“There are many, many homeowners whose financial security and that of their children are inextricably linked to their homes, and who regard the erosion of their biggest asset with real fear.”

Three months ago:
“And [28 years ago], as now, Vancouver’s real estate was unaffordable. Nothing in that regard has changed.
What has changed are expectations. There are those who feel that the lack of cheap housing in Vancouver is an abomination. They feel that the convenience of a short commute or the proximity to a really good Ethiopian restaurant should be the natural order of things. …
Vancouver, of course, will always be the centre of things in the Metro area. It has history and critical mass on its side.
And by its very nature, it is going to attract people who want to come here and live in the city.
… the market will propel any kind of property here into the stratosphere.”

‘Affordable housing in Vancouver? Why bother?’, Peter McMartin, Vancouver Sun, 22 Mar 2012

Last week:
“Be careful what you wish for. Real estate is a two-way street, and while the issue of high housing prices has been dominated by Yellow Peril alarmists and affordable housing advocates, and by those who despair at the effect high prices have had on their neighbourhoods, there are many, many more homeowners, I’d suggest, whose financial security and that of their children are inextricably linked to their homes, and who regard the erosion of their biggest asset with real fear. They won’t care who buys their home, as long as it’s for a good price. And if the projections of the TD Bank’s economist come true [Predicted price drops of 15%. -ed.], those days when an offshore Asian buyer came calling will be remembered wistfully.”
‘The housing market is teetering. Happy now?’, Peter McMartin, Vancouver Sun, 22 Jun 2012

The speculative mania in Vancouver RE has been caused by locals overextending themselves by overbidding on homes using cheap financing; paying prices far above those supported by fundamental values; speculating that those prices could only go up further.
Any situation where the “financial security” of a large percentage of the population becomes “inextricably linked to their homes” is deeply unhealthy, and should always sound alarms. Such alarms have indeed been ringing loudly in Vancouver, for a good many years, but very few have cared to listen to them.
There are now, unfortunately, many individuals and families at risk of future financial distress as a result of the inevitable unwinding of the resultant market conditions.
– vreaa

19 responses to ““There are many, many homeowners whose financial security and that of their children are inextricably linked to their homes, and who regard the erosion of their biggest asset with real fear.”

  1. McMartin… is there any doubt now that the crash’s true root causes will be denied to the bitter end? This is no Shakspear, no glorious soliloquy briefly revealing the… sun… on a cloudy day, this is old Petey.

  2. I have a 21 year old friend in Calgary that just bought a house for $350k. When I heard she bought a home for that price, I thought it would be a condo. Compared to Van, that’s cheap. I don’t know details regarding the house but I was shocked to hear the low price of the house. Anyways, the house was purchased as an investment. The plan was to eventually flip the property, make a few dollars, then hopefully use that money for a home in the GVRD. I’m not exactly sure if the market in Calgary is heading south yet, but I know prices are still below the peak of 07. I wouldn’t do it. With mortgage rules tightening, RE across Canada is about to be “different”.

    • If you don’t want to own it for 10 years, don’t own it for 10 minutes. Calgary is a nice place to live, and if you’re settling in there are some decent homes available. Not screaming deals, but not screaming undeals.

    • Actually, prices in Calgary are almost back to the ’07 peak. Sales have been spectacular, according to my RE friend. However, they just might hit the brick wall at full speed due to the current oil/natural gas prices and the new mortgage rules coming down the pipe. And, $350 should buy you a “cute little fixer upper.”

  3. You would think that the higher prices rose that more freedom would accrue to those who were benefitting. Instead, the opposite has become the case. With price growth came dependancy and sense of easy entitlement, a view that will soon be shattered as the reversal gains momentum.

    • Agreed. One’s intuition is that many must have benefited from such large price appreciation on so many properties. But spec mania dynamics are not that intuitive: only those who took profits, by selling or downsizing, gained anything, and, once the dust settles, that ends up being only a surprisingly small minority.

    • Exactly. Home equity is not money in the bank. And borrowing against home equity is borrowing against future consumption, just as surely as using your credit card is. The only difference is the rates are lower and the credit limit higher. It thus becomes even more enticing.

  4. In today’s Vancouver Sun (Shelley Fralic):


    Basic message: “Yes, the market seems to be softening. So now is your best time to buy into a rundown shack (or, heck… even a trailer) somewhere in the backwoods of Surrey.”

    The real estate boards must really be applying pressure to the MSM to come up with the last few zingers before the man behind the curtain is fully revealed to the public.

    • “Lower your expectations” – I thought this was the BPOE? This sounds like something you’d hear in the WPOE. “Ya gotta do what ya gotta do” and all that.

    • “…starter homes”, hahaha, I really love that phrase…just call it what it is..a money pit. 😀

    • “First-time buyers often want what they’re used to, what their parents have, a big comfortable house that took mom and dad much of their working life to either renovate, or move up to. And chances are they’ve been conditioned to expect it, having skipped the lesson that you can’t always get what you want, at least not on the first pass”

  5. The Poster Formerly Known As Anonymous

    Why does Peter McMartin have a large mortgage when he began his career in journalism with the Vancouver Sun in the mid 1970s? Isn’t that ample time to pay off a mortgage, especially given that homes cost two shillings and sixpence back then?

    Methinks someone has been HELOC-munching their way through their house’s “earnings.” Were all those toys and holidays worth the cold sweats, Peter?

  6. Peter McMartin probably represents majority opinion. Most people will see the the housing crash as a disease in need of a cure. In fact, the bubble was the disease, and the crash IS the cure. Nobody likes chemo. Sometimes you need it.

  7. Note:
    This post was linked by a reader on ‘reddit’, and discussion followed:

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