Robert Shiller – “People get excited about housing. They get excited about Vancouver. You’ve got to get it straight. Just because Vancouver is a nice place to live, doesn’t mean that prices are going to go up there forever.”

“It’s looking like the bubble is still alive in Canada.” …

“It looks like Vancouver is San Francisco lagged some three years… San Francisco is a bubble city, it’s one of the main boom cities in the US… Californians are known for that, they’re emotional people (laughs)… But they’re no different in Vancouver.. in fact it’s worse in Vancouver… I have Vancouver doubling, even correcting for inflation, in 22 years.. that’s bigger than San Francisco. So it makes you wonder.. where is Vancouver going now? I’ll tell you one thing, I’m not investing in Vancouver real estate (laughs), not me!” …

[Interviewer: Is the issue the prices, or is the issue the affordability?]
“I’d say the issue was sociology. Economists are getting back to that very belatedly. It’s about how culture changes and how people get excited about housing. They get excited about Vancouver, it’s a beautiful city, by the way… it’s a nice place to live. But you’ve got to get it straight: Just because it’s a nice place to live, doesn’t mean that prices are just going to go up there forever…. when they get sufficiently high, people are going to say: You know, I’m not going to do it… and that’s when it breaks.” …

“Glamour cities are more bubble prone than run of the mill cities… if you have celebrities living there.. if people go there on vacation tours… that’s where the psychology brings on bubbles.” …

“I’m not giving you a strong forecast… I don’t know what these cities could do… they could keep going up. I really don’t know.”

– excerpts from interview with Robert Shiller, BNN, 6 Sep 2012 [hat-tip G]

25 responses to “Robert Shiller – “People get excited about housing. They get excited about Vancouver. You’ve got to get it straight. Just because Vancouver is a nice place to live, doesn’t mean that prices are going to go up there forever.”

  1. Emotion trumps reason.When your mortgage and HELOC total more than you can get for your crack shack in say..oh 6-9 months. There is going to be a lot of emotion in the marketplace. Going up its bliss. Going down, i think the sociological term is, panic

  2. Couldn’t agree more. It’s all about popular sentiment… Vancouver is the BPOE, etc. We’re a fad city. The thing is, though, fads change. Just look at the States. RE speculation went from fun and cool, to financially devastating and lame.

    • BTW, followers of Shiller know that he’s smart enough to not publicly make hard predictions. One can reasonably infer, however, that he believes Vancouver is toast.

  3. I’ve lived in SF and stil have ties there (wife’s family). There are a lot of similarities, including large Asian population, west coast, reasonable climate, etc. only thing is SF doesn’t get ranked highly in the
    Livable cities rankings because they’re in the US (health care system, risk of terror attacks, etc) but otherwise, SF is way more cultured, people nicer, incomes much higher, and generally I find a better place to live. The rich also don’t tend to brag about their cars or how much their house is worth (check out Marin County, rich folks but generally nice down to earth people). I can’t say the same about Vancouver.

    • Home ownership rates are around 33% in SF. Van, 70%. Big difference in the pool of potential owners and their incomes.

    • UBCghettodweller

      Biggest difference: there are real jobs with pay nearly commensurate with cost of living.

    • Uh yeah, if you ignore a homeless problem that dwarfs Vancouver’s and the filth, SF is a swell place.

      • 4SlicesofCheese

        But do they have a DTES.

      • I completed small parts of my residency in several US cities including SF. Great place for the well educated and skilled, so no surprise the well educated and skilled find it an attractive city to live in. And Bob, you are right on, when I lived there the city decided it needed to save money and closed almost all of its social housing for the mentally ill. Of course, the street was the only option for most.

  4. Gold is now north of $1700 per ounce, and there’s not a few Gold mining head offices in Vancouver and Toronto.. Schiller can roll the bones all he likes but Canada tends to do better than the USA when commodities are in a bull market. Where is Vancouver going now? That’s a question for an horary astrologist… i’ll spin wheel and see what it says…

  5. I’m waiting for the bull’s arguments that will tear Shiller’s arguments apart. It will be interesting to see what they came up with.

  6. Did he say sociology? Eat that, psychology!

  7. His point about cities with a story to them being more prone to bubbles is a good one. Reminds me of an old post on torontorealtyblog last year: he talked about a place he liked to visit called Park City, Utah. This place like many others got caught up in the buying frenzy in the states, despite the fact that it was this little artificial town surrounded by empty land. There was no land scarcity, and no one should have bid up the prices of existing RE since you could just go a half mile down the road and build a new place on an empty lot. Yet they did anyway. It wasn’t a logical investment based on the fundamentals, it was emotion-driven. A frenzy. David then tries to spin that as being evidence that Toronto doesn’t have a bubble brewing: Park City had no land scarcity and prices crashed; Toronto does have land scarcity, so prices won’t crash.

    But the true take-home message is that land scarcity has very little to do with short-term valuations. Even in places like Park City, Utah — with abundant land for development all around — prices got over-heated and later corrected, even though it should have been obvious that a bubble was brewing and those rapid price increases didn’t make sense. How much easier then is it to then inflate prices beyond fundamentals in a place like Toronto or Vancouver, where the fundamentals aren’t quite staring you in the face so dramatically as the cornfield next-door? Where there are lots of stories buyers can tell themselves to justify the insane prices (celebrities, BPOE, HAM, running out of land, new transit lines, or whatever).

  8. I know you guys hate Realestatetalks but I just couldn’t help myself. “thinktom” is a westside Realtor looking for the inevitable fall bounce in sales to boost morale in the ranks.

    I’m such a douche. And alone.

  9. If Robert Shiller is right, then a thousand Bob Rennie quotes are wrong.

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