“Will the Vancouver housing market crash? Should I be waiting for a major drop in prices before buying a home in Vancouver? Should I sell my Vancouver home, rent for a while and then be able to buy an equivalent home for a lot less money? The answer to all of them is a resounding NO.” …
“Housing prices did crash in the 1980’s but a major difference is that at that time many homes had been bought by speculators on very small margins and interest rates soared well into double digit levels.
Now, very few homes are held on spec and any anticipated increase in interest rates is expected to be very modest. Mortgage rates may even go down. Canadian banks make a significant share of their profits from mortgage lending and it is a low risk part of their business since their prudent lending standards reduce the chance of default. Also, many mortgages are guaranteed by the Canadian Mortgage and Housing Corporation (CMHC).” …
“The cost of housing in Vancouver is not likely to change dramatically for the foreseeable future. It may soften a bit or it may even rise a bit.” …
“Prices are about 3 per cent lower than they were six months or a year ago, but are 4 per cent higher than they were three years ago. Prices for detached homes have been the softest, while apartments and townhouses have seen much less change, reflecting the trend to condos as a more affordable form of housing.” …
“There are two groups which would benefit from declining home prices. First are people in the Vancouver area who do not own real estate and whose income level does not enable them to afford the size and location of home to which they aspire. Many have adjusted by seeking a smaller home and/or one in a less costly neighbourhood. But some cannot afford even that.
A second group are the retirement age baby boomers across Canada who hope to spend their golden years in this small corner of Canada where you don’t have to shovel snow. They are frustrated because a home anywhere else in Canada buys much less home in and around Vancouver. They are also one of the main reasons why a housing crash will not occur. Any drop in prices will lead to retirees entering the Vancouver housing market, putting a floor under prices.
Those in the international community do not seem to mind our house price levels. When looked at in a global context, home prices in Vancouver are not unreasonable. Ask anyone from London or Hong Kong. And people from around the world see not only good value in our real estate, but also an open society, a pleasant climate and a stable political environment.
Finally, the majority of people in greater Vancouver already own real estate, benefit from current housing values and would be hurt by a crash or any serious drop. They do not want to see the value of their biggest asset decline. Home equity often forms a large part of retirement savings and people count on it in their financial planning.” …
“So, if you want some Vancouver real estate should you buy now even if you pay a little more and get a little less than you had hoped? Probably. And should you sell your Vancouver real estate in the hope of buying it back later for less? Definitely, not.”
– from ‘Little chance of correction in Vancouver real estate market’, Roslyn Kunin (‘Troy Media BC’s Business columnist; consulting economist’), Troy Media, 18 Mar 2013 [hat-tip ATP, who added, perceptively “same old, same old“.]
If it really was a case of paying “a little more” and getting “a little less”, few would be discussing the matter. We fully expect that people will “pay a little more and get a little less” in the Vancouver RE market. Fact is they are paying a lot more and getting a lot less.
This “same old, same old” column archived here for the record. It will eventually be noteworthy that in March 2013 some people were still making ‘limitless demand’ arguments for ongoing endless price strength in the Vancouver RE market.
And it is remarkable that an economist would not give any thought to economic fundamentals in their discussion, and wouldn’t consider indicators such as price:rent or price:income ratios in their analysis.
– vreaa
Vancouver Real Estate Anecdote Archive 
Cuo Bono, indeed
how ’bout showing us the foreclosure lists?
“Finally, the majority of people in greater Vancouver already own real estate, benefit from current housing values and would be hurt by a crash or any serious drop. They do not want to see the value of their biggest asset decline. ”
Thank you General Obvious, your point is irrelevant.
And there isn’t a thing they can do about it either. I’ll show you, I won’t list my property…
If the majority of people in Greater Vancouver already own real estate, why should we think they are going to buy additional real estate on top of the real estate they already own? Isn’t part of the bear argument that homeownership rates are at a record high of 70% nationally. That means there is very little pent up demand for housing because most people already own. It’s strange how this economist takes something that should be a bearish indicator (record high ownership rate) and spins it into a bullish indicator.
She nearly had with the line about the boomers across the nation keeping a floor on prices…but then I thought…bollocks!
They are going to keep a floor on prices. But are they going to keep the current overvalued high floor on prices? The article itself states that these savior buyers are unhappy with how little their money can buy, especially when they try to trade up from a less overvalued market. Author can’t even connect their own dots.
“Author can’t even connect their own dots.”
—
Yeah, well said.
Many of the bull arguments contain internal inconsistencies.
“the majority of people in greater Vancouver already own real estate”
Doesn’t that mean we’ve run out of buyers leading to price declines? Remember that old supply & demand equation? They probably covered that in your economics course Roslyn.
“benefit from current housing values”
How do they benefit? The only way they benefit is if they sell and move to a cheaper location (I.e. bank the gains) or by taking out a HELOC and investing in a better performing asset (equity withdrawal for consumption isn’t a smart move even in a rising market). If they stay in Vancouver they are on the same property ladder whether prices are high or low. Any sane economist knows that exceptionally high house prices are bad for economic activity (resources misallocated) which hurts everyone in the long run.
“and would be hurt by a crash or any serious drop”
Only if they’re overextended. And being hurt by something happening isn’t a reason why it won’t happen.
Amazing..
The amount of of deception and deceivers in the RE market.
Don’t worry boys and girls…Its the FEAR speaking
When I took Economics, we called it “Graphs and laffs”.
“Finally, the majority of people in greater Vancouver already own real estate, benefit from current housing values and would be hurt by a crash or any serious drop. They do not want to see the value of their biggest asset decline.”
That a pretty scary argument to complete your defense of why property values will be upheld. Re: the whole dissertation is baseless.
How about this one in response: “You can ignore the consequences of reality, but you can’t ignore the consequences of ignoring reality”
“Finally, the majority of people in greater Vancouver already own real estate, benefit from current housing values and would be hurt by a crash or any serious drop. They do not want to see the value of their biggest asset decline.”
Prices won’t fall because we don’t wan them to. Well thank the lord for that! Homeowners across the land will sleep better now, comfortable in the knowledge that they can simply will prices from dropping.
That is many times worse than the discretionary sellers myth that says people will hang onto their homes rather than sell at a loss. Are we sure this article wasn’t satire?
I thought it was “You can ignore reality, but you can’t ignore the consequences of ignoring reality” — but yes, agreed.
And the original quote is a “tautology” I believe — yes, I learnt that word on this blog. =)
OMG! She is an Economist? I did not see that part. I am really disgusted now.
No need for disgust, Farmer. Pity will do.
“The only function of economic forecasting is to make astrology look respectable.”
― John Kenneth Galbraith
Maybe disgust is too strong. I am pretty surprised though because so much of what she wrote is misplaced and out of touch with reality, facts and history (not to mention current thinking and analysis). Even realtors are not talking like that anymore. I just kind of assumed she was a shill for the industry based on the reasoning presented. Now I think that what she is expressing are rationalizations to support her own thesis and quell personal fears about the inevitable. She might have a lot at stake.
Remember “I’m Brian Fellows”? Like that.
Just saw on the news Flaherty show some actual balls to stop Manulife from offering a low mortgage rate.
Scary part is Rae and Mulcair came out and bashed him for getting involved with banks business.
I have lost faith in all parties to resolve this housing bubble.
Good for Jim. The banks are making him look bad right now with all their come-ons, rate reductions and marketing at a time when the national market is verging on deflating. Jim knows it has to be controlled but it is not easy to do piecemeal one bank at a time. Talking them down is a good start. I hope he sticks to his guns.
F should just go ahead and tell the banks “no more mortgage insurance, you are on your own” and wish them go luck!
I agree.
But I think CMHC will hit its ceiling soon anyway.
How close are they Ret?
Agreed. That will immediately curb the free lending. Anything else means that the banks are leaving money on the table — and they’re all about extracting every cent (especially if it’s ever risk-free cent).
Today all the Canadian news were about how F overstepped his mandate and curbed the free market! Let the market deal with the mortgage rates and it will sort everything out! Poor home buyers are now going to miss out the wonderfully low rate the Manulife was offering etc. Some conservative MP was publicly opposing F “negative actions on a RE market”. 3 commentators were trying to discuss the issue and when one of them (a girl) said that she would like to hear what would Ron Paul said about such an interference with the free market – I almost choked, what free RE market??? Drop the CHMC to show them a free market.
I sold my house last May in Lions Bay and my RE agent says it has since depreciated 15% or $150,000.
I like the part about the 3% drop in 6 months – it was funny as hell, because the 3% must be on the homes that didn’t sell at all. I see homes in New West that have been on the market for a year and more. I bet they have same price and value as a year ago,so that shows that we are all good in the hood !!!
I love how she plants red herrings throughout the article, never explaining how these little factoids suppor ther argument (because they don’t).
Many mortgages are backed by the CMHC. So?
Mortgage lending is the banks’ most profitable business line. So?
Vancouver isn’t expensive compared to London and Hong Kong. So?
And then of course there are the outright falsehoods:
The early 80s saw more speculators than today. Really?
Retirees from all over will be moving to Vancouver. (I’m sure she meant Vancouver Island. Dang editors and their chopping!)
If these are the arguments RE boosters are falling back on, we can be certain the correction is well underway.
No she is a [cough…cough] economist. Unfreakingbelievable.
Someone help me out here; if the majority of people in Vancouver own, and most detatched homes need helper suites, plus people are buying condos to rent out, and according to the bulls this trend can be extrapolated upwarcouple infinity, who the hell are they renting to if the majority of people own?
On a related note, there appears to be more rental vacancy signs up in the kits beach area this year than before… When i moved to kits 2 years ago this month, even the run down suites seemed to be rented out in the first couple days of the month. Now vaccancy signs stay up for weeks or months on end…
There are a ton of vacancies in the Marpole low-rises. I don’t keep track of numbers, but there have been empty suites in my building and several of the neighbourhood building I keep an eye on for months now.
Dr. Roslyn Kunin has a PhD in Economics from UBC and she has been awarded the Crystal Ball Award by the Association of Professional Economists. How can I argue with her? I don’t have a crystal ball.