Don Campbell, ‘Real Estate Expert and Educator’ – “We can’t ride that emotional roller coaster thinking that it’s about making money.”

Don Campbell: “We’re probably 12-15% above what the underlying economic fundamentals should say the prices are in Vancouver… so it’s not a bubble, but it is overpriced.”

Don Campbell: “Go through Kits, go through the Westend, you start to see a lot more properties up for sale. It’s a psychological thing… people are thinking ‘oh my goodness I have to get out now’… even though they probably bought it for 300, it went up to 600, it’s probably now 550.. they’ve still made their 300 grand… but as we’ve talked before there’s fear and greed, fear and greed, the greed gland goes (inaudible).. you haven’t lost any money, you’re still living in a place.. The important thing is that in Canada, owning your own home is the only.. the only tax shelter that we have left.”

Don Campbell: “I’ve been doing this for 20 years, the values go up, and the values go down… we can’t ride that emotional roller coaster thinking that it’s about making money.”

Interviewer: “Right, so, get into the market if you can, but, what about the interest rates?”
Don Campbell: “Interest rates will not be moving. .. Love them or hate them, what they did with these changes was brilliant. .. They put a 1% targeted interest rate [hike] on the housing markets.”

Interviewer: “Now, it is ridiculously expensive to get into the market if you’re looking to buy a detached home..”
Don Campbell: “Mmmhmm [agreement]”
Announcer: “..anywhere in…”
Don Campbell: “…anywhere!..”
Announcer: “…except in the States! … You get way more for your money than in Vancouver… So, are we ever going to see the prices come back to reflect reality here?”
Don Campbell: “Yes, we’re starting to see a slowdown in the market, we’re going to see a bunch of listings, but you’ve got to realize that what happened in the Phoenixes and the Palm Deserts isn’t going to happen here.. down there it was.. really.. it was a bubble.. a pure and clear bubble.. here it’s not.. it’s just the pendulum has swung towards overvalued… it’s not to the point of going all the way around… so, we’ll see a slowdown, and we are witnessing that, but we will not see a slowdown where job creation is occurring, the Dawson Creeks, the Albertas, the southern Saskatchewans, there’s none of these rules there, there’s nothings going to happen there other than pressure up..”

Don Campbell, ‘Real Estate Expert and Educator’, on Global TV, 30 Jun 2012. Archived on youtube by Campbell’s own ‘Real Estate Investment Network’. [hat-tip Ben Rabidoux and jesse]

Thoughts:

1. We are not “12-15% above what the underlying economic fundamentals should say the prices are in Vancouver”. It’d be interesting to see on which numbers Campbell is basing that assertion.
We are actually more close to being greater than 100% overvalued; 100% above what underlying economic fundamentals such as rents and incomes say the prices should be in Vancouver. This means that we’d need a price drop of 50% or more to attain fair value. If that sounds preposterous to any reader, remember that the publication ‘The Economist’ calculates that housing prices for the whole of Canada are 75% overvalued as calculated by rents (perhaps the most valid fundamental).

2. No, the Kits owner in Campbell’s example has not “still made their 300 grand”. Their 300K paper profit has dropped to 250K, and is threatening to fall further, quite possibly to zero ‘grand’ (if prices were to drop 50%).

3. Homes are not “the only tax shelter we have left”. TFSA’s are another tax shelter, admittedly smaller and far less broadly used.

4. It is to the interviewer’s credit that she asserts that Vancouver homes are “ridiculously expensive” and that prices do not “reflect reality”. Campbell does not convincingly respond to these challenges, however. His last quoted statement above, for instance, shows him taking a question about Vancouver RE overvaluation and answering it with reassurances that job creation in Dawson Creek and Saskatchewan will support those markets. Huh?

5. Campbell is on record repeatedly reassuring market participants that there is no bubble, but it’s not clear he even knows how to define a bubble. In this interview he seems to express the fuzzy opinion that it’s “(when the pendulum) is to the point of going all the way round”.

6. Imagine the thousands of homeowners heavily dependent on the value of their RE holdings for their future financial health. As those holdings begin to plummet in price, tell them not to worry, that “it’s not about making money”. Take note of the responses you receive.

– vreaa

Prior posts featuring Don Campbell:

BNN Don Campbell Interview Transcript – “The Apocalypse Is Not Coming” – ‘Plateau’ As Worse Case Scenario
[VREAA 30 Oct 2010]

Don R. Campbell, President of REIN, In His Own Words – “Bubble, bubble boil and trouble! I just keep hearing this whole thing about bubbles this and bubbles that… It’s not a bubble. It is a very readable cycle.”
[VREAA 17 Nov 2011]


UPDATE:

In comments on this and another thread, Ben Rabidoux added:
“I am SHOCKED that no one caught the unbelievable error in Don’s discussion of the new mortgage rule changes. Apparently, according to this “real estate expert” you used to be able to avoid CMHC insurance by putting 15% down and now that has changed to 20%. What an unbelievable oversight!!!!! How is that excusable for someone who claims to be an expert? +80% LTV mortgages have required CMHC insurance for years!” …
“Oh and as a kicker, after I pointed the mistake out to Don via twitter, he removed the blog entry on his site that contained this video and then messaged me asking me to be more discreet when I correct him in the future by direct messaging him instead. I guess he can’t afford to have the REIN flock lose faith in their infallible leader.”

52 responses to “Don Campbell, ‘Real Estate Expert and Educator’ – “We can’t ride that emotional roller coaster thinking that it’s about making money.”

  1. Well done vreaa
    More solid comments about market pumpers
    People need to get rid of this silly notion that the increase in value was income
    Only if you sell do you get that gain

  2. Renters Revenge

    So what exactly makes Don a “real estate expert?” What are his credentials? Why should anyone listen to this guy?

    Maybe it’s the fact that he has gone “the final 30 feet” and has actually bought and sold real estate?
    http://www.donrcampbell.com/never-break-the-final-30-feet-rule-when-investing-in-real-estate

    Guess that makes me a real estate expert too! Now when’s my global interview?

    • When RE prices drop, negotiators realize they can save money by cutting agents out of the process. For Sale by Owner signs were everywhere as I traveled Lake Country this past weekend. The first ditched when times get tough are the parasites. No one needs a real estate agent to buy anything. They are convenience for the lazy. All you need is a title search, a notary, and a decent builder to eyeball it.

  3. pricedoutfornow

    Is this the guy who advocated buying several highly-leveraged properties? I think I know someone who listened to this advice, over the course of a couple months, he suddenly bought 3 properties as “investments”. Sadly, at least one of them is underwater (in the Okanagan)-he tried to flip it but there were no takers. Now he’s stuck renting it out and losing probably $1000/month because the rent doesn’t cover the mortgage.

  4. ‘cycle’ – lol

  5. Ralph Cramdown

    Of course he’s a real estate expert. Every day, he wakes up and peruses the details of a number of deals which he could invest his money in. Which one does he pick? Invariably it’s the one where he buys a plane ticket, books a hotel, and gives a speech to people about R.E. Those people accept that he’s an expert. The man’s no fool — he invests his money for maximum ROI.

    Unfortunately, it’s hard to tell people that they can make good money in real estate, SOMEWHERE, but that real estate HERE won’t be a good investment for the next five or ten years. Who’s going to pay big money to learn to be a long distance landlord? So he has to say that if you look hard enough, the deals are out there, somewhere within a few hundred km of everywhere he talks.

  6. Holy crow, Batman. Did Don Campbell learn real estate out of a cracker jacks box or is he deliberately bluffing about the extent of the problem for the cameras. I have no idea who Rein is but it is pretty clear to me that this guy is running an agenda. Calling him a “real estate expert and educator” is a pretty big stretch but that seems to be what Global has done and that strikes me as one very big disservice to its audience. That is junk news.

    • I have updated the post with two links to other posts featuring Don Campbell.
      I suspect you’ll find them of interest.

      • Thanks. I will take a look. So far I am still dizzy from amazement that this guy even gets offered airtime to deliver worthless blather to an anxious and worried viewership of homeowners. Is this what passes for comfort now?

        What we really need is a little more straight talk from the experts.

  7. Van east guy

    People prefer to buy a home over tfsa’s because most people don’t know how to invest. And the capital gain on a home is potentially higher. People that do own a tfsa, they have it invested into a gic or a hight interest account. $20k can buy a 400k home. Our government needs to educate the people of this country.

    • lol – not big into personal responsibility, are ya

      • Van east guy

        What are you talking about? Its a fact, isn’t it? I have a tfsa grown to 35k already. And I manage my wife’s too. She has $29k in hers. We contributed the 20k allowed.

    • The fatal flaw with this argument is that one think RE investment is by default “easier” and/or “more profitable” than one could do with TFSA.

  8. GoodWillRenting

    “The important thing is that in Canada, owning your own home is the only.. the only tax shelter that we have left.”

    How in the world can he get away with making a statement like that? TFSAs (as noted by VREAA) and RRSPs exist.

    It’s one thing to issue your own opinions on the overvaluation of an asset class (i.e. 12-15% overvalued). There’s an element of subjectivity in the necessary assumptions.

    But to in effect state TFSAs and RRSPs don’t exist is quite another. Very sleazy, imo.

    • “How in the world can he get away with making a statement like that? TFSAs (as noted by VREAA) and RRSPs exist”.

      These are tax deferrals, not tax shelters.
      Physician, heal thyself.

      • RRSP is a tax deferral which has some tax shelter properties since it gives the ability to count income in advantageous years. TFSA is a tax shelter on gains, although tax is paid on initial amounts deposited. It’s not a tax deferral in any sense.

      • “TFSA is a tax shelter on gains, although tax is paid on initial amounts deposited. It’s not a tax deferral in any sense”

        when you withdraw from TFSA you declare the income and income tax must be paid. In essence it is a tax deferral unless you withdraw at a time when your regular income falls lower than $10,822.
        You pay zero tax on sale of your principal residence. It truly is the only tax shelter on appreciated investment.

      • “when you withdraw from TFSA you declare the income and income tax must be paid.”

        Nothing further from the truth.

      • “You pay zero tax on sale of your principal residence. It truly is the only tax shelter on appreciated investment.”

        For normal people (i.e. non HAM), they make mortgage payments on their homes using after-tax money. TFSA is really a direct comparable to principal residences in terms of tax characteristics (namely investments that are bought with after-tax money and no tax on gains).

      • “When you withdraw from TFSA you declare the income and income tax must be paid.”

        Wrong, F1. Capital accumulates tax-free in TFSAs, and you pay ZERO taxes when you withdraw.

        http://www.tfsa.gc.ca/

      • Van east guy said:
        “People prefer to buy a home over tfsa’s because most people don’t know how to invest”

        F1 confirms with:
        “when you withdraw from TFSA you declare the income and income tax must be paid. In essence it is a tax deferral unless you withdraw at a time when your regular income falls lower than $10,822.”

        That was a quick proof.

      • Now how is anyone going to take you seriously after a comment like that??? Do people really not understand how a TFSA works?

      • Van east guy

        F1:

        You obviously don’t hold a tfsa. And you shouldn’t. Keep your condo.

      • F1, just in case you were wondering, the classy move here is to say ‘oh sorry, I didn’t know that. Thanks for clarifying’.

      • Agreed, Bally. Alas, your hopes for F1 are much too high…

      • Yeah, that’s a pretty major ‘blooper’ to make here in black and white, f1.

        Bally -> We have yet to see formula1 ever admit to having gotten anything wrong. We can always live in hope, I suppose.

      • This one definitely beats out his recent claim that nobody has ever sold their home for a loss

      • GoodWillRenting

        Turning aside from the obnoxious ignorance of F1 for moment, what’s the deal with Don Campbell’s sales pitch?

        I mean, it’s about as ethical as a used car salesmen telling a prospective car buyer they must buy a car because public transit doesn’t exist (and about as equally “clever”).

        I’m not some real estate-hating zealot, but shouldn’t (what I assume are) intentionally incorrect public statements made by a “financial educator” be held accountable?

      • LOL formula1
        With all the time you spend on the internet that you could google how TFSA’s work before you make that statement.

        But thats good for us, because we see more and more how SMRT you are!!!

  9. Not to fear, most people won’t have listened to this guy anyway, or anyone else apparently.
    http://business.financialpost.com/2012/07/09/mortgage-rules-change-today-but-about-half-canadians-dont-know-it/

  10. “it’s just the pendulum has swung towards overvalued… it’s not to the point of going all the way around”

    Hmm… This guy seems to have no idea how pendulums work. In fact, likening the market to a pendulum makes it mathematically certain that we will eventually be in an undervalued market.

    Thanks for the insight Don.

  11. I too would love to see the calculations/reasoning by which a Vancouver detached home is overvalued at $1 million, but not at $900k.

    • Ralph Cramdown

      Ooh ooh ooh! I know the answer to that one! At a mil, the bank takes the risk on the mortgage, but at 900k, it’s the taxpayer?

  12. seeing as how Don writes and sells books, why should he care about his Real estate business now, if only to generate publicity? The point is: There is no such thing as bad publicity. He can handle the shocks to the public of his bullsh$t and the reaction on this forum and others, than why should he care about being accurate? As long as he’s in your face with a book in the wings… book publishing is a great fallback position as the wheel’s come off this train. Understanding this guy is easy. The world is full of them.

    On another note, I haven’t come across his date of birth, but he mentions that he’s been in the business 20 years, and starting out at 20, so is he 40?
    If so, of course he’s a bull, there is no other way to be at that age. Bullish-sh!tt!ng damn near everything. Remember being 40? you felt like you were 30 or 35.

  13. Colonel Kurtz

    what a douche!

  14. Average household income X 2.5 years = average house value. That’s the rule of thumb in lending. The derivative, notional value will be bled off. Vancouver does not have the employment infrastructure to support RE valuations @ 10X wages.

    An important factor that’s rarely addressed: Pressure to sell as newer buildings deteriorate without adequate financing for maintenance. Upkeep on a house in Vancouver is similar to a ship on the water. $$$

    • I honestly don’t recall the last time Vancouver average house was worth 2.5 X median household income – has it been in the last 30 years?

      When I bought my house in 2001, at the near last bottom of our market, the place was worth roughly 4X median household income. However, I was only allowed to borrow 2X household income.

  15. http://vancouverpricedrop.wordpress.com/2012/07/09/apparently-vancouver-is-15-overpriced/

    I did a little bit of analysis and number crunching and the shocking result is that Don Campbell and other experts might be wrong about this!

  16. formula1 wrote:

    “when you withdraw from TFSA you declare the income and income tax must be paid…”

    A-HA-HA-HA-HA-HA!!!! Give your head a shake….. here’s what CRA says:

    http://www.tfsa.gc.ca/tfsarrsp-eng.html

    “TFSA contributions are not tax-deductible but the contributions and the investment earnings are exempt from tax upon withdrawal.”

    Geez…..

  17. Here’s what another real estate “expert & educator” had to say in the US, circa 2005. It’s a personal favorite :

    No Housing Bubble Trouble
    by Alan Reynolds

    http://www.cato.org/publications/commentary/no-housing-bubble-trouble

  18. F1 – – Stick to real estate – if you understand that as much as you understand the TFSA you’ll do just fine. . . . and I thought it was the bottle of wine I had with dinner tonight . .

  19. on the topic of vancouver real estate and gambling… i randomly started reading a book by local vancouver author Kevin Chong, My Year of the Racehorse, in which he starts off wanting to buy a vancouver condo but quickly realizes the prices make no sense and decides to spend his money buying part ownership in a racehorse instead.

  20. I just watched the actual video on youtube. There’s a bit in the video that wasn’t transcribed– can someone please explain what he’s talking about in the first 45 seconds? He says something about CMHC rules only applying if you put less than 15% down. Thought it was less than 20% down. Am I missing something, or is that straight-up misinformation?

    • Yes, we only transcribed a few excerpts.
      And, yes, the ‘15%’ is misinformation (or sloppy thinking); 20% is the cutoff.
      (At first I thought I was watching an old interview and had to check the dates!).

  21. I am SHOCKED that no one caught the unbelievable error in Don’s discussion of the new mortgage rule changes. Apparently, according to this “real estate expert” you used to be able to avoid CMHC insurance by putting 15% down and now that has changed to 20%. What an unbelievable oversight!!!!! How is that excusable for someone who claims to be an expert? +80% LTV mortgages have required CMHC insurance for years!

  22. Don is great, even REIN insiders take him with a grain of salt. Not that that’s a bad thing, he’s worth the price of admission. So I heard.

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