The average price of a single-family detached home in the Greater Vancouver area has increased as much in the past five months as it did from 1981 to 2005.

So profound, it deserves to be said again:
“The average price of a single-family detached home in the Greater Vancouver area has increased as much in the past five months as it did from 1981 to 2005.”
– from ‘World Out Of Whack! Which of these crazy real estate markets will be the first to bust?’, Zerohedge, 16 Jun 2016

45 responses to “The average price of a single-family detached home in the Greater Vancouver area has increased as much in the past five months as it did from 1981 to 2005.

  1. Could hockey-stick some more still, but beyond that Vancouver is toast. Burnt toast. So burnt you can’t scrape off the burnt part.

    • How do you know that this hockey stick wouldn’t attain escape velocity and never come back down? Virtually everyone I know who still doesn’t own is desperate to get in, a 10% discount would get them all excited and a 15% drop, well, there would be no force strong enough to restrict them from rushing and buy, buy, buy, BUY!!!

      Not to mention, every current owner remember 2008 and those who sold then and what happened to them.

      I simply don’t see a very likelihood of anything approaching a 30%+ drop in the next 3 to 5 years, never mind a ~70% crash required to bring housing prices back in line with say 5x average income.

      • “How do you know that this hockey stick wouldn’t attain escape velocity and never come back down?”

        It’s called reversion to the mean. Show me one market that, in time, has not reverted. I like “escape velocity”, though. Add that to the list of hilarious bubble jargon.

        “Virtually everyone I know who still doesn’t own is desperate to get in.”

        If that’s true, then everyone you know is financially illiterate.

      • The stock market has been in an upward trajectory for decades now. Look at any long term chart of S&P 500. There is no reversion to the mean.

      • Astonishing. If ever there was an example of reversion to the mean, it is the stock market. Long-term returns of approx. 8-9%.

    • Shut It Down Already

      El Ninja, so by your definition reversion to mean permits a annual growth rate of almost 10%? A doubling every 7-8 years?

      Space is spot on. The upward trajectory of the stock market is a clear counter example. The “mean” value over a long enough time period keeps on increasing, and is not constant- you said as much yourself!

      Reversion to mean is just technical analysis by another name. Future prices are not a function of past prices.

      • Reversion to mean is the phenomenon whereby growth rates revert to their long-term average over time. The stock market is a prime example. There have been years, and indeed periods of several years, when stock market returns have been above their historical average. And there are periods when they have been below. Often these deviations have been due in significant part to swings in market mood — exuberance and depression — rather than changes in economic fundamentals, which tend to be steadier than investor emotions. So the tendency is for these high and low periods to not sustain themselves. Returns have gravitated, or reverted, back to their average over any statistically significant stretch of time. That average has been about 8-9%. I didn’t say it keeps on increasing.

        It’s true that future prices are not a function of past prices, but that doesn’t mean that the market hasn’t historically exhibited reversion, and won’t continue to.

  2. Btw, in China, it is almost expected now that if the average salary guy wants to get married, the parents will be at least footing the down payment amount. At least – which generally means entire parents savings. But given the rapid increase in housing prices, most parents are more than willing to gift this.

    Also, there is a HUGE chasm between high skill workers and low skill worker wages. My wife’s niece and her hubby that works in local Chinese SAP consulting firm in a 2nd or 3rd tier city pulls down a $2K CAD/month salary when they aren’t on a project – basically hanging around doing not much, and when on projects, easily pulls down $4K to $5K CAD/month salary. All figures are after tax. So, they buys million yuan condos easily. Nor are they statistical outliers like $1M+/yr doctor / lawyers. So, the reported average salary figures in China can be a bit misleading as well.

  3. Oh yeah, only wages are taxed in China with no tax deductions, etc – so basically most people never have to file anything called a tax return or even have to think about tax. Capital gains, dividends, interests, RE cap gains, etc are all non-taxable either.

    The best thing is that when a company offers a salary, you will get that salary. Unlike here where $100K salary doesn’t mean anywhere near $100K take home pay.

    • How is any of this remotely relevant to the discussion at-hand?

      • It is in response to 3rd Rock’s post two stories back about how many the affordability is in BJ China. I’m saying it is not as bad it looks like based on surface.

  4. Would be interesting to do a calculation of how much the bubble needs to burst in order for SFH to be affordable based on average income. I suspect that any bubble burst will still keep the vast majority of people priced out and the 0.1% will use their extra cash to buy at reduced prices. Time to reframe the whole situation.

    • It’s impossible for the vast majority of people to be priced out forever. If people can’t afford to buy, prices will fall until equilibrium is restored.

      • When the top 0.01% owns 30%+ of wealth, the top 1% owns 50%+ of wealth, yes, they can. Simple math and frankly that’s what happened in US. BlackRock & other hedge funds became the biggest property owners in US by buying up millions of homes for pennies on the dollar, while many people are reduced to renters forever.

      • If people can afford to rent a house, they can afford to buy it. If that weren’t the case, then the bulls’ favourite argument against renting — “you’re paying someone else’s mortgage” — would not stand up, would it?

      • So the U.S. is now full of millions of new renter serfs, subjugated by the evil 1%?

        Oops, guess not. The homeownership rate is no lower today than it was in the 80s and 90s:

        https://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=USHOWN


  5. sold $998k_imm assigned on Craiglist for $1.349m

    fwiw the San Francisco’s mother arrested after her two kids’ father was murdered – her parents own many properties in the US and are related to a general (her mom’s brother). The latter has just been apprehended for investigation (graft).

    • Is this in Vancouver? If so, pretty open and close case for CRA for tax evasion if the gains aren’t reported as income.

  6. Dollar don’t go as far these days

  7. @El Ninja, you are sorely needed in some of the following facebook pages: Foreign Investors in Vancouver Real Estate, Housing Action for Local Taxpayers, I honestly think that your stubborn belief that the market will ultimately correct itself will help to mitigate the air of negativity, cynism, etc on those pages. You will be a beacon of light that yes, eventually, that single family home will be affordable to the average Joe like it was during the 80’s or 90’s (the historical mean probably). Hey, why worry about foreign money when the market will eventually correct back to a level that local incomes can afford. I am still holding you to your predictions and you made them pre-“hockey stick” so you need about a 75% drop from today’s prices for it to come true. Basically, 2003 price levels. Good luck with that.

    Btw, why do you say that no one can afford it? What is your basis for saying that, what proof do you have? Cause I am know a lot of people that want to buy and they can definitely afford it. Not all can afford a two million dollar detached and each can afford what they desire to buy, but to say that most buyers have been priced out is ridiculous. I think what space is trying to say is that despite of all the whining by people who probably would never have been able to afford a place anyways, there are still a lot of buyers who can afford the prices in Vancouver. Maybe if all your income is derived locally and you have no parents with existing assets sure you might have been priced out (doubtful with all the basement rentals and laneway helpers going on). But that segment was never counted on to carry this market. They have been priced out before this rise and haven’t been a major driver since probably the financial crisis.

    • “To say that most buyers have been priced out is ridiculous… Maybe if all your income is derived locally and you have no parents with existing assets sure you might have been priced out.”

      Let’s stop and look at this. You are stating that the majority of buyers in Vancouver are earning foreign incomes. You are also stating that the majority of buyers are benefiting from parental financial support.

      The first assertion is false. The second, if true, would speak to a very unhealthy market. It is not sustainable for one generation to have been able to purchase property WITHOUT parental support, and for the next to ONLY be able to purchase property WITH parental support.

      It’s a fixed pie. Drawing on the “bank of mom” will compromise mom’s retirement security. And then what will happen? The wealth transfer will revert, as kids now have to support their parents. And how will they do this? By liquidating their RE, thus pushing prices down. Or retirees will liquidate their real estate. Either way, the gap will be filled, and downward pressure on prices will be applied.

      Not that you would get that. You live in a magical fantasy world where wealthy Chinese will propel prices forever upward and the laws of economics don’t apply.

      P.S. Yes, I stand my my prediction of a massive, disastrous crash in Vancouver RE prices. However, your math is off. In order to revert to 2003/04 levels, in real terms, the percentage decline is in the order of 60-65%.

      Let me give you a quick lesson from, I don’t know, Grade 8? If something rises, for example, 30% in price, it only needs to fall 23% in order to return to its previous level.

      • I am bad at math? Let’s do it this way so that even you can understand, you made the prediction around Nov 1st of last year, at the time, a detached home nice size lot in a good area of burnaby was around 1.5 mil, you said market would drop 50 to 75 percent. So that would put this price in the 0.375 mil to 0.75 mil range. Same house today would be 2 mil, so it would require a drop of 63 to 81 percent to make your prediction actually come true. Did the percentage go up or down? By your logic, does Vancouver housing market have to drop by a larger or smaller percentage to make vreaa’s predictions of doom come true than the one she originally gave?

        Parents aren’t giving away their retirement savings to their kids. They would sell their place to the foreign cash and then use some of it to help their kids to buy. As long as there is foreign cash coming in at the top end, there will always be rich locals ready to assist their kids. This isn’t stretching bank of mom and dad, I am sure if I sold a 3 mil asset I could give my kid a mil to help out too. And also, the assertion that somehow detached properties are bought with local incomes? Seriously? Maybe in your condo market that might be the case but in detached markets some component of that purchase contains foreign money. I love the fixed pie, except the size of that pie changes depending on how much foreign capital hits the market.

      • Oh and one more thing, there is only one real law of economics, it’s called supply and demand. So let’s see how much you understand about this basic law of economics. Pick one segment, any segment, any region of metro vancouver and analyze for me supply and demand in that segment. I am sure the academics such as David Ley, Andy Yan, Josh Gordan, Tom Davidoff who all looked at this issue know less about economics than you do. Somehow they all came to the same conclusion and it ain’t locals leveraging driving this market.

      • “Parents aren’t giving away their retirement savings to their kids.”

        Falser words never spoken.

      • “it ain’t locals leveraging driving this market”

        Oh, but it is. Yeah, there is some foreign money at the top end. But the pyramid upon which everything rests is local demand. Local borrowing, local speculation.

      • So you know this better than academics who studied this problem looking at the data on the ground. Wow… such arrogance. Never knew you had that in you. That’s right, local incomes and leverage can somehow purchase detached homes at 2 million. I believe in unicorns.

      • Don’t put too much faith in those guys. Their jobs depend on following the herd. Bold predictions are risky from a career standpoint.

      • And what if the mls underlying data supports their claims? What then. What I am wondering is, what proof do you have that someone should trust what you say is true. When in reality you have been wrong all this time. The funniest part of all this is, I do research into this matter, not for publication but for personal use and it supports what they say. So, should I trust my own research or your overarching argument.

      • Trust yourself, man. That’s what you have to do in life. Just be sure your research includes a study of history and experiences beyond Vancouver.

  8. “P.S. Yes, I stand my my prediction of a massive, disastrous crash in Vancouver RE prices. However, your math is off. In order to revert to 2003/04 levels, in real terms, the percentage decline is in the order of 60-65%.”

    You must be the twin sister of vreaa. In 2008, vreaa calculated a trajectory drop of 64.5%, and she had all the calculation to prove it, and her good work is still archived here somewhere. Give this info to Peter Russell, and he would make a good laugh out of it; at least, he earns some money.

    BTW, rent is due on Canada day!

    • So is your interest payment. Oh, and your insurance premium. Oops, I almost forgot: you also owe property taxes. You’ll want to keep up with those.

      Btw, that leaky pipe needs fixing. Mind taking care of that for me? Sooner the better. Thanks a bunch.

      • Sorry, you have been booted out cause I want my house back to sale it. You have 2 months starting today. And your next rental, probably gonna get kicked out in one year. That makes for a great marriage and family situation. Have fun living in boxes.

      • Funny, I’ve rented for 20 years and it’s never happened to me. The threat of getting “kicked out” is just a slimy sales tactic.

        Oh, you were once a renter, and had to move? And that put your marriage in jeopardy? If so, you need a new wife.

      • Have you rented in Vancouver for any length of time in the last two years?

        http://vancouversun.com/news/local-news/were-in-a-crisis-vancouver-struggles-to-improve-rental-vacancy-rate

        And no, I wasn’t once a renter and didn’t have to move. But, funny enough, that happened to my tenant. And yes, it put his marriage in jeopardy. And guess what happened, his next place did the same thing in one year. Now I don’t feel good about it, but it did happen. I will make sure he hears your advice cause constantly living in boxes and moving was so great for his young family.

      • in case no one told you, renters like yourself pay for all those! The home owners would not have made it without you, so, thank you very much!
        Happy Renting!

  9. Sam Cooper
    Rule changes in Ontario could spark disruption in Vancouver’s hot real estate market

    “Weeks ago, the federal Competition Tribunal ordered the Toronto Real Estate Board to release proprietary Multiple Listing Service sales data to consumers online.

    Homebuyers in Toronto will now be able to access historical sales data that was tightly guarded by realtors in ways that stifled competition, according to a ruling. The new information should give consumers a better idea of the long-term value of properties compared to current asking prices, experts say, and help them avoid bidding wars that are encouraged under the current system.”
    http://tinyurl.com/h6zu2tt

  10. Kathy Tomlinson
    Vancouver developers shutting out regular buyers with insider condo sales
    http://tinyurl.com/zjho8yc

  11. Scotiabank CEO Brian Porter is selling his posh Toronto townhouse as he issues warnings that Canada’s housing markets may be out of control.
    The converted church that houses Scotiabank CEO Brian Porter’s luxury townhouse, on sale for $3.95 million.

  12. Trudeau worries measures calming Vancouver housing will hurt other markets

    not wishy-washy Dutch build a tunnel under a highway in one weekend

  13. Fred do happy vancouver homeowners spend their time whining on blogs they hate

    the owner of the apartment I rent in Los Angeles had never even heard of vancouver… Fred you better tell him to buy RE there.

    • Happy Vancouver homeowners spend their time doing hiking, boating, golfing. No need to advertise Vancouver, the name advertises itself.

      Me a trailer owner have lot of time to waste and whine and bitch; free wi-fi, toilet, parking and shower at community center in case you don’t know!

      In the same token, why a Vancouver hater like yourself, not living in Vancouver, bash this city on all media outlets! Hater always hate!

    • No, and we don’t need your apartment owner to invest here, we have more than enough foreign capital at play. We are on CCTV5. That’s good enough exposure. Oh and our mayor is sleeping with a hot singer apparently there. He will be a celebrity in China soon.

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