REbelle, REbelle… – “My 17 year old niece told me a bunch of her friends were thinking about going in together to buy a place and instead of renting when they graduate high school.”

“My 17 year old niece told me a bunch of her friends were thinking about going in together to buy a place and living there instead of renting when they graduate high school…
They are all smart so I’m sure they will eventually have good careers but currently they all have part time / summer mall jobs.
I told her it was the worst idea ever on so many levels and thankfully she agreed. Still, it shows you how brainwashed we’ve become.”
- an observer at VREAA 30 Aug 2012 8:51am

“I was on the bus recently and overheard a few young girls talking about buying a place when they go to university next year. The usual “rent is just throwing money away” and “I’ll sell it in a few years and make some cash” we’re part of the conversation. Yowza. 18 with a mortgage, a student loan, and a credit card… Sounds like a recipe for disaster.”
- Terminalcitygirl at VREAA 30 Aug 2012 10:47am

“She got three offers but the first two couples who put in an offer didn’t get approved for financing.”

“I had a chat with a colleague yesterday at lunch. She’s just relocating in Calgary and managed to sell her house pretty quickly. Interestingly, she got three offers but the first two couples who put in an offer didn’t get approved for financing.”
- Makaya at VCI 23 Aug 2012 2:28pm

“One of my deadbeat buddies from high school, who never held down a job or followed through on any type of ambition, just bought a place in Surrey, with 5% down.”

“So one of my deadbeat buddies from high school (never held down a job or followed through on any type of ambition) just bought a place in Surrey. With 5% down. He actually bought it in April and I only found out last week when I passed through town.
So that means we’re at a market top. It was official the day he closed.”
- RiskArb at RE Talks 29 Aug 2012 7:23am

CMHC – Profits fall; Claim losses “jump”.

“Canada Mortgage and Housing Corp. saw profits at its mortgage insurance business fall sharply in the second quarter largely due to a jump in losses from claims. The rise in claims losses suggests that an increasing number of borrowers whose mortgages were insured by CMHC have been unable to make their payments and have lost their homes. Mortgage insurance pays the bank back when a borrower defaults.
In its second-quarter results, released Wednesday, CMHC said that its losses on mortgage insurance claims rose to $168-million for the three months ended in June, up from $144-million in the same period of 2011 and $154-million in the first quarter of this year.
That’s part of the reason why profits from CMHC’s core mortgage insurance business fell to $255-million, down from $341-million. The earnings were also hurt by paper losses on a mutual fund investment that suffered when international stock markets fell.
Part of the reason for the growing claims losses of late has been the dramatic increase in the amount of insurance that the Crown corporation has in force.”
- from ‘Jump in claims pinches CMHC’s insurance business’, The Globe and Mail, 29 Aug 2012 [hat-tip allen]

Olympian Task – Buying A Home In Canada

“The next milestone in Olympic marathoner Reid Coolsaet’s life doesn’t involve running.
“I’m looking to buy a house over there,” he said, pointing to a row of backyards that lines Westdale’s Churchill Park.
The 33-year-old Hamiltonian returned home last week from the Olympics after a little bit of traveling.
But the London 2012 games didn’t work out as Coolsaet planned. He came in 27th.
“I already had a 25 at the World Championship so I thought top 20 was really doable,” he said. “Hopefully a top 10.”
Coolsaet said he was confident at the start of the race, running the first mile at a pace that would have medaled.
But at 26 degrees, it was a hotter day than runners expected.
“I faded bad in the last 5 km, but there were guys who faded worse,” he said.
- from ‘Olympic runner returns home to Hamilton’, CBC, 28 Aug 2012

Filed under ‘RE References In Popular Culture‘.
- vreaa

Vancouver Restaurants: Crunch The Numbers – “Both establishments were located in downtown Vancouver, where rent prices feast on restaurant profits. MacKay was paying $40,000 in monthly rent for the two locations.”

Two high-profile restaurants run by celebrity chef Dale MacKay served their last suppers last Saturday and closed the doors for good. … MacKay opened Ensemble Tap, a casual restaurant, soon after opening Ensemble. Both were located in downtown Vancouver, where rent prices feast on restaurant profits. He was paying $40,000 in monthly rent for the two locations. “You crunch the numbers, you do your best to forecast and try to attain that,” he said.
“Ensemble did very, very well right off the bat. It was a success. We had good feedback but I went in a little under-capitalized into Tap,” said MacKay. “It’s a big space. It’s not Gastown or the East End. The rents are very, very high.”
- from ‘Top chef Canada, Dale MacKay closes his restaurants’, Mia Stainsbury, Vancouver Sun, 27 Aug 2012 [hat-tip 4SlicesofCheese]

“The agent in China was caught off guard as well – the brochure showed trees and ocean!!!”

“With regards to ‘Yu Living’ green condo at UBC south campus, my in-laws in China bought a place site unseen. They are furious now that the view overlooks a future BC Liqour store and Save on Foods. The agent in China was caught off guard as well – the brochure showed a trees and ocean!!!
They should not bought a place with so little advance research; they come from a generation that respected universities and assumed that they were buying into a quality life style for future grand kids.”
- ‘Not too happy’ at VCI 27 Aug 2012 6:02am

It’s easy to be happy with almost any property when prices are barrelling upwards.
When prices stagnate or start falling, owners become more critical of a property’s shortcomings.
Expect lots of stories like this in the downturn.
- vreaa

Vancouver ‘Affordability’ – “The worst levels on record.”

“Nothing, of course, could persuade condo king Bob Rennie that the Vancouver housing market is in a bubble (or, worse yet, a bubble that’s starting to let the air out).” …
“The Vancouver area continues to be the least affordable market in Canada by a considerable margin. RBC’s measures deteriorated further for all types of housing in the area, standing close to the worst levels on record.”
- from ‘RBC: Homeownership costs are now 91 per cent of Vancouverites’ income’, Maclean’s, 27 Aug 2012

Someone Sipped A Latte In The Rain – “I was staying with my aunt and uncle in their $2 million tear down. The city has no industry other than renovating or demolishing and building houses. Such a funny place.”

“Just got back from Dampcouver. Such a funny place . . . was staying with my aunt and uncle in their $2 million tear down. The city has no industry other than renovating or demolishing and building houses. Beyond that is seems like a pricey adult theme park . . . and tourism has such high paying jobs. Funny thing is you sometimes have 7 for sale signs in a row even in the ritzier areas. Guess there must be something special about sipping lattes in the rain.”
- bsallergy at greaterfool.ca 24 Aug 2012 10:58pm

Move here. Buy some RE. Then you’ll understand.
- vreaa

“As a man in my late 30′s, living in Vancouver, who has done better than average in terms of income over the last decade, I can say that owning a home here is almost impossible without putting yourself in a state of constant stress.”

“As a man in my late 30′s, living in Vancouver, who has done better than average in terms of income over the last decade, I can say that owning a home (not a 600sq ft box in the sky) is almost impossible without putting yourself in a state of constant stress. I have averaged about 150K a year, and still, living in Vancouver proper, in a house, is out of the question. I have no interest in being house poor due to over blown house prices. It is so very frustrating to live in a city where people heads are buried in the sand with regards to what is a “normal” condition for property values. I still hear from those “in” the market, that “it won’t go down”… “There is only so much land”… “People want to live here.” Vancouver is a city where the average person is either on the outside looking in, or living in fear that they are going to lose everything because they bought into the hype of the high school educated Real Estate agent. And listening to the banks opinions about housing prices, is like your neighbourhood dealer telling you that crack isn’t addictive.”
- DJIVB, comment at bnn.ca 23 Aug 2012

“People come to town and say it is a bubble, but what do they know?”

As Vancouver’s real estate market cools, losses on the troubled Olympic Village development could soar above $225-million unless condo king Bob Rennie quickly drops prices on unsold units that have languished on the market for too long.
That’s the view of developer and architect Michael Geller, a former NPA council candidate, who suggests flawed pricing and weak marketing is turning the fiasco on False Creek from bad to worse. …
Geller said he fears the city will be unable to sell many of the remaining condos at current prices, as Vancouver’s real estate market seems to have peaked “a year ago when there was a lot of fervour from Asian buyers.”
Geller says better to cut prices and stop losses as competing developments and resale units start to hit the market at prices below Village units, than continue to pay carrying costs for years in hopes of seeing a big real estate rebound. …
“A lot of people in the real estate community are saying this project shouldn’t be taking years to sell out. Everybody knows the market has softened over the last year, and is going to continue to soften.”
…
“The problem with arm chair gossip that the Michael Gellers of the world have, is they don’t sit in the board room with the decision makers and the stake holders … and we have fine-tuned the pricing all the way through,” Bob Rennie said. …
“People come to town and say it is a bubble, but what do they know?” Bob Rennie said.
…
- from ‘Developer Michael Geller says city should cut losses by discounting Olympic Village units; Condo marketer Bob Rennie dismisses Geller as ‘politically motivated’, The Province, 24 Aug 2012

People from out of town have… perspective.
- vreaa

“The woman suggested to the realtor they list her Westside home at assessment value to start. No way said the realtor, they told her 200K below assessment was much closer to market.”

“I was at a function on the weekend and spoke with a woman who just listed her West side home. She had just met with one of the ‘Super Star Realtor to the Stars’ (which is another sign of how nuts this place is).
The woman had suggested to the realtor they list at the assessment value to start. No way said the realtor. They told her 200K below assessment was much closer to market.
What is fascinating in Vancouver is that the common belief is that the assessment is lower than the actual value. This, of course, helps us all stomach the high taxes. Except in many cases it is obviously not true or at least not true anymore.”
- Junius at greaterfool.ca 27 Aug 2012 9:55am

Throughout the mania it was indeed ‘common knowledge’ that properties were ‘worth’ more than ‘assessed value’.
We’ve noted, too, that this has now changed.
- vreaa

CIBC – “Demographic forces will be as supportive to real estate markets in the coming decade as they were in the past decade.”

“Demographic forces will be as supportive to real estate markets in the coming decade as they were in the past decade,” CIBC economist Benjamin Tal says in a report. …
“The growth in the number of Canadians in the age group 25-34, which accounts for the vast majority of first-time buyers, is projected to be much stronger. In other words, the group that is most likely to buy a house will grow faster in the coming decade,” Tal says. …
“The housing correction in the 1990s came with a softening in demographically-based housing demand, CIBC says, which dropped from an average annual rate of more than 2 percent in the late-1980s to 0.2 percent during the 1990s.” …
“Assuming that any upcoming adjustment in housing market activity will occur in a non-recessionary environment, demand for housing in the coming decade should be more than four times stronger than it was during the dreary market of the 1990s,” Tal says.
An increase in immigration is also expected to boost the housing market, according to CIBC, as home ownership rates for immigrants ten years after they have arrived are higher than among those born in Canada.
“So, while housing market activity is projected to soften in the near-term, the good news is that any adjustment will not be aggravated by negative demographic forces,” Tal says. “In fact, at least for the next decade, demographic forces will be strong enough to mitigate the damage and probably shorten the duration of the upcoming market adjustment.”
- from ‘Housing crash fears overblown: CIBC’, bnn.ca, 23 Aug 2012

Real demand for housing supports fundamental-derived prices, not speculative-derived prices.
Perhaps the weakness in the Canadian market in the 90′s came from waning demographic demand.
The weakness now commencing is the result of a cresting speculative mania. Fundamental-derived price supports (based on rent yields or local incomes) only come in at prices far below current market prices. A slight increase in demand due to demographic factors will not substantially change the reconciliation that is going to be occurring.
- vreaa

“Shows much larger than the square footage” – “That’s good, because at 508 square feet, this place is only slightly larger than some of the bedrooms available in similarly-priced houses in other markets.”

“Vancouver — $688 Per Square Foot
This one-bedroom, one-bathroom corner unit in Vancouver’s Kitsilano neighbourhood “shows much larger than the square footage,” the realtor boasts. That’s good, because at 508 square feet, this place is only slightly larger than some of the bedrooms and living rooms available in similarly-priced houses in other markets. The condo boasts “gorgeous mountain views,” but it’ll cost you — $688 per square foot.”
- from ‘What $350K Will Buy You In These Canadian Markets’ slideshow, Huffington Post Canada, 24 Aug 2012

Off The Market – “The ‘For Sale’ sign has disappeared from the lawn. My wife figures they got too close to the baby’s birth to be able to deal with a move.”

“Just a quick update on the couple I know in Burnaby who are expecting a third child and trying to sell to move up to a bigger place. I drive by their $820k ‘starter home’ every morning on my way to work. After a series of weekend open houses every weekend for about a month, the ‘for sale’ sign has disappeared from the lawn. My wife figures they got too close to the baby’s birth to be able to deal with a move. I think the sign might show up again once the realtor brother figures the buyers are back for the fall run. I’m hoping they decided to just stay put as their plan was to sell and buy a bigger place for over a million. Selling and renting was never in the cards.”
- lexlimo at VREAA 22 Aug 2012 12:21am

1. Move-uppers may seem to have done well, but their increased exposure puts them at increased risk in a downturn.
2. Sometimes, by chance, market conditions prevent people from making even bigger mistakes. This couple will likely look back and ‘thank’ their child for “saving” them from the move-up.
- vreaa

“We keep trying to pay up in rent to get a bigger, nicer place. They are invariably listed for sale.”

“We keep trying to pay up in rent to get a bigger, nicer place. They are invariably listed for sale. I’m talking three in the last week that my unsuspecting wife finds on craigslist. Pretty soon this is going to piss her off. I’m scared.
All I can say is thank God we’re not forced to move yet. That was three out of three by the way.”
- Thomas Holloway (Zerodown) at VREAA 23 Aug 2012 11:37am

The mania has made renting less stable and more of an inconvenience than in more normal market environments.
- vreaa

BC Consumer Non-Mortgage Debt At All Time High

“A new analysis suggests Canadian non-mortgage debt rose to its highest level in nearly a decade during the second quarter.
The latest report of Canadian debt trends by TransUnion found the average consumer’s non-mortgage debt load rose to $26,221 in the second quarter.
That’s up 0.74 per cent from the first quarter of 2012 and up 2.41 per cent from a year earlier.
The credit reporting firm said that’s the highest average debt per person it has seen since it began tracking the variable in 2004.
There were wide regional variances, with the average debt load in B.C. hitting $37,879 [up 2.9% YOY]. Quebeckers, on average, have the lowest debt loads in the country, at $18,580 per person, the company said.”
- CBC 23 Aug 2012

Less cushion in a downturn.
- vreaa

“We have decided, again, not to buy this year. Been the same since 2007.”

“We have decided, again, not to buy this year. Been the same since 2007. But we are going to move to either Bowen Island or Squamish to rent while the wee ones are still at home. Looking at a nice place on Bowen that was just taken off the market – absolutely gorgeous house listed at $599K that is renting for $1800. By my math that’s a monthly price:rent of 333 or 27.7 annualized.”
- ArthurFonzarelli at VCI 21 Aug 2012 10:58am

“He has decided to put one of his 2 townhouses back on the market. If he loses quite a bit on it, I wouldn’t be surprised if he and his dad put the other 5 units on the market as well.”

“As the negative real estate headlines are now appearing daily, it seems that I’ve become the “go to” guy when it comes to discussing real estate with the people around me (friends or at work).
A couple of anecdotes showing that panic among sellers has already started…

#1. I told you about a good friend of mine who bought 2 townhouses, along with his dad who bought 4 of them, in Langley earlier this year. They bought these places because dad’s very good friend advised them to do so (great location (Langley???), great price, great potential for future price increase, and all the usual BS…). It turns out that the “good friend” is also a realtor and “helped” them close the deals (they didn’t even got discount on the realtor fees!!!).
After talking to me a few times, and I guess after countless of sleepless nights (my friend is currently unemployed and has not been able to get a new job in the past couple of month), he has decided to put one of his two townhouses back on the market, hopeful that he can get a good price for it. We’ll see what happens, but if he loses quite a bit of money on it, I wouldn’t be surprised if he and his dad put the other 5 units on the market as well… How many people are there like them in the lower mainland?

#2. A colleague at work (late 20s) bought a townhouse in Ladner a couple of years ago (5%/35y) with his wife. After several discussions with me, he’s decided to put his property for sale (for $10K more than they paid for…) and move to a condo in Richmond, closer to work, bigger, cheaper. I think they’ll lose quite a bit in the process, but all in all, it’s a wise decision to make and they’ll recover fast. What made them change their mind? The fact that so little of their monthly payment went to pay for the principal and so much went to pay for the interest. I could see the disgust on his face when he saw the numbers after I did a simulation for him…

I’m really surprised at people’s ignorance regarding the costs involved when buying a property and how little they know about the market in general when they decide to speculate.
Anyway, I can see the general mood is shifting. I no longer hear around me the classic “market only goes up in Vancouver” and that alone is good news!”

- Makaya at VCI 21 Aug 2012 1:44pm

Lower prices will beget selling, and lower prices still.
- vreaa

“So the next place I rented was the main floor of a house, and guess who lived in the basement? The owner.”

“I used to live in a basement suite when I was in college. Fortunately it wasn’t damp or moldy, but it was too dark for my taste and I didn’t like someone living upstairs from me.
So the next place I rented was the main floor of a house, and guess who lived in the basement?
The owner.
If that’s what it takes to buy a house in Vancouver the trolls can have it.”
- Legacy at VCI 21 Aug 2012 9:58am

“It might seem a bit ridiculous now that the house is fully paid off, and you finally have time to enjoy it, for someone to suggest that you sell it. The challenge we are seeing is that homes represent 50 to 80 per cent or more of their net worth.”

“Many Canadians entering retirement find themselves with a significant portion of their net worth tied into their principal residence. Home ownership in many ways is the national symbol of success. Most clearly remember the first home they purchased, and it’s hard forget the years of forced savings to pay down the mortgage.
So it might seem a bit ridiculous now that the house is fully paid off, and you finally have time to enjoy it, for someone to suggest that you sell it.
But for some, this is the only way they can ensure a comfortable retirement. In first getting to know our clients we ask for a net worth statement that lists all assets and liabilities. The challenge we are seeing is that homes represent 50 to 80 per cent or more of their net worth.”
- from ‘Comfortable retirement? It’s time to sell your house’, Kevin Greenard, Victoria Times Colonist, 14 Aug 2012 [hat-tip kabloona]

What percentage of Vancouver homeowners aged 55 – 65 have “50 to 80 per cent or more of their net worth” in their homes?
- vreaa

Garth Turner in Vancouver – “By the time things trough the average price will likely be 40% lower, with a return to 2005 levels. The impact will be substantial. Maybe life-altering.”

“Last night in Vancouver I told people the correction now decimating homeowners’ equity is real, and just starting. The 15% price correction and 30% collapse in sales foreshadows what is yet to come. By the time things trough the average price will likely be forty per cent lower, with a return to 2005 levels. The impact on people who bought in the 28-month delusional period between late-2009 and last March, when I told you what was coming, will be substantial. Maybe life-altering.”
- Garth Turner, well-known blogger and housing bear (greaterfool.ca).
The crowd at Garth’s presentation was larger than at his last appearance here, a fact that likely reflects changing Vancouver RE sentiment. See here for Garth’s own account of the event.
If any readers were present, please share your perspectives on the meeting.

This from ‘Poorboy’ in the comment section at greaterfool [21 Aug 2012]:
“My favourite part of the event: the self-professed financial advisor in the audience who didn’t get where the downward pressure on prices would come from since he wouldn’t sell his million dollar home for 300,000 less.”

Vancouver’s Remarkable Price:Rent Fundamentals – “About to sign a lease, at a 420 price:rent ratio, on 1 year new house built by Asian owner, 1800+ sf, pulled off MLS recently due to no buyer.”

“About to sign lease on 1 year new house built by Asian owner, 1800+ sf, pulled off MLS recently due to no buyer. Now about to be rented to yours truly at ~35 years Price-to-Rent ratio after talking down rent by $100/m. [Thus 420 monthlyrent:price ratio. -ed.]Landlord still has a couple houses near completion. Who knows what happens to the tenant if the landlord goes bankrupt?”…
“I’m moving from a 1Br+den 670 sq ft condo at 283 months (23.6 years) rent, to (the aforementioned) 3Br newer house at 415 months (34.6 years) rent. Definitely makes more financial sense to rent than buy. Viewed a 3Br 1000sq ft newer condo few days ago at 305 months (25.4 years) rent, but passed (interesting to note that property manager is a realtor, guess managing client’s property might be what’s keeping them busy these days!)
- VMD at VCI 17 Aug 2012 10:00pm and 18 Aug 2012 11:22am

An example of a ‘speculative hold’. The owner believes prices will rise in future and is holding the property not for rental yield, but for assumed future price increases.
We are of the opinion that a good percentage of this kind of inventory will be put on the market at significantly lower prices, as it becomes clear that a downward trajectory for prices is establishing itself.
And, yes, this will be disruptive to tenants. The rental market is less stable through a speculative mania in housing, and the unwinding thereof.
- vreaa

Other current sky-high Price:Rent ratio anecdotes from the same VCI thread:

“I am living in Richmond with an (assessed value) : (rent) ratio of about 285.
Strata fees and property taxes not included, why buy now?”
- Anonymous 18 Aug 2012 10:04am

“I’m renting a house in SE Burnaby. Price to rent is somewhere between 350-370 on the conservative side. My best friend is the landlord and I’ve urged him to consider selling. But he will have nothing to do with it. Already has over $1.5mil RE exposure with little other savings. Oh yeah, still looking to buy another investment property because “RE does so much better than the stock market”. Just can’t save people from themselves.”
- How much?? 18 Aug 2012 10:27am

“Here is a unit that has been listed on CL for months (available now) for $2650 per month. The same units are listed for sale at $839K to $879K. So even if they get their asking rent the PR is 316 plus.”
- Anonymous 18 Aug 2012 12:36pm

“Beat you all. 4br house on Ontario. 2012 sale $1.35M. Monthly rent $2850, 2 yr lease. Price/rent 474. I love living here but wouldn’t buy at half the price.”
“Our landlord purchased the property earlier this year as an “investment”. I really can’t understand their business model. The house is an original, nicely-maintained bungalow. New paint, new dishwasher etc.
It’s not a quick flip (we have a 2-year lease) and it’s not a tear down and rebuild, which might make sense. The landlord is shelling out $3k or whatever per month to hold the property. They seem to be invested for the long term.
Of course the potential downside for us is a forced move if the house is sold. We figured that by the end of our lease the house will likely be underwater so that the landlord would not be in a position to sell. We will see how that goes.
I should add the landlord couple are very nice people and I don’t wish them any financial hardship.”
- No Money Down 18 Aug 2012 12:37pm and 19 Aug 2012 10:10am

“I have a whole house (unlike many, home owners, I have no tenants in the basement to worry about) on a nice street off The Drive, assessed at a little over 410 months’ rent.”
- N 18 Aug 2012 1:56pm

“I’m in a 3 bedroom house (we have the place to ourselves), 5 year lease for $1600/mo. House is worth $750,000 based on comps for a ratio of 468.”
- Vulture Fun 18 Aug 2012 11:34pm

“I pay $850 a month for a condo in Surrey. Same unit 2 floors up sold for $253,000 in late 2011. So a ratio of 297:1. You guys are insane with your 400′s ratios.”
- ScubaSteve 19 Aug 2012 12:39am

“I am the winner. I pay 4,400 for a 3,800 ft 6 bedroom (or is it 7?) house in west side.
Assessed close to $3.0 million. For now this is a 660 multiplier.
At the higher price points, it gets more and more un-economic to own and rent these houses out.”
- Van Coffee 19 Aug 2012 8:48am

“I’m at 489 but if I take off the huge strata fees that my landlord pays I go to 696. Strata and ppty tax eat up exactly 50% of my rent cheque. Not a lot left to pay the mortgage and occasional special assessment.
BTW…for all you haters who think we renters are basement dwellers who are broke, I’m writing this poolside in Osoyooss. Thanks landlord!”
- McLovin 19 Aug 2012 11:01am

“For the record – we are in a $1.5M Condo. Strata and taxes are over 1,000 per month and the rent is 3,500 gross (2,500 net of landlord costs). This give you 600.
Property value is no more than the day we moved in.
This represents a $200,000 plus savings and building of equity by renting (we built equity by renting – – – sounds strange).”
- ZRH2YVR 19 Aug 2012 4:52pm

Low Retirement Savings + High Homeownership = RE Sales

53% of Canadians plan to keep working ‘after retirement’.
A further 29% ‘said they were not sure if they would work after retirement’.
Almost half of today’s 50-59 year olds have less than $100,000 saved for retirement.
“The retirement landscape is shifting as baby boomers reach traditional retirement age with a smaller nest egg than they expected to have.” – Christina Kramer, executive vice-president, retail distribution and channel strategy at CIBC.
- from a national online survey (n=805; 5-8 July 2012), conducted last month for CIBC by Leger Marketing. As reported in Globe and Mail 20 Aug 2012, and numerous other news outlets.
—

Bank of Nova Scotia economist Adrienne Warren says that when the latest census figures come out next month she expects us to be in the elite company — depending on your view — of countries with more than 70% of households owning their own homes. Based on the 2006 census, we were at 68.4%. … Interestingly enough, the United States is believed to have cracked that 70% threshold before the bottom fell out of its housing market. … “The government is saying you should not be a homeowner if you cannot afford it,” said Benjamin Tal, deputy chief economist at CIBC World Markets Inc.
- from ‘Home ownership in Canada reaching new heights’, Financial Post, 17 Aug 2012
—

A large number of underfunded homeowner boomers will be heading for retirement with their only substantial asset falling in value. This will add to supply and plunge RE prices further.
- vreaa

Everything Redolent Of RE Prices – “You spend $1-million on a house, you don’t want it to smell like fish”

“You spend $1-million on a house, you don’t want it to smell like fish,” East Vancouver resident Lenore Newman told Postmedia News this week.

As a late-summer heat wave bathes Vancouver with the stench of rotting compost and chicken parts, municipal officials have set to work drafting plans to rein in the city’s rankest offenders. …
“It’s kind of a chickeny, fishy, boiled-up stink,” said a Wednesday caller to Vancouver’s CKNW radio. “You don’t want to be at home at all,” East Vancouver resident Renata de la Parra told a CTV camera crew. Previous accounts have identified the smell as anything from “hideous” to “revolting” to “a combination between vomit and diarrhea.”
Despite the breakdown, West Coast Reduction’s signature stench is nothing new. As the region’s primary animal waste processing facility, it brings in truckloads of animal parts and used grease every day to cook them into tallow and protein meals. Notoriously, the plant is also where serial killer Robert Pickton admitted to disposing of barrels containing the remains of his victims.
The plant began spewing foul odours onto adjacent working-class homes almost immediately after its 1964 opening. At the time, the plant only generated a paltry 25 complaints a year.
Things have not gotten worse. It’s just a matter that expectations have changed
By 2007, residents in the newly gentrified district were picking up the phone almost twice a day to complain, urged on by “stop the stink” posters pinned up on utility poles. “You spend $1-million on a house, you don’t want it to smell like fish,” East Vancouver resident Lenore Newman told Postmedia News this week.
“Things have not gotten worse,” Ray Robb, Metro Vancouver’s manager of regulation and enforcement, told Vancouver radio on Wednesday. “It’s just a matter that expectations have changed.”
- from ‘Can Vancouver’s anti-stink bylaw pass the smell test?’, National Post, 16 Aug 2012

In most cities, you’d be complaining of the smell.
In Vancouver, you complain of the smell:RE_price ratio.
- vreaa

As oneangryslav2 [at VCI 17 Aug 2012 3:17pm] points out, the Post story is a little misleading. Lenore Newman is both an East Van resident and a professor at the University of the Fraser Valley, a ‘researcher in food security and the environment’. One would reasonably assume from the article above that she was a house owner, but she herself posted the following [Apophenia, The Province, 10:51AM 15 Aug 2012]:
“…I should clarify that they edited what I said. I don’t own a house there, I rent, but I commented that the high housing prices are likely why people are complaining more. But if we get down to it, the plant is the newcomer; Commercial Drive is one of Vancouver’s oldest neighbourhoods, and the rendering plant arrived in 1960 during a period when the area was in decline and big business ruled the roost. If you read my blog, Sand and Feathers, you will see that I’m not actually against the plant, though it is becoming clear that they need to bring their technology up to modern standards. And in case people are wondering, I wouldn’t buy a house in East Van, or Vancouver in general; too expensive for what you get. But I understand why people who work hard to buy into the market expect a 2012 level of environmental protection.”

“I wouldn’t buy a house in East Van, or Vancouver in general; too expensive for what you get.”
Bravo, Lenore; agreed.
Another example of the increasing tendency for sensible RE-bearish sentiment to be stated plainly and publicly.
- vreaa
—

On the bracing subject of odours, the following links regarding air quality around a well known condo development (Marine Gateway) near the ‘Vancouver South Transfer Station’ (‘Dump’) forwarded to us by Aldus Huxtable:
1. ‘Addressing Waste Transfer Station Odour’, marinegateway.ca ,
2. ‘Dispersion Modelling of Vancouver South Transfer Station Odour Emissions’, RWDI, Dec 2009

Infographic: Vancouver Detached Home Price vs Government Intervention.

‘Infographic: Vancouver Detached Home Price vs Government Intervention’, care of Canadian Watchdog, 18 Aug 2012

“Young people are leaving B.C. for other provinces at the fastest rate in years, raising concerns about a sputtering economy and unaffordable housing.”

“BC stats from January to March show more than 2,500 have uprooted and left.
Both economists and folks who live here blame the economy, housing affordability, and the high cost of living in BC.
A woman we spoke with isn’t shocked by the mass exodus earlier this year. “No, it’s not surprising at all. I was actually thinking of doing that myself, especially towards the US; you get way bigger houses [in the States] for a small amount.”
One man tells us he’s done it before and could do it again.” [Leave twice?! -ed.]
- ‘Thousands of people leaving BC for other provinces: Some Vancouverites not surprised, blaming jobs and expensive housing’, news1130.com, 16 Aug 2012 [hat-tip RESkeptic]

“Young people are leaving B.C. for other provinces at the fastest rate in years, raising concerns about a sputtering economy and unaffordable housing.
The latest numbers from B.C. Stats show that from January to March this year, 2,554 people left B.C. for other provinces. That’s an alarming jump that continues a negative trend started in 2011, when B.C. logged a net migration loss interprovincially of 1,920.
In an interview Wednesday Helmut Pastrick, chief economist for Central Credit Union 1, said B.C.’s negative migration “seems to be accelerating.”
Pastrick said those leaving B.C tend to be young people looking for better employment opportunities, but there also could be a “push and pull” factor of younger families seeking both better jobs and more affordable homes in other provinces. …
B.C. NDP leader Adrian Dix said interprovincial migration is “complicated” and B.C.’s negative trend covers a short period, so he doesn’t want to jump to conclusions.
But housing affordability and B.C.’s habit of exporting raw resources without developing manufacturing jobs are likely culprits, he said.
“If this trend continues in the coming quarters it is not good for the economy or the government’s record,” Dix said. “We have to focus on making things and manufacturing in a consistent way, and training our [workforce].”
B.C. Finance Minister Kevin Falcon was not available for an interview for this story.”
- from ‘Young people fleeing B.C. in big numbers: Are bad economy and pricey housing to blame?’, The Province, 16 Aug 2012

For dozens of other stories in this vein, see the ‘Avoiding Vancouver‘ sidebar category.
The bubble has been bad for our society.
- vreaa

Where Are We Now? – jesse’s Thoughts on the Vancouver Market

“Most years since 2005 have seen September inventory at least as high as Octobers but not by much. This year looks to be on balance a hybrid 2008-2010 scenario: inventory is off its highs but still elevated, sales are lackluster, and prices are starting to drop, but nothing as of yet that as yet looks as acute as 2008. So what can be expected for the rest of this year and next for sales and inventory?

We can first compare to 2008. 2008 saw Vancouver get hit by a freight train, most likely in part because lending was becoming difficult, with higher mortgage rates than today’s, but early 2009 saw such a dramatic decrease in price-payment ratios there was an immediate response to housing activity, in part buoyed by robust population growth. Both these shots in the arm are for the most part no longer present.

Nonetheless we are still in a mode where low interest rates are allowing some households to reduce their payments as their pre-2009 financing terms expire, and this tailwind will be mostly spent in a year or so (and as of now it’s mostly spent already). Rents are increasing and have been on the tight side in the past 2 years or so.

A slowdown in China’s investment spending has likely led to less capital flows being invested in Canadian real estate this year compared to 2009-2011. And this is not only because of so-called “HAM” but also indirectly through a recent boom in hard commodity prices that has subsided somewhat this year — look at how BC-headquartered resource company equities have been doing since 2009.

The Chinese central government has already approved a significant stimulus spend to come into place in Q4 of this year. That will lead to additional economic activity but this is unlikely to have the same impact as previous stimulus efforts as much of the spend will go into servicing existing outstanding nonperforming loans. I would expect some uptick in capital flows into Canada in 2013 but nothing like was seen in the past couple of years and will likely be short-lived.

Mortgage rate spreads have increased for a variety of reasons since 2011, which has partially offset falling interest rates seen earlier this year. Going forward we can expect further crimps on lending through increased spreads and increased loan rejections for Vancouver-area mortgages.

Population growth has continued to slow, in part due to unemployment still being elevated. This looks to be a cyclical trend that is highly dependent upon residential construction activity. It is the nature of BC’s economy that construction boom leads to population growth but as completions mount, population growth subsides, as it is doing now. This cycle looks to be on roughly a 10 year period and it looks 2012 and 2013 lie in a downdraft.

Units under construction are elevated relative to population growth and still appear to be increasing. As completions mount later on this year and into 2013 this will provide an additional headwind for the housing market.

Are there factors that could produce a renewed bout of strength? Well some navel gazing is in order — I for one did not anticipate the veracity of the stimulus from governments and how strongly they affected house prices. I am, now, trying to keep an open mind as to what could come to the rescue this time round, though any insight into what this might plausibly be would be greatly appreciated. A markedly improved US economy in 2013 would be a positive for Canada as a whole.

Aside any additional strength from factors not considered above, I see continued elevated inventory and lower sales continuing through the rest of 2012 and likely through 2013: we need only look at the early part of this century to see the effects of lower population growth. I think the months of inventory levels will be enough to put a downwards pressure on prices as measured on a year-over-year basis. This will not mean that prices are monotonically going to fall — seasonality sees prices buoyed in the spring for a variety of reasons — but any bouts of strength are likely to be muted before renewing their descent in the second half of the year. How much? I’ll say -5% by the end of 2012 and a further -10% by the end of 2013. And that is only a guess based on what I can see based on the factors above. If factors I considered above combine in some way to exacerbate effects, or if some real sh!t starts going down in, say, Asia, things could get worse.”

- jesse (YVRHousingAnalyst) at VCI 17 Aug 2012

jesse’s price drop estimates are conservative but we reckon they’re sensible: they’re the high probability outcomes for the next two years.
We’d add that at any point buying could slow more rapidly, via the effect of sentiment change. If it suddenly becomes ‘common knowledge’ that prices are dropping (this is not yet the case), buyers would lose the desire to overstretch to buy, and the market could freeze up.
- vreaa

“A couple of weeks ago I hung out with a guy who doesn’t have a day job, he just renovates and flips. He was oblivious to the shift in the market, and quoted Global as saying prices were up.”

“A couple of weeks ago I hung out with a guy who doesn’t have a day job, he just renovates and flips. He was oblivious to the shift in the market, and quoted Global as saying prices were up (HPI). Another friend, who took out a home-equity loan to cover his daughters downpayment was even less aware (basically unaware that there is such as thing as a market that can change). When the truth gets out to the masses, we are going to see sales grind to a near dead stop.”
- N at VCI 15 Aug 2012 6:18pm

When the “truth” of the falling market becomes obvious to the vast majority, all buying premised on rising prices will stop.
In Vancouver’s case, that describes the majority of the buying in recent years.
- vreaa

It’s Where Nature Is – “We take a hit; it’s more expensive for us to live in Vancouver. We choose to live here because it’s where our family and friends are, and where nature is.”

“We take a hit; it’s more expensive for us to live in Vancouver. We choose to live here because it’s where our family and friends are and where nature is,” says one Vancouverite.
- from ‘Thousands of people leaving BC for other provinces’, news1300.com, 16 Aug 2012

The bubble RE has been fuelled by preposterous claims and beliefs about our fine city. People had to tell themselves ridiculous stories to justify overextending themselves into overvalued RE.
“Best Place On Earth” was one.
“It’s Where Nature Is” appears to be another.
- vreaa

Vancouver RE Invades A Citizen’s Dreams – “…and then I woke up!”

“Home.. is where I want to be. But I guess I’m already there”
- ‘This Must Be The Place (Naive Melody)’, Talking Heads, 1983

“I just woke from a nightmare. In it, I had a speckerfriend (a real person), come over yelling at me if I want to help make 12 million bucks. I said how? He replied building a mansion in Whistler. I face palmed and said haven’t you seen vancouverpricedrop? He’d never heard of it, I told him he would be lucky to get 8 mill in this market. A desperate look came over him, I asked how much to break even? He said 3 million, I told him I would think about it …and then I woke up !”
- Loon at VCI 15 Aug 2012 7:34am

“We’re staying in Vancouver because we’ve got 3 sets of grandparents for the kids nearby, and neither my husband or I has much interest in BC outside of Vancouver proper. But my subconscious has something else to say: twice this past week, I’ve dreamed of the relief of packing up and moving to Toronto or Montreal.”
- Absinthe at VREAA 15 Feb 2011 12:39pm

Misallocation of resources.
We’d be better off dreaming about flying and exploring jungles and sex and surfing and traveling and all sorts of other stuff.
As we all already know, RE has invaded our collective psyche.
It’s part of living through a massive spec mania in housing.
Any other home/RE dream*/nightmare* stories out there?
(*The kind that happen while you’re asleep).
- vreaa

Market ‘Breather’ or ‘Last Gasp’? – Vancouver July Residential Sales Dollar Volume Down 28% YOY

JULY 2012 (compared with July 2011):
Vancouver Residential Unit Sales were down 18% (2,135 cf 2,614)
Vancouver Residential Sales Dollar Volume was down 28.4% ($1.43B cf $1.99B)
Vancouver Residential Average Price down 7.4% ($738K cf $797K)
BC Residential Average Price down 12.2%
- from ‘Home Sales Decline in Vancouver, but Surge in Rest of BC’, BCREA press release, 14 Aug 2012

“Some potential homebuyers in Vancouver are taking a breather over the summer months”
- Cameron Muir, BCREA Chief Economist, in the press release cited above

Sales volume leads prices. We anticipate more price weakness ahead.
- vreaa

- chart from CREA, via Ben Rabidoux

Failed Land Flip In East Van – “This is getting boring – I could post stories like this all day.”

“Failed Flip
3129 E. 6th Ave, Vancouver
Sold – August 5, 2011 $715,000
Attempted sell as a pre-sale new-build house??? $1,068,000
Listed and cancelled multiple times
Finally listed the original tear-down – Abandoned the build – June 20, 2012 at $759,800
Sold for $700,000
With all those transaction and holding costs – this has to be a $50,000 loss and no success on the build.
Given the builder that owned it – it is probably a good thing that it never got built because it would have probably been a P.O.S.
This is getting boring – I could post stories like this all day. Richmond is going down!!!!!
Also – Most of the West Side sales (other than new) are going for 10% below assessed.”
- ZRH2YVR at VCI 14 Aug 2012 10:00am

“Far too many middle- and lower-income buyers threw borrowed money at real estate, then compounded the error with expensive upgrades throughout.”

“It might surprise you to learn that rich Americans, people who could pretty easily buy any make or model they like, tend to drive inexpensive cars. A study by car pricing site TrueCar found that eight of the 10 best-selling autos in the country’s 10 wealthiest ZIP codes averaged less than $40,000.”
…
“The takeaway is clear: Your money should work for you, not for the salesperson. If you buy a car beyond your means and, worse, finance that pricey ride, you are throwing good money after bad.
Exactly the same thing happened during the [U.S.] housing boom. Far too many middle- and lower-income buyers threw borrowed money at real estate, then compounded the error with expensive upgrades throughout. Granite countertops, stainless-steel appliances, fancy pools and outdoor decks, usually bought with illusory home equity loans.”
…
- ‘Which Cars Do Rich People Drive? Cheap Ones’, marketriders.com, 9 Aug 2012

Canadians Planning On Selling Homes To Fund Retirement

“Peter and Mary are in their mid-50s and earn two incomes. They are wondering whether they can retire at 60.
It helps that their three children have grown up. The two oldest are “off the payroll” and the youngest is expected to become self-supporting after he completes university in three years.
Their retirement dreams aren’t extravagant. The couple plan to sell their house and live six months of the year in their condo (where the youngest child is now living rent-free until university is finished).”
- from Financial Facelift, Globe and Mail, 10 Aug 2012

“In Alberta, a couple we’ll call Lars, 57, and Phyllis, 56, waited until their late thirties to have children. Not long after, Lars lost his job with a multinational company, forcing him to retrain for a new profession. Phyllis had an illness that curtailed her career and made her a stay-at-home mom doing part-time work. But they adapted.
Today, one child is in university and one is about to start. The couple has six figures of debt and no capacity to save after paying all their bills out of $7,450 in monthly combined take-home income.
With no more than eight years to go to Lars’ planned retirement at 65, they wonder how can they finish paying the university bills and retire with financial security. …
They plan to boost retirement income by taking advantage of high real estate prices in Alberta. They want to sell their $450,000 house and move to the Maritimes, where, they think, they can buy a similar house for $225,000. The difference would add to their retirement capital.”
- from Family Finance, Financial Post, 10 Aug 2012

Many Canadians are planning to sell their homes to help fund their retirement needs.
There appears to be a significantly sized group of them intending to do this at much the same time.
The majority will be disappointed by falling, in some cases plummeting, home prices.
- vreaa

“The cab driver said he thought people in Vancouver were unfriendly, because of the cost of living, which made people work too much and borrow too much, and as a result they were stressed out all the time.”

“I was in a taxi the other day and the cab driver was saying how he has lived in Vancouver for decades and the people here are much less friendly than Toronto etc.
I have not lived in Vancouver that long so I can’t say myself, but I did mention how one would expect the nicer weather to result in a more laid back, friendly attitude vs Toronto.
What he said then was very interesting to me: He said it was because of the cost of living, which made people work all the time and borrow too much, and as a result were stressed out all the time.”
- from ‘TI’, by e-mail to VREAA, 3 Aug 2012

A Riddle, Wrapped in a Mystery, Inside an Enigma

“In fact, most detached homes in my neighbourhood that had stagnated for two months are now sold, but data not posted.
Is real estate board deliberately holding these sales back so it produces data that makes the market appear in “buyers market” territory?”
- eyesthebye at RETalks 11 Aug 2012 7:33am

Hmmm. So, by this argument: Things are actually good but the realtors are conspiring to make them look bad in order to make them even better?
Let’s rather keep things simple: The market looks weak because it is weak.
- vreaa

Erroneous Theories For Falling Prices #2 – The Conservatives Attacked The Vancouver Housing Market And Caused The Crash

“The Conservative government has repeatedly reduced the mortgage-amortization period, dropping it from 40 years to 35 years to 30 years, and finally, to 25 years.
Many potential first-time buyers, in particular, have trouble affording a home in Greater Vancouver when they have to repay their loans within 25 years.
Senior bankers have been cheering on Finance Minister Jim Flaherty, supposedly because they are worried about a housing bubble.
“The reality is that because banks also own investment dealers, their CEOs would prefer to see more Canadian money flowing into the equity markets rather than into real estate.
That’s because the investment side of the financial-services business generates fatter profits—most of the time—than boring retail banking and those unglamourous mortgages.
In addition, chartered banks are not competing with credit unions to nearly the same degree on the investment side in comparison to the mortgage market.
So by shortening the amortization period to 25 years, Flaherty is, in effect, shifting financial resources away from real estate and into paper assets.
If the housing slowdown continues, don’t be surprised if we start hearing about financial troubles in the credit-union sector.
That’s not Flaherty’s concern because credit unions are regulated by the provinces. …
I wouldn’t be surprised if Prime Minister Stephen Harper, a trained economist, has been influenced by a Zambian-born economist in crafting mortgage-amortization policies that may kill the Vancouver housing market and create significant hardship.”
- from ‘Stephen Harper is playing a dangerous game by declaring war on the Vancouver housing sector’, Charlie Smith, Georgia Straight, 3 Aug 2012

A crash follows a speculative mania in the same way that night follows day.
The exact flavour of the descent may be influenced by government policy, but the crash itself will occur one way or another regardless of policy.
People who see politicians expertly manipulating markets are overestimating their power (often because the alternative is more scary – that we only have very limited control over market cycles).
- vreaa
—

Regarding this series:
There is only one BIG reason for falling prices in Vancouver RE: the speculative mania is over.
That is all you need to know to explain the price action that will play out over the next few years.
On the way up we had people attributing price strength to all sorts of bizarre and invalid causes: the Olympics, running out of land, etc. On the way down we expect similarly bizarre arguments for price drops; commentators will offer many erroneous theories as to why prices are falling. We’re already beginning to see them, and the crash has barely commenced.
We’ll collect them; please submit new examples you come across. – vreaa

#1 – Climate Change Caused The Crash
“Prices will continue to fall, as outside buyers from other Provinces such as Ontario, Alberta and Manitoba finally realize that climate change has now become an important issue in British Columbia. What was once an enviable temperature and small secret now has become a drag, as the winter, spring and summer months are now cooler and wetter than before.”
- thinkandact, commenting at the Globe and Mail, 2 Aug 2012

#2 – The Conservatives Attacked The Vancouver Housing Market And Caused The Crash
“The reality is that because banks also own investment dealers, their CEOs would prefer to see more Canadian money flowing into the equity markets rather than into real estate. … I wouldn’t be surprised if Prime Minister Stephen Harper, a trained economist, has been influenced by a Zambian-born economist in crafting mortgage-amortization policies that may kill the Vancouver housing market and create significant hardship.”
- Charlie Smith, Georgia Straight, 3 Aug 2012

Vancouver Through The Eyes Of Neal

- from ‘Neal ‘n’ Nikki’ trailer, youtube, 29 May 2012.
“Neal ‘n’ Nikki is a Bollywood film, released in 2005… directed by Canadian-based director Arjun Sablok. The film was critically panned and was a failure at the box office in India though it did well overseas. This film created quite a stir… characters were seen engaging in sexual behavior, which was not approached before in any major Bollywood film.” - from Wikipedia
[hat-tip 'scamcouver']

Vancouver is portrayed as a highly desirable ‘party’ city for the male protagonist, with lots of women walking, biking and lying about in public places; hot-dog stands; lame statue buskers; and a sky-train that needs to be sped up to look exciting. -ed.

Andrey Pavlov, Professor of Finance, SFU – “I think this debt accumulation engine of real estate price growth is now done. I don’t see where the future support for real estate can come from.”

“According to the Real Estate Board of Greater Vancouver (REBGV), home sales dropped 18.4 per cent in July, marking the lowest total in the region since 2000. In Coquitlam, the number of sales in July dropped 26 per cent from the previous year. …
“We’re seeing some areas that are quite flat and no changes, and some areas we still have pockets of activity,” said Sandra Wyant, president-elect of REBGV.
She suggested July is typically a slow month for real estate sales, noting buyers and real estate agents alike often tend to be on holidays. …
She said prices could start to come down as competition amongst sellers heats up.
However, Wyant said it often takes a while for sellers to make an adjustment in the marketplace.
“Right now it’s a fabulous time to jump into the market,” she said, adding there are many choices and no pressure to make a decision.
…
“But one financial expert believes Lower Mainland real estate has reached a turning point.
Andrey Pavlov, a professor of finance with Simon Fraser University, noted prices in Vancouver have rocketed past those in places like New York and San Francisco, and in the case of the Tri-Cities, are comparable to suburbs of those major cities.
He suggested the pace will not continue and predicts prices will likely drop in the Vancouver area.
Pavlov argued home prices rose dramatically in the Lower Mainland, not out of income or general economic growth, but rather debt accumulation.
With low interest rates and easy qualification terms, people have been taking on more and more debt.
“I think this engine of real estate price growth is now done,” Pavlov told The NOW in an e-mail.
“So I don’t see where the future support for real estate can come from.”
And he’s especially concerned for the condo market.
He explained that singlefamily properties would always hold their value to some extent because usable land in the Lower Mainland is limited.
But he contends condos have absolutely nothing that can support them. And in cases where the quality of a new development might be in question, he can see prices of condos in the suburbs dropping by half or more.
…
- from ‘Housing sales plummet, SFU professor believes price of some suburban condos could drop by half’, Jeremy Deutsch, Coquitlam Now, 10 Aug 2012 [hat-tip Gord and Alexcanuck]
—

Another article of interest because it involves named locals coming out publicly with bearish predictions.
We agree with Pavlov that the home price rises have been the result of a debt fuelled bubble, and that future support is tenuous.
As for the quantitative aspect of his prediction: we’d agree that “condos in the suburbs” will drop by more than 50%. However, so will condos in the city, and, contrary to Pavlov’s apparent suggestion, so will SFHs, in all areas.
During the speculative mania, it was argued that SFHs were something particularly special, and they received that much more speculative juice as a result. During the descent, that speculative component will be wrung out, and prices will return to those of the early 2000′s. For the vast majority of SFHs that means drops of greater than 50%.
- vreaa

Realtor Warns Of “Inevitable Price Collapse; In Excess Of 30%” For Richmond Detached

“In Richmond, there is a high probability of a price decline for detached homes in excess of 30%.”
“Sellers who need to sell will have to cut their prices more deeply to attract buyers. This could be the beginning of a real estate down cycle. The momentum will pick up when more sellers realize that a real estate downturn is in motion.”
“The cascading effect of declining home prices will snowball, causing more home sellers to sell before home prices drop further… The in-balance in supply and demand is massive for million dollar homes in Richmond. A price collapse in Richmond detached homes looks inevitable!”
- James Wong, Richmond Realtor, Monthly report, as cited and discussed by ‘The Village Whisperer’ in the article ‘Richmond realtor warns:”price declines in excess of 30% coming, price collapse looks inevitable!”, at Whispers From The Village On The Edge Of The Rainforest, 9 Aug 2012. Read Whisperer’s whole discussion. Headlined here for the chronological record.

Needless to say, we agree (but believe that ultimate price drops will be >50% from peak).
It is of interest that a realtor is voicing these opinions, and advertising the notion that “price drops will beget price drops”. This will likely stir sentiment.
- vreaa

Financial Institutions Underestimate The Downside – “Metro home prices will slip, not plunge”

“Canada’s hot housing market is beginning to cool off, Scotiabank said Wednesday in a new report, with average home prices expected to decline by about 10 per cent over the next two to three years.
Scotiabank economists warn that the housing price correction will largely occur in the Toronto and Vancouver markets.” …
“The Scotiabank report says that the balance sheets of Canadian households remain in good shape, with real-estate equity sitting at an average of 67 per cent. However, Canadians are still carrying high personal debt loads, and with their balance sheets so heavily skewed to real estate, they are vulnerable to a sharp price correction.”
- ‘Canada’s housing market cooling: Scotiabank’, CTVnews.ca, 8 Aug 2012

Metro Vancouver home prices may slip a bit over the next year, but don’t expect them to drop sharply, according to a report released Wednesday by Central 1 Credit Union. …
“Right now, we’re undeniably in a sales slowdown with substantial declines in sales over the past several months,” said report author and Central 1 economist Bryan Yu. “But we’ve also seen positive employment growth and continuing very low interest rates.
“We believe the supply side will adjust substantially. When prospective sellers see weak sales and pricing, they pull their listings. [Most] don’t have to sell. This balances out the supply side environment.”
Yu’s report maintains home prices in Metro Vancouver should drop more than five per cent this year before rising 2.9 per cent in 2013 and 2.0 per cent in 2014.
“A recent tumble in home sales coupled with a drop in headline prices have some wondering (hoping?), whether Canada’s longtime poster child for a potential housing price bubble is set to burst,” the report concluded. “While a weakening state of demand in Metro Vancouver makes short-term price drops a near certainty, we expect that declines will be both modest and temporary.
“Prospective sellers are expected to respond to weaker market conditions by curtailing listings activity, which will limit excessive inventory in the housing market. Short of another recession and large-scale job losses, market activity in the Lower Mainland is expected to be characterized by a relatively low sales and a flat-to-weak pricing environment.”
- from ‘Metro home prices will slip, not plunge: Central 1 Credit Union’, Vancouver Sun, 8 Aug 2012

As numerous savvy web-based analysts have already observed, these are the same guys who had previously reassured us that any falls at all were unlikely. Now that we’ve already had the falls they’re ‘anticipating’, they ‘predict’ they’ll happen. This is rear-view mirror commentary, and they’ll chase the market all the way down with their non-predictions.
- vreaa

“Now they want to sell and buy a bigger place closer to her job. They will be down tens of thousands.”

“Know of a couple purchased 1 one bedroom in Vancouver for $430s.
This was back in 2010 and they were just getting married at the time.
I know the wife and told her I didn’t think it was a good idea since they didn’t even have a downpayment.
They were so worried about “buy now or be priced out forever”, went to his family for a loan for the 20%.
Fast forward to this week. Couple now has a 1yr old and the place is feeling too cramped. On top of that her job situation is changing and she needs to work in Burnaby.
Now they want to sell and buy a bigger place closer to her job.
They will list the unit for $419K to start.
They’ll be lucky to get $400 and minus the transaction costs, will be down tens of thousands.”
- kansai92 at VCI 9 Aug 2012 12:08pm

“If I decided to sell, no way am I taking a loss, regardless of what they say the market is doing. The market may cool, but hopefully housing prices won’t go lower than what the home is worth in today’s market.”

“We bought our house 2 years ago. We put 25,000 over asking just to be able to get the house since there were bidding wars going on in the area. If I decided to sell, no way am I taking a loss, regardless of what they say the market is doing. The market may cool, but hopefully housing prices won’t go lower than what the home is worth in today’s market.”
- dorri, comment at ctvnews.ca 8 Aug 2012 2:57pm

“The market may cool, but hopefully housing prices won’t go lower than what the home is worth in today’s market.” – We’d like to see a logician dissect that statement.
Many shadow sellers in this position will end up selling their properties at much lower prices, in psychological distress.
- vreaa

Mark Carney – “Invest in productive capital, not in houses or condos”

“And there’s a variety of things that European authorities can do, that the IMF can do, others can do to contain it so that Canadian business and Canadians can get on with their lives and focus on how we’re going to grow our economy, which is largely going to be investing in productive capital, not in houses or condos, and in growing our economic relationships with the major emerging markets,” Mr. Carney, the Bank of Canada governor, said in an interview with CTV.
- from Globe and Mail, 9 Aug 2012

Excellent point; a reference to the dire misallocation of resources that occurs during speculative manias in housing.
At the same time, it’d be fair for many to retort:
“But, Mr Carney, thanks to your low interest rates, my money is not attractive to potentially productive business concerns; as a result I’ve been drawn into high risk speculative activity, such as buying over-priced RE, with leverage, for presumed future price increases.”
- vreaa

“I met a realtor today at an open house. He was totally convinced that this was a quite summer lull and that there would be a feeding frenzy come September.”

“I met a realtor today at an open house. He was totally convinced that this was a quite summer lull and that there would be a feeding frenzy come September. He also mentioned that other realtors were very worried that this is the end of the good times, but not him. Essentially he was saying that we should buy now because prices will be shooting up again. I told him good luck with that.”
- Loon at VCI 4 Aug 2012 6:47pm

“The one bedroom in my building that has been listed for about 6 months now, with two price reductions, has now been taken off the market, realtor took the sign down this weekend.”

“The one bedroom in my building that has been listed for about 6 months now, with two price reductions, has now been taken off the market, realtor took the sign down this weekend. The one bedroom kitty corner to my building that had a reduced sticker on the sale sign was also taken off the market in the last few days, just noticed this morning that the sign was gone.
The one bedroom down the street that has been on the market for about a month has sold. It was priced at just below $300,000, a whole $104,000 cheaper than the almost identical place in my building (granted the place in my building was a corner suite and had a so-so reno, maybe $10,000 worth of reno’s).
I’m thinking that if you price wisely that you can still get out of this market.”
- vangrl at VCI 5 Aug 2012 10:00am

Off the market but shadow inventory, still waiting to be sold.
Will likely come back onto the market at lower prices.
- vreaa

“I just heard of someone who bought a house in East Van with 7 other people! Dude, you’re signing up for a mortgage with roommates? Yeah that ought to work out, good luck with that!”

“I don’t live in Vancouver, but I read ‘vancouvercondo.info’ for the same reason I read the US bubble blogs. The insanity is entertaining. I just heard of someone who bought a house in east van with 7 other people! Dude, you’re signing up for a mortgage with roommates? Yeah that ought to work out, good luck with that!”
- Nex at VCI 6 Aug 2012 2:24pm

“I agree. I think it’s crazy that roommates would purchase property together. I’ve had lots of roommates in my day and it never seems to work out. I can’t imagine being stuck to a roommate for 25 years for a mortgage!
Vancity Credit Union actually has a mortgage product specifically designed for roommates. It’s called the “mortgage mixer”. From the Vancouver Sun:
“Vancity also has a “mixer mortgage” where roommates can go together to buy a home they wouldn’t be able to buy otherwise. ‘It also works well for parents and children, because the parents can own part of the home as an investment, while it helps the child get into the market,’ McKinley said. “It definitely helps people get into the market younger.’”
- Joe_Blown_Away_By_High_Housing_Costs at VCI 6 Aug 2012, in part quoting from Vancouver Sun 19 Apr 2012

Ben Rabidoux Reviews the Status and Implications of the Vancouver RE Market

Ben Rabidoux, at his website The Economic Analyst, has recently reviewed the Vancouver RE market in an article entitled ‘Vancouver housing in full correction mode: Implications for Canadian banks’ [3 Aug 2012].
We earlier headlined a single paragraph from Ben’s article (comparing Vancouver and the US with regard to $1 Million homes), but we’d also emphasize that the entire article is worth the read. Check it out.
- vreaa

“It was more fun as a contrarian fighting a uphill battle in early 2011″; “I don’t even talk about housing anymore with the friends that have bought”; “Where have all the Bulls gone?”

“I don’t even talk about housing anymore with some friends. These are the friends that have bought 800k to 1 million dollar homes and are in their early thirties. Being close friends, it is disconcerting how badly they will be hurt when this bubble falls apart. So I don’t talk about it. Tried to warn them though.”
- 900kCrackHouse at VCI 1 Aug 2012 10:45am

“For me, it’s boring to the point where I don’t feel very motivated to post. As I said a few days ago, it was more fun as a contrarian fighting a uphill battle in early 2011. Now even the bulls are adapting their stance to “we all know it’s falling, but I guarantee it won’t fall too much for too long, sellers should wait it out” (Their stance used to be “UPUPUP to the Moon!” lol)
I used to get a good share of jeers and typical bullish trash talk, but since a few months ago the resistance almost completely stopped.
It’s not that fun for a bloodthirsty warrior to walk onto the battlefield finding most of the enemies already deserted or defected.”
- VMD at VCI 1 Aug 2012 11:11am

“It all seems so easy. We are no longer fighting a rear guard action in Dunkirk we are 200 miles from Berlin with no Germans in sight.
Where have all the Bulls gone? I guess they are finally realizing that we can be wrong for a very long time but we only need to be right once.”
- McLovin at VCI 1 Aug 2012 9:06pm
—

We’ve also noticed the sudden silence of the bulls.
It can only mean that they are experiencing various aspects of the slowing.
- vreaa