Gord Goble in Local Newspapers – Vancouver RE ‘House Of Cards’ Will “Implode”

‘The Upcoming Real Estate Implosion’
‘Behind the propaganda and the mania is but a single house. A house of cards. And it’s teetering.’
Gord Goble, Coquitlam Now, 25 May 2012

Is there a housing bubble in the lower mainland? Housing zeppelin is more like it. Bubbles, after all, are soft and cute and harmless. Zeppelins, conversely, hurtle into the ground, spewing flaming wreckage in all directions. And that’s precisely what we’re about to witness in the GVRD.

Consider the factors that have pushed our prices so absurdly high that the average family now spends 70% of pretax income to buy and own a home. Consider that we’ve already rocketed past the danger zone of most cities in the disastrous American run-up. Consider all that’s conspired to morph our region into the top two overpriced real estate markets in the world.

It starts at the top, with the federal government and the Bank of Canada. Despite doling out repeated warnings over our addiction to credit and our per capita debt, which now stands at a deeply troubling $1.50-plus per $1.00 of disposable income, those in charge have continued to facilitate easy mortgage borrowing and a credit culture. Why? For one, housing-related industries account for a quarter of our GDP. We’d look far less impressive globally were we not buying and selling obscenely expensive homes to one another.

And it filters down from there. The media, supported so heavily by real estate industry advertising (“This segment brought to you by Re/Max”), plays up self-serving industry propaganda and consistently portrays deceptive PR stunts as “news,” while blissfully ignoring realities such as plummeting sales and mushrooming inventory in former hot spots such as Richmond and Vancouver West, and an already tanking market in key neighbouring zones such as the Okanagan and the eastern Fraser Valley.

Our banks and lenders, meanwhile, squash accusations of subprime lending (loaning to high-risk borrowers – the same practice that helped crush millions of American families) while actively participating in it. Land developers literally work overtime to catch the end of the mania and the correspondingly sky-high valuations. Realtors pump the “Buy now or be priced out forever” mantra and work to falsely convince us offshore Chinese are grabbing everything in sight. Ultimately, locals are inundated from all sides with stories of unicorns and pots of gold and wrongly believe the pyramid scheme of the past decade will somehow, illogically, continue forever.

But, like The Matrix, not all is as it seems.

When the smoke clears, when developers have glutted the entire region with product (they’re almost there – just look around your neighbourhood), when realtors – mere salespeople – are no longer rock stars and pseudo-financial advisors, when the CMHC stops backing every high-risk borrower that comes calling (the corporation, run by a board with blatant ties to the real estate industry, will soon sport a much shorter leash), when newly introduced mortgage restrictions have sliced and diced the number of potential buyers, when interest rates have jumped from their emergency lows, when local TV producers stop airing dubious realtor PR stunts (helicopters purportedly loaded with offshore realtors, trumped-up condo lineups, marketers posing as investors) as hard news, when the market is flooded with the homes of bailing baby-boomers seeking to fund their retirements, when the imaginary tidal wave of incoming Chinese is revealed as the mere speculative ripple it has been, when fatigued owners realize killer home payments devastate every other aspect of their family’s lives, and most importantly, when the mania dies (manias always die) and when real estate ownership is no longer the Holy Grail, there will be nothing left but you and decades of onerous payments on a crashing asset.

You will wonder what could have possessed you to overpay by fifty or a hundred percent for a creaking “old timer” in a lousy neighbourhood or a “new” slapped-up-in-a-month-by-handymen townhouse in a future ghetto, and you will curse the day you saw the pretty ad that compelled you to do so. Your realtor will not be there to console you, your lender will not hand you free money to extricate yourself. Worse still, there will be no respite to those who, for reasons beyond their control, need to sell. They will do so at a grievous loss.

So…what do you do? If you bought near the peak (roughly mid-2011), and particularly if you’re feeling the strain already, contemplate selling – before the downward spiral picks up steam. If you’ve so far resisted the siren song, continue to resist. Instead, rent.

Renting gets a bad name in a transitory environment where even pizza delivery guys contemplate $300,000 condos, but remember: Renters are immune to exploding zeppelins. Renters are free to invest the money they saved by not buying. Renters do not surrender thousands per annum on property taxes, repairs, renovations, city utility bills, and burdensome monthly maintenance fees. And renters can move without enduring the cost and hardship of selling. Your realtor will tell you “Renting is throwing your money away.” You can tell him he’s a liar.

Buying and owning a principal residence can be a smart move. But not here, not now. Not when mania is at the helm, not while deception remains healthy, and not when the long slide they don’t tell you about has already begun. Many will lose. Heavily. Don’t be a loser.

For more discussion on the realities of the local housing market, check out two of Greater Vancouver’s busiest housing blogs: Vancouver Real Estate Anecdote Archive (https://vreaa.wordpress.com/) and Vancouver Condo Info (http://vancouvercondo.info/).

above is the entire article, from Coquitlam Now, 25 May 2012 (p9)

Way to go, Gord.
Educating citizens about the speculative mania in housing is a very good thing.
– vreaa

43 responses to “Gord Goble in Local Newspapers – Vancouver RE ‘House Of Cards’ Will “Implode”

  1. Thanks, VREAA.

    Though I prefer the version in today’s Coquitlam NOW. Bigger, a couple less typos, and pretty much unedited. Available online by going to the Coquitlam NOW site, clicking on “Digital Edition,” and flipping to Page 9.

    • Thanks Gord. I’ll update with that version once I get a text copy.

      • Yellow Helicopter

        Excellent article. Well done to the author- it’s informative, well-written and thought-provoking. Hope any new readers to the site, as a result of this piece, delve into the archives.

  2. Holy crap. Have we reached a new threshold of real estate pessimism (by which of course I mean real estate realism) in the local media?

    • calling a bottom soon … way too many bears out there … http://tinyurl.com/6tpn2kd

      • Good luck. You’ll need it.

      • Ralph Cramdown

        I spent my formative years in Sioux Lookout. I think I went to school with that guy’s son. Maybe that’s where my outlook comes from?

      • liggsie, check article … we’re not talking about the same kind of bottom …
        ralph, if this image sticks everytime i fire up ms_outlook, you’ve just screwed me for the rest of my corporate days …

      • loose conjecture, fwiw … specifically on gas/oil, that chart appears to show up something interesting … the steep ramp into the 2008 peak, mostly credit-fueled … otoh the steady ramp into today’s prices, printage-debasement-fueled … very different circumstances … also, if rule is to be believed, there are structural reasons oil supply will be highly-constrained going forward – lack of exploration funding … this to play out against perhaps some falling demand (???) … well, imagine that pleasantry … high and perhaps even higher gas prices as local RE deflates … talk about turning the screws

      • In space, no one can hear you scream… On the bog, however…

      • ha-ha … a last OT curiosity for the week … enjoy life have a good weekend … go ryder! 🙂
        http://tinyurl.com/bv9abex

  3. Wow, really well written. And to think not that long ago the idea of a bubble was blasphemous. We had to be “closet” believers in the bubble. Reality does not tolerate being dressed up, covered up or jailed up forever. It’s all over but the crying folks. Can someone pass around a box of tissues?

  4. Nice one, surprised they would actually print it…. hope you have an un-listed phone number, you might need it.

  5. reality check

    Just because one of the regular posters on this site has something printed in a local rag doesn’t a bubble make.

    • I don’t see anybody arguing that.
      The market is a speculative mania, where prices are two to three times fundamental values; that’s what makes it a “bubble”, nothing more, nothing less.
      The fact that Gord’s article gets published is interesting enough, but it’s the content of what he writes that is most important.
      Don’t you see the marked disconnect between fundamental value and housing prices, reality check?

      • reality check

        It wasn’t an article. It was an opinion piece. Big difference

      • Semantics.
        Did you see the articles/”opinion pieces” on the Canadian RE spec mania in The Economist, or those by Krugman, Shiller, Kedrosky, Keen, Rabidoux, Shedlock, etc, etc… all of whom see what Gord and the rest of us see?

      • Another thing, rc.. Gord’s article probably comes across as “opinion” because you’ve become so acclimatized to mistaking the bullish opinion we are inundated with for “truth”.

      • reality check

        When it clearly states “My View”, that is an opinion piece.

      • As we said: Semantics.
        I like the truth, no matter how it is packaged.

      • “As we said: Semantics.”

        Not really, reality check has a point. An newspaper article is based in fact, regarding something that has already happened. An opinion piece is entirely based on a single person’s opinion of the good/bad merits of an event, or their views on the future outcome resulting from an event. They are not the same thing at all. That’s why papers separate “articles” from “opinion” sections. Gord’s “article” comes across as opinion, because it is – I only saw 2 actual facts in it, and a lot of speculation on why/how/where we go from this point forward with regard to housing in the LM.

        That being said – very well written, and kudos on getting such a negative op-ed piece published in this city. I personally see a future where everyone loses their shirts about as plausible as a future where RE only continues to go up – probably neither will happen, and we’ll settle somewhere in the middle.

      • nuxfan; the following from the first half of Gord’s article:

        Facts:
        – the average family now spends 70% of pretax income to buy and own a home.
        – our region [is one of] the top two overpriced real estate markets in the world.
        – [the BOC has doled out] repeated warnings over our addiction to credit and our per capita debt.
        – [debt] now stands at a deeply troubling $1.50-plus per $1.00 of disposable income.
        – those in charge have continued to facilitate easy mortgage borrowing and a credit culture.
        – housing-related industries account for a quarter of our GDP.

        Easily argued to be fact:
        – the media, supported so heavily by real estate industry advertising (“This segment brought to you by Re/Max”), plays up self-serving industry propaganda and consistently portrays deceptive PR stunts as “news,” while blissfully ignoring realities such as plummeting sales and mushrooming inventory in former hot spots such as Richmond and Vancouver West, and an already tanking market in key neighbouring zones such as the Okanagan and the eastern Fraser Valley.
        – our banks and lenders, meanwhile, squash accusations of subprime lending (loaning to high-risk borrowers – the same practice that helped crush millions of American families) while actively participating in it.
        – Land developers literally work overtime to catch the end of the mania and the correspondingly sky-high valuations.
        – Realtors pump the “Buy now or be priced out forever” mantra and work to falsely convince us offshore Chinese are grabbing everything in sight.


        The rest could be argued to be ‘analysis’ based on the prior facts.
        Where does ‘analysis’ end and ‘opinion’ begin?

      • reality check

        Now you are ranting vreaa. Very entertaining

      • rc: Actually, all I did there was listed the facts in Gord’s article, verbatim.
        Should we now discuss the semantics of ‘rant’?

      • alright, I stand corrected – there were 6 facts in the opinion piece.

        “Easily argued to be fact”: huh? If you have to argue at all, then its not a fact. That’s the beauty of a fact, it either is or is not.

      • nuxfan: fair comment.
        But if you look over the points I listed in that category, I think you’ll see why… Many would argue that it is ‘fact’ that the msm are biased in their overall presentation of RE related issues (I would; I think you would, too); others would say this is not true, that it is not ‘fact’.

      • I actually think that both sides are fairly heavily biased in their overall presentation of the now and interpretation of the future of RE in the LM (and Canada in general). It has been a long time since there was such a polarizing topic in our media, everyone has something to gain or lose – tangible or otherwise.

        The only fact is that no one actually knows what the future will bring.

    • Oh, reality check, please remain a commenter on this blog for ever and ever. Pretty please?

    • 4SlicesofCheese

      Don’t shoot the messenger.

    • reality check: When you see a newspaper piece where a real estate industry representative says “There is no bubble,” that is also an opinion. The opinion of someone with a vested interest in selling more homes. When you see a Global TV news anchor gush, “If you need more proof the Vancouver market is HAWT!” while introducing yet another bogus Cam Good scam, that is also an opinion. The opinion of a TV station appeasing one of its biggest advertisers.

      Indeed, the very essence of this humungous bubble, “Buy now or be priced out forever,” is nothing *but* the opinion of people who want us to continue buying and selling insanely overpriced homes to one another. Here in the BPOE, we’re smashed over the head 24/7 365 by “opinions” that primarily benefit the housing industry. Interesting that an opposing opinion would stir you up so. I figured someone with the handle of “reality check” would see beyond The Matrix.

      BTW, what’s *your* opinion, rc?

      • Froogle Scott

        I’m in agreement, Gord, and congratulations on having your piece published.

        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.

      • reality check

        This is my opinion. House prices will correct in the near term by about 15% and then continue to increase over time.

      • Gord – this is true. And rightly so, this blog has faithfully railed against the constant portrayal of opinion as fact in our MSM when it comes to RE speculation and the future of RE in our city.

        So I find it interesting that opinion is now equated with fact in regards to your piece.

  6. Gord, if you could keep us updated on your tally for email hatemail versus email praises, that would be interesting. I post on real estate on Facebook several times a day the last 1.5 years and I have to say I’m running into way more belligerent home owners these recent days. We’re going to need a whole new section of this site for anecdotes on whining as we go down. It’ll look like gloating, but it’ll be a fair capturing of the total bubble cycle.

    • pricedoutfornow

      I was wondering the same thing…how many hate emails and phone calls are you getting, Gord? Is your phone number unlisted (I hope for your sake it is). I’m frankly surprised you were brave enough to write such a piece under your real name (way to go!).

  7. Why has it taken this long for anyone in the mainstream media to state the obvious? Did this guy not know this was going back in 2009 and 2010 and 2011; why write about it now? Actually the RE bubble first began to be inflated under Chretien back in the mid 90’s when he changed the RRSP rules to make it easier for 1st timers to buy; it’s been blown bigger and bigger ever since.

    • Up until very recently, the mainstream media has been very reluctant to publish any articles that are RE bearish. Gord and others like him have known of the existence of the bubble for years; mainstream has not been listening.

    • Paul, kudos for recognizing the existence of the bubble so long ago. I too had a pretty good idea what was going on in 2010, so I sold my house in favor of renting. (I do put my money where my mouth is.)

      As for writing about it before now, I did. A few months after I sold my home, I had a piece with an identical message published in The Sun.

      • Its good to know that there is at least one voice in the cacophony blasted by self serving bankers and realtors whose message is getting out in the MSM. Ayn Rand said something to the effect that one can deny reality but one cannot prevent the consequences of denying reality. Though the Vancouver and Toronto RE markets have long denied reality, they will not be able to prevent the Hindenburg consequences. 50% decline over the next 5 years would be conservative, and consequent disappearance of the Middle Class an inescapable consequence. It is impossible for the majority to get rich doing the same thing together, and the Canadian Middle Class is about to find that out in the rudest possible manner in the developed world.

  8. Control of inflation has been a cornerstone to demonstrate “good economic institutions” and hence promotion of a productive society. The BOC however allowed a sustained credit boom to occur, causing vast asset inflation not tracked in the annual CPI numbers. Issuance of credit outpaced productive resources leading to an asset bubble. In Canada and Vancouver in particular we must see either a rise in productive resources ( jobs and wages) or a correction in asset prices priced in Can $. There is no sign of a revival in wages so we will see either a drop in asset prices or a drop in the Can $ to bring Vancouver real estate prices back within international norms. As the Can $ value is sustained by the resource economy –and there is little sign of price long terms drops in the oil and minerals sector– the most likely outlet will be a drop in real estate prices back to affordability levels, or a long period where there is no meaningful growth. –15 years or more to allow inflation in wages to catch up to asset prices. A price drop of some severity and duration is the most likely scenario.

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