“We have been looking to rent. Most landlords seemed pretty eager, were willing to offer at least $100 off and almost hounded us when we didn’t call back. The same units are still on craigslist, indicating an oversupply of rental units (or a price mismatch).”

“A little off-topic but I wondered what you guys would make of the rental market. We have been looking to rent for a few weeks now and have seen mostly tower and new condo units (1BR and 2BR) for $1100 to $1450. Most landlords seemed pretty eager, were willing to offer at least $100 off and almost hounded us when we didn’t call back.I can still see the same units on craigslist that were offered 3 weeks ago, indicating an oversupply of rental units (or a price mismatch). Is there an actual excess of housing in BC or do I just happen to look at an unattractive market slice? Do you guys think rents are going to go up (more and more people who assume the crash will happen are waiting to buy, therefore increasing demand for rentals) or down (since desperate investors need to rent out their units even at a loss)?”
suspectum at VCI 22 May 2012 11:32am

33 responses to ““We have been looking to rent. Most landlords seemed pretty eager, were willing to offer at least $100 off and almost hounded us when we didn’t call back. The same units are still on craigslist, indicating an oversupply of rental units (or a price mismatch).”

  1. The downward trend is what I expected to see as an early sign of the market going.

    I also stand by my estimation that the first serious drops will happen late this / early next year.

    Better stock up on popcorn.

  2. pffft! hard times … http://tinyurl.com/brsgkxg

  3. pricedoutfornow

    I’ve been wondering if it’s a renter’s market myself. I have been browsing the 3 beds plus in COV and come up with some like this http://vancouver.en.craigslist.ca/van/apa/3028200491.html
    Really? $1500 for a whole house “west of main”? Seems pretty cheap! (or are prices always this low?) Seems to me I looked at 3 bed plus not too long ago and couldn’t find too much that was desirable,. These days I see quite a few that look alright. Comments?

    • Becareful, a lot of these rentals are scams. Once you email them, you get a response like: Oh we are out of country on missionary work dealing with AIDs/STD prevention in Africa. We are looking for someone to take care of our home, etc, etc….

      I hit upon 3 ads like that from different people on these good deal rental ads already.

  4. OT … sir_nem … for your hotdog_archives … http://tinyurl.com/76w9y2t

    • Bravo, Chubster! Recognizing a trend with unlimited growth potential, I immediately forwarded that piece to my favourite FantasyIsland concessionaire. More to the point, if ‘SirNem’ had penned the Leader… it might have looked something like this: “HotDog! BeatCop Busts WienerQueen – SWAT Team Storms In For Seconds”… “Shocked Supreme Court Justice Antonin Scalia, upon learning of his disgraced cousin’s failure to dispense condiments following her second run-in with the law remarked, “What today’s decision will stand for, whether the Justices can bring themselves to say it or not, is the power of the Supreme Court to write a prophylactic, extraconstitutional Constitution…” – Dickerson v. United States, 530 U.S. 428, 461 (2000) (dissenting)

      • OT_didn’t know where to file this one …

        Published: April 12, 2012 at 2:47 PM

        BEIJING, April 12 — China’s State Administration of Radio, Film and Television says it cut a shot of a topless Kate Winslet from the 3D version of “Titanic.”

        The 1997 epic starring Winslet and Leonardo DiCaprio as star-crossed lovers was re-released worldwide in time for the 100th anniversary of the historic sinking of the luxury liner during its maiden voyage.

        A memorable scene in which DiCaprio’s poor artist Jack sketches Winslet’s society girl Rose naked has been edited in China so Winslet is only seen from the neck up.

        “Considering the vivid 3D effects, we fear that viewers may reach out their hands for a touch and thus interrupt other people’s viewing,” the administration said in a statement. “We’ve decided to cut off the nudity scenes.”

        E! News said one Chinese man complained about the alteration in an online film forum.

        “I’ve been waiting almost 15 years, and not for the 3D icebergs,” he wrote.

  5. Rents will go up if and when people are forced to sell (either through market drop depression or their hyper leverage finally hitting home). With a home ownership at record high levels, the only likelihood will be that there will be a swamp of new renters on the market, which will cause some upward pressure on rents throughout the process.

    The real question is how large the second+ homes market are. They will most likely be the first to sell, but won’t increase rental demand, but I believe they’re much smaller than the first time home buyers of the world who put down 5%, 35-40 to get in the door to a unit they still can’t afford in the long run.

    • Rental prices are more determined by by what someone is willing and able to pay. This can be somewhat distorted by some of the usual factors that apply to real estate purchases, but not to the same degree, and not at all by the speculative element so enormous in bubble thinking.
      What you get for that rent is determined by regular supply and demand factors, but the total rent paid is paid out of current income, and thus with less ability to grow.

      Don’t forget all the newly foreclosed on dwellings that will need occupants that will be added to the rental stock. Assuming (fair assumption!) that most owners (owers) have bigger nicer places than they would be willing to expend rent money on, the rental stock could greatly increase in both quantity and quality.

  6. A housing price correction is a deflationary event and should generally result in lower rents.

    • Actually the data don’t support this. The best example is San Diego where Rich Toscano tracked rents through the bust down there and he found relatively little weakness in rents, perhaps 1% growth reduction, but nothing significant.

      • ++ in theory, there’s a timing dynamic at work … distressed ppties are getting held up in the foreclosure process. so, while they represent a significant supply overhang, they also aren’t reaching the market place. some forecasters are looking for rents to rise as the mtg delinquents get booted, thereby temporarily increasing demand faster than supply can reach the marketplace. longer-term, things will ‘requilibrate’ as investors convert purchases of distressed ppties into rental stock. not sure what the dynamic for gvrd would be though …

        and on that whole monkey thing? … bite of cheese for the formulaic one … http://tinyurl.com/8xybxjf

      • any clues on how the cdn process for distressed ppties might or might not be different from maple_south? sort of curious to see if it will be long and drawn out or short and brutal … i’m guessing since the cdn banks do not have the same need to hide bad assets, do extend and pretend, etc., the process will be shorter and people may just get totally pasted … looking forward, investors don’t need a bottom to start. there just has to be a good enough set up. wsj article a few days back said some were starting to get in around 7%-9% yields … suppose that and within15%-20% of a long-term valuation bottom is green light-ish

      • chubster, I don’t have a good sense of how fast foreclosures could hit. If there is substantial equity there may be some impetus to sell at steep discounts and avoid foreclosure proceedings. We’ll know more in the next couple of years.

        For me, it’s not much more than a craven joy of watching caged dogs fight over a piece of meat. And deep down, really, I feel nothing. Nor should I.

      • I used to work for the head office of one of the big five banks and, when I worked there at least, it took about 18 months to bring a foreclosure to market. It is is grindlingly slow process in Canada and unless things have changed considerably I would expect a lag in default to sale this time round as well.

  7. I’m guessing rents will fall, people generally want to stay in their home and wont walk away. They’ll do everything they can, drain thier banks accounts, max thier credit cards, borrow from family, drain thier rrsp etc. They try to delay the inevitable. So no sudden influx of renters. But def way too many condos that will enter the market in the mean time.

    But the inevitable happens and they get foreclosed on, and with no savings or anything theyll probably move in with family.

    By the time they become renters, houses have dropped so far that renters will be tempted to buy, so renters leaving and renters entering at the same time.

  8. reality check

    It will have no impact on the real market either way

  9. LS in Arbutus

    One thing I do note, is that SFH on the west side, whole house, in half decent shape, or not, some quite dumpy, landlords on Craigslist are trying to ask $4,000 and up. A year ago, if you saw something for over $4,000 it was a really NICE SFH, granite and stainless steel, or with a basement suite to boot. Now you see livable (and sometimes not so liveable places) looking really tired and they are TRYING to ask $4,000.

    Not every listing, but quite a few of them. I really DON’T think they’re getting it. I wonder if it’s some offshore buyer (or local) who has paid $1.5 million + and then thinks, damn, I can’t rent this for “only” $3,000 – $3,500. My cash flow will be terrible. I am going to ask $4,000…..

    Or are they really getting this?

    I think I can afford to pay a decent amount, but I’d be very hard pressed to spend more than $3,500 a month on rent for a dingy house on the west side.

    • Excellent points and questions.
      Are the rents on these places creeping up to $4000 p.m.?
      Are they successfully being rented out at these rates?

    • Well, you’d want tenants paying that sort of rent to be making $144K or so per year – if you’re pushing the envelope, $120K. It’s a landlord asking for trouble that rents to those who can’t pay: credit checks are good.

      Anyway, that’s the 15% of household incomes in Vancouver? And many of those top 15% own.

      So, I’d say that this is a wildly oversaturated segment. I’m sure people are renting at that rate, but you’re going to get a lot of room-shares, vacancies, etc.

      • LS in Arbutus

        Good points. I am sure you are right that some people do rent at that rent, but not long term, or they are sharing.

        You’re not going to get someone in the top 15% wanting to live in a dingy, tired, 80 year old house with 40 year old carpeting.

        I guess it’s like anything, if you want to attract better tenants, then you’re going to have to have a decent product and that’s what some of these landlords aren’t going to find when they go to rent their $1.5 million+ knock down.

        I certainly have seen a shift upwards in ask for rents though in SFHs over the past year.

  10. and what if none of your predictions come true and the market doesn’t crash?
    great blog, BTW….I read the posts everyday.

    • That is possible; prices could proceed forever upwards, but we think it highly unlikely. We’re in a spec mania supported, thus far, by cheap money and speculating locals.
      For the market not to crash, prices would have to be supported largely by a never ending flow of wealth from elsewhere.
      That or marked inflation in local wages (which couldn’t happen without marked increase in interest rates, which couldn’t happen without increased mortgage rates, and which couldn’t happen without crashing the market, so this option is a non-starter…).
      The ‘New Monaco’ option is the only scenario we can think of where prices could continue relentlessly upwards.
      Any other ways?
      One may be that Vancouver suddenly discovers a new, highly profitable industry, and starts making something that can only be made here, that the whole world wants, and that causes average local wage to double, etc., etc. Any ideas for such an industry, post them here.

      • Wages will only go up if they can’t find enough people to do the work – either because it’s too dangerous, dirty, horrible, or too specialize and you can’t train people up fast enough. Otherwise, lots of unemployed and under-employed, over qualified locals and foreign workers and university students waiting to snap up the job.

      • Robert Dudek

        Don’t you already have marijuana production and distribution? Seems to fit the bill.

    • I agree with paulveekhoff…markets may not fall since the govt is keeping interest rates low enough that home owners are still able to afford living at their house…and the longer the rates are low (isnt it 8-10 years now?) the longer they’ve been able to pay down their mortgages. A crash can not happen just because people are “tired/angry” about the whole situation. Something big like a lot of home owners loosing their (construction/resource industry?) jobs and now can not afford their homes, will probably cause a crash.

      • which will happen as more and more income is diverted into mortgage payments and similar non-productive non-sustaining spending. The rise in housing prices contains the seed of its own destruction as the prices get higher and higher.

  11. reality check

    With Europe now on the road to destruction, interest rates may stay low for years and years and years

    • sorry, the pt missing is the bosses eventually lose control of rates … have you looked at spanish and italian sov yields lately? … and that is with much effort to the contrary … things can look calm for a while, even a longish while … but when they let go, the adjustments will be quite sudden … 5 yr lock? like a knife at a gunfight

  12. Thank you this is the best pots.

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