“My good friend’s girlfriend broke up with him recently, because he didn’t want to “settle down” (buy a house).”

“My good friend’s girlfriend broke up with him recently, because he didn’t want to “settle down” (=buy a house). My friend has been waiting for a crash since 2008. We like to talk about bulls having various problems including marital stress because of excessive debt, etc. But the bubble is clearly straining relationships on both sides.”
bubbly at VREAA 23 Nov 2012 3:33pm

The misallocation of resources that occur as part of a massive speculative mania in housing include interpersonal conflicts and the associated misspent energies around buy/rent disagreements and debt spending. Sure, couples have ample disagreements around housing during more typical times, but in the grip of a speculative mania they are that much more powerful and that much more destructive.
– vreaa

47 responses to ““My good friend’s girlfriend broke up with him recently, because he didn’t want to “settle down” (buy a house).”

  1. This is going to be so fugly on the way down.
    “Who would ever think that the housing bubble could cause quite an effect among couples planning on a divorce? A report by Bankrate.com states, “If the home’s value has fallen below the amount owed on the mortgage, neither spouse wants to be saddled with that liability. If one wants to keep the home, it’s difficult to refinance the mortgage so the departing spouse can be cut loose from the debt. And evaporating home equity can take with it the means to pay lawyers for the divorce itself.”
    http://realty.com/housing-news/housing-bubble-impacts-divorce-rates/

    • Not much of a name...

      My sister is in this exact predicament. So here they sit in a stalemate, one upstairs and one in the suite in the basement. Neither one willing or financially able to budge. Both of them are miserable with no solution in the near future all the while their house value decreases. Oh the joys of homeownership.

      • I’ve personally delayed settling down and having children b/c of the crazy real estate prices. I equate owning a home with raising a family and it’s not possible now so the family is a no go. I do not want to be like many people I know either living in the basement of their parents or stretched to the max. Not my kind of thing.

      • Anymouse, start the family now, kid will come in 12 months, if you are virile, and they don’t need more than a rental space for 2-3 years. When the kid needs a playground, it will be time to buy.

      • kid will come in 9 months…if nothing changed recently that I am not aware of…

  2. He’s a lucky man………….and I don’t know since I haven’t met him, but, perhaps he just doesn’t realise it quite yet.

    Seriously. Looks like there’s another “Real Housewife of Vancouver” without a second wallet to dig into, coming back onto the market on a streeet corner near you.

    • Exactly. He is fortunate to find out, before they got married and had kids, that his girlfriend has a very different mind set. I hope he spent enough time to explaining his position to her and this is her well informed decision, then good luck to them both finding the pair that would think alike. There are many other girls that do not equal “settle down” and “buy a house”, and understand that one can achieve better financial stability in a falling RE market and unstable job situation with the other means i.e. valuing financial prudence, common sense and liquidity above the coveted “joys of homeownership” shared with the mortgage holder.

  3. Vreaa, are you a University drop-out? Check out Larry’s latest post, you gotta love the signs of panic in the BC RE industry…

    No End In Sight

    Our good friend Cameron Muir Chief Economist of the British Columbia Real Estate Association says that he is “now convinced that we will never hear the end of housing bubble speak.”

    Impending Doom

    The premise is now as firmly entrenched in popular consciousness as carbon emissions and TMZ. It has taken the form of idolatry in the blogosphere, where any countervailing narrative is demonized. It has catapulted university dropouts into media darlings because of a hackneyed webpage and an opinion. It has been tarted up by so-called experts who predict impending doom year after year, despite being completely wrong every time.

    No To Tinted Glasses

    Now, I’m not wearing tinted glasses. Housing markets go up and they go down. However, my point is that sharp and significant
    declines in home prices are usually created by massive economic shocks, like the 21 per cent mortgage rates and recession of 1982. Yes, there can be short term speculative bubbles that float back to earth after the circus leaves town, but home prices in Vancouver, for example, have been incongruous with other Canadian markets for decades.

    Doom Sayers

    The big test was 2008. That was the year of the doom sayers, when the largest financial crisis since the Great Depression besieged us and the collateral damage hurled us into a global recession, one from which we still haven’t fully recovered. The airwaves were all a buzz with end of the world prophets and those predicting home prices would be chopped in half, at least. It was going to be the big one! The housing market had gone through a significant inflationary period leading up to 2008. Unlike today, speculation was clearly evident. Accusations abounded that Vancouver was overvalued, unsustainable and frothy. One financial institution even had a publication called Housing Bubble Watch, now defunct, in which Vancouver was always the straw man.

    Back In Droves

    So what happened? Home prices fell 15 per cent from peak to trough, but that was short-lived. Indeed, once the clouds of uncertainty dissipated only a few months later, buyers came back in droves.

    Record Level Trigger

    The most dramatic turnaround ever recorded occurred in Vancouver during 2009, when the year began with 1980s level consumer demand and ended with sales tracking near record levels. Prices came right back to where they were before the crisis, and have stayed there, for the most part, for the past three years. If such a severe financial crisis and global recession couldn’t trigger a meltdown of the housing market or pop any asset balloon, what could?

    Misconception

    The main misconception about housing markets is that they behave like the stock market. They don’t. Bad news can drive stocks lower in a matter of seconds, whereas homes are relatively illiquid; they take a long time to sell and have higher closing costs. In addition, owner-occupiers typically don’t speculate with the family home. In times of hardship, the home is typically the last thing to go. Instead, they hold off on other expenditures like lattes, movie tickets, new TVs and vacations.

    Catastrophe

    In a market that has a well-diversified economy and expanding population, fire sales are extremely uncommon. Unless there is household financial catastrophe on a large scale, potential home sellers simply wait until market conditions improve.

    Place Your Bet!

    I write this piece as home sales in Vancouver and many other markets stagnate and homes prices tread water (see the Canadian Real Estate Association’s Multiple Listing Service® Home Price Index for an accurate reading). I have no doubt that the voices of impending doom will soon renew their bellicose refrain. Perhaps their tea leaves will be right this time and the market will indeed collapse, leaving homes selling for 50 cents on the dollar. I’d put my money on that refrain continuing for a long time to come.

    • Thanks Makaya. Tempting to take some time “unpacking” Larry’s arguments and responding to them. It’s just so exhausting. Perhaps I’ll find the energy, or do it piecemeal.

      • Naked Official #9000

        I read half last night, tried to read the rest right now – would rather cook breakfast -yeah, it’s noon, Larry – I love how he devalidates people as “university dropouts” – dude, you sell houses.

      • It looked to me like those were Cam’s words not Larry’s…something about “Copyright British Columbia Real Estate Association. Reprinted with permission.”

        Header Format – YatterMatters

      • Loon -> Yeah. See below.

    • LY: “The big test was 2008. That was the year of the doom sayers, when the largest financial crisis since the Great Depression besieged us and the collateral damage hurled us into a global recession, one from which we still haven’t fully recovered. The airwaves were all a buzz with end of the world prophets and those predicting home prices would be chopped in half, at least. It was going to be the big one!”

      The big test SHOULD have been 2008, but we were bailed out by plunging interest rates, even though there was nothing integral to our local economic and bubble activity that suggested we needed emergency rates. 2008-2009, under more normal circumstances, would have been the first leg down of a housing collapse. Free money has delayed that, but there will be nothing similar to save us next time we commence a descent in earnest.

    • Makaya: “Vreaa, are you a University drop-out?” and
      LY: “It has catapulted university dropouts into media darlings because of a hackneyed webpage and an opinion.”

      Alas, no, I completed all my studies. Possibly a mistake, in retrospect.
      (Isn’t it de rigueur for successful people on talk shows to point out that they dropped out of college?)
      As for the ‘media darlings’ bit, there have, indeed, been public figures who have gained higher profile on the theme such as Garth T and Ben R. (Both have done so legitimately, in my opinion, by calling the bubble for what it is. And, interestingly, both are national and not local bloggers). But, interestingly, the frequently-read local bloggers have all remained publicly anonymous. For instance (and I’m sure other anonymous local bloggers can tell similar stories): I’ve been contacted many times over the years, by national and international newspaper reporters, and, less frequently, tv journalists, being asked for an opinion, to be interviewed on camera, etc. Whenever I’ve had any exchange with any of them, I’ve asked to remain anonymous. There have been lots of opportunities to try to grab a spotlight. But local bloggers have avoided this. I think most of us are following the bubble because it fascinates us. Obviously we all have personal RE positions based on the bear case. But we’re not selling anything in the way that is clearly being done by realtors or industry-sponsored talking-heads. I think the majority of us have sincere concerns about the way in which the spec mania in housing (2003-2011) has had bad effects on our city and our citizenry.

    • LY: “Now, I’m not wearing tinted glasses. Housing markets go up and they go down.”

      Larry is clearly on record stating that he doesn’t expect price drops of more than 10%-15% (even, in one tv clip, saying he doesn’t foresee “double digit” price drops).
      So, his advice re the normal behaviour of markets, and how large down-cycle drops can be after run-ups of 100%-200%, should all be taken with a grain of salt.

    • LY: “In addition, owner-occupiers typically don’t speculate with the family home. In times of hardship, the home is typically the last thing to go. Instead, they hold off on other expenditures like lattes, movie tickets, new TVs and vacations.”

      Frequent readers know that first sentence deals with one of my favourite subjects. All buyers in recent years (since 2005?, before that even?) have been speculators in that they have bought at least partly on the premise that prices were going up fast and would always remain strong. They would never have purchased properties at those levels (2-3x the cost of renting, in many cases) if they hadn’t believed that. So, yes, many owner-occupiers have been speculating with the family home. They see the family home as part financial instrument. Some of them don’t even know they’re doing this.

      With regard to “times of hardship” and the “hold(ing) off on other expenditures like lattes, movie tickets, new TVs and vacations”. Talk to a local retailer of almost any type and you’ll hear that we are ‘there’ already.
      Once housing costs [obnoxiously large]% of income, and belts have been tightened in every way possible, where do you go? There is no ‘eleven’ in discussions with your banker. We don’t expect the tightening screws to effect everybody, of course.. there is still a lot of wealth in the city, there are many owners who are comfortable and do not rely on their RE for future financial security. BUT there are some who are strapped, and will be forced to not buy or to sell or to move, etc etc. Housing bubbles do NOT require external stressors to collapse (but any will help it along).. they are perfectly capable of collapsing under their own weight. They run out of oxygen (new buyers, new debt). Only a surprisingly small number of owners have to decide to liquidate for prices to drop a lot. As Larry said, it’s an illiquid market… but that puts it at higher, not lower, risk of volatility. Illiquid markets sometimes go ‘no bid’.

    • Interestingly, every one of the 5 comments thus far under Larry’s article say, essentially, “c’mon, it’s clearly a bubble”.

  4. Kill all baby boomers

    I’m appalled that someone with a shitty masters degree would contemplate calling themselves an economist.

    • Not much of a name...

      He’s the “chief economist” at BCREA. It means all the other economists there only have bachelors degrees.

    • Is that not his job?

    • “Muir began his career in 1986 as a Realtor with the Fraser Valley Real Estate Board. After six years in real estate sales and development, Muir shifted his focus to academic pursuits, obtaining diplomas from Kwantlen University College and the University of British Columbia, a degree from Simon Fraser University and graduate work in economics and property theory.

      Prior to joining BCREA, Muir held the position of Senior Market Analyst for the British Columbia region with Canada Mortgage and Housing Corp.”

      http://www.remonline.com/?p=241

      I see no mention of a masters degree.

  5. What a hilarious anecdote! I’ve been saying for a while that if I were dating a girl/woman who expressed a plan to settle in Vancouver and raise a family yhat i would dump her immediately! Some serious analysis as to how i came to be dating such a dolt would follow.

    Exceptions could include independantly wealthy heiresses or possibly lowly physicians. Currently accepting applications.

    • @boogerbob… I think your posting speaks to the bigger picture and by that I mean “have a family”. My thinking is that a woman would compromise on a buy vs rent situation with her guy but I sense this dude didn’t want to have kids. That would be the deal breaker. Yes, housing would be stressful but if she wants kids now then he has to deliver.

    • >lowly physicians

      You need to be a little more selective. Despite being hot, smart and relatively young, MDs doing their residency are most often in huge debt and don’t earn that much despite the years of training.

    • I think you should aim for the wealthy heiress. These days, doctors marry doctors, we are not accepting outside applications.

  6. Being dumped now for refusing to join the collective mania will look like a narrow escape soon enough. I’m thinking of my brother-in-law, talked into assuming a mountain of debt by his wife and her parents, and a friend that has just purchased a townhouse because she couldn’t handle a year or two of rent-free living in her mother-in-law’s basement. Both sets purchased within the last three months. Where will they be when it falls apart? Oh, the social collateral damage!

  7. Terminalcitygirl

    From the world of hurt, a new anecdote… Husband had a call from a relative recently. This family sold their max mortgaged house in the interior last spring so they could move to Hope and amazingly didn’t lose money on the sale. Of course they took whatever money they got frommthe sale and immediately mortgaged a new house despite the fact that they don’t have jobs or savings or pensions. He shared that they would like to have us for dinner but they don’t have a table to eat at and no money to buy one. He also said he was trying to look for work but didn’t have enough money to buy gas to drive to Chilliwack which is the only place in the region that might be hiring. He is early-60s with health issues. While I think he is on the extreme end of stupid, I wonder how many other folks are living similiar unexamined lives and trying to keep up appearances.

  8. I sat down with my fiancee late last year before we got married and did a full presentation on why current house prices and levels of debt are unsustainable, and on the costs of renting vs. owning. Both of us are big savers and have more then enough for a down payment and could comfortable take on about 500K in a mortgage with our current incomes, at current interest rates. After explaining everything, showing all the data, historical charts, fundamentals, etc, etc. she was on the same page. We both agree we do not want to live in a condo, and our current rental situation is nicer then the house we would likely buy. So for now we keep saving and investing. Typically asset bubbles collapses historically take 3-7 years to play out. As it is, we plan to buy something in 2014 but it’s still dependent on how this plays out. I don’t plan to try to time the bottom, I will just wait until prices become comparable to renting. When we buy a house, we will not expect any return on it. It will simply be a home, if prices rise in the future from that point then that’s a bonus, if prices go to zero, then the price we paid will just be the cost of shelter for the duration of our inhabitance.

  9. I’ve been contacted twice regarding opinions on markets. I have in both cases asked to remain anonymous. Further, my training is not in economics or finance. The reporter in both cases has stated it’s tough to be cited if 1) I ask to remain anonymous and 2) I have no formal training in the subject for which I am being interviewed.

    Media has rarely been about presenting the data and arguments in and of themselves — opinions — it has been attempting to find a succinct way of presenting what is a complicated argument for why Vancouver and Canada should be worried, the best way is to abstract the gory details of formulating a sound and defensible thesis behind reputation and authority.

    I refer the honourable members to the following statement, cited a few times by me in the comments of this blog, as a quote best capturing my personal position on citations in the “mainstream” media (not that this means much coming from a spineless bitter risk-averse basement dweller renter post-secondary dropout like myself):
    http://www.calculatedriskblog.com/2007/03/media-inquries-policy.html

    Dear reporters, we quote your stuff periodically, giving credit both to the reporter and the publication, under fair use terms. We have no objection to your returning the favor. If you have an editor who will not allow that, and you think that the problem can be solved by getting one of us to drop our online personas, give you our real names, and say the same thing to you over the phone, so that you can get your editor to accept it as something other than just blogging, which everybody knows is untrustworthy ranting by anonymous nuts, you are making a faulty assumption about the relationship among us, our birthdays, and yesterday. Neither CR nor Tanta wishes to play into a set of assumptions that render what we say on the blog as unworthy of coverage by the Big Media, but what we might say on the phone to Intrepid Reporter as good dirt and straight skinny.

    • Did you notice who OSFI first added to their twitter account? https://twitter.com/OSFI_ca/following Four housing bears.

      Ever wonder why there is no good analysts and economists to give media interviews? Because the best ones go work in the US and UK.

      We’re on our own here.

    • jesse/YVRAnalyst -> Thanks for the post. Agree completely.
      The whole thing about devaluing the message because it is stated by anonymous sources is a fascinating one. We’d argue there are many times in history where listening carefully to the anonymous (usually contrarian/outsider) opinion could have benefited communities/cities/countries immensely. The message deserves to be examined, regardless of source.

  10. You don’t need to have a house to raise a family. Surely people around the world have children without one bedroom per child, a giant SUV, a 6 figure income, after school activities 5days a week…

    I’m having a kid with no second bedroom, no crib, nothing. In fact I live in the basement of family members. They’re itching to babysit and are making meals for us. It all depends on how good your family is. Obviously not everyone can feel comfortable living with their parents/siblings, but if it works, there is no shame!

  11. Pingback: The Office of the Superintendent of Financial Institutions Canada Follows The Twitter Accounts Of Bearish Bloggers And Not Those Of RE Industry-Insider Commentators | Vancouver Real Estate Anecdote Archive

  12. Pingback: Hoax/Joke – ‘The Office of the Superintendent of Financial Institutions Canada Follows The Twitter Accounts Of Bearish Bloggers And Not Those Of RE Industry-Insider Commentators’ | Vancouver Real Estate Anecdote Archive

  13. Pingback: Spot The Speculators #92 – “They took whatever money they got from the sale and immediately mortgaged a new house despite the fact that they don’t have jobs or savings or pensions.” | Vancouver Real Estate Anecdote Archive

  14. vreaa, thanks again for this wonderful blog. Your comments are *always* worth reading. They should be required reading by all. I’ve quoted you many times on Facebook and you are my most quoted source. Your ability to conceptualize and verbalize complex topics is unmatched. For example, jesse is sharp, but his writing skills lack your polish so he’s tough to understand. You could certainly entertain unmasking anonymous at some point and taking some public credit for your words. Cheers.

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