4549 W 12th Ave, Vancouver West-side
2,569 sqft SFH on a 33×122 lot; built 1933
This particular house previously featured on these pages:
‘Half The Width, Twice The Price’ 25 Apr 2012
‘Next Stop, 2008 Prices’ 19 Nov 2012
Price history:
1:
March 1997: Sold $457,500
[renos in 1998]
2:
April 2008: For Sale at $1,679,000
May 2008: Price reduction $1,595,000
May 2008: Taken off market
June 2008: For Sale at $1,495,000
July 2008: Sold $1,430,000
3:
April 2012: For Sale at $1,975,000
Jun 2012: Price reduction $1,875,000
Taken off market
Aug 2012: For Sale at $1,775,000
Nov 2012: Price change $1,698,000
4:
21 Dec 2012: Sold $1,550,000
—
Increase of $120K (8.4%) over 4.5 years (since July 2008), for a compound annual rate of 1.8%, pretty much the rate of inflation, so this property did indeed end up selling for the same real price as in the summer of 2008. Of course, with transaction costs factored in, this represents a loss for the recent seller.
According to examples such as this one, west-side SFHs are back to 2008 prices, as much as 25% off 2011-2012 peak, and there does not appear to be any good reasons to suggest that they’re not going to continue to fall. At $1.55M, this property has still sold far above it’s fundamental value.
This is what speculative manias look like when they begin to unwind.
– vreaa
Vancouver Real Estate Anecdote Archive 
It is a significant loss once carrying costs are taken into account.
But in the bull’s world, they never count those.
But the person was also getting a place to live (or rent) in exchange for those carrying costs.
Bears never take that into account… 🙂
(100% bear here, just keeping you honest)
Correct, davers.
But bears do take that into account (note I mentioned transaction and not carry costs).
The entire math would, of course, involve
Rent (about 3k per month, or 162k for the 4.5 years)
vs
Mortgage interest +
Any other mortgage costs +
Prop tax +
Opportunity cost of down payment +
Maintenance (expense and time) +
Any renos (expense and time) +
Transfer costs (including sales commission)
Out of interest, estimates of above appreciated.
The overall point is that the owner may have covered living expenses through this (highly atypical) 4.5 years, very little more, if anything. The house is no longer a financial instrument guaranteeing future riches. This is why momentum players have left the building.
Carrying costs:
Mortgage of probably at least $1 million
Taxes
Insurance
Maintenance, Incidentals
Possible renovation, new furnishings
Assuming that shelter can be had for cheaper than the cost of all the above, it isn’t a very good exchange.
Can’t believe nobody’s done the math yet…
So, (in thousands):
Purchase price: $1,430k, 4.5 years later sold for $1,550k, gross profit of $120k.
Prop tax (Vancouver mill rate ~0.4%) = $5.72k/yr [$25.74k]
Interest on $1144k (simplified interest-only, no break fee) mortgage at 3%: $34.32k/yr [$154.44K]
Maintenance: hard to estimate, but let’s be generous and say it’s been a lucky half decade and the maintenance was well below the typical rules of thumb and comes in at just a half of a percent per year: [$32.175k].
Transaction fees (realtor, lawyer, staging, land transfer tax): est. at 8% of the sale price = [$124k].
Insurance: I’d guess about $2k/yr for a place that expensive. [$9k]
The opportunity cost is the tricky one. The TSX was at a high in July 2008 that still hasn’t been reached. Assume that they would have invested their $286k 50% in XIC and 50% in XBB on July 1 2008, and rebalanced annually (I had to estimate the dividends). [$35.6k] To account for investing the cashflow difference in renting requires whipping out a rent-vs-buy spreadsheet (I just so happen to have one, but it’s all tweaked up for Toronto variables at the moment). Alternatively, they could have purchased a 5-year GIC, which IIRC were at ~4% in 2008 [$62k]. (stock market opportunity cost factored into the renting side)
So grand total: buying cost them $225k over the 4.5 years, or $4.17k/mo.
Renting at $3k/mo would have cost $162k, and they would have made $35.6k on their invested downpayment (in a fairly poor period for investing), leaving the renters with a net cost of $126.4k. With the more optimistic GIC scenario, break-even rent would have been $5.3k/mo, which gets you quite a bit of house.
Even in what were a good couple of years for buying, renting won out — properties were just too over-valued in 2008 for buying to make any sense without the expectation of continued appreciation.
“Pride of ownership” was (just about) a 6-figure expense.
According to RateHub, the 5-year fixed rate in July 2008 was 5.2%, (I used 3% assuming that it was a reasonable, close-enough average of fixed rates and variable rates over the period) costing the owning case another $100k or so.
> Potato
I’ve just read your “Rent vs. Buy: The Investment Spreadsheet” post on your site, and everything you’re saying corresponds with what I’ve been discovering with my own investigations. I’ve been meaning to run my various scenarios through your calculator, and will certainly do so before I share with my own findings.
A couple of points to highlight, which are implied by your comments here, but could possibly be missed by some:
1) After everything is factored in, including opportunity cost and imputed rent (if you’re a believer in imputed rent), most of the time, in most real estate markets, both owning and renting cost the owner and the renter money. Is it such a big surprise that the largest ongoing expense for any of us actually costs money? The idea that a buying a house is an investment is a pernicious belief popularized by all the different industry players who make money when people buy and finance houses. The own vs. buy debate isn’t about who has the greater return, it’s about who has the lower costs.
The only time a house can return profits is during a bubble, like the one we’ve been experiencing, assuming the owner gets the timing of buying and selling right. The flip side is that an owner can be financially devastated during a crash, again depending on timing — i.e., buying high, selling low.
2) It’s not just opportunity cost on the down payment. It’s opportunity cost on the closing costs, and the property/land transfer tax. And more importantly, it’s the ongoing and accumulating opportunity cost each month that the owner puts X amount of dollars more into the total cost of ownership than the renter puts in to renting. That’s all additional money that the renter saves, invests, and can earn a return on. I know your spreadsheet takes all this into account — I just wanted to highlight it for others.
Thanks, Froogle.
Just to clarify: yes, your principal residence will cost you money. In most market conditions (i.e. not in the midst of a bubble as now) it may make more financial sense to own your shelter than rent it, but at the end of the day shelter still costs money. Real estate in general should be an investment: landlords are in the business to make money, and at sensible price-to-rent multiples should have an expectation of doing so. But then when you live in the house instead of renting it out, you give up that income.
But… But… RoyalLePage is adamant! Adamant, I say….
…”fears of a sharp or drawn out collapse are unwarranted.” – Phil Soper, CEO Royal LePage
[G&M] – Mild Correction Expected for Housing Market: Royal LePage
http://tinyurl.com/ao3ghtg
Whew!
And to think we were all getting unduly worried…
Yeah….that was a close call. To think we fools doubted all those experts. What ever will they come up with next year to cause the reality to just go away so we can have a normal city again.
Next year they will lay blame on global instability and any number of obscure outside factors.
Next year?…Try next month!
“Mild” is probably another one for the bubblespeak list. Such a calming word, like a balm or a salve. A reassuring word — when things get too complicated for the average joe to understand.
Mild, medium, hot, and ayayayayayay!!!!!
Agreed, Froogle. As with “soft”, “easing”, “tapping the brakes”, and so on. So warm and fuzzy.
“Time to adjust” is another in this category, as in “the market requires time to adjust” [Royal LePage, today]. Very gentle. A vacation!
“We’ve got cows.” – Phil Soper, sometime later this year…
Hola, Amigos! Una corrección moderada… Estilo español!
[UK Telegraph/AEP] – Comrade Barroso, the existential threat to the euro is mass unemployment
…”Fresh losses could reach 50pc and drag on for 10 to 15 years in parts of the overbuilt sunbelt. “The market is broken. We calculate that there are almost 2m properties waiting to be sold. We have made no progress at all over the past five years in clearing the stock,” said Fernando Rodríguez de Acuña. “There are 800,000 used homes on the market. Developers are sitting on a further 700,00 completed units. Another 300,000 have been foreclosed and 150,000 are in foreclosure proceedings, and there are another 250,000 still under construction. It’s crazy.”…
http://tinyurl.com/ajuy6e3
There is a SFH on a 68 lot in Shaugnessy, albeit on 41st ave that’s selling for 1.688m. There are also new houses, smaller lots, in Killarney area selling for 1.8m-2.2m, some of these are on 49th ave. Has prime west side dropped below east side?
More like east side sellers still stuck in Summer o’ 2012.
We should see if there are sales examples to bear any of this out.
Are they actually selling Brian or are they just on the market at those prices?
Personally I don’t think long term the East side will be more expensive than the West but while the market is resetting we’ll see some inappropriately priced property.
Not selling but sitting on the market. There is one house on the corner of 49th and Kerr, right by a Shell gas station that was selling for about 1.4M back a couple years ago. I don’t think it sold. And then it was placed back on the market recently at more than 1.7M. This is a few years old home, about a 45 lot, I gather. There is a new build whose front entrance is on Butler St (a smaller nice street) but it’s also on the corner of 49th. Initially it was selling for 2.2M, now down to 1.8M. Still, my point is, these two houses are on a relatively noisy street, on the east side. Granted, they are newer builds, but the Shaughnessy home has a bigger lot (albeit also on a noisy street). The builders are so deluded.
While these price reductions are welcome I still find it amazing/terrifying that its still sold for nearly 3 1/2 times the price it did in 1997.
If it had gone up at the rate of inflation which most of our wages haven’t it would be $616,200.
That’s exactly why we still have a long way to go before we hit rockbottom.
In Richmond, of course, it can even fall further, because there is no rock at the bottom.
There is rock at the bottom. A really big rock. The fools in the crowd suggest there is a pillow soft landing on the way. Sorry folks….it is a rock.
So, you mean it will crash on the rock, right?
Some days I dont know what the hell I am talking about, RTS but I do know extra booze often seems to help. How about this instead…….the Hindenburg made a “soft landing” when it glided into Lakehurst New Jersey on May 6th 1937. Unfortunately it was fully engulfed in flames as it gently touched down on the Tarmac killing 35 people in the process. It is a bit how I visualize Vancouvers coming descent. You just cannot blow the biggest housing bubble on th eplanet and then not anticipate an epic crash to follow.
So there ya go. Soft landings are indeed possible
Agreed that fundamental value is well below $1M.
Most people would still see this view as lunacy, though.
So all the upscale neighborhoods have declined. Most of us can’t afford those areas anyways. I’m bearish, but not happy yet
I am a college student living at home in a house assessed at 7 million dollars. With that price tag you would expect a mansion right? Nope. The house is 90 years old, doesn’t have insulation or a proper heating system. My parents bought the house in 1985 for 450,000. Adjusting for inflation that is 860,000 in 2012 dollars. That is the most I would pay TODAY for this piece of junk house. However we do live in a quiet area in the UBC area and the property itself is quite large with a premium view, but even those factors do not begin to justify the difference between the assessed value and the inflation adjusted price my parents paid 28 years ago.
Luckily my parents were smart with their finances and a large correction in the market will not affect them. My parents have avoided using any paper gains in the property even when their coworkers and friends kept pestering them to take out loans against the house to buy condos and rental properties. These same coworkers and friends have been driving around in fancy leased cars and enjoying nice vacations every year while my parents worked hard to pay off the mortgage. I have had to sit through countless dinners where my parents friends bragged about foreign investors leaving notes in their mailboxes making cash offers on their houses and how they could “cash out” at any time. But they didn’t. Now that they do want to sell they are finding the market has cooled and no on wants to pay peak prices for their homes. Very few people are prepared to spend 15 million dollars on a home in a cooling market.
Robert -> Thanks for sharing all that; will headline.
I would love to know which house it is Robert. I grew up on the Endowment lands and know almost every home there by heart, at least the ones from the 80’s and prior..I won’t ask though as I understand it is personal but can you tell what street it is on? Great story by the way. I think there is often a belief that anyone owning in that area is swimming in cash which is obviously not true. Many that I knew were fairly typical working folks although most were professionals or business people. The risk they faced was being presented with the chance to lever heavily into even more property as you mentioned. That is just fine until the market reverses or unwinds and the real hazard becomes all too obvious..
Farmer, I live north of Chancellor Blvd (think Acadia Road, Newton Wynd, Kingston Rd etc.) And you have hit it right on the head. A lot of the my neighbors are educated professionals such as surgeons, specialists and lawyers and they bought houses over 20 years ago. These same people would not be able to buy their own houses at today’s prices even while being the highest earners in the province.
The next 10 years will be an interesting era in the area. A lot of the home owners around us are reaching retirement age. Will they look to sell their homes or will they pass the homes along to their children? If they are looking to sell, who will be there to buy a 10 million dollar, 50 year old home?
Exactly my thoughts. I had inflation at 3% and the current price would be $734,000 (compounded). I remember 1997 prices were also overly inflated because of Hong Kong people migration to BC from fear of communist Chinese seizing their assets.
Wow is it just me or is there a serious counter-movement afoot today across all lines of media promoting the notion of a soft landing? Perhaps this seemingly coordinated effort (banks etc) is in response to Macleans piece, nevermind on-ground realities presently unfolding in Vancouver?
Much of 980 AMs morning talk was all of a soft landing but a crisis. One realtor said the last eight months have had a lack of listings! That was during Simi Sara’s show.
Sold…Van East Commercial/Residential,
the worst, the most self centered place on earth,
stupid property tax increases…
$4,000 to $24,000 over the last few years…
Because someone else sold…
Oh well..
Safe…
Now looking at a cute piece of property down the valley
$72,000 below assessment,
and some $150,000+ below the last sale…,
and 1/3rd of the value of the sale I made in Vancouver,
and $2,000 in property tax…
Hmmm…. should I or Shouldn’t I…
I sold for 3x’s what I paid in 2005…
Bank sale, guy folded.
lots of these … in the valley… looked at over 20 so far… in the same price range… flippers getting murdered… there.
Wonder how many more Bank Sales are out there in Greater Vancouver and the lower mainland…
Only one of these properties was listed as a Bank sale…
Found out by asking…
The bank is almost at 90 days now…
Then they have to disclose loss…
AHHHH……
Leverage… commie learn lesson well…
Silver
Tune in next week for the finale of ‘Flip That House’ LM edition. Synopsis : A women who looks like shes dressed to go fox hunting accompanied by a guy in a down Patagonia jacket and Buddy Holly glasses hugging and crying in the front seat of their X5.
Ha-ha-ha….. too true. 😉
Hey Gang, check this out:
http://blogs.wsj.com/canadarealtime/2013/01/08/housing-crash-fears-for-2013-unwarranted-forecasters-say/
Here we go:
http://www.vancouversun.com/business/Vancouver+house+prices+decline+further+economist+says/7790495/story.html
Quotes:
“Nowhere is the housing market weaker than in British Columbia, where resales are down 17 per cent year to November and are well below the past decade norm,” Guatieri said. “Vancouver’s resales have plunged 31 per cent in the year to December and benchmark prices are down just over three per cent since the spring.”
and
‘Unless people continue to flood into Vancouver — foreign residents with a lot of money — that market looks very ripe for a meaningful correction — not a material one — of at least five per cent or so for the next year.”‘
Lots of the typical potboiler blame-it-in-the-foreigners and blame-it-on-mortgage-rules schtick. But, none-the-less… it was in the Sun. That says a lot.
Also: http://memegenerator.net/instance/33070537
I live in Vancouver West, and I have hard time believing people denying effects of HAM on Vancouver housing market. There exists a gradiant of price from Vancouver West toward east, and same gradiant used to exist from Richmond to south and east. Now, recently a lot of them moved to West Vancouver and if you look at Noth Shore prices they have gone up 25% since 2010.
I have been watching North Shore market very closely and you should be blind not to see the exedous from Richmond to West Vancouver in the past two years. This “investor immigrant” program is nothing but menace to local economy. What have they started here that is considered a “business”? If Conservatives stop this program, they will have my vote next election.
I personally know of two HAMs who moved from Richmond to West Vancouver. I guess you can call it they are moving up the “property ladder” or this being Canada, the “property totem pole”.
totally agree, the “investor immigrant” program is a scam.
“Newly affluent Chinese nationals are bringing big wads of cash into North America the old-fashioned way — tucked into wallets, purses and suitcases at airports — and it appears a chunk of it winds up in Canada’s housing market.
Between April 2011 and early June 2012, money brought by Chinese citizens comprised 59 per cent of all monies seized in Vancouver and Toronto airports, the country’s busiest, according to a Wall Street Journal news report.
Nearly $13 million in cash was seized during that period, the newspaper reported, citing Canada Border Services Agency data obtained under the country’s access to information legislation. Most of the money was returned.
In one case at Vancouver’s airport, a Chinese man was found with $177,500 in the lining of his suitcase and stuffed into his wallet and pockets. He was fined.”
http://ca.finance.yahoo.com/blogs/insight/suitcases-chinese-cash-flooding-canada-borders-162935775.html
What the heck is “a meaningful correction — not a material one”?
Like a “meaningful conversation” or a “meaningful relationship”.
Just a figure of speech, I guess.
Greenhorn comes with some lolz
“bloodbath”
“tug-of-war between buyers and sellers”
And a few Michael Levy comments.
– Predicting increased political freedoms will see renewed interest from China in Vancouver real estate
“there is no property bubble… prices have come up because of demand, domestic and offshore”
Perhaps he’s right, but that’s a giant gamble especially if China’s economy sees rebalancing frictions.
I guess Levys income is up 300% in the last ten years selling bullion to scared senior citizens and end of the world nutters. When it takes 85% of pre-tax for an avg family of 4 to afford the avg LM home his flippant boosterism/hypothesis is downright dangerous
“increased political freedoms” will see renewed interest from CHINA.
That’s a funny one. And I thought that the waves of Chinese buyers during the last 3 decades were due to affluent Chinese wanting to park their money here due to political uncertainties.
Therefore, increased political freedoms and certainty should mean that they would repatriate rather than invest.
Let’s listen in to CKNW this week. I’m sure there will be usual suspects denying that there is bubble.
I will save you an hour of your life, Real Estate Tsunami: don’t listen to CKNW on Saturday morning. You’re welcome.
This house sold for 1502.6 oz of gold in July 2008 and 944.8 oz of gold in December. That’s a decline of 37.1 per cent, the senior citizens and nutters are doing alright.
Is this Levy guy for real!!
He’s been Bill Good’s financial sidekick for about 20 years.
hey just saw this though someone must have referenced it already, i imagine … anyway, knew he (they) had a firm view of the hamster thesis … “Why is it we have a massive amount of mortgage debt originating in Vancouver? How does that jibe with the story of wealthy investors coming in with suitcases full of cash? Something’s got to give there.” … http://tinyurl.com/b6kklpc … cheers
ps. mr. 2.7% – check us rates pre- and post-crash – they went down … a significant amount; even better, check jp rates and ppty values since that crash
Bankers expect soft landing for Canadian housing market despite slowdown
http://www.ctvnews.ca/business/bankers-expect-soft-landing-for-canadian-housing-market-despite-slowdown-1.1105197
Oh my GOD, we are screwed. This is a play by play redo of the housing flame out down south. I expect there is going to be a good market for bubble deniers for the next year. There was a huge demand for sooth sayers down south, I am sure it will be no different here.
It is in their interests to downplay the risks. They are of course speaking to sentiment and trying to sooth peoples worries. Not that it will help much. The market is fully saturated at the current high ownership levels and the first time buyers are far too thin on the ground to materially impact sales levels and open the way for others to move up. They knew all this years ago though. The dynamics of easy credit are well understood but the decision was made nonetheless to extend credit without regard for the consequences as the models predict risk was low when spread across the whole of the nation. This is one aspect of having banks with a national scope and profile. Risk does diminish when you spread it thinly enough. Some areas might be a disaster while others actually remain quite stable. In the US where there are thousands of small banks the outcomes were quite different and hundreds have failed as an outcome where the majority of their business was in a hard hit region.
i just watched ctv vancouver news. they did a 5 minute piece on real estate here. they interviewed tow realtors and one guy from real estate board. they all said prices of sfh in vancouver were down 1 % for 2012 and say prices wont fall more than 3 % in 2013 as sellers dont need to sell so they will just pull properties and wait…so buyers who are expecting big drops will not ever see that. the real estate board guy said there is nothing in the cards that is showing sellers will have to sell so prices will stay high. then the host of the news said , well, there you have it….no bubble popping here and went onto next story. the sheep will sleep well tonight.
The statement that the host has made is sort of an oxymoron. There is an admission to “bubble”, but then it is said that it is not bursting. So, it must burst sometime in the future then. Is anyone going to buy in a bubbly market?
They are just trying to buy time so they can sell their own places.
tug-of-war
fence sitting
wait-and-see approach
won’t see as much decline as buyers might like to see. Smooth.
Sometimes I wonder if these guys are spinning for the public, or for their members.
Just by looking around and using common sense one knows the prices have not come down very much on van. west when you have overpriced older homes on 50′ lots still being priced over 2 million. I am sorry but reducing your price from 1.6 to 1.5 on a 33′ lot is not going to do anything for the average person. Wages have no where near gone up very much since 1997 when that house was $457,000. It will be interesting to watch MLS (porn) to see how many new listings come out in anticipation of the Chinese New Year. Is it not year of the snake? Watch out for those realtors!!
my landlord paid 2.5 million last jan. – this weeks assessment came in at 2.05 million. thats bigger than 1% .
my co workers assessment last year was 1.4 million…last weeks came in at 889 thousand. also bigger than 1%. houses are still way way overvalued-and have a long way to fall but 1-3 % drops according to media? maybe every month but not annually.
http://www.bnn.ca/News/2013/1/4/Canadas-housing-market-Watch-for-falling-prices.aspx#.UOzLBpWyWeY.twitter
“Vancouver was the poster child of a real estate market gone wild, with home prices soaring over the last decade”
A poster child for a market gone wild. The contradictory imagery is impressive.
Mixed metaphors gone wild.
Euphemisms that don’t work.
I sense an opportunity for a new, ‘reality’ based, direct-to-DVD presentation…
“Realtors™ Gone Wild!”
Just imagine the fun we’ll have crafting those late night infomercials!
Oh yeah, and “Realtors™ Gone Wild!” reality show would involve some cut-throat moves by the participants. Maybe similar to Hunger Games.
Point number 4…..1.5 million for that! I’m so happy I left the BPOE…..and the rain!
Andrew Hasman (Van. West realtor) has just released his report for the month of December. He only reports Vancouver West. Here are snippets from the report:
Westside Single Family Detached Properties:
During the month of December home sales were down 20% versus last year from 62 sales to 49 sales this year. For the full year of 2012 home sales were down 37% from 1986 units down to 1243 units.
The average selling price of a single family home was down 22% from $2.79 million last year to $2.152 million this year. For the full year the average selling price looks even at approximately $2.4 million.
The supply of single family homes ended the year at 697 units versus 558 units a year ago. An increase of 24%.
Months of supply increased from 9 months last year to 14 months this year. This indicates a Buyers Market.
Townhomes and Condos:
Townhome sales were about even with last December and Condo sales were down 40%! Year to date Townhome sales were down 26% and Condo sales were down 22%.
The average sale prices of a townhome was 5% higher this December at $899,000 and year to date average sale price is down just 1% at $932,000. Condo prices in December were 9% lower at $578,800 and year to date down 2% to $618,500.
The supply of townhomes was 10% higher at years end versus the same time last year at 230 units. Condo supply was 16% higher this year at 1527 units.
Months of supply for townhomes increased slightly from 6 months to 7 months at years end. Condo months of supply climbed from 5 months last year to 10 months this year.
There are some commentaries from him that I avoided pasting here.