“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

64 responses to ““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.”

  1. Agree, vreaa, the “money on the sidelines” line rarely works out in market crashes. Consider the home ownership rate, cross-reference that with what happens to equity when prices are weak and when existing properties take months, not weeks, to sell, and the ability, never mind the desire, to buy property evaporates.

    This anecdote is a bit odd, and though it’s the common refrain, there is a subtext here that things are expensive. This person can likely afford to live in Vancouver, just not with the lifestyle that was awarded in the past. Think of it this way: transport yourself to 2004 and then ask how many people were clamoring over each other to buy at 2007 prices. Nobody. This is simply a “new normal” without much concept for where the trough is, other than “it must not be too far because I see people with money waiting”. We’ll see!!!

  2. The cult of real estate claims more victims daily. Precious family income’s shoveled into a dying asset class rather than a diversified portfolio. Almost everybody underestimates the cost of ownership and inflates the rewards. Brushed aside are closing costs and selling charges, as well as property taxes, maintenance charges, condo fees and endless home improvements driven by fad and fashion. Truth is, most people who bought in Calgary or Edmonton four years ago have lost money. The same will be true in Vancouver two years hence. And recent ‘winners’ in Toronto bidding wars will curse ever having gone to battle.

    RBC estimates 52% of pre-tax average family income is needed to own a house in Canada – even with the lowest mortgage rates ever. That leaves 48% of the after-tax portion of $83,100, or just $30,340 yearly – $2,500 a month – to afford food, clothes, a car, gas, insurance, utilities, vacations, kids, pets and sufficient alcohol. The survey noted above says four in ten of those families can’t hack it. They worry about running out of money before they run out of month. So you can kiss off any cash for the TFSA or retirement plan.

  3. Renters Revenge

    “sufficient alcohol”

    Nice!

    • Right. The survey showing 4 in 10 can’t hack it just tells us they really need more booze and less house!

  4. “The vast majority of market participants have a great deal of trouble buying assets that are falling in value”.

    Agree with that. The herd will flee danger just as readily as they embraced the opportunity of an easy meal in a rising market. We are witnessing just such an event now as listings swell and sales plummet. So where are all the anxious sideline buyers as prices are in the process of falling?…….

    The herd is already running away.

  5. 4SlicesofCheese

    Not sure how old this poster is and what the situation was, but 20 years ago is a long time to wait, and price/income/rent ratios are nothing like todays.

  6. Ralph Cramdown

    Not to be snide, but somebody who’s been renting for 20 years, saving the difference and investing wisely ought to have a whopping DP by now. If you’re shopping at Whole Foods while you’re waiting for housing to become affordable, it never will.

    • You have to admit that this has been a pretty exceptional bull run in Vancouver real estate though. There have only been two good buying opportunities (relative to incomes) in the past 32 years. That is a tough break for most people but lets not pretend for even a moment it is normal. It is not. Nothing about Vancouver real estate has been normal for so long most don’t even know what normal is anymore. Cripes, some folk think quarter million dollar shacks in the lane are a great deal. The city is officially insane.

      • “Nothing about Vancouver real estate has been normal for so long most don’t even know what normal is anymore”.

        32 years of abnormal? Shouldn’t you be calling this normal by now?

    • “somebody who’s been renting for 20 years, saving the difference and investing wisely ought to have a whopping DP by now”.

      Save 1K/month over 20 years you’ve got $240,000.
      What was the price of a detached home in 1991? 300K? Now 1.1million?
      So are you closer now or further away than 20 years earlier?

      • At just bank interest rates you would have $400,000 and you’d be far ahead of your peers in preparing for retirement.

      • Ralph Cramdown

        That’s the kind of thinking that I’m talking about, formula1. The kind that assumes that renters make 0%, compounded, on their investments, and that homeownership costs, structure depreciation and mortgage rates have been zero for two decades. With math like that, you win!

      • “At just bank interest rates you would have $400,000 and you’d be far ahead of your peers in preparing for retirement”.

        unless your peer in a 1991 home buyer. Isn’t that what the issue is?

      • The return on the DJIA over the last 20 years has been 9.4% pa so if you invested $1000 per month you’d have about $700,000 by now.

      • Even if you’d managed to time it perfectly from the 1991 trough (average price $200K) to the 2011 peak ($800k) you’d still be better off investing plus your wealth is not so concentrated in one asset.

        Home owner – $1.5M ($800K from house (bought for $200K in 1991) + $700K from $1K per month invested compounded at 9.4%)

        Investor only – $2M ($200K initial investment + $1K per month compounded at 9.4%)

      • If you are exiting your single asset class of real estate on your own timeline, you are unlikely to maximize that return. Unfortunately you can’t divest of it slowly without paying interest or getting utterly ripped off by a reverse mortgage corporation.

      • “Even if you’d managed to time it perfectly from the 1991 trough (average price $200K) to the 2011 peak ($800k) you’d still be better off investing plus your wealth is not so concentrated in one asset”

        some of us have families to house. Any trade off in proposed wealth is worth the justified unless you don’t mind moving your kids home, school, daycare, etc every couple of years.

      • Totally agree it’s a pain in the ass to move but that wasn’t the issue we were talking about. You suggested you’d be financially better off to have invested in real estate and that is not the case. I accept there are good reasons to buy a house even if it is not the most sensible thing financially BUT the fact remains that even over a period of exceptional increasing in house prices you’d still have made more money investing in the stock market.

    • “Not to be snide, but somebody who’s been renting for 20 years, saving the difference”

      Almost nobody saves the difference. Most people adjust their monthly spendings to fit their income and end the month with zero. Most renters probably have no idea what the mortgage payment on their place would be, yet alone the discipline or ability to bank it each month.

      The “saving the difference” argument is a fallacy which doesn’t stand up to any sort of scrutiny.

      • 4SlicesofCheese

        Can you help give some suggestions on ways to spend all this disposable income I have, because I rent my residence, that I supposedly am not saving.

      • Ralph Cramdown

        We save the difference, and then some. We could buy a house for cash today (in our city, but not in our neighbourhood). When we do buy, assuming interest rates aren’t too high, we’ll give a mortgage for 80%, invest the proceeds, and have tax deductible mortgage interest. I realize that, in today’s society, what we’re doing is deeply unfashionable, but I’ve been a contrarian since before contrarianism was popular.

      • If you can’t invest the difference than you lack enough discipline to also comfortably cut your spending to make payments, or to save for emergency repairs on your house and will be living a very stressful life in said house.

      • Anonymouse

        You guys just don’t get it.

        Most people set a monthly budget for their accommodation. Let’s say somebody takes home $10K/month, and rents their pad for $3K. If they bought, chances are they wouldn’t be living in the same place, they’d be living in a place that has a $3K mortgage – in today’s over-priced market, it would likely be smaller and perhaps in a less desirable area. Either way, they’d spend $3K/month on shelter and spend the other $7K on whatever they want. The point is that renters are living in properties they couldn’t possibly afford to buy – there’s no scope for “saving the difference”.

        It’s like saying if you quit your daily Starbucks habit you’d have an extra $5K in your pocket after 5 years. Technically that’s true, but realistically the money would just get spent on something else along the way.

      • 4SlicesofCheese

        So what you are really saying is renters are snapping all the luxury properties. Damn renters.

  7. “The vast majority of market participants have a great deal of trouble buying assets that are falling in value.” – VREAA

    [BloomBerg] – Pending Sales of U.S. Homes Decrease by Most in a Year

    …”Mortgage rates at record lows failed to sustain the pace of demand as some buyers may have waited for home prices to decline further. Limited access to credit and persistent foreclosures still weigh on housing, adding to concern it will remain a source of weakness for the world’s largest economy. “The pattern of demand is sluggish and volatile,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York, who projected a decline. “Until the supply issue is resolved, we could see further declines in prices and the housing market will continue to hover around the bottom.”…

    http://tinyurl.com/869me5m

  8. soon you’ll just go next door for fresh …

    Former bank vice president Christopher Toole, 47, created an “aquaponic” — a nonprofit business that encourages urbanites to grow tilapia and other denizens of the deep in their cramped city apartments.
    http://tinyurl.com/7vjgcr6

    ps. comment_purgatory = 1

    • Okay I have to say it…what a “Toole”… 😛

    • Ralph Cramdown

      Picture the cops busting your door down with a ram after a tip from the hydro company….

      “Nobody here but us fish!”

    • Okay, I’ll confess I get some veges from some basement hydroponic growers who use a water cycle that goes through a tilapia tank. 1) the veges are quite tasty for hydroponic and 2) they don’t taste like fish and 3) I’m looking forward to buying tilapia.

  9. visit some detached open houses on anything under 900K. Do your own research

  10. It depends on how many people actually “work” downtown.
    It’s a nice city to look at, but basically a giant rainy tourist trap, and as a functioning city it’s not all that great. You might be surprised to find these “well paying” jobs you speak of are not as abundant as you might think. Much of the core city is taken up by condos/housing not business. Plus HAM does not buy falling assets. They are over in Toronto now doing the same thing they did here.

    • “You might be surprised to find these “well paying” jobs you speak of are not as abundant as you might think. ”
      To add to that…the feds are now moving a lot of good public service jobs (i.e coast guard, science jobs…and not in the news, engineering, finance and HR related jobs) in Fisheries as well as other gov depts are being moved to the eastern/atlantic provinces.
      Most of the ‘new’ work i see being created downtown are service ‘restaurant’ jobs that requires you to shave ur legs and wear mini-skirts…

      • nice pickup, reminds me of tw (but of course, it was customers that wanted to go to hooters)… sir_nem, it might all start getting very messy soon … i’ve ‘seen’ a lot already by mid-week … shootings, ragings, probably-drug-fueled face eating and entrail throwing … BUT, the one that sticks could mean ‘amercia’ (the ww concept) will just refuse to fail … http://tinyurl.com/7kq7cht … have a nice evening 🙂

  11. Don’t under-estimate the stupidity of the average person or their ability to part ways with hard earned cash. As well, there are a lot of renters who can’t wait to starting their place for security and ability to settled down and have kids. Because if there is one thing we learned, it is that you can’t have kids if you are renters because that would just permanently scar your kids, rob them of their future and condemn them forever to being 2nd class worker grunts. No you must own before you can have a family!

    Off course, given most companies do not top up salaries for people on maternity leave, I’m not sure how the new buyers plan on affording the mortgage while the mother is on maternity or the daycare and other child costs after maternity leave. Oh well…..that’s a separate problem, nothing a total lack of budget planning can’t solve. 🙂

    • Wait, if being the child of a renter is so terrible wouldn’t that inspire said child to study harder so they can afford to own when they move out?

  12. Renters Revenge

    “The Lotos blooms below the barren peak:
    The Lotos blows by every winding creek:  
    All day the wind breathes low with mellower tone:  
    Thro’ every hollow cave and alley lone  
    Round and round the spicy downs the yellow Lotos-dust is blown.  
    We have had enough of action, and of motion we,  
    Roll’d to starboard, roll’d to larboard, when the surge was seething free,  
    Where the wallowing monster spouted his foam-fountains in the sea.  
    Let us swear an oath, and keep it with an equal mind,  
    In the hollow Lotos-land to live and lie relined  
    On the hills like Gods together, careless of mankind.
    For they lie beside their nectar, and the bolts are hurl’d  
    Far below them in the valleys, and the clouds are lightly curl’d  
    Round their golden houses, girdled with the gleaming world:  
    Where the smile in secret, looking over wasted lands,  
    Blight and famine, plague and earthquake, roaring deeps and fiery sands,
    Clanging fights, and flaming towns, and sinking ships, and praying hands.  
    But they smile, they find a music centred in a doleful song  
    Steaming up, a lamentation and an ancient tale of wrong,  
    Like a tale of little meaning tho’ the words are strong;  
    Chanted from an ill-used race of men that cleave the soil,
    Sow the seed, and reap the harvest with enduring toil,  
    Storing yearly little dues of wheat, and wine and oil;  
    Till they perish and they suffer—some, ’tis whisper’d—down in hell  
    Suffer endless anguish, others in Elysian valleys dwell,  
    Resting weary limbs at last on beds of asphodel.
    Surely, surely, slumber is more sweet than toil, the shore  
    Than labour in the deep mid-ocean, wind and wave and oar;  
    O rest ye, brother mariners, we will not wander more.”
    Tennyson

    • “Let us swear an oath, and keep it with an equal mind,
      In the hollow Lotos-land to live and lie relined
      On the hills like Gods together, careless of mankind.”

      Vancouverites on the hills above, considering their markets free of the earthly gravity that besets those of mortals the world over?

      Lots of ways this works, RR, thanks for the ‘colour’.
      “Clouds lightly curl’d” round “golden houses”.

  13. This is called trying to catch a falling knife. Gradually, people who are waiting on the sidelines will buy into the RE market. The most bullish of them go first after the initial discount. The most bearish go last. Virtually none time the bottom perfectly and the vast majority must suffer long drawdowns because they bought much too early.

    I happens in all markets not just real estate.

  14. Renters are dangerous – pass the ammo:

    RCMP warning about armed and dangerous suspect.

    BURNABY – Angus David Mitchell, 26, is wanted for attempted murder his former landlord was shot in front of his home on Gilpin Crescent in Burnaby last night.

    http://www.news1130.com/news/local/article/367984–rcmp-warning-about-armed-and-dangerous-suspect

  15. Writer has been waiting 20 years for Vancouver to be affordable. Well, understood for the past 8 – 10 years with the rise in real estate. However the 20 years needs an asterisk that says “affordable to him/her”
    This would have seemed like an example of where buying small and building equity over time would have worked for the writer.

  16. vreaa – just curious, when the market in Vancouver drops, what % of buyers taking advantage of the lower prices do you see being existing property owners buying a secondary property vs. new buyers getting a primary residence?

    • Diggstown -> Most property owners in Vancouver have a disproportionately large amount of their net-worth in RE, and the majority carry it with some leverage, too. Thus, when prices fall I don’t see many either wanting to increase their exposure to RE, or being in a position to do so (Actually, we’re anticipating many will become sellers, hurrying to attempt to lock in dwindling paper profits). So, when prices start their fall in earnest we don’t see many current owners buying second or third properties.
      Also, we expect many first time buyers to sit on their hands.

      We all know, from past experience, and from watching other markets, that the best time to buy is when prices fall and everybody gets fearful of an asset class. Yet, remarkably, this remains very difficult for the majority to do, and, if you’ve ever bought into falling markets, you’ll know why. You’re human, too, and such action is fear-inducing.
      The Vanc RE collapse won’t be any different. Only a very small minority will buy in the vicinity of the trough, when everybody hates the stuff.

  17. Relaxed & Happy Islander

    Not sure what dollar numbers would qualify for the G&M poster’s 15% reduction, but perhaps he’ll soon get a chance. I see “Urgent to Return China” has lowered his asking price on MLS by $200k to $2,280,000.

    • Maybe they’re not kidding. Friend of mine just bought a foreclosure, fully furnished, of a family who hightailed to Asia, leaving a pile of unpaid debt.

      • Relaxed & Happy Islander

        Whoa – that’s pretty interesting. I wonder if your friend’s story is an isolated one.

      • Told-you-so-in-2007

        This is interesting, jesse. Can you tell us any more about the situation without comprimising the identity of the fleeing family?

        I wonder how common this is going to be moving forward.

      • Relaxed & Happy Islander

        sorry, still having problems with the reply window…
        One of the great panaceas employed about why we needn’t worry about CMHC’s exploding insurance level is that less than .05% of mortgages go into foreclosure. We know non-Canadian’s require 35% down. We assumed this was bank risk until we learned a number of banks had been getting CMHC insurance onon their convential mortgages….Hmmmm..

      • Not sure the details, didn’t ask too much, but the story is that the family owed money — not sure how much — and simply pulled up their stakes and left. Think it was family of 4. I don’t think it’s that common but who knows. The guy got the place with all the high-end furniture still there.

        @Told-you interesting that banks (now) require a certain level of capital in Canadian jurisdiction to approve stated loans. Before February or so they didn’t. Yeah.

      • Had a cousin, this was quite few years back 5 yrs maybe, whose neighbour house caught on fire, whole thing up in smoke. But neighbour didnt have home insurance, he let the bank take the house and left Canada to go back to China.

  18. the search for great ideas continues – like fish farming in your condo (well, it leaks already anyways, no?) … the local ec will need a boost … a helping hand so to speak (pfffft!!) …
    “America’s hottest new export is made by hand … There will be an explosion in demand … the second-largest facility in the U.S., exports to more than 50 countries, but Canada is its biggest customer … up to $500 per donation …”
    http://tinyurl.com/csau3s7

    • Misleading diagram. It makes it look as though the American sperm are just swimming to their export markets on their own. Like that ever happens.

    • Perhaps we’ll see the ads soon. “Tired of having to rent out your basement to low life tenants just to pay the mortgage? Sell your sperm for cash instead!”

      • well, yes exactly. once one’s market price per donation has been gauged, it is straight forward to calculate rent or mortgage in donations per month … see how much one is up for.

    • …pssst… Zimbabwe. JuJu TopUps. BeAfraidChubster! Very, very afraid.

      [DailyMail] – Men fear women in Zimbabwe after spate of rapes to harvest their _____

      “According to reports, victims of the freeway femme fatales are drugged or subdued at gun or knife-point – one man was even forced to perform at ‘snake-point’ when his rapists brandished a live snake.”

      http://tinyurl.com/6uv75ah

  19. When my wife says that she’s tired of waiting I always say, “Don’t worry, it will feel very easy to wait once prices are moving downwards.”

  20. Years ago, a friend of mine and I decided we were going to go parachuting. We set a date, and committed to it. As the date got nearer, I chickened out. I had every intention of going, and was completely sincere when I told him I would, but couldn’t go through with it. \

    I suspect a lot of these “15 percenters” waiting on the sidelines are the same thing. They say they’ll jump in and buy the dip, but when the dip actually happens, they’ll be too afraid to jump. People don’t realize just how fast sentiment changes when a bubble pops. It changes overnight.

    (The man formerly known as the Raging Ranter, until he lost his WordPress password and decided he was tired of being known as the Raging Ranter anyway, so he created a new WordPress ID.)

  21. @Jesse or anyone.

    Does REBGV or anyone publish sale-price-to-list-price ratios for Van?

    • The stats package does not appear to have it. http://www.scribd.com/doc/92120808/April-2012-REBGV-Stats-Package-Mike-Stewart

      I don’t think it would be terribly reliable anyway. There are so many ways around it for the realtors. At least in the U.S. My Canadian friends, in fact, when they bought in AZ two years ago, the realtor there once she knew they were very interested, pulled the house off the MLS and then relisted it before marking it sold, with a price matching their offer. Voila, 100% sale price to list ratio.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s