Overheard At Ben Rabidoux’s Presentation On Canadian Housing – “He asked “When do you think the crash will occur?” Ben, of course, said “Right now, sell now.” Shockingly, the guy next to me said “Hey man, that’s my landlord in Yaletown, he’s got 5 properties down there. I can’t believe it. He’s so screwed.”

As had previously been announced here, Ben Rabidoux gave a presentation on Canadian Housing in Vancouver 28 Nov 2012, and it was very well received by the audience of 650. We hope that Ben posts some form of the talk at his site. At VCI, people are relaying summaries of the talk, and sharing their experience of the evening. There were also some interesting anecdotal observations:

“Looking carefully, you also see a lot of “shooters” from the downtown finance scene. I was one row away from one of my friends on the “street” who went there independently, as did I. A few rows ahead was a guy who runs one of the largest investment funds in Vancouver. My read, the leaders in the big money crowd are starting to take the bubble talk seriously.” – HAM Solo

“Going into the seminar, I thought Ben would provide a more soft-moderate outlook to the bubble resolution, probably in line with bank analysts/economists, but he’s all-out hardcore bear armed with numbers, graphs, and a complete frank discussion about what’s out there and what will happen. He explains some stuff we discussed a million time here as well as some new stuff that we haven’t thought about before that will affect the market going forward. I was about 60:40 on soft landing vs crash before and now I’m leaning 90% towards crash.” – RaggedyRenter

“Lots of insider interest; one fellow introduced himself to David LePoidevin after the talk as a local construction insider looking to hedge downside risk by investing in a short-on-RE vehicle David offers.” … “Long story short, Ben is probably responsible for another dozen Boomer mansions hitting the market in January, priced to get out before Armageddon.” – Many Franks

“The people behind me kept asking each other questions about what CMHC was and it was clear neither of them had any clue.” – BLISTERINGAGENT

“The couple behind me decided that it might be a good time to sell their Shuswap Lake property.” – Bailing in BC

“The highlight for me was during the Q&A when a guy got the microphone, he was all dressed in a white pimp suit and asked “When do you think the crash will occur?”, Ben of course said “Right now, sell now.” Shockingly, the guy next to me who looked white said “Hey man, that’s my landlord in Yaletown, he’s got 5 properties down there, I can’t believe it, he’s so screwed.” It was awesome.” – Ray


Presentation now up on youtube:
‘Canadian Real Estate: What happens next?’, Ben Rabidoux, Vancouver, 28 Nov 2012

59 responses to “Overheard At Ben Rabidoux’s Presentation On Canadian Housing – “He asked “When do you think the crash will occur?” Ben, of course, said “Right now, sell now.” Shockingly, the guy next to me said “Hey man, that’s my landlord in Yaletown, he’s got 5 properties down there. I can’t believe it. He’s so screwed.”

  1. Sad I couldn’t make it… but I’m in the prairies so that’s my excuse. I’ve been following Ben since the beginning of his blog and he’s been my primary source of information. Rock solid analysis. Start to finish. The couple who doesn’t know what CMHC is… there really should be no discussion on these elevated prices without the mention of CMHC providing cheap credit to the masses. Glad to hear it went well, and hope the reality of our housing market gets out to as many people as possible.

    • You’re in the sweet spot. Brad Lamb (Toronto condo salesman/developer) was on Canada AM the other day, and he said, quoting from memory “Nationally, the real estate market is doing well, except for Eastern Canada [including Ontario] and BC.”

  2. …”might be a good time to sell their Shuswap Lake property.”…

    Shocking… when you allow that practically everyone up there already knows what it means to be underwater. Figuratively… and literally.


    • Isn’t Shuswap MOI at 20+? Hasn’t it been like that for at least two years?

      • http://www.omreb.com/page.php?sectionID=2

        Oct L/S*=196%

        Oct ActiveListings = 1642

        Oct Sales = 75

        MOI = 21.89333*

        [NoteToBubbly/ED: In the past, having detected several curious anomalies in the way the ‘MainLine’ (strange but humorous use of intravenous substance abuse argot… until you dig into the local ‘economy’) REB puts together its STATS – * not the least of which, their penchant for publishing a Sales to List ratio vs. the more common/telling List to Sales ratio – I studiously ignore them in favour of regional observational/comedic documentary photojournalism.]

  3. I wonder if David knew how bearish Ben was going to be. Good leadin for his short funds!

    Does anyone think there was anything in the analysis that was overstating things a bit?

    • You mean like 50% price drops for Vancouver?
      I agree with that bit, as you know.
      Ben understands the power of the psychological effects when a mania turns.

      What aspects do you believe he overstates?

      • I don’t know too much on the details on the debt side. It’s a very complicated argument with complicated analysis more than what I typically get into on my blog.

        I do know, however that David Dodge thinks higher household debt loads are manageable because rates are going to stay low for many many years. That is something to consider regarding the timing and magnitude of price drops. FWIW it’s very unlikely price drops will proceed in a straight line. I expect some future years to be worse than 2012. I just don’t know which one!

        Ben made some excellent comments regarding the likelihood of credit being loosened in 2013. I think it could be loosened a bit and my most recent thoughts are that it HAS to be loosened from here to pull off a “soft landing”. If it remains tight, though, I expect additional downwards pressure for Vancouver (and national) prices. A way of thinking about what is likely is to think what the government/BoC wants to avoid. They want to avoid a situation of significant negative equity. That means they want people to get onto defined and accelerated loan payback structures but at the same time avoid a situ where many people cannot secure loans due to inadequate equity ratios. Low rates allow this to occur to some degree but ultimately I believe if they are serious about controlling price drops they will have to take a risk and open up the lending taps again a tad. Sales NEED to be propped up to avoid more severe price drops.

      • I don’t think that Ben was overstating anything. He seemed almost apologetic about some of the things he was saying. Kinda like a Dr. delivering some bad news “I wish I could tell you otherwise but I’m afraid it’s terminal”. He didn’t go hard on selling. If I recall correctly the only time he said people should sell now, in the main body of his presentation, was if you were relying on RE to fund your retirement. New buyers weren’t really mentioned. If your already underwater your damned if you do and damned if you don’t I guess. Mostly it was graphs showing historical trends compared to now. He gave his opinion, which was that a hard landing was the most likely scenario and the prediction that Vancouver could see 50% drops but on the most part he left it to the audience to draw their own conclusions from the data he showed. The conclusion that I drew was “SELL RIGHT NOW” but I already did 😉

      • Cyril Tourneur

        “I do know, however that David Dodge thinks higher household debt loads are manageable because rates are going to stay low for many many years.”
        True, rates may stay low but with 163% debt/income ratios, credit expansion cannot continue and that is the more troubling issue. Without credit expansion asset prices will have no other option but to deflate.

      • “credit expansion cannot continue and that is the more troubling issue”

        So this is true, however there is still room to expand this, either on the government or household side. An analogy is on who’s BS to stuff credit expansion to stave off significant price drops. Governments have some room to do this but need a politically expedient excuse.

        I think it will be difficult for the government to elicit a soft landing both nationally and in Toronto and Vancouver.

    • BTW, with regard to the whole issue of profiting from the fall using short funds, shorting the banks, shorting the loonie, etc.
      Do not expect that to be an easy matter. I know that there is lots of talk of all the guys who hit very big home-runs in the US with their crash (Paulson, Bass, etc).. but there were many more who got the fundamental call right but either didn’t profit or actually lost money (Schiff most obvious example).
      Also, there is the matter of timing.
      Some will make money on the short side, but it will take skill.

  4. Vancouver Renter

    There were a lot of grave faces in that crowd, some attendees clearly enduring Ben’s talk like it was slow torture. Some interesting points he made that I hadn’t heard before.

    I liked his Debt:GDP ratio being a counter-argument for foreign investors. I agree with Ben and those here who have suggested foreign ownership in BC has been overstated. There was one comment from the crowd last night (and i’ll paraphrase): “Not a single Canadian has purchased a home in my neighborhood for years.” Great anecdote… I thought Ben did a good job of offering the foreign investor explanation up as Vancouver’s marquee “it’s different here” argument. Funny enough, the gentlemen asking the question retorted in frustration: “but it IS different here!” almost as though if he raised his voice a bit louder it would come true.

    I’ve been trying to think of ways to short the BC housing market for about two years now and as a first time buyer would, in a perfect world, put a housing short ETF of some sort in my RRSP and then cash that out with the first time buyer credit and use it as my downpayment when we get closer to bottom. I’m not sure if that’s possible but I am going to talk to the guys that financed the talk last night to see.

    One other thing I would have liked to see was a projection on his graph that showed the household starts overlapping with new builds, and how the household starts will likely start to drop once baby boomers both sell their recreational properties and in some cases their primary residences to fund retirement. It was fascinating to look at Ben’s graph on this and see the spike in household formations around ~1980 when the baby boomers started forming their households. It would have been a good transition into his very Gary Shilling-esque view of the next decade being different from the last.

    • I like the quote you paraphrased above. Not only is it racist, he followed it up with this gem: “Canada’s immigration per capita is 10 times that of the USA!”. It was the first time all night that someone other than Ben stated *any* statistic. Ben immediately followed up with: “No, it’s not.” . “It’s about 20% more but certainly not 10 times.” Ben was great.

    • The guy who said “it’s different here” wasn’t the same guy who asked the question. I was right down there. The questioner acknowledged that Ben gave a “good answer”. Also, it’s not racist to say “foreigners are buying houses” if foreigners are buying houses. Saying something about a race, does not make the statement racist.

  5. David pointed out that at the peak in San Fran, homes were around 6.9x pretax income and Vancouver is sitting at around 11x pretax income. Not pretty!

    • UBCghettodweller

      And Americans still complain about SF and the Bay Area being incredibly expensive by American standards. As I look for potential Post-Doc positions, the areas around Stanford and Berkeley seem pretty reasonably by Vancouver-tinted standards. Rent vs. Own ratios are within a range that if you have enough for a reasonable down payment, combined with the tax benefits of being a mortgage payer in the USA, in addition to fact that many of the for-purchase properties are much nicer than rentals, AND that you can lock in to a ridiculously low interest rate for 30 years, the prospect of buying suddenly seems like an un-insane idea to me. Although a lot can change in the next year or two before I’m finished my PhD and really can consider moving elsewhere. The concept of dumping most of my net worth in to a single largely illiquid asset scares me.

      • rent in SF proper is way higher than Vancouver, it’s pretty shocking. but ya it does mean that the price-rent ratio makes more sense. i’m paying 2.5 times what I paid in Mt Pleasant to live here.

      • UBCghettodweller

        evilfred- You’re absolutely bang on about San Francisco proper. The areas around Stanford and Berkeley are far more reasonable than San Francisco proper. For rentals, they’re no worse, if not slightly better quality, for places near campus.

        If you have one of them thingies with wheels that burns dead dinosaurs, the options end up be outright reasonable compared to Vancouver despite increased transit costs… As someone who rides a motorcycle as his commuter vehicle, I’m looking forward to milder weather and much better used motorcycle market while using a form of transportation that is nearly as cheap as walking.

  6. “Overheard At Ben Rabidoux’s Presentation”

    did people pay money to hear this?
    Holy sheep.

  7. Pop goes the bubble

    I was unfortunately unable to make it, does anyone know where one can find a link to his presentation. I would love to read it.

    Business Insider had a interesting article on our bubble yesterday and specifically Carney’s role in pumping it up. Take a look at the comments some great insight and comments there.


    If anyone figures out how to short this bubble please let us know, unfortunately it does not seem as easy to do as it was in the states. Shorting Canadian real estate is the trade of the decade, just have to figure out how to.

    • The best way to short real estate in Canada?

      • Pop goes the bubble

        Unfortunately all that renting allows you to do is not lose money. I agree by renting you are in essence short the housing market. However all renting is doing is allowing you the opportunity to buy in later at a cheaper price (which is a great strategy) However if you truly believe the market is going to crash (and I do) you are not going to make a big windfall profit by renting. I am looking for a way to make a profit on the downside. any ideas. In the US you could short the home builders, mortgage brokers, and even the banks. I don`t really know of any way to do it in Canada now that it is our turn.

      • Everybody wants to profit on the downside around here. What’s up with that, why not find somewhere to profit from upside.

        Sincerely, poor guy.

      • Ralph Cramdown

        Because long distance landlording is a good way of having someone else profit from your downside?

      • Or short the Canadian dollar.

  8. Just 16 Days… then a non-refund deposit…a deposit that’s large enough even if they fail to close we will be in a good position…,
    … Big slow sweat over eyebrows as I wait…
    My property tax increased at more than 25+% a year since 2005… just do the compound math on that starting in 2005 at a base rate of $4,000 a year. …. By 2020 I’m dead or the Economy is…
    1+1 Math says sell… Take much profit and wait… math always wins… as does capital formation…
    I can buy 20 acres near Mission for a third of what I sell for and still have $500+ grand set aside… Hmmm…

    My Agent says Richmond is dead already, my looking for a new home says Mission, Mapleridge, are dead, Langley and points east are under assault big time, and on my block of businesses… more than 50% are selling or already exploring getting out and shutting down… think about that.

    Commercial St. in Vancouver… I have not talked to a single Local owner who is not getting murdered by the increasing property tax…., most are very close to shutting down…
    And every one is selling due to the property tax increases driven by other peoples market speculation.

    Just where will the real GDP jobs come from… as business closes down…
    Who will pay the taxes for the public servants wages… certainly not the public servants.. they just recycle other peoples taxes…
    What is the public supported portion of the paid jobs now… 63%… I think

    As house prices fall municipalities will be trying to make up lost revenue anyway they can… property tax will go up… to cover the overly generous public wage increases… what is it Vancouvers mayors assistant gets about… $350 thou. a year ? The city financial wizz who just retired gets about $250 thou a year ? I believe.
    There are 300 plus Public Servant blood suckers like this in BC…. your tax payments at work..
    A White House Chief of Staff makes…. not that much….
    sorry for the long wind
    and waiting…
    and drinking coffee while I watch this pile of shit unravels…

    • “There are 300 plus Public Servant blood suckers like this in BC…. your tax payments at work…” Sounds like ther’s only 300+ middle class left in BC to rape and plunder…feel sorry for those poor (literally) suckers who works/worked for you.

    • Naked Official #9000

      I highly doubt the mayor’s assistant cadre makes 2.5bn RMB per annum – stats, cadre!

      Do not be a disharmonious splittist!

  9. Public servants should be making servant wages!!, not master’s wages IE the tax payer!!

    • I would love to see what kind of administrative talent the city could get on servant wages. They’re civil servants, not paupers.

    • Oh sure….so lets cut salaries to the bone and then start enjoying all the wonderful benefits of the Third World where plenty of power is vested in the hands of people at the bottom of the pay scale.

      Sarcasm aside, there are good reasons Canada enjoys one of the lowest levels of corruption in the world and has a properly functioning judiciary and good policing. Incomes are a big part of it and as a general rule it does not pay to risk your career by taking bribes and kickbacks.

      • [G&M] – Canada ranked worst of G7 nations in fighting bribery, corruption

        …”Canada has again been scolded on the international stage for its “lack of progress” in fighting bribery and corruption by a watchdog agency that ranks it among the worst of nearly 40 countries.

        Transparency International, a group that monitors global corruption, put Canada in the lowest category of countries with “little or no enforcement” when it comes to applying bribery standards set out by the Organization for Economic Co-operation and Development.”…


      • [G&M] – Former SNC-Lavalin executives charged

        …”When Pierre Duhaime abruptly left SNC-Lavalin Group Inc. in March, the Montreal engineering firm praised his work as chief executive officer and paid him nearly $5-million as a “departure arrangement.”

        But Mr. Duhaime is now at the centre of a criminal probe that dates back to his first days as CEO and appears to be tied to $22.5-million in alleged improper payments SNC made to agents to help win construction projects. The controversy has cast a cloud over SNC, one of Canada’s best-known companies, and raised questions about a $2.3-billion hospital project in Montreal that SNC is leading.”….


        [NoteToEd: ‘Oddly’, public officials on the receiving end of SNC’s CaymanIsland SupplementaryRetirementIncome Program have yet to be identified/charged. Not quoted in the abstract above, and my favourite from the piece, “Both men left SNC earlier this year amid allegations $56-million in improper payments had been made to unknown agents to help the company secure construction bids. SNC said the money had vanished.”]

  10. I read about his presentation, so may have missed the finer points, but I was disappointed by the idea that fear drives this market. That certainly is far from original (we’ve read it on local blogs for years) and doesn’t strike me as analysis. Again, maybe I missed the finer points, as I only read about it in the paper. Low interest rates are going to have their way. We may not go up, but don’t look for any kind of correction for a while. Expect to hear the same complaint ad infinitum “Sellers aren’t adjusting to the new reality”, which, translated means “Sellers aren’t motivated to drop prices”.

    “My Agent says Richmond is dead already,…” Not my experience right now. I’m quite surprised on how much action we’re getting on a current Richmond listing.

    Nemesis – remember when you and I speculated that Obama would have a hard time getting re-elected because the youth vote wouldn’t be as energized four years down the road? I thought of you when the turn out figures came out 🙂

    • Dude if you want to post “I’m busy” anecdotes like that head over to retalks with thinktom and Mike Stewart.

      Sales are not good right now. Check the numbers.

      • Ralph Cramdown

        You can’t be a successful realtor if you’re not an optimist. If you sell 10 a year and you’ve sold one in the last 5-6 weeks, things are busy. No sale but some traffic through the open house? Busy. But hey, it’s December, so as long as you’ve got a few prospects lined up for January, busy…

        The ones that are still blogging in a few years might not be as cheerful:
        That agent is actually quite interesting, by the way. He as lots of insight into his and the industry’s business, and lots of time to type.

    • I’m still smarting over that call, SenorCaballero – having lost a friendly wager with some Yanqui psephologists on that very matter… Albeit the incumbent’s youth support did bleed 6 points to the opposition vs his prior contest’s – the youth segment nevertheless turned out in stronger numbers than the anecdotals suggested would be the case. Win some. Lose some.

  11. BTW, VREAA, I still hate WordPress.com. Always a pain posting comments. Get off your fat wallet, bleed the beast and move to WP.org!

  12. Like low interest rates have had their way in Japan and the US?

  13. Seriously, there is a significant number of us (with actual savings…gasp) that want to speculate on a RE crash in Canada (focused on Van and TO). Short X, short Y is easy to say as a strategy for a retail investor but in reality we don’t have the time to properly and effectively execute this strategy. I’ve always hated financial advisors as the majority of them are sheep that assess your risk profile by survey then prescribe the firm recommend portfolio however if you can show me an IA that shares my view of the bubble in Canada and has acces to the resources to develop a properly hedged strategy; sign me up!

    I’m pushing for a forum at VCI so we can confidently disclose who we all are so these connections can be made, if anyone else has an idea, let me know.

    I’ll throw 100k as a start to any manager in these forums who shares my bearish view and has a strategy to win from what is about to occur. Don’t pitch me forex or shorting dividend paying equities (unless you have a perfectly correlated dividend paying stock I can go long on he he), I’m already playing that, I want something that is something I can’t do myself as a retail trader.

  14. After reading the analyses, IMHO Rabidoux didn’t address the HAM factor adequately. Of course nobody really knows the extent of the problem (yes, problem) because accurate indepth information isn’t being collected.

    I’ve heard it said, and I agree, that the fastest way to detrmine how much of a factor HAM is would be for the Feds to announce they will tax all Canadians income, reagrdless of where it is earned.

    • What more do you want? He said it is happening, is difficult to measure, and is providing a story that is helping to sustain the bubble. HAM doesn’t explain record debt levels, which is the centre of his thesis.

      • Agreed.
        Foreign buyers had modest direct effect and very, very big indirect effect (as a story that locals told themselves while overextending to purchase).

    • We’ll have to agree to disagree on that. People typically tell me, “Oh you can still afford a house in Vancouver on an average wage, but it will have to be in Langley and Maple Ridge”. All I can reply is: “Why?”. Who is living in what used to be middle class neighbourhoods in Vancouver proper?

      I don’t know anyone who has bought on the West Side in 8 years, but I know several who have sold out to Chinese families. Someone may have a Canadian passport and have kids at PW, but if they earn their living in Mainland China, they’re HAM to me.

      • Some folks just can’t see the forest for the trees or they are assuming that the SFH and condo markets are composed of the same buyers (which is certainly not the case). In my own extended family, three SFHs and two businesses sold all to HAM over the past five years. Another tells me that 80% of his BMW sales are all to HAM. However, this is just a personal anecdote and doesn’t necessarily prove anything to others.

      • Naked Official Jumps the Gun

        This sounds racist!

  15. They do that already.

  16. I think it is pretty obvious topic now, I suggest to check these stats from Canadian Census 2011 to understand where we are headed:

    population – 33 476 688
    population increase 2006-2011 > 5.29 per cent
    The population of over-65ers has increased to almost five million over the last five years
    The median age in Canada is today 40.6 years, up from 39.5 years five years ago and much higher than the 33.5 years of two decades ago
    The average family in 1961 had 3.9 members, while today it has 2.9.

    So I´m very crash POSITIVE

  17. EinsatzgruppenVancouver

    Geez, sounds like Ben decided to soft pedal it.

    I just recently found out my inlaws are planning on selling their house in Surrey. In april, a near-identical place across the street sold for $520K. Last month, another near-identical (neighborhood/cul-de-sac built by the same builder in the 70s) went on the market late june (just before OSFI and Flaherty brought in the new mortgage rules), sold last month for $450K.

    Back in may, was at a family BBQ at inlaws’ place, they and all their suburban friends were patting each other on the back about how awesome it was to own property that kept going up and up and up. I said (because I’d had a few drinks, won’t do this again…) “Yeah, money’s never been cheaper in Canadian history and real estate’s never been more expensive but yet people still think real estate is still going up.”

    It was like I’d said “pull my finger” then farted like a trombone solo. Dead silence, imagine a pin dropping in slow motion.

    I’ve been half-assed trying to tell my wife’s parents that they should think about cashing out, y’know, on the house they bought in 1979 for $25K, since at least 2010. Oh, god forbid that anyone who isn’t a homeowner AND is under 40 could possibly know anything about financial planning.

    Let me just say it’s gonna take a lot of willpower to not say “I told you so” as their house languishes on the market through to 2014 because “It’s worth more than $450K”, but hey, keeping my mouth shut is cheaper than a divorce lawyer. :->

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