failure to process this is duly noted.

      • @f1. so your logic -> rising prices can be guaranteed by >100% LTVs. party!

      • f1 -> So, your theory is that when prices fall, sellers won’t be able to sell because they’re underwater, therefore all the sellers will simply take their properties off the market; refuse to budge on price?
        This bizarre theory is “duly noted”.

        You may be surprised to hear that, in market troughs, properties do (and will) sell for even less than replacement value (less than prevailing lot value and construction costs). Makes no sense, but that’s what happens.

      • vreaa,
        please show me an example of a Vancouver sale where the seller has accepted less on sale than the total equity. “underwater” mortgages are paper losses in this province since all mortgages are recourse. I’ve yet to hear of anyone turning a huge paper loss into absolute debt by selling…certainly not at a 300K loss. Your assertion is simply ridiculous – or wishful thinking

      • f1 -> Explain what you mean by “where the seller has accepted less on sale than the total equity.”

      • 4SlicesofCheese

        “a Vancouver sale where the seller has accepted less on sale than the total equity. “underwater” mortgages are paper losses in this province since all mortgages are recourse.”

        I do not understand what you are saying either, but if you are saying no one has ever lost money on RE in Vancouver, you are batsh!t crazy.

      • F1 thinks Vancouver’s 1% population growth is behind the recent run-up in real estate prices. As compared to 3-5% pop growth in such real estate strongholds as Phoenix and Vegas…

    • Every house in my hood in the U.S. sells for below replacement value. And we totally missed the boom and bust.

    • Well I can almost guess your age now, Formula, because you obviously missed the action in the early Eighties when plenty of Vancouver homes were foreclosed and subsequently dumped cheap by the banks.

      Some sold below development cost. Many, many more sold below price paid. Keep in mind that equity is only a relative (even fictional) measure of market strength and that it can easily (and usually does) evaporate in a housing downturn.

      As is generally the case, real money is lost.

      That is the portion of true wealth that exists within the down payment price. Debt lingers though and remains a constant with little regard to prior valuations. Even that debt that suggests asset valuation growth (and thus future or existing wealth), is merely manufactured in our minds and is little more than a creation in our heads of (false) future expectations of wealth.

      It can quickly disappear as we regularly see.

      The shift in wealth (from weak hands to strong) that is experienced by those unfamiliar with how money is made or lost tends to all happen in that narrow band between the price demanded and the debt portion actually offered. That is to say that in usual situations, what is always lost is the *real* contribution of the buyer. Whether this is 5%, 10% or 15%, is not so important except to note that it is what will be gone first in a downdraft of prices.

      Why does that matter?

      It matters because the price paid or invested by a new owner is representative of real money. Someone worked or engaged in a real enterprise to earn the down payment amount. That is real money and it is thus the real wealth that is going to be lost.

      The rest is a paper fiction and is of no consequence when it vanishes except where it encumbers the owner of the (created) debt to the lender. Interest will be paid on that portion for decades in some cases and so its marginal utility is its ability to create future streams of income for lenders who offered backing even against faulty ideas of debt obligations of the day.

      That is to say that during a bubble, loans are readily given even on the basis of wildly unreasonable prices because those debts created will generate a windfall of interest income for lenders even after the valuations return to normal (no, I am not supposed to tell you that).

      In short, a house price correction is intended to take your down payment (real wealth) and pass it along to someone better able to manage and invest that same money which represents true wealth. Buyers of overpriced assets rarely realize they are mere fodder for this machine.

      That’s just the way it is.

  7. just do a comp on credit conditions n and s of the border. it explains EVERYTHING.

  8. interesting discussion of us housing entrails from a couple pros

  9. Vesta, Gord: This is right up your alley.

    “This spring, The Globe and Mail’s Personal Finance site is launching a special Home Buying series exploring the financial side of what, for many Canadians, is the biggest purchase they will ever make. To add some depth to our coverage, we’d like our readers to give us a hand. We’re looking for several house hunters to help us chronicle what it’s really like to be in the trenches of major urban real estate markets, where bidding wars push prices high above asking and homes are listed and sold within days.”

    http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/tales-from-the-trenches-of-the-sizzling-real-estate-market/article2403526/

    Via “curious lurker” at VCI.

    • I’d do this in a heartbeat just for the fun of it, but how can I convince anyone I’m a “house hunter”? I’m not that big a liar. If I was, I’d be a realtor.

      • They did not precisely define “house hunter”. Perhaps they are willing to interpret hunting liberally, e.g., hunting for rental properties, hunting for absurd examples of speculative excess, hunting for blog-fodder, etc.

  10. Thanks, Jeff, and thanks, Gord, and thanks for all your enlightening contributions to this site.

    Ralph Cramdown, I love the idea of a profitable tunnel!

    After completely losing my cool on this site over the weekend (with the information that a lot of houses in Trafalgar are being flipped regularly and are also often vacant, when I know of so many families who might like to live there) — with what seemed to me to be the last straw after many things I thought were the last straw, I finally decided that I would take some political action (not just involving letters to the gov’t) instead of battling with trolls. I’ll let you all know the details if I can get something going and in case you’d want to join me.

    Thanks again to the VREAA host for bringing us together here. Anyone interested in learning more about and doing something about Vancouver’s housing crisis would do well to check this blog for helpful information.

  11. Naah, no fake blood (or fur). But yes, large group demonstrations/petition drives/civil disobedience is what I’m thinking. I guess mentioning Gandhi was a little gradiose, but I was trying to suggest calmness, high-mindedness, restraint, etc.

  12. I see the old ranchers in that area are being gobbled up by developers who then will put in townhomes or single families with tiny yards. Compared to Vancouver, some of these homes in Morgan Heights, Elgin must seem very enticing in terms of price and square footage. White Rock has seem to become a ‘hot area’, perhaps people who are cashing out from Vancouver but also many people qualifying for mortgages they have no business having.

  13. i just feel sorry for the angry people. getting more and more desperate.

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