Monthly Archives: May 2012

24Hrs – “We expect that the Vancouver-area market will remain under pressure in the period ahead.”

– from 24Hrs, 30 May 2012
[Hat-tip to  ‘scamcouver‘ for sending the link via e-mail]

There are differences of opinion out there as to whether prices are rising or falling or chopping around looking for direction; this is made more complicated by the fact that people are looking at various different measures of housing prices: averages (mean and median), REBGV benchmarks, Teranet (single home sale/resale comparisons).
– vreaa

Premature Calls Of “Bottom” – “Awesome deal. Bears might just be missing yet another correction.”

This page is now an archive for premature ‘bottom calls’:

Premature Calls Of “Bottom”

“Awesome deal. Bears might just be missing yet another correction.”
eyesthebye, 29 May 2012

“Vancouver’s housing sector may have hit its bottom with an improvement in home sales seen in October”
Marc Pinsonneault, National Bank, Wall Street Journal, 21 Nov 2012

“The Canadian housing market appears to have achieved “a soft landing”.
– from Scotiabank report, Canadian Press, 11 Dec 2012

“With others sectors of our economy picking up a little steam, growth should actually gain momentum this year rather than crashing as it did the U.S.”
– from ‘Canadian housing market finds its feet’, Jay Bryan, The Montreal Gazette, 15 Mar 2013

More to follow, you can be sure.

6467 Elgin St, Vancouver [image: Google Earth]
Original Price $790,000
Sale Price $680,000
Just to provide some context of what’s selling above asking… and what’s not”

jesse at RETalks 29 May 2012 12:57pm

“Awesome deal. Standard size lot, close to (but not bordering) 49th ave.
Again, buy the home not the stats – there are deals out there.
Bears might just be missing yet another correction.”

eyesthebye at RETalks 29 May 2012 7:15am

To those who expect ongoing relentless strength in the Vancouver market, homes will appear cheap, then cheaper, then cheaper still, as the mania unwinds.
‘eyesthebye’ is a prolific poster at RE Talks, and a very vocal bull, who has widely publicized having bought a SFH in the Knight Street area of East Vancouver for, we believe, $600+K in early 2009. ‘eyes’ is on record as having claimed that (1) SFH prices cannot possibly drop more than 15% in Vancouver, and that (2) SFHs in Vancouver will never, ever, be available for less than $500K at any point in future.
Needless to say we disagree on both counts.
Expect to see bottom calls from bulls all the way down.
As a commenter on these pages suggested recently, it would be worthwhile archiving these hopeful predictions in one place, and we’ll use this post for that purpose. Use the category and sidebar links for convenient access. Please forward all ‘Premature Calls Of “Bottom”‘ you may spot, and we’ll pop them up above, for the record.
– vreaa

Christian Science Monitor – ‘Canadians Still Think Real Estate Has Nowhere To Go But Up’ – “I would say prices are hyperinflated. But for the price of housing to go down in Toronto, that I can’t see.”

Actor and broadcaster Jeff Douglas says he knows there are “more responsible” things to do than take on a mortgage he will likely have to pay until he turns 70.
But that didn’t stop him and his wife, interior painting contractor Ana Maria Diez, from charging headlong into the battleground that has become the Canadian real estate market.
Mr. Douglas and Ms. Diez fell in love with and purchased a 1,300-square-foot duplex in a middle-class west Toronto neighborhood last month for $632,000. Like an increasing number of Canadian buyers, they sealed the deal after duking it out with several other couples who also wanted the house. They placed no conditions on their contract and finally paid 112 percent of the original list price of $555,000.
“It was one of the last houses I think we’d have a shot at because the price of houses in Toronto goes up every week so it was definitely a now or never situation,” says Douglas. “At $625,000 ($632,000 inUS dollars) we feel like we got a bargain.”

Douglas and Diez may feel lucky. But house purchases like theirs are increasingly fueling concerns that, like their American neighbors a few years ago, Canadians are spending themselves into financial disaster.
“What we are seeing is the irrational exuberance that was present in the US,” says David Madani, a former Bank of Canada analyst now with the consultancy Capital Economics. “It has all the symptoms of a disaster waiting to happen.” …
Although buyers seems convinced that real estate prices can only go up, Mr. Madani, along with the International Monetary Fund, the Economist magazine, and various independent and bank economists, warns they are already overvalued by as much as 25 percent.

“If credit tightens tomorrow, the game is over,” adds Ben Rabidoux, an analyst with the US real estate market research firm M Hanson Advisors and the author of the website The Economist Analyst. “I think we will see a decade of stagnant returns and a stagnant economy.”

Still, Toronto real estate agent Melanie Piche says she expects real estate prices to continue rising.
“People see their friends, how much money they have made in real estate,” she said. “And there aren’t a lot of safe places to put your money right now. Where else can you make 10 percent?”
Jeff Douglas agrees, and said he thinks of his purchase as an investment, similar to buying into the stock market.
“I would say prices are hyperinflated. But for the price of housing to go down in Toronto, that I can’t see,” he said. “Simple supply and demand dictate that as long as the city continues to grow, there will be a demand for housing and that will keep prices up.”

– from ‘Canadians Still Think Real Estate Has Nowhere To Go But Up’, The Christian Science Monitor, 29 May 2012

“One of the commenters for a G & M article today accused housing bears of being “unpatriotic”. Because a housing correction is bad for the economy, therefore to hope for a correction is anti-Canadian.”
crankycorvid at VREAA 30 May 2012 7:59pm

Hey!.. who do these guys think they are at the Christian Science Monitor (and the IMF, and The Economist, etc, etc) dissing us Canadians for patriotically supporting our RE bubble in the face of all common sense?
Almost makes one want to drop interest rates further, or go on a rant about health care & immigration & BPOE, or go out and buy a six-pack of condos, just to give the market a boost and show them they’re wrong.
– vreaa

[PS: “Hope” doesn’t come into whether we have a “correction” or not.
Once a speculative mania runs rampant, the collapse is already built in, regardless of what various participants desire.

“I would love to buy in Vancouver even at a 15% discount. I have waited for over 20 years for Vancouver to become affordable and I have given up. How many people do you think are there who are waiting for their chance to buy in Vancouver.”

“I would love to buy in Vancouver even at a 15% discount. I have waited for over 20 years for Vancouver to become affordable and I have given up.
A lot of my work is in Vancouver. Only a few people I work with are NOT looking to buy. They hate their commute, so want to move closer. They want children, so want to buy secure and adequate housing. They want to build a future, and so despair of handing their money to the landlord. Or they just want Vancouver real estate for whatever reason. All of them are keeping their powder dry for any chance to get in. Then there are immigrants, always more.
So riddle me this, how many people do you think are there who are waiting for their chance to buy in Vancouver. 20? 500? 200,000?
Don’t get me wrong. I could and would buy there at half off. I just do not expect that to happen. I can’t speak for Toronto.”

PassingAlong, comment at the Globe and Mail, 10 May 2012 11:41am

This logic will prove to be incorrect.
Yes, there are people on the sidelines who would like to own, and a relatively small number will buy in patches all the way down.
But, when prices start falling in earnest, the vast majority will not snap up homes at 10%-off or 15%-off or 20%-off…
The market will be falling from extremely overextended levels, 2 to 3 times fundamental values, and, with falling prices, prospective buyers will lose their appetite to overextend to the max of their affordability levels.
Even some who think they are waiting to snap up 15% off ‘bargains’, will end up sitting on their hands.
The vast majority of market participants have a great deal of trouble buying assets that are falling in value.
– vreaa

Froogle Scott – “By systematically promoting only one side of the opinion and emotion, Vancouver’s MSM is participating in the manipulation of the citizenry.”

“Over the past few weeks I’ve had some interaction with two couples, both of whom are currently renting, and are contemplating house purchases. I’ve outlined the bear/bubble case for one couple, and hinted to the other couple, in more muted terms, that they could be buying at or near the peak. Everyone has been polite, but you can feel how uptight it makes people to hear these opinions. Including other people present at these conversations. It’s as if you’re the dinner party guest pushing your personal religious, political, or social beliefs onto others. It obviously makes people uncomfortable.
That’s the problem with the unbalanced and unethical MSM coverage of real estate in Vancouver. It conditions the vast majority of people to believe exactly what the vested interests want them to believe. And it makes people uncomfortable with legitimate and healthy debate. It’s all opinion, it’s all emotion, but by systematically promoting only one side of the opinion and emotion, Vancouver’s MSM is participating in the manipulation of the citizenry.”

Froogle Scott, at VREAA, 27 May 2012 12:31pm

Those of you who don’t already know Froogle’s epic Vancouver RE story are encouraged to check out ‘The Froogle Scott Chronicles: Mortgaging Our Souls In Paradise’.

“Forget The Eights, Let’s Just Sell The Place.”

1706 West 59th Street, Vancouver [MLS V928779]
2344sqft SFH, 50×110 lot, built 1941
Listed 30 Jan 2012: Ask price $2,180,000
Price reduction 13 Mar 2012: $1,888,000
Price reduction 4 May 2012: $1,680,000
Price increase
[huh? -ed.] 28 May 2012: $1,790,000

Ah, yes, those crafty head-fake price rises into a weakening market, designed to befuddle buyers and rekindle price war panic like in the good old days of 2003-2011.
There are over 1000 SFH’s for sale on the West-side, and more arriving each day.
Has Elvis left the building?
– vreaa

“What’s the Difference Between A Shed And A ‘Laneway House’?” [Drum-roll] “About $268,000!” [Cymbal]

“Alexis Lum is building a laneway house in his parents’ backyard for three reasons: It’s more affordable than a two-bedroom apartment; he can rent it out if he decides not to live there; and he can have privacy and independence from his parents, while being close enough for regular family dinners.”
“I do love mama’s cooking,” he said, adding that he’s sharing the investment with his brother, Antoine, 31. Lum, 28, is a French secondary school teacher at Southpointe Academy in Tsawwassen.
Lum’s situation is pretty typical: laneway houses have been allowed in Vancouver since 2009, and usually they are built as a way for parents to help their adult children get into the pricey Vancouver housing market.
Lum grew up in the Dunbar house behind which he’s now building the laneway house for about $270,000, and he’s really excited to get the keys.
“I love it. It’s absolutely fantastic — it’s a beautiful, small house,” Lum said of the two-bedroom home in his parents’ backyard.
Michael Lyons, vice-president of marketing for Smallworks, a builder of laneway homes in Vancouver, said that at least half of his customers are building these small houses at the back of their lots for the next generation.
“They can’t afford to buy in the neighbourhood where they grew up. People want to stay close to their family,” he said.
The cost to build a laneway home averages between $250,000 and $270,000; that price includes preconstruction costs of $11,500, excavation and site work of about $30,000 to $35,000 and another $175,000 to $200,000 for the construction, Lyons said. “By the time the dust has settled, you’re in the $250,000 to $270,000 range.”

“With the benchmark price for all residential properties in Greater Vancouver sitting at $679,000 and housing affordability a significant problem in the Lower Mainland, a laneway house could be considered a bargain.”

“We made a decision to support laneway homes as a way to make home ownership more affordable and also to build up the city’s rental stock,” said Colin Lawrence, mortgage development manager at Vancity.

The next generation can get the financing themselves and pay the mortgage, Lyons said, adding that right now a laneway house adds about $300,000 to the value of a property.
For homeowners looking for rental income, a laneway home would also be a good investment.
The mortgage on $250,000 would cost about $1,200 a month, Lyons said, but laneway homes can rent out for as much as $2,000 a month on the west side, or $1,700 a month on the east side.
“Basement suites are renting out for $1,600 or $1,700 a month for a two bedroom on the west side of Vancouver,” he said. “It’s not surprising that a detached house — where you don’t have to live below someone with their kids running around or playing piano above your head — would rent for more.
“You’ve got lots of light, you’ve got two floors and you’ve got two bathrooms. Of course it’s going to be valuable.”

– from ‘Laneway eases path to ownership’, Vancouver Sun, 7 May 2012 [hat-tip Yalie at vci]

All part of the ‘This Is Vancouver; Accept Less For More’ ethos.
We dare anybody to attempt to justify the $270K cost for that structure, sans land costs.
Entire actual houses cost that or less all over the continent.
We’ve collectively gone completely insane.
Group hysteria. Emperor. Clothes.
And it goes without saying that the vast majority of these 500sqft structures will be built with ‘equity’ ‘extracted’ from the fantasy value of the main house, via HELOC.
“Adds about $300,000 to the value of a property”?
Let’s talk once “the dust has settled”.
– vreaa