“Ah, Vancouver. How quickly we forget. We moved to Vancouver from overseas in July 1979, bought our house within ten days the market was heating up – a fixer upper on the westside, Pt. Grey for $105,000. Totally renovated new heating, plumbing, electrical, some cosmetics for $25,000. By July of 1980 the market was on fire, prices were increasing weekly. There were no bidding wars I think it was illegal at the time, but mortgage rates were in the area of 20-21%. We decided to get out, and tried to sell the house by ourselves: first week of August listed for $235,000, no bites. Second week advertised for $245,000, some phone calls, one showing. Realized sheeple would only believe agents’ pricing. Got an agent who evaluated/listed it at $265,000. The house sold in 6 weeks for $254,000. Here comes the good part: we gave a first VTB [Vendor Take Back] non-transferable mortgage for $180,000 at 18% for one year, moved to Windsor and bought a bigger, newer, renovated house in the best neighbourhood for $125,000. It gets better: The “investor” who purchased our house put it up for sale two months later January, 1981, but the bubble had burst. He sold it just before his mortgage was due for $180,000. In one year, he lost $74,000 of his down payment plus the $26,000+ he paid us in mortgage payments, plus taxes, closing costs, agent fees for selling the property. Not counting, I’m sure, what it cost him in nerves. He who does not know history is doomed to repeat its mistakes.”
– diva at greaterfool.ca 15 Mar 2013 9:58 pm
And, to round the story out, that same property probably hit recovery in real terms over about 20 years (by about 2001 it probably would have been selling for about $500K, which is $254K in 1981 dollars, inflation adjusted).
And by 2011 the same property was ‘worth’ $1.7M, given the action of our 2001-2011 spec mania. It is now, Mar 2013, likely worth 10% or more below that (sans rebuilds etc.)
After the current bubble bursts, it’ll be interesting to see if real prices recover within 20 to 25 years (that’s what it took on average last time round).
It’ll be particularly intriguing if, in the coming trough, houses like the one described return to their inflation-adjusted 1980 peaks (in other words, about 66%-off). That’d be really cute, and something that’d get the TA guys into a tizzy (it’d look cool on the charts).
66%-off is the very high end of our guesstimate for the trough; we suspect 50%-off is more likely.