Cartoon – Royal Mortgage Helper

– David Sipress, The New Yorker, 30 July 2012

S&P Downgrade Outlook On Canadian Banks – “A prolonged run-up in housing prices and consumer indebtedness is contributing to growing imbalances, applying negative pressure on economic risk for banks.”

Ratings agency Standard & Poor’s has revised its outlook downwards on seven Canadian financial institutions, citing high housing prices and consumer debt.
…
“A prolonged run-up in housing prices and consumer indebtedness in Canada is in our view contributing to growing imbalances and Canada’s vulnerability to the generally weak global economy, applying negative pressure on economic risk for banks,” the rating agency stated in its decision. “Growing pressure on banks’ risk appetites and profitability arising from competition for loan and deposit market share could also lead to a deterioration in our view of industry risk.”
…
House prices have roughly doubled over the past decade while, relative to GDP, consumer debt has risen from about 70 per cent to more than 90 per cent, S&P pointed out. And it suggested that Ottawa’s actions have not done enough to stem what could be a significant problem for the economy. “Successive government efforts since 2008 to counteract the stimulative effect of low interest rates on consumer borrowing and home prices have done less than we expected to counteract the growing level of consumer leverage and housing market risk in Canada,” S&P said. The agency is now watching to see if the most recent moves that the government has made will have better results.
…
– from ‘S&P cuts outlook on 7 Canadian banks’, G&M, 27 Jul 2012

‘High-Volume Local Vancouver Realtor’ – “The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view of an anticipated market correction.”

“As you are no doubt aware there has been a huge slowing in the market and predictions are that there will be a correction of approximately 25% on detached properties and up to 30% on condos. The other prediction is that we will not see any sort of recovery for another 2 years. How much of the above is true only time will tell. One thing I do know is that The Federal government has not helped by a) cancelling nearly 300,000 investor applicants who were already 2 years into their application process and b) Making it much harder to get a mortgage without proof of income and increasing the ratio of income to borrowing. This has directly affected the numbers of people looking to buy from outside our borders.
The other problem I have personally experienced is purchasers that bought properties I had listed have hit HUGE problems getting a mortgage, as banks would not appraise the property at what they paid for it even though it was sold on the MLS and in some cases at multiple offers! The appraisers told me they just don’t see the value in a lot of properties and want to make sure they do not over-value in view again of an anticipated market correction.
Good quality properties that are priced well are still selling and there have been some big sales, as you will see from my attached stats sheet. If you don’t have to sell then don’t, if you do then make sure you price it right, choose a Realtor who will promote it right and last but not least prepare now with photos, floor plans etc., so you can come to market as soon as there is a change – even if it is nominal.”
– this letter from a “high-volume local Vancouver realtor” posted by Simeon Garratt at his website allure.com 23 July 2012, in a post entitled ‘IS THE CANADIAN GOVERNMENT KILLING VANCOUVER REAL ESTATE?’.
Simeon Garratt himself adds:
“I think that the Federal Government is directly curbing the growth in the real estate sector. Canada -Vancouver specifically- has been on the ‘hot spot’ radar of people from all over the globe. We have been ranked the best place to live, the safest place to live and have an economy that is second to none. A huge amount of our economy’s growth is based on our need to grow as a population. Currently, Canada’s population is dwindling and without the support of a strong immigration system, it will get worse.
I believe that if we focus on creating good quality jobs and giving young people quality education, we will attract higher salaries, bigger companies and housing prices will become less of a factor. It is common in most metropolis cities around the world to commute an hour to work. For some reason, we think we are the exception.”
—

1. The appraisers are to be commended for their caution: it is currently very hard to reconcile ‘price’ and ‘value’ for local properties.
2. We do not foresee local economic strength so powerful and so sustained that it raises local incomes such that RE prices make sense by that fundamental measure. Incomes would have to double or more for that to happen. Can you imagine that happening without mortgage rates rising?
3. We don’t know what Simeon Garratt means when he says “(we) have an economy that is second to none”, or “a huge amount of our economy’s growth is based on our need to grow as a population.” We see lots of signs that our economy is over-dependent on: the RE industry, industries directly related to RE, and the other temporary knock-on wealth effects of a speculative mania in RE.
– vreaa

600,000 square feet is to be dedicated to office space packed in around Rogers Arena and BC Place – “We have our work cut out for us to fill that space.”

“The city’s planning department, concerned about the loss of key office sites on Vancouver’s small downtown peninsula to the condo boom of the 1990s and 2000s, decided several years ago that the last bit of undeveloped former industrial land that was the site of Expo 86 – Northeast False Creek – should include 1.8 million square feet of commercial space.
Of that, 600,000 is to be dedicated to office or, as the planners call it, “job space,” packed in around Rogers Arena, the home of the Vancouver Canucks hockey team, and BC Place, the government-owned stadium where the B.C. Lions play football and Whitecaps play soccer.
That 600,000 square feet is the equivalent of a whole Park Place tower in Vancouver’s business district or the new PricewaterhouseCoopers tower on York Street in Toronto.
Now, landowners in that area are trying to figure out who they’ll get as tenants.
“We have our work cut out for us to fill that space,” says David Negrin, president of Aquilini Development, one division of the Aquilini family empire that includes the Canucks, Rogers Arena and a host of other businesses and development projects. “It’s just a tough location because it’s on the edge of the [central business district].”
– from ‘Canucks owners gamble on new office district in Vancouver’, Globe and Mail, 30 Jul 2012

Dunbar House Moved To Vancouver Island – “Everyone asked if we really were knocking the old home down. We said we’d rather not, but to make money in the development world, you have to build a new home.”

CBC Announcer: “Moving is often a hassle, but moving a whole house takes some special expertise.”

Announcer: “And so the journey begins for a 97-year-old Dunbar heritage house, picked up, put on a trailer and [taken] out of town. It’s quite the sight for all the neighbors.”

Neighbourhood Lady 1: “I love these old houses. I really wish that we could keep it.”

Announcer: “However, it’s that typical Vancouver real estate story of a small house on a big lot. But, rather than the usual tear-down, this one was saved.”

Neighbourhood Gentleman: “It’s fabulous moving it..”
Neighbourhood Lady 2: “Nice to save it … Very good to save it.”

Neighbourhood Lady 3: “I wish it was in the neighborhood, I would feel less annoyed about having my power out if I’d known it was staying. It would have made a dandy lane-house.”

Announcer: “It’s too big for that, almost too big for this journey. Boulevard trees had to be cut back, Hydro had to down power lines to make way.”

Mover: “We have a lot of obstacles on the way, wires to drop and raise back up, and it is a little slower with all of the pedestrians that are here.”

George Puusepp, Former Owner: “You wouldn’t be able to afford to reproduce it that’s for sure. You can’t find the timber that they’ve got in it now.”

Ben Ford, New Owner: “We figure it’s about $140,000 for the house.”

Announcer: “That is some deal. Inside, stained-glass, old-growth fir moldings & floors. Only one room upstairs is painted. Jean Rouday’s grandfather built the house in 1915. She grew up there.”

Jean Rouday: “I painted the woodwork, so I’m the culprit… the nerve of me, right?! (laughs)”

Announcer: “The 4 km trip to the Fraser River took 5 hours. Next week it gets barged to Union Bay on Vancouver Island where, let’s face it, it will be a welcome sight.”

– from ‘Entire house moved out of Vancouver’, CBC News, 26 Jul 2012 [hat-tip to Nem]

—
The same story covered by the Vancouver Sun, with further perspective:

Heritage home makes incredible journey
Dunbar house transported by truck and barge to its new location on Vancouver Island
Shawn Conner, Vancouver Sun July 27, 2012

When George Puusepp heard the Dunbar house he had lived in for almost two decades was being moved, he travelled from his new home in Kamloops to witness the event.
On Thursday, Puusepp was among the onlookers who watched as the pine green heritage house, which had been freed from its foundation at 3725 West 37th Ave., was loaded onto a transport truck to make its way to the Fraser River where it would be placed on a barge.
“It’s very strange, but very gratifying,” said Puusepp, as the 1,800-square-foot home inched through the streets of Dunbar.
“I’m really glad they didn’t tear it down,” the 69-year-old retired high school teacher told The Sun.
The house, built in 1915, was the first home in the area to be built out of lumber. “The inside is all first-cut fir – wide planks, no knots,” said Puusepp, who lived in the home between 1986 and 2003. “You never see that any more.”
Dozens of neighbours came out to watch the slow journey of the sturdy structure, which has original stained-glass windows on the side and a veranda out front. Crews from BC Hydro and Telus, as well as from moving company Nickel Brothers, came out to ensure that power and phone lines did not interfere with the truck and its cargo, which measured more than 10 metres at its height.
The salvation of the house is a triumph for all involved, said Guy Taylor, of Averra Developments, which purchased the house and lot in December.
“When we said we were going to build a new house on the site, everyone asked if we were really knocking [the old one] down,” said Taylor. “We said we’d rather not, but to make money in the development world, you have to build a new home.”
Averra contacted Nickel Brothers, who agreed to take it off their hands. As luck would have it, co-owner Jeremy Nickel knew just the right buyer.
Ben and Jen Ford had hired the company to move a house before, and had helped with a few others. The Dunbar house was exactly the kind of classic home the professional renovators were looking to purchase for their family.
“This is the kind of house we’d been hoping they could find for us for years,” said Jen Ford, who had come in to watch the move from Gabriola Island, where the couple now lives with their four daughters.
The family will move into the house once it reaches the community of Union Bay on Vancouver Island.
“It’s got all the period features and the character,” said Ford. “It’s in such good shape for its age. Usually at this stage a house is pretty rundown.”
Nickel Brothers sold them the house for the cost of the move, she added, an estimated $130,000. “You couldn’t build it for that, that’s for sure.”
The move wasn’t without its snafus. Spectators and technicians waited patiently in the July heat Thursday, while crews lowered a power cable that stretched across an intersection so the house could get through.
“I’ve been doing this about 25 years,” said Rick Picard, sales manager at Nickel Brothers. “It’s one of the most complicated moves I’ve been involved with.”
BC Hydro field inspector Bob Coulter was at the site to sign off on the temporary removal of power lines by a contractor. As the house once again began its westerly progress Coulter remarked, “Sure is a beautiful home.”

So long; Adieu.

“We will buy a house in Spain in 2014. We would be happy to pay $150K Canadian for a detatched Villa with Ocean views and a pool. I have to disagree with the predictions for a housing crash here in Vancouver.”

“I’m waiting to buy a house in Spain. A country house 5 to 20 K away from the drab concrete settings of the coast. I used to live in Gibraltar in the mid 80s when the Costa Del Sol was pretty much sand dunes and an acre of waterfront was $40,000.
We will buy in 2014 which is when we would be happy to pay $150K Canadian for a detatched Villa with Ocean views and a pool. I have no idea if the market would be at the bottom then but that is one hell of a deal and we would be very happy to purchase at that price. We have duel Citizenship .
I have to disagree with the comments about a housing crash here in Vancouver.
It’s pretty solid on all fronts. There may be a level or even a 10% correction but there will be no crash.
I used to think there would be a crash (since 2004) but after much thought I became aware that as crappy as Vancouver is during the winter etc its still the warmest and most interesting place in the entire country to live. Our banking system is tight. Commodities + resources are in abundance.
Canada is rocking on the business front as is evident in the real estate prices across the country. If you have cash its a very safe country to bring your treasure to.
It’s just not comparable to Spains economic woes and the parallel is stretching it a bit.”
– comment by ‘a different fred’* at VREAA 29 Jul 2012 3:50pm [*’fred’ is not the same fred who posts many trollish comments. ed.]

Vancouver RE Discussed On CBC, Again – “Patti Croft recommends cashing out and is thinking about it herself”; “Patricia Croft kept insisting Canada would be the *only* country to engineer a soft landing in real estate.”

1. “Anyone else catch The House on CBC radio this morning [14 Jun 2012]? Tsur Somerville [UBC Sauder School Of Business RE economist] and Patti Croft [Bay Street analyst], mostly falling over one another with the usual “not-a-bubble”, but with some pretty bearish sentiment lurking beneath the conciliatory tones (considering the sources):
– Nationally speaking, they see a 10-15% overvaluation.
– They openly admit that this national number is mostly be driven by Vancouver and Toronto, implying enough overvaluation there to significantly sway national numbers.
– Patti recommends cashing out and is thinking about it herself.
– Tsur seems to have given up on recommending metrics and now suggests “if you like it, buy it”.
– Even though there’s no bubble, Canada will earn a feather in its cap by successfully engineering a soft landing.
Also, apparently you now need 50% overvaluation to have a national bubble.”
– Many Franks at VCI 14 Jul 2012 11:28am

2. The CBC financial roundtable discussion on The National [CBC TV] last night focussed heavily on debt. The same four folks appeared that were there last time. Patricia Croft kept insisting Canada would be the *only* country to engineer a soft landing in real estate. She said it twice.
– Dr. Nick Riveria, VCI, 25 Jul 2012 10:22pm

David Rosenberg Sees More Downside For US RE

“How can it possibly be that the US housing market is showing a durable recovery when it is still taking a median of eight months for the builders to find a buyer upon completion of the unit? Up until April 2008 – in the midst of the Great Recession – a number this high was unheard-of, having happened but once previously and that was the peak of the previous housing market meltdown in June 1991.”
– David Rosenberg, 26 Jul 2012
—

We agree with Rosenberg.
Our own estimation is that US RE markets have at least 20% more downside.
In Vancouver, our downside risk is still of the order of 50%-66%.
– vreaa

“We got sick of the ridiculousness of the market. People overbidding on shacks and financing some 90yr-old’s retirement by buying her house which she bought for $90K in 1952 for $1.2 Million.”

“My fiance and I both have good professional jobs in health care. We are in our early 30s. He owns a condo in east vancouver that could probably go for 250,000 to maybe 300,000. He bought for 180,000 5yrs ago and renovated. I am renting. We have enough in the bank for a sizeable downpayment on a home in North Vancouver. We are looking to finally consolidate homes and start a family in the next few years. We’ve been looking for 7months and have just been on a 2month hiatus as we got sick of the ridiculousness of the market and people overbidding on shacks and financing some 90yr olds retirement by buying her house which she bought for 90,000 in 1952 for 1.2 Million$ ..you know, the recent Vancouver usual. The market is changing. The new mortgage rules actually suit us favourably as the interest rates haven’t, yet, changed and the other restrictions don’t apply because with our cash flow we could have a Million dollar home paid off in 15 yrs with a 25percent downpayment. My question is, what do we do? If I were to buy a home right now, we’d plan to stay there for at least 10 to 15 yrs. Rental homes on the North Shore are few and far between. And at some point you want to start your life and settle down. I try to stay informed on housing and the economy. Lots of signs pointing in the direction of not buying. Should we sell the condo and rent? Should we keep the condo, rent it out and rent a home? Should we buy something if we can lowball and get a home that was 1Million earlier now for 850,000??”
— from Amber, via Garth Turner, at greaterfool.ca, 26 Jul 2012

This couple will likely be buyers quite soon, as the market softens a little more.
They’ll tell themselves they’ve “lowballed” and gotten a “deal”.
They seem to harbour at least some belief that one can’t “start your life” until you own your home.
– vreaa

Sherry Cooper, BMO – “There is already about a 15% to 20% correction in Vancouver, thanks to the overbuilding during the Olympics. And that’s still manageable, given that much of it is at the very high end of the market.”

Interviewer: “What is the possible worst case scenario that the Canadian consumer would look at from a housing deflation?”

Sherry Cooper (BMO Chief Economist): “Well, it wouldn’t be in general everywhere; that’s because we haven’t seen a pumped up situation, in most of the cities of Canada, with the exceptions, possibly, of Vancouver and Toronto. There is already about a 15% to 20% correction in Vancouver, thanks to the overbuilding during the Olympics. And there, uhmm, that’s still manageable, given that much of it is at the very high end of the market.”

– from BNN Market Sense, 16 July 2012, Part Five: Canadian June Home Sales.

Run That Buy Me Again – “I’ve been in and out of three properties in Whistler since 2001 and that market has been very good to me, because I’m very bullish, in real estate in general.”

“While he is becoming more of a household name as one of the dragons on TV’s Dragon’s Den and has a venture capital firm helping smaller entrepreneurs, you might not necessarily think of Bruce Croxon as a real estate investor. And yet, while living in Whistler, BC in the late 1990s, Croxon took it upon himself to get into the real estate game after having realized the value real estate can bring.
…
“I’ve been in and out of three properties in Whistler since 2001 and that market has been very good to me, because I’m very bullish, in real estate in general, and more specifically on the resort real estate market,” he says.
Croxon is an avid skier and while living in Whistler for about two years he decided to educate himself about the real estate market there. “I learned the market well enough so I thought I could be safe in terms of buying a place to stay and so I added a couple of more places just as pure investment. It turned out to be right for a period of time.”
The first purchase was a personal residence. But with the growth in confidence of the local market, Croxon added on to his holdings with a so-called “ski-in, ski-out” condo. He rented that out to a business he owned in the area.
“The third was more for speculation but I ended up renting it out, and at the end of the day, when I was back in Toronto, I decided to sell that one as well – that was a single family residence on a very nice piece of land,” he recalls.
Croxon explains that the resort market is of interest to him because of the limited supply of land and development potential for areas that people are interested in visiting. For example, he says Canada, specifically Whistler, has some of the best skiing opportunities in the world. “I think there is limited supply and if you want that terrain you’ve got to go there and there is a limit on how much you can build. So it was the right combinations to have an asset grow.”
…
With all the asset classes that have made their way in and out of Croxon’s portfolio over the years, real estate has served an important niche, especially given his investment strategy.
Says Croxon: “I’m an operator and have not been an investor until recently. [Real estate] was a way to be passively involved in an investment I developed some confidence in. You really don’t have to work that asset too much,” he explains.
“It will either go up or down on its own. For me that’s the attractive part of it. In general, I just think real estate, over a long period of time, has performed quite well. People need a place to live and it seems to be one of those asset classes that survive,” he adds.
…
– from ‘Dragon’s Den star reveals why he’s still bullish on real estate’, Joel Kranc, Globe and Mail, 27 Jul 2012, an article reprinted “from Canadian Real Estate Wealth Magazine, a monthly publication focused on building value through property investment”.
—

This has to be the hand-waviest article we’ve seen on RE investing for quite some time.
There really is no substance to it at all.
The author tells us that a guy who made money trading Whistler properties over the last 10 years is kinda sure it’s possible to make money in RE.
Why RE? Land is limited. “People need a place to live”. RE “seems to be one of those asset classes that survive”.
There is perhaps nothing that any potential RE investor could take from this article that would be of any use to them whatsoever.
There is certainly no information about the current state of the Canadian market.
Should an investor be buying or selling RE? How has the RE market actually been doing, in Whistler, or anywhere else, for that matter?
Perhaps the one lesson gleaned could be that to make money in RE, you have to buy and sell.
And that fortunate timing is crucial for many participants.
– vreaa

“A 27 year old colleague of mine bought in Whalley in late 2009, claiming that it would be the new Yaletown.”

“A 27 year old colleague of mine went out and bought in Whalley in late 2009, claiming that it would be the new Yaletown.
My other bearish colleague and I almost laughed when she said this during a staff meeting, as he actually lives in Surrey. She was so proud that she wrote in the office log “off to get my mortgage approved for my first place – smiley face”
She is married to a guy that works at the bank, and they have since bought another place. They are renting the Whalley place, and claim that their rent covers their mortgage payment. When questioned further, they didn’t factor in property taxes, insurance, and strata fees..
I cannot wait till this twit gets burned…”
– SKS at VCI 25 Jul 2012 8:12am

“i wish vancouver would go back to how it was when i was growing up. i’m 35. there was some freedom. now, the love is gone, rules abound. complainers run everything. we have to compete with the entire world to buy a house.”

“i wish vancouver would go back to how it was when i was growing up. i’m 35. i liked living on the westside. it’s too expensive now. kits beach used to be empty on a satuday in july. it was nice. now it’s full of douches, and the culture is more transient than anything, lots of people from australia or just arrived from out east. ick. there were lots of small stores in cute old buildings on 4th and on robson. it was nice. now it’s just the same old crap that can be found in any generic mall or cruise ship port. people were mellow, cleaned up after themselves, and would congregate on the beaches at night during the summer, and were free to have a fire and drink a beer. there was some freedom. now, the love is gone, rules abound. complainers run everything. we have to compete with the entire world to buy a house. everyone wants to come here, but what about the people who lived here before? pushed aside, a humble cuture, overrun. who cares about the money! let’s stop whoring our city out to the world. i propose limits on foreign property ownership. if your not canadian, you can’t buy land in vancouver. good ruloe i think. we wouldn’t be the first place to do it, and for the same reasons..good reasons.”
– ‘go love your own city’, at straight.com, ’29 Jul 2012′ [hat-tip Adam]

“There is a 2 BR unit for sale at Shangri-La. A signboard in front of the building said “MUST SELL TODAY!!”, $1.08M. Two days later the same signboard had the price crossed out with a handwritten price of $998K.”

“There is a 2 BR unit for sale at Shangri-La. On Thursday or Friday a signboard in front of the building said “MUST SELL TODAY!!” and the price was approximately $1.08M. On Sunday the same signboard had the price crossed out with a handwritten price of approximately $998K. The “MUST SELL TODAY!!” was unchanged, though.
I say “approximately” because I can’t remember the exact numbers with 100% certainty. But those figures are correct or very close to correct.”
– Kermodei at VREAA 23 Jul 2012 2:20pm

Olympics, Redux – “Part of the reason that people get grumpy about the games is inflated expectations: the Olympics are always mis-sold.”

“Part of the reason that people get grumpy about the games is inflated expectations: the Olympics are always mis-sold. First, host governments say that the economic benefits of the games will greatly outweigh their costs. Second, they claim that the games will inspire people to exercise more. Third, they predict intangible benefits from being in the global spotlight for a couple of weeks. The first two claims are rubbish; the third does not apply to London.” [Nor did it to Vancouver. -ed.]
– from ‘Rewards of the rings’, The Economist, 21 Jul 2012

“Finally in 1987 my parents afforded an old house built in 1916 for $87K. That’s all they could afford. Over the past 30 years the house value has gone up to over $700K and they haven’t even done anything to increase its value.”

“My family immigrated to Vancouver in 1981 from the Philippines with $200 and 4 suitcases. We rented basement suites from 1981-1987 when the housing market was so bad, and finally in 1987 my parents afforded an old 1916 house for $87K. That’s all they could afford given they were also sending my brother and I to private schools. I had a very modest upbringing to say the least. Over the past 30 years my parents’ house value has gone up to over $700K and they haven’t even done anything to increase the value of their house.
MANY Vancouverites are immigrants from developing countries even poorer than China. MANY Vancouverites are extremely hard workers who would like to continue living in a home they can call their own. We would also like to ensure our children and their children can do the same.”
– val at The Thirties Grind 11 July 2012 7:07pm

“We recently let our recreational property listing lapse because we could not get what the property was worth to us. We will try again in 5 or 6 years.”

“We recently let our recreational property listing lapse because we could not get what the property was worth to us. We will try again in 5 or 6 years.
We sincerely want to sell, but on our own terms. I wonder how many listings are driven by expectations of windfalls and not need.”
– Jim at yattermatters.com 20 Jul 2012 7:33pm

In 5-6 years time, that property will almost definitely have a market value substantially less than it does now. If the proceeds from this sale are important to retirement plans, Jim should sell now.
– vreaa

One Note, Three Anecdotes – Unplanned SFH Flipper; Dual Property Stress; Realtorship Declined

“The young colleague who was approved for a massive mortgage, on a smallish income, and bought a SFH in Coquitlam, is now listing it for sale in the hopes of eking out a profit. Another colleague still hasn’t had any luck offloading his North Van duplex. In the meantime he has to service a $1.2 million loan that he used to purchase his new North Vancouver SFH. He hasn’t received a single offer since it was listed over two months ago.
Had lunch with a pal today that I hadn’t seen in several months. The last time I saw him he was thinking about becoming a real estate agent. I disabused him of the notion with all of the usual arguments. I asked him today if he was still thinking of becoming a real estate agent, “No, not with everything that I’ve been reading and hearing.”
– Manna from Heaven at VCI 10 July 2012 2:01pm

“We ARE serious to buy, but on our own terms”; “The buyer and seller would not agree on a $2500.00 difference of value opinion.”

“A recent coffee shop story from a Vancouver Realtor® pal claimed that a sale on a east side $950,000 home never concluded when the buyer and seller would not agree on a $2500.00 difference of value opinion.
Worthy of calculation, the $2500.00 equates to a 0.26% difference of dollar opinion which in this case was big enough to kill the deal. If you are scratching your head wondering why then there is perhaps a reason within that tells us there is more to this market than we might suspect – a reason I believe that won’t be accountable in market fundamentals.
A sentence in an email from a buyer helped clarify this 0.26% conundrum. Stated was:
“We ARE serious to buy, but on our own terms.”
– local realtor Larry Yatkowsky, at yattermatters.com, 18 Jul 2012, who described this stubbornness as ‘Mule Talk’.

There are periods during a downturn when prices are ‘sticky’; where buyers and sellers stare each other down; where sellers are reluctant to “let go” of properties where they have gotten attached to the idea of them being worth ‘x’ and now the buyer is asking them to “give it away” for ‘x-y’. Then comparables sell for less and expectations are reset.
– vreaa

Song: ‘A House in Vancouver’ – Daily Dancer sings about the Vancouver housing market

“Will housing prices ever go down?
Well, there’s a hopeful crowd that’s stickin’ around
And there are many like me, with good job and good pay
Who can not afford a house in Vancouver

[C’mon, even a small condo is priced at half a million]
[I suppose I could buy, and not see a spare cent for the rest of my life]

From the heart of Vancouver all the way to New West
On our fine Earth, this place is the best
So say those ads, to us, every single day
All those tricks just to get us to pay

Now is always the best time to buy
Never let an opportunity go awry
But even in the ‘burbs, the prices are still high
Guess I have no hope to own in Vancouver

[I guess I’ll have to start looking elsewhere]
[Like Saskatchewan… Saskatoon… nice house for a quarter the price]

Foreign money is always what is blamed
But the racists here are never shamed
What about the locals and all their greed?
Who make every want into a need

But some out there are smellin’ the rat
In this land where the realtors get fat
Yet it won’t be me who’s caught in the trap
With an outrageous mortgage and no funds to tap

[Yep, I’d *be* the tap… that’s for sure]
[But, hey! I’d be livin’ the American dream!]

Decades of debt just for a house
But no one is as poor as a church mouse
I say the poison is all the borrowed wealth
But, how could that be bad for your health?

The interest rates are bound to go up
And many a wallet will feel the hiccup
But, it won’t be me who buys in today
And risk a worthless house long before I get to old age

[If I don’t die first]

So don’t be house rich and cash poor
Take your well-earned cash and go on a tour
See all that the world has to offer
Listen not to what the admen proffer

[You don’t need it… live life, have fun]
[Go and buy that new toy… because you can]

So, will I ever buy a house in Vancouver
[Not at this this rate]
I guess I’ll be forever paying rent in Vancouver
[Unless the bubble bursts]
‘Til then, I’ll keep paying rent in Vancouver
[And if I win the lottery?]
Then I’ll buy a tiny house in Vancouver”

– from ‘A House in Vancouver’, ‘Daily Dancer’, self posted youtube video, 2 July 2012

Excellent sentiment.
The housing market really has thoroughly saturated our psyches.
– vreaa

Spot The Speculators #87 – “To add to our stress, the condo we were living in before we purchased this house isn’t selling.”

“Overheard this conversation today at a bus stop in the Lower Mainland:

A: I haven’t seen you very much lately

B: Yeah, we just bought a house and it is constantly in need of repairs. Every time we touch something it breaks. We opened a window and the glass fell out so we had to fix that. We had to get a new furnace. We had to replace this. We had to replace that. We keep finding deficiencies that need to be replaced.

A: Oh that sounds stressful!

B: Yes, it is stressful. And to add to our stress, the condo we were living in before we purchased this house isn’t selling. Our realtor told us the reason our condo isn’t selling is because the carpets smell bad and that we should replace them. We can’t afford to install new carpetting so we are thinking about just getting them cleaned to save money. He is telling us that these carpets are such a big problem but we don’t understand because the same realtor sold us that condo with the same smelly carpets in it. I don’t understand what has changed.

…It was all I could do to bite my tongue and not tell this person that they have a much bigger problem than smelly carpets.”

– joe_blown_away_by_high_housing_costs at VCI 19 Jul 2012 5:10pm
—

Carrying TWO properties, with leverage, into a downturn, is a recipe for personal financial disaster.
A good number of Vancouver households are carrying more than two.
– vreaa

Seller Urgency – “I AM GIVING THIS CONDO AWAY FOR $80,000 LESS THAN COST!! – ANY TAKERS?”

$278000 I AM GIVING THIS CONDO AWAY FOR $80,000 LESS THAN COST!! – ANY TAKERS? (15152 RUSSELL AVENUE – WHITE ROCK B.C…)

Date: 2012-07-19, 12:57PM PDT
Reply to: ********@hous.craigslist.org

THE ADDRESS IS 15152 RUSSELL AVENUE. THE 21 FLOOR BUILDING WAS BUILT BY BOSA PROPERTIES IN 2009. IT IS BY FAR THE NICEST BUILDING IN WHITE ROCK AND THE BEST LOCATION. THE CONDO IS VACANT NOW AND I CAN SHOW IT TO YOU FRIDAY. THIS IS A 502 SQUARE FOOT STUDIO ON THE 5TH FLOOR, IT IS VERY WELL DONE AND HAS EVERYTHING. I HAVE A FULLY ASSUMABLE MORTGAGE WITH TD CANADA TRUST AT 2.2% INTEREST, $180,000. FOR 35 YEARS. THE INTEREST PAYMENTS ARE ABOUT $600. PER MONTH. THE STRATA FEES ARE $137 PER MONTH WHICH INCLUDES MAINTENANCE, HEAT, AIR CONDITIONING, GAS FOR THE COOKTOP STOVE, AND HOT WATER. IT ALSO COMES WITH A PARKING SPACE AND A STORAGE LOCKER. THE UNIT FACES NORTH WITH A VIEW OF THE MOUNTAINS. THIS IS A LOT CHEAPER THAN RENTING. THERE IS AN AMENITIES ROOM AND A GUEST SUITE. THE POOL AND JACUZZI HAVE NOT BEEN BUILT YET BUT WHITE ROCK HAS EVERYTHING YOU WILL NEED WITHIN A SHORT WALKING DISTANCE. INCLUDING THE OCEAN, THE BOARDWALK AND THE BEACH.

IT IS BY FAR THE NICEST BUILDING IN WHITE ROCK AND THE BEST LOCATION. THE CONDO IS VACANT NOW AND I CAN SHOW IT TO YOU TOMORROW. THIS IS A 502 SQUARE FOOT STUDIO ON THE 5TH FLOOR, IT IS VERY WELL DONE AND HAS HIGH END LUXURY EVERYTHING. THESE UNITS ORIGINALLY SOLD TWO YEARS AGO FOR $349,000. PLUS GST. I AM SELLING FOR $279,000. (INCLUDING HST) BECAUSE I HAVE SOME PERSONAL PROBLEMS AND NEED TO LIQUIDATE ALL OF MY REAL ESTATE ASSETS. MY LOSS IS YOUR GAIN. FORTUNATELY, I HAVE A FULLY ASSUMABLE MORTGAGE WITH TD CANADA TRUST AT 2.2% INTEREST, THE BALANCE IS $180,000. THE AMORTIZATION IS 35 YEARS. THE MONTHLY PAYMENTS ARE ONLY $600. PER MONTH. THE STRATA FEES ARE $157 PER MONTH WHICH INCLUDES INSURANCE, MAINTENANCE, HEAT, AIR CONDITIONING, GAS FOR THE COOK TOP RANGE AND HOT WATER IS ALSO INCLUDED. IT ALSO COMES WITH A SECURE UNDERGROUND PARKING SPACE AND A STORAGE LOCKER. THE UNIT FACES NORTH WITH A VIEW OF THE MOUNTAINS. THIS IS A LOT CHEAPER THAN RENTING. THERE IS AN AMENITIES ROOM AND A GUEST SUITE. WHITE ROCK HAS EVERYTHING YOU WILL NEED WITHIN A SHORT WALKING DISTANCE. INCLUDING THE OCEAN, THE BOARDWALK AND THE BEACH.
PETS ARE ALLOWED UP TO 15 KILOS. YOU COULD RENT THIS CONDO OUT FOR $1,000. TO $1200 PER MONTH OR IF YOU FURNISH THE CONDO WE CAN GET YOU $1500 PER MONTH GUARANTEED IN OUR CORPORATE RENTAL PROGRAM.

– from craigslist, 19 Jul 2012 12:57PM [hat-tip ‘Anonymous’ at VCI]
—

Our apologies, the screaming capitals are exhausting to read, but we’ve let them stand as a reflection of the urgency that some sellers are beginning to experience.
Notes:
Selling below prior purchase price is not “less than cost”. Selling “below cost” means selling for less than the cost of production (and even that may be above fundamental value, given land price speculation and inflated construction costs during a bubble). Properties will sell for what is truly “below cost” much later in the price decline.
– vreaa

“I am in the market for a downtown 2 bedroom condo as first time buyer. Here comes the death spiral.”

“Here comes the death spiral at Cosmo 161 W Georgia St:
I am in the market for a 2 bedroom condo as first time buyer in downtown for the past few months. My budget is 500k. I have been watching this building closely.
There are 6 units that are exactly the same layout on MLS. Unit 807, 1608, 1708, 1808, 2108, 2208. Asking price from 575k to 629k.
807 had open house two weeks ago (I viewed) and was the lowest priced at that time. Now 2208 entered the market last week and priced lowest. 807 (V949770) just reduced it’s price to beat 2208 (V962354) this week.
At this rate, I hope they will drop to $500k by Nov. this year.”
– G at VCI 20 Jul 2012 10:14pm

If a ‘death spiral’ is beginning (as may indeed be the case), why plan to buy in November?
– vreaa

“I sold the last of my 3 places recently. To be honest I was a bit worried about how it might impact my ego having to convert to being a renter and the feeling that I might be throwing money away.”

“I sold the last of my 3 places recently and I’ve said how happy I was to be out of the market. That’s certainly true but to be honest I was a bit worried about how it might impact my ego having to convert to being a renter and the feeling that I might be throwing money away. Well I’m happy to say it’s fantastic renting! All of the problems I used to have to spend all of my spare time fixing – the hundreds of trips to Home Depot, etc, not just on repairs but filling the house with things that perfectly outfitted it. At first I missed those trips but now I realize all the money I was spending. When renting we don’t have to worry about how the place looks because we might need to sell one day. And all the time and energy I’m saving allows me to be doing what I should really be doing – spending time with my young kids.”
– No Noise at VCI 13 Jul 2012 6:09PM

Entities Are Aligned In Perpetuating The Speculative Mania Regardless Of Political Stripe – “The only decisive action taken by politicians has been to add more layers of finance to the teetering system of debt and precarity. Elites in Vancouver continue to prolong the system and extract super-profits.”

‘Imagine. A financial institution that lets everybody profit. Now that’s an idea I can live with.’ – Vancity Billboard, Vancouver, July 2012

“A brief recount of recent history is necessary for understanding why and how the local government under Vision Vancouver can be expected to aim towards re-mortgaging the housing crisis, deferring the current crisis of value underlying overinflated housing assets citywide. When the market crashed in 2008, many saw an opportunity for the city to meet its promised housing goals, including its promise to take actual concrete measures to end homelessness. After years of land speculation and high prices created by unprecedented consumer debt, properties finally started showing signs of affordability, with housing activists calling on the municipal government to buy newly-priced lots throughout the city.
In effect the opposite occurred, with sections of the property elite buying up land from the province in private deals, like at Little Mountain in 2009, or selling land back to the government at inflated pre-crash levels, like the land trading of Robert Wilson, who bought dozens of buildings and sold them back to the public. Fundamentally, Wilson and Holborn’s extraction of public funds and assets represents the spirit of the broader post-2008 period.”
…
“Looking back on the past half-decade, what stands out is that since the onset of the financial crisis of 2008, no effort has been made in policy and elite circles to re-evaluate the fundamental contradictions of state-backed housing privatization, despite the rampant inequalities produced by Vancouver’s real-estate market, and despite the volatility of that system. The market, towering over an exploitative rent-extraction economy, has only been the recipient of ever-new supports from the neoliberal state. The only decisive action taken by politicians has been made to add more layers of finance to the teetering system of debt and precarity. The recent experience in Vancouver has shown that while elites continue to prolong the system and extract super-profits, radical change can only come from below. Only a movement led by renters will be capable of taking action to halt the circuits of the exploitative real-estate economy and replace it with something new.”
…
– excerpts from ‘Re-financing the housing bubble: Strategies of the neoliberal state’, Nathan Crompton, rabble.ca, 20 Jul 2012 [hat-tips to ‘joe_blown_away_by_high_housing_costs’ and Jeff Murdock]
—

“My biggest complaint with the article is placing onus on Vision Vancouver for perpetuating the bubble when it’s the nature of the City’s finances, not the political stripe of council, that’s the problem. Ultimately cities derive revenue from permits and other real-estate-related activities and, if that is not present, either need to increase revenues in other areas or cut back. …
So at the local level, because of how the tax base is matched to the expenses, regardless of who’s in power, there will be pressure to kowtow to the real estate industry to keep revenues flush. And it’s not some “neoliberal” trend in my view, it’s what the populace votes for…”
– from a comment by jesse, VREAA, 20 Jul 2012
—

Our thoughts:
As a speculative mania develops and takes hold, more and more individuals and institutions in a society become aligned in their interest to perpetuate the bubble. This occurs on all levels, from the citizen to the federal. Home-owners, RE investors, landlords, contractors, developers, realtors, universities, credit unions, banks, municipal government, provincial government, central banks, federal government…
The entities are co-opted, not by some plan, but rather because all interests become aligned in a dependence on ever increasing prices, and the debt financing necessary to keep that going, and the temporary artificial easy ‘wealth’ that results. Ever expanding borrowed funds being spent into the economy certainly seems better than having to generate genuine wealth from true productivity; and it seems good to the naive, while it lasts.
It is crucial to realize that the majority of individuals and institutions become aligned in this interest, regardless of political stripe.
In the mature stage of a speculative mania, the vast majority of citizens and institutions are heavily dependent on the bubble continuing, and almost all those in positions of political power will have been thoroughly co-opted. This is a market effect. This is also why bubbles are never, ever legislated away. The majority always votes to shore up the mania, to perpetuate the bubble; any dissenting voices will be voted down; any protesters ejected.
Government intervention, from the civic to the federal, can extend the life of bubbles, but cannot dismantle them safely. This is not an ideological, or a pessimistic observation, but one made based on mathematic law and knowledge of market dynamics. Like a chain-letter or a Ponzi scheme or a raging forest fire, the engine runs out of fuel, eventually.
…
Of course, there will be all sorts of flavours and differences in the finer points of this process, so it is arguably of value to discuss how exactly local government is choosing to perpetuate the bubble. In this regard Nathan Crompton’s article is of interest. We respectfully submit, however, that the large overarching picture is far, far more important, and that differences in local approaches will pale into insignificance in the face of the broad implications of a collapsing speculative bubble. After the dust settles, the exact details of local policy will again become important.
…
– vreaa

“I have a friend I literally begged to sell his Yaletown condo a year ago. Instead he poured in 50 K worth of Miele and Granite and teak floors. He lost his job on Tuesday.”

“We rent in a very nice Vancouver Condo Highrise – average for one bedroom is around a million. (gulp).
Three Open Houses in our Building last weekend.
NOT ONE SHOWING. (The concierge and I are pals).
NOTHING. Nada.

Today – anecdotal evidence of how business is in D/T Vancouver. The ONLY place I saw that was busy is Sears – going out of business – a new tenant is rumoured to be Target. The rest of the stores in the area are DEAD as Stephen Harper’s eyes.

I have a friend I literally begged to sell his condo a year ago. Instead he poured in 50 K worth of Miele and Granite and teak floors. He lost his job on Tuesday.
He called this morning, and he sounded terrible. I dropped in on the way back home (he lives in Yaletown) – and when I got to his shoebox, he looked like he hadn’t slept in a month.
He was nearly in tears. I asked him to tell me what was going on and I just listened.
Maxed credit cards. Leased Land Rover. 60 inch TV – all the toys.
He has one bank account that has $123 bucks in it, and a two week severance check worth $1190.
He was frantic. His Mortgage payment is coming up at the end of the month, $2350.
What could I do for this guy? He can try and list his shoebox – but he owes 412 K on it and it won’t sell.
His student loans total? $45 K – he has an MA in Fine Arts. His animation job was chopped.

I have a sinking feeling that my poor pal is in a crowded boat.
The whole mess makes me sick.
This is just starting.
What is coming is a disaster. I am very concerned that we have a generation of folks that will be destroyed. Maybe two.
DEBT. Easy credit. It’s like Oxycontin. Once you get on it – you are finished.”

– Bill Gable at greaterfool.ca 20 July 2012 6:45pm
[hat-tip ‘subterranian’]

BC Business Magazine – “Was this a massive bubble? Slightly. But bubbles imply resulting crashes, and I don’t believe we’re going to have one.” [Why not?]

“History shows that Vancouver has always been a real estate boom-and-bust city. Now that the most recent mania appears to be over, with sales falling and prices threatening to follow, there’s no reason to think that’s going to change. Look for a long quiet period.

Fear and worry are rampant in Vancouver these days: the mighty real estate market is struggling. Whether it is in a tailspin or due for a monstrous crash is the subject of endless dinner conversations, office cooler chats and online messages.

I’m generally in the tailspin camp, because I’ve seen this kind of real estate mania in Vancouver before. Ever since I moved here, what seems like a hundred years ago, I’ve been hearing the “you have to get into the market” mantra and the “woe is me” reactions that follow.

Many years ago, when I was writing a financial planning column, I saw a chart that showed the increase in home prices generally mirrored the inflation rate – despite the bouts of mania – over time.

That means that, essentially, a house is like a big bank account, advancing about 3-5 per cent a year, if measured over decades. In some short-term periods it can rise much more than that, in others it falls or does nothing. Overall, it evens out.

So the people who “get rich” on housing usually own them for 30 years and essentially save their money in a house. They could have done better with some other kind of investment, but needed a place to live, so combined the two.

Here’s my own example: once, I bought a big, old, heritage house that required some rehab work. It cost me $270,000, which I thought was outrageous at the time, but as it turned out, wasn’t.

Some eight years later, I sold it for $425,000 – a gain of about 55 per cent. But for most of those years, it barely registered any increases, and in some cases, even dropped. All the gains – which averaged out to roughly 6-7 per cent a year – came in the last few years. That was at the beginning of the current mania that saw the price of that house hit almost a million.

That’s a long boom that has now apparently subsided – a 10-plus percent drop in sales usually signals the end of a giant buying spree.

Was this a massive bubble? Slightly. When prices rise that much, we’re nudging bubble territory. But bubbles imply resulting crashes, and I don’t believe we’re going to have one. Of course, prices will drop a bit, but an American-style catastrophe isn’t going to happen.

More likely, we’ll just have a long fallow period in which prices have to correlate with incomes, and markets have to better adjust to geographical and other factors. During this period, prices will drop somewhat, but mostly they’ll stagnate. What will likely happen is that this stagnation period will be longer than usual, because the market got ahead of itself so much.

But eventually it will happen again. The Vancouver region now has about twice the population it had 20 years ago, and will continue to increase over time. This increasing population means that more people have to live farther out in the region, where it’s cheaper and there’s more housing availability. In the more popular inner regional areas, prices will inevitably rise again.

Those who understand these rhythms and are patient will do very well. But that will be a minority. It always has been.”

– entire text of ‘Real Estate Mania Is Ending’, Tony Wainless, BC Business, 13 July 2012 [hat-tip Don]

1. To paraphrase the old quip: Our market is ‘slightly’ like a bubble in the way that someone gets ‘slightly’ pregnant.
2. The author seems to lay out at least some of the important dots, but then, in the end, fails to draw the logical conclusion. Note the form of his flawed logic: “Was it a bubble? Well, if it was a bubble it’d have to end in a crash. I don’t believe it’ll end in a crash so, it can’t have been a bubble.” Why doesn’t the author draw the logical conclusion? He doesn’t share with us why exactly he believes it won’t end in a crash, but it’s very likely he does that simply because he hopes it won’t.
3. Yes, the Vancouver RE market is “a massive bubble”. How do bubbles end? Do they peter out over a “long quiet period”? Or do they collapse? Do we have any examples of bubbles simply going away over a “long fallow period”? [Answer: No].
4. To Tony Wainless and others proposing a ‘soft landing’: Who do you expect to now be doing the buying? Prices are still at stratospheric levels compared with price levels supported by fundamentals. For a soft landing to occur, you need a steady supply of buyers over years and years of flat or reducing prices. People in Vancouver have only been overextending themselves to buy at these levels because they presumed future price strength would be relentless. With a lacklustre market, people will stop stretching (hasn’t this already started happening?), and prices will collapse. We cannot see how this market could resolve itself with a soft landing.
5. Talking of minorities: Those who understand that this is a speculative mania, and understand the full implications of that conclusion, remain a very, very small minority.
– vreaa

“I said that if I was him I’d drop the price steadily until his Eastside SFH sold, but he didn’t seem to like that suggestion.”

“I was doing some errands last week that involved dropping in at a number of retail spots. At one, the very friendly guy assisting me commented on the weather and then spontaneously started telling me about having a SFH for sale east of Main. It’d been on the market for 4 weeks and he’d gotten very little interest and no offers. He seemed puzzled by this. I said that if I was him I’d drop the price steadily until it sold, but he didn’t seem to like that suggestion. I didn’t ask him when or for how much he had purchased.”
– from westsidefrank, via e-mail to VREAA, 16 Jul 2012

Vancouver; Spain – “It was certain, Andy explained, that real estate prices would not decline. The demand was insatiable at almost any price.”

“I remember in 2003 my mother had a New Year’s Eve party at our family home in Málaga, in southern Spain, at which over 80 people sat for dinner, including most of my old friends still around from high school days. That night I had one of those epiphanies (as you often do on New Year’s Eve, I guess) about the real estate market when I suddenly realized that nearly every one at the party was involved in one way or the other in real estate. Most of the people there (including my Persian sister-in-law) were real estate developers, real estate agents, real estate lawyers, architects, or owners of building and construction companies. All of them lived off (and had prospered mightily from) the real estate boom in southern Spain.

But this cannot be, I thought in my naiveté. If the only industry around is real estate, then we must be living through a real estate bubble of enormous proportions.

Later that night I spoke to one of my old high-school friends, Andy, who was at the time a prosperous real estate agent with houses in Marbella (purchased on borrowed money, naturally), a Mercedes, and all the trappings that accrue to an immensely charming and self-confident real estate agent during a real estate boom. In our conversations, and ones that took place subsequently over the next few years, I warned him that the property market in the south of Spain looked out of control, and it would be a good idea from him to diversify his savings out of real estate.

Same old same old

Of course Andy didn’t. He explained to me that what we were seeing in southern Spain was not a bubble because there were very strong reasons to believe that real estate prices were undervalued and were going to rise a lot more. Europe, he told me, is aging rapidly, and old people, as everyone knows, like nothing better than to retire in some warm and sunny place, preferably on the beach. With an infinite supply of European old people and limited European beachfront property, mostly in Spain, Italy, and Greece, where in addition you had great food, warm-hearted people, and plenty of immigrants to keep the prices of services (and servants) down, it was certain, Andy explained, that real estate prices would not decline. The demand was insatiable at almost any price.

This seemed like a perfectly reasonable argument on the face of it, and it was widely proposed to justify ever-soaring Spanish real estate prices for many years, not just on the Spanish coast but also, perhaps a little bizarrely, in every nook and cranny of the country, including some pretty gray and inaccessible building projects outside cold, northern industrial cities.

The weakness in the argument, of course, was that although there might have been near-infinite demand, this could not justify near-infinite increases in prices, especially since the demand itself was likely to be highly pro-cyclical because the Spanish economy had itself become dependent on real estate development.”

– from ‘The unacceptable behaviour of the market’, by Michael Pettis, at mpettis.com, 17 Jul 2012

“Same old same old”, indeed.
Change the date, and a few words, and Vancouver fits like a glove.
– vreaa

“Where I work close to Richmond I was stunned at the amount of commercial real estate available.”

“Where I work close to Richmond I was stunned at the amount of commercial real estate available. For example, a 143,000 square foot building previously occupied by Kodak. I don’t know who thinks this is a great time to get involved in a major purchase after seeing the sheer volume of “For Lease” signs…”
– Prepmonkey at greaterfool.ca 18 Jul 2012 10:35pm

Seeking Value In RE… And Other Spheres – “When my PhD is done, I’ll be more than happy to shake the dirt of Vancouver off of my shoes. Pretty much any other city I go to in North America has either a lower cost of living or better job opportunities or both.”

“Most of the new UBC profs I know live in tiny sky boxes, an hour commute out in the suburbs, or are up to their ears in debt. Remember that years of grad school followed by a half-decade of post-docing leaves them with very little savings. Either mortgage up or buy small and/or far out, because you don’t have a damn thing for down payment.
Honestly, when my PhD is done, I’ll be more than happy to shake the dirt of Vancouver off of my shoes. Pretty much any other city I go to in North America has either a lower cost of living or better job opportunities or both. The only way I lose as a trained scientist is by staying in the lower mainland. This is the sentiment amongst pretty much every other grad student I know who doesn’t buy in to the “best place on earth” dogma.
Vancouver has become a place where young people piss away their 20s in pseudoretirement and student debt and a resort town for the pacific rim economic elite and babyboomers who bought property pre-2001.”…
“I’ve seen a few professors trade up in the real estate market after being in Vancouver for several years. This usually was because they were able to buy a place in East Van, Kits, or Dunbar pre-2004 and trade up as the market got over heated in combination with their income plus the spouse’s… I also know of one person who related the market to a E. coli growth curve and pointed out that we’re hitting plateau phase right now as all economic nutrients have been used up and got the hell out at the peak. Maybe luck, maybe real foresight.”
– ‘UBCghettodweller’ at VREAA 17 Jul 2012 8:55am and 2:11pm

“As a highly trained specialist, it usually makes sense to go where your skills are valued and appreciated, and you can be financially rewarded for having those skills. It is difficult to argue that Vancouver abounds in such opportunities for highly trained scientists (there are exceptions, e.g., geologists and forestry-related scientists).”
– ‘Anonymous UBC Professor’ at VREAA 17 Jul 2012 9:39am

“I stuck it out as a postdoc for a few years and then, adios! And I’ll tell you, I’ve never looked back (although I visit from time-to-time… mainly just to remind me why I’m gone).”
– E.G. at VREAA at 17 Jul 2012 4:28pm

“I have a sister-in-law who graduated form UBC with a PhD in BioChem. just a few years ago. She would have happily stayed in Vancouver, actually she would have happily moved anywhere she had to, for a post-doc or tenure-track position. RE was not an issue, simply landing a good job was #1. My understanding is faculty positions are difficult to come by. A good friend of mine with a new doctorate was just offered a position at UPEI and he is extremely happy, again RE not a factor, just getting an offer was the trick. I sometimes wonder if we place too much weight on the significance of Vancouver RE in regards to career, especially in the early years. After all, renting is always a great option, even for professionals. Regardless, my sister-in-law landed at Stanford, and rents.”
– Allen at VREAA 17 Jul 2012 11:14am

“The phenomenon isn’t restricted to Vancouver (albeit, Vancouver’s RE market distortions arguably exacerbate it)…
Here’s a timely piece from NewsWeek’s Joel Kotkin on ‘GenerationScrewed’ that addresses those themes.”
– Nemesis at VREAA 17 Jul 2012 1:20pm

“Perish the thought there are vast expanses of undeveloped land in North America, ripe for the picking. Areas of California, once deserts and groves, turned into some of the most progressive areas on the planet over the past 40 years.
The “generation screwed” needs to figure out other methods of getting what it wants. Muscling in on the previous generation’s territory is likely going to meet with resistance. From that perspective it should be no surprise apartments are becoming smaller.”
– jesse at VREAA 17 Jul 2012 3:24pm
—

Wise people take advantage of resources that are irrationally undervalued, rather than getting in line to compete with the herd for resources that are irrationally overvalued.
– vreaa

City of Vancouver’s re:THINK HOUSING Competition Submissions

“As part of the work being done by the Mayor’s Task Force on Housing Affordability, re:THINK HOUSING, an open ideas competition, has been launched to generate a broader discussion of possibilities for Vancouver’s affordable housing crisis. Aimed at everyone who has an interest in affordable housing, from the general public, to designers, planners and architects, to philanthropists, non profits and financial institutions, the Ideas Competition seeks to create the space for provocative, bold new ideas that address Vancouver’s affordability challenge head-on.”

Submissions closed on 29 June, 2012, and can now be viewed HERE. [Hat-tip ‘terminalcitygirl’.] Images above are from two of the submissions.

We note there are no “Educate-the-public-about-asset-manias-and-thus-crash-housing-prices” submissions.
– vreaa

The Story Of Burnaby Joe – “He finished high school and has worked in the building trades his whole life. Owns his own home. Now bought his 18 and 19 year old daughters each a new condo.”

“I had some drinks with a friend last night who told me about a friend (let’s call him Burnaby Joe) of his who has contributed to the craziness here in Vancouver. Burnaby Joe is in his mid-50s, born and raised on the east side of Italian parentage. He finished high school and has worked in the building trades his whole life. He owns his own home (probably mortgage-free) in Burnaby.
Anyway, my friend told me about Burnaby Joe’s pretentious and spoiled daughters–18 and 19 years old – who have almost as many shoes as Imelda Marcos in their “clothes room” at home. Each of these girls is as of recently the proud owner of a new condo in the North Burnaby area.
How many of these cases are around? How did Burnaby Joe finance the purchase of these two condos? Cash? HELOC? When the market turns will Burnaby Joe both the means and fortitude to hang on while equity drops monthly?”
– oneangryslav2 at VCI 11 Jul 2012 11:32am

“A friend is leaving Squamish and has to sell, but not a single viewing. They are looking at drastic price reductions, below their existing mortgage, or holding it as a rental until the ‘market turns around’.”

“A friend in Squamish is trying to sell his place…..not a single viewing even after an open house. They are leaving Squamish and so have to sell. Now they are looking at drastic price reductions (below their existing mortgage) or holding it as a rental until the ‘market turns around’ (his words, not mine). I feel for the guy and his family, but this is an example of what happens when you buy at the peak of a bubble. The Aqua development in Squamish still has units available, even after the significant price reductions. There are early purchasers in there that paid nearly a 100k more for the privilege of ownership than a present day buyer.”
– Anonymous at VCI 14 July 2012 10:29am

“My wife doesn’t want to buy, not just because of prices, but also because she doesn’t want to anchor us to Vancouver. But my family will lay on the pressure as prices decrease.”

“I’m starting to feel a bit of angst. My wife (from the East Coast) doesn’t want to buy, not just because of prices, but also because she doesn’t want to anchor us to Vancouver. But my family will lay on the pressure as prices decrease. Could get dicey.”
– Patiently Waiting at VCI 29 Jun 2012 8:32pm

Sensible Words From Sam Wyatt, Westside Realtor – “This is a very serious situation. If you plan to sell, you will need to price BELOW the most recent comparable sales prices. If you don’t do this, your listing will stagnate.”

“Last month I pointed out that the active listing volumes for detached Westside houses actually exceeded the highest volume during the credit crisis. In June the number of houses actively listed was even higher at 1078. During the credit crisis, the active listings of detached homes on the Westside never exceeded 1053 houses. Keep in mind also that the three year average number of active detached homes listed on the Westside between January 2009 and December 2011 was only 589. This is a very serious situation.” …
“Vancouver’s real estate market is getting and is going to get hit from both ends. So, now that you are thoroughly depressed, here is the bright light: IF YOU SELL NOW, YOU WILL STILL BE SELLING NEAR THE TOP OF THE MARKET. If you plan to sell, you will need to price BELOW the most recent comparable sales prices. If you don’t do this, your listing will stagnate.”
– Images, and text excerpts, from ‘July Market Update: Am I Too Late to Sell?’, by Sam Wyatt, Vancouver Westside realtor, at samwyatt.com 5 July 2012

Sensible stuff.
Sure, Sam Wyatt stands to gain if his sellers price sharply, but we happen to agree with his take on the market.
Prices are headed down, and the only way for sellers to get to the front of the queue is to lower their prices.
This is the process by which price drops progress.
This also demonstrates why it’s impossible for anything more than a relatively small number of sellers to get out near a top.
Those who do so will look very fortunate in coming years.
– vreaa

“I agree buying today is insane, but the bears forget that there are legions of homeowners who are living mortgage free. So the market drops.. big deal. I am in for the long haul.”

“One thing most bloggers in here seem to overlook. There are masses of homeowners like myself, who like myself have shaved years off the mortgage monster and have only a few years remaining. We have been given a golden opportunity on financing with ultra low rates that probably won’t return for decades..yes, my old man use to tell me how in the early 80′s, 1st and 2nd mortgages were the norm, 11%-12% rates made you feel blessed.
So, I enjoy the remaining years of my mortgage with a locked in, juicy 2.89%…bought before the market lost it’s bearings – prices may have doubled, but I am loving where we live – mortgage free is just a skip away – and though some will hiss that being liquid is having cash – but I say – what if..just a thought, the world goes into a financial crisis (I know, that’s just crazy talk) and the currencies around the world become worthless toilet paper – hard assets will rule. Money won’t keep you warm at night if those digital numbers all of a sudden get wiped out.
I agree buying today is insane, but the blog dogs forget that there are legions of homeowners who are living mortgage free, investing in themselves and have the same long term investment strategy .. so the market drops .. big deal – I am in for the long haul…I came to terms that dedication and commitment will always prevail, and I climbed my own Everest and watching all the rest scramble below me.”
– Just Park It at greaterfool.ca 12 Jul 2012 9:48am

Sure, there are a majority of owners who will sit tight through even a protracted downturn. Bulls forget that bears expect that. Prices are set at margin, and it only takes for a small minority of owners to become anxious sellers for a price crash to occur.
Furthermore, some owners in the same position as ‘Just Park It’ underestimate how much the market price of their house has come to mean to them. This is one of the perversions of the bubble… regular citizens get distracted by the mania; they change their outlook, their plans; perhaps even at an unconscious level. They anticipate that, if the market drops, they’ll simply shrug and think “big deal”. But then it happens and they notice the unsettling effects. Some will even surprise themselves by rushing to market to attempt to lock in what then remains of their paper gains.
– vreaa

“I went for lunch today and I wasn’t scorned by my friends for being a bear. I can’t find anyone to argue with anymore. The harsh reality of a very long move down is sinking in.”

“I went for lunch today and I wasn’t scorned by my friends for being a bear.
The fun is over. I can’t find anyone to argue with anymore. The harsh reality of a very long move down is sinking in. I am sensing big time panic among a lot of people out there.
Truthfully I thought it was going to be fun but I think it is just going to be sad.”
– McLovin at VCI 30 Jun 2012 9:46pm

Yes, it is going to be a largely sad affair.
And definitely less fascinating than the mania itself.
– vreaa

“If my friend sells his Coquitlam Townhouse for what the same units are going for in his complex he will lose money. He pulled it off the market.”

“My friend was trying to sell his Coquitlam Townhouse as he’s changed jobs and leaving town. If he sells it for what the same units are going for in his complex he will lose money (he’s sunk over 45k into it on Reno’s over the last 5 years). He pulled it off the market, and is now trying to rent it for more way more than the equivalent units in his complex because his has be heavily reno’d.
Methinks there are many stories just like this out there, in the suburbs especially.”
– Anonymous at VCI 11 Jul 2012 7:10pm

“Overheard someone was trying to sell his condo in New Westminster recently. He wanted $370,000 because a 20,000 cheaper unit sold $350,000 early this year. But his realtor told him to list for $320,000.”

“Overheard someone was trying to sell his condo in New Westminster recently. He wanted $370,000 because a 20,000 cheaper unit sold $350,000 early this year. But his realtor told him to list for $320,000 in order to make it saleable.
This is about 20% drop in price.
He disagreed, so pull the condo off the market. But by the end of the year, I guess his condo will worth less than $300,000.”
– good-format at VCI 8 Jul 2012 9:14am

Bear Wins Bet – “Earlier in the year a bull at my work asked me for my prediction for house prices for end of 2012, to which I said 10%-off and he immediately bet me $100 so I took it.”

“Earlier in the year I mentioned a bull at my work, who knows about my bearish views asked my prediction for house prices for end of the year, to which I said 10% and he immediately bet me 100 dollars so I took it.
He came up to me fri and said looks like I might owe you 100, so we kind of got into theories about what is causing the recent declines and he believes it solely has to do with the global economic troubles, namely Europe.
He believes the uncertainty is causing people to slow down buying.
I go on to explain the exact same thing I told him a few months ago, locals over extending themselves and local incomes do not support prices and the recent mortgage rules magnify how sensitive locals economic health are.
But no he still believes what he believes and says I focus only on facts and not the “fuzzy things” his words, such as everyone wants to live here, no land, growing demand etc.
Sigh”
—
“(When he suggested the bet) he got so frustrated debating me that he basically said fine whats your prediction, I said 10%（which I thought was conservative) and he was the one who suggested we bet $100.
He was so sure of himself I think he thought I would have backed down after money was on the table and all the people listening to our conversation.
At the times he had a little group of bulls around him and they all thought I was crazy. Most of those bulls are in the bear camp now. Although I don’t believe they really know the extent of what is to come, they just parrot what they hear in the MSM currently and right now that is bearish news.
This is a smart guy too, and had sold in 08. I think he felt he lost out and never should have sold then because prices dropped but of course shot back up to new highs so he now believes Van RE is bulletproof.”

– 4SlicesofCheese at VREAA 8 Jul 2012 at 1:15am and 9:13am

Bets can be fun, and socially important (they often serve the purpose of modern day duels!), but, as we all know, that’s not where the real ‘betting’ is happening.
– vreaa

David Rosenberg’s Stunning Canada vs US RE Charts – “Canadian housing prices are not sustainable, my friends.”

As the U.S. begins to recover from its housing bubble, concerns have been escalating about a housing bubble in Canada.
“Canada is carving out a top, while the United States is seemingly carving out a bottom,” writes Gluskin Sheff economist David Rosenberg.
Using three charts, Rosenberg points out the stark differences in the Canadian and U.S. housing market and the existence of a possible Canadian housing bubble.

Chart 1. The ratio of Canadian housing starts to U.S. starts is now 0.3x:

Chart 2. Canadian home prices are on average twice the level of home prices in the U.S.:

Historically, average home prices had been close to parity.
Rosenberg asks, “which of the two do you think is going to correct relative to the other?”

Charts 3 & 4. Vancouver & Toronto home prices relative to U.S. home prices:

Vancouver’s home prices are down 12% from year-ago peak levels but still average $733,000. Toronto’s average is about $517,000.
“Not sustainable, my friends,” writes Rosenberg.

– from ‘Canadian housing prices are not sustainable: David Rosenberg’, Financial Post, 11 Jul 2012 [hat-tip pennysaver]
—

Spend some time with these charts and you’ll see why our own call for Vancouver prices to fall 50%-66%, peak to trough, is fairly pedestrian.
By the way, we suspect that US home prices haven’t yet bottomed, and have about another 20% to go.
– vreaa

Kelowna Realtor Selling His Vancouver ‘Rooming House’ – “Listed it at 1.4M, no bites, then 1.2, no bites and then withdrew the listing.”

“I went to an open house in Kelowna today… Talked to the listing agent… Nice guy who says he’d rather be in Vancouver because it fits his lifestyle better… He was trying to sell his 10 unit “rooming house” in Vancouver’s West end… Listed it at 1.4M, no bites, then 1.2, no bites and then withdrew the listing. I guess he needs the money to make up for a bad “real estate deal” which soured in the Okanagan. He said I should buy two houses – one for personal use and one to rent out. Told him I don’t see real estate as an investment… I’d rather buy a bank stock with a 4-5% dividend yield…”
– Bo Xilai at VCI 7 Jul 2012 10:27pm

Kelowna – “Both the deals with “accepted” offers had just collapsed due to “financing”.

“We went to go see houses in Kelowna over the weekend. We saw eight homes – two with “accepted” offers… one our agent showed us, the other was an open house we just happened to walk by… Anyway, we got a call from our agent – both with “accepted” offers had just collapsed due to “financing” issues.”
– Bo Xilai at VREAA 8 Jul 2012 10:06pm

Tales From The Periphery – Victoria and Kamloops

“In the southern interior around Kamloops and Clearwater on holidays, and can’t believe how many people want to cash out right now after buying in last 2-6 years. Nothing selling. Prices softening already and only sharply discounted properties moving. Family and friends I have been telling to hang on and let rent cover payments for at least five more years, which they can do fortunately…no point selling at a loss. But many ppl want or need the “cash” now. Five years of reno’s, renters…and ending up in the negative after transaction costs. Not even having a good time with my told-ya-so’s. So much glut and lack of interest in buying, but this time no more “yeah but it will turn around”…more a sense that “this time it is different” and not in the good sense. True stories from the front lines. CRAZY how much talk there is of RE – everyone is getting in or mostly out…thought it was just fucked up Vancouver’s only conversation point…but, nope, seems everyone else has bought into it across BC.”
– ArthurFonzarelli at VCI 6 Jul 2012 11:55am

“I have a friend that just bought a tear down in Oak Bay last month and is reno’ing it to the tune of 200k. He was bragging his ass off on Facebook like he’d finally achieved membership in some exclusive club. His wife works for the government and he dabbles in a bunch of different things, but they’re by no means wealthy.
He’s going to be f’d to high heaven in a couple of years…..and the club isn’t going to be very exclusive at that point.”
– Anonymous at VCI 6 Jul 2012 2:04pm

“Came back from Victoria last weekend visiting the parents in the Fairfield area (near Gonzales Bay). Could not get over how many homes were on the market. This has not been a neighbourhood that has had an overly high turnover of ownership (even the parents noticed as they don’t drive but walk everywhere). Many of them were also waterfront properties. Drove through the Uplands bit – LOTS of homes on the water side for sale – presumably in the millions+ category. Can’t imagine who will be snatching all these homes up.
Walked through the Bay Center(?) mall downtown in the middle of the afternoon – it wasn’t anywhere close to being busy. Actually, now that I think back, there really wasn’t one shop I went into where I had to wait in line to pay or would be considered busy. How do people make any money in Victoria? There’s nothing there but small businesses that close at 6pm. Yet the average home in Fairfield area is around $700-$900K. Truly mind boggling.”
– unimpressed at VCI 6 Jul 2012 at 3:01pm

Whistler Hilton Blowout Sale – Looks like some American from New Jersey has defaulted and foreclosed on something like 40 units at the Hilton in Whistler.

“Anyone know what’s going on with all the HSBC foreclosure sales at the Hilton in Whistler? Looks like some American from New Jersey has defaulted and foreclosed on something like 40 units. Ouch. They are blowing them out however so you’re seeing the Whistler stats spike a bit on volume.”
– ZRH2YVR at VCI 8 Jul 2012 11:06am

“Are you a landowner in Pitt Meadows?” – “No, a happy renter while the market collapses.” – [Laughing] “That won’t happen!”

“I was just walking into the IGA in Pitt Meadows, where the front page news is property taxes squeezing pensioners and fixed incomes.
There out front of the store stood an older gentleman beside a table, with signage relating to the hot topic and asked me if I was a landowner in Pitt Meadows, I blurted out without a thought “No, a happy renter while the market collapses, which will sort the tax issue at hand.” The man burst out laughing and proclaimed “That won’t happen!”.
May I note that adjacent to this IGA are the foundations for a 388 unit condo building. They’ve got the posts up for the signage to face Lougheed, but the marketing placards aren’t up yet. At the same time, behind the IGA, there is a rezoning app for a 97 unit residential mixed use, all within arms length of 4 other condo/townhouse developments that appear to be certainly under six to eight years old.”
– from Aldus Huxtable, via e-mail to vreaa, 8 Jul 2012

Forests and Trees – “They discussed the relative merits of the other houses for sale in the area. Lot size differences, backyard exposure, etc. I realized that everyone is blind to this bubble because they are obsessed with minutiae.”

“A friend from Toronto is in town, we met up with her at her brother’s house yesterday. They live in a BC box in North Burnaby. I went prepared not to talk real estate because the house is for sale. They are asking $820k, the ad on MLS describes it as a “great starter home”. Which it is, but with the price tag of a mansion. The realtor is my friend’s other brother. So you can see why I kept my mouth shut. Even without my prodding, talk turned to real estate. They are expecting a third child and want to move up to a bigger place. The wife figures they listed two weeks too late (they listed in April). The husband make a comment about his realtor not being able to sell the place (a good hearted dig at his brother). Then they set about discussing the relative merits of the other houses for sale in the area. Lot size differences, western backyard exposure vs eastern, etc. I realized for the first time why everyone is blind to this bubble, they are obsessed with minutiae. I have never before seen a more accurate manifestation of the rearranging deck chairs on the titanic analogy. These folks believe it will just take time to get their price and they are prepared to live in the current house with another kid for awhile. I hope this doesn’t cause a rift in the family as the coming debacle won’t really be the brother-realtor’s fault. And these guys should have a ton of equity and if all they really want is a bigger place, then selling and re-buying should work out regardless of what point they do it. They are probably too deep in to real estate mythology to do the really smart thing which is to drop their price, sell fast and rent for a few years. But I’ve come to realize, that’s asking just to much from the Vancouver home owner with small children.”
– Lexlimo at VREAA 8 Jul 2012 9:46am

“Last week I talked to a couple I was acquainted with about the current market hazard. They kept obsessing about their lot size compared to the neighbors, how it had different zoning, why it had value because it was hand-hewn blah, blah…….and I am looking at them chase their tails on a discussion of irrelevance ahd shake my head in wonder. They had just finished telling me they bought the place (on the bald flat prairies) just 10 years back for 40k and now it could easily fetch 220k and I am thinking that these stunned monkeys really don’t get it at all. They know it went up in price inexplicably but just cannot seem to fathom it falling back to what it was…….the madness of crowds.”
– Farmer at VREAA 8 Jul 2012 at 10:05am

British Author – “I’ve owned my current house, a six-bedroom detached property, for 25 years. I paid £47,000 and it’s now worth around £750,000. Buying property has always been my best form of investment.”

HOW DO YOU FEEL ABOUT PENSIONS?
“I wouldn’t recommend anyone take out a pension; much better to invest in bricks and mortar.”
SO PROPERTY IS YOUR MAIN METHOD OF INVESTING?
“Yes. I’ve owned my current house, a six-bedroom detached property, for 25 years. I paid £47,000 and it’s now worth around £750,000. Buying property has always been my best form of investment. After doing them up, often a member of my family would take them on or I’d sell for a good profit and reinvest in a new place.”
HAVE YOU EVER INVESTED IN SHARES?
“Yes, but I’ve got rid of them all and wouldn’t buy again. Years ago, I knew there would be a financial crash. People who didn’t have money were being lent loads, getting 100pc mortgages with no real hope of paying anything back; it was a ticking time bomb. That’s when I decided to get rid of all my investments – mostly shares – and turn them into cash before investing in property.”
– from ‘Adrian Mole author Sue Townsend talks money’, Richard Webber, The Telegraph, 1 Jul 2012

The global bubble in RE will only be over when people have been taught to doubt recently ingrained ‘truisms’ about ‘bricks and mortar’.
– vreaa

Retail Rents Compared – “Vancouver’s Robson $150, Toronto’s Bloor $300, NYC’s Fifth Avenue $2,250”

Despite the departure of anchor tenants such as HMV and Starbucks, Robson Street — the second-most-expensive retail street in Canada after Toronto’s Bloor Street — is far from dead, according to local retail experts.
The street is a vibrant area going through a time of transition and speculation, with landlords wanting to get top dollar, but retailers hesitant to pay high rental rates, said David Ian Gray, retail consultant with the firm DIG360.
“It’s an interesting time. Robson is in this state of flux,” Gray said. “But when you see the J Crews, the CB2s and the Forever 21s coming in, it’s not a dead street.”
…
However, a new report by Colliers International found the price of rent on Robson fell by 25-per-cent year over year on leases signed during the nine months ending March 31, but the decline is not an indication the street is losing its cachet, according to James Smerdon, Colliers’ director of retail and strategic planning in Vancouver.
Monthly retail rents for new lease deals on Robson averaged $150 per square foot — a bargain price for international retailers, who pay an average of $2,250 per square foot on New York’s Fifth Avenue, which tops Colliers’ global list.
The drop in rent on Robson is a result of a few large stores opening in mid-block locations on the upscale street, rather than on the corner, where rents are typically higher, Smerdon said.
…
“This isn’t an average rate, it’s a survey of recent and notable transactions,” he said.
…
According to the Colliers’ survey, new leases were most expensive on Toronto’s Bloor Street, where rents averaged about $310 per square foot, followed by Robson Street, Alberni Street, and Montreal’s Rue de la Montagne, where new lease rates averaged $80 per square foot.
…
– from ‘Don’t write the obit for Robson St. just yet’, Tracy Sherlock, Vancouver Sun 10 July 2012 [Hat-tip Joe_Blown_Away_By_High_Housing_Costs]

Average or not, it seems Robson is available at $150/sqft.
Vancouver’s Robson $150, Toronto’s Bloor $300, NYC’s Fifth Avenue $2,250.
Perhaps accurately reflecting the relative economic and cultural importance of these centres?
– vreaa