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]
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.
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]
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.”