Matthew Klippenstein Looks Back On Being A Vancouver RE Bear Since 2006 – “Although he and his wife earn well above the average household income in Vancouver, they’ve decided to continue renting.”

“This might be of interest to readers; as a Burnaby-ite (and way-premature housing bear) I noted the Canadian housing and debt situations in the first article I wrote for Green Car Reports about electric cars in Canada. [excerpt below]
I don’t want to throw the blog off-topic, but figured the link might be of mild amusement. I guess the older 2006 MacLean’s article reference might qualify under your “delaying buying” category. And if you had one, “premature calls of the top”. 🙂
– Matthew Klippenstein, via e-mail to vreaa, 22 Jan 2013

Is that a housing bubble? A January 2013 cover story in Canada’s national newsmagazine MacLean’s argues that the housing market has become a popping bubble. While the U.S. housing bubble peaked in 2006, Canadian real estate peaked in spring 2012, with household debt reaching levels seen in America at the peak of the U.S. housing market. If Canadian consumers pay down their debt in coming years, the higher up-front costs of electric cars might stifle sales, even relative to 2012. (Full disclosure: the author was quoted in the above-linked magazine seven years ago arguing house prices were a bubble back then. He and his wife used the money saved by renting to purchase their plug-in Prius last fall.)”
‘Plug-In Electric Car Sales In Canada: A 2012 Review’, Matthew Klippenstein, Green Car Reports, 21 Jan 2012

“Every day Matthew Klippenstein, a 30-year-old fuel-cell engineer, goes online to wait for the sky to fall on the housing market. “House prices make me angry,” he says. Although he and his wife earn well above the average household income in Vancouver, they’ve decided to continue renting. “We’d rather be able to enjoy our lives and be able to afford to have kids.”
Klippenstein watches local housing prices on the site RealtyLink. He feels prices are inflated, and bases this view on information he’s gleaned from blogs forecasting a drop, and on the logic of Canadian financial gurus like Eric Sprott. … Klippenstein thinks the market will correct itself in the next 18 months. “When the bubble bursts,” he says, “there will be a lot of people who got swept up in a speculative fever, who’ll lose a lot of money.”

– from ‘Bubble, bubble, toil and trouble’, Kevin Chong, Macleans, 29 May 2006 [yes, two thousand and SIX – ed.]

“Life has worked out very well. I’ve learned to laugh at myself. 😉
We do still rent (the money saved did after all help us get a plug-in car!) and most importantly, are content to do so. Planning to move in the next year or two, since our place is getting a bit small with the three of us. Though admittedly, the problem is more than likely “too much baby stuff” than “not enough square feet”. Timing will somewhat depend on how fast and far the market falls.”

– Matthew Klippenstein, via follow-up e-mail to vreaa, 23 Jan 2013

Thanks for all this, Matthew.
Vancouver was indeed already locked in the jaws of a speculative mania in real estate by 2006.
Earlier, actually.
– vreaa

Matthew Klippenstein blogs at ‘Eclectic Lip‘.

68 responses to “Matthew Klippenstein Looks Back On Being A Vancouver RE Bear Since 2006 – “Although he and his wife earn well above the average household income in Vancouver, they’ve decided to continue renting.”

  1. …”they’ve decided to continue renting.”…

    Evidently, some YVR developers are banking on just that…

    [CBC] – 2012 a record year for Vancouver rental housing

    …”Vancouver set a record in 2012 for rental housing starts, the city says.

    The city says more than 1,000 new rental units were approved for construction last year — a big jump over the previous four years.

    An average of 328 units were approved in each of 2010 and 2011, after none had been approved in the two years prior to that.”…

    http://tinyurl.com/auqa47k

    [NoteToEd: The readers commentary accompanying that piece may well amuse…]

  2. To be fair to him, in almost exactly 18 months from the May 2006 article, prices did collapse and then our idiotic politicians prevented the normal correction with their well documented shenanigans and now we have an even bigger problem.

    • And they’re still at it…
      ‘Carney urges central banks to achieve ‘escape velocity’ for economies; still room for stimulus’, Bloomberg, 28 Jan 2013

      • Escape velocity?… Perhaps MarkTheCarney should share a banana or two with the latest ‘HeroOfTheIranianSpaceRevolution’.. [apparently the ride wasn’t that much fun]…

        http://tinyurl.com/b2m7xv2

        [NoteToEd: Notwithstanding his natural reluctance to be the first passenger to ride a Safir rocket into space the monkey was nevertheless pleased to report that his seating arrangements were a marked improvement over those on his previous IranAir CoachClass training missions.]

      • “Escape velocity”. LOL. Sounds like something Han Solo would say. A candidate for the bubblespeak compendium?

      • Real Estate Tsunami

        “escape” from what?
        Maybe this is a Freudian Slip.
        Escaping from the mess he created at the BoC.

      • Carney did not coin the phrase “escape velocity” as it is applied to economic stimulus. I remember that phrase (borrowed from physics, of course) being kicked around in American media when they were debating economic stimulus in 2009. Although, as a metaphor choice, it does hint at a bit of Freudian slip on Carney’s part as he is now making his escape out of Canada.

      • Apollo Space Program

        someone call?

    • I think we can all agree that the response to the 2008 collapse was disproportionate in that it lacked the accompanying regulation to prevent bad loans. On the other hand, let us all reflect on the general purpose of monetary stimulus. Central bankers don’t inject money into the economy to make housing affordable. This isn’t the mandate of a central bank at all.

      If central banks hadn’t responded the way they *had* to in 2008, we’d all be bemoaning the lack of jobs on this forum, rather than the lack of affordable housing.

      • lol!

      • Agree, the failure was failing to understand how powerful speculative activity was linked to low rates.

        The stimulus was meant as a bridge, so the jobs produced should not be considered permanent.

      • I am bemoaning a lack of jobs as well as a lack of affordable housing. The real estate bubble has resulted in a misallocation of capital as the economy has become too dependent on real estate. It seems that Vancouver is losing a lot of jobs in retail (so many shops closed downtown) and in animation/IT and in the film industry. I was just reading an article about how Target wanted to set up a distribution centre in the Lower Mainland but could not find any affordable land so they located it in Calgary.

      • anonymous, why should we be trying to keep the film industry alive in BC? After 3 decades of prosperity, the industry has show itself to be totally independent of any localization. The supply chain and network effects of the film industry to the local Vancouver economy aren’t of any value and that is sad and pathetic.

      • Matt: I am not championing the film industry in Vancouver by any means. I am just giving it as an example of an economic sector in Vancouver that was once thriving and is now on life support. But my point is not about the film industry per se. The real estate bubble kills jobs–it is not a long term sustainable source for employment. It drives up land costs which makes it difficult for businesses to locate here and pay employees enough money for housing. Investment capital that may have otherwise created long term stable jobs is redirected toward real estate. Basically, the banks are siphoning money out of the economy because we have record number of homeowners, many of which are bogged down with huge mortgages. That leaves very little discretionary income to circulate through the economy and create jobs.

      • Real Estate Tsunami

        I believe that if the policy makers in 2008/2009 had let the chips fall where they may, we’d had a fairly severe recession, but would be in a nice recovery by now.
        I think, that the low interest policy of the last 10 years has done more harm than good.

      • CanuckDownUnder

        If central banks hadn’t responded the way they did in 2008, we’d all be bemoaning our precious metal purchases.

  3. Vancouver set a record in 2012 for rental housing starts, the city says.

    The city says more than 1,000 new rental units were approved for construction last year — a big jump over the previous four years.

    An average of 328 units were approved in each of 2010 and 2011, after none had been approved in the two years prior to that.

    The push for new rental units is part of the city’s goal to address a lack of affordable housing.

    Despite the approvals, the vacancy rate of 1.8 per cent for rental units in Vancouver is considered very low.

    http://www.cbc.ca/news/canada/british-columbia/story/2013/01/27/bc-vancouver-rental-starts.html

    • ever wondered why rental rates haven’t zoomed up even though the vacancy rate has remained low for years? Seems to me that either the stats are flawed somehow, or the market is telling us the demand for rental isn’t there.

  4. The Poster Formerly Known As Anonymous

    Good morning all,

    I just very nearly choked on my Rice Krispies. Shelley Fralic has written a nauseating article in the Vancouver Sun. Will transcribe sections later. Here is a highlight:

    “Who doesn’t want to live in Vancouver? The beaches, the lululemon culture, the bike lanes”

    “So complain, whine, blame, moan and pray for the bursting of the non-existent real estate bubble in the coveted out-of-reach Vancouver housing market. And then get over yourself.”

  5. The top reason why surrey is cool is because surrey memorial is opening a brand new emergency room. I guess it’s good that the government is responding to the south asian community’s needs with respect to dowry collection.

    • Naked Official #9000

      Disloyal comrade, this racism was not subtle enough! Try again?

      • The Poster Formerly Known As Anonymous

        I LOLled @ Matt. Was going to put it in writing here but then realised that my LOL might have me branded in perpetuity as an irredeemable racist.

      • The Poster Formerly Known As Anonymous

        oops.

      • Naked Official #9000

        It’s ok, the Richmond hospital is owed $25million from our dear friends who’ve departed overseas and “forgotten” to pay their bills.

        Then there are the nine million care cards in a province of four million?

        But this is all disharmony – All praise the loyal cadres at HD Mining and the Ministry of Labour, not to mention cadres Kenny and Finley – Because these canadians certainly wouldn’t know the first thing about coal mining, and it will take FOURTEEN years to teach them!

      • Pretzels...thirsty

        @
        Matt
        The Poster Formerly Known As Anonymous
        ——————————————————————————————–
        You are a bunch of racist morons who will never amount to anything in life….there, I said it.

      • Real Estate Tsunami

        Naked,
        Wow, 25 mill in receivables!
        Are they still on the books, or have they been written off.
        Someone should look into this.

      • Real Estate Tsunami

        I just remembered the Red Rose tea commercials:
        “Only in Canada, pity”

      • The Poster Formerly Known As Anonymous

        @ Pretzels: I prefer the term “anthropologists.” They also never amount to much in life, it’s true.

    • Racism had no place in civil society Matt

      • The Poster Formerly Known As Anonymous

        “Cultural relativism is a principle that was established as axiomatic in anthropological research by Franz Boas in the first few decades of the 20th century and later popularized by his students. Boas first articulated the idea in 1887: “…civilization is not something absolute, but … is relative, and … our ideas and conceptions are true only so far as our civilization goes.”[1] However, Boas did not coin the term.
        The first use of the term recorded in the Oxford English Dictionary was by philosopher and social theorist Alain Locke in 1924 to describe Robert Lowie’s “extreme cultural relativism”, found in the latter’s 1917 book Culture and Ethnology.[2] The term became common among anthropologists after Boas’ death in 1942, to express their synthesis of a number of ideas Boas had developed. Boas believed that the sweep of cultures, to be found in connection with any sub species, is so vast and pervasive that there cannot be a relationship between culture and race.[3] Cultural relativism involves specific epistemological and methodological claims. Whether or not these claims necessitate a specific ethical stance is a matter of debate. This principle should not be confused with moral relativism.”

        http://en.wikipedia.org/wiki/Cultural_relativism

      • Real Estate Tsunami

        Intolerance of free speech has no place in a civil society.

      • The Poster Formerly Known As Anonymous

        Comrade Matt has forgotten the scripture. I beg thine pardon on his behalf, and place a copy here for his reminder:

        “And on the seventh day the gods of political correctness and harmony came down and spake their dogma: ‘Thou shalt blind thine eyes to the differences between cultures, for they do not exist. Should thou inventeth any from thine evil imagination, thou shalt be publicly excoriated for thine evil prejudices. (Except in the instance that thine observations shall be limited to quaint differentials in customs suitable for observation on a travel show on the tele-visual box)’ ”

        He shall practice no more disharmony.

      • The Poster Formerly Known As Anonymous

        “But Lo! On the eighth day, the gods did relent! And they handed down a special exemption pass to Russell Peters, for all the gods did agree that he was hilariously funny and a good guy all around.”

  6. Back to Matthew Klippenstein – apparently even regardless bubble/no bubble subject, the decision to rent was a right one in his case – he is saying that “Planning to move in the next year or two, since our place is getting a bit small with the three of us.” If he bought back then, it could have been either one:
    – a smaller dwelling that he could afford and that would be to small by now so he had to sell and loose money on a downturn market;
    – a bigger dwelling that he would be overpaying for unnecessarily for few years before it became a right size now as the kid grows up.
    Renting does provide more flexibility and the possibility to adjust the size of the dwelling as the times goes and the needs change so you can have the size you need when you need it and leaves more room for the electric cars etc. instead of the overpaying for the holding of that extra room when you kid still prefers to be in your room anyways.
    There are the periods of the relative stability in our housing needs during the life cycle when the owning might be the better option than renting – for example between the first and last grade of the kids school etc. – under the normal housing market situation.

  7. Uh oh:
    http://www.cbc.ca/news/business/story/2013/01/28/business-moodys-downgrades-banks.html

    (don’t Moody’s know that are banks are safe, conservative bastions of prudent lending. Someone from REBGV should call them up and explain the math to them).

    • TheBloombergTerminal’s synopsis is even more entertaining…

      …”Toronto-Dominion, the last publicly traded bank rated AAA by Moody’s, was cut to Aa1, the ratings firm said today in a statement. Bank of Nova Scotia fell to Aa2 and the ratings on Bank of Montreal, Canadian Imperial Bank of Commerce, Caisse Centrale Desjardins du Quebec and National Bank of Canada were lowered by one level.
      Moody’s also removed systemic support from all rated Canadian banks’ subordinated debt, including those issued by Royal Bank of Canada.

      “High levels of consumer indebtedness and elevated housing prices leave Canadian banks more vulnerable than in the past to downside risks the Canadian economy faces,” Moody’s said in a statement.
      Moody’s said that Scotiabank, Bank of Montreal (BMO) and National Bank — Canada’s third, fourth and sixth-largest banks by assets — have “sizable exposure” to volatile capital markets businesses.”…

  8. A bit of an anecdote from the US market, probably forecasting how things are heading here:

    “During the third quarter of 2012, 100,000 underwater borrowers returned to positive equity, owing less on their mortgages than what their homes are worth, according a report released last week by CoreLogic. This change drove down the share of underwater mortgages relative to all home loans to 22%, or 10.7 million, compared with 26% recorded in January 2012.

    In a healthy housing market, 5% of borrowers are underwater.”

    Source: http://finance.fortune.cnn.com/2013/01/25/why-americans-still-feel-poor/

    • I dont understand this. We make a big deal of being underwater on our mortgage, but when people buy luxury cars (Cayman’s, BMWs, etc.) on credit they’re almost automatically under water as the car depreciates faster than US real estate did. People here are dumb dumb dumb.

  9. There seems to be a hard-coded blueprint in peoples minds. Go to school, graduate, get a job, buy a condo, get married, have kids, buy a house, retire, sell house.
    That’s fine and dandy if your financial goal in life is to live like a miser for 25yrs and eventually own your home outright. I’d like to have more than a paid-off home by the time I retire. I’d rather have a diversified balanced portfolio of assets in the 2 to 3 million range paying me cold hard cash every month.
    Right now my friends can’t afford to buy furniture for their kids room because they are saddled with a mortgage on a house and line of credit on the condo. The line of credit was used as a downpayment on the house.
    The house has dropped $50K in assessed. Not sure about the condo. How sad is that.
    Other friends are in the same situation (home, condo, HELOC). Haven’t gone on a real holiday in 5yrs.

    • that is very sad. But, there is hope that mankind can decode and alter the lifecycle programming. Please continue to support your local black market industries, as they are essential to funding the cosmic black arts… the source code can be breached!

    • Naked Official #9000

      All I got from that was that ONLY LOSERS LIVE IN THE BURBS – BUY IN YALETOWN OR DIE BORING

      • lol … i gets mash up of rennie covering omd [potentially offensive reference redacted. -ed.] … condo king is what they’re calling me, tapping out flake equity, never more to be free, pay it all the rbc …

    • That article made me sick. Or should I say Rennie makes me sick.

      [reference to personal appearance redacted -ed.]

    • [potentially obliquely offensive phrase redacted. -ed.]

    • To commenters above: Sorry about the editing; we attempt to make this a censorship-free site. But we are now in the habit of redacting comments about a specific individual’s appearance, or their RE-unrelated personal matters, even if intended in jest.

      • Fair enough, vreaa. Sorry if that crossed the line. There is just something irksome about Rennie – and it has nothing to do with his appearance, or even his character. It has to do with his ideas. By “ideas” I am referring to elitism (“go bold or move to the suburbs”), which Vancouver has enough of already, and his general role in inflating a bubble that has done serious damage to our city. And, frankly, if he is putting himself in the public sphere via lectures and interviews, he cannot expect to be immune to criticism.

      • busted! … by ed … but why ed? … ref to brains vs bull market, fwiw – no personal refs and not even any cursing! … anyways, el ren-ster was setting off multiple bs alarms … egs. on passion, … misunderstands passion can bring happiness but not ‘success’ … most often sacrifice one for the other … on losing a fortune in stock market … if the critics are right, now in ‘successful’ business of encouraging others to do the same … yay!

      • Reposting, as was blocked:

        Fair enough, vreaa. Sorry if that crossed the line. There is just something irksome about Rennie – and it has nothing to do with his appearance, or even his character. It has to do with his ideas. By “ideas” I am referring to elitism (“go bold or move to the suburbs”), which Vancouver has enough of already, and his general role in inflating a bubble that has done serious damage to our city. And, frankly, if he is putting himself in the public sphere via lectures and interviews, he cannot expect to be immune to criticism.

  10. I just read the two Fralic articles linked above, and the sense I get is that she’s just not very informed or analytical when it comes to this current Vancouver housing market and the dynamics at play. The fact that she’s bought and sold a couple of houses along the way, and perhaps done all right on the transactions, doesn’t necessarily make her more informed. It may in fact make her more susceptible to the Vancouver RE Kool-Aid.

    In the Ottawa Citizen article she presents the end of 35-year amortizations as a bad thing, because it prevents some first timers from getting into the SFH market. Does it not occur to her that 35- and 40-year amortizations might have been one of the key factors in making those houses so unaffordable in the first place?

    In yesterday’s Vancouver Sun piece she blithely tosses off the phrase “non-existent real estate bubble,” and yet does nothing to back up that assertion. Sorry, but that’s lazy. And irresponsible. No doubt there are people out there who are swayed by the constant repetition of these unsubstantiated assertions of ‘no bubble’. Will Fralic and the other usual suspects be there to bail them out if it does turn out to have been a huge bubble?

    Having a newspaper column carries with it the responsibility of maintaining a certain level of objectivity. Columnists are expected to have opinions, and they should have opinions, but they should also be adept at interrogating their own opinions and leaving some margin for readers to make up their own minds. There are many knowledgeable and credible people who spend their entire days embroiled in thinking about economic and financial matters, people not given to alarmist pronouncements or hyperbole, who are on record as saying Vancouver is due for a fall. Fralic doesn’t consider those opinions worthy of at least some air time?

    I haven’t read anything that Frances Bula has written recently, but she did have much more perceptive things to say about Vancouver RE a while back. Of course, she’s an independent these days.

  11. You know what’s really annoying? Realtor ads on buses… Makes me want to puke!!!

  12. Vancouver was in a bubble in 2006… it was in a bubble in 2004. Only through hindsight do we see that Matt made a mistake in not buying back in ’06 but even through renting he and his family are reportedly happy. They are only happy because 1) they’ve achieved their goals of a plug-in and a kid, and, 2) their landlord hasn’t sold them out allowing them to create a home.

    The Real Estate market in Vancouver is stressful for homeowners and renters alike. If you stretched too far, you’re stressed out on payments. If you bought too small, you’re stressed out on selling and finding a suitable and affordable replacement. If you rent and have a family, you’re stressed out on it not being “you’re house”. Only if you rent and are single… well, then you’re probably OK and can roll with the changes. I wonder if the birth rate in Vancouver has been affected.

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